Three-Years Of Exuberance Jammed Into One
The Union Tribune reports from California. “Housing, which zoomed up 18.4 percent in price last year, faces “uncertain” prospects this year, according to Tim Sullivan, newly named local chairman of the Urban Land Institute. Sullivan, a real estate industry consultant, said last year’s housing market was one of ‘exuberance.’ ‘Now I’d characterize the 2014 outlook as one of optimism but still with a level of uncertainty,’ Sullivan said, ‘because we had such a nutty 2012 and ‘13 with home prices moving up quickly and a little bit of land selling — maybe a three-year period of exuberance jammed into one. The market is now reeling again and there’s concern and uncertainty.’”
“‘From a residential side, it’s very solid — prices are up — but now we have a concern, after a year of affordability,’ he said. ‘We can’t win for losing and we can’t lose for winning.’”
The Los Angeles Times. “Across a large swath of Southern California, owning a house has become less attractive financially in the wake of rapid home price gains last year. The mortgage payment on a median-priced, three-bedroom would exceed the rent on a comparable property in Los Angeles, Orange and Ventura counties, according to a RealtyTrac analysis, based on prices from the fourth quarter of 2013. Nationwide, there were only 29 large counties in that situation, including the Northern California counties of Santa Clara, Alameda and San Francisco. A year earlier, nowhere in Southern California was rent cheaper than monthly house payments.”
“The median price for a three-bedroom L.A. County house was $417,333 in the fourth quarter. The monthly house payment for such a home rose 40% compared with the fourth quarter of 2012. To qualify to purchase such a house, a buyer would now need to make at least $95,389 annually, according to RealtyTrac. That’s about $42,000 more than the median-household income and $27,000 more than the income needed to buy the median house a year earlier.”
“‘The widening disparity between rent and home prices underscores a growing affordability crunch across the region. Real estate experts say the high costs, without corresponding income growth, have depressed sales. ‘The cost of financed homeownership is becoming dangerously disconnected with still-stagnant median incomes,’ RealtyTrac VP Daren Blomquist said in a statement.”
The San Francisco Business Times. “The Bay Area’s luxury home market is signaling a slowdown ahead even as prices late last year were still showing year-over-year double-digit increases. First Republic Bank’s Home Prestige Index found that luxury home prices in the Bay Area are near records amid tight supplies of homes selling for $1 million and often more.”
“But it’s the commentary from real estate agents that set off alarms for careful followers of the luxury housing market.” In discussing First Republic’s latest quarterly figures, real estate agents in California’s luxury housing market are using telltale language of trouble ahead, with such phrases as ’supply is plentiful’ and the ‘market is solid,’ while others see ‘buyer resistance’ and ‘expect the market to level off.’”
“That type of talk that could prompt home owners to put their properties on the market before prices fall. Real estate agents say that pricing and demand for the limited supply of homes on the market is approaching levels last seen just before the housing market began to crater in 2007. Earlier this month, Christopher Stafford and Terry Wright, both of Paragon Real Estate Group, sent an email to clients alerting them to ’shifts in the San Francisco real estate market.’”
“‘It is far too early in the year to reach definitive conclusions regarding substantive changes in the market, but there are indications of a number of shifts,’ the Paragon agents said. ‘From the hurly burly on the street, the word is that the quantity of offers coming in on new listings is declining. Where a new listing might have attracted 10 or 12 offers last spring, three or four are coming in now; where three or four offers would have arrived, the seller is getting one.’”
The Merced Sun Star. “Merced County home sales prices dipped in January. Merced’s median-priced homes sold for $149,330 in January, which was about $11,000 less than during December but about $12,000 more than January 2013, according to the California Association of Realtors. Across the state, home prices dipped an average $28,000 last month. The state’s median sales price was $410,990 in January, 22 percent more than a year ago.”
“Retired aerospace engineer Owen Klasen was rejected last year when he sought a second mortgage to paint and re-roof his house. Home prices hadn’t risen enough, the loan officer told him. But last month, the same loan officer offered him more than double the credit he needed. ‘I told him I needed $25,000′ on a home equity line of credit, said Klasen, who lives in Fillmore in Ventura County. ‘He said we were qualified to go up to $60,000.’”
“Klasen is among a wave of homeowners in California and nationally who are again putting their homes in hock — despite the costly lessons of the housing meltdown. Homeowners in the six-county Southern California region took out 47,542 home equity lines of credit last year — 48% more than in 2012, according to research firm DataQuick. The median credit line was $100,000.”
“The same trend is taking hold nationwide. Bank of America, for instance, saw its home equity business surge 75% last year compared with 2012, said Matthew Potere, who oversees home equity lending. In the fourth quarter, BofA issued $1.9 billion in new home equity credit lines, up from $1 billion a year earlier. In Southern California, the heaviest borrowing is in the wealthiest neighborhoods, where prices are closer to their peaks during the bubble, DataQuick figures show. Orange County’s Villa Park, with a median home price topping $1 million, had the highest rate of equity credit approvals last year.”
“But homeowners in the affordable Inland Empire also took out more equity credit lines. ‘You are seeing national home prices rising,’ said Kelly Kockos, Wells Fargo’s senior VP of home equity. ‘It’s no longer just the coastal markets.’”
“In high-end markets, which recovered first, some borrowers are using home equity credit lines of $100,000 to $250,000 ‘as a financial tool’ to buy more real estate, said mortgage broker Richard T. Cirelli in Laguna Beach.”
“Adam and Kimberly Smith work at high-tech firms in San Francisco, where prices skyrocketed last year. They recently obtained a credit line on their two-bedroom North Beach condominium. The couple, in their early 30s, plan to rent out the condo and buy a home in the high-end East Bay suburbs. Three-bedroom homes there start at $1 million. Borrowing $50,000 to $100,000, combined with their savings, will give them a 20% down payment on the suburban home they crave. ‘We know we can make an offer this weekend,’ Adam Smith said.”
The Bakersfield Californian. “His son received leniency, but disgraced real estate executive Carlyle ‘Carl’ Lee Cole was sentenced Monday to 17 1/2 years behind bars — the full term recommended by prosecutors — for participating in Bakersfield’s most notorious mortgage fraud conspiracy. The sentences reflected what U.S. District Judge Lawrence J. O’Neill called a ‘tragedy at all levels.’ He described the situation as a hard-working son being lured into his father’s ‘egregious, planned, white-collar heist.’”
“On Monday, Carl Cole was ordered to pay $28.5 million in restitution, and Caleb $663,950. Asked how he would repay the restitution, Caleb told reporters, ‘that’s a good question.’”
“Carl Cole’s business partner, David Marshall Crisp, pleaded guilty Dec. 16 to the same set of crimes. Crisp and his wife, Jennifer Anne Crisp, who has pleaded guilty to one count each of mail and wire fraud, are scheduled to be sentenced March 31. Prosecutors essentially accused David Crisp and Carl Cole of setting up and carrying out a $30 million mortgage fraud scheme that shocked Bakersfield and forced foreclosures throughout the city.”
“A total of 15 defendants are alleged to have participated in the conspiracy to defraud mortgage lenders by using ’straw buyers’ — including Caleb Cole — to buy homes at inflated prices using almost entirely borrowed money. Prosecutors say the homes were resold to new straw buyers at ever-higher prices in order to extract the equity that had built up on paper. Ultimately, most of the properties entered foreclosure as the group was unable to keep up with loan payments.”
“Crisp and his wife, Jennifer Anne Crisp, who has pleaded guilty to one count each of mail and wire fraud, are scheduled to be sentenced March 31.”
I cannot imagine being the father of Jennifer Anne Crisp and watching David Marshall Crisp lead them into this crazy scenario. How do you warn your daughter that this will be an epic failure, while her husband is providing her with luxury homes, limos and Lear jets?
“Honey, you need to read the Housing Bubble Blog and pay attention to Ben Jones……”
One thing that’s rarely mentioned is all the fraud. And the prices. How much of the price increase before was because of fraud. And why is it that returning to those prices isn’t seen as a problem?
‘U.S. Attorney Wagner stated: “Carl Cole is the second defendant to be sentenced for the illegal activities of the Crisp, Cole & Associates real estate firm. During the fraud scheme, Cole enlisted the help of office workers to falsify documents and asked others, even his own son, to lend their names as straw buyers. Today’s sentence is fitting for someone who embodies the recklessness in the mortgage industry in the mid-2000s.”
‘Between January 2004 and September 2007, these defendants and others at CCRE and Tower Lending carried out a conspiracy to defraud mortgage companies and federally insured financial institutions. They used straw purchasers to acquire properties at inflated prices with funds borrowed from lenders, often using 100 percent financing and based on false and fraudulent loan applications. The conspirators frequently resold the properties from one straw buyer to another, each time at an inflated, higher price in order to extract the purported increased “equity” from the property for their benefit. Ultimately, most of the properties were foreclosed upon after the defendants failed to make the mortgage payments when due.’
I wonder if any fraud is occurring in realtime now in 2014 rather than back in 2004-07. And what is being done about it.
There is definitely a drop in fraud from 2005-6-7, which is why I don’t think there will be the same kind of downward pressure on housing in 2014 like we had 7 or 8 years ago….wow, it has been a long time since the bubble built and busted. Maybe we are going to enter a down cycle….
JingleBalls,
Your observations hold as much water as your construction experience.
Google realtor+arrested or mortgage fraud and it reads like a police blotter.
I doubt her dad was paying attention.
Feb 25, 2014,“Smithtown Realtor Charged With Child Porn”
http://article.wn.com/view/2014/02/25/Authorities_Smithtown_Realtor_charged_with_child_porn_again/
More typical realtoR behavior.
Its the profession that attracts sociopaths who are too stupid to rise to power in business or politics.
Nothing is getting better in CA. Crash coming soon in tech world. Taxes will rise more. Prices will craaaaaater
I’d love to see what the evaluation looks like for purchases like Instagram and WhatsApp. I’m guessing they aren’t using EBITDA.
“Crash coming soon in tech world.”
Such a gloomster!
‘Are you nostalgic for the late 1990s? Nobel laureate Robert Shiller thinks the markets are. In an interview with CNBC, the Yale economics professor says:
“We do have a little bit of bubble thinking… people are very impressed by high tech, probably too impressed…. I like to look at long-term earnings. You can’t do that with WhatsApp. That’s for adventurers. I’m more of a stable investor who looks at long history and looks to invest long-term.”
‘Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, thinks this isn’t a replay of yesteryear. “This is an entirely different market,” says Ross. “While we are seeing pockets of euphoria – and we’re seeing price tags on some of these acquisitions that might leave some scratching their heads – I see a very healthy advance, what I would call a bull market, not a bubble.”
“This is not a bubble,” says Ross. “This is a buying opportunity. Play the momentum. There’s nothing wrong with that. Tech is hot right now and it should continue to do so. You’re going to retest that old high at 5,000 as inconceivable as it once seemed to be.”
That would be a dangerous nostalgia. Back in those days, my former employer, which was burdened with debt and did not make a penny in profit during its entire corporate existence, had its stock price on its intranet and on some days the price went up by leaps and bounds. I mentally patted myself on the back so often it felt like a massage. I don’t recall anyone sounding an alarm, and if someone had, I doubt I would have listened. It was a hard lesson but a necessary one.
At the time people like Richard Ross were a dime a dozen.
‘This past week’s $19 billion Facebook binge felt like the beginning of a climaxing of sorts – the type of deal that usually comes to punctuate the end of a great bull market (think AOL-Time Warner, the LBO of Equity Office Properties) or at least speeds up the gallop into the end. It’s either the sound of the curtain dropping or it’s the gun fired just as the dogs round the last lap on the racetrack.’
‘Either way, it’s ominous as hell to those of us with a memory. Facebook (FB) at 70, Tesla (TSLA) at 200, Netflix (NFLX) at 450, Google (GOOG) at 1,200, it’s all of a piece.’
‘Jeff Mortimer of BNY Mellon Wealth Management tells Bloomberg News about some similar activity he’s seeing – namely the fact that stocks that lose money are the new leadership group on The Street: “Two things explain why the biggest gains in the U.S. stock market this year are coming from companies without profits, according to Jeff Mortimer of BNY Mellon Wealth Management: Greed, and fear of missing out…”
‘Unprofitable companies such as Zynga Inc. and FireEye Inc. are leading gains in the Russell 1000 Index. The Nasdaq Biotechnology Index is up 25 percent in the past 10 weeks, the most since February 2012, data compiled by Bloomberg show. Less than a third of its 122 companies earned any money in the last 12 months. Marijuana shares, which trade on venues with less stringent reporting requirements, are among the most active.’
“In this backdrop of human emotions, which begins to take over, it’s one of greed, it’s one of willing to pay for something that will happen in the future and being afraid that one might be left behind.”
“We’re not quite there yet, but we’re well on our way. Anyone who tells you otherwise or pretends that this is normative, rational behavior is a dangerous idiot with no sense of market history.”
One of my professors at the time (a finance professor, btw) and I used to spend a bit of time circa 2000 conjecturing how long it would be until the dot com boom went sky high. It happened in a matter of months from when we had those conversations…
Finally, someone admits that greed and fear are the opposite of how they’re normally presented. Whenever one of the bubbles starts to pop, you hear all the chearleaders entreating people not to sell their overpriced assets. “You’re a chicken.”, they will say. “Don’t sell because selling is always driven by fear. You don’t want to be driven by fear, do you? You’re a brave warrior!”
It’s acually quite the opposite. The buying during the boom phase is driven by the fear of missing out and being left behind. The selling during the bust phase is driven by the greed of profit-taking.
Home builders are having a field day on the back of strong home sales data. Buyers of brand new homes came out in droves in January despite the cold weather and rising mortgage rates. You can read our take on the report here.
Lennar Corp LEN +3.4%
PulteGroup, Inc PHM +3%
Toll Brothers Inc TOL +1.6%
And we’re going to keep adding inventory until resale prices are driven in the dirt like a creosote pile.
“…felt like the beginning of a climaxing of sorts…”
After the climax comes the shrinkage, aka deflation.
Where do you think greater fools originate?
What?
I Am America (And So Can You)
Liquidity and no debt allows for a peaceful nights sleep. Please don’t wake me up at 2A.M. when your stock tanks and you’ve lost everything.
RFMD way up on merger with TQNT
Thousand Oaks, CA Housing Prices Collapsed 25%YoY and Going Lower
http://www.movoto.com/thousand-oaks-ca/market-trends/
Simi Valley, CA Housing Inventory Up 175% As Demand For Housing Collapses
http://www.movoto.com/simi-valley-ca/market-trends/
‘because we had such a nutty 2012 and ‘13 with home prices moving up quickly and a little bit of land selling — maybe a three-year period of exuberance jammed into one. The market is now reeling again and there’s concern and uncertainty.’
Nutty is right. The financially prudent are advised to avoid the U.S. housing market like the plague.
I love nuts. Why do we refer to bad things as being “nutty”, when nuts are so awesome? We should use a different term, such as “broccoli”. Things were so broccoli during 2012-2013. Makes more sense.
LOL. I’m gonna use this one! Practice…”That’s SO broccoli” Yes! WIN.
Santa Maria, CA Housing Prices Dive 17%; DOM Up 21%
http://www.movoto.com/santa-maria-ca/market-trends/
Redwood City CA Housing Prices Crater 18%
http://www.movoto.com/redwood-city-ca/market-trends/
Novato, CA Housing Prices Submerge 10% YoY; Inventory Up 20%
http://www.movoto.com/novato-ca/market-trends/
‘So here’s a question for the people who keep shouting that tech workers and their money are ruining San Francisco: What if you win?’
‘What if it all works out just as you’d like? The tech companies decide it isn’t worth the trouble to try to run a business in San Francisco. The workers say they are tired of being hassled and mocked in the neighborhoods where they live. And they leave.’
‘Of course, part of the reason they came in the first place was that the city offered them a nice tax break for six years. But now, entering the third full year, the companies are likely to take a hard look at how things are working out.’
‘What if the companies say: You know, part of the reason we located here was because we thought our employees would love the city and quality of life. But now we’ve been turned into ideological punching bags. Our firms are criticized for not doing enough in the community, despite hefty donations.’
‘And our employees are being mocked, hassled and trash-talked. It’s unpleasant. They don’t like it.’
‘And then there are the employees who commute on the tech shuttles - the “Google buses” - to Silicon Valley and other points south of the city. They live here but work somewhere else. They’re not really us, detractors say, they’re just driving up our housing costs.’
‘Recently I was talking to a tech critic who has lived in the Mission for years. She said that an older woman, a longtime tenant, had recently been evicted from her apartment. The landlord turned the building into condos and a woman from one of the tech companies bought the place and moved in. “So none of us talk to her,” the critic said.’
Biting the hand that feeds you…..
The tech companies/workers don’t feed everyone else.
Untrue. Fully employed people making good money help feed everyone. Have you been to a restaurant in SF lately. Packed to the gills everywhere you go.
Some of these people became “punching bags” for reasons that are their own fault, to include using blogs and social media to publish controversial social views. If my wealth and job were based largely on the propensity of teenage girls to communicate with each other, or on the security of a computer network that is under constant surveillance and could be hacked at any moment, I’d be a lot more humble than this crowd.
Where would the tech sector go? Yeah, they’re going to pack up and move to St. Louis! That’s an empty threat if there ever was one, although I did see one article claiming that there are designs to create a kind of tech Elysium, or Waterworld, outside the jurisdiction of any government and living under the laws of technology and innovation. Dystopia beckons.
http://news.yahoo.com/silicon-valley-living-inside-bubble-135500820.html
This was posted elsewhere:
‘Vandals have targeted one of the Bay Area’s wealthiest communities and their handiwork has gotten the attention of the FBI. Last Sunday, multi-million dollar homes in Atherton had offensive graffiti sprayed on them. The graffiti was found on walls, fences and even a car.’
‘Many of the messages said “F*** the 1%,” a reference to the income inequality between the top one percent of Americans and the rest of the population.’
I really don’t get this tech/bay area stuff. It’s not that great a place. I’d rather be further south. I’ve asked before, how many meals does Zuckerberg get served that have been spit in by the food staff?
As In Colorado pointed out, Coloradans don’t like Texans. And this is largely because of animosity developed during the 80’s bubble, when Texans ran all over the state buying up real estate, driving up costs and generally making asses of themselves.
Joke heard at the office:
Q: Why is it windy in Colorado?
A: Because Wyoming blows and Texas sucks.
I really don’t get this tech/bay area stuff. It’s not that great a place. I’d rather be further south.’
You have to understand its mostly highly educated foreigners from china and India and they feel more comfortable in areas like Silly valley were there is a big back home presence already there. Arizona or Texas scares the crap out of them with the guns etc.
I know this for a fact they always tell me this when I say I used to live in Phoenix.
Americans and some Europeans will go to these RED states but we are so few in the overall engineering work force these days.
So few and getting old..
LOTS of Asians, particularly from India around the Intel campus in Chandler, Southeast of PHX. Plenty working downtown also.
People who buy houses in Atherton are literally just doing it for the prestige. The houses are old and the streets are clogged. The prices are 10x that of similar houses outside of Atherton. People who own a house in Atherton will ostentatiously snub those who do not. I’m sorry, but I don’t find the graffiti surprising at all.
But “well intentioned” people I can quote on this blog (against the “1%”) would do the same thing - vandalize homes in upscale areas.
That is all class warfare BS.
Where would the tech sector go? Yeah, they’re going to pack up and move to St. Louis!
LOL! When I suggest to my Santa Clara colleagues who complain about the high cost of housing that they transfer to the Broomfield campus, they all say the same thing: No way.
‘they all say the same thing: No way’
But here’s the thing; you have to pay a lot more for employees that live in a high cost area. If I’m the boss and looking at costs, I don’t know that I would care what the employees think about relocating.
True, but unless all firms relocate, then your Silly Valley employees will quit and walk across the street, especially the critical ones.
So if Larry tried to force them to move out here, they’d find a new job in a few days and quit.
And unlike say in Metro Denver, there are plenty of tech firms in Silly Valley. Sure, Denver isn’t a tech wasteland, it is better than most places, but there’s no comparison. Silly Valley oozes tech jobs.
A company that pays relatively well, located in a relatively low cost area, can easily poach the ppl who complain about the high cost of living. When I lived in the Bay Area, I used to say all the time that I wished I could find a similar job in a cheaper place. Now I have one, and I’m much happier.
>>A company that pays relatively well, located in a relatively low cost area, can easily poach the ppl who complain about the high cost of living.<<
There is that allure, until the candidates realize that it’s the only quality employer in the are, or maybe one of a very few. And since we are all expected to be gypsies and change jobs very three years, and layoffs are to be expected, then a place like silly valley, with it plethora of jobs, is more attractive than say Boise, where people who got laid off from HP found that there were slim pickings.
I’m sure the bosses actually love being located in Silcon Valley, as they can use increasing cost of living indicators to justify giving themselves ever higher salaries.
Plus whatsapp just sold for $19B. Apple has a 30%+ profit margin, as does Google. Most profitable companies are lucky to have 10% margins.
I don’t think they are looking too hard at costs. It’s just not yet necessary.
‘I don’t think they are looking too hard at costs’
I’ve worked for a few managers that were like that. Every one of them drove the company bankrupt.
Wait a minute; why don’t the make their phones here?
Oh yeah, I forgot to mention that my scheme only works for people who rent their residences. Oops.
If I’m the boss and looking at costs, I don’t know that I would care what the employees think about relocating ??
Here is the relocation dilemma….Yeah, they can relocate to lets say Texas or Arizona…Problem is, all the bosses have to relocate also from the lead engineers to the CEO and the CEO is the decision maker….All of this group likely have the where-with-all to just stay…The worker bees may not have a choice but the key personnel that make the company go do…
They’ve been moving to Austin (or starting up in Austin) for years.
But I wasn’t even thinking about Texas. What about Oregon or Seattle? Heck, I’d rather live in Las Vegas than the bay area.
They’ve been moving to Austin (or starting up in Austin) for years.
Yeah, but Austin is a bit different from the rest of Texas (culturally), and the house prices there aren’t so low anymore.
Arizona is one of four finalist states where a $4 billion Tesla battery plant will be located. I doubt California is among the finalists.
Governor vetoed the gay discrimination bill. It was written very bad to begin with. What a bunch of retard legislatures Arizona has - with their bulbous noses deep into the idiotic bible. Everyone should be free to discriminate. But to put this into law is idiotic. Were these neanderthals proposing all gays identify themselves as such and register with the state government and that everyone must show an ID regarding their preference at every business? Then get kicked out for not being straight?
The real fact is business owners/managers who discriminate against people because of their color, creed, sexual preference, and so on are the real losers. Many years ago I was looking for a low cost apartment close enough to work. A couple of places I checked, the manager would be a middle aged asian woman and I know they discouraged me because of my skin color. Their loss. I never was evicted from anywhere and I always paid my rent on time.
They should all move to Simi Valley CA
I think many of the companies are discouraged from locating in Silicon Valley yet stay in California…
http://siliconbeachla.com/
Orange County has a lot of good tech jobs centered around Irvine. Great airport - the John Wayne Airport.
‘real estate agents in California’s luxury housing market are using telltale language of trouble ahead’
‘In high-end markets, which recovered first, some borrowers are using home equity credit lines of $100,000 to $250,000 ‘as a financial tool’ to buy more real estate’
‘Borrowing $50,000 to $100,000, combined with their savings, will give them a 20% down payment on the suburban home they crave. “We know we can make an offer this weekend”
Click!
So…they drain all the money out of the condo….combine with their savings try to buy a $1million dollar house. Rent the condo out and live happily ever after…..till the guy renting the condo stops paying the rent. Did they talk about this at the “good debt” seminar ?
You can NEVER debt your way to prosperity OR freedom. Debt on top of debt is REALLY dumb.
They probably can’t get enough rent money to cover the mortgage, HOA, maintenance, and property taxes.
OMG
Or…..they buy their house then walk away from the condo (plan from day one) and give the bank the keys to a over priced asset then it’s their (the bank) problem after they played them for all the money in the condo. Any thoughts ??
Actually yes, I think you’re right Rich. However, they may be in a tighter spot than they thought because the second bank will see that they already have a mortgage. They might not be able to qualify because the second bank will want to apply a debt-to-income ratio. The debt of the condo + house will probably be above the limit. So their plan might not work out (I hope).
Is that Rich Toscano? If so, it really, truly is beginning to look like 2006 again.
‘The rapid slide in the yuan, which has become increasingly correlated with other Asian currencies, could have wider implications on demand for U.S. Treasurys from the region, according to one market watcher. Ju Wang, senior FX strategist, global research said if the People’s Bank of China successfully lowers expectations for further gains in the yuan it could reduce demand for Treasurys.’
“If the central bank manages to lower appreciation expectations for the yuan, this could reduce speculative inflows into China, slow their FX reserves accumulation and hence lower their demand for U.S. Treasurys,” she said.’
‘In the recent years, the yuan has been viewed as a one-way bet, giving rise to speculative inflows into the country.’
Another one-way bet. Who could have imagined that so many one-way bets would end at the same time?
‘From Xinhua Writer Zhang Zhongkai (Note that Xinhua News Agency is the state press agency of the People’s Republic of China. Xinhua is a ministry-level department subordinate to the State Council): China’s property market might have outgrown its boom days, but predictions of an imminent property bubble burst and economic crash are premature. Public anxiety was ignited on Monday by media reports of real estate developers lowering prices in east China’s Hangzhou and Changzhou cities and a commercial bank’s decision to halt some property financing business.’
‘The moves by property developers and banks should not be over-interpreted. Their decisions are rational precautionary reactions toward market changes and business operation problems and only indicate the real estate market differentiation in China’s cities. It is fair to say the property markets in some cities, especially third- and fourth-tier cities, are burdened with overcapacity and face mounting debt default risks. But for megacities like Beijing and Shanghai, the property market will likely remain robust.’
The continued urbanization drive will boost demand for quality real estate projects. Therefore, it is unreasonable to predict an overall property market crash over regional jitters. Most importantly, it should ring the alarm for profit-seeking property developers and GDP-fixated local governments to rein in irrational real estate development and proactively adjust policies before it is too late.’
Too late? Too late for what?
my county re taxes to go up 6.5%
lefties want more
So why don’t you and your fellow taxpayers in your state pass something like TABOR or Prop 13? My property tax bill is about half a percent of the assessed value.
my hobby
80% of my hood works for gov
‘The demise of distress sales triggered the meteoric rise of equity sales, which is stunningly great news. Distressed sales statewide were down at the end of December by nearly two-thirds from a year ago, when their share of total sales was 35.4 percent. In December they accounted for 15.7 percent of California activity. Los Angeles County reported nearly identical numbers for December.’
‘Here in the Santa Clarita Valley, January ended with distressed sales at a record low 16.2 percent. So why do some homebuyers react to vanishing distressed sales somewhat wistfully?’
Because buyers benefited from the higher inventory and low prices REOs and short sales offered. Now we’re back to reality, or at least the new version of it.’
‘Part of that reality has more buyers avoiding bidding wars, if for no other reason than because prices rose too high too fast, leaving some buyers unable to obtain a loan and unable to compete.’
‘The percentage of households that can afford to purchase a median-priced single-family home in California now stands at 32 percent. Homebuyers need a minimum annual income of $89,240 to qualify for a home of $431,510, the statewide median price at the end of 2013.’
‘Those numbers were higher than a year ago when the index stood at 48 percent, yet it’s always a nugget of good news whenever affordability holds steady or bumps higher.’
Median home price at 10 x median income equates to an affordability index rating pretty close to zero.
‘The percentage of households that can afford to purchase a median-priced single-family home in California now stands at 32 percent.”
when it hits 10% sell
‘Redfin today issued a report on home affordability for teachers in California. Across the state’s metropolitan areas, just 17 percent of homes for sale are affordable on a teacher’s salary. In San Francisco, that number drops to zero. In San Mateo and Santa Cruz counties, just one percent of homes for sale are within the average teacher’s recommended housing budget.’
When you factor in property taxes, PMI and cost of living. IT’S CRUSHING!!
The depreciation is what lopsides the mess.
People just don’t think all this through before signing on the dotted line. If you paid $200sqft you’ve got to be crying yourself to sleep every night when it FINALLY sinks in.
Even if buying were affordable for a teacher in many cases people would be afraid to take the plunge as it is NOT a secure job in California for many like it used to be. MY GF has been teaching for nearly 20 years and still gets laid off at the end of each year and has to play musical chairs…she is very good at it and has found a job every time so far but some she applies for literally have hundreds of applicants and she was only able to find part time teaching positions the last two years. Our county (Sonoma) has 40 school districts (which is crazy) and if you are forced to change districts in order to stay employed you only carry 5 years seniority so layoffs are highly likely.
‘San Diego home prices dipped one-tenth of a percent between November and December of last year as the nation’s real estate market continued to slow, according to the Standard & Poor’s Case-Shiller Home Price Indices.’
‘The monthly decline into negative territory took place in half of the 20 large cities tracked by the indices. David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said the year-to-year pickup gave Case-Shiller its best year since 2005.
“However, gains are slowing from month-to-month and the strongest part of the recovery in home values may be over,” Blitzer said. “Year-over-year values for the two monthly composites weakened and the quarterly national index barely improved.”
‘He said the statistics, even when seasonally adjusted, exhibit “some softness and loss of momentum.”
‘The indices were created by taking the price of homes in January of 2000, assigning them a value of 100, and tracking their subsequent rise and fall. San Diego’s index figure in December was 193.87, reflecting an appreciation of nearly 94 percent in home values over the past 14 years. That rate was topped only by Los Angeles and Washington, D.C.’
‘Month-over-month, the median price of San Diego homes for sale has decreased by $15,000, currently standing at $405,000, according to DataQuick. Last month, the San Diego housing market saw 2,338 transactions, compared to 2,717 transactions the same time last year. January 2014 saw the lowest amount of properties sold since January 2011, when 2,248 San Diego homes were sold.’
‘Any time there’s talk of military budget cuts, there is sure to be strong reaction in the military town of San Diego.’
‘On Monday, Secretary of Defense Chuck Hagel announced a proposal to cut the defense spending budget. The proposal would shrink the U.S. Army to roughly 440,000 soldiers, compared to the peak of 570,000 after the 9/11 attacks. That would be the smallest number of soldiers since before World War II.’
‘There would also be cuts in housing allowances and health care benefits for military families. The proposal also includes $1 billion in subsidy cuts to commissaries. “One of the big things is we get a food allowance that kind of ties into our pay,” sailor John Scanlon said. “If they’re going to raise the prices at the commissaries, then they’re going to have to start giving us more money for food.”
‘The biggest local hit would be limiting the Navy’s littoral combat ship fleet, which has been the target of controversy because of cost and performance.’
So Crisp and Cole were too unintelligent to see that their scheme was bound to land them in jail? Wow. Is it worth it to live high on the hog for a few years, followed by 17 years in prison?
The Los Angeles Times. “Across a large swath of Southern California, owning a house has become less attractive financially in the wake of rapid home price gains last year. The mortgage payment on a median-priced, three-bedroom would exceed the rent on a comparable property in Los Angeles.” Quick question: do they factor in taxes into the disparity factor? Because if they don’t then it’s FAR greater. Not to mention PMI because I don’t know a lot of first-time buyers in L.A. that have an extra 80K laying around. Dang, you got to be needing to get on some anti-depressants if you bought last year and see these tea leaves.
Read it again;
“That type of talk that could prompt home owners to put their properties on the market before prices fall. Real estate agents say that pricing and demand for the limited supply of homes on the market is approaching levels last seen just before the housing market began to crater in 2007. Earlier this month, Christopher Stafford and Terry Wright, both of Paragon Real Estate Group, sent an email to clients alerting them to ’shifts in the San Francisco real estate market.’”
Let the cratering begin.
Oh dear.
‘Something has gone wrong in the mortgage market.’
1995 level demand. What an unexpected surprise!
“A variety of factors are thought to be at fault, including weather, investor skittishness and a tight housing supply.”
It’s amazing how consistent the weather is as a source of economic malaise!
‘Sonoma County’s economy grew at 3.4 percent real growth, and generated 3,600 jobs. Housing markets provided a boost to Sonoma County homeowners and their wealth. At 21.2 percent growth from November 2012 to November 2013, this was the best year in housing markets since 2006.’
‘For Napa County, there was a 1.2 percent increase in jobs, about 1,100 overall. Incomes grew by about 2.6 percent in Napa, driven almost completely by tourism, wine and related industries. The slower growth in Napa is likely a function of tourism beginning to peak a bit in the current business cycle.’
‘In Marin County, growth occurred in many services industries, where construction and manufacturing was somewhat flat. Marin County grew incomes by approximately 2.8 percent.’
‘Housing markets in Napa and Marin counties are experiencing the highest median home price gains in the North Bay. But while Marin County prices grew by 21 percent, Napa’s grew by 40 percent.’
Nothing to see here. Low single digit increases in income always result in 20-40% house price increases.
Just trying to carve out a living in So. Cal., keep up with the Jones, pay yer mortgage and sit in traffic got’s to take 10 year off your life. Oh, that’s so crushing.
“keep up with the Jones, pay yer mortgage and sit in traffic got’s to take 10 year off your life. Oh, that’s so crushing.”
Only crushing to those who do that stuff. As a renter you always finish your lease or break it and move to where your next job - short commute. You have time to work that flab off instead of sit on your caboose.
The smart southern Californian white collar worker never buys real estate. Mobility means faster salary growth and short commutes and fitness.
Also real estate is the most anti-diversification financial move a middle-class SoCal resident can possibly make.
“Klasen is among a wave of homeowners in California and nationally who are again putting their homes in hock — despite the costly lessons of the housing meltdown.”
Anytime you double down on debt and ignore the past there WILL be tears. Either when the chickens come home to roost or every time you slosh your way to the mailbox. Yer screwed either way.
What a great post; one of HBB’s all-time best.
It perfectly encapsulates, in just a few stories, so many facets of the 2012-13 mania in SF/LA: the lack of inventory (why sell when you can cash out equity?), the irrational “cash” “investors” (why move up when you can use equity to “buy” an additional house?), the breathless media, the credulous lenders, the fraud inherent in peak-bubble prices, and the knowing repetition of every bubble 1.0 mistake by virtually all actors in this so-called market.
I’m saving this post on my harddrive to show to anyone after the crash who claims astonishment and believes that “no one could have seen it coming.”
“I’m saving this post…”
It will do nothing to convince the denialists that the next crashed was fully anticipated here.