How Times Have Changed In California
The Tribune reports from California. “With San Luis Obispo County home sales for September plunging to their lowest level in 18 years and the median price dipping below $500,000 last month, economists and local real estate experts say it may be several years until the housing market begins to gain strength. The most recent figures from DataQuick show that show that sales of all homes declined nearly 28 percent from the previous year.”
“That’s the lowest September sales on record since DataQuick began keeping such statistics in 1989. Single- family home sales plummeted 37.3 percent from the previous year. The median price of all homes declined last month to $495,000, an 8.2 percent dip from the previous year when the median stood at $539,500.”
“The median for new home sales decreased 16.3 percent from the previous September.”
“‘Where’s the bottom? That’s the same question people were asking when we saw homes appreciating. They wanted to know how high will it go,’ said Keith Byrd of Century 21 Hometown Realty. ‘Where prices are going now is anybody’s guess. But there is room where we will still see a correction. I don’t see anything right now that will bring the buyers out.’”
“As of Oct. 1, the county had about 14.8 months of inventory. That’s up from 8.1 months in early July, Byrd said.”
The Napa Valley Register. “In Napa County, the number of foreclosures doubled in the third quarter of 2007 to 90 homes, compared to 45 in 2006. In Solano County, the number jumped by more than 700 percent in the same period, from 63 foreclosures to 473, according to the Solano County Tax Assessor’s Office.”
“About two years ago, said Calistoga Mayor Jack Gingles, he signed up for a subprime loan with 11 percent interest for two Calistoga properties his family members owned. ‘I had to come up with half a million dollars in two weeks,’ Gingles said. ‘I needed it pronto.’”
“The loan payments totaled $7,000 a month, Gingles said. The loan, he said, ‘bought me about a year.’”
“He tried to refinance the properties in April to lower his interest payments, but credit requirements had tightened and he couldn’t secure a better loan. Within four months, Gingles’ properties were in foreclosure.”
“They were scheduled to be sold this month on the steps of the Napa County Superior Court before a buyer finally came along, said Gingles, who considers himself fortunate.”
The Recordnet. “According to RealtyTrac, there were 1,932 home foreclosures in San Joaquin County the first nine months of this year.”
“Rosa and Alex Lejis lost their Manteca home to foreclosure earlier this year because they were facing insurmountable payments from an adjustable rate mortgage reset two years after buying.”
“Already struggling to make their $3,200 monthly mortgage, Rosa Lejis said, they were looking at monthly payments as high as $4,000. ‘We counted on being able to refinance,’ she said.”
“The house for which the Lejises paid $500,000 in May 2005 is now on the market recently as a foreclosure property for $299,000.”
The Modesto Bee. “Too many new houses. Too many investors. Too many exotic loans. They created a lethal mix that caused the Northern San Joaquin Valley’s housing market to soar, then crash into a painful collage of foreclosures, unsold homes and financial woes.”
“That’s the consensus of experts who try to explain why home values and sales have fallen so far and so fast in Stanislaus, San Joaquin and Merced counties.”
“The region’s homeowners were living large in 2005. Their houses had tripled in value in less than a decade. Developers couldn’t build houses fast enough. They sold more than 47,000 homes from 2001 to 2005 in cities throughout the three counties.”
“My, how times have changed: 2007 will be remembered as a brutal time for real estate in the valley. The three-county region has become America’s foreclosure capital.”
“In Modesto, about 2,400 houses and condos are for sale, nearly six times more than in spring 2005. Because only about 50 Modesto homes have been selling per week this fall, sellers are finding it extremely difficult to attract buyers without significantly dropping their prices.”
“Developers have sliced new home prices repeatedly, often by $100,000 or more, to unload their finished-but-empty inventory. Home auctions are becoming commonplace. Sale prices have plummeted 10 percent to 41 percent since the fall 2005 peak, depending on the city.”
“Atwater’s median home sales prices have plunged 41.6 percent since the peak. This weekend, Pacific Union Homes dropped the price $140,000 on one of its new Claremont Reserve homes. That 3,144-square-foot, five-bedroom house is now $352,310.”
“Prices are way down in Salida, too. The median peaked at $415,000, but was at $277,000 in September, a 33.2 percent drop.”
“‘It’s not rocket science, really. We just have an oversupply of homes,’ said Modesto builder Mark Wilbur. ‘As builders, clearly we overbuilt.’”
“‘The math just doesn’t work. We’re completely at a loss for what to do,’ said Summer Wolfe, who bought a new $439,000 home in Patterson two years ago at the peak of the market, using an adjustable-rate mortgage with no money down. ‘We thought that if we didn’t buy then we’d never be able to because prices kept going up,’ said Wolfe.”
“But their home recently appraised for only $315,000, a 28 percent decline. Their monthly payments, meanwhile, are rising as their mortgage interest rate adjusts. That rate could double within two years, increasing their mortgage payments $1,400 a month. ‘We’re just stuck,’ Wolfe said.”
“So are thousands of other homeowners throughout the region.”
The Fresno Bee. “More than 1,800 homeowners in Fresno County joined a record number of Californians entering foreclosure last quarter, according to DataQuick.”
“‘Talk about equal opportunity,’ said David Mendoza of the Community Housing Resource Center in Fresno. ‘Everything from very low-income housing to estate homes are being foreclosed upon.’”
“‘I saw one the other day where the [house] payment went from $1,500 a month to $2,300 a month. It was a big reset and they didn’t have the money,’ said Riley Walter, a bankruptcy attorney in Fresno.”
“Walter, like Mendoza, said families from all income levels are affected. ‘I’m learning the names of streets near Woodward Park I didn’t know existed,’ he said.”
“How prevalent is it? Mendoza said one lender he knows is issuing 400 new default notices every Tuesday.”
“In August, the median sales price of a new home in Fresno, Kings, Madera and Tulare counties was down 7.6%, and the number of houses finished and unsold or within 30 days of being done and unsold in those counties totaled 395, up 145.3% from a year earlier, according to Hanley Wood Market Intelligence.”
“‘August was particularly bad,’ said Jonathan Dienhart, director of published research.”
The Press Enterprise. “The trophy house has lost its luster. With McMansions being conspicuous casualties in a mountain of foreclosures and unsold homes, builders who during the past decade sold ever larger status-symbol homes are preparing to reverse course.”
“‘The next round of development will absolutely be smaller homes,’ said Alan Nevin, chief economist for the California Building Industry Association.”
“Steve Ruffner, president of KB Home’s Inland Empire division, said whereas KB Home in the past two years built homes sized between 1,800 and 4,000 square feet, the homes in its newest communities range between 1,300 and 2,800 square feet.”
“The turnabout will not occur overnight, say home-building industry experts, because builders that already have government approved plans for large homes on large lots cannot afford to make major revisions midstream.”
“Since the 1990s, Riverside and San Bernardino counties, once the bastion of housing affordable to first-time buyers, have seen an explosion of executive style and luxury homes. Many homeowners sold their houses and used their substantial equity as a down payment to buy something larger and fancier.”
“With the help of rising home values and lenient lending, there seemed to be a bottomless pool of Inland buyers able to buy the so-called McMansions.”
“‘In the last few years, most builders were going after that top 20 percent of the market, the one-in-five people, with a lot of income or a lot of equity,’ said architect Will Haynes.”
“As long as the economy allowed, Haynes said, the move-up market was favored by builders and land sellers because it could generate more profit than entry-level housing. He said government agencies also benefited because they could reap more tax revenue from higher-valued homes and demand more fees, parks and other benefits from developers, who could pass on the cost to well-to-do buyers.”
“‘Everyone was hooked on higher-priced housing and the market was chasing that,’ Haynes said.”
“But conditions have changed dramatically. Homeowners who might want a move-up house are reluctant to sell in a depressed market. Also, the risky adjustable mortgages with artificially low introductory interest rates are no longer available. Those loans once enabled many households to buy homes that were more expensive than they actually could afford.”
‘As long as the economy allowed, Haynes said, the move-up market was favored by builders and land sellers because it could generate more profit than entry-level housing. He said government agencies also benefited because they could reap more tax revenue from higher-valued homes and demand more fees, parks and other benefits from developers, who could pass on the cost to well-to-do buyers.’
‘Everyone was hooked on higher-priced housing and the market was chasing that,’ Haynes said.’
Ahem.. Attention MSM, yet another trend that this blog correctly identified as a by-product of the housing bubble that you entirely missed. Score?
Local Congressman (Rep) looking at bailout?
I talked to our Republican congressman, Kevin McCarthy, who was recently appointed to the Financial Services Committee. He agreed a straight bailout could reward “bad behavior” and he’s not willing to go there. But he did have some ideas about ways to “loosen capital” so that lenders had wiggle room to rework loans
http://www.bakersfield.com/hourly_news/story/270716.html
I talked to our Republican congressman, Kevin McCarthy, who was recently appointed to the Financial Services Committee. He agreed a straight bailout could reward “bad behavior” and he’s not willing to go there. But he did have some ideas about ways to “loosen capital” so that lenders had wiggle room to rework loans
http://www.bakersfield.com/hourly_news/story/270716.html
Hi Ben,
Do you suspect (know) if some in MSM read along with us in our little corner of your blog? That would be toooooooo funny!!
Smiles,
Leigh
P.S.
I do not give a rat’s…er…a$$…
I don’t care who you are, that’s just funny!
Imagine all the molls…lurking…for real, honest (?) …er…thieving, plagiarizing saps!
Note to self: remember the group think(y).
Jeesh,
Group think: a horrible facilitator~run with scissors! Color outside the lines! Jump in a mud puddle! (Do not talk back to your elders…just take my word).
Dare to be different! (double dare!)
Ya just can’t make this stuff up!
Leigh
seems like they do read this stuff, taking notes.. and delay publishing it for a couple years.
Haahaa!
Looks like they are trying to shut us (him) down!
uh oh.
Leigh
In depth?
Taking notes?
No group think here, the local paper (rag) could (would) not quote me correctly.
Fundamentals? (yes, fun da mentals).
Torks my britches…people don’t care and they don’t want to care (aside from my fellow bloggers).
Gold is bubbling, housing contintues to bubble; commodities bubble…what is NOT a bubble.
Water is scarce! Conglomerates are marketing WATER!
Sigh.
I too desire the answer. What will it take for American’s to preserve our lifestyle without jepordizing others?
I don’t know the answer. But, you can count on me!
I welcome input.
Humbly,
Leigh
Ben, please take a day off so I can take one too.
“As of Oct. 1, the county had about 14.8 months of inventory. That’s up from 8.1 months in early July, Byrd said.”
14.8 months = No bottom in sight.
14.8 months of inventory assuming no more homes come on the market. Not even 1 more home can come on the market for 14.8 months, and assuming homes continue to sell at the current pace, in that time inventory will be exhausted.
Let’s call it was it really is. Inventory that is never going to sell at today’s prices. And since the sales volume is dropping and the inventory keeps rising, it would be more accurate to say the months of inventory is infinite at today’s prices.
Let’s REALLY call it what it is…oversupply!
Inventory=OVER SUPPLY (a thousand pardons for sceaming). grrr
Prices?
That’s the joke on many of us!
Grrrr…yesh, I am a ranting!
Infinite…
This is the oversupply…
DO not want to see the big ones fall…seems apparent.
Shrug. Dang. How do honest ones survive?
Hanging head in shame.
Any oppositionist out there?
http://home.att.net/~ysinger/hell.htm
Good night Irene~
Ya just can’t make this stuff up!
Best always,
Leigh
Byrd is a tool.Still touting the ,’better buy now’ mantra to the sheeple. Remember, friends don’t let friends buy houses.
Friends don’t let friends buy houses!
Tools.
Who is left to…
Friends…hmmm…scarce! They are! Jeesh~ (aspirin).
: {
gain six months of inventory in three months.
Its a two for one sale!
Got popcorn?
Neil
A true Byrd brain
“Let’s call it was it really is. Inventory that is never going to sell at today’s prices. And since the sales volume is dropping and the inventory keeps rising…”
Yes, and think of all the current owners who are “trapped” because their house is no longer worth what they paid for it. These folks might eventually be the trade-up buyers in a normal market, but now they are out of the mix, as are the marginal buyers who fueled the Subprime mess.
It’s truly a perfect storm….very high inventory with very few buyers able / willing to purchase at current prices.
Hi Lisa!
Inventory. Hmmm.
Stock.
Overstocked?
Seriously, too many houses (builder, brokers, realtors, et al); too few interested borrowers?
Credit freeze…how many can get a loan?
Let’s play; whom do you know that is:
-willing/wanting to buy (me)-
-can get the financing (yes)
-are waiting for the fallout (yes)
I’m being silly, of course. The MBA reported that the loan rate will be 31% below 2006 levels (I believe).
31%? Below 06 new mortgage originations? Gawd, slap me with a…er…choose your favorite frozen fish!
Best,
Leigh
“14.8 months = No bottom in sight”
But I see plenty of “bums” in the not to distant future.
lemme try my hand at guestimating…
2,000,000 houses for sale.. 500 sales a month..
I get 333 years of inventory.
Tooooooooooooooooooooooooooo Funny!
Joey, me thinks your math is better than the…er…speculators!
As is your reasoning.
The inventory is insurmountable.
I get 333 years of inventory
ROTFL
Ya know, I think eventually they might get tired of renting for a loss? Or maybe there kids will?
Got popcorn?
Neil
September inventory in Santa Barbara and Goleta stood at 14.6 and 17.2 months, respectively, up from 5.5 and 11.5 months (respectively) in August. Uh-oh.
Saint Barbara
(Santa Barbara Housing Bubble Blog)
To all my good friends on this blog who are timing the market to buy. The time to buy is (drum roll please) when the home builders go out of business. As of now none has. Standard Pacific is getting close. Until then save up and convert your cash to gold and wait.
“The time to buy is (drum roll please) when the home builders go out of business.”
Never thought of that as a benchmark. You’re right, none of the homebuilders have gone out of business as yet. Just curious, which homebuilders do any of the bloggers think will go out of business any time soon?
Actually 5 mid size builders have gone bust so far.
1- NJ
1 - AZ
2 - Fl
1 - IL
I’m wondering about the Lennars, the KBs, the Centexes, Rylands, Tolls, etc. Any candidates at that level?
SPF is first, then maybe TOA, then LEN… just my uneducated guess
Hey there Crispy, what about this one?
http://www.reuters.com/article/fundsFundsNews/idUSWEN182220071022
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=TOA&time=12&freq=1&comp=&compidx=aaaaa%7E0&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp
Market cap went from almost $2 billion to $45 million
I wonder about LEN. Wouldn’t hurt my feelings if they just went away, they seem to me to be the most vicious in the way they deal with customers. The world would be better off without it.
I have dealt with DR Whoreton. Wow. I won’t waste a pretty Sunday afternoon by becoming wrathful, but, please, Miss Karma—go for them.
What about Beazer?
Any in California?
I am sure there are, but none that have made national news or at least anyone of the blogs…
Dumore Homes got bought out by a private equity a couple weeks ago after failing to pay subcontractors for a while.
http://www.bizjournals.com/sacramento/stories/2007/09/24/daily24.html?ana=from_rss
My criterion to buy is wait for official recession to roll in (-ve GDP growth). I think the absolute best moment is mid point of recession. Another good thumb rule is to buy when unemployment exceeds 7%.
Another good rule of thumb is to buy when it’s cheaper than renting.
This time it’ll be mid-depression.
California foreclosure report. Good stuff:
http://www.itulip.com/forums/showthread.php?p=18508#post18508
There was an absolutely astonishing article in the L.A. Times today. Apparently, in light of increasing inventories and slowing sales, “senior” real estate clerks are dumping their buyer clients! Huh? Here’s a quote:
Walter Sanford — a top-producing realty sales agent for more than 20 years and today a sales-coaching guru — is brutally blunt on the topic.
In a down market like this, he tells agents, dump the buyers and spend your time and budget cultivating more listings of motivated sellers and only motivated sellers. It’s a way for agents to avoid financial ruin.
“Buyers take longer to make decisions, they ‘nibble’ more, and they will actually eradicate your net profit if you continue to work buyers as a major part of your income flow,” Sanford says.
He adds: Nothing saps an agent’s time and energy or cuts into potential income like showing unmotivated buyers house, after house, after house, and still not making a sale. “So don’t do it, is what I tell them.”
And here’s the link to the rest of the article:
http://tinyurl.com/ysxfl8
I’ve neither a degree in economics nor psychiatry, but even I can spot a bunch of financial retards when I see them quoted. I’m willing to bet that handling a passle of non-selling properties is a bit of a drain on the wallet, too, after a few months, considering the advertising, the babysitting open houses and the…oh gosh…lack of buyers!
There is a person (another realtor) at the end of the article who debunks this method, “educate the sellers of market conditions and continue to cater to buyers.” I understand that it frustrates realtors when nothing is selling. Hey, I get irritated with even minor things when I am hungry. Hunger and empty pockets give me a bad mood too. And it makes me feel bad when somebody takes my toys (luxury SUVs, jetskis, nice clothes) away.
“He who has the gold does not make the rules” sayeth NAR.
I advise for realtors to eat their own children.
At least the problem will end after this generation.
Oh well, he is free to work the way he wants. But, if an agent refuses to show me a house now, because I am “not motivated”, then I certainly will not use him/her when I am finally ready to buy.
Ask him what the present owner bought it for. Add 4% per year (inflation). Make or not make your offer. Laugh and kick the seller.Another win-loose offer!
Errrr… no way. There is a good chance that present owner bought in 2005/6
Sorry brtlmj , I misblogged. You are correct. Doesn’t work for anything after October ‘05. Recalculate formulae.
How about 1997 prices plus 3% each year for inflation?
I thought it was conventional wisdom on this blog that inflation is actually 10% or more? If folks are going to claim that the govt is suppressing CPI info and inflation is actually 10%, then they should be consistent.
‘97 prices x 10 years of 5% inflation is 162% of ‘97 prices.
Just so you know.
Incidently, my salary is about 250% of my ‘97 salary, so hey, I might even go just a touch higher.
“Also, the risky adjustable mortgages with artificially low introductory interest rates are no longer available. Those loans once enabled many households to buy homes that were more expensive than they actually could afford.”
So where’s the F’ing news?. WE already figured that out here 3 years ago.
It’s news ’cause it’s actually being said in the main stream media. And it’s being said a lot.
You know, it was only a short while ago when ALL the MSM barfed forth to the masses was cheery lies. Lies, lies, on and on. And now look! Now every single day Ben serves us up a delicious smorgasbord of increasingly dire information, stats on how much hedgie money went ‘poof’ on this particular day, frightened economists, and weeping FB’s. Even from the MSM. For lots of people who were just stumping along living their lives, trying to pay the mortgage, this IS news.
For me, it’s like a Chinese buffet, so to speak.
Thanks, Chef Ben!
Yes it a buffet of information that only SOME are taking in. Just yesterday I had a conversation with my brother-in-law while gazing down the street in downtown San Jose (one of the hotbeds of foreclosure activity in Santa Clara Co.), and he says “Well ya know the government is going to step in and force the mortgage companies to accept lower rates and restructure the loans…” I almost can’t believe the conviction he has about how they’ll all be saved by the ‘governmant’. I try to tell him that bill is dead in the water back in DC. Dodd made some noise back in Sept. and that was about it. Really no one is going to be ’saved’. But like so many others, he hopes SOMETHING will happen before his mortgage resets next year….I dunno it just astounds me how blind the average person is about all of this…
“the government is going to step in and force the mortgage companies to accept lower rates and restructure the loans…”
This, unfortunately, may happen, in one form or another. But of it does, mortgage companies will tighten credit for future borrowers, and the end result will not change…
Exactly. There’s no wiggle room here. Mortgage companies are teetering on the edge of bankruptcy as it is. How does one force an almost bankrupt entity to accept further losses? And even if one did, those losses simply get moved to another part of the market. If you save the homeowners you screw the banks — and while that might sound ok at first, consider that the banks sell those mortgage bonds to retirement funds. So somewhere, somehow this is a serious sh*t storm.
“But like so many others, he hopes SOMETHING will happen before his mortgage resets next year … I dunno it just astounds me how blind the average person is about all of this …”
Hope springs eternal. What a fool believes he sees. Bla, bla, yada yada …
Reality is too severe for many of the multitudes, thus they create a world of fantasy and that’s where they dwell. Manipulitors of these multitudes understand this need for fantasy and are eagar to support the delusion.
Those who seek to add reality to counter the fantasy are seen as a threat by the manipulators and thus are readily demonized.
If one wants to inject rationality into an irrational world then he will find himself very much alone.
Such is life.
“‘The math just doesn’t work. We’re completely at a loss for what to do,’ said Summer Wolfe, who bought a new $439,000 home in Patterson two years ago at the peak of the market, using an adjustable-rate mortgage with no money down. ‘We thought that if we didn’t buy then we’d never be able to because prices kept going up,’ said Wolfe.”
“But their home recently appraised for only $315,000, a 28 percent decline. Their monthly payments, meanwhile, are rising as their mortgage interest rate adjusts. That rate could double within two years, increasing their mortgage payments $1,400 a month. ‘We’re just stuck,’ Wolfe said.”
While Summer is an absolute ignoramus, the banks, happily slamming anyone and everyone into their ticking timebomb mortage products,are pure evil. These scum suck!ng pigs, and the investors buying their garbage, need to eat these losses, not the taxpayers. Summer needs to have her credit demolished, and shouldn’t be allowed to buy another home for the foreseeable future. It’s time for the great @sskicking of all the pigmen, and the sheeple they fleeced, but not for the prudent folks who didn’t buy into the spin and hype. I want to see the pigmen weeping, as they lose everything they have. It’s time for the reemergence of the middle class in this country. Enough of this corporate greed BS. Rant off.
… at the peak of the
marketbubble …This is the thing that beggars my imagination - how could people really think that prices could continue going up? If they’d stepped back and really thought about it, they must have realised that prices have a ceiling, at some point? Yes?
Sure, lots of ordinary people (not the flippers, or ‘investors’) were sucked into the RE hysteria, but if they’d actually taken a deep breath and thought it through, they must have known that prices for anything don’t go up forever. Sheesh.
The math just doesn’t work. We’re completely at a loss for what to do
The math didn’t work when you bought the damn house, dumbass.
We thought that if we didn’t buy then we’d never be able to
You WERE priced out. You just weren’t aware of it.
God, I hope people like her get screwed as hard as possible.
Apparently you only have one chance to lose 8 billion dollars.
Merrill’s head O’Niell gone.
ooops O’Neal
We got blasted for refusing to take an ARM. From the realtor to the mortgage broker to friends and family. Like always in this mess, we had the last laugh on them all.
“Where prices are going now is anybody’s guess. But there is room where we will still see a correction. I don’t see anything right now that will bring the buyers out.’”
It’s much easier to predict how low they will go than it was to guess how high they would get. On the way down, we know that prices will revert to the mean, then probably overshoot a bit. Simple.
PSA for children on Halloween, 2007.
Every street has at least one house of horrors full of debt people who have no candy. They will ask you if you want to buy their house. Just say no.
Yea, kids come home with bags of keys.
This is really intriguing. Never considered this
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_berry&sid=ab01iQ2rYP6Y
I would be no more surprised at 0 than 50. But, first we had 0, unanimous, then 50, unanimous. So I am expecting 25, unanimous. The unaninous thing seems to be a growing fetish of this OMC.
Unanimous.
At the politburo meetings, the first people to stop clapping for fearless leader Stalin were thoroughly investigated for possible treasonous tendancies.
Some Wall Street analysts are claiming financial markets have taken such a turn for the worse that Federal Reserve officials should cut interest rates by a half-percentage point next week.
What the hell are they talking about? Markets are still near their record highs. If they want a coddling from the Fed, at least do the decent thing and drop below 13,000 so the story looks more convincing.
I think that was the plan but Yahoo and MSFT threw monkey wrench into the works.
Pardon me, but why is it the governments responsibility to protect rich peoples investments? The stock market is NOT in trouble right now. If anything, it’s bubblicious. If the DOW loses like 60% of its value, then perhaps it’s time for some intervention, but otherwise, these whining babies need to shut their pieholes.
–
“‘We’re just stuck,’ Wolfe said.”
No you are not stuck. Stop making mortgage payments; wait to receive eviction notice; and when you get an offer of some money to voluntarily leave, pack your stuff and Walk Away! And let the reckless lenders Pay!
Jas
The day before you leave take two or three months deposit (allow dogs) from several tenants plus two months rent and adios. Quit making payments of course. File a do it yourself 13. hehehehehehe
Recession Meme Revisited.
Quote: “The double-top pattern shows up in the 2001 graph, and now in the 2007 graph.
The duration between the double-tops is 18 months in 2001 and 7 months in 2007.
The first top in 2001 preceded recession by 6 months.
The current 2007 top occurred 8 months ago.
Based on the banking situation, dollar situation, general economic news, debt loads and this keyword graph… we’re toast in 2008, baby. My track record for technical predictions is fairly good. My prediction - Bernanke will cut rates again in a futile effort to revive the housing market and the dollar will drop accordingly.”
http://www.realmeme.com/roller/page/realmeme?entry=recession_meme_revisited
“Bernanke will cut rates again in a futile effort to revive the housing market”
He might cut rates, and he might give the impression the reason is to revive the housing market, but that won’t be the real reason. He knows rate cuts won’t help the housing market at this point.
I don’t think the Fed gives a crap about housing. It’s toast; even they are smart enough to get that. What they are being told to do is fluff Wall Street for the next tech bubble. The middle class is a lost friggen cause. It’s time for one more big party for the investment bankers before leaving for an island far, far away.
Fed is going to serve up another 50 bps cut on Wednesday. The question is, which angle is the mainstream media going to cover? Will it be the looming, monster Web 2.0 bubble taking shape? Hooray! AAPL is up! MSFT is up! Facebook! iPod! Halo!
Or will it be the hardcore dollar destruction, commodities inflation and middle class misery?
The stage is set for a fairly unique situation in modern history. Middle class taking a royal, blood-in-the-streets arse pounding while the NASTY and Dow explodes on the backs of a bullshit iPod/XBox economy.
These kinds of things really set the stage for “once in a 100 years” social and political dislocation. I truly believe that even the dumbest FB’s are going to be bitter about the stock market is rallying while they eat cat food.
It’s just starting to get good.
I absolutely agree, Craven.
That’s why there’s no time like now for someone like Ron Paul in the White House. We should take the opportunity to bring some SANITY back to the country.
http://www.ronpaul2008.com
- MMAB
Most likely is a 25 b.p. cut: dollar rallies and gold falls.
50 b.p. cut: dollar falls and gold rallies, but gold stalls fairly quickly. Gold is very overbought (note it did make that 20% move without a corresponding increase in the price of a suit of clothes, thank you) and $800 is a big psychological level. I’m looking for a move back to $740 - even $660 is possible if the Fed talks tough, but no more, because eventually the whiners will win out in America.
Also, re the buck:
http://www.oanda.com/products/bigmac/bigmac.shtml
It may look hokey, but I’ve been following this for 20 years and it’s very useful - focus on the second to last column. Forget the dollar: The undervaluation of the Asian currencies relative to the pound and euro on a purchasing power parity valuation is the most extreme ever. Rogers agrees that this is the real money maker over the next few years.
Paul in Jax,
http://goldprice.org/
Oh, sure, we have a follow-through on all the trends on Sunday night, which is to be expected, and I could be wrong. I’m not a day trader. But I nailed the last big up move in the face of a lot of criticism . And yeah, I had a position and made some money, and I’ve sold most of it, but I still stand to benefit by the current trend. And I really don’t expect the $600s. But at this stage $40 down is looking like a lot less friction than $40 up. And there’s rarely been a bigger “buy on the anticipation sell on the event” possibility than the one coming up Tuesday. So we’ll see.
The only fly in the ointment is the chart of the US Dollar, which Jim Sinclair at jsmineset.com has characterized as the worst-looking he’s ever seen, with multiple head and shoulder formations.
If the dollar continues going down, gold will go up. The dollar is continuing to go down, day after day. Sure there will be a dead-cat bounce at some point, but the dollar looks like toast.
Saw Gold up $3.50 this afternoon! Can oil be far behind?
Thanks for this discussion, gentlemen. Paul in Jax gives me the idea that I should be ready to dump my whole huge AUD-bonds position in a heartbeat, as I did on July 26-27. It’s nerve-wracking, but AUD tracks with gold, and I am a very inexperienced Forex adventurer.
Az_lender, are you buying AUS via everbank? They (the Everbank people) are making me nervous- bragging about buying $700M in mortgage assets from Netbank. That is sort of like bragging about contracting syphilis, IMHO.
Define “overbought”. The term implies that you know the “actual” value (which is apparently different from the “market” value).
We’re absolutely nowhere near the historical peak for gold yet (inflation adjusted of course), and the dollar is in far, far more serious jeopardy than at any previous time in US history. If someone told me gold was going to quintuple over the next two years, I’d have to believe him.
That having been said — I agree that asian currencies are absolutely the way to go. The yen (FXY) is going to soar. The yuan should pop, but it’s so tightly controlled that the guessing game of “when” is about the same as guessing when gold and silver are going to go stratospheric.
The answer ultimately is spread your money around outside of dollars. Gold, silver, oil, etc. and a mixed bag of asian currencies.
“About two years ago, said Calistoga Mayor Jack Gingles, he signed up for a subprime loan with 11 percent interest for two Calistoga properties his family members owned. ‘I had to come up with half a million dollars in two weeks,’ Gingles said. ‘I needed it pronto.’”
“The loan payments totaled $7,000 a month, Gingles said. The loan, he said, ‘bought me about a year.’”
“He tried to refinance the properties in April to lower his interest payments, but credit requirements had tightened and he couldn’t secure a better loan. Within four months, Gingles’ properties were in foreclosure.”
“They were scheduled to be sold this month on the steps of the Napa County Superior Court before a buyer finally came along, said Gingles, who considers himself fortunate.”
Actually a Thanksgiving tune that got hijacked by xmas…
Dashing through his dough
In a 2 house Heloc withdrawal display
O’er foreclosure he goes
Owing much in pay
The Calistoga mayor of bling
Doesn’t sound so bright
What fun it is to laugh and sing
A foreclosure song tonight
Oh, Gingles Hell, Gingles Hell
Gingles cannot pay
Oh what fun it is to deride
In a most unusual way
Gingles Hell, Gingles Hell
Gingles cannot pay
Oh what fun it is to deride
The mayor that forgot to pay
One commenter says, “housing problems are just about over.” Nice of him to let us know ahead of time . .
http://bigpicture.typepad.com/comments/2007/10/real-estate-ret.html
First line is:
“The conventional wisdom of a year ago was that we would have a soft landing in housing. Today, the stock market message is a hard landing for housing, with clear damage to consumer discretionary spending.”
Actually, the stock market message appears to be NO clear damage to consumer discretionary spending.
There actually is a scenario which rationalizes the apparent paradox of a bullish stock market and bullish bond market - declining inflation. But why is gold then so high and the dollar so low? Something has to give - perhaps a little of everything.
“‘The next round of development will absolutely be smaller homes,’ said Alan Nevin, chief economist for the California Building Industry Association.”
psst…
eCONomist
Why in the world would we need a next round?
You savants overbuilt, like nobody has overbuilt before…
Homebuilders need a next round to stay in business. There are too many homebuilders, they can’t all stay in business. But the ones who survive will not do so by ceasing to build houses.
My smaller homes, you mean people who bought mcmansions turning them into 3 and 4 unit apartments, then I agree. If you mean people shelling out cash to live in a newly built shoebox. I don’t think so.
Already struggling to make their $3,200 monthly mortgage, Rosa Lejis said, they were looking at monthly payments as high as $4,000. ‘We counted on being able to refinance,’ she said.”
What koolaid were all of these people thinking. Bank giving money on what logically know can not meet terms, someone who designed the terms, people knowing they can afford the reset and assume they can refinance? Just amazing.
Now, Bantering Bear, don’t sugar coat it. Tell us how you really feel.
““In Modesto, about 2,400 houses and condos are for sale, nearly six times more than in spring 2005. Because only about 50 Modesto homes have been selling per week this fall, sellers are finding it extremely difficult to attract buyers without significantly dropping their prices.””
Not to worry, sales will pick up right after Superbowl!!
Sarcasm off…
DOC
Souperbowl 2012?
Part of this was posted earlier, but I enjoy back-o’-the-envelope calculations, so here goes some more.
For San Diego, here are some rough figures
Pop = 3m
No. of homes = 1m
Average value of a home at bubble peak = $500K
Conservative estimate of lost value off bubble peak thus far = 10 percent
Conservative estimate of aggregate value of SD home equity off bubble top so far = 10 percent of 1m X $500K = $50bn
And to take this one step further, a very rough estimate of the lost home equity in all of CA thus far goes like this:
Number of CA residents = 30m (that is low, but conservative to reflect that SD housing is more expensive than average)
Number of CA homes = 10m (I have no idea how accurate this is)
Average value of a CA home at bubble top = $500K (not accurate, but a good ballpark figure)
Estimated loss of CA home equity conservatively assuming a 10 percent drop of the bubble peak = $500bn.
What did that Bernanke fellow say about a $200bn bubble loss?
“…drop off the bubble peak…”
P.S. Sorry if these calculations are not exact, but I only had two minutes available to crank them out.
I’m just a country boy and your calcs made my head hurt. I’m going to Bear Market Central to see what the Asian markets are doing. Buffet is buying S. Korea and Brazil. See you tomorrow.
Back a couple of months ago, when i started reading this blog (many, many, thanks to everybody here btw.) I did a back of the envelope calculation: 2 million housing inventory, average price 500k, @ 50% loss. All fudge factors, but i thought reasonable for some kind of order of magnitude idea of the problem. That’s 5 trillion dollars. And probably an under-estimate all things considered. So i think yes, this is going to be the one we all lecture our grandchildren about. And as we all know, it’s only just beginning.
Here is one more very rough calculation which nonetheless will have an interesting answer. With 35 million or so Californians and 300 million or so U.S. citizens, one might think about ratioing up from a $500 bn estimated loss in California home equity (after a 10 percent drop off the bubble peak) to a comparable figure for the national U.S. real estate market:
$500 bn X 300 m / 35 m = $4.286 t loss (after only a 10% price decline).
I know California’s prices are higher than average, so think of multiplying
$4.286 t X R = ?,
where R = ratio of average U.S. home price at bubble peak to average California home price at bubble peak to get closer to the truth. For instance, with a national average bubble peak price of $233,000, P = 233/500 = 46.6 percent, leading to an estimated aggregate national home equity loss of $2 t.
Please be advised that I pulled all the numbers used in these examples straight out of my @%%, making no effort in the process to check against actual figures, as I am sure the REIC experts always do when they cook up their numbers. These estimates are merely for entertainment purposes, and should not be taken as a realistic figures (though I do coincidently recall seeing a figure of $2t - $4t housing bubble loss thrown around in the news recently).
BTW, the average new home sale price for the entire U.S. cleared $300K in 2006, so I am thinking the rough estimate of a peak bubble average U.S. home value of $233K may not be too far off the mark…
““About two years ago, said Calistoga Mayor Jack Gingles, he signed up for a subprime loan with 11 percent interest for two Calistoga properties his family members owned. ‘I had to come up with half a million dollars in two weeks,’ Gingles said. ‘I needed it pronto.’”
“The loan payments totaled $7,000 a month, Gingles said. The loan, he said, ‘bought me about a year.’”
“He tried to refinance the properties in April to lower his interest payments, but credit requirements had tightened and he couldn’t secure a better loan. Within four months, Gingles’ properties were in foreclosure.”
“They were scheduled to be sold this month on the steps of the Napa County Superior Court before a buyer finally came along, said Gingles, who considers himself fortunate.””
Looks like some just added a mayor to their hip pocket!
What is wrong with people. How many here IF they had been that stupid would want to speak publicly so that their stupidity could be broadcast to the entire world? And unless he owed the mob or drug dealers, what would he need $500K “pronto” for?
The bigger question is how did a moron like this become the mayor.
They probably had a townwide wine tasting on election day.
Wow,
at the moment we look so ……screwed.
we?
Nah, I’m fine………
Okay i may be a little screwed, but I was assured I could change my life next year so I’m good!
haha
In 2000, we bought a 2/1 starter near the campus of UOP in Stockton, CA for $128,000. Home prices had just started to appreciate after a prolonged slump. (I can recall friends in Stockton being underwater on their homes in the mid-90’s).
In 2003, the home we bought two years previously was now worth $225,000. We sold it.
By 2005, it was worth $351,000 and there was much gnashing of teeth in our home. It had appreciated 22.5% in each of the past five years!
Then the market turned.
In 2006, it was worth $325,000.
And right now, in fall 2007, it is worth $244,000. That’s a drop of 30% since the 2005 high, but still a YOY appreciation of 9.6% since 2000.
And that’s why I don’t think this market has hit bottom yet. I think a more realistic YOY appreciation rate is 8%. That means this home “should” be worth $220,000 (not $244,000). That means this home needs to drop in price by another 10%.
The scary thing is if you think the real estate market should have appreciated YOY more like 6% since 2000, then this home needs to fall by another 20% (to $192,000). And if you’re a real bear, a YOY rate of 3% means this home still needs to fall another 35% (to $157,000). That would be a drop of 55% since the high of 2005.
I know that seems absurd, but if real wages haven’t dramatically gone up since 2000, it doesn’t seem so far-fetched to believe that home prices need to fall much further to meet the demand of those who can afford to actually buy them.
Hi Chet:
In the bay area, houses appreciate by inflation + 1.5%. So if inflation over the past few years has been 3% (I think that’s the official #), then appreciation should have 4.5% per year.
Wow.
At 4.5% YOY since 2000, that means the house should be going for $174,000 (not $244,000). That means it needs to drop another 28% (or 50% from the high of 2005).
(Correction: I meant we sold the home after three years, not two, but the numbers still pencil out right)
50% from peak is the number we keep coming up with on this blog. That’s what I’m looking for.
Ummmm. This is freaking scarey regarding the stock market. What do you all think:
http://market-ticker.denninger.net/
Quote:
Last week some $75 million of “fed funds” (that is, interbank overnight credit) was transacted at a rate of 15%, and “a bunch” went through in the low to mid 7s.
No, I didn’t mistype that. You can find the actual data at this link.
Originally I, and everyone else, assumed that the “high” was an error. A bad print. That there was no chance this was “real”.
It was.
Yes, “EFF” (effective fedfunds) was right where “it should be” according to The Fed - across all transactions.
Now let’s think about this one for a minute here folks.
“Someone” transacted a $75 million overnight loan that they needed to meet reserve requirements at an absolutely outrageous interest rate - about what you pay for credit card money. A bunch of “someone else’s” transacted a bunch at 7-7.5%.
They had the discount window available to them at 50 bips of penalty to EFF, which is a direct overnight loan from The Fed, but didn’t use it.
Are you going to try to tell me that some banks actually paid nearly 10% more as an interest rate than they had to?
On what planet are we having this discussion?
There is only one possible explanation for this particular behavior - The Fed would not take the alleged “collateral” these institutions tried to put up, and the market didn’t think it was worth much either, even on an overnight basis, and as such “the market” priced the interest rate similar to how Guido would for your “short-term” loan!
This raises the spectre of something truly terrifying in the credit markets -
The Fed may be inches away from losing control over the FF Rate entirely!
Indeed, for those transactions, they already have!
The implications of this, if it spreads, are truly terrifying. We are not talking about a three sigma event, a four sigma, or a five sigma.
We are talking about the equivalent of Financial Armageddon in the credit markets.
Sensing this possibility, a whole bunch of someones put on a bunch of options on the FF Futures contracts that are so far out of the “mainstream” of conventional thinking that they have zero chance of paying off unless a major dislocation event occurs.
so do you load up on ticker symbol DOG or what? Let’s make some money.
I’d rather load up on SKF. The DOW doesn’t have that many financials as components. SKF is an ultrashort on financials.
gettin ready for big legs down…
collars are off, downsides not gonna be managed very well..
currency abandonment and capital flight is underway on US dollar Assets…
Cross your fingers for Hope Now, borrowing money overnight at 15% indicates money movement at frantic pace..fED cut countdown is on.
lets talk rusty old worn out levers…. overly levered levers..
Watch his new tick. Keep an eye on the resistance levels.
Remember, this might not happen overnight and then there’s the Fed and the new stock bubble.
Hi Vozworth:
Why does this portend another rate cut (and linked currency abandonment)? If the Fed is making people pay high rates to borrow against crappy collateral, then they aren’t really reducing rates. Seems like they’re RAISING rates, but only for people who really deserve it.
They are not.
The point is that banks lending to one and other overnight have disconnected from the FFR.
There is a major insititution out there about to go bust as I understand it. Can you imagine the cost of borrowing millions at that rate, even overnight?
But your question is a good one. Why should the Fed cut rates if the credit markets have reached a crescendo point, again? Who does it help? Who does it hurt?
They are pushing on a string now. The only thing that can get the credit markets going again is if the Fed or Treasury start taking the toxic bonds as collateral. If they resort to that, the Asians and Arabs will dump US Treasuries at an even faster rate. So we face severe recession or inflation, depending on how the goobermint reacts to this crisis.
The Fed would not take the alleged “collateral” these institutions tried to put up, and the market didn’t think it was worth much either, even on an overnight basis, and as such “the market” priced the interest rate similar to how Guido would for your “short-term” loan!
Maybe some of these institutions ought to try Pay Day Loans. I hear they offer some pretty good short term lending rates.
When will you know that we’ve hit bottom? When Jim Cramer and David Lareah are alongside Gary Coleman pitching Cash-Call.
From the SLO Tribune link: “If you are buying a house to … make that house your home for five or more years, in the long run, you will be ahead,” Jones said. [Jones = RE broker]
Nope, Jones, that would not be true right now. If I am buying a house AFTER five or more years of declining prices, then probably in the long run I will be ahead. So, wait till 2010-11 to buy. Probably. As I posted above, my price point would be rent parity.
“wait till 2010-11 ”
Seems about right (consult Credit Suisse/Zelman loan reset charts for why).
“With San Luis Obispo County home sales for September plunging to their lowest level in 18 years…‘Where’s the bottom? ”
WHAT bottom? I was (constantly) told that home prices here on the central coast would never go down because everyone wanted to live here. Don’t tell me that the people who told me this (almost everyone!) was wrong!??
wrong wrong.. they only want to live in san diego..
No, no……Boise!
Orange County!
I like that the LA Times writer mentioned that RE agents are also miffed when buyers want to offer 30% less than asking. I think that tune will change. Hell, it already is in the OC. I seeing lots of places 100k reduced and still sitting on zip…
On the dot. Irvine is -19% YOY. LA would soon follow.
I wonder if BB knows he has no power or respect left after that 50 basis point stunt he pulled? Everyone now knows Wall Street is calling the shots.
BB will do whatever they tell him to do. He is irrelevant.
I think he has to cut at least 25 bps. Otherwise, Wall Street traders will freak out and a crash will be underway.
This whole thing is starting to get scary.
“Stocks, oil hit new peaks”
HONG KONG (Reuters) - Asian stocks rose to a fresh life high on Monday as investors bet there will be a U.S. interest rate cut this week, which sent the dollar to a record low against the euro and a basket of major currencies.
A wilting dollar coupled with output disruptions in Nigeria fired up oil prices, sending U.S. crude to $92.79 a barrel for the first time. Gold rode on the coat-tails of oil to a 28-year high near $790 an ounce.
http://biz.yahoo.com/rb/071028/markets_stocks.html?.v=4
Is this golds wall of worry?
http://goldprice.org/
“Steve Ruffner, president of KB Home’s Inland Empire division, said whereas KB Home in the past two years built homes sized between 1,800 and 4,000 square feet, the homes in its newest communities range between 1,300 and 2,800 square feet.”
This shows just how bloated homes had become and still are. In my entire life, I haven’t yet lived in a residence as large as 1300 sf and that’s at the low end of the homes that have been reduced in size. It’s going to be a joy heating and cooling these white elephants as energy costs go ever higher.
from Bloomberg…..
“the largest U.S. mortgage lender, said it will rebound from subprime-mortgage losses, indicating the worst may be over for the industry.”
Ahhh so there you have it, no need for a rate cut!
http://tinyurl.com/36cffm
“…Countrywide Financial Corp., the largest U.S. mortgage lender, said it will rebound from subprime losses, indicating the worst may be over for the industry.”
Will it survive the alt-A and prime losses?
As price declines accelerate, defaults on other types of loans will increase with a greater financial impact than subprime losses. This downturn has a long way to go and so too likely their losses.
Is the tan man trying to temporarily boost CFC so he can dump some more stock? I think there’s a level below which he can’t sell. If this gets CFC back above that level…hmm…
happy
sad
grin : D
love (
laugh (D
wink
blush *^_^*
cry :’(
confused `:|
shocked : O
plain
Is this what you’re looking for………
http://codex.wordpress.org/Using_Smilies#How_Can_I_Have_Different_Smiley_Images_Appear.3F
})
happy
sad
grin : D
love (
laugh (D
wink
blush *^_^*
cry :’(
confused `:|
shocked : O
plain
addSmiley(’post-author’, ‘post-notes’);
Big V must be :bored2 (bored)
Everybody used to say that Sherman Oaks and Sherman Oaks adjacent residential real estate would never go down in price. There are still some who say that LA prices are holding up. Here’s evidence that they are NOT holding up and you can see the cracks widening every day…
According to Zillow and ziprealty:
14712 Killion St VAN NUYS CA 91411
2 beds, 2.0 baths, 1,339 sq ft;
Purchased on 06/16/2005 for $545,000
Purchased on 01/25/2006 for $750,000
Purchased on 08/13/2007 for $594,000 by the bank
On sale today (bank-owned) for $549,900. Any doubters still out there?
Everyone should take a look at Ben Stein’s latest puff piece on Yahoo finance page. Unbelieveable
“‘Where’s the bottom? That’s the same question people were asking when we saw homes appreciating. They wanted to know how high will it go,’ said Keith Byrd of Century 21 Hometown Realty. ‘Where prices are going now is anybody’s guess. But there is room where we will still see a correction. I don’t see anything right now that will bring the buyers out.’”
this buyer not buying anything at these artificially elevated wish prices.