Is The End Approaching For OC’s Housing Bubble?
Jonathan Lansner at the Orange County Register takes a blip versus bust look at recent price trends. Let’s see how his bearish side looks. “You’ve probably heard the news about Orange County’s housing stumble. In January, the median sales price for all types of residences, new and old, fell under $600,000 for the first time in eight months, according to DataQuick.”
“January is an odd month. Home prices have fallen from December to January in 17 of the past 18 years. January’s 6.3 percent decline was practically twice the historical January drop. And if you’re talking 2002, don’t forget that fixed mortgage rates fell from 6.5 percent in January of that year to 4.8 percent by June 2003. Cheap money like that is long gone from the housing scene.”
“The median sales price of all residences last month was 9 percent higher than January 2005. January was the second-slowest month for the appreciation rate in six years. Only May 2005 was less.”
“The median sales price for an existing, detached home peaked back in August at $675,000. Few folks can afford these prices. Sales trends prove it. Total sales of single-family homes in January were the smallest count since February 1997, when the housing’s current winning streak started.”
“Orange County’s smaller, cheaper condos have appreciated 299 percent in the nine years ended in January vs. an overall gain for all residences of 214 percent. Condo popularity shows just how few people can afford a traditional home in this market.”
“In January, 72 percent of Orange County’s homebuyers chose adjustable-rate loans to finance their deals. That’s the lowest use of these loans since May 2004. This drop is likely due to buyers’ reluctance to take on the risk of a double whammy: falling prices plus soaring adjustable mortgage payments.”
“Local lenders filed 384 notices of default in January, the first official step toward foreclosure, the highest since February 2003. In the last 12 months, Orange County defaults grew by 15 percent. That’s the fastest growth rate since November 1996.”
Thanks to the reader who posted this link.
You are always welcome Ben
Anyone who buys real estate right now, without at least considering the impact of peak oil, is insane, IMO.
Couldn’t agree more
Their “blip” happened last Spring, and it turned into their “last hurrah”. No blip this time…..sorry
A couple of sites I ran out of time for.
‘Is $1 billion already lost?’
From Lending Tree. ‘What to do when your home doesn’t sell? Problem: The price isn’t right’
ben, both links are duds. couldn’t pull them up
Sorry, I retried and can’t make the html work.
Bubble is moving as expected, however, as this article points out, the Spring Rally is still in the cards. Lets just hope its a 22!
the links have extra http:// in them
—AL
Very weird - when I click on the links I get redirected to microsoft.com even though I am using Firefox on a Mac!
See if this fixes the links :
‘Is $1 billion already lost?’
From Lending Tree. ‘What to do when your home doesn’t sell? Problem: The price isn’t right’
Links should be:
http://www.lendingtree.com/cec/yourhome/selling/what-to-do-when-your-home-does-not-sell.asp?esourceid=353280&source=353280
and
http://www.azcentral.com/blogs/index.php?blog=164&title=is_1_billion_already_lost_1&more=1&c=1&tb=1&pb=1#comments
“In January, 72 percent of Orange County’s homebuyers chose adjustable-rate loans to finance their deals. That’s the lowest use of these loans since May 2004. This drop is likely due to buyers’ reluctance to take on the risk of a double whammy: falling prices plus soaring adjustable mortgage payments.”
Of course, this could be the result of other forces: The growing inability of first-time buyers to swing an IO loan, or investors unwilling to die another death - and with sales falling their numbers are dropping against the total sales even faster than is reported. It would seem that without 10%+ YOY appreciation the bubble deflates on its own.
Johnathan-
I KNOW you’re waiting to see what I write.
Therefore, I have to reply.
You do get points for trying, I admit.
But a MAJOR part of your argument has a hole in it.
Your very own online Real Estate section, http://www.ocrealestatefinder.com, lists on it’s front page, the number of properties for sale in Orange County.
The number went from 12,000 in December to 16,166 today.
You can’t deny this:
If there are too many widgets for sale, the price goes DOWN eventually.
If there are not enough widgets for sale, the price goes UP.
Just a couple of years ago, the number of ‘widgets’ on sale in Orange County dropped down to 4,000. The price went UP.
So in closing, Johnathan, please remember to include this in your pieces to come…
It’s about INVENTORY, INVENTORY, INVENTORY.
To deny this, is to lose credibility.
People in the OC aren’t dumb.
They see all the For Sale signs popping up…
…and they’re wondering why YOU AREN’T.
Inventory is an OLD indicator!!!
Just like P/E ratio’s in the stock market, it is no longer important. What IS important, is that they aren’t making anymore land, and everybody wants to live in Orange County.
The inventory could be 50,000 homes, but prices won’t go down….trust me!
I love it how people completely ignore the inventory data…and supply and demand. I guess econ 101 isn’t a required class in many places anymore…
SoCalMtgGuy
Another F–KED Borrower
FB FORUMS
… and where it still is required, the students are not coming to class, as the opportunity cost is too high when they can be out making $$$ flipping real property.
Are you seeing where the major inventory increases are happening? Just curious. I haven’t seen that much activity here in Irvine.
Per Zip realty, I have seen inventory up to about 10,200. Not as high as the other numbers but this is a steady increase from about 6500 in Sept. More importantly, Zip shows 2387 that have price reductions. that is almost 25%…..very different climate from summer 05
Actually the inventory for OC is 12287, the larger number includes their listings for part of Riverside county and extreme north San Diego county. However, no one can deny that inventory is rising, the only question is when we will see some undeniable YOY declines in prices. Right now, realtors are brushing off the decline in January saying that those numbers reflect cheaper housing like condos being sold and are not reflective of the broader market.
To be honest, I have not yet seen prices dropping and rents are rising here overall. Hopefully many of those who are waiting it out wont jump on the housing bandwagon for fear of falling behind and thus prolong this madness.
Just went to Palm Springs with the wife over Presidents’ weekend. Coming from San Diego up the 15, then 215, you can see OODLES of developments in various stages of completion. Strangest thing is, there doesn’t seem to be any reason whatsoever for homes to be built so far out away from the cities (LA, SD, OC). We’re talking an hour and a half from anywhere. And, of course, billboards litter the highway with advertisements (KB homes, exit here, turn right…). Even saw some large signs hanging from the development walls trying to hook people with large, bold letters saying things like: “LEASE TODAY AND PAY NO RENT!” We couldn’t get close enough to read the finer details (these sound awfully like car dealers, specials, though, don’t they?), but it was a great trip, nonetheless.
Not a week goes by lately where my wife and I don’t do a little “We rent!” dance. It’s easy, you all should try it. You just pump your arms up in the air - alternating left and right, like the toy monkey beating its drum - while saying “we rent!” twice. Be sure to leave a second and a half, or so, between the utterances - it extends the dance a bit.
hickiwawa -
That rocks - I’m going to debut my very own “We rent!” dance tonight.
THey are building out there because of zoning…
Its the same reason you have construction in Patterson, CA. Or 40 miles north of sacramento:
There is plenty of land (real estate listings show a 400 acre site and a 900 acre site in the east bay hills), but zoning is such that those areas are unbuildable legally.
So these homebuilders build where land is nearly free and the zoning and permitting is “okeydoke”, and people are willing to commute 3 hours a day for the american dream of a monster pressboard mchouse with a 2 car garage and a huge mortgage.
Higher rents accelerate the bursting of the bubble.
Rents are included in CPI. Home prices are not.
Higher CPI = Higher interest rates
Good goin
I posted this at the bottom but I would give a lot for a one-handed OC Register columnist.
This California investor sounds desparate as they try to sell their Boise area investment- or maybe its clever marketing:
http://boise.craigslist.org/rfs/135823357.html
I’m curious if more investors will begin to selling their out of state investments as CA starts to hurt?
The picture include a floor plan. Definately a flipper.
That place looks miserable. Nice single tree out front. I think I would be really depressed living in Boise.
Anyway, to answer your question, yes. Especially as their carrying costs increase as well.
A flipper with a real estate license
Man that dudes website is so professional…not
Looks like he arrived at the party just as the kegs run out.
Bad luck
Wow! That’s false advertising. It says”
That home may be a lot of things, but it sure ain’t gorgeous!
Alright I have to ask. Is it just me or has this thing recently gained an enormous amount of momentum with the HB’s slashing prices.
It seems like in the last 30 days there has been a general increase in the discussion of the bubble. There still isn’t any agreement in the mainstream press, but there certainly has been much more frequent mention. I think it may be that the signs are starting to point decidedly toward a dramatic drop, and away from the Realtor spin, in market conditions.
I’ve been waiting for this bubble to pop for a few years, and seen some blips (fall 2004 in So Cal). The downtrend does seem to have gained momentum right now, and the HBs were, to the best of my knowledge, not offering incentives last year. I’ve been (very) wrong before, but the nationwide increase in inventories, sudden silence on the part of homeowners (instead of constantly harrassing us about losing out on “all that equity” while we rent), and more MSM stories…it does seem to finally be happening. We should know **for sure** by August/September, IMHO.
In my area of So Cal, the number of home sales has plunged and the number of days on market has popped up quite a bit. In terms of price reductions they are just token amounts of of 2-7%, nothing unusual. I only see one home listed in my zip code at zip realty with a price reduction of over 13% from original asking price. Nothing like Sacramento or San Diego … yet (Jaws theme music starts here…)
Yeah,…I thought it would pop after the elections in early 05, based on my assumption that interest rates in the mortgage market would go up faster. It all happening now, just a year later. The big question is how sticky will prices be on the way down? What will happen when 30 year fixed gets to 7% (that was a GREAT rate to lock into a few years ago)…what if it goes up to 8% (early 2000 saw those rates)?
Another thing.
Alot of articles lately are pointing to a lack of buyers. Did this RE- idiot-vaccuum suck in every fool it was going to? Are all potential buyers wolves such as us? The market seems to be sucoming to the most basic economic forces supply and demand.Interest rates don’t seem to be a big factor at the moment.
It does seem to be on tender hooks, doesn’t it? Lots of small things, if interest rates and high prices are small. But no major econ probs, no history making crash at a lender - if anything else, the current atmosphere lends itself to a major giant massive overshoot by the FED, where they won’t figure out the roof fell in until the floor comes up to meet them.
hahahahahah, i am so happy, watch out the air is coming out.
dude, dudette, (paaaat)
don’t get too excited here, the deflation of this bubble is going to have some profound effects on a lot of people in a lot of ugly ways. the overall economy isn’t going to fair much better. if all of the bears on this board are right, we are all in for a doozy of a downdraft, the like of which we have not seen in 70+ years.
IT SHOULD NOT HAVE HAPPENED IN THE FIRST PLACE!!!!!!
I’ve been wondering about the doomsday scenario bandied about on this board (myself included), and about Bernanke’s interest in the Great Depression. While many of us are wondering if he’ll hyperinflate our way out of debt to avoid a depression; perhaps he was brought in to allow a deflationary depression, then find the best way to bring us out of it. This would be as opposed to avoiding the depression in the first place. See, we might be able to have a “quick” depression if things are handled very carefully. That way, we could avoid the hyperinflation which many of us otherwise foresee. Am I way off here?
Yeah, at first I thought the Fed would totally flood the system with cash, lowreing real rates to zero or less. And you know what, I still think they’ll do that. However, I don’t think flooding the system like that will result in inflation. Sure the money supply will EXPLODE and rates will CRATER. But that won’t matter because to get inflation really going you need folks to start raising prices. And I think it’s going to be real tough to raise prices at that point. Why? Well, when the housing bubble bursts, total demand is gonna get CRUSHED. So who cares if Ben B. takes real rates negative. Who’s going to be buying at that point? It won’t matter. Folks have used their homes as ATMs to fuel about half of the real GDP growth we’ve seen since 2001. The other half is from the HBs building and the speculators and investors buying. So fast forward two years from now. Who needs a house then? How many specs will be buying investment properties then? How many folks will be buying second homes? IMHO, sure, some folks (smart and/or lucky) will be buying then, but new demand for all this property that has been sucked up over the last five years is not going to be significant. It’s going to be like getting folks to buy a tech stock after the crash of ‘01 - ‘02 in equities. It’s going to be FEROCIOUS. And yes, the Fed is gonna lower rates, but real demand is not going to be there because real demand wasn’t there after the equities bubble popped! Seriously, on balance, the economy’s 3%+ growth has been directly or indirectly tied to housing (HBs and the home ATM). So who is gonna be buying goods in general then? Sure, there will be demand I’m sure, but there won’t be GROWTH. Just look at Japan. Granted its economy after the 1990 crash in equities was (maybe still is to a lesser extent) totally incestuous, therefore prolonging any recovery. But the Bank of Japan kept real rates NEGATIVE for over TEN YEARS. And what happened? NOTHING. No demand. Nada. Folks were to scared to spend, so they hoarded their cash and they still do to this day. Anyway, it’s going to be ugly when the U.S. consumer wakes up and realizes he’s got no equity in his house and a monster amount of debt to pay off. And sure, maybe business can bail us out and make huge capital investments. But that hasn’t happened since ‘01. In fact, business investment is way below trend. So, again, what’s driven our economy has been housing, and the death of housing means the consumer is gonzo. And when the consumer dies business investment is not gonna lead us out, no way, not until the consumer shows some sign of life, i.e. after he pays down all that debt and gets over the emotional trauma of riding the housing wave up and then down.
Get Long Vega,
What you are describing is known as a LIQUIDITY TRAP (you might already know that, but many do not). This is far worse than you can imagine, Friedman theorized that the only way to stimulate the economy was to give money directly to consumers by bypassing the normal intermediaries (banks and such) during a LT. Japan is a perfect example of a liquidity trap with damaging deflation. Some have called this “Japanese-style deflation” but it is just a common liquidity trap.
What you see lately is hoarding of cash and gold; which, if left unchecked, precipitates a liquidity crunch since investors would rather hold liquid investments than potentially suffer capital losses. This is why it became illegal to hold gold during certain times in history; the central bank is partly there to ensure that there is a mildly inflationary policy that prompts regular investment.
I would say the argument for deflation is very plausible; however, it always depends on psychology, sentiment, or whatever you want to call it. The herd mentality takes over and nothing can stop it, even a cliff
Not to fear.
Bernanke already has a plan.
It is to drop dollar bills out of helicopters.
Just pick them up off the street, walk to your closest real estate broker and pay for a new house!
Of course, we then run the opposite. Hyperinflation, which brought the downfall of the German government in 1923.
I would like to pose a question along these lines. Assuming that the PTB are setting up for a depression, how is the U.S. debt managed? I can see them hosing the citizens and basically making them indentured servants. What I really wonder about is how the dollar remains viable if the U.S. gov’t is not collecting taxes but has 8 trillion in debt obligations? Don’t they have to default? How does this make holding cash a wise position? Any insights on this by anyone?
There’s been plenty of business investment…………in China (as part of the Wal-Mart supply chain). Unfortunately that will not help us. Even Wal-Mart jobs will be hard to come by when the consumer retrenches.
auger-inn:
The government will not start monetizing debt. It needs foreigners to fund itself. They will fight to keep their credit standing in good shape because without it they cannot survive.
IMHO you should hold cash in US Treasuries only. Also, you should look to diversify into other currencies that have more responsible central banks than the USA. I’m waiting for the end of the tightening cycle though. The dollar is definetely at risk of falling once the FRB starts to bring real rates back to negative territory.
You give them too much intellectual credit. They don’t know at all what the hell they are doing and what they are supposed to do. They have only a couple of levers to push and pull, and the only reason we are OK is that they haven’t yanked them too much. The monetary policy is a total joke if you think enough about it (like, blowing a credit bubble and then popping it).
“RE: Bernanke’s interest in the Great Depression. While many of us are wondering if he’ll hyperinflate our way out of debt to avoid a depression; perhaps he was brought in to allow a deflationary depression”
This is one of the most original and thought provoking comments I’ve seen in quite a while. I like the concept because you’ve taken the well known and accepted facts and turned them on their ear in such a way that is both difficult to imagine and yet quite likely the correct conclusion. Whether or not Heli-Ben was actually hired for this job, it will most certainly be his legacy and we can’t rule out the possibility that he was, in fact, hired for it.
DT,
Quite a compliment, thank you. I’ve been researching the credit bubble and macro-economic trends. There were many who believed Dr. Bernanke was going to be the new Fed governor quite some time ago. When Bush made him one of his economic advisors, I became quite sure of his nomination. IMHO, there are some great minds behind the scenes. I do not think for a moment that the credit bubble was a random accident. I believe it was done to shore up corporate financial positions to prepare for the deflation (worldwide, BTW). IMO, deflationary forces have been strong for a long time, and the PTB have been working on an “adjustment plan” for a while (decades). I can only hope because if it really is random, and nobody’s been making preparations, we are in for a world of hurt. IMHO.
Somebody months ago had theorized that the Republicans were conciously spending the country into the ground in order to kill the “New Deal”, big government, social-welfare state and start fresh. Certainly meshes well with the idea of hiring Bernanke to manage a deflationary depression, doesn’t it?
TJ,
I agree with that theory. What’s surprising to me is the speed with which it seems to be coming to pass. Pensions, SS, healthcare, labor unions, etc…all seem to be on the radar recently.
I just wonder how they intend to handle the consumers who have gone into life-long debt.
Comment by boulderbo
don’t get too excited here, the deflation of this bubble is going to have some profound effects on a lot of people in a lot of ugly ways. the overall economy isn’t going to fair much better.
Yes, it may get ugly, but that is definitely NOT a reason to bail out all those people/banks/institutions who are left holding the bag. I hope Congress doesn’t bail out all those “poor” homeowners with negative equity. Doing so would only keep prices high and affordabiliy critically low. I say let’s deflate this bubble as quick as possible and move on.
There are many more of them with many more votes. Who do you think Congress will help?
I agree. The long term pain to family, friends, co-workers and society will be painful for many years. I wish for the wellbeing of the country that this turns into a soft landing and that much as it does not benefit me at least it would do the least amount of damage. IMHO the market will do whatever will cause the greatest amount of pain to the most amount of people.
The souffle is falling, with no way to raise it back up.
SOME OF US DID NOT CAUSE THIS BUBBLE!!!!
Yes, but if you’re smart, you can still profit from the collapse.
OH YES I WILL!!!! SOON
what bothers me is all those people who profited and took the money out of the country. They are sitting in their interest only home and not paying mortgages and have cashed out equity loans with bad credits!!!!!!
well i ain’t feeding no squirrels.
Don’t pat yourself on the back yet. The best way to act in a falling market is to CYA, stay the hell out, and keep your modest fortune from completely disappearing. They call it “bear market” for a reason. Don’t try to outsmart it.
Yes, but we can make a few bucks on the way down by shorting…
At this stage, it’s more predictive by monitoring what the home builders are doing with new home prices in Orange County. If they have to cut prices like they do in Sacramento then you know that the reverberation of this implosion is reaching OC. Existing home prices soon will follow. Furthermore, we are going to have a glut of new home inventory when they begin to build out the El Toro Marine base this summer. I personally would not buy any existing home until 2008, but I anticipate that we may begin to see some reasonable prices in the new homes by next year. HBs are like auto-dealers. They have to move their inventory. They have more incentives and a wider margin to cut prices. At this stage, if they can finish the developments breaking even, it’s considered a success.
well if that’s the case, look at dataquick numbers in same paper. new home prices in OC down 36.1 % yoy from `05. uh oh…
i thought lansner’s article was pretty good. he tries to maintain a balanced outlook when he’s really a housing bear at heart.
and as far as properties in orange county available for sale. there is no way any newspaper can count every SFR/condo listed on the MLS, all
FSBOs (do all FSBOs advertise or register with the newspaper??– in don’t think so).
per the MLS that covers Orange County, there are currently 9006 SFRs and condos available for sale 590 multi-income properties available for sale. total 9,596 for sale. this does not include land, mobile homes, etc.
But, but, but…. Gary Watts is always right. Buy buy buy!!!! They’re not making any more dirt. I think I will go out and have some fun with realtors real soon. I’ll look at the price and laugh. Have hubby take pictures while doing so. A picture is worth a thousand words
Slightly OT:
Look at this craptastic overprices POS.
http://losangeles.craigslist.org/rfs/132585479.html
$1.7 million in my neighborhood (purchased 12/03 for $~680K) WTF??? This is the freakin’ problem. Flippers.
Jesus. Has Venice gotten that pricey? How close to the beach is it?
Whoopie, a million plus for an ugly house!!!
But it has a koi pond roughly half the size of my bath tub. That is worth at least half a mil right there.
Maybe it’s this OC realtor’s home? She puts the same old sh!t on realty times everyday to be on top of the list.
She reaching, isn’t she? She is a joke.
Her face looks like it hit every branch of the ugly tree on the way down…
roflmao
Read this one As expected, the Orange County inventory is dropping fast. Isn’t she mistaken?
There is a guy TimStar on Ventura County section of RealtyTimes. Exact same report every day. Looks like he does not have clients and all he does is to update the website.
Read this one…She says inventory down in Laguna Beach. Hmmmmm, I don’t think so.
Loopy cow.
What are you talkin bout! It has a Koi pond!!
that house is exactly one million dollars overpriced. i hope they rot
at least a million overpriced 1.7 million for a 2 bedroom on a 4k lot. I want a double dose of whatever the buyer is smoking who buys that and a double dose of what the realtor is smoking who shows it with a straight face
Just when you think you have seen everything. If an appraiser makes that number for that his license should be revoked.
A book called “SELL NOW! The End of the Housing Bubble.”
The publisher is a respected name, St. Martin’s Press. Copyright 2006.
Great book. I read the first one - ‘The Coming Crash’ in the summer of 2004. It’s by the same author. Awesome stuff.
Oh . . . and it is 1500 Sq Ft. 2br on a 4400 sq foot lot!!!!!!!!
Zillow is showing 1308 square feet on a 4138 lot. It sold twice recently. 12/05/2003: $685,000 1/10/2003: $502,500. Zillow’s zestimate is 1.19 mil. I would not even pay the 502,500 price.
see what overbuilding will do
http://www.dcbubble.blogspot.com
Soft Landing Alert!!!
Wow, did you know that the Maryland Attorney General’s Office has a flipper cause? Warning, this is a pdf file - If you have recently purchased a house or entered
into a contract to buy one, and think you may be a
victim of a flipping scam, contact the Attorney
General’s Consumer Protection Division. We can
try to resolve your dispute through mediation. Call
(410) 528-8662 or toll-free 1-888-743-0023.
We are still scratching our heads, for more than one reason, at this realtor news summary sent out by NAR. In it, Hawaiian politicians appear to be looking to double or triple tax property investment with their “conveyance” tax; a sales tax to you and me.
The intent of the law is to discourage “flipping”, the buying and selling of real estate in a short amount of time. Flipping is “blamed” for the recent surge in price appreciation of Hawaii real estate.
Didn’t Shanghai inact some taxes a few months ago to discourage flipping and prices tumbled? I’m as free market as anyone, but there are lots of examples in financial matters where government intervenes to make the market function better (like margin requirements, disclosure laws, etc.). There is definitely a “herd” mentality to recent flippers, and it might be the case that putting on the brakes a bit will pop the bubble.
I am all for protecting the innocent from the scam artists. Unfortunately, what we will see in the next year or two, is that many of the “biggest fools” will claim that they were victimized by the flippers. In reality, they likely got into the game because they were themselves greedy and wanted to speculate and “get rich quick”. Sure there will be real victims, but I think most of the ones who will yell “scam!” are going to be the inexperienced speculators. If they jumped on the gravy train and got screwed, that’s just too bad.
WillM, couldn’t agree more. The last ones in are the greatest fool bag holders. Let them rot.
If the bag holders yelling “scam!” had instead made +40% in a year, they’d be be heard boasting at a party about their investing genius.
I’ve already been sued by some moron. I sold a house in March 05, arguably the peak of the market here in Northern Virginia. Well, around August - when the writing was on the wall- the idiot lawyer that bought my house sued me for 15k. This, coincidentally, was exactly what he paid above the asking price.
He claimed some nonsense about an inadequate CAC system. This was a tract house. Over a hundred have the same system. At one point, he said to me “you,you, you’re one of those FLIPPERS!’. I told the dope that I had owned the house for 16 years and lived there myself for the first 4.
The judge threw this dope’s case out.
We’ll be seeing a lot more of these suits soon as bag holders’ losses mount and they can’t escape.
I thought that was why the home buyer had a home inspection, to find those problems and negotiate them upfront. As long as a seller is honest on what he knows are problems and puts them lists them on the disclosure, isn’t he protected from lawsuits like this. A house is a deteriorating product and an old one will always have some problems. Am I correct? What about all those buyers during the frenzy that waived home inpections and bought as is? No recourse for them.
Jeez…this all sounds so familiar (stock market bubble pop). Same game different name. The lucky (notice I didn’t say smart) folks who cashed in on this bubble at the correct time will be hiding (with their money) and very silent as all the late fools start their screaming. I didn’t see many braggarts after the stock market crash, but somebody made a lot of money off of other peoples losses (money that is “Lost” doesn’t disappear, it merely changes hands).
Money does disappear. It’s called default. That is what will ultimately bring down the credit bubble.
You are forgetting 1998.
“The right defining statistic for the last two years is the negative savings rate first recorded in September of 1998. Negative savings rates hadn’t been seen since 1933. The Great Depression was underway, unemployment was approaching 30 percent, earnings
had collapsed, unemployment insurance benefits had yet to be invented, no one had heard of welfare, and assets had to be sold if one wanted to eat. Consumption was above income because for too many people there was no income.
A very different story has to be told to explain 1998’s negative savings rates. Americans felt rich because of the booming stock market and, not surprisingly, wanted to spend some of their new wealth. Consumption exceeded income not because incomes
were down but because wealth was up. Americans were tired of watching their wealth grow on paper and wanted to feel and touch some of their money with bigger-than-that of-my-neighbor sport utility vehicles, 10,000-square-foot homes or other conspicuous consumption.”
Lester C. Thurow
New York Times
January 18, 1999
http://www.lthurow.com/articles/pdf/theboom.pdf
Seems clear to me that as asset bubble grow to absurdity, our savings rate declines. No matter if it’s RE or the Nasdaq. Clear out the bubble crap and our savings rate will go back up.
San Diego County just crossed the 17,000 listings milestone on ziprealty.com tonight, at 17,027. 18,000 sometime in March?
I can’t figure out why Lansner misses the obvious.
Isn’t the fact that Gary Watt’s hangs his hat on to do with ‘following the Inventory’?
I mean, does Lansner ignore Inventory levels on purpose, or is it part of some sinister plan to look at EVERYTHING ELSE instead…
…to keep the Real Estate Machine’s business?
Christ, there’s so many For Sale signs in Huntington Beach (flipper city) that crossing the street has now become an obstacle course.
Does he ignore Inventory on purpose, or because he needs the money?
It seems to me that any fool can see that skyrocketing Inventory only leads to one thing…
…Plummetting Prices.
I just can’t figure out his motives.
Good point AH
I know Jonathan reads your blog, Ben.
I just know it.
Look- Jonathan- just LOOK INTO THE INVENTORY ISSUE.
I really hate having to tear this guy a new one every time he writes something but jeeeeeeezz!
Jonathan- please go to your own website, from the Orange County Register, http://www.ocrealestatefinder.com, and watch that big, fat number on the front page grow by 200-300 listings per day, and then include that number in your argument!
Just once! Write about Inventory JUST ONCE, and I PROMISE I’ll stop picking on you!
Oh what I would give for a one-handed OC Register columnist…
That was nothing but a straddle.
Sunsetbeachguy…
I gotta ask you, since you seem rational…
…why do you think Lansner ignores the obvious?
And…
…just to clarify this to the board…
The reason I like http://www.ocrealestatfinder.com more than the MLS or ZipRealty is…
FSBO’s are a MAJOR, not a MINOR, part of this bubble.
FSBO’s are listed at http://www.ocrealestatefinder.com, as are ‘investment’ properties, and land, and probably children’s backyard playhouses.
FSBO’s are not, to my knowledge, listed on the MLS, since realtors don’t want to deal with them. And FSBO’s are a big, big part of the listings in Orange County. Almost everyone and their fourth cousin has their real estate license here, and they all want to ‘maximize’ their ‘profits’.
Therefore, I think the REAL inventory numbers are closer to what is shown on http://www.ocrealestatefinder.com than other services, that typically lock them out.
Anyone with a pulse can advertise property on that site.
And that’s why I quote it, rather than the MLS, which I do happen to have access to.
But back to my first question…
Sunset…am I being some sort of conspiracy nut or does it seem odd that Lansner keeps talking about EVERYTHING BUT Inventory?
I mean, what’s next for him?
Will we get a column on how planetary alignments show that the Spring will save the real estate industry in Orange County?
Maybe he’s just trying to give me an ulcer, for being such a pain in the a$$.
Or are his motives more sinister?
Since you asked, I enjoy your seemingly good humored rants about the facts staring him in the face. I think that shame and ridicule can be excellent negative motivations and are probably more powerful than positive motivations. You are doing a great job at that.
FSBO’s are a large part of the market one just closed on my block in downtown HB (We moved in in January). I sold my second house FSBO and the only place we advertised during the bubble was the local paper.
I think that it is best to hit the OC Register in the soft underbelly. They don’t do any hard hitting investigative journalism. OC weekly regularly scoops OC Register for example, Haidl rape case, Houchen condos, Garofalo corruption, hell even the housing bubble that Ben blogged about with the condo in Stanton that smelled like pee. Remind them of that fact and their competitive hackles go up and they do just enough real journalism to lull the smug and self-satisfied OC population back to sleep.
That being said, I have been reading Ben’s blog off and on since 2/05 or thereabouts. I was raised in Santa Ana spitting distance from the OCR building, move away for a year and moved back to Sunset and HB. Ben has not ignored any news on the epicenter of the bubble (OC). Thanks Ben! I have read every Lansner article on RE both directly and indirectly on the blog.
Lansner published a bearish case back in 2003 when all rational indicators and UCLA’s forecast were first starting to get clearly bearish. He got spanked like many of the other bears, myself included. (before any of you RE bulls jump on me, I owned 2 homes during the bubble and profited nicely). He was and is right but the timing was waaaaay off.
Any guy with a glamour shot like his has got to have some amount of ego. So he had to pull back both from personal ego and editor’s perspective. I am sure he got a bunch of CAR organized hate mail, probably much worse than you have been giving him, after all your campaign could be written off as just one citizen.
If I remember correctly in the fall of 2005 he published a bit of his personal history with the RE bubble. He rehashed his early (2003) call and reiterated a soft pedaled bubble concern.
Lately, his articles have been couched in allegories. A common defense mechanism for persecuted or oppressed points of view.
http://en.wikipedia.org/wiki/Allegory
I don’t think his editor would let him publish a full out bear case. Generally reporters are treated fairly poorly at the OC Register and if you are at all aware of the mission of Freedom Communications (OCR’s closely held by family parent company) the worldview they communicate around is a straddle between Conservative Republicanism (crony capitalists) and Liberterian (personal freedoms).
He wrote the article about OC property tax delinquencies being a flashing yellow light but didn’t draw any conclusions.
More recently Lansner (within the last 60 days) referred to
the OC RE market as Sisyphean (unending ups and downs) again not drawing any conclusions.
I would guess that most members of the RE industrial complex and OC residents miss the message. Thus he gets on the record again on the bubble and he gets to avoid the organized RE industrial complex hatemail and threats to pull advertising, but the astute reader can see the message.
I think Lansner’s situation is he cannot fully bite the hand that feeds the OC Register. But he is taking as many little nips as he is allowed to do. The RE bubble isn’t his only axe to grind.
If you look over the history of his articles he is a stealth bear and he published just enough to be able three years from now point out that he covered the world’s largest RE bubble and warned everyone.
I agree that many journalists lurk here. In my year or so of posting on this blog I have seen postings turn into articles in major papers. Mr. Lansner if you are reading this please compile all of your housing articles since 2003 so we can see your consistent and even handed approach to OC RE reporting.
We should get together and have a beer at HB brewery. I saw your baby posting and my wife is due with our first in April.
OT, but any good recommendations for HB shorts?
This is sad, but telling of the bubble: http://boise.craigslist.org/rfs/135894591.html
I bet we start seeing this type of ad more often.
Bring ‘em on!
i contactedseller and offered 175k cash.told him to talk to his bank about a short sale.i will only pay what a property is worth period.
Ahhh come on don’t leave us hanging. What was his response?. Sheeesh some people just leave ya hanging. The nerve
The excuse is a classic flipper move to avoid any anti-flipper sentiment and evoke more sympathy.
My advise seek BK counseling and hope your income is below the statewide median income.
I like this from the ad:
I’m assuming now that this person isn’t living there but bought this property as an INVESTMENT.
So now the owner feels that he’s ENTITLED to not lose money on his speculative investment? He should have bought a treasury bond!
Imagine, for example, buying stock in some company and demanding to your broker that he at least sell it *now* for what you paid for it! Don’t these people see that it’s the same thing?
In the very long run, house prices nationwide simply can’t increase more than “inflation” and wages do. It’s simply impossible. Even a 7% average (that’s double your “investment” every 30 years) nationwide over the long term isn’t sustainable.
What’s even funnier is “investors” who buy a bunch of condos in the SAME AREA. Of course they’ll all tank at the SAME TIME. At least try 3-4 different markets. (Though I’d NEVER recommend condo investing.)
I agree with your point…but your figure is off (rule of “7″s), at 7% compounded, and investment would double about every 10 years (not 30). And if you are talking about your actual “investment” then you would only be refering to the down payment and leverage would greatly increase the return. 7% is way too high of a figure for house appreciation, more like 7% net on your down payment after after expenses etc. on a rental property or owner occupied costs. The home should not appreciate any more than the rate of inflation (as you stated). Most of these speculators and risky owner occupied buyers aren’t “investing” at all, that term is being incorrectly used. They are simply GAMBLING, period! They are GAMBLERS and some will win (they rode the hot streak) and other will lose (when the streak goes cold), and just like a cold craps table or roulette wheel, how much you lose depends on when you walk from the cold table.
“curiouser & curiouser said Alice”
$300000 -
——————————————————————————–
Date: 2006-02-21, 6:23PM MST
This posting has been removed by craigslist community.
135894591
auction ‘07,
someone else mentioned this earlier, and I mentioned this a week or so ago. That 15,000 inventory figure includes adjacent Riverside and LA, even some LBC properties. PLUS, there’s pages and pages of commercial properties. If you do the advanced search and remove the LA and Riverside #, we’re looking at 12,000. But then the commerical properties are still there. In reality, we’re really looking at roughly 11,000 listings in OC.
ocrenter…
That’s definately a good point.
I’ll try to refine my search a bit better.
Maybe it’s actually closer to your number…I’ll try it later, probably tomorrow.
Of course, that total keeps growing by leaps and bounds each week, and I find it hard to believe that anyone in the position of real estate columnist on the biggest paper in the county would ignore it.
These aren’t tiny increases we’re seeing.
It really is The Orange County Inventory Fire.
I’m just wondering why Lansner won’t even acknowledge it.
He has an editor and the entire advertisting sales staff screaming at him that inventory isn’t a story just a maybe.
While they and their cronies offload what they can of their RE holdings.
I think that the smarter RE bulls have quickly arrived at the bargaining stage of Kubler-Ross grieving.
Dear Lord, please if you let me offload these last couple of properties I will do anything… including bully the local business reporter to suppress the bad news for a little while longer so I can get out.
Pump & dump. Come to Papa!
http://www.wane.com/Global/story.asp?S=4416470&nav=menu32_2
chalk up another lender and job cuts
God Sunset…
If that’s true…
…they probably want to pull our teeth out.
“Eez eet zaafe?”
(from Marathon Man).
I guess he’s pretty much screwed then, if what you say is true.
After the coming crash, which will be the hardest, fastest, biggest crash the country has ever seen…
…He’ll have to find another occupation, since no one will trust him anymore.
P.S…
You know what?
It’s time to call a spade a spade.
Okay, Jonathan, here’s the deal…
If you don’t take a look at The Orange County Inventory Fire really, really soon…
…I’m going to PERSONALLY call Rebecca Schoenkoph, from the OC Weekly, and invite her to Ben’s Blog.
Then, I’m going to show her all the websites where inventory in Orange County can be seen. Yes, the numbers might be off from site to site, but Rebecca’s a pretty smart girl- she’ll get the picture.
Jonathan, I’m a pretty fair guy.
I don’t want to believe your soul has been bought.
Please look into this soon.
Christ knows, there ain’t nuthin’ worse in Orange County than havin’ ‘Commie Girl’ go for the throat.
I deposit the ball in your court.
LOL thats funny. Guess now you’ll see if he has any nads hunh?
Most people including reporters are lazy.
As we know from this blog if you don’t have your own arduously compiled data set, no one in the RE industrial complex will give it to you, ask Prof. Piggington.
I know that the OC Register doesn’t freely give out budget for buying expensive RE data. I would be inclined to guess that tracking inventory isn’t a data set anyone but bloggers have compiled (and CAR but they won’t release it).
That fact that the market data information is controlled by a professional advancement organization is the crux of what Attorney Generals are getting ready to forcibly bifurcate. It is a conflict of interest to sell and hold all the data. Imagine having to call Enron or Worldcom up and ask about stock trading details of their stock, price, volume and bid ask spread.
That being said Lansner is missing out on the leading indicator of the bust.
Why would anyone want to live in Orange County?
It is one big, congested white trash hell hole subdivision?
Might be a good retirement community.
You mean it’s not like that TV show on Fox!?
A couple of comments. Yes OC is overblown in its desireableness.
The desirability is limited by how fast the the population grows. Hopefully shrinks as a result of the RE Bubble.
That being said, you cannot change where home is.
I think that California needs a bumper sticker similar to Oregon’s Don’t Cailfornicate Oregon.
Any ideas for the bloggers here.
mrincomestream…
Yes, you know what a lampooning ‘Commie Girl’ can deliver.
The article on being able to afford a place in Stanton, which is ‘titty bar convienient’ for only $500,000, made me shoot Pepsi out my nose.
She’s easily one of the best satiric writers in all of California, and her pen, like that of Tom Wolfe or Brett Easton Ellis, is ruthless.
As for Orange County being a great retirement home…
…it probably would be, if the seniors take out interest only, ten year adjustable rate drug dispensary loans.
Do they have those yet?
Coming soon to a lender near you.
Bet on Countrywide, Ameriquest, and New Century.
“Are those denture payments getting you down?”
“We have the solution for you!”
OT, but I almost fell off my chair laughing at this MLS listing.
Here’s what you get for a Million bucks in San Jose, California. Don’t forget to check out the additional photos. Enjoy
http://www.mlslistings.com/common/properties/propertyDetail.asp?type=property&open=0&from=mlslookup&name=&mls_number=609638&OnlyOne=Y
Is that a bar down below named “Boat People?” LOL
This might deserves its own thread:
For Minorities, Signs of Trouble in Foreclosures
Wasn’t it recently reported that “whites” are now a minority in California? Or is it “once a minority, always a minority”?
Once whites become a minority, additional qualifiers come into play in a desparation effort to maintain the status quo of never-ending racial oppression. Hence we now have “underrepresented” minorities admitted into the UCs. By implication, whites are “overrepresented.”
Exploited in the job market, exploited in the financial market. Illegals because of their vulnerable state, and inablility to communicate in the dominant language of commerce usually get the short end of the deal. Especially in CA, there are so many illegal immigrants with loans who use the laughable TIN and no-doc to qualify for loans. Most wont even pay, and will simply walk away. All these so called “friendly banks” who are “embracing the undocumented” could hardly care less about them, they just see them as another source of easy revenue, know that they will walk away, but believe so firmly in the housing market that they will simple collect the property after the immigrants have been forced out. Easy as pie, sick really, those who feign compassion are often wolves in sheeps clothing.
This is the bitter harvest of affordable housing programs designed to turn every US citizen into a homeowner.
Please call Mark Scott Raley at 408-626-9800.
If he can sell this, he can sell doggie poo.
Does doggie poo even have a use?
If it does, Mark is definately your man!
troll?
Nah, Auction is a valued regular.
Auction:
Manure does have uses. It can be digested with Microbes to create methane. Burn the methane and generate power.
Comment by Melody
2006-02-21 17:46:27
Whoopie, a million plus for an ugly house!!!
Ooooo, is that crappy composite tile roofing I spy on that ugly house??
Comment by priced out
2006-02-21 18:00:27
But it has a koi pond roughly half the size of my bath tub. That is worth at least half a mil right there.
No its not. Its only worth a few thousand, tops, and that is if you buy really expensive koi, not some small cheapy “starter” koi. I’ve installed a koi pond at my last house myself…trust me, no koi pond is worth a million dollars.
Wow, what a piece of crap home! That house itself is maybe worth $150K tops, and that’s being generous. What kind of crack are these realtors smoking?
“No its not. Its only worth a few thousand, tops, and that is if you buy really expensive koi, not some small cheapy “starter” koi. I’ve installed a koi pond at my last house myself…trust me, no koi pond is worth a million dollars. ”
B.S. — Koi ponds in CA are worth a million dollars MINIMUM.