Sort Of Like Japan
The Santa Maria Times reports from California. “Santa Barbara County government agencies issued the second fewest new home building permits since 1990, according to the Construction Industry Research Board. In San Luis Obispo County, the number of new residential building permits was the lowest in more than 22 years, according to the data compiled from local building departments’ statistics. Local home builders don’t expect any improvement this year and don’t see any end to the construction slump for several years, an industry spokesman said. Jerry Bunin, government affairs director for the Home Builders Association, said foreclosed homes have been selling for $50,000 and $100,000 less than it would cost to build them today.”
“‘There are still a number of foreclosed units to come into the market,’ he said. ‘As long as they’re out there, we can’t compete. It’s going to be two or three years or even longer before they’re all out there. There’s just no end in sight.’”
The Press Enterprise. “Economists at Chapman University are predicting employers will add about 20,000 new jobs for Inland workers this year. Esmael Adibi, Chapman University’s chief economist, said it could take two more years of job creation at the current pace to eat into the thousands of Inland houses either in foreclosure or facing the process. ‘We need about 70,000 more jobs to absorb those empty homes, and that’s the best-case scenario,’ he said.”
The Bay Citizen. “The housing crisis that began in 2008 could have a crippling effect on California’s ability to provide government services for a generation, according to a new report released by the Silicon Valley Communtiy Foundation and Joint Venture Silicon Valley. The problem: Proposition 13, passed by voters in 1978, essentially freezes property taxes on homes or businesses unless they change hands — meaning that today’s low property values could mean reduced government revenues for years to come even after the recession ends and property values begin to rise.”
“Making matters worse, the groups said, is a provision in state law that allows property owners to petition to have their property reassessed if they think it has lost value. In the 2011-2012 tax year, the report shows, Santa Clara County reduced the assessed value of more than 124,000 properties by a total of $25.9 billion.”
From KFSN. “If you are looking to buy a home, or refinance yours, there’s finally some good news even if you are upside down in your loan. The average interest rate on a 30-year mortgage has dropped to 3.75 percent, and a new Federal program is easing requirements to buy. For first time homebuyers, the climate can’t get much better to buy.”
“With the help of mortgage insurers, prospective buyers with credit scores of 660 may be allowed to put as little as 3.5 percent down. Even those with scores as low as 580 may be qualified to own a home. ‘Unlike the last time they dipped, not quite this low, more people actually qualify because of some of the loosening of the guidelines as far as credit scores and debt ratios are concerned,’ California Funding Loan Officer Marc Navarro said. ”
“Starting March 15th, a Federal program called the Home Affordable Refinance Program, or HARP, will allow some borrowers who are upside down or have little equity to refinance. The goal is to stabilize the housing market and boost the economy. In many cases, some home builders say buyers can realize the dream of home ownership for about the same price they were paying to rent.”
“‘There’s a lot of people who could buy that aren’t aware. And with 3 1/2 percent down, right now you are getting your income tax back you can actually take that money and purchase a home and a lot of times for not much more than you would pay in a deposit,’ Granville sales manager Michelle Brunn said.”
From KCRA. “California, as well as several other states, is considering a settlement with banks involved in foreclosures. The deal would give $20,000 to underwater homeowners and offer $2,000 to those who have had their homes foreclosed on. Real estate broker Elizabeth Weintraub said the deal that banks are offering is not beneficial for a lot of homeowners, because the amount owed on their mortgage far exceeds what banks are offering.”
“‘People are under water too far,’ Weintraub said. ‘If you got a $500,00 home that is now worth $200,000, you don’t want a $20,000 principle reduction — you want a $300,000 principal reduction.’”
The Santa Barbara Independent. “The biggest concentration of foreclosures is in the North County. According to ForeclosureRadar, there were 808 bank-owned properties in the county as of December 31, with 340 in Santa Maria alone and 234 in all of the South Coast. One homeowner, who did not want to reveal her name, works in Santa Barbara but bought a home in Lompoc. A series of crises that occurred in domino-like fashion made it hard for her to keep up with her payments.”
“After much hassle, she was eventually offered loan modifications by both the federal government and her servicer, Bank of America. Without a reduction in her principal, though, neither modification made sense. Her Mediterranean-style stucco house, which she bought for $385,000 in 2004 — and which peaked in value at $450,000 — is now worth less than $200,000. Last March, she stopped making payments and has since moved into her parents’ home. She is currently arranging a short sale.”
The Mercury News. “The housing crisis, which first devastated borrowers who purchased lower-cost homes with subprime loans, has caught up with people whose wealth helped them hang onto their houses longer. Throughout affluent communities in the Bay Area, million-dollar-and-up homes are increasingly being lost to foreclosure, or sold as a last resort for far less than their mortgages.”
“‘About a year and half ago, we started receiving listings of foreclosures from Blackhawk. Prior to that, it was unheard of,’ said Bryce Ellsworth of Windermere Ellsworth & Associates of Brentwood. ‘I sold a home in Blackhawk last year, on three-quarters of an acre, a beautiful pool and backyard and nicely done kitchen. It was $4 million on the previous sale. This time it sold for $1 million cash.’”
“Short-sale specialist Joe Reichert, of Keller Williams in Danville, said some homeowners simply are giving up on the idea that home values are going to increase to anything close to what they were when they bought their home. A business consultant, who asked not to be named, sold the five-bedroom home in Danville that he bought for $1.6 million in 2005 for $900,000 about a year ago in a short sale and moved to Texas.”
“‘The home was probably too expensive for us, but the main reason (we sold it) was the loss of equity,’ the consultant said. ‘It will never go back to that in the near future. We’re sort of like Japan. The prices never recovered over there, and I don’t see that home going back to $1.6 million for 10 years. It was better to short sell it and get rid of it.’”
“The housing crisis that began in 2008 could have a crippling effect on California’s ability to provide government services for a generation, according to a new report released by the Silicon Valley Communtiy Foundation and Joint Venture Silicon Valley.”
FYI what Prop 13 has done is forced a shift from local property taxes to state income and sales taxes. And since state taxes are collected and distributed statewide, you don’t get much more spending in rich towns than in poor ones.
In the Northeast, in contrast, property taxes are sky high, but rich towns can enjoy luxury services at a low share of their residents’ income, while poor towns pay a high share of their income for bad services.
Let’s say Prop 13 affected local property taxes only (I’m not sure of this). How about a statewide property tax? I’ll bet those affluent people arguing against Prop 13 would lose a lot of their enthusiasm.
The problem: Proposition 13 ??
Standard pitch…Our problem is we need more money !!!
No & No….Your problem is you spend to much money….You build stupid “Feel Good” projects and lavish your employees in pay, benefits and pensions far beyond what any person other than your recipients would consider fair & reasonable…
Cry uncle all you want…California has finally woke up to starving the beast…Prop #13 was just the first leg of it…
WT:
Prop 13 limits the statewide property tax rate, but local counties and municipalities (statewide too, but good luck getting them passed with 2/3 majority,) can tack on bond issue fees, utility surcharges, school fees, road taxes, Melloroos, HOA fees, etc., if the country voters approve.
Currently I’m paying for streetlights, sanitation services, water and electrical, sidewalks, sheriff and library services, high school improvements, city parks, etc., none of which are anywhere within fifty miles of me, precisely because of these additional bond charges.
“Her Mediterranean-style stucco house, which she bought for $385,000 in 2004 — and which peaked in value at $450,000 — is now worth less than $200,000. Last March, she stopped making payments and has since moved into her parents’ home. She is currently arranging a short sale.”
“It was better to short sell it and get rid of it.”
Instant mortgage reduction! Plus you get to go free.
Speaking of that “go free” idea, Nick Lowe has a song out called “House for Sale.” In it, he likens selling the house to getting out of jail.
Cruel to be kind…. in the right measure.
My uncle always said “you want to own the house not have the house own you”.
Yo, stuck!
(Nice of you to make an appearance.)
“Throughout affluent communities in the Bay Area, million-dollar-and-up homes are increasingly being lost to foreclosure, or sold as a last resort for far less than their mortgages.”
Sounds like there has never been a better time for folks with a few million bucks lying around to buy.
Speaking of people who may have a few million bucks laying around …
http://www.nytimes.com/2012/02/09/us/california-housing-market-braces-for-facebook-millionaires.html?_r=1
Funny stuff:
“I’m kind of worried — a thousand millionaires are going to be buying houses!” Connie Cao said as she and her family toured a home in a good school district here.
Her husband, Jared Oberhaus, was more optimistic. “Maybe sellers are sitting on their houses now, waiting for Facebook, and they’ll all come on the market at the same time,” he said.
A thousand millionaires are a drop in the bucket in a state of nealry 40,000,000. And I wonder how many of those “Facebook millionaires” will move on to nicer pastures now that they are financially independent?
A college friend did quite well in the IT industry. Matter of fact, he and three Ameritech coworkers went out on their own and started a company that they sold to Cisco Systems for $25 million.
Then, as now, he’s living in Michigan with his second wife (first one died after being hit by a car while crossing a street) and he’s working on another startup venture.
He’s checked out Silicon Valley more than once. I’ll never forget the story he told me about going to a Starbucks where the high-tech business buzzwords were flying right and left. It took every bit of self-control he had to keep from busting into uncontrollable laughter.
Yeah, have you seen much about groupon lately? If I was one of those facebook people, I’d take the money and run for the hills.
I’d take the money and run for the hills ??
Oh they are Ben….Los Altos hills, Palo Alto Hills, Menlo Atherton Hills, Portola Valley Hills and San Francisco Hills….
Yeah, have you seen much about groupon lately? If I was one of those facebook people, I’d take the money and run for the hills.
Groupon seems to have disappeared into the ether. I guess all those bad coupon deals with small businesses that could ill afford such things kinda poisoned the well.
As for taking the money and running, back to my college friend who became a multimillionaire after he and his partners sold their company to Cisco: They were golden-handcuffed to Cisco jobs for three years after the buyout.
And, wouldn’t you know it, their Cisco stock plummeted. To the point where they developed an app that they called Sharp Stick. It tracked the decline of their stock in real time.
Yeah, have you seen much about groupon lately? If I was one of those facebook people, I’d take the money and run for the hills.’
I expect they can’t sell at first, have to wait 6 months
“…Los Altos hills, Palo Alto Hills, Menlo Atherton Hills,…”
But, hills crumble, erode, quake, slide, burn, traffic congest. And half of those houses belong to underwater real estate ladies and their spec house hubbies. Real- tar dreams…. The truly wealthy move their RE money down to Pebble Beach and Montecito
I was just going to post that NYTimes story.
How many people are going to become instantly wealthy as a result of the facebook IPO?
Hundreds? Thousands? The article simply says “legions”.
If Silicon Valley Costs a Lot Now, Wait Until the Facebook Update
PALO ALTO, Calif. — Imagine looking for a house in San Francisco or one of the nicer parts of Silicon Valley, which are already among the most expensive parts of the country. Now imagine having to bid against a legion of newly minted Facebook millionaires.
“I’m kind of worried — a thousand millionaires are going to be buying houses!” Connie Cao said as she and her family toured a home in a good school district here.
Her husband, Jared Oberhaus, was more optimistic. “Maybe sellers are sitting on their houses now, waiting for Facebook, and they’ll all come on the market at the same time,” he said.
“If Silicon Valley Costs a Lot Now, Wait Until the Facebook Update”
So now we not only have one Fed-funded bubble on top of another, but we even have New Dotcom Era fantasy bubbles.
What will they think of next?
New Dotcom Era fantasy bubbles ??
And it feels very similar Pbear although the Dot-Com era was completely out of control…
And I don’t have to “imagine looking for a house in SF”, because we are looking for either a rental OR to buy (yes, we need a roof over our heads).
There is almost nothing for sale for under 600K. The extreme bears are insisting prices will crash 50% more. On the other side (see NYTimes article above) is predictions of ever rising prices.
Starting to wish I lived in FLA.
I write reports about SF commercial real estate, among other metros across the country.
There is nothing like it. I call it “manic depressive.” Nowhere has the kinds of booms and crashes SF does. But according to data collected by my firm, apartment rents haven’t spiked nearly as much as the did around 2000 as of yet. That spike was followed by a massive, massive crash.
A couple of factors: as in NY, market rate apartments are a small share of the total rental inventory but take the whole hit of rising and falling demand. And since the whole places is pretty much built out, expect for expensive high rise construction that replaces (and pays for) existing buildings, supply can’t balance demand in the market, so price has to.
“‘The home was probably too expensive for us, but the main reason (we sold it) was the loss of equity,’ the consultant said. ‘It will never go back to that in the near future. We’re sort of like Japan. The prices never recovered over there, and I don’t see that home going back to $1.6 million for 10 years. It was better to short sell it and get rid of it.’”
And watch this person’s family, coworkers, and circle of friends and acquaintances develop a new outlook on homeownership. It will be like the outlook toward owning stocks that cropped up after the Great Crash of 1929. The average small investor didn’t feel safe in the market until the 1960s — or later.
That’s the span of a generation.
Honestly I thought back in 2008 that the market would bottom out by 2011. It’s nowhere near. Now I’m thinking 2015.