The Train Will Wreck Eventually
The Union Tribune reports from California. “San Diego County’s median home sale price rose to $450,000 in June, up 8 percent from June 2013, DataQuick reported. While that value is at a nearly seven-year high, the pace of appreciation has slowed considerably from just a year ago. ‘Last year everyone wanted to know why are prices rising so fast, and the three main reasons were extraordinarily low inventory, incredibly low mortgage rates and record or near record levels of investor purchases,’ said DataQuick analyst Andrew LePage. ‘This year each one of those has sort of reversed to some extent.’”
“Inventory, while still constrained, is also increasing. In the first six months of 2013, there were 46,146 active listings in San Diego County, up from 26,294 last year, the San Diego Association of Realtors reports. Further, this month, inventory surpassed 8,000 for the first time since February 2012. Across Southern California, homes sold at the slowest pace for a June in three years, with 20,654 transactions.”
“Mark Goldman, a loan officer and real-estate lecturer at San Diego State University, said in retrospect it appeared the price run-up was completed by the end of the 2013 and the market is now returning to normal. ‘It’s better this summer but the first quarter of this year was unexpectedly slow,’ he said. ‘Maybe it was just taking a breath. Houses are expensive and wages aren’t going up.’”
The Los Angeles Times. “In the latest sign of a market that’s plateauing well below its past highs, home prices in Southern California grew at their slowest pace in two years in June, capping a spring selling season that never quite took off. And the furious gains seen this time last year are a thing of the past. In the last 12 months, home prices climbed 7.8%, barely one-fourth their pace in the prior year. A report last week by real estate website Trulia said asking prices in Orange County — a leading indicator of the sales figures DataQuick measures — grew just four-tenths of a percent in the second quarter.”
“Buyers have a lot more to choose from. With prices higher than they were a year ago, investors and all-cash buyers have backed away, constituting their smallest share of home sales in four years, according to DataQuick. At the end of the first quarter, 8.1% of home loans in metro Los Angeles remained underwater, according to CoreLogic. In the Inland Empire, that figure is 17.3%. If prices stall, there’s little they can do but wait out the market and keep making their monthly payments, said Rich Simonin, CEO of Westcoe Realty in Riverside. ‘They might as well hang on,’ he said. ‘You’ve waited out five years. What’s another?’”
“Simonin said this leveling off is a welcome break. For the first time in 15 years, he said, it doesn’t feel as if the housing market is either soaring or plummeting, and there’s no pressure to buy — or sell — now, lest you miss out on a windfall. ‘This is boring and that’s OK,’ he said. ‘The train will wreck eventually. It always does. But for now, we can enjoy a smooth ride.’”
The Mercury News. “Confronted with a shortage of land to build on in the Bay Area, housing developers are getting caught up in the same kinds of bidding wars that have frustrated home buyers. ‘As the good pieces come onto market, multiple builders are bidding on them and the prices are going to just astronomical numbers,’ said Stephen Smiley, a VP of Meyers Research, a consultant to the home building industry.”
“Octavious Mendoza drove down from his home in Elk Grove this week to look for a house to buy in the South Bay for his two daughters. By noon they’d given up on existing homes and were inspecting townhome models in the Berryessa Crossing subdivision KB Home is building in San Jose, where prices start in the $500,000 range. Mendoza said existing houses in his $600,000 price range ‘were old and not very nice.’ ‘These new homes are preferable. If you can get it new, why not?’ Mendoza said. ‘I feel you can’t go wrong buying a house in the Bay Area. The technology industry is not going away.’”
CBS San Francisco. “Everywhere you turn in downtown San Jose new apartment complexes are being built. Some fear overbuilding, which could create a new housing bubble. 12,000 units are either under construction or recently completed. Santa Clara’s Assessor Larry Stone said that could be too many. ‘It’s a very strong and robust market, but at some point in time, the economy is going to level off as it always has and then [the question is] will there be too many apartments having been built?’ he said.”
The Bakersfield Californian. “Bakersfield home prices edged upward in June as listings climbed and total sales slipped from the month before, local appraiser Gary Crabtree reported. The number of homes listed for sale jumped 14.6 percent to 1,163, while total sales closed in June declined 2.2 percent to 539, Crabtree reported. ‘No big surprises as supply increases and demand remains stable,’ he wrote in a note accompanying the report. ‘The market is slowly turning from a seller’s to a buyer’s market.’”
The Calaveras Enterprise. “A sense of cautious optimism rippled through Calaveras County a few weeks back when the county assessor reported an increase in property values. According to the assessor’s roll, property values increased just over 6 percent. Not everybody is quite as confident in the housing market. ‘I don’t think I’m quite as optimistic as far as the assessor’s report and as far as the properties that are selling,’ said Charlene Winkler, the owner of Western Realty in San Andreas. ‘I’m not seeing that big increase like they’re saying. … We’re not seeing as many sales. We’re not seeing multiple offers. We’re actually seeing, on the amount of properties that are coming on and the amount getting reduced, there are more getting reduced than properties coming on.’”
“Another rumor that’s making the rounds in real estate circles is the number of bank-owned properties obtained in foreclosure proceedings that have yet to make it to market. In the Valley Springs area, some homes are still sitting vacant, which implies that ‘they haven’t been released yet,’ according to Linda Frater, a Realtor at Country Oaks Realty in Valley Springs. ‘I think the banks are holding them so they can get a higher price for (their properties),’ she said. ‘If they flood the market, it’s going to change the price right now (by lowering values).’”
The Sacramento Bee. “Born during the housing bubble, this San Joaquin County bedroom town was America’s most ‘underwater’ community six years ago. Mountain House had another unhappy distinction: It was one of the biggest black holes in CalPERS’ investment portfolio. At the depths of the housing-market slump, Mountain House represented a $1.06 billion loss for the California Public Employees’ Retirement System. CalPERS held onto its Mountain House investment. The pension fund’s investment is still deep in the red, with an estimated negative value of around $870 million, but CalPERS officials say they believe Mountain House will eventually turn into a winner.”
“The community remains a work in progress. It has 4,200 rooftops now, and CalPERS owns enough land to build 8,000 more. Housing starts have come back but are still a fraction of what they were during the boom. For every well-tended neighborhood, there’s an empty field of weeds. Even the high school is unfinished. DataQuick said median prices hit $476,500 in May, up from a low of $285,000 in late 2011. Clearly some mortgages in Mountain House remain underwater.”
“Matt Balzarini holds one of those mortgages. A San Francisco firefighter, Balzarini moved his family from Fremont when Mountain House opened a decade ago and paid $500,000 for a home. The property’s value sank to around $200,000 and now is worth something north of $400,000. Balzarini said he has no regrets about staying the course, saying the hometown feel of Mountain House is well worth the one-hour commute and the roller-coaster ride in real estate values.”
“‘I was sold on the dream,’ he said. ‘I want to see everything come to fruition.’”
A letter to the editor:
‘Congratulations to the graduating 8th graders of West Marin School. The best of luck as you go forward in high school. The changes come big and fast from here on out.’
‘Sadly, there are only eight students graduating this year. This exodus of the young should be obvious to everyone and it’s not difficult to imagine the trend continuing until shortly there will be so few students in the Pt. Reyes area that the school itself cannot continue. One can chart a graph and see where it ends easily enough.’
‘In a decade or so when their formal schooling is over will any return to where they grew up? Let’s look at what they have to face: The foul greedy monster himself, or at least his most apparent manifestation, greets the returning youth. Where to live? $850,000 will get you a small house but last I checked Wells Fargo isn’t issuing any 400-year mortgages. Master’s Degree in hand and a good job or not, just scratch the possibility of buying anything off your list. Probably forever. Go to Mississippi or South Dakota if you want the American dream. This surprises nobody certainly but it’s important in establishing where our youth stands, on what side of that fat green line he will find himself.’
‘Let’s just suppose, so we can continue, that the problem of where to live is somehow surmounted and relatively affordable housing is secured. Housing—now there’s a word which puts one in his place immediately. Housing is for criminals, soldiers, and, in our case here, the poor. The old men and women of Inverness do not have housing, they have homes. Say to them “That’s a beautiful housing unit you’ve got there” and you’ll get some mighty queer, angry looks. It’s a telling, class-defining difference. Housing is for tenants, not landlords. People in housing refer to where they stay, not where they live. People in homes have a lifetime of memories; people in housing have a 30-day notice to vacate.’
‘So a tenuous residency in the Pt. Reyes area is established which only eats up about three-quarters of his salary and gives him 150 square feet of a converted woodshed on someone’s three-acre estate. Try not to think about sharecropping or feudalism. As long as your face is white you’re okay. And certainly, if you’re living here your face is white.’
‘Or how about a nice dinner out? Well, for about what a new Model T cost in 1915 (and I use this as an example only because it will be familiar to so many people living here) you and your honey have the choice of about three different establishments determined to fleece every rich tourist rolling down State Route 1 with the promise of some foodie paradise.’
‘And if our young couple enjoying dinner should marry and have a child or two? Let’s just hope that they never run out of diapers and have to make an emergency trip to buy some locally. Whatever savings they may have scraped together will be wiped out with a single package of Pampers. We’ve gone wildly out of balance here; the economy is warped by a tourist surcharge on everything from gas to bad, inauthentic Mexican food.’
‘So who is to blame? Should we blame the rich who have gobbled up the houses only to let them sit vacant, gold in the vault, to be cashed in at some future age? We could, but they’re not here to blame and wouldn’t listen anyway. Bang your head against that wall a while, comrade. Besides, who was it that sold the house to them in the first place? The old. Or, more likely, the sons and daughters of the old who were left the house.’
‘Must it be? Probably…The sound of children playing in Inverness will grow even more faint, then not heard at all. Houses will be sold at whatever price the market will bear, not a dollar less. It’s Capitalism son, nothing but, don’t look so appalled. Pt. Reyes will become an expensive museum, something to gawk at during lunch before roaring out of town again with a trunk full of souvenirs.’
‘There is no amount of talk, no amount of writing, no amount of pseudo-grassroots signage or lockstep dogma going to make a difference when it comes down to money. We can Occupy Pt. Reyes and Ban Fracking all we want but we’ll need to gas up the Prius first before heading back to occupy our lovely million dollar Craftsman. Then again, who knows what seemingly innocuous event might change this ugly ancient course we’re set upon. Maybe one of our graduates, despite it all, comes back here determined to make it a home, not just a place to stay. Maybe you won’t even notice. We’ll grow our beards out and head to the mountains—symbolically of course, don’t worry.’
Name withheld by author’s request.
“People in homes have a lifetime of memories…”
Sounds like he/she is a little pissed they didn’t qualify to play in the Ponzi.
People with a crushing 30 year mortgage on a grossly overpriced house in a useless boom town have a lifetime of memories too!
In California, it’s all about when you bought. And I’d guess most of the old men and women of Inverness referred to in that diatribe bought before 1990.
They probably bought before Prop. 13 was passed (1978)!!
“Housing is for criminals, soldiers, and, in our case here, the poor. The old men and women of Inverness do not have housing, they have homes.”
Welcome to the two-tier society our federal housing policies have created.
It’s monetary policy in general which has manifested itself in all asset prices, which includes housing.
‘Then again, who knows what seemingly innocuous event might change this ugly ancient course we’re set upon’
‘April 24, 2005′
‘”In some neighborhoods of Los Angeles where, in addition to offering as much as $75,000 over the asking price, buyers are sending flowery bios, pictures, and letters to sellers.”
“‘I just oohed and ahhed my way from room to room,’ read one letter to Jane Centofante, who was selling her 2,000 square-foot home in Westwood, a tony L.A. suburb, for a cool $1.49 million. ‘I gather from your [house] that you are warm and smart and bring incredibly beautiful detail to your world.’”
http://thehousingbubble.blogspot.com/2005/04/you-are-so-beautiful-can-i-buy-your.html
“‘I gather from your [house] that you are warm and smart and bring incredibly beautiful detail to your world.’”
This probably works better than “you are a greedy, nasty skank with an overpriced sh!tbox.”
I dont understand the negativity on the housing market, billions were again invested last year by foreigners in U.S. housing market. The Real Estate market prices in some areas has now surpassed the peak of 2007. Recent report: The active inventory for Single Family Homes increased again month-over-month. Sales quantities increased from May to June along with the Single Family Home Average Sales Price, which edged slightly higher from the previous month at 14% above the 2007 peak average. http://www.marinhomelistings.com/Communities/Monthly-Market-Report/Marin-Market-Snapshot-June-30-2014
Negative? How are falling housing prices to dramatically lower and more affordable levels negative?
I biked through this area in 1981. I couldn’t help thinking that the people who could afford to live there were old money or had struck it rich in business or the drug trade.
Bodega, Tomales Bay, Bolinas, Pt Reyes. Lived near that area for about 2 years in the mid-90s. It’s quite the playground. This might inspire a return trip.
Az…. I thought I drove you away forever. How can this be???!
Kind of funny that both Az Slim & ahansen checked in within 24 hours of someone claiming you chased them away.
Oh the tall tales realtors tell.
Disappointed you can’t censor the truth about housing? Get over it.
My sister in Marin County is barely hanging on. She had a nice SFH to rent but the landlords took that place over and now she’s in an apartment complex in San Rafael.
We are from the California generation born in the 50s. What destroyed this state was the disease known as “progressivism.” It made living costs so expensive and is rapidly turning the state into a feudal society of where only the very rich and very poor can live. The rich in Marin County, Beverly Hills/Malibu, and parts of Orange County. The poor elsewhere.
If you ever drove through Mexico, that is what California is becoming. Dilapidated shacks mostly. Last time I drove old 99 through Bakersfield and Fresno, 2010 or 2012, I noticed more spanish billboards, more decaying buildings, etc. I was in shock.
And the 25 million nagging, pestering excess, empty houses just seem to get in the way of the medias narrative.
‘When Laurie Cobb started house-hunting in Marin, the last thing she expected was to buy a mobile home. But when she saw a San Rafael mobile home on a lagoon listed for less than $200,000, the former KKSF music director grabbed it.’
“I did not go searching for mobile homes,” said Cobb, who made her purchase in April. “But this was a blessing waiting to happen,” said Cobb, who retired from broadcasting many years ago.
‘With the median price hovering close to $1 million and a shortage of homes on the market, it’s understandable that Cobb saw the property as a blessing. She is not the only person to change her mind about the much-maligned structures, which Marin agent Laura Watts describes as “the new condos.”
‘”The median price of a mobile home is up 44 percent, to $135,000,” Watts said. Watts arrived at the price by calculating the median price of mobile homes sold between Jan. 1 and July 10 in 2013 and comparing it with the same time period in 2014.’
“Mobile/manufactured homes have always been considered affordable housing in Marin, but the increase has been amazing,” said Watts, a Bradley Real Estate agent.’
200k for a mobile home, lmfao. I remember 10k would get u a nice single wide and 30k you were livn like a rock star in a double wide.
and they do depreciate ! on the HA scale
They all depreciate. Losses on single family structures are greater than trailers.
That’s true. My tent trailer isn’t depreciating faster than my house anymore.
The higher expense for the mobile homes in California is for being tornado-resistant.
Best tornado resistance for mobile homes is to live where EF4 & EF5 tornadoes never occur…
Cobb, who retired from broadcasting many years ago.
Why did she want to live in Marin? She could have lived anywhere in the country.
‘The median price for a Southern California home was $415,000 in June, up 1.2 percent from $410,000 in May and up 7.8 percent from $385,000 in June 2013. “Pent-up demand, job growth and still-slow mortgage rates continue to put pressure on home prices,” DataQuick analyst Andrew LePage said. “Why the drop-off? The supply of homes for sale, while still low in an historical context, is higher this year, and the decline in affordability serves as gravity for home prices. People can’t stretch with exotic risky loans the way they could during the last housing boom.”
time to loosen credit again?
There still tryn to make people solvent who took out bogus loans in ca.
They keep running commercials here like they did for the food stamp program. It says you can get up to 100k to help u save your home.
So somebody gets a free 100k and then the new buyer is forced to overpay for a shack in a shoddy area of s cal.
Once you get away from the ocean things go downhill fast.
Go to elcajon and then tell me how how luxurious ca is.
‘Reflecting trends seen throughout modern society, more than three-fourths of California home buyers used social media in their home search, up from 52 percent who used it in 2011.’
‘Given the limited supply of homes available for sale, fewer buyers were satisfied with their home purchase than last year. Only about half of the buyers were satisfied with their purchase in 2014, down from two-thirds (66 percent) in 2013. Nearly half (46 percent) of buyers felt they “settled” on their home purchase in 2014, up from 34 percent.’
‘Additional survey findings include: Buyers cited price decreases (54 percent), receiving a promotion or raise (34 percent), low interest rates (29 percent), and favorable prices/financing (17 percent) as the top reasons for purchasing a home.’
‘Echoing a recovering housing market over recent years, buyer optimism of home prices also continued to improve, with the vast majority of buyers (81 percent) believing that home prices will rise in five years and 60 percent believing that prices will rise in one year. This is an improvement since 2009, when only 35 percent of buyers believed that prices would rise in five years, and only 8 percent who believed prices would rise in one year.’
‘the vast majority of buyers (81 percent) believing that home prices will rise in five years and 60 percent believing that prices will rise in one year’
‘I feel you can’t go wrong buying a house in the Bay Area’
Bubble era beliefs about ever-spiraling home prices are back. I guess this means the housing market is improving?
81 percent. That’s a lot of people who have completely abandoned their critical thinking skills. How is it that any of these people are granted access to hundreds of thousands, if not millions, of the bank’s dollars?
Great post today, but also, how DEPRESSING.
The remarkable things about the recent 7.8% growth rate in LA home prices are mentioned nowhere in the article:
1) This rate of price appreciation is way above where U.S. inflation is supposed to be (e.g. the Fed targets a 2% inflation rate);
2) If price appreciation continued at this recent ’slow’ rate, LA home prices would double over the next ten years;
3) I’m sure this time is different, but the last time LA home price appreciation dipped from a roaring double-digit rate to single digits was just before a major crash.
That LA times article was totally bonkers. It’s starting to sound like the LAT shares journalists with The People’s Daily House and Home section. Prices “only” increased 7.8% this year so far? How much are they supposed to increase when incomes are stagnant/falling?
Buyers have “more to choose from” because prices are so high that most can’t afford to buy and investors won’t at this level? Sort of like a parking lot full of used Honda Civics at $100k each and a salesperson going “look at all the choices!”
Underwaters might as well “hang on”, because “what’s another year?” Where exactly does the LAT think the market is headed? Back to 30% a year increases forever?
And then: “This is boring and that’s OK. The train will wreck eventually. It always does. But for now, we can enjoy a smooth ride.”
Quote of the century.
“Simonin said this leveling off is a welcome break. For the first time in 15 years, he said, it doesn’t feel as if the housing market is either soaring or plummeting, and there’s no pressure to buy — or sell — now, lest you miss out on a windfall. ‘This is boring and that’s OK,’ he said. ‘The train will wreck eventually. It always does. But for now, we can enjoy a smooth ride.’”
Is this another way of saying SoCal housing prices have achieved a permanently high plateau?
not a buyer in sight.
Shortage of water in California is going to make it hard for new housing developments to be approved.
At least California isn’t literally underwater. However, if weather patterns remain as the last two years So. Cal is out of water 12 - 18 months.
Saw a picture of Huntington Lake an hour ago. Bone dry. It’s a lake I used to be an hour away from, 7,000 feet up in the central Sierras. Great for summertime sailing. And next to a snow ski resort for winter ski bunnies. I haven’t seen such conditions since the late 70s.
That’s sad. I used to go there with my best friend (RIP) when we were teenagers. Also used to go to Shaver, Bass, and Millerton, sailing a Prindle 16.
I lived near Bass Lake when two snowstorms per year dumped snow up to my knees. Of course I was under age 8…
“DataQuick said median prices hit $476,500 in May, up from a low of $285,000 in late 2011. Clearly some mortgages in Mountain House remain underwater.”
Keep dreaming! In neighboring (more developed) Tracy homes just as big and new are sitting there for months at the mid-300’s, and 500k is the low end for the tri-valley, which is less than 15 miles away, is already fully developed, and where residents commuting toward the bay don’t spend an extra 45 minutes navigating the of the worst rush-hour choke points since the 101 was invented.
Areas like mountain house/tracy are 350k MAX in fair value for a well-equipped 3 bedroom, and it’s reflected in how long homes priced over that sit on market.
Does Mountain House smell like a slaughter house the way that Tracy does (at least to my recollection from back when I used to have to drive through on occasion)?
Maybe they should change the name to “Slaughterhouse.” Has a nice ring.
At the depths of the housing-market slump, Mountain House represented a $1.06 billion loss for the California Public Employees’ Retirement System. CalPERS held onto its Mountain House investment. The pension fund’s investment is still deep in the red, with an estimated negative value of around $870 million, but CalPERS officials say they believe Mountain House will eventually turn into a winner.”
I am glad they are not managing my pension with that type of judgment.
“The one with the least debt wins”
Got that right!
Even the plutocrats who have benefited the most from the Fed’s deranged money-printing are starting to profess to be nervous about excessive QE. I think what really makes them nervous is that a growing number of the 99% are on to Wall Street and its scams.
http://www.zerohedge.com/news/2014-07-16/carl-icahn-very-nervous-about-stocks-due-feds-excessive-money-printing
‘Home prices had been escalating for the last two years largely because investors from outside Inland Southern California had been buying up homes and turning them into rental properties. That created a shortage of available inventory, which drove up prices.’
‘The economy, while improving, has not put many potential buyers over the top. The 8 percent jobless rate is still Southern California’s highest, and many of the jobs that have been created do not pay that well.’
‘Joseph Onello, an agent at Keller Williams Realty’s Temecula office, said the ratio between renting and owning has not narrowed enough to make a big difference. “The difference is not compelling enough to get people to want to buy,” Onello said.’
The jobs which have been created are of the $10 per hour variety. I don’t know anybody who could buy a house on $10 per hour. I can’t imagine buying a house on less than $30 per hour, and forget combining incomes to do it. That means you’re dependent upon two jobs to hang on to the place. With more than 50% of marriages ending in divorce, that’s suicide anyway. Single people don’t really need to buy, with no kids. Buying a house makes little sense anymore, IMO.
: “economy, while improving,” well this is a numbers game. I love sports metaphors, the 300 hitter who drives very few runs home and the 260 hitter who gets the big hit at the opportune time.
Wages are for the most part in the tank, employers continue to hire applicants and have them work two jobs for less pay.
Banks are making a fortune not paying interest to savers, this also hurts the economy very bad.
The economy is like housing lot of wait and see, in the mean time buyers don’t buy, and corporations have no incentive to pay better wages, banks never care about the masses.
Like the Jewish Palestine standoff that last forever, America can’t afford this stand off anymore, either the Fed and corporate America make a decision on this country’s direction or failure of the system is
or could be eminent?