Flashbacks To 2006
The Desert Sun reports from California. “California’s poverty rate of 23.5 percent is the highest of any state in the country, according to new information from the U.S. Census Bureau which factors in government programs to assist low-income people and families that aren’t included in official, income-based poverty measures that were developed in the early 1960s. Some experts believe California’s higher cost of living is responsible for the increase in its poverty rate under the new means of evaluation, compared to 16.3 percent under the old measurement criteria. Nationally, the new-measure poverty rate increased by a full percentage point, to 16.1 percent, or nearly 50 million people in poverty.”
The Signal. “All conditions are good for buying a home — except for the severe shortage of houses listed for sale, according to a 2012 Annual Housing Market report. And that shortage is only heating up the bidding wars on the homes that are available for sale. Some 57 percent of home sales received multiple offers in 2012 — the highest in the past 12 years, the California Association of Realtors reported.”
“‘We are also watching sellers push for the removal of the appraisal contingencies for every offer submitted,’ said Connor MacIvor with RE/MAX. ‘This is creating havoc on the ‘trust’ part of the real estate equation.’ Another headache for buyers, he said, is that sellers are starting to price their homes far beyond comparable value in the area. The problem with this scenario is that appraisers, slapped for overinflating home values during the subprime mortgage market mess, won’t match the selling price if they can’t justify it. And that leaves desperate homebuyers between a rock and a hard place.”
“The market conditions are ‘flashbacks back to 2006,’ MacIvor said.”
The Orange County Register. “Real estate agents note that the low inventory of homes for sale – in Orange County and across the nation – has created bidding wars for many homes, pushing prices higher than recent comparable sales. Mortgage Broker Dennis Smith cited an appraisal on a small apartment property in Long Beach. The seller and buyer agreed on a sales price of $730,000. The appraisal came in at $620,000.”
“Smith said some comparable sales the appraiser used were more than three miles away, and a few were sales dating back more than a year. The appraisal may have been a challenge, Smith said, ‘But over $100,000 (lower than) what the seller, listing agent, selling agent and buyer felt the property was worth?’”
“He found some fresher sales for comps with fewer units, but his appeal was rejected. ‘So we canceled with that lender and went to another lender and ordered a new appraisal,’ said Smith, co-owner of Stratis Financial in Huntington Beach. The second appraisal came in at $720,000 – with some of the comps he cited in the appeal. The initial appraiser could not be reached for comment.”
The Union Tribune. “Roughly 5,300 homes are on the market in San Diego County at this moment, half of what we saw just a year ago. But is this the type of dynamic the county needs to finally see a fully recovered real estate market? ‘It’s not a situation where the demand is overwhelmingly strong,’ said Michael Lea, professor at SDSU’s Corky McMillin Center for Real Estate. ‘We still have a housing market that is not well. There are few houses on the market. That’s what’s unusual. It’s stemming from the fact that housing prices are up but are still way off their peaks and there’s negative equity.’”
“Roughly one in four local homeowners with a mortgage are underwater on their home loans, he said. Some of those folks may want to sell their current homes for bigger, better places but can’t because they’d lose money in those deals. In essence, many potential sellers are still on the sidelines, waiting for price appreciation. ‘We need a continued rise in prices,’ said Lea. ‘It’s the most healthy thing that can happen. It will move more and more people out of negative equity and then it will start to revitalize the trade-up market, which has been moribund.’”
“Derick Sparhawk and his fiancee, Rachael Weathers just started the homebuying process. Sparhawk and Weathers are looking for something less expensive, in the $300,000 range. ‘I anticipate there will be a lot of putting in offers and being rejected,’ said Sparhawk, who is a server at Benihana.”
The Glendale News Press. “The number of homes and condominiums for sale in Glendale continues to lag compared with last year, according to the latest real estate figures. Even as the pool of available homes shrank, the number sold jumped by 57.5% — from 40 in October last year to 63 this year. Some banks are still jittery about going with foreclosures because of investigations by the federal government about whether past foreclosures were handled properly. Foreclosures can also involve a lot of complicated paperwork, said Harout Keuroghlian, chief executive of JohnHart Real Estate in Glendale. ‘There’s so much red tape that it could be years before [a home] even hits the market,’ he said.”
The Mercury News. “With a tough Homeowner Bill of Rights set to take effect in California New Year’s Day, cancellations of foreclosure auctions have spiked in the Bay Area and throughout the state, according to a report. ‘Fewer homes are in trouble,’ said Joe Reichert of Keller Williams Realty in Danville. ‘There’s a mentality of, ‘I’m almost over the hump, and if I hold on a bit longer values will come up,’ he said.”
“There are still plenty of people in trouble with their mortgages, although the numbers are declining, said Martin Eichner of Project Sentinel in Sunnyvale, an authorized nonprofit that helps struggling homeowners. ‘We had a foreclosure fair in San Mateo in October,’ he said, ‘and there was a line around the block before we opened the door.’”
The Press Enterprise. “Terra Verde Group, a real estate investment firm that recapitalizes distressed real estate assets, announced the acquisition of Rancho Las Flores, a 9,850-acre master-planned community in Hesperia. The property was acquired from R.E. Loans, a private mortgage lender that lent more than $80 million to the project and emerged from bankruptcy in the third quarter of 2012, said Craig Martin, founding partner of Texas-based Terra Verde.”
“Currently in an unimproved condition, Martin said the rolling terrain with valley plains and mountain views will be designed to support up to 15,500 residential units. What prompted the Rancho Las Flores acquisition? ‘We’re seeing the market tighten up across Southern California,’ Martin said. ‘Developers have been less active in the last few years than homebuilders, so lot supplies have been absorbed. Lot prices are climbing back to previous high water market price levels. We think that trend will continue, and accelerate.’”
And yet California has some of the HIGHEST income taxes and sales taxes in the union.
But I thought high taxes and making the “rich” pay their “fair share” leads to economic prosperity????
Obama told me so.
“But I thought high taxes and making the “rich” pay their “fair share” leads to economic prosperity????”
Post hoc, ergo propter hoc fallacy…how many different fallacious argument techniques do you have in your tool kit?
The Desert Sun reports from California. “California’s poverty rate of 23.5 percent is the highest of any state in the country, according to new information from the U.S. Census Bureau which factors in government programs to assist low-income people and families that aren’t included in official, income-based poverty measures that were developed in the early 1960s
I thought the poverty rate nowadays was calculated with respect to all incomes, so it’s a measure of inequality rather than absolute poverty. There has always been a lot of inequality in California.
“Some experts believe California’s higher cost of living is responsible for the increase in its poverty rate under the new means of evaluation, compared to 16.3 percent under the old measurement criteria.”
Looking on the bright side of the situation, at least California’s housing market is showing steady ‘improvements.’
Southern California home prices, sales show gains over a year ago
By Kevin Smith, Staff Writer
Posted: 11/19/2012 06:35:42 PM PST
Updated: 11/19/2012 06:41:27 PM PST
Housing construction in the West San Fernando Valley on Monday, November 19,2012. (Dean Musgrove / Staff Photographer)
Southern California’s housing market continued to gain traction last month as the region’s median home price rose by more than 16 percent, home sales grew by 25 percent and foreclosure resales hit a five-year low.
Though the region’s median home price held steady at $315,000 from September to October, it was up 16.7 percent from the year-ago price of $270,000, real estate tracker DataQuick reported Tuesday.
Housing sales in the six-county area - which includes Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties - showed an even bigger gain.
A total of 21,075 new and used Southland houses and condos were sold last month. That was up 18 percent from September and up 25.2 percent from October 2011.
…
One of the most interesting things has been the re-lapse of CA media and REIC members back into their role of justifying insanity.
‘Corona del Mar broker Suzanne Wyrick said the housing market has been heating up since February, culminating in an “insane” market by late summer. “The market just took off,” Wyrick said. “We had so much pent-up demand and the interest rates are so low, people said, ‘I don’t care what’s happening with the economy, let’s go spend our money.’”
‘Irvine housing consultant John Burns said he’s seeing an influx of affluent immigrant shoppers from multiple countries moving into Orange County. Investor buying also appeared to be at near-record levels in October…Brea housing consultant Pat Veling said bargain hunting days may be over for now. “That is truly unfortunate for those prospective buyers who waited too long to see a further bottom, which did not come to pass,” he said.’
http://www.ocregister.com/articles/percent-377668-sales-market.html
‘those prospective buyers who waited too long’
And there we go; it’s too late, you foolish renters. You’ll never own a house now. I wonder what will be said next?
“We had so much pent-up demand and the interest rates are so low, people said, ‘I don’t care what’s happening with the economy, let’s go spend our money.’”
Yea, when you don’t have a job, or it looks like you might not have one next month that’s the time to spend all your savings on a down payment.
Unemployed folks tend to not be able to save up for a downpayment; I guess that’s one reason to have low-downpayment loans and downpayment assistance programs?
What will be said next?
“It’s a new paradigm, and everybody who doesn’t buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.
Renters, and anybody born in a future generation, will not be able to afford a £15,000,000 starter flat in 15 years. They will live in tent cities, and Hondas.
This asset bubble is different than all of the others - it will never slow down, or pop. The gains are permanent. “
I’ve already seen a booth at the mall yesterday advertising homes. The papers said “Stop throwing money away on rent”, “Housing prices are only going to increase”, and “Now is the time to buy”.
Unless one is in a poor neighborhood the prices appear to be well north of the FHA/Fannie mortgage guarantee limits, so these must be “move-up” equity people that rode the housing inflation wave with an existing home. Maybe I’m missing something since I tend to skim these days?
“This is creating havoc on the ‘trust’ part of the real estate equation.”
Did ‘trust’ suddenly become part of the real estate equation and nobody reported it?
I think it was reported in Ripley’s Believe It or Not.
‘We need a continued rise in prices,’ said Lea. ‘It’s the most healthy thing that can happen. It will move more and more people out of negative equity and then it will start to revitalize the trade-up market’
This is the grand strategy of the Federal Reserve. Anything less and it will fall down. Prices will have to rise to the point where the millions who are underwater can sell. But to who? And won’t we just be back to the hopelessly unaffordable situation we found ourselves in in 2006? There’s absolutely no logic to be found with the current policy. It seemed a few years ago that the idea of us all getting rich buying and selling each other houses had been discredited. Why does the media or government not ask policy makers how this is supposed to work? And what negative outcomes might arise if they are wrong?
“Prices will have to rise to the point where the millions who are underwater can sell. But to who?”
Some guesses:
1. Hedge funds who will turn them into rental housing
2. All cash foreign investors
3. U.S. investors who are way ahead of the curve, like Darryl in Phoenix
4. The Fed, zombie GSEs or other federal government agency? (AKA market maker of last resort)
5. Other?
It’s also good to bear in mind the real purpose of all these housing market resuscitation programs is to save lenders, banks, etc. All is well once a home is in the hands of an end-user bagholder who can shoulder the losses, whether investor or householder.
‘Hedge funds who will turn them into rental housing…All cash foreign investors’
The outcome of this is already being pondered:
‘From January of 2007 to December of 2008, repossessed homes on the market went from 57 to 4,664 in San Bernardino County. Today there are 317, according to Jerry Gusman with Realty Executive Experts in Rancho Cucamonga, a real estate radio show host who gave a presentation on the market for the Southern California Real Estate Investors Association in Ontario’
‘Investors are buying the majority of the property in auctions on steps of Inland Empire courthouses. The houses are not even turning into foreclosure listings. Fannie Mae now allows bulk sale purchases to large investors. For example, an investment company just bought 970 homes in one transaction in the the U.S. Southwest. Large investors either rent out or flip the homes.’
‘A high percentage of owner occupancy is good for property values, so it may be a logical conclusion that investor-dominated activity will impede the real-estate market’s recovery in the area, but Mowery says the low inventory is countering the effect so far. “Those rentals have not come to market yet,” he said, “but eventually the supply of rentals is going to impact the market. It hasn’t yet.”
http://www.dailybulletin.com/breakingnews/ci_22014229/upland-foreclosure-market-drying-up#ixzz2Cm753n00
I have been told by local police that when affordable housing or rental housing or a mix of the two get close to 20% that the crime rate in that area goes up and to stay away from buying in those areas. Current buyers aren’t doing their homework.
My money’s on the zombies.
Ding! Ding! Ding!
Now that we are officially a Fascist state (in the classical sense: with the legislative and executive branches of government being nothing more than tools, moving in lock step to the orders of the corporate oligarchy) - the buyer of all of this inventory will be US, the citizens, by means of ‘whole-purchase’ bailouts to homeowners. CA just passed this in part - putting taxpayers on the hook for $100K in underwater homeowner shortfalls.
Now that the trial balloon has been floated in la-la land, and the MSM have been kept obediently quiet, and the dulled down population has looked on in slack-jawed, mouthbreathing indifference - it is time for Bolder Moves.
The One will take credit and do it in a Big Way for all of his brethren, the oppressed.
Step right up fer some hopey-changey! Assuming you still have a private sector job, you’ll be paying for it anyway. You’ll be paying for it until you choke.
I really enjoy your realistic view of the current state of affairs, and I wish my wife was half as smart as you. Invigorated!
FB’s who are even slightly above water can refinance. Once everybody has refinanced — or figured out that they will never be able to refinance, or refinanced and re-defaulted — the inventory can revert to bottom feeders and rental hedge funds, as p-bear suggests.
“It seemed a few years ago that the idea of us all getting rich buying and selling each other houses had been discredited.”
Did the Fed ever come out and admit the absurdity of this notion? Because if the Fed never said it, it never was said.
‘Did the Fed ever come out and admit the absurdity of this notion?’
How about this one:
‘There’s really only positive, encouraging news in these new numbers,” association board president Donna Sanfilippo says. “You can’t help but feel good about what we’re seeing in the San Diego County real estate market. Homes are moving and prices are increasing. If our recent first-time homebuyer clinic is any indication, which turned into a standing-room only event, San Diego is becoming a real estate town again.’
As Home Sales Quicken, So Do Realtors’ Pulses
http://business-news.thestreet.com/daily-news-real-estate/story/as-home-sales-quicken-so-do-realtors-pulses/11767595
“You can’t help but feel good about what we’re seeing in the San Diego County real estate market. Homes are moving and prices are increasing.”
Yes, for all the people who’ve been priced out of the San Diego market for the last decade, I’m sure they feel like cheering at this bit of good news. The stupidity of the quotes today is amazing.
I often wonder if any of these shills realize that their own children will eventually need homes too.
“California’s poverty rate of 23.5 percent is the highest of any state in the country, according to new information from the U.S.”
Can you say illegal aliens?
Can you say benefits for illegal aliens that drive those who are forced to provide them away from California? (Maybe that was 2banana’s point above…)
I don’t know, but I bet these people are going to be poorer if they get a loan:
‘Sparhawk and Weathers are looking for something less expensive, in the $300,000 range. ‘I anticipate there will be a lot of putting in offers and being rejected,’ said Sparhawk, who is a server at Benihana’
“…poorer if they get a loan…”
Another patently absurd notion that never was properly discredited:
Federally-funded ‘affordable housing’ loans to help low-income families purchase houses they cannot afford drives them further into poverty.
“Federally-funded ‘affordable housing’ loans to help low-income families purchase houses they cannot afford drives them further into poverty.”
Lots of college graduates are employed by the government in these various “help” agencies. Do any of them have a clue that they’re actually aiding and abetting the demise of the poor?
Yes, I think it was. Illegal aliens have created a death spiral in the state. Taxes are raised and needed investments are not made repairs to roads, flood control projects etc. due to the costs of mean tested programs for illegals and their families, which include legal residents, and the cost of education for “high risk” students. The high taxes and the decline in the quality of life causes net tax payers to leave.
So which is it are they legal or illegal? Or do you just mean brown people?
“Roughly one in four local homeowners with a mortgage are underwater on their home loans, he said. Some of those folks may want to sell their current homes for bigger, better places but can’t because they’d lose money in those deals. In essence, many potential sellers are still on the sidelines, waiting for price appreciation. ‘We need a continued rise in prices,’ said Lea. ‘It’s the most healthy thing that can happen. It will move more and more people out of negative equity and then it will start to revitalize the trade-up market, which has been moribund.’”
The real problem is that these negative equity holders have been misled by so many different housing market stimulus programs into falsely believing that the value of their homes will soon rise so much that their negative equity will go away. If only they realized this was not going to happen soon, they would be more willing to face the music and put their homes on the market when it made sense for life cycle reasons (job change, relocation, retirement, etc), rather than holding out hope for a big helicopter drop of capital gains that is unlikely to materialize.
Or they plan to live in the house a long time, and with their new HARP 2.0 (unlimited LTV) refinance, it would be more expensive to become renters than continue to make the payments.
They can always walk away and become renters…but for now, if they get cheap gov. cheese, staying and making the payments might be the cheaper monthly alternative (especially since property taxes will adjust downward to meet the current market value).
“Derick Sparhawk and his fiancee, Rachael Weathers just started the homebuying process. Sparhawk and Weathers are looking for something less expensive, in the $300,000 range. ‘I anticipate there will be a lot of putting in offers and being rejected,’ said Sparhawk, who is a server at Benihana.”
Who would loan a waiter $300,000?
‘Who would loan a waiter $300,000?’
The government. Who is making 90%+ of the loans?
‘it brings no satisfaction to have predicted that the Federal Housing Administration would sooner or later threaten taxpayers. That day has arrived. Safely past the election, the feds announced Friday that the FHA’s liabilities exceed its assets by at least $16.3 billion—and the gap could reach $93.7 billion in the worst case.’
‘Yet it’s worth recalling that when we warned about FHA’s troubles in September 2009, we got an accounting lecture from HUD Secretary Shaun Donovan and a letter from FHA Commissioner at the time, David Stevens, that we were “just plain wrong.” He added that, “I can say undoubtedly that the FHA fund is playing a key role in the housing recovery and poses no immediate risk to the American taxpayer.”
http://finance.yahoo.com/news/latest-taxpayer-housing-bust-034900816.html
I would LOVE to get the government out of housing loans and education loans. Then my kids might be able to afford houses and college.
Social engineering through policy is always full of unintended consequences but at least usually has some sort of outcome close to what was intended. Social engineering through debt subsidies just makes whatever you’re trying to encourage more expensive.
I’ve concluded that Bernanke is focused like a laser on the health of the banks, and all else is secondary. With the entrenched TBTF guarantees and the Cheney-esque “Debt doesn’t matter” attitude, he’s realized that the only way to reflate housing prices is to debauch lending again. And with increasing non-current loans, and FHA getting close to a bailout, he’s recommending lending standards become weaker, again. Which, with government taking the bad loans off the bank’s hands, does enrich the banks. And if debt doesn’t matter, there’s no consequence to anyone in his blinder-based view.
It could well be that Bernanke, like many CEOs, simply doesn’t care about issues other than his core directive. For CEOs, it’s increase profit. For Bernanke, it’s “Take care of the banks.” Side effects on the economy at large may well not register. Or not be a concern.
Mortgage lending standards are too tight: Bernanke
The Fed
Housing not ‘out of woods’ despite improving conditions
November 15, 2012|Greg Robb, MarketWatch
Some tightening of credit standards was appropriate to the lax lending conditions that led up to the housing bubble, he said.
“However, it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery,” Bernanke said.
http://articles.marketwatch.com/2012-11-15/economy/35126370_1_record-lows-mortgage-rates-credit-standards
“…David Stevens…”
What is David Stevens doing today?
http://www.mortgagebankers.org/DavidStevens.htm
‘Developers have been less active in the last few years than homebuilders, so lot supplies have been absorbed. Lot prices are climbing back to previous high water market price levels. We think that trend will continue, and accelerate.’
Judging from the newly updated signs along my daily commute route (”From the $600s” etc) and the evidence of construction crews firing up the bulldozers to complete the tract home developments whose construction has been on hold since 2006, I expect the trend of overbuilding unaffordable San Diego County housing will continue, and accelerate.
“Lot prices are climbing back to previous high water market price levels.”
This is complete baloney.
Land prices are still very low, nowhere close to high water market prices. Perhaps if you select Beverly Hills, this may be correct, but if you pick the state as a whole (and most development was taking place inland), land prices are still low.
Land prices are rising, but we are in the first inning of land prices going up.
Land prices are still WAY TOO HIGH. Only when the market is allowed to clear all inventory, which includes shadow inventory AND LAND, will there be a recovery. We are not even close yet.
For CA, from what I see, most residential land has cleared (changed hands during the downturn). Banks and builders were early to dump land holdings. Banks because they didn’t know what to do with it (and it wasn’t paying them ANY interest, only costing them money to hold), and builders because they could go to Uncle Sam with their hand out for tax refund from prior years’ taxes paid. Residential land values have just bounced off historic lows starting about 6-9 months ago in inland CA.
Generally speaking in CA, the problem over time is that it is too difficult to get land approved for development. As such, any land that is entitled for residential development sells at a significant premium to unentitled land. Throw in Williamson Act issues, and the amount of land available is restricted further.
It was an anomaly that land values were so low given these supply restrictions. Regardless of whether you think residential land values are too high, they are actually quite low relative to history in CA because of these restrictions in adding more residential land to supply.
I used the Control-F word search to find any mention of shadow inventory in the above post. Result: Nada.
Any mention of the word “vacancy”?
I’m tired of people equating few listings to a “shortage”. A “shortage” is when there aren’t enough housing units in existence compared to the number of people who want to occupy them.
A listing “shortage” can be easily manipulated into existence.
A true shortage is much harder manipulate into existence.
A listing “shortage” can quickly turn into a listing surplus (do the math, econ 101).
A true shortage is much harder to turn into a true surplus.
I’ll just sit back and watch the hedgies and rich Chinese flip houses back and forth to each other. Let’s see how this turns out.
If regular people want to jump in and sign up for debt, go right ahead. But personally I love the real freedom of not being a debt slave.
I’m more interested in watching the trends in rent prices. My bet is they will trend down. Let’s see …
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