Local Market Observations
What do you see in your housing market this weekend? Statistics? “The Assessor’s Office will mail 475,296 Assessment Notification letters which detail each property’s assessed value as of January 1, 2011 (lien date). Each notice serves as the basis for the calculation of property taxes contained in the property tax bill to be mailed in September. The overall number of properties assessed below their purchase price increased five percent to 124,148. The total reduction in assessed value of these properties increased thirteen percent to $27 billion.”
“Twenty-seven percent of all single family homes, and forty-nine percent of all condominiums are assessed below their purchase price, primarily due to the collapse of the residential real estate market. For the first time, home values in some high income areas experienced a steeper rate of decline compared to the previous year. For example, last year in Los Altos Hills 342 properties were assessed below their purchase price for a total reduction of $320 million. This year, the assessed value of 471 properties was reduced and the total amount of reduction jumped to $1.4 billion.”
“‘Basically, it means our economy has not yet recovered, due to the record level of distressed sales or foreclosures,’ said County Assessor Larry Stone.”
Economic forecasts? “A report released by the U.S. Conference of Mayors shows that the Valley’s economy won’t be improving any time soon. The report stated that in 2010, the Phoenix area had the 7th lowest economic growth in the country at 0.9 percent. Phoenix was well behind places like Oklahoma City (7.5 percent), El Paso, TX (7.2 percent), and Buffalo, NY (5.4 percent).”
“Chris Camacho is the vice president of the Greater Phoenix Economic Council. He said that the Valley’s dependence on housing and construction, just before the recession hit, set the area up for a big economic crisis. ‘We’re more reliant on housing and construction jobs than Detroit, Michigan is on the automotive sector,’ said Camacho. ‘If you think about the vast supply tied to the automotive industry in the Midwest, this is a significant issue we are dealing with.’”
Or foreclosures? “Petitions by banks to the state land court, which is the traditional start of a foreclosure process, fell by 72 percent in 26 area communities between May 2010 and May 2011, according to The Warren Group. The drastic drop in activity is not a sign that the economy is recovering, said Vincent Valvo, editor and publisher of Banker & Tradesman, a newspaper owned by Boston-based Warren Group.”
“‘This is not a sign of people paying their mortgages. This is a sign of banks who are scared of judges,’ Valvo said. ‘There is nothing else in the economy that explains this. Unemployment has come down only nominally, wages have not risen significantly, the economic outlook of the state hasn’t shot through the roof, prices of homes haven’t risen, and sales volume hasn’t risen. This is a paperwork issue.’”
“Last fall, lawmakers in Massachusetts also extended the period between when homeowners default on their mortgages and when lenders can file petitions in the land court from 90 days to nearly five months, Valvo said. The result is a greatly slowed process that has drawn out the purge of bad mortgages from the housing market.”
“He compared conditions to a leaky faucet. ‘We don’t have a flood anymore, but we can’t turn it off either,’ he said. ‘It’s going to be this annoying splatter of homes in limbo that’s going to interfere with the rational housing market for years. What’s going on right now is excellent for people who are facing the loss of their home. It’s an absolute nightmare for everybody else who needs a functioning, realistic housing market.’”
“The result has been a constant trickle of homes that are sold by banks at greatly reduced prices, undercutting values for traditional sellers. Andy Luke, a sales associate at Re/Max Home Finders in Natick, said agents have to try to prove to buyers that a low sale price isn’t the final cost.”
“‘The foreclosure properties just continue to put a strain on us,’ Luke said. ‘We’ve got to take into account that buyers kind of know now that foreclosed properties are distressed properties. … They get blinded by the price, but then they go inside with me and they’re shocked about the condition they’re in.’”
“Luke said the below-market prices keep normal-priced houses on the market a lot longer. ‘If (the foreclosures) were to come on the market all at once, that would make it worse, but what we have right now is still really bad, unfortunately,’ he said.”
From the Gilroy Dispatch assessment article (first link above):
‘When the market value of a property declines below the previously established assessed value as of January 1 each year (lien date), the Assessor is required to reduce the assessed value to reflect the lower market value. However, when the real estate market recovers, the Assessor is required to “restore” the assessed value consistent with the market. Proposition 8 provides that property owners are entitled to the “lower” of the fair market value of their property as of January 1, 2011, or the assessed value determined at the time of purchase or construction, and increased annually by either two percent or the annual California Consumer Price Index (CCPI), whichever is lower. This year the CCPI is 0.753 percent.’
If I understand this correctly, then this is a really great reason to avoid purchasing a home in California until prices truly bottom out. Unless, of course, if you are a trust fund baby or a savvy investor with bundles of cash available.
Proposition 8 provides that property owners are entitled to the “lower” of the fair market value ??
Yes but their is a catch….”If” the fair market value were to increase beyond the 2% maximum limit per year under prop.13 then the assessor is allowed to raise your assessment…In other words, the reduced assessment is only temporary if the values go back up to previous levels…Now, when & if that might happen is a entirely different question…
The part you quote is only for current owners. My understanding is that a new owner’s Prop 13 basis is locked in at the assessment as of the time of purchase.
Prospective home buyers in CA would be wise to avoid catching themselves falling knives and wait for this housing crash to settle down before locking in a Prop 13 basis.
So …. If the value of your property goes up, then you don’t have to pay more, but if the value of your property goes down below your purchase price, then you can pay less?
These are just asking prices, but kind of interesting.
There is a two building (high rises) condo development a few blocks from my apartment. They imagine themselves as THE high end buildings in this area. They seem nice enough from the outside, though I heard from a physical therapist that the people who live there moan about special assessments a lot. Seems that the buildings are old enough for things to be going wrong.
One very large unit is being offered for sale or for rent. 4 bedrooms, 4 and half baths, 3650 square feet. Kind of like a Mcmansion in the sky.
Asking price for purchase - $3,350,000
Asking price for rent - $8000 a month
Asking almost 420 times monthly rent for a condo. Nearly $1000 a square foot. Good luck with that one folks.
The cheapest listing in the ad is for a 2 bed, 2 bath with 1593 square feet - $1,250,000. No rent listed for that one.
“Asking almost 420 times monthly rent for a condo.”
Several years back, a former regular HBB poster who called himself flat used to often remind us that about once a decade since time immemorial, U.S. home purchase prices at the tail end of a recession bottomed out at purchase prices of 100 to 120 times rent.
Several years later, it seems we are still waiting…
And there is nothing to indicate that $8000 is even a market rate rent. That is the wishing price. Unless it happened very recently, no one has actually agreed to pay that much.
I’m not sure what sort of mind altering substances the seller is on, but they’re strangely potent. I don’t even need to see the place to understand how delusional he/she is.
I’d ask to see it, if I thought I could get anyone to show it to me. I think you have to make a heck of a lot more money than I do to be taken seriously enough to be worth the time.
I think there are one bedrooms in the buildings. I might be able to convince someone that I was interested in (and able to purchase) one of those, but it would be a near thing. The last time I saw one of those advertized, it was for about half a million.
Checked Craigs list later yesterday. Single family houses with 4 bedrooms and usually 2 full and 2 half baths and in similar or the same school districts are asking rents between $5000 and $5500. They might be smaller in terms of square feet, and leave the renter with more responsibilities (like sidewalk snow removal) and fewer amenities, but still quite a bit less than $8000 a month.
Can they really get that much for rent? Who could pay that?
Embassy of [fill in the country of your choice] perhaps?
There are some staff members that that don’t live in the actual residence but are important enough to get nice digs Or they might keep it for very important visitors. Some of the buildings are quite small. As noted above, I think $8000 a month is way too high if compared to similar single family houses in the area. But the security might be easier to arrange in a limited access high rise.
There are diplomatic plates in the garage in my building, but that would be for much lower level staff.
It looks like the housing bubble collapse is finally hammering assessed housing values in the Silicon Valley area (Santa Clara County). And this party is only getting started, as the coming reduction of the conforming loan limit from $729,750 to $625,000 has implications for California’s high end coastal communities, as federally guaranteed financing to force Main Street Midwestern folk to help fund Coastal California millionaire housing purchases will be considerably reduced.
I always like to use long division to translate the aggregate statistics given in reports like this one into household level averages:
“The Assessor’s Office will mail 475,296 Assessment Notification letters which detail each property’s assessed value as of January 1, 2011 (lien date). … The total reduction in assessed value of these properties increased thirteen percent to $27 billion.”
$27,000,000,000 / 475,296 = $56,807 per property — ’tis a mere flesh wound!
“For the first time, home values in some high income areas experienced a steeper rate of decline compared to the previous year. For example, last year in Los Altos Hills 342 properties were assessed below their purchase price for a total reduction of $320 million.”
$320,000,000 / 342 = $935,673 — Oof!
I remember speaking to a person who told me that houses in Los Altos Hills could never do anything but appreciate at crazy rates. Why? Because they’re “rare”. Never mind the fact that Los Altos Hills is right in the middle of a sea of other neighborhoods, with not one being any more “rare” than the others. Glad to see LHH is getting their licks.
“Petitions by banks to the state land court, which is the traditional start of a foreclosure process, fell by 72 percent in 26 area communities between May 2010 and May 2011, according to The Warren Group. The drastic drop in activity is not a sign that the economy is recovering, said Vincent Valvo, editor and publisher of Banker & Tradesman, a newspaper owned by Boston-based Warren Group.
…
This is a paperwork issue.’”
Lazy, stupid, cowed MSM journalist altogether too readily report the drop in foreclosures as a sign the shadow inventory is shrinking and the housing market is recovering. I expect at some point over the next five years, word will escape that the foreclosure pipeline became severely constipated beginning around the time of the fall 2010 robo-signing scandal, and a massive shadow inventory dump will ensue.
Do all housing busts sport empty houses, neither for sale nor for rent, on virtually every street in the country?
I don’t know, but a lingering memory of the S&L crisis was the many sparkling brand new, glass-walled, vacant office buildings to be seen around the Midwestern city where I lived at the time.
“Andy Luke, a sales associate at Re/Max Home Finders in Natick, said agents have to try to prove to buyers that a low sale price isn’t the final cost.”
This isn’t rocket science, folks. If foreclosure homes are not priced to reflect the cost of fixing them up, JUST DON’T BUY. And use this simple formula to aid your purchase decision:
Final Buyer Cost = Purchase Price + Renovation Cost,
where Renovation Cost = full financial outlay needed to restore a trashed foreclosure home to livable condition.
“‘The foreclosure properties just continue to put a strain on us,’ Luke said. ‘We’ve got to take into account that buyers kind of know now that foreclosed properties are distressed properties. … They get blinded by the price, but then they go inside with me and they’re shocked about the condition they’re in.’”
Don’t be fooled by the appearance that foreclosure homes are more affordable than homes in move-in condition. Simply apply the simple formula above to guide your purchase decision. Let the savvy investors snap up the foreclosure homes if you aren’t sure the purchase price is properly discounted to reflect the cost of deferred maintenance and repairs.
“Luke said the below-market prices keep normal-priced houses on the market a lot longer. ‘If (the foreclosures) were to come on the market all at once, that would make it worse, but what we have right now is still really bad, unfortunately,’
What do used home sellers have against affordably priced housing?
I started cutting and pasting the MASS article until I realized you’ve already addressed it except for one thing….
Now lets put this BS to rest once and for all regarding this lie that “foreclosures are all trashed, thus you should be afraid of them because ‘you’ll pay more in the end’”.
Most of the REO I’ve seen needs paint/carpet/appliances, etc. With the exception of one house, I’ve never seen any REO that requires high dollar cost corrective work. Again, paint/carpet/appliances.
Bro’s and Sis’s. Recall during the Realtor-Flipper Fraud Era when it was just a coat of paint and some carpet and cheap appliances skinned in light gauge stainless steel turned a $75k ranch into a $300k “investment”? Well it works both ways. Used up, defective paint and carpet turns it back into a $75k ranch. And that’s being generous.
“foreclosures are all trashed…”
I’m guessing the currently-occupied future foreclosures are a lot less trashed than the vacant ones that have sat on the market for over a year already at 2006 prices, whose current occupants are vermin.
Final Buyer Cost = Purchase Price + Renovation Cost,
But you also must include a risk based cost, since when you start a renovation you find a few new unexpected problems.
The foreclosures in bad shape can’t be bought with a mortgage. No bank will lend against them.
With my point being that you need to give yourself the cash discount in addition to the cost/risk of renovations.
‘It’s going to be this annoying splatter of homes in limbo that’s going to interfere with the rational housing market for years. What’s going on right now is excellent for people who are facing the loss of their home. It’s an absolute nightmare for everybody else who needs a functioning, realistic housing market.’
Who is better off: A priced out renter who perpetually pays artificially inflated rents due to shadow inventory held off the market, or a home owner currently in default facing the loss of their home after several years of rent-free living?
I’d like to take door number 3…
Door Number 3: Don’t buy / don’t rent?
Pay cash for something really cheap to get by with for now. Everybody else is getting hosed.
PB has a family. He can’t ask them to live in a mobile home in BFE. They need schools, community, etc.
I have a family too, probably not as big as his, though. I’m not in BFE. I’m in what’s considered to be a great place. Everything here is horribly overpriced…except where I’m living…because everybody turns their noses up at it. Which makes it the only way to ride out the current situation in my location without getting hosed. It’s not for everybody but I’d do it again in a heartbeat until the craziness is over.
I agree with you Carl. I adopted the same strategy. It’s all win win. The banks won’t loan on MHs with favorable terms thus driving down the price, ie no credit bubble inflation. It is cheap, effective shelter. Quality is better than the aforementioned KB homes and yet they are cheap enough to be considered disposable depreciating assets, much like vehicles. It is the great undiscovered country. This blog educated me to think about shelter in those terms thank god!
Local analysis for rural NM: the home I used to own.
Sold in summer, 2007. Buyers had it back on the market in 2009 with an asking price of 40% over their purchase cost. No sale. They’ve adjusted steadily downward every year and the published asking price now reflects a 10% loss on their original purchase price. Chasing the market down?
Good info. Thank you.
You may be amused to know the buyer was a real-a-tor. :O
Ha!!!
Figures.
I was looking for buyers at all the wrong prices
If New Mexico is anything like Arizona, they’re down about 50% from 2007 already. Prediction: Foreclosure.
I spent some time in Taos, NM back in the early 1980’s. Nice country and I can only guess how the entire area was permeated(thus destroyed) by the likes of Pulte, KB, Troll and NARscum.
I predict the Republicans will win the deficit battle and lose the election war, as Democrats will rightfully be able to pin the next leg down in the Great Recession on Republican deficit reduction measures, and Americans realize they miss their “free” government services once they are gone.
I also predict the real deficit problems related to three wars plus entitlement commitments will be the cans that get kicked down the road, as political “third rails” are never mentioned.
One last prediction: The move to transfer more wealth to the CEO class and other top 1% while robbing middle class America of their pension benefits and rights will finally trickle down to the federal workforce, thirty years after the trend began in the private sector with advent of the “401(K) revolution.”
Deficit battle shaping up as GOP victory
Regardless of any tax concessions President Obama achieves, the end result would favor Republican goals of cutting spending and government services.
By Lisa Mascaro and Christi Parsons, Washington Bureau
July 1, 2011, 5:50 p.m.
Reporting from Washington—
Even as the political battle mounts over federal spending, the end result for federal policy is already visible — and clearly favors Republican goals of deep spending cuts and drastically fewer government services.
President Obama entered the fray last week to insist that federal deficits can’t be reduced through spending reductions alone. Federal tax revenue also must rise as part of whatever deficit reduction package Congress approves this summer, he said. Obama has been pushing to end a series of what he calls tax loopholes and tax breaks for the rich.
But even if Obama were to gain all the tax-law changes he wants, new revenue would make up only about 15 cents of each dollar in deficit reduction in the package. An agreement by the Republicans to accept new revenue would be a political victory for Obama because “no new taxes” has been such an article of faith for the GOP.
But substantively, budget experts note, the plan would still be dominated by cuts to government programs, many of them longtime Democratic priorities, such as Medicaid and federal employee pensions.
…
Notice how folks in certain positions couldn’t be bothered to discuss the decline of the American worker until now. Now it’s the decline of the American GOVERNMENT worker. So it’s getting discussed. I guess it’s progress of a kind.
“and Americans realize they miss their “free” government services once they are gone”
What might these “free services” be? Paved roads? Public schools? I’m just curious cuz I want some free cheese before its gone.
In the areas I search for houses on Realtor.com the Listings Found are noticeably dropping. Base search of 33458 3/2/2 single family down to 410 from about 435 to 445 for most of recent memory. I add several nearby areas after but I can`t tell as clearly how much the listings have dropped. Very few new listings.
Still cr@p sitting price reduced which has been there for in some cases years, still houses that I would buy sitting empty and not listed with recently sold comp killers on the same street and still countless victims living rent free for years due to “economic conditions beyond their control”. Still the game goes on and I`m still a “POB”.
“still houses that I would buy sitting empty and not listed with recently sold comp killers on the same street”
There it is. This is a bonafide conspiracy by The Housing Crime Syndicate to keep prices artificially inflated.
There are houses for sale EVERYWHERE in Richmond. I just randlomly noticed another one down the street with a “lender owned” sign on it. And people here still think prices have bottomed. I was recently told that prices have gotten so low that “even I” could afford to buy one. “Even I”? A college graduate with 10 years of post-college work experience. I should have been able to buy one like 7 years ago. Sheesh.
This home was originally listed for $210,000 early this year. See the 2007 sale price of 349K! And it is in good shape. I watched this house with interest, as it’s virtually identical to what we bought last October for $189,000, and I thought we got a great deal. Woodland, as AZSlim may know, is a town 8 miles from Davis, and we have ALOT of Davisite castaways who just couldn’t afford the college town prices. This house in Davis would be selling for 400,000+.
Sorry, forgot link:
http://www.redfin.com/CA/Woodland/1967-Huston-Cir-95776/home/19474180
This home was originally listed for $210,000 early this year. See the 2007 sale price of 349K! And it is in good shape. I watched this house with interest, as it’s virtually identical to what we bought last October for $189,000, and I thought we got a great deal. Woodland, as AZSlim may know, is a town 8 miles from Davis, and we have ALOT of Davisite castaways who just couldn’t afford the college town prices. This house in Davis would be selling for 400,000+.
371 properties for sale in Mammoth Lakes.
For those of you who don’t know California or don’t ski or fish, Mammoth is a small ski town with an incredible mountain five hours north of Los Angeles.
You can fly into it’s small airport on the side of a mountain or drive as most do. So, in order to ski there, you have to drive 5 hours (gas prices), pay for room, food and ski lift tickets - all of which have skyrocketed in the past few years. At this point, a weekend can easily cost upwards of $500 a person.
A lot of people bought in the mania thinking that rentals would defray the costs of owning. Higher costs mean fewer people able to ski = less rental income. The pain is starting to be felt.
Have some acquaintances who bought in the mainia. Fortunately I’m not close enough to them to feel badly for them. But, I do remember how smart they felt when they bought. Oh well…
Consumer confidence slips in South Florida, where home values aren’t rising as in other metro areas
By Jeff Ostrowski Palm Beach Post Staff Writer
Posted: 10:12 p.m. Tuesday, June 28, 2011
Chart shows brakes slammed on house price declines in 2009.
http://www.palmbeachpost.com/money/consumer-confidence-slips-in-south-florida-where-home-1568434.html - 84k -
Folks (waves hopefully) - I wrote my local market observations about Oil City in Bits. Oxy?