California Sales ‘Plunge’, Inventory At Multi-Year High
The California realtors have their February numbers out. “Existing-home sales dropped significantly in California in February, falling 15.5 percent from the same period a year ago, as inventory levels climbed and median prices continued to escalate, an industry trade group reported today. Meanwhile, the February 2006 median price of an existing home in the state decreased 2.9 percent compared with January’s $551,300 median price.”
“‘Unsold inventory rose again in February to a 6.7 month supply, one of the highest inventory levels in several years,’ said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. CAR also released the following regional sales and price comparisons for February: Santa Clara sales dropped 15.3 percent year-to-year. Sales in Santa Cruz County dropped 23.6 percent year-to-year but were up 0.9 percent from January, while the median price declined 2.5 percent to $712,000 from February 2005.”
“Monterey County sales dropped 16 percent year-to-year but rose 18.3 percent from January. San Francisco Bay Area sales dropped 12.3 percent year-to-year.”
The state’s builders think the solution is more construction. “‘We may be producing some of America’s best college graduates, but we’re exporting them to states where owning a home is more than just a fantasy,’ said Alan Nevin, chief economist at the California Building Industry Association. The state’s 57 percent homeownership rate, the second lowest behind New York, lags far behind the national average of nearly 70 percent.”
“Metropolitan Sacramento needs 62,619 more homes than the thousands already planned to bring the region’s homeownership rate up to the national average, a statewide home-builder trade group said Wednesday. The report..is the latest move in the ongoing battle between the home-building industry and environmentalists and citizens groups weary of what they say is relentless growth.”
“Builders say their suggestion is aimed at easing the sticker shock of California and capital-area home prices by increasing the housing supply. ‘Today, there’s more than a $300,000 difference between home pricing nationally and in California,’ said CBIA Chief Economist Alan Nevin. At least half the extra homes suggested by the CBIA could come from converting apartments to for-sale condominiums, Nevin said.”
Rich Toscano questions the demand side. “It is the rallying cry of the San Diego housing bull: ‘Everyone wants to live here.’ The crux of the argument is this: data be damned; San Diego’s pleasant climate and general desirability will ward off any potential decline in home prices. There are some problems with the “everyone-wants-to-live-here” school of housing analysis. After all, the weather was awfully nice back in 2000. Yet the median San Diego home price has doubled since that time. Has it really gotten that much more pleasant in the past six years?”
“The theory also begs a more practical question. If everyone wants to live here, why are so many people moving away? San Diego County’s population fell between July 2004 and July 2005. The population decrease should have come as no surprise. For the past five years there has been a very clear trend in declining population growth.”
“The primary reason for the out-migration couldn’t be more clear. Homes are simply too expensive in comparison to incomes. And as housing has become pricier, more and more people have left. San Diego is indeed a great place to live, but nowhere on earth is so wonderful that people will pay any price to buy a home there.”
“While the desire to live here may be an unlimited quantity, the means to live here is not. This exodus is a natural result of the housing bubble, and is one of the factors ensuring that housing will one day be affordable again.”
Oh what a beautiful spring time
Oh what a beatiful day
Oh what a beatiful fealing
everythings going my way
Pleeeease tell me Californian investors aren’t driving up prices in Oklahoma :).
San diego prices are a joke. I was born in la mesa, near san diego. I will never live there again. The only thing I like about the area anymore are the beaches.
Got that right! I live (rent) in Hillcrest and a 1500 sq ft. home goes sells for upwards of $550,000 and this price doesn’t include top-notch schools either.
Mr. Berry,
No offense intended whatsoever, but, a comment to help people around the blog understand Hillcrest:
It is ten minutes’ drive to downtown - Hillcrest is not safe at any time of the day. Check out S.D. County crime map (arjis) for the last two months. You can filter for time of day, day of week, type of crime, etc.
I have family next door in Normal Heights (arguably worse).
Also not to offend anyone, but for information sake Hillcrest is also Gay central of San Diego. However, there are great restaurants there and interesting people watching.
But to be fair, it’s far, far better than south of San Diego downtown. I mean, looking at that website you pointed to (ARJIS) the majority of “crimes” in Hillcrest are Disturbing the Peace, which is likely just drunken partiers making too much noise. (I live in PB, and that’s the vast majority of crimes there, too.) Also, what’s nice about Hillcrest is that if you go just a few blocks away to Banker’s Hill there are virtually no crime reports there (according to that website), whereas in PB there’s disturbing the peace just about everywhere!
Yeah, if you want zero crime and no life, move to Poway. But then you’re living in gated communities with synthetic neighbors. Personally, I’d rather live closer to the city in a more vibrant neighborhood, even though that brings with it the party-goers and the homeless.
I rented in Bankers Hill for a few years back in the mid 90’s (great view of the Bay, downtown, ocean, & Point Loma, walk to Balboa Park, bike to the harbor…sob! I miss it.) and enjoyed going to Hillcrest in the evening (Landmark Theater, Corvette Diner, etc.). Never had a problem with crime (too many polite gay folks). Of course if you wander too far from 5th and University you get into some bad areas. More recently, taking my kids to Pizza Nova or Corvette Diner in Hillcrest…crime never was an issue.
And really, the beaches aren’t that great either. The water’s too cold to swim in, it’s full of giant kelp and other assorted nasty stuff. To me the draw of San Diego was the mountains and desert nearby and the Balboa Park area.
Don’t forget about the “brown tide” which washes up from Tijuana every time there is a heavy rain…
strewn with “logs”…
and not sure about SD proper, but north county, around the carlsbad area smells like sewage in places west of the 5.
That’s because of the sewage treatment plant. That smell **IS** sewage. It’s on the west side of the 5 because they discharge all the “clean” water into the ocean there.
Oh, and let’s not forget all those accidental spills that happen multiple times each year, all along the SD coast.
And the red tide…
And the jellyfish…
And the stingrays…
Did somebody mention the cold water???
I sold my home and left San Diego, but I will be the last guy to bash the area. I think it is awesome! Sure it has it’s drawbacks (immigration problems, etc.), just like anywhere else. I have been fortunate to live in all four corners of the U.S. (PacNorWest, New England, South Florida, and SoCal) as well as travel extensively. I think I am unbiased and in my humble opinion SoCal is just the best. Climate, lifestyle, variety of activities, etc. I left solely for financial reasons, but if I hit the lotto tomorrow I would beat feet back to SoCal.
“but if I hit the lotto tomorrow I would beat feet back to SoCal”
Everyone is entitled to an opinion, and I disagree. There’s nothing that would attract me to SoCA: smog, overcrowding, SEVERE TAX BURDEN, overwhelming cost-of-living pervasive stress, crime…
Not the least bit interested…
I’m really not trying to be a smart ass, but if you are in Arizona how can you possibly compare that to SoCal? Unless you like 114 degrees in the summer, dust storms, poor air quality in Phoenix, etc. And talk about crime….I’m sure Phoenix is worse than San Diego. Don’t get me wrong, there are lots of nice places everywhere, but when you weigh it all out, SoCal is nicer. Where are you that it is less crowded etc? If it is that much less crowded, then you give up a lot, i.e. good restaurants, theater, pro-sports, etc. Tucson is nice, but it’s too podunk if you like having access to a variety of recreation and entertainment. I do agree with you 100% on the cost-of-living issue, that’s why I’m leaving…and only because of the cost of housing (everything else in South Florida where I am currently stuck costs MORE…I compared on my last trip back to Orange County).
“Builders say their suggestion is aimed at easing the sticker shock of California and capital-area home prices by increasing the housing supply.”
Am I getting this right? Are the builders saying build like crazy, flood the market with inventory, and thus pop the Californai housing bubble? Did I read that right?
I’m checking my lenses too
It’s not too surprising the association wants to build. The problem is the land costs. They will tell you the land is too expensive for anything but luxury homes. And notice the idea of converting condos. What good does that do?
Chris Thornberg said once that there is a shortage of housing in California, and that it is a shortage of cheap apartments.
Condo conversions are great for helping low income buyers get stucco…
It is difficult for me to imagine anyone dumb enough to think that building more homes at a time of record inventory would be a good idea. My guess is that they’re primarily trying to ease the land use regulations with this bit of PR spin. No industry wants to be regulated.
I don’t think deregulation would even necessarily increase affordability. I think that even if land use regulations were eased, builders would prefer to build “luxury” housing because the profit margins are higher. After all, there are plenty of regions with minimal land use regulations, which nevertheless suffer price inflation because of speculation.
the home builders need to build and sell to make money. They dont have to sell at market, because they don’t have any equity to protect, just need to cover costs and add 5-15% for a nice profit.
The profit margins for new homes is so high that the builders still make money with prices 10 to 20% lower. They are still making money, just less of it, its the people who bought in 2005 who get hurt.
Most of the fluctuation in value is the land under the structure. If builders either sit on very cheap land ($1,000/acre or less–$50-$100 a city lot) or little land they can make money in any environment in which there are sales. Think of it this way if a structure costs $120,000 and you mark it up $20,000 does it matter if the overall price was $200,000 (because you paid $55,000 for the lot and $5,000 for interest) or $600,000 because you paid $440,000 for the lot and $20,000 in interest?
Yes, it makes a difference. The difference is risk.
The underlying land value, unless you sign on to the NAR’s conclusion that land values always go up (NOT TRUE), bears very real downside risk in a project that takes a long time to get from land purchase to delivered product. During that time (in CA could be years), you could see a 50% haircut in underlying land value. There needs to be a risk premium…40%!
Am I getting this right? Are the builders saying build like crazy, flood the market with inventory, and thus pop the Californai housing bubble? Did I read that right?
Builders are like the scorpion who asked the frog if he could ride on his back across the stream. Midway across the water, the scorpion stung the frog, and as he sank into the water the frog asked the scorpion, “Why did you do that? Now we’re both going to die!” And the scorpion replied, “I couldn’t help it. It’s in my nature.”
What’s even more absurd is the notion that CA could HANDLE any more high-density housing? Our infrastructure is so completely broken that near any major city here, traffic is at a literal standstill.
Until we get a real mass transit system, high density housing is just out of the question.
BUT, BUT, BUT, the weather was so wonderful in January!
Ben,
I’ve seen the data posted here, but where can I locate the real estate inventory #s for Phoenix? I think it’s up 300+% or since last summer.
thx
There are multiple places. Ben E. has a good site that I should ask if I can link to. Perhaps a reader will post one here.
Hey Ben (Jones). You’re always welcome to link to HousingTracker. The Phoenix data happens to be some of the most interesting to me too. I doesn’t go back quite to last summer, but it shows some pretty sizeable increases in inventory anyway.
Sac needs more housing? Wow. Here in Monterey county we have a water problem. Down the central valley they have a water problem. Rates are high. The bay area has a water problem. As the cities get bigger there are more gang problems, where does the money for infra structure come from, money for police, firemen, schools, etc.
If you want to watch things unfold in the future just set your time lapse telescope on Las Vegas. Before the housing boom taxing the casinos raised enough money for infra structure. This was a drawing card to Nevada….no state income tax. Now fast forward to after the boom; families are moving into LV and the area around Reno. Families demand greater resources…new schools, road maintenance, hospitals and clinics (remember you are getting some of CA’s low income), more fire stations, police stations, higher pay rolls for new cops, teachers, firemen, etc. Bottom line, where is this money going to come from? Within TWO years I predict you will see a state income tax in the great state of Nevada to cover infra structure and social services.
CA may have a water shortage, but anyone who drives around SD with their eyes open can immediately see there is no housing shortage…
New home prices are being slashed all over Sac. Centex and D.R.Horton have cut prices over 30%. By all means keep building, I want to see Sacramento affordable once more.
Both the LATimes and Sacramento Bee are sending me E-mail ads, notifying me of the great new price-slashing deals from Centex (~$90K price reductions).
Wonder how much Centex is paying these newpapers for this service?
can someone verify if the “30%” off is actual discount from a previous prices or just a 30% discount from an imaginary high list price that no on actually paid? That is, did people in the first few phases acutally lose 30%?
based on what I have been reading here, most buyers who purchased new homes 1-2 years ago are still ahead (not talking about condos).
Most builders have raised their prices significantly during that period because buyers (speculators) were wanting to pay almost anything just to get into the game. So most of the reductions are more like removing the speculative premium part of the price (which probably still earns them 20-50% profit).
sure, but Pamela Anderson just bought a condo on the strip, yahoo front page news told me so, so they’ll be okay a while longer.
Nope. Would have to pass a referendum. Twice. Legislature alone can’t do it.
Not gonna happen.
only one thing to do: wait some more.
Santa Clara County inventory 2006 (mlslistings.com sfh/condos):
1/3/2006 2641
2/3/2006 3095
3/3/2006 3488
3/23/2006 3745
I say: “Condotino condos for everyone!”
And to salute Mr. Toscano down south, I say:
“San Diego condos for everyone [who] wants to live here!”
Speaking of lovely Condotino, the lower end of the bracket is seeing no action whatsoever. A few price reductions in the listings my realtor sent me today.
Some YOY declines!!!! Santa Cruz, No wine country!
This is a good start. Give me 2-3 more next month and the ball should start rollling our way!
Hold on, wait a second. I thought RE only went up?!?
MUAHAHAHAHAHAHAHAHA!!!!
“Meanwhile, the February 2006 median price of an existing home in the state decreased 2.9 percent compared with January’s $551,300 median price.”
But I thought prices always took off like a rocket with the advent of the red-hot spring sales season? Don’t tell me that CA prices can drop!???
“The state’s builders think the solution is more construction.”
I think the solution is fewer investors creating transient demand for houses which they really don’t need and can’t afford to own unless there is a mania driving prices through the roof. I also think the latest CAR numbers suggest the free market is providing a solution to the problem which will swamp out the effect of government and industry efforts to keep the mania alive.
I call bullshit on something: They say unsold inventory is up 109% (6.7 months to 3.2 months); while the days to sell a home is up only 30% (52 days vs 40days).
Good point. Even realtors will admit the days on market thing is a joke.
Yes, good catch.
Because they keep pulling those homes off and relisting them therefore reducing the number of days sold.
Bubble BUTT,
I agree wholeheartedly. This practice is happening daily in Santa Barbara.
52 days to sell on average, after listing the home for fourth time…
kinda like Adam Sandler’s movie “50 first dates” ???
In LA , Villaraigosa wants to double spending for affordable housing. Good in theory, but when you look at the qualifications you see the flawed logic. Money gets diverted from schools and police to subsidize very low income residents’ housing. Why? LA has an oversupply of these workers so why would we spend $$ that we do not have to retain them? Let some of them go - everyone would be better off.
People in the $125K+ bracket are the people that CA should really be afraid of losing, and yet you will never see affordable housing built for them. That is why the upper middle class is fleeing to greener pastures. Why should people making $125K+ have to live in apartments while subsidizing the new homes of people at the bottom rung.
Ahh, the beauty of the People’s Republic of California….
Build more low-income housing and give it away for free; get more gangs, bad schools, and crime-ridden neighborhoods in return. Go Antonio V! (We sure miss your posts here…)
btw, this always the standard procedure in Blue states.
standard procedure in some parts of Europe as well
free housing for (illegal) immigrants and people who spend more than they get from social security (on cars, plasma TV’s etc.).
In my home town, illegal immigrants often get the very best housing; the town council buys it for them ‘because they have to live somewhere’ and because the most expensive homes are usually readily available on the market. Of course these homes are readily available because they are way overpriced, but that is something politicians do not want to talk about.
Some of those European immigrants don’t care much for cartoons…
Go to Nantucket and make that claim. They’ve been having a problem hiring civil servants and lower paid medical staff for years. You have to keep in mind how many lower (than $125M) paid people are necessary to keep up civil infrastructure.
Are you kidding? Civil servants and medical assistants in CA make more than many college graduates.
Oh no, the lower-income people I am referring to are those making minimum wage or are illegal and there is no shortage of restaurant workers or domestic help in LA. What makes it doubly bad is that so many people get paid under the table here that if you combine the hidden wages of some of these people with the benefits they collect, they are doing better than most of us.
This from DataQuick (dqnews.com):
“The use of adjustable-rate mortgages for home purchases has declined significantly in California during the past three months, the result of more caution among buyers and lenders in a market that is seeing slowing increases in home values, a real estate information service reported.
In February 51.9 percent of all home buyers financed their purchases with an ARM, down from 63.7 percent in January, 68.7 percent in December and 70.9 percent in November, according to DataQuick Information Systems.
The use of ARMs, which are easier to get and are considered by many to be an indication that buyers are stretching their finances, peaked in May last year at 73.7 percent. Peak usage during the prior real estate cycle was in September 1988 when ARMs accounted for 66.1 percent of all home purchase loans.
“Some of the financing issues at play here are fairly complex and would include this year’s higher conforming loan limit, the spread between the cost of an ARM and a fixed-rate mortgage, use of equity lines, and federal regulators who have recently told lenders to lower risk levels,” said Marshall Prentice, DataQuick president.”
More caution among buyers and lenders - maybe, but it could be the fact that short term rates to long term rate spread has collapsed and that there is virtually no benefit go going ARM anymore.
Of course! It’s not as though borrowers all of a sudden became more risk averse LOL!
That’s a totally preposterous claim - pure nonsense speculation that the RE complex is so good at making and then retracting the next week with some new silly BS claim — without consequence to credibility…
I believe the reason for the drop in adjustable rate mortgages is due to the fact the speculators have vanished. Almost all the flippers looked for short-term, cheap financing to accomplish their goal. ARM’s and NegARM’s were their tool. Now the only adjustables closing are the fools who buying into the bubble, but can’t afford it. What I’ve seen over the last year is that if people can afford it, they’ll take the fixed rate mortgage. But again, I believe the drop in ARM’s is due the fact that speculation has dried up.
I totally agree with this assessment. I can actually understand a flipper’s mentality of getting the cheap money at risky repercussions down the road- simply because they would not (ideally) “own” it when the A.R.M. adjusted.
It’s unfortunate that others were/are so caught up in getting “in” to the market that they totally disregarded the ramiFucations of their actions.
In 2004 a 5 year jumbo ARM (say $500K) was only 4.25%, while 30YFM was 5.8-6%. Today 5 year jumbo arm is 6.5%, while the 30YFM is 6.6% !!! [All rates for A+ credit]
I’m sure the spread for 2 and 3 year ARM was much greater in 2004. ARMS are only for the insane now.
It’s funny that still 51% are still getting ARMs
Every one of my friends that bought a home in the past 3 years took out an ARM. It was the only way that they could buy into a neighborhood without bars on the windows. And mind you, every one of them has a HHI of at least $150K+ I would guess.
How absurd is it that a “starter home” in “decent” parts of LA costs $650K (2 BR condo)-$850K+. Sure, they could move to cheaper areas, but these are people with MBA’s from top 10 schools. Living in Hawthorne or Van Nuys isn’t an option.
“The primary reason for the out-migration couldn’t be more clear. Homes are simply too expensive in comparison to incomes. And as housing has become pricier, more and more people have left. San Diego is indeed a great place to live, but nowhere on earth is so wonderful that people will pay any price to buy a home there.”
It is not only that many will not pay any price to buy a home in SD, but that many cannot possibly afford current price levels. In fact, it is only through suicide financing hidden by euphoric home equity gains that many recent buyers were able to purchase. Now that prices are flat or falling and inventories are climbing against a backdrop of higher interest rates and increasing concern about credit underwriting standards suggests that yesterday’s marginal buyer is today’s priced-out emigrant.
““‘Unsold inventory rose again in February to a 6.7 month supply, one of the highest inventory levels in several years,’ said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.”
can’t ya just picture old cruella trying to spit out these words?
I love that too - funny how Leslie has trouble remembering when the last time was inventory hit 6.7 months. A few months ago, Leslie had no trouble recalling the biggest price increases since [date]19xx. Been drinking too much Leslie?
But who said a society could have more than 70% home ownership ratio
Correct me if I am wrong but isnt that a high home ownership ratio?
Yes, but it’s alot lower than that in CA
Yes, but it is about 9% higher in CA now than it was before the beginning of the bubble (from 55% up to 60%, if memory serves)…
I think I heard somewhere on the news that the actual number is actually closer to 56% - the 70% comes from the fact that multiple houses are owned by a single individual.
The only stat. that matters to me is that homeownership by working families is the lowest since 1976. Guess those tax breaks are really helping…
I think the real “actual” number is lower than the 56% quoted, if you include those ‘homeowners’ who are highly overleveraged.
Rich Toscano
good article by him! talking down the “every one wants to live here” strawman.
Every one wants to leave here — Good pun, Rich!
Thanks Ben E. for the link. I found this while looking: http://www.armls.com/pdfs/SoldStatsFeb06.pdf
& Thanks Ben for this fabulous blog–I sold my house in Oct.
Ahhh Leslie Appleton-Young. Remember she predicted that there is no bubble, demand is strong, housing is sound, and that prices will keep going up into the stratosphere.
Now what Miss Appleton-Young? Is that egg on your face? Is Crow Pie for dinner?
If she worked for a real company, and not a corrupt corporation, she would be FIRED for her idiocy. But then again, she serves the interests of the CAR. It’s the same as Scott McLellan going out there and saying that no one in the White House was involved in Valerie Plame.
Yeahhhhhh.. Leslie.. time to find a new job.
organization, not corporation. It might as well be Enron.
… there is no bubble (NOT!), demand is strung, hissing is sound, and that prices will keep going up into the stratosphere until the hard crash…
She sounds like a classic paper shuffler… grabbing a stack of papers and pretending to work, when the boss man comes by.
A large segment of society has to always be mobile or nomadic due to their marketability within the job market. It is also healthy because it means a higher %age of rental units are available and affordable to those performing the ancillary jobs within a viable community. Current high housing costs has not only robbed out children of housing within a given community but has also locked out those performing much needed ancillary tasks. Low income assissted housing is just another way of trapping this segment of society into a debtors prision.
I don’t know about the rest of you but I used one of those rent or buy calculators to see what I should do (like I don’t already know, dah!). I put in my current rent vs buying a $500,000 house with associated costs (including tax bracket) and a 5 yr occupation span…..and viola, it said that after 5 yrs that I would be ahead by renting to the tune of $93,000. But, you can’t even get a decent house here for under $700,000; so when I see the sun com’in up in the morning I can smile, gas my car without worring about gas prices, eat in any restaurant I want, take that vacation that I want, actually purchase that new car on a 3yr loan, and I can damn well get a good nights sleep.
All this while throwing money away on rent?
While I totally agree that renting is now far better than owning, I have lately read some posts about rent going up considerably in certain areas. Certain areas. I have read about people who wanted to move but were amazed by how much rents have increased in their “target” town.
Is this a trend? Has the greedy apartment-to-condo conversion trend caused rental prices to rise in some areas? Yeah. I know I can get a helluva deal on a golfcourse in Phoenix, but in an area I might actually be offered a job is the discount for renting diminishing?
rents are soaring in scottsdale…thanks to condo conversions… btw… the conversions are no longer selling…many projects can’t sell… some are 1/2 empty or more.. stupid.
Dear Phuck,
Well said.
Rents have climbed sharply in Irvine. The Irvine Company’s target increase this year is a 6.5% increase…same for next year.
NAR Reaches Up Ass, Pulls Out Numbers
http://www.xanga.com/russwinter
Are you trying to tell my they full of bullshit? They would not do that… would they?
hehehehe
Are you saying they full of bullsh*t? They would not do that would they? Interesting data, thanks.
What’s next, NAR asking us to pull their finger???
Jon Lansner’s blog today -
Selling a home? You’re not alone
Let’s face it. There’s only reason to look at the Realtors’ monthly existing-home-sale report: the dirt on inventories. So here’s February’s “Unsold Inventory Index” for single-family detached homes being sold by owners:
The O.C.: 10.4 months worth of homes to sell vs. 5.7 months for the same period a year ago.
California: 6.7 months vs. 3.2 months a year ago.
U.S.: 5.3 months vs. 4 months a year ago.
He’s talking my language.
That is significant.
I would love to gloat over there but the comments are off or not working.
Isn’t 6 months the typical buyers market threshold CAR/NAR economists liked to bandy about.
We just blew right through that milestone. Inventory is still building in OC.
Ya THE OC inventory is up 56% since January from 7,245 to 11,339 as of 3/23:
http://bubbletracking.blogspot.com/2006/03/tracking-orange-county.html
Let me get this straight. The builders want to build more housing in places like Sac? And only luxury homes because that is all they can build due to high land costs? And the higher income, college educated, earning more than the median (like me and my wife) are fleeing CA in droves because we are not willing to take out a suicide loan to pay the absurd price of $700K+ for a house that should be (and was 10 yrs ago) priced around an ave of $300K+? So the inflow is still immigrant (nothing against them) but no money, higher birth rate among lower income, and all of the phantom (foreign) high income people buying in droves, are going to buy all of the 700K+ houses? I think they need to concentrate on building some starting homes where people actually work and so that they aren’t commuting 2 hr + each day, and people can afford to live here. The market will eventually straighen it out, but it will be at a terrible cost. Since prices are now going down, people that bought with suicide loans will be hurt (sorry, but do homework), flipper floppers will be hurt (no sympathy there), and those that “liberated equity” and find they have to pay it back, and value has sunk (no sympathy for stupidity). I have been visiting in the inland empire here this weekend. I saw a hand written sign coming off of a freeway on a pole (5 Bd, 3 Ba house, make best offer). Also billboards saying “I buy ugly houses, all cash, call XXX), and “we can show you how to buy 4 income properties, call XXX). So some are now desparate, and others still flipping and trying to drag more in. I am so glad that I left this area. San Diego weather is the same today, as it was 5, 10, 15, 20, 25, + yrs ago. I don’t want to be in that nutfarm where decent housing is out of reach. I will appreciate ABQ, where weather is still nice and housing much more economical.
The only place I have seen them building homes where homes are desperately needed is all the new condo projects in downtown Los Angeles. I know one person who bought a condo in one of the earliest projects they put up downtown and he was thrilled. No more battling traffic every morning to get to work! In fact, he could just walk to work! Another guy was quoted in a news article stating he sold his house in Chatsworth and moved to a downtown condo. He cut his commute time from two hours down to five minutes.
If I could afford it, I’d like to own one of those myself.
almost into the 30’s with my top RE articles.
#20 Pension funds play catch-up with high rise of real estate
#21 As real estate market cools, ‘buys’ return
Title
#22 Selling Condos? “The DJ’s Got To Be Really Good”
#23 Looking For A Condo? Grab A Sleeping Bag
#24 buyers are sending flowery bios, pictures, and letters to sellers
#25 The Housing Bubble Made Me Quit My Job
#26 L.A. banks strongest in nation, report concludes
An economist might argue that the market is now more efficient. I am not an economist.
I will argue that the inventory buildup underway is evidence that the housing market is efficient in the long run…
Here’s a little gem I read today…
“The idea behind this article is to point out that it is never “different this time.” The finisher to investment bubbles is that the laws of economics eventually set in. It often takes a long time, but eventually the cure for high prices is exactly that: high prices”
I believe builders intend to keep building at their current pace. My cousin is a planner for Pulte Homes in Northern California, and despite layoffs in their sales department they are still planning and building more.
This is the same thing that happened in 1990. Builders just couldn’t stop building. It’s what they do.
And why not keep building? They are probably making 200% profit and even if prices drop 40, 50% they’ll still be making a profit.
That doesn’t mean anything. I know a sign maker that took a huge deposit from etoys.com a few months before etoys.com went under.
They’re partially correct. However, the region’s planning departments would never allow the constuction of enough lower-cost homes that would lower the value of existing homes. Think about it: would you approve of anything that would lower the value of YOUR home? Where do you think the term NIMBY came from?
exactly.
What they do in the Netherlands is this: build very expensive housing, often with huge local government subsidies, to ‘help low income people buy an affordable home’. This morning I had to read half a page in the regional newspaper from a government slimebag who explains how great this is for low-income families.
The suggestion is that the people who buy these new expensive homes are now owning or renting homes that are too cheap for their income, and they will move up when they get the chance. Which leaves their former home for people with lower income.
Thanks to this clever strategy, home prices (especially the cheaper homes) keep rising, and that is exactly what government wants. Simply building cheap homes (which would be very easy to do) is not a politically acceptable solution.
In some cities there are even huge subsidies for demolishing cheap (but still very good) homes and building luxury villas instead. The low income people who can no longer live in their homes are forced to move to heavily subsidized rental properties.
Everybody profits: builders, local government (more tax income and probably lots of money for politicians under the table), home owners (prices keep going up), even the low income guy gets better quality housing (although they often do not want to move).
The only one who is screwed is the taxpayer.
I don’t know if anyone else has started to notice the latest buzzword floating around to combat ever increasing home prices>>>”Workforce Housing”. Here is LV/Clark county we have the most prime example of dancing around the obvious notion that home prices need to decline to and wala ‘workforce housing’ issue solved. I present to you the stinkiest piece of government ineptitude:
http://www.snrpc.org/WorkforceHousing/FinalDraftr4.pdf
208 pages of worthless garbage without giving one sentence of attention to the fact that maybe, just maybe supply and demand takes hold and prices gasp *decline. Instead, it drivels on about how local and state governments can subsidize the coming workforce by setting aside what sounds to me like internment camps for the newcomers and young people to serve the “homeowner class”. Where are we gonna keep our workers george? The absurdity of the situation grows everyday. My only solace is that its worse in CA…../cry
This happens in every cycle.
Back in the 89 bubble UCLA built a bunch of faculty/staff housing. After they got built nobody wanted them.
They had to sell them off to the private sector.
It will only add to the oversupply and further depress prices.
That will be good for the bears.
The Cal State University housing comes with strings - namely, if it’s sold in a certain period of time, the University shares any increased appreciation.
LMG:
Good point
LMG:
do you have an anonymous email?
4.73% on the 10yr today! Can 4.80 be too far off?
Coincidentally (I am sure!), the markets seem to be 100% certain the next FF rate hike will land squarely on 4.75%. Something is rotten in the District of Columbia.
GetStucco,
I agree. The frustrating part is if you say this, it is too easy for folks to throw out the “conspiracy theorist” baloney. Well…let’s see. No matter what organization folks work for, there are internal agencies who are supposed to oversee/check the system. However, in order to get to that position, you at sometime had to work your way up. Everybody knows everybody. Add in the fact that trillions of dollars are at stake. What the heck would a logical person think? Yup, there you have it.
I believe some enterprising financial econometrician could tease this out of the numbers, but I am not that enterprising…
The strategy is rather simple, though: Look at that persistently flat yield curve that we have seen recently (for how many months on end now?) in comparison to other similar episodes in economic history when the yield curve inverted. My guesses:
(1) In the pre-PPT episodes of curve inversions, there were none of these protracted periods when the long-bond yield matched the short-term T-bill yield within a few basis points for months on end.
(2) The extremely flat yield curve reflects a policy manipulation of the bond market designed to strangle the Conundrum without triggering a crash.
(3) The irony is that in order to kill the Conundrum through slow strangulation rather than by firing squad (a market crash), it is necessary to first eliminate the risk premium on the long bond…
Sounds like a good story to me. Come on, financial econometricians, show me the numbers!
hmm … 10-year rates are dropping in Europe again, now at 3.6%.
I think all you guys are too optimistic about higher rates killing the bubble. For the moment Ben B can ‘defend the dollar’ and the ECB takes over the pumping. In a few months when everybody believes Ben B is an ‘inflation fighter’ (most people on this blog already seem to believe this …) he can get back to the Greenspan program again - just in time for all those ticking ARMs that are going to reset.
It won’t make any difference. In the absence of another 9/11, Bernanke has no precedent for slashing the federal funds rate like Greenspan did in the months after the attacks. He just can’t do it fast enough to ’save’ anybody from resetting ARM trauma.
well, another day like today and the ‘uptrend’ in rates of the last month is definitely finished. so much for the ’strongly rising rates that will kill the bubble’ that everyone here is drooling about …
Interesting data from the latest U.S. census figures on counties: nearly all
California coastal counties (except L.A., Orange, and a few others) lost population from July 2004 - July 2005.
And everyone wants to live there? Sounds like an affordability and/or desirability problem to me…
I don’t know if people realize that, yes california has a nice climate, but not everyone likes the california lifestyle.
You must mean the arrogant OC types!!!
To LVrealprop,
Oh hear, oh hear yea, ‘Affordable housing’ means subsidized housing which I think falls under Section 515 housing. Could be wrong but read (google) it and you’ll get the gist. They will take existing (SFH) housing tracts of high priced housing and give low mortgages to low income families. Probably up to 25% of an existing tract.
But keeping that in mind, why can’t someone making $150,000 go over to Carmel, CA (by local standards $150,000 would now be low income) and be subsidized into a $1,500,000 dollar piece of heaven?
If housing prices are left alone, like water they will seek their own level of entry price. Subsidizing property is not going to solve this puppy. We have built too many houses way too fast with poor construction in ever expanding neighborhoods and it will take at least 5yrs to find which will become slums and which will become respectable viable non crime ridden neighborhoods.
subsidizing property (either through HMD, special mortgages, free loans etc. or subsidized renting) only drives prices up further.
For plenty of evidence look at the Netherlands, they have all the incentives that you can think of. The only ones who profit are the RE/building sector, homeowners who have more than one home and local government (taxes).
LA Time, AP
Adjustable Mortgages in State Down in February
http://tinyurl.com/l6jg6
“…California home buyers…In all, 51.9% of home buyers last month financed their purchase with adjustable loans, compared with 63.7% in January, 68.7% in December and 70.9% in November, according to DataQuick Information Systems.”
I don’t get it. Today, some (most?) ARMs have a HIGHER APR than fixed rate mortgages. If you look at E*Trade’s web site, all of their ARMS have a higher APR than either their 15 year fixed or their 30 year fixed. Are most of the ARMs being taken out option-ARMS, so that people can make lower (initial) payments, and thereby (barely) afford the outrageous prices out here?
I’m not in banking, but my guess would be that they’re still getting ARMs not for the rate, but because they need the I/O or neg-am “features” and those aren’t available with fixed-rate loans.
Here’s a nice **bank owned** property in Escondido. Sold for $925,900 on 10/29/04. It’s now listed for $875,000.
That’s a $50,000 drop from **2004** price.
BTW, I’m seeing a lot more foreclosures, “bring any offer” and “motivated seller” homes.
http://tinyurl.com/qm695
Oh, and it hasn’t sold yet…
Tiny URL didn’t seem to work…try this:
http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=061016027&page=2&property_type=SFR&mls=mls_sandiego&cKey=j1rr2bm6&source=SANDICOR
but it is in Escondido. There are new homes that’s 3,700 sqft in Valley Center selling for $670,000. I would say prices in the $600,000’s is more like it for this place.
This should keep people out of California (at least those here legally):
LA Times
Council Declares City an Illegal Migrant Haven
http://tinyurl.com/jwxgy
“Coachella has become the latest Southern California city to declare itself a haven for illegal immigrants.
Council members this week approved a resolution condemning a proposed federal crackdown on illegal immigration and declared Coachella a “safe, healthy and dignified place to live for its immigrant communities, regardless of immigration status.”
Something isn’t adding up with CAR’s Feb numbers.
The median price of a CA home was down 2.9% … but all the biggest regions were up: LA was up 0.9%, OC was up 3.2%, SD was up 0.5%, SF was up 1.7%, SC was up 3.4%. Heck, even Sacramento was up 1.6%.
All told … 15 out of 20 CA regions exhibited price increases, and only 5 CA regions exhibited price decreases.
How does that calculate to -2.9% for the entire state?
They may be releasing some moderately bad news to set the stage for a Spring/dead cat bounce.
As http://www.piggington.com has pointed out NAR is not afraid of putting out incorrect analysis to support their worldview.
I love San Diego, I lived there for a while. If this bubble truly bursts, that will be the first place I go back to.
http://www.novabubble.blogspot.com
What’s the second place you’ll go back to?