A few observations.

[hipmatt]

Seen some really interesting things lately….

Interest only loans and 100% financing is still going strong, especially if they can get the home to appraise for more than the purchase price. How STUPID can the banks get? The writing is on the wall as they continue to put more nails in their own coffins.

I know a young lady and her husband, (make about 80k combined) they just closed escrow on their new 3300ft MCMANSION in the French Valley area of TEM/Mur. 10 year interest only, either 0% or close to 0% down. They paid $400k. They said…”the house was a repo, we got it for $100k less than it is worth, and the interest only loan, well, we only want to be there until it goes back up and we can make some money on it.” .. bottom line, people still have no clue as to what a home purchase is all about. Funny thing is, there are only 2 people, yes two, and no plans for kids either, living in a 3300sqft home… well thats the American Dream boys.

Also, some neighbors I know owe $680k on their home, when the house next door(2 houses down and identical , won’t sell for $539k (on the market for over 100 days now.) Their payments just reset, and its basically a matter of time before they foreclose or short sale it. To bad, cause they are nice people, just made financially BAD choices.

As a matter of fact, according to the tax data I pulled up on Harveston in the MLS, there are MANY home owners who owe at least 100% or more of their homes current value. The answer that I keep hearing from them all is, ..”well, we can wait until the market picks back up next year.”

I have a hunch that there are many a Temeculains that are in this same predicament. They finally are feeling the payment pinch, and just can’t sell, due to owing more than what the home is worth. And the answer that I hear from almost all it that they will sell when the market picks back up… The thing they don’t get is that if everybody waits to sell when the market “picks back up”, then the market won’t pick back up due to a flood of inventory.

I think this is one way to look at the relatively slow price reductions we have seen here. I think that we will have stable price reductions here for years as the inventory just won’t shrink. There are too many homes for sale, and people are having to either foreclose, short sale, or lower their price to get out.

I am also seeing resales starting to lower their prices to a more reasonable level. Granted it’s still not getting the job done, but prices do seem to be coming down. Its pretty easy now to find a nice 4/2.5 in Murrieta for under $400k, I do expect these homes to hit high 200s in about 3-4 years.

The biggest question on my mind is what mortgage rates will do. Nothing can really save RE at this point, but if rates continue to climb steadily for the next 3 years, expect even bigger discounts. I wonder when the foreigners will stop financing our debt?

[drunkle]

i think that answers the question of when the market (in temecula, anyway) is going to “drop”. next year. with so many average joe’s waiting for the market to pick up next year, either they get slaughtered because the market continues to drag or they flood market all at once and create a glut. either way…

[drunkle]

i think that answers the question of when the market (in temecula, anyway) is going to “drop”. next year. with so many average joe’s waiting for the market to pick up next year, either they get slaughtered because the market continues to drag or they flood market all at once and create a glut. either way…

[mydogsarelazy]

French Valley? Don’t get me started.

We got invited to a birthday party for a 3 year old there, and it was so odd. This young couple — neither one was thirty yet — had just moved into a totally stunning new house and the pool was under construction in the backyard. Dad had tatoos up and down his arms and legs and Mom looked like Barbie. The party consisted of kids watching a movie on a new plasma screen TV.

The neighborhood was only half moved into and it was like a kind of ghost town of big, new houses.

French Valley is where you can buy a big new house in the middle of nowhere, although the Detention Center isn’t too far.

JS

[mydogsarelazy]

French Valley? Don’t get me started.

We got invited to a birthday party for a 3 year old there, and it was so odd. This young couple — neither one was thirty yet — had just moved into a totally stunning new house and the pool was under construction in the backyard. Dad had tatoos up and down his arms and legs and Mom looked like Barbie. The party consisted of kids watching a movie on a new plasma screen TV.

The neighborhood was only half moved into and it was like a kind of ghost town of big, new houses.

French Valley is where you can buy a big new house in the middle of nowhere, although the Detention Center isn’t too far.

JS

[temeculaguy]

Matt, you won’t have to wait that long for the high 200’s on a 4/2 lets say 2000-2200 sq ft house in Murrieta. Make a u-haul reservation because you have less than 12 months to wait. Foreclosure.com shows 838 nod’s and 434 not’s compared to temecula 479 nod/ 276 not. Both towns are the same size but the core client/stonewood fiasco favored Murrieta and it will have a significant effect that will hit all at once and actually may diminish or blend in after a few years. Some similar sized cities (since foreclosure.com can be inaccurate, but likely to be equally inaccurate in other towns. Vista 210/190, San Marcos 198/143, carlsbad 127/111. Murietta has between 2x to 8x the nod rate and 2x to 3x the not rate of other similarly sized nearby cities. Look at that NOD rate, those hit the market in six months. Santa’s coming and the first name on his list is Matt.

[temeculaguy]

Matt, you won’t have to wait that long for the high 200’s on a 4/2 lets say 2000-2200 sq ft house in Murrieta. Make a u-haul reservation because you have less than 12 months to wait. Foreclosure.com shows 838 nod’s and 434 not’s compared to temecula 479 nod/ 276 not. Both towns are the same size but the core client/stonewood fiasco favored Murrieta and it will have a significant effect that will hit all at once and actually may diminish or blend in after a few years. Some similar sized cities (since foreclosure.com can be inaccurate, but likely to be equally inaccurate in other towns. Vista 210/190, San Marcos 198/143, carlsbad 127/111. Murietta has between 2x to 8x the nod rate and 2x to 3x the not rate of other similarly sized nearby cities. Look at that NOD rate, those hit the market in six months. Santa’s coming and the first name on his list is Matt.

[Bugs]

Remember when we were talking about boom buyers needing staying power to ride out the cycle? Many of those buyers are now trapped in those homes by the equity deficit. They aren’t going anywhere because they can’t go anywhere. They can’t take a job in another town, they can’t move closer to their parents, and they certainly can’t afford to get sick or lose a job or go back to school or get a divorce.

Everyone assumes that at the end of this cycle the next cycle will reach the same prices, at which point these peak buyers will finally be free to move on without financial loss.

What if that assumption (next time will be as good as this time) doesn’t pan out? Just as society has had to come to terms with the realization that at some point the next generation will not do better than the one before it, maybe we should be considering whether there’s an upper limit to how much a residence will sell in relation to wage and population trends.

The 2005 price spike was 3 times larger relative to the long term trendline compared to the 1990 spike. What if the 2015 spike only reaches to equal that 1990 spike? What if the former $600,000 house declines in nominal pricing to $300,000 and then only increases to $400,000 the next time around? There isn’t anyone who can say what interest rates and employment are going to look like 5 years from now, let alone farther on down the line.

I seriously wonder how many of the 2005 buyers have considered the possibility that they could be stuck in that house for 20 years? And further, how many people can successfully go that distance?

[Bugs]

Remember when we were talking about boom buyers needing staying power to ride out the cycle? Many of those buyers are now trapped in those homes by the equity deficit. They aren’t going anywhere because they can’t go anywhere. They can’t take a job in another town, they can’t move closer to their parents, and they certainly can’t afford to get sick or lose a job or go back to school or get a divorce.

Everyone assumes that at the end of this cycle the next cycle will reach the same prices, at which point these peak buyers will finally be free to move on without financial loss.

What if that assumption (next time will be as good as this time) doesn’t pan out? Just as society has had to come to terms with the realization that at some point the next generation will not do better than the one before it, maybe we should be considering whether there’s an upper limit to how much a residence will sell in relation to wage and population trends.

The 2005 price spike was 3 times larger relative to the long term trendline compared to the 1990 spike. What if the 2015 spike only reaches to equal that 1990 spike? What if the former $600,000 house declines in nominal pricing to $300,000 and then only increases to $400,000 the next time around? There isn’t anyone who can say what interest rates and employment are going to look like 5 years from now, let alone farther on down the line.

I seriously wonder how many of the 2005 buyers have considered the possibility that they could be stuck in that house for 20 years? And further, how many people can successfully go that distance?

[blahblahblah]

The next bubble will be something completely different. Last time it was tech stocks, this time it is houses, next time it will be bio stocks or energy stocks or south sea trading shares or tulips. Houses are not going to have another run like this for a long, long time; the psychology is not going to be there to support it.

Nominal home values might not decrease a whole lot once the US starts inflating its debt away, but real values are going to decline for a long time…

[blahblahblah]

The next bubble will be something completely different. Last time it was tech stocks, this time it is houses, next time it will be bio stocks or energy stocks or south sea trading shares or tulips. Houses are not going to have another run like this for a long, long time; the psychology is not going to be there to support it.

Nominal home values might not decrease a whole lot once the US starts inflating its debt away, but real values are going to decline for a long time…

[PD]

Bugs, nice post. Most people are assuming that the next cycle will top out above the peak of this last cycle. It might not happen that way. We might have to go through two cycles before peak buyers are saved.

[PD]

Bugs, nice post. Most people are assuming that the next cycle will top out above the peak of this last cycle. It might not happen that way. We might have to go through two cycles before peak buyers are saved.

[cr]

I was thinking about the interest rates, and it seems like most people have started accepting the idea that the FED will not lower them again, but still some hold on to hope that they will.

A good analogy I think would be to say, “I’m too drunk to drive now, I better drink some more to sober up.”

Lower rates are a huge part of the problem, either direct or indirect. Applying the root of the problem as a potential solution to it is 100% bass-ackwards.

[cr]

I was thinking about the interest rates, and it seems like most people have started accepting the idea that the FED will not lower them again, but still some hold on to hope that they will.

A good analogy I think would be to say, “I’m too drunk to drive now, I better drink some more to sober up.”

Lower rates are a huge part of the problem, either direct or indirect. Applying the root of the problem as a potential solution to it is 100% bass-ackwards.

[Author]

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