There Will Be Blood In California
The Used House Salespeople report from California. “Home sales decreased 29.8 percent in January in California compared with the same period a year ago, while the median price of an existing home fell 21.9 percent, C.A.R. reported today. ‘The slight increase in sales predates the president’s signing of an economic stimulus package including a temporary increase in the conforming loan limit, but that much needed reform could give the market some momentum,’ said C.A.R. Chief Economist Leslie Appleton-Young. ‘Let’s hope congress and the president see fit to make the higher loan limit permanent.’”
“C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in January 2008 was 16.8 months, compared with 7.6 months for the same period a year ago.”
“In a separate report covering more localized statistics generated by C.A.R. and DataQuick, 6.3 percent, or 16 out of 253 cities and communities, showed an increase in their respective median home prices from a year ago.”
The Tribune. “In another sign of how the mortgage lender crisis has hit San Luis Obispo County, Estate Financial Inc. is having money problems, leaving developers unable to finish projects and investors wondering when they’ll get their money back.”
“Karen Guth, president of the real estate lending company in Paso Robles, said Estate Financial’s troubles are due to ‘the lack of liquidity’ caused by the significant drop in qualified buyers for the company’s real estate investments.”
“‘We’re trying to finish our projects, but there are not a lot of people buying houses these days, and so our loans are not selling off,’ Guth said. ‘Our problem is not unique. It’s a cycle in the real estate market and it’s a cycle in a credit market, a perfect storm of bad news.’”
“When the real estate market was booming, Estate Financial typically sold its real estate investments within one to two years, with a 12 percent return to investors, Guth said. By 2007, Estate Financial had an estimated 1,000 investors funding more than $340 million in real estate loans, according to reports filed with California’s Department of Corporations.”
“But with foreclosures in the state mounting, potential home buyers as well as new investors started to evaporate, and developments funded by Estate Financial began to stall.”
“‘Apparently sitting on the sidelines is a multitude of potential new investors, which EFI needs to fund its current loan commitments, as well as create an opportunity for Fund investors to liquidate some of their shares,’ Guth and Joshua Yaguda, her son and VP of the company wrote.”
“As a result, October was the first month in the company’s 20-year history that many of its borrowers failed to make their payments on time or at all, the letter said.”
“In another letter to investors, dated Oct. 23, Guth and Yaguda said that if investors had not yet received their interest payments that month, ‘with very few exceptions … it is not forthcoming. You should assume for now that future payments will remain unpredictable.’”
The Pasadena Star News. “With a crucial part of the Ambassador West development in receivership after its owners defaulted on a $44 million loan, completion of one of the city’s largest, most prestigious housing projects has been thrown into doubt.”
“The property owners, AACP Properties and Ambassador Acquisition Coalition Partners II, have been unable to find a builder to replace Pacific Standard Homes, which in November abruptly pulled out of a deal to build 70 luxury condominiums on four parcels on the Ambassador West site.”
“The lender, Drawbridge Special Opportunities Fund Ltd., promptly filed suit and the 19.72-acre property went into receivership Dec. 27.”
“Dorn Platz President Greg Galletly, whose company helped steer the entire project through City Hall, predicted it will be hard to find a buyer for the condo parcels.”
“‘Home builders just do not have the capital to step up and buy something like this today,’ said Galletly, whose company has a 2 percent stake in Ambassador West. ‘This site is still one of the best in Southern California, but in today’s world home builders are all in serious trouble.’”
“Fred Zepeda, president of the West Pasadena Residents Association…said the neighborhood had been stunned by Ambassador West’s recent problems. ‘We’re anxious to find out what’s going on,’ Zepeda said. ‘I don’t think anyone knows what’s going to happen - everyone’s still staring at each other.’”
The Press Telegram. “‘There Will Be Blood’ couldn’t have come out at a better time - at least for the purpose of making an explanation of U.S. economic expectations more colorful. Economists sometimes like to draw a comparison between the title of popular running feature films and their outlook for the U.S. economy.”
“‘My movie theme is ‘There Will Be Blood,’ said Jack Kyser, chief economist of the Los Angeles County Economic Development Corp.”
“Local economist Joe Magaddino, who chairs the Economics Department at Cal State Long Beach and authors an annual report released in May that illustrates the economic outlook using that year’s feature film releases, agreed with Kyser’s assessment.”
“‘We didn’t really anticipate it to be slowing this much,’ Magaddino said. ‘Each week, it looks worse and worse, with the chance of a recession occurring on the rise.’”
“Magaddino didn’t want to ruin the annual suspense that builds up over which feature film he’ll chose for the coming year. However, Robert Swayze, Long Beach’s economic development director, didn’t hesitate to belt out what he thinks will be Magaddino’s likely choice for best picture to describe the economy.”
“‘There Will Be Blood,’ Swayze quick reply when asked. ‘All signs point to a slowdown.’”
“As the nation goes, so will the state, the region and Long Beach, Magaddino said. ‘The Southern California region isn’t so big and isn’t so diverse that it can insulate itself from the U.S. economy,’ Magaddino said. ‘We anticipate this year it’s going to be a much slower year for the region and we also anticipate it’s going to be a much slower year for the city of Long Beach.’”
“And in Orange County, the drop in employment numbers already gives the area the appearances of a recession. ‘Orange County looks to us to already be in a recession in terms of negative employment growth,’ Magaddino said.”
“One area of Long Beach that may be particularly hurt by the housing slowdown and the sluggish economy is downtown. ‘So much of downtown revitalization is tied to condo sales,’ Swayze said.
“Several massive high-rise condo projects planned for the area have been either halted or delayed. Add to that halting expectations for weakening retail sales. Downtown has struggled to find retailers along its Pine Avenue artery and at downtown developments like the Pike at Rainbow Harbor and CityPlace.”
“‘We’re rather pessimistic on retail,’ Kyser said. ‘And that spells tough times for downtown Long Beach. To survive you need retail.’”
“Retail encourages development of residential properties, and without plenty of residents around, retailers typically shun an area, Kyser said. Kyser expressed similar concerns about downtowns in Los Angeles and San Diego.”
“‘There will be blood downtown,’ Kyser quipped.”
The LA Times. “The downtown Los Angeles skyline is still dotted with construction cranes, but not as many as developers once promised.”
“More than a third of the approximately 110 residential projects proposed for downtown have been delayed or put on hold amid the rocky real estate market.”
“Yet downtown boosters and urban planners are focusing most of their angst on two mega-projects: the Frank Gehry-designed Grand Avenue complex on Bunker Hill and Park Fifth, which would be the tallest residential complex west of Chicago.”
“Both projects have pushed back their start dates in recent months as developers sought capital and construction loans in an increasingly difficult market and negotiated the various government approvals needed to begin construction.”
“Grand Avenue officials announced Friday that one of the project’s original investors — the California Public Employees’ Retirement System — was pulling out and that Istithmar, a fund controlled by the royal family of Dubai, was investing about $75 million in the $3-billion development on Bunker Hill.”
“The fate of both projects is increasingly being seen as a tipping point for the future of downtown.”
“Even the most ardent of downtown supporters agree that the area has not yet reached a critical mass. New downtown dwellers still complain about a lack of shopping and that for every newly vibrant street, there are others that still seem dead.”
“‘The bottom line is, the real estate world is frozen right now,’ said Homer Williams, a Portland developer who is involved in a number of projects in downtown L.A.’s South Park district. ‘Unless you have to move, either you’ve been transferred, get married, divorced, something that compels you to do something, you aren’t going to do anything.’”
The San Diego Business Journal. “Notices of Default and Notices of Trustee’s Sale skyrocketed in San Diego County last month, according to several foreclosure reports released this month.”
“According to Default Research Inc., San Diego had 6,003 Notices of Default and Notices of Trustee’s Sale in January compared to just 2,997 a month earlier and only 1,723 in January 2007.”
“With a minimum of four months between the recording of a Notice of Default and the property being sold at auction, the recent increases in defaults clearly indicate that auction sales are likely to also increase further in the upcoming months, according to ForeclosureRadar.”
“ForeclosureRadar said that by comparing January foreclosure sales to defaults four months ago, it appears that as many as 80 percent of defaulting homeowners may now lose their homes at auction.”
“‘While certainly more homeowners are getting into trouble, the far larger issue is that fewer homeowners are able to get out of foreclosure than ever before,’ aid founder Sean O’Toole, in the report.”
“Foreclosures are up in nearly every county and O’Toole said homeowners are not the only ones feeling pressure. He said that in January, 98 percent of auction sales went back to the lender after receiving no bids.”
“Of the 19,821 foreclosure properties sold at auction in the state, 13,950 were discounted with an average opening bid at 16 percent lower than the remaining mortgage amount, and of those, 4,624 were discounted 30 percent or more.”
The Mercury News. “Bay Area residents accustomed to treating their homes like piggy banks could be in for unpleasant surprises as home prices decline in many areas. Not only are banks less willing to issue popular home-equity lines of credit, but some of the nation’s biggest lenders are freezing existing loans.”
“Morgan Hill homeowner Kelly Urbina received a letter from Countrywide two weeks ago telling her she can no longer access the credit line that she says the lender encouraged her to get when she bought her three-bedroom home in 2006.”
“‘I still have a substantial amount of equity in my property, so I was surprised to get a letter that just said, ‘We’re going to suspend your line,’ said Urbina, who works as an underwriter for a mortgage banking and wealth management firm in Palo Alto. She knows the value of her property has dropped somewhat, but not ’significantly,’ as Countrywide claimed in the letter.”
“Urbina and her husband used some of the equity line to remodel their kitchen two years ago, but otherwise they have reserved it for emergency use.”
“Urbina said she was surprised the lender didn’t simply lower the amount of her line of credit rather than suspend it. ‘I would have felt that was a very fair thing to do,’ she said.”
“‘Everybody’s going to have to do it,’ said Guy Cecala, publisher of Inside Mortgage Finance. ‘We’re just at the beginning of this trend of lenders freezing home-equity lines of credit.’”
“‘It very much could hit people up here, whether it be Countrywide or another lender, where values have come down,’ said John Conover, president of Borel Private Bank in San Mateo. ‘This is a significant issue for people who expect to be able to borrow on their loans.’”
“Nationwide, homeowners borrowed $355 billion worth of home equity loans and lines of credit in 2007, down from $430 billion in 2006, according to Inside Mortgage Finance. California borrowers make up 20 percent to 25 percent of the market.”
“Susan McHan, homeowner Kelly Urbina’s employer, said her company has at least two clients in the East Bay who have received the letters from Countrywide. In both cases, she said, the homeowners dispute that their home values have fallen sharply, and they are working with Countrywide to try to reopen their credit lines.”
“‘They had plans that they were going to be using the loans for,’ McHan said.”
“As for Urbina, she was not counting on using her equity line soon, but she likes having one. ‘What if I did have an emergency and I needed the line?’ she said.”
‘Even the most ardent of downtown supporters agree that the area has not yet reached a critical mass. New downtown dwellers still complain about a lack of shopping and that for every newly vibrant street, there are others that still seem dead.’
Ha ha. I’ve never even been to LA and I was trying to tell the LA Times this was a housing bubble by-product almost three years ago.
Also: ‘The slight increase in sales’
I looked and could not see what increase she’s talking about.
BTW, here’s the CAR DQ table.
Untill they decide what to do with the homeless population downtown, the whole ide is a pipe dream…bubble or no bubble.
Increase in sales…. Has to be month-over-month.
Every year as we move from January into February we see a pick up in real estate activity. And this year, then normal seasonal pick-up in activity will have every used house sales man shouting from the nearest mountain top… “LOOK, we are past the bottom.”
As months of supply climbs, as prices drop, as foreclosures skyrocket, as year-over-year numbers plummet, the used house sales people will be ordering you to look at nothing but the month-over-month numbers.
BTW: family and I were up in Flag over the weekend to play in the snow. Bet the businesses are doing GREAT year-over-year with the great snow that they are getting…. Proof that the brought is over since this one normal year is so much better than all the previous years. Oh, wait…. it takes more than one year to restore depleted water table and break a drought???
Next you will be telling me it takes more than a normal seasonal uptrun that happens from winter to spring to signal the end of the worst housing market since the Great Depression.
the “revitalization” zone near 7th and Bixel is scary. I would not live there even with restaurants. I would only feel ok w/a bodyguard posse.
“the “revitalization” zone near 7th and Bixel is scary. I would not live there even with restaurants. I would only feel ok w/a bodyguard posse”
That is the central city west redevelopment zone , a gigantic slum clearance/urban renewal process along wilshire/ seventh from just west of 110 out to bixel/ lucas. I have observed a clump of new condo projects going up from 2005-07 centered at bixel/wilshire. At least one ,the Vero lofts at 1234 wilshire , was completed last year but sticks way out into pico-union third world tenement zone which the LA cent city west slum eradication process has probably made worse.
In addition there are the existing condo complexes including such beauties as the Medici : some of the residential units actually are sited right at bixel st entrance to 110 fwy on- ramp. Style of said condos seems to be of a buttressed fortification design for excluding the street vermin
What’s up with the numbers on the CAR chart for the west side of LA? Up 96.7% ? That sounds fishy.
Westside $1,628,000.00 $827,500.00 96.7%
West LA $735,000.00 $732,500.00 0.3%
Downtown LA $637,500.00 $739,000.00 -13.7%
South LA $392,500.00 $430,000.00 -8.7%
North East LA $417,000.00 $485,000.00 -14.0%
The number of sales is so small that a few *real* mansion sales can skew the median. The West Side includes Beverly Hills, Brentwood, Pacific Palisades, Santa Monica, and other areas with mansions over $10 million.
Yeah, didn’t Jennifer Garner & Ben Affleck buy something for over $22 million?
This is all the high-end sales for every hi-end zip area od LA county for Jan 2008 per data quick:
Beverly Hills 90210 13 $2,550 2.2%
Beverly Hills 90211 1 $1,170 -2.5%
Beverly Hills 90212 3 $3,080 32.3%
Calabasas 91302 16 $1,638 14.9%
Glendale 91207 8 $1,165 11.8%
Hermosa Beach 90254 3 $1,761 -25.4%
Encino 91436 10 $1,100 5.8%
La Canada Flintridge 91011 10 $1,888 28.6%
LA/Bel-Air 90077 13 $2,000 55.5%
LA/Brentwood 90049 16 $2,100 23.7%
LA/West LA 90025 6 $1,215 105.1%
Malibu 90265 6 $2,450 -17.3%
Manhattan Beach 90266 17 $1,575 20.4%
Marina del Rey 90292 2 $1,565 28.0%
Pacific Palisades 90272 18 $2,100 -10.6%
Palos Verdes Pen. 90274 8 $1,855 15.9%
Pasadena 91105 10 $1,008 10.7%
Rancho P.V. 90275 15 $1,330 43.2%
Redondo Beach 90277 11 $1,070 23.7%
San Marino 91108 8 $1,328 -8.6%
Santa Monica 90402 5 $3,288 -36.8%
Santa Monica 90405 3 $1,625 28.9%
Sherman Oaks 91403 9 $1,199 37.0%
Sherman Oaks 91423 8 $1,025 14.2%
Tarzana 91356 10 $1,100 0.0%
West Hollywood/LA 90046 10 $1,358 13.1%
West Hollywood/LA 90048 6 $1,435 30.6%
West Hollywood/LA 90069 6 $2,121 43.8%
There were 250-251 hi-end homes sold jan 2008 out of 2382 total sfh’s sold for all LA county. 10-11 % of total home sales are the high-end. Other 89-90% are the rest of LA.. hi-end sales/prices may still be holding up but if u look at LA County overall there is a RE impending nuclear implosion about to go off both in the ghettos(35% of LA is ghettoland) and in the average Jsixpac hoods. 11% hi-end will not hold up 89% of the rest of LA’s plummeting RE, which is nosediving as we speak.
There’s an article in the Atlantic about the shift of yuppies back to the downtowns from the burbs, in part driven by fuel costs. I think that the urbanization trend is slowing going to come to pass, even in the New Economy. The gays will be displaced first, since they have good taste and being surrounded by them is non-threatening to most people.
http://www.theatlantic.com/doc/200803/subprime/3“I think that the urbanization trend is slow[ly] going to come to pass, even in the New Economy”
I’m with you 100% on this. I’ve been preaching this very idea over the past three or four years. I agree with the Atlantic article in so much as there will be great tracks of townhome developments delapidated into modern ghettos. However, I believe the powerful lure of the cities will be, and already is, greatly dimished.
Chicago, my urban destination of choice was chock-full of neighborhood bars, well run mom and pop ethnic resturants, thriving corner hardware and clothing stores, and a wild array of people, including old timers, yuppies, artists, hoodlums, druggies, and blue collar laborers. Once you got out of Lincoln Park you could find all of these people mixed together in a heterogenous mish-mash. A plumber might own the house across the street, and old couple the one next door, and three teenagers might be renting the one down the street. And I, the yuppie, as I was called on many occasions, lived in the middle of all of them.
By the early nineties, the boom was on. And in a matter of 15 years most of what I loved about the city had been priced out, snubbed out, grossed out, burned out (as in my case) or bought out.
ALL GONE.
My favorite European Deli (where the landjagers and sauerkraut where handmade), Meyer’s, closed and was replaced by a Quiznos. My favorite Mexican resturant (not a greasy spoon but nice Mexican resturant like you’d find in Mexico), El Tipico, closed and was replaced by who knows what — last I heard the building sat empty.
You can find a Quiznos in any city in the country. You just wouldn’t have to pay $5 dollars to park at most.
The artists in Wicker Park either found the city too expensive and left or they found themselves sitting on a million dollar piece of property and scrapped the paint for a realestate license. Santa Fe is an artists’ town too (wink wink, nudge nudge).
Aside from constantly being ten dollared and twenty dollared to death (the modern version of nickeled and dimed), I don’t know what one would see in the city these days. A homogenous glut of stainless steel, Sub-Zero, Coach bag toting, tatooed for originality, dream seekers. There certainly isn’t anything wrong with that in moderation. But it doesn’t make for the gritty-good-time city I loved for so many years.
The homogenezation of the cities will be their undoing. The old and the well established are not cool and if your city is too pricey to support the young and talented you’ll find they avoid it. If an Indian family on Devon Ave can’t open a fantastic mom and pop resturant because Quiznos rented the corner lot at twice what they could pay…well then you’ll have Quiznos instead of curry. Let them eat sodium.
I can’t ever go back to Chicago, much as I miss it from time to time, because it’s just not there any more. Going back to Chicago is like going to a good friend’s funeral — the suit is nicer than anything I remember but the body is lifeless and uninteresting.
It’s now merely a great big, dirty, Schaumburg. I can no longer discerne suburb from city.
I managed to talk an elderly woman out of buying one of those pre-construction condos at work. She is pretty near retirement. Best accomplishment I had all year.
Good for you, James. In exchange for your excellent work, I hereby confer upon you an official HBB gold star. Here: *.
Way to go. She will be thanking you when this unravels.
DOC
Ben, I think the following will get a more complete chart than the one that comes up on your “here’s the” DQ link…
http://www.dqnews.com/ZIPCAR.shtm
(I’m not very good at this, but I did get to see a better chart)
:0
The whole idea of living in California, especially Southern California is the enjoyable weather. Nobody wants to live in a condo downtown. It is a last resort, say if you’re homeless, or a speculator.
“The whole idea of living in California, especially Southern California is the enjoyable weather. Nobody wants to live in a condo downtown. It is a last resort, say if you’re homeless, or a speculator”
Not only is LA dwtn a singularly unattractive area without a single large park, lake or shorefront anywhere but the air is bad as well. It is usually a yellowish smoggy haze . I attibute that to LA dwtn being ringed by 4 major regional /interstate fwys, thru which pass the most busiest amt of automotive traffic in the world . The amt of smog/exhaust/ pollutants/ particulates belching daily from 2-3 million cars contantly moving or more likely crawling along the 10/5/110/101 fwys into or thru dwtn is the main reason for the nasty yellowish makeup of DWTN air . These fwys are elevated as well and the heavilier particulants wiil rain down into the lower flat parts of dwtn such as eastside fashion & warehouse districts ,which is why these are the worst uglisest most decayed slum sections of dwtn.
True. The very success of Los Angeles was based on the idea of a detached single family home in a (somewhat) leafy suburb with a convertible in the driveway. Downtown is a hard sell; it’s a harsh environment of modern (and now postmodern) architecture. And multi-story residential buildings are simply frightening in the middle of earthquake territory. The older 10+ story buildings are especially vulnerable. I once lived on the top floor of a four-story that swung wildly during even 4s. Downtown is going to look like a war zone if anything large ever hits the central Basin.
I live downtown adjacent (just north of the 4 level but no hi-rise mess)
I choose to wait it out here for the next couple of years because the wife works downtown and my work involves alot of freeway driving.
She can go 3-4 weeks on a tank of gas and I can get anywhere at 60 MPH on average because I go against traffic. My boss will remember that when he has to cut payrolls in the next couple of years.
“Sure we can keep Larry, but he lives in BFE, but this guy can be anywhere in SoCal first thing in the morning. We’re gonna need to grab every chance at income possible.”
The faux city life in the core is going to fall apart. But I am ready for it.
“Home sales decreased 29.8 percent in January in California compared with the same period a year ago, while the median price of an existing home fell 21.9 percent, C.A.R. reported today.”
Yowza!
And I have to laugh at the Economics Prof from CSLB saying So Cal’s economy isn’t so large or so diverse that it can insulate itself from the rest of the US economy. As if the problem originated with the “rest” of the US economy, and poor Calif was just sucked down the tubes along with the rest. When in fact the whole I/O neg-am ARM game is a Calif specialty, and it is Calif sucking the rest of the US down the tubes, more than the other way around.
No doubt. California is 17% of the nation’s GDP. They’ve screwed up royally out here…
But they still have their sunshine! That’s got to be worth something.
–
CA Resale SFH Median Price recap:
Current price = $430,370
9 Months Ago = $597,640
Year Ago = $551220
Down 28% from the peak.
Jas
Limbo
What don’t these people get? A credit line is not an emergency fund. It’s not your money - it’s a loan. They all put the cart before the horse and take the money as HELOC or refi instead of selling or saving. How are these people going to function when there’s no more credit?
Not only that, you’re sort of expected to repay the loan. You know, like, with interest?
That is so like observant. Dude, you know what I mean.
Been there, done that. Years ago! Testify, ARC! One thing you are forgetting though, the new black is really the old red.
The HELOC’s were the savings - with the credit line available and the equity always increasing (cue the swan song) incomes could be spent to the limit. For people like Urbina this is a disaster: the return of an ancient economic tool called budgeting.
budgeting is so “old economy”. I don’t think they even teach it in schools anymore (or practice it in the school districts’ budgeting offices).
Right arryoG. “Budgeting” these days just means spending no more than the loan amount for which you expect to qualify.
It’s insane.
This is why a DOWN PAYMENT used to be so critical…People HAD to budget and save for that down payment–and you bet your a** the banks would check the account the money was in to make sure Daddy didn’t just give you the $$ recently.
DOC
Well, of course, a down payment would imply buying a home is not every American’s god given right..
“As for Urbina, she was not counting on using her equity line soon, but she likes having one. “What if I did have an emergency and I needed the line?” she said.
DUH……it is called a “savings account”
Ever hear of one of those? That is where you take money you earn and put in in the bank and leave it there.
Amazing things savings accounts. If there is an emergency you use that money in the savings account.
Only a complete moron who should NEVER be giving financial advice to anyone would think that the answer to an emrgency is simply to BORROW more money that has to be paid back with interest - a LOT of interest as the loan goes for many years.
Shouldn’t own a house if you don’t have a SAVINGS account with a minimum of 6 months living expenses socked away and better to have 12 -18 months of expenses in the bank.
Trying giving up the lattes, trips to the mall for frivilous spending, overpriced SUVs and fancy cars, endless shopping for junk. and eating out all the time. Put the money IN THE BANK and leave it there.
“Shouldn’t own a house if you don’t have a SAVINGS account with a minimum of 6 months living expenses socked away and better to have 12 -18 months of expenses in the bank.”
Watched a little Suzi Orman while channel surfing. She had a segment called “can I afford it?” where callers ask if they should/shouldn’t borrow for home improvements, bigger house, etc. She shot em’ all down…
Almost all were shot down for the same reason…they didn’t have enough “emergency” savings set aside. Some of these folks had great incomes, they were just shi**y savers.
DOC
“Bought in 2006″ + “Lots of equity”
hahaha
“Susan McHan, homeowner Kelly Urbina’s employer, said her company has at least two clients in the East Bay who have received the letters from Countrywide. In both cases, she said, the homeowners dispute that their home values have fallen sharply, and they are working with Countrywide to try to reopen their credit lines.”
“‘They had plans that they were going to be using the loans for,’ McHan said.”
“As for Urbina, she was not counting on using her equity line soon, but she likes having one. ‘What if I did have an emergency and I needed the line?’ she said.”
That’s what savings are for, you retarded, mouth-breathing, sad sacks of rhino droppings!
Try going through a divorce. Try going through a custody battle. Try living through medical bills that are not covered by insurance. Try living on a median household income as prices continue to rise substantially faster than your paycheck.
I live a modest lifestyle, driving a used pickup that I bought 3 years ago for $7K, doing most of my shopping a Wal-Mart, $40 for a family of 4 to eat out is a splurge…. And yet we struggling to keep from drifting further into debt, largly because of our mountain of debt.
$130K from buying the house. $20K from medical bills. $15K from a custody battle. $40K in debt I ran up during the 5 years I was paying my ex $24K a year in alimony and child support ($800 a month alimony is over but I have to pay the $1000 child support for another 2 years). $60K in student loans.
Our total debt is almost $300K. Barely over 2x our combined household income of $130K. I can’t imagine how anyone does it with 3x, 4x, 5x or more debt.
Gas keeps getting more expensive, food keeps getting more expensive, medical co-pays keep getting more expensive, insurance keeps getting more expensive, taxes keep going up…. but our paychecks get smaller as the premiums on our insurance grows faster than our wage.
Try walking in another’s shoes for a bit….
Dude, you need a hug.
Agreed with the hug. I have no beef with your situation. What is tragic is that the system, of which, we are all part of is slowly dying. Sure, I know Hoz and TX are making a killing. However, somewhere else womeone is getting clobbered.
Sure, we have more billionaires in this country than ever before, but what about the rest of us trying to hold the line. Oh, I get it. Send my wife back to work and let others watch our kids.
You see, our society is sick. Some thought the way out was riches or greed, others by piling on debt, and still others by holding the line/dream. Tragically, this is coming to a halt.
Don’t worry Darrell. Soon the game will be over. No one will be left to collect some of those debts because the entire system is rotten from WH down to the lowliest of us. Heck, a guy who works just came in today and borrowed 5 bucks from me. I had no problem giving it to him. But this is a guy I know and I feel his pain at times.
You see, the middle class is dying. No one wants to step up and say. Heck, when McCain told Michiganders 2 weeks ago that the jobs weren’t coming back (1st time I’d heard one of the candidates speak honestly, and I am not a supporter of any of them), ol’ Mitt nearly went apoplectic (sp).
As usual the middle class will continue to be squeezed. However, what we don’t realize is that once the MC is gone, this country is toast. Just look at the economy now that everyone is flat busted because of housing and CC’s. And don’t give me that garbage about todays DJIA rally. I call BS on that one. Wouldn’t give you more than 5K for the DJIA. All smoke and mirrors by da boyz.
Rant off!
But, OCDan:
It’s not true. Congress is swelling with people who realize that the middle class is important, and we’re about to get another one in the White House. The jobs ARE coming back, right after we take them back. I was listening to the radio on Friday, and there was this Indian guy on there just worried sick that the US was going to stop giving all our jobs to the rest of the world. First he admitted that globalization was a gift from the West, then he tried to tell us all that we “had to compete” with low-cost labor/manufacturing environments in impoverished countries. Well, guess what Mr. Worried Indian Guy? Worry! Globalization was a gift, and we’re about to take it back. We don’t HAVE to compete with anyone because we are still in charge. The middle class always wins in a Democracy such as ours.
Can I have what you’re on? ;o)
You are joking, right?
OC - those billionaires may be becoming less. Many of those drank the cool aid from crystal glasses.
TX is not as rich as you think. If she was, she’d pay someone else to write her comments for her. It would be under ‘TXChick57’s-lackey’. Besides, she’d be out of Dallas by now living in somewhere nice like Detroit if she was that good a trader.
Bwahhaaa you owe me a screen…
I agree that the Middle Class is rapidly being squeezed into a much smaller portion of the overall population. Many have been clinging onto the illusion of still being in the Middle Class through creative financing, but that can only work for so long.
While I’m not unsympathetic to your plight, what makes you any more entitled to an easy source of cash than the other 50% of the population that is forced to or chooses to rent?
A HELOC is not a right - especially when values are projected to tank in CA.
I’m not unsympathetic to your pain, but it appears that most of your debt was choice. $60K in student loans, buying a house, having children, running up $40K in debt, and even getting a divorce - those are all choices you made about how to live your life. Uninsured medical is a disgrace IMHO. No one should have their lives ruined in order to get medical care.
and he got after me for not having any kids. I don’t have any of those problems. None. Zero.
I never really got the whole propagation thing.
amen, sister
“and he got after me for not having any kids. I don’t have any of those problems. None. Zero. ”
I took a “Women in history” class in College…ok, to meet girls.
Was the only guy in that class. Classmates and instructor (female) were chatting about how selfish people were in not having kids. I mentioned that some psychologists will argue that people have kids for selfish reasons too, and that there was a club in Sacramento, CA called “child-free network” for people to discuss some of the advantages of living childfree.
You can guess that didn’t go over very well. Did top-notch work in that class and got the only “B” in my entire undergrad curriculum.
DOH! That’s what I got for putting in a little semi-contrarian view.
Friends of mine sometimes comment on how I’m happy, able to do things when I want, afford things, etc.
I just tell them it’s discipline, budgeting, etc…I don’t say “no kids” to avoid the standard BS I’d hear otherwise.
DOC
He bought the American dream, hook line and sinker.
Education, kids, nice house, fancy growing city (Phoenix).
Phoenix - that place is a hell hole - no way does it deserve the growth it got in the past 10 years. Why oh why do we make such stupid choices. We learned nothing form the 1970’s energy crisis about sustainable living.
Don’t let your spendthrift libertarian philosophy get in the way of a little understanding and compassion.
Well, I make around 70k with the two jobs I work with 3 kids at home, and a stay at home mom. I paid off all my credit card debt - around 10k, and saved 50k over a year and a half to put a down payment on a 135k home. I don’t know your exact cash flow but I’ve got a few tips that might help.
*Sit down with the wife and make up a contract that you both sign that lists your priorities in order. Then off of that priority list start making a written budget. Be prepared for one of the worst fights in your relationship. Trust me once you get past the first two months your marriage becomes a lot better.
* Stop shopping at wal-mart. Completely. That place is a heap of rip off. They act like they are the lowest price place in town but it’s not true, not even close. My wife buys bread at the day old place, and shops at a place called panhandle salvage which basically just sells scratch and dent cans of food/milk/ice cream/etc and gets almost all our groceries at under half what they sell for at wal-mart. I’m sure if you live in a town with over 200K for population then you should have a place like this. The wife feeds my whole family of 5 (one teen, a two year old, and a baby) very well for under 300 a month. I don’t know how she does it but it’s not a lie.
* I stopped driving a truck, which is like getting a root canal without painkiller for a Texan, and started driving a 4 cylinder 1995 Camry that is valued at around 1700 bucks or so. I drive all over the place and spend about 100 bucks a month in gas instead of 300+ like I used to.
* We use cash for our grocery budget, spending money, and household expenses. These are easy to get swipe happy with a debit card.
* We put 1K dollars in a money market account, and called it the broken leg fund, and said if we ever got an inkling to buy something on credit we would use this first. Now we keep that money as a floor in our checking account and the couple times we have slipped up and dipped into it we have avoided bank charges. I can look back in quicken and see years where I had around a thousand dollars just in stupid bank charges. No bank charges is better than interest. Overdraft is a tool to oppress the masses.
* I cut up my credit cards, paid them off then closed the account. Then went back 6 months later and screamed when they didn’t close the accounts like I told them. We drew a hard line in the dirt and we refuse to backslide into credit at all.
* We started with our smallest debt and started knocking them off one at a time. Some months were a step back, but we never put anything on credit.
It’s been freaking difficult I won’t lie. My friends thought I’ve went bat shit insane when I quit playing Warcraft, and golf and started doing side computer work for cash, but now that I’m closing in on the end of the journey by paying off the student loans within a year or so barring any huge problems I can say it’s a journey worth taking. I would look into the Dave Ramsey plan if I were you. A lot of people don’t like him because he’s an anti debt nazi, but as I knock off debt, even low interest rate debt I have realized that the debtor truly is slave to the lender, and I’ve got a lot better sleep knowing my family will be able to fight to see another day.
You’ve got a keeper there vmlinux - treat her well…
vmlinux,
That was fantastic. I love stories like these.
cool… simply cool.
My wife and I make about 200K. We clip coupons like crazy and see who can save the most at Ralphs (double coupons ya know…). Last week the cashier finished and asked “how much do I owe you?”
Good for you! I wish you’d take my husband under your wing…. He finds my frugal impulses irritating, so I’ve tried to turn it into a game, outbeating “the man” Now he actually fights late fees and send in those rebates that companies offer but make you jump through hoops to redeem.
I think you should always walk a mile in someone else’s shoes. That way, you are a mile away when they realize you have their shoes. ;-D
Athena:
Can I have a ride?
“but our paychecks get smaller as the premiums on our insurance grows faster than our wage.”
Yes it does and I think Thats called STAGFLATION
Just move to Canada and get social healthcare and the bill collectors can’t come after you there. After you run up bill there, most of your bills here will be written off and you can move back.
Then some investment fund buys your debt for pennies on the dollar and then housnds the hell out of you for payment even if it is 20 years later.
Hang in there Dar.
Is it a God-given right to have a HELOC? The worst case scenario, assuming that you need money for an emergency…and the home value really hasn’t dropped…is to sell the house and rent!
Seriously, renting never killed anybody…
“Seriously, renting never killed anybody”
You won’t get invited to your homeowning neighbors’ fancy dinner parties.
Actually, in todays’ climate, that may be no longer true. They might hire you as a guest speaker.
Nope. I get invited all the time.
THey elect me to county boards and make a director of various organizations.
My bankers (little local 2-branch bank that is VERY conservative) dote on me - think I am ‘oh-so-clever-and sensible’ about money and the managing it.)
They all think I am oh-so-brillant for understanding that house prices were out-of-whack to area incomes and refusing to buy when it would cost me 58% more than to rent the same house.
They cheer when I take on a local developer in the local newspaper (who aides and abets me in the effort) when the developer is turned down for a rezoning for ‘condos’ and whines that they are just trying to build ‘affordable housing. Uh huh…..’affordable’ when less than 13% of the town can afford their prices. All founf it hilarious that I didn’t argue the morality of the devleopers claim, I jsut slapped down the income and demographic numbers and told the developer that they ned to go back and learn arithmetic.
So yes, we rent and get invited to dinner parties (and even dinner parties by elderly die-hard Republicans whose knowledge of their party stopped with Jerry Ford.)
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If you rent and fall behind you get evicted quickly, mostly within three months. If you “own,” you can live for free for 6-12 months before getting evicted. And you will not have to worry about your security deposit.
“Debtor-ship” has its privileges!
Jas
Wow, I don’t think you’re spoofing… but can’t always judge that.
Your suggestion for dealing with unexpected expenses is for a family to take the equity out of their house by selling it, no matter the market conditions, and take on the expenses of moving on top of whatever else is going on in the household? No matter that if it’s medical bills, you may be less than mobile and maybe even hospitalized? Let’s see, utility reconnects $300, boxes $2000, movers to get across town for a small 2-3 bedroom house $2600, 10% hit on your auto insurance, days off from work, moving your kids to a new school… etc etc.
You think all that is more reasonable than one quick trip to the bank for a HELOC where the interest would be tax deductible and you are going to lose the equity either way? Okaaay…
Emmi:
Lending is something that banks do FOR A PROFIT. They don’t do it just to help people out. Why should the bank lend you money if they’re not likely to make a profit off it? They shouldn’t, and you shouldn’t count on it.
One should not “depend” on obtaining credit to pay for possible future emergencies. One should save, earn interest, and rest assured that there is something there “just in case”.
One should save, earn interest, and rest assured that there is something there “just in case”.
A few years ago home prices were rising much quicker than almost anybody could save forcing many to panic and buy or be priced out forever, thats INFLATION. Borrow all you can with inflation raging. the trick is knowing it will change. Most believed it never would.
I think thats why so many decided to borrow and not save. If the US gets deflation borrowers are soooooooo screwed. Thats why the FED will try and replenish the money lost in bad mortgages. Too bad its going to buy up commodities.
When banks have been pleading, begging with people to take out HELOCs and now suddenly turn around and turn the spigot off, regardless of the credit level or how much has been borrowed, I think the people indeed are justified in saying, “Hey, waitaminnit! WTF?!”
Looks to me more like absolute panicking clear across the board.
…retarded, mouth-breathing, sad sacks of rhino droppings!…
WOW!!
Ya just can’t coin it quite like that!
Woooooohooo!
Leigh
“needed reform could give the market some momentum,’ said C.A.R. Chief Economist Leslie Appleton-Young. ‘Let’s hope congress and the president see fit to make the higher loan limit permanent.’”
Give it up honey, 80% of us can’t afford houses that expensive so where is the big surge in sales supposed to come from ?
the fact that this bimbo gets airtime is appalling. If she says white, you KNOW the correct answer is black.
That woman absolutely, positively makes my skin crawl…
Bits today had some people raring to do something! I will try to be at Vitello’s in Studio City this Friday night around 6pm. ANYONE up for it?
Sounds like fun. Count me in.
Keep me posted on whether this event will occur. The chance I can make it is only 33%, but it would be good to know if it’s still happening.
RER and AZ -I get into LA thurs night. Look on the bits thread Friday morning for confirmation. I’ll post from LA.
Anyone ever meet in San Diego? I know we have a healthy contingent of HBB do-gooders on here!
My wife and I would both be game to meet with other like-minds.
I think people have had get togethers in SD. (Haven’t been able to make most of them - just bad timing.) So they do happen. But you can always set up another one!
needed reform ? you mean fckin the taxpayers ?
Reform?? How about getting rid of her. That would be a great reform.
Here, here… however, like the cockroach that she is, when you squish one, you know there are hundreds of others lying around waiting..
its truly a pleasure to see home prices in san luis obispo county falling,but not fast or far enough…the 800k are now 700k the 500k are now 400k and falling,but the populations income does not even support a 300k house.No investor money or second home money from the rest of calif driving our prices up.with only the locals left who have no $ w/ 50k being a great central coast wage,who can tell how far these prices might drop on the central coast.
Did anyone get a looky at that Stockton number? 33% off. That has really got to hurt. Another couple of months and we can buy in Stockton for less than 6 figures. Homes for everyone.
Stockton? If they were giving them away I’d still hesitate.
No question about the ex. I was just sayin’ that things are not different anywhere. If prices are too high, then they are too high and will fall.
I know, someone, anyone, everyone thought Stockton was different. Same ol, same ol.
Stockton, Modesto, Merced…you couldn’t pay me to live in any of those cesspools.
I think you answered your own question in the context of your post. Affordability will return, it has to.
–
‘Let’s hope congress and the president see fit to make the higher loan limit permanent.’
Even after the prices fall 40-50% in CA, Less-lee Apple-ton Yun-egg?
The problem was not the loan limits but rather inflated prices, don’t you think? Now, nature is taking its course and all would be fine without any need for making anything permanent. So, relax.
Jas
Insight from the smarter (not hard with me) people here…
if we are to look at what’s currently happening (negative feedback loop of vertical foreclosure #’s, NOD’s, falling prices, less sales, more foreclosures, etc) and I think the now famous CSFB reset chart showing that there is a whole other wave of resets coming - just with differing flavors but with almost the exact same volume and shape - AND that we’re only 1/2 through the current phase…then…
It’s a friggin bleak picture that I STILL think is uderstated by 95% of sheepole out there. And if that’s the case, purely focusing on equities - which ones do the smarties on this board see as still having the most downside? Is it banks like Citigroup (stuck with that SIV poo-poo)? High end/first to cut from a budget like Harley Davidson? The homebuilders who have already been beaten down but have more downside ($0.00)?
Hope the braintrust of TexGirl, Niel and Jas (sorry if I missed some of you - again, I have taken many blows to the head) think about the most realistic stocks that even with the beatings they’ve taken still infer substantial downside risk at this time.
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Go for the gold and the trolled — Goldchain Silverknife and Troll Brothers (there is lot of gap between the current position of the falling bodies and the ground).
Jas
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BTW, I do flips when it comes to shorting Scams – I sold some Jan’10 300 naked calls on GS and I have lot of naked Jan’09 35 calls on TOL. The falling bodies will have to rise to what amount to rising to the moon. I take my chances on that.
As the title of a chapter by Galbraith says: “In Goldman Sachs We Trust” (quotes in the original).
Jas
“What if I did have an emergency and I needed the line”
No problem—just use your savings. Right?
…
“Sell it all, immediately”
Here’s a hair-raiser from Steve Moyer. Article from Market Oracle.com
**most important point about his article: he claims that real estate prices will NEVER recover to their former levels** According to Moyer, prices will slide, slide slide until they reach some sort of equilibrium. At a fraction of their former prices.
Meanwhile, sell your real estate now. Sell it now. Now. Get rid of it. All of it. Even if you can’t get 2005 prices (and you won’t). Get what you can now, set the money safely aside and buy the property back (or one like it) several years from now, for a lot less money.
You might make a case to retain your personal residence, particularly if you bought it prior to 2002 and/or have a very large equity (60% or more). You need to live somewhere, and that stability (and home ownership) can be worth more than money. But whatever equity you can pull out of any other property now will pay greater dividends later on, when the mother of all credit/liquidity crunches — continuing to unfold right before our very eyes — makes safe cash King in a way few of us can fathom right now.
At this point, the cancer — now exacerbated by a pronounced, continuing, anticipatory drop in retail, office and apartment REIT values and a developing storm in securitized commercial mortgage markets — is spreading unfettered and ALL U.S. property values are poised to take an increasingly substantial dive in the next 24 months, followed by an even greater one the next several years after that. Japan-style real estate deflation — only worse — has arrived; it is no longer a matter of speculation.
I now expect every property category to become significantly affected — houses, condos, fourplexes, apartment buildings and complexes, shopping centers, office buildings, industrial complexes, lots, land — you name it. The evidence (and a growing and overwhelmingly negative real estate buying psychology) has me convinced that no property type will be spared.
I tried to sell the house that we love last summer for whatever we could get. My wife would have none of it.
well, at least you love it…. that’s good!
got a link for that?
look below…….
“Sell your Real Estate Immediately”
by Steve Moyer
http://www.marketoracle.co.uk/Article3701.html
Real estate may not be saved, but if you look our past (50 years of inflation), I think you can reasonably assume cash will not be saved either. This is what makes the decision hard.
What’s hard about it? If you’re concerned about your cash inflating away, then go buy an asset that isn’t deflating and hold on to it. RE doesn’t fit that bill. Why would one buy a deflating asset in an inflationary environment?
Even if you can’t find a non-depreciating asset (or don’t want to take the risk), it always makes sense to save for an item that will be cheaper later, rather than borrowing to buy it at a higher price. The only thing that might make buying “good” any time soon is if rents explode, and that won’t happen without wage inflation, which will not start happening for at least two years (have to start taking our jobs back from Asia first).
From the article…
“Today’s “great deal” will be tomorrow’s loser, as real estate deflation continues to take greater hold and we find ourselves in The Incredible Shrinking Equity economy. That “$605,000 house” you can buy for $470,000 today will be worth $370,000 in a couple of years, then $270,000, then $170,000, then possibly less than that when it becomes cash-on-the-barrel-head time at some point down the road.”
Shhhhhhh…..shutup dude! The wannabe vultures are setting the new comps, and you’re gonna scare ‘em!
Well I’ve done a few posts on this. But give me one good reason that prices would stop falling ? I’ve not come up with one.
What stops house prices falling is when rental property becomes cash flow positive for a while. But given the looming recession and massive overbuilding rents will be dropping since they are sensitive to the economy. The bottom if it exists is long way off. Most people agree that when housing prices are in line with rents the bottom will happen but what a lot of people are not thinking about is where is the bottom for rent ?
http://tinyurl.com/ynmbmo
Here’s a link for Reno. Rents, the are dropping. So, when houses drop to meet rents, they will have to drop just a little bit further.
Probably a lot of immigrants legal and illegal going home. Along with American laborers moving to cheaper areas.
From your article. I think we will see this soon in California.
My complex emptied out for some reason I think quite a few people here worked in for the subprime shops and have left. Irvine is different you know it was the birth place of subprime lending.
In any case you see my point the bottom of this thing if there is one is currently beyond the event horizon of a black hole.
My co-worker here in Silicon Valley just turned in his two weeks’ notice, plans to take some time off for hobbies and maybe a bit of consulting. His house is paid off, therefore he has nearly infinite freedom. Crackpot advice like “sell all your real estate now!” would be ludicrous advice in his case.
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My son is auditing a home developer in NorCal. If the proposed sale prices on the new homes end up being too high then he would run into troubles with his construction loan agreements. I think that prices of 800s & 900s are too high for city of Napa. He is in worse shape in Solano County where prices are in free fall (down 30%+ from the peak).
Jas
As a Napan, or Napkin as some prefer to call themselves, I can confirm that you are absolutely correct that Napa cannot support $800k or $900k home prices. This is a glorified cow-town, where grapes just happen to grow quite well. Grapes are a commodity, and the US is being undercut by Chile, S. Africa, Australia, etc. just to name a few. There is no other industry in this town, other than agriculture and the few folks that work in food services, hotels, etc. and people that commute into the Bay Area. As gas prices increase, people that commute will be leaving in droves, as who wants to pay all that extra $$$ for the privilege of sitting in traffic for 3 hours a day.
As for the builder that you are referring to, as there are only 3 new home builders in town actively building in town (Delco, Castle, and O’Brien), I can pretty much guess which one you are referring to, but they are all hurting. My understanding is that one of the above has not sold a single home since last September, but that was from the guy that bought that house. He paid over $900k with no upgrades. As of last weekend, that same home is now down to $800k, and every upgrade imaginable is included. I figure I can buy one when the builder goes into B/K for closer to $400k.
Also, I’ve been to numerous REO’s, and made a few offers, but I have to admit that to some extent, it’s just for my own entertainment value. I just love seeing the look on the agents face when the bank is into the house for $720k, already lowered their price to asking
I am repeatedly assured by various people at work that Silicon Valley house prices won’t fall, even though all the surrounding counties are down by double digits. Denial is still very thick on the ground. Silicon Valley real estate is a lot like Google stock shares: it has the implicit assumption of permanent 25% annual growth priced into it. The moment that assumption was proved false was the end of the game. Only difference being that stock shares can fall a lot faster than house prices.
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“‘So much of downtown revitalization is tied to condo sales,’ Swayze said.”
Ain’t that the truth in 50 other cities, including in FL?
Jas
what? $400 billion in home equity? talk about your lost opportunities, why the govt. could’ve built 333 B-2 Stealth bombers with that kind o money…
Or it could have funded one more year of war in Iraq…
http://www.safehaven.com/article-9465.htm
Long time reader, first time blogger. As a 26 year old somewhat educated male, I look at what these people were sold on and I wonder how people could have been so naive when buying or taking out equity for that matter. A lady bought a home for 150 and now owes 430…”We used the equity when the kids went to highschool” - from another article. Are you kidding me? You used 272 thousand dollars in equity for your kids and a better kitchen! I bet your uneducated kids didn’t even make it to a prestigious school! I hope all these people who pretended to be Donald Trumps and faked a lifestyle they never had crawl into holes never to be seen again. Thank you morons for messing it up and delaying my first home purchase becuase I knew this would happen and a home in the El Cajon should never be worth more than 400,000. Gotta love San Diego!
Ben, your website is the best and I am so glad to have discovered it!
The reason these “morons” sucked money out of their over-inflated property prices has a name. It’s called GREED. Just take a deep breath, put your pennies away, rent for a few years and you will get your house in El Cajon at the price you can afford. Above and beyond that, if you engage a Realtor when you decide to buy DO NOT TRUST HIM OR HER. Avoiding these pitfalls is VERY easy. Simply apply the old adage: “If it looks too good too be true - it probably is too good too be true.”
Mike… I think envy and vanity (mainly) and immaturity (secondarily) vice greed was a bigger driver in HELOC withdrawals… just my gut from those I know who’ve used them..
Mr. Buck:
I totally share your frustration with all these bubble riders who are now whining that they have to pay back the $$ they borrowed. You’re only 26, so your house purchase will only be delayed for a couple years. I’m 31. I “should” have bought a house about 2.5 years ago, and will have to wait another 2-4 years before doing so. Every time I see an FB fall, a tiny smirk is born on my face.
Yeah, with a family in growth, I’d like to be able to buy. Hell, I’d like to be able to rent a house right now, but unfortunately the local homedebtors are still looking for GFs to cover their mortgages. So we stay in the apartment and hope that we can rent a more baby-proofable place before the kid is mobile.
Big V, you’re 31? You don’t look a day past 29! Sorry for your continued frustration and give a “howdy” to Mr. Big V from me. We’ll all have sweet places out here for a song in a few years. OK, maybe the song will be In-a-gada-davita, but still…
MrBubble
Mr. Buck: I first saw a property bubble in UK when I just finished college ~23 years old. I saw many of my age group buy in haste and repent at leisure. Similar story of negative equity and in some cases, turning in the keys.
What you are missing from here is the “RE” will always go up group think that was so common. You may also want to thank your parents. If you were born a few years earlier, you may have got yourself caught up in this mania. There are many people who have not had the life time experience of a recesion.
You gotta thank our finanical system for that. People just enjoyed the gravy train of free money, courtesy of Alan Greenspan.
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“As for Urbina, she was not counting on using her equity line soon, but she likes having one. ‘What if I did have an emergency and I needed the line?’ she said.”
Hey, Urbina, there was something called saving money for emergencies. That must be news to you, but warm up to the old-fashioned idea.
Jas
As for the fiscal state of California currently:
“…December 31st is the mid-point in the budget year, and it’s a good time to get our bearings on the actual condition of the state general fund. Unlike the Department of Finance monthly reports, the Controller reports money as it is received and spent, and as such gives the clearest picture of the state’s actual financial position.
At the budget mid-point, the Controller reports that the state has spent $15.8 billion MORE than it has received in revenues – the biggest mid-year deficit ever recorded. Our actual cash balance is a negative $13.3 billion – all covered by borrowing. Last year, the cash balance was a negative $5.4 billion, meaning that our cash position has deteriorated by $7.9 billion over the past 12 months – that’s the actual measurement of our current annual deficit spending…”
As reported by state senator Tom McClintock on his web site. So much for the “Golden State.” Yes, there will be blood!
I overheard 3 cops on Saturday night talking at Baker’s Square (good pies). They are going to start requesting restitution for DUIs again. Also, the water company “mistakenly” didn’t turn on my water at my new house (rental) on Friday, forcing me to call and request service on Saturday. They said they would have to charge me $190 for it. I said “no thanks”, and my hubbie decided to steal water from the lake to use in our toilets. There are traffic cops everywhere, and I have heard reports lately that cops have not been showing up to “noncritical” calls, such as noise complaints, that can turn ugly if left unattended.
Class Action against Homebuilder Standard Pacific’s CEO and CFO and the company NEVER NOTIFIES SHARHOLDERS?
From the 10K:
On or about January 23, 2008, Lead Plaintiffs filed a Consolidated Class Action Complaint for Violations of Federal Securities Laws. The Consolidated Complaint names Andrew Parnes and Stephen Scarborough, Standard Pacific’s Chief Executive Officer, President and Chairman of the Board, as defendants.
Plaintiffs allege that the price of Standard Pacific’s common stock was artificially inflated during this period because Mr. Parnes and Mr. Scarborough provided false and misleading earnings and sales guidance to the public
After the lawsuit was filed, the board gave the CFO a $1.5 million dollar cash bonus while the company is in violation of its debt covenants. No wonder CA real estate is in trouble.
Please, say it ain’t so … not in America ?
I wish I knew how to post videos on the blog but I’m not that computer savvy. Anyway, I just watched a video of George Magnus, Senior economic advisor for UBS in London, being interviewed by the Financial Times. Quiet guy. No standing on a soap box shouting, “Now is a great time to buy!” Just the opposite.
Magnus warned a few years ago that the housing in the US was going to nose dive. Of course, shills like the Larry Kudlow’s of the world, said he didn’t know what he was talking about. The Bahgdad Ben Bernake’s and the Godfather Henry Paulson said sub-prime was contained. Mr. Magoo assured us there wasn’t a problem. Suffice to say, Magnus has been proven right as was Professor Schiller. The Kudlow’s, Bernake’s, Magoo’s, Paulson’s of the world were ALL wrong.
In the current interview, George Magnus said that by this October, US tax payer dollars will be used to bail out FB’s. He said that Bahgdad Ben Bernanke’s moves (lowering interest rates) will not work. The tax give-away in the works will not do much. That this current situation is FAR worse than any previous financial problem. He expects a 1 trillion dollar meltdown.
Magnus states that the situation can no longer be saved by the Fed printing more money and lowering interest rates and that the only solution is massive government intervention. Magnus states that cheapening credit via Bahgdad Ben Bernake’s helicopter is NOT going to solve the housing crisis and now only government legislation (what that means I shudder to think) will make a difference. He does, however, predict another full 1% drop by Bahgdad Ben ut it will not be enough.
If anyone is foolish enough to think of buying property at this juncture, there is no question in my mind they are stepping in front of a freight train which is NOT slowing down but is actually gathering speed. Once again, put any thoughts of buying out of your mind for at LEAST 2 years. At that point there might be debris you can sort though.
The problem that the fed has is that they really only have one tool - interest rates. And, as they say, to the man who has a hammer, every problem looks like a nail.
Oh they got other tools. They look at the books and quietly talk about bank reserves.
If anyone is foolish enough to think of buying property at this juncture, there is no question in my mind they are stepping in front of a freight train which is NOT slowing down but is actually gathering speed.
my brother-in-law just bought in Cape Coral, I told him it was a bad idea.
He’ll be doin’ the Joshua Tree Boogie in no time.
“and that the only solution is massive government intervention.”
I don’t expect anything massive to happen until after the election.
What about cheap areas like the rust belt? Buying is cheaper than renting in many cases.
“‘Apparently sitting on the sidelines is a multitude of potential new investors, which EFI needs to fund its current loan commitments, as well as create an opportunity for Fund investors to liquidate some of their shares,’
Looking for new bagholders?
12% returns on investment? Needing ‘new’ investors to liquidate exiting shares? Mom and son corporate bigwigs?
Can anything scream low-ball Ponzi any louder?
Why in the world would anyone consider building condo’s in downtown Los Angeles. I worked in downtown LA for a couple of years in the mid 90’s, and wanted to make sure I was out before 6 pm (or dark, whichever came first) and back to the safety (relative of course) of the ‘burbs’. After that, the folks that roamed the streets were not the types that I wanted to be around. At least, downtown San Francisco is a happening place and I could see some value of living in downtown SF if single, and upscale. Not a place for families, but felt safer than LA. I worked in downtown SF for a couple of years also and never felt like I ‘had to get out’ before dark and often stayed to do whatever.
Just back from Cape Town, South Africa and it was the same sentiment about 6 or sundown.
So if there’s blood downtown, will there be blood uptown? All across town? Upstate? Downstate? In the Northeast? In the Southeast?
River City and Peoria? I wonder if evacuation plans have been made for large cities in the event of catastrophes… like riots, food or water wars, civil unrest, etc. Surely our plan-ahead govern-mental giants have mapped out areas in the wide open West and Southwest where “temporary” relocation camps could hold a few million disgruntled types. Would it be FEMA or Homeland Security, or who, do you think, would be in charge of such projects if TSHTF?
But hey, think of the kids, for them it would be like an adventure, a real long summer campout, a vacation away from the big city, a breath of fresh air. FRESH AIR - yeah, that’s the ticket.
Just until things blow over. Till it’s safe back home.
Google KBR and “detention. That will get you started.
Ben, you don’t need to go to downtown LA to know it is the sewer-pit of the world. The place reeks. I went there everyday for 2 years, and was so happy to get my transfer back up to the Bay area back in mid 1990’s. I can only imagine it has gone downhill even worse now. Tijiana feels safer. At least they want the American tourists, as it is their economic lifeblood.
You wouldn’t know the difference between Tijuana and Downtown L.A….or I should say couldn’t tell the difference…
I’ve spent time in downtown L.A and I’ve spent time in Tijuana and I can tell the difference. The stink of urine coming off the walls in the alley ways of L.A is much stronger.
Hello everyone,
There has been a lot of talk in the media lately about it being a buyer’s market and how it is a “good time to buy”. Let’s look at some historical data and see if it truly is a good time to purchase. This will also let us compare how buying a median priced house today differs from buying the same house in the past. To accomplish this, I pulled the interest rates for the last 20 years as well as the median price and median income for the same time period. This allows us to truly examine, without emotion, the hard data. Remember, it is easy to spout nonsense like “demand is high, they are not making any more land, or it is special here”, but it is impossible to argue with the numbers.
The first thing the media cites is that interest rates are at historic lows. Let’s see if that is true, and if so, how much lower are rates today than the historic average? One caveat: we will ONLY look at 30 year, fixed rate mortgages.
Looking at the interest rates for the past 20 years lets us see that rates are indeed at historic lows. It is interesting to note, however, that rates have floated in the 6-8 percent range for nearly all of the past 15 years. Today’s low rate is currently 5.82% versus a historical median rate of 7.6%. (A median number is when half the numbers are higher and half are lower.) So using the historical median as a guide we find that that buying today saves us exactly 1.78%. Wow! That is quite a savings right? Well, how much will 1.78% mean on a monthly payment? If you purchase a house with a mortgage of $475,000 (LA’s median home price) you will save $560 per month. This equates to $6,720 per year. Certainly a good savings, but the median home price in LA County declined $41,000 last year! So if you buy today, because of a low interest rate, you are gambling that your house will not depreciate more than $6,720 per year. Doesn’t look like a good bet to me…
The second thing the media talks about is that prices are lower than they have been in a long time. Let’s take a look at the past 20 years of median home prices for LA, Orange, and San Bernardino Counties.
Here in California, we are subject to numerous cycles where housing prices rise, then decline, only to rise again creating a long term pattern of appreciation. This would seem to indicate that the real estate agents are correct and that any time is a good time to buy a house here in Southern California. However, they are wrong!
Let’s see what happens at various purchase points during the last 20 years and see where it would have been optimal to buy a house.
The year is 1986 (Before the boom)
Median household income is: $24,897
Median home price is: $135,393
Median interest rate is: 10.19%
Your monthly payment would be: $1,207
How many years of labor to pay off your house: 5.44
The year is 1990 (Peak of the boom)
Median household income is: $29,943
Median home price is: $212,130
Median interest rate is: 10.13%
Your monthly payment would be: $1,882
How many years of labor to pay off your house: 7.08
The year is 1996 (After the boom)
Median household income is: $35,492
Median home price is: $172,886
Median interest rate is: 7.81%
Your monthly payment would be: $1,246
How many years of labor to pay off your house: 4.87
The year is 2007 (Decline has started)
Median household income is: $48,201
Median home price is: $475,000
Median interest rate is: 5.82%
Your monthly payment would be: $2,793
How many years of labor to pay off your house: 9.85
Just looking at the data above is shocking. Not only is it still not a good time to buy, it is nearly the absolute worst time in history! It has never taken longer to pay off your house than it would if you bought today. Let’s adjust those numbers above for inflation and find out just how much worse it is today than in years past.
Median income adjusted for inflation:
1986: $43,699
1990: $44,778
1996: $45,416
2007: $48,416
Looking at the above salaries, we can see that we are earning on average about $5,000 more today than we were in 1986. Surprising isn’t it? Let’s take a look at median home prices adjusted for inflation and see if it equals out.
Median Home price adjust for inflation:
1986: $257,689
1990: $350,513
1996: $233,135
2007: $475,000
Wow! So we get to make an extra $5,000 but have to pay an extra $218,000 for a house? That is outrageous! Not only do we pay more for the house today, but we pay increased property taxes for as long as we hold the property as well! Looking at all the data I would say that there has not been a worse time to buy a house in the past twenty years than today!
The last time the market bubbled and then returned to normal was the ten years between 1986 and 1996. Interestingly enough, even though it appears at first glance that prices never returned to their 1986 levels, they actually went lower when adjusted for inflation. So saying that prices never come back down and only keep going up is ONLY true if you do not adjust for inflation. If you bought a home in 1986 and sold it 1996 you actually LOST $24,000 in purchasing power due to inflation. If you were unfortunate enough to buy during the peak years you lost $117,000. This does not include all the interest payments you would have made during that time.
Clearly figuring out how to time the market is important. So when will it be a good time to buy in our market? Using the past 20 years as a reference point, we should wait until the median price reaches level seen in 1996 adjusted for inflation. In today’s market, that means prices need to fall an additional 48.5% to reach the absolute bottom. Whether it reaches that level with price declines, inflation, or a combination of both, the 20 year trend indicates it will eventually hit that spot. The question is whether or not we will be patient enough to wait.
Can’t happen you say? Tell that to the people who bought in 1990.
Your argument is cogent but you must be new here. This is old potatoes.
We need new potatoes (aka trolls) so we can beat the cr@p out of them.
Sorry there aren’t any trolls.
They are all at the seminar on ‘how to avoid foreclosure’ sponsored by the local government.
please, allow me.
Consider this. There’s many comments about rich getting richer, decline of middle class, etc. Rich getting richer does not show up in the median income. If 10 avg guys are in the room, the median income might be $50k. Bill Gates walks in. The median is still $50k, although the average is much higher. So, if the top 25% percent or so are making more, this will not affect the median.
How does this affect housing prices? Generally speaking, people towards the higher end of the income scale are more likely to buy. (no offense intended to renters!) So in this scenario of higher end going higher, home prices could go up while median is flat.
This won’t go forever. Folks who don’t care about own vs rent (or prefer the flexibility of renting) will choose to rent if owning costs more, which it does now. but this does explain some of the rise of the median income to median home price multiple.
Yeah, go FPSS, go GO!
a nice chuckle to end my day… many thanks pusycat..
“prices need to fall an additional 48.5% to reach the absolute bottom”
Sounds good.
Even though you are preaching to the choir I appreciate the time you spent writing that all down. It was very well written to.
Thanks Stretch - Very well researched and revealing commentary.
Nicely said stretch
downtown LA
Untill they decide what to do with the homeless population downtown, the whole ide is a pipe dream…bubble or no bubble.
Turn Michael Douglas lose down there as his character from “Falling Down”. That should take care of the problem. And a damn funny movie.
I wonder who played “The Gimp” in Pulp Fiction.
In the mortgage business, eh?
http://sfbay.craigslist.org/sby/rfs/583712094.html
“I also know my place is barely worth 390K…but I also know that no matter what right now is an absolutely awesome time to buy a home”
Gawd!!
LOL I can’t believe someone is still hawking a interest-only loan
Give him a glass of milk, a cookie, a pat on the head, and tuck him into bed.
Then smother him with a pillow. Eat his cookie, drink the milk, and offer him up for a Darwin Award.
“‘The bottom line is, the real estate world is frozen right now,’ said Homer Williams, a Portland developer who is involved in a number of projects in downtown L.A.’s South Park district….”
Enjoy him LA. He’s the guy responsible for condos on every block abutting the river in NW and SW Portland and all the tax subsidies and political back-scratching that go along with them. Glad he’s focusing elsewhere for now…
FWIW, I just spent a week driving from SF to Phoenix, visiting, and driving back. Damn near every billboard I saw was for housing developments.
Or Casinos.
Hmmmm……
I regularly drive much of that same route (SF-Albuquerque) and I concur 100%. It’s staggering and makes you realize how much of the “economy” was built on the shaky foundation of a real estate bubble.
After seeing billboard after billboard, with one nature-themed development after another (Quail Run, Lincoln Meadows, River Canyon, plus about a dozen named “Tuscany”) you realize that it is all just one big con game. We were bewitched and bedazzled. They knew just what emotions to play on.
And the Academy Award goes to all of Realtordom, for best acting performance in the category of sheer fantasy.
How much crack did this house buy?
http://tinyurl.com/2xvg9d
Sales History
01/14/2008: $381,660
10/14/1985: $101,500
I’m guessing the last time it was cleaned was 1985.
Ew, I can smell it from the East Coast.
It’s actually in a nice middle class neighborhood too. I imagine the neighbors did a little happy dance when they moved.
I’m taken to a ‘log-in’ screen. Think the used home sellers read your link and took it down?
You have to set up a ZipReality account to peek.
‘The slight increase in sales predates the president’s signing of an economic stimulus package including a temporary increase in the conforming loan limit, but that much needed reform could give the market some momentum,’ said C.A.R. Chief Economist Leslie Appleton-Young. ‘Let’s hope congress and the president see fit to make the higher loan limit permanent.’”
The (hyphenated-one) thinks ’ssshrubery will come to the rescue?
He’s the lamest duck since Hoover, got Hoovered out of office, 76 years ago…
OK, now I’m confused. I thought Neil was EmperorNorton. I guess I’m not very good at this.
Fleet Enemas work really quick.
“According to Default Research Inc., San Diego had 6,003 Notices of Default and Notices of Trustee’s Sale in January compared to just 2,997 a month earlier and only 1,723 in January 2007.”
The SLO Tribune article and the comments on it in its own web space are very interesting, appearing to describe a simple (or not so simple) vehicle for the exploitation of amateur investors. Ms Gush apparently collects a $143K MONTHLY fee for the management of this enterprise, whether it is doing well or not. Good luck, inv’s.
I don’t know if anyone sane is going to want to live in those rapidly deflating neighborhoods. On RedFin, homes in East Oakland that sold for $300k two years ago are now selling for half that price.
First off, who the hell wants to live in East Oakland, let alone pay $300,000 for the privilege? Second, who wants to live there now, no matter how cheap? People rarely take care of properties they know they’re going to lose, foreclosed properties are frequently vandalized, and those neighborhoods are going to see serious decline. Think Detroit or Flint, Michigan.
And in Orange County, the drop in employment numbers already gives the area the appearances of a recession. ‘Orange County looks to us to already be in a recession in terms of negative employment growth,’ Magaddino said.”
I like how s/he got the word growth in there. Contraction of employment would sound to bad but if we get the word “growth” in there…
Also as the recession worsens politicians will talk about “the economy having a bit of a pull back”.
They hate to use words like depression.
negative employment growth vs job losses
credit markets vs debt markets..
credit cards vs debt cards..
low interest rates vs outrageous home prices..
Cuz, we’re sheeple.. baaaah… baaah
There Will Be Blood was a terrible movie. The soundtrack was awful. There was no point to the story and very boring. The acting, props, and wardrobe was great, but that didn’t help the flawed script. I hate it.
The credit burst is a mess and the movie is a good comparison to the whole thing.
Couldnt disagree more. I
I might have a warped mine, I was actually the only person laughing at the final scene in the bowling alley (in the theatre). My wife looked at me like I was nuts…
The movie was great and DDL was on his game!
I’m with you Crispy. Two high school buddies and I watched it at the Charles St. Theater in “Bodymore, Murdaland”, drinking whiskey like the old days and laughing by the end of it. Plainview was this monomaniacal, misanthropic Ahab-like character who absolutely pwns religion with all of these weird, discordant yet textured strings in the background. Good stuff.
In five years I will be drinking knife catcher milkshakes.
MrBubble
Agreed. Aside from Day-Lewis, it was like watching paint dry. And the score was just plain bad, sorry to say.
Guess you don’t like Radiohead, then.
said Urbina, who works as an underwriter for a mortgage banking and wealth management firm in Palo Alto.
Since when is mortgage banking wealth management? Too many people believe(d) that DEBT=WEALTH.
About five years ago I had an after-tennis conversation with a friend. He wanted to buy a new house he could not afford with very little DP because “REAGU”, and I wanted to keep all of my equity in common stock. He spoke about Rich Dad Poor Dad, and I spoke about writers who use books to generate an income stream. (We have all since learned that RDPD belongs in the fiction dept.)
This past weekend I visited him at his house. Nice house in a three to four year old development, they just can not afford it and I suspect that lots of his neighbors are in the same boat. His wife is damn near close to a nervous breakdown. She told me that I was just about the only visitor (outside of family) that they have had since they bought the place three years ago. Too busy working “retail hell” to pay for it.
He is now looking to get out for what he “has in it.” Not going to happen. House next door for sale, house across the street for sale. Second listing with second used house seller. Foreclosure for sure, but they have not yet capitulated.
Now here is something very interesting: It was obvious from my visit that this new house buying thing was HIS idea, not HERS. And the new car purchase of two years ago was HIS idea as well. And yet in that same conversation five years ago I remember him telling me that if it was him with my stock equity then his wife would make him sell the stock to put it into a house.
Lesson learned: In the future, run from the serial book writers and have nothing to do with their wealth-busting money flavor of the day.
“REAGU”, ahh yes reagu I hate that stuff
you’re all wrong this calculator says buy !
http://finance.yahoo.com/calculator/real-estate/hom-06;_ylt=AiT4_tuUJFdxhuDCt710Xbu7YWsA
That calculator is no good - it won’t let you put in negative numbers for the appreciation rate…
“Urbina said she was surprised the lender didn’t simply lower the amount of her line of credit rather than suspend it. ‘I would have felt that was a very fair thing to do,’ she said.”
God forbid that the bank should factor in such discriminatory traits as ABILITY TO PAY. Don’t these people realize that the bank doesn’t WANT to lend them $$ that they are not likely to pay back, even IF that loan is collateralized by a properly valued asset? Although Urbina is totally wrong about the value of her house, it doesn’t really matter. Why should the bank go through all the effort of foreclosing just to get their money back (with a forshortened interest horizon), when all they have to do is protect themselves upfront by NOT LENDING MONEY TO PEOPLE WHO CAN’T PAY IT BACK?
No Big V, what the bank is saying quite loud and clear is not only is your property worth less today but that they expect it to be worth much less in the future.
I know. In the past, the game was that you didn’t have to earn a living to pay your debt, because you could always just sell the house for some astonishing number. Your income had nothing to do with it. Well, surprise, surprise, incomes are back. So sad.
Yes… and that means real education and real careers will be back soon as well… talk about a tragedy…
Comment by BubbleViewer
2008-02-25 18:44:30
I regularly drive much of that same route (SF-Albuquerque) and I concur 100%. It’s staggering and makes you realize how much of the “economy” was built on the shaky foundation of a real estate bubble.
Bubbleviewer, I made the same drive many time about a year ago. Much of the eCONomy I noticed was the same. Saw too many casinos in CA, AZ, and NM. Too many new crappy houses I can’t imagine anybody buying. Wondering about the ‘running out of land’ crap argument when I just drove through 900 miles of empty land in CA, AZ, and NM periodically broken up by a town building homes for all of the Boomers that are going to retire there with their endless bank accounts. HAHAHA
Funnily enough, I was in San Francisco all last week at a conference….stopped in to the wonderful SF MOMA to check out its new exhibits.
One was a photographic exhibit of the Bay Area, focusing on the intricate freeway system and its environs - with some enormous wide shots of San Jose.
The husband just thought the photos were beautiful (and they were).
I, on the other hand, being a long-time HBBer, saw the houses rather than the freeways. I noticed in the photos that San Jose’s housing stock (at least near the freeways) was at best 10 years old. Acre upon acre of new apartment/condo housing….and looking closely, almost no cars on the streets and the driveways.
Its been more than a decade since I’ve been to San Jose - but…wow… looks like over half of the city is new construction.
Wonder how that’s going for them?
And I can agree with others about the billboards in CA, NV, AZ - on our way up to Burning Man last year from Los Angeles, well over half the billboards on the 395 were for homebuilders, for zero lot houses, in the midlle of nowhere, with no amenities, next to the highway.
NPR AUDIO - Walk away from your mortgage
http://www.npr.org/templates/story/story.php?storyId=19346659
An online company is trying to convince some homeowners that losing their home might not be so bad. The Web site, youwalkaway.com, features pictures of happy families; it urges stressed-out homeowners to “use our proven method to Walk Away.”
I had heard about this but had not seen the website.
Its says
“Your lender WILL NOT be able to call you in attempt to collect!
Your lender WILL NOT be able to collect any deficiency or loss they may receive by you walking away!
You WILL be able to stay in your home for up to 8 months or more without having to pay anything to your lender!
You CAN have the foreclosure REMOVED from your credit!”
Wow…….wonder how many will go for it? How many will live rent free for months?
This should only prolong the process of dumping more inventory into an already saturated market.
Incredible……
My partner mentioned to me that he recently suggested to someone that they should simply walk away and rent. He said that they hadn’t even thought about that as an option!
Well, they did, and now they rent, have more money to spend, shorter commutes, and a better life.
If the word gets out that renting is the new black, foreclosure rates will spike (even more…).
I just visited brokeroutpost. I saw this post titled “Last of the Mohicans” where they discuss how many brokers are now in other careers. Kind of funny.
http://forum.brokeroutpost.com/loans/forum/2/204745.htm
The Mohicans would have perished even faster had they been wearing bright yellow jackets.
Sorry Tom.. didn’t read the link… All I’ll say is that comparing Realtors or Mortgage Loan Brokers to Mohicans is an insult of massive proportions to the Mohicans.. especially the last of the Mohicans..
Right now my city council is showing a presentation about how expensive housing is here compared to wages, and how we have to take a more proactive approach…with absolutely no sense of how this is not unique at all. Absolutely clueless…looking for taxpayer $$ of course…blech.
Riddle me this:
http://www.movoto.com/real-estate/homes-for-sale/CA/Saratoga/12246-Via-Roncole-100_777653.htm
12246 Via Roncole, Saratoga CA. Asking about 1.5m. About 2000 sqft, looked reasonably nice. Open house, to pending in 1 week.
From mlslistings.com:
1852 orangetree, in mountain view. Asking 1.495. looked fine. Listed to pending in 2 weeks.
698 los ninos way, los altos. 1.449m. ok but small. Listing to pending in 3 weeks.
20018 knollwood dr, saratoga (cupertino school). 1.448. Listing to pending in 2 weeks.
OTOH, a crack in the Fortress:
12070 Saraglen Dr in Saratoga. 1.429m. For sale for 3 weeks now, not pending yet. Last summer this would have been gone in 1 week.
And of course a variety of houses outside of Cupertino / Saratoga / Los Altos / Los Gatos school districts are lingering on MLS.
Inventory in these areas is under what it was last summer still.
Why could it be? There’s not very many houses in these areas for under $1.5m. At any time, maybe 10-15 for sale in the better school districts. And there’s more than a few hundred people that can afford them. The prices aren’t really going up any more, but not going down much either. I guess this will continue unless stock prices dive, or if sales of median-priced houses dive. That hasn’t happened yet either - condos yes, bad hoods yes, but not too many people moving up from East Palo Alto to Palo Alto. And high-tech companies are still hiring and giving raises.
The folk in “higher class” neighborhoods (read: ugly, run-down, old, close to OK schools and work) are holding out, using their 401ks and whatnot to keep their houses until the market comes back. They actually have money in savings, and don’t want to lose their good credit scores. They will lose everything over the next 2-4 years. The smart ones sold out in 2005.
“Why could it be?”
Double strength Kool-Aid in the Valley. Aging population locked into “golden prisons” because of Prop 13.
But be patient: Private equity spigot starting to turn off. Tech stock prices just beginning to fall. Consumer spending/real estate-led slowdown just getting started. The nicer towns will be the last ones down — but it will happen.
There is a short sale currently listed in Atherton (on Selby).
Granted, small lot, older house, but someone lent more than the house is now worth.
That would have never happened in 2005 or 2006…
“As for Urbina, she was not counting on using her equity line soon, but she likes having one. ‘What if I did have an emergency and I needed the line?’ she said.”
You’d have to rely on your savings. Oh, wait. No savings. My bad.
DOC
Property values are plunging to the ground at the speed of gravity and the mighty C.A.R. hopes increases in loan limits are here to stay. Are these people retarded? Why, so those of us living in what were formerly the median priced homes can survive our foreclosures when forced to move and possibly move into McMansions at half price three years from now?
Get a grip people.