Waiting To See If Prices Might Drop A Bit
The Santa Cruz Sentinel reports from California. “The median price for a single-family home in Santa Cruz County plunged in February to $380,000, the lowest since January 2000, prompting one agent to declare the market has bottomed out. Gary Gangnes of Real Options Realty tallied 92 sales, with homes in Watsonville, the area hardest hit by foreclosures, accounting for a record 33 percent. And 66 percent sold for less than $500,000, the highest percentage in years, according to Gangnes.”
“In Watsonville, banks sold foreclosed homes at discounts of 30 percent to 50 percent. A few examples: 124 Grant St. sold for $166,000, down from $490,000 in 2004. 38 Lower Cutter Drive sold for $215,000, down from $420,000 in 2003. 518 E. Lake Ave. sold for $235,000, down from $395,000 in 2002. Those are not condo prices; those are single-family homes.”
“Only four homes sold in February for more than $1 million. Longtime appraiser Glenn Fuller reported 212 listings in that price range at the end of last week. ‘That’s a lot,’ he said.”
“‘We’ve hit our bottom in South County in single family,’ said Dee Dee Vargas, president of the Watsonville Association of Realtors. ‘If you’re waiting to see if prices might drop a bit, you might miss the boat.’”
The LA Daily News. “The relentless wave of foreclosures across Southern California helped push February home prices down to early 2002 levels, even as home sales spiked on healthy bargain-hunting, a market tracker said. Last month, 15,231 new and previously owned houses and condos were sold in the six-county region, said MDA DataQuick. That was up 42 percent from the previous February. But the median price fell 39 percent to $250,000, with foreclosures accounting for 56 percent of February sales.”
“In Los Angeles County, the median price fell 35 percent to $299,000, and sales increased 32 percent to 4,590 transactions. In Ventura County, the median price fell 26.5 percent to $327,000, and sales rose 10 percent to 545 properties.”
“Adjusted for inflation, current payments were 50 percent below typical payments in spring 1989, the peak of the previous real estate cycle. They were 59 percent lower than the current cycle’s peak in July 2007.”
The Press Enterprise. “Last month the median price of houses sold in Riverside County was $190,000, down from $195,000 in January and almost 42 percent lower than the $325,000 median price in February 2008. In San Bernardino County the median home price dropped from $162,000 in January to $153,000, down more than 47 percent from a year earlier.”
“New home sales continue to fall. Last month builders sold 277 homes in Riverside County, down from 557 a year earlier and 2,109 at the height of the housing boom in February 2006. In San Bernardino County, 109 new homes sold last month, a drop from 304 a year earlier and 792 in February 2006.”
“It was the first time in 10 months that the Southern California median home price did not decline. ‘If we get more than a month of this I will begin to believe we will see a major change. The market should be near its bottom,’ said John Husing, a Redlands economist specializing in Inland Southern California. ‘The problem is that the supply of foreclosures has been overwhelming demand, causing prices to keep going down. I think we are very close to the bottom in price and if any of the policies of Obama work, we are at the bottom.’”
“Leslie Appleton-Young, chief economist of the California Association of Realtors, said, ‘You are seeing a very strong recovery in sales activity, especially in areas where prices have fallen the most.’”
The Sacramento Bee. “Free-falling home prices and thousands of bank repos have pulled investors back into the Sacramento housing market at levels not seen since the headiest days of the housing boom, new statistics show.Preliminary estimates from researcher MDA DataQuick indicate that 28.4 percent of February buyers in Sacramento County were investors aiming to buy, repair and rent out their new acquisitions.”
“‘I bought about 31 houses last year, and I’ll buy some more this year,” said Duane Lyons of Granite Bay, a longtime investor, ‘but not as fast as I did last year. ‘I think for a lot of investors right now, nobody’s quite sure where the bottom is. Things are still dropping down. Guys like me aren’t buying as much as we were.’”
“The veteran said a lot of investors jumped in too early, a year or more ago, and are stressed now by debt, falling values and downward pressure on rents. He said many owe more than they collect in rent, which may result in a new series of foreclosures. ‘A lot of them aren’t able to get their mortgage payments,’ Lyons said.”
“El Dorado Hills investor Scott Arbuckle said he and his partners have also slowed their purchasing after buying 10 area bank repos last year. ‘The buys have been good and they’ve cash-flowed well and make great sense as an investment,’ he said. ‘But the prices … keep sliding. You just scratch your head. How is it possible that they keep declining?’”
From KPBS. “Faced with shrinking incomes and home values, more people are opening up their houses to strangers. We’re talking about the modern boarding house, where homeowners rent out bedrooms in order to keep making the mortgage payment. Marianne Russ reports.”
“Christin Barron’ and her husband Efrain paid $400,000 for their four-bedroom, three-bath home a couple of years ago. Now it’s worth maybe $300,000. It’s in an Elk Grove neighborhood where foreclosure signs are about as common as mailboxes. The Barron’s landscaping business went south with the housing market. Christin says she’s been late on the $2100 dollar mortgage payment for five months straight.”
“‘I’m afraid of that roller coaster. I don’t want to get behind. I don’t want to miss my bills,’ she says ‘So I made a list of things I could do to bring in more income and one of them was renting out the room.’”
“She put an ad on Craigslist for two of the four bedrooms. At first, no hits. Then she lowered the rent from $525 dollars to $400. A woman in her 60’s is taking one. The other’s still up for grabs. The Barron’s 1900 square foot home is already pretty full. There’s Christin, her husband, 5-year old Ally, 5-month old E.J. and Efrian’s mother, Ernestina. They’re giving up the office and Ally’s playroom to make space for new housemates.”
“‘I hope that you know, it works out because I, myself, we’re just hard workers. We know whatever it takes we’re just going to have to push to make ends meet. If this is the first of many things we have to do to keep the house, we’ll try our best to do it,’ she says.”
“Corey Koehler is with the Rental Housing Association of Sacramento. ‘The challenge is you’ve got an apartment-type setting inside of a single-family home,’ he says.”
“He says there are several potential pitfalls: for example, homeowner’s insurance typically won’t cover a renter’s belongings. Or there could be local codes restricting the number of cars in a driveway. And he says homeowners are still required to follow fair housing guidelines when screening potential housemates: ‘If they screen wrong and they get a fair housing complaint. Perhaps they get the wrong person in there who vandalizes the place, or the homeowner does need to contact an attorney or spend money to try to get the person out of there,’ Koehler says.”
The San Francisco Chronicle. “After a year of fruitlessly asking Washington Mutual to lower her mortgage payments, Stacey Rustrum of Pittsburg took her twin toddlers and marched into an Oakland bank branch on Tuesday, hoping that in-person help would accomplish what her hours of phoning had not. What she’d heard about was a ‘homeownership center,’ a new concept designed to help struggling borrowers initiated by banking giant JPMorgan Chase, which now owns WaMu, as well as EMC, the former lending division of Bear Stearns.”
“Rustrum’s…family’s finances are tight because the economy has cut into her husband’s income as an ironworker, and she had to give up her real estate job to care full time for their son Austin, 4 1/2, who has cerebral palsy, epilepsy, chronic lung disease, asthma and brain damage. ‘I applied a year ago to WaMu,’ she said. ‘They asked for additional information, like pay stubs. I sent them four times. Then they declined me because they said I didn’t have enough income to pay my mortgage’ - even though she was current on her payments at the time.”
“Now the family is three months behind, largely because of buying a van to transport Austin and his wheelchair. They are hoping to shave $400 off their $2,250 payment and get a fixed-rated loan instead of their current interest-only loan, which is scheduled to adjust higher in five years.”
“They owe $445,000 on a house worth about half that. ‘There’s no way the market is going to come back that much in (a few) years,’ she said.”
The Union Tribune. “A slumping housing market and grim employment outlook have apparently persuaded thousands of county residents to stay put – a sharp departure from recent years when far more people left the area than moved here. Last year, 420 more people moved into San Diego County from elsewhere in the United States than left. That’s a reversal of the year before when there was a net movement out of the county of 15,500.”
“‘In this market, people see their investments aren’t doing well, and for many people their home is their investment, and that, plus high unemployment, will make people more cautious about making a move,’ said demographer William Frey of the Brookings Institution in Washington, D.C. ‘This is clearly a reaction to what’s going on in the housing market.’”
“‘These are about the most dramatic numbers I’ve seen in a long time. I was expecting some trend like this, but this is much more dramatic than I was expecting,’ he said.”
“For more than a decade, San Diego County workers have clogged the freeways commuting to southern Riverside County, where they found much cheaper housing. ‘During the peak of a housing market, you see spillover into other areas, and you feel you can justify the commute because you’re buying a house you think will appreciate and you need the space and the backyard,’ said Andrew LePage, an analyst with DataQuick. ‘But when the market turns, people don’t have the sense real estate is a great investment and they’ll find something that will do them well closer to work.’”
“Ed Bass, a transplant from the Bay Area, moved to San Diego County in November after landing a job as a global marketing manager for the San Diego biotech company Gen-Probe. Unlike many of his colleagues, whose homes now are worth less than what is owed on them, Bass was able to sell his home in Danville for a profit and last month purchased a home in Encinitas.”
“‘I have colleagues who are up to half a million dollars under on their homes, so they could not leave,’ Bass said. ‘And I have other colleagues who have been trying to sell for two or three years and have not been able to, so they just stay. I had a great opportunity with a great world-class company, and I’m two miles from the coast, with an ocean view. I couldn’t have afforded that before the downturn.’”
From Reuters. “Ron Barnard is throwing in the towel. Like a growing number of the 8.3 million American homeowners who owe more on mortgages than their homes are worth, he’s ready to just walk away. Barnard and others like him are starting to worry market experts and economists, who fret that the growing trend may deal a blow to an economy on its knees while swelling an already ample pool of bad loans.”
“In California’s Inland Empire east of Los Angeles, where Barnard lives and sells real estate, median home values have plunged more than 40 percent in the last year as formerly sidelined buyers snapped up foreclosed properties.”
“Deflating home prices thus threaten to accelerate a negative feedback loop that has sent prices lower, said economist Ed Leamer, director of the UCLA Anderson Forecast. ‘Should the downward spiral in home prices, neighborhood condition and equity deterioration continue, more and more mainstream borrowers are likely to walk away from their homes,’ Credit Suisse said in a December report.”
“More than half of Nevada’s mortgage holders now owe more on their mortgages than their homes are worth. Arizona holds second place with 32 percent of homeowners have negative equity, and Florida and California follow with 30 percent each, according to First American CoreLogic. The total value of U.S. residential properties fell to $19.1 trillion in December 2008 from $21.5 trillion a year earlier. California’s losses came to more $1.2 trillion — roughly half the nationwide decline, the firm said.”
“‘I’m able to keep my head just above water right now,’ said Russ Sweet, 61, who is now living with his son and renting out his underwater home in Temecula, California, at a loss after an injury ended his career as an electrical lineman in San Diego. While he fights to stay afloat, Sweet says some of his neighbors in Temecula — a haven for commuters who work in more expensive coastal cities — already have walked away.”
“Barnard, who already has stopped making payments on five investment properties purchased in 2005, is on the verge of giving up on his own home that is now worth roughly half its $800,000 purchase price. Barnard and some financial planners say that, in certain cases, giving up is the only option. ‘People are hurting,’ said Barnard, who includes himself in that group. ‘They’re scared or they’re angry.’”
‘Deflating home prices thus threaten to accelerate a negative feedback loop that has sent prices lower, said economist Ed Leamer, director of the UCLA Anderson Forecast.’
Ya think Ed?
‘It was the first time in 10 months that the Southern California median home price did not decline. ‘If we get more than a month of this I will begin to believe we will see a major change. The market should be near its bottom,’ said John Husing’
So we are back to the old YOY versus MOM median game? In a full on collapse, who cares what the median is? It could be much more desirable houses selling in foreclosure. There isn’t any telling.
As for the CAR economist:
‘Leslie Appleton-Young, chief economist of the California Association of Realtors, said, ‘You are seeing a very strong recovery in sales activity, especially in areas where prices have fallen the most.’
Yes, that’s covered in the first week of the first college economics class, dear.
“It could be much more desirable houses selling in foreclosure.”
Bingo! As prices fall off a cliff, and a glut of foreclosures to choose from, any prospective buyers left standing (the kind with a downpayment and good credit) can afford to buy much higher up the quality distribution than they would have been able to circa 2005. Hence the median will tend to understate the quality-adjusted decline in market values during a crash (even though it is telling that it has fallen by 40 pct YOY in many recent periods).
Here in Tucson, an MSM story just crowed about an increase in the local median house price. Here’s the linkie-dinkie.
But I suspect that the increase in median may be due to the prevalence of the following type of buyer:
“The veteran said a lot of investors jumped in too early, a year or more ago, and are stressed now by debt, falling values and downward pressure on rents. He said many owe more than they collect in rent, which may result in a new series of foreclosures. ‘A lot of them aren’t able to get their mortgage payments,’ Lyons said.”
“El Dorado Hills investor Scott Arbuckle said he and his partners have also slowed their purchasing after buying 10 area bank repos last year. ‘The buys have been good and they’ve cash-flowed well and make great sense as an investment,’ he said. ‘But the prices … keep sliding. You just scratch your head. How is it possible that they keep declining?’”
In other words, “The houses have cash-flowed well, so we’re breaking even on that . . . but there’s that nasty $10,000 a month in equity going out the window. After adjusting for inflation, we should start recouping on our investment in 2018.”
By which time he’ll be living in a cardboard box and drowning his sorrows with bottles of Thunderbird.
El Dorado Hills investor Scott Arbuckle said he and his partners have also slowed their purchasing after buying 10 area bank repos last year. ‘The buys have been good and they’ve cash-flowed well and make great sense as an investment,’ he said. ‘But the prices … keep sliding. You just scratch your head. How is it possible that they keep declining?’”
Your itchy perception of declining prices is just a mild symptom of the Greed-Type A Propaganda Virus. You need to leverage and re-enfroce your positions and then double-down gain… Fast! Other Fools are just snapping them up.
Just buy 10 more bank REO’s, shampo, rinse and repeat. You guys should be bald, broke and in court in no time at all.
My bill is in the mail
“can afford to buy much higher up the quality distribution than they would have been able to circa 2005.”
Personal example from Elk Grove: In 2005, we were unable to afford a condo (not that we wanted one.) Seriously, condos in suburban central Elk Grove. It’s a nice little town but “nice little town” does not a condo market make. Now we’re looking to buy a SFH, 4/2. Last fall, when we started looking (on the theory that we needed to start looking so that we would know what we wanted), those 4/2s were on micro-lots (like eight-foot deep backyards and almost townhouse construction.) Four months later, we’re looking at real lots– .2 acre and up– and pretty nice places.
We’re throwing in a lowball offer on a house that is comparatively small, about 1500 square feet, but which is set far forward on a .22 acre lot in a cul-de-sac. If we get it, we’re going to have fun with it. Nice, well-established neighborhood, about five miles from Evil Rob’s work. If we don’t, well, we’ll shrug, keep looking. The deals get better all the time.
Incidentally, this is in the $150-$200K market, which is below 3x median income for Elk Grove. I just wish I knew where the heck that weirdly high median is from– it’s not like EG has a huge amount of high-income job sources.
The areas where prices have fallen the most are the undesirable areas that have a high proportion of ‘investors’ getting in.
That’s another bubble coming up.
I guess the fact that huge numbers of people are facing potentialy long term unemployment isn’t going to effect the bottom.
Not to mention the long train of alt-a recasts.
Also have to figure in the people in weak equity positions aka underwater or zero equity will add distressed inventory for a long period of time.
I wonder how prop 13 effects things. People are locked in at higher tax values might give up faster just to get the lower tax burden in the future.
I believe inland and fringe areas are getting to the bottom much faster. Long term pressures on these areas might be much higher than expected due to energy concerns though.
Yeah really. What’s going to happen this summer when most of the people that have been laid off so far have blown through their savings (if they had any) and pretty much don’t have any choice but to walk away? I suspect a sort of positive feedback loop has started here - increasing initial foreclosures => worsening economy => job losses => more foreclosures.
Not to mention capital squandered into zombie banks. We will probably have a period of price inflation as hedge funds get hold of money to play with futures again.
Thanks BB.
Congratulations Julius, you understand what the words positive and negative mean when used to describe feedback! Mr. Leamer in the Reuters story incorrectly described the same phenomenon as negative feedback.
Maybe he just means that he doesn’t like it, so he calls it negative.
Deflating home prices thus threaten to…sent prices lower,
That would be a positive feedback loop.
Everyone should send LAY an email, telling her to loose weight.
HA!
This is a “positive feed-back loop” not a negative one, Ed. Just because home prices aren’t going your way, doesn’t make it negative.
First I get what you are saying, and you are correct. But ! actually, it’s just the reverting to mean portion of the bigger negative feedback loop. Houses tend to stay in the 3x median income range and are pushed back to that equillibrium point. We’re just on the feedback portion of that cycle.
Where’s the negative in your “negative feedback loop”? I searched above but could not find any clarity on this point. Maybe I missed it; please re-clarify.
IAT
A few examples: 124 Grant St. sold for $166,000, down from $490,000 in 2004. 38 Lower Cutter Drive sold for $215,000, down from $420,000 in 2003. 518 E. Lake Ave. sold for $235,000, down from $395,000 in 2002. Those are not condo prices; those are single-family homes.”
I’m sure the folks in Des Moines are sctaching their heads when they read stuff like this.
Those people that bought condos for those prices are really screwed.
I suspect the banks that loaned money to these FBs so they could overpay for their “investments” are even more screwed, as more and more of the FBs decide to walk.
I heard some asshat “financial expert” on talk radio the other day mention in one breath how the gov’t. has to mark all the toxic paper to market before infestors want to get back into MBS’s, and in the next breath, he said the gov’t is going to make a ton of money loaning all of these FB’s (in this case the B stands for banks) money. What about all of the toxic debt? Just unreal.
“‘I have colleagues who are up to half a million dollars under on their homes, so they could not leave,’ Bass said. ‘And I have other colleagues who have been trying to sell for two or three years and have not been able to, so they just stay. I had a great opportunity with a great world-class company, and I’m two miles from the coast, with an ocean view. I couldn’t have afforded that before the downturn.’”
How many of the collegues will stay put for another 2 years? Eventually this pig must move through the python. The stimulus packages are trying to force feed the python while corking its ‘aft end.’ Eventually something will happen and it won’t be pretty.
Sadly, I know of a lot of layoff notices to people I care about lately. Exactly how will they ‘hold on.?’
Ben gave numerous examples of investors now regretting ‘catching the knife.’ I know of a few who are starting to realize how much they have fed into their ‘investments’ over the last few years. Rents will not cover costs. Now with ‘room for rent’ being the life line more and more are turning to.
I wonder… with so many homes for rent, how many of the renters have sub-rented? Hmmm?
More than half of Nevada’s mortgage holders now owe more on their mortgages than their homes are worth. Arizona holds second place with 32 percent of homeowners have negative equity, and Florida and California follow with 30 percent each, according to First American CoreLogic.
And this is the ticking time bomb. It takes people ~18 months to wake up to the fact and accept they’re screwed. Add the resets and…
Got Popcorn?
Neil
Your pig in the python analogy, aside from being hilarious, is one of the most eloquent descriptions I’ve heard on the effect of the stimulus package on the housing market.
Change it to Elephant in Phython and I’ll buy a two tickets to watch it that snake crap
popcorn anyone ?
What happens when your pet python gets into the Orville Redenbacher’s and then decides to take a nap on a rock in the sun?
Big V,
The imagination can run wild with that one.
*throws up *
Neil,
I looked at lots of big houses built in Victorian era and other large roaring 20s houses back on the east coast.
My girlfriend warned me against purchasing any after the last bust. The hackjobs had been converted to multifamily dwellings, some permited some not. Huge amount of work to restore them made it unprofitable.
As we talked about a couple years ago, we still see remnants of the great depression. Either in old art deco buildings like the theater in San Pedro, or as you mentioned, fancy wood work in south central “slums”. Anyhow, things are echoing. We will see those granite counter tops for the rest of out lives and probably have to explain the negative viewpoint.
Just like in the last couple of busts, vacancies are increasing dramatically as people double up, move home exc.
Still could be a few more years before it crushes Manhattan Beach and RPV. Look for acceleration in late 09 with the AltA wave.
James
Hey! You weren’t in Atlantic City, were you? Saw the ex-wife on Monday; said she’d been to the St. Pat’s Day parade on the boardwalk on Saturday. I remember taking our kids 10 to 12 years ago; always had a pretty good time. Well, she said she couldn’t remember it ever being so small. Seems one area in which businesses have cut back here is sponsorship of floats in parade.
My son goes to the University of Central Florida in Orlando. We were looking for apartments and ran across a guy trying to rent his newly minted McMansion to up to 5 college students.
I don’t know if he did it but I like to think of his neighbors with their $800K house living next to Animal House. Har, har…
Who cares? Bernanke and the Obama idiot continued to monitize the debt. Your real estate goes up in price, your savings (ha) gets debased, and inflation cranks up. Gold went up $60 today. Weimar Republic here we come. And, I thought the scrub was bad.
“The veteran said a lot of investors jumped in too early, a year or more ago, and are stressed now by debt, falling values and downward pressure on rents. He said many owe more than they collect in rent, which may result in a new series of foreclosures. ‘A lot of them aren’t able to get their mortgage payments,’ Lyons said.”
HAhahahaahAHAHAHAH!!! * gasping for breath * HAHAHAahahah!
Ahhh….iggerant greedsters. For someone (me), who believes that cruel laughter is the best possible medicine, they’re the gift that just keeps on giving!
Yeah that is one of the sweetest quotes I’ve seen in many months.
Oh, I don’t know. I think you’re being a little harsh there. The act of purchasing a property and renting it out isn’t greed - it’s plain old capitalism of a fairly honest sort. The only thing those guys are guilty of is not having any sort of rational understanding of the housing market. Ignorant, I’ll agree with.
I said ‘iggerant’. It’s a different state.
Purchasing a property that doesn’t quite cashflow only means one thing:
It was purchased for future expected appreciation…
…you know…2005 prices…
That is ignorance AND greed.
Yeah! That’s what I was gonna say! As soon as I had the smart words ready.
(Thanks, SMF)
Here in Northeast Ohio, rental agency (with about a dozen apartments) says it cant get applicants to sign; they’re afraid of getting laid off. Solution: rental agreement says if tenant laid off they get 2 months free rent, after which, if still unemployed, get released from lease. Beats eviction. Hey all you California investors…come on down! Plenty of room on the wheel less train!
Sounds more like how most people were “purchasing” houses — pay high-price rent 3-6 months, default, live for free 3-6 months. In the end, it’s a wash.
lol
Bajajajajajaaaaa
…and that cruel laughter is the last thing that many, once happy yet tasty, little clams ever hear
Man, you’s totally fixated on clams lately.
And I approve of that, since I’m fairly fixated on them myself.
I’m even going to forgive you for telling me I was fat yesterday.
…and that cruel laughter is the last thing that many, once happy yet tasty, little clams ever hear.
But see, there’s worse ways to go, I’m sure. Well, not the boiling water and gettin’ your hard bits flung into the kitchen sink part, but the laughter part. Surely that’s not so bad?
Is what I tell myself, anyway…
I never called you fat, besides I have the “Midwestern Post-Winter fresh clam, oyster and seafood Deficiency Syndrome”(MPFCOSDS), so it doesn”t really count if I did
I’m NOT FAT!
Also, I don’t want to hear anything about clams for at least another week. *goes a pretty shade of sickly pale *
Oly,
Do you have a job (asking politely) or are
you a wood nymph playing in the forest?
I already told you the answer to your question, Rancher. What, like a whole week+ ago?
Don’t you pay attention to the results of your posts?
Go check.
Sorry, rancher, that was terse. It’s just, you, know I DID answer, with a tidy and just-right response, although you may have been out fiddling with some puking cow or other, being a rancher and all, and therefore missed it.
Having said it once, just right, it feels like anti-climax. I’m sure you understand.
I do have a job.
I take it serious.
Good enough? Okay, then
You and me both, Olygal. From this vulture’s serene perch on high, the carrion just keeps piling up. The thing is, half of them don’t yet KNOW they’re dead meat.
The thing is, half of them don’t yet KNOW they’re dead meat.
Is this the funny part, or is this the NOT funny part? I’m having a hard time deciding.
Whatchoo think?
I agree with Ben that probably what is happening is a softening in the middle-range houses, 200-500k range–what the newspaper in our area (Coachella Valley) idiotically, still, refers to as “entry-level housing.” They are just starting to pancake.
Just starting to pancake. Hmmm, would that be like the WTC South Tower at 9:59 a.m. on September 11, 2001?
The WTC analogy really hit home to me. Watching those towers fall and the people scrambling out of the way while you see people jumping to their deaths out of windows. A scary foreshadow of things to come.
And it’s not exactly like they’re running out of land in Coachella Valley either.
“A slumping housing market and grim employment outlook have apparently persuaded thousands of county residents to stay put – a sharp departure from recent years when far more people left the area than moved here. Last year, 420 more people moved into San Diego County from elsewhere in the United States than left. That’s a reversal of the year before when there was a net movement out of the county of 15,500.”
Let me get this straight: A grim employment outlook is stemming the tide of people leaving San Diego? I think not; a better explanation is that many folks got stucco in the crash and are now sitting in homes worth way less than the balance of their mortgages with no way to leave town without executing a short sale and taking a large hit to household net worth. Moreover, with all the rescue plans under discussion, there is hope for many people to end up with a house for a fraction of what they originally agreed to pay for it. As the old saying states, “Possession is 90 percent of the law.”
This is more like what I believe explains the recent dearth of departures from San Diego.
“‘I have colleagues who are up to half a million dollars under on their homes, so they could not leave,’ Bass said. ‘And I have other colleagues who have been trying to sell for two or three years and have not been able to, so they just stay. I had a great opportunity with a great world-class company, and I’m two miles from the coast, with an ocean view. I couldn’t have afforded that before the downturn.’”
They are living rent free and likely will for many months before the banks catch up and realise this, so why bother moving out? By then, they would have saved a decent amount to go rent that house elsewhere.
“‘I bought about 31 houses last year, and I’ll buy some more this year,” said Duane Lyons of Granite Bay, a longtime investor, ‘but not as fast as I did last year. ‘I think for a lot of investors right now, nobody’s quite sure where the bottom is. Things are still dropping down. Guys like me aren’t buying as much as we were.’”
It sounds like there is still no shortage of investors willing to become future accidental landlords!
Accidental landlords? Can you just imagine the crunching sound of the forthcoming trainwreck?
That is sure a lot of houses.Must be a pain in the but to keep track of all the documents.Me think this guy will end of losing his @ss.Got rent?
Barnard and others like him are starting to worry market experts and economists, who fret that the growing trend may deal a blow to an economy on its knees while swelling an already ample pool of bad loans.”
This reminds me of an enjoyable conversation I had yesterday, whilst dining with pals and some agglomerated hanger-ons that just came along. I happily delivered some fresh bad news I had just heard about some local builders and what this meant and some girl said: ‘You mean, you intend to kick them when they’re down?!’ Obviously this was not a pal, but only a hanger-on, because any of my pals would have known what my answer would be, and which was indeed a loud: ” F–K yeah! Yes, f–K, yes! Jeebus! When they’re on their knees is when their heads are easier to reach with my cute little shoes!’
Then I demonstrated what I meant, accidentally almost crippling a passing waiter with my enthusiasm. (Good think he was nimble, huh?)
Anyway, my point was, the kneeling economy has best prepare for some good head-kicks from ‘Barnard and others like him’. I mean, I’m very surprised MORE people are not walking away.
Not only should you be kicking them now, when they’re down, but you should also be criticizing their hair and pointing out the flaws in their automobiles. Kicking does not go far enough, IMO.
See, this is why I like you and your duck. You both have good advice to give.
I sooo ‘under-read’ the bit about the duck…
Olygal, just wait until you get your pink HBB T-Shirt from Ben. You can whip open your cape, thrust out your chest and chug a beer at the same time. Then laugh between air and the next beer
Just be sure to post the picture in here.
Oh!
*semi-appalled and theatrical gasp *
“A slumping housing market and grim employment outlook have apparently persuaded thousands of county residents to stay put – a sharp departure from recent years when far more people left the area than moved here.”
This morning WBBR Bloomberg had a discussion on this as it relates to the sunbelt. Of course the born and bred RE dopes will point to collapsing housing prices in the sunbelt as the cause of the bottleneck rather than expose the truth that shacks in the northeast are still grossly overpriced. That’s all changing as we speak given the fact that sales in the Northeast have collapsed.
Is it fair to presumed that the CA/OR synergy is the same as NY/FL?
“shacks in the northeast are still grossly overpriced”
Frustrating ain’t it?
I don’t even bother to look at the MLS anymore. I see houses that have been on the market for years, with 2006 wishing prices. I have no problem staying where I am. The fools can die of old age, in their houses, before I pay these absurd prices. Most of these people are looking for an idiot to overpay for their house so they can move south and buy a place for cash.
The Wisconsin FB sellers, RE agents and bank REO’S seem to hold their ground for months, drop back in single $100 increments, and then re-list and try again. It’s going to take a tank or something with a flamethrower to get these clowns mind’s right
mikey - I absolutely agree. The mantra from WRA is “we didn’t have the big run up in prices as California and Florida so we’re okay here.”
4 houses with 1 block of me went on the market this week….with another still on market (at least two years).
Dream Price house - Faces a really busy highway and listed at 265K. Of the last three houses listed on this street for the last two years, two sold (finally) for 240-249K and were much nicer than the one now listed at 265K. Another house was on the market at 265-275 for two years until the owner took it off the market There’s another house down the street that’s been on the market for 2 years at 229K.
Two blocks north, a house hit the market at $315K. Can’t wait to see what it may finally, if ever, goes for, as the highest price I’ve seen a place go for was 285K, but that was on a cul-de-sac. Also, I think the house that just came on the market has an illegal gas fireplace, as it’s not showing up on the tax assessment.
There’s real talk about Florida never having the right dynamic again. Used to be that a New Yorker would sell his $200k house with a $100K mortgage on it, move to Florida, buy a nice 3/2 beachside for $80K and add $20K in upgrades.
Unfortunately those $80Kers don’t exist beachside anymore. Now you get a 3/2 for $125K in the center of the state which is like living in a sauna for 9 months of the year & you get a firm kick in the rear every year on property taxes.
Last year Florida actually had more people move out of the state than move in for the first time on record. The population still inched up due to high birth rates amongst the “new population dynamic” (i.e. latin community).
I’m all for this as my job is relatively secure. I desperately want millions of people to move back to wherever they came from. That should help depress golf course prices and increase fish stocks.
The market should be near its bottom,’ ‘The problem is that the supply of foreclosures has been overwhelming demand, causing prices to keep going down. I think we are very close to the bottom in price and if any of the policies of Obama work, we are at the bottom.’”
“We just landed on Omaha beach, and Berlin should be surrendering any day now. The problem is just that the supply of German tanks and troops has been overwhelming us, causing us to not get very far. If this magic fairy dust works, we should be in Berlin any day.”
And dang if those Russkies didn’t get to Berlin first!
This housing bubble is kind of a virtual Stalingrad.
Striking this iceberg has been quite inconveinient and we at White Star would like to apologize for the delay. We will soon be underway when we stop the leak in the hull of this unsinkable ship.
Titanic eventually found the bottom.
Then they declined me because they said I didn’t have enough income to pay my mortgage’ [....] Now the family is three months behind, largely because of buying a van to transport Austin and his wheelchair.”
Hey! It looks like WaMu was right! What are you complaining about?
“El Dorado Hills investor Scott Arbuckle said he and his partners have also slowed their purchasing after buying 10 area bank repos last year. ‘The buys have been good and they’ve cash-flowed well and make great sense as an investment,’ he said. ‘But the prices … keep sliding. You just scratch your head. How is it possible that they keep declining?’”
You know, these guys somehow think the RE world is completely detached from the economy at large. Have you been in a cave the past six months Scott? I’ll tell you how it’s possible: people keep getting laid off, and when they get rehired, it’s for less money, fewer benefits, etc. I scratch my own head at Mr. Arbuckle’s head-scratching.
I just can’t imagine what country these foreign investors must come from to think of Detroit housing is an investment. Must be some sort of a US citizenship play??
My sister is a realtor in the Detroit area. She’s sold quite a few houses in the last few weeks to foreign investors. Of course, the commision on a $10,000 house isn’t much, and I have to wonder if the investors know how rundown Detroit is. Apparently, they think it’s the deal of a lifetime. I keep hearing Gordon Lightfoot’s “Black Day In July” whenever I think of those folks buying houses in the most decayed city in America.
The only Lightfoot music I would have in might for Detroit RE would be “The WRECK of the Edmund Fitzgerald”
The Youtube video of BDIJ has footage of the riots. Today on google earth the area looks like an urban park with one or two forlorn houses in each block at best. Yeah, I’d really want to live there!
Oh, brother. Does that ever bring back the memories.
November 10, 1975 was the day that the Fitz went down. And those gales of November were blowing pretty hard down in Ann Arbor, where Slim was about halfway through the first semester of freshman year at the University of Michigan. And it was my 18th birthday.
I recall that my dorm-mates were too busy with their schoolwork to go out and legally drink with me. So, I had to wait until the weekend.
I can remember news of the ship going down, but for all the television I watched (not much), I don’t recall it being the #1 topic of conversation. We were more concerned about the upcoming Michigan-Ohio State game, which was going to be played in Ann Arbor that year. (We lost.)
Slim: I think we’re contemporaries. If that was a Saturday, then I was probably taking off a day from studies down in Washington, in a freshman dorm, listening to, oh, Boston’s first album, “Frampton Comes Alive,” “Bohemian Rhapsody.” I’m getting this right, aren’t I?
I was legal in Michigan for 3 whole months before they raised the drinking age back up to 21. I was living in Walled Lake at the time and remember the news. Now, Waltucky is a fancy yuppie suburb and the urban sprawl has nearly reached Flint. I can’t wait until the economy gets even worse and all the new upscale homes are vacant and/or vandalized.
I bought his best hits for Christmas as a gift. Kept it for myself. Bought the orig. album way back when.
What a great song. To this day, Even as an Independat Convserative, I find that to be one of his best.
Fight on “Motor city”,
Too bad they have bad “Carma”
I was in Troy last October for a hockey tournament. Had bagels at Einsteins every morning.
The median household income in Santa Cruz County is only $62,849. So how the hell does this person figure that the median house price shouldn’t be anything under $380k?
Is it a desirable second home or retirement community? If so, that would give some wiggle room, but still seems high.
Desirable second homes don’t fare well during times like these.
Retirement community? What does that have to do with anything? Retired people depend on the sale of their current house to buy their new one.
I dont understand your points. You implied that prices should be dependant on local incomes. Neither retirees nor second home buyers rely on local incomes for payment of debt service. There are other dependant factors that are relevant, just not local income.
I should add that the data I have seen on second home purchases shows that a significant portion are brought with proceeds of windfalls (i.e., inheritence, exercise of stock options, etc., or savings or earnings on other investments, and often the purchaser is retired with a primary home in another area). Thus, the percentage of current income going towards debt service on second homes is usually substantially different than that associated with a primary residences.
Natalie:
“Desirable” second homes are not necessary, so when people need money, they sell them. Especially when said homes were bought speculatively with neg-am mortgages.
Retirees have an income. That income is calculated into the median household income where they live. They usually don’t buy their houses with income, though. Rather, they sell their old house and then use the proceeds to buy a new one. If the housing market is down, then it’s down for their old house too, which gives them less money with which to buy the new one.
Since Santa Cruz is in California, and is relatively expensive compared to most places on Earth, there are not a whole lot of retirees moving there from more wealthy areas. Local incomes would probably be an inhibitor to retirement in Santa Cruz for most people, since most retirees probably can’t compete with local wage earners.
If you want to see what happens to places like Santa Cruz during an economic crisis, just take a look out there right now. Houses are for sale everyhwere.
That “significant portion” still probably only adds up to a tiny fraction of the total homes for sale or sold. You think?
I dont know how we got here. All I did was ask about the area to see if there were other factors at play other rather than local wages. You act as if I think home prices will rise or something.
As for the portion, I know ppl that have homes along the NC and FL coasts. Poor areas yes, but a “huge” portion of the owners of homes on the coast are not locals. I just wanted to see if it was the same in Santa Cruz.
I can think of two “sell the second home” stories from my circle of acquaintances. Both sales have happened within the last year. And I think that more such stories will be headed our way in the months to come.
Its a hippie community with a great beach and a good boardwalk complete with roller coasters, etc. - filmed in “Lost Boys” but the movie called it Santa Clarita, I do believe.
Have great old time bands in summer on the boardwalk for free — remember Herman’s Hermits? He still puts on a great show!
Sounds like a fun place to me.
Although the median income may not be much, don’t forget to factor all the off-the-books pot sales.
The city of Santa Cruz near the beach, and across the ridgeline from Silicon Valley. Lots of people make the busy, wreck-filled commute in every day.
Watsonville is mostly unemployed illegals, and outside of reasonable commute range from Silicon Valley. The local unemployment rate is over 10%.
Monterey Herald, just down the road from Santa Cruz: “The median sales price for a Monterey County home in February dropped 58.3 percent from the same month last year, a real estate tracking company reported.
Last month’s median sales price for all homes, including new and resale homes and condos, dropped to $193,750, said a report released Thursday by MDA DataQuick. The median sales price in January was $210,000; a year ago in February, it was $465,000.”
The downscale areas have seen big price drops and sales volume increases. The more expensive areas are seeing inventory pile up.
“Only four homes sold in February for more than $1 million. Longtime appraiser Glenn Fuller reported 212 listings in that price range at the end of last week. ‘That’s a lot,’ he said.”
“‘We’ve hit our bottom in South County in single family,’ said Dee Dee Vargas, president of the Watsonville Association of Realtors. ‘If you’re waiting to see if prices might drop a bit, you might miss the boat.’”
*****
Is that 53 months of $1 million house inventory…?
And in Watsonville - miss the boat?
LOL!
The “house price bottom” is going to have legs around there for well into the next decade, if it does not reach the very end of it.
Lot of strawberry pickers there, that’s how.
Prices have to go lower in San Fran as they are still way too high! I went to 4 open houses Sunday and there were at least 3 cars in front with people walking around in a daze. Some people never learn! These were houses which were $800k and higher… Just for kicks I spoke to a mortgage broker on Monday. He gave me some good, but startling information. He said we NEED to have 20% for a down payment and we would only qualify for a max of $750k with a $200k+ yearly income with NO debt! Granted I only would pay a max of $500k for a house, but compared to the past few year - what a change! He also said the front/back end was now 33/38.
How can all these people walking around open houses qualify under these terms? I was told 11 houses went pending in my area (Danville) on Saturday. Granted, pending not sold. I am confused which is why after signing a 1 year lease with my landlord last week I asked to extend to 2 years.
The inflation levels coming in the future are going to be insane and I can’t wait until interest rates go through the roof! I despise the FED and White House/Congress! They are all a bunch of thieves! Why do you think Volker is hiding in the background? I would LOVE to have 10% interest rates which equals MUCH lower prices!
Volker is the head of a committee that has no power, and is surrounded by ideoligical enemies with real decision-making power. So, I wouldn’t expect him to have any influence on policy. I’ve always said he was appointed as window dressing…
As to the Bay Area, i just Zillowed at a property i’m familiar with and have been tracking, in San Francisco’s inner Richmond. Zillow says it’s price has fallen $40,000 in the last 30 days.
“He that can have patience can have what he will.” –Benjamin Franklin
found another one.. a distant relative’s home.. in Seacliff.
Zillow claims it’s declined $106,000 in the last 30 days. Granted it’s a near $1.4M house, but still.. we can confidently look forward to at least another year of this…
“Sitting on the dock of the bay
Watching the tide roll away
I’m just sitting on the dock of the bay
Wasting time”
Those asshats will never qualify, EBR. And if they do, just have your dog shit on their lawn.
I think it’s time to bring Volcker out of the shadows and put him in charge of Treasury. Geithner’s a disaster.
There is a Peter Schiff speech to the a group of Austrian School of Economics folks, where Peter says the right person for the Sec of Treasury should be Madoff. After all, he’s a master of ponzi schemes, and would do a better job than TG. He was quite funny. He also says we could tell the Chinese they are predatory lenders, we can’t pay them back, and we want a cramdown. He was on a roll that day…
Ludwig von Mises Institute video
I listened to it!! Great!! It was quite informative and confirmed all my beliefs.
I think your real easte agent would classify some areas as move up areas. In ye olde days, you would buy a house and live there for 15 yrs. Sell and move to a more desirable area.
Generally this required years of sacrifice to get the first house paid off.
There tended to be some help from inflation on paying off the loan.
Often these purchases come from someone selling a “cheap” home in San Jose for 400K. Or something like that. Or perhaps inherited property.
The NAR was on the radio this morning. I noticed that they go out of their way to enunciate the “or” in realtwhore. I just thought that was kinda cute.
I’m hearing some chatter that banks (specifically countrywide, but others as well) have finally decided to start foreclosing again and to start selling their shadow inventory of reo properties. The logjam may finally be coming undone.
Has anyone else heard anything?
I heard from some one who heard from another who works at BOA. around april is when I was told that Countrywide would start DUMPING
I know someone who does the mortgage modifications at BofA and have been told that there is a significant percentage of these loan modifications that are in trouble in as little as three months. Was also told that BofA don’t require any proof, apart from two pay stubs. Again, more of the same….
Interesting post. I was under the impression that the next wave of adjustable rate increases was set to take place this July. If so, I think we’ve got a ways to go.
yes, i wonder about that shadow inventory. i made an offer on my first house, yesterday, owned by wells fargo i’m told. anyhow, i could be early but i wont underestimate the fed and their printing machine going forward. anyhow, offered 77k, asking 83k! 1700 sq/ft 3/2 1970 and needs carpet painting and other work. pool. in a north phoenix area. offer is all cash and if they respond and want more the answer is no and i’ll wait until summer or a place i like as much! anyhow, i want to get some of my cash out of the banks, out of the possible future inflation all these printing presses could cause. and, i have rented my whole life, i’m 45….and i’m buying all cash. if they fall more i’ll wait for under 60k and no fixup and rent it out. if it does not fall more, i won’t buy a second home as a rental!! oh, and i’ll be taking the $7700 credit too!
i like everything about your plan (i’d do the same in a heartbeat if i found a place i like) except for jumping in now primarily as a hedge against inflation.
Figure that the house you now pay $77K for could well depreciate to about $55K in the next year or so. How bad would inflation need to get for that to happen to $77K in cash that’s sitting in a bank?
Go ahead and buy.. It sounds like a further decline in price/value won’t matter to you financially.. but be realistic and practical about the reasons why you’re buying now. Fear of inflation (or fear of any sort) is not a legitimate reason, imho.
Sounds like a house where I used to live in N. Phoenix near 19th Ave. Of course, that description fits hundreds of houses in that area.
“‘We’ve hit our bottom in South County in single family,’ said Dee Dee Vargas, president of the Watsonville Association of Realtors. ‘If you’re waiting to see if prices might drop a bit, you might miss the boat.’”
Yep, better grab one now before they resume the blistering 1/2% over inflation increase in price we experienced for 200 years before things went crazy.
Jeeze, where else can I get a 1/2% return a year plus pay a bunch of expenses along the way? Wait, I think my gold was up 7% just today!
…you might miss the boat.’
Yup.. grab your luggage and head for the pier! All Aboard!
“Hey.. where’s the boat? Am I too late? Oh hell.. I just knew I’d miss it!”
“Ummm… Can you see all that debris and the oil slick over by those rocks?”
“Yeah… ??!”
“If you’re waiting to see if prices might drop a bit, you might miss the boat.”
Add “original thinking” to the list of skills not needed in order to sell houses. We’ve heard this line (at least) every month for two+ years.
The boat sprung a leak. It isn’t leaving anytime soon.
The boat DID leave. A ship of fools left about 5 years ago and struck an iceberg.
Let’s hop back into the time machine… yes, the bottom is probably in, say a growing number of “experts”…. 29 months ago…
http://www.msnbc.msn.com/id/15416909/
Yeah, the same “experts” who failed to see this coming, are now serial bottom-callers. I think I’ll trust my own analysis.
Forclosure moratorium end will spell the end for “stabilizing” prices. Here in FL I know several people who have not made a mortgage payment in many months. All is quiet with them - the bank never even calls. Waiting for ‘O’ I guess. Something will give soon. The owners of the houses are not living in them and could not care less if the bank comes for them. This is going to get worse, trust me.
This is going to get worse, trust me.
yep
Has this guy even read the Fair Housing Act?
http://www.usdoj.gov/crt/housing/title8.php
Section 803, subsection (b)(2) states “Nothing in section 804 of this title (other than subsection (c)) shall apply to … rooms or units in dwellings containing living quarters occupied or intended to be occupied by no more than four families living independently of each other, if the owner actually maintains and occupies one of such living quarters as his residence.” (emphasis mine)
Section 804, subsection (c) pertains to discrimination in advertising.
So if you are renting out a room in the SFH that you own and live in, you can refuse to rent to anyone you damn well please for any reason at all, but you can’t advertise that you are looking for e.g. a single white female.
Disclaimer: I am not a lawyer, but I can read.
Californians– don’t be fooled, wait it out … house prices are still going down. The market is stocked with houses and foreclosures they can’t sell. House prices will be going down more and you will get yourself a bargain. Granite whereever you want .
““Ron Barnard is throwing in the towel. Like a growing number of the 8.3 million American homeowners who owe more on mortgages than their homes are worth, he’s ready to just walk away.”
=========
What I don’t get is why Ron would go public with this info. Putting aside the morality of walking out on a debt, why in the world would you wan to have your story out for the world to see?
Is it a case of wanting 15 minutes any which way you can get it? Do people like Ron just not give a sh*t. Are they proud of this and want to shout from a rooftop?
I just don’t get it.
Manny,
They apparently don’t take the time to think — just like when they signed the loan papers. Some never learn.
IAT
down here in Argentina..
people were thinking the same…wait for lower prices in apartments..
back in 2001 then one day they woke up their money was worth 30% or what it was yesterday..and the ppl owning apartments lost, but only 30% instead of 70%..
basically they at least got something for their money..
I agree with the Phoenix guy buying a 77k house..buy something before your money is devalued and safety box’s at banks are emptied and sent to Europe by your bank.
yeah, i’m not buying mainly because of inflation-i’m the 77k guy in phoenix, but it is another reason to buy and not have all my assets in cash as they are now. and, since i don’t own any house and i need one to live in i figure now is the time to start. should hear today back from the bank! if it does not happen atleast i will know the process in dealing with the banks. shiller says we are setting ourselves up for a dollar collapse, the dollar benefited from all the problems out there so far. but, you can see how the dollar fell when the fed said it would buy long bonds. they are going to drive interest rates under 4% for houses and it will create demand eventually. they will do everything to slow the fall in prices. It will hit a bottom but no one knows that date or if the house you like will be there at that time. I love this house for 77k. of course, we are also hoping the foreigners(chinese and japanese) will fund this massive spending we are seeing out of washington. I also know the banks are insolvent, roubini and others are right on target. so, do you trust all the promises of the gov’t and believe your money is really 100% safe. plus, i get the 8000k credit if i spend 80k! I could buy and rent a 80k house after the 3 years and collect atleast 1k/month in rent. i have a friend with a family very close who rent now for that much so i’d rent it to them in the future and limit my destruction of the property by renting to someone i know. I win by paying 1993-1994 levels, this house sold for 85k in 1995!. I believe prices are now correcting below the price they would be at if there was no housing bubble. It probably will continue to fall, but eventually everyone has to decide for themselves an entry point!