Home Prices Down, Defaults Up In San Diego
The Voice of San Diego has this update on that city. “In 2006, spring has seen record numbers of people lining up to sell their homes, but there’s been no subsequent rise in the rate of sales. Indeed, sales activity in April 2006 was down 30.7 percent from April 2005, despite the existence of almost 20,000 homes for buyers to choose from. That’s the biggest year-on-year decrease in sales rates since April 1995.”
“According to figures from DataQuick, median prices in the county have actually dropped over the last six months. And they’ve been dropping throughout what is usually the market’s boom season: Spring. DataQuick’s figures show that the price of all new homes, condos and single family homes combined, in San Diego has decreased 8.8 percent since December 2005.”
“For existing single family homes, the median price has dropped 1.8 percent since November 2005, and for existing condos, the median price has dropped 1.3 percent.”
“The discount real estate brokerage ZipRealty said some 33 percent of the San Diego County homes currently listed for sale on its Web site have reduced their prices.”
“Greg Speaks, (who) provides most of the For Sale signs seen in the county, said business has been booming in the last few months. That’s not surprising, given the recent spike in inventory, but Speaks said what’s more interesting is that he’s not been getting too many signs back from customers.”
The Union Tribune. “A recent spike in default notices may be a sign that some homeowners are struggling to pay the adjustable-rate mortgages that now dominate lending in San Diego County’s residential real estate market, analysts warn.”
“Notices of default, the first step toward mortgage foreclosure, jumped 60 percent in the San Diego region in the first three months of this year, compared with the first quarter of last year, DataQuick reported. Neighboring Riverside County had a 64 percent jump in default notices over the last year.”
“David Berson, chief economist for mortgage-investment giant Fannie Mae. However, Berson is troubled that foreclosure activity is rising during a period of economic growth. ‘Normally this is a situation in which housing problems tend to go down, not up,’ Berson said. ‘If it continues, it could be a sign that borrowers are in financial distress.’”
“Longtime San Diego mortgage broker Ed Smith Jr. Smith has seen too many people who are willing to take financial risks for their slice of the American Dream. ‘You have a hardworking family trying to buy home in a market where a starter home costs $500,000 to $550,000,’ said Smiths. ‘They are all looking for the lowest monthly payment. They don’t plan for when the freight comes due on that ticket.’”
“In La Mesa, Erik Weichelt, a real estate agent who specializes in marketing or real estate owned properties acquired through foreclosure, said business is good. ‘We have more REOs now than we have in the past three years,’ Weichelt said. Until recently, ‘there was no need for the foreclosure process; appreciation was so strong. People were able to refinance or sell the property and get a fresh start. Now, because of limited appreciation and some stagnation in the market, that is just not available.’”
Another California realtor is also doing well. “A year after shedding her blazer and slacks in favor of a bikini for a billboard advertisement in Belmont Shore, real estate agent Wendy Heath is doing just fine and then some. Visitors flocked to Heath’s Web sites, either to view her advertisement or check out her listings.”
“‘Every once in a while you’ll have an agent mention, ‘Oh, you’re the bikini Realtor,’ Heath said. What’s next? ‘I never stop thinking, but I don’t know what’s next,’ she said.”
(Sorry to repeat an earlier post, but it belongs here):
As usual, many of the most interesting conclusions to take from the Union Tribune article must be read between the lines, including:
1) “While the spike doesn’t threaten most homeowners…”
The last spike in defaults (in the early 1990s — see the sidebar graph) occurred when most San Deigo-area homes were in the process of losing 30% or more of their market value, which would translate into an average loss of $150K at today’s prices, in part due to the large number of homes on the market whose owners had to sell due to the inability to continue making payments. But maybe this time is different, and home prices will steadily appreciate along with burgeoning default rates?
2) A sidebar graph hints at another answer to the question “When would be a good time to buy?” DataQuick’s chart, which only goes back to 1992, clearly shows the spike in defaults as the last bubble imploded; they were running about 3000 per quarter for most of the early 1990s (versus a bottom this cycle below 1000 per quarter in 2004), then ultimately spiked up to over 5000 per quarter in early 1996.
In the first quarter of 2006, there were 1,533 default notices, versus 960 in the first quarter of 2005. I will not even think about looking at homes until the rate of default notices is back up above 3000 / quarter (my guess is by late next year). By that time, there will be much more inventory to chose from, and most everyone will either be agreeing with one another what a terrible investment real estate is, or else keeping their mouths shut.
Good gauge, Getstucco.
You rock, stucco.
appreciate the numbers perspective
…record numbers of people lining up to sell their homes, but there’s been no subsequent rise in the rate of sales.
How many times in the last three years were we told that if only more homes were available sales would skyrocket?
Say’s Law
Precisely — 18 months time to double the default rate!
“According to figures from DataQuick, median prices in the county have actually dropped over the last six months. And they’ve been dropping throughout what is usually the market’s boom season: Spring. DataQuick’s figures show that the price of all new homes, condos and single family homes combined, in San Diego has decreased 8.8 percent since December 2005.”
Hah! So we can anticipate double-digit decreases in price by the end of 2006, then? IT IS A RENTER’S MARKET. ONLY PEOPLE WHO DON’T MIND LOSING MONEY SHOULD BUY RIGHT NOW.
I think that we should innundate writers of these articles with the following question to ask these “realtors”:
How can this be a buyer’s market if prices are falling. ISN’T THIS A RENTERS MARKET???
“A year after shedding her blazer and slacks in favor of a bikini…”
No way Ben, that one’s too easy!
I’ll bet she does a lot of “thinking” On her back.
I hope she is anexpert marshall artist or a sharp sHOOTER!!
Should read:
Afters years of taking her clients pants down and bending them over…
Reminds me a bit of a craigslist posting someone linked to on this blog a while ago… about a mortgage broker who explicitly implied that she loves to “mix business with pleasure”. Since I don’t have any personal experience in this area, I can’t say for sure, but for those who are into it, I can’t imagine even hiring a supermodelesquelooking-escort-for-a-night would be more than a few grand. Probably much cheaper (not to mention probably MUCH more value for your money) than signing hundreds of thousands of dollars away by buying an idiot-mortgage from that poster. - sorry if this post offends.. I only intended to poke fun at the people willing to go to any measure to keep this ridiculous bubble going.
you can get high class (super model hot) escorts in Tijuana for $50, why pay this skank.
Adelitas is the place to go!
This is going to get very scary. I love how Berson cannot see how people are in distress despite the boom. What on earth? I am sure glad this guy is not a brain surgeon. How could he not see this coming. All these 30 somethings (i’m in that group, so I am not picking on them) bought with no money down, I/O, and every other suicidal bell and whistle loan possible. Hell, the whole economy is running on debt. What is this guy smoking? And to think, he probably makes 6 figures with comments like this. It just proves my fatehr was always right when he told me, “The less you know, the farther you go.”
Another piece of the FNM braintrust.
at least Berson is recognizing a problem….for a man in imbedded in the real estate markets, that is an accomplishment….
His real problem, the government GDP numbers. - where imports are ADDS and exports are DEDUCTS. Then there is the inflation adjustment, currently reported as 1.8% core 3.3% overall….
Gee is it any wonder GDP is up 4.6% after subtracting 1.8% inflation.
Understanding the family financial destress is not a conundrum once you make the appropriate deductions from GDP.
I mean corrections.
Another California realtor is also doing well. “A year after shedding her blazer and slacks in favor of a bikini for a billboard advertisement in Belmont Shore, real estate agent Wendy Heath is doing just fine and then some
“‘Every once in a while you’ll have an agent mention, ‘Oh, you’re the bikini Realtor,’ Heath said. What’s next? ‘I never stop thinking, but I don’t know what’s next,’ she said.”
Next stop is offering knobbers in exchange for purchase agreements I would think. For pete’s sake, the gal strips down for a picture and then thinks that all the attention being paid to her is because of her Real Estate acumen? Be sure to tip her when she gets around to giving you a lap dance, or whatever.
does she look good in that bikini ive been looking at la jolla condos so when they go down enough i will need a realtor.
and judging by the pic she has quite the bulldog
does she look good in that bikini ive been looking at la jolla condos so when they go down enough i will need a realtor.
You mean when condos go down enough, so will she?
(Sorry, can’t resist wordplay.)
From Wikipedia:
“In the 1920s, the widespread use of the home mortgage and credit purchases of automobiles and furniture boosted spending but created consumer debt. People who were deeply in debt when a price deflation occurred were in serious trouble –even if they kept their jobs–and risked default. Indeed, prices and incomes fell 20-50%—but the debts remained at the same dollar amount. As the debtors tightened their belts, consumer spending fell, and the whole economy weakened. With future profits looking poor, capital investment slowed or stopped. In the face of bad loans and worsening future prospects, banks became more conservative. They built up their reserves, which intensified the deflationary pressures. The downward spiral sped up. This kind of self-aggravating process may have turned a 1930 recession into a 1933 depression. (Parker, p. 14)”
Thanks for cheering me up. LOL.
This cannot be taken at face value. Words of caution, just because it shows up in wiki doesn’t mean it is correct. Sure, credit was extended but not to any level that we would worry about today.
Tounge in cheek??? Most of the time I can’t tell with you Mr. Cote.
Usually I don’t tell but this time honestly Wiki is just crap. The 20’s were a confusing time and strange things happened in stocks and such but the paragraph quoted just doesn’t jive with what the historical record shows.
And are these not confusing and strange times as well Mr. Cote?
No confusion, just a conundrum.
“just because it shows up in wiki doesn’t mean it is correct ”
in fact, because it is in wiki means it is a suspect.
In defense of Wikipedia, have a read from this article in Nature (one of the most prestigious and respected science journals)
A follow-on study showed that while the constant errors per article were about the same, Wikipedia articles were on average twice as long as Britannica articles.
Thanks for posting that. With all the talk of how, “so long as the economy grows, everything will be fine,” it’s important to remember that this level of debt might in and of itself sink the economy.
Thank you KirkH for that from Wikipedia. People don’t realize just the astronomical amount of debt that is keeping this economy running. My father was a child of the depression and lived like it until he died about 10 years ago. Nothing, and I mean nothing, was ever purchased on credit. Every car we owned was a deathtrap because they were all used, not preowned like today (Man, I hate that term, call a spade a spade for crying out loud). My dad was one of those, like my grandfather on my mother’s side, who would ask for a PO and 10 reasons why I should give this to you, when asked for money. My grandfather, in fact, would ask, can you eat that book, car, piece of furniture, etc. These men saw the worst. Sadly, even if another depression doesn’t hit for some time, how sad is it to watch people chained to a home or a debt because they refused to live within their means. This economy is all smoke and mirrors right now. Sorry for the rant, but I hate what I see going on.
I know some people who are in debt up to their eye balls. Everything they have was pruchased on credit. They have zero savings despite the fact that they earn very good income.
How some people can live like that?
An honest question.
Did it ever irritate your father/grandfather to see inflation eat away at any savings they maintained?
It seems the spend spend spend mentality is fostered by the incessant inflation we’ve experienced. When the value of the dollar continually drop with respect to financable assets, it is more rational to borrow and spend if you discount possible deflation. It seems the US consumer has forgotten completely about deflation.
Feep,
I think you’ve hit the nail on the head. That phenomenon explains the dogmatic belief that real estate will never go down in SoCal because it hasn’t in the last several years. I argued with my sister-in-law this weekend about this very subject. I asked her if she would buy her house in Diamond Bar at it’s current price level (which is >100% higher than what they paid 5 years ago). Her answer was…yes, because that’s it costs right now. No concept of the risk of being upside down on a mortgage. Just because that’s what it costs to own a crappy 1300 sft house in Diamond Bar, CA.
from my experience its more of the herd mentality. the hype. the keeping up with jones’. the jealousy.
I find myself wanting to say there are more “safety nets” in place now than in 1929. What I mean to say is probably closer to the prediction that there will be some massive bailout of those who became addicted to debt because our economy has become addicted to consumer debt. Has anyone noticed that bad news for the long term economic health of our nation ALWAYS is greeted as good news by Wall Street, mainly because it means the fed won’t shut off the crack supply just yet?! The real power in our political system is held by the lobbyists, who will sell our grandchildren to keep the consumer debt driven economy alive. I think there will be some massive bailout/system of bandaids to maintain the debt-driven behaviors on which our consumer economy depends.
Let’s see, hmmm? Good looking gal (assumption) takes off clothes to drum up business, guys are attracted to aforementioned realtors picture and decide to patronize her business (perhaps with a subliminal hope of getting into her pants), business picks up and all is well in her world.
Next stop, knobbers offered for any purchase agreements that fall within 10% of asking price?
Be sure to tip this gal when she stops by to give you a lap dance. Nice to see nothing has changed with regard to workplace sexual dynamics.
Now that I think of MY realtor naked, I shudder in horror and rush for a 4x dose of Benadryl. It’s not fair.
hooters realtor, homes and wings , This might be the next boom,
I know Ben posted on this earlier, but we just put up the newest home builder sentiment chart. The numbers don’t sound like a big deal, but when you see it on a chart, it’s really ugly:
BubbleTrack.blogspot.com
Reversion to the mean indeed.
New high: $75 million home
O.C. house price highest ever in state.
By JEFF COLLINS
The Orange County Register
The founder of a Seattle software company is asking $75 million for his Corona del Mar house, believed to be the highest price ever sought for a California home and one of the highest in the nation.
Frank W. Pritt, founder of Attachmate Corp., is listed in county property records as the owner of the eight-bedroom, 10-bathroom home that occupies three oceanfront lots in the Cameo Shores area of Newport Beach.
The ultramodern 30,000-square-foot mansion had the highest residential property assessment in Orange County at the end of 2005, when its assessed value was listed at $29 million, county records show.
“Ultimate Homes” magazine reported in January that $75 million was a record price nationwide in 2004 and that just two homes – Donald Trump’s $125 million estate in Palm Beach, Fla., and a $75 million residence in Bridgehampton, N.Y. – were going at that price or more in 2005.
The Wall Street Journal also reported in January that there are just 60 homes on the market nationwide selling for $30 million or more.
Three Orange County homes sold in 2005 for $22.5 million to $29 million, the first time any homes in Orange County sold for more than $20 million.
The “Portabello” mansion in Corona del Mar, according to the listing agent John McMonigle’s Web site, features ocean views from most rooms, and is designed like a nautilus shell.
Other features include a two-story grotto with a pool, two spas, a swim-up bar, tunnel slide, poolside lounge room and barbecue area.
It also boasts an “entertainment level” basement with a bowling alley, art deco theater, automotive museum, café and full exercise facility.
Now that is some BLING!
I just wanted to let all my fellow bloggers know that I will not take on a funny-money loan when I purchase this house, it will be all cash.
LOL
Who will be the sucker that overpays 75 - 29 = 46 mils?
I could never understand how a home could have more bathrooms than bedrooms. Does everyone who lives there have diarrhea at the same time or something?
Party hurlage factor - you have to have some extras for those frequent parties where many guests can be expected to blow chunks while your overnight guests have concurrant squirts.
I remember during the last downturn in the mid 90s how celebrities were getting great deals on million $ Beverly Hills homes.
Shoot, I just remembered those were some of the handful of few million dollar homes in California at the time. Well, I guess lots of new home debtors are living their Hollywood dreams for a while longer.
Here’s one for Ben…
Collectible cars can be a fun alternative to stocks and bonds
http://tinyurl.com/z2kge
Home buying runs below average, from OC Register
http://tinyurl.com/lzgbg
Great statistical roundup on all of our favorite topics here.
But remember, it’s not a bubble, it’s a baloon and we are gently floating down to a soft landing.
Yea!, a landing into a canyon full of jagged rocks and prickly pear cactus with 5 inch needles!
Here is Wendy:
http://www.freerepublic.com/focus/f-news/1402306/posts
got milf? LOL
I think my wife is hotter than that! I think I need to get her into real estate. It sounds like the path to enternal wealth or enternal HELL?!?!?!
Nice implants. I guess at least 1 commission went to a plastic surgeon. Maybe if she sells another house she can get her face fixed and buy a different bottle of hair dye.
LMFAO!
A.K.A. “Dusty Gazongas”
What startles me is how quickly the foreclosure thing is playing out. The quotes:
“there was no need for the foreclosure process; appreciation was so strong. People were able to refinance or sell the property and get a fresh start.”
and
“Notices of default, the first step toward mortgage foreclosure, jumped 60 percent in the San Diego region in the first three months of this year”
are stunning. Given that the market is still cresting, I would have thought the wipeouts would have waited for a few months. But here they are, and going to get worse.
I think that appreciation and HELOCs have acted like delay fuses for these foreclosures. A year ago, those 1500 idiots who normally eat hot deal, were able to get appraisals for big $ and fended off foreclosure. (or sold to even bigger FBs and GFs). But now it’s like a firewood stored for cold season, each successive quarter without these fools crashing and burning are just stockpiles of kindling and these rate hikes are like gasoline. Someone light a match, please.
hot death, not hot deal.
That is exactly what I was thinking. What? Already? I thought it would take at least a few more months for the foreclosures to start kicking in, what with the first of the ARMS just now resetting. Now we are seeing them (lenders) getting ready for large scale defaults? Dang! This thing is going to snowball into nothing but protruding hands and feet sooner than even I thought it possible. Look out below!!
You are so smart!
Yes, I am smart. Thanks for noticing!
Is this video an example of another willd card in the housing bubble? (see: Theft By Deception - Deciphering The Federal Income Tax
Los angeles Friends In Deed
Comment by Max
2006-05-15 14:13:09
got milf? LOL
LOL…and think Wendy should stick to RE. She would never get hired at the Crazy Horse in Las Vegas.
“Well at least that bulldog is in the proper position to cover up the gruesome stretchmarks. In real estate it’s - LOCATION, LOCATION, LOCATION!”
LOL
“David Berson, chief economist for mortgage-investment giant Fannie Mae. However, Berson is troubled that foreclosure activity is rising during a period of economic growth. ‘Normally this is a situation in which housing problems tend to go down, not up,’ Berson said. ‘If it continues, it could be a sign that borrowers are in financial distress.’”
HOLY SHIT!!! This genius is the chief economist of an organization holding trillions of dollars in mortgages. Financial distress - ya’ think? That’s what happens when illegal alien gardeners are buying $500,000 houses in Los Angeles.
What would be a sign that Fannie Mae is in financial distress? Maybe if they could not produce their financial reports for an indefinite period of time?
“In 2006, spring has seen record numbers of people lining up to sell their homes, but there’s been no subsequent rise in the rate of sales. Indeed, sales activity in April 2006 was down 30.7 percent from April 2005, despite the existence of almost 20,000 homes for buyers to choose from. That’s the biggest year-on-year decrease in sales rates since April 1995.”
Yea, 20,000 overpriced homes. Call me when the discounts hit 50%…yawn.
Remember, after the summer comes the fall.
And during the fall, a lot of people will be “flippin out”.
Make that over 20,250 overpriced homes (ziprealty.com shows over 200 homes with a listing date of 5/15/06, and these do not include FSBOs).
“Greg Speaks, (who) provides most of the For Sale signs seen in the county, said business has been booming in the last few months. That’s not surprising, given the recent spike in inventory, but Speaks said what’s more interesting is that he’s not been getting too many signs back from customers.”
D’oh!
FOR SALE signs…Now why didn’t I think of that angle?
Hmmm… who manufactures lockboxes? Are they publicly traded?
Wendy must have a night job at Angels in Long Beach showing off those silicone gabanzas.
If I were the illegal gardener that got $500K for the loan for a POS house, I would take the money and do as Taco Bell says - “Run for the border”
For the heck of it, please send an email to Wendy asking her to post up several ‘glamour’ shots on her website. http://www.teamheath.com - was really disappointed that she didn’t expand on her newly minted talent. And she is featuring a 2 bd room home in Belmont Shores for the bargain price of $899,000. I have my checkbook ready (and car for when the rubber hits).
STUPID QUOTE OF THE DAY….
http://www.sun-sentinel.com/business/local/sfl-zhomesbr16may16,0,157809.story?coll=sfla-business-front
“”People are not going to see much relief on insurance. They’re not going to see much relief on their taxes. I don’t see [prices] going much lower,” said Donn Roebke, an agent for Illustrated Properties in Wellington. “This is the best time for someone to go ahead and purchase a home.”