A Substantial Decline In California
The Voice of San Diego reports from California. “Last summer, year-over-year home prices dropped for the first time in a decade. And new data released Monday marked the 12th straight month of such drops in San Diego County’s home prices. The 19,184 homes sold in the first six months of this year mark the slowest first six months of any year in almost a decade.”
“‘At this point, you can kind of start saying, ‘What’s it going to mean for the whole year?’ said Peter Dennehy, local real estate analyst.”
“The county saw three times as much foreclosure activity in June as it did in the same month a year ago, according to data from RealtyTrac. Last month, foreclosure filings in all stages of foreclosure measured 2,564 in the county, compared to 842 in June 2006. And in June 2005, there were 317 such filings.”
“‘If foreclosures are going to stay at elevated levels, and some people are saying the resets have only just begun, we’ll know the problems are deeper than many ever thought,’ said Andrew LePage, analyst with DataQuick.”
“‘What this is largely about is a bunch of demand that’s missing because it played out prematurely in early 2005,’ LePage said. ‘People were worried about missing out, losing out. We stole demand from the future back then.’”
“Dennehy said the median and sales rates give a good picture of what’s going on in the market, in general, feast-or-famine terms, but the price indicators hide much of the actual state of the market, where homes are selling for as much as 20 percent less than they once were.”
“‘If there was a home bought in 2004, and you’re seeing it sell again in 2007, you’re going to see a substantial decline,’ he said.”
“‘In the past, economists have viewed the economy as affecting the housing market,’ said University of San Diego economics professor Alan Gin. ‘Now it seems to be the other way around this time around.’”
The North County Times. “No agents or economists interviewed in recent weeks said they expected a broad rebound in Riverside County home prices within the next year.”
“Even the California Association of Realtors, known for its perpetually cheery take on the state’s real estate market, forecast that prices will fall 2 percent this year in the state, and other economists have estimated that declines of 5, 10 or even 18 percent are needed to bring prices back into line with residents’ incomes after record appreciation in recent years.”
“Local sellers who cut their price by $20,000 have often been able to sell their houses in just a couple of weeks, agents and sellers said.”
“That’s one reason prices have fallen from 2 to 20 percent in most Southwest County neighborhoods. The price of a typical existing home in Temecula has fallen about 8 percent in the last year to $435,000, according to DataQuick. Prices have fallen 3 percent to $385,000 in Menifee and 16 percent to about $425,000 in Murrieta.”
The Union Tribune. “DataQuick has yet to tally June foreclosures, but analyst Andrew LePage says there’s no evidence yet that the surge is ending.”
“A record 532 dwellings were taken back by lenders or sold at auction in May, a slight rise over April, DataQuick reported. County foreclosures for the first five months of the year totaled 2,240 compared with 336 for the same period in 2006.”
“Rodney McHone, who bought his Oceanside home three years ago for $609,000, has put the four-bedroom house up for sale, hoping he can get $475,000 for it in a short sale. He says he knows there’s no guarantee his lender will let him stave off foreclosure by accepting a lesser price, but McHone says he has little choice as he faces mortgage payments that could soon balloon to more than $5,000 a month.”
“‘This was my wife’s dream house,’ said McHone, who is trying to work his way back up from a substantial pay cut in his job. ‘I’m not going to walk into a foreclosure. I worked too hard to build up my credit. I’m not going to let no house screw up my family.’”
The LA Times. “Southern California home sales plunged to a 14-year low in June, dragged down by growing weakness in the Inland Empire, where sales volume declined nearly 50%, data released today showed.”
“In June, sales in Riverside County plummeted 50.1%, and the median price fell 5.9% to $400,000. San Bernardino County sales fell 47.2%, as the median price was flat compared with a year ago at $365,000.”
“In Ventura County, the median price fell 6.9% to $582,000, and sales declined 27.8%.”
The Santa Cruz Sentinel. “The increasing number of high-end sales in Santa Cruz County is keeping the median home price high, at $757,000 in June, a barely perceptible dip from $760,000 in May.”
“But the number of overall sales is down in comparison to the red-hot market of three years ago, when more than 250 homes sold in June. This year’s June sales, 164, are the fewest since 2001, according to Gary Gangnes of Real Options Realty, who compiled the monthly statistics.”
“The current housing inventory is at a 10-year high with 1,292 listings.”
The Press Democrat. “Sonoma County’s sluggish housing market showed modest signs of life in June, but agents say it’s still too soon to start calling an end to the county’s 2 1/2 year market tumble.”
“Prices have fallen for 12 consecutive months in year-over-year comparisons, the longest decline since The Press Democrat began tracking home sales in 1990.”
“Inventory also continues to back up, as new listings hit a market even as buyers remain on the sidelines hoping for better deals.”
“‘Have we hit bottom? I can’t tell because you always have a spring surge,’ said Beth Robertson, an associate broker in Rohnert Park. ‘But what I thought was positive was that this might be the beginning of the end of the downward spiral.’”
“Total sales were 20 percent off last June’s pace, when 435 homes sold. That’s a sharper drop than May’s 15 percent decrease, and second only to April’s 21.5 percent drop compared to 2006. That tells some brokers that what the market really needs is for buyers to wake up and realize how good they’ve got it.”
“‘This is strongest buyers market that we’ve seen in eight years,’ said Ross Liscum, co-owner of Prudential California Realty. ‘We just can’t seem to get the buyer to acknowledge they’re in the driver’s seat.’”
“Liscum blames this condition in part on the media’s ‘doom-and-gloom’ headlines, while Robertson said she’s seeing plenty of activity in homes that are priced right.”
“A recent home in Rohnert Park priced in the high $400,000s was scooped up after a $40,000 price reduction, she said.”
“The number of single family homes for sale in June increased by 4.9 percent, to 2,568. At the current rate, it would take 7.4 months to sell that many properties.”
“‘This is not a market for all sellers,’ Rosa said. ‘A lot of sellers can’t stomach this market.’”
OT - Bear Stearns reports subprime hedge funds worth about 10 cents on the dollar. After hours has BS down about 3%.
But remember, 10c on dollar is for the higher graded one. The other one is declared to be nearly worthless.
“10c on dollar is for the higher graded one.”
Comforting point.
I’m not an investment genius, but generally I think you want your investment to be worth more than zero.
Yes, the greater fool theory doesn’t work when you bag is empty.
Lots of FBs out there who are just figuring out that their “investment” has a net worth of less than zero.
I think you want your investment to be worth more than zero.
Uhm…in the real estate game, you can very well have “investments” worth less than 0.
I’ve seen foreclosed properties, worth negative values because the cost to demo or an environmental clean up is more than the vacant site.
Some dude who been dumping waste oil on a back lot, or a heavily trashed multi-unit loaded with asbestos and lead paint?
Here Mr. REO Banker Guy…How’s a negative $50k clean-up bill for the place you lent $350k against.
Man, don’t they go ballistic when this stuff surface….and you can bet that after this lending orgy it’s out there in spades.
“I’m not an investment genius”
Apparently, neither were the fools at BS - on the bright side, they might be hiring soon, and it sounds as if you’re qualified!
LOL!
I’m moving everything I can into bonds tomorrow. I don’t even trust cash anymore as the dollar is tanking also.
Wair du I send my rezoomay?
“Wair du I send my rezoomay? ”
ROTFL!!!!!!!
It is 9c on the dollar, but that’s relative to the end of April valuation. The value took a steep dive from March to April. The truth is probably closer to 5c on the dollar.
The investors had hoped for 50c on the dollar. They must be victims (of something).
5c versus 10c = 50% off sale! Snap’em up, hedgies…
Of course, the come-on for hedge-fund investors is that they were wealthy and more knowledgable than us mere scum.
Sort of reminds one of how the ‘venerable’ LLoyds of London suckered in U.S. investors to become ‘names’, and then stuck them with the liabilities of the asbestos lawsuits.
One of my more reliable explanations of otherwise inexplicable human behaviors is: “People are just dopey.”
Seems to work most of the time.
Ouch.
Seconded.
According to The Wall Street Journal, Bear Stearns told investors in the hedge funds late Tuesday they are worth virtually nothing, with the more highly levered fund worth zero cents on the dollar, and the less leveraged fund worth 9% of its value at the end of April. A Bear Stearns press release is expected later Tuesday.
The fear is that such a worst-case-scenario with the valuations could cause many more funds than expected to mark-to-market their portfolios. The next domino would be banks further tighten the strings on their lending to hedge funds through their prime brokerage business. This means investors that borrow to invest may have to pay more for the money they’ve been using. This might mean funds sell other assets to cover those costs, and that could include high-yield bonds and leveraged loans, both of which have also suffered losses of late.
http://www.thestreet.com/_yahoo/markets/marketfeatures/10368425_2.html
Are you trying to tell us in so many words that the stock market is likely to hit another record high tomorrow?
Yup, lever up baby. Buy the ultra long funds.
Check out the NIKKEI. Off 1.21% and counting.
Chart
Japan needs to organize a homeland version of the PPT, so their stock market can always go up, too.
They had one for years, that is how their market got to 39K and change. IMHO every professional trader knew in 1987 that Japan was in a bubble stock market, but exchange rules prevented 99% of us from being able to short stock. And for those few traders that were able to short stock, it was in the thousands not tens or hundreds of thousands of shares. Short selling provides market liquidity in a down market.
“They had one for years, that is how their market got to 39K and change.”
You’d think that would have been a cautionary tale for the Fedsury, wouldn’t you?
Hey!
All you hedgies and banker Pig Men:
“How’s your model lookin’ today?”
Like Tryra…161…babeeeeeeeeeeeeee
http://tinyurl.com/2hv84s
http://tinyurl.com/yqbyg3
another one
WSJ:Two Bear Funds Nearly Worthless, Investors Told -Sources
http://tinyurl.com/2czm4x
“Worth $0″ is better than the financial positions of many U.S. homeowner households (less than $0).
Yeah, but like McStoned, they’re not going to let no negative equity screw up their families… They don’t need no steekin’ equity!
Well, they had predicted this result about two weeks ago in the Financial Times. No big surprise, we will see what happens this week in the markets. Loan market is going to get tighter as banks upgrade underwriting.
The Bear Stearns hedge fund meltdown is a watershed moment. Sort of like Ownit Mortgage shutting down (better name = “f”it mortgage). Or the NAR ‘fessing up to price declines. Or New Century going BK.
Next watershed moment = Bernanke p*ssing on the fire
BSC looks like it is in slow crash mode off its all-time high (thx in part to excellent plunge protection services…)
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=BSC&time=20&freq=1&comp=&compidx=aaaaa%7E0&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp
Speaking of the plunge protection team, this morning’s Bloomberg post includes this:
“The funds had bought so much with borrowed money that the losses were magnified, wiping out investors’ capital, Michael Hecht, an analyst at Bank of America Corp., said today in a report. Hecht advises buying the firm’s shares. The funds’ losses ultimately won’t reduce Bear Stearns shareholders’ equity, Hecht said.”
Thanks a lot for the advice, pal..
“‘What this is largely about is a bunch of demand that’s missing because it played out prematurely in early 2005,’ LePage said. ‘People were worried about missing out, losing out. We stole demand from the future back then.’”
Here’s your missing demand…
http://ml-implode.com/
“Even the California Association of Realtors, known for its perpetually cheery take on the state’s real estate market, forecast that prices will fall 2 percent this year in the state, and other economists have estimated that declines of 5, 10 or even 18 percent are needed to bring prices back into line with residents’ incomes after record appreciation in recent years.”
Get real. None of those numbers are sufficient to bring prices back into line with residents’ incomes.
RUle of thumb for me is take what they are spewing and double it minimum so in this case 10, 20 or even 36% at a minimum.
It doesn’t matter. Banks have started demanding that borrowers be able to repay their loans. Market value of homes is set at the margin - when and where transactions happen. Prices will therefore drop necessarily (barring hyperinflation).
“Banks have started demanding that borrowers be able to repay their loans.”
What nerve. Since when do banks care about whether borrowers are actually able to repay their loans? That’s just so 1990s thinking.
Ahh, I remember now, grunge bands, AOL, and down payments.
watch your local Thrift, I saw one 7 months 5.15%
when those guys start trying to attract money…its not a good sign to run in and plunk down a big chunk of change…
I am seeing a need for a further 40% drop to bring prices inline with incomes and rents. The math is simple and with the new tougher lending standards, I would not be surprised to see sales really drop fast now.
Why am I so happy at all this “pain”?
- Bitter Renter
- Tired of being snubbed about “not getting on the bandwagon”
- Enjoy restoration of equilibrium
- Shorting builders
- Like to see greed put in its place
- Sadist
- Want to see “easy money crowd” out on the streets
So why is it that some of us take such great delight in the RE bubble burst?
I have decided that for me it is probably the last one….I am sick to death of all the fakes and phonies living beyond their means while gravity and sanity were on a 5 year vacation…..
“I am sick to death of all the fakes and phonies living beyond their means while gravity and sanity were on a 5 year vacation…..”
Same here.
“In June, sales in Riverside County plummeted 50.1%, and the median price fell 5.9% to $400,000. San Bernardino County sales fell 47.2%, as the median price was flat compared with a year ago at $365,000.”
D’ya think anyone in LA besides the journalist who wrote this piece has noticed the housing market is changing?
All the Kool Aide in the world aint going to change what is happening here. They can pretend it isn’t happening, they can fain indifference and pretend all is well, but right under the surface a large black tumor of reality is going to break through the skin. We even have REO with ocean views now….unreal this is just starting barely beginning and there is nothing to stop it.
“feign”.
the reason for house price in inland empire to decrease while price in LA and OC to hold is that the inland empire for the most part is made up of working class people. They buy low end houses; whereas in LA and OC, rich people still buy at bubble prices while the low end is dead in the water. thus median price in LA, OC is stagnant but not decreased while inland empire price keeps on decreasing.
Psssstt…..median in OC is over 600k, grab your helmet and jump in a fox hole when this crashes it is going to make a big boom….OC and LA are done fried and over extended beyond any repair the only hope is a 35%-50% reduction in prices.
When OC crashes I want to see an update on the ‘Real House Wives of OC’ and their snotnosed kids.
Median for a SFR is $734,000 in OC. Considering that OC’s median household income is somewhere around $75,000, I’d say that 50% off (combo of price drop and wage increases) certainly seems realistic (still leaves prices at ~ 4.9 times median HHI).
IMO houses in the “nice” neighborhoods will fall by 70%. I don’t know what is going to happen in the “ultra high end” neighborhoods (i.e. Malibu, Bel Air) but I would not be surprised to see similar declines in those places.
People have no idea what is coming. The average middle-class, college-educated FTB can’t really afford to pay more than $150,000 for an SFH. $300,000 is a ton of money, that should buy a McMansion, not a starter home.
Even in LA, the number of people who can actually afford to buy a $500,000 house is vanishingly small.
The Malibu house I grew up in is now worth 1.7 million. Back in the 80s and 90s they use to call the neighborhood “Valley by the sea”. Prices? 400K back then…
Lock the bunker doors … its going to blow…
The place I grew up in in Malibu Zillows at the same price. My parents bought it in 1959 for $22,500.
“People have no idea what is coming.”
You are absolutely right. Everyone I talk to seems to think that this downturn is short term. They have no idea how long it is going to continue, which will be well into the next decade and maybe beyond …
“They buy low end houses;”
I’m you mean shacks for 400K
How much do the rich guys in OC/LA make to buy 800K homes?
We live in Venice in a $800K house (or it was when bought). It’s hardly a mansion, but it’s nice and we can ride bikes to the beach. We have a household income of about $325K. With a 30 year fixed mortgage, it’s pretty manageable. However, I know we’re not typical.
Jeezus! Nice work.
“We’re not worthy….we’re not worthy…..we suck…”
You’re not going to be rich long making those kinds of purchases. Your house is only worth what the market will bear. If the rest of the population in the area can’t afford those prices, they will come down. Sure, you say, we’re only living here, we don’t care what we are paying for it. Well you might in 5 years when an even better house, closer to the beach is sold for 1/2 the price of yours and your mortgage is 2x what other people are paying for better houses. Then you want to get into one of those better houses, but can’t sell yours without taking a 400,000 dollar loss. Hey, what the hell, that’s just a bit more than your annual income so why worry?
Doctors and lawyers are known to have money problems too. Gee, I wonder why.
It’s very much in our favor for the prices here to crash so we can upgrade. We certainly wouldn’t be buying here at today’s prices. We know it’s a bubble. Our house isn’t worth what we paid, let alone what it would sell for now. On the other hand, we have a house that we like and can afford. We’re not extravagant. We save, we drive economy cars. I know you’re pissed off at the bubble buyers in over their heads, but we live well within our means.
I live in OC, I’ve seen these “rich people” you speak of. They ain’t rich.
I agree. If it’s just about richness, why were these rich people only paying a third of today’s prices seven years ago (or thereabouts)?
Amy’s right, 250K is working class in LA
HaHaHaHaHAAA!
Estimated median household income in 2005: $42,667 (it was $36,687 in 2000)
Los Angeles $42,667
California: $53,629
Estimated median house/condo value in 2005: $513,800 (it was $221,600 in 2000)
Los Angeles $513,800
California: $477,700
http://www.city-data.com/city/Los-Angeles-California.html
Some affordability ratios for LA (median house/condo value to median household income):
2000: $221,600/$36,687 = 6.0
2005: $513,800/$42,667 = 12.0
Stop the nonsense. What are you smoking?
Don’t you personally know some illegal day workers? Wonder if they’re taking in $250K
Who do you hang out with? Hollywood types and RE “professionals”? 250K is what certain types of doctors make (not GPs), and maybe union dockworkers.
Two income middle class households probably make $80,000 - $130,000…and they usually have extra expenses like child care and private school (if they know what’s good for their kids).
lawyers, bankers, doctors, high end RE “professionals”, actors, producers, directors, other talent, agents, contractors, small business owners, porn actors, the idle rich from all over the world, venture capital workers and other financial pros, accounting partners, etc all make that kind of jack in west la. The very high end is not going anywhere because most of those jobs are not real estate related.
The poseurs who took out big mortgages to move on up, though, who were, say, mortgage agents, will lose their homes. I just don’t know many of ‘em. Most new purchasers of homes in WLA that I know fall under the above categories and most had the down payment of a traditional mortgage paid via their folks.
I hope Santa Monica and other nice parts of WLA blow up but I am not counting on it. Not many people are going to buy in Riverside or Inglewood not matter how cheap it is. Not many people will be forced to sell in the nicer areas. Maybe prices go down but most people who live in the nicer areas don’t earn “wages.”
well, all jobs will be real estate “related” to this disaster in the long run.
see.. when J6P can’t afford to go to a movie, porn or otherwise, all them actors producers, talent, agents, ad agencies, etc. are gonna suffer. And when he can’t afford a dentist for the kid, or a new car, or any stuff beyond survival, likewise the small businesses, dentists and doctors will be hurting… bad.
“all make that kind of jack in west la. ”
$250K a year? And what are they spending on houses? $1.5M? $2M? $800K for a condo conversion? Sorry, even with “making that kind of jack”, you can get into trouble at those prices.
“Most new purchasers of homes in WLA that I know fall under the above categories and most had the down payment of a traditional mortgage paid via their folks…Not many people will be forced to sell in the nicer areas.”
So all of these people have 20% down, fully amortizing 30 or 15 year fixed rate mortgages? Lets see, making $250K combined income, with a $1.5M - $2.0M purchase, and a trust fund for the down payment, you are still left with a loan of $1.2M to $1.6M. Hmmm, and making only $250K a year? well, at 6.25% 30 year fixed, the principal and interest is $7.7K - $8.8K a month. Taxes would be at least $1.2K-$1.6K a month, and what would be the insurance? How much does the gardener cost? The pool guy? The nanny? The private school? The two luxury car/performance car/behemoth suv payments?
Are you sure that these acquaintances aren’t just fibbing a bit, and maybe took out a kind-of sort-of little bit of an exotic mortgage, just to “free up some cash flow”?
If you want, I can look up the recorded trust deeds for you and tell you what kind of loans they have. If you are up for it, it should be interesting…
Here’s the thing, you can’t have a house *worth* 1.5 million on the West side and the exact same type of house in Riverside worth 150K. That just ain’t going to work!
$250k salary is hella good but that wont be enough for a $1.5m house and the $750k houses arent terribly nice, I can get one of those for around $50k in NW Pennsylvania.
The nice areas arent immune either, maybe the crash will be more gradual and played out longer.
I grew up in West LA, Santa Monica area. My parents still live there in a million dollar L.A. dump built in the 1930s with crumbling stucco and broken red tiles on the roof. Yeah, you know the style. After living in other areas of Southern California, I wouldn’t return to West LA unless I was paid 250k a year and I’d scrimp and save to get out of there ASAP.
Anyone who thinks this area is attractive, trendy or whatever is in a mental ghetto. They need to get out and see the world. West LA and Santa Monica are sooty, noisy, traffic deadlocked at lot of the time, badly zoned and terrible for raising a family if you are a breeder. If you aren’t well, maybe that’s a good area for you. The point is, if your goal in life is to own a house in West LA, you must have pretty low expectations.
It’s like tourists coming to Hollywood thinking it’s, well, Hollywood. You’re in for a rude surprise if you expect to see a movie star.
In your dreams. It’s all going to crash except the top 1% who have nevered worried about the price of a home. LA. and OC will take just “a little longer” to fall hard as some have 401, stock to sell, etc to keep them or “float” for a period of time. This crash will hit “all” but there are those who still believe they are the exception and live in a special place where something like this can’t or won’t happen. This picture show has been seen before but some have forgot their history.
Just wait until it becomes obvious how many lainvestorgrls were speculating in the high end stuff like PV. I can see it in my hood (92127) — median list price stuck around $1.4m but the median sale price persistently below $800K. This anomaly cannot persist for long.
My parents have a house near Pico and Sepulveda. At the end of the 80’s they were getting unsolicited offers for 750k. Mid 90’s those offers went down to a low of 435k so prices do drop. L.A. is toast. It’s toast, and I’d short the whole place with a huge put option if I could time it right.
Salaries haven’t changed all that much in LA to support a 4x 5x increase in house prices. L.A. people are completely crazy. L.A. people will consume whatever is offered and will explode like goldfish who eat too much. Just watch. When L.A. implodes, the loss of wealth is going to be 3x bigger than the entire rest of the country combined.
Houses in Venice (crowded, dirty, gang infested) were going for $1000/sq ft. Granted that’s probably a 400sqft house but please people. This is what you get when irresponsible young people are allowed to borrow hundreds of thousands of dollars (I know a bunch of them). Gee, I want to live next to a smelly canal because hippies once lived there. Oooo there’s a house with paisleys painted on the side. Oooo there’s a wall with a mural (graffiti). Ooooo. I want to live near the beach for $1000/sqft. Oooo they have a Hare Krishna restaurant. Oooo they have a surf shop. The craving for culture of any kind no matter how absurd is driving this madness.
They spike up property in “trendy” places. The money is basically wasted on sensation instead of value. This kind of person is fickle and critical and in a few years will move on to somewhere else leaving Venice to rot.
how about like this is the good half of the year
““‘At this point, you can kind of start saying, ‘What’s it going to mean for the whole year?’ said Peter Dennehy, local real estate analyst.”
‘We just can’t seem to get the buyer to acknowledge they’re in the driver’s seat.’
Buyers are definitely acknowledging they’re in the drivers’ seat — by refusing to go along for the ride to the bottom of the hill.
“Buyers are in the driver’s seat”?
Ok, let’s do this then.
Since prices were going up 25% a year in 2004 and 2005, let’s see -25% a year for a couple of years.
I want to offer $380 or less on a house that sold for $510 in early 2005.
Pedal to the metal!
dude, there is a REO in N PHX near central, last sold for 570K, bank has it listed at 325K, interested??? its like when you drop a pebble in a dark well, and wait a few seconds before hearing it hit the bottom ( we have a couple of seasons before we here that echo)… IMHO doesn’t matter what the previous a-hole paid for a property, you are not buying till its worth as a ’shelter’ to you is equivalent to its price.
although knowing how much under-water the prices are gives me a warm and fuzzy.
my personal hold-out number is when its costing me 20% or more to rent the same house than to buy, that’s when i’ll wade into the water. sortta like the inverse of the current number where you can rent at 20% (or less) of the cost of ownership
got cash?
Actually you should buy when it costs the *same* to rent as to buy. No smart person is gonna pay more to rent than buy. I would pay about 20% more to buy than rent due to the benefits of home ownership. But in some areas, buying costs 100% more!
Not always. Buying implies commitment. If you are not sure you want to settle in the area or your job can move, renting can make more sense. Also, if you rent, you can change your mind about the area/house/city on a whim and move. Another benefit of renting - no expenses on maintenance and these can amount to a lot occasionally when something expensive fails. As a renter you can always move out, if something goes wrong with anything.
Benefits to renting are numerous and should not be underestimated. People got into this buying mood only because prices were going up. With prices inline with rents and not going up, it’s a question of a personal preference/situation.
“Actually you should buy when it costs the *same* to rent as to buy.”
Should cost less to buy than to rent. This was the situation in NorCal circa 1996 (30-yr fixed mortgage on our condo for around $760/mo; could have rented it for $1100+).
Think of it this way. For what other product is it cheaper to rent than buy in terms of daily payment over x years? Renting (or leasing) is almost always more expensive in the long term than buying.
I don’t know whether the fact that the product value depreciates or appreciates over time has anything to do with it. It is only in housing where we see this phenomenon of renting being humongously cheaper than buying. And given that a house is just another product or commodity (if you can really bring yourself to see it that way) then this state of affairs cannot continue for long.
in NW Pennsylvania, the landlords are drinking the rent kool-aid and the tenants are too dumb to realize you can buy a $35k to $50k house that they are renting for $500 a month! Ill let you do the math. Yup im buying around the year 2010. This probably will be the bottom and even if I have to sell, ill lose much less money than renting!
Rent makes sense in the bubble areas but somewhere like NW Pennsylvania, buying is a no brainer. I don’t even expect prices to drop much. Of course I may consider some other state if prices there drop enough.
GetStucco, your comment makes me think of a newbie (investor) on a roller coaster. Full of excitement on the way up followed my a little panic as the drop starts, followed by the sick feeling in the stomach as they plummet to the ground, hoping that the ride (fed, interest rates, lending policies) will keep them from smacking the ground at the bottom. This is followed by a loop-d loop with every roller newbie in chasos hoping for a quick stop for a run to the exits. However the ride keeps going so they can’t exit and instead barfs over on the person next to them. This person next to them may be a little more prepared (equity) for the financial ride but got mixed up in the “mess” all of the way to the end. Nobody enjoys the ride, but will remember it for a looong time.
stick a fork in it…
…it’s done.
“A recent home in Rohnert Park priced in the high $400,000s was scooped up after a $40,000 price reduction, she said.”
Scooped up? You mean like a turd?
40k not much of a reduction.When we start seeing 200k deductions things will be correcting substantially.
I am already seeing 200K deductions on alot of homes in the 1M to 1.5 Million dollar range here in LA / OC and they are still not selling.
$200k off a 1.5 million house is only 13.3%, not much greater than 10% off a $400k property percentage-wise. These people are early-phase knife-catchers who think they just got super “bargains”. They will be educated by Mr. Market (a very patient teacher) soon enough.
Saw a short sale (on ziprealty.com) priced at $995K as of this past Sunday which was maybe $500K (33%) off recent comp sale prices (and current list prices of comps) on Concerto Lane (92127)…
“Scooped up?”
They mispelled “snapped up.”
Pooped out, scooped up, stepped-in, snapped up- its all good. Housing only goes up and we’re all gonna’ be bazillionaires. Look at me, Mom- I’m an investurd!!
rotflmao….too effin funny….I love it…
Thanks for one of the funniest posts I’ve seen on this blog.
‘We just can’t seem to get the buyer to acknowledge they’re in the driver’s seat.’
They’re not acknowleding realtors because they’re busy driving away. Sayonara suckers!
‘We just can’t seem to get the buyer to acknowledge they’re in the driver’s seat.’
Fine…then take my 30% off lowball offer to the seller without giving me any lip about how ridiculous the offer is.
Exactly. 3 months ago, we were offensive with our offers. Now we’re in the driver’s seat?? F-U!!
well, whoever is today’s designated driver, I hope they realize that it’s raining knives outside.
‘We just can’t seem to get the buyer to acknowledge they’re in the driver’s seat.’
I still think most buyers still want to be in the drivers seat with the seat angle at about 80/20, they just aren’t allowed to anymore. I think there would still be demand if the exotic lending was still available.
I suspect those on this blog are in the minority of buyers (IE responsible) although it’s slowing changing. Still all roses and sunshine in the East Bay. For sale signs everywhere, but most people I still talk to are oblivious.
‘I’m not going to walk into a foreclosure. I worked too hard to build up my credit. I’m not going to let no house screw up my family.’”
Oh boy, where do you even begin with this one?
“‘This was my wife’s dream house,’
I suggest that the next time your wife has a dream, kick her to the curb!
Do you think that when the ‘dream house’ goes so will the marriage? After all he has to save his credit rating (?) and she’ll have to save her image. Reminded me of something on tv where a woman from OC who had gained a few pounds from her former size 2 said, “It was considered sheik to look anorexic”. Funny that as her weight went up her friends stole away.
LOL ill never marry and will keep saying that. Wow who needs a wife like that?
Sounds like he’s going to go kicking and screaming, rather than walking into his eventual foreclosure. Screwed up family optional.
So often I hear someone describe a house as a Dream Home. This guy also describes his place as his wife’s dream house. Being able to make the payments down the road when the ARM adjusted should have been more than just dream too!
Sorry to break it to you, but your credit is probably already screwed at this point…
They bought the house with 100% financing. They’re gonna love it when they get the tax bill for the forgiveness of debt. The $134k of income is probably more than they’ve ever made in one year (although Im sure they told the lender they made more than that!)
Are saying they lied? No one ever did that! That would be fraud and that is illegal!
Sarcasm off!
Rodney McStoned said, “I’m not going to let no house screw up my family.”
Ah, the tragic linguistic consequences of being subprime…
Rodney McStoned said, “I’m not going to let no house screw up my family.”
The “no house” comment jumped out at me, he’s right “no house” is exactly what he will have. This guy can’t speak english correctly and owns a 609,000 mortgage. Callin’ it as I see it. Rant off
“This guy can’t speak english correctly…”
Maybe because he is McStoned?
McScrewed is more like it…
I feel a Weekend topic coming on..
Mcsomething or other for the blog..
Now that I think about it, his comment would have been a great one for the earlier “You know you’re subprime when” thread. Hindsight is, like, sooo 20/20.
McBoned!
McLeashed!
McWhipped… by the wife that is
“I’m not going to let no house screw up my family.’”
That’s right, McStoned, you can do that job all by yourself.
McBoned…..I like it. Goes well with McBored-Out, McReemed, and of course, McCornholed.
stop it……………….I can’t breath…….la…….la….laugh……..laughin…………..laughing t…………tooooo haaard…..
McMuffined and loving it!
McGiver (McGyver?) …He will McGive the house back to the bank.
Perhaps he’s in the acceptance stage and he meant to use the double negative?
Okay, Ben. I am calling BS on this name. There is no mcNo way this McGuy is McCalled McStoned.
I am laughing out loud in a public library as I type this. Man, go change the name, for McCryin’ out loud. This guy must be stoned to have survived all the McName calling while McHe was McGrowing up.
In related news, I did have a high school teacher named Mike Grifone and his wife was named Meg. I am not joking. He was 5′6″ and an ex-marine from Korea. You did not mess with him. But if you were cool, so was he.
McStoned needs to get together with Dick Gaylord
OT: Pulte Homes released absolutely brutal Q2 results:
* Net New Orders Were 7,532 for the Quarter, Down 20% from the Prior Year Second Quarter
* Backlog at June 30, 2007 of 14,928 Homes, Valued at $5.2 Billion
* Closed 5,938 Homes in Second Quarter 2007, a Decrease of 40%; Average Sales Price Per Home Decreased 4% to Approximately $320,000
* Preliminary Q2 2007 loss from Continuing Operations in the Range of $2.00 to $2.10 Per Share, Inclusive of Impairments, Land-Related Charges and Restructuring Charges
* Impairments and Land-Related Charges in the Range of $740 Million to $770 Million for the Second Quarter 2007
http://biz.yahoo.com/prnews/070717/cltu144.html?.v=18
How many years ago were those land-related charges predicted here?
And what happened to those “experts” who said when HBs were taking the first write-downs that the HBs were taking the “big bath” so that they wouldn’t have future write-downs? Seems like the baths just keep getting bigger and bigger.
“Backlog at June 30, 2007 of 14,928 Homes, Valued at $5.2 Billion”
….meaning completed but unsold homes on their books?
No, meaning orders not yet completed. But don’t worry, half of those orders will get cancelled soon.
This should drive the market to new highs…
Right — contrarian geniuses always recognize bad news as a buy signal (kind of like opposite day on Sponge Bob…)
The sun going supernova would be great for stocks, because it would force the Fed to lower rates.
GS, you did not just make a ref to SpongeBob on this board. Holy smoke, this bubble has reached new lows, or, would that be highs. I might have to ask, McStoned.
Come on — this board needs more Sponge Bob culture…
“kind of like opposite day on Sponge Bob”
LOL!
‘Valued at $5.2 Billion’
Oh, and who came up with this number? I’m sure it’s not the market.
‘I’m not going to walk into a foreclosure. I worked too hard to build up my credit. I’m not going to let no house screw up my family.’
Well, he doesn’t have to go to foreclosure. All he has to do is make his payments. Whether or not he can make them is a different story.
A mtge brkr once told me that a lawyer once told him that when it comes to keeping your house, it’s simple…”you pay, you stay. you don’t, you won’t”.
Point is…pay up or get out. two choices, but not so easy in many cases.
This is why you need to have a down payment and lots of reserves, other assets, etc.
“‘This was my wife’s dream house,’ said McHone, who is trying to work his way back up from a substantial pay cut in his job. ‘I’m not going to walk into a foreclosure. I worked too hard to build up my credit. I’m not going to let no house screw up my family.’”
Kool, Dude. You keep up that tuff talk … ain’t no freekin house gonna take down a California homie.
Dude - you are toast. You could not of qualified for a fully indexed amortized 30 year loan in the beginning … just like you can’t qualify now.
This was my wife’s dream house Yeah, and you were her dream husband…. And, how did that work out???
lol. good one. This McHone guy seems like he’ll go down in infamy like the Mexican Strawberry picker and the $700k home. Problem with McHone is that we have his real name. I picture him as an angry sweaty guy who wears a wife beater and drives a pickup truck. “Im not going to let no house screw up my family…” - classic
Can you imagine playing that old board game, Mystery Date, and coming up with the McStoned card as your future husband?
He’s even worse than the beatnik.
You could not of…
You could not have
Yeah, I’m one of those.
McStoned is McHoned.
I have been reading this blog for about 6 months (this is my 1st post) and wanted to share my personal experiences recently in Burbank/Toluca Lake. There are about 5 houses for sale on the street I live on. I rent a room in a house for $650 a month, I dont know what the main renter pays but I would guess in the $2k range so $2650 all told. The house was recently sold to an “investor” (in the $700k range I am told) who wants to continue renting out the house to us. Unless the investor intends to substantially increase our monthly rent I dont get how this can make financial sense or cents! I am like everyone on this blog in that 3x my salary makes me able to afford substantially less than 700k for a 1940’s style home even if it is on the border of Toluca Lake. I keep waiting for the price drop to show up, but its seems the craziness is continuing here in the LA area.
Simple, you factor in 20% YoY god-granted, law-of-physics appreciation, and rent is just gravy. Of course, he might have got $100K cash-back at signing is going to walk.
My homeower friends in LA are just starting to take notice that the appreciation might be grinding to a halt there soon. They are aware that the housing market is tanking in SD, but think it can’t happen in LA. I have to remind them that the market went crazy down here first, and that they are just lagging behind by more than a year. They used to laugh at me, but they’re not laughing anymore as their area slows down and their payments weigh on them heavily.
You might check the county assessor’s office and see what your new landlord paid for the place you’re renting if you’re concerned. You could also check with a title company to see exactly how he paid for it if you think the guy might have a NOD show up at the door sometime down the road.
Im not going to let no house screw up my investment property…
With the BS hedge fund news today…….could I venture a simple question?
Is all this still contained and is Goldilocks still alive?
Investors learn extent of Bear damage
By FT Reporters
Published: July 17 2007 23:44 | Last updated: July 17 2007 23:44
Bear Stearns on Tuesday told investors in two stricken hedge funds managed by the bank that one fund had lost all its value and the other had about nine cents remaining for every dollar invested following bad bets on the US subprime mortgage market.
The losses, especially for the less leveraged of the two funds, were worse than investors expected.
http://www.ft.com/cms/s/faba75c6-34b5-11dc-8c78-0000779fd2ac.html
I wonder what rick santelli has to say about this minor glitch in a market hitting 15k by end of year.
The futures are way down for tomorrow. The Nikkei is currently down 208 points. Goldilocks has been like the villain in Terminator 2. She can reassemble herself at will. I don’t know what it will take to paralyze her but this will force her to assume another shape.
Yes, everything is contained. Nothing to see here, keep moving along now.
Nice bike.
Of course it is luvs.
Don’t you see, according to the “pundits” on CNBC, why the stock market is high is because a) the sub prime fiasco is already factored in; b) this is a global economy and other countries consumers will pick up the slack from the US consumer. These two alone should explain why we have a large run-up in the market. 15,000 here we come.
You know, the next 1000 is only about 7% - that’s easily “doable” by the end of the year.
If the stock market shrugs off subprime for a few more months I think the DOW will hit 15000 in 2007.
Not a cheerleader - just an “M3 liquidity needs to go somewhere” and “DOW is cheap when priced in Euro, Yen, and Pound” realist.
I think I found Goldi:
http://www.drugfree.org/Portal/DrugIssue/MethResources/faces/photo_4.html
Are you sure that isn’t the San Diego Creative Investors Association members webpage? I think one of these guys is Taco Bell Jeff.
Containing the containment containers which are contained within the containments of the containings has proved difficult to contain.
<scottish_accent>Captain, she can’t take any more! We’re losing anti-matter containment!<scottish_accent>
Am I the only trekkie here?
“Am I the only trekkie here?”
That reminds me, when does the new season of BSG start?
Hi arroyogrande,
Starts in Jan 2008. This season is the last one for the series. Producers decided to end BSG early. They want to go out on a high note.
“This season is the last one for the series”
Frack!
November 2007.
Sheesh! Will some close the tag!! All these post below are still in !!!
BSG is awesome. One of the better shows on the idiot box. It’ll be missed…
Forgot to add, I’m a trekkie, BSG and B1 fan.
What’s B1? (B5?) Reminds me, need to pick up B5 season 3 on DVD.
“Is all this still contained and is Goldilocks still alive?”
Oh yes…Goldilocks is not gonna let no bear screw up her good times.
Goldilocks will be Re-Contained.
Liscum blames this condition in part on the media’s ‘doom-and-gloom’ headlines, while Robertson said she’s seeing plenty of activity in homes that are priced right.”
“A recent home in Rohnert Park priced in the high $400,000s was scooped up after a $40,000 price reduction, she said.”
I live in the Sonoma area so rohnert Part is down the road. The whole area is so overpriced one can only laugh and gag at these prices. I could tell many stories but you folks know all about them just by going to open houses in your own neighborhoods.
I must pass along this little gem though not a big bucks story but represents much of the nonsense in home prices around here.
A little area called boyd hot spring has a small 700 ft home on a 5K lot for sale at 389K, the lowest priced home around. It needs a new foundation, major dry rot issues the hot water heater and washer and dryer are located outside the home in a broken down shed attached to the house. The home was last sold in Aug of 2000 for
33K.
Wow. That’s 50% appreciation per year they’re expecting. Even for a half-crazed seller, this seems pretty far over the top.
Perhaps it’s 300k cash back?
priced right or not, with credit tightning like a noose around sellers necks, prices will need to be even more right before sales do much. As for the press, they seem to be doing what they can to pump up the market, but it is hard to sell a dead horse as a thoroughbred.
Dam it! Gloom always comes before Doom! It’s only logical. Please try to get it right.
” That tells some brokers that what the market really needs is for buyers to wake up and realize how good they’ve got it.”
lol, another stupid realtor quote. Buyers will have it good when prices revert to norms with regard to incomes. There’s a long way to go yet and prudent buyers will have the patience to wait.
“lol, another stupid realtor quote.”
That’s funny! That’s so true. How many stupid realtor quotes are there going to be before the give up, I wonder. =o)
We stole demand from the future back then…
Marty! Marty!!
“What is it Doc?”
Get in the DeLorean, go back to 2005 and unload this Mcmansion!
Good one! Investing would be easy with a time machine.
Great one!
Curt: 88 mph!
OT: In this environment are rents going to rise or fall in Bay Area? I am interested in September/October timeframe as I have to move.
After you have checked out the credit worthiness of your new prospective landlord wait until you don’t have to put down a first, last and cleaning deposit. How many lower income are going to be able to come up with FLC deposit? If you have a good job you should be in the catbird seat.
Who knows…that city (SF) is wacky with the amounts people are willing (not able) to pay. s far as I know, it varies neighborhood to neighborhood. Downtown? Sunset? Marina? Tenderloin :)?
Or are you talking peninsula, SillyCon valley, San Jose…Gilroy?
A big change in dataquick’s standard monthly blurb about foreclosures:
“Foreclosure activity is high, although foreclosure properties are not yet a drag on home values in most markets.”
OT! Wipe Out….
http://www.marketwatch.com/news/story/bear-credit-hedge-funds-almost/story.aspx?guid=%7B4465B0D7%2DF76F%2D4735%2DBE8A%2DFC6038AFA93C%7D&siteid=yhoof
From the article……………
“Late Tuesday, one investor was bidding one cent on the dollar to exit their position in the High-Grade Structured Credit Fund, the person said”
O’boy
“If foreclosures are going to stay at elevated levels…..”
317 in 2005
842 in 2006
2,564 in 2007
What’s the definition of “staying”?
Staying or straying?
Yes many are straying today. Surprisingly, although many have jobs, many are having difficulty making their $4000 $5000 monthly payments after the mighty reset hits. Is it just me or is that nuts?
Yes many are straying today. Surprisingly, although many have jobs, many are having difficulty making their $4000 $5000 monthly payments after the mighty reset hits. Is it just me or is that nuts?
At some point the foreclosures will have built to a level where the new are replacing the old. Sort of a permanently high plateau. But when the volume is tripling every year, “Staying” at an elevated level seems to be changing by the minute.
Like leading a hiking expedition over the edge of a cliff, and while descending to the bottom, telling those around you, “go ahead and take a break, and lets let the others catch up….”
(yeah, thanks sir….)
“Dennehy said the median and sales rates give a good picture of what’s going on in the market, in general, feast-or-famine terms, but the price indicators hide much of the actual state of the market, where homes are selling for as much as 20 percent less than they once were.”
“‘If there was a home bought in 2004, and you’re seeing it sell again in 2007, you’re going to see a substantial decline,’ he said.”
In the comparisons I’ve done lately on Craigslist SD, I’ve seen quite a few places for sale that were purchased in ‘04. Often, the listings are trying to trying to sell just for the original purchase price. Factor 3 years worth of inflation into that and whatever improvements were made. Ouch.
While the median and other reference data seem to show very modest declines in prices, it is interesting that we are seeing some 2004 prices this early in the cycle - that just wiped out the gains from 2005 and 2006 (OK, not sure if SD had any gains in 2006, since they’re ahead of us here in OC, but the gains from 2005 should have still been pretty healthy). Will SD see 2003 pricing (or even some 2002 pricing) before the end of the year?
On your marks, get set…
http://biz.yahoo.com/ap/070717/risky_mortgages_regulators.html?.v=3
So the Fed will go after rogue lenders normally not regulated, using consumer protection law. Glad to see it, but the whole horse/barn door issue is still on the table. Never the less, tightening regs = fewer buyers. That will make my all cash offers more favorable…..in 2010.
Bear and IndyMac in crosshairs for Alt-A loans.
New York, July 17, 2007 — Moody’s Investors Service has placed under review for possible downgrade thirteen tranches from eight deals issued by Bear Stearns in 2006. The collateral backing these classes consists of primarily first lien, fixed and adjustable-rate, Alt-A mortgage loans.
The ratings were placed under review for downgrade based on higher than anticipated rates of delinquency in the underlying collateral compared to current credit enhancement levels.
http://calculatedrisk.blogspot.com/2007/07/moodys-possible-downgrades-of-alt.html
CFC reporting a surge in defaults…don’t know if it’s old… the Tour de France has me spending less time on the blog.
http://www.reuters.com/article/topNews/idUKN1760344520070717?rpc=44
“the Tour de France has me spending less time on the blog.”
Good luck. I hope you win. I love cooking contests.
If you love cooking contests, then you will love the CFC default swaps….master cooking (the books) at its best…….
“and other economists have estimated that declines of 5, 10 or even 18 percent are needed to bring prices back into line with residents’ incomes after record appreciation in recent years”
Say what? Only up to 18%?! I say prices have to drop from 25 to 50% or more, especially in the IE (San Bernardino, Riverside) where prices often tripled from where they were when the bubble began to grow.
Pure cheerleading. They know that prices doubled or even tripled in some places, during a period in which incomes rose by a third. Prices need to fall by 60% to be back in line.
Damn right. Prices need to fall by 30 - 40 percent in places like Minnesota and Wisconsin. There is no way that they don’t need to fall even more in places like Florida and California.
“…especially in the IE (San Bernardino, Riverside)…”
No, no, no — you are confused. Only sales volumes could ever possibly fall by 50% in the IE; prices are on a permanently high plateau (just like in San Diego — Karevoll said so…).
“‘This is strongest buyers market that we’ve seen in eight years,’ said Ross Liscum, co-owner of Prudential California Realty. ‘We just can’t seem to get the buyer to acknowledge they’re in the driver’s seat.’”
——————————————————————————
Me: “Well you could tryyyy…”
…
…
…
…
Mr. Liscum: try dropping the prices???
Me: I knew you could do it.
http://messages.finance.yahoo.com/mb/BSC
check out Bear Sterns message board at Yahoo. Some funny stuff. depending on where you have or “had” your money.
BSC appears to be down after hours nearly 4% which is not too bad since wages, employment and stock market are way up for year according to Goldilock kuntlow
Don’t forget the latest stories from the San Luis Obispo Trib (or at least the web site)…
“4-H and FFA Livestock Project Scholarships announced”
“Action! in Arroyo Grande”
“Pigeon options messy”
Oh wait, no housing bubble news here.
What kind of “action” can I get in Arroyo Grande?
http://biz.yahoo.com/ap/070717/bear_stearns_funds.html?.v=1
Can someone please tell me difference between nearly worthless and something most people would not touch with a 10 foot pole?
“unprecedented declines in the valuation of a number of highly rated securities”
Isn’t that an oxymoron?
The latter case normally involves the presence of a hungry alligator.
Bear Stearns Says Hedge Fund Worthless
Tuesday July 17, 7:56 pm ET
By Joe Bel Bruno, AP Business Writer
Bear Stearns Hedge Funds Nearly Worthless As Investment Bank Tries to Calm Investors
NEW YORK (AP) — Bear Stearns Cos. told clients Tuesday that a meltdown in the subprime mortgage market has made the assets from two of its flagship hedge funds almost worthless.
http://biz.yahoo.com/ap/070717/bear_stearns_funds.html?.v=1
From the article…………….
“Bear Stearns shares fell $5.41, or 3.9 percent, to $134.50 in after-hours trading. The shares had closed down 40 cents at $139.91.”
Interesting times……….
HA. I didn’t see the comments at the top, you gotta be quick to break news on this blog!!
The interesting thing about the Union Tribune article, was that it indicated the “median” price had declined a few percent, indicating the worse of the price reductions were behind us and that now of course was a great time to buy. It then went on to tell of the 609K house being short sold for (hopefully) 475K - a whopping 22% drop if he gets that much!
“‘In the past, economists have viewed the economy as affecting the housing market,’ said University of San Diego economics professor Alan Gin. ‘Now it seems to be the other way around this time around.’”
I always knew Gin was a genius. He was just hiding it till now.
And after housing effects the economy, the real wild card will be if the economy then effects housing. It could be a double downdraft for housing values. 50% decline, followed by another 50% decline? (Which does not = zero, but rather 75% decline over all.)
My sense is that while I would like to see prices fall, the resulting effects on the enconomy will be catastrophic. The economy is like a giant ship, and to some degree can be steered. Unfortunately, Greenspan and those in power chose to run it aground. Really the damage which was done by creating this bubble is now just beginning to be felt, and will have repercussions for years to come. I doubt there is anything that can be done to reverse this. I knew someone recently laid off by a furniture store chain. I am hearing Car sales are down, appliance, furniture and home improvement products are all tanking. As they do, wages will be pressed down and fewer will be able to buy houses, in turn pressing the housing market even more and placing an ever growing group under financial distress.
so.. i’ll be able to buy 4 times as much property as i’d planned?
very cool..
I hear people talking about a depression. If this happens house prices could fall as much as 90% off but most of us won’t have more than $1000 to buy a house since our stocks/funds also crashed and we are all unemployed. So no, a depression won’t make houses more affordable. Just a normal crash landing.
Not to worry. House prices cannot fall by 90% — impossible! Only hedge funds denominated in home loans can fall by 90% or more…
Well I don’t expect house prices to drop 90% unless there is a depression but then we will all be poor.
How much will Florida(south? north?) drop and ultimately be? What if theres a couple big hurricanes? How cheap a square foot would I be looking at? in NW Pennsylvania, I can get a nice house at $30/foot(includes lot)
NONSENSE. Yes, a lot of people lose a lot of money, but even during the Great Depression 75+% of people worked and did just fine. You’ll have money, you just won’t want to spend it.
Even during the Great Depression, unemployment “only” got up to 25%. If we have a repeat, that will be bad luck for those of us in the 25% — but for those of us who have essential skills and do the jobs that need doing even during a depression that purges all nonessentials, a 90% drop in prices would be very nice indeed.
Heck, if OC prices dropped 90%, I’d buy a nice Balboa Island bayfront for a comfortable 400K and have plenty left over to buy a couple of charity cases $70K houses in Irvine.
If history told me, stocks fell about 90% during the 1929 great depression. So houses also dropping 90% won’t make it any more affordable unless you keep the job and wages don’t drop anywhere near 90%.
I worry how this will affect home businesses and more importantly, mine and my parent’s stock/fund/bond investments. How much of a drop are you forecasting in assets? house prices?
Wages (for those who kept their jobs) didn’t drop anywhere close to 90% during the Depression. That was part of the problem. Many prominent people (including President Herbert Hoover) subscribed to an economic theory known as “Fordism,” named for Henry Ford’s theory that if you paid your workers a lot, you’d sell more cars, because they could afford to buy more of them. (The fallacy of this theory was in its overemphasis on the role of consumption spending in aggregate demand.) So Hoover pressured big companies to keep wages high — which, in that steel-and-coal economy, had a major effect in maintaining high wages across the board. Trouble was, with spending and profits way down, producers had to cut back somewhere — and since they couldn’t easily lower wages, they chose option (B), namely, laying scads of people off.
Anyway, the point is that during an asset-bubble bursting or a major recession, it’s asset values, corporate profits, and employment that take the biggest hits (in roughly that order). Prevailing wages tend not to drop anywhere near as much. The result is that for a person who keeps his job, his ability to acquire assets is usually enhanced by a contraction, not reduced.
“A recent home in Rohnert Park priced in the high $400,000s was scooped up after a $40,000 price reduction, she said.”
Scooped up - the new code for “snapped up”?
when you are bottom feeding you scoop. High flying speculators did all the snapping up a few years back.
The press Democrat’s headline was “local housing market strengthens” the first paragraph starts “median prices rose…since april” the second paragraph mentions the yoy decline.as far as RP,and the $40 k price reduction…you can rent the best house in the best part of rohnert park for $1500 a month… a new 4/3 with 3 car garage and pool.
“‘This was my wife’s dream house,’
Wife: I like the house…plus the schools. We can do this!
It’s Goldilocks who’s contained…as the dollar drops like a rock.
“July 18 (Bloomberg) — The dollar fell to a record low against the euro and dropped versus the yen after Bear Stearns Cos. reported hedge fund losses, fueling speculation investors will spurn U.S. assets as the economy slows.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4s8F.ieMvOs&refer=home
As predicted by Hoz….
“The yen is rising on an unwinding in carry trades,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Bear Stearns latest woes are sparking risk aversion. This isn’t just about Bear Stearns. Other hedge funds may be suffering just as much.”
The yen may rise to 121.70 against the dollar today, Soma said.
Any gains in the yen may be limited by speculation the Bank of Japan will delay raising interest rates while it gauges the impact of subprime loan defaults. The U.S. is Japan’s largest export market.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4s8F.ieMvOs&refer=home
“Rodney McHone, who bought his Oceanside home three years ago for $609,000, has put the four-bedroom house up for sale, hoping he can get $475,000 for it in a short sale. He says he knows there’s no guarantee his lender will let him stave off foreclosure by accepting a lesser price, but McHone says he has little choice as he faces mortgage payments that could soon balloon to more than $5,000 a month.”
“‘This was my wife’s dream house,’ said McHone, who is trying to work his way back up from a substantial pay cut in his job. ‘I’m not going to walk into a foreclosure. I worked too hard to build up my credit. I’m not going to let no house screw up my family.’”
Gee look who is the fool. You took a suicide loan to buy a house at 7-10x your salary. Give it up, you can’t afford such an overpriced house
“7-10x your salary”
google Rodney McHone for his address.. zillow that and get the demographics of the area and avg. household income is about 50K, so it’s probably more like 20X his salary (before his pay cut) or about 12X him and the wifey together.
I am glad those type of suicide loans are having the breaks put on them. The lenders and CDO’s are pratically worthless now. Suicide loans result in huge losses for all parties involved. I am glad to see him lose a house he would have never afforded in a million years. Those kind of people should be in a $100k house, not $500k!
Looking at the Credit Suisse “Adjustable Rate Mortgage Reset Schedule”, I wouldn’t expect the REAL pain in sub-prime and Alt-A to be felt until early 2008. And after that, extreme pain follows for another 1 3/4 years, and the a second extremely painful wave starts 3/4 of a year after that.
Sub-prime and Alt-A investors haven’t seen anything yet…wait until the Spring Foreclosure Season next year…
You mean, we have to do this all over again this time next year? Weee.
Southland home sales slowest since 1993:
http://www.dqnews.com/RRSCA0707.shtm
San Bernardino has 50% decline in sales YOY. 2195 homes were not sold. With median price of $365K, that’s (6% of $22K per home x 2195 = ) about $48 Million missing commissions for the month of June. That’s about $400 million (since June is bigger sales month than say fall/winter) missing commissions for the year. That’s a lot of missing money!
Subprime problem is contained all right….. NOT!
Regarding ‘immunity’ of West LA, have to disagree. True there are plenty of folks making several hundred grand a year, but even these incomes don’t justify current prices. What has fundamentally changed in the past few years to justify a doubling of Westside prices? Think all the recent buyers have newly minted wealth? The rich have always been here. What’s new is the crazy loans and the RE mania. The wealthy have been nearly as dumb here as the ‘average’ folk in the Inland Empire. I personally know one bloke in a 2.4 million home with a suicide loan. Spoke to a realtor last week who told be there are plenty of highly leveraged sellers in real distress now, including multi-million dollar homes that were bought with subprime. Gonna get bad in West LA, too. It’ll just take longer.
“plenty of folks making several hundred grand a year, but even these incomes don’t justify current prices.”
Bingo!
OT — Saw a funny comment on the end of the SD Union Tribune article Ben posted last night:
“By Khalil Greene on 07/16/2007
Dude, I make $2,250,000 /year and I still can’t afford to buy a house in SD. I graduated Ridgemont High. Come see me play tonight at Petco. I may hit for the cycle.”
(Many more over-the-top comments where that came from…)
http://www.signonsandiego.com/news/business/20070716-9999-bn16housing.html
Anyone who bought a bubble house will be paying a “stupidity” tax that redistributes wealth from the dumb, to the frugal. That’s nice.
Make that a “bad at math tax”, just like the lottery. lol
“‘What this is largely about is a bunch of demand that’s missing because it played out prematurely in early 2005,’ LePage said. ‘People were worried about missing out, losing out. We stole demand from the future back then.’”
What a crock.
Question. Hedge funds have a lot of control over the members investments. They don’t have to let the partner take his money and run, right? This will prevent a run on the hedge funds that have invested in sub prime slime but in the end will just delay the inevitable. That should put some brakes on the shock tomorrow. Disclaimer: I don’t know anything about nothing.
I went out open housing last weekend in Running Springs, California. I could barely stop myself from laughing when I saw the dumps these people were trying to sell. They hosts/owners/sitters were uniformly HUGE middle aged women sitting around waiting for the gravy train (probably inherited the house in a divorce when their husbands just got fed up with how revolting they were). It still hasn’t sunk in. I was so insulted by the entire episode I won’t be open housing for another 6 months.
Oh oh oh! I found out how people are affording their homes in L.A. They’re renting out rooms. I’m seeing more and more of this. Is this sustainable? What are the ramifications?
Next year there will be “de facto” actor’s strike and also writers strike. actors and writers would nor be able to get paid at least for a year. What a nice timing.
that’s nice.. strikes spur innovation… robotics mostly, but as far as actors are concerned, animation is almost ready to replace them completely anyway.
My wife’s grandfather died and left a Glendale, California house to the family. They sold it and couldn’t believe how much it was worth. It was originally bought for around $4000 but it sold for $760,000. It was a total L.A. dump, stucco, flat roof with cracked red tiles, built in the 1930s yadda yadda you know the style, with a swimming pool that hadn’t been maintained for decades!
I watched it on Zillow. The flipper who bought it sold it to another clown for 860,000.
That latest fool has been trying to sell it for a year for 999,000. It hasn’t been working so we recently saw a realtor advertising it. It has been completely remodeled and they want 1,013,000 for it. Hahahaha. Good luck. Obviously he is trying to “stage” it. Pssst. Hello? Banks aren’t lending that kind of money any more. Unless an Arab Oil Sheik drives down the street and wants that house, you’re screwed.
Haha that clown caught the knife and its cutting him and bleeding him into foreclosure. That dump probably won’t sell even for $500k today and is probably really only worth $300k at most.