August 13, 2014

When Demand Says ‘No Thanks’ Prices Must Be Trimmed

The Orange County Register reports from California. “Great schools and wider opportunities for their children have been key draws for Chinese home shoppers, who have flocked to grab properties in Irvine and a handful of other Southern California cities in recent years. But another key reason is to get their money out of China, fearing that a real estate bubble there might pop or that the government might clamp down on wealth. Spending by Chinese buyers on U.S. homes soared 72 percent in one year, to $22 billion, the most of any nationality, according to Realtor estimates. Thirty-five percent of that went to buying homes in California.”

“Chinese buyers seek out places like Irvine, which has a reputation for top schools and low crime. They tend to prefer newer areas, and since these buyers often rank among China’s elite, there’s a strong appetite for luxury homes. ‘The real driving force is preservation of wealth,’ said luxury home specialist Lee Ann Canaday of Laguna Beach, who has been attending real estate expos in China for the past three years. ‘They still see the United States as a safe haven.’”

The Press Enterprise. “Home affordability is a growing concern in Southern California, so much so that some real estate analysts are watching for signs of a post-recession housing bubble. Between 2008 and 2012, Inland household income fell about 9 percent. From 2012 to May 2014, said RealtyTrac VP Daren Blomquist said, Inland household income rose only 2 percent as home prices soared 53 percent from the 2012 bottom. ‘We got burned in the last housing bubble, so we’re paying very close attention to whether we are in danger of seeing another bubble, given the rapidly rising home prices over the past couple of years,’ Blomquist said.”

“A $445,000 home in Los Angeles County would eat up 50 percent of a median-income buyer, RealtyTrac reported. Buying a median-priced $565,000 home in Orange County would consume 47 percent of the Orange County median-household income, $73,617, the RealtyTrac data said. Jeanette Hartmann, sales manager of American Pacific Mortgage in Temecula believes favorable interest rates have helped keep homebuying on track. ‘Home values aren’t continuing to rise like they had,’ she said.”

“Homes are sitting on the market for 60 days before sellers get offers, helping prospective buyers feel more comfortable about their decisions. Buyers also are getting more realistic, she said. ‘I just had a client yesterday who makes $80,000 a year but couldn’t get approved for a $400,000 house,’ Hartmann said. ‘He had four car payments and a boat and alimony. I had to tell them, ‘Nope.’ When we worked the math backwards, they qualified for $200,000.’”

The Desert Sun. “Desert homeowners who had a short sale during the recession may have to wait two more years before they can borrow using one of the more popular kinds of home loans. Originally, they were required to wait two years after a short sale. Beginning Aug. 16, they will have to wait at least four years from the date of the short sale before applying for a loan conforming to Fannie Mae guidelines. The expanded waiting period will lock out a growing number of ‘boomerang buyers’ in the Coachella Valley, loan officers say.”

“Buyers who had a short sale sometime between July 2012 and Aug. 16 will be most likely be affected, desert loan officers said. ‘There are some that are just stuck, they don’t have the down payment money, and others are going to have to wait until the three-year time period and look to FHA for alternative means,’ said Dean Rathbun, president of Avis Mortgage Inc., which serves the Los Angeles, Orange County and Coachella Valley areas. ‘All of a sudden, the rules have changed after they made their ploy.’”

“‘A huge percentage of our buyers are boomerang buyers who went through a loss of a home, and now it’s 2014 and they can buy again,’ said Bret Cohn, a senior loan officer for Stearns Lending in Palm Desert. ‘People who owned multiple properties and let those go to short sale, they want to move here now and buy a primary residence. They were told to short-sell their house, not realizing that they’re going to have to wait because the rules have changed.’”

The Union Tribune. “California’s economy should continue to expand faster than the nation’s over the next five years, but the rising cost of housing in the Golden State is going to keep some of that growth in check. Hindering economic growth, however, is the rising cost of housing, which Beacon economist Chris Thornberg said is largely due to a lack of supply. Statewide prices have grown by double digit percentages since June 2012, the forecast released this week by Beacon Economics says. ‘You can’t add jobs if there is no growth in the labor force because people are leaving because they can’t afford housing,’ Thornberg said.”

The Bakersfield Californian. “Bakersfield’s housing market showed signs of weakness last month as prices slipped and more sellers accepted offers less than what they asked for. Appraiser Gary Crabtree’s July market summary says the median sale price of an existing single-family home in the city declined by 2.5 percent from June to settle at $210,000. ‘With long-term interest rates and prices declining, housing is becoming more affordable,’ Crabtree wrote. ‘But with the declining median family net spendable income and lack of meaningful job growth, the market is moving toward stagnation.’”

The Folsom Insider. “It looks like the recovery, though not over, sure has slowed down. For 18 months, from March 2012 to September 2013, homes in Folsom were selling fast, and by last summer were averaging 16 days on market. At one point, there were only 82 homes for sale in Folsom, and multiple offers were coming in, sometimes sight unseen. Things sure have changed. For the 7th straight month, Folsom housing inventory has been on the rise, ending July with 221 homes for sale, a 3-year high. No, it’s not time to panic. It seems to be a sort of leveling of the playing field.”

“I think that what’s happening here is that the investors snapped up the lower-priced, rental-grade properties, and have just about abandoned the market. The average price per square foot dropped from a $212 in May, $210 in June to $206 for July. If you’ve got a home on the market, or are considering selling, it is important to do your homework, work with your agent if you have one, and take your best guess at the right price. With today’s technology, the whole world knows when your home goes on the market, so if it’s taking longer than average to sell, re-think the pricing strategy. There’s an old saying that goes, ‘There’s nothing wrong with ANY house that a lower price won’t fix!’”

“The seasonal house-selling slowdown has once again morphed into overindulgence of real estate self-pity. I’m not sure that a one-year switch in regional buying conditions from the hyperactivity of spring 2013 to this summer’s relative calm is cause for much alarm. I assume all the real estate pros who in last year’s frenzied start said ‘This can’t last’ actually realized what that meant!”

“Still, the recent housing debacle is fresh in many minds, so anxiety remains a volatile real estate commodity. But it’s also sad to hear a blame game brewing. In today’s hypercritical age, sadly, somebody’s got to take the fall for any misstep or a hiccup like 2014’s perceived homebuying sluggishness. So as a public service – with my authorship tongue placed a tad in cheek – I have delineated nine likely housing cool-down culprits, ranking them by my sense of their culpability.”

“NO. 6: BUYERS Obviously, this summer chill wouldn’t be here if shoppers could only see the true value that remains in the housing market. Why do house hunters look at lofty home prices, (up 50 percent off the bottom in some communities) then recall the last housing debacle and worry? To be fair, shoppers should know why they are delaying a purchase. If it’s a bet that prices will be lower next year, they should weigh that probability vs. the possibility that mortgage rates will go higher.”

“NO. 2: SELLERS It’s not 2013, and that seller’s market won’t be back soon. Look, this pricing formula does not work: Take the last comparable sale, add 5 percent (or maybe 10 percent if you’re sure you have better view/backyard/paint/appliances/whatever). Be warned, the free market has a cost. When demand says ‘no thanks,’ prices must be trimmed. Perhaps wannabe sellers should visit a nearby new-home project to see what’s offered in their valuation range. Remember, builders are in one business: selling homes quickly.”




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97 Comments »

Comment by Housing Analyst
2014-08-13 03:31:09

SF Bay Area Housing Demand Collapses 13% YoY As Demand Plummets Statewide

http://www.zillow.com/local-info/CA-home-value/r_9/#metric-chart-embed

Comment by CJ
2014-08-13 12:06:06

The page you link to says no such thing. So why post it every day?

 
 
Comment by Housing Analyst
2014-08-13 03:49:38

Danville, CA Housing Prices Sink 9% YoY As New Listing Double And Demand Plunges Statewide

http://www.movoto.com/danville-ca/market-trends/

 
Comment by Housing Analyst
2014-08-13 04:11:43

Austin, TX Housing Prices Turn Negative MoM As Price Reductions Explode 190%; New Listings Balloon 64%

http://www.movoto.com/austin-tx/market-trends/

Comment by Prime_Is_Contained
2014-08-13 08:33:59

HA, could you consider posting these Movoto links in the Bits Bucket, rather than in the topic threads? I don’t see Austin mentioned in any of the articles that Ben quoted above.

Thx…

Comment by Housing Analyst
2014-08-13 09:46:17

They’re a painful reminder no matter where they’re posted.

 
Comment by taxpayers
2014-08-13 11:38:39

I guess that’s a no- we can all go to movoto if we need to

BTW their data points are weak

Comment by Housing Analyst
2014-08-13 11:48:10

You say the same thing about zillow.

Here’s some advice… go to realtor.com. got it?

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Comment by Guillotine Renovator
2014-08-13 11:51:09

Of course it’s a no. He’s unreasonable. When you bring data he resorts to lies, mockery (”lolz”), or disappears altogether. I called him out on his $55 per square foot including the lot and asked him to show me a building lot in Seattle, and nothing but crickets.

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Comment by Housing Analyst
2014-08-13 12:04:31

Then show some data kiddo. Don’t just make a claim. Substantiate your claim.

And we’ build profitably all year round in WA state for less than $55/sq. And it enrages you to no end.

 
Comment by Guillotine Renovator
2014-08-13 12:15:24

You don’t build here, sunshine, because you’re not a home builder. Show me the $55 psf in Seattle. You can’t. You’re not a home builder, you’re not a well driller, you’re not a septic installer, you’re not a housing analyst, you’re not anything you pretend to be. You’ve sadly resorted to being a troll, and a lying one at that. Realtors are liars, and so are you.

 
Comment by Guillotine Renovator
2014-08-13 13:03:54

***crickets***

 
Comment by Housing Analyst
2014-08-13 13:11:28

Every state in the country. And you’re enraged because of it.

 
 
Comment by Ben Jones
2014-08-13 11:58:01

‘their data points are weak’

With small cities and towns, Movoto isn’t very useful. But their data on large markets showed inventory rising/general weakness way before any other website. Proof’s in the pudding.

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Comment by Ben Jones
2014-08-13 04:16:06

‘Home sales fell in July while the median sale price of single-family homes in San Diego County continued to stabilize above $500,000, according to new housing statistics from the Greater San Diego Association of REALTORS® (SDAR).’

‘Single-family resale homes sold in July decreased by about 13 percent compared to June, while sales of previously owned condominiums/townhomes fell about 2 percent.’

‘The median price of single-family homes sold in July was $517,000, down slightly from June, but still 7 percent higher than July 2013. Condos and townhomes sold at a median price of $325,000, down by about 3 percent from June, and about the same as a year ago.’

‘Meanwhile, the number of active listings in San Diego County is approaching 8,500 on the Multiple Listing Service (MLS). That is the highest it’s been in 2 1/2 years.’

Comment by Whac-A-Bubble™
2014-08-13 22:53:25

‘The median price of single-family homes sold in July was $517,000, down slightly from June, but still 7 percent higher than July 2013. ’

That number sounds familiar. Wasn’t the pre-bubble collapse peak around $517,000?

‘Meanwhile, the number of active listings in San Diego County is approaching 8,500 on the Multiple Listing Service (MLS). That is the highest it’s been in 2 1/2 years.’

Still less than half the peak inventory before the bubble burst (20,000+).

 
 
Comment by Housing Analyst
2014-08-13 04:17:32

” Spending by Chinese buyers on U.S. homes soared 72 percent in one year, to $22 billion, the most of any nationality, according to Realtor estimates. Thirty-five percent of that went to buying homes in California.”

lolz….Foreign buyers is up 35% to a whole whopping 7% of the market. That’s about historical norms. Giving the NAR press department something to do is about all it amounts to.

It’s an estimate based on a survey of realtors. And you know what that means.

Comment by Prime_Is_Contained
2014-08-13 08:37:49

And you know what that means.

RAL!

 
 
Comment by Housing Analyst
2014-08-13 04:19:08

‘The real driving force is preservation of wealth,’ said luxury home specialist Lee Ann Canaday of Laguna Beach, who has been attending real estate expos in China for the past three years. ‘They still see the United States as a safe haven.’”

Strange that is considering a house depreciates rapidly resulting in a loss of wealth.

 
Comment by Housing Analyst
2014-08-13 04:22:52

“California Most Impoverish State In The US”

http://en.wikipedia.org/wiki/List_of_U.S._states_by_poverty_rate

(geography adjusted)

Comment by Ben Jones
2014-08-13 06:31:43

‘$1,000 a month for tiny room, bedbugs, seedy surroundings in the Mission’

‘Laura Chinas, 42, and her husband sleep on the floor, and her kids, ages 4 to 11, sleep crammed on the lower part of a bunk bed. The family’s belongings pack the top bunk. They have no bathroom or kitchen of their own. Mice and bedbugs also call the tiny room home.’

‘And the rent for this worn, rodent-infested home that’s not much bigger than a parking space? A thousand dollars a month.’

‘The tech-fueled economic boom has hit 16th and Mission streets in a big way, bringing with it Google buses, expensive condos and high-priced restaurants and boutiques. But just a few properties down from the famed intersection is the dubiously named Grand Southern Hotel, a single room occupancy hotel with 60 units. Many of them house families, and 22 children live inside - the most of any SRO in the Mission.’

‘Increasingly, this is what life is like for children on the lowest economic rungs in one of the richest cities in the world. Fifteen percent of children in the city live in poverty, up from 10.7 percent in 2008, according to census figures.’

Comment by goon squad
2014-08-13 07:02:00

“tech-fueled economic boom”

The Chinas family should have cashed in their CYNK shares at $20. Instead they got greedy and lost everything, now they get to live with bedbugs.

 
Comment by Housing Analyst
2014-08-13 08:03:11

And the people of the land of Fruits, Nuts, Freaks and Molesters are thrilled about it.

Comment by Ben Jones
2014-08-13 08:46:07

‘Sacramento mayor’s income inequality task force meets in New York’

‘Mayor Kevin Johnson said in a statement that the group would “recommend both national and local policies that will help to give everyone opportunity.” Those policies could include proposing increases to local minimum wages and working to increase access to affordable housing.’

‘The task force’s meeting coincided with the release of a report by research firm IHS showing that jobs gained during the economic recovery pay 23 percent less than the jobs lost during the recession. And it showed that 73 percent of the nation’s large metro areas have more households making less than $35,000 than households making more than $75,000.’

‘The north Oak Park neighborhood of Sacramento already has gained an anecdotal reputation as a magnet for homebuyers looking for an affordable urban experience. Redfin sales agent Melanie Franklin said the neighborhood centered around Broadway and east of Highway 99 is getting more inquiries from buyers who’ve seen prices soar beyond $300,000 for a house in neighboring Curtis Park or Tahoe Park, but can still get one in north Oak Park for less than $200,000.’

‘Even so, prices have been on a steep upward climb there as well, with the median price of $79,000 three years ago climbing to $170,000 now. Homes now take 26 days to sell, slightly longer than in 2013 but less than half as long as it took in 2011.’

‘Franklin said the low prices of a few years ago spurred investors to buy several homes and sink money into renovations and additions, which not only increased values overall but gave the neighborhood new life. “I feel like because the prices are so low still, first-time buyers are really finding opportunities there,” she said.’

Minimum wage increase to the rescue!

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Comment by aNYCdj
2014-08-13 15:55:44

gotta have those dogs,people get married to their dogs….why?…. at least a cat would catch the mice.

 
Comment by Whac-A-Bubble™
2014-08-13 22:56:16

Oh gawd…

 
 
 
 
Comment by MacBeth
2014-08-13 08:48:44

This is already well known - but often denied.

A state that is filthy rich in certain geographic areas is destined to be filthy poor in others. (SOMEONE has to serve the needs of the elite class).

Washington DC is the same way.

And Colorado = The Next California. All one has to do is visit Colorado to see how it’s rapidly devolving into a Have vs Have-Not geography.

Comment by Ben Jones
2014-08-13 09:11:57

‘Candy Warmuth and her ex-husband Bill Atnip spend their days at the Lodi Public Library and at Burger King, using the Wi-Fi for their laptop and the space indoors to stay out of the summer heat. Warmuth checks her Etsy page to see if she has any orders. Atnip endlessly searches job listings…Warmuth and Atnip are homeless. The two were hit hard by the recession and lost their jobs, homes and contact with relatives who could help them.’

‘Before Warmuth divorced Atnip, they lived together in a home on North Church Street. After the divorce in 2005, Warmuth moved back to her hometown of Santa Cruz to work cleaning houses, a business that didn’t last long as people tightened finances during the recession. Atnip lost his house when his variable-rate mortgage became too expensive, and the bank foreclosed on the house. His brother with Down syndrome was living with him at the time, but was moved to a state-funded care home after they lost the house.’

‘Now the pair lives out of their SUV, often parking it in the Walmart parking lot where they won’t be bothered at night.’

‘No large-scale cleanup materialized Monday at the South Bay’s largest homeless encampment. A city official conceded that there was miscommunication, and that workers only will be removing trash sometime this week from the opposite side of Coyote Creek, where there are only a few tents.’

‘The intense scrutiny illustrates the complexity and challenge the city is facing as it tries to rein in a sprawling encampment that has drawn national attention because it is near the heart of wealthy Silicon Valley. Officials resolutely say that encampments like The Jungle are unfit for human habitation, can be dens for criminal activity and are destroying the environment.’

‘Homeless and their advocates counter that nobody wants to live this way, but some have nowhere else to go.’

“This is the richest place on the planet, and we have to figure out a way to house people,” said Sandy Perry, of the Affordable Housing Network of Santa Clara County. “And if we can’t do that, then at least we can provide a camping area with proper sanitation. This isn’t a law enforcement problem. It’s an affordable housing problem.”

‘Aguirre’s campsite is well-tended, and he said he puts out trash cans for everyone to use in an effort to keep the area as garbage-free as possible. “I didn’t choose to be homeless,” he said. “We were living in our car. But my wife’s health got worse, and we couldn’t stay in there. That’s why we came here. But we’re also trying to figure out how to get out.”

‘Aguirre said he has a Section 8 housing subsidy, but can’t find a landlord who will accept it. “I have a voucher, and I still can’t find a place to live,” he added.’

 
Comment by goon squad
2014-08-13 10:01:36

“Colorado = The Next California”

True, but only TABOR will prevent it from becoming Taxifornia.

 
Comment by rj chicago
2014-08-13 10:17:36

Macbeth - might this report add to the issues heading toward the Colorado = The Next California debate?

http://www.mainstreet.com/article/money/investing/marijuana-legalization-colorado-gets-new-report?page=1

 
Comment by Ben Jones
2014-08-13 11:16:10

‘More condos and houses on the market and a slowdown in buyers signing contracts is now impacting prices in the Washington region. Listing service MRIS’ monthly RealEstate Business Intelligence report says the median sales price of a house or condo sold in July was $428,000, down 1.2 percent from June. Even compared to a year ago, the median sales price last month was up just 0.7 percent.’

‘Summer is typically slow for the housing market, but this summer is even slower than last year. Pending sales were down 4.8 percent from July 2013, and fell 7.4 percent from the previous month. The number of sales that closed last month was down 8.4 percent from a year ago.’

‘And there is more for buyers to look at, with active listings up 33.5 percent from a year ago.’

Comment by taxpayers
2014-08-13 11:46:30

last summer was slow? not in 22151

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Comment by Housing Analyst
2014-08-13 13:14:10

Was it? Based on the data, demand was lower in 2013 than it was in 2012.

 
 
 
 
 
Comment by Dave of the North
2014-08-13 06:05:23

‘I just had a client yesterday who makes $80,000 a year but couldn’t get approved for a $400,000 house,’ Hartmann said. ‘He had four car payments and a boat and alimony. I had to tell them, ‘Nope.’ When we worked the math backwards, they qualified for $200,000.’”

Sheesh, with 4 car payments, a boat, and alimony, he would struggle to buy groceries, let alone a $ 400 K house.

Comment by Ben Jones
2014-08-13 06:23:05

‘Last week, WalletHub attempted to measure the winners and losers since the worst recession post-Great Depression ended five years ago and came up with a list that was not kind to California.’

‘The economic recoveries of Stockton and San Bernardino ranked 149 and 150, respectively, among the nation’s 150 largest cities, using criteria based on 18 “essential metrics.” Bankruptcy was a heavily-weighted factor, which both cities have suffered through.’

‘No California city made the Top 10. The median ranking of California’s 29 cities was 114, below the midpoint of 100. The average was 102.’

 
Comment by MacBeth
2014-08-13 08:51:20

Yes, but at the same time, it’s quite remarkable that the guy’s trying to buy a house for 5X.

In this case, you’d suspect that his appetite is out of line with his means. But you never know. Perhaps $400,000 is a crap shack.

Comment by Blue Skye
2014-08-13 09:42:19

With so many cars, he should be prepared to drive until he qualifies.

 
 
 
Comment by goon squad
2014-08-13 06:27:33

“seek out places like Irvine, which has a reputation for top schools and low crime … Buying a median-priced $565,000 home in Orange County would consume 47 percent of the Orange County median-household income, $73,617″

Bill, you could easily afford twice that. Amy says you should buy a $1,130,000 starter home. And you better hurry and get one before the Chinese buy them all!

Comment by AmazingRuss
2014-08-13 07:54:53

We gave them all our money for cheap plastic walart crap, and they’re giving it back for overpriced crappily built mcmansions. The circle is complete.

Comment by Ben Jones
2014-08-13 08:00:23

Re-posting this from yesterday:

”According to Global Financial Integrity, a non-profit group that traces illicit flows of capital, US$1.06-trillion left China between 2002 and 2011 despite tough currency controls. This is equivalent to China’s GDP in 2002 and roughly US$10-billion a month.’

‘Recently, a leaked report from China’s central bank estimated 18,000 officials and employees of state-owned enterprises pilfered US$123-billion and fled to the U.S., Canada, Australia and the Netherlands. Recouping these assets will be on the agenda, but efforts must focus on removing the culprits at home to create a meritocracy and deploy the nation’s capital to build wealth, not to build political buildings or bridges that line politicians’ pockets.’

‘In 18 months, nearly 250,000 officials and others in governments and state-owned enterprises have been held for detention or charged. Some 70 have died or committed suicide while in custody.’

‘Investigators are unraveling schemes that embezzle, launder and export bribes, kickbacks or the proceeds of crime. Some involve bribing a bank officer to take a deposit then wire funds offshore. Another option is to drive truckloads of cash into the backdoor of friendly casinos in Macao where the cash is blended then paid out, minus a fee, as gambling winnings in another currency.’

‘More devious schemes by big shots have moved tens of billions offshore without handling cash or involving banks. For instance, money managers are paid inflated fees to invest Chinese corporate funds abroad. The catch is that half of the fees are paid out to shell companies owned secretly by Chinese officials or paid out to buy them condos or art.’

‘Other tactics involve bribing officials or executives by selling assets at a loss so they can pocket immediate profits; overpaying for offshore assets in return for kickbacks or wiring cash to “fronts” owned by officials or their children who wash the bribes as though they were legitimate income.’

‘Whatever the source, Canada must stop being naïve and aiding and abetting such crimes. In Canada, there are no restrictions or disclosure requirements with the result that Toronto and Vancouver housing costs have been driven up artificially due to frenzied buying by anonymous foreigners. This is why Toronto has 130 high-rise residential projects or as many as New York City with dramatically more people and immigrant arrivals.’

Comment by Blue Skye
2014-08-13 09:58:45

“250,000 officials …held for detention or charged. Some 70 have died or committed suicide while in custody.”

Wow. It’s all fun and games until somebody gets their head cut off.

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Comment by shendi
2014-08-13 19:01:33

So how it is that these fleeing corrupt Chinese are seeking “good” schools for their offspring?

If my experience these past three years interviewing engineering candidates is any indication then there is nothing for the local students to worry about. These foreign born naturalized students of Chinese origin are no better than the average US born student. But one thing I have to grant them: they are earnest.

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Comment by MacBeth
2014-08-13 08:54:52

Funny how much money people think “good” schools are worth these days. What a crock.

But at least these Chinese are adding timber to an already enflamed area. Might as well burn down was is already on fire rather than set somewhere else ablaze.

Tell you one thing - California certainly has done a magnificent job promoting its schools! Holy cow.

Comment by taxpayers
2014-08-13 11:42:02

I paid my kid $500 an A = valedictorian

collectivists hate that

also isn’t private catholic school cheaper than a mcmansion 20 miles out in the burbs?

 
 
 
Comment by Ben Jones
2014-08-13 06:28:10

‘A Modesto man facing trial on fraud counts in Texas was rearrested here Tuesday on new charges of swindling real estate investors in California, with combined profits topping $1.26 million, authorities say.’

‘Xue Heu, 37, fabricated documents while duping Central Valley people into giving him money for property deals, reads an indictment handed up Thursday by a federal grand jury in Fresno. Rather than buying land, more than $360,000 went into his bank accounts or was used “for other purposes” over six years, the document says.’

‘Heu initially was arrested in late May along with Dick Price, 71, also of Modesto, and accused of bilking $903,500 from Texas investors in conspiracy with Mark Steven Thompson, who is believed to have lived in Oakdale. The Texas indictment said Heu and Price pretended to represent government-sponsored enterprises Fannie Mae and Freddie Mac to fraudulently sell eight properties in San Antonio and Houston, and five in undisclosed California cities.’

‘At the time, Stanislaus County District Attorney Birgit Fladager said she expected the men would face additional federal charges here. Her real estate fraud unit cooperated with the FBI and federal prosecutors in both cases.’

‘The local indictment against Heu cites “numerous victims” and specifies eight counts of wire fraud related to the suspected conspiracy, half involving Modesto: a Modesto victim identified only by the initials “J.M.” is said to have lost $20,000, and three others are said to have wired a combined $41,300 to Heu’s Modesto accounts via New York banks, the document says. Other victims were in Sacramento and El Dorado Hills, the indictment says.’

‘Heu, who also has lived in Sacramento County, portrayed himself as chief executive officer of Liquid Assets & Land Investments Inc. in some deals, the document says. In others, he claimed to be a land developer and the owner of Capital Land Investments LLC to persuade victims to gather other investors interested in flipping foreclosed homes, the paper says.’

‘To keep investors from getting suspicious, Heu forged signatures on fake deeds and produced bogus papers indicating that his company had negotiated settlements with a federal housing agency, the indictment says. He “duped the investors into believing Heu’s real estate investment transactions were legitimate when, in fact, they were fraudulent,” the document reads.’

Comment by taxpayers
2014-08-13 11:43:18

why would you make a check out to the owner- always a escrow lawyer

 
 
Comment by Ben Jones
2014-08-13 07:15:11

‘Hindering economic growth, however, is the rising cost of housing, which Beacon economist Chris Thornberg said is largely due to a lack of supply. Statewide prices have grown by double digit percentages since June 2012, the forecast released this week by Beacon Economics says. ‘You can’t add jobs if there is no growth in the labor force because people are leaving because they can’t afford housing,’ Thornberg said.’

What’s the problem? High house prices fix everything, right? Because if they don’t we’ve got a big problem, as Yellen and the boys have bet everything on higher prices.

‘Orange County is the third most expensive housing market in the country, according to the National Association of Realtors. The median price for a home in OC was $691,000 during the second quarter of this year.’

‘Four of the top five most expensive markets in American are in California, the group said.’

Comment by Rental Watch
2014-08-13 09:07:34

Regardless of how the economy is doing, high home prices are the best indicator of outward migration from the State. ISTR reading that outmigration peaked in 2006, just when the economy was doing well, but home prices were WAY too high.

I’ll sound like a broken record here, but the solution is to BUILD MORE HOUSING.

The numbers don’t lie.

We have too many people for the housing stock that we have. CEQA has hindered new development for decades and the problem keeps getting worse.

And this lack of supply is a MAJOR contributor to the boom/bust housing cycles in CA.

Comment by Puggs
2014-08-13 09:22:32

You also have a water supply problem.

 
Comment by Ben Jones
2014-08-13 09:35:48

‘the boom/bust housing cycles in CA’

It doesn’t have anything to do with the enormous caps on federal loan guarantees? Cap the loan guarantees at the same level as Omaha and you’ll get Omaha prices.

Comment by Housing Analyst
2014-08-13 09:43:05

I can’t wait for the 3 hour long tapdance response from R._Fraud.

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Comment by Rental Watch
2014-08-13 12:26:21

How about this as a short response:

Loan limits were the same until 2008. Prices varied widely up to (and past) 2008.

The hypothesis that making loan limits the same will make prices the same is wrong.

 
Comment by Whac-A-Bubble™
2014-08-13 22:59:13

“The hypothesis that making loan limits the same will make prices the same is wrong.”

The hypothesis that making loan limits the same won’t bring California prices back in line with economic reality is wrong.

 
Comment by Rental Watch
2014-08-14 00:06:33

Prices in California became out of whack with what you call “economic reality” a long time before the loan limits became different in the first place.

The loan limits only became different in 2008…don’t you think prices were out of whack before then?

 
 
Comment by Rental Watch
2014-08-13 12:05:24

The difference in caps don’t explain the boom/bust cycles. They could contribute to higher prices, but not the wild swings. Tighter supply leads to more potential for “mania” attitudes–as too many people rush to buy too few homes when attitudes shift.

Today, the cap in Lathrop is the same as Omaha. Yet Lathrop’s median home price is well above that of Omaha.

Also, you seem to forget…up until 2008, the caps were the same in nearly every state (with the exclusion of Alasak, HI and the Virgin Islands).

Only in 2008 did Fannie introduce the idea of higher limits for higher priced markets.

From a financing standpoint, there was no differentiating factor between the states during the height of the bubble. So, something else must have been at play. What do you think it was? Based on my research, it was lack of supply.

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Comment by Housing Analyst
2014-08-13 13:12:59

There is no lack of supply but there is plenty of lack of demand.

 
Comment by Ben Jones
2014-08-13 13:19:12

‘From a financing standpoint, there was no differentiating factor between the states during the height of the bubble.’

‘The difference in caps don’t explain the boom/bust cycles.’

You’re splitting hairs. Here’s a PDF:

http://www.fhfa.gov/AboutUs/Policies/Documents/Conforming-Loan-Limits/loanlimitshistory07.pdf

So the cap almost doubles from 2000 to 2008. Then we have this:

‘In 2006, conforming loan limits were raised to $417,000. Loan limits were then held at that loan size between 2007-2013 despite rapidly falling home values nationwide.’

‘At the time, officials defended the move by citing their want to make mortgage credit available to home buyers during a crucial stage of the housing market’s recovery.’

‘Reinforcing this point, in 2009, conforming loan limits were raised in certain “high-cost” areas nationwide; areas in which the median home sale price handily exceeded the national average.’

‘The government has designated more than 208 high-cost areas nationwide including New York City, New York; Los Angeles, California; and the entire San Francisco-San Jose-Oakland metropolitan region.’

California gets a huge cap increase when house prices were falling! Oh, where oh where would California prices be if the DIFFERENCE in the cap didn’t exist? So how about we stop subsidizing this priceless dirt and California goes to the private market for its loans? Can you imagine the screaming, wailing and forecasts of doom if that was even contemplated?

Anyway, prior to 2007 or so, you could get a loan with a pulse.

 
Comment by Rental Watch
2014-08-13 15:01:47

Oh, where to begin…

We’re starting with this statement:

“Cap the loan guarantees at the same level as Omaha and you’ll get Omaha prices.”

Very broadly, you are saying that more availability of finance leads to higher prices. In that regard, it doesn’t matter whether it comes from Fannie/Freddie/FHA, a conduit lender, or a local bank. The point is that if money is free for anyone with a pulse, then it drives prices higher.

And I agree with that as a general statement.

HOWEVER, such free money was available EVERYWHERE during 2004-2007. Why then did some markets go up WAY more than others? If you are correct, than all markets should have moved together.

I’m saying that there are lots of other factors at play, NOT just availability of finance, and so it is absolutely false to assume that you can cause prices in two markets to equalize simply by making the availability of finance the same in those two markets.

I’m also saying that we have decades of data prior to 2000 that show this to be true.

Even if you were to equalize availability of finance across the US, you would still see differences in prices, related to supply/demand, incomes/job availability, tax rates, climate, crime, etc., just as we have seen for decades.

 
Comment by Ben Jones
2014-08-13 15:35:35

‘If you are correct, than all markets should have moved together.’

They pretty much did, time wise. From Montana to Florida to the North-east to Alaska to Hawaii, and almost every place in between.

‘Why then did some markets go up WAY more than others?’

My opinion is the level of speculation. Remember the equity locusts? They sweep into Oregon or Idaho: boom, up go the prices. They moved into Nevada, same thing. Of course there will be some variations, if only because of different economies. But as I’ve pointed out, a house in Palo Alto cost about the same as the one I grew up in in N. Texas, when I was born. There were sustainable blue collar owners in the bay area not that long ago.

Just do this exercise; what would house prices be in California if the caps were the same? I’ve pointed out before that the Phoenix FHA cap is IIRC $100k lower than Flagstaff. Lo and behold, that’s pretty close to the gap in the medians. Two hours apart and the incomes are significantly higher in Phoenix.

 
Comment by Rental Watch
2014-08-13 16:40:59

“But as I’ve pointed out, a house in Palo Alto cost about the same as the one I grew up in in N. Texas, when I was born.”

Aside from finding that very hard to believe (prices were already expensive in Palo Alto when my great aunt moved there in 1946), the biggest change in the CA housing market occurred increasingly after CEQA was passed.

In 1970, CA passed CEQA. While projects that were on the books (approved projects) could continue, new projects were severely hampered. Usually cities do their planning a decade or two ahead of time. Over time, the older projects were burned off, and new projects were slower to start, CEQA took hold, and supply of new homes was hindered and the addition of new supply slowed to a crawl. CA built:

1970’s: 2.1MM homes (added 3.7MM people, 1.8 new people per new home)
1980’s: 2.1MM homes (added 6.1MM people, 2.9 new people per new home)
1990’s: 1.1MM homes (added 4.1MM people, 3.7 new people per new home)
2000’s: 1.4MM homes (added 3.4MM people, 2.4 new people per new home)
2010-2013: 235k homes (600k decade pace; added 1.1MM people so far, 4.6 new people per new home).

Prices in CA vs the rest of the country diverged LONG before the caps were changed–and it was on the heels of CEQA.

“Just do this exercise; what would house prices be in California if the caps were the same?”

Marginally lower, but definitely not the same as Omaha.

And you should do this exercise; What would house prices be in California if CEQA had never been passed?

My answer: A LOT lower. Perhaps still not the same as Omaha, but a hell of a lot lower.

 
Comment by Rental Watch
2014-08-13 17:04:45

To put the number of people per housing unit into perspective.

The US (ex-CA) has 277.8MM people
CA has 38.3MM people

The US (ex-CA) has 119MM housing units
CA has 13.8MM housing units

The US (ex-CA) has a total of 2.33 people per housing unit.
CA has a total of 2.78 people per housing unit.

It doesn’t seem like a big difference until you do the math.

If you want to magically create enough housing units in CA to make its ratio the same as the rest of the country, you would need to add 2.6MM homes.

This differential wasn’t nearly as bad pre-CEQA. Now, we’re at least a decade behind on housing development…and it’s getting worse.

 
Comment by Housing Analyst
2014-08-13 17:26:18

“Why then did some markets go up WAY more than others? ”

They didn’t. Percentage wise they all rose at roughly the same rate.

Remember… prices were falling nationally before 1998.

 
Comment by Rental Watch
2014-08-13 18:40:29

No they didn’t. Directly from the Case Shiller. Values in January 2000 to peak in the 20 markets they follow:

Phoenix: +127%
Los Angeles: +174%
San Diego: +150%
SF: +118%
Denver: +40%
DC: +151%
Miami: +181%
Tampa: +138%
Atlanta: +38%
Chicago: +69%
Boston: +82%
Detroit: +27%
Minneapolis: +71%
Charlotte: +36%
Vegas: +135%
NYC: +116%
Cleveland: +23%
Portland: +87%
Dallas: +26%
Seattle: +92%

Percentage-wise, they were all over the map. The worst offenders were in the “bubble states” (which is why they were called “bubble states”) of CA, NV, AZ, and FL.

 
Comment by Housing Analyst
2014-08-13 19:09:05

Yes they did. CS excluded years 1997-2000.

 
Comment by Rental Watch
2014-08-13 19:42:17

LOL.

OK then, CS data from January 1997 to peak (only the Dallas series started after 1997):

Phoenix: +175%
Los Angeles: +271%
San Diego: +248%
SF: +217%
Denver: +87%
DC: +184%
Miami: +219%
Tampa: +169%
Atlanta: +63%
Chicago: +96%
Boston: +146%
Detroit: +61%
Minneapolis: +115%
Charlotte: +52%
Vegas: +159%
NYC: +170%
Cleveland: +42%
Portland: +105%
Dallas: +26% (only from 2000)
Seattle: +157%

 
Comment by Housing Analyst
2014-08-13 19:47:03

Post the link.

 
Comment by Rental Watch
2014-08-14 00:02:03

http://us.spindices.com/index-family/real-estate/sp-case-shiller

Under the “Additional Info” dropdown menu below the “Factsheet” dropdown menu, there are a number of links to Excel files. You need to click on the one called “Home Price Index Levels”.

This spreadsheet has the indices for each of the 20 major markets Case Shiller tracks.

http://us.spindices.com/documents/additionalinfo/20140729-103542/103542_cshomeprice-history-0729.xls?force_download=true

 
Comment by Rental Watch
2014-08-14 00:04:36

Sorry, had to put the kids to bed…the link will post after Ben has had a chance to monitor…the link is the the S&P Case Shiller page.

 
Comment by Housing Analyst
2014-08-14 17:53:26

You better look at your spreadsheet again. Each location had it’s own peak and trough at different times. And each one are within 15% of each other.

Percentage wise they all rose at roughly the same amount.

 
Comment by Rental Watch
2014-08-14 19:08:25

LOL. You are the worst “analyst” I’ve ever seen.

Location: Min Index Value / Max Index Value / Difference Min to Max

Phoenix: 82 / 227 / 175% (min to max)
Los Angeles: 73 / 274 / 273%
San Diego: 72 / 250 / 248%
SF: 69 / 218 / 217%
Denver: 75 / 152 / 104%
DC: 88 / 251 / 185%
Miami: 88 / 280 / 219%
Tampa: 88 / 238 / 172%
Atlanta: 83 / 136 / 65%
Chicago: 86 / 169 / 96%
Boston: 74 / 182 / 147%
Detroit: 64 / 127 / 97%
Minneapolis: 79 / 171 / 116%
Charlotte: 89 / 136 / 52%
Vegas: 90 / 235 / 161%
NYC: 80 / 216 / 170%
Cleveland: 87 / 123 / 42%
Portland: 91 / 187 / 105%
Dallas: 100 / 139 / 39% (only from 2000)
Seattle: 75 / 192 / 157%

Los Angeles had the greatest move, min to max–an increase of 273%. Cleveland had the smallest move, min to max–an increase of 42% (I disqualified Dallas due to lack of data).

 
Comment by Housing Analyst
2014-08-14 19:29:21

And you’re the most dishonest we’ve dealt with.

It’s not a min/max calculation. Try floor/ceiling.

 
 
 
Comment by Housing Analyst
2014-08-13 09:39:20

With 4.4 million excess, empty and defaulted houses in CA, why build more ?

Comment by Kidbuck
2014-08-13 15:51:20

A meaningless number, by itself. How many are crap shacks? How many are in crappy locations? How many are ugly boxes bereft of any style and grace that were thrown up for $55 per sq foot?

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Comment by Rental Watch
2014-08-13 16:43:13

It’s also a meaningless number because it’s completely made up.

 
Comment by Housing Analyst
2014-08-13 17:19:31

It’s reality whether you agree with it or not and it’s not going away.

 
 
 
 
 
Comment by Ben Jones
2014-08-13 07:19:24

‘LATHROP – The nearly 11,000 homes that will be constructed at River Islands will drastically alter the landscape of whatever school district ends up serving the students that fall within its boundaries. ‘

‘Right now, even though home sales have been skyrocketing, the first resident isn’t set to take ownership until Aug. 21.’

Wow, I haven’t heard the news about why this place needs 11,000 houses. Is there a factory coming in? If so, it must be a big factory.

Comment by Rental Watch
2014-08-13 09:03:27

I’ve never understood Lathrop (the demand for housing there).

A few local points though:

Amazon is building a 1MM square foot distribution center in neighboring Tracy. Tracy has infrastructure problems which (unless it has already been fixed) is hindering their ability to build a lot more housing.

Tesla acquired a 430k square foot facility in Lathrop for manufacturing.

Neither of these add up to enough demand for 11k homes, but combined they probably add 1,000+ new jobs to the area in the near term, and are indications of business locating in the area.

HOWEVER, there is another significant item not talked about on this blog in the northern Central Valley, called California SB 5. This is a law passed in CA that requires flood mitigation measures to be taken to protect new development from a 200 year flood. This is significant because forever, FEMA required only mitigation for 100 year floods to be able to get flood insurance.

So, there is a HUGE amount of land that now is VERY expensive to develop in the Central Valley (that wasn’t very expensive to develop pre-SB 5).

If you are Lathrop, and you have land outside of the 200 year flood zone, you will pull folks that would have purchased homes in the neighboring cities who now can’t build the homes.

And let me reiterate….11,000 homes is a hell of a lot of homes, and will probably take 20 years to build-out, so I’m not saying that Lathrop “needs” 11k homes today, or even in the medium term. What I am saying is that there are regional issues that are hampering development in the area and signs of industry coming into the area.

Comment by Housing Analyst
2014-08-13 09:41:02

Nonsense.

There is no no demand for housing in CA. Demand has been plunging statewide for years now.

 
 
 
Comment by MacBeth
2014-08-13 08:45:10

“‘The real driving force is preservation of wealth,’ said luxury home specialist Lee Ann Canaday of Laguna Beach, who has been attending real estate expos in China for the past three years. ‘They still see the United States as a safe haven.’”

And they couldn’t have found a better country in which to accomplish this.

At least some reporters are catching on - that the United States no longer is interested in generating wealth, that instead, it’s focused on preserving it and acquiring it from elsewhere - namely through redistribution.

Comment by RioAmericanInBrasil
2014-08-13 11:21:06

the United States no longer is interested in generating wealth, that instead, it’s focused on preserving it and acquiring it from elsewhere - namely through redistribution.

Here’s some charts illustrating the redistribution.

http://static4.businessinsider.com/image/4bbcb17c7f8b9a6218b70000-1200/look-at-the-wealth-gap-grow.jpg

http://currydemocrats.org/in_perspective/taxes_for_weealthy_fallen_dramatically.jpg

http://www.motherjones.com/files/change%20share.png

http://i2.cdn.turner.com/money/2011/02/22/news/economy/income_inequality/chart_income_inequality.top.gif

 
 
Comment by Puggs
2014-08-13 09:24:37

“Desert homeowners who had a short sale during the recession may have to wait two more years before they can borrow using one of the more popular kinds of home loans. Originally, they were required to wait two years after a short sale. Beginning Aug. 16, they will have to wait at least four years from the date of the short sale before applying for a loan conforming to Fannie Mae guidelines.”

Good! They should have to pay a tax surcharge when they re-buy to reimburse taxpayers for the short forgiveness the bank wrote off.

 
Comment by joesixpack
2014-08-13 09:26:55

‘He had four car payments and a boat and alimony. I had to tell them, ‘Nope.’ When we worked the math backwards, they qualified for $200,000

I wouldn’t loan him a penny, because when the car bubble pops, along with the boat bubble, he will have to move back in with the ex and bail on the mortgage.

Comment by Puggs
2014-08-13 09:34:36

This sucker pays retail for Everything. No wonder he wanted to buy now LOL!!!

 
Comment by joesixpack
2014-08-13 12:42:49

If he gets married and divorced a few more times he will have an alimony bubble

 
 
Comment by Housing Analyst
2014-08-13 09:35:14

Oh my word….

Contra Costa County, CA Housing Demand Falls To 1990’s Low

http://files.zillowstatic.com/research/public/County/County_Turnover_AllHomes.csv

http://picpaste.com/pics/98247604f6f0f3514714ba459a040445.1407947654.png

Are we all having fun yet? ;)

 
Comment by rj chicago
2014-08-13 09:36:29

Mornin’ peeps!!
Chart of the day - home price index - interactive - What catches my eye is the overall charts - green to red to green again - wonder what is round the bend as this series moves forward. Yikes!!

http://www.newyorkfed.org/home-price-index/#

Comment by Housing Analyst
2014-08-13 09:52:23

Given the fact housing demand has cratered to 19 year lows, how is this chart relevant?

 
Comment by Whac-A-Bubble™
2014-08-13 23:07:20

The Bernanke started QE3 helicopter drops of cashola on housing in early 2012, and it shows up loud and clear on your figures.

 
 
Comment by X-GSfixr
2014-08-13 09:37:18

Mom’s place is finally on the market. (she moved in with my sister in Texas).

- Doesn’t want to do anything more to spruce it up/correct issues, because she says “let the next owners do it”

-When I suggest that she might do well just breaking even, she replies “I’m not giving this place away……..”

Which is a dynamic I’m seeing a lot of…… a lot of “I’m not giving it away” inventory just sits, until it passes into the hands of more motivated sellers.

 
Comment by Housing Analyst
2014-08-13 10:01:02

Portland, OR Housing Prices Turn South At Peak Of Selling Season; Price Reductions Surge 132% As New Listings Erupt 63%

http://www.movoto.com/portland-or/market-trends/

 
Comment by Ben Jones
2014-08-13 10:18:55

‘Wall Street is running into resistance unloading commercial-mortgage backed securities. Bond buyers are pushing back as banks aim to sell at least $6 billion of the debt in August in the busiest U.S. summer since before the financial crisis for securities backed by loans tied to properties such as strip malls or skyscrapers. After overlooking deteriorating underwriting standards for months, investors are becoming more selective as geopolitical turmoil sparks a flight from risky assets, according to Bank of America Corp. analysts.’

“Investors couldn’t get enough of these deals three weeks ago,” Scott Buchta, head of fixed-income strategy at New York-based brokerage Brean Capital LLC said in a telephone interview. “The world view has changed.”

Wow, I hope they didn’t pay too much three weeks ago.

Comment by Ben Jones
2014-08-13 11:11:42

‘Italy Slides into Recession as German Output Falls’

 
 
Comment by Housing Analyst
 
Comment by Ben Jones
2014-08-13 11:04:31

‘Southern California home prices rose 7.3% in July compared to a year earlier, the smallest gain in more than two years, a research firm said Wednesday. The July figures, released by CoreLogic DataQuick, indicate the region’s housing slowdown deepened last month. Compared to June, the median home price dipped 0.5% to $413,000.’

‘The slowdown largely came down to more supply and less demand. Investors continued their retreat in July, after flooding the market with all cash offers last year. Absentee buyers—mostly investors—purchased 23.6% of homes last month, the lowest level since December 2010. All cash purchases also declined.’

“Prices came a long way in a couple of years, and now a lot of would-be buyers just can’t stretch their finances enough to buy in today’s more conservative lending environment,” CoreLogic DataQuick analyst Andrew LePage said.’

 
Comment by taxpayers
2014-08-13 11:36:39

http://finance.yahoo.com/news/japans-economy-shrinks-1-7-april-june-govt-013314722.html

japan’s sales tax financing of keyne’s SHT fails

SHOCKING !

 
Comment by Housing Analyst
2014-08-13 13:51:44

Bellevue, WA Housing Prices Plunge 10% YoY; New Listings Escalate 129% As Sellers Slash Prices

http://www.movoto.com/bellevue-wa/market-trends/

 
Comment by rj chicago
 
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