‘Is This Going To Be A Train Wreck?’
A pair of reports from California. “Loma Linda resident Bradford Botanes expected the market to be slower now than when he bought his three-bedroom, two and one-half bathroom house 18 months ago. ‘It’s slower than what I expected,’ he said, noting that no one has toured the house, on the market since April, in about a month.”
“The once-sizzling Southern California housing market is cooling. ‘The froth is definitely out of the market,’ said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. ‘There are a lot of price-reduced stickers on those for-sale signs.’”
“Many potential sellers not wanting to miss the top of the market have listed their properties for sale. Real-estate listings for much of San Bernardino and Riverside counties and the San Gabriel Valley, excluding Pasadena, increased 46 percent to 56,371 for the first five months of 2006 compared to the same period last year.”
“The last four months have been record-setting months for new listings since the listing service began tracking in 1999, said spokesman Gordon Maddock. ‘May was the strongest month for listings when 12,000 residential properties were placed on the market,’ Maddock said.”
“‘I’m torn between wondering if we are going to be alright or is this going to be a train wreck,’ said (realtor) Ken Scott. Scott, like many in the industry, is concerned what will happen when some of the dicey creative mortgages convert to market rates next year: ‘Will households find themselves in trouble?’”
“For the first five months of this year, the number of notices of default, the first step in the foreclosure process, increased 34.8 percent to 2,853 in San Bernardino County, said John Karevoll, an analyst for DataQuick.”
“‘The key word is that the ARMS are ‘starting’ to kick in,’ economist John Husing said. ‘Most of them have a two-year kick, so the ones that are hitting this year are the ones that were taken out in 2004. The ones who are potentially in danger are the ones who took loans out in 2005,’ Husing said. ‘They could have problems in 2007.’”
The Daily Bulletin. “There is no question home prices have skyrocketed during the past few years. Cities such as Fontana, where the median price was $135,000 in the spring of 2002, had a median of $430,000 in April. ‘The boom is over,’ Kyser said. ‘There really is not a lot to enjoy about the housing market right now.’”
“Everyone has heard the stories, anecdotal and otherwise. The guy down the street who listed his house six months ago, has cut the price twice and still can’t get anyone to buy it. The neighbor who has open houses every weekend and still hasn’t been able to sell. The streets with sign after sign, FOR SALE.”
“‘We have reached a transition point in the market,’ said Bill Velto, realtor in Upland. ‘We are at a point where buyers are more cautious and sellers are more aware of buyers’ concerns.’”
“Or to put it a little more bluntly…’To sell a house right now, you’ve got to want to sell,’ Velto said. ‘You’ve got to need to sell.’”
“Indeed, it appears that a good bit of the excessive inventory on the market isn’t really on the market. Numerous sources have suggested that many of the homes that are for sale are listed at unrealistic prices.”
“Locally, Velto speculates that roughly 60 percent of the homes currently listed for sale aren’t priced realistically. ‘Take any sample of 10 homes and the chances are six of them are priced higher than they should be,’ he said.”
“That price, he said, can be anywhere from about 7 percent up to 20 or even 30 percent above current market value. It’s a price set by sellers afraid they’ve already missed the crest of the market and fear they’re losing money every day they don’t sell.”
“But taking a long-range view, Redlands resident Karen Oliver still thinks buying a house will pay off as an investment. She and her husband are planning to buy a second home in Redlands as part of their retirement portfolio. By renting it out, ‘long term it will be good deal,’ she said.”
‘Fontana, where the median price was $135,000 in the spring of 2002, had a median of $430,000 in April.’..That price, he said, can be anywhere from about 7 percent up to 20 or even 30 percent above current market value. It’s a price set by sellers afraid they’ve already missed the crest of the market and fear they’re losing money every day they don’t sell.’
How over-priced is Fontana again?
Considering that at $130K they were way overpriced… Well you know the rest.
People don’t forget that Fontana, is pretty much an armpit.
The joke is Fontucky.
It is truly hideous
When I was living in the IE, Fontana was famous for a few things: Sammy Hagard, Hell’s Angels, KKK and a closed Fontana Steel plant from which the economy never recovered.
Oops, I meant the Kaiser Steel plant.
Now it’s a nice race track.
Fontana is still an armpit, but with all the recent development now it’s not quite in the same league as Romoland and Homeland; i’t more like an armpit in the league of, say, Perris.
If you know the IE you’ll know how funny the above sounds…
That’s right, I forgot about the race track! That is nice. Those places you mentioned are funny as well. Now if they can only find a way to spruce up Rubidoux…
LOL - I think Rubidoux will never make it, but I’ve been surprised before, especially by Wildomar, Elsinore and Menife. I’m starting to think there is no commute too far for southern californians in search of $500,0000 houses!
OMG Rubidoux !!! I passed through that town (if you can call it one) when I was staying at the Mission Inn in Riverside.
I thought I had stepped back in time. I was looking for some place to fetch breakfast, figured I’d find an IHOP, Dennys , something. Nope, not a fking thing in that place. I reminded me of a near abandoned route 66 town.
Worked in Lake Elsinore for years. Not as bad a town as most people think it is (if you only work there), but I’ll tell you, you couldn’t pay me to live there!
Every vertical surface is painted with grafitti and the schools are full of illegals. Some areas are OK and the LE Storm minor league baseball stadium is a spectacular place to take the kids to watch some baseball. Just make sure when you leave after dark that you get right onto the freeway.
I can’t beleive this article I just read at http://www.realestatedecline.com ! Marin, California median price drops $79K month to month
OK. Ben has it posted now. It’s all good.
I read that San Bernardino county median price was 361,000. IT is a stretch for fontana to have median of $430,000 in april of 2006: have you seen fontana lately. The south half is all grimy truck yards and truck service shops( along the 10 frwy) and large construction yards and warehousing operations.
The northern half is seeing a lot of recent development of new home tracts and shopping centers: perhaps all those new tract homes are being priced a bit high.
Rubidoux( back in 2003 anyhow) was a depressing mix of ragged rustic homesteads, trucking yards, some new scattered business parks, vast empty fields, all situated near the Santa Ana flood plain.
Gots ta go ta Rubidoux!!!
“Or to put it a little more bluntly…’To sell a house right now, you’ve got to want to sell,’ Velto said. ‘You’ve got to need to sell.’”
These articles are getting better with each passing day. Yeah Velto, and those that ‘got to need to sell’ just set the comps for the rest who didn’t need to sell but will now need to sell. And all those who don’t need to sell will be paying higher property taxes then those who just bought lower.
And if your loan amount is above the ‘need to sell’ line…your ARM is SOL IMHO.
I love the “you can’t just want to sell, you need to sell” bit. There may not been as many in that category right now, but you can bet after the next rate hike there will be…
http://www.BuyMoreHouses.com
There will be more of them after every quarter that the ARM resets. This is just the beginning. Buyers should hold back and wait till late 2007/2008 when the bulk of the ARM resets would be putting maximum pain on sellers.
nope. On the prop taxes, under P-13, you can apply for a reduction. Ended up being a thriving business in early 90’s.
And as values rise again your property taxes rise back up to your purchase price basis (eventually) and in this case 10-15 years.
I can honestly say that I just sold my home in Fontucky in January. You cannot believe how much these people think their homes are worth. We bought ours for 142K in ‘96, sold for 400K, making a nice profit. However, the guy next door with 1 extra bedroom and a little more land and a pool, originally bought for 150K, wanted 570K for his home last winter. Hardly anyone even visited. These prices out there are nuts. BTW, who wants to commute either to or from that area. I did 120 miles round trip before deciding that my quality of life was more valuable. Now I live 4 miles from work, go home for lunch, wife is stay at home, no debt, and a tidy savings. So what if I don’t own, but rent. No more responsibility and next time I buy I will buy out of state and put 50% or more down. No more big mortgage payments for us.
Waaaahoooo! Good job, Dan! (I’m serious!) Stay at home wife, no debt, short commute. Life is golden.
Most savvy Southern Californians realize that commute time is the #1 indicator of quality of life.
It is a hiring criteria when interviewing for jobs because it also affects job performance.
But the USA elected a moron that doesn’t care about this urban planning. You are soo in love with cars in California and in the States in general, that your politicians work for big oil and the car industry. Urban planning is almost perceived as communistic ideology. And the real drama is that places like China and India are adopting the same horrible model, instead of doing like Europe and Japan.
The result is that the US will be more and more dependant on the Middle East. You really desserve much much higher oil prices. Not just higher interest rates will bust the real estate bubble. Your love affair with these pieces ecological shit cars like Hummers and 4×4, will accelarate the destruction of it also. Suburbia will also kill the real estate.
We have already had the flame war on that topic.
Robert Cote and I have agreed to disagree.
There are a number of points of view on this topic and data can be shown to support either case.
The urban planning in this country is by and large pathetic. To not have mixed use neighborhoods is exceedingly stupid on lawmakers parts and ultimately in our worst interests long term. Yuppies in suburbia have this “not in my neighborhood” elitist mentality when it comes to zoning, etc. We are WAY too reliable on the automobile in this country. When Bush said we are addicted to oil, he was right (however begrudgingly I say this). I would love a blog on this as it pertains to housing.
Click on Robert Cote’s name he has a blog - Exurban Nation.
I prefer walkable neighborhoods. Robert likes cars.
OK. Now I think I get it.
Perhaps this explains why Cote kept trumpeting the notion that LA is “so densely” populated.
It’s a fact, not a notion.
Do I have to do this again?
Large cities with greater densities than LA in North America include:
NYC
SF
Mexico City
Vancouver
Chicago
Boston
Newark
Montreal
Philadelphia
Yonkers
Miami
Toronto
DC
Go find it at wikipedia.
I suppose next you and he will be claiming people don’t use cars in those places.
Did mine! I quit after 14 1/2 years of continually-worsening commute.
let’s see…if you had put 142K in 96 in the Fidelity Investment Grade Bond fund (a fairly conservative fund), you would have had 266K.
You did live in this house, of course, but each year you needed to pay property taxes, maintain the house, and when you sold, you lost 6% (so you only got 376K).
So you didn’t do badly!
But if this were an investment property, and you weren’t living there, it may have not really been all that great. If you had invested 142K in ‘96 in a 500-stock index fund, your average yearly return by 2006 would have been 8.3%. Assuming this wasn’t a first or second home (so no tax break when you sell), and assuming maintanence and taxes, but enough rent to just break even, you would have done better in the stock market…even through the dotcom crash of ‘99….
That’s not how it works. $142k in 1996 and sold in 2006 for $400k.
Assume 20% down and 5.5% interest (start at 6.0% refi to 5.0%).
$38k up front and $110k mortgage. First ten years of $650/mo and $20,000 off principal. Say $50,000 of money put to work. Interest after deductions $350/mo so $42,000 instead of $80,000 in rent. Waling away with $300,000 looks to be something like 60% return per year. No, the house was the clear investment winner.
I used the actual payments an 8% (no refi), tax benefits in the 25% tax bracket, 1% property taxes (growing at 12% annually), and flat rent savings of 11,300 annually and got a 15% ROI unlevered and 20% ROI for 50% gearing and 28% for 80/20. Pretty good investment no matter how you slice it (my mortgage assumption is particularly conservative). I don’t recall rates being that low in 96 but I could have been wrong. Return would have been higher if they refi’d in 2001 or so.
You lie. I don’t usually post such provocative and inflamatory comments but you are lying. Not, mistyping, not in error, You are deliberately lying. You try to get away with: “1% property taxes (growing at 12% annually)”… No. In Fontana property taxes are growing at 2% or less annually. I’d normally accept 12% as a mistype of 2% with the “1″ accidentally hit in front but not in this case. Regardless, of course they refied. Who didn’t? Seriously, got an example that isn’t an extreme outlier?
Purchasing RE 1996-2001 has so far proven to be the most lucarative small investor product since the tech-boom of 1998-2000. Past performance is not indicator…
Holy crap, the normal mortgage (20% down) returned darn near 30% with my conservative assumptions, I wasn’t arguing with you. Around here the assesments tend to rise with the property value so the tax amount rises even if the rate doesn’t (I knocked a couple % off the growth rate for no one wanting the assesments to rise too quickly and I shouldn’t have used a constant growth model but I was in a hurry, sue me). Yeah if they refied they probably could add 5%-10% to their return.
My guess on implied rent savings is probably a little low (and more important to the return calculation than quibbling about an extra couple hundred on the tax assesments). I wasn’t trying for a CPA blessed/AIMR approved performance calculation just something more than a one line guess.
I’ll give you a tenative yes on the last point, levered purchases of real estate have proven to be the most lucrative small investor product of the last 50 years, but if you find anyone offering 80% gearing on equities they would trounce real estate returns, as most good hedge funds proved since 2001, too.
Mea culpa, prop 12 is teh evilness. Kick the return up a little, and start taxing people for the value of their assets rather than hosing the newcomer.
i put 5k in a house in 97 and sold it in 2004 for a 4000% profit talk about leverage
Four mile commute back to the stay at home wife means some good lunch time, even if you don’t have time to have lunch.
“But taking a long-range view, Redlands resident Karen Oliver still thinks buying a house will pay off as an investment. She and her husband are planning to buy a second home in Redlands as part of their retirement portfolio. By renting it out, ‘long term it will be good deal,’ she said.”
Karen Oliver and her husband have never had a good idea or they would not now be living in Redlands, CA.
And there’s no way they “pencil” positive on a rental property in redlands right now. Looks like they want ot raise ‘gator for years to come.
and if you want to “invest” why buy two homes in the same area? Pick another area based on some research–not just because it’s near you. You don’t pick stocks or other investments because the company’s HQ is down the block from you, do you?
Actually it’s not unwise to buy locally because it is easier to manage and you (hopefully) understand the area better.
When I look to pick through the bones of this in a few years I will be primarily looking locally (San Diego). Although a rental in Vegas would be great to writeoff “business trips”.
Actually I find Redlands kind of cute.
You can still buy Victorian houses there for under $400k, which is overpriced for the area but not a bad deal for a beautiful old house.
What kind of Victorian?? We looked in Redlansd 2 years ago and all we found were ranch homes from the 60s. The Victorians in that price range need another 100k poured into them just to make them safe. Wiring, foundation, plumbing. That’s not an easy fix and maintaing a house like that has to be a love, because it’s surely not a good investment.
http://www.BuyMoreHouses.com
Well, I only looked very casually at about the same time, so your information is probably better than mine.
What killed it for me was the smog (as the poster below mentioned) and the heat.
I wouldn’t want to raise kids in that unhealthy air. Isn’t it smack dab in the middle of the worst air quality in the US?
There are a lot of really standout old victorians in and around the riverside central city district, which by the way is deteriorating very rapidly.
I like Redlands too, especially the historic section of downtown and the Smiley Heights area.
The problem is you still have the unbearable heat and smog in summer. Take a picture of the Univ. of Redlands (my alma mater) in the winter and you see beautiful snow capped mtns. in the background. Take same picture in summer and see only brown sky. I have never missed breathing in all the smog since leaving the IE in ‘98.
I agree. No matter how historic and “nice” the fact that the air is so spoiled completely negates any positive upside. Bad air trumps any and all other ‘niceness’. All of those places suck (as in an exhaust pipe). Gross. I mean, “gag me with a spoon”.
OT and hypothetical: I read an article on CBS yesterday (sorry no link) about a study that concluded SoCal was due for a major earthquake that could potentially cause thousands of deaths and tens of billions of dollars in property damage. God forbid, if this ever happens, how would this affect the bubble here? I’m wondering if this type of event could have a silver lining for FBers (or at least the ones with good earthquake insurance) if the insurance companies or taxpayers financially bail people out. Could they claim damages based on the last appraised value or last comps? Would a major earthquake be a boon or bust to FBers? Thoughts?
I think it would be a definate BUST. Earthquake ins is not required, and I’d bet that most fb’s are not shelling out the extra $$ for it. THe only bailout is usually in the form of low interest loans for repairs, but how many fb’s can afford another loan on top of their already outrageous mortgage payments?? Not many.
That would be my hope, in a sane world. Given the generousity of the USG with the deficit $$$$ they blow and the Katrina precedent I wouldn’t be the least bit surprised if everyone in SoCA got $1M to calm their nerves after a major quake. In fact, I’ll bet they’re counting on it.
Any likely USG quake response should be worked out and detailed well in advance of the big one so all expectations can be crushed early on. Otherwise the $40B in spending on Katrina will look like lunch $$$$$$ in comparison…
perhaps they’d only reimburse for repair/replacement value? You can build an “800K home” for under 300K, especially if its really just a shack (more like 100K replacement value in that case).
These 800k homes in CA have a $100k replacement value. People don’t have EQ insurance for a number of reasons.
1. Denial, it won’t happen here and if it does, it won’t be bad and my house will survive it.
2. It’s very expensive and the deductibles are very high.
3. The Katrina put. Californians believe that the rest of the country will bail them out, just like what happened with Katrina. Why pay for insurance when the rest of the country will pay for it anyways?
I live in San Diego and don’t have earthquake insurance.
2. It’s very expensive and the deductibles are very high.
And that is the reason.
Quake insurance has a $50K deductible and they want to charge me $5K a year. It’s just not likely enough to pencil out for me to do that, especially since the insurance company will probably go bankrupt anyways in a disaster big enough for me to really need them.
In the case of a quake that big, it’s just an act of god and I would be happy if my family came out safe. Screw the house. I’ll clear the lot and live in a trailer if I need to.
Quake insurance has a $50K deductible and they want to charge me $5K a year. It’s just not likely enough to pencil out for me to do that, especially since the insurance company will probably go bankrupt anyways…
Its a real dilemma. My own compromise is to pay myself
the premium and invest it in an aggressive mutual fund.
If disaster strikes, at least I have something. If it doesn’t
I have some extra $$$ that I never factored into my
retirement plan.
In effect, I am self-insuring.
Its a tradeoff to do it this way, but I think worth it.
99% of the people are NOT doing this. They spend the money elsewhere instead of doing what you are doing.
I am sick of bailouts. How can we change this?
Can one of you run for President? We need a new good one.
Total BUST. Most people in So Cal do not have EQ insurance because it is very expensive. If you are wondering about earthquakes and RE do a search for the 1994 Northridge EQ on google. I know at least 5 people who just handed the keys back to the bank because they had no EQ insurance and no $$ to pay for the repairs.
The Feds (read us taxpayers) will pay to have their homes rebuilt. No need for insurance anymore. Katrina, etc have proven time and time again, good old Uncle Sam will bail you out.
There is no good earthquake insurance.
Last time I shopped for it the terms were:
Premium $600/year, roughly twice as much as regular homeowner’s insurance.
If you have a claim payout was 10 cents on the dollar for losses.
Try homeowners insurance down here in sunny south FL. Thanks to hurricanes, it’s going to cost me (shopping now) about $2,500/yr. for coverage. And no, I don’t live in a McMansion, just a relatively new 4 bed house for me, my wife, and 2 kids. I’m lucky too … I don’t live in the area where you have to buy separate windstorm coverage. That would probably tack on several hundred more dollars. And don’t forget that 2% deductible for hurricane damage, such that if you actually get a storm, you have to pay thousands of dollars out of your own pocket to get the repairs done. Ugh.
At least Floridians can collect for damages. The out-of-pocket on earthquake insurance is 10% to 20% so you might need to shell out $100K before the policy even kicks in on your $500K house. And many common types of earthquake damage are excluded. Basically, your house needs to be a total loss before earthquake insurance is going to help you. If there was a 2% deductible on earthquake, I’ll bet almost everyone would have it.
Most people don’t carry earthquake insurance because of the high deductible AND the fact that the value for most homes is in the land, not the building.
Dude, no offense, but $600/yr is nothing. Seriously.
That $5k IS something per year for a 50k deductible.
I would pay…
It was a condo for 30K of contents coverage only.
Payout was 10 cents on the dollar.
oh - no way! Contents only?! OK - I agree w/you!
Dont you remember the last earthquake in the SFValley? It was the end of the 40% price slide after the aerospace layoffs, rodney king, riots….and all the illegal in the apartment buildings camped out in the parks for weeks….
Dont you remember the last earthquake in the SFValley? It was the end of the 40% price slide after the aerospace layoffs, rodney king, riots….and all the illegals in the apartment buildings camped out in the parks for weeks….
I was there. Scary as all hell. 6.9 my @$$. It was way more. Damaged buildings all over, not just SF Valley.
CA people: make sure your house is BOLTED to the foundation and make sure all your large pieces of furniture are bracketed to the walls. You do not want your kids crushed.
This is great advice. And everyone (CA or not) should have an emergency kit that will help them survive three weeks without assistance. Don’t forget your pets! I always make sure I have an extra bag of food which normally lasts two weeks - with rationing will last them three,
Definitely not just a 6.9. But remember how they kept adjusting it, I believe because they were trying to avoid FEMA payouts???? Anyhow, I’m a CA native an know of NOBODY who has EQ insurance. Due to the expense and deductibles, most Californians assume FEMA will take over because the EQ would have to be horrendous to clear the 20% deductibles. Insurance is just not worth it to these people. (You should have seen the insurance fraud after the 1994 quake, BTW. I can’t blame the ins. companies for not wanting to take this on.)
Yeah, historically there’s an earthquake of this magnitude every 200-300 years. It’s been 250 years. So the “due” date should be taken with a grain of salt. In our lifetimes — most probably, but any day — no.
Here’s the link…
http://cbs2.com/topstories/local_story_172152905.html
Actually, the link I was referring to is a similar one below.
http://www.cbsnews.com/stories/2006/06/21/tech/main1738005.shtml?CMP=ILC-SearchStories
Excerpt:
The new study, which analyzed 20 years of data and is considered one of the most detailed analyses yet, found that stress has been building up since then, and that the fault could rupture at any moment.
Sounds like any day to me.
i survived the 71 sylmar qhake and the northridge 7.5 it was not good.my grandmas house in granada hills was of the foundation and i saw firsthand levelled apt buiding with dead folks underneath.the big one will deystroy los angeles.the last one caused commuters from santa clarita to drive to tijunga and back to valley.how about a 3 hour commute.i was 3 feet in the air off my bed in northridge quake and my building was red tagged.it aint pretty.
The report from I believe scripps (published in Nature magazine) states that the southern section of the San andreas fault is overdue for a big(7.5+)quake due to built-up stresses along that section of the fault.
A quake of that Magnitude with epicenter anywhere in the Palmdale/Phelan/San Bernardino section of the Fault would easily kill thousands and cause 10’s of billions in property damage.
A quake of that magitude only occurs about every 300 years on average in the southern half of the SAF so we are talking about probabilities.
The guy down the street who listed his house six months ago, has cut the price twice and still can’t get anyone to buy it.
Bubblefucius say:
Man who wait until last fall to put house on market same as man who wait until last-call to pick up girl; both in for ugly ride.
“Man who wait until last fall to put house on market same as man who wait until last-call to pick up girl; both in for ugly ride.”
Now, that’s funny!!! Thanks, rainman
Good one
In my best Arnold voice. “That was a good one!”
Hey! Someone should compile all of the Bubblefucious “words of wisdom” and stick ‘em on blog. Wouldn’t they be a hoot to read this time next year??
Great job, Rainman! You are definitely one of the most creative writers on this blog. You crack me up.
BayQT~
I vote for a best of (which would be all of) Bubbles the Clown. Bubbles only makes rare appearance these days though…?
Yeah! I like that. “The Best of….”
Cool beans, Huggy.
BayQT~
Bubblefucius confess:
This one Bubblefucius crack himself up. First time laugh out loud in eighty years.
thanks
Reaching for a napkin to wipe the coffee off my face, keyboard and screen.
Can houses be Coyote Ugly? Oh, yeah, I guess they can. Ben has photos to prove it!
“Man who wait until last fall to put house on market same as man who wait until last-call to pick up girl; both in for ugly ride.”
Just had my first “alcoholic beverage sprayed all over keyboard” occurrence…
Now that’s some funny sht…..
This kind of commentary has me addicted to this blog.
I can’t believe this guys!! They were saying before in the same newspaper that the Inland Empire will not be affected by the bubble because the job outlook is good and all the people from Orange county are coming here bec. of lower prices, and now that it is very obvious they are changing their tunes, i would like to smack them in the head. Sorry just venting. i live in Loma Linda and i have check the MLS listing and there are houses that are vacant and for sale. I also notice that people just guess on the prices they list their houses for. i saw one where it is 100,00 more than another house in the same neighborhood and the diffrence between the two are not much.
I’m mad right now because a couple of people i know just bought houses this month and they are going to be screwed. and i feel sorry for them because they just got reeled in because everybody is saying its a good investment. I’ve been reading this blog now since april 2005 last year and ever since then if anybody ask me what i think or that i should buy i direct them to this site. but lately they have not talk to me about buying because they now i will shut them down and say its not the right time.
Well that’s my rant for the day, sorry.
lovpunani
ps.
Inland Empire right is starting to heat so get ready for the BIG ELECTRIC bills for those 3000 sft. houses that needs to be cooled.
You know it’s gonna be bad if you see these McMansions with all the windows open and fans a blowin all day and night! To my eyes this would be just to funny.
What’s up with all the Escalades with their windows rolled down?
They want you to see who’s driving. Can’t see through all that dark ass tint, ya know.
BayQT~
LOL! I am waiting for the McMansions (We call them Plywood Mansions in Pretensia the capital of Fake Forest) to be converted to multi unit apartment living.
I like the term “garage mahal” to describe McMansions.
Garage Mahal is a new one to me! Very nice
I can’t stop laughing. I love it.
Perfect!
I’m also partial to “Acrapolis.”
Don’t forget the Faux Chateau!
There should be more of these.
Trouble is, these McCrackerboxes don’t have the structural integrity for proper conversion to multi-family. Lots of new structural work might make it cheaper to scrape and rebuild.
Yep, today is a flex your power now day.
Basically, the State encouraging people to use less power to avoid rolling blackouts.
http://www.fypower.org/now/
http://www.caiso.com/outlook/SystemStatus.html
And what a load of BS that is.
It’s not even warm around here yet. The beach cities are around 71 degrees today. If they’re calling alerts now, we’ll be in the dark for most of August and Spetember.
The Cal-ISO site is particularly Orwellian. In addition to the Conserve-O-Meter (I Kid you not), They also have the Alerts, Warnings, and Emergency Status (AWE) for the electric network. So I guess if there’s a short circuit, you would have Shock and AWE.
We just need to build some power plants and cut the cr4p with these “flex your power” alerts. There are already punitive rates charged to customers for over-baseline usage, so the incentive to conserve is in place without the cutesy web sites and nightly lectures from the local newsclowns.
FYPower is a utility funded program that was VERY effective when Enron was manipulating CA’s market, it saved ratepayers BILLIONS of dollars that would have otherwise gone to Ken Lay and Jeff Skilling.
As they say, the generals always fight the last war.
Take a look Orange County you’ll see people on In Huntington Beach and other local areas, where they still start there listing at 850k plus. And those who have been listing for awhile drop prices with the same amount of room, bath, sqft, and are 150k less then these New listing.
Lot’s are still listing at the same price and been on the market since December.
Some home you’ll see back on the Market and listed for the same price they listed it 3months ago??????????
I see this everyday!!!!!
“Many potential sellers not wanting to miss the top of the market have listed their properties for sale….”
Oops — too late.
My wifes family is in the Inland Empire (I just love that name. Empire of what?) The word coming in from down there is that it’s getting ugly.
Empire of debt.
Indeed! You must have read Bonner’s book. For any that haven’t already, log on to Amazon and get a copy of Bonner’s “Empire of Debt”. Good stuff.
For inquiring minds:
http://www.inlandempire.us/news/2006/01/how-inland-empire-got-its-name.html
BayQT~
The obvious pattern I’m seeing is that all the pain is concentrated in these marginal communities, at least for now. A colleague of mine just sold his house in Washington, DC in 3 days, for top dollar. It wasn’t even a nice house at all, but it’s in a fashionable part of DC so he pocketed a cool $1.65 mm. At least for the moment, the elite neighborhoods don’t seem to be getting hit, it’s only these godawful exurbs and crappy towns that never should have been expensive in the first place.
That’s the roadmap. The last to appreciate is the first to depreciate. Just like junk stocks in 2000. Think KTEL before Intel.
Well, except when that isn’t true, as Marin County (highest median income county in the world) is leading the market down in the Bay Area (along with Napa County) at -2.9% median YOY for May.
See: http://marinrealestatebubble.blogspot.com/
It has been 30+years since I left the Bay area, what is the commute like between Marin and the City? Is theGolden Gate a log Jam? What about parking? The reason I ask is that IMHO - Marginal pricey exurbs that are not close to good public transportation are going to get smacked. In Chicago, the gangs have been exported to the suburbs including pricier suburbs. The former inner city is developing into gentrified pockets that are within walking distance to the loop. I expect the city proper to be the last place to collapse. 10 Years to hit the cities.
I moved here (Bay Area) from Chicago 32 years ago….and what a difference 30 years can make….in both places. I remember when a Sunday drive from Berkeley to Stinson Beach was wonderful…I remember the tree-lined neighborhoods where I grew up in Chicago. But my last visit to Chgo (2000) was such a disappointment…I can’t imagine what it looks like now.
Damn, I feel old. LOL!
BayQT~
QT - I have not been to Chicago in 2 years! I will be going to Chicago next Thursday to see my beloved Brewers take on the Loser Cubs.
Hoz,
Since the Golden Gate started issuing Fastrak transponders a couple years back, the morning southbound backup has all but disappeared. The choke point is really in San Rafael (which Caltrans is working to widen - but is taking their sweet time. )
Chris…I haven’t been in San Rafael since I moved from El Sobrante 3 years ago. I used to go shopping there from time to time. At that time, the SR bridge crossing wasn’t that bad and neither was the traffic IN San Rafael….have things heated up that fast??
BayQT~
I agree nice homes in nice neighborhoods of Davis CA are still going for top dollar. They think it is agreat place to raise kids, it appears all the purchases are made by Doctors. This is the only exception I have seen in the market.
I started to track the local numbers for myself. Everyone in Davis has been saying that it can’t happen here because Davis is special yada yada yada. So here are the Davis housing numbers from Zip Realty:
6/22/06
Single Family Homes 215
With reduced prices 110
Percentage 51%
Condominiums 34
With reduced prices 14
Percentage 41%
Davis_renter,
Zip Realty isn’t showing me the number of reduced prices anymore. I am doing the same thing as you for Simi Valley, and they stopped showing the number of reduced prices when I check the box for that.
Perhaps I am doing something wrong all of a sudden?
Yikes. I’ve had a feeling that Zip may be pressured into not showing the price reduceds in some areas.
In some Seattle ‘hoods it went up to 50% reduced and began a near frenzy among realtors and RE boosters in general. This is NOT the kind of info that helps them convince buyers that Seattle is a hot market and you better buy in while the buying’s good.
I really hope that it was just a temporary problem with the program and that they’re not shutting you down in Simi Valley.
Yeah your right, if they are still paying for it now they will get burned.
The erosion is general but the smaller more volayile markets are by definition going to show the effects first and largest. For instance; San Berdoo/Riverside is still up on sales and price. Huge volume, huge momentum. Takes time to turn a big ship. Doesn’t mean it isn’t turning.
But pain? No pain at all. Yet. People settling for $400k profit instead of $500k profit might seem painful to them but don’t try and call it pain to the rest of us.
LowTenant, I couldn’t disagree more. Did your colleague sell in the last month? I noticed what I think was a dead cat bounce in late Feb. through April. But as of mid-May and June, nothing–and I mean nothing–is selling in DC. I can’t believe how many houses in Bethesda and Chevy Chase are just sitting on the market. Friends of mine are trying to sell their place in DC proper, and haven’t gotten a single bid. They have a nice place in a super-desirable neighborhood and they’re priced below comps but no one is buying.
Fashionable part of DC….would that be Georgetown?
BayQT~
This guy’s house was on a nice street near Chevy Chase Parkway in NW, nothing particularly great but a neighborhood sought out by a lot of young professionals with kids. He sold it in mid-May. For the record, I agree that these neighborhoods will eventually feel it, and that the peak prices won’t be seen again for 6 or 7 years at least. However, the sellers in these areas are still not suffering, and they won’t take as big or as sudden a hit as you’re seeing out there in VA and MD.
Hell yes, it is going to be a train wreck or is that train coming in for a hard landing.
The train left the stationed an hour ago, hit 80 mph cruising speed and the bridge 5 miles ahead is out.
There is a bridge repair crew on site, but unless they work 30 hours a day, 10 days a week, it won’t make a difference.
Even if they do get the bridge repaired, the emergency repairs may not hold and the train is in for a hard landing.
Malapropism intended.
Yes and a cheerleader is standing by the tracks with a sign that says: “The bridge is fine, all is normal”.
The cheerleader is spinning that sign by the way
Yes, but I think the train is going to be levitated to a permanent high plateau.
MjM
I sold my OC house/ guest house in late 04’ as part of my “capital preservation” plan. Moved back to the IE in my humble little 1100 sf home I’ve owned since 85’. I can tell you it’s like trying to potty train a new puppy around here when people ask why I did it. I can roll up the newspaper, shove their head in it and say bad move bad…yet they just keep crapping all over the place.
Anyhow, I’ve got a front row seat to the carnage and will likely end up in prescott when the smokle clears…
I like that analogy.
Talking sense to RE bulls is like potty training a puppy.
It’s what you’ve tried to do at OCR but unfortunately, jon doesn’t want to potty train his puppies yet.
You know, Jon would not post my last two replies…They might have been pathetic attempts at humor and after I re-read them, I just blew it off as my poor grammar or straying too far from the subject, but after you mentioned that he started censoring your post, I lost a lot of respect for that blog. Your posts were always articulate and well written. I haven’t checked back there to see if the site’s been overrun by bulls yet…
Thanks for the kind words.
Potty training puppies is a lot of work, it is dirty work and not all that glamorous. Also, the pupies don’t like it very much.
I don’t blame Jon for not wanting to have potty training happening on his blog, it is just simply too messy with the general populations understanding of finance and economics.
I have lurked at OCR and the level of discourse has dropped.
There are 2 articulate bears left and not a single articulate bull.
But puppies can learn and will grow up to adore you. The RE bulls will keep crapping until their bottoms are sewn shut and they will NEVER adore you.
‘The boom is over,’ Kyser said. ‘There really is not a lot to enjoy about the housing market right now.’”
Oh there is A LOT to enjoy about the housing market right now if you are sitting back & watching it implode on itself
I predict that no matter how high inventories get the average D.O.M. will never exceed 60 days because of the habitual practice of re-listing. There could be a hundred years of inventory on the market and the avg. D.O.M. would probably still be about 50. The price reduced ads are a joke too. Yeah, price reduced from an unrealistically high asking price, not the original purchase price of just a few short years ago. Give me a break, these people will try every trick in the book.
If 50% of the listings are price reduced and 50% have been relisted after 30 days with lower prices, then 100% have been price reduced. Another realtor trick of the trade.
Why is he selling his house 18 months after he bought it? If he bought it as an “investment” he has no right to complain! All speculative investments, whether gold, houses, or stocks, may go up or down.
I can’t stand these people who think it’s their G-d given right to make money on every speculative investment they make!
The problem is that they are not *real* investors. A real investor knows risks and knows that they could win or lose….and is prepared for that outcome. These specuvestors (sheople) are new to the game, as we all know, and are just flying by the seat of their pants. Somebody told them that RE prices always go up and that’s what they were expecting. When it didn’t happen like they thought, they pout. What we are seeing is a bunch of adult pouting and *uh oh’s* but no clear admission of error on their part.
Oh, well. They should have used the brain they were born with.
BayQT~
Had they actually had a brain in the first place, they wouldn’t have gotten themselves in this mother-of-all-bubbles. Anyone who could think rationally didn’t buy into a fundamentally unsound market.
“Oh, well. They should have used the brain they were born with.”
It could be that they are using it and that is problem! All knives start as dull pieces of metal, but it takes time and effort to form a keen edge.
OTOH, sharp knives end up as dull pieces of metal if not regularly sharpened.
“Or to put it a little more bluntly…’To sell a house right now, you’ve got to want to sell,’ Velto said. ‘You’ve got to need to sell.’”
You’ve got to lower your reservation price to a level which reflects the resurrected risk premium.
our local newspapers are now flat out lying about the real estate market,both the santa rosa press democrat,and the sf chronicle “reported” the dq news numbers for may,the chronicle even printed a chart shoing sonoma co with a 3.5% appreciation yoy in may when the dq news report shows a loss of.2%,they also reported a median of %582,500,when dq news reported $532,000…the pd was just as bad.they both claim to be quoting dq news!so three cheers for michael coit of the pd,and kelly zito of the sf chronicle,exemplars of the new journalism.
“so three cheers for michael coit of the pd,and kelly zito of the sf chronicle,exemplars of the new journalism.”
Yeah, what’s happened to Kelly Zito (SF Chron RE reporter)? She had a really good run there of being somewhat honest and realistic about BA real estate. No more. That article was shameful, and sneaky to boot. Well-fed (and housed) editors must have applied the thumb-screws.
I’m sorry to post this whole article but it is chock full of good quotes from Appleton-Young and friends.
http://www.mercurynews.com/mld/mercurynews/14867139.htm
Slowdown in forecast
REPORT PREDICTS EVENTUAL DROP IN HOME VALUES BUT NO DECLINE IN PRICES
By Sue McAllister
Mercury News
Home prices in the Bay Area and the rest of California will level off for at least two years after edging higher in 2006, according to a closely watched economic forecast expected today.
The prediction is part of the University of California-Los Angeles Anderson Forecast for California. For years, Anderson economists predicted California home prices would tumble.
The tumble never came. Now, as home sales across the state are slowing, the economists are issuing a tempered outlook: Next year, they predict, home values will scarcely budge. In 2008, they could drop 4.1 percent.
The economists cautioned that the projected dip in home values is not a decline in prices. They actually expect home prices in California will stay flat and inflation will push values lower. The forecast is for the state overall — some areas may fare better, some worse.
“All the data show a major slowdown underway in California real estate markets, with a significant drop in sales and a very sharp deceleration of price appreciation in 2006,” economist Ryan Ratcliff wrote.
Joe Brown, who heads the region’s largest real estate brokerage at Coldwell Banker Silicon Valley, remains upbeat about the housing market. He expects the weather and the innovative spirit here to continue luring new residents. But Brown, a 26-year veteran of the local market, recently cautioned that buyers who plan to stay in a home less than five years need to be careful. Real estate moves in cycles, he said.
Meanwhile, the chief economist for the California Association of Realtors, Leslie Appleton-Young, recently revised her own statewide forecast. Last September she said the median price of an existing house in California would increase 10 percent this year; now she’s saying 8 percent. She expected a 2 percent drop in sales volume for 2006; she’s now predicting a decline of nearly 17 percent.
“Essentially, we got into a slower market quicker and heavier than we expected,” she said.
In “The California Report: At the Tipping Point,” which was released with the Anderson forecast, Ratcliff wrote that he expects some job losses in construction, mortgage lending and real estate sales. But he also predicts annual increases in employment, and for personal incomes to rise nearly 5 percent between 2006 and 2007.
Ratcliff anticipates a similar pattern in the Bay Area.
“Because the economy in the Bay Area is finally starting to get back on its feet, I don’t see another 1990- or 2001-type job loss,” he said, explaining that home prices rarely fall significantly unless they are preceded by significant job losses and a recession.
“A housing bubble is a significantly different thing than the Nasdaq bubble,” Ratcliff said. With a housing bubble, home prices flatten out as buyer incomes rise. With a stock market bubble, “sales activity goes through the roof and prices fall through the floor.”
Ratcliff writes that there are a number of variables that could still upend his soft-landing forecast, and even lead to a statewide recession. One is the potential for another large drop in manufacturing employment, another the unknown effect of the adjustable rate mortgages that became popular with buyers in the past few years.
Distress sales from homeowners squeezed out by a rising adjustable mortgage could “lead to a more severe drop in average home prices than we are predicting,” he wrote.
Appleton-Young believes about 520,000 resale houses will change hands in the state this year, down 16.8 percent from last year’s record high.
“It’s the first time in three years we’ve gotten the sign correct,” she joked, referring to the fact that for the previous three years she had also called for sales volume to drop — and then it surged to new records.
She said the Bay Area has the lowest supply of homes for sale of any region in California, but nonetheless “we have definitely transitioned into a market where buyers can take their time.”
Some clearly are taking a “wait-and-see attitude” toward making a purchase, Appleton-Young said, and some sellers are testing the market to see whether they can get the price they want for their homes. The result is slower sales and much more moderate price appreciation.
“Essentially, we got into a slower market quicker and heavier than we expected,’’ she said.
Shouldn’t that be, as a person who expects to be quoted in public “more quickly and more heavily than we expected?”
Not that bad grammar depreciates their prognostications within the general public, like they have a clue who David Liareah is or
Leslie A/Y (should be A/R “) ).
Rely on her! Being wrong two times out of three isn’t that bad! I once (once) had a Financial Advisor with the same batting average. He’s now toast.
Still bugs me big time, as they are the “mouths.”
REPORT PREDICTS EVENTUAL DROP IN HOME VALUES BUT NO DECLINE IN PRICES
Uh, correct me if I’m wrong but if something drops in value doesn’t it sell for less ? Is there a new math I don’t know about ?
The report is basically saying that nominal prices will stagnate for several years, while inflation goes on. So, the price will remain the same (in nominal terms) but it will be worth less because inflation will have eroded the value of money during that time.
Personally, I disagree with the report, as it has a few major caveats that are simply untenable (like, they do not know the effect of ARMs re-setting over the next few years - duh, it doesn’t take a genius to figure that out), but this stagnating prices (on the high plateau) is the classic position of those advocating a “soft landing.”
Yep. It definitely sounds like just another spin. I’m in the Bay Area (Dublin, CA) and I’ve been tracking the area (especially my neighborhood) very closely for over a year. I’ve seen price drops, incentives, my mailbox FULL of mailings from builders hawking their programs and communities, etc, etc. PLUS, the number of foreclosures has increased in the Bay Area (http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/02/03/BUGT5H1NAC37.DTL)…so what exactly ARE they talking about here? Yes, it’s the soft landing spin.
BayQT~
New terms:
sell ———– to dump, to unload.
Most owners trying to sell in today’s market need to take 10-15% off the price just to compensate for the interest rate differential which exists today from the previous few years. This doesn’t even begin to address how much needs to be shaved to compenstate for overspeculation. The average Joe and Georgina don’t understand this, so when they reduce their price by 5-10% and still don;t get any offers they are dumbfounded, and the existing glut of homes builds…………….
Did anyone else catch Appleton-Young claiming that a normal market is seven months of unsold inventory? It seems to me that all of the Realtors have always said that six months is normal. Is she trying to move the yardstick?
Also, does anyone know if the unsold inventory index uses seasonally adjusted sales figures? Since Spring and (depending on where you live) maybe Summer are the busiest times of the year for buying/selling, it’s important to know if the unsold inventory index uses seasonally adjusted sales figures. If those numbers are not seasonally adjusted, then the unsold inventory is going to skyrocket in a few months when the number of transactions falls. Thanks in advance for advice on this.
“Or to put it a little more bluntly…’To sell a house right now, you’ve got to want to sell,’ Velto said. ‘You’ve got to need to sell.’”
Would this verbage still be deemed a ’stand off’ between buyers and sellers?
I was just reading OC Weekly and Rebecca S’s column.
Guess who reads this blog!
She used the Upton Sinclair quote.
The Register? Here’s our favorite muckraker, Upton Sinclair: It is difficult to get a man to understand something when his salary depends upon his not understanding it.
Evem better she is bashing OCR at the same time!
Rebecca:
How about an OCWeekly follow up on the RE bubble in OC?
http://www.ocweekly.com/columns/commie-girl/commie-girl/25323/