Tuesday, September 30, 2008

Flashback

One of the very first posts that I did on the blog took a look at the current prices versus the traditional average prices. I thought I would take a look back for the benefit of our newer readers and see how close we are now. The data comes from the Nation Association of Realtors.



The first chart shows the median price from 1980 through 2006. As you can see the prices fluctuated a little bit. You can clearly see the early 90's bubble and the mid 90's correction. Compared to this bubble the last one was just a speed bump. I put the red line on the chart, starting in 1980 and continuing through the peak of the last bubble out to today. Using that as a trend line, median prices today would be about $240K. But that trend line is through the peak of the last bubble. A very optimistic trend line. If you were to draw that line through the trough in the mid 90's the median price would only be about $150K. That's probably on the pessimistic side so if we split the middle the median should be around $200K. At the current rate of decline we should hit that in about 6 months. Currently we are at $247k and dropping at about 5% per month.



The second chart shows the ratio of median price to median income. As you can clearly see the ratio of median income to median home price stayed primarily between 2X and 3X, even through the last bubble it just barely broke 3X. But in this bubble it peaked at something like 8X the median income. If my data is correct the median income for Riverside County is currently around $54K. Oh look, we end up at that $150k number again.

I hear a lot of people saying that prices will never fall that low. I don't know why they think that. These ratios have been the same for many many years. Much farther back that these charts show. Has anything changed in the last 10 years? Contrary to Realtor spin, we are not running out of land, you could build millions of homes in the IE on all the vacant land. It sure not the weather. It's not like we live at the beach, half the year it's hotter the hell here. There's not a great job market, the pay sucks out here, which is why 1/2 the population commutes to LA. The air quality is on par with post explosion Chernobyl most of the year. So why would anyone think prices are not going to fall back to traditional ratios. The only thing that is not factored in is the size of the homes. Maybe we should add at least 10% to the median price for the increase in the home sizes over the last few years.

Do you believe that the prices will fall back to traditional levels? If not what is your reasoning?

SB1137 is helping cut the inventory


I've received a few emails asking about the drop in inventory over the last few weeks and some people are wondering (freaking out), "what's going on". Why the big drop? It looks to me as if that new state law, SB1137 is the culprit. It does not look like increased sales are reason for the drop. It looks like there are less new listings hitting the market. Which is what should happen, until the banks contact all the delinquent borrowers. I posted a couple of weeks ago that this law was drastically cutting the foreclosures (temporarily). It may also reduce the sales, since nearly all sales now are foreclosures. With less foreclosures hitting the market there should be less sales. This might be hard to determine though as the sales naturally drop off this time of year anyway.

Monday, September 29, 2008

the weekly tumble

The weekly asking prices continue the downward spiral. The low end seems to be slowing down a bit, only dropping $5k (2.8%) in the last month. The median asking price made a much larger fall. Dropping from $248k all the way to $236K. That's a 5% drop, or 12K in the last month. The high end also lost $12k in the last month.


Trend09/28/20081 month3 month6 month12 month
Median Price$235,900-5%
-12.6%-26.3%-42.5%
Inventory12,347-10.9%
-9.7%-12.1%-18.8%

Historical Data

DateInventory25th Percentile50th Percentile
(Median)
75th Percentile
09/28/200812,347$174,900$235,900$332,900
09/21/200812,368$175,000$239,900$337,655
09/14/200815,443$177,900$240,000$339,000
09/07/200814,569$179,900$244,900$340,000
09/01/200813,852$180,000$248,000$345,000
08/29/200813,590$180,000$249,000$349,000

Some of them deserved what they got


8895 Gentile Wind is one of the KB homes in The Retreat in South Corona. This home is a recent REO (like every other house in The Retreat). It sold new from the builder in 2005 for $743k. The buyers put in a little landscaping (and I do mean "a little", a 6' patio slab and a brick planter looks to be about it). The they manage to off load this thing in Nov 07 for 1.3 million??? WTF, that is months after the market imploded. In Late 07 there were already enough foreclosures in this tract to fill a cruise ship. In late 07 there were already homes on this same street listed under $700k yet this home sells for $1.3M. That sale is obviously fraudulent. It has a big red rotating sign on it that says "I screwed the lender". Gawd I wish they would hunt these people down and make them listed to Hanna Montana records nonstop for a few years. Oh wait, that might be cruel and unusual punishment. Eh, who cares.

Obviously the bank got screwed and this house is now listed for $430k. That makes this the cheapest house in The Retreat currently. Not my much mind you, there are several in the mid $400s. This house has fallen 43% from what it sold for new in 2005. Or if you want to go for the shocking (but obviously fraudulent) number, it has fallen 67% from the previous sale for a loss of $870K.

At the current price this house seems like a good deal. But once you factor in the HOA and the taxes this place becomes quite a bit more expensive. Still at this price, I think this will go pretty quick. Assuming there are any buyers left after this week.

Who's going to buy now?



Unless you live under a rock you probably heard about the market meltdown today. Our gubment was unable to push through the 700 Billion bailout despite pleas from Bushy and the financial geniuses at the Fed and the Treasury. I was even a little shocked that it didn't pass. As soon as the news hit the wires the markets went off a cliff (and they are still diving, the Nikkei is down over 500). Our financial Ebola has found it's way to Europe and now their banks and brokerages are failing.

With all this hitting the news every night I have to wonder, who is still looking to buy a house? I was planning on seriously looking in early 09. Prices in my target areas are starting to hit the "magic number" that I had set 2 years ago. But now I have more to think about. If this continues, are our jobs safe? My wife is in healthcare so she is relatively immune to economic fluctuations. My job however is directly connected to defense spending. If the gubment runs out of money they might decide they don't need the new fangled time machine I'm designing. They might decide to cancel Deathstar that our sister division is building. And what will we do with the clone army? Those guys have to eat and that's not cheap. Especially at government rates where a hamburger costs $500.

Undoubtedly this will make a lot of buyers think twice before buying a home. The other question, and the one the government is worried about is, will there be any banks around lending money to buy homes. Will the government step in and start giving out low interest loans? Personally I think that would be the quickest way to get the market moving. A gov sponsored disaster type loan program could keep the real estate market moving. Although I would only favor this if they screened the applicants and ensured they could afford it.

That's all for now, I have to head off to Costco to buy as much rice and bullets as my car will hold....

Sunday, September 28, 2008

Flipping, alive and well


Here's a flip attempt in Corona.

3231 Huntfield St was taken back by the bank for $401K. The previous owner had paid $930K in Dec 2006 for it. It sold in early Sept for $370K. That is a loss of 60.3% from the Dec 09 price or if you prefer your loss in dollars, that's a loss of $560K. This one was picked up by an investor hoping for a quick profit. It's already back on the market priced at $499K. Not bad if he can get it that's a quick profit of $130K less sales costs. The flipper looks to be an agent or broker.

Listings like this have to make you wonder if these agents aren't taking advantage of their positions to snag deals before the public gets a chance. This house at $370k was a steal (unless it was trashed). There's no way that it would have sold that low had it been on the open market. Homes in this area, this size are still selling for well over $400k and some are still getting over $500k. The listing says it is completely rehabed. But the house was only 3 years old and it's only been 3 weeks since it sold so they could not have done much more than paint and carpet. Now this house could have been trashed and everything could be legit, but it does make you wonder....

Foreclosure Alley

Thanks to David for the heads up on this piece. This is a great news piece on the foreclosure wave hitting the IE. Be sure to watch the video!

http://kcet.org/socal/2008/09/foreclosure-alley.html

Saturday, September 27, 2008

Interesting Video

I try to keep politics out of the blog but this video has some interesting tidbits of information on some of the decisions and policies that helped inflate the bubble. So keep your political views to yourself when making any comments.

Friday, September 26, 2008

JP Morgan sees a 58% decline in California


JP Morgan has put out this little diddy on their predictions on the housing market. The are offering 3 scenarios, and basing price declines on those. Their current estimate for peak to bottom price declines for California is 44%. We are already at 44.2% (according to DataQuick) so that forecast is pretty well out the window at this point. We have winter approaching, the mother of all financial meltdowns underway and a backlog of foreclosures taller than the Petronas Towers. Their next set of numbers is based on a deeper recession. That guestimate is a decline of 48%. Again, at this point you don't have to be a brain surgeon to conclude that we will probably hit that by the end of the year. Currently prices are losing about 5% per month. The last prognostication is based on a severe recession. It predicts a 58% decline. That is probably closer to what we will actually see.

So far this downturn has proved every estimate, even the most pessimistic to be overly optamistic. Everyone has missed the mark so far even the doom and gloomers. A 58% decline is probably a little too optamistic also. Back near the beginning of the crash. Global Insight estimated the IE to be 65% overvalued. I don't know whether we will see a 58% decline or a 65% decline in the median. But I'm sure it will be that range somewhere. And if the recession is really severe it could be even higher. So far most of the foreclosed homes are due to speculators that bought over their heads. A severe recession would create another wave of foreclosures due to job losses.

Thursday, September 25, 2008

WaMu is toast

JPMorgan Chase & Co. Inc. came to the rescue of Washington Mutual Inc. Thursday, buying the thrift's banking assets after WaMu was seized by the Federal Deposit Insurance Corp. in the largest failure ever of a U.S. bank. This is the second time in six months that JPMorgan Chase has taken over a major financial institution crippled by bad bets in the mortgage market.

That's gotta take a load of the minds of Paulson and the boys. Getting someone to buy that turkey seems to have been quite a piece of magic. They definitely pulled a rabit from a hat. Had WaMu failed like IndyMac and the FDIC had to take it over it could very well have wiped out the FDIC's entire reserve.

Sales by city

DataQuick has just released the sales by city numbers. These include resale SFR, Condo and New homes.

Riverside County 3,903 $247,000 $395,000 -37.47%
AGUANGA 2 $237,000 $398,000 -40.45%
BANNING 45 $157,500 $269,500 -41.56%
BEAUMONT 140 $261,500 $365,000 -28.36%
BLYTHE 7 $185,000 $232,000 -20.26%
CALIMESA 7 $235,000 $355,000 -33.80%
CATHEDRAL CITY 76 $217,500 $327,500 -33.59%
COACHELLA 37 $220,000 $299,000 -26.42%
CORONA 505 $350,000 $530,500 -34.02%
DESERT HOT SPRINGS 97 $135,000 $259,500 -47.98%
HEMET 176 $174,000 $305,000 -42.95%
HOMELAND 4 $195,000 $435,000 -55.17%
IDYLLWILD 16 $307,500 $330,000 -6.82%
INDIAN WELLS 16 $675,000 $680,000 -0.74%
INDIO 171 $240,000 $350,000 -31.43%
LA QUINTA 95 $355,000 $500,000 -29.00%
LAKE ELSINORE 164 $220,000 $365,000 -39.73%
MECCA 3 $85,000 $250,000 -66.00%
MENIFEE 113 $255,000 $381,500 -33.16%
MIRA LOMA 33 $359,000 $475,500 -24.50%
MORENO VALLEY 394 $183,000 $370,000 -50.54%
MURRIETA 329 $280,000 $400,000 -30.00%
NORCO 36 $445,000 $585,000 -23.93%
NUEVO 15 $215,000 $500,000 -57.00%
PALM DESERT 97 $333,000 $390,000 -14.62%
PALM SPRINGS 116 $277,000 $401,000 -30.92%
PERRIS 189 $185,000 $340,000 -45.59%
RANCHO MIRAGE 37 $463,750 $677,500 -31.55%
RIVERSIDE 425 $242,000 $415,000 -41.69%
SAN JACINTO 91 $185,000 $325,000 -43.08%
SUN CITY 111 $215,000 $320,500 -32.92%
TEMECULA 236 $325,000 $450,000 -27.78%
THOUSAND PALMS 4 $171,750 n/a n/a
WHITE WATER 2 $137,000 $285,000 -51.93%
WILDOMAR 60 $300,000 $413,500 -27.45%
WINCHESTER 52 $280,000 $410,000 -31.71%


San Bernardino County 2,314 $215,000 $360,000 -40.28%
ADELANTO 55 $126,000 $261,750 -51.86%
ANGELUS OAKS 2 $113,750 $77,500 46.77%
APPLE VALLEY 133 $157,000 $265,000 -40.75%
BARSTOW 19 $135,000 $181,500 -25.62%
BIG BEAR CITY 23 $207,500 $295,000 -29.66%
BIG BEAR LAKE 42 $324,000 $350,000 -7.43%
BLOOMINGTON 27 $195,000 $375,000 -48.00%
BLUE JAY 2 $312,500 $707,000 -55.80%
CEDAR GLEN 3 $125,000 $84,000 48.81%
CEDARPINES PARK 4 $111,545 $85,000 31.23%
CHINO 68 $348,000 $420,000 -17.14%
CHINO HILLS 59 $475,000 $587,500 -19.15%
COLTON 35 $151,250 $330,000 -54.17%
CRESTLINE 22 $171,250 $248,500 -31.09%
FAWNSKIN 2 $232,500 $869,500 -73.26%
FONTANA 294 $260,000 $425,000 -38.82%
GRAND TERRACE 11 $240,000 $350,000 -31.43%
HELENDALE 14 $202,250 $291,250 -30.56%
HESPERIA 168 $187,500 $310,000 -39.52%
HIGHLAND 64 $200,000 $342,500 -41.61%
HINKLEY 2 $36,500 $55,000 -33.64%
JOSHUA TREE 13 $118,000 $204,500 -42.30%
LAKE ARROWHEAD 19 $353,500 $447,000 -20.92%
LANDERS 2 $172,000 $140,500 22.42%
LOMA LINDA 30 $350,000 $425,500 -17.74%
LUCERNE VALLEY 3 $145,000 $213,000 -31.92%
MENTONE 5 $225,000 $387,750 -41.97%
MONTCLAIR 22 $264,000 $375,000 -29.60%
MORONGO VALLEY 4 $166,500 $212,500 -21.65%
NEEDLES 2 $190,000 $139,000 36.69%
ONTARIO 125 $260,000 $355,000 -26.76%
PHELAN 20 $208,000 $319,000 -34.80%
PINON HILLS 7 $199,000 $282,500 -29.56%
RANCHO CUCAMONGA 190 $380,000 $491,250 -22.65%
REDLANDS 57 $295,000 $400,000 -26.25%
RIALTO 104 $200,000 $342,500 -41.61%
RUNNING SPRINGS 16 $155,000 $235,000 -34.04%
SAN BERNARDINO 222 $133,000 $298,000 -55.37%
SUGARLOAF 8 $183,500 $258,000 -28.88%
TWENTYNINE PALMS 23 $110,500 $109,000 1.38%
TWIN PEAKS 5 $79,000 $216,000 -63.43%
UPLAND 49 $415,000 $497,500 -16.58%
VICTORVILLE 230 $170,000 $299,000 -43.14%
WRIGHTWOOD 5 $225,000 $235,000 -4.26%
YUCAIPA 51 $285,000 $379,250 -24.85%
YUCCA VALLEY 43 $124,500 $235,750 -47.19%

Tuesday, September 23, 2008

They just don't get it

The more and more I read about this bailout the more I am convinced our so called "leaders" haven't a clue. The latest is Bernanke's comments that the government should buy all that toxic waste at a price close to the "hold till maturity value". So instead of buying this crap at market values they are proposing to buy it basically at full price or what would have been full price had the market not imploded. There reasoning is that the prices we are currently seeing are "fire sale" prices and they don't reflect the "actual value". Are they freaking kidding me?? They really believe those 700 sq/ft shacks in Compton are worth $500k. This is beyond insane.

News Flash Mr Bernanke, the current fire sale prices are still more than most of this stuff is worth! They are attempting to keep homes unaffordable in the mistaken beleif that they really are worth that much. Even though very few people could afford them under normal underwriting standards.

They would be far better off taking that 700 billion and starting a government backed mortgage program with low, fixed 5% rates. That would thaw the real estate market in a hurry. As long as they used traditional lending standards to ensure that people could pay the loans they might actually make some profit on that 700 billion.

Besides 700 Billion is not going to go very far considering the current rate of defaults is over 50 billion per month. Plus they are proposing to buy the stuff at maturity value which would probably make that 50 Billion per month closer to 70 billion per month.

Oh yea, this just keeps getting better and better.....

Monday, September 22, 2008

Like a fart in a sleeping bag...


Like a fart in a sleeping bag, Mr. Mortgage's August report will bring tears to your eyes. I just don't know if they are tears of joy or tears of sadness. If you think things are getting better you may want to read the full report on his website. It's another great dose of reality from Mr Mortgage. Here's the key points from his August report.

In the month of August, the key stats are (for California):

* 37,988 Total Sales; down 3.9% from Julys June’s 39,507 and the slowest August for organic sales since DataQuick began reporting in 1988.

* 46.9% of Total Sales (17,816) were Foreclosure Resales; up 2.1% from last month and 1100% from two years ago.

* 21,172 ‘Organic Sales’ (Total Sales less Foreclosure Resales). This is down 1640 homes from July.

* $301k median price; down 5.3% in a single month and a whopping 37.9% from last summer. As expected long ago, prices are gravitating towards the most readily available financing: Agency <$417 conforming.

* 43,205 new Notice-of-Defaults, which will result in 34,500 new foreclosures 4-5 months from now.

* 213,500 new Notice-of-Defaults in past 5-months= 171,000 new REO from 4-6 months out as they move through the system.

* 25,309 homes went back to the bank as REO totaling $10.65 Billion…second highest of all time.

* Only 12,679 units left inventory (Total Sales less New Bank REO)

August sales by zip

Here's the sales numbers and median prices by zip code. These are for houses only so the median is a little higher than you might otherwise see.



SFR Price % chg $/Sq Ft
Countywide
### $235 -40.50% $120
Banning 92220 44 $150 -44.90% $113
Beaumont 92223 69 $235 -25.40% $116
Blythe 92225 6 $183 -20.70% $138
Cabazon 92230 1 $157 -37.60% $107
Calimesa 92320 7 $235 -33.80% $163
Canyon Lake 92587 34 $246 -50.30% $121
Cathedral City 92234 69 $220 -32.80% $125
Coachella 92236 21 $200 -26.70% $96
Corona 92879 66 $285 -38.60% $159
Corona 92880 117 $363 -35.00% $133
Corona 92881 34 $371 -36.40% $158
Corona 92882 116 $332 -34.90% $167
Corona 92883 78 $346 -20.00% $145
Dsrt Hot Springs 92240 81 $126 -49.60% $80
Dsrt Hot Springs 92241 3 $183 -26.60% $84
Hemet 92543 25 $110 -51.80% $85
Hemet 92544 55 $173 -33.10% $106
Hemet 92545 89 $185 -37.40% $92
Homeland 92548 4 $195 -55.20% $89
Idyllwild 92549 18 $290 -12.10% $257
Indian Wells 92210 10 #### 23.70% $348
Indio 92201 66 $205 -38.60% $117
Indio 92203 50 $250 -42.30% $105
La Quinta 92253 69 $340 -27.90% $166
Lake Elsinore 92530 111 $190 -46.90% $112
Lake Elsinore 92532 44 $260 -50.20% $101
Mecca 92254 3 $85 -66.00% $67
Menifee 92584 98 $246 -31.80% $110
Mira Loma 91752 34 $359 -27.10% $138
Moreno Valley 92551 79 $185 -51.30% $107
Moreno Valley 92553 116 $150 -51.60% $103
Moreno Valley 92555 84 $240 -38.10% $96
Moreno Valley 92557 88 $185 -47.50% $113
Mountain Center 92561 1 $199 -70.70% $100
Murrieta 92562 124 $285 -31.20% $119
Murrieta 92563 159 $280 -29.60% $108
Norco 92860 37 $445 -23.90% $163
Nuevo 92567 15 $205 -54.40% $135
Palm Desert 92211 27 $361 -9.90% $173
Palm Desert 92260 17 $358 -16.00% $175
Palm Springs 92262 32 $390 -9.80% $233
Palm Springs 92264 21 $740 18.20% $288
Perris 92570 41 $220 -35.90% $113
Perris 92571 133 $178 -48.10% $95
Rancho Mirage 92270 21 $603 -29.90% $229
Riverside 92501 28 $225 -39.20% $153
Riverside 92503 89 $237 -38.50% $146
Riverside 92504 49 $210 -38.40% $156
Riverside 92505 51 $234 -49.20% $153
Riverside 92506 40 $265 -50.10% $179
Riverside 92507 35 $240 -36.40% $164
Riverside 92508 41 $290 -29.40% $132
Riverside 92509 75 $216 -38.30% $139
San Jacinto 92582 32 $200 -43.70% $84
San Jacinto 92583 50 $150 -48.10% $87
Sun City 92585 29 $220 -38.10% $112
Sun City 92586 30 $167 -25.80% $108
Temecula 92590 1 $910 -5.50% $220
Temecula 92591 76 $295 -29.50% $137
Temecula 92592 111 $330 -24.10% $128
Thousand Palms 92276 4 $172 n/a $108
White Water 92282 1 $109 -55.30% $73
Wildomar 92595 40 $239 -44.00% $116
Winchester 92596 43 $275 -26.90% $101
























SAN BERNARDINO COUNTY SFR Price % chg $/Sq Ft
Countywide
### $205 -41.40% $128
Adelanto 92301 45 $115 -50.10% $78
Angeles Oaks 92305 3 $114 46.80% $143
Apple Valley 92307 61 $157 -38.40% $95
Apple Valley 92308 61 $135 -51.50% $101
Barstow 92311 19 $120 -33.30% $77
Big Bear City 92314 24 $208 -29.70% $193
Big Bear Lake 92315 42 $333 -2.10% $269
Bloomington 92316 29 $195 -48.00% $138
Cedar Glen 92321 3 $125 48.80% $121
Cedarpines Park 92322 4 $112 31.20% $116
Chino 91710 38 $350 -24.70% $195
Chino Hills 91709 53 $478 -16.90% $225
Colton 92324 35 $153 -53.60% $126
Crest Park 92326 1 $775 103.90% $325
Crestline 92325 25 $171 -31.40% $137
Fawnskin 92333 2 $233 -73.30% $198
Fontana 92335 68 $189 -51.40% $137
Fontana 92336 150 $311 -28.50% $140
Fontana 92337 62 $230 -40.10% $145
Forest Falls 92339 2 $185 38.10% $102
Grand Terrace 92313 10 $238 -33.00% $153
Green Valley Lake 92341 1 $225 -9.30% $153
Helendale 92342 12 $202 -30.60% $96
Hesperia 92344 54 $210 -42.90% $85
Hesperia 92345 99 $164 -42.50% $99
Highlands 92346 62 $200 -40.30% $131
Hinkley 92347 2 $37 -33.60% $44
Joshua Tree 92252 12 $108 -42.90% $92
Lake Arrowhead 92352 18 $349 -16.00% $323
Landers 92285 1 $144 2.50% $109
Loma Linda 92354 14 $281 -34.70% $191
Lucerne Valley 92356 3 $145 -28.20% $125
Lytle Creek 92358 1 $110 -54.20% $107
Mentone 92359 5 $225 -30.90% $154
Montclair 91763 23 $264 -32.30% $195
Morongo Valley 92256 4 $167 -21.60% $115
Needles 92363 2 $190 36.70% $117
Ontario 91761 32 $310 -23.50% $182
Ontario 91762 20 $260 -36.60% $176
Ontario 91764 38 $225 -36.20% $183
Phelan 92371 19 $214 -37.10% $111
Pinon Hills 92372 8 $199 -33.40% $109
R Cucamonga 91701 35 $385 -20.20% $195
R Cucamonga 91730 29 $310 -29.30% $201
R Cucamonga 91737 30 $416 -38.20% $224
R Cucamonga 91739 53 $500 -15.60% $174
Redlands 92373 21 $370 -17.10% $212
Redlands 92374 30 $223 -34.40% $144
Rialto 92376 73 $185 -41.40% $122
Rialto 92377 33 $236 -42.90% $136
Running Springs 92382 16 $155 -34.00% $147
San Bernardino 92404 58 $133 -54.90% $110
San Bernardino 92405 41 $130 -40.10% $97
San Bernardino 92407 52 $190 -43.70% $123
San Bernardino 92408 5 $203 -35.70% $130
San Bernardino 92410 32 $105 -67.00% $103
San Bernardino 92411 27 $90 -59.10% $89
Sugarloaf 92386 7 $162 -41.10% $157
Twentynine Palms 92277 22 $93 -10.60% $82
Twin Peaks 92391 5 $79 -64.40% $125
Upland 91784 24 $530 -13.10% $211
Upland 91786 18 $325 -33.00% $204
Victorville 92392 103 $159 -46.80% $85
Victorville 92394 36 $160 -41.30% $82
Victorville 92395 56 $159 -36.50% $95
Wrightwood 92397 5 $225 -4.30% $184
Yermo 92398 1 $325 174.30% $99
Yucaipa 92399 44 $275 -21.00% $143
Yucca Valley 92284 44 $125 -47.20% $90