Is OC Moving Into The ‘Too Painful To Recall Department’?
A pair of reports on the Orange County, CA housing bubble. “The Orange County housing market continued to slow last month, with slumping sales and annual price gains in the single digits, figures released Tuesday show. And while the median price of an Orange County home set yet another record in April, at least one local real estate agent questioned whether that figure reflects an actual increase in local home values or an increase in the sale of high-end homes at reduced prices.”
“In March and April, there were nearly 34 price cuts for every 100 home sales listed in the Southern California MLS, which includes Orange County and parts of Los Angeles and Riverside counties. That compares with 21 price reductions per 100 sales in the same period last year, the MLS reported.”
“Meanwhile, the number of homes listed for sale in Orange County increased 121 percent in the past year, rising to 12,296 listings by the end of April. DataQuick figures show that sales dropped to 3,276 homes last month, down 16 percent from March at a time of year when sales typically accelerate. And sales were down 28 percent from the previous April.”
“(Realtor) Dick Lobin in Huntington Beach said a ’standoff between buyers and sellers’ is causing prices to rise while sales decline. ‘The buyers are saying no, no, no, unless it’s particularly nice, and the sellers have an abiding faith in the market,’ Lobin said.”
“A breakdown of Orange County sales by price show that lower-priced homes have been hit the hardest. For example, the number of homes selling below $600,000 dropped 40 percent or more last month, DataQuick said. Above $700,000, sales were down just 9.5 percent, with $1 million-plus homes off just 5 percent.”
“‘Who gets hurt the most when there’s pressure on the economy? It’s not the people with money,’ said Lobin, who focuses on the Garden Grove-Westminster area. ‘It’s tougher on the entry-level homebuyer.’”
“Cary Hairabedian, an agent who sells homes in Cypress, questioned whether home prices have gone up or high-end home sellers were more motivated. ‘So what happened? Overpriced, expensive homes slashed their prices,’ he said. ‘You’ve got this pendulum swinging back and forth. It skews things.’”
“Scott and Kristan Bruce took that into account when they priced their Tustin home to sell at $744,900. The Bruces, both teachers, decided to move to Cleveland because the price of a move-up home here is out of reach. ‘We’re listing it a little bit low compared to other homes to sell a little bit quicker,’ said Scott Bruce. ‘Now it’s a buyer’s market. The homes around here have been on the market a little bit longer.’”
“(Realtor) Bob Hunt in south Orange County said the last time he saw rising prices and declining sales was just before the housing bust of the 1990s. But that doesn’t mean history is about to repeat itself, he said. ‘I’m not saying we’re heading into the ’90s again. Certainly not,’ the veteran agent said. ‘It’s an anomalous market right now. You’d think (the prices) would be down.’”
And from Jon Lansner. “Six straight months. Six times Orange County couldn’t sell as many homes as last year. A losing streak of this length has occurred only three other times since DataQuick began tracking the market in 1988. Two of those times fall into the ‘too painful to recall’ department.”
“What’s clear is this slump is more than a blip. Last month’s 3,276 sales marked the slowest April since 1995, when an 11-month string of sales declines was in the works.”
“(Realtor) Bob Hunt in south Orange County said the last time he saw rising prices and declining sales was just before the housing bust of the 1990s. But that doesn’t mean history is about to repeat itself, he said. ‘I’m not saying we’re heading into the ’90s again. Certainly not,’ the veteran agent said. ‘It’s an anomalous market right now. You’d think (the prices) would be down.’”
Remember, this time, it is really different. And if you believe that I have some bridges for sale.
I, for one, truly do believe that it really is different this time. This time, it will be much much worse than anything we’ve seen before.
I totally agree.
Where they find 3,276 fools?
damned texan, arizonan speculators
Off topic - Recently a co-worker asked my opinion of the RE market, and of course, I was happy to oblige. Another co-worker overheard us and interjected with all the usual crap “different this time, soft landing, long haul, blah blah blah”, and of course, I was happy to rationally counter all of his -ahem- arguments. Apparently now there’s a rumor going on the office that I’m a real estate doomsday freak. That may be true, but I’ll also be the REDDF who won’t lose his shirt when it all starts to unravel.
I keep my mouth shut mostly and when I do provide an opinion it is usually in the form of a question from just another confused citizen:
“What confuses me is that between property taxes and HOA fees not to mention the mortgage it seems to be so much more expensive to own than rent? I mean, aren’t I throwing away money on all that other stuff too?”
In my best wonderingly simple voice.
I have a friend who shares my exact thoughts on the Real Estate market. He has a big mouth and gets a lot of flack for it. I don’t care about being “right” right now, I’ll just be rich later on.
I make an exception for close friends I want to keep out of “danger” but it has to be a pretty close friend.
Yes, I find that I have to be very careful with who I talk about the housing market with. People who don’t want to believe there is a bubble get really upset if you mention that. It’s a very emotional subject.
And from Jon Lansner. “Six straight months. Six times Orange County couldn’t sell as many homes as last year. A losing streak of this length has occurred only three other times since DataQuick began tracking the market in 1988. Two of those times fall into the ‘too painful to recall’ department.”
These housing downturns are quite similar to childbirth (by my vicarious observation) — the pain is so intense that it is erased from memory after the fact, which sets the stage for the next similar episode.
I beleive it’s the belief the pain is so far out in the future we are able to dismiss it as something we’ll deal with when it happens, and hope for the best in the meantime. Related to why history is doomed to repeat itself and people are able to delude themselves into thinking “it’s different this time”.
I believe that’s precisely why I have an only child…and…I will never again buy high. I’ll wait a coulpe of years.
Just watched Glengarry Glen Ross last night. What a great flick. There isn’t a second where some shmuck isn’t trying to sell some other shmuck something and the backdrop is Real Estate. And no one wanted to buy.
Year of release: 1992.
My favorite quote which I couldn’t find in IMDB was the guy hustling Levine out of his house saying “My wife filled out a card two years ago and we’ve been harassed ever since. I don’t want to buy Real Estate, not now, NOT EVER.”
Freepness,
I’m not familiar with real estate lingo. What card?
Oh it was just some card out of magazine or something. Some way they got the leads. Or it could have been that stupid crap they have at the malls…
oh a sales lead generating thing. thanks
An addition to Stjoe’s comments regarding Mr Hunt.
“IT LOOKS LIKE A DUCK. IT QUACKS LIKE A DUCK. IT WALKS LIKE A DUCK. IT ACTS LIKE A DUCK. BUT, IT IS NOT A DUCK. IT MUST BE A SWAN.”
“(Realtor) Bob Hunt in south Orange County said the last time he saw rising prices and declining sales was just before the housing bust of the 1990s. But that doesn’t mean history is about to repeat itself, he said. ‘I’m not saying we’re heading into the ’90s again. Certainly not,’ the veteran agent said. ‘It’s an anomalous market right now. You’d think (the prices) would be down.’”
Denial is more than a river in Egypt.
Why, you are exactly right sir. I DO think price are down.
Don’t you?
Reading his comments, I’m not convinced it’s denial. I think it’s might be that he can’t bring himself to say what he knows is happening / wants to say because of peer pressure.
homes selling below $600,000 dropped 40 percent or more last month… ‘It’s tougher on the entry-level homebuyer.’”
Entry level homes at $600K?? Lol, of course there won’t be any crash there.
Exactly. I live here and it’s a joke. The people that have bought into this over the past couple years are in for a rude awakening in the very near future.
An interesting point: I’ve talked to owners that are in homes recently purchased for $1M+ and they agree that people buying $500,000 “starter” homes may be in for an adjustment, but the more “desirable” $1M+ plus homes with ocean views, etc. will “hold their value”. Hmm…so the $500,000 homes could become $350,000 homes, but the $1.5M home will hold it’s value? I’m not sure where the logic is in this, but I’ve heard this from more than a few recent buyers of homes in excess of $1M. Any thoughts?
I am not very familiar with your area, but if it behaves as the NorthShore suburbs of Chicago behaved in the last downturn (1990’s)- then some of your acquaintances in the most expensive houses are correct. However the houses priced not on the lake and geographically undesirable - Dropped. Including suburbs like Deerfield, Northbrook, Libertyville etc. winnetka, Glencoe, Kenilworth, Lake Forest did not appreciate for 5 years.
Also, back in the ’90s the average buyer in the nicer ‘burbs “wrote a reader” aka paid CASH. My average borrower in these areas are leveraged tothe hilt. Different this time.
…but the $1.5M home will hold it’s value?
I’m not sure where the logic is in this…
I don’t think there is any logic other than wishful
thinking by realtors.
In other words, just more urban mythology.
As a 27 year resident of Irvine, (Orange County) I can
assure you that just as many “rich” households around
here are leveraged upto their eyeballs as Joe Average.
Probably even more so ’cause social expectations
rise along with the neighborhood.
Sure, there are some for real very, very wealthy
people in the OC. But I firmly believe their numbers
are far less than what is sometimes imagined.
Per the US Census, even the “rich” zip code median
household incomes are not sky high.
I personally know of households who have to have the
latest Beemer, but can’t find enough cash to replace
the 25-year old roof on their house, or someone I
happened to talk to yesterday who is not taking a
family vacation this year ’cause the heating, A/C
system had to be replaced.
Everybody rich in the OC? You betcha!
Here’s where it gets ugly. The dope with the $1M mortgage without 3 nickels to rub together suffers, for argument’s sake, the same 30% decline that hits the $400K mortgage holder in a starter. The difference now is the $1M chump is $300K upside-down where the $400K dolt is $120K out. The leverage is the same but the guy taking the biggest risk takes the biggest hit - BY FAR, IN DOLLARS!
And then… the lenders suck it up and get bailed out by our kids since this all gets added to the nation’s debt (provided the USG can even find buyers for bonds)…
Here is a perfect way to look up AGI by Zip code.
A poster on the OCR blog pointed this out. It is a great tool better than census data.
http://www.melissadata.com/lookups/TaxZip.asp?Zip=92648
Zillow told me my house was more expensive than 97% of homes in America.
I pack a lunch because I am too cheap to eat out everyday.
Does not compute.
Right. I grew up in Palo Alto, then got transferred to Orange County. Sound glamorous? I’m in the Brown Bag Brigade too, and I drive a 1994 Geo. It’s like Alice in Wonderland anymore. Does this end?
Zillow tells me I have 6 bedrooms and 3 bathrooms and about 10,000 sq. ft. property.
Actual is front house 3 br. 1 ba. 963 sq. ft. with geanny quarter of about 400 sq. ft. and 1 bath. If you make a bid, sight unseen, you may be crushed.
Zillow values my property at $987K - I wish! $$725 on a good day. County records, on which tey are based, are often wrong.
If you have ever gone up into the Hollywood hills, Bel-air, brentwood, beverly hills, The Mullolland ridge, malibue, ect and seen all those muli-million dollar mansions nestled in the hills you would swear that LA was nothing but a town full of filthy-rich celebrities/producers/media moguls.
I’m in the western burbs of Chicago & in the sales records (been looking stuff up in them since 2001), the houses that went down in price in the 90s were mostly the expensive houses.
They were expensive houses that went down! Libertyville and Northbrook are not inexpensive. But the multi million houses in Kenilworth, Winnetka, Lake forest were flat. Until the 1994 FED meeting that started this housing bubble on its way.
The expensive will get hammered too and probably more so as there is a smaller pool of buyers out there. This happened last time in the SF Bay Area.
Norcal Ray,
Was the timing/declines in the bay area similar to Los Angeles? (1990 - 1998). Do you think the bay area will take the level of hits that say Phx, Las Vegas, Boston will get?
Dont know nothing about buyin no house,
The timing of the decline was similar to LA but the length and % of decline was less severe. I think this was due to the tech industry starting to pick up in 1994. Still some areas got hit just almost as bad as LA.
I don’t think the bay area will get hit as hard as Phx, Las Vegas, Boston will get hit but it probably won’t be a lot less. Depends on the local economy and jobs going foward. We will probably get hit as hard as LA this time.
Thanks for your perspective. Possibly I’ve been talking to too many bay area people who are convincing even me they are somewhat immune from what the rest of us will endure.
It also depends somewhat upon when that other monster bubble down in Mountain View implodes. I think its called Google or something like that.
The $1mil barrier has migrated inland from the beaches so now you have homes that probably sold for 400k a few years back carrying prices of $1mil or better 2 or so miles inland. IMHO we will see prices revert everywhere. There are as many FBs in those $1mil homes as in those $500k POS. I have a good friend who has lived here all his life (in OC) and he told me three years ago to wait because he has seen it rise and fall numerous times and each time the highest priced propoerties took a hit as great or greater percentager wise as the lower priced ones. The fantasy that “We are richer, so we are different” just will not hold water.
For laughs, I visited Prado on Lake in Pasadena this weekend.
Starting fare is $607k for 943 sq.ft. with assoc. fee > $600/mo.!
With a 6% mortgage, 100% financing (which takes care of op. cost of any DP) and 1.2% prop. tax rate, you’ve got monthly carry cost of about $5k!!! How ’bout those DTI figures for “entry-level” (bagholder) buyers? Any takers/suckers?
Those “assoc. fees” are really going to kill projects like that. The price of the house will go down over time and new buyers will get back in the market. But when the “assoc. fee” is so substantial and doesn’t go down over time, it kills the underlying asset. (The home.)
And in fact, to maintain the same level of revenue in the face of high vacancy those rates will need to CONTINUE.
I foresee a lot of worn lobby carpets in the future.
“Those “assoc. fees” are really going to kill projects like that.”
People say that by living in a trailer, I’m not a homeowner. Neither is this guy. His HOA is more than my lot rent. And I’d bet my trailer is just as nice than his 943 sq ft starter.
At least I’m not paying mortgage on top of my rent.
This condo development is 4 blocks from where I work. Yes, the Lake Street business district is very “desirable” and close to everything, G–dammit! 943sft for $5/month ?? How the hell could even come close to being “affordable” for anyone likely to want to buy it (FTB childless couples, IT engineers, etc.). if you combine two well paid IT engineer’s salaries, this would eat up *at least* 50% of take-home pay, probably a lot more. Forget a single income buyer/family or couples with kids or anyone below the top income quintile.
The schools in Pasadena aren’t very good and most of the families who can afford it send their children to private school.So the rest of the income goes for tuition!
943 sq. ft kind of limits the ability of taking in borders. At least with the McMansion you can rent out three or four rooms to help make the I/O payments.
There seems to be a lot of Pasadenans in this thread so here goes. I’m looking for a place to rent in pasadena, 2br
Comment got cut off, strange..
anyway…2br
Comment got cut off, strange..
anyway…2br $1600 month, any tips would be most welcome.
Pasadena has some interesting old retored buildings such as the classical turn-of -century structure on colorado off lake currently housing the Pasadena City Hall offices. Pasadena has a good walking downtown district with good sights. Still, paying $5000 grand a month for a condo in DWTN Pasadena is steep? And no Beach? Also, traffic around that area and on the 210 is terrible! I would compare similar units in Santa Monia, Manhatten Beach, or Huntington beach near Main Street/Pier, unless i had a high-paying job in Pasadena and could walk?bike to work.
She just mad becuase somonen over in Westminster and GG are telling there sellers to lower there asking price and they are.
I look at Zip almost everyday and both those city’s are still high for my taste, but at least I’m not seeing starting prices at 800k plus for a 1500sqft home. Townhomes In these area’s New listing are in the low 500’s, to high 500’s, and low 600’s, when they where trying to get 700’s plus. SFH are being listed in the low to high 600’s from 1100sqft to 1900sqft
But In Huntington Beach there reducing there prices $10dollars, $1000dollars, one guy yesterday had big reduction on his listing, I looked it was $1dollar! He went from $658,999 to $658,998 some of these people arn’t even trying and deserve to lose.
There just trying to make more then a buck thanks to these Realitors and greed!!!!!
A reduction (however small even $1) shows up in green in the MLS perhaps drawing more attention to the listing. Desperate stuff though.
And on a percentage basis it would be……….?
I have an idea to make some affordable housing. Let’s take the office buildings cleared out by the likes of Ameriquest, and other dying lenders, and make CUBICLE-CONDO’s. If Ameriquest fired 1000 MB, then that is 1000 cubicles to turn into a mini-condo. Each one should be about 8 by 8. The lucky owner will have a place for their clothes (thanks to overhead hang), computer, and a fold-out cot. They will have to have a restroom share, and maybe have a community shower added in each restroom. This would work in all of the cities across the country where they are not building any more land. Like San Diego, Miami Seattle, SF, Boston, NYC, Wash DC, etc.
Any more refining ideas.
SUVs and Cabin Cruisers are bigger.
Don’t give them any ideas!
LOL. I mean, maybe not this time, but God knows, during the NEXT bubble something like this may be tried.
Granite desks, anyone?
You mean that Ameriquest building off the 405 and jamboree/Von karmen? There is also the Argent Mortgage building and other RE Lending giants right there. Yes they would make excellent stacked affordable housing units, expecially for the bourgeoning immigrant population in nearby Santa Ana/Costa mesa. Note: there appears to be a ton of stacked condo/townhome/lofts/apts springing up all over OC. There is massive development occurring in the Platinium triangle around Anaheim stadium, construction along jamboree off the 405, More units near 405/5 junction,ect. OC will soon become a county of stacked condo units instead of an endless flat horizon of SFH’s.
OC is not different. The housing bubble will hit there, there will be no soft landing in Orange County
David
Bubble Meter Blog
As Chris Thornberg says:
OC really is different. If you drive down the 405 a TON of sub-prime lenders are HQ’d here.
OC will get hammered!
[Borrowing from UCLA's Chris Thornburg and Sunsetbeachguy]
I say: “Thornburg quotes for everyone! ‘OC will get hammered!’”
http://video.google.com/videoplay?docid=-2640239019877885520&q=housing+bubble
I have been mesmerized lately by this totally inane show “Housewives of Orange County”. It’s this reality show of “Cota de Caza” or something like that where everyone is white and drives a 50,000 dollar SUV. What’s funny about it is, everyone on the damned show is a mortgage broker or realtor. All these people do is sell houses and mortgages to each other. Aside from getting an occasional boob job or having a pool party, this is all they do. How long can a local economy go on like this?
Have been to Cota de Caza,which is probably the newest master planned community in Rancho San margarita, and is nestled right against the Cleveland nat forest. Went to one 2 block long cul de scac and saw 4 million dollar homes for sale. Have to admit, it is an absolute marvel in planned community development, right down to the roadside turnoff/park with a view of an artificial lake.
Been there too, to visit friends. Elitist in a way, but more in a good way than bad. Feels very safe and close to nature.
Close to mountain lions too.
Actually, there was a blurb in the Reno links yesterday about how builders are putting up condos that look like McMansions from the exterior. I guess some of the discussion of cutting up the large houses into sub-units is very possible.
Mcmansions … could be useful as rooming house/soup kitchens for unemployed mortgage brokers.
Some first-hand OC housing history: In 1987 bought a house in a Dana Point subdivision for $250k. We bought in first phase from builder. Same plan was $400k at phase 4 in 1989. Put the house on the market in 1996 for $300 thou. Had to drop the price to original $250 to attract a buyer. There were 20+ foreclosures to compete with. Of cousre we took a loss after RE fees etc. Lesson learned: Prices don’t always revert to the mean- they pass it.
I agree - and that is why I believe this will take 15 years to unravel.
Now THAT is a long-term outlook.
SLO Invester: Would love to see your input on my blog.
Please post the link to the Central Coast blog! I’m addicted.
At least you weren’t the $400k ‘last man in’ who did end up losing some substantial dough. Maybe they hung on and sold last year for $1m though?
Bought a condo in Torrance (LA near coast) 1986 for 120K. Prices went to 145K in 1988 at top of bubble. Prices dropped to low of 75 K in 1995 at the low. I sold at 85K in 1999. Condo now sells for 220k.
Point being, the whole cycle of bubble top in 1988 to the “time to buy lows” was around 8 years. Why would this time be different?
“‘Who gets hurt the most when there’s pressure on the economy? It’s not the people with money,’ said Lobin, who focuses on the Garden Grove-Westminster area. ‘It’s tougher on the entry-level homebuyer.’”
He is wrong, because he is equating *not* purchasing a home with getting “hurt.” Actually, entry-level homebuyers are doing fine, because they have been priced out, are not buying, and will not have negative equity when they pick up the keys. Anyone who is currently buying (or bought last year) is in trouble.
It is important to not let language like this seep into future discussions of a bailout. The person who is getting hurt when prices don’t fall and homes don’t sell is the home seller.
Believe it or not, there are some first time buyers out there buying. And they will be hurt.
OC really is different. If you drive down the 405 a TON of sub-prime lenders are HQ’d here.
Lots of room to build the CUBICLE-CONDO’s. Let’s clear out that excess commercial property. There is no more land that you know of. Add more cars to the world’s longest parking lot (405)
Lets not forget Park Place funding right off the 405 in laguna hills. Their operation is rather small in scale, almost like a boiler-room operation. Compare that with Countrywide’s Corporate MegaOperations Campus in Simi valley, which rivals a boeing factory in size and scope.
a little OT - phoenix is flirting with 46k.
i love a good flirt
now back to our regular scheduled program
Get your black balloons ready for the big 50!
I believe those numbers are for AZ. That does not make them any less spectaclular. Phx is in the 25k range. Anyone confirm or deny?
for consistency we report the phoenix and sd #’s from zip. and by all accounts, that is the metro area (no prescott, tucson or otherwise)
If you go to ziprealty, those are the numbers for all counties in the Phoenix area, ie Maricopa and Pinal. So it’s not the whole state.
There are something like 3.8M people, so 45K houses is alot but not an incredible amount. If you add in the builder houses that aren’t listed, it’s probably 15K more.
I saw 8, yes 8 houses, for sale on a single block in Higley, AZ. How depressing for the one guy who really has to move, some comes to look at his house and every other house is for sale. Hopefully he bought in ‘01 and can lower the price enough to bring down the comps for all the greedy investors trying to sell in his neighborhood.
That is the sort of situation that is going to absolutely pop the bubble. If 2 of those 8 have to sell for whatever reason (financial, have to relocate, etc.) then there is going to be a reverse bidding war that will drive down the comps for all the other houses in the area. That sort of situation is why I think that this market is going to move down very, very quickly. We’ve already got the inventory action, now all we need to see is the price action. Surely it can’t be far behind.
Can you imagine the animosity among home owners in a lot of these neighbourhoods where so many homes are for sale? They all want to sell first and would hate to see another house go before theirs. Then when one guy starts the price war they’ll all hate him for lowering the bar for them all. Wonder if we’ll see some headlines like …
‘Rival homesellers involved in shootout in Phoenix subarbs’.
Where the hell is Higley in relation to Phoenix? Jobs? Industry? Golf courses?
Higley is right next to Gilbert. Actually a decent area but not many people live there
OT- Today’s stock market correction a precursor to housing bubble inflection point? What do you guys think? My potfolio is 80% short right now.
I just watched the Closing Bell on CNBC and several of the guests blamed the drop on the combination of the housing market and interest rates. Not the present dynamics of them, but what they fear is coming. Its like the perfect storm brewing.
I’m 100% cash right now. I was 50% gold this morning, but I sold off. I’m looking far bargains and it won’t be a house.
I think that it was the iNflation report which sent the Stock Market diving. DId the CNBC commentators mention anything about the dangers of a rapidly falling dollar? I would rather get my info from “the prudent Bear” or other Internet site that listen to the TV news network blather.
“(Realtor) Bob Hunt in south Orange County said the last time he saw rising prices and declining sales was just before the housing bust of the 1990s. But that doesn’t mean history is about to repeat itself, he said. ‘I’m not saying we’re heading into the ’90s again. Certainly not,’ the veteran agent said. ‘It’s an anomalous market right now. You’d think (the prices) would be down.’”
——————————————————————
I think this is the first time we have seen the word “anomalous” to describe the market. How to talk out of both sides of your mouth and not risk being called a liar.
Don’t know why Bob Hunt reminds me the shrink who appeared in all 3 Terminator movies.
The Five Stages of (RE Market) Death and Dying
1. Denial
2. Concern
3. Worry
4. Fear
5. Panic
Are we at the stage 2 yet?
Re DS’s 5 Stages of Real Estate Death and Dying:
Are we at #2 or #3? Checked Dow at -214 but seems like emotion sets in for a day and then we’re back up like someone changed the channel.
We are just getting out of denail as far as the stock market is concerned. CNBC’s Closing Bell interviewed their guests and all seemed to agree that people are very worried about the combination of inflation, rising interest rates and a falling housing market. That is the first time that I have seen housing in general attributed to a stock decline. I’d say we’ve got many, many more days like today ahead of us.
when you talk about people losing everything, to the tune of 100’s of 1000’s of $’s, and becoming IRS tax slaves to boot then all bets are off.
i picture these poor bastards being herded into roman galleys ben hur style and rowing against their wills for the rest of their pathetic lives.
sadly, many folks will skip straight to depression, insanity, drug addiction, divorce, domestic violence, murder and suicide
‘The buyers are saying no, no, no, unless it’s particularly nice, and the sellers have an abiding faith in the market,’ Lobin said.”
———————————————————————
The entire market is based on faith. NOT fundamentals. I know who wins, and it’s not faith.
When does the new psychology kick in that opens the eyes of to those with “abiding faith in the market?”
Come on O.C.! Open your eyes and admit that the facts on the table now truly have shaken your faith.
I know, I know there-there have a good cry. It’s o.k.
I live in Irvine ( the heart of OC ) Most of the homes for sale in my neighborhood are owned by realtors! Trust me when I say that there are no cars out in front of the open houses. The rent on my condo is less than half of what the house payment is. My landlord is getting killed! LOL
Renting is such a BARGAIN relative to being a mortgage payer, easily 1/2 the monthly outlay and no downside (true, no upside either but that’s gone for a good while).
I am so happy I sold my Oak Creek (Irvine) condo in Spring of ‘04!
Factoring in payments, taxes, assoc., etc. I’m still ahead of the game having sold where I did vs. where prices are now and where they’re heading. It’s good to have time on your side, as the bagholders are learning the hard way. Watch for DOM to increase even more before prices really start to tank.
exactly. there is no “stand-off” between buyers and sellers right now. there is no “blink first” contest going on.
the passing of time will not force the hand of a buyer.
Same story in San Clemente. Beautiful neighborhood, but when the average purchase price is $950,000, and my rent is only $1,400 next door, someone’s being taken to the cleaners. It isn’t me.
That sounds just like the SF Bay Area!
This is so true in Irvine. I have access to MLS from a friend and on the realtors comments it seems like all of them say that they are owned by a licensed realtor.
One of these is a condo on our area. Bought 2 years ago for 475k, for sale now at 780k. No way in hell am I going to give some owner $300k profit for doing absolutely nothing. For now we will continue to rent with cash in the bank. Still not seeing the prices dropping yet though. This is getting ridiculous. We will want to buy eventually…
I’m in San Diego and that’s exactly how I feel as well. No way in hell am I funding someone elses retirement plan (their SD house) just because the weather here is nice.
I just calculated my rent vs buy.
I am renting for 29% of the cost of buying.
you win.
Lee Irvine
I move to FV a year ago and renting, moving this weekend back to HB save $600 a month in rent! Renting another 3/2 house, but where I live In Green Valley over by Mile Square this Realitor has 3homes up for sales there since I moved In. He finally rented one but the other 2 still sit empty! I wonder if he’s hurting?
Looks like there are an abundance of recent Hispanic/other immigrants to rent out to in that area. That desperate realter/landlord needs to connect to the burgeoning Hispanic population and get 2-3 immigrant families to move in with their 10 siblings/children. They might end up trashing the place but at least he will have cash flow.
‘We’re listing it a little bit low compared to other homes to sell a little bit quicker,’ said Scott Bruce. ‘Now it’s a buyer’s market.’
When sellers start to agree that it’s a buyers market, we are making progress.
He’ll be chasing the market down too. A little bit lower isn’t going to cut it with homes coming on the market in droves. The next listing will be a little bit lower and so on…
Orange County sales have slowed a lot this year. Resales (SFRs and condos) per MLS:
4/15/06 to 5/14/06 $739,868 avg price / 2,326 sales
4/15/05 to 5/14/05 $688,757 avg price / 3,888 sales
prices up 7.4% / volume down 40%
also, last year prices had increased 10% from Jan 2005 through mid May 2005. this year prices are only up 2.1% during the same time period.
looks like scary Gary Watts may have to rethink his 15% forecasted price increase.
looks like scary Gary Watts may have to rethink his 15% forecasted price increase.
_________________________________________
No need to check “its already in the bag”!
OT:
You Gotta Have Park… Without the Condos
“Metro has an interview with ESDC chairman Charles Gargano, who says he wants to get “Brooklyn Bridge Park up to a level where work can begin in early ’07.” Interestingly enough, a bunch of civic groups and the Sierra Club have joined together and sued to stop construction of Brooklyn Bridge Park over the inclusion of high-end real estate. Originally, the plan was to put 700 condos in to offset some of the park’s operating expenses - but then the number of condos went to 900, and now the plan has 1200. The lawsuit claims that the Empire State Development Corporation has been “rewriting” the rules when it comes to planning the park.
“Check out the plan for Brooklyn Bridge Park. And in his Metro interview, Gargano says that in 10 years, New York will look “better than ever. You will see a built World Trade Center, including the new memorial and the new transit hub. You will see a new Javits, the new Moynihan Station. You’ll see a thriving Queens West with tall residential towers. You’ll see Atlantic Yards completed. You’ll see a new Yankee Stadium. A new Mets stadium. New buildings for Bank of America and Goldman Sachs. Brooklyn Bridge Park completed. We will have our waterfronts cleaned up with parks.” That’s optimistic, but we hope the city will have more parks, too.”
I think OC will just be the next Bay Area, where prices skyrocket into the millions even though no one at all can afford them. The subprime lender crash has already begun, but the bidding wars on $600,000 starter condos continues.
The Bay Area sees healthy increases in home values even in years where they lose hundreds of thousands of jobs (and population outflows). There is another set of “fundamentals” at play in California for which the supply/demand and affordability equations are exempted.
I’m going to assume you are being sarcastic or have a dry sense of humor.
are you the same guy who posted a couple of months ago that LA is the new Paris? Stanton is not San Francisco.
Actually LA is the new Mexico City.
“The Bay Area sees healthy increases in home values even in years where they lose hundreds of thousands of jobs (and population outflows). There is another set of “fundamentals” at play in California for which the supply/demand and affordability equations are exempted.”
“Fundamentals”?
This kind? That houses continued to climb in value in the SF Bay despite layoffs, etc., because of the financially self-delusional behavior of the populace, combined with the policies of the Easy Al Fed and along with lax lending standards.
Do you realize your first sentence makes no sense at all? “Prices will skyrocket even though no one can afford them?” What set of ‘fundamentals’ do you think exists outside of fairyland that would allow this to continue indefinitely? Please enlighten us.
Just because you don’t like it, doesn’t make it untrue. So quit your little tantrum. Prices have been skyrocketing for five years. They were thrice removed from any sort of fundamentals BEFORE the run-up. Almost no one can afford current prices. Why is this such a mental obstacle for you?
The new “fundamentals” are clearly outlined in the New Affordability Rulebook, written by Dr. Howe Muchamonth. You should read it.
Honestly, if you don’t understand how this has gone much farther than it’s ever gone before and it’s not sustainable then there is no hope for you. You should be loading up on real estate in So Cal right now then- plenty to choose from.
And I don’t need to read a book from some fool with an agenda to think that this times it’s different.
I think it is sarcasm.
But about 6 months ago there was a RE bull with a similar handle so I don’t know.
“I think it is sarcasm.”
What this blog really needs is a sarcasm font.
With all due respect, da OC ain’t SF! SF is a world-class city, the OC, while fantastic in many spots, can’t hold a candle to SF.
And, on a parity basis, $/sq.ft. comparisons aren’t that far off between the two areas.
Has Scary Gary “It’s in the Bag” Watts made any recent comments to back up his hot air he was blowing earlier in the year. We’d love to have a video cam stuck in his office to watch the sweat off of his fat forehead, and listening to the calls from the FBers who bought their depreciated home thanks to his professional recommendation (the old fat wind bag).
He’s still spot on. Scary iasn’t it? Yes, 17% for VenCo and 16% for OC 2006 versus 2005 is still mathematically dead on. Of course we all know better but there honestly isn’t any data to support that certainty.
about a month ago i think he said he’s holding to his 15% forecast, but if inventory continues to increase he said he may have to redo it. he said that sellers have jumped the gun this year by putting their homes on the market earlier than usual and he expects inventory to decrease somewhat going into the summer months.
don’t know if he’s right or not. OC inventory for sale has gone up 81% since Jan 1 of this year and up 6.8% since May 1.
FYI, Gary Watts was on the OCR RE blog.
See here:
http://blogs.ocregister.com/lansner/archives/2006/04/insider_qa_housings_1_fan_gary.html#comments
Here is the link for Wendy. Check her out.
2006-05-16 09:21:36
I sent an email to Wendy, the bikini clad realtor in Long Beach. I asked her where the portfolio pictures were on her website. LOL - here was her response - enjoy - free free to send more
Her website is http://www.teamheath.com on one of the posts yesterday, someone provided a link to the billboard picture that Wendy had purchased. LOL - you can actually see the billboard on her site.
WLMOM@aol.com Add to Address BookAdd to Address Book Add Mobile Alert
Date: Tue, 16 May 2006 08:05:23 EDT
Subject: Re: Website Contact
To: housingbubblesob@.com
Al-
Click on the “Got Real Estate?” button.
Take care-
Wendy
The house next door to me is for sale by a realtor with the first name of Melissa. She stuck her card in our door, and her website is, and I sh*t you not, missyallover.com. If that doesn’t sound like a porn site, I don’t know what does, but my husband and I laughed for like 10 minutes, until we realized that we wouldn’t forget it, either. And I haven’t…
Is this what the Desperate soon-to-be-out-of work Realters are resorting to, using sexy-suggestive Business cards so it’s hard to tell if you’re dealing with a realtor or an exotic service.
Housing bubble is poping: http://www.lewrockwell.com/north/north455.html
March and April have shown us that the boom phase of this cycle is behind us, so now it’s just a question of how the cycle ends. Right now it looks like changes in the real estate market are happening gradually. But there’s a lot of uncertainty among analysts regarding the effect of higher interest rates and how fast the economy is generating demand in regional markets,”
How the heck is the economy going to generate “regional demand” in a bubble market when probably 50% of the jobs there were related to housing in the first place ? If anything, demand is going to fall ! We’ve got a storm that is going to build in intensity as it plays out here !
http://www.dqnews.com/RRSCA0506.shtm
…but the $1.5M home will hold it’s value?
I’m not sure where the logic is in this…
————————————————————–
Those $ 1 million dollar homes cost $ 500k just 4 short years ago. The truly “wealthy” folk who live in OC (less than 5% of the population) don’t typically buy these types of homes but choose the multi-$$$ Million estate.
The problem with Orange County is that most everyone “thinks” they’re the new landed gentry and are holding on to the illusion of their homes value.
I agree. IMO - recent buyers (1-2 years) of homes in the $1M range in SoCal will get burned badly as prices drop, interest rates rise and ARMs reset.
My theoretically technically supposedly never even close in reality $1.3-1.4m home cost $0.2m real dollars just a decade ago. I’m not the problem. The people that bought over the fence in 2005 for $2.1m are the problem. They were convinced as to “the value in the land.” Wipe their $500k structure from their lot and wipe my $200k structure and we are even. See the problem? Actually it is worse. They pay 1.2% in taxes and I pay 1.2% in taxes. Their holding costs are killing them. Personally I’d love my house to be worth half what I paid so that I could halve my taxes. Nothing else in my life would change. See the problem? I don’t think think the repercussions are sinking in. The last decade in home price increases are based on the most stupid persons worst judgement. It ain’t realized wealth until you cash out and I am not talking HELOC but to actually divest assets. If you just hold the house you ain’t rich yet.
If you just hold the house you ain’t rich yet.
Absolutely correct. 1000 percent.
I have studied the Irvine market for years and have developed
an empirical rule that the carry costs (exclusive of any
mortgage) is 2-4 percent of the purchase price per year.
(In a few cases even higher)
I define carry costs as Property Taxes, Insurance, Association
dues, and routine maintenance.
Nor does it include ’social image costs’ — meaning expensive furniture, plasma TV’s, etc.
These costs (with exception of some maintenance)
cannot be deferred and are due on presentation in cash .
One thing I would like to understand before I die is a) the
mystery of the great pyramids and b) how already over-leveraged
homeowners can fund such carry costs.
SInce this blog is about real estate I will have to get my
answer about a) elsewhere.
Anybody got any theories about b) ????. Some mysterious
source of cash that noone has told me about??
Often it’s not paid with cash, it’s paid with further debt, or by failing to save for retirement, etc. The homeowner doesn’t feel bad taking on, because in his mind, his net worth is still huge-and lenders are happy to look at this net worth and loan away. These folks have often financed their cars, vacations etc etc etc with HELOCs, with a minimum payment that barely or does not even hit principal, so their need for cash flow is lower. Same with the mortgage itself. The dream is that when they go to sell this will all wash away in a spring rain of equity…..
Gimme a C
Gimme a R
Gimme a E
Gimme a D
Gimme a I
Gimme a T
What’s that spell?
What’s that spell?
Yes, it’s called a HELOC. Mystery solved.
b) HELOC’s or reverse amortization mortgages
One of the most popular mortgages in No Cal is a 2.9% interest only product that accrues at a rate of 7% (4% adding per year). If you take the 2.9% PLUS 3% of other costs, you are at 6% interest only, which on $1MM house is $5k per month. Manageable with one big salary or two smaller salaries . . . perhaps not lots of eating out though . . .
OK, but all this debt has to have a limit. These guys that can’t make the carrying costs on their house are going to get slaughtered when appreciation stops or depreciation begins.
I think those numbers you are proposing may not be accurate since the value of homes departed from their costs. A $1MM 800 sq ft dump in Venice beach, CA would not cost 1-2% to maintain. Also, since you insure the structure and not the land, the cost to rebuild (and hence the cost to insure) would be fairly minimal (perhaps $100K). Your property taxes would be very high, but none of the other additional costs track.
The “mystery” of the pyramids is no mystery even in the present environment. The pyramids were invested in by people who thought they could live forever and thus safely assume collective debt of centuries if not millenia. A sense of mortality is equally in order today. All four of my own childrens’ grandparents made plans for their children (and progeny); me, my siblings, my wife and her siblings. None of us need it and none have died. These are both amazing facts taken in historical perspective. “Lucky” since 2 of the 4 are still busy spending our inhieritance with our blessings.
That said; expenses 2-4% per year exclusive of mortgage costs is waaay too low. California Prop 13 taxes after 30 years is already 2% per year of purchase price. is there anything lower than that? Massachusetts pays 2 1/4 percent in taxes don’t they? Insurance has nothing to do with purchase price as well. Then except for California and a few select sunbelt areas 1% per year in mantainence is too low as well. I say 5-7% is a better middle range. I’m lucky with the low end but I see aging relatives in New England paying more in just lawn care and snow removal than I pay in taxes. Homeownership is a costly undertaking.
Don’t shortchange Plasma screens however. It doesn’t take many $6 buckets of popcorn and $9.50 seats to cover the monthly cost of a 42 inch and Orville Redenbacher’s.
“Don’t shortchange Plasma screens however. It doesn’t take many $6 buckets of popcorn and $9.50 seats to cover the monthly cost of a 42 inch and Orville Redenbacher’s.”
Holy smokes, good point. I might stop making jokes about plasma TVs. But I’m NOT going to stop making fun of Hummers.
Damn straight. Hummers are just the silliest examples of … I don’t know… compenstaion, ostentation? The funny part is that real Hummers are great vehicles; tough, long lasting, economical. The abortions they call Hummers and sell to the public are just top heavy overweight Chevy trucks with steroid problems. Gee, see any relationship to recent housing trends? Same deal. What we lump together as McMansions are a few serving needs in an efficient manner and the junk offered to the public being ugly dogs with big appetites.
I think you’re imagining things Rob. Or jealous.
Yes! it’s called plastic!
Some still looking for GF to holding the bag while they plunder the equity?
http://albuquerque.craigslist.org/fns/161844999.html
***MAKE $10,000 IF YOU HAVE GOOD CREDIT***
——————————————————————————–
Reply to: serv-161844999@craigslist.org
Date: 2006-05-17, 1:53PM MDT
IF YOU HAVE GOOD CREDIT, YOU CAN MAKE $10,000 FOR PARTNERING WITH US IN THE ACQUISITION OF REAL ESTATE IN THE UNITED STATES. ALL YOU HAVE TO DO IS HAVE GOOD CREDIT. WE TAKE CARE OF THE REST. IF YOU ARE INTERESTED IN MAKING $10,000 IN THE NEXT THREE WEEKS, PLEASE REPLY VIA E-MAIL.
ONLY SERIOUS REPLIES.
no — it’s NOT ok to contact this poster with services or other commercial interests
161844999
I believe those numbers are for AZ. Phx is at like 26k. Anyone confirm or deny?
http://www.ziprealty.com/maps/index.jsp?cKey=4j67s47w
this is the source of our numbers.
OT:This new from the Denver MLS -This McMansion just went on the MLS today-60,000 LESS THAN paid FOUR YEARS AGO:
MLS Listing:
$500,000.00 22645 E CALHOUN PL
Sale Record from property tax record:
Sale Book Page Date Instr Trans Qual Price
B209 8036 05/17/2002 SW 2 Q 560,000
Their neighbors gotta love it- 4 others for sale right by it, three of them right next to one another
Price Bed Bath Finished Address
Square Ft
$444,000.00 4 4 2,891 22846 E CALHOUN PL
$444,500.00 4 4 2,930 22886 E CALHOUN PL
$500,000.00 3 3 2,866 22645 E CALHOUN PL
$520,000.00 4 4 3,336 22826 E CALHOUN PL
$535,000.00 4 4 3,348 22856 E CALHOUN PL
My husband and I currently live in South OC and decided we wanted a bigger place to expand our family. We just sold our condo and are almost through escrow (thank goodness). We would rather pay less to rent a bigger place, invest our equity and wait for prices to head down. We’ve had so many friends tell us we’re crazy for getting out of the housing market. “You’ll never be able to get back in!!!” Hey, I’m just glad we’re getting out while we can! We’ll see how my friends feel once their lovely teaser rates reset!
It’s a good thing for your sake that you’re not phased by the realtor-speak people are brainwashed with (”You’ll never get back in!”). I did the same thing last fall, selling an overpriced studio posing as a one bedroom in Irvine, to get double the house size now in San Clemente. My family has never been happier. I pity the poor soul that bought the Irvine box, and guaranteed won’t get out of it what he paid for it.
We made the same decision. Frankly, I don’t care what others think. We have above average income, and we will be priced out ‘forever’. I wll be the one laughing all the way to the bank.
Don’t let those buyers get away!!
Anyone who buys stocks knows that a rising price on a falling volume is the precursor to a declining price. Its that simple.
Did anyone see Frontline on the decline of pension plans?
The future is grim for millions and millions of Americans who thought they had money in their pensions. Good thing all those Americans have equity in their homes.
Now… what happens when all those boomers retire and try to sell their homes?
I love it…two teachers with a $750K house!!!! This just goes to show how whacked things are right now. Of course they want to move to a hellhole like Ohio…they’ll be able to buy the $100K house their means would normally allow (and still live in a castle in Ohio), and bank the rest.
You know the real reson for this couples move: they bought a house that they can no longer afford with “creative” financing and need to get the hell outta Dodge. Too bad they were a year late.
Another interesting thing–Buffett sold all of his silver and has cut his international portfolio some. I guess his thinking must be that the Federal Reserve (and international markets) will support the dollar at any cost…by raising interest rates. If that is true and comes to pass, gold would plummet and money market returns would look quite good. Sometimes cash isn’t such a bad thing.
I don’t think Buffett investing $5 bil in an Israeli company is much of a vote of confidence for the US Dollar. He’s also interested in buying other foreign firms with his idle cash so I think it’s clear what his feeling is regarding the Fed supporting the dollar. The Feds WANT a lower dollar (without actually saying it) because it’s the only way they can repay the vast amounts of our money held by the rest of the world, and they also know they CAN’T raise rates much more anyway or else they’ll kill the economy, which is bad for job security. So the dollar be damned.
Where did you read he sold all his silver?
The USD is going down, one way or another. Higher rates will only hasten the fall. America is one big I/O mortgage, and the teaser rate’s about to expire just as the FB’s pay is being cut. Can’t very well have “full faith & credit” when the country’s bankrupt, now can we?
Larry Kudlow said today that he has had private conversations with people at the Fed and they are resolute that they are going to keep inflation at 1-2%. That means much higher interest rates. No more of this one and done stuff. Someone said to Larry that higher rates would kill housing and Larry said that they said that would be OK. Time will tell, but if they are going to raise rates to keep inflation at 1-2% and TIPS are at 2.4% right now, then the dollar will stay pretty healthy.
lmao
people at fed talking to larry kudlow…
Anyone have an update on those gals in Palm Springs and their success in reselling their remodel? I love stories like theirs.
I’d like to point out that I’ve gone in many houses where the buyers didn’t have the monies to put in the back yards, are living with mattresses on the floor, a cheap table and chairs from a second hand store in the dinning room and still talk (three yrs later) about how much money they are making. At some point they plan to sell and go to another city to buy a cheaper house to live in.
It really is difficult to know what to invest in right now (I know what NOT to invest in-housing!). The question is, once the economy really tanks, is the Fed so hawkish that they would continue to raise rates in an effort to bolster the dollar, or once housing seriously falls, will they start to cut rates?
Bill Gross, the so-called “Bond King” finally acknowledges he is wrong. I remember back in summer of 2005 he was so confident that the Fed would start cutting rates by the end of that year. It looked like he might have been right, especially since a couple of hurricanes were later thrown into the mix. But, alas, he was wrong and the Fed keeps hiking. I get the feeling that these rate increases will be done for however long is necessary, despite what the ultimate impact is to housing.
The IMF has even suggested selling some of their 23,000 tons of gold! Clearly, the bank boys are concerned about gold’s price and will likely try to undermine it any way they can (as has been publicly acknowledged during the 1987 stock market crash). I think even gold is too risky now…after all, it is moving irregardless of economic news (case: yesterday, the inflation reads were tame, gold went up; today, inflation reads were hawkish, and gold still tried to rally, but profit taking forced it lower in the last hours of the day). Really, gold is becoming nearly as speculative as housing these days.
Interesting. I sold my gold today. I didn’t necessarily think it was speculative, but it didn’t move up (or at least stay there) with the rise in the inflation numbers today. I expected it would I might buy back in later.
Larry Kudlow really seems to think that the Fed is going to hold inflation to 1-2% with interest rate hikes. If they actually do that, they will kill gold.
I’m undecided about gold. I know about the 1980 run up gold had, but the Fed might act differently this time.
Gold will eventually win out, but not without taking a beating now and then.
The dollar is doomed. They can raise rates ’til the cows come home, and it won’t matter a whit. What good is the dollar if backed by an economy in depression and a government in bankruptcy?
Ouch!
You said it brother.
The “What good is the dollar if backed by an economy in depression and a government in bankruptcy?” line describes a possible outcome for the U.S. if we don’t mend our evil dollar multiplying with nothing to back it ways, yesterday.
A US hyperinflation scenario is very scary. OTOH, those with houses and crushing (fixed) debt could see a lot of the debt wiped away if their jobs kept up even a little with hyperinflation.
Gold is insurance. You pay for insurance. With Gold it is the opportunity cost involved in not buying something more productive.
Okay, let’s see now…
- Real Estate? No.
- Stocks? No.
- Bonds? No.
- Cash? No.
More like disability insurance; it covers for you when everything else is counterproductive.
Gold will do fine. It’s price has been beat down so badly by all the bullion banks selling short over 20-30 years, it almost has to go up (famous last words). I can’t see keeping any dollar denominated assets, including money market accounts, considering the way the Fed is printing money and creating credit like there is no tomorrow. I wonder how much of the Govt debt is being “bought back” by the Feds printing money… Someday I’ll dump the gold and buy a house, and low ball the heck out of some FB.
Somewhat OT, but I was working in high tech in the bay area right before the dot com crash. The arrogance and such strange “way out there” behavior was at it’s worst right before the crash. Any aware person could look at how people were behaving and “just tell” the Gods were going to punish them. I get much the same feeling now with realestate, and the very house-centric behavior going on. Anybody see the TV ads for the home York airconditioner outside compressor fans that now come in colors you can coordinate to the outside of your home?
Did anyone notice the comment in the story about two teachers in a 774K house? HUH??????????????? How much do teachers make out there.
BTW, crash today partly attributable to three things: GM bankruptcy rumor, premium selling hedge fund being liquidated, Rove indictment rumor. Nothing to do with housing. That’s too convenient.
Where’s Melody? Time to start planning that party, girl!!!
I hope cash is a good thing. I sold two rentals this year and banked the money. You could put what I know about the stock market in a thimble. Come on higher money market/cd rates!!
FLreappraiser
What rates are you getting? Emigrant Direct is giving 4.5% on a savings account.
Check your credit union. I’m getting 5.15% APR at OCTFCU on a $500 minimum 10-month rising-rate account. It’s tied to the jumbo CD, and you can add up to the original amount once in the ten months and choose a higher rate once in the 10 months, if available. Sweet!
The Emigrant account is cash savings, fully liquid, and the rate adjusts. I started mine at 3.8% last fall, now it’s at 4.5% with online transfers in/out of your primary checking. I also have a an emerging market fund that has done well of late. I wish I had heeded the call to buy gold last year. I wonder what the upside really is for gold? And why it took a dive today?
The unreality of real estate prices in OC (where I rent) is staggering. I would not be surprised if part of the 40% fall of sales of houses under $600K is due to the fact that there simply aren’t many of those houses left. Most starter homes are in the $600-700K range, and if you actually want to be in a decent neighborhood - not great, just decent (e.g., Tustin, Costa Mesa, etc.) the prices are in the $750-850K range. Even with the suicide loans, I don’t know how people are buying these places. I make a good salary, but there is no way that I can even come close to affording these homes, and I refuse to use a suicide loan. I’m waiting and hoping to see prices drop 50% here. I know it may take some time, but I won’t buy until the value makes sense and I can actually afford it. We saw 30-40% drops in the early 90’s, and that was without all of these people using I/0 and option ARMs. Seems like (and, for my sake, I hope) we are headed for a much greater fall this time around. Things are NOT different here, and it’s NOT different this time (except for the huge leverage/debt from the suicide loans). I don’t wish others ill will, but I’m trying to play by the rules and overpay and take on ridiculous amounts of debt that I can’t repay. If everyone else would do the same, and not feel that they are entitled to whatever they want whenever they want it, then there would be some sanity in the housing market. But, I guess maybe that’s asking too much from people today, who seem to have no sense of delayed gratification (i.e., buying only what they can afford, when they can actually afford it).
Your predictions for future rents?
I think that rents may rise as more FBs are forced to sell or foreclosed upon, as their I/O and ARMs re-set.
It would not surprise me if a good portion of the 40% fall in sales of homes under $600K in OC (where I rent) is due to the fact that there simply are not many houses left in OC for under $600K. Starter homes (not condos) here typically go for $750-850K in any decent – not great, just decent areas (e.g., Tustin, Costa Mesa). The disconnect between prices and affordability is astounding. I want to buy a home, but I refuse to overpay, and I refuse to use a suicide loan, which is the only way that I could even think about buying anything at these types of prices. I don’t wish ill will on anyone, but I hope for my own sake that we see a 50% drop here (we dropped 30-40% in the early 90s). That’s about the only way that I could realistically buy anything decent in OC. I have friends and relatives who have purchased in the last couple of years (and my mom bought a condo here in ’89 at the top of the market, and was underwater for about 8 years), so I understand that such a drop will cause some pain. But I’m trying to play by the rules, and only buy something that I can actually afford using a standard 30-year fixed mortgage. So, I can’t say that I will shed any tears for those who tried to use creative financing to buy something out of their price range, thereby distorting the market and causing me to have to wait several years to buy. I make a good salary, and I can’t even think of buying a house here (or most of the condos, for that matter). How are these people, even the ones with the I/O and option ARMs, covering their monthly costs? It makes no sense to me, and I feel like the disconnect between value and prices is astounding. It is NOT different here, and it is definitely NOT different this time – except that the fall will almost certainly be much bigger than last time because of all of the crazy lending/borrowing practices.
Orange county is simply overpriced at $680,000 Median price and homes need to adjust a bit downward. But I think that OC will fare better than Riverside/San Bernardino counties in the long RUN because The jobs and Corporate high-tech sectors are much stronger in OC than in thr Inland Empire. In Fact there will be a RE bloodbath in the IE over next few years. The supply of new homes in The IE is exploding! There are Mini-bubbles all over parts of the IE such as victorville, applevally, coachella valley/greater palm springs area,temecula valley,Rialto/fontana/San bernardino, Plus good jobs scarce in the IE, what is avaiable in abundance are $10/hr warehouse positions and trucking jobs.
how’s phelan looking?
Phelan is a large wide-open still rural homesteaded area between victorville and palmdale and it resides onthe north slope of the San Gabriels. It also denotes a small town. Have only been thru there a couple of times but it is high desert scrubland and looks like the homesteaded plots are still large with trailers and ranch houses, It is about as far away from LA as one can get. Looks like there is a bit of growth activity and the small village of that name has a new mall, shops and a police station all in one street corner. Not sure( would have to look at a thomas guide) but i think it is off the Pearblossom hwy running between the 15 and the 14. All this info from year 2005 so maybe things might have changed since then.
Maybe a new topic, especially for the OC in California? On this blog, there seems to be no distinction between flippers and investors. The people who bought the house across from me in a a preservation zone with Craftsman-era homes put at least $65k into remodeling, revamped the landscaping, and added a spa. The “flipper” next door has added a garage, put tons of sweat equity, new carpet, paint, and flooring into his “flip”.
People such as this are not buying pre-constuction with the idea of making a fast buck. I think they are closer to me. I bought 19 years ago, added new roofs, central air and heat, electrical to code, insulation, double-insulated windows, kitchen and bath remodel, gut and re-frame, and more. Much done with sweat equity.
I feel the angst of those who cannot enter this market and do what we have, luckily, done. For your sake, I hope the market takes a 50% haircut. Honestly! We are in our 50s and don’t have kids, but if we did, how f@#ked would they be? A drop would be like welcoming back the middle class.
There should be some respect on this blog for those of us, investors included, who add value to housing in a community, and perhaps a greater degree of distinction and disrespect for the mere opportunists who have artificially inflated the American Dream.
End of rant.
Robin:
I totally agree. We’re in pretty much the same boat, having bought well before the recent insanity in the market. I think there are plenty of us here that realize that unless we plan to move to the midwest or Texas, we are not wealthy. It’s really nauseating to listen to friends brag about their “net worth,” including artificially inflated housing into their calculations. While I think we have the RE and MB industries to point a finger to, I don’t think we can give the average Joe down the street a total break. I know many people who re-financed and took lots of cash out for completely frivolous stuff. Others took at HELOC loans with adjustable rates. So, these folks are partly to blame for the problems we are about to experience. When these guys are upside down, all those RE/MB/construction jobs are going to be exterminated. Since they contributed to much of new job increases in OC, our unemployment rates are going to skyrocket. This won’t be helped by reduced retail activity by the newly upside down (or even those who no longer feel the “wealth effect” as their property values dump), another sector that has driven local job growth.
So, I say don’t blame those fiscally conservative types who’ve been playing by the rules. The ones to blame will be the “new economy” types who have been leveraging themselves and our local and national economies into historically dangerous territory. Since these folks are rampant in OC (and in SoCal in general), things are indeed “different here.”
Robin
I appreciate your compassion (evidenced by your hope to take a 50% cut just to help get the market back to normal) for me and the rest of us that have been locked out of housing because we refuse to use “exotic” mortgages. You’re not a flipper, and I wouldn’t even consider you an “investor” since you say that you bought your home 19 years ago. That sounds more like a long-term homeowner, and one who decided that they wanted to upgrade their home and did a lot of the work themselves. I don’t think anyone on this blog, myself included, has any resentment for long-time homeowners like yourself. Hey, I hope to be one myself. My problem is with the lenders and buyers (not just flippers or investors, but also some of the typical “buyers,” like the two teachers who bought $775K house) who are providing/using irresponsible financial gizmos, which have the effect of radically distorting the real estate market. The banks and (many) buyers have acted so irresponsibly over the last five or so years. I don’t care about any damage that they may cause themselves (that’s their business). However, I am angry about the unintended consequences that their actions have caused (real estate prices out of control) and will cause (the economy is going struggle mightily) that negatively effect me and many others.
P.S. I also have no problem with “investors” who buy and hold properties (that they rent) to generate positive cash flow. That is a sound business, as long as the numbers work using standard loans. BUT, the “investors” who are buying using option ARMs and renting the place in the hopes solely of accumulating appreciation and selling in a couple of years, those people have caused harm to the economy.