- This topic has 53 replies, 13 voices, and was last updated 12 years, 3 months ago by
CA renter.
-
AuthorPosts
-
August 2, 2012 at 8:35 AM #749369August 2, 2012 at 8:57 AM #749371
The-Shoveler
ParticipantNormal, the New Normal etc…
What’s Normal ?
I don’t think there is anything normal about SoCal.
I think the nearest thing we had to a Normal housing market was before OER (Owners Equivalent Rent) IMO.
But I remember when it was 3 Dollars to camp at the beach, That was great when you were a twenty something beach bum, so what has that got to do with being normal ? (nothing but I remember it).Oh I was seeing they were taking up raising Minimum wage to just under 10 dollars a hour, Well there’s a start.
August 2, 2012 at 9:17 AM #749375jpinpb
ParticipantHaven’t been visiting Piggington in a very long time. Some things just never change.
In any case, congrats Matt on your purchase. Hope it all works out and you enjoy it. At least you will be relieved in not having to look any more.
August 2, 2012 at 9:38 AM #749378sdrealtor
ParticipantLol, we are still at 🙂
Hope all is well in your world JP!
August 3, 2012 at 4:08 AM #749426CA renter
Participant[quote=sdrealtor]Five years ago you were among the most vocal that the problem was too vast for the government to manipulate its way through. You said over and over there was NO way they could. They have and even though we aren’t done yet it’s time to admit you didn’t believe they could do what they have done. Not saying its right just that they did it.
Your comments consistently show a small and closed point of view. It is what is.
Btw I have been in SAn Diego since 1986 with the exception of a few years here and there. We’re there no normal markets here in the last 26 years?[/quote]
Funny, here I am in 2010 (using quotes I made in 2007) refuting this very accusation. Not sure if you were directing it at me in this thread, but I responded to it, anyway.
[quote=CA renter]Just in case anyone thinks I believed the govt wouldn’t bail out the deadbeats:
——————-Comment by CA renter
2007-03-17 12:28:23The way I see it, there are two groups who stand to lose if there is no bailout: the lenders and the FBs.
If the market is allowed to do its thing, foreclosures will flood the market, making the losses swift and certain (as they should be, IMHO).
The way to stem the tide would be to force the lenders to re-write the loans (or sell at a steep discount to GSEs or other institution which could be set up by the govt). The loans would be re-written at fixed rates (lower than current FRM rates). Negative equity would not be a factor as the new loans would cover 100% of current mortgage, irrespective of collateralization.
These loan terms would be extended to 40 or 50 years, and the borrower could make I/O payments for the entire time they live in their homes. Only upon sale would the “lender” expect principal payment, and the lender could have an agreement whereby they share risk/reward — like they could be entitled to 50% of the appreciation/depreciation.
In the meantime, the Fed would be working overtime, trying to inflate our dollars, so in 15 years, the FBs might be able to break even and finally get out from under their “homes”.
—————————-
FB wins by not losing home & not having to pay what they originally agreed to pay.Lender wins because they will lose much less than if the market were flooded with foreclosures. Collateral prices would drop, but not as significantly.
As lenders take losses, the big banks/financial firms move in and take over the mortgage companies. They (who, in many cases represent the final lenders) would be able to buy these mortgages for pennies on the dollar. They win the biggest piece of the pie.
http://www.thehousingbubbleblog.com/?p=2503#comment-509394%5B/quote%5D
…………………..
Back in 2006, in response to this question…
“…So everything we have been saying here is becoming a reality and at this point I have to ask, “Are we missing anything here?” What are the potential events or actions that could stop housing prices from tanking big time? Heck, it even looks like BB is taking the tough love approach. Is there anything happening now or that could happen that we may be somehow blind to? Anything that in 2 years we would slap our foreheads and say, “Duh! Why didn’t we see that?”
…
I wrote this:
“Comment by CA renter
2006-06-10 01:26:29
1. A housing “tax credit” for all homeowners (hyperinflation). Say, each homeowner can qualify for an additional $5,000+ each year because they are part of the “ownership society.”2. Some form of debt forgiveness as the govt offers to cover lenders’ losses on mortgages/bail FBs out.
3. More “downpayment gifts” by the govt or some such thing that forces even more money into the housing market.
4. Our dollar loses value (the govt prints money to pay off international debts) and we can once again export more than we import (imports too expensive/exports cheap) and get back to making things in the US. Not that other FCBs would allow that to happen, but it’s a thought.
Not that I think any of these things are likely or wouldn’t have tremendously bad consequences…just trying to imagine the worst.”
http://www.thehousingbubbleblog.com/?p=834#comment-81444
I routinely argued against bailouts, long before the “financial crisis” because they would reward the very people who destroyed our economy (irresponsible borrowers and lenders) at the expense of savers/fixed-income recipients, workers, prudent buyers. I repeatedly said that these bailouts would not work over the long run, and that our economy would be eventually be even worse off — over the long run — than if they had allowed things to fall quickly and severely.
So far, I have been proven right. Look at what’s going on all around the world right now. Most of that is due to the credit bubble and the various govt/central bankers’ attempts to keep the asset-based Ponzi scheme going. The economic crisis is nowhere near over.
August 3, 2012 at 4:47 AM #749427Participantsdr,
I’ve always said that the Fed/govt would do everything possible to bail out the big financial players, and I’ve always said that these manipulations would succeed at masking true prices *for awhile.* I even predicted the nationalization of the GSEs and the fact that they would be used to off-load risk from the private sector. Not once have I said that the manipuluations wouldn’t work, just that they wouldn’t work in the long run, and that they would end up causing more damage and would shift the costs from those who caused the crisis to those who had little or nothing to do with it, and who were trying to avoid it, altogether. Nothing has happened that would change my position on that.
It’s the long term that matters to me, and all of these bailouts have done nothing to fix the root of our problems. While you’re hyper-focused on housing in the NCC area, I’m looking at the bigger picture (contrary to what you’ve claimed, I’m the one with the open mind and open eyes, and I’m looking at the larger world and the ramifications of all these bailouts…you’re just focused on your little RE world in NCC).
While we’re at it, from 2006:
Comment by CA renter
2006-12-31 20:17:17
Let’s have a friendly wager.I believe nominal prices will drop by 40% by 2010.
The only reason this won’t happen, IMHO, is if the PTB decide to bail everyone out via a “Ownership Society Tax Credit” or some such nonsense. Perhaps, we will enact trade barriers and require all business to buy at least 50% “Made in America” materials/services. Maybe the unions will pull themselves up by their boot straps and demand 200% wage increases for all. Maybe a new RTC is set up to offer those 40-year I/Os with principal only due upon sale of the home.
Barring all those things, I’ll bet you a bottle of wine (or beverage of your preference), not to exceed $50 (in today’s dollars) that prices will fall 40% by 2010.
Deal?
(Comments wont nest below this level)http://www.thehousingbubbleblog.com/?p=2095#comment-344205
—————–
Comment by CA renter
2007-06-30 04:33:39
Would like to see another predictions thread.I’ll stick with my prediction from last year…YOY housing prices, nationally, will be down 10-15% by Dec 2007. There will likely be some type of (failed) bailout attempt, which will stem the foreclosures temporarily. Recession by Dec 2007. Foreclosures rise into 2008 & national prices drop an additional 10-15% by late 2008.
The credit markets will likely be volatile & I believe there will be periods when it looks like everything will collapse, then suddenly all will seem well as more money is injected into the system (from???). Each time the credit spigot gets turned back on, though, the loose periods will be shorter and shallower than before, IMHO. Very slowly, liquidity will dry up, but it will probably take years to totally unwind.
The bottom arrives no sooner than 2010-2012, with an emphasis on 2012 (or later).
http://www.thehousingbubbleblog.com/?p=3024#comment-764314
—————–Comment by CA renter
2006-10-11 23:07:46
Also agree with “waiting in LA”. The BIG year of the downturn will be 2008 or later *barring a bailout*. I think it will also go beyond 2012. There are demographic changes this time which will put downward pressure on prices for a long, long time to come.August 3, 2012 at 12:09 PM #749442bearishgurl
ParticipantIt seems “Prophet CAR” hit the nail on the head … down to the last detail every time she posted!
However, no one really knew the depth and breadth of the “free money” that would later be “given away” to FB’s!
Here’s the latest. Hopefully these “offer letters” will NOT be sent to the FB’s who took cash out of their properties :=0
The first batch of Bank of America’s (BofA’s) principal reduction offers was sent out to 60,000 qualified borrowers in the U.S. this May. Borrowers at least 60 days behind on their mortgage payments were offered an average $150,000 cramdown. BofA is expected to make a total of 200,000 principal reduction offers by August.
These cramdown offers are part of BofA’s efforts to meet the terms of February’s $25 billion national industry settlement resulting from the epidemic of fraudulent home loan originations and subsequent foreclosures. BofA has remained closed-lipped as to the precise criteria for electing which lucky borrowers are given the offer.
It seems that 200,000 floundering homeowners are in store for an unexpected windfall. However, the response from borrowers so far has been nothing short of uncanny: eerie silence.
Over half of the qualified borrowers solicited have not responded to BofA’s cramdown offer, even though a cramdown is an economically viable option in light of foreboding foreclosures.
Many are speculating about the lack of enthusiasm from BofA’s borrowers. Theories range from previous unpleasant customer service experiences with BofA, to a simple case of borrower fatigue. Many homeowners behind on mortgage payments whose previous calls for assistance went unanswered may be fed up with the taxing process of seeking help, believing BofA’s offer is among a large list of other modification offers which never come to fruition, or shortsale strategies that are just too good to be true.
BofA also has a somewhat notorious reputation for losing paperwork and poor administration, leading to a sense of mistrust among their disgruntled borrowers…
(emphasis added)
My take is that the low response rate, ESP in CA (where most of the letters were likely mailed to, due to higher overall values and a “captive audience”), is due to being able to “squat” ad infinitum. An “average” of $150K “cramdown” to sign a modification and begin paying on the modified mortgage is not that alluring to an FB who has been squatting for years. These borrowers’ credit is already shot and they simply feel they’ll make out better by calling B of A’s bluff and continuing to squat until another (bogus) offer comes along or they are evicted after foreclosure with perhaps some “walking money” ($3K?).
These offers also do nothing for the borrower who owes well over $150K more than their property is worth.
It’s as simple as that.
August 3, 2012 at 12:45 PM #749443ParticipantA couple posts cherry picked out of hundreds. You didnt beleive they would be successful holding prices as high as they have. You were firm in your belief all areas were the same and that no area would decline less than 50%. The reality is only one post matters. The one where you actually put your money where your mouth was and bet on 45%+ declines in even the most stable of neighborhoods. We never hit 25% in any of them. Case closed.
August 3, 2012 at 1:15 PM #749444briansd1
Guest2 quotes from Keynes are relevant here:
“The long run is a misleading guide to current affairs. In the long run we are all dead.”
“When the facts change, I change my mind.”
I’m really sick of people arguing that “in the long run” blah, blah, blah.
Yes, in the long run, we have to pay back debts. Unless human ingenuity comes up with something better than money to allocate resources.
If one truly believed that in the long run things are the same, then why even take on debts now?
Generally, speaking credit is good for society because it allows us to unlock human potential today, for a better future.
Humans can create stuff and build things. It would be a shame to stop and go into hibernation because of a lack of credit.
*
BTW, I believe that government and Fed intervention would not have worked as well for house prices if the rest of the world was growing. The European crisis and the slowdown in China has caused our interest rates to drop to an all time low.
It makes no sense to leave money in the bank. Depending on the market, better invest money in real estate and get a return.
August 3, 2012 at 1:19 PM #749446ParticipantGreat quotes both of which I use often.
August 3, 2012 at 1:27 PM #749445ParticipantDeclines of 60% or better hit the likes of Stockton, SB, parts of RIV Co, parts of Sac Co, Lodi, Merced Co, Fresno Co, Los Banos, Salinas, Bakersfield, Campo and Imperial Co., etc. This was all due to massive overbuilding during the millenium boom (in conjunction with loose lending).
The portions of other cities/counties where massive overbuilding took place fared slightly better due to proximity to well-paying jobs, tourism AND/OR coastal locations.
Agree that location DOES matter but CAR stuck her neck out on these “predictions” and they turned out to be VERY accurate, to say the least.
Did YOU make any similarly-detailed predictions in ’06/’07 which we can access online now, sdr??
Hindsight is 20/20.
August 3, 2012 at 1:43 PM #749447GuestBG, that’s why it might be a good idea to buy in the hard-hit ares, if you can find some good deals. And if you believe those areas will come back.
In many areas, the housing collapse took on a life of its own and prices dropped below fundamentals, well below replacement cost. As an example, the replacement cost of my house in Vegas is more than double purchase price. USAA will insure the house only on condition of inspection because they don’t want a claim on a trashed house. Many insurance companies charge high premiums because of the claims in that market (because of foreclosures, short-sales, etc..)
BTW, I predicted 50% off, or Year 2000 nominal prices. It’s not turning out that way for good areas of the country such as San Diego, DC, New York, etc… Time and inflation are at play also.
Those good areas might stagnate and give us 50% off, over the long run, in real terms, while other areas recover better.
IMO, it’s not a good idea to take emotional ownership of any prediction. When the facts change, you change your mind and adjust to the new facts.
August 3, 2012 at 2:08 PM #749448Participant[quote=briansd1]BG, that’s why it might be a good idea to buy in the hard-hit ares, if you can find some good deals. And if you believe those areas will come back.
In many areas, the housing collapse took on a life of its own and prices dropped below fundamentals, well below replacement cost. As an example, the replacement cost of my house in Vegas is more than double purchase price. USAA will insure the house only on condition of inspection because they don’t want a claim on a trashed house. Many insurance companies charge high premiums because of the claims in that market (because of foreclosures, short-sales, etc..) . . . [/quote]
I understand all this, brian. But WHO is going to rent YOURS or MY house in Lodi, for example, when there are now nearly twice as many living units as actually needed in that area?
And more importantly, how much can a long-term tenant there afford to pay (consistently) in rent?
I can see buying for clearance prices in a place like LV as even though it is overbuilt, it still has Nellis AFB and large government contractor-employers as well as it being the center of the gaming industry with a large tourism base. These sectors alone employ hundreds of thousands of people.
Los Banos and Brawley residents don’t have all these well-paying, benefitted jobs available to them. And when Norton AFB closed, it literally decimated the employment base of SB.
With contaminated groundwater, no residential building (thankfully) took place on Norton’s land (which was turned over to the City). Instead, distributor warehouses for retail and mfrs were built there after some mitigation work was undertaken by the City.
see: http://www.dtsc.ca.gov/Success/upload/Norton_AFB.pdf
(wait to load)Those forklift drivers for Kohl’s can’t possibly be making as much (salary and benes) as those thousands of GS-4 thru 9, GM-11 thru 14 and WG-5 thru 9 DOD jobs they replaced.
Not by a long shot.
August 3, 2012 at 2:37 PM #749449GuestBG, the hard part and the fun part of investing is identifying the best areas.
For example, if you look at the long run, investors could have made a fortune correctly identifying the White flight to the suburbs, the change of the suburbs from bedroom communities to self-sufficient cities, the gentrification of the urban core, etc…
There are cyclical trends and there is location, location, location. Each market is different.
Oh, another thing about the long run, people in their 50s who bought at the peak who still holding on are pretty much screwed. Chances are they will die before they see a return.
August 3, 2012 at 9:14 PM #749455Participant[quote=sdrealtor]A couple posts cherry picked out of hundreds. You didnt beleive they would be successful holding prices as high as they have. You were firm in your belief all areas were the same and that no area would decline less than 50%. The reality is only one post matters. The one where you actually put your money where your mouth was and bet on 45%+ declines in even the most stable of neighborhoods. We never hit 25% in any of them. Case closed.[/quote]
Bullshit. Those posts were 100% consistent with all of my posts made over the years. Feel free to do your own searches of my posts. Find ONE where I said that the govt/Fed would not succeed in manipulating prices in the short-medium term.
Not only that, I was one of the few people who NAILED the rolling bubble and said that different areas would be affected differently. I’ve always said that prices would drop between 35-50%, depending on the location, etc. Never once did I say that all properties would drop in the same way or at the same time, or at the same rate.
From 2007 (and I was saying it would shake out this way even before this):
[quote=CA renter]As some other posters suggested, the difference between this cycle and the last is the EZ credit. Last time (late 80s), people mostly just stretched the DTI ratios, but at least had to bring money to the deal (down payment) and qualify (decent credit, stable job history & proof of income, etc.).
IMHO, we reached the top of the natural housing cycle in 2001, and prices would have gone down from there if not for the credit bubble. The momentum from 2001 on came directly from the bottom via “no job, no credit, no money…NO PROBLEM!” loans. The people in starter homes saw hundreds of thousands of dollars — far more than they ever imagined “owning” in their lives. Like lottery winners, they took that money and spent it all on the move-up homes (and then some, as they also had access to EZ money and higher DTI ratio loans). The volume of buyers coming in from the bottom overwhelmed the market — which is why the bottom outperformed & stayed ahead of the mid-upper levels.
Now, since the starter buyers (first-timers) were coming in mostly with 0-5% down, they have very little wiggle room & any resets (or inablity to use HELOC money to make the mortgage pmts, as the “equity” isn’t there anymore) throw them over the cliff immediately.
The upper end came in with money from the sales of other homes — again, hundreds of thousands of dollars. They have a buffer that the starter market didn’t. In time, this buffer will also disappear when money stops flowing from the bottom up. There is a lag effect, but it will certainly come. These buyers were stretched just as much as the first-timers, but have some “equity” to pull out (their down payments) via refinancing. At some point, they will also hit a wall.
Just MHO. :)[/quote]
http://piggington.com/comment/reply/5559/54961?quote=1#comment-form
Here you are, arguing with me about this exact thing in 2010:
[quote=CA renter][quote=sdrealtor]Care to share where those other places you are hearing about are? I know Phoenix and Vegas have been crushed. I have a friend I just spoke to in NY and the suburbs who said prices are back down to 2002 levels in prime areas (demographically equal to NCC). I just checked the town I grew up in which is an upper middle class Philly suburb. The houses are selling at 2002 prices in my town which is demographically equal to NCC (actually my town has a higher median income and is more affluent than Carlsbad). Nice homes there in better school districts than we have here start around 300K which is about 1/2 what they do here. FLA has been crushed. The midwest has been crushed.
Where in the country are these places you are referring to?
Other than California where are homes not affordable.[/quote]
There are some pockets of Florida that have been affected more substantially by the downturn than others which now offer excellent opportunities to investors in high quality new developments, Peerless points out. In Orlando, buyers can pay $140 per square foot down from $250 in 2006 and in Sarasota prices that were $350 per square foot are now as low as $47.
http://www.propertywire.com/news/north-america/florida-prices-at-bargain-level-201001253837.html
—————–While Chicago foreclosures continued to pull down home prices in areas like South Side and Cicero by a total of more than 60 percent since 2006, foreclosure activity pulled down prices only slightly in areas like Gold Coast and Upton, allowing prices to drop only by 11 to 15.3 percent.
There have been many negative stories about the current real estate market. It is important to note that there have been areas holding steady and not seeing much of a decline in value. Davis is one of these places, but other areas close to downtown Sacramento are also holding there own including most of Land Park, parts of East Sacramento, McKinley Park and Curtis park. These neighborhoods are well-established and close to downtown. Recently KCRA TV did a newstory on the housing market in the bubble.
http://activerain.com/blogsview/403241/sacramento-bubble-areas
———————Cumberland, as you might recall, had some of the nation’s biggest price increases through a good bit of the downturn. Whether the drop now is giveback, new foreclosures pulling down values or statistical skewing in a small market, I can’t say. Any thoughts, guys?
http://www.finance-insurance-loans.com/finance/real-estate/home-prices-plummet-in-western-maryland/
[This is what I’m seeing here in California (both in SD and LA). The lower end, already hit and now filled with first-timers and speculators, is strengthening while the higher end — which held up better thorughout most of the decline — is weakening. -CAR]
———————-This is an older chart from 2008 which shows how the different areas declined at very different rates in VA:
http://www.homefinders-newsletter.com/category/northern-virginia-market-report/
—————–The problem is financing. Although government stimulus programs have spurred some homebuying activity in the lower-priced market, would-be buyers of more expensive homes are strapped for credit. In most markets, including Miami, Fannie Mae considers loans for homes above $420,000 or so to be “jumbo loans” that typically have higher interest rates. As sales of these homes are tight, home prices are hit — but prices are slower to budge.
“The high-end market is going down more than the overall market, but sellers in that market don’t necessarily see themselves as being different from other sellers,” says Miller. “So it’s causing the spread between the ask price and contract price to widen.”
http://realestate.msn.com/article.aspx?cp-documentid=22857795
[Again, mid to higher-end homes, even in Florida, are slower to fall. While they’ve fallen more than homes in CA, they’ve generally held up better than the lower-end areas…but it seems like that is about to change. -CAR]
—————–Hate to make you have to watch a video presentation, but see what this says, noting what’s happened to Scottsdale and zip 85234 (didn’t get the name of the last zip, sorry…one of the better/best areas in the Phoenix):
[From a Seattle RE blog comment — I’ve heard this from other people who live in the area, too. Higher-end homes have fallen very little, respectively.]:
Notice, they’re from the Eastside and Seattle areas; higher priced Pink Pony heaven locations. More wealthy sellers too IMO, IOWs they can afford to list a property for a year or two without going bankrupt….so refuse to sell sweetheart deals like the more blue collar locations.
It’s like the price vultures patiently waiting in the trees for the seller cattle to finally collapse, eventually the economic realities hit the rich fatter cattle too.
—————-This is from 2008, but describes the same trend:
Although America’s housing downturn has rippled nationwide, its impact varies greatly by geography – right down to individual streets, developments, and ZIP Codes.
http://www.csmonitor.com/Money/2008/0521/p01s04-usec.html
——————-Also, if you read the housing blogs that are nationally-focused, you’ll read the same thing. As many of us expected, the downturn hit the lowest end first, and was moving into the mid/higher end (in all cities and states, in general), but the govt intervened mid-decline and pumped **trillions of dollars** in the credit/housing markets. People are free to believe whatever they want to believe, but I am 100% convinced that this intervention halted declines (temporarily?) in the mid-higher ends.
IMHO, the declines in these markets have already begun, and the much higher-priced homes seem to have lost about 20% or more in 2009 while the lower end gained. Looks like we’re about to see the “big squish-down.”
Will work on more tomorrow…[/quote]
-
AuthorPosts
- You must be logged in to reply to this topic.