Hanley Wood’s latest figures show that new home contracts — an indication of future, completed sales — still are lagging last year’s levels, even though selling prices dropped nearly 20% and sales of existing homes have surged. (O.C. deals to buy old residences doubled in a year. Read more HERE!)
The Costa Mesa research firm reported that contracts to buy new houses fell 39% below year-ago levels in June. Condo contracts were down 37%, and contracts to buy townhomes and small, multi-unit complexes likewise dropped 39%. New-home deals typically take from three to six months to close escrow.
[ More housing: PRICING | INVENTORY | RENTS | FED | RATES ]
Here’s a breakdown for total contracts signed and prices by category for June:
| Type | Contracts | Vs. 07 | Median | Vs. 07 |
|---|---|---|---|---|
| SF | 81 | -39.1% | $879,900 | -18.5% |
| Condo | 51 | -37.0% | $410,990 | -11.0% |
| TH/Plex | 47 | -39.7% | $480,000 | -14.1% |
| Total | 179 | -38.7% | $579,000 | -19.6% |
Source: Hanley Wood Market Intelligence. SF=single-family; TH=townhomes; Plex=duplexes, triplexes, etc.
Read more:
- Builders shave $430,000 off new O.C. house prices
- Early Aug. O.C. homebuying up 10%
- July’s O.C. broker sales fall $170 million
- Only 1 O.C. ZIP had no home losses
- Slump costing O.C. 65,000 home sales is over
- July O.C. home pricing tumbles 28%
- Beach homes become O.C.’s slowest sellers
- Tell us ‘Is O.C. housing approaching bottom?’
Given the median for a SFR in OC is now around $500K, it should be no surprise that the sales have fallen off by almost 40% for new SFR’s, what with a median of $819K.
What that means is that only the folks who can actually afford the payments on a $700K loan are now buying. The 40% who never could are now out of that market segment.
So what does this mean for homebuilders going forward?
Will the new reality of 179 homes a month, or 2,160 home sales a year be enough to keep their current staff levels?
Or, like most, if sales are truly off 40%, how deep will they need to cut into both operating and admin staff levels?
California median sales prices were down a record 40.3 percent from July 2007.
Orange County median sales prices were down a record -29.8% percent from July 2007.
So much for the shady character on this blog spewing its garbage that home pieces would never drop 40%.
Remember folks, we’re not even halfway done with this mess.
To Provider and Jimmy-
This is an excerpt out of the Aug 15 paired sales article:
“For example, LePage noted that the median price – or midpoint for all sales – of a Laguna Beach home increased 8.2 percent during the first six months of 2008 compared with the first six months of 2007. But if you look at individual homes, rather than the entire market, the picture changes. About a third of all Laguna Beach homes that sold between mid-April and mid-June fetched less than their previous sales. The average decline among these homes: 15 percent. ”
So much for beach areas being immune.
And yes Provider. I know. I know. Laguna Beach is NOT Irvine which, according to you, is the ONLY place this is not occurring in.
It is a good time to be a good salesperson…we do not cost a lot to keep on the payroll.
Bubble buyers, like provider are facing some very tough times.
Their mistake is creating a crisis in their family’s life.
Their home is worth hundreds of thousands of dollars less than they owe on it.
Their mortgage payment is becoming impossible.
They have tried unsuccessfully to sell their house.
They have creditors constantly calling.
This might explain why provider acts so desperate on this blog.
Bill, she’s taking a nap, let her rest.
I must admit, you know I’m a total bear on real estate, that the decline in median price is going down faster then I thought it would - ONCE IT FINALLY STARTED!!!
Geesh, when you thought that there were no other fundamentals that could keep this sic puppy up, something happened. NINJA loans and lots of other flavors, straw buyers, flippers - you name it - it was the perfect storm. I really thought it would start declining much much earlier than it did.
Now my question -
“New-home deals typically take from three to six months to close escrow.’
why?
Melody,
I assume you’re talking about finished homes?
Bill, you’re a d ouche. You can’t backup a single thing you said, as usual. Your’re s cum. You and Melody deserve each other.
Melody Says:
“I really thought it would start declining much much earlier than it did”
Without Wall Street’s ability to sell the entire world into bad debt, it would have declined much much earlier.
Provider,
Didn’t you move your mom in to make your payments?
Bill and Melody can’t come up with anything meaningful to say, so they hump me all day and all night. Sad.
Ah damn, she woke up. I’m not gay provider… sorry
Bill, I don’t know if these are finished homes are not… why so long? Did I miss the fine print… Damn that fine print.
“The foreclosure crisis has left thousands of homes in Clark County sitting empty. Those vacant properties soon become eyesores.
A North Las Vegas man is doing his part to try to prevent an abandoned home from becoming a neighborhood nuisance. Now, he says he was threatened with jail time. ”
provider - what did you say about second homes earlier? A neighbor wants to take care of the property (to keep his value up) and he might be arrested? Go figure.
I knew this but thanks so much Bill. Isn’t it odd that they changed the bk laws but they’re out in great numbers? It’s almost like they (govt/federal reserve) knew, but it didn’t stop because even with the new criteria, they can go bk.
If I was down hundreds of thousands on a property, I probably would walk. I hate to say that, but I would walk.
Mind you, the last I checked my credit score was 820.
Melody,
Most new construction is not complete, therefore they have longer escrow periods. That is the only reason. If the home is complete, typical escrow periods as in a resales would apply…although the quicker you close, the better the deal.
I think you would rent it out Mel…
I don’t know Mulli, it saddens me that so many got into this mess. What would I do? What if I could couldn’t keep up with losing so much every month? It would be a money pit from hell.
Thanks for clearing up the length of time for new homes… I didn’t get it.
You would think that with all of our technology, we could do escrow in days.
Walk throughs and inspections.
I had to have my car fixed and they were still using a program in dos to print out my repair receipt. Maybe that’s my answer. People don’t like change. If it ain’t broke, don’t fix it. We should be so much farther than where we are with fraudsters nipped in the bud before it happens.
Can you tell I’m listening to the conference?
idk why car repair and other businesses are so behind the times…i guess they do not wish to pay for the upgrade. My gf has the same issue at her job and the computer system in place there.
Walk throughs and inspections don’t take long - unless there is something wrong.
Mulli - since you’re a realtor - how do you truly feel about our economy? about woodbridge (toxic - is it a true concern)? did realtors make huge rewards during the boom to save them through this “hard time”? Did realtors invest as crazy as others? Did you see fraud? Did most realtors coerce appraisers? How should this be corrected? How do you feel with the “mess in general”? If you see someone that you sold a house to and they look desperate, how do you react?
Tell me what you can so I can try to understand this better in a different eye.
Well Melody: here is my last 4 years…
I hold licenses in three states: TX HI and CA.
I was in TX when the boom started, working for an upscale production builder. In Houston, these homes went from 2800-4300s.f. and were priced from $230,000-450,000. Property taxes in Houston run about 3%, but there is no state income tax. My guess is most of these people are just fine today as Houston did not have the severity of upswing like OC did…therefore, the housing tornado missed Texas. From there, I began selling to the ultra-wealthy in Houston, so they are fine too. The only other housing boom project I was on was a very successful branded hotel condo in Hawaii. Again, very specialized product, no true comps on value…first new construction on Waikiki in 25 years. Still not complete at this time. But all of these people are just stoked to be future owners in this building. Again, prices from $500,000-9,000,000. I tell this story so you can grasp where I was during the housing boom. I was not here locally…so I cannot comment with any accuracy on those here that are suffering.
The economy: it is not as bad as the media is spelling out…but it is not as good as eternal optimists want you to believe it to be. The truth usually lies somewhere in the middle. For example, I do not see housing crashing to the levels most bearish ones predict on here. Nor do I think we have bottomed…the truth is in the middle.
Most people live beyond their means…my guess is most agents did not save enough.
I do not know enough about Woodbridge to comment. I truly don’t.
Did I see fraud? I think appraisers fudged some numbers at times to get the repeat biz since times were so busy. The bottom line in 2005 was a sign went in the yard, and if it was a good home, multiple offers. I blame the underwriters for most of this debacle as they were the safeguard to the money. Wall St. (Bush was right) was drunk by packaging all of these loans mixed with other investment vehicles. Just stupid stuff.
I do not think gov’t intervention is the answer. But politics are too prevalent in our society, so our gov’t will continue to help…especially since it is an election year.
OC is a very special place. Those that do not get around enough become blind to the beauty and all the area offers. It is prettier than LA and San Diego, and the prices show it. San Diego does not have near the levels of wealth found in this county. They are not the best source to follow as we judge our recovery timeframe. Neither is Vegas nor Phoenix. Not even FL. This location is pretty special. This is the part that I think most bears here choose to ignore. It is not just about fundamentals here. Never has been.
I hope this helps clear up where I stand on these issues.
Thanks Bill. That was actually helpful.
I agree with you on prices not falling as far as some here predict, only because inflation was over 6% midway through the year. If you add inflation back into the mix at say 10%, a 25% fall would only have to fall another 15%, because the 10% inflation would eat up the rest.
That being the case, what do you think is going to happen when jumbo conforming is due to reset back to $650K? Do you think it will really go back there? I think the politicos will stop it from going backwards. That’ll be like putting another straw onto this camel’s back.
Thanks so much mulli
I’m a native Californian. Grew up in Chula Vista. Moved to Sacramento for 20 some years, then moved to the OC. I must say, I love this place (Laguna Niguel) better than the others. I go home often (San Diego) and I don’t like what I see. What’s more strange, is when I was a child in San Diego, OC was not portrayed as a “nice area”. I have traveled throughout the US and have exposed myself to several cities in California. I do genuinely love the OC. When I first moved to Sac, I loved it there. It had a feel of peacefulness and just a calm feeling all-round. It has since changed and I would never consider on moving back (talk about poor planning). My heart is here now. Other areas in CA I so love is Napa, Sonoma, Tahoe, Carmel, Monterey, Catalina, Cambria, and Big Sur (there could be others but I don’t know). I realize you can’t compare apples to oranges but let’s get back to reality. People have to live. A home is a home. The median income does not substantiate the median home price.
My husband is from Texas (brother in Houston) and yes, the housing has not gone ‘as crazy’ as here. If I were a realtor, I would much rather have a market that was stable.
So where do you feel the median price will fall to? Typically the up’s are higher and the down’s are lower than expected (history). It will overcorrect in my mind. How do you feel in real price range?
Thanks again mulli and good for you in being so diverse (multiple states).
“The collapse of the housing bubble has left millions of Americans with homes worth less than the amount owed on them and resulted in foreclosure rates at their highest since the Great Depression.
So please tell me - how are we going to fix this?
You know Mel, I am not a big fan of the median price. Case in point. If you look at that big red arrow today, down some 29% YOY…well, mostly big ticket homes were moving last year at this time. Today, mostly small ticket homes are moving, hence the shift in the median. The public is still a little freaked out today. Lenders will ease eventually….they have to. I think we will overcorrect, but we will shoot up from the overcorrection to the normal range pretty quickly thereafter.
Not sure Mel…perhaps a class action suit for purchasers of primaries between 2003-2006, when the “fraud equity” was created by BS loans. The question would be, whom do you sue?
Melody
We DON’T fix this. Government interference in the housing market will only prolong the pain, not prevent it.
I think it’s OK, though. People who bought what they couldn’t afford using funny loans and/or fake documentation will foreclose. They will lose their home but they will then rent for a few years and pay less rent for a comparable place. Their credit will repair over the next few years, their incomes will rise, and housing prices will fall.
I know several people who have lost their homes (and you probably do, too) and not one of them is out on the streets. And all of them are paying less money to rent than they were paying for their mortgages (by far). Financially, they are in a better position. Why would we try to prevent that?
Mulli -
For a true comparison, can’t they do a ppsf(house)/land size equation? Your land is your biggest asset (I think) Are we that far behind the times?
Rational - a 3200 square foot home on a property with no back yard should be less than the same house on a larger property. I’ve seen the opposite, that’s why I’m asking such a dumbass question.
You would think that as large as nar/car is, they would have that in their database - do they and I just don’t know it?
I agree…i love ppsf…way more than median. I like avg price as well. It is truly your micromarket that is most important. 3200 s.f. in Mission Viejo is different than LN. Should be about a 10% premium for LN.
Mulli -
The way I see your industry is that you have to prove you’re better than the others. Your database needs to be better than the others. You need to steer people in the right direction and if you don’t have “all your tools” to do so, it’s gonna hurt. The ppsf/condition/ungrades/land size needs to equate as one if you guys (real estate industry) can figure that out.
So while David L got paid those millions defending your cause, why couldn’t they have supported your database to give a true value of what is what? Spelling lessons, picture taking and description telling would not have hurt either.
Ok, I’m tired, but I know my questions and concerns are valid.
Bill Gates quote: In this business, by the time you realize you’re in trouble, it’s too late to save yourself. Unless you’re running scared all the time, you’re gone.
Each agent is his/her own business. But I agree with several points of yours…will delve into more tomorrow. gn.
new home sales are down because they are being released by the builders much more slowly than last year. It’s not complicated. It’s not dramatic.
Lansner, your conclusions don’t jive with your past data.
Here’s some persespective on these numbers. It’s obvious that the SFRs and Condos that are selling are smaller, and the townhomes are bigger. Not rocket science.
These numbers are not down 20%
Type / Jul/08 / May/07 / May/06
SF / 879900 / 894990 / 1099000
Condo / 410990 / 524000 / 603730
TH/Plex / 480000 / 430000 / 398900
Total / 579000 / 634900 / 657490
The overall is down 9% in one year and 18% in two years.
Sorry, that’s 9% in one year, and 12% in two years.
Provider -
Builders have had houses ready and available for months. Please don’t tell me they’re holding back. Some are on the brink of bk - they are very eager to sell, They’ve lowered their price and have offered incentives more than with resales.
What aggravates me with builders is - how can they leave projects half done? Shouldn’t there be a law prohibiting that in some way? If the builder walks, the banks should have someone else go in to at least finish the project.
Melody, the difference is last year they had more oversupply and cut prices to move them out. This year they have less oversupply and are not readly to go lower. So they move less, but at a healthier price.
Marcia,
Having a civil discussion with the likes of yourself and Mel is very welcomed. It is a nice change of pace from the typical ridicule and chest-thrusting I see from the local fraternity members here. You touch on several reasons why I like RE…namely you can reap huge windfalls with little skin in the game. And simply because I am a RE professional, somehow everything is my fault. I would loooooooove to meet several of the”big bears” in person. They still might be impassioned, but it would be civil…as a debate should be. You would not have the name-calling etc. that you see here daily. Like I mentioned earlier, I may even like rants and Bill (good heavens) if we were to meet on the street. But, the cyber-toughness creates a shield for people…similar to behavior one displays while driving their car. You are interacting but not within earshot…unless you choose to roll your window down and start a confrontation because that guy cut you off. How stupid when you think about it…but people get mad and some commit crimes due to their inability to control their emotions. Like many people here…
I don’t know Mulligan, extending the hand of friendship to this bunch could cost you a finger or two. And watchout for Melody/Marcia making nice-nice, you know what they say about Geeks, er, Greeks Bearing Gifts.
Seeking Alfalfa-
You are correct. I reserve my right to be as much of a jerk here as anyone else has. And thank you for calling me a Geek. I take that as a compliment actually. I’ve certainly been called worse.
That being the case, at least Mullie TRIES to back up his arguments with facts.
I think we bears get frustrated most with the free use of opinions that appear to be unsubstantiated.
I am probably as guilty of that as others on this blog. So I don’t exempt myself either.
Marcia,
I’ll bet you have. I mostly post articles here that I find just as a point of interest. If you’ve got a problem with the facts presented in the articles then your beef is with them not me.
seeking - whether you want to accept this or not, we’re all in this in one way or another. There is nothing wrong with understanding this mess on all levels. Try to “chill out” a lil bit. I have no motive other than to understand. I do like mulli’s approach on issues. He’s more “laid back” and I like that. The mentality of me me me me needs to stop.
seeking - go back to bed and start over.
Since I’m in IT - geek is a compliment.
Ah, IT, well that explains a lot. And put the 60’s peace & love, go with the flow bit away, as you like to say, “Been There Done That”