A Bit Of A Correction In California
The Tribune reports from California. “Sales of San Luis Obispo County homes slipped 6.4 percent in June year-over-year, but that was a significant improvement over the 30 percent drop registered in May, according to the latest information from DataQuick. However, it was the slowest June for home sales—a month that historically enjoys strong activity — since 1996.”
“Meanwhile, the overall median home price fell 9.4 percent, to $530,000 from $585,000 in June 2006. ‘The overall trend in (San Luis Obispo County) has demonstrated a bit of a correction,’ said DataQuick analyst Andrew LePage.”
“The median price for resale detached homes —which constitute the bulk of all home sales, was $569,500, down 4.6 percent from $597,000 the prior June.”
The Fresno Bee. “Home sales in Fresno County fell to a 10-year low in June as the real estate market continued to struggle, (Dataquick) reported. Prices also continued their decline, falling 12.2% from a year ago to a median of $276,500 in Fresno County. Tulare County’s median of $231,750 was a 12% drop from June 2006.”
“The prices are staying low in part because the supply of houses for sale is so high. In Fresno and Clovis, 4,167 single-family homes are for sale. With monthly sales averaging 350, that equates to an almost one-year supply of property on the market.”
“Fresno appraiser Carole Laval says (the price slump) averages about 1% per month.”
“Joan Jolly, a Fresno agent said she does have one client who is being transferred two years after buying a house and putting $80,000 worth of upgrades into it. ‘It’s just not there,’ she said of the profit.’”
“Jolly said, ‘Real estate was never meant to be a commodity you buy today and sell tomorrow.’”
The Press Democrat. “Greg Levy’s hopes for selling condominiums he converted from apartments have been dashed by Sonoma County’s housing downturn, forcing him to rent out the units with a turnaround still not in sight.”
“‘We just don’t have the demand. We’re not going to deal with this market anymore,’ he said.”
“Condo sales are slumping alongside houses in the county as the market’s decline nears the two-year mark. The typical condo sold for $375,000 in June, a 4 percent drop from the peak of $390,000 in October 2005.”
“A tightening rental market is an indicator that buyers are staying on the sidelines. Sonoma County’s apartment vacancy rate is dipping and rents are rising.”
“‘Properties are staying full. A lot of people are still choosing to rent because the affordability gap is so wide. Also, a lot of people the last six months or so have held off from making purchases because prices have been falling,’ said Jason Smith, an analyst with NorCal Commercial.”
The LA Times. “When Riverside County landlord Eloise Figueroa learned that her tenant was about to move out of her four-bedroom home in Perris and into a lower-priced rental house, she sprang into action.”
“‘I said, ‘Where are you going? What are you paying? OK. That’s your new rent,’ said Figueroa, who agreed to cut her renter’s $3,000 monthly lease by $150 to keep him.”
“Figueroa, who owns four homes in south Riverside County, has a plan to deal with the slowdown. She is giving new tenants the option to buy by applying their monthly lease payments to a mortgage that she’s willing to carry.”
“‘When you have a housing recession, this is the sort of thing that happens,’ she said.”
“In June, the typical monthly mortgage payment of Southern California home buyers was $2,430, up from $2,422 a year ago, according to DataQuick. That’s in contrast to the Southland’s average monthly rent of $1,400 for the apartments surveyed, RealFacts’ second-quarter report said.”
The Union Tribune. “The average monthly rent in San Diego County jumped 5.4 percent to $1,345 during the last quarter compared to a year earlier, reflecting a rental market that is seeing increased demand as home sales slow, foreclosures rise, and condo conversions retreat to rentals.”
“RealFacts’ survey may have a tendency to overstate rent increases in the San Diego market where move-in incentives such as one month’s free rent have been common, said Robert Pinnegar, executive director of the San Diego County Apartment Association.”
“‘I’m hearing that landlords are tightening their budgets because they don’t see a lot of rent growth going on,’ Pinnegar said.”
The Desert Sun. “Coachella Valley apartment renters paid $10 to $30 more a month on average in April, May and June compared with the same three-month period a year ago, marking a more modest increase than in previous quarters.”
“Coachella Valley apartment renters paid $10 to $30 more a month on average in April, May and June compared with the same three-month period a year ago, marking a more modest increase than in previous quarters. Second-quarter rental rates dropped in Indio, Palm Desert and Palm Springs.”
“There’s been a marked slowdown in recent months, said Carlos Campos, assistant manager at Andorra Apartments in Indio. Some renters have found good deals on homes as sellers trim their asking prices, while other tenants have lost their jobs, Campos said.”
“Many of the higher-paying residential construction jobs have disappeared, he said.”
“Dragged down by big losses related to the real estate slump, California’s employment engine ground to a near standstill in June with a net gain of 400 positions, state figures released today show.”
“Reflecting layoffs by troubled subprime lenders and the big chill in home building, the financial activities sector lost 5,700 jobs, while construction shrank by 5,300. By comparison, the other four declining sectors lost a total of 5,900 jobs.”
“‘Slowing state job growth has been primarily caused by the slowdown in residential building and resale activity,’ said Stephen Levy, senior economist for the Center for the Continuing Study of the California Economy. ‘A continuation of the slowing will cause problems for this year’s and next year’s state budget.’”
The San Gabriel Valley News. “In the face of an increasingly tough mortgage market, Pasadena-based IndyMac Bancorp. announced Thursday it is laying off about 400 employees, roughly 4 percent of its total work force. Most of the layoffs will become effective immediately, a company official said.”
“In an e-mail to the affected employees…CEO Michael W. Perry said the company ‘must take action in order to protect our business and remain competitive.’”
“Industry loan volumes and profit margins continue to be under pressure, he said. ‘While recently our pipeline has been recovering, we concluded that we needed to both right-size our work force to our current volumes and also be very hard-nosed in redesigning our processes,’ Perry said.”
The Bakersfield Californian. “Countrywide Financial Corp., one of the country’s largest residential mortgage lenders, shut its Bakersfield subprime branch, according to a company news release.”
“‘The subprime mortgage business is slowing,’ Countrywide spokesman Rick Simon said in the release.”
“Locally, the entire home mortgage business is slow, said Brian Dawson, president of American Financial Services, a residential lender. ‘I don’t know, I’m just not surprised,’ Dawson said. ‘I think you’ll see that closure. I think you’ll see other closures.’”
“Dawson, whose company has been making prime loans since 1985, called the nationwide upheaval in the subprime sector ‘a scary business.’”
The Contra Costa Times. “‘I think what most builders would tell you, both on and off the record, is that a substantial portion of (builders’) business came from less than perfect credit,’ said Bob Burton, VP of sales and marketing for the Hofmann Co., based in Concord. ‘I’d say upwards of 30 percent was subprime.’”
“Joseph Perkins, CEO for the Home Builders Association of Northern California in San Ramon, said he believed some of the blame resides with the Federal Reserve Board, which decided to raise interest rates, to the detriment of the housing industry.”
“‘You had a two-year campaign to ratchet up interest rates,’ he said. ‘That campaign ended up killing the housing boom. And what’s so interesting is that there were so many people out there who thought it would be a good thing. Now we see it hasn’t been.’”
From KCBS 5. “Contra Costa County residents who live near homes going through foreclosure are at higher risk for West Nile Virus exposure, according to the county’s Mosquito and Vector Control District.”
“Deborah Bass, a district spokeswoman, said people under financial distress because of foreclosures are more likely to abandon or neglect properties.”
“‘In Contra Costa County for example, there are 10,000 homes that are in some sort of foreclosure process,’ said Bass. “We can put a lien on the property.’”
‘More than 80 homes from Santa Rosa to Oakley will go on the auction block Saturday in another sign that the drooping Bay Area housing market is taking its toll, particularly on people who relied on exotic mortgages.’
Speaking of auctions, whatever happened to Auction Heaven in ‘07?
I meant the person who used to post here, not the concept.
This another one of those pretend auctions (reserve pricing) or is this one for real?
It is a Hudson & Marshall. Reserve pricing, auctioneer will bid against the buyers on behalf of seller. It is a fake auction. That being said, the prices are getting better, the buyers are getting wiser, and the sellers are more motivated. Is it time to go to an auction? Not really. Auction Heaven in 07 is a bit early. The true Auction Gate opens in 08, although it could be a grind into ‘09.
I did a little reasearch on a land auction yesterday. I was interested in a parcel of land. Turns out, it was in a failed subdivision from 25 years ago. They got parcels approved and never put in the roads. So your “parcel” was in a cow field, landlocked. Minimum bid $5900. What a joke.
I wouldn’t go unless I was bored but if I did go I’d make damn sure I put in a ridiculously low bid, well under reserve pricing and then give up immediately when/if auctioneer bid against me. I’d do it several times then leave. Friggin dolt auctions.
There is one this weekend at the Radison in Sac. I’m going so I see what happens to house in Woodland. I also want to see how low the homes go in Dixon so I can tease a coworker on Monday.
I just had a vision of the look that’d be on my face if the auctioneer decided to teach me a lesson, allowing me to become the proud new owner of the landlocked pasture mentioned above.
Sit up front, facing the peanut gallery.
This how not to bid video is immensely helpful.
http://youtube.com/watch?v=2NSnShgwG3U
Josh
Oh I’m not buying anything. I read the auction disclosure. They won’t let it go for what it would really get. I hoping for free booze however >; )
I went to the REDC auction at Cal Expo in Sacramento last month. Most of the homes sold just below what they would sell for on MLS. No bargains. A lot of people. Everyone caught up in the next big thing in real estate, i.e., bank owned auctions.
f4, yes you are right about prices. Then you add the 5% auction fee, plus all the closing costs and poof, a new GF becomes a new FB.
“RealFacts’ survey may have a tendency to overstate rent increases in the San Diego market where move-in incentives such as one month’s free rent have been common, said Robert Pinnegar, executive director of the San Diego County Apartment Association.”
Another easily-overlooked factor: I am guessing homes which feature granite counter tops command higher rents than those without them?
Yea, sure…
Side by side, they do. I was amazed to see an “upgraded” small place rent faster and for more than an older bigger unit near me. Of course, renters now are likely 3-month liars who signed a year lease, only intending to party the summer away.
Funny… an apartment complex I drove by here in Portland this morning had its usual sign offering specials - with a new one on top of it: ” Granite Countertops.” These are ordinary places - not particularly high-end.
Is everyone in love with granite, or has there been an onslaught of cheap Chinese granite?
I put in granite whenever I remodel my units, for the past 2-3 years, and they’re low end units. Granite is so cheap now, I think it actually ends up being cheaper than tile due to the saving of labor for grouting and tile cutting. I paid $250 for granite, materials only, for an entire kitchen, during my last vacancy.
You’re telling us you put granite in the cockroach infested units? That’s awesome.
granite’s cheap now because it’s losing it’s popularity, just like shag carpet did, etc.
the next “in” countertops will be white formica
what goes around, comes around. you think??
When we moved out of our apartment in SD a few months ago they were offering 1 month free + $200 deposit to move in. That was definitely not the case when we first moved in. Of course, there were several huge conversion-reversions nearby.
“Dragged down by big losses related to the real estate slump, California’s employment engine ground to a near standstill in June with a net gain of 400 positions, state figures released today show.”
Imagine how ugly those figures would look if illegal immigrant employment were properly reflected (I am guessing it is ignored)?
Keep in mind that job gains in the past have been similarly muted…
Good point. However, there is a shoe dropping from the illegal immigrant labor market, which is the impact of disappearing economic dark matter from consumer expenditures of many illegal construction workers on local retail economies.
Those guys driving the “Bimbo” brand bakery goods must be singing the blues!
Does anyone know of any of those lease-to-own (or rent-to-own) situations which have been successful?
How much of the lease/rent amount is typically applied to the future purchase, percentage-wise?
I could never figure out how this could work out for anyone except the owner, and even he/she is in a dubious position.
Please AVOID at all costs any lease-to-own or similarly funky financing arrangements. Getting into bed with someone as a landlord is hard enough — these types of deals require that they’re your lender too. Uggh.
Consider: 1) if you think the house is going to go up in value, buy it immediately with a conventional fixed rate loan from a bank + 20% down payment, 2) if you think the house is going to decrease in value, DON’T BUY IT (or commit to buy it in a least to own situation) until the price comes down. Simple. If you can’t afford a 20% down payment - bluntly — you probably shouldn’t be buying a house.
Not simple: If you put down 20% on the assumption that “real estate always goes up” but it goes down by 20% instead, you lose 100% of your downpayment money ($100K+ in Coastal CA).
These pretty much always suck. I’ve seen “deals” where 300 of the 2100 goes to the buydown which is crap. And why lock in at an inflated price? The only people that benefit is the seller and they are banking on you defaulting. You can imagine how nasty that can get.
You took the words right outta my mouth, Gwynster!
For practical purposes, a “lease-to-own” arrangement is basically the same as purchasing an option on the property, except that instead of paying the option premium up front, it is paid over the lease term. A certain portion of lease payments are set aside to pay the premium. If you decide to buy, that portion becomes a down payment. If you walk, you lose those payments, similar to allowing an option to expire.
The perceived advantage to the option purchaser is that they are locking in the price ahead of time. The purchaser can then get their financing in order and not worry about the purchase price increasing. This might make sense if you thought the price would increase by a small to medium amount (say 7-10% over 2 years), but with the bubble and the easy credit, it made far more sense to just purchase the property outright with creative financing.
If the property goes down in value, well, there goes your option premium. It’s better than paying an inflated price for the home, but not as good as just saving the extra rent.
“‘Slowing state job growth has been primarily caused by the slowdown in residential building and resale activity,’ said Stephen Levy, senior economist for the Center for the Continuing Study of the California Economy. ‘A continuation of the slowing will cause problems for this year’s and next year’s state budget.’”
My wife (not a Palo Alto economist) made a similar observation today without prompting. I believe her question was something to the effect of, ‘With the CA govt getting accustomed to ever-higher property taxes from rising home sales and values, won’t the slowdown in sales and price appreciation hurt their budget projections?’
I admit I put this into my own words, but this is essentially what she was asking me about…
I worry about this in my business, which sells to event centers and so forth.
Trust me, the people in here in Sacramento know it’s coming. The old timers are used to being paid on vouchers. State employees without saving to bank on are going to be in a bad place.
Most definitely, GS. It’s why I find it comical when “some people” continue to claim that govt employees won’t be affected by the housing crash.
Not only do local govts have higher income from property taxes, but they also receive a lot of their income from sales tax. Both will be severely hit in the coming years, IMHO.
Don’t forget that the finacial bankers marketed heavliy to public employee pension fund managers. These managers pick investments like they are ordering sushi, “give me one of each from shashimi grade AAA.” When the mark to market hammer comes down, these managers will be forced to divest from all the bad fish that gets downgraded to California Roll BBB.
This guy is one of the reasons house prices shot up…. and are now going down :
http://tinyurl.com/2r2dlp
(Posted in Bits and Buckets at the very tail end.)
Should’ve been advertised:
“Alligator Farm for sale.”
I must be confused is he trying to sell a negative cash flow of 5000.00 a month in a declining market? I misread it, right?
No you did not misread. But just think of the equity you would be building.
Though I bet that some “investor” would snap up the chance, probably using fake ID and ripping out the copper and selling the AC and then dumping it
Where they say they are NOT IN DEFAULT, they forgot to add the word YET. Hopefully they will be cheaper when the bank sells them. I never thought I would see a ‘business opportunity’ advertised that flaunted negative earning…
Poole: Subprime still contained.
THE FED
Poole sees subprime woes staying isolated
St. Louis Fed chief downplays chances of broader spillover
By Greg Robb, MarketWatch
Last Update: 1:38 PM ET Jul 20, 2007
ST. LOUIS (MarketWatch) — The meltdown in the market for subprime mortgages should remain isolated and not affect the broader financial system, St. Louis Fed President William Poole says.
Poole told reporters after a speech Friday that the overall system is well-capitalized. “It is much less likely the problem will spread,” Poole said, when compared with the savings-and-loan crisis in the 1980s.
http://www.marketwatch.com/news/story/st-louis-feds-poole-sees/story.aspx?guid=%7B06192301%2DF500%2D45DB%2D9A02%2D23E681C55EB3%7D
“Poole told reporters after a speech Friday that the overall system is well-capitalized. “It is much less likely the problem will spread,” Poole said, when compared with the savings-and-loan crisis in the 1980s.”
He’s right in a way. No the problem can’t spread anymore because the spigot of easy money has been turned off. Now we will reap the devastation of that problem and the devastation will spread far and wide. The only question is how far, how wide, how deep and how long?
” we can put a lien on the property … ” from a county mosquito control official.
Lovely. Just lovely !!!
One of the main reasons I resisted buying a house so long is just this reason:
the fact that almost anyone, for any reason, real or not, can slap a lien on your property w/out due process. Especially the govt.
I have an explicit Release of Lien & Liability statement, for anyone who does any work on my home, that will be signed by all parties.
So far I’ve never had to use it as I am a freakin perfectionist that doesnt trust anyone to do as good a job as I can, but someday I wont be able to do a repair, and the Lien Release will come in handy.
Kudos to Ben for all the horror stories about subs not getting paid, and other scams, that lets caring homeowners try to avoid pitfalls.
I cant stop everyone’s lien power but I can sure enough screen out the ones who try to lien for those looking for an easy payday at my expense.
calm down, don’t be so paranoid.
this is about esentially abandoned properties, languishing on the market, while pools of water around the property fester into breeding grounds for disease-ridden mosquitos.
they should lien on these people.
kthomas
I know full well what the point of the article was about. My reply to the statement of ” we can lien ” is accurate and I bet a lot of other typical homeowners arent too happy about the current lien process.
I will ” calm down ” as soon as you ” get serious”. After all, this blog is about people taking things seriously, as in paying attn to what has & might happen in REAL life.
Deal with reality or reality will deal with you.
Relax Francis
Smart practice. If everybody were as conscientious as you, my construction-law practice would dry up completely.
BTW, you probably already know this, but you want to make sure the subs execute lien releases when paid, too.
Thomas,
Can you explain the process in more depth? Are you suggesting that contractors sign release when paid by the homeowner and subs sign when paid by the contractor?
Thanks.
The practice can vary by state. In California, there are standard lien releases in the California Civil Code (Section 3262). Here, the owner should get releases from the contractor and from all subcontractors (subcontractors must serve a 20-day preliminary notice on the owner). The contractor gives the owner a signed conditional release in exchange for payment, plus an unconditional release for prior payments (i.e., if the owner is making the third progress payment, the contractor should have given the owner three conditional releases and two unconditional releases). The contractor should be responsible for obtaining the releases from the subcontractors (and they follow the same practice as the contractor when he is paid). Again, this is the practice in California, and it varies by state, but hopefully that helps.
Short version: yes.
Excellent detailed version: What WaitinginOC said.
Thanks Thomas and Waiting.
BTW & FYI
This is also the way developers manage to stretch their cash flow. They refuse to process a contractors next payment until he manages to get all of the releases resolved for the last one.
It ends up being a negeative feedback loop that has contractors financing a developers project for him, for months.
It is a fair and useful system for individual homeowners but it is ripe for exploitation from giant businesses. It also increases costs for home building because everyone factors in the carry burden in their bids.
It is easy and fair for one owner working with a handful of contractors. But a housing tract involves dozens of prime contractors, hundreds of subcontractors and thousands of vendors. All of them have to be on the same page and that is impossible.
I can guarantee mistakes have been made and I would be wary of picking up a fire sale tract house from a financially strapped builder in the near future. In their haste to unload finished homes, someone is going to miss a lien or two.
The turnover rate in the accounting departments for these homebuilders is obscene. Their project management staffing is also here, today gone tomorrow.
“Joseph Perkins, CEO for the Home Builders Association of Northern California in San Ramon, said he believed some of the blame resides with the Federal Reserve Board, which decided to raise interest rates, to the detriment of the housing industry.”
That’s right Joe, it’s all the Fed’s fault….not the suicide loans or the fact many people decided they could pay 50% of the their take home each month to pay for their over-priced POS houses. Nah, the other fact that houses because of the 2002, 2003 and 2004 mania drove prices way out of the reach of most wage earners. It definitely couldn’t be that the 1.5% property tax on a $600,000 crackerbox at $9,000 a year is about a little over half the cost of renting a 2 bedroom apartment for a year.
Let’s blame the Fed. Let’s lay the responsibility on everyone else because in California people don’t have to accept responsibility for their stupidity. Oh and by the way Joseph….I think you’re full of sh*t.
The Fed is partly to blame, but more for lowering rates so much during the 2000 - 2002 period. Greenspan knew there’d be an equity boom (bubble), but why should he care?
America got too greedy, again. I can’t remember hearing a politician or CEO tell Americans that they need to live modestly, and within their means. It’s always BUY BUY BUY. Crap, even my own family were bloviating about real-estate, and why I needed to by now, and that rent is for the birds, etc. etc. Guess what? They’re idiots. I’m debt free, plenty of CA$H in my pocket to help amuse me, no mortgages, no property taxes, no Homeowners assoc fees, no none of that BS….. happily renting, and just LOVING this hole bubble thing exploding….Big part of my day is visiting Ben’s site,and then patting myself on the back.
Ben, I love this BLOG!
Who is this POS Joseph Perkins ? Oh yes, another shill for the Home Builder’s Assn. branch of the REIC.Why do we even lend him credibility and read his utterances? His job, like LAY, Lereah (how can we forget?), Lum and the rest is to promote the REIC. But, unfortunately the sheeple believe their crap. Just don’t get sucked to the darkside and believe the stuff with M-3 going at over 10%. The printing presses are going wide open. If anything thing, we need higher interest rates to get this bubble popped and to protect the dollar and our savings. What say the brethren? Satisfactory!
Amen!
‘not the suicide loans or the fact many people decided they could pay 50% of the their take home each month to pay for their over-priced POS houses.’
- Did you know someone who was only paying 50% of there net income for a mortgage?
I actually had a mortgage broker try to convince me I could survive on paying half my wages on an I/O piggybacked with a home equity loan. He told me the lenders know that people pay their mortgage first and everything else second because it is the roof over their head which is most important.
And this morgage broker go un-named except he used to be a tight end for the 49ers and had to quit because he had a bad back….initials of G.C.
I almost…I say almost drank the kool-aid…..
Joe is right, in that the boom is completely the fed’s fault, but not the bust for the reasons he gave, because he is too stupid to understand. The fed causes these booms and busts. They lowered rates to an all time low of 1%, kept it there for too long, then raised it up in 17 baby steps to what is still a historically low level of 5.25%. The boom didn’t die because of the fed, which caused it, it died of exhaustion.
People are not goldfish. They know when to stop eating, and in this case, when to stop borrowing. These people thought the house would appreciate in value. That’s what happened. They were wrong, now they have to pay. They gambled, they lost. They need to stop whining about “The American Dream” and take their medicine. I’m tired of, “The Man gave me too much money. My civil rights been violated”.
‘Real estate was never meant to be a commodity you buy today and sell tomorrow.’
Wow, I haven’t heard the above statement in about 5 years, it’s about time.
There are still a lot of FBs who amazingly think RE is a very liquid investment.
That statement should have been made LOUD before we got into the pickle we’re in. How many millions of jobs will be lost in the next six months? The longer we avoid paying the pipper, the more userous the interest on the debt.
I’m normally an optimist when it comes to the economy and markets. Not after this cycle… I’ve only been bearish twice in my life. Once before the dotcom meltdown (far less impact than I thought) and now. Me thinks that I won’t be wrong on the impact this time. Just getting the timescale right… (e.g., due to delayed payment of the dotcom bust)
Got popcorn?
Neil
A home may be owned for prestige purposes but it is still only a stove, toilet, bed and roof. It never should have been turned into an investment tool to get rich on. That’s what commodities and stocks are for…risk/reward. Houses are supposed to be shelter.
well.. when this thing bottoms out, I for one am gonna buy RE as an investment.. and it’ll have little or nothing to do with appreciation.
Remember the survival “rule of threes”?
- 3 minutes without air
- 3 days without water
- 3 weeks without food
Add:
- 3 months without payments
Three years without an offer.
buckyball
Do I dare add ” 3 years without married sex ” for the men on the blog ?!?!
( great list, by the way)
LOL do you explode after 3 yrs? >; )
ahhhh, fair gwynster in davis
my alter ego (Dr Karl Marx Bros) sends greetings / Sac Landing.
I never posted there again after the sign-in requirements /already too many passwords to remember …..
I was also considering attending the Radisson auction, just to get a sense of current selling prices. We know they’ll still be too high, but just how much . .. maybe, FINALLY a downward shift!?
But since yer gettin job offers from back east, you can laugh at us poor locals sluggin it out like a Macys White Sale !
If you happen to see a blonde guy, non-descript average joe looking dude bout 5′11″ 220 Ibs, flash me an HB hand signal gangstyle so I know its you. We contrarians gotta hang. word.
Hey! No one showed me the HG hand signal.
I’ve always wanted an HBB signal so we could find out who’s a real buyer/FB versus an HBB’er doing trenchwork while out looking at open houses & new models.
Any of you ever wondered if the other couple in an open house is one of us?
How about a black tee-shirt with a white FB circled and crossed through on it?
Let’s bring that up on another thread. I like it!
You get used to it……
“Do I dare add ” 3 years without married sex ” for the men on the blog ?!?!
( great list, by the way)”
I just had to laugh! Actually studies show that virgins and abstinant/celebate men live an average of 13 years longer! Humans and animals do NOT need to mate except for procreation.
Are you sure it doesn’t just SEEM longer?
3 decades without a mortgage (renters)
For people from the SF Bay Area: When do you expect this “slump” to finally begin having a downward effect on rental prices? I’ve only seen rents going up to insane levels.. $2,000 to $4,000+ for one and two bedroom apartments. Do you think these prices will ever go down, or are rents going to keep going up until they match mortgage payments? Can people really afford these high rates?
Where are you renting? There are tons of 2 bed apartments under 2k on the peninsula.
I’ve given up on the bay area. Moving out of CA early next year, and I know several other families that have done the same. We earn well into the 6 figures but what’s the point of making money if it all goes to expenses. The houses are old and there’s little sense of community since it’s all highway based urban design.
Where are you going, I’m asking because I see a lot of people leaving and I’m wondering where everyone’s headed
I have a telephone interview next week - Duke Univ >; )
My top pick location - I couldn’t be happier.
Good luck!
Definitely good luck, Gwynster!!!!
We’re getting out of California too, once the wife graduates. It just makes me sick to make so much money and have so little to show for it. Seems like most people around here are making up the difference with debt.
When do you expect this “slump” to finally begin having a downward effect on rental prices?
Beginning in late Fall this year as FBs with vacant For-Sale houses begin going insolvent or face the reality of declining prices and put their cr@pboxes on the rental market. Like I mentioned in a comment yesterday’s bit bucket thread, it is only a matter of time before we see a glut of rentals that used to be for-sale at exorbitant wishing prices.
PS - I posted yesterday’s comment under my old ID “PDXrenter”
I don’t expect rents to fall in the Bay Area, unless you’re talking about far flung suburbs where the foreclosures are. Rents are higher than ever in LA, for what it’s worth.
My friend pays $700(or was it $800) a month to rent a 2/1 apartment in San Francisco. She now splits the $2000 3/2 house with a roomate. No one is going to pay crazy $4000 rents, those fools will just get foreclosed. Other speculators are renting for under $2000 a month, those too will give up when house prices don’t rebound like they think.
Yes many people are leaving CA, even their fat $100k paycheck can’t get them much in such an overpriced location. Even $50k elsewhere goes so much further!
Tell this to my neighbor, who’s trying to sell the house behind me after just one year of living in it:
“Joan Jolly, a Fresno agent said she does have one client who is being transferred two years after buying a house and putting $80,000 worth of upgrades into it. ‘It’s just not there,’ she said of the profit.’”
“Jolly said, ‘Real estate was never meant to be a commodity you buy today and sell tomorrow.’”
I don’t know if he’s putting 80k into it, but it’s been up for sale since April. I surmise it hasn’t gotten any offers, as he’s now into the staging phase.
Last week, it got a load of crushed rock thrown down in the front yard — and the bermuda grass is already poking through in some places. It also got some nice looking wooden window blinds. Now I see a window treatment truck over there.
Oh, and here’s some snark: When I was househunting back in ‘04, I looked at the house that’s across the driveway from my neighbor’s. Like my neighbor’s, it had no street frontage. (It’s on a flag lot.) My agent advised me against buying, as the lack of street frontage would make it hard to sell.
Well, my agent was right, because the house behind me went on the market in July 2005. It went into the staging phase in late September 2005, and was finally sold (to my current neighbor) in March 2006.
Despite all the ballyhoo about staging a home for sale, the ‘05-06 sellers still sold for 30k less than their original asking price. And, for this part of Tucson, where starter houses are in great abundance, that is a haircut.
Oh, did I mention that the current owner started out at the same original ask as the previous owners? I don’t think he’s going to get it, staging or not.
Regarding the quote from the lead-in: “Real estate was never meant to be a commodity you buy today and sell tomorrow.”
Duh! But tell that to any buyer 2 years ago and they would laugh at you! My buddy who is mostly in real estate fails to note that you can never dollar cost average into real estate (unless you have tens of millions of dollars). It’s a different creature of investing compared to the investments that you can take small bites of at a time. Flipping is a loser’s game.
Agreed. Good points. R.E. is also not a liquid investment like securities - which also have market makers, etc.
Who in the world is paying $3K a month to live in PERRIS?!
You could rent a house in LA for that!
Bugger that — you could get a really nice semi-detached house on a greenbelt in the delightful Bluffs district in Newport by-God Beach, right above the Back Bay, for close to $3K.
Damn, one of my close childhood friends lived there, up Dovor, off Galaxy & Polaris I think. They were on the bluffs above the bay with a fabulous view. They sold it in the late 70s and moved into the Big Canyon development. I wasn’t impressed with the new place. The Dovor Cliffs house had this Sinatra on vacation /brat pack feel to it. So $3k a month for the spread that? wow
“The Dovor Cliffs house had this Sinatra on vacation /brat pack feel to it”
Great image, gwynster.
You sound like you’re referring to Westcliff and Dover Shores. $3K/mo. rent would probably be a little low there. The “Bluffs” I was referring to is the development of that name on the other side of the bay, makai from Eastbluff Road.
Yes I would pay to live there close to Fashion Island, etc., but Perris for $3,000 per month. WTF!!! I grew up in Riverside, just a short drive from Perris (could hear the roar of the cars at Riverside Raceway). My cousins (In L.A.) thought we lived in the boonies, and we did.
I wouldn’t pay $3,000 to rent here in Scottsdale, and this is a relatively nice city…
And by the way, who moves and uproots their family for a $150 per month savings. Things must be real tight financially in that household - either they can no longer afford the commute or they are in (correction) were in construction.
I just browsed craiglist for Perris,CA; 3000SQFT 5-BR McMansions overlooking a golf course generally rent for $1700-$1800. I am officially calling BS here.
In the commuter hell of Rancho Cucamonga and Chino Hills houses were selling for 800k until recently. 5k/mo nut minimum for mortgage/property taxes in an area w/median household income of 76k.
For those of you watching these “nicer” areas of the IE, I do see some light peeking thru the far end of the tunnel. Neighborhoods formerly asking as high as 900k are starting to sprout listings in the 700k range (large lot, 3000 sq ft, pool). These are “asking” prices which no one expects to get, so a 650k offer is a substantial decrease form the heyday of late 2005.
My son-in-laws parents live in Rancho Cucamonga and it is very nice (up near the hills). The character of their neighborhood is first rate and is a mature area (15 -20 years), not like the sprawl from the last 5 years. Still, way way way overpriced.
- Rancho Cucamonga is nothing like the Inland Empire Marino Valley area’s.
Rancho Cucamonga might be nice to look at, but it is one HUGE tract home development and the air is obscenely unhealthy. The whole town is buried in a cloud of brown smog that you can see from when you approach it from the freeway.
And yes, the commute has got to be at least 2.5-3 hours each way to LA. It would be quicker to fly in from another state every day!
FYI: Starting this Tuesday, CalTrans will open the rest of the 210 Freeway to the 215. That means all those FB’ers that commute to their underwater mortgage in Beaumont/Redlands can now choose to park on the 60, 10 and 210 every workday.
If I remeber correctly some judge forced them to only allow 1 carpool and 3 regular lanes. I think it is already time to open up the phantom fourth lane.
I could rent in Carmel for $3000 a month!
Not west of the 405 you won’t.
“Who in the world is paying 3k a month to live in Perris?!”
Yeah, I was wondering the same thing. Sheesh, I pay 1750 a month for a house in San Diego.
Not that anyone on this blog needed further evidence, but the stories that have come out in the MSM in the last month are some pretty dramatic, attention-grabbing headlines….the earlier story on new homes selling at prices below existing homes and the comments from the CEOs from the big builders can only lead people in denial (FBs, Realtors, the FED) to believe that this bubble is for real and that it’s going to have some serious consequences.
Ben, congratulations on your quote in Yahoo Finance on the Pacific NW. I’m in total agreement with you… we’re on the right shoulder. We don’t have as far to fall in Portland, but fall we will.
OK, I know things in CA have a high price per sq. ft but isn’t over $34,000/sq ft. a bit on the high side?
http://palmdesertca.yahoo.idx.prucalonline.com/details.aspx?firstrecord=0&searchtype=2&propertytype=2&searchminprice=0&searchmaxprice=10000000&searchbedrooms=-1&searchbathrooms=-1&sort=5&sortacdc=desc&miles=-1&searchgeo=Palm+Springs%2c+CA
gotta be a misprint.. here’s that same address
http://tinyurl.com/3yxswq
its a standoff in san luis obispo county,prices are going down,but look at that median housing price in a county w/hardly any good paying jobs…thankfully the equity nomads from la and san fran will stop driving our housing prices up,because the cant get enough now to afford slo county,this will take a long time,being a happy renter,i have time ON MY SIDE…i will not buy untill there is blood on the streets,i can smell it though……i see it in the retail sector the auto repair shops, after gas and mortgages we californians have no money left for anything else…..
SAN DIEGO INVENTORY MILESTONE:
ziprealty.com inventory of SFRs + condos has crossed the 20K threshold for the first time in 2007.
“Your search has returned the first 200 of 20018 homes”
Nationwide ziprealty inventory is up as well:
“ZipRealty has 1,295,665 active homes Nationwide”
Of course, that is a small portion of the 5m figure that has been tossed around in MSM stories as of late…
SMASHING condo at the famed Racquet Club Garden Villas, designed By legendary Architect William Cody and built by Paul Trousdale in 1964
Now smashing the condo down. That is a darn good idea. What wrecking ball can we use? Would be highly entertaining. LOL
“Meanwhile, the overall median home price fell 9.4 percent, to $530,000 from $585,000 in June 2006. ‘The overall trend in (San Luis Obispo County) has demonstrated a bit of a correction,’ said DataQuick analyst Andrew LePage.”
Q: What do you call a 9.4% YOY price drop that f’s pretty much every borrower who bought in the past year or two in SLO?
A: A good start!
And the percentage drop from the peak is even more than this: the median broke 600K in September of 2005, then declined for a while until the beginning of the slowdown last summer, when it broke 600K again in late summer in the middle of slowing sales.
newbie here. can someone help me out? I’m being screamed at constantly about the tax advantages of mortage interest. While this is obviously a savings, does it really offset the cost of a loan at, say, 6.5%? I have been a believer so far that to own a home free and clear was more desirable than to owe a mortgage. Some people who have done well for themselves in real estate over the past 40 years tell me that i am dead wrong. Appreciate your help here….
The advantage of owning a house free and clear is security. The advantage of paying mortgage interest is that it’s tax-deductible, and thus effectively subsidized. If you’re in a moderately high tax bracket and a high-tax state like California, your marginal combined income tax rate could be as high as 40%. With that rate, a $100 tax deduction puts $40 back in your pocket.
How does this apply to mortgage interest? Consider this example:
You take out a mortgage, borrowing $100,000 at 5%. That means you pay $5,000 in interest per year, which is tax-deductible. Since you’re therefore not taxed on that $5,000, you pay $2,000 less in taxes ($5,000 x 40%). $5,000 minus $2,000 leaves you $3,000. So your net cost of borrowing that $100,000 is $3,000, meaning that your real effective interest rate is 3%.
If you can find a safe investment for the $100,000 you’ve borrowed at greater than 3%, you come out ahead. It’s basically a tax-subsidized arbitrage play. Let’s say that you find such an investment that returns 4% after taxes. That gives you a net return on the overall transaction of positive 1%, or $1,000 per year. That’s what real estate boosters mean when they speak of “putting your equity to work for you.”
The major downside is that you might invest your $100,000 in an investment that loses money. It makes very little sense to borrow against your home equity to invest in equities or (God forbid) real estate, especially in an inflated market. Finding safe investments with a return greater than your net interest cost is the trick. One interesting possibility is parking your money in an investment that just breaks even. If interest rates fall, you refinance your mortgage and lower your effective mortgage-interest rate below the rate of return on your investments. If interest rates rise (you did get a fixed mortgage, right?), you may be able to re-invest your $100K at a higher rate of return.
Whether the marginal income you could squeeze out of this kind of strategy is worth more than the peace of mind of owning your house free and clear is up to you.