California Affordability At All Time Lows: CAR
The California realtors have affordability numbers out. “An affordability index produced by the California Association of Realtors trade group held steady from November to December but was down 5 percentage points since December 2004. The percentage of households in California able to afford a median-priced home stood at 14 percent in December, compared with 19 percent for the same period a year ago.”
“The minimum household income needed to purchase a median-priced home at $548,430 in California in December was $134,200, based on an average effective mortgage interest rate of 6.33 percent and assuming a 20 percent down payment, C.A.R. reported.”
“At 24 percent, the High Desert region was the most affordable C.A.R. region in the state, followed by the Sacramento region at 19 percent. Santa Barbara County was the least affordable region in the state at 6 percent, followed by the Northern Wine Country region at 7 percent.” Affordability was also low in the Northern Wine Country (7 percent), Monterey (9 percent), San Diego (9 percent), Orange County (10 percent), Palm Springs/Lower Desert (10 percent), and San Luis Obispo (10 percent) regions, the association also reported.”
“Home prices increased from $960,000 to $1.3 million (35.4 percent) in the Santa Barbara South Coast area from December 2004 to December 2005, the association reported.” “Prices increased 31.1 percent in the High Desert area, 26.2 percent in the Santa Barbara County area, and 20.6 percent in the Riverside/San Bernardino area in that time, according to the report. Price increases were slightest in the North Santa Barbara County area (4 percent), San Diego area (4.6 percent), San Francisco Bay Area (8.2 percent), and Palm Springs/Lower Desert area (8.2 percent) from December 2004 to December 2005.”
California data
Rates may go higher still:
The Federal Reserve may need to keep raising the benchmark U.S. interest rate to prevent inflation from accelerating, Chicago Fed Bank President Michael Moskow said.
‘There are risks to the inflation outlook — namely, the potential for energy cost pass-through, pressures from increases in resource utilization, or rising inflationary expectations,” Moskow said in a speech to the Risk Management Association of Chicago. ‘If inflation or inflation expectations were to rise persistently, then policy clearly would have to be tightened further.’
Prices are as high as ever here in L.A. As for west L.A., I see no weakness whatsoever. I’m starting to get really skeptical that this bubble will ever pop around here.
Nah stay patient investorgirl, it’s coming I’m already seeing price drops in places like Palos Verdes, South Bay in general. More seller motivated in the ads etc etc.
For sale signs are popping up like daisies your time will come and you’ll be laughing all the way to the bank
My cash is ready and waiting, but seems to have less real estate buying power as each day passes…
I hear that. The last week activity has REALLY picked up on the SF peninsula. I’ve seen some houses selling in 2 and 3 days, and they aren’t at giveaway prices. Seems to me like this could keep going a while yet in this area.
People are truly insane.
Patience. No community is an independent island unto itself.
I live in the South Bay area and can almost say the same thing, practically no signs of weakness or it’s extremely well hidden if it’s there.
South Bay Beaches Housing Bubble
You won’t see weakness west of the 405 until things get a lot worse than they are now. The vacancy rate is still very low on multifamily, although it has picked up a bit since last spring. And the people sitting in those $3MM houses are not broke yet. OTOH, some of the folks who recently paid over $1MM for condos out here may be starting to sweat.
Give it some time, and keep your powder dry. There will be a better time to buy on the west side.
“Please note: For 2006, C.A.R. will begin reporting the Housing Affordability Index (HAI) on a quarterly basis. The first quarter HAI will be released on Thursday, May 4. ”
As these monthly reports have increasingly exposed the negative results of the ‘healthy housing market’, this report is going the way of the Fed’s M3: out of sight, out of mind.
C.A.R. likely has a good read on their January numbers. Now they suddenly decide to postpone releasing the numbers until May? It makes one wonder what they are hiding.
Scumbags buy Apt Complex
Apartment owners: Get out or rent doubles
http://tinyurl.com/bv92z
One can only hope these creeps get what coming to them
This tactic sounds sooo much like Pasadena CA in the mid-80’s.
They stopped in the 80’s. I thought they were still doing it. Just taking a little more subtle approach to keep the press at bay
From the article,
. . .
Harold ‘Jack’ Lehman, a lanky man in his 70s who works as a ranger at Heritage Oaks Golf & Country Club.
. . .
Sue McNeil, a 75-year-old tenant who works at Wal-Mart to help pay her bills.
Holy cow.
“Please note: For 2006, C.A.R. will begin reporting the Housing Affordability Index (HAI) on a quarterly basis. The first quarter HAI will be released on Thursday, May 4. ”
I guess we shouldn’t be surprised. Maybe by May 4th affordability will be back to 25%.
It’s amusing that Sacramento - the second most affordable place in the state seems to be stalling and crashing first.
God help San Diego when the bubble finally pops.
You’re spot on about Sac.
The reason: 35% of of all new homes built in the Sacramento area over the last 3 years (and there are TENS OF THOUSANDS, Natomas, Elk Gove, W. Sac) were bought by speculators. They are now dumping those houses, which is why those areas are seeing a severe decline (10% since Sept) - wait till it spread to the older neighborhoods, where the sellers are still holding out for last summers prices.
The reason is that the only job growth we’ve had is from RE driven industries. A quick look at salaries across the country also suggests that Sac salaries aren’t that must above midwest.
The person who could find Sac affordable is someone who works in BA and commutes. Not to mention, most the locals bought before the prices skyrocketed so who is left to sell those homes to once the RE / contructions jobs dry up?
Yes, my bubble market can beat up your bubble market. Don’t worry though, the Pottery Barn gift certificates and Centex 12-hour sales will eventually find their way to San Diego and other markets.
Lander
Sacramento Land(ing) Blog
Santa Barbara County was the least affordable region in the state at 6 percent
I took a peek at the price guesstimates of my (very plain-jane) SB neighborhood using zillow.com, and apparently I’m surrounded by 900K to $1M dollar homes. My rent you ask? $2100. Down from $2200 because no one else was interested.
I don’t have a clue how much payments/tax would be if I bought one of these boring houses, but I would imagine it’s rather *ahem* high, to say the least…
It would cost around $7,500/month to own that home with 0 down and 30-year fixed rate. ($6,200 mortgage + $1,000 property tax + $300 HOI, etc). i will not consider buying until the price drops over 70% to reach positive cash flow.
I wonder how long CAR will keep reporting figures like these, or any others. If we have truly topped out, and inventory and month-to-prices seem to bear this out, then the whole RE cheering section is out of luck. LA county home prices rose until late summer, and are basically flat since then. The YOY joy is about to end, and the lingering effect of rising interest rates will keep grinding away at affordibility.
it seems to me that prices in los angeles and the san fernando valley just keep going up. i sold my house in the eastern san fernado valley for 640 k in spring of 05, and now you cant touch anything in that area for less that 700k. zillow has my old house priced at 735k…i no longer live in the area but keep an eye on it…and i was hoping that prices would have gone down,but no they just keep on going up…for all u san fernando valley people on this blog,what the true story…..
I do not know what the data base is on Zillow but it has a long way to go as I have been checking out some properties in So. Calif that I know and they are way off the mark. Also checked out AZ and So. Oregon. Not accurate.
Let’s see:
Housing affordability at all time lows=No one can afford a house.
Housing sales at all time high=Everyone is buying a house.
As I was sleeping, was a new economic law developed. Where is all the money comming from?
Check out the growth speed of total credit market debt outstanding, and you stop wondering where the money is coming. Y-y growth speed is something like 25% US GDP - not bad, huh?
Eating oatmeal, credit cards and selling blood
next is plasma, then a kidney!
We should start a thread about possible businesses that can profit in a foreclosure environment. I would like to start seminars around San Diego instructing home buyers how to salvage their mortgage or how to reposition debt or file for bankruptcy in the correct manner…Any thoughts?
Benjamin “Graham (Warren Buffet’s guru) identified three forces that he felt were resopnsible for the stock market crash (of 1929).
1. Brokers were told to generate excitement about a stock
2. Banks loaned money to speculators…Since the loans were backed by the value of stocks, when the Crash occurred, like a house of cards, everything tumbled down.
3. Excessive optimism
page 32 “The Warren Buffet Way” by Robert Hagstrom
What makes things different today?
Another interesting section of the book talks about Grahams take on bubbles “One sure sign of a mania is when people have forgotten the lessons of history”
out of LA…
Basically, you’re dead on. Prices did rise past spring ‘05, but by last fall they flattened hard. Been doing an average bounce around 520k~ since then. Sales are slipping some, and inventory is really gaining ground. Less demand, more supply = falling prices. Give it time, give it time.
Comment by Markmax33
2006-02-09 14:30:02
We should start a thread about possible businesses that can profit in a foreclosure environment. I would like to start seminars around San Diego instructing home buyers how to salvage their mortgage or how to reposition debt or file for bankruptcy in the correct manner…Any thoughts
I’d love to see a thread like this too.
My two cents…I’m willing to bet that there will be new positions opening in consumer credit debt counseling services. (I just hope to gawd that it doesn’t become populated by new employees who are former real estate flippers/agents. )
omg can you say? “star-bellied Sneetches” - a dr. suess must read >; )
You said you hope it isnt populated by ex-flippers and agents…….
But of course it will be, they are going to need jobs after the bubble bursts.
I can just hear it: “I see you have a bankruptcy on your credit report. Oh, looks like you only had owned seven investment properties when you filed. Eight credit cards. They repossesed your Escalade, Hummer and Harley. Dont worry honey, this will all come off your credit report in 10 years. I know, because I had 15 condos in Las Vegas when I filed BK a year ago. Hopefully by then the real estate market will have taken off again. Here’s my Real Estate card. Oh, I know a great mortage broker with a bank that is still solvent who could get you a loan too. Too bad Option Arm loans are now illegal…. Damn, those were the days.”
Houses in the South Bay (Los Angeles) are starting to drop. Inventory on average is inreasing by nearly 1 to 2% per day (Manhattan, Hermosa, Redondo). 30% of all houses for sale are running reductions. Home prices are down compared to December.
I think Zillow is awesome, but, even when all the bugs are worked out, it is a lagging indicator. The most recent comps I have seen on Zillow are 10/05 and in many areas prices are down since then.
It takes a while for dataquick and the tax assesors to update there records. At least here it does
This assumes 20% down. I can attest that all the deals I see are not even close, most are piggybacks. Assume 100% financing and the required income would be at $161,040.
Keep in mind that these are December numbers and, two months ago..
Wonder what the affordability index would be at $160k required income?
On top of these scarry stats add that people are generally ignoring the affordability issue, assuming payments they can’t afford on loans that will rise steeply when the teaser IO period expires. The majority of todays buyers are strapped from the gate and are looking at their payments almost doubling!!!
I ceased to be amazed the folly of the public. Gives you a new appreciation to the term “lambs to the slaughter” as they gleefully run to the financial guillotine.
Zillow is pretty cool. but keep in mind that it pulls info off public records, which are often incorrect. i checked out a couple of properties i was very famliar with, and it showed incorrect square footage, didn’t show pool & spa when there was one, etc. also, doesn’t show up to date closings (which are updated on MLS/public records within 7 to 10 days).
not a bad toy though. but don’t rely on it.
This will kill Northern and Southern Nevada. About time
checked zillow and they are way off same tract houses across the street from onother same model and the price variations were 50k.mind you these are homes that sell for 275 to 300k in antelope valley.also i am seeing alot of price reductions there as well as ventura cty.
Remember the LA Riots of 1992? When the skies turned grey over the entire region as buildings burned and chaos ruled the streets? The starting point was at the corner of Florence and Normandy in South LA. According to zillow.com, houses right next to this intersection are valued between $400-500K.
Those houses are hardly worth $20K considering the misery you go through living in such a neighborhood. Half a million bucks - can you believe it.
I guess if the prices can be completely disconnected from economic fundamentals they can also be disconnected from everything else. The only thing these prices are even remotely driven by is simple greed. And greed does not give a rats arse if you have to duck flying bullets to get into your front door. Greed only waits for you to sign on the dotted line and give it what it wants. IMO greed is evil and the only thing required for evil to triumph is for good people to do nothing. Or in this case for clueless sheeple to keep playing the greater fool. When will this come to an end?
How can it be acceptable for public records on property transactions to be innacurate and for the accurate data to be unavailable to the general public when this data should be the basis for the largest financial commitment most people will ever make? I know that is probably a runon sentence. My point is why are we giving so much control over this information to those with a vested interest and a profit driven agenda? This is especially important because the “commodity” is being pitched not as a residence, but as an investment vehicle. When the politicians decide it is time to “hold hearings” to find out what went wrong and how to fix it I suggest we send em an email storm requesting that all real estate transaction data be treated like securities or commodities and failure to do so or deception be a crime.
Zillow as an RE buster is quite interesting. This one is worth watching to see how NAR reacts and what happens next.
I’d take zillow’s prices with a grain of salt. I checked my house, and it’s priced at $935,000 (in OC). I know that the price that it’s being sold for now–yes, the new homeowners are selling–is around $859,000 (and the realtor said it’ll probably go for $825,000. So, that’s nearly a 100K difference. My 2 cents on zillow.
Not Zillow related, but just an amusing thought for the weekend. Sometimes looking at listings, I come across $600K listings where the seller will “entertain” all offers between $589 - $600K, but wait! Not to worry….last phrase of the listing is “VERY MOTIVATED SELLER!!!” I’m kind of wondering if this cracks anyone else up, or if I’m the one with a perverse (bitter?) sense of humor… have a good weekend all.