November 21, 2013

An Indicator Of What’s To Come In California

The Press Democrat reports from California. “October ended with fewer than 850 homes available for sale in Sonoma County, less than a two-month supply at the current sales pace. Agents and brokers don’t expect a big upswing in inventory in the coming months, partly because so little new home construction has occurred in the last six years. Peg King, an agent with Coldwell Banker in Petaluma, said some sellers have told her they won’t list their homes until next spring specifically because they have heard that prices will rise next year. ‘They have their ear to the ground,’ King said of sellers.”

The Mercury News. “After years of post-bubble turbulence, the Bay Area housing market appears headed for a period of stability as rapid price increases hit a wall and sales plateau. Santa Clara County’s median of $713,000 was up 15 percent from a year ago, but down 5 percent since June. San Mateo County’s median price of $782,000 was up almost 15 percent from a year ago, but down almost 10 percent from a high in August.”

“Alameda County’s median sale price was $568,000, up 35 percent from last year but down nearly 4 percent since a summer peak. Contra Costa County’s median sale price of $395,000 was up 31.7 percent from October 2012 but down 12 percent from July. ‘Until a few months ago, price reductions were almost unheard of,’ said Steve Pierce of Keller Williams Benchmark Properties in Fremont. ‘Now it’s becoming more commonplace, particularly if properties were not priced reasonably to begin with.’”

The Santa Cruz Sentinel. “‘I’m seeing a cool-down,’ said Heidi Robinson, an agent with Thunderbird Real Estate in Soquel who represented sellers in Scotts Valley and Ben Lomond who closed deals to investors in October. ‘We don’t have the buyers we had before … They got a little tired of that multiple-offer scenario and decided to take a break.’”

“Robinson, who has specialized in distressed properties, said a lot of investors were ‘fixing and flipping’ during the summer in San Lorenzo Valley, where an investment of $20,000 could ready a home for a buyer using an Federal Home Administration loan. That activity has slowed, whether an aftereffect of the federal government shutdown in October or a result of the slowdown in the Silicon Valley housing market. One example: A newly remodeled three-bedroom house in Capitola was listed for $635,000 on Oct. 28 by owners who are relocating. A week ago, the price was dropped to $599,000.”

The Union Tribune. “Foreclosures in San Diego County ticked up from September to October. Last month, lenders foreclosed on 173 properties in the county, up 18.5 percent from the 146 in September, DataQuick reported. Percentage wise, it was the biggest month-to-month jump in foreclosures since they rose from 715 in December 2010 to 959 in January 2011, a 34.1 percent gain. A bank can file a default notice 90 days after a missed payment, starting the foreclosure process. Filed notices rose from 466 in September to 541 in October.”

“‘I just attribute that to noise,’ said. ‘It’s such a small number. In general, I would expect foreclosures to be going down as property values increase more and more.’”

The East Bay Express. “Earlier this fall, glossy mailers blanketed Richmond as part of a smear campaign against the city’s proposal. ‘Wall Street is back to take another bite’ out of your home, the mailers warned. ‘The Council’s heart is in the right place — they are trying to help Richmond homeowners struggling to save their homes, but they’ve bought a risky plan that could seriously harm the value of your home.’”

“The mailers were financed, in part, by a $70,000 donation from the California Association of Realtors.”

“Currently, about half of Richmond’s homeowners are still underwater on their mortgages — that is, they owe more than their home is worth. Vicky Conway is one such homeowner. The lifelong Richmond resident bought a house with her husband in the North & East neighborhood of the city in 2004 for $325,000. She estimates it’s now worth less than half what they paid for it. ‘We’re not going to be able to retire and continue with the same mortgage payments,’ she said.”

From New Times SLO. “Even once they hit the multiple listing service of the retail real estate market, many of the flipped houses in SLO County weren’t bought by people who wanted to live in them. The number of claims for homeowner’s exemptions has fallen each year since 2008, decreasing by more than 1,650 in the last five years, according to Kirk Kidwell, the assistant county assessor. Investors may be holding on to houses until prices rise higher, or fixing them up for resale.”

“‘We just don’t know how many houses are being held off the market,’ Dana Lilley, a county supervising planner who specializes in housing, pointed out.”

From CNBC. “They say all real estate is local, but the West has more recently been an indicator of what is to come for the rest of the nation. It was the first region to crash in the mid-2000’s and the first to show signs of recovery toward the end of the last decade. Now the tides have turned again. Sales of existing home sales nationally fell 3.2 percent in October from the previous month, but in the West they were down 7 percent. The West was also the only region to see a year-over-year decline in home sales.”

“Investors may be putting some properties back on the market again in Phoenix, eager to take advantage of higher prices, but those same higher prices are crimping demand. If this is an indicator of what is to come in California, that is a clear red flag.”

“While home prices in California, and across the nation, are still well below their peaks of the housing boom, there is a major difference for home buyers today: credit. Mortgage rates may be lower on the 30-year fixed, but that wasn’t the product used during the boom. Adjustable rate loans with no down-payment requirement and 1-percent ‘teaser’ rates were popular. Those are gone today. Now, most loans are fixed-rate products that require larger down-payments and higher credit scores.”

“‘Bottom line, on a monthly-payment basis and relative to income needed to qualify for a loan, a house in California is far more ‘expensive’ than from 2004 to 2008, even though house prices are not back to peak levels,’ said Mark Hanson, a California-based housing analyst. ‘Put another way, it costs a lot more today to pay for a house using a mortgage than it did from 2004 to 2008. Thus, if 2004 to 2008 was a ‘bubble,’ then this must be, too.’”




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64 Comments »

Comment by Taxpayers
2013-11-21 05:29:27

CA will have to go after RE taxes again. $100k life guards , pensions etc.

Comment by JingleMale
2013-11-21 06:25:40

You dissin on Pamela Anderson? She earned her pension. Think of all the lives she saved on Bay watch!

Comment by Housing Analyst
2013-11-21 06:56:10

realtors are liars

Comment by Doom
2013-11-21 08:45:18

The first word out of we’re mouth after being hatched was liar?

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Comment by Housing Analyst
2013-11-21 19:32:34

Is Lester Appleton Yun a liar?

 
 
 
 
Comment by Strawberrypicker
2013-11-21 19:11:55

The public unions will be the end of Prop 13. It’s been in the works for years.

 
 
Comment by Housing Analyst
2013-11-21 05:39:07

As we saw yesterday, houses in California are priced 275% higher than replacement costs(lot, labor, materials and profit). Granted that they’re not selling at that price as sales have all but collapsed.

Comment by Blue Skye
2013-11-21 08:41:24

“We’re not going to be able to retire and continue with the same mortgage payments…”

Long math is so hard.

 
 
Comment by Mr. Banker
2013-11-21 05:53:56

“A bank can file a default notice 90 days after a missed payment, starting the foreclosure process.”

My favorite word in this sentence is the word “can”, as in “do not have to” - meaning I can foreclose if I want or not foreclose if I want. Once the FB gives to me the choice of foreclosure then the ball is in my court.

“In general, I would expect foreclosures to be going down as property values increase more and more.”

If property values go up then foreclosures will go up because as mortgages that were underwater rise above the water line the unrealized paper losses that were weighing heavily on my bank’s books will disappear. This is the point, this break even point, that I may decide to exercise my option of foreclosing on the FB.

He stayed because he could, because I allowed him to. And because he stayed he kept the strippers from trashing the house - the house that I hold the ownership papers on. Plus a lived-in house helped keep the values up for the neighboring houses that I also happen to own mortgages on. When the time is ripe for me then I will offer to the FB my Thirty-Minute Program; I’ll give him 30 minutes to get his sorry ass and all of his belongings out of my house.

Comment by Whac-A-Bubble™
2013-11-21 08:35:11

“He stayed because he could, because I allowed him to.”

Foreclosure vampires stay in their homes at the pleasure of Mr. Banker.

Comment by Carl Morris
2013-11-21 09:44:46

The only question is why does Mr. Banker get so much pleasure from it?

Comment by Puggs
2013-11-21 10:15:47

He has detached his conscience. Remember, “It’s just business”.

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Comment by Housing Analyst
2013-11-21 06:09:29

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.

Comment by Doom
2013-11-21 08:58:49

Let me educate you again, a state that has 10 times more population then most states has 10 times more of everything including rich and poor. You could never dream of living in Cal. wealthy communities so Mr Jealous you say uneducated statements?

Comment by Hi-Z
2013-11-21 09:52:55

Doom;
The reference was to the geographically adjusted PERCENTAGE of people in poverty. Percentages have nothing to do with size so CA is in fact #2 in that category. I assume geographically adjusted means adjusted for cost-of-living, mediam wages, etc but perhaps that is wrong.

Comment by doom
2013-11-21 10:14:57

Yes I understand that like per capita, but this Cal thing, we left there ourselves 17 years ago, but the state afforded us a great life someplace else, as we made investments and my business did very well in the 33 years living in So Cal.

I don’t believe in putting a place down that fed us, and Cal a very progressive place unlike the Mid-West where we were stagnant challenge us, we took advantage of great year round climate and made money at the same time.

Does a state with over 37 million people present itself to problems you bet, maybe it should become its own country?

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Comment by Housing Analyst
2013-11-21 15:46:09

“The reference was to the geographically adjusted PERCENTAGE of people in poverty.”

That’s right.

In addition to be the #1 Impoverished outpost that it is, it’s a corrupt cesspool overrun by illegals.

 
 
 
 
 
Comment by JingleMale
2013-11-21 06:27:39

Heard on the news yesterday CA has a $2B surplus this year.

Comment by Housing Analyst
2013-11-21 06:53:58

2 billion against a 145 BILLION state debt?

Raindrops in the desert.

Comment by Pete
2013-11-21 11:46:01

Yes, why did we even bother balancing our out of control budget? Oy.

 
 
 
Comment by Housing Analyst
2013-11-21 06:40:01

Sacramento Rental Rates Collapse 12%+ Year over Year

http://picpaste.com/pics/0347004bfa864ddae16df5847cc9707a.1385041157.png

 
Comment by Housing Analyst
2013-11-21 07:03:23

“Which Bubbles Will Burst Worst?”

http://retirementincomejournal.com/issue/november-15-2013/article/which-bubbles-will-burst-worst

“It is only a question of time, and if you asked me to guess, I’d put the collapse’s onset in the fourth quarter of 2014.”

And this housing collapse will make the previous look like a church bake sale.

 
Comment by Housing Analyst
2013-11-21 07:04:23

Prepare yourselves for Mortgage Meltdown Part II

“Subprime 2.0: Big Banks Exposed To $60 Bil In Bad Gov’t Loans”

http://news.investors.com/ibd-editorials/102113-675996-bofa-wells-citi-jpmorgan-saddled-bad-fha-mortgages.htm

Now the very fundamental point of this pending disaster is that millions of people overpaid for housing from 2009- current.

 
Comment by Whac-A-Bubble™
2013-11-21 07:06:27

“‘I just attribute that to noise,’ said. ‘It’s such a small number. In general, I would expect foreclosures to be going down as property values increase more and more.’”

Keep whistling as you stroll past the graveyard.

Comment by Ben Jones
2013-11-21 08:09:08

‘I would expect foreclosures to be going down as property values increase’

That’s just the thing, prices are going down in San Diego.

Comment by Blue Skye
2013-11-21 08:50:31

“They have their ear to the ground,’ King said of sellers.”

And apparently they have their posterior sticking up in the air.

Comment by Ben Jones
2013-11-21 09:14:53

This is funny:

‘Peg King, an agent with Coldwell Banker in Petaluma, said some sellers have told her they won’t list their homes until next spring specifically because they have heard that prices will rise next year’

Yeah, when prices go up by many tens of thousands in 18 months, what’s going to happen next? It’ll go up some more!

‘they have heard that prices will rise next year’

Now where would they have heard that? From the article:

‘Earlier this month, former UCLA economist Christopher Thornberg predicted low inventory levels will help drive up home prices 10 to 12 percent next year in Sonoma County.’

No worries, it’s in the bag. And I’m sure Thornberg will make up the difference if he’s wrong.

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Comment by Central Valley Guy
2013-11-21 13:24:48

Thornberg was such a terrific bear 8 years ago, it seemed he had one of the few megaphones out there calling the bubble. I wonder why he has changed his mind.

 
Comment by rms
2013-11-21 14:23:33

“I wonder why he has changed his mind.”

I’m sure Chris and his wife were ostracized from the social circles they were familiar with, and his career likely hit the proverbial brick wall. It may not be obvious, but one has to walk in the right direction to keep from falling off of the “rolling log.”

 
Comment by Rental Watch
2013-11-21 14:32:09

“People are saying the reason prices are falling are because of all of the foreclosures, but the foreclosures are happening because the prices are falling. They’ve got it backwards. The prices are falling because they’re too freakin’ high.”
Chris Thornberg, Beacon Economics, Aug 27, 2008

http://www.housingfinance.com/economic-conditions/economist-thornberg–this-too-shall-pass.aspx

Early ‘09 (or late ‘08?), he notes that this will pass–notes some overshooting on the downside.

http://www.bloomberg.com/video/70165258-beacon-s-thornberg-on-u-s-housing-market.html

A video from May 2011…seems like a fairly neutral view (certainly less bearish than in 2008)

http://www.builderonline.com/economic-conditions/former-housing-cynic-chris-thornberg-says-its-time-to-buy.aspx

He turns bullish in early 2012 noting affordability being really good, but still notes some headwinds.

https://beaconecon.com/blog/housing_bubble_too_early_to_call

And in April 2013, he notes that prices have gone up a lot, but he’s not yet ready to call a bubble.

So, from my recollection, this is the history of his views…Thornberg was early in warning about a bubble in 2003, and was full ringing alarm bells in 2006. He then watched and commented as home prices were falling, and at some point felt home prices fell too far (2009). Then there were some comments about how all the excesses needed to get worked through, and by 2012, became bullish. And now, it seems like he is not yet fully ringing alarm bells, but cautioning that a bubble can come back if people start buying based on trend, and not fundamentals.

If we get another year of 20% home price increases, I’m guessing his caution of another housing bubble will gain volume.

 
Comment by rms
2013-11-21 18:27:50

Chris Thornberg would do well to focus on median household income v. median home price. These professionals have lost touch with economic reality and the average family’s ability to survive without section-8 and snap cards.

 
 
 
 
 
Comment by Housing Analyst
2013-11-21 07:09:24

The lifelong Richmond resident bought a house with her husband in the North & East neighborhood of the city in 2004 for $325,000. She estimates it’s now worth less than half what they paid for it.

What’s the problem here?

Why wouldn’t a house be worth less after sustaining 10 years of depreciation.

Anyone?

Comment by Whac-A-Bubble™
2013-11-21 08:39:23

It helps to know that as of 2004, Richmond home prices were 3X their 1996 levels. So a 50% loss off 2004 prices is still a 50% gain off 1996 levels: (3*0.5*100-100)% = 50%!

 
Comment by Blue Skye
2013-11-21 08:52:07

Depreciation is the icing on the Deflation cake.

 
 
Comment by Whac-A-Bubble™
2013-11-21 07:09:50

“‘The Council’s heart is in the right place — they are trying to help Richmond homeowners struggling to save their homes, but they’ve bought a risky plan that could seriously harm the value of your home.’”

“The mailers were financed, in part, by a $70,000 donation from the California Association of Realtors.”

That’s hi-larious!

Comment by Housing Analyst
2013-11-21 07:11:53

Is it any wonder why the public believes that realtors are liars?

 
 
Comment by Whac-A-Bubble™
2013-11-21 07:11:18

‘Put another way, it costs a lot more today to pay for a house using a mortgage than it did from 2004 to 2008. Thus, if 2004 to 2008 was a ‘bubble,’ then this must be, too.’

Q.E.D.

 
Comment by Ben Jones
2013-11-21 08:30:04

One interesting thing; the CAR report came out mid-week. I thought by this morning there would be many reports on it. Almost nothing. But there is this:

‘At the end of the third quarter, 13.2% of homeowners with a mortgage remained underwater in the L.A. metro region, a decline from 25.9% in the same period last year, according to Zillow. Prices, however, are still below their peak during the last decade’s bubble.’

‘Those that purchased a home at what turned out to be unsustainable prices remain stuck. About 10% of underwater homeowners in the L.A. area owe more than double what their house is worth, Zillow said.’

‘The the Inland Empire has the greatest percentage of homeowners underwater in Southern California. In Riverside County, 27% of homeowners with a mortgage are still underwater. In San Bernardino County that rate rises to 29.1%.

“Many homeowners remain too far underwater for reasonable price appreciation alone to help,” said Zillow chief economist Stan Humphries.’

‘Negative equity, he said, is simply the new normal.’

Bzzz, wrong answer Stan. There is a big temptation to walk away in this situation. So while you have the government making loans at 200% LTV, etc, when it dawns on these FB’s that prices aren’t gonna make them whole, they’ll bail.

Comment by Housing Analyst
2013-11-21 08:36:25

And let’s be honest here.

Who in hell wouldn’t walk away from these kind of losses? Get serious. You’ve got people overpaying 200%+ premiums on a depreciating asset from east to west coasts and north to south. Good golly miss molly! Hell… we have a few right on this blog that did so.

Going into the transaction, EVERY one of these people brought nothing to the table. There is nothing to lose by walking away. Nothing.

 
Comment by Carl Morris
2013-11-21 09:51:28

‘Negative equity, he said, is simply the new normal.’

Alrighty then. Now that we’ve established that, let’s see how it all works out.

 
Comment by Puggs
2013-11-21 10:29:48

The reason life is so expensive in t!ts up Cali is all the extras you have to pay for just to keep up with the nabes! So many hot tubs, flat screens and granite counter tops were put on the house tab.

 
Comment by Rental Watch
2013-11-21 14:43:42

Most people who were going to walk away have already walked away. One reason why I believe this is the case is that the lack of income associated with forgiveness of debt has always been seen as temporary gift…if people are at all paying attention to this, it would encourage them to talk away sooner rather than later.

That said, there will be a steady stream of people who simply cry “uncle” and walk away over time, but it won’t be the same pace as before.

I think the biggest issue with the underwater borrowers is that it decreases mobility, AND if someone falls on hard times (loses a job, etc.) there is no way to simply sell the home to avoid foreclosure.

Comment by Blue Skye
2013-11-21 15:26:29

Buckle your seatbelt then, because there are going to be a lot of sobering “life events” in the not so distant future.

Comment by Housing Analyst
2013-11-21 15:49:00

That’s right.

With how many MILLION’s of underwater home-debtors in that hell hole of a state, they’re not stick around to go even deeper underwater.

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Comment by rms
2013-11-21 08:57:21

From the News Times piece: “In the end, disheartened and embittered, their savings exhausted, the Thomases stopped making their payments, packed up their possessions, and moved into a large tent in the Southern California backyard of Tony’s mother. (The spare rooms in the house were already occupied by Tony’s brother and his family, who had also fallen on hard times.)”

Wow, that News Times piece on San Luis Obispo, CA was great. It is something you’d NEVER see in the SLO Tribune, N-E-V-E-R!

Great catch there, Ben.

Comment by scdave
2013-11-21 09:16:59

Wow, that News Times piece on San Luis Obispo, CA was great ??

Where ?? The link Ben posted appears to be about LA

Comment by Ben Jones
Comment by rms
2013-11-21 13:35:02

The terrible gap between median household income and median home prices in SLO is a dirty little secret rarely discussed in the local media.

I just sent the author, Kathy Johnston, a kudos.

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Comment by HBB_Rocks
2013-11-21 10:34:42

Enjoying the great weather of CA by living in a tent no doubt.

Comment by rms
2013-11-21 13:05:49

“Enjoying the great weather of CA by living in a tent no doubt.”

+1 Gotta wonder about that marital sex life in a tent. :)

 
 
 
Comment by Puggs
2013-11-21 10:22:36

“‘I just attribute that to noise,’ said. ‘It’s such a small number. In general, I would expect foreclosures to be going down as property values increase more and more.’”

You should know all about noise! This is the kind of thinking that comes from smoking to much of your own product during a Realtor pump and dump meeting.

 
Comment by doom
2013-11-21 10:30:44

I know I’m a liar, lets get that out of the way?

You are on your death bed you had everything you wanted in life, you die in peace.

You are on your death bed and you had nothing in your life you die in misery.

True both died,, but one person had a hecka ride in life, the other person was always waiting for the next bus?

Comment by In Colorado
2013-11-21 10:47:27

Will this really matter once they’re dead?

 
Comment by inchbyinch
2013-11-21 11:09:05

doom
Yep, it’s about the “dash”. 19XX-20XX

Comment by Housing Analyst
2013-11-21 19:45:58

realtors are liars..

 
 
Comment by Puggs
2013-11-21 11:11:10

Sounds like the “most toys” bumper sticker analogy.

Comment by Ben Jones
2013-11-21 11:18:59

‘A help site for McDonald’s employees reportedly suggests they return holiday gifts to get out of debt. “You may want to also consider returning some of your unopened purchases that may not seem as appealing as they did,” the McResource site reads, according to screengrabs that were posted on the website of “Low Pay Is Not OK,” a group that advocates for higher fast food wages.’

“Selling some of your unwanted possessions on eBay or Craigslist could bring in some quick cash,” the McResource presentation reportedly said. Low Pay Is Not OK also criticizes McDonald’s for saying “breaking food into smaller pieces often results in eating less and still feeling full” and suggesting that employees, most of whom are on hourly wage schedules, try to take at least two vacations per year.’

‘Another tip from McResource supposedly tells employees to “Stop complaining. Stress hormones rise by 15% after 10 minutes of complaining.”

http://finance.yahoo.com/news/mcdonald-s-tells-employees-to-consider-returning-holiday-gifts-to-get-out-of-debt-152142875.html

Comment by goon squad
2013-11-21 11:46:47

“McResource”

I read in another article that McResource provides guidance for McDonald’s employees on how to enroll for food stamps, medicaid, etc.

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Comment by Blue Skye
2013-11-21 12:20:41

“get out of debt….also consider returning some of your unopened purchases…”

Let’s connect the dots. Stop buying crap you don’t need with money you don’t have!

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Comment by inchbyinch
2013-11-21 11:22:18

Puggs
“The Dash” is a well known bereavement poem read at many funerals. Late BIL was a Mortician.

http://www.linda-ellis.com/the-dash-the-dash-poem-by-linda-ellis-.html

Comment by Puggs
2013-11-21 12:13:06

True dat.

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Comment by Housing Analyst
2013-11-21 15:50:50

If you bought a house in the last 13 years, you’re already on your death bed.

Comment by AmazingRuss
2013-11-21 20:44:31

I bought a house last week, and immediately caught fire, leading to my exploding with such violence I left a crater 50 feet deep. The fireball was seen from 700 miles away, and now the crater is surrounded by a chanting apocalyptic jesus-is-a-space-alien cult.

Won’t do THAT again!

 
 
Comment by Neuromance
2013-11-21 17:03:38

Someone wants to live beyond their means, rarely have two nickels (or dimes) to rub together, and die destitute, that’s perfectly fine, their choice. Free country and all.

However, I just don’t want the government forcing me to bail them out. That’s the only thing I object to.

The parable of the ant and the grasshopper. We’ve got a government and central bank of locusts, feeding locusts on Wall Street. Would be nice if the ants were a bit more represented in the government and in the central bank.

 
 
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