OK folks, let's be realistic. Prices have fallen the most since the Great Depression. How much more do they have to fall before this recession devolves into something worse?
"Rupert writes:
OK folks, let's be realistic. Prices have fallen the most since the Great Depression. How much more do they have to fall before this recession devolves into something worse?"
If the real estate market maintains course and speed for another year, you're going to see a whole new dimension of "something worse."
these are not the droids you are looking for. rising unemployment really just means more opportunities to look for a great new job. falling house prices just means there has never been a better time to buy! interest rates are at historic lows!
the financial crisis is behind us now. Old Ben told me so, after Suzanne researched it....
Wow, foreclosures are really starting to be move the market out where I am (Calabaas/Agoura area). New listing this morning. Foreclosed 3BR condo in Agoura. Sold in '05 for $430k, currently offered at $229k. Started seeing a lot more of this kind of pricing just in the last couple weeks. This is a very desirable area (great schools, etc). It's taken a while for the aggressive pricing to work its way here, but the sellers (banks and short sales mostly) seem to finally be "getting it".
I thought LEH had goods news with another $3B in impaired assets, which is just another great opportunity, added on top of other opportunities. Everytime a new shoe drops, this is great!
Deb,
Ventura County is what Pink Floyd was thinking of when they uttered "Hanging on in quiet desperation..." The '01-'06 buyers are burning through and also watching helplessly as their equity evaporates. Tens of thousands are being pushed to the condition of being one paycheck from disaster. It doesn't show until the end.
We need to assign the parts to this cast of characters
We are the innocent helpless good people of the Shire
Darkness has fallen on the world of men(honest borrowers)
The tanned one= Sauron
Alan G= Saruman (evil white wizard)
Ben B= Gandalf the Grey(However, after he falls off the cliff we know he eventually gets to come back as Gandolph the White and helps save the day)
The Dark Riders= the IBs (they were corrupted by the power of the rings of securitization)
Boramir = Elliot Sp(we know he was overcome by the dark side but will soon sacrifice himself for the good of the other protagonists)
Orcs= subprime mortgage underwriters and their minions
Gollum= Hank P(he knows the short cut through to the credit crisis Mount Doom where the ONE most powerful deadly ring of securitization can be destroyed)
Frodo and Sam= of course, CR and Tanta, sorry Tanta well pretend Frodo was a girl (they just crossed the river and broke out on their own on their journey in search of Mount Doom seeking their destiny)
Theoden, King of Rohan = Congress- still under Sarumans spell(unfortunately, so far Gandalf hasnt been able to break it)
City of Kings = Wall Street
Rowhan= Washington
Steward of the City of Kings= ratings agencies- gave the order to abandon posts that protected the City of Kings
Aragorn= hmmmm?
Who should we get to play the rest of the fellowship, the elves and the others?
What is the point in being early back into this market. People who can't get a mortgage should be considered blessed right now. Who wants to catch a falling chainsaw?
Interesting to compare the May 2007 SoCal report with the May 2008 SoCal report. Last year, sales were taking a dive while prices were virtually unmoved. Now, sales decreases have moderated (if -15% is a moderation from -34%) but prices are tanking.
check it out:
**********May 2007************
All Homes No Sold
May-06 No Sold
May-07 Pct.
Chg Median
May-06 Median
May-07 Pct.
Chg
Los Angeles 10,714 7,426 -30.7% $515,000 $550,000 6.8%
Orange 3,762 2,675 -28.9% $634,500 $635,000 0.1%
Riverside 6,054 3,307 -45.4% $420,000 $406,000 -3.3%
San Bernardino 4,148 2,220 -46.5% $360,000 $361,750 0.5%
San Diego 4,480 3,385 -24.4% $500,000 $492,000 -1.6%
Ventura 1,145 861 -24.8% $599,500 $590,000 -1.6%
All SoCal 30,303 19,874 -34.4% $481,500 $505,000 4.9%
************May 2008***********
Sales Volume Median Price
All homes May 07 May 08 %Chng May 07 May 08 %Chng
Los Angeles 7,426 5,445 -26.70% $550,000 $422,000 -23.30%
Orange 2,675 2,266 -15.30% $635,000 $485,000 -23.60%
Riverside 3,307 3,444 4.10% $406,000 $290,000 -28.60%
San Bernardino 2,220 2,075 -6.50% $361,750 $250,250 -30.80%
San Diego 3,385 2,979 -12.00% $492,000 $380,000 -22.80%
Ventura 861 708 -17.80% $590,000 $435,000 -26.30%
SoCal 19,874 16,917 -14.90% $505,000 $370,000 -26.70%
How much more can they fall? Plenty. There's still very little inventory on the west side below $400/sqft, and that's still roughly double what it should be, at least by the time the market would naturally bottom out (imho). There's a whole mess of people still in fantasy-land for home valuation, and they all need to be disillusioned before the market can correct to rational levels.
On the upside, I think we're getting past phase one of the artificial bottom, where people were buying thinking they were getting a good bargain, only to see prices fall further and have their "steals" be underwater (aka: knife catchers). Once they are shaken out of the market, we can really start the free-fall correction period where nobody is buying, and even REO's priced 10% below market won't get bids. Then, hopefully, we'll see some real price correction, instead of the slow burn which fuels people's fantasies about nearing the bottom while prices are still 80% higher than they should be.
We need a reality show with good looking people desperately trying to hold on to their homes, paycheck to paycheck, while wildfires, drought and an earthquake hit them and their state and local government go broke and one by one they lose their jobs and are voted out of the gated community. Nah, too unbelievable.
Remember too: each REO sale reduces housing demand by one, in contrast to a traditional in which the seller typically turns around to become a buyer of another house (or condo).
"entry level" priced houses may be selling right now, but this is doing nothing to create demand for higher priced houses.
Been there, I'm going with CR as Gandalf and Tanta as Galadriel.
Anyway.
I can see why all bears' eyes are fixed on CA, AZ, and FL. However, living in MA, I think the long term danger lies in places like this one. Prices have indeed dropped--and yet, in certain "micromarkets," realtors are still able to persuade a few fools to spend 800K for a flipped house on an ugly street.
The relitters say that this or that neighborhood is "immune." Of course it's not.
But these sales point to a continued, long slow slog down for many parts of the country. Something that may be more damaging in the long run than the short, sharp shock felt in places like Orange County.
" There's a whole mess of people still in fantasy-land for home valuation, and they all need to be disillusioned before the market can correct to rational levels."
Ain't that the truth. Everyone on the west side of LA still believes this is just a little bump in the road, not the sinkhole that it really is. Denial is the name of the game. Though fear is beginning to bubble up (oun intended) as the "selling season" busts yet again....
Now, the OptionARM reset wave is starting in the next half year to so, i wonder what effect that will have. Apparently there are about 600k to 800k houses in California that are currently on OptionARMs
What was the story last year in the DQ reports.. That sales were abnormally low because subprime blew up.
Sales on the low end got hammered because of it (skewing the median upward).
Now dataquick is talking about the availability and pricing of jumbos on the high end..the mix shift is returning back to normal.. and in the case of foreclosures selling faster on the low end.. skewing the median lower.
Yesterday I talked to a girl at the park about the idea of potentially buying a house. I said "yeah, maybe in 1 to 2 years, I'll start thinking about it." She said that she was ready now "because it's now or never". This is in Phoenix. Someone actually convinced her that "it's now or never." I immediately prescribed a heavy dose of CR, but I bet she's not going to take her meds.
Just a little "color" to illustrate the current LA attitude towards Real Estate. From a curbed LA thread comes this response:
if you're renting and will never have enough money to buy in LA perhaps you should spend less time reveling in the unfortunate situation the economy is in and find a way to save up for a downpayment.
Fact is that in good neighborhoods in LA proper - ie not crap areas of the valley or other places lacking safety or a sub-2 hour commutes - there will always be a fundamentally solid level of demand for homes and a lot of people who can still afford them.
Things are definitely stabilizing in my neigborhood (Hancock Park / Larchmont), which did not see much of a fall to begin with based on the DQ data that I've seen. In the past week 3 homes withinb a 4 block radius of mine are in Escrow, one of which sold before its open house with multiple bids over asking.
I'm not saying things are all rosy, but the eager renters thinking they'll be picking up massive bargains in coming weeks/months/years are every bit as deluded as the buyers who paid the crazy prices they did for cookie cutter developments in the IE.
I am seeing more inventory in North Virginia but prices are slow to come down. As more foreclosures occur in the area and as the option ARMS reset earling (1/3 of the NOVA area used them), I hope to see some price adjustments to reality. It has been slow but the prices are moving down on the market and sellers. Now, I can only hope that my wife can wait one more year.
"Of all the Southland homes that resold in May, 37.4 percent had been foreclosed on at some point in the prior 12 months"
Astounding.
Suprise...
First?
Cheers,
LADY TRUFFLES, HOME DECOR AND APPAREL STORE, CLOSES
Sequim Gazette - News Article
These price declines are amazing.
27% haircut in one year. Even I'm amazed, and I was expecting unusually rapid price drops.
Just wait until those new higher mortgage rates ("the Bernanke Special") kick in.
There is still a significant amount of inventory from foreclosures that has not hit the market yet. We have a long way to go to get to the bottom...
With each months price drop a new round of underwater FB's will decide to walk away.
OK folks, let's be realistic. Prices have fallen the most since the Great Depression. How much more do they have to fall before this recession devolves into something worse?
Rupert,
This is not a recession and the economy is doing well.
Geez Rupert, stop harshin my bubble buzz
Yeah Rupert, where did you get the idea we are in a recession? Not at the gas station or the supermarket, surely.
The unemployment rate shooting up is normal, right?
Lacker (@ Fed) calling for a rate hike. Maybe he needs to speak to Novak and get his story straight.
"Rupert writes:
OK folks, let's be realistic. Prices have fallen the most since the Great Depression. How much more do they have to fall before this recession devolves into something worse?"
If the real estate market maintains course and speed for another year, you're going to see a whole new dimension of "something worse."
Just because the 17% of GDP that is housing related is off 50% doesn't mean anything.
I find this to be GOOD news. I also hope we hike rates to the moon.
Seriously, we can go for the long and semi-painful, or the short and really painful. I think it's tantamount to ripping a bandaid off.
There can be no economic recovery or nominal price appreciation until we hit bottom.
these are not the droids you are looking for. rising unemployment really just means more opportunities to look for a great new job. falling house prices just means there has never been a better time to buy! interest rates are at historic lows!
the financial crisis is behind us now. Old Ben told me so, after Suzanne researched it....
What if we could all vote for the next rate adjustment?
Say every quarter, there is a ballot for adjustment:
a) Hold Rate
b) Increase .25
c) Decrease .25
d) Increase .5
e) Decrease .5
We'd all get our say... you know, like a democracy.
Wow, foreclosures are really starting to be move the market out where I am (Calabaas/Agoura area). New listing this morning. Foreclosed 3BR condo in Agoura. Sold in '05 for $430k, currently offered at $229k. Started seeing a lot more of this kind of pricing just in the last couple weeks. This is a very desirable area (great schools, etc). It's taken a while for the aggressive pricing to work its way here, but the sellers (banks and short sales mostly) seem to finally be "getting it".
I thought LEH had goods news with another $3B in impaired assets, which is just another great opportunity, added on top of other opportunities. Everytime a new shoe drops, this is great!
[i]Yeah Rupert, where did you get the idea we are in a recession? Not at the gas station or the supermarket, surely.[/i]
The signs are all around us (especially with gas, they are literally all around us).
And don't call me Shirly.
There always after me level 3 assets!
Is there any reason to believe that the 27% declines weren't "sticky"?
Deb,
Ventura County is what Pink Floyd was thinking of when they uttered "Hanging on in quiet desperation..." The '01-'06 buyers are burning through and also watching helplessly as their equity evaporates. Tens of thousands are being pushed to the condition of being one paycheck from disaster. It doesn't show until the end.
meanwhile...my monthly rent check stings a little less each time I write it out...
Buy now, or be priced out of the REO market forever.
They aren't making any more REOs, you know.
Lehman researched it.
Renting is for losers - just ask anyone renting out any investment house bought in 2005. Or ask anyone renting a house in foreclosure.
This market has only one direction to go.
The American Dream is alive and well - because if they build it, someone will buy it. Especially at 50% off, at the housing sale of the century.
Feel free to make your own contributions - America's home industry is counting on you to still buy, to save the economy.
Just ignore the fact that those people without clothes aren't swimming - they're drowning. In a sea of red, as far as the eye can see.
We need to assign the parts to this cast of characters
We are the innocent helpless good people of the Shire
Darkness has fallen on the world of men(honest borrowers)
The tanned one= Sauron
Alan G= Saruman (evil white wizard)
Ben B= Gandalf the Grey(However, after he falls off the cliff we know he eventually gets to come back as Gandolph the White and helps save the day)
The Dark Riders= the IBs (they were corrupted by the power of the rings of securitization)
Boramir = Elliot Sp(we know he was overcome by the dark side but will soon sacrifice himself for the good of the other protagonists)
Orcs= subprime mortgage underwriters and their minions
Gollum= Hank P(he knows the short cut through to the credit crisis Mount Doom where the ONE most powerful deadly ring of securitization can be destroyed)
Frodo and Sam= of course, CR and Tanta, sorry Tanta well pretend Frodo was a girl (they just crossed the river and broke out on their own on their journey in search of Mount Doom seeking their destiny)
Theoden, King of Rohan = Congress- still under Sarumans spell(unfortunately, so far Gandalf hasnt been able to break it)
City of Kings = Wall Street
Rowhan= Washington
Steward of the City of Kings= ratings agencies- gave the order to abandon posts that protected the City of Kings
Aragorn= hmmmm?
Who should we get to play the rest of the fellowship, the elves and the others?
There always after me level 3 assets!
"They always after me Reo's" - Wells Fargo
What is the point in being early back into this market. People who can't get a mortgage should be considered blessed right now. Who wants to catch a falling chainsaw?
Interesting to compare the May 2007 SoCal report with the May 2008 SoCal report. Last year, sales were taking a dive while prices were virtually unmoved. Now, sales decreases have moderated (if -15% is a moderation from -34%) but prices are tanking.
check it out:
**********May 2007************
All Homes No Sold
May-06 No Sold
May-07 Pct.
Chg Median
May-06 Median
May-07 Pct.
Chg
Los Angeles 10,714 7,426 -30.7% $515,000 $550,000 6.8%
Orange 3,762 2,675 -28.9% $634,500 $635,000 0.1%
Riverside 6,054 3,307 -45.4% $420,000 $406,000 -3.3%
San Bernardino 4,148 2,220 -46.5% $360,000 $361,750 0.5%
San Diego 4,480 3,385 -24.4% $500,000 $492,000 -1.6%
Ventura 1,145 861 -24.8% $599,500 $590,000 -1.6%
All SoCal 30,303 19,874 -34.4% $481,500 $505,000 4.9%
************May 2008***********
Sales Volume Median Price
All homes May 07 May 08 %Chng May 07 May 08 %Chng
Los Angeles 7,426 5,445 -26.70% $550,000 $422,000 -23.30%
Orange 2,675 2,266 -15.30% $635,000 $485,000 -23.60%
Riverside 3,307 3,444 4.10% $406,000 $290,000 -28.60%
San Bernardino 2,220 2,075 -6.50% $361,750 $250,250 -30.80%
San Diego 3,385 2,979 -12.00% $492,000 $380,000 -22.80%
Ventura 861 708 -17.80% $590,000 $435,000 -26.30%
SoCal 19,874 16,917 -14.90% $505,000 $370,000 -26.70%
How much more can they fall? Plenty. There's still very little inventory on the west side below $400/sqft, and that's still roughly double what it should be, at least by the time the market would naturally bottom out (imho). There's a whole mess of people still in fantasy-land for home valuation, and they all need to be disillusioned before the market can correct to rational levels.
On the upside, I think we're getting past phase one of the artificial bottom, where people were buying thinking they were getting a good bargain, only to see prices fall further and have their "steals" be underwater (aka: knife catchers). Once they are shaken out of the market, we can really start the free-fall correction period where nobody is buying, and even REO's priced 10% below market won't get bids. Then, hopefully, we'll see some real price correction, instead of the slow burn which fuels people's fantasies about nearing the bottom while prices are still 80% higher than they should be.
NICK +++++++++ Well said. Someday true market forces will be allowed to take over. The market forces will be with us... always.
Who wants to catch a falling chainsaw?
- CrouchingShort HiddenSquatter
This guy!
YouTube - Juggling Chainsaws
Headline "Lehman's Fuld Comes Out Swinging"
then hits himself in the face.
Drew I would now like 70% of US households to try to attempt the same thing with the Feds supervision, of course.
We need a reality show with good looking people desperately trying to hold on to their homes, paycheck to paycheck, while wildfires, drought and an earthquake hit them and their state and local government go broke and one by one they lose their jobs and are voted out of the gated community. Nah, too unbelievable.
Remember too: each REO sale reduces housing demand by one, in contrast to a traditional in which the seller typically turns around to become a buyer of another house (or condo).
"entry level" priced houses may be selling right now, but this is doing nothing to create demand for higher priced houses.
Been there, I'm going with CR as Gandalf and Tanta as Galadriel.
Anyway.
I can see why all bears' eyes are fixed on CA, AZ, and FL. However, living in MA, I think the long term danger lies in places like this one. Prices have indeed dropped--and yet, in certain "micromarkets," realtors are still able to persuade a few fools to spend 800K for a flipped house on an ugly street.
The relitters say that this or that neighborhood is "immune." Of course it's not.
But these sales point to a continued, long slow slog down for many parts of the country. Something that may be more damaging in the long run than the short, sharp shock felt in places like Orange County.
" There's a whole mess of people still in fantasy-land for home valuation, and they all need to be disillusioned before the market can correct to rational levels."
Ain't that the truth. Everyone on the west side of LA still believes this is just a little bump in the road, not the sinkhole that it really is. Denial is the name of the game. Though fear is beginning to bubble up (oun intended) as the "selling season" busts yet again....
Now, the OptionARM reset wave is starting in the next half year to so, i wonder what effect that will have. Apparently there are about 600k to 800k houses in California that are currently on OptionARMs
D'oh! "oun" = "pun"
Curlydan,
What was the story last year in the DQ reports.. That sales were abnormally low because subprime blew up.
Sales on the low end got hammered because of it (skewing the median upward).
Now dataquick is talking about the availability and pricing of jumbos on the high end..the mix shift is returning back to normal.. and in the case of foreclosures selling faster on the low end.. skewing the median lower.
Grima Wormtongue = Larry Kudlow
Yesterday I talked to a girl at the park about the idea of potentially buying a house. I said "yeah, maybe in 1 to 2 years, I'll start thinking about it." She said that she was ready now "because it's now or never". This is in Phoenix. Someone actually convinced her that "it's now or never." I immediately prescribed a heavy dose of CR, but I bet she's not going to take her meds.
I'm surprised that CR and Tanta haven't done a post about Proposition 13 here on the blog.
When people predict huge price drops, I'm not sure they are taking the supply constrictions of Prop 13 into account, especially in Los Angeles.
Just my .02 and I could be off base, but I'd love to see a Tanta UberNerd post about it.
Tiger and Rocco tied at 18. Go to sudden death playoff.
I like Ben B as Grima Wormtongue and will ultimately be cast out by Theoden.
Aragorn = Denniger?
Just a little "color" to illustrate the current LA attitude towards Real Estate. From a curbed LA thread comes this response:
if you're renting and will never have enough money to buy in LA perhaps you should spend less time reveling in the unfortunate situation the economy is in and find a way to save up for a downpayment.
Fact is that in good neighborhoods in LA proper - ie not crap areas of the valley or other places lacking safety or a sub-2 hour commutes - there will always be a fundamentally solid level of demand for homes and a lot of people who can still afford them.
Things are definitely stabilizing in my neigborhood (Hancock Park / Larchmont), which did not see much of a fall to begin with based on the DQ data that I've seen. In the past week 3 homes withinb a 4 block radius of mine are in Escrow, one of which sold before its open house with multiple bids over asking.
I'm not saying things are all rosy, but the eager renters thinking they'll be picking up massive bargains in coming weeks/months/years are every bit as deluded as the buyers who paid the crazy prices they did for cookie cutter developments in the IE.
We've got a ways to go yet...
I am seeing more inventory in North Virginia but prices are slow to come down. As more foreclosures occur in the area and as the option ARMS reset earling (1/3 of the NOVA area used them), I hope to see some price adjustments to reality. It has been slow but the prices are moving down on the market and sellers. Now, I can only hope that my wife can wait one more year.
When am I going to see 27% drops in NY. Are we immune?
Mike in Long Island: have you seen any drops in NYC or Long Island? 0%-5% maybe?
I wouldn't be surprised if NYC remains as the last fortress of bubble prices.
Not only the houses/condos are expensive in that city, but also rents are comparably expensive.
In all other major cities, bubbles opened up huge cost gaps between owning and renting, a sure sign of a bubble.
But, we don't see that in NYC as much.