Kind Of A Real Estate Bust In California
The Orange County Register reports from California. “It used to be easy to refinance, tap into home equity for cash or get 100-percent financing for a home. Mortgage experts say financing is still available to the right people, under the right conditions – at a cost. The danger is that home prices could fall further, a distinct possibility at a time of soaring foreclosures and a glut of homes on the market.”
“‘In parts of Mission Viejo where homes sold for $875,000 a couple of years ago, they’re now listing for $690,000,’ said Lou Pacific, a Mission Viejo mortgage consultant who has worked in the industry 30 years. ‘So what do you do if you want to refinance for $850,000 because you need money again? The house isn’t worth it.’”
“‘If you have to refinance, contact the lender as soon as possible, before you go into default or foreclosure,’ said Dustin Hobbs, spokesman for the California Mortgage Bankers Association. ‘It’s like detecting cancer. The sooner you find out, the more options you have.’”
“Other industry experts say it’s already too late – that even locking in a loan doesn’t guarantee financing. ‘I’ve been hearing the most heart-wrenching stories in my 21 years in this business,’ said Jeff Lazerson, president of Laguna Niguel-based Mortgage Grader.”
The Associated Press. “Mortgage broker Ed Smith Jr. has been arranging home loans for 24 years and it’s never been tougher for him to close a deal than during the past few weeks of turmoil.”
“The upheaval has made it virtually impossible to secure financing for scores of borrowers who would have easily qualified for mortgages just a few months ago, creating a lending drought likely to deepen the housing slump. ‘You have a ripple effect in the marketplace that is devastating,’ said Smith, who is based in San Diego.”
“”I have three borrowers who desperately need to refinance and they aren’t going to be able to do it. They are going to lose their homes,” said Patrick Schwerdtfeger, a Walnut Creek mortgage broker.”
“Orange County mortgage broker Jack Williams has seen nine mortgage deals unravel in the past 11 days. He has since been able to secure financing for two of the borrowers, but ‘it doesn’t look real promising’ for the others as lenders hunker down. ‘You can have one rate sheet in the morning, then it will change at noon and then it will be completely different again at 5 p.m.’”
“The lending slowdown is bound to drive some mortgage brokers out of the industry and prompt layoffs in other related businesses such as title insurers, predicted Wayne Repich, founding partner of Vanguard Mortgage & Title Inc. in Concord.”
“‘This is the worst I have seen in my 19 years in the business,’ Repich said. ‘I’m usually an optimist, but this downturn really has me concerned.’”
The Recordnet. “Home-equity loans…have become more expensive, require more documentation and are harder to come by. ‘I’ve even noticed some entities aren’t even doing home-equity loans,’ said Steven Rosso, CEO of Pacific State Bank in Stockton.”
“The real estate downturn has had and will continue to have a major impact on consumers, said Michael Duffy, CEO of Financial Center Credit Union. ‘We saw in March a surge of individuals coming in for signature consumer loans,’ he recalled.”
“The credit union found many of the applicants held adjustable-rate mortgages whose payments were rising. ‘There were a lot of people who were having their rates adjusting and were not prepared for it and were looking for loans to see them through until they could figure it out or they could refinance,’ Duffy said.”
“The crunch came in when the credit union had to turn many away. ‘In most cases, those folks coming in are already at a high debt-to-income level, and it’s impossible to lend to them,’ Duffy said.”
“Duffy worried that the mortgage credit crisis would prove a major hit on the Central Valley economy, which has been booming until recently, powered largely by an influx of former Bay Area residents.”
“‘I don’t see good times for us,’ Duffy said. ‘We’ll either go sideways from here or we’ll go down.’”
“A lot of commercial loans are funded from the same pool of resources as subprime residential loans, said said Randy Thomas, a Sperry Van Ness commercial real estate broker in Stockton, and that means tighter credit standards.”
“‘No one trusts any of this paper right now,’ he said. ‘Everybody’s re-evaluating because of the subprime lending and giving everybody who could fog a mirror a loan. It’s pressuring all lenders to re-evaluate all types of lending. It means our purchasers may have to come up with more money.’”
“Even some 20 percent-down deals won’t be happening in this new credit atmosphere, he said. ‘The bottom line is loans that were getting done 60 days ago aren’t getting done today,’ he said. ‘This is a big deal.’”
“Sean Snaith, a consultant to University of the Pacific’s Business Forecasting Center, said the recent spate of bad credit news doesn’t bode well for residential real estate. ‘It is a kick to housing when it’s already down,’ he said.”
The Daily Press. “Sales of new homes statewide in June continue to lag behind last year’s pace, according to an industry association, while builders in the High Desert report declines in sales.”
“‘Market absorption is off by about 50 percent compared to a year ago,’ said Mike Dwight, VP of Frontier Homes in Hesperia, which sells about one out of every six new homes in the High Desert. ‘We have had to discount prices,’ Dwight added.”
The Merced Sun Star. “In new subdivisions where builders are looking to clear standing inventory, buyers are seeing offers of free pools, cars and even finder’s fees for residents who get their friends to buy a house in the neighborhood.”
“Atwater resident Shane Ingalsbe is among the buyers who’s glad he waited until now to buy in Jacob’s Ranch, a brand-new gated community. The four-bedroom, 2,767-square-foot house he just bought there was listed at $539,900 in May 2006 when he first considered buying it.”
“He’s glad that deal didn’t work out. Ingalsbe bought the house recently for $427,500. The seller, S&N Builders, paid his closing costs, an increasingly common perk for buyers.”
“Realtor Peggy Flanagan, who’s been in the business about 30 years, says she didn’t know whether to laugh or cry two years ago when local buyers would walk into her office pre-approved for a $200,000 home loan. She would think, ‘Honey, that’s not going to get you a lot,’ she recalled.”
“Now, prices have plunged — the median home price in July was $311,500, compared to $369,000 in July 2006.”
“Gone too are the days when soaring appreciation rates meant quick and easy home equity loans, says Flanagan — which is a good thing. ‘Your home is your home, your castle that you come home to,’ she said. ‘It’s not your bank account. It’s not your entertainment center.’”
The Press Tribune. “A downturn in property values is showing up on Placer County’s assessment rolls, with a drop in assessed values taking a bite out of growth. The $4.5 billion increase for the year would have been nearly $1 billion more if real estate values hadn’t decline, forcing a downward adjustment on about 18,000 mostly residential properties.”
“The county contains about 140,000 residential properties and the downward adjustments have been to houses bought in the past three or four years at the peak of price increases. While the demand for housing is still present in Placer County, values have grown far beyond what the market can sustain, said Placer County Assessor Bruce Dear.”
“Like Dear, county CEO Tom Miller mentioned the current problems associated with no-interest home loans made at the peak of the real estate market, particularly on properties that were bought by speculators. The county is expecting more owners to walk away from homes that are worth less but that they now have to pay interest - based upon the higher initial value.”
“Dear said after the meeting that it’s possible that people will walk away from one home and buy a neighboring home for $75,000 less. They can afford to make payments on the second home, now that prices have dropped.”
“Housing prices have outstripped affordability, Dear said. ‘The market activity in the spring was kind of a real estate bust,’ he said. ‘It suggests the numbers will continue to decline significantly in this assessment roll.’”
The News Sentinel. “Inside Lodi’s tony Sunwest subdivision, ‘for sale’ signs dot nearly a dozen of the neighborhood’s well-kept lawns. Some of those signs have become fixtures in front of the two-story mansions, staying as long, or longer, than anywhere else.”
“‘It’s the toughest market to move — anything over $1 million is sitting six months, even at a reduced price,’ said Pam Murray, a real estate agent who specializes in the region’s pricey homes and ranches. ‘There’s a shortage of buyers in that price range,’ she added. ‘We’re having to get more creative.’”
“There are 35 homes for sale at $1 million or more in the Lodi and Galt areas, including Lockeford, Clements, and Acampo. Just four of the million-dollar homes have sold in that area this year, according to listings provided by Lodi real estate agent Kathy Williams.”
“‘We don’t have a lot of activity,’ she said, noting that even high-end buyers are being more cautious about how much they pay for a home. ‘They just want to make sure that they’re not overpaying…and that’s true in any price range (of the housing market).’”
“In the city of Lodi (plus Woodbridge) eight homes sold for $800,000 or more during the first eight months of 2005 — considered the peak of the housing market. So far this year, just three homes have sold at that price or above, said Paul Mertz, past president of the Lodi Association of Realtors..”
“‘I think this year is obviously different from the norm,’ he added.”
“Potential high-end buyers, often retirees or families from Southern California or the Bay Area, haven’t swarmed the area this year, looking to buy country properties, Murray noted. They’ve struggled to sell their own homes in their areas.”
“‘Our clients that would have been coming up here in droves and raising our prices — they’re not able to close on their properties, and that’s really slowing us down,’ she said.”
“One Bay Area real estate expert said he sees the region’s housing market, high end as well, struggling through 2008. The large supply of new and expensive homes, especially in areas like Stockton, will weigh the market down.”
“‘The Central Valley is not going to look good for the next couple of years,’ said Thomas Davidoff, an assistant professor who specializes in real estate at the Haas School of Business at the University of California, Berkeley. ‘Five years out, I think things will be fine and dandy,’ he added.”
said Thomas Davidoff, an assistant professor who specializes in real estate at the Haas School of Business at the University of California, Berkeley. ‘Five years out, I think things will be fine and dandy,’ he added.”
An assistant professor of real estate who apparently isn’t familiar with any of the previous residential RE busts in the US and globally.
–
There isn’t much money in very bearish forecasts. That is as true of academia as it is in the market place outside. There is never any harm if a bullish forecast 5 years out is wrong but there is price to pay if the bearish forecast doesn’t materialize. Free market in action…
In economic forecasting, on the rosy scenario side, dishonesty pays!
Jas
I think it was meant to be written this way:
“….an assistant professor at the Haas School of Business, who specializes in real estate….”
That is, he teaches a modular accounting course, and on the side, recently bought 5 West Oakland crack houses to renovate and be ready for the 2008 spring season recovery.
you kill me - my comment was going to be that i didn’t know they had a major in smoking crack! he is definitely delusional, at best!!!
lol
I live near West Oakland and can vouch for the crackhouse comment. I had no clue Haas real estate professors had such a myopic view of the market.
Of course he didn’t say who “things will be fine & dandy for”. As a renter looking to buy about then, I will probably be happy. Still kicking myself for not buying at the bottom in SF when I could (it would still have been a financial stretch).
Recent news blip from todays San Jose Mercury
Page 4 from Sat Edition…
Percentage of homes sold for more than listing price…
36%
WTF/….. the Realtors are still saying multiple offers are still
present… the graph goes back to 2005… showing in 2005 60%
at the peak.. WTF… I guess I was right about realtors creating fake multiple bids… Toady the inverse is true…
some 60% are selling below asking price… yet all the news points to higher med. prices…
WTF
To see all the latest Silicon Valley RE stats, check out,
” The Last 30 Days (Jul’07 Data)” at:
http://www.viewfromsiliconvalley.com/id350.html
Thanks!
Still waiting in SF - houses in my neighborhood are at a MINIMUM 700,000. Still selling, with multiple offers.
There is more foreclosure activity, though - according to yahoo. Is there a better site to track number of foreclosures in a given neighborhood.
that reminded me of some of the prediction just a year ago, when many of these professors were claiming that there is a new financial paradigm. what with the new money coming from china and else where, that would cause the interest rate to be permanently low and that real estate would be permanently high. I thought that was just cow dung; and now the smell is unbearable.
There are a lot of people still clueless to what is happening out there.The false economy is comeing to an end.Can you imagine what is going to happen to auto sales? I saw a nice dodge charger on the road for sale the other day.Called and they wanted 29000 and they had 12 days before it went back to the bank. I was thinking 20000 at the most. Cash is king right now. The feds are behind the eight ball as usual.Is it time to wheel out greenspan again? Goldilocks has been run over by a truck full of illegals on their way to advance america.
Read the most recent reports? Auto sales are already going off a cliff.
could you post a few links? I know down, but have not seen the cliff on these reports…
Lear, US Car-Parts Makers Face Losses as Auto Sales Decline
Bloomberg - Aug 16, 2007
US auto sales fell to the lowest for July in nine years, prompting GM, Ford and Toyota Motor Corp. to cut their forecasts for total vehicle demand…
Say, didn’t GM’s Lutz proclaim all was well just last week? So what’s the deal? I’d love a solid explanation on how the auto industry thinks it can survive this unscathed. Just a guess, but I bet their best customers this past decade were FBs. People with cash now have that cash, at least in part, because they didn’t waste it on cars. So who is left to buy all those new cars if those that want them can’t - and those that can don’t want them?
I agree with the previous poster, and having spent 30+ years in the real estate industry (title companies) [running a foreclosure department in the '79-'83 downturn and serving as a senior executive in the '90-'94 downturn, and gladly sitting this one out as tenured faculty], I can tell this assistant professor that he should expect the market to bottom in 2011 at the earliest and not serve as an investment vehicle until sometime after 2015. The only thing that will speed up this process is if the market falls more quickly because of the knowledge consumers gain because of the information available from the Internet and sites like this.
TICOR?
Being a professor myself, I quickly investigated Thomas’ vita. Very impressive! MIT, Harvard, etc. The problem is that he is about 35 years old and has absolutely no experience and very limited academic background in real estate. It is much easier to write papers about things than to make money on those same ideas in the market.
My impression - smart person who is either insulated from the real world or has no experience to draw on when evaluating the current situation. Either way, not a reliable source. And … no incentive to prognosticate a negative outcome.
A professor of business management at WKU in Bowling Green, KY paid an unholy ransom for a crumbling motel in Cave City a few years back, and now he has it up for sale. The seventy year old plumbing has to be replaced completely, the electrical is from the 1950’s, etc… He is going to lose a bundle either on repairs or a sale as is. There are still greater fools out there, but he is going to find out they can not get financing. Welcome to the real world, professor.
Got 10% down?
It may be just dandy then. In 5 years, the cost of housing may make sense based on fundamentals. I am willing to wait that long with cash in-hand to buy if thats what it takes.
Fine and dandy? I’ve been fine. I’ve been dandy. But I’ve never been both fine and dandy at the same time except that day in 1974 when I was both, for a few minutes, fine and dandy.
“Sean Snaith, a consultant to University of the Pacific’s Business Forecasting Center, said the recent spate of bad credit news doesn’t bode well for residential real estate. ‘It is a kick to housing when it’s already down,’ he said.”
You make your living off of economic news
Just give me something, something I can use
People love it when you seem to muse
They love economic soundbites
Well, you could have been a blogger and wound up here
But then you’d get a clue, and the facts would be clear
Come and whisper into a fishwrap’s ear
Give em’ economic soundbites
Kick em’ when they’re up
Kick em’ when they’re down…
This entire mortgage meltdown is a trigger event. Much like the earthquake miles out to sea, few realize that a tsunami is racing to shore.
Hey, free fish! Need to get me some of those. I’ll be right back.
Right when you feel the ground shake or see the water receding at the beach, it is time to get to higher ground. Unlike most however, I don’t see the current foreclosure and credit crisis as the trigger point. It was set in motion several years ago by super EZ home financing and low interest rates, which in turn created the bubble which in turn created the foreclosure crisis which in turn created the credit crisis which in turn …
I am guessing the next “which in turn” to be a giant and almost immediate reduction in house sales, which in turn will increase foreclosures which in turn will cause credit to tighten even more which in turn will cause a landslide in house prices… and so on. It is all related and all part of the same big puzzle. It is all also unwinding in a predictable if not messy manner.
I understand the events that led to this situation, but the recent shock has triggered a ripple in the world. I don’t pretend to know exactly how it is going to play out. What I do know is a shock of such incredible magnitude will lead to an uncontrollable situation. It is building energy right now for something truly spectacular.
I see a financial panic coming. We had semi-panic on Thursday. Although the Fed stopped it momentarily, the ripple is now playing out. People are talking about it. The anxiety is building. The next shoe that drops, or the one after that, will undoubtedly cause wide scale panic.
You can’t stop a tsunami once it gets started. And I think it has.
…but the recent shock has triggered a ripple in the world.
No surprise there. The underlying problems are global, although the U.S. has absolutely been the chief facilitator.
The recent behaviour by the fed and it’s counterparts around the world is strong evidence of just how serious the current situation is.
I think we agree on all points. My concerns are 2-fold:
1. JOBS. Not just construction and lending related, but all JOBS. Will there be a huge tsunami of layoffs?
2. Pensions and 401(k)s: J6P is unwittingly holding part of a bag that they had/have no or little control over over whether ING… or UBS or Fidelity or whoever… has invested big time in MBSs.
Recession will turn to depression (or maybe worse) if the PRUDENT J6P gets fried…..
All the factors which caused the bubble, are not reversing and hastening its collapse. Loose credit, prices go up. Tight credit, prices go down. Prices go up? People have urgency to buy. Prices go down? People have urgency to sell.
There is more to this tsunami than housing. The U.S. has lived off credit for at least 20 years. That debt is soon going to be called. It’s not going to be pretty. Just reverse all the economic progress we’ve made in those past 20 years and subtract the production facilities and people that were lost as money went to non-productive activities like American Idol, video games and Ipods.
But the fish are just sitting there on the sand. There can’t be any harm in venturing out there to pick them up.
Hey what’s that on the horizon? :-0
Just like those nickels in front of that steamroller?
“Gone too are the days when soaring appreciation rates meant quick and easy home equity loans, says Flanagan — which is a good thing. ‘Your home is your home, your castle that you come home to,’ she said. ‘It’s not your bank account. It’s not your entertainment center.’”
Isn’t it amazing how great people are at expalaining things after the fact. That is the best part of reading comments from the “industry professionals.”
Jas
You could of read that quote fifty times a day on this blog two years ago. Way to be on top of it Flanagan!
I am so tired of talking real estate with locals (Central Coastal Cali). Whenever we meet someone new, it eventually comes out that we are renting, and when they ask why, my wife automatically says (without thinking) “my husband thinks prices will go down”. Some people say, “hmmmm, that might happen”, but *most* look at you like you’ve just made fun of their religion. In those cases, I try to back peddle, and I bring up that with the amount we save each month by renting, it’s hard to think about buying anytime in the near term. I am just so tired about arguing against the ideas that “everyone wants to live here”, and “mortgage rates don’t matter because rich retirees move here”. Fine. I don’t want to talk about it any more. I just want to sit back and learn from this whole crazy state of affairs, so just pass me off as that “crazy house prices go down” guy, and let’s talk about something else. I’ll keep renting and socking away money, and we’ll see what wins out in the end…the fundamentals, or ‘faith’. I had that same battle during the tech stock boom…and in the end, “fundamentals” won out over “it’s different this time”.
End of rant…
Peter Schiff summed it up best. To paraphrase, the kind of declines we are expecting will be unprecedented, so people naturally don’t believe it can possibly happen, but the price increases from, say 1995 to 2005 (especially after 2003) were also unprecedented.
In general, anyone under 35 or so has never seen bad times and has only experienced appreciation in real estate.
I urge everyone to listen to Schiff on this week’s Goldseekradio interview (he’s in Part II). He is talking about declines of at least 50, 60 percent in most areas.
Gold Seek Radio
Also, peter in his book says something to this effect that We (as a country) are going to have crisis which will test our character. I tend to beleive that.
listen for unconventional moves by the Fed regarding the capping of the long term yield, capping bonds.
Won’t help.
“crisis which will test our character”
My character was certainly tested this last week.
People are getting an education in economics and how our monetary system is ACTUALLY running. That is a necessity to remedy the problem, if so desired. Mr. Schiff has used the scientific method (using empirical data from the past to predict the future) in his analysis, and I agree.
Folks like Mr. Kudlow make a statement that free market capitalism is the best path to wealth. That is quite accurate, except our system is currently a socialist economy that is planned by the FED setting monetary policy and Congress setting fiscal policy. Between the two, they are attempting to make policy that can be used as a valid tool for every person’s best interest, at every possible instance in time.
It is impossible to do this, and has been demonstrated over and over throughout history.
Yes, a market economy (it would be nice if people stopped referring to a free market since there is no such thing–even a so-called “free market” has rules that are determined by the consumer, or the market–hence the more correct term of a market economy) is the best method for creating wealth. The US can do that again, if we can turn ourselves back into a market economy instead of a socialist economy.
The FED cut rates and people are happy. How happy would folks be if Congress just passed a massive tax package to bail out a private company like Ford? Well, adding more money (often referred to as “liquidity”) is a massive tax on all of us through inflation, or more appropriately devaluing the currency. How did we fall for the WIN (Whip Inflation Now) campaign? Yes, inflation does benefit those who have access to the new money first. That is simply how it works.
best post in a long time. of course the ignoramuses who write for the financial press have missed the government bail out of wall street…I fear that Bernanke will be willing to go back to negative real rates (or even negative nominal rates - something that whacko Paul Krugman advocated for Japan about 10 years ago).
What can the salaried fool such as myself do… not much… I am going to take a huge paycut but at least I can take my pay and immediate convert it out of USDs. Unfortunately, fools living on social security and pensions can’t.
Where can I apply to borrow from the Fed is what I want to know. When that 0% rate comes out, I want to borrow 100 billion with an original issue discount and no maturity date.
at the moment, Fed has to make a choice between inflation and deflation, and they’re clearly picking the former (’cause they know the history well)
gold will move down parallel with RE
the NAR and Kitco are cut from the same cloth
[in song]
Riff Raff: With a bit of a mind flip…
Magenta: You’re into a time slip…
Riff Raff: And nothing can ever be the same.
Magenta: You’re spaced out on sensation. HAH!
Riff Raff: Like you’re under sedation!
All: Let’s do the time warp again!
“gold will move down parallel with RE”
I don’t think so. Gold is an insurance against the meltdown of the financial system. Just imagine the total mkt value of the RE in the world and that of gold.
“the NAR and Kitco are cut from the same cloth”
I wouldn’t go that far.
Jas
Sure gold will get hit some, but the issue is the stability of the banking system - which obviously, is a lot less stable than people think. That trend of more distrust in the banking system will manifest itself in a higher price of gold. It might take a while. But to dismiss it so quickly is just ignorant.
Note that in the Gold Seek Radio clip, there is an incredibly long string of commercials from about 17:25 to 28:00.
Don’t you just love people’s reasoning?
“They won’t let it happen” LMAO!
“That won’t happen because it would destroy the market” ROFL!
I agree 100% you with you, arroyo. It amazes me the outright refusal for people I know to believe that prices are going to come down further. Just yesterday my sister-in-law was saying RE prices always go up…even in light of what has been happening the past few months. “It always picks up in California at the end of summer…right now it is a buyers market…how can you say that RE prices can go down any further than they already have?…blah, blah, blah”.
I’ve gotten to the point where I don’t even talk about it much anymore. I’m getting tired of getting laughed at as a bitter renter.
That’s too bad because no one is laughing at me. I’m getting more and more “maybe you were right?” Also, my confidence in myself is way up - it was so obvious for so long that things were so wrong but so few of us saw it that at times I thought maybe we were wrong. So far, however - not a bit!
I am usually a straight forward person, BUT a bit of spin, rent to own! may help. Usually the nosy ones can’t see the your cards anyhow. I have bit of hatred for the type “he/she is so narrow minded that they can see though a keyhole with BOTH eyes!”
I feel ya brother, I have (had) a good friend who invested in a speculative property or two in Santa Maria and Nipomo who basically won’t speak to me anymore because I divested of ALL of my real estate holdings a year ago.
He is about ready to lose all of the money he made in RE - about $1M total. Easy come, easy go.
wtf? won’t speak to you because HE was stupid? you don’t need friends like him….
Arroyo — “…but *most* look at you like you’ve just made fun of their religion.”
LOL. Great way to put it — ditto on avoiding the topic when with groups, for exactly the same reasons.
Halcyon is different — very different.
The problem is their religion was contagious. It didn’t take much greed to let this disease spread.
The cure requires a Joshua tree.
Got popcorn?
Neil
Hey Arryo:
Never stop ranting. Never stop. Never stop.
-Big V
Anybody current on the statute of guessitations limits?
“‘The Central Valley is not going to look good for the next couple of years,’ said Thomas Davidoff, an assistant professor who specializes in real estate at the Haas School of Business at the University of California, Berkeley. ‘Five years out, I think things will be fine and dandy,’ he added.”
He’s giving himself 5 years to slowly define the words “fine and dandy”. He’ll end up saying something like this:
“5 years ago, I said everything would be fine and dandy today. And it is. Housing is all-time affordability highs. Young couples can now easily afford their mortgages off of one salary, and new mothers are able to stay home with their children. What could be finer and dandier?”
Cross-post from “local market observations” thread:
Santa Clara County, CA milestone:
Today, ZipRlty combined SFR + Condo inventory breaks 6000.
2006 peak inventory was somewhere slightly north of 4500, in October.
2005 peak inventory was ~3250, in October.
Of course these are still relatively small numbers, given the population 1.7 million.
Unfortunately, here in SCC, “…they’re not re-zoning anymore land.”
–
SFH listings are at record (for the past 10+ years) of 4554. During Jul’05 it was in 1500-1600 range. Triple in 2 years. Sales are down 50-60%. So supply-demand is 6 times worse.
Jas
Ah but they are rezoning more commercial land for residential.
I expect more SFH and COND/TH to continue to rise in years ahead. The kicker is jobs are increasing in retail and goverment.
Higher paid jobs are continuing to ship out.
And another thing (while I’m in a ranting mood)…
I was listening to a local real estate guy with a 1 hour radio talk show today. A caller called in and asked how long it took RE prices to get back to the peaks after a downturn (like presumably we have had the past year). Her family wants to get the maximum value from their sale so that they can buy a family “compound” for the extended family to live near each other. The radio RE guy outlined that during the last downturn, there were 3-4 years of price declines, followed by a few years of flat prices, followed by a very slow appreciation, followed by the boom of 2003/2004 or so. From the last peak to the start of the next boom was about 9-10 years. I had expected him to go on to say that prices wouldn’t hit their peaks again for 8-10 years (based on his previous time line). However, amazingly he said that he expects to see prices back at the peak in three years. What?!! You just said that prices didn’t stop going down until at least three years later. I just don’t get it. The Kool-Aid is still very strong in Cali…this will take a few years to sort out, so even with the exciting financial news we’ve been witnessing recently, everyone should probably be patient.
Been pondering this as well. Can past historical cycles be reliably referenced to quess when peak appreciation might return, considering newer factors in the equation, such as capital gain tax exemption of $500k for married couples? Historically low interest rates which now appear to have peaked and (likely) headed downward once again. More mainstream attitudes toward RE as a get-rich-quick vehicle, versus previous decades.
These sorts of things…wondering if the next cycle will come more quickly this time. Thoughts?
No chance in he!!. There’s virtually no comparison between past cycles and this one.
That’s right TJ&TB.
The last cycle was caused BY a downturn in the economy, whereas the present cycle IS CAUSING a downturn in the economy. Last time, we saw huge changes in the stock market and some change in housing. This time, we’ll see huge changes in housing and some change in the stock market.
“The last cycle was caused BY a downturn in the economy, whereas the present cycle IS CAUSING a downturn in the economy. ”
IMHO, the bubble MASKED severe weaknesses in our economy. The bubble bursting is just taking the mask off. You can only get so far with a finance and service based (and not production-based) economy.
100% agreement.
The mask is off and she ain’t pretty.
The time to go from top to bottom should be much shorter than the last real estate crash because of the change in the way information is disseminated. In 1990 the internet was a relatively new phenomenon and information took much longer to reach the general populace. It was also extensively filtered by the mainstream media.
There has been at least an order of magnitude increase in the availability and variety of information available to everyone. This won’t change what will happen, it will just make it happen faster.
Hey AG - I know the show you are talking about - oddly the mortgage shill he usually has on, Nicolette Hardesty, has been conspicuously abscent over the past month.
I remember about a year ago - the doctor (who I believe has an MBA) on before him, took him to task about the fraud in the RE industry.
Maybe one Saturday we should all start calling his show and tell him how clueless he is about economics.
tape it and post the link!
Are you selling in San Francisco
Be sure you know the Jumbo Rate is dear
For those that sell in San Francisco
They’re gonna find, some hesitant buyers there
For those that sell in San Francisco
Summertime will not be the same as ‘67, there
In the streets of San Francisco
Real estate sale signs ignored, an image of despair
http://www.youtube.com/watch?v=dFp48BLpH-A&mode=related&search=
That was nice. And thanks for the Monterey clip.
Have you done a takeoff of “Somebody to Love” yet? Jeez, you don’t even need to change the first two lines:
“When the truth is found to be lies
And all of the joy within you dies.”
About sums up the situation of many FBs.
“Atwater resident Shane Ingalsbe is among the buyers who’s glad he waited until now to buy in Jacob’s Ranch, a brand-new gated community. The four-bedroom, 2,767-square-foot house he just bought there was listed at $539,900 in May 2006 when he first considered buying it.”
“He’s glad that deal didn’t work out. Ingalsbe bought the house recently for $427,500. The seller, S&N Builders, paid his closing costs, an increasingly common perk for buyers.”
- Shane did not make out too bad … he will now be upside down only 150k when the bottom finally hits.
–
Lot of people here have a very optimistic view of the bottom prices, it seems.
Jas
Optimistic from “their” point of view. From our point of view, such bottom prices are poison.
I was just thinking the same thing……$427,5000 is STILL a lot of money for a house, gated or not. We (they) have lost perspective. I couldn’t afford my own house now.
In Atwater? Not a chance. A former military base town, in the middle of nowhere in the CV. Houses in that area will be selling for 200K or less within the next couple of years.
You got that right.
I agree. I am from the San Joaquin Valley. The natural scheme of things there is more than 11% unemployment, mega gangs and their mega gang fights (which the media does not publish), and some of the worst air pollution in the country (blown in from “clean” San Francisco/Oakland/San Jose). City officials have poor urban planning, pushing development out to farmland, rather than revitalizing downtown areas. I know of places in Fresno where home prices increased over 200% since 2003. It is unprecedented. In fact, urban decay tends to lower the values relative to inflation over time while blight marches toward the newer sections of towns over the years.
It’s a bleak picture and I’m not making it up. It’s out of frustration because I like the Valley.
change a couple words and you just described the IE-riverside /san berdoo county. CV/IE are mirror images of each other and both are headed toward total RE/economic collapse.
Gated communities make me snicker. Just wait until they have a bunch of foreclosures and end up with Section 8 and/or slum housing in their gated community…
“So what do you do if you want to refinance for $850,000 because you need money again? The house isn’t worth it”
Here’s a novel idea:- live within your means rather than assuming you can use the house as an ATM.
Piggy Bank$
But, but, but, that would mean I couldn’t live in my “Dream Home” that I’m entitled to ! Whahhhhh !
Problem is it’s too late. These folks are now facing the specter of having to live way below their means for the foreseeable future. It’s play now, pay later for those who’ve been dancing to the piper’s tune.
You mean give up the McMansions, Hummers, boats, Harleys, MBZs, BMWs, boob jobs, Europe flings, etc., etc. and live within their means? These big spending morons won’t go down without a fight, BUT they will go down hard this time around.
I don’t understand this. My Mom just got a postcard in the mail today talking about taking out equity while she still can. Why would anyone take out their money in a house in the first place unless they were dying?
“Gone too are the days when soaring appreciation rates meant quick and easy home equity loans, says [Realtor Peggy] Flanagan — which is a good thing. ‘Your home is…your castle that you come home to,’ she said….It’s not your entertainment center.’”
Arthur: I now wed thee and on round table shall bed thee.
Gwen: For to amuse ourselves much, m’lord, motel six is but a fortnight’s journey, lest we incur the scorn of Peg, alas, which haveth such fury as to lay ruin these very stucco walls thou hast mortgaged on hilt.
So JFK’s term was called Camelot
What about us?
Foreclosedalot
Sir Bonedalot……the story’s tragic victim.
ARMalot.
Emptylot
Galahadahouseonce.
I feel your pain arroyogrande, here in South OC there’s still a considerable amount of delusion regarding the RE market. It’s amazing the amount of intelligent people who have bought hook-line-and-sinker into the NAR spin. However, having said that, I take comfort in the knowledge that homes in my neighborhoodd (Rancho Santa Margarita) are already seeing significant price declines. Just saw a nice 4 bdrm 2000 ssf house come on the market for $ 663 k (still overpriced but last year this same house would have been listed for $ 800 k +). The “smart” sellers have been quietly reducing their asking prices while the dellusional are still clingling to 2005 “wet dream” prices.
As for the local’s, we’ll I stopped talking RE 2 years ago because I got tired of getting the wierd looks when people discovered I was a (GASP!) renter!
I have a girlfriend with a ‘villa’ in the midwest she was not able to sell and finally rented. Desperately wanted to buy here; I”ve been working on her for months, trying to talk her out of it especially since she wants to leave the area in 4-5 years. Her husband is a former mtg broker. The desire to ‘own’ (we have to redefine that term because you don’t really ‘own’ the house until it’s paid off) may just be genetic. How about RA - renters anonymous - groups? 12 steps to overcome feelings of shame and come out of the kitchen?
don’t worry, hardly anyone is qualifying to “buy” since last week…
will that cure people? I’m seriously not sure…
Yeah, it’ll cure ‘em. Kinda like the way a bullet to the head tends to cure people of things. Reeeel quick-like.
People are starting to get it now. A friend told me yesterday that when he closes (hopefully) on the sale of his house next month he intends to rent. Problem is he has a very high salary and will take a hit on income taxes.
“you don’t really own the house until it’s paid off…”
Not true. There are many different ways to “own” a home. You “own” debt. If you borrow money for the home, you “own” the debt, so you “own” the home. If you sign a lease or rental contract, you “own” that debt, too. Rent is a form of “own.”
Hey, neon kitty lips. I really like your name. I feel cute typing it.
okay, I didn’t want to say so myself, but since someone else has…I feel cute just reading it!
Here’s a message to all the whining brokers and realtors who complain about the lack of mortgages available and tighter lending standards, especially for our “subprime” brethren:
Would YOU lend these people money, at the rates you are trying to get for them, and with the high LTV they are requesting? Right, didn’t think so.
So quit b!tching.
Right ….The RE industry ,as well as borrowers ,are so spoiled by the crazy lending of the boom that they think they are entitled to this low down liar loan stuff . As far as Im concerned the whole RE industry needs to be purged . Any real estate agents or loan agents that did not engage in fraud for a commission ,you can stay ,everybody else step down .
Wiz, I’m having some really funny conversations with folks right now, it’s really hard not to break out in laughter sometimes. It always starts with Dude, I have equity… but I can’t get a rate low enough to afford it, or what do you mean they don’t do 100% loans anymore for my Fico Score or something similliar.
It’s funny with all the media splash last week with Cramer and what not you would think folks would know what’s going on but they don’t.
They know nothing !
…NOTHING!
I completely agree. Reality has been warped beyond belief. Do people in RE understand that 20% down payment is not just a number that was plucked from the air, but rather, it was a figure arrived at after decades of housing booms and busts. That’s how much skin you need in the game to keep from walking when times get tough.
the complete shutdown of credit should start showing up in the November stats (homes sold in August close in October and are reported the next month). this could be a very cold winter!
The Christmas…..ooops, Winter (have to be politically correct) shopping season will be a bust, retail will lay off people and stores will close.
The grinch who stole Xmas comes to mind. This will be a chilly winter indeed.
Not only that but the largest dollar amount of ARM resets happens in October, $50 billion
yippeee!!!!
The chart I remember…… I’m sure it’s $100 Billion in October
I’ve been wondering if some of those are already showing up now as people who couldn’t afford them in the first place are showing signs of stress before the reset.
Sorry this sound better:
Stress before the test!
I think we will see this much sooner. First of all homes normally (i.e. no problems) take 30 days to close and loans have a 30-day lock. Secondly, lock or no lock, no one will be able to close in August for a non-conforming loan. Lenders will pull their commitment (if they are still in business). I think will will see the impact of the new lending standards beginning with the August sales data and fully in the September data. When results are released in October it will be a real trick or treat.
From SoCal :
“One of my client get off the hook with 92K last year on short paid
off sale, but the end of the year they send her 1099 for the same
amount + interest”
Wait, no one told her that scenario before she bought?
Bad, bad Realtor.
If collectively we have a negative savings rate, who will “run on the banks”?
Bank Runners Mantra…
Show Me My Money!
Savings? What savings? If it weren’t for the collectible (key word) quarters from all the states that I never spend, I’d have no savings. Oh yeah, have a bunch of old pennies, too.
Ah, Precious Metals, a wise move at this juncture.
“‘It’s the toughest market to move — anything over $1 million is sitting six months, even at a reduced price,’ said Pam Murray, a real estate agent who specializes in the region’s pricey homes and ranches. ‘There’s a shortage of buyers in that price range,’ she added. ‘We’re having to get more creative.’”
But…but…but I thought the high end was doing fine. Thats what they told me last month. Oh yeah, that was before jumbo loans all but disappeared. I’m sure all the multi-millionaires on Cali will come to the rescue paying cash.
a million $ is suddenly a lot of money again since last week
All you million dollar loan borrowers , put you money where your mouth is and put down a big down payment . A million dollars is alot of money ,so you have to have alot of money and income to afford such a loan .
Wiz, but that’s the funny thing… When you have to dig into your pockets and pull out 200k for a million dollar house you look at it a lot differently. You start thinking for 200k I can build the damn thing myself for what you get in some areas. Even if you have to spend 250k to 500k for the lot. The lack of 100% and jumbo financing is going to kill SoCal. Sooner than later.
Good point MI. Plus, most people that can bring $200k plus for a down payment (I would assume more so than lower priced home buyers) are educated on what is going on in the RE market. They realize that that $200k might quickly evaporate if/when prices drop 20% plus. Furthermore, most people (again an assumption) with this type $$ lived through the early 90’s RE bust here in So Cal. And the xperience left a deep scar for many. I know it did for me and I didn’t lose any $$ but I still remember what the RE market was like.
But there will always be the “keeping up with the Jones” crowd out here. People love to impress others but what goes on behind close doors is something terribly different. My job enables me to see true worth via personal financial statements and for the most part people are living on credit even though on the surface they look like their living the “life of Reilly”.
House prices are a matter of opinion. Debt is real.
I like that one — compact and telling.
A lot of people are disconnected from the fact of what the disappearance of jumbo loans does to the market here in Los Angeles. They seem to think a jumbo loan is anything over a million. Which is simply not true. You can’t buy anything in this city now without at least 5% down the last 100% closed shop yesterday. I had a funny experience with that First Magnus closing but I can’t share it. But it served the guy right.
Well because we had to many people getting paid to buy a house lately in the fraud areas ,I would say that 5% down isn’t enough .
But I agree mrincomestream ,a tight money market will be a disaster for California .
I was contacting LO’s last week to see what I would qualify for. No, not because I’m buying (I’m not a complete moron) but because I was curious about all the rate craziness and what it looked like in real terms.
Anyway, I’d been going back and forth with a lady at First Magnus and, after sending me her latest rate quote, she actually sent me a detailed, well-thought email saying that I should probably wait to buy for at least a year - and wait for problems in the secondary market to clear up. That it would save me and my family money in the long run.
SAY WHAT???!?!??
I could not BELIEVE that a LOAN OFFICER was giving me such honest, good advice. Doesn’t she work on commish?
I told her I agreed with her, appreciated her candor, and that she’d moved to the top of my list - by far - for when we eventually got down to financing.
2 days later, First Magnus went belly up. Oops!
Do you think that LO was really that honorable of a person, that she’d told people the truth all along?
Or do you think she had previous knowledge that FM would be shutting down - and so was just lettin’ the truth fly, because, what the hell. What’s she got to lose?
“I had a funny experience with that First Magnus closing but I can’t share it.”
Okay, just tell us a hypothetical story then.
Oh man, Mr. IS’s stories are the best.
When this thing is over, you should publish a book. I’d buy it.
A lot of people are disconnected from the fact of what the disappearance of jumbo loans does to the market here in Los Angeles.
No doubt! Jumbo *is* the L.A. market. It’s all over but the cryin’.
“lot of people are disconnected from the fact of what the disappearance of jumbo loans does to the market here in Los Angeles.”
Certainly it will kill sales and vitually all RE activity in the high-priced LA Coastal communities such as Mahhatten Beach, Venice, Santa Monica, Brentwood, West LA, Bel Aire, Bev hills,Pac Plisades,Marina el rey,, Malibu,West HO,ect. Only millionaires selling to other millionaires, and only a very few mega bucks celebrities, sports stars, LA business moguls will be the only ones able to pony up the $200+Half mil down for those mega estates in the hollywood hills.
The Westside middle class buyer/and seller is kaput, and therefore westside prices in the lesser ordinary flatlands below the hiils must freefall. Should happen by winter 2007-2008, unless we see more stupid fed action to reflate the bubble via black cobra chopter drops and 2 %+ drop in Fed rates. The Westside lives and dies by inflation/credit expansion: deflation-contraction kills Westside housing prices. Only celebrity Bev Hills doctors and pricy Century city attorneys are immune from the impending westside RE rubble collapse, and may actually profit from it.
Sorry La investor Girl but Venice is going down hard.
Nothing in Venice ever should have been priced over $500,000 to begin with, and prices will revert to that level faster than any other Westside area. Next to drop are the marginal areas of the fairfax district south of PIco/Olympic and from fairfax east all way to Dwtn LA. Raggedy parts of old hollywood and upscale WestHo also will see decent drops over time, and even possibly revert to conforming prices. Mar Vista, shoddy del rey, Culver city, 90034,90035, South and east Santa Monica’ edge areas’ will fall somewhat slowly but inexorably back to near conforming limits.
. The jumbo loan free ride is over, and Westside collapses like a heap of rubble(slow-motion collapse).
Dwtn LA another story but the collapse wil be faster and far harder than the WESTside. Lot of garbage over building and waaaay overhyped and overpriced. Dwtn LA sucks: the LA civic/buslness leaders attempted to dress this pig up but it still stinks.
Sing it, peter!
There are far too many pretenders in this town, and they’re all about to be exposed.
IMO the government can’t do a damn thing about it, either — every so-called cure is worse than the disease.
Don’t apologize, I’m watching with glee. And you forgot to mention the hood, that’s going down big time, no one over there has 5% or 10% to put down on a 400K - 500K house (that’s what they cost now). LAIG is salivating but waiting.
“Don’t apologize, I’m watching with glee. And you forgot to mention the hood, that’s going down big time, no one over there has 5% or 10% to put down on a 400K - 500K house (that’s what they cost now). LAIG is salivating but waiting. ”
No homes in LA county hoods, thats most of LA County excluding the westside and a thin coastal sliver, were ever worth even 1/2 of $500,000. These gutter areas were simply pushed up by toxic easy credit and appraisal mort fraud, tons of it. The bubble really blew up big in the LA gutter regions and they wiil just as easily pop. Wait till that REO gutted Compton boarded up POS shack is released by the bank for under $100,000, maybe by early 2008. This will collapse inner city prices by 50-70% In less than a year: inner city POS’s will go for $100,000/$150,000 at least for fixer- uppers in very bad hood areas(50% of city of LA is in this category).
Tell us! Tell us the funny First Magnus closing story! I won’t tell hardly anyone!
Not FM, but a previous incarnation, Greenpoint. Heard this one yesterday from a buddy who brokered mortgages in the ‘87 bubble.
Guy seeking a huge mortgage in upper NJ comes into the office with wads of cash– but after all the paperwork is done, can’t produce a valid social security number. Panic as my friend sees that fat commission evaporating. Thinking quickly he has a brainstorm! A fingerprint! Can the guy use a fingerprint on the app instead? A quick conference with the office manager ascertains that why yes. A fingerprint would work just fine. An inkpad is produced.
Guy gets his mortgage.
too bad someone can’t move out of their apartment into a house with no money down and just by the magic of their signature have all their money issues solved for the rest of their life- retirement, vacations, cars, all that deductible interest………too bad the gravy train had to pull into the station
test
OT but has anyone read the book “The Goal” by Eliyahu M. Goldratt.
In the book he runs a factory. The factory is losing money. The focus on things like efficiencies, productivity, reducing man hours. It is a game with numbers and words. The simple Goal of any business isn’t customer service or any of that. The simple Goal is to make money.
I sit back and see all these people on CNBC tout unemployment figures, exports etc to tout the economy is strong. It is just a game of numbers and words. They are focusing on the wrong metrics to judge this economy. Just like they are using the wrong metrics to measure inflation.
As one poster above said, “We don’t know what we don’t know.” If you can’t measure it, you can’t manage it and the fact of the matter is all these Wall Street experts who say everything is fine are lying or they are morons.
The Goal of any business is to make money and make as much of it as they can. Goldman Sachs and Bear Stearns and many others beg the gov’t to stay out and let free markets rule so they can maximize the amount of money they make. When things go south and they start losing money, they ask for the rules to change to keep them making more money. It’s hypocrisy at the highest level.
What do all the banks, people on wall street, and Gov’t tell us? Ahh, they tell us everything is fine using the game of numbers and words. The metrics they give us aren’t a true reflection of how the economy is doing.
Same reason the homebuilders kept building. To have construction workers idle was bad. Instead of focusing on throughput (sales) they focues on efficiencies (building houses) and all of their money is tied up in inventory that is not selling. The homebuilders with a ton of inventory right now have a serious cash flow problem. I don’t care what anyone says.
/rant off
My chief complaint on the employment number is the percentage employed has been high for a while.
No mention of wages and income which are flat to declining.
So, income has been dropping and people are underemployed.
Exactly. It’s not a true measurement.
I would break it down into percentiles. I would track anyone out of work looking for work. All they take is the unemployment pay figures. Realtors, Brokers, and many others aren’t counted. Neither are day laborers out of work right now. My brother has been looking for work for 3 months in construction and he isn’t getting unemployment, but I know he is looking, but I also know they aren’t counting him.
The numbers are flawed. It’s a play on numbers and words.
Here is an example.
http://tinyurl.com/32jus4
“I would like to know how you calculate the “jobless rate” Here in Florida, only 1/3 of the unemployed qualify for unemployment compensation…does that mean that only one-third of unemployed people are used in the calculations?? I am unemployed, I know I wasn’t included. How about people who have been unemployed so long that their unemployment benefits have run out?? Are these counted in the numbers.
The statistics are a bunch of crap designed to make the politicians seem like they are doing a good job with the economy!!
How many people who want to work can’t find work that pays minimum wage or above??
Posted by: PlaywithNumbers”
Six alternative measures of unemployment:
http://www.bls.gov/webapps/legacy/cpsatab12.htm
U-3 is the headline rate.
It says the “real” unemployment rate is 8.3%
Those who are unemployed and looking for work.
“..In the book he runs a factory. The factory is losing money. The focus on things like efficiencies, productivity, reducing man hours. It is a game with numbers and words. The simple Goal of any business isn’t customer service or any of that…”
hey Goldratt,
Maybe if you gave some thought to customer service you wouldn’t need to be so focused on cost cutting and reducing man hours..
To say that customer service is not the ultimate goal of a business makes some sense.. although the point could be easily argued.
If good service and product are not counted among the many goals of a money-making business, that business won’t be one.
Customer Service and R & D are all MEANS of reaching the goal which is making money.
Business has no desires. People have desires and goals.
If Bobby’s poorly run business gets a large gift of money from Grandma, did his business reach the goal? Bobby may have, but the business did not. The business is still a failure.
How can this be if money were it’s goal?
Business is a machine. As a machine requires lubrication, so a business requires money. Without money it grinds to a halt and dies.
True, but if a business is not making money, then it is not meeting it’s goal, so what is to be done to get it there? Is it market share? Well, maybe, but market share should not be “THE GOAL”.
You need Cash Flor, Return on Investment, and Profit.
If a business makes 1 million dollars, is that good? Depends. What was the return on investment if it took 1 billio to get there? Not good. Now you see the problem with AHM. They were running on razor thin margins. When it came to a stock buyback, they got screwed.
Homebuilders are hurting because of cashflow. All their money is tied up in spec homes. Same thing with contractors who did work on all those homes for coast bank, hence the liens on the property. Chances are they will lose their a**es as the homes get auctioned off on the courthouse steps.
Flow not flor. And Billion instead of Billio.
i’m restricting my opinions to business basics.. to whether or not money can be considered a goal.
Since money is a business necessity, like water is a necessity to the life of a man dying of thirst in the desert, can acquiring it be considered a goal?
Seems to me the ultimate goal of both is survival. Your comment illustrates the point:
If a business makes 1 million dollars, is that good? Depends..”
..it depends on if $1M is adequate to keep the business alive or not. If it is, it’s good. If not, it’s bad.
A quick look at Goldratt’s bio suggests he’s a pencil pusher.. perhaps an efficiency expert.. and I understand how he would tend to place money atop the tallest pedestal.
But were he an entrepreneur who must have a clear, 360 degree view of the entire enterprise and beyond, I think his view of money-as-goal would change somewhat.
I read his book. I don’t even use it as a goal of making money. I am a Database Administrator. I don’t care about hit ratios and things like that. It made me look at the goal. What is that? To get them the data they need in the quickest amount of time. So if they say payroll is slow, look at payroll. Forget looking at the whole system. Yes the system is important, but I think we overcomplicate things way too much and that is what you see when you hear people cite all these statistics but we have people all over not able to afford homes. As if that means the economy is healthy because incomes are up (they factor in everyone’s income and divide.) So if the higher end incomes are way up but the average wage is stagnant, well it doesn’t look too good unless you are at the top looking down.
“Inside Lodi’s tony Sunwest subdivision, ‘for sale’ signs dot nearly a dozen of the neighborhood’s well-kept lawns.”
I never thought I would live to see the words ‘tony’ and ‘Lodi’ in the same sentence.
Delusion is alive and well in the central valley. Lodi is no exception. The fact that people paid 1 million for homes in the city is amazing. There is no real industry there and the commute to SF is 2 hrs each way. Lodi, Stockton, Manteca, hell the whole of San Joaquin county is in for some serious pain in the next few years…
If they can pay $1,000,000 for a home in Lodi, they can instead afford to pay $500,000 for a home near the ocean in Fort Bragg (north coast California) where the air is cleaner and crime is far lower.
Who wants to live in Fort Bragg, CA where there is no shopping, it’s always foggy, terrible restaurants, and a city with no employment opportunities? We go there every summer when it reaches 110 degrees in our city for a day or two. There’s really nothing there except the rocky coast. Mendocino is nice, but the housing is very expensive. It’s several hours of driving on a windy long road to get there, and there’s really no cultural stuff going on there except for a few art galleries to view.
There are better places to live IMHO.
Jaye,
The things you do not like about Fort Bragg are exactly what I like about it. It will remain a small town for quite awhile, away from urban diseases such as crime.
Oh, man. That is a classic. Madness! The entire world is gripped by madness!
“Inside Lodi’s tony Sunwest subdivision…”
Makes me think– the next bubble: water rights…
‘Um, I’ll sell you this lot in Lodi for $1K. Ahem, but the water access rights will cost you $50K’
http://www.iht.com/articles/2007/08/16/business/hedge.php
Even better
http://ftalphaville.ft.com/blog/2007/08/17/6667/did-the-fed-put-lipstick-on-a-pig-or-save-the-day-six-views/
“.. This is lipstick on a pig, and is merely delaying the inevitable..”
Well yeah.. that is the whole point of it, imo.. to delay, and so avoid panic and a sudden crash.
I doubt BB’s Fed is in denial.. to the contrary i think he’s well aware of reality and carefully manipulating whatever tools he has in his possession to control the slide.
Money market goes for broke…………………….
This is worth a read………
http://www.theaustralian.news.com.au/story/0,,22263812-28737,00.html
“”Virtually no one foresaw the Great Depression of the 1930s, or the crises (that) affected Japan and Southeast Asia in the early and late 1990s, respectively. In fact, each downturn was preceded by a period of non-inflationary growth exuberant enough to lead many commentators to suggest that a ‘new era’ had arrived,” the bank said in its latest annual report.”
Those who can foresee see it too early and get discredited just about when the crisis is about to play out. If one reads history and studies Schumpeter can foresee the Greater Depression (greater the “bankers’ mischief” greater is the “catastrophe”).
Jas
Thanks!!
Crisis Counsel
http://money.cnn.com/galleries/2007/fortune/0708/gallery.crisiscounsel.fortune/index.html
OMG, Erin Burnett calls China our greatest friend. She says, be careful what you wish for. If China were to make toys without lead or food without poison, prices might go up.
Here, watch:
http://www.thevanguardian.com/news.php?id=12
Oh, that’s the interview at the end of which Chris Matthews practically pulls out the vaseline lol, asking Erin to come closer to the camera for him!
I think she was being just the slightest bit flippant about how our economy depends on China, but the principles are sound no…that we need China to buy our mortgages and to supply us with cheap goods so that all the poor people buying all those houses can think they afford the resets on the ARMs…at least til recently anyway. I honestly think the new fear that we’re being given poision in exchange for a couple cents less per tube of toothpaste is a factor in the current ‘panic’. Oh crud, all those people who can’t make their payments and are maxxed out on the creditcards really *won’t* buy their necessities at the dollar store if that’s where the killer cosmetics and toys are, and they’ll just send their keys to the bank in unison!
Question. Can anyone speak to the relationship between the 2005 Bankruptcy Law changes and distressed home owners and consumers. Were they in preparation for massive anticipated consumer debt? Did the know the housing boom is/was a controlled Ponzi scheme? Did they know already that people were borrowing far beyond their means when the change the laws?
I know when people get foreclosed on they get kicked out their homes. Can they wind up homeless and in debt? Get dragged into court to pay the old house debt?
I know if you fall behind on a $500 credit card they start charging 30% interest and take you to court right away. At my local court house it’s standing room only on Tuesdays and Thursday. Nobody can pay their bills. It really sad to see these people…the look of defeat and fear in their eyes.
I think that one of the models for easy lending was that the lenders had more recourse with the new BK laws . I don’t think the lenders thought that so many people would not be able to pay .I also do not think that the lenders thought the fraud aspect in lending with get so out of hand .
The most important aspect of the bankruptcy code was the “automatic stay” provision. This allowed consumers to file for bankruptcy at anytime during the creditor’s collection process putting an immediate stop to all contact and collection activities from the creditor. The new law requires that a debtor receive credit counseling from an approved non-profit credit counseling agency for 180 days prior to filing Chapter 7 or Chapter 13 bankruptcy.
While this may sound benevolent, a much closer look at the practical effect of this provision reveals the crafty peeling of the debtor’s rights. The 180 day requirement is to provide the credit counseling agency the opportunity to work out payment plans with creditors. However, during this same period of time the creditor is not restrained from collection efforts. For example, Margaret is a homeowner in Jacksonville, Florida and is six months behind on her mortgage. As a rule, credit counseling agencies only work with credit card companies and have little or no training with dealing with mortgage companies.
After receiving foreclosure papers, Margaret goes to see her attorney to file for bankruptcy and is told that she must first seek credit counseling before filing for bankruptcy protection. Meanwhile, the foreclosure proceeds on schedule and a sale date is set 120 days later. However, Margaret still has not completed her 180 day requirement. What will happen to Margaret’s home? That’s right! The home will be sold and she cannot stop the sale by filing bankruptcy.
Went to costco this morning. Usually lines used to be 15 deep at checkout, at least 30-40 minutes wait to get out. Today i walked directly to empty register. This was south sacramento.
I love Costco, but I know my limitations and it is way too easy for me to overspend there. I haven’t been to the Costco in Folsom for well over a month now, and lately I’m not going to Raley’s, either. I’m opting for Safeway, and will probably start going to the discount grocery off Blue Ravine as well. This is pretty sudden, too — or at least my awareness of it is. After about 3 months of not being able to save a dime, I’m back to saving again.
costco in my area - lines 1-2 deep. Used to be 3-5. yes - easy to spend there. this weenend set me back 170.00….
weekend.
or maybe that was a freudian slip.. need to ween off that place - but i love it!
I love Costco and Sams. BJ’s is a nightmare. They need to organize it better.
Yep, as much as I hate Wal-Mart, I love Sams too.
Costco has recently made (successful) efforts to speed up their check-out lines. I would not read too much into this.
I’ve shopped for a long time at Food 4 Less - now Food Maxx. 10 years ago you only saw hispanics and trailer trash there. Now it’s Indians, single moms, and retired folks. It was when I started seeing people like me (ordinary white middle class) that I knew something was amiss in the economy.
I cannot believe you saw this also. I was at Costco in the Tustin Market Place here in So. Calif on Thursday afternoon about 3:30 P.M. and you could have driven a truck through the place. I picked up a few items and no check out line. Maybe 25 people in the entire store.
That is because everyone is at the Costco at the District instead, a few miles down on Jamboree.
Comment by Reset Bubble
2007-08-18 15:50:47
Is Jen Bones a guy? Is he also a Professor B?
Comment by dude
2007-08-18 18:19:18
Jen Bones? Jen bones who
Comment by sleepless_near_seattle
2007-08-18 10:32:18
I’m confused. Is it Prof Bear during the week and Stucco when the coat and tie come off on the weekend?
Comment by Jen Bones
2007-08-18 10:37:35
Alt-Ego
Slowly reality is taking hold here in Miami:
MLS #: M1097305
ZipRealty Price Track:
Price Reduced: 04/02/07 — $425,000 to $299,000
Price Reduced: 06/25/07 — $299,000 to $225,000
Price Reduced: 08/18/07 — $225,000 to $199,000
This “handy man special” (i.e. tear down) is located on 14,507 sqft.
Looks like some sellers are finally realizing that they won’t get their 2005 wishing prices. Shave off another $100K and you’re about in the ball park of where it gets interesting.
I’ve been hearing how the film industry is having difficulty getting financing for movies, as money is short…
This on top of a strike starting in the fall~
Doesn’t it seem stupid to go on a strike when the economy is about to take a downturn? There are some people complaining about non work issues and others are wondering why when it looks like lay offs could start for any reason.
Here is the news about that MGM little problem of financing for movies.
http://www.hollywoodreporter.com/hr/content_display/film/news/e3id91feee4bbb8d440dd19be53e6e89f16?imw=Y
I’m looking forward to going to the running of the banks…
Watch out for Bulls~
“‘If you have to refinance, contact the lender as soon as possible, before you go into default or foreclosure,’ said Dustin Hobbs, spokesman for the California Mortgage Bankers Association. ‘It’s like detecting cancer. The sooner you find out, the more options you have.’”
How to avoid Cancer (mortgage).
I did not buy. I avoid things that CAUSE Cancer in the first place. Maybe this is a new way of thinking of mortgages. Some avoided the cancer risk: no bad mortgage, some may have undetected cancer: ARM or other exotic debt, and some have terminal cancer-loan going bad or resetting.
It was such a real estate mania that borrowers were just going on any loan thinking the trick was to just get in on any loan and refinance later ,and often times they didn’t even read the loan documents. Teaser rates and low starting payments were the loan of choice for the short term thinking borrower during the mania . No skin in the game low down loans were the choice of many who had no regard for the real cost of money because of the teaser low payment .
These RE mania borrowers didn’t even know what a tight money market was and they were told they could refinance or sell once the loan adjusted because “real estate always goes up “.”Get in now or be priced out forever “, was the line used on the fear-based borrower .
The lenders and appraisers accepted the crazy price increases on real estate based on short term demand alone ,without any regard to the demand being short-term ,unstable demand by unqualified buyers and speculators .
In prior lending cycles if a house went up 20% in one month the appraisers and lenders would refuse to allow such a increase in a short amount of time and they would make the buyer put more money down if they wanted to overpay like that . Hit the mark appraisals was the greatest mistake with this lending ,along with the low down ,stated income loans .If the general economy was only going up by 3% to 5% per year ,there was no justifying 20% to 50% increases in these areas in one year . The demand was fake because it was not end-user long term qualified demand . People thinking that greater fools would just keep coming and than they found out that they were the greater fool .
Some of these mortgages are so huge I think some folks after they have lost their home are going to be happy new renters-sort of philosophic even (lol) once again they will be meat eaters. Hopefully they will do better next time!
State owned German bank Sachsen LB receives EUR17.3 bln ($23 bln) financial aid from a money pool of state owned banks to survive US-subprime losses. Losses of German state owned banks are compensated by German tax money.
http://www.ad-hoc-news.de/AdHocNews/en/12927798/DGAP-Adhoc-SachsenLB-Ad-hoc-notification-in-line-with-%A715
Your house. “Back when they told you what your house would cost, nobody mentioned what you’d also be paying so that nature wouldn’t repossess it long before the bank
I am surprised that no So. Cal. blog folks have comented on the 21+% drop in the prices in Mission Viejo per a REALTOR! I wonder how bad it’s going to get after all the potential buyer fools find out they need 20% down and decent credit to get a jumbo in Orange County.
Ben, I would love to see a topic on how folks think the pull back in loan underwriting to no $417K + loans without strong income documentation and at least 10% down will/is impacting the Orange County, CA market. I am already seeing the impact in Laguna Beach, but I am wondering what others are seeing.
Remember, it only goes up on OC! NOT!
This is my all-time favorite listing in Laguna Beach:
http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=L19534&page=1&property_type=SFR&mls=mls_so_cal&cKey=0jf3tbph&source=SOCALMLS
On the market for 543 days and counting. Price reductions:
Price Reduced: 04/13/06 — $1,800,000 to $1,650,000
Price Reduced: 09/26/06 — $1,650,000 to $1,595,000
Price Reduced: 04/12/07 — $1,595,000 to $1,495,000
For the first time this week, I noticed homes in the 1.2 million range slip in down into the below 1.2 million range. Prices are coming down and I’m waiting.
I can’t believe what the-world-owes-me-a-house wimps we have in this country. A “heart wrenching” story is one where the person was turned down for a mortgage? WTF? Oh boy. Hard times are coming and people like this are really going to fold up fast when that happens. You’d think that having to rent was like getting diagnosed with cancer for these people. What is wrong with Americans? Is this typical?
Article in the WSJ from David Ranson of H.C. Wainwright & Co. Economics Inc. arguing that housing is in fact quite undervalued and has a good chance of going up higher within 3 years because of the correlation between it and precious metals. I suppose it never occurs to him that precious metals might be overvalued, but anyway…
“But the relationship between housing prices and the prices of highly inflation-sensitive assets such as commodities is much more impressive than the relationship with the economy. There is a particularly strong correlation between percentage changes in housing prices and percentage changes in the price of gold — especially when a short time lag is taken into account.
…
According to the same data, the real price of housing was 30% above its norm as recently as 2001.
…
Since that time commodity-price inflation has escalated, and nominal housing prices have lagged far behind. The graph suggests that housing prices are now 30% below their equilibrium in terms of the precious-metals benchmark. Any further decline in the ratio plotted in the chart would transcend the bounds of historical experience. The last time that housing prices underperformed the precious-metals market as dramatically as this was in the 1978-80 period, after which they bounced back dramatically.
…
All of these various empirical reasons challenge the popular view that housing prices will remain weak because they are in the throes of a “correction” from “bubble” levels. On the contrary, housing prices are weak only in the sense that, after outperforming commodity prices in the late 1990s, they have fallen behind since 2001. History suggests that housing is significantly undervalued, and nominal housing prices have a lot of catching up to do over the next few years.”
This is pretty interesting. So, we should have been short residential real estate in 2001 and gone long in say 2006. Interesting investment philosophy.
Who cares. These idiots are looking at the wrong numbers. The median income cannot afford the median house price. I think in Florida only 10% of the population can afford the median priced home.
The correlation of wages and gold prices have not kept up either. I think people are undervalued. We should see wage increases of roughly 50% so I think employers better rush in and pay their people more or they might lose them
Homes like this sold for $160-175k back in 2001.
http://tampa.craigslist.org/rfs/400584802.html
A Beazer - stay away!
Unless you are in the mould growing business.
These guys (Beazer) also got in the Mortgage business. They will be the first public bankcrupt homebilder.
I also went to Home Depot and Target this weekend and they were dead. The target cashier said the grocery side of the story is busy but the rest is empty.
I actually saw Home Depot employees looking bored. Usually you can’t find them to help you. It’s dooms day I tell ya
I am looking at homes in Western MA. I have seen a handful of houses listed with incomplete construction. Builders are actually trying to sell partially constructed houses! I guess they ran out of money to finish the construction and are selling the homes “as is”. These homes have no siding, no flooring, no cabinets, no heating systems, no drive-way…et cetera… I wonder if it good for a house to go through the winter w/out siding? Well at least there’s a place for the neighborhood kids to drink beer….I know because I was one of those kids in the 1980s