An Opportunity For Some, A Tragedy For Others
The Used House Salespeople report from California. “Home sales decreased 33.4 percent in December in California compared with the same period a year ago, C.A.R. reported today. The median price of an existing, single-family detached home in California during December 2007 was $475,460, a 16.5 percent decrease from the revised $569,350 median for December 2006.”
“C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in December 2007 was 14.5 months, compared with 5.9 months (revised) for the same period a year ago.”
“In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 8.8 percent, or 25 out of 285 cities and communities, showed an increase in their respective median home prices from a year ago.”
The Orange County Register. “The California Association of Realtors reported today that the median Orange County house price for all of 2007 fell for the first time in 12 years. CAR reported that the median price of an existing single-family home was off 7.9% in December from December 2006.”
“According to CAR, the number of homes on the market would take 26.3 months to sell at December’s sales pace, down from 29.5 months in November…up from the 9.4-month figure for December 2006, CAR reported.”
The Union Tribune. “Despite a real estate downturn that has made housing in San Diego County more affordable, a new nationwide study shows that the county’s median priced home of $440,000 remains out of reach for most workers here…according to the Center for Housing Policy.”
“In San Diego County, the amount of household income needed to purchase a median-priced home during the third quarter of last year dropped 12 percent to $143,738, compared with $163,404 a year earlier. The county’s median household income is $68,000, and with wages destined to remain stagnant this year, there is little room for optimism for entry-level buyers, say some analysts.”
“‘We’re not going to get back to where the median-income household can afford the median priced home, so housing will still be unaffordable in San Diego,’ said Marny Cox, chief economist for the San Diego Association of Governments.”
“Foreclosure filings in Riverside County jumped more than 50 percent last month, and skyrocketed 300 percent compared to a year ago. A total 6,821 filings of mortgage default notices, auction sale notices and bank repossessions were recorded in the county in December, said RealtyTrac.”
“Statewide, there were 53,292 filings in December, a 33 percent increase over November, RealtyTrac said. The figure represented a 238 percent increase over 2006.”
“The state ‘documented the highest number of foreclosure filings and the most properties in some stage of foreclosure in 2007,’ according to a RealtyTrac statement.”
The North County Times. “New home sales in North County dropped for the second straight year, reflecting a national trend that showed the worst annual decline in new home sales ever recorded, according to by the Commerce Department.”
“New home sales in North County since 2005 have tumbled 49 percent. The region MarketPointe defines as North County Coastal - from La Jolla to Carlsbad - saw the biggest dive in new home sales, recording a mammoth 73 percent drop in fourth quarter sales to 87 properties from last year’s fourth quarter when 317 homes and condos were sold.”
“When compared to December 2006…the North County median fell 9 percent to $569,000. During housing slumps, buyers often look for the cheapest price, which tend to be in older homes, and builders often prefer to offer incentives such as granite countertops, rather than slash prices on new homes, said Russ Valone, president of MarketPointe.”
“‘There’s no doubt that we have inventory now that we never would have had three years ago,’ said Mark Connal, director of sales for a homebuilder in Escondido. ‘Loans are harder to get, the economy isn’t as good and a lot of people don’t want to buy because they haven’t perceived we’re at the bottom of the market.’”
From USA Today. “The most striking trend in the San Bernardino real estate market is the surge in foreclosures. Lenders filed close to 24,000 notices of default last year, up nearly 150% from 2006. And 7,727 homeowners lost their homes through foreclosure — roughly one in 20 sales and up nearly 720% from the previous year, according to DataQuick.”
“‘Foreclosures have been growing at a rapid pace for all of 2007, and we anticipate almost an avalanche in 2008,’ says Rich Cosner, president of Prudential California Realty.”
“His agents are telling owners who need to sell within the next five years to put it on the market now because prices are projected to fall further. For buyers…there’s a 15-month supply of homes to choose from. Price declines are hitting every neighborhood, Cosner says.”
“‘I’ve been in this business for 35 years,’ Cosner says, ‘and I don’t believe I’ve seen a more difficult market for homeowners. We are not anticipating any significant turnaround until mid-2009.’”
The Bakersfield Californian. “Kern County tops a new list of large U.S. home markets with a high probability that homeowners will miss a mortgage payment. First American CoreLogic’s report ranked Kern ahead of every other large metropolitan area in the country, just above No. 2 Stockton and No. 3 Fresno.”
“County records show that lenders sent 8,651 default notices to Kern property owners in 2007 — more than twice the rate in 2006, when 3,275 defaults were recorded.”
“Eydie Gibson, a real estate agent at Watson Touchstone Real Estate, said the recent increase in foreclosures allows some buyers into the market as lenders price foreclosed homes to sell quickly. ‘It’s a temporary bump,’ she said. ‘It’s an opportunity for some, a tragedy for others.’”
“But credit consultant Anselmo Moreno found it harder to see the ranking’s positive side. He said local real estate professionals pushed sales too hard between 2004 and 2006, leading some people to buy when they should not have.”
“‘It was just a matter of time before (mortgage lenders) realized we are at the highest risk for mortgage defaults,’ Moreno said.”
The Fresno Bee. “In Fresno County, the number of new homes sold in 2007 fell 19.4% from the year previous to the lowest level in three years, slipping below 2004 figures. In Madera County, sales fell almost 62% compared with 2006 to 432 — the lowest total since 399 houses changed hands in 2003.”
“‘Builders have been waiting for buyers and buyers have been waiting for prices to drop. At some point, they have to match up,’ said Robert Keenan, executive director of the Home Builders Association of Tulare and Kings Counties.”
“Last year was the first year that new-home prices took a tumble. The median price of a new home in Fresno County in 2007 was $293,000 compared with a peak of $349,500 in 2006. Likewise, Tulare County values fell 14.5% to $267,250 from $312,500.”
The Modesto Bee. “Northern San Joaquin Valley home prices have plummeted, but they haven’t fallen enough to become affordable for most wage earners, a new study shows.”
“Home buyers must earn about $98,000 a year to comfortably afford a median-priced house in Stanislaus County, the Center for Housing Policy reports. But workers in only one of the 64 occupations studied — construction managers — earned that much last year.”
“Even two-income couples with good jobs — such as accountants, police officers, school teachers and firefighters — barely can cover ownership costs, the report showed. The findings were about the same for San Joaquin and Merced counties.”
“Anita Hellam, executive director of Habitat for Humanity for Stanislaus County, remembers during the mid-90s ‘when the majority of the working families living in Modesto were able to find affordable housing.’”
“But Northern San Joaquin Valley home prices nearly tripled from 1996 to 2005, pushing ownership out of reach for many residents.”
“Even though valley home prices fell about 25 percent during the last year, Hellam said more people than ever are seeking Habitat for Humanity’s help to acquire their first home.”
The Recordnet. “In San Joaquin County, new-home sales fell 26.9 percent, from 2,865 in 2006 to 2,095 for all of last year, according to the Gregory Group in Folsom.”
“Joe Anfuso, CEO of Stockton-based Florsheim Homes (said), ‘I think it’s all part of what we need as part of the correction cycle.’”
“He noted that home buying traffic picked up in December and has gained some momentum, though many would-be buyers continue to sit back to see whether prices keep dropping. ‘The only thing that’s stopping them is what if the market goes down?’ he said.”
“In response, the company is rolling out a price guarantee: If a buyer purchases a new home this year, the buyer is guaranteed a rebate if the base price of that home is lower at the end of the year. ‘To get people off the fence, we’ll take the ride with them through the year,’ Anfuso said.”
“The average selling price of a new home in San Joaquin County dropped 12 percent over a year, from $519,350 in the fourth quarter of 2006 to $456,956 in the fourth quarter of last year.”
The Auburn Journal. “The comeback of the $200,000 home and the promise of Placer County’s continuing popularity as a place to live are two of the clouds local real estate leaders are focusing on during a troublesome market.”
“Placer County Association of Realtors statistics for December show a $357,000 median value for the 226 homes sold in December — down from $366,000 in November, and $439,700 in December 2006.”
“The median value is well off the peak of a red-hot August 2005 real estate market in the county, when it soared to $517,500 and 486 sales were closed.”
“Joe Newton, Association of Realtors president, said Monday that while the market has been awash with negative industry statistics, the downturn has meant clients buying and selling homes ‘rely on us even more as trusted advisors.’”
“Over the weekend, Newton had a chance to compare notes with California Association of Realtors colleagues at a conference in Indian Wells. The 2008 Placer County association president said that while the Lincoln area had some problems, the market was much more positive in other areas of the county.”
“That compares with areas like San Diego, Stockton and Elk Grove that were struggling with foreclosures, he said.”
“‘The leaders in the industry know that a positive attitude is important so our clients move forward with confidence and authority,’ Newton said.”
“Michael Lyon, CEO of Lyon Real Estate, pointed to a marked increase in the number of homes for sale priced below $200,000 as a bright sport for the industry.”
“‘Just one year ago less than two percent of the homes for sale were priced below $200,000,’ Lyon said. ‘Now 12 percent of the homes for sale in the four-county Sacramento region are priced below $200,000, with the majority of these homes being bank owned.’”
“Lyon said that increase, with the number of closed sales in December jumping 50 percent over November, indicated a ‘new boom’ in that sector of the market.”
“Lyon said the second bright spot from December’s survey revolved around the inventory of houses in the $200,000 to $300,000 range. The inventory of 3,969 homes represented 30 percent of the total number of homes listed in the four-county inventory taking in Placer, Sacramento, El Dorado and Yolo counties.”
“Placer County sales were up 300 percent for the year in the $200,000 to $300,000 price range due to sharp price declines, he said.”
“The Trendgraphix report’s overall totals for the tri-county region of Sacramento, Placer and El Dorado counties mirrored the Placer County numbers. Sales were 22 percent lower than December 2006 sales and the December inventory of 13,181 homes for sale was 28 percent higher than the December 2006 inventory.”
Here is the CAR/Dataquick table.
“The median price of an existing, single-family detached home in California during December 2007 was $475,460, a 16.5 percent decrease from the revised $569,350 median for December 2006.”
That is a serious, serious decline. So what happened to wages and prices? Up 3.5 percent? You are talking about a 20% decline relative to wages. Another year like that (or worse) and two years flat and you are up to a 50% decline, with close to a 40% nominal decline.
These numbers in the Dec 07 CAR report truly shock me - especially the month-on-month changes in the median sales price (highlighted in bold):
(The numbers (1)-(5) correspond to columns in the following data)
(1) Median Price (Dec 07)
(2) Percent Change in Price from Prior Month (Nov 07)
(3) Percent Change in Price from Prior Year (Dec 06)
(4) Percent Change in Sales from Prior Month (Nov 07)
(5) Percent Change in Sales from Prior Year (Dec 06)
Santa Barbara County $492,860 -26.8% -18.8% 1.0% -39.6%
Santa Barbara South Coast $925,000 -14.4% -26.0% -18.2% -42.3%
North Santa Barbara County $323,810 -8.7% -25.0% 20.0% -37.2%
It looks like those multimillion dollar sales in Montecito and Hope Ranch are no longer propping up the median…
Santa Barbara County’s annualized rate of decline (based on Nov 07 - Dec 07 drop in the median sales price):
((1-0.268)^12-1)*100 = -97.6 pct annualized.
No worries though — that one-month rate of decline is a seasonal aberration, and is clearly not sustainable for long.
You know, I’d bet someone working on a PhD in some applied statistical area would have a great disertation topic especially with all this raw data floating around.
Schiller
I wonder why they left out Brea, Newport Beach, Westminster, …
They usually include Morro Bay, Cayucos, Los Osos — perhaps the omission of these is the reason why SLO County is shown as gaining while ALL the towns listed for SLO County are shown as losing. (But they left out a lot of the towns.)
Hey Az - the numbers are definitely down in SLO County. I have a few examples of 25% declines over at my site. Because the North Coast has so few properties being sold, just one sale can really skew the stats.
As for N. Santa Barbara County - the implosion in Santa Maria and Locpoc is just amazing (and not unexpected).
Wow! I always wonder why Humboldt, Del Norte, and Mendocino counties are never included. Seeing those price declines elsewhere is truly staggering, but I want to see that here! People here, surprisingly, are still acting like there is no housing bubble and although sales are definitely down YOY, I’m still dumbfounded at the number of people who are still buying up here. Our median in Eureka/Arcata is not that far off from San Diego county–how does THAT happen?
Same thing around the Thousand Oaks/Westlake area - transactions down but prices for SFR’s holding steady. The only thing going down are the thrashed ones.
I beg to differ. If prices are holding (inconsistent with my observations), it’s only because nothing is selling. People in Westlake are asking absolute dream prices because most sellers here don’t need to sell. A friend of mine has reduced his W.V. property from $2.2 mil to $1.5 without even a nibble. DOM= 547
Even CAR reported a 15.7% YOY decline for T.O.
It’s definitely not “different” here.
I do not see many really substantial drops in Newbury Park/Westlake area - the median is soooo high for the incomes - wheres the crash?
I see few homes in Toaks area, under 500 K. These were sold >700K in 2005/6.
TOaks is on the brink guys. Watch out for the spring flood
Does your market cater to retirees, international investors or millionaire second homes? That market likely will not tank as quickly…at least not until the recession is in full swing.
i believe the feds will reduce interest 50 bps, this in turn will devalue the $$ further in international markets, thereby pushing up deficits and increasing the price of imports including oil…we readers of bubble blogs know it is not going to help housing…the jam we are in has several reasons, one of which, is that housing is not a measurement included in the cost of living and cola increases….if this was this could have alleviated this bubble by pushing wages up to compensate for the increase in housing…..which in turn would have inflated all prices, increased property taxes and reduced our deficits by paying off with cheaper dollars…just a thought……..lumps
“50 bps”
I’ll raise you to 75 bps — or else a large stock market selloff.
–
Fed is planning a Shock & Awe move tomorrow. Let us see which way it goes. Either 0.25 or 0.75 will accomplish the mission. Later that day Burn-ass-ke will be flown to a destroyer carrier with Mission Accomplished jumpsuit. Can’t wait so see it live.
Jas
75bps and we have a rally.
Anything else… Oh, I wish for a rate increse, but we all know that isn’t happening.
But how will any of this help stem corporate layoffs? This isn’t Japan; we lay off when business sucks.
Not to mention what oil could do as the dollar weakens…
Got popcorn?
Neil
What if the Fed realizes that they were stampeded by the rogue trader at SocGen and decides to *raise* 0.25%?
Now *that* would cause some Shock & Awe on Wall Street!
Really, none of that crap matters. The problem for people holding real estate today is oversupply. There are too many houses all across the country, built over the last 4 years or so because each one was a little money-making machine. Now that the oversupply is ‘revealed’, prices are going to drop no matter WHAT anyone does.
The feds will cut, cut and cut. The primary effect of the Fed rate is on the housing market. With the current bubble though, things are so extreme no matter what the Fed does prices will drop. All the rate cuts is doing is raising the floor. But the height of the fall to the floor is important, so they’re going to push down rates as far as they possibly can.
They advanced the timing in response to the market, but they’re not responding to the market. They’re responding to the credit crunch. They look like they’re responding to the market because the market is being driven by the same forces they are.
OT, and I don’t know if it’s been posted already…..sorry if it has.
Reuters
FBI probes 14 firms in subprime crackdown
Tuesday January 29, 4:35 pm ET
WASHINGTON (Reuters) - The FBI has opened investigations into 14 corporations as part of a crackdown on improper subprime lending, agency officials said on Tuesday.
FBI officials told reporters the probes involved potential violations including accounting fraud and insider trading.
They did not identify the companies, but said the probes reached across the industry to include developers, subprime lenders, companies that securitized loans and investment banks that held them.
The cases could lead to potential civil or criminal charges, the officials said.
The FBI said it was investigating the cases with the U.S. Securities and Exchange Commission, which has opened about three dozen investigations into the subprime market collapse.
Targets of the SEC probe include Swiss bank UBS AG (VTX:UBSN.VX - News) and U.S investment banks Morgan Stanley (NYSE:MS - News), Merrill Lynch (NYSE:MER - News), Bear Stearns (NYSE:BSC - News), as well as bond insurer MBIA (NYSE:MBI - News). It was not clear whether any of these companies were involved in the FBI investigation.
The SEC, which has formed an internal subprime mortgage task force, is looking at how financial firms priced mortgage-based securities and whether they should have told investors earlier about the declining value of those securities.
Ooooo! Can’t wait for the perp walks!
Wow, weren’t those excellent put candidates last spring
toot
umm . . . “used house salespeople?” LOL. Ben are you now doing comedy on this site?
No rate action today. I’m having an increasing number of senior moments.
TX,
I am now long shredders, matches, and white out.
LOL!! I almost choked on my food!! Thanks for the laughs
I mentioned last month that CAR emailed me and asked that if I wasn’t going to use the royal ‘R’ word, to use some other name. It seems the royal ‘R’ word is trademarked, so I guess it was a threat.
‘R’ = recession, right?
Yes Ben..It appears that the gov’t may have US Recessions(Tm) trademarked for our future
Well Ben, I like “used house salespeople” much better.
Don’t get your ties caught in the shredders, boys…
Yes! Stick it to the banks! Wallstreet cannot be duped. Pay, banks, pay!
There is no such thing as a bank. There are only bondholders and shareholders.
The executives got theirs; the employees were employed; now, the shareholders will get theirs.
Good to know there is ‘no such thing as a bank’ - my lawyer in AZ has repeatedly cautioned me, “Don’t do X, the state might regard you as a bank” (and this would be a disaster because of ensuing reporting requirements etc) - but if there’s ‘no such thing as a bank’ I’ll use that as my defense - I read it on the HBB!!
Lucky for the Fed, because if there are no banks, then there is no culpability for banking regulation.
I feel like I’m coming full circle again. The more I think about it, the more I believe the ultimate blame has to placed with the public. I started out thinking stupid greedy people, then I moved on to greedy banks and corporations in cahoots with those that shall not be named along with their buddies the mortgage brokers. My next step was to blame the Fed and all the manipulation of the markets along with their homeys the hedge funds. But I keep coming back to the idea that none of it could have happened without the voluntary participation of the sheeple. There were no house nazis, no one was forced to buy anything at any price, no one was forced to do liar, no doc and/or exotic loans that they could not possibly afford, no one forced anyone to refi, to HELOC and to spend like it would just all continue to boom. And I don’t see armed troops out there right now forcing anyone to catch a falling knife. The only way we could ever see any long term change is for the total public to get on board and individually do the right thing - live within means, save, get rid of the credit cards, get rid of the aspirational luxury lifestyle and just plain get right with life. And, lastly, I’ll add they can start voting - at least in CA, you don’t even have to leave your house. I vote absentee and then walk down a block and drop it in the box. We get the government we deserve. I know all the political corruption from both parties, but I’m still going to have my say and sometimes vote for the lessor of 2 evils because that person is exactly that; better than the other guy.I’m not saying there hasn’t been systematic fraud and manipulation, although the way it’s turned out I would say most of the fatcats screwed themselves, too - it was more incompetence than malicious, IMHO. I really believe some of these people when they say they had no idea this would happen, be so big, involve the total economy…they were that stupid or just swept up in herd mentality. I’m done ranting now.
With the Cheney Admin and their cozy relationship with WS - nothing will happen!
And to the DOJ and FBI which visit these blogs - I challenge you to ignore the White House and do the right thing for America!
The SEC for the most part is a waste of time they are to buddy,buddy with Wall Street. However the FBI is a different story plenty of folks in the department looking to make a name for themselves. Could/will get a little more interesting.
Wonder if Casey will pop up in there? He’s still spamming me.
Did you get the “millionare by Christmas” email too?
Did you get the retraction too?
Sure…and since he’s recommending that I buy gold, it seems like it’s time to sell. If Casey’s not a shoe shine boy, I don’t know what is.
Is there enough money among Wall Street’s subprime lending kingpins to repay more than a small fraction of the damage they have inflicted on global financial markets?
Why do you think the lenders will have to repay?
I suspect the conversation will be, “Mr. Treasurer, we would be delighted to buy US Treasuries and government agency bonds with our sovereign wealth funds, but only if you cover our banks losses that you assured us were sound investments.”
I don’t. I was merely trying to get a discussion going on the relative size of the damage inflicted versus what the perpetrators might have to pay.
Exactly, Hoz, and that’s why the Fed will end up as the only buyer on earth of Treasuries.
My oh my…
Any bets on the Tan Man suddenly taking a Burmuda vacation?
Got popcorn?
Neil
“In San Diego County, the amount of household income needed to purchase a median-priced home during the third quarter of last year dropped 12 percent to $143,738, compared with $163,404 a year earlier. The county’s median household income is $68,000, and with wages destined to remain stagnant this year, there is little room for optimism for entry-level buyers, say some analysts.”
“‘We’re not going to get back to where the median-income household can afford the median priced home, so housing will still be unaffordable in San Diego,’ said Marny Cox, chief economist for the San Diego Association of Governments.”
You hear THAT, you troglodyte bottom-feeders! No affordable housing for you, says the housing Nazi. Go back to your pathetic little bubble blog and commiserate with other priced-out renter-doomsters. Gravity does *not operate* here in San Diego.
That quote has put that butt-plug right on top of the JT List for ‘08! This guy is an economist?!! Well Mr Economist, please explain how your going to defy the laws of economics. How is an economy as large as SD County going to survive without affordable housing? I’ll tell you what, Mr Economist, if you can come up plausible answer to that one I’ll spare you the prickly ass-missle coming your way. If not, prepare to be skewered!
Yes my friend, Marny Cox really deserves the JT treatment. Do dual income cops now never buy a house? Talk about trouble keeping the peace…
OK, did Ben make up another name? Because Marny Cox sounds like a skin condition where I never want a skin condition.
Got popcorn?
Neil
prickly ass-missile?
“Gravity does *not operate* here in San Diego.”
Funny you should mention that curious rumor. Just last night I attended an excellent presentation by a San Diego geologist who suggested otherwise (with respect to the reason that homes on Mt Soledad have been sliding down the hillside as of late).
Here is some info on one of his books…
http://sdsugeology.blogspot.com/2007/10/new-publication-pat-abbott.html
He’s actually correct, though using a straw man. The median priced house has NEVER been affordable by the median income in SD, nor any other desirable place to live. More like the 70th percentile income can afford the median priced home. Even when homes are at their most affordable, they are still expensive in San Diego, in most communities.
Historically prices here rotate around 4-6 times median income as opposed to 2-3 in most places in America. That being said, that dude is still full of sh*t, prices have a long way to come down to get to 4 times median income.
4-5x
“‘We’re not going to get back to where the median-income household can afford the median priced home, so housing will still be unaffordable in San Diego,’ said Marny Cox, chief economist for the San Diego Association of Governments.”
Could this happen?
Could it be that the staggering amount of inventory built recently in San Diego is so far from most jobs, that even if the housing prices drop to conform with median incomes that those houses will not be occupied simply because of their distance from work?
I know that people commute from Temecula to jobs in San Diego.
No way! That’s just insane. What a world.
You’d have to be borderline retarded to do that.
Yeah that pretty well describes the population of Temecula. Gun in one hand, bible in the other. Driving your oversized truck to your job in SD and getting 8 mpg on the way!
No Pussycat, you have to be a full out retard to do that. Traffic in the North County is as bad and sometimes WORSE than LA.
Most of my DH’s young/new co-workers commute from Temecula or Murrieta.
The others rent in lovely coastal towns for a fraction of the cost — and have a 5-10 minute “commute” to work (like us).
Post from City-Data.com:
I work with a guy who lives in Temecula, he leaves his house at 4:30am to beat the traffic, goes to a gym, works out, buys coffee and gets to work about 7:30. Works all day, then anohter 90min+ to get home. Goes to sleep about 9pm and it all starts again.
Not much of a life but many do it. The alternative is taking your Temecula house and adding another $300k to it in order to get the same thing closer in.
The alternative is renting, and oh the freakin’ shocker, havin’ a life!
Or move to an area with a real quality of life and family environment. Cedar City, Utah? Austin TX? ABQ? Tucson? Life is too short to waste.
That is crazy, life is too short to be spending up to 4 hours in a car to get to work every day. Time to move to another state.
And another thing… since he’s most likely a W-2 employee… NONE of his GAS or MILEAGE is DEDUCTIBLE for income tax purposes.
He’s paying to go to work everyday!! (Don’t even mention childcare expenses for the extra hours gone)
Poor guy.
Here’s to hoping they make that commute in leased cars
…
It [no jobs where houses are] is the only scenario I can envision that will keep housing prices in an overbuilt area from declining to fundamentals.
So either it’s true or that Cox person is an idiot.
If housing becomes affordable closer to the metro areas, what happens to places like temecula, corona, norco and all those places that people go to in order to get affordable housing? Who would live in those places if they could afford to live closer to work?
THey COULD afford to live closer to town if they’d be willing to give up their granite lined walk-in closet slash entertainment centers. Trekula, land of the 5 bedroom bloat houses.
I call it Trekula. A veritable CF along the freeway. And it used to be such a dusty little rural town.
It was a great little town - now it looks like the whole fwy 15 corridor - just rows upon rows of beige with red roofs. Up in the hills are the fou fou wineries.
As you drive/drove through Temecula, it never ceased to amaze me that so many developements had 7-9 bdrms or more. WHO was buying these Boxes with rooms?
‘Hey neighbor pass me the toilet paper across the 1 ft between our houses’….They are so so close. Zero lot lines, if they could share a roof, might as well share toilet paper.
My mother commutes from Temecula to Lakewood. Yup.
“I know that people commute from Temecula to jobs in San Diego.”
That has been going on for 20 years plus. I worked with people who commuted from Corona to RB and Hemet to SD in the 70’s and 80’s. Temecula was built as a bedroom community for SD county. There is no other reason for a city there. No industry of any significance and miles of houses along hwy 79 to Hemet. And yes they are all crazy. The manic desire to “own a home” no matter how long the commute has to be some mental disorder.
As an ex-Californian, with relatives in San Diego, Riverside, and San Bernardino, I cannot fathom why they put up with such long commutes, to live in cheaper homes in crappy communities (Temecula, Norco, places that are garbage/dairy farm scented, etc.), when often there are decent, cheap, rentable alternatives nearer to their work.
And isn’t spending so much time driving in car physically unhealthy for someone? I have kidney problems, so sitting in a car for a drive longer than an hour is extremely physically uncomfortable…I’d die (probably of bladder explosion) if I had a four hour commute every day!
You’ll hear this from lots of experts. Remember a house is worth whatever you can get someone to pay for it. So in some areas I can see prices stagnating for a long time, or even rising temporarily until the bubble creaps to close to justify the ridiculous prices. It’s the ripple effect in reverese in many areas. In the Bay Area I think we have those centers Marin, Lafayette, Palo Alto/Cupertino, and parts of San Francisco. That will fight the bubble long and hard but ultimitatlly will be effected in the long run.
No way. They will collapse last, but the collapse will be swift and brutal.
Here is the East Bay (Fremont), prices are already down 25%. SFHs that were $400/sq. ft. are now $300/sq. ft. asking price. No idea what they are actually selling for.
Nice site, EastBayBubble!
Prices will come down and affordability will go up, but nowhere close to national levels. At bottom, perhaps 40 or 50 percent might be able to afford a median priced home versus around 10 percent in 2005.
I don’t think location of the housing will be a huge issue. Those commuting in from Riverside County appear to be decreasing over time. Traffic on the 15 freeway is not as heavy as it was 5 years ago and FasTrak fees have been increased because of declining revenue. No need to pay to use the HOV lanes if traffic on the “free” lanes isn’t as congested. There was a strong incentive for some to move to Riverside County in the late 90’s. Housing there was still cheap and the San Diego rental market was extremely tight. Any decent rental was gone in a day or two of going on the market. However, over time the rental market in San Diego County has softened some, gas has gotten a lot more expensive, and so did housing in Riverside County. There also isn’t much to do in Riverside County versus San Diego County. I know people who moved to Riverside County in the late 90’s to buy that sold and moved back a couple of years later to rent again. I expect that high gas prices and falling home prices in San Diego County will accelerate this shift back over the next five years.
“At bottom, perhaps 40 or 50 percent might be able to afford a median priced home versus around 10 percent in 2005.”
Greg — that is pretty much what I said in another post further below. The high price of housing and low price of labor in San Diego pretty much guarantee there will always be an active rental market here comprised of buyers who either are priced out of owner-occupancy or else who do not want to make the long-term commitment to owning. (Too early to tell to which group I belong…)
I have to agree with you on this, “but this gated community is different”.. just pulled into my “housing area” and I was surprised to see SOLD and Pending on 2 condos here. They have been on market for 4 months and I will let you know asap when the closing occurs and what they actually sold for.
I suggest that ‘certain’ areas are still selling albeit, long and hopefully reducing prices alot.
In the coachella valley, ‘we’ are in our high season and “selling period”. 3 more months to go.
I expect sales to pick up quite a bit this spring as knife catchers, like salmon swimming upstream to spawn and die, do their duty. Just because the market is going down doesn’t mean that stupidity is outlawed. And just because people are buying right now doesn’t mean the fundamentals have changed and that prices won’t continue to fall.
Yeah, we can’t make the mistake of thinking that every little sale portends a stupifying return to bubbledom.
I remember seeing alot of ‘40 somethings’ in the mid nineties still wearing MC Hammer pants…
It just takes some people a little while to come around…
I’m surprised prices aren’t dropping faster with all the foreclosures and homes on the market - there’s still a lot of denial here. I’ll trade the heat for the visitors anytime. When I moved in with family 9/06 there were no houses for sale in our community. There’s now at least 6 - 3 are foreclosures.
There’s nothing unhealthy about 40% or 50% of people being able to afford a median-priced home. Indeed, considering the number of people who choose to rent a/c mobility, it seems “affordability” would mean 40% being able to afford the median-priced home, 40% being able to afford the lower-than-median home, and the rest being tenants by choice or by duress. No? Of course, the measure of who can afford what may be an additional absurdity. I have never spent more than 20% of income on primary residence, and never will … though I can imagine spending more than 20% of principal to buy for cash and hide from income tax. When it seems safer.
You hear THAT, you troglodyte bottom-feeders! No affordable housing for you, says the housing Nazi. Go back to your pathetic little bubble blog and commiserate with other priced-out renter-doomsters. Gravity does *not operate* here in San Diego.
I don’t think that’s what he is implying. He is saying that prices will continue to remain out of reach for most people…….I guess the idiot is considering a blighted landscape like something out of Mad Max………nothing but decaying homes
I think he is saying it because he is compensated via tax revenue…
Translation: “Our city governments can’t afford lower reassessments.”
Ring-a-ding-ding! That dough has been spent - probably several times over - in municipalities across the country.
Yet another act in this high drama.
From the original post:
“Joe Newton, Association of Realtors president, said Monday that while the market has been awash with negative industry statistics, the downturn has meant clients buying and selling homes ‘rely on us even more as trusted advisors.’”
I don’t know what this guy is smoking, but I would like a puff. Just one puff.
IMHO, the only thing I’d rely on these people for is HBB fodder.
People who would rely on Realtor are the ones who bought 700 sqft homes for $400k. Realtors and Mortgage Brokers have a vested interest in you buying, not buying something you like or can afford, just buying. They have the touchy feely way of saying it, but I think they just want to get their fee and move onto the next sucker.. I mean client.
–
Are used house salesmen, or saleswomen, better than used car salesmen?
Jas
To paraphrase W.C. Fields: “Only if they are throughly cooked.”
Wow..the Equity Ice Castles, Palaces and McMansions are MELTING fast and the Spring BUST is Months away.
Whatever WILL all the dear little Entitlement Princes and Princesses of the Realm do ?
Gulp..gulp..gulp !
LOL! Rely on a real estate clerk! I think I will ask my Barber, he has more education.
“CAR reported that the median price of an existing single-family home was off 7.9% in December from December 2006.”
There are 10 CAR heads sitting in a room wordsmithing their next press release. The most ingenious one in the room declares “Let’s not tell people that prices are down; how about ‘prices are off‘?”
And obviously the opposite of “off” is “up”.
Here are two articles published in Ad Age that bash the TV advertising realtors are airing saying “It’s a great time to buy a house.” You know it’s bad when the bullshitters are crying bullshit on the other bullshitters.
http://adage.com/article?article_id=123374
http://adage.com/garfield/article?article_id=123355
Heard a radio ad by the NAR today–”Real estate doubles on average every 10 years…[but, later on]…all localities are different.” Another deliberate effort to mislead the public and avoid liability for doing so–average price appreciation would not be relevant unless localities were sufficiently similar for you to expect the same result.
Did you see? The second page lead to a new site: http://rottenlyingsleazyrealtors.com/
In Ad Age. Fabulous!
At least its better than saying:
Prices negatively appreciated.
“Prices are sky-low”
But they have to get ground-low to be affordable.
The sky is so low and ominously black, I would almost say it looks like a Texas twister is about to hit.
Kansas twister, baby!
Texas Tornadoes
Awesome group
Flaco Jimenez plays an incredible polka on the push button accordion!
I saw FJ play live once. In Benito, Texas no less. RIP Doug Sahm.
Unbelievable! I would love to see him… maybe the Mexican Fiestas at the Summerfest will have him play.
Freddy Fender too alas
Jealous of you, no; envious, yes!
Given that Alameda County was not included, I would be on the lookout for this number to be revised to a “higher absolute value”.
“‘I’ve been in this business for 35 years,’ Cosner says, ‘and I don’t believe I’ve seen a more difficult market for homeowners’.
That’s because it IS different this time. Doesn’t matter how many years you have been in the business, never before in history was credit so lax.So forget your 35 years previous and adjust to something you have never seen before.
So forget your 35 years previous and adjust to something you have never seen before.
Class, open your books to Florida 1925/1926.
Yes, in some areas it is that bad. Not all. Certainly not Manhattan, but every area will depreciate.
Got popcorn?
Neil
Jas Jain — does this explain the delay you have been discussing?
KAPOOM!
“The median price of an existing, single-family detached home in California during December 2007 was $475,460, a 16.5 percent decrease from the revised $569,350 median for December 2006.”
Stillllllllllllllllllllllll not low enough. With 20% down, you are still looking at about 130K annual income needed for that mortgage.
Come on, we can do better in Klowkneefourkneeahh!
CA SFH Resale Price Down 20.4% from Peak Price 8 Months Ago, or –29.0% Annual Rate
Peak Price Apr-07 $597,640
Current Price Dec-07 $475,460
Jas
“The median price of an existing, single-family detached home in California during December 2007 was $475,460, a 16.5 percent decrease from the revised $569,350 median for December 2006.”
———————————————————————————-
You know if the CAR is reporting a 16.5% decrease in one year then the real drop was probably significantly higher! Still, this is gonna be a rude wake up call for the Orange County koolaid drinkers.
“In San Diego County, the amount of household income needed to purchase a median-priced home during the third quarter of last year dropped 12 percent to $143,738, compared with $163,404 a year earlier. The county’s median household income is $68,000
Am I reading this right? They just implied that prices need to be less than 50% of their current values to be in line with median income? or maybe they are saying that households need to double up?
No, they are saying it’s “not gonna happen”, i.e., San Diego will remain *permanently* unaffordable to FTBs. However, I think your interpretation is more accurate.
For the record, last time San Diego went through a major correction, affordability* roughly recovered from 10 pct to 40 pct.
*Based on the old CAR methodology, which asked what percentage of households can afford the median-priced home. There are various dubious assumptions (e.g., households will make a 10 pct downpayment) which make the CAR’s affordability statistic a questionable measure of market reality. And they also changed their methodology in recent years to goose up their estimate of what percent of households can afford to buy a median-priced home.
I wonder, when CAR compares the “new” affordability, to the “old” affordability - 1990 (20% down, 30 yr. Fixed) Did they apply the new metrics(10% down, ARM) to the 1990 median? I mean, what a bunch of crooks if they don’t. I believe they are not. CAR is attempting to show that affordability levels are pretty much the same as the last downturn, although the appreciation is vastly higher this go around “new bubble”.
Even though you have a lower downpayment now- higher loan value,the rates are so much lower, that it makes prices seem not quite so unaffordable to someone who would casually take the CAR at their word.
Did they apply the new metrics(10% down, ARM) to the 1990 median?
A: No.
I mean, what a bunch of crooks if they don’t.
A: Yes, they are –and damned liars too.
“Did they apply the new metrics(10% down, ARM) to the 1990 median?”
That would have been like shooting themselves in the foot.
That being the case there will be few if any sales moving forward, so no further need for the CAR, since there will not be enough members to keep them afloat. If I were them I would be seriously considering the welfare of my members and jumping up and down on prices to get things moving again.
“or maybe they are saying that households need to double up?”
That’s it — three households per McMansion in each of San Diego’s 131 ‘New Home Communities.’
Recall the old Victorian houses. They were the original mansions. Many are now divided into apartments. You can see this in any major city.
Yep, and Harlem was originally upper class when it was built. Given time many of todays fancy places will be tomorrows slums.
I had a friend into Victorian houses. She called the apartments hack jobs.
Near impossible to restore.
I also checked the forgotten detroit web site. Amazing to see how such architectural gems have decayed to nothing. Lived near Detroit for a while and saw all those buildings and looked at their history.
Time can do amazing things.
Economic busts like this. Well, we are going to be just shocked in a few years.
I doubt 50 years from new folks are going to lovingly restore McMansions. I’d rather they plow them under and restore some agriculture.
Oops, now folks, not new folks.
7.9% decrease in Orange County… “it’s in the bag”!
Gary lost his bag when I rammed him with that sequoia sized JT last summer. Something that size is bound to take out some unintended targets.
“‘We’re not going to get back to where the median-income household can afford the median priced home, so housing will still be unaffordable in San Diego,’ said Marny Cox, chief economist for the San Diego Association of Governments.”
Thanks for the brilliant commentary there skippy. So what are the possitilibies a statement like that infers? For that to happen, prices won’t come down to affordable levels…which means nobody buys anything (relatively) because it’s unaffordable…which means real estate as an industry becomes a non-industry as everybody sits around in a perpetual stalemate like a high school dance…
Hmmm…seems like that’s not going to help anybody any more than rapidly falling prices that eventually find a liquid environment where the average person can purcahse an average house.
Stupid, stupid comment. If entry level buyers cannot afford housing, move-up buyers cannot sell to purchase a new home, etc.
Then the RE market goes completely DEAD. No first time buyers, no market, period. Very simple.
“Then the RE market goes completely DEAD. No first time buyers, no market, period. Very simple.”
Absolutely, the market depends on new money coming into the market. Trade-up or trade-down buyers alone can’t keep the market afloat.
Will Dave Ramsey devotees be the only ones to afford entry level and upgraded houses ?
…which means real estate as an industry becomes a non-industry as everybody sits around in a perpetual stalemate like a high school dance…
Couple of great gems in that sentence!
Unaffordable housing is an oxymoron. If homeowners can’t afford it, they won’t buy. People who need to sell couldn’t sell. Landlords couldn’t make any money renting, and bankers would what, just sit on their assets, because of some supposed paper value? What a stupid-ass statement.
True. In the end, sales prices must reflect likely rental income.
condo that friends looked at today was asking 1800 and friends balked/walked.. agent told the owner to lower price…now it is 1400. but I think that friends looking will blow it off as that opportunity was missed by owner.
Good renters they are too. Too bad, owner missed that boat.
In the last 15 years, sales prices have not reflected rental income in Silicon Valley.
Many sfh rentals are first homes, then when the family moves up they keep the prop 13 assessment and rent out. So it is cash flow positive if they exclude the opportunity cost of the equity. But buying an sfh for the purpose of renting out has not been a good cash flow deal at least in the last 15 years. It was a good deal overall due to appreciation, which won’t obviously be the case for the next few years.
I can’t speak to multi family, no experience there.
So, maybe it is different this time?
“We’re not going to get back to where the median-income household can afford the median priced home, so housing will still be unaffordable in San Diego”
Translation: “Silly comrades, nothing will stop government economic plan to wipe middle-class from face of earth.”
The hungrier you get, the better it tastes!
close
.
“Home buyers must earn about $98,000 a year to comfortably afford a median-priced house in Stanislaus County, the Center for Housing Policy reports. But workers in only one of the 64 occupations studied — construction managers — earned that much last year.”
Oh. My. God.
Yeah…there are LOTS of THOSE walking around… how many are CURRENTLY making 98K, I’m not sure.
“Construction managers”
Heh, heh. Good luck with that as a strategy going forward…
I’m floored as I read that. We all know many areas will take a hit as REIC employment drops, but to read 1 out of 64 qualifies and that one is REIC…
I do not anticipate that the goverment will be able to do anything to keep housing in that area from rapidly returning to normal. In the 1995/1996 there was an ‘idiot test’ in Palmdale/Lancaster. If you didn’t take your earthquake insurance money to buy elsewhere, you were an idiot. Ok, they changed the laws on how insurance pays out… but still, we’re talking people with zero down!
Got popcorn?
Neil
Have you seen that ITT Tech is now advertising like crazy for their new “School of Construction Management,” talking up how there’s lots and lots of such jobs out there because home construction is at an all-time high?
I feel bad for anyone who signs up for that program… when they get out in two years, it’s back to flipping burgers!
Every time I see that add I groan… and my wife tells me to be nice!
Those people should go into a health related field… sigh…
As patients?
ITT and DeVry were pumping their IT programs during the tech bust of the early 00s when experienced IT people were getting laid off in droves. Whatever ‘hot new field’ they’re pushing is probably going down the tubes soon, if not already.
Laugh if you will: my cousin the former Florida-rehab-flipper has just gotten a Real Job in Delaware as … a Construction Manager! Luckily for him, he’s already qualified. Furthermore, if the job doesn’t last forever, that’s probably OK too. His kids are both grown up, and his wife has a hospital admin job. Anyway, I respect my cuz for knowing when he’s beat (no more FL rehab/flips).
He doesn’t really have to “know” when he’s beat though. All he has to do is starve and, voi la, he’s out lookin for a job.
I can tell you only some two income families can afford it in Modesto,Ca. I used to work for Stanislaus County.
8.8 percent, or 25 out of 285 cities and communities, showed an increase in their respective median home prices from a year ago.”
deduct any from the last quarter that aren’t looking at a cornfield or oil derrick and the number is 0 ,dude
“In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 8.8 percent, or 25 out of 285 cities and communities, showed an increase in their respective median home prices from a year ago.”
I bet that in almost all these “communities” the prices are down from the peak prices during 2007Q2 in many of such communities.
Jas
So what I see is buyers can no more afford those prices in Cali than they can here in MT. All these years I thought people in Cali had to be rich or something.
“Lyon said the second bright spot from December’s survey revolved around the inventory of houses in the $200,000 to $300,000 range. “
How ironic. If I were a contruction manager in California, I would be very concerned about my prospects for future employment. Those who are left are probably going to make that $98k, those who are not, nothing…
Remember that we are talking about two distributions: house prices and amount that an income can pay for (about 2.5 times annual income). There will be some people that can afford a house, though not many.
The actual computation of the overlap is an integral that depends on the details of the distributions. If these are known, a numeric approximation can be readily done (left as an exercise for the reader:).
“(about 2.5 times annual income)”
Is that a rising-price-market estimate or a falling-price-market estimate? (Without running any numbers, it looks more like the latter to me…)
Hi Martin:
You also have to remember that, during a down market, one must subtract the percentage of households that DON’T WANT to buy from the distribution of households that could if they wanted to.
Hi, I agree with this idea. Basically, the bottom 30% or so are not going to buy. And we know that in the last 10 years the majority of economic gains have gone to the top 30 or 50%. So while the median income has been flat in real terms, the income of the home buying population has increased. Not by as much as houses have gone up, but looking purely at the median is not correct.
Also, when one’s income is more than median, one can spend more than 28% on housing comfortably. Someone making 2x the US median doesn’t have to spend 2x as much on cars, food, utilities, clothes, etc. Which means that more than 28% is available for housing if so desired. Or the 2xer can spend 2x as much on everything, meaning 28% is what is available. I make 2x as much as I did in the 90s, yet the car I drive only cost 30% more. and some other costs like car insurance and restaurants are actually lower than in the 90s for me.
“His agents are telling owners who need to sell within the next five years to put it on the market now because prices are projected to fall further. For buyers…there’s a 15-month supply of homes to choose from. Price declines are hitting every neighborhood, Cosner says.”
“‘I’ve been in this business for 35 years,’ Cosner says, ‘and I don’t believe I’ve seen a more difficult market for homeowners. We are not anticipating any significant turnaround until mid-2009.’”
Wait a minute . . . five years - mid 2009? Am I missing something here? Methinks he is just afraid to say 2013.
Is he implying that prices will snap back to their current levels by 2013? I doubt it.
No, he’s saying things will only be worse five years from now.
I agree.
I like what you did, Ben!
There is NO reason for anyone to think that Realtwhores as a group could care less if a used house was overpriced, way overpriced or WAY WAY WAY overpriced. The majority are only interested in their monopolistic and unreasonably high commission from the transaction.
The CAR and NAR organizations have proven over and over and over again that they have nothing but contempt for the well being of the consumers of used houses. Advertising that real estate only goes up, and that owning a house will solve your problems, is at least as damaging as advertising cigarettes and beer on children’s TV shows, IMO.
“‘We’re not going to get back to where the median-income household can afford the median priced home, so housing will still be unaffordable in San Diego,’ said Marny Cox, chief economist for the San Diego Association of Governments.”
See, now, if I was *really* stupid, I would believe this! Do you think Marny meant ‘within the next month’?
Why would he assume this? I guess he is counting on govt intervention in various forms (e.g., increase in GSE conforming loan limit) to ensure that San Diego homes remain permanently unaffordable?
I would guess he meant ‘within the next year’
Maybe he knows that even if house prices crashed another 50% the houses will be out of reach for most people. Why? Answer, because there would be 40% unemployment and the task of waiting in bread lines will be more important than sleeping under a $200,000 roof.
GS, you often spoke about the elephant under the rug………….is this the one you meant?
Bond Insurers May Lose AAA Ratings Before a Bailout (Update1)
By John Glover
Jan. 29 (Bloomberg) — Bond insurers led by MBIA Inc. and Ambac Financial Group Inc. may lose their top AAA ratings before they benefit from any rescue plan.
The bond insurance industry stands to lose $41 billion on securities linked to subprime and other mortgages, according to JPMorgan Chase & Co. analysts. Efforts by New York Insurance Superintendent Eric Dinallo, 44, for a $15 billion fund to bolster insurers’ capital are likely to be overtaken by events, independent research firm CreditSights Inc. said today.
“Given the number of competing interests and levels of commitment of participants involved, we think it is unlikely that an agreement sponsored by Dinallo could be hammered out within the appropriate timeframe,” CreditSights analysts Rob Haines, Craig Guttenplan and Joe Di Carlo in New York wrote in a report. “In the offchance that any deal could be solidified, the rating agencies are likely to have already taken action.”
The industry guarantees about $2.4 trillion of securities issued by U.S. cities and states and bonds backed by mortgages, credit cards and other assets. Insurers including Security Capital Assurance Ltd., FGIC Corp. and ACA Capital Holdings Inc. have been seeking capital since November when Fitch Ratings and Moody’s Investors Service began reviewing the effect of rising defaults on mortgage securities guaranteed by the companies.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ajygNY3Jw0UM&refer=home
There are too many of the durn critters for me to keep track of them all.
The elephants are breeding like rabbits.
Lately, the Fed reminds me of Elmer Fudd blasting away at Bugs Bunny; as Bugs pops from rabbit hole to rabbit hole, devouring carrots all the way.
That is because the FED does not have the right tool for todays job. Remember when the only tool you have is a hammer every problem looks like a nail.
The truth is that we need a controlled enviornment in which
citizensconsumers see dramatically increased income in a rapidly tightening credit market.A world of rapidly decreasing incomes or stagnant income and increasing debt = checkmate.
OT–
The upstart Santa Barbara Daily Sound newspaper’s marquee online advertiser is now the SBAOR (the local Realtor association). In its Jan. 21 issue, the Daily Sound ceded 6 entire columns (on two facing pages) to one of that association’s members–a real-estate and mortgage broker–for the purpose of explaining to readers that the opportunity of a lifetime to invest in South Coast real estate is nigh. This week at the Santa Barbara Housing Bubble Blog, I beg to (dis)agree. Here are just two of 26 pragraphs from that 01/21 Daily Sound article:
I have personally followed the real estate market for as long as I can remember and one thing is certain: the market always moves forward with or without you. The real estate market moves up and down, but we should all realize that the overall trend for the past 30+ years has been up, despite recessionary periods.
. . .
I have been asked if I participated in speculative property purchases during the last two years. The answer is yes — commercial and residential. Fortunately, I focused on a few additional indicators (recipe ingredients) and bought in a foreign market with a foreign investor. (If the U.S. economy falters, foreign investors will likely pick up the slack.) Part of the recipe I applied and continue to apply is to buy in an area that is improving month by month and day by day, buy where the big boys play (Four Seasons, Marriott, Ritz Carlton, and Radisson), buy in retirement areas and communities by the sea. Sounds like Santa Barbara, doesn’t it? Because we have all these things right here, you can bet pretty safely that the buying opportunities will improve every day.
Also this week at my blog: a revealing photo of the lowest-priced SFR inside Santa Barbara’s city limits, along with its three vital measurements: price, plinth, and lot size. What a turn-on!
Whip it good,
Saint Barbara
wow, I loved living in SB, but there is now way I would pay +$400k to live in something like that, its a Compton cirb in a Santa Barbara locale. Stucco would actually be an improvement to that puzzling edifice.
“In response, the company is rolling out a price guarantee: If a buyer purchases a new home this year, the buyer is guaranteed a rebate if the base price of that home is lower at the end of the year. ‘To get people off the fence, we’ll take the ride with them through the year,’ Anfuso said.”
Looks like a pretty good “insurance policy”. Until you look at the Credit-Suisse ARM reset chart and realize most option & Alt-A (stated income) ARMs do not reset until 2011.
A clever move by builders — but no guarantee that the same house won’t sell for a lower price as an REO. By the way, I think Florsheim was better in the shoe business than houses.
“…the buyer is guaranteed a rebate if the base price of…”
The base price is the determining factor. Everything else is meaningless. Does the base price include a roof? lol
If a buyer purchases a new home this year, the buyer is guaranteed a rebate if the base price of that home is lower at the end of the year.
They’ll cheat, new homes will now come with a free garage.
Or they’ll just switch floor plans…
Or plain just file BK…
guarantee requires a counter party and I seem to remember reading something about counter party risk…
Got popcorn?
Neil
Florsheim only sells residence to old ladies who have so many children they don’t know what to do.
excellent point HARM
I’m suspicious about this wording. How do they calculate the “base price”? Is that the asking price before throwing in extras? If so, then they can just have a “sale” at the end of the year where they throw in all the extras for free (worth maybe like $200k), but keep the base price the same. I mean extras like a pool, a guest house, stuff like that.
Extras like a roof, or windows or doors and slab under houses?
“The liquidity crunch also contributed to the significant decline in the median price due to the lack of financing options for loans above the conforming loan limit of $417,000,” Brown said. “It is imperative that the proposed increase to conforming loan limits that is part of the economic stimulus package receive swift approval by both houses of congress.”
The Used Home Salespeople are keeping alive the hope that an increase in the conforming loan limit will suddenly flood the market with millionaire buyers eager to borrow over $417,000. But there simply are not enough homeless millionaires in all of the U.S.A. to have much of an impact. The only way I can see this mattering is if other measures are passed to keep qualifying new buyers to purchase homes they cannot afford, including fraudulently high appraisals and no income verification.
Yes, yes, yes Bear. Raise the limit to 10 million and the affordibility numbers still suck. Getting an interest break of 2% on a mortgage that you can’t afford the principle payment on is no help.
The interest break is at best 0.75 - 1.00 percent. However, the reason is there are fewer loans under 400K going belly up that jeopardize an MBS. If the new MBS includes LFKAJ (loans formerly known as jumbos), the risk of default on the MBS increases and the overall interest rate for mortgages will go up. So there will be a 2 tier MBS system, GSE loans under 400K and GSE loans over 400K. Mortgage rates will reflect this.
Sounds like it may primarily be large banks who can profitably take advantage of GSE loan purchases above $417K?
Sounds like it may primarily be large banks who can profitably take advantage of GSE loan purchases above $417K?
Bravo! Give that man a prize!
I wish some financial journalists would weigh in on whether the real purpose of raising the conforming loan limits is to bail out banks or consumers, because I am running low on hand lotion worrying about it.
It is not worth worrying about. The hope for the bank is that the FBs can refinance into a GSE loan, thus guaranteeing the MBS and subsequent CDOs. That is not possible based on the current defaults. It will require full doc.
Some consumers it will help, these individuals deserve the lower rate, great incomes good credit. So it will save them upto 6K/yr. This still will require full doc.
The Realtors will still be in the same boat. Only qualified persons need apply. In California, about 12% of the population qualifies. How many of those 12% are looking to buy a starter home? (I am referring to houses requiring jumbo loans).
Good grief! Don’t these people get it. Even if you drop the interest to 0% (highly unlikely), on a 540K home, you would still have a 1500/month payment on the loan. Now, add in HOA, taxes, insurance and maintenance and you are anywhere from 1500-2500/month. NICE! Let’s say 2K/month (we’ll split the difference), at 1/3 income, you better be making 6K/month or 72K/year. AND THAT IS ASSUMING EVERYTHING I JUST LAID OUT in a best case scenario!
Not.
Gonna.
Happen.
Besides, the bank can’t charge 0%. Even if the base rate (LIBOR or whatever) goes to 0, the bank is still charging about 2.5% margin for a prime mortgage. Furthermore, sending the Fed funds rate to 0 would not produce a LIBOR of 0 because banks will still have to charge eachother something for overnight borrowing. So I guess that sets a lower limit of, what, 3% for prime mortgages?
“The Used Home Salespeople are keeping alive the hope”
Don’t forget, the Soft and sweet, wise and wonderful, mystical, magical Spring Selling Season is just around the corner…the housing crash will be over!
Don’t worry, your government is working day and night to find ways of getting into the risky lending business directly (FHA expansion) or indirectly via pressuring Fannie/Freddie into relaxing their standards by bribing them with additional taxpayer-financed capital. Or via repeated Fed interest rate decreases so that banks can borrow at 1% and lend at 6% - compensating them for the additional risk.
“borrow at 1% and lend at 6% - compensating them for the additional risk”
That does not look like fair compensation to me…
Markit ABX Closing Prices
ABX-HE-BBB- 07-1
Index Summary Since Last Roll
Comp Price Weekly High Weekly Low High Low Maturity Coupon
13.94 14.15 13.06 97.47 13.06 25AUG37 3.890%
http://markit.com/information/products/abx.html
The price decline has slowed down here a bit in Riverside, CA. In fact, there have been few new listings in the last week or so. This is driving me crazy. We want to buy our first home, but refuse to buy more than we can afford. I guess a $90,000 annual income isn’t going to hack it. It is just out of our reach.
So, will the price decline pick up in the spring?
There should be price declines well into the end of 2009.
Don’t sweat it bubbleiscious. Get used to socking away as much of your income as you can. After a while you will magically notice you can buy a whole house for cash. Whether you will then WANT to do so, is another matter.
just wait. i have been looking in the south bay for years and prices are starting to soften. i sold out in 2005 and will probably buy back in 2009. reality is starting to sink in…..
Also keep in mind that housing bottoms don’t rebound quickly. You’ll have time to notice the bottom, so you won’t miss out regardless.
Another pack of lies being reported by the press again! Come on! Everybody knows the median income in San Diego is more like a gazillion dollars a year not that paltry number $68,000 a year. That’s what they pay people at Walmart to stock shelves or work at 7/11.
In California we all make more money than we know what to do with, that’s why we all pay so much for a house here. This whole thing is a conspiracy to prevent the Republicans from keeping the White House in 2008. I myself carry $68,000 around in my wallet just in case I want to buy something like a Hummer or a really big yacht to go water skiing on the delta with. Damn, come on now doesn’t everybody in California have at least that much if not more for pocket change?
On the real side of things though….these articles only prove what I’ve been saying for awhile now….California is no longer the “Golden State”, we have become the “Goldplated State”…shiny on the outside…worthless on the inside.
I think you mean, the “Gilded State.”
dunno. 100K is common in my ‘hood. Santa Clara co.
I believe the median household income in Santa Clara is $80,573/year.
Even with a $100K income, a buyer shouldn’t be paying more than $350K-$400K IF they are putting 20% down.
Starter homes should be in the sub-$100K-$175K range.
“Median” homes should be in the $175K-$275K range.
“Upper-middle” move-ups should go from there to maybe $600K (big range).
Then, you have your **truly** wealthy (can pay cash, if they want to) who can buy whatever they want. This is a very small percentage of the population, IMO.
From the merc:
Santa Clara County Receives $12 Million to Assist First Time Home Buyers
SANTA CLARA COUNTY (KRON) - First time Home Buyers in Santa Clara County may be receiving help soon, thanks to a state mortgage assistance fund.
County officials say they were given $12 million to provide Mortgage Credit Certificates to qualified first-time homebuyers. The certificates will allow buyers to receive a federal income tax credit of up to 15 percent of the interest they pay on their mortgage.
To qualify, applicants cannot make more than $94,500 for up to a two-person household or $108,675 for a household with three or more people. The home price cannot be larger than $630,000 for a new home or $570,000 for an older home.
“Housing is one of the biggest issues facing working families in Santa Clara County,” Santa Clara County Board of Supervisors Chairman Pete McHugh said in a statement. “Through the Mortgage Credit Certificate Program, residents can increase their buying power by reducing the amount of federal taxes taken out of their wages.”
Will this help prop up those inflated prices, or will the number of people who can qualify be negligible?
Both….
Do the math on this one. Will be foreclosed within 12 months. or eating top ramon and riding county transit for 30 years. Plus you’re funding a depreciating asset.
I think they also have a “favorable Rate” program for First Time buyers but the requirements is that you can’t earn more than $80,000 (Dual income included) So take your pick.
I don’t think this “income tax credit” will influence any price appreciation of real estate. But buying a house at this time, with these prices is ludicrous.
Number of people who qualify will be negligible.
And good luck finding a used house in Santa Clara County for $570k that is not surrounded by razor wire (condos excepted).
Notice the distinct lack of assistance with a down payment. They could refund 100% of the interested paid, and it still wouldn’t address the real problem.
Yes, it will help prop up prices. Who is paying for this?
How can the state of California give out a Federal Income Tax Credit?
mid may was 799,000
6/10/06 was 836,471
6/14/06 was 840,935
6/17/06 was 846,120
6/20/06 was 850,317
6/22/06 was 855,892
6/24/06 was 860,647
6/29/06 was 866,037
7/01/06 was 858,675
7/09/06 was 870,854
7/11/06 was 882,239
7/13/06 was 886,055
7/14/06 was 890,896
7/18/06 was 895,022
7/21/06 was 900,000
7/25/06 was 905,170
7/28/06 was 910,001
8/01/06 was 903,718
8/12/06 was 915,336
8/19/06 was 920,755
8/26/06 was 925,176
8/29/06 was 951,242
9/15/06 was 955,352
12/1/06 was 925,170
12/2/06 was 915,258
1/01/07 was 857,760
1/20/07 was 900,302
2/14/07 was 932,055
4/21/07 was 1,148,456
4/27/07 was 1,171,189
5/11/07 was 1,192,290
5/18/07 was 1,202,413
5/25/07 was 1,238,121
6/14/07 was 1,256,361
7/28/07 was 1,300,943
8/27/07 was 1,365,670
9/24/07 was 1,405,798
12/07/07 was 1,345,525
12/31/07 was 1,294,918
01/02/08 was 1,240,148
01/29/08 1,300,796 today
numbers are back above one - three.
http://www.ziprealty.com/maps/index.jsp?usage=search&cKey=74rbwvlk
Thanks stanley. Comparing 08 to 07, we should hit 1.4 the next time you report, and perhaps keep going upward from there…
Thanks for proof that real estate always goes up!
Did you all see this? This bothers me a lot
http://news.yahoo.com/s/ap/20080129/ap_on_re_us/foreclosure_pets
When I see stuff like this, I want this f***ing housing market to be bailed out. I know it’s irrational but I don’t care if I have to pay up for a house as much as I care that this sort of thing happens. These are innocent victims big time.
I don’t want these FBs bailed out for abandoning pets (dogs left tied to a tree in the backyard, my God!).
I want these a-holes lined up and shot.
“I want these a-holes lined up and shot. ”
Nope, too humane. Lock them in a stuffy closet and let them eat drywall while they slowly starve to death.
This story made my stomach turn. We have a wonderful rescue dog ourselves, and I cannot imagine *ever* abandoning her. These folks see dogs as a product. Just had a co-worker brag about her recent $3000 ‘priceless’ puppy purchase. And they come with a ‘guarantee’?? WTF??
My rescued best friend is priceless too, and I saved a life. One of the most rewarding things I have ever done is to save that dog and see her blossom into a wonderful part of our family.
I will donate my tax-rebate to the dog rescue.
Don’t let Ben Bernanke know what your weakness is. He will use it against you.
This is why I don’t think landlords should be able to disallow pets from their rental property. There should be some law stating what they can charge for a pet deposit and leave it at that.
Yep, it sucks. I’ve been donating more to shelters and I just adopted a sweet Blue Heeler who had been in a Calif. shelter for 9 months (and she’s only 11 months old). This is pup #5 for me. I sleep warm at night. My dogs ARE NOT PART of my family, Darryl of PHX, they ARE MY family.
I took in several cats last year that were on death row in local shelters. And that’s just a drop in the bucket of course. I also took a Frenchie in August of last year from some idiot who had to leave his house. Did I mention this fool paid $2,800 for this dog (on a credit card naturally). Thankfully he looked up the breed rescue before dumping him at a shelter.
You still think we are going to enjoy this?
This is the begining of ugly.
Wait till we find kids/grandma left behind.
Got… hell I don’t know… Pepto?
No, I don’t. If I were King of the Fairies, I’d find some way to keep these numbskulls in their houses so their animals could at least have food and theoretical shelter.
Kick out the numbskulls and donate the house to a shelter.
Yep, we have 3 rescue dogs. One heeler from Montana (named Montana), one heeler pup penned up with no food/water (named Dakota) and one blue tick bloodhound around a year old lost in the desert without tags (named Doolie). What a family!!
Does anybody have a link to these deserted animal blogs?
Tx;
Last night I started crying over a purina dog food commercial.
You’ll know it when it tugs at your pet lover’s soul.
I also weeped from reading about Chicago’s fuzzy helpless victims.
I love little dogs.
Ouro, do what you can to help, donate money, time, whatever you can spare. These little guys are VERY appreciative (I also have 7 cats, all abandoned).
PS As for a link, there are shelters all over, pick your region and search Humane Society of xx county. Another good one is bestfriends.com, I spent 2 weeks there donating my time a couple of years ago and they do good work.
Actually, donate to local rescue groups rather than municipal shelters. No kill organizations are good. The rescuers need every time they can get because many times they receive animals in need of a lot of veterinary care.
My breed rescue group, for a very popular expensive breed is getting a “blizzard” of surrenders now. If French Bulldogs are being dumped, I don’t even want to think about more plentiful, less expensive dogs.
My vet friend in calif just got a tiny half chihuahua half pug that someone dropped in the dropbox at the Tuolomne County HS. What a cute little rascal, she was very very happy to get a new home. You can read their minds, they’re so appeciative. No kill shelters are definitely the way to go.
Yeah last week I donated some toys to some german shepards.
I don’t even really like that breed, but I felt so sorry for them.
Cool.
PS Hope they were used house salespeople chewables -
They were xmas chewtoys 70% off.
German shepards have to have something to do all the time.
You know how Katrina was tragic with the animals.
The shelter people were there fighting to save the lost animals.
There is no big fight to save foreclosed animals yet.
“In response, the company is rolling out a price guarantee: If a buyer purchases a new home this year, the buyer is guaranteed a rebate if the base price of that home is lower at the end of the year. ‘To get people off the fence, we’ll take the ride with them through the year,’ Anfuso said.”
And what if they back out or go out of business? Besides the bottom is not a year from now, it’s more like 5 years
Yahoo to Cut 1,000 jobs.
http://www.nytimes.com/2008/01/29/technology/29cnd-yahoo.html
Comment by barnaby33
2008-01-29 17:37:46
He’s actually correct, though using a straw man. The median priced house has NEVER been affordable by the median income in SD, nor any other desirable place to live. More like the 70th percentile income can afford the median priced home. Even when homes are at their most affordable, they are still expensive in San Diego, in most communities.
Historically prices here rotate around 4-6 times median income as opposed to 2-3 in most places in America. That being said, that dude is still full of sh*t, prices have a long way to come down to get to 4 times median income.
My comment:
I did not know this! If that is the case, do most people rent? And if rent is a much better deal, why do some still buy? One could rent till he retires, invest the extra money and be better off than buying. Then he can relocate somewhere cheap.
Ive been told the same for the “desirable” parts of Florida. Median income is around $30k a year per person, but will houses drop to $60k in south FL and Gainesville? It appears that the snowbirds and retirees are the ones setting house prices while the middle class is leaving FL in droves for cheaper states with higher salaries.
I did not know this! If that is the case, do most people rent? And if rent is a much better deal, why do some still buy?
Some people actually make money in real estate as an investment. And some locations do grow for much longer periods (Seattle comes to mind, what 15+ years of price increase?).
Mortgage is at a fixed price… inflation can help if you own for 5+ years.
Many people prefer to own. This way you can do whatever you want with the house (within reason), you aren’t forced to move by the landlord, keep kids in the same school etc. Even if it is cheaper to rent. If someone’s got the money then they may prefer to spend it on housing. Others would prefer to rent and spend money on something else. Neither is right.
Buying for an investment is a different story of course.
I meant to say, neither is right, neither is wrong, it is just personal preference. (spend money on owning vs other)
Would you like some cheese with your whine?
It is imperative that home prices come in line with wages—not that you can gouge your 6% on unreal home “values”.
I wrote both my CA Senators to remove the lifting of $417k loan limits, if anything they should reduce them due to home prices falling. CA needs homes people can afford so businesses stop moving to lower cost areas.
Let those businesses move, the loss of jobs is far more effective in lowering house prices.
Its happening. A lot more than people realize.
It will take time for people to wake up to it… there is a record number of empty homes in the US. They’ll fill somehow. (We’ll… except for the one’s bulldozed.)
Got popcorn?
Neil
I wrote them too. If everyone writes in, it might help.
$417k mortgage will get you a $521k house with 20% down.
At 3x income, you’d need to make $173k a year to afford this with a non-suicidal loan.
$417k is high enough.
Why Did Ben Bernanke Call Hank Paulson 85 Times During Early Stage of Subprime Crisis?
http://www.thewashingtonnote.com/archives/002762.php
The CAR report is killing me:
Los Gatos $1,400,000.00 $970,000.00 44.3%
Mountain View $730,000.00 $640,000.00 14.1%
(dec 07, dec 06, %age change)
These are the only two Fortress-like areas listed.
so basically, anyplace I aspire to live in is up. Anyplace else is down. not good.