On the brink of self destruction
Widespread panic
Broken glass inside my head
Bleeding down these thoughts of
Anguish… mass confusion
Panic Song — Green Day
When I am preparing posts, I scan Redfin for properties. When I first started doing this in the spring, rollbacks were hard to find, and most sellers were still trying to make a profit or at least cover their commissions on a sale. 
As spring gave way to summer, I began finding more and more rollbacks, and foreclosures and short sales were becoming more common. As the summer progressed, I began finding more REOs and deeper rollbacks. It was a relatively quick (for a real estate market) transition from a bull market to a bear market. However, recently I have noticed a more significant change.
In August when the credit market seized up, sales — which were already low — almost completely stopped. This credit event and the problems it has created has been widely covered by the mainstream media which has brought it to full public awareness. Over the last few weeks, I have really noticed a change in the market I was not expecting until the winter: fear is gripping the market.
In the post Houses Should Not Be a Commodity I described the stages of a bubble market in great detail. IMO, the developments in the credit market have prematurely jolted the consciousness of the market from denial into fear. A change in market consciousness is a gradual transition as each of the markets participants has a different psychological makeup, but the behavior of many homeowners in the market is evidence that this transition has begun.
Back in mid-July, before the big credit market meltdown in early August, I profiled a series of properties in Oak Creek. There were a few rollbacks, but there wasn’t that much inventory, and no real signs of fear or panic. In the last few weeks, there have been several listings of condos and entry-level housing appearing on the market.
Notice the density of green house symbols in certain neighborhoods. In particular the northernmost neighborhood has shown a dramatic increase in the number of listings, and many of these are rollbacks. This is fear in action.
Another neighborhood showing increased listings and more racing to find the bottom is Northwood II.
Like all the new neighborhoods in Irvine, this one is populated by specuvestors who are starting to realize they made a terrible mistake. The homes priced in the $750K to $950K range, so these are not the small condos we are seeing struggle everywhere else. This is the first sign of fear spreading from the low-end of the market to the move-up SFD market.
Another neighborhood showing and increase in listings and a decrease in pricing is Northpark.
In particular, the neighbhorhoods adjacent to the 261 are showing fear transitioning to panic. There have been a large number of foreclosures there, and new listings are popping up to try to get out before the tsunami of REOs washes away whatever equity these owners have left.
Of course, we have our neighborhoods where fear and panic have already set in…
Westpark condos above and Orangetree below…
Quail hill (not shown) is also showing distress. I invite you to go to Redfin and check out the market for yourself.
Fear in the market is not something that can be quantified; however, evidence of fear can be inferred from the behavior of market participants. An increase in listings and lower asking prices is fearful behavior. When the race to the bottom becomes more feverish and sellers start aggressively lowering prices to get out of the market, you will know fear has taken hold and capitulation is right around the corner.
“Fear in the market is not something that can be quantified; however, evidence of fear can be inferred from the behavior of market participants. An increase in listings and lower asking prices is fearful behavior. When the race to the bottom becomes more feverish and sellers start aggressively lowering prices to get out of the market, you will know fear has taken hold and capitulation is right around the corner.”
How far away do you think that corner is? Are you still sticking with your original timeline mentioned in various analysis articles in the spring? Or does the rapid decline caused by the credit crunch make you think that we are closer to capitulation?
Personally, even with the benefit of hindsight and knowledge of the credit crunch, I believe your original timeline is close to what we will see. If you are underwater on your loan, you can’t refinance without bringing a check to the table. And the use of a house as an ATM prevents most people in this area from being able to do that.
Though the pain we are seeing from the subprime implosion and resets of teaser rates on existing subprime loans, the longer period before the Alt-A loans reset make me believe that we are closer to the beginning of the problem than to the end of the problem.
—–
It will be interesting too to see what effect potential recession/unemployment does to the timing as well. If Templeton’s maximum below holds true though, won’t really have to worry too much about predicting the bottom – it’ll be obvious when it’s finally here for awhile.
“Popularity is temporary. When a sector goes out of fashion, it stays out for many years. ”
(from http://www.zpub.com/sf/arl/arl-temp.html)
Construction, real estate 21% of LA/OC business output
http://lansner.freedomblogging.com/2007/09/26/construction-real-estate-21-of-laoc-business-output/
I am wondering, if you have enough of those little green houses can you cash them in for one big red hotel ? And do you think this game has any………”get out of jail free cards……?
Reality is still not sinking in
Check out this listing in Woodbury…
”http://www.redfin.com/stingray/do/printable-listing?listing-id=949480
They want $1,525,000 ( $407 sq/foot) today, after they paid $1,429,000 last year.
The whole area is on for sale, and this listing’s been up for 77 days.
Fear? Not until this listing goes for $850K ($226 square/foot).
These McMansions (5b/5.5ba/3750 sq/foot) situated way inland, beyond the Santa Ana Fwy are in for a bruising.
I still think my original timetable stands. There is a delay in the median dropping due to the slowdown in low-end sales. So the weakness will precede the numbers.
What strikes me about this drop is how orderly and predictable it has been. It has been a textbook bubble. During the decline of the 90s there were headfakes, surprise rallies, and other unusual happenings that would make you question the decline. This one has behaved according to the script which is surprising to me.
I didn’t think the tightening of credit would happen overnight. These things usually occur more slowly so the market can adjust gradually. The abruptness is unusual.
“Fear? Not until this listing goes for $850K ($226 square/foot).”
I think that would be capitulation…
It will truly be a scary Halloween for some people!
Do you suppose some heartless prankster will dress up as a banker, mortgage broker, repo-man, or sheriff for Halloween and knock on their doors?
And is there anything in the rules about how you play if the bank runs out of cash?
Nah, why knock if there’s no candy bowl? 🙂
I think for many, fear hasn’t even set in. They are still delusional about the prospect of losing ANY of their home purchase value, especially if they bought in 2004, early 05. Imagine buying in woodbuy in 2005 at 800K, thinking surely it’ll go up, but no, it’s going downwards.. quickly. So even in the past three months we’ve seen some rapid changes, even more could be forecasted through the end of the year.
People I talk to aren’t in even tune with what is happening to prices in their communities. Sure they know prices are coming down from last year, but many still feel safe. They may know prices have come down $40-60K from last year, but they don’t expect it to fall 160K-300K+. I can only imagine when this is realized that fear is shortlived, it could immediately turns to panic.
You hit the nail on the head. Before, I used to get a little excited when I would finally come across an interesting property. Now, it’s almost too easy to spot tons of REOs and bigtime rollbacks 🙂
Yes.
And here’s the reason.
This house is in Turtle Rock
http://www.redfin.com/stingray/do/printable-listing?listing-id=1067784
Or this wishing price in TR too
http://www.redfin.com/stingray/do/printable-listing?listing-id=1027726
It’s homes like these that will destroy those new neighborhoods.
The fact is that when homes without a view in TR go for 500, 400 bucks a square foot (or less), there’s no way in hell that a rational market will support the prices they want in those inland developments.
And this also portends ill for TRidge and Quail Hill. In a market with slow sales, all it takes is a few homes for the same price in established, more desirable areas to destroy the overpriced homes.
Let’s face it… it will be a long time before the market will pay over 300 bucks per square foot East of the Santa Ana Fwy…. Heck… east of University Blvd. ( Except for the handleful of homes right on the Woodbridge lake).
In looking at the map of Northpark (which also included West Irvine on the other side of the 261), I saw a cluster at the NE end of Northpark Square (near Irvine Blvd). Those are SFRs in the $900K and over range. If you’re looking for spread into the high end, I think you would find it there.
This house doesn’t look like anyone has lived in it. The furniture looks great but looks like a model home. If it isn’t staged, someone spent a fortune decorating this place just to flip it!
Here’s a scary thought for you.
Maybe the credit crunch and housing collapse will be more gradual than they appear to be right now. While the tightening in August was sudden, there is no way to know when it will end. (How it will end is pretty apparent)
Also, though the collapse was sudden, I think it’s fair to say that it took longer to get started than most sane people would have thought possible.
Also, as the Fed lowers interest rates, the dollar becomes weaker. This brings on inflationary pressures. Because mortgage rates are more closely correlated to 10 year T-Bills, all the easing in the world won’t help people who got stupid the last few years.
Sales volume won’t pick up until housing is affordable again. And the tighter credit gets, the lower prices have to go to become affordable.
Every week I see more evidence that I was right to cut my price 100k, piss off all my TR neighbors and bail out of my house at $450/sq-foot. I made an obscene profit (even after the price cut) but if I had been greedy I would probably still have my house on the market. My wife thinks I tell her all about the housing bubble to justify the price cut, but I think I’m right, and TR Broadmoor will sell for $350/sq-foot in a couple of years… that’s 2003 prices.
Tonye,
Your house sounds pretty awesome, so yours would probably fetch more ;). I wonder if I used to walk past your house every night with my dog. There was a gorgeous one on Bethany my wife and I would always admire.
I saw that listing on Moonray. When the asking price falls below the purchase price, I will profile it. That will be a pretty big rollback for Turtle Rock.
Irvine Renter…check out this listing in Northwood Villas (located in Northpointe) Plan 2 just dropped to $500,000. That’s $70,000 less than the last sale and puts it below any of the 2 bedroom Plan 1 condos. The last time you did something on this neighborhood the same Plan was in Escrow for around $580,000.
This is serious panic in action.
IR,
Could the pending reset of their home loans be a factor in the increase of listings?
That could be part of it. There must have been an “Oh $hit” moment when they realized they couldn’t refinance and they couldn’t afford the new payments. Of course this is being followed by the realization that they can’t sell either.
After panic there is a blissful state when the owners accept there is simply nothing they can do. Then of course, someone else will panic.
I’m a visual person, and these images are the most graphic and telling representation (to me) of what all this reduces down to.
IR: I’ve been reading this blog for several months, learning about the West Coast market in particular, and other bigger issues in real estate, finance, herd behavior, trends, and history. It’s great stuff, and a great read from out here in flyover land. But while I’ve enjoyed learing about what’s going on, and what will be coming our way, it’s upsetting to see what the reality starts to look like. Some of these people are families, with kids. Watching a real estate crash isn’t just a graph anymore to me, nor is it green houses superimposed on a Google Maps-like image. It’s people’s lives and futures crashing down to the ground and it’s more than a little sad to me to watch. But it has to end, and end badly I guess. Otherwise, it wouldn’t really end.
well, that is true, while it is very difficult to sympathize with flippers and speculators, there are no doubt families who bought with the intent of making a nice home for their kids, who are now in bad financial shape and under a lot of stress these days. although back in 1990 I knew families that bought at the peak of the 88 to 90 bubble, who were underwater for almost a decade before the most recent jump. but they persevered and if they held their home for a couple of decades they made out okay.
I thank to all these flippers and speculators, they are afterall doing an exceptional community service.
“Buy low, sell lower” that too after refurbishing it. Isnt this a great community service?
What is mind boggling is these flippers and speculators don’t get into their head that there is a reason flipper/speculator ended up buying/getting the home instead of end user as the end user either didnt want to pay that price or didnt think the price/property was valuable. This means eventually the flipper/speculator outbid/overpaid for the house than what end user would have paid or wanted to pay. Flippers are greedy, they spend money to fix it in anticipation to cash big. They dont realize that people who they outbid by buying low are not going to pay more for crappy refurbishment. If they think they will find bigger fool, they should realize that other people must have looked at the house and that it sold for a lesser proce. I would rather do it myself to my taste than live with someone else’s interior designing. Even if it means $20,000 cheaper, I would prefer as is house in lieu of covered up/make-up.
Way to go flippers, keep outbidding and buying, this is the only way you will burn and burn good.
It is tough to make out by living pay check to paycheck, I can only imagine what it would be like to be in debt and not being able to make the two ends meet at the end of the month. I dont say the people who got into trouble deserve it, however if they were the ones who made the wrong decision. Its still not too late for these people to get out as things are going to get a lot worse than we see now.
From South Florida–Miami Dade’s single family sales are down 45-44%
for houses/condos. For August. September has got to be worse, since
part of August was before the credit mkt seized up.
Broward County, just to the north is down 23-22%.
I haven’t closed a single house transaction this month, can’t think when
this was before. I have got in a bunch of evictions and foreclosures.
The Federal Secret Service interviewed an appraiser who used to be the employer of an appraiser down the hall. And yep, I think the appraiser down the hall is honest. (Of course I have never thought
that any appraisal was worth the paper it was printed on; they are
simply fig leaves for lenders, to cover the fact that all loans all the time are simply based on hopes and guesses.)
Anyway, I told the friend that I am not a criminal atty, but he better hire himself one fast.
Appraisers necessarily rely on comps. If all the comps are inflated what are they to do?
The dishonesty here has been going on at a high level for at least 6 years, and at a pretty high level for forever.
An honest broker on my floor had Countrywide repeatedly try to get him to steer borrowers to bad loans, when they qualified for better.
He said no, his clients wanted fixed rate mtges. Of course, he did make
a lot of money on yield spread premiums. Clients who wouldn’t accept it when he said they couldn’t afford they house they wanted went elsewhere (and lied) and really got raped. And then they would call him for a bail-out Sometimes he could help, but mostly he couldn’t. These were certainly willing victims.
wonderful post.
I like that you adjust your position based on the data available, I once disagreed with you, I said this market will correct much faster than any of us has seen. my opinion was not based on any analysis just observing people around get intoxicated with debt.
I know it’s a simple conclusion but never in history has credit gotten out of control, so my simple conclusion was that it will tighen at once–>lock putting the housing market in a spin.
my only question is since everything is moving so fast, are we all (here at IHB and other housing blogs)going to be shocked by how nasty this bubble unwinds???
lawyerliz,
Do you think the pressure on appraisers from lenders have reversed now? Are lenders now pressuring appraisers to be very conservative in their appraisals because the lenders have gotten burned so bad recently?
wonderful post.
I like that you adjust your position based on the data available, I once disagreed with you, I said this market will correct much faster than any of us has seen. my opinion was not based on any analysis just observing people around get intoxicated with debt.
I know it’s a simple conclusion but never in history has credit gotten out of control, so my simple conclusion was that it will tighen at once–>lock putting the housing market in a spin.
my only question is since everything is moving so fast, are we all (here at IHB and other housing blogs)going to be shocked by how nasty this bubble unwinds???
It’s interesting that Greenspan opens his new book with how fast the markets self-correct now, he was amazed how quickly they self-corrected in 2001.
If that trend holds true (ie. markets are getting better at self correcting quickly), then you’d expect his correction to occur in record time. Certainly the downfall is happening sooner than expected (ex. credit crush was fast and worldwide, housing prices here is dropping faster than we expected).
I mean, I have trouble remembering what links I’ve posted, sometimes I run into a new one on someone’s blog – oops it’s 5 days old, that’s history now, not really relevant given the events in the last 5 days, so I can’t post that one.
The speed of change is amazing.
typo above, should be “this housing correction” not “”his correction”.
I am so freakin tired of talkin to f’ing realtors!! They are the most ignorant, flighty, brain-dead borrowers on the planet. I need a drink! I must have a target on my chest for I talked to three today alone.
Hear are some excerpts…..
“My house was gutted an remolded throughout so its better than most comparables.”
“I’ll need to proceed with a stated documentation loan. And my FICA score is over 800.” (It’s FICO not FICA. FICO stands for the Fair & Issac Company that created the rating system)
and my personal favorite…”My house is worth more than that. I know, I’m a realtor. I’m not stupid.”
AHHHH!!!! Yes you are. If you’re a smart realtor than I apologize, but the ease of entry into this profession has filled it with HS drop-outs and glorified housewives.
What about the people who didn’t go into a lot of debt, but still have to deal with the fallout. What if there’s inflation (ie. their savings down down) or recession/deflation (ie. lose their jobs)? Those are the people I feel sorry for, if those scenarios come to pass.
Hopefully, it won’t end like this (excerpt from
http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm)
“The impact that the experience of the Depression has had on views about the role of the government in the economy is easily understood when we recall the sheer magnitude of that economic downturn. During the major contraction phase of the Depression, between 1929 and 1933, real output in the United States fell nearly 30 percent. During the same period, according to retrospective studies, the unemployment rate rose from about 3 percent to nearly 25 percent, and many of those lucky enough to have a job were able to work only part-time. For comparison, between 1973 and 1975, in what was perhaps the most severe U.S. recession of the World War II era, real output fell 3.4 percent and the unemployment rate rose from about 4 percent to about 9 percent. Other features of the 1929-33 decline included a sharp deflation–prices fell at a rate of nearly 10 percent per year during the early 1930s–as well as a plummeting stock market, widespread bank failures, and a rash of defaults and bankruptcies by businesses and households. The economy improved after Franklin D. Roosevelt’s inauguration in March 1933, but unemployment remained in the double digits for the rest of the decade, full recovery arriving only with the advent of World War II. Moreover, as I will discuss later, the Depression was international in scope, affecting most countries around the world not only the United States.”
Hmm, sounds like you need a laugh. Go watch this video in which Cramer takes on the realtors.
http://www.cnbc.com/id/15840232?video=533257614
Mine turned out to be all white. It’s not on Bethany.
Of all the trades, the stucco guys are the worst. Mine did a pretty good job, but stole my beer, got drunk on the job and then “forgot” to put the pigment into the paint coat.
So, I got a white on white house. I was sooo happy to see those clowns get out of my life, what with all that scaffolding surrounding us for 12 months (I kid you not).
I think that the “non updated” stock homes in the Broadmoor will go for 300 to 325 at the bottom. Homes like mine that have been redone right (not all of them did) should fetch around 375 tops.
Except that the behemoth 4000 sq foot 6 b/6ba hotel up the street will go for far less.
Hmm….. You mean my house will be worth more than $1MIL even after the rollbacks?
WoooHooo… I had no idea my house would be ever worth that much. If I had known that I would have splurged and added optical fiber when I laid out the 1600 feet of Cat5e.
Mortgage rates jump
Fixed 30-year rate climbs to 6.42 percent, says Freddie Mac; adjustable-rate mortgages slip.
http://money.cnn.com/2007/09/27/real_estate/mortgage_rates/index.htm?postversion=2007092710
“My house was gutted an remolded throughout so its better than most comparables.”
Hmmm… that’s actually true. If it was done correctly.
Tearing into a house and rebuilding it, gets rid of the old stuff that has wear and tear into it and brings in newer stuff that has a longer shelf life.
This is why -all other things being equal- a newer home is costlier than an “existing” home.
The bottom line is that rebuilding a house can really add to its value significantly if it is done in good taste and with high quality materials.
We’re talking about adding additional/ replacing electrical lines (30A), more efficient fixtures and HVAC, insulation, windows, new cabinets, etc….
Forget crown molding, new paint and carpet.. or my pet peeve, granite on top of painted/resurfaced old cabinets
Of course, most people who do a quality rebuilding job don’t plan on selling the house, they do it for themselves or as a low headache rental.
Read that carefully – I missed it the first time – it’s “remolded” not “remodeled”.
As in, the house was in a nice humid area of the US, then I locked it and left it for 6 months with the windows shut, and the mold grew …
House Panel Passes Tax Rise on Vacation-Home Sales (Update1)
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3XP6Mauc16M&refer=home
“It’s people’s lives and futures crashing down to the ground and it’s more than a little sad…”
Cry me a river. If they over-leveraged themselves then they can rent, as I and many others do. And like it. It’s not the end of the world. It happened to my family back in the last RE downturn (early 90’s). BFD. The only long term injury was my dad’s pride.
It’s not like they’re going to be killed or thrown out on the streets. What’s the old expression? Life’s a bee-atch and then you die.
Here around Dana Point I have not yet seen the massive increase in houses for sale. What I have seen is no sales in my gated community for the last two months and many homes sitting — rather shocking given that summer is supposed to be the peak sales season.
Another conflicting data point is that just this week two of the homes that have lingered just went contingent — will they fall out of escrow? will the prices reflect a new attitude of sellers to more rational pricing? or will these be transactions that keep sellers clinging to the belief that prices won’t fall?
In the meantime I have noticed more and more homes doing quick fixes as of late as well — a new set of homes to hit the market? Or a last gasp of MEW?
Who knows but I hope you are right Irvine renter and that this fear begins to spread towards the coast as well.
I will provide another comment when I lear the fate of these two new pending home sales.
“What if there’s inflation (ie. their savings down down) or recession/deflation (ie. lose their jobs)?”
Jeez the bleeding hearts are out in force today. Lost their savings or their jobs? Wow what a tragedy. I could give a crap, they still live in America the land of opportunity.
What I feel bad for are the diamond slaves in west Africa, the “cleansed” villages of Darfur in Sudan, and hell-hole ghettos of India and Bangladesh. Now those are some sorry mutha fukkas to feel bad for. Anyone in the US is amateur hour.
The Moonray rollback will represent the biggest to date in Turtle Rock, not necessarily the biggest we will see…
Yeah, and hopefully they didn’t put a PATRIOT Act kibosh on you. In that case you could see the inside of a federal penn just for telling your pal he was being investigated. I’m feeling a bit cynical today.
Spoken like a true moron.
I agree somewhat but upgrades are still “in the eye of the beholder”
Cry me the Beloved Country. Perhaps you should move to Africa and show ’em how it’s done, and rid us of your stupidity.
Considering that fully 30% of U.S. retirees own nothing outside housing equity, social security is on the decline, and health care costs are about the only thing outpacing college tuition, your comments demonstrate nothing less than an abject lack of understanding of the full ramifications of what is very likely to happen.
This is not about a few social climbers getting bucked out of the market. The multiplier effect of a wholesale meltdown in 23% of GDP (including housing an ancillary services), is beyond comprehension (well that’s obvious in your case). The Great Depression is the only episode we can point to of similar magnitude.
If this thing slides off the table, housing won’t be the only only asset to go up in smoke.
As for those poor unfortunate souls in the third world, the only beacon of hope they have is a return of the might and prestige of American capitalism and democracy. So if you actually give a shit about them (which I am positive you do not) you would be hoping for a best case scenario in the good old U.S.
Oh and by the way, you know what ended the Great Depression right? WWII dumb-ass. Sound like fun to you?
I guess I was feeling a bit cynical today.
Spoken like a true ass.
“Oh and by the way, you know what ended the Great Depression right? WWII dumb-ass. Sound like fun to you?”
What ended the Great Depression was the New Deal jackass. The United States was coming out of the depression before WWII hit. WWII certainly got industry moving quicker, but we could’ve just kept going with public works projects and done just fine had that war not broken out.
“but never in history has credit gotten out of control, ”
May I respectfully disagree. Credit got out of control fairly similar to present times in the late 1920’s.
Agree with you.
I would WAY rather have a place “as is” than one that’s had a schlock rehab.
Here in my area of Chicago, the seculative rampage triggered the conversion and rehab of hundreds of old courtyard buildings, most of which were quite beautiful, with the usual lovely 20s vintage millwork and architecture, along with the great floorplans featuring spacious, classically proportioned rooms and generous closets. My rental has about $6000 worth of beautiful millwork in the living room alone, very typical for this type of old building.
Along came the rehabbers to buy the bldg, gut it back to the studs, and fill it with 80s vintage yuppie gestunk such as exposed brick and can lights and “open” kitchens, so that they could cram a 2 bed 2 bath into the footprint of a 4 room one bed, leaving the place with a squirrely floor plan, ugly, misproportioned rooms with windows in the wrong places, and two tiny closets.
Mind you, many bldgs so treated had been slums and anything you did to them was an improvement.
But most were the gems of the neighborhood- really beautiful and unique places that attracted great tenants who stayed forever, and now these places are destroyed. I can’t even stand to drive by my old bldg for thinking of what they did to it.
I told my agent, I want an intact vintage, I’ll do the kitchen myself, and the mechanicals, too. Just so it hasn’t been destroyed by a tasteless rehab.
I have more compassion for the young families that were financially prudent and opted NOT to buy something they couldn’t afford. Now they are starting families in apartments and/or condo’s – a place they can’t really call home.
Why did/do they have to do this? Because people got greedy, pure and simple. They bought homes before it was their time. Sorry, can’t shed any tears for those folks.
“…there are no doubt families who bought with the intent of making a nice home for their kids, who are now in bad financial shape and under a lot of stress these days.”
The reason most are in bad financial shape is because they didn’t adhere to the classical principle of 20% down, 28-33% DTI. If they couldn’t meet this requirement, they shouldn’t have bought. So, either greed or ignorance convinced them otherwise. I have no sympathy for the greedy, but do have a little for the ignorant. Just a modicum…
Wow, it sure was a lot of work to prepare this, but the result is really impressive. There seem to be lots of interesting estates in attractive locations on the market now. But it’s sad for the interested wannabe owners here that the prices still aren’t at a level where buying makes sense. However, I’m sure tht in some years, many dreams will have become true. That’s a great outlook!
Tonye,
If you’re right, maybe you and I will be neighbors again in a few years. That would almost be unfair to the world though… I make an f*in killing on a TR house then I can come back and get to live in TR for even less that I paid (about 350/sq-foot in 2003).
Dare to dream. At this rate the Mrs. and I will be living in Laguna.
Carl
PS My house wasn’t a disgusting stock early 70s pigsty. I had hardwood, granite, recessed lighting, CAT 5, etc…. it wasn’t done incredibly, and the house wasn’t 100% updated, but it was a hell of a lot better than the average Broadmoor McDump. I sold in Nov 06 and I haven’t seen a house go for less yet… but as they say… “To the first to the exits go the spoils”.
Major,
I think the issue is that it can be hard to make a rational decision, especially when you are young and inexperienced, when you are surrounded by irrationality. WHen I was in my late 20s, I had a good job, and money in the bank. Everything in the society was telling me the next step in life was to buy a house. So I did, with 10% down and more about 40% DTI. I was stupid, but the whole country was stupid.
I was not a flipper. My intention was to live in that house indefinitely. I wised up to the situation and got out in 2006. Am I smart? Savvy? NO. I’m lucky. I could easily have turned out to be one of these sob stories. So yes, I have compassion for the people that were naive and stupid, like I was. I don’t begrudge them or revel in their pain. I don’t even want to see the specuvestors hurt, but their losses are necessary to return sanity to the market.
So count me, and thousands of other highly educated but inexperienced professionals, among the ignorant.
“And the tighter credit gets, the lower prices have to go to become affordable.”
That’s the ticket!
that is the ugliest house I have ever seen.
Some of those families with kids need to learn not to put their families financial lives at stake with get-rich-quick flipping/refi to death Ponzi schemes.
& the only way for the financially responsible families to ever truly afford to own a home is for a severe deflation in home prices to occur.
That’s it.
The only way.
But that’s the problem. So many, some of whom are intelligent, are ignorant about houses & mortgages.
A house is the largest purchase most will ever make. Yet, people will take more time researching the ins and outs of a HDTV before they will a house. Including all potential financing arrangements and what’s most important when deciding what to buy.
With a house, most first-time buyers ask how big the closets are & if there’s stainless-steel appliances, but don’t care how old the roof/HVAC is.
Why is that?
Actually the reason for the end of the Great Depression is still being debated today. Most economists consider the New Deal & WWII components, but one of the real keys being the conversion from the gold standard to the dollar standard.
A recourse we no longer have available.
Countrywide actually implemented a moratorium in Miami, Las Vegas, & (a city in CA I cannot remember now) that would requires any purchases there to include 5% more down than the programs would normally require & also needed a minimum of 2 appraisals, 1 of which could not be older than 30 days & the other had to be a pending sale.
There is so little business here that I don’t know the answer.
But I see the possibility that the pressure will reverse.
There is so little business here that I can’t answer the question.
Certainly the possibility of pressure in the other direction exists.
Yeah, my son was going to buy a supercheap cracker
house in Tampa, and the day he was going to send his
$1000 earnest money check, Countrywide eliminated the 5% down program, so he didn’t send it and the deal fell thru.
By the way, he could have rented it for his monthly payments, give or take $100 a month.
Actually, if the sellers called now, I’d want them to come down another 10%.
No, HE was telling ME (as potential counsel) that he was being investigated.
I hope the Patriot Act wouldn’t cover trying to find cousel,
but who knows? We certainly don’t live in a free country anymore, and haven’t for a while.
The New Deal or WWII are both the same from an economic standpoint. Both created infrastructure investment and spending in a deflationary environment. A deflationary environment is devastating for the reason that what will cost a dollar today to create will cost 80 cents tomorrow therefore everybody waits.
We are not heading to a deflationary environment. Even without FED action, we were not heading towards Deflation, internal assets that cannot be exported were heading to a correction with exportable resources. Over all economic output is facing hyper-inflation, not deflation. Commodities in US dollars are going through the roof, in non-US pegged currencies, they are flat.
Yeah, we are in for a depression, in my opinion, not a recession, tho consumer spending was up last month.
A last gasp?
An honest realtor as a last gasp of prosperity went on a
cruise. Now she’s looking for a job. She was offerred to get in on a flipping scheme involving increasing values artificially by 100s of thousands of dollars. I think this was just recently too.
She said thanks but no thanks, and don’t even tell me anything more, I don’t want to know.
Here, the media is all excercised about a Cuban kid custody case, and ignoring the fact that we may be in for the financial end of the world.
Diana, I agree. The gold standard was a straight jacket for monetary policy. Of course, this is the very reason many people want to go back to it. While I wholeheartedly despise the gold standard, I sympathize with its supporters when I watch the Fed at work today.
No_Such_Reality, not really. Wars end. Production of war time equipment is not needed after the war. Of course, companies lobby (i.e. military industrial complex) to keep production going even when it’s not needed. But, we would have sunk right back into depression if we didn’t have sound (New Deal) policies in place before and after the war.
I am also a bear on the dollar. The question is whether the Fed will reverse course. I certainly hope so. But, no matter what the Fed does now I can only see one direction for equity markets: down. If the Fed keeps lowering rates then foreign investors will exit the U.S. market. If the Fed raises interest rates then irrational investors will exit the market, because they have been fed the line that higher rates always kill the economy. Not true. It depends on the circumstances. I think the Bank of Japan screwed up big time when they put rates at 0%. I think this is why their recovery has taken so long. I hope we don’t end up doing the same thing.
I worry about that too.
Reading the money supply was 12:1 just before the Great Depression, then reading that MSN article with the financial wizard who calculated it was something like 50:1 leveraged now scares me. I sure hope it’s an apples:oranges comparison that I’m too ignorant to understand what the differences are.
I paid $200K for my house a loooooong time ago.
Even with 300K of rebuilding, plus maintenance expenses….
I don’t like Laguna. Getting in an out is a huge hassle. From TR I can be at the Performing Arts center in 15 minutes or on the free side of the 73 in five.
BTW, UCI has really built up their housing on the East Side, all the way to Culver. Culver is now four lanes all the way up the hill and on to McArthur.
Let’s invade France. This time we can take the Chunnel. I’m sure the Brits, Germans, Spaniards and Flemish will love it.
The Swiss won’t care, again.
Then we can take all of their Euros and bring the dollar back up.
And Boeing will love it if we disrupt Airbus production a bit more (mind you, they’re doing just fine screwing things up by themselves)….
True… but new plumbing, new romex, new HVAC, new venting, new roof, new windows, new can lights, etc… are not in the eyes of the beholder.
I guess some people think that changing the rugs, putting a granite counter and new door knocker are a “to the studs” remodel -what I call a “rebuild”.
Some of us just know better.
And of course, a bad remodel/rebuild is worse than none at all.
The dumbest thing is that young family get ragged on by their parents (who, being older and wiser, should know better) about why they need to buy a house, etc.
I guess it makes a kind of twisted logic (ie. boomers bought their house, made a forturne as the population increase and suddenly families making 2 incomes instead of 1 bid their places up) – just do what I did, worked great for me even though I don’t know why …
And still it’s 1.5MIL…… Not exactly peanuts.
Sue – Sorry, but your comparison of the money supply is apples to apples.
I and my family are those people. We looked and looked for a reasonable place for our family of 3 and were priced out within months. Our realtor brought us around to 20-25 yr/old townhomes/condos with detached garages and crappy grounds/amentities going for 200-250K. I stood outside one of them and looked at my wife and said, “No way in hell am I stretching ourselves finacially to live in a sh!t box like that.” (Of course now those places are ask 400K+. Ha!).
Hmm. Maybe we should keep renting even if housing does go down. Depression brings unemployment, unemployment somtimes means moving …
“This time we can take the Chunnel”
Best comment I have read in years.
“The dumbest thing is that young family get ragged on by their parents (who, being older and wiser, should know better) about why they need to buy a house, etc.”
There is no doubt a LOT of pressure on the young family to buy that home from family, friends, and society.
However, like all momentous decisions, one’s “blood and judgement” must be “very well commingled” (Hamlet). Caring out such a task requires listening to one’s reason and not exclusively the parents. It is part of growing-up and is not easy, but must be done.
Carl, I ‘m happy for you that you got out when you did. Many in the same boat will be paying a HIGH price for not severing that umbilical cord from their parents.
Why thanks.
I’ve had four Letters to the LA Times Editor published. (Disney Hall, Loonie Tunes and Disney, Vans Production…)
Plus one to Automobile Magazine ( souls and my Alfa Romeo ).
Several to Autoweek.
And lots on internet (msnbc.com for one).
I think I read too much Hunter S. Thompson, Tom Wolfe, Kerouac, Kafka and JP O’Rourke in my life. ;-D
Got them all in the library of my immaculate chateau in TR. I may consider selling my extensive book library once I start accepting offers. And I don’t need a letter… I want a 9 paragraph essay. ;-D
All you saving diligent renters should be worried about where your money is parked. A financial disaster the size of what I’m worried about means that all your hard saved money may evanesce.
The FDIC insurance will mean nothing if inflation hits the heights it hit before, and/or the banks start going under, big time.
I am actually going to buy a few gold coins, just in case.
I am also going to buy some canned goods (and tell my hub they are “hurricane supplies”.
My house will be paid for by the end of the year.
Gee, I sound like a crazy survivalist. Gosh, I hope that I’m wrong and I lose a few thousand bucks if gold goes down.
Well, maybe we could stop the stupid war and start improving infrastructure, which we certainly need to do.
Bush is too stupid to do anything like this tho.
In Greenspan’s book, he said even during the Great Depression his family (he had a single working mother supporting them in an apartment) always had enough to eat, and he even got a 25 cent allowance.
It won’t be as bad as the canned goods hiding type of thing.
Although, if food prices keep going up, you could argue they’re a mini inflation hedge. As long as you don’t get too sick of eating the same canned vegetable the store had that great discount on :).
I’m rather impressed that Bush even remembers to breath.
What’s the point of infrastructure if no one can afford to fuel up their car and drive on it? Things are never that simple.
http://news.monstersandcritics.com/usa/news/article_1356819.php/Greenspan_tries_to_mop_up_his_oil_spill
Greenspan said he feared Hussein could push oil prices well above $100 a barrel, threatening the world economy. The threat was the possibility he would try to close the Straits of Hormuz through which much of the oil in the Mideast flows to foreign markets.
Infrastructure isn’t just roads, tho I suppose you California people think it is.
It includes dams and levees also. The levee around Lake Okeechobee, the huge lake in the middle of Florida, is in bad shape. The New Orleans levees still are not in good shape. (Tho, I personally think that New Orleans as a city, rather than a large town, has no reason to exist.)
I’m sure there are lots of other dams and levees that need repair.
If global warming melts all the polar ice, I suppose some politician will propose that we build levees around the whole dam(n) country. That would keep a lot of people busy!
The Smithsonian, if you consider that infrastructure, needs new plumbing etc.
Not to speak of bridges, airports etc, etc.
Visualize your unemployed realtors wielding a shovel or backhoe!
Dude, newsflash. All areas, regardless of east or west of the 405 are in for a bruising. What is with people in Irvine? “It can’t happen here” was all I heard in 2005-06. Well, guess what. It can, it will and it is. Doesnt matter what side of the freeway you live on.
Screw oil! We need coal fired cars baby!