‘Too Much Supply And Not Enough Demand’ In California
The California realtors have the April numbers out. “Existing home sales decreased 21.4 percent compared with the same period a year ago, the California Association of Realtors reported today. C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in April 2006 was 5.6 months, compared with 2.4 months (revised) for the same period a year ago.”
“In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 84.5 percent, or 339 out of 401 cities and communities showed an increase in their respective median home prices from a year ago.”
“In Los Angeles, sales were down 12.8 percent from a year ago. In Orange County, sales were down 11.4 percent in the month and 33.2 percent in the year. In Riverside/San Bernadino, sales were down 12.9 percent in the month and 23 percent in the year.”
The Desert Sun. “The Coachella Valley housing market in April continued in its ’soft landing’ pattern of the past several months. The 1,009 homes sold was down 30.3 percent from a year ago, according to DataQuick. While still showing more energy than some other Southern California markets, unsold inventory in the valley, currently at 7,497 properties, is well up from year-ago levels.”
“‘Sellers have to be flexible, but buyers still have to be realistic,’ said Greg Berkemer, executive VP of the California Desert Association of Realtors. ‘I’m not sure people realize how much of an equilibrium we’re seeing here.’”
“Contributing to the unsold list, he said, are properties entering the MLS that were previously listed only as for sale by owner; houses being put on the MLS by new-home developers; and homes being listed by investors who weren’t able to ‘flip’ them as quickly as they had hoped.”
“The current situation is frustrating to investors like Cathedral City resident Wayne Biswurm. ‘As an investor, I’m not really happy about the situation right now,’ Biswurm said. ‘There’s too much supply and not enough demand.’”
“The valley and all Southern California regions saw annual drops in their property sales counts. Ventura County sales were down more than 41 percent from a year ago, and the Southland as a whole was down more than 21 percent.”
The San Francisco Chronicle:
‘More than 400,000 acres of Bay Area land, the equivalent to 13 San Franciscos, could be paved over during the next 30 years if local governments do not act to contain sprawl, a Greenbelt Alliance survey to be released today warns.’
‘There is a total of nearly 4.5 million acres in the Bay Area, of which 761,400 acres are urbanized, according to the report. The Alliance surveyed San Francisco, Marin, Sonoma, Napa, Solano, Contra Costa, Alameda, Santa Clara and San Mateo counties.’
As usual, there are some surprises in the Dataquick/CAR link (second down). Check out LA and Santa Barbara.
Not really a surprise for SB median to go up. There’s always gorgeous $2 million and up homes for the rich folks which sell in any market. The bottom end is drying up, which is shifting the median up here.
$2 million? That’s not such a gorgeous house here in Bay Area, my friend.
A worthwhile piece from today’s Daily Reckoning:
The Daily Reckoning PRESENTS: It happens. Formerly “hot” housing markets
eventually lose their sizzle. But does that mean that will simply level
off - or take a long tumble down? Elliott Wave’s Susan Walker explores…
THE BIG “WHAT IF?”
by Susan C. Walker
It’s long past time to talk about housing markets losing their sizzle.
They’ve already begun to turn down in the most bubbly markets on the East
and West coasts. Now we’ve arrived at the truly difficult part of any real
estate boom-and-bust cycle - the time when prices hang in the balance.
Will they go up any more, will they plateau or will they - collective
shudder - go down?
This uncertainty particularly worries those who have bought some
investment property - say, a second home or condo - and are having trouble
selling it. Is it time for them to face their inner fear that they might
have to sell their property for less than what they originally paid? Worse
yet, what if the property doesn’t sell even then?
It happens to the best of families - relatives lose their shirts on real
estate. In my own extended family, there’s a perfect example. Let’s call
him Uncle Mike. Back in the early 1970s, he retired and used his nest egg
to buy property on Hilton Head Island in South Carolina. One lot for
himself and his wife, and four more pieces of land for his kids to build
on some day. Easy to see what a great investment that must have been.
Hilton Head is such a success story. Wasn’t he smart to get in at the very
beginning?
Well, Uncle Mike was smart, but the investment was not. The developers of
Hilton Head went bankrupt and took Uncle Mike down with them. He had to
sell his home at a loss. He found no buyers for the four lots, and the
bank took them over. (Some lucky buyers later scooped them up for a
pittance.) Then he and his wife had to move into an apartment that was
one-third the size of their previous home. His retirement ended up looking
less like “Easy Street” and much more like “Difficult Drive.” Once the
real estate market shook out, Hilton Head recovered and went on to become
the luxurious vacation spot it is, but Uncle Mike never recovered.
Ah, but most people who have bought investment properties recently didn’t
own in the 1970s. It’s hard to be prepared for the history you don’t know
to repeat itself. In fact, ElliottWave.com points out that people choose
to see only one side of the price equation. Even as sales of new homes
drop and the number of homes on the market rise, still there is virtually
no fear about home values:
A recent national survey of homeowners by the L.A. Times shows ‘widespread
faith in the real estate market.’ The worst possible scenario, that prices
would ’stay the same’ over the next three years, was selected by just 5%
of homeowners. That total was less than the 6% who said they expect to see
a rise of 31% or more. No matter how much talk of a bubble there may be,
homeowners continue to demonstrate that they have no clue about the
ramifications of one. And this is in an environment in which prices
actually are falling! The denial runs so deep, it’s not even denial
anymore. It’s some kind of epic disconnect between the reality of a newly
falling housing market and an unwritten social contract that says home
prices do not fall. [The Elliott Wave Financial Forecast, April 2006]
Yet, you don’t have to have lived through a housing bust yourself to
appreciate the effects. Just think of someone you know who lived through
the bust in the Houston oil patch during the 1980s, or the Northeast condo
bust in the late ’80s and early ’90s, or Atlanta’s real estate bust in the
1970s. Most property owners then twisted in the wind, waiting, waiting for
prices to turn back up. Many of them couldn’t hold onto their property,
and the people who picked up the pieces at rock-bottom prices became the
next land barons.
That brings us to the big “What if?” What if that investment house or
condo you bought doesn’t sell? Plan B is usually to rent it, but what if
you can’t find renters? Do you just hold on and keep paying the mortgage
and other carrying costs, or do you throw the towel in and sell at a loss
to whomever will buy?
The real problem is that markets can move much slower than we expect,
which makes it all the more difficult to decide what to do. For reference,
historian John Brooks wrote about how it felt to live during the Great
Depression. In one word, it was “surreal.” Keep in mind his description of
the 1929-1933 experience:
[It] came with a kind of surrealistic slowness … so gradually that, on
the one hand, it was possible to live through a good part of it without
realizing that it was happening, and, on the other hand, it was possible
to believe one had experienced and survived it when in fact it had no more
than just begun.
When a market starts to turn, it doesn’t have to be quick. It’s more
likely to be slow and painful - like boiling a frog. (The idea goes that a
frog would jump out if it were thrown into a pot of boiling water. But if
it’s put into a pot of cold water and then the heat is turned on, the frog
could not judge the threat.) In fact, economist Gary Shilling wrote in
Forbes magazine last September, “History also suggests that a housing boom
does not have to end violently. The Federal Deposit Insurance Corp.
counted 63 home-price run-ups in various cities over the last 30 years,
but so far just nine of these ended in busts, and all of those were
regional.” He goes on to point out that prices that went up gradually tend
to come down gradually over many years. That means slow housing market
busts can slowly boil investors who don’t have the cash flow to hold onto
their properties until the market turns again.
So, will there be more Uncle Mikes in the world next year this time?
Thinking about human nature, the answer has to be a resounding ‘yes.’
There are only a hardy few who can hold on through a protracted bust or
who are able to absorb a loss and move on to the next investment. In the
meantime, though, many people who own property will suffer from the
effects of mental anguish and indecision, not unlike that poor frog who
doesn’t know if the water is going to keep getting hotter.
Regards,
Susan C. Walker
for The Daily Reckoning
Editor’s Note: Susan C. Walker writes for Elliott Wave International, a
market forecasting and technical analysis company. She has been an
associate editor with Inc. magazine, a newspaper writer and editor, an
investor relations executive and a speechwriter for the Federal Reserve
Bank of Atlanta. She is a graduate of Stanford University.
Very, very good article. Only to add is the obvious, people buying homes who probably shouldn’t be using option ARMs (credit card mortgage or foreclosure ARM) and standard ARMs. They have no clue what they’ve gotten themselves into. They too will encounter the “Uncle Mike” scenario.
Why is OC up 10.4% YOY in one report and up 6.9% in the other??
It’s called cooking the books!
No, one is all sales, the other existing SFRs. These are tricky critters.
For blogs for Westchester County, NY see http://westchesterny.blogspot.com
Talk about Bay area being paved over. The entire LA/ Scal coastal basin is already at the point of being “paved over”. The Inland empire counties of Riverside and San bernardino have seen the entire region, which just 20 years ago was a vast area of pastureland between The eastern boundary of LA county and the cities of riverside/corona/San bernardino, almost completely disappear to become vast industrial/warehouse/housing tracts. All of the newly sprung communities of Rancho cucamonga, rialto, norco,mira Loma,chino,Ontario,Fontana,Colton,ect did not exist or wer just tiny little villages only 20 years ago. Orange county is pushing housing tract development into the formerly empty Irvine/laguna hills area south of the present city of irvine and the 405 fwy. The Entire LA coastal Basin is , or will soon be, a 100 mile wide by 150 milw long continuous peneplain of endless urbam sprawl, running endlessly from San Fernando to the north to San clemente to the south and from the South bay beach communities east to Banning/beaumont.
I don’t doubt that at all. But the idea of a shortage doesn’t jive with this report.
There are a lot of infill projects.
I live in coastal Huntington Beach and there are still empty lots. There are even more empty spec houses.
City Zoning dictates the “footprint” (cemented or built property) you (I) can imprint on the lot you own. Maybe it should be applied equally on a city, county, or state level in terms of percentage? Big stretch, I know. They are not making any more land, but there is still a lot of it available depending on where you want to print your foot.
As a former SD resident, we thanked God every day for Camp Pendleton. The only thing between San Diego becoming part of the LA-OC megalopolis. Semper fi.
I agree 100%. My wife and I used to live not too far from the front gate just off the I-5. Driving on Pendleton is unreal. It’s got so much open land I hear they still even have buffalo running wild on its Eastern part near Fallbrook. Ocean views from many vantage points and unspoiled beaches. It’s like the North County I grew up in.
I don’t put anything pass the BRAC anymore though and developers would love to get their hands on that land to create a whole new “upscale” city.
“There’s too much supply and not enough demand”
This quote reminds me of the movie Spinal Tap, when they show that band playing to all these crappy venues with like 20-30 fans. The interviewer asks them “You know, I see that the crowds at each show keep getting smaller-do you think that maybe that points to declining popularity of the band” The guy in the band says “No! I think it means we’re playing to a more selective audience”
Once prices “go to eleven” there’s nowhere to go but down.
Give me one reason why ‘buyers have to be realistic’ as the author in this article states. Inventory is through the roof, prices do not reflect reality nor economic fundamentals and rates are climbing. It should say, ’sellers should bail out why they can. Buyers should lowball for the best price regardless of comps.’
Hell yeah.
Well said!
And the sellers should feel damn lucky to get any offers, lowballs or not. I think any offer in the current SoCal market is unrealistic. I say, let them marinate a bit longer before slapping them on the grill…
‘buyers have to be realistic’
_____________________
But **WE ARE** being realistic. We expect home price ratios (price to rent and income ratios) to return to realistic levels, based on historic, pre-bubble trends.
What ISN’T realistic is $500,000 “starter” homes.
When the credit market dries up, and buyers have to actually **qualify** for a loan, we will again see what “realistic” is all about.
Amen to that!
C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in April 2006 was 5.6 months, compared with 2.4 months (revised) for the same period a year ago.”
I am surprised that the inventory number is still historically so low. If the magic number is 6 months of inventory, we’re really close…but I think we need to see 9 months or so to actually see noticeable price decline pressure.
Simmssays…wacky cars
http://www.americaninventorspot.com
We need about 12-18 mo’s of inventory to see any real changes in the So. Cal market. In the last downturn If I ran a search for a 3+2 for 400k I would have had at least 500 in the results were far from that now.
San Diego zip inventory:
1-23-06 15,568
today 20,849
at bubble peak in Apr. ‘05 it was in the 4-5,000 range. Those 20K+ sellers are not going to be able to sell those houses at today’s asking prices. New houses and condos come on line every day as well. The “5-6 mos.” of inventory is a fiction.
Ok, but in reality how many months of inventory is that. Although I’m a Realtor I have no clue about the San Diego market. I don’t think that 20,849 is 12-18 mo’s worth of inventory for that size region. But I could be wrong. On top of that how many of those are bank owned properties. Even though that number is large compared to last years. There’s still aways to go. Before it becomes critical IMO.
There were 2,397 SFR, condos, and townhomes sold in San Diego County in APril. There are now 20,849 homes listed for sale. At that same pace we have a 8.7 month supply.
Downtown is a micro-climate of the San Diego Market. There are 540 units currently on the market. Approximately 1 to 2 close each day… 25 closed between 5/1 and 5/18, or 1.4 per day. At that rate we have 385 days or almost 13 months worth of inventory.
But, things may be turning more sour as we speak??? It was noted on another site that in the last 5 day span, only 1 unit went into pending sale status. More time is needed to really tell if a change is taking place.
For a person who works in sales (RE), you sure have interesting punctuation, Mr. Stream. You’re not alone, of course - most of the RE adverts that get stuck in my doorjam are similarly lacking in basic writing skills.
We Rent!-
It’s doubtful you would ever get advertising from me that isn’t professionally written. Actually it’s doubtful you would ever get a piece of advertising from me. I don’t suffer fools well. So I don’t do mass marketing. It reduces my exposure to idiots. Like I’ve said before I’m semi-retired, my clients are high net worth, at least 500k liquid and come from repeat business/referrals.To maintain my sanity anyone who is taken as a client rest assure they have been heavily screened.
If my posts are so painful just skip over them.
Waiting in SD-
IMO here’s the problem with the inventory numbers. Untill they include a large portion of foreclosures ie: 75% or more. There is no relevance to them. They are absolutely meaningless in regards to price. It just means there’s a whole lot of bricks for sale.
The numbers that are relevant and important are the REO numbers untill they increase substantially there will be no substantial reduction in price.
Ha ha!
Yes, as we know - supply doesn’t relate to price at all. Those of us with an education agree
So, … how many years of University does it take to become a realtor?
I only spent 5 getting my B.S.E in Computer Engineering. Tell me, what can I do to obtain such a standing where I learn that supply does not factor into price?
http://www.azcentral.com/arizonarepublic/business/articles/0525economy0525.html
Arizona Republic article above discusses record UNSOLD housing inventory!
Also the Media and the government report the past. After Wall street gets to position themselves….Economy is “falsley recovering from the 2001 bubble crash ..that we are told was virtually painless… Government reported +5.3% Q1 GDP (after it deducts 3.3% for inflation) 8.6%…..What is your inflation # to deduct?
Also the government payments were UP UP UP..Question is why? Answer Medicare and other transfer payments were sent after the New Year versus 12/31/2005, as in the past 20 years.. That is why Wall Street KNEW the Q1 #’s would be better than Q4!…Problem is Q2 now has to compare to Q1!!!
So you are reading NOW the economy in Q2 is going to slow….WHY? because it never grew @ 5.3% to start with!
Since Real estate that accounts for 12% of GDP & is off as much AS WE KNOW it is..then What?, Where? is the economy growing? IF AT ALL? Amazingly $3 dollar gasoline has no impact…like magic wage inflation is “well contained” by the government statiticians? As airline & auto workers take drastic pay cuts…..
Too bad for the rats….sorry no more high ground…the Pied Piper has arrived! Full blown recession by August! unless of course we start a war! then its DEPRESSION!
Interesting info on Chicago and Kansas City, posted at lemetropolecafe.com:
Foreclosure Rates Soar in Metropolitan Chicago
Residential Real Estate Becoming Buyer’s Market
CHICAGO, May 25 /PRNewswire/ — Driven by rising interest rates and high levels of debt, foreclosures on homes in the eight-county Chicago metropolitan area are sky-rocketing, particularly in the region’s fastest-growing counties.
The soaring rate of foreclosures is quickly transforming what has long been a seller’s market into a buyer’s market.
“During the refinancing boom, people found themselves qualified for homes
they might not have qualified for if the interest rates were higher,” explains Jeff Metcalf, founder and CEO of Record Information Services Inc. (RIS), a suburban Chicago-based company specializing in marketing data collection.
“Any movement up in the mortgage rates, particularly for those who used adjustable rate mortgages, is going to affect a lot of people.”..
-END-
The same is true in Dallas as duly noted by the Dallas Morning News. And then there is this:
As stated the house numbers are bogus-here in Kansas city there was an emergency Home Builders ASSC Meeting with one point of focus –WHAT DO WE DO WITH ALL THESE HOUSE’S WE HAVE BUILT ?????
nobody buying-my son is a gutter contractor and had 5-8 builders-he now has NONE-no sales going on-my neighbor is a painting contractor-million dollar plus homes only—guess what–laid off his crew and has nothing in the pipeline!!!!
The real number is a backlog of 7-8 months and rising-as I wrote you several weeks ago in this regard -THERE ARE NO MORE MARGINS LEFT and NO BUYERS LEFT. The number of new homes sitting and growing weeds is probably more to the tune of one million.
“Unsold Inventory Index for existing, single-family detached homes in April 2006 was 5.6 months, compared with 2.4 months (revised) for the same period a year ago.”
————————————————————
LOL. There’s 3 houses for sale on my block, 1 for about a year and the other 2 for 5-6 mos. I think the market is completely halted except for sellers who cut their price dramatically.
“‘Sellers have to be flexible, but buyers still have to be realistic,’ said Greg Berkemer, executive VP of the California Desert Association of Realtors. ‘I’m not sure people realize how much of an equilibrium we’re seeing here.’”
————————————————————–
skyrocketing inventory is NOT equilibrium. I track zip inventory for San Diego, Vegas, Phoenix, and CA Central Valley. Steady, daily, unrelenting increases. Patience WILL NOT reward the sellers.
With sales down almost a third, I guess realtors’ incomes must also be coming in for a proverbial “soft landing”.
My brother in Law who is a Realtor up in Folsom CA near Sacramento has yet to sell a house this year. He said if things don’t get better he’s going back to being Trader Joes manager.
If he wants to make a living, tell him to stop living the lie, convince his clients to lower prices drastically to sell them. He makes a cut on every sale. Coddling unrealistic sellers shouldn’t be in his job description. Every house can be sold…TODAY…for the right price.
>>convince his clients to lower prices drastically to sell them
Thats the problem, clients refuse to be convinced thinking they know more about the market. He’s had 1 sale fall through because the clients wouldn’t budge on a $10K price reduction saying they would rent it out before lowering the price. Another favorite is the lady with the house full of hideous “Art” collections she refuses to store as well as some pretty scary paint colors that she won’t change for the unwashed. Yet another stubborn client who overpriced but has had no showings gave the “It sells when it sells, it’s priced right” comeback when asked to lower the price. And lets not forget the nutjobs who even now add another $25K to the listing prices because “they are going to offer me less anyway so start high”. The sad fact is these clowns cost time and money to market and the money isn’t coming in on the agents side to support this.
So?
Mo Money,
I think you’ve just explained why this will take a loooong time (at first), and IMHO, it’s because of the internet and all the information now at our fingertips. People claim the benefit is to the bears/buyers, but I think the sellers perceive a benefit as well.
I’m going to side with Realtors on this one. **This is one area where Realtors are very, very valuable.** When sellers relied on Realtors to help price property, the prices were marked-to-market. Realtors knew where the market was headed (up or down) and a good agent/broker could recommend a price that would sell. These days, sellers do much more research than most buyers I know. They know the top price of homes sold in their neighborhoods, and will price their home accordingly, irrespective of what’s happening **now**. IMHO, that is why we are seeing the rising/record inventory numbers and stagnant prices (for two years in San Diego!). Sellers think they know everything, due to all the available information, and will ignore “the market” at their own peril.
That being said, once reality sets in — and this requires buyers to be very patient and disciplined — prices should come down in a loud whoosh, IMO. If, however, buyers decide to give up early, we could be in for one of the most protracted RE busts in history, IMHO.
On the money CA Renter
I think being a Trader Joe’s manager sounds kind of fun. Certainly more so than being a realtor.
“There’s too much supply and not enough demand”
Hmmm…. let’s see, Econ 101 says that is when prices should go down… Since we know that isn’t happening (yet), expect the standoff to continue. Clasic end of the bull market standoff market. Sigh…
I’m facinated by patterns, but I just wish this one could play out faster than the historical norm. We all know home prices are sticky… but prices will still drop. I’m planning to do a little “For Sale” sign tour in October in my area. I just wonder if the prevenlence of information of the internet will make this downturn faster than before… or not.
Personally, I love it when realtors tell buyers to change.
“‘Sellers have to be flexible, but buyers still have to be realistic,’ said Greg Berkemer, executive VP of the California Desert Association of Realtors. ‘I’m not sure people realize how much of an equilibrium we’re seeing here.’”
Equilibrium?!? Not exactly the word I would have used…
Buyers don’t have to change at all. Homes are sold in what is effectively an auction market. Buyer bid… bids can be either accepted, rejected, or “counter-offered.” If the bids are too low… reject them and keep holding the auction. But reject them knowing inventory is growing and there are dozens of identical auctions going on within a dozen blocks.
I’m quite sure that 75%+ of the market doesn’t need to sell no matter how high or low home prices go. Woop dee do, they don’t set the market price. Just remember market price is determined by the last few months transactions. So once prices do drop… it will get interesting.
Yes, sellers could be like my grandfather who happily died with four side by side lots (he was tired of bad neighbors, loved to grow farm crops, and damn the diseconomies of doing it in a waterfront suburb). But I think there will be enough motivated sellers to bring us back to recalling the 1990’s here in Cali.
Does anyone have a good count of non-MLS homes for sale in Cali? Also, I’m very curious as to the total quanity of new build single family homes, townhomes, and condos hitting the market in Los Angeles/OC. Any links?
Thanks in advance,
Neil
You’re exactly right. Realtors know that buyers have time on their side in a big way. Tha’ts why they are to scare buyer’s inton believing that they better buy before the interest rates go up more.
I know this is a small sample size, but I went to 13 open houses about a month ago. Just looking to see what was out there. Seven of those 13 open houses were vacant. I only saw a couple of other people looking at houses that day.
One of the realtors told us that day that once people move into that area they usually never leave, funny how there were 300 homes for sale in the neighborhood.
I’ve done two “samples” like the one you just discussed. Just over two weeks ago I experienced what you described. But last weekend… there were plenty of lookie loos. However, I couldn’t help but notice how desperate realtors were to lock us into a buyers contract. And almost everyone walked out going “too exensive.” I flat out rejected a house as “not having enough curbside apeal” and you should have heard how many properties the realtor was willing to show me!
I actually expect prices to increase this summer. No, I’m not on controlled medication.
But I know at the end of every great bull market there is always one last rally.
And then there is the fall… the traditional bane of all bull markets. Not a problem if the flippers out there are all willing to stick together through the winter (builders would love to get out that way). But the market is like a cracking dam with the water level rising behind it. The longer this goes on… the greater the impact. In a way, in benifits future buyers if sellers won’t discount… yet.
Neil
Interesting reasoning, I do not disagree
It is impossible to predict what a crazy person will do next. Sales might pick up, because sellers will eventually start to lower their prices. People will jump in and fell that they got a great bargain, because the seller reduced their price by X dollars. Then the buyer will go brag to his or her friends about what a great deal they got, and tell them that they should buy now.
As long as borrowers keep paying the interest, I’ll hold my finance stocks and the band can keep playing the music.
Of course some prices will hold or even increase a little. With all this inventory the only houses that will sell will be the very best. So we have a situation of the very best houses being sold for the same price that an average POS commanded last year.
Can,t provide figures but there seems to be a condo/apt/lofts building frenzy in Long Beach. At least two tall condo/apt towers cirrently under construction . harber view apts at 250-300 w ocean has 500 units total. Ther must be at least 20 condo/Apt tall towers in all in Dwtn LB, and an abundance of medium height(2-5 story)complexes all over dwtn(archstone apts at 400 pine is one). 133 promedade way is site for a soon to be completed 20-unit luxury lofts. Tons of loft units going up, many of them consersions from old landamrk buildings. 115 w. 4th, address of landmark(1929) walker building, is being developed by Domaproperties.com into Lofts . As there are only three places along entire Scal coast(San diego, Marina De rey and LB) where tall condo units are permitted. LB is banking on a sure market for multi-unit living near the harbor/ beach. Of course Dwtn Lb has it’s problems,but i will not elaborate them here.
I believe there are 5,500 condos coming on the mkt in the next two years in dwtn L.B. My gf knows a guy who bought one last year and he plans to buy another because his has “appreciated”, the usual shills say people from Santa Monica and West L.A. will buy them and some will I’m sure but not all of them, should be interesting. Not huge inventory though for sfr, days on market longer but good houses priced right in nice areas still selling in days or weeks. Prices still insane, 2bd 2ba houses going for 550k and up in the better areas. I’ve been saying since last summer that this can’t go on but I’ve been wrong so far. Like nhz and others have said, until and if the easy money dries up this could go on for a while, that and the fact that the belief that you can’t go wrong with real estate still permeates most peoples thinking, msm for the most part saying the same thing, spinning or burying bad news and playing up the good news. Lot of equity sloshing around out here…
The latest new Dwtn LB redevelopment boom(there have been several, all ended badly)is in process. No doubt fueled by this latest RE bubble runup. What makes developers think that there will be a mad rush to purchase $300,000-$1 miilion dollar+ lofts in dwtn LB, which is not exactly a haven for well-healed artists or rich bohemians. Of course i could be wrong-there is a loft community in a real crappy rundown but gentrifying section of Dwtn LA off alameda between 4th and 6th st.
Sadly, dwtn LB has had problems bringing life and vitality to the dwtn and harbor. Pine ave has seen numerous shops closed and resold, and there are constant bad rif-raff elements emanating from the crappy part of town just a few blocks north of DWTN.
And there’s the truck-choked Long Beach fwy, the only ingress/egress into Dwtn(can use pacific ave to wardlow, then left-right to get onto 405 avoiding 710 entirely.
Hate to bad-mouth LB but the problems i list are what is keeping the dwtn from becoming a lively urban walking experience, and what may in the end depress the dtwn condo/loft market.
http://www.economist.com/opinion/displaystory.cfm?story_id=6975848
Bears in the woods
May 25th 2006
From The Economist print edition
Despite the rattled markets, the world economy is still relatively strong. Just don’t bet your house on it.
Economic strength is detrimental to inflated housing prices, since it increases interest rates. Basically what happens is that in a strong economy, the real sector sucks all the money from the financial, putting a cap on leveraged assets’ prices.
On the other hand, a weak economy may dictate very low interest rates, and leveraged assets may go up in price. It happened in Europe and in the US after the 2001 recession.
I read the Economist artcle:
take aways are..
US markets in good shape versus emerging markets..Well sue India and Russia & Mexico,Finland & others were down over 10% in about 8 hours of trading.
Bonds were “Safe”….misinformation I heard that the elephants in the key hole relaized that emerging market debt cannot not be escaped therefore they are “swiftly rejiggering” their Wizardry formulas in an attempt to hedge thier junk soverign debt disaster!
:::looking for a flight to quality {reduce risk} US Treasury only rally SOON! ::
“flight to quality” - Treasuries..sounds like Equilibrium per below!
http://www.financialsense.com/fsu/editorials/view/2006/0525.html
This article “View from S.Valley, has some interesting trend data related to Silicon Valley {CA}annual home prices in 1st 6 months….Looks like the 2nd half will get worse if the trends continue!
Here’s hoping Trader Joe has a manager job available?
I have been wondering how the Realtors were doing with a 16% haircut in sales….and new bees still overcrowding the R E License schools! ?
Established Realtors like myself are doing fine but then again I’ve been at it awhile. Anybody who’s tossed their hat in the ring over the past 3 to 5 yrs. Will be in for a rude awakening.
When you say a while, how long exactly? Where do you sell real estate?
Ventura County to San Bernadino County. 10+ yrs. Started by selling foreclosures for lenders, now mostly small cap commercial and loans. If a client puts a gun to my head I will sell a house but not willingly or without a grudge. There is a better chance of it snowing in hell before you catch me driving a buyer around to view houses.
I’m sorry, but these charts are killing me. These median price increases in no way whatsoever reflect the current state of the RE market in my area. Sales prices are rising in Ventura County??!! Give me a break. Home sales have plunged here. I’ve seen huge price reductions. Vacant houses sitting on the market since last summer. Open houses are desolate. I officially declare war on the “median” sales price as a market trend indicator.
I have heard that Ventura county imposes very strict limits on urban land /housing development in order to preserve their farmlands. Maybe thats why homes are still rising in price. What happens is the prices eventually become so high due to limitations on supply imposed by the community that all of it’s working/middle class population leaves the area, leaving only the original geriatic prop 13 homeowners and a very few high-income elitists. This is happening in S. Santa Barbara county, which also severly restricts housing supply development.
What you “heard” is wrong.
Cote:
In other threads you alternately praise and bemoan the SOAR ordinance in Ventura.
Which is it?
PS Yvon Choinard owner of Patagonia (which I am sure you have an opinion on) advocates for mixed use development.
But lives in the ultimate exurban wet dream, Hollister Ranch.
He is also conflicted like your posts seem to be.
SOAR is great only because it does exactly what it was intended to do and precisely because it does nothing any of its’ critics claim it does. Chouinard has fallen under the spell of Rick Cole and his secret takeover of San Buenaventura city hall. The city manager is a smart growther, all his assistants are smart growthers, two of the council are planner smart growthers. Go to my blog and search for soar and cole.
Thanks for the invite to your blog, but I am smarter than getting into a fight with a man who owns a printing press.
I just thought that the mix of advocating for “smart growth” and yet living the exurban dream dichotomy was very interesting with Chouinard.
Essentially his position is he has his exurban dream but you can’t have yours because the laws have changed and you are priced out. Thereby protecting his exurban values.
Everyone cannot have an exurban spread without necessarily destroying the exurban values you and most Americans hold dearly.
I have seen it myself living the exurban lifestyle in Jamul, CA. The endgame is leapfrogging suburbs.
At times, I am conflicted between mixed use planning and exurban desires. Short of an agrarian grow your own food society I don’t think that this is workable.
I think that the market should determine where people want to live without any subsidies for either preference.
That is never going to happen.
So the rational/practical response is to get mixed use an equivalent amount of subsidies that exurban/suburban developments gets (cheap energy, utilities and roads to serve these developments).
I just meant look at my scribblings about SOAR and Cole. There’s like three manifestos on each.
It your final point however. The exurban pattern is not subsidized, that expalins its’ spontaneous success and persistence. It is the mixed use, trtansit oriented development, new urbanist schema that requires subsidy.
My thoughts exactly!!! It’s been driving me nuts the last several months because they love to trot out the YOY price increases to show people how the market is ’still going up!’. I can’t wait until we roll over on those yearly price comparisons and then everything will be down YOY. And if they want to capture the current market conditions how about comparing prices versus 6 and 3 months ago? That would be more telling.
“‘Sellers have to be flexible, but buyers still have to be realistic,’ said Greg Berkemer, executive VP of the California Desert Association of Realtors. ‘I’m not sure people realize how much of an [equilibrium] we’re seeing here.’”
I cannot think of LESS appropriate word that equalibrium. As an English major, the word oxymoron springs.
New contest - Let’s fill in all of the more appropriate words to substitute for equalibrium:
clusterfcuk
renter’s market
greater fool convention
absolute tanking
and so on . . .
Totally agree. This market is in equalibrium about as much as Wiley Coyote was in equalibrium at the absolute edge of a very high cliff.
ROFLMFAO.
Yeh …it’s closed market session….cooling off period lasting 60 days and counting! No program trading allowed!
Sellers offers to high!
Buyer bids to low!
No trades getting done
“Overhead supply” will overwelm slim bids when those ARM resets get going in earnest
ROTFL
But just remember, Wiley was always ok unless he looked down.
And he was *never* at the absolute edge… he always managed to be a good 15 to 20 feet off the cliff over the canyon.
Important question: will the sound of flippers hitting bottom be the same muffled time delayed “thump”? ROTFL
Neil
I think his middle name was actually “E.” Maybe? (Man that was a long time ago!)
In any case, the flippers are probably thinking the same thing Mr. Coyote was likely thinking - as I ride the falling rock (house) down to the valley floor, I can just jump upward off the rock right before hitting bottom - and somehow be saved.
What….. you mean…. that WON’T work?????
Meanwhile, Santa Clara County hit yet another inventory high today (YOY). 4642 today vs. 3589 one year ago (sfh/condo, source: mlslistings.com)
And new townhouse/condo complexes continue to break ground in the seediest areas.
This perhaps a noteworthy from the CAR/Dataquick stats - highest cost area in SoCal actually cracking first?
Los Angeles Selected Areas
Westside $930,000.00 $982,000.00 -5.3%
“There’s too much supply and not enough demand”
What these RE shills need are some illegal aliens to address that lack of demand. Maybe the senate will make ‘em legal, and give them supplemental monthly stipends so they can enjoy the American dream too!
Sounds like you could run for Senate yourself with that kind of thinking!
Do you have any difficulty in ignoring your loved ones demands and kowtowing to the wills of foreign interests? You just might be a senator!
Yes, that you and I would pay for
You haven’t been keeping up they are already getting the monthly stipends.
Ventura should be toast here very soon. Sales drops like these will kill that market. How the HELL is Bakersfield still up so big! UGH!!!
Other than realtor and mortgage security derived employment Ventura County can do just fine with only half as many houses again being sold. The generally careful growth policies have kept the prospect of a glut from being likely, agriculture is the number one industry, biotech and government employment is unlikely to suffer and physically we are still wedged between Santa Barbara and Los Angeles. That said, the Neutron Bomb ticking away at Countrywide is going to send ripples far and wise. Did I say “wise?” Clever, I’ll keep that in. 9000 highly paid office jobs that could go anywhere with T1 and FedEx availability. Scary stuff but still only 2% of employment.
Several counties are now YOY below inflatin - Sac, SD, Placer, Yolo, Sant Bar, San Mateo & San Fran
If I did not know any better, I would think the associations are making up these numbers so the Federal Reserve won’t raise the interest rates any more.
No if they wanted them to stop raising rates, all they would have to tell them is the truth. If they came out and said that the housing market is going to collapse. BB and Co. would start dropping rates to save the day. At that point though it would be too late, because once the truth is known now one will buy a home.
So they are sitting back biding there time, trying to let the realtors close a couple more sales before it becomes extremely obvious that the housing market is in trouble.
Was supposed to read “no one will buy a home” sorry
GRRRRRRRR.
This bear is getting angry. NBC Nightly News just did a story on foreclosures and ARMs. They said foreclosures are up nationwide by 79% this quarter over last year apperantly.
Then they did a piece on a family in Dallas. You know the type where they focus in on a family about to lose their house and make them look like good people who we should all help out. Well funk them!!! They are the dumb ass that bought too much house. Their payment jumped from 1300 to over $2000 and they were like I am angry, confused, and upset. Like shit bitch whose fault is that??? F’in dumb ass! Be pissed at yourself!!!
Then the snake David Lereah appeared and had the gall to say that we could possibly see a decline in that trend if jobs pick up. Shit bag we got the unemployment rate under 5% even with 12 million parasites in the country!!! What a shit bird!!! He knows exactly what is going on and I could see it in his weasly little eyes.
That is all.
I sense a money making oppertunity in making up T-Shirts with American homebuyers new motto. “It’s not my Fault!”
“Like shit bitch whose fault is that??? ”
Re: Poor slob(bette) foreclosed on in Dallas - and, oh gosh, I’m on TV
The more stories you hear about Texas going down, the more you know it’s pretty bad. Texas has always been a debtor friendly state.
bwahahahaha! That is the most creative and effective use of profanity I have read all day!
It seems that the peak was around last August. I tried a quick search to try to find median prices listed month by month for the past year, to see if I could figure out when the YOY numbers might turn negative (my guess is sometime this summer, at least in some areas), but I haven’t been able find them. While I’m obviously interested in Orange County, I would be interested in any of the formerly “frothy” regions (SD, LV, PHX, etc.), as well as the national number. Does anyone have any links to any of these? Thanks.
Here you go…for San Diego:
http://www.sandicor.com/
Go to “sales statistics” and surf through there. Enjoy!
Try this
http://www.benengebreth.org/housingtracker/
Here is a link for the SD area. Hard to say when we will have YOY decreases. Should be within the next couple of months IMO.
http://rereport.com/sdc/main_ncc.html
Thanks. I’m hoping that as soon as we can get a YOY decline, that the media will finally jump on it. Since the media appear to be completely incompetent at investigating and analyzing the statistics, my hope is that they will understand that YOY declines mean that the bubble has burst, and that they will start to report this to the masses, so they will stop buying and let this correction really pick up speed.
I don’t wish harm on others, but I don’t feel sorry for those who will learn a much needed hard lesson from their experience with toxic loans. I want to buy, but I won’t do so until it makes sense. Unfortunately, that means that I have to put off owning my first home for a couple more years because others were too ignorant to understand some basic economics. Sorry for the rant, but this is frustrating, and sometimes it helps to blow off a little steam to people who actually do understand what is going on. Thanks, Ben, for this blog, and for all of those contributing, it helps me to have the patience that I need and to give me some reassurance in those few moments of doubt that arise occassionally.
See the 2nd paragraph in Ben’s write-up. Why didn’t the author cite which communities out of the 15% (100%-84.5%) saw price declines?
I wish harm on some.
Good story and video clip on foreclosures from NBC News-
http://www.msnbc.msn.com/id/12975777/
Oh god, my imortal soul is in trouble. Why?
A co worker who so wanted to take out equity in his house to buy a McMansion being built above him in San Diego (purely to flip)was talked out of this by yours truly this morning. He is now convinced the better investment is a San Diego condo! Is this the butterfly effect where one small action that’s good can lead to a much more dire action that’s horrid? Oh… what have I done!
Just for the record, that San Diego condo costs *exactly* twice what his four bedroom house cost him. Sigh…
Sigh… You can lead a horse to water…
Neil
Sigh… You can lead a horse to water…
…but you can’t stop that dumb sommbitch from buying a San Diego condo. Guess it’s time to put him down.
OK you buyers, listen up…………………
Be More Realistic!
While driving across town today I tuned into the local radio RE guru (IMHO a RE pimp). Shameless promotion of selling his properties under the guise of teaching you how to become an informed seller or buyer. Anyone pulling up beside me probably thought that I was ready for the funny farm as I was ranting to an empty interior.
Part of the stupidity:(1) 50 years loans are good and they can’t discriminate because of your age so that means that a 95 year old man can apply for one of these loans and who knows people are always living longer.(2)within 12 to 18 months rates will be back in the 4-4.5 range and start another RE binge. (3) caller just bought a property in Wyoming and was surprised that his neighbor was from Modesto.He said it’s soooo beautiful there in the summer (I suspect that he is a flipper who called in to promote the area as he was not selling his property in Carmel Valley). (4) He said that his Salinas properties were priced right but not selling. (5) His buddy in the mortgage business said that he was going to a big meeting in Las Vegas (June8/9) on creative ways to manage your home equity so that it’s working for you (I smell the snake oil salesmen com’in out in force). Any info on the latter needs to be reported on this blog.
.(2)within 12 to 18 months rates will be back in the 4-4.5 range and start another RE binge.
Yeah, I’ve heard something similar running on KGO, refi now at his higher fixed rates, sit back and watch the market drop and then refi again “It’s a no brainer” and easy as ordering Pizza. If its such a no brainer we should start calling them “Lobotomy Loans” to be more accurate. I also don’t know how these guys are getting away with claiming “no costs to you”, there is no free lunch.
“(1) 50 years loans are good and they can’t discriminate because of your age so that means that a 95 year old man can apply for one of these loans and who knows people are always living longer.”
LMAO stop it. You did not hear that on the radio. I refuse to believe.
MORE ways to manage your equity?! No doubt, this bubble has really brought out the roaches…may the boot heel of fate squash these guys and soon.
Fester: you are on fire in this thread.
Particularly the marinate/grill analogy.
The flippers are still out there buying, at least in Humboldt!
My wife is a banker and today a nice, bay area couple (of course) applied for a loan on a 500K “fixer upper” that they said they would only hope to own for a few months to do some upgrades and then sell.
I’m appalled these people are still out there. I guess boomers’ flipper habits are an addiction that is impossible to break. I only hope that the ship sinks with all these f**kers on it!
We need a list of these new clusterfu*ks, imagine one of us being the buyer when they have to unload at $325K after sinking $100K into their flip.
‘As an investor, I’m not really happy about the situation right now,’ Biswurm said. ‘There’s too much supply and not enough demand.
Then get the hell out of RE, you liver fluke!
$500k for a decrepit house in huMOLDt county? Jeez, have these Bay Area idiots screwed things up. Would have to grow a lot green to pay for a house like that. I hope you get 100 days of fog this summer and 100 inches of rain next winter to chase those snakes out of the lovely (but perpetually depressed ) state of Jefferson.
As for realism..
Dear Mr. BA Flipper,
I would rather have my kneecaps removed with a spoon than pay you $650k for an old house which you recently cluelessly bought from another flipper for $500k and added granite countertops and a steam shower for $5k. I would much prefer to buy it from the bank for $200k when your investment has shriveled like a your nether regions after skinnydipping in Humboldt Bay.
In the Spirit of Amity and Charity,
Mr. Fester (HSU Class of 1989)
What is the “fuel” the causes ordinary people to become “flippers”. ‘
I found the answer.
Wake up at 4am and turn on your TV. The channels are still saturated with “here is how I made $1M and anyone can use my simple formula….ad nauseum.”
The uninformed fools that are still taking this bait are the “last hurrah”. By fall these “seminars” will be a historical footnote and the easy money crowd will start returning to the their normal modus operandi for becoming rich….Vegas.
I was visiting Desert Hot Springs a couple of weekends ago. Plenty of people trying to unload their shacks in town, and if you count what’s for sale in the “new construction” developments on the outskirts of the town, I would say half of DHS is for sale. And plenty of “Price Reduced” on those For Sale signs.
The town itself seems to be catering to the developers- there are fancy new signs on almost every streetcorner with the DHS city logo on top and directions to the various developments below. Does someone who lives in one of these developments really need a street sign telling them where they live? They’re more like advertisements for the developments, courtesy of the towns taxpayers dime.
(a) Based on closed escrow sales of single-family, detached homes only (no condos). Reported month-to-month changes in sales activity may overstate actual changes because of the small size of individual regional samples.
—>>Movements in sales prices should not be interpreted as measuring changes in the cost of a standard home.
Prices are influenced by changes in cost and changes in the
characteristics and size of homes actually sold.
The footnote on the Cal sales report makes the numbers meaningless.
Move up buyers, because of the equity they have, are purchasing larger, more expensive homes, and letting their smaller, less expensive homes they bought 3 years ago sell quickly so they won’t have 2 mortgages. Since the number of sales are down, the move up buyers will be finished by the end of “spring buying season”. The remaining sellers will have no one to sell to.
Jeez, if I could pick up a little 1,000 sq ft ’shed’ for about 150k, not the 750k they want, maybe I would be enticed to buy….
I posted last fall that my Uncle(from the NE) had bought a couple of
condos and became a realtor in Fl…He recently told me he sold both condos for a considerable loss and gave up his realestate job and is going back to the great white NE…Some how my winning the debate doesnt feel as good as I thought it would…My uncle still has a
large Beanie Baby collection….He has perpetual bad timing.
The Bay Area
http://www.sfgate.com/columnists/lloyd/
The author is clueless. She is writing purely from her own perspective which is skewed because of when she bought (’97). She seems to completely gloss over what happened in the decade prior to 1997.
Many of her articles seem schizophrenic. I love this little gem:
“a serious buyer’s market — as many of my renter friends would define it — has not yet arrived, nor will it ever.”
Really Carol? So now she can see into the future and without a doubt declare this.
‘Sellers have to be flexible, but buyers still have to be realistic,’ said Greg Berkemer, executive VP of the California Desert Association of Realtors.
Not true. We buyers, or rather, *potential* buyers absolutely do NOT have to be what Greg Berkemer calls “realistic”.
I’ve already saved approximately 40,000 dollars by not buying a year ago- twice my annual rent payment. In this local “frothy” market, buyers will save tens of thousand dollars in the coming years, simply by waiting and renting.