Buyers Determined To ‘Turn Back The Clock’ In California
Some housing bubble news from California. The LA Times, “Guy and Karen Vidal are experiencing something new as they try to sell the small Craftsman house they own in Silver Lake. Since listing it at $699,000 two months ago, they’ve reduced the price twice, first to $679,000 and then to $659,000 a couple of weeks later.”
“The problem for the Vidals is that after several years of frenzied bidding, buyers are also determined to turn back the clock. ‘Buyers don’t have that panicked feeling: ‘If I don’t buy before the post goes up, I’ll get into multiple offers and lose out,’ said (RE offcie manager) Ron Tornell. In his area, Tornell said, there were roughly 900 houses and condominiums on the market at the beginning of May, up about 25% from last year.”
“The people the Vidals bought from acquired the house in October for $400,000, turning a quick profit of $125,000 before agents’ fees and taxes. Guy Vidal says they spent more than $60,000 to restore the Craftsman. The Vidals’ agent, Lyn Bradford, believes it would have sold quickly a year ago. ‘People are taking their time; there’s a lot of fence-sitting going on,’ Bradford said. ‘There’s no doubt the market feels flat.’”
“‘As soon as we bought it,’ Guy Vidal said, ‘the market changed.’”
“Another recent buyer who has seen the market change is Matthew Zevin, who lives in San Diego’s Carmel Valley neighborhood. Sometime last fall, however, Zevin noticed a pronounced slowing. ‘It was drastic,’ he said. ‘There was suddenly a lot more inventory, and with more inventory, prices started dropping.’”
“The Zevins paid $1.5 million in November for a 3,800-square-foot house. Coincidentally, they had bid $100,000 more for this same house in July. The sellers had rejected that offer, which was contingent on the sale of the Zevins’ home. ‘If we were buying it today,’ Zevin said, ‘we’d pay even less.’”
A San Diego realtor. “This is getting awfully repetitive, inventory continues to climb and demand continues to fall. As of this writing inventory is 19,380 homes.”
“If you remember March Pending sales were 3,176 which I thought would bring April in around 3,000, down 27% from April 05. However, April sales were 2,570, down 38% from April 05’s 4,136 sold homes. One could make a case for increasing downward percentages. For the past 8 months each month has had an increase in the percentage decline in market sales.”
“The decline in sales is across the board. The under $500,000 sales are down by 44%, the $500,000 to $800,000 sales are down by 35% and the over $800,000 sales are down by 24% from last year.”
“All the incentives being offered in the marketplace hide, a bit, what is happening to prices. If the market decline continues in the 30% to 40% region and inventories remain above 6 months these pricing levels can not be sustained. In order to take advantage of this market, Sellers need to have marketing programs that stimulate demand for their home.”
The Sacramento Bee reports on some incentives. “Looks like the real estate market really is cooling off. To the point where one luxury home seller in a neighborhood full of Kings and politicians is offering buyers a free Mercedes and a year of massages.”
“The once-hot housing market has ‘normalized,’ says selling agent Jade Phung. To sell pricey homes, realtors have to ’step up their game,’ she says. In this case, the owners are throwing in their 2004 Mercedes E320 and an existing contract with a masseur who gives monthly massages at the home’s pool-side cabana.”
A mercedes AND a massage? Sign me up!
Yeh, and then pay property taxes on them moving forward… why would anyone fall for these kind of incentives?
There needs to be an uprising in CA to amend Prop 13 to close LLC commercial property loophooles and allow for re-asssessment at cashout refi at the new value.
Better yet get rid of Prop 13 all together. You’d probably be able to get a lower % assesment in exchange. Yeah some people’s tax will rise, but is that better than not being able to sell your home once everyone figures out how the game is played?
Prop 13 only works if you assume houses are going to go up.
Abolishing Prop 13 will NEVER happen.
However, fine tuning it to discourage cash out refi’s that fueled the rolling bubble is a worthwhile use of public policy.
The other egregious abuse of Prop 13 is LLC loopholes that allow commercial and multi-family property deeds to never change. Just the owner of the LLC. Most commercial property in CA hasn’t been re-assessed since Prop 13 went into affect.
“The other egregious abuse of Prop 13 is LLC loopholes that allow commercial and multi-family property deeds to never change. Just the owner of the LLC. Most commercial property in CA hasn’t been re-assessed since Prop 13 went into affect.”
I agree. And I think that all the people that are paying the higher property taxes are subsidizing those rich cat owners of those commerical properties. Those guys are riding like a wolf in sheep’s clothing, filthy rich, while the purpose of Prop 13 was to protect low income senior citizen’s from losing thier homes from unaffordable property taxes.
The abuse must stop now.
Nonsense. If the purpose of Prop 13 was to protect seniors, then the tax caps would have been limited to seniors. Period. The pupose of Prop 13 from day 1 was to keep taxes low for the rich at the expense of the middle class.
You now have a crazy quilt of taxation which distorts the housing market and impedes labor mobility. Sort of like what happens when most people live in public housing.
You should move to market value taxation with caps or credits for seniors, like many other jurisdictions.
The purpose of Prop 13 is to keep owners (regardless of age) from being taxed out of their homes. THAT is why CA voters voted for it. I agree that it should not apply to commercial, and one could definitely make an argument that it should not be transferred from one generation to the next.
It does not distort market prices. During a bubble/boom period, buyers ignore prop taxes and dive head-first into the game. They know full well what the cost is, and that is the great benefit of Prop 13 — knowing the cost in advance. In a normal market, the demand would shift down which would make the price go down, and the taxes would be lower as well.
Lesson: Don’t sign up for more than you can afford. It is this attitude (I’ll jump in and let “someone else” fix my problem once I’m in it) that causes bubble mania. People need to **THINK** before buying. Don’t expect rational people (long-time residents) to bail out the idiots who buy without any regard for affordability. Taxes are based on price when purchased which should align with income. That is how it should be. Prop 13 is the greatest thing that happened to California, IMHO.
If it weren’t for prop. 13, I’d be paying over 9,000 per year in property taxes for this POS I live in in N. Hollywood for 200,000.
I’d be paying more in taxes than in mortgage. The deduction would be so large that I’d be caught paying Federal AMT. One important point that is overlooked; Prop 13 in addition to keeping people from being taxed out of their homes also keeps money out of the hands of inept polticos. Look what the idjits just did. Revenue was up an unexpected $7.5 bn so what did they do? They spent it. Nevermind that if they hadn’t spent it we’d only be $3.5bn in the hole this year. Gives drunken sailors a bad name.
I strongly agree Cote;…The thrust behind prop 13 was to put a hault to the easy funding every time a politico came up with a new program.
Never mind the unintended consequences.
It’s all over here in Sacramento. Prices in this county are plummeting.
http://ziprealty.typepad.com/marketconditions/sacramento_real_estate/index.html
Would you have that report on Phoenix?
http://ziprealty.typepad.com/marketconditions/phoenix_real_estate/index.html
The major markets are listed on the left.
Thanks! I love graphical numbers! hehe
“A mercedes AND a massage? Sign me up!”
This housing debacle, unlike the massage, will NOT have a happy ending.
Couldn’t resist
This is coming fast now, there was a time just a month or two ago when people who were still touting housing could retain some credibility with the masses. This is now over, expect more and more for bad stories to start breaking in all news markets.
One thing about the media, they absolutely LOVE misery, and there will be plenty of misery for them to feed on. It was a virtuous circle on the way up, and it will be a vicious circle on the way down, both ways (up/down) events feed on themselves to make the situation worse.
OT:
keep ramming…
http://www.sun-sentinel.com/business/local/sfl-zinsure13may13,0,3665685.story?coll=sfla-news-health&track=mostemailedlink
more details:
http://www.sun-sentinel.com/business/local/sfl-zinsure13may13,0,3665685.story?coll=sfla-news-health&track=mostemailedlink
tiny url, if you could?
He made it into a link. All you need do is right-click and open in new tab.
I did…. didn’t work.
Hmm, worked for me.
Maybe Polestar’s still on a tabless browser. You remember those, dontcha?
‘[Sen. Ron Klein, D-Boca Raton,] urged Gov. Jeb Bush to veto the property insurance bill and call a special legislative session to craft new legislation to protect homeowners from “random cancellations and massive rate increases.”‘
Prediction: Ron Klein is going to demanding a bail-out for FBers in a year or two.
Boosting property insurance prices
State Farm Florida is proposing two rate increases in Florida, an average of 58.8 percent and 12.7 percent. Here’s how the numbers break down for South Florida:
Broward County*
First increase: 86.9 percent on average
Second increase: 15.4 percent on average
How it affects you: If your annual premium is $2,000, the first increase is an extra $1,738, bringing your premium up to $3,738. Add an additional $575.65 for the second increase, which brings total premium to $4,313.65.
Palm Beach County*
First increase: 81.6 percent on average
Second increase: 15.3 percent on average
How it affects you: If your annual premium is $2,000, the first increase is an extra $1,632, bringing your premium up to $3,632. Add an additional $555.70 for the second increase, which brings total premium to $4,187.70.
Miami-Dade County*
First increase: 80.6 percent on average
Second increase: 14.7 percent on average
How it affects you: If your annual premium is $2,000, the first increase is an extra $1,612, bringing your premium up to $3,612. Add an additional $530.96 for the second increase, which brings total premium to $4,142.96.
*Does not include areas east of Interstate 95; those State Farm customers already get windstorm coverage from Citizens Property Insurance Corp.
Source: state Office of Insurance Regulation
But wait…this is San Diego! Everyone wants to live here. They’re not making anymore land. I’m like sooo confused! OMGawd!
A little bubble observance in my hood: I looked at some condo conversions about a month ago in Hillcrest. Totally cute, pretty unique and impressive for a conversion, honestly. The only thing was the prices! Walking through the complex, I noticed not ONE unit was occupied. They were asking $280k for the smallest, 1 bedroom unit. Well folks, I’m pleased to announce that the prices have been slashed across the board and the cheapest unit is now priced at $207k! While this is getting more reasonable, at just under $400/sq ft I still think the prices need to go a lot lower. I won’t be buying until things hit approx. $200-250/square foot. But things are lookin’ mighty nice so far, if I may say so myself!
Keep them prices comin’ down, people!
What is the address and/or complex name? Hell, if they hit 130k, it would be very tempting…. …. wait, no, slap me bad thinking.. lol
Well folks. Looks like instead of a housing shortage we have a housing surplus! Is the California population decreasing? Maybe people are “dying” to move out of California, causing the housing surplus, Heh heh.
The most bubble news everyday
http://www.homepricedecline.com
Didn’t someone say that as long as people have sex we’d be needing more housing ? They must not be having sex anymore !
Funny. Maybe it’s because they finally said “ah f*ck it!” and actually listened to their own advice. They’re now really to busy for multiple bids and cover letters stating why the seller should sell to them.
Nah — the problem is just that people are not having *enough* sex…
Surffroggy:
Your URL doesn’t work.
I am interested is there a better URL?
Same for me…
Like I said earlier:
Everyone wants to live here. Just not at the same time.
This housing bubble stuff seems to be snowballing. Just no end to the articles about the troubles that homeowners are having trying to sell their houses. I can’t wait to see what the Sunday papers have to say about the situation. Last summer every paper had an RE special in the Sunday paper. Maybe all the RE companies cancelled their advertising ?
I love this stuff!
Fall LA…fall
And in the fall…fall some more!
surffroggy…your link went nowhere????
i’ was in oakland ca the other day,square blocks of condo’s are going in,priced from 400k to 1m,downtown near the greyhound station and freeway….maybe 4000 units….hole in the ground to near complete….maybe you will get a free pitbull when you buy “enjoy the vibrant streetside pharmaceutical market!” i predict the world’s largest municipal swimming pool as the fate of the hole in the ground and high quality section 8 housing for the rest…..an example of what bad drugs and cheap whiskey can do to city planning
I suspect we will soon read lots of stories about cities which really got the ball rolling on solving their “affordable housing crisis” just about the time the bubble popped. I am not sure exactly how this will play out, but my brain is haunted by images of empty corporate real estate office complexes that were prevalent towards the end of the 1980s. It seems likely that we will have a lot more dark towers go up before the bubble is finished waisting America’s misallocated aggregate investment spending for years to come.
“‘As soon as we bought it,’ Guy Vidal said, ‘the market changed.’”
Boy, that’s a crying shame for these folks. Thought they’d sink $60K of worthless upgrades into the old POS and then turn a tidy profit themselves. Ladies and Gentlemen, I’d like to introduce two greater fools - Guy and Karen Vidal. Hey, Guy and Karen, maybe now you’ll have to get a real job and scale back those thoughts of instant riches for doing absolutely nothing. If these two clowns had done absolutely the minimum do diligence before buying this shack, they would have seen the writing on the walls; that this housing mania had peaked last summer. But, no reason to do any research when you’re getting ready to take on a half-million dollars worth of debt. Just close your eyes and sign on the dotted line.
Suzanne did the research
I notice the perjorative terms that journalists use to describe bubble sitters.
Buyers are determined to turn back the clock.
That is sensational copy that helps sell papers but it is a disservice to the facts.
There has been an unsustainable run up in RE prices and we are beginning the correction to revert to the mean.
Well said. The title should read “Buyers are determined to turn clock forward”.
Prices are not going “backwards”. (The silly assumption there is that real estate prices always go up, which contrary to broker hyperbole history reveals to be anything but the case). No …prices are not going “backwards”, they are continuing on their logical curve downwards.
Yeah, ’cause clocks only run forward. Too bad markets aren’t clocks, just all those WorldCon shareholders.
In my local paper the headline is: “Buyers Be Brave! Make an offer!!!”
bwahahahahahahahahaha…. on your knees boy!
Maybe it has something to do with the general population’s sentiment. I just found an interesting website that is talking about “boycotting the housing industry.”
http://www.boycotthousing.com/home.aspx
I’m not affiliated with it, but I found it interesting as a note that people are just plain fed-up with the ridiculousness of the situation and they are just not going to take it any more.
I wondered, if the website represented that sentiment generally, and after reading this post, I guess it does!
I like the idea of visibly boycotting a house buy…I just wish it wasn’t just for the bay area. How about ALL of Caifornica???
“Sellers need to have marketing programs that stimulate demand for their home.”
Here is the new marketing program.
1. Quickly guzzle a 32oz cup of warm gin.
2. Grab your pen and checkbook.
3. Drop the price of your RE till it is the lowest in the hood.
4. Write a big fat check to the bank to cover your “investment”.
5. Throw up and move on with your life.
“All the incentives being offered in the marketplace hide, a bit, what is happening to prices. If the market decline continues in the 30% to 40% region and inventories remain above 6 months these pricing levels can not be sustained. In order to take advantage of this market, Sellers need to have marketing programs that stimulate demand for their home.”
The cheapest marketing program: Lower the price until somebody is willing to pay what you are asking. As a hint to what might be an appropriate price level for current market conditions, note that the 10-year T-bond rate, which pretty much moves in lock-step with mortgage interest rates, has backed up to mid-2002 levels and seems poised to adjust higher:
http://tinyurl.com/qdkb4
Next factor in that prices were rising in mid-2002, but now they are falling, which tends to make would-be buyers still more hesitant. So a list price somewhat lower than the mid-2002 comparable price would be a good place to start, then lower the price from there until you find a buyer.
GOOD LUCK, STUCK FLIPPERS!
Appraisers should bring the comps downward in response to incentives .
Example 500K house -
50k car incentive
450K true value of house
Stupid Lender based loan on the 500K sales price
Smart Lender based loan on 450k being sales price ,otherwise lender makes loan on a value greater than market . Old time Lending =check for any incentives or kickbacks and reduce appraisal accordingly .
Wizard –
I agree with you. The super-discounts which the homebuilders are using to move their unsold inventory is screwing up the comps — by upwardly biasing the recorded sale price by $50K+ from the actual market value. Used-home sellers (or their agents) who mistakenly price off the nominal dollar figure for comps without reflecting the discounts will find themselves unable to find a buyer.
I wonder if the builders are deliberately limiting their competition from the used home market by tricking used home sellers to list at a price where they will never be able to compete with super discounts? Maybe it is time for used-home sellers to start offering new cars as incentives at the open house, instead of guacomole.
Thats why the builders started out with incentives because they wanted to avoid the affect on comps . But when it really comes down to it you add up the amount of the kickback and that’s what it took to sell the house ,therefore it’s a price reduction that should bring down the appraisal .
I’ve been renting in Fremont CA for a couple of years now waiting for the market to fall. Even now - as things fall off in San Diego, Phoenix and Boston - I’m not seeing a significant slowdown here. I’ve seen good 3000 sqft homes listed for ~1.5 mil selling in about 2 wks. Can anyone confirm his, or the contrary, about the valley? What is going on in SilliValley?
No slow down on this side of the bay. I am seeing average houses sell in 7 days with multiple offers. Prices are around $1M for 1600 sq ft. and they sell like hotcakes.
People are insane. Crash or no crash, we’re leaving Norcal in 2008.
Could be dirty money from communist China and Vietnam.
Google $s?
Nope. Those guys (and gals) are buying the high-end properties.
Where ya headed bitch ??
No obvious slowdown in the bay area “except” a change in mentallity…Homes on the market longer with spoty price declines and low inventory…
Is it safe to come out now?? I met with a woman yesterday who was trying to convince me that my MANY BK clients walking away from theie houses (that they were tricked into buying) need to go through a short sale process to keep a foreclosure off their record and put 2% in her pocket. I dunno. Is there money to be made in short sale process? If this is (as I believe) a glacial slide for years to come, then short sales now are irrelevant in the long term. Thoughts from my more experienced bloggers?
I’ve been having discussions with a former Orange Co broker with a lot of experience in the last bust. There is some interesting action in short sales. In some ways, it seems like shorting a stock as it goes down.
Ben- Please come on the radio show soon!!!! As I understand it, shorting is cramming down the mtg Cos. to accept less than what is owed. By definition the mkt. MUST be declining OR the mtg. brokers lied and cheated to get the loan at way more than the house is worth! While it seems obvious to me, I’m pretty cautious when it comes to math. That’s why I went to law school instead of medical school. . . And, by the way, I AM a real lawyer and I had to send in 4000 cereal box tops before I could get my license. . . So THERE!!! to all of you are are sending those nasty e-mails! ( I’m stomping my feet as I write this!!!!!!)
LOL. Are you doing consumer or Ch. 11 work? I just loved working in that area and at times am really really tempted to get back in now that business is so good and going to get REALLY good. You might want to invest in a pullout bed for your office.
Has any one noticed Inventory has really jumped here in San Diego over the past month (over 1000 new listings in 20 days) putting us at 20169 last time I checked ziprealty. I am thinking if the chart keeps going, we will see 30K properties listed by October. Listings will fall by 4000 during the month of December and we will see two categories of listings - those listed for fun and those listed for sale. The ones actually for sale WILL be discounted. So what happens next year when the floodgates open on foreclosures?
Yes, I have noticed. And I have also noticed that articles in the press which quote realtors and DataQuack always under-report the inventory figure for San Diego. You would think a competent newspaper editorial staff would check the figures…
Here is a case in point, from this very post:
‘A San Diego realtor. “This is getting awfully repetitive, inventory continues to climb and demand continues to fall. As of this writing inventory is 19,380 homes.’
Here’s an ugly situation:
“Oceanside looks at legalities in collecting Marina Towers fees”
By: CHRIS TRIBBEY - Staff Writer
“OCEANSIDE —- As lawyers with the city and the Marina Towers homeowners association hammer out the details over the proposed sale of the land under the 17-story building on Harbor Drive, they say they are also making sure that condo owners can’t sell their property without the city knowing about it.”
“The condo owners base their transfer fee assessment on the number of condos that have changed hands over the previous several years. Valuing the average condo in the Marina Towers at $890,000, increasing in value by 5 percent each year, with seven units sold each year, condo owners predict the city will earn $74 million over the life of the deal. In a high-end assessment, if 10 units were to change hands each year, with the average price at $970,000, increasing in value by 7 percent each year, condo owners say the city could make more than $250 million.”
http://tinyurl.com/hl4fy
Interesting that the city decides to sell the land at the top of the market. Wonder if it’s a coincidence. Also, this is exactly why I wouldn’t buy in a PUD/HOA or on leased land. What in the world are they thinking? They pay rent AND a mortgage AND an additional “transfer fee” to the city upon sale.
Why are those condos so expensive? How many sq. feet?
There is a 2 bedroom 1400 SF listing at $849K. They are fairly nice, but probably not worth a third the current asking prices, but then what else is new? Dont forget about the $1200 Monthly tax and accoc fees. You can rent one for around $2500
The reason they are so expensive it because they are on the water. Those poles you see in the foreground (picture in link) are sailboat masts in the harbor.
They are still too expensive. My mom looked at some in 1998/1998, I believe they were selling for around $180K-$200K. They should be $350K, TOPS, since you have to pay such high monthly fees on top of the mortgage.
If this article was in the LA Times today (haven’t read the paper yet), then this is big, because IMO the Times reports the news on RE as much as it influences it.