The Races Have Shut Down In California
The Press Enterprise reports from California. “Inland Southern California’s home sales last month were the worst in a decade in Riverside County and the worst on record in San Bernardino County. In June, Riverside County posted 3,359 home sales, down more than 47 percent from June 2006. San Bernardino County recorded 2,190 home sales, a drop of more than 50 percent. The slowing market took a toll on sales prices.”
“‘We have seen rising foreclosure activity through the year and no sign it is done climbing, and we are now seeing some real steep declines in prices. It is very difficult to say where bottom is,’ said Andrew LePage, analyst for DataQuick.”
“The move-up market has almost disappeared, which has cut demand for homes in the $400,000 to $700,000 price range, said Scott Chappell, a director of the Inland Valley Association of Realtors. He said as a result home prices in Riverside’s Orangecrest area have dropped 15 percent in the past 18 months.”
“Bill Santoro, broker owner of National Realty Group in Moreno Valley, described the market there as ‘almost in a free fall. Every time we move the price down to get ahead of the pack, the competition comes back just as fierce, dropping their price further.’”
The Union. “The number of defaulted properties in Nevada County has doubled in the past year, according to figures from the county recorder’s office.”
“The high rate of repossessed homes stems from a combination of a buyer’s frenzy several years ago, when buyers were willing to do anything to get into a home before prices rose beyond their reach, said Phil Ruble, president of Olympic Mortgage in Grass Valley.”
“‘You can’t make the payments,’ Ruble said. With prices falling in some markets, some homeowners now owe more than their house is worth. ‘So they just walk away,’ Ruble said.”
“Interest-only loans are tools to get some buyers into a home and have been used effectively by a number of people, said John Taber, a commercial and residential loan officer. Those who neglected to do their homework before they invested are the ones hurting now, Taber said.”
“‘If you take a chain saw out and don’t know how to use it, you’ll be without a hand,’ Taber said.”
The Orange County Register. “The median price for an Orange County home returned to record territory last month, but experts warned home sellers against popping champagne corks.”
“Sales were way down, making the month the slowest-selling June in two decades. Some said the record median home price likely is a distortion caused by the decline in sales and a lack of buyers for lower-priced homes.”
“It was the slowest June in the 20 years DataQuick has tracked the market, and it follows the worst May on their books as well.”
“‘It doesn’t mean the value of your house has gone up,’said housing consultant Richard Gollis. ‘We’ve eliminated people who couldn’t afford to be in the market. Those who can afford to be in the market are buying higher-priced product.’”
“Juliette Saunders of Fullerton and her husband have been unable to find an acceptable home in Orange County that they can afford. ‘There’s no way we can afford a house anywhere in Orange County,’ she said. ‘Say, I wanted a loan right now. The banks are freaking out and not giving them.’”
The LA Times. “In Los Angeles County alone, 3,000 sellers took their homes off the market from May to June, or about 7% of all sellers, according to real estate brokerage ZipRealty Inc. Many sellers are simply holding out, refusing to give up any perceived equity gain by reducing their asking price, said John Karevoll of DataQuick.”
“Regina Nadeau didn’t need the latest sales figures to tell her that the market is slow, she’s been trying to sell her Lake Forest condo for the last eight months. ‘I pray every day and have a sense of peace, otherwise I would be stressing out,’ she said.”
“Nadeau has cut her asking price twice since January, and is now seeking $318,000 for her one-bedroom place. But she says she’s reluctant to take it down any lower: ‘I don’t want to sell too cheaply.’”
“San Bernardino is reeling from the post-boom effects. In June, sales in the city fell by 57% and the median price dropped 16% to $246,000 from $290,000 a year earlier.”
“Ditto for Lancaster in the Antelope Valley, which like San Bernardino also attracted large numbers of first-time home buyers seeking affordable prices. There, sales plunged 62% in June and the median price declined 13% to $279,500 from $320,250, according to DataQuick.”
“‘Whenever you have a market that is receding, as Southern California is right now, it will recede more in the spillover markets,’ Karevoll said. ‘In the core areas, people will be much less affected than where there was a lot of building and risky lending.’”
The Ventura County Star. “The days of double-digit price and sales increases are gone, said Jack Kyser, chief economist of the Los Angeles County Economic Development Corp. The housing market probably won’t recover until 2008 or early 2009, he said.”
“‘We’ve had the bubble, and now the bubble has slowly deflated,’ Kyser said.”
“In June, Ventura County’s median sales price for new and existing homes and condominiums was $582,000 in June, down 6.9 percent from $625,000 the previous year, DataQuick reported Tuesday.”
“Sales in Ventura County fell by 27.8 percent, from 1,227 a year ago to 886 in June. Monthly sales have not topped 1,000 since December 2006. In contrast, sales during the peak year of 2005 exceeded 1,000 every month, hitting a high of 1,913 in June.”
“Sales have fallen more than predicted, said Mats Olson, an economist with the UC Santa Barbara Economic Forecast Project. In February, he projected about a 15 percent increase to existing home sales in Ventura County, based on historical housing cycles. Instead, sales have declined even further.”
“Still, there is no reason to be alarmed, Olson said. ‘Granted, prices are down 6.9 percent from a year ago, but the month over month numbers are generally flat,’ he said.”
“‘When people ask, when are we going to be off to the races again?’ you have to say, the races have shut down,’ Kyser said.”
The Fresno Bee. “An overflowing and rambunctious crowd bid on 16 bank-owned houses in less than 45 minutes Tuesday at what was likely to be the first of a string of auctions to be held in Fresno.”
“Energized by rock music that set the tone, more than 200 people, some serious investors and many just curious, crowded into a room to watch Hudson & Marshall’s first auction in Fresno since 2001.”
“Some fetched prices so low that real estate agents in the audience wondered whether the lenders would wind up accepting them. Representatives of the lenders did not attend the auction, so the bidders won’t know for one or two days whether their offers will be accepted.”
“Nhung Nguyen, who submitted the winning bid on two Fresno houses, said she was surprised that the prices were so low. She bid $132,500 for a five-bedroom, two-bath house that was listed for sale at $184,900, and $155,000 for a three-bedroom, two-bath house that was listed for $199,900.”
“An almost 4,000-square-foot house on Alluvial Avenue previously listed for sale at $669,900 was auctioned off for $500,000.”
“‘It was my first auction,’ Nguyen said. ‘With so many people, I never thought I could get anything.’”
“Nguyen, a real estate agent, plans to rent the properties to tenants for about $1,200 per month.”
“Eric and Jane Wood traveled from Orange County to try to buy some investment property. Eric Wood bid on a four-bedroom, two-bath house on Millard Avenue, but was outbid. Wood said he didn’t want emotion to get the better of him.”
“That was also the advice of Daniel Slenders, a Chowchilla resident and a veteran of cattle auctions who had his eye on a house in Clovis and one in Madera, but didn’t get either. ‘You never get excited,’ he said. ‘There are more auctions coming up.’”
“An almost 4,000-square-foot house on Alluvial Avenue previously listed for sale at $669,900 was auctioned off for $500,000.”
“‘It was my first auction,’ Nguyen said. ‘With so many people, I never thought I could get anything.’”
“Nguyen, a real estate agent, plans to rent the properties to tenants for about $1,200 per month.”
I would be very happy to rent a 500K property for 1.2K.mo.
In 2 years I should be able to pick it up for 250K.
Another new bag holder.
Read it carefully. The article says she bought 2 properties, one for 132k and one for 155k. If she can rent those for 1.2k each that’s not that bad at all really. Compared with the house I’m renting for 2k that costs 800k to buy.
Reality check! There are thousands of new 300K homes throughout the Central Valley that are renting for $1200 or less. She needs that much to break even (her specu-flipper wish price) but she’ll end up at 8/900 a month if she’s lucky.
I was mentally running her numbers and kept thinking, “What happens if the tenants trash one of the houses? Or both?”
That would eat up her profit margin right quick.
“If she’s in a 33% combined federal/state tax bracket (which is probably low, this being California), that knocks off about $405/mo. off her $1,228 net expense, getting it down to $823.”
When doing a cash-flow analysis, you don’t factor in taxes. Of course, she won’t pay taxes on the money she won’t have is she is losing money.
exactly - agree 100%
Even if she only gets $1,000 per month, it seems like she’d be doing OK. At 7.5%, the monthly interest on a $155,000 house is $968. Granted, she has to pay property tax (say $160/mo) and insurance (say $100/mo), and maybe HOA dues, too, but aren’t those items deductible as business expenses? If she’s in a 33% combined federal/state tax bracket (which is probably low, this being California), that knocks off about $405/mo. off her $1,228 net expense, getting it down to $823.
Granted, she’s not going to get rich making a $177/mo. profit (in fact, she’ll probably spend more than that maintaining the place), but she could do better if she got a lower interest rate or actually succeeded in getting closer to her target $1,200 rent. The place has five bedrooms. That’s five farm laborer families you can shoehorn in at $200 each. I can’t imagine that would be so hard to set up.
Did you just based your assumption on an interest-only note? On a rental property? Thomas, Thomas…….shame on you.
Add 10% for the auction fee and there goes 5 years of potential tax write-off “profits.”
You mean there are still speculators who actually tell the lender it’s a rental? I thought they all said they were owner-occupiers of all six of their houses.
So when was the last time a foreclosed home didn’t need at least 10-20% of the cost in repairs? Deadbeats aren’t good stewards.
I have offers on 3 foreclosed homes. None have even been lived in. They do need back yards and the spider webs swept out. But they sold for $650,000. Current asking is $450,000. By October, probably $400,000. December, $375,000. By then, it will be tempting.
Check out Craigslist Fresno. Lots of 3/2s for $1200. The CHEAPEST 5 Bedroom is $1290.
http://fresno.craigslist.org/search/apa?query=&minAsk=min&maxAsk=max&bedrooms=5
Give Nguyen some credit. There are going to be some deals on this road to the bottom. She may have one.
Let see Nguyen get financing on her auction deals. Investor financing is not ez, and liar loans are hard to get.
Bet she doesn’t close. Down payment of 25% for investors.
Yea, she caught the knife and it cut her and shes bleeding dry. Why would any sane person rent a $180k house for $1200 a month if they can rent a much better $300k house for the same price?
110 and 129 times rent isn’t bad (especially for California) if the properties can actually be rented at $1200 each (and they are not in need of repairs). Lots of assumptions here.
Maybe we’ll hit the 100 times rent mark sooner than later.
Peak,
I am with you. Prices are tumbling and are going to take a bigger tumble in the next 6 months. I put 3 offers into lenders about 60 days ago and was essentially shunned with no response by all of them. Now the banks’ agents are calling me to see if I will update the offers, since the banks might take them. These are high end houses. I could rent them for 15 times annual gross. Not a great deal because of some bonds, but a small positive cash flow after all expenses.
I think 10 to 12 times rent for middle class houses is going to be here in the coming fall…….no pun intended.
‘I could rent them for 15 times annual gross.’
http://www.heraldtribune.com/article/20070716/REALESTATE/707160433/1201
Article on rents falling in an area due to massive supply of vacant units that end up on the rental market. This is the future of most of California.
Awaiting,
I read this same article. You are correct about the trends in S Florida. It is not that desperate in California. I have been tracking rentals in my area and yes, it is soft, but everything priced reasonably is rented in 30-60 days. Overpriced stuff still gets rented too, in 60-120 days. My point is that the supply/demand is very local. I do think rents will continue to soften in N California, so I built in a 10% reduction. Thanks for the heads up.
Peak, that means a 100K to 150K average house price in the Central Valley, given the current ceiling on rents. Funny thing is that given inflation over the last 5-8 years those prices would be about spot on.
Ain’t the market wonderful?
is it my imagination or are things picking up faster?
Mr. or Ms. MMG, It sure seems like it is going faster to me. And I am of the 15 years correction. My bottom is a lot lower than many on this blog however - so instead of 15, maybe 12 years.
MMG, you are correct, the slide is picking up speed. I see the lenders are starting to “get it”. They look at the stats forecasting the traffic jam of foreclosures coming down the pike. The smart ones are getting houses sold at 10% under that last comp. The other 9 out of 10 lenders are sitting, while their assets become worth “10% less than the last comp”. March the market down. Exciting.
Bubble bloggers wake up and be ready. It is possible the time will come soon to make some moves. I see lots of houses at $140/sf in Sacramento. Another 10 to 20% drop and you are buying at or below reproduction costs and you can under cut the FBs to keep the houses rented to people with great credit. I think December will offer some good deals. That is not to say all the banks will get on the band wagon, but select deals may be worth buying. Be selective and let the other idiots sit.
“I see the lenders are starting to “get it”.”
Yes, indeed. One particular REO which I have been watching in Reno was just reduced from $535k to $415k. It has languished on the market for more than 6 months. I can’t see anyone paying more than $300k considering the work needed, but hey, knifecatchers happen.
BB, yes “knifecatchers happen”……….but $300k could happen just as well.
“is it my imagination or are things picking up faster?”
In some places yes - but Florida and Sacramento are seeing a much faster downturn than San Diego.
All I can think of is the ‘big family’ (or families)that would want to rent a five bedroom place. Can you say trashed? I hope it has tile or some other hard surface floors, rocks & concrete for landscaping, no window coverings and bring your own Refrig, washer & dryer.
You really can’t tell much without knowing the vacancy rate. If the place is vacant because there is other competition, it may not be a good deal. Maintenance, etc. also need to be taken into account. If Ms. Nguyen did her homework on all of the variables before she went to the auction, and stuck to only buying houses for prices that made sense, she should come out at least “ok”.
If she went in without doing her homework, who knows…
LOL. you are most assuredly correct and I feel like the doofus that I am. That is what happens when GOING BRAIN DEAD.
I lived in Fresno and I wouldn’t pay $1200 a month to rent. $8-900 a month, yes.
Oh, and if it has five bedrooms, it’s because they converted the garage to 2 bedrooms - hardly a house I would ever consider renting.
The agents are drinking a triple dose of the kool-aid. I spent the weekend in Scottsdale/Paradise Valley AZ. hitting the links with a good friend of mine. I noticed every other house it seemed was for sale. It looks a lot worse than what is described in the media. The prices are all over the place. Gave me the vision of a poor mans Beverly Hills. Anyway, had a conversation with a few agents I encountered at a local watering hole with varying levels of years and experience in the industy. They all owned multiple property in the area and were fervant that the market was going up in 2008 “for sure” as one said. If I didn’t know better I’d think the biggest bagholders in this fiasco are the agents from my conversations with these folks. It also interesting to watch the body language change as I slowly hit them with fact after fact.
That’s a great visual!
Did their body language involve the middle finger?
LMAO
Lots (almost all?) of the real estate agents were drinking the Kool Aid and believing the lies that they were spouting to their clients (buy now or be priced out forever).
Thus, they fancied themselves as real estate moguls and bought whatever they could. Now, they can’t face the fact that they may have made a huge financial mistake.
The quote from Upton Sinclair comes to mind: “It is difficult to get a man to understand something when his job depends on not understanding it.”
i was in RE sales years ago and you soon realize that 1/2 of 1/2 of 6% aint gonna make anybody rich. The money is in ownership.
There were lots of opportunities to make “deals” with the commission money, as in obtaining an interest position in a property in lieu of taking a check. So, many salespeople held minor interests in their client’s purchases.
Although outright ownership is possible, these agents you spoke of likley have pieces of properties and are unable to sell.. or to do anything ..except hope and pray for the best.
MIS, I can relate. I was in Florida last January. 400 houses along a golf course. I saw 2 people in occupancy. The hidden “vacant house” vacancy factor is double the quoted 2% nationwide.
Who golfs in Scottsdale in July? I cannot accept any memory as anything but a possible hallucination. Reminds me of the time I was playing 18 in Minnesota in January….
No hallucination JimmyB even with early tee times it was hot as Hades
Even for $250k, youd be better off renting for $1200 a month. If you can get it for $200k then maybe buy.
“An almost 4,000-square-foot house on Alluvial Avenue previously listed for sale at $669,900 was auctioned off for $500,000.”
Don’t count your chicks before they hatch. It’s Fresno, he’ll move three illegal families in there and charge each of them $1200 a month.
Last year, these inland areas (Lancaster/Palmdale) were touted as the last place in L.A. County a family could afford to buy the American Dream. You had to go there to get “entry-level” homes below $350,000. And even at that, $350K bought you ~1,500 sq/ft on postage stamp.
If paying $350K sounds reasonable to you, you’ve lived in CA too long and have no perspective. You should be able to buy a descent home in 95% of America for less than 100 per sq/ft. Descent means brick, property, hardwood, granite and safe good schools. Again, most Californians (save Del Mar or certain areas of Orange county) don’t know what good public schools are anymore. Just because the schools were good when you went there in the 70’s and 80’s, doesn’t mean there just average now.
To boot, Lancaster/Palmdale has only 3% of L.A. County’s population, but over 20% of its “Section 8″. There was a mass migration from Compton, Inglewood, Crenshaw and Pacoima up to the Antelope Valley. A once quiet and safe aerospace Mecca has transformed into a gang, drug and crime infested sewer in just five short years. Yeah, there are still pseudo-safe areas in Lancaster (West of I-14), but you still have to pass a lot of unsavory characters there in your day to day life. Certainly not a place to raise children in (can you say “private school”).
Now everyone is shocked that home prices are falling. Funny, the Antelope Valley got clobbered last decade in the last real estate bubble. From 1990 to 1997, prices fell in the A.V. by 40% and this bubble is way bigger. In the 90’s bubble, most still had conventional loans and the place was actually a nice place to live. Now its twice the price and half as desirable.
I wouldnt pay $100k to live in that ghetto. NW Pennsylvania is better and its $50k at *todays* prices!
That is precisley the reason why even LA and OC aren’t safe from big drops. What happens when all these Baby Boomers retire and realize that the golden years in Palm Springs, Arizona or Vegas is going to blow because these bubble areas have decended into chaos.
They will have two choices, stay in their empty nest homes and watch equity fiz away while health care skyrockets.
Or they can do what I am begging my Mom to do.
Dump that LA/OC home for cash in the bank, move to the Midwest, buy a $150k small home for cash, put the rest in CD’s denominated in Euro’s, UK pounds, AUS $ and Canadian $.
You wouldn’t believe how many Asian and South American investors are running around LA/OC looking for investment property. Let them take these turkeys off our hands for the next few years.
Watch how quick the old folks try to dump and run for higher ground. They have a long way to go before their equity is marginal.
‘You wouldn’t believe how many Asian and South American investors are running around LA/OC looking for investment property. ‘
Is this purely anecdotal? I find it hard to believe this could happen after the Japanese got so badly burned in LA commercial real estate in the 1980s.
Alluvial Avenue? What do they live in the Lytle Creek floodplain?
He didn’t “pick up” the house …
he shackled himself to it, and jumped overboard.
Ownership cuts both ways. I guess he doesn’t know that yet.
Nguyen opened the bag and said ” What’s that smell?’ For a moment he thought he was in Manteca.
“Nguyen opened the bag and said ” What’s that smell?’”
its Mr Gary “Stinky” Watts turd, 6% in the bag, the other 94% of the real Gary Watts is still touting the LA Real Estate Comback in Fall ‘07
Off Topic- Wayne Angell, former Fed governor suggested that the Fed will lower rates to re-ignite the housing market. This was between shots of koolade and bong hits on CNBC with Cocaine Larry Kudlow. Needless to say, I was very disturbed by this notion.
God I hope not! Inflation will soar like crazy! Actually lower interest rates will just delay the invetiable. Those suicide loans are comming due regardless.
Does the Fed have any real power to control interest rates anymore? I don’t think so. Remember Japan,
their Central Bank had rates down to 0.5%. That didn’t stop their bubble from deflating, nore did it re-ignight their property market.
I humbly agree with you, but very humbly
The reason is the dollar is and will continue to be the currency of trade. The federal Reserve controls the dollars. The net effect is that other countries will continue to believe in the value of the dollar (aka:The Federal Reserve) or their governments are history. If outsiders are fooled then why shouldn’t the rest of us be fooled.
“Actually lower interest rates will just delay the inevitable.”
Also would have the undesirable effect of encouraging more overbuilding. Maybe 5m homes for sale (w/2m+ vacant) in a nation w/ 114m households isn’t quite enough for the Fed?
Higher interest rates weren’t the cause of the end of the housing market bull run, and I don’t think that slightly lower rates would re-ignite it. You still have the fact that people would still have to take out 95%-100% loans, ARMS, neg-am, stated income, etc. I don’t think many investors would be happy to take a bunch of loans like that, even if you are “alt-a”. Just my opinion, credit tightening has already started, and will continue unabated until it “plays out”.
Lowering rates would probably inflate a new bubble, probably in the stock market and/or commodities.
I wonder if it is even possible to mitigate all the damage done by poor lending standards by just lowering interest rates. I think the “housing souffle” has fallen and mereley turning up the stove isn’t going to cause it rise again.
rate cut in the bag, man…. .this economy is way the hell overheated…..
cmon get with the GLOBAL expansion.
uh, dont you mean a rate hike……no, seriously, these guys want inflation, not deflation.
Banks are creditors. Inflation wipes out debt. They want inflation even less than we do.
they=horders of goods
“Inflation wipes out debt.”
But here is a twist. We have seen stories that hint on a massive stock of bank REO building up. Suppose Bernanke successfully respiked the punch bowl and got home price acceleration to move from negative to positive. Then anyone holding REO would look smart — provided the inflation came soon enough.
That’s my devil’s advocate take. My sensible side says that there is no way to turn the situation around in time, as it takes maybe 18 mos for the effect of a monetary policy shock to filter through to the economy…
“Then anyone holding REO would look smart — provided the inflation came soon enough.”
Too bad inflation would create more REO faster — the “A” in ARM stands for adjustable.
“Respiking the punchbowl” to boost home prices would have to come from reloosening of lending standards. FED has issued a tightening guidance (qualify ARMs at maximum interest rather than teaser rate) which will happen largely 9/1/07, and that is in addition to the natural market tightening from the withdrawal of investment funds in MBS. That is in addition to individual states’ legistlative tightening (MN, IL, CO, OH, more to come). Fannie and Freddie are even throwing on points and upping scores to qualify (and you know there’s teeth to a credit crunch when that happens!)
The lender of last resort is FHA, so if FED want to juice to engine it’ll be there, by 1) upping the maximum loan value 2) lowering the broker’s requirements to qualify and 3) reducing the documentation needed to qualify. FED can’t intervene directly into FHA, it has to happen legislatively; so If you see a 123 bill you know the fix is in.
I personally don’t think the FED is at the helm anymore. Foreign investors, hedgies, pensions, mutuals, wall st banks are all sloshing on the high seas… FED just interprets statistics to make them palatable. Food up 8%, but core is peachy… OFFICIALLY.
Wow. I wish I were that good at interpreting my report cards when I was a kid!
thanks jas
Actually, I think the Fed has almost no room to manuver. The dollar craters to new all-time lows almost daily. This is just with a failure to raise rates in line with everyone else besides Japan. If they were to actually cut the overnight rate, the devaluation would accelerate. Given that most of our debt is now sold to foreign buyers, they might be a little bit less interested to fund our overconsumption if they are also guaranteed a currency loss in the bargin.
The Fed does control short-term interest rates. But their credibility on inflation is so tattered that to cut Fed Funds would likely push the 10-year Treasury rate higher.
Won’t the interest rates just naturally go up as foreign investors stop buying Treasury bonds unless the yields go higher? “You want me take stupid dolla bills? You got give me more interest!”
We already have 10-year rates competitive with other the developed nations. Germany (Euros) - 4.54%, UK - 5.41%, Japan - 1.91%, US - 5.01%.
The problem is that they are all pushing rates higher while we are not. That and our money supply is out of control and under the authority of a man with a known inflationary bias. The only way to restore confidence in and the value of the US dollar is to quit creating so many of them.
Yes, but UK rates for a 3 month Libor is 5.73% - not much money around near term.
“Won’t the interest rates just naturally go up as foreign investors stop buying Treasury bonds unless the yields go higher?”
Yes they would. Bears worried about this scenario starting back to before the beginning of Greenspan’s tenure (check out this book for a classic example: The Great Depression of 1990, Ravi Batra, 1985).
I believe the Fed has an unannounced policy of pegging l-t T-bond yields (along with gold prices). T-bond yields and gold prices are two leading indicators of inflation, and if the Fed contains them (as well as the core CPI), then the sheeple will sit back and take them at their word when they say “inflation is under control” (while ignoring contradictory evidence from the currency markets).
BTW, I posted an article last weekend showing that the Eccles Fed (during the Great Depression) set a precedent for pegging govt bond yields; the difference (I think) is that it was common knowledge back then that this was the procedure, whereas nowadays, everyone assumes Mr. Market sets l-t T-bond yields.
under your scenario a “decoupling” of gold and l-t bonds, perhaps, which seems to be starting.
BTW, you can also see how terrified Bernanke is of credit deflation. In his testimony today, he warned Congress not to inhibit “legitimate” subprime lending - whatever that is. He also talked about how important hedge and private equity funds were. Basically, he doesn’t anybody to mess with the elements of the credit pump that have produced so much asset inflation.
translation:
1. don’t use as an excuse to discriminate against minorities.
2. don’t unmask that hedgies, etc. are noyhing but a ball of air and the whole market would implode if you do
“‘Whenever you have a market that is receding, as Southern California is right now, it will recede more in the spillover markets,’ Karevoll said. ‘In the core areas, people will be much less affected than where there was a lot of building and risky lending.’”
Less affected? Seriously? The places that are in the core, the OC and LAC are beyond retarded in pricing and the douche bags plastic smile people who own these houses feel entitled to their gains of 05′. So, they are going to hold on to a higher price, while the mortgage industry and banking industry adjust to the new terms. The buyer pool disintegrates into a dribble of people and the prices have to plummet to be able to be had by more than the 1.5% that can afford or qualify for the sales. You have to be smoking crack rock to not see this coming, I mean it is blatantly obvious and completely unavoidable to keep the median where it is. I asked Mr. T what his prediction was for this housing market and he had a single word response “Paaain….”
All the signs point sharply down right now. I think everyone on this blog has a sense that 2008 will be the year to watch out for. I see things coming together in a perfect storm. I believe by 2008, it will be all but impossible to get giant loans any more, for all but the highers income buyers with solid long term credit records, so I can see sales figures move from the thousands today to the low hundreds in many areas, and stay there until prices adjust to the new reality.
agree, that is why I just signed a one year lease in the OC, so I can sit back and watch the show. at the rate I’m going hopefully I can save my 20%. as prices come down, the amount I have save becomes a bigger portion of the down payment.
Save your 20% and then save some more. The savers are the ones who will still be standing when it’s all over. I might add that before you save, reduce your debt burden to zero and get rid of all the unnecessary flim-flam that does nothing for your pocket book.
thanks for the advice ex-nnv, no debt here, except for a car lease (by choice), the other paid off, running well. as for the unnecessary flim flam, that is hard…lol.
I figure since this will probably take some time, I/wife might as well enjoy life , vacation/travel..etc. but as long as savings are growing at a healthy pace,…we’re fine.
Savers in USD have been raked over the coals as they have destroyed the dollar.
My English Pounds are weighing in at $2.05 today up a nickle in the last week.
“Bulls make money, bears make money, pigs go to the slaughter house.”
In the last 3 weeks the “carry trade” has yielded 560 pips on face value = 5.6%, fully margined ~ 5,000%. I took my profits today. It did everything I expected over the next few months. Greed kills.
Get out of Debt and Get out of Dollars.
Foreign investors that make up the absolute and controlling interest in US Bonds and dollars have a choice to support our sinking ship of state or go someplace else with their money. What do you think they will do?
Support our dollars, of course.
Why would you expect these countries to change their normal operational procedure
or as Alan Greenspan said recently when asked about China getting out of US dollars and T Bonds
“Who are they going to sell them to”
I’m waiting for the overcorrection. Best guess: Fall 2008 - Winter 2009.
IMHO, 2015 - 2020
A whole generation will grow up never seeing rising land prices.
Hoz, the biggest mistake people make is assuming the conditions that exist will stay that way forever. It happened to all the greater fools/f’d borrowers. Don’t let blinders keep you from seeing the market will recover at some point. If you are smart, after it bottoms, buy some property and hold it for cash flow. It will happen. 2009 is a good estimate.
My buying window is end 2009-2011…
I think we’ll see a very fast drop.
Note… I don’t think the uptick will be very fast. But people will want more space… a Jacuzzi, etc.
But let’s see what the bank will lend.
Got popcorn?
Neil
I already own property.
If it took 5 years for the stock market to recover from its crash in 2000 (excluding the NASDAQ which has not yet recovered), why would you believe the greatest bubble in the history of the US is going to last 4 years and then pleasantly recover?
Japan’s RE downturn lasted 17 yrs (before its first uptick). Japan is a nation of savers. The US has negative savings, an aging workforce and 10 yrs from now when some mope in Santa Barbara wishes to retire to ‘Sun City’, if his house is free and clear, is he really going to care if he sells for 300K or 350K?
The stock market bubble was far more liquid than the RE bubble (you could short stocks, creating buyers all the way down).
The market will recover, my advice do not be near sighted enough to believe that we are close to a bottom. This is the first inning of a nine inning game.
As long as Realtors, the Federal Reserve and other dubious sources are predicting recovery - the market is going to keep going down.
Have these sources been right yet?
Why would you even consider believing their spiel now?
We’ll see gold at $2000 first.
(Which still won’t be a new high for gold adjusted for inflation)
I believe it will go down *hard*. A sharp drop (not Japan like).
Now… If I’m wrong, let’s discuss in late 2008/2009.
So I’m not about to believe their spiel.
And I agree… first we have to see J6P declare the end of real estate.
But eventually we will have a time to buy… and I’m an optimist. Someone somewhere is inventing something I will want. The US has a very dynamic and mobile economy (hence why I think this will be faster than Japan).
But again, if I’m wrong… I’m willing to admit it. In two years.
Got popcorn?
Neil
I believe it will go down *hard*. A sharp drop (not Japan like).
Echo of Robert Cote there. He was wrong, and I believe your prediction will also prove wrong. There is too much of an effort underway by the Fed, Treasury and other govt entities to prop up the market. The effort will fail, but it will slow down the correction (much as the Japanese govt’s efforts to intervene in their crash served to drag out the mess over 17 years).
Neil, I enjoy your posts - it will not be J6P that will be the turning point - it will be the nekulturney, the California airheads that jumped on the bubble and will pay their mortgages as their RE goes down in value. The same ones that said “RE only goes up”
The effort will fail, but it will slow down the correction (much as the Japanese govt’s efforts to intervene in their crash served to drag out the mess over 17 years).
This is a good point. One of the reasons WHY Japan’s RE deflation took so long is the BOJ’s ZIRP. If the U.S. adopts ZIRP (as some banksters have proposed), get ready for a long sloooow bleed.
Everyone here would prefer a quick, decisive plunge off the cliff vs. slow death by a thousand cuts. Unfortunately, none of us run the Fed (or Wall Street).
The US has a current account deficit of 7% of GDP, and I can assure you that its foreign lenders are not going to lend it money at 0% interest, or anything close to that.
If other countries’ interest rates go up, US rates have to follow. That’s all there is to it.
“figures move from the thousands today to the low hundreds in many areas, and stay there until prices adjust to the new reality.”
It’s not going to be prices in some areas. People will want to rent closer to work making some properties unsellable in rural areas.Years ago rural property was hard to sell because you had a limited number of buyers for that type of property and it will be so again.
Another case of inflated sub-prime CDO’s that fear a marking-to-market. The moist air that held up prices on higher-valued homes has all but evaporated, but if no one sells who can say what the value truly is.
In my small town one of the local ‘characters’ thought a lot of anything he owned, and always valued them with a price 2 times reasonable. So his land and properties sat for years and years until time and inflation caught up. He could afford to wait out his fantasy prices, but time is coming for many that posting the prices they demand will only bring derision.
“‘Whenever you have a market that is receding, as Southern California is right now, it will recede more in the spillover markets,’ Karevoll said. ‘In the core areas, people will be much less affected than where there was a lot of building and risky lending.’”
Not sure if it will recede more in the spillover areas, but it will recede earlier (iTulip has been forecasting this for quite some time). To say that the core areas will be less affected seems disingenuous; it will just take a little more time for the foreclosures to hit in sufficient numbers to drive the market price down in the core areas - but it will happen.
“it will just take a little more time for the foreclosures to hit in sufficient numbers to drive the market price down in the core areas - but it will happen.”
That could be a good thing! Most people will probably start buying too quickly when they feel the market is turning around and that means in the outlying areas. Once they have settled in they have to sell before buying and if the core area prices start receding later that puts you in the driver’s seat to buy.
The high quality core areas will go down but more likely by quite a bit less than the areas where the builders are running rampant and commutes are horrible.
Still trying everything imaginable to talk down the market calmly, to avoid panic. The high end hasn’t been hit *hard* yet. Getting hit for sure, but the bulk of it just has a slightly longer fuse with heavy optionARM, Int Only Xyrs and 3/27s. That segment gets its clobbering later this year, late fall early winter. 2008 will be resale housing depression time.
“Interest-only loans are tools to get some buyers into a home….”
Lemesee….cut….paste…. there we go:
“Buyers are ‘Some Tools’, to get Interest-only loans into a home….”
cut paste cut cut cut
Buyers are tools..
“Juliette Saunders of Fullerton and her husband have been unable to find an acceptable home in Orange County that they can afford. ‘There’s no way we can afford a house anywhere in Orange County,’ she said. ‘Say, I wanted a loan right now. The banks are freaking out and not giving them.’”
About time! No suicide loan for her! She needs to save up 20% down, rent and buy a house in 2010 for cheap.
No problem want a small Orange Co home for $700K - just put up $140K and be prepared to document a $200K a year stable income. I know folks who can do that, but they already own … Me. I suffer at a lowly senior software engineers salary, so no way I could afford half that
Watch and see how low sales figures go - I think it will be quite shocking. Then watch prices.
This is one aspect of the bubble and bust that really frosts my patootie. “The banks are freaking out”. There is really no excuse for this. If “the banks” had just stuck to their past saner standards of lending (down payments, verification of income, realistic appraisals, etc.) there would be no freakout right now. Just a nice, steady business in solid loans, with people who have the ability to pay, in homes that are valued correctly with respect to economic conditions. What a concept, huh? Instead, now the pendulum will swing in the other direction to extreme pucker butt.
Palmetto–>What a concept, huh? Instead, now the pendulum will swing in the other direction to extreme pucker butt.
I wonder if extreme pucker butt will affect us?
Those banks have a lot of damn gall, expecting borrowers to actually pay that money back. I’m guessing Juliette Saunders has been holding out for a house even more oversized than her sense of entitlement, while her wimp of a husband trots dutifully at her heels like a poodle.
” her wimp of a husband trots dutifully at her heels like a poodle.”
Lotta guys have had difficulties with the wife about buying a house during the bubble, I think. Spoke to one guy today who held out and didn’t buy, but he had a helluva time with the wife about it. Now she doesn’t bother him because she sees what’s going on, but I was just thinking it must have been sheer hell for one spouse to be cautious while the other spouse wanted a house.
Those “difficulties” stem from their need to grow a pair. I was lucky, in that my wife was willing, reluctantly, to listen to logic and reason in the final analysis, plus I’ve got a good track record as a contrarian investor. But, I was quite prepared to put my foot down and say, “Not going to happen until the bubble implosion plays out.”
Ill never marry and I would tell my friends to divorce their useless wives rather than place themselves in financial ruin. If she is going to be so dumb, ditch her!
I convinced the wife to sell just as we finished all of the renovations (jan/feb 06). Not easy. Many arguments.
We sold.
Got out. Renting a nicer place for less money. Also put the majority of the proceeds in C$ & Sterling-based assets.
Lets just say, she trusts my judgement now.
Palmetto, I just had lunch with a guy that bought in June 2005 in an expensive area. A title rep. Main reason for buying? The wife was impossible to deal with until we bought a home. He still considers it worth it. Wait until the market correction takes his job. He is probably down $100,000 in value. Sheesh.
That’s really well done, sparky. Arguments about houses, finances, etc. can be really rough on a marriage, I’m tellin’ ya. Been there. Glad you were able to prevail and that she now trusts your judgment.
The ex-wife cut me off for two months back in 1999, when I told her that I wasn’t going to buy a house that I couldn’t pay for on my salary only, instead of the horse ranch she had (has) fantasies of owning.
I started re-evaluating our relationship after this episode.
Why are divorces expensive? Because they are worth it.
My wife, thankfuly trusts my judgement but my mom, my in-laws, my boss, my friends, etc. etc.,the list goes on, keep looking at me funny for being stubborn for the last 5 years at not buying a home. I explain the obvious reality and all look back like glassy eyed and say “but it won’t be that bad here.”
Someone point out on a map where this “here” is, I think it is where they film those Walgreens commercials.
My brother-in-law jumped in the kool-aid lake 4 months ago in Temecula. God help him.
Poor bro, hes gonna drown trying to slurp all that kool aid. Oh and divorces are expensive, but I can see a whole wave of divorces happening as husband won’t buy wife a house or they get foreclosed then wife walks away. A divorced happened in my neighboorhood and the house still isnt selling. Probably will get foreclosed soon.
I still shake my head when I see people marry. Most people I know wish they never married and those who never marry are much happier. I don’t need a woman in my life other than friendship and some romance(dating, cuddling, slow dancing)
Two guys are out fishing and one says to the other,’I think I’m going to get a divorce. My wife hasn’t talked to me for two months since I wouldn’t buy the house.’ The other buddy then says ,’ I’d leave well enough alone!’ hehehehehehe
Thankfully, my fiancee is even cheaper than I am.
Still, why marry? If you like her then just live with her and be best friends.
My husband turned all our financial decisions over to me when we married. All he asked was that we never recieved late debt calls.
Fast forward 11 years, he was moaning about the money we had spent to travel to two daughters graduations( one from high school and one from college, two months apart) I asked him “You have no idea how much we have in savings alone, do you?” So I showed him the statements and he fell out of his chair.
The point is, not all women are spenders. I want a home of my own so bad I can taste it, but I refuse to pay the stupid, killer prices they are asking now. I’ll wait and save and pick up what I want for pennies on the dollar.
Thank you Brenda! I think several of the women on this board are getting tired of being lumped into such a stereotype. Yes, there were women who browbeat their husbands into buying. But the reverse was also true. I know financially conservative women married to spendthrifts and, often worse, gamblers. Men who think they can make a quick buck in the hot asset of the time (which was RE.) As usual they lose.
Women are too eager to buy a nest. Men are too eager to gamble. Getting stuck with one of those types sucks financially. But trying to blame women for this stupid mess is as ignorant as blaming only the lenders, only the borrowers, only dirty mortgage brokers, only realtors, only the Fed, etc. Lots and lots and lots and lots of blame to go around.
Thanks for providing a reality check against this misogynistic chatter, Brenda.
Some of these guys wouldn’t dream of dating a woman who wasn’t totally “fine.” Too bad she gets that way by being HIGH MAINTENANCE.
Hello, dudes, get a clue.
I just got back this morning from Oahu. My laptop crapped out so I wasn’t able to file reports as frequently as I’d hoped.
I was on Kona for a week, Oahu for a week, and we stayed in rentals. There are for sale signs all over on both islands. I got the impression that inventory is sitting since many sings were quite faded or had fallen down.
There were numberous open houses and hard sells for condos all over the place. One of our friends took a 90 min. sales pitch in order to get free airfare to drop a student off at BYU-Hawaii.
I saw quite a bit of construction, but not nearly as much as CA. Also, it seems that there’s quite a lot of raw land for sale. The idea that there’s limited land though, is tripe. There are vast buildable tracts that run for miles, they just aren’t for sale.
I was in Hawaii two months ago. The amount of construction was staggering on Kauai and Hawaii. Oahu? Not as much, but enough to be interesting. Sleepy areas of Kauai were being build up rapidly (Princeville… ok, not so sleepy anymore, and a few other areas).
Hawaii feeds off money from elsewhere. As that money recedes… They will take a hard hit.
Got popcorn?
Neil
I visit Hawaii regularly and most of my family is still there. Oahu doesn’t have much available land except way out in the boonies (think Inland Empire or Antelope Valley relative to LA). They also have relatively low turnover of existing housing - folks just don’t move around that much there. Honolulu will take a lot longer to get hit than most places. The one major exception is condos. Too much new supply and it’s too easy to add more. That market will get crushed and soon.
Big Island and Kauai have lots of land available to develop in desirable locations. Much heavier and more direct dependence on tourism and out of state buyers. New construction is very large relative to the existing housing stock. Lots of demand is from Californians looking for a vacation / second home. The demand profile looks a lot like the luxury condo market on The Strip in Vegas or in many of the Colorado ski towns - all of which are seeing tons of pressure. Maui looks a lot like Kona or Princeville, but covering almost the whole island. Those areas are going down hard and soon.
One of my uncles is a banker in Honolulu. He mentioned that a luxury condo project in Kaanapali had done very well with their first phase. They decided to do a second phase of about 100 units. They pre-sold about 40 but have only managed to sell 2 in the last 4 months.
Lots of condo construction downtown, Ala Moana, Kakaako, and Waikiki. We have had a rental crisis here during the bubble years because of condo conversions. I imagine that the new condos will become apartments as they sit and rot on the market. Not much new SFH construction locally, but I can’t imagine prices staying where they are. People die, divorce, etc.
During the last bubble (Japanese), condo prices were -60% and SFH were -40%. It will probably happen again. Especially once the HELOC-financed tourism dries up and economy heads south.
Some of the fundamentals here are different, but the wages are the same and everyone here needs the same toxic loans to buy. We are lagging you guys by a year or so, but I have been seeing lots of “open house” signs when I’m out on Sundays. Things are clearly changing.
I visited Kona side of Big Island a few months ago. Complete disaster.
Maybe it was -40% (condos) and -20% (SFH). Can’t remember.
OT Talking of renting in SF Bay Area Fremont:
Looking at craigslist SFH homes 3 br - 2 - 2.5 K is the norm for a decent school.
I don’t know how to make sure I don’t get caught in landlords foreclosure problems.
Get an apartment or something backed by a good property management company that can show you that it is reasonably managed and not underwater financially.
“In Los Angeles County alone, 3,000 sellers took their homes off the market from May to June, or about 7% of all sellers, according to real estate brokerage ZipRealty Inc. Many sellers are simply holding out, refusing to give up any perceived equity gain by reducing their asking price, said John Karevoll of DataQuick.”
Something similar may explain why SD MLS inventory increases are stalled out just south of 20,000 SFRs+Condos. No matter. Sellers w/high cash burn rates will still find themselves forced to choose between selling at prices that don’t cover the loan balance or else waiting until foreclosure day.
Nothing like sellers on the sideline with notes due.
perceived equity gain.. interesting concept.
probably flushing around a thousand bucks a day in “perceived” equity, but it’s never a bad time to refuse to sell…as long as you hang in there.
“Interest-only loans are tools to get some buyers into a home and have been used effectively by a number of people, said John Taber, a commercial and residential loan officer. Those who neglected to do their homework before they invested are the ones hurting now, Taber said.”
and from their website at good ol’ Delta Loan:
Our Products!
Conventional or Jumbo Financing
100% Loan to Value Purchase. Buy a home with NO down payment!!
No Income Verification
Bankruptcy OK
Construction Loans that convert to fixed with one time close.
Gee, do you think that lining up loan defaults with home loan companies in Nevada County might put Delta in the crosshairs?
The party’s over on Wall Street
http://money.cnn.com/2007/07/18/markets/markets_530/index.htm?postversion=2007071817
One day does not a trend make.
I thought it was one quarter a trend does not make. At least that what my Econ 204 prof said in April of 1980 about the negetive growth of the prior quarter. Little did he know what the next three years were going to be like for the national economy, or what the new decade was going for the state of Montana.
#@*#*# I meant; or what the new decade was going to be like for the state of Montana
Montana would be better off seceding from the nation.
What? and be third world poor. Besides that, we have Max “pork barrel” Baccus as chairman Senate Finance Committee. He bring all sorts the goodies to the state. If you believe our local news media, our state’s economy would never function with out the pork.
Hey you wish to join the rest of the US and be third world? Visit Chicago or Detroit or Cleveland!
Montana is exporting its wealth east, when it should be looking north.
North is Alberta, it is about the the only Canadian provence with a dynamic economy. It’s and Montana’s economy are well connected already. A lot of eastern Canadians can’t stand Alberta. I have been told it’s too much like the U.S. So I don’t how looking north is going to change things.
The moneys being generated in Montana far exceed the payback from Washington and the excess profit is being sent to New York. The vast amount of moneys being generated in Montana at this time makes the California gold rush look like pikers.
So, what else is new. It’s been that way since the Anaconda Company ran the state.
Secede!
ha! ha! ha!, In your dreams.
LOL
That was what started this tidbit when I escribed
“Montana would be better off seceding from the nation.”
Still true, but probably will not happen. (Unless the Federal Government decides to sell off its National Parks to help settle debts).
Actually NYC area, greater Chicago, LA pay the taxes. Montana pays very little:
http://www.taxfoundation.org/publications/show/2278.html
What an incredibly misleading set of statistics. Where were the federal moneys spent in Montana? Military and mining, and the moneys from the mining go east and are controlled by the Federal government.
But NYC gives more to the Tax Foundation - so …
You are spot on… The party is over (where is Dandy Don when you need his singing)
“Bear Stearns Cos. strategists estimate that about $290 billion of deals still need to get funded, including those of Greenwood Village, Colorado-based credit-card processor First Data Corp. and energy company TXU Corp. of Dallas.”
Sorry GS et al, I failed to keep up with the numbers I only thought it was 77B unfunded.
NO ESCAPE (or you can keep the cheese just let me out of the trap)
“…Acquisitions by private equity firms such as New York’s KKR and Blackstone Group LP helped push sales of high-yield bonds and loans worldwide up more than 70 percent during the first half of the year to a record $708 billion, according to data compiled by Bloomberg. High-yield, or junk, bonds are those rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.
The investment banking fees generated by LBOs in the first half amounted to almost two-thirds of the $12.8 billion paid by LBO firms to Wall Street in 2006, data compiled by Freeman & Co. and Thomson Financial show. In the race to win deals, the five largest U.S. investment banks more than tripled their lending commitments to non-investment grade borrowers during the past year to $174 billion, according to their regulatory filings.
KKR co-founder Henry Kravis in May called it the “golden era” of buyouts at a conference in Halifax, Nova Scotia. The extra yield investors demanded to own junk bonds rather than Treasuries shrank to a record low of 2.41 percentage points in June from the peak of more than 10 percentage points in 2002, according to index data from New York-based Merrill Lynch & Co. The spread has since widened to 3.07 percentage points….”
Bloomberg
No Escape
Saw my first forced eviction (via the Sheriff) foreclosure last week in Orange County. What made this so odd was that the foreclosure occurred in the Dove Canyon area (very high end) where forced evictions by the Sheriff are fairly uncommon.
Guy bought his home in 2005 for $ 1.2 million and now can’t sell for even $ 799 k - ouch!
Wow, what did that look like? I’ve never seen one.
LOL he got ripped off as have so many others. The kool aid is still being passed around, may take another year before the pitcher runs dry. Can anyone tell me if ill be able to get a decent house in the Sierria California for under $100k by 2010?
“Can anyone tell me if ill be able to get a decent house in the Sierria California for under $100k by 2010?”
Yeah, me too.
Bye and palmetto,
I’m anticipating that you will be able to buy a decent house somewhere in the Sierra Nevada by 2012 for under $100k.
Bill - In investments I will disagree, but in this you are correct give or take a few years. IMHO 2017 for 100k in todays dollars.
Whoa todays prices are crazy(probably even worse in 2005) So you are forecasting prices to drop another 67% off? This means what costs $300k today will be $100k sometime in 2010? At todays prices, you can’t touch anything for under $200k and theres no way I want to live in a $200k shack! What makes the Sierria so expensive besides the mountain views? Isnt NV better than CA? I hear people say so. Oh and whats up with all those $2m to $15m houses? Crazy!
$434,900
3 Bed, 2 Bath
1,886 Sq. Ft.
2.35 Acres
3655 Quail Run Trail
Wellington, NV 89444
MLS ID# 70013375
———————————
$359,900
5 Bed, 3 Bath
1,768 Sq. Ft.
5 Acres(the land looks barren)
————————————
$533,900
3 Bed, 2 Bath
2,192 Sq. Ft.
0.34 Acres (whats up with so many properties on tiny lots?)
Look at NW Pennsylvania prices:
$19,900
3 Bed, 1 Bath
2,018 Sq. Ft.
0.15 Acres (probably needs minor TLC)
————————–
$31,500
3 Bed, 1 Bath
1,248 Sq. Ft.
0.25 Acres (1948 model)
————————–
$65,900
2 Bed, 1.5 Bath
810 Sq. Ft.
10 Acres (1986 house. Lots of land!)
How do people justify paying those crazy Sierria prices? Even south Florida is cheaper!
I’ll try to address this. I lived in the Sierra Nevada as a child. My father rode horseback into the Yosemite area in 1937 (at age 16). Later he fought in World War II, returned home to Ohio, got married, had a kid, built a house along a creek in the early 1950s around Oakhurst (near Yosemite) and moved his family there. He learned a lot about the area and I learned from him about the advantages and disadvantages of it all.
Fast forward: The San Francisco bay area living expenses were getting so ridiculous that a lot of “Silly Cone” valley people thought it wise to pull up anchor and move to the smoggy San Joaquin Valley where you could see the air and get very fat driving 70, 80 miles or more each way to work. Some of them saw this trend and started speculating. Speculators from LA joined in and moved up into the hills of the Sierra, pushing up prices. Problem is, you have to get above 5,000 feet to be in the clean air. The air in the San Joaquin valley is becoming critically unhealthy, and, as someone corrected me a week ago, it’s mostly blown in from San Francisco/San Jose/Oakland. Ironically San Francisco is lauded as city in the top 5 with the cleanest air! The unhealthy air will pull down prices in the Sierra Nevada as the smog works its way upward. The big force that will bring down the prices of the Valley and Sierras is when the real estate prices crash in the bay area. Lots of people will return back to the bay area (many of them are renting on the outskirts) when prices go down. This will push down prices tremendously in the Valley and force Sierra prices down.
I was born in Fresno and lived there for 20 years and know the region of the Valley and central Sierra Nevada.
I don’t care too much about California taxes. I am going to convert to a Roth IRA in 2010 and most of the portfolio I have outside the 401ks and IRAs will go into municipal bonds. I’m going to pounce on real estate once the cost of renting is more than the cost of buying. I’m aiming for a place on or near the coast.
Bill In Phoenix, will the air become cleaner once those silly investors move back to the Bay area? If the air is that unhealthy, I don’t want to live there then. I love mountains and its a shame if pollution ruins it.
I wonder if this will become common practice in the years to come. evictions in the OC. yes I would say OUCH.
were you chillin while this eviction took place?
Do tell! Did the poser get the bums rush or what?
Please tell me they TASERed him on general principle.
OH GAWD, Sammy, I’m dyin’ laughin’ over here…
Nothing like a flash-dancing flipper convulsing on the front lawn to move the housing bubble along!
Shoot, dude, ya did it again! The mental picture is priceless!!! I hear the “Cops” music playing in the background…
WhaTCHA gonna do when they come for you….bad boy…bad boy…..
Think of the Michael More movie Roger and Me:
The sheriff is standing at the door saying get your stuff out or i will lock you out…..and then when they get their stuff to the curb people drive by and steal the stuff….all LEGAL…….
Then the sheriff has the landlord change the locks and signs a release and its over….
If the tenant comes back on the property they can be arrested for trespassing….not pretty especially if its raining and you have NO friends with cars to haul your stuff out of the rain.
‘There’s no way we can afford a house anywhere in Orange County,’ she said. ‘Say, I wanted a loan right now. The banks are freaking out and not giving them.’
Does this mean that if a house was for sale for three times your documented household income, and you put 20% down, you couldnt’ get a loan? If there is no such house, perhaps that is a problem that will resolve itself. If there is no such downpayment, well..
“‘When people ask, when are we going to be off to the races again?’ you have to say, the races have shut down,’ Kyser said.”
What’s he talking about? It’s opening day at Del Mar today (where the turf meets the surf). I’ll be there tomorrow (office outing).
This means we have a long way to go…we are at bottom when people say real estate is the worst investment or really don’t even want to talk about it.
Heading off to the races and betting on the pick 6 might be your best bet if you just have to buy a house today.
“Bill Santoro, broker owner of National Realty Group in Moreno Valley, described the market there as ‘almost in a free fall. Every time we move the price down to get ahead of the pack, the competition comes back just as fierce, dropping their price further.’”
As predicted in here many months ago. Now, let’s wait for the piddling 1% drops to give way to 10-15% at a time, to no avail.
Test
“Bill Santoro, broker owner of National Realty Group in Moreno Valley, described the market there as ‘almost in a free fall. Every time we move the price down to get ahead of the pack, the competition comes back just as fierce, dropping their price further.’”
Now, that’s what I like to hear! Let them shew each other up and drop prices till home prices make sense.
But (Regina) says she’s reluctant to take it down any lower: ‘I don’t want to sell too cheaply.’”
Damn it Regina, you’re supposed to say ‘I don’t want to give my house away”. You can’t even be an idiot correctly.
“Inland Southern California’s home sales last month were the worst in a decade in Riverside County and the worst on record in San Bernardino County. Riverside County….down more than 47 percent from June 2006. San Bernardino County…..a drop of more than 50 percent.”
This seems like one of the best threads yet on conditions deteriorating!
Go California! Go!
Five Things You Need to Know:
Now this is a real good read……………….
http://www.minyanville.com/articles/Bear+Stearns-subprime-bernanke/index/a/13380/from/yahoo
“So, in other words, it appears Bear Sterns was able to either sell or take down internally all the holdings of the funds at a level that wipes out customers, but leaves the firm fairly well covered. Sweet!”
Did they mention this detail in their ‘Dear Client’ letter (featured on the WSJ web site)?
Interesting times. We are at the point in this CA RE bubble that monthly “foreclosure activity” (which I understand combines NODs and NOTs) is about the same number as monthly sales. Both are around the 35,000 - 40,000 number per month.
This is interesting because that means that buyers could restrict themselves to purchasing from defaulted properties or foreclosure auctions only, and those *not* in foreclosure would sell essentially nothing. Then at some point those properties would have to compete with the distressed sales by becoming NODs themselves or lowering their prices. That’s a very powerful argument for continuing price declines in CA.
That’s a very powerful argument for continuing price declines in CA.
Its a powerful argument for a collapse. First in outlying areas… but eventually the cores must drop to prices that can be sustained by incomes.
1995 resulted in the keys being thrown on the roof. When will it happen this time?
Got popcorn?
Neil
Well, 1995 was 5 years after the top of the market in 1990. So 2005, plus 5 years is 2010. Lots of Jingle Mail in 2010. Of course, if the economy holds, the bottom might be 2009. If the (world?) economy does not hold, it could be 2012. Either way, there should be no hurry. There is no need to wait, if you land a deal in ‘08. But you will still be fine, if you wait ’till ‘09. You can wait for ‘0-10, if it takes until then, and you may be in heaven, if you wait till ‘11.
I can definately wait till 2010, maybe 2011. I am currently saving up money as a first time buyer and hope to pay 100% down, no mortgage. Hope interest rates skyrocket LOL
Good luck surviving the War on Savers. BB & friends will try hard to punish anyone sufficiently prudent to save up for a down payment, as the macroeconomic consequence of a sudden shift to a positive savings rate could precipitate his worst nightmare — DEFLATION. Promoting household financial mismanagement en masse is far preferable to deflation in the Fed’s twisted calculus.
“Promoting household financial mismanagement en masse is far preferable to deflation in the Fed’s twisted calculus.”
That’s right - shop ’til ya drop - or else.
“San Bernardino is reeling from the post-boom effects. In June, sales in the city fell by 57% and the median price dropped 16% to $246,000 from $290,000 a year earlier.”
Our family ate dinner at the San Bernardino Hilton two weeks ago. It was Sunday evening (maybe normally a slow time, anyway), but in a large restaurant with reasonable prices and a decent (three star) rating according to the California AAA guide, we were one of two parties dining there at 7pm. I am really curious now whether that 16% home price drop (and its implications for the cashout ATM) might explain why the restaurant was so empty…
You went to a Hilton in San Berdu to eat dinner? I don’t know anyone who would go to a hotel to eat-out, (I’m not making fun, just sounds odd if you weren’t visiting a guest or function there) Is the food great, if so I’ll try it out.)
Anywho, I went to the newer Costco off Sierra & 210 at 2 PM on a weekday and there was no line for the 3 open registers. More people in line at the food court. Granted it is recently opened, but when you have more people buying gas and hot dogs at a COSTCO than at the registers, something is definetely wrong with the economy.
Check it out for yourself, then when you exit the parking lot, go directly across the street to a small cul-de-sac tract and count the for sale signs. (9 out of 23). It’s been 2 weeks must be more now.
“I don’t know anyone who would go to a hotel to eat-out…”
You must not travel cross-country with kids too often…
Please stop telling these no-line Costco stories. I’m so jealous. Every costco near us is PACKED every hour of every day. We’ve tried going everyday of the week, at all hours. 30 minutes before closing on Friday night is the only time you can move.
I concur. I don’t know what corner of the Universe “Hold-Out” lives in, but it must be a dusty, dry planet, far from this earth, i.e. San Berdu or something. The Costco in Fountain Valley is constantly packed. A real pain to park at or get in and out of.
Modesto’s $200 Club (aka Costco) is not too busy most times.. i’ve had zero wait time at checkout on Sundays. I’ve only shopped there for a few months and wouldn’t know if business has slowed.
even when i do not use a shopping cart i can’t get outta there for less than a C-note.
“‘If you take a chain saw out and don’t know how to use it, you’ll be without a hand,’ Taber said.”
Subprime lending collapse = chain saw massacre
Subprime lending = chain saw massacre.
Corn tortilla + fish + the fixins’ = heaven.
“‘We’ve had the bubble, and now the bubble has slowly deflated,’ Kyser said.”
Slowly deflated?! If you go by number of sales, this bubble has busrst with a BANG! The decline in prices is just gaining steam and once it hits full throttle, it will burst so loud your ears will hurt.
Wait till credit gets really tight and banks stop loaning money that cannot be repaid even to those with high fico’s - When you have tens of thousands of properties for sale, many of them distressed and but a few hundred potential buyers then bang. Right now it is screeching to a halt.