RadarLogic, a home-price tracker that concentrates on per-square-foot valuations, says LA/OC home values (for all types of residences sold — homes, condos and newly built) ran at $303 per square foot in April, down 23.4% in the year, according to their most recent pricing report. To some observors, the per-square-foot measure can be more accurate because it’s not as easily swayed by a changing mix of homes sold in a period.
Of this region in April, RadarLogic says …
… continued to show price-per-square-foot declines as motivated sales continued to make up a large percentage of total transactions in the market. The market showed a 14.7% increase in transaction count from March to April, consistent with seasonal expectations. Motivated sales made up 29.0% of the market in April 2008, up from 3.0% in April 2007. Motivated sales continue to depress the price-per-square-foot with a year-over-year decline of 19.1% compared to an increase of 0.6% in April 2007.
LA/OC’s depreciation rate was fifth worst among the 25 big U.S. market tracked by RadarLogic, following Sacramento (-31.7%); Vegas (-29.9%), San Diego (-28.1%) and Phoenix (-25.6%). To read more of RadarLogic’s report, CLICK HERE!
Other local pricing news …
- Mid-June home pricing near 1st gain since Nov.
- O.C. homes seen as 25% less unaffordable
- Big Orange property index takes worst hit in 13 years
- O.C. home affordability jumps in 2008’s first quarter
- SoCal home woes could mean 50% price drop
- O.C. homes seen as undervalued; 1st time since ‘03
- Chapman sees O.C. home price down 9% in ‘09
It must be the bottom. Again.
Until next week.
RealtorDaveE Says: “Bubble, we’re actually finding some common ground:”
Ok, you just ruined my day. The last thing I want in life is to agree with a Realtor. :-)
No, just kidding man. You seem to be one of the few honest Realtors out there. I’ll recommend you as a Realtor when the market bottom in OC sometime in 2010.
R Dave,
Don’t bother. You’re talking to a brick wall. This “blog” has become an insane asylum where everyone walks in circles and screams their lunatic mantra rant. It is, (and really always was), a waste of space and time. I’d advise everyone here who doesn’t subscribe to the apocalyptic scorched earth theory of economics to stop posting and then sit back and watch the attention starved haters turn on each other. Now that would be worthwhile!
Click on name to discover what Lee in Irvine thinks about this!
VOR
My name says it all as far as you are concerned.
RDave-
Thank you for the enlightenment. I went to your link. I will now slog through the bill to see what I can find.
I will back off my discussion of no bailout.
But let’s see what an example might look like:
$888,000 Zero-Down Loan. Bank takes 10% write-down of $88K. New loan amount is $800,000.
FHA takes it over at $550K. Guaranteeing $250K in equity.
In 6 years, the owners have 50% equity, or $125K saved, tax free.
In addition they will also get 50% of any market appreciation. (Let’s assume another $150K/2 for giggles, or $75K).
Total equity in 6 years is $200K.
Let’s look at their costs:
$888,000 at 6.5%, discounted by 2% for write-off leaves 4% net a year, call it $35K a year.
$550K at 4.0% = $22K a year.
So $13K x 6 years is an add’l $78K benefit to home owner.
But they have to pay an additional 1.5%, or $8K a year.
They have to pay 3 points on the re-fi, but they’d have to pay 2 pts for a re-fi into something else, so this adds an addl $5k.
$8K/yr x 6 years is $48K + $5K , so $53K.
Net benefit to homeowner: $78K-$53K or $25K additional.
So in 6 years, had I been irresponsible, with nothing down, I would walk away with: $125K+$75K+$25K = $225K tax free.
Where do I sign up?
While it seems that the Federal cost is being muted, this is still a huge handout to those who were irresponsible.
I have an alternative.
Why are we writing down the loans at all? Let’s just charge a lower rate of interest and start walking it up at 1% a year.
That way I’m not contributing to free equity.
It slows the foreclosures allowing for absorption, which isn’t the case today.
And yes, they will get a bit of a free ride for another year or two, but then they have to go rent like the rest of us.
The part I totally disagree with is the free equity, compliments of me, the taxpayer.
another 32% next year.
Bubble,
Lol. You made my day. BTW, that 2010 estimate for the bottom is the one that seems most likely to most of the economists I’ve been following. I think you’re probably on the money on that.
Marcia,
You’re welcome. You are right about slogging through that CBO report, although it picked up a bit once I got past the charts on pages 2 & 3. I think just about every poster on this blog writes more clearly than the CBO.
As for the equity, we’re reading this thing differently, but you’re the CPA so maybe I’m missing something.
The last paragraph on p. 6 of the CBO report says, “Under the new program, the participating mortgage holder must agree to a loan
refinancing arrangement that brings the loan-to-value (LTV) ratio on the new FHAinsured
loan to no greater than 90 percent of the property’s current appraised value.”
The way I read that, the loan is reduced to 10% below CURRENT it’s the original lender that takes the hit of the reduced loan.
Oops–somehow hit “enter” too soon.
Replace the last paragraph above with this:
The way I read that, the loan is reduced to 10% below CURRENT market value. And it’s the original lender who absorbs the loss of equity. That’s better for the lender than a foreclosure, but I’m not sure how many lenders will want to do that. Probably a case-by-case thing with most.
Anyway, the 10% equity is actually FHA’s share, plus half of the additional equity if the place eventually appreciates. That’s part of how the program pays for itself.
I may be wrong, but that’s how I’m reading it. If I’m right, it seems like a win-win, at least for the taxpayer & the economy. And the borrower avoids foreclosure (if they can qualify for the new loan), while the lender saves a lot of hassle and expense.
Not exactly what I thought before I started checking it out.
And its all voluntary by the lender - yes?
Something they can do today voluntarily - yes?
the only catch is that they want taxpayers to back them as a trade-off for those continuing to choose to be dead-beats - yes? no?
Just asking.
VOR’s posts are as grounded in “reason” as mine are in soothsaying. Throw another msg board martyr on the heap.
lolololololol
Let’s see take the loan down to 90% of CURRENT value instead of a short sale at CURRENT value just so some dumba$$ can stay in the banks home. That’ll only work in areas where there really isn’t anyone available to buy the home once it is foreclosed on. Around here there is apparently no problem selling the foreclosed homes so there really isn’t any need to support this concept here.
Okay, so this bail out has some very interesting terms…Lets look at the language of the contracts that made this mess..People didn’t read before they sign, so what makes the bail out more promising..The money is being given to the very same companies who has the loans……I don’t get it…any bail out where money is given to the loan companies is another profit for them and less for the average citizen…this country has gone to sh%$..right with out politicians.
I want Realtor dave to be my Realtor when this thing is over. He is not a lying scumbag.
…VOR……..
………. when the locust arrive……… try to wipe off the honey quick !
……… LOL….. RE Dave…. you think that is going to work?
…… seems to me it makes more sense than ever to walk away……
………. 1.5% yearly fee………. 10% of principal……… plus half any phantom equity……………….. people who bought a house they could not afford, with no money down…… are going to want that????? why?…… they can just walk away…… repair their credit in 4 years and buy at the bottom……..
Bubble,
I don’t want to ruin your or my reputation by agreeing with you twice in one day, but that was an excellent article you linked to. Overall pretty much on the money.
I do think the subprimes are more responsible than he does, because it was the subprimes that kept inflating the bubble from about 2004 - 2006 or 2007. (In west Orange County where I work we peaked in summer of 2006–I think DataSlow’s 2007 median peak was the result of a shift towards higher end homes. )
Anyway, this ain’t over yet. Which is why I support the bailout, as I understand it (hey, we can’t agree on everything) but it’s also why I say it’s time to start drilling but to extract substantially more tax dollars from the oil taken out of the ground. How many good-paying jobs would that create here in California?
Mav,
I don’t think it’s a cure-all, but I think it will help some. Check out Bubble’s UK link, we need to take some carefully targeted action to reduce foreclosures.
As for the costs to the homeowner, Mav, you’re right–it’s stiff. But haven’t most folks on this blog been complaining about the homeowners getting a free ride?
I think this is fair. The homeowner saves their credit and gets the loan brought down to market value in return for equity sharing and a stiff “mortgage insurance” fee to protect the taxpayers.
I’ve worked with plenty of short sellers both in this and in the last recession, and I’d say about a third of them would both be helped by this sort of thing and would jump at it.
Lenders reduce their distressed inventory but take a loss.
Homeowners get back to an equity neutral position with a 30 year fixed loan they can afford in return for some fees and equity sharing.
Taxpayers’ interests are protected & they actually might make a profit.
Our economy isn’t quite as likely to fall off a cliff.
Sure, it’s not going to solve all our problems, but it sure seems like a rational step in the right direction.
Like I said, the cure-all would be for us to kick OPEC where it hurts by dramatically reducing the offshore & Alaska drilling bans but taxing the heck out of the oil that comes out of the ground. As I understand it, the way it stands now, our government gets nothing when oils removed from federal lands, which is where most of it is! Target that revenue towards things to reduce our energy dependence, improve education, balance the budget, and eliminate the trade deficit all at once.
Now that’s a no-brainer, in my book, and it’s an issue the Republicans could actually win on.
Whether that would be good or bad is a whole different topic. I do agree with the Lincoln Club that there isn’t much difference between today’s Republican Congressional Leaders & the Demos when it comes to pork or earmarks.
Dang, that was long. Sorry. That’s why I sometimes link.
I gotta get some work done!
………………….. RE Dave, the home debtor is the only one that can be taken for a ride at this point…………………. those that put zero money down…….. can only lose by agreeing to ANYTHING………… there best option is to walk away………..
………. there are no free lunches………… the banks will foreclose….. unless the home debtor is willing to agree to terms that are unfavorable to themselves and favorable to the bank………. like i said they can just walk away……… rent the same thing for below the cost to own…. repair their credit…. and buy at the bottom…………..
……… that bill has about as much chance of working……….. as gas has of going back to $2.50/gallon
Cease the lacuna’s
You know, the City of Anaheim has its own publicly owned power company. So for those of us who were lucky enough to live in Anaheim during the power shortage during the Enron years never saw our rates skyrocket like those who had SoCal Edison or PG&E (LA was also like Anaheim).
Given that oil is now a national security item, like the military, while I am a free-market capitalist, I think the government should run the oil companies. I’m sorry, but we are already paying billions and billions in subsidies. I’d rather we just pay it in inefficiencies instead, since that’s what it will amount to.
We wouldn’t be in this shape now. It’d be like Anaheim or LA Power during the power shortage years. At least the pricing would be stable.
I don’t know. I don’t think we should turn over items that literally can cause this country to go into recession in a matter of months. If you figure we pay Exxon $10 billion in subsidies, and they make $40 billion in a year net. What do you think they’d make without the subsidies? $30 billion net. Poor, poor Exxon. Only $30 billion net. What’s a body to do?
Anyone have a better suggestion? Keeping it the way it is seems a recipe for disaster. We should learn from this.
I have some questions then:
What would happen if the lenders attempted to list those homes at 10% below CURRENT MARKET PRICE?
Then give the current borrower a chance to find their own funding. Now hear me out: isn’t it logical to think that if they were able to buy the property at the peak pricing - then they at least have to be able to get funding (given current standards) for the 10% below current market price?
Thereby, keeping the taxpayer out of the entire effort?
If the current borrower cannot get that kind of funding then they have NO BUSINESS being in that home and the home should be sold to the next person who CAN PAY THAT PRICE AND GET FUNDING GIVEN CURRENT STANDARDS - Yes? No?
Please don’t tell me that if they discounted the home price to 10% below current market value that it will not be sold.
The person that can pay that price without taxpayer assistance should be given the opportunity to buy and live in that house - yes?
The market corrects and everyone that makes well thought out decisions prevails - yes?
It almost seems like the ultimate goal here is to prevent home prices from being listed at 10% below current market value since we all know that sales would pick up even further if that was to happen.
I am talking about actual sales between a buyer and seller (albeit a lender) but without the taxpayer being leveraged in the mix. and a buyer that can get the funding without having to have some kind of bill to get the deal through.
Just logically thinking this through.
This bailout is just another ploy to keep the banks from selling these homes at steep discounts.
Let the market buy up these properties for what they’re worth - not force the taxpayer to back what the banks think they’re worth.
Who actually puts the value on that house anyway? The value is determined by the FRICKIN’ MARKET!!! Let the buying market determine the right value, let the banks keep their 10% and then sell the damn house!!!
This bailout just falls short when you think about this logically. Its all a ploy - simple as that.
They are using words such as “market value” and so forth and giving it new meaning.
Does anyone here think “market value” is anything other than what the market is willing to pay for that item?
I cannot be alone in this line of thinking.
Marcia,
“Why are we writing down the loans at all? Let’s just charge a lower rate of interest and start walking it up at 1% a year. That way I’m not contributing to free equity.”
Did you suggest to artificially setting the interest rate at 1%? This would be a bad choice with bad consequences. The interest rate should be up to the free market and it’s already bad enough that the quasi-private Federal Reserve has their hands in it. Didn’t we learn and take notes of what can happen when the interest rates are manipulated beyond what they should be? The spread between the European and US central banks’ interest rates is already ‘bad enough’.
And doing this ‘just for the homes in default’ is not really a good solution, either. You’d still reward the irresponsible and by doing so you not only screw the responsible ones - but you encourage them to fall behind as well for the low interest rate payment. You’d just prolong the inevitable and pave the road for a Japan like 15year downturn…
There should be ZERO bailouts. Only that way will individuals and lenders alike learn their lesson. But that won’t happen and because of that it’s your best bet to take all your savings and put them into a stable foreign currency or into the Precious metals. That includes foreign stocks that do not depend on the US consumer. Guess what will happen to the USD with the “nationalization” of Fannie Mae and Freddie Mac…
And RE bulls, don’t worry, this type of inflation will not save the home prices over the next couple of years from further deflating because we are / will experience stagflation at the very same time. Especially here in OC.
If you’d want to give free money to somebody to encourage sales activity and slow the foreclosure activity you might as well give big tax incentives / rebates to first time home-buyers that were responsible and didn’t buy during the height of the bubble market. And I mean true tax rebates, not welfare check as was the case with the “Economic Stimulus Package” deal. Only give the rebate to those that actually paid taxes with a max of e.g. 20% of the home price. This could be achieved with rebate system that would go back for the previous three tax years.
We have hit the absolute low low lowest of low bottom AGAIN so it must be time to buy.
R.DaveE: Great answers. However, I am not sure I agree with that foreclosure scenario.
Here’s why:
Aren’t sellers complaining today that the banks are taking too long to respond to short sales? So why the lengthy process?
Would the market price not be the highest price they can get in the market?
A home that sells today is a price set by the market. Anything other than that is not.
What I am saying is this:
Clear cut and dry -
If a home owner that purchased within the last four or five years is having trouble making payments, is turned over in their loan and needs to sell the house to get out from underneath it, there should simply be a blanket policy that the banks follow: set the price at 10% below market value. I mean - we are talking about the same market value - yes?
The banks CAN avoid this foreclosure process by allowing the short sales and expediting them.
If the homeowner wants to match that price - then so be it and then the lender cuts a deal with financing to that current owner and takes on the risk of that loan.
If the home needs to be sold in x # of months - and then x number of offers come in - then would the highest price offered not be the market price?
The exception to this would be the stubborn home owner that is defaulting and still wants to live rent free. In that case - I will back any bill that expedites that process of “cleaning house.”
You see - fact is fact. There are buyers out there that can afford these homes and will buy these homes at REAL MARKET PRICES - especially if you throw in a 10% discount to boot - and not the bloated prices that the lenders would love to get from the overextended buyer or the taxpayer.
Would it be better for these current owners to get out from underneath the homes and move on with their lives at a lower cost of living in some rental than to be burdened with the fact that they “share” equity with another organization? Aren’t they limiting the potential of what they possibly can do with their money and time since they will still be so overextended that they essentially will be working to pay a mortgage and that’s it? (Since anyone not in that category should not be eligible for this program since they can obviously pay anyway).
Its a free market - if the current owner is given an opportunity to “buy” that home at a price - then let them (without help from the taxpayer) otherwise, let them move over and allow the next guy in.
The lenders are just not ready to allow the market to set the market price - this is the root problem here. All the wording in the world can attempt to paint some other picture but the song remains the same.
Lastly, last time I checked, Fannie, Freddie and the FHA are in enough trouble - the taxpayer is enough trouble - what in the world makes a troubled homeowner more special than a troubled taxpayer? The burden of this debacle should not be saddled onto the shoulders of our taxpayers nor their children - since I think we all can agree that this will translate into more debt overall for every taxpayer within our borders.
There is absolutely no real potential for this to go any other way - otherwise Fannie, Freddie and the FHA would not currently have a problem with capital.
Of course I will admit, I’m a bit tired from three days of back to back meetings with DOD officials and suppliers. Maybe after a martini I may change my mind and actually read it (LOLOL)
Dave - you have great patience - you are a credit to your profession.
Nvest80: tax incentives to people that will buy and live in the homes - not investors - and I back that 100%!!! (I am a RE investor so I am not looking for handouts here myself - I just can’t stand watching someone else throw away my taxpayer dollars when there is no need to)
Hell - that even brings up another point. The establishment of need. There has been enough debate as to whether we really need a bailout at all to make any sensible person pause before communicating to the rest of the world that the US rewards recklessness and lies. It’s a matter of principle. This is just wrong - no matter how you look at it.
Maybe think of it this way:
Buyers (the market) are now willing to only pay for what they can afford, rather than what banks will actually lend them (artificial market). Over the last few years, we saw what happens when a market is set by less than ethical behavior from buyers and lenders.
Now, should we not let these new wave of responsible borrowers set the market to where it belongs? Wouldn’t any other move by the Fed essentially be another move to artificially set the market?
Anyone stop to think that the ultimate goal is supposed to be to increase home ownership?
What is the best path to that ultimate goal?
This is certainly not the best path.
If the ultimate goal was to prevent further loss for the biggest purveyors and risk takers that had set this current market, then this is definitely the best path.
DaveE: “The market will settle at that price reasonable sellers and buyers can agee on, bill or no bill. I just think we need to remove some of the upcoming foreclosures from the inventory to avoid a death spiral of downward pricing that drags us all down.”
I think I see what many are taking issue with.
Are the buyers that are currently bidding on properties “not reasonable?”
Who is to say if I offer a price that is 20% below asking I am being unreasonable - who is being unreasonable: the seller with the 20% too high price or the bidder with 20% too low price? by what standard?
Was doubling of home prices in 3 years reasonable?
Who has the right to label anyone as being unreasonable given the current events and the events of the last 5 years?
Come on man - this is the same argument from day one.
People whine about it being too expensive then they whine about it being too cheap.
STOP THE FRICKIN’ WHINING ALREADY and let the market reign. Suck it up and it’ll be over with before we know it - and the taxpayer will have less debt to deal with.
………. not buying it……… you need to pay to go into a cryogenic chamber……. 4 years from now you come out of the cryogenic chamber…..with your buckets of cash and buy every house you want at the price you want………. 10% below current market is going to look like bubble pricing by then…………..
…as a side note……
………. when do you all think Fannie and Freddie will be penny stocks?……
…… i can’t wait for the movie: GD2….
I don’t support the housing bailout bill or any type of bailout for that matter; however, I am resigned to the fact that a bailout of some type is very probable given the politcal landscape.
In my opinion, no bailout will ‘fix’ the underlying problem nor will it halt the slide of real estate. It might delay the deceleration but no stop it really in any substantial way.
I do not have great faith in our government. They do a good job of rhetoric but have surprisingly little insight or solutions into the real problems of what is happening. It seems to be very politically incorrect and unpopular (although Hank Paulson did try to few days ago) to say that people bought too much house than they could afford, or that they got refinanced into loans they should have…AND they should take responsibility for this.
Instead, the government wants to play the blame game and try to find out who is responsible and try to punish those, and if this fails due to lobbyists, then just let it fall on the U.S. taxpayers, because, heck, no one monitors where this money is going anyways!
“So you bought a house for $700,000 and now just realize that you really coudn’t afford it? Well just go ahead and keep that house. It’s on us, the United States of America!”
“Oh, you refinanced and got an additional $400,000 loan for your property but spent it all and now you realize that you can’t pay it back? Well, we all know it wasn’t YOUR fault. So go ahead and keep that money…whatever you do or did with it is your business. Complimentary of the United States of America!”
Now I don’t believe that the house buyer or refinancer is all to blame. Mortgage brokers, lenders, investors in the mortgage products, and the Fed all have a huge hand in this as well. I believe that whoever took the risk must pay the price. That is just how investing works. This bailout crap does not make sense at all to me.
……….. do you people understand what a bailout looks like?…..
…….. i’ll give you an example…….. Bear Sterns was bailed out……
……………. i thought it was going to be a matter of months………..
……………. so how many days do you all think it will take for Fannie and Freddie to be penny stocks?……..