A Different Downturn In California
The Marin Independent Journal reports from California. “In Marin, the national mortgage meltdown has done lots more than just make buyers anxious, it has cost hundreds of mortgage industry and other housing-related jobs, kept houses on the market longer and boosted the county’s foreclosure rate. ‘You’re a very small elite market, so you’re certainly not representative of the state as a whole,’ Leslie Appleton-Young, the chief economist for the California Association of Realtors, said of Marin.”
“Still, she said: ‘No one is immune from what’s happening in the marketplace right now. No one.’”
“Marin’s median single-family home price fell to $950,000 last month, higher than this time last year but below last month’s record $1.125 million. In April, the county’s median single-family home price hit $1,010,000 - the first time any California county broke the seven-figure barrier, before slipping to $925,000 in May.”
“At Charlie Christensen’s Sausalito brokerage, some clients are feeling the pressure. ‘It’s very dicey out there - it’s unprecedented,’ he said. ‘It’s going to be tougher for people to qualify for new loans.’”
“‘We’re kind of on an island here,’ he said of Marin. ‘It may not be as bad as it is in some other places, but I think it’s going to be a little worse than people think unless the Fed steps in and takes some radical steps.’”
“The situation will lead to positive reform, experts said. ‘It was so unrealistic to have the money so easily available,’ said Bill McKeon, a broker associate in Greenbrae. ‘That’s what everyone’s talking about. It was very common to have zero-down purchases, a lot based on stated income, and that was bound to end. I think what’s catching everyone by surprise is how abruptly it ended.’”
“Like all corrections, this one shall pass, Christensen said. ‘I think people need to take a deep breath and let this thing settle out,’ he said. ‘There’s a correction occurring. Some people are going to lose their homes, some in Marin. Is it going to be biblical proportions? I don’t think so.’”
The Sacramento Bee. “In a sense, New Century and other fallen lenders, as well as homeowners who are losing their properties, are victims of history. Until now, most experts say, the housing market had never undergone a serious swoon as long as the economy was still growing.”
“Lenders took comfort in the argument that only a recession could do major harm to the housing sector and ignored signs that the market was going cold. ‘The hubris of the period was driven … by the thought that the economy was on sound footing,’ said Mark Zandi, chief economist at Moody’s Economy.com. ‘That argument convinced the homebuilders and the lenders and added to the frenzy.’”
“‘We haven’t faced this before,’ said Howard Roth, chief economist at the state Department of Finance. ‘It may well be a new phenomenon that we’re seeing — a downturn in the housing sector slowing down the overall economy.’”
“‘There’s nothing to compare it to,’ said Fern-Luzzi, the Roseville branch manager of recently collapsed mortgage lender First Magnus Financial Corp. ‘I’ve seen it since the 1980s — I’ve been in downward markets and there’s always been the light at the end of the tunnel,’ she said. ‘This one seems to be different.’”
“This time, housing experienced a once-in-a-lifetime boom caused by excessively loose lending standards. ‘Globalization had a lot to do with this,’ said Greg Sandler, founder of Roseville-based 1st National Home Loans. ‘Essentially, we’re not playing with the same road map here. This is a different downturn than ever before.’”
“In the 1990s, even with unemployment soaring, it took five years for defaults in Sacramento County to double, according to DataQuick. This time, the default volume has more than tripled in a little over a year.”
“‘It’s more severe now; it’s much faster,’ said Michael Carney, a professor of finance and real estate at California State Polytechnic University, Pomona.”
The North County Times. “A group of more than 60 upscale tract houses purchased last year with 100 percent financing is falling one by one into foreclosure. The owners, individual investors who are nowhere to be found, began to default on their mortgages in May, triggering three-month countdowns to auction.”
“At least five defaults have been recorded this month, bringing the total to 40 of the 67 local houses linked to Elias Ochoa, a real estate agent who ran the Corona branch of a mortgage brokerage until June.”
“Connecting the houses like frayed threads are the names of Ochoa and 32 buyers, including that of Julio Zamarripa, who is listed as the owner of a house in Murrieta. Paul Parker, who lives two doors down, said that he wondered why someone would invest in a $475,000 house with values stagnating and nearby houses renting for just $2,000, half to two-thirds what a typical mortgage might be.”
“Lenders are seizing and selling the houses at particularly delicate time for the Murrieta area. More than 4,000 properties in Southwest County have tipped into default since early last year, according to the foreclosure database. About 1,800 of those have gone to the auction block.”
“With a focus on money, and not real estate, banks are becoming more willing to cut prices in order to sell off the houses they seize. Home prices stand to take much a bigger hit if banks seize and sell houses faster than companies create jobs for new homebuyers, economists say.”
“Neighbors on one block of Pepperleaf Street, where five houses are linked to Ochoa, say the weeds and brown grass don’t bode well. One owner is trying to persuade lenders to accept $450,000 for a house that he bought with a $645,000 mortgage late last year.”
“Karen Myatt, an agent who sold the house to Zamarripa and another to another Ochoa client a month later, said nothing about the transactions struck her as unusual. ‘His buyers said ‘look at these great deals; this house is going to go up another $70,000,’ Myatt mused. ‘The market was starting to turn, but no one realized it.’”
The Union Tribune. “In most neighborhoods in San Diego County, where the median home price is $489,000, a jumbo loan barely gets you through the door of a ‘reduced price’ house. Only 20 of the 92 ZIP codes in the county have a median price of less than $417,000.”
“‘People who want to take out a loan for $500,000 are getting clobbered,’ says T.J. Knowles, a mortgage broker in San Diego. ‘By historical terms, the jumbo loans are still reasonable, but in a place like Southern California, where things are already so expensive, the interest rates just add to the pain for a home buyer.’”
“‘There’s a lot of fear out there right now,’ says Knowles. ‘No logic is being applied to what’s happening in the market. Everyone’s trying to figure out what the level of risk really is and then run for cover.’”
“‘The whole mortgage business is pretty much at a standstill,’ Knowles says. ‘Everybody’s been caught like the proverbial deer in the headlights.’”
“Mark Goldman, a residential loan officer with San Diego’s Windsor Capital Mortgage Corp., the second-largest mortgage brokerage in the country, describes himself as an optimist about the real estate market, saying there are a growing number of good deals for would-be home buyers and there will be even greater opportunities once the current period of adversity ends.”
“In the short term, however, even Goldman thinks there will be a lot of pain for a lot of troubled homeowners who will not be able to switch to affordable loans, no matter what the government decides to do about the conforming limit.”
“‘For the people who are now having difficulty paying off their mortgages, a lot of them will suffer and a lot of them will lose their homes,’ Goldman said. ‘Many households are going to be seriously damaged.’”
The Record.net. “Victoria Rodriguez was not only a thriving real-estate agent in recent years, she was honored as one the area’s top-selling real-estate agents four years in a row.”
“That was in the boom time, and that spigot shut down to a trickle nearly two years ago.”
“As a single mother with four children, she said she simply couldn’t pay her bills. This in a residential real-estate market slammed so hard that sales plummeted over the months from nearly 900 in May 2005 to a low of 268 last month, a 70 percent decline in business.”
“‘It was very difficult to find buyers for properties, so I had to find something more consistent,’ she said. ‘The market just got tough. It was increasingly difficult to just get people in to look at homes.’”
“She held 15 open houses for one property, and only one person stopped by to even look, she recalled. For the first time in her eight-year career, she said, she had listings that expired without selling.”
“Rodriguez is working as a mortgage adviser. But she works on commission in that job, too, she said, and business is so slow she is drawing advances on future commissions. ‘I love selling real estate,’ she said. ‘I just have to make a living, and right now, that’s too tough.’”
“Leslie Appleton-Young, chief economist for the California Association of Realtors, said that last year the group had 210,000 agent members. So far this year, the number has dropped to about 190,000. Still, that compares with a statewide membership three years ago of about 144,000.”
“‘Membership is being pretty sticky this time,’ she said. ‘It’s not falling as rapidly as the market is.’”
“She thinks that may be because this down cycle, the economy is staying fairly strong, which allows agents to get some other work while still keeping a foot in the real-estate field.”
“‘People may be just be biding their time,’ Appleton-Young said. ‘The long-term projection for California is always pretty positive - quality of life, sunshine, technology and so forth. And there tends to be an optimistic bent in general to the profession.’”
‘Support is growing for the notion that something more intense than political posturing is needed to illuminate the black hole devouring the residential real estate market. Los Angeles City Councilman Richard Alarc n, who received lots of attention last week after calling for spending taxpayer money to deal with the crisis.’
‘The councilman’s financial-aid suggestion did not get a warm reception. The Daily News asked readers if local government should respond to the growing foreclosure crisis. Only one of the 269 responses logged seemed to favor the idea.’
‘Here’s another suggestion. Every time a home is foreclosed on, why not require the lender to make the original, and subsequent, mortgage applications part of the record? And then have someone from a regulatory agency, like the federal Office of Thrift Supervision, examine the documents to make sure that no fraud was committed on either side of the table at the close of escrow.’
‘As reporters peel away the onion layers of the subprime mortgage crisis, what they are finding really stinks: Fraud. Greed. Little oversight.’
‘Financial Times reporters Saskia Scholtes and Brook Masters found that most borrowers in this already risky venture overstated their incomes and more than half overstated what they earned by 50 percent or more.’
‘These two reported that it was typical for an applicant making $50,000 a year to write down he or she was earning $200,000 annually. Fraudulent Internet companies sidled up, providing false paycheck stubs for a $55 fee, Scholtes told a radio interviewer on National Public Radio. For an additional fee, the same Internet company would pose as an employer to ‘verify’ the lies on the application to a lender.’
‘I know people are going to hate me for saying this, but I’m not sorry that foreclosures nearly doubled last month and are increasing every day.’
‘I’m not sorry that real-estate prices are creeping down by the glut of desperate ‘for sale’ signs all over Southern California.’
‘I’m not sorry that all those developers building lofts downtown and in Hollywood and North Hollywood with no parking might have to eat their investment when they find they can’t get half a mil for the 400-square-foot corner of a former sweatshop.’
‘I’m not sorry that people who kept taking the ‘free’ home-equity money from the banks beyond all reason are now finding out how not free that money was.’
‘I’m certainly not sorry that the huckster mortgage companies and banks that thought it was a good idea to make subprime loans to people with bad credit ratings are now taking a bath. I only wish it involved some sort of public humiliation involving glue, sand and glittery body paint.’
‘I’m not even sorry that people will lose their homes and be forced to give up the Hummer they bought with a home-equity loan, and move into a one-bedroom apartment in Panorama City or, worse, in with the in-laws in Porter Ranch.’
‘I tell people I am sorry, but I’m really not. I am, in fact, gleeful. And I’m not the only one.’
‘It’s a relief, too, because we all knew this was coming. Even people like me with math anxiety could work out that at some point the hot real-estate market, built in part on risky loan deals, was someday going to reach critical mass and start to crumble.’
‘Well, here we are, and it’s beautiful. And that’s why I must implore all the well-meaning politicians proposing bailout measures to just go away and work on curing cancer, or something that will actually help humanity, not enable it to continue on its financially irresponsible path.’
I moved to Iowa for the caucuses, trying to see that my kids’ futures turns out a bit better than they’re looking now, assuming the most effective change of course would come from a Democrat. If they all advocate a bailout of ANYBODY, I’m taking on an extra account or 2, upping my income, and going home in February having never lifted a finger for any of them. The deal is off, for me.
TT,
Not sure I understand what you mean about the “most effective change” coming from a Democrat, but that’s OK.
The MOST important thing for “all of them” is getting elected, and then getting re-elected. We’re better off if we don’t look to Washington to fix anything.
Lip
Once a party has a couple of terms, they’re so corrupt you have to change teams no matter who’s wearing what label, ergo, time the give the Dems a shot, though feeling pretty faithless about the idea.
Hmmm, reply isn’t posting. Just figured the corruption is pretty entrenched after 2 terms, need to change teams to get anything done at all. Oh, they’re “fixers” all right.
‘I love selling real estate,’ she said. ‘I just have to make a living, and right now, that’s too tough.’
I hear Taco Bell is hiring.
Like many in the RE profession, she just got used to the easy money rolling in and then felt entitled to it. Just get a listing, plop a sign and presto… juicy commission. Now that these clowns actually have to work for a living we’re hearing these sob stories.
Let ‘em rot.
I guess she never heard the old saying “Saving for a rainy day”. The whole country is going to get a reminder of the wisdom of those five words.
Saving for a rainy day, you must be kiddin’! This brainchild is borrowing against her future commissions.
It doesn’t rain here in Southern California, and real estate never goes down!
Seriously, I am losing track of the number of listings I see that mention “owner is RE agent.” Not sure if its investments gone bad or falling incomes, but lots RE agents are losing more than a job right now.
“I am losing track of the number of listings I see that mention “owner is RE agent.” Not sure if its investments gone bad or falling incomes, but lots RE agents are losing more than a job right now”
Even drug dealers know it’s bad business to use their own product.
Oddly its raining in Manhatten Beach… Right smack dab in the summer.
Didn’t somebody misspell Manhattan yesterday too?
Just sayin’.
Manhaten Manhatten Manhatan Manhattan… if I spell it right it means space aliens have taken over my mind.
So embarasing.
I hear Taco Bell is hiring.
So is McDonald’s in Missoula MT
“I hear Taco Bell is hiring.”
In Mexico. Heeee Heeeeeeee
Yikes. Taco Bell, Mexico would be Montezuma’s Revege, squared.
I know I will take a few hits on this blog, but as a mom, cut this one some slack. With 4 children to raise as a single mom I doubt this one is driving around in a hummer…At least with that job, she could be around for her kids with the flexibility. We do what we must.
Who held a gun to her head and forced her to have FOUR kids?
And where is the Dad? Is he dead? No?
‘Financial Times reporters Saskia Scholtes and Brook Masters found that most borrowers in this already risky venture overstated their incomes and more than half overstated what they earned by 50 percent or more.’
These are the people the rest of the country is expected to bail out. This makes my blood boil.
Send the IRS a copy of their stated income form with taxes assessed and make them accountable, it’s fraud one way or the other.
From the Daily News editorial:
“It’s hard for Democrats not to rush to the aid of the victimized homeowners. It’s a good instinct, but sometimes it’s in everyone’s interest to step aside and let faulty systems fall apart. This is one of those times when we ought to let it burn. I’ll bring the marshmallows.”
‘I know people are going to hate me for saying this, but I’m not sorry that foreclosures nearly doubled last month and are increasing every day….’
This Daily News article (”Let Mortgage Fires Burn On”) was written by columnist Mariel Garza. I’m unfamiliar with Mariel Garza. Be that as it may:
Kucinich-Garza ‘08!
Jen, I have been secretly adding small amounts of sodium pentothal to bottled water deliveries to newspaper, real estate, and eventually the NAR offices. Don’t tell anyone…..unless you accidentally should drink some of course.
‘Here’s another suggestion. Every time a home is foreclosed on, why not require the lender to make the original, and subsequent, mortgage applications part of the record? And then have someone from a regulatory agency, like the federal Office of Thrift Supervision, examine the documents to make sure that no fraud was committed on either side of the table at the close of escrow.’
This is a good idea…
You think? With an estimated 2 million homes to be foreclosed?
Too many foreclosures, too little time.
And, please don’t tell me we would hire out-of-work realtors to process these examinations.
Hell no. I hire gov staffers that were locked out of home buying because they never earned enough to enter the market. This should be really easy as local government revenues shrink and staffers get laid off. They will be the perfect people to go after these asshats. If I loose my job, please give me the big cases and I promise to go after the fraudsters for every cent with glee. >; )
The heartening thing (for us who want no bailouts) is that Scholtes was interviewed on National Public Radio, which is economically socialist biased. How many liberal LA motorists in their Escalades were spilling their coffee when they heard Scholtes’s tirade against the stupid buyers who overstated their incomes, stupid mortgage companies, and the gleeful hope that they will all be bitterly punished by the free market?
I hate to break it to you, but they don’t listen to NPR. Rush L maybe; Kramer, definitely; NPR, naaaahhhh.
In CA, NPR get a lot more listeners then Rush, Faux news, or even CNN. The rest of the nation is a crapshoot.
NPR is about the best news reporting in this country.
I agree. ‘Bout all I pay heed to, although I watch the other stuff for comedic value.
I second.
I listen to NPR (and the BBC) every weekday.
I think Volvo x-country or Range Rover. Not an escalade.
OK Saskia, what is your HBB name?
‘Well, here we are, and it’s beautiful. And that’s why I must implore all the well-meaning politicians proposing bailout measures to just go away and work on curing cancer, or something that will actually help humanity, not enable it to continue on its financially irresponsible path.’
That is Nobel prize material!
I had a very good feeling after reading this.
“I am, in fact, gleeful. And I’m not the only one.”
Couldn’t have said it better. I’m gleeful to report that I work in the same building as ACCREDITED in Orange, one of their 5 retail support centers. Wednesday the parking lot suddenly has lots of spaces available in the morning. Thursday one of their double doors at the entrance was closed. Friday both doors closed. SHUTTERED. I felt the same way that moment as after an orgasm. It was beautiful - SHUTTERED. Almost makes up for SNAPPED UP we put up with all these years. Back in 2002 I thought I was the lunatic, watching all the homebuying activity, finally capitulated in 2005 and became a homedebtor, but a $212K fixed rate (5.75%) 30 year mortgage - I plan to retire in the house 9 years from now ($265K purchase price w/loan at 2.5 *x* income). Finally, 2007 brings vindication, and realization that I wasn’t a lunatic after all.
Got diversified assets?
Perfect. This about sums up the “Extraordinary Popular Delusions and the Madness of Crowds” that brought this intergenerational mania to a head and the forthcoming results from all of this look as if they are about to be realized. For all real estate bears here, just make sure you don’t underestimate the fall out from this as it is quite likely that there will be failed institutions at all levels, some of which are likely to amaze all of us and thus not only is it important to conserve our financial resources but likely just as important as to make sure they are in a safe place. Spreading some bets may not be all bad when looking to where one keeps their funds and investments.
What everyone refuses to see is that there can be no bailout. Who was lending the money to these fools? It was not US banks or credit unions. With eyes full of greed, foreign money sought to invest their US deficit derived win fall back into the ever rising US real estate market. Wall street started funding non-traditional mortgage companies. They repackaged the trash they were funding into new “innovative” financial product. They then sold it overseas after paying the ratings agencies to rubberstamp it with “USDA choice”. Once stamped with “AAA” foreign investors fell all over themselves to buy this crap. Now funds are going down in France, Germany, Britain, Canada, and Australia. How eager do you think they will be to buy anymore of the crap. Recently the white house sent the housing secretary to China to beg them to keep buying. He was laughed out of Beijing. This avenue of liquidity is gone and it is not coming back any time soon. We are in the process of returning to the old days of 20% down with 3 times payment income. The carnage will be spectacular and your government can do nothing about it.
I love all the facts the LAY uses to backup her opinions.
““‘People may be just be biding their time,’ Appleton-Young said. ‘The long-term projection for California is always pretty positive - quality of life, sunshine, technology and so forth. And there tends to be an optimistic bent in general to the profession.’”
“Still, she said: ‘No one is immune from what’s happening in the marketplace right now. No one.’”
My, LAY will say whatever sounds good that day. I bet she has no real understanding of the driving forces of the market.
We had a horrid downturn in LA in the 1990’s. 40% drop in the worst hit areas; some of which were very “high end supposedly insulated” areas.
Quality of life includes disposable income… Not much of that when homes went for 11.4X income. Oh… so much better now, its dropping below 11.0X income…
Traditional bottom in So-cal is 6.0X income… But wait, the traditional peak is 8.0X income… And people HELOC’d their way off the property ladder this time. Bwaaa haaa ha!
Anyone who used home equity to buy a fancy car loses my sympathy. By fancy, I’m talking anything nicer than a 4-cylinder Accord or Camry. Yes, I drive a 6-cylinder; but I’m a pesky renter with savings.
I need to get off my addiction to this blog. I know not much will happen for a year (well, more of the same). But this is history in progress and I find it so fascinating to watch the “mother of all train wrecks.”
Got popcorn?
Neil
What would we do without the “got popcorn” guy?
Hang in there Neil. It’s just the beginning… we are indeed living in interesting times.
Neil–
Given publicly-available data, do you think it is possible to know/project:
1. How many forced sales will happen per month (death, new remote job, exploding mortgage, etc), as opposed to owners who can and will sit tight.
2. What % of #1 will turn into short sales/foreclosures.
3. What #1 + #2 will do to for-sale inventory.
4. What #3 plus other factors (changes in size & wealth of RE buyer population, changing lending standards) will do to prices.
We know there are large forces changing the market. I just wonder if it’s possible to forecast the likely effects more precisely. Does anyone have a housing economic model that might give something more than a SWAG but tries to forecast the gross change in supply vs demand?
Thanks for any insight.
–Nick
Nick,
I’m afraid all I can do is SWAG at this point. But I will point out I am normalizing to different factors than you.
Real estate prices are set at the margin, so its the fraction of sales that matter, not the fraction of total inventory. So I’m trying to predict where monthly sales will go and what fraction of monthly sales will be foreclosures. We will hopefully never have a huge fraction of inventory in foreclosure at once. That would be scary and very 1931 ish. Real estate is driven by the monthly turn over with an amazing low pass filter put in on the downside. But that is not the same to say there isn’t a downside.
That said, all of my models are SWAGs. I am not a Ben, Calculated risk, Bearmaster, or OCrenter (top real estate bloggers in my book). They might have a better answer.
Got popcorn?
Neil
Thanks for the response.
My assessment is that neither the most bearish or most optimistic outcomes are likely, but rather that reversion to the mean will occur as a combination of nominal price declines early on followed by real price declines as RE lags inflation for years. I imagine modeling the economic future is like using a supercomputer to model the weather–pretty good for tomorrow, but iffy for next week.
Reversion to the mean is the most bearish outcome. In some places (South Florida) we are talking 50% reduction of home value. Believe it or not that would be the normal mean for that area.
Bingo, BP.
You hear Cramer crying about Armageddon, and stuff like that. And this is just the necessary process to get back to NORMAL.
Funny how they make the reversion to the mean into a bad thing. It’s just getting back to normal.
Nick said:
“ I imagine modeling the economic future is like using a supercomputer to model the weather–pretty good for tomorrow, but iffy for next week. ”
Yep… just as many important variables. You can predict pretty well big stuff (average temperature in July, National median price corrected for inflation for a decade), but not the “little” but important stuff. (Hurricane path, rate of price drops in Las Vegas in November). So a very good analogy.
Reversion to the mean is the most bearish outcome.
Not in the least the most bearish outcome. Some areas will see revisions well below the mean. In some areas, buyers will be so fearful, rent will produce double digit ROI again. In so-Cal? I don’t know. We haven’t seen that in decades.
The bad thing about “revision to mean” is the economy was mal-invested. Undoing that is never pretty. Necessary, but not pretty.
Got popcorn?
Neil
Hello Nick,
I guess we all go with the general guideline of reversion to the mean. So, I’d guess that prices would retrace to 1999-2000 levels and perhaps recover to 2001 levels as soon as 2010.
The mortgage resets start to peak later this year and then taper off into the spring. However there is a HUGE second wave of resets that will sap away life from the market in 09-10.
Neil (and others) we estimating that the neg AM portion of the reset wave would cause that to crest earlier and buyers would begin to return in ‘10.
Beyond that aspect of the bubble; I believe the damage to financial industry and market trust will push it out further.
We are also near a inflection point for population. In the last bubble thread people pointed out that Mexicans are leaving. Well, commiting massive fraud first, then leaving. If we don’t have the additional population added by that influx we should start seeing population decline.
Real estate will get hit even harder.
I could see this decline lasting to 2012-13 and being a poor investment till 2020.
Best of luck to those that are still here.
There’s already a steady decline in consumption/economic growth beginning around 2012, as the big spending cohort, 39-54, begins to wane. Even considering immigration, legal and otherwise and their spenging peaks kicking in earlier in their 30s, we’re going to run out of consumption acceleration and go into decline. That’s not considering ARMageddon.
In the last bubble thread people pointed out that Mexicans are leaving. Well, commiting massive fraud first, then leaving. If we don’t have the additional population added by that influx we should start seeing population decline.
Why the above is factual and expected, its freaky thinking of the impact. The hairs on my neck stick up thinking of the consequences of that trend. It bothers me almost as much as when I found out the bubble was even in Arkansas.
Got popcorn?
Neil
Yes that was in SoCal, in the Bay Area we had a similar downturn…40% in Silicon valley… but it was all due to
global competition in the tech industry. Not much has
changed since 1991. Prices of goods and services created by
Tech companies continue to decline and no way can they support high costing homes.
“Prices of goods and services created by
Tech companies continue to decline and no way can they support high costing homes. ”
Austin, Tx is another good example: its economy is dominated by tech companies (Dell, AMD, Freescale, IBM) and salaries for mid-level managers at these companies are about 20% to 30% below what mid-level managers make in Houston or Dallas, eventhough the cost of living in Austin is greater.
You asshats at boeing better get to work or we are going to drive you completely under.
NOC
Who said anything about Boeing. I do not work for them.
In fact… I think you and I work for the same company and I do think momentum is in our favor. But don’t be too hard on Boeing, we do sell components to them that they resell to foreign customers.
Got popcorn?
Neil
“Traditional bottom in So-cal is 6.0X income… But wait, the traditional peak is 8.0X income… ”
But has the entire mortgage industry ever locked up, and completely recalibrated, before? We are in uncharted waters. Loans to facilitate 6.0 times may not exist when all of this is done.
The worst point in recent history would be the early ’80s. When mortgage rates hit 14+% (for a 30 year fixed rate). The only way you could afford a home was via an ARM. Money got so tight that old smoke stack industries were trashing whole plants US Steel’s Gary works, Bethlehem Steel going under the waves, … Looking for a job as a tech, and seeing a 3 foot stack of resumes on the guy’s desk! Oh, not pretty times.
“40% drop…”
The scary thing is that 40% number came off a much lower median sales number.
40% off 250K vs. 40% off $500K. Not from California so I don’t if my numbers are accurate…
Seems to me that the California economy is especially dependent on bubbles. First, the dot.com bubble and not the real estate, mortgage lending bubble.
‘Seems to me that the California economy is especially dependent on bubbles.’
- Agreed. I am in the construction industry and I can say that I witnessed the boom that the workers experienced. They did not think that it was an aberration …. soon to disappear forever. They spent that money like crazy and are so far underwater that it is hopeless.
Those are great numbers coming out of “we’re different” Marin. I bet Marinite is grinning ear to ear somewhere out there.
‘I think people need to take a deep breath and let this thing settle out,’ he said.
If we hold our breath that long, we’ll all be dead!
Now now… you can only hold your breath until you pass out; the autonomic nervous system will restart the breathing automatically. So the worst they can do is give themselves a bad headache.
That said, sit back and relax. This is going to take a long time. Tell people the truth, but if they’re not ready to hear it… don’t push it. Denial doesn’t fix a problem. Fear doesn’t fix it either.
So wait… it will happen. Soon people will just care about Thanksgiving, Christmas, etc… just wait… We already have many areas where by October foreclosures will out pace sales. Not really many places earlier (unless sales do even worse than this bear thinks they will), but many will join later.
Who would loan money to homedebtors now? Me? I’d be demanding a high ROI with “meat in the game.” Easy credit turns off quick and disappears for years. We’re not even done with the tightening.
Got popcorn?
Neil
I have to admit Ms. LAY is right about Calif’s weather. Think I must wait for its financial and political climate to undergo some change. Wish I could do as much HBB as usual, but I am caught in a limbo between Toshiba and Verizon, who both claims my Internet problems are each other’s fault.
Remember this quote:
‘By historical terms, the jumbo loans are still reasonable’..says T.J. Knowles, a mortgage broker in San Diego.’
And lets reconcile these:
‘Lenders took comfort in the argument that only a recession could do major harm to the housing sector and ignored signs that the market was going cold. ‘The hubris of the period was driven … by the thought that the economy was on sound footing,’ said Mark Zandi, chief economist at Moody’s Economy.com. ‘That argument convinced the homebuilders and the lenders and added to the frenzy.’
‘People may be just be biding their time,’ Appleton-Young said. ‘The long-term projection for California is always pretty positive - quality of life, sunshine, technology and so forth. And there tends to be an optimistic bent in general to the profession.’
Well Ben … lets look how California tech companies are adjusting to high prices…
Employment growth has been in other states and not in CA.
Google like many others are hiring outside the state and getting nice concessions from other state and tax freebies..
Several like 3com and Borland who been around for decades have relocated from the Bay Area to East Coast and Texas.
Recently, AMD will create a billion dollar mfg and R&D facilities in upstate New York.
AMD Nears New York Fab Design Completion.
AMD New York’s Fab 4x “Conceptual Design” Unveiled
“The incentives offered by New York include a $500 million grant for construction, $150 million in R&D subsidies to be used over 5 years, and $250 million tax rebate.”
Every month we hear stories like this one.
You got to love the way LAY gets all the media attention and no rebuttal…
‘By historical terms, the jumbo loans are still reasonable’
This statement is true since 1973. Prior to 1970 not true.
Reconcile Mr. Mark Zandi’s comments on the failure of banks to stress test the economy with Ms. Leslie Appleton-Young’s assertion that California is the place to be. Two different items that might be congruous. The ideas are not mutually exclusive.
Ms. Appleton-Young and Mr. Zandi may both believe California is the place to be and Ms. Appleton-Young and Mr. Zandi may both believe that banks should stress test loans based on the economy. Not enough information.
–
‘It may not be as bad as it is in some other places, but I think it’s going to be a little worse than people think unless the Fed steps in and takes some radical steps.’
Even the rich areas need the Fed to step in. Don’t these guys have any shame? It is disgusting to see so many Americans who want the Fed to step in only in one direction — when markets are in trouble. When things are flying high they want the govt. to keep away and let the free market work.
Jas
unless the Fed steps in and takes some radical steps.
Yes, that’s one of the first words that springs to mind when you mentioned the Fed: “Radical”. LOL.
“When things are flying high they want the govt. to keep away and let the free market work”
… they want the govt. to keep away and let them rape the free market. There,
For many decades Marin was the most expensive of Bay Area cities.
Most homeowners come from the most wealtiest in Business and Entertainment sectors. Many uninformed owners would be shocked to see prices drop, since many would say it was immune from any down turns. But this is a bubble and all parts of the bay area will be effected. There is no precedence for homes to rise 3-4 times in under 10 years as they have in the region. It will take a 50% haircut to get back to long term trends.
Of course the was no precedence because they never had 100%-125% stated liar loans and all the other Exotic Dancing loans before. It all goes back to the crazy loans. Remember “its the economy stupid?” Well try “it was the loans stupid.” No loans no money no money no house sale no house sale, well we all know the rest.
“Mark Goldman, a residential loan officer with San Diego’s Windsor Capital Mortgage Corp., the second-largest mortgage brokerage in the country, describes himself as an optimist about the real estate market, saying there are a growing number of good deals for would-be home buyers and there will be even greater opportunities once the current period of adversity ends.”
- I think that Marky does not have a clear view of the future buyer. They will need to come to the table with ‘Cash’ and that immediately eliminates about 90% of the buyers that he was used to dealing with over the last 5 years.
Mark, come up with plan B.
“We Need Affordable Housing” was the cry
“Homeowner Bailout” is the new shout
seems the solution to #1 is in not doing #2
#1 will happen all by itself, no pols needed
I’ve already been thru all this before. I lived in Argentina for 20 years. If you’ll recall, Argentina was the ‘poster child’ (and testing ground) for the new Neo-Liberalism that now grips America. Outside of the Housing Bubble, everything else in the American economy is faithfully repeating the happenings in Argentina, where for 10 years the economy appeared to be going exceedingly well. Then it all crashed into a chaotic heap and went to hell in a handbasket. People’s savings where FROZEN and then eventually completely LOST.
I see the same thing happening now in the U.S.: the continuous lies from the government (”there is no housing bubble, the is no civil war in Iraq, there is no reason to worry, there is no inflation, we don’t torture” etc).
I think the U.S. is about to go under just like the ex-Soviet Union did, bankrupt under the weight of it’s own fiscal irresponsibility. The U.S. is, despite it’s impressive arsenal of weaponry, about to slide into Third-Worldishness.
And just like Ben says in the article above, I really CAN’T say I feel sorry at ALL about it.
And then again maybe we are turning into a third world country as a result of a glut of third worlder’s and their goofy history revisions.
soon evita will be here w FREE-er healthcare
USA will spend till it drops
“Leslie Appleton-Young, chief economist for the California Association of Realtors, said ‘Membership is being pretty sticky this time….’”
At once sticky and unctuous — the Appleton-Young Paradox.
Me thinks membership is sticky as the dues have already been paid! Just wait for when the next checks are due. There are 3X the realtors required in a downturn. Bwaa haaa ha.
And so many of those Realtors ™ are stuck with an alligator. Its feeding time folks…
Got popcorn?
Neil
“It’s feeding time folks…”
Not yet Neil, not yet. Circling the bait, looking for the filet, planning the attack, waiting, waiting, ….
Patience, the best is yet to come.
Unctuous?!! Damn it Jen, I warned you……
Scanning the paper, I can still rent a very nice place in Marin for about 1/2 the cost of a comparable monthly mortgage nut. Marin homeowners are in for a very rude awakening indeed.
Let ‘em rot.
“This time, housing experienced a once-in-a-lifetime boom caused by excessively loose lending standards. ‘Globalization had a lot to do with this,’ said Greg Sandler, founder of Roseville-based 1st National Home Loans.
Way to go Greg! Blame the World for your stupidity…
I’d love to know how having our socks made in China is responsible for Countrywide doing liar loans. This connection could be fascinating. Someone has got to run with this..
Got popcorn?
Neil
Read the article.
I went back and re-read the article. What my comment was on is “how is this loose lending standards related to globalization.” I understand this is a world wide credit crunch. But I do not understand how loose lending standards can be blamed on globalization. On wall street repackaging loans an hedge funds buying them? Sure.
I’ll agree with the statement from the article that this is a different downturn than ever before (from the paragraph with the quote on globalization). But I do not see how globalization is to blame.
Maybe its because I work in one of the few US industries that is primarily driven by exports.
If you end globalization, you cut off 60% of our customer base.
Got popcorn?
Neil
I believe he was referring to the international securitization of the mortgages.
Ahhh… that’s fine. I understand that part. Maybe I’m nitpicking details, so I shall bow out.
Do know I am amazed at your finds Ben.
Neil
I think Neil is pointing out how Wall Street is blaming loose lending practices, while lenders are blaming the packagers/sellers of mortgages. How convenient to blame the other guy.
That too…
I think the whole lose credit scenario has so much blame to go around. Who loaned to whom under terms that were insane in forethought. I like the way of distributing risk (believe it or not. Societies with interest bearing lending grow at twice the real economic rate of those that don’t), but to lose sight of basic financial fundamentals?
I just really like the community Ben has built up. So I try to play nicely.
I’m just as frustrated as the next guy at this happening… so perhaps I over do my schadenfreude. (Its but a vent that we broke so far from fundamentals.)
Neil
Loose standards were the result of the disconnect of risk from reward by those involved in creating the loans. Securtization was but a mechanism for this disconnect to happen.
Standards only began to tighten up when risks were once again connected to rewards.
IMHO.
Put another way, the mess was caused when people began lending other people’s money without having to worry whether the loan could be repaid…
IMHO
China had wheel barrows of dollars that they had to put back into America to keep the dollar from crashing on internation monitary exchange markets. Like everyone else, they didn’t want 3% RoI with 3% inflation, so they looked for investments with better than 3%.
MBS was better than 3%, and they bought as many as they could get. Money Markets paid better than 3%, and the Chineese plowed money into them, but they needed investments with returns, so turned to MBS.
In the end, the only thing with good return when stocks were falling and most fixed income equities were paying under 3%, was MBS.
The only way to generate the kind of MBS volume needed, was to lend to ANYONE that could fog a mirror.
Old Al Greenspan was qouted as saying the Fall of the Berlin Wall errrr 1989 was the cause of homes increasing in value in 2000…
WoW! that one tops all…think Al was smoking something…
http://search.ft.com/ftArticle?queryText=greenspan+berlin+wall&y=3&aje=true&x=16&id=061009007374
Preemptive strike by Mr. Greenspan to deflect mounting worries in the international financial markets about the US Federal Reserve policies to foment ‘asset bubbles’.
Do you think that Mr. Greenspan leaves out bad behavior because he doesn’t recognize it? What’s wrong with criticizing the bad guys?
The reasoning, Neil, is that many developing countries with big trade surpluses maintain the dollar peg by buying USD-denominated securities, which has significantly depressed long-term interest rates in the US.
“‘There’s nothing to compare it to,’ said Fern-Luzzi, the Roseville branch manager of recently collapsed mortgage lender First Magnus Financial Corp. ‘I’ve seen it since the 1980s — I’ve been in downward markets and there’s always been the light at the end of the tunnel,’ she said. ‘This one seems to be different.’”
The Great Depression might qualify as a good basis of comparison. I have read that interest-only mortgages were the most popular sort in the 1920s. And a poster just yesterday mentioned that 30-year fixed mortgages were one of the remedies adopted during the Great Depression to fix problems with the housing market.
ALMOST ALL MOTGAGES IN THE 1950s WERE 20 YEAR, THE 25 YEAR CAME ABOUT IN THE 60S, THEN 30 YEARS CAME TO COVER INFLATION
30 year loans make no sense for condos. By the time you have the loan paid off, the building practically needs to be torn down and rebuilt.
Unless the HOA fees take care of the rebuilding?
Don’t trust Condo HOA’s . Ask to see the reserves. usually the HOA can just cover the maintance and will need a special assesment for rebuilding. And if home owners are going broke and not paying their dues? I sold my older Townhome last year after I had been there 16 years. It was slowly falling apart ” maintance defered” and the hoa had tripled as well going from 119 to 350 a month. I had to replace the windows, garage door, outside water heater door, outside fence, main water pressure regulator, repair outside stucco and paint it. So what did the HOA do? Paid for trash , water and a Hired landscape crew to blow leaves around every week. Glad I sold it when I did, can you imagine anyone buying into that mess now that the market is soft? 93021 was the zip BTW. Lots of termites as well and they can do some damage, which was overlooked by the inspector? So much for building inspectors.
You’re right, Tulips. Condos are a Ponzi scheme.
‘These two reported that it was typical for an applicant making $50,000 a year to write down he or she was earning $200,000 annually. Fraudulent Internet companies sidled up, providing false paycheck stubs for a $55 fee, Scholtes told a radio interviewer on National Public Radio. For an additional fee, the same Internet company would pose as an employer to ‘verify’ the lies on the application to a lender.’
LMAO…acquisition of the American Dream…by fraud.
The new paradigm for this country.
But hey, this too shall pass…just ask Salsalito Charlie.
Cheating has been around for decades. Blame Nixon for the growth of dishonesty in America. It was adopted by several Presidents (democrat and republican) since then. The general public shrugs and says “everyone cheats, so we should too.”
Let the free market cure the unaffordable housing crisis and let it administer punishment for those who lied about their loans. The invisible hand is the hard wrench of reality.
The invisible hand is the hard wrench of reality.
Beautifully written Bill.
I think the U.S. economy is about to TANK, just like the ex-Soviet Union did.
You said that already, Dan.
Capitalist institutions are constantly rebuilding themselves. What happened to the Soviet Union is very different from what is going on here.
The premise that real estate would keep going up as long as there was low unemployment and no recession was always nonsense. It doesn’t matter how many people are employed, it only matters how much they are getting paid.
The amount people can pay for real estate is dependent upon their income. If prices reach a level that incomes do not support, I don’t see why the experts could not foresee a real estate recession even at full employment, especially when incomes were flat or down for all but the very top portion of wage earners.
I love the posts from the East bay. It’s really different there I swear!
MOON OVER MARIN
The crowded future stings my eyes
I still find time to exercise
in uniform with two white stripes
Unlock my section of the sand
It’s fenced off to the water’s edge
I clamp a gasmask on my head
On my beach at night
Bathe in my moonlight
Another tanker’s hit the rocks
Abandoned to spill out it’s guts
The sand is laced with sticky glops
O’ shimmering moonlight sheen upon
The waves and water clogged with oil
White gasses team up from the soil
I squash dead fish between my toes
Try not to step on any bones
I turn around and I go home
I slip back through my basement door
Switch off all that I own below
Dive in my scalding wooden tub
My own beach at night
Electric moonlight
There will always be a moon
Over Marin
All hail Jello Biafra and The Dead Kennedy’s
SubKommander Dred
Its a Holiday in Cambodia and its tough kid but its life….or Let’s Lynch the Landlord Man….turn on the gas, smells like Dachau,yeeeaaahhh…….after that they can dump us in the Police Truck….California Uber Alles’
Jello would find the HBB and FB slightly amusing….
offtopic, Joy Division/Ian Curtis movie coming out in October.
So Vicky Rodriguez, the top selling agent for four years in a row in one of the most expensive places in the U.S. couldn’t save any money while times were good? I’m going to guess that Vicky is an “investor” as well in some underwater properties. Otherwise, there is no excuse for her to have problems.
My thoughts exactly! She should have saved for times like these - especially as a single mother with four kids. What sort of a role model is she? Oh well, this is the land of speculation! I gotta have mine NOW.
Victoria Rodriguez was not only a thriving real-estate agent in recent years, she was honored as one the area’s top-selling real-estate agents four years in a row.”
“That was in the boom time, and that spigot shut down to a trickle nearly two years ago.”
“As a single mother with four children, she said she simply couldn’t pay her bills.”
did we forget to squirrel away some of that record breaking income?
is that a squirrel joke?
‘You’re a very small elite market, so you’re certainly not representative of the state as a whole,’ Leslie Appleton-Young, the chief economist for the California Association of Realtors, said of Marin.”
Remember when Leslie Appleton-Young’s lips move she lies. She always has distorted the truth about the housing bubble. Keep up the good work Ms Young. You counter-balance reality.
“With a focus on money, and not real estate, banks are becoming more willing to cut prices in order to sell off the houses they seize. Home prices stand to take a much bigger hit if banks seize and sell houses faster than companies create jobs for new homebuyers, economists say.”
Yeah right, that’s the big quandary… the delicate balance between liquidation of REO’s and that number being meshed with all the new jobs soon to be created. What happens when the jobs are being lost rather than created?
I think the technical term for that is Double-Whammy!
“‘There’s nothing to compare it to,’ said Fern-Luzzi, the Roseville branch manager of recently collapsed mortgage lender First Magnus Financial Corp. ‘I’ve seen it since the 1980s — I’ve been in downward markets and there’s always been the light at the end of the tunnel,’ she said. ‘This one seems to be different.’”
“It’s different this time!”
BWAHAHAHAHAHAHAHAHA!!!!
Ronald Regan Play Book
1)Deregulate Saving and loan Industry, but continue to inssure deposits with FDIC
2)Fire half the regulators who are overseeing the S&Ls (Less regulations require less regulators)
3) Let the pillaging begin
4) Ronald retires a hero
5) Govt bailout
Bush #2 play book
1) Deregulate Energy
2) Srangle the regulators
3)”Good work Ken boy”
4)Star two wars, see Haliburton stock go up 500%, OK Cheny is set
5) I see opportunity in Real Estate
You left out #6 on RR playbook: Persuade Communism to crumble. Or maybe you did not want communism to crumble…
Russian style Communism collapsed on its own. It was always going to, with or without Reagan.
Read “The Decline and Fall of the Soviet Empire” by Fred Coleman. He would agree that the system toppled itself and that Reagan deserves very little credit. Reagan could have bankrupted them without bankrupting us.
Soviet Union was already toast by the end of the 1970’s, Brezhnev’s years of corruption hollowed-out and decapitated the system. It took another 10 years of deficits of essential goods and services and public’s loathing of those in power for the country to officially dissolve.
Maybe Reagan had something to do with the day when my dad came home and told us he couldn’t find any sugar in all of the stores - but I have my doubts.
“What effect would a boost in the conforming limit actually have?”
1. It would provide an implicit interest rate subsidy to help some wealthy people (those who actually have sufficient assets plus anticipated future earnings) purchase Jumbo-sized McMansions that cost more than $417,000. This is a home purchase hurdle beyond the wildest imagination of most Americans to ever be able to clear.
2. It would potentially enable a few more households who do not have sufficient assets plus anticipated future earnings qualify to purchase homes they cannot afford (costing more than $417,000), putting them on course for future foreclosures.
3. It would provide a bailout for speculators (banks and flippers) currently on the hook for gambling losses in overvalued homes they foolishly purchased for over $417,000 on the assumption that “real estate always goes up.”
4. It would help D_dd’s Wall Street and Greenwich constituents be able to afford funneling bigger campaign contributions his way.
5. It would impose a regressive tax (to cover the GSE’s implicit interest subsidy) on the majority of the population which will never be able to afford purchasing a Jumbo McMansion at a price over $417,000 to subsidize the wealthy minority who can afford to purchase homes in this lofty price range. The folks who get to pay for this subsidy include the low-income segment of the population which the GSEs are supposed to serve.
6. It would spill over into still-higher and less-affordable home prices in coastal zones, undermining the GSEs’ affordability mission.
Aside from these minor issues, I think the proposal to raise the conforming loan limit is a great idea.
Is it going to be biblical proportions? I don’t think so.’
I hate when the RE types use this anti-scare tactics. I believe that this is a false argument called ‘misleading vividness.’ Of course it won’t be of biblical proportions. But it does not need to be of biblical proportions to be very, very painful.
Lies, lies, lies… tell me lies, tell me sweet little lies.
Ahhhh, I see dear Leslie is still spewing her usual lies about Califronia “being different”. Bwa ha ha ha ha.
As a former CA homedebtor who sold near the peak back in 2005, all I can say is : Hasta la vista, suckers!
I just knew something was really, really wrong when my little old house “appreciated” in value almost 300% in just two years. Thank God I found this blog, and others, to confirm that I was not the only one seeing the train wreck a-coming.
Now I look back and laugh at all these f*-ed mortgage slaves, realtwhores and MSMS shills begging the government to bail them out… Bwa hahahahaha… The Dems might talk the right talk, but that’s all it is. NO ONE can stop this train crash. Even if Heli Ben lowers to 3%, it’s way too late to save most of these morons.
Remember the Titanic. The passengers didn’t know how bad it was until the boat capsized. That damage happened way before the music stopped and the screaming began. Right now the music is still playing, even loudly in some places… But it will stop. And the boat will sink. Even the chimp in the white house and Heli Ben can’t change the laws of gravity (and economy).
Like Neil says, it’ll be a while before the REAL fun begins. I’ll be calling Leslie in 2009 or 2010 to buy some property in Marin for cents on the dollar. That is, if she’s still a realtwhore. Something tells me she might be looking for alternatives already.
Enjoy the popcorn!
Leslie might drop the realt part of that
Snicker…
As ex-Californian noted, the music is still playing and yet they haven’t noticed the seats (on the life boats) are gone.
It is really sad what is going to happen.
I hope people realize my schadenfreunde is but a vent for my frustration at this unavoidable disaster.
But it will be 2009 at the earliest that I buy. 2010 is probably a much better option. Neat thing, as renters we have time to debate when to buy (and its not like it will ever be “in the next 3 months.”).
Got popcorn?
Neil
We have to look out if there is a bail out though.
We will have hell to pay.
As one astute blogger noted, the only way to pay for a bailout would be to eliminate the tax credit for mortgage interest…
Hmmm… wouldn’t quite have the desired effect.
Got popcorn?
Neil
I still think a good start would be to eliminate the mortgage interest deduction for second homes. This would be a good start at least. Plus have the broker and appraiser have more on the line in cases of Fraud.
“Neat thing, as renters we have time to debate when to buy ”
Nicely put. Right now, I just love being a renter. Little by little, few at a time, I am hearing of more friends and/relatives who have to turn over the keys. It is sad in a way, but let’s face it: what on earth were they thinking buying half million dollar houses; they are not doctors!
Peter,
I agree with you.
I’m excited about the start of the college football season, but I dread to find out who is suffering financially. Why are they connected? Half of the crowd I go to games with bought $1M plus homes. Now, a good fraction of them can afford the homes; but who was faking it? Sadly, I think I know of a half dozen.
Even sadder, I believe most of my friends were among the more sensible during the bubble. So I think I shall see less of the pain than most… sigh… too much still.
Neil
The fakers need to be tought a good lesson about high finance. I have no pity for any of ‘em because they helped jack up the prices for all of us.
Let ‘em rot.
It is important to take stock of who supports a bailout and who does not, IMO. I cannot imagine how it would be in the CIC’s interest to bail out speculators in the CA coastal bubble markets.
From the Calbreath article:
Last week, Dodd met with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson to push for a higher conforming limit.
“This would have a positive effect on dampening down interest rate hikes,” Dodd said after the meeting. He said Bernanke seemed receptive, but Paulson – the official voice of the Bush administration on this matter – refused to back such action.
Small victories. They raise that limit every few years with inflation. God help us if we decide all that bad debt has to go to the public.
upscale tract houses = oxymoronica
‘“‘We’re kind of on an island here,’ he said of Marin.’
Like virtually everyone I meet in Southern California, I did my years in the Bay Area and eventually left. I still go to the lovely City by the Bay from time to time but prefer Paris (where I own) and So Cal (where I rent) as far as places to live. I think if we have a contest to find the last group of koolaid drinkers to proclaim “it’s different here!” as their market goes flaming off a cliff, it would definitely be in the Bay Area. The jumbo shutoff valve was really turned for the first time in this crash within the past six weeks and this will be reflected in numbers starting in October. By this time next year, when the ARM and IO resets are here in number, markets in the high end places will be uglier than those in South LA. They will be saying ‘it’s different here’ because people will be leaving mansions for middle class homes in other places, instead of leaving shacks for apartments in CA.
Today’s Austin American Statesman has an article that looks in to whether the city could fall in to the same trap that Miami and Las Vegas have gotten in to: a condo glut.
Here’s one quote that got my attention:
“For every 100 potential buyers who could have qualified for a mortgage in recent months, only 50 to 60 can qualify today, said David Taughinbaugh, a senior vice president in Prosperity Bank’s downtown branch. ”
http://tinyurl.com/ywo4xp
First, thank you for the article on Austin, I found it interesting. But I couldn’t help but note:
“The Austin market seems to be a different animal from the rest of the country,” he said.
Hey, its different in Austin!
As others have already noted, this is a world wide credit crunch. Austin won’t be any more immune than Miami; yes, they’ll have less oversupply, but $600/ft-sq is a tough sell anywhere but the tightest real estate markets. Heck, even then I think its overpriced for even NYC.
Homes in Austin cost, IIRC, $120 to $180/ft-sq to build. Traffic in Austin doesn’t justify *that* level of premium for living close to work.
Interesting article, but the projects fail a sanity check. Don’t get me started on 800 ft-sq units (that’s the size of the apartment I split in grad-school).
Got popcorn?
Neil
Ya, when I’m driving down sixth street past the Whole Foods HQ there is a billboard advertising 600K condos downtown.
The price of the Condos downtown makes no sense. 10 minutes out of town with 600K you could buy an acre with 3.5K square foot home on it.
I see these condos having a 70% haircut. Eventually, the UT students could use them. About 10 blocks north of the warehouse district closer to campus there is what looks like a business building ( reflective glass windows ) but to my shock I found out it was dorms.
I recall reading in the Statesman newspaper last month they were going to propose more condos on the other side of the river. I think they want to get rid of the animal shelter too for more condos etc.
The spin was for us to accept a “changing” Austin.
Is there a nice neighborhood around Sacramento, single female friend who needs to move there is asking. Does anyone have any input?
There are several choices for Sacramento. Depends on your parameters. If you want clean suburban stucco living go for Roseville or Folsom. If you are single and want to be close to entertainment in the downtown area live in Midtown(the grid) or East Sacramento. Avoid South Sac, Elk Grove, Natomas, Del Paso, Oak Park. Of course….don’t buy…..RENT!
While I am not a missionary when it comes to religion, I have been trying to deter everyone from buying. So, yes, renting. Thanks for the info! With ’single’ I meant no huge house is needed, but the person is not looking to be close to ‘entertainment’.
See:
http://sacramentolanding.blogspot.com/
…for lots of info.
I live in Sacramento. Where is her job?
She will work mostly from home, only commuted occasionally.
Then she has a lot to choose from. It really depends on price and what she wants out of it. Ask over at Sacramento Landing with a bit more info and we can feed you all kinds of info.
My recommendations would depend on where she works and if it’s “business” hours or shift hours. If she is planning on working downtown, living closer in could be best. As a single woman, though, she needs to be aware that there is a lot of foot traffic, bums, etc. that spill over into the trendy neighborhoods in East Sac. (I loved living in the Victorian apartment building downtown, hated the bums who hung out in the lot next door and threw bottles over the fence.)
Carmichael and Fair Oaks are nice places to live that are closer in than Folsom or Roseville by far.
Sacramento has dangerous areas not just South, but also in North Highlands, Del Paso Heights, and Natomas. A lot of West Sac is very dicey. I wouldn’t recommend living in the Pocket area, which is generally very nice, due to the high risk of flooding (and I mean rapid flooding that would come up over the 2nd story in most of the Pocket).
There are some really cute neighborhoods near UCD, but there are also some awful ones and they tend to spill over, so I’d avoid anything in that area and pretty much everything South of 50 and east of 99 until you get to Elk Grove Blvd. Elk Grove east of 99 is ok, but the commute is bad during business hours. Elk Grove west of 99 is kind of dicey until you hit Laguna Blvd, and then it is a little better. (I used to live off Calvine Rd and I was amazed at how quickly everything turned seedy and run-down there in just a couple years!)
Like all corrections, this one shall pass, Christensen said.
Is it going to be biblical proportions? I don’t think so.’”
I can’t recall reading about people losing their homes in the Bible? Although it has been some time since I perused the good book.
I read in the Bible where a Prophet lost his ass but I think it was a four legged kind! Wait, I remember now, his ass talked to him, that was it, Did they have Real Estate agents in the bible?
No, only builders and Pharisees.
Smoked that one out!
Sodom and Gemorrah had an issue, but the people died with the real estate, so only non-resident speculators had to deal with it afterwards.
The really interesting thing in the Old Testament deal with real estate is all land having to revert to its orignal owner (or family, I guess) on the Jubilee year within Israel. There were no fee simple absolute real estate sales, just longer or shorter term rentals depending on where you were in comparison to the Jubilee.
‘The market was starting to turn, but no one realized it.’”
Classic denial, and the five stages of grief starts with, yup you guessed it, DENIAL (”there’s no bubble”), then comes ANGER (”stupid lenders and greedy buyers!”), BARGAINING (”please accept a short sale”), DEPRESSION (”I’ll never buy another home”) and ACCEPTANCE (”I thought a loser like me could be an RE mogul, boy was I wrong”).
“Like all corrections, this one shall pass, Christensen said. ‘I think people need to take a deep breath and let this thing settle out,’ he said. ‘There’s a correction occurring. Some people are going to lose their homes, some in Marin. Is it going to be biblical proportions? I don’t think so.’”
Of course the correction and/or damage to the economy WILL be of biblical proportions. How can it be otherwise? After all, the housing price gains were of biblical proportions.
Until now, most experts say, the housing market had never undergone a serious swoon as long as the economy was still growing.”
Unitl now we never had liar loans and exploding ARMs. I guess there’s a first for everything.
The economy is growing? Sort of. Incomes are flat to down against inflation since 2000. Most of the income growth has been at the high end.
No. The economy blows. This is all the big debt bubble symptoms. The rich are cashing in like crazy, fraud is rampant and the middle is dying under a pool of debt trying to keep up.
It is game over. system reboot in T-12 Months (after next summers fall out).
was at the beach in NJ a home was advertized at 22k income for $635k
GE has a p/e of 17? and you’re supposed to buy a pos rental home at over 30 ?
I know a couple who bought a 2br condo in LA for $700k last Sept (basically at peak). mommy and daddy covered the 20% down payment, but they still had to take out an interest-only loan to afford the monthly mortgage payments/condo maintenance fees. i know another couple who convinced mommy and daddy to invest in a development for them on the east coast — and they’re probably about to lose most of their investment. so that’s another factor in the mortgage meltdown - lots of mommys and daddys are losing chunks of their retirements trying to hook up their kids with RE.
All the people I know who are trying to buy right now, to this day, were given money by mommy and daddy. Everyone I know who has actually earned their own 20% down payment is laughing at the prices.
Good point IUnknown. Now, I have no problem with parents helping out their kids (its what parents do). But I do not pity spoiled kids about to get a lesson. Anyone buying now (outside of a very few markets) is too spoiled to delay gratification.
Anyone else think that their parents Heloc’d the money to help?
Got popcorn?
Neil
Or, may I add, too dense to realize their new home is a depreciating asset that they’ll be saddled with for the next decade or so.
I know a young couple of Dinks in Yorba Linda that just bought their a home, had to be at least $750K, even though I tried to warn them. It’s nice, but they have no idea how long they’re going to have to live in it.
Anyone else think that their parents Heloc’d the money to help?
I do. And that’s the best part, 2 birds with one shot. They can hit the street at the same time and regroup as a unit after the foreclosures.
This is unprecendented…therefore, things are going to happen that no one could predict. Wife and I are saving cash like mad to pick up bargain in 2011/2012 when a rental property cash flows + from day 1 w/20% down.
Got diversified assets?
Hah - well in these cases I know the parents didn’t HELOC - but I bet a lot are. Either way it’s $$$ coming out of their retirement futures and going down the drain.
Hah - well in these cases I know the parents didn’t HELOC - but I bet a lot are. Either way it’s $$$ coming out of their retirement futures and going down the drain.
“‘The whole mortgage business is pretty much at a standstill,’ Knowles says. ‘Everybody’s been caught like the proverbial deer in the headlights.’”
No not everybody
Some of the comments on this forum that characterize “liberals” as bailout-friendly are mostly BS IMO.The liberal crowd I know where I live and work is universally opposed to government bailouts for irresponsible borrowers who have/are, and will be reneging on their signed mortgage contracts. It’s a lot more fair to take people on a one-to-one case basis than stereotyping an entire group based on their social policy politics. The idea that a few who break their mortgage contracts should suffer the consequences of financial ruin, but that when the number of contract breakers is significant there must be something done to bail them out makes me sick to the stomach think about.
What the heck happened to personal responsibility, and being “tricked” into signing an inappropriate mortgage contract - pu-lease! If you don’t review and understand any contract before signing it, you damn sure shouldn’t be at the table to begin with.
Isn’t this what W meant by ‘The Ownership Society?’
Nah, I think he meant that banks owns all the people in the US.
Citibank to home debtor: pwned!
‘The hubris of the period was driven … by the thought that the economy was on sound footing,’
To quote Peter Schiff: The fundamentals of the American economy are sh**.
Avoid South Sac, Elk Grove, Natomas, Del Paso, Oak Park. Also, Northighlands, anything east of Mananznita to Sunrise, Rancho Cordova for the most part, midtown and downtown can be sketchy.
Go to the Sacramento Police Department Website they have a great internet tool that shows where high crime areas are, but this is only good for the City of Sacramento. If she does not have to commute then Roseville, Rocklin and Davis are good and Carmichael West of Manzanita. East Sacramento North of the 50 freeway is really nice.
Unbold
Another try
“In most neighborhoods in San Diego County, where the median home price is $489,000, a jumbo loan barely gets you through the door”
Sometimes I want to scream. Ranting is betta. What happened to 280K for a fine home in SD?
Today in LA: a lot of really sorry open houses, no activity whatsoever. In this category, I saw at least 5 mcmansions built in the past couple of years, the open houses were totally deserted. The agents looked like a combination of bored and nervous. Prices still really high, but you’d think they’ve got to come down under these circumstances. Nothing is moving.
“‘We’re kind of on an island here,’ he said of Marin. ‘It may not be as bad as it is in some other places, but I think it’s going to be a little worse than people think unless the Fed steps in and takes some radical steps.’”
Socialism for the rich. Free handouts Bill Gates and company. Come and step our backs.
The market in LA is at a standstill. Nothing is moving. Everyone is talking about it now. Saw some open houses today: prices still very high, but no traffic at all. Bored RE agents sitting around doing nothing. Prices have to eventually follow.
We’re kind of on an island here,’ he said of Marin.
Ah, I get it, we’re different in Marin, right? Sorry. Explain exactly how Marin will stay high when the surrounding areas drop
..unless the Fed steps in and takes some radical steps.
Like what? Lowering the interest rates to zero won’t save this bubble: it’s done! Injecting more liquidity into the markets will set inflation roaring. We were giving credit to people who should not have been buying homes…Who are the next greater fools? Just how can the Fed raise personal income so that it will match housing prices?
The process was simply unsustainable. You can’t get it back without other damage
Dow Jones rising, Feds Cutting Interest rates, Bail outs… I’ve come to terms on these. It may eventually happen. But I also come to a conclusion that housing and all the things associated with it will collapse big. I don’t even rally care if people are still buying in my area. These people will also fall into the black hole. I still hear people in the BA area that it’s not going to so bad. Hmmm Not too long ago, I heard them say that housing prices will not be effected.
Bold off?
bold off?
I live right up the way from a new Tim Lewis community in Orangevale, CA (right outside Sacramento, near Folsom.) The planned community featured two models, the cheap ones and the expensive ones. I’m sure they have a much fancier classification setup but I could care. The most expensive homes were advertised, wait my bad… “released” at around 700k each. Now keep in mind this is freaking Orangevale, not the worst area in Sacramento, and that’s about all it has going for it.
This weekend Tim Lewis dropped the prices of every home by 100k. All of them. It was advertised in the Sac Bee New Homes section. Maybe they should “release” another one of those stupid red mini-blimps to let everyone know that they’re selling? Oh wait, no one cares.
Another bold off try.
‘The hubris of the period was driven … by the thought that the economy was on sound footing,’ said Mark Zandi, chief economist at Moody’s Economy.com. ‘That argument convinced the homebuilders and the lenders and added to the frenzy.’”
This statement is not entirely correct. Here is a more precise statement:
‘That argument convinced the homebuilders and the lenders and economists like myself and added to the frenzy.’
There.
Got 10% down?
Actually, I’m not sure the economists ever bought the lie. It convinced John and Jane Public who continued to buy houses, allowing the big boys to make $ billions of hay while the sun shined, knowing the Fed would ride to their rescue when it all came crashing down. And if the Fed didn’t ride to the rescue and they actually lost their job, they’d just have to console themselves with their huge bank balances.
oh bull single mom of 4 kids, HELLO, I am a single mom who was an agent turned investor. I saved for the rainy days while everyone drove nice cars and remodeled. I have an old bathroom, I do however pay my bills and have 8 figures saved. TOO late to save for the rainy day, huh, How can we feel sorry for dumb people, perhaps for their kids. 4 Kids, top sells agent for 3 yrs, HELLO, did u save anything??????????? so sad, Be thankful daily and don’t spend it. I told my kids, let me work my tush off for 4 yrs, because this is history, no one has ever seen this market, skyrocket here in suburbs of L A, Ca. Why is it that no ones saves.
As soon as a read that California has a quality of life i stopped going any further with the article and took the rubbish out to the sidewalk?