The Problem Is There Are No Buyers In California
The Press Enterprise reports from California. “To cut the glut of homes on the market, the chief economist for the California Association of Realtors on Thursday urged real estate agents to refuse listings from clients who don’t need to sell or won’t lower their price to reflect declining values. ‘The best thing you as a real estate professional can do in this market is to encourage sellers who are not serious about selling their homes not to list. Don’t take a listing from someone on a hope,’ Leslie Appleton-Young told a group of Inland mortgage brokers and agents.”
“Median home prices have not fallen as sharply as sales, she said, because homeowners are reluctant to cut prices and because sales are shifting toward the higher end of the market, which is less affected by the availability of low-cost loans.”
“Appleton-Young’s suggestion that the huge inventory of unsold homes could be significantly reduced by eliminating speculative and unrealistic sellers was received with some skepticism by Beverly Bayer, an appraiser from Moreno Valley.”
“‘The problem is there are no buyers,’ said Bayer, who attended the meeting.”
“Bayer said in Moreno Valley, 59 homes in the multiple listings sold last month, while there are 2,200 homes on the market.”
The Sacramento Business Journal. “Almost 8,000 bank-owned homes were for sale in the four-county area at the end of August, according to RealtyTrac, and that number could easily double by the end of the year.”
“‘The investors and the asset managers have not faced reality, and they think they are going to get a lot more for these homes than anyone is willing or able to pay now,’ said Ron Leis, broker in Carmichael. ‘They are going to have to take huge, huge losses. There is some pain that has to be felt.’”
“‘Banks don’t want to be in the business of managing property. If you can’t sell it in a short time, then presumably its value is set too high,’ said Anker Christensen, chief financial officer with River City Bank. ‘If no one is buying it, you have to reduce the price. If you don’t reduce the price, what are you doing?’”
“Some of the lenders are so far removed, they don’t know what they own, Leis said. ‘I’ve gotten to the point where I send lenders the crime reports for the neighborhood their house is in along with my brokers’ pricing opinion because they are just not going to get what they are asking,’ he said.”
The Sacramento Bee. “Sacramento-area home builders have long maintained that many of the region’s foreclosures are hitting investors who bet big and lost. The Mortgage Bankers Association now has some numbers.”
“The MBA says 21 percent of prime loans that are in default in California belong to people who bought homes without living in them. And 15 percent of subprime loans now in default belong to the speculators.”
“Since they started as a whisper last November, home auctions in the Sacramento region have become a roar. The biggest one yet, 306 houses lost by owners to the bank, is scheduled at Cal Expo at the end of this month.”
“This time, it will take the weekend to sell them all. It’s proof of how extensive the foreclosure problem has become in this part of the state. The majority, 227 houses, are in Sacramento County, according to REDC.”
“The firm, doing its third auction in Sacramento this year, will sell 48 San Joaquin Valley homes in Modesto on Oct. 1 and 160 Bay Area homes Oct. 6 in San Mateo.”
“Incidentally, the firm is expanding to do more home foreclosure auctions across the United States. It’s one real estate sector where business is very good.”
The Ventura County Star. “After 22 months of sagging demand for housing, August and September could be brutal as the real estate market hits rock bottom, an economist projected Thursday.”
“‘We’re in the bottom of the third inning, maybe the top of the fourth,’ said Mark Schniepp, director of California Economic Forecast in Goleta.”
“Schniepp was cautiously optimistic about where the real estate market is heading in Ventura County. But he was clear that the county is in the middle of a ‘terrible residential recession.’”
“The housing market will remain in the doldrums for some time, Schniepp said, adding that prices could continue to fall by 5 percent to 10 percent over the next 12 to 14 months.”
“The subprime crisis has been overblown and accounts for only a small percentage of mortgage loans, said William D. Dallas, chairman of Dallas Capital Management. But it’s hit the nation hard and has plunged the country into what some, including Dallas and Schniepp, believe is a real estate recession.”
“Dallas added that much of the bad news surrounding the real estate industry has been blown up by the media, such as the number of foreclosures. In the second quarter, foreclosures spiked in Ventura County to 303 from 43 over the same period a year ago.”
“The speakers’ optimism was a welcome surprise to the packed crowd. Larry Works, a commercial loan officer in Ventura, appreciated that the speakers didn’t offer a ‘doom and gloom scenario.’”
“‘Basically, the thought was, be cautious, be ready to adapt,’ he said. ‘Overall, I think everything’s going to tighten. You’re going to see some great bargains (in housing), so the people who have liquid assets are going to be the Rockefellers of the 2010s.’”
The Santa Cruz Sentinel. “When sales are down, you have to get creative. That’s what Santa Cruz agent Dan Doerksen is doing.”
“Doerksen has organized a four-hour bus tour Saturday to show homes selling for less than $600,000. The tour, which departs from Aptos at noon, will include homes and condos in Aptos, Capitola, Soquel and Santa Cruz. So far, 15 of the 30 spaces have been taken.”
“He figured a chauffeured tour on an air-conditioned charter bus, with information on the properties, prizes and refreshments, would mean less stress. ‘So, which sounds better: do it yourself or allow us to serve you?’ he asked.”
“Countywide, home sales have been lagging, with 143 homes sold in July, an 11-year low for that month. When sales are down, the buyer has an advantage.”
“‘Due to the subprime market fallout, many people are nervous about buying, which has caused sellers to offer incentives to sell their homes,’ Doerksen said. ‘We feel that right now is one of those rare moments in Santa Cruz County where prices have leveled off.’”
“Given that median prices have risen steadily from $240,000 in 1996 to $744,000 in 2006, he sees the current market as ‘the perfect time to buy.’ Loans are available if you have good credit, a good down payment and you can document your income, he added.”
“Doerksen isn’t the only agent getting creative. Last month, Realtors Cassie Maas in Los Gatos put together a driving tour of homes for sale in the Santa Cruz Mountains, creating a map and offering a barbecue.”
“She had two homes for sale, and people visited the one with the barbecue, even though it was in a rather remote area. Five groups of buyers came, as many as had toured the home in the past year.”
The Mercury News. “The number of homes for sale rose more steeply last month in Santa Clara County than in any other of 13 counties included in a monthly report from a local realty brokerage.”
“The inventory of for-sale homes rose 9 percent in the county from July 31 to Aug. 31, to 6,412 houses and condos, according to a monthly report prepared by Redwood City-based Movoto. The second-highest increase was 5.3 percent in San Diego County, followed by a 4.1 percent uptick in San Francisco.”
“In Santa Clara County, inventory is rising in part because more buyers are hesitating, said Warren Winsness, president of the Santa Clara County Association of Realtors. ‘A lot of buyers are sitting on the fence,’ he said. ‘They’re concerned they can’t get loans because of what they hear in the media. As a result, the number of sales is really down.’”
“Movoto founder and broker Henry Shao said listings in San Jose are driving the county’s overall inventory trajectory. Listings in San Jose are about double their level from three years ago, he said.”
“Movoto’s report also features an estimate of what percentage of homes for sale in each county are ‘distressed,’ as measured by whether terms such as ‘bank owned,’ ’short sale’ or ‘in foreclosure’ are included in the comments entered by listing agents in the MLS.”
“In Santa Clara County, those properties made up 11 percent of listings, up from 9 percent at the end of July. San Mateo and Santa Cruz counties had rates of about 10 percent, also up from 9 percent. Contra Costa and San Benito counties had the worst incidence of distressed properties, with 22.1 percent and 20.3 percent falling into the category, respectively.”
Hopefully the server problems are over, but if you have a problem posting, please check back.
BTW, the Sac Biz Journal article is worth a read in entirety.
Ben, even Osama seems to know about the bubble. You think he’s reading your blog:
He also speaks to recent issues grabbing headlines in the United States, referring to “the reeling of many of you under the burden of interest-related debts, insane taxes and real estate mortgages;
Yes he seems to speak more honestly than Alan Greenspan ever did. Not sure who the real “public enemy number 1″ really is anymore.
.. Yah, OBL cares deep in his heart about the plights of J6P westerners. He’s playing to his fan base.
Excessive debt has always been enemy # 1
Hello Christian America
In Islam charging interest is a sin, you can loan momey, but not charge interest.
Didn’t Jesus Christ “throw the money lenders out of the Temple”?
Actually, Jesus threw the “money changers” out of the temple - individuals that would convert foreign money (not acceptable) into Hebrew half shekels. These “money changers” would charge outrageous fees, much like today’s mortgage brokers.
ALL RIGHT - Which one of you is OBL??
JIHAD … er … I mean “Gee, I had a mortgage, but now I am foreclosed.”
LOL!
I’d read a while back that people had trouble distinguishing Obama from Osama. Now it’s going to be really hard for them.
Yes Osama & Obama both have black hair
How much money did al-Qaeda cells make through mortgage fraud? This housing bubble was probably a great fundraising mechanism for them.
All of Wall Street gangs participated in it, surely all of the Mafia gangs and other street gangs, as well as Osama gang
were in on it too. Easy 100K cash back per transaction, each house
probably seen at least 3, 4 churns .. The amount of frauds must
be staggering.
A complaining realtor:
“I think it would help if we could get some of the properties fixed. If the carpet is shot, no one wants to buy it,” Leis said. “It would help sales to shine ‘em up, polish them and paint them. Maybe keep watering the lawn and mow it once a week just so it shows well.”
I have to wonder, if the realtor is so desperately craving a sale, why doesn’t he or she do these repairs and chores, rather than hoping against hope that a bank will take care of them? God forbid that a realtor should have to actually WORK to earn a commission!
Countrywide to cut 12,000 jobs, according to WSJ.
You beat me to this headline.
Curious if i should take up their offer and lock up money in a 12 month CD with them for 5.45% (ha ha ha)
This must be breaking news - it doesn’t even show up in Google News yet. If so, it’s about time! I was wondering how a company that is so obviously poised to go out of business could be trickling along cutting 500 jobs here, 900 there, and still employing close to 60,000. But 12,000, that’s a good start!
What a difference a day makes. Here is yesterday’s WSJ byline: ” Countrywide Cuts 900 More Jobs 09/06/07′
Countrywide Plans to Cut
As Many as 12,000 Jobs
By JAMES R. HAGERTY
September 7, 2007 5:36 p.m.
Countrywide Financial Corp. announced plans to reduce its work force over the next three months by 10,000 to 12,000 jobs, representing as much as 20% of the current total.
The largest U.S. home-mortgage lender also expects that its loan originations in 2008 will be about 25% lower than this year.
http://online.wsj.com/article/SB118919813950820850.html?mod=yahoo_hs&ru=yahoo
According to Hagerty:
The company is retrenching to focus on relatively conservative loans that it can hold as long-term investments in its savings bank unit or sell to government-backed investors Fannie Mae or Freddie Mac. The company also will aim to make loans that can be insured by the Federal Housing Administration.
Does FHA have the capacity to absorb all the loans Countrywide et al promise to deliver?
“Does FHA have the capacity to absorb all the loans Countrywide et al promise to deliver?”
Answer: probably not. FNMA actually bought prime mortgage pools, combined them into REMICs and sold them on the bond market. Albeit prime, conforming mortgages should yield better bonds than non-conforming (especially because of downpayment requirements), but FNMA might still have trouble selling ANY mortgage-backed bonds for a reasonable amount. If they can’t sell the bonds, they won’t buy the mortgage pools. That is why Countrywide is facing the possibility of holding the mortgages itself (instead of creating its own mortgage backed bonds or else passing them to FNMA).
Does FHA have the capacity to absorb all the loans Countrywide et al promise to deliver?
Do America’s borrowers have the capacity to qualify for all the loans that Countrywide et al promise to deliver?
I live in Ventura county looks like we are going to experience some layoffs,being that Countrywide is the second largest employer in the county.
Add that to the layoffs announced by Amgen a little north of you and I think that region is in trouble.
I agree. The ABC affiliate in Santa Barbara on their website reported that the city of Oxnard has taken out the most subprime loans in the state of California.
Make it 12,001. Fire Mozillo’s ass.
He doesn’t care as he cashed several hundred millions in stock sales.
That’s probably the only part of him that hasn’t been burned already.
Here is a fresh indication there may soon be still fewer buyers in California…
September 7, 2007 5:24 P.M.ET
BULLETIN
COUNTRYWIDE FINANCIAL PLANS TO CUT 12,000 JOBS: WSJ
Not working for the weekend
Major indexes close deep in red due to economic worries in wake of weak data on jobs
For the week, Dow is 1.8% lower; S&P, Nasdaq slip more than 1%.
http://www.marketwatch.com/?avatar=seen&dist=ctmw
As I drove by Countrywide’s office in Elk Grove, Ca. a few days ago, I applied some no sun needed instant tan on my arm, in appreciation of all the a.r.m.’s Angelo made possible…
This story (12000 countrywide layoffs) was reported Wednesday evening on some emplyee blogs and here. But all the MSM parrotted the 900 layoffs directly from the company’s press release. Two days later (after the markets have closed for the week), now they report the full layoffs.
Why does all the MSM copy each other’s articles almost word for word from the company’s press release. Why didnt any of the news providers (WSJ, AP, Yahoo Finance, Market Watch) dig a little deeper. If any of the reporters were paying attention they could have mentioned that there were rumors that the true layoff plans were 13x larger than the company’s press release.
I thought this was funny as well. I read I think on the Finance portion of yahoo about rumors of the job cuts. That post was more specific that it would be roughly 1000 jobs per week getting cut until it hit something like 20,000 jobs cut. So I was not surprised at all to hear 12,000 jobs being cut announced after hours today. Some of the stuff in the finance message boards on yahoo about different companies turn out to be true about 3-4 days later after they get posted.
“To cut the glut of homes on the market, the chief economist for the California Association of Realtors on Thursday urged real estate agents to refuse listings from clients who don’t need to sell or won’t lower their price to reflect declining values”
=> This will be the rise of the 100% based internet based peer to peer sales. Maybe it will be online auctions, but the end result will be the elimination of the realtor.
After all if someone wants to sell they will!
More fodder for the government to hit the RE industry with a class action suit. Who defines ‘need to sell’? Sounds to me that a lot in the business need no more competition until they unload; they’re probably the ones holding the higher price neighborhood listings. I didn’t think they could sink any lower but they sure have.
CAR acts like OPEC
And zillow will be the appraiser of choice for seller
Zillow is way out of date; In some places, new developments have gone up, houses on these have been foreclosed, and zillow still shows an empty lot! The older and smaller houses around one of this new developments are listed $100K over the price of the new and bigger homes!
“This will be the rise of the 100% based internet based peer to peer sales. Maybe it will be online auctions, but the end result will be the elimination of the realtor.”
That was my thought exactly. I truly hope that these dumbasteches try to boycott their customers. That would be the funniest thing in the world. The type of thing you usually only read about in Douglas Adams novels. Too bad he’s not alive today. Wow.
“Given that median prices have risen steadily from $240,000 in 1996 to $744,000 in 2006, he sees the current market as ‘the perfect time to buy.’ Loans are available if you have good credit, a good down payment and you can document your income, he added.”
$240 to $744 in ten years, and you now need about $150 down? California is so toasted. That median needs to drop by at least 50%, to $350 or so.
I don’t know if my post made it here, but it said that he can’t be serious about a good time to buy, from 240 to 744. That’s insane.
And the person with good credit, AND a good down payment, AND can document income, is…..where??
Exactly! Those few people are on this blog, that’s where.
My guess is that 99% of the population with good credit, a good down payment and good income (that can be documented) are much too intelligent to buy at current price levels.
Wrong. The psychology still hasn’t shifted.
Very true. I still see houses with sold signs on the realtors sign right in my very own neighborhood. granted out of the 25 signs 2 may have sold signs on them but who the flux would be stupid enough to purchase right now with all that we know. I couldn’t imagine paying a new mortgage only to see my equity going, well , what equity? I can only imagine a Realtor making a sale today. I’ll bet a change of underwear is standard equipment.
A lot of sales are falling out of escrow because the buyers cannot get the financing they anticipated. Watch for some of these “sold” properties to magically re-appear as “re-listed”.
Bigfoot or the Sasqwash…
A 310% price increase, por que?
Ok let me whip out my short & sweet demographic estimates
General Total Population
1997 - 2000 -2005
238,862 - 255,602 - 240,367 (1998 pop increased to 243,200 which was the start of the big increase)
Median Household Income
2000 - 2003 - 2005
53,998 - 62,053 - 58,640 (yes that is a decline, not a typo)
Median home price, Specified owner occupied
2000 -2003 - 2005
377,500 - 575,097 - 694,100
Gross rents, median
2000 - 2002 - 2005
924 - 1,167 - 1,202 (rents did dip in 2003 & 2004 to 1,112 and 1,127)
OK how many people can see the bigger issue here with buying now?
My realtor friends still don’t get it, they tell me the market is horrible here in Rhode Island, but they can’t figure out its the cost of the home? I mean, so many of them think its a liquidity problem……well now that the free money days are over, its soon to become obvious that its an affordability problem……….40% haircut coming here. House down the street started at 400k on June 1st….now listed at 315k…..had an open house this weekend - no shows!
The good news is that if you have a perfect score, nice income, and a fat downpayment, you can still buy. The bad news is that you don’t have any of those things.
LMAO!
test - i hate dissapearing posts
Dude, not only would you have to document your income, but you would have to document that your income is approximately $250,000/year.
Sure, no problem. I make that much just advertising for the 50-year mortgage on Ben’s Blog. whatever
“Given that median prices have risen steadily from $240,000 in 1996 to $744,000 in 2006, he sees the current market as ‘the perfect time to buy.’ Loans are available if you have good credit, a good down payment and you can document your income, he added.”
******
Oh, yes. What a “perfect time” to buy.
Since one can be pretty sure that the place also went for $744K sometime within 2005, I’ll do the math:
(744/240)^(1/9)-1 = 14% annual gain
For nine years! And I wonder how that compares to income growth over that time.
“Thanks Alan Greenspan and the ‘Do Nothing’ Fed!”
Can someone simultaneously whack this guy with the 20 lb trout while introducing him to the joshua tree?
Just to make sure, “this guy” is Doerkson not sf …
I think “Doerkson” means “Son of Dork” in danish
And dork means unit of large marine mammal.
Thanks guys and gals, I wondered why my Dad laughed when I told what my nick name was at my fraternity at the University.
OK, this is the second joshua tree reference that I’ve seen. What gives? Fill me in.
Fill Him In !!!!!!!
Imagine a really large corncob…
A joshua tree is a cactus that grows in Nevada, Arizona, and southeast California. Members of the REIC are encouraged by this blog to “Go hug a joshua tree”. Some HBBers, such as palmetto (I think), have crafted voodoo dolls of the most annoying Realsters and have hung said dolls from the splines of joshua trees.
http://en.wikipedia.org/wiki/Joshua_tree
Cactus-like tree. Sorry.
I believe that Auger-in pioneered the Joshua-tree-as-suppository treatment for irrational exuberance.
Nope, I believe that was ex-nvmtgbkr(sp?)
Just hearing the name Alan Greenspan makes me want to throwup.
Since my previous stat post didn’t go through
A 310% price increase in 10 yrs, whiskey tango foxtrot?
Ok let me whip out my short & sweet demographic estimates
General Total Population
1997 - 2000 -2005
238,862 - 255,602 - 240,367 (1998 pop increased to 243,200 which was the start of the big increase)
Median Household Income
2000 - 2003 - 2005
53,998 - 62,053 - 58,640 (yes that is a decline, not a typo)
Median home price, Specified owner occupied
2000 -2003 - 2005
377,500 - 575,097 - 694,100
Gross rents, median
2000 - 2002 - 2005
924 - 1,167 - 1,202 (rents did dip in 2003 & 2004 to 1,112 and 1,127)
OK how many people can see the bigger issue here with buying now?
If you’re so ticked off about no income growth, change your position from prep cook to hamburger flipper. Get another job, dummy.
“The number of homes for sale rose more steeply last month in Santa Clara County than in any other of 13 counties included in a monthly report from a local realty brokerage.”
*******
Well, well, well… perhaps some catching up to do?
All the FB’s crying about their ARM resets have a new friend…and a solution:
“He also speaks to recent issues grabbing headlines in the United States, referring to “the reeling of many of you under the burden of interest-related debts, insane taxes and real estate mortgages; global warming and its woes…” ”
“To conclude,” bin Laden says, “I invite you to embrace Islam.” He goes on to say: “There are no taxes in Islam, but rather there is a limited Zakaat [alms] totaling 2.5 percent.”
Your killin’ me!! Bin Laden is commenting on the RE market!
This is where sub prime meets sub human.
Don’t you guys feel like your watching a movie and you’re thinkin’
“I think I’ve seen this before”
Neal, we need popcorn. Don’t put any of that cancer causing, flesh eating virus, butter stuff on it. (Do we get popcorn from China?)
Soak it in Vodka. Sweeet!!!
And charging interest isn’t techinically allowed in Islam either.
But their bankers do an end-run around that with purchase-lease arrangements that act the same way as loans.
Actually, something that Americans are never told is that one of Muslims’ main beefs with the West is our debt-based monetary system. And I have to say, from what I can tell, the Muslims are right: our monetary system is immoral and dishonest.
A person or bank should not be allowed to charge interest on money that is created out of thin air.
Actually the bible says not to charge interest either. Luke 6:35
But then there is a story Jesus tells in Matt chap 25 about three slaves whose master was going away and gave each the same amount of money to invest while he was gone. Two increased the master’s money like 5 or 10 fold and one hide the money and when the master returned the guy who hid the money and didn’t invest it and make it grow was called “evil”.
In fact the master was pissed because in vs. 27 he says “why didn’t you at least out the money in the bank so I could get interest?”
So I guess Christians can do what they want.
I’m going the Church that thinks interest and investing is a good thing and has an open bar on Sunday.
As soon as I can find one……
As a good friend of mine likes to say, “Jesus saves. Moses invests.”
It like what Golda Meir said “That Moses, what a putz! He led us around in the desert for 40 years and settled in the only place that didn’t have oil!!
Or the one:
Jesus saves, but Gretsky takes the rebound and scores.
Originally “Jesus saves and Espo scores in the rebound”
what happened to George Nelson?
cant even get a good Coen Bros reference hear anymore.
Let’s see if this gets through:
Jooz are allowed to lend money at interest.
What are Jooz?
Not cool, this is a housing bubble blog…
Exactly my point.
The bible says to lend to those who are in need and do not sell food to the poor for a profit. It is against charging intrest when you lend to other israelies but has no problem charing intrest for foreigners. The bible also makes it pretty clear that you should not borrow money unless you are in need. It also makes it clear that debt is slavery and you cannot serve both God and Money.
The bible is also strongly against debt-as-money because of the dishonest nature of fiat money. The lord likes fair scales (to weigh gold/silver) and fiat money is nothing more than dishonest scales.
Dan;
Jesus made two contradictory statements.
Actually, who cares what the Bible says. This a Housing Blog.
He’s just a bitter renter.
lmfao!!!!!!
whats the monthly nut on a cave in a mountains of afganistan
Bin Laden has real granite counter tops….and a granite couch, a granite bed, a granite dining room set…..
This is rich:
To conclude,” bin Laden says, “I invite you to embrace Islam.” He goes on to say: “There are no taxes in Islam, but rather there is a limited Zakaat [alms] totaling 2.5 percent.”
If you get that one by the IRS, I’ll wear a burka
Embrace Islam? Yeah, tell that to the Sudanese in Darfur who are being embraced by Islam in the form of genocidal Arabs. I’d sooner be an FB.
I hear in Darfur you can get a 3/2 hut made out of cow dung with a goat skin front door for 0 down and a starter rate of 1.5%!! 2% if it’s with in walking distance of a well.
Seriously, it’s tragic that no one seems to care about that situation. More murder in the name of Religion.
It’s happend throughout human history. And Islam isn’t the only religion with blood on it’s hands.
I hear in Darfur you can get a 3/2 hut made out of cow dung with a goat skin front door for 0 down and a starter rate of 1.5%!! 2% if it’s with in walking distance of a well.
Seriously, it’s tragic that no one seems to care about that situation. More murder in the name of Religion.
“Bono” was at a concert in Ireland, he told the crowd to be quiet and he started slowly clapping his hands then said that each time he clapped a child in Darfur died. From the crowd an Irishman yelled “Then stop clapping you A-hole”. Some people do care.
Maybe if everytime Bono clapped his hands, he sent a plain load of food over their, you might convince someone he really cares.
In Islam Insane taxes - are paid by non martyrs. After all martyrs needn’t file a tax return.
Actually, there is a school of thought that has been thinking this was part of the terrorist attack. In fact, this was the second wave.
They flew planes into the center of the banking system.
How hard would it have been, before the attack, to ask…
“What would the Americans do after that?”
Some in this country believe this. I ain’t saying I believe it.
But I do think it deserves to be seriously debated.
Sounds like a bit of a hedgeache, may I suggest a couple of aspirin?
“‘The problem is there are no buyers,’ said Bayer, who attended the meeting.”
Oh, there are buyers, just not at the prices the sellers want to get.
Data point from the Palm Springs area. Know a small developer who has done quite well the past few years. Has about 10 homes for sale currently, and none are selling. Only offers are extreme lowballs (>50% off, and give me a car, too, etc). These are not high end homes, probably list for 300-400K, which is nice but modest for the area. So, it seems the average joe in CA is now well and truly aware of the distress in RE market. I think those 50% off offers are actually pretty close to fair-market value.
Good. One of the predictions on this blog is that most of the folks who were lucky enough to make $$ off of real estate sales were also stupid enough to use that $$ to buy even more real estate. Once the leverage is all chewed up, these folks will probably lose more than they ever made.
“‘Banks don’t want to be in the business of managing property. If you can’t sell it in a short time, then presumably its value is set too high,’ said Anker Christensen, chief financial officer with River City Bank. ‘If no one is buying it, you have to reduce the price. If you don’t reduce the price, what are you doing?’”
Looks like the banks are turning on each other in the press. Who wants to bet Anker was invited to a few too many cocktail parties during the boom where his banker buddies from less conservative lenders made fun of him not jumping on the bandwagon? Payback’s a bi-yauch.
So, it seems Ms. Mrs. or Mr. Anker Christensen understands supply and demand. That name is sexually neutral, although I don’t think I could get it on with a girl named Anker. Must be a guy. My ex wife was an anchor, but that’s a whole nother blog.
So what you’re saying is that if they’re not selling, they must be priced to high, you smart little chief financial officer you!!
Ya’ think, Moron!!
There are still some buyers and real investors hanging back. When you hit the right price, they will buy.
If you reduced the price of all the surplus and vacant houses to $100, I’d probably buy 1,000, at least….after some market, tax and insurance research. There may be a point where other factors make a $100 house a bad deal. Thats already happened in many inner city locations, so it’s not outside the realm of possibility.
But in general, at some price point well below what Anker today can not even imagine, they will sell.
Its like the guy who asked the hot chick if she would sleep with him for a million dollars. “Sure!” she replied.
“Would you sleep with me for $5″ he asked
Now she was insulted. ” What kind of a girl do you think I am?”
“I thought we had already established that. Now we’re negotiating price”
Hey, Anker, I’ll give you $100 for that 4/3 with a pool and the much sought after granite counter tops. You know the one
that you have a $400,000 note on. Call me.
“‘Banks don’t want to be in the business of managing property. If you can’t sell it in a short time, then presumably its value is set too high,’ said Anker Christensen, chief financial officer with River City Bank. ‘If no one is buying it, you have to reduce the price. If you don’t reduce the price, what are you doing?’”
I’ll speak for the delusional banks.
“What I’m doing, is engaging in a game of denial. You see, if I sell the house at market price, I lose a bunch of money, and also have to face the fact that my entire portfolio of REO’s is not worth nearly as much as I had hoped. I don’t like this at all, so I’m riding the market down to really screw myself good. Thanks for asking.”
“Given that median prices have risen steadily from $240,000 in 1996 to $744,000 in 2006, he sees the current market as ‘the perfect time to buy.’
He can’t be serious.
“Loans are available if you have good credit, a good down payment and you can document your income, he added.”
Lots of those out there, I’m sure.
Especially ones that haven’t already bought.
Agent Doerksen (where do these names come from?) would be better served getting one of those “short” yellow school buses for the dolts he’ll have riding on it.
LOL…as my mom always used to say…”that, but for the grace of God, could be you…”
This reminds me way too much of Ben’s post from quite awhile back on the knife-catching Baltimore investment buyers’ bus trip.
Make sure that when you get the keys from School bus Nagin that they work. Stay away from canals and water.
I told you guys, “Doerksen” means “Son of Dork” in Danish.
Pay attention!!
I drove through the northern Inland Empire (Sacramento & environs) a couple of days ago, and I can’t really decide which Inland Empire is uglier…
The up north flavor has exotic pesticide smells, heat and dust, the down south flavor has heat, smog and desperation.
Call it a tossup…
You left out the fact that there is a ‘decidely’ Latino flavooor.
At least the intolerant toolbags live closer to the beach. So they have that going for them.
“To cut the glut of homes on the market, the chief economist for the California Association of Realtors on Thursday urged real estate agents to refuse listings.”
Ah yes, the ol’ “eliminate the competition” trick.
In fairness, it’s probably their best approach in getting people to lower the price.
Refuse listing until all of us realtors have sold our flips. THEN start accepting listings again.
**BINGO**!!! And Premature Curmudgeon wins the prize!
Hmm..
Sounds a little like collusion and restriction of trade..(maybe)..
Pen;
In Florida its illegal for Realtors to conspire to manipulate the market. For example all realtors agreeing to charge the same commission, agree to fix prices in a certain area etc. Even if just two agreed to do it, it still wrong.
I agree Realtors should tell dumb ass Sellers who are atill living in 2005 that they should take a fast train to reality but trying to get the whole group to act collectivily ain’t right. Besides most realtors have no clue anyway, so they are in no position to advise anyone.
By the way, wasn’t NAR of which CAR is the state organization until very recently putting a positive spin on all this.
How many times in the last two years did Lereah say we had hit bottom? Inevitably the bottom hit Lereah, but alas we are cursed with the Spawn of Lereah, Yun the sorcerer of numbers.
“To cut the glut of homes on the market, the chief economist for the California Association of Realtors on Thursday urged real estate agents to refuse listings from clients who don’t need to sell or won’t lower their price to reflect declining values. ‘The best thing you as a real estate professional can do in this market is to encourage sellers who are not serious about selling their homes not to list. Don’t take a listing from someone on a hope,’ Leslie Appleton-Young told a group of Inland mortgage brokers and agents.”
*******
And these people claim they are professionals?
That they represent anyone’s interests but their own?
As well, it seems to me that the CAR’s media ads in California are mostly about “a hope” - one that they can convince some fools to become buyers.
[And OT - David Lereah, like Alan Greenspan, picked a good time to move on to other things.]
“ That they represent anyone’s interests but their own? ”
No. Never forget that.
Now this will keep down the inventory 4Q2007. However as these become REO’s, expect Realtors ™ to tell the banks to cut the price. (Please, give me a commission!) This could drive down prices another 5% to 10% in 2007. I’m not expecting more just because too many people are only at fear. Desperation might actually start in October (darn… I blogged last month it would move to November… Cest la vie.) But expect to hear a lot of noise about how the market will get stronger post the superbowl.
It won’t. But the NAR/CAR exists for one purpose only: drive sales.
Got popcorn?
Neil
Agreed. It sounds like another half-baked plan to cover up the problem. The next thing you will hear is that they have asked sellers to queue up and take turns offering their home on the market. That way there is only one house on the market and the price can remain artificially high.
I seem to recall reading a book offering advice to agents. According to this tome, agents should be hustling their tails off to get listings, listings, and more listings. Then, if there was a bit of extra time, they were encouraged to “play with buyers.” (Yes, that was the wording that the book used.)
There is definitely some wisdom in turning down delusional sellers who refuse to “lower their price to reflect declining values”, but refusing to accept listings from people who (in the Realtor’s omniscient opinion) don’t “need” to sell smacks of cartelesque collusion and blatant market supply manipulation. Methinks this sage advice has more than a *little* to do with underwater Realtor-investors trying to dump their own personal inventory without competition than anything else.
Why should a broker waste their time and money on a listing that won’t sell? That’s NOT illegal. Lower the price Dumbo.
I agree with you, but they need to act independantly. They can’t all conspire in an attempt to manipulate the market.
I don’t list homes but if I did and the Seller insisted that I list it at an un sellable price, I’d give him the number of a Realtor I didn’t like.
When it comes to unrealistic sellers that won’t lower their price, agreed. But carefully re-read the first part of that statement:
“urged real estate agents to refuse listings from clients who don’t need to sell“
Since when is it up to the RE agent to decide who does or doesn’t “need” to sell? And who granted them a legal monopoly to collude against sellers they arbitrarily deem “unworthy” of listing. Sounds like a certain industry cartel is badly in need of some Trust-Busting regulation.
Hmmmm, how do I put this without getting slammed. Ok here goes… If you are sitting at the kitchen table with the seller and he tells you I just want to put it out there to see what I can get for it. That may clue you in a little bit.
What if, hypothetically, I want to sell so I can buy a property somewhere else? I don’t need to, but I’d like to, so do I qualify as a prospective client?? The realtors just need to refuse listings based on stupid prices. Anything will sell at the right price.
“urged real estate agents to refuse listings from clients who don’t need to sell“
Since when is it up to the RE agent to decide who does or doesn’t “need” to sell?
My sentiments exactly.
Basically what she is saying is “It’s bad for us Realtors if there are a lot of houses on the market so refuse as many lisitngs as you can, any way you can”
I agree, who cares why. It’s all about “How Much”
“‘The problem is there are no buyers,’ said Bayer, who attended the meeting.”
Um, no, you turgid dolt. There are a ton of us here. We’re all on the sidelines waiting for prices to fall 20%.
Make that 40%… (inflation adjusted)
Speak for yourself. I’m waiting for 33% or more!
at least 50 to 60 percent more to go, given that the economy will be so much toast for the foreseeable future.
You really don’t want to see home values drop 50-60%.
Oh yes I do….
Ok, how about 48-49%. I’m flexible.
There was an estate in Greenwich, CT that sold for over a million in the 1920s which went for $75,000 in 1933.
Ha! Got you all beat. I’m waiting for 60% !!
Trishyla
The relentless falling of prices will scare away as many as were attracted as it was going up…
A bottom seems far, far away
When the yurt and cave bubble gets going we could see traditional home values drop 90%
How about 10 cents on the dollar, as in the 1930s.
The insane amount of debt, the leverage, the failure to save and to top it off the willingness to belive nonsense and the stuff from the backend of a cow will position the RE to approach the pricing of the 1930s.
Ben will drop bunker-buster dollar bills from the helicopters if that happens.
“Ben will drop bunker-buster dollar bills from the helicopters if that happens.”
What makes you think he hasn’t already?
there is enough liquidity in the system to drown all the 800 pound gorillas in the room, the problem is they just dont have enough lipstick on the pigs yet.
They used up all of the lipstick on the 800lb Gorilla.
Looks stupid no?
apologies to all the white elephants
Barb and Trish, I’m with you, 50-60%
And even that may be high. SFer, hate to burst your (housing) bubble but in reality prices have already fallen 20%. You can get deals in your market 30% or more. I’m talking about 30% off the 2005 peak.
We are approaching desperation time. There will be plenty of real good deals. Perhaps to many.
Oh, I was hoping more like 50% including inflation.
I made a bet with my boss that Phoenix AZ city of Ahwatukee prices would drop 25% from the 2005 peak, he said I was crazy and took the bet. I have until 2009 to get the 25% price drop.
Hes going to hate it as he recently bought a million dollar home way back in next to south mountain.
You probably have already won that bet
“After 22 months of sagging demand for housing, August and September could be brutal as the real estate market hits rock bottom, an economist projected Thursday.”
The market is going to hit bottom THIS MONTH? What planet is this guy living on? One might have thought that such irrational exuberance would have been shaken out of his system by now. “Bottom of the third, top of the fourth,” my heinie. I say we’re barely into the second inning. The bottom in real terms is certainly not going to be reached this year or next year, and if the famous ARM reset chart is correct, it’s not going to be reached in the next FIVE years.
But the mighty Casey is up to bat …
Well, they can claim it hit bottom. If historical buying cycles hold, ‘08 spring will sell more then ‘07 fall/winter. Look Real Estate is recovering! Then repeat for ‘09 through 2012.
2012 is just an arbitrary number I chose. I’ll buy when it makes sense for me to buy.
The realtors say you can’t time the market, just buy and live in the place. Yet OTOH, the market is going to bottom. But they didn’t tell us it was going to top. What a bunch of BS.
It may very well be in the third or fourth inning, however this one is going extra innings! Maybe it will go into the eighteenth or more.
It is a quote given by a guy who lives on the coast who has forgotten that prices in Santa Barbara/Goleta area dropped 30-35% during the 90’s.
Wow…I may actually have a chance to move back there after 17 years in Arizona
“Don’t take a listing from someone on a hope.”
The tide turns. The CAR officially turns on their sellers as they realize Realtor jobs are in jeopardy. Who didn’t see that coming?
Imagine if the newspaper’s classifieds department ran the same way. “Now, Mrs. Smith, are you SURE you want to take out an ad to sell your dining room set?”
Classifieds get paid up front (or used to before CL), realtors get paid if there is a sale. I really don’t blame them for only wanting “serious” sellers, as in “I will sell this house for the market price, regardless of how low that price is”. Just like market price on the stock exhange - that’s the price take it or leave it. This will be good for the overall market.
Of course the gist of the CAR’s directive is that they want inventory levels to be held in check. They hope that by reducing sheer numbers of properties on the MLS, things might not look quite so desperate. My guess: most sellers who don’t “have to” sell have already withdrawn.
told professor stucco this very item two weeks ago, expect FEWER listings in the MLS…..why?
Help me Obi Juan, your my only hope.
You’re going to see some great bargains (in housing), so the people who have liquid assets are going to be the Rockefellers of the 2010s.
Buying on a 5% to 10% dip won’t make you a Rockefeller, but it might make you a Patsy.
Huh?
I’m not going to argue with anyone who says wait to buy until 2010. That’s not a patsy. Its already obvious that 2008 will see twice the price drops of 2007. In some areas (that didn’t drop much) far more. 2009 will probably be analogous to 1994 in the Last Los Angeles price drop (big drop).
So this guy just didn’t say a lot… but its good advice. Besides, we all know J6P cannot plan past the next paycheck, much less delay gratification for four or more years.
I’m thinking condos will be killer deals in 2011…
Got popcorn?
Neil
Maybe I misunderstood what he was saying. His quote was in the context of a real estate cheerleading session, where “the speakers’ optimism was a welcome surprise to the packed crowd” and another speaker predicted no more than a 5% to 10% drop, over the next 12 to 14 months.
So it sounded to me like he was saying “keep your powder dry and jump in and buy a year from now when prices have declined by 5% to 10%, and you’ll end up sitting pretty like a Rockefeller by the 2010’s.”
Obviously I agree with his strategy, but not with his predictions regarding the timing or the magnitudes. I predict that most buyers will be better off waiting until 2012 at least. I think the discounts will be 40% to 50% in SoCal and the Bay Area, and anyone who ends up buying next year at small discounts will end up looking not like a Rockefeller but a knife catcher.
I don’t think I could ever buy a condo. I can’t get past buying an apartment and still paying for the maintenance, insurance and HOA. Besides, if I ever buy a home, I’d like to have a backyard for Texas barbecues and for my dogs to run around and play.
Jerry, are you a communist? The thought police will arrest you for barbeque smoke and your dog making noise as he/she frolics. Heaven forbid that your wife or children whimper when you beat them. Condo associations, city,county authorities don’t want you to have freedom.
“The speakers’ optimism was a welcome surprise to the packed crowd. Larry Works, a commercial loan officer in Ventura, appreciated that the speakers didn’t offer a ‘doom and gloom scenario.’”
LOL, yea don’t tell me the truth…tell me lies…sweet little lies…because I can’t handle the truth…..keep me in the dark a little longer and pass the manure…..
How much does it cost to have sunshine blown up your A$$ anyway ?
Willful ignorance can be very expensive.
what ever happened to competetive ignorance?
google reads:
Did you mean competetive ignorance.
“‘The problem is there are no buyers,’ said Bayer, who attended the meeting.”
WRONG! There are plenty of buyers; the real problem is that sellers are asking for too high of a price; Let them cut their prices significantly (30%, 50%) and they will find buyers pretty quickly.
..here in MA, I think a 25% price cut would bring the buyers out (it would bring me out)…
There are many house that I am watching in the $600k - $700k price range. Knock these down to $450k - $625 and I’d be a buyer. It might not be the bottom, but it would be so much closer to affordable (at least for me).
Bottom line..there are plenty of buyers at the correct prices.
Pen,
I congratulate you. This means you have approximately $100,000 cash available for a down payment (20%, which is historical norm, arrived at after decades of housing booms and busts). I am in the same lucky boat as you, but I really don’t think there are “plenty of buyers” who have $100,000 (plus extra cushion for emergencies/bad times), good credit, steady job, etc. But hey, I could be wrong.
Thanks for the accolades…
I am very fortunate in many of the cards that I have been dealt (all as a result of great parents). Nothing compares to being a child of the depression era/WW2 generation, when it comes to values.
I earn, save, pay bills, blow-a-little all in balance.
I believe the best formula if you have a mortgage is your networth cannot be less than 1.5 to 2 times your incumberances. Example, cash, stocks, bonds, equity in home equals $300,000. Your mortgage should not exceed $200,000. Even better your mortgage should not eceeed $150,000. This way you can pay off your mortgage in an emergency and/or your house is not your entire investment portfolio.
I can’t disagree with the logic, but I don’t think this would work for certsain age groups, trying to get their start.
not sure how to calculate the student loan,
would that encumberance be “mark to model” or “mark to market”?
There are, by definition, exactly as many buyers as there are sellers. All the rest are wanna-bes.
“The housing market will remain in the doldrums for some time, Schniepp said, adding that prices could continue to fall by 5 percent to 10 percent over the next 12 to 14 months.”
I rent in a new development in Camarillo. The home across the street is currently listed for sale at 10% off the 2005 purchase price. Given the lack of activity on the on the other 6 houses for sale within a tw block radius and the job market in Ventura County, 5% to 10% dip in the next 12-14 mos seems overly optimistic.
“Doerksen has organized a four-hour bus tour Saturday to show homes selling for less than $600,000.”
Hmm, a four hour tour ? Is the bus by any chance named “the Minnow”?
The bus should be the Titanic.
Hey little buddy, look at the homes that the Professor has created out of palm fronds and coconuts.
Better bake some coconut cream pie to serve at the open house.
Better bake some brownies, ala Toklas
If you wanted to “tour” all the homes currently selling for less than $600k in my area (Pasadena), you wouldn’t need 4 hours –4 minutes would probably do it. The pain has not spread that far into “prime parts of L.A. County (yet).
Agreed, but I just noticed the first of the unsaleable condos going up for rent in my area (Santa Monica). Also I have noticed houses for rent in the NoMo neighborhoods. Big changes since six months ago in spite of wishing prices not falling yet.
Landlord, I’m beginning to notice that also in Westwood. A house two blocks from us has been up for lease for about 3 months and was not yet rented as of Wednesday ($4,900 asking). There are at least two others offered for lease in a ten block radius. This is unusual in my area.
Is the bus by any chance named “the Minnow”?
Maybe the bus is named “Deeh-dee-deeh!”
(c) Carlos Mencia
“So far, 15 of the 30 spaces have been taken.”
Someone should sign up just to interrupt and laugh at the fool at every stop.
Totally LMAO
Next up, the Shortstop… batting a little over .700
Ventura Foreclosure
“Dallas added that much of the bad news surrounding the real estate industry has been blown up by the media, such as the number of foreclosures. In the second quarter, foreclosures spiked in Ventura County to 303 from 43 over the same period a year ago.”
I bet many of them were located in Oxnard .
“Median home prices have not fallen as sharply as sales, she said, because homeowners are reluctant to cut prices and because sales are shifting toward the higher end of the market, which is less affected by the availability of low-cost loans.”
Don’t look now, but Jumbo-the-Elephant loan interest rates are about to sit on the higher end of the market and crush it.
“‘The problem is there are no buyers,’ said Bayer, who attended the meeting.”
The problem is there are no sellers willing and able to sell at the current market price. Think of a residential real estate equivalent of Black Monday (Oct 19, 1987) on Wall Street, but where the gap between the bid and asked price distribution is frozen in time.
Excellent analogy!
So let’s get this pig in the microwave and get on with the show
The problem of demand. We are at 70% households that own RE in this country. Now of the 30% left how many have the financial ability to buy a home with the necessary down payments. The pool of new buyers of any stripe has to be tiny no matter what the prices, investors looking to become landlords and future flippers are in for a crushing experience. Other then buying a home to live in at a affordable price based on price/rent ratios is the only reason one should buy otherwise its cheaper to rent. The huge number of vacant homes is a huge red flag!
“The MBA says 21 percent of prime loans that are in default in California belong to people who bought homes without living in them. … ”
This is what scares me - the wave of prime loans that will wash up after subprime and alt-a loans have already crashed on the shores of despair. Imagine the credit tightening when lenders realize that prime loans are going south on them.
This is what encourages me to believe that price declines (like so many other recent changes in the economic picture) will turn out to be larger than expected.
Your mouth to God’s ear
It kind of reminds me of the old line about cocaine being God’s way of telling you that you make too much money. Real estate boom must also have been one of god’s ways of telling you that you make too much money. I wonder how many otherwise well-to-do Americans will have ended up squandering their wealth by buying 3, 4, 5 homes as “investments.”
More like God’s way of telling individual households not to gamble with leverage on speculative investments where the downside payoff is a large multiple of their net worth.
“‘The problem is there are no buyers,’ said Bayer, who attended the meeting.”
This really irks me. If all of a sudden, Mercedes started changing $100K for a C-class, they would have few buyers, too. An asset price is determined by what BUYERS are willing to pay for it, not what SELLERS want to sell it for. Basic Econ 101 for dummies.
Anyone stupid enough to buy right now in LA surely would also be too stupid to a) have a 10% down payment and b) have good credit.
“Anyone stupid enough to buy right now in LA surely would also be too stupid to a) have a 10% down payment and b) have good credit.”
Would-be sellers face a Darwinian conundrum.
They do - it’s called an S class, and while slightly bigger and more powerful, is not “3 times better” than the C class. But it is three times more “exclusive”, if that matters to you.
MB = money buster
BMW = big money waster
Awww come’on there’s nothing like a 7 Series BMW. I don’t need rational thoughts from the peanut gallery as to why I should not buy one. Geez… ruin a guys Friday why don’t ya.
There has never been a better time to sit on the sidelines and wait. From the Sac Biz Journal article:
“Most in the business expect prices to drop because the inventory of bank-owned houses is growing. Almost 8,000 bank-owned homes were for sale in the four-county area at the end of August, according to RealtyTrac Inc. of Irvine, and that number could easily double by the end of the year.
If that happens, and lenders are forced to lower their prices to get the homes off their books, shockwaves will reverberate through the whole housing market.”
This market is so totally fookin’ screwed.
I had a look at the weekend real estate pull-out in the Portland ME Press Herald this morning.
Page after page of grotesque, functionally obsolete, McMansions that have virtually no marketablity to downsizing boomers or Gen Y X’ers tapped out on student loans.
Talk about white elephants.
These houses are nothing more than energy fuel hogs and stationary targets for the property tax man.
“…stationary targets for the property tax man.”
Soon to be targets for the bulldozer?
hey HD.
How’s things?
Any thoughts on the North Shore?
Where to (in down % points) from here?
Yeah, give us the North Shore update.
Swampscott, Marblehead, Gloucester, Manchester, etc.
[wishing I could effect the local accent through the internets]
[affect]
HD,
Are you referring to new construction or existing older homes?
Just curious.
Pen
You are so right. I keep wondering where are the SFH for downsizing boomers or any person that doesn’t need their house to scream - Nouveau Riche. A nice development of housese running 1200 to 1800 sq ft on one level and no granite counters or stainless steel anything.
“Banks are allowed to own their premises and offices, but they cannot invest in speculative real estate. Any property that a bank takes back as collateral for a bad loan is OREO or REO, and it is property a bank is supposed to sell. How quickly it has to be sold is debatable, but it must be sold.”
Someone ought to point out to these banks that it is highly speculative to hold on to OREOs just now, and that they risk riding a falling knife all the way to the bottom if they keep hanging on forever.
But if they do they have to ‘mark to market’ which reduces their capital and stock price. Countrywide is still not lowering their prices on their REOs giving Mozillo time to exercise more options and sell more stock.
In this cycle, “the bank” may really be the servicing agent for a pool of mortgages. In the last cycle, despite the fact that banks really were better off getting rid of REO quickly, there was more often than not, a bureaucratic process involving a bank appraisal department (among the most clueless group you will ever find in a bank) that would argue with the REO group assigned to sell the property about what constituted a fair value. Appraisers have to use comps which are backward looking and therefore useless in a rapidly deterioriating market such as we are currently experiancing. No bank appraiser is going to tell anyone in the bank to price a property lower that what he can point to using “data”. Certainly, some smart banks (the small minority)recognized this and would ignore the appraisers and aggressively price the REO to move it quickly.
This time, it will be interesting to see whether wall street is more nimble than a typical bank, or whether the added complexity of the servicing agent and various holders of the individual tranches, some of whom now have potentially conflicting objectives, will make the process even more complicated.
Yea, that is going to be interesting to watch. Myself, personally feel that beginning 1Q08 we are going to see fire sales as Wall Street tries to recoup capital.
hate to disagree with you, but many appraisers use pending sales data as well as current listings. in a declining market current list prices, if lower than closed sales prices, are emphasized, as are pending sales prices. and many appraisers also take into consideration absorption rates, forecasting, etc.
Have you seen any recent appraisals, most are boiler plate and don’t take into consideration the things you mention unless they are trying to hit a higher number. However, what you said is correct in theory
“Somebody said that Wall Street fell,
but we were so poor,
we couldn’t tell…”
–Alabama
A lot of FBers are going to be singing those words real soon; thing’s are starting to get uglier than Allen Greenspan!
Janis Joplin comes to mind (”freedom’s just another word for nothing left to lose…”)
The late Barbara Jordan once asked a class of University of Texas students to define freedom. One wisenheimer responded with the Janis Joplin definition. Jordan thought that was pretty funny.
OT..
Got Krudlow on in the background…crying about the market…where’s the Fed? he asks..
Do they not get it? It is not the Feds job to bailout the market everytime it goes down.
Oh, he “gets it” alright. The S&L and LTCM bailouts taught him well about the “Greenspan put”. Wall Street is now as dependent upon Fed bailouts as Big Agriculture is on farm subsidies.
“Wall Street is now as dependent upon Fed bailouts as Big Agriculture is on farm subsidies.”
******
HARM - hope you don’t mind.
I think I’m going to intimate as much the next time I talk to some Pigmen bankers and hedgies.
That’ll be fun.
Be my guest :-). Can’t wait to hear their reaction.
More insight from the Sac Biz Journal about why banks might be reluctant to offload OREOs at current market prices: Doing so might inadvertently reveal that market values have dropped so much that it could trigger an avalanche of FBs walking away from their unaffordable, rapidly devaluing white elephants.
‘ In addition to the existing problems of the subprime disaster, there is the potential for a lot of people who bought at the top of the market to just walk away from their homes as home values decline. Loans with no down payment mean that the person in a home with a declining value has nothing but a credit rating to lose by walking away.
“There are too many people who overbought and have no vested interest in the home. When the loan value is $60,000 higher than the house, they don’t see any reason to stay,” Leis said. “If you don’t have any skin in the game, you are going to walk.”‘
Another reason not to buy until the bubble rubble dust settles:
Hiding the owner
The condition of a house is also very important in making a sale, and REO homes tend to suffer from neglect, Geise said. “Generally speaking, the lenders don’t want to do any repairs on the houses.”
Leis agreed, saying some of the foreclosed homes are a tough sell because the buyers are putting most of what they have into getting the house, and they won’t have any money to make needed repairs.
“REO homes tend to suffer from neglect”
before, during and after foreclosure….to say the least…It’s a funny thing how fast a house falls into disrepair, while vacant. You’d think they would just go into some sort of “suspended animation”, but it’s quite the contrary. They begin to decay, rapidly.
“They begin to decay, rapidly.”
Certainly a bank’s REO department grasps this simple fact. Why would they want to hang on to REO at prices the market will not bear when (1) said prices are dropping and (2) they have to either bear high carrying costs (including maintenance) or watch the asset crumble to the ground.
Banks are no more rational than individuals, as they are simply made up of a collection of individuals. Their motivations may be different from individual RE owners, but they act the same way. They will not cut prices until regulators cause them to, or until market forces become so overwhelming that it’s “obvious to everyone.” We’re not too far away from either option.
“Banks are no more rational than individuals,…”
Possibly less so, now that you mention it.
http://en.wikipedia.org/wiki/Groupthink
In Texas, banks are getting Real Estate agents to take care of the property for them in return for the listing. Only the disparate ones are doing this, but that number is no doubt growing.
“…Certainly a bank’s REO department grasps this simple fact…”
In short…job security
I looked at a REO in the SFV the other day. It was a 3+2 with wood floors and big trees. I was tempted…it was below %00k which is good for the area….till I realized it didn’t have any heat or air. NONE. There had never been ducting…no signs of any vents…. I wonder what else the previous homedebtor forgot to put in…plumbing????
They begin to decay, rapidly.
I don’t understand this concept, please explain. I have been told ad nauseum by media “experts” that houses were self-sustaining, perpetual-motion ATM machines. What’s this “neglect” and “upkeep and repair” thing you speak of?
Good book on this very topic:
http://www.worldwithoutus.com
“The speakers’ optimism was a welcome surprise to the packed crowd. Larry Works, a commercial loan officer in Ventura, appreciated that the speakers didn’t offer a ‘doom and gloom scenario.’”
- I am in sales … don’t bullsh*t a bullsh*tter. The future for that industry is dim and black … so dark that no light can escape from it.
Don’t shoot the messenger:
http://www.thestreet.com/s/get-aboard-the-mortgage-bailout-plan/newsanalysis/investing/10378291.html?puc=_dm&
1%.
Wow.
Perhaps they believe a bailout is really going to work; an excerpt:
“Although this may seem a bit far-fetched, insiders in the financial-services and home-building industries are buying their own companies’ shares these days at a record pace — essentially betting that something like this scenario will transpire. Homebuilding companies’ executives bought $15.9 million worth of their firms’ annihilated shares in August, the largest monthly purchase in the sector since Thomson Financial started keeping track in 1990.
The last time that insiders even came close to this level of buying, in September 2001, the sector rose 55% in value over the next six months while the S&P 500 index advanced 10%. Thomson analysts suggest that raw valuation is a factor in insiders’ zeal for their stocks — as the price-to-book-value of the sector hit 0.75 last month, the lowest since October 1990 — but clearly a larger motivating force is at work.”
Strange. I read that same article yesterday. Well, so much for the surge. Stocks are down.
If W is personally taking over national economic policy, we are all doomed.
Sorry to interupt here, but the tally of signatures on the no bailout petition has been somewhat disappointing. Please sign it and pass it on. I was quite suprised to see how many of my homeowner friends signed it. I’m sure a lot of people think it’s fruitless, but it only takes a second and it sure would be gratifying to see it end up on the evening news. Thanks
http://www.petitiononline.com/bailout/petition.html
Hate to break it to you, but an overwhelming majority of the folks who will read your request to sign that petition would potentially be on the receiving end of a bailout.
interRupt… dang it!
You’d probably get more signatures if your petition wasn’t so blatantly partisan.
I agree. I didn’t write it, but I’ll try anything to prevent our gov’t from socializing these bank’s losses again.
Have you passed this around the other blogs?
Be sure and note the comments in the Sac Biz Journal article about the banks and asset managers holding onto wishing prices themselves until being forced to sell at “real” market price by regulators and the market. This is what happened in the 1989 - 1995 period. This is when you’ll get your real deals (50% off and more).
What’s in it for them to hang on? Are they acting rationally, or just living in an irrational, lingering bubble of denial?
In general, I think you hit it on the head. It’s denial. From my personal experiance selling REO in the early 90’s, there are typically different groups in the bank that have different degrees of interest in recognizing and dealing with the problem. Usually the group that has the most power, at least until the fan has been spinning for awhile, is the group that originates new business. For awhile, this group wants to believe that they are looking at a “temporary situation” or that “values will stabilize” or that “our collateral was better” . To believe otherwise will result in the rapid decline of their power and authority. Banks, like most large organizations are slow to react. Plus, they are pretty dumb. Currrently, I think we are at a point that is analogous to 1989-90.
Also…once they sell..they have to record the losses. As long as they hold onto it they can value it however they like. I’m sure they’re not ready to have their books record such ginormous losses.
I am using the 91-94 price range as a guide.
CNBC just anounced CWC killing 12,000 - oh, I mean “letting go”….
I live in the Conejo Valley and several of my friends work for Countrywide. They’re in the Default Management Dept. making collection calls. Imagine how rosy they feel after a long day on the job. I have a feeling their jobs are safe for the time being.
“Doerksen has organized a four-hour
busturnip truck tour Saturday to show homes….He figured a chauffeured tour on an air-conditionedcharter busturnip truck…would mean less stress. ‘So, which sounds better:do itfall off yourself or allow us toserve youkick you off?’ he asked.”Stop, stop! You guys are killing me! (Typed while laughing.)
Ha ha.
OT..dumb question…
Listening to Kudlow, Barney Frank po’d about Fed not cutting rates. He wants 50 beeps cut.
My question is this..would a 50 beep cut really change anything at this point?
The stock market? temporarily, yes
The housing market? no.
Yes - it would send the USD into a death spiral, all but ensuring heated inflation. The FED is in a corner, and you saw today’s jump in gold, and the dollar breaking support at 80 as warning shots. Cut rates, sacrifice the USD, and there will be hell to pay. Sorry, I don’t believe there is any way out of this conundrum. I don’t see a rate cut - not without a Jimmy Carter economic debacle ensuing.
dr digits
That would be great. Long term rates would skyrocket in anticipation of heavy inflation, while near-term rates would drop which would prop up stocks. It would be a good time to exit (and short) stocks and get into bonds. Then, once the quick fix subsides, buy back into stocks as they fall. Done well I think a lot of money could be made over 10 or 15 years.
He must be on crack!
Question for everyone.
I keep reading about buyers from the last two years - what about all the fools who ATM’d their houses? Their loans are coming due too… aren’t they going to end up in the smae situation and just fuel this baby even more?
I know a few who did that, I think they are going to have issues paying it off every bit as much as the ones who bought…
Let me rant as I drink my beer{poor mans version of happy hour}. HAD
I just caught Kudlow, schmoozing up to get his interest rate cuts. They’ll do anything to reinflate the housing bubble and penalize renters.
Let’s see, homedebtors get tax writeoffs, subrime borrowers will get free house payments before they get foreclosed on; some subprimes will get refinanced into lower rates courtesy of John Q. Taxpayer. What a country! Penalize savers by lowering the Federal Funds Rate and reward speculators, hedge funds, et al.
Maybe it is time to convert to gold. I can’t believe the stuff I’m hearing…makes me ashamed to be an American and to hold dollars.
“She had two homes for sale, and people visited the one with the barbecue, even though it was in a rather remote area. Five groups of buyers came, as many as had toured the home in the past year.”
Like flies on a cowpie, are people to a free meal. It’s a great way to generate traffic, although that may be a bad thing if they are dripping BBQ sauce all over the house and leaving greasy smudges on the doors and trim!
Desperate times call for desperate measures, and the ‘free food’ angle is certainly one of them, one borrowed from (ahem) car dealers among others, employed only when the product itself isn’t exciting enough (or priced right) to generate any consumer interest.
Not necessarily free.
$16 per adult or
$30 for two adults
and no kids allowed.
Equity line gone. The serf’s last line…
If you charge me up
If you charge me up Ill never stop
If you charge me up
If you charge me up Ill never stop
Ive been running hot
You got me ticking gonna blow my top
If you charge me up
If you charge me up Ill never stop
You make a grown man cry….
http://www.youtube.com/watch?v=cOYOExbzv-8
Attention….if you are not wearing your seat belt and don’t have an air-sickness bag handy…DO NOT READ THIS!
A sample:
Between classes, throngs of students flocked to the lobby to booths featuring affiliates of Nouveau Riche. Save Our Scores (or SOS, as it is called) helps high-risk borrowers boost low credit scores so that they can borrow more money at lower rates. (Fees range from $600 to $1,200.) Investor Concierge, the real estate brokerage firm owned by Piccolo and his associates, helps students buy houses and condos, arranges financing, then provides management services for their far-flung properties. (The firm’s slogan: “Click a mouse, buy a house.”)
http://tinyurl.com/32v8nb
Yep, know someone who looked at thim last year - “go more in debt… it’s all about the portfolio…”. s*ckers one and all…
Best paragraph from the story:
The way the Michigan real estate market is headed, it might not be so easy. According to Judy Brant, a broker in Fenton for more than 20 years with Coldwell Banker, the inventory of homes in Genesee County, which includes Fenton, averaged 2,000 units in 2005. Today it is 8,000, up 300%. When Brant heard that Nouveau Riche students had bought 60 condo units in her town - sight unseen - she said, “I’m speechless. The housing market here is tied to the auto industry, and prices are falling faster than you can imagine: 10% last year and another 10% this year. Who knows when it will reach rock bottom? As far as rental properties, it’s hard to rent anything here now. Houses and apartments sit empty all over town. People are leaving because there are no jobs here. We’re really suffering.”
I met a guy who sold his nice house east of Seattle 2 years ago and (gasp) moved to Detroit, where his plan was to become a slumlord and live off of the ‘passive income’–sweet!
He had attended some kind of 1-week investing seminar where you learned how to buy foreclosed property, and of course Detroit was high on the list of places with lots of foreclosures. He had actually flown back to Detroit and stayed a week to check things out (and still decided to do it).
I didn’t have the heart to tell him what he was getting into (I don’t think it would have registered with him, so what’s the point)–I lived in Flint for a couple of years during college, and it’s similar in a lot of ways to Detroit.
First I wanted to thank Ben for fixing the posting – tried to post a few the last couple days and nothing seemed to make it.
My partners’ daughter-in-law works for a builder here in town & she def. drank the cool-aide. She bough a house a couple weeks ago from them way the heck out in Surprise – she’s been very recently promoted to a seller, huby left job to be stay at home dad – now she’s talking about buying a Cady-SUV to “look the part”. He’s already swearing he won’t bail her out (we both bought in late 98… lots of equity and even if a ½ drop we’re both looking fine…). Oh, and of course they had to get all new furniture and what have you just to make sure they maxed everything out. She’s all big about “have to have all the upgrades…”.
He was also showing me a flier from around the corner from them (North side for those in town, just off the north 101 and 7th street…) – “priced to sell” at 379 – was 500+ last year… Yep, it’s still sitting there…
I tried to post about what’s going on with food (we have a 4,000 acre wheat farm in Oregon and have been watching this one for a couple months…), but I see the news is finally figuring it out – now that it’s up almost 200% from last year… Last year was 3.44~ish\bushel. We sold off at 7.22\bushel this year, and it’s fast approaching 9. Now the hedgers are flocking into that market – next bubble ya think?
And thanks for everyone who releases knowledge here – been very helpful the last few weeks as we decide where to drop our farm income this year – overseas is looking mighty darn good!
wHOA, WHAT HAPPENED…LET ME CONTINUE WITH MY RANT. iN THE PREVIOUS TREAD THERE WAS A ARTICLE FROM THE courant NEWPAPER REGARDING acorn PROTESTING IN FRONT OF A HEDGE FUND. i WROTE A REPLY, UNDER from pa. wHAT STRUCK ME AS FUNNY IS THE WORKING CLASS TAKING BUSES TO gREENWICH ct TO PROTEST AT A hEDGE FUND, AND THE hEDGE FUND PEOPLE CALLED THE pOLICE. YES THIS IS A DIFFERENT TIME WE LIVE IN. tHIS IS NOT “GRAB YUR RIFLE, i SEE rED COATS, sTAMP tAX, wHISKEY REBELLION, GRABBING A PITCH FORK, tOM jOAD, OR EVEN fARM AID CONCERTS OF THE 80′S. nO THIS IS TAKING A gREYHOUND TO bLUE bLOOD CENTRAL AND PROTESTING. hELL ct “GOLD COAST” DON’T WANT ANYONE{YES THAT MEANS YOU AND ME} ON THIER BEACHES. sO SOME “PEONS” PROTESTING A HEDGE fUND MUST HAVE BEEN A SHOCK. iF YOU GET TIME READ THE ARTICLES AND THE RESPONSES. hOPE AM NEVER IN gREENWICH AND NEED A KIDNEY, HELP, A FRIEND.
Have another beer for me and push that “Caps Lock” key!
thx curt. I dont post often, Been coming to this site for a long time. I recall coming here to read and very few comments . That was sad because reader comment can offer alot of info. Now a good topic can get over a hundred comments. I did not need to embrass myself like I did.
hey, don’t be embarrassed, it was an interesting post and I laughed heartily at curt’s response.
You’re not the only one, my god that was funny…
DID NOT MEAN FOR CAP…LET ME WORK IT OUT….test. ok
Uh…let me see…in 1996 you could buy a nice house in Santa Cruz county for about $288,000 with a downpayment of $48,000 and have monthly payment of about $1,600 a month at 7.25%(current jumbo rate). Now in 2007 that same house is selling for about $850,000. So with a 20% downpayment of $170,000 at the same 7.25% the payment is about $4,600 a month.
Now I’m not really sure about the how much the median household income was in 1996 but it is currently at about $72,500. Divided by 12 that makes the median household monthly income about $6,041.
Let’s do some math…
Monthly median gross income = $6,041
Monthly house payment with 20% down at current jumbo rate with 30 year fixed = $4,600
Monthly property tax bill = $1,062.50 (1.5% purchase price annually)
Insurance = $250 a month.
Total monthly cost for the house = $5,912.50
$6,041 - $5,912.5 = $128.50
Wow…with the extra $128.50 I could take the family for a day at the Santa Cruz Beach Boardwalk as long as nobody wants to eat or have electricity for the rest of the month…
But hey…they’re just numbers…they don’t really mean anything.
The sad part is that this strory is repeated all over the world. This RE bubble is like a world wide flu bug that continues to plague mankind. I hate to say it but as it deflates it will take a great deal of wealth with it, and leave the US with a hallow economy.
Hallow as in reverent? More likely hollow like an empty shell.
Actually, the peak for MHI in SC county was 62k in 2003 and has been declining ever since. The population is also going negative and is almost back to 1997 levels. Those housing prices are worse then you think.
I went back and looked…the average household income is the $72,000. The median is in the high $50’s. Any way you split it…the incomes can’t support the prices longterm…
I just contacted Schwab today..I’m rolling my IRA into CD’s this weekend..I’d rather take 5.25% on a 6 month CD than roll the dice in the market with its manic girations.
There will be an SF Bay housing bubble party on Saturday, August 15th at noon at Arguello Park in Belmont.
We’ll make it a potluck. I’ll bring potato salad. Please post what you will bring and I’ll keep track. I’ll post the menu each day so people know what and how much to bring.
After the picnic, we will migrate to a posh drinking establishment for those who have sexy shoes to show off. Am open to suggestions as to where said wet site should be.
Be there or be an FB,
Big V
September 15th
LOL it’s take me at least 4 hours to get there with traffic anyways.
Timely notice: Lehrer says the 3rd segment of tonight’s News Hour will cover the spillover effects of the Calif subprime mortgage mess.
You guys will love this! It’s been somewhat accepted in the office now that the housing market is bust (we have several with interest only loans with ridiculous payments), however, I keep hearing that this is only in SOME areas, not nice places like South OC, including Irvine and Mission Viejo where these people live. So we just interviewed a very nice lady who proceeded to tell us her reason for moving on was that the job she was offered in the Inland Empire meant she needed to sell her nice, new house in Irvine. After 6 months on the market, she had received one offer for $100,000 less than asking price, lowered the price twice, and got a second offer at $80,000 less than asking. Her hubby is an RE agent. I saw some jaws drop with that story.
How desperate must you be if you live in OC and are even looking for, let alone accepting, a job in the Inland Empire?
Comments is already at 236 and its not even 6:00pm.
Anyway buyers backed out of condo deal today. Landlord probably had 100 repairs to do before selling san diego condo for 349K.
I’m sure Landlord said take it or leave it. Two inspectors three hours equals six hour inspection.
There are buyers looking for houses, but they’re not crazy enough to buy now, knowing that the market continues to go down and continues downward. Sellers remain “in denial” about the value of their homes, they have chosen to stick with their outrageous asking price and not losing one penny. This just stalls the market, but give it another 6-12 months and you’ll see prices coming down. Unfortunately many can’t watch even another month, because they’re facing foreclosures. If you’re a buyer, just sit tight and wait…it will be worth it.
Doerksen has organized a four-hour bus tour Saturday to show homes selling for less than $600,000.
Less? Oh, like say, $590K? $595K?