Tuesday, December 30, 2008

Price drops accelerating

The price drops are accelerating (again).

Home prices continued to drop in October, according to the S&P/Case-Shiller home-price indexes, with home prices in the Sun Belt continuing to be hit hardest.

“The bear market continues; home prices are back to their March 2004 levels,” said David M. Blitzer, chairman of S&P’s index committee. He added that both composite indexes and 14 of the 20 metropolitan areas are reporting new record declines. As of October, the 10-city index is down 25% from its mid-2006 peak and the 20-city is down 23%, Blitzer said.

The indexes showed prices in 10 major metropolitan areas fell 19% in October from a year earlier and 3.6% from September. The drop marks the 10-city index’s 13th straight monthly report of a record decline. In 20 major metropolitan areas, home prices dropped 18% from the prior year, also a record, and 2.2% from September. None of the regions was able to stave off a decline from September to October.

Metro Area October 2008 Change from September Year-over-year change
Atlanta 119.77 -2.4% -10.5%
Boston 159.17 -1.1% -6.0%
Charlotte 128.02 -1.8% -4.4%
Chicago 145.49 -1.6% -10.8%
Cleveland 108.76 -1.0% -6.2%
Dallas 120.60 -1.1% -3.0%
Denver 129.05 -1.5% -5.2%
Detroit 86.10 -4.5% -20.4%
Las Vegas 142.57 -2.7% -31.7%
Los Angeles 179.82 -2.6% -27.9%
Miami 173.42 -3.0% -29.0
Minneapolis 135.71 -3.4% -16.3%
New York 190.04 -0.9% -7.5%
Phoenix 135.18 -3.3% -32.7%
Portland 166.44 -1.9% -10.1%
San Diego 159.12 -3.0% -26.7%
San Francisco 139.44 -4.2% -31.0%
Seattle 170.45 -1.4% -10.2%
Tampa 165.44 -3.4% -19.8%
Washington 184.92 -2.7% -18.7%

This isn't really news to readers of this blog. It does illustrate that the bottom ain't anywhere close though. Accelerating price drops are an good indication that there's still a long way to fall. This is the same pattern we saw last year in this area. The prices were sticky until late in the year as sellers were hoping that the late summer buyers would save the day. When that didn't happen the prices really took a big fall in the winter. This year will probably mirror that. With a flood of REO's poised to hit the market and buyer sentiment at all time lows the chance of prices stabilizing are slim.

Sunday, December 28, 2008

Time to break out the crystal ball

I made my 2008 predictions about this time last year. Some were pretty good, others I might have been early on. I thought the crime rate would already have started to rise but that doesn't seem to have happened (yet). Most of the other stuff I think I did a lot better than most of the so called economists.

I'll skip repeating the silly forecasts that were made by the NAR and the home builders. We all know "there's never been a better time to buy, blah blah blah......). As expected they were all horribly wrong. By the way if you want to read the CAR 2008 forecast it's here, (yup 4% down, oh so close....NOT).

This years forecast is a little foggier. All the government meddling is making it hard to get a grasp on what's going to happen. They usually don't mess with free markets but this is obviously a far bigger problem for them than previous crashes. All that meddling will probably stretch this mess out far longer than I would like.

So on to the magic 8-ball. It sees price declines in the IE of another 20% in the IE in 2009. The OC and LA will see larger price declines, probably closer to 30%. Home building will dry up (like that hasn't already happened). Even building smaller homes it's going to be hard to compete with the REOs. I think we will start to see the larger homes wilt on the vine. Now that the potential for large gains are gone those big homes are just money-pits. The average family doesn't need 4000 s/ft nor can they afford the added costs such homes generate. I think the interest rates will remain low since the government and the NAR beleive this is the best way to halt the price declines. There are arguments both ways, it will help sell homes, however it's very likely to have the opposite effect on prices especially in the long run. I see rents coming down as a result of prices coming down. When you can buy a house in Perris for $120K you sure as heck don't need to get $1500/mo for rent. So as more homes are sold off to investors, expect some competition for those renters and that should bring rental prices down (keep that in mind when looking at investment properties).

The overall economy will continue to erode as job losses widen. Look for the weaker chains to start folding in droves. Don't buy stock in Ghottchalks, Circuit City, Home Depot or Pier 1 to name a few. I forsee a mass culling of nail sallons, coffee shops and high end eateries. The holiday hope is gone. The only thing the new year will ring in is the cold hard reality of a going out of business sale for many of these places.

Unlike some economist (and Tyrone) I don't see the demise of the dollar or the total collapse of our economy. While we may be printing money like mad, so is the rest of the world. Europe and Asia are just as bad off as we are. I think the entire global economy will contract but stay coupled and balanced within reasonable limits. We may not buy as many useless trinkets as we once did, however we still need products. People have to have clothing, food and medicine. It may not be gucci or lobster but there we will still buy stuff.

So there's mine. Lets here yours!

Norco Hills, 61% off peak

Here's a decent looking deal for anyone interested in Norco Hills. 1493 Harness Ln, Norco, is a 4 bedroom, 3 bath single story home. It's just under 3000 sq/ft and it sits on just over a half acre (unfortunately much of that is a hillside). The home sold new in 2001 for $372,500. It sold near the peak in July 2006 for $883k. It recently went back to the bank and they listed it for $349K. That's the lowest price I've seen in this area by about $50k. There was a listing a few weeks ago on a similar house at $399k. That one went quick and I expect this one will too. I'm sure this will sell over list but we will have to wait and see what the final number comes in at. The loss from peak is $533k or 61% if it sells at list.

This house would actually fit my target profile perfectly but unfortunately I don't like the floorplan. It's in my target area, in my target price and is about the size I want. Now if I can just find a floorplan I like in this price range....

A few streets away in the same tract there is another new listing. This one however, illustrates that some people (especially realtors) still have "hope". 1042 Canyon View is a larger (3900 s/f) 2 story home with all the bells and whistles. It's got the rock pool, the fancy resort style back yard and lots of great upgrades. The lot is much better with an expansive view. But in this market what are those extras worth? The first home is listed for $111 sq/ft and that's probably a fair price. This second home is listed at crack smoking price of $256 sq/ft or a few happy meals shy of 1 million dollars.

The house itself is nice but it doesn't look super upgraded. The flooring is not super high end, I see carpet and 12 x 12 tile. The apliances in the kitchen are ordinary and the cabinets don't look all that spectacular either. It looks like most of the extra would be on the outside. I don't really see anything inside that screams "high end". So what is the view worth? How about the fancy backyard? If we use the same dollar per sq/ft as the base the home's base value is $432k. Now a pool and a view (of the 15 fwy) ait worth $568k. I think the lot is worth an extra $30k and maybe another $100k for the hardscape putting the total value at about $570k.

The asking price is nearly 1 million which is only $50k less that this guy paid in 2005. I don't know if he added all the fancy stuff or it was there. But either way I don't see anyone paying anything close to his asking price.

Friday, December 26, 2008

A rent vs buy lesson

You might be tired of me harping on about price levels and how when the rent versus buy ratios are in line we are back into a normal market. Over the last 7 or 8 years those levels were way out of whack. You could rent a house for 1/3 of the cost of buying it. While cruising the new listings today I ran across this fine example of:

1) why we ain't there yet
2) Who's going to buy for double rental costs
3) How not to list your house

6941 Orozco Dr in Riverside.
This is a big mansion up in Hawarden Hills. The most posh area of Riverside. This is a real mansion with pool, tennis court and all the bells and whistles. At over 6000 sq/ft this isn't your average big tract home. The current owners bought pre-bubble in 2001 for very boeing price of $777k. Not wanting to go with the current prices levels they have listed at a more "peakish" value of $1.6M (yea like that's gonna happen). But just in case you can't afford the $1.6M sales price you can rent this house for only $4500/mo. Obviously the sellers are just hoping to find some sucker that didn't get the memo about the housing bust. The rental costs is probably close to their holding costs (assuming they didn't HELOC the house during the bubble). I bet they are thinking, "we can just lease it for a couple of years until prices come back". Well, prices ain't coming back for decades! If you want out, price it like you want out.

Now comes the lesson part of the post. Let's figure value based on rental costs. Let's just do it the quick and easy way by estimating 10 years rent (or 120 payments @ $4500). That gives you a value of $540K. Or you could figure how much of a mortgage would give you a 4500/mo payment. For the sake of simplicity lets just leave out taxes (both property and income tax credits). This is a jumbo so we will figure 7% interest. Even if you could get 100% finanicing the loan amount for a $4500 payment would be $670K. Add taxes, PMI and your much higher. And of course, in the real world these days you need a down payment. These would all work to lower that principal amount (down probably closer to $600k). For the sake of simplicity let's just say the value based on rent potential is $600k +/- $100k. That's a far cry from the 1.6M asking price! If you were to buy this place, even with 20% down you are looking at a payment of well over $8K per month once property taxes are factored in.

Now the how not to list a house lesson. Dear Realtard (Brad) if you are going to list a house for 1.6 million you probably should not also include the lease option at $4500/mo. That tells us buyers that the real value of this place is some where close to $600K.

$600 or $700k is probably way low in today's market for this house. That might be closer to what this will sell for 2 or 3 years from now. I bet if this listed for closer to $1M he would get some action. At 1.6M he better hope that some NBA star wants to move to the hood.

One thing that I will mention. Even though I say $700k is way low for this house in today's market, there is little data to back this up. Why? Because nearly nothing over $600k is selling these days. Not much over $350k is selling but once you get over $600k the market is DEAD. If you look at the past 3 months sales over $600 on Redfin you will see about 20 closings. But many of those are actually foreclosures going back to the banks. If you change that search to over $1M there are only two sales closed in the last 3 months. The high end is DEAD, DEAD, DEAD!

Wednesday, December 24, 2008

The IE is now 50% off peak

The latest report from the California Association of Realtors has the IE median price at $202,740. That is down 41 percent from last years $344,930 median price. But the IE peak median was $416,000 in Jan 07. That puts us 51.3% off peak prices.

Back around that (early 07) time the research outfit Global Insight reported that the IE was 65% overvalued. According to that math the median should have been $145k, so we still have some room left to fall. The Fortune report says another 27% over the next tow years. And the official X-report (that's the report I generate using reams of data, a few drams of whisky and my Magic 8-ball) predicts another 20-25% from the current price. Those all put us around the same place. $150k median give or take a few k.

Tuesday, December 23, 2008

Worst markets for 2009

Fortune Magazine has the IE at number 3, and 8 of their worst 10 markets in California. Miami and Washington DC were the only markets out side of Ca to make the list.

2008 median house price: $256,540
2009 projected change: -23.3%
2010 projected change: -4.8%

A popular boom earlier this decade fueled runaway prices for single-family homes in this market, which includes San Bernardino and Ontario, outside Los Angeles. Median prices are expected to fall to $197,000 in 2009, down nearly $60,000 from 2008.

Obviously their data is old. Currently Riversides median is $220k and San Berdu is at $185k. So the median for the entire IE is probably just a smidge over $200k. I think their projected change is about right though. Another 20% should put the IE back in the ball park.

Now if your really want to read a depressing (but mildly amusing) article check out this one from GQ. It's about foreclosure ally (The 15-fwy from Corona to Temecula), Lake Elsinore in particular.

"These houses are seventy-five miles from jobs in a world where oil gets ever scarcer. They are large and thus expensive to heat and cool. And forgive me, Southern California contractors, but they are junk. The market for $450,000 houses with ARMs waiting like assassins in the financial tall grass is over for good. It is quite possible that we have built and financed houses, developments, whole towns, without futures, that will collapse and become curious ruins."

The National numbers are out

They are out and they are BAD. The stock market meltdown and the job losses are obviously starting to show in the numbers. The number of new homes sold was the lowest since 1981! That's BAD.

Existing-home sales – including single-family, town-homes, condos and co-ops – fell 8.6 percent to a seasonally adjusted annual rate of 4.49 million units in November, from a downwardly revised level of 4.91 million in October, and are 10.6 percent below the 5.02 million-unit pace in November 2007. ( those numbers put us back in 1998 territory).

Lawrence Yun, NAR chief economist said he expected a decline. “The quickly deteriorating conditions in the job market, stock market, and consumer confidence in October and November have knocked down home sales to another level. We hope the home sales impact from the stock market crash turns out to be short-lived, as was the case in 1987 and 2001,” (Well it doesn't hurt to hope Lawrence.)

Total inventory also increased to an 11.2 month supply. (Isn't is supposed to go down this time of year?).

From Bloomberg

Sales prices for existing U.S. homes fell the most on record in November, tearing a deeper hole into households’ already tattered finances. The median resale price fell 13 percent from a year before, to $181,300, “probably the largest price decline since the Great Depression".

“November sales just collapsed,” said Chris Low, chief economist at FTN Financial in New York. “Price declines are accelerating. As bad as this is, it’s going to be considerably worse in a month’s time.”

“Housing is still in a freefall,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.

Monday, December 22, 2008

So, what's Santa bringing you?

Hopefully the readers of this blog were smart enough to stay out of the bubble and still have some cash to through around at Christmas. I'm not a big fan of the commercialized orgy of buying that Christmas has somehow morphed into. I'd prefer to go back a few decades and have a simpler version. Of course my kids look at me like I'm some kind of whack-job. But buying gifts for the sake of buying gifts just seems silly to me. It seems every year I'm expected to buy gifts for more and more people. Since gift buying is so hard, now we just exchange gift cards. What's the freaking point of that. I get a $50 gift card from uncle Fester and he gets a $50 gift card from me. Why don't we just exchange crisp new $50 bills. Better yet, why don't we just pour each other a nice dram of single malt (scotch) and toast a happy holidays!

However, if anyone wants to buy X a gift, a nice bottle of single malt would do nicely!

Slip slidin' away.....

Buying a home on a hill always means you have to worry about things like landslides, runoff, fires etc. Usually it takes more than a year though for problems to occur. It looks like the Canyon Oaks tract (South Corona near Tom's Farm) is already seeing some problems. KB homes has evacuated 4 of the homes as a "precaution". I

From the PE

Four Corona area homes have been evacuated by LA-based homebuilder KB Homes because a retaining wall in the backyards is beginning to crumble and has been deemed unsafe, KB Homes spokesman Craig LeMessurier said Sunday.

The homes in the Canyon Oaks community are just over a year old, but heavy rains last week and the forecast of more this week caused the precautionary action.

Kat Sanders lives two doors down from one of the homes evacuated and said she is fearful as well. "I'm terrified. I've had trouble sleeping," Sanders said. "They're (KB Homes representatives) telling me I'm fine, but it's pretty worrisome when they're telling us there's no problem, but don't turn on your sprinklers."

One of her neighbors has cracks across the backyard and each of the four evacuated homes has black plastic and sandbags across the backyard near the wall. Engineers for the homebuilder were on the properties Thursday and Friday, and they made their recommendation Friday night, Sanders said.

Sanders said she and her husband paid $571,000 for their 3,600 square-foot home with four bedrooms and a loft last year.

(WHAT, They paid $571k last year?? They should hope the house does slide down the hill. Then at least they can get thier money back).

Steve Sanders, a resident in the Canyon Oaks area in an unincorporated area near Corona, off Temescal Canyon Road, looks at an eroding retaining wall. KB Homes evacuated four families as a precaution because rain is expected this week.

Sunday, December 21, 2008

$55 a s/f in South Corona

Here's a listing that should get some action.

11135 Larkspur Ct, Corona This house is in Sycamore Creek. It has 5 bedrooms and 3.5 baths with 4158 sq/ft. Its a mini mansion! This baby sold for nearly $700k back in March 2006. it looks like the bank tried to get $265k at the court house steps, but there were no takers. It's hit the market with an almost ridiculously low asking price Of $227,500. Now I realize things are a bit slow right now, especially in South Corona but is $55 a s/f what its going to take? One things for sure, this should get a pile of offers at that price. This home is listed at 68% off the original selling price in 2006.

Anyone else think the price is a typo? I did until I checked what else was for sale in this tract. There's a bunch of stuff in around $100 s/f with quite a few in the $90s. There are two other model matches for this big-ass house and they are both listed in the $70s (one's a short and the other is a REO).

Saturday, December 20, 2008

Median price by city

Data quick has put out the Nov city report. They compared prices to last year. I changed the report and used the data from last month to show the month to month decline for Riverside. (I removed a few cities with very low sales counts like Cabazon etc.)

2008-nov 2008 oct %change
Riverside County 3,537 $220,000 $230,000 -4.40%

BANNING 47 $150,000 $142,000 6.00%
BEAUMONT 96 $235,750 $253,000 -6.80%
BLYTHE 6 $136,000 $280,000 -51.50%
CATHEDRAL CITY 69 $187,500 $195,000 -3.60%
COACHELLA 47 $185,000 $196,000 -5.70%
CORONA 464 $350,000 $350,000 0.00%
DESERT HOT SPR 100 $106,000 $120,000 -11.70%
HEMET 174 $150,500 $154,000 -2.00%
INDIAN WELLS 10 $516,000 $750,000 -32.00%
INDIO 139 $209,250 $230,000 -9.00%
LA QUINTA 75 $384,000 $305,000 25.00%
LAKE ELSINORE 173 $205,000 $210,000 -2.40%
MENIFEE 83 $228,000 $242,000 -5.80%
MIRA LOMA 27 $310,000 $303,000 2.30%
MORENO VALLEY 400 $160,000 $171,000 -6.50%
MURRIETA 265 $246,500 $266,000 -7.50%
NORCO 22 $350,000 $390,000 -10.30%
PALM DESERT 56 $342,000 $350,000 -2.30%
PALM SPRINGS 83 $250,000 $268,000 -6.80%
PERRIS 212 $171,500 $169,000 1.00%
RANCHO MIRAGE 23 $415,409 $435,000 -4.60%
RIVERSIDE 432 $220,000 $225,000 -2.30%
SAN JACINTO 89 $162,250 $170,000 -4.80%
SUN CITY 109 $185,000 $210,000 -12.00%
TEMECULA 175 $284,000 $310,000 -8.40%
WILDOMAR 52 $257,250 $280,000 -8.30%
WINCHESTER 64 $276,500 $266,000 3.70%

The California report

Here's the latest Dataquick report for the state. No news here, the numbers are ugly. Sales are down 25% month to month and the median price is down over 7% month to month. Those are some BAD numbers folks!

An estimated 32,163 new and resale houses and condos were sold statewide last month. That was down 24.0 percent from 42,293 in October and up 25.7 percent from 25,578 for November last year. Sales have increased on a year-over-year basis the last five months. California sales for the month of November have varied from last year's low to a peak of 60,326 in 2004, the average is 40,592. MDA DataQuick's statistics go back to 1988.

The median price paid for a home last month was $258,000, down 7.2 percent from $278,000 for the month before, and down 37.7 percent from $414,000 for November a year ago. Around half the drop in median is due to depreciation, the other half due to shifts in the types of homes selling, and how those homes are financed.

The typical mortgage payment that home buyers committed themselves to paying last month was $1,198. That was down from $1,310 in October, and down from $1,951 for November a year ago. Adjusted for inflation, mortgage payments are back to where they were in spring 1999. They are 40.3 percent below the spring 1989 peak of the prior real estate cycle. They are 51.8 percent below the current cycle's peak in June 2006.

Thursday, December 18, 2008

2001 Prices, Am I being too optimistic?

Since I started this blog, and actually far longer than that, I have believed that prices would probably fall back to 2001 level. The reasons for that are because that is where the charts all tell me prices should be. 2001 price levels would bring the price to income and price vs rent ratios back into line with the long term trends. Many other bloggers are now suggesting prices will fall back to 1997 levels. I suppose that's possible since when bubbles pop the prices tend to over-correct. Still 2001 prices are what I'm targeting as my "buy" sign.

Some areas of SoCal are getting close if not already there. Some of the outer areas of the IE are probably in the 2001 price range. The Bay area however has already passed that level and is now down to mid 2000 prices. Many parts of the Bay area started tanking well before us down here in SoCal. Inland areas like Sac and Modesto started in Late 2005/early 2006. Down here in Fantasyland we did not start seeing real price declines until 2007. So they are a little ahead of us on the downward slope.

Check it out

Bay Area home values plummeted to an eight-year low in November, as discounts on foreclosed properties continued to draw buyers and drive down prices.

The median for existing single-family homes in the nine-county region fell to $350,000, a 47.8 percent drop from a year ago and the lowest level since September 2000, according to MDA DataQuick. Nearly 50 percent of the houses that sold during the month had been repossessed in the last year.

"Bargains and foreclosures are still king," said Andrew LePage, analyst with the San Diego real estate research firm. "It's a little scary to think of what sales would be like without the deep discounts, since that seems to be what's driving the bulk of them."

Across the region, 3,217 resale homes traded hands in November, up 31.9 percent from a year ago. Transactions were down nearly 43 percent from October, in part because there were fewer than normal business days last month. Given the tone of financial news and tight lending environment, LePage said he was surprised the sales figures weren't worse.

Because foreclosures are swaying prices so much, values continue to hold up better on a relative basis in the coastal markets that have had fewer repossessions. San Francisco had the smallest year-over-year median decline, although it was still a significant drop: 18.5 percent to $697,500. The median means half of homes sold for more than that amount, half for less.

Sales continue to be concentrated in the low-cost areas that have been hit hardest by foreclosures. The most expensive markets - Marin, San Francisco, San Mateo and Santa Clara counties - usually account for 43 percent of regional sales but their share this month was 35 percent. Those four counties were the only ones where sales declined from a year ago.

The hardest hit county was Contra Costa, where prices sank 49 percent to $260,000. Spencer has seen homes in the area that nearly sold, only to come back on the market for $50,000 less two months later.

Riverside numbers by Zip Code

Check out how many zip codes are under $100 sq/ft median. There are now quite a few that are even under $80 sq/ft!

Price % chg $/Sq Ft
Countywide $210 -38.20% $106
Aguanga 92536 $249 n/a $132
Anza 92539 $133 n/a $88
Banning 92220 $150 -36.00% $98
Beaumont 92223 $225 -16.40% $105
Blythe 92225 $136 -1.60% $126
Cabazon 92230 $99 n/a $75
Calimesa 92320 $213 -18.10% $131
Canyon Lake 92587 $195 -46.60% $113
Cathedral City 92234 $202 -34.80% $113
Coachella 92236 $175 -20.50% $95
Corona 92879 $254 -40.30% $150
Corona 92880 $356 -24.00% $127
Corona 92881 $325 -31.20% $164
Corona 92882 $350 -17.20% $163
Corona 92883 $318 -18.60% $133
Dsrt Hot Sp 92240 $103 -50.70% $65
Dsrt Hot Sp 92241 $125 -50.00% $103
Hemet 92543 $94 -43.40% $76
Hemet 92544 $134 -44.30% $85
Hemet 92545 $173 -26.60% $84
Indian Wells 92210 $913 -48.60% $303
Indio 92201 $178 -30.50% $102
Indio 92203 $217 -38.10% $98
La Quinta 92253 $376 -26.20% $156
Lake Elsinore 92530 $170 -39.30% $102
Lake Elsinore 92532 $252 -29.20% $94
Mecca 92254 $132 n/a $82
Menifee 92584 $221 -26.30% $94
Mira Loma 91752 $325 -30.10% $139
Moreno Val 92551 $145 -50.00% $87
Moreno Val 92553 $135 -53.40% $94
Moreno Val 92555 $219 -37.40% $92
Moreno Val 92557 $166 -48.00% $103
Mountain Ctr 92561 $111 -87.70% $123
Murrieta 92562 $270 -28.20% $112
Murrieta 92563 $245 -36.40% $100
Norco 92860 $350 -21.00% $161
Nuevo 92567 $179 -43.20% $101
Palm Desert 92211 $320 -36.30% $161
Palm Desert 92260 $399 -13.40% $195
Palm Springs 92262 $272 -29.40% $143
Palm Springs 92264 $410 -35.40% $209
Perris 92570 $175 -52.70% $94
Perris 92571 $165 -40.00% $82
Rancho Mirage 92270 $480 -34.20% $200
Riverside 92501 $185 -44.90% $122
Riverside 92503 $215 -49.50% $133
Riverside 92504 $165 -51.90% $132
Riverside 92505 $190 -49.30% $126
Riverside 92506 $298 -18.90% $159
Riverside 92507 $167 -53.80% $125
Riverside 92508 $323 -14.80% $124
Riverside 92509 $220 -37.10% $130
San Jacinto 92582 $176 -48.20% $73
San Jacinto 92583 $149 -38.60% $75
Sun City 92585 $190 -35.50% $101
Sun City 92586 $158 -26.00% $100
Temecula 92590 $573 n/a $172
Temecula 92591 $273 -29.80% $127
Temecula 92592 $282 -19.60% $118
Thermal 92274 $125 n/a $89
Thousand Palms 92276 $152 -41.20% $97
White Water 92282 $109 n/a $63
Wildomar 92595 $227 -38.60% $95
Winchester 92596 $254 -27.60% $98

Tuesday, December 16, 2008

What could you do with $373 a day??

What could you do with $373 a day? That buys a lot of Lattes, hookers and golf! It also just happened to be how much the median home lost in value per day over the last year in Riverside County. If you prefer your losses on a monthly basis that's $11,375 per month. If you need the yearly loss (for tax purposes or some such thing), it's $136,500. The median home lost over twice the median yearly family income. The good news is that the median home is getting closer to the long term ratios of price to income. It's still a little above the trend line but we're getting closer. San Berdu is basically there at $185K but Riverside still has another $40k-$50k to go.

The million dollar question is will it stop there? At the current rate of decline Riverside County will hit the long term trend line in about 4 or 5 months. San Berdu is within a month of the line, but I don't see any sign that it's stopping. In fact last month was a big increase in the price declines from the prior month. With all the bad news it's hard to believe the declines will stop in only a few months. Kinda makes you think twice about buying, huh?

November Median takes another dive

I posted a few days ago that North County San Diego Median price fell 12% in ONE month. The numbers for Nov were released today and the IE did better but still fell quite a bit. Riverside fell 4.5% and San Berdu fell 7.5% from Oct to Nov.

All homes 7-Nov 8-Nov %Chng
Los Angeles $499,000 $340,000 -31.90%
Orange $582,750 $400,000 -31.40%
Riverside $356,500 $220,000 -38.30%
San Bernardino $330,000 $185,250 -43.90%
San Diego $440,000 $305,000 -30.70%
Ventura $521,250 $355,000 -31.90%
SoCal $435,000 $285,000 -34.50%

Last month the Riverside Median was $230K and San Berdu was $200k. The number of sales fell about 800 in Riverside from 4500 to 3700 and in San Berdu the fell from 2900 to 2400. Some of that decline is the normal drop from Oct to Nov but some of it is the result of the market cooling after the Stock Market collapse.

Here's the DataQuick report.

Southern California home sales outpaced last year for the fifth consecutive month in November, when 55 percent of buyers in the resale market chose repossessed homes. The abundance of discounted foreclosures helped push the median sale price down a record 35 percent from a year ago, a real estate information service reported.

A total of 16,720 new and resale houses and condos closed escrow in the six-county Southland last month. That was down 22.3 percent from 21,532 in October but up 26.9 percent from 13,173 in November 2007, according to San Diego-based MDA DataQuick. (But still the second lowest year on record. Last year was the worst)

On the surface, last month's sales look much weaker than in the prior two months: November's 26.9 percent year-over-year sales increase compares with annual gains of 64.6 percent in September and 66.7 percent in October. Moreover, the 22.3 percent drop in sales between October and November was a record and compares with an average October-to-November decline of just 7.4 percent since 1988.

The median price paid for all homes combined last month was $285,000, down 5 percent from October and down a record 34.5 percent from November 2007. Last months median was the lowest since it was $298,000 in April 2003, which was the last time the median was below $300,000. November's median stood 43.6 percent below the peak $505,000 median reached in spring and summer of last year.

The median price has eroded consistently over the past 16 months as price depreciation swept the region, discounted foreclosures ballooned in inland markets and sales stagnated in higher-end neighborhoods. The latter have suffered from, among other things, a difficult financing environment for large mortgages.

Foreclosures have accounted for about half of all Southland resales during the past three months. In November, 54.6 percent of all the homes that resold had been foreclosed on at some point in the prior 12 months. That's up from 50.9 percent in October and 18.8 percent a year ago.

At the county level, these "foreclosure resales" ranged from 44.1 percent of November existing home sales in Los Angeles County to 70.4 percent in Riverside County. In Orange County foreclosure resales were 44.2 percent of sales; in San Diego 52.1 percent; San Bernardino 67.8 percent and in Ventura County 47.8 percent.

Indicators of market distress continue to move in different directions. Foreclosure activity has waned recently but remains near record levels, while financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages. Down payment sizes and flipping rates are stable, non-owner occupied buying activity appears flat overall but is above-average in some markets, MDA DataQuick reported.

Monday, December 15, 2008

How to short sale

There was an article in the LA times on how to do a short sale on your house. Hopefully this info is correct and hopefully the short sellers will read it. I still see a lot of short sales listed for way more than the nearby REO's.......

Here's a part of the article,

More than a few financially strapped owners have tried to unload their homes through what's known as a short sale, only to end up stymied by what most believe to be an uncooperative lender.

Truth be told, though, lenders are so swamped these days by underwater borrowers who need permission to sell their homes for less than what they owe that they give most short shrift. But there are ways to get your lender's attention.

For starters, align yourself with an agent who has experience with short sales. Most don't, according to Stacy and Michael Spickes, a husband-and-wife realty team who operate America's Home Rescue, an Austin, Texas, firm that has handled about 250 short sales over the last six years.

"Ninety-five percent of all agents don't know how to do these transactions," Stacy Spickes says. (I will vouch for that!)
Look for an agent who has established alliances with loss-mitigation staff at various institutions, if not your particular one, and can offer references of previous clients who have completed short sales.

Beyond that, here's the step-by-step short-sale process the Spickeses have created to increase your chances of getting your lender to say yes:

* Criteria: To qualify, you must be behind on payments, have a legitimate hardship and have little or no equity in the property, generally 8% or less.

Your hardship must be genuine, but lenders these days are fairly lenient, according to the Spickeses. It used to be that only a death, medical emergency, divorce or job loss qualified.

But now, if your mortgage payment or even your property taxes rise beyond your ability to pay, lenders are typically agreeable to a short sale.

However, before deciding, lenders will want to see a financial work sheet listing all your bank accounts, real estate owned and other assets.

If you have enough cash on hand or assets that can be sold, lenders will demand that you make up the difference between what the house sells for and what you owe. (Yup they are gonna make you sell your Hummer!)

The article goes into a fair amount of detail in what is expected and what you need to do. It's a pretty good read and most short sellers would be well advised to give it once over. I'm so tired of looking at short listings that obviously have no chance of selling.

Sunday, December 14, 2008

60 minutes breaks the bad news.

60 Minutes had a great piece on the mortgage mess this evening. It pretty much parallels what most of us here already know. This mess is far from over!

A Second Mortgage Disaster on the Horizon

Median down 12% in one month!

Man, I thought the IE was in a nose dive. Check out the latest report for North County San Diego.

North County's housing market reversed course last month, dampening the possibility of a pending recovery from slow sales and falling prices. A monthly housing report released Thursday showed the sales boom of September and October had softened and prices plummeted at an alarming rate.

The median price of a house in North County took an absolute beating, dropping 12 percent in just one month. That brought the median price in November to 40 percent below the same month a year ago, dropping to $358,000.

Sales were up just 32 percent from a year ago after two straight months of sales that were double the weak 2007 numbers.

North County has been mired in a severe housing recession for two years with anemic sales and tumbling prices. Strong sales numbers in September and October had provided a glimmer of evidence that price declines might be nearing an end. Thursday's report, released by the North San Diego County Association of Realtors, debunked that idea.

"Unemployment is skyrocketing, expectations about the economy are falling and I would suggest people are becoming somewhat more cautious about purchasing," said Mark Goldman, a real estate lecturer at San Diego State University.

Still, price declines appeared to be very real. The median price per square foot, which adjusts for the size of the house, also tumbled ---- falling by 8 percent in just one month and down 30 percent from last year. Such a dive in prices set records in the four-year-old survey for biggest drops in median price and median price per square foot. It was also the first time in the history of the report, known as HomeDex, that the median price per square foot dipped below $200, declining to $196.

It will be interesting to see what the IE numbers look like. I don't expect to see a 12% monthly drop though, so don't get too excited. We've been dropping between 3 to 5% per month. With the October stock market collapse and the rising unemployment starting to factor in, it is conceivable that the monthly drops may see an increase.

Saturday, December 13, 2008

What's is like on the streets?

It's been a few weeks since I went out looking. I was wondering from those that have been pounding the pavements, "what are you seeing?".

I can see from the listings on Redfin that homes in the areas I've been looking are sure as hell not moving. The upper end of the market seems to be dead. Some homes that I thought would sell quickly due to their low prices are still listed after weeks or even months in some cases.

Foreclosure Storm Will Hit U.S. in ‘09 Amid Job Loss

It looks like the mainstream media is catching onto something I've been saying for months. Foreclosures will not be slowing anytime soon. The current batch are primarily the result of the bubble popping, the credit crisis (the end of fantasy financing) and mortgage resets. Job losses account for a small portion of the current crop of foreclosures. But the mounting job losses will inevitably start taking a toll on the ability of some homeowners to keep making the monthly payments. The job losses are accelerating at an alarming rate. Currently they are feeding upon themselves. Job losses in one sector are causing job losses in others. If you add this new symptom to the already long list of ailments it makes a recovery or even a leveling out a remote possibility. If this was a horse we were talking about a bullet would be the cure.

From Bloomberg

U.S. foreclosure filings climbed 28 percent in November from a year earlier and a brewing “storm” of new defaults and job losses may force 1 million homeowners from their properties next year, RealtyTrac Inc. said.

A total of 259,085 properties got a default notice, were warned of a pending auction or were foreclosed on last month, the seller of default data said in a report today. That’s the fewest since June. Filings fell 7 percent from October as state laws and lender programs designed to delay the foreclosure process allowed delinquent borrowers to stay in their homes.

“We’re going to see a pretty significant storm next year,” Rick Sharga, executive vice president of marketing for Irvine, California-based RealtyTrac, said in an interview. “There are two or three clouds that suggest a pretty heavy downpour.”

Rising unemployment, expiring foreclosure moratoriums and state efforts that “run out of steam” will push monthly filings toward the record of more than 303,000 set in August, Sharga said. The number of homes that revert to lenders, the last stage of foreclosure and known as “real estate owned” or REO properties, will increase to 1 million from as many as 880,000 this year, he said.

Initial jobless claims increased to 573,000 in the week ended Dec. 6, the highest level since November 1982, while the number of workers staying on benefit rolls reached 4.429 million, also the most since 1982, the Labor Department said today. U.S. companies slashed payrolls by 533,000 last month, the fastest pace in 34 years, for a total of 1.9 million job cuts so far this year.

“The labor market is facing its worst crisis since 1982, and it is certainly not over yet,” said Harm Bandholz, a U.S. economist at UniCredit Markets and Investment Banking in New York.

Home prices have fallen by about a fifth from the mid-2006 peak, according to the S&P/Case-Shiller home price index.

‘Devastating Consequences’

“The decline in prices and its devastating consequences” will continue next year with no indication of when they will stabilize, Hall said. Programs that modify the terms of loans, including efforts by Fannie Mae, Freddie Mac, JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. can’t help thousands of borrowers, he said.

Something like 70 percent of subprime foreclosures are beyond the reach of modification programs because the owners are investors, because the owner is in default for the second time on the property, or because the owner has disappeared,” Hall said.

California had the most filings with 60,491, up 51 percent from a year earlier, and a rate of one filing for every 218 households, more than twice the national average. California had six metro areas in the top 10, led by Merced in third place with a rate of one in 76 households in a stage of foreclosure. Modesto, Stockton and Riverside-San Bernardino ranked fourth through sixth, Bakersfield was ninth and Vallejo- Fairfield was 10th, according to RealtyTrac.

Thursday, December 11, 2008

Looks like the bailout is dead

The 14 Billion Auto bailout seems to have died in the senate. The market will probably sink like Russian sub tomorrow. Short the auto makers quick....

A $14 billion emergency bailout for U.S. automakers collapsed in the Senate Thursday night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.

The collapse came after bipartisan talks on the auto rescue broke down over GOP demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.

Thank you UAW, way to sink your own ship!In other news, a 50 BILLION Ponzi scheme, REALLY!

Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a $50 billion Ponzi scheme in what may rank among the biggest frauds ever.

The former chairman of the Nasdaq Stock Market is best known as the founder of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he launched in 1960. But he also ran a hedge fund that U.S. prosecutors said racked up $50 billion of fraudulent losses.

Madoff told senior employees of his firm on Wednesday that "it's all just one big lie" and that it was "basically, a giant Ponzi scheme," with estimated investor losses of about $50 billion, according to the U.S. Attorney's criminal complaint against him. A Ponzi scheme is a swindle where early investors are paid off with money from later investors.

The $50 billion allegedly lost to investors would make Madoff's fund one of the biggest frauds in history. When Enron filed for bankruptcy in 2001, one of the largest at the time, it had $63.4 billion in assets.

U.S. prosecutors charged Madoff, 70, with a single count of securities fraud. They said he faces up to 20 years in prison and a fine of up to $5 million (a fine of 5 million seems rather insignificant when there are 50 billion in losses) in cases like this I think a more "medieval" punishment is in order.

This should do the trick, and when they are done with Madoff they can strap Blagojevich into it.

Tuesday, December 9, 2008

Here comes Chryfordolet

I found this damn funny, so enjoy!

Monday, December 8, 2008

Mortgage mods, failing miserably

Mortgage mods, failing miserably! I wrote a blurb about the re-default rate on modified mortgages a few weeks ago. Today there was a better and more detailed account of just how bad the track record is on these "modified" mortgages. It seems these people are like crack addicts. No matter how much help you give them they just keep falling back on their old habits. Here's a thought "let's just foreclose and sell the house to someone that can and will pay for it!"

"The results, I confess, were somewhat surprising, and not in a good way", John C. Dugan said.

Comptroller of the Currency John C. Dugan said today that new data shows that more than half of loans modified in the first quarter of 2008 fell delinquent within six months.

After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53 percent, and after eight months, 58 percent,” the Comptroller said in remarks at the Office of Thrift Supervision’s National Housing Forum today. (The data is similar for mortgages modified in the second quarter: the re-default rate after three months was 39 percent, and after six months, 51 percent.)

Mr. Dugan spoke during a panel discussion with OTS Director John Reich, Federal Reserve Board Vice Chairman Donald Kohn, FDIC Chairman Sheila Bair, and Federal Housing Finance Agency Director James Lockhart.

A key question, Mr. Dugan said, is why is the number of re-defaults so high? “Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers? Is it because consumers replaced lower mortgage payments with increased credit card debt? Is it because the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments? Or is it a combination of these and other factors?”

That question “has important ramifications for the foreclosure crisis and how policymakers should address loan modifications, as they surely will in the coming weeks and months,” the Comptroller added.

His remarks also provided a preview of the second OCC and OTS Mortgage Metrics Report to be published later this month. The report will show continued increasing delinquencies and foreclosures in process for all first-lien mortgages held by the largest national banks and federally-regulated thrifts. However, the report will show new foreclosures decreasing by 2.6 percent from the second quarter.

The mortgage metrics report covers nearly 35 million loans worth more than $6.1 trillion, or about 60 percent of all first-lien mortgages in the United States. The quarterly reports are unique in that they are not merely surveys, but instead consist of validated, loan level data using standardized definitions for prime, Alt-A, and subprime mortgages, and standardized definitions for loan modifications.

“We believe the reports include the most accurate and reliable data on mortgage performance that is available today,” Mr. Dugan said. “And in addition to providing more clarity about mortgage performance generally, the data have proven to be exceptionally valuable for supervisory purposes.”

That's great eh? We spend trillions of dollars bailing out banks and borrowers. Yet they still cannot seem to figure out the real problem is UNAFFORDABILITY!. It does not matter how you modify a loan, if the buyer cannot afford it he WILL default. How much extra will these lenders lose by holding that property for another year or 18 months. They had the chance to foreclose and sell months ago. Now they must start the process again, and a year from now they end up foreclosing anyway. What will the addition loss be after another 18 months to 2 years of price declines? Mortage mods might make sense in some specific cases. But in the vast majority of cases this is just putting the borrower on life support for a while. They are already brain dead, pull the plug and move on.

Saturday, December 6, 2008

What will it take to get you "off the fence"?

Most everyone reading this blog is reading it because they are looking to purchase a home. I am wondering what it will take for you to take the plunge.

There are some facts we know and some we don't. We know prices have fallen considerably in the last 2 years. We know that prices in most of the IE are still above historical norms. We know the economy is in bad shape. Interest rates are still low. Inventory is still high. Sales numbers have picked up but they are still some of the lowest in the last 20 years.

We don't know how much farther the prices will still fall. We don't know what the interest rates will do in the future. We don't know how bad this recession will be. Some of us are in industries that may be affected by job losses (like me in defense) and we could lose our jobs.

So what will it take to get you to buy?

The Bankers are SHOCKED!

From the LA Times

A record 10% of the nation's mortgage-burdened homeowners fell behind on their loan payments or were in foreclosure during the third quarter, according to a survey released Friday by the Mortgage Bankers Assn., which said California and Florida were the biggest contributors to the worsening picture.

The percentage of loans at least a month overdue or in foreclosure was up from 9.2% in the second quarter and 7.3% a year earlier, the trade group said. In Florida, 7.3% of home loans were in foreclosure at the end of September. The figure was 3.9% in California and just under 3% for the nation.

In a grim report Friday, the government said U.S. employers cut 533,000 jobs in November, the weakest performance in 34 years, sending the jobless rate to a 15-year high of 6.7%. California unemployment is now well over 8% (about 10% in the IE, we are fast approaching the levels of the early 90's).

Combined with a 40% decline in California's median home price, the faltering economy is resulting in the highest rate on record of troubled home loans actually going into foreclosure, said Jay Brinkmann, chief economist for the Mortgage Bankers Assn.

California represents 13% of the loans in the country, Brinkmann said, but is recording 19% of all new foreclosures.

"California has lost more than 100,000 jobs over the past year, compared to Michigan, the usual poster child for unemployment, which only lost 70,000," Brinkmann said.

"Things are going to get worse before they get better," said Thomas Lawler, a housing economist based in Virginia. (DUH!)

At first glance, California's troubles seem little different from those anywhere else, because just under 7% of borrowers in both California and the nation are behind on payments. But Brinkmann said a clearer picture emerges when you compare the number of newly delinquent loans in one quarter with the number of loans entering the foreclosure process the following quarter.

That foreclosure "roll rate" was about 10% to 12% nationally in the 1990s and ran from 12% to 15% for most of this decade, Brinkmann said. The percentage is now 30% nationally but has reached 79% in California and 65% in Florida, he said.

"This is nothing like anything we've ever seen before," Brinkmann said. "We were shocked when we saw the California roll rates."