Latest home-selling stats from DataQuick for 22 business days ended Feb. 22 show that only four O.C. ZIPs out of 83 with buying activity above the year-ago period: Orange 92867; Villa Park 92861; Huntington Beach 92647 and Dana Point 92624. All told, those four ZIPs had just 65 sales. (More ZIP info is HERE!)
Overall, countywide sales in this most current period were 45% below a year ago. No doubt February was the 29th straight month with sales below the year-ago mark. And pricing is still weak; off 16% from a year ago and down 20% from last June’s peak.
Here’s how the key slices are faring …
| Slice | Price | Vs. ‘07 | Sales | Vs. ‘07 |
|---|---|---|---|---|
| House | $575,000 | -14.2% | 916 | -42.7% |
| Condo | $369,000 | -18.9% | 351 | -44.5% |
| New* | $562,000 | -2.0% | 175 | -56.0% |
| All | $515,000 | -16.3% | 1,442 | -45.2% |
* Includes single-family homes, condos and recently converted apartments
• COMPARE: CLICK HERE to see how other home-price indexes see O.C.
Per DataQuick, Single Family Median Home Price:
2007
06/26= $735,000
06/30= $734,000
07/12= $725,000
07/17= $725,000
07/25= $720,000
07/31= $718,000
08/07= $719,000
08/15= $712,750
08/22= $710,000
08/30= $710,000
09/11= $700,000
09/14= $689,000
09/21= $675,000
09/26= $670,000
09/30= $655,000
10/12= $655,000
10/16= $660,000
10/23= $655,000
10/31= $650,000
11/08= $645,000
11/14= $645,000
11/20= $645,250
11/27= $649,000
11/30= $655,000
12/10= $640,000
12/14= $634,000
12/27= $610,000
12/31= $600,000
2008
01/07= $600,000
01/15= $595,000
01/23= $595,000
01/31= $583,250
02/07= $585,000
02/13= $575,000
02/22= $575,000
Things are really starting to pick up?
Hurry up and buy so you can get priced IN !
Lock in that purchase price HIGH baby HIGH !!
Be 20% underwater in 2 years, BUY NOW !!!
Holy Crap, Fraudera Ranch took an absolute beating:
Ladera Ranch $500,000 -27.0% YOY
A lot of Bears post negative article after negative article, as links to bubble reports dot com, and the like. Here’s a positive article from an unexpected source. Sorry, the link required a password, so I cut and pasted this recent article from Time Magazine:
“Ignore the Headlines! Except this one. Sure, housing’s in a hole. But there’s a potent case for buying now, whether it’s real estate or stocks
By Dan Kadlec February 14, 2008
Famed Money Manager Peter Lynch is perhaps best known for his timeless wisdom that you can beat the pros by focusing on stocks of companies where you either work or shop or have some other edge. But a more relevant Lynchism today is this gem: Ignore the headlines.
That’s no easy thing. How do you tune out all the chatter and ink on recession,housing, subprime woes, the credit crunch, rogue traders, insolvent bond insurers, $100 oil and nukes in Iran? It’s enough to make you sit on your thumbs and wait before making any big moves. But what, exactly, are you waiting for?
There has rarely been a moment in history when you couldn’t scare yourself into doing nothing. And yet, as Lynch observed nearly 20 years ago, “in spite of all the great and minor calamities that have occurred … all the thousands of reasons that the world might be coming to an end–owning stocks has continued to be twice as rewarding as owning bonds.”
A top reason to not buy stocks, in Lynch’s view, is if you don’t already own a home–in which case, that should be your first investment, since an owner-occupied home is nearly always profitable. Through a spokesman, Lynch reaffirmed these views to me–housing debacle and all.
When prices are falling, few people have the discipline to buy stocks, a house, gold, art or any other asset. But those who do pull the trigger excel in the long run. As John D. Rockefeller famously said, “The way to make money is to buy when blood is running in the streets.”
And the streets are stained crimson. Start with stocks. They have been pummeled this year. GDP braked sharply last quarter, and there has been plenty of panic about a recession. The Federal Reserve is slashing short-term interest rates at the fastest clip in decades. But if you stick to your steady, diversified plan while everyone else is retreating, you will be happy years from now. For one thing, Fed rate cuts always lift the economy eventually, and the stock market typically starts responding just as headlines get gloomiest. Sure, the market could fall again before recovering. But the recession may be half over already–or we may avoid one altogether. You just never know.
As for housing, certainly some skepticism is in order. Formerly sizzling markets in
Florida, Nevada, Arizona and California probably haven’t seen the worst headlines just yet, though they may well be close. And “jumbo” mortgages, those more than $417,000, are likely to remain artificially high for a few more months while banks work through their credit issues.
But let’s say you are emotionally ready to be a homeowner. You have good credit, plan to stay put for five years and have been waiting for the perfect entry point. It’s time to get serious–before an inevitable rise in interest rates wipes out your advantage. “The thing that will make home prices stop falling is the very same thing that will push mortgage rates higher,” says Jim Svinth, chief economist at mortgage firm Lending Tree. So anything you gain by a further drop in prices might be offset by rising financing costs.
Consider a typical home that sells for $218,900. You put down 20% and get a 30-year fixed-rate mortgage at today’s rate of 5.5%. Monthly principal and interest come to $994.31. Let’s say that 12 months from now the same house goes for 10% less, or $197,010. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs rise a point, to 6.5%, your monthly payment would be $994.94 and you’d have saved nothing. Meanwhile, home prices might steady and sellers might become less willing to negotiate. And you have spent a year living someplace you’d rather not be.
It’s more complicated if you must sell before you can buy. But that logjam won’t persist forever–and if it appears you’ll be trapped for a few years, try to refinance at today’s lower rates. Risks always seem most acute when the headlines give you ulcers.
But that’s exactly when you should think long term–and get off your thumbs.” End of article.
Wow, things are reeeally picking up out there. I’m sure the NAR would tell you so…
Foreclosures that I am familar with either have “investors” that removed “equity” from their houses. Or, have had a divorce. Tell me, when are the “investors” going to be held held accountable for sticking banks with hundreds of thousands of dollars per house in bad debt? Of course, the “investors” are giggling because so many of them did it that nothing can be done about it.
I’d rather have a lower principal with higher interest than the other way around if the payment was the same. That way if you decide to overpay you have less of a principal to pay down.
Dood,
“You have good credit, plan to stay put for five years and have been waiting for the perfect entry point. It’s time to get serious–before an inevitable rise in interest rates wipes out your advantage.”
That inevitable rise in interest will actually serve as an advantage in the future.
Home prices will drop further due to rising interest rates. Monthly payments might be the same due to higher interest rates but property taxes will be lower for the length of ownership and the tax deduction will be greater for the same monthly payment level.
Furthermore if you buy now before interest rates go up, the house will become a ball and chain to your life style. You will be locked into the home when the inevitable home price drops continue as interest rates go up.
Interest rates in 2 years are going to absolutely shock the current bulls on this board.
“But what, exactly, are you waiting for?”
Well, how about waiting for any meaningful signs that the economy is stabilizing before jumping into a declining housing market?
Obviously, the US losing 65,000 jobs in just one month is not really encouraging. The record foreclosures reported yesterday doesn’t help either.
You got to be out of your mind to jump in now when every single economic indicator out there is pointing negative. This is not the time to be a hero. The people who have waited to buy during the past couple of years have been rewarded. As an example, there was NOT one single listing for a SFR 3bed 3bath in Huntington Beach for less than 600K in September 2005. Now there are 57 listings. You probably say: “well, that is a sign to buy now”. No, because all economic indicator are telling me that they will most likely be 100 listings or more for under 600K by the end of the summer.
If you wait, what is the worst thing that can happen? You miss the exact bottom. So, what? Prices are not going to go up like they did during the boom for several years. So if you miss the exact bottom, maybe you’ll pay 5% more. Big deal. You’ll see plenty of sign sthat the market is stabilizing when we get there.
The people who followed your advice back in 2005 of “always a great time to buy” are now underwater. You and the other realtors only care about keeping the market overpriced. Real people are losing their homes in record numbers and that is not gloom and doom. That is just reality. Go to Santa Ana and Westminster and see all the REOs and tell the former owner that it is always a great time to buy.
There will be a good time to buy but not for another year or two.
Looks like that “uptick in sales” that the bulls wishfully reference as evidence of a bottom is doing nothing but lowering the comps. Classic dead cat bounce. This train wreck will continue unabated for at least two more years.
Question to the bulls: has there ever been a time when it was not a “great time to buy”?
there were many times in the past when the peak of the housebubble was called only to be proven false. so now the bottom will also be called many times until in retrospect, it is finally confirmed. but there is one simple rule to follow that will tell you where the bottom is; it’s the 7-10 years rule. peak in 2005, so bottom is in 2012-2015.
dood & crew,
It’s astonishing that these articles make it through and that some people just don’t get it. Some bullish folks try to imply bloggers pressed for a bubble and are causing it or extending it… the bubble is what it is, just accept it.
The article is a complete mess, trying to equate buying some equities on the way down with buying a house. Guess what, I have put about $5K to work in the stock market in the last two weeks, adding little bits at a time (and yes, most are down). So what, now I’m supposed to go do the same with a house with $500 or $600 or $700K??? Childish and uneducated argument. Just because prices are falling does not make them a good deal or a good time to buy. Typewriter prices started falling with the computer coming out, but so what? Buy a whole bunch b/c they’re half price? The vast majority of folks buy homes with loans/credit, and therefore have to make payments on that credit. If prices are still to high to prudently make those payments, I don’t care if prices have fallen 75%, it’s still a terrible time to buy! It’s not like a stock, when you can throw a small amount at it, then wait, then throw a little more in, over and over. It similarly is not a stock or fund that you can sell at a moments notice if you want to stop the bleeding or if you need funds elsewhere. Wouldn’t it be nice if I didn’t have to worry about monthly payments, or about my credit and going upsidedown on a depreciating house? Also, I’d actually own the stock; I wouldn’t own the house… I’d be renting from the lender until it is paid off, or at least until I had some significant equity. (then there’s the whole idea of being able to pay cash, and watching your asset decline for years b/c no one else can… but that’s another post I won’t bother with)
The real problem with the bullish folks is that they have just lost complete perspective… they have become completely jaded as a result of the 5 year boom. They forget completely what it was like before, or how markets work at a fundamental level. The excess was so great, it’s made them lose their mind and ability to think clearly and evaluate facts. If bulls had left the country on a 5-7 job assignment and read nothing about RE and came home in another year or two, prices could fall another 20%+, get back in line with historical and supportable norms, and they would think nothing of it. It’s b/c they got so caught up in the rush up… that’s exactly what a bubble is all about. Get over it.
“When prices are falling, few people have the discipline to buy stocks, a house, gold, art or any other asset.”
So true. Thanks for the very interesting article, Sighburrdood. It looks like some of the new escrows are starting to close. Too bad that sales in the really distressed areas are making the medians look deceptively low. We should look at medians by area for a more accurate picture. I’d like to see what sales took place in Anaheim, Santa Ana and the rest as a percentage of the whole.
Employers slashed jobs by 63,000 in February 2008, the most in five years, the starkest sign yet the country is dangerously in recession.
I HOPE ALL OF YOU HAVE FIGURED OUT THAT
THOUTFUL
SIGHBUR GOO GOO
SCOTT A
VOICE OF RECKONING
AND SEVERAL OTHERS
ARE ALL THE SAME PERSON TRYING TO COMPLIMENT THE OTHERS COMMENT
DOESNT ANYONE NOTICE THAT LOOK BACK LOOK AT THE WRITINGS AND THE COMMENTS THEY ALL WRITTEN AND VOCABULARY THE SAME
I WENT BACK AND LOOKED THROUGH AND ITS SO OBVIOUS
NATIONAL BUBBLE U CANT TALK TO BRICK WALLS LET THEM FALL APART BY THEMSELVES
WE KNOW U ARE RIGHT BUT SAVE UR ENERGY JUST
KEEP SHORTING THIS MARKET AND SMILE ALL THE WAY TO THE BANK I PROLLY RUN INTO U THERE
WE WILL BE THE 2 GUYS DONE AT 1 PM AND AT THE BANK WI TH SMILES
SEE YOU SOON AND SMILE AND SHORT AWAY….LOLLLL
After looking through the charts it looks like a solid 30%-35% of sales were from the extremely distressed areas. There were 31 sales in Newport Beach, 22 sales in Laguna Beach and 106 in Santa Ana.
Thoughtful, watch what happens to Newport and Laguna when the stock market tanks, I can tell you it won’t be pretty in those rich areas.
Houses Going Up in the OC
Not all is gloom, prices rise in the OC
Orange 92867; Villa Park 92861; Huntington Beach 92647 and Dana Point 92624
I say the bottom will come faster this cycle.
This will happen for the same reason that home prices rose as fast as they did:
Rapid communication and information availability.
There was no internet during the last cycles. We had to rely on realtors and the slow national news media to tell us what was happening.
The national news media is only starting to notice what was obvious over a year ago - they will now drive the market down further.
Also, there are a lot more losers this time around, and the market is already falling hard.
I sold early on the upswing in 2004 (still hard to believe prices rose in 2005) and will probably buy late on the down slope (2010). Perhaps I will be surprised that prices fall further in 2011, but I can live with this level of risk.
I would rather have people buying toasters right now then buy a house. We need to improve consumer spending before I give a care about house values
I live in 92647 (Huntington Beach). I think the reason that this area has seen a small gain in sales from a year ago is because the prices have dropped dramatically, but are nowhere as low as they should be. The house I rent has seen a $160k drop in the fair market value in the past year and is currently “worth” about $520k. Ten years ago, this house was worth $180k. Since we’ve lived here, there have been no improvements and much deterioration. That’s what happens when the owner refuses to correct termite damage, water damage from old pipes, and cosmetic damage from high winds. Because of all the work this particular house needs, there is no way it is worth more than about $300k. But, there are those that believe that this is a great time to buy! Are they insane? If the landlord would sell to us at a fair price (no more than $350k per an appraiser friend), we’d buy it. But, last year, he took this totally paid-off house and re-mortgaged it for $640k with an ARM. Stupid man.
Numbers are reported down for another month. Gee, what a surprise (to the bulls anyway), but not to everyone else. The truth is the truth, no matter how hard you try to warp it.
Nothing wrong with plankton, but plankton won’t be getting into sfr’s for $250,000-$325,000. When I was a plankton, I was realistic, and didn’t demand everyone accomodate my every wish.
Hi ya doin Thoughtful (hope all is well),
I’m not speaking about one individual plankton. I’m talking about tens of thousands of plankton. This is Econ 100. Who will buy the homes of the existing OC property owners when they die ? Based on responsible lending practices, first time buyers can BARELY afford 3 bedroom homes at $250K to $325K. The laws of economics can not be denied indefinitely, though the toxic subprime loans certainly tried.
(now that was really my last post today)
“I say the bottom will come faster this cycle. This will happen for the same reason that home prices rose as fast as they did: Rapid communication and information availability.”
Law - I am very interested to see how this does in fact play out. But, from what I’ve seen, I don’t think the bottom will come significantly faster (though it’s possible). I do think it should come at least a bit faster, though. While much more info is now available to everyone, I would contend that still it’s a small percentage of people who actually will utilize it to the full extent. The rest won’t put in enough work to make sense of it, so I don’t know how much of an effect it really will have. The power to look at online listings is huge, though.
Most people are content to take what the MSM says at face value - and, as you said, the MSM has been slow to the story (I agree with this also). I’ve also noticed the general attitude is for people to see that either prices are rising or they’re falling and go from there without looking much deeper into the fundamentals.
Nothing wrong with someone needing to buy for $250K to $325K. What IS wrong is expecting it to be a three bedroom sfr in the neighborhood of your choosing.
Hey Jeffery’
While all you White Punks on Dope are sitting around waiting for everybody to admire what a genius you are Hundreds of Thousand of people from around the world are coming here with money and they don’ read your junk ecnomic BS. They are going to be buying and you’re going to get the short end of the stick again. Maybe Mom will give you your old room back.
Oh lets be real - adding “in the neighborhood of your choosing” is a bit of a straw-man move. He didn’t claim it would develop in the flowery center of Anytown.
Play nice now.
“The way to make money is to buy when blood is running in the streets.”
CAUTION - ” Do not get on the street if flow of blood is at very high speed, you will also be running with the blood”
WAIT - “Until the blood flow slows down a little bit”.
All Indicators - ” Pointing blood flow is increasing at this time”
SHORT THE MARKET SHORT THE MARKET
THIS IS MY LAST REPORT TO
LATER
THIS IS SO MUCH FUN SEE U AT THE BANK TODAY NATIONAL BUBBLE
SHORT AWAY
SHORT AWAY
LOLLLLL
So, we sold in Ladera on 6/26/07 in 18 hours for $850k for a 2450sq ft home and moved to Atlanta where I WISH, WISH, WISH we would have heeded advice and rented. But NO we bought…we bought a nice house for $565k in a new neighborhood where, since we moved here, only 1 home has sold leaving 7 open homes and probably 15 vacant lots. Pricing has dropped ~$30k so for our home that is, what?, 7%? I expect that to sell the homes and based on what I see around us, here in Atlanta homes will have to drop another $30k, so that’s ~11%?
I’m happy we sold in Ladera when we did as I would rather be in a home (since we were scmucks and didn’t rent) with an 11% drop vs. staying in Ladera with whatever %age the drop is there.
BUT, I would be curious if any of you have a national picture of the declining market. We want to move back to OC in a couple of years so we’re ones that are watching the market closely and comparing Atlanta “bottom” to “OC” bottom. I’m thinking it would be great to go BACK to Ladera and buy an equivalent to our $850k home for $650k….wonder if prices will actually go down that low.
And what cracks me up (and I have been a lifelong republican) is Bush saying a week or so back “We’re not in a recession or headed there!”. I am on the fence now of voting for a democrat instead.
Daddy Warbucks,
Didn’t there used to be a gay bar in Cathedral City, CA called Daddy Warbucks …but the local residences re-named it “Daddy Sore Butts”. I got nothing whatsoever against gays, but everytime I’ve seen your posts I think about that name and giggle. Maybe other bloggers can share in this laugh in the future.
Also in the future, maybe consider using economic facts to back your arguments instead of simply calling others “poo-poo heads”. I thank you for the memory of the “White Punks on Dope’ song. I completely forgot about that good old radio tune. I’ll have to look it up on You Tube. Thanks Daddy Sore Butt.
“Daddy Warbucks Says:
March 7th, 2008 at 9:10 am
Hey Jeffery’
While all you White Punks on Dope are sitting around waiting for everybody to admire what a genius you are Hundreds of Thousand of people from around the world are coming here with money and they don’ read your junk ecnomic BS. They are going to be buying and you’re going to get the short end of the stick again. Maybe Mom will give you your old room back.”
Bull talking point #41: people from all across the world will buy up OC properties with cash.
Rebuke: If this is such a significant phenomenon, why are sales and prices decreasing? And are foreign buyers that much ill informed to not realize RE’s instability?
Jeffery
Typing with your left hand and remembering old times in Cathedral City huh?
So Thruthi actually admits that prices could come down to a reasonable level.. $250K-325K. Let’s explore that shall we? Say that this value represents the not-so-desirable neighborhoods and then tack on a premium of say 25% for the better neighborhoods. What we get is 360K if take the average price now then lets say that another 25% for the next level up and what do we have 450K. Well, folks, you heard it from Truthi herself…houses in Santa Ana, GG, BP etc are goinf for $250-325K, Irvine, Tustin, HB, West CM, MV, LF are 360K and then the nice parts of Tustin Ranch, TRock, Eastside CM and other big houses etc are at 450K…..sounds like its right on…
I dont know if hundreds and thousands are coming here to buy. I have no evidence. Maybe they are.
If they are here, they aren’t buying, thats for sure.
Read the headline above. Sales are down.
Eat it, how about you address me correctly? Anyway, I said no such thing. Let’s be clear: NO cities in Orange County will have sfrs for $250,000-$325,000 (EVER), and the premium for Irvine, Tustin and Mission Viejo will be 100%-200% (or more) than Santa Ana, Garden Grove and Buena Park. Location, location, location….ever heard of it?
Hysterical….25% premium for better neighborhoods! What’s the premium for Newport Beach, 50%? Santa Ana: $250,000, Newport Beach: $375,000. Makes sense to me. Anyway, the stupidity of this blog is beginning to grate on me. I think I’ll find a better way to spend my time than jousting with a numbskull like you.
Dood,
I read that article. What it doesnt address is the tax question. It also forgets about the savings you will have by waiting a year. The example of a home close to 200K is way different than a home that is 600K. I agree that the payments will be the same, but using his example you will save 12K with a lower downpayment. If you have the 120K sitting in the bank you could easily make another 6K or more in a year. Lastly you can rent something for anywhere from 500 to 1000 a month less than a house payment. If you go with the 500 that saves you another 6K.
So by waiting a year even if the interest rate is higher and the payment is the same you have already saved/made at least 24K. This extra 24K will help you to get an even bigger house in a nicer neighborhood than the original 600K home would have went for a year ago.
So the arguement is very weak at best.
Daddy Warbucks Says: “Hundreds of Thousand of people from around the world are coming here with money and they don’ read your junk ecnomic BS.”
Lol. These permabulls are so predictable. When all other arguments fail, use the “foreigners will buy our homes” argument.
This is the typical comment made by people who obviously never lived outside Orange County and haven’t traveled much.
Although the “foreigners buying” argument might actually work for internationally known cities like NYC, Orlando, LA, Honolulu, and Miami, it certainly doesn’t apply to a place like Orange County.
Having lived in other parts of the country and other countries, I can tell you that very few foreigners even know where OC is. Every time I travel outside the US, I have a hard time explaining where the heck the OC is to the point that I just say: “I live in the LA metro area”
The OC is two expensive to appeal to the international buyer and it definitely lacks the culture and prestige of international destinations like the other cities I mentioned.
The OC is a good place to buy if you live here and have a job here. No the place to buy a vacation home.
Let me see, if I’m a foreigner, do I buy a second home in beautiful Maui or in Huntington Beach with a great view of the power plant?
Numbers are down for another month. Gee, what a suprise. You can’t argue with the truth, no matter how hard you try and warp it.
Oh, by the way.
I forgot another great magnet to attrack foreign buyers: the SMOG.
For a million dollars here you get a great view of the power plant and you even get the smog for free. What a deal.
Clean air is overrated anyways…
lol
Never say never, Truthi. (We all know who you are.) I don’t think we’ll see any first time buyers in NB so we can leave that out. In MV right now you can get SFH for well below 500K and falling. Tustin is right around the corner at below 600K. Oh, and Santa Ana in the 400K so I think your math is a little flawed and may I say, your tone a bit shrill.
Actually, the numbers are stable. Even in light of a full blown meltdown, the numbers are stable. Santa Ana sales: 106. Laguna Beach sales: 26. What did that do to the median?
the heart in the dagger for the foreign buyer theory is our falling dollar
find me a sucker who wants to buy into a falling housing market with the currency risk of the dollar
that is the ultimate double whammy
yet the realtor dribble, dribbles on……… fire up the hair gel, silicon, and cheap suits
“Let’s be clear: NO cities in Orange County will have sfrs for $250,000-$325,000 (EVER)”
I just checked realtor.com and found a lot of sfr’s (minimum =detached 3bd/ 2ba .14acre) in SA, Anaheim, Garbage Grove (lol), Westminister in the $235-350 range. Last time I checked those cities were part of The OC? Is there another website that has multiple listings indicating otherwise? Not sure of the opinions on here.
Leave Newport Beach out of the median statistics just because first timers don’t buy there? Makes perfect sense. Shrill? You’re a comedian.
Then you’re in luck! Keep your head down. Don’t worry about the rotted wood, holes in the roof or broken windows. I bet you can get it livable for under $100,000. Thanks for helping to prove that Orange County is affordable!
Nice listings in Santa Ana. Most were in the 1,000 square foot range, placing them at $275 per square foot. I’d rather go with a condo.
Wow- ok there. I’m not looking to buy.. already own 1 house and rent 1 condo out. Sadly, the equity is going down… but I’m not getting emotional over it. The MAJORITY of my $$ is diversified in the market- so no, I’m not praying that my properties will put me into retirement (I’m not putting all my eggs in 1 basket). But, I guess I’m just being rational. And YES, we are currently in a bear market. With the economy currently, or heading into a recession/ more job layoffs.. it doesn’t look like the RE market will turn anytime soon.
I love how some bulls here are in complete denial about what has happened to the market in OC for the past year + and what is basically guaranteed to keep happening for the next year or two, and yet they tell bears who back up everything they say with facts and numerous expert predictions that they’re wrong. Denial is the first step to overcome bulls before you can start to recover your common sense. I’m trying to help you so you don’t go out and buy more overpriced OC property and lead yourself to financial ruin. And I’m trying to make sure that non of the real estate newbies here don’t take your horrible advice about a false bottom and go out and buy in the middle of a crash. But of course you’ll put me down again by the end of the day, say nothing of value, and have no facts to back up your prediction of a bottom and that now is a great time to buy. I’ve been talking to realtors lately since I will be buying months down the road, and even they are not ignorant enough to tell me that now is a good time to buy. They are literally telling me that I should wait. So that says it all. Desperation on the part of SOME current home-owners is astounding!
My bottom feeding neighbor found himself a 3 bdm/2 bth with a pool and no association dues short sale in Lake Forest, right across from the street from Mission Viejo, listed at $399,900. Not exactly $350,000 but getting there. It last sold in 2005 for $625,000.
No ifs ands or buts, the decline is spreading deeper and more rapidly than anyone coud have predicted.
Smart guy, that’s what it takes. There are some ok places down there, even if they still are $300-$400 per square foot.
Samson:
You left out the most significant part of that article:
“At the end of the day, these efforts will be insufficient,” Zandi said. “Policymakers will need to be more aggressive and put taxpayer money on the line to stem this. Ultimately, we will find a bottom, but it would be a mistake to let the market run its course.”
This is what is going to happen, you and I as taxpayers are going to pay to keep people in their homes, stop the foreclosures, and give them their equity back.
Well I see that most of the idiots are still at it.
The recession likely started last year.
Get ready for a wonderful summer, with waves of foreclosures and
gasoline near $5.00 per gallon. ( I mentioned $4.50 last fall).
All the unemployed will have a great time at the beach searching for jobs.
It’s time for Americans to get off their high horse and join the rest of the world, start saving instead of spending.
Those of you old enough to remember the Carter years, high inflation
(12%) high unemployment, high food prices etc.. called stagflation it’s coming real soon at the theater near you.
I just laughed at the example of buying a home for $218K vs $197K.
All things being equal, I would always take higher interest rate and less principal. That’s because I can always refi when rates go back down sometime IN THE NEXT 30 YEARS. I can’t ever reduce the amount I paid for the house.
So besides making interest on my down payment over the next year and saving $20K to boot, it is worth the higher interest rate.
I do agree with Thoughtful in that most millionaires today got there thru real estate and not the stock market. That’s because RE has the power of leverage. $100K in stocks equals $500K in RE. So if stocks rise by 10%, = $10K; if RE rises by 4%, = $20K. Power of leverage will win every time.
But like stocks, I am not supposed to “catch a falling knife”. Entry point is critical, even if I happen to live in my investment. I will make another $50K-$100K by waiting a year. How many middle class couples can save $50K-$100K tax free in 12 months time on $90K in median income? That comes out to $4K-$8K a month in savings.
So we continue to wait.
I do laugh at those who think we have single handedly brought this RE market to its knees. That’s like the fleas claiming responsibility for warming up the backside of a dog that has just turned closer to the fire for warmth.
David, for such a flame thrower you are really sensitive. Nowhere did I say I look down on other locations. I only pointed out the factors that drive values. If you think Murrietta should not cost half of Orange County you do not understand these factors.
Anonymous, “flush homeowners out of the system”? These are for the most part people who could afford their homes before they were hit with huge rate adjustments combined with a lack of liquidity. The others are already getting taken out of the system. What a pompous attitude. They deserve help, and they will get it.
Thoughful– sorry but I’m not going to be responding to you. Watch the youtube post please. And take an Econ 101 class in the future, or at least talk to an economist. Peace out!
“This is what is going to happen, you and I as taxpayers are going to pay to keep people in their homes, stop the foreclosures, and give them their equity back.”
Manual for desperate permabulls.
1) If “foreign buyers will save the housing market” argument doesn’t work,
2) refer back to the old “the Federal government will bail out the housing market”
3) If that doesn’t work either, use the “you get a great tax deduction” argument.
Repeat all these steps above as many times as necessary to try to fool potential buyers into buying in a declining market.
Anonymous, you have very a VERY broad definition of “economist”. This guy runs seminars. I found nothing worthwhile in the video, nothing. And for your information, I have a very extensive education, which included classes far more complex than Econ 101. Thanks for the entertainment!
About Michael Gasior
Michael Gasior is the founder and President of AFS Seminars LLC as well as our chief instructor. When you enroll in any of our programs, you will be instructed and entertained by a man widely considered one of world’s most dynamic public speakers.
Mr. Gasior founded AFS Seminars in 1989 after spending time with several Wall Street firms and a major European bank. Using anecdotes and lessons drawn from his lifetime of experience with economics, investments and the financial markets, he passes this hands-on knowledge to everyone in attendance. His teaching style is dynamic, interactive and heralded throughout the industry. When you register for any of our programs you are assured to spend your time with one of the world’s finest teachers.
Mr. Gasior has held a host of securities licenses and industry designations. He has authored ten textbooks on investments and the investment markets, and over 400,000 people worldwide read his monthly newsletter. His breakthrough radio program “Big Money with Mike Gasior”, which aired worldwide on the VoiceAmerica Radio Network, was one the first shows ever to focus on the needs, concerns and issues faced by the world’s largest investors.
Besides helping the over 40,000 people who have attended his sessions during the past 18 years become better equipped to perform their duties for organizations globally, he has also contributed in a substantial way during a variety of consulting engagements where he has served as an industry expert.
I suspect someone like you would not learn anything from a professional economist and someone with much more financial experience, EVIDENT in your posts. 1+1 = 74, right? Go back under the rock you came out from joker. Have a nice day everyone else! Peace!
I have a better education than that guy. I searched the web and cannot find a single credential for him, unless you count this: “Mr. Gasior brings an encyclopedic degree of knowledge of the issues facing this community” (at least its some kind of degree). He appears to have some areas of knowledge, but no more than many of our beloved bloggers here.
Thoughtful,
“Dow plunges 200 points”
“Employers slash jobs by most in five years”
“Thornburg faces big margin calls, survival at stake”
“Oil hits new record”
“Bush advisor: economy could shrink this quarter”
“Consumer confidence at lowest since 2002″
“Foreclosures rise in February”
It looks like housing prices are set to drop for years to come, but maybe, just maybe you (sighburrdud) can try to spell check all these problems away.
NationalBubble:
With all due respect, I am not telling people to buy homes, I am warning taxpayers that you’d better start saving for the additional taxes that will be necessary to pay for the stupidity that will be implemented by Washington.
Every day, I hear more and more congressman, senators and presidential candidates agree with these bailout proposals.
You can stick you head in the sand all you want, I can plainly see what is about to go down.
I can see what is about to go down too…your imaginary equity.
“You can stick you head in the sand all you want, I can plainly see what is about to go down.”
I agree that the Feds are going to try to bailout the market but my point is that a bailout won’t stop the decline in prices just like it didn’t in Japan.
I appreciate what SOB has to say. I agree that americans need to start saving more. Unfortunately most americans are addicted to debt like crack addicts are addicted to crack. There will be a forced change in the near future as interest rates sky rocket and credit markets tighten further. Many people will no longer be able to get credit in the near future.
Since when has relying on the Fed government to bailout an industry been something to bank on?
It hasn’t worked in the automobile industry, and its not proven to work here. Over time, bloated the housing market will correct itself. As the pendulum swings to the buyers side of the market, earnings should fall back in line with home prices and will see a gradual increase in prices.
Newport and CDM Rule.
SOB,
I do agree with you that taxpayers will more likely get hit one way or another. We really already are with the national debt at the level it is now. It is so sad that the government thinks a cash bailout is going to help with anything. To try to ease things, by giving us $600 that has to be borrowed from China, which in turn is intended to buy goods that are made in China. It sounds to me like the only economy that will benefit is China’s/
On the note of people getting “there equity back” is part of the problem. As much as people here have said it is wrong for people in OC to feel entitled to be able to buy an affordable. It would be equally wrong for people to feel they are entitled to “there equity”
This paper money doesnt exist. Only in the minds of the homeowners. No one deserves to make a profit on their home…it is all market driven.
Even if the “bailouts” begin to help some people, the banks are not going to start giving out loans like candy. People incomes are not going to rise rapidly. Employment rates will still drop and inflation will hold steady.
All of these things will deflate housing prices regardless of how many homes get saved.
The market needs to correct itself, you cant cure it by chasing good money after bad.
It is and will always be about affordability.
I agree that the Feds are going to try to bailout the market but my point is that a bailout won’t stop the decline in prices just like it didn’t in Japan.
The answer is - it depends. Prices will not significantly decline further if:
- the Fed/FHA/Fannie/Freddie buy the toxic loans (with additional capital provided by you and me as taxpayers)
- the new owners of these loans artificially lower the interest rate and forgive the principal amounts
- FHA gets into the subprime business in a big way (which they are heading that way)
- the Fed continues to throw money at banks begging them to lend it
- Fannie/Freddie are pressured into lowering their lending standards in exchange for an explicit government guarantee (which is coming soon - just ask Senator Schumer)
The problem with all of my “if’s” is that I am finding it very hard to find anyone in a position of responsibility in our government that is standing up an saying that these proposals are crazy - in fact, I am seeing the exact oposite. I have seen a few in the Bush administration but they’ll all be gone in less than a year.
I don’t know what the answer is, but anyone relying on the feds to act with any common sense is nuts.
Jimmy (aka Troll)
Newport and Corona Del Mar “Rule” ….. the zip codes with properties that aren’t selling at all.
Newport’s zip code-92661 had one sale in the recent DataQuick listings (click above) and Newport’s 92662 also had one home sale. Yah, they sure do “rule” something, but it ain’t home sales, and it ain’t price appreciation. The bigger they are, the harder they fall.
Americans need to save their money and make sacrifices in the future if they want financial security in their old age. Is it really important to have that high-end car with spinners in your driveway, that nice expensive boat or purebreed dog, or buy expensive clothes at Nordie’s or Saks? AND buy a high-end house with Mello Roos in some places? Many people have over-stretched their budget, lived beyond their means and now they will suffer the consequences. Oh, BTW I’ve noticed more and more people who shop at the 99-cent Store, drive up in their Merdedes, BMW’s or some monstrous SUV.
“In the US 30% of ALL houses are owned free and clear ”
nearly as many have NO equity whatsoever. why do you think the total US home equity just dropped to 49%, the lowest figure since 1945? the large majority of these people will walk away from “their home” if they haven’t already.
for those of you who eat out a lot……
who else has noticed that there are less and less people at restaurants in the OC?
“Requires no tolls” highlights a property located right next to a toll road (this community let alone official city did not even exist until a toll road was built). how else would I get to my job in Costa Mesa?
commute 15-20 minutes on surface streets to get to the freakin’ 405 and deal with another 20-25 minutes of traffic?! ARE YOU KIDDING ME? I know because I’ve done this run to get to someone’s house when I lived in C.M.
it’s practically the definition of “Tolls required”
“who else has noticed that there are less and less people at restaurants in the OC?” yes I do, and yes I have… gives me a lot more room for my s.o. and I to enjoy ourselves. and no more beckoning waiters.
that and the lack of ratings system will surely do in the restaurant biz for a while
SOB loves when clueless politicians come up
with their hair-brained schemes in hopes that
he will get out of being upside down in his
over-priced house sorry SOB its just another
pipe dream get over it
“When prices are falling, few people have the discipline to buy stocks, a house, gold, art or any other asset.”
are you kidding? I’ve been doing all of the above like crazy minus one or two. art is one because I have picked other investments so far. though everyone talks about art as this great investment (better than homes, IMHO) so it’s very enticing now.
guess which the other one is.
No one at the mall either. Just got back from the park (in Talega) with my kids. One of my friends told me they are letting their home go into foreclosure. Paid 750,000 for it in 2003. Took out loans,refi it to the tune of now owing about 850,000. Put it in the market 2 years ago for 1mil,no takers. Now ,she told me,”we are losing money every month and just want it to stop.” They will be leasing a condo. Another woman told me her neighbor announced yesterday they would be allowing their home,bought brand new in 2005 for over 1mil,to go into foreclosure. The comps in the neighborhood are priced at about 780,000 and dropping. These aren’t investors,they are real people who make good money(150,000+)and have families. They bought into the hype and believed every word their agent said. Stupid? Yes….Atypical? I’m thinking probably not in the OC. Very,very sad.
SOB, I am mistified as to why you should be supporting this bailout that will clearly hurt the taxpay (you and me) to save the stupid and the greedy (unless you are one of them). For give me if I am wrong, but if I loaned you $100 and then a judge tells me that I have to lower the principle to say $75, how much more likely does that make me to loan the next guy $100? Or are you saying that the entire mortgage lending industry will now be taking care of by the federal entities?
not sad for the vultures circling around here.
Wow!
Even after a nice vacation I see everyone still thinks the sky is falling.
I waited an hour to get a table last night for dinner. There was no shortage of consumers. Where are you eating???
Thoughtful (actually anyone): it was stated earlier that “pending” sales have picked up by ~ over 80% since Dec.07/Jan.08
I ask - what gives here with this topic?
For God’s sake - will someone spew out accurate data for once? What is correct? Closed sales are increasing or not?
I’m not picking on anyone here. I’m not even making any conclusions. I just want to know one thing. What is it?
Eat it:
#1 - I am not supporting any bailout, but it is coming against my will
#2 - Yes the federal government will be getting into the mortgage business in a BIG way - whether we like it or not
As my earlier post at 8:41 am suggests, I’ve been a bit in disbelief concerning the “Affordability” numbers estimated in the Global Insight (economic consultants) report posted on this blog last Weds 3/6/08. I sat down with a calculator and examined the yearly numbers for Santa Ana-Anaheim (aka Orange County). Here’s what they had for 4thQ 2004 vs. 4th Q 2007.
Median 4th-Q 2004 OC selling price - $617.4 - affordability was 34.4% overvalued. Correction to affordability (100%-34.4%=65.6%): $617.4 x 65.6% = $405,014 (the price that OC homes should be to be considered affordable according to their estimates).
Median 4th-Q 2007 OC selling price $548.6 - affordability was 7.1% overvalued. Correction to affordability: $548.6 x 92.9% = $509,649 (the price that OC homes should be to be considered affordable according to their estimates).
So, in the 4th-Q 2004 affordability was defined by Global Insight as $405,014, but three years later the affordability is defined as being $509,649. One needs to multiply - $405, 014 by about a factor of 1.26% to get (nearly) $509,649. Therefore, according to Global Insight, home affordability in OC risen $104,635 in three short years. (Incidently, this number is about half of what the rest of the country averages for their entire homes). Somethings screwy here.
This beckons the question: Did OC wages + OC inflation rise a full 26% in the last three years. I don’t think so (though I didn’t research the answer). Then, how did Global Insight do their calculations and arrive at their OC Affordability estimates. According to Global Insight’s findings and today’s DataQuick median home sales report, we are only 1% away from true affordability in OC.
Anybody with number crunching experience have any FACT-BASED answers ? Is Global Insight correct ?
We actually have a say in how the government bailouts out the flippers and liars. We vote. My congressmen and senator will be hearing from me.
As for the fed getting into the mortgage business in a big way…where exactly will all that money come from? Raise taxes? Borrow it? Wouldn’t taking on all that toxic loans make the GSEs fail?
Good luck with that letter to your representatives, all I have ever received was a form letter about how we need to help the poor homeowners….
Taxes will be raised on the “rich”…just wait until you hear the definition of the rich!
More will be borrowed, but more likely, a LOT more will be printed….
Stop using logic and reasoning to make your points, both of these concepts are reviled in Washington…..
I still can’t get over how quickly the prices in Ladera Ranch have crashed. And they have yet to slow the quickening drop, much less near a bottom. Ladera’s median home price now at $500,000? Yikes!
I wonder how “Steph” is doing with her new $419,000 Ladera condo with the marble backsplash that she was hoping to get reappraised this month for $480,000?
Something tells me that if the median is now $500,000 in Ladera where the vast majority of units are detached sfr’s or custom homesites, that a condo is nowhere near that median figure. Even with the marble backsplash package added by Lennar.
Hmm, stock market crashing.
Jobs data in today and horrible.
Foreclosures and short sales increasing.
This spring and summer, a whole new wave of inventory is about to hit the market, creating more competition and putting further downward pressure on the market.
Rates are going up.
Inflation aka gas and food prices are rising way faster than incomes.
Yet some people here still insist we’re at a bottom and say now is a great time to buy. Go figure. With all that education, some of you should really start putting a little of it to use.
Jeff, I’m going to go out on a limb here. I think you are making an error. To say something priced at $1,000 and overvalued by 25% is worth $750 is not correct. I believe it would be worth $800 (1,000/1.25). The greater the degree of overvaluation, the greater the spread between your method and mine. I could be wrong, but I doubt it. Here are some numbers to consider:
Jeff $ Jeff % Price Global % Global $
750 0.750 1,000 1.250 800
500 0.500 1,000 1.500 667
250 0.250 1,000 1.750 571
Jeff $ Jeff % Price Global % Jeff $
405,014 0.656 617,400 1.344 459,375
509,649 0.929 548,600 1.071 512,232
I am getting a figure closer to 11% over those three years. Let me know your thoughts.
Ummm??? The stock market is not crashing. Do you have a clue what a crash is? Were you even over 18 the last time it did?
So if I am right, Global Crossing is saying that affordabilty for 2004 was $459,375 and affordability for 2008 is $512,232. This is a difference of approximately 11.5% over 3-4 years.
I’ve seen crowds more often than not when I’ve been out. However, they are not as consistent as in the past. No one is saying the economy is not taking a much needed breather. Geeze people, get a grip will you?
No sweat! To be honest, I think they use some secret sauce in their calculations as well. I agree using 1985(ish) to 2007 as the baseline is wierd.
Scott, in the 3 months ended today,
Dow down 13%
Nasdaq down 18%
S&P down 14%
Each index lost ~3% this week. What would you call this? Easing? Correcting?
But then again….the baseline used in 2004 could have only used numbers up to 2004, so maybe that’s not so relevant.
I have gotten a grip…and it’s on the reality that home prices are tumbling faster than even the biggest bear predicted…
What exactly has been fueling the economy lately? How about equity extraction? Does that have any bearing on our economy? No, probably not.
I wonder how flat incomes over last 7 years is affecting people’s ability to spend more? No, of course, people spend more than they earn.
What could possibly be causing the economy to take breather when everything is just fine and dandy? I’m sure it’s nothing. Like when you have suspcious looking mole.
Save your breath Eat, this one’s a “Grade A ” MO-RON
Taken this discussion 1-step further …. along the same mathematical lines you utilized …. For LA, the 4th Q 2007 Global Insight numbers are:
LA: $481.3K with a present overvaluation of 31.8%.
Crunching that number: $481.3K / 1.318 = $365,174
That’s supposedly what the affordable LA median home number should be according to Global Insight. What might you think about that ? As for me, I don’t see the OC homes differing that drastically from the LA median homes. The LA number seems more reasonable.
Poggi–I think you should get an award for consistently writing so much, while offering absolutely nothing of value. Reading your “thoughts” is the intellectual equivalent of eating pork rinds–but is far more distateful.
make that “distasteful”
Thanks for your opinion crystal. Too bad you’re wrong. I consistently put more facts and stats on this blog than just about anyone here. You just disagree with them. There’s a difference. I guess you don’t understand that.
Then answer the question poggi.
Do you know what a crash in the stock market is?
I was basically summarizing the key data points for the day, but since Crystal is having a hissy fit, here’s some more details to prove you bulls wrong for about the 188th time:
Stocks tanked Friday, falling to the worst levels in nearly 18 months after a weak February employment report and more financial sector woes exacerbated recession fears.
Oil spiked to a record $106 a barrel before retreating a bit, the dollar continued its plunge
The broader Standard & Poor’s 500 (SPX) index fell 0.8%, closing at its lowest level since August 23, 2006. The Nasdaq composite (COMP) lost almost 0.4% and ended at its lowest point since Sept. 11, 2006.
“You can see as a general rule that there’s a revulsion to any risk and a lack of confidence in the market,” said Bill Stone, chief investment strategist at PNC Wealth Management. He said that the economy has probably been in a recession since the start of the year.
Job losses are the worst in five years. Employers cut 63,000 jobs in February, the biggest monthly cut in five years. That fell far short of expectations, which had called for employers to add 25,000 to their payrolls, according to a Briefing.com survey of economists.
The report is the latest indication that the economy is headed for a recession, if it isn’t in one already.
“The report was horrible,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc.
“Even the one bit that seemed like good news was bad news,” he said. “The unemployment rate went down, but it was because the labor force shrank, which is not good news.”
Meanwhile, President Bush’s top economic advisor said Friday afternoon that the nation’s economic growth could fall into negative territory this quarter, in line with outside experts, but more dour than the White House has been.
Citigroup (C, Fortune 500) said late Thursday that it was shaking up its residential mortgage business, cutting assets by $45 billion over the next 12 months and halving the number of loans to be held in its portfolio.
Ambac Financial (ABK), the troubled bond insurer, said it had successfully raised $1.5 billion in capital by selling stock and convertible bonds, in a move meant to preserve its financial strength rating. The plan got a lukewarm response when first announced Wednesday, disappointing investors who were expecting a bigger bailout plan.
Meanwhile, lenders to Dutch bond fund Carlyle Capital have begun to liquidate securities in its $21.7 billion portfolio, the Associated Press reported. The company said it received substantial additional margin calls and default notices from its lenders. (Full story).
Margin calls require borrowers to pay back loans or offer more collateral.
Thornburg Mortgage (TMA) continued to plunge after the company revealed it can’t cover current margin calls and that it will restate past earnings to account for a decline in the value of its mortgage securities held in a portfolio at the end of 2007.
I could go on and one and on but you’re boring me. Have a great weekend. remember NOW IS A GREAT TIME TO BUY, LOL
Hey Scott:
“Do you know what a crash in the stock market is?”
You ain’t seen nothing yet.
Poggi,
That still does not address the question.
You do not provide any insight. You only regurgitate articles that you do not understand.
Hey Scott, thanks for telling me what I do and do not understand. What would I do without you lol.
Any bull on the OC real estate market is clearly who does not understand the impact of the data points in these items. I guess that includes you? Do you think OC real estate is going up this month?
Please tell us so we can all laugh at your ignorance.
I’m 32, you figure out what I have and haven’t seen big boy. I’ve been monitoring financial markets in some aspect since about age 10.
David Poggi
I thought that answer was considerably better than a Pork Rind, and a Slim Jim, or a Pickled Pig’s Knuckle. However, I wish the bloggers here would focus more on self-education and less on low-brow comments ….. though a good come-back does occationally pack some laughs.
I answered your question now you answer mine Scott. You man enough?
I will repeat myself.
Do you know what defines a crash in the stock market?
My intent has nothing to do with the direction of real estate.
Are you hiding under your desk? I’m still here.
Jeff, the US Census shows a Los Angeles County median income for 2006 of $56,930 and an Orange County median income for 2006 of $80,193.
Love the pork rinds joke! I agree WHOLEHEARTEDLY. David Poggi doesn’t even know what he doesn’t know. My resevoir of guilt over hassling him has run dry due to the fact he richly deserves it.
“Reservoir”.
Yes, let’s keep the posts short, concise, and to the pork.
The problem with Poggi’s latest “List of Woe” is that even though it’s from this week, it’s old news! Yes, we get it. We have a credit crisis, we are in a recession, there is pain. That might actually explain why people are willing to take tens, and even hundreds of thousands, of dollars in losses. Cause, meet effect. I hope he doesn’t trade stocks, he’s much too skittish and girly.
Thoughtful,
Thanks for researching those figures. Very cool.
So, that’s an OC to LA income ratio of about 1 to 1.4
Along the same lines - affordability of OC/LA homes - using the Global Insight affordability data.
Projected Affordable OC - $512,232
Projected Affordable LA - $365,174
The LA to OC home afffordability ratio is also 1 to 1.4. Right in line with your income figures.
Evidently, the Global Insight folks are on the ball, at least from an LA/OC home affordability ratio point of view. Thanks Thoughtful …. I learned something there. Evidently, you really are thoughtful.
Dog,
Thanks.
Love,
Cat
Thoughtful,
Got it. And don’t forget that future “I told you so” down the road interaction. Signing-off till tommorrow.
Permabulls…the game is on wall street and in the financial centers. You experience with local RE markets is meaningless in the unfolding scenario. The way things are going, the financial sector and credit system will be completely frozen within 6 months.
The GSE’s can’t do much when the spreads on agency paper widen to unheard of levels.
It does not matter what someone wants to buy. When a loan is not available at all, and money (cash) talks and all else walks…what do you think houses will cost?
I know of someone who bought an REO recently for $290K. It sold for $920K 18 months ago. This sort of occurance is going to become common. CW had $4B of REO on their books. They can not even keep track of all the stuff coming back to them.
In late 2008 supply coming back to the market will do so at fire sale prices. At the same time, financing may not be available.
You experiece with RE over the last 10…15…20 years means nothing in this environment.
The coming carnarge in the CDS markets has more to do with house prices than how close something is to the beach. Do you perma bulls even know what a CDS is?
BrantW,
….. come on Wall Street doesn’t know nothin’ bout our local Real Estate….. they surely can’t shut down access to credit in the OC? no way ! no how !
this is going to unfold worst than I thought.
BrantW,
Indeed I do. That was one method to hedge.
Where you savy enough to profit last summer?
S..dood: “But that’s exactly when you should think long term”
I agree - however, why are more home buyers in the OC still using ARMs instead of locking in the low fixed rates for the long term?
Are they not hearing ya? What strategy do you think they’re leveraging?
Correction
Were? :)
I have a business associate who just pulled 100% out of her $100k home equity line because she was afraid the bank would reduce the line on her.
She is willing to put it in the bank as a cushion and pay the difference on the spread between interest income and expense just to have availability.
That’s kind of like a run on the bank from the 1930’s, isn’t it?
My definition of a stock market crash:
1929: Stock Market Index falls from 250 to 175, or 30%.
1987: Stock Market Index falls from 2500 to 1750 by 12 noon…same 30% downdraft.
That’s what I call a “crash”.
I would say a “crash” is a 10% or greater movement down in any 1 day.
NBI-
I think buyers use ARMs because they can get higher ratios, at least that used to be the case.
Who knows now with the credit markets as tight as they are.
Thank you Marcia. Hopefully Poggi is reading this so he can be informed. Instead he became defensive.
I think people take ARMs because they rates are too good to pass up. It’s real money they are saving.
“the rates”
I want to know a couple of things:
1. why do people keep saying that the ARMS are going to reset soon (were they all done at once and they will all reset at one time?) when are we talking about reset?
2. I would LOVE to know what everyone thinks will really happen in NB and CDM. Looking at all of the things going on with stocks, RE, etc. all put together- what is the most honest evaluation of what will happen to these rich areas? 1. we find out the rich aren’t really rich and really can’t afford these homes? 2. we find out that these areas really can sustain these high (unGodly) prices?
You’re all opinionated- let me hear it.
Hey Mav,
I also caught the Tubes - White Punks on Dope on you tube earlier today too, thanks to the reminder I got from Daddy Warbucks.
Jeff,
That’s awesome….. I tend to ignore the Daddy Warbucks version of Thoughtful….
in regards to ARMs, the writing is on the wall
people taking them now are going to get royally screwed
in a lot of ways I feel bad, but I guess some are in the know, and some are not
The way this game is playing out it might be smart to take an ARM — IF one were buying now.
If rates continue to be pushed down you might win.
If rates jump……the fools in charge might subsidize and/or rescue you or, if not, you just walk like everyone else.
No stigma to that anymore.
The “rules” don’t apply anymore and with no rules there is no right and no wrong.
Marcia,
Ain’t going to happen — a 10% down in one day.
Can’t happen.
Trading curbs, you know…… that and the automatic programmed trades that occur in response to predefined price and volume changes.
Too much happens that isn’t easily explained or consistent, ie: massive buying by shorts covering after a sudden market drop…….. etc.
Nothing is simple anymore - (If it ever was:)
Anyone ever hear of the blocks in place to “prevent” a stock market crash in present day America. Lol Scott, your definition of a crash can’t even happen. Simpleton.
Thoughless, if by “hassling” me you mean proving yourself wrong about the market over and over and over again, you have certainly succeeded. I enjoy being right at your expense on a daily basis. The sad thing is that you’re about twice my age and always proclaim to have such a great education, yet you never say anything to show it.
A Mom in CDM,
Tidbit: Your question timing was off. Friday night at 8 pm isn’t prime time on blog. Also, it’s helpful to voice a position first, then inevitably an opposing or agreeing voice will surface. Caution - be prepared for some occational “adolescent testosterone” within the replies. Try again later.
A Mom in CDM,
Another suggestion …. Maybe pick another blog name. Nobody want’s to disagree with a sweet, nice “Mom”. However, if it were something like “Satan’s Mom”, the bloggers would engage more readily. Hopefully, you get my point.
mom in CDM: good questions. What I have found in our research is that certain areas that have seen a larger percentage of purchases utilizing ARMs are more susceptible to having people get into trouble and therefore, eventually, lowering the comps for that neighborhood. It takes more than one foreclosure in an area to lower prices (based on foreclosures alone).That’s the concept of many local little markets.
As for the other areas - they’ll see an affect but not nearly as great.
Thoughtful: “real money being saved”
I know that. But the honest answer is: they are leveraging risk to lower payments.
That’s the point I am making. What happens when it comes time to refi, and 80% of these folks were not tracking rates and the direction they’re heading. They end up having to refi out of the ARM only to find fixed rates are higher. You know how many I/O’s are still being made? What happens if prices remained flat, or continued to decline at that time?
Lastly - these are families - not investors. What kind of timeframe are these people looking at for home ownership when considering such financing? This smacks of an affordability tool more than an investment/cash flow tool.
You do understand that if you intend to own that home, you do have to pay it off - yes? And the goal would be to pay less overall - correct?
BrantW,
I am calling your bluff on this one:
“I know of someone who bought an REO recently for $290K. It sold for $920K 18 months ago. This sort of occurance is going to become common.”
Prove me wrong. Post the address.
pdu: that’s a great point. I believe to be accurate to some degree for what people are thinking and expecting frrom the gov.t.
The concept of self reliance has been replaced by large government and fancy welfare programs for the homeowner.
Little pride in this county - if you ask me. People so willing to gamble on their families home, willing to simply walk way from an obligation, etc.
Looks like I’d better start doing credit checks before hiring. Who in the world would want to put a $10M project in the hands of someone that can simply walk away from their obligations. I wouldn’t trust them to deliver on a design for a toaster.
Thoughtful/NBI-
You are both correct:
2006 Median HOUSEHOLD Income is $70,232
2006 Median FAMILY Income is $80,193
Thoughtful/NBI-
If the above is true, Median Family Income is $80K, with an assumed rate of 6.0% on a 30 year loan, and a DTI of up to 40%, how much loan would that be please? Can you walk me through the calcs?
I just want to make sure I am on the same page as to what the median household can afford to buy in the OC.
I looked up the two definitions, and I guess “family” is 2 or more legally related people in a household, where “household” includes 2 or more unrelated people and singles. I don’t think this stuff is all that meaningful, except in a broad way since it includes the very large percentage of people who rent. There is also no way to know what people bring to the table. I think it’s a big mistake to assume that people don’t have sizable downpayments. Just my opinion, like most of what is written here.
Working on an amazing hotel condominium opportunity and one of our lenders can do 100% financing with pledged stock assets to replace the down payment liquidity. Good lenders with good investors will find buyers for loans. The big loan shops who sell to wall st will be standing on the sidelines while the smaller shops who sell to private investors who look at individual packages rather than the whole will flourish in this new economic environment.
re: mom in cdm
i can give you some insight into NB - CDM market. townhouse and condo is weak. most sfr is good, exceptions: bad streets. i see many low ball offers on NB - CDM homes that are almost all rejected. these people have money and are good investors. they reject the mob mentality. many low ball offers are not even countered. in HB, things are better for buyers. HB owners are more open to reasonable offers. the rich have won the housing game. all else lost.
Hi Thoughtful-
Thanks for the clarification on Family vs Household.
I guess the only reason I question the downpayment is because there were so many lo/no-down loans, and a whole lot of foreclosures now due to the fact that folks can’t make the pmts.
If someone took out a lo-down loan, but still had cash in the bank, why would they be in trouble now? They’d just use their cash reserve to get them to a more stable interest rate refi.
You are correct that it is all just speculation on all our parts, except for when the media gives us stats to draw on.
Jimmy is absolutely right. Owned three homes in CDM before selling in early 2004, and relocating to the Midwest due to job. What an awesome community. That said, while no area is immune to this mess, CDM and Newport will fair much better than the rest as they are and will continue to be aspirational communities.
Im looking at homes in my area of Lake Forest that at one time sold for high 500s low 600s, now you can find them as low as 430k, these are asking prices by people who I have known for years, not banks, and not short sales, just people trying to cash out.
Almost 200k gone, just like that, and more to come, may I should do the same while I still can.
I’m starting to think another 10% or even 20% my be in the cards, who would of thought we would see this kind of decline and at such a rapid pace.
If this ain’t a Crash I dont know what is.
The majority of Bear bloggers here are predicting 2 primary things. One, that prices will come down significantly further, and two, that the bottom of prices in O.C. won’t come for AT LEAST a year.
I, personally, have been steadfastly suggesting for about a month now, that the bottom is here - right now. The number of escrows is up - dramatically, and the inventory, which is USUALLY jumping by leaps & bounds at this time of the year, is staying essentially the same.
Here is a blurb from Steven Thomas, of Remax, dated 3/6, which Jon will undoubtedly refer to, in a day or two. ( I’m on Steven’s mailing list, just like Jon.)
“Multiple offers in the lower price ranges? Yes, it is true. Our reports from the streets substantiate the latest development: the lower ranges, especially distressed properties, are receiving multiple offers. It is difficult to gauge the current real estate market by reading the papers or listening to newscasts. The absolute best way to assess what’s going on in is to poll the Realtors® out in the field, writing offers, guiding buyers from home to home, and representing sellers in the marketing and selling of their homes. The reports are in: the lower ranges, below $500,000, are seeing plenty of activity, with multiple offers and buyers losing out on their first choices.
The lower ranges were hit the hardest through the subprime shakeup and they slowed first. Logically, it seems appropriate that this range, the entry level, would be the first to heat up. The below $500,000 range accounts for 45% of the current active inventory and 50% of the most recent demand. One year ago, it accounted for 26% of the active inventory and 28% of demand.
First time buyers are stepping into the fray with their first real opportunity to purchase in years. Bank owned foreclosures are in vogue and are seeing the most activity. Foreclosures only account for 7% of the total active inventory, but 23% of demand. There currently is only a 2.37 month supply of foreclosures, an extremely valid explanation for all of the multiple offers.
When the expected market time is below the 5 month mark, it is a seller’s market. Everybody is looking for a deal, but it seems that the banks are in the driver’s seat. With the new FHA and conventional loan limits coming, the upper ranges will witness a similar boost in demand shortly.
Demand, the number of homes placed into escrow within the prior month, increased modestly by 73 homes in the past two weeks from 1,820 to 1,893 escrows. Demand is at levels not seen since June of last year. And, according to our Realtors® out in the field, what is NOT reflected in the data is that when a buyer and a seller come to an agreement on a short sale, where the seller’s combined loans against the property exceed the purchase price, most homes are not changed in the Multiple Listing Service (MLS) to reflect the agreement. Instead, they remain on the market as active listings until formal lender approval of the short sale.
You see, the buyer and seller may agree on a price, but the seller is really bargaining on behalf of the bank since the bank has to take less than what is owed. They are “subject to lender approval” according to the terms of the contract. So, the standard practice of care out in the field is to keep these homes on the market until lender approval occurs. Also, we are not talking a couple of days for the lenders to respond either. On average, they are taking anywhere from 21 to 90 days to respond. Needless to say, demand is currently understated. This should wash out over the next month as more and more lender approvals hit the market. There are over 4,000 short sales currently on the market, 26% of the current active inventory. Short sales only account for 17% of demand (remember, it is currently understated).
That isn’t the entire report, but should suffice for purposes of THIS thread. Conclusion, just as I have been observing for weeks now, there ARE some good buys out there - the lender repos and the corporate relos, and that ASTUTE buyers should be poring over them to find some excellent buys - UNDER the current market.
When those good buys are picked over, and they are not being replaced nearly as fast as they’re being snapped up, buyers will only have “normal”, non-distressed sellers to deal with, at somewhat higher, and firmer prices - in about 2-4 months.
The bottom is here, now, in South O.C.. I’ll be back in 4 months to say “I told you so!” As for now, I’m off to see some properties.
and we will be here to watch you say that in 4 months, dood.
For all of you who give much credence to the DQ ( DataQuick.) median, for O.C., here is a wake up call. For the past 6 months the O.C. median has drifted ARTIFICIALLY lower for one HUGE reason.
Most of that data is reflecting a large, TEMPORARY absence of more expensive properties. Sales of properties priced over $750k have been considerably lower for the past 6 months, ( less than half of normal.) due to the jumbo loans mess that has now pretty much been sorted through. ( AND helped immeasurably by the new higher conforming loan limits.)
The plankton of the house buying cycle is now ( the past 6 weeks.) starting to emerge, to buy the lower and medium priced foreclosures. There are MANY buyers in the wings, for medium and higher priced properties. Once those sales ( which are entering escrow as we type.) show up on DQ, in 2 or 3 months, the Bear Negative Bloggers here will wonder what the heck happened, and have no plausible explanation for it - other than the one I’m presenting.
For them, in 2 or 3 months, it will be too late. The REAL bottom, which is happening right here, right now, will have eluded them just as it did in 1998.
Happy lifetime of renting, bad news bears.
If you think the bottom is here, see how much the price has dropped in the last 6mos in one high end zip in NB. Your home just lost $535K
in value (or speculative Ponzi price). Since it is more than likely
the next six months will be worse, assume just an equal loss to this
Aug 2008…yup your house will now be priced at $1,425K. That’s a
cool million in speculative price gains wiped out by reality returning
to the real estate market. Most likely it will be even lower by year-end,
approaching $1,200,000 if there are any foolish buyers left that will
pony up their cash for a still overpriced home in this zip.
This is the price one pays for turning a necessity into a speculative
“investment”. Speculative investments follow certain pricing patterns
and housing will be no exception. Of course, if you don’t care about
price and living at the beach is your dream, as is having all your
cars rusting, dry rot & mildew, your tiny little town flooded with
flat landers during the peak vacation and summer months so badly you can hardly travel up or down the peninsula, and don’t forget having those nice noisy jets always flying over your home, way worse than living next to a freeway, yes NB is totally worth paying any price asked.
OC Pricing:
—————
Src: OC Register (except for est’d prices)
Newport Beach 92262 $1,425,000Est’d -42.9% 1 0.0% Aug ‘08
Newport Beach 92662 $1,960,000 23.2% 1 0.0% Feb ‘08
Newport Beach 92662 $2,495,000 -20.2% 1 0.0% Aug ‘07
Pretty scary when you see it in print isn’t it? Why wasn’t it scary
on the way up? You didn’t have any trouble believing it would continue
to the moon then, right? Get real, prices do not and can not sustain
exponential increases forever, and must always return to a point where pricing is based on ability to pay as well as perceived value. When the illusion of forever increasing prices was broken by reality, it
causes a return to more normal increases, once the real true
bottom has emerged, and it isn’t even close to being here yet.
Disclaimer: I have been involved in RE since the 50’s, lived through
the baby boom pricing in housing when you could buy a 3Bd/2ba/2c home in MV for $33,500 in the mid-70’s. Normally, this home would have been priced at about $100K in the year 2000, but we all know it was much more, and by most estimates should be valued at around $200k-$275K now.
All the other price “movement” is just a result of either lack of formal
real estate valuation knowledge or plain stupidity and greed. Well, I
like MV, and ok maybe it will fetch a premium and bottom out in the $300K range, it might happen, but the lots are generally so tiny and so was the sq. ft. of these homes. Go do some research and see what could have realistically made these homes worth 22X what they were built for back then in just over 30 years, did wages go up that much… not most folks, this then is a speculative bubble and current average wages will determine the floor in pricing regardless of where a home is located, excluding hose higher end homes over $1M that are bought for cash as a want and not a need by a very few who have that kind of discretionary savings.
The smart RE investors sold out before the market topped out, the
dullards will hold on for a year or two more and take an even bigger hit. I guess it’s true…”a fool and his money are soon parted”.
to the OP that said:
“Consider a typical home that sells for $218,900. You put down 20% and get a 30-year fixed-rate mortgage at today’s rate of 5.5%. Monthly principal and interest come to $994.31. Let’s say that 12 months from now the same house goes for 10% less, or $197,010. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs rise a point, to 6.5%, your monthly payment would be $994.94 and you’d have saved nothing. Meanwhile, home prices might steady and sellers might become less willing to negotiate. And you have spent a year living someplace you’d rather not be.”
I couldn’t agree with you more, I am waiting for the prices in OC to get
down to your typical home price of $218K and then I will buy, maybe…it could be that they will fall further if the credit situation gets worse as many learned financial experts do.
To all the people here who are living in the past, get real your 3/2 1450SF home was never worth $750K and it won’t ever be again for a very very long time, as all RE participants got a reality check and see that what goes up can and does go down. As was said before, it is always smarter to negotiate a lower price than jump in too early and be stuck for 30yrs with an overpriced home. Better to wait for a real bottom which is a ways off yet. Prices were 50% overvalues EVERYWHERE at the peak of the bubblemainia.
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