An Unsustainable Trajectory In California
The Daily Breeze reports from California. “The median price of all South Bay homes sold last month was $513,000, down 12.3 percent from the same month a year earlier, according to a report released by the California Association of Realtors. For strictly single-family home resales, May’s statewide volume was up 35.2 percent over the same period a year earlier.
“In the beach cities, the median dropped only 5.8 percent to $801,000. Redondo Beach saw a 14.8 percent drop in its median to $617,500. The South Bay’s median price drop was far milder than that of Los Angeles County, which saw an annual decline of 30.1 percent to $299,000 in May. The city of Los Angeles saw an even more severe plunge of 45.4 percent to $280,000.”
“‘Buyers are beginning to realize that the combination of favorable home prices, historically low mortgage rates and first-time homebuyer tax credits, may not align again for many years,’ CAR President James Liptak said in a statement.”
“Local home prices continued their slide in May, amid the recession and ongoing job losses.”
“At her first job interview in two months on Friday, unemployed Shellie Langley approached questions about her work history and her knowledge of wine with nervous excitement. Her potential employer is the soon-to-open Tin Roof Bistro in Manhattan Beach, a casual American restaurant in the Manhattan Village shopping center.”
“‘I really need a job so, so bad,’ Langley told her interviewer. ‘I’m completely open for all shifts. I’m looking to be a server but will be a hostess, cashier, anything.’”
“For Langley, who lost her job as a secretary earlier this year when the small company she worked for downsized, the Tin Roof was an oasis in a desert of non-hiring restaurants. ‘It’s been awful. Everywhere I’ve been, they say, `We’re not hiring,’ said Langley, who lives in Hawthorne with her two children. ‘It’s been devastating. I had to let a car go. I’m just on the verge of bankruptcy. I need a job so I can stay in my home.’”
The LA Downtown News. “While the Related Companies’ $3 billion plan to transform Grand Avenue remains on hold, the New York-based developer has more quietly made a significant play in Little Tokyo’s luxury rental market. In 2005, Related obtained city approval to construct a $250 million, market-rate housing community on the site, but subsequently sold two of the Block 8 plots to developers the Kor Group and K. Hovnanian.”
“In turn, those developers separately sold their pieces to AvalonBay Communities Inc., which plans to build another six-story rental project, called Matsu, at the southwest corner of Los Angeles and Second streets. Meanwhile, Related is holding on to the parcel on the northeast corner of the block until the economy recovers, said Related of California President Bill Witte.”
“Lloyd Lee, a 31-year-old real estate loan specialist, and his wife relocated from Las Vegas into a sixth-floor, one-bedroom unit at Sakura Crossing. ‘We were looking for the right combination of security, price, location, amenities and service,’ said Lee. ‘We looked at literally every decent place in Downtown as well as Pasadena and this was the best place to go with.’”
“While Sakura Crossing Project Manager Rick Westberg said that Related is not advertising any rent reductions or other economy-sensitive deals, Lee said his unit at Sakura Crossing is less than $1,700 per month. He would not reveal his exact rent, however, because ‘They might be mad at me for telling you, because I got a really good deal.’”
The Desert Sun. “Riverside County faces economic head winds over the next two years, with another surge in foreclosure activity, minimal employment growth and marginal appreciation in home values, keeping the county’s tax coffers lean, according to a report given to the Board of Supervisors. ‘We’re being battered here very badly,’ Supervisor Bob Buster said in response to the 47-page economic forecast authored by researchers at Cal State Fullerton.”
“Researchers said the Inland Empire’s housing boom put the area ‘in an unsustainable trajectory,’ leading to artificially high median home prices that barely one-fifth of the region’s residents could afford using conventional loan products. The market peaked in 2006, when the median home price in Riverside County reached $415,000. Since then, prices have dropped 60 percent, squashing demand for new construction, the researchers said.”
“‘The Riverside County economy has plunged into an even deeper recession than the national economy,’ the report states. ‘The collapse in the housing market and in housing activity is one of the main factors behind the sharp deterioration of the county’s economy.’”
“The number of California hotels involved in a foreclosure action or in default has risen 125 percent in the past 60 days. Those properties already lost to foreclosure have largely been in the counties of San Bernardino, Riverside and San Diego.”
“Alan Reay, president of Atlas Hospitality Group, said Atlas saw signs the hotel industry may be affected by the housing crisis in California about 18 months ago, and has compiled data over the past year on troubled hotel properties. Initially, foreclosure action was taken against independent hotels, the hotel brokerage and consulting firm noted. Most were boutique motels in secondary markets.”
“‘Only in the last 60 days have we seen a massive run-up,’ Reay said. ‘I think hoteliers are getting to the point of not seeing light at the end of the tunnel, and they’re starting to throw in the towel.’”
“Earlier in June, Sunstone Hotel Investors Inc. disclosed its intent to forfeit the W San Diego to lenders after efforts to reach a compromise on the hotel’s $65 million securitized mortgage failed. Sunstone, a real-estate investment trust, bought the W in 2006 for $96 million, just before the economy slumped.”
“‘It’s the first publicly traded company to take that move,’ Reay said. ‘It’s the tip of the iceberg,” he added. ‘No market or brand is immune in this downturn.’”
From Bloomberg. “Four months after President Barack Obama pledged $275 billion to shore up home sales, the engine that powered every U.S. recovery since 1960 is stalled. Bankers’ reluctance to finance buyers who won’t live in properties is one barrier to a turnaround. There’s little chance the turnover will increase enough this year to end the housing recession, said Andres Carbacho- Burgos, an economist with Moody’s Economy.com.”
“‘We have a lousy job market and an excess of around 1 million extra homes that has to be worked off,’ he said in an interview. ‘The housing market is not going to hit bottom before mid-2010.’”
“If the cost of money doesn’t put consumers off, loan officers’ new strictness may keep them out of the market, said Grant Stern, a mortgage broker in Miami Beach, Florida. About 50 percent of banks tightened requirements for prime borrowers in the first quarter, asking for bigger down payments and more cash on hand, among other things, the Fed said. ”
“‘Six years ago, standards were pretty permissive, and two years ago all you needed was a pulse,’ Stern said in an interview. ‘Nowadays, even people who have reserves that equal amount of the loan are getting rejected.’”
“Driving through Riverside, California, Bruce Norris pointed to a half-dozen empty houses with ‘For Sale’ signs stuck in untended lawns that he said investors might buy if banks would just extend some credit. ‘People today look at us as the enemy,’ said Norris, head of Riverside-based Norris Group, which purchases and renovates homes to rent or sell. ‘That’s a big problem for housing because if we can’t get the financing we need, a lot of these properties are going to sit vacant.’”
The Times Herald. “The Vallejo area was the first in Northern California hit by the recession and it will be the last to recover, according to an economic think tank’s latest forecast. The University of the Pacific’s Business Forecasting Center’s most recent report predicts Vallejo won’t recover to its pre-recession jobs level for about five years, or until the second quarter of 2014. Merced and Sacramento, predicted to be the second last to recover, won’t do so until near the end of 2013, the report reveals.”
“San Francisco and San Jose, on the other hand, will be the first Northern California metro areas to recover — in mid-2012 — a full two years before Vallejo, center director Jeff Michael said. Like most think tanks, the center has not always been right about its predictions. It predicted significant growth in the Vallejo area, for instance, which never materialized, presumably because of the recession.”
“‘Vallejo’s employment was the first to peak, in the first half of 2006, and began a slow decline after that,’ Michael said. ‘Predicted growth just sort of stopped in ‘04.’”
From CBS News. “The value of most Americans’ single biggest investment - their home - continues to fall. And their second biggest - their retirement nest egg - has also taken a hit. Since the bear market began in November, more than $2 trillion in 401(k) savings has evaporated.”
“CBS News business correspondent Anthony Mason reports. Sam and Myrna Cadelinia were hoping to raise a glass to retirement five years from now. But, Sam says, ‘That’s all changed.’”
“Sam owns a San Francisco real estate business and his nest egg has been eaten away by the recession. Retirement portfolio down 25 percent while business has virtually stopped for his company. Now he doesn’t know how to invest what money they still have.”
“‘Not all is lost. Our lives are just evolving differently,’ he said.”
The Mercury News. “Your home equity has sunk and your mortgage is underwater. But if you’re drowning in Silicon Valley’s housing market, Santa Clara County Assessor Larry Stone may have a little relief for you. Almost one in four county homeowners are being notified that their plunging property values entitle them to a temporary tax break averaging about $2,000. The assessor’s office has just mailed notices to the county’s 460,000 residential and commercial property owners, stating the assessed values that will be used to determine their property taxes this year. Those values have been reduced from last year for 90,000 of the county’s 406,000 single-family home and condo owners, thanks to the decline in the housing market.”
“The total assessed value reduction is more than $17 billion, reflecting average reductions of $170,000 for homeowners. By comparison, about 46,000 property owners got reductions last year averaging $78,000 for each home.”
“‘Some people think this is good,’ Stone said, acknowledging it’s perhaps little comfort since every dollar in reduced property tax means $99 in lost equity.”
The Los Angeles Business Journal. “Babette Heimbuch joined FirstFed Financial Corp. more than 25 years ago, just about the time the thrift made its first option adjustable-rate mortgage loan. She was there as FirstFed grew into one of the nation’s largest so-called option ARM lenders. And she is there today as CEO as FirstFed is the last one standing among all the big lenders of those risky loans.”
“The big question looms: Will FirstFed, a savings and loan founded in Santa Monica on the eve of the Great Depression, be next? ‘We’d be fools not to be nervous,’ said Heimbuch. ‘But all we can do now is work really hard to fix the problems that we have.’”
“With 38 branches across Los Angeles and assets of $6.8 billion, FirstFed is L.A.’s fifth largest depository institution. Much of its growth, however, has come on the back of the variable-rate loans that have been defaulting in large numbers in the past two years. FirstFed, the parent of First Federal Bank of California, has endured nearly $300 million in losses in just the past two quarters while its loan-loss provision has ballooned to more than $300 million. Nonperforming assets now stand in excess of 8 percent of total assets – even half that amount would be considered high.”
In January, regulators placed the thrift under a cease-and-desist order over concerns that its capital supply was rapidly depleting. Even its auditor expressed doubt about its ability to survive.
Yet the institution is still around, and executives, who admit that the work can be draining, said they expect it to stay that way.
“The risk in this portfolio was not Armageddon,” said . “It was pain and suffering, but not Armageddon.”
“Management instituted a massive – and, to date, successful – loan modification program beginning in 2007, well before most other lenders saw the need. The company halted its lending and reduced staff levels by nearly one-quarter through layoffs and attrition. Top executives took a 10 percent pay cut.”
“‘We’re the last option ARM lender out there,’ Heimbuch said. ‘Not to say that we’re not struggling and we don’t have to raise capital, but we feel like we’re getting our arms around the risk.’”
“FirstFed had been making option ARM loans without incident for more than 20 years. The loans held up well largely because option ARMs tended to be given to borrowers with good credit and proof of income. But everything changed in the early 2000s, Heimbuch said, when Wall Street firms began securitizing the loans in large numbers. ‘When Wall Street came in and had really low pay rates with no documentation, that just bastardized the loan and ruined it,’ she said.”
“James Giraldin, FirstFed’s chief operating officer remembers the day he realized that Wall Street’s influence would prove disastrous. In the fourth quarter of 2005, he learned that one of the top local competitors was a subsidiary of Bear Stearns. At that moment, he said, he knew that securitization was truly taking hold of the industry. Turning to Heimbuch, he said, ‘This is over.’”
“FirstFed readily admits it made the mistake of dropping its own standards in a misguided attempt to remain competitive. It did that mostly in 2005, a year in which the thrift originated $4.4 billion in single-family loans – primarily option ARMs and most without full verification of income or assets. But the thrift was also one of the first to pull back. By late 2005 and into 2006, managers made the decision to stop underwriting the riskiest loans and begin requiring proof of income. Within two weeks, their business dropped in half.”
“‘We really cut back,’ Heimbuch said. ‘We took a lot of grief for that. People were saying, ‘Why aren’t you lending? Everyone else is lending. What’s the matter with you?’”
“Giraldin pointed out, just a year of unwise lending has pushed the company to the brink of failure. Since then, shareholder value has been all but wiped out. Its stock, which traded at more than $69 a share in 2007, closed June 25 at 35 cents. ‘Most of our pain and suffering comes from that ’05 production,’ he said.”
“I’m completely open for all shifts”
Where was this language all during the boom? Back when we were MEW-flush, you couldn’t find help on the weekends. Everyone was too busy installing gazebo’s and koi ponds to be bothered w/ ‘that’?
Oh but now… they want to jump on board and show how they can be a “team player”. Has anyone stopped to consider that had we more dedicated workers during the boom we wouldn’t have had everyone ( regardless of ambition ) at full employment to q-u-a-l-i-f-y for a loan?
I’ve been reading a book about the skilled trades. It’s called Blue Collar and Proud of It. It’s intended to counteract that “You must go to college or else you’ll be a failure!” rhetoric we hear so much of.
The book puts a lot of emphasis on a potential tradesman’s (or woman’s) willingness to work hard, be part of a team, and be willing to learn new things.
In short, being a “team player” never went out of fashion in the trades. And a big part of the reason is that your life depends on it.
Arizona Slim,
That is one reading rec. I will definitely take! Right, working high atop scaffolding etc. requires everyone to pay attention, and to look out for the other guy.
Now we spend most of our time trying to figure out how to get the “other guy” fired or at the very least derail all his/her best efforts. In my last few years working in the corp. env. I can’t think of one sales meeting or whatever where everyone wasn’t dragging their feet and rolling their eyes into the back of their head?
We like to spend a lot of time here slamming FB’s and most of it is well deserved. But I’ve also known more than handful of successful people that borrowed up to their eyeballs and worked very, very hard and made it work. The problem was, the avg. flipper wasn’t any more dedicated “off” the job than they were “on”. Easy Money Only.
I used to go with a journeyman electrician who worked all over the place, preferred comm’l and not that piddly residential stuff. Worked on the pipeline, on nukes and in Iran. He was really bright and alert, and went sightseeing and got into local politics, went to union mtgs etc and told me lots of funny stories. B
I liked the way he could say FU and quit if he didn’t like the job he was on. IBEW had good retirement too.
My role model is this “contract A&P” that I had on my crew one summer. Worked on helos, airliners in Korea, etc; whoever paid the best, and had the most O/T.
Worked all the O/T he could, weekends, holidays, etc. When April rolled around, his 6 month vacation started. On/about October 1, he’d call his employment agency and get a new contract. One guy told me he spent summers herding cattle. (if you knew the guy, this story was entirely believable).
He wasn’t married, and had no kids, so that helped a bunch.
I’ve been working toward eventually following his footsteps…..my problem is that all the things I like to do costs money. So I’m shooting for a deal where I can get away with working 2-3 days/week.
Having worked in the corporate environment, I have a lot more respect for my really good and conscientious auto mechanic than 90% of the managers and self-serving tools in the office.
There’s a lot less bullsh*t-factor in the trades and in IT where I work than in management, sales, house-flipping and such. If you’re full of it, you’ll be found out pretty quickly. While being a sociopath flim-flam artist appears to be the surest way to go far in the corporate world that rewards aggression and facade much more than capability.
Stephen Colbert had a guy on who made a similar argument about the trades…the guy was a motorcycle mechanic and a philosopher, I believe (that’s what he called himself).
Anway, he had a new book out that’s probably somewhat along the same lines. It was a show last week, I believe. I’m sure you could track down the guy’s name and his book.
The book is called Shop Class as Soulcraft: An Inquiry Into the Value of Work. Author’s name is Matthew B. Crawford. Definitely on my summer reading list.
The book is “Shop Craft as Soul Craft” by Matthew Crawford. I haven’t read it yet, but there was a good review in the June 7th New York Times.
I was reading an article last night by some aerospace engineers part of whose thesis is that long term lunar habitations (Oh, all right: obligatory acronym: ISRU, in-situ resource utilization
) could have the additional pyschological benefit of building a larger interest in developing a space faring civilization amongst the large portion of the population that aren’t fighter pilots with Ph.D’s… once they see tradesmen on the moon smelting ore, casting metal and putting up habitats and fixing solar panels and etc.
Dedication is a two-way street and companies want “flexible” employees, not dedicated.
In my job, dedication absolutely required that you be flexible and were inseparable.
“Bankers’ reluctance to finance buyers who won’t live in properties is one barrier to a turnaround.”
This one jumped out at me and knocked me down.
Yah. “Bankers’ reluctance to fund gambling is one barrier to a turnaround.”
There we go… much better.
sfbb,
Or walk into Merrill Lynch and tell them you’ve never traded Options before but read a “For Dummies” book on it and would they extend you 500k or a mil. in margin to “get your feet wet”?
Security..!!!
But all during the boom, that’s exactly what lenders were doing w/ 2nd/Inv. homes. No probalo!
They were kinda doing it with first homes, too.
“I have no job and no money, but what say you loan me a mil to buy a house and we’ll all get rich off of the equity?”
sfbb,
LOL! Yeah, uh… now that you mention it?
I actually felt bad for our in-laws ( Boom Believers to the end, well up until recently ) They were all stoked that everyone would want to go to their place on the OR coast for the 4th!
Bit by bit, everyone made polite excuses but I think the bottom line is that the OR coast is so freaking UNpredictable no one wanted to run the risk of p!ssing away some as precious as the 4th in a drab 50-something drizzle?
Which I’m pretty sure I TOLD them! So much for the “appeal” of a 2nd home on the coast eh?
My in-law situation is terrible. The parents sold the house everyone grew up in (gorgeous house in San Rafael) to ‘lever up’ into an admittedly sweet looking super house on the bay, but due to the recession killing their business and the unscrupulous flipper whose cost cutting led to an almost unrepairable landslide (and who they still haven’t managed to pin down in the lawsuit after 2 years of chasing him) they are now just about to lose the new house and they are constantly wishing they had never sold the old place. The sister-in-law and her husband bought in a Toll development at the peak and have seen houses sold for 50% off. I have no idea what they’re going to do when their ARM resets.
On my side, I have an older brother who bought a mcmansion in montana and has lost his job in the housing related industry. Fortunately for him he used our parents as a mortgage lender. (Unfortunately for them.) They are now making payments based on the pick-a-’whatever they can scrape together’ plan. My younger brother is going to sell at a loss when he moves out of where he currently lives, but he paid cash for a sensible older house with the proceeds of the house he sold near the bubble top when he moved into the area, so he’s only going to get gouged, not destroyed. Sure he’ll be down tons, but he made tons on the first house, so he gets closest to a ‘wash’ of the above people. Fortunately, everybody else on my side had bought homes much earlier. My parents bought their retirement home in 2000, and are probably going to be ‘underwater’ based on their purchase price, but they paid cash and will move out only when they die or they get to old to take care of themselves even with a live-in assistant.
I’m actually reading the “Bonds for Dummies” book right now, and it isn’t bad. But I get your point.
Ouch, Sweeping Changes, that one jumped out and knocked me down too.
“Sam owns a San Francisco real estate business and his nest egg has been eaten away by the recession. Retirement portfolio down 25 percent while business has virtually stopped for his company. Now he doesn’t know how to invest what money they still have.”
1. Sam’s in RE so nothing can go wrong…check.
2. Sam’s in RE in enchanted Golden City on a Hill by the Shinning Sea so nothing can go wrong…check.
3. Sam’s in RE in enchanted Golden City on a Hill by the Shinning Sea still thinking about investing with his nest egg so nothin…
Hey..we’re MISSING some Koolaid here !!
Hey..we’re MISSING some Koolaid here !!
I’d bet Sam was doing the “big-dog” strut on the balls of his feet a couple of years ago. Now Sam is past-due for a Joshua Tree shagging.
“‘Some people think this is good,’ Stone said, acknowledging it’s perhaps little comfort since every dollar in reduced property tax means $99 in lost equity.”
I think it’s great since tax bills are money out of my pocket right now and I don’t plan on spending my equity on toys anyway.
In FL, every 100 dollars in lost value translates to 2 dollars in savings! Weeeee… Look, there’s some advantage to having an outrageous mill rate!!
Soon they will have to pay me taxes to take the house!
“Every dollar in reduced property tax means $99 in lost equity.”
And every dollar in reduced property tax means $2 in reduced public services, since debts, pensions and retiree health care don’t go down and layoffs are by seniority not productivity.
That’s not at all true.
What services? you mean government waste on entitlements and public union benefits?
How is it possible for 40 police cars to chase down a perp? We’ve all seen it lots of time. Wouldn’t 10 cars be enough?
Fire trucks for medical emergencies? Yeah, everyone’s seen that too. The EmMed Tech is part of the crew, so send the WHOLE crew with the $250,000 truck for a Medical emergency. Why not just send the Medics and leave the truck?
Then, 5 ambulances all show up, for one person.
Just yesterday, i saw a fire at a building here in Clearwater, Florida. FIVE (5) fire trucks on seen, more on the way. ONE plugged into the hydrant.
Most standing around.
Don’t they have radios??? Don’t NEED MORE TRUCKS.
RETURN TO STATION.!!! NOOO!!!
They have NOTHING TO DO, anyway.
But we NEED ALLLLLLL of them.
Government service, my ass!!
And don’t even get me started on the theiving unions with their double and triple-dip early retirements while still working!!! SERVICE???
You should tell the truth and call it THEFT, which is what it is.
Screw them all!! Shut down these “services” and let’s see how horrible our lives will be.
Whew! I feel better now.
diogenes,
Feel a little better myself! I was watching “Tru TV” the other day ( I’m just going to take a shower and I’ll be right out hon! ) and for (1) drunk gal at the beach in San Diego they have beach patrol guys in 4WD’s, ATV’s, a “Search & Rescue Boat” and I kid you not, a helicopter scouring the area!
Turns out she fell down the dune and then went home. It’s just good to know if you put YOURSELF in peril we have these baby-sitters at your avail?
Wow…Florida is one fooked state.
Incidentally - to what extent does California’s property tax scheme (Proposition 13) resemble Florida’s? Both states are going to be in the crapper for years. Why would ANY newcomer want to get socked with property taxes that are many times higher than equivalent houses owned by a single owner for 20+ years?
Lunacy.
No wonder why there’s demand for housing in California. There’s no turnover!
My sanity requires me to believe that you were being sarcastic.
“In the beach cities, the median dropped only 5.8 percent to $801,000.
Hmmmm - and is the median annual income in these beach cities around $300,000??? If not, look out below.
There will be pain. Oh yes, there will be pain!
The cap and tax bill provides that you may not sell your home until you do upgrades in plumbing and kitchen. ?
Apparently, whenever you sell property, the property must pass the smell test, which will be administered by a federal employee who will come visit the house. If you don’t have the correct windows, etc. - sorry, you cannot sell said property.
Sounds like fun! Just think of all the potential scams!
Yet another reason not to BUY property unless you expect to die there.
“There will be pain. Oh yes, there will be pain”
…and you don’t even mention the bruises, all of those UGLY bruises will leave surely leave marks.
No way, the economy promised the beach areas that it would use a sack of oranges to beat them senseless instead of the bag of rocks it used on the inland areas. That way they can die slowly of internal trauma while still looking good.
lol
What’s funny is look at that number. Notice something?
10% down + $729 = $809k.
Sellers are financing closing costs. What we see in the South bay is:
1. Fierce competitition for homes that are in range of FHA loans.
2. Steady interest in homes that are 10% down + $729k.
Above that, demand slides off quickly. Oh, there are still cash buyers and a few pricier homes selling. But everyone who could afford $2M+ with 30% down already is over-invested in real estate. JTR’s ‘great squish down’ is in effect in the south bay.
Got Popcorn?
Neil
Bring back the $417K, heck that’s a rich person house in Greenwich CT…..back in ‘99
JTR made me think of Joshua Tree. Haven’t heard that term in awhile.
I think the highest income is in Manhattan Beach at around 150K median. That will probably drop with the decline in the real estate market.
Lots of studio people here too. Movie/entertainment business is still going quite well. Perhaps our strongest export.
Lots of aeropsace going on too. Good bit of high tech stuff. Our other strong exports.
Prop13 distorts things a good bit. Its also considered a “move up” area. Schools are well funded but drug problems are very bad. Area is OK but you have to have the “face west” disease. Basically those of us that are happy here look to the west all the time and are unaware of lawless areas like Hawthorne, Lawndale, Ingelhood and Compton being a short drive away.
Median family income in Redondo is 108K 2007 estimate, right next to Manhatten and somewhat nicer IMHO.
Next town is Hermosa at about 104K 2007 estimate.
All the towns run into one another. The Hermosa/MB are the snobiest. Parking is better in Redondo and the dolphins tend to come close into the surf here.
Should crash like heck in another couple of years. It will be a while before life gets sucked out of the area. Basically lots of deep pockets and lawyereering will fend forclosures off for a bit. So, young people will move away and inventory will just sit for a long time.
I should also add some other things about the area. Basically you are talking about a small section of a small section of the coast around LAX.
The population numbers for Hermosa, Manhattan, Redondo, Palos Verdes and Marina Del Rey together are pretty small. LA county is 10M people and you are talking about areas that are 1-2% of the population. The really high cost areas are even less.
Manhattan and Hermosa act like they are two distinct towns but they share the same drug infested high school.
“‘Buyers are beginning to realize that the combination of favorable home prices, historically low mortgage rates and first-time homebuyer tax credits, may not align again for many years”
Sorry, prices haven’t fallen enough even with lower rates to make buying worthwhile. Anyone who thinks a $700K 30 year old house with termites and old bathrooms and fixtures is a bargain is sick in the head.
I really liked how the next quote was on unemployment slowing business cutting home sales.
The worst for the South bay has not yet hit.
Got Popcorn?
Neil
Agree. It’s far from begun here in the south bay. However I do think the people sitting in those 2 b/2ba $900,000 bungalows in Hermosa Beach are no longer smug. I’m heading over there to the pier after work in three hours for a brew.
Interesting, I only pay $1800/mo for a 3bd/2ba 1500sq foot home in S. Redondo.
Hmmmm, tough choice…should I buy an $800K house in S. Redondo which equates to a $4.5K/mo payment, or should I save $2700/mo on rent and buy one cash in 10 years? Or maybe I should become an investor, I could by a Manhattan Beach 50-yr-old shack near the strand for $1.5M and rent it out to 14-college-kids at a $8K/mo negative return. You’re right Mr. Realtwhore, I should buy now or be priced out forever!
Long live the mania. After 35 years of living in Southern California, one thing is certain; we’ll always have an excess of sheeple. Everyone follows trends here, even if it means following each other off a cliff. As long as people frantically follow each other into over-priced assetts, we’ll continue to have beenie-baby brawls, PS2 street scalpers and housing fist-fights!
“Everyone follows trends here, even if it means following each other off a cliff”
You bring up a lot of good points in one post there. With a steady influx of new trendsters on a regular basis, no one has to worry about making sense?
When I was stationed there in the 80’s most people “I” knew didn’t even entertain the idea of owning a home there? Back then, “prestige” meant scoring the nicest rental. Thinking back ( they were probably at neg. cash flow even -then- )
I sold a 50 year old 1,000 SqFt house in San Jose for almost $700K in May 2006. And it had termites and one old bathroom and the FB bid over my asking price. So I took it.
Can’t people just look at a situation and make a guess whether it’s a deal or not?
They aren’t making anymore land you know.my realtor told ca real estate was a can’t lose investment.I saw her at walmart last week sweeping floors.
Are you serious. Saw her sweeping floors. P.S. They’ re not making any more land because there is glut of it. A fly a bit coast to coast. There’s a thousand year supply of land.
Lee said his unit at Sakura Crossing is less than $1,700 per month. He would not reveal his exact rent, however, because ‘They might be mad at me for telling you, because I got a really good deal.’”
Another example of how the bottom is still far away in California.
This renter thinks he is not paying market rates for his apartment.
“Less than $1700 per month” for a 1-bedroom in downtown LA is a “really good deal”?? Either the rental market has gone insane over the past few years since I lived in SoCal, or this guy is completely delusional.
E.g., I was paying $1350/month for a nice 2-bed, 2-bath apartment in Newport Beach, 1.5 miles from the ocean, as recently as mid-2005.
Yeah, but look at the upside. In downtown L.A., there’s always a drug dealer nearby when you need one. It’s all about location!
“‘Six years ago, standards were pretty permissive, and two years ago all you needed was a pulse,’ Stern said in an interview. ‘Nowadays, even people who have reserves that equal amount of the loan are getting rejected.’”
Maybe its the heat (80 already in the shade here in the San Fernando Valley), or maybe I haven’t had enough coffee yet…
But! If they have the money to buy in ‘reserves’, why are they asking the bank for a loan? Why not just buy the screamin’ deal with the ‘reserves’?
Am I missing something?
speedingpullet,
Typical poor, poor pitiful me REIC throw-away statement. “Look at us, we can’t even get people like ‘that’ financed!? We need more programs and tax breaks etc.”
The only credit I’ll give there is for making the distinction between insane lending and -totally- insane lending “standards”.
“Am I missing something?”
Yes, never put all your money on one bet. Reserves are just that, money for emergencies or new opportunities to make money. For buying a potential sinkhole like a house you use leverage, aka a loan.
Yes, but he wasn’t serious. The implication was that if the subject “reserves” are not deposited into a lockbox that only the bank has control over, why the hell should the bank give a rat’s ass; and if you do so deposit them, might as well just pay down the loan. I guess there could be some complex arbitrage play, but the banks dont want, and shouldn’t be expected, to take part in your games.
I’m not taking part in Chase Banks games either. We started an account there, but never got around to putting more than $100 into it.
They are paying us 0.000000% interest on our savings account. Silly me, I thought the 0.1% they were paying when we deposited the $100 was as low as they would go.
“‘Stern said in an interview. ‘Nowadays, even people who have reserves that equal amount of the loan are getting rejected.’”
I call BS on this one. You mean to tell me, someone has 750K in the bank (totally liquid reserves) and can’t get a loan for 750K to buy a home (with 20% down)? That’s bullsh**, I just don’t believe it.
Maybe they are talking about 401K reserves/non-liquid assets (other homes, for example), but I simply do NOT believe that someone with 750K in cash can’t get a loan for 750K. That’s total make-believe, if it were true, the entire housing market would have stopped cold, ONLY cash buyers would be able to purchase. 1000s of loans are being written EVERY day, many without even 20% down.
This is BS.
I disagree. as stated above, unless its in a lockbox over which only the bank has control, the bank can’t count on it staying there. The person could use it to buy another house the next day. Banks want a perfected security interest in collateral they take (i.e., mortgage, blocked accounts, etc). “Look how rich I am” statements just are not good enough.
Note that good underwriting has two steps: (i) determining you are ok with the LTV on the collateral that is given to you (as well as the type and that you have a perfected security interest therein), and (ii) confirming that the borrower has sufficient income/money to pay the debt service so hopefully you never have to go after the collateral. One is not a substitute for the other. Both need to be present.
Nope.. Still don’t buy it. If a buyer with ~10yrs of cash reserves and 20% down (obviously, since they can buy it for cash) can’t get a 750K loan, then there would be no 750K loans written AT ALL. We’re not getting the whole story here. This guy might have 750K in his 401K, but there’s no way people are getting rejected when they have a good credit score, years of cash reserves and 20% down.
I know a couple who just closed on a house in FL, 500K+, 20% down, good incomes and good credit. They had no trouble getting a loan, and certainly do not have 500K in cash. Also, they have another house that they need to sell (so they have 2 loans currently). And it’s in FL, the worst of the worst for housing markets, with a few years left of falling prices.
I stand by my original statement.. This story is BS.
Many banks still do 80% max jumbo LTV, although some have moved to 70%. I agree that someone will give you an 80% LTV loan if you can prove you should be able to afford debt service, albeit you may not get the best rate. I guess my point was more to the fact that money over which the borrow still has control should not be considered in determining the applicable collateral LTV. There are two seperate issues: (i) the collaeral the bank requires, and (ii) reasonable comfort that the borrow can pay debt service. Money over which the lender does not have control should only be considered for determining whether (ii) is satisfied.
Maybe the guy walked into the loan office with a lot of white powder on his nostrils.
That’d make me write off the ‘cash reserves’ right now.
Or perhaps it was a guy with no documentable income at all, a recent BK, and crappy fico scores wanting to borrow 750k and having 750k in cash. I don’t think I’d loan him a dime either.
Maybe the guy kept asking “This is non-recourse, right? You’re sure, non-recourse?”
Believe it….deals are falling apart all over the place…the lenders are real skittish right now…
Hey, what can you L.A. types tell me about Calabasas? I have a colleague who is thinking about moving to the left coast.
Calabasas?
Hot in the summer and nice in the winter.
It’s freeway-close, within commutable range of most of LA, just outside (to the West) of the denser portions of the San Fernando Valley. Hilly countryside with nicer tract homes. Malibu is a short drive over the hills. I don’t know much about the schools, but they are probably above average for the area. You can Zillow for more info about the houses.
Yeas, both Woodland Hills and Calabasas tend to be as hot as hades in the summer.
There’s some sort of wierd temperature inversion that happens in the West SFV, so that people who live there tend to read the weather/temps for Palm Springs rather than L.A County, as its always much hotter there than in other parts.
Calabasas is quite a large area (91301 and 91032).
You have tract homes north of the 101, which I’ve never been to (too far from the Husband’s work to be viable) and some McMansions south of the 101 and west of Topanga Canyon Blvd. They tend to be newer builds and often gated communities - which aren’t my cup of tea.
However, if your friend is an adventurous type, and has the money, there’s some lovely ranches and older homes with a bit of land westward along Mulholland Highway, Dry Creek Cold Canyon Rd and into the Santa Monica Mountains in places like Monte Nido (on the Malibu-Calabasas border). Its a lot more rural there, and would probably be a total pain to commute to and from the Westside - but if they want peace and quiet (at a price) that’s a really nice area to be in. Great views, and not too far to the PCH or the 101.
Calabasas also bleeds into the northern Topanga Canyon area - the triangle of land in between the fork of Old Topanga Canyon Rd and Topanga Canyon Rd is mostly in Calabasas.
I’ve seen places near Paul Revere Dr going for about $750 - $900K last time I looked.
Westwards along Mulholland and in Monte Nido you’ll not get much change from $1mm.
But - prices have been very slow to come down in the area, many places have been sitting unsold for months (if not years), and this is classic Prime/Alt-A country, so expect prices to drop further.
Prices seem to be falling more quickly in neighbouring Tarzana (east of Topanga Canyon and south of the 101) - there’s been quite a few foreclosures in the area, and prices in general are lower there anyway.
I’ve seen some short sale/foreclosure listings for under $700k - but can’t attest that this isn’t some UHS ploy to start a bidding war. Tarzana’s nearer to the Westside, and tends to have a lot of older ranch style houses on big lots, though people in recent years have raized them and made McMansions out of the property, so it’s best to go and check them out first. There’s a couple of country/golf clubs in the area, and a few newer gated communities.
Anyway, get your friend to look up property in 91302 and 91301 and see what they think, just like sm-landlord said
speedingpullet
We’re in Thousand Oaks, and it’s been heating up here, too. Hotter every summer. Moorpark actually has great climate, but I don’t like McMansionville. We use to run our AC only 1 week a yr in Moorpark. We also owned an over sized garage mahal in Wood Ranch too.
We’re thinking of buying in Woodland Hills. The commute, then I do work, is a killer, and I’m a Redline subway gal. The 101 is a parking lot and I want to be closer to the action. Any cautionary tales or advice?
What’s this “parcel tax” rumor I heard being discussed in L A County? What do you think of Burbank, btw?
Hey sm landlord. how’s SM?
Do they still have rent control there?
Greeting from the People’s Republic of Santa Monica.
Yes, we still have rent control - that’s not going to change, what with something like 70% of the local population being renters.
The good news is that our local government is not quite as nutty as San Francisco, where I hear that they are planning to ask landlords to reduce rents according their tenant’s ability to pay. So if a tenant becomes unemployed, I guess you could only charge 30% of their unemployment bennies, and when those run out, I guess you would have to house them for free.
I’m sure that will work out well…
Not.
Actually, there is something to this. Especially with commercial real estate. Greedy delusional commercial landlords kick their tenants out at the drop of a hat, not realizing that their storefront or office space will likely remain vacant for years. If the owners would compromise, if possible, small and otherwise businesses could squeak through the hard times just enough to keep the area viable. But no. Out the tenants go, the storefronts/ office spaces remain on the market for years, and downtown ares et. al. are destroyed. Residential FB’s aren’t the only ones who drink Kool-Aid!
I locked in an overpriced rental near the beach.
i can move anytime but where could I go during a revolution?
I would advise renting for two years to get the lay of the land before buying.
The schools in La Cresenta are quite good. Not as hot as Calabasas and closer to the city.
“Actually, there is something to this. Especially with commercial real estate. Greedy delusional commercial landlords kick their tenants out at the drop of a hat”
Here in Salinas the 24hr fitness ctr faced a landlord who wanted to up the rent so they moved the first of Jan 2009 to a new and better location with more space etc. The gym members got a great deal of improvements and the other location has been vacant ever since. I wonder what they are doing with the indoor pool while the property remains vacant.