A Blanket Decline In California
The North County Times reports from California. “North County’s housing market reversed course last month. A monthly housing report showed the sales boom of September and October had softened and prices plummeted at an alarming rate. The median price of a house in North County took an absolute beating, dropping 12 percent in just one month. That brought the median price in November to 40 percent below the same month a year ago, dropping to $358,000. Sales were up just 32 percent from a year ago after two straight months of sales that were double the weak 2007 numbers.”
“Strong sales numbers in September and October had provided a glimmer of evidence that price declines might be nearing an end. Thursday’s report, released by the North San Diego County Association of Realtors, debunked that idea.”
“‘Unemployment is skyrocketing, expectations about the economy are falling and I would suggest people are becoming somewhat more cautious about purchasing,’ said Mark Goldman, a real estate lecturer at San Diego State University.”
“Only houses priced under $400,000 increased in sales from a year ago. Still, price declines appeared to be very real. The median price per square foot, which adjusts for the size of the house, also tumbled —- falling by 8 percent in just one month and down 30 percent from last year.”
“Such a dive in prices set records in the four-year-old survey for biggest drops in median price and median price per square foot. It was also the first time in the history of the report, known as HomeDex, that the median price per square foot dipped below $200, declining to $196.”
“Another trend persisted in the November report: Sales boomed in foreclosure clusters but stagnated in high-end, coastal communities. One cause of slouching high-end house sales could be the cost of financing large loans, as lenders have applied one of the steepest premiums in history to loans above a certain size, which are not backed by the government.”
“In addition to more expensive borrowing, Carlsbad mortgage broker Sheldon Ruckens said he thinks plenty of high-end homes carry negative-amortization loans, risky products that can see payments increase by as much as 100 percent. ‘My feeling is it’s going to take time to hit the high end, but looking at what the economy is doing, it’s coming,’ he said.”
The Union Tribune. “The plunging U.S. economy and subsequent cuts in the construction, service and manufacturing industries are prompting many immigrant workers, particularly those in the United States illegally, to contemplate a life-changing decision: Do they stay and earn far less, or head home to meager opportunities?”
“Outside the Home Depot store in Point Loma last week, the economy was chiefly on workers’ minds as they waited for contractors, rushing toward every vehicle that arrived. There was not enough work for everyone. ‘My last job was two months ago,’ said Juan Gonzales, a concrete layer who took the bus from Lemon Grove to wait for work. ‘My savings are gone. We can hardly pay our rent. In another month, we won’t have any money.’”
The Desert Sun. “The worst recession in decades continues its stranglehold on the Coachella Valley, The Desert Sun’s latest quarterly Economic Index shows. Lee Morcus, who co-chairs the Coachella Valley Economic Partnership, used one simple sentence to describe the situation. ‘It is bleak,’ Morcus said, even as the entrepreneur saw well over 1,000 people — many from the unemployment lines — file applications for 200 jobs at the new Jackalope Ranch restaurant the Kaiser Restaurant Group plans to open in Indio.”
“‘I expect 2009 will be worse than 2008,’ Morcus said. ‘I’m still skeptical about 2010.’”
“The Construction Industry Board has reported that 748 permits have been pulled through October, Bell said. The number pales when stacked against the 7,000 permits that used to be issued when valleywide construction was at its peak. ‘We have probably lost 15,000 to 19,000 jobs in the construction sector in Riverside County,’ said Fred Bell, executive officer of the Building Industry Association, Desert Chapter. ‘That doesn’t count the service sector jobs, so we’ve seen quite a bit of impact on the job base.’”
“Richard Oliphant, a longtime Coachella Valley developer who postponed construction on the billion-dollar Avanterra mixed-use project…said he remains optimistic. ‘The Coachella Valley population is only at 425,000,’ he said. ‘At build-out, it will hold over 1.25 million, so we’re only one-third built-out.’”
“Oliphant voiced confidence the nation’s top economists will get it right. ‘Otherwise we’re making a horrible mistake throwing $1 trillion at the problem,’ he said. ‘If it doesn’t make it right, I don’t know how we can.’”
The Recordnet. “The number of existing houses sold in San Joaquin County dipped sharply last month, as did the number of houses on the market. Sales fell after September and October saw the highest sales numbers ever - predominantly foreclosure properties, according to the monthly sales report, based on Multiple Listing Service data. A total of 981 existing single-family homes sold last month countywide, down from 1,258 in October, the report said.”
“Foreclosures make up about 45 percent of monthly listings countywide but account for almost nine out of 10 sales. At the current sales rate, today’s foreclosures would be picked out of the market within two months. This isn’t a drying up of the foreclosure properties pool but a temporary lag, said Jerry Abbott, president and co-owner of Grupe Real Estate, Stockton.”
“State and federal policy changes aimed at helping homeowners wrestling with potential foreclosure have simply slowed down for many the march through the foreclosure process, he said. Abbott said that means new foreclosures have been lagging for a couple of months, but he expects foreclosure numbers to jump again in January and February. ‘It’s kind of thin pickings right now in terms of good foreclosure properties,’ he said.”
“TrendGraphix said the median sales price fell from $190,000 in October to $175,000 last month in San Joaquin County. That compares with a $200,000 sales mark in January 2002, when TrendGraphix began tracking sales as the market was well into the start of a six-year boom.”
The Monterey County Herald. “All Monterey County residential properties — about 95,000 houses — will be reassessed in January to make adjustments to their tax value. County Assessor Steve Vagnini said Friday that the value of a property, which determines the tax amount owners pay, is normally only reviewed when there is a change of ownership, new construction or a request. But the recent housing market dive has caused a sharp decline in values and it is only fair to do a reassessment, he said.”
“‘We never saw a blanket decline in the market value’ before, Vagnini said.”
“Love Motors in Seaside has closed its doors for good after 25 years. On Friday, the lot holding fleets of Chevrolet cars and pickups, and a showroom housing high-end sports and luxury sedans, was empty of customers. The dealership’s closure is a major fiscal blow to Seaside, said City Manager Ray Corpuz. ‘Our largest industry here is the car industry,’ he said, adding that it provides 60 percent of sales tax revenues.”
“City officials have met with dealers in the Seaside Auto Mall and ‘a lot of them are saying, ‘We can sell the cars, but people can’t get the credit,’ Corpuz said.”
The Contra Costa Times. “A recent report by advocacy group First Focus estimated that the mortgage crisis will directly affect 311,000 children in California and 2 million nationwide, with many forced to move away from the stability of their homes and schools. Thousands more will be indirectly affected in other ways.”
“Dave Behling, a teacher at Freedom High School in Oakley, said the downturn is apparent on his campus. Several students have moved away, victims of foreclosure. More are prioritizing their part-time jobs over school work to contribute to the family’s bills. The hallways — usually abuzz this time of year with girl talk about who’s going with whom and where to buy new winter formal dresses — instead are filled with solemn conversations about sewing a gown or borrowing one from someone else.”
“No one is talking about the economy outright, he said, but it’s clearly taking its toll on students. ‘A lot of the people have got a facade up,’ Behling said. ‘And I don’t know how long the facade is going to stay up before it crumbles.’”
“Behling, facing possible foreclosure himself, knows firsthand. His wife, a data technician for the school district, has taken a second job, and his 17-year-old daughter is desperately seeking work. Her plans for college — initially focused on the University of Utah but now turned toward state schools and community colleges to save money — are up in the air.”
“‘Obviously, there are students out there that have been affected by this,’ said Luis Peres, outreach coordinator for West Contra Costa. ‘You look in the neighborhoods and there’s foreclosure signs everywhere.’”
The Marin Independent Journal. “The fiscal news is getting worse at Marin County Civic Center, where officials expect the county to face a $4.8 million budget gap next year, about $1 million more than predicted little more than a month ago. County Administrator Matthew Hymel attributed Marin’s widening budget chasm to the county’s slumping housing market.”
“‘It’s a reflection of the housing market downturn being longer than most have expected,’ Hymel said. ‘It hasn’t bounced back. We’re counting on more property declines over the next year.’”
“While Marin is faring better than other regions, Assessor Joan C. Thayer said the county, cities and special districts ‘are going to have problems’ as sagging property values and slowing sales crimp the property tax tap agencies depend on for funding.”
“‘I think the situation is more serious than it was last year, and that the recession has deepened,’ the county assessor said. ‘Everybody’s property has declined in value.’”
“The median price for all homes sold in Marin in October was $599,750, a 31.5 percent drop from $857,000 a year ago, largely because of 74 condo sales, many of them foreclosures, at a median $315,000. The median price of a single-family home in Marin in October was $850,000, down 13 percent from $978,000 last year, and 141 single-family homes were sold - down from 169 in October 2007.”
The San Francisco Chronicle. “San Francisco’s real estate industry might be happier to bid farewell to this year if next year offered the hope of anything better. It doesn’t. Instead, executives at the helms of the city’s biggest brokerages say they’re preparing for an unpleasant and unprofitable 2009, although it may turn out to be the best year that buyers have seen in more than a decade.”
“‘San Francisco had managed to fool itself through most of 2008 into thinking that it wasn’t going to suffer the same sort of issues that have hurt other places in the state,’ said Christopher Thornberg, an economist with the consulting firm Beacon Economics. ‘The last four or five months of the year, San Francisco has seen price declines that have been quite prominent. You can’t have prices fall as much as they have across the bay without some impact on San Francisco itself.’”
“The median price of a single-family home in San Francisco fell 16.6 percent to $702,000 in October, the most recent month for which data are available, according to MDA DataQuick. The October drop compares with $842,000 in October 2007. The median price is now 22 percent below its peak of $900,000 in May 2007.”
“Top executives at Zephyr, McGuire Real Estate and Pacific Union GMAC Real Estate, three of the city’s biggest brokerages, say sales are slower this December than last. Sales volume is down 28 percent at McGuire, according to Charles Moore, the company’s CEO.”
“One of his top agents approached him recently after listing a home that she was convinced would sell quickly. ‘She thought it was a run-don’t-walk situation that would go over asking (price) with multiple offers,’ Moore said. ‘Two weeks later, she showed it to a buyer who offered less than the asking price and got it. There’s a new, lower benchmark.’”
“Even as the real estate executives say they’ve encouraged their agents to lower expectations, they are finding increasingly that the prices still aren’t low enough.
When Zephyr agents presented their new listings at last week’s sales meeting, said owner Bill Drypolche, the inventory was relatively light, not abnormal for this time of year. But the number of homes with price cuts and deals that collapsed in escrow was way above average. ‘It was disheartening,’ he said. ‘It’s very unusual in San Francisco to have to go through rounds and rounds of price cuts. It means that either we missed the market, or we were too high in the first place.’”
“After a 14-year rise in home prices, a period in which it seemed that values moved only in one direction, Moore said it’s difficult to persuade sellers to price low. Whereas in the past, a below-market price might have been a ploy to attract multiple offers, Moore said, he’s now encouraging his agents to tell their clients to price low and be willing to accept an even lower offer.”
“‘It is good counsel today to tell your seller to list the property under the competition,’ he said. ‘A high-water mark is no longer appropriate when the tide is ebbing. Prices are still coming down, and good sellers have to chase the prices down.’”
“As a group, Moore said, sellers are going to have to acknowledge that is no longer their turn. ‘For the past 14 years, all of our buyers have acted under a sense of urgency,’ he said. ‘Sellers need to embrace that it is what it is. They have to start acting differently with more of a sense of urgency.’”
IMO, there is a significant change in the reports from the North County Times and the Record. After big increases in sales for a while, now volume drops, even as prices continue down. Stockton was even selling more than during the boom. But as foreclosures dropped due to government meddling, the market didn’t improve, but got harder.
Listen up policy people; foreclosures are the markets way of healing, and anything you do to slow it down only makes things worse.
I’ve been working with lenders inspecting, cleaning up, and getting their properties ready for market. Word from the ones I work with is to look out for the foreclosure floodgates to be opened once again in earnest after the first of the year. One of my contacts said more than what we’ve sen so far.
Obviously, what we’ve seen this fall/early winter was a clear-cut example of a dead cat bounce (in sales, not price) which was to be expected. Now witness the knife-cachers bleed.
“Word from the ones I work with is to look out for the foreclosure floodgates to be opened once again in earnest after the first of the year.”
That would be a logical consequence of all the foreclosure moratoriums, which don’t solve the problem of loanowners who cannot afford their mortgages.
Flood as in new units on the market or flood of new foreclosure notices?
The banks need to move the units.
As Ben noted, foreclosures are the relief valve that helps heal the market. If there is no healing…
Got Popcorn?
Neil
The natural workers aren’t very plesant.
So right. The Alt-As are coming.
We were at my wife’s friends house in La Jolla yesterday. They started working at pizzerias 17 years ago in Mira Mesa and they now own 3 restaurants and a beautiful home in a gated community in La Jolla. These houses were 1-2 million minimum in my estimation. The husband tells me that they’d like to sell the restaurants and the house and head back to Europe but they can’t hope to get 60% of what they paid for all of it. The restaurants are very successful and he said “they’re not going to give them away”. I told him that if that’s the case, they’ll be owning the house and businesses for quite awhile to come. He hung his head and said “yeah, I know”.
The restaurants are very successful and he said “they’re not going to give them away”.
I just don’t understand this behavior and it’s very common. If you’ve made a decision, just do it (responsibly) and go forward.
Do they want to head back to Europe or do you want to spend years doing things you don’t want to do in a place you don’t want to be so you can squeeze every last dollar out the transaction?
My sister is the same way. She wants to move to NC (supposedly). The house is on the market at too high a price and sits with no showings. And they’ve put more money into it. And they are taking vacations to Las Vegas and such.
If it were me, I would have cut the price every month until it sold. In the meantime, I’d be saving money like mad to make the move and minimize the impact to our long term goals.
I just don’t get it, in either case…
It’s because the “gains” of the bubble are already spent, but the losses are held as a fool’s collateral in the hopes of a bailout, a stroke of luck, or a reversal of the laws of physics (i.e. what goes up will continue to go up, in defiance of gravity).
Perhaps, it’s best that we don’t “get it”.
I am beginning to realize that the decision-making process of the people on this blog (mine included) is fundamentally different than others.
If we want something, we reason it out, and aim for it. We understand trade-offs, and realize that sometimes you can’t have it all in which case you prioritze.
In this case, do they want to get back to Europe, or they do want to keep doing it what they do? Which is it?
I’m with you; it’s simply extraordinary.
“The house is on the market at too high a price and sits with no showings.”
What town? NKingdom? Are you guys natives or imports? The fact that she’s seeking to relo to NC ought to be a sign that the old trend of northerners moving south is still alive and well.
“I just don’t understand this behavior and it’s very common. If you’ve made a decision, just do it (responsibly) and go forward.”
I don’t get it either. If you really, really want to change your life, go for it and don’t worry about losing a few measly dollars. You’ve only got one short life to live and you don’t take a dime with you when you die.
I swear it seems like some of these people only want to move because they’re convinced they can’t. Unless they’re facing foreclosure or mandatory job relocation, why is anybody considering selling their home right now? Yet, just like in the early 1990’s, as soon as the economy tanked everyone wanted to sell their house RIGHT NOW. It’s like the sheeple are just driven to buy high and sell low.
Welcome to Chapel Hill, NC or to Wilmington…all comers welcome.
Tell the guy to go back to Europe. We don’t need his type here.
-Big V
What an asinine comment. His “kind”? And what “kind”, specifically, is that?
Hey, if Europeans want to come over here and make decent food for us I’m all for it. Americans in general have pathetic taste in food, so these people’s presence here could only be an improvement.
Oh. and on another note….
All last summer the wife and I have been making cash offers, way low-ball. Recently, with our eyes on other investment opportunities, we discussed financing small amounts on the places we were looking at. We’re talking 60 to 70 percent down here, loan amounts of 40% or less. So I get on the phone to some of my prior contacts and was soon blown away. Now, I knew things were tight in the world of lending, but not this tight. I always assumed that there would always be a place for stated income loans as long as the potential borrower had at least 50% down. Heck, I’d lend the money right now to any stated borrower who plunks down 50% on a viable property, and then pray he/she doesn’t make a payment! I mean, that’s the whole idea of a lender allowing for the elimination of income verification, and that is the risk is far offset by other factors, such as very high down or a pool of assets to back the loan. The problem with the recent past is that lenders ignored the factors that offset risk on stated deals (not all stated deals are bad). But I found recently is that if you are a self-employed borrower who, after all his/her schedule C deductions, cannot meet the qualifying criteria, YOU’RE OUT! (just an FYI - almost all self-employed do not meet the qualifying criteria after deductions. In my years of qualifying self-employed borrowers, I’d say maybe 5% would actually qualify after Sch C deductions, which is how income amount is calculated according to FNMA standards, which sets the benchmark. Corporations, LLC’s and the like are just as bad) Almost ALL self-employed need stated income type loans, which are found on the A side as Alt-A, or as one of many sub-prime products. As of last week, only one lender had any kind of stated loan. B of A. In talking to a B of A rep last Friday, they only have one month left for their program and it’s gone too. NO MORE Alt-A of any kind. That will slaughter the market BIGTIME!
Talk about more downward pressure in ‘09? Add that too it!
GOT CASH?!!
But what rational lender would lend 50% of the principle on a stated income loan given that it looks like values might drop more than 50% from here, perhaps even much more than 50%? The tsunami that’s headed toward shore isn’t going to care that the buyer had 50% or more into the place.
In other words, banks may finally be realizing their models don’t work because their previous behavior broke the system. And, they may be starting to realize that this is going to be the depression to beat all depressions.
Such a realization on the part of banks would seem to be a good thing, for it can only speed the unwinding and, thus, the subsequent recovery, if recovery is possible.
IAT
If banks actually anticipated homes dropping another 50% in value, then they’d be breaching every fiduciary duty by loaning to anybody regardless of the down payment. Now, another haircut of 50% is not off the table IMO, but nnvmtg’s incredulity is warranted in that banks are probably not anticipating this sort of drop. Just the fact that a borrower is willing to put 50% down basically frees the lender from any sort of risk and whether the borrower has a W2 or a schedule C becomes irrelevant. I too would be ready lender with this kind of down payment. Prices are already off by 40% and another half of the remaining 60% puts the lender investment at 30% of the peak value. No matter how bad this recession is going to be, it’s going to be tough for an investor to lose money at that level; especially given that the bank/lender will own the property outright at that point.
Problem with that premise: banks already have so many houses that houses have become like toilet paper. In addition, the houses they have as REOs - given stripping, vandalism, carrying costs - are arguably losing value faster than the ones they have in their core lending business as payment streams. Why would they want more of the former? Even the regular business is behaving badly.
Making a loan that difficult to get is the banks’ way of saying they don’t want the business. They now have legally defensible reasons to decline the non-traditional business. What they are grasping for is a defensible reason to decline the traditional business - full doc, 30 yr fixed. Appalling but true.
Deposits and payments are drying up. Given fractional reserve system, this has a multiplier effect on the loans that can be made. As in everything else, loans were a great business on the way up, with increasing deposits and loan volumes that were more or less on a predictable positive slope fueling a disproportionate amount of lending. But the same leverage on the way down is a bear.
I don’t understand why sch C makes any difference. Surely AGI or at worst AGI-deductions should be all that counts.
Oliver
“Oliphant voiced confidence the nation’s top economists will get it right. ‘Otherwise we’re making a horrible mistake throwing $1 trillion at the problem,’ he said.
So much for “Oliphants” having a superior memory. After the “nation’s top economists” got it so horribly wrong over the past few years, why on earth would the same people suddenly get it right?
I think what he really means by “getting it right” is that he wants the Obama folks to lend him money so he can get back to the business of fully building out his little city. IE, Mr. Messiah sir, could we please go back to the status quo 2005.
Wasn’t that Bush’s idea?
My PHD Phsyicist sister told me a few years back an Intellectual is a person educated beyond their intelligence. I believe many economists fall into this group. As a group, they are clearly out of touch with reality, with lots of theory and book learning, but little common sense. I often joke that I am just a computer programmer, but like many on this board saw this all coming years ago.
This clearly proves economists should be replaced with engineers if we want to fix things
Do not underestimate the gullibility of the engineers.
I am an engineer myself (with a PhD degree, so probably educated beyond my intelligence too) and saw this bubble forming in Chicago since 2003-04, but I can tell you that none of my colleges (all of them engineers with BS, MSc, and PhDs) saw it coming and all of them drunk the kool-aid. All of them bought houses way above their means, some bought investment properties too. They all thought I am crazy for renting, and just smiled dismissingly when I predicted a minimum drop of 50% from the peak.
So the lack of common sense is not a trade mark of the economists, and does not anything to have with ones education either.
I was stunned too that so many of these brainiac engineers/doctors didn’t raise some simple questions, like
1. Isn’t $275000 for way too much for an apartment? It couldn’t possibly cost that much to build + 15% profit…
2. We’re making houses faster than we’re making people. Won’t we eventually run out of people?
3. I don’t get this I/O thing. Fundmentally, it sounds no different than rent.
4. I REALLY don’t get this neg-am thing. It’s like compound interest in reverse! Isn’t that, like, insane?
5. What are people going to do when their mortgage payment goes up? Are they seriously depending on a raise?
6. These subprime folks seem like real losers to me…are they really going to pay for this house for 30 YEARS?
This is stuff that I came up with in 2004 before even before I knew what a no-doc or a heloc/MEW was. At the very least, they should have looked for more info, as I did.
Oxide, many of my colleagues cannot put 2 and 2 together, when it comes to the housing market, even now. They just have this “deer in the headlights” stare. What can I say. It is true that a fool and his money are easy to separate.
Oxide, many of my colleagues cannot put 2 and 2 together when it comes to the housing market even now. They just have this “deer in the headlights” stare. What can I say. It is true that “ a fool and his money are easy to separate”.
A big part of the problem is both the distinction between “education” and “intelligence,” and the role that emotion and social conditioning play in the behavior of even the best educated, and yes, most intelligent of people. No matter how educated or even smart a person is, they can and will make some bad decisions because that is simply part and parcel of being human.
Some people will make fewer such bad decisions, and education and intelligence help people who have those qualities make fewer mistakes than others. But they will still make mistakes, though what those mistakes may differ depending on the their individual conditioning and emotional make-up.
It is also possible to make an “intelligent” choice, based on all the available facts and the most detached and rigorous of reasoning, and still be wrong. I don’t think that buying real estate during the bubble is an example of an “intelligent, but wrong” decision as much as an emotional and socially conditioned one; but “smart,” wrong decisions do happen.
Do not underestimate the gullibility of the engineers.
I am an engineer myself (with a PhD degree, so probably educated beyond my intelligence too) and saw this bubble forming in Chicago since 2003-04, but I can tell you that none of my colleges (all of them engineers with BS, MSc, and PhDs) saw it coming and all of them drunk the kool-aid. All of them bought houses way above their means, some bought investment properties too. They all thought I am crazy for renting, and just smiled dismissingly when I predicted a minimum drop of 50% from the peak.
So the lack of common sense is not a trade mark of the economists, and does not anything to have with ones education either.
I work with a number of engineers who bought far beyond their means. A typical example would be my officemate who this past summer bought a $950k house on a $120k income. Even now, against all evidence, he ridicules the idea that Silicon Valley real estate can ever decline in value. I wouldn’t be surprised if his house has dropped at least $100k just in the 5-6 months since he bought it!
there are plenty of engineers amongst the FBs.
Could just be a common sense thing then. I don’t see a lot of that in my line of work either.
In addition to common sense, I think one of the key differences between HBBers and FBs is an ability to disregard what other people think of us. Surprisingly, it’s not as easy as it sounds.
I’m just guessing that most of us don’t buy a particular handbag or suit or car…just because it’s the “in” thing to do.
We probably also scratch our heads when people spend an extra $3,000+++++ to buy a watch (or purse or jeans…) that performs the same basic function as something far, far less expensive.
So many times I’ve felt I “don’t get it” (what everyone is doing) only to realize later that I was right (it was a stupid “investment” or purchase).
I consider an intellectual someone who approaches life with thought, reason, and facts (As can be best determined by investigation). I don’t think education plays any role in being an intellectual.
Plenty of people with no degrees that are intellectuals.
I think you speak of the pseudo intellectual, I found a site with a few funny definitions.
1. One who attempts to flex intellect that does not exist within his or her own mind.
5. Posseses a severe tendency to blindly and wholeheartedly believe any bullshit they hear, only to subsequently regurgitate the misinformation to anyone they see in an asinine attempt to appear more intelligent than a used, broken condom
6. My definition - Regurgitates without thought, understanding, or investigation, often with no other purpose than to stroke their own ego.
A monthly housing report showed the sales boom of September and October had softened and prices plummeted at an alarming rate. The median price of a house in North County took an absolute beating, dropping 12 percent in just one month.
BWHAHAHAHAHAHAHAHAHA! Either California is having a zombie outbreak, or those are an awful lot of impaled knife-catchers I see lurching around. Back in 2004-2005 I don’t think even the most convinced housing-bubble vultures in here were predicting 12% declines in a single month. FINALLY, it’s starting to get good!
12% will get a few people’s attention IMHO.
‘We can sell the cars, but people can’t get the credit,’ Corpuz said.”
Imagine that, having to have the actual MONEY needed to make a purchase, instead of buying everything on credit. How much of our much-vaunted “prosperity” of the past decade has been built on shaky pyramid of DEBT? Tell me this return to fiscal sanity isn’t long overdue.
Cash rules.
Combotechie:
I haven’t been able to sort out the deflationistas, gold bugs, hyperinflation arguments, decoupling theories and such offered here by those more trained than me in such dynamics.
But at this point in time…. there is no doubt…. cash does rule.
For instance: looked at a house a pal is buying. It has lots of so-called new furniture. Furnishings for sale too. Would be owner of home attempted to write the contract for furnished unit. The bank said no, wasn’t in the business of putting a value on used furniture (even though it was the quality that could be appraised, in usual times). Shoot, banks used to lend money for repairs. I recall hearing the phrase “throw it in with the loan” dozens of time in my life. Or the appraisal could include personal property. Anyway, this time, cash could be exchanged for the furnishings only, real estate lady says. Guy had a price list. Overpriced, but the stuff has to go.
The close of escrow is supposed to be mid-January.
A week before, when furniture is headed for consignment or metal building storage, cash for the merchandise will be king indeed.
Trouble is, didn’t like the guy’s table and chair tastes.
Rather shop for such things at an estate sale; I use old Vt. sap buckets for indoor trash cans, for instance.
Agree, but what really stuck out for me was the uncritical reporting of the popular –and incorrect– meme,”people can’t get credit”, without any effort at fact-checking. There are a number of dealers near where I live, and while business seems slow, it’s hardly ground to a complete halt, as “people can’t get credit” would imply.
People *can* get credit, they just can’t get stated-income, $0-down financing –which is a good thing.
Declare the State bankrupt, rename California “Death Valley West” and start ALL over
Several students have moved away, victims of foreclosure. More are prioritizing their part-time jobs over school work to contribute to the family’s bills. The hallways — usually abuzz this time of year with girl talk about who’s going with whom and where to buy new winter formal dresses — instead are filled with solemn conversations about sewing a gown or borrowing one from someone else.”
Oh, horrors! Anyone who has spent any time around the typical vapid, self-absorbed, semi-literate High Schooler, existing in their own instant-gratification la-la land while pissing and moaning about pricess-and-a-pea sized problems like someone dissing them in facebook, generating barrages of trite texts instead of actually DRIVING the car daddy gave them, will be less than sympathetic to the long-overdue reality check these kids are getting.
The more thoughtful and reflective of them might look at the rampant consumerism and greed that characterizes their parent’s generation, count the cost of that debt-fueled lifestyle, and resolve to do things differently. Others might have to turn their attention from self-engrossment and their own individual techno-pod long enough to realize there’s REAL PROBLEMS facing them, their families, and their future, and they need to step up and deal with that reality - not a minute too soon.
their own individual techno-pod
+1 for that phrase.
BTW, fabric and trim for formal prom gowns — not to mention the sewing machine and skill — will cost more than a gown off the rack from Macy’s. These young ladies would do well to drop the princess act altogether.
This makes me the Worlds Worst Mother, but I am not particularly fond of the “princess” trend in the world of girl’s toys and fashion. A little of it is okay, especially, if it comes from the kids themselves. (You know, if they make the crowns and use Mom’s high heels - play stuff that comes from their own efforts..)
But all the stuff around them now is “princesses” and “shopping”. The “real life” princesses (at least in their own mind) I know are hard to be around, neurotic, and completely unhappy. Shopping as a “hobby” is shallow, unfulfilling, and will land you in the poor house. Why would I want to do that to my daughter??
Madison Avenue wants that for your daughter. So you should want it to! Or haven’t you been properly brainwashed by your TV and magazines?
I don’t think hollywood and the media will ever receive the blame they deserve, for their participation in this debacle.
I don’t have kids but I really detest this particular meme.
It is sheer infantilizing, and if I had a daughter I would go totally and completely @peshit.
Hang in there! Maybe she will become a mathematician or a physicist or a surgeon or some such other brainiac.
Dress up. You detest DRESS UP?
I have two nieces, and have always resisted giving them “princess” type Christmas and Birthday presents. Instead I have tried to give them things to awaken a sense of alternatives.
I think these gifts were appreciated, and I know one of my niece’s girlfriends were absolutely fascinated when I gave her a small microscope one year, but I suspect they were also regarded as somewhat strange.
So much for my efforts; the older niece graduated with good grades from her 3-year tertiary course a couple of weeks ago.
In fashion design specialising in bridal dresses.
LOL!!
BTW, I despise that whole “princess” thing, too. Some people think we’re mean because we buy (mostly) gender-neutral toys and books.
Agree with Vermontergal. Kids need to create their own play. We have no right to force our/society’s stereotypes on them, IMHO.
After sewing all my clothes and dance dresses for years, I finally sold my machine 7 yrs ago. Regretfully I wish I still had the machine, but the costs of fabric- and crap fabric to boot- and machines etc are so costly, it does indeed make shopping at sale time in Macy’s the thing to do. Those chain fabric stores are the crappiest places. I remember when….oh well. Big Box Stores Unite against middle class again/Corporations unite.
Funny I just purchased a machine mostly for repairs. When hyperinflation and taxation hit you’ll want to be able to fix/repair/build as much as possible.
Never ever give up your machine. I still have 4.
Depending on where you live, you can still get decent fabric reasonably but it’s rare. The trick is patterns and knowing how to do real handwork (I can still draft a double breasted suit from scratch in 10 minutes). But if I’m knocking off a wang couture for instance, I’ll spend on the fabric and make it up with vintage handwork.
and don’t forget the young princesses from Oakley who now have to sew or borrow their prom dresses….omg…I wonder how many of them acturally know how to sew or even cook?…and do you mean that miss sweet 16 britney now has to buy a used ford pinto instead of a mercedes for her first car….omg!…the very thought of it.
Princess economics has gone rampant over the last 30 years and it really accelerated over the last 10…the result has turned many of our children into adult spoiled brats.
There’s nothing like a fat depression to teach our kids the true worth of things…i think the faultering economy and the collapse of princess economics is the best thing for america.
“I wonder how many of them actually know how to sew or even cook?”
I wonder how many of their mothers know how to cook.
Gosh crazy,
How many of their fathers know how to cook? Give me a break.
I think crazy’s remark was more about a particularly narcissistic generation (starts with a “B”) than a gender-directed insult.
Do you know how to sew, Jeffrey, or is this time consuming, tedious, low-value chore only expected of female children?
Oh Sammy, you’re suck a jerk. Right. The kids who lived through the first Great Depression were admirable, while the kids who will have to live through this one are worthless maggots who deserve it. Get off your high horse.
Have you seen the behavior of today’s children? Saying “they deserve it” certainly isn’t far from the mark. These children “deserve” a strong reality check at the very least.
“One of his top agents approached him recently after listing a home that she was convinced would sell quickly. ‘She thought it was a run-don’t-walk situation that would go over asking (price) with multiple offers,’ Moore said.
Man, do I love watching realtors get schooled by something called REALITY.
22% off peek in SF and still falling…
22% off the peak, after 14 years of relentless price increases?
Yawn.
Wake me up when it’s 80% off the peak, so I can start lowballing it even further.
My knowledge of California geography is limited. Will someone please tell me where North County is? I’m curious how home prices there are only now dropping below a median $200/sq ft. Is it somewhere on the coast?
“North County” is a local reference to north San Diego County (particularly bedroom communities like Rancho Penasquitos, Rancho Bernardo, Rancho Santa Fe, Escondido, San Marcos, etc).
Don’t forget quaint places like Cardiff-By-The-Sea.
“Foreclosure-by-the-Sea” doesn’t have quite the same marketing cachet, I suppose.
But Enron-by-the-Sea does!
then there is foreclosureside, and foreclosurebad. Not sure what to call Encinitas though. Perhaps more coffee ?
Enron-itis?
FPSS, I wish Bernanke could just build a time machine so he could go back and bail out Enron.
“Another trend persisted in the November report: Sales boomed in foreclosure clusters but stagnated in high-end, coastal communities. One cause of slouching high-end house sales could be the cost of financing large loans, as lenders have applied one of the steepest premiums in history to loans above a certain size, which are not backed by the government.”
Not only sales have fallen off a cliff in high- end communities, but virtually all retail and recreational activites. I frequent Sunset beach and Huntington beach, two popular OC coastal resort communities, and it looks as if a neutron bomb has hit these popular coastal Beach funzones. In Oct/Nov the weather was unseasonably warm -average 75-80% - and still the beaches were deserted. I do see more and more middle- age boomers( joining the already encamped regular beach bumb hippies) taking up surfing, probably because they just became unemployed and are taking up some cheap simple recreational diversion. Ditto for the East Long beach- Alamitos Bay/Belmont Shore resort area. Empty and deserted.
This has been the trend all fall, and December has seen a further dropoff in beachside resort & spending activity.
just a followup to the drop off in housing sales in hi-end coastal communities. I see quite a bit of homes/rooms with rent signs posted in sunset beach, my main hangout . The owners of expensive beach side properties in SB will rent out their homes/rooms rather that sell in a down market. lots of properties for rent out in sunset beach,a nice tidy expensive- to- live-in but otherwise low-key laid back beach community with a long clean stretch of white sandy beach and a ton of water recreation opportunities. Been rather empty of beach goers lately as the US/Worldwide economic collapse has indeed hit this and other hi-end coastal resorts mainly due to complete collapse of consumer spending.
REOcinitas
Rentcinitas.
“The median price of a house in North County took an absolute beating, dropping 12 percent in just one month. That brought the median price in November to 40 percent below the same month a year ago, dropping to $358,000. Sales were up just 32 percent from a year ago after two straight months of sales that were double the weak 2007 numbers.”
FYI, a one-month decline of 12 pct occurs at an annualized rate of
((1-12/100)^12-1)*100 = -78 pct.
The rate of decline must be bottoming out, as it is clearly not possible for prices to decline at a 78 pct annual rate for very long before bargain basement prices are reached. (The silver lining: bargain basement prices will be affordable, even to young families trying to start careers in San Diego).
Here is the article in USATODAY answering to all questions…
http://www.usatoday.com/money/economy/housing/2008-12-12-homeprices_N.htm
Declines will be similar to the stock market: bouncing up and down in response to a potentially infinite number of variables, as any good non-linear system does. The most important variable is the most difficult to model: human psychology.
You can predict the direction, but not the rate or the degree of decline beyond the short term. That’s what kills me about so many of these so called “computer models”. They were wrong about long term rates when the bubble was going up, and they’re equally unreliable going down.
I understood the article differently. Two months of stable prices, followed by a one month decline of 12%. That annualized rate would be -40%.
Just like it’s been all along, the better areas in North County have held up rather well during the downturn. The prices have been fairly stable since Q3 of 2004 (which was basically the peak in the better areas of North County).
Only now am I starting to see some actual price declines, but it is still rolling in from the less desirable streets/neighborhoods to the most desirable. This is within the same zip codes, BTW.
It is the foreclosures that are moving, and these areas are more affected by the general economy and the stock market than they were directly affected by zero-down, neg-am loans (though we have plenty of those, too).
The desirable neighborhoods will be the last to crash. They are only beginning to have real declines, as we’ve only seen about a 10-15% decline so far (if that, some people have made money since the peak!!!).
Despite a record rate of price declines, a global financial collapse and a steadily rising unemployment rate, some bottom callers still cling to a naive belief that the market will reach bottom in one year. I predict they will continue with this stopped-clock prediction until history proves them correct.
The main thing that is thus far missing from a true housing market bottom: CAPITULATION. There is no evidence that myriad would-be sellers have thrown in the towel on their hopes to sell for quasi-2005 prices. There is no evidence (yet) of a panicked rush to the exits, with sellers falling all over one another to underprice and get out before an outright price collapse. And nobody I have seen quoted in the MSM has yet noted that “real estate is the worst possible investment.” Until I see such signs, I will be very skeptical about claims that a bottom has been reached.
On that front we have a very long way to go. I picked up a local FSBO publication yesterday. Even with a middle to high income relative to the state economy, we could only afford 2 houses in the whole publication by traditional lending measures. (And we’re 100% debt free..)
I’m kinda wondering which of the coming seasons will bring on the local crash. NE markets are literally frozen anyway in the winter. One of these springs is going to bring on a huge set of price reductions.
Ding!
Just ran stepson to library, waited in parking lot for him to get book, and heard on radio US Senator Robert Menendez (D, NJ)babbling on about the great benefits of foreclosure moratoriums. To the extent these make the responsible among us more attractive to lenders– and the irresponsible, even more of a bad bet for lenders–I agree that they are beneficial.
Imagine if voting rights were tied to your credit score. Methinks we’d have a better class of elected officials.
No, no, no, this used to be the mainstay of the Democratic party of the 19th century linking voting to land ownership.
This is a really bad idea for obvious reasons.
And who says those who have better credit scores can actually think? What credit scores say is only one part of the ‘thinking pie’.
Just look at all those who are suffering from the Bernie Madoof(sp) debacle. I am Sure They have/HAD good credit scores.
And just cause one might have a bad /mediocre credit score doesn’t mean they haven’t learned their lesson about investing with crooks. Recognizing a crook is a highly defined skill.
And doing something about it.
Credit scored reward those who are well educated, W2 Employeed and don’t take risks. Artists, Inventors, Musicians etc often have low credit scored due to quirks in their nature would be eliminated.
Yet another obtuse, self-serving idea from Sammy the biggot Schadenfreude. Maybe we should restrict voting to land-owning white males too.
well, it worked pretty well for the first few decades of our nation….except any land owning male could vote, regardless of race.
“Her plans for college — initially focused on the University of Utah but now turned toward state schools and community colleges”
AWwwww…pardon me if I don’t shed a tear. I’m getting tired about these poor innocent kids’ “college plans on hold! blah blah” as if it were the biggest tragedy. If she’s like most college-bound who don’t have a clue what they’re going in for, she’d be better off taking advantage of Cali’s JC system then transferring to state college. It doesn’t have to be someplace far away and magical. One of ours started at Ohlone in Fremont using his veterans benefits and is now a psychiatrist with agencies and hospitals all over the country bidding for his services and offering to pay off his student loans. Not sure why he chose to be a shrink but whatever..
Considering how most High School graduates don’t seem to be able to write a coherent sentence or count out the right change at Starbucks, it’s no tragedy that fewer of them will be college-bound. Maybe universities will return to their previous role of educating the brightest 10% or so of the population, rather than being the diploma mills they’ve turned into.
I teach one course per semester as an adjunct at a local state college. Despite the fact I warn students the first night of class that “I don’t do extra credit,” I am invariably approached every semester by poor students with pleas for a chance to earn “extra credit.” This fall, two of them teamed up and buttonholed me after class one night. One of them informed me, “I don’t test good”; the other chimed in, “Yeah. Me too.” God help us.
Our local high schools have used the % of kids going on to college as their measure of success for the last 2 decades, at least.
In fact, the high schools seem to have no other metric to achieve other than maximizing the # of students who meet the standards for admission to local colleges. And local colleges invariably offer remedial studies for students who didn’t actual seem to receive the education they were supposed to in high school.
The trend of pushing every kid to college was very evident in my affluent high school. As I was graduating high school, the gradation requirements for incoming freshmen where changed to match the admission requirements for UVM as closely as possible.
Thus at my high school, there was no emphasis at all on the idea that this was the last shot to turn out educated citizens. Remedial, vocational, and home economic education were offered, but with far less emphasis than college prep courses. They are the “also ran” courses for the kids whose talents, ambition level, or behavior problems prevented them from being shoe horned into college prep classes.
It would be great if high schools focused on educating their student body, rather than “prepping” them for the next level.
When I was in high school, the teachers bragged about which colleges their precious angels were accepted to. One of the wiser teachers said “It’s not where you get in, it’s where you get out of.” Needless to say, the wise teacher was not popular among the rest of the faculty.
My wife is a teacher, and she notes that educating students seems more often than not to run headfirst into the “preserving self-esteem” wall. Sadly, this is the case not only in the public schools, but many of the private and Christian schools as well.
I remember numerous teachers that made my classmates and I feel quite stupid from time to time in order to drill home a particular important concept, and I’m forever grateful that they did.
Better yet to be able to teach difficult subjects by example, without ever resorting to heavy handed techniques, but if I have to choose… bring on the drill sargeants. The fact is that we humans have finite learning capacities, and some things are hard to understand, so not all learning is going to be easy, and there will be failures along the way.
Apparently ifthefooshits missed the grammar “important concept” class - it’s “classmates and me” not “classmates and I.”
It’s not so called intelligence that makes one succeed in life, it’s curiosity.
Well put.
But our economy has been set up to require a lot of college grads. California has a shortage of them, remember? Remember all the dweebs who have come on this blog and complained that there aren’t enough mathematicians or scientists or engineers? Geez. It’s like you’re damned if you do and damned if you don’t on this blog. From the comments posted so far today, it looks like you guys are longing for a society full of mechanics, carpenters, and housewives with no skills other than domestic chores.
I think it’s OK that I am a female with a science degree who does not sew. And yes, I like nice clothes and shoes, and I don’t feel GUILTY for letting my husband buy me those things.
Hmm…
I’m longing for a society that educates every person to their full potential. College never was for everyone. I think modern high schools use colleges as a way to lower their standards and no longer worry about making sure that their students have actually received an education.
Many people are kinesthetic learners who excel at the occupations you listed. If you excel in science and prefer to buy daily necessities because you can, more power to you. Bottom line is that we need as many people as possible to achieve in professions they are good at and they like.
…it’s no tragedy that fewer of them will be college-bound.
Unless you consider they will be paying for what’s left of social security, running our government in the future, and otherwise making decisions that will affect everyone’s future…there’s no tragedy at all!
Agreed, no tragedy at all. If they don’t go to college (that is, the non-bright) they will be forced to specialize in something they are good at or learn some useful trade, become gainfully employed where they have a productive advantage, not be indoctrinated with wrong-headed and unproductive ideals, and everybody from their children to their grandparents will be better off.
Meaning of “No Child Left Behind”: Everyone has the right to go to Law School, even lazy and unintelligent people.
And please remember, dyslexia or (so-called) ADD is in no way a sign of lesser academic ability, which is why it’s only fair that these special adepts are allowed 50% more time to do their tests.
“(so-called) ADD”
+1, brothah!
I’m easily distracted. It’s a failing I work hard every day to overcome. It’s part of life, for me. Take a drug? Not on your life. Do I have a disability? No. I have a discipline problem.
Discipline problem. That’s beautiful!!
I have a PhD in mathematics. Getting my first job with pretty tough going; no one wanted to hire me. It was so insane, that some HR person from IBM refused to even grant me a campus interview as I failed to have the required 2 computer courses needed to work at her facility. I tried hard to explain that I taught CS classes as a TA, but to no avail.
I finally found a small company that was prepared to take a chance, as I had written a Mac program and they had clients that wanted a Mac version of their DOS program. I liked that company, and have come to like small companies since then.
Big companies want experience at very specialized activities. If you don’t have this or that, you are automatically removed from consideration. I myself am now guilty of this when looking for people to hire. I know companies are not interested in developing talented people. It is not worth it to say, “Hey this person looks interesting, maybe we should try them.”
I don’t think we have a shortage of mathematicians, rather we have a surplus. Our employment system wants consultants with specialized knowledge (buzzwords) they can hire and treat as employees. As most people don’t understand advanced math (or know the buzzwords), there is no perceived need for such people. Big companies don’t want thinkers or talent, just cogs. Small companies can not afford to take too many risks, so tend to be careful in hiring people.
Oliver
P.S. This sounds kind of bitter, but I don’t mean it that way. I have no regrets in doing a PhD. I just believe shareholder money would be much better enhanced hiring 400 talented thinkers and paying the CEO $3 million a year, rather than paying the CEO $103 million a year.
The higher education bubble.
Hey in Montana:
How come you didn’t help your kids get an education?
Maybe he kind of figured that it was their responsibility to take care of themselves once they became legal adults. Like my parents and many in my generation did….
In what year did it become an obligation of parents to pay for their offspring’s college education?
““Oliphant voiced confidence the nation’s top economists will get it right. ‘Otherwise we’re making a horrible mistake throwing $1 trillion at the problem,’ he said. ‘If it doesn’t make it right, I don’t know how we can.’”
Are these new “top economists”?
Good thing we got rid of the old top economists that we had we had before…
I just want a one-handed economist.
How would you hear the one-handed economist clap?
How to know if an economist has the clap?
Possibly using a Gram stain?
Listen for the slap on his/her forehead!
“Charlie Brown you’re such a blockhead!”
How was Behling, the highschool teacher facing foreclosure, planning to pay for the 17 year old daughter’s college? I mean it shouldn’t be an unexpected catastrophy that college comes after highschool and, gasp, has to be paid for. I’d love to know why he’s facing foreclosure- heloc, neg. am. loan. And - why isn’t he looking for a second job, like his wife?
Exactly.
So on CNN they mentioned ivy zelmans USB chart. I didn’t hear what they said, but what is coming up as far as resets?
Rubbing hands together with a big smile!
I just watched 60 Minutes, where they devoted a segment to the housing bubble. They showed Ivy Zelman’s chart, crediting Credit Suisse (where she worked when she put that chart together). Next tsunami re-set is 2010. So, we can look forward to people calling bottom all next year, saying we’re out of the woods, then…BOHICA!!!!!!!!!!!
Yeah, we watched it too. They did a decent job talking about both Alt-A and Option-ARM mortgages, and they interviewed a flipper in Florida.
Videos available here:
http://www.cbsnews.com/sections/60minutes/main3415.shtml
thanks to the three hour difference I get to watch 60 mins now. thanks palmy!
Starring Barney Crank.
For those who missed it, the link to the 60 minutes transcript (or at least the story) is here:
http://www.cbsnews.com/stories/2008/12/12/60minutes/main4666112.shtml
Kudos to CBS for posting a transcript instead of making me watch 20 minutes of shallow video.
We are very famliar with The Credit Suisse chart. It’s the one with the two humps. THe first hump was this year when all the subprimes reset. In 2010, all the ALt-A and Primes reset. And get this..if I rememberthe chart, a significant portion of those mortages were MEW and HELOCs, where primes refinanced their fixed mortgages into I/Os and neg-ams and bought toys with the cash. This group of brainiacs are best represented by Mr. “I’m in debt up to my eyeballs.” They won’t be primes very long.
Ivy Zelman: The Fallout
By: Ivy Zelman Related Articles
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“The economy and investors are currently bracing for the ramifications of one of the most unprecedented actions ever taken by the federal government, which is set to alter the landscape of the U.S. financial system. In theory, a government-created entity designed to offload toxic assets from the balance sheets of financial institutions has the potential to stabilize
the beaten-down credit markets, which in turn might alleviate pressures in the housing market. In addition to the government-financed takeover of troubled assets, the Treasury also plans to expand its previously announced program to buy agency mortgage-backed securities and have the government-sponsored enterprises (GSEs) increase their purchases of mortgage-backed securities in the open market.
In the words of Treasury Secretary Paulson, removing these assets from financial institutions will help to “restore confidence in our markets and our financial institutions so they can fuel continued growth and prosperity.” The government has essentially taken the stance that committing hundreds of billions of dollars of taxpayer monies is worth avoiding the unknown of continued financial institution failures.
While the preliminary commentary indicates that the government is focused on purchasing up to $700 billion of residential and commercial mortgages and securities from financial institutions, there is much uncertainty about what the plan might ultimately entail. Furthermore, there is mounting speculation that the government could pursue a second housing stimulus bill including the re-implementation of down-payment assistance, a larger tax credit, and a freeze on foreclosures.
The bailout plan could target three potential areas: the purchase of mortgages and securities; the purchase of foreclosed homes; and the purchase of AD&C loans.
In my view, the primary roadblocks to a housing recovery are confidence, consumer credit quality, and deflating home values—not liquidity. The government has already taken numerous steps to infuse liquidity into the secondary mortgage market with little impact on housing fundamentals. This government bailout will not address the credit problems or accelerating job losses plaguing the market; however, it will lower mortgage rates and might improve confidence for buyers who have been on the sidelines. The Catch-22 for these buyers is the inability or unwillingness to sell existing homes at depressed prices, particularly as about 10 million (or 20 percent) of mortgage holders have zero or negative equity.
I currently estimate that there are approximately 800,000 to 1,000,000 foreclosed homes owned by banks and other financial institutions. Assuming that the government can judiciously purchase the foreclosures, hold them until the market is much stronger, absorb the carry costs, and avoid the moral hazard of additional foreclosures, the benefit to the housing market would be significant. At the very least, perception alone would be a boon to confidence. However, I believe that this would result in an enormous drop in existing-home sales as real sellers would be unwilling to sell into a down market at depressed comps from previous foreclosure prices.
If AD&C assets are taken off of lenders’ books at some level of discount, it is likely to result in an acceleration of impairments taken by builders. Additionally, I believe it is highly unlikely that banks will immediately re-enter the still-risky real estate lending business simply because it has been cleansed of troubled loans.
Unanswered questions include: How will the value of purchases be determined? Is this a one-shot offer? Are non-bank financial institutions such as hedge funds, insurance companies, and municipalities able to participate? How will the government ensure that fresh capital is reallocated to the housing market? And, does the government understand the risk?
As Congress considers another housing stimulus plan, I believe that, if implemented, the return of down-payment assistance and a larger tax credit that does not require repayment would be most effective toward stabilizing the market. I believe that freezing foreclosures or loosening underwriting criteria would be harmful to the medium-term health of the market and carry heavy moral hazard risks”
Where’s that chart?
I think Ivy is being too generous. I wouldn’t give anyone down payment assistance, and the tax incentives to buy real estate are already over the top. Oh well, she’s one of the few out there who seem to have any grasp on the situation, so I guess I’ll take what I can get.
Here’s the full report. “The” Chart is exhibit 42 on page 47: CAUTION PDF
http://www.recharts.com/reports/CSHB031207/CSHB031207.pdf
Took a road trip to visit relatives in “Elk Grove”. Passed through the towns of Lodi and Lard.
Gangster tagging EVERYWHERE in Manteca. All the walls surrounding those half-emtpy housing developments look how the NYC Subways looked in the 1970s.
Galt! I forgot Galt!
Yeah, I was the crazy one buying silver and gold during Y2K instead of real estate in ncsd! How has it worked out for me? I have more Ag/Au than i can lift. And no mortgage payment! Bwahahahahhahah!!!
I’m thinking about taking a job in the Bay Area, and am thinking about buying a home in the South Bay Area (Santa Clara, Sunnyvale, San Jose).
Does anybody have any idea about *when* it would be a good time to buy a house in this area — 2008, 2009, 2010, etc. Civil answers are appreciated.
I think that this economy is actually beginning to look like other bad economies in the past, and that there will be a real bottom to it sooner or later. Ultimately the government will have to bring jobs back to make that happen though, either by changing corporate law, getting rid of some of those ridiculously corrupt visas (H-1B, L-1, F-1, etc.), erecting trade barriers, or all of these.
It’ll happen, because otherwise the country will empty out and everyone will move overseas and America will get conquered by Mexico or Canada (or whoever else wants all those McMansions); or everybody will starve to death, or — the government will do what it needs to do, which is to end the endless corporate subsidies.
Thanks in advance for the help!
Spiffy