There Used To Be A Housing Boom In California
The Sacramento Bee reports from California. “Sacramento home builders have tried practically everything to move product in a slow market: lower prices, auctions, luxurious upgrades and so on. Now they’re offering cheap money. Working in tandem with lenders, two home builders are offering mortgage financing for new homes at below-market rates. ‘The builders are clearing brush,’ said John Schleimer of Roseville-based consultant Market Perspectives. ‘The big push certainly right now is to get rid of standing inventory.’”
“John Arvanitis, a Citrus Heights mortgage broker, said interest-rate buydowns are preferable to continued price reductions, which drive down market values for everyone in the community. ‘You don’t want to perpetuate (or) assist in a market crash,’ said Arvanitis.”
“Elk Grove, already mired in an economic slump, may be at the forefront of what’s coming to the entire Sacramento region. Already home foreclosures there are up fivefold. Unemployment has climbed. Laguna Ridge – a big new master-planned development – is largely a ghost town of unsold homes and vacant lots.”
“And with the region’s unemployment rate rising, homeowners aren’t the only people struggling. ‘We’re doing our best to stay open,’ said Chris Correa, co-owner of a long-standing brewpub. ‘There used to be a housing boom, a lot of new people, a lot of new money moving in here. Now people’s houses are losing equity. People are incurring debt and they’re just not coming out to restaurants.’”
“The flood of Bay Area refugees to Elk Grove drove housing prices skyward and generated a mad rush to build homes, schools and shopping centers. The downturn calls into question just how strong the boom really was. They were wealthy on paper but chronically short of cash.”
“Preparing to expand, the Sacramento Natural Foods Co-op looked at demographic studies of Elk Grove and saw nothing but high incomes. But when the Co-op opened in the Elk Grove Marketplace on Bond Road, it found many residents weren’t so rich after all.”
“‘A lot of these 70,000 new residents down there were young families with mortgages up to their eyeballs,’ said general manager Paul Cultrera. ‘The disposable income wasn’t there. … It’s tied up in mortgages and new furniture.’”
“The slowdown is most obvious in the Laguna Ridge development, also known as Madeira. It was going to be Elk Grove’s hottest new community, with 8,000 homes by 2009. The downturn has made a joke of that timetable.”
“Much of the 1,900-acre site is a vast plain of unbuilt lots. Only 229 houses have been sold since the development opened 18 months ago, according to the Gregory Group.”
“Anna Starr, owner of the Yarn Shoppe on Laguna Boulevard, has watched three of the 11 tenants disappear from her shopping center over the past year. ‘Three vacancies in our little tiny shopping center – that hurts a little bit,’ Starr said.”
“Starr, who took out a second mortgage to buy inventory, is afraid of being overextended. ‘You’ve got your house tied to it, your livelihood,’ she said. ‘I’m curious to see how the summer’s going to play out for us if the economy continues to slump. I think my summer’s going to be hard.’”
The Record Searchlight. “Homes sales in Shasta County in 2007 reached a 10-year low while the median price fell 4.3 percent from 2006. DataQuick reported the 2,108 homes that sold in Shasta County last year were the fewest since 1997, when 2,078 escrows closed.”
“‘When you look at 1997 as the point … there were a lot fewer houses on the market then, so it’s really much more meaningful … it’s noteworthy,’ Redding real estate agent Glen Jones said of 2007’s numbers.”
“Doug Eaton of Guild Mortgage in Redding said he’s had his busiest week in about a year. But his clients are refinancing out of adjustable-rate mortgages. The buyers haven’t come out.”
“‘I think they are waiting for prices to drop further,’ Eaton said.”
The San Francisco Chronicle. “Across the country, task forces of prosecutors, FBI agents, securities investigators, class-action lawyers and others are mobilizing to figure out who broke the law during the high-flying days when lenders were handing out mortgage money like drunken sailors.”
“California, with its spiraling property values and history of loosey-goosey lending, is one of 10 ‘hot spots’ nationwide where mortgage fraud proliferates, the FBI said.”
“One Oakland woman, who asked not to be identified, explained how she exaggerated her income - with encouragement from her mortgage broker - when she refinanced her home.”
“‘He didn’t say anything illegal out loud,’ she said. ‘He didn’t say ‘lie,’ he just made a strong suggestion. He said, ‘If you made $60,000, we could get you into the lowest interest level of this loan; did you make that much?’ I said, ‘Um, yes, about that much.’”
“He went clickety clack on his computer and said, ‘Are you sure you don’t remember any more income, like alimony or consultancies, because if you made $80,000, we could get you into a better loan with a lower interest rate and no prepayment penalty.’ It was such a big differential that I felt like I had to lie, I’m lying already so what the heck. I said, ‘Come to think of it, you’re right, I did have another job that I forgot about.’”
“One Bay Area man who worked as an account executive at several subprime lenders said he witnessed mortgage brokers who blatantly falsified information on loan applications.”
“‘I had a broker open a drawer full of blank W-2s and pay stubs while he told me he could get me whatever I needed’ in terms of ‘proving’ borrower’s income, the man said.”
The North County Times. “Several banks issued statements this week saying they were temporarily suspending withdrawals from open home equity lines out of concern that borrowers could owe more than the house is worth…even on people who are current on their mortgage payments.”
“‘It’s an emotional hardship,’ said Patti Lien of Menifee. ‘We kept our credit good. We’ve done everything right, and this is what we get because Countrywide made all these crappy loans.’”
“Countrywide Financial announced Thursday that it has cut off 122,000 borrowers from pulling any more equity out of their homes. Wells Fargo, Washington Mutual and JPMorgan Chase released statements Friday saying they have also started halting equity lines because of tumbling home values.”
“‘It really wreaked havoc for me,’ said Dan Holbrook, a Fallbrook homeowner. At the end of the year, Holbrook paid off his equity line with a $50,000 payment. Four days later, Bank of America froze his equity line, he said.”
“‘I’m scrambling right now,’ he said. ‘It has created a tremendous amount of stress because that was money to live on for me.’”
“Holbrook, a real estate consultant, said most people view such loans as emergency-only money. That is how he viewed it until the housing market slowed, he said. ‘A lot of people figured these equity lines were safety nets,’ he said. ‘The problem is many of us are on a high-wire act right now. And you think the net is there, and you fall and it’s not.’”
“The banks’ reactions follow a 17-month drop in San Diego County home values, according to a Standard and Poor’s report. Riverside County has also seen falling home values, with some areas losing almost half their value, said Phillip A. Bellante, owner of a San Diego mortgage broker.”
“‘I can show you areas in Murrieta and Riverside that have gone down 40 percent,’ he said. ‘And is it going to go down more? Yeah, it is.’”
“In the midst of a severe countywide housing downturn, Carlsbad stands out as a city where many homes have retained their value and have actually appreciated.”
“But even with strong median prices, the coastal city has seen some sales at a loss of 15 percent or more in value over the last three years. ‘You’re getting some very localized markets within Carlsbad that are getting nailed and some others are doing fine,’ said Norm Miller, a real estate professor with the University of San Diego Burnham-Moores Center for Real Estate.”
“The median price for 92011 was $872,000 in 2007, practically identical to the 2006 median price. But of 71 homes sold in that ZIP code in 2007 that had previously sold in 2004 or later, 30 have lost value, according to data from the county’s MLS.”
“One buyer who is convinced of Carlsbad’s relative strength in the housing market is Sonjia Kurzepa, who plans to retire there when she moves from her current home in Denver. She recently purchased her soon-to-be primary residence in Aviara.”
“But she said she knows San Diego County is working through a housing depression and that some homes in the beach community will continue to lose its value, but not hers.”
“Kurzepa, a long-time real estate investor, owns homes in Nevada and Florida, two states that have joined California in leading the nation in home-price declines. She said none of her homes has lost value.”
The Union Tribune. “Seven affordably priced homes being built on Wisconsin Avenue are almost finished, but few qualified buyers have applied to buy one. Even though interest in the affordable homes is high, few people have submitted the necessary paperwork.”
“Eighteen applications are in and less than half are expected to qualify for the two-and three-bedroom townhomes, said Claire Carpenter, CEO of the community development corporation.”
“‘It’s a great opportunity for good people to find good-quality homes in a market that almost precludes this kind of opportunity,’ Carpenter said.”
“The townhomes are 1,150 square feet and 1,310 square feet. Each has 2-½ bathrooms and a one-vehicle carport. The purchase price is expected to be $389,000 to $419,000. Buyers must meet income restrictions set by the federal government.”
“David Cooksy, the city’s director of housing and redevelopment, said it’s a tough time to sell homes even if the price is subsidized. The slowdown in the housing market and economic uncertainty led to a drop in the expected sale price, which last year was $450,000.”
“The city was planning to choose buyers by lottery in March, but there may not be a lottery if more people don’t apply and qualify.”
The Orange County Register. “About 5,000 people, many of them looking for real estate bargains, filled a hall at the Anaheim Convention Center on Saturday for an auction of foreclosed homes.”
“Julie Finaldi of Corona and her husband picked up a two-bedroom, 900-square-foot house in Riverside with a winning bid of $150,000. Under the auction rules, a 5 percent ‘buyer’s premium’ was added to the bid, resulting in a sale price of $157,500.”
“Finaldi, a Realtor, figures the house needs about $20,000 to $30,000 worth of renovations, much of which her husband can do. They intend to rent the house out for $1,200 or $1,300 a month.”
“‘I’m so excited,’ she said. ‘We’ve been trying to get one for a while.’”
“Mark Vachani was bidding on a house in Irvine’s Northpark neighborhood. The three-bedroom home was recently listed by a broker at $959,900. Bidding opened Saturday at $449,000.”
“The auctioneer launched into a rapid-fire solicitation. Bids escalated quickly. Men in tuxedos raced through the crowd, screaming or waving brightly colored batons when they spotted a bidder.”
“As the price rose above $700,000, Vachani dropped out. The winning bid was $860,000.”
“Winning bidders were escorted to a curtained-off area to arrange financing with mortgage lenders and sign escrow paperwork. More than a few of them either backed out or failed to qualify for financing, so the homes went back for rebidding.”
“The Northpark house was auctioned again within about 20 minutes. This time it went for $820,000. The second winning bidder also failed to close the deal, so the house came up a third time.”
“‘I’ll go to 700, maybe 750 – that’s it,’ Vachani said. He went to $775,000. The winning bid was $810,000.”
“While bids came fast at the front of the hall, the back rows were filled with folks who were mostly just watching. Frank Gasparovic of Cypress was hoping for a house in Orange County or Corona for about $200,000.”
“‘I’m not really serious,’ said the school district maintenance worker.”
“Several banks issued statements this week saying they were temporarily suspending withdrawals from open home equity lines out of concern that borrowers could owe more than the house is worth…even on people who are current on their mortgage payments.”
Gulp…
Kool-aid drinkers & Heloc raisers…
Yeah — this should be a big leg down for consumer spending. House prices to follow.
Yeah, and short staffed lenders will likely cut consumers off en masse too. No case by case analysis here - no time.
Credit Crunch Time!!!
I resemble that remark!
Enforced responsibility, Soup Nazi style - “No more HELOC for you!”
I liked this part, Stucco.
‘A lot of people figured these equity lines were safety nets,’ he said. ‘The problem is many of us are on a high-wire act right now. And you think the net is there, and you fall and it’s not.’”
The HELOC is the safety net? This real estate consultant is about as bright as I would expect a real estate consultant to be. What a boob!
As a last resort, maybe, but how many out there need that safety net already, it is so early on in the game? What will they turn to in 2010, 2012 or whenever?
Tents!
Tents? You’re too optimistic, NYCity, as I would expect from you, given your incessantly cheery and charitable outlook. I, on the other hand, am often grouchy and spiteful. So I say…cardboard boxes! And not the nice thick cohesive ones from Sears appliances, either. I mean the flimsy easily buckled cardboard boxes that used to hold generic toilet paper for shipment to the discount grocery outlet, in grubby heaps, held together with soiled duct tape.
I saw that living in Tokyo in the 90s. *Every* public underground space (and there are a lot) was home to a box or two, or twenty.
The park near my house had about 30 box-homes set up. With a box home, you only need about $30/mo to survive.
My hubbie came home from work the other day after a double shift. He said the sidewalks in Manhattan are covered with cardboard boxes and TENTS.
He couldn’t remember, in all his years working in Manhattan, seeing so many homeless.
There’s a revolution brewing…
I live in NYC, the sidewalks are not covered with boxes and tents.
I see people sleeping on the subway steps and there’s the guy at Brooklyn Bridge that is there every morning. I don’t see the boxes and I walk around Midtown quite a bit. Are we talking Northern Manhattan?
maybe the boxes and tents only come out late at night and are packed back up early in the morning?
Recently several co workers in conversation mentioned
they had Helocs but hadn’t used them. They were keeping them as ’safety’ nets.
So, they won’t be able to utilize them at all? wow. soon
Yep, I can’t wait to reel in a “safety net” full of thrashing FBs, headed straight to the cannery called “foreclosure.”
My execucar driver on Friday night in Phoenix told me he was interested at one time in renting in the same apartment complex as mine. I asked him why he did not rent? He said he bought a house three years earlier. I may be mistaken but he said something to the effect he makes $17 per hour. No time to watch the super bowl, he said. Sounds like a Mortgage Slave to me.
Sammy Schadenfreude wrote:
“Yep, I can’t wait to reel in a “safety net” full of thrashing FBs, headed straight to the cannery called “foreclosure.”
That’s like poetry. I like it!
Credit card limits will be next to take the hit…as a number of you have been saying on this blog for years “cash will be king”.
” … cash will be king .”
You mean the despised worthless unbacked fiat paper that some members of this blog say will soon be burned for fuel to keep warm? That stuff?
Naw, everything will be okay after the Fed loads up the helicopters and B-52s and rains bundles of $100 bills on the population.
Not to worry, party on.
Granted, cash is becoming worth less, but it’s not going to become worthless. If it becomes worthless paper we won’t have to worry about housing…got plenty of ammo and canned goods?
Every day I read of billions of dollars disappearing into thin air. Billions of the $tuff. That’s going to make the remaining billions that much more valuable for those who have it or can get it.
Cash is king.
Without HELOCs, cash out refi, or credit cards, the sheeple will panic. It must be something my wife can sense. We now have quite a few cases of canned goods in the closet now…
Got popcorn?
Neil
Aw Neil, c’mon, you’re right here in my neck of the woods. Everyone wants to live here, we’ll be fine, mix up another Cadillac Marguerita for the Mrs. and relax.
You did stock up on Tequila when buying those canned goods, right?
I think cutting off the HELOC for many people will only help them justify the jingle mail, maxed out Credit Cards and giving the banks what they deserve by filing bankruptcy.
The next batch of foreclosures just got pushed to the cliff’s edge, and this batch will make room for the next batch. Got CASH?
That’s a good point - all the people with multiple mortgages feeding the alligators with their HELOCs are going to be forced to get rid of the house now - they can’t hold on for another year hoping for a recovery.
The banks are doing the FBs a favor in the process of protecting their own a$$es. Without HELOC money available, the FBs cannot dig themselves further into their debt holes.
Trouble is, I read that Countrywide only cut off about 120,000 FBs. They need to cut off ten times that number - and they probably will, given some time.
Yes, you’re right. After some of them swallow that huge lacka-HElOC money lump in their throat, they might just decide to get their acts together and work on getting their financial house in order.
Judicious wrote:
“Credit card limits will be next to take the hit…as a number of you have been saying on this blog for years “cash will be king”.”
And credit card issuers may raise minimum allowable payments. And then wait for card holders to default on something… either one of their credit cards, mortgage payments, or utility bills and them punish the creditee with some brutal raises in the percentage rate on the outstanding balance… perhaps 15-25 percent for example, to cover what they refer to as “added risk”, and take a bigger junk of financial flesh from these debtors?
Lenders becoming “a little smarter” now? Perhaps greed is not such a big factor now.
Greed always turns into $phincter-tightening fear once the worm turns.
A lot of these greedheads and specuvestors are going to end up with sphincters the size of the Lincoln Tunnel, only they’ll see more traffic and can’t charge a toll.
One thing I like about you, Sammy, is your delicate and elagic turn of phrase. It’s like poetry, almost.
Ooops, I meant ‘elegiac’. Too much SuperBowl watching beer. Now, who’s playing again? Those one guys, right?
Sammy,
I type in awe. That is a comment to save an reuse through this downturn.
I’m bored watching the superbowl. Time to actually start drinking in earnest.
Oh, I know enough foreclosures around here it could get interesting. I strongly believe that the 1992 “Rhodney King” economic related riots will be nothing compared to the first big riot of this downturn. Will it happen in 2008 or 2009?
Yes, said riot happening is part of my buying plan. I don’t want it to happen, but its becoming too probable. This time it will likely be Mexicans versus African Americans. But it will take more economic pain and the heat of summer to make it happen. So 2008? or 2009?
Got popcorn?
Neil
goatse!!!
Either you know what I’m talkin’ about or you don’t.
oh please. wake me up when someone outdoes the guy who posted about an FB wishing he were in prison with his face in the toilet with a poster of Cindi Crawford taped to his back. no, it wasn’t me.
About time! This will drive house prices down faster once herd mentality realizes a house is a place to live in, nothing more!
SAFETY NET? Needed to pay the bills? I am gonna DIE without my HELOC?
YOU STUPID FOOLS! Save like me. If I became unemployed, it would be TEN YEARS of no income before I would lose the home
What an ol’-fashioned response!
(And I like the anger.)
Heloc is paved with good intentions…
Let’s see how much Bernanke really understood from his fascination with the Great Depression as people start saving - maybe even hoarding cash, and HELOCs/credit cards get shutdown.
“…maybe even hoarding cash…”
My impression is that he believes it is always possible to print more and drop it out of helicopters if necessary to provide stimulus.
And it’s always possible to convert cold hard cash to tangibles. That’s why the 0% limit is the hard edge on interest rates, fiat or no fiat.
What is more likely is “quantitative easing”, printing cash to lower the yield on the long end of the curve. However, that does nothing to help the FB’s. They couldn’t pay the interest at 0% anyway.
Its easier and less confusing if the feds drop bombs from the aircraft instead of cash. Eventually it will have a similar effect.
Yes, yes, yes, yes, yes, yes, yessssss …..
“Preparing to expand, the Sacramento Natural Foods Co-op looked at demographic studies of Elk Grove and saw nothing but high incomes. But when the Co-op opened in the Elk Grove Marketplace on Bond Road, it found many residents weren’t so rich after all.”
Suzanne strikes again!
There’s big money in helping companies locate their stores. I had dealings with one such firm here in Chicago. From what I observed from their methodology - they were slaves to census data. A lot of places just crunch the census numbers and resell that data, or they simply follow other store chains that do their own research.
More proof that we’re nothing but a nation of low class, cash strapped, indebted phony a$$ posers.
Hey, I might be low class, but I’m not strapped for cash, indebted, nor a phony-a$$ poser.
I shopped at that store quite a few times when I worked in the area, and finding myself down that way again a few weeks ago I drove on over and was flabbergasted to discover they had closed shop. THAT was quick.
Why do people who hate to pay a 6% commission to a real estate company just roll over and happily fork over 10% or more to an auctioneer? “Auction rules require a 5% buyer’s premium.” My butt. The auctioneer wants to make the price look lower than it is by charging 5% to the buyer and 5% to the seller, so the buyer is paying 10% - the amount paid that the seller doesn’t get.
The buyers aren’t thinking about it as much as you. They’re only thinking about what a great deal they’re getting.
Will that capacity for self-delusion be enough to support prices for a while, thus dragging out this process? How long will it take for the successful bidders to figure out what happened to them?
I do not understand why anyone would go to an auction to buy anything - an auction is pretty much a means of manipulating the sheep, although I suppose it might represent a price discovery mechanism for sellers who need to price a lot of inventory for which there is no normal market.
Sold to the sheep standing up @ 860k, no make that $820k, no make that $810k…
While Sammy the Vulture peers down from his roost, sizing up the latest carrion-to-be who will be lucky to get half what they paid once the Great 2009 Firesale rolls around.
Auctions are like credit cards and buffets — some people win, most others subsidize the winners. If you keep your head in a “fair” auction, you can actually pick up some bargains. At least that’s been my experience with antiques and collectibles.
‘If you keep your head in a “fair” auction, you can actually pick up some bargains. At least that’s been my experience with antiques and collectibles.’
Mine, too. But I look the item over carefully BEFORE all the shouting and attempts at outdoing another bidder begin, and make a firm decision about the highest bid I will offer. And that’s it. It is just too easy to get caught up in the bidding frenzy, especially because I enjoy getting caught up in frenzies. Frenzies are fun, and I’m all about fun. But overpaying is NOT fun, and that’s that.
If I win the item, that’s great, and if the price goes past what I am willing to pay, I don’t mind, because it was too much.
I’ve been to auctions that were a complete waste of time and i’ve been to ones where I bought 1 oz Krugerrands in quantity (hundreds) for $100 back of the spot price.
You just never know…
Lad, that’s a little difficult to take. Why would someone sell Krugerrands for $100 off spot at auction, when they could take them to a coin shop and get full value less a 2% spread? Kruggerrands are about as liquid as physical gold gets, and it’s not like there is no market…
That’s like selling stacks of hundreds at a discount - the only time you would do that is if you were laundering….
Oops… I think I just answered my own question.
It was back in the days of anti-apartheid days in the 1980’s, and I bought them at a U.S. Customs auction, the only proviso being that I had to export them, and couldn’t take delivery in the USA.
The public was scared off, because of the export clause.
Sometimes hurdles can be your friend…
Think people think….“The Northpark house was auctioned again within about 20 minutes. This time it went for $820,000. The second winning bidder also failed to close the deal, so the house came up a third time.”
Now, from the bidding disclosure statement:
“On page 122 paragraph 3, I quote verbatim: ‘Except where prohibited by law, the Auctioneer may open bidding on any property by placing a bid on behalf of the Seller and may further bid on behalf of the Seller, up to the amount of the reserve price, by placing successive or consecutive bids for a Property, or by placing bids in response to other bidders.’”
All bidders are future FB’s in this game…
“Winning bidders were escorted to a curtained-off area to arrange financing with mortgage lenders and sign escrow paperwork. More than a few of them either ***backed out*** or failed to qualify for financing, so the homes went back for rebidding.”
Can you say shill? Fraud? Set up for the saps?
That’s why I won’t be buying a house by auction, it’s rubbish. Ill just lowball some desperate owner or buy from the bank.
That’s why I won’t be buying a house by auction, it’s rubbish. Ill just lowball some desperate owner or buy from the bank.
Exactly. And this auction was a reserve auction. We aren’t even approaching bottom until the auctions become no reserve. I bought my shack in Newport Beach in 1994 at 30 cents on the previous FB’s mortgage direct from the bank’s REO dept, and plan to do so again during years 2012-2016. This is a shipwreck in slow motion. Difficult as it is, we must continue to be patient.
Got diversified assets?
Bullseye cris!
Good catch.
“Unlike Holbrook, Lien said she did not rely on her home equity line as a source for daily expenses. But she said the loss of her equity line was nonetheless an upsetting shock because she thought it could cover unexpected medical expenses or other emergencies.”
“‘It’s an emotional hardship,’ said Patti Lien of Menifee. ‘We kept our credit good. We’ve done everything right, and this is what we get because Countrywide made all these crappy loans.’”
“It’s a hardship. It’s money that we thought was there and it’s not,” she said. “We didn’t go on a cruise, we didn’t buy new cars but we’re still suffering because of others.”
I would guess that as your house doesn’t have enough equity in it to cover a HELOC, one of those “crappy loans” was yours.
You’re suffering because you expect something for nothing. Instead of saving money for “emergencies” you expected your house to support your lifestyle. Your “emotional hardship” is caused by the fact that you now realize just how financially strapped and screwed you are.
Get a second job and start saving.
“We’ve done everything right…”
evidently you haven’t.
Why not sell your house and rent or buy a smaller house and pocket the cash to put into savings? Problem solved!
Did you see where in the U.K. that a bank , that was bought by Citi is cancelling peoples credit cards. The ones that they are cancelling are those whose balances are paid off each month, with no interest. Get ready. The banks are not making enough off the other sheeple to carry.
The banks make a lot from merchant fees as well, so I’d be surprised if Citi cuts the legs out from someone who spends a lot on their cards even if they do pay their balances off every month.
The banks make their money whether you pay your balance or not because the merchant is charged 1.5-3% on each credit card transaction. Interest is just icing on the cake.
“John Arvanitis, a Citrus Heights mortgage broker, said interest-rate buydowns are preferable to continued price reductions, which drive down market values for everyone in the community. ‘You don’t want to perpetuate (or) assist in a market crash,’ said Arvanitis.”
Real estate remains the most dishonest industry on the planet. This is why I won’t touch anything in housing for a long time to come. And the sheep just don’t get it so they keep getting sheared.
The good thing about sheep, is you can fleece them over and over again…
But, it looks like they took this last batch to the rendering plant, by mistake.
Instead of shearing them they skinned them. D’ohhh.
More than a few of them apparently wandered a little too close to a lonely sheepherder.
“It’s not what it looked like, your Honor. I was just helping that sheep over the fence.”
Perhaps this time they take the skin and some meat too?
“If God did not want them sheared he would not have made them sheep.”
- Eli Walich, “The Magnificient Seven”
Medical industry is a close second in the race for most dishonest industries.
Hey Abattoir!
“‘The builders are clearing brush,’ said John Schleimer of Roseville-based consultant Market Perspectives”
I clear the brush about every 6 weeks. When I’m done it looks like someone skinned a cat in my shower.
City Boy, I agree, real estate is totally dishonest.
The auction signs have gone up in San Jose. The house I’ve been watching empty for months now even with a Realtor sign on it didn’t sell. As of last week it had huge auction signs on it. Yesterday it was open for inspection and lots of hopeful knife catchers were touring it.
People will overpay for anything as long as they think they are getting a deal.
Exactly, NYCityBoy. I think I read or heard somewhere that this has been part of Wal-Mart’s success. A perception of low prices sometimes trumps the reality that some items might actually be higher in some cases than they are at other stores.
WalMart trumps Costco prices. Those are a real joke, but everyone thinks they’re getting such a deal, because they haven’t compared prices on their impulse buys at Costco.
Impulse buy prices, sure. But you can’t beat Costco for milk, bread, meat. I wouldn’t buy fresh veggies there unless you can eat a lot of them in a short time. A whole lamb roast is so much less expensive than any lamb you can buy elsewhere. You can get a dozen croissants for less than the price you will pay at most stores for 4 to 6 croissants.
Butter, cream, yogurt — much much less.
Costco’s CEO earns less of a multiple of the average worker’s salary than do most, and the average worker has better pay and benefits than any Wal-mart worker could ever hope to get.
Costco has the best prices for the quality of goods anywhere. Most everything sold at Wal-Mart is pure junk. Compared patio umbrella’s $5 cheaper at Wal-Mart, not even half the quality of the Costco item. You have to look beyond price to overall value. When comparing quality and value, no one beats Costco. Plus, they treat their employees much better than Wal-Mart. Costco is a benefit to a community. Wal-Mart sucks a community dry by teaching their miserably paid employees how to suck down state and federal benefits. Wal-Mart is disgusting.
The only difference I can see between the 2 corpses, is one greets you on the way in, and one greets you on the way out.
Wow it’s like a Costco infomercial all of a sudden…
They still are in your area (Manhattan), aren’t they?
I’ve written this many times but living in New York City means you are not living in the real world. I don’t know anybody that has bought anything in Manhattan in years. I’m sure people are buying but I don’t know any of them. You don’t see for sale signs in front yards. I really don’t have much of a clue what the real estate market is like here except for all of these half-finished projects around me. Many are just awful. That is what is speaking loudest to me. We are surrounded by silly developments such as:
be@william (Corcoran Group)
45 John Street
59 John Street
DistrictNY
William Beaver House
Broad Street and Wall Street condos
None of it makes any sense to me. I don’t know how well any of it is selling but I still don’t see many lights at night at 59 John Street.
Thanks for the insight. I was surprised to hear “The Donald” say that he expects a downturn in Manhattan during his interview with Neil Cavuto a few weeks back. The better areas of L.A. (where I currently reside) and Manhattan (where my wife would like us to move to) should be interesting markets over the next couple of years.
Manhattan will be very interesting as the I-banks cut back their CDO employment. I also expect them to ’sell’ jobs to the sovereign wealth funds or move ‘back office’ jobs to cut costs.
LA? Oh… if the writers strike could go on past the Oscars, it will finally trip the whole housing market there.
Got popcorn?
Neil
One of my clients is now in escrow on an apartment in Manhattan for 1.8 million. When I told him that real estate in Manhattan was “softening,” he just shrugged and said he made 1.8 mil last week in the stock market. This is the same guy that bought a home in Newport Beach, CA because it came with a boat slip large enough for his yacht.
I did tour a house that was on auction for $350k “buy it now” or submit your highest bid. The seller has the right to reject all bids and not sell. Basically a reserve auction. My dad said that house wouldn’t be worth even the $250k I thought it might get. He paid $440k for it. Poor FB
“Kurzepa, a long-time real estate investor, owns homes in Nevada and Florida, two states that have joined California in leading the nation in home-price declines. She said none of her homes has lost value.”
Delusion runs deep with this one.
It seems the California debacle has happened so fast. It seems as recently as early fall they still hadn’t turned. Now they’ve been gutted like a fish.
I still want the delusional LA_investor_gorilla to come back here and tell us how sacred West L.A. is. I had told her it was the same garbage I heard right here in my own neck of the woods. Feel free to blast this one but I think NYC has a better chance of not getting crushed than L.A. And I think NYC will still take a few good shots to the ribs. I’ve been consistent in that belief.
West LA got slaughtered brutally in the early-mid 1990s and will do so again over the next few years. lainvestortroll must have still been living in Kansas in the 1990s.
How much slaughter did West L.A. take in the early ’90s? 30%? 50? or?
I believe her nose was getting longer and longer when she said “none of her homes lost value.”
I doubt she’s L.A.ughing much these days…
Hi guys, I’m baaack. House three doors down from my rental in N. Hollywood is currently bank owned. Yay. Went in today, the agent was standing around, really lonely, not a visitor in sight. Kinda felt sorry for her, until she started trying to sell me on what a bargain the 1400SF house was for the list price, close to 700K. As for my prime target area, Santa Monica, still no deals. As I’ve said before, I call it like I see it. Cheers.
Santa Monica? There was nothing like all of those bums on the Esplanade. They looked so content on every bench. A truly magical shopping experience. I just am not an L.A. person. Good luck. Be careful investorgirl. If you’re sitting at the table and you don’t see a pigeon, then………….
So, you took a break from the work as a porn “star” to grace us with your presence.
Thanks.
Nothing good in the Southbay yet. Still quiet.
You guys are being too tough on lainvestorgirl. She has never cheerleaded (cheerled?)real estate, she just laments how slow the west side of LA is to fall. I think she’ll be happy when it finally does.
“Santa Monica? There was nothing like all of those bums on the Esplanade. They looked so content on every bench. A truly magical shopping experience. I just am not an L.A. person. Good luck. Be careful investorgirl. If you’re sitting at the table and you don’t see a pigeon, then…………. ”
Bums in SM better behaved and a bit more upscale than the dwtn LA bums. At least in SM they don’t urinate and defecate on the sidewalks.
BTW I used to do daily stops along bluff park and the bums might congregate in clusters or lay out on the lawn but they actually do not bother the joggers and Walkers . Not shilling for SM but homeless problem a bit overstated, especially in comparison with the decayed state of rest of LA city/county. If U get around LA much U will see how crapped out much of the county is , with 60% of LA city offically a third world ghetto/ decayed slumzone swarmed over with gangs and graffiti , compared to which SM would appear to be nirvana, which it is not because SM is neither nirvana nor Riviera hi-end. It is a somewhat tidy yuppish middle-upper middle class community with a few snobbish super rich north of montana ave, and a lot of overpriced ordinary stucco claps south of 10 fwy which will drop 30-40% next 2-3 yrs .
“‘It really wreaked havoc for me,’ said Dan Holbrook, a Fallbrook homeowner. At the end of the year, Holbrook paid off his equity line with a $50,000 payment. Four days later, Bank of America froze his equity line, he said.
“‘I’m scrambling right now,’ he said. ‘It has created a tremendous amount of stress because that was money to live on for me.’
“Holbrook, a real estate consultant, said most people view such loans as emergency-only money. That is how he viewed it until the housing market slowed, he said. ‘A lot of people figured these equity lines were safety nets,’ he said. ‘The problem is many of us are on a high-wire act right now. And you think the net is there, and you fall and it’s not.’”
No comment (because I’m speechless).
He’s a “Real Estate Consultant”. Funny… he doesn’t seem to have much of an internet presence.
No comment (because I’m speechless).
No comment from me either (because I’m laughing my bum off).
Mark Twain made an astute observation concerning bankers and umbrellas and rain.
Again, I am glad HELOC is a thing of the past. See my reply above.
I’m with Olympiagal above… LMAO that the sheeple never hear about Mark Twain age old sage advice about bankers.
Got popcorn?
Neil
Neil, maybe we will go back to the old days where the only people that could borrow money were the people that didn’t need it. Those days aren’t so long ago. The people that really need loans are the people that one should not lend to. That’s the reality of banking.
Why would they freeze his credit line AFTER he paid it off, and moreover, why would he care?
“John Arvanitis, a Citrus Heights mortgage broker, said interest-rate buydowns are preferable to continued price reductions, which drive down market values for everyone in the community.”
With this scheme the FB is instantly under water. It’s just creative financing to get the payment down, however they end up with a higher principal balance than if the price were dropped to get the payment down. This is a sucker’s deal.
And they are stuck with that loan, and who knows what surprises lurk in those terms. I doubt many more FBs read their docs today than a year ago - just a hunch.
Yep - no refinancing for you! If you have a high interest rate mortgage, you may be able to refinance out of it eventually, but you can’t do anything about the price you paid for the house.
Starting underwater - and aslo paying higher propery taxes than they should.
Can you really make 250k per yr working for home depot in Roseville Ca.?
Bud told me thats what he was making in the boom times over the last few years. Must have been something to do with all of that building going on out that way.
“But she said she knows San Diego County is working through a housing depression and that some homes in the beach community will continue to lose its value, but not hers.”
“Kurzepa, a long-time real estate investor, owns homes in Nevada and Florida, two states that have joined California in leading the nation in home-price declines. She said none of her homes has lost value.”
Yeah–homes don’t lose value unless you sell. WTF? This stuff is comical.
Oh… this is probably the best Superbowl Sunday I’ve had in a while.
See, my husband and I went for a little jaunt in South O.C., namely Mission Viejo.
He wants to buy within the year, I’m patiently asking him to wait until at LEAST the end of ‘09 (and silently vowing not to sign ANY mortgage papers until then if reason fails to work). To that end, we looked at some places today.
One was nice, a 5-bedroom at $550k, in a nice neighborhood, but nothing to write home about.
The other two weren’t worth mentioning.
But then, on a whim, we drove past my grandparents old house (which they bought for $27,000 in 1972, and, at last check, was zillowing for $800k — have I mentioned that we should stop accusing people of smoking crack and start accusing them, in the vernacular, of being “on Zillow” — but, I digress) and at the top of the hill in that very solid neighborhood was an enormous two-story 5 bedroom home, bank-owned.
I jumped out of the car to grab the flyer, expecting it to top the two comma mark ($1,000,000).
Instead?
$640,000.
When I showed it to my husband, his face blanched.
Forgive the football analogy on this most-holiest day, but…
Guys, forget all the crowd noise. The momentum has shifted. We are in the red zone. And we are going to score. Over and over and over and over again.
Tell your husband to wait another 2 years, houses will be a few hundred thousand cheaper!
Reading about all the big drops in SoCal makes me both envious and happy. The SF peninsula is still annoyingly, stubbornly flat at ridiculous, absurd prices, but the same was true of OC until very recently. Now look at it go! I am pretty sure that this year, the Bay Area will FINALLY be following suit.
“Stimulus” plan’s massive increase in the GSEs conforming loan limit is a final “Hail Mary”
Thanks hllnwlz for the update. My wife and I are patiently watching Dana Point. My wife went to a bank repo in our neighborhood, a 4,3 townhome, 1850 sq.ft. The bank wants something like 550k. They’re nuts. The place was trashed. At the peak, that floor plan was going for roughly 800k according to zillow. That’s probably a bit high, but then again things were insane during the runup. Anyway, my wife told the realtor that we *might* be back when the bank is willing to take 400k. The realtor just turned her back. Whatever lady.
“The place was trashed. At the peak, that floor plan was going for roughly 800k according to zillow.”
FYI zillow zestimates are way out of whack. I cannot even figure out why they continue to put wildly inflated values on homes at estimated $100- $300,000 over what they should be selling for in a depressed market. This is in the long beach area of LA county. It is as if they are trying to keep the prices of existing owner occupied homes artificially inflated even as foreclosures are flooding the market and nothing is selling. Maybe too few sales to make comps but i do not go by zillow zestimates. In truth they might be a REIC-controlled shill company.
http://www.redfin.com/stingray/do/printable-listing?listing-id=1269103
Listing Price History
Date Price
Nov 05, 2007 $1,199,000
Dec 13, 2007 $1,149,000
Dec 13, 2007 $1,199,000
Dec 18, 2007 $995,000
Jan 26, 2008 $975,000
The above is the listing price history of a home in Laguna Niguel that had an Open House yesterday. The home was purchased on Aug 10, 2005 for $1,139,000. So far it is down about 15% from the peak.
The home was empty and apparenty sold by a relocation company. Only property taxes run at $1000 per month, let alone the mortgage and insurance.
The home is actually nice, 3000+ sft in 10,000+sft lot, much better than the 3B/2BA 1500sft on 5000sft that are still listed for $600,000.
What is also interesting is that the home was purchase in 2001 for $572,500. If we use the 2001 price with a 4% yearly appreciation, the fair value should be $753,000. This is about 33% below the peak. So I guess another 18% since 15% is in the bag to paraphrase another brillinat OC economist, Garry Watts!
“If we use the 2001 price with a 4% yearly appreciation”
I understand the premise and am in no way being critical of this indidual post, my comments are in reference to constant use of inflation #’s. Useing general inflation numbers, correct or not, do not show the true picture. The inflation metric that should be used is “Wage Inflation-minus-Food and Energy inflation and all components affected by it. When this is appled to Bubble areas, the current Wage Deflation from lost jobs or reduced REIC related incomes coupled with true cost of living increases does not have us as far down as most inflation adjusted arguments represent. Sheople are still paying way to much of their monthly income for houseing.
All this really means is we have a looooong way to go, 2011 @the earliest for any sort of bottom, the pesemist in me thinks 2015…UGH.
“What is also interesting is that the home was purchase in 2001 for $572,500. If we use the 2001 price with a 4% yearly appreciation, the fair value should be $753,000. This is about 33% below the peak. So I guess another 18% since 15% is in the bag to paraphrase another brillinat OC economist, Garry Watts!”
Try 1990 price and adjust for wages from there on. 2001 prices is way too high, far out of reach vs. local wages.
CA prices are waaaay out of wack! Discounted to 975K? Using a conventional 30 year loan, 20% down (got a spare 195K floating around?) Mortgage for 780k / 3 = Income for THE NEXT THIRTY YEARS of 260K is the slightly below the 1% of the wage earners in the country (from the IRS income tables)
Top 1%: 295,495
Top 5% 130,080
Top 10% 94,891
Top 25% 57,343
Top 50% 29,019
Nice place BUT 975K? Again California prices have a long, long way to fall. The medium income in CA was ~50K last time I looked, good luck selling.
I humbly agree with OC and Bye Fl
If you want to find the market put in a bid of $753,000. You’ll probably be wearing the house.
Meaning only 10% of homes in the country should cost more than 300K.
In the Great Mogambo tradition …the New mantra will be:
200 THOUSAND DOLLARS IS A LOT OF FREAKIN MONEY FOR A HOUSE!
Another disgusting Redfin listing:
http://www.redfin.com/stingray/do/printable-listing?listing-id=1301910
This dinky thing of 728 sq feet sold for $575k at what was the presumptive peak of the bubble, June 2005, and the greedy pigs listed it for $799k in November. They apparently got no takers, so they relisted in January and RAISED the price to $849k. This is only a few blocks from my new apartment (rental, of course) - I’ve half a mind to walk over there and take a dump on the porch.
Beds: 2
Baths: 1
Sq. Ft.: 728
$/Sq. Ft.: $1,166
Lot Size: 3,049 Sq. Ft.
Age (Years): 83
Year Built: 1925
Type: Detached Single Family
Style: Cottage/Bungalow
Stories: 1 Story
View(s): Neighborhood
Neighborhood: Downtown
County: Santa Clara
MLS#: 763732
Status: Active
On Redfin: 76 days
Just insane! Maybe they finished the basement or maybe it’s one of those rare basement homes in CA? Doesn’t matter as this price is rubbish! What’s your rent by the way? Just keep renting then relocate.
I’m paying just over $2k/month for a 3-bedroom place, about 6 blocks from Castro Street. I have no intention whatsoever to buy anything unless/until prices come down at least 50%. And if that doesn’t happen then yes, I’ll absolutely remain a renter until I’m ready to leave the Bay Area. If you buy in the Bay Area at these prices, you’re throwing away money.
“While bids came fast at the front of the hall, the back rows were filled with folks who were mostly just watching. Frank Gasparovic of Cypress was hoping for a house in Orange County or Corona for about $200,000.”
If we have returned to traditional lending standards, this guy would have to have a 40K down payment and assuming good credit and 5% fixed, he only needs to have an income of 33K. That’s a lot of house in other parts of the country, but not even on the radar in California.
Good luck finding a bank to lend you 6x income. Maybe if he had $100k down, it would work.
You’d be surprised…even in today’s financial climate, some (apparently smaller community) banks continue to make subprime loans and refinance FBs. I wouldn’t have believed it if I hadn’t seen it with my own eyes just last week.
The crisis won’t truly end until the *banks* wake up and that won’t happen until the Fed and Congress stop talking or giving bailouts. FBs will always exist.
I hope any dumb bank still alive dies. Survival of the fittest. The bottom will be reached when lending standards are very tight and houses in line with incomes
What is going to happen when these small banks can’t unload these loans as securities on to another company? If they keep them I guess they have to wait for the defaults to start wizing up or will they get a clue when the can’t sell them?
Yea banks still are making bad loans to poeple with decent credit, multiple poeple I know have been getting financing with 5 percent or less down, and been aproved on loan amounts greater then what there income should allow…It’s nuts, one friend has no down payment and got pre-aproved for a 230K loan, I told him to avoid mortgage brokers at all cost and just go straight to the bank and get a 30yr fixed loan, but I have a feeling with little to know down payment he is going to have to try to go through a mortgage broker…I really don’t understand why mortgage brokers exist other then to get loans for poeple who should’nt get loans to begin with, and in order to do that that have to commit fraud in one way or another……If you need a mortgage juts go online and check multiple banks rates on a 30 year fixed loan, and get it from the bank with the lowest rate…
The SF Chronicle’s big article on mortgage fraud was a shocker. Of course, they’re still calling it a Subprime problem. Apparently no one can (or wants to) imagine all that fraud spilling up the food chain to Alt A and Prime. But, it’s a start.
“The purchase price is expected to be $389,000 to $419,000. Buyers must meet income restrictions set by the federal government. ”
“Two homes will be set aside for very low-income buyers, such as a family of four with an annual income between $24,000 and $38,000. The remaining five homes will be available to low-and moderate-income buyers, for example, a family of four earning between $30,000 to $90,000 annually.”
How is anyone with these incomes going to be able to get financing for these homes given the current lending standards? Since when is 6x median income “affordable”? Those prices look like peak bubble prices for that area.
We also had “low income” homes here in south FL. To date, maybe 50 have been built. Gee I wonder why? The low income houses were supposed to cost between $164k and $299k. Guess none of those $30k earners could afford any. Also prices have been going down nicely to the point you can get a nice house for $250k in a regular neighboorhood so why pay that in a shobby “low income” neighboorhood that is a future slum in the making?
$30K - $90K income…
Gee, that’s quite some range and by the way at 3x income, the 90K qualifies for 270K not 390K and a family of four earning that much would want a 3Br house on a quarter acre minimum not some pint sized townhouse.
What business does a $24k to $38k have buying a house in the first place?
I wonder how many huge corporations invested in CDO’s like this one did.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/03/BUQIUQIB6.DTL&feed=rss.business
“I wonder how many huge corporations invested in CDO’s like this one did.”
When are the 401k pension plans are going to reveal their hits?
“The slowdown is most obvious in the Laguna Ridge development, also known as Madeira. It was going to be Elk Grove’s hottest new community, with 8,000 homes by 2009. The downturn has made a joke of that timetable.”
Oddly enough, there’s a subdivision over on Cooper Point, right here in Thurston co WA, also called ‘Madeira’. It must be a popular name for craptastic bloated development chancres. And, not very oddly, it too is full of ‘for sale’ signs lately.
See, they should have called it ‘Windy Pine Ridge’ or ‘Apple Tree Farms’ or ‘Lilac Blossom Cove’, especially if there are absolutely no pines, ridges, apple trees, lilacs, farms, or coves in the vicinity.
What’s even more amusing is that they had to move several mid-sized oak trees to clear out that huge area. It’s really something to see a tree in a custom pot that’s abut ten feet square.
Oh, and I know somebody who has been fighting with these developers over their use of eminent domain and his land. They want to pay him for only the undeveloped side of the land to put the road in— but that would literally have his front door opening into traffic, so he wants them to pay for the whole parcel, three acres plus house. He has, after all, been living in the house for thirty years, it’s only reasonable to pay him an amount that would enable him to get a new house (instead of the $300K for taking everything but the house, and making the house unlivable.)
At the moment, they’ve only built half the road and are running both lanes of traffic down that side while negotiations proceed. He may end up getting only $300K in the end, but if so, by that point it will purchase a comparable house and lot!
“I hope we shall crush in its birth the aristocracy of our moneyed
corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.”
Thomas Jefferson
http://adage.com/article?article_id=123374&search_phrase=housing+crisis
What Housing Crisis? front page of Advertising Age 1/28/08
And if you like above you will love this one from same mag.
http://adage.com/garfield/article?article_id=123355&search_phrase=garfield
I like this quote from the 1st link:
“I don’t think, in general, advising people today to buy homes for financial reasons is good advice. There’s very good reason to believe the price of residential housing in most communities in this country will be lower a year from now than it is today,”
snicker. When the mob turns, it turns ugly fast. Bwaaa haaa haa!
And the comeback in the comments was priceless:
Bob, you sure seem to have it in for realtors. FYI, I am working with one to sell a condo now in CT
snicker. People are trying to stop the truth from coming out. Now the bears finally are getting momentum. That momentum will force the market to undershoot. When is the bottom? Not for a long time.
Got popcorn?
Neil
“loosey-goosey lending”
L.G.L.
I wrote:
It’s funny that “lower end” is now $100k to $200k. I would need $40k to $75k annual salary and 20% down to afford those homes. What is the median per person salary in those locations? Even if it’s $40k, this barely gets you into a $100k house and you need $20k down at that. I do not consider those prices reasonable if they were much cheaper before the bubble. My dad bought an upper middle class house(3777 living sf) in West Palm Beach on an acreage lot(with pool and tennis court) for $225k back in 1995. He sold his middle class 5/3 2300 sf house for $105k.
Wages in 1995 were almost the same as wages today and the cost of living was much lower due to cheaper gas and food. Nowdays essentals take a bigger chunk out of wages, leaving less available for houses. I honestly think a $100k house today isn’t any easier to afford than a $100k house before the bubble.
I also want to thank you Jetson for your replies. So it’s all those new jobs that’s making house prices in the southeast permanently higher. You are saying whatever houses cost won’t drop much, if at all? Guess ill be staying in the rust belt forever as I can neither afford a $150k house nor do I want to pay that when it’s so much cheaper in the rust belt and let those people move out, I don’t like overcrowded towns, too much crime and traffic.
I recieved a reply:
Bye FL, the SE is cheaper than many other places especially in housing but is (relatively) not a cheap place to live. You still must have an income in order to exist. You don’t get a 50% decrease in car prices because you live in Tn, NC, Al, etc. Gas is essentially the same everywhere. Food might be somewhat cheaper at the local farmer markets in the summer but most grocery store chains still cost just like everywhere else. The same is true for utilities.
Housing prices have gone up in the SE, some increases due to inflation and some because of people moving to the area (like from Fl) and paying more (ie, they got took because of comparing local prices to the more expensive areas they came from). I do think there will be some percentage drops but not like Fl or Cal or ???
Quite frankly, $150k isn’t a lot to spend on a good house today in a nice part of any major SE metro area. Not even in 2001. You are dreaming if you think you’ll be able to find something at $40k-$50k you’d want to live in (unless in a ghetto area - they are alive and well in the large SE cities).
Out of curiosity, what do you think the median family income is in the SE metro areas anyway? I think you are looking for the unattainable.
I am replying to him:
You need an income anywhere, but the median income doesn’t get you much house in most towns in the southeast. I know most things cost the same, but your house is the single biggest expense. A $300k house can cost you $30k a year due to mortgage, taxes, insurance, repairs, etc. Elsewhere if you can get a such house for $100k, you just reduced your annual expenses by $20k!
$150k is alot considering you could have gotten a 1500 square foot house in southeast Florida for around $100k before the bubble. You can now get the same house for $150k in parts of north Florida and southwest Florida today and prices are still dropping fast. Any location that does not return to pre bubble prices is truly different then. Gainesville used to have 2/1 800sf shacks for $25k and 3/2 1200sf safe middle class houses for $50k back in 1998. Median salaries in that location is around $27k per person. That won’t even touch that $25k shack which can’t yet be had for much below $100k. Youd be looking at a mobile home or a 1/1 condo. Before the bubble, median salary was not much lower, perhaps $22k per person, yet this was enough for that safe $50k 1200sf middle class house. Oh and your property taxes would be only $500 a year.
Even in Miami before the bubble, long ago median wages were $15k a year and you could get a nice condo for $30k and pay only $100 annual property taxes. Median wages of $40k won’t touch a $200k condo who’s annual taxes are $3500 a year! Surely prices must return to fundamentals or people will be forced to live in tiny, cramped homes or relocate.
Median per person wages are between $30k and $42k in the southeast. This would be enough for $50k to $100k of house depending on how much your other expenses and debts are. Things will truly be different if safe middle class homes don’t fall to between $50k and $100k.
There isn’t much to choose from at $40k to $50k in the southeast, this is why I am leaving and moving to NW Pennsylvania which is the northeast. Fundamentals are still alive there where us middle class people earning the median income can afford a decent 1500 sf house. No way will I spend $150k to live in the southeast when I can get the same for $50k in the northeast along with lower taxes and cost of living.
In closing, if the southeast does not become affordable(based on median wage), the fear of being priced out which realtors love to say to get you to buy now will have become a fullfilling propency. I honestly don’t know what middle class people will do. Live two families(or an extended family) to a $150k house? Rent out one of the 3 bedrooms(meaning share the house with some stranger)? Settle for a 2 bedroom condo or shack? It looks like middle class needs to be redefined if this is the case where median salary(50% percentile) will equal lower middle class or even upper lower class. True middle class may need to be in the 75% to 90% percentile salary to afford the median price house.
While house prices have historically appreciated at less than half percent above inflation, the problem is salaries aren’t keeping up with inflation. Your cost of living increases faster than your salary does meanwhile you have less money left to pay the mortgage on a house who’s price also increases faster than your salary. Too bad salaries may not ever keep up with inflation as companies would rather hire immigrants(they can be legal) willing to compete with you, often happy to accept min wage. Or companies simply outsource labor to third world countries where salaries are a fraction of min wage in America. I remember a story where this guy used to make $45k a year then the company got legal immigrants to relocate to America and willing to work for $22k a year. The company laid off all the $45k earners(unless they were willing to stay for $25k a year, which none were) those $22k wage earners will probably just live two or three families to a house while the middle class will flee that city.
It’s a growing problem all over America. We seem to becomming like Europe or England where even 50 years ago it was normal for 7-10 people(extended or 2-3 families) to share a 1500 square feet house. Or 2-4 people would share a small 1 or 2 bedroom 500-750 square feet condo. This means around 200 square feet of space per person. At $150k for a 1500 square feet house, you would need three middle class wage earners sharing the house. Depending how many children they have, there could be 7-10 people living in that house! That’s one family sharing a bedroom! Youd need two sets of bunk beds! A child should consider him/herself lucky if he gets own bedroom, then the parents are probably upper middle class!
Some people say prices will revert back to pre bubble, others say the fundamentals have permanently shifted. $150k in the southeast is way above pre bubble prices. A $50k annual salary won’t touch that house if you have a wife and child(ren) to support and most do. Even living on your own, you would be “house poor” with little or no money left over for savings. I would not spend more than low $100k on house if I made $50k a year.
Thanks for reading it all. Please comment
I grew up in the Fifties across the street from a family of six living in a double garage.
They owned the land (about an acre) and had big dreams of eventually building a big house, which they eventually - did just as their kids reached the age of moving out (go figure).
The father built the garage with his own hands; the garage contained a small kitchen, two bedrooms (equipped with bunkbeds), a shower and a toilet and sink.
Sounds strange but I also knew lots of families that raised kids in eight-foot wide housetrailers.
I read articles that ship containers are being converted into living spaces is some areas.
How the heck did they manage to pop out 6 kids on a bunk bed?
When I lived in Long Beach, CA in the late 70’s, I remember being shocked to find out that our Cambodian neighbors were three families sharing a 800 sq ft house. We moved after our child was born because the house wasn’t big enough for the three of us.
One minor item, they built way too many frickin homes, and the good news is they are still building.
I bought my first home in 1997 in Riverside brand new, the interesting thing is it had sat vacant for 5 years as the previous builder had gone BK. We paid 130K and the previous builder was getting 225K. As I remember the neighbors were not happy. About 1/3rd of the homes in the development sat vacant until the new builder came in to close em out and start building again. The community is known as Lake Hills.
It’s all happening again, just on crazy lending steroids this time.
Got Stagflation and House Asset Depreciation?
It will be interesting to see if the Guberment steps in and stops Calpers, Texas Teachers and all the regular suspects from haveing to do a Fire Sale on their soon to be downgraded investments which in their charter they are not allowed to hold unless they are of adequate grade.
In my opinion they almost have to or those organizations could loose 10-20% of total value overnight. It is of course technically illegal, but why quible over the details, heaven knows DC never does.
Are the 1500 sq ft houses for 50k in the NE older homes?
I don’t think it is even possible to build a house for 40-50k. If it were 1500 sq ft that would be about $33/sq ft. If the land cost close to nothing and you built it yourself maybe you could do it for that price.
You should remember that old(er) houses are sold at below cost of building a brand new house. The house itself depreciates, it’s the land underneath that appreciates enough that the overall price goes up.
No one will pay the same price for an old(er) house if they could have a brand new house built. Thus is why the cheap houses tend to be 30 to 100 years old.
As the cost of new houses go down, all other houses will follow in the price decline. I am buying a 100 year old house(but has been modernized) in NW PA while waiting for this bubble insanity to bottom out. It could be 2 years or 10 years depending how much the government interfers with free market.
you can buy a grand 4,000 ft2 house for $25/ft2 in my area. It would cost $1M to build, but the point is that noone would build such a house today, especially not in such a place. The locals can not afford to own such a house.
If the “fundamentals” have changed, does that mean that the average family won’t mind paying 40-50% or more of their income on a mortgage? Maybe it means that mortgage fraud will now become standard? Maybe the American consumer will consider working 60-80 hours a week normal? Or that people will start living in more crowded conditions?
What the hell are these “fundamentals” that everyone is talking about?
Clearly, something changed in the last decade, but it had nothing to do with increasing wages. Right now it is surprisingly still a lot more expensive to save your money and have easy access to it than it is to borrow on credit or invest in an increasingly risky market. That’s the thing I would most like to see change next year.
It looks like people are settling for smaller homes, condos instead of house or sharing the house. If alot of people accept this, it will keep house prices higher and at a new level. Investors who buy houses and rent them out also help keep prices high.
The question should not be if prices aren’t going down but if they aren’t going down enough. I have posted on other forums and often no one agrees with my predictions how low prices will drop.
If houses prices go up even .5% above inflation annually, they become less and less affordable each generation. The problem is compounded when wages don’t keep with inflation. I am trying to understand the reason for this fundamentals
Bye Fl wrote:
“If houses prices go up even .5% above inflation annually, they become less and less affordable each generation.”
Historically wages have increased faster than inflation. That’s how the standard of living has increased over the last 100 years in the US. 1950 families didn’t have 2 cars, multiple TVs, access to a wide variety of foods, ipod, international travel, etc. So if housing was inflation + 0.5% but gdp was historically inflation + 2-3%, standard of living increased and housing got more affordable. It’s a little mixed because housing also got bigger and better and hence more expensive, but that’s the overall trend.
” The problem is compounded when wages don’t keep with inflation. ”
The last few years have been an anomaly. GDP has increased but that has not increased median wages. Compensation for the top 10% or 30% has gone up, compensation for the median has been flat. A higher %age of GDP has gone to corporate profits.
The home price vs wage situation is not as out of whack as it looks because the high-income folks (who are more likely to buy) did see an increase in income in the last 7 years.
(note that I am not equating renter to poor, I understand that many people across income range prefer to rent for mobility or for cashflow reasons. but it’s pretty clear that income and homeownership correlate.)
The income distribution may change with the changing administration which would affect higher end housing. But this explains part of what is going on with housing at least in Silicon Valley, where there are still multiple bidders for well-located homes.
I wouldn’t use histories in Fla as a comparison to other large SE metro areas. The pays there (Fla) are low and always have been. And in the past so were the houses. No longer, but the continuing reversion is what you are seeing today.
I’d said median family income. That is what you generally use in buying a house. The larger metro areas do cost and always have.
Houses have increased in price but not at the rates that happened in Fla. You are using the Fla rate increases and then trying to (attempting to anyway) place a corresponding reduction on other SE metro areas that did not experience the … um, guessing … 300% rise in prices (in many spots). Comparing apples to oranges so to speak.
Another thing is that many people have lived in their house for years. Prices have gone up but a lot of folks own their place w/o a mortgage or else their mortgage payment itself is very low compared to getting a mortgage today. I’ve read that around 1/3rd of home owners don’t have a mortgage at all and another third have no problem paying the mortgage they do owe (I fit in this category). Its like CCs, many people don’t have one or else keep the balances low and others have gone wild on them.
A lot of what we are seeing today are people who should have never tried to buy a house. At least, not at that point in their life. And others trying to make a fast buck went the specuation route. I feel some sympathy for the 1st group (not strawberry pickers making $15k a year buying a $700k house though) and NONE at all for the 2nd group. And very little for those who buy a 2nd house w/o selling their old one first.
Living in the rust belt. I’m very familar with the Detroit area (and Chicago for that matter but don’t consider it in this category). There are some beautiful towns and sub-divisions around Detroit, houses that’d easily go for $1mil in Cal (maybe $2mil) are incredibly cheap today. Big problem is (of course) no jobs. Another even bigger problem is that these places have an unbelieveably high property tax rate. The services that you’d normally expect (police, schools, fire, etc) have to now be in a rapid state of decline IMO. You can move there (or where ever it is you are looking) if you wish but I’d surely not buy if I were you, wait a year or so. I think you’ll find the grass isn’t better, etc, etc.
Why would I care about Detroit when I can live just as cheap in NW PA with none of the horrible crime?
Didn’t know where you’re looking. NW PA is it?
Rust belt? You don’t get more rust belt than Detroit.
Give it a shot, the winters can be brutal up that way though. Like I said (prior thread) I lived in Chicago for 3 years, froze the whole time. Have fun.
Chicago’s winters are much colder, you can’t compare the two. And even if im cold, I have it much better than all the problems in south FL anyway
“Starr, who took out a second mortgage to buy inventory, is afraid of being overextended.”
Don’t worry, Anna, your yarn shop will thrive with all that new inventory. You won’t be too overextended, just a little fleeced out. This is a yarn you can tell your grandkids
$heep Dip
These types of businesses are amazing. I think as a whole we all need to get to the point where we can be more honest with people and protect them from themselves.
How many of her family and friends encouraged this woman, along with the Make-Your-Own-Candle, Doggie Day Care and other non-essential budding businesswomen. While they should have been trying to stop them from wasting their life savings and going into further debt by borrowing against their homes.
And yet as soon as these idiots go under some other lady will open a business selling beads, scrapbooking supplies, hand made soaps, candy bouquets, gift baskets and on and on.
All it takes is a slight hiccup in the economy and they are obliterated, and far worse off than they could ever have imagined.
I should have never invested so much in yarn.com, back in the dotcom boom.
I’ve made a fairly decent chunk of change crafting over the last 25 years, usually between 5k to 10k during the holiday seasons. People have bothered me constantly to open a shop and never understood why I didn’t feel it was a good idea.
It is a status thing in our town to have your own shop. A friend recently closed up after a year of trying to sell a very nice Brazilian line of bath products- couldn’t make it.
But we do have some places that make it big… like the quilting shop and the tea shop down the way. Big money in these places… working on feminine politics up in the stratosphere. I would never put my foot in that hotub.
I once met a guy who wanted to pour his savings into a pizza place, one that repeatedly failed over-and-over again throughout the years.
I tired to point out that there must be something wrong in the location or whatever since there were so many failures from previous owners who had their savings accounts sucked dry before capitulating. He saw this as a plus: The ovens and furniture were still in the place; all he would have to do is turn the key, load up on supplies and - presto - he was in business.
Ever the optimist he had an answer for every question I pondered.
The primary idea driving his business plan (I use the term loosely) was to sponsor Little League baseball teams so after the games the parents would bring their kids his pizza place and they would spend all their money and he would get rich. (Gee, I wonder why no other pizza place owners ever thought of that.)
I never saw him again or learned how it turned out
for him.
Many people in the US have enough money to spend on hobbies, not every day is a Hobbesian search for minimal food and shelter.
That’s why there’s golf courses, movie theaters, dog care and food, bicycle shops, restaurants, and other non essentials.
Sure a make your own candle or scrapbooking shop is non essential. So is Best Buy, most of Costco, in fact most of the economy. But if someone is willing to pay for it because they get pleasure out of it, that’s fine.
In this case the proprietor overestimated the market. That doesn’t mean that every non-essential shop is a ridiculous idea.
Poor lady also said her summer was going to be tough, of course, knitting doesn’t strike me as being a summertime pursuit. If her winter is slow then she ought not look to summer for salvation. Besides, Best Buy, Harley Davidson, General Motors, and thousands of others have already laid claim to the rebate checks.
“The cause of liberty becomes a mockery if the price to be paid is the wholesale destruction of those who are to enjoy liberty.”
Mohandas Gandhi
Don’t worry everybody. The Superbowl begins in 30 minutes, and the great housing revival of 2008 will begin promptly at 6:00 AM tomorrow with mad neuvo-bubbleistas frantically throwing freshly minted Bernanke bucks in all directions.
Just a reminder…
Using just 10% of your $600 largesse, will make you the largest slumlord in Cleveland, with 5 dozen houses to your name.
I’m listing my house for sale tomorrow. Of course it will sell in two weeks ’cause the Super Bowl is over.
Ok, fess up.
which one of you wrote this article for Business Week?
http://finance.yahoo.com/real-estate/article/104340/Housing-Meltdown;_ylt=AkXaMwgDypsBc.b2lu0kYGVO7sMF
Not me, the article is too optimistic.
“‘It really wreaked havoc for me,’ said Dan Holbrook, a Fallbrook homeowner. At the end of the year, Holbrook paid off his equity line with a $50,000 payment. Four days later, Bank of America froze his equity line, he said.”
“‘I’m scrambling right now,’ he said. ‘It has created a tremendous amount of stress because that was money to live on for me.’”
after all this time, it still floors me when i read this foolishness!!! why in the world would anyone want to live off equity from your home? this guy needs a good swift kick in the behind!!
“Kurzepa, a long-time real estate investor, owns homes in Nevada and Florida, two states that have joined California in leading the nation in home-price declines. She said none of her homes has lost value.”
talk about in denial!!!
Wow… Homes in Nevada and Florida haven’t lost value? Whatever prescription meds she’s on, its the good stuff.
I’m watching inventory (small article on my blog), its not different anywhere!
Got popcorn?
Neil
Sacramento HBs giving below market interest rates to lure buyers. This is the price per month per 100k.
0% int is 278 a month.
1% int is 322 a month.
2% int is 370 a month.
3% int is 422 a month.
4% int is 477 a month.
5% int is 537 a month.
6% int is 600 a month.
I would rather pay 5% interest on a 250k house than 0% on a 500k house. Even at 0% I think homes in California are overpriced.
“It was such a big differential that I felt like I had to lie, I’m lying already so what the heck. I said, ‘Come to think of it, you’re right, I did have another job that I forgot about.’”
Dang, this just reminded me I forgot to go to work this week…
This year, to save time, instead of following normal audit procedures the I.R.S. should just comb these MSM articles and audit all the FBs who admit to having phantom income.
Unbelievable, huh? Seems like she’s trying to shirk the responsibility for her own loss.
TOUCHDOWN RANDY MOSS! 2 minutes 42 seconds to spring selling season!
GIANTS WIN!
SPRING SELLING SEASON HAS BEGUN!!!
Woohoo
The Plunge Protection Team engineered a Ginats win because they knew it would be good for the economy. : )
Doh! Giants…. I type too fast…
CRASHING THE CALI POST TO FREAK OUT! GO GIANTS!! GO CORRECTION!!
Now that the Super Bowl is over, I am on the lookout for foreclosure tour buses coming in hoards. After all, I saw some publications showing Albuquerque to be the #1 housing market in the country. Do I believe that, H&!! NO. And I expect a ton of them in Elk Grove CA.
Two years ago I was sent to Elk Grove to do an construction status review on a residential development financed by my ex-employer (a wholesale bank). The houses were very nice but I had always wonder where did people who lived in those house worked. I simply didn’t see any major industries (if any) in Sacramento MSA beside state gov’t jobs. All there I saw was highway, road, houses and some rundown malls.
In the bank I currently work for, which got bought by Wells Fargo, there is this infamuous project the bank financed in Gilroy, CA. $15M finance to develop LOTS, not houses, for supposedly luxurious McMansions. LTV was “conservatively” at 50%, but not a single lot was sold for the last 12 months (out of 70 lots). The person in charge for fixing this mess is a SVP whom I closely worked with, and he told me the Bank simply dont want to send out NOD b/c once we foreclose the borrower, which is a LLC, will simply declare BK and we will be stucked for the next 2 years in court. I told him it was either that and put a sign outside the lots that said “REO, contact P. Merrill.” He was not laughting.
The worst part was this SVP is supposed to be mapped over in Wells Fargo, but he needs to clean this Gilroy mess before he can move. Poor guy; he has nothing to do with approving this Gilroy PoS.
One of the major employers for Elk Grove is Apple, actually. It used to be a warehouse and construction facility but now is the call center location. There are also several small corporate divisions in the facility— Evil Rob works for the Retail Distribution Center in logistics and his division has a grand total of six people.
So in other words— a whole lotta minor tech jobs and phone sales, and a few promotion-track positions.
For the greater Sacramento area I also know of HP (Roseville) and Aerojet (Folsom.) The trick is that most of the major industry players in the area are for particular skill sets, and their facilities are all but invisible unless you know where to look. No big factories or showrooms, just a little gate with a discreet sign, usually in a warehouse district.