[Bugs]

Actually, I think we’re okay for apartments. What we really need are affordable condos and townhome units. The trend of converting 40-year old apartment properties into condos was a stopgap measure, and it got abused by the granite/tile “luxury” routine. There’s nothing wrong with average quality construction, formica or white tile countertops and vinyl flooring. We need that kind of housing a lot more than we need wannabe “luxury” units.

[Bugs]

Actually, I think we’re okay for apartments. What we really need are affordable condos and townhome units. The trend of converting 40-year old apartment properties into condos was a stopgap measure, and it got abused by the granite/tile “luxury” routine. There’s nothing wrong with average quality construction, formica or white tile countertops and vinyl flooring. We need that kind of housing a lot more than we need wannabe “luxury” units.

[Bugs]

In that immediate neighborhood I counted about 20 active listings, and there are 6 sales listed since 01/2007. By my count that indicates that even if no more listings pop up it would take over a year to sell all of them at this pace.

Of the 6 sales, 2 appear to have been short sales. That’s going to put a crimp on pricing. I didn’t look through all the actives, but the 1st one on the list is an REO listing.

This is kind of an interesting neighborhood in terms of pricing because when they started out in 2003 you could buy one of these 3,800 SqFt homes for about $700k; then as the golf course and more of the common elements got completed the prices topped out in excess of $1.6mil. This area continued to increase even as some of the other areas cooled off and entered the decline. This area topped out at late as mid-2006. Now it seems to be unwinding just as quickly. The highest sale recently was $1.465 and that home reportedly had $300k in upgrades and site improvements.

Based on original purchase prices in the actives and the recent closed sales it looks like most of those sellers will do no worse than lose closing costs. That is, if they can sell at all right now.

Some of them will clear a nice profit, maybe $300 – $400k. I think that all of the listings above $1.5 (and that’s about a third of them) are wasting their time.

It’s not exactly what I’d call a battlefield yet, but right now anyone who bought in the year prior to the peak is probably in the red right now.

[Bugs]

In that immediate neighborhood I counted about 20 active listings, and there are 6 sales listed since 01/2007. By my count that indicates that even if no more listings pop up it would take over a year to sell all of them at this pace.

Of the 6 sales, 2 appear to have been short sales. That’s going to put a crimp on pricing. I didn’t look through all the actives, but the 1st one on the list is an REO listing.

This is kind of an interesting neighborhood in terms of pricing because when they started out in 2003 you could buy one of these 3,800 SqFt homes for about $700k; then as the golf course and more of the common elements got completed the prices topped out in excess of $1.6mil. This area continued to increase even as some of the other areas cooled off and entered the decline. This area topped out at late as mid-2006. Now it seems to be unwinding just as quickly. The highest sale recently was $1.465 and that home reportedly had $300k in upgrades and site improvements.

Based on original purchase prices in the actives and the recent closed sales it looks like most of those sellers will do no worse than lose closing costs. That is, if they can sell at all right now.

Some of them will clear a nice profit, maybe $300 – $400k. I think that all of the listings above $1.5 (and that’s about a third of them) are wasting their time.

It’s not exactly what I’d call a battlefield yet, but right now anyone who bought in the year prior to the peak is probably in the red right now.

[Bugs]

Believe it or not, I’ve known some property owners who make it a point not to seriously consider offers from attorneys.

Asking the question “Can I get away with it?” is different from “Is it right to do this?”

Renegotiating to deal with a problem that has suddenly come to light is one thing – timing it to take maximum advantage of a seller after the deal has already been struck is another.

You’d be ready to go to war if a contractor or a car salesman did this to you. If you don’t like the deal I think you should just back out.

[Bugs]

Believe it or not, I’ve known some property owners who make it a point not to seriously consider offers from attorneys.

Asking the question “Can I get away with it?” is different from “Is it right to do this?”

Renegotiating to deal with a problem that has suddenly come to light is one thing – timing it to take maximum advantage of a seller after the deal has already been struck is another.

You’d be ready to go to war if a contractor or a car salesman did this to you. If you don’t like the deal I think you should just back out.

[Bugs]

Do you seriously believe that incomes will even come close to keeping up with inflation?

[Bugs]

Do you seriously believe that incomes will even come close to keeping up with inflation?

[Bugs]

Sorry, my last post got cut off.

The missing numbers were “4,100 to 5,100” during 1992 – 1998. We didn’t reach 12,000 new units/year until yr2000.

[Bugs]

Sorry, my last post got cut off.

The missing numbers were “4,100 to 5,100” during 1992 – 1998. We didn’t reach 12,000 new units/year until yr2000.

[Bugs]

Think about what a 10% downpayment requirement would do to marketability in a $300,000 market. A potential buyer would have to come up with the $30k plus closing costs. The brakes on the housing market would lock up and put it into a skid.

[Bugs]

Think about what a 10% downpayment requirement would do to marketability in a $300,000 market. A potential buyer would have to come up with the $30k plus closing costs. The brakes on the housing market would lock up and put it into a skid.

[Bugs]

The single biggest “cost” increase the builders have actually incurred is the cost of the land. If a builder bought land in 2002, they can’t very well discount past retail SFR values of 2002 without running into losses.

As I see it, a 50% decline off peak basically has to result in massive losses for the builders who are still exposed. A 70% decline puts most of them out of business, or at least, cut back to their management staff and sitting in hibernation while they wait it out.

FYI, new home production in SD County dropped from 12,000 – 13,000 per year in the late 80s thru 1990, to as low as <4,100 - 5,100 during the years of 1992-1997. The 12,000 mark didn't come up again until yr2000 (12,166).

And the spike of 1989 was about 1/3 the size of the spike we just came off of.

[Bugs]

The single biggest “cost” increase the builders have actually incurred is the cost of the land. If a builder bought land in 2002, they can’t very well discount past retail SFR values of 2002 without running into losses.

As I see it, a 50% decline off peak basically has to result in massive losses for the builders who are still exposed. A 70% decline puts most of them out of business, or at least, cut back to their management staff and sitting in hibernation while they wait it out.

FYI, new home production in SD County dropped from 12,000 – 13,000 per year in the late 80s thru 1990, to as low as <4,100 - 5,100 during the years of 1992-1997. The 12,000 mark didn't come up again until yr2000 (12,166).

And the spike of 1989 was about 1/3 the size of the spike we just came off of.

[Bugs]

It hasn’t become real apparent yet at the consumer level, but the lenders are increasingly under pressure to conform to the banking rules and guidance that they’ve been ducking for the last few years. Congress is considering closing the loopholes that allow mortgage lenders who aren’t banks to avoid regulatory oversight.

More of the states are stepping up their enforcement programs for appraisers and mortgage brokers, and the FBI is getting more active in investigating mortgage fraud and its components.

Taking all this in context I am reminded of the period from 1986 – 1995, which on a national scale was when we had the S&L bailout (the cost of which we’re still paying for). The lenders had been cut loose in the early-80’s, they ran up some really risky loans, and it all melted down. In response the federal government enacted some additional lending rules, regulations and criteria.

For a while the feds enforced them with some vigor and everyone involved in the process straightened up for fear of getting kicked out. It even involved a certain amount of paranoia – people tended to play it safe. When the economy started coming back the pendulum swung to the other extreme and the feds cut way back on their enforcement. This is what led us to the Wild West environment that we’ve had for the last few years.

I fully anticipate the pendulum will continue to swing towards conservative lending criteria – probably to an extreme equal in severity to the degree of anarchy that fed this last boom.

Sooner or later we’re going to have to start working on the national deficit and the costs of the war. If that comes about in the next couple years and mortgage interest rates go back over 8% this downturn could last for a lot longer than just a couple years.

[Author]

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