‘Gung-Ho’ California Homebuyers Turn ‘Skittish’
A report on realtors provides some insight into California’s housing bubble. “As California’s once-broiling housing market cools and inventories of unsold properties grow, veteran agents expect real estate rookies to start looking for easier ways to make a living. It’s a cycle that has repeated itself again and again, said Diana Lusk, a longtime East County home seller.”
“Based in Mission Valley, agent Anne Christensen says agents motivated chiefly by profit have hurt the industry’s image. Many who purchased in a fevered market now find themselves in homes that don’t suit their needs, she said. Some who invested in homes in hopes of turning a quick profit have been disappointed. At the peak of the market, people ‘were so gung-ho to buy they were willing to grab anything that you threw at them,’ said Reed Colwick, who became a San Diego agent about three years ago. ‘Now buyers are more skittish.’”
“According to the San Diego Association of Realtors, the county’s inventory of homes listed for sale was 6,657 in June 2004, when the boom market was still at its peak. Recently, the county inventory topped 17,000 dwellings.”
“Lusk fears that the widespread use of loans with adjustable interest rates during the boom will leave many buyers financially stressed. ‘They have paid top dollar for their houses,’ she said. ‘In most cases they have to refinance within five years. If they lose their jobs, they are in trouble.’ Lusk said the real estate downturn of the mid-1990s taught her to be cautious. Sales dried up as home values dropped steeply, she recalled. ‘I owed my charge cards a lot of money.’”
Here is another Union Tribune article on realtors. And this reminder from the Sentinel.
‘California actually sends many more people to other parts of the country than it receives,’ said Marc Perry, federal demographer and author of the report, ‘Domestic Net Migration in the United States: 2000 to 2004,’ released this week. Both state and federal officials agree that housing prices are a main factor in pushing many California residents elsewhere.’
Thanks to the readers who sent these links in.
OT, but here’s a column from Bill Fleckenstein on the bubble-turned-bust. Not much ground covered that we haven’t been talking about. But I figured I’d pass it along:
http://moneycentral.msn.com/content/P149596.asp
I read that today as well. He brings up some very good points. I have read his articles in the past. He backs up what he says.
He’s a good writer but what’s up w/ the mullet?
It just means he’s “old school.”
Right about now… I think we could use some “old school.”
Ben,
I think an article with a title like this one (”The Housing Bubble Has Popped”) in such a mainstream media outlet should get its own post.
Bill Fleckenstein has been pretty negative about housing for a long time. Unfortunately, as for many of us, his credibility is down due to it’s continued strength. Although he is one the sources that led me to gold in 94 I think the continued strength in Nasdaq and housing has kept his message from being heard.
Just when he is exactly right he will be least listened to.
The helicopter drop of $ that is going to cause turbo inflation will have a dramatic impact on this housing bubble. All this micro market propaganda is just that. All this liquidity hit the housing market, and just hyperinflated it. Its that simple. Now I bet on commodities becoming the engine. When the industry gets too self serving, they cut their throat. We’ve borrowed from the future. Regression To The Mean.
Regression to the mean….Ouch !!
Santa Clara Dave -
How about these SV comments?
Strongest “stuff” I’ve heard yet from the industry types.
sf jack;….Something is a t work here that I cannot quite get my arms around…Very low inventory with very high prices with selective selling…Only the best properties go quickly now…Others just languish and don’t receive any offers. I am not sure there is a deep pool of buyers that remain in this market….
if there’s hyperinflation, then there is no housing bubble! just a pause in the housing prices increase.
“Lusk fears that the widespread use of loans with adjustable interest rates during the boom will leave many buyers financially stressed.”
Gee, you really think so? Just look at the constant news coverage of the distress people are feeling because gas prices have gone up a few percentage points. Just wait (and it won’t be long) until all the ARM resets start kicking in on all the loose financing that’s taken place. If people can’t handle paying a few more dollars per week for gas, how will they be able to handle hundreds more per month for their mortgage payment? Refinance? Nope. Sorry. That well has run dry.
Time to teach these morons a lesson!
Hey, take it easy…you’re talking about the vast majority of US consumers. LOL! You’re right though, they do need to learn a new lesson, and it’s called:
“Save the money first, then buy something with it.”
This brilliant idea was cleverly parodied in a recent Steve Matin SNL skit (”Don’t buy stuff you can’t afford”):
http://snltranscripts.jt.org/05/05lbuy.phtml
Romeo’s gonna get tossed off the mechanical bull in TX and OK. I don’t know about New Hampshire. What a moron.
Hey TX,
I know about NH. Check out Manchester NH on realtor.com. A has been textile town that thinks its Boston. One of the most overpriced towns in the Northeast!
I drove two miles through NH recently and counted 30 “for sale” signs. I’m not kidding.
I think Romeo has decided that the bigger morons are already in Silicon Valley.
Lots of dumb people in SV…
All are still saying… oh SV will still come back.
But there is very little in the VC pipelines. Little demand for new products and slow introductions.
“If it wasn’t for the demand, prices would drop,’ said real estate broker Richard Calhoun.”
Duh. I’m running out of dumbo words to describe idiot statements like this.
I wondered about that comment, too.
I mean, really. Demand is going over a cliff right now.
So where will prices go…?
Not only duh, but wrong.
“‘It’s an absolute fact that people want to live here. That keeps housing prices high. If it wasn’t for the demand, prices would drop,’ said real estate broker Richard Calhoun.”
Urm, if people want to live here, Richard, then why did San Diego county experience a population decrease in 2005? (The first time since the 70s.) Yes, people may want to live here, but the housing inaffordability is not only keeping people away, but causing others to leave altogether.
Whoops, he was talking about Silicon Valley. I thought the discussion was still on San Diego…
Silicon Valley is high school on steroids. So many posers showing off their latest material gain.
They are destroying themselves with their greed and financial ignorance.
How can people not realize that demand is alot more changeable than supply?
Not only that, but supply can change on the upside much faster than on the downside (unless you are willing to use weapons of mass destruction to reduce it, or make allowances for acts of God like Katrina or the Great 1906 Earthquake…).
This is OT but applicable to the side effects that have been discussed here. I never considered the ramifications of having a major disaster w/the kids so far away from their parents.
“Extreme commuters” who travel more than 90 minutes to work, one way, are the fastest-growing group of commuters, according to the U.S. Census Bureau. More than 3.4 million commuters take that long road to work every day, double the rate of extreme commuters in 1990.
This endless commute is becoming the defining characteristic of the 21st-century working stiff. So much of what we worry about today—volatile real-estate prices, sleeplessness, our overstressed lives—all merge together on the road, as we search for the elusive simple life in some suburban Shangri-La.
The average commute today is 25 minutes, up 18 percent from two decades ago. What drives us to drive so far? Many are doing what California real-estate agents call “driving ’til you qualify.”
But for many people, the long and winding road isn’t leading to the exurban bliss. With everyone stuck in traffic, it turns out there’s no one around to coach Little League or volunteer for the PTA, not to mention get dinner on the table. Robert Putnam, author of “Bowling Alone,” found that every 10 minutes added to your commute decreases by 10 percent the time you dedicate to your family and community. And having parents so far from home creates logistical challenges for local officials. “We’re really worried about what happens in an earthquake,” says John Brooks, an economic analyst in Palmdale, Calif., a booming bedroom community 65 miles north of L.A. “All the parents are down below, and we’ve got tens of thousands of their kids up here to take care of.”
“You question your choices at 4 a.m. But then I get to the train station at 5:10 and see all the people doing the same thing. It’s very humbling to know I’m not alone.” Indeed, the road to the American Dream just keeps getting longer.
The rat race is turning into a marathon. Inside the lives of ‘extreme commuters.’
>“Extreme commuters” who travel more than 90 minutes
>to work, one way
In LA, they don’t call people like this “extreme commuters”, they call them “average employees”.
My wife’s commute is ~30 minutes, but that’s 30 minutes of walking. A nice way to start the day and wind down the day, she says.
I had thought the SF Bay Area traffice was bad but LA is worse. There was traffic on a Saturday - took about 1-1/2 hrs to go from downtown LA to Irvine(a 45 mile drive).
You have obviously never tried the Sepulveda Pass, the Cahuenga Pass, or the Newhall Pass.
Going to Irvine is an easy drive. I used to commute 45 Minutes minimum to go 8.5 Miles from Studio City to Beverly Hills.
The pantywastes up in the BA bitch and moan about nothing. I have been there and it’s nothing like gridlock on the 101 in LA
Why don’t you ride a bike? It would take you 25 minutes.
In NYC any commute under 1 hour is considered a good commute.
I love the rational that they want to give their children the best. I thought spending time with the kids is the best. Living in a Material World.
I’ve lived in LA for 10 years, and I’ve had enough for now. Moving out later this year after my current contract expires. It’s getting scarier to see friends doing everything possible to break into the outrageous market. I’m not sure what the sense of urgency is all about. I might come back someday when prices make more sense. I will be monitoring California bubble for years to come.
I say F##K em all!! Everyone wants to be a RE hero. Let em go for it. In fact, you should encourage these greedy mofos!
I think reality will kick in when people start hearing horror stories from home owners - when ARM loans start resetting. Does anyone know the typical ARM loan borrowers go for?
Here’s some fairly common sentiment from a blog I came across this weekend… (The blog was just a personal outlet, and this was the only reference to mortgages/ARMs…)
Eat the big one you overleveraged jerk!
Yes, it’s the “freaken [sic]goverment’s” fault, not YOU for spending money you don’t have.
one thing i’ve noticed about morons like this is they rarely ever want to accept even PART of the responsibility for the mess they’re in. reminds me of that other article a while back on this blog, where a speculator was about to lose his ass on his “investment home” and was blaming “the media for killing all the buyers” or something like that. pretty pathetic.
this also reminds me, there are literally millions of people like this out there, the question is how long can they live on borrowed money? at what point do they crack? it’s amazing to see but it looks like many of these folks can go on like this for years and years. it doesn’t even seem to bother them that much. unbelievable.
“They have paid top dollar for their houses,’ she said. ‘In most cases they have to refinance within five years”
How can you refinance in 5 years when you have zero equity or negative equity?!! That’s going to be the shocking moment of truth when they go to refi and have their appraisal come back and tell them the news that they are way upside down. They’ll have to pay down thier loan to refinance. I seriously doubt they have that type of cash sitting around.
IMHO the banks will offer a “streamline loan without appraisal”. This product will come in different flavors, but the gist will be to keep the payments from escalating.
What the…? you’re assuming that ‘banks’ will take on the homeowners risk of a deflated value just to maintain the loan balance. A prefect storm method to complete collaspe.
Agreed, maybe when prices are going up, but when the regulation starts to hit and banks have to hold more loans and take more flack for those they do… they will return to appraising and appraising HARD.
He’s right FHA has been doing that for years
“‘It’s an absolute fact that people want to live here. That keeps housing prices high. If it wasn’t for the demand, prices would drop,’ said real estate broker Richard Calhoun.”
No it’s the fact that any drooling idiot can borrow $800K with a I/O loan and bid up the prices on small shitty houses and condos. Being a silicon valley resident I can say that I’d move out of here gladly if I could find a job elsewhere. The pay scales here simply don’t support these housing prices, the roads are clogged and falling apart, the commute is often hellish and the nice weather simply doesn’t compensate for this. I have no idea why anyone would willingly locate a new business here.
Mo;… I have no idea why anyone would willingly locate a new business here.
And therein lies the Key…..
“‘It’s an absolute fact that people want to live here. That keeps housing prices high.”
And just what has changed over the last 5 years to justify 100% or more increases in prices? What, CA has nice weather? Sure it does, but it get twice as nice in the lasy 5 years? Many of these factors were priced into the market way before the explosion in prices. This area has always been expensive and always will be. That, however, doesn’t mean prices can’t go down.
When do we see the nice weather in Silicon Valley? I am in my building all day and on my commute in, I assure you while sitting in my car taking 45 minutes to go 3 miles from Mission blvd to hwy 237 the weather is LOST on me. I do see a nice sunset when I leave the office, to get in my car and sit for another 35 minutes to go two miles to get past the dixon landing road exit in bumper to bumper traffic. At what point is the weather a consideration here?
athena -
Don’t tell me that you go from Sonoma to SV every day via roughly 37-80-880-237?
That is certain punishment.
LOL…
Not every day, and they make it well worth it on the days I have to go in. I tell you the drive is great all the way until I try to cross over from mission to 880 to get to 237 and then sometimes even 237 gives me a hassle for a bit. It is my last 3 miles once I really hit the center of the valley that makes me homicidal!
LOL… one day it was so bad that last three miles with this little toyota tercel doing 12mph in front of me the ENTIRE last three miles without REASON…. no other real traffic- just enough to keep me from being able to change lanes…and THEN this idiot pulls in front of my office’s driveway… doesn’t drive INTO it and go to the passenger let off turnout… but BLOCKS the dang driveway to let his passenger off and me and 23 cars behind me stretched into the intersection behind me were honking and livid. I gave that guy a big full extension universal symbol for Number One and laid on my horn for a good three minutes just for the stress relief… when I got into the building I ran upstairs to the overlook to see if that person was interviewing with us because I was SO not going to hire them!!!! Lost my cool that day I tell you! This was a day where this driver was worse than the traffic!
‘Sales dried up as home values dropped steeply, she recalled. ‘I owed my charge cards a lot of money.’”’
Hmmh… I wonder if this could ever happen again? Nah — lightning never strikes twice, right?
It’s different this time. There are strong underlying fundamentals. Suzanne researched this.
LOL
Suzanne researched this.
Funny…This is our motto for this blog….
Can’t wait to see Suzanne doing the perp walk.
There is a good argument that Calif RE crashed in the early 90’s due to the huge layoffs associated with Defense cut backs, I think we lost 700,000 jobs. Here’s something to consider. The current housing market is priced as if all of those high paying aerospace jobs came back, but they never did. Many of those jobs were replaced by lower paying service sector jobs. The RE market of the 80’s at least had a foundation of high paying jobs that this last boom does not. Also lending standards are far more sloppy. So in essence the market could correct to the same degree it did in the 90’s based on the fact that it is priced almost the same as if half the people in CA won lotto. Simply put, we don’t have the same incomes as California in the 80’s. RE related jobs are going to take a hit and that has been the primary engine of job growth this decade.
This was actually supposed to be a response to Desert Dweller.
It’ll never happen again. The only reason it happened in the 90’s was because of all the defense cutbacks.
Sorry, history may not always repeat, but it always rhythms. This time the R E Complex will be the sector to implode it, along with other factors. South Sea Bubble, Tulip Bubble, Mississippi Scheme, and now the World’s biggest Finance/Housing Bubble. Done that, been there, got the T-Shirt.
Surely you jest?
See comment above
Do not feed the trolls
Amazingly, things are still booming in the South Bay area, south of LAX. There was some mild weakness during Q1, more than historical YOY records have shown, but nothing like the cave-in weakness of Arizona or Florida, or even the about-to-crumble weakness of San Diego. I’ve measured the weakness by number of sales x average sale price, and things have been sort of trending lower YOY, but no collapse. I’ve noticed a few listings expire with no relisting, some get relisted at lower prices, but not majorly lower. Some other long-listed properties are finally getting sold. Days on market are up, but number of sales are zooming back up in my zip (90278) for April. So there has been a decline in price increase momentum, but the sillyness here continues. This bubble area will probably be one of the last bubbles to really implode. Kind of like watching paint dry in the meantime.
Hi bearmaster,
I think you and I have discussed this but I am monitoring San Diego beach communities more than LA beaches. IMO San Diego is like looking into the future. I think La Jolla, Pacific and Mission beach are very similar to Manhattan, Hermosa, and Redondo. The San Diego beaches look to be trending down to way down in units sold which of course pushes up the average price. I expect that the South Bay will see a very similar pattern next year about this time. During the last correction LA home values went down approx. 40%, Manhattan Beach properties went down only 20% (which is still substantial). I expect to see a similar pattern this time. Manhattan will hold more of its value than Hermosa which hold more of its value than Redondo. I think Torrance will be clobbered.
Torrance? Impossible, everyone wants to live there. LOL.
Yes, I remember our conversation.
San Diego sounds like a good bellwether - but I wish I had some more insight as to why. Inventory numbers for San Diego area are actually somewhat more favorable than for Los Angeles, so unclear to me why San Diego is cracking first. (Neither come close to the implosion in Florida or Arizona.) On the other hand, OC is closer to cave-in condition, ya think?
In north Redondo average price has been definitely losing momentum but in Lawndale average price is still going like gangbusters. There is still a bubble here that has yet to really meet a pin. “It’s a mixed up muddled up shook up world.”
San Diego is considered to be the bellwether of the housing market because it kick-started the current housing boom and the rest of the country followed. They have about a 12 month headstart on LA. San Diego has identical arguments as LA rationalizing the bubble i.e. land restrictions, immigration, boomers buying second house, everyone wants to live here, yada yada yada. Sacramento, Fresno, Bakersfield popping won’t get that much attention, but San Diego popping will cause panic. Right now there is a competition on bubbletracking (thanks OCRenter) on what date San Diego will hit record inventory adjusted for population. The old record is 19250 in June 1995, adjusted for population the new record is 22,174. I say July 15 will be the date. Point being having this contest on when San Diego will hit RECORD inventory THIS YEAR is not exactly a good sign for the soft landing crowd.
I lived in the Palos Verdes peninsula in the 1960′-70’s. It was a wonderful place and still is compared to Hermosa etc. Manhattan, Hermosa, and Redondo have become dangerous, overcrowded slums by the ocean. It is so very sad. The driving force is gradual population increase and the unwillingness of our leaders to keep the Mexicans out of our country. We have witnessed a huge decline in the living standard of our people and for our children
Manhattan Beach is pretty slummy.
I am flying out to interview for a job at Northrop in Redondo Beach next week and I have bookmarked your site for future reference. If I do get the job, I may be asking you for advice on apartment locations for my family
My significant other works at Northgrum, my dear neighbor works in the former TRW section of Northgrum. We are a Northgrum family here. I’ll start looking at rentals. You know where to find me.
Here in the San Fernando Valley, we saw a bit of a recovery from the extreme sales weakness of Jan/Feb in March too, meaning sales were only off 15% as compared to 25-30%. However, sales have dropped off dramatically just in the last couple weeks. I continually track the amount of homes that have gone to a pending status in the last 30 days. Last year this time we had about 1700 homes gone pending in the last 30 days. Today? About 1200. And every day it drops lower and lower. I see ugly numbers ahead, and a sudden and noticeable shift in the market.
I think you are confirming my opinion that in LA, the San Fernando and Santa Clarita valleys will the first to go.
Since San Bernardino and Riverside counties have become (more) exurbs of LA, add them as well to your areas to track. LA proper will be the last (of those) to fall.
RE sales being up slightly for March in SF valley, the masses are slow to learn. There are so many idiots out there still babbling about “getting into real estate”, I hear it often. Despite the fact that I understand the reasons for all this nuttiness, I’m still amazed.
I live in the SF Valley, and while the market is less frenzied here, I am sorry to say homes are still regularly selling for totally absurd prices.
I have been watching Long Beach, 90807, for approximately 18 months. The sales and prices slowed July-October of 2004. Then, sales and prices started to climb again. We had our sights on 3 different houses at once. One was a 2/1 (900 E. Luray,90807) for 430K. We offered 420K but were out bid at 423K. Our agent told us the selling agent didn’t want to allow a counter offer. This was in November, 04. Prior to our offer, the house had been sitting for sale with no activity. Then, all of a sudden, there were two or more offers. I wonder if my “Buyer’s Agent” represented both offers??? Would be fun to know. After dealing with buyer agent lies, deception, and realizing the cost facts don’t add up no matter how emotional, I decided not to buy. Not a popular decission with my wife, but she is fine today staying home to take care of our new baby instead of going to work to help afford an over priced asset. Anyway, prices in that zip continued to climb again through the spring and early summer, 05. I didn’t keep notes, but I remember inventory being as high as 90 homes and condos for sale in late fall, 04. In the spring and early summer of 05, it went as low as 30 -40 properties. In the late summer 05, things began to change. Inventory slowly began to rise. 50, 60, 80+ homes for sale. By the fall 05, over 100 properties. It appeared to be the same properties, day after day, week after week. Currently, the inventory just hit 150 properties. I use http://www.firstteam.com/marysuephillips/homes/propertysearchcontents.asp to track inventory.(not my agent). The new owner that outbid me on the house put it up for sale again 8 months later in july05 at $569K. No bites! Lowered to 549K, Oct.05. No bites! Lowered to 529K, Dec.05. No bites! Pulled off market. Relisted Apr.06 529,900.
There will be areas that correct sooner than others. But eventually, all of the overinflated areas will correct. This is going to take awhile. We’ve barely begun to see arms start to adjust. We’ve barely started to see jobs vanish in the real estate and construction fields. If you truly want to buy a home at a fundamentally rational amount, we’re probably looking at another 2 years at least, maybe longer. Remember how intense the mania was when home prices were skyrocketing out of control, and everyone wanted to get in? That same level of intensity will exist oppositely when home prices are falling, and no one will want to buy. There will come a point when no one will want to buy a house - that will be the time to buy. I think we will all be surprised at how ugly this really gets.
Agreed. It may SEEM slow because we think words like “disaster” and then try to put it in human time scale. If prices average a 0.1% decline PER DAY that is 30% in one year (cumulative) and 50% in two years.
That’s HUGE. But seeing a $10K price drop on a $1.4M after a week on the market doesn’t seem like the same thing… but it is, exactly.
In Sonoma the belief is if you don’t talk about it, nobody will know and if you go ahead and lie and tell everyone that properties are still moving and everyone wants to live here… it will make it so, and the buyers will be none the wiser. The key is to make sure you keep the newspapers quiet. Remind them of where their money comes from. One newspaper even requires that you pay in order to read the news on the website… so if they can keep information from flowing, they can keep their party going. Even if it is just in their imagination. It is all about trying to minimize proof they are lying.
Request:
Any info on Vermont market, in particular the Waterbury Center/Burlington area. A freind just moved there from europe and has found the rental market absurdly expensive and observes that the people living in $400-500K homes are shopping at Wal-Mart and driving rusty pickups. The alternative would be to buy an acre and put up a modular home. I expressed some misgivings about doing this right now and asked her to rent for year and got the “You’re just a housing bear” accusation and “My coworkers say this area is different” . I say the area can’t support those prices, it’s the boonies and relies heavily on the ski business. Can anyone post some info I can forward before a big mistake happens or should I just shut my “Bear Trap” ?
Mo -
I grew up in Vermont.
Waterbury is somewhat influenced by the out-of-state/tourist influence of Stowe (20 mins away) and I would guess that market will slow considerably as things retrench in the big cities, especially NYC (”New Yawkers” and CT’ers seem to be common in Stowe).
Greater Burlington’s job market is supported by UVM, the medical center, IBM, IDX and a few other large employers. That IBM fab laid off a bunch of people in the not too distant past and I have no idea if that impacted housing. I do know that Burlington home prices are well above long term trends and I can see no reason for them not to come back down some and revert to the mean - as they are beginning to do elsewhere on the coasts.
It’s no joke that people who cannot afford those kinds of house prices live in Vermont - it seems those kind of people also live just about everywhere now!
Thanks sf jack, can you remember what relative housing prices were like before the bubble took hold ?
“It’s an absolute fact that people want to live here. That keeps housing prices high. If it wasn’t for the demand, prices would drop,” said Richard Calhoun, real estate broker and owner of Creekside Realty in San Jose. ”
IF so why have so many moved to Washington, Oregon, and Utah!
The current buyers should be concerned with hi home prices. The local employers are very concerned. They are not interest in increasing their salary/wage cost in a highly competitive markets.
“It’s an absolute fact that people want to live here.”
I was one of the many young people drawn to silly valley before the first bust, and I can say the ONLY reason I was there was the salary. There is NO OTHER redeeming quality to Silicon Valley aside from its proximity to other cool places like 45 minutes to San Fran, 45 minutes to the beach. There is no “swimmable” water nearby, way too high ratio of men to women, land that is completely flat aside from the brown hills that surround it, and a constant yellow haze on the horizon. Even on the sunniest days, it didn’t really “feel” sunny. People who repeat this BS have never ever lived anywhere else.
Our country is doomed. The average american is no smarter than a bag of rocks. Too many immigrants because whitey and blackie are too lazy to work real jobs. You won’t even recognize this country in 10 years.
As valid as many of the comments here are, I think the main reason the inventory pile up in CA, and in the rest of the country, is psychology- not ARMs or gas prices. I know rates are related to psychology- but I also think the bubble would have topped out anyway, even if rates didn’t change much.
BubbleTrack.blogspot.com
I agree. The market has exhausted itself. Raging bull markets need to be fueled by buyers and we have run out. The same thing happened with the NASDAQ. Big Al’s final 50 point boost didn’t send it over the edge, the psychology did. Greed drives markets up and fear brings knocks them down. No more, no less.
“Based in Mission Valley, agent Anne Christensen says agents motivated chiefly by profit have hurt the industry’s image”
Uhhhh… OK, I suppose. But geeze, how many agents does this “motivated chiefly by profit” criteria leave out? I guess some are motivated chiefly by profit and others, the majority, are motivated entirely by profit. What other reason is there to sell real estate? Perhaps that goomba-ya chant right after the closing when the FB throws all that $$$$$ on the floor so the agents can roll in it?
What a bunch of sh1t.
“Romeo Danais, a long-time Silicon Valley real estate investor is pulling up his investment stakes in San Jose and moving them to Oklahoma, Texas and New Hampshire. He says no-money down, interest-only loans, adjustable rate mortgages, loans with longer terms, loans with options to pay so little the principal grows, two and three mortgages for one home may have become all too common. ‘When a lot of those stretched out, thinly-managed budgets get whacked with increases in their mortgage payment, we will see how strong the desire is to keep buying at these lofty prices. It may take another 1.5 to 2.5 years, but..when it happens, it’ll [happen big],’ Danais said. ‘I am the embodiment of an optimist. I just don’t have a lot of long term confidence in the prices of Silicon Valley real estate. That’s why I have moved my dollars out of the area, and that’s why many other people are doing the same or are considering it,’ he added.”
Bingo! Someone is making sense. We are’nt talking 10-15% correction here. Its going to look pretty ugly if your holding a $500K 800sq ft condo or a $1M 1700 50 year old rancher. Very ugly indeed.
BTW- San Jose Mercury News had a peice on how SUNM may have 25%-30% layoffs they put off since the implosion of the DOT.COM.
Yea! nearly 5 years late. Thats nearly 10,000 hitting the street. Same happened in HP. The first to go are the local employees who are too expensive to maintain.
Send those overpaid azzwipes packing! Then let’s see what happens to RE values, you CA morons!
that blows no man good. If you’re able to get past that American Dream thing, the fact that all those people moved out to Riverside and BF Egypt means there are tons of great rentals by the beach. They’re not making anymore beachfront property but the rent remains amazingly stable in spite of the property “value”. Strange…
1995 ~$105 per sq ft.
2005 ~$350 per sq ft
Normal LT appreciation comes to around 5% for the past 30-40 years.
Regression to the mean would call for a 60% correction.
Yep, mania madness is a factor, but the liquidity has made prices hyperinflate, which caught most sheeples in the mania. Its the worthlessness of the $ too. Sheeples who got in and out earlier in the game have played it well, and that was dumb luck.
I am in the middle of the “Pork Chop” here in Silicon Valley…Literally, ground zero….Born & raised…Grandparents moved here in 1912…
My daughter (28) came over yesterday (we are a very close family)..She said her and her boyfriend were talking about moveing to Portland so they could afford a house and start a life….
I am fortunate to have the ability to help them stay here assisting in their housing costs but I think I will choose not to…Don’t get me wrong, this is a bueatiful place to live but I am comming to the conclusion that its not worth sacrificing “your life” to live here”….
The valley is changing so rapidly that (other than the weather) the quality of life here sucks ….
What defense cutbacks? If you look at the SF Bay Area there was no defense industry. RE prices dropped like a rock. Nearly 40%.
Over 75% of employers in the tech field went out business. This was mainly due to international competition.
SF had lots of defense work. Alameda NAS, Mare Island, and lots of aerospace and defense work in the Valley. The Navy essentially shut down every base in the Bay Area and moved the work to San Diego and Puget Sound.
Rubish! The implosion in 1991 had nothing to do with Military Spending. Computer Giants like AMDAL, ASK Computing, Tandem, and many others died out due to the death of mainframe computing. Semiconductor markets for US declined to Japanese DRAM Dumping policies. By 1995 all manufacturing was shipped out to SE Asia. Much of yesterdays problems still exist today with SAP, Samsung, and countless others.
Thomas is correct although I will add the S & L debacle to the mix…
It really ticks me off when this BS gets said. It a bunch a BS from people who did not work in the valley.
scdave !
Same here born and raised.
I think the reason we are seeing people pull out of places like FL, CA, AZ and then inflating areas like TX, NM, OK is because they perceive that prices have hit a wall in CA, which they have, but also that TX and OK have more potential.
You would ask, why not get out of RE entirely? I think what keeps the money in the game longer is the 1031 exchanges to avoid paying taxes. People so driven to avoid paying taxes will end up losing it all by being greedy and not having an exit strategy. It will also cause prices to fall in these non-traditional bubble areas that experience rapid price appreciation. I have news for you, these prices are only artificially inflated and will revert to the mean when the natural force of gravity takes over and fundamentals dominate again.
Fundamentals, fundamentals, fundamentals people!
I wish I could see the dollar number of money that was lost in the bear market of 2000 - 2003 because people refused to sell stocks and pay taxes on the profit. I personally dumped a couple of people I was helping when they wouldn’t sell when I told them to because of taxes. All ended up losing not only the profits but also much of the original capital.
Tom;…keeps the money in the game longer is the 1031 exchanges to avoid paying taxes.
These have little effect on housing prices….In fact this “1031″ money typically follows migration….
Many people refuse to pay the taxes and invest in anything else, so they look at another market where property is cheap.
But is it really cheap??
My point is they would invest in other areas except for the fact that they want to avoid paying taxes.
When I say other areas, I don’t mean demographics. I mean invest in something other than Real Estate.
what keeps the money in the game is that these bozos have no other way of generating huge wads of cash…
Too kind; most of ‘these bozos’ have no way at all ‘of generating huge wads of cash’ themselves. They are totally dependent on RE appreciation to do it for them.
Also born and raised in the Bay Area. Things had gotten worse in the last 15 years. It has gotten more crowded and the traffic is worse.
Now even more expensive to live as housing has hit the roof.
Still a decent place to live but you have to earning good money. Not a great place to live for the average Joe Sixpack.
Perhaps a good number of Californians are riding the wave in Utah. Excerpts from a bullish Utah housing report from yesterday:
In the first quarter of 2006, the median price of a house in Salt Lake County rose to $200,747, up 16.7 percent from $172,000 over the year-ago quarter, according to the report.
The number of days a house sat on the market in Salt Lake County before selling averaged 39 in this year’s first quarter, down from 61 days a year ago, the report said.
Median home prices were up nearly 14 percent to $187,950 in Utah County.
Steve Camargo, a manager with Century 21 Elite in Murray, said buyers looking in the $150,000 to $200,000 price range are having the most trouble finding available homes. Even $250,000 homes are in short supply, he said.
“My advice is that if you find something you like, move fast,” he said. “It may not be around very long.”
http://www.jacksonholestartrib.com/articles/2006/04/23/news/regional/566e06836e33f47f872571570060b9b5.txt
The URL on the Utah article which got cut off is:
http://tinyurl.com/p4zzh
I think big support for Silliy-con Valley RE prices come from Asian immigrants. I have said this on Patrick’s blog as well. Why ?
1. Many have not lived anywhere else in USA. So they have no way to compare lifestyle in other parts. This is an immigrant friendly place. Lot of their own friends, relatives live here forming a nice social circle. They really like to live here. (Apart from weather etc. which appeal to other demographies as well)
2. Most of these immigrants came here in ealry 1990s or late 1990s. They have never experienced a big earh quake, so cannot adequately comprehend the risk.
3. Since that timeframe - late 1990s, RE has only gone up. Even the dips lasted for about an year, and prices kept going up. In addition, RE in their respective countires has actually ‘always gone up’. Although the reasons are different (population, inflation), they feel BA RE will simply keep going up.
4. Many work in IT, and many are dual income. Often times the family income is over 200K. It is not that difficult to buy a 800K home on that income.
BA inventory is still low compare to other areas - when you take population into account. So as long as there is demand from this demographic, I don’t see a crash happening in BA.
I expect small decrease of 10-20% depending on the area till 2008. By that time, most of the people in this demographic who want to buy will have bought. Then we will really be in short of buyers. In addition, the wave of ARM resets will make matters worse. What happens after that is anyone’s guess. The interest rates could be anywhere depending on what Gov and Fed try to manipulate.
Even then, many of these families will be able to ride it out. What they won’t have is any gain at all in 10-15-20 years. Most jobs are going overseas. I just don’t see who will be able to buy these houses from current buyers at any real gain. As a result, they won’t have much for their retirement or college education for their kids. It’s ironic that the same folks who are willing to pay 1M+ for 50 year old houses in Cupertino just for the schools, will have a hard time finding money when their kids go to college.
So, for BA, let’s come back in 2008 to have some real schadenfreude.
Yeah, the same was true in 1989 at the last top, lots of Asian money buying US real estate.
The large commercial examples are:
Pebble Beach Resort
Steamboat Springs Ski resort
Rockefeller Center
Heavenly Ski resort
They were all bought by Asian’s and sold back to Americans for penny’s on the dollar.
It will happen again with this RE market top.
Comment by To BA Or Not To BA;…
Funny…..Right on the money in the comments though….
Asians haggel over prices like crazy over everything.
You tell them its $5, they will try to give you $4.
The ‘recent’ Asians are from HK. They migrated to SV in early 90’s then we had a RE bottom.
Its in their culture to save like crazy and negotiate prices downward. No its not the Asian that pumped the prices.
Actually I see it more like the Eastcoast people who came over
n the past 8 years or so. The they really bought into the “Cali Dreaming” with an overpriced house/mortgage. They are educated on the east coast, and rec’d big jobs here during the boom days. We call this Legacy Costs. Today, employers are trying to unhinge these big salaries down to realistic levels given. As seen with HP. They cut salaries, bonus and other compensation way dowm in order to be competitive.
I had a mini-confrontation at a dinner with the husband’s family about a week ago. I’m from the midwest and only moved here to SD because it was good for my hubby’s career. His family has been in SD for generations. When I said that I would move out of this state tomorrow, if it wouldn’t hurt hubby’s career, they literally stared at me like I was crazy. “WHY would you WANT to live ANYPLACE else!?” they practically screamed. When I started listing things like traffic, cost of living, earthquakes, and real estate prices they all admitted that those were problems–but still they couldn’t get why I would want to move. Finally I said that since we’re stuck here, at least we have some hope if the RE market crashes the way it’s looking like it might. Then my SIL said, “RE never actually goes down in CA. When someone talks about an RE slump in CA they just mean single-digit appreciation.”
Can someone give me a link to statistics to show her that she is wrong in this?
You are lucky. One of the best bearish RE sites is based in San Diego.
Read this and show it to them.
http://piggington.com/bubble
If they prefer governmnet stats look at OFHEO’s HPI charts.
http://www.sonic.net/~jrmagers/re/hpi/us/San%20Diego-Carlsbad-San%20Marcos,%20CA.png
http://www.housedata.info/CA/SanDiego.Carlsbad.SanMarcos/
I can sympathize as I’m from Chicago and had to move to San Diego in ‘04 because my wife is in the Navy (pharmacist). I couldn’t comprehend why the housing was so ridiculous here until I looked at Rich Toscano’s site about a year ago. Thank god I did because we would have made a really big mistake if I hadn’t seen the piggington site. As for my wife, she still isn’t convinced because the median keeps creeping up and the media has only recently started reporting the inventory issue. Otherwise, her coworkers are all long time SD residents and have no clue about the impending burst. Unfortunately, they fill her head with RE nonsense on a daily basis and I have to undo it at least once a week.
I live and rent in Irvine,Ca. I purchased a home for $254,000 in 1989 at the top of the RE Market. By 1995 the market had slid to $195,000 for my model and did not recover until 2000. Does this 11 year period sound like real estate never drops? I’d say she had better get a handle on something befor the floor falls out.
I’ve been watching a small area in Riverside next to one of the train stations into Orange County. 4 months ago, I went to 3 open houses in this one tract that was built in 89. The first 2 houses that I looked at were going for 750k & 769k ( both 22/24 hundred square feet ) The 3d house I went to, which was the same size, and inside of the same tract, had a listing price for 650k. When I asked the agent about the price, he just shook his head and stated that the seller had bought the house new, and was quite happy with the 650k price because he wanted to move asap. This last week, I went back to that tract. The two houses I had looked at for 750k plus were off the market and there were two more houses for sale, of the same size selling for 650k. What a difference a couple months make.
Oh, and another point. There is a housing tract up the hill a little way that was built within the last three years. 3 months ago, when I last looked around, there were all sorts of for sale signs up and down the streets, many with the word reduced plastered ubove them. this weekend, I could only find one. I bet after that one house sold for 650k it screwed the comps in that area. I have half have a mind to go back up there next weekend and ask some of those poor souls why they aren’t on the market anyomore. I’ll be everyone of them is now upside down .
“Those who forget the past are condemned to repeat it. Apply this maxim to the current real estate market and it might translate to “Overbid and overborrow, and buy a home that plummets in value.”
After spending the last three weeks exploring the hot-air balloon otherwise known as the residential real estate market, I received several letters asking about other real estate bubbles — far and near, past and not-so-past.
Some readers had personal and painful knowledge of the last Bay Area real estate bust — one man bought a SOMA condo in 1989 that lost 25 percent in value over the next four years and didn’t recover its purchase value until a decade later. Other readers, however, simply asked questions such as, “What happened in Japan? Wasn’t there a decline in 1989 there?” Many of these correspondents commented that they hadn’t seen the media deal with the history of real estate busts with any substance, and I did some research and discovered they are right. ”
Pop Pop!
Learning from property bubbles of the not-so-distant past
by Carol Lloyd, special to SF Gate
Tuesday, August 3, 2004
Lee - Go to The State of the Nation’s Housing 2005 and prior years like 1998-2001
Download Appendix Tables (MS Excel) W-1 and you will see the price declines.
Forgot to say this is on Harvard University Web site. But just google up ‘State of the Nation’s Housing.. and your there!
All the data you need is here.
http://www.piggington.com/
OK, I am really starting to worry here! We have owned (& lived in!) our home in a very nice area of Oceanside for almost seven years now (bought in ‘99). We are actively pursuing a move to the Raleigh, NC, area — my husband is busily applying for jobs and interviewing, but nothing solid yet.
We’re in good shape on mortgage debt — owe about 180K and our property is currently valued at about 465K, but I have been a true believer in the bubble for a couple of years now, and an obssessive reader of this blog for about a year. I am afraid to sit on my hands and wait to put the house on the market until a job in NC materializes, but I’m also very hesitant to do it now — we would be uprooting the whole family to move … to where? I’ve checked into rents here locally, and it would be at least $2000-2500 to rent something comparable. Our (fixed-rate) mortgage payment is $1058!!! Even a “luxury” (read: shoe box) apartment down the street would be a minimum of $1700 per month. We just can’t afford the extra outlay of $$$ every month. We have no debt beside our mortgage, but with two kids in private school and trying to save a bit every month, there’s not a lot of wiggle room.
Any advice? Thanks!
if you sell, you can earn interest on the gain. But check the numbers and see if this will work for you.
I advise to sit tight until you know where you’re going. It is true that the interest on your gain would offset a good portion if not all of your increased rent payment, but the stress of moving your family twice and the risk that your husband may not be successful in his job search offset any extra gain you may realize. At least that’s my opinion. The market is not going to tank 50% overnight.
My two cents, I wouldn’t sell until my next move was settled. As far as I can tell, the declines are mostly taking place in AZ, NV and FL. Here in CA, as much as I’d like to see some drastic price declines, they are not yet happening. So far it just looks like price appreciation is stalling, maybe prices are down like 5%. Sit tight, IMHO.
You’re probably right to stay until your plans firm up, but in the current market my piece of (not investment grade) advice is that you don’t under any circumstances commit to a purchase elsewhere until you are absolutely certain you have sold your current house.
If this means renting for a time, or living apart from your husband for a time, so be it.
“Being a silicon valley resident I can say that I’d move out of here gladly if I could find a job elsewhere. The pay scales here simply don’t support these housing prices, ”
The vulture Realtors would disagree with you. And man they really as ugly as vultures.
Thanks for your comments. I will crunch the numbers and give it some more thought.
Thanks for all the helpful info on my housing bust statistics question!! Now I’m armed for the next family dinner.