Housing Bubble Enters ‘Collective Inertia’ Phase In CA
The LA Times takes us back to California. “The experts call it a market in transition. It’s not the same red-hot sellers’ market of the last three years, but it’s also not a buffet of bargains for buyers either. Regardless, neither side seems imbued with a sense of urgency.”
“Laurie McCray is one home seller mindful of the market’s new dynamic. But that didn’t stop her from pricing her Chino home sitting on half an acre admittedly on the high side at $810,000. She says she and her husband are in no hurry to sell despite making a deposit on a house under construction in nearby Chino Hills.’ We’ll see how it goes,’ said McCray, who listed her home for sale May 6 and has received one low-ball offer. ‘If it doesn’t work out, we may lower the price but there’s no need to lower it now.’”
“Clark Huang recently relocated from Florida and is looking to buy. But he’s not in any rush either. ‘Prices may not drop necessarily, but they may not go up much more,’ said Huang, who last month made a deposit on a $400,000 condo under construction in San Pedro but then canceled after feeling he made too hasty a decision. ‘We have choices. We’re not looking to rush into anything.’”
“Inland home prices are climbing at a slower pace than they were last year, and some analysts expect the upward trend to end altogether by December. April home sales in Riverside and San Bernardino counties dropped 12.5 percent compared with April 2005. It was the steepest monthly decline in 11 years. San Bernardino County’s median housing price in April was $360,000, which fell short of a record $373,000 set in February.”
“Real estate agents say sales are taking longer because a burgeoning supply of available homes is giving buyers more choice. (Agent) Karen White said the kind of condominiums in Corona that quickly sold for $350,000 to $360,000 a year ago are now listed for $325,000 to $345,000, and there are 14 of them on the market.”
“White said she does not advise potential buyers to wait for prices to come down more because by then rising interest rates mean they would face higher mortgage payments.”
The Voice of San Diego. “As investors and speculators have flocked to the downtown San Diego condo market, many of the roughly 7,000 downtown units, especially those that have come online during the last two years, have remained empty of full-time inhabitants.”
“Karen McElliott came to downtown San Diego looking for a new way of life. What she hasn’t found are neighbors. Of the six units on her floor in her new condo building, McElliot’s is the only one that’s occupied. The Pinnacle, like many of downtown’s newer condo towers, is currently only 55-percent occupied by full-time residents.”
“‘I was looking forward to meeting new neighbors, and having them over for a glass of wine or saying hello and going for walks in the morning, that kind of thing, and that hasn’t happened,’ McElliott said.”
“According to DataQuick, a local real estate information service, around 33 percent of all downtown homes have their tax bills sent to a separate address. Although the empty hallways are an unexpected consequence of the recent condo boom, experts expect the buildings to fill in over time as residents replace investors.”
“‘Go at 9 o’clock at night and stare at Harbor Club (a condo tower in downtown), those are all sold, you’ll see there’s four or five lights on. Where are those people?’ said David McQuaid, president of the HOA at The Grande, a new residential condo tower in downtown’s Columbia District.”
“Bob Edmonston, who lives in a condo development in the heart of downtown’s Marina District, said living in his building feels ‘weird.’ ‘I would definitely like to have more people around,’ Edmonston said. ‘It’s like everyone knows it’s going to be big eventually, but it’s not big now.’”
“The homeowners’ association at The Pinnacle has just launched an effort to find out what happened to all the people who bought condos in the building. With so many empty units in the building, James Roberts, president of the HOA said he’s sending out questionnaires to all the people who bought units. Roberts said the questionnaires will ask owners a simple question: Where are you?”
“McQuaid said he’s thinking of following Roberts’ lead. The Grande (has) also apparently been a favorite for investors, and McQuaid said he wants to know where all the homeowners are. ‘They’re like ghosts, they come and go,’ he said.”
Thanks to the readers who sent in these links.
It’s getting good here in Sacramento.
http://sacramentolanding.blogspot.com/
That is a lovely graph!
Let the Darwinian winnowing begin!
I’m also a “happy renter” here in Sacramento up in Natomas. Just in the immidiate neighborhood where I live there is a cul-de-sac with 5 houses on it, 3 are now for sale. There’s a street with about 25 homes on it, 5 are now for sale.
Homes are now generally priced between $400K - $500K but to me these houses should easily adjust down to what they’re really worth which is about $180K - $250K. The homes and location are just not that special.
We’re getting all the classic signs here–yards with foot high grass (this is an HOA), blown over RE signs, empty houses, FOR RENT signs, fewer BMWs vs more work trucks, etc.
inland prices are rising ?
BS
I would assume they are up yoy, but down from 6 months ago.
I like the part about meeting your neighbors in downtown SD. I’ve lived here for 5 years and the only neighbors I ever see are crackheads and winos. The professional folks work all day and then seal themselves into their little cubbyholes at night.
Downtown SD is a toilet. I mean that figuratively and literally. Gee, fun walking home to your $$ condo pestered by homeless winos and crackheads and having to watch each step lest you land in a pile of dried up vomit or urine. The large doorway to the building across the street is one big open air urinal, not just for the homeless but also the 20-something dorks who come back drunk from the “fabulous” (read: ridiculous) gaslamp district. What a dump. I’m outta here.
Actually, it is. Especially downtown, leading to Old Sacramento. I visited in April and it is pretty scummy in places. I was expecting something different.
He was talking about San Diego, but your point still stands. Remember, they wanted to tear down Old Sac to buid the interstate because it was the slums; decades of historically-minded management have made Old Sac a nice place but the slums didn’t move far.
Incidentally, the K Street pedestrian mall, while having quite a bit of the slum around it, also has some nifty things such as the newly-renovated cathedral and the old-fashioned Crest Theater. I think the difference between Sacramento and bigger cities is not the absence of slum areas buit their decreased size and proximity to really nice stuff.
Don’t forget about your friendly neighborhood sex offenders…
http://www.meganslaw.ca.gov/search_main.aspx?searchtype=address&lang=ENGLISH
(Search on the zip code 92101 for downtown San Diego)
It’s amazing they can say prices are rising when most have fallen month-to-month. Although prices are higher than last year, it certainly is not rising!
“Median” prices are rising. This is to be expected at this point. Understand if you had two identical houses and one sold in Oct ‘05 and one was for sale today, today’s house would be listed lower and sell for much lower. Eventually. That’s median. Turnover, averages and incentives aren’t like that.
I’ll do you one better. If you had identical houses in May ‘05 and now today’s house would be listed/sell for less. The houses that appearing to be selling for more yoy are much higher quality than the ones that sold at this time last year. The low quality ones? Not selling.
$810K in Chino???? Why the hell must people always commit to purchase another house before their present house sells? These people really need to be taught an expensive lession in economics…
1. Don’t buy before you sell.
2. Never buy into a bubble…only sell into it
3. Don’t be too greedy
4. Don’t live in an overpriced $hithole to begin with.
Have I missed anything? Hopefully these people will be taken to the cleaners.
Since we’re talking about Chino, you’re missing:
5. You can’t polish a turd.
Well, in San Diego we are so special we don’t have to polish our turds. We just slap on a ridiculous price tag and sell as is.
Has anyone mentioned that there’s a men’s prison in Chino? I guess I’m old fashioned, I don’t want to live anywhere near a prison but that’s just me. That’s just like Folsom, it’s beautiful up there but they do have a maximum security prison. Maybe I’ve seen too many movies about prison breaks.
I grew up in the area and Folsom meant “lake” to me, not “prison.” Never been a prison break in the 29 years I’ve been alive— my parents would have talked about it to no end.
They do have wonderful road signs up, though, about not picking up hitchhikers…
“But that didn’t stop her from pricing her Chino home sitting on half an acre admittedly on the high side at $810,000.”
$810,000 for Chino?!?! ‘Admittedly high’??? GEE, YA THINK?!
With all due respect to Chino and Chino Hills residents, but my god…..I remember when Chino was literally a sh*t pile of dirt back in the 80s with some new developments slooooooowly coming up……picture the development where the Freeeling family lived in the movie Poltergeist and you get an idea of what Chino is like. In fact, wasn’t Poltergeist filmed in Chino?
Man, I can still remember when my mom would drive me through Chino and you’d see those human billboards standing on empty corners advertising the $125,000 developments.
I used to think the unlit 71 freeway was the road that took you to where the devil worshipping was.
$810,000 for Chino. I shudder to think what that does for Pomona housing prices….
how much of that $810K is for the privelege of breathing constant dairy farm fumes? Not to mention the great location of being at the narrow end of the funnel which collects the prevailing LA Basin smog windtunnel.
Can we stop talking about what a shi&hole Chino is, or Bakersfield, or the SF Valley, or whatever. Most of southern Cal. is a shi&hole except for a few small pockets, namely the coastal areas, Bev. Hills, Westwood, etc. Enough said.
So true. If you don’t live in “Beverly Hills-adjacent” (a term which apparently means most of Los Angeles west of downtown) its just not nice.
When I was living in L.A., realtors actually used the term “adjacent-Beverly Hills-adjacent” to refer to anything east of Highland. Do they still do that?
Yes - It’s a location (location location)
“White said she does not advise potential buyers to wait for prices to come down more because by then rising interest rates mean they would face higher mortgage payments.”
a) Why is it always about the monthly payment ? If it was me, I would rather owe less and have higher interest rates than vice versa.
b) She is unwittingly telling us the housing market is going down as interest rates climb. Higher interest rates = higher monthly cash flow for the same property = less demand or a lower price.
“Karen McElliott came to downtown San Diego looking for a new way of life. What she hasn’t found are neighbors. Of the six units on her floor in her new condo building, McElliot’s is the only one that’s occupied. The Pinnacle, like many of downtown’s newer condo towers, is currently only 55-percent occupied by full-time residents.”
Just what everyone needs, an empty condo in SD.
“‘I was looking forward to meeting new neighbors, and having them over for a glass of wine or saying hello and going for walks in the morning, that kind of thing, and that hasn’t happened,’ McElliott said.”
Flippers don’t have time to be neighbors.
“According to DataQuick, a local real estate information service, around 33 percent of all downtown homes have their tax bills sent to a separate address. Although the empty hallways are an unexpected consequence of the recent condo boom, experts expect the buildings to fill in over time as residents replace investors.”
What are they going to fill with ? Everyone already owns property. What will they need an extra condo for ? Who are these experts ?
“McQuaid said he’s thinking of following Roberts’ lead. The Grande (has) also apparently been a favorite for investors, and McQuaid said he wants to know where all the homeowners are. ‘They’re like ghosts, they come and go,’ he said.”
They will be broke ghosts in the near future.
I would never know what is really going on in the housing bubble if I didn’t visit this site.
a) Why is it always about the monthly payment ?
I think a lot of people buy the largest/best house they can qualify for, and qualifying depends on the monthly payment. The more interest rates go up, the less house you can buy. I tried to explain it in another thread. When interest rates go up 2 points, you qualify for 18.75% less house.
Interest rates went down a good 2 to 3 points, and I qualify for about 60% less house!
My parents’ admonition was to always buy as much house as you could afford.
Great advice in a 20% down, 3:1 cost to imcome ratio, fixed loan in a non-bubble market. Now, however, you and easily qualify for a house on which you know that you can’t affort the PITI at full value.
That old chestnut needs to be rewritten. Perhaps the great minds here can come up with a new one. Cote? Lingus?
My parents’ admonition was to always buy as much house as you could afford.
_____________________
Backstage,
Yes, it made sense as long as there was wage inflation. This meant that your payment got lower, relative to income, over time. This may no longer be the case going forward. We have to see what the long-term implications of globalization and free-trade will be. In the meantime, I am not willing to bet on wage inflation for a long, long, long time (many decades, potentially). Right now, I think it’s possible that renting might be the very best thing a person can do for many years to come. We renters/savers can use any cash or savings toward better investment opportunities other than domestic RE (I’m guessing emerging markets and commodities would be a better bet, AFTER the global recession/depression). Just MHO.
It took me reaching my 30’s to realize this, but parents aren’t always right.
LV Landlord said…
The more interest rates go up, the less house you can buy.
_____________________
WRONG, WRONG, WRONG!!! Higher interest rates mean there is less money to lend (that’s why $$ is more expensive). Less money to lend means borrowers are screened more (higher lending standards) which means a smaller pool of borrowers which leads to a smaller pool of home buyers. Fewer buyers mean lower prices.
As rates went down and money was chasing borrowers around with exotic loans, more people entered the market and drove prices up (helped that they were using Monopoly money which they “never” had to pay back and didn’t have to qualify for). The rising prices caused more people to jump in and allocate an ever-larger portion of their income toward housing (50%+++ DTI ratios and stated income loans). This made sense as long as prices rose to compensate. Once prices stagnate/decline, there is no more motivation/ability — can’t save yourself with serial refinances — to allocate so much of one’s monthly income toward housing.
Prices AND monthly payments will be coming down as this credit bubble unravels. There is no need for **qualified buyers** to worry about being priced out of the market. Only the NINAs will be priced out…as they should be.
CA renter–
Thank you, well said.
Wasn’t Poltergeist filmed in Riverside? Close enough, though.
Poltergeist was filmed primarily in Simi Valley, Agoura Hills and Irvine, not Chino.
But Chino is a transplant from Bakersfield. Smells like cow $hit . . . wife is from nearby and even if cut a check for $810K to live there, would have to think twice (or even thrice) before comitting to such idiocy.
” Roberts said the questionnaires will ask owners a simple question: Where are you?”
Huddled in the corner wimpering ,and praying……
rocking and rocking and rocking and banging their heads and rocking and rocking….
Me? I’m in my happy place! I’m in my happy place!
lol you all
Alone in the hot tub!
Could someone help me figure out if sale of a 75 million dollar home in the OC, California will affect median sales price of an average say 750K home in OC?
see below for more details.
http://www.abcnews.go.com/GMA/story?id=1971138&page=1
Nope, just the average but then it isn’t going to sell for $75m either.
Won’t have any more affect on the median than any other house that sells above it.
The mean (aka average) on the other hand will be skewed up.
when running averages, you should cap the maximum price. for example, in orange county, if you cap the value range at $5,000,000 that still includes 99.5% or more of the total sales. if you don’t include a cap. 10 houses selling in one quarter can increase the average price $20,000, $30,000 or more. also, some RE agents incorrectily input sales prices. sometimes you’ll see a sales price shown as $9,000,000 when it should be shown as $900,000.
“Bob Edmonston, who lives in a condo development in the heart of downtown’s Marina District, said living in his building feels ‘weird.’ ‘I would definitely like to have more people around,’ Edmonston said. ‘It’s like everyone knows it’s going to be big eventually, but it’s not big now.’”
Sure Bob, everyone just KNOWS it’s going to be big - that’s why they’re all staying away. They just wouldn’t feel right being part of something so ‘big’ and ’special’.
Hey Bob…sounds like all your neighbors are 2nd home owners, speculators, soon to be vacationers / retirees…. SAFE place to live hey?
“White said she does not advise potential buyers to wait for prices to come down more because by then rising interest rates mean they would face higher mortgage payments.”
No, I think I’ll wait. Higher interest rates can eventually be refinanced down…higher debt requires cold, hard cash to resolve. The greater the rates rise, the harder they’ll fall.
I always love that classic realtor line. This assumes the price stays the same with higher interest rates, which is something a paid real estate professional KNOWS IS A LIE. The only people that should be fearing interest rate hikes are ARM & HELOC holders and sellers. A buyer benefits by rising interest rates… especially if they wait.
That classic realtor line is their lifeline right now. It may very well be the reason home sales numbers haven’t completely fallen away.
Geez, can’t the sheeple even comprehend this simple math?
It is idiotic advice for sure. For each 1% move up in interest rates, you can buy 11% less house (roughly). Since everyone is in the same boat, a rising interest rate environment is not a time to be purcashing especially when everyone has already maxed out at the much lower rates and the bulk of the adjustables yet to kick in.
I agree……nothing pisses me off more than this line that has been used a lot lately. As mentioned above, you can refinance your rate, so that is reversable. You can’t reset the price of your home. Once that escrow closes, it’s end of story. Your hosed!!
It does make a good deal of sense if house prices aren’t rediculously out of whack. If prices remain relativly stable through the change in interest rates (which appeared to be the case through the gyrations of the late 80s and 90s) then your payment would move considerably more.
It essentially comes down to ones forecast of housing demand elasticity, you and the bears see house prices as far more elastic than the realtor. Only time will tell who will be correct (especially in the nominal case).
Realtors suggest (at least outwardly) that RE’s elastic moves only go one way - up. Everyone knows that’s impossible. They will find a way to rationalize the next few years, if they survive the wrath of those that listened to them and lost everything (provided they had anything to lose)…
Filming Locations for
Poltergeist (1982)
4267 Roxbury Street, Simi Valley, California, USA
Calabria Drive, Agoura Hills, California, USA
Calmfield Avenue, Agoura Hills, California, USA
Gleam Court, Agoura Hills, California, USA
Irvine, California, USA
Kanan Road, Agoura Hills, California, USA
Rustling Oaks Drive, Agoura Hills, California, USA
Shadycreek Drive, Agoura Hills, California, USA
Simi Valley, California, USA
University of California, Irvine, California, USA
so your telling me I’m living over a burial ground?
Man, you should see Simi today. If it is any help it appears that their county supervisor, Judy Mikels lives in Arizona.
Sounds like you’re in the business…Please say you’re not Rob Reiner
“According to DataQuick, a local real estate information service, around 33 percent of all downtown homes have their tax bills sent to a separate address. Although the empty hallways are an unexpected consequence of the recent condo boom, experts expect the buildings to fill in over time as residents replace investors.”
“‘They’re like ghosts, they come and go’”
**********
I say: “San Diego condos for everyone!”
must be the same thing at orange county’s only completed high rise condo project, located on michelson in irvine. the buildings were completed in the last month or two. of approx. 230 units in both both buildings, 78 are available for resale through the MLS and most of those are vacant.
PW, weren’t both buildings sold-out pre-construction? Now 78 of them are resale! Look out below!
“experts expect the buildings to fill in over time as residents replace investors.”
Well, duh. At some point the “investors” will have to sell or rent to someone who actually wants to live in the place. The question is whether they will lose their shirts in the process, not whether they will feed a mortgage on an empty condo forever. Of course, if the rents and prices drop low enough, these places will feel like a high-rise dorm or a housing project.
I figured it out myself. If below home sells before end of June Median sales price for a home in OC will go up 85,786.22 assuming not too many other homes. See below for what 75 million buys in OC.
http://www.ocregister.com/ocregister/money/homepage/article_1142476.php
No, it will affect the average, not the median.
You’re confusing median with average. (average is also called “mean”)
Here’s an example:
Prices:
$1, $10, $10, $10, $100.
Median=$10. (the middle number)
Average= $26.20 (add them all up, divide by 5)
Let’s add a $75,000,000 purchase:
$1, $10, $10, $10, $100, $75,000,000
Now the median=$10 (10 is still the middle number)
The average however is $12,500,021.83 (add them all up and divide by 6)
As you can see, the $75,000,000 will drastically change the Average (or mean), but it does little to affect the median.
hope that helps.
Clouseau
“White said she does not advise potential buyers to wait for prices to come down more because by then rising interest rates mean they would face higher mortgage payments.”
More bad advice (whodathunk?)
While this may be true, you are much better off buying at low prices and high interest rates, even if the monthly payment is the same. Sometime in the 30 years after you buy, interest rates are bound to come down, then you can refinance, get a super low payment, and have some equity.
Buy high at super low rates? If you’re smart enough to get a fixed rate, your payment won’t kill you, but you likely won’t be able to sell for a long time without taking on much higher payments or selling short.
And of course their advice always concludes with the “buy now” mantra. Strange, that…
I had a friend that sold on long term (5yr) lease-to-sell option contracts so the seller gets out with cash flow that more than covers the mort payment… back when rates were 14%. Kinda leaves you stretched but the lease payment was low compared to a mortgage so both parties were OK and the rates came down so the transaction happened early…
And you tend to have high (or higher) inflation with high interest rates, so odds are, some of your debt will be lost to inflation.
“‘Go at 9 o’clock at night and stare at Harbor Club (a condo tower in downtown), those are all sold, you’ll see there’s four or five lights on. Where are those people?’
——————————————————–
Just wait until all the half finished condo towers currently under construction are finished. I drove through downtown SD recently, condo construction everywhere.
so if I buy one of these condos, can I park my 40ft RV and boat in the valet garage since all the spaces are empty?
free RV parking for everyone!
lol!! That’s a great idea. RV space is very hard to find in So.! Cal
It is my hope that after this is all over, or even as it unwinds, the eternal bunch of cheerleaders that is the NAR are disregarded as totally unreliable when people finally recognize them for the liars they are. That David Leareah continues to get press whenever he spouts his BS is giving credibility where there truly is none. They’ll rah-rah all the way to the bottom–here’s hoping somebody calls them on it and that there will be consequences.
Recently listened to an Edward Jones Investments conference. It was totally positive spin; didn’t hear a single negative word regarding fannie mae, the high hedge fund risk, the MBS markets, etc., nothing but saleman BS. Just drink the koolaid folks…bottoms up!
I came thisclose to signing up w/an Edward Jones broker. Their official pitch is that they’re for the long term investor, not market timers. OK, I was cool with that. Why I eventually walked away was for precisely the reason you state: ‘Don’t worry about the market; best historical returns; housing problems are just a blip; etc…’ No clear defensive strategies at all.
I think many, many people are going to get fleeced this time. The dot-bomb crash of 99-00 is going to be dwarfed by the coming crunch.
Anyone can become a realtor.
It won’t be long before comments like “we’ll see how it goes..” become something more like “Oh my god, what have we done?”. The second half of ‘06 will get ugly.
This was posted on Realty Bite over a year ago, can you see the govt, NAR, builders and the heard in this interesting metaphor?
Sunday, May 01, 2005
Gamblers Pair-of-Dice
Imagine standing at the hottest craps table in history, every time you place a pass-line bet and the shooter roles the dice, they come up “seven.” You just can’t believe your luck, nor can any of the other players at the table. Soon the entire casino is watching in amazement and vying to get in on the action. Even though the dice have come up sevens 60 times in a row, you’re still hesitant to put all your money on the line. You know somewhere deep in your gut something’s just not right about your incredible fortune. The old inner voice (which my wife has notably coined “the voice of reason”) is getting louder and louder, “get out now, get out now, GET OUT NOW YOU GREEDY SOB” As you fight off the crowds, trying to take your position at the table, you continue to bet and win. One of the original players gives in to her voice of reason, pushes her chips in for a cash-out and leaves. Before she can even turn around two men go to fist-a-cuffs over the open space. Casino security breaks it up, ropes off the “magic” table and creates the first ever gamblers waiting line (or in this case, sure winners line) to maintain some semblance of order. The winner got the space at the table and the looser was placed first in line, in case you were wondering. The new player socks down all his money on the line and believe it or not, the dice once again revel another combination of “seven.” By now the casino is broadcasting the action on live circuit TV throughout the entire city and all the major news organizations are recklessly driving to the scene. Seven after seven after seven, these dice must be from heaven. Another colleague soon succumbs to the voice of reason, and leaves with the biggest grin Bob Barker has ever seen from a showcase showdown winner. Mr. Weakling takes the spot and begins to play with trepidation.
In order to give everyone a fair chance, the casino enacts a playtime limit of five minutes. The dice seem to be changing just a bit, now one in approximately every 10 roles a seven doesn’t come up. The first time is a massive shock (the first chink in the system), but one out of ten is still incredible odds. As time goes by, hundreds of players make their fortunes before time expires. Once in a while a player will bet their entire bankroll on the first bet and loose it all, “next in line please.” Due to the incredible loses; the casino sets a minimum buy-in at $100,000 and begins charging a line fee of $1000. In the mean time rumors run rampant through the waiting line that sevens are now only coming up only eight out of ten roles. People at the back of the line start offering to buy spaces at the front of the line. They sense time is running out and must get in before it’s too late. Ninety percent of all players are still walking away with bundles of cash. Line trading prices increase as perceived table winning percentages decrease, which is now down to 80%. The Frenzy and hype are at astronomical proportions. The first few places at the front of the line are now worth about $75,000 each. Now more than ever (before the phenomena) more people are walking away busted from the table, between 30-40%. The price of favorable line positions goes up to $100,000. People are at hysterical levels about getting to the “magic” table before the so-called luck runs out. Many of the returning players are previous winners who can afford to buy a front-line position to get back into the action. Once in a while you hear a leaving player mumble, “what just happened, I was up so much, what went wrong, the dice were supposed to come up seven all the time like they did before, but they didn’t, I can’t believe I just lost everything, I need a really strong drink”
These sentiments are now heard more often than not, as losers glumly walk past the enthusiastic waiting players who dismiss the loses by telling each other “they must not really know how to play dice properly, I’m an expert, I just finished this book while waiting in line on how to play craps like a pro, a fool and their money are soon departed, that just can’t and won’t happen to me, I’m different, and so on and so on and so on……..”
The pit boss, who lost about a gallon of water from perspiration, conspicuously informs the floor manager that the table has just broken even since the chaos started a few hours earlier. He’s clearly relieved, knowing his job is again secure. The magic table is now back in line with long term odds, but the masses still believe there’s gold in them there ‘green felt’ mountains. Loser after loser, the crowds begin to disperse and the bars begin to fill. Many of the paying line patrons even forgo their $1000 cover charge to avoid losing a larger portion of the minimum buy-in. The party’s over as the well drinks collide. Despair, depression, and self-loathing set in on those who got in at the end and lost it all. It’s even worse for those who had earlier won but continued to play into debt.
The next days local headlines read:
“Incredible fortunes Won and Lost in matter of hours, yesterday at Casino X ”
“City jolted with significant rise in suicide rates overnight”
“Casino X reports its largest ever increase in quarterly profits”
“Government to bail out Casino X losers, due to unfair psychological gambling tactics”
Who are you in this story? And where will you be when long-term odds revert back to normal?
That was good!
Im the guy at the sideline blowing spitballs at gamblers necks.
Excellent !!
I’m the guy just trying to scam the free drinks from the hot waitresses.
Though the Fed still underestimate inflation, unless they remove everything from CPI equations, there is really not much they can do to make the number look insignificant.
NYT:Stocks Fall Sharply After Consumer Prices Jump. Rates have no where to go but up.
corrected link:
NYT:Stocks Fall Sharply After Consumer Prices Jump
I’m waiting to hear “what were we thinking?”
I reponded to a pro own / buy person on my blog. I noted inflation fears and today the DOW dropped 214 points over those fears. Read on
http://blog.360.yahoo.com/blog-2pttO.o9dLXkuQT9LgjubLbGXQ–?cq=1“
Sorry about that last link. I’m cut and paste challenged tonight lol
http://blog.360.yahoo.com/blog-2pttO.o9dLXkuQT9LgjubLbGXQ–?cq=1
Geeze, just click on the link in my name ROFL. My apologies !!
It’s probably the same story on NYT that I posted. Inflation is up and rates have no where to go but up. Recent buyers with ARM are between a rock and a hard place.
I kid you not a homeless man with a city/county permit for begging knocked on my door. He said he lost his home to foreclosure.
You can get permits for begging? Do I have to go to school and get a certificate or degree for this type of work? Sounds like it has large degree of interacting with the public so the pay should be quite good!
The question should be… Is it tougher to get than a realtor’s license?
“White said she does not advise potential buyers to wait for prices to come down more because by then rising interest rates mean they would face higher mortgage payments.”
This is an absolute lie.
Over the last few years, mortgage payments doubled as skyrocketing prices more than made up for falling interest rates. One would expect, of course, that house prices will fall fast enough to lower monthly mortgages, despite the rising interest rates.
“Karen McElliott came to downtown San Diego looking for a new way of life. What she hasn’t found are neighbors. Of the six units on her floor in her new condo building, McElliot’s is the only one that’s occupied. The Pinnacle, like many of downtown’s newer condo towers, is currently only 55-percent occupied by full-time residents. ‘I was looking forward to meeting new neighbors, and having them over for a glass of wine or saying hello and going for walks in the morning, that kind of thing, and that hasn’t happened,’ McElliott said.”
No neighbors? That couldn’t possibly be a sign that those downtown condos were mostly bought on spec, at an artificially and temporarily overvalued price, could it? (Gulp…)
I apologize for being so dense as to ask once more, but how is it that it is cheaper to hold an investment property vacant than to fill it up with a renter? Is the presumption that the renter is going to inflict so much wear and tear on the property that it is cheaper to just leave it sit empty and carry the (implicit) rent yourself until you find a greater fool? Or is it just that investors need to stay flexible in order to turn those quick profits when prices are going up at double digit annual rates? And how well do these assumptions hold up now that buyers are scarce and prices are levelling off?
Well, you see, Stucco….The Compleat Flipper Manual covers how to buy and how to sell for a fabulous profit. But it doesn’t get into nasty details like what do you do when you can’t sell for a fabulous profit. Some one ought to publish a sequel… The Really Compleat Flipper Manual, to fill in some of the nitty gritty details. Should sell well…lots and lots of flippers out there who are confused about the current situation.
These flippers remind me of the Underpants Gnomes from South Park:
“Phase One: Collect Underpants.”
“Phase Three: Profit”
“Phase Two: ????”:
Good questions, I wish I had better insight myself. To add more questions to those questions…
In our last cyclic downturn in my area of southern California, it wasn’t unusual for me to see a builder holding undeveloped land and let it sit untouched for years, and I never could figure out how a builder could just sit on the empty land. (I could tell a builder had the land because the land was right next to a major condo complex and maybe had a sign out saying “phase II” or something like that.) Maybe these particular builders were just smart with their cash flow or even lucky and were able to wait it out a few years.
A number of times I’ve posted the question, would a mortgage holder try dumping foreclosed properties ASAP by significantly slashing prices, or sit on the properties in the hopes of a market turnaround (possibly renting them out for income)? BTW, the foreclosure auctions around here are a joke, the minimum accepted bid is as bubblerific as anything on the market.
Sometimes I wonder if the lenders and mortgage holders really “get it” yet.
Some condo associations won’t let you rent out the unit for at least two years. They actually want real people living in the condos, and they don’t want potential buyers thinking they’re living next to a bunch of renters.
“Regardless, neither side seems imbued with a sense of urgency.”
Let’s set the record straight, as the situation then and now is (was) anything but symmetric.
Then:
– Buyers frantically hunt for any home for which they can qualify to buy.
– Sellers “entertain” offers on a list price range from astronomically high to intergalactically high.
Now:
– Fearful would-be buyers rent and patiently wait for the crash to play out.
– The mass of would-be sellers lead lives of quiet desperation.
I saw a craigslist ad yesterday in the area I’m keeping an eye on. The ad said, “pool & jacuzzi home coming on market soon!” with no mention of address or price. I responded to the ad asking for address and price. The agent responded within 30 minutes saying the price was $759K, cross-streets were such and such (not a good area), and mentioned the sellers wanted to wait until after Memorial Day to “entertain” any offers, so she would get back to me on the 1st. I had the pleasure of responding with a chuckle and mentioned so while saying there was no need for her to get back to me. This is getting fun!
“McQuaid said he’s thinking of following Roberts’ lead. The Grande (has) also apparently been a favorite for investors, and McQuaid said he wants to know where all the homeowners are. ‘They’re like ghosts, they come and go,’ he said.”
It sure must be fun to live in a dark tower — the high-rise condo version of a ghost town!
ghosts of the bridge jumper owners…returning to visit the properties that led to their financial demise
muhahahahaha…the Grudge
Chino? Dairy land!
You know, I lost a girlfriend because of Chino. Ya, she told me to kiss her where it was hot and stinky, so I drove her to Chino. I guess that wasn’t what she ment! LOL
That was a beaut!
Some April Dataquick numbers for Sacramento. Enjoy!
“Spring is here. That rebound? Forget about it.”
• April’s sales of 2,212 homes in the four-county area were the lowest for that month since 1998.
• A 36.7 percent year-over-year decline in home sales for the month was the biggest drop since April 1991.
• A 1.9 percent gain in Sacramento County median home values from April 2005 to April 2006 was the lowest since October 1997.
Also, this article:
Cost Of Commuting Leading To Foreclosures
Sacramento Land(ing) blog
Cost Of Commuting Leading To Foreclosures
http://cbs5.com/topstories/local_story_137213853.html
Long Island numbers:
Feb 19, 2006 24,691
May17, 2006 30,547
March, 2005 15,524 (!) NOT a typo!
Are these current for-sale inventories? If so, then I guess Manhattan is following Say’s Law*, or worse.
*As Ted wryly suggested a couple of days ago, Say’s Law redefined for real estate inventory means the for-sale inventory is doubling every eighteen months.
I know this question has been asked a million times — does anyone have a link to that list of articles/snippets from the last large crash (late 80s-early 90s) Much appreciated.
On another note, someone I work with is about to buy another home before her and her husband have sold their other one (maybe getting a some $$$ from mom n dad to cover).
Seems like a huge mistake - - - it’s sooo much easier to be a shopper than a seller right now, and I hate to watch this happen. The link request is for her.
Try the Vancouver Housing Blog, it is Canadian but there is a section called “Blast From the Past” that has articles going back to those periods.
http://van-housing.blogspot.com/
Ventura sales drop like a ROCK and this is the local response:
____________________________________________
Home sales soft in April
But there’s a ‘major surge’ in county activity now, Realtor says
By Gretchen Macchiarella, gmacchiarella@VenturaCountyStar.com
May 17, 2006
Spring might have come a little late in the real estate market this year.
The April sales price report from DataQuick Information Systems showed a soft market, but word from the industry is activity began heating up a few weeks ago.
Sales that closed in April involved buyers who were on the hunt in February and March, when more rain than usual kept buyers away, said Brian Troop, president of Simi Valley-based Troop Real Estate.
“I think this is the first major surge of the year that we are seeing right now,” he said. “Based on the activity we are seeing, the buyers are out there in droves right now, and we are expecting to see a very high-powered marketplace for the next several months.”
Ventura County’s median sales price for new and existing homes and condominiums was $584,000 in April, up 10.4 percent from the same time a year ago, DataQuick reported Tuesday. Since August, the median had been hovering near or more than $600,000.
The overall Southern California market slowed to single-digit appreciation for the first time since November 2001, with the April median increasing 9 percent from a year ago to $485,000.
There was a lot of disparity among Southern California’s individual markets.
San Diego County has slowed the most, with an April median of $505,000 — just 4.3 percent ahead of $484,000 for the same month the previous year.
Still-hot San Bernardino County is up 18.4 percent year-over-year, but it has the region’s lowest median at $360,000. The median is the point at which half the sales are higher and half are lower.
Sales volume is down in every county, falling 21.3 percent for Southern California.
Ventura County had 891 sales during April, a 41.2 percent decline from the 1,515 sales the same month a year earlier.
The state posted record sales in 2005. Agent Hope Goss, with Realty Executives in Ventura, said the interest in housing over the past few years that climbed to a near-frenzy will be closer to a normal market level this year.
The buyers that have hit the market recently are serious.
“I think it is more than just kicking the tires right now,” she said. “I think there are some serious buyers out there.”
Increased interest might bring prices up slightly, Goss said, but generally there are still enough homes on the market to keep prices steady and give buyers a lot of choices.
DataQuick reported that the market continues to look reasonably healthy, with investor activity stable and foreclosure rates still low.
Please email this reporter! I did!
“Increased interest might bring prices up slightly, Goss said, but generally there are still enough homes on the market to keep prices steady and give buyers a lot of choices.”
Does Ms. Goss have no understanding of economics or is she just lying through her teeth?
If only these clowns could be tried under our securities fraud laws.
homebuilders
On Dangerous Ground
By Dan Fitzpatrick
RealMoney.com Contributor
5/17/2006 11:01 AM EDT
URL: http://www.thestreet.com/p/rmoney/homebuilders/10286179.html
There are two sides to every story, and the homebuilding stocks are no exception.
Some are saying that the valuations are compelling and that all the bad news is already discounted into current prices. Others point to the continued bearish price action as evidence that the correction has further to go. A couple of weeks ago, I wrote that the pain was far from over in several homebuilding stocks. I’m going to weigh in on this again, because I just don’t think Wall Street gets it yet.
The last time we saw a really bad real estate market was back in 1989-1990. Most investors don’t remember what it was like back then, and I suspect that a lot of analysts are simply looking at their theoretical models and finding compelling valuations.
After my last piece, I heard from a money manager at Merrill Lynch who insisted that the homebuilders had tremendous value in their land holdings and said that I should stick to charts. He said that, just as Eddie Lampert has done with Sears (SHLD:NYSE) , the homies will unlock all that intrinsic value and the stocks will start moving higher. He argued that the valuation of land holdings remains at the purchase price of that land, irrespective of changes in market value.
That may work well on corporate tax returns and balance sheets, but I don’t think it speaks to the current problems facing the industry. If there are fewer people buying homes (and there are), and price sensitivity remains an issue (and it does), then absorption rates and net earnings per unit will suffer.
Perhaps all of this is already factored into current prices. But I hear about many homebuilders bailing out on big land deals — just walking away from sizeable hard-money deposits because the acquisition just doesn’t make sense any more. The purchase price is out of whack with today’s market.
Also, I suspect that the projections for the remainder of 2006 are still too high. We are entering the time of year when the various divisions in companies start to fess up to corporate about what’s really happening. Those are always tough meetings to have, and division presidents put them off as long as possible while they try to fix things themselves.
This line of thinking will drive the fundamentalists crazy, but I think it matters. I also think the price action matters.
Ten bucks says Gretchen as a CA real estate license. Is there any way to find out for sure?
They can be tried under our civil laws–breach of fiduciary duty, negligence, fraud and misrepresentation, breach of contract …
Cote, this is your ‘hood. Time to do your literary B–ch slap…keep it simple so she understands she’s being ridiculed though.
Is marketwatch.com just a propaganda tool of Wall Street? (My hunch: No more than your local paper is a propaganda tool of the local real estate market).
Contrast some real news with the truthy headline on marketwatch.com:
From Bloomberg.com (remember the Mayor who said that NYC real estate was going to go through crunch times?)–
“Asian Stocks Fall Most in a Year on U.S. Inflation; Sony Drops
http://www.bloomberg.com/apps/news?pid=10000080&sid=aYiFKne1Cr2Q&refer=asia
May 18 (Bloomberg) — Asian stocks fell the most in a year as faster-than-expected U.S. inflation fanned concern rising interest rates will slow demand in the region’s biggest export market. Sony Corp. and Samsung Electronics Co. dropped.”
Compare that to marketwatch.com’s bullish bullsh!t–
“Upbeat start ahead
http://www.marketwatch.com/news/default.asp?siteid=mktw
Futures signal a mild rebound for U.S. shares
Is the drubbing done? Stock futures show signs of life with weekly jobless, Philly Fed survey, other data ahead.”
No mention is to be found on marketwatch.com about the bad overnight results in Asia… Housing market bears will have to content themselves with this article, instead–
“A world of worry
For the real culprit, look no further than the U.S. housing market, finds Randall Forsyth”
(It is in the top center of the marketwatch.com home page, but subscription-only…)
What kind of information do you prefer–
Truthiness (marketwatch.com)?
“Upbeat start ahead
Futures signal a mild rebound for U.S. shares
Is the drubbing done? Stock futures show signs of life with weekly jobless, Philly Fed survey, other data ahead.”
Or news? (bloomberg.com)
“Asian Stocks Fall Most in a Year on U.S. Inflation; Sony Drops
http://www.bloomberg.com/apps/news?pid=10000080&sid=aYiFKne1Cr2Q&refer=asia
May 18 (Bloomberg) — Asian stocks fell the most in a year as faster-than-expected U.S. inflation fanned concern rising interest rates will slow demand in the region’s biggest export market. Sony Corp. and Samsung Electronics Co. dropped.”
Some commentary:
Away from the pretty pictures, and shifting to irrational rationalizations of what’s happening, I keep coming back to the thought that the markets are seriously worried not about Bernanke’s policy, but a widening sense that he is not sure what his policies are. With housing doing its best Wiley Coyote impersonation and the government’s inflation data moving slowly toward reality, Boom Boom is in a corner and staying in it is not a solution. With that said, I don’t really think he has a choice: if he blinks and stops hiking the bond market will do the tightening for him. If he keeps going he will add weight to the outstanding mountain of debt, but at least the crowds might think someone is in charge.
And on the topic of debt, a big thanks to one of our own for bringing to my attention the KBW Mortgage Finance Index (MFX). For those who believe that the real fun for the housing market will begin when “I-don’t-really-have-to-pay-it-back” mortgages start blowing on homeowners’ faces, this index might be a very handy-dandy tool. First, it diversifies you away from takeover risks; it gets around the “borrow” problem as many stocks in this group have already attracted short sellers; and offers options with volatilities that, IMHO, do not reflect the potential risks in the underlying stocks. Unfortunately, the MFX does not include the primary sub-prime lenders, but when the fireworks start I doubt sellers will be too discerning. There is quite a bit of catchdown potential between these two well-correlated brothers.
And did you hear Countrywide Financial’s (CFC) CEO saying on CNBC that they are starting to see an uptick in delinquencies?
Did Gretchen, the REaltor, get herself a bikini picture billboard (like Wendy)?
I just signed up for Zip realty to see what is going on with the market here in the O.C. I find it odd that the sold properties that they’ve been kind enough to list, are from 5 months ago! Have no comparable homes sold since December? I think the real estate industry has some ’splanin’ to do. Clearly the market is in trouble and yet they are doing everything they can to conceal it. Nice ethics.