The Void Left By The Drop-Off In Investors
The Union Tribune reports from California. “The median price for a home in San Diego County fell from September to October, but the pace of annual appreciation still ticked up. The pace of annual home price appreciation has been slowing since peaking at 24.1 percent in June 2013, led largely by investor activity such as foreclosure resales. It has been in the single digits since April, with activity in the market down each month compared to the same in the prior year. Andrew LePage, a CoreLogic DataQuick analyst, said that consumer homebuyers haven’t flooded the market since investors exhausted the supply of foreclosure properties. That’s made for a markedly slow 2014.”
“‘We’ve yet to see traditional buyers fill the void left by the drop-off in investor and cash buyers, which began in spring last year,’ LePage said. ‘New-home transactions are still running at about half their normal level. The resale market is hampered by constrained inventory in many areas, in part because some people who want to put their homes up for sale still haven’t regained enough equity to purchase their next home.’”
The Los Angeles Times. “The Southern California housing market took a step back last month, as home sales fell and price gains slowed. The economy is improving and mortgage rates aren’t likely to soar, factors that will produce enough demand to make price declines extremely unlikely, said Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate. Gabriel said he expects prices to appreciate 4% to 6% next year. Richard Green, director of USC’s Lusk Center for Real Estate, is unsure middle-class incomes will grow. There’s little evidence middle-class incomes are set to improve, he said, and price appreciation is likely to slow to 1% to 2% next year. If homeowners build less equity, they’ll find it harder to trade up to a bigger house, he said.”
“Given the weak price gains, Green said Americans should stop viewing their house as an investment and instead see it as a long-term home that they can afford throughout the life of the loan. ‘You should make a hard calculation whether it costs more to own or more to rent,’ he said.”
The Los Angeles Daily News. “The Southern California housing market continued wallowing last month, with sales sinking to a three-year low for October and the year-over-year price increase the smallest in 28 months. Last month, sales of new and previously owned houses and condominiums in all six of the region’s counties fell 4 percent from a year earlier, to 19,271 — but 18 percent below the October average of 23,413 properties — CoreLogic DataQuick said. The median price fell 7 percent to $410,000.”
“‘The investor part of it — buying on spec or to rent it out — has tapered off quite a bit,’ said Michael Carney, executive director of the Real Estate Research Council at California State Polytechnic University, Pomona. ‘The tapering off in home prices is a good thing. To have those large increases in home prices is not a good thing.’”
The LA Downtown News. ” Last December, Beijing-based Oceanwide Real Estate Group bought the 4.6-acre site of the Fig Central mega-project. The company is looking to build three towers, one with 49 stories and two others with 40 stories, with condominiums, hotel rooms and nearly 167,000 square feet of retail space. The following month, Shanghai-based Greenland Real Estate Group purchased the 6.33-acre Metropolis site, which had been stagnant for nearly three decades. Already the company is in the midst of construction on a $1 billion, multi-phase project that will create three condominium towers and a 19-story hotel.”
“Then in August, real estate investment firm Shenzhen Hazens snapped up the Luxe City Center hotel, also across from L.A. Live, and two adjoining lots for $105 million. The company is looking at a $250 million reworking of the site, according to the Wall Street Journal. That’s three huge Chinese investments in less than a year in Downtown Los Angeles. According to real estate and global market watchers, it may also just be the start of a flood of cash from China into the community.”
“The sheer mass of capital that institutional Chinese firms hold makes it difficult for some local players to compete, said Hamid Behdad, president of the Central City Development Group. As occurred during the Japanese boom, Chinese investors are able to pay more than market value if they treasure a particular asset. ‘How can local developers compete with the money and speed of investment of Chinese firms?’ he said. ‘I don’t know whether it’s good or bad, but it’s reality. They’re overpaying by a certain percentage, but for the developer it’s safer than just leaving the money in Chinese assets.’”
“That isn’t to say that there is no ceiling to what Chinese buyers will pay. Jones Lang LaSalle Vice President Rob McRitchie has closely watched the situation, and thinks there may be a pullback from Chinese investors. ‘Prices this summer, both for ground-up developments or acquisitions, got to the point where it didn’t make economic sense. I’m hearing prices of $200 a foot in the Historic Core and that’s just not sustainable,’ he said.”
The Potrero View. “It seems like everyone wants to live in San Francisco, and that’s reflected in residential rent and sales prices. In Potrero Hill both have jumped by 50 percent over the past five years, according to several real estate agents. In the last year alone prices rose by 20 percent. According to Susan Olk, a real estate agent with Zephyr Real Estate, the Hill has the lowest inventory she’s ever seen, which drives prices up. But there’s more inventory available now than there was in the spring, she added. ‘There’s been a bit of buyer burnout, so there’s more inventory available.’”
“The realtors generally agreed that the only way housing prices are likely to drop is through a macro change, like an earthquake or recession.”
The Concord Transcript. “Anxious homeowners questioned city engineer Rick Angrisani about a recent earth movement geotechnical monitoring report showing ‘there is a continuation of surface and subsurface movement’ in the vicinity of Pebble Beach Drive. A landslide was discovered in the Presley-built development in 2005. Six large dewatering wells and four inclinometers were installed last year to monitor further movement. Since then, one of the meters has been broken by earth movement, Angrisani said.”
“A homeowner claimed he had a contract with a potential buyer who rescinded the offer when an engineer’s inspection cited cracks in the street and other evidence indicating earth movement. ‘On the ridge, I think the city has to get involved,’ homeowner Juanita Jester said, claiming that she was not informed of the earth movement when she bought from the original owner.”
Earthquakes, falling housing prices, Fukushima radiation, mass scale poverty, crime and pollution.
That’s the California menu.
Sounds like the streets are paved with gold in California! Hey- If I promise to grossly overpay for a crappy 1 bedroom condo in a run down neighborhood near San Francisco, can I also get a gaggle of bums and addicts to urinate in the vestibule?
There is no need to overpay for a SF condo to enjoy the company of their many bums and addicts.
“There’s little evidence middle-class incomes are set to improve, he said, and price appreciation is likely to slow to 1% to 2% next year. If homeowners build less equity, they’ll find it harder to trade up to a bigger house, he said.”
“There’s little evidence middle-class incomes are set to improve …”
Which means one should scratch off this source of buying power. The other source of buying power appears to be from borrowed money back by equity rather than borrowed money backed by incomes, however …
“If homeowners build less equity, they’ll find it harder to trade up to a bigger house, he said.”
But the building up of EQUITY is directly related to the building up of PRICE, and price is directly related to the availability of BORROWED MONEY. And if incomes are not “set to improve” in order for this borrowed money to materialize then then all this improvement of price will depend on the improvement of equity, which in turn will depend on the improvement of price.
And if you care to look closely at this you just might discover some sort of financial circling going on.
“some sort of financial circling going on”
Feedback loop. On the way down it’s a “death spiral”.
Who needs it, with so many all-cash foreign and hedge fund investors running around, snapping up housing right and left at ever-improving prices?
Oops…
I think I see it.
With investors and flippers out of the market, only one result: CRATER. It doesn’t have to be new foreclosures or exactly how it happened last time. Pimps and cheerleaders wake up. Half the market is now gone. They’ve run that con already and they won’t be coming back. Without investors and flippers the truth of excess supply is exposed.
Anyone who buys now is a fool.
‘The median price of a single-family home sold in October in San Diego County was $496,750, down 3 percent from September but 5 percent higher than the same time last year, the San Diego Association of Realtors reported. ‘Homes aren’t staying on the market long, so homeowners who are thinking of selling are in a good position,’ said Leslie Kilpatrick, president of the SDAR Board of Directors. ‘While inventory has grown, the most sought-after properties sell quickly, so buyers need to be prepared to act. This is not the time to sit on the sidelines if a move is in your future.’
Given that house prices there are 10x household income, moving as far away as possible would be wise.
http://www.utsandiego.com/news/2014/may/22/hsh-home-affordability-median-income-mortgage/
My FIL, who is semi-retired from a career in construction law, noticed all the freshly-graded land on our recent drive through North County San Diego. He was curious about why so much vacant land was sitting bare and idle.
I guess it’s hard to recognize a new McMansion tract home development when all the bulldozers are mothballed.
I am thinking the same way, there is still some fools that worked really hard and want to move. However, if you can wait it out and see what homes is actually sold at what price, then that’s a safer bet. I notice homes in my area is not selling when the house is over 500k. I do however feel sorry for families have to settle for smaller home at the 400k range when that used to get you a bigger home
Give it time John. That $400k “home” will be back to $120k before too long. Right about what it’s worth.
Tbe market will come back after the Souper Bowl.
BAAAAAAAhhhhhhhhhhhhh
I’ll see you a
condo hotel-and raise you a floating condo hotel
‘Our elders in California tell us this state is a global leader in higher education, but kids today can’t find space at public universities, and those who do are running up huge debts.’
‘We are told California is deeply committed to public education, but our elders fund those schools as if this were a poor Southern state. Our politicians trumpet recent statistics showing California leading the country in job creation, but our unemployment rate remains well above the national average.’
‘In the face of broken promises, the generations in California have reversed roles. Younger generations are driving and smoking less, and committing fewer crimes than our elders did. Our elders live large on retirement benefits and the last generation’s big run-up in real estate values. We live on budgets with bigger college debts and housing debts and tax bills.’
‘Our leadership reflects this upside-down reality. Elected officials are supposed to be creative and future-oriented. But our governor, who got re-elected without bothering to offer an agenda for his next term, is 76; our U.S. senators are 81 and 73.’
‘While those who are supposed to bring new ideas are wedded to the past, those charged with imposing new limits are young and ambitious. Voters just confirmed Goodwin Liu, 44, and Tino Cuéllar, 42, to the state Supreme Court. Is this inversion the reason we are so aggressively restrained, adopting regulations for everything from grocery bags to the hours of high school football practice?’
‘Our elders have accumulated such wealth that we need them to help us buy houses or fund our kids’ educations. Gov. Brown, in a late campaign appearance, let loose a rant after a reporter asked why he hadn’t offered a fourth-term agenda.’
“This is my 12th year” as governor, Brown chided. “No one’s ever had 12 years of constant press conferences and discussions and letters and what do they call those things – State of the State speeches. … So what don’t you know? What don’t you know that you think I could tell you now in front of all these people?”
‘But our governor, who got re-elected without bothering to offer an agenda for his next term, is 76; our U.S. senators are 81 and 73′
When we were younger we thought
Everyone was on our side
Then we grew a little
And romanticized the time I saw
Flowers in your hair
Cause it takes a boy to live
But it takes a man to pretend he was there
So then we grew a little and knew a lot
And now we demonstrated it to the cops
And all the things we said
We were self-assured
Cause it’s a long road to wisdom
But it’s a short one
To being ignored
During the 2010 election, I found a stack of original “Jerry Brown For Governor, ‘74″ bumper stickers in an ANTIQUE STORE next to a stack of the “Jerry Brown for Governor 2010″ vintage. Lol.
It would have a great Republican billboard to have a collection of vintage Pelosi, Boxer, Feinstein and Brown bumper stickers next to the recent ones and the tagline: “California, Land of Lifetime Employment.”
the generations in California have reversed roles. Younger generations are driving and smoking less, and committing fewer crimes than our elders did. Our elders live large on retirement benefits and the last generation’s big run-up in real estate values. We live on budgets with bigger college debts and housing debts and tax bills.’
Mmmm, smells like a falling standard of living.
“Can you say ‘falling standard of living’? I knew you could.” — Mr Rogers
‘RealtyTrac today released its U.S. Foreclosure Market Report™ for October 2014, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 123,109 U.S. properties in October, an increase of 15 percent from the previous month but still down 8 percent from a year ago. The 15 percent monthly increase was the largest month-over-month increase since U.S. foreclosure activity peaked in March 2010.’
“The October foreclosure numbers are not a complete surprise given that over the past three years there has been an average 8 percent monthly uptick in scheduled foreclosure auctions in October as banks try to get ahead of the usual holiday foreclosure moratoriums,” said Daren Blomquist, vice president at RealtyTrac. “But the sheer magnitude of the increase this year demonstrates there is more than just a seasonal pattern at work. Distressed properties that have been in a holding pattern for years are finally being cleared for landing at the foreclosure auction.”
‘Scheduled foreclosure auctions increased from a year ago in 29 states, including Oregon (up 399 percent), North Carolina (up 288 percent), New Jersey (up 118 percent), New York (up 89 percent), Connecticut (up 60 percent), Nevada (up 53 percent), Alabama (up 41 percent), Washington (up 36 percent), Indiana (up 36 percent), California (up 19 percent) and South Carolina (up 18 percent).’
‘Among the nation’s 20 largest metros, those with the five highest foreclosure rates were Miami (one in every 363 housing units with a foreclosure filing); Tampa (one in every 395 housing units); Baltimore (one in every 435 housing units); Riverside-San Bernardino in Southern California (one in every 495 housing units); and Chicago (one in every 553 housing units).’
‘There were large increases from a year ago of completed foreclosures in Baltimore (up 212 percent), Hagerstown-Martinsburg (up 178 percent), Visalia (up 60 percent) and Orlando (up 23 percent). While scheduled foreclosure auctions increased dramatically from a year ago in Cape Coral-Fort Myers (up 170 percent), Lakeland (up 678 percent) and Orlando (up 33 percent).’
It is fascinating to me that properties that were financed in the housing bubble of 2005 & 2006 are just now getting through the foreclosure process. It will really be a decade for the bust to be cleared of the flotsam and jetsam. Amazing.
Add the houses financed over the past two years to the picture. It’s a flight of stairs, and we’re still at the top.
These are new defaults J._Fraud. 2010 vintage mortgages.
Rentalwatch, get your crow-eating bib on:
‘Scheduled foreclosure auctions in judicial foreclosure states, where foreclosures are processed through the court system, increased 21 percent from the previous month and were up 3 percent from a year ago and. Scheduled foreclosure auctions in non-judicial states increased 27 percent from the previous month and were up 14 percent from a year ago.’
California notices of default: 5,899
So those in the know are deciding there will never be a better time than now to off load distressed property, huh.
I wonder why that might be. I’m sure someone can give us a long winded explanation of it all, with lots of cherry-picked stats.
R._Fraud? Oh R._Fraud? Where art thou R._Fraud?
So much for the often repeated lie that California is done working through its foreclosure inventory backlog.
That was the pump. This is the dump.
There will always be foreclosures. The question is whether the number of foreclosures is abnormally high.
An increase of 19% is not as good as it being down, clearly, but it doesn’t speak to the actual numbers (only as compared to last year).
700% higher than long term trend isn’t abnormally high?
You really are a fraud R._Fraud.
Where are the new delinquencies? Show me significant increases in new delinquencies foretelling the next large burst of distress, and I’ll tie my bib on for that crow.
Otherwise, this is all just the pig moving through the python.
By the way, 5,899 NODs in the state is background noise.
There are something like 6 or 7 million loans in the state. A 1% default rate annually would be 60k or 70k per year. 5,899 is right in that range.
At the worst, the non-current loan rate in CA was something like 15%.
The national delinquency rate is still 700% higher than longterm trend and rising. And it’s higher in CA.
https://www.propertyradar.com/trends/california
For those who care to see data. Note no significant move upward in NODs, just a steady trend downward.
4.4 million excess empty and defaulted house and a foreclosure rats 700% higher than long term trend.
You seem to be mistaking delinquency rates with foreclosure rates.
High delinquency rates and uncured defaults adds to the giant bucket of distressed borrowers (which will most likely become foreclosures and short sales). Foreclosures and short sales drain that bucket.
An increase in foreclosure rate (draining the bucket of distress at a faster pace) without a corresponding high number of new delinquencies is nothing more than clearing the market of prior defaulted loans.
The very important question, that is not addressed by Realty Trac, is “how full is that bucket of distress”? The best data I’ve seen that addresses this particular point is from Black Knight’s “non-current” loan data, and the NY Fed in their quarterly update on household credit, where they spell out the amount of different delinquencies in various states (how many are 30 days, 90+, etc.).
No, no, you said the non-judicial states had already dealt with the foreclosures. You just don’t like the data.
Oh dear…
‘Maybe, just maybe, there are limits to what people will pay to live near San Francisco Bay.’
‘Red-hot home prices in the Bay Area are showing signs of pleateauing, according to new figures out Thursday. The median price of a house in the nine-county region ticked down a bit in October to $601,000, its lowest level since March, according to CoreLogic DataQuick.’
‘The madness that was the San Francisco housing market in the first half of the year seems to have finally cooled down just a bit, according to Paragon Real Estate’s latest market report. Some sellers appeared to be pushing the limits of pricing, and the number of expired or withdrawn listings from August through October was up 18 percent over last year.’
“No, no, you said the non-judicial states had already dealt with the foreclosures. You just don’t like the data.”
With respect to that statement, what matters is how many homes with mortgages are non-current (some level of default/delinquency/foreclosure).
This is how many defaulted homes have yet to have been dealt with…and from all the sources I’ve found, I like that data just fine as it pertains to CA.
With house prices @ 10x income, we know what to expect.
No R._Fraud. Respond to the blog owner.
And in case you were wondering WHERE I get the data?
CoreLogic’s most recent National Foreclosure Report:
CA’s foreclosure inventory: 0.6% vs. national average of 1.6%.
CA’s serious delinquency rate: 2.2% vs. national average of 4.2%.
NY Fed’s most recent Household Credit Report:
CA’s % of mortgage debt 90+ days late: about 2% vs. national average of a bit over 3%.
CA’s Quarterly Transition Rate into 30+ days late (new trouble): about 1.1% vs. 1.5% for the national average.
CA’s Quarterly Transition Rate into 90+ days late (another measure of new trouble): About 0.8% vs 1% for the national average.
CA has the lowest transition rate of any of the 11 states specifically called out by the Fed.
And from Black Knight’s most recent mortgage monitor:
CA’s non-current loan rate is the 7th lowest in the country at 4.3% vs. the national average of 7.4%.
Of the 4.3%, 0.6% are homes in foreclosure (as compared to the national average of 1.8%).
And for those who may assert “cherry picking”, look through the reports and see if you can find negative numbers with respect to CA’s overall level of distress…the only cherry picked number is the one that has been plucked from RealtyTrac’s press release..
http://www.soundsnap.com/crow_caw_single_long_01_sfxbible_ss00164
Of course R._Fraud. Now count the defaults, foreclosures and delinquencies not counted as a result of CA’s foreclosure moratorium.
You paid a 250% premium for a depreciating asset R._Fraud. I’d be in denial too.
‘In response to a column I wrote a few weeks ago, a reader sent me an email about another blighted property in Modesto. “After reading your article … it prompted me to bring your attention to Casa Blanca Court on the south side of Coolidge Avenue, just west of Sunrise Avenue,” wrote Dennis Wilson. “This (is) an eyesore that degrades every single property that is located on Coolidge.”
‘Eyesore is putting it kindly. It looks like a ghost town picked apart by vandals. There are 11 identical one-bedroom, one-bath bungalows in various stages of decay. Only two are occupied. The others are windowless, some are doorless, and all are filled with trash and remnants of past tenants and squatters.’
‘Sang Lee, a Bay Area resident who owns 15 other properties in Modesto, purchased the court for $350,000 in June.’
“I try not to go into areas which require way too much management,” he said. “Casa Blanca Court is one of the more dire situations I have gone into.” Securing the court with a wrought-iron gate is his top priority before starting construction. The bungalows’ current “open air concept” is an invitation to squatters and vandals.’
“I can put up windows right now, but that’s not going to help,” Lee said. “I can put them in and they will be broken in 48 hours.”
‘Addressing the city’s conditions, Lee will submit more detailed drawings and plans for this expansion in order to get building permits, which could take one to three months. “My goal is to move as quickly as they will let me,” Lee said. “I’m putting hundreds of thousands of dollars into this. I was never interested in buying it and keeping it a slumlord-type of situation.”
“I can put up windows right now, but that’s not going to help,” Lee said. “I can put them in and they will be broken in 48 hours.” ??
Modesto crime rate 2000-2012…Some of those numbers are stating to approach 2 X national average;
City-data.com crime rate (higher means more crime, U.S. average =
301.1)
408.0 491.0 473.7 529.6 556.5 525.3 498.2 514.6 489.7 470.9 446.9 442.2 526.4
Read more: http://www.city-data.com/city/Modesto-California.html#ixzz3Ixji9OrL
Do a Google map street view of Casa Blanca Court, Modesto, CA. LOL, bet those crapshacks would fetch $500K+ in parts of L.A., once the interiors are properly LOAP’d.
““Anxious homeowners questioned city engineer Rick Angrisani about a recent earth movement geotechnical monitoring report showing ‘there is a continuation of surface and subsurface movement’ in the vicinity of Pebble Beach Drive. A landslide was discovered in the Presley-built development in 2005. Six large dewatering wells and four inclinometers were installed last year to monitor further movement. Since then, one of the meters has been broken by earth movement, Angrisani said.”
“A homeowner claimed he had a contract with a potential buyer who rescinded the offer when an engineer’s inspection cited cracks in the street and other evidence indicating earth movement. ‘On the ridge, I think the city has to get involved,’ homeowner Juanita Jester said, claiming that she was not informed of the earth movement when she bought from the original ”
And, someone , in their brilliance, formed a group that collects a fee from the owners to mitigate damages caused land movement.
I spent 30 years or so adjusting earth movement, and I don’t think you can collect enough money from homeowners to cover the losses and mitigate the damage. When the land moves little can stop it.
But it must have made the sellers feel good to think that would help them sell the houses.
The irony here is that the city knew about this before they allowed building there. The city made the developer organize the mitigation fund.
I would ask , under theCPRA, to see documents and calculation they used to establish the fund and the possible losses used in the calculations.
In effect, is seems to be like an insurance programs and should be under the Department of Insurance.
Perhaps,that is!