Goldman Sachs says …

[4plexowner]

House prices are significantly over-valued in California

Our house price model indicates that Californian homes are 35-40% above the price range implied by current and forecast economic conditions (compared to 13-14% over-valuation nationally). As of August the median house price in California was $589K, but economic conditions support prices between $350-380K; material price declines are likely, in our view.

~

Housing Valuations

http://www.irvinehousingblog.com/wp-content/uploads/2007/10/california-valuations.pdf

[Bugs]

Where were they two years ago?

[sandiego]

This will help the pricing get back to $350,000. It will be bad if you are sitting on a big house in 2 years when the builders start plunking down little cracker boxes on the lots that they already own in the neighborhoods near you.

Inland buyers shunning mega-homes, experts say
10:00 PM PDT on Saturday, October 27, 2007
By LESLIE BERKMAN
The Press-Enterprise

The trophy house has lost its luster. With McMansions being conspicuous casualties in a mountain of foreclosures and unsold homes, builders who during the past decade sold ever larger status-symbol homes are preparing to reverse course.

Smaller and more efficient houses that middle-income buyers such as teachers, police officers and firefighters can afford are needed to revive the stalled home-building industry and lure back buyers, marketing experts say.

“The next round of development will absolutely be smaller homes,” said Alan Nevin, chief economist for the California Building Industry Association.

KB Home is building smaller more affordable homes in the Vicenza subdivision in Perris. “The next round of development will absolutely be smaller homes,” said Alan Nevin, chief economist for the California Building Industry Association.

“The No. 1 issue on everyone’s mind right now is affordability. We want to get affordable and the way to get that is to get smaller,” said Steve Ruffner, president of KB Home’s Inland Empire division.

Ruffner said whereas KB Home in the past two years built homes sized between 1,800 and 4,000 square feet, the homes in its newest communities range between 1,300 and 2,800 square feet.

Smaller homes will be designed for first-time buyers and for the baby boom generation, the eldest of whom will turn 62 next year. Builders expect they will want to trade in homes where they raised their families for lower maintenance, single-story houses.

“The next cycle (of home building) will be driven more by move-down buyers than move-up families,” predicted Mark Boud, principal and founder of Real Estate Economics, a residential real estate research company based in Irvine. “Within the next three years, the majority of what enters the market will be more affordable and, in a lot of cases, smaller,” he said.

Bigger Seemed Better

The turnabout will not occur overnight, say home-building industry experts, because builders that already have government approved plans for large homes on large lots cannot afford to make major revisions midstream. It takes time to design and engineer a new product.

“So you won’t see a lot of smaller units on the market for about a year,” said John Young, president of Rancho Cucamonga-based Young Homes.

Since the 1990s, Riverside and San Bernardino counties, once the bastion of housing affordable to first-time buyers, have seen an explosion of executive style and luxury homes. Many homeowners sold their houses and used their substantial equity as a down payment to buy something larger and fancier.

With the help of rising home values and lenient lending, there seemed to be a bottomless pool of Inland buyers able to buy the so-called McMansions — up to 4,000 square feet — that sported master bedrooms with retreats and huge walk-in closets, cavernous master bathrooms with spas, spiral staircases, multiple fireplaces, three- and four-car garages, game rooms, home theaters and sometimes even a wine cellar or separate abode or “casita” for a mother-in-law or adult offspring.

“In the last few years, most builders were going after that top 20 percent of the market, the one-in-five people, with a lot of income or a lot of equity,” said Will Haynes, a senior principal with William Hezmalhalch Architects.

As long as the economy allowed, Haynes said, the move-up market was favored by builders and land sellers because it could generate more profit than entry-level housing. He said government agencies also benefited because they could reap more tax revenue from higher-valued homes and demand more fees, parks and other benefits from developers, who could pass on the cost to well-to-do buyers.

“Everyone was hooked on higher-priced housing and the market was chasing that,” Haynes said.

But conditions have changed dramatically. Homeowners who might want a move-up house are reluctant to sell in a depressed market. Also, the risky adjustable mortgages with artificially low introductory interest rates are no longer available. Those loans once enabled many households to buy homes that were more expensive than they actually could afford.

‘A Reality Check’

Builders are leveling their sights on middle income first-time buyers, a market segment largely ignored during the recent housing boom, the housing experts say, and those customers demand houses that are simpler, smaller and less expensive.

Most builders are still busy trying to clear unsold inventories of mostly large houses with discounts and other promotions. But they say they have noticed their smaller houses are selling the fastest and that is the market they will target when they build again.

David Kent, a principal and architect at KTGY Group in Irvine, said builders are going through “a reality check.” He said they have a lot of unsold houses priced from the mid $400,000s to the mid $600,000s. “So they want to go below that.”

Nick Mugridge, 26, said on Easter, the day after his wife noticed a KB Home sign on Interstate 215, they hurried to the builder’s sales office in Perris to buy their first home for $302,000. “We put down a deposit before we saw a model because the price was so good,” he said.

Mugridge, the manager of a golf shop in Riverside, said he and his wife, the manager of a Bank of America branch in Murrieta, selected few upgrades for their 2,200-square-foot house. They skipped tile flooring, granite countertops, a security system and surround-sound speakers.

They ordered basic-white walls that Mugridge said he plans to customize with colors he will paint himself and he is also saving money by putting in the backyard landscaping and sprinklers.

Mugridge said the couple, who moved in a couple of weeks ago, were attracted by the small lot, which they knew translates into a lower selling price, and by the lack of a homeowners association, which means they won’t be paying monthly dues. Although their house is no McMansion, he said, it is big enough.

“Coming from an apartment this place is insanely big,” he wryly observed.

Builders say because land value accounts for about a third of the price of a home, the push for greater affordability will lead to detached homes on smaller lots and town houses or condominiums.

Haynes, of Hezmalhalch Architects, said ideally the home-building industry will target households with annual incomes of $55,000 to $75,000 by building houses priced between $200,000 and $325,000. A way to achieve that, he said, is to build seven or eight houses to the acre.

Haynes is developing a prototype for an expandable house. It would give first-time buyers an opportunity to buy a basic two bedroom, single bath structure of 812 square feet with a single-car garage or carport for about $160,000. The initial building would come with a large backyard and government-approved building plans for two future additions.

Ultimately the house could be enlarged to a maximum of 1,650 square feet, including four bedrooms, two baths, a family room and a two-car garage.

Matt Sauls, regional marketing manager for Pardee Homes, said of the six projects that Pardee has under development within its Sundance community in Beaumont, the best seller, Estrella, has the smallest homes, ranging from 1,274 to 1,633 square feet. Clusters of six and eight homes abut a common driveway.

Estrella houses, priced from $240,000 to $270,000, are selling at better than twice the rate of other more expensive Pardee homes in Sundance, Sauls said.

Among the buyers at Estrella is an engaged couple, Kandace Hunter and Philip Brock, both 26.

“Instead of a big wedding we decided to get a house,” expected to be built by the end of the year, she said.

Hunter, a high school teacher, said she and her fiancé, a warehouse worker and college student, were glad to find a three-bedroom house for $244,000 even if the tiny backyard will only hold a barbecue pit and a couple chairs. Plus, she said, the low price means they can still afford movies and concerts.

“It is our starter house. When we have a family we will move on to bigger and better things,” she said.

Little But Luxurious

Architects say designing a smaller, lower-priced house requires more connections with the outdoors to make a home seem more spacious. It also demands efficient engineering, such as placing kitchens, laundry rooms and bathrooms back-to-back to minimize the cost of plumbing.

What’s needed is an attractive house that feels bigger than it is, said Mike Woodley at Woodley Architectural Group in Santa Ana. “Buyers aren’t coming in and saying build me an ugly, small, cheap house.”

Architects and builders said they cannot dust off plans for smaller homes that were popular several decades ago because today’s small house has to accommodate a greater variety of household configurations, such as more singles and childless couples, and retain improvements that buyers have come to expect.

“At some point, people’s expectations have been raised about what they want in a house,” said Joe Barbano, in-house architect for Barrett American.

He said he doesn’t believe today’s home buyers would accept a master bedroom without a walk-in closet or a master bathroom without dual vanities and an enclosed toilet.

But Barbano said he expects for the sake of a lower monthly mortgage payment, home buyers may settle for tile rather than granite countertops, black- or white-faced appliances rather than stainless steel and possibly even linoleum rather than tile on the kitchen floor.

Architects say today’s buyers will sacrifice formal living and dining rooms that were popular in previous decades but they insist on having the combination family room, kitchen and eating nook, known as a “great room.”

A trend toward smaller houses is “a correction long overdue,” said Dowell Myers, a professor of urban planning and demography at USC. Myers said every decade since the 1940s the median home size in the United States has been growing.

In Inland Southern California, the median square footage in a new house more than doubled from 1,061 in 1940 to a peak of 2,556 in 2005, then slid to 2,504 in 2006.

The push to ever bigger homes, Myers said, started in the prosperous era following World War II when couples needed space to raise large families.

The baby boom generation continued upsizing as a symbol of middle-class achievement even as their family size shrank.

Typically many of the bedrooms in the last wave of big home construction were not occupied by children but used for hobbies, home offices or exercise equipment.

“People thought they needed big homes because that is what their parents had done. They forgot there was once a reason for it,” Myers said. “The fashion that was archaic has broken under the weight of rising costs. People can’t afford that much house anymore.”

Reach Leslie Berkman at 951-893-211 or [email protected]

[sandiego]

This will help the pricing get back to $350,000. It will be bad if you are sitting on a big house in 2 years when the builders start plunking down little cracker boxes on the lots that they already own in the neighborhoods near you.

Inland buyers shunning mega-homes, experts say
10:00 PM PDT on Saturday, October 27, 2007
By LESLIE BERKMAN
The Press-Enterprise

The trophy house has lost its luster. With McMansions being conspicuous casualties in a mountain of foreclosures and unsold homes, builders who during the past decade sold ever larger status-symbol homes are preparing to reverse course.

Smaller and more efficient houses that middle-income buyers such as teachers, police officers and firefighters can afford are needed to revive the stalled home-building industry and lure back buyers, marketing experts say.

“The next round of development will absolutely be smaller homes,” said Alan Nevin, chief economist for the California Building Industry Association.

KB Home is building smaller more affordable homes in the Vicenza subdivision in Perris. “The next round of development will absolutely be smaller homes,” said Alan Nevin, chief economist for the California Building Industry Association.

“The No. 1 issue on everyone’s mind right now is affordability. We want to get affordable and the way to get that is to get smaller,” said Steve Ruffner, president of KB Home’s Inland Empire division.

Ruffner said whereas KB Home in the past two years built homes sized between 1,800 and 4,000 square feet, the homes in its newest communities range between 1,300 and 2,800 square feet.

Smaller homes will be designed for first-time buyers and for the baby boom generation, the eldest of whom will turn 62 next year. Builders expect they will want to trade in homes where they raised their families for lower maintenance, single-story houses.

“The next cycle (of home building) will be driven more by move-down buyers than move-up families,” predicted Mark Boud, principal and founder of Real Estate Economics, a residential real estate research company based in Irvine. “Within the next three years, the majority of what enters the market will be more affordable and, in a lot of cases, smaller,” he said.

Bigger Seemed Better

The turnabout will not occur overnight, say home-building industry experts, because builders that already have government approved plans for large homes on large lots cannot afford to make major revisions midstream. It takes time to design and engineer a new product.

“So you won’t see a lot of smaller units on the market for about a year,” said John Young, president of Rancho Cucamonga-based Young Homes.

Since the 1990s, Riverside and San Bernardino counties, once the bastion of housing affordable to first-time buyers, have seen an explosion of executive style and luxury homes. Many homeowners sold their houses and used their substantial equity as a down payment to buy something larger and fancier.

With the help of rising home values and lenient lending, there seemed to be a bottomless pool of Inland buyers able to buy the so-called McMansions — up to 4,000 square feet — that sported master bedrooms with retreats and huge walk-in closets, cavernous master bathrooms with spas, spiral staircases, multiple fireplaces, three- and four-car garages, game rooms, home theaters and sometimes even a wine cellar or separate abode or “casita” for a mother-in-law or adult offspring.

“In the last few years, most builders were going after that top 20 percent of the market, the one-in-five people, with a lot of income or a lot of equity,” said Will Haynes, a senior principal with William Hezmalhalch Architects.

As long as the economy allowed, Haynes said, the move-up market was favored by builders and land sellers because it could generate more profit than entry-level housing. He said government agencies also benefited because they could reap more tax revenue from higher-valued homes and demand more fees, parks and other benefits from developers, who could pass on the cost to well-to-do buyers.

“Everyone was hooked on higher-priced housing and the market was chasing that,” Haynes said.

But conditions have changed dramatically. Homeowners who might want a move-up house are reluctant to sell in a depressed market. Also, the risky adjustable mortgages with artificially low introductory interest rates are no longer available. Those loans once enabled many households to buy homes that were more expensive than they actually could afford.

‘A Reality Check’

Builders are leveling their sights on middle income first-time buyers, a market segment largely ignored during the recent housing boom, the housing experts say, and those customers demand houses that are simpler, smaller and less expensive.

Most builders are still busy trying to clear unsold inventories of mostly large houses with discounts and other promotions. But they say they have noticed their smaller houses are selling the fastest and that is the market they will target when they build again.

David Kent, a principal and architect at KTGY Group in Irvine, said builders are going through “a reality check.” He said they have a lot of unsold houses priced from the mid $400,000s to the mid $600,000s. “So they want to go below that.”

Nick Mugridge, 26, said on Easter, the day after his wife noticed a KB Home sign on Interstate 215, they hurried to the builder’s sales office in Perris to buy their first home for $302,000. “We put down a deposit before we saw a model because the price was so good,” he said.

Mugridge, the manager of a golf shop in Riverside, said he and his wife, the manager of a Bank of America branch in Murrieta, selected few upgrades for their 2,200-square-foot house. They skipped tile flooring, granite countertops, a security system and surround-sound speakers.

They ordered basic-white walls that Mugridge said he plans to customize with colors he will paint himself and he is also saving money by putting in the backyard landscaping and sprinklers.

Mugridge said the couple, who moved in a couple of weeks ago, were attracted by the small lot, which they knew translates into a lower selling price, and by the lack of a homeowners association, which means they won’t be paying monthly dues. Although their house is no McMansion, he said, it is big enough.

“Coming from an apartment this place is insanely big,” he wryly observed.

Builders say because land value accounts for about a third of the price of a home, the push for greater affordability will lead to detached homes on smaller lots and town houses or condominiums.

Haynes, of Hezmalhalch Architects, said ideally the home-building industry will target households with annual incomes of $55,000 to $75,000 by building houses priced between $200,000 and $325,000. A way to achieve that, he said, is to build seven or eight houses to the acre.

Haynes is developing a prototype for an expandable house. It would give first-time buyers an opportunity to buy a basic two bedroom, single bath structure of 812 square feet with a single-car garage or carport for about $160,000. The initial building would come with a large backyard and government-approved building plans for two future additions.

Ultimately the house could be enlarged to a maximum of 1,650 square feet, including four bedrooms, two baths, a family room and a two-car garage.

Matt Sauls, regional marketing manager for Pardee Homes, said of the six projects that Pardee has under development within its Sundance community in Beaumont, the best seller, Estrella, has the smallest homes, ranging from 1,274 to 1,633 square feet. Clusters of six and eight homes abut a common driveway.

Estrella houses, priced from $240,000 to $270,000, are selling at better than twice the rate of other more expensive Pardee homes in Sundance, Sauls said.

Among the buyers at Estrella is an engaged couple, Kandace Hunter and Philip Brock, both 26.

“Instead of a big wedding we decided to get a house,” expected to be built by the end of the year, she said.

Hunter, a high school teacher, said she and her fiancé, a warehouse worker and college student, were glad to find a three-bedroom house for $244,000 even if the tiny backyard will only hold a barbecue pit and a couple chairs. Plus, she said, the low price means they can still afford movies and concerts.

“It is our starter house. When we have a family we will move on to bigger and better things,” she said.

Little But Luxurious

Architects say designing a smaller, lower-priced house requires more connections with the outdoors to make a home seem more spacious. It also demands efficient engineering, such as placing kitchens, laundry rooms and bathrooms back-to-back to minimize the cost of plumbing.

What’s needed is an attractive house that feels bigger than it is, said Mike Woodley at Woodley Architectural Group in Santa Ana. “Buyers aren’t coming in and saying build me an ugly, small, cheap house.”

Architects and builders said they cannot dust off plans for smaller homes that were popular several decades ago because today’s small house has to accommodate a greater variety of household configurations, such as more singles and childless couples, and retain improvements that buyers have come to expect.

“At some point, people’s expectations have been raised about what they want in a house,” said Joe Barbano, in-house architect for Barrett American.

He said he doesn’t believe today’s home buyers would accept a master bedroom without a walk-in closet or a master bathroom without dual vanities and an enclosed toilet.

But Barbano said he expects for the sake of a lower monthly mortgage payment, home buyers may settle for tile rather than granite countertops, black- or white-faced appliances rather than stainless steel and possibly even linoleum rather than tile on the kitchen floor.

Architects say today’s buyers will sacrifice formal living and dining rooms that were popular in previous decades but they insist on having the combination family room, kitchen and eating nook, known as a “great room.”

A trend toward smaller houses is “a correction long overdue,” said Dowell Myers, a professor of urban planning and demography at USC. Myers said every decade since the 1940s the median home size in the United States has been growing.

In Inland Southern California, the median square footage in a new house more than doubled from 1,061 in 1940 to a peak of 2,556 in 2005, then slid to 2,504 in 2006.

The push to ever bigger homes, Myers said, started in the prosperous era following World War II when couples needed space to raise large families.

The baby boom generation continued upsizing as a symbol of middle-class achievement even as their family size shrank.

Typically many of the bedrooms in the last wave of big home construction were not occupied by children but used for hobbies, home offices or exercise equipment.

“People thought they needed big homes because that is what their parents had done. They forgot there was once a reason for it,” Myers said. “The fashion that was archaic has broken under the weight of rising costs. People can’t afford that much house anymore.”

Reach Leslie Berkman at 951-893-211 or [email protected]

[sandiego]

This will help the pricing get back to $350,000. It will be bad if you are sitting on a big house in 2 years when the builders start plunking down little cracker boxes on the lots that they already own in the neighborhoods near you.

Inland buyers shunning mega-homes, experts say
10:00 PM PDT on Saturday, October 27, 2007
By LESLIE BERKMAN
The Press-Enterprise

The trophy house has lost its luster. With McMansions being conspicuous casualties in a mountain of foreclosures and unsold homes, builders who during the past decade sold ever larger status-symbol homes are preparing to reverse course.

Smaller and more efficient houses that middle-income buyers such as teachers, police officers and firefighters can afford are needed to revive the stalled home-building industry and lure back buyers, marketing experts say.

“The next round of development will absolutely be smaller homes,” said Alan Nevin, chief economist for the California Building Industry Association.

KB Home is building smaller more affordable homes in the Vicenza subdivision in Perris. “The next round of development will absolutely be smaller homes,” said Alan Nevin, chief economist for the California Building Industry Association.

“The No. 1 issue on everyone’s mind right now is affordability. We want to get affordable and the way to get that is to get smaller,” said Steve Ruffner, president of KB Home’s Inland Empire division.

Ruffner said whereas KB Home in the past two years built homes sized between 1,800 and 4,000 square feet, the homes in its newest communities range between 1,300 and 2,800 square feet.

Smaller homes will be designed for first-time buyers and for the baby boom generation, the eldest of whom will turn 62 next year. Builders expect they will want to trade in homes where they raised their families for lower maintenance, single-story houses.

“The next cycle (of home building) will be driven more by move-down buyers than move-up families,” predicted Mark Boud, principal and founder of Real Estate Economics, a residential real estate research company based in Irvine. “Within the next three years, the majority of what enters the market will be more affordable and, in a lot of cases, smaller,” he said.

Bigger Seemed Better

The turnabout will not occur overnight, say home-building industry experts, because builders that already have government approved plans for large homes on large lots cannot afford to make major revisions midstream. It takes time to design and engineer a new product.

“So you won’t see a lot of smaller units on the market for about a year,” said John Young, president of Rancho Cucamonga-based Young Homes.

Since the 1990s, Riverside and San Bernardino counties, once the bastion of housing affordable to first-time buyers, have seen an explosion of executive style and luxury homes. Many homeowners sold their houses and used their substantial equity as a down payment to buy something larger and fancier.

With the help of rising home values and lenient lending, there seemed to be a bottomless pool of Inland buyers able to buy the so-called McMansions — up to 4,000 square feet — that sported master bedrooms with retreats and huge walk-in closets, cavernous master bathrooms with spas, spiral staircases, multiple fireplaces, three- and four-car garages, game rooms, home theaters and sometimes even a wine cellar or separate abode or “casita” for a mother-in-law or adult offspring.

“In the last few years, most builders were going after that top 20 percent of the market, the one-in-five people, with a lot of income or a lot of equity,” said Will Haynes, a senior principal with William Hezmalhalch Architects.

As long as the economy allowed, Haynes said, the move-up market was favored by builders and land sellers because it could generate more profit than entry-level housing. He said government agencies also benefited because they could reap more tax revenue from higher-valued homes and demand more fees, parks and other benefits from developers, who could pass on the cost to well-to-do buyers.

“Everyone was hooked on higher-priced housing and the market was chasing that,” Haynes said.

But conditions have changed dramatically. Homeowners who might want a move-up house are reluctant to sell in a depressed market. Also, the risky adjustable mortgages with artificially low introductory interest rates are no longer available. Those loans once enabled many households to buy homes that were more expensive than they actually could afford.

‘A Reality Check’

Builders are leveling their sights on middle income first-time buyers, a market segment largely ignored during the recent housing boom, the housing experts say, and those customers demand houses that are simpler, smaller and less expensive.

Most builders are still busy trying to clear unsold inventories of mostly large houses with discounts and other promotions. But they say they have noticed their smaller houses are selling the fastest and that is the market they will target when they build again.

David Kent, a principal and architect at KTGY Group in Irvine, said builders are going through “a reality check.” He said they have a lot of unsold houses priced from the mid $400,000s to the mid $600,000s. “So they want to go below that.”

Nick Mugridge, 26, said on Easter, the day after his wife noticed a KB Home sign on Interstate 215, they hurried to the builder’s sales office in Perris to buy their first home for $302,000. “We put down a deposit before we saw a model because the price was so good,” he said.

Mugridge, the manager of a golf shop in Riverside, said he and his wife, the manager of a Bank of America branch in Murrieta, selected few upgrades for their 2,200-square-foot house. They skipped tile flooring, granite countertops, a security system and surround-sound speakers.

They ordered basic-white walls that Mugridge said he plans to customize with colors he will paint himself and he is also saving money by putting in the backyard landscaping and sprinklers.

Mugridge said the couple, who moved in a couple of weeks ago, were attracted by the small lot, which they knew translates into a lower selling price, and by the lack of a homeowners association, which means they won’t be paying monthly dues. Although their house is no McMansion, he said, it is big enough.

“Coming from an apartment this place is insanely big,” he wryly observed.

Builders say because land value accounts for about a third of the price of a home, the push for greater affordability will lead to detached homes on smaller lots and town houses or condominiums.

Haynes, of Hezmalhalch Architects, said ideally the home-building industry will target households with annual incomes of $55,000 to $75,000 by building houses priced between $200,000 and $325,000. A way to achieve that, he said, is to build seven or eight houses to the acre.

Haynes is developing a prototype for an expandable house. It would give first-time buyers an opportunity to buy a basic two bedroom, single bath structure of 812 square feet with a single-car garage or carport for about $160,000. The initial building would come with a large backyard and government-approved building plans for two future additions.

Ultimately the house could be enlarged to a maximum of 1,650 square feet, including four bedrooms, two baths, a family room and a two-car garage.

Matt Sauls, regional marketing manager for Pardee Homes, said of the six projects that Pardee has under development within its Sundance community in Beaumont, the best seller, Estrella, has the smallest homes, ranging from 1,274 to 1,633 square feet. Clusters of six and eight homes abut a common driveway.

Estrella houses, priced from $240,000 to $270,000, are selling at better than twice the rate of other more expensive Pardee homes in Sundance, Sauls said.

Among the buyers at Estrella is an engaged couple, Kandace Hunter and Philip Brock, both 26.

“Instead of a big wedding we decided to get a house,” expected to be built by the end of the year, she said.

Hunter, a high school teacher, said she and her fiancé, a warehouse worker and college student, were glad to find a three-bedroom house for $244,000 even if the tiny backyard will only hold a barbecue pit and a couple chairs. Plus, she said, the low price means they can still afford movies and concerts.

“It is our starter house. When we have a family we will move on to bigger and better things,” she said.

Little But Luxurious

Architects say designing a smaller, lower-priced house requires more connections with the outdoors to make a home seem more spacious. It also demands efficient engineering, such as placing kitchens, laundry rooms and bathrooms back-to-back to minimize the cost of plumbing.

What’s needed is an attractive house that feels bigger than it is, said Mike Woodley at Woodley Architectural Group in Santa Ana. “Buyers aren’t coming in and saying build me an ugly, small, cheap house.”

Architects and builders said they cannot dust off plans for smaller homes that were popular several decades ago because today’s small house has to accommodate a greater variety of household configurations, such as more singles and childless couples, and retain improvements that buyers have come to expect.

“At some point, people’s expectations have been raised about what they want in a house,” said Joe Barbano, in-house architect for Barrett American.

He said he doesn’t believe today’s home buyers would accept a master bedroom without a walk-in closet or a master bathroom without dual vanities and an enclosed toilet.

But Barbano said he expects for the sake of a lower monthly mortgage payment, home buyers may settle for tile rather than granite countertops, black- or white-faced appliances rather than stainless steel and possibly even linoleum rather than tile on the kitchen floor.

Architects say today’s buyers will sacrifice formal living and dining rooms that were popular in previous decades but they insist on having the combination family room, kitchen and eating nook, known as a “great room.”

A trend toward smaller houses is “a correction long overdue,” said Dowell Myers, a professor of urban planning and demography at USC. Myers said every decade since the 1940s the median home size in the United States has been growing.

In Inland Southern California, the median square footage in a new house more than doubled from 1,061 in 1940 to a peak of 2,556 in 2005, then slid to 2,504 in 2006.

The push to ever bigger homes, Myers said, started in the prosperous era following World War II when couples needed space to raise large families.

The baby boom generation continued upsizing as a symbol of middle-class achievement even as their family size shrank.

Typically many of the bedrooms in the last wave of big home construction were not occupied by children but used for hobbies, home offices or exercise equipment.

“People thought they needed big homes because that is what their parents had done. They forgot there was once a reason for it,” Myers said. “The fashion that was archaic has broken under the weight of rising costs. People can’t afford that much house anymore.”

Reach Leslie Berkman at 951-893-211 or [email protected]

[Anonymous]

Nothing new in this report as this information was known and reported over two years ago by many professionals (just not main stream). In fact, Poway Seller was saying the same thing nearly two years ago.

[Anonymous]

Nothing new in this report as this information was known and reported over two years ago by many professionals (just not main stream). In fact, Poway Seller was saying the same thing nearly two years ago.

[Anonymous]

Nothing new in this report as this information was known and reported over two years ago by many professionals (just not main stream). In fact, Poway Seller was saying the same thing nearly two years ago.

[Bugs]

Where were they two years ago?

[Bugs]

Where were they two years ago?

[4plexowner]

The 9 page report is worth reading. Lots of good charts. I have included the most significant snippets below.

Bugs – this is part of the banking game – create a bubble in some asset class, profit on the expansion of that bubble, then when the bubble pops profit on the deflation – Goldman will get lots of business (and fees!) from anxious clients wanting to reduce their exposure to CA real estate

~

highlights (lowlights?) from the GS report:

3. Home prices in California are 35-40% over-valued

Now that the secondary market for these affordability products has all but evaporated, we expect home prices in California to return to normalized levels (i.e. levels implied by current and forecast disposable income in California as well as U.S. ten-year treasury yields); this implies a 35-40% fall.

…

While our model is helpful in estimating the magnitude of house price correction due for the state of California, forecasting the timing of such a correction is trickier; the typical response of the average Californian home owner to the prospect of falling house prices is to not sell. Therefore, a correction of 35-40% could take many years to play out.

…

Californian mortgage credit quality is deteriorating quickly
Mortgage delinquencies in California are catching up to the national average

From 2000 to early 2006, Californian residential mortgage debt performed much better than both historical and national averages, thanks to double-digit % annual home price appreciation throughout that period.

Recently, however, home price appreciation in California has flattened out (e.g., up only 2% year-on-year in August 2007), although many counties have experienced declines. Given the recent decline in investor demand for Californian residential mortgage debt (and, subsequently, credit availability for consumers) in tandem with rising state unemployment, we forecast significant house price depreciation leading to credit deterioration in California, which is already accelerating above the national average (see Exhibit 3).

…

We remain bearish on the U.S. housing market; house prices are 13%-14% over-valued nationally (which, like in California, could take several years to play out), growth in mortgage debt outstanding continues to fall (driven by house price depreciation and declines in the home ownership rate), and we have yet to see the worst of residential mortgage credit deterioration (reset volumes for subprime ARMs are set to peak in March 2008, and recast volumes for option ARMs are set to peak in June 2010).

…

1. National house prices are 13%-14% over-valued
House prices are over-valued and a correction is underway (see Exhibits 4 and 5).

…

3. We have yet to see the worst of residential mortgage credit deterioration
Our estimated national schedule for adjustable rate mortgage resets (when low-interest teaser rates reset to current rates) and recasts (when the pay-option expires and borrowers are required to pay the fully-amortized rate) suggests that the worst of residential mortgage credit deterioration has yet to be seen across this country. Reset volumes for subprime adjustable-rate mortgages peak (at $42 bn) in March 2008; recast volumes for pay-option adjustable-rate mortgages peak (at $24 bn) in June 2010 (see Exhibit 7).

[lindismith]

“the worst of residential mortgage credit deterioration has yet to be seen across this country.”

Loved this!

These forecasts are very good. Thanks for posting.

Bugs – this is part of the banking game – create a bubble in some asset class, profit on the expansion of that bubble, then when the bubble pops profit on the deflation – Goldman will get lots of business (and fees!) from anxious clients wanting to reduce their exposure to CA real estate

Great analysis! This explains exactly why ‘the experts’ don’t say anything on the way up. They’re all in on it.

Everyday I distrust Big Business, and Big Finance more and more.

[JWM in SD]

“Bugs – this is part of the banking game – create a bubble in some asset class, profit on the expansion of that bubble, then when the bubble pops profit on the deflation – Goldman will get lots of business (and fees!) from anxious clients wanting to reduce their exposure to CA real estate”

This is the same game played back in ’99-2000 with equities. It’s taken the better part of a decade for me to begin to see the forest for the trees, but it is very clear to me now what has been going on.

In my opinion, the true origin of this was in October 1987, when I was only in my second year of High School at Lincoln-Way High in New Lenox, Il. It’s taken twenty years for this to come full circle but it is happening.

I think all of the true Piggs should really be discussing how to take advantage of this if possible. I think there will be opportunity for those who were prescient enough to see this coming. The key will be survival first and opportunity second, but I don’t think that it is impossible.

[JWM in SD]

“Bugs – this is part of the banking game – create a bubble in some asset class, profit on the expansion of that bubble, then when the bubble pops profit on the deflation – Goldman will get lots of business (and fees!) from anxious clients wanting to reduce their exposure to CA real estate”

This is the same game played back in ’99-2000 with equities. It’s taken the better part of a decade for me to begin to see the forest for the trees, but it is very clear to me now what has been going on.

In my opinion, the true origin of this was in October 1987, when I was only in my second year of High School at Lincoln-Way High in New Lenox, Il. It’s taken twenty years for this to come full circle but it is happening.

I think all of the true Piggs should really be discussing how to take advantage of this if possible. I think there will be opportunity for those who were prescient enough to see this coming. The key will be survival first and opportunity second, but I don’t think that it is impossible.

[JWM in SD]

“Bugs – this is part of the banking game – create a bubble in some asset class, profit on the expansion of that bubble, then when the bubble pops profit on the deflation – Goldman will get lots of business (and fees!) from anxious clients wanting to reduce their exposure to CA real estate”

This is the same game played back in ’99-2000 with equities. It’s taken the better part of a decade for me to begin to see the forest for the trees, but it is very clear to me now what has been going on.

In my opinion, the true origin of this was in October 1987, when I was only in my second year of High School at Lincoln-Way High in New Lenox, Il. It’s taken twenty years for this to come full circle but it is happening.

I think all of the true Piggs should really be discussing how to take advantage of this if possible. I think there will be opportunity for those who were prescient enough to see this coming. The key will be survival first and opportunity second, but I don’t think that it is impossible.

[Arraya]

“Everyday I distrust Big Business, and Big Finance more and more.”

You have good reason they will be our undoing.

Never expect the “establishment” to give you a heads up regarding an impending disaster. To much profit in status quo.

This is just one of many disasters on the horizan. The housing bubble explosion is a stiff jab to the nose of the economy. Only to be followed by peak oil an uppercut to the jaw. Mainstream media is useless unless you want the drinking habits of celebrities.

Interesting times ahead.

[lindismith]

Yeah, I’m disgusted once a week (at least) with all of it. I think in the past I was disconnected from it because it didn’t affect me (although it did, I just didn’t feel it.) Now, I look at how all of this is wrapped up in my daily living, and I want to be sick.

And then I’m even sicker when I realize I’m not doing much about it. Or worse, trying to profit off it myself. It truly is survival of the fittest on this earth.

OT: arraya, do you have a sister named sarah?

[Arraya]

Fear not lindismith, all will be righted, albeit in a most unpleasent way.

OT: arraya, do you have a sister named sarah?

Yikes! I feel exposed. Yes I do. What tiny bits of information could you have picked up on the conclude that?

[kev374]

does anyone know the historic trough-peak and peak-trough ratio in terms of years?

[cr]

kev-
The last 2 major up and down cycles went down just about as long as they went up.

I find it comical that the billion dollar financial giant corporations are now coming out and saying what “doomsdayers” have been saying for 3 years, and only after they show a year over year decline.

[Ex-SD]

$350k-$380k median price?……..ha ha ha ha ha ha ha ha ha
The median won’t even be $300k because most of the people in San Diego don’t make enough money to be able to qualify for a loan for $240k (and that’s after paying $60k down plus closing costs………which most also do NOT have). I’m guessing a median of $250k-$260k. Time will tell.

[lindismith]

Completely off topic – apologies to all.

OT: arraya, do you have a sister named sarah?

I know, I know, it’s crazy but I was invited to a Halloween party on evite and because it was hosted by 5 people, who all had fairly generic names, I could not figure out who they were, and how I had gotten on the list. (BTW, this is the 2nd time in a month this has happened to me.) When I scrolled through the repliers, the only email address that looked remotely familiar was ‘arraya72’, but I couldn’t put it together. I was out a few parties Sat night, and for the heck of it, stopped by. After about 15 mins I bumped into Sarah. She was the one who invited me, and when I asked who arraya was, she said it was her brother. I was still in the dark about how I knew you though until yesterday morning when your user name popped up on this thread, and then it all came together. Small world, no?!

I know Sarah through Surfrider. We are not super close – just close enough to get invited to a big shindig though! The problem is I know about 5 Sarahs.

[4plexowner]

I assume that Goldman Sachs carries a little more weight than PowaySeller

I find this report significant – this is a major investment bank (largest in the US?) telling their clients that CA real estate will be 35-40% lower in the future

[Anonymous]

The point is this is old news. Goldman Sachs should have delivered this report 2 years ago, as many other analyts did. Meanwhile, it is way too late for this report to help any of its customers.

[4plexowner]

The report is not intended to help any of Goldman Sachs’ old customers

The report is intended to generate new business for GS by generating fear in anyone invested in CA real estate – just another aspect of the banking game

Yes, GS ‘should’ have delivered the report 2 years ago but that isn’t how they make obscene profits

[JWM in SD]

“The report is intended to generate new business for GS by generating fear in anyone invested in CA real estate – just another aspect of the banking game

Yes, GS ‘should’ have delivered the report 2 years ago but that isn’t how they make obscene profits”

Yes, unfortunately that is true. That is how the game is played nowadays (since the late nineties primarily).

If anyone here doubts that WS is out to steal your money, almost literally, then this proof positive of that. They want to scare out that remaining $10T or so of home equity that still exists out there and a big chunk of that is in Clownifornia.

[JWM in SD]

“The report is intended to generate new business for GS by generating fear in anyone invested in CA real estate – just another aspect of the banking game

Yes, GS ‘should’ have delivered the report 2 years ago but that isn’t how they make obscene profits”

Yes, unfortunately that is true. That is how the game is played nowadays (since the late nineties primarily).

If anyone here doubts that WS is out to steal your money, almost literally, then this proof positive of that. They want to scare out that remaining $10T or so of home equity that still exists out there and a big chunk of that is in Clownifornia.

[JWM in SD]

“The report is intended to generate new business for GS by generating fear in anyone invested in CA real estate – just another aspect of the banking game

Yes, GS ‘should’ have delivered the report 2 years ago but that isn’t how they make obscene profits”

Yes, unfortunately that is true. That is how the game is played nowadays (since the late nineties primarily).

If anyone here doubts that WS is out to steal your money, almost literally, then this proof positive of that. They want to scare out that remaining $10T or so of home equity that still exists out there and a big chunk of that is in Clownifornia.

[4plexowner]

The report is not intended to help any of Goldman Sachs’ old customers

The report is intended to generate new business for GS by generating fear in anyone invested in CA real estate – just another aspect of the banking game

Yes, GS ‘should’ have delivered the report 2 years ago but that isn’t how they make obscene profits

[4plexowner]

The report is not intended to help any of Goldman Sachs’ old customers

The report is intended to generate new business for GS by generating fear in anyone invested in CA real estate – just another aspect of the banking game

Yes, GS ‘should’ have delivered the report 2 years ago but that isn’t how they make obscene profits

[Anonymous]

The point is this is old news. Goldman Sachs should have delivered this report 2 years ago, as many other analyts did. Meanwhile, it is way too late for this report to help any of its customers.

[Anonymous]

The point is this is old news. Goldman Sachs should have delivered this report 2 years ago, as many other analyts did. Meanwhile, it is way too late for this report to help any of its customers.

[4plexowner]

I assume that Goldman Sachs carries a little more weight than PowaySeller

I find this report significant – this is a major investment bank (largest in the US?) telling their clients that CA real estate will be 35-40% lower in the future

[4plexowner]

I assume that Goldman Sachs carries a little more weight than PowaySeller

I find this report significant – this is a major investment bank (largest in the US?) telling their clients that CA real estate will be 35-40% lower in the future

[lindismith]

Completely off topic – apologies to all.

OT: arraya, do you have a sister named sarah?

I know, I know, it’s crazy but I was invited to a Halloween party on evite and because it was hosted by 5 people, who all had fairly generic names, I could not figure out who they were, and how I had gotten on the list. (BTW, this is the 2nd time in a month this has happened to me.) When I scrolled through the repliers, the only email address that looked remotely familiar was ‘arraya72’, but I couldn’t put it together. I was out a few parties Sat night, and for the heck of it, stopped by. After about 15 mins I bumped into Sarah. She was the one who invited me, and when I asked who arraya was, she said it was her brother. I was still in the dark about how I knew you though until yesterday morning when your user name popped up on this thread, and then it all came together. Small world, no?!

I know Sarah through Surfrider. We are not super close – just close enough to get invited to a big shindig though! The problem is I know about 5 Sarahs.

[lindismith]

Completely off topic – apologies to all.

OT: arraya, do you have a sister named sarah?

I know, I know, it’s crazy but I was invited to a Halloween party on evite and because it was hosted by 5 people, who all had fairly generic names, I could not figure out who they were, and how I had gotten on the list. (BTW, this is the 2nd time in a month this has happened to me.) When I scrolled through the repliers, the only email address that looked remotely familiar was ‘arraya72’, but I couldn’t put it together. I was out a few parties Sat night, and for the heck of it, stopped by. After about 15 mins I bumped into Sarah. She was the one who invited me, and when I asked who arraya was, she said it was her brother. I was still in the dark about how I knew you though until yesterday morning when your user name popped up on this thread, and then it all came together. Small world, no?!

I know Sarah through Surfrider. We are not super close – just close enough to get invited to a big shindig though! The problem is I know about 5 Sarahs.

[Ex-SD]

$350k-$380k median price?……..ha ha ha ha ha ha ha ha ha
The median won’t even be $300k because most of the people in San Diego don’t make enough money to be able to qualify for a loan for $240k (and that’s after paying $60k down plus closing costs………which most also do NOT have). I’m guessing a median of $250k-$260k. Time will tell.

[Ex-SD]

$350k-$380k median price?……..ha ha ha ha ha ha ha ha ha
The median won’t even be $300k because most of the people in San Diego don’t make enough money to be able to qualify for a loan for $240k (and that’s after paying $60k down plus closing costs………which most also do NOT have). I’m guessing a median of $250k-$260k. Time will tell.

[cr]

kev-
The last 2 major up and down cycles went down just about as long as they went up.

I find it comical that the billion dollar financial giant corporations are now coming out and saying what “doomsdayers” have been saying for 3 years, and only after they show a year over year decline.

[cr]

kev-
The last 2 major up and down cycles went down just about as long as they went up.

I find it comical that the billion dollar financial giant corporations are now coming out and saying what “doomsdayers” have been saying for 3 years, and only after they show a year over year decline.

[kev374]

does anyone know the historic trough-peak and peak-trough ratio in terms of years?

[kev374]

does anyone know the historic trough-peak and peak-trough ratio in terms of years?

[Arraya]

Fear not lindismith, all will be righted, albeit in a most unpleasent way.

OT: arraya, do you have a sister named sarah?

Yikes! I feel exposed. Yes I do. What tiny bits of information could you have picked up on the conclude that?

[Arraya]

Fear not lindismith, all will be righted, albeit in a most unpleasent way.

OT: arraya, do you have a sister named sarah?

Yikes! I feel exposed. Yes I do. What tiny bits of information could you have picked up on the conclude that?

[lindismith]

Yeah, I’m disgusted once a week (at least) with all of it. I think in the past I was disconnected from it because it didn’t affect me (although it did, I just didn’t feel it.) Now, I look at how all of this is wrapped up in my daily living, and I want to be sick.

And then I’m even sicker when I realize I’m not doing much about it. Or worse, trying to profit off it myself. It truly is survival of the fittest on this earth.

OT: arraya, do you have a sister named sarah?

[lindismith]

Yeah, I’m disgusted once a week (at least) with all of it. I think in the past I was disconnected from it because it didn’t affect me (although it did, I just didn’t feel it.) Now, I look at how all of this is wrapped up in my daily living, and I want to be sick.

And then I’m even sicker when I realize I’m not doing much about it. Or worse, trying to profit off it myself. It truly is survival of the fittest on this earth.

OT: arraya, do you have a sister named sarah?

[Arraya]

“Everyday I distrust Big Business, and Big Finance more and more.”

You have good reason they will be our undoing.

Never expect the “establishment” to give you a heads up regarding an impending disaster. To much profit in status quo.

This is just one of many disasters on the horizan. The housing bubble explosion is a stiff jab to the nose of the economy. Only to be followed by peak oil an uppercut to the jaw. Mainstream media is useless unless you want the drinking habits of celebrities.

Interesting times ahead.

[Arraya]

“Everyday I distrust Big Business, and Big Finance more and more.”

You have good reason they will be our undoing.

Never expect the “establishment” to give you a heads up regarding an impending disaster. To much profit in status quo.

This is just one of many disasters on the horizan. The housing bubble explosion is a stiff jab to the nose of the economy. Only to be followed by peak oil an uppercut to the jaw. Mainstream media is useless unless you want the drinking habits of celebrities.

Interesting times ahead.

[lindismith]

“the worst of residential mortgage credit deterioration has yet to be seen across this country.”

Loved this!

These forecasts are very good. Thanks for posting.

Bugs – this is part of the banking game – create a bubble in some asset class, profit on the expansion of that bubble, then when the bubble pops profit on the deflation – Goldman will get lots of business (and fees!) from anxious clients wanting to reduce their exposure to CA real estate

Great analysis! This explains exactly why ‘the experts’ don’t say anything on the way up. They’re all in on it.

Everyday I distrust Big Business, and Big Finance more and more.

[lindismith]

“the worst of residential mortgage credit deterioration has yet to be seen across this country.”

Loved this!

These forecasts are very good. Thanks for posting.

Bugs – this is part of the banking game – create a bubble in some asset class, profit on the expansion of that bubble, then when the bubble pops profit on the deflation – Goldman will get lots of business (and fees!) from anxious clients wanting to reduce their exposure to CA real estate

Great analysis! This explains exactly why ‘the experts’ don’t say anything on the way up. They’re all in on it.

Everyday I distrust Big Business, and Big Finance more and more.

[4plexowner]

The 9 page report is worth reading. Lots of good charts. I have included the most significant snippets below.

Bugs – this is part of the banking game – create a bubble in some asset class, profit on the expansion of that bubble, then when the bubble pops profit on the deflation – Goldman will get lots of business (and fees!) from anxious clients wanting to reduce their exposure to CA real estate

~

highlights (lowlights?) from the GS report:

3. Home prices in California are 35-40% over-valued

Now that the secondary market for these affordability products has all but evaporated, we expect home prices in California to return to normalized levels (i.e. levels implied by current and forecast disposable income in California as well as U.S. ten-year treasury yields); this implies a 35-40% fall.

…

While our model is helpful in estimating the magnitude of house price correction due for the state of California, forecasting the timing of such a correction is trickier; the typical response of the average Californian home owner to the prospect of falling house prices is to not sell. Therefore, a correction of 35-40% could take many years to play out.

…

Californian mortgage credit quality is deteriorating quickly
Mortgage delinquencies in California are catching up to the national average

From 2000 to early 2006, Californian residential mortgage debt performed much better than both historical and national averages, thanks to double-digit % annual home price appreciation throughout that period.

Recently, however, home price appreciation in California has flattened out (e.g., up only 2% year-on-year in August 2007), although many counties have experienced declines. Given the recent decline in investor demand for Californian residential mortgage debt (and, subsequently, credit availability for consumers) in tandem with rising state unemployment, we forecast significant house price depreciation leading to credit deterioration in California, which is already accelerating above the national average (see Exhibit 3).

…

We remain bearish on the U.S. housing market; house prices are 13%-14% over-valued nationally (which, like in California, could take several years to play out), growth in mortgage debt outstanding continues to fall (driven by house price depreciation and declines in the home ownership rate), and we have yet to see the worst of residential mortgage credit deterioration (reset volumes for subprime ARMs are set to peak in March 2008, and recast volumes for option ARMs are set to peak in June 2010).

…

1. National house prices are 13%-14% over-valued
House prices are over-valued and a correction is underway (see Exhibits 4 and 5).

…

3. We have yet to see the worst of residential mortgage credit deterioration
Our estimated national schedule for adjustable rate mortgage resets (when low-interest teaser rates reset to current rates) and recasts (when the pay-option expires and borrowers are required to pay the fully-amortized rate) suggests that the worst of residential mortgage credit deterioration has yet to be seen across this country. Reset volumes for subprime adjustable-rate mortgages peak (at $42 bn) in March 2008; recast volumes for pay-option adjustable-rate mortgages peak (at $24 bn) in June 2010 (see Exhibit 7).

[4plexowner]

The 9 page report is worth reading. Lots of good charts. I have included the most significant snippets below.

Bugs – this is part of the banking game – create a bubble in some asset class, profit on the expansion of that bubble, then when the bubble pops profit on the deflation – Goldman will get lots of business (and fees!) from anxious clients wanting to reduce their exposure to CA real estate

~

highlights (lowlights?) from the GS report:

3. Home prices in California are 35-40% over-valued

Now that the secondary market for these affordability products has all but evaporated, we expect home prices in California to return to normalized levels (i.e. levels implied by current and forecast disposable income in California as well as U.S. ten-year treasury yields); this implies a 35-40% fall.

…

While our model is helpful in estimating the magnitude of house price correction due for the state of California, forecasting the timing of such a correction is trickier; the typical response of the average Californian home owner to the prospect of falling house prices is to not sell. Therefore, a correction of 35-40% could take many years to play out.

…

Californian mortgage credit quality is deteriorating quickly
Mortgage delinquencies in California are catching up to the national average

From 2000 to early 2006, Californian residential mortgage debt performed much better than both historical and national averages, thanks to double-digit % annual home price appreciation throughout that period.

Recently, however, home price appreciation in California has flattened out (e.g., up only 2% year-on-year in August 2007), although many counties have experienced declines. Given the recent decline in investor demand for Californian residential mortgage debt (and, subsequently, credit availability for consumers) in tandem with rising state unemployment, we forecast significant house price depreciation leading to credit deterioration in California, which is already accelerating above the national average (see Exhibit 3).

…

We remain bearish on the U.S. housing market; house prices are 13%-14% over-valued nationally (which, like in California, could take several years to play out), growth in mortgage debt outstanding continues to fall (driven by house price depreciation and declines in the home ownership rate), and we have yet to see the worst of residential mortgage credit deterioration (reset volumes for subprime ARMs are set to peak in March 2008, and recast volumes for option ARMs are set to peak in June 2010).

…

1. National house prices are 13%-14% over-valued
House prices are over-valued and a correction is underway (see Exhibits 4 and 5).

…

3. We have yet to see the worst of residential mortgage credit deterioration
Our estimated national schedule for adjustable rate mortgage resets (when low-interest teaser rates reset to current rates) and recasts (when the pay-option expires and borrowers are required to pay the fully-amortized rate) suggests that the worst of residential mortgage credit deterioration has yet to be seen across this country. Reset volumes for subprime adjustable-rate mortgages peak (at $42 bn) in March 2008; recast volumes for pay-option adjustable-rate mortgages peak (at $24 bn) in June 2010 (see Exhibit 7).

[Author]

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