April 9, 2008

There’s No One Out There But Bottom-Feeders

The North County Times reports from California. “Despite relatively high February home sales and real estate agent reports about a swarm of buyer activity, North County’s housing market hit a new low in March. North County home sales posted the biggest year-over-year drop since the start of the housing recession, according to HomeDex. The area’s median sales price continued to take a beating and also showed the largest annual decline yet. In March, it dropped below $500,000 for the first time since 2003.”

“Sales tumbled 37 percent from a year ago, to 484 sales, the largest year-over-decline since sales fell off from a 2005 peak. The perennial bump in March home sales from February for North County was lower than ever recorded for San Diego County.”

“Foreclosures leaped in March, with new notices of default in San Diego County more than doubling from a year ago, to 3,116, according ForeclosureRadar.com. Last month’s inventory is still almost double that of a year ago.”

“The weak sales data in homes and continually steep decline in median price will not last for long despite a potential increase in foreclosures, said one real estate agent.”

“‘I think we’ll see it (better sales) because the pricing structure is going to force the issue,’ said Chuck Smiar, a real estate agent in Escondido. ‘There’s a lot of buyers sitting on the fence waiting for the bottom. And I think if they don’t jump in soon, they’re going to be sorry.’”

“Other real estate agents and brokers said that only certain markets have hit their lowest price points. Meanwhile, sellers in stronger markets are trying to refrain from posting their property until the market recovers. That leaves the potential for a flood of listings, they say.”

“‘We haven’t hit the terrified phase yet,’ said Shawn Harris, a mortgage broker in Oceanside. ‘The sellers are going through the seven stages of denial. … Eventually, they will get to the stage where it’s, ‘Holy crap, I’m not going to be able to make this mortgage payment anymore.’”

The Orange County Register. “Six out of every 10 Orange County homeowners who bought a home in 2006 are ‘upside down’ on their mortgages, meaning that they owe more for their home than it was worth in the fourth quarter of 2007, according to Zillow.com.”

“Nearly four in 10 who bought in 2007 were upside down by year’s end.”

“‘Eighty to 90 percent of our clients are upside down,” said Connie Der Torossian, VP of marketing and outreach at the Fair Housing Counsel of Orange County. ‘Very few have equity, so most owe more than their house is valued at now.’”

“Orange County’s median home price has fallen 19 percent since the peak price set in June, according to DataQuick. The Standard & Poor’s Case-Shiller Index, put the Los Angeles-Orange County peak at September 2006, showing that values fell 18 percent since then.”

“Stan Humphries, Zillow’s vice president of data and analytics, noted that Orange County homeowners still are better off than others in more strapped parts of California.”

“For example, 77 percent of Stockton’s 2007 homebuyers were upside down by year’s end; 73 percent of them were upside down in Merced, Humphries said. In the Riverside-San Bernardino area, 60 percent were upside down, compared to 38 percent of Orange County’s 2007 homebuyers.”

“Mike Cocos, general manager of ERA North Orange County, noted that 34 percent of the homes for sale in the local MLS are either foreclosed properties or ’short sales.’ He said he took a listing at the start of April from a homeowner who owes $80,000 more than the home’s worth in today’s market.”

“Clemente Mojica, the housing services home ownership director, added that borrowers who used stated-income loans to buy their homes now can’t qualify to refinance before their monthly payments go up.”

“First, they now must prove they have sufficient income, something many can’t do, he said. And even if they could qualify, their lowered home value makes it impossible to get a new loan.”

“‘Who’s going to refinance them when they have negative equity, when they’re upside down?’ Mojica asked.”

“Sherrie Le Van has worked as a Realtor in Ladera Ranch for seven years. She says the market shifted in late 2005 and early 2006. Before then, she estimates that agents sold an average of two to three homes a month. Now, it’s down to one, if that, she says. LeVan says a lot of agents have had to supplement their income with other work.”

“‘Everyone’s standard of living has been somewhat affected,’ she said.”

“Before the housing market cooled, LeVan reached out to other Realtors who lived and worked in Ladera Ranch. Their association became known as the Ladera Ranch Resident Realtors Business Partners, and included 12 members. When the market took a nosedive, LeVan said, ‘A whole lot of people dropped away.’”

“Realtor Steve Pattinson now heads the group. He says that over a third of the approximately 331 listings in Ladera Ranch are either bank-owned properties or short sales. ‘People can’t compete with the short sale. Their prices are way up,’ said Pattinson.”

“LeVan says she doesn’t ask former members of the group what they’re up to these days. ‘It’s just such a personal thing,’ she said.”

The LA Times. “Grant Niman landed his dream home in Hermosa Beach after a careful six-month search. The sale price came in just under $1.4 million. Comparable houses near Niman’s pick were selling for as much as $200,000 higher in December.”

“In February, the average of median sale prices in 18 beachside ZIP Codes, including parts of Santa Monica, Manhattan Beach and Long Beach, was $1.08 million, down nearly 8.9% from August and 10.2% from February 2007, according to DataQuick.”

“Some of the biggest seaside bargains, real estate agents said, were in Huntington Beach’s three coastal ZIP Codes. Median prices peaked at $785,000 to $1.2 million in 2007, but the range had declined to $635,000 to $827,000 in February.”

“Newspaper ads for beach-area houses are beginning to echo those for properties farther inland, with headlines such as ‘$$ PRICE REDUCTION!!’ and ‘BEACH HOME STEAL!’”

“‘A year ago, bidding wars were the norm,’ said Denise X. Lavell, who runs Beach Girl Realty. ‘You’d have a buyer out there the day the property was listed. Now, people are taking a month or two months to decide.’”

“Javier and Marianne Cano recently spent nearly $1.9 million for a two-story, five-bedroom Spanish-style house less than a quarter of a mile from the ocean in Redondo Beach. Six months earlier, the Canos would have had to pay about $2 million to $2.1 million, based on comparable home sales at the time.”

“‘We got a little bit off the asking price, but we thought it was priced pretty reasonably in the first place,’ said Javier Cano.”

“‘The individuals who had the income and wealth to own in the beach areas have not seen any significant decline in their situations,’ said Michael Carney, director of the Real Estate Research Council of Southern California at Cal Poly Pomona. ‘If the economy really starts to tank, you might find more of an impact in those areas.’”

The Press Enterprise. “It was only 20 seconds into John Husing’s annual forecast on Inland Southern California’s economy when he said the word few people in the audience wanted to hear.”

“And, the region’s leading economist and a panel of housing and finance experts told a gathering of business leaders Tuesday, there are factors that, if they come to pass, could mean people will say ‘recession’ more than a few times this year.”

“‘For all intents and purposes, we have stopped growing,’ Husing said in his annual economic forecast.”

“In the 12 months from April 2005 to 2006, the two-county area gained 44,100 jobs. But from 2006 into 2007, the gain was a paltry 592 jobs, roughly the number of workers on one shift at a single large distribution center.”

“Currently, the job losses are across the board, and most of them can be traced to the slowdown in the housing market. ‘This has decimated a huge industry,’ said Steve Johnson, director of Metrostudy. ‘It’s going to be very hard to put the machine that produced this housing market back together again, and we will have future pain ahead in the resale market.’”

“Husing said the only people buying homes these days are people shopping for bargains at foreclosure prices. ‘The regular folks are on strike. They’re not buying houses,’ Husing said. ‘There’s no one out there but bottom-feeders.’”

“The current decline in median prices from the late-2006 peaks in the Inland region is something that will lead to a bit of good news, Husing said. It means that the middle-income buyer, who was virtually priced out of the market two years ago, may be able to afford a place as prices continue to decline.”

“Although, Johnson added, the days of the convenience-store clerk putting a $10,000 monthly income down on his mortgage application are probably over.”

“‘The change in the market psychology is tough,’ Husing said. ‘People will be suspicious about prices for a long time.’”

The Modesto Bee. “Property taxes are due Thursday, but Stanislaus County auditors predict a startling spike in unpaid taxes. If trends hold, about 8 percent of what’s owed won’t be paid. That’s about triple what is normal.”

“‘Eight percent is ridiculously high,’ said Todd Filgas, the county’s property tax accountant. ‘We’re having quite the excitement over here about it.’”

“More than 170,000 landowners were billed $484.3 million for their 2007-08 property taxes. Half of that money was supposed to be paid Dec. 10 and the second half is supposed to be mailed by Thursday.”

“But many property owners missed that first payment, and there’s fear that many more will ignore Thursday’s due date. Last year, 6.42 percent of Stanislaus County property taxes weren’t paid, and that was bad enough.”

“‘Since I came here in the late ’70s, it had never been that high,’ said Ray Rassmusen, who manages the auditor’s property tax division.”

“Rassmusen said the county doesn’t have easy-to-access delinquency statistics going back to the Great Depression, but auditor records show the average delinquency rate has been less than 3 percent the past 15 years.”

“Eventually, those taxes will be collected, said Stanislaus County Tax Collector Gordon Ford. Property owners who don’t pay within five years will have their land sold at tax foreclosure auctions. Last year, three Stanislaus County properties met that fate.”

“Mortgage payment defaults, however, triggered more than 2,500 foreclosures in Stanislaus county last year. ‘Banks that foreclose will make their property tax payments. It’s just a matter of when,’ Ford said.”

“Gov. Schwarzenegger spoke at a private meeting at Modesto Centre Plaza with area city council members and officials from Stanislaus, San Joaquin and Merced counties. He said cuts alone won’t solve the $16 billion deficit projected for the 2008-09 state budget, but he ruled out taxes as a solution.”

“Schwarzenegger (said) that he’s optimistic that the current downturn in housing will abate in a year. He was less rosy on the prospects for all distressed homeowners finding their way out of foreclosure.”

“‘It hits a lot of people who took a tremendous risk and knew it,’ Schwarzenegger said, describing the subprime loans that are now failing quickly, particularly in the valley. ‘Borrowers and lenders made mistakes.’”

The Sacramento Bee. “Several Sacramento-area cities stung by the real estate downturn are considering deferring developer fees as a way to stimulate the local economy.”

“‘It’s not just to see if we can get sticks and bricks up,’ Folsom Vice Mayor Steve Miklos said Monday. ‘It’s to get people back to work.’”

“A fee deferral proposal for the city of Sacramento is in its infancy, said Wendy Klock-Johnson, spokeswoman for the city’s Development Services Department. Efforts by the city attorney, treasurer and Development Services Department staff should translate into a proposal for the City Council later this year, she said.”

“Miklos says Folsom’s plan is a local version of the federal economic stimulus plan.”

“‘If we can defer some of the fees that don’t have an impact to the city until folks move in,’ Miklos said, ‘why can’t we build sooner rather than later? The benefit to the city is more properties on the tax rolls. The benefit to the builders is getting these people back to work.’”

The San Mateo County Times. “Home sales continued their downward spiral in San Mateo County in March, while home prices also plummeted in many local cities, a report revealed Tuesday. Home sales slumped 32 percent compared with March 2007, according to the San Mateo County Association of Realtors.”

“‘Housing prices are still high in relation to what most people are paid around here,’ said Stephen Levy, an economist and director of the Center for the Continuing Study of the California Economy in Palo Alto. ‘The prices aren’t sustainable, and they’re still near historic highs.’”

“Levy added that many homes are not worth what they were at the peak of the market a couple of years ago, and he warned that further price erosion is on the horizon.”

“The city of San Mateo’s median price fell 18 percent in March to $789,500, partly because of a drop in prices in the Shoreview area, which has experienced a number of foreclosures.”

“The North County, where many first-time buyers stretched to buy homes with subprime loans, continued to experience significant price erosion. Daly City’s median price fell more than $150,000 to $570,000, and San Bruno dropped more than $100,000 to $634,000.”

“East Palo Alto, another area hit hard by subprime loans and foreclosures, saw the March median price plunge to $382,450, off 43 percent from last year’s mark of $675,000. The median price in Monterey County fell dramatically to $430,000 in March, down from $800,000 last August.”

The Santa Cruz Sentinel. “Home sales plummeted in Santa Cruz County in January and February. So far, 138 have been sold, down 43 percent compared to a year ago, when 243 homes were sold in those two months. March sales statistics have not been posted yet.”

“Of the 11,000 borrowers in Santa Cruz County with adjustable-rate mortgages in the last quarter of 2007, about 7.6 percent were three or more payments behind, 3.5 percent were in foreclosure and 1.6 percent had been sold at foreclosure sales.”

“The trend is up from the first quarter of 2007, when 2.25 percent were behind in payments, 1.1 percent were in foreclosure, .43 percent had been sold, and the number of adjustable rate mortgages was about the same.”

“So many borrowers need help that the Santa Cruz Association of Realtors and its Housing Foundation have scheduled three foreclosure workshops Saturday.”

“One workshop covers what can be done when a homeowner is ‘upside down.’ Others cover the foreclosure time line and loan workout options. Admission to the expo is free, and materials will be available in Spanish as well as English.”

“At least 660 people have made their opinion known on changes proposed in Regulation Z, federal rules designed to protect consumers from unfair, abusive and deceptive lending, and so far, many of the comments are critical.”

“Tai Boutell of Santa Cruz Home Finance said some of the changes make sense, like requiring the lender to determine the borrower can repay for mortgage for at least seven years and requiring brokers to disclose front-end and back-end fees.”

“‘All the regulations should focus on entrance barriers to the profession,’ Boutell said. ‘It is easy to obtain a license, and many loan officers are not even required to have a Department of Real Estate license at all. Loan officers who work for banks are not required to have a Department of Real Estate license.’”

“Santa Cruz homeowner Boone White considers the changes too restrictive and likely to make it harder to buy a home.”

“‘I understand that the purpose is to protect the borrower against unscrupulous lenders but it reads like an act to take 100 percent of the risk out of purchasing a home,’ he said.”

“‘If all loans required the documentation, it would cause folks to buy within their means, but it does not take into account situations like ours,’ said White, an attorney married to a physician. ‘We could not have purchased our home as we were just beginning our careers. Now, we are established, so we are OK.’”

“Santa Cruz resident Peter Ogilvie, president of the California Association of Mortgage Brokers…said requiring borrowers to put money for taxes and insurance into an impound account can be very expensive and could put loans out of reach.”

“He questioned the fairness of a provision singling out brokers to disclose income and not requiring the same of lenders.”

“Tom Mentzer, spokesman for Rep. Sam Farr, said Farr ‘has always supported these types of protections for homebuyers. It’s the so-called ‘liar loans’ and a lack of responsibility from a small segment of lenders that got us in trouble in the first place.’”

“Some question whether the Federal Reserve is the proper tool to enforce these protections. In the past, the Federal Reserve focused on broader oversight.”

“‘We saw a failure to enforce the rules that were in place,’ said Mentzer. ‘That, combined with a blind eye toward questionable practices, led us to where we are. It’s never just one cause. It’s too bad the alarm wasn’t sounded earlier.’”

“Susan Stawick, spokeswoman for the Federal Reserve, said staff would review the comments and determine how to proceed. To those critical of the agency’s rule-making, she said, ‘The Federal Reserve used the authority it has under Regulation Z.’”

“Federal Reserve chairman Ben Bernanke advised Congress the final rule would be ready later this year.”




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182 Comments »

Comment by Climber
2008-04-09 16:02:33

“Eventually, those taxes will be collected, said Stanislaus County Tax Collector Gordon Ford. Property owners who don’t pay within five years will have their land sold at tax foreclosure auctions. Last year, three Stanislaus County properties met that fate.”

This is the exact thing as a foreclosure with one key difference. The government never put any money into the deal. So, now where is all the compassion and pleas to keep people “in their houses”. It’s amazing how the tune changes when the government wants something.

Comment by Bye FL
2008-04-09 16:21:54

I don’t know why there are bailouts, must be those dumb liberals feeling sorry for the “victims”

Comment by robmypro
2008-04-09 17:43:35

Pass the peace pipe.

 
Comment by vannnysrenter
2008-04-09 21:18:23

I think it must be those knuckle headed Neocons wagging the dog.

Conservative = bag of hammers

 
 
Comment by flat
2008-04-09 17:14:28

5 yrs
is that a CA exclusive?

Comment by WaitingInOC
2008-04-09 17:59:43

Yep. Each state (or county) has its own rules as to how long they must be delinquent before the govt forecloses for unpaid taxes.

Comment by James
2008-04-09 18:36:50

You can imagine the condition of a house after sitting vacant and possibly for sale for FIVE YEARS.

If they want to handle the blight problems they should make that a smaller window.

Particularly for banks or vacant properties.

Mmmm. There is a greedy self serving regulation.

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Comment by MacAttack
2008-04-10 09:58:14

The government put PLENTY of money into the deal. It:
* Provided police and fire protection
* Provided water and sewer
* Provided maintained and paved streets.

You, sir, are drinking Kool-Aid. TANSTAAFL.

 
 
Comment by aladinsane
2008-04-09 16:02:52

Let them eat ‘upside down’ cake…

M. Aladinette

“Six out of every 10 Orange County homeowners who bought a home in 2006 are ‘upside down’ on their mortgages, meaning that they owe more for their home than it was worth in the fourth quarter of 2007, according to Zillow.com.”

Comment by hoz
2008-04-09 18:03:19

So not only does the bank own the house but they have created a whole new set of economic serfdom.

“…Anyway, it continues to amaze me how the 21st century is starting to look like the 17th century with fancier technology: tax farmers, mercenaries, and now rentier cities.”
Paul Krugman
Oct 5, 2007

 
Comment by Neil
2008-04-09 18:20:42

And Zillow overestimates.

A friend of mine is in escrow in the OC. For his sake, I hope they close. They will look to buy soon, but since that will take a few months… I hope they’ll rent.

Got Popcorn?
Neil

 
 
Comment by aladinsane
2008-04-09 16:04:36

Wednesday morning quarterbacking…

“Stan Humphries, Zillow’s vice president of data and analytics, noted that Orange County homeowners still are better off than others in more strapped parts of California.”

Comment by hoz
2008-04-09 17:01:12

“‘Who’s going to refinance them when they have negative equity, when they’re upside down?’ Mojica asked.”

Comment by ex-nnvmtgbrkr
2008-04-09 17:14:53

The government, of course…….NOT!

 
 
Comment by Groundhogday
2008-04-09 17:11:13

So is there an advantage to going over the cliff a few minutes after your buddy? In free fall, do you say to yourself, “things look bad, but at least I’ve got more time before impact than Bob.”

 
Comment by Big V
2008-04-09 17:21:12

Oh well, as long as other people are worse off than me, than I must be fine. Schlumpems, call your dad and ask if we can have another loan to pay off this month’s mortgage payment. Just tell him that OTHER PEOPLE ARE WORSE OFF THAN US.

 
 
Comment by albo
2008-04-09 16:10:09

I found a nice site for people interested in San Diego listings:

http://www.jimsmls.com/

they are showing closed listings there, you can see which listing closed 5,10,15% off their listing price, I think they even show those that were taken off the market.

Comment by Suzy K
2008-04-09 22:49:57

Thanks albo!…I pissed away an hour on that site. Way fun gloating over selling in 04′….I know I’m sick

Comment by Rintoul
2008-04-10 09:17:20

Why is it people always writh 04′ instead of ‘04?

Comment by Rental Watch
2008-04-10 11:33:28

Because they don’t check their spelling when they writh their comments.

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Comment by San Diego RE Bear
2008-04-09 16:15:15

““Santa Cruz resident Peter Ogilvie, president of the California Association of Mortgage Brokers…said requiring borrowers to put money for taxes and insurance into an impound account can be very expensive and could put loans out of reach.”

“He questioned the fairness of a provision singling out brokers to disclose income and not requiring the same of lenders.””

Interesting point. Are there any problems with the money in impound accounts “disappearing” when the lender goes under? If someone’s property tax payments disappear do they have any recourse or protection? I’ve never liked impound accounts since my last bank couldn’t tell me for tax purposes how much I paid in real estate taxes, but it never occurred to me to question if the money might disappear altogether.

Comment by combotechie
2008-04-09 16:51:59

“… requiring borrowers to put money for taxes and insurance into an impound accont can be very expensive and could put loans out of reach.”

In my view taxes and insurance are just as much a cost of purchasing as making the monthly mortgage payment. It the buyer can’t afford the total attached costs of buying then he really can’t afford the purchase.

Comment by San Diego RE Bear
2008-04-09 21:13:19

That wasn’t the question. The question was about who DID pay into their escrow accounts at some of these failed lenders. Did they lose their money and were they forced to come up with it again? Looks like the answer is yes, your escrow money is not safe with a lender.

One more thing to put on the list when the time is finally right to buy a house - no loans with escrow accounts, make the payments yourself.

 
 
Comment by pismoclam
2008-04-09 17:03:32

American Home Mtg (NYSE) ,BK and imploded, took in impounds but didn’t pay peoples taxes. Good fun for all.

Comment by combotechie
2008-04-09 17:16:35

My issue isn’t with tax and insurance money going into an impound account; my concern is the elimination of taxes and insurance from the affordability equation.

 
Comment by Big V
2008-04-09 17:36:42

Can’t the tax collector simply require that taxes be paid every month (directly to the taxing agency) rather than using a 3rd party impound account?

 
 
Comment by devo
2008-04-09 17:09:15

Having taxes and insurance impounded is a risk since Escrow companies can and do disappear and the homeowner is still on the hook for the payments. Also if you they don’t pay the insurance premiums you could end up being unisured. I don’t know about recourse but if the company goes bust what can you do? Get in line with all the other creditors, i guess.

We always pony up the extra 0.5% or so of the loan balance at closing, to avoid taxes/insurance being escrowed and therefore eliminate this “tail” risk.

Comment by implosion
2008-04-09 19:45:23

I put down 20% and said no impound account. No extra fee and it wasn’t an issue. That was years ago though.

Comment by vmlinux
2008-04-10 11:25:36

Why not just do what we did and save up your own taxes and insurance and pay them yourself. In fact if I remember we saved like 15 bucks a year by doing it ourselves, and we get the interest through the year.

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Comment by Big V
2008-04-09 17:24:04

Um, if paying your taxes is going to make the house unaffordable, then you CAN’T AFFORD IT. Go-go Gadget caps lock key.

Comment by holytrainwreck
2008-04-10 10:44:10

a dollar that a FB doesn’t pay in taxes is a dollar that all the other good borrowers have to pay.

 
 
 
Comment by Anthony
2008-04-09 16:16:50

So, Monterey county is down almost 50% from the peak. Granted, a lot of that loss is in Salinas and other less desirable places…but it definitely sticks a fork into what many thought there was a bulletproof, no-lose market. How much is the city of Monterey itself going to fall? Those nice houses that were $275-325K before the boom will be back in that area in a year or two. So much for the phony $1M capital gains on those $hitboxes!

Comment by John
2008-04-09 16:34:41

Yes prices will fall, but noone thought Monterey county was bulletproof.

Monterey county has a fragile resort and agriculture economy, much like Hawaii. Prices boom in good times and crash in bad times. It falls between the employment centers (Silicon Valley) and the wasteland (Sacramento, Bakersfield, Riverside, etc.) in price stability.

Yes, prices will fall in Monterey back to pre-boom levels, but the decline is going to be somewhat slower than Seaside, etc. Too many equity rich retirees–they’ll eventually sell but only when going to the old folks home.

-John

Comment by slb
2008-04-09 16:45:27

Now John, it’s not true that “no one” thought Monterey was bulletproof - all of those nice realtors I ran into @ open homes last year assured me most sincerely that it IS different there, people WANT to live there and prices just won’t fall! (sarcasm off.)

 
Comment by Big V
2008-04-09 17:39:26

It wasn’t the rich retirees who sent the market soaring, it was the newbies buying in on exotic loans. When the FB houses finally sell, they will set the new comps for all those retirees. Stable homeowners have not really been a factor in prices for years.

Comment by Wickedheart
2008-04-09 19:47:55

“When the FB houses finally sell, they will set the new comps for all those retirees.”

Good! My daughter was stationed at DLI when she first joined the military. Monterey is beautiful but the people there are ugly and snooty. And when I say ugly I’m not talking about their looks.

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Comment by Ernst Blofeld
2008-04-10 00:22:35

Eh–Salinas and Seaside had a lot of exotic loans. Carmel, Pacific Grove, Carmel Valley, and Pebble Beach had rich out of towners, golfers, and retirees. There’s not much foreclosure pressure on the upscale cities yet.

I think there was a lot of compression in house prices–1950’s crap shacks in Seaside for high six figures, and nice places in better cities for not a huge amount more.

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Comment by Ernst Blofeld
2008-04-10 00:15:16

It’s really shaping up to be a slaughter in Salinas. There were 90 new NODs in the last week on foreclosure.com, and 60 new foreclosures.

 
 
Comment by ChillintheOC
2008-04-09 16:20:04

“First, they now must prove they have sufficient income, something many can’t do, he said. And even if they could qualify, their lowered home value makes it impossible to get a new loan.”

“Stan Humphries, Zillow’s vice president of data and analytics, noted that Orange County homeowners still are better off than others in more strapped parts of California.”
—————————————————————————–
Small comfort to the many who overpaid on those $ 800k + McMansions. The problem with the OC is that the outstanding debt people owe on their “investments” is in the hundreds of thousands ..and dropping!
——————————————————————————-
“‘Who’s going to refinance them when they have negative equity, when they’re upside down?’ Mojica asked.”
——————————————————————————-
This is the single biggest reason that more and more OC owners are sending in “jingle mail” (according to my source at Wells Fargo). People just can’t get financing anymore unless their willing to pony up some big bucks to go along with the deal.

Comment by Bye FL
2008-04-09 16:26:41

Do any of them think they will be bailed out? How many want to be bailed out?

 
Comment by mrincomestream
2008-04-09 16:40:41

That’s the elephant in the room…no one talks about that. These folks can’t qualify at the new numbers even if they wanted to…a large large portion of the California stuff was stated income…now that it has to be proven with W2’s and 1099’s well that’s a whole new ball of wax.

The media doesn’t talk much about that except for the etreme cases like strawberry pickers and McD’s managers buying million dollar homes.

Comment by NotInMontana
2008-04-09 18:54:52

Doesn’t stated income pretty much imply lots and lots of off-books income?

Comment by implosion
2008-04-09 19:54:14

Someone said that was the case years ago, but that these days it’s lots and lots of phantom income.

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Comment by SiO2
2008-04-10 08:06:15

Stated income is also used for lots of stock option or other stock income. The PITI guidelines apply to base salary and bonus. Not stocks options or investment income. So for a silicon valley manager who gets some reasonable amount of income as stock options or grants, the base salary + bonus underrepresents their income, so a stated income may be used. Of course it is used for lying as well.
They are still available, I just talked to a broker in fact. Available for favorable credit rating, good LTV, good reserves. I guess not available to subprimes and no-down. Which lines up with the sensible theory put forth here that a down payment, skin in the game, is a great predictor of loan payback.

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Comment by Bye FL
2008-04-09 16:23:53

“‘I think we’ll see it (better sales) because the pricing structure is going to force the issue,’ said Chuck Smiar, a real estate agent in Escondido. ‘There’s a lot of buyers sitting on the fence waiting for the bottom. And I think if they don’t jump in soon, they’re going to be sorry.’”

Translation: If you don’t buy soon so I can have my 6% comission, you will be sorry as I will be in a really bad mood!

Comment by SD_suntaxed
2008-04-09 17:31:26

This used house salesman keeps saying the same thing to the local media as though he is trying to convince himself. Prices keep losing ground and foreclosures continue to pile up at an incredible rate, but his remarks about ‘missing out on the bottom/ being sorry’ keep going on, month after month.

I heard the exact same thing when prices were still going up wildly. He needs a new mantra, badly.

 
Comment by onosurf
2008-04-09 18:23:12

Smiar, Smiar, Pants on Fire!

Yeah…I’ll be real sorry I didn’t buy today w/ all the foreclosures coming on the market and inventory growing daily.

 
Comment by implosion
2008-04-09 20:01:24

The entire statement is lame. If the supposed lot of buyers sitting on the fence don’t jump in, who is that will drive the prices higher and cause these fencesitters to be sorry?

 
Comment by JimAtLaw
2008-04-09 22:15:58

Of course, it’s always the same thing, scare them in, scare them in, scare them in. Lie, lie, lie. Get that commission no matter what.

Someone should start a new site, something like “badrealtors.com”, that calls them out on this by name, and records the abjectly false statements they made, forever. Perhaps then before a Realtor went on the record calling the bottom, one or two more of them might think, crap, if I’m wrong and clearly spinning, it’s going to show up when you Google my name permanently, and then might speak with a tad more honesty.

 
 
Comment by KirkH
2008-04-09 16:28:32

Can you really call someone a bottom feeder if they’re not feeding at the bottom?

Comment by Rintoul
2008-04-09 16:39:07

That, my friend, is a very good question.

 
Comment by robmypro
2008-04-09 17:21:57

But it sounds so good. “Bottom” insinuates that we have reached the lowest prices and “feeder” insinuates that people are buying at these “low” prices.

We aren’t there yet. We’ll know when because the media will tell is IT ISN’T. When they go totally negative everyone has been washed out.

 
Comment by Big V
2008-04-09 17:45:18

He meant to say “bottom feeters”. They are people don’t have any legs; their feet are attached directly to their bottoms.

Comment by KirkH
2008-04-09 21:12:21

Athlete’s foot must be uncomfortable for these poor soles.

 
 
Comment by Left LA Behind
2008-04-09 19:50:36

“Arse Muncher” applies in this case.

 
 
Comment by aladinsane
2008-04-09 16:34:57

“It was only 20 seconds into John Husing’s annual forecast on Inland Southern California’s economy when he said the word few people in the audience wanted to hear.”

“And, the region’s leading economist and a panel of housing and finance experts told a gathering of business leaders Tuesday, there are factors that, if they come to pass, could mean people will say ‘recession’ more than a few times this year.”

____________________________________________________________

If Empire business leaders needed Husing to tell them there’s a recession going on, their heads are deeper in the sand, than his…

 
Comment by Big V
2008-04-09 16:40:41

“Gov. Schwarzenegger spoke at a private meeting at Modesto Centre Plaza with area city council members and officials from Stanislaus, San Joaquin and Merced counties. He said cuts alone won’t solve the $16 billion deficit projected for the 2008-09 state budget, but he ruled out taxes as a solution.”

“Schwarzenegger (said) that he’s optimistic that the current downturn in housing will abate in a year. He was less rosy on the prospects for all distressed homeowners finding their way out of foreclosure.”

Oh, so Arnie is counting on some magical return to insanity in the housing market to fund state spending? OK Arnie, let’s say that happened (it won’t). In that case, with everyone paying over 100% of their take-home pay to cover their mortgage, how do you think you’re going to get any taxes paid at all? Hmmm? Have you thought about that Arnie? I wish politicians would just admit that housing was overpriced, property taxes were overvalued, and we are bleeding $$ because incomes are stagnant and jobs are leaving the country (and the state). I know it hurts to say it, but acceptance is the first step toward recovery. I’m afraid real progress won’t be allowed until we have hit rock bottom.

Comment by hoz
2008-04-09 17:14:54

How did the States budget deficit for 08-09 shrink to $16B?

The last time I looked it was around $50-60B. Did your beloved governor slide some more bonds through the system?

Comment by robmypro
2008-04-09 17:29:24

The credit crunch took Arnold’s ability to borrow more away. The shit is going to hit the fan now.

Vut do you meeeen vee are cut off NOW?

Comment by amoney
2008-04-09 18:26:16

When you read a quote from Ahnold, do you play it in your mind with his accent, or is it just me?

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Comment by motorcityjim
2008-04-10 07:13:54

I do this but I also envision him wearing gargoyles and a scowl and holding a machine gun.

 
 
 
Comment by SiO2
2008-04-09 18:00:36

The state budget is about $100b. the deficit went from $8b to 15b for 08-09. Pretty bad.

 
 
Comment by OCDan
2008-04-09 17:18:22

Oh what comes to mind with this V,

-Denial is more than a river in Egypt

-Acceptance is the first step toward recovery

-Denial is the first step in grief recovery

I could go, but you get the idea.

 
Comment by hoz
2008-04-09 17:24:25

One unmentioned unintended consequence of loss of states income is in funding for Non For Profits - obviously some are scams, many serve useful purposes.

A Women’s Place
Merced, CA
A Woman’s Place, a prominent Merced-based nonprofit and the county’s primary provider of domestic violence shelter services, will close its doors for good and lay off its entire staff by June 30, the agency announced Friday.
Merced Sun-Star
March 29, 2008

Comment by Big V
2008-04-09 17:49:10

Nice. Save the FB, screw the abused moms.

Comment by hoz
2008-04-09 18:58:46

There are a lot worse layoffs in the NFPs than this one. They’ll be noticed when there is another serious incident and there are no burn treatment centers available within 500 miles. Until you need it , you don’t realize they are gone.

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Comment by turnoutthelights
2008-04-10 07:38:35

Close but no cigar. A Woman’s Place was forced to close due to on-going waste and mis-management of funds - which came to light after its director was arrested twice in the same week for DUI and reckless drivng. The state agencies that provided the funding pulled the plug when they found that a decent percent of their dollars were disappearing into a blackhole of ‘personal expenses’.
The programs (and dollars) of helping abused women will be shifted to another NP in town

 
 
 
Comment by mathguy
2008-04-09 17:58:52

hoz,
I hate to be cold, but good riddance to these state funded do gooder corps. I’m more than happy to help fund do gooder organizations, but i want to do it without having to pay for 3 levels of tax collection and distribution in between me and my designated charities.

two other points i have been trying to raise with californians in particular:
1) if you build a fence to keep illegals out, how will YOU get OUT when things go batshit crazy here in the US, and mex doesn’t want YOU invading THEM? Ditto for Canadia (yes I said Canadia)

2) If government healthcare is such a great thing that all modern nations should and do have except us, then why does the workers comp health coverage provided for severe injury to my future spouse suck SO BAD!?! Getting healthcare in that system is like getting a drivers license at the DMV, except you get your DL once every 4 years, and you may have to fight weekly or daily with the comp system to get “authorized care”. Do I really want my everday healthcare to be like that? At least if my work healthcare plan through Kaiser sucks, i can switch to Blue Cross or something. Yeah it costs me a bit more, but it’s better than having NO RECOURSE when the govt says no. Also, for all the libs out there, what will you do when a republican gets back in power of your healthcare, and says, “Sorry, we are not going to treat people who have AIDS if we conclude they caught it through gay sex?”

All the libs should just think about these things before they start arguing for that “social justice”. And yes I know things could be better than they are now, but what have you personally done to fix it? Volunteered at an old folks home lately??? Thought so.

Math Guy

Comment by hoz
2008-04-09 20:08:45

Yes, I do volunteer and I am an old folk.

Sorry MG I have a different belief in the do-good corp than you. Society is better off having centers for battered husbands and battered wives than having prisons. “Laws control the lesser man. Right conduct controls the greater one.”

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Comment by mathguy
2008-04-10 00:13:27

I don’t doubt that society is better off having institutions to help the poor, the sick, and the elderly. I just believe we are better as a society if we don’t have those things controlled by the gov’t. Giving someone the authority to forcibly take from one to give to another is morally wrong IMHO. I *HONESTLY* think that (income) taxes should be opt in. Isn’t that the true test of the governments efficacy, if the people *want* to pay it to keep going? I am fine with charities, and I also give and donate because I believe they are worthwhile. I just think it is wrong to force a man (or woman) to do so when perhaps his own family needs the fruits of his labor more than someone else’s. Finally, if given the option, how many people would refuse to contribute taxes to support the undeclared and unconstitutional war in Iraq? Maybe not everyone, but lots and lots.

For clarification, I mean at the federal level, not necessarily at the state or local level. That way people have a real option to move to another state, and still maintain citizenship in the US if they do not like the laws in one state, province, city, etc.

 
Comment by mathguy
2008-04-10 00:15:55

So if my last comment doesn’t show up, it was a partial withdrawal of my statement since this is a state funded corp (not federal), although I still think this stuff should be handled a the local level.

 
Comment by mathguy
2008-04-10 00:33:28

Hoz,

Good on you also for volunteering. I’m just saying you are free to choose how to spend your time, it is good(TM ) that you volunteer, but at this point, close to 2 out of 5 days of my work week are taken to “provide for the needy”, and other such nonsense that our federal and state gov’t deems appropriate. Not just me either, but millions of my fellow citizens. And the politicos are squandering the wealth that we are generating, and funneling it into their own coffers. If we decide that we can handle these matters at the local level, these huge governement entities and agencies will have neither the money nor power to squander.

 
 
Comment by Hazard
2008-04-09 20:13:52

Can you make those insurance payments if your company drops all of their portion of the insurance payment? Then you’re on the hook for the entire thing. Something over $20k for a small family currently, it will go up. Are you ready for $30k-35k health insurance payments in the near future? Lots of companies are just dropping out of the insurance payment rat race.

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Comment by spike66
2008-04-09 21:38:22

What is Canadia?? Is that supposed to mean something.

And who is their right mind would head for Mexico if the SHTF?
Seriously.

 
Comment by living_in_bubbleland
2008-04-10 00:22:16

Maybe he has a yeast infection.

 
Comment by mathguy
2008-04-10 00:38:11

If I can’t pay, then maybe I die. But everyone dies. Not everyone truly lives. oh, and Canadia… that’s where the Canadians live :)

Finally, who heads to Mexico when the SHTF? Umm, just about everyone, (including the mexicans right now). Maybe that’s just my SoCal upbringing that has all the stories of people going bust, and scooting to Mex when the local law gets after them for whatever infraction they were decided to have committed.

 
Comment by holytrainwreck
2008-04-10 10:54:44

It’s not that bad here…truly it’s not.

 
 
Comment by Big V
2008-04-09 22:58:43

Oh, Math Guy. How did we get from “domestic violence services” to “government-run health care”? People want their tax $$ to go toward helping people in bad situations that they can’t control on their own, especially when the kids are involved. It makes society more stable. If my husband ever decides to go ballistic on me, I certainly hope there will be somewhere for me to go.

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Comment by mathguy
2008-04-10 00:26:54

Your argument naturally leads to the slippery slope of someone (in gov’t) deciding what constitutes a bad situation. Here is what really makes me wonder… why aren’t all the women of that local city contributing to this non-profit to keep it going despite the lack of state funding? Did they decide it’s not that big of a deal?? Wow, and I thought I was a little cold. If you want the resource available in case your husband goes ballistic, why don’t you get an insurance agent to write you a domestic violence insurance policy? If you are concerned about someone else, send that service some money. Or start a website where you can help DAVs (domesitc abuse victims) find a spare room in someone’s house.

Sorry, I know I tend to go overboard telling people to volunteer and such, but really, anyone can think of 10000 “good” reasons to increase our taxes. If you just donate to your local church or community center, in reality, they can be the clearinghouse for the needy people services.

 
 
 
 
Comment by robmypro
2008-04-09 17:27:08

“He said cuts alone won’t solve the $16 billion deficit projected for the 2008-09 state budget, but he ruled out taxes as a solution.”

Whenever I run into a financial jam, the first thing I do is rule out increasing my income too.

Comment by pmeeks
2008-04-09 20:09:40

How about cutting off the illegals health care, education, welfare, etc.

We would have a 16 billion dollar windfall.

Comment by Rintoul
2008-04-10 12:04:58

You haven’t thought this through. Use your head a little.

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Comment by James
2008-04-09 18:49:22

MMmmmm.

Its always a touch call to raise state taxes. You have the specter of people leaving the state (deflation) or buisness leaving the state. California is fortunate that it is large and less sensitive to this than say New Jersey. Back in Jersey people would go across the border for items not taxed in PA or the inverse for items not taxed in NJ.

Substantial amounts of the population of Jersey/PA/Ohio/Michigan live close to the borders.

The great double whammy portion of all this is the biggest revenue generators from a property tax standpoint are the more recently sold units. So, the fall off in revenue should be epic. The disparity is so huge in taxed amounts. One property is at 5000$ in my area. Another similar house is a 500$ due to prop 13. The 5000 house is in forclosure so that will sit for a long time.

So, that is a huge revenue hit. Good luck to the pro 13 advocates that think its a great idea. Lets see how your doing in 8-10 years.

Comment by Big V
2008-04-09 19:10:32

I hope they finally get rid of all the loopholes in Prop 13.

 
Comment by Mole Man
2008-04-09 21:41:56

It is important to bear in mind that the vast majority of California revenue comes from income taxes on those making over $200k a year. Not only does this mean one specific tax and bracket matter more than any other, it also brings up the complication that those taxpayers typically have a great deal of flexibility in terms of when and how they choose to declare income. When times are tough their taxable income might all but entirely disappear as it did during the last downturn. The California Legislative Analyist has a lot of information about the budget and tax situation online. The current system is highly unstable.

Comment by Rental Watch
2008-04-10 12:47:52

Cool.

Can you let me know how I can delay when I pay my taxes, and how I pay them?

I never knew I had such power…

The reality is that a lot of those people have income from businesses, asset, or stock sales–and then buy stuff with the money since they feel good about the world.

So, if their businesses are suffering, their incomes go down. And if the stock market is down, they sell less stock. If the capital market freeze up, they can’t sell their assets, since buyers can’t get the debt they want/need. And then they spend less, meaning downstream companies make less money, etc., etc., etc.

This is a BIG part of the fiscal impact, not rich people simply choosing to not pay tax. Those people were choosing to not pay tax before.

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Comment by Professor Bear
2008-04-09 16:42:59

“‘I think we’ll see it (better sales) because the pricing structure is going to force the issue,’ said Chuck Smiar, a real estate agent in Escondido. ‘There’s a lot of buyers sitting on the fence waiting for the bottom. And I think if they don’t jump in soon, they’re going to be sorry.’”

Sounds to me as though North County realtors who don’t line a backup livelihood are the ones who are most likely soon going to be sorry.

Comment by Arizona Slim
2008-04-09 16:48:18

Anyone spotted a former real estate agent waiting tables? Or, gasp, doing something more menial like washing dishes?

 
Comment by hoz
2008-04-09 16:56:59

“If all loans required the documentation, it would cause folks to buy within their means…”

People will buy within their means another 60% off please.

Comment by are they crazy
2008-04-09 18:45:16

“If all loans required the documentation, it would cause folks to buy within their means…” And that’s a bad thing because???? What they’re really worried about is that once we go back to normal lending practices, it will force down prices more because people won’t be able to qualify to buy all the overpriced nonsense.

 
 
Comment by DebtInNation
2008-04-09 17:07:55

So, if the buyers don’t jump in and buy, they’re going to be sorry because . . . everyone is buying up all the bargains? WTF?

Comment by combotechie
2008-04-09 17:42:10

Kinda like: “Nobody goes there because it’s too crowded”.

Comment by DebtInNation
2008-04-09 17:55:23

Good one.

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Comment by peter m
2008-04-09 18:27:00

“In February, the average of median sale prices in 18 beachside ZIP Codes, including parts of Santa Monica, Manhattan Beach and Long Beach, was $1.08 million, down nearly 8.9% from August and 10.2% from February 2007, according to DataQuick.”

18 ‘affordable’ beachside zips showed 149 sales in feb, That is 8.27 homes sold per zip. Owners of beach homes are withholding homes from the market due to shaky economy and declning LA prices. 149 sales is a miniscule % of total LA/OC inventory of sold and for sale homes in the the two- county area. It is a blip and means statistically nothing. If economy keeps tanking look for another 10-15% decline in prices in ‘affordable” beach zips later in 2008 and 2009.

The LA times should have listed the 18 zips on a chart for comparison purposes. I know for a fact that LB coastal zips are tanking especially the shoreline condo market. Lots of oversupply and the LB dwtn shorefront zip 90802 not at all favorable as a hi-end beach community though it has an attractive(on the surface)urban water front fun zone. Average condo prices are now below $300,000 for LB.

Huntington beach has tons of condos/ townhomes still overpriced. HB may be a relative bargain compared to the other zips but $ 400-500,000 for a 2.2 condo waaaay too high. Maybe for a large 4-2 3000+ sq ft SFH that price might be OK if next to the beach. I see HB beachside condos at around $300,000 by end of year 2008.

Venice will be declining hard within a year as would be sellers hold back waiting to unload their rediculously overpriced condo-like houses on teeny stamp lots for top $. Sharp declines toward end of 2008 and into 2009.

That article from LA times is nothing but a shill piece written by RE ignoramous’s without a clue as to the real state of the LA Market. There are at least a hundred times as many foreclosed properties in LA county than the total no of LA beach properties sold in Feb.

 
 
 
 
Comment by GH
2008-04-09 18:04:30

What a bunch of nonesense - prices are down from their astronomical heights of a couple of years ago, but remain very very high and all indicators show continuing price drops. The only people who will be sorry are those who buy now and find they are unable to afford their purchase in a couple of years and end up in the foreclosure heap.

Comment by DebtInNation
2008-04-09 18:37:48

Amen. I think it’s kind of a waste of time to compare any prices to peak (Look, mommy! Prices are 30% off peak!) other than for schadenfreude purposes. It was so volatile and so out of the norm that it’s sort of useless for any kind of rational analysis, IMO. I think it’s much more constructive to look at the historic data, forget about the last 3-5 years in one sense, and project prices based on that.

Comment by Rental Watch
2008-04-10 12:52:44

I had this conversation with a guy the other day who was talking up how good a price was since it was less than all the others on the market.

The problem I told him was that this particular asset was simply less overpriced than the others, not that it was a reasonable price…

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Comment by Professor Bear
2008-04-09 16:45:16

“‘We haven’t hit the terrified phase yet,’ said Shawn Harris, a mortgage broker in Oceanside. ‘The sellers are going through the seven stages of denial. … Eventually, they will get to the stage where it’s, ‘Holy crap, I’m not going to be able to make this mortgage payment anymore.’”

I don’t recall the terrified stage of the housing bubble stages of grief, but it sounds reasonable.

Comment by SDGreg
2008-04-09 16:53:47

The terrified phase for many will be when they finally realize the price they paid isn’t coming back any time soon. I think many are still oblivious or still very much in denial about the price declines that will eventually occur and how long it might take to return to the level at which they paid if they purchased near the peak. Once that sets in, not making the payments and walking away will be much easier and a relief, not terrifying.

Comment by Big V
2008-04-09 18:02:44

It will be when they get the notice from the sheriff on their door.

 
 
Comment by DebtInNation
2008-04-09 17:09:15

I forget, which step is the Joshua Tree phase of denial?

Comment by hoz
2008-04-09 17:10:26

That is the 12th step.

Comment by Bye FL
2008-04-09 18:29:00

I am betting many people are still hoping to be bailed out. As long as there are talks of bailouts, this bubble can play out over many years or even decades. We will know when the bottom is near when the gubbermint gives up and stops talking about bailouts and says something like “houses are affordable at last”

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Comment by hoz
2008-04-09 16:49:04

Housing Price Declines—Still a Ways to Go
“…The housing price correction in California markets will likely continue throughout 2008 until sufficient affordability is restored to boost housing demand. The high ratios of housing prices in relation to income and the low affordability indices were maintained by lending practices that are no longer available. Looser lending criteria, combined with low interest rates and the psychology that prices could only go up, caused home prices to double since 2000 in most California regional markets. In the absence of aggressive lending and aggressive buying psychology, home prices still have a ways to decline in order to restore sustainable levels of affordability in most markets in California.

After the Price Correction is Completed CCSCE is working on the 2008 edition of California Economic Growth, which should be available by June. The state of housing affordability will be an important determinant in projecting job growth in the state and major economic regions. At the same time, a tidal wave of demographic change is due in California’s housing and labor markets as the first wave of baby boomers turns
62 this year…”
Stephen Levy
Feb, 2008
CCSCE
http://tinyurl.com/5lfxmy

Comment by DebtInNation
2008-04-09 18:16:26

Interesting graphs. Thanks, Hoz. I’m no statistician, but my basic math would tell me that based on the median existing CA home prices as a percentage of the U.S., I think I’m being generous by saying it needs to go back down to at least 160%, which roughly bookmarks the trough between ‘93 and ‘98, and if it’s at about 218% right now, it needs to fall at least 27% (160/218) just to get back in line with a “normal” relationship with where the rest of the US is right now. Correct me if I’m wrong, but since the median is obviously falling in the rest of the US, then CA will fall more than 27% when all is said and done.

Moving on to the resale prices vs. income, we have that radical divorce from reality in 2002 when the blue line magically soars away from the pink one, and as the index stands right now, income is roughly 1.75 whereas prices are roughly 2.55; 1.75/2.55 = .686 or roughly 31% difference. Assuming incomes ain’t gonna go up much (more likely down?) in CA the next couple of years, we get a 31% drop in prices (from January) to get the index back in line.

Again, I’m obviously no expert, but if my math serves me correctly, I’m getting a number of at least 27-31% drop in CA prices. What do you other HBBr’s say?

Comment by hoz
2008-04-09 19:58:50

It will continue to be self feeding and overshoot on the down side. Price ticks dow, people will get laid off, loans will be even more difficult to get, houses go down, more people get laid off etc. until equilibrium is reached.

Comment by JimAtLaw
2008-04-09 22:21:52

Totally agreed.

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Comment by JP
2008-04-09 21:01:39

Note that the first time buyer’s index does not include the recalibration of that index from a few years ago.

If you use the old standard, my recollection is that first-time buyers index goes to single digit percent.

 
Comment by Big V
2008-04-09 23:08:49

I guess that makes sense, since CA has already gone down 16% from peak. 31 + 16 = 47. That’s just to bring us down to “regular” prices. Of course, then prices will still go down some more due to lack of available $$ to borrow, but I will go shopping when asking prices are about 1/2 of peak prices.

 
 
Comment by DebtInNation
2008-04-09 18:27:03

OK, my other post got eaten, so I apologize if they both show up. This one’s been edited a bit anyway:

Interesting graphs. Thanks, Hoz. I’m no statistician, but my basic math would tell me that based on the median existing CA home prices as a percentage of the U.S., I think I’m being generous by saying it needs to go back down to at least 160%, which roughly bookmarks the trough between ‘93 and ‘98, and if it’s at about 218% right now, it needs to fall at least 27% (160/218) just to get back in line with a “normal” relationship with where the rest of the US is right now. Correct me if I’m wrong, but since the median is obviously falling in the rest of the US, then CA will fall more than 27% when all is said and done.

Moving on to the resale prices vs. income, we have that radical divorce from reality in 2002 when the blue line magically soars away from the pink one, and as the index stands right now, income is roughly 1.75 whereas prices are roughly 2.55; 1.75/2.55 = .686 or roughly 31% difference. Assuming incomes ain’t gonna go up much (more likely down?) in CA the next couple of years, we get a 31% drop in prices (from January) to get the index back in line.

Again, I’m obviously no expert, but if my math serves me correctly, I’m getting a number of at least another 27-31% drop in CA prices, not from peak, but from Jan 08!. What do you other HBBr’s say?

Comment by peter m
2008-04-09 20:08:49

“Again, I’m obviously no expert, but if my math serves me correctly, I’m getting a number of at least another 27-31% drop in CA prices, not from peak, but from Jan 08!. What do you other HBBr’s say? ”

I’m seeing percent drops of close to 50% in some LA communities like lynwood and paramount from peak. Plenty of other LA areas/zips already dropped 30-40%. Theses are in the inland crappy LA county areas.

This thing is getting ugly quite fast.

 
 
 
Comment by AGF
2008-04-09 16:51:21

The “regular people” are on strike? Only “bottom feeders” are out there? ”

Oy.

Comment by Big V
2008-04-09 18:48:09

No, bottom “feeters”. Please see my post above. It’s important that we on the Blog are astute about MSM typos.

 
 
Comment by BottomFisher
2008-04-09 16:51:57

“Several Sacramento-area cities stung by the real estate downturn are considering deferring developer fees as a way to stimulate the local economy.
“‘It’s not just to see if we can get sticks and bricks up,’ Folsom Vice Mayor Steve Miklos said Monday. ‘It’s to get people back to work.’”

Good luck with that one…….maybe if you build them in Canada….like you really need more houses to sell in CA….what an idiot!

Comment by ex-nnvmtgbrkr
2008-04-09 17:22:41

That one got me too. F-n hilarious! Do you need any more proof than this that your local government is truly clueless? Alright Mr Mayor, you go for it dude. That’s just what we need to crash this market even more is more inventory. I love it! Brilliant idea! This guy obviously flunked Econ 101 if you don’t get the whole supply/demand thing.

Yeah, I got a lot of faith in the PTB…..what a bunch of hilarious football humping monkeys.

Comment by robmypro
2008-04-09 17:32:03

It’s like a 1-2 punch. First the gangsters on Wall Street implode the economy, then the idiots in government get to put the cherry on top.

Only in America.

Comment by DebtInNation
2008-04-09 18:40:07

Or they get to drop the cherry in the crater?

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Comment by peter m
2008-04-09 18:59:43

‘It’s http://www.latimes.com/business/la-fi-noanswer9apr09,1,417452.storyto get people back to work.’

This may be a bit off topic , or maybe not, but the vice mayor may have some reason to be concerned about rising unemployment. The above LA times link- in business section- is about the CA state unemployment Dept(EDD) getting so jammed by a tidal wave of applicants for unemployment(UI) insurance that many CA UI applicants are having problems getting benefits in a timely manner, or simply cannot connect thru the antiquated/ overloaded CA call-in lines.
CA Unemployment rate is now at 5.7% ,the official rate , but i know that the real rate is closer to 7-8%.

This economic contraction , at least in CA, is much more serious than what is being officially reported in the MSM.

 
 
Comment by SDGreg
2008-04-09 16:58:37

“Other real estate agents and brokers said that only certain markets have hit their lowest price points. Meanwhile, sellers in stronger markets are trying to refrain from posting their property until the market recovers. That leaves the potential for a flood of listings, they say.”

I doubt that any markets have reached their lowest points. I do agree that there’s a potential for a flood of listings. Why list now given the current level of sales? The only reason to list now is if you need to sell and are willing to be very aggressive on your pricing. Otherwise it’s a waste of time.

Comment by Groundhogday
2008-04-09 17:19:38

“Why list now given the current level of sales? The only reason to list now is if you need to sell and are willing to be very aggressive on your pricing.”

If you plan to sell anytime in the next ten years, then it would be wise to list now, price significantly below comps and sell. Prices have quite a bit more to fall before home prices reach the long term trend (and affordability). Those who wait will be rewarded with much lower selling prices over the next 5 years. We might not see current prices again in our life times (inflation adjusted).

Comment by SDGreg
2008-04-09 17:44:04

I agree with your assessment. If you bought any time in the past few years, getting out sooner is better. Otherwise you are stuck, possibly for the rest of your life.

Comment by DebtInNation
2008-04-09 18:22:44

Actually, if you bought at any time, now is a good time to get out, if financial issues were the only concern. Heck, if you bought at the bottom of the market, all the better. Take your profit, rent for a couple o years, and buy back in, or retire in the Caribbean, etc.

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Comment by James
2008-04-09 18:57:03

Oh, this is just like Mozzilo the tan man, hyping contrywide stock all while unloading his holdings.

Then admiting losses and watching the price crater.

 
 
Comment by Ouro Verde
2008-04-09 16:59:37

“The area’s median sales price continued to take a beating and also showed the largest annual decline yet. In March, it dropped below $500,000 for the first time since 2003.”

Hey North County. Let’s party. Homes are so cheap now!
Too bad this renter has to put saving on hold until BB throws us a bone.
Hey, how much is a down payment on 500K?

Comment by Big V
2008-04-09 18:52:48

Like $500k is really low. I remember in 2002, everyone was saying “There’s no way prices can go above $500k”. Tee hee.

 
 
Comment by hoz
2008-04-09 17:05:59

“Javier and Marianne Cano recently spent nearly $1.9 million for a two-story, five-bedroom Spanish-style house less than a quarter of a mile from the ocean in Redondo Beach. Six months earlier, the Canos would have had to pay about $2 million to $2.1 million, based on comparable home sales at the time.”

Wow what a savings! Brilliance abounds. The world is financially unglued and these mopes paid up.

Comment by aladinsane
2008-04-09 17:21:18

No Cano do.

Comment by hoz
2008-04-09 18:40:09

“Everything was right. I just missed it. It’s disappointing.”
Robinson Cano

 
 
Comment by BubbleViewer
2008-04-09 18:43:17

It’s OK. The house comes with a special sandbox into which they plan to insert their heads.

Comment by Big V
2008-04-09 18:54:35

It’s OK. The house comes with a special sandbox asshole into which they plan to insert their heads.

 
 
Comment by peter m
2008-04-09 19:27:23

“Javier and Marianne Cano recently spent nearly $1.9 million for a two-story, five-bedroom Spanish-style house less than a quarter of a mile from the ocean in Redondo Beach. Six months earlier, the Canos would have had to pay about $2 million to $2.1 million, based on comparable home sales at the time.”

I have problems with the LA Times analysis which I posted on LA land blog. Here is the repost:

LA times said 149 hi-end beach properties sold in feb. Heres the rub:
Almost half of the total feb sales were in the 3 huntington beach zips which indicates an even more distorted minsiciule % of sales in the LA beach zips. basically only a tiny handful of wealthy folks(less than 100) or more likely well- heeled specu-vesters are buying rare LA SFH coastal properties to no doubt do teardowns and /or refurbish into posh palatial beach mansions.
I checked on datquick for sales of million $ SFH coastal units. Two beach properties in playa del rey . 2 in marina del rey. 8 sold in venice. There were maybe 10 total properties sold in santa monica. These million $ purchases of rare SFH properties in the LA beachside are primarily by a few wealthy or specu-vestors looking to erect fancy castles near the shore. The LA times is painting a complete distortion of the LA RE market for hi-end properties. It is a tiny % of the LA hosuing inventory -less than 100 purchasers each month of expensive beachside LA properties out of La county population of 10 mil and over 1 million mortgaged housing units countywide.

Very unhealthy distorted LA market tilted toward a miniscule % of wealthy buyers and not at all representative of the overall LA RE picture.

 
 
Comment by uptick
2008-04-09 17:12:53

Correction is here. These numbers not in the media. Prices rolled back to 1998??!!

MANTECA
3 beds, 2.5 baths, 1,711 sq ft
For Sale: $169,000
12/10/2003: $274,000
09/21/1998: $143,000 *
10/07/1997: $100,875 *

3 beds, 2.0 baths, 1,020 sq ft
For Sale: $189,000
11/25/2003: $239,000

4 beds, 2.5 baths, 2,190 sq ft
For Sale: $249,900
12/19/2007: $346,500 *
10/06/2000: $228,000

Comment by OCDan
2008-04-09 17:24:19

1998 prices are going to hit a lot of places.

Why?

-All the FBs are tapped out. They AIN”T getting anymore debt from the banksters and can’t sell their junk heap house at profit.

-Wages at best have been stagnant since the 70s vs. inflation, so most, I said most, avg. people cannot afford homes that exceed 150-200K, at least in my area.

I will truly not be surprised to see homes go for 250K in Rancho Santa Margarita when this is all done. Some homes are in the 400s, but aren’t moving. I wonder why? See my 2 reasons above. People are tapped out and the rest wouldn’t dive into that financial he!! hole at those costs.

 
Comment by mathguy
2008-04-09 18:06:16

Hi guys,

How is the case Schiller for SD looking these days? are we back to 1999 yet? I’ve seen some deals I’m starting to actually think are good, like 2/2 condos in clairemont/kearny mesa for $150. Those are almost getting to cap rates better than my savings account interest rate with rents at 1200-1300 for similar comps. Of course, I don’t want to lock in a 4% cap rate for 30 years when I will be able to get much higher interest rates in a few years from now, but maybe at 8%.

Math Guy

Comment by mathguy
2008-04-09 18:10:16

I just realized that I forgot to include increasing (yes or potentially decreasing) rents. Does anyone have a good piece of software to plug numbers into to evaluate these scenarios? If no, and I make it in Excel or something, anyone want the spreadsheet?

Math Guy

Comment by hoz
2008-04-09 18:24:37

From the CME Case Schiller Futures
MAY 2008 186.80B UNCH 186.80
MAY 2009 UNCH 161.80
NOV 2012 UNCH 154.40
I would say you would be a lot better off paying 12% interest in 4.5 years and saving 20% on the purchase price versus May 2008. But I like to make money. And the present value of money is around 9.5% -e.g. you should be able to invest and get a return of 9.5% annually on money. So throw your money away on a cheap mortgage.

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Comment by Big V
2008-04-09 18:57:31

Go to http://www.dinkytown.com and use their rent vs. buy calculator. It doesn’t allow you to assume negative appreciation, but you can type in zero at least.

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Comment by amoney
2008-04-09 18:31:05

You may be a math guy, but you sure aint no history guy. You could get a 4 bed 2bath oceanview SFH in Cardiff for ~180K in 1996. Those condos arent worth 75K - the location is horrible, unless of course horrible is your thing.

Comment by Wickedheart
2008-04-09 20:15:28

No, they are not worth $150k. I have to disagree about them not being worth 75k though. Clairmont/Kearny Mesa is a central location and close to Mesa college. If you wanted a rental property it would cash flow positive.

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Comment by mathguy
2008-04-10 00:44:47

As I suspected, at 150k, it is slightly better to buy than to rent according to dinkytown, with a $1200 equivalent rent, and $100 HOA.

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Comment by mathguy
2008-04-10 00:57:28

The breakeven on that is estimated at 3 years. Rent is way lower than payment at the curent 6.5% rate.
Just FYI, here is the summary I did on that $150k prop that currently rents for 12-1300 :

Your total monthly payment was estimated at $1,097.83. Your down payment was estimated at $26,735 and you had a home price of $150,000. This is for a 30 year mortgage at 6.250% in the amount of $123,265. Your total closing costs for this loan are estimated at $3,265.31.

Your current monthly rent is $1,200. The expected inflation rate of 4.10% annually was used to estimate future rent and property taxes. The rate of return use for investments was 9.00% per year after taxes.

Your $1,097.83 monthly payment consists of:
Principal and interest $758.97
PMI $51.36
Taxes $125.00
Insurance $62.50
Association dues & maintenance $100.00

Closing costs estimate of $3,265.31 consists of:
Amount of points paid $1,232.65
Loan origination fee $1,233
Other closing costs $800

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Comment by Rental Watch
2008-04-10 13:01:30

This is consistent with what I’ve heard recently that in the Modesto/Stockton/Manteca area, volumes are way up recently. Prices have dropped from mid/high $300’s to low/mid $200’s. Once prices got to that level, apparently people have started to buy again. One major brokerage firm in the area claims to have had their best month in their history in early 2008.

Prices drop, volumes up, inventory shrinks, eventually builders need to build again. Funny how predictable this all is…

 
 
Comment by SDGreg
2008-04-09 17:14:01

“Foreclosures leaped in March, with new notices of default in San Diego County more than doubling from a year ago, to 3,116, according ForeclosureRadar.com. Last month’s inventory is still almost double that of a year ago.”

Given the stories we’ve seen in the past week or two that it’s now taking lenders 6 to 12 months to work through the foreclosure process, this increasing number of foreclosed properties will continue hitting the market through the end of the year and further depressing comps. It would seem that it would be nearly impossible now to have any price recovery in 2008, not that this should be any great surprise to anyone that’s not a realtor.

 
Comment by aladinsane
2008-04-09 17:17:28

Desperate Houselives

“For example, 77 percent of Stockton’s 2007 homebuyers were upside down by year’s end; 73 percent of them were upside down in Merced, Humphries said. In the Riverside-San Bernardino area, 60 percent were upside down, compared to 38 percent of Orange County’s 2007 homebuyers.”

 
Comment by uptick
2008-04-09 17:30:22

Great rent vs buy calculator with negative appreciation taken into account. Sorry if been posted already.

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html

Comment by Big V
2008-04-09 19:05:05

Awesome. Thank you. My rental will have to drop by 63% before your typical 5-year house purchase would make any sense at all (assuming that the Zestimate is correct and that appreciation is inflation plus 1.5 percentage points).

Comment by uptick
2008-04-10 08:22:43

Interesting, my rental would have to drop to 1998-99 price before 5-yr purchace better tahn renting. So maybe 1998 is the end point of all this. 2009-2012. Depending on region. Central valley leading, NYC trailing.

 
 
Comment by cactus
2008-04-09 20:18:08

You have to figure out home price appreciation over 30 years time not easy to estimate. But its a cool graphic

Comment by Big V
2008-04-09 23:18:51

You can just assume that appreciation is related in some way to inflation. Set your anual rent to inflation, then set your appreciation to something historical (in CA, it’s inflation plus 1.5%). Start typing in lower and lower prices until the house pans out after 5 years, and you probably have the future (bottom) value of your house.

 
 
 
Comment by NoSingleOne
2008-04-09 17:33:35

I’m proud to be a bottom feeder.

Comment by SanFranciscoBayAreaGal
2008-04-09 21:07:45

I’m proud of you that you are proud of being a bottom feeder. ;)

 
 
Comment by GotRocks
2008-04-09 17:51:49

“‘If all loans required the documentation, it would cause folks to buy within their means, but it does not take into account situations like ours,’ said White, an attorney married to a physician. ‘We could not have purchased our home as we were just beginning our careers. Now, we are established, so we are OK.’”

So. How about renting for a year or two? Most of us “little” people had to do that (and usually for a lot longer than a year or two). Get off your high horse and put your egos in check a bit. It’s really not so bad to live like average people…for a short time.

Comment by DebtInNation
2008-04-09 18:51:22

I disagree. They’re adults, and obviously a physician and attorney should be smart enough to make adult decisions. In a free market, there should be some bankers willing to take the risk of financing them based on future earnings. If they choke, then both they and the banker should pay the consequences. Just because they’ve been handing out loans to any asshat with a pulse the last couple of years doesn’t mean that others should be penalized.

Comment by Big V
2008-04-09 19:06:48

Most banks would still want to see at least one year of a job record, though.

 
 
Comment by NoSingleOne
2008-04-09 19:33:04

DIN,

The mentality of these people implies that renting or living conservatively until they make their projected income is beneath them. I was in the same situation when I started my career, and I’m *still* renting. Very few physicians make as much as s/he thinks s/he’ll make at the end of residency. Medical practice is a b*tch-slap of reality after years of poverty in med school, and it’s become very difficult to make the wages traditionally associated with physicians anymore. I’m still paying off my student loans, but thankfully that’s almost done.

I’m betting that they wind up divorced and then defaulting once they realize they blew every last drop of credit they had early in their marriage/careers on debt based on their income “potential”.

Comment by DebtInNation
2008-04-09 21:42:35

I’m not saying it’s necessarily wise for them to buy a house immediately, but just that they should have the freedom of choice to do so provided someone is willing to take the risk to finance them.

 
 
Comment by spike66
2008-04-09 21:44:03

For what it’s worth, doctors are notoriously bad investors. They are routinely taken to the cleaners by brokers. When it comes to lending money, I’d choose a guy who runs a successful hot dog stand rather than a doctor. Business experience trumps medical smarts.

 
 
Comment by Prime_Is_Contained
2008-04-09 18:02:32

“‘The regular folks are on strike. They’re not buying houses,’ Husing said. ‘There’s no one out there but bottom-feeders.’””

That’s funny. The real bottom-feeders know the bottom is not even in sight yet.

What you have out there now are knife-catchers who _think_ they’re bottom-feeders.

Comment by Bye FL
2008-04-09 18:25:45

Seems that every burst bubble has knife catchers on the way down. When the beanie baby bubble burst, lots of knife catchers thought they were getting a “steal” when $500 beanies were selling for $250. Now those are maybe $50 and few people even want those. They have moved onto the next bubble and forgot about beanies.

When house prices bottom out, no one will care anymore, they will find some other bubble to feed on.

Comment by AdamCO
2008-04-09 20:44:08

Hahah, i saw maybe 15 or 20 beanie babies on craigslist for $250 I think it was.

Come one, nobody is buying those. The lot might be worth $20 to someone.

 
 
Comment by Neil
2008-04-09 18:31:05

I was looking for the right quote to respond to.

As NoSingleOne notes, I’m also proud to be a bottom feeder. Its just a long way to the bottom.

Got Popcorn?
Neil

 
Comment by Spook
2008-04-09 19:37:15

ain’t no bottom feeders out there;

looks like a bunch of blowfish to me.

just sayin

 
 
Comment by need 2 leave ca
2008-04-09 18:04:30

Eighty to 90 percent of our clients are upside down,” said Connie Der Torossian, VP of marketing and outreach at the Fair Housing Counsel of Orange County. ‘Very few have equity, so most owe more than their house is valued at now.’”

So, Connie, are you saying that 80 to 90% of the people in Orange County who bought houses in the last few years are DUMBA$$ES. I figured I couldn’t pay a $700K mortgage and didn’t need a lying scumsucking realtor and mortgage broker (great term - make people go broke) tell me that I could. I had an 8 yr old girl reach the same conclusion. Why didn’t all these DUMBA$$ES do the same? Unless In the Bag Gary told them otherwise.

 
Comment by need 2 leave ca
2008-04-09 18:06:19

“Javier and Marianne Cano recently spent nearly $1.9 million for a two-story, five-bedroom Spanish-style house less than a quarter of a mile from the ocean in Redondo Beach. Six months earlier, the Canos would have had to pay about $2 million to $2.1 million, based on comparable home sales at the time.”

Were Javier and Marianne the latest lottery winners? Did they win some secret contest sponsored by Arnold and funded from his personal fortune? Woa, what a bargain.

 
Comment by need 2 leave ca
2008-04-09 18:07:56

The San Mateo County Times. “Home sales continued their downward spiral in San Mateo County in March, while home prices also plummeted in many local cities, a report revealed Tuesday.

Now, when I lived in San Mateo, I was told that prices only went up forever. They would never fall. I think at the time, I was the only one (and others on this blog) that thought those making that claim were full of $h!t.

Comment by SanFranciscoBayAreaGal
2008-04-09 21:20:28

Heck, I live in San Mateo County and I have seen real estate go up and down, up and down, up and now down. I can testify truly brothers and sisters, prices do go down. :)

 
 
Comment by measton
2008-04-09 18:25:10

The elite are reassessing their hatred of food stamps
http://news.yahoo.com/s/ap/20080409/ap_on_re_la_am_ca/haiti_food_protests

I actually hate the idea of food stamps or welfare. What the country should have is a works program. If you want a check you work but gov should guarantee a job, even if it’s separating a box of white chips and black chips from a box that they remix every morning. Or riding a stationary to generate a enough power to light a low watt bulb across town. You show up every morning on time and work. The only thing worse than idol hands are hungry idol hands.

Comment by Left LA Behind
2008-04-09 19:44:54

Too much American Idol for you.

 
Comment by jbunniii
2008-04-09 21:38:17

There’s enough real work that needs to be done in this country that there is never a need to create artificial silly work like sorting chips. How about repairing sidewalks, picking up trash, farming, working as maids or servants for people not on welfare, etc. The list is nearly endless! Certainly any bailout should be reimbursed by the borrowers through labor such as this.

 
Comment by dutchtrader
2008-04-09 22:35:35

amen!

 
 
Comment by need 2 leave ca
2008-04-09 18:34:25

Although, Johnson added, the days of the convenience-store clerk putting a $10,000 monthly income down on his mortgage application are probably over.

Hey, Johnson. A husband/wife convenience clerk team could pull in $10K a month. At $9/hr, they would be need to work about 550 hours/mo. There is around 600 hrs/mo. What is the problem?

 
Comment by Sammy Schadenfreude
2008-04-09 19:33:25

The only thing worse than idol hands are hungry idol hands.

The only thing worse than idle hands are people who can’t spell “idle hands.”

 
Comment by Brian Mihalic
2008-04-09 20:11:19

“a lack of responsibility from a small segment of lenders that got us in trouble”

Name a lender that didn’t lack responsibility in 2006. Go ahead Tom, name just one.

 
Comment by Ken Best
2008-04-09 20:46:52

Chasing the market down: In Sacramento, 95828 zipcode

Price Reduced: 12/13/07 — $334,800 to $284,800
Price Reduced: 12/19/07 — $284,800 to $269,800
Price Reduced: 12/21/07 — $269,800 to $209,800
Price Reduced: 12/26/07 — $209,800 to $194,800
Price Reduced: 12/27/07 — $194,800 to $189,800
Price Reduced: 01/29/08 — $189,800 to $179,800
Price Reduced: 02/01/08 — $179,800 to $174,800
Price Reduced: 02/05/08 — $174,800 to $168,800
Price Reduced: 02/20/08 — $168,800 to $163,800
Price Reduced: 02/24/08 — $163,800 to $158,800
Price Reduced: 03/03/08 — $158,800 to $153,800

 
Comment by Bob Stanley
2008-04-09 20:47:51

Message to anyone looking forward to prices dropping and rental property making sense in the future: please remember that it is a moving target. If house prices continue to decline, rents will probably decrease too. Happened before. This will delay when such investment properties will “pencil out”, if ever.

I am a huge bear, having sold our home summer 2005 in North County San Diego. Sleeping very well these days and renting since (thanks to many of you on this informative site). That said, in addition to a primary residence I once also owned a nice single family detached rental house from 1986 to 1990. 3br, 2ba, 1 car, 1400 sq. ft. one story on a huge 15,000 sq. ft. lot in NJ. Despite a prime location (…enter NJ jokes here…………) in a top school district I always had many months of vacancies, and even had to reduce the rent to find a tenant.

Why? The economy sucked!

Towards the end of 1990 it was empty for 6 months. After 5 years of this I had enough and decided to sell, happy with simply owning our own home (primary residence). The last tenants had wrecked the place, so I had to paint the entire interior (myself), install all new carpeting (they did not understand the words ” NO PETS), new tile in the kitchen, and a new furnace. Bought it right so still realized a nice profit when I sold. Built an addition on my own home with part of the proceeds.

Some of us remember what happened to prices from 1990 to 1996. Flat at best, or depending upon the area they dropped 10% to 20% (not including inflation). This time looks like it will be much much worse.

We could end up with a over-supply of rentals the same way we have an over-supply of over-priced houses for sale today. Rents will go down (remember supply and demand?). The rental property equation depends upon finding renters who can afford the rent - let’s hope they have jobs and are still in California. Not any fun having to make that mortgage payment on an empty second home, believe me.

Assuming anyone’s Mc Trump plan to become a landlord will work out is the same mentality as the flippers who always believed someone would buy their granite counters and stainless appliances. They didn’t plan for loan requirements changing or, heaven forbid DOWN PAYMENTS. The days of easy money are gone - making it and financing it. Smart landlords are sitting this one out.

Rant off.

 
Comment by BuyerWillEPB
2008-04-09 21:01:05

“Owning” property in this country is a myth. Don’t believe me? Then just try not paying the property taxes, and very soon you will find out who the REAL owner is.

Serfdom is cool again.

———————————————————–

“Property owners who don’t pay within five years will have their land sold at tax foreclosure auctions.”

 
Comment by need 2 leave ca
2008-04-09 21:48:55

that Sacramento chasing down is TOO funny. Nothing like a 50-60% haircut. Of course, top price was fantasy land.

 
Comment by Bubble Butt
2008-04-09 21:59:07

Got this garbage from a Remax email today in OC - it is a long post:

Today marks the FIRST time since September 22, 2005 where demand is better than one year ago. The sold statistics, which garner front page headline attention in most media outlets, will not reflect the year over year statistics until May or even June of this year. So, you are hearing it here first, demand is actually better right now compared to last year. You can hear it in our offices too. Here’s the scoop from the trenches: increased showing activity, increased open house activity, buyers are writing more offers, multiple offers in the lower ranges and significantly more first time buyer activity. And, most of this activity was already in the works prior to the new FHA and conventional loan limits taking root in the marketplace. Buyers have been methodically entering the market since the beginning of the New Year. We started the year with demand, a snapshot of the prior 30 day escrow activity, at 944 escrows. There were only 1,473 total escrows on January 1st in all of Orange County with 14,724 homes on the market. That was an inventory of 16.45 months! Since then, demand has increased to 2,286 escrows within the prior 30 days, a 142% increase. Now there are 3,066 total escrows throughout Orange County, a 108% increase from the beginning of the year. Additionally, the active inventory has only grown by 750 homes since we sat on our comfortable sofas and sleepily watched the Rose Parade, bringing the inventory to 15,474 homes. Expected market time has dropped substantially to 6.75 months. Remember, the new FHA and conventional loan limits of $729,750 are just hitting the market now. We are achieving the increase in demand despite a major liquidity problem in the financial markets, meaning loans above $417,000 have been extremely challenging to put together unless a borrower had a lot of money to put down and cream of the crop credit scores. The new loan limits will have a powerful impact on demand. At 10% down, the old $417,000 conventional limit only covered 37% of the current active inventory. The new limits now encompass a stunning 75% of the inventory. The old $367,000 FHA loan limit covered only 23% of the active inventory. The real estate market also has the added benefit of Washington D.C. and every major player that has anything to do with the financial markets focusing programs and legislation aimed at further increasing demand and restoring the financial engine that runs our economy.

Last year there were1,464 fewer homes on the market, but demand was lower by 159 escrows. Demand was dropping fast last year due to the beginning effects of the subprime meltdown that started in March of 2007. Expected market time was almost the same at 6.57 months. Two years ago, the active inventory was at 10,714, demand was at 2,958 and market time was at 3.62 months. Bank owned foreclosures and short sales, homeowners that owe more on their home than the current value, now account for 34.5% of the active inventory. That figure was at 26% at the beginning of the year and 32.8% a month ago.

What about all of the distressed properties in the market place? Bank owned foreclosures are HOT and growing hotter by the minute with an expected market time of just 1.67 months. Two weeks ago that figure was at 2.11 months. Foreclosures only account for 20% of the total distressed market and only 7% of the entire active inventory. Thus, foreclosures are in demand and lenders are calling the shots with multiple offers and no emotional attachment to their “assets.” Their market is similar to the heydays of 2004 and 2005 for all of Orange County. Statistically, short sales have an expected market time of 10.60 months compared to 12.05 months two weeks ago. But, these numbers are not a true reflection of what is really going on in the marketplace. The numbers are grossly understated. Short sales are a totally different animal and should be treated as such. Realtors® out in the field keep a home on the market as an active listing through the Multiple Listing Service until they have formal lender approval of an offer already accepted by the seller. Even when a seller and a buyer agree upon the terms of a contract, escrow is not technically opened until formal lender approval occurs. The lenders have to determine whether or not they are willing to take less than the full loan amount currently encumbering the property. And, if there is more than one loan, each and every lender must sign off on the deal in order for an escrow to proceed. Short sales are “subject to lender approval” and can take anywhere from weeks to months. One of our associates reported from the trenches that they just closed a short sale after a seven month delay in a formal approval. That’s not even the worst case scenario, as many go unapproved and are instead foreclosed upon, wiping out any and all offers currently written on the property. So, when a buyer climbs into a car and finds a short sale that they have interest in, chances are that the home already has an accepted offer that is somewhere in the “lender approval” process. They too can add their offer to the mix and play the waiting game. Many of these short sales are priced at levels to attract buyers, discounting well below the true market price. In this case, the odds of “lender approval” on even full price offers are slim to none. As a consumer, it is best to do a bit of homework and write an offer closer to the market value, above the asking price, increasing the odds of lender acceptance. With more and more homes acquiring multiple offers, that is exactly what is occurring in the market: offers are being submitted for bank approval above the list price.

Everybody needs to keep in mind some fundamental statistics regarding distressed homes. 75% of all distressed properties, foreclosures and shorts sales, are below $500,000 and 94% are below $750,000. Santa Ana accounts for 20% of the entire distressed market in Orange County, 1 in every 5. Anaheim accounts for another 15%, 3 in every 20. The top 5 in total numbers, Santa Ana, Anaheim, Garden Grove, Orange and Lake Forest, account for 49% of all distressed properties, virtually 1 in every 2. With the exception of Orange, all have average list prices below $500,000.

What are FHA loans? The Federal Housing Administration (FHA) offers loans to consumers with some credit blemishes and/or a small down payment. A buyer can put down as little as 3%, all of which can be a gift. FHA is NOT subprime and has been around for years. This is not a program that the government cooked up to replace the void left by the sudden absence of subprime. Rather, with prior FHA loan limits well below the median sales price in Orange County, subprime filled the void. FHA loans require documentation and the buyer must actually qualify.

Buyers, what to do? Slowly but surely, more headlines are starting to illustrate improved demand and a great time to buy. It will take the better part of the next 60 days for the recent increased activity to start changing the tone of the headlines and stories completely. The facts are the facts; the lower ranges, where most of the junk loans occurred, are turning up the heat first. The increased loan limits should restore demand all the way up to $800,000. As liquidity is slowly restored to the financial markets, the upper ranges above $800,000 will in turn start to gain momentum as 2008 plods along. Demand has slowly improved as value has seeped its way back into the market. The conditions are perfect to purchase now and into the horizon: motivated sellers, plenty of homes to choose from, rates are low, new loan programs are available and there are great values out there right now. As a buyer, do not let price be your only determining factor in choosing to purchase. Price is important, but current favorable rates will not stick around forever. Prior to the financial subprime meltdown and financial crunch, the Federal Reserve was methodically raising rates to counter the threat of inflation. The threat of inflation is now high with all of the easing that the Federal Reserve has had to undertake to jump start the economy and the financial markets. Do not get comfortable with today’s interest rates, they WILL eventually increase. As soon as the economy starts humming along again, expect the Federal Reserve to reverse course and push rates up higher. By the way, for every 1% that interest rates increase, it erases approximately all of the benefits of waiting for property values to decrease 10%. The payments are virtually identical.

Sellers, what to do? So far this Spring, homeowners are NOT placing their homes on the market in foolish anticipation of a wonderful Spring real estate market. Thank goodness!!! Quite simply, sellers should continue to bide by a simple rule of today’s market: do NOT place your home on the market unless you absolutely must sell and are motivated to do what it takes to procure a sale, with the right price and condition. With only 2,285 successes over the past month, that leaves the vast majority waiting another month or months. In such a competitive market, it is all about price, location and condition. As a seller, you can do absolutely nothing about the location other than take it into consideration in determining price. Sellers do control their price and condition. After carefully determining an asking price, it still may take time, so pack your patience and be prepared to make changes as the market evolves. Unless you are prepared to market your home as a major or cosmetic fixer, great showing condition is imperative in maximizing your proceeds. Last, be prepared on day 100, just as you were during the first week, for a buyer to walk through the door. Set the stage with the lights on, soft music in the background, window covering opens and make sure your home is neat as a pin inside and out.

 
Comment by Godzilla_kong
2008-04-09 22:12:51

This is a bit off topic. Will many Baby Boomers return to work, stay working after retirement age?

I ask this because my wife and I live in Apple Valley,CA the neighborhood is good. We are currently renting an 1800 sq.ft home on 1/2 acre built in 1985 for $1150/mo. When we first moved here 3 years ago, the neighbors 6 doors down an older couple in their mid-to-late 60’s had a real meticulous yard. The husband was out in the yard everyday weeding, tilling, adding new gravel etc. I mean their house and yard was immaculate. Just about 2 months ago, I noticed weeds peeking out the gravel in their yard, now it is getting taller. I discussed it with my wife that he was probably sick or the wife was sick and he was tending to here. We had the wife of an older couple(80’s) who lives directly across the street from us die about a year ago. I had not seen husband of the older couple for months. Well today I got home from work early, wife sent me out to pick up some spices, as I was pulling out the driveway I seen a white van with blue stripes. Thoughts are racing through my mind “oh this is one of those medical vans that drop off and pick up sick people.” Nope, it was a carpool van, as I got closer to their house I seen the old guy hobbling into his house with a lunch pail. That’s right but he at almost 70 y.o. had to go back to work. I don’t know if they HELOC’d the crap out of their home, expensive gas, increase in food prices or what but it was startling to see him working again.

I would like to help him with the yard, but with 2 young children and working 12 hour shifts and trying to get my Bachelors, I just can’t. Plus I have my own 1/2 acre to tend to, which is how I was able to get the place for this price at the peak in 2005.

Comment by FreedomLover
2008-04-10 11:30:06

Ah isn’t life a bitch? All those boomers thought they were going to have a free ride. Well welcome to the Great Depression of your fathers!

 
 
Comment by FP
2008-04-09 22:27:02

I just saw at least 4 new “For Sale” signs located around the bend from my street. Asking for $1 mil plus. These houses should be around $400K tops. these house were “upgraded” inside and out. As house a couple blocks down change Realtors 3 times already and it hasn’t been over two months.

 
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