A Reality Check In California
Inman News reports on California. “New-home sales dropped 27.8 percent in July compared to July 2006, the California Building Industry Association reported today, and new single-family sales fell 20.3 percent, with median new-home prices dropping 4.8 percent and median new single-family home prices falling 8.6 percent.”
“Eleven of 29 regions in California had double-digit percentage declines in median new-home prices in July compared to July 2006, according to the latest CBIA/Hanley Wood Market Intelligence New Home Sales and Pricing Report, with data not available for three regions.”
“Among markets with 100 or more new single-family sales in July 2007, median prices dropped 27.6 percent in the Los Angeles-Long-Beach-Glendale area, 12 percent in the Stockton area and 10.8 percent in the Fresno area, according to the report.”
The Sacramento Bee. “Sacramento’s 2-year-old real estate downturn has a good chance of hitting bottom in 2008, banking and building industry analysts told struggling area builders gathered Wednesday in the capital.”
“Sacramento’s journey to recovery has ‘been a longer road that I thought,’ said Steve Smiley, a managing director for Hanley Wood. Smiley predicted that builders are likely to end this year with about 9,000 new home sales in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. That’s down considerably from his prediction a year ago that 2007 would end with up to 11,500 sales.”
“Through July, builders sold 5,068 homes in the six-county region, Hanley Wood reported, compared with 6,175 the first seven months of last year. During the recent housing boom, production peaked at nearly 18,000 homes in 2004.”
“Orange County economist and real estate agent Gary Watts predicted that if the Fed cuts continue, mortgage rates will fall on a majority of loans to 5.5 percent by Christmas.”
“Yet a real estate turnaround may be slower coming to Sacramento than other parts of California, he said. ‘It’s not going to happen overnight with you folks. It’s going to drag along for you a little longer than the rest of the state,’ Watts said.”
The Union. “A developer of a south county subdivision is downsizing his original housing project to meet the demands of a changing real estate market. The one-time luxury housing development is now being repackaged as a subdivision for smaller, lower-priced homes and senior apartment complexes.”
“Dave Snow, president of DAS Homes, is bypassing his original plan of two-story custom homes with pricey doors and granite countertops priced between $495,000 to $860,000 for smaller single-story homes with tile countertops priced at $450,000 to $600,000.”
“‘There’s a lot of people just as happy with tile countertops if it can save them money,’ said Mimi Simmons, who is handling sales for Saddle Ridge.”
“Snow said he will keep a watchful eye on the market, and if it continues to show stagnant signs, he would have to re-evaluate his plans for the site.”
“‘Ultimately it’s my responsibility to be open-minded and meet the demands of buyers. If the community needs housing, that’s our goal. I’m not going to build a project out if there’s no buyers,’ Snow said.”
The Orange County Register. “Sales contracts for new homes fell almost 40% in Orange County in July, led by a large drop in sales of new condominiums….according to Hanley Wood Market Intelligence of Costa Mesa.”
“Buyers signed 185 sales contracts in July, compared to 307 in July 2006, the research firm reported. It was the lowest monthly figure so far this year.”
“‘I think it was July where we really stated to feel the problems associated with the subprime (loans),’ Hughes said. ‘That affected the contracts.’”
“Condo sales dropped nearly 60%, falling to 55 units going into escrow. Buyers also signed 43 contracts to buy townhomes or ‘plexes’ (such as duplexes and triplexes), down 42% from a year ago.”
The Union Tribune. “Mortgage and real estate brokers say that the Federal Reserve’s decision to cut a key interest rate will help some homeowners pay off their bills instead of going into foreclosure.”
“But most say that the interest rate cuts and legislative reforms will not immediately revive the real estate market. Instead, home prices and sales will stagnate or decline deep into next year, with no recovery until late 2008 or early 2009, they say.”
“‘I believe the market will weaken more in the next few months, and it may weaken over the next year,’ said Gary London, president of the London Group of Realty Advisors in San Diego. ‘If the economy recesses, all bets are off,’ he said.”
“The White House yesterday appeared to soften its opposition to a congressional initiative that would allow Fannie Mae and Freddie Mac to temporarily buy, bundle and sell as securities loans exceeding $417,000.”
“Although such moves will benefit people hoping to buy into high-priced San Diego County, they will not spark a quick turnaround in the market, many mortgage and real estate brokers said.”
“‘This will help people coming into the market to buy homes,’ said Jan Wright, a San Diego real estate agent, who specializes in selling foreclosed or distressed properties. ‘But adjustable rates are going to go up no matter what. Anyone who has two-year, three-year or five-year adjustable notes is going to get hosed no matter what.’”
“‘The whole point of those products was to refinance when the home appreciates in value. But homes aren’t appreciating,’ she said.”
“Wright said she is seeing sharp cuts in home prices, which she expects to continue. She just helped sell a home for $350,000 that was purchased a year ago for $395,000.”
“‘The guy, who had a two-year adjustable rate note, was looking at a homeowner across the street who had just brought his sale price down by $200,000 and another neighbor who was going into default, and he figured he would sell his house and just rent until the market settled,’ Wright said.”
“Mary Otero Gonzalez, president and chief executive of the San Diego Home Loan Counseling and Education Center in North Park, said she didn’t believe the Federal Reserve’s action would help thousands of homeowners with little equity who are struggling to pay adjustable subprime loans.”
“‘If their loan is upside down – where they owe more than it is worth – it will be difficult for them to refinance,’ she said. ‘They probably won’t be able to.’”
The Voice of San Diego. “The success of the housing market earlier this decade inspired Californians, business-inclined and otherwise, to enter the industries tied to its booming ascent, even after it started to show signs of slowing.”
“But a plummeting number of home sales, dropping prices and increasing foreclosures have left the real estate-related industries reeling of late.”
“Local economist Alan Gin delivered a speech to a group of Realtors recently, telling them about the industry job losses in the county, and was shocked when the crowd began cheering.”
“‘It’s not good because we’ve got fewer jobs out there, but some people in the real estate industry might argue that it’s a good thing,’ Gin said. ‘Some people during the real estate boom just thought it was a way to make quick money.’”
“‘[The job loss] is almost a healthy thing,’ said Realtor Lynn LaBreche Hamilton. ‘It kind of weeds out people that maybe weren’t the strongest agents. Back then, everybody had a sister who sold real estate.’”
“One self-employed loan processor in North County who’s been in the industry for a dozen years said the slowdown in work means she’s headed for foreclosure on her own home. She asked to remain unnamed so that the few clients she still has don’t disappear entirely.”
“In 2005, she made $120,000 processing loans for several mortgage companies. Last year, her income was about one-third of that. And now, she said, her income has dwindled to almost nothing.”
“She made enough to buy a condo for $309,000 in 2005, and to rent office space for her business. Her monthly mortgage payment is $2,300, she said, nearly six times what she earned last month. She’s assessing her options to get out of the condo and thinks she will probably end up foreclosing on it and moving in with her boyfriend.”
“She moved to San Diego from Massachusetts with a degree in communications more than a dozen years ago. When she arrived, she did what she called the ‘move to San Diego and don’t know anyone’ jobs — assistant to a school photographer, door-to-door restaurant coupon sales. Those aren’t an option now, she said.”
“‘Absolutely not,’ she said. ‘I’m 40 years old — I’m not going back to selling coupons door to door.’”
“Mortgage processing was her ticket out of those jobs, so she believed. But her financial livelihood was doubly tied to the housing market, in her job and in her La Costa condo, which she doesn’t expect to get more than $260,000 for if she were to sell.”
“‘A lot of my colleagues that are in title companies are being laid off,’ he said. ‘Direct banks, lenders and other mortgage companies are closing down, because they don’t have the products anymore.’”
“And the people who were once flying high are stuck now, he said.”
“‘There were a lot of people who were making a lot of money and not doing much work,’ he said. ‘And now they’re realizing that they’re not going to make $10 or $15K a month at a regular job, even if they have a Ph.D., so it’s a reality check for them.’”
“Orange County economist and real estate agent Gary Watts predicted that if the Fed cuts continue, mortgage rates will fall on a majority of loans to 5.5 percent by Christmas.”
Does Gary have any predictions on how far OC prices will drop?
See my post today - Sorry Gary rates went up…
http://bakersfieldbubble.blogspot.com
Yeah, but 7% for ‘07 is still in the bag.
http://www.impactre.com/Forecast.html
Another bad year for us Pundits!
Let’s assume Gary was misquoted. Could he have been talking about the interest rate of a 30 year fixed loan?….
“mortgage rates will fall on a majority of loans to 5.5 percent”
False…long rates (like on 15 and 30 year fixed rate mortgages) track *expected* inflation pretty well…and loosening the reigns on monetary policy, tends to encourage inflation. Adjustables, on the other hand *might* come down, but only if LIBOR goes down as well. Gary Watts is still an idiot, cheerleading his way past the grave.
After his 15% in the bag did not work out you would expect this stooge Watts to fade away, but he just keeps on going without any mention or regret(or apologies to home buyers who listened to him), I call this the Jim Cramer syndrome after he did the same thing after the dotcom bust.
“‘Ultimately it’s my responsibility to be open-minded and meet the demands of buyers. If the community needs housing, that’s our goal. I’m not going to build a project out if there’s no buyers,’ Snow said.”
Translation:
There isn’t a Snowball’s chance this gets built…
“‘There were a lot of people who were making a lot of money and not doing much work,’ he said. ‘And now they’re realizing that they’re not going to make $10 or $15K a month at a regular job, even if they have a Ph.D., so it’s a reality check for them.’”
Yes, as is the case in the aftermath of any bubble. After the dot com pop, I rapidly lost count of the tales of woe that I heard from former high-tech workers who became waiters/waitresses, store clerks, etc. Noble and productive jobs all, but nonetheless classic examples of wage reverting to what could best be described as a true worth mean.
Of course, the scale of this bubble dwarfs the dot com debacle in every respect, and will have predictable relative consequences on wages, etc.
Spot on! It’s funny…every year my accountant gives me a profile that shows where my income falls relative to other tax returns. Although my percentile remains fairly steady I’ve always wondered how many people who earn more than I do in a particular year fall back 5, 10, or 25% lower in following years??? Bonus volatility tied to aggressive borrowing cannot end well - and it’ll be 2008 before all those ARM’s in ‘06 start to reset, only to sell into a market full of ‘07 foreclosures…! Good times! I have butter and salt, will travel!
This is exactly what I have been thinking about the last few days. What is underemployment like. Realestate agents, mortgage brokers, and contractors won’t show up in the official unemployment yet in massive numbers because they are still employed. Granted they are employed, but they are making 1/8th their income from the previous year or less. How many contractors are working 20 hour weeks instead of full 40 hour weeks. How many people went from formerly high paying jobs to low paying retail or food service jobs. This problem won’t show up till they are officially unemployed and have given up on being employed by their respective industries. This won’t show up till wal-mart has to turn down job applicants left and right.
So many indicators are going to take months to actually show what is happening that a lot of people are going to get burned.
“‘Absolutely not,’ she said. ‘I’m 40 years old — I’m not going back to selling coupons door to door.’”
never say never.
“Mary Otero Gonzalez, president and chief executive of the San Diego Home Loan Counseling and Education Center in North Park, said she didn’t believe the Federal Reserve’s action would help thousands of homeowners with little equity who are struggling to pay adjustable subprime loans.”
mortgage rate is tied long term treasury rate, which has gone up due to inflation fear. so instead of helping, Bernanke just put another nail in the housing bubble coffin.
“mortgage rate is tied long term treasury rate, which has gone up due to inflation fear. so instead of helping, Bernanke just put another nail in the housing bubble coffin.”
Who’d a thunk there’d be a little silver lining behind that cloud?
Well, yes and no. Most FRMs are indexed to the 10-year Treasury rate, however ARMs are typically tied to LIBOR, which in turn moves in tandem with the FFR. So, it should provide some limited relief to option-ARM & NINJA-ARM borrowers experiencing a rate reset, but not if they are underwater and want to refi to a FRM or need to sell.
Yes, but, the spread between LIBOR and the loan rate will increase as borrowers increase loan-loss reserves…so you could have a .25 drop in the FFR, and still see retail rates move in the opposite direction to capture risk. I’m not a banker, but it seems that risk-premiums have increased substantially since early August and will counter Fed moves over the short term?
That’s lenders increase…not borrowers…duh…
Right Nightowlsix.
Even if the LIBOR gets moderated by low central bank rates (has to happen in US and Europe), risk premiums will still send short-term rates upward, or at least keep them from falling. Simultaneously, long-term rates will skyrocket due to inflation risk.
It’s risk, risk, all around. Wherever it stops, it will not rebound!
Geez - everytime I turn the corner with a new-updated understanding of the financial relationships we’ve come to know and depend on - I find something like this…and just chuckle to myself… Silver-lining indeed. And you can catch it all on the WSJ Market Data Center - retail rates haven’t moved down at all…
She’s getting a little too old to work for an escort service and get top dollar, but then she does have a boyfriend. How long is he willing to support her is another question since she must have expensive habits having saved nothing while pulling in a $120,000/year.
She will have to marry him. omg.
Guess that would make him the poor sucker left holding the, umm, bag.
In california, how much is 120k after taxes?
46 cents. That sunshine tax is a killer.
About $82K w/o mortgage deductions…
“‘Absolutely not,’ she said. ‘I’m 40 years old — I’m not going back to selling coupons door to door.’”
never say never.
Exactly, repogirl. This is a concept that drives me nuts. I see people 3 levels below me at work and they are too good to do so many things. It’s beneath them. Much of my value comes from the fact that I will do the nasty, awful stuff that other people don’t want to do. If it involves tedious work, I will do it. If it involves getting dirty, I will do it. I don’t see that ever stopping.
Leadership is about doing the things you don’t want to do but you know they have to be done. Once you are too good to do stuff then you are no longer a leader and you do not have much of any value to anybody. If my wife and I hit hard times, I will go door-to-door with coupon books, if that’s what it takes. And I will do it as well as I can.
cityboy, same here. pride has no place in providing for my family.
We do what we must..my husband and I made the decision one day to open our own business..we drove beat up cars, we laughed that we could not even afford to sniff MCDonald’s fries..we sacrificed and it got us to where we are now..no diffent than my parents did..we all need to do what is necessary to survive..and enjoy the stories that go with it…
The problem is that this goes against the current entitlement track that we are on….work and saving is no longer valued, and I for one am sick of it.
Its amazing on this blog that the issue of property tax revenue loss is not covered and what that means for cities and towns across the country as an issue. The fact that these cities and states have creates such ridiculous entitlement structures for everyone (totally unsupported by stable revenue flows) is a joke. It makes all of us that work hard and save even more pissed, since politicians will just claim there is no budget items to be cut and will have to pile on even more taxes.
RE: Much of my value comes from the fact that I will do the nasty, awful stuff that other people don’t want to do. If it involves tedious work, I will do it. If it involves getting dirty, I will do it. I don’t see that ever stopping.
It’s called being a survivor.
If socio-economic Dawinism were allowed to run it’s course in this land of Oprah worshipers, half of this country would be dead by now.
“I will do the nasty, awful stuff that other people don’t want to do…”
I’m a high school math teacher.
LOL
We Rent!, you just won the “who has suffered more” contest.
But We Rent! has also just won the “Who is Responsible for the Innumeracy of all these FBs?” Award.
NR
If she has got a good body, she can do the stripe pole dance. However being that she is a real estate agent, I doubt she has that God-gift of the female-male fatal attraction.
There’s always: “Hey honey, looking for a date?” 40 is not too old for that. But she’ll have to be quick so as to move a lot of product and make a decent income.
“Sacramento’s 2-year-old real estate downturn has a good chance of hitting bottom in 2008, banking and building industry analysts told struggling area builders gathered Wednesday in the capital.”
“Sacramento’s journey to recovery has ‘been a longer road that I thought,’ said Steve Smiley, a managing director for Hanley Wood.
My take on that prediction is it’s about par for good ‘ol Handle-the-Wood. Just more of their up-beat stroking of a limb industry.
Sure, I have “a good chance” of rolling 7 on a pair of dice. But that good chance is only 1/6. I guess there could be a 1/6 chance that Sac in particular could hit bottom by the end of 2008, though I’m sure Calif as a whole will not do so.
“The White House yesterday appeared to soften its opposition to a congressional initiative that would allow Fannie Mae and Freddie Mac to temporarily buy, bundle and sell as securities loans exceeding $417,000.”
Old Mason-Dixon Line: North & South geographically
New Mason-Dixon Line: $417,000
Yes, but NOBODY can FORCE them to take a mortgage…and the cat’s out of the bag… their auditors will be looking at new paper very carefully…
“And the people who were once flying high are stuck now, he said.”
“‘There were a lot of people who were making a lot of money and not doing much work,’ he said. ‘And now they’re realizing that they’re not going to make $10 or $15K a month at a regular job, even if they have a Ph.D., so it’s a reality check for them.’”
- If you ain’t making 10 or 15k per month, then you aren’t **it.
Do these former ‘high flyers’ even have a clue that the whole thing was artificial?
Sounds like the dot com boom stories. People not doing much work making big bucks.
Nah, you could do NO work in the dot com days. You actually have put on clothes and lift a pen occasionally now.
On the contrary, I know lots of programmers who worked themselves to death during the dot com era. That’s why dot com companies provided so many amenities for employees (free lunch, free dry cleaning, free massage, etc.) It’s so the programmers can work days at a time without going home. They were being paid in stock options, which became worthless when the company went bust. So, on the contrary, they worked a lot and were paid very little.
Wonder who’ll get the pleasure of announcing to Gary Watts that the majority of those subprimes are tied to the LIBOR?
“In 2005, she made $120,000 processing loans for several mortgage companies. Last year, her income was about one-third of that. And now, she said, her income has dwindled to almost nothing.”
“She made enough to buy a condo for $309,000 in 2005, and to rent office space for her business. Her monthly mortgage payment is $2,300, she said, nearly six times what she earned last month. She’s assessing her options to get out of the condo and thinks she will probably end up foreclosing on it and moving in with her boyfriend.”
Some old proverbs come to mind, like “don’t count your chickens before they’re hatched” and “save for a rainy day”. And then there’s that classic Aesop’s fable: “The Ant and the Grasshopper”. Don’t know why those popped into my head like that, they just did…
Don’t forget one for the boyfriend! “Why buy the Cow if the milk is free?”
I won’t say what line of work I’m in (not RE), but I work in a seasonal industry and it cracks me up how many years it takes people to figure out seasonality. They are so happy has things start picking up in the late summer (and magically draw the graph going up forever), then come January things slow dramatically and even tail off for awhile. There is panic as if everything has permanently changed. Truth is, some people NEVER figure it out. Every year they think they’ve hit some magic point, and it will be up, up forever. Then seasonality hits and they are literally depressed. You can slap them in the face and walk them through how last year they same thing happened, they’ll say, “Yeah you’re right.” You can see they intellectualize it, but they don’t really get it and their emotions are still low — they can never adjust.
Sort of like Homer Simpson when he “couldn’t believe” his pumpkin futures when down the toilet Nov 1st…..
If you put all your eggs in one basket… be sure to sell it to someone for in exchange for their chickens.
It’s true. Especially when the basket weighs more than you could possibly hold.
New HBB tee-shirt. Picture of a grasshopper with a line drawn through it (the classic no smoking, etc.) And on the back “Ants Rule!”
Meet my sister, the land slut.
“‘[The job loss] is almost a healthy thing,’ said Realtor Lynn LaBreche Hamilton. ‘It kind of weeds out people that maybe weren’t the strongest agents. Back then, everybody had a sister who sold real estate.’”
“‘The whole point of those products was to refinance when the home appreciates in value. But homes aren’t appreciating,’ she said.”
BINGO. As neatly put as you could ask. Sorry Congress, too late to bailout the Titanic. I’ll always remember yooooooooooo, Fun Yun and Liareah.
“The White House yesterday appeared to soften its opposition to a congressional initiative that would allow Fannie Mae and Freddie Mac to temporarily buy, bundle and sell as securities loans exceeding $417,000.”
Oh, boy, sign me up! Just can’t wait to buy a bundled security based on a rapidly depreciating asset. Or maybe they expect these 2008 tranches to be ‘contained’?
Sell to who? My head hurts.
Yeah, that’s what I’ve been wondering too. Are investors more likely to buy from Frannie? If so, why?
sell to whom.
This scares me! Please inform me, but how does this help? If the loans are backed by Fannie & Freddie will there magically be a market for these loans? If so, who? Hell, if this happens we should all go out and buy houses! Right! What they will do to prop up these insane prices on the coasts!! I hope they all rot in hell!
Maybe someone here can awnser something for me:
New-home sales dropped 27.8 percent in July compared to July 2006
Why are they reporting on July numbers at this point? Does it take that long to report this kind of information? And, obviously, won’t the August reports completely dwarf these numbers?
dqnews already has August statistics for California cities & counties. Maybe “new home sales” are slower to tabulate than aggregated reports that count all recordings.
“Local economist Alan Gin delivered a speech to a group of Realtors recently, telling them about the industry job losses in the county, and was shocked when the crowd began cheering.”
Gotta lov that crowd, cheering their own demise and don’t have a clue!
They all must have gone to Bizarro State University
Actually, read the rest of that post and it makes a lot more sense:
“‘[The job loss] is almost a healthy thing,’ said Realtor Lynn LaBreche Hamilton. ‘It kind of weeds out people that maybe weren’t the strongest agents. Back then, everybody had a sister who sold real estate.’”
It’s a dog eat dog world alright.
“One self-employed loan processor in North County who’s been in the industry for a dozen years said the slowdown in work means she’s headed for foreclosure on her own home. She asked to remain unnamed so that the few clients she still has don’t disappear entirely.”
How could she have not made serious bank, being in her gig for a dozen years, during the bullsyist of bull markets?
RE: “One self-employed loan processor in North County who’s been in the industry for a dozen years said the slowdown in work means she’s headed for foreclosure on her own home
Scores of women used the high incomes in this bubble to ditch their husbands, thinkin’ the gravy train would last forever.
Watch for an Oprah show where they will all be boo-hooing and cryin’ that the sexist, chavinist Pig-Men, and George Bush have destroyed their American Dream.
Geez, I think I’m gonna gack.
Is that the same show where everyone looks under their chair and finds keys to a condo… the Chevy Aveo of real-estate!
I can just hear the crowd murmuring, “F-that! Who want’s to pay property taxes on this turd… can I exchange it for a tee-shirt?”
One more thing. I don’t know if it’s just me but some of the houses on Sacramento’s craigslist got alot cheaper today. 3 bedroom house in a decent area of Fair Oaks, 275k. I read this blog daily so I know what to expect for the most part, I just don’t think my eyes are used to it yet. I love being a renter by the way.
Tampa Bay Craigslist is still stinking out the joint, wishing prices all over the place. I don’t mind renting for now, but I am on the huntdown for a cheap cash deal and soon. I want to put my $$ into at least having a stable roof over my head if my bank acct is going to go poof. If this was a normal bust, I wouldn’t be so antsy, but from the show the a$$clowns are putting on in DC and Wall Street, I’m starting to get VERY nervous.
Good observation. And while we’re on the subject of craigslist. Does it seem absolutely nuts to anyone else on this board that people advertise million dollar homes on cragislist? Are those ads geared towards agents or something? If I was a rich dude and was going to buy a house for a million freakin dollars, I sure as s**t wouldn’t be looking on craigslist for deals, and I wouldn’t want my agent to either. Am I crazy?
I dunno, I’d look on craigslist, just for the heck of it. Many people just use it as a promotion tool, anyway. When I want to sell something fast or am looking for something, I throw as much $hit against the wall as I can and see what sticks. Our buyers came from an ad on a VERY obscure little specialty website, but in the meantime, I was getting calls from a realtor in CA and from people up in Michigan. Florida real estate was very hot at the time (2005) and people were digging deep to find it. At the time, I was completely clueless about craigslist.
No your not crasy. I would use craigslist for maybe a used car but not a house, let alone a million dollar house.
A Realtor is better?
I want to put my $$ into at least having a stable roof over my head if my bank acct is going to go poof
Nah-when the ramifications of peak oil and a bankrupt government cave in on the heads of the idiots who populate Oprah-Land, you wanna be able to get out the door. Might not be easy, but if you’re not mobile, you’re really limiting your options.
US is only the #22nd best place to live anymore.
I’m getting very, very nervous, too. What if the lower dollar encourages auslanders to see our real estate as a good investment, as their euros, or whatever, can make our real estate look attractive? What if the falling dollar has the opposite effect of what we’re hoping, rising values in gold, oil — and real estate? Could this possibly be a scenario?
I don’t think so. The bubble was a psychological thing based on the ‘RE always goes up-not making any more land-flip & get rich quick’ psychology. With markets flat or going down, the mania has to subside.
After the stock market tanks, the money will flow into commodities…….
only for trophy properties that don’t have to cashflow for the owner.
Hi. I think some people are starting to move from the denial stage to the anger stage.
A coworker of mine just started another conversation with me about housing. He’s usually pretty good about it, but today he got to a point where he was obviously very upset, the way people get when someone challenges them to provide evidence that their own religion is the correct one. Suddenly, even though he was the one talking, he turned around and abruptly left, waiving goodbye to me on the way down the hall.
I guess the thing that set him off was after he said “We’ll sit back and see if the prices go down.”, and then I pointed out once more that the prices have been going down for two years, many of the decreases have already been more than most people thought possible, and the foreclosure numbers have been increasing at an increasing rate for the last two years and show no signs of slowing.
Do you think I just overdid it? Fact overload?
I’m very hesitant to raise my voice when I talk to my co-workers about it, I’m still learning quite a bit and I don’t want to trivialize the situation that many people are facing, especially here (Sac). There are several of us around the same age that are working our asses off (IT) and renting/saving. I talk to them about this stuff all the time, I get so many thank you’s from people when I turn them on to this blog.
RE is no longer a discussion for polite company. I have tried to warn friends and co-workers about the bubble since 2005. I was Mr Gloom-and-Doom. Now I won’t talk about it at all, even if asked.
There was a time, if they had bothered to look into the situation, that they could have saved themselves. That time has passed. Talking to them now just seems like gloating.
Mum’s the word.
I guess you guys are right. The time for saving people is over. I’d better cool it.
Big V, do you work with me? What department are you in? That sounds like my co-workers. Oh wait, the drones are all interchangeable.
Im sorry but I’m still pissed about this concept of raising the loan limits on government backed loans so the tax payers can bail out Wall Street , the scum lenders, and the borrowers .
Does anybody think that the bail out loans are going to be given by prudent underwriting standards when they underwrite these loans .
I predict they just plan to buy huge blocks of loans and just take the loss .
Look, none of these loan appraisals are going to appraise out anyway based on the current market ,so how are they going to do the loan without just accepting the prior bogus appraisal .Loans are subject to current appraisals and as I see it that rule would be compromised in order to make these loans . They would be giving 120 to 130% LTV loans to the FB’s . You are talking about people who are going to walk because of not having skin in the game anyway .
To increase the loan amounts to the higher loan amount of up to 700k just opens the gate to the higher loan amount loss in the most fraudulent areas. This is a bail out plan to take over bagholder loans with the taxpayers paying for it .
If they want FHA to be a source of funds for new lending than use FHA in the future as a sourse of funds for new loans ,but to use FHA to bail-out current loans on the books is just a bail out plan to change the bagholder .
I guess my point is that the loan bail-out people are claiming that in part the reason for the bail-out loan are to free up money for the credit markets ,but you free up money by offering ‘new money ,not bailing out “old money”. Does anybody get my point . In other words I would be far more impressed if FHA was offering “new money ” to respond to credit tightening ,rather than offering a change in bagholders on “old money” .
Regarding some of these current FB’s ,they always had the option of trying to get a FHA refinanced loan ,but they didn’t qualify ,so how can they qualify now ?
I would rather FHA keep the loan money for new loans when the market gets stable and real end user buyers need financing .
FHA loans are nonrecourse loans, right? So that means the good ole’ gubment foots the bill for the $$ lost when these jokers get foreclosed on because they cannot make the monthly payment without an i/o pay option and a 2% rate. Bogus and corrupt.
Housing Wiz~
Watch for a court mandated housing debt moratorium when the shit really hits the fan in October.
Can’t have these poor people evicted in the dead of winter.
FEDS will make the MBS holders will eat the value drops, as a contribution to the civic good-or maybe give them all a tax write-off- while FHA/FNMA/VA picks up the tab for a mortgage re-write for whatever the shacks appraise for.
Appraiser’s will be instructed to ignore minimal property standards relevant to structural soundness and omit economic obsolescenses.
US taxpayer will the new bagholders.
It will keep people in their homes so that pretty soon another round of HELOC’s will be floated by bogus FHA appraisals to keep the US consumption based economy afloat a little while longer.
This will be the final act of a moral and ethically bankrupt governmental system which for the past 50 years has richly rewarded the indolent losers in our society.
It really is the end of the line.
FEDS will make the MBS holders will eat the value drops
Make their friends eat $hit? No way.
US taxpayer will the new bagholders.
Now that’s more like it. But, it’s more likely that all this mortgage talk will go no where. Too many competing proposals, to uncertain an outcome.
In a world where RE ‘professionals’ cheer the loss of jobs, Pols are going to find a lot of resistance to bailing out the home owners. Maybe kill the tax provision about forgiven debt, an give them a tax credit for a deposit on their new apartment, but a full scale bailout of home owners is, in practice, too thorny.
I saw a beautiful home today for 350000 in chino hills, pices are going down down down.
Prison adjacent for $350k?
A Steal.
there is chino and then there is chino hills. the CYA is not in chino hills.
“Among markets with 100 or more new single-family sales in July 2007, median prices dropped 27.6 percent in the Los Angeles-Long-Beach-Glendale area”
they gotta be talking about volume. typo?
If it’s a typo, it’s a typo in the source pdf! I think it’s probably a result of statistically low sample size causing wide variability. New SFH sold fell from 258 to 209 MoM, and the median sales price dropped from 450,000 to 360,990 MoM. So I think nobody believes that is representative of actual price declines… yet. I mean, c’mon -19%, MoM?! It’s more likely a skew in the sqft / sale.
HAHA!! Check out at SF/San Mateo/Redwood SFH: -1 house sold in June 07, but then 43 sold July 07 for a MoM sales drop of (This number is in the data!) -4400.0%, awesome!
I was about to argue with you (or them) about the arithmetic, but yes, I see that 43 = -1 * (1 + (-4400%)). Very funny. GIGO.
Guiding the Dollar into the Abyss
…We have seen these banks taking loans from the discount window at a rate of $2.7 billion per day. In other words, through the discount window alone, the growth in U.S. money supply is running at an annual rate of 50%. Got gold, anyone? Well, if that isn’t enough to convince you, I have a couple of things that might…
…The growth in the U.S. over the last 25 years has not been real growth. It has been the result of asset inflation and debt creation made possible by the U.S. dollar being the reserve currency of the world. We have been able to create money and credit and export our inflation right into the reserve banks of exporting and oil-producing nations.
http://tinyurl.com/ytwlxb
Is an “abyss” the same as a “toilet”?
Ah, it was 2 years ago that I discovered Ben’s blog… and what a pleasure it is to see all the predictions play out, especially in California. Time for “reversion to mean” for ratios of housing prices to incomes.
BTW, not sure if y’all have seen this… Digg it… and link comments back to Ben’s blog:
http://digg.com/business_finance/Why_Renting_is_Better_than_Buying_a_Home
Education can only cause buyers “sitting on the fence” to stay there. Don’t do it!
Holy cow… have you read the comments on digg? They are bashing renters and calling them foolish. You wanted to know where all of the buyers are coming from, there you go!
Once the digg community starts to sound more like HBB then we will know that the end is near.
Years away, years away!
test
Today I met another guy who moved to NM from CA. He told me that he had just sold a modest home in Yorba Linda (Orange Cty) for $675K. He said a flipper had purchased another home nearby (a thraser) for $640K. He said that dude was into the home another $100K and had it listed below the $640K and didn’t know if it was sold yet. He said that flopper was taking a blood bath (no sympathy from me). He said he hated CA also. Just thought I would pass that on.
I’m watching the Democratic debate on PBS. They just discussed the subprime issue. It is easy to say that not a single one of the candidates had a clue what they are talking about. They praised Bernanke. None of them had the brains, or the guts, to question the very existence of the Federal Reserve. There is not a giant amongst them. They are all economic midgets from what I can see.
“They praised Bernanke.”
Ya know - who coaches these people? Pols of all stripes got so used to praising AG that the standard reaction of any political hack towards a Fed chief will likely be “praise” from here until eternity.
I think it’s safe to say that anyone who threatens the Established Order of our Corporatocracy will get their balls ripped off by our in-the-tank media.
My friends on the right end of the spectrum can see this effect with Ron Paul.
“The hardest thing to explain is the glaringly evident which everybody had decided not to see.”
Ayn Rand
“The evil of the world is made possible by nothing but the sanction that you give it.”
John Galt
Does anyone know whether fannie or freddie take into account debt to income ratios? Raising the conforming loan amount still doesn’t make up for the fact that 20% wage gains haven’t been happening for the last five years.
Good news. CA property tax part deux comes due in two months.
Countrywide and Wells Fargo will need access to some serious cash…watch out for a digit coming off that checking account amount.
You mean the balance in my 15 year-old WaMu checking account may drop from $28 to $27!? :O (And I have to keep that account - a checking account that old is very good for my credit. But I think I need to bring the balance back down to $1 again.)
If you consider that the loose lending was going on well into 2007, we have many years of high numbers of foreclosures ahead of us, as these loans get blown out. I’d guess another 3 years, with constant pressure on prices and ever tightening lending standards. There’s nothing like high foreclosures rates to make lenders scrutinize every new loan application more and more.
Gary would predict sunny skies and pleasant weather as the snow starts falling and ice is forming, and skies darkening for the fiercest of storms.
I totally agree with you erik…
I live in Ventura County where there is no shortage of perfectly manacured parks and city buildings, fancy new road dividers with full mature trees out of the box… roads being paved every 6 months etc… it seems they are looking to find ways to spend this money… wait unitl this gravy train stops.. they will have to learn how to budget and cut … GOOD LUCK!
Gotta love those 600k homes 1000sq ft 2 bed 1 bath 1953 N. Hollywood or any SFV neighborhood beauties? These homes sold for 12k in the 50’s today they should be worth 89k no kidding, these homes were made with spit excuse the expression nothing has changed except back then a window could be left open, now you sleep with a gun under your pillow.