A False Reality In California
CBS 13 reports from California. “The wrecking ball has claimed another major builder, John Laing Homes. With nearly a dozen housing developments in the Sacramento area, realtors were surprised to learn how soon the well-respected developer was falling apart. Realtor Mani Del Rosario says construction on some projects have stopped indefinitely. ‘They’re a very good company,’ he said. ‘I’m not surprised, because there are so many builders shutting down.’”
“Homeowners worry that unfinished homes could eventually bring down their neighborhoods. ‘You think this community was going to be built right away, and now they’re holding off with no explanation,’ said Jessica Vanbockern. ‘It’s not good.’”
The Fresno Bee. “A central San Joaquin Valley-based builder has filed for bankruptcy protection for the first time since the new-home market started tanking. Ennis Homes of Porterville, which has been in business for three decades, filed a Chapter 11 petition Monday in federal court in Fresno after struggling for two years with the real estate meltdown, its chief executive said.”
“CEO Brian Ennis said the company was selling houses, but its land holdings fell in value so far so fast that some banks stopped financing development. ‘When the land is collateral supporting a loan and the value drops by 50% or more, it’s impossible to adjust to that in a short period of time,’ Ennis said in a statement.”
“Ennis started preparing for an economic downturn in 2006, but the deterioration surpassed expectations. ‘We planned our business based on what the best economists were predicting. Unfortunately, the economists’ crystal ball was not very accurate,’ he said.”
The Recordnet. “Kevin Huber, president of Stockton-based Grupe Co., said foreclosures have significantly affected development and home building in both the short and medium term, because foreclosures are selling well below what it costs to develop and build new homes.”
“It typically costs between $40,000 and $50,000 to develop a Stockton lot with the infrastructure - curbs, gutters, utilities and so on - needed to get ready to build, Huber said. And that doesn’t count the cost of the land itself. In the past few weeks, though, ready-to-build ‘finished’ lots have been sold for between $5,000 and $7,500 each, he said.”
“That’s as little as 10 cents on the dollar from those who bought and developed land while the boom was on but found themselves hurting in the bust and forced to sell. ‘You can buy today for substantially less than what it would cost you to develop,’ he said.”
The Bakersfield Californian. “While a forecast of 2009 released this week by the California Building Industry Association suggests new home construction in Kern County would hold steady at 2008 levels, builders here are more optimistic. Lenox Homes, for example, cleared out most of its inventory — 13 homes — in December, President David Cates said.”
“Home prices now are below what it costs to build them, Cates said, because the houses occupy land bought at the height of the market, when prices were high.”
“McMillin Homes started building 19 homes locally in January. ‘It’s a pretty good start. I think we’re going to have a pretty good year,’ said Carrie Williams, general manager of the company’s Bakersfield division. ‘It’s not going to be stellar like it was several years ago, but that was a false reality.’”
“Guadalupe and Ariana Sanchez represent hope in the housing market. Guadalupe, a carpenter…toured 20 homes, bid on four, and landed a deal with a three-bedroom, two-bath house on Sherman Avenue in the southwest for $160,000. ‘I told my wife, we’re just throwing our money away by renting. Let’s try to get a house,’ he said.”
From NBC Bay Area. “It’s not the news Bay Area homeowners were looking for. The San Francisco Bay Area lost $113 billion in home values, according to Zillow. Compared to the fourth quarter of 2007, home values in the Bay Area plummeted more than 17 percent at the end of 2008.”
“By the end of 2008, almost 18 percent of homeowners owned homes that were worth less than they had been when they were first bought.”
The Mercury News. “The late-payment problem is creeping across the valley into areas such as Willow Glen, Campbell and Sunnyvale. Condo owner Leslie Martin is still up to date on her payments, but she’s worried about becoming one of the statistics. In May 2006, following her divorce, Martin purchased her two-bedroom condo in San Jose west of Willow Glen for $415,000, with a down payment of nearly 20 percent. Now, nearly three years later, falling property values have eroded most of her equity, her take-home pay is less after a job change, and her homeowner association dues have increased.”
“Martin, who works as a San Jose city water-meter reader and shares custody of her 10-year-old son, said she’s been able to make ends meet by getting help from her parents, and by working part time for a valet parking company on weekends when her son is with his dad.”
“‘There’s nowhere to turn,’ said Martin. ‘It’s not like I’m not trying.’”
“Campbell mortgage broker Skip Houston…said he fields a few calls each week from homeowners who are ‘upside down’ or nearly so, and are contemplating their options. Can I refinance? Should I keep paying the loan? Or stop paying and go into foreclosure? ‘Even the people who are making big dollars, relatively, are scared,’ Houston said.”
“The value of all homes in the San Jose metro area fell 17.2 percent in the final three months of 2008 compared with the same period in 2007, to an estimated median value of $587,360, according to Zillow. Across the San Jose metro area, which includes all of Santa Clara County, all homes lost a total of $58.8 billion in value in 2008. The lion’s share of that loss, nearly $29 billion, occurred in the fourth quarter.”
“‘It’s devastating,’ said Anne Ramstetter Wenzel, an economist at Econosystems in Menlo Park, referring to the effect on homeowners whose loans are underwater. ‘In a nutshell, you’re basically poorer than you were when you bought the house.’”
“The number of homes sold in California for at least $1 million plummeted 43 percent last year from 2007. Orange and San Diego counties, once bastions of high-priced home sales, ranked third and fourth, respectively. ‘Orange County and San Diego County both have seen prices throughout the price range decline significantly, so what might have been million-dollar homes a year or two or three years ago are now certainly well below that threshold,’ said Robert Kleinhenz, an economist with the California Association of Realtors.”
The Press Enterprise. “The great Val Verde Unified school construction boom of the past decade has ground to a halt. With developers pulling up stakes and abandoning projects in the district because of a depressed housing market and an ailing economy, district officials virtually have declared a moratorium on seven new school construction projects.”
“‘It’s not a prudent, wise decision at this time to build at all,’ said Deputy Superintendent Mike Boyd, Val Verde’s head of business services. ‘And, were we to build, we wouldn’t have the kids to fill it.’”
The Santa Monica Daily Press. “The school district…is expected to take a significant hit from the state economic crisis. The district could face as much as $12 million in cuts over the next 18 months. The quality of public education could play heavily into property values. Dr. Stephen Carroll, a RAND expert on the economy… spoke of how a solid school district can have a positive impact on the community, making it a more desirable place to live and therefore increasing the price to buy a home in the city..”
“‘It isn’t only people who have kids who are willing to pay more, but people who don’t have kids are willing to pay more because high quality schools reflect higher quality communities,’ he said. “Everyone one of you who lives in a house in Santa Monica enjoy higher housing values because of the quality of the schools.’”
From KABC TV. “Real estate values in affluent Westside communities have remained high, despite the recession- until recently, that is. Mary Beth Woods has been a realtor for 35 years and has seen downturns in real estate before, but nothing like this one and now it’s hit the affluent Westside.”
“And that means dropping your dream price and getting realistic. Last year according to MDA DataQuick, the median price in Pacific Palisades was $2.6 million, now it’s $2.2 million. In Santa Monica the median was over $2 million, now it’s $1.6 million. And in Beverly Hills a $3 million property last year is now going at the more reasonable $2.1 million.”
“A house that Mary Beth is currently showing in the Palisades would have gone for $4 million a year ago. In today’s market the Palisades home has nearly dropped a million in value. ‘”We’ve had more inventory come on the market, we have had fewer buyers, and the sales have slowed. So anybody who has really wanted to sell has had to communicate that by being competitively priced,’ said Woods.”
The San Gabriel Valley News. “Analysts caution that prices will likely continue to fall through 2009 and that the outlook for home sales is uncertain, at best - especially as layoffs mount and banks’ lending standards remain tight. Tom Adams, owner of Century 21 Adams & Barnes in Glendora and Monrovia, agreed that home values will probably experience further declines. ‘I don’t think we’ll see home values climbing for some time,’ he said. ‘But I do think we’re as close to the bottom as we can predict.’”
“‘In the last six months about 95 percent of our transactions have either been short sales or bank-owned properties,’ said Chris Vigil, a broker/associate in Whittier. ‘But buyers are better qualified and more motivated now than they were six months ago.’”
“Adams said stricter lending standards have knocked some potential buyers out of the market. But for the ones who are qualified, his advice is simple. ‘My advice is if you can afford it, buy it,’ he said. ‘And then just sit back and let the market carry you up. Don’t plan on this being a quick turnaround … and this is not the time to be flipping homes. But if you want to buy a home that you can enjoy with your wife and kids this is a good time. And you can watch your value go up in time.’”
The Oakdale Leader. “Richard Hundley, a real estate broker in Riverbank, said foreclosure sales have made up 85 percent of the company’s sales, making December the best month the company has ever had. ‘Foreclosures are carrying the market right now,’ Hundley, a 20-year real estate veteran, who also handles Oakdale properties as well, said. ‘The number of sales are through the roof. There are such great deals out there.’”
“In Riverbank, the master-planned community Crossroads was swept up in the foreclosure wave, resulting in hundreds of foreclosed homes that were nearly new when they returned to the bank with bloated balances on the books from owners that were overextended and upside down by the time the market started to go sour. A similar situation happened to areas within the Bridle Ridge subdivision in Oakdale. Prices tumbled, foreclosures started overwhelming banks, builders left with unsold inventory, and struggling homeowners were left to try and hold on to the American dream by their fingernails.”
“‘Banks are overloaded with foreclosures,’ Hundley agreed. ‘Banks are requiring higher credit scores, more money in the bank, better job histories…and that’s definitely cut some people out of the market that might’ve been able to buy a year ago. But interest rates are just fantastic and there’s a lot of good things going on.’”
“Hundley said he sees more first-time home buyers out there than investors. ‘I’ve seen more cash offers (lately) than I’ve seen in my career. Some homes have dropped their prices by half and some, especially the larger homes, have dropped by almost a third. Million dollar homes are going for $700,000. If you can buy a home, now is the time to do it.’”
‘Ennis started preparing for an economic downturn in 2006, but the deterioration surpassed expectations. ‘We planned our business based on what the best economists were predicting. Unfortunately, the economists’ crystal ball was not very accurate,’ he said.’
What do you expect when the builders and other parts of the REIC pay these people to be cheerleaders? Lots of people ask, how could these rich CEOs have gotten it so wrong? Almost everybody involved were convinced this would never end. That could be a definition of a mania.
But, sure, members of the media, lets keep listening to idiots like comrade Zandi.
Ben Jones,
That’s because everyone was “in” on The Ponzi! You know, the one that puts all of us in a hypnotic trance as we go to reach for our checkbooks? Every ‘thing’ and every ‘one’ we have -ever- known since before clay tablets has been “in” on it!
( As a matter of fact I’m controlling ‘you’ right now through subliminal messages coded in this post )
What are you trying to say in your facetious way?
Oh just playing turn about is fair game? With as knee jerk as many ( not just here on this blog! ) have been to label anything and everything a “ponzi” it’s gotten kind of dumbed down in that regard.
Be it your childhood relationships w/ your ‘own’ siblings, the way we interface w/ co-workers, car dealerships, high school prom dates or even international banking all seem to fall under that same general label.
Oh come now Dinor. You’re taking this a bit far aren’t you? Whenever Ponzi is referred to it should be used only in the financial sphere. Is your 401k statement getting you down or something? Just get out there and tell more people to buy what you have and then sell yours at the top!
It’s not really a Ponzi in terms of having an inside guy doling out returns to participants from new money coming in from fresh meat, but pretty darn similar in action. Plus the bonus that it’s legal!
Most financial vehicles require an ever increasing flow of funds to stay viable. Choke off expanding credit and inflation, and you kill the financial goose. The monetarists that have played games with the levers of the economy for the past 20 years will have their own special seat in hell.
santacruzsux,
Well, that or not -far- enough! I u-n-d-e-r-s-t-a-n-d what a Ponzi is fer’ chrissakes. None of us here require any further explanation.
One thing all the Ponzianistas keep forgetting is that there are NO assurances of profits in the stock market ( or most other instances for ‘that’ matter? )
THAT’S what defines the appeal of a Ponzi. All you have to do is “put your money down” and your return is guaranteed! Doing your research ahead of time and positioning yourself ahead of the crowd is *not a Ponzi dear friends. It’s having vision and taking risks. How did we get so lost?
LOL! Like more than 1% of the population does research in their 401k. G-i-v-e m-e a b-r-e-a-k. Without a continued increase in investment money the whole thing DIES! Yes it is NOT Ponzi, but just an honest greater fool investment. Why do you think they’re clamoring about deflation hurting the financial system.
Inflate or die! What you consider investing is just a pathetic derivative of that concept.
So again, what’s your point? Are you angry about the misuse of the word Ponzi only? Or do you really think that buy low sell high can function without an inflationary bias? Can you respond without being an a**?
..We planned our business based on what the best economists…
Guess that gives new meaning to the word “best”
Of course, these economists were not partying at the
Ponzi party either. Their integrity was beyond reproach!
Ben, based on the dead-on accuracy of your predictions since I started reading your blog in early 2006, you should be making a bazillion dollars a month more than almost any other economist in the country.
Did you hear that twit, Nancy Pelosi quoting Zandi recently in an interview? It was crazy. The clueless leading the clueless!
Yes, Zandi has gone big time and it is sort of horrifying. I mean, he’s sitting there being addressed as Dr. Zandi and he’s identified with Moody’s Economy.com. Jeezily. I mean, that’s what we have, a Moody’s Economy, where someone paid by one of the biggest shill companies on the planet that certified sh*t as solid gold, advises Congress and is lauded on C-Span.
It’s NOT incompetence or stupidity. It’s insanity and there’s no other word for it.
I’ll tell you how. Too many people putting too much trust in people who have been given leadership roles. Note to people: When you can see that morons are in charge, vote them out.
I’ve been trying, but my California compatriots keep thwarting me!
And the economists were:
-Gary Watts: 6% is in the bag
-Greenspan: it’s only froth
-Paulson: subprime is contained, the worst is behind us
-XXX: a thousand people move here a day
-NAR: RE always goes up, buy now or priced out.
…
A meter reader buys a $415K house!
What is that? House price = 10x income.
Plus single parent, so child care costs, child rearing costs, etc… Remember when $400k houses were for successful doctors and lawyers?
Still are. Meter readers are just paying the taxes on them until the doctors/lawyers move back in.
400K homes require 125K income. About 1/10 (perhaps less now) of the households in the country make that kind of income. Honestly, I wouldn’t do it <150K, which only encompasses about 5% of the population (and this is household, not personal income).
Doctors/lawyers/executives/financial wizards/etc. Those without college degree need not apply (for the most part).
Not even a house. It was a condo.
Notice something? The house was priced at the limit for a “conforming” loan. That was no accident. The bottom in many areas quickly rose to that amount. It shows that these GSE-backed mortgages did nothing to make housing more affordable.
And what was the first thing Congress did when the bubble started to pop? They raised the conforming limit.
That’s because they don’t WANT housing to be affordable. Then just want us all to get into a loan we can’t afford and pay a stupid amount of interest over many years on an already grossly overpriced “asset.”
Tom Adams, owner of Century 21 Adams & Barnes in Glendora and Monrovia, agreed that home values will probably experience further declines. ‘I don’t think we’ll see home values climbing for some time,’ he said. ‘But I do think we’re as close to the bottom as we can predict.’”
“Adams said stricter lending standards have knocked some potential buyers out of the market. But for the ones who are qualified, his advice is simple. ‘My advice is if you can afford it, buy it,’ he said. ‘And then just sit back and let the market carry you up. Don’t plan on this being a quick turnaround … and this is not the time to be flipping homes. But if you want to buy a home that you can enjoy with your wife and kids this is a good time. And you can watch your value go up in time.’”
How does this guy’s brain not explode upon holding to conflicting thoughts at the same time. Oh, he’s a realtor.
“that home values will probably experience further declines”
‘My advice is if you can afford it, buy it,’ he said. ‘And then just sit back and let the market carry you up”
uh huh right
How does this guy’s brain not explode upon holding to conflicting thoughts at the same time. Oh, he’s a realtor.
He should have his head explode. If its cheaper to rent and prices are falling…
Oh, doh! Realtor ™ quiz. Its always a great time to buy!
Got Popcorn?
Neil
‘But I do think we’re as close to the bottom as we can predict.’
Right. It’s important to predict the bottom, so we can all start buying and selling houses like mad again. Wouldn’t want to miss out on the next “boom”, doncha know?
I don’t see why he doesn’t explode after saying “enjoy with your wife and kids”. Like everyone who is considering a house purchase is married and a guy.
Well… duh!
Get back to the kitchen and whip us men up some sandwiches ‘n snacks –the game’s on, okay, Big V?
Yesterday I had a knock at the door in the afternoon, I answered the door and the guy says “Hi I’m Robert from XXX Realty do you know anyone that wants to buy a house. It’s a great time to buy a now house then rent.” Either my (paid for house) looks like a rental or things are getting real bad in my market for this guy to go begging door to door looking for buyers.
Kinda sad.
Can you imagine the pep talk he had to give himself before setting out on that walk through your neighborhood?
“The San Francisco Bay Area lost $113 billion in home values”
Again, how is this *not a local issue? How is this *not a local problem? Granted they’re not ‘all’ in default, and many likely won’t. But can -anyone- show me more than a handful of very specific areas of the country that have had ‘that’ level of wealth destruction?
Oh and these are Zoloft-estimates. Damn it, I mean Zestimates!
But look at it this way — if you bought prior to 2002, then you aren’t underwater, are you? Not in the Bay Area.
After then - I don’t have too much sympathy for you, but never mind. Your government does.
‘handful of very specific areas of the country that have had ‘that’ level of wealth destruction’
I don’t know if I agree with that. Over a year ago Riverside county was pushing up to that level. Consider SoCal, the IE, Nevada, Arizona, Utah, Florida and now the PNWest. I’d say it is common to see these declines. Yesterday I posted a report that had Whatcom county in Washington down 18B! And New York City is just getting started.
More importantly, the areas that saw that level of wealth destruction also happen to be the ones where the majority of the RE value is located. Sure, Utah perhaps didn’t see as big a percentage drop. But it doesn’t really matter because UT is such a tiny fraction of the RE value of this country.
People who keep saying “it’s only the coastal areas” or “CA, NV, FL, NYC, SF Bay, etc” are neglecting the fact that the coastal areas have a massive concentration of the RE wealth in this country. It’s great that places in UT aren’t losing much value. But when compared to the 50% that FL has lost, it’s a drop in the bucket.
Ben, Michael,
Fair enough. I guess I’m enough of a Polish person that yes! numbers that topple $100 bil. ’still’ raise my eyebrows? Not only do the coasts contain the majority of the wealth but pop. as well.
I just can’t understand why elected reps. in all non-bubble areas weren’t on their chairs screaming about this? WY, NE, AR, ND, SD etc. How is ‘this’ their… problem?
That’s an excellent question. I have no idea how “middle America” is being railroaded into paying for the “rich” who live on the coasts. Frankly, if I were any of the states other then the ones I mention above, I would be adamant about NOT bailing out the other moron states that allowed themselves to get so mired in this mess. It’s a real separation between rich and poor, and, for now, the poor get to pay for the mistakes of the very rich.
“I just can’t understand why elected reps. in all non-bubble areas weren’t on their chairs screaming about this? ”
Because what little economy there is in those places involves selling stuff to people in the cities. The people in the cities stop buying, the rural area dies too.
Yesterday there was a story about farmers in France protesting falling food prices…. Falling food price is a isolated event??? Or have the people that were living on the debt bubble in the cities stopped being able to pay as much milk?
well, drop in demand from tapped out US consumer, drop in oil price, drop in feed inputs, drop in milk price… hm, well, that should have taken longer…
perhaps this first wave is Chinese cutting back…
Wouldn’t life be so much easier if we were just like the French? Rather than trying to solve our problems, just protest in the street like tantruming little children.
The other day it was reported that the Chicago area has lost $79 B - and we, like the PNW, were towards the rear of the pack.
edge,
And it becomes an ever more regional issue. My guess is that the brunt of that didn’t come from Moline, IL? East Alton?
What makes it even more painful for me is that during “white flight” and urban blight of the 60’s and 70’s Billions got poured into decaying inner-cities from coast to coast. When meth became a rural… blight, where was their “love”?
Well, it’s the same thing here. Not enough $’s, not enough influence.
Oh no, it’s my understanding that the $79 B came from the Chicago MSA.
What billions being poured into decaying inner cities are you talking about?
IAT
Back in the 60’s and 70’s ( before living downtown became high end and glamorous ) many inner cities were becoming run down. All of the higher paid folks were flocking to the burbs leaving city after city w/ declining tax rolls.
It began to form a negative feedback loop. The cr@ppier it got, the more people left! Actually the former World Trade Center was part of a campaign to revitalize LM.
When we were kids, it was easy to picture entire cities being totally vacant. That’s where the “Will the last person leaving ____ please turn out the light?” jokes came from. Billions were pumped in to “Save Our Cities”.
Subsidized buses
Free lunch programs
Enterprise zones
Head Start
Federal crime funding
Health clinics
HUD and its tentacles
USDA food stamps
Welfare payments
No Child Left Behind initiatives
EEOC “programs”
Attorneys who administer previous
Federal building projects
All more concentrated in inner cities. As are costs of supporting illegal residents.
Ran out of time for the rest.
milkcrate,
So very well said. They’ve become such a permanent fixture in our society, by now we simply accept them as if they arrived on the Mayflower?
“HUD and it’s tentacles” LOL!
A few days ago I mentioned that over 40% of the WORLD’S accumualted wealth has vanished in 4 months.
Another poster replied that the portion of real estate value was merely imaginary as it had been inflated.
Well, I disagree. Wealth destruction is quite real. If you throw a rock up in the air, the fact that the rock is up in the air is real, not imaginary. UNSUSTAINABLE, but real nonetheless.
The combination of falling equity prices, real estate prices, bond prices, other asset values and savings have cut the world’s wealth by two fifths in just a few months.
This is greater wealth destruction than the world has ever seen before. Can ayone be so myopic as to think this is just another bump in the road? There is no quick fix for the problem. Many governments, particularly ours, are embracing gigantic deficit spending schemes to try to reflate their economies. I notice that 4 months ago gold traded at $680 per ounce and now it
over $920 per ounce. The “cash is king” mantra may need modification and update. What other asset class is up 35% during this time frame when the world loses 40% of its wealth?
NYC isn’t happening fast enough, but will be veddy interesting to watch.
I wonder if NYC will go back to late 70s prices?
DinOR
“But can -anyone- show me more than a handful of very specific areas of the country that have had ‘that’ level of wealth destruction?”
Ben Jones
“I don’t know if I agree with that… I’d say it is common to see these declines.”
-
I can show you declines measured in tens of billions in a ten block square.
There is an area of Brickell in Miami where you can see literally tens of thousands of condos (dozens and dozens of high rise condos of 30 stories and higher with buildings having easily 1200+ condos each)
Let’s see 10,000-20,000 condos within 5 square miles (quite easy, I’m being conservative) * $500,000 (quite an easy loss on a lot of these) = $5-10B
That’s $5B to $10B in one section of town (not in Miami Beach)
–
Muir,
The reason it stuck in my mind is that we recently featured an article where the data showed that the brunt of the damage came from basically 30 Zip Codes and that left an impression on me.
For bubble watchers sure, there’s a great deal of distinction between IE and SoCal, but I don’t think there is, or should be for the avg. non-bubble state taxpayer?
“There is an area of Brickell in Miami where you can see literally tens of thousands of condos (dozens and dozens of high rise condos of 30 stories and higher with buildings having easily 1200+ condos each)”
That’s scary for many reasons, not the least of which is tropical storms and hurricanes. I really dread to think of what would happen in those condos if electricity ever goes out for an extended period of time. People would be marinated in the humidity and baked by the heat.
Palmy, I live about 2 miles from that area on a small high-rise
on the 19th floor.
I just stood up from chair and leaned my head.
It is pretty to look at.
I only feel at a loss that I cannot communicate better for my fellow HBBrs the enormity of it.
Muir, I live in South Florida for 20+ years and have been in many a mid to high rise overlooking the water from Miami to Palm Beach, for parties, meetings and such. Indeed, the panorama is breathtaking, especially on a spring evening. I would never deny that. But in these uncertain times, I would be uncomfortable living in one, especially during the summer.
Having said that, I will grant you that nothing beats Central Florida for marinating and baking during the summer months. I recall one day in Orlando where I felt I was going to drown just by breathing the moisture-laden air. At least, near or on the Atlantic Shore, there is some breeze to make it more bearable.
My SiL lives in Key Brickell. I took lots of photos when I visited last May. The sheer scale of empty tower construction was breathtaking. I swear the construction crane is FL’s state bird.
If so, I might move after all… Hehehehe… New career…
desertdweller,
On an inflation adjusted basis ( and all the layoff’s in finance ) wouldn’t surprise me a bit! Some of these cities will be forced to re-invent themselves all over again.
In the end I happen to think it will be healthy when people other than the uber-wealthy and trustafarians can afford to live there.
“The declines will exceed 20 percent in about 100 metro areas”
That’s not localized, and that’s not small.
“Million dollar homes are going for $700,000. If you can buy a home, now is the time to do it.”
NOT!!!!!!!!!!!!!!!!!!!!!
Soooo many, once million dollar homes, with soooo many POOR people with Noooo nterest, need or ability to BUY them…
The Horror..the horror
$700k buys an awful lot of livin’.
Million dollar homes are going for $700,000. If you can buy a home, now is the time to do it.”
NO
700,000 dollar homes are going for $700,000
Next year
500,000 dollar homes will be going for $500,000
$200K homes ae still going for $700K.
Saw a few “million dollar homes” listed in San Jose. San Jose! Kind of funny that these homes were a few blocks away from the barrio. Oh yeah, we have a long way to go….
Also, a few friends who own homes are struglling even more since their employeys are cutting their hours or mandatory furloughs. Is this the next wave or something. Instead of massive layoffs, they cut hours or mandatary furloughs. It’s great to be politically correct in keeping employees but to me their productivity will be piss poor. Not know if you have a job the next day really does someone good. They should just layoff and get it over with.
‘Orange County and San Diego County both have seen prices throughout the price range decline significantly, so what might have been million-dollar homes a year or two or three years ago are now certainly well below that threshold,’
Anybody know if this has affected those “real housewives” and their spending habits yet?
I have to take about 10 days off per quarter. If I want any vacation in the future I need to take it mostly unpaid. It’s working out to be around a 7 to 10% pay cut up front, plus about 20% of my total “pay” is in “performance” based pay. Needless to say there are going to be no “bonus” dollars this year. I did get some restricted shares, though.
The good news is that I earn a slightly sub CA salary in CO. The lack of bonus and 10% pay cut still leaves a comfortable margin over the local living expenses. The one income family may come back again after all. Housing costs are still our biggest expense.
From Bloomberg.com, earlier today, partial posted.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8mdg7z0u7Dw
“”U.S. Housing Slump Has ‘Just Begun,’ Says Forecaster Talbott”"
Review by James Pressley
Feb. 5 (Bloomberg) — Let’s say you own a $1 million home in Santa Barbara, California.
The house seemed like a steal when you bought it with that adjustable-rate mortgage in 2005. You still love the white beaches and those yachts bobbing up and down in the harbor.
Then you awaken early one morning, troubled that your monthly payments will soon double. You go out to pick up your newspaper and see for-sale signs on five houses on the street. One identical to yours just sold for $500,000.
Are you going to pay the bank $1 million plus interest for your place? John R. Talbott, a former investment banker for Goldman Sachs, poses that hypothetical question in his latest book of financial prophesy, “Contagion.”
His answer: “I don’t think so,” he says. “If I’m right, then this housing decline has only just begun.”
Talbott is an oracle with a track record: His previous books predicted the collapse of both the housing bubble and the tech-stock binge before it. A friend who runs a New York steak house introduces him as Johnny Nostradamus, he says.
What sets him apart from other doomsayers is his relentless emphasis on simple arithmetic. He walks you through the numbers to show how U.S. house prices got so out of kilter with wages, rental prices and replacement values — the cost of buying a property and building a home. (“Homes in California by 2006 were selling at three to five times what it would cost to build a similar home from scratch,” he writes.)
Five More Years
Talbott’s latest predictions are sobering. The U.S. is only halfway through the total potential decline in housing prices, he says. Home values will continue to deteriorate for four to five years, he forecasts. Adjustable-rate mortgages issued in 2004 and 2005, for example, are only now resetting for the first time, he notes…………………………………..
“Here’s what Pope did: He spent $23,000 on materials for improvements and did most of the work himself. He has a tenant who wants to buy the house for about $180,000.”
“My biggest reward on the one on Teresa (Court) is getting to know the neighbors. They would keep an eye on the house; I would have them over to see the progress,” said Pope, who is on medical disability from a teaching job.”
So Mr Pope is unable to teach due to his disability but he can do manual labor?
If I were the disability insurer, I’d be more than a little interested in this story.
Yeah, no kidding. Disability programs have an unbelievable amount of fraud and waste. Turns out Octo-mom here in So. Cal. has been shoveling out 14 babies while on state disability for the past 10 years. You can go through the trauma of having over a dozen children but you can’t type?
I’m telling ya, getting on SSD/SSI is the holy grail for the hoi polloi.
SSI/SDI income monthly and yet most of those folks,
want ‘no big gov’.. so what I say is, Give back your
monthly checks that the rest of us are paying for…
which comes from GOV.
Seriously these folks are clueless. Can’t speak out of
Both sides of your mouth..Give me back the money
bozos.
Did that pay for IVF then? I doubt it.
Rumor has it that IVF was paid for with student loans.
Got disability?
It’s funny when civil servants put in their workers’ comp claims on an annual or bi-annual basis. They always get a payout for temporary disability, along with another payout for partial, permanent disability. When they rack up enough of these partial, permanent disability payments (% of permanent total disability), they get closer, in the eyes of the law, to being 100% totally, permanently disabled. This works well until they are really injured in an accident caused by someone else. If they claim the accident totally disabled them, the person who caused the accident can always point to all the successful prior comp claims as proof the civil servant was close to being totally, permanently disabled even before the accident. Civil servant can whine that, of course, he/she wasn’t really injured when all those earlier comp claims were pushed, claim that this time they really, really were injured. However, they usually don’t get too far taking this tack.
It ain’t all ‘civil servants’… it is lots of folks.
Desertdweller: You’re right.
It seems to be very common in unionized workplaces. I wonder why?
There are mentally disabling conditions, you know? Perhaps he was shot by a student and suffers from extreme PTSD in a classroom setting. Maybe he was horribly disfigured in an auto accident and is too mangled to appear before students anymore.
Or perhaps he contracted out the labor and merely directed the construction. Show a little kindness, guys. Would you trade places with him?
Maybe he developed an allergy to chalk dust?
ahansen,
We ALL hope you are doing better and making a swift recovery!
It’s just that after everything that YOU have legitimately been through, having pencil-pushers file for carpal tunnel or whatever really makes a mockery of people that are facing true challenges.
Carpal tunnel syndrome is a debilitating injury that can permantly cost you the use of your hands.
What do you know? You’re just a duck!
von Peepwig,
Yes ( when it’s in fact a legitimate claim ) Please to note how there’s a direct correlation to the state of the economy and the number of disability claims for Carpal Tunnel filed?
I’m *not the guitar player I once was. ( There’s only (1) Dick Dale, now 71 y.o! ) but I keep playing and typing through the pain. If you’ve -ever- seen Dick Dale play you’d know exactly what I’m talking about.
Disability is the new welfare.
http://www.thenorrisgroup.com/catagory5video.html
Bruce Norris a long videa trying to sell seats at a seminair but I found it interesting how negative he is. I think he is a big RE investor in the inland empire S CA. Talks about inventory and how banks are holding back putting foreclosed homes on the market, how commecial RE will sell for the price of the land, how unemployment in CA may reach 13%.
That was a GREAT link. Everyone should watch those videos. I see he has a radio show, too. I am downloading mp3s and plan on listening.
Bruce is a great speaker and very knowledgeable about CA real estate. He is negative in terms of what he sees coming for the economy (there’s a reason his last seminar was called “Category 5″ as in big tornado coming through), but long term he sees great opportunities in buying at the bottom. Right now he is buying and flipping, but I like how he flips. He’s buying homes at 15% to 50% of the last sales price (foreclosures for the most part I think) with an average of 28% on the dollar. Most (all?) of these homes are in a condition that would not qualify them for any type of FHA funding. He has three crews working to fix them up with a specific and saleable look and gets them back on the market ASAP in great condition. (He’s built a reputation for doing the work right.) Buyer’s get a move-in condition home that qualifies for any funding at a very fair price.
I’ll be bringing in the materials from the Cat 5 seminar to Vegas. Some great stuff including the legislation he thinks caused a lot of this mess. Great topic for discussion! I wanted to invite Bruce to the meeting but unfortunately there’s another big seminar in Riverside that weekend (Mike Cantu on property management) that’s he’s involved with.
Bruce has been a real benefit to crashing the bubble and nothing he says gives anyone any hope that we are close to a bottom yet. He also thinks 2009 will be the year that commercial crashes so hard that soon (maybe not 2010 but soon) you will be able to buy commercial buildings for “the price of the dirt beneath them.”
My 2008 tax refund was direct deposited today; the IRS is moving right along!
Refund? What’s ‘that’?
Good to hear they aren’t issuing IOU’s ( like ’some’ people we know? )
Yeah, we did our taxes today and there’s $1300 we won’t expect to see from the state of California. (We did not change our W-2s after our little tax deduction was born last year, so our refunds are bigger this year. And yeah, we know we know, but we’re not investment experts by any stretch. And we’re lazy butts sometimes.)
That large “thud” sound you heard just now outside your windows? My family’s final 2008 payment being deposited.
Where’s taxmeupthebootay when encouragement is needed?
The Idaho legislature is still chewing on whether to conform to the new IRS rule permitting adding up to $500/$1000 in property tax expenses to the STD deduction….
I’ll have to file after they leave session at the end of March. Fortunately you don’t have to “file quarterly” for Idaho income tax if you aren’t working and are living off investments/pensions.
“It typically costs between $40,000 and $50,000 to develop a Stockton lot with the infrastructure - curbs, gutters, utilities and so on - needed to get ready to build, Huber said. And that doesn’t count the cost of the land itself ??
The exact point I was trying to make a week or so ago on one of our boards when I believe one of our posters from Las Vegas purchased in a neighborhood they they liked for their family (1600 sq.ft. for $135,000.) in a foreclosure…I suggested that was good value particularly when you like the location and are going to owner occupy the home…WAY below replacement cost which I believe Paul in Florida disagreed…
Just because it’s below replacement cost doesn’t mean that it won’t go lower. Also, replacement cost is horribly inflated by the obsence builder profits that were built in during the last few years. 100/sq/ft is about what it costs to build a home. Lot improvements are extra, but I am sure that those costs will be cut dramatically (1/2 to 1/4 I would expect).
The thing that people just keep failing to realize is that raw land (the kind that needs gutters/curbs/etc) in almost ALL of this country is effectively worthless. There’s SO much land; it’s like the market is glutted for the next 1000 years before we have anything that even approaches a “land shortage”. Now, there are certainly exceptions (NYC, beachfront, etc), but not that many. Frankly, in most of this country, the land should sell for the cost of the improvements (40K, if we use that number) and not much more.
I’ve been to Stockton, and to Mountain View. There’s land everywhere there. The only thing that’s actually “land constrained” is the ocean/ocean views. Other then that, take your pick, there’s plenty of desert for everyone!
I did it on $57 /psft(under roof) and I went marble crazy and had a HUGE back porch, polished concrete floors etc.
I’ve posted this MANY times.
I know at least 3 other people with similar results $47-55 /psft.
(This is not for the faint of heart; I got releases from all my contractors, permits, inspections….)
For the cheap boxes builders put up in Fl, under $45 is a given.
They did their cheap trusses for under $2500 2 years ago.
Builders DO NOT build for $100 /psft (under roof)
did it on $57 /psft(under roof) ??
I would love to see the break down… Particularly, the labor cost for each and every trade…There are about twenty five of them…Did they have liability & workers comp ins. etc…Did you act as your own general contractor ?? If so, add 15-20%…Was this ground up new construction or an addition ? Big difference…Besides, even if we were to use your $57. number and add the costs associated with land development that I described above, you would be way in excess of the $85. per foot that the Las Vegas buyer perceived to be good value…
and to Mountain View. There’s land everywhere there improvements are extra, but I am sure that those costs will be cut dramatically (1/2 to 1/4 I would expect) ??
Since when do city municipalities “Cut” their fees ?? They ONLY raise them…The Fee’s alone in my area (next to Mt. View) run roughly $8.00 per square foot…Add to that, working drawings and engineering and you get another $4.00 per foot…$11.00 per foot and you have not even touched the dirt yet…
Northern Colorado charges around $40,000 for a single family dwelling - that doesn’t count dirt, curbs or anything else (includes water tap, sewer tap, and building permit fees).
I don’t see these fees going away anytime soon either even though they cry and whine about how “unaffordable” housing is. Well no doubt, fully 17% of the median house cost is fees.
“Did you act as your own general contractor ?”
Yes, “owner-builder” let’s you build in FL provided you will not sell within a year.
Costs do not include land. Does include about 30 loads of 30 yards each of good fill dirt, grading.
Let’s make this simple: it included everything: including permits
($+14K to pull impact fees….) lot was level but I wanted to raise the house, hence dirt… to a CO (certificate of occupancy)
The only thing it does not include is the cost of land.
When I say under roof (the way it is measured, not under a/c, I of course am including garage and back porch, entrance)
I’m sorry you are disbelieving, it is your loss.
I can’t say unequivocally that it is very possible to do this.
In your questions you did not include plans (which have to be engineered in FL because of hurricanes and tornadoes) I did save a bundle by getting the engineering very cheap. I took them the plans then they added their boiler plate up to code specs and payed something like 40 cents per foot.
It was a small house 2650 under roof / 1800 under a/c.
Cost was $150K (land was $60K which I bought close to peak)
The master bath was amazing, marble throughout and it was huge) and I did do polished concrete throughout the house.
I spent a lot of money doing a stem wall system (added cost was $5K) and spend an extra 2K for a tin foil back roofing.
–
I am not alone on this.
Oh, did I make any money?
None. If I had finished the house a year earlier I would have made 150-200K easily.
Meant to say “I can say unequivocally that it is very possible to do this.”
I learned a lot and would not recommend this to anybody.
Oh, you forgot to ask about another cost: a builder’s loan.
That would have cost me another 5K.
Payed cash to all the subs (after receiving a release of lien)
Only time I failed to do this, I almost had a heart attack when I was sent a lien for the concrete) I had gotten a release from the masonry guy but had not payed directly for the concrete.
It was just standard procedure, everything was ok.
–
I’m not trying to impress you scdave, in fact, proof of my stupidity was that I did build it. If I had used the money to short the financials and builders, I would have made many millions instead of breaking even when I realized that I would not live in the house.
—-
For everybody:
My dream is a hurricane proof (as close to that, I saw Andrew up-close) house, with a solid concrete roof, no garage, no back porch, staircase outside to the roof.
Real small, no bigger than 1500 sqft total.
Solar panels and a well.
Not in a flood zone.
Bliss… plant some mango trees, orange trees (illegal to do that now…)
Maybe… if land costs plummet.
Sorry if double post.
Meant to say “I can say unequivocally that it is very possible to do this.”
I learned a lot and would not recommend this to anybody.
Oh, you forgot to ask about another cost: a builder’s loan.
That would have cost me another 5K.
Payed cash to all the subs (after receiving a release of lien)
Only time I failed to do this, I almost had a heart attack when I was sent a lien for the concrete) I had gotten a release from the masonry guy but had not payed directly for the concrete.
It was just standard procedure, everything was ok.
–
I’m not trying to impress you scdave, in fact, proof of my stupidity was that I did build it. If I had used the money to short the financials and builders, I would have made many millions instead of breaking even when I realized that I would not live in the house.
—-
For everybody:
My dream is a hurricane proof (as close to that, I saw Andrew up-close) house, with a solid concrete roof, no garage, no back porch, staircase outside to the roof.
Real small, no bigger than 1500 sqft total.
Solar panels and a well.
Not in a flood zone.
Bliss… plant some mango trees, orange trees (illegal to do that now…)
Maybe… if land costs plummet.
Muir…Was not really doubting that you did it, I was just suggesting that in the typical case (Which yours is not) those numbers cannot be achieved…I am glad you survived it
Muir— I know that HGTV is the Upsell Channel, but they had a special on what they called “extreme homes”— one of which was as close to hurricane-proof as you’re going to get. It was concrete in a bubble shape (how appropriate!) with parking only on the first floor— no corners for the wind to catch on, and eighteen feet of flood height before it even started threatening living space. They also had anti-mold linings and cork subflooring.
If you want a hurricane-proof place, that’s a good style to research.
Muir,
We are looking to perhaps go with a “Straw Bale Construction” or similar type plan. It would only be for during the summer initially w/ plenty of time to make it habitable year round as time goes by.
We were thinking polished concrete too. I’m never -touching- another TILE as long as I live!
Get a copy of Carolyn Roberts’ book, A House of Straw. She tells how she built her straw bale house near Tucson
If the BLM were run with the public interest in mind, there would be more land available that ain’t desert.
Argh.
The disagreement comes in that when there is far too much inventory, replacement value is moot. The replacement value of my car, is far more than what I can sell it for, if I were to sell it.
Same for houses in the near future. Those 40K to develop a lot are sunk costs, that might never be recovered.
You can’t base your purchase decision on what it would cost to build it, but on how much you might be able to get for it when you try to sell it down the line, and if you can live with the loss.
The disagreement comes in that when there is far too much inventory ??
So what happens if all the inventory is acquired under replacement costs over a period of time (Pick your own timeline) ??
How’s the water holding up out there?
Colorado has similar issues. The limit to growth is not land it’s water. New developments often depend on leasing the surplus from the primary water owners. In a dry year the is no surplus.
Interested of late talking to people who own businesses in Carmel, Pacific Grove and Monterey; Many live up towards SJ and own businesses here. Most lost money in the Dot.com then put money in RE and back into the stock market only to lament that they’ve been had by the downturn in RE and lost over 40% in the market. Many think that only the poor have been victims. In this ponzi scheme many of the poor have made out quite well by living off the housing ATM before having to walk away while never having any skin in the game.
Have a good friend that lives in Carmel valley…Purchased land for a small townhome development in Seaside and a custom lot in some Mucky Muck area in Carmel hills…He has lost a bundle (1 mil +)…Another friend opened a sports bar down near the Aquarium and lasted only 8 months…I think he lost 300k…
Was talking with one of my clients today. Been thinking of prospecting some of the foundations that have funded her work. In short, the advice was, “Forget it.” Seems as though those foundations got hammered by the stock market downturn. (Once again, I’m glad that most of the Slim Fund is in treasuries, CDs, and cash. Only a little sliver in the stock market.)
“Home prices now are below what it costs to build them, Cates said, because the houses occupy land bought at the height of the market, when prices were high.”
I find these two statements are incongruous.
Home prices cannot be below what it costs to build them, if you build them on land bought at today’s price!!!
Totally off topic. I saw a yahoo article on Obama warning of impending catastrphe. The auther was asking “What happened to hope and change?”
Mr Market, meet Mr Obama. Mr Obama, meet Mr Market.\
Then O does his best GWB impersonation runnning a circle screaming his head off and randomly throwing out bags of money.
Ahhhhh. Good times. I think Obama is already aging rapidly.
..“The value of all homes in the San Jose metro area fell 17.2 percent in the final three months of 2008 compared with the same period in 2007, to an estimated median value of $587,360, according to Zillow. Across the San Jose metro area, which includes all of Santa Clara County,..
$587K median according to Zillow?
Data Quick says otherwise.. claims that Santa Clara county average price Dec 2008 was $430,000, a mere 25% discrepancy.
This included high-end cities like Cupertino ($1.0M), Los Altos ($1.75M), Los Gatos ($1M), and Mountain View ($700K).
City of San Jose, $390,000.
Did i read somewhere that Zillow runs their own RE brokerage?
“It typically costs between $40,000 and $50,000 to develop a Stockton lot with the infrastructure - curbs, gutters, utilities and so on - needed to get ready to build, Huber said. And that doesn’t count the cost of the land itself. In the past few weeks, though, ready-to-build ‘finished’ lots have been sold for between $5,000 and $7,500 each, he said.”
Chant along with Monkey-Boy Steve:
Developers, Developers, Developers, Developers
Now, throw a chair.
OK, so did you guys read the news article about IBM? They are offering their laid-off US workers a chance to move to Russia, India, Argentina, wherever and work there. If they are hired, they will be paid local wages and be subject to local labor laws. Doesn’t that piss you guys off? It pisses me off.
So the US would be full of only CEOs, and everyone else would have to live in some screwey country with no human rights, etc. What a world! Do these people seriously think they can even SUGGEST something like that and get away with it? Don’t they even know the rules of engagement anymore? The arrogance, the stupidity, the GALL!
And yet the zombie shareholders sit around and watch this crap and vote with the board of directors and management 99.98% of the time. Is it that most shares are owned by the same corrupt folks running the companies? No, most shares are owned by pension funds and mutual funds - supposedly for the benefit of regular folks.
Makes me want to liquidate my 401k and tell the mutual fund managers to go work in Russia.
I think the individual investor (like me for example) doesn’t know how to influence corporations when you own a tiny percentage of the outstanding shares. But perhaps after the recent news of the sense of entitlement amongst ceos about bonuses while driving their companies into the ground, investors will find a way to organize so they can have a voice, since the BODs are obviously complicit or asleep at the wheel when it comes to watching compensation.
But the big picture certainly points to the erosion of the very class of people who form the customer base for our consumer economy. When will the corporations wake up and see that their future depends on having the middle class around to buy their products?
Those dirtbags are so STUPID that they won’t realize this basic fact until it blows up in their faces (this year, in other words).
Thank God the Republicans have finally been put out to pasture. Now the Democrats can go about the work of saving these corporations from themselves. Can anyone say “Our contract with the WTO expires in November”?
One of the countries is Nigeria!
Can you imagine $10/day?
“Adams said stricter lending standards have knocked some potential buyers out of the market. But for the ones who are qualified, his advice is simple. ‘My advice is if you can afford it, buy it,’ he said. ‘And then just sit back and let the market carry you up. Don’t plan on this being a quick turnaround … and this is not the time to be flipping homes. But if you want to buy a home that you can enjoy with your wife and kids this is a good time. And you can watch your value go up in time.’”
I read crap like this, and my first reaction is to go out, find the first realtor I can lay my hands on, and punch him right in the teeth.
Dred
Have you seen the new Re Max commercial? It states that now is the best time ever to buy and shows people walking past a house with a sold sign and kicking themselves in the @ s s. Kinda makes me want to kick a realtwhore in the fruit basket.
Is that the one with people literally sitting on a fence???
Anyone going to Vegas got a decent camcorder? Can’t imagine any reason we can’t put a parody of that ad up on YouTube! (Happy fencesitters and others in front of a sold sign with a recent Shiller chart in front of them.
)