The California association of realtors has just release the forecast for next year. They are forecasting a median price drop of 6% and a sales increase of 12.5%. How do they calculate these estimates? I'm beginning to think they just pull numbers from a hat.
How did they do last year at estimating this years numbers. Well, you could have asked you cat and probably have gotten a better estimate. Last year they estimated that prices would fall 4% and sales would fall 9%. At the current rate it looks like the median sales price will drop about 32% and sales will actually increase about 12%. Thats WAY off. So, why would we think this years estimate is any better?
I doubt we will see another 32% decrease but I also doubt it will be only 6%. 6% in January might be about right, but for the year I would be willing to wager a nice bottle of single malt that the number will be closer to 20%. I'm also skeptical that the sales numbers will increase. I think with the faltering economy and tightening lending standards that the sales numbers will be flat or down slightly. I just cannot see an increase with the economy coming apart like it is. I guess we will have to wait and see who gets closer, me or the CAR.
Thursday, October 16, 2008
Tuesday, October 14, 2008
Testing the new toy...WAY OT
Some of you may remember I bought a new Canon 40D a month or so ago. I also picked up a 100-400mm L series to go with it. Here's a shot I took tonight.
1/640 @ f11
1/640 @ f11The Phantom effect
There's a lot of talk on the blogosphere about "phantom Inventory". That's the new name for homes banks have taken back but are sitting on. For some unknown reason they are holding homes and not listing them as soon as they foreclose. There's much speculation as to why they are doing this. The most logical to me is that they don't want to flood the market with REO properties. This would drive the prices down even faster than the 5% per month they are currently dropping. But on the flip side if a bank holds a home for 6 months they probably have lost 15% to 20% of what they could have got by selling right away.
Case in point,
514 Wrightwood Rd, Corona. This is a former model home. It was built in 1997. It sold new for $220K when the development built out in late 97. It sold again right at the peak in Sept 2006 for $580k. The bank took the home back in Jan 2008 for $496k. Even back in Jan there is little chance they could have sold this for the balance of $496k. But they probably could have gotten close. A house just a few doors up the street sold in March for $395k. Another sold in June for $350K. And yet the banks still did not put this home on the market. I've been driving past this house for nearly a year wondering when they would list it. Well, wonder no more. It hit the market this week. Listing price, $262,500. At that price this should attract some attention. Especially from the guys that just paid $350k 4 months ago..... I'm sure this will get bid up unless it's thrashed inside. But I'm also quite certain it will not get bid up $88k to make the June buyer feel better.
The question remains though. Why did the bank wait? If they had put this home on the market back in Jan, when they took it back they probably could have gotten close to $400k for it. Now they will be lucky to get over $300k.
Monday, October 13, 2008
When upgrades go too far
In the heady days of the real estate boom the fastest way to maximize your profit was to upgrade. High end appliances, travertine, granite, and fancy landscaping were all used to maximize profits. But how much is too much? Well here's your answer:
Marble tile on the garage floor is TOO MUCH!
And layed at a 45 too! with a fancy beveled edge to boot. What the hell was this guy thinking. How many people want a marble floor in the garage?This home is near Lake Mathews up near woodcrest/Orangecrest but unfortunately the address is in Perris. This takes the value of this home down about $150K or more. Homes over in the 90504 zip of Riverside sell for a lot more than this home will even though it's only a mile away.
This home was bought in 2005 for $631k. It's a 5 bedroom, 3 bath home, 3725 sq/ft sitting on just over an acre of well manicured land. Gawd knows how much this guys spend on upgrades. Some of the stuff is awesome. The kitchen counters are beautiful the cabinets look low end, in the pics but I'm sure there not though). The bathroom looks like a suite at the Ballagio. They even put marble tile on the stairs. It's over the top gawdy in some respects. Actually in most respects. It makes me want to speculate that a realtor owns it!
Anyway if you want this marble palace it's offered as a short sale for $450K. The price is not that bad considering the home. Some of it would need to be toned down a bit for those of us not used to living in a marble palace. Unfortunately I think the zip code is gonna hurt him. That and the fact its a short sale.....
Thursday, October 9, 2008
Tuesday, October 7, 2008
The latest from Mr. Mortgage
This one makes a good point about some of the workouts the banks are offering to upside down borrowers. The most popular workouts are ones that lower the interest rates way down for a few years but keep the principal balance of the original loan. This is just a stall tactic to keep the banks from having to post that loss on their balance sheets. % years from now house prices will still be much lower than those bubble prices. So those people will find themselves right back in the same boat. Mr. Mortgage recommends fighting for a principal reduction and a slightly higher interest rate on a 30 year fixed. That makes sense to me. But a lot of those workouts will require you to make up that rightdown amount when you sell. These mortgage workouts sound like a nice fix but in many cases the best solution is still to simply give the home back, take the credit hit and buy again a few years down the road.
Da weekly tumble
There's not much different this week than most weeks. The numbers are still falling. The core median asking price is down $15k in the last month and the county median is about the same. The high end did a little better but still dropped about 10K. The low end also lost about $10k last month. Inventory remains fairly stable after the drop in early sept that was due to the new foreclosure rules. I expect the inventory numbers will start to climb by next month as the banks catch up. The rapidly deteriorating economy will surely start having an effect on sales as well.
The Core area data is as follows;
And here's the county data for the Riv/San Berdu metropolitan areas.
The Core area data is as follows;
Including Arlington, Bloomington, Box Springs, Canyon Crest, Casa Blanca, Colton, Corona, Crestmore, Fontana, Grand Terrace, Jurupa, La Sierra, Mira Loma, Moreno Valley, Norco, Perris, Rubidoux, Woodcrest
| Trend | 10/07/2008 | 1 month | 3 month | 6 month | 12 month |
| Median Price | $230,000 | -6.1% | -13.5% | -27.0% | -43.1% |
| Inventory | 12,537 | -13.9% | -7.2% | -10.5% | -15.8% |
Historical Data
| Date | Inventory | 25th Percentile | 50th Percentile (Median) | 75th Percentile |
| 10/07/2008 | 12,537 | $169,900 | $230,000 | $329,000 |
| 10/01/2008 | 12,699 | $171,362 | $234,900 | $329,999 |
| 09/28/2008 | 12,347 | $174,900 | $235,900 | $332,900 |
| 09/21/2008 | 12,368 | $175,000 | $239,900 | $337,655 |
| 09/14/2008 | 15,443 | $177,900 | $240,000 | $339,000 |
| 09/07/2008 | 14,569 | $179,900 | $244,900 | $340,000 |
And here's the county data for the Riv/San Berdu metropolitan areas.
| Trend | 10/06/2008 | 1 month | 3 month | 6 month | 12 month |
| Median Price | $229,900 | -4.2% | -13.2% | -24.6% | -39.3% |
| Inventory | 43,444 | -6.4% | -6.6% | -11.7% | -18.0% |
| Date | Inventory (SFH + Condo) | 25th Percentile | 50th Percentile (Median) | 75th Percentile |
| 10/06/2008 | 43,444 | $161,900 | $229,900 | $345,000 |
| 09/29/2008 | 42,791 | $165,000 | $234,900 | $349,000 |
| 09/22/2008 | 42,629 | $169,000 | $235,000 | $349,900 |
| 09/15/2008 | 48,540 | $169,900 | $239,000 | $349,900 |
| 09/08/2008 | 46,403 | $170,000 | $239,900 | $350,000 |
| 09/01/2008 | 44,714 | $174,900 | $244,900 | $354,000 |
They are still at it!
Unbelievable there are still scam artists out there trying to lure people into no down cash back seminars. Freakin tools!
Check out this email I got today.....
Check out this email I got today.....
Sunday, October 5, 2008
Another tsunami approaching??
Normally housing downturns are preceded by downturns in the economy. This one wasn't because of the asset bubble. Houses became commodities rather than homes. Speculation, fraud and investor exuberance inflated the prices far beyond normal rational levels. Like all asset bubbles, it burst and prices are returning to normal levels. But what about the spillover to the rest of the economy?
Now that this has spread to the rest of the economy will there be a 2nd wave to this housing bust. The first wave is the deflation of the bubble prices currently hitting us. Once the prices return normal levels, will a 2nd wave drive them even lower? This second wave, driven by a severe US recession could take prices far lower than those normal levels. A severe US recession would put millions out of work. Many of those people are in homes they can easily afford right now, but they might lose them if they lost their jobs.
At this point a recession is all but a certainty. In California were in it, and have been for a while. The argument amongst the so called experts is now, how bad will it be. Goldman Sachs has just announced that they are now forecasting a much deeper recession that they expected earlier.
If you read the news all you know about the job losses. They are not just in housing and banking anymore. They have spread to manufacturing, service, government and just about every other sector of the job market. Auto makers, airlines and even Starbucks are laying off.
The talk now is about the coming wave of Prime and ALT A defaults. Will the talk next year be about the coming wave of defaults due to job losses. If you lose your job now, finding another will be difficult. The competition, even for menial jobs is fierce. They are getting thousands of applicants for jobs at Walmart.
Corona just announced it is eliminating 112 jobs due to budget shortfalls. The shortfalls are a result of lower property and sales tax revenues. Lake Elsinore also just had a round of layoffs. Remenber the good old days when a government job was a safe job? I'm not sure there are any safe jobs any more.
Sorry if this post is a little too "tin foil hat" for your taste. But the news these days does not fill me with optimism about the future. I think the government is far too optimistic about this crash. I don't know if they are just putting forth a brave happy face to calm people. Or if they really actually think this will be over in a year or two.
I think the US will be changed forever after this. Hopefully for the better. We have become the nation of the quick buck. A nation trying to keep up with the Jones's. And a nation of perpetual debtors. Maybe this is what we need to snap us back to reality.
Now that this has spread to the rest of the economy will there be a 2nd wave to this housing bust. The first wave is the deflation of the bubble prices currently hitting us. Once the prices return normal levels, will a 2nd wave drive them even lower? This second wave, driven by a severe US recession could take prices far lower than those normal levels. A severe US recession would put millions out of work. Many of those people are in homes they can easily afford right now, but they might lose them if they lost their jobs.
At this point a recession is all but a certainty. In California were in it, and have been for a while. The argument amongst the so called experts is now, how bad will it be. Goldman Sachs has just announced that they are now forecasting a much deeper recession that they expected earlier.
If you read the news all you know about the job losses. They are not just in housing and banking anymore. They have spread to manufacturing, service, government and just about every other sector of the job market. Auto makers, airlines and even Starbucks are laying off.
The talk now is about the coming wave of Prime and ALT A defaults. Will the talk next year be about the coming wave of defaults due to job losses. If you lose your job now, finding another will be difficult. The competition, even for menial jobs is fierce. They are getting thousands of applicants for jobs at Walmart.
Corona just announced it is eliminating 112 jobs due to budget shortfalls. The shortfalls are a result of lower property and sales tax revenues. Lake Elsinore also just had a round of layoffs. Remenber the good old days when a government job was a safe job? I'm not sure there are any safe jobs any more.
Sorry if this post is a little too "tin foil hat" for your taste. But the news these days does not fill me with optimism about the future. I think the government is far too optimistic about this crash. I don't know if they are just putting forth a brave happy face to calm people. Or if they really actually think this will be over in a year or two.
I think the US will be changed forever after this. Hopefully for the better. We have become the nation of the quick buck. A nation trying to keep up with the Jones's. And a nation of perpetual debtors. Maybe this is what we need to snap us back to reality.
Thursday, October 2, 2008
Land, way worse price declines than homes.
From the Wall Street Journal,
As it struggles through the housing crisis, home builder D.R. Horton Inc. is unloading land across California at big discounts.
Horton two weeks ago sold about 2,000 house lots in Desert Hot Springs ... for $7.8 million, according to county records. William Shopoff, a land investor ... estimates Horton paid about $110 million for the land before spending on improvements.
Who knows how much they spent on improvements. But even if they spent nothing that sale would be 7 cents on the dollar. YIKES!!
As it struggles through the housing crisis, home builder D.R. Horton Inc. is unloading land across California at big discounts.
Horton two weeks ago sold about 2,000 house lots in Desert Hot Springs ... for $7.8 million, according to county records. William Shopoff, a land investor ... estimates Horton paid about $110 million for the land before spending on improvements.
Who knows how much they spent on improvements. But even if they spent nothing that sale would be 7 cents on the dollar. YIKES!!
Wednesday, October 1, 2008
Before and After shots
Remember the good ole days. When everyone had a big house, a convertable vette and a Hummer?
Then something unheard of happened. The banks actually expected people to pay for it. The nerve! Well paying for it was out of the question for most average folks. And that brings us to the "after" picture.
The home looks so sad now. No Vette, no Hummer, no occupants. This house, 6347Peach Ave in Corona was purchased new in 2002 for $291K. In 2004 it sold for $560K and now it's owned by the bank. REO price is $355K. Still about $80K too much in my book. I wonder if the home paid for those fancy cars via HELOC or refis??
Then something unheard of happened. The banks actually expected people to pay for it. The nerve! Well paying for it was out of the question for most average folks. And that brings us to the "after" picture.
The home looks so sad now. No Vette, no Hummer, no occupants. This house, 6347Peach Ave in Corona was purchased new in 2002 for $291K. In 2004 it sold for $560K and now it's owned by the bank. REO price is $355K. Still about $80K too much in my book. I wonder if the home paid for those fancy cars via HELOC or refis??
The plunge is spreading
I've posted about sub $100 sq/ft listing and then sub $80 sq/ft listings. But those sub $80 sq/ft listings were for the most part in areas that most of us would rather not put down roots. They have been primarily in far flung areas like Hemet, Perris, San Jacinto and Moreno Valley. They are moving though. Like ripples on a pond sub $80 sq/ft listings are creeping out. There are loads of them popping up now in Murrieta, and it probably won't be long before they start creeping into Temecula, Riverside and Corona.
Murrieta may not be your idea of the perfect town but it's much better than most of the other cities that have gone sub-$80. It is a little far off the beaten path and I would not recommend anyone move there if they cannot find work locally or within a reasonable commute (20 miles). There are a few to choose from in the Sub-$80 range or close to it. Most of them curretnly are short sales but there are REO's to choose from as well. Most of them are huge and most are fairly new. Lets take a look at a few.
26193 Palm Tree Ln is a big 4008 sq/ft, 5 bedroom/5 bath home. This puppy sold at the peak for $680K. It looks like bank took it back WAY back in Jan for $573k. It's just now hitting the market (why did they wait 9 months??). It's listed at $295K or $74 sq/ft. That is a loss of $385k or 57% from the bubble price. This is a nice looking house. The yard leaves a bit to be desired but the house looks clean and ready to move into.
39166 Shree Rd is another nice looking house in Murrieta. This one is 3586 sq/ft and has 4 bedrooms and 3.5 baths. The home was purchased new in 2006 for $632K. The bank took it back in Sept. It looks like the offered it on the court house step for $375K and not surprisingly there were no bidders. It just hit the market listed for $280K or $78 sq/ft making the loss (if it sells at asking) about $352K or 56%. I think this one will go quick, maybe even over list, it looks very nice. Notice the last occupants took the oven!
37705 Summer Wind is a 3160 sq/ft 5 bed/3 bath REO that has been on the market for a month and a half. After a $30k price drop this home is currently listed for $260K or $82 sq/ft. Since it's been on the market a while you might be able to get it under $80.
How about a little Sweet Magnolia? This home is another REO home. It's 3066 Sq/ft and has 4 beds and 4 baths. This one looks to be a sad case. Purchased new in 2000 for $246K it was lost to the bank in August. There's no telling if this was HELOC abuse, familiy tradgedy or simple job loss. My guess is HELOC abuse since the bank took it back for more than the original loan. This is now listed $1k BELOW it's original selling price in 2000! Now that's a rolback! BTW is it just me or is that one BUTT-UGLY house.
Murrieta may not be your idea of the perfect town but it's much better than most of the other cities that have gone sub-$80. It is a little far off the beaten path and I would not recommend anyone move there if they cannot find work locally or within a reasonable commute (20 miles). There are a few to choose from in the Sub-$80 range or close to it. Most of them curretnly are short sales but there are REO's to choose from as well. Most of them are huge and most are fairly new. Lets take a look at a few.
26193 Palm Tree Ln is a big 4008 sq/ft, 5 bedroom/5 bath home. This puppy sold at the peak for $680K. It looks like bank took it back WAY back in Jan for $573k. It's just now hitting the market (why did they wait 9 months??). It's listed at $295K or $74 sq/ft. That is a loss of $385k or 57% from the bubble price. This is a nice looking house. The yard leaves a bit to be desired but the house looks clean and ready to move into.
39166 Shree Rd is another nice looking house in Murrieta. This one is 3586 sq/ft and has 4 bedrooms and 3.5 baths. The home was purchased new in 2006 for $632K. The bank took it back in Sept. It looks like the offered it on the court house step for $375K and not surprisingly there were no bidders. It just hit the market listed for $280K or $78 sq/ft making the loss (if it sells at asking) about $352K or 56%. I think this one will go quick, maybe even over list, it looks very nice. Notice the last occupants took the oven!
37705 Summer Wind is a 3160 sq/ft 5 bed/3 bath REO that has been on the market for a month and a half. After a $30k price drop this home is currently listed for $260K or $82 sq/ft. Since it's been on the market a while you might be able to get it under $80.
How about a little Sweet Magnolia? This home is another REO home. It's 3066 Sq/ft and has 4 beds and 4 baths. This one looks to be a sad case. Purchased new in 2000 for $246K it was lost to the bank in August. There's no telling if this was HELOC abuse, familiy tradgedy or simple job loss. My guess is HELOC abuse since the bank took it back for more than the original loan. This is now listed $1k BELOW it's original selling price in 2000! Now that's a rolback! BTW is it just me or is that one BUTT-UGLY house.
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