Prices Are Half Of What They Were In California
The Marin Independent Journal reports from California. “Another month of plummeting home sales in Marin included a price drop of nearly 30 percent from November 2007, as discounted foreclosure sales continued to drive the Bay Area market. The median price of a single-family home in Marin last month was $790,000, down from $975,000 last year, MDA DataQuick reported Thursday. In October, the median single-family home price in Marin was $850,000. Realtor Peter Harris in Novato said bank-owned properties and short sales have made up about 85 percent of his business over the past year. ‘Prices are half of what they were,’ Harris said. ‘Condos are selling in the low $100,000s. We haven’t seen this for a long time.’”
The San Francisco Chronicle. “Bay Area home values plummeted to an eight-year low in November. The median for existing single-family homes in the nine-county region fell to $350,000, a 47.8 percent drop from a year ago and the lowest level since September 2000, according to MDA DataQuick. Nearly 50 percent of the houses that sold during the month had been repossessed in the last year.”
“‘When you have banks that want to sell (foreclosed homes) but don’t want to make any loans, it makes it really tough,’ said Janice Spencer, a Realtor…who focuses in eastern Contra Costa County.”
“The hardest hit county was Contra Costa, where prices sank 49 percent to $260,000. Spencer has seen homes in the area that nearly sold, only to come back on the market for $50,000 less two months later.”
“California real estate underwent a turbulent year in 2008, according to the California Association of Realtors’ annual report on the state’s housing market released on Wednesday. ‘We’re obviously seeing uncharted territory in a very difficult market,’ said Leslie Appleton-Young, chief economist for CAR.”
“The number of people who sold their property at a loss almost doubled from 11.9 percent in 2007 to 22.2 percent in 2008 - almost triple the long-term average of 7.7 percent. The losses were significant, clocking in at a median net cash loss of $125,000 among those who sold for a loss, compared with $40,000 in 2007. For homes under $500,000, an even higher proportion of sellers - 28 percent - took a loss.”
“CAR expects the statewide median price to continue to fall in 2009, although not as precipitously. It predicts a 6 percent drop to $358,000. ‘Our forecast for next year is for continued softening in prices,’ said Appleton-Young.”
The Sacramento Bee. “Mortgage rates are dropping, and so are home prices in the Sacramento region. What’s unclear is whether falling mortgages will be enough to strengthen the fledgling recovery in Sacramento’s troubled housing market.”
“MDA DataQuick said the median sale price for a home in Sacramento County dropped to $185,000 last month. That was the lowest level since September 2001 and represented a $10,000 drop in one month. Prices have fallen $105,000, or 36 percent, in a year.”
“Warren Adams of Security Pacific Real Estate in Fair Oaks recently scanned the listings for a neighborhood of $1 million homes in Granite Bay and found two dozen homes for sale with no deals pending. ‘I look at that upper-end market, and it’s just dead,’ he said.”
“John Arvanitis, of Sunshine Vista Mortgage Co. in Citrus Heights said…that the low rates won’t offer much assistance to current homeowners who want to refinance their way out of bad mortgages but owe more than their houses are worth. ‘I don’t care if rates go down to 2 percent, if you’re upside-down on your property,’ he said. ‘You’d be surprised how many people are so buried in their properties.’”
“Ninety-one percent of 2008 home loans had fixed rates, said a California Association of Realtors report, ‘State of the California Housing Market 2008-2009.’ Last year, 74 percent of loans had fixed rates, it said.”
“The report said one in five properties fell out of escrow during the year. In one-third of those cases, buyers could not get financing. Another third of buyers changed their minds. But 11 percent fell out of escrow because the buyer couldn’t make a down payment, the study said.”
“Rising sales, it said, were rooted in ‘distressed properties with mark-down prices.’”
The Merced Sun Star. “Merced County has 4,598 bank-owned properties. In November alone, 996 properties were foreclosed on, according to RealtyTrac. With the help of a new state law passed in July, Livingston has introduced an ordinance that would fine homeowners up to $1,000 a day for failing to maintain their properties. City Manager Richard Warne said the ordinance ‘allows the city to take action against houses that are in foreclosure. It’s another tool to deal with vacant homes.’”
“In 2006, Livingston passed an ordinance forcing developers to finish all infrastructure on their projects before they could have a building permit, said Warne. According to Warne, Livingston has 400 vacant lots. But since the city prepared for the scenario, they are ready to be built on. ‘While we may have vacant lots,’ said Warne, ‘all the infrastructure is put in.’”
“Now all they need is a builder.”
The Wall Street Journal. “The city of Vallejo, Calif., gained national attention earlier this year by filing for Chapter 9 bankruptcy protection. Isleton and Rio Vista say they have begun consulting with bankruptcy lawyers as they draw up plans to deal with their mounting budget crises. ‘We’re strapped for cash and by the end of March or early April we may not have enough money to pay for payroll,’ says Hector De La Rosa, Rio Vista’s city manager.”
“California’s troubled towns can’t expect much help from the state. ‘California’s fiscal house is burning down,’ State Treasurer Bill Lockyer said in a statement.”
The Desert Sun. “New population estimates show Riverside County grew by 2.14 percent — or 44,178 people — in the fiscal year that ended in July, the third-largest growth among California’s counties. That number is down significantly from recent years.”
“‘With the uncertainty with the housing market people are just not moving,’ Riverside County demographer Bill Gayk said.”
The Union Tribune. “Southern California housing prices dropped further in November while record levels of foreclosure sales drove sales activity higher, MDA DataQuick reported. The overall median in the six-county region was $285,000, the first time since April 2003 that the figure has dropped below $300,000. It was off 5 percent from October and a record 34.5 percent from November 2007.”
“San Diego’s median, reported Monday, was $305,000, down 5.7 percent from October and off 30.7 percent year-over-year. Sales totaled 16,720 in the region, down a record 22.3 percent from October but up 26.9 percent from a year earlier. The month-over-month change was partly attributed to fewer business days than usual in November. San Diego’s sales count, also reported Monday, was 2,673, up 11.4 percent from November 2007 and down 25.7 percent from October.”
“‘Bargains and bargain hunters have kept this market alive through some of the bleakest financial news in memory,’ DataQuick President John Walsh said in a statement. ‘There’s this renewed sense that you can score a ‘deal’ – something that had been missing for many years. Last month’s Southland sales weren’t great, given they were the second lowest for any November in 16 years. But they could have been a lot worse.’”
“‘The crisis continues,’ National Association of Home Builders Chairman Sandy Dunn said in a statement. ‘While builders are doing everything we can in the way of price and nonprice incentives to move new homes off the books, buyers are afraid to move forward. And in any case, there is almost no way to compete with the cut-rate product that is continually flooding the market from mounting foreclosures.’”
The LA Daily News. “San Fernando Valley home sales soared by 78 percent in November from a year earlier as bargain-hunters snapped up foreclosed properties priced at levels last seen in mid-2003, a trade association said Thursday. The median price of a previously owned home fell by 33percent last month to $375,000, down $182,500 from a year earlier, the Van Nuys- based Southland Regional Association of Realtors reported. That’s an 8.5 percent drop from the $410,000 median reported in October.”
“The median price of a Valley home has plunged by 43 percent from the record high of $655,000 in June 2007. In the 11 months through November, 6,403 homes were sold, 132 more than in all of 2007. But this will still be the second-lowest year for sales since the group began keeping records in 1984.”
“What’s clear is that the $700 billion bailout of the financial system is not yet trickling down to local buyers in a substantial way, said Mary Funk, president of the Realtors group. ‘Many more people are eager to buy, but the credit market continues to be a roller coaster, with lenders changing underwriting rules every day,’ she said.”
The Associated Press. “Diane Shackle found it gut-wrenching to walk away from a mortgage she took out in times that were better for both her and the U.S. economy. But the reality was undeniable: While she was keeping up with the monthly payments, she said she could no longer afford to buy food for herself or even kitty litter for her two cats.”
“So the 44-year-old cocktail waitress walked away from her two-bedroom condo in Southern California last July, turning her back on a debt of nearly $200,000. ‘It ripped me up to do it but I was tired of worrying and I had no food in the house,’ said Shackle. ‘I decided, you know what, I’m not living like this. I’ve got to quit (get out) before I kill myself.’”
“With the deepening economic crisis fast adding to the 12 million mortgages already “underwater” - the term for when a home’s debt exceeds its market value - it’s an option more are likely to consider as home prices continue to fall. Mortgage and financial experts hesitate to recommend a voluntary action that not only threatens to wreck your credit score for years but can result in authorities coming after other assets. But depending on state laws, they acknowledge it makes sense to at least look at it in certain situations.”
“‘You have to make the best decision for yourself, business-wise, which could be walking away from the house,’ said Nicole Gelinas, a chartered financial analyst.”
“Gelinas says it would be unfair to portray mortgage walkers as villains because it’s not unethical to take a loss and walk away from a bad investment that might keep you stuck in a ‘money hole’ for a decade or two. ‘Certainly you shouldn’t commit fraud when taking out debt,’ she said. ‘But when it comes to sacrificing for years and years to keep servicing debt on an inflated asset when the bank lent money against the inflated asset - you can’t blame the homeowner for that.’”
“Shackle moved out of the condo in July and rented an apartment for $750 a month. Foreclosure still hasn’t taken place. But without the burden of a mortgage gone bad, she says, now ‘I sleep a lot better.’”
“The Great Unshackling!”
Free at last!…free at last!…Thank God, we’re free at last!
“Shackle moved out of the condo in July and rented an apartment for $750 a month. Foreclosure still hasn’t taken place. But without the burden of a mortgage gone bad, she says, now ‘I sleep a lot better.’”
“…walk away from a bad investment that might keep you stuck in a ‘money hole’ for a decade or two.”
I’m a little surprised that “walking away” hasn’t spiked yet. Burglaries seem to be rising faster. Even here in Florida, where the decline generally seems to be about 6-12 months behind California’s, I’m not reading about walkaways as much as I expected to. I know people who are upside down by half the purchase price of their property and there is no hope the inflation-adjusted price will ever return to near what they paid. Wonder if it has to do with the recourse vs. non-recourse stuff.
6x 750 = $4,500.00
She should’ve stayed until they came with the “angry face” guys.
Show up to court and inform the other party (if they even show up themselves) “I just want you & the court to know I’m filing bk later this afternoon” …there’s another 30-60 days.
Then again, maybe this is being unfair to…The Bankers!
She could have stuck it out for six or nine months with no payments, then could have gotten ‘cash for keys’ from the bank. hehehehehehe
It killed her to walk away from her two hundred thousand dollar debt. I’m sure she wishes she could pay it all back. Hell i wish i could give everybody 200k. What’s wrong with her?
Nothing wrong, just a business decision. I would walk too.
“Nothing wrong, just a business decision. I would walk too.”
This gets to the root of one of the biggest problems we have, and will continue to suffer from as a country. There are no consequences for wreckless behavior. Banks loan wrecklessly because they will be bailed out. Buyers borrow wrecklessly because they can walk away. This leaves those who act responsibly to clean up the mess. Regardless of whether it’s “legal” to walk away, it’s immoral, and unethical (anybody
remember those terms?). How on earth can an economy function when there is such high doubt cast on whether or not contracts will be honored?
Its the only decision she could have made. I have no problems with cases like hers.
The ones I do object to are the ones who HELOC’d and managed to walk away with their plasma TVs and new cars.
Well said.
Its all done with risk management. If you are afraid the other party will not honor the agreement you make sure that you com e out a head if they default.
Notice how movie theaters make you pay before you enter the theater? Notice how restaurants don’t?
Read some of AZlender’s posts. He seems to be pretty on the ball.
I would hardly characterize it as “wreck-less”.
In fact, I think it would exceedingly kind to limit the condemnation of lending boom behavior to being reckless; it rose to the level of willful misconduct and, in very many cases, fraud.
Causing: a wreck.
Regardless of whether it’s “legal” to walk away, it’s immoral, and unethical (anybody remember those terms?). How on earth can an economy function when there is such high doubt cast on whether or not contracts will be honored?
It is most certainly ethical to walk away when banks, mortgage companies, financial institutions, and the individuals therein are not held to the same “ethical standard” as the average citizen.
The Masters Of The Universe get to walk scot-free, and the yokels get to pay? Is that it?
Sounds like a plan to formalize corporate America’s wet dream of a permanently indentured middle class.
How can you blame FB’s for walking? Good jobs are offshored en-mass to boost the bottom line, pensions get jettisioned without nary a thought, healthcare benefits are gutted and layoffs are all the rage. Companies run up huge debts, declare BK then throw away loyal employees and their benefits like putting out the trash. ‘CEO: It’s just a business decision.’ This behavior has not been lost on J6P, who is merely following the example that’s being set. Walking away becomes merely a business decision.
Skip,
“Notice how movie theaters make you pay before you enter the theater? Notice how restaurants don’t?”
You can get a refund if you leave the movie within a certain amout of time.
After about 15 minutes of a bad movie, I walked out and asked if I could get my money back. I got my money. The person who gave me the refund couldn’t understand why more people weren’t walking out of the movie and asking for a refund.
AZlender is a “she”.
Also, the FB did honor the contract. The mortgage contract states that you will either repay the loan according to your terms, or you will hand the property over to the bank. The lender is incentivized not to overlend because their collateral is their only protection.
Now the bailouts, on the other hand, those were a game changer and never should have happened.
Good point V, the only moral problem is see here is if the property is destroyed by the borrower giving up the morgtage.
When Wall Streed meglomainiacs get away with 35million for packaging the loans, why worry about a borrower walking away after living in a house he couldn’t really afford for 3 or 4 years. What has he taken away from the table? The difference, if any, between his morgtage payments and the rent he would have paid had he not borrowed the house.
I think everyone wishes they could eventually have a paid off home and will be able to retire for a few years without having to work till your life ends.
oh, and maybe a decent neighboorhood, nice schools for your kids and ability to pass something on to them when you die.
So, at least your kids don’t have to work quite as hard and worry about the landlord kicking you to the curb.
I realize we are often talking about speculators and gamblers that lost. On the other side, lots of people out there got goaded into this mess and aren’t as savy. Once they hit bankruptcy, its high credit bills, junky cars and tough times for a decade.
James,
Solid observations. While I can’t claim to be a total innocent ( previously on the sidelines bottom feeding for retirement/vac. home ) I ‘can’ say that my intent of one day leaving a well cared for vac. home that might someday appreciate to my children is well, utterly squashed.
Now I view my acquisition of a vac. home more like the great island chieftans of old… “Why should the home last longer than the man?” ( In short, we’ll take a dump as long as it’s cheap and we can pay it off cash )
oh, and maybe a decent neighboorhood…
The percentage of decent neighborhoods out of all neighborhoods has been dropping over the last 2 generations. There was a time when you could leave the doors to your house unlocked and live in California. But that was before 1970.
Now you have to have bars in the windows.
initial rates of about 7 percent and 10 percent. Her monthly payment, including an escrow account for property taxes and insurance, was about $1,400
Not only that, but those rates are no doubt resetting.
Contrast that with the rent of $750.
Certainly she was stupid to buy under those terms, but people, especially cocktail-waitress type people have been hearing the “Buy a House!!” drum beat so much that they do all this stupid crap. I hope she’s learned a lesson.
I feel sorry for the cocktail waitresses. Have you ever paid attention to any of that “finances for women” crap? Or the “how to succeed in the workplace if you’re a female”? All they ever do is basically tell you to act like a man, which is code for “take a lot of unmitigated risks”, “try to be taller”, and “talk real loud”.
I’m fortunate to be blessed with the brains to disregard such pablum, but the cocktail waitresses of the world have very little defense against it. She went outside of her comfort zone in an attempt to follow some very bad advice.
Another item to note: Women are often chastised for being “too conservative” with their money. Which means that if they’re not in the stock market, and I mean heavily in the stock market, then they just aren’t going to get a very good return on their money. And that is bad, very bad indeed.
Despite the fact that the stock market has gone into the toilet of late, such advice is still being given. Matter of fact, I heard it at a Merrill Lynch-sponsored seminar last month.
Enough complaining already.
What we hear in good times is that women are just as savvy and bold and educated and able to take risks as men are, if not more so. Witness the spate of articles in highly friendly publications like the NY Times about two years ago detailing how modern Uber-women were no longer waiting for their mythical white knights and were out there acquiring single family houses and condos with the best of the world-beaters.
In bad times, the refrain appears to be that women are coerced by bad seminars into making crappy investments.
Incidentally, Buffett, Shiller, Roubini. Schiff et. al. would find it highly entertaining to be told that “unmitigated risk-taking” is a male characteristic.
Hey Wine Country Dude:
I’m a little ticked off by your refrain of “stop complaining”. I think my observations are valid, and that I should be allowed to state them. What I just noted is something I’ve been saying and thinking for quite some time. What you just quoted is something that had been stated by someone else. If the women were being praised for “acting more like men”, then I rest my case. That line is a sales tactic.
Merill Lynch still exists to offer seminars? Didn’t they lunge for the BofA life-raft?
I have friends who have not paid their mortgage in seven months. They still have not been forclosued on. Why walk away at all. Just stop paying!
Yes, I’d walk only when eviction was imminent. Live rent-free until then. Happy Days.
Yes. And let your fellow taxpayers pick up the tab for your own greed and stupidity.
The morons who bought homes at prices they could not afford are every bit as culpable for this mess as the banks.
Gee, thanks, bottomfisherman. Thanks for screwing ME over.
Vallejo running out of cash by March? They’re looking forward to Six Flags opening day this year!
“It’s God’s country, what can I say,” Leslie Appleton-Young, chief economist for the California Association of Realtors, told an audience of agents Tuesday in Terra Linda. “When is the 30 percent decline in Marin County’s market going to happen? Not in my lifetime.”
That’s a great find!
I can hardly wait to see declines like that around here. Prices are down a little but nothing like they need to be for people to actually afford a house. I got an email from a realtor yesterday that said we have 15 months of inventory so I suspect we’re well on our way.
Michael, where is your location?
A small subdivision South of Portland
The Kool-Aid was served late in Portland, hence the latent wearing off effect.
“It’s important to keep it in perspective. Do you really know anyone who thinks, ‘Gee, I’m so sorry I bought in the Marin market?’”
Can we call that bet on LAY’s lifetime? She’s an oxygen thief anyway, no loss to society there.
The name Leslie Appleton-Young is an anagram of “a eye-opening poll slut.” (The anagram includes the hyphen.) I was up half the night figuring this out. Tonight I’m working on “Ben Jones.” That should be a fun one.
Luv,
Jen
Jen,
Love your anagram.
I can help you with Ben Jones. Promise you won’t be up all night trying to figure it out. How about Jen Bones? Kind of catchy don’t you think?
Good, maybe I will see her at the s.j. I’ll go to Saturday night.
Also, only a 6% decline in 2009? At the current clip that’s about one or two months of declines.
What’s the current rate — about 38 pct per year down? Let n be the number of months at that rate to get six percent. Then
(1-0.38)^(n/12) = 1-0.06, so n = 12*log(1-0.06)/log(1-0.38) = 1.553, or about 1 month and 17 days. After February 17, the California home price changes will go to the flat line for the rest of 2009.
In case anyone missed the subtlety of my mathematical sarcasm, let me just say that I truly believe from the bottom of my heart that the CAR forecast is complete bullsh!t, has no basis in economic theory or empirical evidence, and was probably made up off the top of somebody’s head. If the past is any indication of predictive accuracy, it is unlikely to come within ten percentage points of what actually happens next year. If anyone has contrary evidence, I am open-minded enough to consider it.
“Clearly, the market in Novato is much more impacted than the market in Sausalito, Tiburon or Mill Valley,” Beacock said.
What a bunch of bulls–t. You can go to Sausalito, Tiburon, and Mill Valley and find multi-million dollar homes with asking prices that have been slashed 15% to 30% over the past eight months.
Here are a couple of examples from Sausalito. This one was cut from $4.2 million to $3.4 million over the past eight months.
http://www.redfin.com/CA/Sausalito/52-Prospect-Ave-94965/home/1048322
Here is another one cut from $2.7 million to $1.9 million in the past six months:
http://www.redfin.com/CA/Sausalito/675-Sausalito-Blvd-94965/home/626505
The housing market in these areas of Marin is not just struggling, it is IMPLODING. People will not believe what they will be able to buy there 2-3 years from now. Prices will be as ridiculously low in a few years as they were ridiculously high in the past few years.
I have not posted here for a while. Last summer, I repeatedly warned people here to prepare for a depression. Plenty of posters thought I was a crackpot, but I did not really care. I will post the advice I gave then again now:
1. Get and keep a job.
2. Rent so you can be mobile for your job.
3. Avoid the U.S. stock market until the dividend yield rises to at least 4% (it is 3.1% now)
4. Eliminate debt unless you could pay it off if you lost your job.
Keep the popcorn popping,
Red Baron
I’m waiting for several waves of div cuts. How will I know we are there? When Con Edison’s div yield is zero.
Advice #1 and #4 could be a challenge for a lot of people.
I am no prophet, and here’s no great matter:
I have seen the moment of my greatness flicker;
And I have seen the eternal Footman hold my coat, and snicker;
And in short, I was afraid.
V, that is a great poem. Evocative and sinister. Are you a poet, in addition to being smart and such? Thanks for the read and the shiver.
NO! That’s TS Eliot. Sorry, I should have given credit.
My poems are pretty good, though. Maybe I’ll post one one day.
About 2 years ago I told my wife that home prices in the central valley would be 50% lower. She said there is no-way that would ever happen. Well here we are.
I hope you had some sort of sexual wager going on. Just being right is highly overrated.
I appreciate the humor of your comment, but if you think “just being right” is overrated, I urge you to notice the beatific look on the face of Robert Shiller the next time he appears on a talk show. I don’t know why Nouriel Roubini is still scowling, it must be genetic. Shiller didn’t even sell any of his houses, but the vindication of the market has made him an entirely peaceful, cheerful character.
IMO, being right is the best thing that could ever happen to a person.
I TOTALLY agree with you. OTOH, for the first time in my life, I find myself with a burning desire to not only have been proven right, but to witness one particular pr**k’s experience with the death of a thousand cuts. Thank you Baby Jeebus.
Don’t need to wager for sex
“Don’t need to wager for sex”
You got married, didn’t you?
I guess I should distinguish between wagering and bartering…
So, how do HBB’ers feel about “some-sex” marriage?
‘“some-sex” marriage’
It beats the h-e-double-hockeysticks out of “no-sex” marriage.
yeah, but you might need to wager for certain kinds of ess-ee-ex.
Or pay to play.
What do houses, cars, boats, planes and sex have in common?
Way cheaper to rent.
Wow,
How old is everyone here? I think I just ran into a bunch of teenage pimply boys whacking each other with towels on the butt
Better than a bunch of teenage boys just whacking each other.
“…a bunch of teenage pimply boys whacking each other…”
There is an image I will try to soon forget.
Let that be a lesson to you, you teenage pimply boys. Whacking is a solo sport, damn-it! Enough with your twisted locker room version of a conga line.
Okay, you got me laughing with the last three postings
SFBayAreaGal,
So far as I am aware, most men keep thinking about ess-ee-ex throughout their adult lives in a similar fashion to how teenage boys do, though their willingness and ability to act on such thoughts peters out over time.
“The report said one in five properties fell out of escrow during the year. In one-third of those cases, buyers could not get financing. Another third of buyers changed their minds. But 11 percent fell out of escrow because the buyer couldn’t make a down payment, the study said.”
So a total of 77% of wannabe buyers can’t qualify or change their mind. This will take YEARS to stabilize, and price drop for ‘09 will be a whole lot more than the 6% “softening” that CAR is estimating.
nope, think that is 77% of the 1 in 5 (20%) who fell out of escrow, not 77% of all “wannabee buyers”
regards
-evil
Yup
Hey guys…been awhile and I wanted to share this story.
A friend just bought a house in one of the more prime parts of the SF Bay/Peninsula. He paid just under $875. He came close to buying a slightly bigger house last year for $1.150m, but backed out. His wife never let him hear the end of it, so he finally buckled and bought this house last month.
Looking at it, I’m thinking that waiting longer would have:
1) Netted him a better price
2) Netted him a better interest rate
What else? I want to keep track of the things that could have happened had he waited. What do you guys think?
The BIG question:
How much money does his wife make? If she makes a six figure salary, then she could have happily thrown all her earnings down the rat hole of a $1.15 mill mortgage and he could have had some peace and quiet and good sex.
An $ 875,000 mortgage is a rathole, tooo…..
Netted him a better wife?
He could have had the satisfaction of being right (see above).
I am getting to the point here in Thousand Oaks, CA that I don’t think I will ever be able to afford a house. Over the past year the price declines have been very slow, and the per square foot price has declined at a much lower rate, but I actually had some hope that if I was just patient, things would eventually come down to rational levels.
And now the November DataQuick stats are out:
91360 - $535,000 median price (up 21.9% from Oct ‘08) - $289/ft (up 3.2% from Oct ‘08)
91361 - $918,000 median price (up39.1% from Oct ‘08) - $407/ft (up3.8% from Oct ‘08)
91362 - $700,000 median price (up11.1% from Oct ‘08) - $307/ft (down11.5% from Oct ‘08)
Compared to November 2007, the median price in 91360 and 91361 are down less than 10%!
I guess it is different here…..
What’s the median HH income in those zips? If it’s not:
91360 - 180K
91361 - 300K
91362 - 225K
Then it’s not different there. Just taking longer to unwind.
Median Family Incomes:
91360 - $88,592
91361 - $100,952
91362 - $105,078
…also, you are assuming a 3x multiple of income to house price. I have data going back to March 1999 and the lowest multiple (3.4x) was at that time, and it has been consistently above 4.0x since 2000. It got up to 7.4x in June 2005.
Well, of course it was above 4.0 after 2000. Those were the bubble years. Maybe you should buy a house there right now. You can get a mailbox that says “The Troll Residence” on it.
Liquidity of markets.
Assume that a price differential within a market is like a mound of material, like a small mountain. Perhaps many scattered mounds, like local real estate markets. Now assume the baseline, or ‘floor’ of that material sinks. The mounds will begin to flatten such that they regain their previous relationship with the floor.
In a very liquid material (market) such as water, the mounds flatten almost instantly. In a less liquid material (market), such as jello, the mounds take some time to flatten. etc.
Housing is a material of some putty-like consistency. It takes time for the mounds to flatten, but that’s what they’re doing.
I love geophysical analogies to the economy. To take yours a bit further, the bottom of the mound or ‘floor’ is housing demand, sunken due to the credit crunch, subprime implosion, reversion to traditional lending standards and recession (have I missed any of the reasons?). The top of the mound is supply, in the sense of the prices sellers are willing to accept for homes they wish to sell. The gap between the top and the bottom of the mound is due to fundamental realities which immediately constrain demand prices but which do not immediately constrain supply prices, as sellers can, in principle, wait indefinitely for a buyer to materialize who is willing to pay their wishing price. However, a glut of foreclosures piled on top of the mound can quickly flatten it, as whatever buyers are left in the market have a many-to-one choice of homes from which to pick their optimal sale price-quality combination.
In the Bay Area, the mound has great liquefaction potential, which suggests a foreclosure glut will quickly flatten it.
Oh, the disadvantages of illiquid assets classes pops to mind.
Since houses make it near impossible to move and follow jobs, they will category of persons that want a house might shrink.
Government workers, rich people, Retired people.
Houses are very liquid, provided you have the patience to wait for the crash to bottom out before you buy one. In that case, if you need to move at some future point in time, you will be able to sell at a price level that covers your loan cost and does not require you to sell short or to bring cash to the closing table.
Here are some signs the bottom has been reached, or at least is close at hand:
1) Blood in the streets
Home prices are no more than 120 times rent, and possibly only 100 times rent
2) Everyone says real estate is the worst possible investment
3) Unemployment peaked months ago, and prices have finally stopped dropping at double-digit rates
4) Lenders subject mortgage loan applicants to inquisition-like interviews
5) Borrowers need a large downpayment and a steady job
6) Borrowers are not able to borrow an amount that would require payments of more than 28 percent of their incomes
7) Median home prices are no more than 3 times median incomes for the area (2.2 times in Wisconsin)
9) Home prices are no longer dropping like a rock
10) Foreclosures are no longer coming on to the market at rates well above the long-term historic average rate
“I am getting to the point here in Thousand Oaks, CA that I don’t think I will ever be able to afford a house.”
The California coastal region will be the slowest place for declines. This time next year should improve your outlook, but the wait is likely several more years; use the time to hoard cash and improve your credit score.
I agree. House prices in Morro Bay are sinking sinking sinking, but slowly slowly slowly.
well if it really crashes in TO let me know maybe I’ll buy there.
I looked at a house next to redwood school on Gainsborough it was too much.
BTW I lived in TO in 1964 back when it had 1000 oak trees
“What’s unclear is whether falling mortgages will be enough to strengthen the fledgling recovery in Sacramento’s troubled housing market.
MDA DataQuick said the median sale price for a home in Sacramento County dropped to $185,000 last month. That was the lowest level since September 2001 and represented a $10,000 drop in one month. Prices have fallen $105,000, or 36 percent, in a year.”
I was going to say how silly that is, but in fact, but a continued fall in home prices could precisely be a “recovery” in the housing market.
Though I don’t think that’s what they meant.
No, Bank, that isn’t what they meant. To those folks, recovery means a return to those halcyon years of 20% annual appreciation.
Great analogy, EggMan! Here in the Coachella Valley, the upper tiers (400 and up) are just sitting there with no obvious movement (or sales), but everything below has completely pancaked. The low end houses are foreclosing like mad, prices are falling like mad, and selling fairly briskly, being snapped up by ‘investors’ who think they are getting a bargain. But commonsense will tell you that all the upper end houses will eventually start to sink as well, when their wealthier owners capitulate or foreclose–it will just take longer–and when they do, the bottom will fall out of the ‘bottom’ market as well.
Last night as I was purusing real estate pricing here in LA, I noted a one bedroom condo listed in Glendale for $125,000.
As I continued to ponder this listing, I suddenly recalled an article in the LA Times about a young couple thrilled that they had snagged a one bedroom condo in Glendale for $250,000 - about six months ago.
Here’s one of the funniest listings I’ve ever seen. Be sure to check out the chandeliers in the condo palace. If the link doesn’t work go to themls.com > condos> Montrose. Look for this beauty at $639,000.
http://guests.themls.com/profile_page.cfm?mls=P643532SC&tab=search
I would get nightmares sleeping in that place with all the gaudy “stuff”…and a chandelier in every room.
I’d be afraid that one of the chandeliers would fall on me.
Oh my, best not to have too many chandeliers in earthquake country - or hang anything heavy or glass over your bed.
Half price houses?!
This is HORRIBLE!! If this keeps up, people will be able to afford to buy houses vs. renting them forever from the bankers (who get fat off the payments) or renting them for a years, having the loans adjust, and then losing the houses to the bankers (who get fat reselling and refinancing the same houses over and over.) Affordable housing - how is that going to make the bankers rich?
Never fear, though - in Maryland, prices have only declines maybe 10% when they need to fall about 40-50% to be in line with incomes. So, if the folks from California miss the bygone days of absurdly priced junk houses, we still have that in spades here in “Bedlam by the Bay.”
i know - it’s getting ridiculous. Seems the median home price for CA will soon be below that of Maryland. When will it change here?!
“…people will be able to afford to buy houses vs. renting them forever from the bankers (who get fat off the payments)…”
Was it Robert Toll who predicted kids will have to live forever with their parents? Maybe not so much anymore.
Yup. Robert Toll; I remember that. He should be kicked off the team. Go live in Europe, Rob, you hole.
Woo hoo, it’s a California thread!
Say, Big… you made an intriguing comment a week or so ago about how the wealthy were “next” to get their comeuppance in all this mess. Did you mean with declining home values/401K punctures… or something else? Big top manager layoffs? Insight appreciated, if you have the time. Also, didn’t know who the rich were. I guess I would define it as someone with net worth of $750,000 (as finance definition).
Milkcrate
I meant it all. RE, 401k’s, jobs, and businesses. They lay off the worker bees first. After a while, they realize that the worker bees were the only people actually producing anything, so now their company doesn’t have anything to sell. Before long, the execs have to go to. Of course, with no worker bees and no execs, there’s no company. Anybody who thinks that the middle class can get the axe while the wealthy remain solvent is living in a da-REAM world.
Wake me up when we are back to 98/99 prices here in So Cal. Then I might be interested in lowballing a foreclosed home. Cali is in for a rough ride the next 5 plus yrs. The state is BK and must cut thousands of jobs. Taxes will be going up. Unemployment is in the 7s and rising quickly - no doubt we will see double digit unemployment before all is said and done (the IE should be there by the end of 09).
When people ask me about the future of the economy I tell them two things: if banks aren’t lending then businesses arent expanding. If businesses arent expanding they are not hiring. Furthermore what business wants to take on more debt on this economy? Only businesses that are in the brink of BK and banks wont touch these guys. The flow of money is dead.
Well, we have both of these going on here in Cali. But even worse is the fact that SMed businesses are our economys engine. Most SMeds are either downsizing/laying off people or filing BK. Pay raises? Your lucky to keep your job. When people are worried about their jobs do these NAR, eCOnomists, governments thieves, etc. really think people are thinking about buying a house, moving up to a bigger house, etc. NO way. Job instability plus market psychology is a BITCH.
Bottom line = rising unemployment = more foreclosures = lower prices = more foreclosures = lower prices…until 3x salary and/or rent vs own makes sense once again.
“The state is BK and must cut thousands of jobs. Taxes will be going up. Unemployment is in the 7s and rising quickly - no doubt we will see double digit unemployment before all is said and done (the IE should be there by the end of 09).”
I am sure the Califorinia Association of Used Home Sellers took all of these economic realities into careful consideration in their price forecast, no?
Oh yeah I forgot LAY’s a Genie…er I mean genius.
(What’s “SMed” ? - sorry, maybe I need more coffee)
sorry - SMed = small and medium size businesses
Is it possible for a business to expand with the money that they earn by making a profit? Since when was expansion based on lending?
One of the biggest classes of flippers were the corporate flippers. Basically the see that expansion money and leverage against it to buy the company. Since the bank will just take the money after the purchase. So, a company holding 30B in cash just means an extra 30B in a loan.
So, most companies can’t hold cash because they end up being buyout targets. Its a freaking mess.
Trying to think of the last merger that benifited any company in the long run. All short term run ups based on companies making temporary purchases of stock to make the merger happen. Then a big sell off after the merger,which was expected. Eventually there are “gains” in productivity that are supposed to materialize. That is the same BS line of reasoning we’ve heard since… oh… the 70s. I’ve never seen it happen. Everytime it seems like the merged companies turn south.
They do take advantage of writting off goodwill capital. but that is about it.
I guess its made companies pretty credit dependant and very weak in case of recessions.
Remember GM and Ford bought up things like Volvo, Jaguar exc. Where are they now? In the toilet.
Another exciting reason to thank the Fed system for promoting this behavior. Big infestor banks like GS were doing this for a long long time. At previous points it was difficult for a large enough group of investors to get the money together to kill a company. But we got big corporate banks to go in and mess things up.
Excellent post.
‘Condos are selling in the low $100,000s. We haven’t seen this for a long time.’
Like in 1996, when we bought one in the low $100,000s.
Check. Bought mine in 96 for $95K. My error (???) was selling it in 98 for $104K. Hope you held longer. I had the opportunity to move into a truly luxurious and cheap shared rental, but probably should’ve become LL for at least a few years.
“CAR expects the statewide median price to continue to fall in 2009, although not as precipitously. It predicts a 6 percent drop to $358,000. ‘Our forecast for next year is for continued softening in prices,’ said Appleton-Young.”
So far they have been off by miles on all their forecasts during the bust, but at least they have the correct sign at this point (negative). How the rate of price declines will quickly shift from double digits to under ten percent remains to be seen.
Just use a 3x multiplier and you’ll get closer to the actual value.
Six percent about 1-2 months worth of depreciation at the current rate of decrease.
CAR’s predicting a 6% drop next year. That’s the largest drop they’ve ever predicted. Yet, at the same time, they are selling this drop as “less precipitous than last year”. Something isn’t right in this equation.
Maybe they just made a typo and meant next month.
“The hardest hit county was Contra Costa, where prices sank 49 percent to $260,000. Spencer has seen homes in the area that nearly sold, only to come back on the market for $50,000 less two months later.”
There has never been a better time to rent.
California is in serious trouble. Here’s the board:
The state is running massive deficits, and may be unable to pay its bills sometime early next year.
The Democrats in the legislature want to balance the budget with mostly tax increases, but will tolerate some spending cuts.
The Republicans in the legislature want to balance the budget with spending cuts, but will not support any tax increases.
The Republican governor (Arnold) has no relationship with Republican legislators. Indeed, he has angered some Republican legislators because he has passed them in the hall and not even known who they were. So, Arnold cannot deliver any Republican votes for the budget, so there’s no one with whom anyone can strike a deal.
Tax increases are difficult to legislate because Prop13 made it necessary to get a 2/3rds vote to pass tax increases.
In response to that difficulty, for several years people have placed propositions on the ballot that earmark certain monies in the budget. Thus, spending cuts are tough to do because much of the state budget, at least on a percentage basis, has been earmarked by the proposition process, further eroding flexibility.
The state legislature is composed of idealogues on both sides, because of redistricting that has created “safe seats” for each party, further hindering the ability to negotiate.
Term limits have emptied the legislature of across-the-aisle relationships and experience, further hindering the ability to respond to the unfolding crisis.
Oh, yeah, several earthquake retrofit projects (e.g., bridges, highways) may be halted soon if the budget problem is not resolved. In other words, the budget impasse is not just about “welfare,” it is about basic infrastructure and public safety.
This is the state of California. I don’t know if other states have the same situation, but this looks to be a “perfect storm” of impending fiscal disaster. With respect to housing, nuying a house in such an environment is risky, for it contains risks above and beyond those we typically discuss (e.g., the likelihood of a decline to historic norms of price/income ratio).
IAT
Great post, spot on!
just wait until the “big one” hits. Cali will crumble and there will be no $$$ to fix it.
I don’t like Prop 13.
Wait until you have a chance to lock in your Prop 13 basis at post-bubble fire sale prices before you decide for certain.
California is in serious trouble.
———————————————————-
They’re projecting approx $ 40 billion in budget shortfalls by Feb.
Right about now Grey Davis is looking pretty good compared to Ahhhhnuld.
Like most Californians, I am not a Republican. But, this problem is not about Arnold or Gray. It is systemic problem, and both major parties have and continue to contribute to it.
IAT
Arnie’s not a Republican either.
As it was with the popping of the real estate bubble it was not possible for anyone to have seen this coming.
Right about now Grey Davis is laughing his a$$ off…………………..
Retail
Sign of times: Sav Mart in Freso is opening some stores Dec. 25. Clerk says that’s first time.
Good to know! That’s where I’ll be on the 25th (Fresno, not necessarily in a Save-Mart).
I pimp for no store.
Grocery revenues must be really sagging, was the point.
–
Current PPSF and declines from the peak
For desertdweller…
Palm Desert 92211 $161 -44.4%
Palm Desert 92260 $195 -33.1%
Palm Springs 92262 $143 -65.9%
Palm Springs 92264 $209 -37.0%
For dude…
Price Per Sq Ft For Single Family Homes, New & resale
City Zip Code PPSF PPSF From peak
Palmdale 93550 $85 -67.2%
Palmdale 93551 $101 -50.6%
Palmdale 93552 $92 -57.0%
Palmdale 93591 $60 -72.4%
Average ALLZIP $85 -61.8%
Jas
Jas, where do you pull this data from?
I’d like to see the PPSF trends in the Seattle area…
–
I collect monthly data from DataQuick and maintain a spreadsheet.
I also collect daily data from Radar Logic.
Jas
BTW, California real estate prices were dropping back in 1994, same as today (although not as rapidly back then).
SD Union Tribune
State unemployment rate jumps to 8.4%
County figure remains unchanged at 6.9 percent
By Dean Calbreath
2:28 p.m. December 19, 2008
The holiday season has not brought much cheer to California workers this year, as layoffs at hotels and restaurants and weak hiring at shopping malls and department stores helped push the state’s unemployment rate to 8.4 percent – its highest rate since the summer of 1994.
Last month, more than 41,700 workers lost their jobs in California, for a year-to-year total loss of 136,000 jobs, according to data released Friday by the state Employment Development Department.
The statewide unemployment rate, which was 5.7 percent a year ago, was 8.2 percent in October. In comparison, the national unemployment rate has jumped from 4.7 percent in November 2007 to 6.7 percent in November 2008.
“These are god-awful numbers,” said Sung Won Sohn, economist at California State University Channel Islands. “The economy is headed downhill and the brakes are not working.”
Steve Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto, said the numbers show that “California is following the nation into the longest and deepest national recession since the 1980s and, possibly, since the Great Depression.”
In San Diego County, 2,200 workers lost their jobs in the last month, bringing the annual total to 15,300. The unemployment rate in the county remained unchanged from October to November at 6.9 percent, compared with 4.9 percent a year ago.
Alan Gin, economist at the University of San Diego, said the local unemployment rate is likely to approach or top 8 percent sometime next year.
“The outlook for the local economy remains grim at this point, at least for the short term,” Gin said.
Here’s some humor for all of you HBBers
Jay Leno, via U.S. News: “I tell you, [the] economy’s rough. . . . People are standing behind President Bush just to get the free shoes.”
That’s good !!
Defaults make comeback
Increase in notices countywide bodes ill for housing market
By Emmet Pierce (Contact) Union-Tribune Staff Writer
12:02 a.m. December 20, 2008
Gustavo Diaz de Leon of Chula Vista, who recently negotiated a short sale of his house because he didn’t want to go into foreclosure, will take a big loss in order to preserve his credit rating. -
After a sharp decline in foreclosure activity that began in September, San Diego County default notices bounced back last month, dimming hopes that the troubled housing market has seen the worst of the real estate slump.
The MDA DataQuick research firm yesterday reported 1,379 November default notices, which mark the start of the foreclosure process. That was up 24 percent from October, though still 5.7 percent below the November 2007 level.
Sean O’Toole, founder of the ForeclosureRadar research firm, said the recent slowdown in loan failures was caused chiefly by Senate Bill 1137, a state law that requires lenders to take more steps to keep troubled borrowers in their homes.
Economists had predicted that the measure, which took effect Sept. 8, would not have a lasting impact, but few expected such a brief respite for distressed borrowers.
“We are bouncing back from SB 1137 faster than anybody thought we would,” O’Toole said. “In November, usually you see things slow down due to the holiday. You have people on vacations.”
…
DataQuick recently reported that 52 percent of all existing home sales in San Diego County in November involved homes that had been foreclosed on in the prior 12 months. Heavy foreclosure activity is contributing to ongoing price declines, with the median price of a resale home in November at $335,000, down 33 percent from November 2007.
O’Toole estimates that only about one-quarter of the unsustainable loans that were made during the recent housing boom have worked their way through the system nationwide.
Rick Sharga, vice president of marketing for the RealtyTrac research firm, said that about $200 billion worth of adjustable Alt-A loans, traditionally made to people with solid credit but no income verification, are scheduled to reset by 2010, possibly triggering another round of defaults.
“What we are going to be looking at is probably two more years of higher-than-normal foreclosure activity,” Sharga said.
Important question: For how long after “two more years of higher-than-normal foreclosure activity” will the glut of foreclosure properties continue to drag down prices?