The Inability To Get Ahead In California
The San Francisco Chronicle reports from California. “The 21,000 real estate professionals in San Francisco this week for a conference survived the housing downturn and saw the market rebound strongly this year. Bay Area prices are up about 32 percent compared with last year to a median of $540,000 - although medians are much higher in places like San Francisco and Silicon Valley. In 10 years selling homes in the East Bay, ‘This was the best year ever, ever, ever,’ said Liz Rush of McGuire Real Estate. ‘The market is out of control in a really good way.’”
The Mercury News. “The Bay Area is an anomaly, and the strongest housing market in the state, California Association of Realtors chief economist Leslie Appleton-Young told members of the Silicon Valley Association of Realtors at the local trade association’s economic seminar last month. Its recovery has been unparalleled, with high income earners, high desirability and no budget constraints, said Appleton-Young. ‘You really are a beautiful anomaly,’ she remarked.”
From KQED News. “Last Thursday Forum launched KQED’s ‘Priced Out: The Bay Area’s High Cost of Housing,’ discussing what’s driving the market, what these prohibitive costs mean for the region, and what to expect in the short and long term. One guest went so far to say, ‘God wanted the Bay Area to be expensive,’ citing the lack of space to expand development and good weather.’”
“What do you sacrifice to be able to afford housing in the Bay Area. Here’s how some listeners have weighed in: ‘I pay half my monthly salary for a condo for my little family of 4. We haven’t been on a family vacation for over 5 years. No new cars, hand-me-down furniture. I know we have plenty to be thankful for, it’s just a struggle sometimes, and really scary knowing our savings won’t last long in an emergency.’”
“I commute 4 hours round trip 3 days a week. This allows me 2 have an affordable mortgage.”
“The ‘middle class’ life in Marin, when you don’t come from money: retirement, housing, savings, kids. Pick two if you’re lucky.”
The Los Angeles Times. “Housing affordability fell last quarter in California, reaching the lowest level since 2008, as the housing recovery locked some buyers out. Only 32% of potential homebuyers in the third quarter could reasonably afford a median priced single-family home, the California Assn. of Realtors said Thursday. That’s a sharp drop from 49% in the third quarter last year.”
“A recent report from Fitch Ratings estimated prices in much of coastal California are more than 20% overvalued based on market fundamentals such as income, employment, population, mortgage rates, housing units and rental values. ‘Most concerning,’ the report said, ‘there is growing evidence that recent gains have been bolstered by an increase in investment sales, both to institutions and local investors.’”
“The sharp price increase raised concerns a bubble was forming in some regions, although the market has cooled recently.”
The Sacramento Business Journal. “Proving the hottest days of Sacramento’s rebound housing market have passed, the region is now occupying a high spot on another list: The number of homes where sales prices went down. In a new report from Redfin, 35 percent of the homes in the region had a price drop in September. That puts it second only to Atlanta, where 42 percent of homes did so.”
“Sacramento also topped another Redfin list, of price drops compared to a year earlier. In September, 17 percent more homes had their list prices drop than in September 2012, when buying demand from investors blunted much of any need to do so.”
Wall Street Cheat Sheet. “Bubbles do not usually make a significant comeback in such a short amount of time. Home prices peaked in 2006 and started their infamous plunge. However, many measures have been implemented by the Federal Reserve to re-inflate home prices. While home prices are bringing back memories of the housing bubble, the pace is expected to slow as affordability issues weigh on the real estate market.”
“In a recent survey from Redfin, home sellers are showing more disappointment in buyer interest. The percentage of survey respondents who think it is a ‘good’ time to sell their home plunged to 34 percent in October, compared to 48 percent in the third quarter. Meanwhile, 39 percent of respondents are worried about ‘general economic conditions’ when selling their homes.”
“‘The market is softening. Instead of homes getting 10 offers within the first week, they might get one or two,’ said Redfin Riverside, California, Market Manager Paul Reid. ‘Moreover, buyers are more emboldened. Some are making offers below list price and contingent on the sale of their home … and winning.’”
The Voice of San Diego. “Trulia chief economist Jed Kolko published an analysis of home affordability in the U.S.’s top 100 metros. His analysis was simple: It compared the median household income in the metro area to the median home price. The results don’t reveal anything we didn’t already know: The Midwest is a place to buy and the East and West coasts are places to rent. In particular he notes that San Diego is among the least affordable markets in the nation.”
“If I look at my own situation, the neighborhood I live in (Ocean Beach) is cheaper to rent by half than to buy. Which is to say, we spend roughly 30 percent of our income on rent here. If we were to buy, we’d spend 60 percent of our income on a mortgage (assuming we could afford the down payment and get a loan, which is highly unlikely given those numbers).”
“What’s troubling for the city is that I make pretty good money, well above the median household income. I can only imagine what it’s like for those who are at or below the region’s median household income. San Diego is great at getting people to show up. I count myself among the many transplants. I’ve been here for 14 years now. But I’ve also seen many of my cohort leave too soon. Often the rationale boils down to their inability to get ahead here.”
Strange alternate reality the realtLiar porn is.
Housing demand just continues to dwindle in CA…. the state foreclosure moratorium drags on….
The Midwest is a place to buy and the East and West coasts are places to rent.
At least Jedidiah get’s this one right.
As we all know, it’s far less costly to rent than to buy. And that’s been the case for 13 years now.
Those poor So. Caler’s that bought in last two years hoping for fairy tale appreciation. No more 20% increase for you!
…”‘This was the best year ever, ever, ever,’ said Liz Rush of McGuire Real Estate. ‘The market is out of control in a really good way.’”
And this is an incredibly accurate synopsis of the professionalism and analytical skills of the majority of delusional RE pimps. Its not like anyone has ever seen this movie before and knows how it ends:
““…Although only a few observers have noted the vested interest in error that accompanies speculative euphoria, it is, nonetheless, an extremely plausible phenomenon. Those involved with the speculation are experiencing an increase in wealth–getting rich or being further enriched. No one wishes to believe that this is fortuitous or undeserved; all wish to think that it is the result of their own superior insight or intuition. The very increase in values thus captures the thoughts and minds of those being rewarded. Speculation buys up, in a very practical way, the intelligence of those involved.
This is particularly true of the first group noted above–those who are convinced that values are going up permanently and indefinitely. But the errors of vanity of those who think they will beat the speculative game are also thus reinforced. As long as they are in, they have a strong pecuniary commitment to belief in the unique personal intelligence that tells them there will be yet more. ..Strongly reinforcing the vested interest in euphoria is the condemnation that the reputable public and financial opinion directs at those who express doubt or dissent. It is said that they are unable, because of defective imagination or other mental inadequacy, to grasp the new and rewarding circumstances that sustain and secure the increase in values…”
-John Kenneth Galbraith
A Short History of Financial Euphoria
I don’t believe it’s limited to people like Liz Rush. Reflating the bubble is what Americans wanted, and that is what we got. Those of us who identified this, both then and now, as a mania and a dangerous departure from fundamentals are so far outside the mainstream we might as well be from another civilization.
Let it be so when the pyramid collapses as well.
The most amazing aspect of this (which I believe Galbraith points out) is that these cycles recur more often than once a decade, yet collective amnesia among the masses inevitably induces speculative euphoria and reckless gambling activity right up until the next wave of asset price collapse.
…”‘This was the best year ever, ever, ever,’ said Liz Rush of McGuire Real Estate. ‘The market is out of control in a really good way.’”
There you have it. And we just keep jamming the needle in because it feels so good.
a large percentage of the population in ca is flat broke. once you get away from the coasts there are some pretty bay neighborhoods n ca. its not all glitz and glamor.
The coast is a bigger sh*thole than the rest of the state.
Ignorance and adamance do not make truth, no matter how loud you screech it.
Refute it.
Perhaps, but people still wanna live there. It is the most populous state in the nation for a reason. Even residents that complain about how out of whack it is openly admit they’d never leave.
They do?
California isn’t in the to 10 in population density
California isn’t in the top 10 in population growth
What little growth there is is a result of illegal (poor) immigrants.
California is a bonafide and established sh*thole of nth magnitude and everyone knows it.
Yes. It has a kick-ass welfare system.
‘It is the most populous state’
The population has been declining since the 90’s. But by this logic, why wouldn’t everyone be moving to Mexico City?
What’s at issue here are housing prices. Or justifying house prices. Did you know prices are up significantly in Stockton too? Is that because of the air and Google money?
Long time readers have heard this, so excuse the repeat. When I was very young, my hometown in Texas was profiled on 60 Minutes for having the most millionaires in a city under 100,000. In the following weeks and months, I would gaze in amazement at the town, people, and landscape. How special we were! At this time, Texas had America’s Team. Our colleges had the best sports teams, and Penthouse said we had the prettiest college girls. The top TV program was Dallas. Some kids at my high school drove Maserati’s and Mercedes and Lotus’. People were flooding in, because everyone wanted to live there!
Fast forward a few years, and we found out we weren’t so special after all.
A bubble changes how most people feel about everything. What you study at college. How much you think you will earn in the future. It changes how much you spend on things, how much you come to believe they are worth. This thinking is the most difficult to overcome in a bubble. It’s not that the bay area isn’t a nice place to live. But it was a nice place to live 20 years ago, when house prices weren’t anywhere near what they are today..
“I want kippers for breakfast,
mummy dear, mummy dear,
they got to have them in Texas,
cuz everyone’s a millionaire”
But it was a nice place to live 20 years ago, when house prices weren’t anywhere near what they are today ??
I agree Ben…It is a great place to live…I have been around here for awhile…4 generations of family in the same town…Yep…Right at 100 years…So, I have learned alot from the elders, and have seen alot in my lifetime..
How can I frame this latest spike, bubble, call it what ever you like ??
#1 Interest rates are a huge driver…input 7% 30 year mortgage and we have a very different market..
#2 Like interest rates, inventory is at historic lows..Another huge driver..
#3 Money is pouring into this valley…”Big Money”…Its stimulative enough with some of the companies that are rooted here but I am talking about outside influences both within (Think Irvine Company) and outside the USA..We may not be building many single family homes but we are building everything else (including manufacturing space) at a very rapid pace
There are a number of other reasons IMO but those are the latest dynamics that are driving this craziness…
You have millions of excess empty and defaulted houses in CA. There is no reason to build more SFR’s.
CA’s population has not been declining since the ’90s.
It has gained about 8 million people since 1990, and there are only 12 states in the US that even have 8 million people in total.
It’s even still among the fastest growing states in the US on a percentage basis.
‘has not been declining’
I read that yesterday, but I’m not going to bother to look it up. If what you say is true, it’s just one more reason to stay away. Enjoy your 8 lane freeways and worst in nation poverty!
‘If you’re a cubicle dwelling lemming then go live in the midwest and freeze your ass off…’
“It’s even still among the fastest growing states in the US on a percentage basis.”
Liar.
California isn’t even in the top third of the entire nation in terms of population growth.
http://en.wikipedia.org/wiki/List_of_U.S._states_by_population_growth_rate
Why lie about something so obviously false?
So you are attempting to refute me with a chart showing a gain of close to 1m people in the last 3 years?
Nice. Thanks for the assist.
Just schooling you with your own foolish assertions and false claims.
‘The more honest cheerleaders acknowledge that California has challenges, including persistent budget problems…The non-partisan California Legislative Analyst’s Office has done the math. You can find it here. They expect budget shortfalls in excess of $20 billion a year throughout their forecast horizon. This is on annual revenues of less than $100 billion.’
‘Last week the numbers got even worse, as the Governor-elect, Jerry Brown, acknowledged. The deficit may now be as much as $28 billion this year, and over $20 billion for the foreseeable future. This is more than a nuisance. There’s a reason, after all, why California has among the worst credit ratings of any state.’
‘Most people outside of California haven’t drank from this vat of the economic equivalent of LSD-laced Kool-Aid. People know that a state is in trouble when it has persistent intractable budget deficits, chronic domestic net out-migration, and 30 percent higher unemployment than the national average. Indeed, California’s joblessness, chronic budget deficits, governors, and credit rating have made the state the butt of jokes worldwide.’
‘How bad are things in California? California’s domestic migration has been negative every year since at least 1990. In fact, since 1990, according to the U.S. Census, 3,642,490 people, net, have left California.’
Bill Watkins is a professor at California Lutheran University and runs the Center for Economic Research and Forecasting.
I figure one nice big earthquake the fiscal house will collapse in California.
Not many welfare recipients are spending $2000 / month on rent to live at the beach.
That’s just the way CA is, people will always pay a premium to live there.
‘people will always pay a premium to live there’
But will they always pay more next year than this year, and the year after that? Is it possible to pay too much, or borrow too much?
‘According to Joel Kotkin, a professor of urban development, fellow at Chapman University in Orange County, California’s median multiple – the ratio of median household price to median household income – is imbalanced, with the median income unable to pay for the median cost of a home. “So what we’re seeing is a state where the dream of upward mobility . . . is really in serious trouble,” Kotkin said.’
‘If housing affordability is factored in, California’s poverty rate becomes the highest in the nation, he continued, noting that, while the middle class made up 60 percent of California’s population in 1980, it now constitutes 48 percent. In Los Angeles, only 30 percent of potential buyers can afford to purchase a home, he added.’
‘Kotkin also raised concern that the “California dream” is in jeopardy particularly for African-Americans and Latinos. In Atlanta, about 40 percent of African-American residents own homes, he said, but in California the rate is about half that.’
‘When housing affordability is harder to achieve, family formation is affected, Kotkin said, reducing birth rates and causing younger, first-time homebuyers to move out of state. This could cause parts of the state with costlier housing – such as Los Angeles and San Francisco – to become dominated by wealthy, elderly people. For instance, he remarked, “If you look at demographics of some of the nicer parts of Orange County, it is really becoming quite geriatric.”
‘While numbers of overall foreclosures in Oakland are decreasing, they are more and more affecting people who have lived in their homes for 10 or more years, according to a quarterly City of Oakland report on housing issues.’
‘In addition, contributing to gentrification, rent increases are rising off the charts. “New rents in crime-heavy neighborhoods (are) rising to $2,200 (per month),” according to the report.’
‘Much of the change housing market, including the decline in foreclosures, can be attributed to new state and federal laws that provide homeowners at least some level of protection, according to Margaretta Lin, Strategic Initiatives Managers of the city’s Housing and Community Development department.’
‘However, she said, “We continue to see intense impact on longtime homeowners. At the height of thesubprime mortgage crisis in Oakland, families that were in crisis had owned their homes for less than two years. Today the majority of families in Oakland in foreclosure have owned their homes for at least 10 years.”
“Many of the clients we working with have owned their homes for decades,” she added.’
I’m having this vision, of crossing 6 lanes of highway eating a burger, avoiding pedestrians, surrounded by old white guys, yelling out the window at the Chinese guy driving next to me: ‘Go live in the midwest and freeze your ass off!’
Apparently not willing….
California Rental Rates Crumble 7% Year Over Year
http://picpaste.com/pics/d9c575bbbe8d919a5f60fff1408f0445.1384280900.png
There tend to be a lot of young, unattached, professional people who justify the premium to live in trendy places. It is true everywhere, especially in CA since it has so many trendy places. When these people get ready to settle down they usually move. That was my experience when I lived there. People would stay a few years and then get married and move back to Wisconsin, Carolina, wherever.
Yeah, people WILL pay a premium to live in the state of Palo Alto.
With dumb.borrowed.money.
The losses are large.
It may be the most populous now, but there’s no guarantee that it will be the most populous in 50 years. Someday California might export people like the Rust Belt has.
Like heat moves towards cold…. so it is with people and money.
Could’ve fooled me with all the Penske/Uhaul trucks coming in from Cali to Colorado.
once you get away from the coasts there are some pretty bay neighborhoods n ca ??
Can’t you say this pretty much anywhere in america or is this unique to northern California ??
I lived (rented) in Seal Beach in the mid 90’s. I had a nice landlord that owned numerous properties (for decades) around the one that I lived in although he himself lived in Palm Springs. Unfortunately, he was diagnosed with cancer and it became difficult for him to deal with things like posting available rentals and checking out potential applicants so I offered to do it for him.
It was an eye opener. Most applicants were professional couples. One would normally pick up the paperwork and the other would drop it off. They were always well dressed and drove, for the most part, late model high end european autos. Lots of nice jewelry and expensive watches were also part of the package.
My landlord used TRW for credit checks so all I would do is call the number give the credit person the SS numbers and get the various details on the financial details on the applicants.
Almost 90% of the applicants would be qualified as deadbeats. Most had numerous lines of maxed out credit (on average in the 10’s of thousands) and many had legal judgements against them.
None of them argued with me when I told them about their spotty credit (a discrepancy as I was told to call it) and that based on it I couldn’t rent to them. It appeared that the goal was to find a landlord that didn’t check.
My landlord politely laughed at my naivety when I told him how shocked I was at how these well dressed individuals with their nice cars couldn’t even pass a simple credit check.
“It’s California”. He said.
What kills me is that people are driving BMW’s, Mercedes, etc. while living places where they don’t even have an indoor garage or off-street parking, and the cars are getting vandalized, hit by other cars- basically ruined in short order. If I lived somewhere that I had to actually find a parking space, sometimes blocks away, I would drive a beater.
I keep my beater in the driveway to keep the criminals away.
“Most applicants were professional couples. One would normally pick up the paperwork and the other would drop it off. They were always well dressed and drove, for the most part, late model high end european autos. Lots of nice jewelry and expensive watches were also part of the package.
…
Almost 90% of the applicants would be qualified as deadbeats. Most had numerous lines of maxed out credit (on average in the 10’s of thousands) and many had legal judgements against them.”
I’m beginning to grasp why we really don’t fit in here in CA:
1) We don’t Put on the Ritz.
2) We always pay our bills on time.
“The Bay Area is an anomaly, and the strongest housing market in the state, California Association of Realtors chief economist Leslie Appleton-Young told members of the Silicon Valley Association of Realtors at the local trade association’s economic seminar last month. Its recovery has been unparalleled, with high income earners, high desirability and no budget constraints, said Appleton-Young. ‘You really are a beautiful anomaly,’ she remarked.”
Hark!! I hear the mating call of the California Ass-Clown!
Dat’s some good smack they are shooting. Nothing could go wrong with feeding that addiction.
‘no budget constraints’
Yeah, just bend down and pick up some gold nuggets bay-areans. They’re everywhere.
Governor MoonBeam will fix it all for everyone, forever, at no cost. All he needs is just 1 more term…
Say what you want about Moonbeam, he’s way better than the rest of the Dem oferings waiting in the wings. Governer Newsome? Yikes. Or maybe Antonio Villareconquista is more to your liking? I mean, I don’t want to appear to defend Brown too much, but the Dems don’t really have much else to offer. The next gubernatorial race is gonna be a freakshow.
What I find odd is that with all these people in favor of social justice, etc, California is the poorest and it’s largely because of house prices. The Homeowner Bill of Rights just makes things more expensive.
point well taken.. many, many people this country vote against their own best interests all the time and are clueless as to why..
many, many people this country vote against their own best interests all the time and are clueless as to why..
Many others are clueless as to why as well.
“The Homeowner Bill of Rights just makes things more expensive.”
Command-and-control economic policy has exactly opposite the intended effect — what a shocker!
“Say what you want about Moonbeam, he’s way better than the rest of the Dem oferings waiting in the wings. Governer Newsome?..”
I hear you, but the cruel reality is that they are ALL turds. Disgusting, gravelly, repulsive, self-serving turds covered with various colors of paint to conceal the stink that they exude. To hide what they are actually composed of. Pick any color you want, peel off the paint- and you will find that they are ALL turds. And people are becoming conditioned to view acceptance of ‘the least offensive turd’ as a positive development.
Turds have finally become the norm in our punchbowl.
….and seems to be the preferred noun on the HBB.
Only when you’re here JingleBalls.
Yeah, just bend down and pick up some gold nuggets bay-areans.
You might want to be careful doing that…
Right — if you are a man, bending over in the Bay Area for any reason carries risks.
This is the same tripe this hag was peddling last bubble, and will surely be feeding next bubble. Same as it ever was…
“I’m calling it a soft landing — a return to what is considered to be more normal market conditions,”
Leslie Appleton-Young, Chief Economist, California Association of Realtors, 2006
“Maybe we need something new. That’s all I’m prepared to say”
“I’m sorry I ever made that comment.”
“When I get my new term, I’ll let you know.”
Leslie Appleton-Young, Chief Economist, Cal. Assoc. Realtors
When asked about her “Soft Landing” prediction, 2006
Instead of “prepared” misrepresentations, how about just speaking truthfully about this debacle that is housing? Who is “preparing” these tall tales for you to read and why?
California Notice Of Defaults Up A Whopping 38.7% In Second Quarter
http://www.ksby.com/news/california-foreclosures-rise-in-2nd-quarter/#_
‘This was the best year ever, ever, ever,’ said Liz Rush of McGuire Real Estate. ‘The market is out of control in a really good way’
‘You really are a beautiful anomaly’
I guess the drugs are flowing again in California.
Push the needle in…..
Face that sickly grin…..
Holes are in her skin….
Cut by deadly pins….
I think Califrnia is 6-8 months ahead of Phoenix. So if you can buy and flip in 6 months you can’t lose!
u should go up to s. sacramento and get one of the cheap houses and try and flip it.
Even in the better parts of S Sac places are still sitting on the market. It’s worse out there than anyone will publicly acknowledge.
Also, the number of trustee’s sales in Sac County seems to be creeping up again…
“It’s worse out there than anyone will publicly acknowledge.”
+1 This seems to be a real problem in this country.
My understanding is the AZ is a bit ahead of CA, not the other way around. AZ as a state bottomed in mid-2011, CA bottomed in early 2012 (according to Zillow).
And you really think housing bottomed when resale prices are 40% higher than replacement cost?
He’s in his 20’s or something. He was in diapers the last time CA housing was priced based upon economic fundamentals.
California Most Impoverish State In The US
http://en.wikipedia.org/wiki/List_of_U.S._states_by_poverty_rate
(geography adjusted)
DC actually tops the list but that particular nest of corruption isn’t a state…. thank God.
Ugh! I’m tied to Oakland, taking care of two elderly parents and living in their inlaw unit. I make just under 60k a year and will be forced to move this winter as we sell the house so they can both be together in a nice old folks home. Rents in and around Oakland are not affordable. So I’m stuck. I can afford a generous down-payment. But I think I’d make a big mistake buying into this insane market. Maybe I could get a used minivan and a mattress…
Remember….. rents are a fraction of the cost of buying.
and will be forced to move this winter as we sell the house so they can both be together in a nice old folks home ??
Have you given some thought of maybe buying your parents house from them, have them carry the loan at a low interest rate, stay in your in-law unit and rent the house to help offset the mortgage payment to your parents to pay for the retirement home ??
Dies he get to keep his Prop 13 value if he buys ?
Maybe I could get a used minivan and a mattress…
Pay attention when you buy…some floors fold down much flatter than others.
‘Experts say eating while driving can increase a motorist’s chances of a car accident by 80 percent.
Ryan Harrison, an editor in Burbank, said long hours at work means more time in his car.
“I’d rather just eat on the way home, so I’m killing two birds with one stone,” he said. “I would make scrambled eggs before I go to work and then I’d eat them on the way to work, and I’d also eat yogurt. It’s definitely convenience.”
‘With so little time and so much traffic, Los Angeles freeways have turned Harrison’s car into a personal dining room.’
“There is so much traffic here that you have to drive so slowly and there are so many stop lights,” he said. “I need to eat while I’m driving just to save time.”
‘Harrison said there’s more to the distracted driving debate than just taking a bite behind the wheel.
“If they make it so you can’t eat and drive, they should take away being able to put on make-up. I’m not going to be eating my hamburger if I’m trying to get across six lanes of traffic and avoid pedestrians and stuff,” he said.’
http://losangeles.cbslocal.com/2013/11/11/eating-while-driving-significantly-increases-chances-of-a-car-accident-experts-say/
‘If you’re a cubicle dwelling lemming then go live in the midwest and freeze your ass off…’
I want to live in California so that I too can be subjected to ever-increasing levels of gridlock. I want to inch along in heavy traffic, day after grinding day, breathing exhaust fumes and contemplating that as my daily existence. I too want to be so chained to the hampster-wheel that I have to eat meals in my car on a regular basis just to find enough time to work. And as traffic gets even worse, I will eventually cut a hole in the floorboard so that I can poop in my car, saving me even more time so that I can commute for even even longer periods. That would be the life. California dreamin’…
I have seen many women putting on makeup in the rearview while driving in the morning. It’s definitely scary. I also passed someone who was eating cereal with a spoon. That’s way over the top.
“I need to eat while I’m driving just to save time.”
Heck of a way to spend your time.
‘God wanted the Bay Area to be expensive,’ citing the lack of space to expand development and good weather.’
God also wanted the Bay Area to be overrun with homeless people.
God wanted them to be fruitful and multiply. Hence the numerous gay mathematicians up there.
“His analysis was simple: It compared the median household income in the metro area to the median home price. The results don’t reveal anything we didn’t already know: The Midwest is a place to buy and the East and West coasts are places to rent. In particular he notes that San Diego is among the least affordable markets in the nation.”
This sounds so original, especially since it came out of Trulia. Didn’t Professor Piggington already do this for San Diego a decade ago?
Penny wise and pound foolish. Commuting 4 hours round trip several times a week just to pay a freaking mortgage? Save on commuting costs. Ditch the car and rent where you work. Good grief!
Penny wise and pound foolish. Commuting 4 hours round trip several times a week just to pay a freaking mortgage ??
How many people do that in New York, Boston, Chicago & San Francisco ?? With technology the way it is today commuting via transit probably not as stressful or unproductive as it use to be…
Now, if your in a car, that is a whole other issue…I suppose thats why its only 3 days a week…I know many people that commute long distances..They flex there hours..Thats how they get around the stressful traffic…
It still takes time away from exercise and you still sit on your rear
How many people sit on their rear at work ??
How many people sit on their rear at work ??
All the more reason to set aside some time to exercise.
My dad was a tool and die maker, which meant that he spent most of the day on his feet, standing in front of lathe or some other machine. Today we sit on our butts, staring at a screen. We have a nice gym here at work. I don’t use it half as much as I should.
Most engineers I know and in my 28 years, including me. The technicians were mostly standing. They were comfortable that way.
The current model of transportation in this country, with the exception of some subway systems which seem to work decently, is an abysmal failure. They keep expanding roadways which just leads to more and more congestion at the arterials. The single occupant, internal combustion vehicle will be relegated to buggy whip status in due time. The leadership on this crisis, on both a national level as well as the local level, is non-existent.
The single occupant, internal combustion vehicle will be relegated to buggy whip status in due time.
We’ll eventually go all electric if it makes sense. But I think you’ll only pry people out of their single occupant vehicles when economics gives them no choice. It’s just too convenient to give up voluntarily.
“Everyone wants to live here.”
So say the Realtwhores®.
David Davenport, Contributor
I look deeper at the policies behind the headlines.
Op/Ed
4/11/2013 @ 8:00AM
As Jerry Brown Touts California In China, Its Citizens Pack Their Bags
California Governor Jerry Brown (R) shakes hands with China Minister of Commerce Gao Hucheng before a meeting at the Ministry of Commerce on April 10, 2013 in Beijing, China. Brown is in China in an effort to secure Chinese investment in his state of California. (Image credit: Getty Images via @daylife)
While Governor Jerry Brown is in China touting the state’s rebound and recovery, many Californians are busy packing their bags for a move to Texas, Nevada or Arizona. Why? Because it appears that the once-Golden State may finally be overpriced, underperforming and ungovernable.
Is it possible that one state has managed to top every 50-state category on the following shameful list?
- Highest taxes (gasoline, sales and top bracket of income taxes)
- Lowest bond rating
- Highest poverty rate (at 23.5%, the home of 1/3 of those in poverty in U.S.)
- Highest unemployment rate (tied with Mississippi and Nevada at 9.6%)
- Highest energy costs
- Worst state to do business (as judged by Chief Executive magazine 8 years running)
- Most cities going bankrupt
- Prison system so poorly run it has been taken over by a federal judge
And California has managed to do this during its rebound, its good years, according to Jerry Brown who, if not Governor Moonbeam in his second coming as the state’s leader, is clearly not in touch with life on Planet California.
Although there is argument about this, there shouldn’t be: people are leaving the state. The data shows that there has been a net out-migration from California to other states since 1990, balanced for awhile by immigration from other countries. But by 2005 that had eroded, too, with birth rates in the state also dropping at an incredible rate. Over the past two decades, a net 3.4 million people have left the state. And this is before the 2013 increase in income tax rates which prompted even liberal TV talker Bill Maher to complain that “it’s outrageous what we (millionaires) are paying” in taxes, “over 50%,” warning “liberals, you could actually lose me.”
Looking more deeply at the out-migration and its message, one big issue is clearly jobs. So far, it has been primarily middle and lower income people who are leaving, and it is surely no coincidence that their departure tracks the loss of jobs in California. Even when companies do not leave the state altogether, they often open new manufacturing jobs elsewhere because it’s so difficult to get permits in California. It’s also no coincidence that immigration from Mexico has slowed dramatically since even Mexico’s unemployment rate is now lower than California’s. Housing in California is 2.7 times more expensive than in Texas and, with home prices picking up, that will only get worse.
But if jobs and housing launched Phase I of “California, There We Go,” taxes are at the forefront of Phase II which is only now picking up steam. Since California’s increase in income taxes only kicked in during January of this year, no data is yet available, but everyone in contact with business owners and wealthy Californians knows someone who is moving to Texas, Florida, Arizona and elsewhere. And even if the numbers are not large, the loss of every one of these wealthy Californians really hurts because they pay so much of the freight. In 2010, 1% of Californians paid over 50% of the state income taxes, and that will grow significantly under the new tax regime. Foolishly California continues to live off a highly volatile income and sales tax system, with the legislature adding spending in good times, but then through welfare also in bad times. It’s a formula for an annual state budget crisis, which California has endured for years.
…
“Everyone want so live here”.
-they were speaking of the state of Palo Alto.
“…the state of Palo Alto.”
+1 Home of Kirk’s Burgers featuring humble patio seating.
Whenever I visit the long beach area during maritime haze it’s about as endearing as a Chicago suburb in April.
‘the neighborhood I live in (Ocean Beach) is cheaper to rent by half than to buy’
It’s about the same for the house I rent in Flagstaff.
$2250/mo to rent a tiny townhome; OUCH!
OCEANSIDE TOWNHOMES SOLD FOR $81M
Piazza d’Oro sets highest price in SR78 corridor
By Roger Showley
12:01 a.m.Nov. 12, 2013
Piazza d’Oro, a rental townhouse project off state Route 78 in Oceanside, has been sold for $81 million, setting a local record of $366,516 cost per unit, according to CBRE Group.
The seller was an affiliate of Con-Am Group, and the buyer was a Los Angeles investment firm, TruAmerica Multifamily, in partnership with Guardian Life Insurance.
“In my opinion, it’s the best rental property in all of Oceanside and perhaps the 78 corridor,” said CBRE’s Kevin Mulhern.
Located at 3402 Piazza de Oro Way, the 14.4-acre project was developed by K. Hovnanian Homes as a for-sale project. But when the recession hit, the company sold the property, including 32 partially completed units, to ConAm, which completed the construction and began leasing in 2011. The sale closed about two weeks ago.
A property manager said the rents range from $2,250 to $2,550 on units of 1,586 to 1,704 square feet. Ten units are currently vacant.
Mulhern said TruAmerica and Guardian’s purchase represents a “big statement” for Oceanside’s prospects as an attractive housing market for investors.
“(The sale) shows how far it’s come in terms of morphing into what I think generally is a much more coastal-acceptable market,” he said.
However, he did not predict other apartment developers will build similar projects, because Piazza benefited from an oversized models rented at submarket rates. The typical apartment in the county is usually less than 1,000 square feet, while rents on Piazza-type layouts normally would command monthly rates of up to $5,000.
Besides more space, Piazza tenants are getting granite countertops and other upgrades not always available in rental units.
“The finish levels are arguably probably even nicer than in most nice apartment projects,” Mulhern added.
Ultimately, the project could convert to condo sales, he said, depending on market demand.
…
Northern California is the best place to live if you know how to do it.
It helps to be entrepreneurial. If you’re a cubicle dwelling lemming then go live in the midwest and freeze your ass off having 2.5 kids and watching TV all 9 months of winter.
Please stay away from Cali - we don’t need you.
Of all areas, northern CA is the most miserable part of the state.
‘Northern California is the best place to live’
This idea of the “best” place to live has always interested me. Most people I know live somewhere because of family, conditions for raising children, or their job. For what’s the best; I like to use the beer analogy. The best beer in the world is the one in my cooler.
‘If you’re a cubicle dwelling lemming then go live in the midwest and freeze your ass off…’
Yeah, that’s the kind of people I met in N CA.
“Northern California is the best place to live if you know how to do it.”
If it weren’t so blindingly expensive, I would agree. Great weather, mountains a few hours away, beach close by.. It’s hard to argue that given infinite money that CA wouldn’t be on the top of my list for places to live.
Now, for anyone without crazy income, you’d have to be nuts to live there. Making 100K a year in CA is like making 30K a year in most of the rest of the country. It’s so expensive that it makes my eyes hurt.
I understand why movie stars and .COM execs all live out there. What I don’t understand is why “normal” people would try to live out there. I would equate it to a guy making 30K a year trying to buy a 100K car; what are you thinking??
Also, off topic, but I feel the same way about lots of other areas (and most don’t have the appeal of CA). Canada, New York, northern NJ, Chicago… You couldn’t pay me to live in most of those areas, let along paying 500-1000 per sq/ft for the privilege.
BS.
I wouldn’t bring up my kids there. In fact I wouldn’t let my kids loose there… even for a moment. Too many freaks.
What I don’t understand is why “normal” people would try to live out there.”
Very hard to hire SKILLED people here at around 100K per year so at least I don’t have to hear threats about hiring someone cheaper to replace me if I don’t work every weekend, etc.
Property tax is a killer too if you bought during the bubble or within the last couple years. Even with Prop 13 - the taxes in that state KILL YA!!!
Sounds like it also helps to be a jerk.
“Northern California is the best place to live if you know how to do it.
It helps to be entrepreneurial. If you’re a cubicle dwelling lemming then go live in the midwest and freeze your ass off having 2.5 kids and watching TV all 9 months of winter. Please stay away from Cali - we don’t need you.”
Ahhhh LOOK! Someone has ANSWERED the mating call of the California Ass-Clown!
then go live in the midwest and freeze your ass off having 2.5 kids and watching TV all 9 months of winter.
It’s 55 right now and was in the 60’s over the weekend on the front range. 9 months of winter? I don’t think so. Also, FWIW, it can feel pretty cold in the winter in the bay area, courtesy of the humidity.
Please stay away from Cali - we don’t need you.
That’s how many folks here in the Centennial State feel about the hordes of California equity locusts that move out here and buy McMansions.
It’s 55 right now and was in the 60’s over the weekend on the front range. 9 months of winter? I don’t think so. Also, FWIW, it can feel pretty cold in the winter in the bay area, courtesy of the humidity.
Shhhhh…they don’t need to know about that, now do they?
Shhhhh…they don’t need to know about that, now do they?
Oops! My bad!
Don’t come here. We’re buried in snow 9 months a year. The average year round temperature is 0F.
I was just surmising the same conclusion. If Cali is so freakin’ awesome how come is it so many move to Colorado and/or Oregon??? For some reason the awesome weather wasn’t enough to keep ‘em. I guess the lure of colder weather and a huge butt house overcame the mild clime.
“If you’re a cubicle dwelling lemming then go live in the midwest and freeze your ass off having 2.5 kids and watching TV all 9 months of winter.”
+1 Homie…you forgot to mention church, a “low information” favorite.
There is a new show on HGTV called Flip or Flop. (Ala FLip Men) It’s a married couple scooping up REO’s and Foreclosure’s when the wife is not at the gym. I’m curious why there are SO MANY of these in Orange County/Long Beach? I thought the area was special and they had worked through that entire inventory?
It tells you something when a show like that has more homes than can possibly be flipped in a year.
Got excess inventory? Check.
Probably that’s where the production crews live.
Buy While You Can: Housing Still Affordable but Headed Higher
Under 30 and Locked In: How We Bought a Home So Young
these are headlines now ,not from 2005
if you live in a DNC spend tax state like Ca or IL shouldn’t the taxman scare you just a little- RE is the one thing people can’t take w them
this link shows how money is moving between states and counties
http://www.howmoneywalks.com/irs-tax-migration/
“this link shows how money is moving between states and counties”
+1 Thanks! I really ♥ the GIS mapping systems.
California Housing Demand Falls 4-years In A Row
http://picpaste.com/pics/75e091f0c0f8a86408f0c2e769df1cf8.1384280596.png
You think you’ll lose your shirt on just housing in So. Cal??
Wait until you want to send you kids to a school that actually educates them: 7K minimum per year per child. Coach tells you your kid is uber special and should do year round soccer: 2k per year plus gas and lodging because it’s a traveling team. Team parties are usually at “Build a Bear” so plan another $300 for that. Gotta have a hot tub because your nab’s got one. Better get the wifey a boob job too. You’ll fer shur need 4wheel drive because sitting in LA traffic is brutal on your vehicles suspension. Do I need to go on…?
7k/year will eventually get him a 200k/year job. 2k/year++ will land a pro soccer contract potentially worth hundreds of thousands, if not millions. Hot tub is therapeutic and will lengthen my life. Boob job will bring countless future hours of pleasure (and could be leveraged as a side income also). 4WD will open up the entire outdoors for my enjoyment. These are all investments, and the ROI is fantastic on each of them. I don’t see the problem.
2k/year++ will land a pro soccer contract potentially worth hundreds of thousands, if not millions.
IIRC, the average player in the MLS earns about 60K. Sure, Landon Donovan makes a mil or two, but he, and a few other stars are the exception.
Now if little Derek is good enough to play in the English, Spanish or Italian leagues, then the crazy money is there.
Side income! LOL!
In 4 letters, the problem with CA housing is CEQA (California Environmental Quality Act). These 4 letters are the basis for innumerable lawsuits filed against new developments, trying to slow development.
In the meantime, the population still grows by many hundreds of thousands of people per year. Despite all of it’s problems, CA is still VERY pro-entrepreneur (laws favoring employees ability to compete against former employers, etc.), and still attracts more than half of all venture capital deployed in the entire country.
Per PWC’s Q2 2013 “MoneyTree Report”, CA was the recipient of $4.3 Billion of venture investment in the second quarter alone, out of $7.3 Billion deployed in the entire country. Much of this money is lost (spent on salaries, but never create a long-term viable company), but occasionally, an HP is created, or Apple, or Oracle, or Google, or LinkedIn, or Twitter. In some cases, ideas can’t get funded elsewhere, so they move to CA (Facebook).
So, the combination of the anti-growth laws and population growth leads to a shortage of housing.
Population in 1990 was about 30 million, now about 38 million (37 million at the time of the 2010 census). How many housing units were built during that time?
13.7MM housing units in 2010
11.2MM housing unist in 1990
We added 7 million people, and 2.5 million housing units…2.8 people per housing unit.
In 1990, the average number of people per housing unit was 2.66.
In 2010, the average number of people per housing unit was 2.72.
In the entire country ex-CA (CA skews the number upwards–so you really should take out the effect of CA), the average is 2.27 people per housing unit.
Said another way, if you wanted to snap your fingers and create enough housing in CA so that it would be on par with the rest of the country on a housing unit per person basis, you would need to create 2.75 million housing units. That’s a pretty tall order, since in 2005/2006, we were barely cracking 200k housing starts…and even fewer on a net basis when you take into consideration that some houses are demolished each year.
From 2010 to 2012, it didn’t get any better…we added about 750k people, and built about 110k housing units.
How does this manifest itself?
1. Low vacancy rate: 4.6% for rental properties…the third lowest in the country, behind Oregon and Washington;
2. Generally unaffordable housing, which leads to a lower home ownership rate (about 54% last I checked); and
3. A boom/bust housing market–when people decide that they should buy, they all rush to try to buy too few homes, driving prices far higher than they should go, and when things hit a soft patch, they just have that much farther to fall.
Fix CEQA, and you might fix the problem, but it will take a long time…especially since there were CEQA reforms on the table this year in Sacramento, and the only thing that ALMOST happened is that they almost made CEQA worse.
With housing demand sliding year after year in California, 4.4 MILLION excess empty houses, falling population growth, what is it besides falling housing prices that you think might happen?
‘2.8 people per housing unit…In the entire country ex-CA the average is 2.27 people per housing unit.’
People doubling up would work to lower house prices, not raise them. Considering it’s the nations poorest poorhouse, I’m sure that if things keep going this way, it will be three families to a house in the future.
People do not voluntarily double-up. It is a reaction to too few homes, and consequently homes that are too expensive.
And your very own link up above connects CAs lack of affordable housing to what makes it have the highest poverty rate.
“‘If housing affordability is factored in, California’s poverty rate becomes the highest in the nation,”
Answer the following question:
Why is California’s housing so unaffordable?
My answer is quite simple…there isn’t enough of it.
Why?
Because of foreclosure moratoriums. You know all too well there are millions of excess, empty and defaulted houses in CA.
http://newsroom.transunion.com/press-releases/transunion-mortgage-delinquency-rate-drops-nearly-1066953#.UoKACPmshcY
Of course they’re going to drop. Delinquencies go unreported as a result of CA’s foreclosure moratorium.
Here’s the problem with your theory of “unreported delinquencies”:
1. Banks have had regulators up their butts now for 5 years…not reporting a delinquency to the Feds? Not collecting interest on your loans kind of shows up in your records.
2. Owners of RMBS (big institutions, etc.) would notice if they started getting smaller checks. Servicers (who generally make a very small percentage of principal balances) aren’t going to make up a shortfall in debt service payments out of the goodness of their hearts. In fact, dealing with delinquencies is more time consuming, so you know what, servicers get paid MORE with more defaults/delinquencies…they have a financial incentive to report every last delinquency/default.
Who do you think owns all this debt where they are not reporting defaults/delinquencies, where no one notices that the payments have stopped?
It’s not a theory my friend. It’s reality. And from everything I gather from your posts, it’s going to be a painful one for you.
I’ve driven all over northern Cali and central. Except the out-of-hand bay area there are more than enough houses to go around. Zillow a nabe anywhere outside the bay in Cali and you’ll see BUNCHES of blue houses indicating foreclosure releases.
I try to separate “shortage in listings” with “shortage in shelter”. I’m asserting a shortage in shelter (even though the former might also be true). Lots of the homes in foreclosure are still occupied by families (who when they get kicked out, will find another place to live), so foreclosures do not indicate empty shelter that will simply come back onto the market.
The shortage in shelter leads to long commutes (as people need to go far afield to find a place they want to live), low vacancy rates, high levels of overcrowding, and yes, like anything that is in short supply, higher home prices.
In any event, consider the following with respect to the number of listings:
There are about 500k homes that are sold in CA each year (actually a bit higher if you look at the annual averages going back to the late 90s, but let’s stick with 500k). To be in a “balanced market”, you need approximately 5-6 months worth of homes listed at any given time. That would be about 210-250k homes listed for sale at any given time throughout the state.
Excluding “pre-foreclosures” which aren’t yet available to be sold, according to Zillow, there are 118k homes throughout the state that are either listed for sale, or foreclosures for sale (the blue houses). There are 67k pre-foreclosures, which will come to the market over time.
We are short of “balanced” as-is, and even if all pre-foreclosures were to magically become available for sale, we would still be short of “balanced”.
OK, so let’s say that the coast is different (to be fair, this was your comment), and that inland is where there are plenty of listings…perhaps the market is split, where the coast has almost no listings, and inland there are plenty.
Let’s pick on Stockton (City, not MSA).
Average annual sales for the Stockton metro? In the 6k per year range. So, there should be 2.5k to 3k homes listed for “balance”. Today, there are 626 homes for sale (including foreclosures), and another 750 that are in “pre-foreclosure”. Not balanced in either case.
And per REIS (prevalent market study company), the apartment vacancy rate in Stockton?
2.8% (45th lowest out of 275 major markets REIS tracks)
Zillow aggregates less than half of all MLS listings in any state.
Nice try though.
The endless shilling is absolutely nauseating. Don’t you have some flops to flip?
Days on market and price cuts are to high to substantiate this “shortage”
‘Why is California’s housing so unaffordable?…there isn’t enough of it’
I’m familiar with the ‘build our way out of the bubble arguments.’ It’s no more valid now than when all those subdivisions were left half built.
Here’s the easiest way to explain it. If a bank will loan me $150,000 for a given house in Phoenix, they will loan me $250,000 maybe $300,000 for the same house in Flagstaff. If I asked the Phoenix banker, lend me $250,000 for this house in Phoenix, he’d say, no way! It’ll never appraise for that. Exact same type house, 2 hours away. And incomes are much lower in Flagstaff.
California houses are priced where they are because someone will lend them that much. This has been distorting prices for much longer than most realize.
So take away the ridiculous cap that Fannie and Freddie have given to California and what do you suppose would happen to prices? Geronimo!
So if we look at Hawaii, where the same GSE cap is in place; ta-da! $600,000 houses! And similarly, in Alaska, (where it ain’t 75 degrees right now), and the same GSE cap: what do you know? $600,000 houses!
Let’s have the market decide all this. Pull away these lending props and let’s find out what these shacks are worth. I’d guess it would surprise the heck out of you.
I’m not “build our way out of a bubble”, I’m “build our way out of a shortage”.
If it’s all about the finance, how do you explain the prevalence of cash buyers at the high prices (in March, it was about 34%…I haven’t seen more recent data)?
As a point of fact, jumbo loans are currently priced at about the same as the GSE loans from an interest rate standpoint, so the caps aren’t really at issue at the moment. If it’s the cheap finance that’s doing it, then why aren’t other markets recovering as strongly, who also have access to the cheap debt?
As a brief addition to my prior comment (which has yet to appear), “affordability” measures inherently includes the cost of finance and the incomes of the people in the area in which “affordability” is measured.
So, if supply/demand has little to do with home prices in markets, and it all has to do with interest rates, then the “affordability” measures should have fairly little variability across MOST markets (there would be a natural equilibrium range based on prices/interest rates/incomes).
This is simply not the case. Affordability measures range widely.
And that’s the point you seem to miss.
There is no “shortage”. Not in CA, Not in NY, Not in Tokyo.
And as far as demand goes, you’ll have to explain your “recovery” considering demand has falling to 16 year lows…. and sinking.
“So take away the ridiculous cap that Fannie and Freddie have given to California and what do you suppose would happen to prices? Geronimo!”
If the greater fools who overinvested in California housing to exploit the price subsidies implicit in federally-guaranteed lending at the GSE conforming loan limits believed price supports were going away, they would fall all over themselves to increase supply to the point where CA housing prices fell back in line with local incomes and rents.
‘As a brief addition to my prior comment’
Blah blah. What would getting rid of GSE guarantees do to the California market?
Geronimo! Your prices are pure, made up junk.
Yes, N. Cali sucks, please stay away.
Damn this 75 degree weather in November! I wish I was back in Minnesota.
Sustained economic decline with high crime and rising poverty is a deterrent no matter what the weather.
What state/city do you live in?
Nice try but I’m not here pimping my state and town. You are.
There is very little crime in my town. economy is doing fine. House prices are ridiculous which is why I rent for about 1/2 the price of a mortgage. just stay away from the bay area and know the difference between sh*t and shinola.
Of course. This is in Shangri-La NamelessTown…. Right?
Sebastopol, ca. It exists, and no I’m not posting a naked picture of myself in the village square for you as proof. Unless you pay me.
In a state with dominated by poverty, unemployment and high crime.
Your point?
Nice. I grew up in Petaluma.
Also nice!
“…know the difference between sh*t and shinola.”
If you weren’t born a trust fund baby and didn’t win the dot com lottery, this is an essential financial survival skill in CA.
The thing most people don’t get is the worse the weather you live in the more things and bigger house you need to escape your nightmare. When you live in paradise you need very little to be happy.
An impoverished state running rampant with sexual crimes and deviants sure sounds like a nightmare.
It’s only a crime if you get caught.
So goes life in tits up Cali.
So. Cal has the best weather. So why do so many people need so much crap and bigger everything there to be happy?
Man, you really got all butt-hurt, huh? Invoking images of “paradise” and everything. Did someone call your baby ‘ugly’?
No, my butt is fine and my daughter won the genetic lottery.
Really doubtful that anyone sharing your genes has won any prize, unless its for smarm and angst. Although… Obomba won a Nobel Peace Prize- are you two related by anything more than your superiority complexes? You obviously internalize the whole Cali thing, taking criticism as a personal insult. I’m assuming thats because you are the self appointed King Of California, as earlier you were forbidding some posters entry into your special fiefdom. Don’t worry- your paradise is secure. I spent a few years in California and have no desire to go back. When you die, the HBB will spread your ashes in the beloved NorCal paradise that you obviously helped create and nurture- someplace really nice like Oakland, Tracy or maybe Los Banos?
“No, my butt is fine and my daughter won the genetic lottery.”
So you adopted, huh?
Oh dear.
‘If you’re in the market for a newly built home and you gamble on waiting until early next year, you might benefit from aggressive discounts offered by the biggest home builders.’
‘D.R. Horton Inc. Chief Executive Donald Tomnitz didn’t mince words on Tuesday in stating that the builder—the largest in the U.S. by number of homes sold—will roll out sales incentives across the country if the sluggish new-home market doesn’t gain momentum by January and February. That’s the start of the spring selling season, when builders traditionally make most of their sales.’
“I don’t think there’s any question that we’ll start with incentives if the (slow) pace continues into the strong selling season around Super Bowl Sunday,” Mr. Tomnitz said on D.R. Horton’s fourth-quarter earnings call with investors. “We have plans in place, coming in January, to make sure that we drive the right amount” of sales in relation to profit margins.’
‘D.R. Horton’s new orders for homes last quarter of 5,160 marked a 2.2% decline from a year earlier in contrast to analysts’ expectations of a gain of 9% to 10%. Its cancelation rate of buyers backing out of deals increased to 31% last quarter from 24% in the previous quarter.’
‘D.R. Horton’s slowdown matches that reported of late by others. Research and advisory firm Zelman & Associates’ monthly survey of closely held U.S. builders, covering an estimated 15% of the new-home market, found that respondents’ new-home orders declined by 10% in October from a year earlier and prices held relatively flat.’
‘Stephen East, an analyst with ISI Group, said there’s little doubt that other builders will ramp up their incentives if D.R. Horton does. Mr. Tomnitz “said what every other CEO is working on: What’s going to be our game plan if demand doesn’t pick up?” Mr. East said. “In my mind, the overwhelming majority of builders will do the exact same thing that Horton said they will do.”
“Mr. Tomnitz’s comments came as D.R. Horton, based in Fort Worth, Texas, reported results for its quarter ended Sept. 30 that investors regarded as a mixed bag. The builder posted income before taxes of $202.8 million, more than double the amount from a year earlier.
D.R. Horton closed sales of 6,866 homes, up 23% from a year ago. And its average selling price rose by 14% to $262,500.
However, D.R. Horton’s new orders for homes last quarter of 5,160 marked a 2.2% decline from a year earlier in contrast to analysts’ expectations of a gain of 9% to 10%. Its cancelation rate of buyers backing out of deals increased to 31% last quarter from 24% in the previous quarter.”
DR Horton’s stock price was up 4.7% today on these dire predictions. Are people discounting the poor order numbers due to the “Octaper” discussions?
Cancellations outnumbering sales. Just like a few years ago, these builders will be throwing recent buyers under the bus over and over. Here’s another time he didn’t mince words:
‘DR Horton chief executive Donald Tomnitz told investors that the weak US housing market would continue to hit home prices during the year. ‘I don’t want to be too sophisticated here, but ‘07 is going to suck, all 12 months of the calendar year,’ he said.”
“The company’s net income for the three months to the end of December 2006 fell to $109.7m (£56.7m), from $310.1m at the same time the previous year. Mr Tomnitz warned that DR Horton may have to make further write-offs to reflect the number of unsold homes and lower land values.”
“‘I don’t think ‘08 is going to be a great year, but it’s going to be much better than ‘07,’ he added.”
http://thehousingbubbleblog.com/?p=2456
It doesn’t matter about the “taper”. This thing is going over the falls as we type, regardless of ZIRP, QE.
There are important differences between 2006-7-8 and 2013-14-15. No subprime mirror foggers, value to cost ratio much closer, all cash buyer will not default……and more…
You’re forgetting something JingleBalls….. The subprime debacle is still in front of us.
And no…. “value to cost” is severely out of wack.
Nice try though.