What will central bankers do at Tuesday’s meeting? These are times that try the Federal Reserve chairman’s soul, as shaky financial markets put Fed boss Ben Bernanke in a tough spot. Will cheaper money, or even flooding the market with extra cash, get people (from small fry to global giants) to take risks again, such as from buying stocks and homes or lending money. They’ve even had to bailout a Wall Street brokerage. Amid this mess, we asked five experts around town what they thought the Fed could do to get themselves, and the global economy, out of this pickle and what the effort might mean for local housing:
Economist Chris Thornberg, Beacon Economics: “They will cut (rates.) Everything is falling apart. Their $200 billion injection provided at best a temporary relief to a market that is getting absolutely pummeled. Think about it: those mortgage bond pools were valued with a model that said that the possibility of price declines in the housing market is zero. According to Case-Shiller, the national housing market lost 4.5% of its value in the 4th quarter ALONE. Given the pace of home sales and the current stock of foreclosed homes in California would take 5 months to burn off if every home sale in the market was of a foreclosed property. Wow. This is getting very, very nasty. Mortgage rates are irrelevant at this point in time. In fact I would argue that Bernanke is primarily worried about the health of the financial system. What might work at this point in time? A Federal Bureau of Foreclosed Home Purchases: buy them up and, I don’t know what.”
Lender Kevin Budde, Countrywide Bank: “Based upon the tame inflation numbers reported (Friday) it opens the door for an immediate cut by the Feds before they meet if they choose. Otherwise the Fed funds futures have priced in a three-quarters of a percentage point cut. Prior to the low inflation number a half-point cut was priced in. The Fed’s cutting of rates isn’t making a difference on home loan interest rates. It’s all about liquidity of mortgage-backed securities and the lack of buyers. If it wasn’t for the $200 billion Treasury swap for securities (that) the Feds allowed this last week, our interest rates would be even higher than they are today. The concern of the Federal Reserve Board has moved quickly from helping the housing market to preventing a complete meltdown of the U.S. financial banking system. Expect to see extreme organized moves by central banks around the world over the next several weeks. We are in the throngs of the abyss right now for the housing market. In time historians will look back and mark this current period in time as the worst of the crisis. It will be fixed and it will improve but it will begin as confidence is restored in the financial system not by the sheer act of cutting rates.”
Lender Rich Simmons, Nationwide Lending: “Same old story, Jonathan. Mortgage rates are having little correlation to the Fed’s lowering of the short term rates. Who wants to be the bank holding mortgage loans? It is like wanting to be Spitzer’s campaign manager. We just need to be patient, let the market take its course, and our local market will then start to make a comeback. It is going to be a hard fall, but O.C. will recover, it always has.”
Investment adviser Chip Hanlon, Delta Global Advisors: “The market is usually correct in predicting what the Fed will do with interest rates, and futures are currently saying the Fed will cut rates by three-quarters to a full point next week, a panic-type of move. Because the Fed can only control short-term rates, not the long end, there is no guarantee it will bring down mortgage rates. Even if such a move does bring rates down a bit, however, the real estate market will not be saved. Prices are still far too high, especially given a completely changed lending environment in which the sub-prime buyer essentially no longer exists. The Fed might be able to inflate strongly enough to prop up home prices in nominal terms, but in real terms prices will keep coming down.”
Investment adviser Charles Rother, American Strategic Capital: “The Federal Reserve is likely to reduce the discount rate and federal funds target rate by a half point. If there is a surprise, it will be the larger-than-expected decrease of a full point. Currently, the nation’s economy is going through a de-leveraging process. As a result, at this time, inflation risk is only a secondary concern. Any decline in interest rates would benefit the California housing market. Given the current housing market, interest rate cuts would likely reduce the subsequent housing price declines and shorten the housing market recovery time.”
My only question is , are the financial problems going to spread beyond subprime?
Jake,
The problems have already spread way beyond subprime….
have you taken a look at the stock market lately? there is no rosy picture to paint there, and it’s going to get a lot worse in the coming months…… we are going to see a couple “Black *insert day of the week here*” We are going to see more bank runs.
Orange County is cutting teachers across the board because we no longer have enough tax money to pay for them all. The social issues in the OC will take center stage as this progresses. We lived in excess now we will have to live without.
Consumer spending is way down. The home ATM is shut off. This is just the first step. Some jobs have already been lost, but as this progresses there will be more job loss.
If we are lucky we will just have the worst recession in the history of the US and avoid the Great Depression Part II
Irony and T r o l l s are seldom recognized in blogs.
But w i fe will always be screened for.
jake I think what is ironic is that in a couple years many people in the OC will only be able to purchase goods with cash
hard earned cash !
credit is going to get so tight the price of plastic is going to go down
The illusion of democracy….
The $200 billion bail-out for predator banks and Spitzer charges are intimately linked.
by Greg Palast Global Research, March 14, 2008
GregPalast.com
While New York Governor Eliot Spitzer was paying an “escort” $4,300 in a hotel room in Washington, just down the road, George Bush’s new Federal Reserve Board Chairman, Ben Bernanke, was secretly handing over $200 billion in a tryst with mortgage bank industry speculators.
Both acts were wanton, wicked and lewd. But there’s a BIG difference. The Governor was using his own checkbook. Bush’s man Bernanke was using ours.
This week, Bernanke’s Fed, for the first time in its history, loaned a selected coterie of banks one-fifth of a trillion dollars to guarantee these banks’ mortgage-backed junk bonds. The deluge of public loot was an eye-popping windfall to the very banking predators who have brought two million families to the brink of foreclosure.
Up until Wednesday, there was one single, lonely politician who stood in the way of this creepy little assignation at the bankers’ bordello: Eliot Spitzer.
Who are they kidding? Spitzer’s lynching and the bankers’ enriching are intimately tied.
How? Follow the money.
The press has swallowed Wall Street’s line that millions of US families are about to lose their homes because they bought homes they couldn’t afford or took loans too big for their wallets. Ba-LON-ey. That’s blaming the victim.
Here’s what happened. Since the Bush regime came to power, a new species of loan became the norm, the “sub-prime” mortgage and it’s variants including loans with teeny “introductory” interest rates. From out of nowhere, a company called “Countrywide” became America’s top mortgage lender, accounting for one in five home loans, a large chuck of these “sub-prime.”
Here’s how it worked: The Grinning Family, with US average household income, gets a $200,000 mortgage at 4% for two years. Their $955 a month payment is 25% of their income. No problem. Their banker promises them a new mortgage, again at the cheap rate, in two years. But in two years, the promise ain’t worth a can of spam and the Grinnings are told to scram - because their house is now worth less than the mortgage. Now, the mortgage hits 9% or $1,609 plus fees to recover the “discount” they had for two years. Suddenly, payments equal 42% to 50% of pre-tax income. Grinnings move into their Toyota.
Now, what kind of American is “sub-prime.” Guess. No peeking. Here’s a hint: 73% of HIGH INCOME Black and Hispanic borrowers were given sub-prime loans versus 17% of similar-income Whites. Dark-skinned borrowers aren’t stupid - they had no choice. They were “steered” as it’s called in the mortgage sharking business.
“Steering,” sub-prime loans with usurious kickers, fake inducements to over-borrow, called “fraudulent conveyance” or “predatory lending” under US law, were almost completely forbidden in the olden days (Clinton Administration and earlier) by federal regulators and state laws as nothing more than fancy loan-sharking.
But when the Bush regime took over, Countrywide and its banking brethren were told to party hardy - it was OK now to steer’m, fake’m, charge’m and take’m.
But there was this annoying party-pooper. The Attorney General of New York, Eliot Spitzer, who sued these guys to a fare-thee-well. Or tried to.
Instead of regulating the banks that had run amok, Bush’s regulators went on the warpath against Spitzer and states attempting to stop predatory practices. Making an unprecedented use of the legal power of “federal pre-emption,” Bush-bots ordered the states to NOT enforce their consumer protection laws.
Indeed, the feds actually filed a lawsuit to block Spitzer’s investigation of ugly racial mortgage steering. Bush’s banking buddies were especially steamed that Spitzer hammered bank practices across the nation using New York State laws.
Spitzer not only took on Countrywide, he took on their predatory enablers in the investment banking community. Behind Countrywide was the Mother Shark, its funder and now owner, Bank of America. Others joined the sharkfest: Goldman Sachs, Merrill Lynch and Citigroup’s Citibank made mortgage usury their major profit centers. They did this through a bit of financial legerdemain called “securitization.”
What that means is that they took a bunch of junk mortgages, like the Grinnings, loans about to go down the toilet and re-packaged them into “tranches” of bonds which were stamped “AAA” - top grade - by bond rating agencies. These gold-painted turds were sold as sparkling safe investments to US school district pension funds and town governments in Finland (really).
When the housing bubble burst and the paint flaked off, investors were left with the poop and the bankers were left with bonuses. Countrywide’s top man, Angelo Mozilo, will “earn” a $77 million buy-out bonus this year on top of the $656 million - over half a billion dollars - he pulled in from 1998 through 2007.
But there were rumblings that the party would soon be over. Angry regulators, burned investors and the weight of millions of homes about to be boarded up were causing the sharks to sink. Countrywide’s stock was down 50%, and Citigroup was off 38%, not pleasing to the Gulf sheiks who now control its biggest share blocks.
Then, on Wednesday of this week, the unthinkable happened. Carlyle Capital went bankrupt. Who? That’s Carlyle as in Carlyle Group. James Baker, Senior Counsel. Notable partners, former and past: George Bush, the Bin Laden family and more dictators, potentates, pirates and presidents than you can count.
The Fed had to act. Bernanke opened the vault and dumped $200 billion on the poor little suffering bankers. They got the public treasure - and got to keep the Grinning’s house. There was no “quid” of a foreclosure moratorium for the “pro quo” of public bail-out. Not one family was saved - but not one banker was left behind.
Every mortgage sharking operation shot up in value. Mozilo’s Countrywide stock rose 17% in one day. The Citi sheiks saw their company’s stock rise $10 billion in an afternoon.
And that very same day the bail-out was decided - what a coinkydink! - the man called, “The Sheriff of Wall Street” was cuffed. Spitzer was silenced.
Do I believe the banks called Justice and said, “Take him down today!” Naw, that’s not how the system works. But the big players knew that unless Spitzer was taken out, he would create enough ruckus to spoil the party. Headlines in the financial press - one was “Wall Street Declares War on Spitzer” - made clear to Bush’s enforcers at Justice who their number one target should be. And it wasn’t Bin Laden.
It was the night of February 13 when Spitzer made the bone-headed choice to order take-out in his Washington Hotel room. He had just finished signing these words for the Washington Post about predatory loans:
“Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which he federal government was turning a blind eye.”
Bush, said Spitzer right in the headline, was the “Predator Lenders” Partner in Crime.” The President, said Spitzer, was a fugitive from justice. And Spitzer was in Washington to launch a campaign to take on the Bush regime and the biggest financial powers on the planet.
Spitzer wrote, “When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners the Bush administration will not be judged favorably.”
But now, the Administration can rest assured that this love story - of Bush and his bankers - will not be told by history at all - now that the Sheriff of Wall Street has fallen on his own gun.
A note on “Prosecutorial Indiscretion.”
Back in the day when I was an investigator of racketeers for government, the federal prosecutor I was assisting was deciding whether to launch a case based on his negotiations for airtime with 60 Minutes. I’m not allowed to tell you the prosecutor’s name, but I want to mention he was recently seen shouting, “Florida is Rudi country! Florida is Rudi country!”
Not all crimes lead to federal bust or even public exposure. It’s up to something called “prosecutorial discretion.”
Funny thing, this “discretion.” For example, Senator David Vitter, Republican of Louisiana, paid Washington DC prostitutes to put him diapers (ewww!), yet the Senator was not exposed by the US prosecutors busting the pimp-ring that pampered him.
Naming and shaming and ruining Spitzer - rarely done in these cases - was made at the “discretion” of Bush’s Justice Department.
Or maybe we should say, ‘indiscretion.’
Greg Palast, former investigator of financial fraud, is the author of the New York Times bestsellers Armed Madhouse and The Best Democracy Money Can Buy.
Greg Palast is a frequent contributor to Global Research. Global Research Articles by Greg Palast
Nice cut and paste job of irrelevant information, Scott E. ( Snore.)
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.
Sighburrdood - the difference between you and I is that you still believe what the government tells you.
Thanks for the stats Sighburrdoood but Scott E makes a good point. These are mostly government sources and definately deserve to be looked at with some suspicion. Regardless of that, the current economic situation and current real estate data show that the OC is, and will continue to be, negatively effected. Believing otherwise is very odd from a person who appears to be into data, trends, etc.
Sighdude- Unemployment was up in Feb. and will be higher in March.
http://www.calmis.ca.gov/file/lfmonth/oran$pds.pdf
No insult here but I believe you must be paid by the NAR. Who cant get a forecast right! Weather forecasters are more accurate.
By the way-This storm is only getting stronger.
OC pricing has 30% downside risk. No upside gain for years.
ticker Assets Equity Lev (Assets/Eq)
——————————
GS $1100B $37.7B 29.2
MS $1000B $27.2B 36.8
MER $1000B $26.8B 37.3
LEH $690B $18.3B 37.8
BSC $395B $11.8B 33.5
3% decline wipes out everyone of them. Ya think it’s going to happen.
As Scott says you still believe what the govt tells ya. That is being kind of naive in this moment.. Good luck to ya. I hope your buying homes as someone needs to..Thanks for supporting the NAR and your local real estate agent. They need it..
Thanks for the facts, Sigh. All those things are why every last person here is itching to own Orange County property.
And I DO believe your stats are accurate. I am not one who buys into conspiracy theories. I keep hearing how OC has become a ghosttown, but I see just the opposite in my daily life. Someone is wrong.
Not having a ton of time to go through dudes numbers. A few things stand out.
1. Most of these numbers appear to be 2006 #’s. Alot has happend in the last 2 years that make much of this information useless.
2. Even at the current median of 520K that is still not affordable for a family that makes 100K. So that means that more than 70% of the families in the OC cannot afford a median priced home. This would lead me to think that less than 30% (2.1 Million people) of the population is supposed to be able to buy up 70% of the homes in the county. It is still not affordable.
3. The economy of Orange County may not be being hit as hard as others. That being said, there is no true Orange Curtain. People who live in other counties, shop, play and do business here. With layoffs, and rising prices our economy here will be hit just as much as anywhere else.
Im not sure where Dude lives, but some here need to drive away from the beach cities go to santa ana, stanton, parts of anaheim, garden grove, etc. etc. You will see the “real OC”. The people who keeps life churning for those on top.
This place is not that special…for certain there are some areas that are, but it isnt reflective of the county as a whole.
Slight error above. The 2.1 Million people are those that cannot afford to buy a median priced home or above.
“So that means that more than 70% of the families in the OC cannot afford a median priced home.”
Over 60% of people currently own homes, so your stats are a little bit flawed.
“Thoughtful Says:
March 15th, 2008 at 10:21 am
Thanks for the facts, Sigh. All those things are why every last person here is itching to own Orange County property.”
Not at currently highly inflated and unsustainable prices. $104K for a traditional 20% downpayment based on the current median price? $60K downpayment for a “starter” 300K house. Yeah right. I’d like to know what the government stats say about the median cash worth in OC.
Thoughtful Says:
March 15th, 2008 at 10:50 am
“’So that means that more than 70% of the families in the OC cannot afford a median priced home.’”
Over 60% of people currently own homes, so your stats are a little bit flawed.”
Probably more like 70% of OC families could not afford a median priced home if they started from scratch. What would be interesting to find out is what percentage of new home buyers could afford an entry-level house. As with any open-ended systems, the RE market must replenish or perish.
Except they are not starting from scratch. I get so tired of the “how many people can” rhetorical questions. The answer is a lot. Now, if you have hard facts, please share.
Thoughtful Says:
March 15th, 2008 at 11:05 am
“Except they are not starting from scratch. I get so tired of the ‘how many people can’ rhetorical questions. The answer is a lot. Now, if you have hard facts, please share.”
And I get so tired of people forgetting that move up buyers need new home buyers who do start from scratch. That’s a hard fact. These “rhetorical” questions highlight how highly unbalanced the current RE market is.
To think the government can fix the problem is similar to the Fed thinking that easy money can solve all problems — when, to repeat, easy money is what brought us to this sorry state in the first place. I would just say that in order to prepare for what lies ahead, we need to understand the path that brought us here.
Housing is a phony market set up by the fat cat banks, Federal Reserve, greed investors, Wall Street goofs, and Master George W. Bush and Wizard Alan Greenspan. These toxic loans are going to continue to prop up artificially inflated housing prices. California is speculator-driven demand with cheap and easy money that triggered a boom in home construction, sales and prices.
The Fed cuts will nosedive the general economy and stock market, but it will only slow the inevitable market corrections which will simply take an extra year to reach bottom as a result of the interest rate cut. The laws of economics can’t be avoided indefinately. Because of cash liquidity, Wall Street can sink or rise in a matter of days or weeks.
Because of the lack of liquidity, real estate markets take multiple years to work-out the economic inbalances.
Finally, in light of all the government bailout attempts: Let the government get out of the way, enforce the rules that exist, and let the housing markets takes its own course.
Here we are, tenants, paid our rent on time, went through credit checks and everything else, and now, all of a sudden, the landlord’s going bad on a mortgage. We end up to pay for bailout.
Home prices vs. the ability to pay for it still needs to be worked out in a big - big way. They treated their homes as piggy banks instead of as savings accounts. Piece by piece, some gave away their homes by tapping equity to take out cash to pay for big cars, new TVs, expensive weddings or vacations. The Bush administration has cooked up for foreclosure-facing mortgage holders and their lenders. So how are we going to pay for this? Is the president going to suggest that we raise taxes to pay for it? Doubt that!!!
So I guess we’ll just print some more money, put our children deeper into debt and let someone else worry about it… Banks and Lenders are homeowners. The rich, powerful, and greedy get what they deserve–NO BAILOUT.
Carlos,
The federal reserves mandate may be stabilize markets. If a bank loses all its capital than the bank may shut down and this could cause everyone to stop working and that could essentially cause a culture to break down. So we agree we don’t want that.
The fed is suppose to step in stop the bank from failing. But not by making the investors of the bank whole but by maintaining the functioning of the bank. In other words the bank essentially goes out of business as a private concern but the fed steps in to make sure that the business of the bank continues. It does so by using public money to recapitalize the bank if required, but the public money used is owned by the public, it is not transfered to the control of the insovlent bank.
This is in general how the fed should act with the shadow banking system like Bear Stern. Bear Stearn loses its equity and the government steps into keep the transactions that Bear Conducts flowing.
Capital flows are needed by the market place. If they go away because private entities made mistakes, then the government steps in to provide capital flows but it does not give the capital to the private orgs.
This stops a shutdown of the economy and it means that those who made bad bets lose those bets. Just like before this those who made good bets kept the winnings.
It really is pretty much that simple. IF you disagree or want to add to this story please explain.
I am not so interested in the “THE BULLS” filibuster though I realize he cannot keep his fingers still.
It’s a real shame that some people can’t allow the existence of opinions that are counter to their own, and that they have to constantly stoop to slurs and defamation. It speaks volumes about their overall character. What a pathetic way to travel through life.
Between 2004 and 2006, the rate spread between short term (ARMs) and fixed rate loans was very small - with 30yr fixed being very low - a 40 yr low.
Why would a population that earns and has so much money decide to use the riskier short term product at a pace of over 80% for all buyers when the possibility of getting those 30yr products ever again was pretty much non-existent?
Let’s face it - when the time ot go into a fixed rate came and went - people still used the “affordability” products.
Those are the numbers many investors are paying attention to - because we know most buyers are not investors, just wanting to play like one with the place they call home.
The truth will be in the pudding in the next few months and years.
Concerning income growth in the OC for 2007 being 4.5%, was that across the board or just a subset of industries?
Will someone please help me understand this housing mess: I have been watching OC home prices for years-mostly on realtor.com-I followed them skyrocketing. Now, I keep hearing about how prices have dropped “significantly.” However, the drops in prices on realtor.com are neglible, if any. Are sellers still asking ridiculously high prices on these sites then accepting more realistic prices or are they just dying on the vine? I want to start looking, but these unchanging high prices are discouraging. Any thoughts?
“To be sure, some investors believe the extreme level of fear on Wall Street means there is tremendous long-term potential in lower-valued bonds and stocks.”
“There are plenty of attractively priced opportunities” in markets, said Russell Read, chief investment officer at the $235-billion-asset California Public Employees’ Retirement System. “We’re not on the sidelines at all. We’re buying.”
That’s what makes a market.
Thoughtful has an uncanny ability to describe himself. In fact this has been the “THE BULLS” most used stradegy. Understand his own shortcomings and project them onto others. Such a talent must come with years of selling. Perhaps it should be called “THE REAL ESTATE COMPLEX”. Although it is quite easy to undertand and spot.
Thoughtful Says:
March 15th, 2008 at 11:55 am
It’s a real shame that some people can’t allow the existence of opinions that are counter to their own, and that they have to constantly stoop to slurs and defamation. It speaks volumes about their overall character. What a pathetic way to travel through life.
Jake, everyone knows you’re delusional. Everyone knows that people like Sigh, SOB, et al, simply make their cases, and only attack when attacked. You, on the other hand, are the chief attacker. Your denials are laughable. You need help.
As Reagan would have said: there you go again with your insults.
It is true that you and the 50 names you post under think I am delusional. So no conspiracy there. If you get angry you might think about counting to 10 before you post.
Thoughtful Says:
March 15th, 2008 at 12:42 pm
Jake, everyone knows you’re delusional. Everyone knows that people like Sigh, SOB, et al, simply make their cases, and only attack when attacked. You, on the other hand, are the chief attacker. Your denials are laughable. You need help.
Jake, aka “The Chief Attacker”: step away from your 24/7 posting and get some air.
Thoughtful has an uncanny ability to describe himself. In fact this has been the “THE BULLS” most used stradegy. Understand his own shortcomings and project them onto others. Such a talent must come with years of selling. Perhaps it should be called “THE REAL ESTATE COMPLEX”. Although it is quite easy to undertand and spot.
Thoughtful even though you say you are over 60, I hope your not cause your gonna blow a valve.
Thoughtful Says:
March 15th, 2008 at 1:11 pm
Jake, aka “The Chief Attacker”: step away from your 24/7 posting and get some air.
“Thanks for the facts, Sigh. All those things are why every last person here is itching to own Orange County property.” - Thoughtful
Yes…every couple pours over census and economic data when they go to buy a home. They see all those stats and scream…lets BUY NOW.
A drop of 25% per square foot is quite large over two years. Inflation makes the drop closer to 30 percent. Could be getting close to the bottom.
I’ll try to make this short and sweet. ( Like THAT’S really gonna happen, LOL.) In 40 years of living in Orange County - came here from the East in fall of 68 - one thing has continually stood out. The OC is a truly unique area. Of course I can drive through some rough parts, but I have elected to avoid these in most of my years here.
OC is unbelievably resilient. When the defense industry left in the late 80’s, early 90’s, and the County went BK in the 90’s, the Bears on this blog would have had even more of a field day than they’re having now.
Now, over 95% of our businesses in So Cal employ less than 50 people! Think of our diversity! Phenomenal. Technology has blended us into so many different areas.
California ranks as the 5th most powerful nation in the world! There are only 4 other countries in the world that produce more goods & services than Cal! Orange County (as a nation) would rank 26th in the world!
I think that most of the people ( youngsters? ) posting negative stuff here have grown up in Orange County and have absolutely no clue as to how good we have it here. Having migrated from the East after spending most of my first 20+ years there and overseas, I CAN appreciate the difference between here - and say, Detroit.
I’m sure that it’s easy to read about National or World events or calamities and to juxtapose those calamaties locally, as well. As I have repeatedly stated, Orange County is God’s Country - it’s where the majority of the world would LOVE to live.
For a few years the only thing keeping me from coming out here was fear of not getting work. Finally, with the first snow of winter about to fall, I said to heck with it, packed all my worldly possessions into my Corvette and came out here with no job in place. I have NEVER regretted that decision.
Let me conclude with one simple concept. Orange County is among the last places in the world to be affected by negative things happening in the world. Additionally, Orange County is one of the FIRST places to recover from things that adversely affect the world.
I’m not saying to ignore the bad stuff that’s happening, or to be in denial about it, BUT you could try to take comfort that MOST other places are a LOT worse off. Smile, be happy.
I agree that many people “own” in the OC…but what does owning mean. How many own outright, how many owe more than 50%? According to recent stats for the first time since 1945 most people owe more on their home then have equity. So thats a problem.
Consumer debt is at an all time high. As a country we have a negative savings rate. The stock market is tumbling daily. The bond market is weak…The Job market is tight and incomes are decling.
So thoughtful you expect me to believe that there are tons of people whos family income is 100K has more than 100K in the bank for a down payment.
It defies logic. I am sure there are those that do, but not enough to gobble up all of the inventory that is out there. It is naive to think that people are just sitting around on a big bag of cash waiting for the market to correct.
If that was they case most would have purchased by now. Also, those losing their homes would not be since they would have either had the down payment in the first place or they would have used that nest egg to fix the problem.
ALso where is this money being held? I know that the money I have saved is currently in mutual funds….well my future down payment is losing value all the time. I doubt that I am alone.
So dont try to convince us that there are a bunch of fat cats just sitting back and waiting for the “bottom”
Thanks dude. I agree that this is a nice place to live and that it will recover and all will be well. It is just that it isnt over yet. The drop/correction that is. For certain we are much better off than detroit or other hard hit areas, but we are not that much better off than SB county, LA or San Diego. It just isnt true.
Jake,
I think we will see around a 460-480K median in the near future (End of summer) I think it may likely go sideways for a year. Than it will start to turn around. I guess my prediction on what is affordable is when roughly 35-45% of the population can purchase a median priced home or better.
So I feel for the OC to be truly affordable we need to see about a 5-10% additional correction before all is said and done.
That I think would be equal to close to 35-40% off the peak of 2006. This puts the values of homes back in line with incomes/inflation, etc..
i warn all to ignore the dooms day people. they were wrong before, they will be wrong now, and they will be wrong in the future. the easy way to get rich is buy by the ocean and you will be rich in ten years. when you are rich all the dooms day people will still be in OC and still be renting and crying.
trs: your statements are quite, how should I write?, elementary? and shortsighted?
Would you not already have to be considered somewhat wealthy to purchase near the ocean right now?
Or are you referring to leveraging increased risk for possible returns for those that would have to hit the allowable limits on DTI’s and use the best rate programs out there today - which are probably the shortest term adjustables available? Again - its all about absorbing the risk and developing contingencies. Good luck sleeping well at night if that’s what you and your family have chosen to do.
Something tells me - you did not and will not.
Let me make something very clear. I bought back in the 90’s - risk then is nowhere near the levels its at today. I doubt it ever has been this high when considering all factors.
Easy for someone to talk the talk - but try doing that for the first time by the ocean right now if you have to do those things I wrote above. If you do and sleep well at night - its probably because you lack certain knowledge or have that skillset many wish they had - “plausible ignorance.”
Listen, can we PLEASE get some facts straight??
1. National statistics have little relevance to OC (or any one relatively small area). The generalization of national stories and stats on this board is invalid, at best.
2. Please stop saying the “nobody has $140k down for a $700k house. First time buyers are NOT buying $700k homes! They are buying $300k condos!! Move up buyers are buying $700k homes and they DO have $140k. Some of you beat on this subject like maniacs and it’s ridiculous.
3. This isn’t or shouldn’t be a debate about the moral direction of the country. Go to another board to discuss that, if you want to.
4. Nobody reads a post that looks like the Magna Carta. If you can’t say what you need to say in a relatively short space, don’t bother. Nobody reads it and you’re not going to change anyones mind anyway.
There, now I can go to dinner.
VOR,
You make some good points but I want more clarification on point # 2.
Are you saying that someone who bought a condo 5 years ago has $140K in equity to buy a $700K home in this market?
I’m not sure about this one…….. the condo market has been hit really hard…..
Oh VOR,
What are you so afraid of? Why is reality so bothersome for you?
1. Of course National stats dont have a direct effect on what is happening to you next door. They do though have relevance on where things are heading based on where we have been. Everything has an effect on everything is in one way or another. So it is far from invalid. Are you saying that gas, an food prices dont go up in the OC. All the laid off teachers and jobs losses in the various aspects of housing havent happend in the OC? Dont be so myopic.
2. I agree first time buyers should buy 300-400K homes. Your talk of move up buyers require that they first able to sell their home and second have enough equity left over to put a large down payment. My belief would be if they are in a home that has equity in the OC than they dont need to move up. So sure some have 140K in the bank, but arent going to use it anytime soon.
3. The moral direction of this country does have its place here. The problem in the past is that people have seperated the fact that a home should be that a home for your family, not a cash cow. Excepting responsibility for the financial decisions you make effect your families and therefore are a moral imperative.
Where this country is heading financially and how people spend and mostly not save is a huge moral/values issue that we all face. It has a large effect on the future for all of us.
4. Who cares how long the posts are. It appears you dont read them unless they agree with you.
I have no desire to change anyones mind. I just post what I see is factual. The fact is housing is dropping, people are broke and it will probably get worse before it gets better.
For the Bulls: would you care to put the money where your mouth is? It’s really easy, just open an account at optionsXpress and buy LA/OC housing futures. Personally, I have shorted 20 contracts for Nov 2010 at 213 - meaning i’m betting that the Case/Shiller index at that time will be lower than 213. For quick reference, the latest number is 233 for Dec 07 and 100 is the base price of Jan 2000.
Now, for the guy (sightborsomething) who seems so sure the median will be up later this year: you are in luck and can make serious dough if you are right b/c current traders are betting it’s not. In fact, they are selling the Nov 08 contract for only 187 - that’s a whopping 46 points below 233 of Dec 07. Say a wealthy guy like you can afford to buy 50 contracts easily. And for the sake of simplicity the median price won’t even have to be up in Nov 08 index but stay the same as now - you would gain 46 points. That’s a profit of $575,000 (46 points X 50 contracts X $250 per contract). Now run like Forrest Gump to make that money if you are so sure of yourself.
For the Bears: I think you are right that we are nowhere near the bottom yet and this thing will drag on longer than just 6 months or 1 year. And shorting the futures index is a good way to make some money for your next house down payment. Good luck to everyone.
voice of stupidity- comparing a couple of paragraphs
to the magna carta certainly shows the level of your
intelligence- no wonder you have no clue as to whats
happening out there in the real world- its because
of people like you sir that our countrys in the
predicament its in- congratulations sir youre
one of the many real men of genius
Sigh,
Born in OC 64, Live in Bayarea, Have family in OC. Your statements about bears eating up previous problems is plain ignorant.
Please don’t compare anything to what is happening today. This is an all together different problem. Bigger than you want to recognize. I created and ecommerce company by sleeping on sofas and not taking a dime of money. Realizing profits in 1rst year while landing fortune 500 companies. During the dot come implosion. As a business man, life is not bad. As someone who sees the recession first hand everyday while conducting business. People are getting hurt today and tomorrow will be worse.
This is not something to be taken lightly! Who cares about real estate when the financial world is on top of the fault that is starting to slip.
Go ahead and keep selling your spin. Its great but reality says we are heading for rough times. Good luck to you but as someone who has strong belief in the american ideal I say let the chips fall where they may. We can all discuss a year from now right here. I would wager if it was legal. I’ll leave the illegal to your friends at the white house.
I hope 4 all my friends and family in OC that your right!
What lies before us and what lies behind us are only tiny matters to what lies within us-Emerson
I can see why the renters on this blog as so upset. Certainly any renters or housing bubble sitters should be angry. The honest and law-abiding people got screwed three times in a row. Once when they had to sit thru the rising of housing bubbles without any real housing gains. Twice when the bubble imploded on the way down and caused havoc on the stock markets. Thrice when their tax money goes to the pockets of liars and idiotic and greedy bankers. And it doesn’t end there. Fourthly they will be screwed by high inflation caused by all the reckless printing of the US dollar.
Yes, housing is in the dumps, and most would agree we are in a recession to some degree. THey wouldn’t call it a “business cycle” if it never went down. Here is the real issue; hysteria. Now is thetime to buy a rental home or put a little money in the market. Most won’t, because they are caught up in the hype. You make your gains on any asset by buying low and then selling high, yet most do the opposite. Let’s get back to fundamentals; do three or four things very well, if you don’t understand it, don’t buy (works for Mr. Buffett), and make it yout goal to actually save some money every month. We act like moths flocking to a light bulb. We need to think!
If you are a renter with the above housing crisis unfolding,
1. you will be much more likely to be losing your job (due to a weakened economy).
2. you will much more likely be UNABLE to accumulate savings, due to an increase in general commodity prices in a subdued economy. The overall living standards in the USA will continue to decrease (which translates into less net savings).
3. there will be very few investments where you can put your money and have some real return. Chances are your nest eggs will get a haircut in one of the continually unfolding financial crisis.
bottomline, everyone is screwed!
I’m catching the next plane to Dubai
Samson had this to say, in response to a VOR post: “Your talk of move up buyers require that they first able to sell their home and second have enough equity left over to put a large down payment”
Not especially true, if they listened to MY advice. If they bought a condo 5 years ago, it doubled in value and has more than enough equity to refinance with a lower cost conforning loan, in the past 3-6 months, pulling out enough equity to make that move-up purchase, while renting out the condo at a break even or positive cash flow. Not necessarily a need to sell.
Sigh…..
we are currently at 2003 - 2004 prices for condos…….
the clock has been set back almost 5 years already… oh yeah then tack on the 6% transaction fees, well then there is the issue of actually finding a buyer
keep dreaming
My other comment is awaiting moderation.
So here’s one more question: Which overleveraged financial institution is next?
James,
You are another real man genius.
Home prices crashing with no end in sight……… adjust that for inflation.
I could be wrong, but I don’t think James is bashing renters. Look at his post above. Like I said, it’s a bit elliptical, so I’m just guessing.
“VoiceofReason Says:
March 15th, 2008 at 5:38 pm
Listen, can we PLEASE get some facts straight??
2. Please stop saying the “nobody has $140k down for a $700k house. First time buyers are NOT buying $700k homes! They are buying $300k condos!! Move up buyers are buying $700k homes and they DO have $140k. Some of you beat on this subject like maniacs and it’s ridiculous.”
If 300K is the floor price, then I expect OC RE sales to remain slow. What percentage of first time buyers have $60K for a 20% downpayment on an entry-level house? Alternatively, how long will it take them to save that much?
Mav had this to say: “Sigh…..
we are currently at 2003 - 2004 prices for condos……”
And in my scenario above, he refinanced 6 months or a year ago before appraisals might have slid. He then had ready cash to take advantage of someone else’s current misfortune.
As for prices being at lower than 2005 levels, THAT median figure is based on a one or two month aberration, due to a deceptively low number of higher priced sales occuring, due to the TEMPORARY jumbo loans fiasco. ( Affecting sales from Sept. thru Dec., which affected escrows closing 2 months later.)
Now that that situation has been pretty much worked through, in this past month or two, there have been a HIGHER % of higher priced escrows, which, when they CLOSE escrow, and are reported by DataQuick in the next 2 months, to the future HORROR of the bears posting here will actually RAISE the median back to where it should have been, all along.
The Bear’s touchdown dance of this past few weeks, will turn out to have been embarrassingly premature. Of course, that’s just MY opinion. Time will tell. I like MY chances of being able to do a little dancing over the next couple of months, though.
Its great seeing homes in San Juan, Ladera Ranch and Coto, where the sale of price of such specific homes is anywhere from 12% to 25% below where they were in 2005. Maybe one out of ten homes do I see a price point that is close to or equal to a 2006 number (which, some people buy regardless), but more often, everyone home sold in the last few months is 15-25% below the 2005. THe benchpoint is somehwere around Summer to Spring 2004 pricing, and is approaching 2003 levels very soon. I am not saying its going back to 1996, but more realistically, where the bubble should have peaked - 2002-2003 levels.
The only thing that might stop(Save) this, is ultra low interest rates which will impact the 1 year treasury - which is the rates in which option-arm mortgages are based upon - which is the ‘high-end’ option arm of coastal OC. When that baby drops, it will wipe out your Laguna Beach/Newport Coast Homes - which more than 1/2 were purchased/refinanced with the pay-option product. (and where 80% are only paying the minimum payout, with increasing interest balances)
Sighburdood,
I give you an A+ for creativity:
“And in my scenario above, he refinanced 6 months or a year ago before appraisals might have slid. He then had ready cash to take advantage of someone else’s current misfortune.”
So let’s get this straight……. that “potential buyer” would now be about 20 to 30% underwater in their current home…. yet some bank is going to take their “cash” and give them a loan? The good old days of free money FICO scores are over, banks actually look at debt ratios now.
Again, you are off in a fantasy land with gum drop forest and unicorns.
Mav,
Sighburood (THE BULL) will just fillibuster you until you are done and then switch names and complement himself.
He uses good logic out of context as you pointed out. It made “sense” at one time to take out short term debt or long term debt at low rates if the bank was going to give it to you. But as you point out they wont anymore. He knows that, he just wants to keep you arguing.
He knows his portrait of OC balance sheet is old and questionable.
He knows that but since we don’t have latest data he can use it to bait people.
And then he takes on another of his names and insults renters in a way he thinks is subtle and clever. No one bit on that post. He pointed out that renters were losing money in the stock market, like home owners are not. He pointed out that renters will suffer from inflation like homeowners will not. He pointed out that renters will have job losses like homeowners will not and of course he did not point out that renters can move at low cost while home owners cannot.
It is all part of what I would consider a sick game. Sick not because he spends an enormous amount of time doing it, but because he might have influenced some peoples decision to buy, but worse he has stopped any useful discussion on this blog.
The American economy is in free fall at this very moment. And because of the nature of our media there is no real discussion of how the ship can be righted. The basic idea is to give loans to the debtors in one form or another and to make sure markets can function. Well that is the right general idea , but it is the specifics that matter.
While it is a bit hard to see how a good discussion here could have any impact on the general economy a clear model could help people who read the blog to make some financial decisions.
Had peole been attune to what was said on this blog a year ago they could have made a lot of money in the stock market. They could have made a better housing decision. So it does matter.
But this one “BULL” wants to keep the chatter going for his purpose.
And I think Lanser wants the chatter to claim his blog has a large following.
You know people in the public have to work with this market. But those that are truely insightful and creative build there market in clever and long lasting ways.
Lanser allowing the “THE BULL” to enlarge his market through deception (notice I said allowing, I did not say funding or suggesting and thus it is not a conspiracy) he is being clever but short sighted.
Of course first time buyers don’t by $700K homes, they generally start smaller.
But let me ask you this, how many couples/families making $100K/yr want to SETTLE for a $300K converted apartment? I sure as hell don’t.
Townhomes in decent areas are still $450K+. That’s quite a bit of down payment to save up, wouldn’t you think? Let along scraping by to pay the mortage, HOA, taxes, etc.
So Sigh,
I want to understand what you are saying. If a young couple bought a home 2 bedroom condo 5 years ago for say 150K. Lets go crazy and say at the peak the condo went up to 400K (280% increase), but now it is worth 325K (Roughly 20% off of peak) That would be equal to an equity of 175K. My guess would be they had some fancy loan that at best they knocked off maybe 20K off the prinicipal (I doubt this much)
So they owe 130K. They need to take out 140K to be able to get a loan to purchase. There first home will now have a loan that is equal to 270K. That would be roughly 1800 a month with taxes and insurance.
Plus if it is a condo probably another 200 a month for HOA. So 2,000.
So unless it is in a pretty nice area finding a renter that would pay that much might be a bit rough. Since for a few hundred more they could buy something in the current market.
Lets say that a bank will let them do this.
Their payment on their new place will be around 4000 on a loan of 560K. Not to mention closing costs and lord knows what kind costs will be associated with moving, finding a renter, cleaning the old place and fixing up the new place.
So you really think that a bank in this market is going to allow a couple to have two loans that roughly cost 6K a month.
I guess if their combined incomes are over 240K or so year sure.
It is just too risky in the current environment. They would have to be certain to have a renter starting on day one when they move. What happens when they dont…or they lose a renter for a few months?
That is just not a realistic scenario. At least not for the majority of people wanting to move up.
So Sigh,
I want to understand what you are saying. If a young couple bought a home 2 bedroom condo 5 years ago for say 150K. Lets go crazy and say at the peak the condo went up to 400K (280% increase), but now it is worth 325K (Roughly 20% off of peak) That would be equal to an equity of 175K. My guess would be they had some fancy loan that at best they knocked off maybe 20K off the prinicipal (I doubt this much)
So they owe 130K. They need to take out 140K to be able to get a loan to purchase. There first home will now have a loan that is equal to 270K. That would be roughly 1800 a month with taxes and insurance.
Plus if it is a condo probably another 200 a month for HOA. So 2,000.
So unless it is in a pretty nice area finding a renter that would pay that much might be a bit rough. Since for a few hundred more they could buy something in the current market.
Lets say that a bank will let them do this.
Their payment on their new place will be around 4000 on a loan of 560K. Not to mention closing costs and lord knows what kind costs will be associated with moving, finding a renter, cleaning the old place and fixing up the new place.
So you really think that a bank in this market is going to allow a couple to have two loans that roughly cost 6K a month.
I guess if their combined incomes are over 240K or so year sure.
It is just too risky in the current environment. They would have to be certain to have a renter starting on day one when they move. What happens when they dont…or they lose a renter for a few months?
That is just not a realistic scenario. At least not for the majority of people wanting to move up.
I do have a few friends who sold a couple of years ago and put their equity in the bank. They rented for the last couple of years and are now buying short sales. That seems to be working well for them.
sorry about the double post. Error messages everywhere.
Different day, same regurgitated garbage. Note to bears: please stop posting stories from pre-2005 as if they are still relevant. Yesterday saw large numbers of people shopping for homes, you will see evidence of this shortly. And quit with the 20% down requirement scare tactics.
The trends are not your friend.
Does anyone look at their neibhors house for sale? Prices are already below 2003 levels - and they still don’t sell. Why don’t they sell since they are such a “great deal” - becaue no one can afford it! If you are using a house to gain wealth, just like any other investment, it must be sold at the proper time. We talk about all this equity people have in OC- its a pipe dream, go try and get a lien of credit on your hosue if you think I’m kidding. people that could have sold there house in 1 day 1.5 years ago for 1.5 mil now couldnt even sell the place for $700k in 1 day. this is reality - you should have sold if you wanted to get rich from your home. any idiot can see that people that make $100k per year (maybe) cant afford a house in OC. so why would the people that make less than 100k, but squeezed every penny they had to buy a home for $250,000 12 years ago think they are rich? its hilarious. you should have sold that clunker house - now you are just the same you were 12 years ago, squeezing every penn you have to pay for a $250k home in a clunker house.
Da Plane, Da Plane!
Misinformation? Perhaps worse. Disinformation. Homes that sold for 1.5M now going for 700K? Where does this garbage come from.
No its worse than that - they are not “going” for any price. Here is my real point - 1.5 years ago we had a very liquid asset - now we have the COMPLETE OPPOSITE! Misinformation my ass, try MIOPIC.
One more item I’d like to point out. The expanded loan limits by FNMA are actually having a negative effect on the availability of loans. The government raised the limits but made FNMA tightened the screws on qualifying for all loan amounts. Not good news for housing sector. also, FHA loans are all about income - dont care about so called equity or FICO score. In other words, if you are to qualify for a $600,000 FHA loan and have another $1000 in car payments and credit cards you are going to need to make$200,000 per year then maybe you can qualify. Your payment would be $5000 per month. 800 fico score and 50% equity plays no part in an FHA loan - you need to make money to get it.
# Thoughtful Says:
“So that means that more than 70% of the families in the OC cannot afford a median priced home.”
“Over 60% of people currently own homes, so your stats are a little bit flawed.”
—
Hey Thoughtful,
Here’s a thought……If you “thought” before posting your constant rebuttals you’d take up a lot less space here.
You argue that since 60% of the people in OC own homes that the stats saying 70% can’t afford the median priced home are “flawed”.
Give it some “thought” Thoughful, and you just might see that you have illuminated the problem we are experiencing; Many “homeowners” in OC cannot afford to pay for the home they “bought” using a mortgage that enabled them to pay more than the home is worth to anyone today.
You know anyone in that situation?
Thanks to SavingInLA for showing the monthly price per square foot numbers (PPSF). I am just amazed that no one on this blog pays any attention to this statistic. This is by far the best statistical measure of the market.
The monthly PPSF numbers show an accelerating downtrend in the market. From the peak month of June 06 to Feb 08, the average monthly drop was 1.38%. For the last six months, the average monthly drop was 3.05%.
If this trend continues, we are looking at -18.3% in six months or -36.6% in 12 months. That would put the PPSF of a detached resale house at $212 by Feb 09. So the average 2,000 sq ft house would be selling for around $424,000.
I am not predicting this will happen, but the numbers are pointing in that direction.
Wow!
Good to see Jimmy posting again. I was getting worried; thinking he may have lost it — or even gone to the other side - bearish on CDM.
Just noticed zip realty shows CDM listings up — — currently showing 173 listings.
DQ’s latest February sales figures show 10 sold and sales off 54.5% in CDM:
Corona del Mar 92625 $2,372,500 35.6% 10 -54.5%
–
That is a LOT of inventory for those kind of sales.
I dunno Jimmy, but I would be concerned if I were a CDM booster … maybe even worried if I owned much there. Seems likely some of these folks are going to have to lower their asking prices to move this inventory.
Oh, did I mention 77 of those 173 listings already have lowered their asking prices, including the one on Poinsettia you pointed out to us. They dropped that $151,000 some time back and after 73 days on the market it still sits.
What’s going on Jimmy? Those are nice people in CDM. They can’t all (all but 10) be delusional as to the true value of their homes, can they?
Didn’t look at the blog last night, but,
mav; no, I don’t think someone who bought a condo 5 years ago would have the $140k put down in this market. They would have before the down-turn, and there may be a step in between, even in good times. I just get tired of some here hammering on the point of “who can buy…..” I guess right now, nobody is buying……period. So, yes, in that context, if no one is buying, the whole process stops. But I stand by my assertion that there are people capable of buying at all levels at the current prices. And, to some others that asked: Yes, I think there are many first timers that could scrape together ten percent down and be able to make payments on a starter condo, or house that isn’t in their first choice of areas. Nobody guaranteed anyone that it would be easy, regardless of conditions.
samson, I do read them, until they start off on some unrelated tangent. I don’t think I’m alone there.
Look there is only one bull here and it is kind of boring.
So let us switch the game.
Bear Sterns just went under. The Japanese have experience with a lost decade. So my guess is that the Japanese don’t want to be stuck in a down market. So the Japanese are nervous. My guess is the Nikkei drops another 3 percent tonight. So now we can play the game of those who want to guess. If some real new Bull meat comes in then we can debate with them. But all the Bull is gone and you are just beaten up on “Chief Crazy Bull”. That is no fun. Let us guess the Nikkei!
Sigh says:
“Now that that situation has been pretty much worked through, in this past month or two, there have been a HIGHER % of higher priced escrows, which, when they CLOSE escrow, and are reported by DataQuick in the next 2 months, to the future HORROR of the bears posting here will actually RAISE the median back to where it should have been, all along.
I hope someone is keeping track of these ridiculous statements…they’ll be a hoot come summer time…
oh, btw has anyone wondered if all those rich people in OC have already bought a home recently or did they become “rich” in the last two months? Just thinking that most people are locked into a home or looking to get out of a home and can’t stomach the loss. Nah…those days of people cramming the open houses and camping out for just a chance to buy are right round the corner aren’t they. OC is such a great place to live..that will all pay anything to live here…brahhhhhaahahhahahahhahaha.
VOR
I agree with you, “I just get tired of some here hammering on the point of “who can buy…..”
I live in another state and have been watching the OC RE market pretty aggressive for the last 8 months. I’ve probably read every post you guys have left. Some are really informative and others are bored people looking for attention. I’m not a Bull or a Bear, just someone with an open mind and opinion.
What I have noticed is, houses in the Anaheim Hills area that are owner occupied, priced right and in extremely good shape are selling. I know this from experience, I have put offers on 8 of them within the last three months. So for the people that are claiming nobody can buy in this market is talking non-sense.
As far as financing, yes it’s getting tighter, but there are quite a few loan programs with only 3% down. FICO scores still have alot to do with what interest rates you can get.
Bear Sterns is going to be sold for 2 billion. Last year it was worth 20billion. The employees own 30 percent so about 7 billion. So let say a New York manahatten apartment is worth a million. That is 7 thousand New York manhatten apartments for sale. Now multiply that by 5 for the other firms. I think New York real estate is going down.
Maybe we should get the opinion of “CHIEF CRAZY BULL”.
Chief crazy bull has a new name. RK.
If you believe RK I got an apartment in Manhatten he should look at!
Sorry Jake Manhattan is not for me. I lived in the city of Orange as a young man and left over 40 years ago, never to return. But it looks as though I’ll be eating my words. I just closed on a house in Anaheim Hills. Am I going to live in it full time “NO” did I buy it as an investment “NO” I bought it as a winter home. Will it go down in price “YES” do I really care, not really. Will it eventually appreciate in value through the years “YES”. Do I really care what anybody thinks. Not at all.
just the facts - Thanks for the videos. Arthur Laffingstock looks like a blithering delusional idiot. Is the Laffer curve due to him? And Mr. Schiff looks prophetic. He’s absolutely right about Bear - don’t give JPM taxpayers’ (our) money to buy it. Just nationalise the sucker, close it down, recoup what can be gotten by disposing of the assets and be done with it.
On one point I disagree. I don’t believe the middle class wiped out their savings and took on trillions in debt out of some suddenly perverse desire to owe more than they could ever hope to pay back. I think those actions are symptomatic of the increasing economic distress most of the country has been under as real wealth and income has flowed from the production of the workers into the hands of the richest investors over the last three decades.
James - I think you’ve got it about right but it’s not just the renters who have been screwed 4 different ways.
Since the 1970’s, so much of this great nation’s great wealth has been funneled to the richest 1% that everyone else has had to run faster and faster just to stay in place.
Sending women to work bought us some breathing room. Having fewer children bought us some more. We quit saving and got another short respite. Finally, the only way that the bottom 90 to 95% of the country could postpone a serious drop in the standard of living was to use home equity and credit and hope and pray that things would somehow get better before the bills came due.
Well, dang it, it didn’t turn out that way. I wonder what’s next - rescinding of child labor laws?
Dear Chief Crazy Bull,
Your statement that your not a bull or a bear and that you have been looking at a house in Anaheim hills and making all these 8 bids.
Now in your next post you suddenly closed.
A really believable story.
I have one for u. I have been thinking of buying a skyscrapper. And I have been watching the New York market pretty aggressively. I left New York when I was a young man, and now 7 years later, after being a founder of Google, I am going to buy the Bear Sterns tower for cash.
Yeah I got as much evidence for my story as you got for your story.
And if you don’t believe me I’ll meet you any time on any floor of my skyscraper.
Just tell the door man Jake sent you. And no I am not delusional, just ironic thank sir.
Jake, good for you. When I get to New York, I’ll look you up.
Yes Chief Crazy Bull,
You know the address where to reach me. You might also tell us the address of your property so we can see the great deal u got. Or else we might think your just making this stuff up.
Jake,
Where you are miscalculating NYC, Manhattan specifically, is the amount of European currency flowing in to purchase properties. 1.54 Euros to 1 US dollar…Manhattan is on sale to an entire continent, and NYC is Europe’s favorite American destination. They are buying ALOT of RE in their favorite American city:
In the fourth quarter of 2007, the latest data available, the median sale price for Manhattan coops and condos increased 6.4% compared with that period the year earlier, according to Mr. Miller (some dude from the article…but more knowledge of NYC than ANY of us here). The luxury apartments that make up the top 10% of the market, or those priced at more than $2.8 million, increased 28.4% over the same period. Median prices are more accurate indicators than average prices, as they exclude outlier data, such as the ultra-luxury apartments at 15 Central Park West and the Plaza, which skew average prices upward.
Not going to happen Jake. Sorry brother.
Jake, let’s just say, I put an offer on a house located on Aberdeen for $642,000. It was listed for $699,900 and it sold for $700k. I put another offer of $625k for one on Solomon, it’s listed for $675k, it’s under contract now. Another offer on Shoshone ave. $750k under contract for $785k…
Jake like I mentioned in my first blog. GOOD, Clean houses that are priced right are selling. The dogs are just sitting…
bloggers beware of realtors like RK coming on blogs
and telling “stories” on properties that are for sale
they think by telling these stories on a blog it
will help sales its called desparation sorry RK
I was born at light … I wasnt born last night llooll
RK had this to say: “let’s just say, I put an offer on a house located on Aberdeen for $642,000. It was listed for $699,900 and it sold for $700k. I put another offer of $625k for one on Solomon, it’s listed for $675k, it’s under contract now. Another offer on Shoshone ave. $750k under contract for $785k. Like I mentioned in my first blog. GOOD, Clean houses that are priced right are selling. The dogs are just sitting…”
Welcome back to O.C., RK. Your scenario sounds very much like what I’ve been observing for the past 2 months further South in the county, and validates a lot of what I’ve been claiming, as positive signs.
Jake had this to say: “So let say a New York manahatten apartment is worth a million. That is 7 thousand New York manhatten apartments for sale. Now multiply that by 5 for the other firms. I think New York real estate is going down.”
And that is relevant to O.C. real estate in WHAT way? Are you related to NationalBubble?
Btw, the price of Bear Stearns includes their Madison Ave. office which is valued at approx 1.2 billion. Heard that on Bob Brinker (sp?) this afternoon.
Thank You S.Dood.
But I’m only going to be back in the winter’s, the winters here in SLC are getting longer and colder….
What I’m seeing in the OC housing is, houses that sold around the end of 06′ for $6-700k have dropped to approx. $4-500k. But each day they drop, the condition also drops. By the time somebody buys them and fixes them up to a house you or I would be proud to live in, we would be in them more than ones that are already fixed up. I believe that’s why the “GOOD” ones are selling.
With no exaggeration, between looking through the MLS listing’s and physically looking at houses, I bet I’ve weeded through a couple of hundred houses. After looking at all these houses, I only found 8 that I felt were worth putting offers on.
I searched Orange, Orange Park Acres, North Tustin and ended up buying in Anaheim Hills…
I will admit, things are going to get even worse. The private mortgage insurance companies announced last friday, as of April 1st. they will require an additional 5% down in declining markets. So it’s starting to look as though the mortgage insurance companies are going to be dictating terms, not Fannie or Freddie…
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.
Bear Stearns: $2 a share — I’m flabbergasted. From $159 to $2. Someone tell me I’m wrong or that I misread.
Sighburr, are you so sure that the jumbo loan situation has been worked through? It seems as if it’s just beginning, but on this one, I’ll have to wait and see.
Dood said:
“The jumbo loan situation has been worked through ”
how in the world do you figure this? ARM resets will happen way into the next year with lower priced homes as well as these jumbos.
You also cannot judge by week to week numbers. It only takes on large house to throw everything off, but with stats from a previous comment on this article- 173 listings in CDM, 73 or so have lowered price.
Get real, Dood. But appreciate your half full attitude!
sorry- name was suppossed to be Mom in CDM, but Buster was still up there from last month…
a question to those who will know: does the OK for these large financial institutes to borrow money- I am assuming this would come out of our taxes, correct?
Mom,
Well we are paying for part of this….. but governments around the world who hold our currency and give us loans are paying for as much of it or more.
We will seriously be in a Great Depression if the global economic powers decide to sell off our currency or put a credit crunch on our country.
China has huge power in regards to this, trillions in debt and currency.
If they switch to the Euro we are basically screwed.
Mav,
Well China has us by the ba**s and we got China by the Barbie Dolls.
If China cuts us off we will just have to make our own toys. That will be tough for a while but I am sure Santa will help.
And with no Chinese imports I guess Americans will have to stop selling real estate and get a real job. Maybe not such a bad thing.
Jake,
I completely agree with you, in fact I think this super recession is the best thing that can happen to America it will make us stronger.
Running low on cash? Made a few bad bets on dark horses? Don’t worry — just print more money.
The short answer is that the Fed can print money without adding to our national debt.
The long answer Jake and Mav answered, kind of (better than any answer I could have provided.
note:
I coined the term: “Super Recession”
you heard it hear first
I like superecession.
I think that there will be big things come tomorrow.
What RK is saying is true. There are homes out there that are a good value as compared to prices in the past. There are people who can afford to buy these houses and have down payments.
I dont think anyone has argued that.
What is being argued is that as a market as a whole, and for the people that live here. The majority cannot afford the homes with traditional lending as it is. Nor do they downpayments or incomes to do so.
If people did they would not be losing their homes. People would be out shopping and buying like they always have.
To believe that the only reason people are not buying is because of the hype and the media is extremely naive.
I have family members and friends that are in bad shape. I also have other friends who have taken advantage of some short sales and found some good deals. The only reason for this is that they sold a couple of years ago and waited the market out.
The market needs another 6 months at least to work itself out…but I think it will be longer.
Thoughtful Says:
“March 16th, 2008 at 9:19 am
Different day, same regurgitated garbage. Note to bears: please stop posting stories from pre-2005 as if they are still relevant. Yesterday saw large numbers of people shopping for homes, you will see evidence of this shortly. And quit with the 20% down requirement scare tactics.”
Absolutely dumbfounding rebuttal: the “paradigm” that led us into the current mess is here to stay. 20% is not a scare tactic, but an ideal amount for new buyers and lenders to mutually assure themselves of a stable contract.
The only scare tactics can be found in your post: 300K is an acceptable dollar figure for a starter OC condo and prices/sales have stabilized (i.e. now is the time to buy).
“The trends are not your friend”
Is your opinion based on hope, wish, hearsay, rumors, whispers, prayers, a different time frame, or insider info?
Even in GOD’s country housing prices crash, our house would probably sell for about 200k less, yes 200k even in god’s country.
sighburtrump an investing legend in his own mind .. he lives in
a dimension beyond that which is known to man… a dimension
as vast as space and as timeless as infinity… it is the middle
ground between light and shadow between science and
superstition.. it lies between the pit of mans fears and the
summit of his knowledge… this is the dimension of the
imagination… its an area known as “the orange county
real estate twilight zone”
Submitted for your approval. An opaque orb hovers over the land, its murky contents swirling and bubbling inside. Certain inhabitants see this as a sign of the return of justice and vow to slay the heretic “Appreciation”. While others cower in fear of the orb and see it is a sign of darkness. But wait! The contents are clearing! An image is emerging! It is him!! The face of the smiling Lansner!! The orb transforms into a blinding white light and brings golden sunshine to the land. Flowers bloom, birds chirp, and the medium home price stabilizes at mid 04 levels. All is right in the OC.
Housing is going to stay ill until this liquidity meltdown ends. When lenders stop quaking in fear, we’ll be at bottom, and not until then. To paraphrase President Clinton “It’s the credit panic stupid!”
Rants had this soliloquy to offer: “sighburtrump an investing legend in his own mind .. he lives in a dimension beyond that which is known to man… a dimension as vast as space and as timeless as infinity… it is the middle ground between light and shadow between science and
superstition.. it lies between the pit of mans fears and the summit of his knowledge… this is the dimension of the imagination… its an area known as “the orange county real estate twilight zone”
Hey, Rants, not bad. I, though, would prefer to think of it as the “dawning” zone. Thanks though, I appreciate your poetic nature.
VOR, yours is pretty good, also, from the positive side. May the force be with you, VOR!
Dear Sir,
Fed Chm. Ben Bernanke, by lowering the CD rates on bank certificates, is not going to get the economy going. There’s no guarantee that they are going to pass that through to the borrowers. I understand the investment bankers, that are involved in credit cards, are even raising their interest rates. He’s bailing out the wrong people and the Fed still isn’t putting regulations in place to stop what’s going on. Too many lobbyists. The only thing that would change the investment banks technique would be if they nationalized just one when they get in trouble like England did with Northern Rock in February. Look it up on the Web.
Yours truly, Disgusted Middleclass Taxpayer