The Bottom Will Feel More Like A Bog In California
The San Francisco Chronicle reports from California. “The percentage of households able to buy an entry-level residence in the state reached 48 percent during the second quarter, double the level from a year ago, according to the California Association of Realtors. The Bay Area remains the least affordable part of the state, but 32 percent of its households can now afford a first home, up from 18 percent during the second quarter of 2007, the report said.”
“The minimum income required to purchase an entry-level home, estimated at $582,130, is $111,210.”
“Andrew LePage, an MDA DataQuick analyst, said he thinks the bottom is not imminent - and is unlikely to usher in a quick turnaround. ‘Recent history suggests you could be looking at at least two or three years of price stagnation,’ he said. ‘It’s looking like the bottom will feel more like a bog than something you just bounce off of.’”
“‘People are off the sidelines, stepping in, trying to gauge the bottom of the market and feeling that, even if this isn’t quite the bottom, it’s looking great,’ said the group’s chief economist Leslie Appleton-Young. ‘They’re able to get into something they never thought was possible a year or two ago.’”
“Cut-rate foreclosed homes being unloaded by banks wreaked havoc on the Bay Area’s median price in July, sending it down nearly 30 percent to a level not seen in more than four years.”
“A third of all existing homes sold in the nine-county region in July were foreclosed properties, DataQuick of San Diego reported Tuesday. A year earlier, just 4.2 percent of existing-home sales were foreclosed properties.”
“Beth Huizenga and Rich Murillo have been trying to sell their Alameda house since early April. They want to move to Marin County to be closer to Murillo’s job.”
“They started listing the house at $599,000 and after two price drops it’s now at $575,000. ‘Everyone thought it would go quickly; it’s so cute and it’s a starter home,’ Huizenga said. ‘We’re not trying to be greedy (on the price); we’re relying on our Realtor’s expertise.’”
The Marin Independent Journal. “Marin home sales continued to decline last month as discounted foreclosure properties propped up sales elsewhere in the Bay Area. The median price of a single-family home in Marin last month was $875,000, down from $950,000 a year earlier, DataQuick reported. In June, the median single-family home price in Marin was $1 million.”
“In Marin, foreclosure resales were 11 percent of total sales. Valerie Castellana, an agent in Greenbrae and past president of the Marin Association of Realtors, said sellers need to be ‘really astute in their pricing strategy these days.’”
“Buyers remain anxious. ‘They want to make sure they’re not overpaying,’ she said. ‘Many of them are holding off because of that anxiety level.’”
“‘A lot of people are out looking for a bargain right now,’ said Paul Hickman, president of California Land Title of Marin in San Rafael. Buyers ‘are looking at foreclosure properties and those are the ones we need to get past for the market to turn around again.’”
“He said such buyers are facing a more restricted market for home loans. ‘We’re in a knee-jerk reaction from where we were before,’ Hickman said. ‘The pendulum has gone back 180 degrees. It’s extremely difficult to get money right now.’”
The Contra Costa Times. “Jeff Jaye, a mortgage broker in Northern California, used to rely on homeowners looking to refinance their loans for more than two-thirds of his business. Today, he rarely bothers with those applications because he knows most homeowners can’t qualify for a new loan.”
“‘The lenders are making it so difficult to qualify,’ said Jaye, who now mainly works with homebuyers snapping up foreclosed properties and homes selling for deep discounts. ‘I know everybody’s scared right now, but It’s just so over-the top.’”
“Cathi Parson is facing the prospect of asking her mother for help with a down payment. She plans to sell her home in Texas and move back to her native California later this year. She wants to buy a house for up to $400,000 and expects to bring a down payment of around $50,000, or about 12 percent.”
“‘Probably about a year ago, that would have been fine,’ Parson said.”
The Mercury News. “A drastic change in ‘market mix’ has exacerbated the plunge. ‘All the cheap stuff out there is getting scooped up by people,’ said John Karevoll of DataQuick. Generally speaking, ‘the expensive stuff is on hold.’”
“In July 2007, the opposite was true. Easy financing for no-money-down buyers had already dried up, so most sales that occurred were of more expensive homes, which drove the median price up.”
“Software architect Yang Tang, a Santa Clara County resident who is relocating to San Francisco for a new job, just bought a one-bedroom condo in the Mission District after four months of looking with his agent, Hsin Feng in Cupertino.”
“He’s paying about $450,000 for the 700-square-foot home, which was previously foreclosed upon. As recently as April, ‘I think the same kind of places would have been right around $600,000 for one-bedroom, one-bath loft condos,’ he said. ‘It was a waiting game for those to come down to my price range.’”
The Modesto Bee. “Northern San Joaquin Valley home sales prices plunged to a six-year low in July. Buyers are thrilled. The downside is that home prices keep declining: July’s median sales price plummeted to $190,000 in Stanislaus County. That’s less than half what houses were selling for in December 2005, when prices peaked at $396,000.”
“The last time Stanislaus homes were this cheap was in June 2002, according to DataQuick. San Joaquin’s median sales price fell to $220,500 in July. Merced’s median fell to $155,000.”
“Paying a mortgage now can be cheaper than renting. That’s what Christen and Phillip Sterling discovered two months ago when they bought a two-bedroom Modesto condo. They paid about $97,500 for the place, which had sold for $220,000 in 2005.”
“‘We were paying more in rent than we’re paying now for both our mortgage and our homeowners association dues,’ said Christen Sterling, 25. She’s taking college courses and plans to become a nurse. When that happens, the Sterlings may try to buy a larger home.”
“‘Then we’ll be able to rent out this place for more than the cost of our payments,’ she said. ‘So it’s a good investment.’”
“Marlissa and Nick Martell bid on five homes before they were able to buy their Manteca house this month.”
“‘We’re ecstatic!” said Marlissa Martell. The 31-year-old mother of three and her husband have been renting for more than a decade. Home prices were beyond their reach until recently. She said they’re so happy finally to be paying down a mortgage rather than paying rent. ‘It’s like we’re paying ourselves,’ she said.”
The Fresno Bee. “With the price of food, gasoline, medical care and almost everything else on the rise, seniors are getting serious about finding ways to save. Seniors who own their own homes have another worry, said Jack Christy, public policy director for the nonprofit Aging Services of California.”
“Falling home prices have left many of them without the ability to cash in the home equity that is often their primary asset. ‘We’re finding that the rate of people coming into continuing care retirement communities has slowed dramatically, mainly because of their inability to sell their houses,’ he said.”
The Union Tribune. “The National Association of Home Builders yesterday ranked San Diego County as the nation’s 20th least affordable metro area, a major improvement from four years ago, when the region was ranked the most unaffordable market in the nation.”
“‘This is very positive news for people that have been unable to afford housing,’ said Kelly Cunningham, economist at the San Diego Institute for Policy Research. ‘It’s certainly hard for the people who got in over their heads over the past couple years, but the fact is that these prices had to come back to reality so that people could afford them based on their incomes and not on risky financing.’”
“Some local experts say the rise in affordability may be temporary because it’s being driven by low-priced foreclosure sales.”
“‘This is never going to be a truly affordable place to live,’ said Sylvia Starbird, co-owner of Century 21 Carole Realty in Mission Valley, noting that San Diego’s affordability level is still far below the national average. ‘Here we are, in the midst of one of the worst price drop-offs I’ve known, and it is still not an affordable place to live.’”
“Gary London, a San Diego real estate consultant, said as many as 90 percent of the homes on the market are in distress. ‘Why would someone sell their house today if they didn’t have to?’ London asked.”
From CNBC. “Kim and Scott Fisher have been trying to sell their home in LA’s San Fernando Valley since March, after Scott’s textile industry job was transferred to Alabama. Like a lot of homeowners, they were having trouble making mortgage payments, and then had trouble selling the house. But, they say, they were working with lenders to resolve the situation.”
“The Fishers owed $1,050,000 in mortgages, with a $568,000 first mortgage to Washington Mutual, and a $500,000 second mortgage to Wells Fargo. They originally asked $1,399,000 for the home in March, then reduced it to $1,299,000, then to $1,175,000 million, and finally to $1,139,000.”
“They got seven offers on the home, all in the $1,050,000 range…They were even discussing the possibility of a short sale, where you sell the home for less than the mortgage(s) owed. This, as the Fishers started falling behind on payments.”
“But then things suddenly looked up. They got an offer for $1,130,000, and went into escrow the beginning of July. Escrow is set to close tomorrow. Success! Not quite.”
“This week, they say they received notice from Washington Mutual that the bank is foreclosing on the home. What’s more, closing costs are going to leave them $35,000 out of pocket — money they say they don’t have.”
“Kim Fisher says when her husband called both banks, he was told, ‘We cannot help you.’”
“We’ve called both banks. Stay tuned. Sure, it looks like the Fishers bit off more than they could chew, but with a decent resolution so close, why play hardball now?”
“In Los Angeles County, for the first time, the number of homes in trouble over a 12-month period topped 100,000. San Francisco has weathered the storm pretty well — although Default Research says that ‘even in San Francisco…median home prices have declined.’”
“These figures don’t include the short sales.”
“‘Many areas (in Southern California) have seen home values fall over 30 percent since the middle of 2006 during the housing boom.’ says Default Research founder Serdar Bankaci. ‘Without a short sale or a few other options, it is nearly impossible to sell a home that was overly leveraged.’”
The Sacramento Bee. “The cosmetic surgery industry is in need of a lift. Soaring unemployment, high gas prices and the mortgage crisis have left consumers with less discretionary income. For plastic surgeons, that means fewer patients are coming in for elective procedures.”
“‘I think that people are scared. Everything’s going up. Costs are going up. People are watching their pennies,’ says Dr. William Rassman, a surgeon for the New Hair Institute in San Jose and Los Angeles. Business is down 30 percent to 40 percent, Rassman says.”
“This year, many plastic surgeons say they are booking fewer surgical procedures, such as face-lifts and breast augmentations. At the same time, nonsurgical procedures - which are less expensive - are gaining in popularity, including microdermabrasion and injectable toxins such as Botox.”
“While a face-lift can cost $6,000 to $15,000, a single shot of Botox costs $125 to $400 and doesn’t require the patient to take time off from work to recover.”
“‘You see it in the number of patients scheduled in advance. It’s the difference between being scheduled one month instead of three months in advance,’ said Dr. Shahriar Mabourakh of the Folsom Plastic Surgery & Laser Center.”
“The Aesthetic Facial Plastic Surgery Medical Clinic in Oakland began offering financing to its patients for the first time in May. The clinic says surgeries have decreased 20 percent compared with this time last year.”
“‘It’s the economy. The number of patients who had scheduled for a while ago say they can’t afford it now and want to defer for the future,’ said the clinic’s Dr. Sheldon Kabaker.”
“Although most plastic surgeons offer financing options, the housing bust has meant that patients often no longer have the equity to justify a loan. ‘Now financing (companies) are becoming more difficult in who they approve,’ said Mabourakh.”
Perhaps people are just trying to save face, by acting their age?
===========================================================
“The Aesthetic Facial Plastic Surgery Medical Clinic in Oakland began offering financing to its patients for the first time in May. The clinic says surgeries have decreased 20 percent compared with this time last year.”
“‘It’s the economy. The number of patients who had scheduled for a while ago say they can’t afford it now and want to defer for the future,’ said the clinic’s Dr. Sheldon Kabaker.”
“Although most plastic surgeons offer financing options, the housing bust has meant that patients often no longer have the equity to justify a loan. ‘Now financing (companies) are becoming more difficult in who they approve,’ said Mabourakh.”
I go to a dentist who went quite heavily into cosmetic dentistry a few years ago. She also remodeled the office so that it looks all interior design-y. And the previous office wasn’t exactly a down-at-the-heels dump. It looked just fine to me.
She recently sent a letter out to her patients. Usually, she only sends one annual Thanksgiving letter. But I digress. This summer’s letter all but came out and said that she was having a tough time making a go of things.
Too bad. She’s a good dentist. If she’d just stuck to doing good, basic dentistry in the office she had before…
“Housing Bust” = Boob job financed by HELOC
Tried to talk the ex- into one, using the Medical Savings Plan at work. To make the deal work, she had to have one of them done in December, and the other in January……
Decleverage: Boob job repo’ed by lender.
If she’d just stuck to doing good, basic dentistry in the office she had before…
I’ve noticed a lot of small businesses have focused on the upscale/luxury market in the last couple of years…and some, perhaps many, have invested too heavily to survive the coming downturn.
I feel some sympathy, but many also acquired a snooty attitude along with the upscale decor. I won’t pity those ones.
I noticed that a lot in NYC….our rent control laws favors a luxury tile bathrooms, and a upgraded $3000 gourmet stove versus a paint job and $300 stove from sears.
So its easy to raise a $700 studio apartment to $1500+ legally
It wont be long before all those Manhattanites cant even afford a luxury renovated 6th floor walk up…
The same thing happened in veterinary medicine, but I’m too much of a cheap skate to fancify my office too much and it’s a leasehold, so I’d be throwing money away. I paid for new linoleum but not fancy travartine tile like some. I painted the walls myself in the back and only had professionals do the front waiting room. We also trade services with some repair people to cut costs. My main concern is that the clinic is clean, doesn’t smell and is neat and tidy. I don’t need it to look upscale.
I also won’t buy new equipment like digital xrays when the existing xray machine works fine. On the other hand, I pay my employees a bit more than many others and they have pretty good benefits.
But on the whole, I don’t have a huge millstone around my neck and I’ve actually continued to grow my income this year despite fewer client visits.
Sounds like you run a good business, Dani. Good for you!
No worries, Uncle Ben is opening a TLF window for cosmetic surgeons/dentists, candle shops, doggie bakeries, scrap book shops, cruise lines…you can exchange your marked up crap/services.
I really need a little cosmetic dentistry work to repair a small incisor tooth chip, BUT I really do NOT look forward to battling the office staff as they try to bump me up to more expensive procedures, add-ons, etc to pad their bottom line, despite the bait n switch banners you see out front for the “exam & clean $29.99″ special. If you wont pay more then they go into pissy, bitchy attitude mode, tossing their heads around with curt replies. hell, I get enough of THAT at home, I dont need to PAY for it!
in fact, in every place you shop these days, the cashier has been turned into a last ditch intrusive salesperson. you can no longer just simply pay for yer purchase & be on yer merry way without having to endure a merciless barrage of questions, asking if you want to “buy this, buy that, contribute to some charity”. ad nasuem.
I swear by baby jeebus I would so heartily & fathfully patronize ANY bidness that would just LEAVE ME THE FRAK ALONE when I enter store,(leeches at the front door begging money), IN the store checkout, and exiting (same leeches plus Comcast, petition signers, roving parking lot beggers, etc).
WalMart is insidious! every time I get out of the vehicle to shop I have to go into a “hunker down run the gauntlet game face mode” just to get through the front door. I should just get an armored bus & ram through the front doors like dirty harry.
Lowes, Best Buy, Frys, and any auto parts stores also suck. I swear I need to wear a sandwich board sign at Frys saying; ” NO I DO NOT WANT A PHUKING FRYS CREDIT CARD!”
Home Depot even has staff that roam the aisles pestering people with handouts. while outside there musta been 3 flyers on my windshield from desperate tradesmen. hell, I was only inside about 20 minutes !?!
if you look carefully you can see the poor souls sitting in their brand new ford 350 duallies in the outer parking lot watching like a hawk & praying for a call.
rant off. for now - heh heh.
(I DO support genuine seasonal charity fundraisers, like girl scouts or little league, but this DAILY begging is just out of control)
I swear you must live close to me. The Wal-Mart here in San Diego now has more hustlers than the ghetto fabulous Fam-Mart and isn’t nearly as much fun.
I value a dentist who keeps my choppers a-ok.
The others? Rather discretionary.
Now, if I only knew how to close with one of those tooth-filled yellow smiley faces!
Since it’s California, maybe we can call the toxic brew as Bog-Tox?
Should the celebratory HBB-ers burst open the Bubbly and Jiggly?
Sigh, this is all too easy. It’s like shooting FB’s in a barrel.
BWAHAHAHAHHAHAHAHAHHHHHHHHHHHHHHHHHHHHH!!!
New York is next…BWAhahahahahahahahahahahahahahah
New York:
California and Florida are just the warmup acts.
The bog is lined with quick sand.
–
Never heard of bog until today. Dictionaries are always helpful.
Jas
The spouse and I are looking to rent a house in LA on the west side (we sold in 2005 and love renting.) Out of 15 couples that looked at the house, the owners told us we were the only couple that wasn’t in foreclosure or short sale.
The most interesting bit is this house is $4,500 a month. So not only are the FB’s looking to rent, they have no plans what so ever to downsize or save some cash.
Wow. That’s some steep rent. Did they offer it to you?
‘It’s looking like the bottom will feel more like a bog than something you just bounce off of.’”
…..which is exactly why I avoid a bony bottom.
HBB got back!
“The minimum income required to purchase an entry-level home, estimated at $582,130, is $111,210.”
Only a Realtor could deliver that steaming pile with a straight face. This is a totally bogus definition of “affordable.”
In the real world, you’d have to bring a 200K downpayment to make that deal work. A 100K income and a normal downpayment should rate a 300K house, not much more.
Assuming that $100K income is guaranteed for 30 years which it’s a pretty safe assumption these days that it is not.
Thank you, come again.
“…guaranteed for 30 years…”
Guaranteed? No. Expected? You betcha!
Assuming that $100K income is guaranteed for 30 years which it’s a pretty safe assumption these days that it is not.
Excellent point Pussycat !
There are no more cradle to the grave $100k guarranteed jobs in Mr. Roger’s neighborhood anymore.
Demand 25% down, 5 pints of plasma per week and their 1st born kid that comes equipped WITHOUT the beak and claws for any $582,130 loan
That was something that hit me, too. I make close to that, and I’d say I’m a “fur piece” from affording anything freakin’ close to $582K!!!!
Ditto.
No way we’d pay that much on $110K income unless we had 45% down.
This is exactly why we’re in the mess we’re in right now. Too much damn debt!!!
This post also had news of some guy paying about $450,000 for 700 square. Ouch.
Yes, California house prices are still crazy - $582k / $111k is still a ratio of about 5½ to 1, instead of 3 or 3½ to 1, which everyone who’s not a CA realtor understands to be the standard affordability ratio. Also, I wonder if it’s really true that 32% of Bay Area households have an income of $111k or more.
I really wonder if someone is cooking the numbers when it comes to median income. It seems like just a few years ago the U. S. median income was reported as being around $40k. Then, a couple of years ago I started seeing $50k being quoted. Just recently I saw $61k in some news article from (I think) the LA Times. It might have been referring to So Cal instead of the nation as a whole, but I still wonder about these median income numbers that are thrown around.
I thought the 3-to-1 ratio was on the note, not the purchase price.
So, figure $582K * .8 (e.g. 20% down) = 465K mortgage. At a 3-to-a, I figure that to require an income of 155K.
CAR calling that affordable is laughable. What a crock.
The 3 to 1 ratio is on the purchase price, not the note. The Wall Street Journal Guide to Understanding Personal Finance says, “As a rule, you can afford to buy a home that costs up to 2 1/2 times your annual income.”
Wow. So with a purchase price of 2.5-times income, and 20% downpayment, that would imply only a 2-times income note. I stand corrected. And will now wait even longer for the crash to run its course.
Wait, did I say crash? I mean slowdown.
“The 3 to 1 ratio is on the purchase price, not the note.”
Exactly. And a 20% down payment was alwaysassumed with this formula. With the recent disappearance of the 20% down, what people can truly afford is actually less.
Right.
So 20% of 3x = 0.6x, and hence you are borrowing 2.4x the money. Close enough to 2.5x income.
Sounds about right.
Glad to help to make all the various threads come together.
Also, I wonder if it’s really true that 32% of Bay Area households have an income of $111k or more.
Also notice that the article said that 48% could afford an entry level home, but not where. So 48% of LA residents can afford a house in Fresno. Big deal.
CAR cooked the affordability formula a couple of years ago to assume toxic loans. No more standard 20 percent down, etc. So the affordability numbers are really far worse than they say.
“The minimum income required to purchase an entry-level home, estimated at $582,130, is $111,210.”
This data shows how the cult of homeownership is alive and well in California, particularly in more affluent areas like Marin, where I live. Defining affordability at 5.2 times income is a total joke. Someone making $111K–before government entities take their 30% to 35% cut–would be well advised not to buy anything more than $350K.
These kinds of insane affordability calculations remind me of Realtors (TM) who claim that a house that is down 30% from its peak price must be a great deal. There are many condos in Marin down 25% to 30% from their peak prices that today would cost 50% to 80% more to buy than to rent.
When the monthly cost of buying is LESS than the monthly cost of renting, then the housing market will bottom out. Price almost always overshoot on the downside when they mean-revert.
Keep the popcorn popping,
Red Baron
“The minimum income required to purchase an entry-level home, estimated at $582,130, is $111,210.”
Yeah, I looked at that and just snorted. We make a bit over that minimum income, and I know for a fact we could not afford a nearly 600K house. Not a 500K, 400K, either. And, to be honest, 300K is pushing it. It’s the limit. To not have to count every penny, we’d be best off looking at 275 and under.
A RE agent in 2003-2004 kept trying to show us stuff at 315K and 340K (our credit is excellent, we had 20% down). I kept saying, “Yeah, it’s gorgeous. We can’t afford it.” “Sure you can.” “No, we can’t. Next…” We still haven’t bought. I’m glad we realized the prices were insane and decided to be content with what we had until we could afford something nicer.
I can wait.
I’m not looking to impress anyone right away with my travertine X and bamboo Y. I can live with my old carpet and linoleum a while yet.
I don’t understand the love of major debt and money stress. I hate it. I don’t ever want to struggle to live paycheck to paycheck so I can have a big, pretty house. There’s no way I’d go for anything that pinches my pocketbook so much I have no savings.
As y’all say, no one is guaranteed a continued good income. Shit–and layoffs–happen.
Prudence counsels that everyone should buy a bit (or a good chunk) below what they can afford, and that way, when stuff happens, they have wiggle room. The more wiggle room, the better.
If the idiots out there salivating over square footage would stop buying these overpriced houses, maybe we could get sane housing prices for (mostly) everyone in the country and start living within our means. That’s gotta be good in the long-run for everybody.
Geesh.
M.
“We make a bit over that minimum income, and I know for a fact we could not afford a nearly 600K house. Not a 500K, 400K, either. And, to be honest, 300K is pushing it. It’s the limit. To not have to count every penny, we’d be best off looking at 275 and under.”
I’m in the same boat, and my first home purchase in ‘96 was $290K, and it was a huge stretch for my single income, even with a down payment and steady income. Buying anything over 2.5x or 3.0 gross income isn’t sustainable, unless you’re happy heating up Ramen noodles on your stainless steel stove and living paycheck to paycheck.
Me too… combined household income has two of us in that salary range- but who really wants to spend the next 30 years scraping and scrimping for a house? we agreed that that for a mortgage to make sense for us (kids in college etc) and be sustainable and affordable we are not going to buy anything unless it is low 300k or below. We prefer that the house is only 2.5 times the income of the lowest paid one of us… in case one of us is jobless or whatever, the lowest paid one of us has to be able to afford the mortgage, taxes, insurance, maintenance etc.
I still can’t believe people didn’t think about these things!!!
We prefer that the house is only 2.5 times the income of the lowest paid one of us… in case one of us is jobless or whatever, the lowest paid one of us has to be able to afford the mortgage, taxes, insurance, maintenance etc.
Bingo!!! Why does nobody else seem to think about this?
Couples should **always** keep housing costs well under what the lowest-paid person earns (with a cushion on top!).
When the mortgage interest rate hits 15% the average home price in California will be around $200,000.
California Historical Housing Multiples
Median House Price / Family Income = Housing Multiple
Year Mult Med. Fam. Inc. % Chg. Med. Pr. Pr % Chg.
1980 4.7 $21,200 N/A $99,550 N/A
1981 4.6 $23,300 9.9% $107,710 8.2%
1982 4.6 $24,300 4.3% $111,800 3.8%
1983 4.5 $25,200 3.7% $114,370 2.3%
1984 4.3 $26,400 4.8% $114,260 -0.1%
1985 4.1 $29,000 9.8% $119,860 4.9%
1986 4.3 $30,800 6.2% $133,640 11.5%
1987 4.3 $33,200 7.8% $142,060 6.3%
1988 4.9 $34,000 2.4% $168,200 18.4%
1989 5.7 $34,500 1.5% $196,120 16.6%
1990 5.1 $37,700 9.3% $193,770 -1.2%
1991 5.3 $38,200 1.3% $200,660 3.6%
1992 5.3 $37,400 -2.1% $197,030 -1.8%
1993 4.8 $39,100 4.5% $188,240 -4.5%
1994 4.9 $37,700 -3.6% $185,010 -1.7%
1995 4.3 $41,400 9.8% $178,160 -3.7%
1996 4.1 $43,500 5.1% $177,270 -0.5%
1997 4.2 $44,700 2.8% $186,490 5.2%
1998 4.3 $46,500 4.0% $200,100 7.3%
1999 4.4 $49,800 7.1% $217,510 8.7%
2000 4.6 $52,000 4.4% $241,350 11.0%
2001 4.9 $53,400 2.7% $262,350 8.7%
2002 5.8 $54,800 2.6% $316,130 20.5%
2003 6.5 $57,130 4.3% $371,520 17.5%
2004 8.2 $55,000 -3.7% $450,770 21.3%
2005 8.7 $60,000 9.1% $522,670 16.0%
2006 9.0 $62,005 3.3% $556,640 6.5%
Best Wishes!
Wow, the change from 1999 - 2006 is quite something! What’s interesting is looking at the period 1980 - 2000, which includes both the highs of the late ’80s and the lows of the mid-to-late ’90s. During that period the lowest multiple is 4.1 and the average is about 4.6. Affordability, as we have been discussing, is achieved somewhere around a multiple between 2.5 to 3.5. This means that California never achieved affordability at any point in the past 28 years and, in fact, has been very unaffordable on average during that period.
WJK - do you happen to have these numbers going back to 1970? I thought I saw a graph once that showed that CA was actually affordable in the ’60s and early ’70s. Then, on the graph that I saw, it appeared that something happened in the middle to late ’70s that made house prices quite unaffordable.
I’ve never lived in CA, so I wonder if anybody here at HBB lived in CA at that time and has an idea of what happened there back then. It also makes think that it may be possible that this 10 year bubble that is currently bursting may have been built on top of a 30 - 35 year bubble. It may that the catastrophe now affecting the REIC may burst that bubble as well and houses may become truly affordable in CA once again - meaning a ratio of less than 3.5.
Does anyone have anything to add to these thoughts?
I believe the 1970s ushered in the computer-jobs era in CA (higher salaries) along with Baby Boomers buying their first houses.
These numbers are acutally a little higher than those in a chart that was posted a while back, but let’s assume that these are close to being correct, just for the sake of argument. Historically, CA price:income ratios have been higher than 3x. More like 4x during nonbubble times. Hence, in the future, I don’t expect it to sit at 3x for long. However, I do expect it to get there. I say this because the ratio has never gotten as high as it was during the current bubble (9x in 2006 vs 5.7x in 1989), so it should also go lower than it ever has before.
Of course, the fundamental cause of the highs in 2006 are different and more severe than the cause of the highs in 1989. Today’s cause is an immense credit bubble, while the 1989 cause was a less immense version of the capitalisic cycle. Because of the ensuing credit crunch and impending unavailability of easy credit, I think it is perfectly reasonable to expect mortgage lenders in CA to become just as cautious as mortgage lenders everywhere else.
How long the caution will last is anyone’s guess. Theories abound on the fall of CA, the fall of the US, the fall of capitalism, etc. If any of those scenarios play out, then said caution will persist. I think it will last a couple years, since that’s how long it’s going to take to flush all those Alt-A resets out of the system. But that’s just me.
“I believe the 1970s ushered in the computer-jobs era in CA (higher salaries) along with Baby Boomers buying their first houses.”
Exactly right V, demographics!
Oh yeah, it was supported by fundamentals. NOT! This is dot com exits and easy credit all the way.
Agree with the demographic trend.
Also, I believe the above chart shows median income and median house price.
IIRC, the median income-earner does not usually purchase a median-priced house. There is a large segment of renters that is included in the lower half of the median earners, but is not equally represented in the lower half of median-priced homes.
IMO, 3-4X income is fairly normal at cycles lows, and that was with DB pension plans, healthcare, and more stable jobs.
If anything we should be allocating much less of our income toward housing these days. I like 2X and 20% down.
Look at Prop 13, lowered property tax rate to ~1% w. a 2% annual escalator
OTOH, my rate in Tx is 2.66
You can afford more home based on payment amt and are locked on the rate of increase.
Nevertheless, moved back to Tx
“I thought I saw a graph once that showed that CA was actually affordable in the ’60s and early ’70s. Then, on the graph that I saw, it appeared that something happened in the middle to late ’70s that made house prices quite unaffordable. ”
My bet guess would be that something that happened was affordable housing programs. In the early 70’s you could pick up a little starter house in San Diego in areas like Normal Heights and North Park for about $10k to $15K.
Prop. 13.
I bought my first home in California (two houses on a lot) for $65,000 in 1978. The price was about 3X my family income. Those were very different times in California.
The real estate markets in California have a 10 years up and 5 years down pattern. We are only 1 year into the 5 year down phase so not looking to buy until at least 2012.
I still think the mortgage interest rates will hit 15%+ (like in the early 1980’s) before it is time to buy for cash!
Best Wishes
My parents moved here (San Diego) in the late 1950s. Up till the 1970s San Diego median home price was LESS than the national median. I expect that what happened is like my parents’ situation: My mom was a WAVE stationed in Coronado during WWII, went home and used the GI bill, like my Chicago-born dad did, and she probably said, “Screw this weather. I want to move to San Diego.” They did, even though they both took a 50 percent pay cut. I think it’s kind of interesting that most migrants from the East Coast chose the Bay Area, while Midwest folks went for So Cal. I don’t have the stats to back this up.
“Then, on the graph that I saw, it appeared that something happened in the middle to late ’70s that made house prices quite unaffordable.”
Fire in the Valley
Of the 32% of people who can afford a “first home”, how many of them already have one? How many already have two? I guarantee you that 32% of people in CA are not in the market for their first freaking house.
of the 32% who can “afford” the new median priced home… how many already over-extended themselves and are the loan owners for a house they cannot afford?
Or how many now have a banged up credit score due to the flips that flopped, or the foreclosure now appearing on their credit report?
“In the real world, you’d have to bring a 200K downpayment to make that deal work. A 100K income and a normal downpayment should rate a 300K house, not much more.”
I listened to the PBS News Hour in the car today, and they had a segment on the mortgage debacle…the guest said dump the plasma TV and forget about going to Vegas, quit eating out, etc…better be prepared to have a big down payment saved as the days of easy money were OVER. Even for people with good credit scores! And that people with lousy credit wouldn’t be buying houses anymore.
Best news I heard all day!
Best news I heard all day!
That it is!
But we’re not in the darkest days of this downturn yet. Expect down payment criteria to only increase.
we overshot one way, while it will be fought, there will be an overshoot the other way.
Got Popcorn?
Neil
“The Fishers owed $1,050,000 in mortgages, with a $568,000 first mortgage to Washington Mutual, and a $500,000 second mortgage to Wells Fargo. They originally asked $1,399,000 for the home in March, then reduced it to $1,299,000, then to $1,175,000 million, and finally to $1,139,000.”
“This week, they say they received notice from Washington Mutual that the bank is foreclosing on the home. What’s more, closing costs are going to leave them $35,000 out of pocket — money they say they don’t have.”
How in the world do you qualify for $1,050,000 in loans without even $35k in the bank?
Only in America…
Yeah, no kidding!
I’d have to have about $600k liquid before I’d even consider a million dollar house.
How do people live so close to the edge?
And the rest of this article about credit destruction - mortgages, HomeEQ, how “nobody can get the money” is pushing me squarely into the Deflation Is Inevitable camp. Oil supplies up 9+ million barrels today, and gas demand down 9% YOY - the economy is about to slow waaaaay down.
Who is going to consume, and with whose money?
“How in the world do you qualify for $1,050,000 in loans without even $35k in the bank?”
By being a “Shopping Stakanovite”. These folks most certainly “got ’bout the bizness of ‘Merickuh” - how many flailing retail stores did they help support?
John,
Well that and what kind of “textile job” pays well enough to live in a 1mil+ home? Was he some kind of Exec. or what? Jane Wells didn’t say. More importantly how long had they lived there and assuming their re-fi was done during the re-fi craze… where did the 500k go? Gone to the point (as you note) they didn’t have the 35k left to close the deal?
I doubt they had the 2k for Wamu.
Maybe the textile job is code lingo for his wife working a sewing machine in an LA sweatshop garment factory.
Actually DinOR, I was kind of surprised to learn there was even still a textile job left in the U.S.!
Don’t you know that “textile job” is code for “sewing machine operator” which is code for “escort” which is code for “prostitute”?
This is funny only if you understand who Alexey Stakhanov was.
See here:
http://en.wikipedia.org/wiki/Alexey_Stakhanov
Although the article doesn’t give too much details, I wouldn’t be surprised to hear that they have spent all of that $ 500,000 over the past few years. Reminds me of a Dutch saying that could be translated as “if you burn your backside, you have to sit on the blisters”.
poor Kim and Scott Fisher have been trying to sell their home in LA’s San Fernando Valley since March, after Scott’s textile industry job was transferred to Alabama. Like a lot of homeowners, they were having trouble making mortgage payments, and then had trouble selling the house. But, they say, they were working with lenders to resolve the situation.”
Could reason be Kim and Scott were being foreclosed is they had trouble making mortgage payments and might have been praying they could close before bank found out they had a seller and would skip to AL without making those late fees?
Then again perhaps banks know how to go on Zillow and check homes for sale or in escrow especially if there is a sold sign hung on a for sale sign on a home 4 months late in payments.
Hello.
They couldn’t possibly “skip to AL without making those late fees”.
The total accrued interest and penalties would be included in the mortgage payoff amount reported to the closing company. If they don’t pay the fees, the house doesn’t close and they don’t really have a buyer.
Sounds like the bank is squeezing them to take a bit of the hit ($35K cash at closing), and they’re balking and threatening to talk.
talk ==> walk. Doh.
The special of the day is a home Marin-ated using reduction, and then left to stew in own juices…
==============================================================
“Marin home sales continued to decline last month as discounted foreclosure properties propped up sales elsewhere in the Bay Area. The median price of a single-family home in Marin last month was $875,000, down from $950,000 a year earlier, DataQuick reported. In June, the median single-family home price in Marin was $1 million.”
hahahahahahahahahah. Verry punny, EN2. Verrrry punny.
‘We’re not trying to be greedy (on the price); we’re relying on our Realtor’s expertise.’”
Aaah, but you are being greedy and you ARE relying on Realtor’s unreliable and “it’s all about my commissions” expertise. Good luck in selling in Alameda or is that pretty close to Oakland. LOL!
(sorry if this is a second same post)
I recall going to traffic school at Merritt college many years ago, and many of the attendees complained that they were there because they had driven from Oakland to Alameda and were then stopped because of their color.
I think the cops in Oakland are a lot more lenient because they don’t have the funding to respond to anything less serious than violent crime (of which there is an abundance). When people travel outside of Oakland, they may feel harrassed, but are really experiencing normal law enforcement for the first time in their lives. Things like “speeding”, “trespassing”, and “distubing the peace” suddenly become police matters.
I pity the fools who have no understanding of the terms “vested interest” or “conflict of interest”.
What’s good for the realtor is sometimes inversely related to what’s good for you. Caveat emptor.
Right on FP,
I wonder how much spending money Mr. and Mrs. HELOC have “liberated” from their equity since they purchased and been living beyond their means.
“They started listing the house at $599,000 and after two price drops it’s now at $575,000.”
Let’s see…6% commission on 575K = $34.5K to the realt whore, buyers closing costs of 3% = 17.5K leaves $523K…uh oh, that’s less than they owe CountryFried. Will that be cash or check at the closing table, Mr. and Mrs. FB? And what if the price of fuel rises again next spring 09 like it has for the past 5 years, or Mr. FB loses gig or employer cuts back hours? Another REO back to CountryFried. Credit card companies are cutting credit limits and “chasing down the balance.” FBs look at available credit on their credit cards as money in the bank and their only substantial lifeline other than selling assets. Neil, please pass the popcorn.
Got diversified assets?
FP, pdxHOMEDEBTOR,
Are any of you at the point where you’re ready to demand the entire MLS be shut down for an entire day, all listings expire and only those actually ready to price at-the-market are allowed to re-list?
I’m serious. Just. Shut. It. Down.
I’m so tired of these “hat in the ring” listings.
We regret to inform you that until sellers get a grip on reality and with the expense and sheer weight of the listings we are closed until further notice. Please refer to lender REO sites for inventory available in your respective area.
NO! I _love_ the “hat in the ring” listings.
Only by showing the FBs high months-of-inventory will they accept that the market is dead, and that their F’ed.
Denial-based listings is an important cog in the cleansing machinery (where cleansing==colonics for all the FBs and REO-holding banks.)
Prime,
Excellent point! I guess like a lot of us I’ve grown more than just a little tired of all the phantom inventory and prefer we get down to nitty gritty so we can all move forward.
Now that you bring it to light though, it IS an important part of the process. Kind of like kids and homework. They whine but then you tell them the time they spend on the phone and looking out the window day dreaming isn’t getting them one step closer to what they ‘want’ to do!
Just like today’s delusional sellers, if they’d suck it up, they’d already be on to the next phase in their life. I wonder if that isn’t what this boils down to? Sure, they’d love to downsize/move/retire etc. but they’re bound and determined to do it “their way”.
If the individual MLSs would charge $50 up front for each listing, the realtwhores would try to price their listings at a lower price. If you want to hear the realtwhores cry put this in effect. Won’t happen, no way.
The San Francisco Chronicle reports from California. “The percentage of households able to buy an entry-level residence in the state reached 48 percent during the second quarter, double the level from a year ago, according to the California Association of Realtors. The Bay Area remains the least affordable part of the state, but 32 percent of its households can now afford a first home, up from 18 percent during the second quarter of 2007, the report said.”
“The minimum income required to purchase an entry-level home, estimated at $582,130, is $111,210.”
IMHO 97.991%(not exact) of this National Housing Boom and Bust Problem, has been ALLOWING the likes of CAR, NAR , RE Agents, banks and lenders in this Criminal REIC Enterpise , TO DECIDE how much the greedy sheeple could afford.
Would somebody please…SMOTHER THEM ALL with their Pillows tonight !!!
God Bless you, Mikey! Smother them all! The Bay Area is sooooo totally screwed, and the RE industry with their willing home-renting scammers have’nt a clue.
I heard a report on KNX (= LA’s News Radio) this afternoon from a rep for NACA (www.naca.com).
From the web site,
“NACA has established the national standard by getting lenders/servicers to reduce the interest rate to an affordable payment for thousands of owner-occupant homeowners.”
The rep said that there goal is to help everyone stay in their homes by lowering interest rates to 5%, 4%,… whatever.
The rep said this would help everyone.
I’m not so sure about this.
Also, what happens if someone needs to sell a house in one of these schemes a few years down the road?
First of all, NACA clients have to document their income to prove that they cannot afford their mortgage payment. Who would do that? That would just mean admitting that they lied on their mortgage application, making them ineligible for any government assistance.
Secondly, it looks like NACA is just a company that plays hardball with your bank to convince them to either refinance or you will walk. Can’t you do that on your own?
I love the last part, where they tell you that “if” NACA should fail in getting you your low-interest loan, then you will have to take the responsibility of lobbying Congress to “make” your lender accept the deal. They can’t do that. You have a contract. The bank either accepts your offer or decides that it’s better off foreclosing. Congress has no authority. I see this working in the cases where the borrower can prove that the bank committed fraud or broke rules that would get it into trouble. That would make them work with you.
“First of all, NACA clients have to document their income to prove that they cannot afford their mortgage payment. Who would do that? That would just mean admitting that they lied on their mortgage application, making them ineligible for any government assistance.”
You could have been completely truthful on your loan application with regards to income and most lenders would have made a loan that the applicant could not afford, just on the size of the loan alone relatively to income. It wasn’t necessary to lie to borrow more than you could afford, though you could have borrowed a lot more if you did.
And they’re offering a 6% interest rate right now. People got 3-4% in like 2003.
http://dqnews.com/Charts/Monthly-Charts/LA-Times-Charts/ZIPLAT.aspx
LA times zipcode data is out!
Wait….
Covina is $275 /sqft
Compton is $250
Pomona is $220????
Oh… we still have SOOOOOO far to fall.
My dad’s place in Covina shouldn’t be more than $100 per. Zillow still says over $250 per.
I’m renting in La Verne/San Dimas for a few pennies under $1/sqft/mo. Yep, at 100x rent we have a long way to go…
I graduated from San Dimas high in 1985. My mom, aunt and cousin are burried in La Verne Cemetary. Definately my old stomping ground.
San Dimas High School Football Rules!
So, based on the above I guess that means that houses now priced at $582,000 have to fall in price to $347,000 to get back to the old 32 percent of gross income rule from the 1990s? That would be another 40 percent.
Someone correct me if I’m wrong, but wasn’t it CAR (or was it NAR) that completely changed the formula used to calcumalate the affordability percentage a couple years back using criteria that made no sense?
I get the feeling it was NAR (nation-wide travesty is more likely in Uhmerica) — what was that new formula again? Something like 10% downpayment (as opposed to old 20%) and variable rate after XX years (as opposed to old 30yr fixed). What a flippin’ joke.
Rob
It was based on the minimum payment option, which eventually expires.
How they have any credibility is a mystery to me.
I suppose people refuse to see through NAR as long as they are being told what they want to hear when it supports their get-rich-quick, cash-out-in-two-years, retirement plan.
On the other hand, perhaps the NAR deserves credit for recognizing a market so prepared to be duped with no penalty for catering to it, truth be damned.
“Someone correct me if I’m wrong, but wasn’t it CAR (or was it NAR) that completely changed the formula used to calcumalate the affordability percentage a couple years back using criteria that made no sense?”
They redefined it right at the peak of the bubble to make it appear affordability wasn’t quite as bad as it was. If they still used the old method, the current improvements would be more modest.
If you don’t want to fix the problem, just change the way it’s measured. Government inflation and employment stats, housing affordability, etc.
Maybe I should market a “Chamber of Commerce” thermometer. Instead of having a scale from -20 to 120, the new scale for the same thermometer will go from 70 to 80. Now, no matter how cold or hot it gets, temperatures will be delightfully in the 70’s.
“They started listing the house at $599,000 and after two price drops it’s now at $575,000. ‘Everyone thought it would go quickly; it’s so cute and it’s a starter home,’ Huizenga said. ‘We’re not trying to be greedy (on the price); we’re relying on our Realtor’s expertise.’”
Uh, don’t get furious, it’s just a “California” thing.
–
Two price drops totaling 4% and “we’re relying on our Realtor’s expertise.’
Yeah, real smart, “a “California” thing.” Could we have some dumb people puuuuhlease.
Jas
Jas,
I wish it were only a Cali thing.
We did not get the MEMO here in WI either!
Leigh
http://www.marketwatch.com/news/story/fdic-offer-better-terms-thousands/story.aspx?guid=%7B9AF185CA-3EE5-445D-A64F-16E5BE4D1879%7D&dist=msr_4#comments
The FDIC to offer better terms on thousands of IndyMac mortgages
FDIC is about to discover and be ’shocked’ by the extent of fraud that went on….
And all IndyMac mortgage holders are about to stop paying their mortgages. Where will the FDIC get the money to pay for all those people’s houses? How will they cap payments at 38% of income when so many people don’t even make enough money to pay 2% interest (the Fed funds rate)? Someone will have to pay for this, who will it be? Will the FDIC try to wield its power (what power) to make ME pay for this? Can they? I hope not, argh.
I propose (they we us whatever) another RTC, only with a slight variance, since this is different (and it IS).
Break it down into regions (RTC).
North, south, east and west.
Perhaps by 12 Fed districts.
Of course, this is a good idea 2-3 years ago!
Yeah, it makes to much (common) sense.
Grrrr…
Leigh
My first blush reaction was outrage until I realized this idea is so bad on so many levels that it’s moot before it starts. To cap payments at 38% DTI @ 6.5% some of these loans are going to be 200 years long. How many will qualify and, even if they do, will want to commit to paying for underwater mortgages even if they could pay them off in their lifetimes? Now seriously, on the other hand, what percentage of double stupid on a stick dunderheads will actually try to get this deal? My real outrage is all the time, energy, and money being wasted coming up with these worthless ideas. Then - oh why not just kick me when I’m down - I am presented with nothing but stupid articles where not one single reporter can even figure any of this out or ask on relevant question w/maybe a follow up question when they get mush mouth nonsense answers to the 1st one. I’m worn out by ineptness and idiocy.
In plain English, it appears that this plan gives home “owners” a second option.
Instead of only having the first option of foreclosure, they now have the second option of renting the house from the bank until they die - when the bank will take back the house.
Yes, let’s have more of these “bailout” plans. ‘Cause every one so far has had the effect of making foreclosure look like a better option to current FBs. The quicker they get out of homes they can’t afford, the quicker we get to bottom, and to (a nice, long, slow, sustainable) recovery.
More of the usual (incredible) b.s from realtors. This time the California Association of Realtors who state 48% of California residents can now afford a home.
Ummm, I don’t think so, realtorwhores.
Incomes in California vary from $7 an hour to $1 million a week - and everything in between. I can assure the California Realtors Association (as if they didn’t know) that the average income of 48% of the average family in California is NOT $111,210 a year. Added to that, California ain’t a cheap place to live even if you are making $111,210 a year. You need it if you have a family and there isn’t much left over to save 20% deposit on a $582,000 house. That’s close t $120,000 deposit.
Where I live (Thousand Oaks, ca.) there are “WE ARE HIRING” signs all over the place. Is it because the area is booming. No it isn’t. In fact there are foreclosure and for sale signs and bank owned signs all over the place and they ain’t being taken down. Obviously, people with an average income of $111,210 a year are STILL not interested or maybe that $111,210 number is a manipulated number by the Realtors. Say it isn’t so!!
A local mall just lost 2 of it’s biggest renters. Mervyn’s, which is closing umpteen stores for lack of business and Linen’s-N-Things, which have gone belly up (bankrupt). When they move out next month, that mall will be dead. No foot traffic for the remaing stores and that means other, smaller, stores closing.
So why are the WE ARE HIRING signs out there? Because the places hiring are retail and fast food and they don’t pay their employees $111,210 a year. The majority of current employees appear to be latinos. Most whom cannot speak english.
When the new (old) numbers are reached, 3 x annual income, then property will have reached bottom. Thus, the California Association of Realtors are using numbers which came into play during Greenspan’s, “Free Money If You Can Fog A Mirror,” period. Those numbers do NOT apply anymore. 3 x annual income, means anyone earning $111,210 a year, can afford to buy a property for, $333,000. NOT $582,000.
And here’s a 100% guarantee. That’s what will be required in the future. 3 X annual income AND a heft down payment. ALL DOCUMENTED AND KOSHER.
And what they really said was that only the upper half of the wage earners can afford the crappiest houses. No one but CEOs and executives can afford a nice house in CA at current prices. That’s why it’s financial suicide to try to move there. If you’ve been an “owner” there the last 20 years and haven’t caught the HELOC/ REFI disease you may be ok.
A top 50% income can afford a bottom 35% house if they take on a suicide loan and spend 40% of pretax income on the mortgage. No thanks.
An American Werewolf in Loandom?
“Andrew LePage, an MDA DataQuick analyst, said he thinks the bottom is not imminent - and is unlikely to usher in a quick turnaround. ‘Recent history suggests you could be looking at at least two or three years of price stagnation,’ he said. ‘It’s looking like the bottom will feel more like a bog than something you just bounce off of.’”
Ow-oooo! Werewolves in Loandom!
[RIP, Warren Zevon]
“‘This is never going to be a truly affordable place to live,’ said Sylvia Starbird, co-owner of Century 21 Carole Realty in Mission Valley, noting that San Diego’s affordability level is still far below the national average. ‘Here we are, in the midst of one of the worst price drop-offs I’ve known, and it is still not an affordable place to live.’”
That is a pretty good sign that prices have not yet bottomed out. Lots of speculators, home builders and banks are still sitting on falling knife inventory, hoping the prices will come back before they have to sell at fire sale prices. With the median priced San Diego home dropping in value by $400 or so each day on average, I wish them all the best of luck with that plan.
“That is a pretty good sign that prices have not yet bottomed out.”
Professor, you are absolutely correct. When I bought my first house in Klamath Falls, Oregon in 1989, with 10% down payment it would have cash flowed positive as a rental from day 1 - this was about 7-8 years into the timber recession of the 1980s.
Now I don’t think San Diego’s economy is ever going to get that recessed, but the bottom will be reached when investors start purchasing the foreclosures for rentals as profit-making investments with no expectation of short term appreciation, and of course we all know that we’re not even close to that…I’m saving like a squirrel to trade precious metals and oil for more real estate in 2013+.
Got diversified assets?
The key word in Ms. Starbird’s statement is “midst”, as in “middle”, as in “will fall twice as far before it’s done”, as in “will be affordable again, just like it used to be, in a couple years”, as in “I have the name of a porn star because I am really a porn star, but have been posing as a Realtor since 2001″.
“I think San Diego probably will not be as affordable in the (near) future as it is now,” he said. “Everybody I talk to says once we hit 2010, ‘11 and ‘12, we’re going to wish we were back here.”
sellers yes, buyers no
“On the other hand, after the San Diego real estate crash of the early 1990s, the county hit an affordability rate of 42 percent in the spring of 1993 – and remained at that level for six years.”
Given the debt overhang, might prices remain flat more than 6 years this time after nearing the “bottom”?
Even Maddux left San Diego for LA. hehehehehehe
–
Price Per Sq Ft For Single Family Homes, New & resale
City Zip Code PPSF PPSF From peak
Palmdale 93550 $106 -63.8%
Palmdale 93551 $120 -45.7%
Palmdale 93552 $106 -52.6%
Palmdale 93591 $84 -66.4%
Average ALLZIP $104 -57.1%
Hey, dude, which zip code is the best part of Palmdale?
Jas
93551, and in general the farther west , the better.
–
I take it that the prices reflect the desirabililty, or lack thereof, of the areas. Looks like prices are coming close to your target.
Jas
Yep, there is plenty of stock under $100/ft.^2.
I went to look at a house out by rancho vista golf course with wifey tonight. 3250 squares and listed at 300K.
I’m doing a full survey of sales, starting with June for all Palmdale zips and including Littlerock and Acton/Agua Dulce. Almost all bank owned homes are selling at below the price they took them back for at trustee’s sale. The seconds are getting nothing.
There is definitely movement out there. If you read my vulture allegory yesterday it pretty much tells the story of what I think is going on.
I hate to tell you this Jas, but I’m seeing far too many of your countrymen falling for the allure of the falling knife. My data indicate that our friends from south of the border were the biggest first round fools, the big bank from Deutschland was the big second round loser, and the far eastern are now committing liquidity waaaaayyyyy too early.
By my numbers 93551 still had 5X NOD per sale in July, and 93552 had 6X. That really tells me we aren’t anywhere near the bottom.
“They started listing the house at $599,000 and after two price drops it’s now at $575,000. ‘Everyone thought it would go quickly; it’s so cute and it’s a starter home,’ Huizenga said. ‘We’re not trying to be greedy (on the price); we’re relying on our Realtor’s expertise.’”
I wouldn’t be surprised if I drive by this house every day. I live in Alameda, and the story here is that almost ALL of the decent starter homes are $575k… or a measly 25-50k less than what they were at the peak. There are homes that have been for sale here for well over a year. These people claim they’re not being greedy, but they also refuse to lower the prices enough to attract buyers. She mentioned it herself: it’s a STARTER home, and a starter home shouldn’t be kissing 600k. Lower it to 400-450k and maybe we’re talking.
Starter home for $400K? That is just as whacked as $600K. How many people are there making $100K-150K a year that are looking to buy a “starter home”?
My third house cost $180k
Even considering inflation starter houses should be under $200k.
“‘People are off the sidelines, stepping in, trying to gauge the bottom of the market and feeling that, even if this isn’t quite the bottom, it’s looking great,’ said the group’s chief economist Leslie Appleton-Young. ‘They’re able to get into something they never thought was possible a year or two ago.’”
Many of todays buyers, will be tomorrow’s FB’s.
…and if they wait two or more years, they’ll get what only their wildest dreams could imagine.
LAY’s Realtard talk is just another variation of that tired old spiel,
..”now is a great time to buy”
–
She must be doing something right. She still has a job and doing lot better than her employers (CAR members). There is no business like propaganda business – the demand seems never-ending.
Jas
See my post above. The demand is never-ending when the propaganda meshes nicely with the cash-out in two years retirement plan. “And if you can wait 10 years, your house will double! Just like it does EVERY 10 years!”
‘All propaganda has to be popular and has to accommodate itself to the comprehension of the least intellegent of those whom it seeks to reach’. Adolf Hitler
‘They’re able to get into something they never thought was possible a year or two ago.’
Yep, they sure ARE–they’re able to get into a whole cr*pload of financial trouble if they catch falling knives!
My idea of a “Starter Home” would be a 1948-54 3bdr 1 bath mid-west small town Special.
Of course, I’m old fashioned and don’t have the California benefits of breathing in my neighbours Meth Dust when the SWAT Team blows off their Front Door at 4:30 a.m.
“Of course, I’m old fashioned and don’t have the California benefits of breathing in my neighbours Meth Dust when the SWAT Team blows off their Front Door at 4:30 a.m.”
Wow, rough crowd…
After living in PUDs in a McCr*psion, my idea of a real home (for us average, not Malibu or Beverly Hills rich) is a 1954-64 one-story ranch, 4+2, with a private yard w/ spa, CC&R’s prohibiting no building up (keeping yards private), and the freedom of no HOA.
I am sick of the glorified townhome feel. Oh, and if freedom means a pink or green home on the street, welcome to America.
Amen, awaiting!
–
“Generally speaking, ‘the expensive stuff is on hold.’”
And for a very good reason — waiting to come down, or fall down.
Jas
The trade group defines a starter home as one priced at 85 percent of an area’s median, which works out to $329,120 for the state. The minimum income needed to purchase such a property is $62,870, down from $101,440 a year ago (assuming an adjustable-rate mortgage starting at 5.69 percent and a 10 percent down payment).
Garbage, this is slightly over 5 times annual income and involves spending half your take home pay on housing. Not to mention that $329,120 still isn’t going to get you a house in San Diego that would be somewhat acceptable.
Assuming an ARM.
Yeah, OK, kimosabe, that’s really worked out so well so far, hasn’t it?
Bollocks. You couldn’t afford half that at $62K.
You’re not taking home that much at that number. And each mistake is really really expensive at that level ’cause you’re not really bringing home a whole lotta bacon. And you’re assuming perfection for 30 years.
Yeah, that’s a plan that’s definitely going to work out!
Not to mention that the house will become instantly unaffordable when that ARM adjust upwards, DUH!
So - at what point do prices come down far enough such that the CAR will revert to their old realistic affordability index - you know, the one based on true realistic mortgage principles - like a decent downpayment and a fixed-rate mortgage?
I’m surprised no one’s brought that up. IIRC, the affordability index had gotten down to something like 5%, or maybe even 3%, then the CAR decided it was too low, and changed the index to be based on 5% downpayment and an ARM, when the index suddently shot up to something like 25% or so.
What…. a….. friggin…. joke.
Software architect Yang Tang
Can’t . . . resist . . .
Bluebottle + Sprigs:
Yang tang yang tang
Yang tang yang tang
Yang tang iddle I po
Yang tang yang tang
Yang tang yang tang [bluebottle drops behind]
Yang tang iddle I po
Sprigs: Keep lad up. Keep up.
Bluebottle: Keep up lad.
Both:
Yang tang yang tang
Yang tang yang tang
Yang tang iddle I po
Sprigs: lad
Both:
Yang tang yang tang
Yang tang yang tang
Yang tang iddle I po [lad]
Yang tang yang tang
Yang tang yang tang [Sprigs: iddle] [Bluebottle: yang tang]
Yang tang iddle I po
etc.
http://www.youtube.com/watch?v=Nebe1zuEtbc
http://tinyurl.com/3gjwhn
another front page business section article in today’s NYTimes
Ruins of An American Dream-
“As Merced goes, so might go much of the nation. With as many as 2.5 million homes in the United States entering foreclosure this year and, at best, sales of only five million existing houses, the foreclosure price is becoming the rule in many areas. In Los Angeles County, whose 10 million people make it the most populous county in the United States, a third of the sales are foreclosures.”
“Mr. Seivert is going after a house that the owners bought 13 years ago for $86,000 and refinanced six times, taking advantage of rising values to get cash that, in part, they spent on the house. It has a pool with a small waterfall, a TV room in the converted garage, a deluxe outdoor barbecue setup and a kitchen with all the latest gadgets. The owners, who owe $350,000, can no longer make their mortgage payments. Mr. Seivert is negotiating to buy the house for $170,000 and then rent it back to the couple, who have jobs in the area. They will pay $1,100 instead of their current $2,600 a month”
a waterfall!!!! in drought prone California. excuse me, we’re in a drought now! unimaginable needs.