A Recurring Theme In The Coming Months
The California realtors report on May sales. “Home sales decreased 25 percent in May in California compared with the same period a year ago, while the median price of an existing home increased 4.8 percent, the California Association of Realtors reported today. ‘The decline in sales continues to be driven by both tighter underwriting standards since the start of the year and the adverse psychological impact of news regarding foreclosures and the subprime situation,’ said C.A.R. Chief Economist Leslie Appleton-Young.”
“‘In particular, the lower end of the market, which is the part of the market that is most affected by the subprime situation, has seen greater declines in sales and weaker prices than the higher end of the market. This will likely be a recurring theme in the coming months,’ Appleton-Young said.”
“C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in May 2007 was 10.7 months, compared with 6 months (revised) for the same period a year ago.”
“In a separate report covering more localized statistics generated by C.A.R. and DataQuick, 36.7 percent, or 136 out of 371 cities and communities, showed an increase in their respective median home prices from a year ago.”
“‘With prices holding steady or showing marginal declines in many parts of the state, affordability will continue to be a problem even with mortgage rates that remain near historic lows. In a competitive market with a wide range of properties for sale compared with a year ago, those homes that are in top shape and are well priced are in the best position to attract buyers in today’s market,’ said C.A.R. President Colleen Badagliacco.”
The San Francisco Chronicle. “If real estate is a religion, this was an old-fashioned revival meeting, with the frenzied energy of a game show. Tuxedo-clad ‘ringmen’ raced up and down the aisles, urging on the crowd and pointing to bidders. One particularly gung-ho ringman did a chicken dance whenever he saw someone bid.”
“A half-dozen female ‘runners,’ also clad in black and white, clapped and cheered every outcome, then approached the winning bidder, clipboards in hand, to get started on paperwork.”
“‘Folks, take advantage of the market today,’ a fast-talking auctioneer exhorted a packed room of real-estate bargain hunters on Sunday. ‘I have (a bid for) $300,000 now on this condo; do I hear $310? I’ll take $305 if that’ll help you. Who else wants in? Raise those bidder cards.’”
“The bidding got fast and furious, and the three-bedroom condo in South San Francisco sold for $425,000. It was among 88 foreclosed properties, mostly in Alameda, Contra Costa and Solano counties, auctioned at the San Mateo County Event Center.”
“The auction was visible proof that the slumping housing market and subprime loan fiasco have had an impact on the Bay Area. It was the first large-scale foreclosure auction in the region in a decade.”
“‘It’s an adrenaline rush,’ said Omar Felder of Hayward. ‘I feel I’m getting a chance to increase my future riches.’”
“Many properties sold in two minutes. Most had only about four bidders. Some lingered on the block for several minutes while the auctioneer wheedled for higher offers.”
“Each property had a published minimum bid and a higher secret ‘reserve price,’ the actual minimum the banks were willing to accept. A phalanx of bank representatives flanked the auctioneers and told them when to accept lower reserves.”
“It appeared that almost every property on the block received a winning bid, but bids below the reserve were subject to possible denial within seven days, according to the auction catalog.”
“Marjie DeWilde of Mountain View and her husband…weren’t bidding but had inspected and researched some of the properties on the block. Based on her study of comparable sales, DeWilde said she thought most properties were going for about 80 to 85 percent of their current market value. That’s a decent savings for someone who wants to live in a house, but not enough of a discount for an investor, she said.”
“For example, a four-bedroom, two-bathroom Concord house had a minimum bid of $329,000. According to the catalog, it was ‘previously valued’ at $651,000, meaning it had been listed, appraised or received a broker price opinion at that price. It sold for $500,000.”
“Many bidders said they thought the ‘previously valued’ prices seemed high. ‘Most of the homes we looked at were distressed in some way or another,’ DeWilde said. ‘Unless the magical mansion came up, I don’t think we would do it.’”
“Everyone has their own definition of the ‘magical mansion.’ For Whitney and Alexander Hoerman, it was a two-bedroom Menlo Park house that they won with a bid of $590,000 in a nail-biter of a contest with another determined bidder.”
“The couple, who have three children, want a bigger home. While the 890-square-foot home they’re buying is cramped, it’s on a quarter-acre lot, so they plan to expand it. They had been eyeing the house since four months ago, when it was listed at $740,000. ‘We will tear most of it down,’ said Alexander Hoerman.”
The Sacramento Bee. “It’s hardly on the scale of two years ago, but across the Sacramento region it’s still easy to see entire neighborhoods of new houses rising.”
“Selling them now has become the challenge for an estimated 84 home builders who work the capital region. The five-year housing boom that crested in July 2005 has given way to some of the slowest sales since the late 1990s.”
“Locally, as nationally, home builders are cutting costs, production and, in some cases, staff. Through May they closed escrow on 3,564 homes in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to DataQuick. That’s 1,245 fewer than the same time last year, which was then considered a poor performance.”
“Executives of three suburban Sacramento home builders met with The Bee recently for a round-table discussion about the area market.”
“Sacramento division presidents for Pulte Homes, Christopher Cady: ‘I think there’s a certain sense of people saying, ‘Are you at the bottom or are you not at the bottom?’ People are still looking for the values.’”
“Cady: ‘People have gotten so much into that day-trader mentality with houses. If they just get back to the fundamentals and think about why they’re making a home purchase decision. If they think they’re going to try and flip it in six months or a year or two years, again it’s the same problem you have when you’re trading stocks. You’re not that good. You’re not going to be able to time it right.’”
“A second-generation owner of a local home building firm, Sid Dunmore of Granite Bay-based Dunmore Homes: ‘You have to understand most of the overhang was created by ourselves. And I hate to say it, but it was mostly the public builders, which couldn’t seem to stop building. In light of no sales they just kept on building, and they created this huge overhang. And so now they’re eating through it.’”
The Fresno Bee. “With sales slumping, more developers are building smaller houses, cutting frills, renegotiating labor rates and taking smaller profits in an effort to cut prices and appeal to more buyers.”
“Fresno builder Mitch Covington of R.M. Covington Homes is building smaller houses, negotiating with subcontractors and accepting a lower profit. In Madera, his Villa Granada tract has houses starting at $219,950. Previously, he didn’t sell anything for less than $300,000.”
“‘I’m cutting profits significantly,’ he acknowledged. ‘But it will still be profitable.’”
“The homes range from 1,200 square feet to 1,609 square feet, have great rooms, dining nooks, open kitchens, covered patios, two-car garages and 11-foot ceilings in the main rooms.”
“Smaller houses are a departure for many builders who capitalized on a seemingly insatiable demand for housing during a five-year run that ended in early 2006. ‘We couldn’t build fast enough,’ Covington said. ‘There was no reason to go smaller.’”
“Also thinking small is Walter Diamond, general manager of Beazer Homes in Fresno. First-time home buyers and young professionals are among his target audience at Ashlan Village, where Beazer has a new 1,007-square-foot home priced at $219,990.”
“‘We’ve always had a strong market for entry-level buyers, but it is accentuated now with the current status of the market,’ he said. ‘We have a good backlog of entry-level product. We have enough lots for the next two or three years.’”
“Leo Wilson, a builder for 45 years, acknowledged the slowing market, but he said he survived worse periods, including one in the early 1980s when interest rates were triple what they are today.”
“‘Interest rates went to 21%, and no one wanted to buy a house. If a customer came by in the middle of the week, you would jump up and down and bake him a cake,’ Wilson said.”
The Press Telegram. “Folks like Phil Schaefer don’t seem too concerned about the dangers of a real estate market fallout. Schaefer, who has been a Realtor for 20 years, believes the industry can handle the recent flood of agents. He also believes that home prices will not plummet.”
“‘Prices have held,’ he said. ‘It’s an amazing time to buy. It’s really a great time to buy.’”
“There are now more than 534,266 licensed Realtors in the state, according to the California Department of Real Estate. That means one out of about every 52 adult Californians has a real estate license.”
“Schaefer is past president of the board of Pacific West Association of Realtors, a regional organization with 14,000 members. The organization is the state’s largest regional real estate association, and it ranks among the nation’s top five in membership.”
“And Schaefer says that if the bottom is near, he hasn’t seen it. ‘We have about 200 people joining a month at PWR,’ the Santa Ana resident said.”
“Still, he knows there are changes on the horizon. Until last year, PWR has been focused mainly on teaching its members how to deal with multiple offers on their listings and coping with other minor issues in the best housing market in history.”
“But nowadays, PWR is busy arranging seminars on how to conduct short sales or how to take advantage of foreclosures.”
“Currently, housing sales are slowing to a pace where there’s nearly one sale per licensed agent per year. And it may get worse before it gets better, according to the Department of Real Estate.”
“‘Our licensee numbers are still going up,’ said DRE spokesman Tom Pool. ‘It’s gone up every single month for the last seven years. He added, ‘In the long term, it’s gotta come down.’”
‘May 2007 Median Home Prices’
Something smells bad with some of these numbers:
For example with Santa Barbara, how can all three areas that make up Santa Barbara county be down, but the median for the whole county is up?
Santa Barbara County $566,000.00 $515,000.00 9.9%
Lompoc $405,000.00 $409,500.00 -1.1%
Santa Barbara $952,500.00 $1,130,000.00 -15.7%
Santa Maria $425,000.00 $449,500.00 -5.5%
Can anyone figure this one out for me?
If the higher priced homes in Santa Barbara make up a relative majority of the sales, that will drag up the median. Basically it’s a useless number (the 9.9%) but will be touted by realtors as a turnaround no doubt.
I think BB’s point is that the three cities listed all have negative YOY medians, but the overal county median is positive. My guess is that the median price increased sufficiently in Montecito and/or Carpenteria to bring up the median. Montecito, especially, is very ritzy. Although there probably weren’t many sales in these areas, a small number of rich Hollywood types purchasing mansions or estates could bump up the median. From what I hear, the entry level market in SB is dead, but the super-rich continue to buy.
the entry level market in SB is dead, but the super-rich continue to buy.
Just the entry level market in SB takes the super-rich to buy.
I get it now.
Thanks everyone for clearing that up and helping me understand.
desmo said: Just the entry level market in SB takes the super-rich to buy.
Touché
Here is an example -
Lompoc - 1 house is sold for $300K - the median is $300K
Santa Maria - 1 house for $300K - the median is $300K
Santa Barbara - 3 houses for $800K - the median is $800K
The county - $300K,$300K,$800K,$800K,$800K - the median is $800. Medians in all area are lower, but the county’s median in higher.
The real answer is that the list Ben posted leaves out Goleta and Carpinteria, where the median rose a whole lot. See arroyogrande’s post below.
Davis down 2.8%, Woodland down 4.3%. If you actually look at both the markets, you’ll see that the price declines are actually more. This makes me a happy girl.
Gwynster,
you might find something next year at this rate.
I know, crazy ain’t it? And now I’m getting rent to own offers from FBs in East Sacramento (one of our prime areas). I have to wonder how the pot harvest is going in Gold River >; )
Good for you. Still hoping for some good price breaks in the Bay Area.
Dataquick California numbers for May:
http://www.dqnews.com/ZIPCAR.shtm
LA Times chart:
http://www.dqnews.com/ZIPLAT.shtm
534,266 licensed Realtors in the state of California.
What a horrible waste of space, oxygen and ramen.
Most go to bed hungry. Many have alligators to feed.
And the amount of CO2 they produce …
Westlake Village, Ventura County -33.7%
Can you say POOOOOOOOOOOF! ?
Boy do I have some horror stories to share soon.
Boy do I have some horror stories to share soon.
A favorite of mine, give vivid details.
be sure to print the article when you go out to an open house.
Plant in the face of the realtor.
WARNING! Median price information is totally useless in this new market enviornment. The economics experts and research companies that missed calling th”bubble” 12 months ago are working with figures that have no relevance. Let’s go back to basics, like Location, Location, Location. This fundamental is like gravity. It is unseen and almost never talked about, but it is there.
My research of the Las Vegas market shows that 4 of the 60 zip codes of Clark County Nevada contain 30% of the pending sales and closed sales for the entire county. Let me repeat, 4 of the zip codes contain 30 per cent of what is happening.
What relevance does the median price of sales in Clark County have to what is happening in these 4 zip codes.
If you break out median price of condos (bad sales) from single family homes, the figures become more distorted. Break out 1 story homes which are selling 25% better than 2 story homes, and it shows me to ignore the reported median prices, and focus in on what is selling and what is not selling.
I believe the crash of housing prices will be neighborhood by neighborhood and that median pricing will hide the true picture
I looked at Yolo county and even Davis was negative and yet
damn, cut me off. As I was saying
Davis -2.8%
West Sacramento 1.1%
Woodland -4.3%
Yet you get : Yolo County 3.4%
My guess is that they are counting sales outside of the cities where there is still tons of agricultural real estate; i.e., lots of acreage to be divided up and sold by parcel. On the north end of the county you also have Cache Creek Indian Casino so there may be speculating there as well.
So settled neighborhoods down, speculating up slighly.
OT Ben this is one helluva blog much appreciated.
“…For Whitney and Alexander Hoerman, it was a two-bedroom Menlo Park house that they won with a bid of $590,000 in a nail-biter of a contest with another (demented) bidder.”
That’s how *I* read it.
No, it should read this way: “….a nail-biter of a contest with a free bidding shill from the auction company.” If the shill won the bid, they would just bring it up for re-bidding later, saying the “buyer” could not qualify for financing.
If you go to USHomeAuction.com in the rules and regs, section 3 it says: “The Auctioneer may open bidding on any Property by placing a bid on behalf of the Seller. The Auctioneer may further bid on behalf of the Seller, up to the amount of the Reserve Price, by placing successive or consecutive bids for a Property, or by placing bids in response to other bidders.”
Don’t believe it? go and look at http://www.ushomeauction.com/terms.php
Unf–king-believeable. So shill bidding is not only commonplace, now it’s *also* perfectly legal?? What’s next? Hell, why even bother with the pretense of a so-called “auction”? How about just randomly picking “winners” from the phone book and mailing them a “congratulations, new homeowner!” notice (along with their six-figure bill)?
Now you get it. It is unbelievable.
All the “real” bidders should stop bidding immediately when the auctioneer makes any bid. Then they will be forced to re-list the house later. At that point, all previous “real” bidders should stop their bids below what they previously bid for that house. This method will quickly put an end to auctioneer bidding. However it does not work with shill bidders where the real bidder does not know it is a shill. Even then, if a bidder can stop bidding when they have reached their predetermined upper limit for the house in question, they will not be forced to stretch by shills, and from what I’m hearing there will be more and more of the same coming down the line over the next 1-2 years.
all sarcasm aside…why not just set a minimum bid or disclose the reserve? it would save everyone a whole bunch of time.
Do they realize that the longer this foolishness drags out, the worse it will be?
Just liquidate, reset the clock and get things back on track.
Short term pain..just rip those stitches out Doc! I can take it.
Because there will be idiots who get caught up in the “thrill” of the auction and exceed their bids by tens of thousands of dollars. If only 1 out of 10 houses sells to a FB that way, then the auction house makes its money. But the only way to get idiots like that in the door is by advertising “ridiculously” low minimums (although in a few years, those prices for those same homes will look about right).
So you know, there were about a dozen homes at Auction on Sunday that “sold” on Saturday. I’m currently wondering if the home I put a bid on was re-auctioned on Monday’s auction.
Who’s financing these purchases? With a lot of these properties selling for top dollar, they are foreclosures in the making.
they had the same problem in Australia and made it illegal…
it was wide spread scandal down under with fake bidders.
How about this: If a bidder “can’t qualify for financing” then you have to offer the house to the next highest bidder, at whatever the last price he bid was. That will end shill bidding.
590k for a place they plan on tearing down.
Idiots!
Oh, but it has a HUGE quarter acre lot!
And where is the money for the teardown coming from? I’ll bet they figure that they can borrow the difference between purchase price of $590K + auction fee and the $700K wishing price. They are in for a world of ‘comeuppance’ which will only be worse if there are liens on the property. What rock do these idiots crawl out from under?
It was 2 bedrooms and less than 900 sq feet? A dream mansion indeed. Sounds like my old trailer.
Menlo Park, one of the most expensive areas in all of California.
I have idots for you - catch the reductions, the first few are huge >; )
MLS #: 70006243 Sacramento
On Market: 157 days
Price Increased: 02/05/07 — $349,000 to $349,800
Price Reduced: 02/08/07 — $349,800 to $349,700
Price Reduced: 02/15/07 — $349,700 to $349,600
Price Reduced: 02/22/07 — $349,600 to $349,500
Price Reduced: 03/02/07 — $349,500 to $349,000
Price Reduced: 03/19/07 — $349,000 to $339,000
Price Reduced: 05/11/07 — $339,000 to $319,000
Idiots like this just crack me up to no end.
a pattern? It almost looks like the output of a program.
(in hundreds)
+8 (to set a baseline)
Then:
-1
-1
-1 (by the week, roughly..)
-5 ( after near 20 days)
-100 ( after near 20 days)
-200 (about 40 days)
No offense,
But you must be an idiot NOT to realize that 1/4 acre in the Bay Area is worth more than a county in fly over country. It’s the lifestyle….
No mention in the SF Comical article of the repeated re-lists of properties, as mentioned in the Sacramento Bee article on the same subject, and note the reference to “fast and furious” bidding and all properties selling… such obvious cheerleading… {Sigh}
By the way, another auction of 200 homes coming to Sacramento July 22nd. Part of a 5 city tour of 800 homes! The fault line is rumbling. The tsunami will be set off soon. Look for the receding water line as the life is drained out of all the FB’s.
Is this coming from the same outfit? If they follow the same rule set, I won’t be attending (although I also did go watch on Sat for giggles).
No, it is a different outfit. I have the info coming and will post it.
Ben,
Heard you on NPR today. Keep up the good work! Although I kept being interrupted by the plumber, who was working on our water, I don’t think they paraded out an NAR “expert,” to give their spin on things.
What show was Ben on?
Damn what show? I missed it.
Found it, Talk of the Nation
Can you post a link? TIA
Don’t worry, Listen online!
Ok, now I gotta figure this thing out. How do you link with words from a sentence instead of from a tiny URL?
Just curious…
Here’s an example. Write this in your post:
<a href=”www.yahoo.com”>Yahoo</a>
and it will turn out like this:
Yahoo
Well Said, Sid
“A second-generation owner of a local home building firm, Sid Dunmore of Granite Bay-based Dunmore Homes: ‘You have to understand most of the overhang was created by ourselves. And I hate to say it, but it was mostly the public builders, which couldn’t seem to stop building. In light of no sales they just kept on building, and they created this huge overhang. And so now they’re eating through it.’”
That is passing the buck. I know a bunch of private builders (which agressive money and little sense) who overbuilt plus the scores of high school/college dropouts who built too many homes to finance their rockstar lifestyles (”Honey, I know you were cool in high school, but if I don’t get a huge house, country club membership, and Lexus I’m sleeping with everyone you know.”) Anyone who built has some blame.
“Home sales decreased 25 percent in May in California compared with the same period a year ago, while the median price of an existing home increased 4.8 percent,”
Sales decreased and prices increased and the problem just got worse and worse in California, with no end in sight with these types of reports. Unbelievable, and people think the market is going to rebound, not going to happen here for another year, and if you think happen here means a rebound you are dead wrong…the beginning of dread and a loathing and reality and just the tip of the iceberg. I also think this delusional purchasing is also going to leave us with a sharp SHARP SHARP decline with panic instead of the proverbial soft landing.
There will be no sharp decline, there will be a reset !
“‘Prices have held,’ he said. ‘It’s an amazing time to buy. It’s really a great time to buy.’”
I get it, I get it. It’s never a bad time to buy . Yes, Mr. Sunshine & Frontal Lobotomy, it’s always I good time to buy on RealtorWorld.
That is like winning a bag at a contest, and you parade around with the bag screaming and then you slowly start to notice a smell and then carefully open the bag to see it full of crap.
Congrats!
LOL!
“‘Prices have held,’ he said. ‘It’s an amazing time to buy. It’s really a great time to buy.’”
These guys must repeat this tired mantra even when they sleep.
These RE guys are brainwashed to repeat this again and again. It is like a cult except here the members do profit too.
It’s ALWAYS a great time to get a commission check!
“‘It’s an adrenaline rush,’ said Omar Felder of Hayward. ‘I feel I’m getting a chance to increase my future riches.’”
——————————————————————————
The birth of an FB! PT Barnum had this guy in mind a quarter of a century ago.
A little PPT Barnum…
“More persons, on the whole, are humbugged by believing in nothing, than by believing too much”
I am so happy there are still boatloads of idiots with dollar signs in their eyes investing in these really great deals, it makes selling off my own Real Estate so much easier.
What is entry level at over 200K? Has everyone in the RE business lost their marbles. Lower wages, but still hyping the lie that everyone can afford a house. Trust me home ownership doesn’t compare to eating, not in any place I have been.
I thought the same thing- that is the quote of the excerpt.
Starter homes used to be (should be) 125 - give or take. Not 220.
“A half-dozen female ‘runners,’ also clad in black and white, clapped and cheered every outcome, then approached the winning bidder, clipboards in hand, to get started on paperwork.”
Must of looked liked a Ducks Unlimited fund-raiser and the Price is Right rolled into one.
Either that or a room full of dead cats bouncing all over the room.
nothing like creating a gameshow, carnival atmosphere to get the lemmings moving…
step right up folks, a dollar gets you three tries at the ring toss, c’mon folks, don’t miss out your chance to win these fantastic prizes..such as this comb, this stuffed puppy, this plastic snake…
Auctioneers remind me of “carnis” for the most part..
They might even be a few steps below a Realtor or Mtge broker.
“One particularly gung-ho ringman did a chicken dance whenever he saw someone bid.”
Chili dog, fries, and a Coke at housing auction: $9
Auction fees on the house you just bought: $35,000
Cost of house you just bought (which is still overpriced by $75K): $350,000
Getting a gung-ho ringman to do the chicken dance: Pathetic, er… I mean priceless.
That’s pretty funny.
Um… maybe they borrowed the chickern dancer from the Burger King web stie?
very funny…
“A half-dozen female ‘runners,’ also clad in black and white”
The only thing I can think of floating around cloaked in ‘black and white’ is a VULTURE. How appropos!
Pretty soon the female runners won’t be dressed at all. Strippers at auctions. Good sales technique.
US housing market: the good, the bad, and the myth-busting…..
First, a dash of good news: If you’re not trying to sell your house, don’t worry. You may only be in for a 10% to 20% trim in value.
Now for the bad news: If you are trying to sell your house, the market will not lose 3% or 5% when this is all said and done. In my opinion, it will face write-downs in value of 20% or more from the top - maybe even more in some areas.
But it doesn’t seem to matter how bad things get, the so-called experts routinely trot out the same old, tired myths…
“Housing market values aren’t the same as stock market values.” No. But when you lose 20% or 30% on your home, can you still say that housing prices don’t collapse like stocks? You have to experience it first.
“Home prices don’t crash.” Really? When you have excess supply of anything, prices will correct - regardless of the market. And that becomes even more potent when you mix it with other factors: Slowing growth… tapped-out buyers… speculators who need to get out of the market… rising rates, insurance and property taxes.
It’s time to get out your renting shoes………
My advice: Rent, don’t buy. You could rent the same house in the example above for about $1,200 per month - without the hassle of home ownership on a strapped budget.
http://www.moneyweek.com/file/31192/the-worst-is-still-to-come-for-the-us-housing-sector.html
“Slowing growth… tapped-out buyers… speculators who need to get out of the market… rising rates, insurance and property taxes.” You omitted hurricanes
“Each property had a published minimum bid and a higher secret ‘reserve price,’ the actual minimum the banks were willing to accept. A phalanx of bank representatives flanked the auctioneers and told them when to accept lower reserves.”
“It appeared that almost every property on the block received a winning bid, but bids below the reserve were subject to possible denial within seven days, according to the auction catalog.”
I wonder how many bank employee’s were in the audience with a list of ’secret reserve prices’ so they could bid up the properties to about $1k within the reserve?
“It appeared that almost every property on the block received a winning bid, but bids below the reserve were subject to possible denial within seven days, according to the auction catalog.”
I wonder if one time is better than another when approaching a bank to buy and REO property. Is there a time when they have to file disclosures for this sort of thing? or Do they examined quarterly? other?
Interesting question. Do they report REO for any particular period? I imagine that once they start paying property taxes on a property, they start to get more nervous, but other than that…?
Also, do they send people out to check on these things after the initial eviction and clean up is complete? Aside from the B&E angle (”I swear officer, the door was wide open when I found it, I just shut it behind me as I walked in.”), what’s to stop someone from finding an REO online and squatting?
I remeberber from the RTC days, the banks report their non-perforning assets (REO’s) once a year, end of January. Haven’t worked in foreclosures for a while, so I am just reporting from memory
“Currently, housing sales are slowing to a pace where there’s nearly one sale per licensed agent per year. And it may get worse before it gets better, according to the Department of Real Estate.”
“Nearly one sale per licensed agent per year”! Let’s say some agents sell 2 or even, gasp, 3 houses. That means, let me see…, some agents sell around zero houses a year….
Look at this way, seeing that the NAR loves averages and means..
If each agent sells one house per year, than only the ones selling the most high end properties (millions of $) would make enough to live on. For example, 2% of a million bucks ain’t gonna get you very far.
The shill @ $300k probably had his or her hand held high…
“‘Folks, take advantage of the market today,’ a fast-talking auctioneer exhorted a packed room of real-estate bargain hunters on Sunday. ‘I have (a bid for) $300,000 now on this condo; do I hear $310? I’ll take $305 if that’ll help you. Who else wants in? Raise those bidder cards.’”
“The couple, who have three children, want a bigger home. While the 890-square-foot home they’re buying is cramped, it’s on a quarter-acre lot, so they plan to expand it. They had been eyeing the house since four months ago, when it was listed at $740,000. ‘We will tear most of it down,’ said Alexander Hoerman.”
So, essentially, they paid for the lot. $590K for .25 acre.
His poor children.
I hope it’s ocean front.
It has a view of Catalina
How can you not tear down most of a 890-square-foot house?
yeah, it’s like trying to dig half a hole…
Use a nail file and file it down carefully
In many California cities, you cant tear down and rebuild, you have to “remodel” the existing house.
There are rules against tearing down a crapbox, but not against shill bidding? OMG.
Yes, but all you have to do (in many locations) is save a part of a stud wall–basically any bit–to have it count as a remodel rather than a new build or rebuild. Husband’s an architect and he said it is often done so that people can get the permits and get them cheaper. After the “remodel” is done, the original wall bit is usually destroyed as well. Voila–new house.
“‘It’s an adrenaline rush,’ said Omar Felder of Hayward. ‘I feel I’m getting a chance to increase my future riches.’”
I take it Omar was just lurking then.
Increase someones current riches at the expense of your future.
Fresno just had a home show. I’ve been to these in the past and there is good traffic with lots of vendors there.
This year, there were more vendors than attendants. Perhaps it was the crappy sunny weather that kept them away. Perhaps everyone was too busy moving into their new houses.
Here are 2 new listing in Long Beach,
Bank Owned
3943 E. 5th Street
Sold: 12/07/04 $749,000, Refied: $943,500, 03/2006
Listed: 06/2007 $669,900
3711 Weston Place
Sold: 08/2005 $750,000, 100% finance
Listed: 06/07 $731,500
Better buy before you get priced out forever! What BS!
Are those bad areas of LB?
Not too bad for LB. The 5th Street location is ok since it’s south of 7th and on the better (ie East) side of Redondo, but you can get a real mixed bag of blue collar neighbours.
The Weston Place house is in Virginia Country club area which is a nice pocket. We looked at homes there once but I couldn’t get past the crap you had to drive through to get there.
Here are 2 new listing in Long Beach,
Bank Owned
3943 E. 5th Street
Sold: 12/07/04 $749,000, Refied: $943,500, 03/2006
Listed: 06/2007 $669,900
Add the price on Zillow ! Will look funny below the Zestimate of 871,416
Boy, some folks got taken to the cleaners at that auction. Fake bidders, bogus appraised prices, lots of tits and ass.
Count me out. Well, except for the last part.
The last part’s probably fake too.
LOL - the auctioneer’s a piker, the bidders are shills, but the T&A - it’s for real…. NOT!
I am so pissy today for several reasons, none of which I will elaborate on here. With that said, understand where I am coming from (rant on)!
Other than mode, median is the worst stat to use. I could sell 2 houses at $1 and 3 homes at $1mil. The median would be 1 mil, but the avg. (mean) would be basically $600K. NAR loves this number because they know people do not know what the median REALLY IS. They know 90% of the pop will think median is average. All I can say is our education system has really taken a dump when this happens. He11, if you don’t know or are unsure of what it means look it up in a dictionary or on the Internet. Have we become this lazy as not to look it up. Even I get these confused sometimes, but will look it up to make sure I am on the right page.
WE ARE SO SCREWED IN THIS COUNTRY BY FALSE ADVERTISING AND LAZINESS. I think I will now go and take a nap. That wore me out.
I can remember my college statistics professor (a Czech refugee) asking, “Vat kind off average? Mean? Median? Or Mode? In stah-distics, you MUST be specific!”
In right-skewed distributions, which are generally representative of most economic data sets such as income, house prices, car prices, etc., the median is below the mean. In large data sets, as long as data is reported consistently and unambiguously, both are useful and carry information not in the other. In smaller data sets, the median is generally subject to more variability than the mean.
Hey buddy, I hope your day gets better. Dont let the R.E. shills and liars get you down. Most of them will get theirs in the end by way of BK and/or back to shoe store employment. As for the educational system, I agree - lots of improvement needed there.
If you are going to one statistic to represent homes (or incomes), the median is the best (or the lesser of all evils). It removes the effects of extreme outliers, and is more likely to give you the price of a typical home (or a typical income).
Having said that, because it is a statistic, it also loses information. It’s not perfect, but if you had to report one number that represented a population of sales, that would be the best compromise.
“But nowadays, PWR is busy arranging seminars on how to conduct short sales or how to take advantage of foreclosures.”
…how to shop at dollar tree yet still look trendy…secrets to make Top Ramen taste just like steak…6 ways to remove and re-apply that enterprise sticker without anyone ever knowing…build a sandwich board fort for the kids without ever picking up a hammer…101 ways to wok your dog…little known hot spots while vacationing in Cleveland…
I’m thinking of writing a new cookbook for FBs:
“101 Ways With Ramen - With or Without Water”
~Misstrial
LOL!
“‘The decline in sales continues to be driven by both tighter underwriting standards since the start of the year and the adverse psychological impact of news regarding foreclosures and the subprime situation,’ said C.A.R. Chief Economist Leslie Appleton-Young.”
It seems as though the main psychological factor is the fear which is leading to a rapid drying up of the easy money that drove crazy lending. Never mind what is going on in prospective buyers’ minds — it is the subprime MBS investors and lenders who are pulling the plug on the market.
Ben Jones on NPR today http://www.npr.org/templates/story/story.php?storyId=11361676
Good job Ben. I can almost garauntee that guy in Mass. was paying interest only. Rent/Own differencial in that area doesn’t seem like it would be only $200 with a standard loan.
Ben Jones on NPR today http://www.npr.org/templates/story/story.php?storyId=11361676
I’ve been reading the articles about the auctions. Good Lord. It just goes to show you, some of these “bubble brains” will never get any smarter. Instead of camping outside waiting to get on the list for a new home, they switched to insane bidding at an auction. About 10 years ago, when the market was in a slump, we went to a class that teaches how to buy foreclosures. Unless you really know what you are doing, you have no business being there. Guess they just have to keep pumping air into that leaky tire of a house market.
Even if you know what you’re doing, foreclosures are still a risky business. My former landlady bought one. She’s still fixing the place up, almost a decade later.
I think that says more about your landlady than foreclosure auctions. Does it take a year when you ask her to change the lightbulb?
“Everyone has their own definition of the ‘magical mansion.’ For Whitney and Alexander Hoerman, it was a two-bedroom Menlo Park house that they won with a bid of $590,000 in a nail-biter of a contest with another determined bidder.”
Almost certainly this is in the unincorporated areas of San Mateo County that have Menlo Park addresses and are served by the most troubled schools in Redwood City. Anything like this in Menlo Park proper would have been remodeled or replaced by now and probably priced at or above the magical million mark. Psychological effect, anyone?
I might be wrong, but I’m pretty sure this is the run down Span-Med house with cottage shack on Fair Oaks at Tenth by the SPUC ROW that went through foreclosure back at the start of 1996. The most recent tennants had five or six cars parked all around and two big dogs out front most of the time. There were not exactly the best locally hosted guests from Michoacan.
They even adopted the big black shepherd that I was thinking of rescuing. I wonder what happened to him.
fun when a co-worker ocassionally strolls into my dark cubicle and catches me on ziprealty or someplace.
“Oh looking for a house eh? It’s a good time to buy…”
Hard not to smack them with the decaying salmon i keep in my drawer.
Usually i just say, well a-mil-three is a bit out of my price range, but that certainly is a handsome stuccoed shitbox.
I have someone that does that to me all the time. I tell her to go read my door (I have the BS ARM adjusting graph on it with a note that says “you are here” pointing to the current month). Today I played the NPR discussion rather loudly too >; )
How to find the Median Value
It’s the middle number in a sorted list.
To find the Median, place the numbers you are given in value order and find the middle number.
Look at these numbers:
3, 13, 7, 5, 21, 23, 39, 23, 40, 23, 14, 12, 56, 23, 29
If we put those numbers in order we have:
3, 5, 7, 12, 13, 14, 21, 23, 23, 23, 23, 29, 39, 40, 56
There are fifteen numbers. Our middle number will be the eighth number:
3, 5, 7, 12, 13, 14, 21, 23, 23, 23, 23, 29, 39, 40, 56
The median value of this set of numbers is 23.
Is this any way to appraise the shape of the housing market? Median Price Stats are complete buffoonery!
Is this any way to appraise the shape of the housing market?
Nope. It’s just a parametric statistic. It’s a more efficient way of representing the distribution, but at the obvious cost of lost information.
Quartiles are more useful (see housingtracker.net) as they give a better idea of the distribution (standard deviations are inapporpriate, as prices can not be Gaussian). But, even a full view of the distribution has it’s faults. A better way is the price per square foot, which is a crude way of assessing the price of quality. An even better way is to track the individual resales, as used by OFHEO and Case-Shiller.
But if you stratify the population into fairly homogenous neighborhoods, the median should do a good job of representing the price trend. The dataquick numbers are generally ok on the neighborhood level. The problem comes when they aggregate data from a bunch of dissimilar neighborhoods or aggregate data on a county level.
Since the subject of shills came up, my dad (RIP Dad miss you) would sit through these presentations in Vegas to get free show tickets. He said the first salesman would come over and go the soft sell pitch and my old man would smile and say no but there are guys in the crowd say “that’s a great deal” . Then the next salesman would take the tag from the first one and work on my dad that this is a great deal and go on and on about what he’s missing if he doesn’t get in on the ground floor, my dad would smile and say no. Then the top dog salesman would come over take the tag from salesman #2 and just pound and pound on my dad till he turned red because he could’nt break my old man to sign on the dotted line. My dad said the guy got so pissed off when my dad would smile and say no (must have broke his perfect record for sales) that he guy just reached into his coat pocket pulled out the tickets and threw them at my old man and said “get out of here”. But my dad said just about everybody in that room would sign up to buy god knows what.
At a timeshare sales thing in Cabo, the women threatened my wife and then told me she was going to lose her job. I laughed at her and then took my free jet ski ride.
I turned the kids loose at one time-share sales thing; the salesman looked at them, asked me if i was seriously going to buy, I said No, he said here take the prize and get the kids out of here. LOL!
My uncle is a strange character. One time he went to a timeshare presentation in Florida. In these places ANYBODY can get financed for ANYTHING. They took one look at him and told him to leave. They would not even give him the pitch. They just gave him the freebie and told him to go. LOL.
Wow.
Tonight, CNBC almost seemed bearish.
This may in fact be the tipping point.
Gary Shilling was on today (Kudlow) and said, “lower prices are a GOOD thing.”
Almost fell out of my chair. Someone finally spoke the truth (of course, a long-time bear & oft-cited economist here).
Higher prices, absent higher wages are NOT good for the economy.
“Putting the card before the house”
http://money.cnn.com/2007/06/25/real_estate/priorty_credit_cards_not_mortgage/index.htm?cnn=yes
couple weeks ago look at one of the auction homes in Boyles Hot Springs (Sonoma) this is an area that was all very small summer vacation homes for the SF money class and has gone through the Latino neighborhood and recently the yupie fixer up market. In the late 90’s these were 74K in 05 500K, now the neighborhood is full of forsale signs. This particuliar property was listed as a mim bid of 292K which by my standards needs to get closer to 84K.
Boyles Hot Springs; yuppies? Not the town I know.
Looked at a repo in one of the more expensive neighborhoods
in Santa Rosa (Hidden Valley). Bought for 695k in 7/2005; repossesed recently and now sitting on the market for $515k. Checked it out this weekend. Broken window in the garage and the backyard is full
of junk. hahhahha. The meltdown is just getting underway.
“In Madera, his Villa Granada tract has houses starting at $219,950. Previously, he didn’t sell anything for less than $300,000.”
“‘I’m cutting profits significantly,’ he acknowledged. ‘But it will still be profitable.’”
Hmmm, it takes a while for that second sentence to sink in. (Especially for those who bought last year)
ROTFL
If that builder can make a profit… he should keep building.
Although I’m sure a $219,950 home is smaller and has fewer items than a $300k home. But hey, that’s a home that can be bought by a working couple! Why… they can’t build those…
Got popcorn?
Neil
So, if you need to sell, how long would it take you to pay off that $80K??
Ouch.
The decline in sales continues to be driven by both tighter underwriting standards since the start of the year and the adverse psychological impact of news regarding foreclosures and the subprime situation,’ said C.A.R. Chief Economist Leslie Appleton-Young.”
Blame it on the messenger (press about foreclosures,etc.).
Also, I didn’t see her mention the fact that current prices are TOO HIGH (per the affordability indexes for CA cities).
See, Paulson wouldn’t lie. Subprime is contained, everybody knows that.
“Asian stocks fell for a third day on lingering concern that losses tied to U.S. subprime mortgages will curb growth in the world’s biggest economy…
“Investors have been taking their cue from the reaction in the U.S. market to estimate the influence of the subprime problem, which is still unclear,” said Yoshihisa Okamoto, who helps oversee $1.9 billion in assets at Fuji Investment Management Co. in Tokyo. “The decline in the past two days in the U.S. made people bearish about exporter shares.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aoUHd3AkN7JY&refer=home
See, Paulson wouldn’t lie. Subprime is contained, everybody knows that.
“Asian stocks fell for a third day on lingering concern that losses tied to U.S. subprime mortgages will curb growth in the world’s biggest economy…
“Investors have been taking their cue from the reaction in the U.S. market to estimate the influence of the subprime problem, which is still unclear,’’ said Yoshihisa Okamoto, who helps oversee $1.9 billion in assets at Fuji Investment Management Co. in Tokyo. “The decline in the past two days in the U.S. made people bearish about exporter shares.’’
The containment is spreading!! (A funny title to a calculatedrisk article a couple months ago…)
“‘In particular, the lower end of the market, which is the part of the market that is most affected by the subprime situation, has seen greater declines in sales and weaker prices than the higher end of the market. This will likely be a recurring theme in the coming months,’ Appleton-Young said.”
Sounds familiar. Oh yeah, that’s what I posted yesterday
The stats I have read show that subprime was a very small percentage for first time buyers that in fact was used mostly for refi’s, so I don’t get all this talk about the lower end of the market slowing down because of subprime loans rather it must mean that the subprime loan defaults have caused the credit market to tightened which have affected the lower and middle end market segments.
Self gloating is stupid.
“…that’s what I posted yesterday ..”
I remember that discussion.
“..the lower end of the market…has seen greater declines in sales and weaker prices than the higher end of the market.”
It was pointed out that this is exactly how the Plankton Theory begins.. the little fishies are the first to die off.
—-
“..will likely be a recurring theme…”
Huh? How often can one little fishy die? Can a dead fishy be reincarnated (get another loan and buy another starter home and get back in the game)?
No. Bigger fish will go hungry.
“‘In particular, the lower end of the market, which is the part of the market that is most affected by the subprime situation, has seen greater declines in sales and weaker prices than the higher end of the market.”
Santa Monica -17.4%
Playa Del Rey -16.0%
Mar Vista -13.6%
Theory not working….
Is that sales or prices, prices are all that matters.
matter
the favorite NAR stat
median price
May 2007 vs 2006
see the very first post in this thread (with link) by mr. b
Oh brother!
State assemblywoman’s bill would require translation of key information in real estate loans
http://www.nctimes.com/articles/2007/06/25/news/top_stories/62407175131.txt
(check out readers comments)
A bill that’s working its way through the state Legislature would require lenders who verbally negotiate real estate loans in Spanish and several other languages
Shit, an English translation would be a great start. I have a PhD with a minor in quant, and I can’t figure out a quarter of that legalese crap!
lainvestorgirl,
You are a toad. I can’t wait till the end of Q3 08. Your beloved Westside (an area you probably don’t even live in) will be a wasteland. Hope all your loans are 30 yr. fixed.
“You are a toad”
AGREE!
She is just another VA_Investor, DCBubble, LV_Landlord, PVTom, etc…
“Westside real estate never goes down - everyone wants to live here!”
I bet that quote was common in the late 1980s too. Fast forward a few years and we had this headline in the LA Times (no, I’m not making it up):
A sad Westside story: Home prices have declined up to 50% since late 1980s
Myers, David W; Los Angeles Times; May 28, 1993; D; pg. 1
People have such short memories. 1993 was only FOURTEEN YEARS AGO - no one who is old enough to legitimately be able to afford to buy a house has any excuse for not remembering 1993, even if they were wearing flannel and sporting a dorky looking goatee at the time.
“People have such short memories. 1993 was only FOURTEEN YEARS AGO - no one who is old enough to legitimately be able to afford to buy a house has any excuse for not remembering 1993, even if they were wearing flannel and sporting a dorky looking goatee at the time. ”
Wow. Guilty as charged
I’m a bicoastal guy. And I’m intimately familiar with the Westside of Los Angeles. At the moment, it really is different there. LAInvestorgirl is on the money when she says the west side is different. Three reasons:
1. Insanely priced houses continue to sell: Santa Monica, 90402, also known as North of Montana. 9,000 sq. ft lots with teardowns sell here for about $2m. Build a faux-italian McMansion on top of the lot and you’ll get $4m to $5m. Google the blog “Westside Bubble” — where this is tracked.
2. Incomes really are insane in Los Angeles. It is common for a TV executive to pull in $300K to a few million in salary. There are a lot of folks like that here.
3. Homes are bought for cash. This is something that people outside of LA do not understand. People will write checks for multi-million dollar properties.
As much as I know that every region has their own “it is different here” story, it is hard to reconcile with the facts on the ground. Rich Los Angelenos don’t give a rats ass about IO, Neg-Arm, mortgage gobbleygook. They just know that a home that cost $3m last year is now $3.3m this year. No sweat. They’ll earn the difference in a few months.
IMHO, the bubble dies on the Westside, in Manhattan and in the SF Bay Area if and only if the economy as a whole tanks in a big, big way. Only when entertainment producers in LA, bankers in Manhattan , and GOOG & AAPL stock-option millionaires in SF start to see real income and asset losses will we prices for home start to come down.
So — don’t pick on LAinvestorgirl — she is stating what is happening out here.
i too live on westside, and have lived in los angeles all my life….
there are people like you describe, but they are the minority… there are many more prop masters, animators, line producers, etc., who DON”T make 300k a year, and STREECHED to get the proper west side property as LOOKING SUCESSFUL MUST BE ACCOMPLISHED (it’s part of the gig, to GET another gig, as ) many are a project away from
Agreed — I know many folks who are working hard as sound designers, animators, costume designers and line producers. They are squeezed on both ends. On the income side, as you describe, their future cashflow is always up in the air and on the debt side, their mortgage payments are insane. Most of my friends in the category have IO mortgages. They are not nervous yet — but as we’ve learned on this blog — they should be.
The other group are the wealthy — I’ve put my thoughts on them in a response to “joeyinCalif” below.
“…but they are the minority… ”
A very very small minority, most are posers. As someone who has visited many homes here in Los Angeles and has seen a plenty financials. It’s not always what it seems…
“most are posers”
this has been my experience as well
Not only that, but I’ve been hearing “recession” rumblings about the entertainment industry.
A few friends, who’ve worked in the industry since the early 80s, are now looking into different careers.
Just found out a couple of weeks ago that another couple (both in entertainment) are both out of work now.
Of all the people I know in that field, most seem worried about their financial future. Heard it from different people in different areas (some movie, some TV, some music).
If entertainment takes a dive, LA is toast — in a BIG way.
If i get this right, the Westside’s wealth seems to be based in entertainment.. advertising, cable TV, CDs, DVDs, movie ticket sales and the like, which in turn comes strictly from the *disposable income* of the great unwashed masses.
Gasoline, bread, meat or a movie.. decisions decisions.
TV executives.. millionaires.. trillionaires. You cannot have so much money that you cannot be in debt or go broke by sundown.
the basic point is that no matter the $$$ cost of a property:To sell a property, someone must be ABLE to buy it.
If the buyers on the financial tier just below some property’s price cannot, for some reason, afford to buy it, the property will not sell .. and it’s price will drop or it remains in inventory .. This product is not in demand, or to put it another way, it is priced beyond the ability of the demand to pay it.
IF a potential buyer cannot first SELL his own property, he cannot buy up.
Wealthy people may appear to live in their own little world, completely self sufficient, but it’s an illusion,
To survive, the ocean’s ecology needs a constantly replenishing supply of food.. and that food source is primarily a healthy bottom rung on the food chain… first timers.. starter home buyers. And every link in the chain above must contribute to those above..
I disagree with the housing domino theory: where the first time homebuyer buys a house and the seller trades up and so on. This model may very well explain how the majority of the US population buys/sells homes.
I think it fails to explains how wealthy Westsiders, Manhattanites, SF Bay Area folks, etc. approach housing. Wealthy folks that are buying homes with cash (and I know quite a few of those too) approach it very, very differently than those buying with a mortgage. Some principles, I’ve learned from friends:
#1: They buy into exclusive communities. It isn’t enough for them to live just near. They must live *inside*. On the westside, it is Santa Monica 90402. In the Bay Area, it is Old Palo Alto, or Atherton, or Woodside.
#2: These communities aggressively defend their exclusivity by limiting new development — effectively limiting supply.
#3: Now imagine this scenario: demand always exceeds supply for these communities and the buyers always pay with cash. What is the limiting factor on price?
- It is not interest rates.
- It is not crazy mortgage products.
- It is not the ability to sell your current house.
It is your ability to a) generate cash and b) your willingness to part with it. I know a number of Bay Area stock option folks who are banking anywhere from $10K to $100K per *month* in stock option sales. I also know a smattering of folks banking considerably more. Similarly, I know quite a few folks who receive considerable monthly/quarterly/yearly royalty payments from their projects.
You are right, it isn’t as if LA or SF or NY is 100% full of these wealthy folks, but the problem is that even if the number is just a few percent, these folks move the market for homes.
*Because* these wealthy folks consisently provide the “high” bid for prices in most bubbly regions of LA, SF, and NY, everyone else down the line is forced to pony up. IMHO, the bubbliest of areas are now completely connected to the health of the primary economy and unless and until the overall economy tanks and people sustain real job losses, I do not see the bubbliest areas coming down in price.
You are right, it isn’t as if LA or SF or NY is 100% full of these wealthy folks, but the problem is that even if the number is just a few percent, these folks move the market for homes.
If your theory is correct, why did westside LA crash by up to 50% in the early 1990s, including your beloved 90402? Did they decide en masse that the westside wasn’t cool anymore, and then change their minds again in the late ’90s?
Test.
(wondering why my response hasn’t shown up…)
normally a short wait does it..
one of my posts didnt show up for 8 hours
post it again, please.
Tried 3 times now (original and a shorter summary). When they all appear, I’ll look an idiot.
Apology in advance.
(Don’t know if this will appear either…)
(I think it was too long. So I’ve broken it into two parts.)
1/2
I disagree with the housing domino theory: where the first time homebuyer buys a house and the seller trades up and so on. This model may very well explain how the majority of the US population buys/sells homes.
I think it fails to explains how wealthy Westsiders, Manhattanites, SF Bay Area folks, etc. approach housing. Wealthy folks that are buying homes with cash (and I know quite a few of those too) approach it very, very differently than those buying with a mortgage. Some principles, I’ve learned from friends:
#1: They buy into exclusive communities. It isn’t enough for them to live just near. They must live *inside*. On the westside, it is Santa Monica 90402. In the Bay Area, it is Old Palo Alto, or Atherton, or Woodside.
#2: These communities aggressively defend their exclusivity by limiting new development — effectively limiting supply.
I think my response is too long. It failed a 2nd time.
A summary: I don’t think the housing domino theory applies to the wealthy. In my experience, the wealthy trade houses between themselves in exclusive locations with development restrictions. I think primary driver for exclusive locations is health of the overall economy. Unless and until the overall economy tanks, I think the most bubbly areas of the Westside/Bay Area/Manhattan/etc. will be resist price drops.
BTW, one side effect of this is that wanna-be wealthy folks - those who pay with mortgages instead of cash - screw themselves by stretching to buy. It goes without saying that these people will get screwed first. But even they can try and wait for the cash-rich to buy them out of their mortgage.
I win either way. If I’m right, I’m right. If I’m wrong, all the better, I get to go shopping at a gigantic RE sale. My preference would be to be wrong, being right doesn’t pay the bills.
to my mind logic dictates that you don’t “win” either way…. logic would dictate that you are “hedged” to not “lose” either way
What’s great about this particular issue is that we’ll all know the answer within five years. It’s not as though we’re debating the validity of the Riemann Hypothesis here.
Anyone who genuinely believes that LA real estate is going to keep going up from here over the next five years would obviously be foolish not to buy now.
The rest of us will sit on the sidelines accumulating cash, and will keep doing so until it becomes comparably expensive to rent as to buy. Which, incidentally, means that WE win either way, because we always choose whichever option is cheaper.
This is OT …well.. maybe not…since the reason I’m asking is because of the bubble……
Has anybody ever had to deal with collecting on FDIC- insured funds from a bank? If so, how’d that go?
I’m making the assumption that we may be experiencing problems around that should things proceed the way they seem to be going.
Any opinions on which types of banks might be safer than others if the FDIC decided to drop the ball on a some of them?
ETC., etc…. any thoughts and all information welcome.
“any thoughts and all information welcome.”
my first thought is i wish you didn’t say it out loud ’cause i been trying not to think about it..
I did ask my bank(s) about that while opening some sizable accounts.. They kinda sidestepped the question and just said my $$ is perfectly safe. OK. Whatever..
Some banks have failed in the past and FDIC has, afaik, come to the rescue in every instance.. Unless im mistaken no depositor has ever lost his dough.
http://www.fdic.gov/about/learn/learning/when/1980s.html
but there is a book i heard about. The amazon,com reviews looked pretty good so i’m gonna buy it. “Financial Armageddon”
LOL. I know, this question has been gnawing silently at me for a while now and stared screaming pretty loudly today, to the point where I couldn’t shut it up.
I’m wondering if banks that people own stocks in might be better or worse off when it comes to FDIC? Like could they somehow decide to “save” the stock investors and screw the savers in a particular bank if it came to making a choice? They’ve been choosing gamblers over savers for so long now….
Lots of angles and questions….
“Financial Armeggedon” sounds like exactly what I’m worrying about. Let us know what the book says.
read the reviews .. evidently it’s not about tinfoil-hat doom and gloom, camouflaged underwear, stock up on ammo and MREs ..
it’s more about possible near-future financial events and sane preparations for them.
If some bank decided to drop FDIC, or screwed around and lost the insurance protection (by not following the strict fed guidelines), I wouldn’t see the little FDIC sticker on their front door.. and i wouldn’t put my money in that bank.
Yes, but is putting money in an FDIC insured bank considered a sane or insane preparation by the authors of the book?
I guess I’m concerned about these so-called “strict” federal guidelines. from what I can tell, they must have a very loose definition of the word “strict”, judging by what the banks have been up to.
i am gonna buy it tomorrow (if Barnes and Nobel has a copy) and will take a quick look and report back on that point.
from the current look of things, about 95% of the sheeple are still blissfully oblivious… Hardly anyone i’ve spoken to has even a clue about the foreclosure rate increases and RE prices dropping.
Today a friend told me her friend was in a hurry to take advantage of a bargain, and bought a big new house a couple months ago, without selling the current one, and is now (can i have a drum roll please?) carrying two mortgages, and is in trouble.
I says “Really? That’s just terrible! How could that happen?”
ahem..
So, it’s too early to worry about a sudden banking meltdown.
__________
Joey-
thankyou for that link. It’s an interesting read and makes the 80’s look like a total trainwreck. Which is funny because I was around then, happily ensconced in Montana and Maine, taking advantage of the 20% interest on CD’s and using the blood money to buy my first house, totally oblivious to what was happening in other parts of the country. Something tells me I won’t be so lucky this time and the mess is going into every nook and cranny.
Here’s a link with articles on the insurance fund that funds the FDIC. They currently have @ 50 billion dollars:
https://www.fmsinc.org/cms/?pid=1055
Here’s a link to http://www.bankrate.com where they supposedly tell you how healthy your bank is.
It’s on a scale of 1-5 (1 being the soundest). So if your bank’s a 1 or 2 perhaps it’s easier to sleep at night.
If you must have “dollars”, buy Treasury bills directly from the Treasury (www.treasurydirect.com”). Then you can forget about FDIC and just worry about (hyper-)inflation.
Techno-
Why do you think Treasury bills are safer? Sorry if that’s a stupid question…but I do need an explanation.
to renig on bank deposit insurance, is to renig on the US governments contract with it’s population (and many of the world’s population)…
so what? Road Warrior time?
I had CD’s ($99,000) with various S&L’s in the early 90’s. When the RTC took ‘em over, they would just cut you check for the $99 Grand and mail it out. Sometimes it took a while, so you’re out interest for a time, but usually it wasn’t long.
Bills are fine too, but it helps if you have a brokerage account to buy them in. Also, you can buy them directly from the US Treasury. And with bills, you want hyperinflation. Or at least, you keep up with inflation as yields on instruments that short tend to keep pace with inflation.
I wonder what is going to happen with prices when interest rates rise to 8%+. Prices have a looong way to go before they are affordable here in the central valley (CA), but im worried that interest rates will rise before prices come down too much which could result in zero change in affordability.
Well, keep in mind that back in 2001, on the other hand, interest rates fell before prices rose. But rise they did.
There’s no way with this much inventory and stagnant wages, that an increase in rates won’t spell falling prices.
The price change will reflect the change in interest rates.
That being said, it wasn’t “low interest rates” that caused prices to shoot up (indirectly, but not directly). It was loose lending standards.
When credit tightens, watch out. Interest rates are just one small piece of the credit bubble puzzle.
Okay, maybe a large piece…but it’s how the interest rates affected the lending standards that matter.
I don’t disagree that loose lending standards caused a more dramatic run-up. But lower rates certainly caused prices to increase here in Portland from 2001-2003. I don’t think the effects of loose lending dominated until about 2004.
That’s certainly possible, but in CA, we had very loose lending even in 2001/2002. I remember a couple of neighbors (who were NOT people I’d lend $100 to) suddenly refi’ing & pulling out cash.
Kinda funny, but why is it that the “less prudent” seem to catch on more quickly than the rest of us? I didn’t even know the extent of these loans until around 2003. Weird.