An Unsatisfactory Status Quo In California
The Record Searchlight reports from California. “State Real Estate Commissioner Jeff Davi did his best to allay concerns about the housing market as he addressed a packed house of Shasta County agents Wednesday in Redding. It may not be the best of times, he said, but it certainly isn’t the worst. ‘Real estate is cyclical. You can’t deny that. You just have to be more aggressive and do things differently. It’s not a fun time for anybody,’ he said.”
“Home sales in Shasta County in the first half of 2007 totaled 1,192, a 10.5 percent decrease from 2006 and the fewest sales since 1,127 escrows closed in the first six months of 1998, according to DataQuick. ‘That’s not something to necessarily be negative about,’ Davi told members of the Shasta Association of Realtors.”
“Davi emphasized that unless California addresses its acute housing shortage, more and more people will be priced out of the market. The percentage of households that could afford to buy an entry-level in California stood at 24 percent in the second quarter of 2007, according to the California Association of Realtors.”
“Another problem is that wages in California have not kept pace with housing prices, Davi said.”
“Davi didn’t dwell too much on the subprime credit crunch that has enveloped the nation. Homes lost to foreclosure in Shasta County in July numbered 33, the most for any single month this year. For the first seven months of 2007, 175 homes were lost to foreclosure, a 573 percent increase from a year ago.”
“In an interview after his presentation, Davi said homeowners facing foreclosure have to be persistent, adding that 50 percent of people facing a default have not contacted their lenders.”
Inside Bay Area. “City leaders appeared to be sending mixed messages following their first look at a series of proposed changes to tighten code enforcement for vacant properties.”
“Slumping housing prices and bad lending practices have turned the northern San Joaquin Valley into one of the nations leading areas for foreclosures — with Manteca, a city that calls itself the Heart of California, at the center of the crisis.”
“Mayor Pro Tempore Vince said, ‘I have to say, I like what I see. I know its a heavy hammer, but it will keep neighborhoods with vacant houses safe,’ noting he lives near a vacant house he later discovered was used for teen gang parties.”
“Mayor Willie Weatherford hinted that he wasnt willing to go forward with ordinances that could cost taxpayers. ‘We wouldnt be able to get that money back,’ he said.”
“Several lenders and mortgage brokers were scattered about the City Council Chambers to hear the councils discussion, but none spoke during the period for public comment.”
The United Press Syndicate. “Q. ‘A couple of years ago, I purchased an investment property in Sacramento, Calif. In 2006 I was without a tenant for the first half of the year. Making the mortgage payments ate through all of my cash reserves. Currently I have tenants, but the income does not quite cover the expenses.’”
“‘As I look at the property, I see that my cash flow is negative and the value is static at best. If a tenant were to move, not pay the rent or if I lost my job, I would be in financial trouble almost instantly.’”
“‘I don’t know what to do. I can’t sell the property (even if there is a buyer out there) for what I owe on it (after closing expenses), and I don’t have the money to bring to closing if I lose money. I would love to just walk away. I know that would destroy my credit rating, but I am desperate enough to do that because it is likely to be destroyed as soon as there is any problem (so why continue to spend money just to keep an unsatisfactory status quo?).’”
“‘Is it possible to sign ownership over to the lenders? Would that free me from the problem, or would I still be responsible for whatever shortage results from their sale of the property? I am getting desperate. Any advice or information you can give would be appreciated.’ — D.T., Cedar Hill, Texas.”
“A. ‘You’re in a very tough position, akin to the people I described as ‘condo slaves’ during the worst of the late ’80s Texas real estate bust. The condo owners, however, had one advantage you don’t have: They could at least live in their overly expensive condos.’”
“If you give up the investment property, you will still have a liability. When the lender sells the property, it may sell it for less than the amount of the mortgage. In that case you will get a form 1099 indicating ‘income’ in the form of loan forgiveness.’”
“‘I have two suggestions. First, start learning to live with little or no credit today. Second, visit with a good real estate attorney, preferably one experienced in loan workouts.’”
The Times Herald. “They’re not calling it a trend, but school officials said Wednesday they’re encouraged by early figures showing Vallejo school district’s declining enrollment could be slowing down.”
“Schools have, so far, seen a 1.3 percent decline in student enrollment over last year rather than the 3.5 percent loss they experienced between the fall of 2005 and 2006, district spokeswoman Tish Busselle said.”
“Declining enrollment has hit the Vallejo school district budget hard, a phenomenon also hurting dozens of other California districts.”
“Reasons for the additional students haven’t been nailed down, but Busselle said one factor could be the local housing market slump. With families unable to sell their houses, many may be choosing to remain in Vallejo.”
The Orange County Register. “More homeowners are struggling to hold on to their properties and more are losing that struggle, says the latest national report from the Mortgage Bankers Association.”
“Doug Duncan, the MBA’s chief economist, said that the numbers could keep climbing over the next year, longer than previously thought, because investors have stopped buying as many as 40 percent of home loans for sale. ‘Even prime adjustable jumbo loans are not being purchased by investors. They have simply left the marketplace,’ Duncan said.”
“He said more folks with both good and spotty credit also are missing payments on adjustable loans after low initial ‘teaser’ periods end.”
“‘What is not clear, however, is whether subprime ARM loans are causing the problems for California or whether California is causing the problems for subprime loans,’ (he said.) California has 17 percent of the subprime ARMs in the country and over 19 percent of the foreclosure starts on subprime ARMs.
The Press Telegram. “Scott Hamilton takes a Zen-like philosophy on the chicken and egg question. As principal of DOMA, a real estate marketing company focused on downtown Long Beach, Hamilton and company have worked the past few years to market residential properties in downtown by promising residents that the streets would be alive with retailers, restaurants, bars and entertainment.”
“Three out of four isn’t bad. Downtown Long Beach, and Pine Avenue in particular, has a plethora of restaurants, bars and clubs.”
“‘We see that the type of buyer who’s buying in downtown doesn’t necessarily match the demographic of the Census data that retailers are looking at,’ Hamilton said.”
“That data is based on the incomes of people who have been living in downtown, not on those who have been moving into downtown, he said.”
“Hamilton acknowledged that loft sales will be impacted by the real estate slowdown. Builders have already adjusted their pricing and project plans to reflect the changes and the slower sales rates, he said.”
“‘They will adjust and things will start moving again,’ he said. ‘It’s a lot like the stock market: It takes a little bit of belief before it happens.’”
The Press Democrat. “Living within walking distance of church, the mall and other downtown destinations drew Leo and Margaret Trembley to rent in Santa Rosa’s newest luxury apartment complex. The Trembleys are among retirees and younger professionals moving into the Moore Building, the latest housing project in downtown Santa Rosa.”
“‘They’re testing the success of an urban product in a largely suburban community,’ said Scott Gerber, president of a Larkspur real estate firm.”
“The Moore Building offers 79 one- and two-bedroom units that rent for $1,325 to $2,670 a month, the highest rents in Santa Rosa. So far, 20 leases have been signed over six weeks.”
“The county’s rental market has tightened over the past year, a result of job growth and the housing slump, which is leading some potential buyers to rent instead. ‘We’re well positioned right now,’ Jereb said.”
“Downtown is where Steve Roybal wanted to be. The Santa Rosa native is single and plays in a rock and blues band when not holding down his day job.”"
“‘If you’re not going to live in a home, I want to be in the best place I can be,’ he said. ‘Being single and traveling a lot, I was willing to give up an outdoor patio or a front yard in exchange for a theater room and a nice gym.’”
“Roybal also didn’t want to stretch financially to purchase a house. He has friends that struggle to meet mortgage payments because of high housing costs, and now home prices are falling.”
“‘The market’s rocky,’ he said. ‘And what I’ve seen my friends buy, the building I’m in is 10 times nicer.’”
From Rich Toscano:
‘Of the 1,037 defaulted loans remaining after cleaning up the data, only 8 had a value of less than half of their respective homes’ sale prices. In other words, piggyback loans seem to have accounted for fewer than .8 percent of all NODs filed on that particular week. At a time when mortgage defaults are piling up at a monthly rate that is about 60 percent higher than during the bulk of the 1990s downturn, a potential error of .8 percent is analytically insignificant. The double-counting of defaults appears to be a non-issue.’
Huh?
Do you mean that some defaults are counted twice: Once for the main loan and once for the piggyback? Is that what you’re talking about?
No, he means they are not being counted twice.
Oh, I think I get what he’s saying now. If the value of the loan is less than 1/2 of the purchase price, then it must have been a piggy back. Only 0.8% were like that.
… and the light turned on.
Close, but not exactly. He is saying that any piggy-back loan would necessarily be less than 1/2 of the purchase price, so no more than 0.8% of the NODs were on 2nd mortgages. It is NOT true that a small loan value necessarily implies it is a piggy back - it could be a first mortgage that is mostly paid off - but it’s not likely that such a loan would go into default.
Yes
For housing heads, this was their premiere talking point to combat our figures. We can now triumphantly toss the foreclosure numbers back in their face >; )
Money is being printed in the basement and (again) used to prop up the failing stock market, turning red to green (but just barely):
http://www.breitbart.com/article.php?id=070906150105.ba6jjyzu&show_article=1
Sorry, but Helicopter Ben is not coming to save you…
To All Who Are Interested in an SF Bay Area HBB Party:
How about Arguello Park (in Belmont) on Saturday, Sept 15th. We can make it a potluck, and I can bring my frisbee.
Whad’ya say?
I say this is a good idea. In fact, let’s have HBB Parties from sea to shining sea in the U.S. While we’re at it, let’s make this party thing global!
All HBB parties are local.
Yup! Meet me under the “It’s Different Here” banner.
This bubble head requires a very wet site. I was thinking we’d decend on a posh bar someplace. Also, it’s back to school madness for me until Oct.
I think we can bring drinks to the park. We can also migrate to a “wet site” after the picnic if people want to.
Of course you can bring drinks to the park, this is NoCal not SoCal….tell me when and where!
OK call me when we get to site where I can wear heels >; )
“It’s not a fun time for anybody” (said the State Real Estate Commissioner). Ha ha, he was wrong. It’s a fun time for HBB.
It may not be the best of times, he said, but it certainly isn’t the worst. ‘Real estate is cyclical.
What Mr. Davi is trying to tell these real-whores is that it isn’t the worst, BECAUSE THE WORST HASN’T EVEN STARTED YET. THE BOWL HAS JUST BEEN FLUSHED. WE HAVEN’T STARTED GOING DOWN THE $HITTER YET. BUT WE ARE WELL ON OUR WAY. YOU CAN COUNT ON IT. IT IS IN THE BAG!!!!
Rant off.
Pessimists: We are so much deep in s*** it can’t get any worst
Optimists: Yes it can! Yes it can!
what happened to gary watt? the 15% in the bag guy.
Mid-Year 2007 Report - Foreclosures, The Media, The Subprime Market and Where It’s Going
- Gary Watts
“I am holding to my original forecast for this year. I knew the 1st and maybe the 2nd quarter would be a rough one. I think the Fed will cut the interest rates later this year, and home prices will begin to firm up and even appreciate in the fall, especially as we head to 2008 and the election year!” Gary Watts.
Mid-Year Real Estate Update By Gary Watts, Orange County Economist, Real Estate Broker:
http://tinyurl.com/2tlhre
Sorry if this is a double post …
Gary continues to spew the stink. Just like last year, this year he is calling for a turn around on the second half of the year. He also goes on to list his reasons. I read through em and while they seem to support his position he is missing the one key point as I see it. Prices are too high.
I can only guess that Gary and his ilk cannot fathom prices dropping because it would mean that their paper wealth and their revenue stream is diminishing. All I can say is, “you’ll not get one red cent from my pocket till I can afford it with a 30 year fixed.” And even then, I shall not avail myself of an agent nor broker, but a real estate attorney.
http://tinyurl.com/2tlhre
It’s not a fun time for anybody,’ he said…
Funny, I am having a ball now. Especailly compared to when I was getting “priced out” every other day.
Got Popcorn? (oh, and BTW…not the microwave type that gives you a lung disease)…
You just have to be more aggressive and do things differently. It’s not a fun time for anybody,’ he said.”
What’s this “fun time” crap! Oh sorry kids it’s not a fun time right now, We may have to work a little but don’t worry uncle FED will kiss your boo-boo and mean old Mr. Reality will go away.
[Cheech starts toking on a giant joint]
Chong: Toke, toke it up, man!
[Cheech starts choking]
Chong: Kinda grabs ya’ by the boo-boo, don’t it?
“It’s not a fun time for anybody,’ he said…”
LOL speak for yourself their pumpkin >; )
there (sheesh)
In an interview after his presentation, Davi said homeowners facing foreclosure have to be persistent, adding that 50 percent of people facing a default have not contacted their lenders.”
Being aggressive means now that they will just proactively pack their bags and get out. Some may try to be funny and do things like set live pigs loose in the house.
Of course they haven’t “contacted their lenders”. Contacting their lender would suggest that they actually wanted to keep their pet gator. No way Jose!
Hey ex-nnvmtgbrkr, being from Australia I have no real idea of what a Josuha tree is………Is this what you speak of?
http://www.pbase.com/dwdillon/image/1624001
That’s it! The very tree that we tell the REIC to hug.
Ah yes, a fine specimen indeed. Plenty of ass missles to harvest off of that beauty.
Sorry about the lack of JT’s down under, but I gotta think you have something in your flora that will do the trick for the reem worthy.
The FDIC is trying to encourage lenders to do workouts with borrows. They suggest that the lender keep the payment the same( which presumably the borrowers have been able to make) and extend the term of the loan to 40 or 50 years. I guess borrowers that take that deal won’t have to worry about being “priced out forever”, they’ll be “priced in forever”.
can’t wait to hear what the bond holders have to say!
Oh, at first I thought you said “blonde holder”.
A 40 or 50 fixed term isn’t going to do squat to help these people unless they also give them a 1% or 2% percent interest rate. This is just pouring water on a grease fire.
agreed. The interest is the problem. The principal portion of the payment is nothing!
Gwynster — at this point, I’m not convinced that even a 1-2% rate would solve enough FBs’ problems to turn this around. If values are headed down and FBs realize that real estate can be like tulips, what is the advantage to continue feeding the alligator, even when the gator food is cheap. Still a gator, still waiing for real meat, FBs are still screwed because the foreclosure-related comps put them further and further underwater.
I think of the scene in “Master and Commander,” where the hapless young officer jumps overboard while holding a cannonball, thus ensuring an increased rate of descent and no hope of a change-of-mind being useful. To me, a lower interest rate is just a lighter cannonball. They’re still screwed. Why not get it done with, and on with their lives?
Sorry, I just had to point out that the bust must be getting interesting if the analogies are stacked on top of one another like that.
Durbin — not sure where you’re located, but it’s a dark and stormy night here.
Titanic land, actually, but I’m on the Carpathia, what do I care?
Just got a letter from Countrywide touting 40 yr home loans. (and I’m not even in trouble).
I double they’ll be doing much of anything in the near future.
“doubt”
“‘What is not clear, however, is whether subprime ARM loans are causing the problems for California or whether California is causing the problems for subprime loans,’ (he said.) California has 17 percent of the subprime ARMs in the country and over 19 percent of the foreclosure starts on subprime ARMs.
Sounds like a prototypical death spiral.
“California has 17 percent of the subprime ARMs in the country and over 19 percent of the foreclosure starts on subprime ARMs.”
Which makes me wonder where the other 81 percent of foreclosure starts are?
http://tinyurl.com/2qnw3o
WASHINGTON, Sept. 6 /PRNewswire-USNewswire/ — The 2nd Quarter National Delinquency Survey, released today by the Mortgage Bankers Association (MBA), shows that mortgage loans entering foreclosure have increased in 47 states since this time last year. On average, the increases were 50% higher. Only four states — North Dakota, South Dakota, Utah and Wyoming — did not experience increases in new foreclosures. Less than two percent of the American population lives in those states.
Reaching for aspirin…er…cocktail.
Foreclosures are higher in Montana? Dang, I thought all the rich people wanted to live there.,,
This is a no-brainer. The subprime loans are the problem. California has been around for a long time, and it wasn’t causing RE to tank. The tanking coincides with the ARM resets, yo.
I am not sure I agree with you completely. The subprime loans are the first indication of a problem. The real #$!@* hits the fan when Alt-A and some prime loans fail. It just takes longer for those individuals to give up on their financial mess.
Yes, you’re right. I guess I fell into the symantics trap that the MSM has been setting for us. It’s not just subprime that caused it, it’s anything exotic.
Good catch.
keeps coming back to inventory…
when it aint turnin its burnin
cash that is.
I’m not picking a team per se but last time I checked, both issues where sitting around the camp fire together signing “Kum Bi Ya”.
Unless of course it’s Kramer singing “Kum Boo-Yah”!
Manteca, a city that calls itself the Heart of California, at the center of the crisis
I prefer to think of Manteca as the ARMPIT of CA. I don’t view it as a very nice place.
No, not armpit. Manteca is the spanish word for ‘LARD’. It is the GREASE pit of CA.
There’s plenty of competition for that title in the Central Valley.
Like ‘The Toilet’ (Los Banos).
Nothing is worse than the Bakersfield area–same heat, lots of wind and dust, and the oil smell. Mmmmm Oildale. Every morning you go outside to see the sunshine and flowers but are greeted by the fresh smell of a gas station (and For Sale signs). What a way to face a new day!
Boy, is this ever an oucheroo:
“Q. ‘A couple of years ago, I purchased an investment property in Sacramento, Calif. In 2006 I was without a tenant for the first half of the year. Making the mortgage payments ate through all of my cash reserves. Currently I have tenants, but the income does not quite cover the expenses.’”
“‘As I look at the property, I see that my cash flow is negative and the value is static at best. If a tenant were to move, not pay the rent or if I lost my job, I would be in financial trouble almost instantly.’”
I noticed you made no comment, and rightfully so. The question says it all.
“…the value is static at best.”
Yeah, right!!
“…Davi said homeowners facing foreclosure have to be persistent, adding that 50 percent of people facing a default have not contacted their lenders.”
The reason: Long-distance charges for phone calls to a hedge fund in Singapore can really add up.
Luv, Jen
An Unsatisfactory Status Quo In California
Ben, good choice of title. Its very ironic. “Status Quo” implies stability by the NAR/CAR. The situation is anything but stable (continued acceleration in foreclosures, etc.). But we all know the NAR/CAR will spin every chance they get.
Got popcorn?
Neil
I’ve been showing very stable increases in NODs for the last year.
Luckily for the FBs, there is a limit to how many homes can be foreclosed upon… wait, there’s always multiple foreclosures on the same home, nevermind.
The Press Telegram. “Scott Hamilton takes a Zen-like philosophy on the chicken and egg question. As principal of DOMA, a real estate marketing company focused on downtown Long Beach, Hamilton and company have worked the past few years to market residential properties in downtown by promising residents that the streets would be alive with retailers, restaurants, bars and entertainment.”
“Three out of four isn’t bad. Downtown Long Beach, and Pine Avenue in particular, has a plethora of restaurants, bars and clubs.”
- Long Beach is toast. Lots of bums roaming the streets and tons of never fulfilled promises to develope the area.
Oh, they have a kick ass gay parade every year.
“restaurants, bars and clubs”
Great, now if we could only afford to go out after paying the mortage and HOA fees.
I spent some time in Downtown Long Beach this summer. I couldn’t help but notice how unsurprisingly dark those condo towers are at night. The restaurants were mostly the usual franchise suspects, and the entertainment for me was watching the police arrests on the streets.
I also read the article. DOMA has only been in business for about 5 years. They rode the market up and will ride it down. Friends purchased a condo in downtown Long Beach for $149,000 during the last 1989 renewal. The prices dropped to about $40,000 after the riots and my friends did not brreak even till 2001. Those units eventually were selling for $400,000 during the boom. I heard there were only a handful downtown condo of sales in August
Manteca, a city that calls itself the Heart of California, at the center of the crisis
Places worse than Manteca: Needles, Fresno, Bakersfield, Stockton, Fontana, Barstow, Baker, Arvin, Hollister (how is Juan in his $720K strawberry picking house), Los Banos (A$$HOLE of CA)
Only a couple of those places are worse than Manteca. Manteca (lard in Spanish) has nothing, nada, zip, zilch to offer. There’s an old, old joke in the Central Valley about the smell that emanates from a plant in Manteca. Don’t know if the plant is still there, but the smell remains.
Water slides?
Back before water parks were popping up everywhere, the Manteca Water Sildes were heavily advertised over all of Northern California.
Nowadays my area has two water parks, and such local parks caused the Manteca Slides to fall out of business.
I unfortunately was born and raised in Stockton, and went to Manteca for their water slides. Growing up was “OK” I guess, there were gangs and so forth so I had to learn to fight and be street smart, but most areas were still pretty Ozzie and Harriett. NOW when I go back in my middle age witha nice car and wristwatch on, I am afraid. The proliferation of hoodlums and crazies in beat-up cars is astounding, even in what was once a “good” neighborhood.
Amazing how middle age gets one scared but the hoods are worse too.
To get an idea of what the “face of California” has become, visit Disneyland on a Saturday, and compare the Saturday “clientele” with an off season weekday crowd (mostly out of town tourists.
The Saturday crowds are full of hispanic skinheads, guys (and gals) covered in tatoos and wearing cammies. I’m surprised that they haven’t installed metal detectors (a la Six Flags) at the turnstiles. I suppose that it will take a knifing (or worse) for Disney to finally admit that on weekends it California theme parks are full of riff-raff.
Go to Catalina on a summer weekend — social trash of all kinds. Raider Nation.
Los Banos= the bathrooms
“‘They will adjust and things will start moving again,’ he said. ‘It’s a lot like the stock market: It takes a little bit of belief before it happens.’”
Keep dreaming buddy, keep dreaming and it’ll all get better.
“It takes a little bit of belief before it happens”
And a little Pixie Dust…
The percentage of households that could afford to buy an entry-level in California stood at 24 percent in the second quarter of 2007, according to the California Association of Realtors.
Ugh… I cannot be the only one pissed off by that. The CAR states 24 percent can afford “entry level,” but that means getting a neg-AM option ARM. Not only that, most of those 24 percent already own a home. Those that don’t wouldn’t consider “entry level” as that is a small condo here in California. Sigh…
Has Wells Fargo updated the “honest” numbers lately? Last I looked for LA they were a nice round 2% could afford a home.
And what is the CAR doing quoting who can afford the entry level home?!? Is the number so low for the median home that even they cannot spin it?
Got popcorn?
Neil
ps
yea, I started two threads close to each other. But two different thought trains.
I think they made the same mistake that was pointed out a few days ago:
The NAR affordability metric does NOT measure the percentage of people who can afford a house. It measures the percentage of income that the median household earns of what that household would NEED to buy the median house.
If the median house price is $500,000, then you would need a minimum income of about $125,000/year to afford that house. So if the affordability metric is 24%, that means that actual median income is only 0.24 x $125,000 = $30,000. That’s way too low.
It’s just annoying that not even the journalists can get it right.
If the median house price is $500,000, then you would need a minimum income of about $125,000/year to afford that house. So if the affordability metric is 24%, that means that actual median income is only 0.24 x $125,000 = $30,000. That’s way too low.
No, that’s bad math. If the median income were $125k, then the 25% income would be approximately half that, or $62.5k. Even that isn’t exactly right because the distribution is probably more Gaussian (bell-shaped), not uniform.
I get something like a $90,000 household income needed to buy a $375,000 San Diego “starter home” w/ a 30-yr fixed mortgage at current market rates. That looks like a very expensive starter home, and more than a starter income.
P.S. By my estimate, around 24% of San Diego County households do earn over $90,000 (or, conversely, 76% earn less) — in line with CAR estimates (though I am not sure if $375K aligns with their notion of a starter home). However, only around 29% of the homes have a value below $375,000.
Those are condos, right?
Your number is way too high, no household making 90k a year can afford a 375k condo on a 30 year fixed with taxes, insurance, HOA. You gotta go suicide loan.
My household in San Diego makes that and we will only buy a condo in the 250-300 range, anything more than that and we would have to give up the things we enjoy as renters, like eating out all the time, Chargers season tickets, vacations, etc paid for in cash.
Your number is way too high, no household making 90k a year can afford a 375k condo on a 30 year fixed with taxes, insurance, HOA. You gotta go suicide loan.
Or, heaven forbid, a nonzero downpayment.
I did not split out the condos from SFRs, as my data source (SANDAG) did not provide that breakdown. However, a quick check on ZipRealty.com provides the following information for homes currently on the market in SD by list price (which I assume is at least loosely related to market value):
Overall:
Condos 7,252 35%
SFRs 13,413 65%
Total 20,665
Under $375,000:
Condos 4,195 76%
SFRs 1,305 24%
Total 5,500
Above $375,000:
Condos 3,057 20%
SFRs 12,108 80%
Total 15,165
Conclusion: 3 out of 4 SD county homes currently listed below $375,000 are condos, while 4 out of 5 homes listed above $375,000 are SFRs…
P.S. One more perspective:
Share of condos below $375K = 58%
Share of SFRs ” ” = 90%.
I am guessing many of the SFRs listed below $375,000 are either 1br/1bath or else real fixer-uppers…
You don’t mean ditto-ditto, you mean
[share of SFRs] above $375K [ = 90%]
“And what is the CAR doing quoting who can afford the entry level home?!? Is the number so low for the median home that even they cannot spin it?”
Yep…. They magically decide the entry level house is 85% of medain. So… Median = $600K, entry level = $510K.
AND, as pointed out, the affordability index is % of needed income, not % of people with that income. Incomes are tighly packed around the medain. Need $200K and medain is $50K, that is an affordability index of 25. However, that does not mean that 25% of household make more than $200K!
“the affordability index is % of needed income, not % of people with that income.”
Wrong. See my post above in response to Big V.
My post to Big V never made it, but in a nutshell this is how the metric is derived:
Step 7. The minimum income amount calculated in Step 5 is multiplied by 12 to determine the minimum annual income needed to qualify. This amount is compared to the income distribution of households. The percent of the households with incomes greater than or equal to the minimum income becomes the HOUSING AFFORDABILITY INDEX FOR FIRST-TIME BUYERS (HAI-FTB).
I.e. they look at the income distribution and all households with incomes above the requisite amount are counted and become the percentage of households able to afford a starter home. The index is not a % of needed income, it’s the percentage of households that make at or above the needed income.
So— only the top 24% make incomes big enough for a “starter” home. Which, of course, includes big-name Hollywood actors, dot-com folk who got out at the right time, and people like Steve Jobs.
Gaaaah.
That’s funny. I went to http://www.realtor.org/Research.nsf/files/Formulas_HAI.pdf/FILE/Formulas_HAI.pdf, and got the following definition for HAI:
Housing Affordability Index(Composite)- Measures the degree to which a typical family can
afford the monthly mortgage payments on a typical home.
If you click on the link above, you can get the formula.
OK, wait. I see. You’re talking about a first-time-buyer’s index. I guess the formula for that isn’t on the NAR website (or at least not accessible from their formulas link).
My bad.
Actually, CAR ceased reporting its “affordability” statistic in December, 2005, after it hit an historic low of 14% statewide. Eight months later, they announced a “new-and-improved” Housing Affordability Index, based on the following assumptions:
1. Amortizing ARM rate of 6.48%.
2. 10% downpayment.
3. House price = 85% of median price.
4. A monthly nut (PITI) equal to roughly ~50-60% of the FB’s take-home pay. (They didn’t specifically provide #4, but easy to estimate, based on mortgage & income assumptions released by CAR at the time.)
Lies, Damned Lies, and the C.A.R.
4. A monthly nut (PITI) equal to roughly ~50-60% of the FB’s take-home pay.
Ok, I was wrong in it being Neg-Am. Oops. But 50% or more?!? ugh… Give me the old 29% numbers and we know people can stretch for a little more.
Got… money?
Neil
“It’s not a fun time for anybody,’ he said.”
“I kindly disagree, Sir”
Dude needs to cook some popcorn and kick back…
to quote Jay Leno: Exactly!
Get yours today!
“Neil’s *Natural* Hot Buttered Derivative Popcorn”
No derivatives in my popcorn!
Olive oil, salt, and the corn kernels. Nothing else. This isn’t supposed to be food by Dupont.
Neil
Hmmm. I need an air popper.
Olive oil sounds pretty good, now that you mention it.
Corn kernels, bacon grease, butter and salt. Mmmmm good!!!!
One overstretched FB’s Schade is another prudent renter’s Freude.
Not if the bank kicks you out of the house just after you’ve comfortably settled in and gotten the kids signed up in the local school district.
I live in an area where the bubble pushed up rents as well as house prices. I didn’t like the run up and I’m not liking the run down.
“Another problem is that wages in California have not kept pace with housing prices…”
Well, if strawberry pickers can buy a $650,000 2 bedroom / 2 bath house…I really don’t think that we need to increase wage inflation…IMHO
HWY,
Glad you caught that one too. This has to be the most idiotic statement in the post…..it is probably the most concise example of the mentality which irrationalizes the prices of houses to people.
It is like saying that the wind isnt keeping up with the speed of the sailboat which is why we cant go faster.
The statement implies that if everyone made $1,000,000 per month, then ‘everyone’ could afford a house in Maui, Beverly hills and a French Riveria condo. Housing is not priced like lottery tickets.
When on earth will people realize that the price of a house is NOT an exact supply demand curve. CREDIT is the supply demand enabler. The demand for status of home ownership, beachfront property and Ferraris is insatiable whilst the supply of stupidity is equally voluminous. If someone walks in and says “sign here, and ill give it to you” people take it.
It isnt rocket science. This isnt new information. Kramer isnt an investor he is a PT Barnum entertainer…….who was more honest about his trade (sucker born every minute) than anyone these days.
I like your final paragraph, and want to add that more “sober” investment shows like Nightly Business Report are also for suckers…just older or more high-brow suckers who wouldn’t go for Kramer’s style. Had to watch NBR many years to see what a puff piece it really is.
“‘As I look at the property, I see that my cash flow is negative and the value is static at best. If a tenant were to move, not pay the rent or if I lost my job, I would be in financial trouble almost instantly.’”
Well, that begs the question: what if, “they” didn’t pay the rent AND you lost your job…your financial trouble would then be like: quicker than instantly?
The only thing that could make that anecdote more bubblicious is if the guy works in the REIC, who’s pink slip is imminent.
The only thing that could make that anecdote more bubblicious is if the guy works in the REIC, who’s pink slip is imminent.
And… his trophy wife shops for a new lover the second her credit card is turned off.
Got popcorn?
Neil
California. “State Real Estate Commissioner Jeff Davi did his best to allay concerns about the housing market as he addressed a packed house of Shasta County agents Wednesday in Redding. It may not be the best of times, he said, but it certainly isn’t the worst. ‘Real estate is cyclical.
His real meaning. “We just started the downward slide into the big pile of $HIT. Go and get the hipwaders. It is going to get a lot deeper.”
this made me laugh outloud. thank you for that.
“ but it certainly isn’t the worst. ”
No… but it soon will be.
and the 2% in LA that can afford a home, either all ready have one. Or they are the smart ones that will be waiting for the big price drop.
“Another problem is that wages in California have not kept pace with housing prices, Davi said.”
I guess that means logically that housing prices would have to come down to meet wages, no ?
“Davi emphasized that unless California addresses its acute housing shortage, more and more people will be priced out of the market. The percentage of households that could afford to buy an entry-level in California stood at 24 percent in the second quarter of 2007, according to the California Association of Realtors.”
We have no shortage of overpriced homes oddly enough. Plenty of “for sale” signs abound waiting for a box of cash.
Yeah, that’s right. And if there’s such a shortage of buildings for people to live in, then why is renting so god-damned affordable?
This “not enough housing” logic has been shot down time and time again, but it just keeps getting back up like a Zombie. The only way to kill it is to remove its head.
There can still be a shortage of housing. There is no guarantee that the average person can be productive enough to be able to afford the minimum level of dwelling that local codes allow. We have become so accustomed to such a high standard of living that we are unable to imagine anything different.
If you look, world wide, at the average dwelling structure it will not meet US building codes. And yet, world wide there is still a shortage of housing even given that many folks in 3rd world countries would be happy with an OSB box a sterno stove and a firm mattress. The Kensyians keep forgetting that without production there cannot be consumption, monetary illusions don’t hold water in the long run (sure, in the long run we’re all dead too).
A shortage of housing, in and of it’s self cannot drive house prices up. There has to be a surplus of production as well as a shortage of housing. If you haven’t produced anything you can’t very well contribute to net demand even if you’re experiencing a dire shortage.
“I guess that means logically that housing prices would have to come down to meet wages, no ?” Exactly, but not only prices. Building codes and expectations of what is an acceptable dwelling arrangement may need some adjustment as well. If we’re really going to allow nearly unlimited immigration we need to allow them to live in the manner they can afford. The planet’s resources are not infinite.
“‘I don’t know what to do. I can’t sell the property (even if there is a buyer out there) for what I owe on it (after closing expenses), and I don’t have the money to bring to closing if I lose money. I would love to just walk away. I know that would destroy my credit rating, but I am desperate enough to do that because it is likely to be destroyed as soon as there is any problem (so why continue to spend money just to keep an unsatisfactory status quo?). Is it possible to sign ownership over to the lenders? Would that free me from the problem, or would I still be responsible for whatever shortage results from their sale of the property? I am getting desperate. Any advice or information you can give would be appreciated.’ — D.T., Cedar Hill, Texas.”
Dear D.T.: Unfortunately, you lack a private army of your own, otherwise you could state that your neighbor has WMD’s and then draw attention away from your problem by simply invading him and occupying his property. You probably also lack an aircraft carrier you could land on and proclaim, “Mission Accomplished!, I’m all paid off”.
So my suggestion to you is; buy yourself a .357 Magnum and blow your own balls off.
Dan my man you gave him a way out. Lets say the unik (don’t remember correct spelling) follows your advice and decides to walk away from his property and sues you for bad advice. Since, your propert is paid of he will be a happy camper with a squeaky vioce.
Eunuch, since you ask.
Homeowner under foreclosure trying to do a workout with lender on the phone:
Hello, Mr Moogoo Muck… is that you in Shanghai? Well, I’m behind in my mortgage and I’d like to work something out that’s in both of our best interest. Now, I can make 3/4ths the payment for –
Hey you stupid American! You shut up listen! Here how we work out.
You pay all money to Shanghai Hedge Fund or me shoot you in head!
HAAAAA HAAAAA HAAAAA! You send money quick or me put contract on you! HAAAA HAAAAA HAAAA!
http://www.hahahaamerica.com/
“Another problem is that wages in California have not kept pace with housing prices, Davi said.”
I KNEW IT!!!!!!!!!!!! (realtor grammar)
Right now, I am walking into my bosses’ office to demand a 150% hike in my salary to be able to afford a house!
These people must have left their brains behind with the bubble, ’cause this is kooky talk.
“Another problem is that wages in California have not kept pace with housing prices, Davi said.”
Wages have not kept pace with housing? Excuse me but that was never the problem. How could wages ever keep pace with housing when SOP for lending were thrown out the window and fraud became SOP along with greed. If wages were to keep pace with housing what were retirees on a fixed income supposed to be looking at? Were food and medical supposed to sit on the sideline fixed while housing ate up all the disposable income? This was one giant of a Ponzi scheme that is grabbing everyone by the balls because it involves a ‘non-liquid’ alligator asset that is fixed to a foundation of concrete and maintenance and taxes.
Well, some people may have been grabbed by the tits or something.
“Another problem is that wages in California have not kept pace with housing prices, Davi said.”
Poor guy has dislexia — should be, ““Another problem is that house prices in California have not kept pace with wages, Davi said.”
rob
(didnt mean to discount you other sharp folks, just saw HWY’s first in the scroll down
HWY,
Glad you caught that one too. This has to be the most idiotic statement in the post…..it is probably the most concise example of the mentality which irrationalizes the prices of houses to people.
It is like saying that the wind isnt keeping up with the speed of the sailboat which is why we cant go faster.
The statement implies that if everyone made $1,000,000 per month, then ‘everyone’ could afford a house in Maui, Beverly hills and a French Riveria condo. Housing is not priced like lottery tickets.
When on earth will people realize that the price of a house is NOT an exact supply demand curve. CREDIT is the supply demand enabler. The demand for status of home ownership, beachfront property and Ferraris is insatiable whilst the supply of stupidity is equally voluminous. If someone walks in and says “sign here, and ill give it to you” people take it.
It isnt rocket science. This isnt new information. Kramer isnt an investor he is a PT Barnum entertainer…….who was more honest about his trade (sucker born every minute) than anyone these days.
“Davi emphasized that unless California addresses its acute housing shortage”
Acute housing shortage implies a lack of housing not affordability? Bring the price down and the problem solves itself.
“It’s not a fun time for anybody,’ he said.”
No, your definition of a fun time was screwing them by putting them into a property they couldn’t and then celebrate every week about how smart you were to fleece them.
I think he means the “acute illegals surplus”.
“Another problem is that wages in California have not kept pace with housing prices, Davi said.”
The other day I was reading article in my local newspaper and it said wages in CA have gone up by 2.8% adjusted for inflation since 2001. Does that sound about right to everyone else?
That seems generous, after having pay freezes, pay reductions, no raises, a raise that matched inflation, and finally a 6% raise I’d say I’m making less than I did in 2000.
Don’t forget lot of Engineers in SF Bay Area were downsized the jobs were shipped to India or the company went belly up. Generally, those people took a pay cut to rejoin the work force.
Have any of you any idea the dumb a$$ interview questions asked at the time?
Yes:
Are you a programmer or a developer? Your resume says programmer, but we need a developer.
I left California in 1994. I make 15% more in NC than I would make in California ( I work in healthcare, thanks Kaiser-Permanente for low Calif wages). I know this is true as I peruse the want ads in my field and always check with Healthcare recruiters when I attend medical conferences in California. Given the housing prices in California, combined with the less than stellar wages in my field I am easily 50-60% ahead living in the Southeast. Go figure, in California they pay you in SUNSHINE. Just tell your mortgage lender you will be sending them little snippets of hv ( hv=one photon) instead of dollars each month.:)
ExNorCalNative,
I certainly understand and share your frustration with CA’s absurdly high COLA vs. paltry wages, however, you can’t blame it all on healthcare in general or KP in particular. Virtually every job sector here has seen tremendous wage and middle-class-squeeze. This is really just part of a secular nation-wide trend of middle class “cram-down”, though it’s more obvious and extreme in CA, thanks to RE bubble, not to mention the flood of cheap, abundant labor “diversity” we get here.
In December 2005 I got a 25% raise and in January 2007 I got another 25% raise (they matched another job offer to keep me from leaving). Now I work as a Purchasing Agent for a commercial electrical contractor in Sacramento, so I’m pretty much expecting to get laid off at some point in 2008 if I don’t jump ship in Q1-08. But they were some good times while they lasted.
That’s probably using the “official” government numbers for inflation, employment and wages.
I’d bet the *real* numbers are far more grim. My groceries alone are up something like 60% since 2001, and fuel/energy has doubled.
I’d guess in actual terms wages are more like down 10%.
No, it doesn’t look right. All the government workers get those COLAs of about 4% every year. We just had the ‘min’ wage for flippers raised here in California about 8-10% this year. SS also went up 2.3% this year alone.
Given the absurd salaries given to realtors, mortgage brokers, builders, etc., and the secondary effect on those selling luxury goods to them as well as flippers and people working their HELOCs… coupled with huge stock market gains… basically there has been a ton of money floating around, so if you weren’t participating, that low number means you were bringing the average down and weren’t getting jack.
I live on the South Shore of Boston, MA in the town of Hull. Everything is selling for significantly less than the assessed value. The town here have ratcheted up assessment to kingdom come! My house is assessed for $307k and I understand that If I list it for $275k, I will be lucky to sell it. This is a crazy situation! It could be 10 years before these home will fetch their assessed value. This housing bubble is not only hurting sellers…people who have already paid off their mortgages are getting cruched by infalted assessments! The elderly on fixed incomes are being “taxed” out of their homes that were paid off long ago
infalted?
why won’t assessments come down- it’s the law isn’t it ?
Hull - do they have high speed ferry to boston ?
The Orange County Register. “More homeowners are struggling to hold on to their properties and more are losing that struggle, says the latest national report from the Mortgage Bankers Association.”
Cry me a river… Bwahahahahahaha.
All those homeowners (aka Flipptards, relatwhores, Suzanne!, lettuce pickers, welfare parasites, etc.) have no one but themselves to blame.
Let ‘em burn, and pass the popcorn!
Yo, don’t give the lettuce pickers too much hell. They were actually making the best decision, since they had nothing to lose anyway. Oh well. Good thing I’m not a lettuce picker.
Crisp update:
http://www.eyeoutforyou.com/home/9626682.html
“David Crisp’s mother, Tu Crisp”
Does he have an aunt “Notso”?
He’s got a retarded brother named Burnt to a
his wife, Jennifer Crisp, had a defaulted property auctioned off
How much would Jennifer be auctioned off for? Any estimates on her worth? How about Criminal Crisp and Con Cole?
Bush Mortgage Bailout Might Just Work
http://articles.moneycentral.msn.com/Investing/SuperModels/BushMortgageBailoutJustMightWork.aspx
Its time to punish irresponsible borrowers and lenders and reward hard working savers. Boo this man.
everyone here seems to say pretty much the same thing… now what are we gonna do to make it clear to the politicians that any bailout will result in the appropriate punishment?
(I think that such politicians should be drawn and quartered, it is that simple)
we do need a unified front that makes it clear - I e-mailed Boxer, Feinstien, Clinton, and Chucklehead (he who shall not be named)
It would be better if someone would post
1) a concise statement that we could all copy and paste into e-mail messages
2) links to make the e-mail easy for all (I can do this if someone will draft #1)
I have a friend who has made numerous negative comments to me about renting as I am. Because you know you can never have anything if you don’t have a house growing money for you.
Just heard from her and she was embarrased to admit that she was almost going to walk away from her house in Victorvulle (yuck)when her mortgage adjusted because she couldn’t afford it. The lender contacted her after her being 3 months late and told her they want her to stay and will reduce the interest to 5 something for 3 years and add the arrears to the back of the loan.I told her to make sure she reads any paper work real well they send her.
As for me this loser renter has a nice down payment sitting waiting for the prices to bottom which I have no doubt will happen. Wonder if my friend will have a house then or be a bitter renter.
This is for Palmetto, and his hatred of globalization. Luxury is now American-made, vs. the cheap, imported crap from China, per the NY Times…
“Made in the U.S.A.” used to be a label flaunted primarily by consumers in the Rust Belt and rural regions. Increasingly, it is a status symbol for cosmopolitan bobos, and it is being exploited by the marketers who cater to them.
For many the label represents a heightened concern for workplace and environmental issues, consumer safety and premium quality. “It involves people wanting to have guilt-free affluence,” Alex Steffen, who is the executive editor of http://www.worldchanging.com, a Web site devoted to sustainability issues, said in an e-mail message. “So you have not only the local food craze but things like American apparel, or Canadian diamonds instead of African ‘blood diamonds,’ or local-crafted toys.”
With so many mass-market goods made off-shore, American-made products, which are often more expensive, have come to connote luxury.”
http://www.nytimes.com/2007/09/06/fashion/06made.html
Thank you so much for sharing this information Spike.
You guys and gals are the best.
Leigh