It’s A Very Different Ballgame In California
The San Mateo County Times reports from California. “Home sales plunged in San Mateo County in January, as housing prices fell significantly in poorer neighborhoods but held up in upscale areas, a new report revealed Thursday. It was the worst January in 10 years for sales, which dove nearly 45 percent, according to the San Mateo County Association of Realtors.”
“‘Buyers are afraid,’ said Don McFarland, an independent real estate broker in Burlingame, ‘and they aren’t buying because of the loan catastrophe. I don’t think we’re going to see a recovery anytime in 2008.’”
“Prices declined dramatically in areas more likely to be hit hard by foreclosures, such as East Palo Alto, San Bruno, Daly City and South San Francisco. For example, the median price in South San Francisco fell more than $150,000 to $572,500 in January compared to January 2007. East Palo Alto declined $138,000 to about $468,000.”
“‘There will be a significant drop in the median price (of the county) next month, said Richard Calhoun, a real estate agent in Santa Clara, who follows the local market closely.”
“He said many offers accepted in January were below asking price. However, lots of those transactions have not yet closed, and will show up in the February or March report. He expects the county’s median price to drop in February to 2005 levels — possibly below $800,000.”
Inside Bay Area. “While many real estate professionals hope the $168 billion economic stimulus package passed by Congress on Thursday will give the industry a much-needed boost, others are not as optimistic.”
“Christopher Thornberg, an economist and founder of Beacon Economics, said the stimulus package would not bring the real estate industry around. The proposed new loan limit of $729,750, he said, caters to a small number of households in the Bay Area that make more than $160,000 a year.”
“‘The people who are in trouble are not being helped by this plan,’ he said. ‘How many people earn that kind of money to buy those homes? Prices are falling, and they’re falling for a good reason: because they’re too high.’”
“Jay Damato, the broker and owner of Elite Financial in Walnut Creek, said that while he hoped to do some new mortgage refinancing, he doesn’t think the proposed laws will change the housing market.”
“‘At least 70 percent of my clients are in the $450,000 to $650,000 range,’ he said. ‘It’s not going to turn a down market into an up market.’”
“Because the borrower has to have at least 3 percent equity, Damato said that there will be some homeowners who can’t get the loan, especially in places such as Antioch where the market has suffered a severe downturn.”
“Paul Ward, a broker associate in Danville, agreed. ‘It will help psychologically,’ he said. ‘Overall, it will be positive, and it’s definitely a plus, but it’s not a panacea.’”
“‘I think the impact on the housing market is overestimated,’ said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alt. ‘I expect prices to fall the rest of the spring and into the summer. I think we have a long way to go on the price correction.’”
The Mercury News. “There’s no certainty that rates on the larger loans will drop, said Keith Gumbinger, an analyst with HSH Associates. One reason is that it’s unclear whether Wall Street investors who buy mortgage-backed securities will demand a premium for the larger loans Fannie and Freddie back.”
“As a result, conforming rates could actually rise, he said. ‘When there’s uncertainty, usually investors demand higher returns,’ Gumbinger said. ‘The law of unintended consequences could apply.’”
“In addition, the economy could take another turn for the worse. Lenders could maintain a tight grip on credit. And experts also warn that some Silicon Valley borrowers will fail to meet the tighter lending criteria on conforming loans.”
“‘The three big things every borrower needs in today’s mortgage market is good credit, proof of income, and either money for a down payment or equity in an existing home,’ said Greg McBride, a senior financial analyst with Bankrate.com. ‘If you’re missing any of those three ingredients, you have some big hurdles to getting a deal done.’”
“Renee Morgan, a senior loan officer in Los Gatos, said clients have been ringing her phone ‘big time.’ But she doesn’t plan to submit their loan applications until it’s clear rates on larger loans will fall enough to make refinancing worthwhile.”
“‘Why load up my pipeline with loans I can’t close?’ Morgan said. ‘What we think may be true, or it might not be true. It’s an unknown.’”
The Ventura County Star. “Daniel Margolis, general manager of a new restaurant in Westlake Village, said business has slowed for the area’s restaurants. Vendors who deliver his meat and produce are six hours early because they don’t have as many deliveries, he said.”
“He says Mediterraneo is busy on Friday and Saturday nights, but the rest of the week is so quiet ‘you can hear the crickets.’ Tables are about 50 to 60 percent filled on those nights.”
“He attributes the slowdown to the ailments at Amgen and Countrywide, and to the housing slump. Consumers are clamping down on unnecessary expenses.”
“The area, along with the rest of the nation, should receive a boost from the $168 billion stimulus package passed Thursday. John Paglia, a finance professor at Pepperdine University, said he believes increasing the loan limits will be beneficial, but it won’t be enough to spawn a recovery. For one, it doesn’t solve the imbalance between monthly housing payments and monthly incomes, he said.”
“He said he believes sales and home values will continue to drop another 10 percent by the end of 2008 because ‘nobody wants to catch a falling knife and buy until they know we’ve reached the bottom.’”
“Still, the stimulus package should move the market forward because it has a year-end cap, which adds a sense of urgency, said Gary Wartik, economic development manager for Thousand Oaks.”
The LA Times. “Despite a sinking real estate market and job losses at two major employers, Ventura County could still dodge a much feared recession if interest rates continue to fall and Congress passes an emergency stimulus package, a local economist said Thursday.”
“‘Recession is likely to be avoided in Southern California, but we’ll be close,’ said Mark Schniepp, director of the California Economic Forecast, which released its county projections for 2008.”
“‘It’s pretty bleak,’ he said during a conference in Thousand Oaks. ‘We’ve got retail sales going down. We’ve got the apartment market that’s softened. We’ve got the Amgen and Countrywide fallout. We have got a housing market that is absolutely at rock bottom. I think 2008 will be the transition year; 2009 will be a lot better.’”
“Sales of existing homes last year were down nearly 30% to less than 4,100 homes, the lowest level in 25 years, Schniepp said. Further pressuring the market were default notices…more than doubled to 5,022 last year.”
“‘There is a limit to how far a home can go down. It’s time for buyers to realize they are about as low as they’ll go,’ Schniepp said. ‘(If) you don’t have to sell, then hold on until 2010. If you do have to sell, sell right now, immediately. And if you’re a buyer, buy new — these are the best deals you’re going to get.’”
“Darren Hendon worked in the mortgage business for years. He sold many home buyers on adjustable-rate loans with low-interest ‘teaser’ rates that rocket higher, typically after two years.”
“He was laid off last April as the housing slump and credit crisis pinched demand for loans. Now, wearing a crisp-collared shirt emblazoned with the words ‘Financial predators beware!’ Hendon is helping borrowers get out of the kinds of loans he once sold. And, once again, he has plenty of clients.”
“‘I never thought that I was selling anything that was bad,’ he says. ‘I thought I was being part of the solution, and I guess I eventually was part of the problem.’”
“Joel Marroquin, 29 has fallen behind on the mortgage on his Victorville home. Like Hendon, Marroquin is a former loan officer for a mortgage company. But he was laid off last year after home sales plunged and he didn’t close any deals for three months.”
“Now a salesman, Marroquin and his wife, a baby-sitter, have been unable to make their $2,926 monthly payments. They are about $30,000 behind. ‘It’s a little bit of embarrassment,’ he says.”
“The lender, EMC Mortgage Corp., has already offered a workout deal of its own that would require the Marroquins to pay $9,000 of the money they owe upfront. As part of the deal, the lender offered to lower their monthly payments to about $2,300.”
“Marroquin is hoping that Hendon can help him do better. He says he doesn’t have the $9,000 and can’t afford to pay much more than $2,000 a month. Hendon tells Marroquin that he will try but that it is unlikely he can negotiate a workout better than the one EMC already offered.”
“Later Hendon concedes that he can’t help everyone. Neighborhood Assistance submitted 1,057 loans for refinancing or restructuring in November and December, and about half of them have been approved.”
“‘I have a lot of people who bought more house than they could afford,’ he says. ‘Sometimes, I can’t save them from themselves.’”
“Plans for a 45-story, wisp-thin tower of ultra-luxury condominiums between Beverly Hills High School and the Los Angeles Country Club are set to be unveiled today. Developers say it would be one of the most expensive residential buildings in the West.”
“Considered one of the most desirable locations for development in the country, the vacant lot was the object of a high-profile bidding war in 2006 when Irvine home builder SunCal finally topped New York developer Donald Trump with a $110.2-million offer for just 2.4 acres.”
“Two top-drawer projects are also being planned around the intersection of Santa Monica and Wilshire boulevards in Beverly Hills. ‘How much high-end product can the market bear in such a close proximity?’ asked real estate broker Gary Weiss, who called the planned Nouvel building ‘extraordinarily ambitious.’”
“Competition lurks with many other pricey units coming to market. Owners of the Beverly Hilton Hotel also plan to add upmarket condos as part of a major upgrade and expansion on the property. Other high-end condos overlooking the Los Angeles Country Club and at the Montage Hotel in Beverly Hills are being built.”
“The Nouvel design of SunCal’s planned tower is intentionally ambitious, said Frank Faye, chief operating officer of SunCal. ‘This is an exciting opportunity,’ he said. ‘The worst thing we could do is under-deliver.’”
The Los Angeles Business Journal. “The median price of homes that sold in Los Angeles County in January dipped below $500,000 – the first time in more than two and a half years that the price was below that threshold.”
“January’s median price, $496,000, was 9.7 percent less than the same month last year, according to data provided to the Business Journal by HomeData Corp.. It also was 3 percent lower than the previous month’s median.”
“What’s more, the number of homes sold declined. A total of 3,379 homes changed hands in January, 38 percent fewer than January 2007. It was less than half the number that sold two Januarys ago in the county.”
“‘I think slowly but surely it is going to get worse,’ said Mark Wollman, a residential broker for a Beverly Hills brokerage. ‘I think people are really going to start to understand what’s happening this summer.’”
“Jerry Nickelsburg, an economist with the widely referenced UCLA Anderson Forecast, believes the bottom may be hit as early as midyear, when the median could decline 20 percent from its high. Prices are now off 15 percent from their high.”
“The last time the median price was below the half-million-dollar level in L.A. County was in May 2005, when it was $475,000. The following month it was $501,000 – the first of 31 consecutive months in which the price was greater than $500,000.”
“The median price peaked at $585,000 in May and again in July. In October, the price sunk to $525,000 – and it was the first year-to-year sales decline in the current downturn.”
“In the 90241 Downey ZIP code, the median price was down 23 percent to $495,000 and sales volume declined 32 percent to 19 homes sold. In the 90026 Echo Park neighborhood, the median was off 14 percent to $564,000 and volume was down 54 percent to 16 homes sold.”
“In the Burbank 91505 ZIP code, the median price dropped 16 percent to $540,000 and sales volume was down 28 percent to 18 homes sold.”
“Wollman, who has been a broker for nine years and works in Bel Air, Brentwood and Beverly Hills, said that since December he has passed on three listings because sellers had unrealistic expectations. Prior to December, he had only rejected one listing in his career.”
“Wollman was expected last week to meet with a Beverly Hills-area homeowner who wants to sell a house for $2.4 million. Wollman said he would tell the seller, who purchased the home two and a half years ago with an interest-only loan and now wants out, that the asking price would have to be lowered by $400,000 to make a sale possible.”
“‘It is a very different ballgame now. If the buyer can’t get financing, with all the great marketing in the world, the home is just going to sit,’ Wollman said.”
The Press Enterprise. “Chris Erickson said falling home prices and mortgage rates have convinced him it’s the right time to buy. Erickson, 28, figures with his $50,000 income as a maintenance worker for the city of Lake Elsinore, he could buy a house that cost as much as $250,000.”
“He has been attending auctions of houses repossessed by lenders. But so far, he said, the houses he’s liked have been bid up beyond his limit.”
“For several years, skyrocketing home prices far outpaced incomes. From 1996 to 2006, the median price of a house in Riverside and San Bernardino counties tripled, rising from $109,000 to $398,000, according to DataQuick.”
“Meanwhile, median family income in the two-county region increased 137 percent, from $24,250 in 1996 to $57,500 in 2006, according to the U.S. Department of Housing and Urban Development.”
“The percentage of households in the region that could afford the median-priced home shrank to 18 percent in 2005 from 53 percent in 2000, according to the California Association of Realtors.”
“Prospective first-time buyers have gotten considerable relief from the abrupt market downturn. In December, the median-priced home in Riverside County was $355,000, an almost 18 percent drop in a year, and the median price in San Bernardino County was $315,000, a year’s drop of nearly 15 percent.”
“Inland economist John Husing called the recent improvement in housing affordability ‘dramatic,’ but he said he does not believe homes ever again will be as affordable as they were in 2000. ‘That’s ancient history,’ he said.”
“Robert Kleinhenz, deputy chief economist for the California Association of Realtors, said it would take ‘worse than a recession’ for Inland housing affordability to snap back to what it was five years ago.”
“Edina Pham, a 33-year-old stay-at-home mother, said she and her husband, a 35-year-old postal worker, had long wanted to buy a house but didn’t figure there was much hope until prices began to fall last year.”
“She said in November, they moved into a four-bedroom house with a loft that they bought from KB Home in Perris for $335,000. They fell in love with the house, which was part of KB’s unsold inventory and had upgrades like Corian countertops and stainless steel appliances, she said.”
“They were able to afford the house because her husband works at least 20 hours of overtime each week and is ‘a saver,’ she said. He had set aside the $50,000 they used as a down payment.”
“Ironically, lowering home prices does not guarantee a flood of first-time buyers, real estate experts say.”
“‘The paradox is, when housing gets more affordable, young people buy it less because it is a bad investment,’ said Dowell Myers, a professor in the USC School of Policy Planning and Development. ‘As long as the price is dropping, young people will hold back.’”
“Bruce Norris, a Riverside real estate investment adviser, recalled that for three years after a resurgence of housing affordability in the mid-1990s, sales didn’t rebound. The push to buy, he said, came when prices again started to rise.”
“‘Buyers are afraid,’ said Don McFarland, an independent real estate broker in Burlingame, ‘and they aren’t buying because of the loan catastrophe. ’”
Maybe they are waiting for their “stimulus package?”
or nothing sold = “held up”
s housing prices fell significantly in poorer neighborhoods but held up in upscale areas, a new report revealed Thursday.
“‘Why load up my pipeline with loans I can’t close?’ Morgan said. ‘What we think may be true, or it might not be true. It’s an unknown.’”
_______________________________________________________________
As we know,
There are known knowns.
There are things we know we know.
We also know
There are known unknowns.
That is to say
We know there are some things
We do not know.
But there are also unknown unknowns,
The ones we don’t know
We don’t know.
D. Rumsfeld
That is a great place for that great quote!
We do know that one of the things John McCain called right was the wrong-headed predictions by Don Rumsfeld!
A henny-penny lost is found.
McCain is a neo-con stooge. He didn’t turn on Rumsfeld until way too late in the game. I’d vote for Hillary before I voted for him.
Sammy, that is the most-intelligent thing I’ve read from you!
I want her Hillaryness to be the Demoncrat nominee for pres. That will fire up even the left wing country club Repubs. Hopefully we can take back the Congress, but if we can’t, just give us 47-48 senators and 215 in the house. The Dems will make a mess of things, as usual, and we can play the blame game as the economy and housing continues to go down the tube until 2012.
Oh yes, those Democrats will make a mess of all the great things Republicans did over 7 years when they had absolute control over Congress and the Executive Branch.
Well.. here’s a “KNOWN KNOWN”:
RUMSFELD IS AN IDIOT (& Crook)
“‘It’s pretty bleak,’ he said during a conference in Thousand Oaks. ‘We’ve got retail sales going down. We’ve got the apartment market that’s softened. We’ve got the Amgen and Countrywide fallout. We have got a housing market that is absolutely at rock bottom. I think 2008 will be the transition year; 2009 will be a lot better.’”
Mr. overpaid tarrot card reader, tell me what the unemplyment rate will be in 2009 in Thousand Oaks, before you predict the real estate bottom in 2008. In my way of thinking, higher unemployment leads to less demand for housing, so a prediction about housing without a prediction on jobs is just a guess. And I see a parallel universe in job loss and housing
“Rock bottom” my a$$. This guy obviously did not live in SoCal in the 1990s.
Thousand Oaks is just about to have the 20 lb trout Option-ARM train come through. Amgen isnt’ done with layoffs they’ve already announced.
We’ll hit bottom after the apartment market is no longer described as soft.
We’re getting to desperation. When I do my emotions, I think it will be my ‘official transition’ later this month. Don’t worry, I’ll do more research first. But my oh my… stuff is happening fast.
2009 a recovery? ROTFLMAO. That’s capitulation. For newer readers, capitulation is the time frame with the fastest price drops. Its not the price bottom either. There are too many investment emotions left to go through. The REIC let this bubble happen, now they get to watch the gold rush collapse.
If sales are much more than ~4.6 million this year, I’ll be pleasantly surprised that the stimulus packages worked. I’m not expecting ‘an upside surprise.’
Got popcorn?
Neil
Thanks for the reassurance Neil. I need to keep waiting to purchase, or I’ll be crying all the way to retirement and beyond.
There will be tumbleweeds blowing through the auto dealer’s lots in TO by the end of this year.
But we won’t be at a bottom until the expensive parts of LA County join in the decline. So far, prices are holding at nosebleed level on the Westside, in BH, etc. True, sales have declined radically. But the prices need to fall and sales need to happen at lower prices to set the new comps. I’m still waiting for the tide to wash back out to the sea. No way we see a bottom this year unless mortgage rates turn negative. Now, if Countrywide offered to pay me 6% per annum to borrow money from them, OK, then I’ll buy something.
“The great and not-yet-late real estate boom of the 21st Century is not over yet,” said Mark Schniepp, director of the Santa Barbara-based California Economic Forecast, which put the report together.
So is there a real estate bubble?
“Don’t expect any popping sounds next year,” Schniepp said, but he warned that a “plateau” effect might be taking place.”
The key to sustainability, Schniepp said, is demand.
Mark schniepp - Feb 2005
The internet is great isn’t it!
I am so confused by all of this.
Besides, if we know there are unknown unknowns, then doesn’t that really make them known unknown uknowns? We just don’t know what they are.
Green eggs and ham. No, I don’t like green eggs and ham.
This guy was Sec. of D. Lordy, lordy.
Thank goodness he’s gone. Another bonehead was James Watt in the Reagan Administration. An Armagadden Christian evangelist, Mr. Watt was basically hoping the end of the world would occur. I suppose simply because he believed that a big 160 mile high Jesus Christ would appear and for once and for all have proof that an omnipotent man in white exists. Social conservatives are as wierd as socialist liberals. Be eternally vigilant for people who want to take away your personal freedom as well as economic freedom. Hillary sucks just as much as the bonehead Bible thumpers.
And we all remember Janet Reno.
Who’s he?
“I have a black, a woman, two Jews and a cripple. And we have talent.”
James Watt, Secretary of the Interior, September 21, 1983
Hate to break it to you PC types, but that’s still a funny line.
I’m a card-carrying, spotted owl-hugging liberal and I think it’s funny as hell.
My cousin once took James Watt on a helicopter ride to tour Yosemite National Park, and everyone asked him why he didn’t push him out and do the world a service? The park rangers were actually pleased with his National Park funding, but his environmental record?
Interesting with good links too
http://bigpicture.typepad.com/comments/2008/02/5-historical-ec.html
Money quote:
“Given the severity of most crisis indicators in the run-up to its 2007 financial crisis, the United States should consider itself quite fortunate if its downturn ends up being a relatively short and mild one.”
Suncal Towers in LA - LMFAO!!! They just defaulted on $80 million of loans in Bakersfield. Good luck LA!
Definition of “stupid money”:
“Considered one of the most desirable locations for development in the country, the vacant lot was the object of a high-profile bidding war in 2006 when Irvine home builder SunCal finally topped New York developer Donald Trump with a $110.2-million offer for just 2.4 acres.”
I like how the artist rendering has the see through look that will continue to be all the rage
Just like the office buildings in Dallas and Houston?
“Considered one of the most desirable locations for development in the country”
The site is on border between Beverly Hills and Century City. That building would cast a swadow ove r some hi-end residential units around beverly hills high. Imagine some westside homeowners groups will howl and scream . It would be within walking distance of CC hi-rise commercial district and almost within walking distance of hi-rent section corner Santa monica blvd and wilshire. One thing which would be tied into any develpment plans is the ongoing improvement and refurbishment of Santa Monica blvd-designed to improve traffic flows - which was for a long time really ratty west of CC. Haven’ t been there for almost a year but a lot of bigwig developers have been tweaking the century city area as of late. They must see CC as some kind of kinetic magnet for the future of west LA .
100% positive this part of LA has better odds than dwtn LA developments, as they don’t have the homeless problem .
The only way any new hi-rise developments succeed in CC area is to prod folks to walk, bike or take public transport to work . HI-Traffic volumes and preponderance of auto throughfares screw up walkability for Westside as well as dwtn .
I would assume its because all of the entertainment industry is located in CC? Lawyers being the main profession.
I wish Trump would have won out….I would like nothing more that to see that toad get his a$$ handed to him…
Kudos to you, Ben. Nice mention in LAT article on bloggers.
Which article? I couldn’t find the mention.
http://www.latimes.com/classified/realestate/news/la-re-blog10feb10,0,1437518.story
Yes, the article reflects some of the reasons why we have all chosen this blog instead of some of the “crazy” ones.
“‘There is a limit to how far a home can go down. It’s time for buyers to realize they are about as low as they’ll go,’ Schniepp said.
Do tell! What is that magic number Mr Schniepp? What happens when that number is reached Mr Schniepp? Does it bounce back? Does it just start moving up again? Does it move sideways? Can it do that? If it can, how long can it do that for Mr Schniepp?
I’m thinking of a number.
Everybody wants lots of them to follow, and nobody wants just one and in the lead.
“‘There is a limit to how far a home can go down. It’s time for buyers to realize they are about as low as they’ll go,’ Schniepp said.
Is this guy carrying water for the NAR or what? Substitute “home” for any other asset, and it sounds deranged. Let me start by saying I am an advocate of free speech, but commercial speech has been limited and I feel comfort with where the limits have been drawn. But real estate needs to same sorts of disclosures that stocks get . . . NOW. Enough of this puffery and lies.
***rant off***
I love how there’s always a limit on how LOW prices can go, but never a limit on how high they can go. Makes me want to punch this jackhole in the face and see how high the swelling will go.
it would be an honor to bail you out of jail, sir !
let him know how you feel!
http://www.californiaforecast.com/cv.html
Couldn’t agree more - on KFI 640 and FreeFM 97.1 they are still running NAR ads trumpeting return on investment that are not only disingenuous, but would require big disclaimers for other types of “investment” advertising. Sickening.
Exactly Jim. I understand intellectually how they get away with it, but I hope strong advocacy brings some changes to this bull. Maybe a hail Mary lawsuit victory against the NAR for fraud will at least draw some attention to their shenanigans.
Does anyone know what’s going on with lawsuit against the real estate agent for over selling?
Don’t think I heard about this - details?
What’s the golden rule again? Those who have the gold ….
NAR Hails Passage of Economic Stimulus Package to Help Jumpstart Housing Market
http://www.realtor.org/press_room/news_releases/2008/nar_hails_passage_of_stimulus_package.html
(soon to be listed under NAR’s 2008 legislative accomplishments)
You are 100% right. If stockbrokers talked about stocks the way RE agents talk about their product we’d haul them off to jail.
“There is a limit to how far a home can go down. ”
To paraphrase a quote I heard early this week: Unlike stocks, housing doesn’t go to zero except in Love Canal and Detroit.
Obviously potential buyers think prices will go lower than their current lofty levels which have many zeros before the decimal.
I hear it goes to $1 in Cleveland.
“It’s time for buyers to realize they are about as low as they’ll go”
Hmmm… desperate much?
Pay me to take it. Do I hear any bids?
Curious to me that they never say: “It’s time for buyers to realize they are about as high as they’ll go.” These clowns only seem to be able to predict bottom, but not top of the market.
Schniepp sounds like a RE shill. I think that the lowest a house price can go is 100 to 120 multiple of monthly rent. We haven’t got there yet.
A house that rents for $2500 here in So. Cal. could have been sold for $750-$800K at the peak of the boom. When the price for this house drops to $300K or less, I’ll agree with Schniepp.
The multiple got a lot lower than that during the 1930’s, and they had low interest rates too.
Oops, I forgot, something like that could never happen again.
Track down Schniepp’s “California Economic Forecast” and check out his sponsorship list. Banks, title companies, homebuilders, realtors.
http://tinyurl.com/2q4jh7
Can anybody just have the title of “economist?”
Anybody else in the mood for a good ol’ fashioned Schniepp…er, snipe hunt?
This is what I wrote old Mark Schniepp:
“Your prognostications are a joke. So, I took the liberty to look up your list of sponsors. http://tinyurl.com/2q4jh7
It seems to me that you Sir, are not an economist, you are a shill, a carnival barker, someone who is still trying to rope in the last few idiots into this sinking housing ship. Actually, you should be ashamed of yourself!”
“Bruce Norris, a Riverside real estate investment adviser, recalled that for three years after a resurgence of housing affordability in the mid-1990s, sales didn’t rebound. The push to buy, he said, came when prices again started to rise.”
These fools who call themselves economists are completely and totally clueless. Is it even remotely possible that prices were increasing in the late 1990s because incomes were increasing?
1. Norris is not an economist.
2. What he says makes perfect sense: Due to herd behavior, soon-to-be FBs did not start buying until they saw prices going up again after 1997. That’s excatly what happened.
“Inland economist John Husing called the recent improvement in housing affordability ‘dramatic,’ but he said he does not believe homes ever again will be as affordable as they were in 2000. ‘That’s ancient history,’ he said.”
“Robert Kleinhenz, deputy chief economist for the California Association of Realtors, said it would take ‘worse than a recession’ for Inland housing affordability to snap back to what it was five years ago.”
Getting back to 2003 prices shouldn’t be hard. By the time we get there, maybe he’ll have come up with a term for “worse than a recession”. Isn’t there such a term already? Maybe he could go back to the even older than “ancient history” of the 1930’s and ponder the possibilities.
I believe we’re already seeing some 2003 prices in the IE, and Mr. Husing calls the bottom weekly - any publication quoting him is serving advertisers, not its readers…
Or Japan in the 90’s.
‘How many people earn that kind of money to buy those homes? Prices are falling, and they’re falling for a good reason: because they’re too high.’
And there you have it - the emperor has no clothes. Thank you Mr. Thornberg.
Despite its simplicity, Thornberg’s comment grabbed me more than anything else in today’s posts. YUP! prices are Too High. Hey REIC, can you hear this? - prices are too high. Still.
Amen Brother - the prices have been too high for years. Also, his statement dispells the myth that everyone in San Fransico makes $150K a year.
‘There is a limit to how far a home can go down. It’s time for buyers to realize they are about as low as they’ll go,’
Actually there isn’t! A house could easily be worth less than zero if it needs to be torn down, or there are back taxes, dues, assessments owed.
Like the price of the home is somehow independent of the buyer? A house can sell only for what a buyer is willing to pay. There is no downward limit on price of a home.
San Diegans…
My friends in Melbourne, Australia, tell me that the quality of their freshwater is such, that it leaves their hair stringy, this in the midst of the long drought they’ve been enduring, because they are getting the dregs, as far as quality of water goes.
The very same thing is beginning to happen to you…
_________________________________________________________
“It’s not your imagination: Your hair could be a bit harder to lather with shampoo and your dishwasher may leave more spots on the glasses.”
“And take note if you home-brew beer.”
“The county is increasing its reliance on water from the Colorado River, and that waterway carries high levels of dissolved magnesium, calcium and other minerals. The result is “harder water” coming out of your faucets and shower heads.”
http://www.signonsandiego.com/news/metro/20080208-9999-1m8hard.html
Buy an RO. :>)
I had the owner of a plumbing shop try to talk me out of purchasing a reverse osmosis unit because “they waste water”. The reasons I didn’t end buying one are that I couldn’t find one with enough capacity, and that there isn’t enough pressure available at the output to feed an icemaker.
“‘Buyers are afraid,’ said Don McFarland, an independent real estate broker in Burlingame, ‘and they aren’t buying because of the loan catastrophe.
This cracks me up! There’s no “loan catastrophe”. In fact, you can get an excellent rate if you have 20% down and aren’t trying to finance more than 3.5 - 4x your earnings. These were the lending standards for most of the 20th century.
The problem is prices are too high! And they got that way because million-dollar mortgages were being given to “single moms” on SSDI and strawberry pickers making $20K/year.
If the government just left things alone, and required all government backed or insured mortgages to have 20% downpayments, then the prices will quickly reset, we’ll have “affordable housing” for everyone, and the housing business will return to normal very quickly.
So what if the last owners of these flipped-houses were left holding the hot potato? That would contain the problem nicely. Let them spend the rest of their lives paying it off.
mortgages to have 20% downpayments ??
Would you then apply that to all purchases;.. Car’s, Boats, Furniture etc. ?
If they’re government backed and are “no recourse” loans then, yes, they should have 20% downpayments.
I met a buddy for some cocktails at James Beach last night. James Beach is a nice restaurant/bar in Venice a block off the strand. It was a really nice Feb night so I figured it would be pretty busy. Walked in at 7:30 and it was about 1/3 full at the bar and restaurant. Stayed til about 10 pm - the restaurant never got busy. Max 50% of the tables occupied. I’ve been to this place about 10-12 times over the last 4 yrs and have never seen it that quiet.
I go there occasionally and it’s ALWAYS packed. Very interesting anecdotal “evidence” of a consumer pullback.
This seems to be on again/off again. Almost tracking pay cycles… It does imply people are cutting back, but that the typical J6P will go out as soon as they’ve paid their bills and then ‘do without’ for until the next pay cycle.
How many of the regulars at high end bars HELOC’d their way in? One of my coworkers flies to Las Vegas, LA, and a few other people to have a fun weekend with whatever random woman he could connect with. He’d throw around enough money that he always succeeded. (I and other skeptical coworkers were amazed with his constant track record.)
The women never found out he only made $60k/year and doesn’t have a degree. He burned through $500k of ‘equity’ in 4 years.
Oh… the last ~year he’s been on starvation rations. Let’s just say its proven that there are a lot of women in those ‘high end bars’ looking to hook up with the big spenders and only big spenders. Did something similar happen in 1929/1930?
Oh, I know other coworkers have lived less extreme versions of this lifestyle and several random individuals I’ve met while traveling bragged about such ’strategies to meet women.’ Restaurant and bar revenue is about to go on a new trend… CAKE reported ~18 months ago that their ‘high end’ alcohol sales were weakening. Its been a constant trend the whole time…
Got popcorn?
Neil
There’s a term for these women: hobags.
I am a older fart so I do not get to the hip night time places but I will tell you that the geriatric joints (breakfast) are still packed around here…..Non-stop pension and social security checks I assume…..
Not to worry. The crowds will be back after they get their $1000 stimulus and blow it all on booze for as many Friday nights as it lasts!
Information not worth a Plugged Nickelsburg…
“Jerry Nickelsburg, an economist with the widely referenced UCLA Anderson Forecast, believes the bottom may be hit as early as midyear, when the median could decline 20 percent from its high. Prices are now off 15 percent from their high.”
Wow. Another 5% until we hit bottom. Way to go out on a limb. Anyone want to see what Nickelsburg was claiming last year about how far housing would drop? From the UCLA Anderson Forecast of June 2007 “The Forecast calls for “ … the housing induced sluggishness in the U.S. economy to last into early 2008.”‘ Almost over . . . NOT!
Why exactly is 20% the bottom?? Of course he didn’t explain that.
Because 5% more isn’t so big a loss as to scare Suzanne from the market, while another 25% would be, and it will take slightly longer for him to appear wrong than if he called the bottom this month, by which time the sheep will hopefully have forgotten his bad call.
There are counties in California where the median has already dropped about 20% from their peak.
In fact Marin (!!!!!) is one of them, but to be fair I believe in this case the “peak” was a true outlier. IIRC the median jumped over $100K one month, dropped by virtually the same amount the next, and never got close again.
Hmmmm, this outlier might be the YOY comp. some time soon. It will be interesting to see how the Marin REIC spins the story that month.
“Inland economist John Husing called the recent improvement in housing affordability ‘dramatic,’ but he said he does not believe homes ever again will be as affordable as they were in 2000. ‘That’s ancient history,’ he said.”
Some people just wants to live in an expensive area. Consequently, they are choosing to live an expensive life and ultimately a poorer life. To all his own, I suppose.
Cinch
Not to inject a bullish note, but I just noted in one of John Mauldin’s letters that the LIBOR has fallen to 3.10%. This does make a big difference to my FB friend whose I/O ARM will reset to LIBOR+2 in a couple of years. If LIBOR stays as low as that, the reset will be almost benign. Thus stretching out the reversion to rent-equivalent prices.
Looks like I need to learn how to use the blockquote html…sorry
“Now a salesman, Marroquin and his wife, a baby-sitter, have been unable to make their $2,926 monthly payments.
So not only can this guy not handle his finances, he’s also nailing the baby-sitter!
Good Lawd Sammy!
Sitting and nailed…there’s a good joke in there!
But I digress,
Bad Leigh
Mr. Kleinhenz:
I predict something worse than a recession is imminent.
p.s. Zillow’s numbers updated through Feb 5. Wowee Zowee.
“Plans for a 45-story, wisp-thin tower of ultra-luxury condominiums between Beverly Hills High School and the Los Angeles Country Club are set to be unveiled today. Developers say it would be one of the most expensive residential buildings in the West.”
“Considered one of the most desirable locations for development in the country, the vacant lot was the object of a high-profile bidding war in 2006 when Irvine home builder SunCal finally topped New York developer Donald Trump with a $110.2-million offer for just 2.4 acres.”
—————————————————————–
From time to time, this tower will be one of the world’s premier Earth-surfing locations.
“She said in November, they moved into a four-bedroom house with a loft that they bought from KB Home in Perris for $335,000. They fell in love with the house, which was part of KB’s unsold inventory and had upgrades like Corian countertops and stainless steel appliances, she said.”
“They were able to afford the house because her husband works at least 20 hours of overtime each week and is ‘a saver,’ she said. He had set aside the $50,000 they used as a down payment.”
So many things to say about this one, I barely know where to start.
First, the overtime. You can’t count on overtime as “regular” salary. Overtime is cream on top, but shouldn’t be counted in the equation.
Second, the $50,000. I hope the guy has other “savings” because even after making a 20 % downpayment, you want to have money in reserve. Instead, everyone skates on razor thin ice, and when a bit of trouble or unexpected expense hits, they are facing foreclosure.
I would say this family should be buying a house of about $175,000 absolute tops.
The fact that it almost twice that tells me we have a lot more to go.
And regarding the countertops, what the f*** is it with women and countertops?
“I would say this family should be buying a house of about $175,000 absolute tops.”
Do they even make those in California anymore?
What is it with the stupid restaurant kitchen stainless steel appliances? I can always buy a new refrigerator but that doesn’t mean I want to overpay for a house because the appliances are shiny and silver. Ooohh… shiny.
Yes, but they are located in the middle of the desert out past Palmcaster, on dirt roads, and you’re lucky if you don’t have to generate your own power. However, you do have Joshua Trees on the property.
They fell in love with the house, which was part of KB’s unsold inventory and had upgrades like Corian countertops and stainless steel appliances, she said.”
Hey, they fell in love! It’s now their “love” shack!:
http://tinyurl.com/2vl3pp
While knocking on doors of preforeclosures I’ve run into plenty of guys over the years who worked at the Big 3 car companies and were losing houses, and the only thing that happened to them was they got cut back to 40 hours a week.
Baby Boomer Bubble
http://www.latimes.com/classified/realestate/news/la-re-lew10feb10,0,5165011.story
“Historically, seniors don’t become net sellers in Arizona, Florida and Nevada until they reach 75. But the opposite is true in 13 other states — Alaska, California, Connecticut, Illinois, Indiana, New Jersey, New York, Maryland, Massachusetts, Michigan, Minnesota, Ohio and Rhode Island. In those states, the crossover starts at age 55.”
I wonder if the lingering effects of the bubble and lack of retirement savings of the boomers will distort these past relationships. Those selling to relocate somewhere cheaper for retirement may still do so, but later as they need to work longer before retiring. Those who might have relocated just to live somewhere different may no longer be able to afford to do so.
My guess is the effect described in this article is real, but will be more drawn out as the boomers relocate less and sell later. This does support the idea that once bubble prices “bottom”, there may be an extended period of little or no price appreciation.
The 401K bubble is next.
People will be pulling money out of 401K instead of putting money in. I wonder where stock prices are headed.
Anon: Glad you said it - I once started a study (I’m an engineer, not an economist, so this was my own research, not for pay or a degree) on the level of investment in the market due to 401(k) and the like contributions. I never finished it.
I started with the thought that the whole 401(k) was a house of cards. As I read more, I thought that most boomers aren’t contributing to 401(k)s in any appreciable number so as to have an overall effect on the market in either direciton.
All my work is long lost, but if I get some time today I might pull some numbers up.
I have been pondering this for a number of years now….
From 1996 to 2006, the median price of a house in Riverside and San Bernardino counties tripled, rising from $109,000 to $398,000, according to DataQuick.”
Yet the so-called experts predict it will only drop 20 percent off the peak? We’ll see about that.
Exactly. If the REIC
expertsliars would be kind enough to note the median wage increase in those vast areas, they would better understand where prices will go.I assume everyone else is noting the huge number of Trolls now going onto all of the housing blogs giving BS reasons why its a great time to buy. Ok, maybe in Detroit or Ohio where values have dropped so much its academic if they drop anymore. But elsewhere? We have a long way to go.
Got popcorn?
Neil
Yet the so-called experts predict it will only drop 20 percent off the peak? We’ll see about that.
Riverside and Sberdoo already down 20% YOY according to Dataquick. Probably 30% off peak . I see IE falling 60-70% in the really crapped out areas and only 40% best case in the very few desirable parts of the IE. Crappy areas will get down to under $200,000 easily this year( E.G Hespera, colton ,banning, menifee, lake elsinore, and inner S berdoo). A better area such Riverside 92507 Canyon Creast or some parts of Rancho Cucamonga will only fall 40%, worst case 50%.
If U want to BS the remaining Fb’ers and suckers to buy in the IE now is the time as the IE in winter is green and clear from the winter rains( nov to march). Easy to fool naive IE buyers as remaining 7-8 months IE is a nasty sweltering barren hellpitt .
Hey Peter,
Don’t know much about anything at all.
1987: Poloma (sp?) Cali. Track house. 3/1.5.
Lot’s of “Hair” people. $60/cut (no color - I thought I was in OZ!)
Drove to the nice side (if it was ever) of Pasadina. I love Cali, and I love to drive.
Six lanes of hell raising! Wahoooooooooo!
Bottom line, I had fun and bought nice clothes!
I’m sure this one experience is antidotal. (I’ve actually been to Cali about 7-8 times - not an expert).
Compton (of all places) was a real treat…in 1974. No joke, met Mary Tyler-Moore on an elevator and she was nice to me.
Cali is not that bad…good people exist everywhere.
The dates may be past, but the breathe is current.
Leigh
2009 will be a lot better
2009 is when China turns off the faucet.
italics off now?
One more try…
I was hoping nobody would notice.
OT, but I post because it seems to the best explanation of where we are heading. Lots of folks are saying we are going to Inflate and lots say we will Deflate.
This is a good explanation of both situations.
What is Deflation and What Causes it to Occur?
From the article………….
“When the volume of money and credit rises relative to the volume of goods available, the relative value of each unit of money falls, making prices for goods generally rise. When the volume of money and credit falls relative to the volume of goods available, the relative value of each unit of money rises, making prices of goods generally fall. Though many people find it difficult to do, the proper way to conceive of these changes is that the value of units of money are rising and falling, not the values of goods.
The most common misunderstanding about inflation and deflation - echoed even by some renowned economists - is the idea that inflation is rising prices and deflation is falling prices. General price changes, though, are simply effects.”
http://www.elliottwave.com/deflation/
“‘There is a limit to how far a home can go down. It’s time for buyers to realize they are about as low as they’ll go,’ Schniepp said. ‘(If) you don’t have to sell, then hold on until 2010. If you do have to sell, sell right now, immediately. And if you’re a buyer, buy new — these are the best deals you’re going to get.’”
It is sounds like Joseph Stalin’s era of warning to Soviet people! Whoever doesn’t follow this order will be sent to “goolag” probably into the South Central Los Angeles or to Alaska…
Schniepp said. ‘(If) you don’t have to sell, then hold on until 2010. If you do have to sell, sell right now, immediately.
I love it! That is a classic desperation ‘investment emotion’ quote! No understanding that price drops in 2008/2009 won’t recover in 2010. Far from it. The first two recovery years will be lucky to see 5% housing inflation combined.
But we’re not talking about 2014 yet, are we?
Got popcorn?
Neil
There will be no recovery till 2025, since Baby boomers are going to sell there houses to retire … Market will be saturated for very long time. In other hand prices for land will go up only in cemeteries…
2025 is a little optimistic.
My graphs suggest 2030 until US median house price bounces back to 2006 level… but prices will have fallen enough where it’s not suicidal to buy as early as 2012.
I think you made an excellent point, and suggest a trend that most of us here has yet discuss. If this recession is strong and long, the natural result is contraction in the number of jobs. As a result, immigration will also slow if not stop completely. Population growth for the past ten years or so had kept our population growing at a moderate pace. Without immigration our population will stagnate and/or perhaps contract. I personally don’t think we’ll ever return to building more than 1 million new houses per year. Our country is growing older every minute, and the cost of raising children is more expensive than ever. The number of household rate of increase is at its slowest pace in 40 years (sorry, I don’t have the source right off hand). I think we are in a terminal decline with regard to population and housing needs, albeit a slow pace where only a few of us are aware of.
Cinch
Cinch, that’s a very good point, and demographics is something that is “all powerful”, yet very few understand.
Mark Steyn is very good on demographics, and is well worth the read. Essentially, “Old” Europe is toast, simply as a result of the decline of reproduction.
Housing (and especially building) has a distinct causual link to the demographics of the community. Some might say that we have reached Peak Residence Saturation, and that building in the future is going to decline to replacement only.
I doubt immigration will drop much–it has been increasing, and as the border is tightened you’ll see more and more people staying. Hispanic birthrates in the U.S. are higher than in Mexico, and you are starting to see the white birth rate rise again. Our population will probably hit 400 million by 2050 (unless we get lucky.)
http://www.numbersusa.com/overpopulation/headed.html
Illegal immigration might fall with a recession, but I bet legal immigrants will keep coming if only because there are benefits here and once you have waited 5+ years to get here (or whatever), you are unlikely to stay home unless your situation there is vastly better.
birthrates in the U.S. are higher than in Mexico ??
Hell yes….Every child gets a golden parashute if born in the good old USA as compared to being born in Mexico…The citizenship birthright of a child born from illegal immigrant is one of the most bizarre laws I know of…
Schniepp belies his own predictions when he says that those who must sell should do so immediately. He is obviously aware that next year’s prices will be worse. And by 2010, he assumes, everyone will have forgotten what he said in 08.
r u kidding ? it will be 2024 to see raise in house prices
Does anybody here know how I can find information about whether or not there is a toxic hazard at/near a specific address? I tried going to the Santa Clara County Recorder’s Office, but their link to “Search Official Records” isn’t working. It’s for a commercial property.
Thanks,
Big V
Is this the kind of thing you’re looking for?
http://www.envirostor.dtsc.ca.gov/public/
The state should have an agency like the Texas Commission on Environmental Quality. There will be files for various types of cleanup actions in progress such as leaking underground storage tanks, perc (dry cleaner) or others. They’re usually kept on spreadsheets by address. What type of pollution do you think is there?
Right, as Emmi posted. Here’s the list of various cleanups. Depends on what the pollution type you suspect is.
http://www.envirostor.dtsc.ca.gov/public/sites_by_program.asp
Tx’Chick,
You are likely not to see this, but thank you for that link.
Also, thank you for the link to FL abandoned animals…that is where hubby and I are sending the danfangled govt rebate, whatever check.
I’d drive down there myself and take at least a dozen doggies and kittens if we only had our farm!
Best Always,
Leigh
There’s something here called the “Innocent Owner/Operator” program when a landowner has levels of groundwater contamination that require cleanup through no fault of his own (migrating from a nearby site). I assume that you would be referring to suspected soil or groundwater contamination on the site you are wondering about. I am very interested in this stuff and do a lot of side work in it.
Also check with the California Regional Water Quality Control Board, San Francisco Bay Region located on Clay Street in Oakland CA. This is the state agency that specializes in water polluition, both surface and groundwater. The Department of Toxic Substances Control (DTSC) is the agency that specializes in the regulation of toxic chemicals that are used in industry and is located in Berkeley, CA
I tried to post this earlier, but I guess it got lost.
Yes. EnviroStor was perfect (accessed through DTSC website). Really good interactive map. Thanks all
Fresno posted the correct resources…They have all the data and it can be retrieved on-line….
“Inland economist John Husing called the recent improvement in housing affordability ‘dramatic,’ but he said he does not believe homes ever again will be as affordable as they were in 2000. ‘That’s ancient history,’ he said.”
Husing is under orders not to utter the word “loss”, I guess.
I wonder who holds his leash?
” In the 90026 Echo Park neighborhood, the median was off 14 percent to $564,000 and volume was down 54 percent to 16 homes sold.”
“In the Burbank 91505 ZIP code, the median price dropped 16 percent to $540,000″
Still sky high median prices for ho hum areas. I don’t see any big price drops yet.
I do. Look at Lake Balboa/Van Nuys West. There are some sfh below $350k that would be decent with…well…work. There are parts of the area that can be…err… ratty. But there are parts that are kinda okay….passable.
“Prices declined dramatically in areas more likely to be hit hard by foreclosures, such as East Palo Alto, San Bruno, Daly City and South San Francisco. For example, the median price in South San Francisco fell more than $150,000 to $572,500 in January compared to January 2007. East Palo Alto declined $138,000 to about $468,000.”
This is impossible, for I am assured by many co-workers and friends that real estate on the San Francisco peninsula Can Never Decline In Value.
And people seem convinced that housing in Santa Clara County may fall below $800K median and when it does it’s a screaming buy. This only one reason I think we’ll see the same houses foreclosed on more than once as prices kep falling.
One thing that cracks me up about people talking about Peninsula real estate is some crazy notion of equivalence.
Of course, prices are going to drop everywhere; I’m not saying things are different.
But “Fremont” is not “Los Altos” and never will be. Homes in Fremont wlll never, ever, be worth as much as homes on Los Altos.
Pleasanton isn’t Atherton; though both call themselves “Bay Area”. Pleasanton house prices could easily fall 60% because of all the overbuilding, while Atherton, with little new construction, may only fall 20%.
good point. not all places are created equally. but, neither fremont nor pleasanton are “peninsula”. so it’s not a *great* example
Sure, but let’s say that we have established through current pricing that a house in Fremont is worth perhaps one half the equivalent house in Los Altos. If Fremont drops 50% from here (not unlikely) then is that Los Altos house suddenly worth FOUR times what a Fremont house is worth? Of course not. If Fremont drops 50%, then so shall Los Altos.
P.S. I’m not sure why Fremont was brought up. The original comment talked about price declines in EPA, San Bruno, Daly City, and SSF. The latter three are unquestionably smack dab on the peninsula. Even if EPA is not on the peninsula, it’s almost infinitely closer to it than Fremont is.
Sellers in the craigslist “advertising” the new conforming loan limit.
http://sfbay.craigslist.org/sby/rfs/568772242.html
Holy cow ! Burbank 91505…Thats my zipcode ..been here for 9 yrs now…yeah still renting..waiting for price to fall another 30% …lol !!
According to Zillow, my friend’s house in Southwest San Jose just went up $7.5k. Go figure.
Zillow reinvented history on our house. All last year Zillow valued it at $1.3-1.5M. This year, without explanation, they changed the history graph and claim they valued it at $1.8-2M last year, bumping it up $500k. The lower value is more accurate.