The Entire State Is Considered A Declining Market
The San Francisco Chronicle reports from California. “A total of 343,220 single-family detached California homes closed escrow in February (seasonally adjusted), down 28.5 percent from 480,170 a year earlier, the California Association of Realtors said. Median sales price in the state was $409,240, down a stunning 26.2 percent from February 2007. In the Bay Area, the Realtors said sales were down 32.5 percent in February compared with a year ago. The median price was $706,880, a 5 percent drop compared to a year earlier.”
“One Bay Area home seller said she is close to pulling her home off the market and renting it out instead. Ali Liptrot has had her San Rafael 3-bedroom, 1-bath home on the market since early this month with no offers despite lots of visitors. Liptrot, who sells property in Baja and has her real estate license, said her asking price of $629,000 is on par for her Santa Venetia neighborhood.”
“‘It is a little perplexing; I thought for sure I’d have at least one offer by now,’ she said. ‘Every single person who walks in the house says, ‘Your house is beautiful.’ I’m like, ‘Yeah, so put in an offer; give me something to play with.’”
“Because Liptrot purchased in 2000 and has ample equity in her home, she’s not desperate to sell.”
“‘I’m keeping it on until the end of next week and then that’s it,’ she said. ‘I have a good friend I could rent it to for a year and then re-evaluate next year.”
Bay Area Newsgroup. “Foreclosure auction sales more than doubled in San Mateo County in February over a year earlier, though they slowed somewhat from their blistering January pace, a new report revealed Monday.”
“Some 81 homes were sold at foreclosure auctions last month countywide, up 224 percent from February 2007, according to a Web site that tracks California foreclosure sales.”
“Most of the local foreclosures are occurring in blue-collar cities such as San Bruno, Daly City and South San Francisco. Parts of San Mateo, Redwood City, Menlo Park and East Palo Alto are also experiencing a high rate of foreclosures.”
“Many homes in the poorer sections of these areas have lost $50,000 or $100,000 in value, real estate agents say.”
“Sean O’Toole, founder of ForeclosureRadar stressed that with more than 37,000 notices of default statewide, many more foreclosures are expected in the late second quarter and early third quarter.”
“That means many more foreclosures are on the horizon for San Mateo County, he said. In February, there were 300 notices of default countywide. That was up from 244 in January.”
“In August and September, when the subprime lending crunch kicked in and started fueling foreclosures, notices of default in San Mateo County were about 160 per month, O’Toole noted.”
“‘It appears that a number of banks don’t move in on foreclosures immediately,’ said John Gieseker, real estate agent in San Bruno. ‘Banks probably still are trying to grapple with the amount of foreclosures they have.’”
“The 81 February sales figure countywide was down from 121 in January. But the January spike was due to a backlog of foreclosures from late last year, as banks often don’t foreclose on people during the holidays, Gieseker said.”
“San Mateo County’s foreclosure rate is low compared with those in other California counties. Alameda County was up twofold to 487 sales. Santa Clara County was up more than fourfold with 351 sales.”
“In San Joaquin County, which includes Stockton, foreclosures were up more than four times compared with a year ago, with 940 sales. Merced County was up nearly fivefold, with 316 sales. Sacramento County more than doubled to 1,392 sales.”
“Riverside County had a staggering 2,159 sales, up nearly threefold. Another major problem area was San Bernardino County, which had 1,568 auction sales, up 352 percent.”
The Monterey County Herald. “Nearly 40 percent of Monterey County home sales listed in The Herald during a two-week period in late February and early March likely were foreclosures, indicating a move by banks and mortgage firms to recoup some of their losses, said one real estate expert.”
“Out of 43 homes listed in The Herald and sold from Feb. 27 to March 11, 17 were owned by banks or mortgage firms. In Seaside, all five homes sold during that time were owned by banks or mortgage firms, and in Soledad, all four sold homes were likely foreclosures.”
“In Salinas, seven of 18 sold homes were owned by banks or mortgage firms. One bank-owned home was sold off San Miguel Canyon Road in North Monterey County.”
“Sandy Haney, chief executive officer of the Monterey County Association of Realtors, said bankers are selling foreclosed properties as it becomes increasingly clear the housing market won’t rebound immediately.”
“‘Banks have finally said, ‘We have to get rid of these properties,’ Haney said. ‘I don’t think holding onto them until the market comes back (is) going to work.’”
“And Haney said the trend is expected to continue, given the explosion in foreclosed homes in the county. According to the county’s 2008 annual housing report, the number of foreclosed properties is expected to nearly double this year over 2007.”
“And county officials estimate that foreclosures will soar to nearly 3,000 homes in 2008, with the majority of those again expected to be in Salinas. ‘In Salinas, in particular, the marketplace is all about foreclosures,’ Haney said.”
“Haney said one home in North Salinas reflected the wildly fluctuating home market. In 1997, the three-bedroom, two-bath home, built 20 years earlier, sold for $124,000. Nearly a decade later, at the tail end of the market boom, the home sold for $505,000 in May 2006.”
“In August 2007, the home went back on the market, listed at $439,000, and eventually was sold earlier this month for $250,000. Haney said the home was almost certainly in foreclosure when it was sold.”
“Last year, county Assessor Steve Vagnini said, assessors lowered property assessments on about 1,000 homes during its annual review. Vagnini estimated the average reduction at about $50,000 per property.”
“This year, Vagnini predicted that as many as 5,000 properties could have their assessments reduced by an average of as much as $200,000, resulting in a reduction in property values of about $1 billion.”
“‘The impact (of the housing market collapse) wasn’t nearly as great last year to the county treasury,’ Vagnini said, ‘but it will be this year.’”
The Ventura County Star. “Even in past downturns, home values haven’t fallen this hard or fast. ‘We’re definitely in uncharted terrain,’ said Robert Kleinhenz, deputy chief economist of the California Association of Realtors. ‘That’s why it’s so difficult to figure out what the next few months will hold.’”
“In Ventura County…the median sales price was $520,270 in February, down 11.9 percent from $590,380 in January and 23.6 percent from $680,690 in February 2007.”
“The median’s month-to-month decline is ‘alarming’ because it represents an acceleration of the market decline, said Bill Watkins, executive director of the UC Santa Barbara Economic Forecast Project. ‘And that’s potentially dangerous, especially when you combine it with other weaknesses in California’s economy — in particular, the budget,’ he said.”
“Sellers can’t tell what their house is worth because consumers can’t justify spending anything on a house right now, said Mike Hobbs, a consultant for the Realtor Auction Division of Integrated Marketing Solutions in Ventura.”
“When that happens, there’s no movement, so prices drop, said Hobbs, who recently took his house off the market because the value depreciated more than the amount owed.”
“Gary Painter, director of research at the USC Lusk Center for Real Estate. He says the median’s decline represents a ’sample selection bias,’ reflecting that bank-owned properties were the largest component of sales.”
“The median price of an existing, single-family detached home in California last month was $409,240, a 26.2 percent decrease from $554,280 in February 2007, CAR reported. ‘It’s hard to imagine that the median will go much lower than that,’ Kleinhenz said. ‘That’s almost $200,000 off from its peak.’”
The Daily Breeze. “The South Bay housing market continued its slide in February, with some communities seeing a double-digit drop in home prices. Excluding the Palos Verdes Peninsula, the South Bay saw its median home price decline 7 percent last month, compared to a year earlier, said the report by CAR.”
“‘We have too much inventory,’ said Rose Pasquel, who co-owns Coldwell Banker Harbor Coast Brokers in Carson. She noted that ‘the entire state of California is considered a declining market.’”
“The Palos Verdes Peninsula saw a drop in median price of 0.4 percent to $1,150,000. But so few homes sold on The Hill that none of its four cities were individually cited. A city or community must sell at least 30 homes during the month to be cited.”
“Manhattan Beach, one of the highest-priced cities in California, also was left off the list of communities. That was the case with Hermosa Beach, El Segundo and inland areas such as Lawndale, Lomita, Carson and Gardena.”
“Gardena’s absence from the February report was unusual since the city usually meets the 30-home threshold.”
“Gardena and Carson will see tough times as many homeowners with adjustable-rate mortgages can expect loans to reset higher, Pasquel said. ‘I think this is just a first wave of problems,’ Pasquel said. ‘This is just the first wave of mortgages to reset. So we have ‘09 and ‘10 to deal with.’”
The LA Daily News. “The median price of a Los Angeles County home plunged a record 20 percent, or $117,010, in February from a year ago as sales continued their free fall as foreclosures increased, a trade association said Monday.”
“During February the county’s median price fell to $467,200 from $584,210 last year. It’s the second consecutive record drop, percentage wise. Sales in the county fell 42 percent from February 2007 and slipped 10.5 percent from January, the association said.”
“On a monthly basis, sales increased 9.6 percent. Leslie Appleton-Young, the association’s chief economist, said that the monthly sales increase could be an encouraging sign since February was the strongest sales month of 2007.”
“‘So we expect to see that percentage (decline) moderate as we go forward,’ she said. ‘I think we are heading into kind of a bouncing along the bottom (mode) for a little while. I don’t think this will be a sharp V in terms of recovery.’”
“In the High Desert, which includes the Antelope Valley, the median price fell 31 percent to $220,380 and sales fell 27.7 percent from from a year ago.”
The Press Democrat. “New loans are trickling out that cut borrowing costs for larger Sonoma County home mortgages, but the savings fall short of expectations, potentially limiting any boost to the stagnant housing market, lenders said.”
“Borrowers continue to pay higher interest rates for loans above $417,000, the old cap on loans backed by the government. It can also be difficult to qualify for the new loans created by the federal economic stimulus package, which temporarily provides government backing for loans up to $662,500.”
“‘It will help a little bit probably, but not a ton, as we were hoping. It’s not going to solve the housing problem,’ said Alison Fetherolf, VP for the Santa Rosa office of Sterns Lending, which funds mortgages.”
“But loans up to $662,500 in Sonoma County still carry higher interest rates — as much as a full percentage point — than loans under $417,000, lenders said. Rising interest rates may dull the impact of the new loans. Mortgage rates have moved higher for more than a month due to concerns over the housing market and rising inflation.”
“‘A loan at 7 percent is not going to help the housing market,’ said Scott Dovala, branch manager for Ascent Home Loans, which funds mortgages.”
“On Monday, for instance, one lender charged 6.125 percent interest on loans up to $417,000, but 7.125 percent on those up to $662,500. For even larger loans, the lender charged 8.125 percent.”
“While that middle tier is less expensive than the jumbo rate, the pricing still reflects a risk premium because of the large loan amount.”
“‘The lenders are all afraid no one is going to buy them. That’s the whole problem. That’s why the regular jumbo picture is so ugly,’ said Kris Anderson, a mortgage broker in Santa Rosa.”
“Lenders stung by soaring foreclosures are requiring borrowers to meet tough standards to qualify for all loans, including the new mortgages.”
“‘Will borrowers be able to save money by refinancing? Sure they will. But realistically, they will not save as much as they currently think,’ Dovala said.”
“Fannie Mae, for instance, requires a 700 credit score if the borrower’s down payment is less than 20 percent of the purchase price. Fannie Mae also won’t allow homeowners to refinance a first and second mortgage into a single loan.”
“‘It’s pretty huge. A lot of people have first and second mortgages,’ Fetherolf said. ‘If Fannie Mae isn’t allowing us to pay off the second, then it really doesn’t do us any good.’”
“Because Liptrot purchased in 2000 and has ample equity in her home, she’s not desperate to sell.”
“‘I’m keeping it on until the end of next week and then that’s it,’ she said. ‘I have a good friend I could rent it to for a year and then re-evaluate next year.”
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Chasing the market down next year isn’t going to be any better than lowering the price today.
Is this the inverse of knife catching?
And she’s not desperate?
What will happen in 2009 when San Rafael prices creep into the 2003 range, and then into 2002 - any desperation then?
What if, in 2010, they go all the way back to 2000 prices?
These FB’s renting out their places are absolute idiots. They only see their situation in terms of monthly cash flow, so they figure if they are “only” paying out $400 a month, then so be it; neglecting all the while that their equity is eroding by 10x that every month.
also, while the chances of getting caught may be minimal, the terms of her mortgage, insurance, etc, may require it to be a primary residence! (Not to mention running afoul of HOA rules.)
I don’t know about CA, but in AZ, the lender’s lien is senior to the HOA’s lien, so it behooves the HOA to be a little bit flexible with FBs. In a foreclosure, the HOA may be stiffed.
“Manhattan Beach, one of the highest-priced cities in California, also was left off the list of communities. That was the case with Hermosa Beach, El Segundo and inland areas such as Lawndale, Lomita, Carson and Gardena.”
Inland areas of the south bay!! sounds scary! Inland areas!.
Not the gilded beachfront oasis’ of manhatten beach, hermosa, redondo. Here were talking semi-ghettoized Compton- adjacent Gardena , that SB trailer park paradise(Lomita) , Carson-a city of nonstop civic corruption and middle class gangs where large 4-2 SFH’s are now $400,000, and Lawndale, a former SB hokeysville now a ragged gritty exurban crackerslum adjacent to crime-ridden hawthorne.
And they conveniently leave out Wilmington, Heart of the harbor, which is 100 % pure tijuana ghetto.
Note:Torrance is the great middle class anchor city of the SB, and it is frozen as far as sales, and YOY dropped only -5%. The deluded homeowners are simply holding back in vain waiting for the spring-summer pickup. At end of summer till end of 2008 torrance will drop hard and take the rest of the SB with it.
Not to mention the pesky ‘rental income’ on one’s 1040 form.
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“These FB’s renting out their places are absolute idiots.”
This is what will make this downturn prolonged and much more brutal. Too many people who want to sell not selling at prices that market would bear. If she can collect 1% in monthly rent of what price she is willing to sell for then at least she is note taking a big risk.
Jas
Sellers can’t tell what their house is worth because consumers can’t justify spending anything on a house right now, said Mike Hobbs, a consultant for the Realtor Auction Division of Integrated Marketing Solutions in Ventura.
When that happens, there’s no movement, so prices drop, said Hobbs, who recently took his house off the market because the value depreciated more than the amount owed.
Consultant Mike Hobbs caught in the web of the bubble and going down with the rest of the FB’s of Ventura County. Happy landings buddy.
Sellers can’t tell what their house is worth because consumers can’t justify spending anything on a house right now,
Then they’re worth $0!
“What if, in 2010, they go all the way back to 2000 prices?”
There will be, for the N. CA HBBers, much rejoicing.
Heck, there might even be some buying.
I know my wife wants to start nesting. I had to agree to start ’seriously’ looking in 2009 to get her to agree to stop looking in 2007. Best compromise of my (admittedly short) marriage so far! By 2009, she’ll be leery of buying a falling knife. Then all I have to do is say “rent/price in a range we can agree on overpaying, and OK.” I suspect we won’t wind up pulling the trigger until late 2010. And with how fast things are unravelling, that might be pretty close to the ‘return to mean’ point. (Although I’m sure if it is, the market will undershoot another 20% and make me cry anyway.)
Hang in here. My wife was still going to open houses (without me!) last fall — now she’s crowing to friends and family about how smart we’ve been to wait! She’s seen prices fall 100K in our target neighborhood, and now realizes how awful she’d feel if we’d bought when her nesting instinct was in full bloom.
That’s a smart thing to convince her to wait another year. After that year passes and she sees house prices fall another $100k, she is not going to be motivated to buy for several more years. Let her see for herself that house prices *are* dropping
hang in there …. its so worth it… my background: wife of > 12 years + 2 kids have never owned a house. Rented all the time we’ve been together — first in an apt and now in a house. Great rental situation with our relatively cheap rent, very very nice ‘hood, and house probably still would go for around 400x monthly rent. Yeah, prices still wacky.
While we don’t “nest”, my commute is
I’m part of that married crowd! My wife originally insisted we could buy Fall of this year. Now that my predictions are coming true, my insistance on waiting until 2010 doesn’t seem screwy… I’m waiting until I can buy with a sub 20 minute commute during rush hour.
Got Popcorn?
Neil
“In the High Desert, which includes the Antelope Valley, the median price fell 31 percent to $220,380 and sales fell 27.7 percent from from a year ago.”
The desert is so far from LA/OC jobs-rich coastal areas and the price of gas so dear that u might as well live on the moon as out in the high desert.
The only folks who would benefit from hi-desert living are survivalist types living in shabby cheap singlewides or bunkers plunked down on $50,000 empty sagebrush flats out in phelan or helendale or some other god-forsaken barren rocky wasteland out on the hi-desert. Mad-max types.
There will be, for the N. CA HBBers, much rejoicing.
Uh, housing was in a bubble in 2000 also thanks to the Y2K and Internet Start up boom. You’d need to go back to 1988 to have reasonable pricing for the median incomes set. So slash another 50% off 2000 prices and we’re there.
Why stop there, at 50% of 2000 prices? Why not predict that prices will go back to the 80s.. 1880s.
Wasn’t there a bubble in 1988 as well? I’m voting for 1995 prices.
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‘There will be, for the N. CA HBBers, much rejoicing.”
At 2000 prices? If you believe that this will be like a normal decline, or bear market, then that is a reasonable target, but if you think that we are in for one of those once or twice in a lifetime type of bear markets then get ready for 1996-98 lows, or worse. And the USG will be stuck with trillions in assumed debt.
Jas
Jas and MoMo, make no mistake, I’m HOPING for 1997 levels, or “worse.” But at this point I’d settle for 2000 prices. And I bet most of CA that couldn’t buy from 2003-2007 is as well. That’s all I’m sayin’.
That’s one of the reasons we probably never see 2000 prices b/c everybody from 2003-2007 is waiting with an income that would support a 2000 priced house.
ABOUT FRIGGIN TIME DANG IT!!!!!!
http://seattlepi.nwsource.com/business/356339_housing26.html
Congrats, Shizo. You are now officially right. Doesn’t that feel good?
Woot! That’s even better than Stumptown at -.5%. Good on ya!
They don’t get it. It’s NOT going to get any better! The price you can get today — even though it might be disappointing — is quite likely the most you will be able to get, in real value (figuring for future inflation and opportunity-loss) EVER. Waiting a year or two won’t solve the dilemma you face today, just postpone having to deal with it.
Anyone who bought a house in CA from about 1996 on, has *never* seen declining prices. It’s not part of their reality, hence the belief that things will just “pick up again” soon. What’s going on here goes on in Vegas daily, and happened during the ‘com bust. People will ride this out to the end because it just *has* to come back. Smart sellers will lower their price. The rest. . . toast.
I think this is true regarding the state of the economy too. Someone on another blog pointed out that anyone under ~50 years old has never seen a hard recession in the USA. The last one was in the early 1980’s. There’s a whole generation that’s about to get a lesson in econ 101.
They’re also going to get to enjoy a crash course of Values 101.
Did anybody else see that 60 minutes piece on how the youngest set of current working adults have no concept of what it takes to have a job? They talked about how mothers are setting up interviews and these kids quit at the slighted sign of actual work. That’s going to work out well for them. The funniest scene to me was where a company had a trainer come in and was showing these yutes how to use a knife, fork, and spoon.
My wife was speechless, I just said that I’m glad I’ll be competing with those losers for the next 20 years.
But Dude, hasn’t that always been the case with 15-year-olds?
no
I’d like so see what ‘rent’ the “quote” friend will be willing to cover. This would be one story that would be great fun to follow.
I bought my place in 2000, I know I could never rent it out to fully cover mortgage HOA and taxes. Some dreamers around here try though.
‘I have a good friend I could rent it to for a year and then re-evaluate next year.”
==================================================
She’s gonna need to find about 4 or 5 more friends just like that.
It will be about 2013 before those yearly re-evaluations begin to look fruitful.
The Entire State Is Considered A Declining Market
Governator: Dis is da the first time I heard about dis…vhy did not somebody tell me about dis, dat, and de other before?
Anyvay…I kicked ‘make my day’ Clint Eastwood off of the CA parks and Rec commission today….not because my ‘I’ll be back’ beat the crap out of his girlyman move quotes….but because when I appointed him to parks and recs I told him I am really appointing him to ‘wreck the parks’…but he just laughed…hahahha…..no…you ‘won’t be back’ Clint….hahahahaha….I have the last laugh
A total of 343,220 single-family detached California homes closed escrow in February (seasonally adjusted), down 28.5 percent from 480,170 a year earlier
But the sales were UP as compared to January!!!!! The bottom has been reached!!!!!!!!!!!!!
*chuckle*
‘There a lies, damn lies, and statistics’
- Mark Twain
Because Liptrot purchased in 2000 and has ample equity in her home, she’s not desperate to sell.
I’m keeping it on until the end of next week and then that’s it,’ she said. ‘I have a good friend I could rent it to for a year and then re-evaluate next year.
Will she call herself desperate next year when she realizes she missed the boat…again?
“County Assessor Steve Vagnini”
Why is it that the last names of people quoted on this blog are so funny??
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Entertainment is how you draw most people to read or listen to you, no?
I haven’t read Johnson in a long while (it used to be number 2 on the list of home buyers). We got Jones, though, but not among the people in the stories.
Jas
What’s so funny about “Vagnini”? What are you trying to say, Bubble Butt?
What’s so funny about “Vagnini”?
He probably thinks something does’nt smell right, about the name.
Dont get testy Big V.
By the way, what does the V in your name stand for?
Even more to the point, how is Mr. Vagnini related to Ms. Liptrot, mentioned above?
Dont mind her she hasn’t she needs another glass of 30 dollar a bottle wine first before she gets nice.
I haven’t had enough beer yet to post my reply to this.
I hear he’s got a one man show.
It’s called the Vagnini Monologues.
HA…LOL….! Good one, laughing boy…!
Really? I could have sworn Jane Fonda called it something else…….
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“The Entire State Is Considered A Declining Market”
In the most recent Radar Logic data the fastest declining areas in CA, as well as the nation, are SF and San Jose metros. These two were lagging the other three CA metros (LA, SC and SD). I believe that Case-Shiller index combines SF, SJ and SC into SF.
Jas
Personally, id say Cape Coral/Ft. Myers is the fastest declining. Port Saint Lucie and Palm Bay are close behind. For California, it’s probably the IE
SF Case Shiller does not include Santa Clara County. Kind of weird, considering that San Jose is bigger in population than San Francisco.
Ali Liptrot has had her San Rafael 3-bedroom, 1-bath home on the market since early this month with no offers despite lots of visitors. Liptrot, who sells property in Baja and has her real estate license, said her asking price of $629,000 is on par for her Santa Venetia neighborhood.”
The asking price is on par, the sitting time is on par, the failed sale attempt is on par, and soon, the rent will be on par. Oh well, I guess she can always HELOC her ample equity and flee to Baja with the cash.
Who said banks are still dishing out HELOCS? That money spigot has dried up. Even if she could get one, probably 80% LTV max. The best thing for her to do is reduce price to $498k. She will probably get a $475k offer from a knife catcher.
Last I looked HELOCs were still being advertised by Bay Area banks, but what loans are actually being made are hard to tell. Giving someone five or six figures can still be a good bet. Especially those who have owned since the nineties tend to have money in their house, other items, and in other accounts. The HELOC stream is over for deeply underwater newly built areas, but still flowing fine in leafy old money communities.
In other words, HELOC money is still flowing for those who don’t want or need it……and you would be correct. Debt junkies need not apply.
Thats true. I get offers all the time. Even got a call today.
“The median price of an existing, single-family detached home in California last month was $409,240, a 26.2 percent decrease from $554,280 in February 2007, CAR reported. ‘It’s hard to imagine that the median will go much lower than that,’ Kleinhenz said. ‘That’s almost $200,000 off from its peak.’”
Why is it so hard? Was it not $257K prior to the bubble? Looks like we still have plenty of room to fall.
His math isn’t much better than his projections. The decline so far is less than $150K, not $200K. Though with the rate of declines accelerating, $200K shouldn’t be too far away.
$150K in the last year. $200K from peak of 2.5 yeas ago.
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Median price of a resale SFH in CA:
Mar-97 $175,000
Apr-98 $199,160
Dec-99 $221,500
Apr-00 $237,060
Don’t forget that in March 2000 the economy was booming and UR was near multi-decade low. Household incomes have only gone up some 20-30% since.
Jas
Sure the prices look like they have gone down a lot…till you compare to just a few years ago. Then it gets confirmed that there is still a lot of room left.
Household incomes up since 2000 ?
I make only 5k more now than I did then. I’ve seen no changes in top salaries in my are in 10 years ( senior programmer).
They have been stagnant and actually gone down if you consider inflation. Do you have a link that shows 20-30% increase ?
Salaries for engineers are up by 30%+ in silicon valley since 2000. I have internal company data but cannot post it. However, for an individual who is at the top of the pay grade, that person’s salary may not have gone up much. Salaries go up faster earlier in one’s career, as the learning curve is steeper. More experienced people get paid more but may not see the y-o-y % increase as much.
Having said that, if my salary went up by $5k in 8 years, I would look for another job.
You know, even in August when we saw the credit crunch hit, I don’t remember anybody predicting California’s median going down by over 20% yoy at any point. I think we were all thinking this would take a lot longer to play out, with 2012 being a reasonable guess for bottom. But if we’re dropping 20% yoy, that means some areas are falling even faster. Will they ‘bottom’ sooner? Or get driven so far below the mean people will forever look back at 2012 as the year they really were ‘giving it away’ as far as prices go?
Much more likely to get driven far below the mean.
It’s just a simple case of “strong hands v. weak hands”, IMO.
I think the bottom will probably be somewhere between 2010 and 2012. We have to allow wiggle room for bail-out effects.
You still think the bottom is this soon? It took 8 years for prices to peak, shouldn’t it take the same amount of time to bottom?
No. The accretion was not time-limited by any outside factor. It was just a matter of how quickly banks became willing to reduce standards (once they realized that their regulators were out to lunch), and how quickly people became willing to take so much risk upon themselves (once they became convinced that they were about to be priced out forever). The downside, however, is driven by resets and defaults. Once that negative-amortization train hits the wall, the FB must sell or be foreclosed upon; even refinancing won’t help most of them. That’s why I think the famous Ivy Zelman reset chart still stands as the most reliable method for predicting the bottom.
That would be nice to see a bottom around 2011, this means ill be in Oil City, NW PA for 3-4 years then can consider other locations with cheap housing. I realise that alot of people don’t like NW PA and suggest other locations. I will take their suggestion if they will chip in and give me “grants” to the point where my out of pocket costs reflects what house prices would be at the bottom. Because I am not about to catch a falling knife. I will ride out the insanity in non bubble Oil City then decide where to go from there, I may even stay in Oil City if prices there also drop and it’s significently cheaper than elsewhere. Ill then just buy a second house and some vacent land for my orchard. Those trees will grow just as well in NW PA as in Tennessee but the land is significently cheaper.
I like the Ivy Zelman chart but…
The bottom will probably be very wide compared to the peak. A lot of the damage is being done now but it will take a while for people to give up.
The credit contraction will go on for a long time. Job losses will mount up. All causing damage years and years after the resets have gone.
Pile on top of that the probability of population declines further increasing the inventory problems.
Hence the trough on this could easily extend to 2020 or further. Easily.
Big V and all other bottom pickers
The question is, where is the starting point of the bubble? From the starting point you can determine the approximate bottom. I do not believe the bottom will be hit for 10 -12 years, but it will be relatively safe to buy in 3 years, 90% of the down move will be done.
There are very few positives that could stop the decline in 3 years. Where are the jobs going to come from? The banks won’t bottom out for 5 years. The banks won’t be lending for a decade. This is not a wham bam down to affordability and its over. The affordability curve is going down hill faster than house prices.
The starting point of the bubble (at least in my city) was 1998.
1100sq ft inner city bungalows, worth maybe 60K, were being bought for 150K, torn down and replaced with 2 or 3 townhouses priced at 225+K.
This continued until the present.
Uhhmmm, I think a few people did.
The “problem” with California (versus say bubbletown Arizona, where I live), is that the overvaluation has been so systemic and massive, that it will be devestating to the collective “psyche” there when (not if, WHEN) prices return to real levels - 2.5 to 3x income, etc.
Around Phoenix prices have and will fall 30% to 40% from the peak to get to where they should be - maybe 1 or 2 hundred thousand dollars lost at most. But in California, prices need to fall by three, five, or seven hundred thousand dollars to be realistic - massive amounts of money that simply disappear from household “wealth”, and I don’t think Californians as a whole will take it well.
Long after Phoenix, Vegas, and Southern Florida have taken their beatings and started to recover, say 2012 or so, California will still be doing everything they can to pretend that 4 years of 10 to 20% declines haven’t really happened.
That $850k (circa 2006) Bay area house is now “worth” $700K, and will be $610k in 2009, $530k in 2010, $480k in 2011, and $440k in 2012. Still not at 3x local income? $400k in 2013, $370k in 2014…
Excellent point, AZ. This is what so many, esp. in South OC and the Alt-Bay area just don’t get. Time and time again I have talked to the long timers in the South OC area and they tell me they couldn’t come close to buying their homes, even with the second income, at these April 2008 prices.
What does that tell me. First, incomes have not kept pace. Second, home prices are too high relative to those aforementioned incomes. Third, prices HAVE TO come down OR people will not buy as evidenced by the decline YOY in number of SFRs sold.
Unfortunately, the Kool-Aid still runs from a very deep well here in California, so it will take some time. Also, houses went so high that even with 20% each year, it will take time to get back to the 3-4X income for many areas.
Lastly, even with a good down and a good income, I would venture to say that no one, even in the good areas of CA, should be taking on a mortgage larger than 250K, esp. if it is for 30 years.
If you make high 6 figs and have 400-500K to put down, go ahead and buy the 750K home in several years. You will have a nice home near the beach. However, the 70-100K McMillionaires should not be buying anything more than 250K, maybe 300K tops. WIth all the interest (1.5x), the HOAs, the taxes, and the insurance (fire and earthquake (optional)), maintenance, and sweat equity, i.e. mowing the lawn, you will never recoup the money put in over 30 years. Sure, you may have nice nest egg, IF you can sell in 2045. But who knows? Also, as many have pointed here, it is good to be mobile.
OCDan, you are completely ignoring rents. I’m paying $1500 per mo for my nice but small 1B in 94089. This will probably go up to $1800 by the end of the decade, which is about the carrying cost on a $380K property @ 5.5% (3% down).
Once rents hit the $1800 level, 1B condo equivalents will stop falling. Right now the condo equiv is around $410K.
Since 1990 I have not seen houses in silicon valley for 2.5-3x income, nor for 100x rent. However, I could be wrong. Does anyone have a link to data showing that this was the case?
While 8x is too high, waiting for 2.5x seems to be futile (except for people who prefer to rent), I don’t think it has been like that for a long long time. People here have been willing to spend a higher percentage of income to live here. And have been able to do so; since incomes are higher, and most goods cost about the same, there’s more money for housing. e.g. a Ford Focus pretty much costs the same here as in the Midwest.
OCDan, you are completely ignoring rents. I’m paying $1500 per mo for my nice but small 1B in 94089. This will probably go up to $1800 by the end of the decade, which is about the carrying cost on a $380K property @ 5.5% (3% down).
Rents go DOWN in recessions, not up. Check what happened to Bay Area rentals post-2000, and SoCal rentals in the early-mid 1990s.
I still think the bottom will be 2012 or later. The biggest drops may happen before then, but that doesn’t mean that prices will start rising again right away. More likely a continuing slow grind downward. Even sideways/flat is still declining in real terms.
“San Mateo County’s foreclosure rate is low compared with those in other California counties. Alameda County was up twofold to 487 sales. Santa Clara County was up more than fourfold with 351 sales.”
So much for the old party line that only a few of the poor areas will get hit. Looks to me like the entire Silicon Valley is affected. Anyone making the argument that Cupertino is immune will be in for a huge disappointment this year. While neighborhoods filled with 1st-time buyers are starting to realize the full force of the crash, Cupertino and the like are still at the sympathy-pain stage. No 1st-time buyers = No move-up buyers = No market. Value ratios will not change substantially.
The low-end (women and minorities) always get hit first. We still have the middle and upper waiting for their turn.
And I have already seen the pain starting in the low-upper end. The prices still seem high, but they were at about 2004 levels and most sellers were already in the loss column.
How are women “low end”?
From what I understand, most SFHs are occupied by families. Either a married couple or a family with kids, right? Wouldn’t that by definition include a woman to go along with every man? Furthermore, since most divorces end up with the mom and kids living in the house (while dad gets an apartment or condo), it seems that men would be far more likely to fall into the “low end” category.
I think he was talking about salary wise. Women still get shafted pretty regularly in the salary department. (Sometimes by Mr. Spitzer!)
Yes, I know (enter professional Big V). My only point is that, when it comes to SFHs, most women are married and at least indirectly benefitting from their husband’s income.
That’s one good argument for Hillary for President! We can pay her less!
I say we make her ambassador to Bosnia, and make her go away.
“I think he was talking about salary wise. Women still get shafted pretty regularly in the salary department. (Sometimes by Mr. Spitzer!)”
At $1000/hr I think the shafting that was going on was not in the salary department.
There is the typical news story about ‘women and minorities hardest hit’. Right now we are still on that phase were those portrayed in the stories can evoke some sympathy.
But right around the corner I see those with higher means starting to feel the pain coming. What are the news to say then? Are they going to gloat that the ‘rich’ are also being affected? Would those who support a bailout be also willing to bail out the ‘rich’?
Hey Big V: regardless of who gets the house or the kids nearly every study has shown women & children’s standard of living goes way down after divorce. In terms of salaries it’s more complicated - educated white women do better than less educated minority men, but the top dogs are still white men - educated or not.
Yeah, I know, but if we’re talking about SFHs, then it’s usually the guy who moves out. That’s why I don’t think it’s true that women are more likely to live in low-end SFHs than men. Apartments probably, condos maybe, but I’m not sure it holds up for SFHs.
Well how about the guy that comes over to re-tune the missus while the kids are over at dad’s apartment two weeks out of the month? Surely we have to account for this guys standard of living getting a raise? Wouldn’t this net out to even?
Good point, a-i.
The low end is hurting far more than these numbers suggest. Regarding San Mateo County, El Barrio Michoacan is an area that includes part of Redwood City but mostly has a Menlo Park address even though it is not part of Menlo Park. Menlo Park also includes some neighborhoods that are close to East Palo Alto and its long term problems. The higher end parts of Redwood City and Menlo Park proper have seen very little change so far while the low end properties appear to be in free fall or close to that. The difference is huge.
I live in Los Altos. I do expect to get hit. I do expect to fare better than lower priced areas. People with money (SV executives) don’t want to live with the riff-raff (no offense to any riff-raff (Raider fans) out there).
Also since I plan on passing my home to my children I don’t care what the market does.
You’ve got to live somewhere, right?
Mike
“The median price of an existing, single-family detached home in California last month was $409,240, a 26.2 percent decrease from $554,280 in February 2007, CAR reported. ‘It’s hard to imagine that the median will go much lower than that,’ Kleinhenz said. ‘That’s almost $200,000 off from its peak.’”
Hahahahahahahahahahahahahaha. I have an active imagination. Hahahahahahahahahahaha. I see it going down some more. Hahahahhahahahahaha
“Fannie Mae, for instance, requires a 700 credit score if the borrower’s down payment is less than 20 percent of the purchase price. Fannie Mae also won’t allow homeowners to refinance a first and second mortgage into a single loan.”
No equity / no down payment –> no loan
They still aren’t going far enough. Your credit score won’t keep you from walking away if you put down $0 down and the value of your house has gone down by hundreds of thousands of dollars.
You know, given that credit score maxes out at 850, you could make the argument that the score/1000 = what your maximum LTV should be.
700 cs =30% down. 800 = 20 % down. 600 = 40% down.
Doesn’t matter. You could make 100K a year and HAVE AN 849 FICO score on all 3 agenices. Bottom line is you CANNOT reasonable afford much more than 350K and that means you have no other debt.
PRICES HAVE TO COME DOWN! All the wiggly-piggly diddley programs in the world will not save this thing.
Once again, lending 500K to people making 75K a year and home values losing 10-15% a year, means one thing…and it isn’t paying the mortgage.
Jingle mail, anyone…Bueller?
“On a monthly basis, sales increased 9.6 percent. Leslie Appleton-Young, the association’s chief economist, said that the monthly sales increase could be an encouraging sign since February was the strongest sales month of 2007.”
That basically sums up how slow 2007 was. How slow is any year in which February is the month with peak sales for the year (also the shortest month)? How dreadful were the February sales numbers when you have to resort to using month to month comparisons at a time of year when sales would typically increase to show any increase in sales at all?
Her comment makes no sense. If Feb 2007 was the strongest month that means Mar - Dec were worse in 2007. If 2007 is the model, shouldn’t the correlation of Feb 2008 to 2007 be discouraging??
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‘Every single person who walks in the house says, ‘Your house is beautiful.’
Yeah, but that person doesn’t say that your house is priced well. I am sure that you know that people tend to be polite to make others feel good. My advice, Ali, is to knock down the price by $100K before others in the neighborhood do. Secret in selling a house these days is: LOW PRICE. It shouldn’t be a secret.
Jas
She’s delusional. Smart house shoppers don’t unzip their fly to the seller like that. Most retain a detached composure, so when it comes time to negotiate price the seller doesn’t have you by the short and curlies.
Smart house shoppers don’t unzip their fly to the seller like that.
True. So when the seller hears that, they should know they’ve priced themselves out of the market!
So when you hear “this home is so pretty” it really means “honey, did you notice that restaurant we drove by… are you hungry too?”
Got Popcorn?
Neil
“It’s pretty huge. A lot of people have first and second mortgages,’ Fetherolf said. ‘If Fannie Mae isn’t allowing us to pay off the second, then it really doesn’t do us any good.’”
What about the 3rd and 4th? Geez, what do they actually expect? People to payoff their loans or live in the house? WTF?
I guess these people at Fannie Mae don’t really understand the Bay Area. I’m all for tougher standards but really, a 700 FICO score? What’s next enough income to actually be able to afford the monthly payments for an extended period of time? I just don’t get it. I live here the Bay Area and I don’t understand why the rest of the country thinks we’re all a bunch of stuck up jerks…..really just look at Berkeley….they got it all figured out the rest of the country just has to catch up……..NOT!
We looked at a house in beeeeeautiful Livermore last year when the asking price was $575,000(in a borderline neighborhood)…they sellers lowered to $535,000…no fools….took it off the market. They just relisted it back at $575,000…uh..right…and to make things even harder on themselves….their nextdoor neighbors with the exact same floor plan just put their house on the market for $499,950….I guess that does in their hopes for the spring bounce bringing in a fool to pay the price they couldn’t get last year.
There must be something in the water or air here that makes some people such ignorant fools to think a bad neighborhood is worth more than a half million to live in…..
Yes, I think the toxin is called “arogantin”. It tends to accumulate in the ground water near sources of fraudulently-gained wealth, and is most highly concentrated in the skulls and soft tissue of those with very little education, who live in close proximity to those with a lot.
“Fannie Mae isn’t allowing us to pay off the second, then it really doesn’t do us any good.’”
- It actually gets worse. They are supposed to only allow ‘35%’ of income to service the loan to qualify (Jumbo Loan).
My brother is a loan broker in Orange County and he told me that they are able to ‘manipulate’ the income to 45% to service the loan.
Fine, go to 50%. Let look at that.
Say you brin in 5K a month. Good money for many , many people. No shame there. 50%=2500. 2500/month would be about a 400K loan. 600/month for every 100K borrowed at 30 years. As a said above, no one should be more than 250-300K, so the numbers even here don’t make it.
Yet, I still see homes listed at 400k+ in Rancho Santa Margarita. ONLY 1 is listed at 350-450K.
Something will give in the next 2 years and it won’t be buyers.
It’s also rather hilarious that they think 7% is an astronomical rate for a jumbo loan: only if the Mortgage Amount is Jumbo, me thinks.
Heck, when I bought in 1999 my rate was 7.625% conforming >20% down. When I was in college rates were higher than the interest rate on my CC is now, should I choose to carry a ballance.
7%. Haha. IIRC, I had Savings Bonds paying 7% in the 80s.
I’ve always said the Fed’s should use Berkeley instead of Yucca mountain for all the nuclear waste. Might as well throw Santa Cruz in there too.
Mike
RayW - (seriously) There are bad neighborhoods in Livermore?
–
“Most of the local foreclosures are occurring in blue-collar cities…”
Blue collar towns first and white collar next. In parts of the Bay Area white collar towns mean lot of people with Scam Options money to pay high prices for homes. Remember how white collar town were hit hard during 2001-03? In Saratoga home prices were down some 40%.
Jas
I heard the term “green collar” for the 1st time today…
Is this the new term for illegal immigrant landscapers?
Only if you see them @ disneyland.
green collar: does this mean i have have carbon offset sticker on my hummer OR does it mean i have a compost room in my McMansion??
A compost room for all your $sheet, hilarious!
OT: I just saw on the news that McCain said he does not support any bailout; cut to Obama & Clinton talking about intervening.
I am not attempting to start political drift, but seriously, this just decided my vote.
I’d rather have a failed housing intervention than a failed war on the books for another 8 years.
I think with Hillary we might get both!
Hillary…please. Hillary has no hope. I would as soon vote for Bud Abbott or Curly Howard than Hillary. She’s a nothing, she’s in it for her legacy or perceived legacy….Hillary stands no chance. I just want the Bush’s and the Clinton’s to go away. I’ve had enough of them.
Hillary Clinton is without a doubt the worst Presidential candidate of my voting years…just behind GW or even with him…she’s so full of herself…please…no Hillary. I just watched her load of BS about being under fire in Bosnia and then the actual footage that showed how full of crap she is. She’s dellussional and useless…she’s a carpet bagger in reverse…from the south to the north.
Ray you called as it is.
CARPETBAGGER! Amazing what New YAWKERS will put up with. Heck, when I was a wee lad in the 70s we would have laughed at anyone from good ol arky. What happened to regional bias? I know NY has always catered to the out-of-towners, i.e. Kennedys, since Ted will never give his seat up in Taxachusetts.
She’s from the north–aka Illinois–and barely tolerated her time in Arkansas because she thought it would buy her power and glory.
Don’t be slammin’ the good people of Ark. with her crappy “ethics”.
Hillary…I would rather be boiled in oil and served on a bed of rice.
–
Yes, I saw that clip too. I agree with him on this much more than the other two contenders to the throne. I have no horse in this race, but I think that McCain might win despite the economy getting worse as the year progresses.
Jas
Great, just what we need, a McBush for the next 4 years.
I can’t stomach McCain or his druggy wife either. I am beyond p*ssed the democrats can’t put up anyone decent. First Kerry, now Hill-dog and Obama, are they trying to lose?
Amen to that, and I feel your anger. If the Democrats can’t win this election they can’t win any election.
That’s too bad. He also wants to continue spending $4B/mo in Iraq and legalize 12 million illegal immigrants.
Either way (intervening won’t work either), housing will become more affordable rendering it a moot issue, IMO.
Not getting my vote. No way. No how.
(And I supported the guy in 2000, before he had his spine removed on Larry King…)
Just for kicks, do you know how much money the US has spent in Germany (constant US military presence) since 1945? In inflation adjusted dollars? How about Korea since the 1950s? Bosnia since the mid 1990s?
We are seriously wasting the money in Europe, now that they have already been invaded and all.
Muggy - go read the text of the whole speech and don’t go by the TV soundbite. He said much more and even said we have to bail out the banks to save the whole financial system. That’s the worst part of the general public - they vote according to soundbites they hear on the TV.
“… he said we have to bail out the banks”
Oh well, we’re screwed then.
“On a monthly basis, sales increased 9.6 percent. Leslie Appleton-Young, the association’s chief economist, said that the monthly sales increase could be an encouraging sign since February was the strongest sales month of 2007.”
“‘So we expect to see that percentage (decline) moderate as we go forward,’ she said. ‘I think we are heading into kind of a bouncing along the bottom (mode) for a little while. I don’t think this will be a sharp V in terms of recovery.’”
__________________________________________________________
Recovery teams have been sent out all over the Golden State, but unfortunately all they’ve been finding is fatal mortgages, strewn all over.
Gotta love it - she’s calling the bottom, again!
Same for Mr. Kleinhenz - “It’s hard to imagine that the median will go much lower than that.” Gee, weren’t you imagining just a couple of years that it was a “new paradigm” in which real estate prices rose by double digit percentages every year, forever, even with stagnant wages? Haven’t you been surprised by the fall in prices every month for over a year now?
And for the so-called reporters who don’t call them out on this purest of spin, once again, I say, pffffttthhhhhh.
The day of the newspaper has passed, and you are a big part of the reason.
I still fondly remember the “permanently high plateau” commentaries and “most if not all of the gains are here to stay”… forget which idiot put it out there.
“Last year, Appleton-Young forecast the median price of homes would tumble by 4 percent this year in California.
Recently, she confessed the need to eat her own words when she revised the forecast to a projected 8 percent to 10 percent drop in prices….”
February 20, 2008
Real Estate News from Homes101
Instant credibility from Ms. Leslie Appleton Young.
LOL… I wonder if a homeowner would really consider another 10% decline this year “bouncing along the bottom” (let alone substantially more, as the curves seem to indicate…).
Of course, do we really expect reasoned analysis from something called Homes101? Well, not in this room anyway…
“‘It’s pretty huge. A lot of people have first and second mortgages,’ Fetherolf said. ‘If Fannie Mae isn’t allowing us to pay off the second, then it really doesn’t do us any good.’”
Maybe people can pay off their seconds using their wages. Ms. Fetherolf? Vicky? … Hello, is this thing on?
Hey, yeah, about that “wages” thing, that reminds me: howcome Hilray was on the radio this morning yelling about houses are Americans’ “largest source of wealth?” I am a money dullard, but aren’t I right that a person’s largest source of wealth is usually something like a job? Or, in another example, if a person is actually wealthy, his largest source of wealth would be, for instance, his huge pile of money? I guess I just don’t understand about wealth. I used to think it worked like it works in Monopoly, where you have to pass Go to continue playing. I guess maybe I should take an economics class–that would enable me to take out another massive student loan. If an unpaid mortgage is a “source of wealth,” maybe a big fat student loan in default is, too. I guess I had it backwards the first time around.
I know, that really ticked me off this morning. If houses are our major source of wealth, then we seriously need to look at how to encourage JOB GROWTH in this country. You know, like manufacturing and farming and stuff. This is my response to Hillary, just in case someone on this blog gets the chance to chat with her soon:
“An economy cannot be based on the consumer. Rather, it must be based on the producer. If we continue to consume without producing, then eventually we will run out.”
Do you think she might understand that?
I don’t know. I think she’d probably need a PowerPoint show.
In the natural world, the word “consumers” refers to the vultures and roaches and such that dispose of all the corpses of the producing members of the animal, plant, protist and whatever else kingdoms. Without the lowly consumers, defunct producers would pile up and swamp the planet, so “consumer” is an important role, surely, but there’s still something unsavory about being a roach. It’s not really a thing to trumpet about.
And yet, that, exactly, is what we have become. Wow. Great analogy.
Then again, roaches may live well sometimes, but certainly not always, and they learn to live on less - whether we can do that remains to be seen, and strikes me as doubtful. Perhaps we’ll go protectionist and rebuild our industry. (I wish.)
Hillary needs to be impeached. Say, any chance she’ll get careless and stain her own blue dress?
In normal times, a house is often peoples greatest STORE of wealth, but that isn’t the same as a SOURCE of wealth. The bad thing is that for many in Califonria, their houses really WERE “their greatest source of wealth.” The appreciation on their houses was greater than their income. This is not a GOOD thing, it is a sign of an unsustainable bubble.
Just look at her ties to wypro, the Indian outsourcing company.
She helped give away many high-paying jobs, taking the careers of honest, loyal Americans with her. These workers invested in their future, through expensive college degrees and years spent working in their fields. Now, she wants talk about high-paying jobs, what a maroon.
Here in the Boston area, we figure anyone who votes for her is a closet right-winger. Living in a very liberal, wealthy community, I can tell you business interests trump ethics every time.
Don’t insult a commodities savant.
“Fannie Mae, for instance, requires a 700 credit score if the borrower’s down payment is less than 20 percent of the purchase price. Fannie Mae also won’t allow homeowners to refinance a first and second mortgage into a single loan.”
How many California households have (1) a desire to buy falling-price real estate (2) a credit score below 700 and (3) a 20 pct downpayment to buy a home priced north of $400,000 (i.e., $80,000)? Or otherwise, how many interested buyers have (2) a credit score above 700 but (2) insufficient savings for a 20 pct downpayment?
(1) no
(2) no
(3) no
(2) no
(2) no
“It’s nice to have the loan limit adjustments come through. It puts the spotlight on the issue. The increase is well below what most are paying in coastal California markets. It was 20 to 30 years ago when these (50 percent higher limits) were set and it’s hard today to come up with any reasons to justify not including California in the high-cost areas,” Appleton-Young said. (December 1, 2005 Realty Times)
“It’s Economics 101,” said Leslie Appleton-Young, chief economist for the California Association of Realtors. “It’s demand and supply.”
“We may see a blip up in foreclosures and delinquencies,” she said.
December 15, 2005 Sign on San Diego
So sorry - you got your limit increase - suck eggs. She is great for quotes - though
See that is what these dingbats like Simpleton-Old don’t get. While 30 years is much too long for my taste, now, the tried and true numbers don’t lie.
These clowns can raise the loan amounts to 1 billion and it still won’t matter. Like trying to put the squarer peg in the round hole, you just can’t get a household making 70-100K a year make the 360 payments and still live a functional life on a 750K loan. Unless they win the lottery or inherit a small fortune, it ain’t gonna work out.
Indeed, Prof. I’m actually an interested buyer with a credit score north of 700 with enough cash laying around for a down payment on a reasonable price. Of course, the places I’ve looked at lately are not reasonably priced - 20-25% off bizarro world pricing is still crazy.
Soon I’m going to start walking into loft sales places down here and talking about offering 50% of peak pricing, or a price where the place would cash flow. If it’s the only offer they’ve gotten that month, who knows, someone may bite, and then it may be time to start shopping.
—
‘I don’t think holding onto them until the market comes back (is) going to work.’
If everyone held on to “until the market comes back” we will have a mess on our hands. What if buyers held on during 2004-05 until the prices stopped going up? We would have had an even bigger bubble and a bigger mess. Anyway, banks can’t be in speculation business when they already have a big inventory problem at their hands. They need to sell ASAP at APTMB (any price that market bears).
Jas
By definition, the market turns up when all the houses come off the market. The minute “everyone” takes their house off the market to wait for an uptick, an uptick will occur, which will induce “everyone” to put their house back on the market. I’m sure you can see where this is going.
–
Why tax the brain cells with this far thinking? Playing chess with worrying about just the next move.
Jas
Sure, what next, collusion by the used home sellers?
Heck, we can’t even get everyone on board with the no-gas buy day, even with the Internet, nor can we get a day away from the baseball stadium after a strike ends.
Sure, we will get approximately 4 millions sellers to stop selling in order to drive up prices.
What next, a planned manned NASA mission to the sun? Come on. These people really need to think it through!
Dunno, I helped launch a “mission to the sun”…
I think the Italians have already tried it.
Their plan was to go at night.
Mike
“Anyway, banks can’t be in speculation business when they already have a big inventory problem at their hands. They need to sell ASAP at APTMB (any price that market bears).”
Banks cannot afford to sit on property that requires daily, weekly, monthly and yearly maintenance and taxes. Unkempt property is a declining asset.
Sorry if this has already been posted, but its just too funny.
Ben Bernanke Is My Kind of Guy by Lawrence Kudlow
Why do I say this? Simple. I just got my latest adjustable-rate mortgage statement from the bank. When I originally refinanced this loan, it was 5.75 percent. And last summer my ARM soared to 8.25 percent. But guess what? Through February it has round-tripped all the way back to 6 percent.
So I’m now saving $2,000 a month, or $24,000 a year, because Gentle Ben has slashed the fed funds target rate to 2.25 percent from 5.25 percent last fall.
He’s my kind of guy.
http://www.realclearpolitics.com/articles/2008/03/ben_bernanke_is_my_kind_of_guy.html
And we only needed a 40% increase in gasoline price, 20% increase in food prices, 20% drop in the value of the dollar….
What most people don’t understand is that this is as good as it going to get, from here on, it will only get worse. Right now, this day, is the best one you’re going to see in the future.
What’s the number of that occupational hypnotherapist again? The large one?
If his mortgage is a straight ARM (adjustable forever), then he should fix it now while rates are low and he still has equity. Rates can’t remain this low forever, and long-term rates are headed up, aren’t they? It’s been a while since I checked.
“Even in past downturns, home values haven’t fallen this hard or fast. ‘We’re definitely in uncharted terrain,’ said Robert Kleinhenz, deputy chief economist of the California Association of Realtors. ‘That’s why it’s so difficult to figure out what the next few months will hold.’”
No, it’s not difficult to “figure out”! The California market is going to continue to crash. That’s pretty easy to “figure out”. What is actually difficult for the CAR is how to put a positive spin on it. Even sixth graders have difficulty with the “It’s a great time to buy!” jingoism when they see their neighborhood falling apart and Mom and Dad out of work.
” Comment by SiO2
2008-03-24 21:42:55
I read the headlines, and it sounds like disaster. Yet, I look around, and good houses still sell in 3 weeks in silicon valley. Even bad houses in good locations. And the number of jobs is up 1% from last year. Not booming, but not down. I thought that the jumbo crunch might do it, but no, jumbos are still available to qualified buyers, and there seems to be no shortage of people willing to throw down $1.5m. Puzzling.”
My comments: Are they still able to buy with only 5% down? If yes, this explains everything. Once they need 20% down, very few will be willing to put down $300k or have that money. Almost everyone who spent $1.5m on a house really worth maybe $500k will walk away
Correct, Bye.
Also, SiO2 mentioned that he thinks we’re being inconsistent about using the unemployment rate. The government takes people out of the calculation once those people have been out of work for over a year, prompting some to disregard the quoted rate when it declines. SiO2 believes that if we disregard a decreasing unemployment rate, then we should not hail an increasing one. However, I think SiO2 is incorrect.
Because people are only REMOVED from the rate unfairly, but not ADDED to the rate unfairly, it is safe to say that the number is skewed downward. There is no need to question the direction of an increasing unemployment rate.
Anyone with .056 of a brain wouldn’t part with his/her/their hard earned/ill-gotten 300K.
300K in cash, even with inflation, is still a chunk of change. At 3K cost of living expenses every month, you could go 8 years and 4 months without employment. That is a nice place to be. Sure, in NYC or South OC it might be a stretch, but in certain place in TN or Oil City, PA, you could go a long way to getting out of the system.
Well people who DIDN’T ride the HELOC to Hell may well have that kind of equity from their last place.
The thing is, you think that these houses are worth $500k. Fine. But the buyers think they are worth $1.5m. Proximity to high paying jobs and nice weather is worth that to some people. So that’s what they go for.
“And county officials estimate that foreclosures will soar to nearly 3,000 homes in 2008, with the majority of those again expected to be in Salinas. ‘In Salinas, in particular, the marketplace is all about foreclosures,’ Haney said.”
I think that this is interesting because I live in Salinas and something funny has been ongoing in RE since the downturn. Very few for sale signs. But you can walk the neighborhoods and see lawns yellowing and more people in one house. On a recent trip around a neighborhood only two houses out of 30 now have a gardener, two years ago all had a gardener. Two houses that had a for sale sign are now empty and weeds growing and one house has a tour ‘for closures’ sign too. It is as if the RE community a year ago decided to not put out the for sale signs hoping to prop up RE values, and secondly, I think that a lot of owners are staying in their house as long as possible and then simply moving on. Heck, with high gas prices most are probably bailing and moving closer to their work in SJ.
It’s the same here in Monterey. One failed flip had a For Sale sign out and now nothing. There is still a big red sticker on a window, no curtains, and nothing apparently inside.
I think it’s a case of not throwing money away on promotion. The agents don’t want to waste the time and manpower on the signage and now just respond to people who come into the office.
The impulsive speculators (sell only for a fantasy price) are gone and now we’ve entered the stand-off phase. It’ll continue until the panic/capitulation phase…when long-time owners with plenty of equity get tired of waiting, sick, retire, die…
Here’s what really gets me.
You are retired w/ a nice pension and benes. You have no mortgage and the house is “worth” about 500K. In what world do you think you deserve 600K? Shut up, take the 475K and run for the hills. For most people, that 475K check is the most in one lump sum 99.9997864% of the US population will ever see at once.
Why holdout? Get what you can and take off. Why leave the house with your feet pointing up rather than for a little less. Life is too short to be that greedy.
Is there a lockbox on the doorknob?
Maybe soon it’ll be time to start making those super-lowball offers to the banks. Do you want $100k, or to have to demo it in a year and pay the property taxes that have accrued since then? Or to get sued by the neighbors for not keeping homeless people out of it when they burned down the neighborhood? Maybe I’ll get back to Santa Cruz after all.
I grew up in 222 San Miguel and wanted to buy the big-ass mansion (305?) just down the street. . . in 2001 I was shocked to see that somebody subdivided the wonderful triple lot and built ugly-ass McMansions flanking the real mansion. (The real mansion had a whole block — corner lot, middle lot, corner lot — to itself before the subdivision). Mansion sold for $1.2M back in ‘00 I think.
““‘It is a little perplexing; I thought for sure I’d have at least one offer by now,’ she said. ‘Every single person who walks in the house says, ‘Your house is beautiful.’ I’m like, ‘Yeah, so put in an offer; give me something to play with.’”
“Because Liptrot purchased in 2000 and has ample equity in her home, she’s not desperate to sell.”
“‘I’m keeping it on until the end of next week and then that’s it,’ she said. ‘I have a good friend I could rent it to for a year and then re-evaluate next year.””
Oh my, this one is another classic. That realtwhore is trying to peddle her overpriced 3/1 shack for $629,000! Go ahead and rent it out, save a knife catcher $100k. After a year, your house won’t be worth $500k. Keep waiting and you will be back to what you paid in 2000. Kiss your bogus equity away! You don’t deserve any profits, you never earned that money!
“You don’t deserve any profits, you never earned that money!”
hmmm…. no wonder I felt so guilty when I sold my house in Aug. 05…
…thanks to this blog!
oct 05 for me and I had those same guilty feelings! hehehe
me too. October 11, 2005, Thanks HBB!
But…but Marin County is soooooo pretty and the people there are different and smarter than the rest of the country….where else would you have enough money to put $135,000 down on a house make a $3,000+ mortgage payment, $600 a month in property taxes and not mind waiting in line to use the bathroom in the morning? Really…..$629,000 is a steal!
‘It’s hard to imagine that the median will go much lower than that,’ Kleinhenz said.
***********************************
Needless to say, Mr. Kleinhenz lacks imagination.
I have been waiting for Cupertino to go down in price but it is holding strong. Why is it special at Cupertino and Sunnyvale zip 94087? I want to buy a house there for my kids someday.
I live in 94087!
First of all, it’s not really “holding”. The peak price for a house on my block went for 1.4 million. Since then things have barely passed $1M. Sure they’re still ridiculous, but falling.
However, since Sunnyvale didn’t have a lot of new SFH built in the past few years, it didn’t bubble as much. Inventory is smaller. I’m not saying it’s different, but it’s not the same as “ground zero” areas where there will be entire developments of boarded up areas! I think at some price, houses here will find a buyer.
I’d welcome price cuts! If the “value” of my home fell to what I paid for it, adjusted for inflation, I wouldn’t complain one bit. House prices here are complete nonsense.
Since I never intend to sell my house the imaginary price has no meaning to me anyway.
I don’t understand why you want to lose your own retirement equity? Do you plan to live the rest of your life in the same house?
Another thing, could you have sold, rented then bought it back for 1/3 the price in a few years? Wish my parents did that.
Ha! My “retirement equity”? Last time I checked, my house was a place to live, and not a piggy bank. I simply don’t care what it’s “worth” and don’t consider that value when taking inventory of what I have.
I figure that, if I move at a time when house prices are inflated, the inflated price I get for mine would be offset by the inflated price I’ll have to pay for the new place. Similarly, if I move at a time when prices are normal or depressed, my lowered sale price will be compensated by lower prices for housing in the general market. So it’s a wash.
While I may have made out by selling at the peak and buying at the dip, we all know that’s hard to predict!
Since my house is 100% paid-for, all I need to worry about is my prop-13 protected property tax, which is well under 5K.
A most important point and a point with which I concur. It is meaningless to have an appraisal at 5MM if you are not planning on selling.
This is also true for some of the FBs that bought at the top that will continue to pay their mortgage.
Once invested in a home, the price to maintain is less important to the well planned home owner.
Suppose you’ve lived in your house 10-15 years and you really like it as well as the area you are in. It may not be paid for but what you owe on it might be far less than its price today, perhaps much less than 1/3rd. Why sell and move?
Depends where you are. If it’s worth $1M and you can retire on that money and rent comfortably for the rest of your life, then maybe…
Sometimes you need to think of a house as a place to live! Suppose your house really would sell for $1,000,000, but your inflation-protected property tax is only $4,500. (My house has other advantages, too, like no electric bill because of Solar PV panels).
With the current “war on savings” the most you can expect to get for that $1,000,000 is 3.5%. So you’d have to live on 35K/year? Not likely! And, don’t forget, that $1,000,000 is after you lose 6% to a real estate agent, and pay cap gains tax on at least 500K of it.
If you like where you live, and have no reason to move, and you have inflation protected property tax, it may not make sense to move regardless of what your house is “worth” using the “you have to live somewhere” rule.
Wow! 1.4M to 1M is a -29% drop from the peak which I assume around 2005. I don’t see that at all. If you zillow for example:
1510 Klamath Dr. Sunnyvale CA 94087 and plot the price history you will not see a -29% dip. Perhaps I am looking at this in a wrong way, but someone please enlighten me. I am with people here and I would like to see a big drop.
I think that’s because Sunnyvale and Cupertino are not 1st-time buyer’s markets. They have merely leveled off so far because, as long as they can sell to one another, the price doesn’t have to go down. Unfortunately for them, move-up buyers are required to keep prices up because eventually people need to move out of town. If no one can move in, then houses can’t get sold.
Also, there were plenty of neg-am purchasers in Sunnyvale and Cupertino. However, I suspect (but have no proof) that the neg-aming started a little later there, which means it will blow up a little later too. The reason I think it started later is that people with houses to sell didn’t really need the neg-am loan until much later in the game (as opposed to the 1st timers, who were relying on neg-ams in large numbers by 2004ish).
My other theory is that people are so enamoured by their school-oriented neighborhood (in which “everyobody” wants to live), that they are willing to hold on to their crapshacks until their very last penny has been spent. This is different from places like San Diego, where people probably have less tech-bubble generated ego, and are much more likely to walk away even if they can afford it.
Don’t worry, the “hold out towns” will be the next to drop. A year ago, Cupertinites and Sunnyvalians would have eschewed the possibility of even level house prices, but that’s what we’re seeing now.
–
The secret to lower prices in Cupertino, Los Altos, Palo Alto, and such, lies in falling prices of local tech Scams, especially, AAPL and GOOG. In a severe recession they would be down 80%+ from the recent highs and there wouldn’t be any Scam Options money to pay high prices.
The above scenario did play out a limited degree during 2001-03, but should play out for a much longer time this time around. Therefore, if you want much lower prices in Cupertino then pray for severe or prolonged recession.
Cash would be king and debtors would be paupers.
Jas
I live in Mountain View, a couple of miles from the Googleplex. A 1400 sq.ft. house near us just sold for about $1.25m after around 2 months on the market. To start with I wasn’t surprised by the flocks of BMWs and Lexuses that were coming by to look at it; then I saw that they were the realtors’ cars, and the prospective buyers were in beat-up Hondas and minivans. I still don’t understand the prices round here at all. Google stock is now back where it was 2 years ago - most of their current employees will not be getting rich on options. I understand the salaries are good, but even a good Silicon Valley engineer’s salary won’t buy a $1m+ house.
Actually teh Google hands out actual stock with 4 year vesting schedule and not options.
We rent in 94087 (Cherry Chase area) for the schools and gotta laugh whenever a new SFH rental comes up for way less than buying an 800K’er w/20% down (as if anyone even has that much green). There’s going to be a lot of hurting around here very soon.
There’s a joint on Bernardo that’s been “Price Reduced” for a couple months now and is just sitting there. Another one on another the street “Reduced” to 750K (a 2/1 and still in original 60s wrapping) — only idiots would buy now, great schools or not.
I totally agree with other comments that this area is prone to ‘move-ups’, meaning buyers must sell their own homes and bring cash to get in here because the schools add that touch of ‘exclusivity’ — sunshine tax and school tax are just way out of everyones’ reach now that the funny money is gone.
Rob
Here’s another idiot, courtesy Yahoo Finance/AP
Greg and Barbara Abbott have already cut the price twice on the two-bedroom condominium they are trying to sell on the Las Vegas strip. They’re asking $669,900 now — and an offer in the $650,000 range means they’ll lose money.
Abbott thinks hesitant buyers don’t realize how reasonable the current price is. “They’re not really being realistic about what the place is worth,” he said.
Abbott, the condo owner in Las Vegas, is asking a monthly rent of $2,300, down from the $3,500 he had originally wanted.
“It’s empty at the moment,” Abbott said. “We’d intended to rent it, but the timing, of course, was bad.”
His broker, Bruce Hiatt of the Luxury Realty Group in Las Vegas, said there was no shortage of interested buyers — but none had decided to buy.
“They’re all waiting for the magic bottom,” he said.
Really?
If that little lie to themselves allows them to sleep at night (for now)…so be it.
If it “cash flows” at $2300/month where I think it does, then it’s one of those “4 Pinocchios” whoppers.
Yeah, buy the damn condo as the couple asked already, those a**hole buyers!
What are you waiting for? The day after Xmas?
Greg and Barbara ,it is time to walk away from the table. The dice turned up snake eyes again.
Can anyone point me to where I can easily locate stats indicating the top in a particular market, specifically Lancaster, CA? After a back and forth on how bad the housing market is going to get with a friend, we made a bet about the severity of the downside in Lancaster. Over 50% by 3/09 gets me dinner!
You could try going to http://www.zillow.com, and typing in a Lancaster address. I think that will give you access to a chart that will show Lancaster prices over the last 10 years.
Thanks, I was looking at Zillow, but I think those tend to be the estimates for a given property. I was looking for more hard data on sales, like the CAR report. But, didn’t see any back data available on their site.
Try DQNEWS.COM — they have all the info you need.
rob
Can anyone point me to somewhere to easily find stats on where the peak was in home prices for a particular area, specifically Lancaster, CA? I get dinner from a friend if it goes over 50% by next year. Thanks.
“‘It is a little perplexing; I thought for sure I’d have at least one offer by now,’ Ali Liptrot said.
No it’s not…it’s very simple….LOWER YOUR FKING PRICE.
VIDEO: McCain on the housing correction:
“No assistance for speculators. We must not reward those who were irresponsible at the expense of those who weren’t. Downpayment requirements should be raised.”
http://www.cnn.com/video/#/video/politics/2008/03/25/sot.mccain.housing.cnn
“What are you waiting for? The day after Xmas? ”
No… more like:
“The Day After”
(Nyuk, Nyuk, Nyuk)
Hey, where is “gwynster”? Miss her northern CA take on things.
check out this article (got the link from another bubble site)…
“The Cromers took extraordinary measures to better their lives. In 1998, Robert spent 10 weeks on unpaid leave riding a Mission Beach roller coaster for more than 20 hours a day in hopes of winning a $50,000 prize. The contest, sponsored by a radio station, was finally called off with no winner. The station sent five die-hard contestants, including Robert, home with $10,000 each.” omfg, that was a plan??
http://www.signonsandiego.com/news/business/20080323-0820-investors.html?ref=patrick.net
I just took a look at foreclosure.com for Salinas in Monterey County, CA.
Holy hell.
They’ve got probably close to a thousand notices of default, the first steps to foreclosure. Usually the NOD means the owner has missed three payments or more. They’ve got several hundred foreclosed properties on the books. Salinas isn’t that big of a town, maybe 150K. If they sold 18, have several hundred foreclosures on the books, and a tsunami of more headed their way, they are in deep trouble.
It’s almost tempting, if it wasn’t gangland.