HBB Rates The Media: Southern California
A review of the media and the housing bubble continues with southern California.
The good:
Voice of San Diego, April 2005: “The developers have learned a new trick after the last local real estate price bubble popped in 1989. It’s called controlling the ‘absorption rate.’ It goes like this: A builder gets the land and zoning approvals to build new housing subdivisions, but only builds in small numbers of new homes. That is done for two reasons. One is to make sure that housing prices remain high by limiting the supply of new homes, and the other is to ensure that they can sell all the homes in each partial release of homes before they invest in the next.”
“The San Diego Building Industry Association has done a very slick public relations job of linking the problem of a lack of affordable housing and regulatory restraints on unlimited homebuilding in the public’s mind. The argument is that we could build a lot more homes if the regulations didn’t get in the way.”
“The truth is that builder actions to limit the number of homes they release into the market at any one time is a key factor driving up home prices, along with all the young speculators who are getting in with nothing down. Many of the speculators are going to go bust when the price bubble bursts, but the builders will continue to profit as much as they can.”
The Press Telegram, May 2005: “Properties across the board are sitting on the market longer thanks to a rise in the number of homes for sale. The state’s housing inventory is double the level of last year, according to the California Association of Realtors.” Sales of homes for $1 million and up rose from 19,100 in 2003 to 33,100 in 2004.”
“‘I think it’s a psychological threshold as well as a threshold for financial obligation,’ said Robert Kleinhenz, an economist with the CAR. In talking with realtors, more people are backing out of the luxury market, or looking at more affordable options inland, he said.”
“Even at the high end of the market people are shopping for the best deal, said Richard Daskam, with Keller Williams Realty in Long Beach.”
Again the Press Telegram in May 2005: “A blazer and slacks just don’t cut it for one local real estate agent. Heath chose to wear a bikini on a billboard she posted earlier this month. The advertisement is turning heads quicker than a Naples Island open house. ‘It’s kind of flipped people out,’ said Heath, who reported receiving almost as many calls from Realtors upset with the ad as those voicing support. ‘A couple of agents are having a fit about it, but that’s because they just didn’t think of it first.’”
“In a competitive business like real estate, people are increasingly being forced to find creative ways to get people to remember their names, marketing experts say. ‘The problem is everybody has a (real estate) license nowadays, and unless you differentiate yourself, it’s tough to make a living.’”
The Desert Sun, April 2005: “Retiree Fred Crutcher, 68, and wife, Patricia, have had frustrating experiences as both buyers and sellers. While they’re very happy with their new home in northern Palm Springs, they’re still trying to sell their former home, a large two-level condo in southern Palm Springs.”
“The couple listed the at $589,000, but have since reduced the price twice, it is now listed at $580,000. ‘It’s really hard to tell why it hasn’t sold so far,’ said Crutcher. In the meantime, the couple is now having to pay two mortgages, not to mention homeowners’ association fees in two places.”
The Orange County Register: “‘We’re dead in the water as far as home-price appreciation’ if interest rates rise another half-point, said one in Laguna Niguel. ‘Wages are just not in line with home prices.’”
“Paul Scheper of L.L. Financial in Aliso Viejo noted..’inflation fears, prompting an increase in rates. It’s a knee-jerk reaction’…there’s ‘no need for concern or panic - unless the … (jobs figure) does the same thing again.’”
The bad:
Union Tribune, May 2005: “Bill Holz of Eastlake is a Navy command master chief…He and his wife Nancy decided to put their home on the market after less than two years of ownership. Using prices of comparable homes as their guide, they listed it in early February for $919,000, nearly double the $509,000 they paid originally.”
“‘We upgraded the house to the hilt. We probably have $100,000 in upgrades…People don’t make enough money to buy them. Your buyer pool is like a pyramid, the higher the prices, the smaller the pool of qualified buyers. We’ve got to get somebody moving up from another house or condo or town house that might be able to buy these houses.’”
“Alleda Harrison (a realtor) said the current market requires sellers to price their homes less aggressively. Instead of tacking on 10 percent or $25,000 to the price last paid in the neighborhood, sellers should hope they can get a price equal to the last comparable home sold nearby.”
UT, April 2005: “More than 40 percent of the 120 units in Park Boulevard West condo complex are non-owner occupied. At the 86-unit Crown Bay project, roughly half of the property tax bills are mailed to addresses outside the complex. At the 211-unit Horizons tower, it’s about about 35 percent. ‘You’re not going to lose money on property,’ (said one speculator.)”
The North County Times, May 2005: “‘Home values and purchase prices have gone up so tremendously, it’s led to a number of products to assist consumers to be able to buy and to provide flexible options so they can afford what they buy,’ said according to Doug Perry, of Countrywide Home Loans.”
“When Paul Espinoza decided to refinance the home he owns he decided to go with an interest-only package in order to reduce his monthly payment. What he didn’t know at the time he signed his refinancing documents was that his principal amount would continue to climb. ‘The cost to you is really the amount that the principal goes up over the period of the loan,’ said Espinoza who felt that he wasn’t made fully aware of that possibility by his lender when he arranged for the new deal. ‘I’m curious why this isn’t mentioned by loan officers?’”
“Rob McNelis, president of the California Association of Mortgage Brokers’ San Diego chapter said, ‘We’ve all known this rapid price appreciation is unsustainable. Historically, the real rate of home price appreciation is around 3 to 3.5 percent; not a bad day at the races when you realize it’s free money.’”
North County Times, May 2005: “The Realtors report issued last week found the median price of detached homes in Carmel Valley closing in on $1 million, up an even $30,000 from March to $985,000 in April. ‘The theory is, hey, you’ve got two homes, either a vacation home or a primary residence,’ Jim Vanderspek, an Escondido certified public accountant, said. ‘If you don’t want to rent a second or vacation home, it makes a lot of sense to move every two years and then be exempt from capital gains every time.’”
“People who are that property-rich, Vanderspek says he knows of one person with six houses, may not think renting out their home is a good idea, he said. Leaving the house vacant reduces maintenance costs and potential problems with renters. And if you buy with cash, as some are doing, there’s no mortgage to pay off. ‘People are deciding to buy real estate as a straight cash investment. They can just own it and watch it go up in value,’ he said.”
The Santa Maria Times, May 2005: “Financial experts have lately become fixated on the “bubble economic theory,” which basically insists that economic forces create bubbles in various markets, then counter-forces burst the bubble.
The collapse of tech stocks in the late 1990s is a classic demonstration of bubble activity. That market went crazy for several years, turning teen-agers into Ferrari-driving multi-millionaires. The kids who used to be known as computer geeks quickly became sirs. Then that bubble burst, and the sirs went back to geekism and Ford Fiestas.”
The thing about bubbles is no one really knows how long they/ll last. America/s homes are not dot-com stocks in the late 1990s or the Japanese stock market of the late 1980s. Homes have utility that stocks don/t have 7 you can live in a home. If the housing market softens and you lose a little short-term equity, it/s a safe bet you/ll get that value back just by waiting out market swings 7 and have a comfortable place to live while you/re waiting.”
“In other words, don/t sweat the bubbles, which seem to be connected and have a life of their own.”
The LA Times, May 2005: “Kim Kaul, a 36-year-old San Diego homemaker, was an unlikely player..with four young children and a rented apartment. Kaul saw a posting on the Internet..He sold the contract to Kaul for $8,500, money she took out of the family’s meager savings.. the Vegas market caught a chill.”
“She found a tenant, who pays $1,250 a month. But her mortgage was $3,000. When her husband lost his job, the situation became dire. The couple paid the January mortgage with borrowed money, then gave up. ‘I’m sure the market’s going to pick up, but I can’t hold out that long. This is kind of a bummer.’”
The LA Times, April 2005: “The LA Times is reporting on a ‘real estate expo less like a hard-nosed business event than a Gen-X and boomer-friendly rave. ‘It’s a mega-event,’ added Bill Zanker, president of the Learning Annex. ‘L.A. is responding like wild. Everybody in L.A. is talking about real estate. It’s the new aphrodisiac..the new type of rock concert.’”
“The New York-based company (is) famous for its workshops and classes such as cardio striptease and tarot card reading.”
“What they are calling the ‘classes’…’The Lazy Way to Create Real Estate Wealth, How to ‘Quick Turn’ Real Estate in Los Angeles With No Money, Credit or Risk, and How to Get Free Money From the Government for Real Estate.”
Market observers, you decide.
May 2005: “We expected things to level off a little bit this year, but it appears that’s not the case,’ said Jim Link, association vice president. ‘People are concerned that if they didn’t buy now, they won’t be able to afford to buy later.’ Mike Davis, president of the association’s Santa Clarita Valley division, said ‘It’s (a) good to buy and (a) better time to sell,’ Davis said. ‘If someone is going to relocate they should do it sooner (rather) than later.’”
March 2006: “February marked the 13th consecutive month that the region’s median price rose at least 20% year-over-year..’There’s still plenty of gas left in the tank,’ said DataQuicks John Karevoll.”
“Economist Christopher Cagan says the price increases are moving inland and ’suddenly starting to pop, and when it comes, it comes like a really hard whip crack.’”
“In Los Angeles County, sales dipped 8.6%, in Orange County sales fell 11%, in Ventura, sales slid 3.9%, and in Riverside County, sales edged down 2.7%. Michael Davin of CataList Homes in Hermosa Beach believes the region’s high prices are ’sucking the oxygen out of the market.’”
“‘San Diego should have hit the wall about a year ago,’ Karevoll said, ‘but since then prices have..gone up another 16%. There is some uncharted territory we’re in right now,’ he said. ‘And we would love to have had a chart.’”
April 2005: “County residents moved out of Southern California entirely, too, largely in search of cheaper real estate. It’s affordability that’s causing middle-class flights. People can’t afford housing in Los Angeles, but want to stay in the Southwest and will commute long distances. ‘We’re getting a little bit too expensive,’ economist Jack Kyser said of the county, noting a similar trend in Orange County, where 27,590 residents left for other counties last year.”
May 2005: “DataQuick analyst John Karevoll said he gets more calls about San Diego from East Coast financiers than for any other market he monitors. ‘We’re being watched,’ Karevoll said. ‘We’re under the magnifying glass.’”
“Anne Throckmorton said that most real estate professionals remain optimistic. ‘We went around our group, asking about each state’s market areas, and there wasn’t one area where the market was down,’ she said. ‘It was a very ebullient attitude.’”
May 2005: “With no savings, and a college loan to repay, Kelly Pearson took out a mortgage for 100 percent of the price of the house. Closing costs were paid for by a $10,000 gift from her parents. Her plan: to borrow more soon and invest in a condo. The number of homes sold in San Diego in March fell compared with the number sold in March 2004, the eighth monthly year-over-year decline in nine months. The number of San Diego listings swelled 27 percent in March, to 7,062 houses for sale, up from 5,555 for sale in March 2004.”
“Jerry and Laura Satran’s Sunday open house is empty. (They) are asking $1.3 million. But here they are, the second week the house has been on the market, drumming their fingers. The previous Sunday, Jerry says, 40 visitors stopped by. No offers. Two weeks later the Satrans receive an offer: $1.2 million. Not the full asking price. No one seems more disappointed than the neighbors. One woman suggests the Satrans would be hurting the entire block if they settled for less than $1.25 million. ‘She says she was only going to be here for two years, so don’t screw up the comps,’ says Laura. ‘She’s not being cruel, everybody who lives here is in it for the investment.’”
May 2005: “Steve Johnson, of the self-described ‘real estate think tank’ ‘The resale market is the most significant driver of the new housing economy, due to the trillions of dollars of equity relative to debt. Conservative lending practices and a universal merchant marketing/retail approach to new home production drastically limits speculative building in this region,’ Johnson said.”
May 2005: “It’s old news that fewer than one of every five California families can afford a median-priced home in the state. A far different question might be to ask what percentage of families can afford any home at all. ‘It would appear that close to half of California families are on the outside of the market. ‘That is unhealthy,’ said Steve Johnson, director of a real-estate think tank.”
“Another factor helping some people is the fact that some lenders now are offering 40-year mortgages. ‘It seems like all we’re doing is renting from the bank anyway,’ Johnson said. ‘I remember when mortgages went from 20 years to 30 years, so I suppose this is not that big a deal.’”
“Economist Jack Kyser says people with lower incomes could benefit if we were able to ‘unlock’ parts of the housing supply. ‘There are some areas, such as South Los Angeles, which are very affordable and very centrally located,’ Kyser said. ‘The thing that’s keeping this part of the supply “locked’ is problems with crime and with poor schools. It won’t happen overnight, but if we could improve safety and the schools in some of these areas, we could add a lot more housing supply.’”
April 2005: “In some neighborhoods of Los Angeles where, in addition to offering as much as $75,000 over the asking price, buyers are sending flowery bios, pictures, and letters to sellers. ‘I just oohed and ahhed my way from room to room,’ read one letter to Jane Centofante, who was selling her 2,000 square-foot home in Westwood, a tony L.A. suburb, for a cool $1.49 million. ‘I gather from your [house] that you are warm and smart and bring incredibly beautiful detail to your world.’”
“‘They’ve had to kiss a lot of frogs before they find their prince,’ says Ms. Jacobson, a native New Yorker. ‘But those other frogs will find their palaces, too. There are still plenty of opportunities.’”
March 2005: “In his report, UCLA Anderson Forecast Director Edward Leamer …points out that historically; economic expansions have not lasted very long, with five of the last nine lasting only 14 quarters or less. The current expansion is 12 quarters old right now and Leamer sees no growth spurt on the horizon that will extend it much further.”
“In a detailed discussion, Leamer reveals that the three longest expansions in history all experienced growth spurts during which the rate of growth of GDP was abnormally high and the rate of unemployment was driven down. Each expansion is different, with different stimuli bringing about the growth spurt. But Leamer sees no clear stimuli on the horizon in 2005, ruling out both tax cuts (which have already occurred) and monetary stimulus (which has also occurred through low interest rates). An increase in government spending is doubtful (unless it is wartime spending), leaving only exports as a possible ray of hope. Exports were a major factor in the length of the Reagan expansion, and the declining dollar vs. the Euro should stimulate this sector.”
“Leamer concludes with the assertion that a recession is in the future; he just doesn’t know when yet. He doesn’t see it in 2005, but believes it could happen in 2006.”
“In California, UCLA Anderson senior economist Christopher Thornberg says that at best the state economy can be expected to maintain slow growth over the next few years as the weak housing sector saps off strength created in other parts of the state’s recovering economy. ”
May 2005: “‘Affordability is a serious issue,’ said Esmael Adibi at Chapman University in Orange. ‘The fact is that more people are trying to buy more housing than their incomes can justify.’”
“By letting short-term interest rates hit rock bottom, the central bank helped drive down mortgage rates. That in turn created an exaggerated demand for housing, Adibi said. ‘The Fed caused some of the problem, no question,’ said Adibi, who believes local housing prices may start to fall by the end of the year.”
“Adibi and others suggested that Greenspan might be trying to reduce the impending shock of a slowing housing market. But Greenspan’s remarks may be ‘too little, too late,’ said Christopher Thornberg, a senior economist at the UCLA Anderson Forecast who has been among the few economists to emphatically describe California’s housing market as a bubble.”
“People have been freely spending ‘because they feel wealthy’ thanks to soaring home prices, he said. ‘When the market cools, it will have implications beyond real estate,’ Thornberg added.”
This one wasn’t easy to put together. Many of these good/bad papers could have been in either category and probably put out articles that sounded alarms. The North County Times, LA Times, Union Tribune and Voice of San Diego did some of the better reporting as I recall, but maybe it just didn’t get picked up here in the spring of 2005. All in all, I think S CA was more realistic than N CA media.
As for market observers, Rich Toscano, whose blog has always been linked in the HBB sidebar, was far ahead of the other analysts. And he doesn’t need me to establish that. But I almost never posted links from blogs, so that’s why I didn’t find any quotes from him in early 2005. And we also must revisit the biggest mystery of the early S CA bubble observers; what happened at the UCLA Anderson School and why did they reverse the early forecast just as it was coming true?
I agree, some of your “bad” have very good elements…at least, appropriately informative elements.
As an example of Truly Terrible, I recall an L.A. Times article of probably 4Q04 or 1Q05 (I read it in the paper, not on HBB), arguing that the equity appreciation should be subtracted from the expenses of owning, and that therefore owning was still cheaper than renting. bwhahahahahaaaaa, as fpss would say.
I’ve always gone by the principle of “you have to live SOMEWHERE”. Therefore, the imagined value of your primary residence is meaningless, because a comparable home elsewhere would have been subject to the same inflation that your current home experienced.
When I sit down once a year to do my “Net Worth” spreadsheet around tax time, I never put the imagined value of my house in it. I suppose a strict accounting would be the “imputed” value of (what the minimum rent would be) - (cost to maintain my paid-up house / taxes). That, at *best*, is only $500/month of real value I get from owning my home.
‘I’ve always gone by the principle of “you have to live SOMEWHERE”. Therefore, the imagined value of your primary residence is meaningless, because a comparable home elsewhere would have been subject to the same inflation that your current home experienced.’
Yes and no. Many HHs are stucco in underwater homes, meaning they cannot move because they cannot sell their current home, pay off the note and have money left over for the downpayment. I guess that is where the $6500 move up buyer tax credit comes in? If that were used to fund a 3% FHA downpayment, you could get a loan for the amount of $6500/3% = $216,667. That won’t get you very far in the California bubble markets, but could certainly fund a move to most markets in flyover land.
I take it you’ve not had much experience with accounting. Paying principle back on debt is no an expense. On a balance sheet you’re reducing cash and reducing liabilities by an equal amount.
Take it to the extreme. If you borrow $500K today and pay it all off tomorrow, did you all of a sudden incur a $500K expense? No of course not. No different if you pay that debt off over 30 years in monthly installments. The only expense is the interest paid, along with whatever other costs are involved. But certainly not principle payback.
OK Eddie - thanks for the Accounting 101 lesson. But Reuven is not doing an audit (and we all well know how misleading accountants can be!); he is making an honest accounting of his net worth to plan for the future.
And Reuven used the word “principle” correctly in his post. You, dear Eddie, did not.
principle (n): a rule or code of conduct
principal (n): the head of a school or the amount owed on a loan.
If you’re going to post on a real estate blog, please use the word correctly.
When I think about our net worth, I include half the equity in our house. I think I’ll switch to Reuven’s way of thinking.
I remember that dramatic Anderson change in tone.
Older article, but shows Anderson’s deep RE funding reliance.
http://www.anderson.ucla.edu/x5468.xml
Was the school named after Arthur Anderson - did they endow it? I didn’t see a history page on their website.
Wiki is our friend.
The school was named after John Anderson BS MBA JD, who endowed them with $15 million. He own Topa Equities, whatever that is.
Lots of RE big shots running around thanks to the GSEs buying their puffed-up, 12x household income, worthless mortgages. Reminds me of that cheap white bread, Wonder. Nothing wholesome, just puffed-up air.
“…why did they reverse the early forecast just as it was coming true.”
It kind of suggests they were hacks who did not grasp what they were seeing.
Or alternatively they are just the opposite of hacks.
My guess is Anderson group saw a mild to moderate recession in 2005 and felt comfortable reporting so. In 2006 their analysis began showing something far more sinister, deep and long-lived than the original scenario. They looked at their likely issues with funding and revenue stream over the next decade and had an “oh sh*t” moment. Aggressive play for additional RE funding to get UCLA and Anderson through the cold dark winters ahead with a return favor for toned-down rhetoric.
“Aggressive play for additional RE funding to get UCLA and Anderson through the cold dark winters ahead with a return favor for toned-down rhetoric.”
How does making yourself look like know-nothing fools increase funding opportunities? Is it a matter of making UHS feel like you are ‘one of them’?
One potential scenario is RE industry either withholding funding from Anderson or promising more if Anderson softened their tone.
There was a similar discussion about climate change scientists n the bits bucket. It’s all about the funding.
You would be amazed how quickly people forget stuff. Get the funding now, give your advice, and a couple years later, “oops, we were wrong, sorry. [but thanks for the money].” By then, the guys who gave you the faulty funding have probably retired or moved to another company anyway.
Even worse, this happens in science and engineering, when it becomes really obvious that you lied for money. You can’t bribe a molecule or a pipe, but that doesn’t stop them from trying. It’s a farce, but all this bait-and-switch is swept under the rug, because everyone is great buddies from years back, they got each other tickets to the big game, and hey, a guy’s gotta eat [filet mignon with truffle butter.].
This is what stifles innovation.
Oops, I’ll clarify. The crooked funding game happens in science even if they know it will be obvious that you lied or fudged for funding.
Also, please remember that climate scientists receive money on BOTH sides of the issue. There is as much funding available from the anti-warming sources as there is from neutral or pro-warming groups. Probably more — think about it: who has more funding to give out, some poor hippies speaking for the trees, or ExxonMobil?
The first part of a scientific paper I read is not the abstract; it’s the little line waaaaay at the end which discloses who funded the research.
The RE shills at USC were just as bad or worse !!!
Jonathan Lansner also did a really good job for the Orange County Register during a time period when most people were really hoping that the market held up.
Maybe you recall the JL Q&A we did here? I spoke with him on the phone a few times. I got the impression that he wasn’t able to put it all out there. His paper got a lot of ad revenue from RE, but he was very adamant that this didn’t cause him to back away from believing prices were too high.
Of course, with all of this we have to keep in mind that plenty of people jumped on the bubble bandwagon in CA when the wheels started coming off. And timing was a big issue; San Diego was ahead of most markets. LA media insisted they were immune until the end. The central coast papers probably still think everything’s fine, even though Santa Barbara, SLO, and Ventura were among the first to go over the falls.
That’s okay. Orange County, or at least South OC still believes they are immune, as does the WestSide, and all coastal. They’re all immune, don’t you know?
Chuck
Yep - on the Westside blogs I read, the new trolling meme is
‘well mr smartypants…. the westside has only declined by x% - you said it would go down by y%! Therefore everything you’ve predicted and commented on is WRONG! Hah hah!
Then going on to crow about how prices couldn’t possibly go down any further and that we’d better hurry up and buy before prices start rising.
Indeed, derangement still rules the day in West L.A
We get that in coastal San Diego, too.
Lots of bulls left who will gladly remind the bears that prices have only dropped x%, and will be heading back up next year!
Even the central coast papers finally have had to admit that there was a housing bubble - basically because the price declines have been so significant that the majority of the communities out here have seen a decline in property tax revenues.
Their most recent tactic (in a Tribune article a week or two ago) is to admit that those local communities whose property tax base has demonstrated a year-over-year decline did have a housing bubble, but to deny any existence of a bubble in that subset of communities where taxes are unchanged or slightly up as compared to last year.
San Luis Obispo itself is one of those communities, and the Tribune article quoted someone (a local realtor, I believe) who explained this by claiming that, unlike most of the other communities in the county, SLO itself had not experienced a bubble but rather had experienced normal, gradual property appreciation.
Hah! If we had “gradual” appreciation, then I must have hallucinated the nearly 3-times increase in median prices during a 5-6 year period from 2000/2001 through 2005/2006. I can still remember people shaking their heads in bemusement in 2004, realizing that they would be totally unable to afford their own houses if forced to buy at those prices, and wondering what was driving the increases.
Price declines in SLO have been gradual but continue. And with so many state workers (at CalPoly, the state hospital, and the local prison) having salaries cut 10-15% due to furloughs, I am not sure what the heck people thing will prevent further declines.
I felt that Lansner was more bullish than bearish during the mania days and I still feel this way today. My impression is that more often than not he will slant articles and questions in a bearish direction. Now I did get the impression that he was trying to be balanced, but I also think he can’t help himself because he is a home owner and it’s an emotional allegiance when you see the value of an asset you have a stake in rise so dramatically. Many of the best contributors on this blog are owners and I think you all do a better job of being objective than those in the MSM. It probably boils down to pleasing those who signs your paychecks for those in the MSM.
oc,
Haven’t seen you post in a while. Hope life is treating you good.
Does the California Association of Realtors still publish a bogus affordability index? I remember at the peak they had “revised” the calculation to reflect all the NEW and EXCITING financing options available to first-time homebuyers, so that affordability went from something like 9%, to maybe 38%… And has anyone ever called them out on this?
From that same Money May 2005 Article-
“Occupational therapist Angie Carter-Donovan, 31, persuaded her husband Ted, 42, to buy a 1,900-square-foot mess in La Mesa last May for $396,000. It’s her fourth real estate investment in seven years, even though the previous one (a new downtown condo she planned to flip) took six months longer to sell than expected. Still, the couple netted nearly $95,000 from that deal and have been pouring money into the La Mesa house ever since.
It’s on three-quarters of an acre, one of the biggest lots in the neighborhood, but it needs work. A lot of work. The front door doesn’t open. The pipes make loud noises and shake when the water runs. It has — how to put it? — that old-house smell.
Carter-Donovan doesn’t mind one bit. She believes it’ll cost about $100,000 to gut the place and re-landscape. She’s pregnant now and hopes the major improvements will be completed by October, when her baby is due. It’ll be well worth the muss and fuss, she says, since the house should be able to sell for $750,000 when everything is done.”
Well, I just checked Zillow- the Carter-Donovans are still there, but Zillow is listing the Zestimate at $399K. In the esteemed words of ESPN 8’s, Pepper Brooks- “Ouch-Town, population you, Bro.”
I wonder how accurate Zillow is for Sandy Eggo.
persuaded her husband
I wonder if Suzanne was their Realtor!
“The couple listed the at $589,000, but have since reduced the price twice, it is now listed at $580,000. ‘It’s really hard to tell why it hasn’t sold so far,’
lol
Yeah…I keyed in on that quote also…Two $4500. price reductions…Tells you the mentality of a seller at that point in time…
If the house was 1.5% overpriced, somebody would have offered you 5% less. The fact that they didn’t is a good indication that it is more overpriced than that.
As most of you know, I got my real estate license last year and signed on with a small brokerage near my house. I sometimes go to their weekly revival meetings. The tone has definitely changed. The managers try to rev up the agents by touting the tax credit and such. The agents are sober and worried. The biggest change is that very few of the agents price their listings at ridiculously high prices, and are willing to talk their sellers into substantial cuts. Interestingly, the two agents who carry high-end listings are still pricing them high. Needless to say, they aren’t selling.
Thanks for the update, RE!
I’ve seen house as ‘REDUCED” and many times I only see it reduced by a couple of grand. Or better yet, $50 bucks. LOL! These houses are priced in the upper $600K.
“People who are that property-rich, Vanderspek says he knows of one person with six houses, may not think renting out their home is a good idea, he said. Leaving the house vacant reduces maintenance costs and potential problems with renters. And if you buy with cash, as some are doing, there’s no mortgage to pay off. ‘People are deciding to buy real estate as a straight cash investment. They can just own it and watch it go up in value,’ he said.”
Thanks Ben, your post is rich with some glittering jewels of blind ignorance. I remember many of them.
Wow! Just… wow.
Given the tone of many of those articles there should well have been ample indication to at least look down and ensure one still had a brake pedal next to the gas?
Not… that I’ll be applying it any time soon, just to make sure there’s still one there. Oh and much thanks going out to Jim Vanderspek for ‘outing’ himself as an exploiter of tax loopholes no one needed a CPA to point out. That “hidden gem” of moving every 2 years! ( wow, I’d pay extra for that caliber of advice ) and rec. all my friends too!
How’s ‘that’ working out for your clients nowadays Jimbo?
Look at the bright side - nobody’s bitching about capital gains taxes anymore.
DennisN,
LOL! How true. It’s just a shame we had to abuse that to saturation and beyond and manage to drag down the entire economy just to prove that to ourselves?
Guys, even in the most upscale of neighborhoods, an FB w/ only 1 ( ONE! ) home can only do so much damage. When we throw in the potential to exploit the tax code -multiple- times we encouraged rank & file people to exploit it many, many fold.
FB’s that equity-skimmed their own homes ( and remain ‘in’ them and are current on all their obligations aren’t the problem )
+1 Dennis
“Wow! Just… wow.”
DinOR, you took the exact words right out of my mouth. Wow! Just, wow!
A society’s own words serve as it’s most searing indictment.
April 2005: “‘I just oohed and ahhed my way from room to room,’ read one letter to Jane Centofante, who was selling her 2,000 square-foot home in Westwood, a tony L.A. suburb, for a cool $1.49 million. ‘I gather from your [house] that you are warm and smart and bring incredibly beautiful detail to your world.’”
“In his report, UCLA Anderson Forecast Director Edward Leamer…”
“Leamer concludes with the assertion that a recession is in the future; he arters or less. The current expansion is 12 quarters just doesn’t know when yet. He doesn’t see it in 2005, but believes it could happen in 2006.”
“In California, UCLA Anderson senior economist Christopher Thornberg says that at best the state economy can be expected to maintain slow growth over the next few years as the weak housing sector saps off strength created in other parts of the state’s recovering economy.”
I have this amusing image in my head ofJane Centofante running into Leamer or Thornberg at the Westwood Village Coffee Bean, and then having a discussion. Understanding some of the economic forces at play in 2005, Jane sells the house and rents blissfully ever after. Of course, she may have held out or bought something else overpriced.
And the original 2005 CS Monitor article mentions:
“Unfortunately, Jane Centofante has yet to sell her home in Los Angeles. An inspector found traces of creosote - a mixture of potentially toxic chemicals - throughout her home. Since the finding, she has lost four potential buyers during escrow, that critical period of time when a buyer and seller work out the money and other requests when transferring ownership of a home.”
” ‘I’m ready to sell. And I want to sell. But now I can’t,’ says Centofante, who hopes to have the creosote problem remedied before the market sours.”
so, in 2005 they knew that the market “would sour” sometime in the future?
Ostriches, with their heads in the sand.
‘I just oohed and ahhed my way from room to room,’ read one letter to Jane Centofante
Interesting.
According to Zabasearch, a Jane Centofante lives(d?) on Rochester in Los Angeles, which looks a lot like Westwood.
According to Zillow, that house sold for $1.62M in September, ‘07.
Zillow thinks it’s worth $1.17M now.
Remember Mr. Creosote? “I can’t eat another bite.” Then he exploded, just like the bubble!
I remember John Cleese really giving Mr. Creosote the hard sell for that tiny little mint. Here’s the snippet from youtube.
http://www.youtube dot com/watch?v=BlK62rjQWLk
it was also the ut that opened many san diegans’ eyes when they ran an article in the summer of 05 that first introduced us to ben and rich
You know, I don’t remember that from the UT. It was a long time ago, and for a while there, San Diego was this blogs bread and butter.
“The truth is that builder actions to limit the number of homes they release into the market at any one time is a key factor driving up home prices, along with all the young speculators who are getting in with nothing down. Many of the speculators are going to go bust when the price bubble bursts, but the builders will continue to profit as much as they can.”
That sounds an awful lot like a Sherman Antitrust Act violation of the law against price fixing. Since top levels of government are currently executing policies to artificially inflate home prices above fundamental value set by the free market, I suppose it is legal for builders to engage in anticompetitive practices as well?
I regret not posting the name of the writer at the time. This is one of those instances where articles disappear from the original place and I don’t know who he/she was.
“The San Diego Building Industry Association has done a very slick public relations job of linking the problem of a lack of affordable housing and regulatory restraints on unlimited homebuilding in the public’s mind. The argument is that we could build a lot more homes if the regulations didn’t get in the way.”
Real Estate developers have basically run San Diego politics from the get-go, going back to the first real estate bubble in the late 1800s. Doesn’t matter if we have a master zoning plan for the County which takes in account water and transportation concerns, the spin has always been that if we don’t allow for that next 50,000 new homes, then it will jack up prices. So, the public again pays for infrastructure & congestion, and the developers pocket the $$$.
So you are suggesting the San Diego real estate bubble has roots going all the way back to 1890 or so? Small wonder many believe that CA real estate always goes up…
It was gold in them thar hills PB
Big picture question:
At what point did the gold rush boom-bust impulse at the point when California became a US state metastasize into the real estate boom-bust cycle which has played out since at least 1890?
(Revised version…)
Big picture question:
At what point did the gold rush boom-bust impulse, that played out when California became a US state, metastasize into the real estate boom-bust cycle which has played out since at least 1890?
1979. Prop 13. Its been out of control since then, when Clinton removed the capital gains from selling your home 250k single 500k married, it was off to the races… yet both mistakes are still on the books.
“1979. Prop 13. / capital gains law…”
Both should make potential CA buyers even more hesitant to buy until they are sure prices have fully reset, as both will help those who buy low far more than those who catch falling knives on the way down. To the patient go the spoils.
Before Clinton did that, capital gains taxes were excluded if the seller used the gains to buy a new house. Most people still did that after the tax law was changed. Buy for $200K, sell for $400K, buy next one for $600K. It’s not like they took the $200K tax free and lived in a tent.
And the exclusion only applied to primary residence so investors didn’t reap that reward (or shouldn’t have assuming they didn’t lie on their taxes).
Hmm…without collusion among builders it’s hard to make a Sherman case I’d think.
Naturally government price-fixing is OK since antitrust laws don’t apply to the government.
It’s smart for a developer to built out incrementally. But it’s also smart for a buyer NOT to buy until the development nears completion.
How could one learn whether collusion was occurring? I guess if they call it “city planning”, then it cannot be collusion?
“It’s smart for a developer to built out incrementally.”
I don’t get how individual builders choosing to build up incrementally could result in artificially inflated real estate prices, unless they had lots of (cartel or monopoly) market power. Under competition, if some individuals decide to go it slow, others will go it fast, and the net effect on prices will be nil.
Santa Barbara and San Luis Obispo planning policies restrict the number of housing units which come on the market thereby keeping the prices high. Old price/demand curve.
“When Paul Espinoza decided to refinance the home he owns he decided to go with an interest-only package in order to reduce his monthly payment. What he didn’t know at the time he signed his refinancing documents was that his principal amount would continue to climb. ” Ummm. if the principal is going UP, it isn’t interest only people. By definition, interest only means that the principal is not going up or down.
Jim A,
Oh you know.., it’s guys like you with your petty details that brought the economy ( read housing ) to it’s knees!
By REIC-speak that living room set you bought w/ no int. for 12 months would be running you an additional $1,500 before the first payment even comes due!
Has it occured to anyone else here that if it were any ‘other’ industry pulling this kind of sham they’d be shut down in an instant?
Don’t forget when the advertisements were touting ‘fixed’ mortgages…for FIVE years…or however many years.
Talk about deception, as before fixed meant the same payment for the life of the loan.
Exactly. If it’s not fixed for the entire term, it’s a hybrid-ARM. I always got upset when people told me they had “fixed-rate” mortgages that “would go up” after five or ten years.
“…if the principal is going UP, it isn’t interest only people.”
= Pick-a-pay
A builder gets the land and zoning approvals to build new housing subdivisions, but only builds in small numbers of new homes. That is done for two reasons.
I saw this done throughout Florida during the boom. The sales office would have a model of the community with pins in the houses that are sold or “in process of selling”. Invariably, there would only be 1 or 2 homes left–in that “phase”. What they don’t say is that there are at least 3 more phases coming. Sometimes more.
In the failed “Celebration” community, the first phases sold out in their day (today, over 50% of the properties community wide are for sale, empty, or being rented) but they’ve continuously had new areas built up until as recently as 18 months ago. There are some large houses there that have never had an owner. Yet, in the first phases, there was a feeding-frenzy to buy, because of the false scarcity.
Where are the quotes from Leslie Simpleton Young?
The famous CAR economist.
I believe she said we were in for “a soft landing”.
I just saw a condo in Long Beach that is priced lower than it sold for 1984. I thought on the average prices double every 10 years “CAR”
N CA post which is up next time.
I can’t wait.
“I just saw a condo in Long Beach that is priced lower than it sold for 1984.”
FPSS predicted prices would revert to 1983 levels before this is over. It appears that at least in some cases, they are almost there already.
Well, if you look at the charts, the bursting brought precipitous drops at the beginning. As it progresses, the charts won’t drop as much and it’ll look like a ’soft landing’.
And LAY will then speak up and tell everyone how she was right.
“When Paul Espinoza decided to refinance the home he owns he decided to go with an interest-only package in order to reduce his monthly payment. What he didn’t know at the time he signed his refinancing documents was that his principal amount would continue to climb.”
Your on a boat.. Boat has a leak..To keep the boat afloat, you will need to fill and bail 3/4 of the bucket every 10 seconds. Well, Mr. Espinoza decided to just fill and bail only 1/4 of the bucket every ten seconds. Well, the boat will be underwater in no time. Interest only loans.
Negative amortization loans. Even worse.
A friend of mine is buying a house. I didn’t inquire about how much and where but it strikes me that all I hear from them the past few years is they can’t afford this and that. Barely scraping by but they are about to close on a house. Interesting. I’m glad for them but I see a train derailing in a few years. The real estate in my area is brutal. A one bed/on bath house could cost you $500K.
“Barely scraping by but they are about to close on a house.”
Sounds like the type of buyer who might be enticed by Dough-4-Dumps.
Lame prediction:
Dough-4-Dumps buyers will default at much higher rates than the average for non Dough-4-Dumps funded buyers. (This only pertains to those who actually used the tax credit to buy homes, rather than to commit outright tax fraud…)
“Another factor helping some people is the fact that some lenders now are offering 40-year mortgages. ‘It seems like all we’re doing is renting from the bank anyway,’ Johnson said. ‘I remember when mortgages went from 20 years to 30 years, so I suppose this is not that big a deal.’”
A light bulb goes on in somebody’s mind…
then goes off one sentence later.
I remember some strange about-faces from Schiller on the Boston market in 2007 that received lots of press.
From 2007 Q2:
During this cycle, Boston was the first metro area to report negative year-over-year returns, back in April 2006. In June 2007, Boston showed an improvement in its annual rate of decline from the value reported in May, –3.9% versus –4.3% reported in May. Boston has shown improvement since the beginning of the year, where its annual growth rate measured –5.5%. More data however, is needed to determine whether
Boston, whose growth rate turned negative before other metro areas, is truly the first metro area to turn around.
Although this link does not directly quote Schiller, it is implied that his group authorizes that analysis. I remember another article where he gave a direct quote indicating the Boston market had bottomed. What do you bet these guys are human, have buddies in select markets are are doing some favors.
http://www2.standardandpoors.com/spf/pdf/index/csnational_release_082857.pdf
Talk about a stupid bidder. These are the same listings:
http://www.trulia.com/property/1081339875-846-N-Harvard-Blvd-Los-Angeles-CA-90029
http://www.realtybid.com/bidpage/bidpage.cfm?item_id=567682&AP=0&AB=0
Bidding 80,000 more than the last asking price.
yuck, and its a duplex for that much money. Puke green indeed.
Or maybe fraudulent bidder.
There was one house I used to drive by, a lovely brick 3/2(?) on an acre. It was listed for $240K. A few months later some Republicans had moved in. (McCain/Palin sign in the yard.) I looked it up on Zillow: It had sold for $170K, and there was a little note that the Realtor was a relative of the buyer.
Yep.
It’s true that RE agents often get good deals if they know the listing agent. It’s fraudulent when they get it for less than the asking price, like oxide’s example.
I know it’s downtown LA, but that listing shows me that prices have indeed fallen there. Finally!
If only West LA would fall too, then speedingpullet and lainvestorgal could buy.
Happy Thanksgiving to all. We’re going to go walk off last night’s turkey dinner in a charity run/walk now. Then we’ll go have another turkey dinner with family. I love a day off!