The Market Is Stumbling Because Of Affordability
The North County Times reports from California. “For the first time in nearly three years, the median price of a single-family home has fallen below $600,000, according to the latest report from the North San Diego County Association of Realtors. The decline amounted to 4.82 percent, from $609,375 in October 2006 to $580,000 this October. Not since January 2005, when the North County median was $589,000, have single-family homes in North County sold for less, said Robert Brown, an economics professor at Cal State San Marcos who prepared the Homedex report.”
“The market is soft right now, said Mark Oatman, president of the Realtors group. ‘Sales are definitely off right now…People that are out there looking right now are really looking for the deal.’”
“With 5,827 single-family homes on the market in North County at the end of October, North County has just over a 14-month supply of homes on the market.”
“Median prices for attached homes tumbled 11.65 percent, from $395,000 in October 2006 to $349,000 in October 2007, the lowest in a year.”
“Oatman attributed the decline to a large supply of condos for sale, especially new condos. ‘Many of those are from developers who are offering some pretty good incentives to get out from under large projects,’ Oatman said.”
The Orange County Register. “The credit crunch and a foreclosure tsunami continue to pound the county’s mid-section. New home-buying stats from DataQuick show that for the 22 business days ended Oct. 23 that mid-county ZIPs in Santa Ana, Anaheim, Orange, Garden Grove and Westminster had just 343 home sales, a stunning 62 percent below year-ago levels.”
“Orange Countians likely failed to buy more homes last month than the year-ago period for the 25th consecutive month. And the median selling price hovers at early 2005 levels.”
The Daily Press. “From Jan. 1 to Oct. 16, there have been 1,318 foreclosures, with the High Desert accounting for 30 percent of the total number in San Bernardino County. Between September and October, the number of Victor Valley foreclosures jumped 25 percent.”
“The Victor Valley hasn’t been hit as hard as some areas of Southern California because economic trends usually start at the coast and move inland, said County Assessor Bill Postmus. But with the number of foreclosures in the county increasing 1,000 percent since last year and only continuing to grow, we likely have not seen the worst of it yet.”
The Desert Sun. “The number of homes sold continued to decline in September, dropping 32.7 percent from a year ago.”
“The most recent statistics continue to show a housing market in transition, one that favors buyers, is frustrating sellers, and has investors and homeowners nervous about their equity.”
“The median price of existing homes in the Coachella Valley jumped 6.4 percent to $399,000 in September, bumped up largely by the sale of several multimillion-dollar homes.”
“‘Knowing the median price of a home in the desert is interesting, but it is as indicative of the value of your home as knowing the median temperature in America is to predicting the weather here,’ said Leslie Appleton-Young, the chief economist for the California Association of Realtors.”
“‘High-end homes are a market unto themselves and have continued to perform better than the overall market,’ said Patrick C. Veling, president of Real Data Strategies. ‘The entry-level market is really stumbling because of the financing crisis and, frankly, because of affordability.’”
“At the mid-level, motivated sellers who have changed their original expectations are having some luck, but several of them are still in denial. Sales in the high-end, tony market are motivated by lifestyle choices, not the cost of the property.”
“Greg Berkemer, executive VP of the California Desert Association of Realtors, noted that ‘while sales fall overall, you would expect prices to decline as a function of supply and demand. One reason the median prices have not fallen is because the high end is selling so well.’”
“Veling says the data ‘points out the flaw in using median price for anything except real macro analysis.’ ‘The statistical sample (of homes sold) is now small enough that the median price misrepresents what buyers and sellers are dealing with,’ he said.”
“Veling said he thinks it is far more important to know what a competing seller is asking and position against that. ‘The median has basically been reduced to a meaningless academic exercise,’ he said.”
“In September, 524 housing units were sold, down 32.7 percent from a year ago, according to DataQuick. The sale of existing homes dropped 40.7 percent from a year ago. The median square-foot cost also dropped a bit more than 6 percent for existing and new homes and for resale condos.”
“Berkemer said there were 9,170 unsold homes in the Coachella Valley in October, up 571 units over September and up 1,094 from a year ago.”
“The economy through 2008 is on the razor’s edge, Leslie Appleton-Young told Coachella Valley Realtors.”
“‘A key concern is whether turmoil in the housing market will tip the economy into recession,’ she said, before noting: ‘Probably not.’”
“She assuaged Realtors attending the meeting by pointing out the Coachella Valley’s strengths as a resilient area with its resort panache for Canadians and baby boomers, and its multiple sub-markets.”
“‘The market will take back the last 1½ year in terms of price appreciation,’ she said, and the first half of the year will be peppered with resets on mortgages for those who bought homes when the real estate market was at its peak. ‘We’ll have to get through the first half of the year, and we’ll be in a healing mode after that.’”
“Strategies Appleton-Young suggested Realtors adopt for 2008 included one essential business practice: Make sure your clients have their loan. ‘Price appreciation trumps solid underwriting every single time,’ she said.”
“Appleton-Young also advised Realtors to double their efforts, expand their sphere of influence, broaden their portfolio and keep the view that first-time buyers will return in 2008.”
‘Knowing the median price of a home in the desert is interesting, but it is as indicative of the value of your home as knowing the median temperature in America is to predicting the weather here,’ said Leslie Appleton-Young’
You know you are making progress when CAR starts making these points for you.
‘Manteca has more than 200 homes in the foreclosure process. In many cases, that leads to the owners simply leaving their homes behind to fall into disrepair. One home on North Grant Avenue has broken windows, trash in the yard, and garage doors left open. Neighbors say transients come and go. It’s exactly what the city hopes to change when the new ordinance takes effect.’
‘Manteca’s new ordinance will allow the city to board up homes that are in foreclosure. ‘The bank could get fees or fines up to a $1,000 a day. It won’t cost them that much to secure the house. They may become responsible owners,’ said city spokesman Rex Osborn.’
‘ Robert E. Lee Jr., has spent the last four years buying loans from lenders when borrowers don’t pay. When a loan goes delinquent, banks can either sell to an investor like Lee, try to work with a struggling borrower or foreclose. He has an ownership stake in about 1,000 loans and heads two companies.’
‘He’s one of the smaller buyers of delinquent loans, but experts say the market is fluid, with hedge funds and other investors jumping in and out all the time and no one accurately counting total loans traded.’
‘In some markets, REOs are adding up, depressing prices, he says. (’We’re in an REO war,” Lee says.)’
‘Lee reviews plenty of loans in Orange County. For example, he recently reviewed a $253 million pool of loans from Washington Mutual. The more than 1,000 loans stretch across the U.S. but include some familiar cities: Aliso Viejo, Anaheim (four properties, the most among O.C. cities), Dana Point, Irvine, Laguna Niguel, Laguna Woods, Mission Viejo and Santa Ana.’
‘Lee says he is ‘very nervous’ about buying loans when he has no idea how far home prices are set to fall. At the same time, his world, the flip side of the market, will thrive as the housing boom continues to unravel. ‘It took five years to create this monster. It will take another five years to work it out,’ he said.’
Ben Bernanke and the Honorable Senator Chuck Schumer are trying to get Fannie/Freddie to raise the GSE loan limits to $1,000,000 now. We taxpayers will be forced to eat Wall Street’s droppings. The GSE’s were buying nearly half of the subprime mortgages during the ponzi scheme and now they will be used to bail out Wall Street. The FHLB is already buying the junk debt from CountryWide and other mortgage lenders. The NY Fed Bank was recently taking CDO’s as collateral for discount rate loans.
http://tinyurl.com/2bzhqf
There is nobody in Congress more corrupt than Chuck Schumer
http://tinyurl.com/35klv9
It should be clear to everybody what BB and Senator Schumer are up to . Boy were both those guys sleeping on the job when all this corruption with loans took place .
Everyone should pay a LOT of attention to this! If this goes through, the buying frenzy will start up all over again for houses currently listed above $417,000. You think you had a bubble before, 1,000 sq ft homes will start selling for $800-900k all over the country.
I disagree. The GSI loans have requirements for full documentation of income and tight controls on debt to income and purchase to income.
My guess is that the GSEs are losing a lot of money on lowend loans, and they need some extra fees that are generated by the higher end of the market to keep them from going insolvant.
I’m sure they’re working on that issue.
Fannie Mae’s profits dipped 35 percent last year as the agency increased its holdings of Alt-A and subprime loans, according to the company’s delayed 2006 annual report, filed today.
http://tinyurl.com/395mqo
It looks like those requirements just went out the window:
Freddie Mac late on Tuesday announced it would provide 90-day forward commitments to lenders with terms that accommodate most Alt-A loans.
Alt-A loans have credit scores above subprime, but include characteristics that have become common among loans gone bad — such as no proof of income or loans to borrowers with no stake in the property. The market for Alt-A loans has dried up in recent days as investors increasingly balk at any security that is not guaranteed by Freddie Mac, Fannie Mae or Ginnie Mae.
“We felt it was important for us to make a statement saying we are active in this marketplace,” Coulter said. It is also “a good opportunity” to “add value” to lenders’ loans, he said, compared with times when Wall Street was a more aggressive bidder for the mortgages.
http://tinyurl.com/3xt4qr
Not a chance in hell, John. Think that one through before you hit the panic button next time. What’s it gonna do, really? Lower the rate a bit for Jumbo’s and free up capitol for these guys to lend. So what! Two things to think about:
First, I agree with Darrell. Underwriting will still be too strict for most. Look around - people aren’t qualifying for Fannie/Freddie under 417K right now anyway, making the lower end is one of the most distressed markets. You’re still going to need a lot of cash down, and people just don’t have it.
Second, housing has finally caught leprosy and no one wants to touch it. Remember the whole psychology thing. There’s blood in the streets and fear in the family rooms. Once this sets in you don’t shake it. i’m going to see if I can find the link to an article that this German dude wrote in which he shows how once a bubble like the one we have begins to deflate there really isn’t much you can do about it, even if you lower rates to nothing. You might make another bubble, but not in the one that just deflated. I’ll post it if I find it. It’s all logic and statistical data.
Would really appreciate it if you could locate and post this info. All this talk of increasing conforming limits to 1 Million probably has a number of us groaning thinking our patience is about to be tested some more.
The government is a powerful driving force behind economic and financial decisions of investors. Taxes and subsidies have great influence in our corporate and personal lives. It had a huge hand in the RE bubble, from the tax exempt capital gains, to the mortgage interest deduction, to FHA and GSE’s, and now this.
My main concern is that FHA and the GSE’s will be used as a toilet where the toxic loans will be dumped. They are already using FHA to refi subprime option ARM’s.
I hope they do raise it to $1 million. I will take out a $1 million reverse mtg. Non taxable woopie.
Conforming to $1M will help tank the market.
They’ll have to qualify. DTI limit of 29%.
Its just going to point out to everyone how everything is overpriced. It will take a long time, but things are accelerating.
ex-nnv has the right idea. People will extract money from real estate, not put more money into it. Not this year.
Got popcorn?
Neil
Schumer is a snake. Unfortunately I voted for him and I am regretting that moment more each day. He was spineless when it came to Mukasey and he will be spineless when it comes to bowing to the banks and BB. While it’s nice to complain about the snake on this blog, why not write Chucky and let him have it? I have sent him many a scathing note, of course with no reply from Chucky, but I felt better nonetheless. Down with Chucky!
Chucky can be reached at: http://schumer.senate.gov/
I went to an exciting Ron Paul rally today in Philadelphia. Thousands of people turned out in very chilly weather to hear Ron Paul decry the war in Iraq, the war on drugs, and the war on the dollar. He wants an audit of the gold in Fort Knox. Hey, he may be “crazy” but he got a terrifically enthusiastic reception. I finally got a bumper sticker and a yard sign.
Worse than that, the FHLB’s just loaned 51 Billion to CFC in SEpt and Aug of this year, using their GSE status to raise 143 Billion AT 4.9%!!!!!!!!!!!!!!!! and then turned around and lent 163 Billion to over 800 mortgage companies those two months including 51 BILLION to CFC and WaMu got 31 BILLION at that 4.9%!!!!!!!!!!!
Your tax dollars at work - bailing out corrupt corporations and the banks!
You guys need a new American Revolution!
Government programs usually start out as noble causes, but always end up hijacked in order to line the pockets of special interests.
jerry from richardson . Your thoughts are what I think .
People who need a million dollar loan should be putting alot of money down . I think alot of banks are holding alot of bad paper over the 437k current loan amount limit .Not only do banks need to offload current junk loans ,but they need new money over the 437K limit to make more stupid loans .Let’s face it ,the higher loans amounts pose the greatest risk of big loss for the lenders ,so they need a bagholder to pass to, like the taxpayers .
The reason they need “new money ” and “old money” up to a million, is to again have easy money in the higher loan amounts to spike the sales in the high end and take in current junk high risk paper .Wait until the re-set with this higher junk .
Now ,believe me the loan underwriting for the new proposed government backed loans will be easy and it will be low down lending in the name of helping with a tight money market .
As I see it ,the biggest hurdle will be in getting the increase on the loan amounts ,but after that ,the underwriting will be easy because they will say its just short term lending to help out with a tight money market . Once they get the higher amount approved than its just a simple matter of getting the easy underwriting or lower down payments approved ,(they will call it a new program ) Anybody that needs a loan amount that high (above 500k) should be putting a big 20 to 30% down payment . It’s not the United States problem that coastal areas shot up to absurd levels .We are going to bail out lifestyles of the upscale coastal States or New York for that matter (and I live in California ).No way
Now BB might be saying 1 million just to make it look reasonable when they only approved 800K amounts ,whatever .
Did anybody think that BB got any real hardball questions at the Senate hearings ,other than from Ron Paul . A couple of those Senators ,(like the one from Orange Country ),made me sick when she acted like big loan amounts were her States God given right ,and what was that senator doing when this bubble was inflating ?
The public has got to object to this fast one .We got to go back to prudent underwriting and whatever crash in price that is going to create . Let the lenders re-write their toxic loans and take the loss on the rest at their own expense to be dragged out for years ,and that is it .
I don’t want to hear that the lending will be prudent with this bailout government backed loans to 1 million because it won’t . BB is trashing the dollar and he will continue to do so in a CYA attempt to undue the bad lending by providing more bad lending . It’s not the job of the government to bail out faulty lending by private investors and lending institutions .It might be the job of the government to back FDIC insurance ,but certainly not gambler loans in a mania .The legal or criminal court remedy is the usual remedy for stuff like this . The bail out Government agents are calling for bail out loans without :
(1) Knowledge of criminal and legal liability regarding loans ,(that has not played out yet )
(2) Without accountability of agencies that were sleeping on the job or in breach of duty to regulate the loan industry .
(3) Without a overhaul of the appraisal system or corrupt loan underwriting system that resulted in fraudulent inflated loans ,that needs to be purged .
(4) Without a investigation of hedge funds ,rating agencies and Wall Street loan funders part in having so many bad loans on the books and faulty appraisals .
(5) Without clear disclosure of the loss from the lenders/loan investors .
(6) Without investigation of what % of loan applications were fraudulent from borrowers ,(and who are the real victims )
(7) Without investigation on builder involvement and conflict of interest with their “special lenders ‘ that created a high % of speculator driven demand in new home tracts .
(8) And without regard to crashing prices that would result in the taxpayers catching a falling knife if loans were made in a crashing market ,rather than waiting until the prices stabilize .
I could go on and on . The people in power where the jerks that got us into this mess and they should not be the jerks that get us out of this mess . Maybe they should elect a neutral group to oversee a investigation that can act in the best interest of the Country regarding the so-called credit crunch or the aftermath of a mania .
This is getting comical, China is trying to reign in credit, the u.s. banks are pushing on a string.
“At the mid-level, motivated sellers who have changed their original expectations are having some luck, but several of them are still in denial. Sales in the high-end, tony market are motivated by lifestyle choices, not the cost of the property.”
- Did Leslie use the word ‘Denial’?
She has been the queen of denial.
Like Cleopatra?
Can we hope she gets bitten in her asp?
“Sales in the high-end, tony market are motivated by lifestyle choices, not the cost of the property.”
Rich people don’t like to lose money any more than the middle class, and perhaps have even more of an aversion to losing money. If they think property values are declining, sales will fall. This notion that the high end won’t be affected is complete nonsense.
But, but….high end is Different.
High end is different in Coachella Valley and totally skews the median. High end is almost exclusively 2nd homes and are out of range of even the wannabes.
A few weeks ago I was visiting some relatives in Hillsborough, CA. I’ve been making that visit every few months for over 30 years. I’ve never seen so many for sale signs in all that time. I toured a few of the homes over 4 months ago–and they’re still for sale. Keep in mind most of these are $5 Million and up.
The high-end is of course affected by property values, but the inputs driving those property values are not the same inputs that are causing the declines in the other 99% of property values.
Of course, realtors conflate nice, upper middle class housing and high end housing when it’s convenient, but high-end really is different. It’s high-end if buyers are paying cash, and prices are based on location, not construction. That’s probably only 50 zipcodes in the US, the rest of the so-called high-end stuff is just upper-middle class mass-produced crap (think Ralph Lauren housing.) Real high-end housing can weather a 20 year economic downturn without impact, but is horribly exposed to long-term demographic and cultural changes.
I would submit that “high-end” buyers are no smarter than the rest of us: they just have more cash which means less 3rd party involvement interfering with their buying decisions.
They can bring a box full of stupid to the closing table and there are fewer people to say “STOP!!! You are making a huge mistake!! I won’t fund this!”
I think the high-end market IS different–it’s just slower to respond to normal market forces.
‘Manteca’s new ordinance will allow the city to board up homes that are in foreclosure. ‘The bank could get fees or fines up to a $1,000 a day.
Excellent! This tactic - hefty daily fines for flippers, FBs, or lenders who let their properties go to seed - was first proposed by yours truly on this very board. Hope the concept spreads nationwide. $1000-a-day fines for not maintaining vacant properties would be just the ticket to get them back on the market - while further imploding the bubble - and into the hands of responsible owner-occupants. Now for the other part of my plan - to levy double property-tax assessments on the owners of vacant properties that are not used as primary residences. That’ll kill off what’s left of speculation in the housing market, and help get those houses occupied by owner-occupants.
“Now for the other part of my plan - to levy double property-tax assessments on the owners of vacant properties that are not used as primary residences. That’ll kill off what’s left of speculation in the housing market, and help get those houses occupied by owner-occupants.”
So you hope to put individual landlords out of business ? How American of you
OK, I should clarify: I would only impose double property-tax levies on “investor-owned” properties that sit vacant, not on those being rented, i.e. serving their primary purpose of sheltering individuals or families. Legitimate rental properties, even those that happen to be vacant, would be exempt.
Any plan to raise someone else’s taxes is in bad taste. How about this? No more mortgage interest deductions! This will affect *everyone* and is more fair.
Better yet! I do think, however, that housing speculation should be actively discouraged. There won’t be too many “investors” or flippers if they were penalized by paying more taxes [the proceeds of which could go to better enforcement of local code violations]. I would also distinguish between investors who buy run-down or distressed properties and actually renovate them to a decent standard - resulting in more livable and value-added housing, which benefits the community - and flippers, who make only superficial improvements, if that, and are primarily motivated by making a quick buck.
All they need to do is bring back traditional lending standards. 20% downpayment and no more than 3.5* annual income. Investors–with cash–can still invest all they want.
Bingo! 3.5 times income for total debt load and 20% down. With these standards, it won’t make any difference what the Fed or GSE’s do. Increasing the money supply? Great, but unless it translates into higher wages houses are still not affordable. Raise the GSE upper limit? Great, but unless incomes rise rapidly, few will really be able to afford a $1 million home.
The only way the Fed can hyperinflate our way out of this mess is to stimulate WAGE inflation. But they are pushing on a string, and really don’t have the means to make it happen in a global economy.
One of the most pressing problems facing our society is the lack of affordable housing [and I'm not talking about socialist schemes to plant parasites and deadbeats in section 8 housing]. The rampant speculation of recent years has pushed housing prices out of reach of many middle or working class families, unless they took on dangerous levels of debt. A key element in this has been the “investors” and speculators.
Federal, state, and local policies should actively discourage speculation in housing, which is not just another “commodity,” but is an abode where people were intended to live. These policies should be especially proactive in targeting flippers or lenders whose vacant, unkempt houses attract the criminal element and degrade formerly decent neighborhoods. There are too many decent families and individuals requiring decent, affordable housing in decent neighborhoods, to tolerate the unhealthy and destructive speculation of the past several years.
Investors–with cash–can still invest all they want.
ROTFL
Not seen since 1999.
Got popcorn?
Neil
You got my vote. Since I plan on owning outright any property I hold in the future, I could give a crap about mortgage interest deduction.
Also, if you make more than 150K, Mortgage Interest Deduction phases out. (Through a mechanism separate from AMT. Read the tax forms!)
So all the Mortgage Interest Deduction does is raise house prices on the low-end! People extend themselves–esp. on the low end–to the maxium their howmuchamonth mentality can “afford”
Here’s a “tough love” idea: how about bringing back the Post Audit?
You know, where lenders actually checked AFTER close-of-escrow to see if the borrower still had their JOB, actually LIVED in the house they bought as an OWNER-OCCUPANT, experienced any “unusual” changes . . . not to mention several other “no-brainer” risk reduction strategies for lenders now only practiced in a galaxy far, far away . . . Ahhhh, I remember the good old days, too.
Oh man,
I forgot about post audits! Great idea.
Personally, I think we’re going back to 1970’s mortgage rules, including the 25% down payment (excluding starter homes and FHA).
Got popcorn?
Neil
Yep, that happen my brother in the early 1980s. Depstite the fact that he and wife owned their primary residence free and clear and had liquid assets about 5 times the mortgage on the 2nd house, bought as a rental, bank gave him a bunch of grief. My guess was bank had kept the loan in their own portfolio. Boy, have lending standards change. My think their going change again
Good idea. This will bleed out the flippers waiting “for the market to come back”.
How about treating investors and flippers as what they are - business. While we’re at it, how about doing a little checking up so that they can’t lie and say it’s a primary residence. Let they get business loans, all the permits and licenses and file business tax returns.
I own multiple properties I’ve purchased to save from development. Should I be punished for not building upon them?
Rangel and Hillary plan to eliminate the mtg deduction as we know it. Also deductability of local and state taxes. The high tax states, Ca, NY, NJ are really F’d. They are blue states. Hmmmmn.
There is no way this is going to happen.
Just require larger down payments and extend the requirement for tax free mortgage gain from 2 years to living in the property for 5 or 7 years . Also maybe take away the interest deduction on second residences which is actually a luxury buy or limit that deduction . Still give the business write off on a investment rental property because we have to have investors that provide housing for renters( but currently we have a excess of flippers/speculators with dwellings to rent and many are vacant ).
Overhaul the current appraisal system to cure the potential for corruption that took place during this boom .
Require more disclosure with loans for borrowers and more underwriting requirements for lenders to prevent fraud . Make the State lenders and the Federal Chartered Lenders have the same requirements .
Require insurance on any loan over 80% loan to value ,even if it has a 1st TD and a second TD .
I could go on and on ,but we just have to get back to prudent underwriting standards ,appraisals ,and loan risk management .
“‘A key concern is whether turmoil in the housing market will tip the economy into recession,’ she said, before noting: ‘Probably not.’”
As an “Economist” did you forget any other factors that might tip the economy into recession ? Like the weak dollar, inflation, credit crunch, falling sales of our debt ? Nah, none of those could possibly matter !
The weak dollar, in and of itself, is not recessionary. It is, if anything, good for growth. Exports have been an addition to US GDP growth for the last several months (for the first time in years.) This is mostly due to the weaker dollar making our exports cheaper.
Taken to an extreme, a weaker dollar could be inflationary, and thus lead to higher interest rates. This would be anti-growth. At this point, with interest rates seemingly headed lower, this does not look like it’s happening yet.
Oh give me a break! I see you’ve been indulging in some CNBC koolaid. Sorry, go sell crazy somewhere else.
The following is the breakdown of GDP growth for the 4th quarter of ‘06. Notice the part about exports being a contributor to growth.
“Fourth quarter real GDP jumped to an annualized 3.5 percent from the 2.0 percent pace in the third quarter. The fourth quarter growth rate was above the consensus forecast for a 3.1 percent boost in GDP. The acceleration in growth was primarily due to acceleration in growth in nondurables personal consumption, government purchases, and in exports as well as a drop in imports. Partly offsetting these factors were a slowing in inventory growth and a small decline in business fixed investment.”
Is that clear enough?
Clear enough? Only if one believes the numbers you give. I don’t.
Yep, our grains are cheaper when we export them… and the loaf of bread costs us more at the store.
The only way a fgalling dollar is good for growth is if we were once again a manufacturing economy and were really selling ‘things.’
Isn’t one of our biggest exports recycled cardboard? What a boon to our economy. The next growth industry will be ragpicking.
Don’t forget bottle redemption.
What have we got to Export?
All the manufacturing is in China.
KOOLAID anyone?
Yep. wait till the other shoe drops and you will be singing a different tune…dollar dropping is ok..sheesh.
NOT.
we got KOOLAID to export
I agree about the cheaper dollar being a stimulus to growth.. revived US manufacturing of products for export means more jobs and increased industry activity..
As the economy gets stronger due to the effects of a weak dollar, the dollar strengthens. The advantage we have due to the weak dollar then disappears.
What then happens to those mfg jobs? What, if anything, was gained?
it looks like an example of the “broken window” parable .. Rebuilding an economy that has been unnecessarily broken is not economical, much less profitable.
I have to disagree with you. Weaker currency is good for countries that are dependable on trade. USA economy is not one of them. Manufacturing creates only 18% of HDP. This sector benefits the most from cheaper currency. However, export is very small part of USA economy and an even less of goods are sold abroad, since services are also large included in these numbers. Hence, weaker dollar also cuts the value of these services. Falling currency also increase import prices and virtually wipes out value of our hard-earned money. I came from country that experienced rounds of devaluation in the 90’s, which on one had did indeed spur export, but over the longer period of time, higher import prices pushed inflation to double digit number. The same had happened in UK and Italy during currency crises in 1992. Weaker dollar would be beneficial only if the balance of trade would be reversed. Since USA own billions of dollars worldwide, there is no way that world would be able to absorb the amount of export that would go from this country to entire planet. Dollar crisis shows deep structural deficiency within USA that is linger for very long time, and won’t be solved in near future.
I am pretty amazed at how the US has been able to keep itself afloat.
When the stock market bubble busted, economists watching only the money supply won’t have noticed that it is the toxic loans that brought the economy back from recession.
Now the spin seems to be devaluating the dollar.
This game can still be played because low end exporters like China is still not raising their currencies. When they really grant America’s wish and stop keeping the dollar and buying US treasuries. We will really get what we are wishing for - hyperinflation and further dollar declines.
So bring it on, bring back the roaring 80s. I see how we can buy houses with 18% interest rate. But hey, no worries, I will put no money down and stop making my first payment, because the government will help me out.
Ever since the $ started its fast drop the past 6 months or so, you can’t believe how many European tourist in DC. TONS of them.
I think it is most likely a misquote….
The reporters heard:
“… recession. Probably not. Much is going well.”
She said:
“…recession. Probably. Not much is going well.”
Darrell, that’s clever, but don’t forget this is Leslie Appleton-Young we’re talking about.
“Appleton-Young also advised Realtors to double their efforts, expand their sphere of influence, broaden their portfolio and keep the view that first-time buyers will return in 2008.”
LAY was followed by an univited and unwelcome speaker, Sammy Schadenfreude, who advised the assembled realtors to stop listening to utterly discredited NAR shills, to recognize how deserving they are of the abuse and contempt heaped on them by their screwed “clients” and saavy housing-bubble partisans, to reduce their portfolios by refusing listings from greedheads, and to keep in view that only knife-catchers and ultra-lowballers will be buying in 2008. Sammy further passed out job applications for entry-level positions in the fast food and sanitation industries, “where you can at least do an honest day’s work.” Before being escorted off the stage by security, he told the Realtors, “I’ve got a special message from Ben Jones and the HBB crowd,” then mooned the audience.
Don’t need a weatherman to know which way the (hyphenated-one) hot winds blow…
Tooooooooooooo funny
LMFAO!!!!!!!!!!
It’s similar to the “dotcom” crash of 2000. I was working for a Big Traditional Company at the time, and after the crash we got resumes from these college-dropout kids with purple hair, pierced tounges, and few real skills who wanted jobs. (Pets.com didn’t work out!) Most of them were barely suited for work at McDonalds. I suspect a lot of R-E and Mortgage brokers will be in for a shock when trying to find their next job.
Funny, my experience with the then-young dotcomers was exactly the opposite. A lot of smart, young kids doing very well today, thank you.
Some of the dotcommers had organizational or technical skills.
What skills does Joe reator posses? The job didn’t even require a college education or a journeyman’s experience. It was off the street, put on a suit, and sell.
While there are always sales positions, not at the pay of the last few years.
Got popcorn?
Neil
Errr…
Used car sales?
But I heard that some of them were cashiers to start with (per rich dad), so working in McDonalds isn’t unfamiliar to them.
ONE yr ago. several realtors, EX realtors were working at the Mathis Bros furniture store…Over yr ago the times were already tough for realtors.. I expect to see some in ToomanyBucks coffee stores.
Hey fellow desert dweller - maybe they’ll end up at BadAss Coffee. I’m shocked at how many for rent signs there are out here. Usually by this time of year, there’s hardly nothing left. Behind El Paseo there are tons of places. I’m not seeing prices decline too much yet, but I can smell the desperation. It will be wonderful to see all the plastic cougars taken down a notch.
Gosh, could this have an affect on the super-size me McBoob phenomena? Lot’s o’ bubble chests in my ‘hood.
As the market ages we’ll see a deflationary boob economy. I’m not looking forward to seeing such a flat market…
Sammy
That was, as the Brits say, ” BRILLIANT ” !!
Good one Sammy!
Governator: Hahahahahahahahah and such!
Appleton-Young also advised Realtors to double their efforts, expand their sphere of influence, broaden their portfolio and keep the view that first-time buyers will return in 2008.
Is she saying “Jesus is coming” and he will need a home to stay? Because if she is I’m not so certain it will be next year. Perhaps in 2012 when world is suppose to end. Hello LAY get a grip with your BS
She’s not an economist. She’s an optimist. She is telling people what they want to hear. If she told them the truth, half of them would probably jump off bridges or leave the field altogether and the CAR wouldn’t collect their yearly membership fees.
Tom, the only part of your comment I disagree with is the word “optimist,” which should be “cheerleader.” (Not exactly the same thing.)
“Appleton-Young also advised Realtors to double their efforts….”
I believe the Captain of the Death Star had this same strategic plan, and I don’t recall it working out so well for him or the project….
Real Estate is the foundation for ofthe financial structure, its the collateral for loans and directly affects liquidity creation. When the US housing markets deflates then margin calls go out world wide which we are seeing on a daily basis now and beginning to affect the stock market. Continuing deflation in the housing markets will have similiar effects in the US as they have in Japan over the past 15 years, nobody likes to express or make those statements because we all feel that the USA is different but margins calls based on declining value of the underlining assets used for loan creation are the same in all languages.
Until we get the public to realize that It costs money to own a home, and their income has to be enough to support it and their lives , there will be little chance of enforcing a law that limits the amount of money they can pay for a house.
Everyone wants bigger and better for themselves and their progeny, and will stretch their resources to strive to meet their goal
My first house was 1,040 square feet 3Br.Ibath concrete slab, asphalt tile, or asbestos tiles (LOL) , and the buyers of today would not even consider that house for a new house,
I was going to do a tract in Bakersfield, 640 houses, but the gross profit was $1,000 a house, and the financer withdrew the commitment, so it fell through.
Live and learn, I guess.
McMansion backlash. There’s hope yet for small houses:
http://realestate.msn.com/Buying/Article_wsj.aspx?cp-documentid=5458941
“There’s hope yet for small houses.”
according to the tulip.com model, at some point in the 15 year ongoing deflation of the housing bubble, subdivision of mcmansions will become commonplace….
“…that for the 22 business days ended Oct. 23 that mid-county ZIPs in Santa Ana, Anaheim, Orange, Garden Grove and Westminster had just 343 home sales, a stunning 62 percent below year-ago levels.”
So lets see: for those 5 cities… apprx 750,000 total population…. they sold 343 houses. I wonder how many “unemployed” real estate agents live in those five cities?
The RE Industry is a Live Grenade in the US Economy. Everyone from the FB’s to the Gov’t KNEW that this CON GAME was HIGHLY EXPLOSIVE but they leveraged, flipped and tossed it around anyway…and NOW they’ve LOST the friggin Safety Pin.
Even some of the GF’S and brave Investors are NOW scrambling and screaming …”FIRE IN THE HOLE”
Pass the popcorn Neil
Mikey,
What’s funny is so many just want to ignore the damage this con-game has caused. Too late…
Although I would say “HIGHLY IMPLOSIVE.”
I believe we’re heading to painful import inflation yet domestic deflation. My… that could be interesting…
Got popcorn?
Neil
FB says I want a do over.
Sorry if posted already: Last night was “A Fourth Night”
hehehehehehe
“As of September 30, 2007, up to $5.5 billion of our custodial deposits may be subject to placement with another bank if our credit ratings were reduced below investment grade,”
Countrywide says downgrade could weaken business:
http://www.reuters.com/article/ousiv/idUSN0937747920071110
Countrywide’s conniving ways?:
http://www.hooversbiz.com/2007/11/02/countrywides-conniving-ways/#more-369
I think the public gets what it deserves. They have been willing to believe the sham that the economy is strong, low unemployment, no inflation, cheap money, etc. The gubment has been able to distract the public from their fleecing - wages have barely moved up in 5 years but the fatcats have been getting fatter. Then the spin is that we’re creating more millionairs and billionairs so everything must be ok. Make it an ownership society so the public thinks they command their own ship, but they don’t realize that it’s all being manipulated behind the curtain. And keep blaming the bottom - it’s all the fault of the poor, the welfare mothers, the illegals - if we just stop coddling the poor, we’ll all be rich. Most of the public seem to be too lazy to research or learn - it’s easier to sit in front of some screen and be spoonfed soundbites.
Airline industry has been hit hard by reduction in pay since 9/11.
So, when “they say” that wages have increased… couldn’t prove it by friends/associates in airline industry. All airlines.
Just the CEO and mgmnt gets pay raises and bonuses.
Ever notice how on weekends and holidays airlines still operate fairly well.. GEE do you really need all that mgmnt CEO cause they aren’t around on nights, holidays, and weekends.
Next time you fly, be thankful for the ones actually making the airlines fly. Not the pilot, or the mgmnt teams.
As for housing, many airline employees have had to downsize 3-5 yrs ago just to barely afford their rent/mtg.
Last I checked, pilots were taking pay cuts as well and by the way, they actually DO make the airline fly.
I’ve read in many different places that the US airline industry, considered as a whole, has not been profitable since its inception. Why people invest in airlines is beyond me. People fly because they enjoy it, I guess.
It was all so utopian!
http://www.alternet.org/story/66634/
This is all very easy IMO.
My #s might be wrong but…average ‘Mericun household income is 45K..which is, say 35K after tax (ball park)…so 3K/mo. cash.
Got 2 cars which run say 1500/mo. ALL in (insurance, maintenance, gas, payment, etc.)…so he’s got 1500/mo. left right?
If he buys a 300K house, he’ll have to pay 2500/mo. ALL in (maintence, PMI, etc.)…so total expenses 4K & income of only 3K..this doesn’t even include food, clothes, etc.
Cant’ happen if my #s are right. Which they might not be.
Ideas?
I think you’re overestimating the likely expenditure on cars. But the “can’t happen” part on mortgage is right anyway.
average american household income might be 45k but for the most part these folks are not buying 300k homes. Here in Texas folks with that income might be buying a $125k starter home, of which there are hundreds of thousands for sale. It works out here for the most part if the buyer is disciplined.
I’ve heard this argument a lot.
So if the nationwide ownership is 70%, I guess the average wage earners falls into that 30%? The average home price is certainly not $125k.
I must have forgotten what average means.
The housing has been out of whack, defiant all the fundamentals for this round of boom due to:
1. Greenspan let the interest rates stayed at 1% too long
2. Greedy Wall Street brokers relentlessly promoted the mortgage backed securities (MBS)
3. Regulators at sleep led to liars loans, cheap money and Casino mentality
Now the reality is:
1. 2/3 of California loans in the last two years were either subprime or ARMs, rates reset has just started.
2. The $417K jumbo loan would not even buy any updated kitchen never mind decent house in SF, no help
3. Lenders are tightening up; financing will be a big hurdle to overcome in buying a house here, no cheap money
4. Tons of condo is being erected around the Transbay area, pressure on inventory
5. Dollars is plummeting, the Chinese, Japanese and Arabs are not purchasing any more treasury bonds instead they are going to buy American companies, tight credit
Don’t see any way up but down, unless something different happened again, like what?
like what?
Manipulated “threat” that would enable the gov to do Marshall Law and take away all the rest of our rights. And enable a massive war that would further Fill their coffers.
Plan on it.
Americans are kinda unique in a couple ways.. One is the country was founded by immigrants who had the balls to escape oppression of various flavors.. it’s in the genes.. i have no fear of govt domination in the USA.
as far as filling coffers, anyone who’s saved money can invest and profit from current events. If i’m in Big Oil stocks do i like to see the price or oil rise? If not, why am i invested in them?
Taking over a company is not so easy - there is no warranty of return, and a lot of people in that company would quit or would cost more. Earning 3-4% laying back is a lot easier to do than feeding the barn full of pig
But with the number of foreclosures in the county increasing 1,000 percent since last year..
This is the very first 1,000%-badness i’ve seen..
A Q to any of the mathematicians out there.. Isn’t there some kinda mathematical shorthand for 1,000% and above?
It might save a lot of bandwidth in times to come.
how about
“increasing 1,000 percent since last year” =
“increasing 10x since last year” or possibly
“increasing 11x since last year” if that’s what was really meant.
1,250% increase would be.. 1.25X if that’s a correct assumption. The division by a 1000% decrease (in sales, for instance) might get tricky.
Hey, az .. i got a question.. a couple years ago someone told me 25% returns on mortgage paper was possible.. i think they were talking about hard money second loans..
afaik, when using a broker, the upper limit is something like 10% return.
you ever hear of 25% returns?
That’s easy. Throw a prepayment penalty into the mix on a loan that’s refinanced a few months after it is originated and you will get that sort of annualized rate of return……
hmm.. an 18% rate and a charge of 10 points might help too..
i see a period in the near future when a whole sh*tload of people who make a good income can’t borrow a dime from a bank..
1,000% is ten (10) times the base figure.
Simple, really. Then again, I’ve grown up with the metric system.
A Q to any of the mathematicians out there.. Isn’t there some kinda mathematical shorthand for 1,000% and above?
Sure, you can use scientific notation!
Although in this case I assume they are talking about a 10-fold increase right? If there were 10 foreclosures last year and the number went up to 20 this year that would be a 100% increase. If it goes from 10 to 100 that would be a 1000% increase.
In scientific notation you’d say the increase was 1×10^1
with every additional zero you just increase the exponent by a digit.
i dunno..
Start with 10.
A 100% increase would = 20.
A 200% increase would = 30?
A 300% increaswe would be 40?
if so, should a 900% increase of the original ten = 1000, and a 1000% increase be 1100?
Or you could say that foreclosures are up by three orders of magnitude.
Which is another way of saying the same thing as the scientific notation method.
If two numbers differ by one order of magnitude, one is about ten times larger than the other. If they differ by two orders of magnitude, they differ by a factor of about 100. And thus if the foreclosure numbers yoy differ by three orders of magnitude the larger is 1000 times more than the smaller number.
‘The market will take back the last 1½ year in terms of price appreciation,’ says LAY.
And exactly what appreciation has that been since June ‘06? Try 5½-7 years - as long as the Realtors are still serving Kool Aid in gallon jugs to the sellers who are not smart enough to figure things out on their own, it will only prolong and increase the pain…
Sorry, LAY, as the North County San Diego Realtors have reported, the market took back the past two years of appreciation since just last month! Prices are in a freefall here, lady — get a clue!!!
wow, rents in my hood are only up 10% from 10 years ago !
22151 w express bus to the pentagon is the most rentable spot on Earth
we have a long way to go from 230-240 times rent.
I paid 120 times rent
I believe it (the 10%). The house I rented from 1998-2005 fetched its owner about 8% more rent in the final year than in the first year.
Express bus? Pentagon? Aren’t you the one who is usually railing against such communist nonsense?
The Orange County Register. “The credit crunch and a foreclosure tsunami continue to pound the county’s mid-section. New home-buying stats from DataQuick show that for the 22 business days ended Oct. 23 that mid-county ZIPs in Santa Ana, Anaheim, Orange, Garden Grove and Westminster had just 343 home sales, a stunning 62 percent below year-ago levels.”
**********
With this in mind, I’m revving up my recently sleepy email campaign. I give honest feedback (without them asking) to the realtors trying to pimp these $hitboxes for WAY more than they are worth. Usually I get ignored, but other times they engage. I’m going to start including links to “relevant” news that I hope the pass on the the sellers. This is going to be fun….
Can’t wait Stomp!! go get em’ … pile the links on.
Why does anyone still bother interviewing Leslie Appleton-Young? She has been dead wrong on just about everything. Blast from the past, December 2005:
Despite rising interest rates, a growing for-sale inventory and a slowing sales pace, the county’s shortage of housing will prevent prices from dropping steeply, speakers asserted.
“It’s Economics 101,” said Leslie Appleton-Young, chief economist for the California Association of Realtors. “It’s demand and supply.”
In figures released outside the conference yesterday by DataQuick Information Systems, the county’s median home price rose 6.4 percent in November, far less than the double-digit gains of April but strong by traditional standards.
Addressing the statewide economy, Appleton-Young forecast “a slight decline in home sales” for California in 2006.
In her forecast, Appleton-Young predicted a 2 percent statewide decrease in single-family home resales next year. She anticipates a 10 percent statewide increase in the cost of a median-priced resale home.
Appleton-Young called California real estate a market in transition. “I think we’re in for a soft landing,” she said.
“Strategies Appleton-Young suggested Realtors adopt for 2008 included one essential business practice: Make sure your clients have their loan. ‘Price appreciation trumps solid underwriting every single time,’ she said.”
“Appleton-Young also advised Realtors to double their efforts, expand their sphere of influence, broaden their portfolio and keep the view that first-time buyers will return in 2008.”
Yeah okay shill.
“North County home median price drops below $600,000
By: BRADLEY J. FIKES- Staff Writer
NORTH COUNTY — For the first time in nearly three years, the median price of a single-family home has fallen below $600,000, according to the latest report from the North San Diego County Association of Realtors.
The decline amounted to 4.82 percent, from $609,375 in October 2006 to $580,000 this October. Prices also declined from September, when the median stood at $630,000.”
Let me get this straight: The median North San Diego County home sale price fell from $630,000 in September 2007 to $580,000 in October 2007 — $50,000 (or 7.9 percent) over one month’s time???
That one month drop represents an annualized rate of decline of
[(580/630)^12 - 1] X 100% = 63 percent. Perhaps I will be able to afford to buy a home in San Diego by this time next year?
Meanwhile, try not to catch yourself a falling knife.
I hate to point this out, but the SoCal wild fires did not hit until October 21 (at least in North County San Diego) and hence their full bomb shell impact on prices will not begin to show up until the November numbers are in. I expect November to be still bleaker than October, and December to be bleaker than November, and January 2008 to be bleaker than December 2007. The market will not bottom out until after the Souper Bowl.
PB thank you for making those articles easier to understand.
Those phoney realtors are all over Carlsbad.
When will the people in San Diego really see a difference?
Low-end buyers are coming back? Who is around to lend to them now that the subprime sector has pretty much vanished from the face of the planet?
One thing going on in the market now, said Dennis Smith, a Carlsbad-based Realtor, is that low-end buyers are coming back.
Those low-end buyers had been disproportionately hurt by the credit squeeze earlier this year from the subprime loan debacle. Burned lenders had tightened standards excessively, skewing the median toward the high end, where credit issues weren’t a problem, he said.
But political pressure and threats of government intervention to help low-end buyers have convinced lenders to ease off.
“Now we are seeing a return to a more normal credit ability,” Smith said.
Ha! Got popcorn? Haw-Haw!
From the Desert Sun “High-end homes are a market unto themselves and have continued to perform better than the overall market”
Good luck with that.
I sold my house, and I will buy again, when the time is right.
But, I won’t be buying a ‘high end’ home; I’ll be buying two mid-size homes.
Why would anybody buy a ouse that has not reverted to it’s true value?