Just how slow have the past six months been? DataQuick’s February report tells us that since August, when the credit crunch’s grip on housing sales turned from modest drag to tight stranglehold, O.C. home sales have not hit 2,000 — no less the old low of 1,848 set in February 1995.
Before last summer, note that there were only three months since 1988 with less than 2,000 O.C. home buys. Look at this accompanying chart for 20 slowest months since ‘88. Please note how many recent months made this dubious list, including last July and August before mortgages became difficult to get.
As for more details of DataQuick’s February report, and other real estate news … Just click on the headlines below:
• Good news? February O.C. pricing = January
• Home buying half last year’s slow O.C. pace
• February results by ZIP
• O.C. isn’t alone. SoCal housing’s hurting, too
• CA foreclosures fall …
• … so did OC’s count!
• Is Wall Street getting a secret mortgage bailout?
• Are lenders cheating cities with foreclosures?
• Click here for more O.C. housing news
Congratulations to all the bitter renters who stuck with their convictions, and didn’t follow the herd to buy vastly overpriced Orange County real estate. Now we watch as the inevitable occurs … and laugh at the Permabulls (or Permafools) who suggested the ridiculous prices of 2005/2006/2007 would stick. LoL Wait and see how they act when the inevitable 2001 are back!
One more point … IT’S IN THE BAG!
I agree Lee.
Home prices are down 16% in just one year. Ouch!!!
Unfortunately, this is just the beginning. And now OC is going into a recession at the worst possible time when the housing market is imploding. Talking about a “perfect storm”
I don’t blame people for not buying homes. Buying real estate right now is like buying Cisco shares in early 2001. People though they were getting a great deal after a 20% drop just to see prices go down another 60% in the following 2 years.
I guess 600,000 for 700sqft won’t fly with $4 gas? I can’t wait for these people who try to apply for a job with my company, when I run their credit to offer them a job and it says foreclosure on it. “I’m sorry we don’t hire people who live beyond their means.”
It seems like just yesterday when questioned “IF” the Real Estate Bubble would ever burst, what would happen? Then being laughed out the Country Club for suggesting the mighty California bubble would do such a thing, things can only go higher!! This is California!!
I can’t remember the names of those people or where they are today.
OK - I do agree that the bickering between bears and bulls has become quite immature and fruitless.
What it all comes down to is the seperation between those that feel now is the time to buy and those that feel now is not.
Those that feel now is the time to buy has hung their hats on an increase in opened escrows - not substantial, but at least an increase. I agree - we saw an increase. Substantial to call bottom? You have to be more convincing than these numbers suggest.
The other side of the coin is the evidence of increased demand. But folks, this is not a normal market. All of these multiple offers being laid out for homes are being done by a smaller group of buyers. There are buyers out there right now putting down up to 10 offers in one month’s time simply due to the fact that there is no real obligation to follow through. This is so ever evident on the short sale listings and foreclosures. These in total encompass more than 3/4 of the overall offeres being thrown around. Buyers can submit 10, and go with the low ball that gets accepted. It takes months for the banks to respond as well, further adding to the desire to put down multiple offers - who wants to wait around?
My point is this: if you want people to buy, then encourage it through real education and facts - not with carefully spun information that can easily be misconstrued as a true bottom. This is not bottom in any sense of the word. You may believe it is bottom, and we may very well be there - although from my experience and the close circle of very successful friends/business partners I converse with, we are not at bottom. According to the FED we are not at bottom. According to the outside world that has decided to boycott mortgage backed securities, we are not. But to suggest it so strongly with little hard evidence and plenty of speculative information can easily mislead those that are trying to evaluate their risk threshold. A mistake on evaluating risk in purchasing - which IS 100% SOLEY DEPENDENT ON THE PERSON AND FAMILY - especially in this market - is VERY IMPORTANT.
I, for one, do not want a repeat of what we have been seeing. But the lending numbers are telling me that many folks are taking on risk that they may not have even calculated. If I use an ARM right now to buy an OC investment property, I am not taking on the same risk as someone doing so whose buying their primary home using most of their cash to do so. Let me tell you why: I will use an ARM so I can generate positive cash flow - its now making me money. Someone buying a home to live in - they are not making money by using an ARM. There is no cash flow. Appreciation that we’ve seen in the past 5 years is a thing of the past. So what if the home drops in value - I’m still making money every month. If I see rates heading in the wrong direction, I can mitigate the risk in one of several ways: I can buy the property outright, I can refi into any loan program I choose and if I have to pay the depreciated amount to do so, then I will, or I can sell, or I can hold and stay put and possibly go cash negative on the place. Hell, I can share the loss by selling it to one of my corporations and have my partners share the loss in equity for a small fee on my part and then reap the rewrads later when the market does finally return. That’s only a few of my options. Now picture a family doing this. What are really their options if this is their first home, their home values drop, even slightly, and they HAD only $100K in the bank that was used for the downpayment and they make just enough to barely get by on the fully indexed rate or how about the initial rate only? Their risk is not even in the same ballpark. Hell - its not even the same sport.
My goal here: I want the foreclosures to stop. I want the whining to stop. I want people to make real, sensible, educated decisions. Yeah sure, an ARM is always a great tool. When used wisely. No one, and I mean no one, can argue the fact that it brings extra risk and contingencies that do not include refinancing or selling at a loss must be planned for - especially in light of currently low rates and the risk of rates is ever increasing for the next three to five years (not months here). This state’s laws that provide an easy out when prices go south encourages people to walk away. Its sickening. We are not sheep. We are human beings with brains that can reason and evaluate risk and then TAKE RESPONSIBILITY FOR THOSE DAMN OBLIGATIONS.
Nuff said - PEACE
I’m always surpised and disappointed by the mean spirited comments on the real estate blog.
To Isay - I sure hope that nothing even happens in your life when you need the compassion of others. You might actually get the treatment you give.
notbuyingit:
Using an ARM becomes a lot more of useful tool instead of a tool for disaster when you buy at the bottom of a crashing marketing instead of buying at the top of one of the worst bubble markets of all time. So moral of the story is wait people. Values still have farther to fall and if you use an ARM when you buy at the bottom, you’re basically guaranteed at least some small appreciation and you will be able to sell the home for at least a small profit in 5-years, unlike those who bought in 2004-2007 and they’re losing their back sides. Don’t believe the hype of people with an agenda that say now is a bottom, when you can clearly tell from all facts and press that we’re not even close.
Correction for that last statement: based on the lending numbers I’ve been seeing (specifically loan types, DTI’s and downpayments), many people buying homes right now using ARMs cannot say the same - it can be misconstrued that I meant all. That is not correct.
David: You might want to clarify the reasoning behind that statement: “Using an ARM becomes a lot more of useful tool instead of a tool for disaster when you buy at the bottom of a crashing marketing”
I presume your meaning is that rising home values equates to decrease risk in using lower downs and ARM type loans - you could always sell if rates go too high when its time to refi. Moreover, and the finance gurus please correct me if I’m wrong: rates are typically higher at the bottom of a home price cycle and decline as sales volumes increase and prices rise- yes? no?
I think we’d be better served if we stopped outlining other people’s agendas - all provocation should end.
Great info - thanks.
“OK - I do agree that the bickering between bears and bulls has become quite immature and fruitless. ”
more like laughing at the silly words coming out of permabulls’ mouths
An adjoining thread states that price in the O.C. have declined for the 29th straight months. 29 months? Is it that long, already? Seems like just yesterday.
Well then, since the typical downswing of the past 3 cycles averaged about 30 months, I guess we ARE now at the bottom, or leveling off point.
Another adjoining thread states that “Home prices FLAT for February!”
A thread in the mortgage section states “OC foreclosures down in February!
As NationalBubble SHOULD say “There is GOOD news today, in South O.C. real estate! ( Since NB typically posts HOURLY negative news on even positive posts, I thought a turnabout would be fairplay.)
Hear, hear, all ye Bearish types! In addition to the good news above:
For the past 6 weeks the number of escrows is up more than 50%
Inventory, which usually explodes at this time of year has remained practically the same for the last 2 months.
At open houses in MY area, ( South O.C..) traffic is heavy and buyers are getting excited, and making offers again. ( and obviously opening those escrows mentioned above.)
GEE! Could Sighburrdood have been correct, all along? The tide SURE does seem to be turning. OMG! What will NationalBubbleHead and Pudgy David have to complain about?
YOUR BLOGGER: Sales have fallen 29 consecutive months on a year-over-year basis.
nbi,
i think now is the time to buy for me and me only.
i think what you are saying here is that the buying decision should depend on each and everyone’s individual situation and need.
it is a good argument and i have no problem with it.
you have consistently be one of the better debater out there.
What a refreshing place this thread is right now. Useful insight with information anyone can learn from and no name calling.
I like it like this.
Not buying it’s post gives a great perspective — a view from an investor with experience and knowledge. I’m glad he shared it.
nbi,
I think I remember your hypothetical deal. It was $700k, yes? 25% dn, I forgot the payment amount.
I would contend that that scenario is for a move up buyer who would 1. have probably 50% or more down and could therefore command the best mortgage interest rates on the balance, and 2) be fairly established in a good paying job with decent security. On the other hand, it would be next to impossible for the average first timer to afford such a house without substantial outside help. If you change the equation to reflect a young working couple trying to buy a $300 condo, then I think it would be more realistic. 5% dn=$15000, $285k for 30yrs@6%=$1709. PropTx=$250 Assoc Dues=$250. Payment=$2159. Doable, I think, for a young working couple.
OOOppppsss….did I celebrate this being a civil thread too soon? :) :))
Why would I be complaining sugbur? Thanks to my years of experience in the industry, I knew better than to listen to bulls like you who month after month call for a false bottom. So now the places I’m considering buying have come down 40-50%. If I had listened to any of you bulls. I would now be down at least $50,000-$75,000 in reverse equity. So I’m incredibly happy and not complaining about anything other than the garbage advice you give here daily. You can still call me David the happy renter for now.
We should call you the old man who cried bottom instead of the boy who cried wolf. You’re twice my age, make a ton of money, and own multiple properties, yet you lie here daily about what’s to come. Either that or you’re still in denial even after many many months of being worng. Either way, good luck to you. I hope nobody here is foolish enough to listen to someone who’s advice contradicts just about any expert and all the daily press and statistics that come out.
nbi,
this duplex i bought last year is giving me shelter for FREE.
that is right i live upstair and rent the downstair unit.
if i only listen to the press and the bear here. i would have passed this duplex in fv last summer.
INTEREST 6.13% PRICE 417,000 LOAN 284,000 YEAR INS 0
YEAR 30 DOWN 133,000 YEAR TAX 5,254 MON INS 0
LOAN AMT 284,000 LOAN AMT 284,000 MON TAX 438 TOTAL 2,264
MONTHLY PMT 1,727 TAX 1.26% MON UTIL 100
Not buying it === Return of the Jedi !!!
Graphrix === Were you at…….??
He knew what was up…..sharp guy……?
He was one of the olny blogers to be mentioned by the writer.
He ran into him at the courthouse while shopping REO’S.
I remember him telling me they were too expensive. The banks were not lowering the prices enough to attract him into a purchase. Let us see what that looks like December 08 / 09
lee,
To be fair, that is the auction starting price, so the sales price will probably be higher, but if that home could be bought for anything close to that, it would be a pretty good deal. There may be other costs, and the home has no landscaping, but not a bad deal.
Not buying it === Return of the Jedi !!!
We all appreciate your knowledge & wisdom
Graphrix === Were you at…….??
He knew what was up…..
He was a sharp guy and I appreciated his posts.
He was one of the olny blogers to be mentioned by the writer.
He ran into him at the courthouse while shopping REO’S.
I remember him telling me they were too expensive. The banks were not lowering the prices enough to attract him into a purchase. Let us see what that looks like December 08 / 09
Lee, I know you personally don’t want to live in Corona, but there are some very very nice neighborhoods and houses there. Many of them are newer and nicer than even most areas in South OC.
They’re just not in OC of course so hence the value difference. But for anyone wanting a home that would sell for $800,000+ in some parts of Irivne, you can get something better in Corona now for probably $400,000 or less.
Chicken Little:
That is exactly what I advise every 1ST time buyer should do
Dont go to big on the first property
Buy a DUPLEX wich is a sacrafice at 1st however
5 years down the road you rent out both units and aquire again !!
THAT IS WHAT I DID………..
Yo chicken Little: Nice move !!
Were are they located ??
scott a,
the duplex is located in fountain valley across from mile square park.
we have 100% occupancy rate in this apartment complex.
chicken little
your $133K could be making you a lot more money elsewhere (as opposed to the 0 to negative return you are currently getting) and you could be living in a much nicer place and area
but hey, to each their own
check back in 2010, i’d be curious to know how much the duplex is worth then
mav,
you can’t even buy a duplex here anymore.
too many tenants here which allow landlord to raise rent.
my 133k was getting 2% in ca money market fund.
the ca money fund is yielding around 1% today thanks to the fed.
chicken little:
tax free muni’s are yielding close to 5%
with the tax advantages it’s about an 8% return
Chicken Little:
That is an awesome location !!
A processor in our office….
Just moved out of that big apt complex accross from mile sq.
Reason ????
Here rent is / was raised up to $2,000.00 for a 2+2 apt. !!
Solid…………..Smashing………….sensational……………Smack down !!!
Is that what you are getting as well ??
If not…..Raise the rent to market value !!!
Chicken Little;
Pointless to talk returns with MAV
He is a ultra conservative older gentleman who…..
Would rather RENT and have a huge nest egg……
Makes him feel safe at night !!!!
He is affraid of your most famous line:
THE SKY IS FALLING
ahahahahahhahahahahahahahahahahahhahahahah
OR
THE MARKET IS CRASHING !
Run Run…..
INVEST AND MAKE 5%…….. ??
Way to conservative for a young wippersnappers like us !!!!
scott a,
that is right as far as the fv unit you are refering to.
mav,
if you want to wait for the bottom, better find a fortune teller.
ScottA,
Just because I am conservative now does not mean I am always conservative.
I have made huge returns over the past 5 years investing in India in China.
There is a time to be bullish and a time to be bearish…… stick to fundamentals don’t speculate.
i’ve been telling you ScottA
if you want to be agressive now:
SRS, SKF, and DZZ are the way to go, look them up
i’d rather stick to tax free muni’s right now
Mav:
I know you are sharp
I know you make good decisions
I know you make money in the market
I know you live in THE most beautiful area in OC === Laguna Beach
I understand though…..
Who would not want to live there…….??
It is awesome….
Good surf spots too…. == Thalia & Oak St.
Good restaurants == Romeo’s & Mastros
It is just strange that would not make the sacrafice to own a home…
mav,
fountain valley is small yet it is the headquarter of quite a few corporations…kingston, dlink, hyundai, ocsd, ocwd, fvrh.
i can walk to work every day. can you?
Mav:
Do your market returns chime at the tune of $7,000.00 a month ??
Chicken Little:
Even at $2,000.00 a month….=== $24,000.00 a year your killing it !!
Did you start your PMC / S-Corp.. yet ?
ScottA,
Why buy if I can rent the same for less without the obvious downside risk? I am cash flow positive with liquidity on the renting side.
All you have to do is look at historic price to income ratios to understand where the market is going.
This is like looking at P/E ratios.
Value investing…….
Beleive me, when it makes sense to buy, I will buy….. we are a long way off from that time……. at least a couple of years
Here you go permabulls:
LOS ANGELES - Median home prices plunged in many of California’s most populous counties in February, with Southern California leading the slide with an overall drop of 17.9 percent compared to a year earlier, according to new housing data released Thursday.
The drops reflect a deepening housing crisis in the state, which saw home values soar during the housing boom then decline sharply in most areas.
Median home prices fell this year in 15 major counties, DataQuick Information Systems said.
The median price in a six-county area of Southern California fell to $408,000 — the lowest level since October 2004, when it was $402,500. That median is 19.2 percent below the region’s peak price of $505,000 last summer, and it’s 1.7 percent below January’s median, the firm said.
In the nine counties of the San Francisco Bay Area, the median price fell 11.6 percent to $548,000 compared to a year earlier and 17.6 percent from the region’s peak median price of $665,000 last summer. Bay Area prices were essentially flat from January.
Home sales volume also kept sliding last month.
Sales fell 39 percent from a year earlier in Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura counties. In all, 10,777 homes were sold in February in those six counties, up 8 percent from January, DataQuick said.
Southern California’s home sales volume has hit new lows every month since September.
The nine San Francisco area counties saw a similar slowdown, as sales dropped 36.7 percent last month from February 2007.
Some 3,989 homes were sold in San Francisco, Marin, San Mateo, Napa, Alameda, Sonoma, Contra Costa, Santa Clara and Solano counties. That was up 11.2 percent from January.
Even as prices fall, buyers remain slow to dive into the market, with many waiting for prices to fall further.
Others have been unable to find affordable financing because lenders stung by soaring mortgage defaults and foreclosures have cut back on the easy lending that helped propel the housing boom.
The dynamic has worsened the prospects for many homeowners desperate to sell as falling home values drain their equity.
Statewide figures were expected later Thursday.
Chicken little:
You are right about the location….
Prime OC and in the “Middle”
Close to everything north or south
My first Brokerage office was off newhope next to the post office…
See my line above about the PMC….
Mav:
I know…..I know…..
No ONE…… and i mean….. No One…….could buy in LB 4 what the rent is.
Its all good sir..
You are living for today…..
You are waiting for tomorrow….
Just enjoy those sunsets over catalina !!
David Poggi had this to say: “We should call you the old man who cried bottom. You lie here daily about what’s to come. Either that or you’re still in denial even after many many months of being worng.”
First of all, David, I am NOT lying - I’m giving formidable opinions based on my experiences and my observations. As for being wrong for many months, I have only been posting here for 4 or 5 weeks - I know that it SEEMS longer, but it hasn’t been.
As for being wrong, most of what I originally posted, and have been posting ever since HAS turned out to be accurate, with more good news every day.
You ALSO said: “Either way, good luck to you. I hope nobody here is foolish enough to listen to someone who’s advice contradicts just about any expert and all the daily press and statistics that come out.”
I refer you to my first answer, above. I HAVE been accurate because the facts I’m giving are based on what’s happening today, where most of the naysayers you’ve alluded to ( and that my primary protagonist, NationalBubble posts from his agenda laced website, on an almost hourly basis.) are posting stuff from 2 or 3 months ago, or even a year ago.
The news today, about Orange County real estate, is GOOD! ( And will continue to get better.)
Here’s some of that “Good” news you talk about from today Sigbur.
Where do you get your blinders?
Those are some dang good foggy goggles you’ve got!
In California, foreclosure activity was up 131% year-over-year with a total of 53,629 filings.
Rising foreclosures and big losses at Fannie Mae and Freddie Mac are making it harder for people with good credit backgrounds to get a traditional mortgage.
And for those who can still get a loan, the tremors in the mortgage-backed securities market has made loans more expensive for borrowers. As the prices of mortgage-backed securities have fallen, their yields have risen, leading to higher mortgage rates.
“The cost of mortgage financing has increased dramatically and it couldn’t come at a worse time,” said Tom LaMalfa, managing director of Wholesale Access, a mortgage research firm. “We’re going to see a further diminishment of available mortgage money.”
Investors were spooked after Fannie and Freddie reported a combined $6 billion in losses for the fourth quarter as defaults rose.
To shore up their finances and regain investors’ trust, Fannie and Freddie have been instituting new fees and stricter underwriting guidelines, making it costlier and harder to qualify for traditional mortgages.
Wholesale Access has estimated that all these changes mean 30% to 40% of borrowers who could have qualified for a conventional mortgage a year ago can no longer do so.
“Fewer buyers who can come into the market mean more homes on the market,” LaMalfa said. “The absence of an increase in demand will put further pressure on prices.”
SIGHBURRDOOD:
You know I respect you…….
However…………….
Got to agree with GRAFRIX who is an experience REO guy…….
Feb only had 19 business days……….== less time to foreclose.
It is too soon to call a bottom sir………………………
I am going to batten down the hatches and hold fast ……
Captain Scott says……..
The storm aint over yet …….. !!!!
More waves of foreclosures to crash over the OC………!!!!!!!
No bottom till all these get waves get washed out……………….
what ignorant and ultimately slimy comments: anybody with half a brain can see that the real estate gravy train left and ain’t coming back: look at Reuters today, the margin calls continue, the Fed does not have the resources to stop this deflationary spiral. It is far worse than you realize and will continue. Sure, you have some looming resets and need some greater fool to come along but it is immoral to attempt to sucker some new bagholder to assume your obligations/negative equity.
The funny thing about this implosion is that the mindset of “real estate only appreciates” is based on a baby-boom-fueled engine that is about to shift into reverse. There can be no bottom with such selling pressure. You permabulls are either pathetic fools (see, e.g. the woefully uneducated ramblings of “scott a) or slimy real estate agents (see, e.g., the “buy now, it is all good” bs from thoughtful and sighburrhood).
shiny, you are 100% correct. Either they are all blind or they’re just plain lieing. Either way I don’t feel sorry for them or anyone who believes them.
The resale homes numbers are much worse from a homeowners the foreclosures and short sales are what are selling. A homeowner who is trying to cash out has little chance unless he wants to compete with those prices.
We haven’t even begun to feel the effect of the Baby Boomers downsizing or moving out of state at retirement time. Do any of you honestly think that this will help things in a few years?
Shiny:
You pompas A-rod……
Did you not see my post………
I am not calling it a bottom yet……
HERE YE
HERE YE
I Scott the fortune teller……
Call the bottom December 2009 !!
I am saying….
Rents will go up in an inflattionarry inviornment.
Meanwhile…..
Myself and other landlords will ratchet up rents another 7 % this year
I will debate you on that topic any day !!
WSJ
“March 13, 2008, 2:01 pm
Housing Market Has Further to Fall
Those looking for relief from the housing downturn shouldn’t get their hopes up for any recovery soon, according to economists in the latest Wall Street Journal forecasting survey.
The majority of respondents say the U.S. is currently in a recession, and one of the major drags has been the housing sector. On average, economists see a 5.3% drop in house prices, as measured by the Office of Federal Housing Enterprise Oversight, in 2008 and a 1.3% decline in 2009. “The bulk of inventory problem hits this year, pulling prices down,” said Diane Swonk of Mesirow Financial, referring to the imbalance between homes on the market and sales.
When economists were asked when home prices will touch bottom, most said it won’t come until 2009. Just 28% think the worst will pass this year, while 10% don’t see a recovery until 2010. Ethan Harris of Lehman Brothers said the bottom won’t come until the third quarter of 2009, and warned that “home prices will bottom later in many bubble regions.”
DINA:
That is right inline what I…………….
Scott the fortune teller say….
BOTTOM ======================= 4th Q …….DECEMBER 2009 !!
Shiny - for the most part you hit the nail on the head!
David Poggi had this to say: “Median home prices plunged in many of California’s most populous counties in February, with Southern California leading the slide with an overall drop of 17.9 percent compared to a year earlier, according to new housing data released Thursday.”
Nice try D-Pog, but this is just a statewide rehash of the Register’s report of a week ago - which stated that OC’s median had dropped 13% or so in the past month or two - a report that brought froth to the chops of the resident bears, who then tried to do their touchdown dance. ( until I rained on their parade.)
Here’s a synopsis of the response that I posted then. There is a HUGE reason that the median has suffered recently. The activity of bigger sales, over $500k, has been non-existant due to the jumbo loans dryup that occurred in Sept./Oct., and that is just NOW finally being worked through.
Those bigger home buyers were pretty much put on hold which skewed the median figures because they reflected a higher than usual percentage of lower priced houses. ( resulting in - DUH! - a lower median.)
Beginning pretty much now, and continuing for the rest of the year,
( because of higher conforming loan rates, in addition to the increase in ALL sales activity that has been documented by the Register in the past week.) I predict that the median will actually go UP, and level off at a much higher figure than that of 2 weeks ago.
The same abberation or illusion is true for all of Southern California.
I’ll hereby predict that said higher figure will be announced by the Register in the first week of April. ( And for So Cal, in the Times, a week later.) Time will tell.
Again, I ask the bulls a modified version of a question I posted yet but they never responded to:
Can a bull please provide your opinion on how these numbers are something positive and indicate a “bottom”? (Esp to those who have called a bottom already). How does 1 month of less foreclosures indicate things will be going up again? Again, historically there is a long period of stagnant prices and sales after a slide.
SIghbur, You are brave to post a prediction, and I commend you for it. I’ll be interested to see what happens.
There is a fat lady warming up in the wings.
She can be hell when she’s well but she’s been sick.
I think the end is near.
No predictions here–I’m just going to ride the REO market as long as it goes. But, one of the major banks I represent has forewarned us that we haven’t seen anything yet and that the REO pipeline is really going to be flowing the 1st or 2nd quarter of ‘09. Considering the volume already in the market, that is downright scary.
Don! The fat lady had a stroke. It’s not healthy being that overweight. Now make me another poem. This blog needs more poems!
One question that keeps popping up as the meltdown unfolds is: “When is it all going to end?” In truth, that question is almost impossible to answer, because it depends to a great extent on the actions of some key players, including the Federal Reserve and the Washington political establishment.
Even so, given that many of the current woes stem from the plethora of distortions that developed in the residential property market, it seems a good bet that a true turning point will only really be seen when home prices fall back to levels that have some link to economic reality.
In “Mind the Gap: Home-Price Downside,” the Wall Street Journal’s Scott Patterson highlights a statistic that suggests we still have quite a ways to go before we reach that point.
The economic balance hangs in large part on how much further home prices will fall. A look at one important measure — the relationship between home prices and household income — suggests we might not even be halfway there.
Over the long run, home prices and income should march along the same path. As households earn more, they can afford to pay for more expensive homes.
But the two can get out of whack. During much of the 1990s, incomes grew faster than home prices. The landscape shifted around 2000. From the start of the decade through the mid-2006 peak, home prices nearly doubled, thanks in part to falling interest rates. Over the same period, income per household rose just 26%, according to Moody’s Economy.com.
In certain states, the disparity was extreme. Seven states, including California, Florida and Arizona, saw annualized growth in home prices outpace income growth by 10 percentage points from 2002 through 2006, according to housing expert Thomas Lawler.
The difference between income growth and home prices has started to narrow. Home prices were down 10% through the fourth quarter from their peak in mid-2006, according to the S&P/Case-Shiller national home-price index. But to bring prices in line with incomes, they will need to fall further. If incomes continue to grow in the next year as they have in the past decade — probably an optimistic assumption — it would take a 9% to 12% drop in home prices to bring the two measures in line with each other.
In states that saw bigger housing bubbles, the correction will be more severe, says Mr. Lawler.
It is also possible that home prices will overshoot on the downside, just as they did on the upside. Goldman Sachs economists say prices could fall another 15%. Merrill Lynch economists say they could drop another 20% to 30%. Both banks have been more bearish than others on the economy — and so far look correct to have been so pessimistic.
Some food for thought
According to the economists, since 1854, the U.S.A. has encountered 32 cycles of expansions and contractions, on average with 17 months of contraction and 38 months of expansion. However in recent years, they have been shorter and much less common. Since 1980, there have been only four recessions (see charts to see how stocks did in these periods). The charts show the impact on stock market indices.
• January-July 1980: 6 months chart (worst quarter GDP Growth -7.8% [1])
• July 1981-November 1982: 16 months chart (worst quarter GDP Growth -6.4%)
• July 1990-March 1991: 8 months chart (worst quarter GDP Growth -3.0%)
• March 2001-November 2001: 8 months chart (worst quarter GDP Growth -1.4%)
During March 1991 to March 2001, the United States experienced the longest economic expansion - 120 months.
Note that the depth of the recession has been decreasing in magnitude, suggesting the Fed measures have been effective.
Shiny had this absolutely unacceptable thing ( actually more than one.) to say to Scott A.: “You shouldn’t have gambled but you are too stupid to know it. Get some education and better yourself.”
Other than to briefly poke fun at the ridiculousness temporarily wrought by Jeff/Jake, there is NO place on this blog for such insults.
( More, from the same post: “You really might want to get that GED or some other sort of remedial education. You are borderline illiterate”)
It is one thing to disagree with someone - lord knows I’ve had a lot of similar potshots aimed at me - but to hurl such insults at someone you merely disagree with, is THE most despicable form of insensitive, intolerant stupidity. Yes, I used the same word, but in my case it was justifiable.
You there, shining in the pile of manure that you threw upon this blog, are everything, and worse, that you called Scott A.
This is GREAT news. Housing prices are crashing, and the speculators, banks and realtors are going under. It will only get better for the economy and the people who do productive work.
# Time for Truth Says:
March 13th, 2008 at 6:04 pm
“This is GREAT news. Housing prices are crashing, and the speculators, banks and realtors are going under. It will only get better for the economy and the people who do productive work.”
Hey genius, in what industries would you presume these job losses are coming from? Oh, that would be construction, finance, etc. When the housing economy is expanding, companies are hiring as it is very closely tied to the overall economic health of this country. So as you sit there with your GREAT news, just know that the economic slowdown in OC will not begin to prosper again until RE returns to active levels, which in turn will promote growth and value to the OC economy. Next.
Mulliganville said: “Oh, that would be construction, finance, etc. When the housing economy is expanding, companies are hiring as it is very closely tied to the overall economic health of this country. So as you sit there with your GREAT news, just know that the economic slowdown in OC will not begin to prosper again until RE returns to active levels, which in turn will promote growth and value to the OC economy. Next.”
During the 90’s, economic expansion was not driven by RE. A healthy economy would not rely on just one sector for growth. Instead of sinking money into failing enterprises, investors move capital into more promising fields, such as biotech. A RE recovery might coincide with, but not necessarily create, an economic recovery.
In other words, robust economies re-invent themselves.
Arthur Jensen ,
Only time will tell whether the Fed is truly successful in regulating the economy. Keep in mind that the job of the Fed is to regulate the economy for steady growth and also to preserve the value of our currency.
Thus far they’ve failed miserably at preserving the value of the USD, considering that the USD lost 94% since the Fed took control of the US money supply. Also keep in mind that the Fed is in charge of this since 1913 and also was in charge during the Great Depression. I’d say that the recent “longest economic expansion - 120 months” as you’ve pointed out has much to do with the USD inflation policies that are set in place. Whenever the Economy should have corrected itself the Fed intervened and injected more USD into the Economy, preventing a healthy correction. Instead, by doing so, they’ve created money out of nothing.
One way to look at this is to think of the United States as a company, with the US Dollar being the stock, US Dollar holders are the shareholders. What the Federal Reserve has done is nothing else but to dilute the value of the share through the creation of more shares. How long can this go on? Take a look at the historic chart of the US Dollar Index.
I’d say that this cannot go on much longer and foreign Nations have already hinted at replacing their US Dollar holders with something else - e.g. Precious Metals, Euros, etc.
If you were a foreigner, would you continue financing the American Dream? Would you continue to invest your money in USD? Not only is there a greater risk now that a percentage (if not all) of your money that you loan is lost through default on that security, but on top of that your return must be greater than the yearly devaluation of the USD. I sure wouldn’t support the American Dream with my savings - in fact we are diversified OUT OF THE US DOLLAR already. And we are Americans!
So while the current data you’ve provided makes the case that the Fed can guide the economy for infinite growth with minor setbacks, I’d say that you have to re-evaluate that position just a couple years down the road. Not only have the monetary policies of the Fed (Greenspan & Bernanke) inflated our currency; but they’ve set us up for the ultimate economic depression.
Shiny:
Again you are arrogant and over confident…..
BTW:
Why would you say I am overleveraged……..???
Pride?
Arrogance??
Belmont Heights Historical District
R-2 == Duplex
Bought 2000…….. $600,000.00
Appraised 2007.. $1,200,000.00
Aliso Viejo
Condo
Bought 2000……. $225,000.00
Appraised 2006.. $510,000.00
Big Bear Lake
House
Bought 2005…. ….$340,000.00
Appraised 2006.. $420,000.00
Rental income $7,500 a month
You are right about one thing
I am building a RE CA empire
#5 in the Trough…( planning )
Laguna Niguel or Aliso Viejo 3+2 SFH ….on the down..december 2009.
#6 Liesure World for Mom….( planning )
#7 Maui or Kauaii…..Vacation rental….( planning )
Your turn……?
I do not understand why homeowner bulls are so angry to hear people hopping that house prices will go down 50% or more. They should actually be very supportive that idea and here is why:
(1) A house you buy as a home is a place to live not investment. So it does not matter what the market do
(2) If prices go down 50% more people can buy and be a homeowner just like you
(3) If prices go down 50% the house monthly cost will be low percentage of total income leaving more money to spend on other things
And more…
The only reason I think is that people be angry is because they buy a house as investment (short term flippers), but we all know that investment can go up or down and have a risk.
So I think the bulls just got there agenda wrong, they should support the reduction of the house cost so more people can share there homeownership enjoyment, aren’t you all so nice people after all?
Anyone hear about the great guidelines that came out this week from Fannie and Freddie? They are going to sell like hotcakes. It’s going to be fun watching the fits when the numbers hit the blog. A few more weeks and rates will settle down too!
Thoughtful and Signbordude, please stop posting baseless predictions that the bottom is here. The majority of data points to the opposite. To continue to predict this causes you both to lose credibility.
Just want to debate Sighburrdood on his/her B.S about loan is easier to get now, and that would help housing in the next few months:
1. On your statement that big loan is easier to get: NOT TRUE. All loans are much harder to get now, and rate on all loan have been going up on the last few weeks, every week !!!. The spread between 10 year T-rate and the MBS (your mortgage rate) is 22 years high, and keep getting wider. There’s no buyer for the MBS market.
2. Most lender cut HELOC significantly, or cut it off completely. Lot of people use this as source to purchase another house.
3. No market for second loan. So significant down payment is the only way to go. Most cash-out refi in CA is limited to 70LTV
4. SISA and SIVA are almost impossible to get, regardless of FICO score and loan amount, unless you have 70LTV or better for SIVA. Most loan now required full-doc. If you go SIVA, better get good down payment. SISA: forgetaboutit.
5. Two most powerful lenders in US right now: BoA and W.F apply policy of severely distress market to all loans in CA, NV, and FL. That mean 20% of down payment for all loans with 680FICO, and yep, full-doc most the time.
6. 5% appraisal cut on all conforming loans under Fanny and Feddie. That mean 5% of your down payment is not count.
7. If you have any rolling 30, or 60 or 90 (late), forget about refinancing. No one will touch your file. At least, these 30, 60, or 90 help with short-sale. For short-sale, if you have any asset, whether it’s in bank account or 401K, bank will go after it.
8. Most people who get into trouble with loans are still in phase of teaser rate, and rate just adjust. Lot are still in IO or neg-arm rate, and already can’t pay. Both of these are no longer exist, even if loan is restructured into 30 years fixed, their payment will go up substantially.
9. FHA is pretty much useless in CA, even though its limited is raised to 729K. Reasons ? full-doc only, and 45 TDI max, and mostly reserved for low income. Its terms are contracting when applied for OC market.
10. Loan guidances are being changed on daily basic (and rate have been going up almost on daily basic too), it’s getting harder every day.
11. 3-6 month reserved is required on all loans now, regardless of LTV.
12. Paul Wilson just propose new lending rule that make borrowing money even harder. Too little too late. Just make it harder for borrower & broker.
13. Bank have been holding off in foreclosure. Both C.W and W.F even let borrower stay in house pass 3 months of NOD, for free, since they can’t handle the foreclosure and don’t want to leave the house sit empty.
These came from my friends, some own broker shop, other work as AE for large lender. True, there are lot more pend-up demand & traffic, but lot less loan get approved. My friend said lot of loan get yanked off even on closing day !!!. Rate of rejection/failed escrow is higher than ever, and keep getting worse.
Both of the factors that help the housing boom: easy money, and cheap money, are both gone. Probalby forever. Pend up demand could go all it wants, but if banks don’t loan, there’s no transaction.
So tell me how housing market will get out of the black hole. None of those pend-up demand and increase traffic will help if buyer can’t complete purchase transaction ?
Any fact you have to support your hype, beside that pend-up demand thing ?
Quarmilearner, I guess you’ve taken one of my posts somewhat out of context. The first point I was trying to make is that up until this month a borrower was limited to a high of $417,000. loan, for conforming loans. With 20% down, that meant a sales price of about $525,000.
With the new higher limit loans, now coming onto the market, that same buyer can buy a house priced at more than $900,000. Of course the buyer has to qualify - I’ve tried to make that clear in my posts - that these are NOT stated income, or liar loans. Perhaps you’re taking issue with me because you’re skeptical that there are enough buyers in South O.C., that can actually qualify.
I personally do not have any problems with the loans being more difficult to qualify for - I was not trying to be flippant to suggest that everyone could qualify for these loans. If that’s the way my posts came across, I apologize. I know they’re not easier to qualify for today, but they DO give a qualified buyer better options and higher limits than the old conforming or jumbo loans. At least that’s what my preferred lenders have told me.
One of my lenders is with WF and said that they are geared to do FHA loans, and like I said in my post, that those were easier to qualify for for people with past credit issues. Maybe I heard him wrong - it was just a brief general conversation - but I don’t think I did.
Anyway, I’m no expert at lending - I was just trying to post what I perceive as good news for people sitting on the fence. I know quite a few people who are thinking of buying mid range ( $750k to 1mm.) and most of them say they’re going to put down 30-50%, and keep their present house as a rental - which is what I recommended to them.
I don’t think any of them/us have any issues with lenders being more stringent than they were a year or two ago, and none of us that I’m aware of, got funny money from our lenders. I do know that we are not the only ones out there looking to buy in the next few months.
Some of my friends are also in a position to assist their children with SUBSTANTIAL down payment help, so even some youngsters - 20’s and 30’s are out looking under that scenario. I don’t think this is a new concept, although MY parents were not in a position to help me. They never owned a home until I actually helped them to.
Anyway, it’s late and I need to retire for the night. Sorry if my posts made things appear easier than they really are. When I started, 39 years ago, it wasn’t easier to buy than it was to rent - it just seemed like a good idea - and for me, it was.
thanks for the clarification… the pool of qualified buyers is shrinking…
if you have the financial means to purchase now… 20%+ down
then hammer the seller… we have been making offer for the past 4-months… but the caveat is that we offer 15% - 30% under the asking price…
just heard back from a realtor that we offered 15% under the list price (already discounted). we made the offer 3-months ago… the realtor told us that they will not even present the offer to the bank…
we knocked our offer down another 10%…
buyers market… make offers that make realtors ill… they will come back for more…
Realitycheck had this advice: “if you have the financial means to purchase now… 20%+ down - then hammer the seller… we have been making offers for the past 4-months… but the caveat is that we offer 15% - 30% under the asking price…”
( And how many of those offers have gone into escrow? )
He/She also said: “just heard back from a realtor that we offered 15% under the list price (already discounted). we made the offer 3-months ago… the realtor told us that they will not even present the offer to the bank…we knocked our offer down another 10%…”
( I repeat - did your revised offer get accepted? I’ll admit, most prices on available listings are too high - they are “normal” sellers, trying to preserve some of their equity. However, there are numerous lower priced lender repos and corporate relos out there that are priced pretty competitively. An offer 10% under list might work with them, but they aren’t stupid, and for the most part, they aren’t desperate.)
He/She also said: “buyers market… make offers that make realtors ill… they will come back for more…”
Hmm, sounds like you’re spinning your wheels, to me. Lots of offers, NO escrows. How many different Realtors have you gone through in this time-wasting exercise?
There are articles over the past week indicating that there are multiple offers on MOST lower priced “short-sales”. I have experienced that same phenomenon in a slightly higher price range on more than one occasion over the past couple of weeks, getting beat out by other buyers offering MORE than list price.
Perhaps you’ve heard the fallacy that Realtors MUST present ALL offers. This in not true if the lender or owner tells their listing agent, in writing, that a certain threshhold must be achieved - kind of like the auctions that are making a big splash these days.
A top bidder “wins” a house in the auction then the same house reappears a half hour later because the “winning” bid did NOT meet the lender’s minimum price. I’ve heard of instances where the same house has appeared in the same auction as many as 5 times, and STILL didn’t go to escrow.
If the Realtor you’re using keeps coming back for more, they must have a lot of time on their hands, are really stupid, or are extremely inexperienced, or all 3 of the above.
Thoughtful: Those guidelines are considered lenient?
Maybe you should post them because I may not be reading the same thing as you. Some of the windows and terms seem a bit strict - as they should of course. Please post a link to what you’re reading when you get a chance.
Thank you in advance
I tried to bet somebody $20K that the bottom WASN’T here now (user claimed it was) about a week ago here. No response.
Too bad they continue to spew the same garbage. I could of stood an extra 20K in walking around money.
Jim Cramer is going postal on the fed buying the garbage Bear Sterns collateral, backstopping JP Morgan. If you think the mortgage market is dead now, you haven’t seen anything yet. Turn on CNBC and watch the future of RE prices - DOWN.
quarmilearner, every single thing on your list is wrong! I won’t spend my time arguing every point, but as an example: the 5% hit for a declining area is off of the maximum LTV otherwise available. So, a 90% loan could be cut to 85%, but if you were only needing 85% it is IRRELEVANT. It does not cut into, or otherwise do ANYTHING to your down payment. Please note this has no bearing on the appraisal whatsoever either. Where did you obtain your in depth knowledge of loans?
I don’t mean to be annoying (insert snide remark here), but I’ve posted a few basic questions over the last week or two, and only one or two bulls have actually responded. My questions, I believe, are basic and would help to understand the WHY behind their reasoning. Yet, with the lack of responses, my opinion is that these bulls have no legs to stand on. It makes their claims baseless. Kind of like saying it’s this way “because I said so.”
I challenge the bulls to prove me wrong on this, because if this is a place for debate (blogger even said so this week!), then I’d like to know why you feel the way you do.
But sticking your head in the sand isn’t going to make the real estate problems go away.
Sighburdood:
I need to give you credit.
This is quite possibly the dumbest comment I have ever seen posted on this blog:
“Quarmilearner, I guess you’ve taken one of my posts somewhat out of context. The first point I was trying to make is that up until this month a borrower was limited to a high of $417,000. loan, for conforming loans. With 20% down, that meant a sales price of about $525,000. With the new higher limit loans, now coming onto the market, that same buyer can buy a house priced at more than $900,000. ”
I salute you Sighburdood, real RE man of genius !
OK, I can’t resist another one. “FHA is pretty much useless in CA, even though its limited is raised to 729K. Reasons ? full-doc only, and 45 TDI max, and mostly reserved for low income.” It is not for low income, who told you such a thing? A jumbo to $729,000 allowing a 45% debt ratio is a POWERHOUSE loan.
Thoughtful just for total transparency on FHA:
“FHA Debt to Income Ratio
Borrowers must meet two debt to income (DTI) requirements. These can be modified based on compensating factors.
The housing ratio (front-end ratio) must be 31% or lower. This is calculated as total monthly housing payments divided by gross monthly income
The total obligations ratio (back-end ratio) must be 43% or lower. This is calculated as total monthly debt paymnets divdided by gross monthly income. ”
So there are 2 requirements, 31% for the home payments.
Post your questions again k.o.
What’s your point, Mav? There is almost always a difference between those two ratios. See the words “compensating factors” too? This is a strong program, quit your scare tactics.
Bank appraisals are another x-factor.
29-31% DTI on home payment is stringent compared to yester year.
Also the minimum 90% LTV on those jumbo conforming is harsh vs. yester-year. (you even said so, a few days ago Truthi)
Bank appraisals in a declining market are another dagger to the heart of this housing market.
“Can a bull please provide your opinion on how these numbers are something positive and indicate a “bottom”? (Esp to those who have called a bottom already). How does 1 month of less foreclosures indicate things will be going up again? Again, historically there is a long period of stagnant prices and sales after a slide.”
Mav, call me whatever makes you happy. The vast majority of jumbo loans have always been at LTVs LOWER than 90%. And bank appraisals coming in low? That would be a good thing for buyers, wouldn’t it? The only consequence of that would be a seller having to decide to walk or not. I am so sick and tired of the falsehoods, scare tactics and outright manipulation of you all. I would say that 80% of what I see written here is absolutely FALSE. There are only two possibilities: the people who post here either don’t know any better or they are hoping to fool people. I think we have both kinds of people here.
k.o.
February was the 2nd worst month for sales volume in the modern history of Orange County
…… enough said…..
Anyone who tries to call a bottom off of 1 month of data is smoking something.
Hunker down Thougtful
ko, no one has said prices are going up next month. The most I’ve seen written is sellers will become less willing to take a thrashing when things stabilize. I see plenty to be optimistic about, you don’t. That’s what makes a market.
thoutful / truthi
if the banks come in with a lower appraisal, comps have to drop or the home will not sale, it’s that simple…… integrity in the appraisal market combined with banks who are afraid to lose more money has a major impact on this downward spiral…. all of the factor work together…even if the buyer wants to pay more, it ain’t happening….. no way no how……..
maybe these loan changes will help out some banks
personally i am working on a care package right now to send to wall street…. I really hope these banks can stay a float and extract as much money from the home debtors as possible before they need to go REO
“if the banks come in with a lower appraisal, comps have to drop or the home will not sale, it’s that simple”
Listen up, mav. A hypothetical seller makes a deal for his property at $700,000 (which was probably worth $800,000 last year). The bank (A) through a abundance of caution, says it’s worth $675,000. Everyone lays out their case, but the bank (A) won’t budge. (In the meantime, the file gets sent to other, more reasonable, banks (B), (C) and (D). If all these options are unsuccessful, the seller has to accept that the property may only be worth $675,000 today. He has the choice to lower his price by the amount by which the new loan will be short (this is NOT $25,000), or to walk. The buyer has the choice to come in with the amount by which the new loan will be short (this is NOT $25,000), or to walk. The buyer also has the choice to hold out for a price concession of the full $25,000. None of these options involve “comps have to drop”, I don’t even know what that means.
Thoughtful: I’m looking at that now. Intersting info. So, someone buying a home and has less than 25% had better have a 700 or better Fico. Hmmmm.
And the restrictions on refinancing - those who purchased in the last 3 years with low downs have better not have a single late payment.
That’s pretty strict if you ask me. Many will still be able to leverage, but I would gamble to say that its not the majority of current homes on the market given the number of distressed homes.
I’m very elated by this for the simple fact at least they are going to be very careful in what they (Fannie and Freddie) purchase. I don’t want my taxpayer money buying garbage - and there’s plenty of it out there.
The FHA side of things is very strict - but really no more than how it has been traditionally pre-last cycle. 31% DTI is for the home payment is a good safe limit that allows many to carry on a pleasant lifestyle while raising a family.
I can foretell the number of young professionals earning six figure incomes that are having to pinch pennies to live in a recently purchased home will be declining.
Thoughtful:
I went to the Fredie mac loan link…..
Those are some great programs…..
I wish they lasted longer than 7 months….
I would go….
$600,000 @ 90% LTV for 30Year Fixed with 10 Intrest Only Option
10 years would be pleanty of time to ride out this Trough.
10 years of saving and investing instead of paying down a depreciating asset
That might event be enough to make me buy December 08
Right before the limit changes back……..a thought ………thoughtful
Not buying it:
You know I respect your advise…..
Same question to you as thoughtful….
You think Laguna Niguel December 08 would be a play??
I have perfect credit and could easily qualify…..what do you think?
Still too soon December 08?
I could ride out the Trough / Storm on a 10 Year IO option on the 30yearFixed..
ScottA,
Did you notice the 2nd property LTV limit?
The good ol’ days are over.
nbi, a 700 FICO score is not unusual.
Thoughtful, I would definitely agree that a 700 FICO score is not unusual.
A 700 FICO score with 10% down payment and 29-31% DTI….. well maybe that’s a different story.
The limits will be made permanent, mark my words.
Thought,
Maybe you have not said that specific claim about things going up next month, but I’ve heard vague claims that “things will be going up soon” and “oh, its not declining here” from others.
I forgot the kicker:
the desire to put the 10% of hard earned cash into a depreciating asset
that certainly is the kicker
“The limits will be made permanent, mark my words.”
I would agree, unless it’s in the banks best interest to lower them back down….. this doesn’t have much to do with home ownership.
Realitycheck:
If you run into another Realtor who says that an offer is too low for them to submit, remind him/her that they are required to convey all offers unless provided with specific directions to the contrary by his/her client. I think the DRE would be interested in hearing about a Realtor who unilaterally determines which offers he/she will or will not submit to a client.
Mav:
That would be owner occupied sir…….
This would be my personal residence……
Would they make me change out the loans on my other LBC prop first?
That would be the question……
ScottA,
You don’t think they will look at your Debt portfolio?
MAV:
Of course they will…..
The also will look at Equity….
Year I bough….how I bough = 30 year fixed.
Loan balances
Example:
Big bear
One 30 year fixed note 6.5 % on equity eccellerator program
Bought it for 340,000
appraised $420,000
Note balance $420,000
Upgrades $50,000
So……
Even if you take 20 or 30 % off the top……..
Still can show cash flow
Still treading water
Mav:
Opps..
Note balance
$320,000
Not
$420,000
Paid cash & credit cards for upgrades,
I still need to pay off $40K in side debt
As
I did not want to “Rip” from the prop.
Do you think Fredie Mac would make me change the note on LBC?
That is the real question…….
ScottA,
I’m not a freddie mac loan dude, but I’d be surprised if they would let you get away with a 10% down payment in your situation.
I honestly would be interested to hear the loan terms freddie would approve you for right now. If you find out it would be good data.
Mav:
I carrying about $1,100,000.00 in fixed home notes = debt……
Not to say that is a light load…..
The cash flow / values / Equity, have supported & justified
The aquisitions however…
That would be good data…….
I forwarded that link to my brother,
He is looking for # 3 in the trough
Happy hunting to all…
Alot of the speculation, if they were fact, would definitely have significant effect on the local market.
Here’s the problem with relying on such speculative information. There is no precedent to go on. Anyone know anytime in history when we’ve seen such actions to this degree by the Fed? Or when foreclosures hit the market with such ferociousness? Or when foreign investors boycotted our MBS’s to this extent? All the experts have stated the same - this time is different - very different.
We know some facts here: first time home buyers must start buying for the market to return. If you think not, then numbers will work wonders in convincing me. If your retort is void of numbers, please don’t bother. Rates have a huge impact on home buying, hence home values. Especially when they fluctuate significantly. Never in housing history has home prices appreciated to the extent we have seen recently. The old adage - “the higher they go the harder they fall” usually holds true - LA times just noted home prices are falling harder now than in previous downturns. My point: the facts cannot be ignored - but rather they must be reconsidered in light of new speculative information. For much of this information, but not all, not one single entity has actually published numbers on since they are, in fact, still speculative.
A first time home buyer will need to use their cash for buying a home rather than not equity. So on that fact alone, is a first time home buyer willing to gamble the $100K or $150K they have spent their lives savingbased on speculative information now rather than wait to see what becomes of this information in the several months ahead. I would think they would like to see how these speculative numbers look - is it a trend? Is this really bottom? Published inventory numbers in the next several months, along with closed sale numbers, median price movement, and the loan types being used and so forth are all string indicators on the health of the market. The Fed would not be 99% focused on housing if the bottom already hit. I’d rather chance buying at a price that is 2-3% higher than bottom than finding out later it was still %20 from it - if that was me.
Gambling on speculative information in light of the volatility we’ve seen in this local market is a NOT a smart move for family that is not earning over $200K a year? Now, let me qualify this. Some families may not care that they lose 20% of that down payment and can wait to see it return when prices return in years to come. I don’t speak on everyone’s behalf by any means. Just throwing a moment of pause for reasoning in this mix. No momentary lapse of reason here, please.
I have said it before, even to MOM - whose bringing in well over $200K - Buying is a very personal thing. High income is a strong enough reason to overlook certain volatility and it allows you to mainly consider how long you feel like living there and what kind of write-offs you need.
Last fact: nothing I or anyone else on this blog should be able to influence your decisions to buy or not to buy. If it does, then you have not done your own homework. Do your homework!!!
So for the slow learners: if I was earning $300K a year and renting - all the information being posted by those suggesting to buy or not to buy right now would be ignored - because I’d be buying anyway. If I was earning $140K a year and was renting and had kids to feed and spent 7 or 10 years saving/investing my money and its doing fairly well for me - I’d be ignoring anyone suggesting to buy or not to and be doing my own homework - research that would be strong enough to pen a thesis on before risking my family’s well being. Buying now is risky - plain and simple. Just don’t whine about it if you make the wrong choice. And that, my friends is my ultimate point. Stop the frickin’ whining and pay what you said you would pay!!!
Another fact to consider: in light of so many idiot mistakes people have made recently. What do you think you will think of yourself if you bought now and found out it was not a true bottom and 20% more of your down is gone a year from now? You will feel much like ….. an IDIOT. If that’s what you’re concerned about.
Thoughtful: “nbi, a 700 FICO score is not unusual.”
What’s “not unusual?” 50%? 60% of people refi’ing, first time buyers, etc.? I’m looking at studies that we’ve had to pay for. The average for homeowners is much higher than that for renters. Over the last three years - that average has declined significantly. I would need to see the results for the leveraging of these new products before making any conclusions.
I appreciate your predictions, though.
dood…
sorry… not spinning our wheels… we’ve got alot a traction… because we have the 20+ down, verified income and no contigencies…
the realtors and the sellers are wasting our time… these realtors do not have a clue… why would they contact us back 3-months later? they should have taken our offer 3-months ago… they would have sold the home… now because of their sign of weakness… we are not interested in the 3-month old offer… did i mention we are shopping in san clemente?
this is a business proposition… i can wait for the best deal…
apparently you and your friends are in the charity business and willing to pay the asking price for these homes… not the approach i would take but i am happy you and your friends are so generous…
we have only made 5-offers, two realtors have called back… but our offers expired in 7-days. it is a new deal and lower offer… but more and more properties are sparking our interest… no shortage of homes in san clemente… got one on the hook… but they got less than 24-hours to take the deal or we move on…
me and my friends (several offering) are doing the same thing… hammer the seller until they cry…
Thoughtful: The limits will be made permanent, mark my words.”
And you spend how much $$ on lobbying every year? You have some insight.
I predict 2 years from now we’re going to see a report that states just how much tax payers are losing with such limits.
Here’s the problem with these limits - they are BASED SOLELY ON MEDIAN HOME VALUES THAT EXIST AFTER THE LARGEST RUN-UP IN PRICING EVER IN HISTORY. And has nothing to do with actual income.
When Fannie and Freddie further continue reporting increases in losses - I would begin thinking about retracting that statement.
I’m not saying you are wrong. I’m just saying there is alot more to it - even if it has the effect they hoped for.
“I carrying about $1,100,000.00 in fixed home notes = debt……”
ScottA: do you know what a margin call is?
Thoughtful: By the way- this move from the Fed was to also encourage the foreign investors to back what our Fed is so willing to back.
Once that channel opens again, the need for this limit will decrease again. At least we hope so.
# k.o. Says:
“I don’t mean to be annoying (insert snide remark here), but I’ve posted a few basic questions over the last week or two, and only one or two bulls have actually responded. My questions, I believe, are basic and would help to understand the WHY behind their reasoning. Yet, with the lack of responses, my opinion is that these bulls have no legs to stand on.”
—
K.O.
The real reason for only one or two bulls responding?
There are only one or two bulls here…… they just post under so many names you’d think they are out there en masse.
Mav asks:
“Do you know what a margin call is ”
aahhahahahahahahahahhah
Good one !!
That is exactly what would happen……
IF……… they all moved out at once….
I am crazy hu……………..lol lol lol lol
I am an idiot …………lol lol lol lol …..ribsplitter !!
$1,100,000.00 in notes
$11,500.00 in monthly bills.
Guess how much of that….
I have to come up with a month….???
Winner gets a starbucks card…!!
Good observation,nbi. I agree with you that people buying homes to live in do not, and need not, abide by the same rules of thumb as investors. For instance: many people think homes should not be priced higher than 160 (or god forbid 120) times rent. The reason? Investors are looking for PROFIT that can only exist at this level. People buying homes to live in do not care about this metric. They care about the home, schools and other amenities that provide the home life they desire. I would like to know why a monthly profit motive would apply to someone wanting to put down roots.
Well, for one, many first time buyers like myself will only stay in the place a few years and then rent it out. But that’s just a guess.
I don’t really care about that. All I care about is that I don’t listen to any ignorant bulls that called for a false bottom because if I had, I’d already be down $50,000 + in equity. Thank God I stuck to what I know and will be buying close to the bottom of the market. I’ll save hundreds of dollars a month on my payment and my place will start appreciating within a year or two instead of taking 10-year to catch back up like all the people who foolishly bought in OC over the past few years.
David is calling for appreciation in a year or two. You may find yourself on “the list” with talk like that.
Thoughtful Says:
“March 14th, 2008 at 4:42 pm
David is calling for appreciation in a year or two. You may find yourself on ‘the list’ with talk like that.”
Depends on his date of purchase, which he did not specify.
Thoughtful: Agreed. They shouldn’t be considering it for that.
When I purchased my first home - it was for a home; it was not for potential returns. Buying a home and then realizing some lost equity that will eventually return over the years wouldn’t bother some people that much. To some, it stops at: “This home is mine; there are many like it, but this one is mine.”
As long as they can pay for it, those are the neighbors I prefer. Think about it. They already know that lost equity is a strong possibility, its happening all around them. These are the fighters. These are the ones with some backbone, when compared to those that buy and then decide to walk away because they lost 10%, 15%, 20% in value or whatever. When the sh&^t hits the fan, they’re the ones that will still be there - paying their bills and making a good life for themselves.
pdu,
I tend to agree, especially when 2 weeks ago the post of the lady buying a place in Ladera Ranch and having at least 8 bulls congratulate her on it. Yet I pose what I believe to be a legitimate question and only one has responded.
I’m not trying to purport any conspiracy here, but where have the bulls gone when they seemed abundant 2 weeks ago? Prove me wrong and contribute to the debate, bulls, please!
Night all y’all!
Rants ( related to B-Rant? ) asked Sighburbirdbrain ( whoever THAT is.) Does he ever read or watch anything that happens outside of OC?
While I do, I don’t give that National or Worldly news as much credence as some people on this blog. ( Does the name NationalBubble ring a familiar note? )
Here are some excellent reasons why I don’t: ( Courtesy of the U.S. Bureau of Labor, California Employment Development Department, U.S. 2006 Census, DataQuick, Realfacts, California Department of Finance, Southern California Governments, Forbes.)
“Defaults and Foreclosures:
The media is great at announcing record foreclosures but, as the year ( 2007.) came to an end, the average monthly defaults were at 1,149; lenders only foreclosed on 347 of those homes. Homeowners in default emerge successfully 70% of the time by either refinancing their home or successfully selling it. Approximately 69% of the foreclosures were under $500,000 and almost 94% are under $750,000. The numbers may seem large but, when you realize that Orange County has 634,000 homeowners, the percentages become very, very small.
Incomes and Wealth:
Orange County has a median income of approximately $75,000, which is the 6th highest in the State. This is amazing when you consider how many workers earned less than $36,000 last year. The median income is really much higher, because more than 12% comes from investments, interest and capital gains - not wages and salary!
Merrill Lynch has 6 offices in Orange County with $24.2 billion under management. There are 42,120 families with $1 million to invest (excluding primary residences), and 11% of households have a net worth exceeding $1 million dollars. Orange County is home to 8 billionaires; ranks #3 in the U.S. with 116,517 millionaires; 67,729 earn more than $200,000; and 30% of households earn in excess of $100,000. In Orange County, 14% of our market is 2nd homes or income properties, and 22% of our properties have no loans!
Population and Employment:
Orange County’s population only grew by 23,000 in the past 12 months, but still ranks 2nd in the state with a total population of 3,098,000. This county is a net in-migration county; 16% of immigrants are Asian and 33% are Hispanic. The California Department of Finance predicts our population will grow to 4 million by 2050.
The counties work force has 1.57 million workers and ranks 5th in the NATION in the total number of jobs. The county’s unemployment rate is 4.3%, ranking it the 3rd lowest in the State. Income growth for ‘07 was 4.5%.
Housing and Rents:
Orange County is one of the most densely populated counties in the United States. Builders are phasing out the single family detached home, with very few being built after 2010. Planners are developing more clustered housing and vertical unit developments. This dynamic county ranks 3rd in the U.S. for apartments (due to the high median price of homes) and retail growth (solid economic prospects). OC ranks 4th in the U.S. in rental rate increases at 6.4%, due to strong demand verified by the high occupancy rate of 95.5%.
Source: U.S. Bureau of Labor, California Employment Development Department, U.S. 2006 Census, DataQuick, Realfacts, California Department of Finance, Southern California Governments, Forbes”
After living here for 40 years, I have come to know OC as God’s Country, a totally unique area, that people have continued to flock to, just like me, and that phenomenon is NOT going to change anytime soon. You want to talk about Detroit, you’re talking to the wrong person. I’ll opt for relevance every time.
SavingIn LA had these price per square foot ( PPSF ) statistics from DQ ( DataQuick.):
2006 $/SqFt
Jun 444
Jul 433
Sep 435
Nov 420
2007
Jan 427
Feb 420
Mar 418
April 424
May 415
Jun 419
Jul 413
Aug 404
Sep 379
Oct 381
Nov 369
Dec 353
2008
Jan 345
Feb 335
So looks like prices have dropped from $444 to $335 per sqft - which calculates out to a 25% drop in prices since June 2006.
Thanks for corroborating my median price theory.
In another thread I have given a plausible reason as to why the median price dropped substantially all of a sudden. Your PPSF post above illustrates my point quite dramatically. Until Feb. of 07, PPSF prices declined ever so slightly. In Mar. 07 the sub-prime mess hit and caused a brief lull in RE activity. Even so, for the next 5 months, your PPSF prices still only nudged down slightly.
It wasn’t until Sept. 07, when the jumbo loans debacle hit, that RE activity in the higher price ranges - $500k and up, practically died for a couple of months. From Sept. through Dec. 07, the vast majority of houses closing escrow ( thereby being reported by DQ.) were lower priced, ergo the deceptive, lower median AND PPSF figures.
The jumbo loan situation has been worked through now, with MANY more higher priced sales. The startling result ( startling to the touchdown dancing bears, celebrating the lower “illusionary” figures.) is going to be new higher median prices AND PPSF over the next month or two, resulting from a more balanced picture of overall sales.
It will be interesting to see the new HIGHER DQ figures come the first week of April and even more in the first week of May. I can’t wait to rub some bearish snout in the figures.
sighburdood,
get a life old man! why are you on this blog if you are so damn rich and have it all? nobody cares about your worthless rantings. they are just annoying!
lansner is a tool…… “freedomblogging” indeed.
We’ve got a long ways to go down. And that doesn’t even count what happens after all the politicians have been re-elected and the loan incentives go away after Dec 31, 2008.
Sellers trying to ’short sale’ their houses are still between 1/3 and 1/2 of the inventory that is appearing on the initial MLS search that I do for my buyers when I create automatic search programs. I make sure that their final data feed doesn’t contain any short sales.
99% of these short sales will show up later as bank owned properties. If my buyers really want a particular short sale property I tell them to wait a bit.
I’ve been telling my buyers since Aug 2005 NOT to buy with the expectation of their home going up any time soon. My questions to them were and are, “where do you want to be stuck for the next 10 years?” and “can you afford it?” This is the way that their parents thought about home ownership and I encourage them to think the same way. Typically they choose to get out of their bad neighborhood and into a home that might be a little smaller than they wanted but one that they can make the payments on.
My buyers in 2005-early 2007 thought that I was slightly nuts. Now they’re calling to thank me.
[...] Foreclosure sales 23% of fresh O.C. home deals 4. Insider Q&A gets a housing-cycle lecture 5. O.C. housing’s 6th straight month of slumber Like this item? Click on icon to share; first one emails it! These icons link to social [...]