A Greed Tragedy Full Of Surprises In California
The Union Tribune reports from California. “In a grim report on the weakened state of the housing industry, Harvard University says the United States is caught in a real estate market downturn ‘that is shaping up to be the worst in a generation.’ Nicolas Retsinas, director of the center, said formerly hot housing markets such as San Diego County saw prices rise to unsustainable levels in the first half of the decade.”
“In the San Diego region, the housing boom led to overbuilding. ‘At some point, the law of gravity had to come into play,’ Retsinas said.”
“Despite the report’s somber tone, some analysts said it might be understating the problem.”
“‘We have never had anything like this happen,’ said Christopher Thornberg, an economist with the Beacon Economics research firm in Los Angeles. ‘It’s a bloodbath. Prices are falling because they are too high. You would have to have prices in California fall 40 percent in order to get back to an historical level of affordability relative to incomes.’”
“Although the report predicts an eventual rebound of the housing market, Retsinas says he’s uncertain when that may occur.”
“‘It will vary place to place,’ he said. ‘You are more likely to see an earlier bottoming out in areas that didn’t see overbuilding, like the Northeast. It will probably be in 2009 there. In other places, like Southern California, I think you are looking at 2010.’”
The Chicago Tribune. “A San Diego real estate brokerage has seized the opportunity to market its services to same-sex clients getting hitched now that such weddings are legal in California: Wellsford Realty is offering to pay for a reception for domestic partners who marry and buy a home or condo (primary or vacation home) through the company.”
“Fine print: What the company is specifically offering, however, is to rebate one-third of its commission, ‘which can be used to celebrate their wedding day or plan that perfect honeymoon,’ according to a release.”
“The rebate could be substantial, though, considering that San Diego has been one of the nation’s pricier markets. But track the local data, and you might realize why this real estate company wants the business.”
“The San Diego Union-Tribune says the median home price in the area plummeted $15,000 between April and May, to $490,000, and from a high of $518,000 in November.”
“More fine print: It will offer its rebate to straight couples, too, according to spokesman Brian Yui. ‘We don’t want to reverse-discriminate,’ he said.”
“And one more thing: ‘I guess if you wanted the rebate in cash, that would be OK too,’ he said.”
The LA Daily News. “California’s real estate market is a three-act play. Sort of a greed tragedy full of surprises. That’s how the UCLA Anderson Forecast sees things.”
“Act 1 was great, for the most part. Act 2 was horrible and Act 3 is still playing itself out.”
“Ryan Ratcliff, who analyzed the market, noted that as late as 2004, California’s real estate juggernaut seemed unstoppable. ‘Anyone with a pulse could qualify for a $500,000 mortgage. But just three short years later, this unprecedented boom turned into an unprecedented bust,’ he wrote.”
“‘Phase two began with 2007’s explosion of foreclosure activity and the bottom dropped out of California’s housing market,’ Ratcliff noted. Ratcliff said the forecast’s economists and others always knew that lending excesses during the boom were foreclosures in waiting.”
“‘But neither we nor the financial wizards of the mortgage-backed securities market ever anticipated that foreclosure levels in California would surpass previous records without the kind of massive job losses last seen in the wake of the aerospace contraction in the early 1990s,’” he said.”
“When will the recovery start? That’s the big unknown. ‘It may be a little early to be celebrating the beginning of phase three - perhaps we’re better off thinking of this as phase 2.5,’ Ratcliff said.”
“Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., said that this third phase depends on whether there was a building bubble where you live.”
“Not too much of one in the Los Angeles area but certainly in the Inland Empire and Central Valley.”
“‘It was almost like a heart attack,’ he said of the market collapse. ‘But after the heart attack, you have a long period of convalescence.’”
The Press Enterprise. “The whirlwind of foreclosures hitting Inland counties is ousting renters from their homes, often with little or no warning.”
“‘A lot of these people are just innocent bystanders in a tornado,’ said John Bouzane, a lawyer and owner of a San Bernardino law firm that represents lenders seeking to repossess and resell homes whose owners have stopped making mortgage payments.”
“The California Apartment Association estimates that a fourth of foreclosed single-family homes are occupied by renters.”
“‘A great number of owners of property simply do not let their renters know they are in (default on their mortgages). They will continue to collect rent and also bring in new renters,’ said Darrell Moore, deputy director of Inland Counties Legal Services.”
“Some property managers like Bill Santoro in Moreno Valley, say in response to the tenants’ plight they are screening potential clients to avoid leasing houses headed to foreclosure. Still, Santoro said such checks are not foolproof because lenders generally don’t record a notice of default until a mortgage is at least three months delinquent.”
“Landlords in default on their mortgages tend to entice tenants with very low rents and sometimes advertise that they will accept applicants with poor credit, said Pete Nyiri, owner of Top Producers Realty in Corona.”
“Some tenants also are being scammed by people who take a deposit and first month’s rent on an empty house in foreclosure that they don’t even own, he added.”
“Nyiri advises tenants he removes from foreclosed homes to be careful when they rent again. He advises them to have a rental agency guarantee in writing that the house they are planning to lease is not in default and then to recheck the county records every two months.”
“Paula Schnurr said after the three-bedroom house her family rented in Corona was foreclosed on early this year, she learned that the owner never made a mortgage payment although they had been paying rent of $1,875 a month since June 2007.”
“She said after a struggle she got back her deposit and found another house to rent. But she said she worries that the ordeal could be repeated. ‘It is hard to trust people any more,’ she said.”
The Daily Press. “Construction jobs plummeted in December, and Hispanics took the hit the hardest studies show. ‘There are so few jobs here since December, lots of people are moving to find work somewhere else,’ said Jesus Chavoya, a Victorville resident who worked in concrete until last November. ‘Some people came from as far as Mexico to work here.’”
“Jorge Basaldua joined family members in Victorville in 2005 when there was plenty of construction work. ‘In 2005 people were using the money to buy cars, it was a good time,’ said Basaldua.”
“Workers like Basaldua still found new construction jobs in 2006, when construction wages started shrinking nationwide.”
“‘People paid us less but most workers here didn’t quit until 2007 when there was no more work,’ he said. ‘Moving away or staying in one place, construction was still good money.’”
“Hispanic laborers like Chavoya, lost nearly 250,000 jobs in 2007 because of the housing slump, but still look for construction work on Center Street Park. The housing market slump also meant fewer maintenance jobs for Hispanics to prepare houses for sale, said Fran Chevalier, sales agent with Frontier Homes.”
“‘A lot of Hispanic women are in the cleaning business,’ said Chevalier. ‘The drop in sales would mean less work for women. We also didn’t have to maintain as many new yards and 90 percent of landscapers working on Frontier Homes are Hispanic.’”
The Fresno Bee. “An adjustable-rate mortgage bubble is coming to the central San Joaquin Valley’s housing market, and the tens of thousands of homeowners who hold those mortgages should prepare for the rate increases to come.”
“That’s the word from mortgage counselors worried that the easy lending practices of the housing boom years are about to lead to a lot of pain for borrowers.”
“‘There’s a bubble coming through this fall, an ARM bubble that was originated about two to three years ago,’ said Martha Lucey, president of a nonprofit financial counseling group in Fresno.”
“In other words, she said, ‘there are a lot of people in Fresno in a whole lot of trouble.’”
“Between July and September, 9,847 adjustable-rate mortgages in Fresno County will experience some kind of reset, said Jennifer Shepherd, sales manager for Chicago Title in Fresno County.”
“Of those, 7,367 are owner-occupied, rather than investor-owned, she said. Of that number, 6,359 involve homeowners who owe 90% or more on the home, giving them ‘very little chance of refinancing,’ she said.”
“In dollar terms, about $4.3 billion in ARMs still await their first rate resets in Fresno and Madera counties, according to First American CoreLogic data. At the coming reset peak, in August, holders of $204 million in ARMs in the Fresno region will have to start paying more per month.”
“That could add to the rising number of foreclosures throughout the Valley, said David Mendoza, director of the Fresno Housing Resource Center.”
“One subprime borrower he is counseling started out with monthly payments of $800, but those rose to more than $1,200 a month at the end of the loan’s two-year ‘teaser’ period. Now, with the reset, that payment will rise to more than $1,600 a month.”
“And on the high end, ‘We have people coming in here who signed on for $2,400-a-month payments that are nearing $4,000 a month’ upon reset, Mendoza said. ‘These are estate properties purchased for between $350,000 and $500,000 that are now being lost.’”
“Holders of ‘option ARMs,’ that allow borrowers to choose how much they pay each month may see even steeper increases, said Lucey. Homeowners were actually increasing the total amount they owe, Lucey said.”
“‘You add that on top of an interest rate adjustment, and you can see an increase of over $1,500 a month’ upon rate reset, Lucey said. Such high resets are common among people her office is trying to help, she said.”
“Mendoza said he’s had trouble getting some lenders to consider loan modifications for borrowers who haven’t yet missed a payment — perhaps, he suggested, a sign of how busy most lenders are trying to deal with the flood of late payments, defaults and foreclosures.”
“Dustin Hobbs, spokesman for the California Mortgage Bankers Association, said lenders are working hard to respond to every homeowner in trouble. However, he said many lenders are ‘just overwhelmed’ by the number of borrowers seeking help.”
“‘We’ve heard from counselors who’ve had difficulty sometimes working with lenders,’ Hobbs said. ‘Much of that has to do with the unprecedented volumes involved.’”
anybody could qualify for a 500K house and in 1999/2000 everyone could buy Yahoo stock and make $20/share
no different. same bull market geniuses. Same “victims” and bad guys doing the perp walk. Guess commodities will be next although it was not that easy for j6p to participate in that market.
Hi Tx,
Do you really think commodities are due for a fall?
Oil/gas too?
Pen
“Guess commodities will be next although it was not that easy for j6p to participate in that market.”
Jeez, people have been so spoiled by free energy all their lives that they can’t imagine how precious and rare a commodity oil is.
Dr. David Pimentel at Cornell University calculated that a single gallon of gasoline contains the energy equivalent of approximately 500 hours worth of human labor. That means a barrel of oil can get you 22,000 hours of work for $135!
Common sense says “not a bubble”
It really is about the energy return on energy invested.
Until we come up with an energy source that has a bettern return on the energy invested than oil, oil will keep going up.
Oh yeah — we are running out of oil and gold same as we were running out of land a couple of years ago. Oil is (somehow) different then all them other bubbles, though…
There are 2 sides to every stroy, listen to what this guy has to say.
http://video.google.com/videoplay?docid=3340274697167011147
I dare you to try to go one day without using oil or oil-based or oil-transported products or eating food that was not somehow fertilized, harvested, or transported to the grocery shelf using oil.
Jeez Louise, didn’t anybody read Dune? Don’t you get that oil is spice?
Oh. My. God. Emperor!
Dune!
That’s right, we need oil. But wait a minute, we need houses too. Well then, how come home prices can get slaughtered, but not oil prices? Oh, I see, oil’s special…NOT.
Well then, how come home prices can get slaughtered, but not oil prices?
Banks didn’t offer 30 year teaser-rate ARM NINJA loans for a lifetime supply of oil 2003-2006.
While the supply of land is fixed, the supply of housing on this land is increasing via development and redevelopment.
The daily supply of oil on the market, however, is DECLINING such that there is a mild but present supply-demand imbalance.
Finally, as stated above oil — in the form of gasoline to nost people — possesses immense economic utility vs. its present consumer cost. Eg. I can burn a gallon of gas running 5 errands around town at the cost of ~$5 in an hour or two vs. spend all frickin’ day on a mass transit schlepping bags around.
Oil prices will continue to increase due to the present and future lack of a swing producer who can alter the supply imbalance. Other suppliers will come on line but the market price will be set at the margin of what the buyer will pay not at the cost of production of these new suppliers.
The only way for oil to go down to where it was requires an alternative energy regime to take its place in our usage. This is not going to happen for the foreseeable future.
Long time lurker, first time poster. And I just had to ask: if oil is so darn expensive to make, then why are oil companies posting record profits? I’m sure you can google it up, but here’s just one link:
http://abcnews.go.com/Business/PainAtThePump/story?id=4749343&page=1
Anyway, yeah, I guess you can tell I don’t necessarily agree with the whole cost thing.
Actually, it was harder to buy Yahoo. Unlike houses, stocks had margin requirements.
So a little fun “on the ground” open-house experience this weekend.
My wife and I would like to eventually buy in Belmont, CA, which is in the SF Bay Area. We’re interesting in being ‘in the hills’ a little bit, and have been watching the area for awhile. So this weekend, we went out to tour the open houses. We went because we saw a 769k house that would sort of fit our minimal wants. So we went and checked it out and found out that the listing agent managed to sell it to a buyer client and ‘double dip’ before the open house was there, but had a list of open houses in Belmont, so we went out and looked.
There were a ton of people at the in contract 769, and we checked out a few 800’s that had at least a few other couples, show up. Then we moved up into the 900s, and it went dead. We went to a street that had 3 properties, 988k, 1.1, 1nd 1.2, and we saw one other couple the whole time. We hung out at a 1.2 for about 46 minutes chatting with the realtor (about babies. Wife is in her 3rd trimester) and didn’t see a single other person show up.
This is definitely different than even 6 months ago, when seeing people swarm the mid 850s fixers, browse the 900s, and at least peek in the 1 million plus houses. 700k was reserved for the flats, certainly not in the hills.
There is definitely denial in sellerland here, but slowly and surely things are creeping down, and the buyers need lower and lower prices to cause a feeding frenzy.
Anything above 400K in Belmont is unsustainable…
Homes were selling for low low 200K in 1998/99…
Now gone up 300-400% while income / inflation
bearly 25/30% accumulated… As history has shown
even SF Bay Area will face declines as we are seeing
today.. more to come…
No argument from me. I expect the entire bay area to crater. I know people who had to short sell because they were upside down. I know people who bought in 2005 and just sold at a loss and thank their lucky stars they got out when they did. I also know people who just bought in November and look like deer in the headlights. I also know someone who put 30k into remodeling his house to make it ’sell faster’ and now thinks he should raise the price by 100k once the carpets are in. I keep telling him to price aggressively, but I don’t think he will.
It’s fun watching things crack.
And I should have made it clear that we were in NO WAY looking to buy. Just going out to see what was going down.
For Belmont in general that sounds right, but the hills are rather nice and the Greek community there is pretty tight. I’d guess more like $500k at the bottom, but this market turns like a supertanker so that’s still a ways out.
I can’t even imagine browsing for a $700K home. Those numbers don’t even make sense to me. Might as well be speaking Latin. Unless my salary goes up 4x, I can’t imagine I ever will.
I should have mentioned that we weren’t going out to slap an offer up on the place. We were going out to check it out and see what ridiculous POS was getting pawned off at 760k.
The house would have rented for probably 3000 a month, so 340k for the house would be about right.
We haven’t gotten to the point on the pennisula where we can start lowballing seriously. But we will get there. And then I’ll be offering a max of 150x rent. Which is still way to much, but is still something I could live with.
The fun thing was that there was a 3000 sq. ft nicely polished mansion selling at 1.2 in a nicer location than a 1700 sq. ft POS built in the 60s that somebody was trying to sell for 980k. There were a lot of houses at just under a million that were half the size and way less than half as nice selling at a -20% off a super nice house. It was an eye-opener to some of the delusions. Belmont will crash, but it’s just nice enough to PRETEND to be Fortress, like say Palo Alto et. al, so it’s an interesting preview of what will happen to those burgs in the very near future.
“I can’t even imagine browsing for a $700K home.”
Nor can I. I still consider a $300k home to be very expensive, and reserved for those with exceptional salaries.
A $300K home IS very expensive…massively so. Not many people around the country would qualify. I know I wouldn’t based on income…though I could buy such a place for cash.
One must remember there’s lots of Californians and New Yorkers on this board. What they think is feasible and reasonable isn’t for most people in other places.
or those with help from the parents, or available equity from a prior house purchase sometime between 1849 and ~1999.
Was that the house on Winding Way? We almost went to see it this weekend but I didn’t want to spend the gas money to drive from Cupertino. This week we explored the open houses in the Cambrian part of San Jose. I noticed the same thing you did re the price point - the house priced at $729k had a lot of traffic. We checked out some homes in the $900k range and the traffic was really thin - one other couple, possibly just the neighbors.
In case you check back, yes. It was the house on Winding Way. The house was EXTREMELY unremarkable. The back yard was unusable and the house looked like it had been a rental for 10+ years. But they priced it under 800k, and that brings ‘em out in Belmont in the hills. Soon it’ll take under 700k, and eventually under 600k. Towards the bottom it’ll take under 500k to get people swarming.
It is going to get even uglier in Marin county after the Fourth of July and the number of potential buyers shrinks seasonally. The Realtors (TM) will not know what hit them as the option ARMs start to reset starting later this year.
Keep the popcorn popping,
Red Baron
The beautiful people of Marin are routinely trying to sell condos and homes for 20 to 30 times the annual rent. I would not even consider buying anything here at more than 15 times the annual rent.
What’s more, rents are likely to fall rather than rise. As more people lose their jobs, they will share housing with friends or family, so decreasing demand for rentals from the unemployed and underemployed will more than offset increasing demand for rentals from people who have been through foreclosure. Also, the shadow rental market will keep expanding because so many “homeowners” will not be able to sell their homes.
Keep the popcorn popping,
Red Baron
–
‘that is shaping up to be the worst in a generation.’
No, Mr. Retsinas, it is the worst in a life-time. Hell, it is worse than the worst period of the Great Depression, 1930-33. You need to get your comparison banechmarks straight before you make comparisons.
Sloppy history is a bad business.
Jas
“Worst” is relative. I view the current & future housing bust as the “best” opportunity to buy a truly affordable house in my life. It’s only “bad” if you’re a commissions-based used house salesman, crooked mortgage broker (oops, that’s redundant), speculator, FB, or psuedo-academic cheerleader for the REIC.
I disagree, as the baby boomers age and need to get rid of their homes there are going to be more than enough homes to go around. There will be more net sellers than net buyers for decades. I see housing not only being a terrible investment short term through the next 2011 ARM reset tsunami but well beyond. There is absolutley no need to buy a home for a LONG time. You can run some #’s here http://www.dinkytown.net/java/MortgageRentvsBuy.html when I plug in numbers on a $300,000 condo with an $300 HOA and get back a rent to buy break even of 15-18 years it makes my head spin…. why is ANYONE buying at these prices in San Diego.
Well, except for the issue of potentially renting and then getting tossed out sporadically from one place after another as they go into foreclosure. That’s my worry as we’re looking to rent a SFH.
I disagree, as the baby boomers age and need to get rid of their homes ??
And go where ?? Now if you said “die” instead of “age” you have a better argument…
“When will the recovery start? That’s the big unknown. ‘It may be a little early to be celebrating the beginning of phase three - perhaps we’re better off thinking of this as phase 2.5,’ Ratcliff said.”
Yes Mr. Ratcliff and perhaps we’re better off thinking of you as idiot.5.
Phase 2.6 is when Mr. Rat jumps off the Cliff.
I am unable to decide whom I should be like in my next life….Peter Schiff or Christopher Thornberg.
–
Hanumaan.
Jas
Huh?! The Magic Monkey Guy? Whatever for? Is there bonuses I haven’t read about?
> Hanumaan.
> Jas
Oh yeah…and then what? Burn down the excess housing inventory with my tail
http://en.wikipedia.org/wiki/Hanuman
” Ravana then orders that Hanuman’s tail be lit instead…(Hanuman) escapes from his captors, and with his tail on fire he burns down large parts of Lanka.”
A Fiery Tail? Okay. That IS a bonus!
Oh, that reminds me of the Hare Krishna festival that is nowadays celebrated in Spanish Fork, Utarrr, at regular intervals. I bet I could even google it and find out the details, if I wanted, see if they still do it since I left Utarr and came here to Olympia.
Yes, I remember when the simple folk moved in and built their pretty wooden log cabin temple, but the important thing is, they started having these great ‘Meet the unwashed, mostly Mormon public and defuse the fear of other religions’ festivals, and I loved those events! You would go and get ushered around a log cabin and then slobbered on by llamas and meet the Spanish Fork Hare Krishnas, and there would be a bonfire with a large wooden Ravenna set up to burn. You could throw stones at him as soon as the flames were lit, was the ritual.
Alas, my throwing arm happens to be a girly twiggy throwing arm, and I don’t believe I ever connected with the wooden Ravenna, although I did connect with some other visitors, on the backs of their heads. It didn’t hurt though, probably, because like I said, my throwing arm is candy-*ss. But my intent was pure, and that counts, surely.
There was a point here. Was it a Monkey God?
Oh, yes, Monkey Gods are great. Ravenna is bad. I think we can all agree on this.
How about a suckling pig? Oink oink. For you shall be the bacon next to my scrambled eggs, the pancetta in my pasta shrimp, the butt in my cuban style pulled pork. Did I just hear a squeal?
“Some people came from as far as Mexico to work here.”
Whoa. That’s what, a whole hundred miles? Not exactly a Marco Polo trip, that.
Yeah, that one caught my eye as well. As if it weren’t obvious they were from Mexico.
There’s been MEXICANS working in socal? Say it ain’t so!
My world view is collapsing all around me!
‘That’s what, a whole hundred miles? Not exactly a Marco Polo trip, that.’
Yeah, well, then let’s see you make it. And make it while you’re scared and have no water, either.
I am not a fan of illegal immigration, so you know. I think it hurts everyone all around– although that is another thread subject and would easily take a few weeks to discuss.
But a lot of these people who make a run for the U.S.A. have got nothing, and that includes lessons in geography. Some of them have never gone more than 20 miles from home, and neither did their moms or dads. They are easy meat for the awful.
I’m not objecting to your statement. I’m just saying, 100 miles is not that much. Not that much for you and me, but that’s you and me.
Many who come here illegally have to run a gauntlet of nasty elements, nasty people, and often risk their lives, this is true. However, it would be nice that once they get here, they would at least bother to: (a) learn the language,
(b) try to embrace the laws, culture (and flag) of their adopted country, and (c) occasionally display a little gratitude in between dropping anchor babies and going on protest marches demanding their “rights” + more free taxpayer hand-outs.
I could walk 100 miles on my fingers……yellow pages
Mexican laborers have no problem making their way all the way up to Washington state. The point is that making it all the way to Victorville, of all places, isn’t any great shakes.
The point is that making it all the way to Victorville
What a cruel fate.
If they’re going to run the gauntlet, wouldn’t you hope to land somewhere that could at least grow agave or something greener?
Got Popcorn?
Neil
Mexican laborers and fruit pickers have been in WA for a long time. What’s astonishing are the sheer numbers as of late. I’d estimate the illegal immigrant population in this country to be in the 20 million range at this point, and that’s being conservative. They’re everywhere.
From the original post:
“‘We have never had anything like this happen,’ said Christopher Thornberg, an economist with the Beacon Economics research firm in Los Angeles. ‘It’s a bloodbath. Prices are falling because they are too high. You would have to have prices in California fall 40 percent in order to get back to an historical level of affordability relative to incomes.’”
Dude, prices have been, like, too high for years. Like, where’ve you been?
Slim, you know that Thornberg has been right about prices for years. And he’s one of the few who argue that prices are still too high.
“When will the recovery start? That’s the big unknown.”
I think it was Thornberg who said to the effect last week..
“This is the recovery! We are recovering on the down slope.”
“Dude, prices have been, like, too high for years. Like, where’ve you been?”
I know, but at least the MSM is finally stating what should have been so obvious….that prices became totally disconnected from income during the bubble. But, no, we heard five years of everyone wants to live here, and they’re not making any more land and the boomers are coming and endless other bogus explanations for ever-increasing home prices.
What’s amazing is these are the same lines they trotted out in the 1990’s bust and in every bust before that. Same ole, same ole cr@p.
Why tinker with a winning formula?
Zactly. If it’s not broke, don’t fix it!
Harvard guys got it wrong big time back in 2004-06 and denied of any bubble… they said it was all sustainable and justifed… they are just eating their words now…
CA has been in a bubble for nearly 10 years now since 1999…
A fixer in my former SD neighborhood was $100k in 1999.
“‘It will vary place to place,’ he said. ‘You are more likely to see an earlier bottoming out in areas that didn’t see overbuilding, like the Northeast. It will probably be in 2009 there. In other places, like Southern California, I think you are looking at 2010.’”
*****
Or for much of California, more realistically, 2012 at the earliest.
“Harvard guys got it wrong big time back in 2004-06 and denied of any bubble… ”
*****
Yes.
And Nicholas Retinsas, for some reason, is now getting getting quoted for national news programs because of the most recent study.
And the Harvard fund that lost all its money betting
on subprimes. Right after the 2 Bears Stern funds blew up.
Yale has been calling the bubble correctly, so
it’s Yale 1, Harvard 0.
People forget everything after about 15 years — wars, hurricanes, etc. Then something comes along and kicks their ass, and they wonder what hit them.
Dude, prices have been, like, too high for years. Like, where’ve you been?
AS, you have spent to much time at that Tucson YMCA, it should be “Mr. Thornberg” to you.
He’s probably Dr. Thornberg. And I don’t work out at the YMCA — too far away from the Arizona Slim Ranch. I use a city rec center’s gym instead.
“Prices are falling because they are too high. You would have to have prices in California fall 40 percent in order to get back to an historical level of affordability relative to incomes.”
Is this an indication that our views are being accepted by the majority? Regardless, I love the press.
Yes, but we have yet to see convential wisdom embrace the “fact” that real estate is the WORST INVESTMENT EVER.
That will be the time to buy back in.
I’m waiting for that to be said of stocks.
Guess what, they are saying that about cash….
“‘But neither we nor the financial wizards of the mortgage-backed securities market ever anticipated that foreclosure levels in California would surpass previous records without the kind of massive job losses last seen in the wake of the aerospace contraction in the early 1990s,’” he said.”
Yes, no one had the foresight because unlike the early 1990’s, people were buying homes who didn’t have jobs in the first place. Massive job losses leading to foreclosures is quite the antiquated notion. The only things contracting now are the bloated egos of specuvestors and the state budget of California.
Hmmm. I draft securizations. I have been discussing a housing bubble with the “wizards” I represent since 2000. In part because Atlanta started appreciation at 10% or higher around 97 or 98, a little earlier than some other areas. If prices are rising above 5% per year, how could intelligent ppl not be discussing a bubble and the ramifications thereof?
Why can’t they limit thier professed ignorance to themselves?
Wasn’t it Tolstoy who wrote something to the effect of there are two types of fools, quiet fools and loud fools. I guess you can put your “wizards” in the loud fools camp as their mouth betrays them everytime they open it up.
” the kind of massive job losses last seen in the wake of the aerospace contraction in the early 1990s,’” he said.”
It’s starting to rhyme, but it it will be interesting how it plays out. The job losses are just starting,Credit is just clamping down ( Peter Schiff etc. ). Oil prices just working through (Dow chem. etc ). Who’s gonna lend you money for a house when the job losses,credit crunch really start to accelerate? It has just started to pick up speed..You aint seen nuttin yet’ ..I truly hope not, but don’t have much hope in how this will play out.
You know, I wonder if the stepped-up border controls aren’t having the opposite effect, at present, of what they’re supposed to do (i.e. reduce the number of illegal immigrants in the U.S.).
It seems to me that high wages are the draw to living illegally in the U.S., while the relatively higher cost of living is the downside. If the jobs are gone, what incentive does a person have to keep paying high U.S. living costs instead of their cheaper equivalents back home in Mexico?
It would seem that there’s an incentive for an unemployed illegal immigrant to head home to wait out the downturn. Except there’s one thing: With increased border enforcement, a person might decide the benefits of sitting out a U.S. downturn in cheap Mexico are outweighed by the diminished prospects nowadays of being able to sneak back into the U.S. when the downturn ends.
Absolutely NO work in Mexico and also if you live in the wrong areas, you can either be killed by the Drug cartels etc.
Mexico needs to get its act together.
And the US isn’t helping that at all by allowing all the immigration, jobs, the road through tex, etc. Nafta.
All the drugs/terrorists can just stream through the southern border.
One thing that most Americans are completely unaware of is…
Mexican-Americans born here that have never been south of the border, are held in utmost contempt by Mexicans.
And it’s a two way street. The “Mexicans go home” graffiti that appeared in my neighborhood at one point some time ago turned out to be the cooperative effort of some brown skinned Mexican-American kids.
Entry from Juan’s daily diary in Tijuanna Mexico:
930: Get up early
10:00 Get burrito from truck
11:00 Sell leather goods in shopping plaza
12:00 Siesta
1:00 get bored and go make fun of drug dealers….
It’s too bad the only impression ignorant people get of Mexicans is that of the illegals that come here. Believe it or not, there are many Mexicans that don’t sell drugs, leather goods, or work on farms or construction. Of course, the Mexican physicists, playwrights, professors, etc., tend to be much less visible here because they are too busy doing their own thing in Mexico.
Debt, Most people here on the street don’t really give a flip either. The ivory tower ,and gated community jawboning doesn’t reflect the avg. guy on the street that has to elbow his way to the feed trough. What used to be a living wage in construction, or any labor job has been done away with due to imported slave labor. Always burns me when someone brings up the arguement that illegals do jobs we won’t. We used to when it was $15/ hour not when it’s 7/hr. Tomatoes will be $10 if we didn’t have cheap labor, no we won’t…we won’t buy them, mechanize, or grow our own. It’s frustrating to watch the lower middle class being stripped bare by invaders, and the upper class telling the rest to eat cake while never having to rub elbows because they have their
little brown slaves doing their shopping, cut their grass, and complaining about the sad shape of riff/raff walking the streets.
“‘It was almost like a heart attack,’ he said of the market collapse. ‘But after the heart attack, you have a long period of convalescence.’”
How does one convalesce a patient that’s already flatlined?
I was thinking along similar lines. The good scenario is a long period of convalescence, but heart attacks also are often fatal.
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“‘We have never had anything like this happen,’ said Christopher Thornberg, an economist with the Beacon Economics research firm in Los Angeles. ‘It’s a bloodbath. Prices are falling because they are too high. You would have to have prices in California fall 40 percent in order to get back to an historical level of affordability relative to incomes.’”
Chris has gotten the true religion, it seems. His replacement at UCLA Anderson Business Forecast, Ryan Ratcliff, is badly into the old religion. An example of how the bad forces out the good in the propaganda business.
Jas
“The San Diego Union-Tribune says the median home price in the area plummeted $15,000 between April and May, to $490,000, and from a high of $518,000 in November.”
Dataquick just reported the May 2008 median sale price in San Diego at $380,000. I guess the Chicago Tribune editors don’t let the facts get in the way of their reporting.
“‘A lot of Hispanic women are in the cleaning business,’ said Chevalier. ‘The drop in sales would mean less work for women. We also didn’t have to maintain as many new yards and 90 percent of landscapers working on Frontier Homes are Hispanic.’”
For all those homeowners out there struggling to pay that mortgage, stop spending a hundred dollars a month on housecleaners and landscapers. Mix together a half and half concoction of distilled vinegar and regular water, put on some rubber gloves, get a nice abrasive sponge, and go to town on that bathtub, sink and toilet. And while you’re down on your hands and knees, say a prayer to Sweet Baby Jeebus for giving you the strength and perseverance to see this financial storm through. Like sands through the hourglass, cleaning the porcelain potty will bring a new found joy to your life.
Craigslist viewing yesterday brought up alot of folks having house cleaning businesses all of a sudden. Or maybe not so sudden, it was my first time perusing that section. Just lots of em.
Was in craigslist trying to find that diamond that Txchk recently scored, but saw retailers instead. Not a desperate seller.
“There must be a pony in here somewhere…”
Ponies? I like ponies!!
“‘A lot of Hispanic women are in the cleaning business,’ said Chevalier. ‘The drop in sales would mean less work for women. We also didn’t have to maintain as many new yards and 90 percent of landscapers working on Frontier Homes are Hispanic.’”
I’m just wondering what the hell happened with the Hispanic woman I married! Why doesn’t she clean!!!!!! Ahhhggggggg!
You weren’t supposed to marry the cleaning lady Diego! But I bet she makes a mean carne asada.
You must have gotten the abberational mutant. My wife is latina and she is a cleaning machine.
I’m the original slob so it took a couple of years to reach common ground on that.
“I’m the original slob so it took a couple of years to reach common ground on that.”
Very encouraging words to a fellow slob, dude.
No problemo man, the first step is admitting you have a problem. LOL
That’s funny, I was just thinking the same thing.
Plus, it’s twice as bad in my family-I’m 1/2 Mexican, but I don’t garden anymore (I like my vegetable garden, and I do gardening “projects” (e.g., sprinklers) but I think the maintenance is tedious). Paying for a maid and gardener is money very well spent, in my opinion-frees up some valuable weekend play time. My wife sometimes feels residual guilt about the maid, but not me.
I do clean my own pool, but that is more of a zen-like task, slowly brushing and sweeping up leaves. Listening to the gurgling water, deep in my own thoughts. Then nuking every living organism in the water with chemicals.
‘I do clean my own pool… Then nuking every living organism in the water with chemicals.’
That’s what I like about you. Your monkish purity.
But truly, having swimmed in and drunk busy water– and I mean ‘busy’, with the swimmy and floaty specks–you just go ahead and involve chemicals. But not too many!
Balance, monk-man, balance.
“‘But neither we nor the financial wizards of the mortgage-backed securities market ever anticipated that foreclosure levels in California would surpass previous records without the kind of massive job losses last seen in the wake of the aerospace contraction in the early 1990s,’” he said.”
Bullshit. Everyone on this board knew YEARS AGO this would be a gigantic mess. Allowing someone to buy a house with nothing down, purchase at 6x, 7x, 8x annual income with an IO/Neg Am ARM, why would someone need to lose their job to have that not work out over the long haul??!!
“‘It will vary place to place,’ he said. ‘You are more likely to see an earlier bottoming out in areas that didn’t see overbuilding, like the Northeast. It will probably be in 2009 there. In other places, like Southern California, I think you are looking at 2010.’”
These guys never get it quite right. Areas with high appreciation and overbuilding, like Arizona, Nevada, California and Florida, will fall the fastest and the most. Areas, like the Northeast, with high appreciation but not a lot of overbuilding, will fall slower, as sellers cling to the past and don’t have the pressure of a lot of empty less expensive houses to compete with. The Northeast simply won’t have buyers qualified to pay the asking prices. It’ll be a slow bleed in the Northeast. If he thinks it 2010 for Southern California, it won’t be before 2010 for the Northeast. Areas like the Midwest, which experienced less appreciation, will bottom faster, as prices have less far to fall before being in line with incomes.
This sounds like the situation in Thousand Oaks, CA. No empty new construction to put big-time pressure on the existing stock. Prices are inching down at a snail’s pace.
On the other hand, things priced around $250-$275/ft and listed at less than $550,000 sell pretty fast (within 2 weeks). Anything listed above $300/ft or above $550,000 (regardless of price/square foot) sits for weeks. That is probably a function of the $417k jumbo limit (I realize it is officially higher). I’ve seen a few SFR’s above 2,000 square feet sell for around $225/ft or less, but they go really fast (pending in a few days after being listed).
It’s interesting how the free market is “different here”, even though new buyers are finding it equally difficult to qualify for mortgages everywhere.
Other than area incomes, I wonder what actually determines the relative strength of any particular housing market?
My troll sniffer just went on alert.
I agree with your take on the Northeast, but not on the Midwest. If anything the Midwest’s fate will most resemble what you envision for the Northeast. The bleed will be slow and the recovery even slower. There are structural issues with the Midwestern economy that this boom and bust have obscured. I wouldn’t look for the Midwest to bottom, or to recover, before any other region - we’ll bring up the rear on this one.
I’d say much of the midwest is as “bottomed” as it is going to get. Can’t even give away a house in Cincinnati or Detroit. Much of what’s left will fit on my Visa card.
Vmaxer, your comments affirm what I see every day. New buyers qualify for $150-250K, for houses that used to sell for $400K. This is on Long Island.
The problem is property taxes, which are often $7,200 a year, or $600 a month — or, using backwards math, the equivalent of $100K of mortgage payment. In other words, property taxes alone are taking $100K off the price of houses here — and no one wants to admit it.
There are some houses where the new mortgage payment will be equal to the current tax payment, because assessors won’t drop values to distressed prices.
“Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., said that this third phase depends on whether there was a building bubble where you live.”
“Not too much of one in the Los Angeles area but certainly in the Inland Empire and Central Valley.”
________________________________________________________________
Kyser roll forgets to mention that the city of angles went whole hog on helocs, it being the capital of the see me-dig me cult that spent it’s way to happiness, or a reasonable facsimile thereof.
He’s being pretty disingenuous with that quote also because there are many parts of LA that are rife with tear downs/subdivisions.
Drive around in teh valley and you see many places where a developer took 2 old large lots and did a tear down replacing the 2 houses with 10.
I was in L.A. last week and builders almost made an art form out of squeezing in gawdawful homes & condos in some of the nastiest spots imaginable, that were heretofore vacant land.
Next to freeways with no sound walls, that sort of thing.
Exactamente, can you imagine the fallout years from now when we find out that they built houses on some future EPA superfund site? I guaran-darn-tee this will happen.
It would be interesting to study a sampling of poorly located new construction projects from this boom - to see how/when/if prices recover - not on a national or regional basis - but block by block or even building by building.
With millions of surplus housing units already available it is doubtful anyone will have to settle for something next to the freeway or the railroad tracks. Buildings in those locations will probably fill the role they have historically filled - slums, granite and stainless notwithstanding.
You should see Pacific Beach in San Diego, I lived there for a time, that place continually puts god awful condos on tiny little lots and none of the architecture is good, one recent condo group looks like gingerbread houses, frosting colors and all. The developers are truly ruining that little town. The residents are so worried about drinking on the beach ruining the town, they should have been worried about the poor city planning.
Oh, well. They can always market them to the deaf.
No, wait. My father’s almost deaf. But he certainly can sense vibrations. So, scratch that living by the freeway thing.
City Of Angles? Isn’t it Angels? Is that delibrate or do you mean Angels? It always bugs me.
Where’s the beef?
___________________________________________________________
“Rancher Kenneth Twisselman is worried. He works on Temblor Ranch in western Kern County, raising cattle on 50,000 acres. The land is split between three families and the oil industry, which leases some for drilling.”
“Twisselman declined to divulge specific numbers, but said the drought forced the ranch to halve its herds from last year by slaughter or relocating them to pasture in Oregon or further north in the state.”
“We have very few cattle, and very little grass,” he said. “And of course a lot of the corn has gone to ethanol, not feed lots.”
http://www.bakersfield.com/102/story/477890.html
Wickedheart:
Why don’t we call it what it was originally named?
El Pueblo de Nuestra Señora la Reina de los Ángeles de Porciúncula
(The Village of Our Lady, the Queen of the Angels of Porziuncola)
“Angels of Porn” is about right, especially in the SFV.
City of Angels
It’s going down tonight in this town
Cause they stare and growl
They all stare and growl
I take a scar every time I cry
Cause it ain’t my style no it ain’t my style
Going down to the gravel head to the barrel
Take this life and end this struggle
Los Angeles come scam me please
Emptiness never sleeps at Cliftons 6 am
With your bag lady friend and your mind descending
Stripped of the right to be a human in control
It’s warmer in hell so down we go
They say this is the city
The city of angels
All I see is dead wings
It’s a ghost town rabid underworld
Dionysian night vitriolic twilight
A mirage comes up it never ends
Once you get burnt you’re never the same
Left behind erased from time
Ain’t no decency in being boxed up alive
Look around ain’t no R.I.P. signs here
We don’t rest in peace
We just disappear
So here we are Los Angeles
No angels singing in your valley of unease
I watch the sun roll down the pacific
Over hookered sunset strip
They say this is the city
The city of angels
All I see is dead wings
There’s a black moon tonight
Ain’t shining down on the western neon lights
They say this is the city
The city of angels
All I see is dead wings
“In a grim report on the weakened state of the housing industry, Harvard University says the United States is caught in a real estate market downturn ‘that is shaping up to be the worst in a generation.’ Nicolas Retsinas, director of the center, said formerly hot housing markets such as San Diego County saw prices rise to unsustainable levels in the first half of the decade.”
The first thing that caught my eye was the name. ‘Retsinas’? Super! I first heard that word in a Hemingway story, and ‘retsina’ was cheap acidic Greek wine, out of a goat-skin wine bag on a bus, on the way to go fishing or something. Whateve. The story made me want to go out and buy some retsina right away, which was not that easy, being as I was in Utarr County, Utarr State, and nowhere near Greece. Oh, and I was 10 years old, too.
These obstacles were eventually overcome. Eventally I learned that retsina needs a ton of olive oil and fresh fish to taste good. Or, retsina needs a ton of retsina to taste good, but my point is, alright ‘Retsinas’! I like to hear your unpleasant words! Give me more!
How were the oysters? I actually prefer them with that vinegar and shallot sauce. Some of the best oysters I’ve had where at the Brooklyn restaurant up in Seattle. I liked their high backed chairs at the bar…made one think they were on a ride at disneyland. One shouldn’t eat oysters in tacoma. Why is tacoma smelly? Their blown glass is amazing though. I say the word “blown” as if it was spelled “balown”, sort of like the initial sound in bologna, though I never liked that nasty meat. You can’t dress up that meat either with some mustard, still nasty as far as I’m concerned.
bologna taco could be good tho.
U ever listen to Utah Phillips talking bout moose terd pie?
“Hey man, this is moose turd pie!! Its good though.”
O that’s a good one.
‘How were the oysters? I actually prefer them with that vinegar and shallot sauce.’
I just ate them with butter and lemon. And beer. Lots of beer.
In 3 hours I will have forgotten the word “retsinas” and yet you pull it from a novel you read when you were 10?
I feel inferior.
In my defense, I remembered it up until I’d say about 16 years ago. Wasn’t there a lot of absinthe going around too? It’s all a blur, the whole Italian front and Spanish revolution and the big fish.
‘Retsinas’ involved some sort of wickedness, sleepless. Of course I remember it. And what sort of freakish lass reads Hemingway when she is 10, we must ask ourselves?
Well, Utarrr has some long winters. And that’s what was in the bookshelves, in my defense. That and the Book of Mormon. Not a difficult choice.
Den mou aresi to retsina. Poli gliko einai.
Party on, Garth!
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“Wellsford Realty is offering to pay for a reception for domestic partners who marry and buy a home or condo (primary or vacation home) through the company.”
Discrimination is America? I thought that it was against the law.
Jas
Discrimination happens all the time. Just think of any organization with the word “black” in it.
The Blackstone Group? Is this your thought? Of course it’s true, no JP6’s allowed, only pigmen and pigmen-in-training.
Maybe it’s time to go back to your Osama jokes.
YOu can learn a lot about the right-wing mindset when it’s anonymous this way, huh? interesting.
fun to learn about the “conservative” mindset on here courtesy of anonymity, no?
“Act 3 is still playing itself out.”
Yep, and act three is where Oedipus tears his own eyeballs out!
Isn’t Antigone around here somewhere? When’s she show up?
Again…inferior.
“Some tenants also are being scammed by people who take a deposit and first month’s rent on an empty house in foreclosure that they don’t even own, he added.”
Where is Jerry Brown when you need him?
Oh, the jails are full already?
Maybe a Bus Brigade of illegals back to Juarez, led by Arnold in his stretch Hummer, would free some jail cells.
Anything over 400K in Belmont is unsustainable…
Most prices were around $200K in 1998/99 and
inflation has only gone up around 25/30%…
incomes have been snailing near that rate…
so expect these prices to fall…
“Australia is running out of water. Large swaths of the continent have experienced drought conditions since 2000, and in the eastern part of the country, where most people live, the last seven years have been the driest on record. Agricultural production has faltered, rivers have shriveled and the nation has even racked up a body count due to “water rage.” It’s “the worst drought in 100 years,” according to Prime Minister Kevin Rudd. And it could soon repeat itself in the U.S.”
“The math is simple: Increasing populations require more water. Couple increased demand with changing rainfall patterns due to climate change, and you’ve got a potential worldwide crisis. Australia is the test case. If Australians can find a way out of their current drought, they will light a way for the rest of the world. If they can’t, well, the news isn’t good.”
http://www.forbes.com/technology/2008/06/19/australia-drought-restrictions-tech-water08-cx_ds_0619dry.html
______________________________________________________________
I was up in the High Sierra over the weekend, and there was practically no snow, looking up to 13,800 feet in elevation. A friend that’s been out on a month-long backpack on the eastside told me there was even less snow to be seen there.
And Californians keep using water like there’s an endless supply…
Australia has two desalination plants (Perth and Sydney), but they keep getting sidetracked in Sydney because they’ll have some minor increase in rainfall or some environmental group suing that makes them think running one is too expensive and they need to mothball it…then it doesn’t pan out and they’re that much further behind. They don’t have a real coherent and long term national water policy.
We definitely don’t have one either, but neither do we have any real leadership when it comes to energy or housing. It’s a shame how people who try to plan for these things get ridiculed for being ‘Chicken Little’ types.
Why would environmentalists fight desalination plants? Except that it takes a fair amount of energy to desalinate and the water comes out kinda soft, what’s the harm? Ocean will get too salty?
here in Carlsbad they are trying to build one, the big complaint is that some fish will get sucked into the intake pipes… actually one of the best uses of our old powerplant would be desalination and the building of a more efficient one, both ideas that I expect to have 0% of success in Southern California. NIMBY even if it means your children and their children will have water and continue their way of life…. “oh think of the property values, why won’t you think of the property values”
Environmentalism is a religion. Nature is their god. Humans are the devil.
To the environmentalist sheeple, every issue is an “environmental” issue. Since humans are evil, the goal is to promote anything that might reduce the number of humans living on the planet. Regulate, restrict, reduce and, wherever possible, cut off human life support.. water, food, energy, land, etc.
Wasn’t “Mad Max” shot in the Austrailian outback?
I didn’t know he got shot. I thought he lived.
This from a couple of weeks ago.
Drought shuts world’s biggest cattle ranch
http://www.independent.ie/world-news/australasia/drought-shuts-worlds-biggest-cattle-ranch-1404852.html
Au contraer grasshopper. GTW (Golden Trout Wilderness) snow pack is twice as much as last year. Run off in the south is less than 80%, runoff in the north is greater than 100%.Season opens July 1. Der governator is full of caca. Comes with sleeping with an elitist socialist liberal who gets a trust fund, had a silver spoon, and never had to work for a living. It’s rubbed off and addled his Austrian brain.
Seriously, nobody remembers that jackass Retsinas from Harvard??
He was clapping and talking up the bubble for the last couple of years claiming it didn’t exist; it’s different this time. He is a scumbag. The worst kind. It’s either a scumbag or an idiot, and I find it hard to believe he is as stupid as he has made himself out to be over the years.
It is very believable that nobody remembers him. Why should he be honest?
TheHousingBubble blog remembers. We have records of who said what and when. We remember when Paulson and Bernanke said
“subprimes damage is limited” and “the worst is behind us”.
This blog shall be the most valuable resource to study this bubble,
the NINJA loans, and now the FHA , oops, FOA loans.
“In dollar terms, about $4.3 billion in ARMs still await their first rate resets in Fresno and Madera counties, according to First American CoreLogic data.
The thought of $4.3 billion being sucked out of Fresno and Madera boggles the mind. Is there even that much value there? Then comes the realization: This is fake money that is balanced precariously at the edge of the precipace waiting for a good draft to fall and scatter. The amount of real money involved was always minimal which is one of the reasons the whole thing erupted so exposively.
I’ve been watching Fresno prices for about 5 years now. In early 2002 the quality core ranged from $180K for older (but solid) 1970-1980 housing stock to ~$350K for new McMansiony stock. Prices DOUBLED 2004-2006, and are back about halfway down to the 2002 pre-bubble levels. Prices are still in free-fall according to zillow but listings aren’t moving so it’s tough to know where this will end up.
(I’ve got my eye on a nice property that’s listed for ~$500K that I would gladly pick up for $400K, but the owners aren’t budging on their list price after 6 months on the market).
>> “‘It will vary place to place,’ he said. ‘You are more likely to see an earlier bottoming out in areas that didn’t see overbuilding, like the Northeast.
That includes New York City. So we’re out of the woods.
Even more good news for renters. We got an offer from the bank to vacat the condo we were renting that went back to the bank. They offered us $2000 to get out in 2 weeks. Plus we got 1 month of free rent $1300 before they contacted us, and we actually got our deposit back in full from the defunct landlord: $750. So assuming we get out in 2 weeks we make $4000 OR I can just sit here and squat and wait for the bank to start the eviction process…
Anyone on here have a record for # days they are living rent free in a foreclosure, I am at 23 days.
GREED TRAGEDY???
Ben, with all those comics out of work, I’m ashamed of you.
(Smirk, smirk……)