People Are Nervous That Prices May Come Back To Earth
The Orange County Register reports from California. “Orange County home prices continued to rise through February but at a slower pace than in recent years, new housing figures show. CoreLogic reported that last month’s median home price – or price at the midpoint of all sales – was $610,000, down $8,500 from January, but up by $20,000 from the previous February. That’s a year-over-year gain of 3.4 percent, the second-lowest price appreciation rate in almost a year. It’s also just the ninth time in the past 29 years the median home price dipped from January levels. Los Angeles housing economist G.U. Krueger and some local real estate agents also noted many buyers struggle with affordability.”
“Realty One broker-agent Sherry Bahrami said buyers are balking at high asking prices, and sellers are giving in. ‘Sellers … softened their response and negotiated an under-asking (price) contract,’ she said.”
The Desert Sun. “Home prices sank to their lowest levels of the winter season in February, hitting a median of $283,000, according to CoreLogic DataQuick. Resale home prices fell by 10.3 percent from February 2015, down to a median of $287,500, CoreLogic DataQuick’s records show. New homes sold for a median price of just $327,000, down 5.6 percent year-over-year and by far their lowest level of the winter homebuying season.”
“‘It helps to know that over 50 percent of homes in the Coachella Valley are owned by non-resident owners and more than 70 percent of money generated in real estate transactions comes from those buyers,’ said California Desert Association of Realtors president Judy Horn. ‘America’s current economic uncertainty, coupled with the decline of Canada’s currency as measured against the American dollar, has a negative impact on our second home market and out of area investment in Coachella Valley’s real estate market.’”
The Lake County News. “Home sale prices in February edged down, but the number of sales was up, according to the Lake County Association of Realtors. LCAOR reported that the February median sales price of single family residences in Lake County pulled back by 18.24 percent when compared to the January 2016 median sales price. Distressed property sales jumped to 18.5 percent of the sales after falling to 8 percent in January. A number of different types of sales make up distressed properties including auction sales, real estate owned (foreclosed properties) and short sales, LCAOR said.”
“‘Even though the month to month median price went down the real estate market has been very active especially for this time of year,’ said 2016 LCAOR President Erin Woodward. ‘As inventories tighten and prices increase in surrounding counties more buyers will consider opportunities in Lake County.’”
The Marin Independent Journal. “The median price of a Marin home fell 4 percent in February, to $925,000 compared with the previous February, and sales dropped 3 percent. The median price of a condominium also dropped, going from $505,000 in February 2015 to $448,800 in February 2016, according to CoreLogic. There has been a lot of talk lately about ‘unicorns,’ new technology companies, many of them social media, with valuations of a billion dollars or more. While there has been a lot of funding of such ventures, the view today is that there may be too many of them and valuations might be affected, Dreyer said. ‘Some experts are cautioning that we’re at the end of a hot cycle,’ Dreyer said.”
“As goes Silicon Valley, so goes the Bay Area, so the economy and the real estate market might see an effect if the cycle ends. David Swaim, owner of Tam Realty in San Anselmo, said, ‘It’s still a strong seller’s market, it’s just starting to show signs of coming back to earth. People are nervous that prices may come back to earth later this year.’”
The Mercury News. “Silicon Valley luxury home sales rose sharply in February from the month before, though they dropped 11 percent from the level set a year earlier, according to Coldwell Banker. The median sale price of a luxury property in February was $2,550,000 in Santa Clara County, up 6.5 percent from the January median of $2,395,000 — though down 4.2 percent from the median of $2,662,500 in February 2015.”
“Arthur Sharif, an agent with Sotheby’s International in Menlo Park, called this year’s market ‘topsy turvy,’ with buyers’ confidence swinging this way and that, at least partly because of recent stock market fluctuations. ‘The underlying theme, I think, is that the go-go days of 2014 and 2015 are behind us,’ he said. ‘I think we’re going to see a little bit of sober reality.’”
“He said that homes priced between $2.5 million and $5 million ‘are staying on the market for a little bit longer time. And we’re seeing fewer multiple offers and the prices are down a little from where they’d been. And that’s true in Los Gatos and Saratoga and even in the holy grail of the market, Palo Alto. After what we’ve experienced for the last two years, it’s been a little bit of an eye opener.’”
From KCBS All News. “Real estate firm Trulia finds that starter home inventory is down overall by more than 40 percent since 2012, and in the Bay Area, investors are holding onto a large percentage of those homes. In the Bay Area, the median price of the homes that normally attract first-time buyers is higher than anywhere in the nation.”
“‘The shocking number that came out of the report was actually the share of income the starter home buyer, even if they can put 20 percent down on a home, would have to spend to service the mortgage, is like 110 percent of their income. That’s unbelievable. That’s uncharacteristic of the rest of the country, but that really is a sign that home-seekers are starting to look down the housing ladder,’ Ralph McLaughlin, Chief Economist for Trulia told KCBS.”
“‘It helps to know that over 50 percent of homes in the Coachella Valley are owned by non-resident owners and more than 70 percent of money generated in real estate transactions comes from those buyers,’ said California Desert Association of Realtors president Judy Horn.”
$283,000 to live in El Centro? Well, I guess you could supplement your food stash by fishing the All American canal. And those cool, dry summers are the $h*t!
Home sales in El Centro (chart) …
https://www.google.com/search?q=el+centro+ca&biw=1360&bih=651&source=lnms&tbm=isch&sa=X&ved=0ahUKEwi8oaT1rdnLAhVonoMKHXqVAwUQ_AUIBygC#imgrc=cxdaoX_3YIY3xM%3A
http://www.realtor.com/realestateandhomes-search/El-Centro_CA/show-price-reduced
$125k lots.
Did you look at the satellite view of the lot Ben ?? LOL…Out in the middle of BFE surrounded by open land as far as you can see….
And price dropped $24,900 in the last 3 months! Buy now or be priced out forever! HA!
$283,000 to live in El Centro?
Hey, it’s just a stone’s throw from cosmopolitan Calexico/Mexicali!
I don’t think I’ve ever been anywhere more miserable than Coachella in the summer. Thermal is the most aptly named town in the area.
“The median price of a Marin home fell 4 percent in February, to $925,000 compared with the previous February, and sales dropped 3 percent.”
I’ve been posting this link here for years but I don’t care at this point:
https://www.youtube.com/watch?v=sjSuMixiBX4
But there is no fraud occurring. Right?
‘Silk Gardens owner Terry Newcomb remembers vividly her customers having to walk across makeshift ply board ramps to get into her E. Main Street shop during the months in 1998 that the downtown beautification project saw the entire street completely renovated. The beautification project is just one bump in the 20-year span that Silk Gardens has called downtown Turlock home.’
‘While things started to turn around in 2010, the business has changed permanently. “It won’t ever go back to the heyday,” said Newcomb, who described young couples tasking her with decorating every room of their $700,000 home during the housing boom. “There are more choices now, but also people are more judicious with their money.”
I can’t view the entire article, but there’s this:
‘As thousands of new S.F. apartments open, some concessions for renters’
‘Thousands of new units opened in the past year across San Francisco, and developers are now offering rental concessions like a month of free rent and free parking.’
I was just in SF yesterday and counted 7 cranes, just from a single vantage point.
Imagine what rents would do if you waived a magic wand and removed rent control–a HUGE number of apartments would come back on the market…equilibrium rents would be way below where there are today.
‘The CEO of one of Alphabet’s subsidiary companies just proved how dead-serious Larry Page was when he said that blowing up the Google’s corporate structure would make it more “more accountable” for how it spends its gobs of advertising revenue.’
“The fiscal discipline era has now descended upon everything,” the CEO of Alphabet’s smart thermostat company, Nest, told The Information’s Reed Albergotti.’
‘Fadell says that Alphabet’s putting its financial squeeze on his company as well as all other subsidiaries. The message now, he says, is “hey, show us your business plan for the year. We’re going to hold you to those numbers.”
‘Fadell’s candid observation comes less than a week after news broke about another sign that Alphabet is tightening the reins and increasing its revenue expectations. After Google appointed a new CFO in Ruth Porat last year, analysts from Deutsche Bank wrote optimistically that her focus on disciplined spending seem to hint at the “dawn of a new era.”
http://finance.yahoo.com/news/googles-parent-company-alphabet-tightening-161846931.html
I know some people who work at Google (er, um, Alphabet)–most people around here do.
They are tightening the reins, yes. This is especially the case in the parts of the company that don’t make any money. Moonshots will get funded, but more and more, they will be looking to how the moonshots can generate revenue.
There was a recent rumor that they are putting Boston Robotics up for sale, because having a revenue generating product is too far away (10+ years).
On the other side though, the vast majority of employees work for their cash cow, Google (something like 90%+ of employees), and if those divisions have a way to grow revenues quickly with more investment, you can probably expect money to pour into them.
YouTube will invest heavily in content.
Artificial intelligence will become more fully ingrained in lots of their products (it’s already in search).
Google Fiber will get plenty of money for infrastructure expansion.
Search will make sure they have the best engineers working on the product.
Etc.
Engineers will continue to be paid very well. However, folks on the G&A side may get squeezed.
I think by far the bigger issue in the Bay Area will be VCs cutting off funds to their investments that don’t have a product that is working.
Think of Alphabet as a company that is made up 90% of employees who work on products that make a ton of money. The rest of the employees are working on speculative products.
Think of Venture Capitalists as companies that are are made up 10%-25% of employees who work on products that make a ton of money (and 10-25% might be generous–mainly this would be late stage investing). The rest of the employees are working on speculative products.
If the VCs start cutting back funding for companies that aren’t “making it happen”, those employees will be starting from scratch at a different company.
If Google starts cutting back funding for their companies that aren’t “making it happen”, I can easily imagine Alphabet trying to keep the best engineers in-house, redistributing them to other parts of the organization.
‘those employees will be starting from scratch at a different company’
Driving for Uber?
They’ll get on the welfare roster like everyone else in CA.
“California Is America’s Poorest State”
http://www.laweekly.com/news/california-is-americas-poorest-state-4177082
“‘those employees will be starting from scratch at a different company’
Driving for Uber?”
The reason tech is so strong in Silicon Valley is that smart engineers know that there will be lots of options (not Uber drivers) regardless of what happens to their current employer.
HOWEVER, if they work for 10 start-ups that all fail, they’ll get paid a nice salary, but never get the big hit. All those transitions are costly in terms of salary progression, etc.
Looks like they’re trying to get 4k for them… all the while the other end of town is emptying out.
‘the share of income the starter home buyer, even if they can put 20 percent down on a home, would have to spend to service the mortgage, is like 110 percent of their income’
I guess this could work if they can refinance in the first month or two.
‘There has been a lot of talk lately about ‘unicorns,’ new technology companies, many of them social media, with valuations of a billion dollars or more. While there has been a lot of funding of such ventures, the view today is that there may be too many of them’
The more the merrier! Why too many of them? They are worth a billion dollars (or 10, or 50) aren’t they? They can just go IPO and watch puddles while losing hundreds of millions like other social media sink holes.
Puddle watching and floating boxes of air. Great images.
‘Home prices are rising faster than wages in most of the United States, making homeownership increasingly difficult for average Americans in some of the most populous areas of the country, according to a report released on Thursday.’
‘The report found that home price growth exceeded wage growth in nearly two thirds of the nation’s housing markets so far this year, with urban centers like San Francisco and New York City among the least affordable.’
‘To buy a median priced home in various areas of New York City, Brooklyn and Manhattan especially, or in the San Francisco metro area, a buyer needs to spend between 120 percent and 95 percent of the average wage on mortgage payments. Among populous areas where the growth in house prices outstripped wage growth were Los Angles, Phoenix, and San Diego.’
a buyer needs to spend between 120 percent and 95 percent of the average wage on mortgage payments ??
The math does not work unless you add in a 2nd income…And even at that we are still looking at roughly 50%…No way you can underwrite a government backed loan with a 50% ratio…Something is misleading in the data or we are missing some…
It makes all the sense in the world and it leads to this;
US Housing Demand Plummets To 20 Year Low
http://1.bp.blogspot.com/-0q8fIAsczFk/VUANHEhSbnI/AAAAAAAAjRs/oANwXOUviGw/s1600/MBAApr292015.PNG
“The math does not work unless you add in a 2nd income…”
And then it’s still 100% of takehome. Housing at anything over 25% of household budget (takehome) is unsustainable. With wages in a long decline trajectory, houses need to fall by 75%.
It’s ridiculous.
Did you factor in the Chinese buyers?
A few thousands illegals aren’t going to make a market when housing demand is at 20 year lows.
Affordable housing policy = EPIC FAIL
Affordable housing policy is trending toward high housing prices but getting the government to subsidize the bubble part. Almost everybody wins.
Poors buyers pay a low PITI while gov covers the rest. For Mr. Banker, he gets his high PITI, some from the poors and some from the gov. (he don’t care which as long as he gets it)
Similarly, poors renters get rent control or subsidies; they pay a low $$ while gov covers the rest. For LL’s who rent out, they get to collect high rent high in line with high PITI, some from poors renters and some from gov. (he don’t care which as long as he gets it)
For owners, prices/equity stay high.
For politicians, they get votes and high prop taxes.
The only losers, unfortunately, are middle-class and rich renters, and there aren’t many of those.
—————–
On a side note, I’m not sure I like using the term “poors.” When it was first used on HBB, it sounded like poors were poor people who were poor because they were lazy, welfare queens, etc.
However, recently on HBB, my impression is that “poors” means poor people who are poor because they’ve been screwed over by central bankers and politicians. Which IMO is acceptable as long as it’s clear.
Woman…. You’ve got rocks in your head.
San Francisco, CA Housing Market Implodes; Prices Crater 7% YoY As On Billowing Housing Inventory
http://www.zillow.com/san-francisco-ca/home-values/
After many years of growing faster than wages, California home prices have plateaued or started to decline. This is despite little or no mortgage interest rate increases plus a deliberate behind the scenes effort to loosen lending standards in order to qualify more marginal buyers. Just imagine how much California housing affordability will improve once rates eventually normalize!
And also all the banks not foreclosing and purposefully keeping these homes off market and artificially increasing prices by limiting inventory. And slowly “foreclosing” once the “Price is Right”!
Forget Generation Rent: More Younger Americans Aim To Buy
http://www.npr.org/2016/03/24/470974459/forget-generation-rent-more-younger-americans-aim-to-buy
I smell NAR propaganda.
Mercer Island, WA Housing Market Craters; Prices Implode 11% YoY As Speculator Slash Prices
http://www.zillow.com/mercer-island-wa/home-values/
Forget Generation Rent: More Younger Americans Aim To Buy
When we bought our 1st home in 1984, Volcker had rates at 17.5% for an ARM (5 points either way), and housing had a relationship to incomes. We eventually refi’d down to 7.5% fixed on a reasonable mortgage, and stayed 14 years. I feel for the young’ins of today.These are different times and I feel for those starting out.
One comment mentioned they paid off their house in 18 years. Good for them.
And still lost money.
It is one thing to be young and just barely able to afford a modest house. It is an entirely worse thing to be old and have all your life savings “invested” in an overpriced shack with granite countertops and nothing to live on.
Not us jake and blue sky. Patents are doing well. Nice try.
You two have way too much time to post.
Obamacare hearing for us today. 2015 is a mess and we got fed up ad took it to a judge. Looking forward to resolution.
And now youre further underwater.
Patents are doing well
Good for you Flipper! Does that mean you don’t have to pout coffee at the office anymore?
‘Another Denver oil company files for bankruptcy’
‘Emerald headquarters are at 200 Columbine St. in Denver and the company has 42 employees, according to YahooFinance.’
‘It’s the second Denver energy company bankruptcy filing this month: On March 18, Venoco Inc., an oil and gas company focused on pumping oil in southern California, filed a voluntary petition for Chapter 11 bankruptcy protection.’
http://www.bizjournals.com/denver/news/2016/03/23/another-denver-oil-company-files-for-bankruptcy.html
Canadians selling in Palm Springs, Florida. Unicorns getting shaky. What’s the common denominator? Assets pushed up by the biggest money creation in history.
“…biggest money creation in history.”
There’s more where that came from…
Wanda cuts sales target amid cooling China property market
Financial Times-10 hours ago
Wanda cuts sales target amid cooling China property market. Yuan Yang in Hong … “But this leads to an oversupply of land, which causes prices to fall further.”
Mitsui to record 1st annual loss in writedowns on copper, LNG assets
The Japan News-Mar 23, 2016
Markets for everything from oil to iron ore have been hit hard by oversupply and … No.2 economy, driving losses on assets held by Japanese trading houses.
Singapore one of the world’s weakest property markets
Select Property-Mar 23, 2016
The country’s real estate sector has been ranked 51st out of the 55 housing … Coupled with the volatility of Asia’s largest stock markets and the oversupply of …
Business Recorder -Mar 23, 2016
Trading houses are betting on oil markets remaining oversupplied for at least two more years even as crude prices stage a recovery driven by early signs of …
Bank Negara Malaysia 2015 Annual Report highlights
The Star Online-Mar 23, 2016
Average shortage of 85,911 housing units per year between 2011 and 2015. … Oversupply in retail segment in the major Malaysian urban areas, particularly in …
BNM Financial Stability Report 2015 on domestic property market
The Star Online-Mar 23, 2016
Oversupply of commercial properties if left unchecked, may lead to deeper imbalances in the property market with spillovers to the other parts of the economy.
“the biggest money creation in history”
There’s a catch. It was issued as debt. That debt can only seem to be serviced on the whole as long as economic activity accelerates faster than the rate of interest. Grow or die, that sort of thing. It growth stalls, then the debts must be defaulted on and the “money” goes poof.
From 1990 to 2000, the lowest number of annual residential permits in the Coachella Valley was more than 3,000.
Peak was 7,800 in 2004.
From 2003 to 2006, if you call 3,000 annual permits the “baseline”, builders got ahead of themselves by about 14,000 homes.
However, starting in 2007, they new permit activity has been abysmal–averaging about 1,000 new permits per year, or about 18,000 less than the 10-year average to 2000.
In the meantime, job growth has been running at about 3% per year since 2012, and population is expected to grow by about 5,000 people per year over the next 5 years.
In other words, median prices aside (which in a market with so many vacation homes can vary widely), the market is not getting out of whack with respect to new supply being built relative to either history, population, or job growth.
If I had an alarm bell to ring, it wouldn’t be about the Coachella Valley housing market.
With 25 million excess, empty and defaulted houses, 4.4 million of which are in CA, I wouldn’t worry too much about building permits.
http://www.mercurynews.com/drought/ci_28916909/state-drought-coachella-valley-grapples-shrinking-water-supplies
water?
“You’d have to have rocks in your head to buy a house at these prices.”
Now or at any time in the last 15 years.
I have three homes in the Palm Springs CA area, so I watch the market fairly closely. I see multiple price reductions as well as some homes not selling and being rented out. I had no idea that fully 50% of homes and 70% of the money is associated with non-resident activity. That seems awfully high given that there are 600,000 or so counted by the Census.
Palm Springs, CA Real Estate and Homes for Sale
1,436
http://www.realtor.com/realestateandhomes-search/Palm-Springs_CA
Palm Springs, CA Price Reduced Homes for Sale
606 Homes
http://www.realtor.com/realestateandhomes-search/Palm-Springs_CA/show-price-reduced
That is getting up toward 50% that have had a reduction. Seems high compared to other places! … but in line with what I’m seeing.
Palm Springs, CA Housing Market Craters; Prices Cave 8% YoY On Ballooning Excess Inventory
http://www.movoto.com/palm-springs-ca/market-trends/