[temeculaguy]

It’s a very small niche that can live in one country and earn income in another. Ask yourself if the dollar literally doubled against the British Pound tomorrow, would you choose to live in the UK. It wouldn’t be relevent unless you earned your pay U.S. dollars and paid your mortgage in Sterling. Other than lottery winners and the ultra wealthy, very few jobs can handle a commute like that (but there are some). Retirees from Europe won’t flood the U.S. because they would lose their socialized medical care.

[temeculaguy]

Zillow has an automated formula that uses data from past sales and gives equal value to last week’s comp and last year’s, so it cannot react quickly to changes in the market especially if they are rapid (up or down). It can’t evaluate listing prices, condition, specific location or the million little things that can change the value of R/E. It can be a useful tool for certain things but not prices (ballpark of six months ago at best), agents and appraisers are needed for specific valuations. It’s easy to graph a stock price on the internet because there are no variables and sales of exact replicas occurr every five seconds. Even used car prices can come close using computer valuations but trying to do that with R/E will never be more than a novelty.

[temeculaguy]

I think the wave just has’t hit that price range yet, visit this post in four months and you will see a different story. Here’s a tale from the front lines of the bust in Temecula. Two weeks ago today I visited the grand opening of a development and they seemed to have priced aggressively. 359k for 2100 sq ft detached alley home ($140 hoa includes all landscaping, pool, no mello roos) granite and choice of cabinet finish and upgraded fixtures free. Last Sunday I went back and after two full weekends of it being open, not one sale. I even asked the salesperson if they were out of sold buttons for their map and she confirmed, not one sale and that phase is being framed and may have passed some room option cutoffs.

Today I visited another large development a mile away that had opened and started selling in January, but to my dismay they are only pouring foundations for the models now and expect the models to be done in August. Same price today that was set in Jan 07 is 359K gets you a 1500 sq. ft. attached triplex, no granite, pay for cabinet finish upgrade, etc. I think they had less sold buttons than they did in January. I told her what the new ones nearby were going for and her jaw dropped. She countered with “well you have to look at what’s included in ours” and opened up the brochure to reveal 6×6 white tile counters and honey oak cabinets. I told her the competition is not only detached and larger by 30% but include everything they charge for. She muttered something about her manager not informing her of this and I added that despite the competition being cheaper, bigger and better, they haven’t sold anything, then wished her luck at these prices and headed to the parking lot where it was easy to find my car as it was the only one besides the salesperson’s. This change took only 120 days.

Maybe only the outlying areas and the lower priced homes will decline during this bubble. Maybe 4-S maintains it’s price level and never goes down with the rest. Good luck with that.

[temeculaguy]

$2500 a month rent or 920k purchase is so far out of whack I can’t even criticize it for fear of violating the persons with disablities act. Using those numbers a 460k house would rent for $1250 and a 300k condo would rent for $800. If 300k condos rented for $800, nobody would buy them, I don’t mean less people I mean not a single one.

If someone wants to throw down almost a mil for what they can rent for 2500, have at it and could the bartender please me whatever that person is drinking.

[temeculaguy]

More fuel for the fire and support for your late summer 2008 forecast. The Homebuilders convention was covered by a CNBC reporter who said she has never seen a gloomier bunch at a convention except for maybe the 8-track industry convention.

http://www.paperdinero.com/BNN.aspx?id=169

At least there is no spin from the builders, their cheif economist put a guy holding a lifepreserver on the cover of it’s convention program with the words “grab on.” He admits no recovery this year, maybe next year and said priced were still too high. A stock analyst (and I’ve seen others same the same thing) said the homebuilders stock tends to recover a year before the market does so in the next three to six months he suggests buying homebuilder stock, that would put the recovery start at late 2008. Latesummer 2008, your armchair economic analysis seems to have support with the experts, you may be on to something.

One other note is that a lot of people think a decline will take years but the NAHB chief economist says it is happening very fast and he had to dramatically change his forecast that he made only a few months ago.

[temeculaguy]

David “Bagdhad Bob” Lereah actually tried to get some of his credibility back and says “these are not good numbers and there is no way to make them look like good numbers.” He blames sub-prime and does throw in that the pacific northwest is holding up. He looks like he’s starting to spin for a sub prime bailout.

Toward the end of the 4 min clip from cnbc they flash a graphic that says “san Diego” is one of four biggest losers. Funny, the other three did have bad weather but we didn’t.

http://www.paperdinero.com/BNN.aspx?id=161

[temeculaguy]

I was wrong, it is far worse, numbers came out today, the west was down 29% in total sales from March 2006

http://paper-money.blogspot.com/

[temeculaguy]

SD, you know that no matter how bad it gets, even a 20% across the board drop from today or better, old scripps is designed to weather this storm and will only get half of the drop if that. 25-30 year old, high end homes whose neighborhood didn’t fall apart around them probably have large amount of people with little to no mortgage, very few people paying 2003-2006 prices, even fewer neg ams or interest only, no subprime with owners at an age that their life and jobs are stable and the speculators and investors are slim, but they aren’t too old of houses that everyone is dying or moving to assisted living and passing them to their kids who heloc them and because the neighborhood actually improved as did the schools, there is no reason to move. Nothing makes that area ripe for anything but a percentage of the overall drop. You give a lot of people good advice and have enough knowledge to make a killing in the downturn, it must feel like a handicap that you are so set on one of the few items in the store that will never go on sale.

[temeculaguy]

To use an anology, when you eliminate any group of customers, some specific numbers go up and others go down. Let’s say grocery stores tracked the average grocery bill and it was $50.00 and then they posted a sign that only people with more than three children at home can shop at that store. Then the average grocery bill goes to $100 but total sales drop. Why? Because single people buy less groceries. The store has lower overall sales and less profit but the averge amount per customer went up.

Eliminate or reduce people with bad credit, no down payment or first time buyers from the game and median price goes up because those people would have bought cheaper houses, bringing down the median.

Look at the reports on any financial website from yesterday and you will see total sales hit a 20 year low, down 9% in the west where the weather was fine. This is a temporary situation with the median because, unlike groceries, expensive homes are purchased by people who generally sell medium priced homes and the medium come from the cheap. The cheap will be hit now, the medium are in the “on deck circle” and the expensive is still sitting in the dugout, but they will get their turn at bat. But since I delved into another analogy, the pitcher loses a little strength with each batter so the expensive homes get to face him when he’s a little more tired and they are the better of the three at bat so it’s not entirely one sided.

The trouble is, this pitcher is 9 feet tall, 300 lbs and is on a steroid nobody has ever heard of. The strength and size of this pitcher (bubble) isn’t just 5% or 10% better than the last guy, it’s double, 180 mph fastball has a lot of us scared. Batter number one (sub prime) snapped his leg in half just walking to the plate. What’s next?

[temeculaguy]

Initially I saw the map and got excited because the zip code I am watching (92592) was in red, yipee!! Then I read the legend and the colors are based on the total numbers of foreclosures in a zip code, not a percentage of foreclosures to properties or population. Perris wasn’t even red and that is the highest rate per 1,000 households in the state last month, made national headlines. That wan’t so much a foreclosure map as it was a population map, many of the zips in red are the most populated zips. From that map, Temecula 92592 (population 56,000) has more forclosures than Temecula 92590 (population 3,446). And Murrieta 92563 (population 22,458) was also red. So that must mean that 92592 and 92563 have about the same amount of stress on R/E and 92590 has more stability. What it means is that 92563 has twice the forclosure rate of 92592 and doesn’t tell me jack about 92590. These were the first four comparisons I made and since it was all useless info, so I stopped there. As Espn’s Chirs Berman says, “lets go inside the numbers.”

It is obvious that forclosures are on the rise and prices are falling but do not draw any conclusions about trends based on that p.o.s. map. Come to think of it i bet there are more forclosures in California than Iowa, More in New York, than Rhode Island, maybe I should make a map.

[temeculaguy]

I have seen numerous interviews with Shiller, he is not Mr. Worst case scenario, he’s more centered than Roubini (who I also love to watch). About a month ago there was some jumps in certain numbers and Shiller said he was more bearish than the market was but he has to respect the market. The guy is a sociologist in an economist’s clothing. He is usually dead on, he the called the tech bubble and is a professor at Yale, go ahead and listen to you neighbor while ignoring one of the top economists from one of the top universities in the greatest economy in the world, surely that brings no credibility. After watching a few of his interviews I wish Yale was closer because I would crash his classes and he’s the first guy to come along that makes me regret that my education wasn’t Ivy League. Not because he says what I want to hear but because his are arguments are so cogent that no matter what I thought before listening to him, afterwards I have to re-evaluate my position. I dare you to pick one of Shiller’s arguments and tell me why he is wrong.

[temeculaguy]

I have seen REO stuff priced higher than when it was in it’s last few weeks as a short and I’ve seen REO brown lawners in bad shape with no upgrades priced higher than model matches that are in good condition from private sellers. I had been chalking it up to out of town lenders using old appraisals and the amount owed to determine pricing, not the market. But the REO has the canned language about “no warranty, as is” why would anyone pay more for that little luxury. I also notice these overly priced REO’s always have a realtor with an out of town area code, I could have priced it better from an internet search of the MLS. The last thing I’ve noticed is that two of them were priced with a few hundred dollars of the ZESTIMATE. Sometimes I feel like I’m taking crazy pills.

[temeculaguy]

Find out what is included, for the most part HOA’s have open books and as a co-op of sorts they spend the money on the neighborhood, whether it’s condos or houses. Sometimes it’s close to a wash (500 is higher than I’ve owned in but I don’t know what that gives you). Condo associations tend to buy fire insurance, trash and outside water and landscaping with your dues and put away reserves for painting, roofing, termites, etc. It would be fruitless tho have the individuals do their own if they are attached. If you add the $500 back into your budget for what you could afford in a non association house it is not an accurate measure of affordabilty. If you figure what the fire insurance, trash, water, landscaping and maintenance with the sfr (lets say $250 for example), then you could afford $250 more in the sfr payment, since that was your question. Most of the veterans of this site can attest to the fact that there are many costs other than the mortgage associated with home ownership of an sfr. My experience is that it is almost a wash, but then again I’ve never paid for such an expensive hoa, find out what you get and like the others have said, it comes down to preference. Having owned in an no mello roos, no hoa neigborhood, I’ll never do that again. My perference is for the low hoa’s that charge $30-$50 and maintain some rules, especially as the neighborhood ages. Otherwise you come home to your stucco, spanish roof neigborhood and find a neighbor painted his house blue, another rips out his lawn and puts in white rocks, while a third plants corn in his front yard (all true stories from my old neighborhood). I would gladly pay $30 a month to keep the christmas lights confined to six months a year. I visited freinds in my old neighborhood and ran into my old next door neighbor in his yard. After some pleasantries I couldn’t help it and said “dude those christmas lights were up when I moved out eight years ago, do they even work?” Enjoy the no hoa, I’m sure there are stories about it going the other and renegade hoa’s. Of course every time a friend tells me a story about his pain in the butt hoa hassling him about his oakland raider sheets in lieu of blinds in the windows or his collection of rv’s and boats in the yard, I nod in agreement but secretly I am happy I don’t have to live next to him.

[temeculaguy]

I am baffled, are they doing neg am loans on cars? Isn’t a 2004 still under warranty. How are you still down 17k three years into it? Do they do helocs on cars now? Is the 6k what a dealer told you was the the trade in value, because they always go below low blue book, maybe you can sell privately. I am still baffled, I bought a new honda in 03 and a new chrysler in 04 (same depreciation issues would apply) and put nothing down on both my cars, taking a five year loan on each. Sure they were probably upside down the first year or two but both are at least even now and getting close to being paid off. Actually I bet the 2003 oddysey is worth far more than the 4k I owe on it. Only the honda is out of warranty (who the hell cares they don’t break) and Dodge/Chrysler gave away 7 year warranties for free in 04. What are “repairs”, breaks and tires? Reliability aside, they all need those but replacing transmissions and engines on a 2004? That’s a warranty issue.

More info please, we can’t solve your illness without the symptoms. What did you pay for it and when? Did you roll a past upside down car into the current loan? Did you take a ten year loan or something? I just keep looking at the numbers and can’t see how three years later you owe 80% of the sticker price.

[temeculaguy]

The only way to solve this debate is a scientific study in this country because other countries have different cultures. It will sound crazy but we will find the answer. Pick an insignificant state in the U.S. something in the South or with an average tooth count of less than 12 (just being honest, Alabamba is a good pick but that’s negotiable). Divide the state in half, and set up secure borders for five years, nobody moves in or out because that will skew the results. Both sides need to be economicaly and racialy similar. Allow everyone on one side to have as many guns as they want and to carry them anywhere they want. Sell them at 7-11, no paperwork, no I.D., crazy people, felons, let kids have them in high school, football players during games, no rules about guns, have at it.

Then completely outlaw them on the other side, punishable by death to possess them for anyone other than cops, ammo too. No appeals for possession cases, carry out death sentences within 72 hours in public places.

Rest of the country stays with what we have, using popular vote and elected officials to decide the norm.

After five years show me the data, compare it to the rest of the country and the debate ends. We go with the best of the three: everyone, nobody or the way it is. The caveat is that wackos on both sides will be forbidden forever from arguing their point because the argument will have been settled.

Regardless, we on this site will discuss how the data will affect the real estate prices and how to get a foreclosure for nothing in one of the experiment zones.

[Author]

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