Temporarily More Affordable In California
The Desert Sun reports from California.”Home sales across the Coachella Valley fell 25 percent in August compared with the same month last year, a new report shows. DataQuick reported the valley’s median price in August for resale houses rose to $420,000, an 8.2 percent increase from year-ago figures. Sales of higher-end homes likely played a part in that increasing median price, analysts said.”
“A notable exception was in the Coachella Valley’s new-home sector, where the median price fell nearly 5 percent to $380,000 amid heavy buyer incentives and discounting, DataQuick reported. There was a 36 percent drop in new-home sales volume in August compared with last year.”
“The median price paid per square foot has dropped for nearly every ZIP code in the valley, said Andrew LePage, analyst with DataQuick. The valley’s overall median price per square foot dropped 4.3 percent to $226, with cities such as Coachella and Desert Hot Springs experiencing 20 percent, 25 percent, 45 percent or greater declines in per-square-foot prices, DataQuick reported.”
“‘That could be reflecting two things: depreciation in at least some areas and price segments within the market as well as a shift toward a greater portion of sales in more expensive areas that probably tend to have larger homes,’ LePage said.”
“‘Much of the value of a house is concentrated in the first 1,200 square feet or so, given the kitchen, baths, etc., and typically larger houses will sell for a bit less on a per-square-foot basis,’ he said.”
“With 8,417 homes on the market valleywide in mid-August, according to the California Desert Association of Realtors, buyers had plenty of options and considerably more bargaining power than in years past, analysts said. That has put downward pressure on prices in many communities.”
“A home price comparison index released by Coldwell Banker last week showed…that a single-family home in Palm Desert, for example, costs $461,250 compared to $526,500 a year ago.”
“‘While the price of this average, middle-management home dropped about 12 percent compared to last year, buyers and sellers need to keep this in perspective,’ said Ron Gerlich, regional VP of Coldwell Banker Residential Brokerage’s desert region.”
“‘The current fluctuations in real estate and mortgage markets have temporarily made Palm Desert more affordable than last year, creating a window of opportunity for both first-time and vacation home buyers,’ Gerlich said.”
The Daily News. “Home sales plunged across the San Fernando and Santa Clarita valleys during August as lending sector turmoil continued to roil the markets, a trade association said.”
“Sales in the San Fernando Valley fell an annual 33.1 percent to 552 transactions, the lowest total for an August since record keeping began in 1984, said the Van Nuys-based Southland Regional Association of Realtors. That’s the third lowest sales total this year.”
“Subprime loans have all but disappeared and the Valley median price is so high that potential buyers don’t have access to Fannie Mae and Freddie Mac backed loans capped at $417,000, or the conforming limit. And credit standards have been tightened.”
“‘It’s killing sales in the lower end of the market, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge. Blake said that asking prices in some areas of the Valley are now 10 percent under what homes sold for a year ago.”
“During August the inventory built to a 10.4-month supply, the first time it broke into double digits since September 1995. The record is a 23-month supply in February 1993. That’s the amount of time it takes to deplete the inventory at the current sales pace.”
“In the Santa Clarita Valley, sales fell an annual 25.6 percent in August to 186 transactions, traditionally a busy month.”
“The median price of a single-family home, which peaked in April 2006 at $643,000, fell an annual 8.9 percent to $560,000 in August.”
The Orange County Register. “Real estate consultant Pat Veling’s math says Orange County’s supply of homes for sale hit what he called the ‘troubling’ nine-month level, a point that could trigger price drops and cause the inventory of listings to go up even further.”
“Veling tells us, ‘Back in the early 1990’s, when I was measuring inventory in the same way (using a 12-month absorption period), the inventory really began to climb — and quickly — once we hit the 9-month mark. I have told you before that it eventually peaked at 19.2 months in November of 1994. I have also said that I would become far more concerned about inventory levels depressing prices once we got to this 9-month benchmark. By my calculations, we hit that number (Monday.)’”
The Mercury News. “Pushed to exaggerate home values during Silicon Valley’s real estate run-up, appraisers say agents and homeowners are now pressuring them to prop up those values as prices decline.”
“People ‘are trying to refinance to get their butts out of trouble, and the values aren’t there,’ said Mike Terry, who appraises homes in San Mateo County.”
“It’s not as easy now that the market has stopped in its tracks. But some real estate and mortgage agents are asking anyway, as homeowners become desperate to sell homes or refinance loans taken out in the past year or two.”
“Greg Walker of Almaden Appraisals said he was recently called by an agent who asked him if he could ‘get the same value’ on a house in Monterey County as it was appraised for six months ago.”
“The owners had done a cash-back refinance, paid off some credit card bills and were stuck with an $800,000 loan on a house now worth $750,000, he said. ‘You look at it, and there’s no way. The value was there six months ago but it’s not there now.’”
“‘What a lot of them do is what I call dialing for dollars,’ said Jim Manning, a semiretired appraiser with 32 years in the business who lives in Half Moon Bay. ‘They get on the phone and start dialing appraisers, asking, ‘Who can come up with this value,’ and ‘We don’t want it if you can’t.’”
“‘Most of us old-timers have thrown up our hands in the air,’ Manning said. ‘We’ve seen this industry nose dive.’”
Inside Bay Area. “Homeowners in an upscale subdivision where 34 new homes will be sold at auction are seeking some kind of compensation from the developer.”
“Anderson Homes plans to auction off the vacant homes or properties under construction in the Paseo West subdivision in Manteca as a way to stir up interest among homebuyers and fill the empty homes quickly, said Craig Barton, chief financial officer for the Lodi-based developer.”
“On Friday night, frustrations reached their boiling point, as Barton met with the homeowners in an emotional three-hour meeting. Following the meeting, Paseo West homeowners crafted a letter asking Anderson Homes for a $20,000 per owner rebate for their property.”
“‘We’re asking for something that would narrow the gap and make the blow less devastating,’ Paseo West resident Dave Cantrell said.”
“‘Will it solve everything? No. But, at least it’s not a slap in the face,’ said resident Joseph Leon. ‘We know we can’t stop them, but it’s a way for Anderson Homes to say, ‘This is not typically what we will do. We’re in this with you, and we want to stay a family.’”
“They are concerned that the auction will undercut property values by hundreds of thousands of dollars and that the current tight credit situation will mean only investors will participate in the auction.”
“‘If that happens, then they’ll most likely turn it into a rental community,’ Cantrell said, adding that the homes yards and features would be very basic, unlike those of the current owners.”
“Minimum bids start at $285,000 for a four bedroom, two bath home in the Manteca project, about 40 percent below previous asking prices in the subdivision. That home’s asking price is normally $460,850.”
“Still, homeowners in Paseo West, who acknowledge that the market is down right now, maintain that auction prices will disproportionately affect their property values.”
“Paseo West homeowners also chide Anderson Homes for overbuilding. Anderson Homes built too many homes at the Manteca site and in Los Banos when the housing market was strong. But as the market got cold, buyership slowly declined, Barton said.”
“‘At what cost do we have to pay for their poor business plan,’ Cantrell said, adding that in his background as a subdivision developer others did not extend themselves that way.”
“‘When we moved in, we knew we were paying more money, but we were also buying into a quality neighborhood where the price value wouldn’t go down,’ said Joseph Leon, who moved to Paseo West from Fremont 14 months ago.”
Got 1984?
http://money.cnn.com/2007/10/02/markets/4Q_outlook/index.htm
“Bad news is good news on Wall St.”
“Sales in the San Fernando Valley fell an annual 33.1 percent to 552 transactions, the lowest total for an August since record keeping began in 1984, said the Van Nuys-based Southland Regional Association of Realtors. That’s the third lowest sales total this year…
“Subprime loans have all but disappeared and the Valley median price is so high that potential buyers don’t have access to Fannie Mae and Freddie Mac backed loans capped at $417,000, or the conforming limit. And credit standards have been tightened.”
“‘It’s killing sales in the lower end of the market, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge.”
Then i suggest you tell your potential clients to START SAVING SOME F-N MONEY!!! You remember this cute little ditty we used to hear ” We’re saving to buy a home”?. Barely remember it, don’t you? Well, you’re gonna start hearing it again.
I know of three escrows that fell out because borrowers could not qualify. they have 20% down, but their month income is not enough. The new standard, which used to be the old standard, is that mortgage payment can not exceed 30% of monthly income or bank will not lend. The road to the bottom is long and hard.
“Hard” — yes. “Long” — not so sure. If 20% downpayment and 30% of income monthly payment cap come back into vogue, the correction may play out at lightning speed, regardless of what kind of interest rate subsidy bailout Congress manages to pass.
If you knew of three buyers with 20% down, then that truly is amazing. In tha last 5 years of doing countless purchases, the only people that had 20% were the “trade ups”. Of the folks who walked through my doors, that hadn’t sold a home and cashed in on some equity, few had enough to even cover the closing costs. And as for reserves? Forget about it. I remeber just staring at these folks in disbelief and wondering what the heck they were doing in my office. But of course the reason they were there is that the loans were there. No down? No reserves? No job? Sure, what the heck!
Amazing that many people have no cash in the bank. Saving money has totally gone of fashion.
“Saving money has totally gone of fashion.”
This is a natural consequence of a War on Savers, which understates actual inflation and protects the value of the DJIA while letting the U.S. dollar go down the tubes.
I can’t tell you how many six-figure earners I’ve seen that live paycheck to paycheck. It’s an absolute trip!
“…I can’t tell you how many six-figure earners I’ve seen that live paycheck to paycheck…”
Yea, I don’t understand that either, see it often…
“‘What a lot of them do is what I call dialing for dollars,’ said Jim Manning, a semiretired appraiser with 32 years in the business who lives in Half Moon Bay. ‘They get on the phone and start dialing appraisers, asking, ‘Who can come up with this value,’ and ‘We don’t want it if you can’t.’”
And they call this a profession.What a joke.
I see it too. Six figures sure ain’t what it used to be, although it is better than a sharp stick in the eye. When I wuz a pup, a millionaire was a big deal. Now, it’s billionaires. I think some six figure earners expected more of a “wealth effect” than they got.
Count my wife and I in that boat. We make $130K combined but have $0 savings and negative net-worth.
I got behind when I was in my 20s. Got caught up in my 30s, but then got wiped out in a divorce. Just finished paying off my $8K a year alimony that I’d been paying for the last 5 years, on top of my $12K a year child-support (that has several more years to go). I was making $65K a year, but $20K to the ex. You might call that $45K but child support isn’t tax deductable (tax on alimony is paid by the recepiant, but tax on child support is payed by the payer), so I was really living on the equiv of $40K income. Oh, and subtract another couple thousand a year for insurance and medical expenses for the kids. 3 visitations a year requiring round trip airfare from CO to AZ… etc. I ended the marriage $20K in debt (including $15K in lawyer bills) and finished paying off the alimony 5 years later with $30K in debt.
My wife (of 3 months) made $40K a year before earning her Master’s Degree and getting a raise to $55K last year. She too had a costly divorce in her 30s, recently had a custody battle with ex, and had about $20K in medical bills that weren’t covered by insurance. Her ex owes us about $5K in legal bills from the recent court battle, but who knows if/when we’ll get paid.
In short, just because we make six figures now does not mean we’re not still trying to catch up from recent history when we were each living on MUCH less.
Reminds me of an old joke …
Q:Do you know why divorces are so expensive?
A:Because they’re worth it.
‘…the only people that had 20% were the “trade ups”.’
Bingo! With home prices falling at their fastest rate ever, the “trade ups” are out of the game. All that are left at this point are “trade downs” (e.g. retirees liberating CA equity to move to a less expensive market) and savers with 20% down. Too bad the War on Savers has practically driven the latter group to extinction.
RE: And they call this a profession.What a joke.
All aided and abetted by the qualifying regulations set up by the National Appraisal Standards Board (feds) and enforced by your own local state Board of Appraisers.
Your tax dollars in action.
Now that’s the real JOKE!
Hi Ex! Let’s play having fun with numbers! Come on–your an exmortgagebroker…it will be fun!!
Chuckles,
I put this together just to illustrate how assine purchasing property is out of line with what the banks are saying they are now doing—traditional loans. LTV, yes, 20% down, 30 yr fix. OK?
Jane and Joe make $5000.00 a month and want to buy a home. Using the 30% discresionary for PITI (liberal, I know) they qualify for a whopping $175,000.00 mortgage. Yes. Now for math.
$5000.00/mo income x .30=$1500.00 PITI (K?)
$175,000 loan - 20% down $35,000.00 = $140,000.00 Loan
$140,000.00 @7% for 30 yr fix + $3000.00 tax +$300.00 ins
= $1206.42
When I actually put this together, I asked myself (teeny brain) how many JJ6Ps bring in $5000.00? I pulled the number out of my butt…based on my life experience.
OK…confession time…we have waaaaaaaaaaaay more than $35,000.00 for a down payment, hecks, we could buy a McM, but that’s to silly even for silly us!!
Many who frequent here are kindred spirits.
But seriously, I ask in all honesty, how may JJ6P can come up with the $35k for a $175k home? (OK even 10%).
HBBs likely ran this exercise before I came to this board.
Please gawd, let my math be correct, for the wrath may be well deserved (chuckles).
Curtsey,
Leigh
Now stop that, Leigh. Your using common sense and the powers that be just won’t tolerate it. Now go pour yourself a glass Koolaid.
I’m sorry - JJ6P? What?
Joe and Jane six pack…
Average Joe and Jane?
Hey Ex!
Pouring myself a glass of Blatz, that’s right, Blatz baby!!
Smiling face!
Leigh
now you know why Warren Buffet bought Clayton Homes a while back - he knows low cost (read trailer park mobile homes) housing is where it is goig to be at plus thru AIG insurance he mortgages and insures them - one stop solution to people with only 900.00 a month to spend and wants to own. The way things are looking, it willbe easier to buy a mobile home than to credit qualify for a landlord.
I’m guessing Mr. Buffett does math. (Does he reach for aspirin like moi?)
Dang…blood is thin…
He owns Clayton? They’re terrible! Crime-ridden, and going downhill since ten years ago, from what residents tell me.
Btw, $5000/mo is clearing $60K (don’t know if that is before or after taxes). This is not so ridiculous as the median household income is about $52K (before taxes).
With two wage earners at decent jobs, they could afford a $175K house … which out to be at least a 3/1.
Of course, this varies by area. Some places have depressed wages, others, overpriced housing.
In G’ville you can rent a 3/1 for $900 to $1100, but nobody has told the Realtwhores&tm; yet.
I have to play a little bit of devils advocate here — I actually could afford to pay 50% of my monthly income towards a house payment. Why? Because I have no kids and zero debt - yep, even the car is paid for (and yes, that still includes paying into a 401k). So the remaining 50% of income would be very easy for me to live off and live off quite comfortably. Now I know I’m the exception, but …………..just had to put it out there.
I think it depends on what income bracket you are in. 50% of $40K a year doesn’t leave much left. 50% of $250K is more than enough to live off of - even with a car payment.
Ex’M,
I composed a great post just for you but it got et. Asked Ben for help (sniff).
Smiles,
Leigh
Read this instead. From the Telegraph, Jump off the deranged bull now:
Start to take profits right now. Trim any American, British, and European equity that is highly geared to the credit cycle….
Do not ride this deranged speculative bull into late October. The balance of risk and reward are just too far out of kilter. Do not under any circumstances join the mad scramble for emerging market stocks. Cut positions in Latin America, Eastern Europe, Asia, and China.
http://tinyurl.com/2q2avq
Great commentary. Wish this Brit could be our Fed chairman.
“Japan’s Nikkei fell 81pc over fourteen years from a peak of 39,000 in December 1989 to a nadir of 7,600 in May 2003. Land prices in Tokyo fell by four fifths. House prices fell by over half.”
Now, if someone would care to translate these terms into what it could potentially be in the US when all is said and done, by all means take a crack at it. I think our real estate will be similar. But what about the DOW?
palmetto - “But what about the DOW?”
At bottom, there will be a period (not just one day) when you will be able to buy the Dow with two ounces of gold. It happened early 1930s and early 1980s and will happen again. Currently the Dow costs about 19 ounces, so there is a long way to go.
I believe it actually got to 1 ounce per Dow for a very short time (maybe one day) sometime in 1979/1980.
Japan has a rich history. I do not judge.
Japan insist on besowing medals…to those they deem.
Edward Demming, a true humanitarian. An American economist, said to be the one whom brought Japan out of the world reality of cheap vs quality.
A humble one…my confident. Japan celebrates Edward, Ford sought out his advise, and failded to implement the simle principles of quality, yet, the best years of Ford, for Edward’s advisement.
How does that go…the road to hell is paved with good intensions ?
My teeny brain is incapable of such grandeur!
Greed is the black abyss.
Ah Demming. His is the philosophy that brought the company where I work now, back from the brink back in 2003 to profitablty today. (Without layoffs BTW.)
An American, whom contemporaries shrug, found
solace in the bowels of the competitor; not a country of his home; his last breath, at ninety-three, then did they reconize the loss. Nor understand statistical measurements, within a whisper of many counts.
A complex idea, he communicates as standard deviation.
Ode to W. Edward Deming.
10/14/1900-12/201993
Leigh
“Edward Demming, a true humanitarian. An American economist, said to be the one whom brought Japan out of the world reality of cheap vs quality.”
Actually Deming was trained as a mathematical physicist, but converted to a statistician (he was a professor of statistics). He thought of quality control/process control as a branch of industrial statistics, not from an economist’s point of view…
No more gold standard? The next bubble?
With nano, how valuable is gold? (seriously, I don’t know)
Best Always,
Leigh
What is gold other than the base metal for shiny bling bling?
Gold (and Silver) are free market currency. A financial asset that can’t be devalued into oblivion like US paper dollars and paper bonds.
Please open a history book. This has all been played out before.
Gold is actually used in small wiring inside of microchips as well. It could go up in value as nanotechnology needs more of it. Pure speculation.
Psst…Oct 15? 22?
(Please don’t shoot me with a bazooka!)
those declines are in NOMINAL terms, meaning adding in inflation, housing in central Tokyo delined 90% from peak pricing in 1989, as of Dec 05.
GEEEEEEE”S I just cought a glimps of CNBC and according to them everthing is a BUY!!! WOW!! there is nothing but GOOD news in the world! What happened to the CDO’s and all of the negitive stuff out there in the world. Who is going to eat these BIG losses!????
Hmmm…just good news in the world tonight.
From MMFL’s link…
Or if you like parallels, try October 1987, when the US dollar was falling in the same disorderly fashion we have seen since August this year.
It is fundamentally worse this time: the global dollar index has hit record lows; and the US is no longer a net creditor. It now has external liabilities reaching 35pc of GDP, putting it within a few percentage points of a compound debt crisis.
Sounds like deep doo-doo to me.
My teeny brain attempts to understand the insurance pools of ‘87 vs the CDOs of…er…02?
Good catch!!
Let’s see,
> trim American, british, and European equity…
> Cut positions in Latin America, Eastern Europe, Asia, and China.
What’s left? Africa, Australia, and Antarctica?
Isn’t the Blog Telegraph a bit different from the Telegrah itself? (Like the letters to the editor not necessarily reflecting editorial policy).
1984? Where’s the beef!
JUMP!
RELAX!
Thank you for the eye leaking laughter!
Gawd, visuals are the best!
Soft Landing!
Leigh
Toooo Funny.
Rather suddenly, every house in the valley is worth $416,999.99 max
“Subprime loans have all but disappeared and the Valley median price is so high that potential buyers don’t have access to Fannie Mae and Freddie Mac backed loans capped at $417,000, or the conforming limit. And credit standards have been tightened.”
There is a definite notch effect at the $417K threshold, thanks to the GSE interest rate subsidy on conforming loans.
I love it, I remember a real estate agent coming by a rental I own in the North Hollywood area and looking down on it (as she condescendingly scanned the surrounding cul de sac of 3 bed/2 bath single family homes) because it was in “a neighborhood with a bunch of 500 thousand dollar homes”.
Mum (bless her soul ‘99 RIP) said, F* em, and thumb your nose too, no one looks down on you!
Thank Jeesh that woman did not have lasers! (RIP Mum). Condescending toward any family member–uh oh.
She put the fear of gawd unto any (sale person, snake-oil or otherwise), one who dared to knock upon the door!
Took no prisoners, not my mum!
Nice lady, did not mince words…scared me honest!
Does the loan pay for closing costs? If so, subtract those from the loan amount.
I’m shocked and what a surprise. What a coincidence. Who would have thunk it. No one could have predicted that. We’re now living through surprise party economics.
I’m shocked and what a surprise. What a coincidence. Who would have thunk it. No one could have predicted that. We’re now living through surprise party economics. Every day it’s just one big surprise and shock after another. On top of Fbs that want to publically announce in their slob stories that they were completely ignorant and/or irresponsible, we now have our top economists saying they had no idea any of this would happen, but it’s all good. Rant off.
- Today’s KNX news featured an interview with Christopher Thornberg … he told the real deal truth. He also said, “Why are folks acting surprised at the continuing bad news? they should expect it to get worse until the end of 2009.” This will be the new normal.
That’s a great line… “Why are people acting surprised…?”
Which means it will only be “less worse” after 2009.
Thankfully, there are people like Thornberg around to spell it out for the masses, including the MSM.
I too thank Thornberg. He was the willing early to stick out his neck. Let’s face it, our income isn’t impacted about what we post on this blog; but to him it was a hit on professional reputation (at first). The reward is vindication and respect.
Neil
Gerlich simply doesn’t get it. This isn’t a little one year pause or slight dip before prices go up again at double digits. The downside is going to be long and painful.
Off topic, I wish Alan Greenspan would shut up.
I wish that clown Jack something or other in Florida would shut up. The one they quote on every Florida condo story.
…or John Husing of the IE, or Gary Watts of the OC, ect.
The NEW five-letter curse word. grrr
> Off topic, I wish Alan Greenspan would shut up.
Nah, he’s in “reputation correction” mode.
He needs to ensure that his speaker rates don’t dip! That’s how he’s going to be cashing in over the next few years.
Maybe prices did get out of whack in CA after all…check out the last 5 years:
******************************************************
California Historical Housing Multiples
Year Mult Med. Fam. Inc. % Chg. Med. Pr % Chg.
1980 4.7 $21,200 N/A $99,550 N/A
1981 4.6 $23,300 9.9% $107,710 8.2%
1982 4.6 $24,300 4.3% $111,800 3.8%
1983 4.5 $25,200 3.7% $114,370 2.3%
1984 4.3 $26,400 4.8% $114,260 -0.1%
1985 4.1 $29,000 9.8% $119,860 4.9%
1986 4.3 $30,800 6.2% $133,640 11.5%
1987 4.3 $33,200 7.8% $142,060 6.3%
1988 4.9 $34,000 2.4% $168,200 18.4%
1989 5.7 $34,500 1.5% $196,120 16.6%
1990 5.1 $37,700 9.3% $193,770 -1.2%
1991 5.3 $38,200 1.3% $200,660 3.6%
1992 5.3 $37,400 -2.1% $197,030 -1.8%
1993 4.8 $39,100 4.5% $188,240 -4.5%
1994 4.9 $37,700 -3.6% $185,010 -1.7%
1995 4.3 $41,400 9.8% $178,160 -3.7%
1996 4.1 $43,500 5.1% $177,270 -0.5%
1997 4.2 $44,700 2.8% $186,490 5.2%
1998 4.3 $46,500 4.0% $200,100 7.3%
1999 4.4 $49,800 7.1% $217,510 8.7%
2000 4.6 $52,000 4.4% $241,350 11.0%
2001 4.9 $53,400 2.7% $262,350 8.7%
2002 5.8 $54,800 2.6% $316,130 20.5%
2003 6.5 $57,130 4.3% $371,520 17.5%
2004 8.2 $55,000 -3.7% $450,770 21.3%
2005 8.7 $60,000 9.1% $522,670 16.0%
2006 9.0 $62,005 3.3% $556,640 6.5%
Hold on a second. There are some NEGATIVE NUMBERS in the percentage change in value year to year.
That has to be wrong. Housing never goes down in price. Please recheck your numbers with the NAR and get back to us.
Your coming around… did you go back and read the last 2 1/2 years worth of posts yet?
You have to admit it was pretty damn fun getting a newbie on the hook. Got the blood moving….
Agree. It felt good to see the posts, it felt like 2005 all over again.
I just naturally like being a contrarian, it’s good for everyone to have to justify their beliefs….keeps one from being lost in an echo chamber…..
I think everyone here had to convinced. Do you think it’s fun being EX-nnvmtgbrkr?
Sorry, should be “had to be convinced”.
I don’t know how many of us had to be convinced. Some of us are here because we couldn’t stand the isolation of listening to RE bulls in our daily lives. HBB did help convince to sell my Maine house in May 06. I then tried to talk my subsequent clients out of taking loans. I was arguing that the risk (to them) was very great — these people were putting down 25%-30%. Their answer: “It’s different here.” They thanked me for the loans, but they thought I was crazy to be trying to talk them out of it. The very last borrower (April 07) I told I would not make the loan unless the borrower read HBB for a week first. It made no impression, It’s Different in a Phoenix RV park. A few more prospective borrowers came after me this summer. I lied and said I didn’t have the dough. The truth is, I can get the same interest rate from the Federal Govts of Iceland and Brazil, and there’s less book-keeping.
Beliefs? This is economics, just bring data please. And like we don’t know what a troll says. BTW, parroting the main-stream media isn’t being a contrarian. We are the contrarians and have been for years. The fact that day by day, the MSM is being forced to admit we are right doesn’t put the shoe on the other foot.
With all due respect Ben, there are people posting here that are making statements about when prices will bottom out, how big price declines will be - and in what areas, etc.
Everyone here should be ready to justify why they say what they say when challenged.
Well said Ben.
Data is valuable. I’ve changed my economic models thanks to data I’ve gleaned off the blogs. It took me a long time to accept that this downturn will be very long.
I’m looking at the WSJ chart (hat tip calculated risk) showing the pending sales verses “existing home sales.” Ouch.
What I find interesting is that pending home sales have been noisy, but actual closed sales have been just a downslope through 2007. (I’m reading a chart with a very course x-axis, so pardon a month’s error.)
http://blogs.wsj.com/economics/2007/10/02/where-is-the-bottom/
All of those false recoveries in “pending” sales have not had one blip on real sales.
Got popcorn?
Neil
Nothing wrong with a contrarian who brings data to support (or refute) his position…
“I just naturally like being a contrarian, it’s good for everyone to have to justify their beliefs….keeps one from being lost in an echo chamber…..”
Unlike the MSM, this blog echoes the truth. What assumptions are you using to justify your contrarian beliefs?
John, where are you getting your data?
Median prices are from CAR, median family income is from CA Dept of Finance (who got it from Bureau of the Census).
This was from a spreadsheet I have had for a while that I added the last 7 years to….the multiple jump is quite revealing.
I realize that a professional stat guy could pick on this all day so I do not claim that the “family income” data is the correct data to use and I think the Census people changed the way they did their surveys prior to 1994 but I just did it to show an overall trend….
***JohnF Disclaimer***
I make no warranties and no one here should go out and get a 100% LTV, stated income loan and make any home buying decisions based on this date. Thank You.
*************
I still argue that this is going to be different from anything we seen yet.
I would agree with that. This run in prices has been unprecedented, as well as the depravity in underwriting. Playing with OPM.
IMO, this is the biggest financial swindle in United States history. And Ben Bernanke will bail out the swindlers at the expense of wage earners and savers. The rich get richer at YOUR expense. Buy stuff you can “drop on your foot” as Helicopter Ben hyperinflates to bail out the fraudulent banking system! Silver, Gold, food/DBA, oil, ect.
CDs? Treasuries? Please check the USDX chart! Might as well tape a “Kick Me!” sign on your back.
The fed has referred to a “systemic crisis.” Get out of the system!
http://www.financialsense.com/
ok first thing - ran, don’t walk away from the CAR data and get thee to the BEA data set webpage. Next, I compose a long and violent rant about CADoF estimate.
Sorry about the second part, I just have the energy anymore.
Bahh what an ADD entry - I don’t have the energy and run from the CAR data. I’m tired of sounding like Joyce with a synaptic misfire when I crank out a fast post. Is it fireox or mozilla that has the spell checker?
The down years don’t include the incentives.
The up years don’t include cashback deals.
I have been looking to buy a condo for the last 2 years. I have put about 5 offers in at this point. The realtors on both sides pretty much said don’t waste my time with the offers. I did anyways. Welp some of those condos are still on the market. Over a year under $400k range in the LA area, not in the hood. Some of the other places that did get sold haven’t been back on the market. Others have as short sales. Wow less than a year and a short sale on under $400k range.
I started looking again and in a not as nice neighborhood a condo that was a complete fixer was $370k (made offer at $350k), was getting estimates at about $50k to fixup and be a decent place for that price range. Last night I saw similiar in a better part of that area completely redone for $370k.
If anyone is looking in specific areas for their own place, they should have noticed prices have drastically come down since last november. That was the last month that I was looking everyday. And now with lowering interest rates no one has any excuse to say the bubble isn’t going to burst big time.
I only believe this to be more true because I work for a Land Design Engineering firm and the work is slowing down a lot. My friends at other companies see the same thing. Not like the Southern California 90’s where plenty of these companies temp. closed shop, but I bet something similiar happens in the next year. Thats when I think everything will really start to happen.
It is instructive to compare the current bubble runup to previous housing booms:
Boom #1 (1985-1989): 4.1 4.3 4.3 4.9 5.7
Boom #2 (1996-2002): 4.1 4.2 4.3 4.4 4.6 4.9 5.8
Bubble from hell (2003-2006): 6.5 8.2 8.7 9.0
My take:
1) The market was poised to correct in 2002, when the Fed hit the pedal to the interest rate medal and sent home prices to the moon.
2) Prices need to get down to a multiple of 4.1 times income to get rid of the bubble (actually very much in line with multiples implied by traditional lending standards!).
3) The implied drop in this multiple from 2006 down to the bottom is 54% ( (9.0-4.1)/4.1 X 100% ).
4) Whether nominal drops of over 50% occur depends upon how successfully the War on Savers turns out.
5) It took seven bad years for the market to bottom out last time, after only a four-year boom phase:
Last bust (1989 - 1996): 5.7 5.1 5.3 5.3 4.8 4.9 4.3 4.1
6) If it is not different this time, we could be looking for a multiple of 4.1 by about 2013 or so (2006 + 7 = 2013).
Note yoy -decrease- in median family income; twice in 90s and again in 03-04.
In the 90s drop, house prices also dropped roughly the same %. In 03-04 income drop the house prices increased by the largest % in the table. Brutal effect on the multiplier.
“Brutal effect on the multiplier.”
It also calls into serious question the strategy of blowing bubbles as a standard tool of monetary policy.
“It also calls into serious question the strategy of blowing bubbles as a standard tool of monetary policy.”
Anyone at the FOMC paying attention? Yellen, Poole, Chairman Bernanke? Anyone?
I think this statement is calling your name.
Bingo!
CaCV saw declines in MPI, MHI, and gross rental rates yet since the punchbowl was spiked, ave. home prices grew by 65% [semi calculated wag] in 03-04. The theory being discussed here is that this risky jump into asset investment was fueled by despondence over the decline in personal earning power.
“The theory being discussed here is that this risky jump into asset investment was fueled by despondence over the decline in personal earning power.”
Next reasons to be despondent:
1) Decelerating home equity
2) No savings
“The theory being discussed here is that this risky jump into asset investment was fueled by despondence over the decline in personal earning power.”
No doubt about that. Everyone I know who’s in trouble with housing debt was looking to real estate investment as a way to make up for not being able to make enough from a real job. Az_lender is no different, except that my way of investing in real estate turned out to be a better guess (so far).
yeah Prof B., but the Fed was far more disciplined and the mortgage market wasn’t nearly as reliant on foriegn capital and they didn’t try to bail out FB’s with changes in legislation and regulation. So, all bets are off and all is conjecture at this point in time. Stay tuned.
Errata:
(9.0-4.1)/
4.19.0Yes, PB, this calculation looks good. I find it heartening that, no matter how we look at it, we continuously come back to the conclusion that house prices in CA should drop approximately 50% in inflation-adjusted terms. You can look at it from a rent-vs.-own, affordability, or historical-price-trend perspective. They all yield approximately the same answer.
Oh, I forgot to mention that you can also look at it from a lending criteria perspective. If monthly-payment criteria go back to normal, people’s payments will double or triple.
So that makes 4 methods that all point to the same result.
I came up with a number only slightly above 4 in an independent analysis to answer the question “What multiple of income can a household afford using a 30-year-fixed mortgage at 31.25% of income with 0% downpayment?”
The 31.25% w/ 0% down is roughly equivalent to assuming 25% of income w/ 20% down — as in the NAR’s affordability calculation: 25%/80% = 31.25%. I prefer not to assume a 20% downpayment, as it is a bit like Santa Claus, the Easter Bunny or a good viola player, i.e., a figment of your imagination.
You have spelled it out exactly. I realize you want to be contrarian JohnF. However, it is unrealistic to think that homes that cost 9X+ annual income can be supported for long, EVEN IF WE HAD 0% INTEREST!
The laws and fundamentals of home buying demand that homes in California for the most part are in the 150-300K range on average and dep. on where you want to buy in. This 850K crap in Foothill Ranch where the avg. salary is at BEST 75-100K is unsustainable.
You may say I am a wishful thinker. However, one thing I do track is debt and we have a lot of it in this country. Last week I read where the US has 13 Trillion in consumer debt, 3/4 of which is mortgage debt. Think about that for a moment. 9.25 Trillion in mortgage debt in this country. Assuming 300,000,000 people, that means that every individual, including children has a mortgage of 300,000. All I can say is WOW! That is completely unsustainable, esp. when we account for wage stagnation the last 35 years.
Additionally, if we take out all those who own free and clear, that number has to grow to well over 400K for each individual who doesn’t own.
“9.25 Trillion in mortgage debt in this country. Assuming 300,000,000 people, that means that every individual, including children has a mortgage of 300,000. All I can say is WOW!”
Sorry to nitpick (what a gross word) but actually I think 9e12/3e8=3e5 = ~$30k/Person not $300k
should have read 9e12/3e8 = 3e4. sorry was thinking of your answer $300K which would be 3e5. In any case I believe $30k is the correct answer. Note this is also the approximate national debt per american. somewhat daunting.
I find it interesting that the bottom was 2 years AFTER incomes stopped bouncing around and finally started to consistently rise.
Hmm looking at CA state or do you have data by county? Is the data for periods pre-1990? If so, please share >; )
Table is very simplistic - overall CA median price over overall CA median family income. That’s all the data I could easily get. I think you can get median prices for certain CA areas, the trick would be if you could get the corresponding income data down to that level.
I got most of this data from the CA statistical abstract:
http://www.dof.ca.gov/HTML/FS_DATA/STAT-ABS/Statistical_Abstract.php
DoF…. ugh **bangs head on table repeatedly**
Yes, it is that messed up. Welcome to hot debate of Fed data collection vs State. When NIH tosses a submission back into your lap because you opted to use muni or state numbers instead of Fed, you’ll feel this way too.
It is quite amazing that simple statistics that anyone (such as you or me) can easily download can nonetheless tell such a powerful and widely-ignored story.
The 4.1 multiplier implies traditional lending with 20% down. The math is pretty simple 3.28x income and 20% down is 30% AGI.
There are a couple of other fudge factors you could throw in there. We changed the laws on capital gains so that effectivly increases prices. We also might be dealing with population declines.
The lag factor that everyone talks about has to deal with nominal economic conditions and the time it takes for people to recover from their credit getting killed.
The data JohnF basically shows prices track credit standards very directly. Credit got really really loose and the prices got pumped up.
You could argue it is sustainable but eventually the risk premiums would supress the market (i.e. interest rates will rise). As lending gets loose beyond the classical affordability the number of loan failures increases dramatically.
Anyhow… there is substantial potential for some undershoot. Remember the percentage of people that extracted equity is quite high and systems like this tend to ring. So incomes will probably drop, prices will crash and recovery will be longer.
Anyhow, when that multiplier is back to normal then its an OK time to buy.
Thanks for the data.
Recovery will be longer than expected as MBS holders can sit on properties for three years or longer. Banks don’t have as much of a window.
James:
Can you please explain why MBS holders can sit on properites longer? I hadn’t heard this before. Thank you.
I should have put a qualifier on that.
Someone dug up some MBS data last week and posted it on the blog. Its tough to sort through the language and I don’t know if the source was accurate. So, I was thankful someone pulled out stuff we might be interested in but it may not be all encompassing for all MBS.
Its meaning was they would “try” to sell the properties but had the option of keeping them on the books for up to three years.
Banks have different rules and normally the federal examiner (FDIC?) makes them sell after 1yr or if the amounts are too large.
I’d also note that houses not collecting interest are pretty huge losses. You start to lose 1.5% in property taxes along with lost interest.
Since MBS are not banks, its conciveable they modify their agreements and sit on them even longer.
RE: Recovery will be longer than expected as MBS holders can sit on properties for three years or longer.
LOL!
Hope they all got good mold prevention teams.
We already know real estate prices are sticky, especially when the psychology reaches the point where everyone knows that “real estate is a terrible investment.” If prices were on a temporarily low plateau while incomes began to rise, then the price/income ratio would fall — not because the numerator (median price) was falling but because the denominator (median income) was rising.
Asking prices are sticky. But who cares if their are no buyers.
It just means this time around we will be talking years of inventory as normal. And forget a lot about what you think you know about housing way to many homes where bought via fraudulent practices this time around.
Don’t forget two weeks ago the OC Register had an article that said it would take 4 years to sell in Santa Ana. Fine, you don’t want to lower your price, I’ll go another 4 years renting. The benefits greatly outweigh being a mortgage debtor for 30 years on a 700K note.
I dare anyone at the SF Chronicle to print JohnF’s table:
“California Historical Housing Multiples”
With a little paragraph explaining what the multiple is all about… since the paper has a lot of catching up to do in explaining what the housing bubble was, is and will not be for years into the future.
I’m willing to bet the SJ Merc may even have a variation of it.
They have my full permission to incorporate any or all of my back-of-the-envelope analysis…
Hah! The SJ Merc has been as complicit in this rouse as any. Why, those good-for-nothing, lazy, alcoholic scoundrels! I’ll string them up if I ever get my hands on them.
ergh.
Merc has too many RE customers to rock the boat……….its getting better though.
Hi John!
I lurked for over a year before I had the courage to post!
Welcome John. Ben is awesome! (Lawd, I sound like a commercial!)
I too was called a troll (due to my ignorance) but this blog is safe.
Pull up a chair and pour yourself some tea (or whatever you fancy).
I could be wrong (and often am) perhaps you are retired? (I’m not prying).
It’s not my place to welcome you, but set a while, and don’t be intimidated…good people.
Best,
Leigh
So nice of you to do this - some blogs are like being back in high school where the seniors like to harass the freshmen.
Hi Crazy!
I’m too old for HS…46yr young. (But I do feel like I stepped out of bounds, for I’m a guest, not the host)
Curstey to Ben
Ben seems to be the perfect parent model. He gives us information and sometimes gives us his opinion or guides the conversation, but leaves us to learn and assist each other on our own.
43yr old renter after divorce, hoping some sanity will return to the Conejo Valley RE market.
“Pull up a chair and pour yourself some tea (or whatever you fancy).”
NO! Step away from the kool-aid. We have banned it on this site due to the high carcinogens.
And welcome.
Anyone who thinks a 50% correction is unrealistic should be shown this table - it makes it clear that such a correction is nearly inevitable, unless “it’s different this time.”
Note by the way the decrease in nominal income (hence even larger decrease in real income) during the early 1990s - so the price decrease was more pronounced than the ratio drop would suggest.
Even if incomes don’t drop during this correction, they certainly haven’t increased much in the last 7 years, so a reversion to the “normal” ratio of 2000 means essentially a return to 2000 prices.
Final note: those figures are statewide and therefore we may well expect an even bigger decline in the most unsustainably bubbly areas - Central Valley, Inland Empire, and so forth.
“Homeowners in an upscale subdivision where 34 new homes will be sold at auction are seeking some kind of compensation from the developer.”
Blow me, says developer.
Los Banos is a crap hole. It makes Bakersfield look like a 5 star resort.
Apparently they would for … say … $20K.
“‘Will it solve everything? No. But, at least it’s not a slap in the face,’ said resident Joseph Leon. ‘We know we can’t stop them, but it’s a way for Anderson Homes to say, ‘This is not typically what we will do. We’re in this with you, and we want to stay a family.’”
Bwah-ha-ha-ha-ha-ha-ha…………best comedy this blog has ever posted. (oh my side..)
They need to talk to the woman suing Apple for $1M over the phone price drop (or her lawyer anyway). That woman has psychob*tch written all over her.
I saw that. Un-frickin’-believable! That Betty just got her name on a JT from my private reserve.
Next he’ll want them to breastfeed him. Since when does anyone expect a business to be their family? It’s a business and it’s sole purpose is to make money. I wonder if this dope thinks that everytime anyting goes on sale “it’s a slap in the face?”
“Next he’ll want them to breastfeed him.”
Actually, he’s the one that’s nursing, and it ain’t on no boob! The developer says “thank you” dude.
You mean he’s playing the magic flute?
Yeah, ha ha. I noticed that one too. Like, I buy something from you, and suddenly we’re related. Yeah, like the way a bedbug is related to your a$$.
eewwhh…dang, a great analogy, but, Jeesh!
uh oh…dang!
Bubbles are blowing : )
“On Friday night, frustrations reached their boiling point, as Barton met with the homeowners in an emotional three-hour meeting. Following the meeting, Paseo West homeowners crafted a letter asking Anderson Homes for a $20,000 per owner rebate for their property.”
That is the craziest bailout proposal I have seen to date. Surely they can’t expect the builder to give away free money.
“It’s a way for Anderson Homes to say, we’re in this with you, and we want to stay a family.”
It is like a family. You just got sucker punched by your big brother when the disciplinarians weren’t looking.
Save that well crafted letter too, because it will need to be resubmitted quarterly for the next 3 -5 years.
LMAO! How true!
What are the “home owners” going to do if * they don’t give them $20K? Lemme see. “Well…That’s the last time we buy an overpriced $hitbox from you guys…Yeah, that’ll learn ya!”
*Note: if == when
The good news for these bozos is that they won’t have to worry about having renters in the neighborhood in the future, because these “home owners” will have foreclosed by that time and be RENTING somewhere else.
How about refunds from some subprime lenders like Ameriquest or New Century?
Rant ON! I am so sick of these R-Tards, as my son would say, claiming foul on everything. Every time I think we have hit the bottom of lunacy in this country, something like this comes along. Thanks, Ben for this forum. I know we have goten soft in this country, but this one takes the prize. People you bought. Now you are screwed. Deal with it. You either deal with the decisions you make in life or the decisions you make will deal with you!
Rant OFF!
$2K rebate? er…did we sign a CONTRACT?
Humble appologies for the cap locks.
Jeesh!
watching “Judge Maria Lopez”. She had an RE case. At end of show she mentions the subprime mess and people buying things they don’t know what getting and now losing homes. Great to hear from a non RE related show on mainstream TV
“They are concerned that the auction will undercut property values by hundreds of thousands of dollars and that the current tight credit situation will mean only investors will participate in the auction.”
“‘If that happens, then they’ll most likely turn it into a rental community,’ Cantrell said, adding that the homes yards and features would be very basic, unlike those of the current owners.”
Oh, the humanity!
WTF, now credit is tight and only investors can get loans and participate in auctions?
Where does it say in the constitution that those things are a right of every American citizen and/or illegal that is here?
Like an investor is gonna buy one of those…Please. What could you rent for in Manteca $1200/mo?? maybe. It would need to sell for $150k to make buying as an investment work. Even the dopes that buy these at the auction will be upside down next summer. Then maybe they can ask the developer for 20k back too.
“‘When we moved in, we knew we were paying more money, but we were also buying into a quality neighborhood where the price value wouldn’t go down,’ said Joseph Leon, who moved to Paseo West from Fremont 14 months ago.”
I’ve heard “its different here” so many times I cannot take it seriously anymore. It just makes me laugh. Credit crunches are painful. Nothing is going to get the flow of funds going again now that the lake behind the dam is dry. If you want to create power from that water, the lake needs to have a height to it. We’ve sucked the system so dry, we’ll have to cut the outflow to rebuild the lake level.
And a drought is ahead.
I’m going to be waiting for this month’s Fannie Mae auction. It could be very interesting… The skipped August and did only 90 day bonds in September. So I could be wrong on when the credit crunch happens, but how the heck is Fannie Mae going to get all the money they require in December? Change the conforming limit all you want… bond holders have to want to buy. We’ve already seen what happens with the ‘pier loans.’
Got popcorn?
Neil
Speaking of “It’s Different Here,” I move that we make this the official slogan for all local HBB gatherings. As in, we meet at our favorite local spot under the IDH banner.
Anyone up for such a gathering in Tucson?
My gathering in Redondo Went great! It was a blast. It was great company and conversation.
Its different here is the REIC last Rally cry. We should steal it.
Got popcorn?
Neil
Neil, how ’bout a saturday night next time? Some of us need to be at work on Monday morning.
Lightweight.
Ok. Last time was due to plans on the Saturday.
I understand. It turned into a 5 hour even (for those of us that closed down the Cheesecake Factory).
Got popcorn?
Neil
They really thought by paying more that it would insulate them from recessions, credit crunches, stock market crashes, etc ? What kind of warped thinking is that ? I guess if you’d only paid another $50k for a car it would never break down and never need gas ?
Interesting point Neil. The cat is out of the bag on the dollar. Slow death. Therefore, you would need higer rates of ROI for those funds. However, if they go to high, then we will all know there is a cash crisis at Fannie. If the gubermint bails them out through the Fed, there goes some more value on the dollar.
Don’t these a$$hats get it. This is one vicious cycle these dolts, with Greenspam leading the way, have created.
There is some weird time delay going on interest rates…
Have you noticed that real rates seem to be masked? We keep seeing bonds trading below par value but being quoted at par rates. Huh? Drop an 8% bond 4 cents on the dollar and that is about a 8.75% bond (Doing the math in my head…)
But its working from a perception standpoint. I know quite a few bright economic trend followers that have missed the effective interest rate changes that are occurring.
Got popcorn?
Neil
“‘It’s killing sales in the lower end of the market, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge. Blake said that asking prices in some areas of the Valley are now 10 percent under what homes sold for a year ago.”
You think that a 10% reduction is bad. You have no idea … NO IDEA of how bad it is.
–
Looks like we will keep getting conformations of the fact that the median prices are seriously inflated, i.e., they are “meaningless prices.” The meaningless prices in Coachella Valley went up 8.2 from a year ago. The meaningful prices (“overall median price per square foot), on the other hand, dropped 4.3%.
Jas
“‘While the price of this average, middle-management home dropped about 12 percent compared to last year, buyers and sellers need to keep this in perspective,’ said Ron Gerlich, regional VP of Coldwell Banker Residential Brokerage’s desert region.”
The comps just dropped by 12 pct and this guy says be calm. This sounds like fear. Why is he afraid?
First of all, wtf is a “middle-management” house? I’m going to ask to see some “fry cook” houses or “cashier” houses next time I go looking.
That’s what I was thinking. Will this house manage my middle for me so that I don’t have to go to the gym? That’s a pretty good bennie, after all.
They are stucco boxes with faux med style, piled within 10 ft of each other with “desert” landscape, granite & SS, 3 car garage, pool & jacuzzi, in gated community and they go for about $700K to $1M. You can find tons of these communities all over SoCal, particularly OC.
“average, middle-management home”
Hmm. Let’s say 70% of Americans are homeowners. If the average home is a middle-management home, then persons at the 65th percentile of the socio-economic scale are middle managers. Everyone from the 66th to the 99th percentile is somewhere above “middle management.” This top-heavy structure is bound to go out of business. (What top-heavy structure? American society.) And that is just what’s happening!
Not that it Lardly matters, I paid 10% more for some Manteca yesterday
@ the market, damned inflation…
“Anderson Homes plans to auction off the vacant homes or properties under construction in the Paseo West subdivision in Manteca as a way to stir up interest among homebuyers and fill the empty homes quickly, said Craig Barton, chief financial officer for the Lodi-based developer.”
“‘It’s killing sales in the lower end of the market, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge.”
Well, I guess prices will have to come down so those sales can pick up.
Dude, is this 1-4closeonme? Like I found a couple of dead sales here in the valley. It’s gnarly, dude, I mean it looks like they totally got run over by the FB bus while waiting for someone to bring them one those bitchin’ ARMs. Oh yeah, while I’m here, can I get a nodoc for a house up north in Manteca? In Paseo West. I have a cash business and I’m looking to expand. Good auction coming up, 40% off. Awesome. Dude, of course I’ll give you a sample.
hUH??
No disrespect–Casey?
Dang. Let me be the last to call another a troll. DUDE.
BTW, please…oh…forget it…I’ve overstept my bounds.
“Subprime loans have all but disappeared and the Valley median price is so high that potential buyers don’t have access to Fannie Mae and Freddie Mac backed loans capped at $417,000, or the conforming limit. And credit standards have been tightened.”
Like I said, I guess those prices will have to come down so those sales can pick up.
“On Friday night, frustrations reached their boiling point, as Barton met with the homeowners in an emotional three-hour meeting. Following the meeting, Paseo West homeowners crafted a letter asking Anderson Homes for a $20,000 per owner rebate for their property…
“‘Will it solve everything? No. But, at least it’s not a slap in the face,’ said resident Joseph Leon. ‘We know we can’t stop them, but it’s a way for Anderson Homes to say, ‘This is not typically what we will do. We’re in this with you, and we want to stay a family.’”
Mr. Leon, I’m sure you each one of your neighbors shared your bubblicious profits with the builders of the homes you sold to buy into Paseo West. I mean to keep that warm and fuzzy family thing going and all, right?
Right? Mr. Leon?
Joe?
* crickets chirp *
That’s what I thought.
Well I expect that’s exactly what they did-used the proceeds from those over priced sales to buy these overpriced homes.
I went to an open house I passed in Venice today. When I informed the listing agent that prices were coming down, she “scoffed” at me, and told me that prices are up for the year in Venice, and are only down slightly in surrounding areas. Her listing was a 900K property that needed major structural work, she actually had architectural plans to show buyers because it was basically a tear down.
I think she might have been right. I don’t see prices falling in West L.A., I just don’t think it’s ever gonna happen there.
When prices were only falling in the IE/Palmcaster, I thought the way you do, but now that they’re down in the SFV, I think it’s only a matter of time.
West LA and the south bay took it hard in the last downturn. Palmdale was falling for 3 years before they felt a thing… and then fell hard. The stories are still famous.
Got popcorn?
Neil
SFV = almost reaching civilization
Its slowly working its way inward. Crept in to the valley already… another adult industry slowdown.
This is going to be U G L Y.
People like Will Farrell and that guy who played Screech on Saved By The Bell are different from you and me - they don’t balance their checkbooks, they don’t worry about not having a job next year, they’re just loaded with cash, and they ain’t living in peon locales like Miami or Aspen or New York - they buy in L.A. I can’t afford it, but if you can find something that’s pulled back 5% from last summer’s prices, I’d jump on it.
if you can find something that’s pulled back 5% from last summer’s prices, I’d jump on it.
You first!
I can’t afford it, but if you can find something that’s pulled back 5% from last summer’s prices, I’d jump on it.
ROTFL
That’s the issue. Affordability is at 2% in LA. No one can afford it. Not the aerospace workers, not the “B list” Hollywood types, no nurses, police, fire, or even doctors.
Remember the desperate attempts by people to escape LA during the 1990’s downturn? We’re going to lose the jobs again (REIC will start it off).
As to peon places, people like you mentioned usually have five or more homes. There aren’t enough of them to prop up LA’s prices. I’ve found places pulled back 10%. No interest.
Until those that work for me can afford a home, my job is in danger of relocation. Simple as that. Prices aren’t there yet.
Bring charts like this (I know, already posted in this thread):
http://blogs.wsj.com/economics/2007/10/02/where-is-the-bottom/
This is too well informed of a group to claim its time to buy. See no uptick in the black line? We’re far from the bottom. Volume always leads price.
Got popcorn?
Neil
I can’t afford it
That is the problem. Until those that work for me can afford it, prices are doomed to drop fast.
I have no desire to live in a region that excludes nurses, firefighters, and police from owning. With LA’s current 2% affordability… ouch.
My work has high morale, yet we are losing good people fast. Why? Its entirely cost of living. Hollywood is losing the “B-list” types. Where? Tucson (Sony) and New Zealand.
People and jobs are mobile.
Got popcorn?
Neil
Uh dude… you’re not looking hard enough. PS, list price and sales price are very different things.
chilidoggg,
Are you smoking crack? 417K limit. Do you know what they net worth of the top 10% of the nation is, including real estate? It’s 475K. Top 5% is 825K. Do you expect the top 10% to all live in what lainvestorgirl calls “civilization”?
You have got to be kidding me. Median income for Santa Monica is 58K. Even at 10X income that puts a home at 580K. It’s not different there, and most of the people you think are soaking filthy rich are posers, plain and simple.
test
Hi Chilidoggg:
If prices have rised in any area, but incomes haven’t, then it doesn’t matter what the incomes are. The only thing that matters is that the prices are too high for the incomes. It’s that multiple thing we were talking about before. If the multiple in an area has historically been, say, 5%, then it will tend to stay that way unless something drastic happens.
I meant to say risen. I’m not really that stupid, I swear.
Oh, and don’t forget the price:rent ratio. That’s another one that corrects for “pricey” areas.
Funny that you mentioned Screech. He had a website up not that long ago where he was peddling T-shirts to try to save his house from foreclosure. And I think his house was in Idaho or Wisconsin (some place up around there, anyhow). And, there just aren’t enough rich folks out there to support the prices in LA. People always claim there are tons of rich people, but look at the median and average incomes, and realize that these people should be buying a median-priced house. The multiples just don’t work. West LA was just as nice in the 90s (maybe nicer back then), and it still fell hard. It will happen again. Itulip predicted long ago that the declines would move from the exurbs to the suburbs to the urban areas. We’re to the suburbs now, with the urban areas getting ready to follow.
I saw a house(SFR) in the valley(SFV) for $398k the other day. Shitty house…but even South Central houses have been half a mil. This is progress. Lotsa Reos.And the party has barely started.
Speaking of B actors and people escaping LA, I have to chime in on this. I had a B list TV actor move in next door to me in Sept - no kidding. He graduated from UCD and returned to teach along with his wife. We had a great time comparing IMDB enteries. Turns out we’re 2 degrees separated via Angela Lansbury. Small world.
Oh and he rents >; )
Just give in time LA. The creep takes awhile. We all think this is gonna turn on a dime, but it won’t. I see it here in South OC. Slowly, but surely it will come, even here. San Diego County to the south and Santa Ana to the north, but it is slowly coming to a town near you. I call it creep because I have no better name for it, but it clearly describes what is happening all over the map right now.
I just don’t think it’s ever gonna happen there.
Right -’cuz “it’s different there” and $.9 million is never too much to ask for a tear-down, especially in Venice.
LOL!
Best comeback.
First off, locally we call it The Desert Scum. It’s Gannett and the articles are hysterically superficial normally. About 4 years ago, there were only about 800 homes available. Then the building started and the stories of people camping out overnight for new developments. Before that a 3/2 w/pool in Palm Desert was about $200K max. There are tons of cheap faux OC McMansions now and fenced desert where I guess they decided not to build. Those $200K houses became $700K by 06. Even now, they’re still around $600K. The big problem is there are no high end jobs out here - the bulk are low end hotel, tourism, retail or fast food - I would guess bulk of families have income in the $50K range. Alot of OC and LA folks brought their equity out here and were really set for life until….the refi rallies started and they just kept spending, spending, spending.
” Auctioneers with Kennedy Wilson Estate Group — the auctioneer for Anderson Homes — have said that they fully expect to get the minimum advertised bid value and that once prospective buyers start bidding, the selling price will be close to the asking price.”
Gee, guess I may as well stay home if they expect me to pay near asking price at an “auction”.
So they’ll have shills at the auction?
OT..
If home prices go back to pre-2000 levels, that means the median price of a home may be less than the price of a fully loaded Mercedes S600.
How is that for some perspective?
A Cadillac used to cost $3295 to $9700 circa 1930.
http://www.thetruthaboutcars.com/?p=3823
2nd link, so its from thepeoplehistory dot com
1930:
Average Cost of new house $7,145.00
Average wages per year $1,970.00
Pontiac Big Six Car $745.00 (Ford had lower cost cars too.)
So a top of the line Cadillac cost ~$2,500 more than a house or about 133% of the median home. A lower end one cost half a new home.
In 1935:
Average Cost of new house$3,450.00
Average wages per year $1,600.00
So a super high end car in 1930 cost about three times a home in 1935. The ratios for a Bugatti price ratio to a 2007 home is about right…
How is that for perspective?
Got popcorn?
Neil
Nice one-upsmanship there, Neil!
One thing that really hi me was in 1935, a house cost only 2.16X average (individual?) wage. Today, it’s 11x average combined household wages in CA.
“‘When we moved in, we knew we were paying more money, but we were also buying into a quality neighborhood where the price value wouldn’t go down,’ said Joseph Leon, who moved to Paseo West from Fremont 14 months ago.”
where do you think this guy got that idea? maybe from a realtor?
Now here’s a couple of videos worth watching………Peter Schiff.
http://www.europac.net/Schiff-CNN-10-1-07_lg.asp
http://www.europac.net/Schiff-CNBC-10-1-07_lg.asp
‘At what cost do we have to pay for their poor business plan,’
———————————————
You (’homeowners’) are paying - that was their business plan. Looks like you FBs were were the ones with the poor business plan by overpaying for a house.
“‘At what cost do we have to pay for their poor business plan,’ Cantrell said, adding that in his background as a subdivision developer others did not extend themselves that way.”
“‘When we moved in, we knew we were paying more money, but we were also buying into a quality neighborhood where the price value wouldn’t go down,’ said Joseph Leon, who moved to Paseo West from Fremont 14 months ago.”
Ummm, where shall I begin?
1. I think it was your poor planning that led you to buy an overpriced house in Manteca of all places.
2. Buying where “price values” wouldn’t go down? Manteca? Peak of bubble? Wha?
They keep saying upscale, upscale, upscale, but what do they consider upscale? Is there really an upscale area of Manteca? Why?
I think that “upscale” deserves a place in the Rest Home for Overused Words.
Right next to “luxury” and “condo” when used in the same sentence.
The five letter curse word…Condo.
Jeesh, where on gawd’s green earth is there not a c0ndo?
Ya just can’t make this stuff up!!!
Manteca! Even the NAME of the place is a joke! It’s Spanish for LARD! See the entry in the Wikipedia: http://en.wikipedia.org/wiki/Manteca,_California
According to the Wikipeida, it was named “Manteca” by mistake.
Reminda me of the Chevy Nova. Doesn’t Nova mean “Doesn’t run” or something like that in Spanish?
Doesn’t Nova mean “Doesn’t run” or something like that in Spanish?
Not really. Nova is the name of a stellar explosion. The “NOVA = doesn’t go” was meant strictly as a joke. The Spanish equivalent for “doesn’t go” is “no va” with a stress on the “a”. Actually Nova is an OK name from a marketing perspective, even in Spanish speaking countries, and even if you don’t mind your car exploding like a dwarf white star!
“Is there really an upscale area of Manteca? ”
Maybe they mean ‘upwind’. THAT would be worth something…
“we knew we were … buying into a quality neighborhood where the price value wouldn’t go down,’ said Joseph Leon”
You “knew” nothing of the sort. The word is “thought.” Come to think of it, that’s not right either — “thought” implies that you actually applied some logic to the situation, when you basically just assumed what the Realtor was feeding you was true.
Because if you can’t trust a dolled-up high school grad with fake boobs and the ability to pronounce the word “equity” more or less properly, who can you trust?
“My name is Joe Leon and I’m a recovering Kool Aide drinker.” LOL!
They had a great business plan! They sold overpriced homes to people who didn’t really have the money to pay for them and let some bank (and ultimately all Americans) get stuck with the details.
Why does anyone think that anyone–developer or lender–isn’t just trying to make a buck?
I’m still astounded by people who took ARMs back when rates for 30-year-fixed was about 5.5%. Did they really think the banks were pushing these products because it was better for the CONSUMER? That the banks were doing you a favor? That, if you swallowed the story and refinanced several years down the road, that you would have been better off than if you took the fixed mortgage in the first place?
they probably made the choice because of the monthly difference between 5.5 percent and 4 percent (or whatever they could get out of an ARM at the time). I’m guessing most home buyers making a decision like that were stretched pretty thin month to month and not thinking strategically. In the moment they were thinking tactically. Hind sight makes pretty good strategists out of all of us.
Talk about affordable! I just saw an ad on T.V. for this organization. I guess running out of water would do the trick!
http://www.calwatercrisis.org
The water crisis is real I think .I already started cutting back on water 2 years ago and I think I will attempt to even cut back more.I also installed a new water system for the plants and lawn that is suppose to cut down on the run off waste .Also taking quick showers these days .Also ,at the sides of the house where I had grass, I changed it over to concrete because it really was a wasted area to have grass with water usage .
I just got a announcement on my phone regarding FHA . I pressed the # 1 to get more information . The guy said that FHA will give a 5.50% fixed rate regardless of credit scores because they are trying to get people out of adjustables . I don’t know if this was a scam or not ,but did anybody else get a call where they were announcing FHA fixed regardless of credit scores ?
Anyway if this is true , than FHA plans to give fixed notes with no regard to credit scores . It could of just been a mortgage company trying to get business by using the FHA line .Also the recording almost sounded like a public service announcement .
Prolly a scam. Maybe I’ll try to find the FHA site and find out.
My husband got this message on his cell phone of all things. He doesn’t give his number out to just anyone. I told him I thought it was a scam. Why would the FHA just randomly call people especially people who have been renters for quite awhile?
want perspective?
Kansas farmland in 2006: $800 per acre (2006 dollars)
Kansas farmland in 1880: $200 per acre (1880 dollars)
The $800 price in 2006 would be $20 in 1880 prices.
Thus, 120 years later, the price of Kansas farmland is STILL 90% off peak. 120 YEARS later, still down 90%.
Prediction: In the 2120’s, they will be talking about CA real estate still being 90% off the all-time highs in the 2000’s. Well, in terms of Yen, Yuan, or Euros. Cause there won’t be a dollar by then… so sad…
The KS farmland stats was from the Daily Reckoning awhile back. I saved it.
Badger, that is a great statistic.
Plus, at least Kansas farmland is very fertile for growing crops (much more so than the “soil” in the California Central Valley, which only grows crops due to the extreme amount of fertilizers, insecticides, and pesiticides dumped on it). Certainly, the acre of Kansas farmland is far more useful than the McMansion that sits on a lot 1/8 the size and produces nothing other than squatters!
Dude, you really don’t know what you are talking about. The Central Valley is one of the most fertile places on the planet, which is why it’s a frackin’ shame it keeps getting plowed under for tract homes. Ever heard of something called the Dust Bowl? That was Kansas in the 1930s. Try reading The Grapes of Wrath.
/rant off
As someone born and raised on the SF Peninsula the stories of housing woes in places like American Canyon, Stockton, Brentwood, Tracy etc etc make sense. The true value of new houses in these communities is much less than was being paid in the bubble. But I have not heard much if anything about trouble in places on the Peninsula (Mountain View, Palo Alto all the way up to SF). What does this mean? no bubble there? fewer interest only loans because buyers had more to put down? (I doubt this last conjecture), bubble will take more time to manifest there?
So all you doom sayers out there - what is your prognosis for that housing market?
Dear Hans:
Last time I checked, SF was down about 4%. That’s according to the Case-Shiller index. Mountain View was the first city to show y-o-y declines in the Bay Area.
Palo Alto will fall hard when it falls. The reason the pricier areas are taking longer to fall is that the buck stops with the first-time home buyer. Every time a wealthy person needs to move, they need another wealthy person to buy their house. Usually, someone else has to move up from a lower spot on the totem pole in order to fill in the higher spot. As you move on down the line, you eventually get to the first-time buyer. If there isn’t one, the process can’t go.
Because we’re talking about a whole bunch of houses (not just one progression of buy/sell transactions), we can look at it like a chemical reaction. If you keep adding more and more titrant, but reduce the flow of one reactant, then the chemical indication of change will slow down more and more over time.
thx - nice analogy. You say Palo Alto will fall hard - meaning the chain reaction will be amplified as it moves up the totem pole? I’d think the opposite would be true as the further you move into wealthier communities the more financial resources people have.
It’s a very interesting problem (maybe lesson is a better term) - although one I’m glad I can watch from a distance. I just sold my place on the peninsula in July and became a renter. We had 4 offers over asking. Friends who still live in the area say the market has not changed much from their perspective. time will tell.
“When we moved in, we knew we were paying more money, but we were also buying into a quality neighborhood where the price value wouldn’t go down.”
Total B.S.
They were high as kites on the kool aid and erroneously believed they were buying a neverending equity cash cow.
NOW THEY KNOW they bought into a mania built on hype and psychology bolstered by greed on many fronts.
House is plummeting in value and the neighborhood’s turining into total s**t right before their eyes. Pucker-up time!! Yikes!!
DOC
Off topic maybe, but the Documentary Chanel has a show called “Afluenza”. Great show for the message. Worth a peek.
Blood in the streets:
http://www.nbcsandiego.com/news/14255708/detail.html?rss=dgo&psp=news
OK M in PB: I was looking at sublets and rents in SD today on craigs list and they seemed high to me. PB is my favorite place down there. Been thinking of moving from desert to SD, but only if I can find cheap rent in a safe neighborhood. What’s the story down there? I keep reading about giveaway rents in SD.
PB wouldn’t be my pick for a safe hood. According to a News 8 story PB has more crime than any other SD neighborhood.
http://tinyurl.com/yrg7dy
I haven’t seen any give away rents here but I can tell you that the wishing rents on Craig’s list don’t come anywhere near gettin’ rents. I pay 1750 a month for a 1380 sq ft, 3 bedroom 2 bath house in Serra Mesa. Gardener included. I’d say 1600 to 1800 tops is the going rate in Serra Mesa. Wishing rents on the other hand are $2500.
This clown has been trying to sell/rent this for well over a year. Original wishing rent was $2495 with no takers so he lowered and lowered till he finally came down to $2095 and still no takers. So he upped it to $2195.
http://tinyurl.com/32sm55
I was posting that from my old computer I moved to Carlsbad.
Move to PB if you are a twenty somthing with no kids and you like to go bar hopping and sun at the beach.
If you are older or have kids, that is the last place you want to be. If you must live there try to live in Crown Point where I used to live. 1bd 1 ba all utilities paid for was $925 with carport. 2bd rooms were $1600. Good luck!
The realtor who was shot had a last name of Magot?
Come on that has to rank up there with the top ironic names found on this blog.
I guess the shooter got tired of “Magot” leaching off of FB’s like dead carcasses.
“A Cadillac used to cost $3295 to $9700 circa 1930.
http://www.thetruthaboutcars.com/?p=3823
2nd link, so its from thepeoplehistory dot com
1930:
Average Cost of new house $7,145.00
Average wages per year $1,970.00
Pontiac Big Six Car $745.00 (Ford had lower cost cars too.)
So a top of the line Cadillac cost ~$2,500 more than a house or about 133% of the median home. A lower end one cost half a new home.
In 1935:
Average Cost of new house$3,450.00
Average wages per year $1,600.00
So a super high end car in 1930 cost about three times a home in 1935. The ratios for a Bugatti price ratio to a 2007 home is about right”
Cool stats. 2010 average prices of a Playa Vista shiftbox v. that used Bugatti from the 2005 boom. Will they fall in tandem?
I’m still waiting for the baseball-cap wearing flippers to leave this stapled-together particlewood condo thing in WeHo. The day will come…
Half a mil for a Los Banos home, way to go dumbasses.
“…but we were also buying into a quality neighborhood where the price value wouldn’t go down,…”
Ha ha ha! Prices wouldn’t go down, eh? Quality, eh? Dumbasses.
“…but it’s a way for Anderson Homes to say, ‘This is not typically what we will do. We’re in this with you, and we want to stay a family.’”
Ha ha ha ha ha! $20k! Family! Motherhood! Apple Pie! Ha! Way to go dumbasses!
“‘If that happens, then they’ll most likely turn it into a rental community,’”
Oh what a disaster. Way to go dumbasses.
So 34 homes are going to be auctioned in Los Banos. Who wants to bet that 34 honest bidders don’t even show. Los Banos is a spit hole out in the middle of nowhere. What’s a person supposed to do there in Los Banos for work? Shovel insecticide? Shovel cowturds at that giant cattle stinkfarm on the 5 just south of them? I know you aren’t going to tell me commute to the Bay Area, because that would require a lobotomy first. Get a lobotomy and then come talk to me about commuting from Los Banos. I’ve been on the 152 going down through “Garlictown” Gilroy to Cupertino and Los Altos, etc, many times. I can tell you if a squirrel gets run over on the 152 and looks at a driver cross-eyed, then the traffic is going to be backed up for miles.
Los Banos. Sheesh what a bunch of dumbasses.
The article focused on a Manteca subdivision and the comments were from Manteca .
I went to the Gilroy Garlic Festival once. (I live in Sunnyvale, CA about 75% of the time, so it’s just an hour and a half south of me). There was a gang-related fight and a stabbling. I never went again. (And it was the same bunch of street vendors and carnies that show up at any “street fair”, etc, with Garlic added)
Gilroy is doing things like enforcing dress codes to cut down on gang activity: http://www.mercurynews.com/valley/ci_6903222
My point is: Gilroy is a CESSPOOL!
Manteca may mean “Lard” but “Los Banos” is “The Bathrooms”