Adjusting To The New Reality In California
The Contra Costa Times reports from California. “For some, foreclosed homes may be the embodiment of broken dreams, but for others they can be a sign of hope. Rande and Tracy Ross, a married couple from Stockton, came on the tour to look at possible investment properties, mainly to rent out. ‘It makes you sad. So many people got into these bad loans because they listened to their agents or mortgage brokers. They thought they were experts,’ Tracy said.”
“The Rosses paid more than $400,000 for their home in 2005, and were going to look at foreclosures in their own neighborhood, priced less than $300,000.”
“‘On one hand, you say, ‘Oh, my God!’ but on the other hand, this could be a good market for buying,’ she said.”
“Greg Paquin, president of the Gregory Group, said that these foreclosure tours are giving ‘exposure’ to homes that may not otherwise make it to the general public. ‘Many of these bank-owned homes can be purchased for less than the replacement costs,’ he said.”
“Foreclosed homes are selling about 30 percent less than original asking price in the Tri-Valley and 35 percent lower in Fremont and Newark.”
“John Case, an associate broker in Brentwood said that the tour covers most of East Contra Costa County’s communities including Antioch, Brentwood, Discovery Bay, Oakley and Pittsburg. ‘The overwhelming interest is in Brentwood, probably because it has taken the biggest hit in price,’ he said.”
“East County has been among the state’s hardest hit areas in the subprime mortgage crisis. Of the 556 homes on the market in Brentwood in February, 181 were bank-owned, according to statistics provided by the city and gathered from the DataQuick.”
“In Antioch the situation is worse, with 503 of the 1,184 homes on the market bank-owned, and 69.26 percent categorized as distressed.”
“With more than half the homes (56.65 percent) on the Brentwood market in February classified as distressed the city is hosting a free workshop on Saturday to educate homeowners on the foreclosure process and to connect them with resources intended to help.”
“‘We have a lot of people that do not seek the outside help because of fear, because of embarrassment, and they could miss a good opportunity to still continue to be a homeowner,’ said Elaine Brooks-Cox of Pittsburg’s Pacific Community Services.”
The Santa Cruz Sentinel. “Fewer people are fleeing the once prohibitively expensive coastal reaches of Northern California, according to U.S. Census Bureau numbers. Santa Cruz County was among a number of greater San Francisco Bay Area counties that saw more U.S. residents staying put last year than any time since 2001.”
“For an explanation, observers say look no further than slumping home sales and slipping economic opportunity. ‘For people to leave the most desirable areas, there has to be motivation to go, like jobs and housing,’ said Jim Chubb, a loan broker at Pacific Inland Finance in Soquel. ‘With the economy shrinking, that hasn’t happened.’”
“‘As the housing market has tanked, people aren’t so sure what they want to do,’ confirmed John Weeks, director of the International Population Center at San Diego State University. ‘They’re not going to make precipitous decisions about new housing.’”
“The draw of cheaper real estate inland is no longer an attractive investment as housing markets have plunged in places like Salinas and the Central Valley.”
“‘People are saying we don’t want to buy there. Others paid four [hundred thousand] and it’s now worth three,’ said Chubb.”
The Fresno Bee. “The Merced-based holding company for County Bank anticipates a big loss for 2007 — caused by falling real estate values in the central San Joaquin Valley.”
“While the bank’s most recently reported problems have arisen mainly in the last quarter of 2007, the August foreclosure on an $11.7 million loan for a failed condominium construction project in the Sacramento suburb of Rocklin was an early sign of problems, Morford said Joe Morford, banking analyst with RBC Capital Markets in San Francisco.”
“‘Through 2007, management indicated that was an isolated issue,’ he said. ‘Now we see there’s much more deterioration across the portfolio.’”
The Tribune. “Paso Robles will hold off on filling city jobs and defer some financial transfers as part of a belt-tightening effort in a challenging economy. Paso Robles’ economic picture is being influenced by fewer homes being built, the national mortgage crunch and rising gas prices, according to city staff.”
“So far this year, the city has had three housing starts compared to 46 last year and 241 in 2006. For 2004, at the peak of the building boom, the city saw 512 housing starts.”
The Desert Sun. “The abandoned, foreclosed home on Caribe Street looked OK from the outside. Inside, it was obvious that squatters - homeless people who stay the night in vacant houses - had invaded. It’s a scene that’s starting to crop up in neighborhoods across the valley - a byproduct of skyrocketing foreclosures.”
“Indio, with nearly 1,500 homes in foreclosure in the city’s limits, is leading valley cities in taking a stand. A new law goes into effect April 4 targeting abandoned homes with overgrown landscaping, stagnant pools and other eyesores that scream ‘empty’ to squatters.”
“In Desert Hot Springs, where abandoned homes also are being used for unsupervised parties by youths, a similar ordinance was approved Tuesday by its City Council. In Palm Springs, the subject of abandoned buildings including homes was discussed at a recent City Council study session.”
“Homeowners are walking away from their homes without notifying their lenders, said Indio police Lt. Forest Meadows said.”
“And banks in some cases won’t take responsibility for properties until more than six months into the foreclosure process, he said.”
“Stephanie Grant, assistant VP of public relations for Wells Fargo, e-mailed the following statement: ‘We suffer significant financial losses whenever foreclosure becomes necessary, and neighborhoods may suffer from vacant homes. Wells Fargo has a strong business interest in selling a real estate owned house as quickly as possible.’”
“Indio Councilman Mike Wilson said he’s relieved to have the new ordinance in place. He had a squatter staying in a foreclosed home across the street and saw what it did to his Sonora Wells neighborhood.”
“‘They were coming late at night and leaving early in the morning,’ Wilson said. ‘If we’re maintaining the front yard and pools and Jacuzzis it takes away the squatter or transient issue.’”
From ABC 12.com. “A family of accused con artists is suspected of leading an operation that processed thousands of home loans in California during the past several years in a widespread refinancing scam.”
“Prosecutors say the operation was led by 25-year-old Eric Pony. ‘When someone like Pony, as alleged, lies to them and steals money from them…he’s gonna go to jail. We’ll do our best to make sure he’ll spend as much time there as possible,’ said Larry Roberts, the deputy district attorney in San Bernardino County.”
“When Traclyn Sharrit looked to refinance her mortgage, she thought she found a solution to save money on her San Bernardino, California home. She soon realized she’d been sold a bill of goods she never bargained for. Her mortgage bill is now beyond her family’s means.”
“‘I was paying 2,000-something dollars a month…People like Eric Pony are not only robbing my American dream, they’re destabilizing the entire housing and financial market,’ accused Sharrit.”
The Associated Press. “The combination of sinking home prices and tighter lending standards has been a major aggravation for Ron Broussard, a 38-year-old sales representative for a home builder.”
“Broussard took advantage of soaring Southern California property prices three years ago to refinance a loan on a house he had owned since the late 1990s. Today he’s still stuck with a $720,000 mortgage and has been renting it out since moving with his family to Texas a year ago.”
“Once appraised for $1.1 million, Broussard’s lender now says it’s worth about $300,000 less. He does not yet owe more than the property is worth, but Broussard worries that is a possibility. ‘The way the market’s going, you know, who knows?’ he said.”
“Broussard has found little sympathy from his lender, Countrywide Financial Corp. While Broussard accepts responsibility for taking out a mortgage whose monthly payments are due to skyrocket once the unpaid principal exceeds the home’s value by 15 percent, he feels betrayed by the lender’s unwillingness to negotiate better terms.”
The Daily Breeze. “Warren Snyder, who co-owns Carriage Realty & American Broker Loans in Torrance, has already seen his business slow because of the weak housing market. It may come closer to a halt with tighter lending standards. And Snyder says he’s OK with that.”
“‘If they’re taking steps to get back to the old rules and regulations, I think it’s going to be very, very good,’ said Snyder, a longtime critic of loosened mortgage requirements that have contributed to the nation’s current credit crunch. ‘These steps that they are taking are not enough, but they’re in the right direction.’”
“Home buyers are adjusting to the new reality, Realtor Adolph James said.”
“‘One of the things I’ve noticed is most of the people interested in purchasing property in the South Bay are bringing more money than they had in the past,’ said James in Manhattan Beach. ‘You’re seeing fewer people coming with only 5 percent or 10 percent (as a down payment). The psyche is you can’t come in with a shoestring because that’s how people got in trouble.’”
The LA Times. “The tumbling housing market has prompted county tax officials around Southern California to begin reducing the assessed value of many houses, resulting in lower tax bills for homeowners.”
“The values of more than 41,000 homes have been reassessed downward so far in Los Angeles County. Other counties have barely begun the reassessment process but promise to get the job done before property tax bills are mailed in October.”
“In Riverside County, the assessor’s office has been fielding at least 100 calls a day from people concerned about property values and wanting to know when and how theirs will be reassessed, said county Assessor Larry Ward.”
“‘It is a huge job,’ said Orange County Assessor Webster J. Guillory. ‘We will do it with existing staff and lots of overtime paid for weekend work and 10-hour days. We don’t have nearly enough staff to do this level of work.’”
“Around the Southland, officials are automatically reevaluating homes purchased in recent years, especially at the height of the housing bubble from 2004 to 2007. Thousands of homeowners have also filed informal requests.”
“Ventura County Supervisor Peter Foy said: ‘We’re not at the bottom yet. We could see another reduction in values. It’s not a good situation. It’d be nice if people felt their investment in their home was still what it used to be.’”
The LA Daily News. “Due to significant drops in Los Angeles County home values, Assessor Rick Auerbach said Thursday that he’s in the process of reassessing the values of 310,000 homes.”
“Auerbach said not all of the revaluations have come at the request of homeowners. Market conditions - and the growing likelihood that some properties are overassessed - have spurred him to review recent sales.”
“‘We are basically looking at all single-family homes and condos that have a purchase date, whether purchased new or resale, between July 1, 2004, and June 30, 2007, because those are the ones we think might deserve a reassessment below their Proposition 13 values,’ Auerbach said.”
“The 41,000 reviews were from that July 1, 2004-June 30, 2007, period, he said. Auerbach estimates the reassessments will reduce the county’s assessment roll by $5.6 billion.”
“The reassessment comes after the median price of a home in the county peaked in February 2007 at $616,230 and has since dropped 23.8percent, to $469,420, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp.”
“‘We expect prices to continue to slide down, and a lot of that downward pressure will come from foreclosed homes,’ Kyser said. ‘The assessor will continue to have to do this.’”
‘The Rosses paid more than $400,000 for their home in 2005, and were going to look at foreclosures in their own neighborhood, priced less than $300,000. ‘On one hand, you say, ‘Oh, my God!’ but on the other hand, this could be a good market for buying,’ she said.’
Well, this has to be a first. A FB going back for seconds!
And the idea of Indio FBs keeping the hot tub clean for squatters is pretty funny. BTW, the ABC 12 link has some orange jumpsuit pics some of you guys have been predicting. It really does seem that this case marks a new mood shift in the bust.
Yeah, what’s this THEY business. They were as big of idiots as the people they are sad about and now they are thinking about becoming even bigger idiots.
Luckily for them, real estate always goes up, in the long run…
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What if that happens after the owner who bought near the top is dead?
Jas
I myself agree with J. M. Keynes on his point: “In the long run, we are all dead.” If the new owner dies before his real estate goes up, then his heirs are SOL.
Papa was a rollin’ stone
Wherever he laid his hat was his home
And when he died
All he ever left us was a loan…
A FB going back for seconds!
well, this same “reasoning” is what makes paupers out of stock market “investors”. Buying the dips.
It works great in a bull market when every drop turns back up, and trend goes higher. It leads to bankruptcy when the bear market can’t find a bottom.
Cost-averaging down with housing inventory? A new investment scheme, I guess.
Buying on the dip in stocks can be good or bad, one has to carefully research this. But in general buy low, sell high
Buying the dips in a bear market will get you toasted.
This is a bear market in housing that could last 5 more years, and the share market bear may be just as long.
Got cash?
“Buying on the dip in stocks can be good or bad,
one has to carefully research this.”
No problem, Suzanne researched this.
DOC
Proving again, that we are still in the early stages of the bubble. Why go back for seconds when the area is still rife with excess housing?
And some are still expecting prices to go back up soon. I did a simple calculation that showed a $300K loan would take 10 years to take the principal down $50K. And I certainly expect the price to go down another $50K (20%).
Plus a rental is only profitable if you can rent it out. And to not commit fraud, you have to get a loan that gives you higher interest payments.
Also, renters aren’t stupid! Renting a single-family home carries a risk that the “owner/investor” may not make his mortgage payment and leave you out on the street. Better to rent in traditional apartment units.
It may be MUCH harder than these people think it is to get renters.
“Rande and Tracy Ross, a married couple from Stockton, came on the tour to look at possible investment properties”
Heeeere we go again. I see stories like these as problematic because despite the non-ending news of the housing recessions, there is a seemingly large amount of people who still view housing as none other than something you ‘invest’ in. As long as this attitude exists, the more likely that the bubble will reappear the second banks and lenders find another way to weasel people into homes.
I have to say that as of late, I know of two people who have bought homes within the last month… and both were very aware of the bubble’s pop, but bought anyway. Apparently, the shell of stupidity people have is a bit thicker than I thought.
God I hope banks don’t relax their lending standards again. Who will buy their CD? Do the banks want to throw away more money? Has a bubble in history ever reinflated itself after partially deflating? I have yet to see one such example of any bubble I know.
The only scenario in which that can happen is a scary one indeed. You see, wall street won’t buy that crap anymore, or any investors for that matter. The only way it could happen is if the Fed decided to promise to buy this stuff up if they started pushing it again. We know that’s basically what they’ve done in that past few weeks, that is, take the crap off the hands of these investment banks to keep them afloat and hopefully un-seize the credit markets. But you can’t make the lenders lend what they can’t sell. So will the Fed step in and not only buy the old crap, but start buying the new crap to create crazy credit again? God help us if they did! You think todays crisis is bad, if that scenario unfolded…………I have to think there’s enough sanity left to keep that from happening.
If that happens, my parents will buy several “investment” lots and flip them. So would many others. Itll be a bubble all over again. I hope this doesn’t happen it will compound today’s existing problems.
I didn’t say it would reinflate the bubble, because it won’t. I’m talking economic Armageddon.
I know one: The South Sea Bubble experienced the mother of all dead cat bounces after it started to pop. The prospect of another chance to make a killing on the upside was so enticing that even the likes of Sir Isaac Newton, inventor of the calculus and architect of the Newtonian world view, who had made a personal fortune by selling before the bubble began to deflate, was drawn back in. Later, upon losing said fortune, he uttered a knifecatcher’s quote for the ages:
“I can calculate the movement of stars, but not the madness of men.”
Top story for ABC News 30 last night… “Fresno housing has hit rock bottom…”
Apparently Fresno is starting a Spring marketing campaign disguised as news event.
http://abclocal.go.com/kfsn/story?section=news/local&id=6033383
I damn near hit the floor on this one. Lots of phrases like “I think prices “, “Pull the trigger”, “I believe”,
Bobby Fena with Colliers Tingey International said, “Banks are flush with cash that they need to lend out,
LOL.
I know that guy. Went to college with him. And what he really meant is, “Banks have flushed the cash that they previously lent out.” A small error in syntax…
“He recommends homeowners who owe more than they can make on their home wait out the market, but says those with equity may want to take advantage. “For those people who have equity or cash to invest, this is a classic move-up sellers market.”
Equity to invest?!!! This guy is like the dude that never figures out that if you put your hand in the fire you get burned every time.
Oh, good luck getting to that equity all you would be equity-rich investors. Mention cash-out to your banker and he just might shoot you!
ABC news is hemorrhage viewers. They are a joke.
LOL Ben. I was thinking the same thing. WTF are these idiots doing going back for seconds? Talk about averaging down!
yes same thing came to my mind.
what idiots… they havent realized their 400K
is about the same as that 300K they are looking at.
Unless they are really looking at downsizing and bargin hunting via a walk away, then it almost makes sense.
BINGO!!!
this was just too good not to post
http://hosted.ap.org/dynamic/stories/L/LIVING_WITH_PARENTS?SITE=FLROC&SECTION=HOME&TEMPLATE=DEFAULT
mom i’m home! can i borrow the car?
Oh, good grief. Can’t they at least pay some rent to the old folks?
You missed the best part - look at what she’s saving up for!!!
“She’s trying to save several hundred dollars a month for a house “
Are you kidding me? 52 yrs old…moving back in with your parents because you don’t want to rent in Wisconsin…you’re right that was too good not to post…sheesh
1. Send the 52 yr old daughter on a all expense paid trip to Disneyword for a week in the sun to relax and find herself.
2. Then quicky and quietly MOVE to some undisclosed location.
3. Order and advertise a open Mafia Hit on any relative or friend that squeals about your new location.
Cheaper in the long run
Again, I guess we are an oddball family. When I moved to desert, my daughter and SIL and I decided if we were all going to live in PD, we could get a much bigger/better house to rent by pooling resources. Suits us all well and I get to hang out with my grandson at will.
That’s the way it’s supposed to work…not the other way around.
I know of some late-Boomers and Gen-Xers who are relying on their folks’ money to bail them out of trouble (after the folks die). Thing is, if you spend your folks into the poorhouse BEFORE they die, what will be left?
The 52-yo in the article is saving to buy a house, implying that renting would be beneath her. Hmm…renting is more shameful than living with your parents at 52?
I am 26 and feel ashamed to still be living with parents. Good chance ill be in NW Pennsylvania sometime this summer. Ill have a good downpayment saved and could probably buy one of the cheapest houses in 100% cash if necessary if I can’t get financing.
Aha, now you admit that you are not moving from FL to NW PA until summer. Summer! Dare I say “chicken” ? Sorry to harrass, but I do think a lot of us here see certain lifestyle and weather problems w NW PA. Maybe you have a girlfriend up there?
Hmm…renting is more shameful than living with your parents at 52?
Heh - apparently so.
I don’t think there’s anything shameful in actually living with your parents. What’s the point of family if you can’t band together and help each other out?
What I would find shameful is being a leech at 52. (And why the parents at 80 are okay with that, I’m not sure.) It’s easy enough to pay for things and or simply deposit a check in their account. People can be adament about paying for things but unless it’s a weird control issue, they usually seem to be relieved when you insist.
Personally, I’d rent a mud hut rather than move back in with my parents or my in-laws. But that’s another story. *grin*
When my parents want to scare me, they offer to have my wife and I move in.
When I want to scare them, I answer yes.
LOL
“Kim Foss Erickson, a financial planner in Roseville, Calif., north of Sacramento, said she has never seen older children, even those in their 50s, depending so much on their parents as in the last six months.”
Some of the predictions on this board a few years ago were that people would move in with family and friends, sharing unused rooms in existing housing, thus increasing inventory (this was one of mine). Looks like this, too, is coming to pass.
That’s been one of my predictions as well. A lot of FBs are going to be moving in with Mom & Pop, or other relatives, while they try to rebuild their lives and credit. Anyone who thinks rents are going up because of all the newly homeless FBs is engaging in wishful think - there’s a HUGE amount of unused capacity in basements, guest bedrooms, etc. waiting to be crisis housing for FBs. Rents are headed in one direction: down.
I see tons of classifeds advertising rooms and ‘kitchen privileges”….rent a room in my McMansion and get free internet, and use of the microwave! Sometimes I look up the tax parcel and sure enough, they bought it in the last 2-3 years. I saw one where the owner would do their laundry!
Lots of people (MSM types) were predicting that there would be a huge market for rentals and that people loosing their homes would drive the prices up. Some of us just laughed at the idea.
This is the 3rd horse of declining rents trifecta. Think of it as a big game of musical chairs. Some people already left the local games for a game in another area so we have excess chairs. Then the new people coming into the game brought their own chairs with them to add to the pool. Now we have people sitting in each other’s laps leaving yet more unoccupied chairs?
And THAT was going to drive up rents how? If you want more butts in more chairs, rents have to decrease to make them more desireable. But yet we still see inexperienced new Landies chasing the market down with rents too, just like the FBs of 06-07 chasing selling prices down. It would be funny if it wasn’t so pathetic.
Let interest rates sink, it’s still a damn fine time to be a saver with this sort of deflationary pressure going on.
“Ventura County Supervisor Peter Foy said: ‘We’re not at the bottom yet. We could see another reduction in values. It’s not a good situation. It’d be nice if people felt their investment in their home was still what it used to be.’”
“Around the Southland, officials are automatically reevaluating homes purchased in recent years, especially at the height of the housing bubble from 2004 to 2007. Thousands of homeowners have also filed informal requests.”
___________________________________________________________
The public has some nerve don’t they?, adjusting their property taxes downward to what their homes are really worth, and bankrupting city halls hither and yon, that expanded too much on the basis of more property taxes being paid, not less.
I wonder who people will despise more, soon?
Local do-nothing politicians or Faraway do-nothing politicians
And it’ll be another year or two before the full ramifications of the falling tax revenues work their way through the web of many state/local governments. Some may get a pass for FY09 but FY10 should get interesting. When the state/local pols realize this will they dig their heels in and refuse further reductions? If so, then what? The next leg down?
The bell is tolling:
County of Stanislaus
Modesto, CA
The deepening slump in the building industry and continuing financial problems in the county’s health care system cost 14 county employees their jobs Tuesday night. The Stanislaus County Board of Supervisors eliminated the jobs of nine people in the building permit division of the Planning Department, and the jobs of five people in the Health Services Agency. The board also cut eight unfilled positions in the two departments. Both were unanimous votes. “This is indeed a sad situation,” Planning Director Ron Freitas told the board. “We are all painfully aware of the steep decline in the building industry.”
The Modesto Bee - March 19, 2008
Genitope Corp
Fremont, CA
Genitope Corp. will slim down to about 20 workers from nearly 200 and will seek approval for its MyVax personalized immunotherapy for cancer in other countries. MyVax failed in a 287-person Phase III trial to show it could halt the progression of one of the 30 types of non-Hodgkin’s lymphoma, which collectively affects more than 54,000 people annually in the United States.
Source: East Bay Business Times - March 14, 2008
61 MAs filed in CA last week. I would not like to get sick in California now based on the vast number of hospital layoffs over the last year.
“‘On one hand, you say, ‘Oh, my God!’ but on the other hand, this could be a good market for buying,’ she said.”
The current problem with the market is that it is still horribly overpriced in bubble areas, and yet still priced far less than the peak, so I would still say it is a great time to sell and a terrible time to buy - based on a simple assertion that properties are still selling well over their fundamental value. That is unless of course you were one of the many idiots that bought in at even higher prices.
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At the end of 2003, the prices in almost all CA areas were above the fair value and, yet, I have only seen Sacramento area prices go below the year-end prices in 2003 (based on Radar Logic PPSF data). At the very least, I expect prices to fall below 2003 level in almost all areas. Yes, we do have a long road to hoe.
I think that I have CA Cities table saved for Sep’03. I will compare and see how much the latest prices are above the Sep’03 prices in various cities. I am sure that some cities already have prices that are below the Sep’03 level
Jas
That would be awesome. Can’t wait to read it.
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I did find Dec’03 and Dec’04! I just posted below.
Enjoy!
Jas
Awesome Jas. If you can dig some city data up I would be most interested in Huntington Beach and Newport Beach. But the county info is great. Thanks again.
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Your wish is my command!
Feb’08 gain since Dec’03 and Dec’04:
Huntington B 8.2% -11.9%
Newport B 72.2% 40.1%
The NB data could be influenced by low volume. The Feb’08 price of $1.8M was at all-time high within my data set and a month ago it was $1.25M.
Jas
Does anyone ever think that home prices in California will ever correlate with income again?
Without looking at metrics, home prices in the Central Valley have doubled, tripled, or more since 2000 while income has at best kept pace with inflation. I predict home prices have a long ways to go for them to become affordable again.
Yes
In much of California, I expect an 80%+ drop in house prices. We are 1/3rd of the way to the bottom. It should be safe to buy in 3 yrs - IF you plan on staying in the house for a decade- 90% of the drop will have occurred.
IMO the bottom will be 1994 prices adjusted for CPI inflation less 10%.
Many people refuse to wait and are relocating to cheaper states. I am doing the same, I don’t want to wait years or even decades for this mess to play out. I can get affordable housing elsewhere today!
That is the true crime from this whole friggin mess.
I concur but the market for >4 unit owner occupied housing will have a better recovery rate. I see myself picking one up at the bottom. I also see the other 3 units filled with no rent paying in-laws who refused to believe an HBBer’s advice. I hope they don’t take offense when I sell the 4 unit for a nicer place in a gated community where I can leave them off the guest list for entry.
I also predict other HBBers to do the same since we are outnumbered, smart and to a fault, kind to the stupid.
If 80% hits in 3 years, I would be in fear of shear panic and chaos. That kind of speed and volatility is uncharted territory. We could have a full on banana republic or worse if that happens. Maybe even Weimar, 80% down and %8,000 up in the same year.
God, I love it when you talk numbers like that, Hoz.
“I constantly walk into a room and I don’t remember why, but for some reason I think there is going to be a clue in the fridge.”
Caroline Rhea
“John Case, an associate broker in Brentwood said that the tour covers most of East Contra Costa County’s communities including Antioch, Brentwood, Discovery Bay, Oakley and Pittsburg. ‘The overwhelming interest is in Brentwood, probably because it has taken the biggest hit in price,’ he said.”
Bay of Pigs disaster in the making… (does anyone else who reads and posts here thinks it makes sense to wait until everyone is saying “real estate is the worst investment” before jumping back into the choppy, shark-infested waters?)…
absolutely.
I don’t often think of old Joe Kennedy, but this reminds me of the story of him and the shoeshine boy in 1929 …
You may be right- it could be a roller coaster ride down. Plenty of ups and downs (false bottoms) until the market finally reaches the bottom.
Absolutely. The MSM and J6P must absolutely HATE housing before I’ll buy. It all comes down to who has the power at the negotiating table. Right now most sellers still think everything we be okay next quarter. Prices always go up in the long run, blah…blah. When the MSM finally goes UGLY NEGATIVE on housing, this will convince the sheep as well. And THEN and ONLY THEN will I be willing to entertain the idea of buying a home. It is going to take this just to get prices back to where they were before the insanity started. We’ve got 2-3 years easy. It should take that long for the Baby/Bubble Boomer horror stories to finally make it down to the sheep as well. Then the sky starts falling.
Fed game plan: Reflate the bubble before housing hatred and conventional wisdom about stupidity of real estate investment takes hold of J6P’s perceptions.
And the haircuts keep getting shorter and shorter in downtown San Diego…
425 W Beech St #438
Price: $219,900
Beds/Baths: 1 / 1
Square Feet: 641 sf
Sales History
Date Price Held Return Annual
03/24/2006 $460,000 1y 7m 68% 37%
07/27/2004 $274,518 n/a - -
425 W Beech St #610
Price: $249,000
Beds/Baths: 2 / 1
Square Feet: 877 sf
Sales History
Date Price Held Return Annual
02/10/2005 $407,000 n/a - -
1435 India St #502
Price: $199,500
Beds/Baths: 1 / 1
Square Feet: 835 sf
Sales History
Date Price Held Return Annual
11/08/2005 $359,900 8m 20% 29%
02/18/2005 $299,000 n/a - -
Still too expensive at that square footage.
Correct. These aren’t even premium buildings downtown. At $175/sq.ft, we’ll start talking. The collective seller psyche downtown will be at the emotional stage of ‘panic’ on Neil’s chart.
$175/foot is too expensive unless you get ocean views. I say more like $100/foot is reasonable
“For some, foreclosed homes may be the embodiment of broken dreams, but for others they can be a sign of hope. Rande and Tracy Ross, a married couple from Stockton, came on the tour to look at possible investment properties, mainly to rent out.”
This is what tells me RE is still grossly overpriced and we are nowhere near a bottom. You have knifecatchers wanting to catch more falling knives. Until the prevailing belief becomes RE is a horrible investment that should be avoided, clear a path.
Isn’t the whole city of Stockton the embodiment of broken dreams?
You are correct that this is way too early to look at investment properties. The only way it could maybe be logical is if they paid cash and the ROI was high than placing the money in high yield savings.
I was always of the preception once it became cheaper to own than rent many people would jump on housing. It wont take a drop of 80 percent to see that happen.
Ahhh, dutchie, you don’t know how far rents are going to fall, though, do you?
There is going to be such an oversupply of rental properties, it would take an excellent crystal ball to see what median rent in various areas will be in 2 - 3 years time.
March 21, 2008
SF Metro: Radar Logic Reports Price Per Sq Ft Drops of 13.7% in 2.5 Months
San Francisco, CA, Metro:
Alameda County, California
Contra Costa County, California
Marin County, California
San Francisco County, California
San Mateo County, California
The latest data is for the transactions that took place during the 28 days ending on January 17, 2008. The PPSF was $436.84 on 10/31/07 and is currently, as of January 17th, at $376.85, comes to a drop of 13.7% in slightly over 2.5 months. From the peak we have 18.7% drop in 7.5 Months. Soon we will see annual price decline of more than 20%, which is already the case in more than half the counties, if the current trend continues. I think that the first two counties listed above are contributing to the large decline, but the other three might start to catch up.
Jas
“Fewer people are fleeing the once prohibitively expensive coastal reaches of Northern California, according to U.S. Census Bureau numbers. Santa Cruz County was among a number of greater San Francisco Bay Area counties that saw more U.S. residents staying put last year than any time since 2001.”
Interesting. I personally know of many people who are choosing to leave the state. No quality of life here unless you earn a small fortune.
I just got back from a visit to my parent’s place in TN. I visited Nashville, Chattanooga,and Knoxville- all very nice and well revitalized cities. After returning to California, it sort of feels like a third world country here.
My parents combined make less than my salary… yet their large home on 18 acres with a pool is paid for, they drive two newer cars, are going to retire at 60, and take vacations to Europe and the Pacific Islands. The contrast between my life and theirs is such a dramatic disparity. I’m having some serious thoughts of moving to either Nashville or Chattanooga if the price of housing in the Bay Area doesn’t start dropping to levels where 300-375k for a decent SFH is realistic within the next year. I’m willing to wait a bit… but I could at this very moment buy with cash in other places with some leftover even though TN actually has it’s own little bubble to contend with.
Even if prices became affordable, the traffic, overcrowding, and cost of everything in between itself is almost enough to make me want to get out of here. It is a very tempting idea for me at this point.
I think CA will be the last place in the US where housing prices fall to match incomes. This may not occur in your lifetime.
You forget that affordability was 10% during last boom in 1988-89 and then bottomed with prices declining 35-40%
Affordblity went to 75% by around 1996. Both prices and interest rates declined…
By 1997-98 homes were around 100/sq ft and total prices was 3-4 x annual incomes… so prices do swing down and dow swing by large margin.
People don’t believe Tennessee will fall much. I can’t afford current TN prices and you could live in parts of Florida for the same price. Is Florida an option for you? If not, it just goes to show that *not* everyone wants to live in Florida. I would rather be in TN than Florida but at $70/foot for TN, I could live in NW PA for less than half that price.
No point living in CA, you are right it’s a third world. Why are you even considering paying $300k for a shack?
The prices in TN were extremely varied. There were smaller fixer-upper homes in some of the outer city limit areas for 45-60k. Land was still pretty cheap. Anything close to a school or in a neighborhood was for some reason a lot more than homes that were not. It seems that Mcmansions are pretty popular there. But older homes are still about the same as they were last time I was home, meaning anywhere from 75-100k. But subdivision and Mcmansion homes were getting a bit too expensive, as in 220k for some ugly-ass looking brady bunch house in some older subdivision near my high school, to some 5,000 ft Mcmansion for 350k. I’m not interested in those anyway.
The thing is that the economy in TN is now actually fairly decent. So while NW PA might be cheaper, I’d be willing to bet that if you throw in the median wage there, NW PA would actually cost you more. That and with fuel prices going through the roof, you’d better hope that the home you buy in PA is newer with fantastic insulation and storm windows because otherwise, the cost of heating is going to strip away whatever you might have saved on the price of the home. All I’m saying is that my Wife is from NW PA, and there’s a very good reason why it is cheap.
So why not buy a sub $100k house while waiting for prices on mcmansions to bottom out? Then youll be able to live like a king just like your parents in a mansion on 18 acres
Sure the salary is a little higher in CA but this doesn’t come close to the cost of living expenses. I find it boggling that people put up with this. Is it the weather? Beaches? Lifestyle?
Maybe in your case TN is better. For me im self employed and my wage is the same anywhere I decide to relocate. As for heating costs, its $200/month to heat a bigger house to 65 degrees and I may not need it this warm.
The good reason I can see NW PA being cheap is it’s a non bubble location. Florida used to be cheap before the bubble, $50k used to get you a 1200 square foot starter house in some parts of Florida. What will you say when many other locations become almost as cheap as NW PA?
Bye, you say you can get a house in NW Pennsylvania for half of $70 per s.f. That’s $35/s.f. I don’t believe it. Provide a link to houses for sale for that kind of price.
Search Realtor dot com. Ive personally visited the area and checked the insides of the houses. $35/foot isn’t so surprising and no one will think it’s a “steal” when youll be able to score houses for $45/foot in Texas and $50-60/foot in much of Florida.
Ben posted this article yesterday from San Diego.I have made some comments there unders “GaryinSD”.
Checkout the other comments made there in the last 24 hours.Sure is alot of denial still going on.
http://www.nctimes.com/articles/2008/03/20/news/top_stories/07_05_253_19_08.txt
I dunno–here in Elk Grove, CA, the reductions and REO activity is fast and furious, and there’ s a handful of deals in eash zip–although it’s not the norm yet–Prices overall have receded back to 2005 levels…I prefer to party like it’s 1999
I am tempted though, when I see McMansions selling at 50% of what the jacka$$ in 2006 paid for it (there’s a few around).
Bottom line in Sacramento, there’s PLENTY of land, and outside of some pretty well-paying state gigs, the jobs don’t pay sh*t. Your average 3/2 1500 SF. shouldn’t be more than 200K max.
No offense or anything, but Californian’s seem to have such a warped sense of value sometimes. Your average 3/2 1500 SF SFH shouldn’t really cost much more than about 100K imo.
My brother lives (rents) in SAC, and he says he just gets numb to the numbers sometimes.
I’ve seen average 3/2s in Elk Grove below $200K and dropping fact. Since we still have a long time to play this out, I wouldn’t be surprised if they do fall in line with fundamentals yet.
“he feels betrayed by the lender’s unwillingness to negotiate better terms.”
You know, I should be used to this by now, but I’m not. God these people are F-n infuriating. It’s not the lenders responsibility, obligation, or moral duty to negotiate your note. Pay up or foreclose, that’s your options.
And the lenders are feeling pretty betrayed when they find out the collateral backing their loan is really worth 50% of the loan balance. There’s a whole bunch of crying going on now.
The only reason that lenders offered teaser rates, option ARMs, etc. was because the discounts would be paid for by the resets down the road. Okay, so we’re here and now the borrowers want to back out? Sorry, little boy — off to the salt mines with ye. That’s the price for visiting Pleasure Island.
The only reason that lenders offered teaser rates, option ARMs, etc. was because the discounts would be paid for by the resets down the road.
Of course, it seems way odd that the lenders didn’t bother to check if the borrowers could actually pay the loan payments after the reset.
I guess that’s the little “oops” that has the Wall Street suits running to the Fed for cash at the moment.
True.
It seems
Oops, sorry about the bad edit job.
“Of course, it seems way odd that the lenders didn’t bother to check if the borrowers could actually pay the loan payments after the reset.”
It sure doesn’t take an MBA to figure that one out does it?
What’s worse is these dorks didn’t even have a clue that the value of the “collateral” could have been distorted by the very fact they were pouring money into the market at a furious pace.
Hey, I’ll be the first to say the lenders have got comin’ what they’ve got comin’. But this whole “I’m a victim” and DESERVE negotiated terms is complete BULL-SH*T! As the lenders should’ve known, so should have the borrowers, so each DESERVE the Joshua Tree they’re being pounded with!
If you compare the teaser rate to the banks’ cost of funds at the time the loan originated there was a positive spread of 100-200 BPs. Plus, the upfront fees, accreted over 2 to 5 years, boosted the effective yield on the loan. The portfolio lenders’ strategy was to make money on these loans as medium term investments. They were pretty sure the borrowers couldn’t afford the reset but due to rising home prices the borrowers would refinace or sell which would liquidate the loan.
By the way, one of the definitions of a substandard loan is one that can only be liquidated by the successful completion of a single, speculative transaction. Bank regulators require, unless indicated otherwise, a 20% loss reserve for credits classified as substandard.
ex,
just shows you the level of sophistication and intelligence so many of these savvy, super-smart “investors” operated at in the last few years. They wanted a house, they signed up, now their gamble didn’t pay off. Tough shit. I can’t stand crybabies howling about morality, “someone needs to help me!” and “betrayal” when in actuality they’d be the first to strip the house before it foreclosed.
“‘I was paying 2,000-something dollars a month…People like Eric Pony are not only robbing my American dream, they’re destabilizing the entire housing and financial market,’ accused Sharrit.”
Hmmmm….I smell something fishy…someone needs too look a lot closer at Ms. Woe is me I’ve been taken advantage of…
Dude, everything the MSM has been reporting since they’ve been “on it” has smelled fishy to me. For example, some of the “victim wants to remain anonymous” stories seem invented to me. Some almost seem bent on coaching the reader into what they think they should do. The MSM’s thrust seems to be to portray all these FB’s as poor innocent victims. They keep this up, we just might have a revolution on our hands, or at least a nationwide Katrina. What they should be writing is all you greedy or just plain stupid FB’s just own it and take your JT like a man.
As a proud (usually) full-time member of the dreaded MSM, in California no less, the amount of sympathy seen in the newsroom for these dumb ass buyers makes me sick.
That’s because most of the rank and file that work there have been real happy to see their home prices triple in the last decade, and they can’t seem to see that as anything but a good thing.
These are pros — despite everything you may hear, 99% of the time they cover the story without fear or favor. Democrat or Republican, Schwarzenegger or Perata, cops or crooks, don’t matter. The only bias I see is for a good story.
But the minute you talk about housing values it’s like talking to a brick wall. There’s an institutional bias in my newsroom toward “regular families need help from the government because of crooked banks” and “the bottom’s just around the corner.”
I alternate between laughing about my co-workers delusions and wanting to scream because of how we’re failing the citizens who depend on us.
i just agree 100% with your on this one ex-nnvmtgbrkr. The FB’s never like to talk about what they did with the money they pulled out ,they never like to talk about the fact they were relying on real estate going up .
If someone said to me that they would loan me 5 million bucks at a teaser rate of 2% ,but than the interest would adjust up at whatever the interest plus the spread was , I would still know that 5 million bucks was to much for me to borrow.
The FB’s played the gambling game and it didn’t work out ,so that’s not a victim, maybe a gambler , maybe someone who wanted something they couldn’t afford ,but not a victim .
I don’t know the percentage of borrowers that were victims of agents changing loan documents ,or signing documents without borrowers approval ,but that’s a different deal . Still in those situations ,why did the borrower take the money ? If I was a victim of fraud I would be screaming my head off about it the minute it was discovered . Why did these FB’s wait until real estate turned around and went down in price and all of a sudden they are victims. .Maybe victims of having their dreams of riches and easy money shattered .
I don’t get it . The borrowers bought into the “real estate always goes up “and they went on toxic loans because they wanted the money . I’m sick of borrowers acting like victims . I know some were victims of some fraud set up ,but what percentage ? Also , if that were true that they were victims of fraud ,the FBI and the LAW should be on it ,not a Federal bail-out .(IMHO)
Are we going to say these FB’s are victims because they bought the hype of the time ,they gambled ,and they get the ‘Mania Defense”.
OK ,so the real estate community and the loan agents were telling the FB’s that they could just refinance or sell down the road ,but is that a defense for liar loans and all that jazz that they did . Were the FB’s really brainwashed by these creepy sales pitches by the industry ,and are they off the hook because of brainwashing . It’s a interesting question ,but I still view them as easy money gamblers in a high % of the cases .
But I do see the MSM reporting that “everyone” or at least J6P believes that FBs have mainly themselves to blame. Polling shows exnnv’s attitude (also mine) is very popular after all.
“Rande and Tracy Ross…came on the tour to look at possible investment properties, mainly to rent out. ‘It makes you sad. So many people got into these bad loans because they listened to their agents or mortgage brokers. They thought they were experts,’ Tracy said.”
How condescending. And I’d like to know how these are “possible investment properties.” Are they looking for cash flow? Or appreciation? My guess is the latter because other than say, Youngstown or Buffalo or Muskegon, I don’t know of many places with SFRs that cash flow…
Several people have quoted this comment. It’s why I am relocating to a non bubble area.
“Broussard has found little sympathy from his lender, Countrywide Financial Corp. While Broussard accepts responsibility for taking out a mortgage whose monthly payments are due to skyrocket once the unpaid principal exceeds the home’s value by 15 percent, he feels betrayed by the lender’s unwillingness to negotiate better terms.”
This bozo signs a contract for what looks like a Neg-Am option ARM, then gets his panties in a wad when he has to honor said contract after borrowing even more against it.
“‘We have a lot of people that do not seek the outside help because of fear,”
We have a lot of people who are afraid they have fraud dripping off the pages of the documents they seek to refi.
” Rande and Tracy Ross, a married couple from Stockton, came on the tour to look at possible investment properties, mainly to rent out. ‘It makes you sad. So many people got into these bad loans because they listened to their agents or mortgage brokers. They thought they were experts,’ Tracy said.”
“The Rosses paid more than $400,000 for their home in 2005, and were going to look at foreclosures in their own neighborhood, priced less than $300,000.”
“‘On one hand, you say, ‘Oh, my God!’ but on the other hand, this could be a good market for buying,’ she said.””
That’s one dumb FB if ive seen any. Even in this bad market, I can’t believe there are still a few remaining investors. The bottom is when investors won’t touch houses
I can’t wait for all of the speculative excesses to be flushed out of the market. These myophic morons overpaid in 2005, learned nothing, and now are going back for more. I can’t wait till disconsolant, weeping FBs like this are being turned out onto the street by lenders. The Second Wave Knifecatchers have to be well and truly buggered before the bottom is in.
The giant sucking sound of the Perot presidential campaign is replaced by the flushing sound of…
…okay, which candidate wants to touch this one?
It’s a sad reality that there will be knife catchers all the way to the true bottom. I am even seeing people on this HBB planning to buy next year or two. They would be the 3rd wave of knife catchers buying when we will be only halfway to the bottom.
–
Here Are Feb’08 Price Changes In Counties and Cities in CA Arranged By Gain Since Dec’03
The last column is price change since Dec’04. I hope that format comes out OK.
County/City Change Since
——————— Dec’03 Dec’04
Kern County 69.8% 21.3%
BAKERSFIELD 65.5% 17.1%
TEHACHAPI 60.5% 17.3%
CUPERTINO 39.5% 16.5%
FRESNO 39.5% 10.6%
Fresno County 38.9% 13.6%
Tulare County 37.0% -1.1%
SANTA BARBARA 35.3% 9.0%
STUDIO CITY 24.2% 7.5%
Santa Clara Co 22.2% 2.3%
MORGAN HILL 22.0% 3.4%
El Dorado County 18.6% -14.2%
Alameda County 17.6% -1.0%
SAN JOSE 17.4% -3.6%
San BernardinoCo 16.9% -10.8%
Los Angeles Co 16.5% -2.1%
Contra Costa Co 15.8% -5.1%
DAVIS——– 15.4% -5.3%
ALTADENA 14.5% -6.9%
San Francisco Co 14.4% -0.3%
SANTA MONICA 13.2% 4.9%
San Mateo County 12.4% -4.1%
Santa Cruz Co 11.3% -7.1%
PALMDALE 11.2% -14.1%
Marin County 10.9% -5.0%
FAIRFIELD 10.4% -10.8%
San Luis Obi Co 10.0% -5.3%
LANCASTER 9.5% -16.6%
*** MEDIAN *** 9.0% -11.3%
NORTHRIDGE 8.4% -9.2%
LA CANADA FLI 8.0% -17.2%
Nevada County 7.8% -9.8%
PASADENA 6.7% -8.0%
Madera County 3.7% -22.3%
VAN NUYS 3.0% -16.6%
Orange County 2.0% -11.7%
Napa County 1.5% -13.9%
SHERMAN OAKS 0.6% -13.6%
Riverside County 0.3% -16.0%
MERCED——- -0.6% -29.4%
VACAVILLE -1.5% -17.0%
Solano County -3.2% -19.8%
Santa Barbara Co -3.6% -21.4%
Merced County -5.5% -31.3%
CHATSWORTH -7.2% -20.0%
Stanislaus County -8.2% -28.8%
SIMI VALLEY -8.6% -19.6%
Ventura County -8.7% -21.7%
GILROY———- -8.9% -24.4%
Placer County -9.4% -24.8%
San Diego County -10.1% -17.3%
Yolo County -11.0% -30.0%
Monterey County -11.1% -25.4%
Sonoma County -11.3% -26.8%
San Joaquin Co -13.1% -32.3%
Sacramento Co -17.0% -29.4%
STOCKTON -17.9% -36.2%
SACRAMENTO -23.2% -35.8%
Jas
Great stuff Jas. Thank you!
–
Kern County 69.8% 21.3%
BAKERSFIELD 65.5% 17.1%
TEHACHAPI 60.5% 17.3%
The above is due to the fact that the bubble didn’t arrive in these areas until the summer of 2003. Crispy, your thoughts?
Jas
Is this median sale price? Median listing price? or Price/Sq-ft?
Nevermind…I see it is price per sq-ft. Aside from Sacramento, it looks like Santa Barbara is below 2003 (along w/ a few others).
–
Sorry, my fault. These are based on median prices for all homes and condos sold and recorded during the month. The data source is DataQuick.
Radar Logic data that I post sometimes is PPSF and those are for metros that consist of several counties except for the largest few.
Jas
Isn’t the information age a grand time to walk the face of the planet! Hard to hide elephants under rugs given the ease of posting publicly available information on blogs
:-) 
We are not anywhere close to the bottom. There is still momentum on the buyers side. There have not been any shifts in the buyers psichology. The only thing that stops people from buying is lack of qualification for mortgages (not enough income and downpayment). Two days ago I went to an on-site auction in Laguna Hills. A 2300sft, 4BR, zero-property line foreclosure. It lingered on the market, priced at $650k. It required at least $75k of work. The place was packed, 40 people at least, at 2:30PM on a Wednesday! The house was sold for $518k. There are another $3k for the auction company. Then everything is subject to lenders approval (the house was foreclosed for a $750k unpaid loan). At $521k, hardly a bragain, with the work required, the final cost will be around $600k, just a sliver less than the recent comps. It went in less than 10 minutes.
Looks, like “MISSION ACCOMPLISHED” moment is still far away, lots of knife catchers out there.
“‘They were coming late at night and leaving early in the morning,’ Wilson said. ‘If we’re maintaining the front yard and pools and Jacuzzis it takes away the squatter or transient issue.’”
I heard that the squatter across the street from the Councilman asked him if he could heat the pool up to 78, and have dinner ready around 8:30, he also said he thought the gardener could trim the edges of the grass a little neater next week.
There is no American dream of owning a house in California anymore. The house prices are too high and out of range for the majority of their population. Sellers refuse to lower their asking price much at all and I’ve been watching the listings … so we’re at a standstill. Personally California house prices are to high for the majority of the population as well as the quality of life is poor. Most retirees are leaving the state as well as young couples that seek affordable housing. High house prices, taxes, poor education, traffic and illegal immigration issues, etc — tell me, what’s so good about CA these days ???
weather, culture, jobs (especially in tech), nature….
and for many people, families (extended), personal history, etc. Some people have deep deep roots in CA. Hard to just toss that away.
Yeah, if it was really such a crappy place, everybody would move, and if they did that, prices would come down quick. They don’t, and they haven’t. It was a beautiful 70 degree day this March 21st, and I went for a hike in Pt. Lobos State park, one of the more beautiful places on earth. Try doing that in one of those midwestern craphole towns where you can ‘afford’ to live there because nobody wants to.
Newbie’s got it right. I live in New England, but miss the proximity of jobs and nature in CA, combined with the glorious climate. I’m packing $ away so I can eventually return to CA- maybe when housing is down another 30%.
I keep hearing remarks about “home prices peaked a year ago” and “the peak of the housing bubble from 2004 to 2007.” For California prices on houses apples to apples (and not median) peaked 2005. And I thought the media/NAR strategy was to say prices have been falling for YEARS (i.e., how much longer ya gonna wait, pal? Now’s a GREAT time to buy!)
This just strikes me as odd. There must be a motive.
It depends on where in CA. Prices in the nicer parts of santa clara county are basically the same as last summer, at peak. Maybe a couple % pts down.
Whereas east san jose, and parts of San Diego, are lower now than last year.