Battening Down The Housing Bubble Hatches In California
The North County Times reports that fewer people are denying the housing bubble. “Analysts are in wide agreement that the market in San Diego and Riverside counties is caught in a so-called ‘housing bubble,’ but they disagree on the implications. The region’s swelling inventory of unsold houses, a sharp decrease in home sales and flattening prices all point to a much cooler housing market in the next few years, economists and real estate analysts say.”
“Being in a ‘housing bubble’ essentially means that home prices have ballooned beyond what a region’s income levels can sustain in the long run. And that, analysts say, is precisely where Southern California finds itself. ‘What you’re really asking is, ‘What is an asset bubble?’ (UCLA economist) Christopher Thornberg said. ‘That is when a market price of an asset is completely out of whack with the fundamental value of an asset.’”
“It is inevitable, said Ed Leamer, director of the UCLA Anderson Forecast, that the housing market gradually will fall back in line with the rental market, which for the most part has been keeping pace with income growth. ‘It can’t sit there in a stable, expanded state the way it is now, just because the home prices are fundamentally unaffordable,’ Leamer said.”
From the Orange County Register. “In the past year, $100 billion was lent against Orange County property, a sum equal to the gross domestic product of nations such as Iraq or New Zealand. Certainly we’ve seen noteworthy layoffs at local lenders. You cannot overlook the fact that the number of local bankruptcies, late property taxes, defaulted mortgages and foreclosures all rose in the past year.”
And the Fresno Bee. “This year, the mood is different, as Valley agents and home builders, fresh off the greatest real estate boom in recent history, anxiously await the next batch of sales figures. The number of houses listed for sale exceeds the number selling, which puts pressure on prices. Values have slid in some neighborhoods. Likewise, builders are staring at a slowing market while the number of competitors and lots have climbed.”
“The 2,400 or so houses for sale are far more than 900 during the peak years. ‘Price reduced’ signs are starting to creep into the landscape as sellers scale back expectations in a market where more houses are for sale than sold.”
“‘Someone can create a market by adjusting the price. I’ve had several sellers make big price adjustments,’ (agent) Ken Neufeld said. ‘Most have been in the 5% to 10% range.’ Some of the increased supply is probably coming from investors trying to get out at the top. ‘I’ve seen people who bought last summer who are selling now,’ Neufeld said.”
“Add to that the increase in home builders, at least seven entered the marketplace in recent years, and developers are starting to pull back or offer incentives. Centex Homes shook things up when the nationwide home builder slashed the price by as much as $60,000 in select subdivisions from Fresno to Bakersfield. Centex has held similar sales in other areas, including one this weekend in Sacramento.”
“Veteran real estate broker Ralph Strachan noted the houses became available after a deal fell through, possibly because the prospective buyer couldn’t sell an existing home or because an investor backed out. ‘They are cleaning up the inventories and battening down the hatches for a normal market,’ Strachan said.”
“Lennar Homes has stopped doing deals that are contingent upon the purchaser selling an existing house. ‘We are not cutting prices,’ Steve Lutton said. ‘But we are offering incentives and reductions only on those that are finished and ready to close [escrow] in 45 days.’”
“Luxury home builder Gary McDonald acknowledged the surplus of lots controlled by builders and said he expects land prices to start drifting down. ‘There are too many builders in the market. Think about what happened in the last three years from Dinuba to Reedley to Selma to Fowler to Kerman to Fresno and Clovis. Thousands of lots are coming on in the next few years, and sheer supply will cause land prices to level,’ he said.”
Thanks to the readers who sent in these links.
Yeah, Ed - just like prices “gradually” spiked well beyond the affordability of nearly everyone who lives in California.
Don’t worry folks, prices will slowly creep down 40 or 50 percent to a more stable, affordable, healthy equilibrium in which sellers and buyers will co-exist in a virtual housing utopia.
I, myself, can barely wait until this day arrives.
If houses fall back in line with rental/income values can you imagine how much houses would have go down in most cities . I
If rental value creates the floor prices to come , the house I sold in 2005 would have to come down 38%.
Prices will overshoot on the way down, below rental prices. They will even pass rental - expenses. At some point below that there will be a floor…
Another possible scenario is both rents and home prices can go down at the same time if there are way too many new homes being built or too many people move out of the area. California might not have over-built, but the state has lost probably a million middle class families.
Can we achieve utopia without the entire economy tanking ? I’m sensing a disconnect between the housing market and the rest of the economy. Jobs seem to be picking up at the same time the bubble is bursting. Companies are investing in their infrastructure. Will enough people face foreclosure or being trapped in a declining asset to slow retail spending ? Quite franky a 50% reduction in prices in San Jose wouldn’t make much of a diffence if lending standards are tightened and Interest rates stay “high”.
I’ve mentioned this a few times. The RE market was going down the sh**ter in much of the country from 1990-1996. Yet most people would agree the economy wasn’t bad, except for a brief recession early in that period. Perhaps it was because people quit throwing their money away on something as unproductive as overvalued houses.
I think it’s possible (and I hope it turns out that way), but the jury’s still out. The bubble is in the early stages of bursting — the ripple effect will take months to work its way through the rest of the economy. Lenders haven’t clamped down yet — they’re still playing the volume game. Consumer spending could be in for a huge hit as the housing ATM shuts down.
What’s interesting is that the stock market is on a tear. I’ve thought for some time that the flow of speculative capital would eventually divert from real estate back into stocks. And the real proof that a new stock bubble is only a year away: CNN/Money reports on a new glut of venture-funded startups. That’s right — if you didn’t become a dot-com millionaire in the last bubble (I actually did, but lost it all - true story), teach your 17-year-old how to spell “Ajax” and send him to Sunnyvale.
I was close to being a dot com millionaire as well. I worked for a financial tech company and with the stock options at the very peak I was close to the Big Mill.
And I didn’t act. I sat on it. I got greedy. It is the biggest regret of my life. But I am far from the only one.
I know that delicious feeling of greed. I know what it feels like to see all these paper profits, then correlate past trends and think, “If I just hold on a while longer it with be worth 2x.”
It wasn’t all thrown overboard. I did use some of those options in order to buy my house. I am thankful for that. But I still wonder where I’d be now if I had done the smart thing and acted when I should have.
Don’t feel bad Lou… you’d wouldn’t have been so different
I could have joined Qualcomm in 1995 with stock options. Instead I joined a smaller company… in the social scene of which I met my wife… and to whom I owe a lot more than the stock options could have purchased.
Hey John - I have a 17 yr. old too (as of yesterday). I lost almost 7 figures in the stock market. Yes, IQ means nothing when common sense goes out the window. Some life lessons just need to be experienced to learn.
I got hire by AOL in 99 and lost my paper millions because I sat and eventually got laid off. My good buddy got hired by QUalcomm same year (still there) and ahs made millions. Opposite tale of 2 techies
They will gradually fall back in line with rentals… and then gradually crawl under them… and then gradually outstrip them.
All the while those paying the mortgages will be wishing it weren’t so damn gradual.
Ben and others, sorry for OT post, just got done cracking up over REBNY’s March 9 press release — what about? Why the hot housing mkt in 2005! Interesting that in hot 2005 median co-op prices only went up 6 percent. Can’t wait for 1st quarter data, should they ever release.
http://www.rebny.com/pdf_files/AnnualCoopCondo05Press.pdf
meanwhile in brooklyn, just saw an ad for an apartment - larger than mine, but same maintenance, same area- for 85,000 less than I sold mine for last summer.
The key “Ed Leamer, director of the UCLA Anderson Forecast, that the housing market gradually will fall back in line with the rental market”. Take a good hard look at that statement. That is your key to when the market bottom has been reached. Etch it well in your brain!!!!!!
How do you “level off” when the plane is out of gas?
You gain speed by going into a steep dive then pull back and fly level until you get close to stalling and then dive again!
The only people that are going to be affected are those who have purchased late in the market, those who raided their mortgage for paper profits, and those who are just plain stupid. That should be about 10% to 20% of the mortgage holders, the rest are just fine.
How does that square with “in the last year $100 billion was lent against Orange County property.”
And that’s just one county.
So do you think prices will go back to 2002 prices or where ?
Not sure where you got those numbers, but even assuming you’re right, if 20% of the homeowners are in trouble, that’s a staggering number. As for the others who are “just fine” I agree that they won’t lose their house, or suffer a huge cash crunch, but a big chunk of the paper profit they have been counting on may disappear, which will quite likely affect their spending habits. At least until the next asset bubble inflates, I guess.
I agree that the more equity you have the better off you will be. BUT, I think the people who are in most peril are those who stretched to buy, and leveraged themselves with ARMs. When things begin to get ugly, and 3 or 5 years after they bought, their interest rates go up from 4% to 6% or even 8%, and they can no longer make make the payments (since their salary hasn’t gone up 25% or 50% in that time), they will be faced with trying to sell their home in an environment when the pool of buyers can’t afford the payments either.
Even for those not buying late in the cycle, the choice may be to sell at a price where a lot of the built-up equity has been stripped away, default on the loan, rent out rooms, or go BK.
And if in the meantime the folks who bought “early in the cycle” took out a HEL for improvements, they might have well have bought “late in the cycle”.
Thousands of lots are coming on in the next few years, and sheer supply will cause land prices to level,’ he said.”
My, my…and how does the saying go, “Land-it’s not like they’re making any more of it…”
Level my arse….
Lots of lots coming on line in the next few years, BUT the big boys won’t discount or sell to small contractors or individuals. This is my take on things and experience in the Bakersfield and Central Coast markets. They will hold onto their inventory until the next blurp up in the market and then they will build again, in two years or five, whatever it takes.
Except lots of the “big boys” don’t hold land in inventory or take too much entitlement risk anymore. They hold purchase options from local investors who are willing to take the land entitlement risk. If the market slows, the “big boys” are the first who will renegotiate their land purchase prices, or simply let their options lapse. The local investors are left holding the bag. If they can hold on, they can set their price when the market comes back. If not, the burn will crush them . . . especially at the prices people have been paying for unentitled land over the past couple of years.
Undeveloped land in the wrong places can be the hardest thing in the world to sell.
I hear people gripe” “when are prices gonna come down?” alot it seems. I say to them, there is no way prices can stay this high. Some of what you are seeing is “false bravado” by people who made some money in the run-up. They will have to pay gains taxes on their quick flips and the overhead and lavish living has got to be eroding previous profits. Even now they might still break even if they sell. The longer they wait, the more money they will hemorrhage. Do not be fooled by their fascade of ease, they are sweating bullets right now if they’re over-extended with debt, soon they will capitulate outright. The nonchalance they exhibit is a ruse, builders, speculators and lenders, along with the politicians are watching this debacle take place with great apprehension. Hell, I even heard John McCain is trying to unload his McMansion before the crash. This is a terrible time to be in debt. I am saying it, if you play their game and get in over your head in debt at this time with an illiquid depreciating asset you will suffer right along with the rest of the fools living in their make-believe world. There may be economic displacements down the rode. Do you really want the dead weight of a huge mortgage around your neck at a time when you might need to be able to move for whatever reason? There are so many associated costs with owning a house, there are so many other houses that will come on the market in the next decade. The speculators think they have cornered the market when actually all they have down is painted themselves in a corner. Do not give in now when you have the most to lose and almost nothing to gain. Rent a little nicer place if it makes you feel better, but do not doubt that this is a bad time to buy a house that costs ten times your salary because you are tired of waiting.
Thanks. I am feeling discouraged in this underground flat and ready to do anything after 3 years here. A house we looked at when it was 350,000 just came on here in Seattle for 449,000 and I was excited until and thinking about getting one of these ridiculous loans until I found out that it was the house we rejected at 350,000.
Glad for the encouragement, will copy and send to my husband. Thanks.
Thank you for unwittingly talking me down. The need for a buying fix is growing unbearable.
OMG man you’re sounding like somebody who was hot to buy Cisco when it dropped from like $80 to $50. Remember that it was below $10 before it was all said and done. I can’t say it enough — this spring selling season will be to the housing market as spring 2000 was to Nasdaq.
Is it too early to start crowing?
From the Orange County Register. “In the past year, $100 billion was lent against Orange County property, a sum equal to the gross domestic product of nations such as Iraq or New Zealand. Certainly we’ve seen noteworthy layoffs at local lenders. You cannot overlook the fact that the number of local bankruptcies, late property taxes, defaulted mortgages and foreclosures all rose in the past year.”
OC Population = 3m
Iraq Population = 25m+
OC borrowing > Iraq GDP? Oh-oh…
$100bn is a lot, but consider that the USA is spending equivalent dollar amounts on military costs in Iraq each year. Ref the $92bn appropriation that the Senate is considering now that the debt ceiling has been lifted. The mortgage money may disappear in the future, but the overseas occupation costs are already gone.
From Fresno Bee: “They are cleaning up the inventories and battening down the hatches for a normal market,” Strachan said.
Any sailor can tell you that the only time you batten down the hatches is in preparation for a storm. I’ve been sailing for more than thirty years and have never battened down for a “normal sail”!
Took the words out of my mouth Landlord…Some inconsistency in that statement…
I love the term “batten down the hatches”, but not when it applies to real estate or the economy or the stock market. I put myself at our beach house ( in the “red-neck riviera”) watching a Nor’Easter race up from the chesapeake. The weather can change on a dime. It is very exhillarating (sp?).
The wind whips up and white caps appear. Boats are taking off in all directions heading for safe harbor. Sometimes this happens, seemingly out of nowhere, at 2A.M. I call the neighbors. Wake my husband. The boats and jet skiis have broken loose on their moorings and are crashing against the beach or docks.
I’ve got the flashlight and I’m in the water. Swimming and pushing the boats out of the crashing surf. Neighbors appear and shouts are heard. We are all in this together. Exhausted, wet, entering the shack where we spend summer weekends; I feel good. Another boat disaster prevented.
California is not the only part of the planet where the buyers have vanished…
http://www.chinadaily.com.cn/english/doc/2006-03/17/content_542190.htm
The reality of the upcoming decline is prices is actually pretty boring. First time buyers stand to gain, and retiring folks stand to loose. Other than that, most people won’t be affected. People trading up, can still do so, because, though they will get less for the house they trade-in, they will pay less for the house they trade-up to.
Flippers will be hurt, but hopefully they represent a small portion of the economy. I think the estimates of people using their houses as ATMs are exaggerated. And the people who were doing this kind of behavior (taking money out to drive ugly Lincoln Navigators), were most likely people that were kind of foolish to being with, and would have at some point gotten in trouble some other way - like maybe with credit cards.
So all in all, I welcome the decline in housing. Anyone thinking that our economy will tank solely based on house price declines needs to come up with reasons why.
No we don’t. We just need to wait, that’s all.
one word: leverage.
that’s why.
Sounds like the FDIC is nervous anyway:
http://www.fdic.gov/news/news/press/2005/pr4405a.html
From the article:
Institutions should consider stress tests that incorporate interest rates increases and declines in home values. Since these events often occur simultaneously, the agencies recommend testing for these events together. Institutions should also periodically analyze markets in key geographic areas, including identified “soft” markets. Management should consider developing contingency strategies for scenarios and outcomes that extend credit risk beyond internally established risk tolerances. These contingency plans might include increased monitoring, tightening underwriting, limiting growth, and selling loans or portfolio segments.
And still more:
Problem Loan Workouts and Loss Mitigation Strategies - Financial institutions should have established policies and procedures for problem loan workouts and loss mitigation strategies. Policies should be in accordance with the requirements of the FFIEC’s “Uniform Retail Credit Classification and Account Management Policy,” …
And still more:
More financial institutions are issuing HELOC mortgage-backed securities (i.e., securitizing HELOCs). Although such secondary market activities can enhance credit availability and an institution’s profitability, they also pose certain risk management challenges.
Sounds to me like the FDIC was issuing warnings to lenders about this situation last year. Gotta love that line: “Institutions should consider stress tests that incorporate interest rates increases and declines in home values.” don’t you? I wonder if “soft” might translate “bubble”?
How’s this for a reason?
DC…Read the September UCLA forcast….If housing goes south in a significant way it will likely drag the whole econmy into recession…
This assumes supply/demand equilibrium at current prices - Clearly a wrong assumption with rising inventories. As my econ professor liked to say, “everything interesting happens at the margins.” Just wait until the marginal (5% to 25%?) mortgage holders (I refuse to call them “owners”) have to liquidate over the next five years, and prices will decline.
In the mean time I think I will work on my golf game and get ready for trout season.
Yeah baby !!!!
Ay, caramba! Did we all miss this Forbes article from Friday, or was it just me?
Ten Signs of a Real Estate Apolcalypse
“Apocalypse” — not much ambiguity there. Here’s a great quote:
“Prices will certainly plummet if we have significant loss of house buying power,” says James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.
See? That’s how you get to be a dean at one of the nation’s most prestigious universities.
Thanks for posting this link. At least 2 or 3 of the events listed seem pretty likely during the next five years, but in California the real estate bubble is already collapsing under its own weight. One or more of these disasters would just accelerate the inevitable implosion.
The $120/bbl oil scenario is not farfetched. Oil demand is set to exceed supply this year and worldwide production is peaking.
$5/gal gas will kill the bubble.
Nice to see another peaker in the mix. Invest in alternative fuels, get out of debt, learn to live light.
Peak Oil
This site sponsored by Chevron.
There does seem to be a difference in how this “bubble” is behaving across the Golden State. In the San Joaquin Valley, inventories have soared and housing prices are unquestionably falling. This is perhaps due to the huge number of home builders in the Central Valley (i.e., McMillin, Centex, Beazer, to name a few). Conversely, many coastal areas have seen fairly steady housing prices and inventories. For instance, I’ve been watching Humboldt county, on the north coast, and invventories are virtually unchanged since October…and median prices are near where they were six months ago. There still appears to be plenty of Santa Rosa speculators up here looking for relatively cheap housing. Perhaps these people are so stupid that they don’t see the approaching storm…or maybe they are actually smarter and will make a profit if buyers who are waiting for lower prices give up and just start buying.
I am sorry for the people that will be substantially and negatively affected. But gosh darn it, I am ready for the market to get back to something that is realistic and affordable. People that bought at the top… they should have been more aware.
I think a lot of california investors are going to find PHX and ARZ are their waterloos. phoenix and arizona are not going to be just places, they’ll be synomous with losing it all. I can hear conversations.
what happened to john doe?
he lost all in arizona
More like “Oh, man, he Phoenixed his finances up pretty bad”.
Don’t forget Texas. That will be the CA speculators’ retreat from Moscow. On this graph, the beige band represents capital outflows from California into Texas real estate, the black band represents capital recovered.
There’s plenty of reasons why — I could list them, but we’ve been down that road here so many times before.
There’s lots more why it’ll tank without it, too. Did you hear about the latest book out? “The Second Great Depression: Starting 2007, Ending 2020″. Great interview with the author over at FSO.
As stated earlier, now is not the time to be in debt of any kind, especially mortgages.
2 months ago, Santa Barbara realtors would only report that “we are going to have another strong year here… maybe not 20 - 30% gains like the last several years, but clearly in the 5 - 8 % range”
Fast forward to today and many of them are saying that the market has changed. “Sellers need to be more realistic with their pricing in order to have Buyers seriously consider the properties”.
Hmmmm, what just a 60 day time period will do to a market “that will never go down, will always appreciate, will always be desirable”.
I see lots of “New Price!”, “Just Reduced!”, “Major Price Reduction!” attached to the ads these days…
WONDER WHAT ANOTHER 60 DAYS WILL BRING????????????
Another 60 days will bring more increased inventory in all areas .
I also think that a declining housing market will adversly effect the economy due to:1) less money to spend from refi. cash outs 2)Layoffs in the banking,RE,Construction and mortgage businesses 3)Layoffs in other industries that both service the industires in #2 and due to loss of spending due to #2 in the general economy 4)General bad business climate due to heavy bank and lender losses.
Also, I have said it before and I will say it again. I dont think we will have the much awaited “bust in the bubble” with declining prices until there is a general concensus in this country that there is a bubble and that this huge RE price run up is a farce. This has not happened yet. I speak to people every day that are totally oblivious to the RE bubble and they think this will go on forever, and not just kids or uneducated peons. I have spoken to more than a few business people in the last month who feel this is business as usual. But be patient , it will happen and then look out.
“I speak to people every day that are totally oblivious to the RE bubble and they think this will go on forever, and not just kids or uneducated peons. I have spoken to more than a few business people in the last month who feel this is business as usual. But be patient , it will happen and then look out.”
I’m becoming more and more convinced that the reality of the bubble won’t hit most people until a few For Sale signs sprout up in their area, each listing with a price slightly lower than the last one. Everyone I talk with assures me that they bought in a good neighborhood and that values there couldn’t go down. Somewhere else maybe, but never on their street.
We scrutinize every little blink, cough and hiccup of this bubble daily on this blog as we look for indications of the speed the downturn is taking while this all plays out. Keep that in perspective. It’s very easy to become impatient while wondering when the Housing ATM/Speculation Partying hype will finally die the death it deserves. Most people are clueless to the facts that we take for granted in discussions here. They just don’t spend much time pondering the larger implications of a global housing and credit bubble for some odd reason.
What seems painfully obvious to those of us paying attention now will be ideas that will take the oblivious by surprise in the next year when they realize that refinancing out of their problems is no longer an option.
Even with all the bubble news hitting the front pages of the papers, I still think it’s only going to sink in for many when the signs go up in the neighbors’ yards and sit there. It’s going to happen, but we still have a long way to go yet.
Most people are clueless to the facts that we take for granted in discussions here.
_________________
Absolutely true. We here are soooo tuned in to the bubble. We (here)are addicted to the numbers, and probably each spend more than a few hours on the internet each day reading Ben’s blog (and others’) just searching…searching…searching for that weakness which will bring the whole house of cards down.
You can bet Joe/Jane Sixpack is just starting to hear whispers about the bubble. J6 is busy watching mainstream TV, drinking beer, and working. They certainly do not want to think about housing values going down. Talk of economics gets boring for them. They will only understand when, at their seventh refi in the past two years, they are told that there is not enough equity in their house to “pay off their (credit card) debt” once again. They will not know **why** their house is worth less, and may never know about the credit bubble. These things “just happen” as far as they are concerned.
We have some time to go before news of the housing bubble reaches the masses. Slowly, it is just starting to happen.
Comment by DC Condo Watcher
2006-03-19 18:26:44
The reality of the upcoming decline is prices is actually pretty boring. First time buyers stand to gain, and retiring folks stand to loose. Other than that, most people won’t be affected. People trading up, can still do so, because, though they will get less for the house they trade-in, they will pay less for the house they trade-up to.
Flippers will be hurt, but hopefully they represent a small portion of the economy. I think the estimates of people using their houses as ATMs are exaggerated. And the people who were doing this kind of behavior (taking money out to drive ugly Lincoln Navigators), were most likely people that were kind of foolish to being with, and would have at some point gotten in trouble some other way - like maybe with credit cards.
So all in all, I welcome the decline in housing. Anyone thinking that our economy will tank solely based on house price declines needs to come up with reasons why.
Many reasons, perhaps the best reason is debt. The US has the highest debt of any country in the world. We are being subsidized by Japan, China and Korea. The housing market is just one phase in the overall economy. Sooner or later Peter has to pay Paul and when that day comes which is not too far off the US Real Estate market plus many other markets will crash. You cannot run a country on debt alone and with 254 million people and 8.2 Trillion debt something will give. The first dam to break will be RE after that then banks.
I would think retiring folks will do okay. They probably have no mortgage debt and bought their houses 30 years ago for a tiny fraction of what they can sell them for now. If so, they can cash out now and spend the next three years living in RVs or various retirement communities before they buy again in a place they really like.
this is a hidden bomb in the RE market. My area Redwood shores now a one million Plus area. 30 years ago this was only $85K. whenever grandma wants to sell or the heirs they can take $500K or 250K and still make plenty of money, and in the process put a nail on home values.
the IMF did an asset study and housing busts lead to recessions.
YUP…..
Slightly off topic…
Does anyone know how to get trend information on construction? I think it’d be an interesting data source to watch. If there is slowing jobs market in construction, it will adversely affect the growth of markets like San Diego, Phoenix, Vegas etc. which are primarily real estate driven.
Simmssays…
AmericanInventorSpot.com
Driving near San Jacinto today (southeast of Riverside CA) I saw a sign with a lot for sale, complete with plans for a 500-townhome development. Note that this is only a land sale, no construction has taken place. This appears to be a cancelled project.
Everyday on XM radio I hear ads for some kind of wildlife preserve land in Arizona. Sounds like someone is trying to get rid of a bunch of excess land.
I am seeing more signs of cancelled home development projects.
What would be really interesting are the market studies that these developers have performed, which tell them when to continue development, or when to cancel their projects. I would love to see their internal memos on this.
AIR BEAR….The inventory for approved California housing projects (Lots) for sale in California has shot up dramaticly in the last 90 days….
The land-sales ads aren’t an indicator of impending doom. I’ve heard some of those ads for well over a year, and I’ve seen the same ads (for different land barons — somebody in Colorado) in the back of airline magazines for at least two years. Those guys bought their land some time ago so they’re like the homeowner who is sitting on 3x appreciation. They might drop their prices to move some inventory, but they’re not sweating it like somebody who just bought a year ago.
Cabin…..I am not talking about long term land owners even though they are part of the equation…
The same flippers that invaded the housing market invaded vacant land….Everybody and their borther has taken land through the initial phase (Tenative approval) and then try to spin it at a heafty profit…
Problem is, with only tenative approval, you still have a year (or more) until yu can bust the dirt….Then its another 8 months to bring product online…Point being, who can tell me what the market price is going to be in the spring of 2008 ?
And, just like the big builders who has pricing flexibiltiy ? The long term land owner…
scdave-
I’m very curious about land prices too. My brother in law is a helicopter pilot and he took us up yesterday and I was amazed at the amount of open space in the middle of cities that we would have never noticed except from the air.
I’ve heard people talk about the lots they own…we would really like to buy one and build something other than the crappy tract home.
But my question is, when these guys realize they aren’t going to get their spec homes built in time to even make a profit- what will the land go for? It seems like a vacant lot should drop much more than an existing home because there is no possibility of renting it out.
Also– does anyone follow the Canyon areas in Orange County? Silverado, Trabuco?
Hopper…The builders in metro’s typicaly will not sell the lots…Furthermore, even if they were to sell the lots the lots likely have been approved by the city as a “Planned Development” meaning, you cannot deviate from the approved plan…
In more rural areas you may be able to find a lots for sale in a subdivision…If that does not work, I would suggest you look around the older neighborhoods in the community you are trying to locate in…You may be able to find a vacant lot or a old house that you can tear down …
At some point, a realtor who lurks here should have a light bulb go on in his head.
Lurking realtor thinks…okay…maybe the market really IS turning…
How long will it take for prices to come down?
How will I put food on the table as this happens?
Here’s the light bulb moment-
Get David Lereah to aggressively ask sellers to lower their prices faster.
The flippers are done. Right now they’re all stumbling around, waiting to fall over. Most flipper homes in Huntington Beach have already been on the market 4 months. By the time they actually start dropping their prices- it may be too late for them. And ‘SpringHopeMania’ begins to unwind Monday- the first official day of spring.
Thus, these flippers need to hear someone ‘in authority’ tell them what to do.
The person who controls most of what the public hears and thinks is David Lereah. We may not like it, but that’s how it is.
If lurking realtor wants to feed his/her family, lurking realtor needs to change David Lereah’s rhetoric.
Write an anonymous note on your company letterhead, and send it off.
I’ll be more than happy to use a realtor to buy our house- when prices come down to the level of rent. Until then, I will create the ‘Mother of all Downpayments’.
So, if you wanna get paid so you can EAT- Mr./Mrs. Lurking Realtor-
Work on David Lereah. He ain’t gonna listen to me- but he might listen to you.
Light bulb.
once all “experts ” agree then it’s not true
HMMMMMMM ?
To DC condo watcher,
“The reality of the upcoming decline is prices is actually pretty boring. First time buyers stand to gain, and retiring folks stand to loose. Other than that, most people won’t be affected. People trading up, can still do so, because, though they will get less for the house they trade-in, they will pay less for the house they trade-up to.”
I don’t agree with your thinking. How can you trade up. If you have a $50,000 house that now is worth $500,000 and you sell it all you can do is buy another $50,000 house. Plus you probably already raided a hugh portion of your equity. Most 1st time home buyers have already bought in an inflated market and will probably be renters after the fall out. Nope it’s the near retiree who kept a level head who will be one of the folk in the catbird seat, as well as the buyer waiting on the sideline.
You both are right. I bought 8 years ago in So Cal. I have not re-fi’d, nor ‘taken money out.’ I want a bigger house. Now, the best thing for me may be to sell now, rent for a year or two (or three?), and then buy. But even if I don’t and the market goes down, it will be a wash because although I will have less equity to roll over, my next house will be cheaper too. The ones, as usual, who will really get burned in all of this are those who bought over the last 2 years at or near the peak and over-leveraged themselves with a funky loan that they won’t be able to cover as rates readjust, and they can’t sell without a huge loss. Foreclosures, B-K’s, and ugliness will follow. Boo-hoo, live and learn.
maybe: my new neighbor purchased for one million in Dec and put down 30%. Now doing a significant remodel another 200K.
If the market goes down 20-30% his investment is gone!
The idea that only recent buyers with low down’s will be the only ones to suffer may be wishful thinking.
CA adults w RE license = 2%
add mort banking etc you prov]balbe get to 4%
cut that in half= unhappy days
Why unhappy? Disintermediation always brings benefits. These people are friction not lubricants. Their dead bodies rotting in the California sun will serve as a warning for future generations. That 2% however is a bit misleading. $1m house you want to sell next year? $2500 later and you are your own agent and save 3%! $30,000! You’d be crazy not to do this so we have people who do two deals and then nothing ever again.
speakin of the disintermediation, was in phx last weekend. mucho ads touting the benefits of using a realtor to buy or sell. “Can get you as much as 16% more than selling it yourself!”
I just noticed, today’s the first day of Spring.
You’al should be careful around any open houses, the mobs will be overwelming.
You wouldn’t want to get caught in the cross-fire of a bidding war!
I know it wasn’t officially “spring” yet, but I went to 5 open houses in the NY suburbs yesterday. Of the 5, 3 of the places were vacant, one apparently repo’d. And in 3 of the homes, we were only the 2nd or 3rd people to tour the place all day. Wow, so different than the activity at the open houses we were seeing last year at this time.
My neighbor had an open house yesterday, I live on a culdesac so I can tell when there’s people visiting. Plenty of parking and not a single soul I saw. Matter of fact, I saw the RE agent outside on the cell. I drove by to get my mail and he waved me down thinking I was a prospective buyer he was trying to give directions to. He looked desperate but yet still had that fake flashy vibe to him. I didnt know if to laugh or feel sorry for the sap.