You described pretty well what I am seeing here in Ventura county. The high end is frozen except short pay and bank owned stuff at about 30-40% off the peak. Many prices are stickier and are not moving. I have observed a lot of listings that did not move last year just have not come back on the market. The question will be how long can the folks can remain hunkered down. With Countrywide, Amgen, Dole, etc. my guess is not too much longer.
FinanceGuy, yes, I'm finally hearing stories from agents in the trenches that lenders are reducing some REO prices enough to sell them - but only in the lowest priced areas. This doesn't mean a bottom in prices - but it is a "sign of life". At some price, buying vs. renting makes sense.
I don't know how much a median priced home ($265K) in Riverside rents for - but my guess is the numbers now make sense for some renters.
Meruelo Maddux Tumble Puts Los Angeles on Sale at 65% Discount
"A package of Los Angeles real estate on sale for 35 cents on the dollar is attracting investors to the depressed shares of Meruelo Maddux Properties Inc., the biggest private landowner in the city's four-square-mile downtown." Meruelo Maddux Tumble Puts Los Angeles on Sale at 65% Discount - Bloomberg.com
Sometimes the prices people pay just leave me shaking my head. I've got a 2br, 2 1/2 bath, 1400 sq townhouse at the very back corner of a cul-de-sac with a 2 car attached garage that isn't out in the suburbs, everything in town is relativly close, yet in 2002 I only paid 75K for it. I just wonder why people don't just say NO to what I see as outrageous prices.
baba writes:
dead cat bounce, knife catchers, call it what you want, I suspect though that they will be another 30% under water before the bottom
I second that. The credit crunch isn't done. The meme of "Buy now or be priced out forever" isn't dead yet. Nor are the loan resets. This is a breather, not even the end run. I don't want pain for others... but the long term indicators aren't good.
Not to mention, the banks haven't dug themselves out of their hole yet.
A different way of putting it is that a huge percentage of the market in San Diego, Riverside and Las Vegas (where sales are also accelerating) are REOs, and banks are willing to take the market price to clear the drek off their balance sheets (unlike unrealistic private owners).
And, obviously, sales happen at market prices, whereas they do not happen when offering prices are above market (as has largely been the case until now).
This says nothing about whether the market is going up, down or sideways, it only says something about the willingness of sellers to sell at market.
In Vegas, there are apparently a lot of investors piling in looking to pick up foreclosures cheap on the theory that all the building on the strip will result in a lot more jobs, increasing the demand for housing in Vegas over the next two years.
Unfortunately, whether the strip can employ people depends more on the demand for gambling (which is dropping fast) than the number of rooms on the strip (because if the rooms can't be filled, at least some casinos are going out of business).
I was talking with a friend who's a hard core landlord who was trimming his portfolio in Tempe, AZ.
In his area of interest(1 mile around zip code 85281)Anything below $250k is selling within a week, anything above $250k to conforming is taking a couple of months, anything above conforming to $1mm isn't moving at all, anything above $1mm is behaving regularly.
He's got more applicants than properties, 25%(from 0% YoY) are people who are trying to move closer to city center due to transport costs.
I can imagine this scenario playing out in waves, starting in the less expensive areas, then moving up the price ladder to nicer areas...then rippling back out to see new reductions again in the less desirable areas. Rinse. Repeat... until the true bottom is finally reached.
Calculated Risk: I can give you the buy-rent equation in Stockton, California one of the hardest hit markets in the nation. Stockton has also seen increases in sales volumes on a year-over-year basis from February to April. Prices have fallen enough so that the cost of buying is similar than renting. A 30 year old three bed, 2 bath house sells for $180,000 (almost exclusively REO properties) and rents for about $1,100 per month. The New York Times calculator suggests buying is better than renting after 5 years. - NY Times
But even though sales are up on a year-over-year basis prices are still falling because of an increasing number of foreclosures for sales and more aggresive price cutting by banks. I have been closely watching this market for about a year. From July 2007 to Feburary 2008 prices fell by almost 5% a month!! For a home worth $360,000 about a year ago this meant prices fell nearly 18,000 a month. I realized that such a steep drop was unsustainable and around February this year the pace of price cuts dropped. Now prices are still falling but "only" about $3000 a month.
By the way about 80% of San Joaquim county sales (the county containing Stockton) are distressed home sales, either foreslosures or short sales.
Definitely seeing more pendings, the pull through to closed sales hasn't happened yet. I think Realtors are spinning their wheels with low probability transactions (short sales & lowballing REO). The Homedata closed sales article that came out a couple days was indicating that Aprils numbers weren't that fantastic just a seasonal increase. The article made it sound like March to April sales usually fall because it did so last year, which happened because of the Feb/March subprime blowup.
I've seen a few SOLD signs recently on property with for sale signs for over a year. I'd be curious know what the clearing price was relative to the original listing price.
Note that these are the first SOLD signs I have seen since last summer. So looks like buyers are showing up now and sellers are meeting them at some price point.
As for Eastlake mentioned by Prof Piggington....yes there are increased sales as I mentioned days ago; I am seeing life in homes that have been empty for a year. This however is locking in some extremely low comps for all the other homes and putting more and more resellers, all the way down to 2002, 2003 purchasers, in an upsidedown situation. I would guess that 80% or better of the for-sale inventory is empty homes. There are about 2000 homes for sale and I think there are many more than that as listed by the city as empty. I don't know if these are investors or residents, but I have seen many many homes with construction crews in them before people...so either the buyers are getting the work done first or my guess it's investors who are looking to rent/sell. If it is investors then it will do nothing to inventory but it will put pressure on rents.
Also, when the stress caused by the option arm explosion hits over the next year or two, then the price drops will hit the better areas and put even more pressure on the lower-end.
Anybody buying now to live is probably going to be upsidedown or flat for sometime and will hurt the buy-up market.
The increase in volume will no doubt be see as good news, but I remind you when Nasdaq 5000 dropped like a rock how often did anyone care about volume? It was price that mattered and what matters in the housing market. Banks and Bernanke care about prices, prices, prices,.....volume associated with big price drops is bad news.
More than 56% of 05 buyers were upside down during the first quarter this year. For 06 buyers, the number increased to 71%, and 48% of those who bought a home in 2007 were upside down. Here is Zillows breakdown of equity numbers for Orange County homeowners in Q1 2008:
Traffic for casual dining, a segment that includes Applebee's, Ruby Tuesdays and TGI Friday's, fell 0.3% in the first quarter of 2008.
The Food Marketing Institute also released a survey of 2,020 last week showing that 71% of respondents say they are cooking at home more and eating out less at restaurants.
Also: According to the American Bakers Association, flour prices are up 50 percent since January, 173 percent since last May.
Re: Consumer inflation in China rebounded to the highest level in 11 years in April, as food prices continued to surge, official statistics showed on Monday.
The Consumer Price Index (CPI), a barometer of inflation, jumped 8.5 percent from a year earlier, according to a statement on the website of the National Bureau of Statistics (NBS).
The media simply never gets it right. They give an impression, highly colored by the inexperience, bias, and laziness of the reporter. Most of all, in national events, the reporting is based upon the reporter's urgent need to magnify his or her own importance. This is only human, but it's good to recognize it.
Yet the national media is still selling us fear of a recession. One of the major national newspapers has a reporter who's desperately trying to peddle a story of national economic collapse even as the economy stays afloat.
And the beautiful part is that it's now crystal clear that we're not in a recession (we could be later -- anything can happen). There was just a report that showed first-quarter 2008 GDP growth was positive, meaning that as a matter of arithmetic we can't be in a recession, any more than a man who's gained weight can also be losing weight.
FT has an article that says banks are "starting to find buyers" for MBS's now. Another sign of improvement, or just people trying to catch falling knives?
I won't call them knife catchers. I would call them fools. All the data shows that housing price declines are never finished in a year. They are usually 10 year cycles.
The real economy is just now starting to slow. Wait until Sept. Then it will start getting pretty. Pretty Ugly!
How come no one in the world knows how to calculate - forget it - just present inflation.
Im the US they look at it month by month with tiny numbers it is either 0.1 or 0.2 (50% difference btw) or 0.3 (33.% difference) this is not the ebst way to prsent a value which is around 10% a year.
In china they go for the yearly rate - but they avergae it a year back.
If it was yield of some bond they would know what to do: Take the monthly rate (say it is 0.25 % last month) and do this
1.0025% to the power of 12 and now reduce 1 = this is your real on going inflation rate expressed in per year numbers.
"I just wonder why people don't just say NO to what I see as outrageous prices."
Because some of them don't know what outrageous is. They have been conditioned all of their lives that R/E, like stocks, long term go up and that's all that matters. If you are in your 20's and have the means, plan to live there for 20 years or so, and buy now even if you over pay you will eventually be ok in our fiat money, government spending, inflation is growth system. The inflation and it's source is the part they don't understand.
We're seeing something similar in Northern VA. Prince William County and other outlying areas that have been savaged with REOs and short sales are now moving, now that prices have dropped substantially, while close-in areas like Arlington have had little to no price movement but transaction volume has dropped off a cliff.
On the NoVA regional bubble blog I suggested that this was evidence of a substitution effect - buyers who would purchase close in are being drawn farther out by the increased price delta. I was surprised by the ardor of those who argued with complete conviction that there is no substitute good for Arlington and McLean real estate, and that price drops in outlying areas will have no impact on the "desirable" areas!
It's going to take some time for these folks to get the memo, I think. The kool-aid is still flowing freely.
Yal,
Not to be nit picky, but your math applies to things where interest is paid on a monthly basis. I.e. a home loan or a car loan. A month is treated as 1/12th of a year. You pay the same interest in February that you pay in March.
You can calculate an annualized inflation rate this way, but it would make more sense to take the number of days in the month into account. I.e. February would be 28/365 of a year instead of 1/12th. So if the inflation rate in February is 0.25% tha annualized rate would be ((1.0025)^(365/28) - 1 ) * 100%.
Things like money market funds pay more interest in March than February because March has more days. They typically calculate a daily interest rate of (1/365 of a year or 1/366 of a year every calendar leap year or 1/365.25 of a year every year) and pay out the accrued interest for the month at months end.
How to treat leap years is another issue. Basically leap years make it impossible to have a standardized way of annualizing daily numbers so that the annualized number works for all year intervals. I.e. if something pays 5% interest and the interest is accrued daily, You can't make all investment annivesary returns equal 5% annualized as long as everyone's investment in the fund grows at the same daily rate. I've presented the proof to this to many actuaries at financial and insurance companies over the years and they all eventually agreed that I was right. They typically compromise and treat every year as having 365.25 days. Close enough.
Saw a friend at a wedding this weekend. He and his wife moved to Colorado 4 years ago for her to do her MD residency. Bought a nice suburban house for $200K. He put in a new kitchen and bathroom. In the past year she finished the residency and took a job 5 hours away. They have been trying to sell the house for almost a year. Asking price of $200K. No dice. A few months ago he got a call from his realtor saying, "so, I see you've sold your house". He said, "What?!" She said, "we'll i'm here at the house and there are two men living here who say they bought the house". He told her to call the cops. The guys ran. They had been living there for weeks.
He says nothing is selling. New developments are in bad shape. Foreclosures everywhere.
Just one story of one person's bad luck. However, if people want to say housing is turning around, I'll be happy to take their money.
MBIA reports a loss of $13.03 per share. Market doesnt mind as earnings dont actually matter anymore. Time to continue loading up on this stock ahead of the further capital raising announcement.
Well, if the guy reduced his $200,000 house 40%, it would probably sell at $120,000.
So I think there is a bottom lurking there. Maybe things will go down another 5% or so, but compared to previous carnage, not so bad. Knife catchers
will get a nick only, not have their
fingers cut off. For heaven's sakes,
even in GD 1, prices went down "only"
30%.
I think bears here will say it has further down to go, even if it goes
down 90%!!
If you put 10% or 15% down, at 40% you will
not go underwater.
Well, if you cut the prices of houses in half, activity might pick up - I can believe that.
Unfortunately, in many places, Maryland being one of them, we are still living int the realm of 10% off 2005 pricing is a "discount" because they "can't just GIVE the home away!" and "we're all rich because of DC." and so on.
I expect our housing market will also pick up... after prices fall 40% or so.
If you put 10% or 15% down, at 40% you will
not go underwater.
Lawyerliz | 05.12.08 - 8:45 am | #
Liz,
When the place a guy is buying here at work closes in a month or so I'll post all the details. Think 600k plus place at the peak. Bank was asking 200k as a REO. He offered 170k and they took it!!!
Like he said,Yep he understands there could be more downside but he is using a shitload of cash from a sale up north 3 years ago so his payment is gonna be nil. He has been in a tiny apt with a wife and 3 kids.
BTW,the place is a 5/4/4 on a .5 acre lot...On a golf course !!!
Just as the unsophisticated low end buyers were the most likely to buy at the the top of the bubble, and enter into disadvatageous loans, they will now be the most likely to be the knife catchers.
If homebuyers used homes as an investment vehicle, this would look like the setup of a bulltrap. But since nobody ever uses homes as investment vehicles, everything looks fine.
I wouldn't sweat the gojillion IO recasts and ARM resets coming in the next twenty months or so--they'll have no net effect on the eleven month inventory overhang.
"In his area of interest(1 mile around zip code 85281)Anything below $250k is selling within a week, anything above $250k to conforming is taking a couple of months, anything above conforming to $1mm isn't moving at all, anything above $1mm is behaving regularly."
Cash - FHA - What used to be the private mortgage mkt - Cash
FWIW my rent in NYC was just offered to me for ZERO increase versus last year. To me that is a huge deal and a sign of weakness in the great NYC market.
Rent vs buy here is still over 2.5x (to buy) - you can rent a 1300 sq ft two bedroom for $5k/month - high end building whereas buying would cost $12k all in (roughly).
Sales are up in these areas, but are foreclosures up as well? I think the key question is what's happening to REO inventory?
If they are seriously decreasing their inventory, that would be encouraging. If they are just keeping it steady at a very high level, this has a long way to go.
"MBIA reports a loss of $13.03 per share. Market doesn’t mind as earnings don’t actually matter anymore."
Earnings don't actually matter... hmmm, this sounds like 2000 all over again!
On another note: I think I-Tulip predicted long ago that the real-estate 'turmoil' would begin in outlying areas and move inward. That does seem to be tha pattern in many cities - though not all. The gas price issue will affect that picture, too, as Alec mentioned above.
If you sell your house at 40% less than you paid for it 4 years ago, odds are you are going to have to come up with some cash at the closing. Not many are willing to do that. Or able to do it.
I don't believe it as simple as you make it out to be.
as someone noted above, the season of resets has just begun. It will be a long season.
Housing prices where I live are still going up. I'm in the process of selling the last of 4 rental buildings my family and I bought and rehabbed in the past 4 years. More than doubling our money. I'm selling this last one to someone who has said, "I think real estate is a really good investment right now". Now I'm selling at prices where the investment still makes sense if it never goes up in value. They can break even on rents and even make some money. I don't think they will double their money in 4 years like we did.
Am I too bearish? So far its been working well. And I'm well hedged. If the real estate market turns around tomorrow and its all clear sailing from here, i'll eat my losses on SRS and celebrate my good fortune.
What I noticed around here in Charlotte County is below say 50k properties last fall disappeared pretty quickly. As the demand was filled at what people thought was a good deal listings started piling up.
I follow the MLS like a hawk and in the last 3 months we went from 450-475 listings below 100k to north of 600 this week. 3 years ago 100k got ya a dumpy trailer in a trailer park.
Oh,there are currently 130+ listings for 3 bedroom homes less than 100k.
On Bloomberg, Meredith Whitney says that fair value for Citigroup is 10 dollars a share. I am a bear but this is shocking. My target was 15 but now I just want to sell everything.
Pondering the Mess,
I live in the middle of montgomery county. Some homes in my neighborhood sold for around $650k at the peak 2-3 years ago. The most recent sale was for $425k. It was the lowest sales price in probably 5 years. The homes are all basically the same 4 bedroom colonials. Some are in better shape than others. The one that sold for $425k had been on the market for 2 years and from what I heard hadn't been improved in 20 years.
What I've noticed in the DC area is Loudon county is taking the biggest hit since it was the most overbuilt in the last 5 years and hence has the most distressed sales. I expect them to have price drops in excess of 25% from the peak. Prince George's county is also taking a hit since they have a higher percentage of subprime borrowers.
I think Montogmery and Fairfax will fare better since there wasn't as much recent construction. They'll still take a hit, but not as big a hit.
I know everyone thinks this, but DC won't suffer as much as other areas because our economy is more stable. We experience smaller booms and we experience smaller busts. There aren't any abondoned foreclosed homes that I know of near where I live.
You don't have to sell at the top, or buy at the bottom to do well, just near them. This article makes complete sense and that is what is happening around here. Two close friends of mine who both own real estate firms have told me that "kick the tires" traffic is WAY up now, and that there is a lot of pent up demand from people not wanting to get burned. If they feel prices have somewhat stopped their lunge downward and leveled off, they'll buy.
It's overly facile to use the term "knife catchers", isn't it? Again, who can call the absolute top or the bottom? But what will happen here is the REOs will set the comps, and then sellers will either stay put, or they'll get realistic. In these parts many people selling are NOT the ones that bought near the peak, but people still looking to make big gains because that's what they were told. They'll get religion soon enough.
For 90% of the normal people, the buy decision is not based on investment calculations. It's based on simple desire, family pressure, and some monthly figure that isn't so far about renting that they'll do it to have a place of their own. These signs of life bear that out.
An update (from local media) on the Arkansas bank closing last Friday. These reported actions by the FDIC described in the article seem to indicate a large or suspected fraud.
"A local bank is shut down by the Feds, and employees were held for about six hours. The bank is Arkansas National Bank, located at Taylor Crossing in Idaho Falls.
We're told about 3:30 Friday afternoon federal regulators came in, closed the bank, and seized all the assets and property. No employees were even allowed to leave.
The Feds let employees leave around 9 P.M., after searching all of the their personal belongings and confiscating employees' keys.
The government has even hired police officers, who will constantly supervise the bank throughout the investigation. Federal regulators say they've closed ANB after discovering "unsafe and unsound" business practices. Regulators will be auditing all of the loans and accounts through the bank. Over the weekend, all deposit customers can access insured money by writing checks, or by using debit or ATM cards. Checks drawn on the bank that did not clear before Friday will be honored up to the insured limit. Customers with uninsured deposits can either call the FDIC toll-free at 1-877-367-2719, or click on newslinks above for a link to the FDIC's website.
The toll-free number will be working Saturday morning by 7 A.M. The failed bank's all nine offices will re-open Monday morning as branches of Pulaski Bank and Trust Company. Local Bank Under Federal Investigation |
KIDK CBS 3 - News, Weather and Sports - Idaho Falls - Pocatello - Blackfoot, ID
- Idaho Falls, Pocatello, Blackfoot - Idaho
| Local & Regional
Transaction volumes are probably picking up because of all the REO sales in these areas.
This doesn't mean prices have bottomed - especially in real terms - but the increase in transaction volume might indicate that most of the nominal price decline has already occurred for some low end areas.
When foreclosure volumes start to come way down then it's time to start thinking about a bottom if history is any indicator. Right now that appears to be a long way off.
We are a long way from the bottom in the SF Bay Area,even absent a recession.I found myself telling someone that Rome was not destroyed in a day last weekend,which got me an odd look.
"Think 600k plus place at the peak. Bank was asking 200k as a REO. He offered 170k and they took it!!!"
As a realtor in Greater Palm Springs(Riverside Co) I would love to find such REOs for the many clients I have looking to "steal" a property. They just don't exist here-yet. A nice home offered at that huge a discount would attract 20+ offers--way over asking. I guess it depends on the market. Even at public auction, such a property would probably sell for $400K or thereabouts.
'Housing units in zip code 22031 with a mortgage: 4,130 (554 second mortgage, 497 home equity loan, 7 both second mortgage and home equity loan)
Houses without a mortgage: 718
Median monthly owner costs for units with a mortgage: $1,601
Median monthly owner costs for units without a mortgage: $451'
I have no idea of the date or source of the data, and admittedly, Fairfax City has had a few waves of development, and is subject to a fair bit of turnover, due to GMU, government employment, etc.
But this was even more striking -
'Housing units in zip code 22032 with a mortgage: 7,230 (1,109 second mortgage, 880 home equity loan, 77 both second mortgage and home equity loan)
Houses without a mortgage: 877
Median monthly owner costs for units with a mortgage: $1,621
Median monthly owner costs for units without a mortgage: $406'
22031 is one of those ZIP codes where, actually, people live in the same house longer than average for the region (some other ZIP/Census mash-up - sorry, don't remember the link). This also includes a number of retired military/government/contractor home 'owners.'
But look at the numbers - someone is making a lot of money in the difference between mortgaged and unmortgaged housing, and the number of free and clear housing in both ZIP codes is around 15%.
The numbers surprised me, since we are talking about a very solidly educated and middle class demographic here, even if it tends to higher mandatory mobility than might be found in some regions due to the nature of some government jobs.
And yet, roughly 85% are in debt for their housing.
I think the debt crash has a long, long way to go - Americans have been living beyond their means for something approaching a generation, and the looming bill is becoming harder to simply explain away.
Don't take too much comfort in appearances - even in areas without much in the way of recent building, debt accumulation remained part of the American Dream.
The alarm clock might go into snooze mode for another period of drowsiness dreams, but soon, it won't shut off so easily.
Oops - '22031 is one of those ZIP codes' should read '22032.'
22032 is a remarkably stable area in Fairfax in terms of how long people remain in their houses, and since I can't remember the link, I won't hazard any guesses, except to note it was much higher than in other areas around it, like Burke or Springfield.
CR says, "At some price, buying vs. renting makes sense." But not necessarily. Buying would still make no sense even when the cost is the same as renting if the value of residential real estate continues to decline.
Then there's the idea that, even when you're comparing buying to renting, there's also a relationship of buying and renting not to each other, but to the whole national economy. Both buying and renting may be too costly at the same time. In other words, the ratio of monthly housing costs to incomes may still be historically very high.
Then, there's the question of whether falling home prices bring down rents, and how much of a time lag in involved there. So, when the day comes that buying is better than renting, that may be just temporarily till rents catch up.
Outsider -
I honestly don't know. Some sourced data is definitely 2000 Census data, Other data is absolutely impossible for me to guess at source. Some data is dated, and some of the dates are reasonable to consider as the latest - at least in terms of publication schedule.
Some data is definitely outdated - unfortunately, the mortgage information is truly undated, and its source is difficult to discern.
However, there is no way I can imagine that number of mortgaged homes has decreased since 2000, and the percentages noted for 22031 and 22032 are remarkably high, at least from the national standard assumption of often used here.
The data quite honestly shocked me, as data often will, when compared against lazy assumptions and stereotypes - ones often repeated, without any data at all to support them.
I assume the data are quite accurate - my personal guess, the data is roughly from 2006.
The other thing - the mortgage stream from 22032 is roughly 500 million dollars a month. That is enough money for anyone interested in dipping their hands into to it to be equally interested in making sure that the revenue flows into the future.
After all, look at how little those unmortgaged people are contributing to the growth of the American financial system.
Which is a sickening statement in itself, isn't it? And yet, one our current Treasury secretary would grasp instinctively.
I was surprised by the ardor of those who argued with complete conviction that there is no substitute good for Arlington and McLean real estate, and that price drops in outlying areas will have no impact on the "desirable" areas!
The exact same mindset is exhibited in "nice" areas of LA, and I suspect in "nice" areas everywhere. The belief is that until it happens. . . it won't happen.
Here in Sacramento, what sells are the very distressed homes because they've finally dipped down into the affordability range for the area. Most everything else just sits.
Now I do have one acquaintence who is about to do a walk away. They bought a huge centex monster and are now purchasing a second home in the downtown area for 240k. Once they close, they are going to let the Centex house go. When I asked how in the hell they could get financing, they admitted to draining a 401k and using some inheritance money. They are banking on the lenders being swamped enough to not come after them. I rolled my eyes and wished them good luck that.
Slightly OT. Took the wife out to breakfast this weekend and I was amazed the prices had been increased over 25%. About half the tables were empty, at a time the place would have been full normally. Also, hearing anecdotes about people burning down their houses with the SUV and pickup parked in the garage. If oil and food prices don't come down soon, this could get really ugly. Experiencing falling living standards, though inevitable, isn't fun.
This thread just shows the folly of trying to call a bottom. Remember how people used to try to claim that all real estate is local, that it's different here, prices never go down in [fill in the blank], etc.? That wasn't and isn't entirely true, but it's also not completely false. Different markets are going to bottom at different declines and points in time, and different market segments are going to bottom at different levels and different points in time. Of couse there will be some contagion and spill over and so on, and bigger economic macros will impact the entire market (but the impact won't be consistent or even).
But some interesting patterns are developing. After it's all over, it will be interesting to see how many of them hold up, and how many turn out to be false heuristics.
dead cat bounce, knife catchers, call it what you want, I suspect though that they will be another 30% under water before the bottom
You described pretty well what I am seeing here in Ventura county. The high end is frozen except short pay and bank owned stuff at about 30-40% off the peak. Many prices are stickier and are not moving. I have observed a lot of listings that did not move last year just have not come back on the market. The question will be how long can the folks can remain hunkered down. With Countrywide, Amgen, Dole, etc. my guess is not too much longer.
FinanceGuy, yes, I'm finally hearing stories from agents in the trenches that lenders are reducing some REO prices enough to sell them - but only in the lowest priced areas. This doesn't mean a bottom in prices - but it is a "sign of life". At some price, buying vs. renting makes sense.
I don't know how much a median priced home ($265K) in Riverside rents for - but my guess is the numbers now make sense for some renters.
Best Wishes.
Meruelo Maddux Tumble Puts Los Angeles on Sale at 65% Discount
"A package of Los Angeles real estate on sale for 35 cents on the dollar is attracting investors to the depressed shares of Meruelo Maddux Properties Inc., the biggest private landowner in the city's four-square-mile downtown."
Meruelo Maddux Tumble Puts Los Angeles on Sale at 65% Discount - Bloomberg.com
Sometimes the prices people pay just leave me shaking my head. I've got a 2br, 2 1/2 bath, 1400 sq townhouse at the very back corner of a cul-de-sac with a 2 car attached garage that isn't out in the suburbs, everything in town is relativly close, yet in 2002 I only paid 75K for it. I just wonder why people don't just say NO to what I see as outrageous prices.
baba writes:
dead cat bounce, knife catchers, call it what you want, I suspect though that they will be another 30% under water before the bottom
I second that. The credit crunch isn't done. The meme of "Buy now or be priced out forever" isn't dead yet. Nor are the loan resets. This is a breather, not even the end run. I don't want pain for others... but the long term indicators aren't good.
Not to mention, the banks haven't dug themselves out of their hole yet.
Got Popcorn?
Neil
A different way of putting it is that a huge percentage of the market in San Diego, Riverside and Las Vegas (where sales are also accelerating) are REOs, and banks are willing to take the market price to clear the drek off their balance sheets (unlike unrealistic private owners).
And, obviously, sales happen at market prices, whereas they do not happen when offering prices are above market (as has largely been the case until now).
This says nothing about whether the market is going up, down or sideways, it only says something about the willingness of sellers to sell at market.
In Vegas, there are apparently a lot of investors piling in looking to pick up foreclosures cheap on the theory that all the building on the strip will result in a lot more jobs, increasing the demand for housing in Vegas over the next two years.
Unfortunately, whether the strip can employ people depends more on the demand for gambling (which is dropping fast) than the number of rooms on the strip (because if the rooms can't be filled, at least some casinos are going out of business).
I was talking with a friend who's a hard core landlord who was trimming his portfolio in Tempe, AZ.
In his area of interest(1 mile around zip code 85281)Anything below $250k is selling within a week, anything above $250k to conforming is taking a couple of months, anything above conforming to $1mm isn't moving at all, anything above $1mm is behaving regularly.
He's got more applicants than properties, 25%(from 0% YoY) are people who are trying to move closer to city center due to transport costs.
I can imagine this scenario playing out in waves, starting in the less expensive areas, then moving up the price ladder to nicer areas...then rippling back out to see new reductions again in the less desirable areas. Rinse. Repeat... until the true bottom is finally reached.
Calculated Risk: I can give you the buy-rent equation in Stockton, California one of the hardest hit markets in the nation. Stockton has also seen increases in sales volumes on a year-over-year basis from February to April. Prices have fallen enough so that the cost of buying is similar than renting. A 30 year old three bed, 2 bath house sells for $180,000 (almost exclusively REO properties) and rents for about $1,100 per month. The New York Times calculator suggests buying is better than renting after 5 years. - NY Times
But even though sales are up on a year-over-year basis prices are still falling because of an increasing number of foreclosures for sales and more aggresive price cutting by banks. I have been closely watching this market for about a year. From July 2007 to Feburary 2008 prices fell by almost 5% a month!! For a home worth $360,000 about a year ago this meant prices fell nearly 18,000 a month. I realized that such a steep drop was unsustainable and around February this year the pace of price cuts dropped. Now prices are still falling but "only" about $3000 a month.
By the way about 80% of San Joaquim county sales (the county containing Stockton) are distressed home sales, either foreslosures or short sales.
OT,
New layout is nice.
Carry on...
Definitely seeing more pendings, the pull through to closed sales hasn't happened yet. I think Realtors are spinning their wheels with low probability transactions (short sales & lowballing REO). The Homedata closed sales article that came out a couple days was indicating that Aprils numbers weren't that fantastic just a seasonal increase. The article made it sound like March to April sales usually fall because it did so last year, which happened because of the Feb/March subprime blowup.
I've seen a few SOLD signs recently on property with for sale signs for over a year. I'd be curious know what the clearing price was relative to the original listing price.
Note that these are the first SOLD signs I have seen since last summer. So looks like buyers are showing up now and sellers are meeting them at some price point.
As for Eastlake mentioned by Prof Piggington....yes there are increased sales as I mentioned days ago; I am seeing life in homes that have been empty for a year. This however is locking in some extremely low comps for all the other homes and putting more and more resellers, all the way down to 2002, 2003 purchasers, in an upsidedown situation. I would guess that 80% or better of the for-sale inventory is empty homes. There are about 2000 homes for sale and I think there are many more than that as listed by the city as empty. I don't know if these are investors or residents, but I have seen many many homes with construction crews in them before people...so either the buyers are getting the work done first or my guess it's investors who are looking to rent/sell. If it is investors then it will do nothing to inventory but it will put pressure on rents.
Also, when the stress caused by the option arm explosion hits over the next year or two, then the price drops will hit the better areas and put even more pressure on the lower-end.
Anybody buying now to live is probably going to be upsidedown or flat for sometime and will hurt the buy-up market.
The increase in volume will no doubt be see as good news, but I remind you when Nasdaq 5000 dropped like a rock how often did anyone care about volume? It was price that mattered and what matters in the housing market. Banks and Bernanke care about prices, prices, prices,.....volume associated with big price drops is bad news.
Off Topic:
Does the BAC-CFC deal survive till the end of the week?
but the increase in transaction volume might indicate that most of the nominal price decline has already occurred for some low end areas.
That is until the real recession hits and people other than Realtors and mortgage brokers start losing jobs.
Half of 2005-07 O.C. buyers owe more than homes value
Lansner on Real Estate : The Orange County Register
More than 56% of 05 buyers were upside down during the first quarter this year. For 06 buyers, the number increased to 71%, and 48% of those who bought a home in 2007 were upside down. Here is Zillows breakdown of equity numbers for Orange County homeowners in Q1 2008:
This could be a sign that the REO floodgates are opening, which (to pile on the water metaphors) could signal a second wave.
Traffic for casual dining, a segment that includes Applebee's, Ruby Tuesdays and TGI Friday's, fell 0.3% in the first quarter of 2008.
The Food Marketing Institute also released a survey of 2,020 last week showing that 71% of respondents say they are cooking at home more and eating out less at restaurants.
Also: According to the American Bakers Association, flour prices are up 50 percent since January, 173 percent since last May.
Re: Consumer inflation in China rebounded to the highest level in 11 years in April, as food prices continued to surge, official statistics showed on Monday.
The Consumer Price Index (CPI), a barometer of inflation, jumped 8.5 percent from a year earlier, according to a statement on the website of the National Bureau of Statistics (NBS).
Woot! Local paper on the front page of Calculated Risk!
=)
Recessions Are in the Eye of the Beholder
Yahoo! Personal Finance: Calculators,Money Advice,Guides,& More
The media simply never gets it right. They give an impression, highly colored by the inexperience, bias, and laziness of the reporter. Most of all, in national events, the reporting is based upon the reporter's urgent need to magnify his or her own importance. This is only human, but it's good to recognize it.
Yet the national media is still selling us fear of a recession. One of the major national newspapers has a reporter who's desperately trying to peddle a story of national economic collapse even as the economy stays afloat.
And the beautiful part is that it's now crystal clear that we're not in a recession (we could be later -- anything can happen). There was just a report that showed first-quarter 2008 GDP growth was positive, meaning that as a matter of arithmetic we can't be in a recession, any more than a man who's gained weight can also be losing weight.
by Ben Stei
FT has an article that says banks are "starting to find buyers" for MBS's now. Another sign of improvement, or just people trying to catch falling knives?
FT.com / Comment / Analysis - Value to unlock: Banks are starting to find buyers for mortgage securities
CR,
Can you give the adds on the blog a slightly different colour, so that they are colour-coded to be skipped.
I won't call them knife catchers. I would call them fools. All the data shows that housing price declines are never finished in a year. They are usually 10 year cycles.
The real economy is just now starting to slow. Wait until Sept. Then it will start getting pretty. Pretty Ugly!
How come no one in the world knows how to calculate - forget it - just present inflation.
Im the US they look at it month by month with tiny numbers it is either 0.1 or 0.2 (50% difference btw) or 0.3 (33.% difference) this is not the ebst way to prsent a value which is around 10% a year.
In china they go for the yearly rate - but they avergae it a year back.
If it was yield of some bond they would know what to do: Take the monthly rate (say it is 0.25 % last month) and do this
1.0025% to the power of 12 and now reduce 1 = this is your real on going inflation rate expressed in per year numbers.
Was it so hard ?
"I just wonder why people don't just say NO to what I see as outrageous prices."
Because some of them don't know what outrageous is. They have been conditioned all of their lives that R/E, like stocks, long term go up and that's all that matters. If you are in your 20's and have the means, plan to live there for 20 years or so, and buy now even if you over pay you will eventually be ok in our fiat money, government spending, inflation is growth system. The inflation and it's source is the part they don't understand.
We're seeing something similar in Northern VA. Prince William County and other outlying areas that have been savaged with REOs and short sales are now moving, now that prices have dropped substantially, while close-in areas like Arlington have had little to no price movement but transaction volume has dropped off a cliff.
On the NoVA regional bubble blog I suggested that this was evidence of a substitution effect - buyers who would purchase close in are being drawn farther out by the increased price delta. I was surprised by the ardor of those who argued with complete conviction that there is no substitute good for Arlington and McLean real estate, and that price drops in outlying areas will have no impact on the "desirable" areas!
It's going to take some time for these folks to get the memo, I think. The kool-aid is still flowing freely.
-Jaso
Yal,
Not to be nit picky, but your math applies to things where interest is paid on a monthly basis. I.e. a home loan or a car loan. A month is treated as 1/12th of a year. You pay the same interest in February that you pay in March.
You can calculate an annualized inflation rate this way, but it would make more sense to take the number of days in the month into account. I.e. February would be 28/365 of a year instead of 1/12th. So if the inflation rate in February is 0.25% tha annualized rate would be ((1.0025)^(365/28) - 1 ) * 100%.
Things like money market funds pay more interest in March than February because March has more days. They typically calculate a daily interest rate of (1/365 of a year or 1/366 of a year every calendar leap year or 1/365.25 of a year every year) and pay out the accrued interest for the month at months end.
How to treat leap years is another issue. Basically leap years make it impossible to have a standardized way of annualizing daily numbers so that the annualized number works for all year intervals. I.e. if something pays 5% interest and the interest is accrued daily, You can't make all investment annivesary returns equal 5% annualized as long as everyone's investment in the fund grows at the same daily rate. I've presented the proof to this to many actuaries at financial and insurance companies over the years and they all eventually agreed that I was right. They typically compromise and treat every year as having 365.25 days. Close enough.
So, it's not quite as simple as you claim.
Saw a friend at a wedding this weekend. He and his wife moved to Colorado 4 years ago for her to do her MD residency. Bought a nice suburban house for $200K. He put in a new kitchen and bathroom. In the past year she finished the residency and took a job 5 hours away. They have been trying to sell the house for almost a year. Asking price of $200K. No dice. A few months ago he got a call from his realtor saying, "so, I see you've sold your house". He said, "What?!" She said, "we'll i'm here at the house and there are two men living here who say they bought the house". He told her to call the cops. The guys ran. They had been living there for weeks.
He says nothing is selling. New developments are in bad shape. Foreclosures everywhere.
Just one story of one person's bad luck. However, if people want to say housing is turning around, I'll be happy to take their money.
Kevin Phillips - Bad Money: the Global Crisis of American Capitalism
Bad money Kevin Phillips
Link off Jesse's Cafe America
MBIA reports a loss of $13.03 per share. Market doesnt mind as earnings dont actually matter anymore. Time to continue loading up on this stock ahead of the further capital raising announcement.
Well, if the guy reduced his $200,000 house 40%, it would probably sell at $120,000.
So I think there is a bottom lurking there. Maybe things will go down another 5% or so, but compared to previous carnage, not so bad. Knife catchers
will get a nick only, not have their
fingers cut off. For heaven's sakes,
even in GD 1, prices went down "only"
30%.
I think bears here will say it has further down to go, even if it goes
down 90%!!
If you put 10% or 15% down, at 40% you will
not go underwater.
Charlie,
the point is that infltion should be reported as the running yearly rate.
It does not make sense to report monthly as 0.1% when it is 0.14999999 or 0.0511111111%
nor does it make sense to report the diff in price froma year ago.
inflation is all about current derviative (and maybe even 2nd dervivative) or price change and prjections for the future (not the far past)
mbia confessional ! mbia confessional!
panmdering for hat tip behind bizarro and others(grrrrrr)
Well, if you cut the prices of houses in half, activity might pick up - I can believe that.
Unfortunately, in many places, Maryland being one of them, we are still living int the realm of 10% off 2005 pricing is a "discount" because they "can't just GIVE the home away!" and "we're all rich because of DC." and so on.
I expect our housing market will also pick up... after prices fall 40% or so.
If you put 10% or 15% down, at 40% you will
not go underwater.
Lawyerliz | 05.12.08 - 8:45 am | #
Liz,
When the place a guy is buying here at work closes in a month or so I'll post all the details. Think 600k plus place at the peak. Bank was asking 200k as a REO. He offered 170k and they took it!!!
Like he said,Yep he understands there could be more downside but he is using a shitload of cash from a sale up north 3 years ago so his payment is gonna be nil. He has been in a tiny apt with a wife and 3 kids.
BTW,the place is a 5/4/4 on a .5 acre lot...On a golf course !!!
Chris
I dont count 'signed sales contracts' anymore. Only successful closings count in this new era of deleveraging.
Just as the unsophisticated low end buyers were the most likely to buy at the the top of the bubble, and enter into disadvatageous loans, they will now be the most likely to be the knife catchers.
"Think 600k plus place at the peak. Bank was asking 200k as a REO. He offered 170k and they took it!!!"
Sounds like a safe bet to me.
If homebuyers used homes as an investment vehicle, this would look like the setup of a bulltrap. But since nobody ever uses homes as investment vehicles, everything looks fine.
I wouldn't sweat the gojillion IO recasts and ARM resets coming in the next twenty months or so--they'll have no net effect on the eleven month inventory overhang.
Jump in, because rents only go up!
"In his area of interest(1 mile around zip code 85281)Anything below $250k is selling within a week, anything above $250k to conforming is taking a couple of months, anything above conforming to $1mm isn't moving at all, anything above $1mm is behaving regularly."
Cash - FHA - What used to be the private mortgage mkt - Cash
FWIW my rent in NYC was just offered to me for ZERO increase versus last year. To me that is a huge deal and a sign of weakness in the great NYC market.
Rent vs buy here is still over 2.5x (to buy) - you can rent a 1300 sq ft two bedroom for $5k/month - high end building whereas buying would cost $12k all in (roughly).
SR
CR,
Sales are up in these areas, but are foreclosures up as well? I think the key question is what's happening to REO inventory?
If they are seriously decreasing their inventory, that would be encouraging. If they are just keeping it steady at a very high level, this has a long way to go.
"MBIA reports a loss of $13.03 per share. Market doesn’t mind as earnings don’t actually matter anymore."
Earnings don't actually matter... hmmm, this sounds like 2000 all over again!
On another note: I think I-Tulip predicted long ago that the real-estate 'turmoil' would begin in outlying areas and move inward. That does seem to be tha pattern in many cities - though not all. The gas price issue will affect that picture, too, as Alec mentioned above.
liz
If you sell your house at 40% less than you paid for it 4 years ago, odds are you are going to have to come up with some cash at the closing. Not many are willing to do that. Or able to do it.
I don't believe it as simple as you make it out to be.
as someone noted above, the season of resets has just begun. It will be a long season.
Housing prices where I live are still going up. I'm in the process of selling the last of 4 rental buildings my family and I bought and rehabbed in the past 4 years. More than doubling our money. I'm selling this last one to someone who has said, "I think real estate is a really good investment right now". Now I'm selling at prices where the investment still makes sense if it never goes up in value. They can break even on rents and even make some money. I don't think they will double their money in 4 years like we did.
Am I too bearish? So far its been working well. And I'm well hedged. If the real estate market turns around tomorrow and its all clear sailing from here, i'll eat my losses on SRS and celebrate my good fortune.
Reality is bearish.
Journeyman | 05.12.08 - 9:25 am | #
What I noticed around here in Charlotte County is below say 50k properties last fall disappeared pretty quickly. As the demand was filled at what people thought was a good deal listings started piling up.
I follow the MLS like a hawk and in the last 3 months we went from 450-475 listings below 100k to north of 600 this week. 3 years ago 100k got ya a dumpy trailer in a trailer park.
Oh,there are currently 130+ listings for 3 bedroom homes less than 100k.
It's a freakin race to the bottom!!!!
Chris
On Bloomberg, Meredith Whitney says that fair value for Citigroup is 10 dollars a share. I am a bear but this is shocking. My target was 15 but now I just want to sell everything.
Pondering the Mess,
I live in the middle of montgomery county. Some homes in my neighborhood sold for around $650k at the peak 2-3 years ago. The most recent sale was for $425k. It was the lowest sales price in probably 5 years. The homes are all basically the same 4 bedroom colonials. Some are in better shape than others. The one that sold for $425k had been on the market for 2 years and from what I heard hadn't been improved in 20 years.
What I've noticed in the DC area is Loudon county is taking the biggest hit since it was the most overbuilt in the last 5 years and hence has the most distressed sales. I expect them to have price drops in excess of 25% from the peak. Prince George's county is also taking a hit since they have a higher percentage of subprime borrowers.
I think Montogmery and Fairfax will fare better since there wasn't as much recent construction. They'll still take a hit, but not as big a hit.
I know everyone thinks this, but DC won't suffer as much as other areas because our economy is more stable. We experience smaller booms and we experience smaller busts. There aren't any abondoned foreclosed homes that I know of near where I live.
You don't have to sell at the top, or buy at the bottom to do well, just near them. This article makes complete sense and that is what is happening around here. Two close friends of mine who both own real estate firms have told me that "kick the tires" traffic is WAY up now, and that there is a lot of pent up demand from people not wanting to get burned. If they feel prices have somewhat stopped their lunge downward and leveled off, they'll buy.
It's overly facile to use the term "knife catchers", isn't it? Again, who can call the absolute top or the bottom? But what will happen here is the REOs will set the comps, and then sellers will either stay put, or they'll get realistic. In these parts many people selling are NOT the ones that bought near the peak, but people still looking to make big gains because that's what they were told. They'll get religion soon enough.
For 90% of the normal people, the buy decision is not based on investment calculations. It's based on simple desire, family pressure, and some monthly figure that isn't so far about renting that they'll do it to have a place of their own. These signs of life bear that out.
An update (from local media) on the Arkansas bank closing last Friday. These reported actions by the FDIC described in the article seem to indicate a large or suspected fraud.
"A local bank is shut down by the Feds, and employees were held for about six hours. The bank is Arkansas National Bank, located at Taylor Crossing in Idaho Falls.
We're told about 3:30 Friday afternoon federal regulators came in, closed the bank, and seized all the assets and property. No employees were even allowed to leave.
The Feds let employees leave around 9 P.M., after searching all of the their personal belongings and confiscating employees' keys.
The government has even hired police officers, who will constantly supervise the bank throughout the investigation. Federal regulators say they've closed ANB after discovering "unsafe and unsound" business practices. Regulators will be auditing all of the loans and accounts through the bank. Over the weekend, all deposit customers can access insured money by writing checks, or by using debit or ATM cards. Checks drawn on the bank that did not clear before Friday will be honored up to the insured limit. Customers with uninsured deposits can either call the FDIC toll-free at 1-877-367-2719, or click on newslinks above for a link to the FDIC's website.
The toll-free number will be working Saturday morning by 7 A.M. The failed bank's all nine offices will re-open Monday morning as branches of Pulaski Bank and Trust Company.
Local Bank Under Federal Investigation |
KIDK CBS 3 - News, Weather and Sports - Idaho Falls - Pocatello - Blackfoot, ID
- Idaho Falls, Pocatello, Blackfoot - Idaho
| Local & Regional
Can't go down forever.
That said, it can go down in waves as pent up demand gets satisfied and there is no follow on.
Or it can be a slow decline in either nominal or absolute terms. If however you gotta live somewhere due to job or family you gotta buy.
If you have aspirations of being a RE tycoon, you gotta start buying before the big run up or if the numbers you crunch say you can make a profit.
Transaction volumes are probably picking up because of all the REO sales in these areas.
This doesn't mean prices have bottomed - especially in real terms - but the increase in transaction volume might indicate that most of the nominal price decline has already occurred for some low end areas.
When foreclosure volumes start to come way down then it's time to start thinking about a bottom if history is any indicator. Right now that appears to be a long way off.
We are a long way from the bottom in the SF Bay Area,even absent a recession.I found myself telling someone that Rome was not destroyed in a day last weekend,which got me an odd look.
"Think 600k plus place at the peak. Bank was asking 200k as a REO. He offered 170k and they took it!!!"
As a realtor in Greater Palm Springs(Riverside Co) I would love to find such REOs for the many clients I have looking to "steal" a property. They just don't exist here-yet. A nice home offered at that huge a discount would attract 20+ offers--way over asking. I guess it depends on the market. Even at public auction, such a property would probably sell for $400K or thereabouts.
I have been waiting for an appropriate thread to post this, and this is the hook.
'I think Montogmery and Fairfax will fare better since there wasn't as much recent construction. They'll still take a hit, but not as big a hit.'
Just a few days ago, I ran across a link to Stats about all US cities - real estate, relocation info, house prices, home value estimator, recent sales, cost of living, crime, race, income, photos, education, maps, weather, houses, schools, neighborhoods, and more. Fascinating, especially when plugging in two ZIP codes, one for Fairfax City, the other next to it.
What was striking was the following -
'Housing units in zip code 22031 with a mortgage: 4,130 (554 second mortgage, 497 home equity loan, 7 both second mortgage and home equity loan)
Houses without a mortgage: 718
Median monthly owner costs for units with a mortgage: $1,601
Median monthly owner costs for units without a mortgage: $451'
I have no idea of the date or source of the data, and admittedly, Fairfax City has had a few waves of development, and is subject to a fair bit of turnover, due to GMU, government employment, etc.
But this was even more striking -
'Housing units in zip code 22032 with a mortgage: 7,230 (1,109 second mortgage, 880 home equity loan, 77 both second mortgage and home equity loan)
Houses without a mortgage: 877
Median monthly owner costs for units with a mortgage: $1,621
Median monthly owner costs for units without a mortgage: $406'
22031 is one of those ZIP codes where, actually, people live in the same house longer than average for the region (some other ZIP/Census mash-up - sorry, don't remember the link). This also includes a number of retired military/government/contractor home 'owners.'
But look at the numbers - someone is making a lot of money in the difference between mortgaged and unmortgaged housing, and the number of free and clear housing in both ZIP codes is around 15%.
The numbers surprised me, since we are talking about a very solidly educated and middle class demographic here, even if it tends to higher mandatory mobility than might be found in some regions due to the nature of some government jobs.
And yet, roughly 85% are in debt for their housing.
I think the debt crash has a long, long way to go - Americans have been living beyond their means for something approaching a generation, and the looming bill is becoming harder to simply explain away.
Don't take too much comfort in appearances - even in areas without much in the way of recent building, debt accumulation remained part of the American Dream.
The alarm clock might go into snooze mode for another period of drowsiness dreams, but soon, it won't shut off so easily.
Oops - '22031 is one of those ZIP codes' should read '22032.'
22032 is a remarkably stable area in Fairfax in terms of how long people remain in their houses, and since I can't remember the link, I won't hazard any guesses, except to note it was much higher than in other areas around it, like Burke or Springfield.
rent_to_own - how recent is that data? When I plugged in my town, I only got 2000 figures.
CR says, "At some price, buying vs. renting makes sense." But not necessarily. Buying would still make no sense even when the cost is the same as renting if the value of residential real estate continues to decline.
Then there's the idea that, even when you're comparing buying to renting, there's also a relationship of buying and renting not to each other, but to the whole national economy. Both buying and renting may be too costly at the same time. In other words, the ratio of monthly housing costs to incomes may still be historically very high.
Then, there's the question of whether falling home prices bring down rents, and how much of a time lag in involved there. So, when the day comes that buying is better than renting, that may be just temporarily till rents catch up.
Outsider -
I honestly don't know. Some sourced data is definitely 2000 Census data, Other data is absolutely impossible for me to guess at source. Some data is dated, and some of the dates are reasonable to consider as the latest - at least in terms of publication schedule.
Some data is definitely outdated - unfortunately, the mortgage information is truly undated, and its source is difficult to discern.
However, there is no way I can imagine that number of mortgaged homes has decreased since 2000, and the percentages noted for 22031 and 22032 are remarkably high, at least from the national standard assumption of often used here.
The data quite honestly shocked me, as data often will, when compared against lazy assumptions and stereotypes - ones often repeated, without any data at all to support them.
I assume the data are quite accurate - my personal guess, the data is roughly from 2006.
The other thing - the mortgage stream from 22032 is roughly 500 million dollars a month. That is enough money for anyone interested in dipping their hands into to it to be equally interested in making sure that the revenue flows into the future.
After all, look at how little those unmortgaged people are contributing to the growth of the American financial system.
Which is a sickening statement in itself, isn't it? And yet, one our current Treasury secretary would grasp instinctively.
I hate this javascript switching - the anon above replying to Outsider was me.
I was surprised by the ardor of those who argued with complete conviction that there is no substitute good for Arlington and McLean real estate, and that price drops in outlying areas will have no impact on the "desirable" areas!
The exact same mindset is exhibited in "nice" areas of LA, and I suspect in "nice" areas everywhere. The belief is that until it happens. . . it won't happen.
What an outrageous price..... Some of the data are really confusing
IRAQI DINAR
Here in Sacramento, what sells are the very distressed homes because they've finally dipped down into the affordability range for the area. Most everything else just sits.
Now I do have one acquaintence who is about to do a walk away. They bought a huge centex monster and are now purchasing a second home in the downtown area for 240k. Once they close, they are going to let the Centex house go. When I asked how in the hell they could get financing, they admitted to draining a 401k and using some inheritance money. They are banking on the lenders being swamped enough to not come after them. I rolled my eyes and wished them good luck that.
The only bottom call I will ever give due consideration is a 50 percent or higher consensus on this board.
Slightly OT. Took the wife out to breakfast this weekend and I was amazed the prices had been increased over 25%. About half the tables were empty, at a time the place would have been full normally. Also, hearing anecdotes about people burning down their houses with the SUV and pickup parked in the garage. If oil and food prices don't come down soon, this could get really ugly. Experiencing falling living standards, though inevitable, isn't fun.
This thread just shows the folly of trying to call a bottom. Remember how people used to try to claim that all real estate is local, that it's different here, prices never go down in [fill in the blank], etc.? That wasn't and isn't entirely true, but it's also not completely false. Different markets are going to bottom at different declines and points in time, and different market segments are going to bottom at different levels and different points in time. Of couse there will be some contagion and spill over and so on, and bigger economic macros will impact the entire market (but the impact won't be consistent or even).
But some interesting patterns are developing. After it's all over, it will be interesting to see how many of them hold up, and how many turn out to be false heuristics.