It’s Going To Be A Bumpy Ride In California
The Orange County Register reports from California. “Homes in Capistrano Beach and Irvine’s Northwood areas may have been hit hardest this year by speculators buying properties, only to bail out when the housing slump hit. Median prices there fell about 15 percent, DataQuick reported. Overall, median home prices fell in almost 70 percent of Orange County’s ZIP codes during the first half of the year, DataQuick reported.”
“And while median prices increased in 23 ZIP codes, they accounted for about 28 percent of Orange County’s 83 postal zones. But some agents questioned whether other neighborhoods with the highest price gains really saw home values go up. Irvine sales agent Mac Mackenzie, who sells homes throughout Orange County, said many are areas where more expensive houses are selling for less, pulling medians artificially up.”
“‘Those 23 ZIP codes where prices are up doesn’t take into account price reductions (made to get) a sale,’ Mackenzie said. ‘Higher cost houses are selling for less. I think that’s skewing the numbers.’”
“The biggest price drops occurred in areas with high numbers of new-home sales, such as Newport Coast and an area near The Block in Orange (92868), said Hahn. In addition, areas such as Capistrano Beach (Dana Point’s 92624) and Northwood (Irvine’s 92620) are pricy neighborhoods where a lot of speculators invested, then bailed out when the slump hit, putting homes back on the market for whatever they could get.”
“‘Capo Beach is really hit hard,’ Mackenzie said. ‘There were so many speculators who tried to flip houses (there).’”
“Bob Chapman, who oversees a Prudential California chain in south Orange County, said that more higher-priced homes are selling now, making the median price look better than it is. ‘I don’t think it indicates an increase in value in very many places at all,’ Chapman said.”
The Sacramento Bee. “The housing sector weighed down the job market with increasing force in Sacramento and California last month, leaving payroll growth nearly at a standstill. ‘The housing slowdown is taking a bigger bite than previous months,’ said Dennis Meyers, an economist with the state Department of Finance.”
“‘It seems like housing is at the root of it all,’ he said, adding that the housing sector is hurting other segments of the economy.”
“Consumers ‘are living on fumes — there’s going to be a slowdown,’ said economist Chris Thornberg. ‘We have a real mess on our hands.’”
The San Mateo County Times. “Lately, the real estate propellant for the East Bay has fizzled. During the last year, four key industries that are tied directly to housing construction, sales, or financing, have lost 5,000 jobs in the East Bay alone.”
“‘The East Bay will not completely avoid the fallout from the housing market problems,’ said Scott Anderson, senior economist with Wells Fargo Bank.”
“Anderson has just returned from San Diego, which went through a job boom in recent years because of robust home-building activity. The reverse is now the case in San Diego, he said.”
“‘The housing market in San Diego has single-handedly brought that area’s economy to its knees,’ Anderson said. ‘All of it is related to the housing fallout. They are also seeing effects in retail employment, which is due to a slowdown in consumer spending.’”
The Union Tribune. “San Diego County reported the slowest year-over-year job growth since January 1994, when the county was crawling out of a recession.”
“‘Things are looking pretty bad,’ said Alan Gin, an economist at the University of San Diego. ‘It’s conceivable in the next couple months that we might see negative job growth – a fall in jobs.’”
“Economists pinned the blame for slow job growth on the local housing market. ‘It really is the real estate market that’s causing this,’ said Kelly Cunningham, an economist at the San Diego Institute for Policy Research. ‘Even though job growth in the visitors industry and the professional business sector is still positive, we’re losing as many jobs as we are adding.’”
“For the past year, Cunningham and Gin have been predicting that San Diego would be able to survive the real estate slowdown without falling into a recession. Now they say they are not sure.”
“‘If this trend keeps going on for the next couple months, it would suggest that we might have a recession before the end of the year,’ Cunningham said. ‘Not a big recession, but a slight one.’”
From KGO TV. “Homeowners in some Bay Area communities are defaulting on mortgages at a record pace. In the first three months of this year, defaults in Contra Costa County are up two hundred twenty-five percent.”
“Statewide, there are nearly 500,000 homeowners currently facing foreclosure. Eleven percent of all subprime adjustable rate mortgages are past due, and analysts keeping track of it all say it will get worse.”
“For Richmond homeowner Robert Harrell, it all happened at once. The security guard supervisor lost his job, at the same time his mortgage company hiked his mortgage rate. ‘Which just about doubled my house payments, which put me behind so,’ said Harrell.”
“When Harrell started missing some of his payments, the mortgage company began foreclosure procedures. ‘They just wanted their money,’ said Harrell.”
From CBS 5. “It’s a sign of the record number of foreclosures: 80 Bay Area homes will go on the auction block Saturday at the Concord Hilton. More than 5,000 foreclosure notices went out in June. That’s three times more than last year.”
“Local newspapers are filled with hundreds of default notices. Many homes were purchased by people with bad credit who took adjustable rate subprime loans. Congressman George Miller said the government may do more to force lenders to educate buyers of the risks.”
“Miller…believes the worst is yet to come. ‘We are just entering the unwinding of the subprime loan scandal,’ he predicted.”
The Signal. “With subprime lending worries continuing to send shockwaves through financial markets, the foreclosure market in the Santa Clarita Valley may have only just begun to grow.”
“‘The foreclosure crisis is going to continue for a couple more years,’ said Rodney Fernandez, executive director of the Cabrillo Economic Development Corporation.”
“It is a trend that many in the real estate market are aware of in the Santa Clarita Valley. ‘There is going to be a foreclosure market,’ Pam Ingram, a local real estate agent said. ‘We just don’t know to what extent it’s going to be.’”
“For those who are looking to buy a foreclosed home, however, the time is ripe, and a person can receive a home for below market value. Ingram said it was important to have someone knowledgeable there to help with picking the market.”
“‘You need to be very careful when you’re shopping,’ she said.”
From Eyewitness News 29. “More trouble for the once, high-profile Bakersfield realtor, David Crisp. Eyewitness News has learned, for the first time, a home belonging to either Crisp or his wife Jennifer, is poised to go on the auction block.”
“Documents show an outstanding loan for $400,000. The Crisps can’t sell the home themselves because of an outstanding I.R.S. lien amounting to over $111,000. There are eight properties showing ‘notice of default’ owned by the couple.”
The ChicoER. “While the worst is over, the north valley isn’t out of the woods yet when it comes to the housing market. ‘It’s going to be a bumpy ride over the next 18 to 20 months,’ said Greg Paquin, president of The Gregory Group.”
“Blackening the view, both past and future, are the number of shaky mortgage loans that have been made to individuals ‘who shouldn’t be buying a home,’ Paquin said.”
“Not only has that put some mortgage lenders in trouble, it’s hurt builders who have had to foreclose. ‘We heard stories about people living in Sacramento and buying properties in places they’ve never seen’ for speculated return in California hot housing markets.”
“Paquin also blamed lenders for backing away from their strict guidelines in lending and allowing that to happen. However, he said traditional standards were falling back into place.”
“‘Other than people in housing, people are feeling pretty good,’ Paquin said about the north valley economy.”
The Modesto Bee. “It’s a good time to be a renter in Modesto. Apartment rents remain flat in Modesto, according to statistics released today by RealFacts.”
“Many people appear to be leasing apartments instead of trying to buy homes with housing sales sagging badly in most parts of the West, according to RealFacts.”
“Sales have been bogging down during the past two years as home prices have declined, causing more prospective buyers to stay on the sidelines in hopes of getting a better deal.”
“The slowdown also reflects greater difficulty in getting mortgages as interest rates rise and lenders tighten their qualifying standards.”
“When the Northern San Joaquin Valley housing market was booming, investors jumped in to buy homes they planned to resell, or flip, at higher prices or to use as rentals. As the market cooled, it became inundated with rental units, and that has helped hold down rents.”
2 years of bogging down……..hmmmmmmm
‘Those 23 ZIP codes where prices are up doesn’t take into account price reductions (made to get) a sale,’ Mackenzie said. ‘Higher cost houses are selling for less. I think that’s skewing the numbers.’
It nice that the realtors are making our points for us to the press. Somebody predicted that here long ago.
Realtors are going to come to a point where they are so desperate to get sales volume rising again that they might have to resort to measures as desperate as telling the truth.
Perhaps that’s why Lereah left, eh? He just couldn’t fathom the concept.
“Statewide, there are nearly 500,000 homeowners currently facing foreclosure. Eleven percent of all subprime adjustable rate mortgages are past due, and analysts keeping track of it all say it will get worse.”
Census 2005: 13 million housing units in CA
500k/13 mill gives 3.8%
Assuming 60% homeownership
we get 7.8 mil CA homeowners…
SO 6.8% of all CA homeowners are in some stage of foreclosure?!!! Am I making a mistake with my arithmatic or assumptions? That figure seems absurdly high.
500,000 / 7,800,000 X 100% = 6.4%, which still sounds absurdly high (your number is on the right order of magnitude, but I cannot match the .8). Putting it another way, about one out of every 16 homeowners (7,800,000 / 500,000 = 15.6) is facing foreclosure.
DON’T BUY YET!
Taking the math one step further, if someone has figures to put to this, of the 500K homeowners in trouble how many bought in the last 4 years?
Assuming some 2.5 Million properties changed hands during this time period (approximately 52,000 a month) and assuming 80% of the distressed properties were bought during this timeframe. (I am totally guessing at the 80% so if someone has real numbers please …) then some 400K of these 2.5 million are in trouble or 16% of recent purchases.
I believe this number is probably about right, since it makes sense long time owners have equity and bought at pre bubble prices. If this number continues for several years, some 30 to 50% of properties purchased in this timeframe could be subject to foreclosure over the next 5 years!
“I believe this number is probably about right, since it makes sense long time owners have equity and bought at pre bubble prices.”
But don’t forget the potential dissipative effect of cashout-ATM financing on long-time owner’s equity.
This is true, and in some cases you do hear about those who continually refinanced taking out, squeezing every last drop. I was down at the bike shop last year and some gal was in there buying a high end bike all bragging to her friend how she had a $150K home equity line attached to her Mastercard, so the effects on the economy are clearly not limited to the real estate market once all the money is gone. Worse, having spent it all in a drunken stupor, many will be left with years of payments instead of savable or spendable cash, leading to an even bigger downturn.
Isn’t one foreclosure in California the same dollar equivalent as three home foreclosures almost anywhere else in the country? OMG!
500,000 foreclosures; That sounds like the statistic for the entire US, for first half 2007.
I think they mean 500,000 in CA are either facing FC now or possibly will over the next year or two.
It’s kinda like the subprime statistics on foreclosures: “up to two million suprime borrowers will face foreclosure [across the US]“. This is, of course, a projection into the future.
‘ “The housing sector weighed down the job market with increasing force in Sacramento and California last month, leaving payroll growth nearly at a standstill. ‘The housing slowdown is taking a bigger bite than previous months,’ said Dennis Meyers, an economist with the state Department of Finance.”
“‘It seems like housing is at the root of it all,’ he said, adding that the housing sector is hurting other segments of the economy.”
- When historians look back at the bubble, they will discover that they missed about 500k workers that were never counted in the construction trades. Here in SO CAL there is a marked absence of truck loads of workers and materials like there was in the last 4 years.
I’ve noticed it, too. I don’t know where they all went, but there is a very pronounced decrease in the number of Mexican nationals.
Maybe the marketplace is solving that illegal immigration problem.
You pay the money one way or another, either to the tax man or the bank. Whats the difference? Paying a dollar in interest to get back 30 cents at most is not a winning investment. If the house were fairly valued compared to rent, it might be another story. Plus there is the opportunity cost of the down payment and lost investment income from money spent on the house. All-in-all, now is a terrible time to gamble on a house.
Over the long term RE is only a FAIR investment at best. Over the short term it is a disaster.
Josh
So, the question was “is the interest write off on your taxes in CA worth it?”. Assume a 400K loan @ 6.5% APR. P&I is about $2500/mo. For more fun let’s say it’s a 30 year loan carried to term so Multiply $2500 X 360 ~= 905K. Hmmm…905K minus 400K = $505K in interest payments. Can you write of the entire $500K in interest payments over 30 years? Someone smarter than me please help answer? I’m only a lowly renter.
One can claim the interest paid on a mortgage as a deduction from the taxable income. Yes you can claim the entire $500k interest (over 30 years) as a deduction. However note that the amount the govt. refunds you depends on your tax bracket.
For eg. if you pay 25k as interest in a given year and your tax bracket is 20% you get a refund of $5k. So you still end up paying $20k to the bank.
The calculation above is simplistic, usually for those with 6figure incomes, the tax return are not attractive once the mortgage interest exceeds $35-40k p.a. The AMT also distorts the actual savings in tax by a lot.
I think interest tax deductions on houses are overrated for the majority of the population. It most benefits those in high tax brackets. But since most of the population isn’t lucky enough to be in those brackets, they benefit less if you consider that many of them will have to forsake the standard tax deductions in order to itemize the housing interest. The AMT in turn might nibble even more that advantage away.
Yeah, and heaven forbid you get laid off. There goes your “deduction” - poof!
Apologies if yesterday’ overall California DQ numbers have already been posted, but this seems significant:
“The median price paid for a home last month was $479,000, down 1.0 percent from the record high of $484,000 for March, April and May. That was down 0.2 percent from $480,000 for June a year ago. The year-over-year decline in median was the first since January 1996 when the then-median of $146,000 was down 2.0 percent from $149,000 a year earlier.”
LINK:
http://www.dqnews.com/RRCA0707.shtm
I’ll tell you what else is “significant”:
(479,000/146,000)^(1/11.5)-1 = 11% annual appreciation
11 and one half years at 11%. Well then, what comes next?
Where’s that Shiller NYT chart and that roller coaster animation?
Many thanks Alan Greenspan and the “Do Nothing” Fed!
In 10 years the median went from 149k to 479k? These are in real dollars right?
A more meaningful statistic would be the decline in the price per sq. ft. per month.
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….
there is no better investment than being debt free as STAGflation moves in
There are a lot of rent vs. buy calculators out there. They all take into account the mortgage interest deduction. Here is one from the NY Times. It is possible you live in some isolated area in which it is cheaper to rent, but try it out for yourself.
The tricky part is home appreciation. To be accurate you should plug in the inflation figure +1.5% for home appreciation. That is the historical norm.
Given that realistic inflation/appreciation ratio you will find that the 120 times rent is a pretty good ballpark (i.e. don’t buy if the cost of the home is more than 120 times what you can rent it per month).
“To be accurate you should plug in the inflation figure +1.5% for home appreciation.”
Yes, this is the historical norm.. but given the loose lending and appreciation far above this level over the past 7 years, assuming appreciation matches inflation would be generous. When I run that calculator for my town, I assume we will lag inflation by one % point over the next 10-15 years (and that is an optimistic scenario).
“plug in the inflation figure +1.5%”
LMAO
figure in inflaton, 5-10% drop/yr for the next 5, 5-10% for maint and upkeep and lost opprotunity cost of down payment along with the ammount you pay over rent.
I love RE rentals (at 100 times rents or less) anything else is insane. Yes, owning has many bennefits over renting, but your asking an investment question. At this point in the cycle pondering a purchase is not advisable. Rather than try to guess the bottom better to wait for the first few real quarters of appreciation, so what that you miss the absolute bottom by 5-10%… it is much better than cutting yourself on the falling knife.
What % of state and federal income taxes do you pay?
The mortgage deduction is all of the interest you pay on the mortgage over the course of a year. The savings is your % of income taxes paid on the mortgage interest.
Don’t forget that you have to deduct your standard deduction from the amount. That is the actual dollar amount of the mortgage interest deduction.
Most RE fanboys wildly overstate the benefit of the tax deduction.
If you get a neg-am IO ARM at 2.5%, with a nominal interest rate of 6.5%, and your marginal tax rate is 30%, then your deduction is 6.5%*30% or 2.05%. So, you’re only paying 0.45% — the mortgage pays for itself! For a little while….
BTW, Someone pointed out that I should include that I live in CA, that independantly employed, and make about $250K per year.
I’m being screamed at constantly
BTW, Someone pointed out that I should include
First get a backbone then worry about the interest deduction.
Sounds like his wife wants to buy a house and is watching him type the post!
LOL
Oh. You live in CA. Then the answer is easy: rent.
Oh. You live in CA. Then the answer is easy: MOVE!
If you make $250k/year from W-2 sources, ask your accountant.
If you are self employed you need an accountant worse!
If you don’t have an account get one.
At that income level you may end up in AMT land if you start taking large mortgage interest deductions. Get an accountant.
No offense there Garrett, but if you make that kind of money and have to come here to ask that question then you are in severe need of personal financial advise. My rate is $100/hr…let me know.
Somewhere else on this blog he said he was a doctor. Maybe you could trade services???
Where are those Californians getting such big paychecks? I guess it explains in part why houses are so expensive but not everyone is rich, my friend makes $50k-60k a year and splits the $2k monthly rent on a $750k townhouse only the rich can afford.
I think we are paid a lot more to afford the astronomical costs of housing, not vice-versa. At least that’s what I told the boss when I last asked for a raise here!
“For the past year, Cunningham and Gin have been predicting that San Diego would be able to survive the real estate slowdown without falling into a recession. Now they say they are not sure.”
And yet they are still listened to by the MSM. This was not a difficult prediction. This entire blog predicted a housing-led recession for California. This morons are only now getting to that conclusion. It’s like they predict the winner of the Kentucky Derby after the race has already been run and the idiot journalists still think their opinions have value. Burn down the REIC and MSM.
…It’s like they predict the winner of the Kentucky Derby after the race has already been run…
It’s worse than that. They predict the first one out of the gate will win, and thereafter change their predictions every time the lead changes.
Here in LA they’re entirely useless. They always go straight to the vested interests, and you already know what they’ll say before they ever say it. Heaven forbid they actually practice real journalism in this town.
The LA Times proved this by having the Bear Stearns article of worthless hedge funds hidden in the back of the business section that morning. Thank you LA Times.
HELOC - Don’t Call it a Loan
This blog new. Most do not want or hear the truth. It hurts. Reality is hard to accept but that is why we still have Santa Clause, the tooth fairy, where adults can still believe as children that this is some big mistake and their lives will not be changed. Times like this Wall St. will have the answers and once again everything will be ok. Believe. They have our interest at heart.
“Local newspapers are filled with hundreds of default notices.”
ironic - they’ve traded income from RE ads for income from default notices. bet it wasn’t much of a trade.
My husband has had a nice job offer in SF. I don’t think we can even consider it. Can you buy anything in the Bay Area or Marin that isn’t gangland for 400K or less (2000 square feet or more)?
Try not to fall over laughing. I really don’t know.
I’m sorry I just can’t help myself, I’m bent over laughing right now. The answer to that would be No. Don’t move to California, trust me.
“Try not to fall over laughing. I really don’t know.”
Oh come on, yes you do.
Check out burbed.com for your answer, txchick. Scroll down to the Fallujah entry.
You’re not fooling anyone, tx. We know you actually can afford it, you just can’t bring yourself to pay it!
p.s.: Same mentality here, albeit on a somewhat lower scale.
txchick57:
I live in the SF Bay Area and make enought to buy a “median” priced home in our area (~750K or so) … but am not about to (!). Housing prices have doubled here in the past 5 years yet have simply stopped moving. Sales just aren’t happening and a ton of condo developments are coming on the market. Pricing are slowly coming down.
My advice: RENT RENT RENT if you do move here. Once can get a very very nice house in a nice area (Rockridge, Montclair in Oakland or in San Rafael in Marin) or a very nice apt in SF for about 2-3K a month. Yes, 2-3k a month is expensive for texas but I’ve found wages are higher here + you don’t have texas weather. You also will get a place that should be in walking distance to transit and nice markets and coffee shops.
THe same house you would rent probably would have a “wishing price” of about 750K to 1.25M if the owner tried to sell, eg, the rent is about 1/250th or 1/300th the price of the house (yet another indication about overpriced housing has gotten)
I have to agree with this comment, definitely rent. I rented a $700K house in Rockridge for 3 years for $2400 per month (house would probably cost about $1MM now). We’ve rented a $1.6MM-$1.8MM house in San Francisco for the least 4 years for $3100 per month. Prop 13 has really skewed owners’ costs. There are plenty of $2MM+ houses in SF where long term owners pay annual property taxes of less than $2K. Therefore, they are inclined to rent these houses out or even leave them vacant, because their carrying costs are very low (of course opportunity cost is very high). Many are “saving” the homes for their children, who will be grandsfathered in at the low property tax assessment. Mortgage interest + property taxes if I were to buy my current rental would be around 11-12K per month versus rent of 3K. For us, it’s a no-brainer to rent.
DAAAAAMMMMNNNNNNN! A $1.6+M house for $3100/month? Where do I sign up??? (Of course, need it in L.A. area).
plenty of 3-story beach houses in HB for sale $1.6 million: rent $3K
Agreed. My buddy lived in the 400 block of Herondo Street while I lived in Torrance. Recent 2 bedroom 2 bath models have come down from $900,000 to $750,000 on that block. My friend had a 1 bedroom apartment and paid $1400 per month rent. He thought it was the best bargain in the world. He certainly did have a bargain! Could ride his modest bike to the HB pier and meet us at Sharkeez. Good old days!
Consider renting, and buying at the end of the bubble. (Wife and I bought an East Bay home in 1996, when everyone was saying real estate is a terrible investment…)
What??? Move to CA??? I thought you were the new boss at the Internment Camp for HBB Bloggers. Did you turn the job down?
(Just in case you haven’t read today’s Bits Bucket: “What would an internment camp look like for the HBB bloggers? I’m guessing we would all be reporting to TXChick within a matter of hours..”)
Oh, I get it, the new camp’s in Ca, your husband has a job offer, huh…LOL
We were in the same situation 2.5 years ago…my wife received a job offer that was EXACTLY $100,000 more than she was making. I consult, so had flexibility, we lost almost $200k on our house in Detroit (including 20 months carrying costs). Still made sense, as my wife was unable to save a dime in her prior job. Now has both a 401k (with match up to 4% of salary) and a defined pension benefit plan. Even with the cost of living in CA, it has worked well for us. We live up the hill from the ocean, but we do rent. Though, have been looking…but prices just don’t make sense, as of yet.
Contrary to popular belief, you CAN make it Cali if given the right situation.
If I moved back to Cali it would have to a fantastic job offer too good for me to pass up, and I’d have to be able to live in a nice area, no working for high pay in shitholes. Would I buy? Right now, hell no. I’d rent somewhere nice and maybe consider buying in the future when home prices are really reasonable.
After watching this bubble slowly play out and the mess its making of our economy, I am seriously having doubts about ever owning again. I’m happy just to rent for the money and headache it saves me plus the flexiblity it gives me.
Very good stories! I’m a consulting engineer and a native Californian who enjoyed living in LA from 2003 to 2003 while renting. My income was very high and my rent $1000 per month. I got a big kick out of seeing all these expensive cars and SUVs in the south Bay, but lots of POS houses (check out Anza between Torrance Blvd and Sepulveda Boulevard) commanding $5000 monthly mortgage payments. Ask yourselves how long your incomes will last. Be honest. If your answer is shorter than the number of years you are willing to pay mortgage, you should continue renting.
Correction: er, I lived in LA from 2003 to 2006!
You actually might be able to find something in compton for that price and size. It would probably be a fixer upper riddled with bullet holes.
HELOC - Don’t Call it a Loan
Prob not, even Compton they want $250-300 a square foot. Safer areas can run around $400 a foot and the really nice areas ive seen $600-1000+ a foot!
How much more is txchick going to make compared to her old job in Texas? Duh, rent don’t buy!
I am self employed and even I am tempted to move there! ~$3000 rent on a $1.5m house? Wow! I would of course need a few roomates as no way can I afford it alone. Maybe my parents will move there then they, me and ill find a sweet female friend to all split rent. Will the rents go down as house prices drop? I will never be able to afford to buy in SF, my parents might if that $1.5m house drops to $500k or less and the taxes accrodially drop due to lower appraisal.
Please tell me more! I am excited at the cheap rent! Doesnt the landlord lose prop 13 if they rent it out? I believe in Florida you lose your 3% homestead cap if you rent it out. I know you do if you sell it. Maybe in CA you only lose it if you sell so those people refuse to sell if they owe it free and clear and bought it way before the bubble. Cause once they sell, they can never get back in.
In California, you don’t lose Prop 13 rights even if you are an investor or landlord.
Really safe areas, like Venice!!!
I don’t know if this is going to display right but it shows numerous houses in Venice selling around, and greater than $1000 per square foot. You may have to zoom in closer to the areas labeled “Santa Monica” and “Marina Del Rey”. Venice is the quasi-slum beach area between them. Normally, you don’t want to be outside after the sun goes down in Venice. Notice I said, “after the sun goes down”, not “in the dark”.
http://tinyurl.com/2go8v9
This is going to end badly.
tx, your are obviously trolling….
pleas stop.
I’m assuming the question comes about for the same reason I have a really hard time renting - too many pets? Don’t know what to tell you. In the back county areas of CA you can rent even with lots of dogs. In the Bay Area I am assuming it would be pretty hard and this is why you may be tempted to buy.
If you are serious about moving and need to find a rental, work with some of the posters here in that area. If you were moving to San Diego I know property managers who would consider someone with pets if I recommended them. I’ll bet we have some SF people here who also have connections.
Good luck and please don’t stop rescuing the pups!
Heh TxChick, if you happen to come across this late comment: California is great if you are a renter. Please be sure, however, to buy precious metal bullion and savings bonds in earnest when you and your spouse move to Cali. For obvious reasons.
Thornberg: “Consumers are running on fumes.”
Stanley Johnson: “I’m in debt up to my eyeballs.”
Capital One: “Keep the monkey off your back.”
So, what’s in your wallet? If you’re the average American consumer, not much. I don’t recall who said it first, but I have to agree - this will end badly.
i don’t know either, but they started saying the same thing for the same reason in the mid-90s. 10+ years later and it still hasn’t ended badly.
To me, it depends on who you are talking about and the definition of bad.
I think the average American consumer is doing / will be doing a good chunk worse now and the next few years than in 1995. He will have gone through two of the largest US bubbles ever within a span of 15 years in the two primary asset classes that are touted as the most suitable for him. His debt load is massive with stricter bankruptcy laws to bind him. But most of all, his real wealth has been destroyed by bad financial decisions with a focus on consumption and speculation over savings and investment.
Lots of people stick up for Joe 6P. There is always some group that is always responsible for the woe of the moment. Politicians, businessmen, illegals, foreign countries, some secret cabal, WTFever. And I’m sure they do their part.
But Joe 6P is the foundation and has always been the largest (albeit shrinking) piece. He willingly pays to plays in a casino where he can’t win just because it feels good to play. And he willingly cedes the serious decision making (and wealth) to the house while he is having his fun. When he is done and sees the final tab, I’m sure he’ll find someone to blame, and he’ll get a consolation T-shirt while being escorted out.
But as soon as he gets paid, guess who will be back?
“Consumers ‘are living on fumes — there’s going to be a slowdown,’ said economist Chris Thornberg. ‘We have a real mess on our hands.’”
I seem to remember this guy saying “contained” or some such nonsense.
For some reason when reading the more recent news, I hear lines from Dr Strangelove in my head…
MM: “Dimitri remember when we talked and said what we would do if something went wrong with the bomb. Yes. The bomb Dimitri.”
In our case its all those credit bombs out there.
“I seem to remember this guy saying “contained” or some such nonsense.”
You’re right, but at least he has the courage to change his forecast and voice it to the public. There are few others that have been willing to do this.
Whoa Nellie! Thornberg has been one of the few voices of reason about the unfolding RE disaster for the past 2 years. We do not speak ill of Thornberg on this blog, he’s been on our side for a long long time.
Thornberg’s always been a bear, although gagged professionally in the past. Nice to see the new job allows him a much greater degree of accuracy and honesty.
Plus he’s really a hunk, especially for an economist!
To paraphrase realtors with their, “Now is a great time to buy. Interest rates are still low,” b.s. the mantra for those who saw this mess unfolding (in particular many on this blog) should be, “Now is a great time to RENT. Interest rates are too high even if property values were much, much lower which they will be by the time this bust has run it’s course. There are a lot of bargain rentals out there and a lot more are coming down the line.”
OT: index, index and damn index
From Seeking Alpha:
http://biz.yahoo.com/seekingalpha/070721/41811_id.html?.v=1
Seeking Alpha
Credit Suisse/Tremont Index Implodes On Bear Stearns Hedge Fund Meltdown
Saturday July 21, 3:36 pm ET
Matt Hougan (IndexUniverse) submits: Another day, another hedge fund indexing debacle.
Credit Suisse/Tremont, one of the most popular hedge fund indexers, issued a bit of a revision to one of its indexes Thursday. After reporting on Monday that its fixed-income arbitrage index was up 0.21% in June, CS/Tremont reversed course on Wednesday and said that the index was actually down 6% for the month. Year-to-date returns dropped from positive 3.7% to negative 7.5%.
Oops.
The reason? The implosion of the Bear Stearns (NYSE: BSC - News) hedge funds caught in the web of the subprime mortgage meltdown. Those funds did not report returns on time to Credit Suisse (NYSE: CS - News), which calculates the CS/Tremont benchmarks. And when they did - poof - the indexes took a tumble.
I am surprised the FED is officially saying “too bad, you thieves”]
Federal Reserve Bank of St. Louis President William Poole said investors who lost money buying subprime mortgage-linked securities got what they deserved.
Poole criticized the underwriting standards and interest- rate assessments of Wall Street and endorsed the Fed’s steps to strengthen consumer safeguards. His remarks come after Chairman Ben S. Bernanke committed to tougher rules to protect consumers during his semiannual monetary policy testimony this week. [NOTE:: to "protect consumers"]
“The punishment has been meted out to those who have done misdeeds and made bad judgments,” Poole told reporters in St. Louis after a speech on the market for mortgages to borrowers with sketchy or weak credit histories. “We are getting good evidence that the companies and hedge funds that are being hit are the ones who deserve it.”
above from Bear stearns message board
http://messages.finance.yahoo.com/mb/BSC
They are looking around for any scapegoat at whom they can point a finger (other than at themselves!).
Thinkspeak.
“The punishment has been meted out to those who have done misdeeds and made bad judgments.”
Say it over and over and maybe no one will notice the blood on your hands.
Good then no bailout either. No only if they would actually start going after everyone who lied on their loans and signed on the dotted line. I am actually unsure if signing a document actually means anything anymore.
HELOC - Don’t Call it a Loan
6 billion here, 400 million there, pretty soon you’re talking about some real money!
Anybody look at the video from KGO-TV? Guy was talking about his house in foreclosure/default and as they walked towards the house there were 2 very recent Corvettes parked there. Something didn’t seem right. Just me? Guy lost his job as a security guard and has a $50K Vette?
Upon further review…also a Benz & what appears to be an older Rolls Royce in front of his house. Fiscal discipline? Hmmm.
Some entrepreneur should start a parking lot for the homeless who live in their cars - a more upscale section for these kinds of guys.
Went to the KGO site to see this, and was sorry to also see Pete Wilson (ABC -Channel 7) had died…..missed that.
Hope he still has enough to hip-check Tammy Faye at the Pearly Gates.
Wow, that’s terrible; he was really good; used to watch him on TV nightly news growing up; and more recently listened to his talk radio show. Very reasonable & regular, especially for a SFBA guy.
RIP. He will be missed. Even those who he infuriated with his smugness (and there were many, including myself at times) respected his dedication, thoroughness, and humor. He went well before his time.
This week’s Property Ladder looks like it could be the best ever. Two 26 year old idiot mortgage brokers are flipping a house in Pomona, CA. I’m not familiar with that area but the price is ridiculous. Morons like these two are what helped build the housing mania. Good luck California. You are going to need it.
I went to school at Pomona College, which, strangely enough, is in Claremont, a cute little town near the city of Pomona itself. Pomona at the time was the murder capital of the US. It could have improved over the last twenty years, but my memory of it was that it was generally a gang-infested hellhole.
Pomona is kind of like a really dangerous area with gangs and probably wouldnt want to be there for any reason unless you go to the College there. My car was broken into while visiting friends on campus, the cop came with wet blood all over my car from breaking the glass and said they dont really go after that kind of stuff. There are a lot of really bad cities in Southern California that people seem to think otherwise. This could fall on that list.
HELOC - Don’t Call it a Loan
“This week’s Property Ladder looks like it could be the best ever.”
After watching the first ten minutes, I think you’re right. The contractor is already in jail
OMFG, unbelievable. Best Flipper Episode Ever. Don’t miss the dude with the dollar sign on his baseball hat.
“Homes in Capistrano Beach and Irvine’s Northwood areas may have been hit hardest this year by speculators buying properties, only to bail out when the housing slump hit. Median prices there fell about 15 percent, DataQuick reported.”
Surely they meant to say 15 percent up in Cap Beach? Because double-digit gains for The OC were, are and will be forever in the bag. Gary Watts told us so…
BTW, Lainvestergrl, Cap Beach sounds like a fairly high-end area; is it different in the high-end of LA than similar locales within The OC?
GS,
You don’t really expect her to answer do you? She is somewhat logically challenged in anything that is outside of West Ho. I sometimes think she is a plant by the REIC.
Plant or not, ya gotta be here (LA) to believe it. It’s frustrating as hell, we’re the last bastion of delusion. Hell, we’re even getting “bad” news outta SF. LA? Nothing to see here, move along.
Check ZIP listings for say… 90048, 90024, anywhere in a decent, non-ghetto adjacent area. *listing* prices are still going up. What’s selling (not much) is a different story, but the kool aide is still flowing here. Nuts….
Volume precedes price…Always. As the credit contraction continues, that kool aid will get mighty thin…even in LA.
I’m with you plysat. We rent in 90024 and I can’t see any evidence in West L.A. of a real estate slowdown. The prices are still ludicrous.
“And while median prices increased in 23 ZIP codes, they accounted for about 28 percent of Orange County’s 83 postal zones.”
Then on the other hand, median prices were flat or decreased in 60 ZIP codes, accounting for about 72 percent of Orange County’s 83 postal zones. I am guessing lots of homeowners in these 60 ZIP codes are feeling like going postal on Gary Watts about now.
“Give me a one-armed economist!” demanded President Harry S. Truman.
“Miller…believes the worst is yet to come. ‘We are just entering the unwinding of the subprime loan scandal,’ he predicted.”
Thats why now is NOT the time to buy. Don’t drink that kool aid or catch that falling knife!
If you buy today, and sell in say three years, you will be selling to a market where very few can qualify for the kind of high end financing required to make a mega purchase - say a $500K house in California. Today is a terrible and uncertain time to buy.
“Statewide, there are nearly 500,000 homeowners currently facing foreclosure. Eleven percent of all subprime adjustable rate mortgages are past due, and analysts keeping track of it all say it will get worse.”
Let’s see that is 500,000 non-payed property tax bills just on foreclosed properties; now let’s see the state numbers for total tax delinquencies. I’d also like to see the projected state and county budgets. Carmel safety members were just granted a new contract through 2010 with
(8 3/4%) increases per year. I guess their tax base is safe.
a way out of this mess might be rent to own and build equity before you buy. does anyone have a formula on how long you should rent for and how much of the rent should go towards the purchase.
That’s what I would like to do.
I’m thinking a $500k house at $3000 per month with $1500 going towards the down payment and a one year lease.
At the end of the lease, I can apply the $18,000 towards the purchase of the house.
Lease options always work well in a falling market. After 12 months, I get to buy the $500,000 house that by then will - if I’m lucky - appraise at $375,000.
Where do I sign up?
Thats why rent to own is dumb! You throw money away for nothing!
First of all rent on a $500K house is more likely to be $2,000 / MO, becasue the house is only actually worth $250K, second of all you are better off dropping the $1500 / MO into a savings account where you should be able to get 5%. At the end of that time, you can approach the owner and offer to buy at the current market value and have degotiating power. Picture having agreed to buy his house at the full $500K and he is holding your $18K as well… the only deal worse than these are payday lonas.
Ahahahaha….ahahahhaha, in cash you didn’t get the first time…Ahahahah…rent to buy..that’s a good one.
Yeah, that is a good one! I like the response below - reeeeeeeeally sellin’ it!
Rent to buy is almost always a bad deal for the tenant, don’t do it.
“‘Other than people in housing, people are feeling pretty good,’ Paquin said about the north valley economy.”
‘Tis but a flesh wound!
He may be surprised at how many people, directly or tangentially, are “in” housing.
Didn’t count the For Sale signs in SF on my bike today. Turns out that it’s more difficult to get around in SF when not in a car. It’s a bit hilly here…
BTW — The ‘quake a few days ago woke me up at 5AM. Anyone else? Any idea what THAT would do to the RE mkt here? I’m in Bernal Heights and I thought that the bedrock would be better than the alluvium in the Mission. Self-delusion is the worst kind!
Pomona, Compton, or Baghdad? Which is safer? I’ll take Baghdad. At least you have a strong military presence. In Pomona, Compton, and a lot of the rest of CA, the gangbangers rule the street.
Txchick - Bay area house prices are the highest and most out of whack in the country. I was so happy to leave the Bay area (and LA too). If you move, find a nice place to rent near your work. Follow the advice you have been giving here for years. I lived in the Bay area for 12 years, and LA basin for 6 yrs. I know them both VERY WELL.
I look forward to the day when people (including the realtors themselves) begin to realize that realtors are not economists.
A real estate agent commenting on whether its a “good time to buy” a house is like a clerk at Kay Jewelers forecasting the gold futures market.
These people are merely overpaid clerks. I think that realtors will suffer a tremendous public relations problem as a result of the housing market downturn. I predict that when the market does turn around, people will find new avenues for buying real estate which do not involve these middlemen/women.
You don’t have to be economist to have seen this coming.
Salaries haven’t changed. House prices have shot up 4x 5x (in Southern California). Almost everyone lied on their loan applications to be able to afford the houses that they year before they were denied. Loads of new and expensive cars on the freeways. If people were already maxed out before the housing bubble, and the salaries haven’t changed significantly, a rebalancing is going to occur. The future has been hocked, now that future is going to be poorer in direct inverse amount to how much better the recent past has been than it should have been.
It’s all fueled by borrowing and debt and that debt has to be paid off by someone, somewhere. Worse, it’s secured debt and even worse, the bankruptcy laws have been made more strict.
This is going to end badly.
Given the sheer numbers involved, I could see some organized protesting to reverse the bankruptcy laws. Politicians like a passive population, but they hate having to fight past a huge loud mob trying to get into their offices. Of course if that happend, credit would get even tighter and the housing market even worse.
I second that. Wages have only incrementally increased. The only thing fueling these massive appreciations was lax credit.
…..Actually LIAR loans.
Oh, for an “on the ground” photo of what an area looks like with $1000/sqft house prices…
http://static.panoramio.com/photos/original/1332677.jpg
How trendy! Oh my god I want to live there and I’ll pay anything. Now where can I get the money, oh cool, New Century Financial is offering a million dollars with no documentation and no money down. Let’s move to Venice!!!
Correction New Century Financial is all out of million dollar no doc loans.
BTW, how much for the RV?
Got Cash?
I’m outraged! The media, realtors, the government, the Fed, housing experts, and economists all said this wasn’t going to happen! They all were POSITIVE real estate only goes up, they ain’t makin’ any more land, and we would all be priced out forever if we did not buy.
Are you telling me everyone got it wrong? No. They were all lying through their teeth.
This country is in sad shape. Very sad shape.
HOMES WENT UP 250% AND SALARIES DID NOT. LIAR’S LOANS PUSHED PRICES ON HOMES UP, BUT THE VALUE IS JUST NOT THERE. OVER THE NEXT 4 YEARS WE MAY SEE A CORRECTION HAPPENING, AS PRICES FALL FURTHER AND FURTHER, AND RECENT LOANS FAIL ALSO.