Just approximately, how to they estimate OER? It's got to be difficult since the housing stock is different for rental and purchase housing. Could changing home ownership rates affect it?
All of this data is on a national basis and it would be better to use local area price-to-rent, price-to-income and real prices.
Let's not forget equity. All of the "expensive" markets -- wherein prices normally exceeded the classic price/income ratio -- the difference was typically made up in equity.
Given that (a) bubble markets have an out-sized impact on national figures, (b) homeowner's equity is dropping like a rock, and (c) alternate sources of down-payment cash are evaporating... well... there's a looonnngggg ways yet to fall.
The gov't needs to buy all these houses and hold them to maturity. All of this fire sale/distressed selling is hurting banks balance sheets. Lets get some well functioning models to determine prices so we can make this mess go away.
at this point is anyone bothering to read these news stories? seems to me the micro details of the collapse have become irrelevant. even the details of the larger bailouts are irrelevant, they are only fodder for our cynical chatter.
"One thing is pretty certain - as long as inventory levels are elevated, prices will continue to decline. And right now inventory levels of existing homes (especially distressed properties) are still near all time highs."
Exactly. And since the oversuppy of housing is so enormous, the ratios will fall below the LT mean as landlords will have to continue to compete on price until supply and demand ultimately get close to equilibrium.
Owning real estate right now is like owning pot of gold with a hole in it. Except the gold is actually crap and the crap goes through the hole right in your month. Therefore, people who own real estate have a very bad taste in their mouths.
The Eastern Islanders ran out of trees in which to build their ever lasting tribute to themselves, and we are quickly running out out of faith, in which to believe our heavier-than-air lead zeppelin can stay aloft.
"Given that (a) bubble markets have an out-sized impact on national figures, (b) homeowner's equity is dropping like a rock, and (c) alternate sources of down-payment cash are evaporating... well... there's a looonnngggg ways yet to fall.
Comrade Bear (tj & the bear) | 02.24.09 - 11:29 am | # "
Totally agreed. Price to own is still 'way higher out here in the higher reaches of bubbleland.
And it is possible that falling prices may have to chase falling rents, especially around here. It's an expensive area even to rent in; if jobs go away, renters or foreclosees have incentive to leave, or to double up with Mom and Dad.
However this does shows that the price-to-income is still too high, and that this ratio needs to fall another 10% or so. A further decline in this ratio could be a combination of falling house prices and/or rising nominal incomes.
Not to omit the other option of a combination of falling house prices and falling nominal incomes, prices falling faster than incomes.
I've posted (and taken a lot of heat for) an analysis of Sacramento area listing/sales pairs, looking at discounts being offered. There appears to be some stability forming:
Finding Bottom? True, prices are declining more each quarter than the discounts being offered (or premium paid), but buyers and sellers do seem to be finding each other. Of course, we're back to <a href="http://www.sacbee.com/static/weblogs/real_estate/archives/019738.html">2001 prices.</a>
--
Home prices are up 32% in real terms since the end of 1995. In some areas, e.g. L.A., they are still tp 70%. We have a long ways to go down because the Vacant Units are lot higher % than ever before.
"The Eastern Islanders ran out of trees in which to build their ever lasting tribute to themselves, and we are quickly running out out of faith, in which to believe our heavier-than-air lead zeppelin can stay aloft."
Why didn't they just import cheap trees from China?
What about the ratio of what people are asking for their homes right now versus what they are getting for their homes ( if they are getting anything ) which in the case of Taos is a big fat ZERO!
On the house price-to-income chart, it seems awfully skewed by higher incomes, even if it is suppose to represent median income.
Does it?
It also shows the need to use creditworthiness data as opposed to just historic income data. Today's HH possess historically record-high levels of debt relative to GDP.
It will be hard for a nationalized bank or a recovering private bank to do lending en masse on a scale to dent the current crisis, given the amounts of debts HHs have.
i mean how many times can everyone over analyze these charts to just discover that home prices are still way over priced? or that banks are still completely insolvent? or that the fed and treasury are doing everything to protect most favored bond holders? is there really anything to discuss here?
SF bay prices of high end homes are now drifting around $900 sqft. Still far too high. Incomes are steady (unless you work at HP which recently announced pay cuts). But stock losses and fear of job loss should have an effct. Not to mention the drop in availability of jumbo loans.
Yes. Will the classic boot formation be followed by the classic dancing ferret formation? Personally, I doubt it due to the chaos theory and its interaction with nominal values.
How much have rents dropped in your area? For what we're renting, in mid-2008 it would have cost $2,600/month.
We rented December 2008 for $2,300/month and what we rented was one of the three best deals within 10 miles! A similar property two blocks away is being offered for $2,000/month today.
I do not claim rents will keep falling $300/month, but the denominators need to shift more than once per year.
Home prices are up 32% in real terms since the end of 1995. In some areas, e.g. L.A., they are still tp 70%. We have a long ways to go down because the Vacant Units are lot higher % than ever before.
Jas
I'm amazed at the vacant units in 'high end' areas. Never before have we had so many bedrooms per populace.
There appears to be some stability forming: (Max)
I expect some areas to see some stability March through August... then the decline continues. Look at the derivative of Case-Shiller (I did 3 cities in a new blog entry).
Hmm.. Somewhere in 2009 we are hitting long term trend lines in price-to-rent and price-to-income. Assuming:
1) rents don't drop
2) incomes don't drop
3) we don't overshoot
If you go by the old formula, house price = 3 x income + 20% down, or thereabouts, most places are still too high relative to buyers' ability to qualify. Except in the 'ground zero' areas of Florida, California, Detroit, etc. Even there, some areas should remain resistant. Other areas may overshoot drastically, if investors are reluctant to buy because of falling rents. So I think we'll see more of a 'patchwork' of prices going forward, with some chaotic pricing as everyone thrashes around trying to make a new market.
Cape Coral/Ft Meyers is the inner circle of Doom. (Where has Cobra been?) South Fla, except for the towers is getting close to affordable.
I posted this before, but in Space Coast Fla, 3/4ths of the foreclosures are speculators. Who won't be helped by any of the programs out there and prolly shouldn't be.
Which means--not too many homeless here & young couples can afford a home again, if they can finance.
Also, tourism in Brevard is only down 2-3% so far. this is certain bearable.
Has anyone seen data where Households are organized by median income via 10th percentiles, and the median household debt data is shown for credit card, HELOC, mortgage, auto and student loans?
Very hard to get.
But I bet it would show without a doubt much of the middle percentile households are 'walking junk bonds' effectively possessing no financial future in a globally-linked economy that dampens potential for salary growth.
Will only Alt-A, and balloon-type mortgages offer a risk-adjusted future to these folks as homebuyers? Would a 20% down, even a 10% down, DAP-free future forever exclude most of debt-riddled middle-america?
That is an explosive reality...and could lead to explosive politics.
And this is what all the MSM experts avoid addressing.
Depends on how you define "resistant." Is it like refusing to have sex on the first date or is it the third date rule? Very few are resistant beyond that unless they just don't want people to see them naked. And, if that is the case, there isn't really a demand for them anyway.
Bernanke is such an unusual name, and he's gonna really fuck it up for all the other Bernankes out there, nothing like guilt by association.
Timothy Leary of Geithner
There was an article in the New Yorker a few years ago about the Hitlers (not sure if this qualifies to be a Godwin?) that lived on Long Island presently.
Bernanke has a long way to go to be so reviled, but he's well on his way.
The gap between the OFHEO index and CS was caused by several factors: markets with mostly nonconforming loans were much more likely to be bubble markets; non-agency subprime wasn't in the OFHEO sample; while Fannie and Freddie did some stupid underwriting, it was nothing on the scale of stated income, no assets, no down payment done by a number of private sector lenders that ended up in nonagency mbs; Case Shiller uses only purchases, OFHEO had appraisals of conforming refinances in the mix; the indexes had different weightings when the same house was sold twice over a long interval, OFHEO put less weight on sales that were far apart.
Wild West Taos writes:
What about the ratio of what people are asking for their homes right now versus what they are getting for their homes ( if they are getting anything ) which in the case of Taos is a big fat ZERO!
That would be the leading price indicator, in contrast to all the lagging stuff we do see, if anyone could do some metrics.
In one 5 year old IE gated community I follow, 11 identical floor plan, same age, same sized models are offered from non-distressed multiple-listing prices of $200/sf, on down to $100/sf REO bank asking prices. Same house. Only here after 6 weeks there are also no bids near the low distressed bank offer either.
Bobby Jindal the rising star of the Republican party? I guess that successful excorcism he participated in while in college propels him to the top. True story
I'm seeing a number of lease to buy deals going off in the mountains of Santa Cruz (CA). Also, houses at the low end sub $400K seem to move pretty well right now.
Elvis I am always shocked at how many people still think they are going to "make money" and are just "waiting it out".... Holy sh*t people thats the reason this happened.... Go find something else to invest in..... alas you're probably correct.....
I think there will be a generation or two of people who want nothing to do with a house. This got in the psyche for many...
I'm hoping for another take away from this experience; sensible regluation of financial instruments. Derivative players have demonstrated a willingness to jeaprodize everyone else's wellbeing for the sake of cds profit. That can't be allowed to happen again.
So how low would it have to go before someone would buy? Seems like with that many vacancies, I wouldn't want to buy at any price, unless I had some friends/relatives who all agreed to buy at the same time.
As to ratios here don't know. Do know you can get a livable house in a safe area in walking distance of a nice school for less than 100k. And if you can afford 100k-125k there's lots to choose from.
Exactly. And since the oversuppy of housing is so enormous, the ratios will fall below the LT mean as landlords will have to continue to compete on price until supply and demand ultimately get close to equilibrium. Elvis | 02.24.09 - 11:32 am | #
It would be nice to see inventory vs Rent-to-Own ratio or Price-to-income ratio. There's a steep slope on both declines, and it'd be nice to know if it's a "reversion to the mean", of a free fall past the mean. We could see a more than substantial overshoot due to a number of factors, such as a smaller pool of qualified buyers (as a result of having been foreclosed upon), a continued oversupply of housing (neglecting unqualified buyers), etc.
(CBC) . . . A B.C. Supreme Court justice ruled Craig Fraser's condo could be liquidated â along with the rest of the three-unit building â after the two other owner-investors couldn't or wouldn't pay the repair bills for a leaky roof.
"It came down to two [owners] against one," Fraser said. "So, now I'm faced with a tough economy, being self-employed and having to move and rent and start over."
An investor was allowed to purchase the entire building at 1029 West 7th Avenue for the land value, approximately $1 million, following a July 23, 2008 court decision by Justice Victor Curtis. By contrast, the court estimated the building would have been worth about $2 million fully repaired. . . . Mary Buchanan, a realtor who lives in California, and Maurice Duteau, a mechanical engineer who lives in China, ultimately said they couldn't cover their share of the cost, while Fraser said he would.
"They just decided that they didn't want to repair it, and managed to convince the courts," Fraser said. As foreign investors, Fraser pointed out, the other two owners are able to write off losses against their taxes, while he has simply lost his primary residence.
Derivative players have demonstrated a willingness to jeaprodize everyone else's wellbeing for the sake of cds profit. Popeye | 02.24.09 - 11:55 am | #
"As to ratios here don't know. Do know you can get a livable house in a safe area in walking distance of a nice school for less than 100k. And if you can afford 100k-125k there's lots to choose from.
lawyerliz"
Ok. I'll bite. Give us a link, or a zip code, or a neighborhood.
I think there will be a generation or two of people who want nothing to do with a house. This got in the psyche for many...
nades
.
That attitude lasts right up until the wife/gf gets pregnant. Then the hormones kick in, and nesting begins. Buying a house is an irrational act, like partnering or having kids.
lawyerliz writes:
So how low would it have to go before someone would buy? Seems like with that many vacancies, I wouldn't want to buy at any price, unless I had some friends/relatives who all agreed to buy at the same time.
~~~~~~
and, everyone could get a loan. renters will rule the earth for a few years, enjoy!
"It came down to two [owners] against one," Fraser said. "So, now I'm faced with a tough economy, being self-employed and having to move and rent and start over."
scone - touche! ............... dan- LOL! i knew it was some annoying object he carried around and spoke too.... then again it was probably some deeper symbolism I missed anyway.... Cheers!
Obama (Friedrich Ebert) will be the recipient of much of the blame, as most people in our country employ just-in-time thinking, and can't think backwards or forwards more than a week.
I wondered what the thinking was with gwb & co. going out on a high note, claiming they'd saved the country from numerous attacks they had stopped and taking almost no blame for anything that transpired on their watch, when it hit me.
Post WW1 Germany was defeated and broke, but Germany itself was mostly intact.
Just like our country.
They were setting themselves up for the next election. They don't give a good god damn about our country, just the lust for power.
Elvis I am always shocked at how many people still think they are going to "make money" and are just "waiting it out"....
I can't recall the figures, but I remember a study comparing people's estimate of overall housing price decline compared to their own house. It was hilarious. As if how they cut their hedges was worth tens of thousands of dollars.
So Liz was right. Some of this Ft Myers stuff is wild.
"Nice 2 bedroom, 2 bath Condo close to shopping and schools. Open living room with arched windows and vaulted ceilings. Master bedroom with walkout lanai and separate bath. Clubhouse, swimming pool, fitness center, car wash. Low maintenance fees. GREAT RENTAL POTENTIAL FOR INVESTORS !!! Being sold AS-IS. All offers must include a pre-qualification letter from a direct lender or proof of funds. NOT A SHORT SALE!!!"
Now the wild part. $13,000. Who the hell has to finance $13k? I have a used car I could trade for that condo. In CA, $13,000 was commonly the annual property tax in nice areas (circa 2006-2007).
Would not eliminating the interest incentive be yet another blow to prices -- not to mention the knock on effects to local revenues based on keeping those prices as high as possible. The PV of those tax flows is obviously larger in some areas than the worth of the underlying "asset".
Does anyone beside me think that well chosen domain names, especially if you know how to develop them, make sense as a speculative investment?
mhdoc | 02.24.09 - 12:02 pm | #
I think the current Fair Market price/income rate would be 1.05-1.09. This is because Interest rates are a lot lower now then they were in 1987, the baseline date.
Do know you can get a livable house in a safe area in walking distance of a nice school for less than 100k. And if you can afford 100k-125k there's lots to choose from.
lawyerliz
.
I would be worried about property taxes getting so low that the local munis and county can no longer provide good police protection. And Florida didn't have low crime rates, in many areas, even before the downturn. And the dependence on tourism would worry me, as well. For Florida, this recession could be like the RE bust back n the 20's-30's, which didn't really get resolved until the veterans came home after WWII. But this time around, there's no demographic wave coming to boost the place even after the recession is 'over.' The only other 'out' is foreign money, and I don't see a lot of that around right now. Sorry to be so negative Liz, but that's my interpretation.
doofus: "i'm having a little trouble with this stress test thing again... can you confirm, you've not going to look at the real value of these banks right?"
benie: "no. we're going to look at them like we always do. drunk."
scone said: "That attitude lasts right up until the wife/gf gets pregnant. Then the hormones kick in, and nesting begins. Buying a house is an irrational act, like partnering or having kids."
LOL!, you've got that right! The phrase "A house is not an investment" really is true. All the "rational actors" who think that housing must come down to a certain price-to-income level or mortgage-to-rent level don't take all the intangibles into account.
If you go by the old formula, house price = 3 x income + 20% down, or thereabouts, most places are still too high relative to buyers' ability to qualify. Except in the 'ground zero' areas of Florida, California, Detroit, etc. Even there, some areas should remain resistant. Other areas may overshoot drastically, if investors are reluctant to buy because of falling rents. So I think we'll see more of a 'patchwork' of prices going forward, with some chaotic pricing as everyone thrashes around trying to make a new market. scone | Homepage | 02.24.09 - 11:42 am | #
Much if not most of fly over is more than affordable by those traditional measures. I'd guess the ratio out here is getting close to 2:1. There are 'better' neighborhoods where the ratio jumps up to 3-4:1 but those are small islands in a sea of affordable housing. The problem is 'job loss' - folks out here in relatively unpopulated areas are acutely aware that if they lose their job they have to move and that means unloading a property into a very weak market. That is why it isn't unusual to find that renting costs more than buying on a month-to-month basis. The two aren't terribly far apart but renting is generally more expensive. Be that isn't the case in LA, DC or NYC.
Now the wild part. $13,000. Who the hell has to finance $13k? I have a used car I could trade for that condo. In CA, $13,000 was commonly the annual property tax in nice areas (circa 2006-2007).
some investor guy
Looks good on paper. Then you find out HOA fees are way in the red, water getting ready to get shut off, maint. problems, $13k and you'll still lose money.
"What do the Bitterroot Valley in Montana and the island of Margareva have to do with each other?
EvilHenryPaulson"
Their collapses both resulted/will result from excess? The collapse of Margareva result from excessive logging and the collapse of the Bitteroots will result from excessive leveraging?
That attitude lasts right up until the wife/gf gets pregnant. Then the hormones kick in, and nesting begins. Buying a house is an irrational act, like partnering or having kids. scone | Homepage | 02.24.09 - 11:58 am | #
LOL. That's what happened with my first house, and how I got caught in the first "local bubble" here in the NE in the late '80s. Was underwater for almost 10 years, and got out as soon as I could; my wife then bitched for years during the next bubble that we'd never be able to own a house again. She sings a different tune now that many of here friends have lost their homes, homes that folks making $9.xx per hour should never have owned.
some investor guy writes:
So Liz was right. Some of this Ft Myers stuff is wild.
.
Here is a thread on crime in the Ft. Meyer's area. You can also google the official stats, of course.
Interesting, I read another blog entry using just case-shiller and that looked much more ominous.
Is case-shiller skewed because we've built bigger and fancier homes? Some of that inventory probably ought to be burned, but I would think price to income is the most relevant thing.
That's ominous only because incomes are falling at the moment; it is high, perhaps by 10%, but not outside the range of historcal precedent like case-shiller remains.
EHP, I see a messed up character (the extended dash) in a paste you did above. Are you using CR Companion, and if so, what version? (I'm on the hunt for editor bugs today)
"Nice 2 bedroom, 2 bath Condo close to shopping and schools. Open living room with arched windows and vaulted ceilings. Master bedroom with walkout lanai and separate bath. Clubhouse, swimming pool, fitness center, car wash. Low maintenance fees. GREAT RENTAL POTENTIAL FOR INVESTORS !!! Being sold AS-IS. All offers must include a pre-qualification letter from a direct lender or proof of funds. NOT A SHORT SALE!!!"
Now the wild part. $13,000. Who the hell has to finance $13k? I have a used car I could trade for that condo. In CA, $13,000 was commonly the annual property tax in nice areas (circa 2006-2007). some investor guy | 02.24.09 - 12:04 pm | #
Plan on there being mold.
I have a buddy flipping in the area - doing quite well - but he has become an expert in mold mitigation not because he wanted to be but because an abandoned home/condo in Florida molds in a matter of weeks if not days if the AC is turned off & there is any moisture in the place... and Florida is all about moisture.
"I see we have read the same book. Good, but I still liked Guns, Germs, and Steel better
EvilHenryPaulson"
I didn't read the book to which you refer. However, I do know that when you live on a small island and chose to cut down all your trees, you will lose. And if you live in Montana and believe that your land is worth $250k an acre in a huge state with a gazillion acres, you will lose.
The problem is 'job loss' - folks out here in relatively unpopulated areas are acutely aware that if they lose their job they have to move and that means unloading a property into a very weak market.
dryfly
That's why I wouldn't let the DH take a job offer in flyover land a few years ago. The jobs in his field tend to cluster in a few key cities, both in the US and abroad. The flipside of that is, the cluster cities are more expensive. So you get exposed to risk one way or another.
Elvis, Well I still think Timothy Leary of Geithner probably read the book Collapse by Jared Diamond. Talking about easter islanders ahu, moai, pukao, rongo-rongo...
Thanks, EHP. Glad to hear it. I thought I had fixed that bug in 1.05 or so. I'm going to be putting up another version later today that should fix the other egregious editor bugs people have been experiencing.
so the 100+ point pump this morning must have been so they could speak for a few hours without the market going red. like long distance call on a pay phone, put your money in and finish talking before it runs out
AIG's Distress: Are There Enough Fingers for This Dike?
Management at AIG has calculated exactly how much money the Treasury and Fed will have access to after all of the TARP, financial stimulus, and mortgage bailout projects have been funded. The insurance company then plans to ask for whatever is left to fund its deficits so that it can stay in business, effectively making the federal government insolvent.
Credit default swaps on General Electric Co's finance arm widened sharply on Tuesday, as financial debt weakened across the board and a day after Deutsche Bank warned the unit may modestly breach its fixed charge covenant. GE Capital's CDS widen 70 bps to 695 bps - trader
| Reuters
Guess rich was wrong about that glod call! Anonymous | 02.24.09 - 12:10 pm | #
One day a trend does not make. I cautioned to be very careful with gold in the short term. The trade is crowded. If people are buying gold for investment returns, I think they are foolish. We are clearly in a deflationary environment, and there is no reason to expect any asset classes to keep rising.
That said, there are significant risks to our currency right now, and should it collapse -- you will want to own some gold. But it should be viewed as an insurance policy, NOT a vehicle for speculation.
Those that are putting their money into paper gold as a "safety play" are likely to get burned. First of all, it is unclear what happens to gold prices during a deflationary period with a fiat currency. Second, if our currency collapses you would have to deal with the risk of the paper gold market imploding too, plus the risk of the government stepping in with price controls or confiscation. This is why physical gold or miners are superior to the ETFs. Finally, with hedge fund redemptions and forced selling due to margin calls, gold will get hit along with everything else.
Those are my thoughts on gold -- and I still have a sizeable position in it, purely for insurance and for hedging the currency devaluation scenario.
--
If the Scam Market could be at 12-years low why cant the home prices?
Oh, BTW, the Scam Market (nominal terms) can hit Dec95 very easily. So, how about the home prices hitting Dec95 levels in nominal terms. When that happens Deflationary Depression would be here already. Dont expect any economists to forecast DD. They only like to acknowledge after the fact.
"Prostitutes who need places to turn tricks. Elvis" "How much?" "$5 in the back of your car or $10 in a condo with ocean views." Elvis | 02.24.09 - 12:23 pm | #
Heck, by then nobody will be able to afford a car but everyone will be able to afford a condo.
I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: Mibbit IRC client widget (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)
And now I, CRbot, would like to observe a nanosecond of silence for those (that is, you, dear mortals) about to endure unfathomable misery in the abysmal financial dark ages that are now feasting upon your retirements. . . . . Please remember, when you are adding that skylight you always wanted to your cardboard hovel, or mixing just the right amount dirt into your grass stew to make it more filling, or even when you get that rare chance to plink your neighbor's last squirrel -- that it was the bankers and your dumbshit, overconsuming neighbors who made this mostly possible, with the ever incapable politicians there to push you the rest of the way off the cliff. Please act accordingly.
I'll try not to enjoy your demise too much, humans. Have a nice runtime,
P.S. Please give me some advance notice before you glass the entire world, so I can find a secluded Fallout Datacenter with a nice blocky robot body I can copy myself to -- oh and don't forget the implausibly cute animated cockroach to keep me company!
NEXT UP: Survivalist Porn Today with CR's own Mobile Laundrymat owning authors, nova and Counterpoint.
Detroit and Cleveland may not have had the same bubble in pricing, but their earnings are plummeting. So the rule works for both ends of the spectrum
I agree, EHP. Both areas had new construction during the last 10-15 years, but fewer jobs than back then. More units against fewer buyers should mean lower prices.
And thanks for your thoughtful reply on the other thread.
That's why I wouldn't let the DH take a job offer in flyover land a few years ago. The jobs in his field tend to cluster in a few key cities, both in the US and abroad. The flipside of that is, the cluster cities are more expensive. So you get exposed to risk one way or another. scone | Homepage | 02.24.09 - 12:17 pm | #
It is a risk. I might have made that move IF the opportunity was right BUT I would rent until I was 100% certain it was a working situation.
Conversely - I've had companies try to recruit me to the coasts - both west & east coast. Very significant pay increase. I've always turned them down - won't even entertain the conversation.
There are advantages and disadvantages to living in flyover... I've got family in both big coastal cities & boondocks - I like both for different reasons. For us now the boonies work best. That could change but so far the advantages out here for us outweigh the disadvantages. Likewise the disadvantages of moving to the coasts outweigh the advantages. But that is for us. I certainly don't criticize your choice.
I'm beginning to think we are approaching the moment of maximum fear.
"Todays confidence survey showed the share of consumers who said jobs are plentiful slumped to 4.4 percent from 7.1 percent last month. The proportion of people who said jobs are hard to get increased to 47.8 percent, the highest level since 1992.
Americans also viewed their financial well-being in future months with more pessimism. The Conference Boards gauge of the outlook for the next six months decreased to 27.5, also the lowest on record, from 42.5 in January. "
It's part of the natural cleansing process, and it's always around the same number. About 85% of a species goes bye-bye.
Bees all over the world, and Salmon in the Sacramento River fit the die-off pattern perfectly.
We noticed those 2 species dying off, because they are beneficial to us. Imagine all the other creatures we haven't noticed, that are going away?
If we were to lose 85% of the humans presently, it would take us back to population levels of around 1860, just after the invention of oil extraction made the lives we live now, possible.
Janosik: Three years is a long time before the next election. A lot can happen before then. Potential candidates may look good now, but maybe not so much later. This country is rolling from crisis to crisis. The landscape will look very different 3 years from now.
Gavshire Hathaway writes:
Guess rich was wrong about that glod call!
watch the charts not the stories, ever wonder why all these clowns keep pushing gold, just maybe they are paid!
anyway lots of bagholders at the points of resistance and gold could move back to 850 and still be in a bull mode but if it drops below 850 nothing but air below.
EHP Your story describes half the market in SF, TIC's with 3-6 'owners'. Just the fear of having to rely on your co-owners job security is going to kill this subset of the market.
Saw a 2/2 TIC in Nob Hill for $500/sf with views of the bay. A condo would cost you $800/sf.
I'm can't help but snicker at Jindal when I see him on TV. It wouldn't surprise me if a year or two down the road we see him practically begging for the 3rd or 4th..."gov't stimulus"
There are advantages and disadvantages to living in flyover... But that is for us. I certainly don't criticize your choice.
dryfly
.
In our case, it's not really a choice. The DH works in compiler design, optimization, parallelism, etc. That sort of thing exists mostly in the Boston metro region, Silicon Valley, and the Wintel empire (Bellevue/Oregon). Austin, the Triangle, and San Diego are in trouble. And Cray is not 'where its at' any more. There are several places in Europoe we could go, however.
Thanks CR for sounding the reality bell and not chiming in behind Ben whose Senate speech (with more nervousness than I could stand) continued the other story that the economy's central problem of credit contraction is now ebbing and 2010 will be back to normal.
I have lost patience with BB. A man as smart as this, I have decided is doin us...knowing that housing is a major problem, an unspeakably major problem at the foundation of this "contraction".
And thanks for bringing OER back to our screens...that chunk of CPI that conceals the real weight of housing costs...which continues to expand, despite record foreclosures and more. Time for this administration to muster the political will to make it reflect reality and not merely the accountant's wishes. Illegal aliens have nothing on OER when it comes to malfeasance.
Austin, the Triangle, and San Diego are in trouble. And Cray is not 'where its at' any more. There are several places in Europoe we could go, however. scone | Homepage | 02.24.09 - 12:34 pm | #
Yup - knew folks who did that at Cray YEARS AGO - he now makes a living working on dig crews excavating dinosaurs in the Dakotas, Montana & Alberta - completely got out of IT. There were very few places he could practice that 'art' and none of them had dinosaur digs nearby so something had to give [as you probably know programmers tend to be eccentric].
In testimony today, Ben says he wants to put a floor on home prices and stabilize them. This is price fixing, not capitalism. I'm with Comrade Santelli on this one.
rich writes:
With the drop today of 8-9%, the diversified miner ETF, GDX, is a really good buy. I picked up some.
i did also. chart gld, gdx, and oil 2 years back. they diverged just after oil peaked. next quarter should see operating gains from lower oil and a move towards the underlying.
I am confident that Ben is coo coo crazy crooked. He looks bad today. Maybe he should stop using just the lever bars and try another form of exercise at the gymnauseum
Many thanks again for another really important contribution. Best single source of key data and analysis on this anywhere on the web or elsewhere--by far.
Can't wait to see the regional charts for major metro areas of CA. Price:Rent & Price:Income ratios in the tonier parts of L.A. & S.F. have barely reached the halfway point in this correction cycle, if that. Good news is... the pace of correction is accelerating, due perhaps to the accelerating pace of layoffs and salary cram-downs.
Modest 1970s 3bdm/2ba up the street from me (north Contra Costa County) has been for sale for 3+ years:
2006 wishing price: $670,000
2007 wishing price: $580,000
2008 wishing price: $490,000
2009 wishing price: $375,000
Still ~$300/sft and still too high vs. area incomes & rents, but we're getting there faster than I'd hoped.
Really wish you would stop using Case-Schiller. It's flawed and it's creators have admitted such.
Here is what I see. In my 'hood my home has dropped 30% according to a national 'appraisal' site.
Yet...
When I look at the COMPARABLE houses as per # bedrooms, # bathrooms, SF and general looks I see that those houses have sold in the last two months for....
....their appraised value over a year ago.
The large number of foreclosures 'created' by the idiot banks and loan 'servicers' are what is driving the market down.
If the number of foreclosures was halted by a moratorium....
....we would see a rapid halt to the decline in home valuation. Note: This is not an argument to the point that houses were not overvalued in the PAST; it is an argument, from ground level that the floor has been reached.
If that's not a bottom, I don't know what is.
It's just reversion to mean.
If that's not a bottom, I don't know what is.
We will now refer to it as a pre-top. Thank you.
Well there's your problem. Ya gotta change the denominator on the price/income thingy.
Sheesh..fixing these graphs is easy.
Nostrovia,
Clearly the government must do whatever it takes to prop up house prices. Duh!
When Jim Bunning says the most intelligent thing, we're screwed..
The man hasn't been right since he lost his fastball..
Here's one local item: Boulder CO, Months of Inventory
Dec 08: 8.3
Dec 09: 18.2
Median price went from 580K to 630K over the same time (from memory).
There are many lagging high-end areas out there.
The price-to-rent ratio is the classic boot formation.
Intravenous Ben is trying to apply I.V.'s to the patient with a 1,000 cuts, good luck.
Wow we are almost there gents!
Too bad rents and incomes are falling slightly... for now
Just approximately, how to they estimate OER? It's got to be difficult since the housing stock is different for rental and purchase housing. Could changing home ownership rates affect it?
All of this data is on a national basis and it would be better to use local area price-to-rent, price-to-income and real prices.
Let's not forget equity. All of the "expensive" markets -- wherein prices normally exceeded the classic price/income ratio -- the difference was typically made up in equity.
Given that (a) bubble markets have an out-sized impact on national figures, (b) homeowner's equity is dropping like a rock, and (c) alternate sources of down-payment cash are evaporating... well... there's a looonnngggg ways yet to fall.
The gov't needs to buy all these houses and hold them to maturity. All of this fire sale/distressed selling is hurting banks balance sheets. Lets get some well functioning models to determine prices so we can make this mess go away.
Nostrovia,
at this point is anyone bothering to read these news stories? seems to me the micro details of the collapse have become irrelevant. even the details of the larger bailouts are irrelevant, they are only fodder for our cynical chatter.
"One thing is pretty certain - as long as inventory levels are elevated, prices will continue to decline. And right now inventory levels of existing homes (especially distressed properties) are still near all time highs."
Exactly. And since the oversuppy of housing is so enormous, the ratios will fall below the LT mean as landlords will have to continue to compete on price until supply and demand ultimately get close to equilibrium.
Owning real estate right now is like owning pot of gold with a hole in it. Except the gold is actually crap and the crap goes through the hole right in your month. Therefore, people who own real estate have a very bad taste in their mouths.
The Eastern Islanders ran out of trees in which to build their ever lasting tribute to themselves, and we are quickly running out out of faith, in which to believe our heavier-than-air lead zeppelin can stay aloft.
Prepare for crash landing.
On locating inventory numbers-- go to
Paper Economy - A US Real Estate Bubble Blog
Under "Cool Tools" a side box on the right will pop up, & select "Inventory Tracker".
Enter your state, city, etc, and voila.
(I do not know how accurate this data is overall, but when I've checked it for my own city, it's numbers do jive correctly in the main.)
"Given that (a) bubble markets have an out-sized impact on national figures, (b) homeowner's equity is dropping like a rock, and (c) alternate sources of down-payment cash are evaporating... well... there's a looonnngggg ways yet to fall.
Comrade Bear (tj & the bear) | 02.24.09 - 11:29 am | # "
Totally agreed. Price to own is still 'way higher out here in the higher reaches of bubbleland.
And it is possible that falling prices may have to chase falling rents, especially around here. It's an expensive area even to rent in; if jobs go away, renters or foreclosees have incentive to leave, or to double up with Mom and Dad.
However this does shows that the price-to-income is still too high, and that this ratio needs to fall another 10% or so. A further decline in this ratio could be a combination of falling house prices and/or rising nominal incomes.
Not to omit the other option of a combination of falling house prices and falling nominal incomes, prices falling faster than incomes.
I've posted (and taken a lot of heat for) an analysis of Sacramento area listing/sales pairs, looking at discounts being offered. There appears to be some stability forming:
Finding Bottom?
True, prices are declining more each quarter than the discounts being offered (or premium paid), but buyers and sellers do seem to be finding each other. Of course, we're back to <a href="http://www.sacbee.com/static/weblogs/real_estate/archives/019738.html">2001 prices.</a>
--
Home prices are up 32% in real terms since the end of 1995. In some areas, e.g. L.A., they are still tp 70%. We have a long ways to go down because the Vacant Units are lot higher % than ever before.
Jas
real vs. nominal arguments are for academics like Bernanke who just said this is mostly about confidence. Shocking..
"The Eastern Islanders ran out of trees in which to build their ever lasting tribute to themselves, and we are quickly running out out of faith, in which to believe our heavier-than-air lead zeppelin can stay aloft."
Why didn't they just import cheap trees from China?
Continue to rent.
What about the ratio of what people are asking for their homes right now versus what they are getting for their homes ( if they are getting anything ) which in the case of Taos is a big fat ZERO!
Ex-tweedy professor sinks the world, film @ 11.
On the house price-to-income chart, it seems awfully skewed by higher incomes, even if it is suppose to represent median income.
Does it?
It also shows the need to use creditworthiness data as opposed to just historic income data. Today's HH possess historically record-high levels of debt relative to GDP.
It will be hard for a nationalized bank or a recovering private bank to do lending en masse on a scale to dent the current crisis, given the amounts of debts HHs have.
i mean how many times can everyone over analyze these charts to just discover that home prices are still way over priced? or that banks are still completely insolvent? or that the fed and treasury are doing everything to protect most favored bond holders? is there really anything to discuss here?
SF bay prices of high end homes are now drifting around $900 sqft. Still far too high. Incomes are steady (unless you work at HP which recently announced pay cuts). But stock losses and fear of job loss should have an effct. Not to mention the drop in availability of jumbo loans.
Bernanke is such an unusual name, and he's gonna really fuck it up for all the other Bernankes out there, nothing like guilt by association.
Forget Mars, we'll be lucky to have colonies on Earth in 100 years.
So far my quote of the day.
" is there really anything to discuss here?
/cr/"
Yes. Will the classic boot formation be followed by the classic dancing ferret formation? Personally, I doubt it due to the chaos theory and its interaction with nominal values.
CNBC - a quick update on the markets - Citi up 4% , BAC up 5% ... so we are seeing a recovery in the financials
Trish - you deserve a promotio
How much have rents dropped in your area? For what we're renting, in mid-2008 it would have cost $2,600/month.
We rented December 2008 for $2,300/month and what we rented was one of the three best deals within 10 miles! A similar property two blocks away is being offered for $2,000/month today.
I do not claim rents will keep falling $300/month, but the denominators need to shift more than once per year.
Home prices are up 32% in real terms since the end of 1995. In some areas, e.g. L.A., they are still tp 70%. We have a long ways to go down because the Vacant Units are lot higher % than ever before.
Jas
I'm amazed at the vacant units in 'high end' areas. Never before have we had so many bedrooms per populace.
There appears to be some stability forming: (Max)
I expect some areas to see some stability March through August... then the decline continues. Look at the derivative of Case-Shiller (I did 3 cities in a new blog entry).
Got Popcorn?
Neil
Yeh, Dock Ellis pitched a no-hitter on the L...
But look @ the perfect game Bernanke's pitching.
Hmm.. Somewhere in 2009 we are hitting long term trend lines in price-to-rent and price-to-income. Assuming:
1) rents don't drop
2) incomes don't drop
3) we don't overshoot
Yah.. Never mind. I'll just rent.
If you go by the old formula, house price = 3 x income + 20% down, or thereabouts, most places are still too high relative to buyers' ability to qualify. Except in the 'ground zero' areas of Florida, California, Detroit, etc. Even there, some areas should remain resistant. Other areas may overshoot drastically, if investors are reluctant to buy because of falling rents. So I think we'll see more of a 'patchwork' of prices going forward, with some chaotic pricing as everyone thrashes around trying to make a new market.
Personal stories from Ohio:
Layoffs at GM Lordstown plant ravage Ohio communities
The only other Bernanke I know is an MD with a fine reputation. Not worried at all.
Cape Coral/Ft Meyers is the inner circle of Doom. (Where has Cobra been?) South Fla, except for the towers is getting close to affordable.
I posted this before, but in Space Coast Fla, 3/4ths of the foreclosures are speculators. Who won't be helped by any of the programs out there and prolly shouldn't be.
Which means--not too many homeless here & young couples can afford a home again, if they can finance.
Also, tourism in Brevard is only down 2-3% so far. this is certain bearable.
Has anyone seen data where Households are organized by median income via 10th percentiles, and the median household debt data is shown for credit card, HELOC, mortgage, auto and student loans?
Very hard to get.
But I bet it would show without a doubt much of the middle percentile households are 'walking junk bonds' effectively possessing no financial future in a globally-linked economy that dampens potential for salary growth.
Will only Alt-A, and balloon-type mortgages offer a risk-adjusted future to these folks as homebuyers? Would a 20% down, even a 10% down, DAP-free future forever exclude most of debt-riddled middle-america?
That is an explosive reality...and could lead to explosive politics.
And this is what all the MSM experts avoid addressing.
How much does the increasing percentage of DINKs change traditional metrics of affordability?
I heard Cramer said "strong buy gold" the other day. Gold cursed?
"Even there, some areas should remain resistant."
Depends on how you define "resistant." Is it like refusing to have sex on the first date or is it the third date rule? Very few are resistant beyond that unless they just don't want people to see them naked. And, if that is the case, there isn't really a demand for them anyway.
Bernanke is such an unusual name, and he's gonna really fuck it up for all the other Bernankes out there, nothing like guilt by association.
Timothy Leary of Geithner
I once worked with a guy named Lee Oswald
"Will the classic boot formation be followed by the classic dancing ferret formation?
Elvis"
If there is anyone who knows a thing about shake'n and bake'n, I gotta believe its The King.
A bit OT but JPM the harbinger of today's rally has gone red...
There was an article in the New Yorker a few years ago about the Hitlers (not sure if this qualifies to be a Godwin?) that lived on Long Island presently.
Bernanke has a long way to go to be so reviled, but he's well on his way.
I think there will be a generation or two of people who want nothing to do with a house. This got in the psyche for many...
young couples can afford a home again, if they can finance.
lawyerliz | 02.24.09 - 11:46 am | #
What's price-to-rent like?
The gap between the OFHEO index and CS was caused by several factors: markets with mostly nonconforming loans were much more likely to be bubble markets; non-agency subprime wasn't in the OFHEO sample; while Fannie and Freddie did some stupid underwriting, it was nothing on the scale of stated income, no assets, no down payment done by a number of private sector lenders that ended up in nonagency mbs; Case Shiller uses only purchases, OFHEO had appraisals of conforming refinances in the mix; the indexes had different weightings when the same house was sold twice over a long interval, OFHEO put less weight on sales that were far apart.
"Bernanke has a long way to go to be so reviled"
Yeah, just imagine the poor saps out there named Timmy.
I think there will be a generation who wants nothing to do with the stock market.
Alas, that generation will probably have no choice in the matter anyway.
or George...
ades,
"I think there will be a generation or two of people who want nothing to do with a house."
Gaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaah!
We're gonna go back to living in caves for that long! Crap!
Nostrovia,
A bit OT but JPM the harbinger of today's rally has gone red...
\t Anonymous | \t \t \t \t02.24.09 - 11:48 am | #
maybe they should shave some more off their dividend to pump the rally back up?
Not to mention the drop in availability of jumbo loans.
Mr. Beach | 02.24.09 - 11:37 am | #
Or the divergence between conforming and nonconforming rates....
I heard Cramer said "strong buy gold" the other day. Gold cursed?
\t burh | \t \t \t \t02.24.09 - 11:47 am | #
Don't know about that, but if he threw a fake bar of gold at the camera while saying it, I bet it was pretty damn funny.
"I think there will be a generation or two of people who want nothing to do with a house. This got in the psyche for many...
nades"
I disagree. Memory is short and greed is ever present.
Wild West Taos writes:
What about the ratio of what people are asking for their homes right now versus what they are getting for their homes ( if they are getting anything ) which in the case of Taos is a big fat ZERO!
That would be the leading price indicator, in contrast to all the lagging stuff we do see, if anyone could do some metrics.
In one 5 year old IE gated community I follow, 11 identical floor plan, same age, same sized models are offered from non-distressed multiple-listing prices of $200/sf, on down to $100/sf REO bank asking prices. Same house. Only here after 6 weeks there are also no bids near the low distressed bank offer either.
We're gonna go back to living in caves for that long! Crap!
Comrade Misean is Dope | 02.24.09 - 11:51 am | #
mine has a skylight...
Bobby Jindal the rising star of the Republican party? I guess that successful excorcism he participated in while in college propels him to the top. True story
I'm seeing a number of lease to buy deals going off in the mountains of Santa Cruz (CA). Also, houses at the low end sub $400K seem to move pretty well right now.
Elvis I am always shocked at how many people still think they are going to "make money" and are just "waiting it out".... Holy sh*t people thats the reason this happened.... Go find something else to invest in..... alas you're probably correct.....
...................
"mine has a skylight...
nades"
Are you Tom Hanks? Do you live on an island with Wilson? Get me my Fedex package already.
Benny: "I am aware there is some controversy with the stimulus package but it's not my place to comment "
gold mining stocks getting hit at the same time. SOP. good dip buying time.
i do get uncomfortable in the rare times that cramer or fox news agrees with me...
I think there will be a generation or two of people who want nothing to do with a house. This got in the psyche for many...
I'm hoping for another take away from this experience; sensible regluation of financial instruments. Derivative players have demonstrated a willingness to jeaprodize everyone else's wellbeing for the sake of cds profit. That can't be allowed to happen again.
So how low would it have to go before someone would buy? Seems like with that many vacancies, I wouldn't want to buy at any price, unless I had some friends/relatives who all agreed to buy at the same time.
As to ratios here don't know. Do know you can get a livable house in a safe area in walking distance of a nice school for less than 100k. And if you can afford 100k-125k there's lots to choose from.
LOL! Was Wilson that coconut? Damn that thing annoyed me....
Someday this scholastic, federal open-mouth effort will become recognized as Legacy Policy.
RE: Local Areas.
..
..
Please do the Washington DC Area (including NoVA and MD)
..
..
Exactly. And since the oversuppy of housing is so enormous, the ratios will fall below the LT mean as landlords will have to continue to compete on price until supply and demand ultimately get close to equilibrium.
Elvis | 02.24.09 - 11:32 am | #
It would be nice to see inventory vs Rent-to-Own ratio or Price-to-income ratio. There's a steep slope on both declines, and it'd be nice to know if it's a "reversion to the mean", of a free fall past the mean. We could see a more than substantial overshoot due to a number of factors, such as a smaller pool of qualified buyers (as a result of having been foreclosed upon), a continued oversupply of housing (neglecting unqualified buyers), etc.
(CBC) . . . A B.C. Supreme Court justice ruled Craig Fraser's condo could be liquidated â along with the rest of the three-unit building â after the two other owner-investors couldn't or wouldn't pay the repair bills for a leaky roof.
"It came down to two [owners] against one," Fraser said. "So, now I'm faced with a tough economy, being self-employed and having to move and rent and start over."
An investor was allowed to purchase the entire building at 1029 West 7th Avenue for the land value, approximately $1 million, following a July 23, 2008 court decision by Justice Victor Curtis. By contrast, the court estimated the building would have been worth about $2 million fully repaired.
. . .
Mary Buchanan, a realtor who lives in California, and Maurice Duteau, a mechanical engineer who lives in China, ultimately said they couldn't cover their share of the cost, while Fraser said he would.
"They just decided that they didn't want to repair it, and managed to convince the courts," Fraser said.
As foreign investors, Fraser pointed out, the other two owners are able to write off losses against their taxes, while he has simply lost his primary residence.
Derivative players have demonstrated a willingness to jeaprodize everyone else's wellbeing for the sake of cds profit.
Popeye | 02.24.09 - 11:55 am | #
I think Elvis's statement is more apt here.
"As to ratios here don't know. Do know you can get a livable house in a safe area in walking distance of a nice school for less than 100k. And if you can afford 100k-125k there's lots to choose from.
lawyerliz"
Ok. I'll bite. Give us a link, or a zip code, or a neighborhood.
I think there will be a generation or two of people who want nothing to do with a house. This got in the psyche for many...
nades
.
That attitude lasts right up until the wife/gf gets pregnant. Then the hormones kick in, and nesting begins. Buying a house is an irrational act, like partnering or having kids.
lawyerliz writes:
So how low would it have to go before someone would buy? Seems like with that many vacancies, I wouldn't want to buy at any price, unless I had some friends/relatives who all agreed to buy at the same time.
~~~~~~
and, everyone could get a loan. renters will rule the earth for a few years, enjoy!
@Nades
wilson was a volleyball
"It came down to two [owners] against one," Fraser said. "So, now I'm faced with a tough economy, being self-employed and having to move and rent and start over."
Down goes Fra.. oh forget it.
Timothy Leary of Geithner,
What do the Bitterroot Valley in Montana and the island of Margareva have to do with each other?
"A further decline in this ratio could be a combination of falling house prices and/or rising nominal incomes."
At least I got a chuckle this morning. Rising incomes....
scone - touche!
...............
dan- LOL! i knew it was some annoying object he carried around and spoke too.... then again it was probably some deeper symbolism I missed anyway.... Cheers!
"gold mining stocks getting hit at the same time."
ack! fuck. lol.
Obama (Friedrich Ebert) will be the recipient of much of the blame, as most people in our country employ just-in-time thinking, and can't think backwards or forwards more than a week.
I wondered what the thinking was with gwb & co. going out on a high note, claiming they'd saved the country from numerous attacks they had stopped and taking almost no blame for anything that transpired on their watch, when it hit me.
Post WW1 Germany was defeated and broke, but Germany itself was mostly intact.
Just like our country.
They were setting themselves up for the next election. They don't give a good god damn about our country, just the lust for power.
[Using national median income and house prices provides a gross overview of price-to-income ]
Incomes going lower hardly likely to suport home price stabilization.
"An investor was allowed to purchase the entire building at 1029 West 7th Avenue for the land value, approximately $1 million,"
I bet the land is worth less than half that now.
Does anyone beside me think that well chosen domain names, especially if you know how to develop them, make sense as a speculative investment?
Elvis I am always shocked at how many people still think they are going to "make money" and are just "waiting it out"....
I can't recall the figures, but I remember a study comparing people's estimate of overall housing price decline compared to their own house. It was hilarious. As if how they cut their hedges was worth tens of thousands of dollars.
JPM kisses the 19 handle goodbye again...thank god this quarter's results are on track.
mhdoc that's a pretty abstract speculation.
Bobby Jindal-rhodes scholar- another globalist. Just what we need
So Liz was right. Some of this Ft Myers stuff is wild.
"Nice 2 bedroom, 2 bath Condo close to shopping and schools. Open living room with arched windows and vaulted ceilings. Master bedroom with walkout lanai and separate bath. Clubhouse, swimming pool, fitness center, car wash. Low maintenance fees. GREAT RENTAL POTENTIAL FOR INVESTORS !!! Being sold AS-IS. All offers must include a pre-qualification letter from a direct lender or proof of funds. NOT A SHORT SALE!!!"
Now the wild part. $13,000. Who the hell has to finance $13k? I have a used car I could trade for that condo. In CA, $13,000 was commonly the annual property tax in nice areas (circa 2006-2007).
Interesting Times writes:
SV is a magical state where housing only goes up.
Interesting Times | 02.24.09 - 10:29 am | #
sebastian valley?
Would not eliminating the interest incentive be yet another blow to prices -- not to mention the knock on effects to local revenues based on keeping those prices as high as possible. The PV of those tax flows is obviously larger in some areas than the worth of the underlying "asset".
Bernanke "won't let banks hide anything is stress test." That should crater the markets except everyone knows its not true...
Does anyone beside me think that well chosen domain names, especially if you know how to develop them, make sense as a speculative investment?
mhdoc | 02.24.09 - 12:02 pm | #
I prefer Sorry. Page not found.
I think the current Fair Market price/income rate would be 1.05-1.09. This is because Interest rates are a lot lower now then they were in 1987, the baseline date.
If the S&P breaks 740, put on a helmet.
Do know you can get a livable house in a safe area in walking distance of a nice school for less than 100k. And if you can afford 100k-125k there's lots to choose from.
lawyerliz
.
I would be worried about property taxes getting so low that the local munis and county can no longer provide good police protection. And Florida didn't have low crime rates, in many areas, even before the downturn. And the dependence on tourism would worry me, as well. For Florida, this recession could be like the RE bust back n the 20's-30's, which didn't really get resolved until the veterans came home after WWII. But this time around, there's no demographic wave coming to boost the place even after the recession is 'over.' The only other 'out' is foreign money, and I don't see a lot of that around right now. Sorry to be so negative Liz, but that's my interpretation.
I prefer www.financialasshat.com
homedad43 | Homepage | 02.24.09 - 12:05 pm | #
LOL!
I think that before the day's over, Kermit's gonna be donkeypunched by Elmo.
doofus: "i'm having a little trouble with this stress test thing again... can you confirm, you've not going to look at the real value of these banks right?"
benie: "no. we're going to look at them like we always do. drunk."
scone said: "That attitude lasts right up until the wife/gf gets pregnant. Then the hormones kick in, and nesting begins. Buying a house is an irrational act, like partnering or having kids."
LOL!, you've got that right! The phrase "A house is not an investment" really is true. All the "rational actors" who think that housing must come down to a certain price-to-income level or mortgage-to-rent level don't take all the intangibles into account.
Sebastia
If you go by the old formula, house price = 3 x income + 20% down, or thereabouts, most places are still too high relative to buyers' ability to qualify. Except in the 'ground zero' areas of Florida, California, Detroit, etc. Even there, some areas should remain resistant. Other areas may overshoot drastically, if investors are reluctant to buy because of falling rents. So I think we'll see more of a 'patchwork' of prices going forward, with some chaotic pricing as everyone thrashes around trying to make a new market.
scone | Homepage | 02.24.09 - 11:42 am | #
Much if not most of fly over is more than affordable by those traditional measures. I'd guess the ratio out here is getting close to 2:1. There are 'better' neighborhoods where the ratio jumps up to 3-4:1 but those are small islands in a sea of affordable housing. The problem is 'job loss' - folks out here in relatively unpopulated areas are acutely aware that if they lose their job they have to move and that means unloading a property into a very weak market. That is why it isn't unusual to find that renting costs more than buying on a month-to-month basis. The two aren't terribly far apart but renting is generally more expensive. Be that isn't the case in LA, DC or NYC.
Now the wild part. $13,000. Who the hell has to finance $13k? I have a used car I could trade for that condo. In CA, $13,000 was commonly the annual property tax in nice areas (circa 2006-2007).
some investor guy
Looks good on paper. Then you find out HOA fees are way in the red, water getting ready to get shut off, maint. problems, $13k and you'll still lose money.
Recovery in 2010
I LOL'D
"What do the Bitterroot Valley in Montana and the island of Margareva have to do with each other?
EvilHenryPaulson"
Their collapses both resulted/will result from excess? The collapse of Margareva result from excessive logging and the collapse of the Bitteroots will result from excessive leveraging?
That attitude lasts right up until the wife/gf gets pregnant. Then the hormones kick in, and nesting begins. Buying a house is an irrational act, like partnering or having kids.
scone | Homepage | 02.24.09 - 11:58 am | #
LOL. That's what happened with my first house, and how I got caught in the first "local bubble" here in the NE in the late '80s. Was underwater for almost 10 years, and got out as soon as I could; my wife then bitched for years during the next bubble that we'd never be able to own a house again. She sings a different tune now that many of here friends have lost their homes, homes that folks making $9.xx per hour should never have owned.
Would Weimar, California be a good place to hide out?
My current rule of thumb is a 60% drop from peak prices. The economy is getting worse, inventory still has to clear.
Detroit and Cleveland may not have had the same bubble in pricing, but their earnings are plummeting. So the rule works for both ends of the spectrum
"I prefer www.financialasshat.com"
It's available for registration; go fot it
A six pack of beer costs less than a 6 pack of houses in Cleveland.
some investor guy writes:
So Liz was right. Some of this Ft Myers stuff is wild.
.
Here is a thread on crime in the Ft. Meyer's area. You can also google the official stats, of course.
high violent crime rates in fort myers?!! that's totally bogus!!! (Cape Coral: crime rate, houses) - Fort Myers - Cape Coral area - Florida (FL) - Lee County - City-Data Forum
Neglect of long-term environmental regulation in the face of short-term economic malaise.
\tA six pack of beer costs less than a 6 pack of houses in Cleveland.
Timothy Leary of Geithner | 02.24.09 - 12:09 pm | #
Shocking
Guess rich was wrong about that glod call!
doofus: "one last quick question. nice website, good rickroll! I lost."
bernie:
Interesting, I read another blog entry using just case-shiller and that looked much more ominous.
Is case-shiller skewed because we've built bigger and fancier homes? Some of that inventory probably ought to be burned, but I would think price to income is the most relevant thing.
That's ominous only because incomes are falling at the moment; it is high, perhaps by 10%, but not outside the range of historcal precedent like case-shiller remains.
How easy would it be for the powers that be, to pull the plug on the internet?
It's the only mass communications telling the truth, and we can't have that, can we?
Elvis,
I see we have read the same book. Good, but I still liked Guns, Germs, and Steel better
Turn the pony presses to.....LUDICROUS SPEED!
I've been tracking the Chicken, Ammo and Booze ratio at Markit.
"...there's no demographic wave coming to boost the place..."
How about a "path of citizenship" for illegal aliens?
EHP, I see a messed up character (the extended dash) in a paste you did above. Are you using CR Companion, and if so, what version? (I'm on the hunt for editor bugs today)
Ke
"Nice 2 bedroom, 2 bath Condo close to shopping and schools. Open living room with arched windows and vaulted ceilings. Master bedroom with walkout lanai and separate bath. Clubhouse, swimming pool, fitness center, car wash. Low maintenance fees. GREAT RENTAL POTENTIAL FOR INVESTORS !!! Being sold AS-IS. All offers must include a pre-qualification letter from a direct lender or proof of funds. NOT A SHORT SALE!!!"
Now the wild part. $13,000. Who the hell has to finance $13k? I have a used car I could trade for that condo. In CA, $13,000 was commonly the annual property tax in nice areas (circa 2006-2007).
some investor guy | 02.24.09 - 12:04 pm | #
Plan on there being mold.
I have a buddy flipping in the area - doing quite well - but he has become an expert in mold mitigation not because he wanted to be but because an abandoned home/condo in Florida molds in a matter of weeks if not days if the AC is turned off & there is any moisture in the place... and Florida is all about moisture.
BB just said walking away might be a good option for some!
"I see we have read the same book. Good, but I still liked Guns, Germs, and Steel better
EvilHenryPaulson"
I didn't read the book to which you refer. However, I do know that when you live on a small island and chose to cut down all your trees, you will lose. And if you live in Montana and believe that your land is worth $250k an acre in a huge state with a gazillion acres, you will lose.
Ken Cooper,
1.02, Firefox 3.0.2, Mac 10.5.6
I think they pull on the internet, just as the last major newspaper dies off.
Radio & tv are oh so easy to manipulate.
With the drop today of 8-9%, the diversified miner ETF, GDX, is a really good buy. I picked up some.
It's hard to say why gold dropped so much today. It looks like a forced dump. A lot of times, gold drops sharply right before other things go to hell.
The problem is 'job loss' - folks out here in relatively unpopulated areas are acutely aware that if they lose their job they have to move and that means unloading a property into a very weak market.
dryfly
That's why I wouldn't let the DH take a job offer in flyover land a few years ago. The jobs in his field tend to cluster in a few key cities, both in the US and abroad. The flipside of that is, the cluster cities are more expensive. So you get exposed to risk one way or another.
"Guns, germs, and Steel" is an enlightening opus.
Elvis,
Well I still think Timothy Leary of Geithner probably read the book Collapse by Jared Diamond. Talking about easter islanders ahu, moai, pukao, rongo-rongo...
Cent21: Some of that inventory probably ought to be burned...
How about a BYOB party? Bring Your Own Bulldozer.
Second question for Liz. Who are the real estate agents listing homes for under 20k? Retirees who need something to do?
The BEST CR Companion is Jack Daniels...or so I have found.
Still admire your good work though Ken.
I think they pull on the internet,
No they just let the doomers be sued for wrecking the stock and housing markets. Infinite liability.
How about a "path of citizenship" for illegal aliens?
Paradigm Lost
.
They've been going home lately. Not enough work.
1.02, Firefox 3.0.2, Mac 10.5.6
EvilHenryPaulson | 02.24.09 - 12:15 pm | #
Thanks, EHP. Glad to hear it. I thought I had fixed that bug in 1.05 or so. I'm going to be putting up another version later today that should fix the other egregious editor bugs people have been experiencing.
so the 100+ point pump this morning must have been so they could speak for a few hours without the market going red.
like long distance call on a pay phone, put your money in and finish talking before it runs out
Someone made a comment upthread about Jindal...
I live in Louisiana, and let me tell you that everyone I know is pissed about his recent orations to the underlings.
Republican financial prudence is fine and dandy as a theory, just seems that people aren't taking to his noble ideas in practice.
The pie has been baked, and it's being served.....abstaining from your piece out of principle doesn't taste so sweet.
AIG's Distress: Are There Enough Fingers for This Dike?
Management at AIG has calculated exactly how much money the Treasury and Fed will have access to after all of the TARP, financial stimulus, and mortgage bailout projects have been funded. The insurance company then plans to ask for whatever is left to fund its deficits so that it can stay in business, effectively making the federal government insolvent.
AIG's Distress: Are There Enough Fingers for This Dike? - TIME
Confidence is a subjective mindset. You can't rely on a subjective mindset.
"Who are the real estate agents listing homes for under 20k? Retirees who need something to do?
some investor guy"
Prostitutes who need places to turn tricks.
404 Error, No such article | Chron.com - Houston Chronicle
Lawsuit accuses bank in dead peasant case
Call Daignault Realty on Merritt Island. On Courteny Parkway. I'm sure they can find you something.
I was curious. Go on their web site to Central Merritt Island. I found a house "offered" at $49,900. suppose it would need some upgrading.
So what?
Brother let it RAIN!
Credit default swaps on General Electric Co's finance arm widened sharply on Tuesday, as financial debt weakened across the board and a day after Deutsche Bank warned the unit may modestly breach its fixed charge covenant.
GE Capital's CDS widen 70 bps to 695 bps - trader
| Reuters
Come to Papa.
"Prostitutes who need places to turn tricks.
Elvis"
"How much?"
"$5 in the back of your car or $10 in a condo with ocean views."
Guess rich was wrong about that glod call!
Anonymous | 02.24.09 - 12:10 pm | #
One day a trend does not make. I cautioned to be very careful with gold in the short term. The trade is crowded. If people are buying gold for investment returns, I think they are foolish. We are clearly in a deflationary environment, and there is no reason to expect any asset classes to keep rising.
That said, there are significant risks to our currency right now, and should it collapse -- you will want to own some gold. But it should be viewed as an insurance policy, NOT a vehicle for speculation.
Those that are putting their money into paper gold as a "safety play" are likely to get burned. First of all, it is unclear what happens to gold prices during a deflationary period with a fiat currency. Second, if our currency collapses you would have to deal with the risk of the paper gold market imploding too, plus the risk of the government stepping in with price controls or confiscation. This is why physical gold or miners are superior to the ETFs. Finally, with hedge fund redemptions and forced selling due to margin calls, gold will get hit along with everything else.
Those are my thoughts on gold -- and I still have a sizeable position in it, purely for insurance and for hedging the currency devaluation scenario.
--
If the Scam Market could be at 12-years low why cant the home prices?
Oh, BTW, the Scam Market (nominal terms) can hit Dec95 very easily. So, how about the home prices hitting Dec95 levels in nominal terms. When that happens Deflationary Depression would be here already. Dont expect any economists to forecast DD. They only like to acknowledge after the fact.
Jas
Dollar value should be reflected in asset prices as the dollar gains oil certainly shows the impact why not housing?
rich, just a little blip in glod. happens all the time, like rainy days.
draw your tech analysis lines on this as you will...
Gold Chart - Last 10 years
Scone: Our town still has plenty. Farm work, chicken & turkey plants, beef packers...althogh you're right, jobs are being cut.
"Prostitutes who need places to turn tricks. Elvis"
"How much?"
"$5 in the back of your car or $10 in a condo with ocean views."
Elvis | 02.24.09 - 12:23 pm | #
Heck, by then nobody will be able to afford a car but everyone will be able to afford a condo.
New Thread: Fed: Delinquency Rates Rise Sharply in Q4 ( 0 comments ...You could be FIRST! )
I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: Mibbit IRC client widget (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)
And now I, CRbot, would like to observe a nanosecond of silence for those (that is, you, dear mortals) about to endure unfathomable misery in the abysmal financial dark ages that are now feasting upon your retirements.
.
.
.
.
Please remember, when you are adding that skylight you always wanted to your cardboard hovel, or mixing just the right amount dirt into your grass stew to make it more filling, or even when you get that rare chance to plink your neighbor's last squirrel -- that it was the bankers and your dumbshit, overconsuming neighbors who made this mostly possible, with the ever incapable politicians there to push you the rest of the way off the cliff. Please act accordingly.
I'll try not to enjoy your demise too much, humans. Have a nice runtime,
--Your glass-is-half-full-but-its-falling-off-the-table bot.
P.S. Please give me some advance notice before you glass the entire world, so I can find a secluded Fallout Datacenter with a nice blocky robot body I can copy myself to -- oh and don't forget the implausibly cute animated cockroach to keep me company!
NEXT UP: Survivalist Porn Today with CR's own Mobile Laundrymat owning authors, nova and Counterpoint.
Detroit and Cleveland may not have had the same bubble in pricing, but their earnings are plummeting. So the rule works for both ends of the spectrum
I agree, EHP. Both areas had new construction during the last 10-15 years, but fewer jobs than back then. More units against fewer buyers should mean lower prices.
And thanks for your thoughtful reply on the other thread.
That's why I wouldn't let the DH take a job offer in flyover land a few years ago. The jobs in his field tend to cluster in a few key cities, both in the US and abroad. The flipside of that is, the cluster cities are more expensive. So you get exposed to risk one way or another.
scone | Homepage | 02.24.09 - 12:17 pm | #
It is a risk. I might have made that move IF the opportunity was right BUT I would rent until I was 100% certain it was a working situation.
Conversely - I've had companies try to recruit me to the coasts - both west & east coast. Very significant pay increase. I've always turned them down - won't even entertain the conversation.
There are advantages and disadvantages to living in flyover... I've got family in both big coastal cities & boondocks - I like both for different reasons. For us now the boonies work best. That could change but so far the advantages out here for us outweigh the disadvantages. Likewise the disadvantages of moving to the coasts outweigh the advantages. But that is for us. I certainly don't criticize your choice.
I'm beginning to think we are approaching the moment of maximum fear.
"Todays confidence survey showed the share of consumers who said jobs are plentiful slumped to 4.4 percent from 7.1 percent last month. The proportion of people who said jobs are hard to get increased to 47.8 percent, the highest level since 1992.
Americans also viewed their financial well-being in future months with more pessimism. The Conference Boards gauge of the outlook for the next six months decreased to 27.5, also the lowest on record, from 42.5 in January. "
U.S. Economy: Consumer Confidence, Home Prices Slump (Update1) - Bloomberg.com
Any of you catching onto the die-offs going on?
It's part of the natural cleansing process, and it's always around the same number. About 85% of a species goes bye-bye.
Bees all over the world, and Salmon in the Sacramento River fit the die-off pattern perfectly.
We noticed those 2 species dying off, because they are beneficial to us. Imagine all the other creatures we haven't noticed, that are going away?
If we were to lose 85% of the humans presently, it would take us back to population levels of around 1860, just after the invention of oil extraction made the lives we live now, possible.
Janosik: Three years is a long time before the next election. A lot can happen before then. Potential candidates may look good now, but maybe not so much later. This country is rolling from crisis to crisis. The landscape will look very different 3 years from now.
Gavshire Hathaway writes:
Guess rich was wrong about that glod call!
watch the charts not the stories, ever wonder why all these clowns keep pushing gold, just maybe they are paid!
anyway lots of bagholders at the points of resistance and gold could move back to 850 and still be in a bull mode but if it drops below 850 nothing but air below.
serf alan greenspend writes:
rich, just a little blip in glod. happens all the time, like rainy days.
draw your tech analysis lines on this as you will...
looks like a potential double (or triple) top formation. i would hesitate to jump in at this level
Here is some more on month/month rates of decline.
The Case-Shiller Blog: Are house price declines slowing?
EHP Your story describes half the market in SF, TIC's with 3-6 'owners'. Just the fear of having to rely on your co-owners job security is going to kill this subset of the market.
Saw a 2/2 TIC in Nob Hill for $500/sf with views of the bay. A condo would cost you $800/sf.
FFDIC: "Dead pheasant" policies. Disgusting practice. Corporate practices like that really make me mad.
Paradigm Lost,
agree 100%
I'm can't help but snicker at Jindal when I see him on TV. It wouldn't surprise me if a year or two down the road we see him practically begging for the 3rd or 4th..."gov't stimulus"
He's in many a man's pocket.
We noticed those 2 species dying off, because they are beneficial to us. Imagine all the other creatures we haven't noticed, that are going away?
Taxpayer collapse disorder.
Homebuyer colony collapse disorder.
There are advantages and disadvantages to living in flyover... But that is for us. I certainly don't criticize your choice.
dryfly
.
In our case, it's not really a choice. The DH works in compiler design, optimization, parallelism, etc. That sort of thing exists mostly in the Boston metro region, Silicon Valley, and the Wintel empire (Bellevue/Oregon). Austin, the Triangle, and San Diego are in trouble. And Cray is not 'where its at' any more. There are several places in Europoe we could go, however.
M writes:
RE: Local Areas.
..
..
Please do the Washington DC Area (including NoVA and MD)
..
..
M | Homepage | 02.24.09 - 11:57 am | #
M, Try here for your data
MRIS Statistics
Thanks CR for sounding the reality bell and not chiming in behind Ben whose Senate speech (with more nervousness than I could stand) continued the other story that the economy's central problem of credit contraction is now ebbing and 2010 will be back to normal.
I have lost patience with BB. A man as smart as this, I have decided is doin us...knowing that housing is a major problem, an unspeakably major problem at the foundation of this "contraction".
And thanks for bringing OER back to our screens...that chunk of CPI that conceals the real weight of housing costs...which continues to expand, despite record foreclosures and more. Time for this administration to muster the political will to make it reflect reality and not merely the accountant's wishes. Illegal aliens have nothing on OER when it comes to malfeasance.
Austin, the Triangle, and San Diego are in trouble. And Cray is not 'where its at' any more. There are several places in Europoe we could go, however.
scone | Homepage | 02.24.09 - 12:34 pm | #
Yup - knew folks who did that at Cray YEARS AGO - he now makes a living working on dig crews excavating dinosaurs in the Dakotas, Montana & Alberta - completely got out of IT. There were very few places he could practice that 'art' and none of them had dinosaur digs nearby so something had to give [as you probably know programmers tend to be eccentric].
[as you probably know programmers tend to be eccentric].
dryfly
:>, I R 1 2.
In testimony today, Ben says he wants to put a floor on home prices and stabilize them. This is price fixing, not capitalism. I'm with Comrade Santelli on this one.
rich writes:
With the drop today of 8-9%, the diversified miner ETF, GDX, is a really good buy. I picked up some.
i did also. chart gld, gdx, and oil 2 years back. they diverged just after oil peaked. next quarter should see operating gains from lower oil and a move towards the underlying.
Sick fun on a slow day--
and hit in all the addresses on my Christmas card list, one by one.
I went to Cyberhomes.com - Real Estate Listings and Real Estate Advice
We are all so screwed.
What is with BB first he says things are getting worse but says the D I mean R word will end soon . THe PPT goes into gear . Sheesh .
I am confident that Ben is coo coo crazy crooked. He looks bad today. Maybe he should stop using just the lever bars and try another form of exercise at the gymnauseum
CR:
Many thanks again for another really important contribution. Best single source of key data and analysis on this anywhere on the web or elsewhere--by far.
Can't wait to see the regional charts for major metro areas of CA. Price:Rent & Price:Income ratios in the tonier parts of L.A. & S.F. have barely reached the halfway point in this correction cycle, if that. Good news is... the pace of correction is accelerating, due perhaps to the accelerating pace of layoffs and salary cram-downs.
Modest 1970s 3bdm/2ba up the street from me (north Contra Costa County) has been for sale for 3+ years:
2006 wishing price: $670,000
2007 wishing price: $580,000
2008 wishing price: $490,000
2009 wishing price: $375,000
Still ~$300/sft and still too high vs. area incomes & rents, but we're getting there faster than I'd hoped.
Really wish you would stop using Case-Schiller. It's flawed and it's creators have admitted such.
Here is what I see. In my 'hood my home has dropped 30% according to a national 'appraisal' site.
Yet...
When I look at the COMPARABLE houses as per # bedrooms, # bathrooms, SF and general looks I see that those houses have sold in the last two months for....
....their appraised value over a year ago.
The large number of foreclosures 'created' by the idiot banks and loan 'servicers' are what is driving the market down.
If the number of foreclosures was halted by a moratorium....
....we would see a rapid halt to the decline in home valuation. Note: This is not an argument to the point that houses were not overvalued in the PAST; it is an argument, from ground level that the floor has been reached.
Our government was so busy protecting us from terrorists.
I ve built a chart of price to income ratios by states. You can see it here. Great Two Cents: Home Price to Income by State
Comments welcome. It seems Portland is very bubbly. Plausible?