"deals created" is the key. Maybe so (though I'm skeptical), but in TODAY's market, MANY more deals are falling apart due to financing and appraisal issues than one year ago.
So ACTUAL sales compared to ACTUAL listings is the battleground to look at.
Supply and demand. More and more homes staying on the market will keep pressure downward.
i live in orange county, and i can assure you the bottom is not yet in site, as of march 20, all sales were down nearly 40% from a year ago per dataquick. here's another link to lasner's blog with the numbers:
Baby boomers, watching their most prized asset...their home...where home equity is falling for the first time ever...will begin to SELL and downsize tp protect their precious remaining equity dollars as they move closer and closer to retirement...
At about the corresponding point in the Japanese real estate bubble collapse there was a dead-cat bounce in sales as people who had long been "priced out" saw what appeared -- relative to bubble peaks -- good opportunities to buy. The belief that real estate prices would soon resume their rise, and that they could never decline for very long, was still alive.
But the slide then resumed, and kept on for 10+ more years.
Regarding Willow Bank, as of June 30, 2007, this little bank in PA held $190 million worth of mortgage-backed securities in its portfolio, of which $82 million was in CMOs.
Of the bank's $1 billion loan portfolio, 27% was single-family residential, 32% was muliti-family and commercial, 9% was construction, and 27% was HELOC.
Only 9% was commercial business (i.e., non real estate).
This little bank is REAL ESTATE CENTRAL. They bet the farm!
Formed via the 2005 merger of Chester Valley Bankorp and Willow Investment Serices, a Philadelphia registered investment advisor (RIA).
You see the pattern?
Investment advisor buys bank to gain access to FDIC-insured deposits in order to leverage up and bet the farm on real estate.
Not only did the FDIC approve the merger. They slept through it all! Now, they have to pay.
Baby boomers, watching their most prized asset...their home...where home equity is falling for the first time ever...will begin to SELL and downsize
I have no idea where this redonculous meme came from. How many people actually sell their primary residence when they get a little older? No one in my family did until they were well advanced in age and the reason was they just couldn't keep up with the maintenance. Others stayed there until they died because they could afford to hire people. Generally parents keep a larger house for quite some time for their kid's families (including grandkids) to come. My parents are still in their same over-sized house for this reason. I think that's probably the norm.
I'm pretty sure his whole baby-boomer sell thing was a Real Estate industry marketing push to get people to sell and buy.
I like the uptick in Feb 2007, followed by a plunge!
Also see:
U.K.-based HSBC paid nearly $1.14 billion for Mexico's fourth-largest banking group, Grupo Financiero Bital, in late 2002, an undercapitalized firm with about 1,400 branches, six million clients, and some $22 billion in assets.
HSBC subsequently recapitalized the bank, invested in new systems and products, and changed its name to Grupo Financiero HSBC.
Economists expect counter-cyclical fiscal spending on infrastructure projects by a federal government flush with oil dollars, robust business spending, and strong domestic demand to help offset some of the headwinds coming from the U.S., which receives more than 80% of Mexico's exports.
"There is no doubt that the economic cycle is linked to that of the U.S.," Thurston said.
While domestic demand mitigates the problem, "the real question is what happens in the U.S., how deep, how long. We are predicting slow growth in the U.S. right through until probably the first half of next year," he said.
Even so, financial firms of all stripes have plenty of opportunity to grow in coming years, thanks to the low use of banking, insurance and asset management products in Mexico.
"The drivers for growth in this industry are significant. You've got a relatively unbanked population, but you've also got a very young population coming through. In the next five years there will be 10 million or 11 million young Mexicans who will come of an age where they will start needing banking services," Thurston said.
Bank loans as a percentage of GDP, a common measure of the penetration of financial services in a country, are still in the mid-teens, compared with an average of 25% for the BRIC nations of Brazil, Russia, India, and China, according to the Association of Mexican Banks.
Mrs. Bosch has said repeatedly she'll have to be burned out. I am so hoping to relocate to palmtreeland I'm thinking of loading the basement with tires so the firemen can't ruin my plans.
In the very late '80s -- can't remember the exact year -- I turned on the TV in my hotel room one morning during an business trip to Tokyo and found myself watching an NHK show in which an audience of obviously well-to-do matrons was listening raptly* to the pronouncements of an Armani-clad investment analyst, who was advising them that no one had ever lost money in the Tokyo market as long as they's stayed invested more than three years.
That was when the Nikkei index was nearing it's eventual peak of 40,000.
ipodius, There are a lot of people in California fantasizing about selling as they approach retirement. Every dinner party someone in their 40's or 50's brings up the state they are looking at. The houses that my wife and I have made offers on or thought deeply about it are all owned by people loking to cash out and downsize. One to Michigan, one to Utah, and one to a condo are smaller house here.
... How many people actually sell their primary residence when they get a little older? ...
ipodius, remember, you don't have to sell to get the profits out -- you just keep refinancing. Eventually, you'll be able to use refinancing cash to buy a luxury condo in Florida, or a vacation getaway in the Adirondacks. Then you'll have two ATMs! Let the bank sell them after you die.
Neighboring San Diego County is on track for 3060 sales March 2008 versus 3963 March 2007. The markets are not so different that one would be off 25% y-o-y and the other flat to positive.
The problem with a "deals created" metric is that far more deals are falling through. New home sales contracts that don't close, financing issues, etc. Nothing here but typical salesman happy talk.
The effects of the slowdown have hardly begun to be felt. We're many months - probably years away from any bottom anywhere. The global, over-leveraged economy needs to unwind before a bottom in anything comes into sight.
Not sure if this was posted - Mr. Mortgage shows evidence of how Lehman lent $1M, no money down, no docs to people with poor credit:
Interesting Times said: "Looking at the chart, this is statistically insignificant."
True enough, but when compared to 30-year fixed-rates it becomes more significant.
In October, 2005, rates crossed above the 6% level and continued to rise. That generally coincides with the peak and downtrend of sales. (An overlay of mortgage rates on the chart would illustrate this pretty well, I think.)
Those rates have been falling steadily since late last year, and have now crossed below 6% again.
Add-in, whether one likes it or not, the Fed's "bail-outs", aggressive easing (with at least one and possibly two more to come), behind-the-scenes arm-twisting to get stronger banks to step-up and save the weaklings, the Economic Stimulus package, etc., and there's a strong counter to the housing weakness.
I do expect we will see a little bit of a 'bear market rally' this spring. This is due to seasonality, people trying to get out before equity depletes, and people trying to buy before rates go up.
But I also think inventory is going to keep rising and things getting really ugly this summer.
Mrs. Bosch has said repeatedly she'll have to be burned out.
lol...the senior ipodia of the family has prevented my dad from living out his dream of a smaller condo. "Where would he kids stay?" Ipodius Sr and I remark that we stay at that new invention called a hotel when we travel, but it falls on deaf ears.
I suspect that, even as w has said about the chatter in a subsequent post, it is just chatter that will be vetoed when push comes to shove.
Ralph Soone writes:
Baby boomers, watching their most prized asset...their home...where home equity is falling for the first time ever...will begin to SELL and downsize tp protect their precious remaining equity dollars as they move closer and closer to retirement...
Supply?? We ain't seen nothing yet....
We haven't seen anything. Historically, retirees with poor savings made up the difference by selling their primary residence and moving to a lower cost of living region.
When they realize its 'sell now or never retire,' they will try. But that is during the panic phase. I do not expect that until after its known that the spring and summer selling seasons were a total flop.
As to the graph, sales ahve to go up 100% just to stabilize prices! Its not happening in the OC. Not with today's job market and credit.
We'll see a there, but not before 2011 at the earliest!
59 percent of respondents ages 41 to 49 plan to buy a new home for their retirement.
Yes, my father would have answered that poll one way, and my mom another Also the key word is plan. We all know plans are subject to change. Especially now that RE has tanked for the next 10 years at least.
** Of greatest note is this: "significantly more first time buyer activity"
significantly more first time buyer activity
WHY???
Not related OT, but...
Technical Note
Gross Domestic Product
Fourth Quarter of 2007 (Final)
March 27, 2008
Corporate Profits
Profits from current production decreased $52.9 billion, or 3.3 percent (quarterly rate), in
the fourth quarter, compared with a decrease of $20.5 billion, or 1.2 percent, in the third.
In BEA reporting, bad-debt expenses, asset write-downs, and other valuation
changes are not counted as current-period expenses that lower profits. Similarly, loan-
loss provisions that anticipate possible future losses are not deducted as expenses in
the national accounts and do not reduce NIPA profits. In financial accounting, these
provisions are charged against income and reduce profits.
"There are a lot of people in California fantasizing about selling as they approach retirement. Every dinner party someone in their 40's or 50's brings up the state they are looking at. "
I know those that have done it in California, and successfully, but they did by the end of '06. And even then I kept urging them to hurry.
The Southern California Coastal markets have a very serious demographic problem. There are 1) too many public service employees near retirement age (usually the top employer) and 2) falling school enrollment in the upscale communities and 3) first wave boomers sitting on rapidly deteriorating home equity. 2008 is a peak in school enrollment. From here on families will be shipping the last kid off to college and putting the homestead on the market. There just isn't a generation waiting to buy. Does anyone know of any municipality in southern California that isn't in or predicting a fiscal emergency?
If the Madison County Board of Supervisors approves Resolution No. 31 on Tuesday, potential residents will no longer have to live in Madison County for one year to take advantage of the Madison County First Time Home Buyers Assistance Program.
Whether people can sell or not is irrelevant to the fact that many will try--increasing inventory.
Also, as time passes, many must sell. In the East, multi-story houses with third-floor master bedroom suites really don't work well for 68-year-olds. And as boomers age, many more will start to die, beginning with those who die relatively young.
It is really hard to argue that demographics don't put pressure on home inventories.
When they realize its 'sell now or never retire,' they will try
The lower-cost option is usually to stay put, since you're long past the day of having to pay rent. Also a funny thing happens as you get older I've noticed. The thought of having to move more often (when you rent you are never guaranteed that you'll be able to stay somewhere for the duration), and to locales that you are unfamiliar with tend to not look so attractive. I say I'm going to sell my primary and move when I retire. But I said I was only going to stay in my house for 5 years when I bought it. It's now 11 years later.
When the time comes, my house just might be the least-cost option. In which case I'd stay there and go rent somewhere for the worst winter months. Now that's the least-cost way out.
Some of the rules have changed for first-time homebuyers. Still, many of the mechanics remain constant, regardless of the market.
What has changed......I smell a rotten fish with a rat head!!
Current recommendations are that your monthly-housing-payment-to-income-ratio falls between 28 percent (conservative) and 33 percent (aggressive). That is, the total of your monthly housing payment should fall between 28 and 33 percent of your gross monthly income. ???
Oh yes. Not only is the Sr Mrs Ipodia "she who must be obeyed" she is "she who wouldn't even think of not obeying" And people wonder where I got it from lol
One thing to remember about retirees selling their homes in comparison to years past is that in years past people bought small(er) homes that they could reasonably stay in through old age. Baby boomers, especially during the boom period, went out and bought McMansions with 5000 finished square feet. As they get older, these houses are impractical both due to size and number of stairs. Thus, sell the McMansion and move to a ranch-style home, pocketing what equity is left.
Some income and purchase price restrictions apply, but with the federal Rural Development Loan program, homebuyers can potentially secure a low, fixed-rate loan from the government with no money down.
Theres also a mortgage guarantee program provided by the Federal Housing Administration that enables homebuyers to purchase a home with less than 20 percent down and not have to pay the additional mortgage insurance premiums traditionally required for such loans.
Also, there is the Oregon Bond program, which allows qualified first-time homebuyers to purchase a home with 3 percent down and pay a less-than-market interest rate on a fixed-term mortgage.
In addition, the state offers two separate programs the Home Purchase Assistance Program and the Purchase Assistance Loan to help homebuyers secure funds for a down payment or pay closing costs.
Its also possible to use more than one program, said Craig Tillotson, a residential loan specialist with the Oregon Housing and Community Services Department.
In the East, multi-story houses with third-floor master bedroom suites really don't work well for 68-year-olds.
Well, I can tell you that my parents live in a colonial-era 3 story center entrance colonial with one bedroom and my mom's sewing room on the third floor. I imagine the only way they are leaving is in a box. So can can work just fine. Especially when your taxes and insurance (after a senior abatement) are 3.5k a year and you have no debt.
Overseen by the U.S. Department of Agriculture, the rural development housing loan program helps homebuyers purchase property in rural areas. In Central Oregon, that means everywhere outside Bends Urban Growth Boundary, said Drew Davis, a housing specialist at the USDA service center in Redmond.
The program originates loans at subsidized rates and guarantees loans made by private lenders. For eligible applicants, that can mean conventional loans of up to 100 percent of the homes purchase price, Davis said.
There are income and purchase price limits.
For loans originated by the USDA, the income limit is 80 percent of the countys family median income. For loans guaranteed by the program, the income limit is 115 percent of the median.
In Deschutes County, the 2008 estimated median family income is $58,200, according to HUD. It is $49,200 in Crook County and $47,000 in Jefferson County.
The median income changes based on household size, Drew said.
Purchase price restrictions are $273,100 in Deschutes County and $200,160 in Crook and Jefferson counties.
Davis said the number of loans guaranteed through his office are up more than 500 percent from last year, and that his office also is originating more loans. Davis credits the surge to the drying up of the subprime mortgage market.
When the mortgage industry has done some significant changes, as to who is available to do 100 percent loan-to-value products, and with the tightening of Fannie Mae/Freddie Mac guidelines, its caused (lenders) to remember we have been out here marketing to them, and the ones already using us are using us significantly more, Davis said.
Housing Works
Joy Johnson, 81, purchased a newly built home in Redmond last month using a rural development loan from the USDA. She put $1,000 down on a loan that charges 1 percent annual interest.
Johnson also was able to convert her Section 8 rental voucher into a homeownership voucher.
Johnson lived in a home for many years but was more recently living in an apartment in Redmond with her four cats. At risk of losing her cats due to rental restrictions, Johnson found her own home with the help of Housing Works.
I either had to pay $250 for each one for a deposit or take them out and have them put to sleep and you dont do that with cats you have grown from kittens, Johnson said. With my own place, I can have my cats and go out the back door and sit on the back step and do what I doggone want to.
Housing Works Fisher said her organization offers a number of ways people can qualify for housing-assistance programs. Although the organization doesnt lend money, it offers home-buying education classes and assists people in finding lenders with experience underwriting loans that conform to the applicable programs.
It can also help people sign up for a 3-to-1 savings matching program run by the nonprofit CASA of Oregon. Participants who save $1,000 in the program, called VIDA, then qualify for a $3,000 matching payment. It lasts up to three years, meaning participants can potentially put away $12,000 to be used for a down payment, Fisher said.
Its wealth-building, and what that means is people can save for home ownership, she said.
The VIDA program is open to anyone in the community who earns up to 80 percent of the county median income, Fisher said. It is administered by the Newberg-based CASA of Oregon and uses funds provided by foundations and the federal government.
When your largest asset by far is your home, then selling your home to have a comfortable retirement is just about your only choice. Most people below the 10% bracket are in this position.
I had a similar conversation with my father. Cooking ramen in my percolator Sr. had been wanting to settle to a smaller condo, but my mom, Mrs. Cooking ramen in my percolator Sr., seems intent on an even larger home. I do not believe irrationality is gender-specific, but cynicism and practicality may be. Anyway, Cooking ramen in my percolator kid #2 is just amused by my mom and pop's arguments.
Actually, deals are a false indicator. Take a look at all the condo developers who had deals on their property. Who could have know that their deals would fail when buyers walk away from their deposits? In this case, I would rather see sales being completed and REOs slowing down. I fully expect that this will be another failed bottom call.
What is your opinion of first time buyers related to this "upswing"??
I find it virtually impossible to believe a young first time buyer will have the cash, job or FICO to justify a purchase of a home in this economy. What think, any opinions?
Re: "The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,821 last month, down from $1,889 the previous month, and down from $2,303 a year ago. Adjusted for inflation, the current payment is 18.0 percent lower than the spring of 1989, the peak of the prior real estate cycle. It is 28.0 percent below the current cycle's peak in June 2006."
"In the East, multi-story houses with third-floor master bedroom suites really don't work well for 68-year-olds.
Well, I can tell you that my parents live in a colonial-era 3 story center entrance colonial with one bedroom and my mom's sewing room on the third floor."
On the California coast, a great many of the newer homes were built two-story to get maximum house on minimum lot these last 20 years.
But the olders I know who want to downsize, mainly want to downsize into single-level houses. Stairs: not.
I do know one 70-year-old with a three-story townhome (four if you count the garage). But he's got an elevator.
Markel said: "Bottom line: A lot of Boomers will feel building pressure to sell over the next decades."
Would it be anecdotal to point out that they'll still need someplace else to live?
You make an excellent argument for changes in demand for a particular type of house (multi-story house vs. single-level). It's just not an argument for an across-the-board increase in inventory.
I'm a boomer, and as a result of slow-but-steady income increases and a fortuitous refinance my monthly mortgage payment has gone from being 32% of my net income to 22%, and it's improving. My mortgage payment is about on-par with what I'd pay to rent, so staying in my home is the lowest-cost option for me.
More than a quarter of the population has some difficulty walking by age 58.
Oh I don't doubt this, my point is that the least-cost option for many people will be to stay put no matter what the floor-plan. Or move in with a child.
And after reading the amusing anecdotes from Ramen, Rob Dawg, and me, you'll probably have to think about that second option. I can tell you that ipodius will gladly cough up some coin for the first floor bedroom renovation for the elder ipodii
The other option is income-based over 55 housing, which is popular around here. But, of course, you can't have assets so people put the property in the kid's names long before. Your tax dollars at work keeping them from moving in with you!
ipodius writes:
iPodius Regina as Mrs. Top Dawg would quip
LOL! I'm going to steal that and give it to the family! It's so true...as I'm sure you can relate
I think that I can relate but I'll need to ask permission and then be told what I really think before I'm sure.
Seb, says: "Would it be anecdotal to point out that they'll [aging boomers] still need someplace else to live?
You make an excellent argument for changes in demand for a particular type of house (multi-story house vs. single-level). It's just not an argument for an across-the-board increase in inventory.
You answer your own question. The current stock is not appropriate for future demand. Maldistributed, malformed and mispriced, these McMansions if you like, will be new "permanent inventory" dragging down everything else for years.
I think retiring away from the city is pretty common actually. Just looking at my family and my wife's it is clearly the case. Our families came to Southern California a century ago too. Of the family who has stayed married almost all go to cheaper drier parts of the state in retirement or to other cheaper states. 40 years ago they retired to places like Simi Valley and Hemet, which were small cheap communities with not many jobs. The last 20 years they have been going to Oregon, Nevada, remote central coast California and a few to the mid west. They all worked and raised there families in places like Santa Monica, San Diego, and the San Fernando Valley. Upon retireing ALMOST ALL LEFT. Often they moved to the same towns to retire. Now the remaining cousins in Southern California are staying for their jobs. All the while thinking about where to go when retirement comes.
And level of wealth makes little difference in who leaves. The wealthy ones go to places like Mendocino and Carmel. The rest go to rural areas.
Probably, this is more an endictment of the total lack of any sense of community in So Cal.
"The other option is income-based over 55 housing, which is popular around here. But, of course, you can't have assets so people put the property in the kid's names long before. Your tax dollars at work keeping them from moving in with you!"
The church I used to attend looked at developing income-based senior rental housing on the property by selling tax credits. Turned out it's darned hard to find someone who can afford the rent and meets the income requirements, at least around here.
The median income for a household in the county was $61,899, and the median income for a family was $75,700. Males had a median income of $45,059 versus $34,026 for females. The per capita income for the county was $25,826. About 7.0% of families and 10.3% of the population were below the poverty line, including 13.2% of those under age 18 and 6.2% of those age 65 or over.
Rob Dawg said: "The current stock is not appropriate for future demand. Maldistributed, malformed and mispriced, these McMansions if you like, will be new "permanent inventory" dragging down everything else for years."
Same argument in sheep's clothing: A permanent inventory of McMansions, not of all housing.
If it's even a valid argument. House size has been growing for decades, anyway, and McMansions are the exception in housing, not representative of the bulk of the housing stock.
The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,821 last month, down from $1,889 the previous month, and down from $2,303 a year ago. Adjusted for inflation, the current payment is 18.0 percent lower than the spring of 1989, the peak of the prior real estate cycle. It is 28.0 percent below the current cycle's peak in June 2006."
Ok 2: The median income for a household in the county was $61,899, and the median income for a family was $75,700. Males had a median income of $45,059 versus $34,026 for females. The per capita income for the county was $25,826.
About 7.0% of families and 10.3% of the population were below the poverty line, including 13.2% of those under age 18 and 6.2% of those age 65 or over.
Re: The current national vacancy rate is 4.7 percent, below the 5.0 percent level which is considered landlords market. The areas with the lowest apartment vacancies include Northern New Jersey, San Jose, Miami, Salt Lake City and San Diego, all with vacancy rates of 2.9 percent or les
A fair number of the people in my parental unit's generation have chosen to move into one of those old folks condo/townhouse type facilities with the medical staff and a community dining center and the like.
It's not just that the currently popular McMansions aren't going to be popular, it's quite possible that the entire current stock of seperate single family homes located in *urbs will not be wanted.
You answer your own question. The current stock is not appropriate for future demand. Maldistributed, malformed and mispriced, these McMansions if you like, will be new "permanent inventory" dragging down everything else for years.
Also, seniors require a net gain off their sale to retire.
There are plenty of surplus Florida Condos to handle the flux. Texas and the Carolinas are quite welcoming to retiree friendly homes too. The number of cities that have 3+ years of inventory is staggering. This is before we really get into the recession.
Sebastian, I live in Irvine, CA and I can tell you that McMansions ARE INDEED indicative of the housing stock here in Orange County.
People don't seem to realize that sales are NEEDED in order for prices to fall. Prices can't fall until they become recorded sales, and then they become good 'ole comp busters. You will continue to see more and more sales as prices fall.
GRMs are totally out of whack in CA, due to the cheap purchase money of the last few years. Until those go back to the 160-200 range, we will see a combination of rent price increases and house price drops.
Even if sales activity increases year-over-year sometime this year (which won't surprise me, just because it can't get much worse), prices will not bottom anytime soon.
Prices will not bottom until the supply of homes on the market falls back in line with historical norms. Even a significant increase in sales volume would take a long time to chip away at the massive supply we have in the bubble markets.
So, whether or not a bottom for sales activity is here, prices will continue to fall for quite some time.
The church I used to attend looked at developing income-based senior rental housing on the property by selling tax credits.
Around these parts old factories, mill buildings, etc have been turned into over 55 units privately, and your rent is based on income. Some people pay full, some are subsized but you don't know who is paying what. It works.
I think, w, your post is interesting because of the regional variation. In NE, people tend to not move so much. The Cape is particularly attractive to retire to because of the seasonality, mild winters, and small community but still leaves you close to what you know. The year-round demographic is very much older. Some people will winter in other places, but there is this attachment. Perhaps it's because the area is so old and settled and most have family close by.
Sebastian writes:
Rob Dawg said: "The current stock is not appropriate for future demand. Maldistributed, malformed and mispriced, these McMansions if you like, will be new "permanent inventory" dragging down everything else for years."
Same argument in sheep's clothing: A permanent inventory of McMansions, not of all housing.
Exactly like how you have accepted 2008 unemployment measures that don't count permanently discouraged workers.
If it's even a valid argument. House size has been growing for decades, anyway, and McMansions are the exception in housing, not representative of the bulk of the housing stock.
2008 seems to be the first year without the average new home size growing. McMansions are the new norm. Roughly 2500sf in 2007 from 1400sf in 1970.
I'm in the biz (21 years) and have worked for a while for RE/MAX Real Estate Services in their mortgage division. Steven Thomas is very, very good with numbers and statistics. The numbers though do not take into account several key items. First, affordability - not many on OC can afford a median home. Second, tightening guidelines - no more Stated ARM's or no down payment loans, Third, withheld from market bank owned properties. The market will be flooded over time with a vast number of REO properties that the banks hold. Fourth and finally - if this is a bottom (it isn't), the chart is not going to reverse itself. It will run along a bottom for years to come. The numbers as presented and the environment we are in distorts Steven Thomas's findings. They cannot be relied upon.
Home builders with an eye on the first-time buyer market may not want to design their product too much differently than the homes that are being built for move-up buyers, but they definitely will want to put the accent on affordability, according to an NAHB analysis of characteristics of first-time buyers from the 2005 American Housing Survey from the U.S. Census Bureau.
The median price of the homes purchased by first-timers was $150,000 in 2005, compared to $230,000 for the trade-up market, according to NAHB economist Elliot Eisenberg, whose analysis of the survey data is published in the current issue of HousingEconomics.com.
And while the 2.4 million homes bought by first-timers in 2005 accounted for an impressive 43% share of the homes sold that year, the large majority of them 86% were found in the existing home market. Given that new homes are usually more expensive than existing homes, these results ate not surprising, the study says.
February 19, 2008 - Indianapolis, Ind., maintained its standing as the most affordable major U.S. housing market for a 10th consecutive time in the fourth quarter of 2007, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), released today.
Nationwide, housing affordability increased for the quarter and on a year-over-year basis, rising to the highest level since the first quarter of 2005.
"Today's HOI reading indicates that 46.6 percent of all new and existing homes that were sold during the fourth quarter were affordable to families earning the national median income of $59,000," said NAHB President Sandy Dunn, a builder from Point Pleasant, W.Va.. "With mortgage rates returning to near the record low levels of a few years ago, more potential home buyers across the country are finding that they now can buy the home of their dreams."
The HOI indicates that the national weighted interest rate on fixed and adjustable-rate mortgages - a key component in calculating the HOI - was 6.42 percent in the fourth quarter, compared to 6.73 percent in the third quarter.
In the nation's most affordable major housing market of Indianapolis, 89.5 percent of homes sold in the fourth quarter were affordable to families earning the area's median household income of $63,800. Also near the top of the list for affordable major metros this time around were Youngstown-Warren-Boardman, Ohio-Pa.; Detroit-Livonia-Dearborn, Mich.; Toledo, Ohio; and Grand Rapids-Wyoming, Mich., in that order.
In 2006, the median annual household income according to the US Census Bureau was determined to be $48,201.00.
Aggregate income distribution
The aggregate income measures the combined income earned by all persons in a particular income group. Overall, all households in the United States earned roughly $4,286,391 million in 2005 (4.3 trillion)
Please note that all figures are presented in 2003 dollars
Another common measurement of personal income is the mean household income. Unlike the median household income, which divides all households in two halves, the mean income is the average income earned by American households. In the case of mean income, the income of all households is divided by the number of all households.
Overall, the mean household income in the United States, according to the US Census Bureau 2004 Economic Survey, was $60,528, or $17,210 (39.73%) higher than the median household income.[60]
Rob Dawg,
Don't you know anything? Those are actually Whopper Homes, not McMansions. As anyone from Phoenix or Sacramento or suburban Northeast Corridor can tell you, there aren't many McMansions anyway.
lendingmaestro said: "Sebastian, I live in Irvine, CA and I can tell you that McMansions ARE INDEED indicative of the housing stock here in Orange County."
Well, the McMansions in CA are a lot more expensive than they are in most of the rest of the country. Where I live they're half the price of what they are where you live.
I'd be willing to concede that inventories of McMansions in California might be hard to move.
lama writes:
Rob Dawg,
Don't you know anything? Those are actually Whopper Homes, not McMansions. As anyone from Phoenix or Sacramento or suburban Northeast Corridor can tell you, there aren't many McMansions anyway.
Considering how so many are far under water I suggest "Dunkin' Housing," "Negabucks," "Very Lowes," "El Casa Loco," "Worst Buy," "Short Circuit Citi," "Bustburgs," "Flipper Kings" and "Debt Queens."
We are just beginning to see the real recession with increased job losses, etc. To say nothing of CRE, cc default, decreasing 'real' purchasing power of the middle class.
2 trillion in assets are being washed away: there goes collateral needed to 'trade up.' And the Credit Crunch is spreading worldwide.
BB said, "We will not allow prices ( RE assets) to fall 10% per year." That means -9%, -9%, -9%, until 'reversion to the mean.'
The third adjustment to productivity is for the difference in the output deflator and the consumer price index used to measure real wage growth. There has been a large gap between the rates of inflation shown in the two indexes in recent years because the prices of consumer goods and services have risen more rapidly than the price of investment goods (most importantly computers). 5 As is the case with the growing share of output going to depreciation, better or cheaper investment goods provide no direct benefit. The benefit should be realized through the economys ability to produce more consumption goods and services.
The rates of inflation shown by the indexes also differ because the output indexes are chain-weighted, while the CPI is a fixed weight index. Arguably, the PCE deflator should be used to deflate real wages, but this discussion follows convention in deflating real wages by the CPI-U-RS and CPI-U-X1.
Net Output" adjusts for the difference between GDP and NDP as well as the previous "Economy wide" adjustment, while "CPI Deflator" includes also both previous adjustments in addition to adjustment for the deflator.
I know many of you (Tanta/CR) have not had lunch and are taking naps, but please, please, do not forget to remember your NDP adjustments!
A year ago, the Mortgage Bankers Association was thrilled to sign a contract to buy a fancy new headquarters building in downtown Washington. Interest rates were low, the group's revenues were steady and the prospects for quickly renting out part of the structure were strong.
Critics also see irony -- and some justice -- in this predicament. "They are certainly getting what they deserve," said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal research group. "Mortgage bankers encouraged people to take out mortgages that were very risky, and the result of that was a large number of the mortgages went bad and caused mortgage interest rates to soar. Now they are the victims of high mortgage rates and chaos in the market more generally."
The lobbying group is about to sign the final papers to buy the 12-story building on L Street NW for about $100 million. Like many of the companies it represents, the organization is facing a triple whammy of woes: Its financing costs are up, its income is down, and the leasing market is slow, leaving it, so far, without a single tenant.
It was only a year ago when everyone in CA was going to cash out and buy a cheap mansion in Arizona, and life outside of CA would be wonderful, remember?
I'm in the OC and in my neighborhood the season inventory is just coming online. Many are the same homes that were taken off the market last Fall. We may see more sales soon, but it seems like the growing inventory will overshadow whatever buyers show up.
The house around the corner from me is a 4+2 that was listed for $715k at the peak. It is now listed at $499k and sitting.
This is obviously in the more gang-infested part of OC, but still...
So, let's take him at his word, just for a moment. He's using a running 30-day average, which isn't bad, because it avoids the usual problem with months of different lengths that mess up most graphs, including the one in the posting. Okay, so far acceptable. And he's talking about "deals created" I'm thinking this must be "under contract" or equivalent. Well, it takes a house a month, or so, to get out of under contact and sold, and deals do fall through.
If my guesses are correct, there will be a lag and you won't see the sales increase until the April numbers.
SO, going back to last year, April was 2600 sales from around 2100 "deals created" in March from his data. Not to cheerlead RE or anything... but that doesn't sound like an unrealistic ratio of closed deals (20% falling through).
Are his numbers for February available? or January, better yet?
... I didn't finish my calculation, I realize. If his numbers had bearing on reality then April sales on that chart there would be 2850 which would put them slightly above 2007's numbers, which would be quite a rebound.
Home sales will bottom when people can afford the houses. Check median household income for the area vs. median housing price. Is it within the acceptable 2.5 to 3 range for this area? Nope, so sales have not bottomed. Anything else is: noise, more stupid lending, knife-catchers trying "get rich quick."
No
Remember, it's never too early or too late to buy!
OC Nightmare, that was my reaction too. It seems very unlikely to me.
Best to all.
consider the source
"deals created" is the key. Maybe so (though I'm skeptical), but in TODAY's market, MANY more deals are falling apart due to financing and appraisal issues than one year ago.
So ACTUAL sales compared to ACTUAL listings is the battleground to look at.
Supply and demand. More and more homes staying on the market will keep pressure downward.
Dead cat bounce
There will probably be an update with the title "Oops!". fingers crossed
i live in orange county, and i can assure you the bottom is not yet in site, as of march 20, all sales were down nearly 40% from a year ago per dataquick. here's another link to lasner's blog with the numbers:
Orange County home prices and sales, mid-March | median, www, ocregister - Business - The Orange County Register
JKB writes:
Dead cat bounce
JKB | 04.07.08 - 11:18 am | #
Looking at the chart, this is statistically insignificant.
Baby boomers, watching their most prized asset...their home...where home equity is falling for the first time ever...will begin to SELL and downsize tp protect their precious remaining equity dollars as they move closer and closer to retirement...
Supply?? We ain't seen nothing yet....
IMO.
At about the corresponding point in the Japanese real estate bubble collapse there was a dead-cat bounce in sales as people who had long been "priced out" saw what appeared -- relative to bubble peaks -- good opportunities to buy. The belief that real estate prices would soon resume their rise, and that they could never decline for very long, was still alive.
But the slide then resumed, and kept on for 10+ more years.
jm,
Similar to what we are seeing in the stock market today.
deals created in the past 30 days
Last 30 days? Isn't this like counting the omelet before all the eggs are broken?
Well at least REO is moving again. Happy Daze are here... soon.
Regarding Willow Bank, as of June 30, 2007, this little bank in PA held $190 million worth of mortgage-backed securities in its portfolio, of which $82 million was in CMOs.
Of the bank's $1 billion loan portfolio, 27% was single-family residential, 32% was muliti-family and commercial, 9% was construction, and 27% was HELOC.
Only 9% was commercial business (i.e., non real estate).
This little bank is REAL ESTATE CENTRAL. They bet the farm!
Formed via the 2005 merger of Chester Valley Bankorp and Willow Investment Serices, a Philadelphia registered investment advisor (RIA).
You see the pattern?
Investment advisor buys bank to gain access to FDIC-insured deposits in order to leverage up and bet the farm on real estate.
Not only did the FDIC approve the merger. They slept through it all! Now, they have to pay.
It's just seasonality isn't it? Actually it looks like its severely below trend.
Here's the link to Willow Bank's last 10-k, from which I extracted the data.
http://www.sec.gov/Archives/edgar/data/1163428/000110465907075173/a07-23722_310ka.htm
Baby boomers, watching their most prized asset...their home...where home equity is falling for the first time ever...will begin to SELL and downsize
I have no idea where this redonculous meme came from. How many people actually sell their primary residence when they get a little older? No one in my family did until they were well advanced in age and the reason was they just couldn't keep up with the maintenance. Others stayed there until they died because they could afford to hire people. Generally parents keep a larger house for quite some time for their kid's families (including grandkids) to come. My parents are still in their same over-sized house for this reason. I think that's probably the norm.
I'm pretty sure his whole baby-boomer sell thing was a Real Estate industry marketing push to get people to sell and buy.
I like the uptick in Feb 2007, followed by a plunge!
Also see:
U.K.-based HSBC paid nearly $1.14 billion for Mexico's fourth-largest banking group, Grupo Financiero Bital, in late 2002, an undercapitalized firm with about 1,400 branches, six million clients, and some $22 billion in assets.
HSBC subsequently recapitalized the bank, invested in new systems and products, and changed its name to Grupo Financiero HSBC.
Economists expect counter-cyclical fiscal spending on infrastructure projects by a federal government flush with oil dollars, robust business spending, and strong domestic demand to help offset some of the headwinds coming from the U.S., which receives more than 80% of Mexico's exports.
"There is no doubt that the economic cycle is linked to that of the U.S.," Thurston said.
While domestic demand mitigates the problem, "the real question is what happens in the U.S., how deep, how long. We are predicting slow growth in the U.S. right through until probably the first half of next year," he said.
Even so, financial firms of all stripes have plenty of opportunity to grow in coming years, thanks to the low use of banking, insurance and asset management products in Mexico.
"The drivers for growth in this industry are significant. You've got a relatively unbanked population, but you've also got a very young population coming through. In the next five years there will be 10 million or 11 million young Mexicans who will come of an age where they will start needing banking services," Thurston said.
Bank loans as a percentage of GDP, a common measure of the penetration of financial services in a country, are still in the mid-teens, compared with an average of 25% for the BRIC nations of Brazil, Russia, India, and China, according to the Association of Mexican Banks.
Agreed, ipod.
Mrs. Bosch has said repeatedly she'll have to be burned out. I am so hoping to relocate to palmtreeland I'm thinking of loading the basement with tires so the firemen can't ruin my plans.
doom,
In the very late '80s -- can't remember the exact year -- I turned on the TV in my hotel room one morning during an business trip to Tokyo and found myself watching an NHK show in which an audience of obviously well-to-do matrons was listening raptly* to the pronouncements of an Armani-clad investment analyst, who was advising them that no one had ever lost money in the Tokyo market as long as they's stayed invested more than three years.
That was when the Nikkei index was nearing it's eventual peak of 40,000.
ipodius, There are a lot of people in California fantasizing about selling as they approach retirement. Every dinner party someone in their 40's or 50's brings up the state they are looking at. The houses that my wife and I have made offers on or thought deeply about it are all owned by people loking to cash out and downsize. One to Michigan, one to Utah, and one to a condo are smaller house here.
... How many people actually sell their primary residence when they get a little older? ...
ipodius, remember, you don't have to sell to get the profits out -- you just keep refinancing. Eventually, you'll be able to use refinancing cash to buy a luxury condo in Florida, or a vacation getaway in the Adirondacks. Then you'll have two ATMs! Let the bank sell them after you die.
Neighboring San Diego County is on track for 3060 sales March 2008 versus 3963 March 2007. The markets are not so different that one would be off 25% y-o-y and the other flat to positive.
The problem with a "deals created" metric is that far more deals are falling through. New home sales contracts that don't close, financing issues, etc. Nothing here but typical salesman happy talk.
The effects of the slowdown have hardly begun to be felt. We're many months - probably years away from any bottom anywhere. The global, over-leveraged economy needs to unwind before a bottom in anything comes into sight.
Not sure if this was posted - Mr. Mortgage shows evidence of how Lehman lent $1M, no money down, no docs to people with poor credit:
YouTube -
More icebergs ahead, Cpt. Titanic.
Interesting Times said: "Looking at the chart, this is statistically insignificant."
True enough, but when compared to 30-year fixed-rates it becomes more significant.
In October, 2005, rates crossed above the 6% level and continued to rise. That generally coincides with the peak and downtrend of sales. (An overlay of mortgage rates on the chart would illustrate this pretty well, I think.)
Those rates have been falling steadily since late last year, and have now crossed below 6% again.
Add-in, whether one likes it or not, the Fed's "bail-outs", aggressive easing (with at least one and possibly two more to come), behind-the-scenes arm-twisting to get stronger banks to step-up and save the weaklings, the Economic Stimulus package, etc., and there's a strong counter to the housing weakness.
Sebastian
I do expect we will see a little bit of a 'bear market rally' this spring. This is due to seasonality, people trying to get out before equity depletes, and people trying to buy before rates go up.
But I also think inventory is going to keep rising and things getting really ugly this summer.
59 percent of respondents ages 41 to 49 plan to buy a new home for their retirement.
2005 Harris poll.
Boomers move into retirement / Many want to live near grandchildren with new home
Mrs. Bosch has said repeatedly she'll have to be burned out.
lol...the senior ipodia of the family has prevented my dad from living out his dream of a smaller condo. "Where would he kids stay?" Ipodius Sr and I remark that we stay at that new invention called a hotel when we travel, but it falls on deaf ears.
I suspect that, even as w has said about the chatter in a subsequent post, it is just chatter that will be vetoed when push comes to shove.
Ralph Soone writes:
Baby boomers, watching their most prized asset...their home...where home equity is falling for the first time ever...will begin to SELL and downsize tp protect their precious remaining equity dollars as they move closer and closer to retirement...
Supply?? We ain't seen nothing yet....
We haven't seen anything. Historically, retirees with poor savings made up the difference by selling their primary residence and moving to a lower cost of living region.
When they realize its 'sell now or never retire,' they will try. But that is during the panic phase. I do not expect that until after its known that the spring and summer selling seasons were a total flop.
As to the graph, sales ahve to go up 100% just to stabilize prices! Its not happening in the OC. Not with today's job market and credit.
We'll see a there, but not before 2011 at the earliest!
Got Popcorn?
Neil
59 percent of respondents ages 41 to 49 plan to buy a new home for their retirement.
Yes, my father would have answered that poll one way, and my mom another
Also the key word is plan. We all know plans are subject to change. Especially now that RE has tanked for the next 10 years at least.
** Of greatest note is this: "significantly more first time buyer activity"
significantly more first time buyer activity
WHY???
Not related OT, but...
Technical Note
Gross Domestic Product
Fourth Quarter of 2007 (Final)
March 27, 2008
Corporate Profits
Profits from current production decreased $52.9 billion, or 3.3 percent (quarterly rate), in
the fourth quarter, compared with a decrease of $20.5 billion, or 1.2 percent, in the third.
In BEA reporting, bad-debt expenses, asset write-downs, and other valuation
changes are not counted as current-period expenses that lower profits. Similarly, loan-
loss provisions that anticipate possible future losses are not deducted as expenses in
the national accounts and do not reduce NIPA profits. In financial accounting, these
provisions are charged against income and reduce profits.
"There are a lot of people in California fantasizing about selling as they approach retirement. Every dinner party someone in their 40's or 50's brings up the state they are looking at. "
I know those that have done it in California, and successfully, but they did by the end of '06. And even then I kept urging them to hurry.
That door is closing now.
Retirees will attempt to downsize - and live in Manteca? That's just left of California's anus. Good luck with that, Dell.
The Southern California Coastal markets have a very serious demographic problem. There are 1) too many public service employees near retirement age (usually the top employer) and 2) falling school enrollment in the upscale communities and 3) first wave boomers sitting on rapidly deteriorating home equity. 2008 is a peak in school enrollment. From here on families will be shipping the last kid off to college and putting the homestead on the market. There just isn't a generation waiting to buy. Does anyone know of any municipality in southern California that isn't in or predicting a fiscal emergency?
If the Madison County Board of Supervisors approves Resolution No. 31 on Tuesday, potential residents will no longer have to live in Madison County for one year to take advantage of the Madison County First Time Home Buyers Assistance Program.
Whether people can sell or not is irrelevant to the fact that many will try--increasing inventory.
Also, as time passes, many must sell. In the East, multi-story houses with third-floor master bedroom suites really don't work well for 68-year-olds. And as boomers age, many more will start to die, beginning with those who die relatively young.
It is really hard to argue that demographics don't put pressure on home inventories.
the senior ipodia of the family
And would I be correct in inferring that this would be She Who Must Be Obeyed - Mrs. Ipodius Sr.?
When they realize its 'sell now or never retire,' they will try
The lower-cost option is usually to stay put, since you're long past the day of having to pay rent. Also a funny thing happens as you get older I've noticed. The thought of having to move more often (when you rent you are never guaranteed that you'll be able to stay somewhere for the duration), and to locales that you are unfamiliar with tend to not look so attractive. I say I'm going to sell my primary and move when I retire. But I said I was only going to stay in my house for 5 years when I bought it. It's now 11 years later.
When the time comes, my house just might be the least-cost option. In which case I'd stay there and go rent somewhere for the worst winter months. Now that's the least-cost way out.
Tanta, what's up with first time buyers??
Some of the rules have changed for first-time homebuyers. Still, many of the mechanics remain constant, regardless of the market.
What has changed......I smell a rotten fish with a rat head!!
Current recommendations are that your monthly-housing-payment-to-income-ratio falls between 28 percent (conservative) and 33 percent (aggressive). That is, the total of your monthly housing payment should fall between 28 and 33 percent of your gross monthly income. ???
She Who Must Be Obeyed - Mrs. Ipodius Sr.?
Oh yes. Not only is the Sr Mrs Ipodia "she who must be obeyed" she is "she who wouldn't even think of not obeying"
And people wonder where I got it from lol
One thing to remember about retirees selling their homes in comparison to years past is that in years past people bought small(er) homes that they could reasonably stay in through old age. Baby boomers, especially during the boom period, went out and bought McMansions with 5000 finished square feet. As they get older, these houses are impractical both due to size and number of stairs. Thus, sell the McMansion and move to a ranch-style home, pocketing what equity is left.
OT - Birmingham prepping for bankruptcy
Story not found - al.com
Some income and purchase price restrictions apply, but with the federal Rural Development Loan program, homebuyers can potentially secure a low, fixed-rate loan from the government with no money down.
Programs bring homes into reach |
| The Bulletin
Theres also a mortgage guarantee program provided by the Federal Housing Administration that enables homebuyers to purchase a home with less than 20 percent down and not have to pay the additional mortgage insurance premiums traditionally required for such loans.
Also, there is the Oregon Bond program, which allows qualified first-time homebuyers to purchase a home with 3 percent down and pay a less-than-market interest rate on a fixed-term mortgage.
In addition, the state offers two separate programs the Home Purchase Assistance Program and the Purchase Assistance Loan to help homebuyers secure funds for a down payment or pay closing costs.
Its also possible to use more than one program, said Craig Tillotson, a residential loan specialist with the Oregon Housing and Community Services Department.
Markel writes:
59 percent of respondents ages 41 to 49 plan to buy a new home for their retirement.
2005 Harris poll.
Flipping the switch on The Wayback Machine to Reverse, I find this note:
59 percent of respondents ages 46 to 54 plan to keep the box their refrigerator came in for their retirement.
2009 Harris poll.
teens for banks! Yeah!
I saw an interesting figure the other day.
In Mexico, 6% of homeowners owe money against their house.
In the US, 66% owe money against their house.
ipodius writes:
She Who Must Be Obeyed - Mrs. Ipodius Sr.?
Oh yes.
iPodius Regina as Mrs. Top Dawg would quip.
In the East, multi-story houses with third-floor master bedroom suites really don't work well for 68-year-olds.
Well, I can tell you that my parents live in a colonial-era 3 story center entrance colonial with one bedroom and my mom's sewing room on the third floor. I imagine the only way they are leaving is in a box. So can can work just fine. Especially when your taxes and insurance (after a senior abatement) are 3.5k a year and you have no debt.
Rural development housing loans
Overseen by the U.S. Department of Agriculture, the rural development housing loan program helps homebuyers purchase property in rural areas. In Central Oregon, that means everywhere outside Bends Urban Growth Boundary, said Drew Davis, a housing specialist at the USDA service center in Redmond.
The program originates loans at subsidized rates and guarantees loans made by private lenders. For eligible applicants, that can mean conventional loans of up to 100 percent of the homes purchase price, Davis said.
There are income and purchase price limits.
For loans originated by the USDA, the income limit is 80 percent of the countys family median income. For loans guaranteed by the program, the income limit is 115 percent of the median.
In Deschutes County, the 2008 estimated median family income is $58,200, according to HUD. It is $49,200 in Crook County and $47,000 in Jefferson County.
The median income changes based on household size, Drew said.
Purchase price restrictions are $273,100 in Deschutes County and $200,160 in Crook and Jefferson counties.
Davis said the number of loans guaranteed through his office are up more than 500 percent from last year, and that his office also is originating more loans. Davis credits the surge to the drying up of the subprime mortgage market.
When the mortgage industry has done some significant changes, as to who is available to do 100 percent loan-to-value products, and with the tightening of Fannie Mae/Freddie Mac guidelines, its caused (lenders) to remember we have been out here marketing to them, and the ones already using us are using us significantly more, Davis said.
Housing Works
Joy Johnson, 81, purchased a newly built home in Redmond last month using a rural development loan from the USDA. She put $1,000 down on a loan that charges 1 percent annual interest.
Johnson also was able to convert her Section 8 rental voucher into a homeownership voucher.
Johnson lived in a home for many years but was more recently living in an apartment in Redmond with her four cats. At risk of losing her cats due to rental restrictions, Johnson found her own home with the help of Housing Works.
I either had to pay $250 for each one for a deposit or take them out and have them put to sleep and you dont do that with cats you have grown from kittens, Johnson said. With my own place, I can have my cats and go out the back door and sit on the back step and do what I doggone want to.
Housing Works Fisher said her organization offers a number of ways people can qualify for housing-assistance programs. Although the organization doesnt lend money, it offers home-buying education classes and assists people in finding lenders with experience underwriting loans that conform to the applicable programs.
It can also help people sign up for a 3-to-1 savings matching program run by the nonprofit CASA of Oregon. Participants who save $1,000 in the program, called VIDA, then qualify for a $3,000 matching payment. It lasts up to three years, meaning participants can potentially put away $12,000 to be used for a down payment, Fisher said.
Its wealth-building, and what that means is people can save for home ownership, she said.
The VIDA program is open to anyone in the community who earns up to 80 percent of the county median income, Fisher said. It is administered by the Newberg-based CASA of Oregon and uses funds provided by foundations and the federal government.
In Mexico, you can buy a house for a chicken, two sheep, and a donkey.
Ipodius,
When your largest asset by far is your home, then selling your home to have a comfortable retirement is just about your only choice. Most people below the 10% bracket are in this position.
http://visionsfromspace.com/images/USWealthAndIncomeDistribution.jpg
The lower-cost option is usually to stay put, since you're long past the day of having to pay rent.
For Boomers? Who bought or refinanced during the Bubble? How many chose 15- or 20-year mortgages?
Everyone I know over 50 who bought recently used a 30-year note, assuming they'd get a magic pony for their retirement party.
Wonder where I could find the statistics on the mix of 30-, 20-, and 15-year mortgage originations over the past few years?
iPodius Regina as Mrs. Top Dawg would quip
LOL! I'm going to steal that and give it to the family! It's so true...as I'm sure you can relate
Ipodius,
I had a similar conversation with my father. Cooking ramen in my percolator Sr. had been wanting to settle to a smaller condo, but my mom, Mrs. Cooking ramen in my percolator Sr., seems intent on an even larger home. I do not believe irrationality is gender-specific, but cynicism and practicality may be. Anyway, Cooking ramen in my percolator kid #2 is just amused by my mom and pop's arguments.
Let's take a break from personal anecdote for just a minute, if possible.
More than a quarter of the population has some difficulty walking by age 58.
The page cannot be found
Bottom line: A lot of Boomers will feel building pressure to sell over the next decades.
Actually, deals are a false indicator. Take a look at all the condo developers who had deals on their property. Who could have know that their deals would fail when buyers walk away from their deposits? In this case, I would rather see sales being completed and REOs slowing down. I fully expect that this will be another failed bottom call.
CR, Tanta,
What is your opinion of first time buyers related to this "upswing"??
I find it virtually impossible to believe a young first time buyer will have the cash, job or FICO to justify a purchase of a home in this economy. What think, any opinions?
Re: "The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,821 last month, down from $1,889 the previous month, and down from $2,303 a year ago. Adjusted for inflation, the current payment is 18.0 percent lower than the spring of 1989, the peak of the prior real estate cycle. It is 28.0 percent below the current cycle's peak in June 2006."
"In the East, multi-story houses with third-floor master bedroom suites really don't work well for 68-year-olds.
Well, I can tell you that my parents live in a colonial-era 3 story center entrance colonial with one bedroom and my mom's sewing room on the third floor."
On the California coast, a great many of the newer homes were built two-story to get maximum house on minimum lot these last 20 years.
But the olders I know who want to downsize, mainly want to downsize into single-level houses. Stairs: not.
I do know one 70-year-old with a three-story townhome (four if you count the garage). But he's got an elevator.
Markel said: "Bottom line: A lot of Boomers will feel building pressure to sell over the next decades."
Would it be anecdotal to point out that they'll still need someplace else to live?
You make an excellent argument for changes in demand for a particular type of house (multi-story house vs. single-level). It's just not an argument for an across-the-board increase in inventory.
I'm a boomer, and as a result of slow-but-steady income increases and a fortuitous refinance my monthly mortgage payment has gone from being 32% of my net income to 22%, and it's improving. My mortgage payment is about on-par with what I'd pay to rent, so staying in my home is the lowest-cost option for me.
Sebastia
More than a quarter of the population has some difficulty walking by age 58.
Oh I don't doubt this, my point is that the least-cost option for many people will be to stay put no matter what the floor-plan. Or move in with a child.
And after reading the amusing anecdotes from Ramen, Rob Dawg, and me, you'll probably have to think about that second option. I can tell you that ipodius will gladly cough up some coin for the first floor bedroom renovation for the elder ipodii
The other option is income-based over 55 housing, which is popular around here. But, of course, you can't have assets so people put the property in the kid's names long before. Your tax dollars at work keeping them from moving in with you!
ipodius writes:
iPodius Regina as Mrs. Top Dawg would quip
LOL! I'm going to steal that and give it to the family! It's so true...as I'm sure you can relate
I think that I can relate but I'll need to ask permission and then be told what I really think before I'm sure.
ipodius writes:
iPodius Regina as Mrs. Top Dawg would quip
LOL! I'm going to steal that and give it to the family! It's so true...as I'm sure you can relate
I think that I can relate but I'll need to ask permission and then be told what I really think before I'm sure.
Seb, says: "Would it be anecdotal to point out that they'll [aging boomers] still need someplace else to live?
You make an excellent argument for changes in demand for a particular type of house (multi-story house vs. single-level). It's just not an argument for an across-the-board increase in inventory.
You answer your own question. The current stock is not appropriate for future demand. Maldistributed, malformed and mispriced, these McMansions if you like, will be new "permanent inventory" dragging down everything else for years.
This is a significant distortion IMHO:
Increased open house activity, buyers are writing more offers, multiple offers in the lower ranges and significantly more first time buyer activity.
I think retiring away from the city is pretty common actually. Just looking at my family and my wife's it is clearly the case. Our families came to Southern California a century ago too. Of the family who has stayed married almost all go to cheaper drier parts of the state in retirement or to other cheaper states. 40 years ago they retired to places like Simi Valley and Hemet, which were small cheap communities with not many jobs. The last 20 years they have been going to Oregon, Nevada, remote central coast California and a few to the mid west. They all worked and raised there families in places like Santa Monica, San Diego, and the San Fernando Valley. Upon retireing ALMOST ALL LEFT. Often they moved to the same towns to retire. Now the remaining cousins in Southern California are staying for their jobs. All the while thinking about where to go when retirement comes.
And level of wealth makes little difference in who leaves. The wealthy ones go to places like Mendocino and Carmel. The rest go to rural areas.
Probably, this is more an endictment of the total lack of any sense of community in So Cal.
"The other option is income-based over 55 housing, which is popular around here. But, of course, you can't have assets so people put the property in the kid's names long before. Your tax dollars at work keeping them from moving in with you!"
The church I used to attend looked at developing income-based senior rental housing on the property by selling tax credits. Turned out it's darned hard to find someone who can afford the rent and meets the income requirements, at least around here.
Re: First time buyers in Orange County:
The median income for a household in the county was $61,899, and the median income for a family was $75,700. Males had a median income of $45,059 versus $34,026 for females. The per capita income for the county was $25,826. About 7.0% of families and 10.3% of the population were below the poverty line, including 13.2% of those under age 18 and 6.2% of those age 65 or over.
Orange County, California - Wikipedia, the free encyclopedia
With zero down and no income, this should be a cake walk and our next Bear Stearns default should be just a few weeks away!
Rob Dawg said: "The current stock is not appropriate for future demand. Maldistributed, malformed and mispriced, these McMansions if you like, will be new "permanent inventory" dragging down everything else for years."
Same argument in sheep's clothing: A permanent inventory of McMansions, not of all housing.
If it's even a valid argument. House size has been growing for decades, anyway, and McMansions are the exception in housing, not representative of the bulk of the housing stock.
Sebastia
One last item:
Ok 2: The median income for a household in the county was $61,899, and the median income for a family was $75,700. Males had a median income of $45,059 versus $34,026 for females. The per capita income for the county was $25,826.
About 7.0% of families and 10.3% of the population were below the poverty line, including 13.2% of those under age 18 and 6.2% of those age 65 or over.
Ok one more more general question:
What is happening to employment and rent prices?
Re: The current national vacancy rate is 4.7 percent, below the 5.0 percent level which is considered landlords market. The areas with the lowest apartment vacancies include Northern New Jersey, San Jose, Miami, Salt Lake City and San Diego, all with vacancy rates of 2.9 percent or les
A fair number of the people in my parental unit's generation have chosen to move into one of those old folks condo/townhouse type facilities with the medical staff and a community dining center and the like.
It's not just that the currently popular McMansions aren't going to be popular, it's quite possible that the entire current stock of seperate single family homes located in *urbs will not be wanted.
You answer your own question. The current stock is not appropriate for future demand. Maldistributed, malformed and mispriced, these McMansions if you like, will be new "permanent inventory" dragging down everything else for years.
Also, seniors require a net gain off their sale to retire.
There are plenty of surplus Florida Condos to handle the flux. Texas and the Carolinas are quite welcoming to retiree friendly homes too. The number of cities that have 3+ years of inventory is staggering. This is before we really get into the recession.
Got Popcorn?
Neil
Sebastian, I live in Irvine, CA and I can tell you that McMansions ARE INDEED indicative of the housing stock here in Orange County.
People don't seem to realize that sales are NEEDED in order for prices to fall. Prices can't fall until they become recorded sales, and then they become good 'ole comp busters. You will continue to see more and more sales as prices fall.
...all with vacancy rates of 2.9 percent or less
GRMs are totally out of whack in CA, due to the cheap purchase money of the last few years. Until those go back to the 160-200 range, we will see a combination of rent price increases and house price drops.
Even if sales activity increases year-over-year sometime this year (which won't surprise me, just because it can't get much worse), prices will not bottom anytime soon.
Prices will not bottom until the supply of homes on the market falls back in line with historical norms. Even a significant increase in sales volume would take a long time to chip away at the massive supply we have in the bubble markets.
So, whether or not a bottom for sales activity is here, prices will continue to fall for quite some time.
The church I used to attend looked at developing income-based senior rental housing on the property by selling tax credits.
Around these parts old factories, mill buildings, etc have been turned into over 55 units privately, and your rent is based on income. Some people pay full, some are subsized but you don't know who is paying what. It works.
I think, w, your post is interesting because of the regional variation. In NE, people tend to not move so much. The Cape is particularly attractive to retire to because of the seasonality, mild winters, and small community but still leaves you close to what you know. The year-round demographic is very much older. Some people will winter in other places, but there is this attachment. Perhaps it's because the area is so old and settled and most have family close by.
Bogus data!
http://thumbsnap.com/v/MpY5CDzM.gif
Sebastian writes:
Rob Dawg said: "The current stock is not appropriate for future demand. Maldistributed, malformed and mispriced, these McMansions if you like, will be new "permanent inventory" dragging down everything else for years."
Same argument in sheep's clothing: A permanent inventory of McMansions, not of all housing.
Exactly like how you have accepted 2008 unemployment measures that don't count permanently discouraged workers.
If it's even a valid argument. House size has been growing for decades, anyway, and McMansions are the exception in housing, not representative of the bulk of the housing stock.
2008 seems to be the first year without the average new home size growing. McMansions are the new norm. Roughly 2500sf in 2007 from 1400sf in 1970.
I'm in the biz (21 years) and have worked for a while for RE/MAX Real Estate Services in their mortgage division. Steven Thomas is very, very good with numbers and statistics. The numbers though do not take into account several key items. First, affordability - not many on OC can afford a median home. Second, tightening guidelines - no more Stated ARM's or no down payment loans, Third, withheld from market bank owned properties. The market will be flooded over time with a vast number of REO properties that the banks hold. Fourth and finally - if this is a bottom (it isn't), the chart is not going to reverse itself. It will run along a bottom for years to come. The numbers as presented and the environment we are in distorts Steven Thomas's findings. They cannot be relied upon.
Funny how, in insisting that it is only the mix of sales that will change, Boomers glide over the little bit about the death rate.
Baby Boomer Death Counter Clock
The next generation down, the X-ers, is not large enough to simply take over Boomer housing. I mean, not at the prices Boomers will want.
Affordability Key for Selling to First-Time Home Buyers
Reprinted with permission from National Association of Home Builders
Home builders with an eye on the first-time buyer market may not want to design their product too much differently than the homes that are being built for move-up buyers, but they definitely will want to put the accent on affordability, according to an NAHB analysis of characteristics of first-time buyers from the 2005 American Housing Survey from the U.S. Census Bureau.
The median price of the homes purchased by first-timers was $150,000 in 2005, compared to $230,000 for the trade-up market, according to NAHB economist Elliot Eisenberg, whose analysis of the survey data is published in the current issue of HousingEconomics.com.
And while the 2.4 million homes bought by first-timers in 2005 accounted for an impressive 43% share of the homes sold that year, the large majority of them 86% were found in the existing home market. Given that new homes are usually more expensive than existing homes, these results ate not surprising, the study says.
Read the rest of the story at National Association of Home Builders
February 19, 2008 - Indianapolis, Ind., maintained its standing as the most affordable major U.S. housing market for a 10th consecutive time in the fourth quarter of 2007, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), released today.
Nationwide, housing affordability increased for the quarter and on a year-over-year basis, rising to the highest level since the first quarter of 2005.
"Today's HOI reading indicates that 46.6 percent of all new and existing homes that were sold during the fourth quarter were affordable to families earning the national median income of $59,000," said NAHB President Sandy Dunn, a builder from Point Pleasant, W.Va.. "With mortgage rates returning to near the record low levels of a few years ago, more potential home buyers across the country are finding that they now can buy the home of their dreams."
The HOI indicates that the national weighted interest rate on fixed and adjustable-rate mortgages - a key component in calculating the HOI - was 6.42 percent in the fourth quarter, compared to 6.73 percent in the third quarter.
In the nation's most affordable major housing market of Indianapolis, 89.5 percent of homes sold in the fourth quarter were affordable to families earning the area's median household income of $63,800. Also near the top of the list for affordable major metros this time around were Youngstown-Warren-Boardman, Ohio-Pa.; Detroit-Livonia-Dearborn, Mich.; Toledo, Ohio; and Grand Rapids-Wyoming, Mich., in that order.
HOI is not updating this, wonder why?
In 2006, the median annual household income according to the US Census Bureau was determined to be $48,201.00.
Aggregate income distribution
The aggregate income measures the combined income earned by all persons in a particular income group. Overall, all households in the United States earned roughly $4,286,391 million in 2005 (4.3 trillion)
Please note that all figures are presented in 2003 dollars
Another common measurement of personal income is the mean household income. Unlike the median household income, which divides all households in two halves, the mean income is the average income earned by American households. In the case of mean income, the income of all households is divided by the number of all households.
Overall, the mean household income in the United States, according to the US Census Bureau 2004 Economic Survey, was $60,528, or $17,210 (39.73%) higher than the median household income.[60]
HINC-06--Part 1
Rob Dawg,
Don't you know anything? Those are actually Whopper Homes, not McMansions. As anyone from Phoenix or Sacramento or suburban Northeast Corridor can tell you, there aren't many McMansions anyway.
lendingmaestro said: "Sebastian, I live in Irvine, CA and I can tell you that McMansions ARE INDEED indicative of the housing stock here in Orange County."
Well, the McMansions in CA are a lot more expensive than they are in most of the rest of the country. Where I live they're half the price of what they are where you live.
I'd be willing to concede that inventories of McMansions in California might be hard to move.
Sebastia
lama writes:
Rob Dawg,
Don't you know anything? Those are actually Whopper Homes, not McMansions. As anyone from Phoenix or Sacramento or suburban Northeast Corridor can tell you, there aren't many McMansions anyway.
Considering how so many are far under water I suggest "Dunkin' Housing," "Negabucks," "Very Lowes," "El Casa Loco," "Worst Buy," "Short Circuit Citi," "Bustburgs," "Flipper Kings" and "Debt Queens."
What really has changed?
We are just beginning to see the real recession with increased job losses, etc. To say nothing of CRE, cc default, decreasing 'real' purchasing power of the middle class.
BB said, "We will not allow prices ( RE assets) to fall 10% per year." That means -9%, -9%, -9%, until 'reversion to the mean.'
Nothing has really changed.
The Productivity to Paycheck Gap: What the Data Show The Real Cause of Lagging Wages Dean Baker April 2007
http://www.cepr.net/documents/publications/growth_failure_04_2007.pdf
The third adjustment to productivity is for the difference in the output deflator and the consumer price index used to measure real wage growth. There has been a large gap between the rates of inflation shown in the two indexes in recent years because the prices of consumer goods and services have risen more rapidly than the price of investment goods (most importantly computers). 5 As is the case with the growing share of output going to depreciation, better or cheaper investment goods provide no direct benefit. The benefit should be realized through the economys ability to produce more consumption goods and services.
Net Output" adjusts for the difference between GDP and NDP as well as the previous "Economy wide" adjustment, while "CPI Deflator" includes also both previous adjustments in addition to adjustment for the deflator.
I know many of you (Tanta/CR) have not had lunch and are taking naps, but please, please, do not forget to remember your NDP adjustments!
Dunkin Housing, without the line of traffic waiting to buy one.
Come to think of it, you don't have lines in front of Dunk's out there, do you?
Housing Crisis Hits Its Own
Mortgage Bankers Group Faced With Tougher Terms
Housing Crisis Hits Its Own - washingtonpost.com
A year ago, the Mortgage Bankers Association was thrilled to sign a contract to buy a fancy new headquarters building in downtown Washington. Interest rates were low, the group's revenues were steady and the prospects for quickly renting out part of the structure were strong.
Critics also see irony -- and some justice -- in this predicament. "They are certainly getting what they deserve," said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal research group. "Mortgage bankers encouraged people to take out mortgages that were very risky, and the result of that was a large number of the mortgages went bad and caused mortgage interest rates to soar. Now they are the victims of high mortgage rates and chaos in the market more generally."
The lobbying group is about to sign the final papers to buy the 12-story building on L Street NW for about $100 million. Like many of the companies it represents, the organization is facing a triple whammy of woes: Its financing costs are up, its income is down, and the leasing market is slow, leaving it, so far, without a single tenant.
** same Dean Baker as from above
It was only a year ago when everyone in CA was going to cash out and buy a cheap mansion in Arizona, and life outside of CA would be wonderful, remember?
Arizona is the new Nevada
I'm in the OC and in my neighborhood the season inventory is just coming online. Many are the same homes that were taken off the market last Fall. We may see more sales soon, but it seems like the growing inventory will overshadow whatever buyers show up.
The house around the corner from me is a 4+2 that was listed for $715k at the peak. It is now listed at $499k and sitting.
This is obviously in the more gang-infested part of OC, but still...
So, let's take him at his word, just for a moment. He's using a running 30-day average, which isn't bad, because it avoids the usual problem with months of different lengths that mess up most graphs, including the one in the posting. Okay, so far acceptable. And he's talking about "deals created" I'm thinking this must be "under contract" or equivalent. Well, it takes a house a month, or so, to get out of under contact and sold, and deals do fall through.
If my guesses are correct, there will be a lag and you won't see the sales increase until the April numbers.
SO, going back to last year, April was 2600 sales from around 2100 "deals created" in March from his data. Not to cheerlead RE or anything... but that doesn't sound like an unrealistic ratio of closed deals (20% falling through).
Are his numbers for February available? or January, better yet?
... I didn't finish my calculation, I realize. If his numbers had bearing on reality then April sales on that chart there would be 2850 which would put them slightly above 2007's numbers, which would be quite a rebound.
What exactly is being compared here? Year over year "deals created?" Or sales?
If there were 2300 "deals created" during the past 30 days wouldn't those be sales closed in April or May?
Last year's March DQ sales were 3100 and April/May are usually higher.
Lay offs, unemployment, no commissions ... Ice BERG dead ahead.
Home sales will bottom when people can afford the houses. Check median household income for the area vs. median housing price. Is it within the acceptable 2.5 to 3 range for this area? Nope, so sales have not bottomed. Anything else is: noise, more stupid lending, knife-catchers trying "get rich quick."