Unchartered Waters In California
The Daily Bulletin reports from California. “Home prices in Southern California are racing downhill, but does that mean it’s a buyer’s market? Each month real-estate agents watch prices plunge and foreclosures soar, and several buyers are still in no rush to make deals. ‘Prices aren’t just falling - they’re falling faster than they were,’ said Michael Carney, executive director of the Real Estate Research Council at Cal Poly Pomona.”
“Carney’s localized bi-annual report shows home prices dropping 18.4 percent in San Bernardino County and 21 percent in Riverside County from April 2007 to April 2008. And prices were already falling before that.”
“San Bernardino-based real-estate agent Hamid Aghili sells new homes but hasn’t negotiated a sale in months. ‘Prices are lower, but people don’t have money,’” said Aghili.”
“The 15-year real-estate veteran’s phone range off the hook during the housing boom, but not these days. More often than not, Aghili finds himself working on ’short sales.’”
“Josee Maclaughlin, real-estate agent in Upland, thinks 2010 might be the long-awaited bottom-out year. About 60 percent of her business is short sales right now.”
“‘It’s a long process,’ Maclaughlin said about short sales. ‘The banks don’t have enough employees to get it all going. It’s bank back-up.’”
“Bank-owned properties have flooded her territory, which stretches along the 210 Freeway from San Dimas to Rancho Cucamonga. ‘It kills sellers who aren’t in that situation,’ Maclaughlin said. ‘They can’t get their values up.’”
“Caroline Urso said ‘nobody really knows’ when home prices will flatten. The loan officer with Countrywide Financial in Redlands has sold one new-construction home loan in the past nine months. She was used to selling up to 10 per month.”
“And instead of packaging $400,000 mortgages, now she’s arranging loans for $100,000.”
“‘We’re in unchartered waters,’ Urso said about the current real-estate market. ‘The more and more people walk away (from their foreclosures), the more prices will keep falling. It’s really disheartening. It’s killing everybody’s value.’”
The Voice of San Diego. “San Diego County home prices dropped 20.5 percent in the most recent Standard & Poor’s/Case-Shiller home price index, the March 2008 index compared to March 2007’s. It was the 20th consecutive month of such declines.”
“North County mortgage broker Yamila Ayad said she’s seen signs of life in recent months that have pulled her out of the two hardest years in her career. ‘It’s not a market where anybody would want to voluntarily sell a home today,’ she said. ‘I have definitely seen houses that have fallen to 50 percent of what they were selling before.’”
“‘Prices are falling today because they’re too high,’ said Christopher Thornberg, Los Angeles-based principal of Beacon Economics. And the hope espoused in the literature of some perky agents — that the market will soon turn around dramatically — doesn’t fit the nature of a slow-moving regional housing market.”
“‘Home markets do not bounce, they splat,’ Thornberg said. ‘We’re not dropping a rubber ball here, we’re dropping a watermelon.’”
“Individual sellers still have to compete with banks for lowest prices on listings as banks seek to unload repossessed properties quickly. And 35.1 percent of the homes sold in April and 36.6 percent of the homes sold in March in San Diego County had been foreclosed on at some point in the prior 12 months, according to DataQuick.”
The Union Tribune. “The San Diego Case-Shiller index, set at 100 in January 2000, now stands at 185.44, down from the peak 250.34 in November 2005. That means that at the peak homes were worth 2½ times their 2000 value but have since fallen back 25.9 percent to today’s level.”
“James Hamilton, an economist at the University of California San Diego, called the Case-Shiller findings ‘pretty serious’ but ‘not mysterious.’ ‘There is still a very big overhang of unsold homes on the market,’ Hamilton said. ‘That’s going to bring the house price down.’”
“The San Diego Association of Realtors most recently said that more than 18,300 homes were listed for sale earlier this month, an eight-month supply at current sales rates.”
From Bloomberg. “About 30,000 foreclosed homes have been auctioned in California so far this year, the most of any U.S. state, according to RealtyTrac. Banks holding repossessed properties are so eager to unload them they’ll give buyers discounts of as much as 40 percent, said Celia Chen, an economist at Moody’s Economy.com.”
“‘Lower prices will certainly entice buyers back into the market, especially in a state like California where the median home price is so high it’s made it very difficult for people to afford a home,’ Chen said.”
“Foreclosure auctions are removing inventory and may lead to a faster housing market recovery as prices drop, Karl Case, co- founder of the S&P/Case-Shiller home-price index, said today.”
“‘Banks don’t wait around,’ Case said. ‘They put it on the market and get rid of it. That means prices adjust more rapidly.’”
“Sales jumped 20 percent or more in April in Las Vegas, Fort Myers, Florida, and Riverside and Sacramento, California, areas that had ’strong and sudden price drops,’ said Walt Molony, spokesman for the National Association of Realtors. Those cities also ranked among the top 10 U.S. metro areas with the highest foreclosure rates, RealtyTrac said.”
“The most expensive U.S. metropolitan market for single-family homes in the first quarter was San Jose, with a median price of $780,000, the National Association of Realtors said in a May 13 report. The national median home price was $196,300 in the same period.”
“San Francisco had the second-most expensive home sales, with a median of $701,700, followed by Honolulu, at $620,000, and the Anaheim and Santa Ana, California, areas at $597,900, according to the Realtors’ report. The metropolitan area surrounding New York was fifth, with a median single-family home price of $491,900.
The biggest U.S. state also led the nation in home-price drops. Sacramento saw the biggest price decrease in the nation during the first quarter with a loss of 29 percent, followed by the Riverside and San Bernardino areas, down 28 percent, the Realtors said.”
“San Diego’s median home price dropped 23 percent in the first quarter, the fourth-biggest U.S. price decline, according to the Realtors’ report. Los Angeles was No. 6, down 21 percent, the Realtors’ study said.”
The Contra Costa Times. “Elias Escobedo lost his house earlier this month when it was foreclosed on, but not because he didn’t pay his mortgage.”
“Instead, he’s the victim of a real estate agent who is accused of forging the deed to his home and embezzling $40,000 in a scheme to raise his credit score and pay his monthly mortgage payments, according to the Contra Costa County District Attorney’s office.”
“In the Bay Area, counties are ranked by mortgage fraud with Santa Clara being the highest and then followed by Alameda and Contra Costa counties. California is the fourth-ranked state with significant mortgage fraud, after Florida, Nevada and Michigan.”
“His agent was the same real estate agent that sold the home to Escobedo in 2004. Escobedo said that Bullard told him his credit was bad and he could come up with a way to clean it up and invest the money, he said. Using a straw buyer to hold the property, or someone paid to park the deed, they would refinance the home, take money out and pay the mortgage.”
“The agent, Rodney Alonzo Bullard, has been charged with grand theft and two felony counts of forgery by the Contra Costa County district attorney’s office.”
“Escobedo now lives with his mother in downtown Pittsburg. ‘I feel stupid because I put my trust in him,’ he said. ‘I invested all my life savings with him.’”
“This familiar scam is one of the most well-known and widely-used in California, yet homeowners still fall victim to an agent or broker who suggests the arrangement.”
“‘There was a time when we had maybe 40 notices of default a month and now we’re having 600 to 700 a month,’ said Ridge Lazard, deputy district attorney for Solano County, who said foreclosure scams have ballooned in the last year. ‘We have more and more desperate people who become easy targets. They want to hear there’s a simple solution.’”
“‘They do offer the simplest situation,’ said Chris Sadlowski, an agent with the Concord resident agency of the FBI. ‘They tell them, ‘Don’t worry about it anymore.’”
“And that is a welcome relief to worried and stressed-out homeowners, he said.”
“Sadlowski said that the East Bay has a huge amount of mortgage fraud and fraudsters target low-income and ethnic communities, specifically new immigrants or non-English-speaking populations that may not be aware of laws or regulations.”
“‘In my personal opinion, they’re already in a bad situation, so they kind of cross their fingers and hope it turns out for the best,’ he said. ‘People are working from an emotional deficit.’”
The San Francisco Chronicle. “In the San Francisco area, which Case-Shiller defines as the counties of San Francisco, Alameda, Contra Costa, Marin, San Francisco and San Mateo, the one-year price decline from March 2007 stood at 20.2 percent. The decline from February to March was 3.5 percent.”
“The Bay Area’s year-over-year price slump was the sixth steepest of 20 major metropolitan areas tracked by the index.”
“‘Prices are falling because they were too high - ridiculously high,’ said Christopher Thornberg, principal of Beacon Economics in San Francisco. ‘They’re now in the process of going back to a more normal level. Frankly, that’s a good thing.’”
“The index uses January 2000 as a benchmark of 100. The current number for the San Francisco area is 168.38, meaning prices are still up 68 percent from eight years ago. The last time the local number was at that level was in May 2004. Thornberg said he thinks prices could return to year 2000 levels.”
“‘We’re at a pace now to bottom out in early 2009,’ Thornberg said.”
The Eurerka Reporter. “Property tax cuts that are benefiting thousands of homeowners throughout the state are not expected to have the same impact in Humboldt County. ‘We don’t go up as fast and we don’t go down as fast,’ said Humboldt County Tax Assessor Linda Hill.”
“Even so, the market slowdown that began in 2005 could lead to property tax cuts for those who purchased at the high point of the market and have watched as their homes have lost value. A homeowner could save $30 a month in property tax for a $36,000 drop in assessed value.”
“The Sacramento Bee reported last week that assessors in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties are reviewing residential taxes for the second straight year and could cut property taxes $104 million in the eight-county region.”
“According to The Sacramento Bee, Sacramento County reassessed 50,000 properties last year and will review 85,000 this year, with potential tax cuts of $60 million.”
“Statistics from the Humboldt Association of Realtors reveal the county’s median home values peaked in second-quarter sales in 2005 at $320,000 and have fallen 6.5 percent to $299,000 in the first quarter of 2008.”
“The drop is 13 percent in the North Bay area, where the median price of a single-family home was $355,000 through the fourth quarter of 2007 before falling to $309,500 in the first three months of this year.”
“‘The prices are off only a little bit. It’s the sales that are off dramatically,’ said Realtor Richard Dorn.”
anybody loading up on DUG yet?
is that Gary “DUG” Watts…20% in the bag?
best load up on spam, I try not to talk about Collaterized Commodity bonds too much…
google the Plaza Accord if your a new reader, and your upside down on your house.
no real estate sold it all so no upside down.. acutually down side is way up these days.. Looked at plaza accord interesting but still feel long on the dong or dug..
Don’t spam me bro!
Not yet. Txchick found a good entry point last week. I’m watching closely.
what entry point are you looking for $135-$150?
YUP on DUG.
You might want to read this article before you put too much of your hard-earned bread into DUG, at least on a long-term basis. I think this article does a wonderful job of explaining clearly why we are are $130. A scalp of 5-10% is one thing, but betting on a big drop in oil is not realistic, IMO.
Oil is in a long-term uptrend. A safer bet to me would be to go long on a pullback to $110-$115.
Why Oil Costs Over 120 per Barrel
“Sales jumped 20 percent or more in April in Las Vegas, Fort Myers, Florida, and Riverside and Sacramento, California, areas that had ’strong and sudden price drops,’ said Walt Molony, spokesman for the National Association of Realtors.”
And of those homes, a good 30-50% of them are going to ‘investors’ hoping to cashflow a little and then to sell at 2005 prices ‘really soon’.
Hence, the original problem of speculation STILL HAS NOT ENDED. It has only shifted to foreclosed properties.
Also, I bet that many of the speculators who bought REO did so with teaser rate, 100% financing from the bank owners. Falling rents and rising vacancies will send these properties right back to the banks.
Nah, that’s too hard to pull off these days. There’s 100% out there, but it’s owner-occ all the way. What this is is a bunch of knobs with some cash that are going to be taught a valuable lesson the JT way. Some will panic real soon after realizing their mistake and, if they’re smart, dump their investment real cheap and recoup what they can, while others will ride the JT to the bitter end. Sounds a lot like that bubble we all saw deflate not that long ago, huh?
Ex, that would be me you are discussing. I just bought a 2700 SF house for $288,000 from Bear Stearns (the same week JPM got the other part of them). It is rented for $24,000/yr. 5.2% cash flow, 8.4% when you consider I achieve $308/mon pay down on my 30-year fixed rate loan.
I bought below reproduction cost on a house some specuvestor paid $710,000 in early 2006. She bought site unseen and got $96,000 cash back at close, but is going broke now.
There will be no JT here. I bought for long term cash flow. If it appreciates 0%, I still make more than my money market funds. My return would be better if I could use the tax benefits, but the AMT takes them all away.
Please do not assume everyone buying now is an idiot. There are some smart people achieving their objectives these days. I also send Ben $50 every quarter, ’cause that is the most valuable tuition I have ever paid. I graduated U.C. Berkeley 1977.
Hi Jingle, can’t you still deduct interest under AMT? I know you can’t deduct property tax. Or are the rules different because it’s a 2nd (or more) house? just curious.
that is a pretty good deal as an owner. $24k annual rent hasn’t gotten a $288k house in santa clara county since at least 1992. (Meaning that the 24k rent would have been a 400k house in 92, and more since then.)
Yeah, but wait until these “investors” get a good look at what they’ll have to do to fix the damage left by those who walked away. That’ll really eat into their profit margins.
Hence, the original problem of speculation STILL HAS NOT ENDED. It has only shifted to foreclosed properties.
Yes. Lots of knife catching going on. Two people at work just bought here in CA, and one of them is talking about buying a rental for investment purposes. I said it was too early to buy, and even provided the widespread bubble-going-down chart for simple trend analysis. It didn’t matter. These people got “great deals” versus those who bought a few years back, and both were trying to get out of bad rental situations.
It has also shifted to oil, precious metals and foodstuffs.
’specially oil and gold, because the elves are very busy planting more of those things underground and the deposits will provide 10 billion people enough energy and gold for 5 centuries. I know, because the National Enquirer had an article stating exactly that.
My dream is over. NoSingleOne is still dreaming…
Where is the demand for gold and oil, Bill? Oh yeah, the FBs want to line their showers and with it, and the more oil costs, the more people need it…just like housing, right?
Oh, did I almost forget to mention that they aren’t making any more land?
Glad you’re hungry for chasing bubbles, buddy. Save some of your money, crow is the only thing I know is gonna get awfully expensive after the next crash.
No kidding, NoSingleOne. If I never hear about gold again I’ll be happy. But then again maybe Bill in Maryland can’t live wifout his Gold Teef, his chains, his spinner rims? The gold bugs on this blog are sometimes as scary as your most drooling FB.
Old Crow doesn’t taste like chicken.
“Old Crow doesn’t taste like chicken.”
I keep thinking this real estate speculator stuff is now like a game of hot potatoe. Nobody is going to want to be holding it and become even more desperate to dump it all.
Kind of like my sunw, lucent, digx, wcom and cisco. Now those were desperate times. One day Im rich, the next day im holding sawdust. Too late to sell.
Do you think people will start selling more homes just because the market died?
Agnes, lets sell now so we can rent just in case things get worse.
I think most of us saw this coming. I watch my area, as well as a few others, real closely and I notice at least half of these foreclosure sales going to non-owner occ.’s. What’s really hilarious is the some of them go back on the market immediately at yesterdays wishing prices. Talk about wanna-be vultures! These guys are more pathetic than the dude in todays story that got scammed by his agent. At least he can say “Yep, I’m a f-n moron, but I could’a been one of “those” guys”.
“And of those homes, a good 30-50% of them are going to ‘investors’ hoping to cashflow a little and then to sell at 2005 prices ‘really soon’.”
I say BS on investors getting financing on homes in Las Vegas. First, Vegas is considered a “high risk” area by Freddie and Fannie, so right off the bat, add another 5% to the down pay.
You can not get claim second home and get financing, it’s either owner occupied or investment. Try and get into an investment home under 20% down in Vegas, NOT HAPPENING.
So now we have an investor picking up a $325,000 house for $200,000, which is duable, but he has to put down 20% or $40,000 Thats 40,000 dollars. Show me an investor today willing to put down $40,000
on a house in a declining market like Vegas. Another Main street Media reporter who is just didn’t do his homework.
David,
I’ve been watching these myself and sure enough the former foreclosure goes pending then I see an ad on CL for that address saying that the home will be available for rent in a few months. It’s like clockwork.
Some start by asking for really high rents and get dragged down to something reasonable, just to lessen the monthly bleeding and others start off reasonable but it’s at a rate that _might_ cashflow if they put 30% to 40% down. Toss in vacanacy rates, which are excelerating here, and repairs and maintenance and they are holding at a loss.
The next wave to hit us is job losses. The next thing these flipping masters of the universe need to worry about how much time they will spend handing out eviction notices because people with no job don’t pay the rent very well.
This is in Yolo county, just outside of Sacramento.
“The next wave to hit us is job losses.”
We’re seeing increasing evidence of a sharp pullback in consumer spending in many areas. This should begin to translate into net job losses soon. Given that much of the current foreclosures and price declines have occurred with little or no net decline in jobs, the price declines should get really interesting. This should accelerate the descent toward the eventual “bottom” and finally put to rest any notions that recovery is near.
They got rid of the ‘Premium’ last week. Freddie and Fannie will no longer stigmatise areas of declining value.
David Cee,
You make the reasonable assumption that the rules will be enforced.
Bwaahaaahhaaaa.
IAT
The best part is these knob bonnets are jumping in at 02-03 prices, not realizing how much homes here were overpriced even then.
Another thing I’m seeing are homes listed pending sale for 3 to 5 months disappear off the MLS and then back on the MLS with no sale. These are either purchases falling out after a freakishly long time or the banks are trying to juggle shadow inventory while trying to stimulate demand.
Or everyone, banks, brokerages, realtards, etc. could incapable of completing an actual transaction. I’d probably go with door #3.
knob-bonnets?
As prices plummet my savings/month renting vs. buying since Dec. ‘04 are now up to $2160/month without including taxes/insurance/maintenance.
Why buy when you can rent?
Those rent vs own calculators are fun when you can put put in a negative number for appreciation. Yahoo is still behind the times…they only allow positive numbers.
So far I have saved $47,000 by renting and if depreciation continues I expect that number to go over 100k.
Yep, my number writ large is $90,720. It gets even bigger if I use sales prices instead of wishing prices because way back at the top fo the bubble people were getting AT LEAST asking price and now they are getting a fraction of asking price.
Crap, now you made me go look it up. Dec, ‘04 85% of asking, Apr. ‘08 75% of asking.
plus the ‘08 asking price is LOT lower than ‘04 asking price
“…in a state like California where the median home price is so high it’s made it very difficult for people to afford a home,’ Chen said.”
I wonder how that couple is doing with their $850,000 cookie cutter “home” in Garden Grove…no, the real question is… In what year will it actually be worth $851,001?
2025
In dollars or ameros?
Ok….so my BIL (ugh) and my wife’s sister sell their home in Ladera Heights about two years ago for $910,000.00 (originally bought for about $260,000.00 in 97). They did basically nothing to the home, except fix some of the “stuff” that broke, for the entire time that they lived there.
The people who bought the house from them could barely get the loan. They failed twice. However, the third time was the charm and they were able to buy into the “American dream”.
Oh….the “dream” home is next door is some sort of half-way house for mentally disturbed adults. They have guys in white outfits who watch over the occupants.
An “escapee” even once got over the common fence into my SIL’s back yard and “decorated” the garage and fence with some paint that he found in their garage.
My wife and I told them politely that the $910,000.00 sale was a “gift” and “you may want to hold off jumping back in to housing” along with “here read these housing (bubble) blogs, etc. etc”.
My BIL’s response was to a throw a L.A. Times home weekend magazine with some “The prices here in SoCal are never going down! Ever!” cover story in front of me and then to tell the both of us to mind our own business.
Two months later he (and the wife) payed over 1 milllll for a “teardown” two streets over from their old property. He made sure that this one didn’t “get away” by adding about $50,000.00 to the total to make sure that he didn’t get into a bidding “war” with some other individual who may want it.
Back to the old house that they sold. It sits directly across from another house with similar square footage (100 less) and the same number of beds and baths. This other house has been redone a bit and it appears to be a much cleaner house overall than the one that my inlaws sold.
Well, that cleaner house across the street is now on the market (Bank owned). The price started in the $700,000’s. However, it is now priced at $649,900.00. I’m guessing that the price can be negotiated much lower.
Similar homes on the street (for sale by the owners and not the lenders) have dropped to the low $800,000.00’s. Many of these homes in the neighborhood that are now for sale were purchased in the last year to year in a half.
My guess is that the couple that paid the $910,000.00 less than two years ago for basically the same kinda house aren’t very happy.
My wife talked to her mother a couple of days ago. My wife’s sister told the mother that the prices are holding steady in their Ladera neighborhood. No worrys, “prices aren’t going to drop in this area”.
My wife quickly changed the subject.
Here’s the bank owned property:
http://lalife.com/address/5539_S_Holt_Ave_Los_Angeles_CA_90056
That zip code cost me many a radio out of my BMWs in the 80s. Must be better now?
That zip code cost me a lot of German radio systems out of my BMWs in the 80s. I hope it has gone upscale?
My BIL’s response was to a throw a L.A. Times home weekend magazine with some “The prices here in SoCal are never going down! Ever!” cover story in front of me and then to tell the both of us to mind our own business.
kalifornia koolaid drinkers time to dry out now
Thanks for the story. I know too many people who foolishly bought in CA.
“The most expensive U.S. metropolitan market for single-family homes in the first quarter was San Jose, with a median price of $780,000
So that is turns means that the median income is roughly $300k and change, or as I like to figure things, about $144 per hour. I hope I never get a parking ticket when in San Jose.
Does this make San Jose the most sought after soil in the country? Do people tell their friends… “I did it! I finally have a San Jose address!”?
It must be a really great place to live.
It must be a really great place to live.
Not so great, but not terrible either. SJ is where all the *management* jobs for tech firms are located. The line jobs were moved to Reno, Phoenix, Dallas, India, China, etc. long ago. SJ values climbed rapidly during the 70s and 80s then ran up to absurd levels during dotcom bubble and that momentum carried over to the housing bubble. Now there’s lots of money pouring into alternative energy (and perhaps a bubble)–with many companies located in SJ.
Think of it as Manhattan for geeks. If alt energy turns into a full bore bubble the values should hold up “relatively” well.
-John
SJ is icky. People are crazy.
Sung by Dionne Warwick, written by Burt Bacharach and Hal David
Do you know the way to San Jose?
I’ve been away so long. I may go wrong and lose my way.
Do you know the way to San Jose?
I’m going back to find some peace of mind in San Jose.
L.A. is a great big freeway.
Put a hundred down and buy a car.
In a week, maybe two, they’ll make you a star
Weeks turn into years. How quck they pass
And all the stars that never were
Are parking cars and pumping gas
You can really breathe in San Jose
They’ve got a lot of space. There’ll be a place where I can stay
I was born and raised in San Jose
I’m going back to find some peace of mind in San Jose.
Fame and fortune is a magnet.
It can pull you far away from home
With a dream in your heart you’re never alone.
Dreams turn into dust and blow away
And there you are without a friend
You pack your car and ride away
L.A. is a great big freeway.
Put a hundred down and buy a car.
In a week, maybe two, they’ll make you a star
Weeks turn into years. How quck they pass
And all the stars that never were
Are parking cars and pumping gas
I’ve got lots of friends in San Jose
Do you know the way to San Jose?
Can’t wait to get back to San Jose.
“Sung by Dionne Warwick, written by Burt Bacharach and Hal David”
http://www.youtube.com/watch?v=6gsUuZMpXHk
Raised in SJ myself, and I recall this Dionne Warwick piece very well. Blossom Hill Road was called Downer Ave back in ‘68, and Eastridge Mall wasn’t built yet; SJ Speedway was still busy. My neighborhood friend lost his life in ‘68, the Tet Offensive. Lots of Cherry orchards in SJ in those days. Then came the microprocessor.
rms,
Do you remember Frontier Village? I remember the fruit stands and the orchards.
“Do you remember Frontier Village?”
Oh yeah, went there many times!
95% of the houses are priced for the 5% of Bay Area millionaires that live in the area. The sellers are running around thinking that the millionaires will buy up their special piece of paradise, so the correction will only occur once the sellers with 10-30 years of equity get desperate or die off, which of course will happen eventually.
SJ is probably zoned for large lots with mostly single family units. That discourages overbuilding of condos and multifamily units that are the most vulnerable to foreclosure as of today.
I’m noticing the crash is occuring faster in places with a lot of new housing units on the market, as well as a greater price/income disparity (ie HELOCs and exotic loans), and places with a tanking economy. Just wait…everyone will succumb to one of the three sooner or later.
$780K in SJ, PLEASE! 300K to qualify. Not going to happen.
Lesson in thinking about what you read (from Bloomberg).
“About 30,000 foreclosed homes have been auctioned in California so far this year, the most of any U.S. state, according to RealtyTrac.”
California is the state with, by far, the most people and households, accordingly I would expect California to have the most foreclosures, as well as the most murders, the most ice cream parlors, the most deaths from cancer, etc.
“Banks holding repossessed properties are so eager to unload them they’ll give buyers discounts of as much as 40 percent, said Celia Chen, an economist at Moody’s Economy.com.”
Discounted 40% from what? Ms. Chen, as an economist you should know better.
Does that also include the most debt?
Most illegals?
Most unemployed/umderemployed?
Most uneducated students?
Most credit cards?
Most upside-down houses/cars?
Geez, get a grip!
California is the state with, by far, the most people and households, accordingly I would expect California to have the most foreclosures, as well as the most murders, the most ice cream parlors, the most deaths from cancer, etc.
Don’t forget the best team in the NBA!
Boston is in Massachusetts. (Stupid American schools and their poor geography teaching).
IAT
“‘The prices are off only a little bit. It’s the sales that are off dramatically,’ said Realtor Richard Dorn.”
Which tells you what, Dick?…..hmmmm?
Yeah, I got that one too! 2+2= DRAMATIC PRICE DROP
I just spoke to a good friend who lives in La Quinta, CA (Coachella Valley / Palm Springs area). He knew his neighbors were big spenders with lots of debt so it wasn’t a big surprise when he saw a foreclosure notice on the front gate to their track. It listed the name of his neighbors wife and the address. The husbands name was not on the notice.
So this is where the story get’s ugly:
They have a new baby, one yrs old. I looked the house up on title - they have a 1st, 2nd and private 3rd (it looks like from a friend - $20k) for a total of $720k. My friend estimates the house is worth $500k max (probably less). Of course they refied several times and pulled cash out to buy toys such as a Hummer, jet skis, etc. He was working in the mortgage business up until 12 mos ago when he lost his job. He hasn’t worked since. She then had to get a salaried job making less than $80k.
So on Monday she showed up at my friends house. She began telling the whole story to my friends wife. It turns out that just before she got pregnant they has some “mutual” friend staying with them. The husband ended up hooking up with the friend. They split up for a while but then got back together. Then she got pregnant and had the kid. Last October they stopped paying their mortgage and have been living rent free for 8 months. Turns out the husband was not listed on the foreclosure because he did not sign for the loan – he had a BK 6 yrs ago. Then, on Sunday night, she was told by her husband he was going to Escondido for a painting job and he wouldn’t be home for the week. She then checks his phone and sees a text to another woman. Turns out he’s cheating again. They have a big blow out. Pushing and shoving ensue. She’s tells him to leave the house. He says no way (I guess they will both be leaving shortly). This couple is in their early 30s.
No money, no house, no credit, no marriage. Just misery.
Now why don’t Used-House Salespeople ever highlight warm fuzzy stories like this when they are selling induhviduals on the all-enveloping candy-coated goodness of the American Dream?
Multiply this story by hundreds of thousands throughout this great bankrupt nation!
The part about the spouse not on the loan is exactly the sitch my in-laws are in. Wife is not on loan. BIL is and is going to go BK AGAIN! Then they can leave the house and she buys a new/larger one for less than the one they are in now. And yes, this is the couple that bought my house. My wife is the sister of the woman, whose hubby is going to declare BK. On the other hand, they are not likely to divorce. My SIL is enamored with BIL.
Did I mention he is selling the harley he has rode maybe 200 miles in 5 years? D’oh!
welcome to the land of bankruptcy and home of debt
And the story ain’t done. Wait ’til she gets the IRS bill. I can see the headlines now - “Woman Chokes Man With His Own Testicles, But Jury Sympathetic!”
forgot one last thing - they’ve run up $140k in credit card debt.
Credit card debt: the cherry on the cake.
At least they’re young enough to start over. But it’s gonna be painful.
I can’t understand how someone can run up $140K in credit card debt.
I know, I know, you get a creadit card, $10K limit, run up debt to limit, lather, rinse, repeat 14x…. Even for the more foolish of us, I would think by 5 or 6X some tiny alarm bells might start to go off, No?
Got 3 credit card offers in the mail today. And I’m a deadbeat to these guys (never pay a cent of interest). I guess I’m answering my own question, aren’t I…
It’s like the guy who weights 450 lbs. At what point do you stop and say, “Hey, this is out of hand! I need to diet!”
that comes right after the first heart attack.
When the maggots start helping.
I cannot understand how can a man just up and leave a child.
Even better question: once she found out the jerk was cheating on her (on top of sponging off her income, using her credit, etc.), why did she still have the kid? Or, if abortion is against her religion, not just give it up for adoption?
I live out here and I can tell you that there are oodles and tons of houses for sale out in La Quinta alone. You couldn’t pay me to live out there. The traffic is dreadful. There are not many people that could or would pay that much for a house out here right now. It’s very grim, but the interesting part is that aren’t that many rentals. Our landlord just informed us he sucked all the equity out of the house and will be turning it back to the bank when the loan resets in December. He’s upside down.
What do you think he’d do, if you stopped paying rent?
I don’t know. I thought about trying to find out what bank holds the note and trying to negotiate with them to stay, but if he’s refied, there could be several banks involved. Good thing the kids didn’t buy this heap in 12/05 when they tried to sell it to them for over $430K. Similar house down the street, updated w/pool & spa just went below $320K.
shes going to end up as one pissed off CA divorced lady looking to get even on the next one. Bummer.
So let’s blame the success of an American Dream.
So let’s blame this excess on an American Dream.
It’s Hummer time! I always knew Hummer owners were losers on steroids.
“Home prices in Southern California are racing downhill, but does that mean it’s a buyer’s market?
I think buyer’s market will start as soon as prices will come to affordable levels. Today prices are still for reach and smarth FB’s who are cutting grass…
My ex-boss must be deliriously happy that he and his wife managed to sell two years ago and move to Pittsburgh. Nice little house, officially in Goleta but actually in Santa Barbara–they unloaded it at $850K and then bought a gorgeous old Victorian in Pittsburgh for $350K. None of it was planned due to real estate or anything–it just worked out that way.
Actually am not unhappy owning right now but will probably have to up and move to DC in 5 years–sigh.
“Prices are falling today because they’re too high…Home markets do not bounce, they splat,’ Thornberg said. ‘We’re not dropping a rubber ball here, we’re dropping a watermelon.’”
More great commentary from Chris Thornberg. He called the housing bubble well before most economists, and he continues to state the truth, often directly refuting realtors and their ilk. The fact that he puts things in such well worded, humorous, and blunt terms is just icing on the cake.
“Caroline Urso said ‘nobody really knows’ when home prices will flatten..
She much be referring to the date…
Otherwise, everyone who matters knows. They will flatten out when price is affordable according to prudent lending practices.
Recession Talk;
How can we have a recession when we are having 24 hour a day, day after day, month after month hyperinflation?
If everything is going up there is no recession.
Zimbabwe.
Hyperinflation is 50 percent a month.
Houses would not be dropping in price if there was hyperinflation.
Hyperinflation means everyone that has money wants to get rid of it as soon as possible. What we have today is just the opposite.
Yep, it’s still pretty easy to get yourself killed on the streets of a big American city over a $20 bill nowadays. Somehow I don’t see that changing anytime soon.
Due to all the market turmoil, we have both inflationary and deflationary trends going on right now, for different assets and in different countries.
Right now, most fungible commodities are inflationary, but many economists think this is purely due to speculation and therefore not sustainable (except for foodstuffs, due to global warming and destruction of farmland). Wages, housing, some stocks and most treasuries are deflationary. It should shake out in a year or so which trend will win out.
I vote for deflation, but only once Bernanke stops postponing the inevitable and printing free money for his buddies on Wall St. I’m sure most HBBers don’t want to hear this, but once Wall St. crashes, the economic fundamentals of Main St. will start recovering, although their annuities and savings will likely be decimated.
So..It’s not that Ghawar, a 50 year old oil field, the largest in the world, is probably beyond peak. You whistle in the dark and plug your ears when you hear Matt Simmons explain all the evidence that it’s peaked.
Nah! No inflation. It’s all caused by money supply only. Supply and Demand won’t work for oil because the elves are making more of it and planting it in large deposits below Kansas.
Fossil fuels? What does “fossil” imply in “fossil fuels.”
Goldilocks says oil will fall to $41 per barrel. LOL
Actually it’s probably both–oil scarcity (some of which is speculation but most is a simple demand/supply thing) and the inflating of the dollar.
Whatever happened to the fiscal hawks? Neither the Democrats nor the Republicans seem to have any left….
Oil went from $80/barrel in Sept ‘07, and now is $130/barrel in May ‘08. What magical market forces in the last 8 months do you propose explain this? I thought there was a recession going on?
Did oil supplies suddenly drop 50% in the last 8 months? That’s the only explanation for a doubling of prices when you are faced with an inelastic demand curve and there is no speculation.
The last time this happened to energy stocks, there was a bubble due to Enron twisting the deregulated market, but now it appears to be due to primarily to speculators fleeing the stock market.
I bet you bought lots of houses too while the realtors told you we were running out of land and the population was exploding due to so many wealthy strawberry pickers immigrating here.
It is sad when people have become so disconnected from the physical world as to think that there are absolutely NO physical processes behind anything. That said, it is, therefore, very unlikely that Wall Street is going to accurately price matters as key markers in oil production are passed because, as we know, Wall Street runs as much on rumor and mirrors as any other market.
So, in trying to read Wall Street to learn about the amount of oil remaining, one is looking in a funhouse mirror trying to gauge the size of a canyon to which one has turned one’s back–in short, not the way to go.
I am not denying that *eventually* some substitutes for oil will be available–they may very well be available, eventually. But the dislocations of a shortfall are a reflection in part of physical limits for, truly, as Bill in Maryland suggests, they aren’t making any more fossil fuels, and any substitute is going to be a long time in coming, and much more expensive. We would be unwise to presume some kind of slow and steady change in prices as the shortfall approaches–instead, expect convulsions driven by rumor and dawning horror.
IAT
the magical force of the dollar crashing? Or the magical force of oil scarcity? Remember a one percent scarcity can cause a one hundred percent price appreciation.
Several refineries are off-line, but even that is suspect. People in Bakersfield protested when the refinery there was closed recently.
I have a hard time believing people can so easily dismiss the idea of market manipulation when we’ve so recently lived through Enron.
On the other hand, I can’t feel that sorry for those who could easily have bought fuel efficient cars and didn’t. Or those people who could have chosen to live close to work but didn’t because they wanted a bigger house.
Either way, a windfall profits tax on the oil companies is a good idea in my book.
“Fossil fuels? What does “fossil” imply in “fossil fuels.”
This oil situation is a speculative bubble if I’ve ever seen one. Yes, demand has been increasing steadily and supply has been holding steady, but in the last ten years the price has doubled. This price action cannot be accounted for with supply/demand…it is speculation.
Oh, and the same goes for gold, except it is even more of a speculative bubble in my opinion.
“Individual sellers still have to compete with banks for lowest prices on listings as banks seek to unload repossessed properties quickly.”
No, individual sellers have to compete with banks for best value.
With all the stories about concrete down the drain and stolen hardware buyers are looking for value, not lowest price. If you house is in good shape and is well cared for you don’t have to beat the bank on price, but you do need to find a qualified buyer who can afford your house.
You may not have to beat the bank on price, but you gotta love these dreamers who think their McCrapbox is worth 200K more than the bank’s.
Quote from Prof Carney in 2005:
“People who talk about a bubble are blowing smoke,” said real estate economist Michael Carney with California State Polytechnic University Pomona.
Carney said even if mortgage rates rise another percentage point or two, he thinks that the increase in California housing prices would only be slowed, but they wouldn’t fall.
“I don’t see anything to stop them,” Carney said.
How big is Prof Carney’s Bong ? He surely know a lot about smoke since
economics is clearly not his area.
I detest Carneys. Smell like cabbage. Small hands.
Ben your title for this thread, Unchartered Waters In California, along with the housing bust, reminded me of Bus Hatch, famous river pioneer on the Green and Colorado Rivers, who was infamous for telling everyone on his raft trips:
“Do something, don’t just stand there like you’re getting milked!”
Bull in the headlights momment:
is it safe or am I just supposed to get milked?
“unchartered waters”
What the snot does this mean?
it means the proofreader was asleep.
I guess its from ‘charter’ as in ‘granted’ or ‘deeded’, so the waters in Calif. have no deeds (they are distressed or REO).
My BIL was looking at a house in Victorville to rent. We saw a for rent sign in this newer 2 story home so we stop to check it out. We pull up and the owner and his wife are there looking around as well. Seem strange to me because he’s acting like it was his first time there to. Now he admit home was purchase at a auction. Then he started telling my BIL yeah if you want to rent it you can move in this weekend no application need just June rent($1150) and $675 deposit. We walk in the house seemed in good shape about 2/3 years old decent floor and no trash. The home so far seemed nice it was 4/2 probably 2200 sqft but when we go to look in back yard I notice empty slab where AC compress ought to be. Then the owners? speak up oh yeah I gone to replace that and when you move in I’ll take the first month rent and purchase a new unit I ALMOST LAUGH OUT LOAD. So the point I got out of this is there are still a lot of want to be flipper out there..
“I ALMOST LAUGH OUT LOAD”
Does that mean what I think it means?
wow, I got a great laugh out of that!!!!!!!!!
I need a 3 ton
tx for the idea
Thanks Inland Empire, I got beer up my nose.
‘It kills sellers who aren’t in that situation,’ Maclaughlin said. ‘They can’t get their values up.’
Buyer determines price, Lady !!!
“‘We’re in unchartered waters,’ Urso said about the current real-estate market. ‘The more and more people walk away (from their foreclosures), the more prices will keep falling. It’s really disheartening. It’s killing everybody’s value.’”
What value? if the prices were in $600000-$700000 it meant that you had value in your houses? . In order to have a value, you have to have valuable brain in your “box” Urso…
“San Bernardino-based real-estate agent Hamid Aghili sells new homes but hasn’t negotiated a sale in months. ‘Prices are lower, but people don’t have money,’” said Aghili.”
Oh, no no no, Mr. Aghili. Some “people” out there still have money. The “problem” (from your POV) is, stupid people no longer have access to unlimited, cheap, neg-am, liar-loan credit. The problem (from *my* POV) is that prices have still not fallen enough to attract intelligent, well informed buyers.
States like California will continue to have falling Real Estate prices due to careless speculators that drove prices too high too fast. Housing prices got out of control and needed a correction. The people who were smart about buying a house will be fine in the long run. The market will slowly return. Unlike buying a stock that can go away overnight your house will be there tomorrow. It will have value in the future.
OMG, are you a real live troll??? We haven’t had one of those to poke in such a long time!
Ok, maybe I’m being too harsh, but what you said is likely very close to the NAR-party-line that will be coming down the pike soon.
At some point, everyone will realize that the current “It’s a great time to buy!” slogan is a big steaming smelly pile of manure from a large feisty male bovine.
What will they come up with next? Something along the line of “Houses will always have value in the future.”
Sure they will “have value”–just in some cases, that value may be amazingly low, and the long-term value may NEVER approach what the buyer paid if they bought when NAR said it was a “great time”.
Don’t feed it, especially not after midnight.
worse an ag land speculator troll. I’m sure someone who is having a slow night will have some fun.
“San Bernardino-based real-estate agent Hamid Aghili sells new homes but hasn’t negotiated a sale in months. ‘Prices are lower, but people don’t have money,’” said Aghili.”
Oh, no no no, Mr. Aghili. Some “people” out there still have money. The “problem” (from your POV) is, stupid people no longer have access to unlimited, cheap, neg-am, liar-loan credit. The problem (from *my* POV) is that prices have still not fallen enough to attract intelligent, well informed buyers with good credit.
why would intelligent, well informed buyers with good credit buy in San Bernardino?
“‘Banks don’t wait around,’ Case said. ‘They put it on the market and get rid of it. That means prices adjust more rapidly.’”
Guess he didn’t read the North County Times story from the other day. The one that said 60% of the foreclosures hadn’t even come on the market yet because the banks couldn’t (or wouldn’t) process them.
http://www.nctimes.com/articles/2008/05/25/business/zaf41acdb8154b2028825744f0072bdda.txt
Statistics from the Humboldt Association of Realtors reveal the county’s median home values peaked in second-quarter sales in 2005 at $320,000 and have fallen 6.5 percent to $299,000 in the first quarter of 2008.
As I’ve long said, Humboldt county has amazingly withstood this so far compared to the rest of California (whose median is down 32 percent from the top). And, the few REOs that come across, there are multiple bids for these properties. I’ve been waiting very patiently, and will continue to do so, since I know these prices are well out of line, but it is unbelievable to me that Eureka, of all places, may end up with the highest priced property in the state at the rate everywhere else is dropping. Unbelievable.
Unlike the rest of the state, those Humboldt folks would rather die than have the bank foreclose on their pot farm….
Not so, I know 3 realtors in humboldt who are bankrupt. People are not buying houses here. People are not renting either, they are leaving in droves! Eureka is losing 80+ teachers next year due to a lack of enrollment. Jobs are no where to be found. The average household income doesn’t even top 40,000 here. It will be a bloodbath here like everywhere else. No way people will come here to pay higher housing costs when they can go somewhere else and actually get a job. I know several people who have been foreclosed on. Maybe because they didn’t grow pot?
In the east bay, seems like there are still some houses sold for high prices while some are going for lower. Makes me think that there are still a good number of people willing to spend top dollar, but not enough that all houses go for top dollar. This is all based on creeping around on Zillow.
Anyone else have a take on this?
The East Bay is where a lot of people buy when they transfer here - a lot of them “have” to buy, because of spouses and expectations, etc. Our company has had two new mid management hires in the last 6 months, who are trying to sell houses in other parts of the country (Atlanta and Chicago), and trying to figure out what they can afford to buy here - and they have no choice, the spousal units are insisting, NO renting.
I feel sorry for them, to be in that situation…and it will prop prices up a little.
RE: ‘I have definitely seen houses that have fallen to 50 percent of what they were selling before.’”
Woo-hoo! (in Homer Simpson voice)
50% drop-called here on the HBB 3 years ago.