I have long suspected that the whole "reset explosion in 2010 (or thereabouts)" factor was a lot more complex than people often make it out to be. Especially for San Diego… we are at the forefront of the bubble on the way up and then the way down; it makes sense that our reset peak might happen earlier as well.
But there are bigger reasons than that to doubt the reset explosion thesis. One is that resets don’t matter — all those loans were written at a time of substantially higher short-term rates, so a simple reset to the prevailing market rate should actually lower the mortgage payment. Recasts, not resets, are the danger. Recasts occur when the borrower starts paying down principal on an interest-only loan (in which they’ve paid only interest, as the name suggests) or a negative amortization loan (in which they haven’t even paid all the interest, resulting in a principal that’s been growing since they took the loan out). Option ARMs would fall in the latter category, assuming that the borrowers had chosen to take the "option" to pay less than the full payment amount.
Now, there are certainly a lot of loans like this set to recast, but they account for only a portion of the loans seen in those famous reset charts.
My other doubt had to do with the fact that people often don’t wait for a reset to bail on their mortgage. If you paid peak pricing, unless you got a hardcore neg-am loan your monthly payment is higher than it would cost to rent the same place — so why wait around for the reset before pulling the ripcord? Some neg-am loans might have payments so (temporarily) low that it would make sense to stay until the 11th hour. But in the case of many mortgages, it would make sense to default before the reset date.
Unfortunately all of the above are just suspicions without any data to back them up. So I was real interested today when I stumbled across an article on this topic on the blog Accrued Interest. The author provided data from option ARM-heavy mortgage pools he’s (or she’s?) been tracking, and the conclusion is that a lot have defaulted already and a lot have paid off already. Meaning that while there are still some potentially troublesome mortgages left, they aren’t as big as the reset explosion thesis would suggest.
Thoughts from the Piggs?
I would agree that resets and
I would agree that resets and recasts are not going to be the big time bomb that some are expecting. But unemployment over 10% in San Diego and almost 12% in California is solid data that is a definite challenge to any housing has bottomed story.
XBoxBoy
Excuse me for my clumsy
Excuse me for my clumsy blurting in on the experts, but I had understood that the fuse on this one had fizzled out sometime ago when rates were lowered. It’s seems more about the whole package now.
The problem with rates is
The problem with rates is that the govt doesn’t control them in the long term. Recasts will occur and since most people have been paying the minimum on their POA’s, its pretty much a guaranteed foreclosure. Add into that the double whammy of the bank actually having to back out all those uncapitalized profits and you have another potential catastrophic trigger in the banking system.
Josh
I would say there’s a very
I would say there’s a very fine line between “resets” and “recasts” when talking about any 5 year ARMs in California. I would bet the farm that 75% of these ARM’s were written as IO. That percentage certainly held true for the thousands that I saw written between 2004 and 2007.
The low indexes will definitely blunt much of any future foreclosure wave– for a while. But how comfortable are folks going to be effectively living on a 6 month adjustable? For most of the folks that put down nothing with an 80/20 or even 10% with an 80/10 on their 5 year IO’s, chances are that indexes will rise before they have enough equity to refi off their 6 month adjustable. Remember, these folks are now paying P&I on a 25 yr amortization schedule. How many are going to walk away because they have no equity AND they like to sleep at night? The day the Libor rises a full percent, there’ll be a new batch of foreclosures. Lower indexes will just spread the pain over a few years at best.
Agreed that Option ARMs are recast nightmares. Some of the early ones (pre 2006) written by companies such as WAMU, had recast levels of 125%. WAMU changed this to 115% in line with the others after that point in time. To give you an idea of how lax underwriting standards were…All borrowers needed was a 600 fico to be able get an 80/10 (WAMU 1st and 2nd) Option ARM to purchase a million dollar home, stated income. If you had a 640-660, you could buy that same home Option ARM, stated with an 80/20 – 0% down. And, if something didn’t fit, the Account Executive working for the bank would usually suggest to you how you could “fix it” since he/she was getting incentive pay for closed loans.
WAMU’s OA underwriting guidelines were not that different from dozens of other lenders– I am just chosing them as an example since they are now defunct. These Option ARM loans were a cash grab for all. We have not heard the whole story about what kind of loans are sitting on these banks’ balance sheets since, the banks, obviously, would prefer an ordered descent into chaos. This is why they’re tight lipped, there is a shadow inventory and I know of dozens of people who have not paid their mortgage in a year but have not received an NOD.
It would be possible with the indexes (ie: MTA) being down of late– even with margins of 3.5% — for some earlier Option ARM loans to get the full 60 mos of minimum pay.
I recall a statistic a few years ago claiming that even though 80% of OA loan holders stated that they made more than the minimum payment, only about 20% actuality made more than the min pay. The payment shock alone on ANY of these OA’s that come due/recast taken in the context of this economy, upside down positions of these loans would cause me to wager that the majority of these will default when they recast. Payments jump from about half of an IO payment to a full P&I payment — who’s going to refinance them at 50% negative equity?
Right now, if OA loan holders are making the minimum payments– and these artificially low indexes have extended the amount of time that these dwellers’ were able to make these minimum pick-a-payments– they’re living above their means, in “their own home” and paying half of what it would cost to rent. Why wouldn’t they hold off until recast before defaulting– especially if some banks are taking a year now to begin foreclosure?
There might be a batch of
There might be a batch of foreclosures but there wont be a wave anymore. There are less and less of these loans every day, they haven’t been making new ones, their popularity fell incredibly over the past two years and the article rich linked tried to put a number to it, saying that only about 1/4 of them still exist, having not been refi’s or repo’d already.
A lot of people bought from 03 to 06 that had no business buying but those who were holding their breath waiting for appreciation have already drowned, gotten out of the water or sprouted gills. This was a valid theory at one point, but it already happened, recognize that the wave of foreclosures is already upon us, there wont be anymore big ones because short sales and loan mods occur daily but new zero down i/o loans stopped, it’s just hard to see because they have only been spening a few hours on the market, had people not bought them, they would appear to be everywhere.
Although zero down has
Although zero down has stopped, we have FHA at 3.5% and that’s minimal. Perhaps there is no wave to happen in Temecula, but I can tell you that I continue to see NODs that just don’t let up over here and some were from last year, had foreclosure dates and either reinstated, got modified or got extension, only to be getting NODs again.
If the game is extend and pretend, that seems to be working. But eventually you would think the bank will have to come to the table w/some money and if a high percentage of homes they’re holding are not generating revenue, then something will come to pass. Perhaps the government will just continue to throw money at it until you kids have grandkids.
temeculaguy wrote:There might
[quote=temeculaguy]There might be a batch of foreclosures but there wont be a wave anymore. [/quote]
I really think that depends on your area. If you flushed all the crud out of the system already (like it sounds there in Morgan Hill), then there will most likely not be a wave.
But in areas that have not dropped (definitely some areas of LA), the floodgates have to open at some point.
I have a friend that teaches in an LA suburb and he told me that 80% of the kids apply to get a free lunch because they are below the poverty line. Three bed, one bath, 1100sq ft. houses in that area still go for $600k. The same houses that sold for ~$220k in 2000.
Houses have to come in line with incomes at some point. I don’t know how it will happen, but I gotta believe it will.
IMHO, everyone’s been focused
IMHO, everyone’s been focused on the foreclosures, where the real problem lies ahead of us — qualified buyers with substantial down payments in a higher interest rate environment. Prices are dictated by new buyers, not by old sellers.
Right now, we are seeing artificially suppressed interest rates, “free” money from the govt., down payment assistance via tax credits and what appears to be a significant number of “cash back” deals (please confirm if you are seeing the same), low down payments that essentially put the buyer underwater on day one (if you’re only putting 3.5% down, and selling costs run at least 5-6%, you’re underwater), etc.
On top of all that, the supply side is being manipulated more than anything I’ve ever witnessed before via moratoriums, forced loan mods, short-term refis (back into hybrid ARMS!!!!), and deadbeats who’ve been allowed to squat for many months if not years.
Just like during the boom, they are sucking in all the demand from future years. Many of today’s buyers are investors and flippers (again!). Where are the future buyers going to come from after all the current FHA and govt-guaranteed loans default in the near future, and the rest of the world has had enough of the jacked-up inflation efforts of our Fed?
So many still have the notion that housing is their ticket to wealth. The excesses have not yet been wrung out. The only lessons that have been learned thus far is that the biggest risk-takers and deadbeats will be “saved” at the expense of the few remaining responsible people.
IMHO, the bubble is not over. We’ve just seen a tiny blip along the way. We may well continue to have a strong market through next year, but then what?
CA renter wrote:IMHO,
[quote=CA renter]IMHO, everyone’s been focused on the foreclosures, where the real problem lies ahead of us — qualified buyers with substantial down payments in a higher interest rate environment. Prices are dictated by new buyers, not by old sellers…
So many still have the notion that housing is their ticket to wealth. The excesses have not yet been wrung out. The only lessons that have been learned thus far is that the biggest risk-takers and deadbeats will be “saved” at the expense of the few remaining responsible people.
IMHO, the bubble is not over. We’ve just seen a tiny blip along the way. We may well continue to have a strong market through next year, but then what?[/quote]
Great post. You may very well be right about the short term bounce. Then what?
With high unemployment and
With high unemployment and businesses going under everywhere isn’t the government doing essentially what everybody buying a house was doing 4-5 years ago. They are spending with stated future income. Where will the gov get the tax money if the economy doesn’t revive. I say the government is doing a big poker bluff, they’re hoping the economy recovers before the bill is due. I just hope we don’t end up like Russia, broke and destitute.
Pockets of resistance, not
Pockets of resistance, not the majority of the landscape. My hood isn’t an eception, it has become the rule, the exceptions are the few places that didn’t lose any value from peak. When Rich posted a graph last week of the entire county of San Diego down between 40 and 50%, it was followed by complaints that a few zip codes that bucked that trend. Those are the pockets of resistance, they will either have a late drop or be slower to rise next time. sdrealtor showed some examples that they didn’t go up during the boom at the same percentage, postulating that the downturn wouldn’t be as sharp, that theory has some legs too.
Ralph, the example in L.A. could be that the example is confined to a specific zip code, I have no data but I have to believe the whole county isn’t holding onto 300% appreciation from 2000 with a pupulation of 80% below the poverty line. Either it’s bad data, skewed data or the people will choose the next town over at half th price and the neighborhood your friend spoke of will correct. There are fluxuations and it takes the market a little time to even them out.
justinmac, I don’t anything about that guy or his methodology, I just agree with his premise, that there was a finite number of these loans, they aren’t making any more of them and lots of them have been eliminated one way or another, with more each day, at some point it’s been worked through.
jp, fha’s 3.5% requires verification of income, assets, reserves, credit score, etc. If someone is able to qual in what many think is the worst labor market in a long time, their risk level isn’t on par with these loans. They don’t do teaser rates, option arms, for the most part it’s vanilla 30 yr fixed. They have also existed for decades, and performed well for decades, through many cycles, so I don’t consider them a continuation of the recent lending practices that got us into this.
SD, I agree with your analysis, as much as it will have repercusiions, as real as the threat of inflation is by their actions, the powers that be did reach their goal, they forced a bottom. Or did they? maybe they just wasted time and money and we would have gotten to this same point by ourselves, when you look at the affordability graphs rich posted, isn’t that where it would have found itself with no intervention, perhaps all they did was prevent a severe overcorrection.
temecula I am not sure where
temecula I am not sure where the bottom would have been without all of the intervention. Most of what I am sure of is that for the time being we have hit a bottom and indeed sprung off it in many areas. I do agree that this is not what I would call a fundamental healthy market. Not that a healthy market was the goal of the govt. Nobody wants the hard path, not the government and not the public. Health implies hard cuts have been made and that is not what we have seen. We have seen an explosion (rather then a contraction) in my opinion of credit. That is, rather then forcing the credit failures into the market we have done the opposite, force them out! The inventory suppression has been no short of remarkable. I have just spent the last 2 hours studying the upcoming trustee sales in the various zip codes around the county and it is horrendous with respect to availability. I agree with what you said in that maybe they wasted time and money and maybe they did not but my kids are screwed either way. I will be intrigued to see how it plays out because just like CAR said all of this is indeed based on low rates. I cannot help but think that higher rates will really crush things but how badly? I mean people buying now at a fixed rate will indeed be okay when rates hike up. So who is screwed besides the patient buyer hoping to score a deal. Well obviously a seller and obviously those who have loans being reset… Okay but what if the gubment simply forces a loan mod for those guys? Well? Obviously it will not be the first time thats for sure.
Again, tg you have me in your boat for sure…I agree with CAR when the rates run things will be very interesting and we should see trouble again but I think our wonderful prez, treasury and fed will be keeping rates in line for awhile now.
temeculaguy:
Ah, No. I just
temeculaguy:
Ah, No. I just followed the link and read the blog: The author said that 40% are not paying and another 23% (probably the min pays) are not technically dilinquent. How is it that “only 1/4 still exist”?
Second of all, I don’t agree with the author’s methodology. My feeling is the 11th hour holdouts are more likely to default and past percentages have no bearing. These people haven’t refied, moved, etc. because they are most likely clinging to that below rent payment. I think out of those 23%, there will be a higher % of defaults.
“…Another 40% is not paying. That means the potential ‘new’ problems are only 23% of the remaining principal…”
How is it that when that 40% get’s foreclosed on that that won’t be a “new” problem for the banks (who have to now write off the loss) or the real estate market, which I believe is what we’re ultimately concerned with here?
Rich I would have to agree
Rich I would have to agree with you 110%. I am in the midst of a major rethinking of things myself. In retrospect I feel that for properties below a certain price level not only has the bottom come but we have seen a fairly substantial bounce already. Case in point in PQ where I had a close of escrow in February at 490k. SAME floorplan went on the market 3 days ago and is in escrow. I believe the accepted price was 40k above that. Conditions of the homes were similar. So that represents almost about 8% appreciation in 6 months.
I am seeing much of the same behavior in lower end and even mid end stuff. Take Sabre Springs for instance, same behavior in the low 600k range. In short I am beginning to believe that if you are searching for a home under 700k you have indeed missed the bottom altogether. Certainly those looking for 300-400k stuff in many Mira Mesa or Clairemont are out of luck at least for the time being.
I believe that we (or at least I) have made an egregious error on the efforts that would be made to reinflate. Simply stated the pockets of the govt are deeper then any other pockets on the planet. Unemployment is as high as we have seen it and will get even higher but every pigg who has played that unemployment card has seen quite opposite results. It is like holding a double down etf over the past 4 months… You are simply swimming against a tide that is provided by vast resources. Getting ones mind around the fact that the markets, (be it equity or housing) can be easily manipulated is a tough thing to do.
While it is true that our credit is dictated by China it seems quite unlikely that they will turn that spigot off in short order. In fact even if there were a high number of recasts, I would very much say, “So what”. Honestly, so what? Big deal. We have a government in place that has essentially taken over two car manufacturers and a monolithic insurance company. We have a Tresury that has more power then it has ever had in the history of our country. We all KNOW FOR FACTs that banks have plenty of inventory. We also know that there are the beginnings of PPIP investments now being made, (SOME EVEN BY CHINA) for the distressed assets. Moreover the events that I have been seeing at the trustee sales of late are also signaling a significant shift in what has been coming available and what the sales are going for when they do sell along with the opening bids.
So in summary what I see is that they, (the “they” being those who have an interest in reinflating real estate values) have actually done a fabulous job. If you are looking for a higher end home, maybe 700k and up, you are still in good shape. If not then you are not in good shape.
My last ditch hope does pretty much lie in the bond market. If somehow we can get a dislocation there, then yes all bets are off… However that will be a much wider destruction of credit then just real estate. Similarly I do also believe we will be in a jobless recovery sort of scenario but that is just what the next version of our economy will be. Yes we will have less people gainfully employed but that seems to not have had any effect on demand for many of the desireable homes.
Housing prices have come down, not nearly to the extent that I wanted them to but for many sectors they came down enough. Now I do not expect a runup but they have already bounced pretty hard in areas I serve. Some of my clients have indeed thrown in the towel and bought and others are resigned to renting a few more years. However in all cases I am not giving out my previous forecast that I believe this is a temporary bounce. In fact I think we will be in a stagnant to slowly trending up case for another year or two (as long as rates stay put) and then we will see what interest rates will dictate with regards to direction.
justinmac
[quote=justinmac]temeculaguy:
Ah, No. I just followed the link and read the blog: The author said that 40% are not paying and another 23% (probably the min pays) are not technically dilinquent. How is it that “only 1/4 still exist”?
[/quote]
What he means is that all mortgages in those pools have either been refi’d or already gone into default — meaning that only 25% remains that could POSSIBLY go into default.
The point of this thread was that the expectation of a huge number of new DEFAULTS due to resets in 2010-2012 might be exaggerated, because many of them have already gone into default (or been pid down).
rich
http://mhanson.com/blog
http://mhanson.com/blog
peterb
[quote=peterb]http://mhanson.com/blog[/quote]
With his webpage reset I cant see his old predictions but he has his past media appearances listed, I’m pretty envious he got on cnbc with erin burnett, even if it was a remote (I refuse to do a remote, holding out for an in studio appearance and she has to touch my hand) but my petty jealousy aside, I watched his april appearance, he ended with “we will look back on 2009 as the catastrophic slide of the upper middle and high end (over 500k).” In four months, if that doesn’t happen, can we ban linking to his predictions. How many wrong guesses do you get, in baseball and family fued you get three, just give me a number so I know when I am done hearing it.
peterb – thanks for the link.
peterb – thanks for the link. Some impressive graphs and strong arguments.
I think I’m in the camp of head fake, too. It looks like a spring dead cat bounce to me. And w/a lot of bank and gov assistance to force it to happen.
Government throwing just an incredible amount of money to banks, bailouts, incentives. I mean in the order of throw anything at the wall and see what sticks. The low rates and incentives have even lured some Piggs to succomb. I am even quite tempted.
The banks are cooperating in this regard by holding back inventory. You can argue whether it’s intentional or not for whatever reason, whether they’re too busy or incompetent or don’t want the loss on the books, but I think we can agree there is inventory they have that is not listed that evenutally will be.
I say eventually b/c I do not envision squatters living for free in houses forever or houses sitting empty that are bank owned for years. I imagine their investors will some day want to see some money coming in and free loaders or an empty houses just won’t do it.
The inventory is low, yes. Agreed.
The NODs are so voluminious and in par w/what Mr. Mortgage has discussed. They continue in the now 10+ ZIPs I watch. The only ZIP that I’ve seen low NODs is Point Loma.
Now trying to figure out what’s going on w/all the NODs is what I’ve been trying to understand. So bear w/me while I write out loud and hopefully some of the Piggs can offer feedback and assist me w/this. This is what I’ve observed.
Some places tried to have a normal sale and then eventually get a NOD and end up sold by the bank for a lot less.
I figure a low percentage of NODs got modified, those that qualified, which according to Kelly at VOSD, is low. And I believe it. There are a lot of restrictions to qualifying and that is going to weed out many.
I have seen some of these NODs succeed in short sales. The short sales take an inordinate amount of time, but they do occur and it’s for considerably less than what the house had previously sold and/or less than the refi/HELOC.
I have seen some that must have gotten reinstated, but then turned around months later only to get another NOD and eventually list for much less. This has just assisted in prolonging the process.
I have seen some that got foreclosure dates and then fell off the map. Then re-emerge w/another NOD later and go through the process again. Delaying the eventual sale for a lot less.
I have seen some w/foreclosure dates that banks sell as REOs w/in a month and for lower price.
I have seen some w/foreclosure dates that banks list w/in a few months for less.
I have seen some w/foreclosure dates that just disappear. No listing. And I mean for a very long time, like several+ months and still stealth.
So we agree there is low inventory.
We agree rates are low.
We agree there are tax incentives.
We agree prices have come down.
We agree sales have happened for the above reasons.
We agree the can is being kicked, dragging this out.
We agree that NODs continue.
We agree that banks have inventory that for whatever reason is not listed.
I’ll even agree the government will continue to throw money at this for as long as it takes.
However, can we agree that considering all the money spent already, the best they’ve done is nothing to celebrate over. All their efforts has merely succeeded in slowing down the process.
(Like watching a train wreck in slow motion)
Can we agree that many of the NODs will eventually list or are there some that believe they will all be modified?
For the NODs that eventually list, can we agree it will be less than the last purchase price? I say yes, otherwise, if the owners can sell for more, it would be an organic sale and not a NOD.
Other than modification, short sales or bank holding on to them indefinitely, but to be eventually listed, any idea how else the NODs will be absorbed?
I think the only other option is if the market turned around and we were at peak prices again. Anyone think that’s going to happen any time soon? Next year?
What would be the impetus to make prices go to peak levels? Low rates – Check. Easy money – FHA. Somewhat got that at least for mid-priced.
Anyone think we’ll have laxed lending again any time soon?
Inflation does seem to be the wild card.
For those that believe inflation will happen, any idea when? A couple of months from now? A year from now?
“…Right now, we are seeing
“…Right now, we are seeing artificially suppressed interest rates, “free” money from the govt., down payment assistance via tax credits and what appears to be a significant number of “cash back” deals (please confirm if you are seeing the same), low down payments that essentially put the buyer underwater on day one (if you’re only putting 3.5% down, and selling costs run at least 5-6%, you’re underwater), etc….”
Not for too long, CA Renter:
http://www.reuters.com/article/marketsNews/idUSN2047810620090822
Now there’s no direct correlation, but all of these indexes we’re talking about have a strong tendency to follow the fed rate. Once inflation rears its ugly head, those currently low rates that will blunt the impending full-on foreclosure wave in the near term, will escalate and perpetuate where things left off.
There is no free lunch. We are simply stretching the pain out over time. It’s better for the banks (and general economy) this way– they get more of their money back with an orderly descent into chaos. If rates are held artificially low, it slows the amount of time it takes for housing to find its true bottom and more evenly distributes the pain, but the flipside is that we don’t come out of it as quickly. Once those that like to see the value of the dollar sustained start clamoring, the fed will need to raise rates. These low rates are temporary. (Although if we look at Japan as a model, they could last 10 years.)
SD Realtor, I appreciate you being upfront about being a realtor, but let’s be honest…San Diego real estate values are going nowhere quick. In fact it may be a better time to buy 3 years from now. We are only about halfway through paying the fiddler and these artificially low rates offer a tentative bottom and have the net effect of draining future equity/home appreciation (because the other shoe- ie: raising rates– will have to drop eventually) until a sustainable overnight lending rate is implemented. We are simply robbing Peter to pay Paul later by keeping rates this low.
Disclaimer: I am a CA RE Broker who can’t wait for real estate to get well again.
I’m with the T2 Partners.
The
I’m with the T2 Partners.
The number of ungodly bizarre mortgages written is unprecedented.
Bernanke, paulsen and geithner are trying to reflate the bubble, this is not
a simple task and won’t change things.
blogett called this the mother of all head fakes, and i’m with him.
consumers are dying, unless geithner thinks he can print enough
wall street millionaires to buy all that california real estate, the bottom will
keep falling.
Grrr, SDR. I leaned on your
Grrr, SDR. I leaned on your posts (and others) to needle my boosterish agent. Now what am I to do?
sms do not fret. Please go
sms do not fret. Please go back and reread my post okay? If you don’t want to then take heart in the last part of it…
“Now I do not expect a runup but they have already bounced pretty hard in areas I serve….. In fact I think we will be in a stagnant to slowly trending up case for another year or two (as long as rates stay put) and then we will see what interest rates will dictate with regards to direction.”
In other words, in the ABSENCE of interest rate shock I do not believe that prices will go down significantly in the sectors I discussed above. I am convinced that unemployment will continue but I believe will not significantly push pricing. I am also convinced that foreclosures will continue however I think between the fed/treasury/govt/wall st that there is not this huge inventory landslide that others have predicted.
*************
As for mr mortgage who many people here love to quote…lets look at a few of his gems shall we?
http://www.fieldcheckgroup.com/2009/04/07/4-7-ca-foreclosures-about-to-soar/
Foreclosures About to Soar Near-Term — Easily Back to All-Time Highs
Are you ready to see the future? Ten’s of thousands of foreclosures are only 1-5 months away from hitting that will take total foreclosure counts back to all-time highs. This will flood an already beaten-bloody real estate market with even more supply just in time for the Spring/Summer home selling season – great timing!
*****************************
This one is from his 2/20/09 Guide to the Truth.
http://sethkaufman.posterous.com/2-20-mr-mortgages-guide-to-the
This Spring/Summer selling season could very easily bring this all to a head. Banks, that have been holding on tight to much of their distressed note and REO inventory awaiting the big taxpayer bailout that would buy distressed assets for 100 cents on the dollar, may decide Obama’s plan was more of the same and bring a flood of inventory to the market right before the buyers show up in March. *****Those looking to buy this Spring/Summer should have a lot to choose from.****
*****
So really now…. Is there a single buyer out there who reads Piggington who can say that this spring there was alot to choose from?
Meanwhile while he posted that, I had posted my concerns about a lack of inventory and about how I was seeing many Active listings were not even available because they were short sales and had offers on them. I also was skewered by some after Rich posted about my experiences with inventory shortages and a heating up market. Someone even said I was exhibiting salesmanship and trying to create a sense of urgency.
All I was doing was reporting what I was seeing in the market I service. That is all I am doing now.
************
justinmac, I have posted here for over 3 years and if you can find a single post where I have told anyone it is a good time to buy then go ahead and bring it up. I am not saying now is a good time to buy nor did I say even at the supposed bottom it was a good time to buy. As usual I have to explain that people buy for thier own reasons and not everyone buys for financial reasons. Saying I feel as if we bottomed out in some markets doesn’t mean anything more then that. Also please see my already rereferenced thoughts about interest rates driving prices down. Furthermore I also qualified which markets I was referring to. As far as business goes, realtors should not care if the prices are high or low. With the pricing in San Diego anyone can do well if they are honest and know what they are doing.
When rates rise, and they will absolutely, then yes pricing will adjust. However I don’t believe leading people down a primrose path with promises of impending price drops in all markets is any more helpful then saying real estate goes up everywhere forever.
If you or anyone else really believes in thier heart and mind, that those in power will let the bond market dislocate in the next few months, or even in the next year, then so be it. I do not. Furthermore you posted
“but let’s be honest…San Diego real estate values are going nowhere quick”
What exactly was this in response to?
Was it in response to me saying
“In fact I think we will be in a stagnant to slowly trending up case for another year or two (as long as rates stay put) and then we will see what interest rates will dictate with regards to direction.”
Also I am not saying prices will go up quick. I am saying in certain submarkets they ALREADY HAVE gone up. At least in a few of them I work in. Have you showed any homes in PQ lately? Have you noticed the trend at the courthouse down on Broadway with opening bids?
SD Realtor wrote:
If you or
[quote=SD Realtor]
If you or anyone else really believes in thier heart and mind, that those in power will let the bond market dislocate in the next few months, or even in the next year, then so be it. I do not. Furthermore you posted
Also I am not saying prices will go up quick. I am saying in certain submarkets they ALREADY HAVE gone up. At least in a few of them I work in. Have you showed any homes in PQ lately? Have you noticed the trend at the courthouse down on Broadway with opening bids?[/quote]
And how will they control the bond market?
Does seasonality enter into the equation? Do markets go up and down in a straight line?
SD realtor, another
SD realtor, another masterstroke of psychological warfare – were you a psyops officer in the military? Just curious.
We don’t know how large or sustainable the buyer pool is. Anecdotes on bidding wars and enormous pools of buyers are just that.
Many feel that the pent up demand will peter out, just as pent up supply builds. Then what happens? The seasonal bump in sales and prices is pretty predictable – so what? 12% unemployment and decreased state spending has what effect on household income and home prices?
Some of you have allowed yourselves to be manipulated by these folks into a panicked frenzy. Take a deep breath, remember the fundamentals, remember that many of the 2005-2008 buyers are tomorrow’s foreclosures.
This market is not going up for any sustainable length of time. It will drip, droop, and dribble along due to the interventions.
Inflation or deflation? The $23.9T question.
Inflation or deflation? The
Inflation or deflation? The $23.9T question
While everybody is waiting for inflation like the cavalry to come in and save the day, wages are down almost 5% YOY and they are lowering SS payments for the fist time ever. So what exactly is inflating besides deficits?
25-50% of the mortgage holders in SoCal area under water and almost a 3rd nationwide puts resets to the back seat as a major default threat.
Of all the people that became unemployed over the last 12 months how many are still sitting in their homes waiting for foreclosure?
Arraya wrote: So what exactly
[quote=Arraya] So what exactly is inflating besides deficits? [/quote]
CPI, energy, commodities, home prices, stock prices…
Looking at YOY figures obscures the fact that this stuff has all been rising for most if not all (depending on which one you are talking about) of 2009…
rich
deriving drunk wrote:SD
[quote=deriving drunk]SD realtor, another masterstroke of psychological warfare – were you a psyops officer in the military? Just curious.
[/quote]
What is that supposed to mean? It sounds to me like you are accusing SDR of being dishonest and trying to manipulate people. He has been an active and (to me, anyway) valued member of this site for 3 years — you’ve been here 3 weeks. It’s totally inappropriate for you to make that kind of accusation without having any context. Forgive me if I misinterpreted your post — but if I didn’t, please, show more respect.
As it happens, I think SDR’s arguments are completely reasonable. I also think CAR’s post was fantastic as well. I don’t know what the answer is, and I don’t think anyone does. There is no precedent for this and no way to know for sure how it will play out. But there are good, reasonable, and data-driven arguments coming from either side.
I think a big difference just comes down to personal belief in the efficacy of govt intervention. I happen to be with Adam on this one; I think that all the money printing, intervention, and on-the-fly changing of the rules is a major force to be reckoned with. Some people obviously don’t feel that way. There is room for disagreement and debate without resorting to personal attacks and accusations about people’s motives.
Rich
“In my opinion, if Bernanke
“In my opinion, if Bernanke discontinues his agency MBS purchase plan, the market will collapse overnight. The suspense will soon be over.”
– R. Su
Does this statement instill confidence in you? When someone this insightful, experienced and analytical says that something’s going to break soon and it may not be good……enter at your own risk. But you cant say you were’nt warned.
Mortgage payment details may be a moot issue with unemployment at these levels and growing. Even so, if most people are paying the neg-am payment level, will they be allowed to continue this?
peterb wrote:
Mortgage
[quote=peterb]
Mortgage payment details may be a moot issue with unemployment at these levels and growing. Even so, if most people are paying the neg-am payment level, will they be allowed to continue this?[/quote]
Rich and others say that unemployment is not a leading indicator and even w/unemployment this high and rising, sales continue.
SDR..Apologies for jumping to
SDR..Apologies for jumping to conclusions– It does appear from your past posts that you are logical and data driven and not simply arguing from the standpoint of a vested interest. I saw the Realtor, and well, I’ve been hurt before.
Rich, agreed that perhaps only 23% of OA’s remaining are elegible to be categorized as defaults…But the 40% are not being dealt with and have yet to become problematic to the general economy and the RE market. All due respect, I think it’s a question of semantics since most would probably see the the “default” hitting once the negative effect is felt by the public. My point is that the banks aren’t taking any action in many case/obfuscating, so they’re already sitting on the wave of “defaults”, it just hasn’t hit the public yet. but yes, it does appear that the bottom may be between 40-63% OA default ratio. I guess that’s encouraging in some regard. What will the effect be once these turn into foreclosures/bank losses?
As far as having confidence in the Fed’s ability to maintain control: They are between the same rock and a hard place as they have been for a couple years now– ie: Deflation and Inflation: I am in the camp that’s calling BS on Bernake’s claim that he’s got lots of tools to fight inflation that don’t involve raising rates. Bernanke’s got few alternatives but to jawbone.
There is a growing divide today between those that want to maintain the value of the dollar by raising rates and not printing so much paper and those that want to stimulate the economy by dropping money from helicpoters. I thnk Ben’s hands are tied and the only thing the fed can do is slow the trainwreck. There is no wiggle room/ alternatives are limited. Each option that helps in one regard plays havoc in several others. IMHO.
justinmac wrote:Rich, agreed
[quote=justinmac]Rich, agreed that perhaps only 23% of OA’s remaining are elegible to be categorized as defaults…But the 40% are not being dealt with and have yet to become problematic to the general economy and the RE market. All due respect, I think it’s a question of semantics since most would probably see the the “default” hitting once the negative effect is felt by the public. My point is that the banks aren’t taking any action in many case/obfuscating, so they’re already sitting on the wave of “defaults”, it just hasn’t hit the public yet. but yes, it does appear that the bottom may be between 40-63% OA default ratio. I guess that’s encouraging in some regard. What will the effect be once these turn into foreclosures/bank losses?
[/quote]
I agree completely that the stuff that’s already defaulted, and hasn’t hit the market yet, could be a real problem. But this “shadow inventory” is a topic I’ve constantly written about, and that has been constantly discussed here on the site.
As I’ve always understood the reset-explosion thesis, it was supposed to mean that a whole bunch of performing loans would go into default, and that would be ON TOP of the shadow inventory already out there. This is the interpretation I am questioning here… I am not denying that shadow inventory is a problem (far from it, as I’ve typed my little fingers to the bone talking about that very problem).
So yeah the semantics are a little confusing but I think this is an important distinction.
rich
Justin, I think we’re
Justin, I think we’re thinking the same things but I want to confirm that my assessment of you opinion is accurate.
I think the Fed’s in between a rock and a hard place by design. The recent bump in home prices is a result of equity flowing in to the market via the Federal Gov’s ‘Economic Stimulus’. Most, if not all, of the pent-up demand for affordable housing is gone[my opinion, I have no numbers to support this].
So now what? I think we’re in the ‘hope and pray’ part of the federal economic stimulus plan: Hope and pray that 100s of billions of dollars in printed money greased the wheels of our economy long enough to avoid another severe economic downturn.
In short: I agree with Rich that I don’t see a wave of foreclosures causing a significant depression in the real estate market. I also don’t see the real estate market making significant gains anytime soon either.
Thanks for your reply,
Thanks for your reply, Rich..You are all that and a bag of chips!
Important destinction, Yes… But the “..Not Such a Big Deal” in the article title caught my eye…But I know that’s why your title ends with a question mark.
Big deal to who? The folks who analyzes future default ratios or the public? We won’t know how big the deal is until the banks stop obfuscating.
I think the unemployment
I think the unemployment figures are leading indicators, of future defaults.
justinmac no worries at all
justinmac no worries at all man. It is all good. I know the post would not be to popular on the site but what the hell. Nonetheless thanks for the post.
The post I made is simply a blend of what I have seen in the past several, not just a few, months along with a growing… paranoia that I have had for years and have watched turn to a reality.
Note I am not refuting what some of the other excellent posts have brought up. JPINPB is a data hound and she tracks NODs like no other. Simply stated if I relied on PURE LOGIC, in no way would I disagree with posts like JPs, Peters, and many others. What I have learned is that logic is less reliable as thinks continue to warp.
Watching sales pick up while more people lose jobs has to be the wierdest thing I have ever seen. However in a wierd way, does it make sense? If unemployment is a lagging indicator, and the equities market is a leading indicator, and we have literally pumped trillions of dollars into the market, and there are really not a hell of alot of places for money to go at the moment. Top that off with some PPIP investments starting to happen and I start to go wtf…
Now in no way do I disagree with Ramsey Su. That guy is a heavy hitter and knows his stuff. If the FED does stop supporting the secondary market then yes rates will shoot up and yes the market will essentially collapse.
However I challenge anyone here on this board, ANYBODY, do any of you honestly think that the president can push through his agenda at all with a collapsing market? So in some mystical way, I am willing to wager that the secondary market will somehow continue to function fairly efficiently for a little while at least. For that matter the stock market may continue its unbridled march as well. Yes I know, now I am wearing a tinfoil hat.
So….. my post and feelings are not about logic and what the markets SHOULD DO given the data. In fact they are opposite. Do I see the market taking off? Nope… I see it being flat to appreciating at a modest pace… how long? Depends on the mortgage rates… depends on the secondary market, depends on the bond market. In essence it is nothing but a delay but I feel it is a longer delay then what I was anticipating. I was feeling that by June or July we would be back into a slow market. I was wildly incorrect.
As to the comment about being in psy-ops… well that would actually be pretty damn cool because to me there is no more honorable profession in our country then those who serve in our armed forces. So I will take it as a compliment!
I am late to the party and in
I am late to the party and in reading the critique of SDR, which was totally off base, it appears I do not need to come to his aid, Rich broke out a rarely seen these days can of whoop ass, bravo.
SDR, maybe it’s just four or five of us, maybe it’s everybody but the yahoos, but you and little sdr have made more accurate predictions without actively making predictions than most of the prognosticators. I loved your comparisons of your predictions to mr mortgage’s. People need to find a new crackpot to link to, I’m done with that guy.
What is amazing is that after three years of being an active part of this forum, without a single drop of evidence that anything you have said is disinegenuis, you still have to take pot shots from the peanut gallery, and you take them in stride nonetheless. My hat is tipped to you and to rich as well, for his well timed, albeit rare interventions.
Thanks tg…
Cro looked to be
Thanks tg…
Cro looked to be in pretty rare form the other night eh? I was disappointed that the d had a pretty weak pressure package… I like the lb they picked up. Oline looked pretty weak however. I also gotta say that Volek made some pretty nice throws as well. He threw that one 20 yard out to chambers that was on a line.
sorry for the hijack.
Hijacks are acceptable this
Hijacks are acceptable this late in the thread, there will be a new article in a day or so and these don’t reset on the active forum topic list, so football it is. I gotta say, i’m feeling good about the bolts right now. If you recall, I felt really good about the lakers at the start of last season and look how that turned out. If they are gonna get a lombardi trophy, this may be be their best shot. LT and gates still have it and are healthy, rivers is in his prime and has the receivers to make it stick, cromartie might just be that way all the time now, he’s shown flashes before, he just needs to string them together and merriman is back and with addition the, lb core is great and has depth. I like them this year, forget preseason, its just to try out the guys on the bubble, but the big picture looks good barring injuries or crimes. Steelers have some distractions, I’m not sure that brady is 100%, the stars are lined up, the only question mark is Norv and perhaps I’ve been too harsh. If we could just get phil jackson to coach the chargers I’d drive to vegas tonight and bet it all. I realize it’s not his sport but if there was ever a guy that could pull it off it’s phil, and with only 16 games a year, it would be good for his health plus SD is the closest football team to his home, he could stay at waltons pad, he’s already set all the nba coaching records, it’s time for him to move on and make sports history in another way. I digress, but I still have very high hopes for the bolts this year, a superbowl is not out of the question, at least not yet.
temeculaguy wrote:Hijacks are
[quote=temeculaguy]Hijacks are acceptable this late in the thread, [/quote]
It’s interesting to note that there are over 50 posts after this one, which goes to show just how hard it is (if not impossible) to predict where we are with things. Is this crash winding down? Or, are we only half way through it?
Thank you to everyone for your input.
Zero
BTW, I’m of the camp that there will be a second leg down to this thing once interest rates start to rise (but then I’ve been soooo wrong before).
SD Realtor wrote:
Watching
[quote=SD Realtor]
Watching sales pick up while more people lose jobs has to be the wierdest thing I have ever seen. However in a wierd way, does it make sense? If unemployment is a lagging indicator, and the equities market is a leading indicator, and we have literally pumped trillions of dollars into the market, and there are really not a hell of alot of places for money to go at the moment.[/quote]
I have a thought about those buying homes w/unemployment increasing. It is a strategy that has crossed my mind:
If I lose my job and don’t pay rent, I will most certainly get evicted.
If I “own” a house and lose my job, I can live there for free for up to a year.
It sure does give one another incentive to buy. Just saying.
Jp it is the twilite zone.
Jp it is the twilite zone. Roubini just had a good writeup laying out an argument for a double dip recession. It made a lot of sense. Car that was a very good point and I would totally agree with it in its entirety.
SD Realtor wrote:
Note I am
[quote=SD Realtor]
Note I am not refuting what some of the other excellent posts have brought up. JPINPB is a data hound and she tracks NODs like no other. Simply stated if I relied on PURE LOGIC, in no way would I disagree with posts like JPs, Peters, and many others. What I have learned is that logic is less reliable as thinks continue to warp.
[/quote]
In thinking about what you said, I reflect on the bubble years where others here, such as myself, looked at what was happening, said it made no sense and was unsustainable and did not get sucked into the irrational exuberance.
Two ways to look at it. We could’ve bought and now been living in a house for free. Or we are glad that we didn’t buy b/c, as we expected, it would not end well and people are losing their homes. Glass half-full or half-empty, depending on how you look at it.
In that same line of thinking, as you say, SDR, what is happening now, logically, does not make sense. I continue to think that the end result can’t be good. I just can’t say this whole mess is over, despite government efforts and bank withholding inventory.
The government had a hand in creating the bubble in the first place. My confidence in them has eroded. They said we weren’t in a bubble back when we were. Now they are alluding to bottom. I want to believe. What I’m seeing tells me otherwise.
Totally agree with that,
Totally agree with that, jpinpb.
We were able to avoid the internet bubble (up and down, unfortunately) and the housing bubble (down) because “nothing made any sense.” With everything that’s going on now, absolutely NOTHING makes any sense. For that reason, I’m out of the market until something reasonable becomes available and we can beat the inevitable 100+ investors/buyers who will be submitting offers as well.
Still patiently (or not so patiently) on the sidelines…
Interesting…I wonder how
Interesting…I wonder how many of you are out there. I closed escrow on a 1400sf 3/2 with 2 car attached condo in May. I also believe that you [as in you representing the decision to wait on the sidelines] are in the minority.
I still believe that prices are stable enough to support my purchase decision…we shall see.
Weberlin, I think you only
Weberlin, I think you only have part of the story, jp and car are looking to buy in the stickiest of zip codes, what you said is true for most areas, just not theirs, yet.
CAR, because you said that you are sidelined until something reasonable comes along, what happens when it does? Do you have goal house for a goal price in mind, what happens when it hits that goal and marcoeconomic conditions are still crappy (because in all liklihood it will not hit the goal during good times), will the news and the uncertainty scare you or will you just decide that it came down in price to meet you, you didn’t have to rise in price to meet it. Then you will be forced to take a position in my camp, the one that thinks affordability is the biggest fundamental. I still feel most people buy when their own calculator says they can, not when the newspaper says to.
temeculaguy wrote:Weberlin, I
[quote=temeculaguy]Weberlin, I think you only have part of the story, jp and car are looking to buy in the stickiest of zip codes, what you said is true for most areas, just not theirs, yet.
CAR, because you said that you are sidelined until something reasonable comes along, what happens when it does? Do you have goal house for a goal price in mind, what happens when it hits that goal and marcoeconomic conditions are still crappy (because in all liklihood it will not hit the goal during good times), will the news and the uncertainty scare you or will you just decide that it came down in price to meet you, you didn’t have to rise in price to meet it. Then you will be forced to take a position in my camp, the one that thinks affordability is the biggest fundamental. I still feel most people buy when their own calculator says they can, not when the newspaper says to.[/quote]
Good point, temeculaguy. I bought in 92111, 1 mile west and across the street from the Fashion Valley Mall. What zipcodes do you think jp and car are looking at?
temeculaguy wrote:Weberlin, I
[quote=temeculaguy]Weberlin, I think you only have part of the story, jp and car are looking to buy in the stickiest of zip codes, what you said is true for most areas, just not theirs, yet.[/quote]whoa, whoa, whoa. When did we come to the general agreement that we’ve got reasonable prices in most areas? Leaving TV out of things for a moment, are you contending that more of San Diego, rather than less, is reasonably priced at the moment? As far as I understand it, it’s mostly $500K and under that’s moving again. That leaves out a lot of areas in San Diego almost in their entirety and even within the “cheapest” ZIPs, you’ve got properties above and below that line.
And, of course, even more challenging if one is “limiting” their search parameters to SFR.
I am still of the belief
I am still of the belief there may be some compression also.
Example:
Area A – SFR is going for, say, 500k in an ok area.
Area B – The desireable areas are at 600k, but in the next year gets reduced to 500k.
Why would I buy in Area A? And if I did, how happy would I be when if I waited, I could’ve bought in Area B. And if I try to sell, fat chance I’ll get what I paid for b/c people would rather buy in Area B for the same amount. Area A would have to reduce in order to sell.
jpinpb wrote:I am still of
[quote=jpinpb]I am still of the belief there may be some compression also.
Example:
Area A – SFR is going for, say, 500k in an ok area.
Area B – The desireable areas are at 600k, but in the next year gets reduced to 500k.
Why would I buy in Area A? And if I did, how happy would I be when if I waited, I could’ve bought in Area B. And if I try to sell, fat chance I’ll get what I paid for b/c people would rather buy in Area B for the same amount. Area A would have to reduce in order to sell.[/quote]Absolutely, and I think I’ve seen a ton of rationalization on this front. Again, a lot of what’s moving are what some would consider to be expensive (read overpriced) starter homes.
I’m all for if you like a place and can afford it, go to town, buy it, enjoy it, get on with your life. But, if instead you know really want to live in Area B and you’re settling for Area A, then you better go in with your eyes wide open, because you could be setting yourself up for disappointment.
And please, let’s not have anybody come in and quibble about “well, people always want more/better than they have.” Sure, but I’m not talking about that. When many (most?) people buy their first house, they know they’re not going to be there forever (or maybe even 10 years, which is just this side of forever…)
Another good point. Some
Another good point. Some people buy their first homes hoping to move up. But if the move up property price is coming down to what you paid for yours, then who will buy yours for the same price when you have to sell?
Let’s just make a list of
Let’s just make a list of parameters that can affect home prices, and try to forecast their respective developments in near future. Let’s mark each of these developments “up” or “down”, according to how they are going to affect home prices.
Interest rates. Currently at all time lows, and held there artificially. They can only go up, which will push home prices down.
Jobs. Everybody seems to agree: unemployment rates will keep rising for some time to come, which means we can add another down.
Supply. Between the shadow inventory, upcoming recasts (be that a wave or a drop) and complete absence of any by-choice sellers, the pent-up supply must eventually hit the fan, so: down.
Government subsidies. FHA loans cannot go much lower than 3.5%. 8K tax credit program will probably be extended, but I doubt the amount will be substantially increased. Soon or late the program will end, which gives us another down, although not in a very short time frame.
Pent-up demand. A lot of people were priced out during the boom, so they jump on an opportunity once it presents itself. While I admit to be surprised by the number of these people (I mean normal people, with downpayments and jobs), a lot of them have already caught their knives, so their numbers must be decreasing as well. down.
So I don’t see a single reason for the prices to go up. But nevertheless we actually do observe a bounce. Banks and Fed together do everything to postpone the inevitable, against all logic. And not just in housing sector.
Why?
I believe the explanation is simple. Somebody needs to look like the savior of the economy, at least until he gets to keep his job this coming January. We’ll see what happens after that.
sdcellar wrote:(or maybe even
[quote=sdcellar](or maybe even 10 years, which is just this side of forever…)[/quote]
Since when is 10 years = this side of forever? Not everyone is looking to move through 5+ houses before they retire. Actually, how about this, why do you pick a street in your favorite starter area of SFR that was built 15+ years ago. Then we can count how many of them bought more than 10 years ago and how many bought less than 10 years ago.
Here’s one example: http://www.sdlookup.com/Property-C24A0DE4-9112_Libra_Dr_San_Diego_CA_92126. Out of 10 houses on that street, 8 bought 10+ years ago and 2 bought less than 10 years ago. Can you easily find a street that have more people who bought less than 10 years vs people who bought more than 10 years ago?
I don’t know about you but 10 years flies by very quickly for me. I bought my house 8 months ago and I haven’t even bought all the furniture yet. It still look like I barely just moved in and I feel like I barely just moved in. I still haven’t repaint the whole house yet. I probably won’t feel like I fully settled in for another 2-3 years at the very least. I wouldn’t want to move again after just barely put everything up and personalized everything.
whoa, easy AN, by 10 years, I
whoa, easy AN, by 10 years, I meant that it should be long enough (e.g. 10Years == virtuallyForever), which I think fits with your world view.
For my point though, it doesn’t matter what street you’re on or which one you pick. What matters is what each homeowner’s goal is. I actually had this particular discussion with sdrealtor a few years ago and it turns out that plenty of folks on plenty of streets have a ripe old vintage. Makes some sense though doesn’t it? Different people have different goals at different points in their lives. On man’s starter home is another man’s last place he’s ever going to live.
sdcellar wrote:whoa, easy AN,
[quote=sdcellar]whoa, easy AN, by 10 years, I meant that it should be long enough (e.g. 10Years == virtuallyForever), which I think fits with your world view.
For my point though, it doesn’t matter what street you’re on or which one you pick. What matters is what each homeowner’s goal is. I actually had this particular discussion with sdrealtor a few years ago and it turns out that plenty of folks on plenty of streets have a ripe old vintage. Makes some sense though doesn’t it? Different people have different goals at different points in their lives. On man’s starter home is another man’s last place he’s ever going to live.[/quote]
At least it seems like we agree that everyone is different. Some people I know bought their first home in a starter area and never left. While others, bought their first home in areas most of us would considered move up areas and they’ve moved through 3-4 house in the last 15 years. So, on one hand, you have people who buy 1 home for life. Then on the other, you have people who will never settle down until they’re in their custom multi-million dollar home. But based on sold history, it seems like most people hold their house for over 10 years. There’s no way for us to know how many of those people bought that house as their “starter home” though.
This thread is a perfect
This thread is a perfect example of the chaos that thrashes around my head on a daily basis.
I tried to buy a house in Clairemont and it was an utter chaotic mess. So many bids, you would go into houses and the counter is practically 100% full and it was only on the market a day.
You look at the data, we were one of the epicenters for crap loans, yet inventory is scarce. You see all the stats regarding nods and the like yet the market reflects none of the results of the data.
You then move on to think that the govt. can only do so much, that the cards will fall and then things will make sense again. Yet the cards don’t seem to fall as they should, and the govt. seems to be able to do as it pleases, with banks riding their coattails, hiding under the umbrella of safety.
It used to really bother me, a frustrated fence sitter that wanted to finally pull the trigger. So now I am back to renting a place I couldn’t buy for a cheaper payment, though I would pay more to own the place and do with it as I please. (The price/rent ratio isn’t that far off)
AN wrote:sdcellar wrote:whoa,
[quote=AN][quote=sdcellar]whoa, easy AN, by 10 years, I meant that it should be long enough (e.g. 10Years == virtuallyForever), which I think fits with your world view.
For my point though, it doesn’t matter what street you’re on or which one you pick. What matters is what each homeowner’s goal is. I actually had this particular discussion with sdrealtor a few years ago and it turns out that plenty of folks on plenty of streets have a ripe old vintage. Makes some sense though doesn’t it? Different people have different goals at different points in their lives. On man’s starter home is another man’s last place he’s ever going to live.[/quote]
At least it seems like we agree that everyone is different. Some people I know bought their first home in a starter area and never left. While others, bought their first home in areas most of us would considered move up areas and they’ve moved through 3-4 house in the last 15 years. So, on one hand, you have people who buy 1 home for life. Then on the other, you have people who will never settle down until they’re in their custom multi-million dollar home. But based on sold history, it seems like most people hold their house for over 10 years. There’s no way for us to know how many of those people bought that house as their “starter home” though.[/quote]Yes, thanks for repeating yourself and myself again, but with the added flair of a tone of disagreement. Rather than restate, I’ll just ask you to read again. I’m talking about buyers who know they don’t intend to stay for much of a long haul. Come on, you’ve known people like this. Condo buyers often fall into this category (but not all of them, of course. thanks in advance for responding with that salient point!)
also, just for fun, even though I don’t care and as stated is not my point, I ran my street because you asked and I do try to respond to you.
0-5 years: 4
6-10 years: 7
11-15 years: 2
16-20 years: 10
I’d say most people on my street didn’t plan to move on to another home any time soon, even though some did. My landlord being a case in point. (which, btw is also included in the 11-15 year resident bucket, so I guess there’s even more to the story, eh?)
sdcellar wrote:Yes, thanks
[quote=sdcellar]Yes, thanks for repeating yourself and myself again, but with the added flair of a tone of disagreement. Rather than restate, I’ll just ask you to read again. I’m talking about buyers who know they don’t intend to stay for much of a long haul. Come on, you’ve known people like this. Condo buyers often fall into this category (but not all of them, of course. thanks in advance for responding with that salient point!)
also, just for fun, even though I don’t care and as stated is not my point, I ran my street because you asked and I do try to respond to you.
0-5 years: 4
6-10 years: 7
11-15 years: 2
16-20 years: 10
I’d say most people on my street didn’t plan to move on to another home any time soon, even though some did. My landlord being a case in point. (which, btw is also included in the 11-15 year resident bucket, so I guess there’s even more to the story, eh?)[/quote]
Yes, you’re right, most people buy homes to flip them. Most of them have no intention in living in them forever (i.e. 10+ years).
yeah, that’s what I said…
yeah, that’s what I said… You’re a waste of my time.
sdcellar wrote:yeah, that’s
[quote=sdcellar]yeah, that’s what I said… You’re a waste of my time.[/quote]
Yet you’re responding. You must have a lot of time to waste.
Quote:Area A – SFR is going
[quote]Area A – SFR is going for, say, 500k in an ok area.
Area B – The desireable areas are at 600k, but in the next year gets reduced to 500k.[/quote]
That’s not the way things are now. Slow-moving desirable areas have substantial premiums over ok areas. For example, SFR are moving quickly in Mira Mesa (median price – 350k), things are sluggish in University City (median price – 650k) and things are glacial in low-end La Jolla (serious inventory starting at 900k and up, median price 2.5m). There’s no clear reason why University City should be this much more expensive than Mira Mesa (esp. since Mira Mesa has better schools), and, as great La Jolla is, the spread between University City and La Jolla does not seem sustainable.
As a result of compression, the median in Mira Mesa could go up to 400k, the median in UC could go down to 550k, the entry barrier in La Jolla could go down to 700-750k, and the median in La Jolla could go down to 1.5m, and that would nicely equalize sales rates in all three areas.
sdcellar wrote:whoa, whoa,
[quote=sdcellar]whoa, whoa, whoa. When did we come to the general agreement that we’ve got reasonable prices in most areas? Leaving TV out of things for a moment, are you contending that more of San Diego, rather than less, is reasonably priced at the moment?[/quote]
I’m only going off Rich’s charts that he constantly updates, especially the recent ones that depict San Diego County at between 40 and 50% off peak right now for ppsf. Since this doesn’t include Temec and the prime piggington areas of north coastal and 56 corridor are reportedly down about 0-20% (from the frustrated posters here, not my own research) but it’s fair to say it isn’t 40% off, then other areas within san diego and other price points are down even more. It’s a big county, Chula Vista and oceanside are each bigger than carlsbad or carmel valley, piggies get lost sometimes in their very narrow search, I’ll bet the East county and south bay has taken a good whack, and that is middle class, not north coastal. I know rich doesn’t make data up, so this data has to be coming from somewhere. I’ve debated in my own head if the end result will be convergence/compression of the various levels, logic says it will, Bug’s old theories bear it out, Eugene’s theory is my favorite right now because it blends the different activity levels at the different price points with the bounce seen at some price points and communities. Eugene does a lot more research broken down by community and communities outside of north coastal that I pay close attention when he posts.
Then there is what ibjames wrote, albeit it wasn’t in a reported sticky zip code, that the price to rent isn’t far off, if it’s spread to clairemont, pb can’t be that far away, from there it heads north, if there weren’t so many damn buyers out there, ibjames would have gotten his place and the compression would already be under way, will they stop coming in the fall/winter, I have no idea. Since we have so few people reporting on what is happening in 80% of the county, maybe they have already slowed down, maybe the bounce from bottom the low end is experiencing will slow them.
Then there’s the conflict I get from a dear friend who listed her place in la mesa, bidding war on day one just last week, but the final bid for a decent sfr you could raise a family in, located in a family neighborhood, 350k, that doesn’t sound insane to me.
I wonder if the unemployment number effect the middle and lower tier areas but barely impact the upper end, sure seems to be happening that way for the time being.
Here’s where I put myself on an island, I think the economy has only about a year left of this crud, six months in some respects and about a year for employment because it always lags. I don’t think it will cause r/e to shoot up after that, but it will done going down and then my paranoid inflation fears start to set in, that’s why I think this winter will be a time a lot of piggies jump in if the convergence theory plays out. Once employment turns the corner and does so for a few consecutive months, we will see a hell of a lot more fence sitters, right now it is just the people with recession proof jobs.
TG, bold prediction about the
TG, bold prediction about the economy and unemployment. However, these days, I felt that I am the only one sitting on an island waiting for the double-dip. Actually, I take that back, at least Dr Doom is with me:
http://news.yahoo.com/s/nm/20090824/bs_nm/us_roubini_doubledip_recession_3
carlsbadworker wrote:TG, bold
[quote=carlsbadworker]TG, bold prediction about the economy and unemployment. However, these days, I felt that I am the only one sitting on an island waiting for the double-dip. Actually, I take that back, at least Dr Doom is with me:
http://news.yahoo.com/s/nm/20090824/bs_nm/us_roubini_doubledip_recession_3%5B/quote%5D
I’m on that island, as of Dec. 1, 2008:
http://piggington.com/recession_started_dec_2007_as_predicted
Geez. I’m late to this party. Good thread. Hard to catch up with 3 pages of posts.
Back to Rich’s original comments – he points out that the obvious supply side concerns (shadow inventory, resets) may be fading or not as large as originally believed – and I suspect that is right. I think in 2010, the reduction in the demand side will be the driving force in the housing market, not so much an increase in inventory or foreclosures.
And – if you do buy into the double-dip theory, as I do, then we won’t need resets or recasts to pitch a whole lot of people into fore-closureland. I think foreclosueres will come from owners without jobs, spread all across the subprime-to-prime spectrum.
The recent buying spree could be draining the market of all the qualified buyers. Will there be any left in late 2010 ? I’m not so sure.
As govt. programs fade, run out of money or become politically unsupportable, as interest rates rise, as unemployment continues, as banks become more paranoid about lending – where will the buyers come from ?
We may see some happiness in the market for a few more months, maybe even another little Spring rally in 2010, but it’ll be stagnant or another mini-crash after that – because of demand reduction, not supply increase, I think.
All I can think is – wow, this housing market moves slowly. This recent rise in prices and sales could pushes the bottom out another year past 2012.
The frog continues to boil and now we are messing with it cuz we turned the heat down a bit before continuing on up to 212 degrees F.
temeculaguy, yep, that’s
temeculaguy, yep, that’s where I don’t buy it (and I think we’re mostly on the same page) It’s not just precious Carmel Valley that hasn’t come down 40/50%. It’s other areas, like well, let’s say Mira Mesa that Eugene referred to earlier today as okay and suggested it’s been harder hit. Down more than CV, but it ain’t down that much.
It’s the mix, man, the mix. Oceanside and the other white meat, wait, I mean the other CV. And oddly enough, probably some of the stuff at the other wannabe high end that was stupid. Some places in 4S Ranch, San Elijo Hills. You think that “cutesy” 2/2 in North Park ever would have sold in the past for 700 kilobucks? No way.
I contend that it’s not a narrow swath that’s sticky in price. Rather it’s a somewhat narrow swath that’s taken a big hit and is selling like got dang hotcakes. Again, remember, the high end based on the current C-S is like $400. Anybody here think that represents the high end in San Diego?
And all of this, combined with the remaining wackiness has people in a tizzy and houses are moving again. And for all I know, it will stay that way for a while again. Prices over the past six years or so didn’t make sense in San Diego, who says they have to make sense now.
The short of it, TG, is a lot of people want to be you, but unfortunately for them, they live in San Diego.
I’ll admit, I don’t live
I’ll admit, I don’t live there anymore so my opinions are armchair observer at best, it’s just that to the outsider,the charts about affordability and historical price may have led to improper conclusions. It seems 80% of the debate centers around 20% of the zip codes. That alone would lead an outsider to believe there will always bee some disparity, it’s abvious sign of demand for certain areas, so many want to be close to the ocean, avoid the heat, have decent schools but not pay what others will, and the others still exist even in historically bad times, we can’t wish them away.
I did live there for a chunk of my life and about 20 years ago I packed my bags, I was young but I was a feshly minted college graduate, recently married to another freshly minted college graduate, with no kids and two decent jobs in a rental west of I-5. It wasn’t during a bubble, the population was lower then and we searched for a house we could afford and liked, to to no avail, probably spent a year scouring the coastal corridor between del mar and oceanside. It was a little drastic that I just said to hell with it and headed to temecula but back then I thought to myself that I do not want to spend such a huge chunk of my income on housing, there are other things I’d like money for and what happens when I start having kids, it would be nice to have the flexibility to make it on one income, so I split, and i have no regrets, but I also had work flexibility and didn’t increase my commute. The point of the story isn’t that my option is for everyone or even anyone but me, it is that it wasn’t really affordable 20 years ago, nor has it been since, sure it has better years than others, but it was never really user friendly and probably wont be again. Sure there was a day when a plumber could buy a nice home in encinitas, maybe when it was considered out of the way, but in 1990, I had two incomes, good incomes, no debt, and i couldn’t make it work, at least not comfortably. In retrospect i probably could have swung it, but I went to the extreme, paid 1.5 our annual income, and just didn’t lose sleep. A few years later, we were making a lot more money, decided to upgrade to a bigger place and that one was 2x our income, my hand shook when I signed the papers, I was terrified, wtf was i doing, I was leaving a house that i owed less money on than i made in a year. I could have it paid off before I was 30, why do i need more (of course i didn’t need more, but i was married at the time and was not permitted full use of my brain by contract, but I digress). So yeah, I break out the mapbook joke now and again when i read about people making the same money as I make talking about 600k houses, I think to myself, these people are nuts. Maybe you are, maybe you aren’t, but until you can make everyone else sane, it is what it is, during an epic financial meltdown, during record unemplyment, they still line up, how you still watch the lines without throwing your hands up in the air, perplexes me sometimes.
I was writing a diatribe and
I was writing a diatribe and an sdcellar/AN hockey game broke out, I thought we were past that, c’mon boys, we are on the same team, save it for the enemy.
TG, I totally agree. As I’ve
TG, I totally agree. As I’ve been saying for the last 3 years, I’ll buy when my mortgage is less than comparable rent and it is. With 20% down, my P+I is a good 500-600/month less than rent. With 0% down, it’s about $50-150/month less than rent. We both agree that tax deduction usually cancel out taxes and insurance, so I don’t count those numbers. I don’t know what sdcellar’s definition of affordable is, but when it’s cheaper for me to buy than rent, that’s affordable to me. But it’s probably just me trying to rationalize my purchase. Maybe my goal should have been mortgage w/ 20% down be 50% less than rent.
AN wrote:We both agree that
[quote=AN]We both agree that tax deduction usually cancel out taxes and insurance, so I don’t count those numbers. I don’t know what sdcellar’s definition of affordable is, but when it’s cheaper for me to buy than rent, that’s affordable to me.[/quote]
God, I wish. We are looking for a mortgage in the 260-280 range. Our finance software estimates a monthly tax savings of about $150-$175 tops. I don’t think that’s even half of taxes+insurance, never mind HOAs or Mello Roos. Maybe our 3 kids already consume a large share of our deductions. Or it’s our paltry income.
We pay 2000 in rent for a house that would probably sell for around $500,000 (and has MR+HOA), so this rent=mortgage for comparable property thing is still alien to us.
smshorttimer wrote:AN
[quote=smshorttimer][quote=AN]We both agree that tax deduction usually cancel out taxes and insurance, so I don’t count those numbers. I don’t know what sdcellar’s definition of affordable is, but when it’s cheaper for me to buy than rent, that’s affordable to me.[/quote]
God, I wish. We are looking for a mortgage in the 260-280 range. Our finance software estimates a monthly tax savings of about $150-$175 tops. I don’t think that’s even half of taxes+insurance, never mind HOAs or Mello Roos. Maybe our 3 kids already consume a large share of our deductions. Or it’s our paltry income.
We pay 2000 in rent for a house that would probably sell for around $500,000 (and has MR+HOA), so this rent=mortgage for comparable property thing is still alien to us.[/quote]
Yes, you’re right, in your situation it does not make sense ($500k house w/ MR+HOA and rent only for $2000). For $2000 rent, I personally think it would only make sense up to $370k w/out MR+HOA. For every $100/month in MR+HOA, I’d reduce the price by $20k. This is also using 4.75% interest rate. If rates go up, price will have to go down some more.
AN wrote:smshorttimer
[quote=AN][quote=smshorttimer][quote=AN]We both agree that tax deduction usually cancel out taxes and insurance, so I don’t count those numbers. I don’t know what sdcellar’s definition of affordable is, but when it’s cheaper for me to buy than rent, that’s affordable to me.[/quote]
God, I wish. We are looking for a mortgage in the 260-280 range. Our finance software estimates a monthly tax savings of about $150-$175 tops. I don’t think that’s even half of taxes+insurance, never mind HOAs or Mello Roos. Maybe our 3 kids already consume a large share of our deductions. Or it’s our paltry income.
We pay 2000 in rent for a house that would probably sell for around $500,000 (and has MR+HOA), so this rent=mortgage for comparable property thing is still alien to us.[/quote]
Yes, you’re right, in your situation it does not make sense ($500k house w/ MR+HOA and rent only for $2000). For $2000 rent, I personally think it would only make sense up to $370k w/out MR+HOA. For every $100/month in MR+HOA, I’d reduce the price by $20k. This is also using 4.75% interest rate. If rates go up, price will have to go down some more.[/quote]
Right. We have a pretty good deal on rent, although it’d be nice if the A/C reached my kids’ rooms. I live in Twin Oaks Valley Ranch development of San Marcos. The mello roos and HOAs aren’t too bad compared to, say, San Elijo Hills. Homes of our place’s size used to go for high 600s at least; this house – a lifelong rental – might struggle to get 500 right now.
smshorttimer wrote:
Right. We
[quote=smshorttimer]
Right. We have a pretty good deal on rent, although it’d be nice if the A/C reached my kids’ rooms. I live in Twin Oaks Valley Ranch development of San Marcos. The mello roos and HOAs aren’t too bad compared to, say, San Elijo Hills. Homes of our place’s size used to go for high 600s at least; this house – a lifelong rental – might struggle to get 500 right now.[/quote]
What do you think fair rent price for your rental would be right now? For me, it’s all about rent vs mortgage, so 2005 price doesn’t mean much to me. You say it would struggle to sell at $500k right now, but what price would it sell at if it was listed at $400k? The way I see it is, since you had a great deal on your rent, for every $100/month in rent above the $2000/month rent, I’d add about $20k to the $370k price I mentioned earlier. Obviously, this calculation is w/out MR&HOA.
Since you mentioned you live in Twin Oak Valley Ranch, I did a quick search around North San Marcos and I found this one: http://www.sdlookup.com/MLS-090045511-521_Cassou_San_Marcos_CA_92069
It was sold for $595k in 2003, so it’s pretty safe to say it probably would have sold for around high $600k at peak. This house is currently listed at $360k-$400k. How much do you think it’ll rent for?
Then there’s this one: http://www.sdlookup.com/MLS-080061973-797_Avenida_Codorniz_San_Marcos_CA_92069. Currently listing for $380k and sold for $640k in 2006. How much do you think this would rent for?
Seems like there are many more houses like these listing around $350-400k. Are these considered inferior to your rental?
AN wrote:
What do you think
[quote=AN]
What do you think fair rent price for your rental would be right now?[/quote]
Up to $2200, maybe. At least in a better economy. We were surprised to get that much house for 2K after seeing what 1800 got you around Dido and San Marcos. It’s 2860 square feet, but only 3 bedrooms (plus den and loft), and no upgrades. If the owners spent some money on the interior and fixed the upstairs central air, they could probably fetch more. But they have used it as rental income since Day One. The house is 8 years old and we are only the second tenants.
[quote=AN]You say it would struggle to sell at $500k right now, but what price would it sell at if it was listed at $400k?[/quote]
Well, I am sure it would go well over list. I’m not as RE savvy as most here, but I’m guessing at least 450, but it wouldn’t surprise me to see 475. Cul-de-sac and great southern view from upstairs, including some of the golf course.
[quote=AN]Since you mentioned you live in Twin Oak Valley Ranch, I did a quick search around North San Marcos and I found this one: http://www.sdlookup.com/MLS-090045511-521_Cassou_San_Marcos_CA_92069
It was sold for $595k in 2003, so it’s pretty safe to say it probably would have sold for around high $600k at peak. This house is currently listed at $360k-$400k. How much do you think it’ll rent for?[/quote]
1800 maybe. That house is on the other side of Twin Oaks Valley Road from the subdivision. I haven’t driven on that part of Cassou, but I had already looked at the listing when it came on. It’s near ag land; lots of toiling migrant workers nearby might depress its appeal. Just sayin’.
[quote=AN]Then there’s this one: http://www.sdlookup.com/MLS-080061973-797_Avenida_Codorniz_San_Marcos_CA_92069. Currently listing for $380k and sold for $640k in 2006. How much do you think this would rent for?[/quote]
It could probably fetch our price; it’s pretty big. Similar flooring to our place. Santa Fe Hills is a development around Palomar College, again on the other side of Twin Oaks Valley Road. Higher Mello-Roos, but no HOAs, I believe. I think it would be considered a notch below TO Valley Ranch. My wife and agent looked at a place there recently and were not impressed. I can’t say I’ve canvassed the entire neighborhood.
These appear to be the only active listings from TOVR subdivision. That last one would be a pretty good deal for list price or a little over. For the HOAs/MR, you get access to community pool, plus there are walking trails and at least three playgrounds in the subdivision.
http://www.sdlookup.com/MLS-090028845-547_Lawnsdale_San_Marcos_CA_92069
http://www.sdlookup.com/MLS-090031521-545_Lawndale_Pl_San_Marcos_CA_92069
http://www.sdlookup.com/MLS-090018275-774_Pebble_Beach_San_Marcos_CA_92069
AN wrote:TG, I totally agree.
[quote=AN]TG, I totally agree. As I’ve been saying for the last 3 years, I’ll buy when my mortgage is less than comparable rent and it is. With 20% down, my P+I is a good 500-600/month less than rent. With 0% down, it’s about $50-150/month less than rent. We both agree that tax deduction usually cancel out taxes and insurance, so I don’t count those numbers. I don’t know what sdcellar’s definition of affordable is, but when it’s cheaper for me to buy than rent, that’s affordable to me. But it’s probably just me trying to rationalize my purchase. Maybe my goal should have been mortgage w/ 20% down be 50% less than rent.[/quote]Yeah, that’s what we were discussing, affordability of your house (or even affordability in general). Yeah, I’m suggesting folks should be looking for a 50% discount from rent. Yeah, I said everybody is a flipper. And I been here 3 years too.
I have to be clear though,
I have to be clear though, I’m not sure what the competition is like for the 400+ range in clairemont, I was looking in the 300-400 range.
I don’t think PB houses have adjusted that much, I think jp could elaborate on that, I think houses in clairemont make sense in the 300-400 range, I can’t justify the 400+ range right now. So I didn’t shop it, but the 300-400 range is insane for shopping, open houses look like zoos
temeculaguy wrote:I’ll admit,
[quote=temeculaguy]I’ll admit, I don’t live there anymore so my opinions are armchair observer at best, it’s just that to the outsider,the charts about affordability and historical price may have led to improper conclusions. It seems 80% of the debate centers around 20% of the zip codes. That alone would lead an outsider to believe there will always bee some disparity, it’s abvious sign of demand for certain areas, so many want to be close to the ocean, avoid the heat, have decent schools but not pay what others will, and the others still exist even in historically bad times, we can’t wish them away.
I did live there for a chunk of my life and about 20 years ago I packed my bags, I was young but I was a feshly minted college graduate, recently married to another freshly minted college graduate, with no kids and two decent jobs in a rental west of I-5. It wasn’t during a bubble, the population was lower then and we searched for a house we could afford and liked, to to no avail, probably spent a year scouring the coastal corridor between del mar and oceanside. It was a little drastic that I just said to hell with it and headed to temecula but back then I thought to myself that I do not want to spend such a huge chunk of my income on housing, there are other things I’d like money for and what happens when I start having kids, it would be nice to have the flexibility to make it on one income, so I split, and i have no regrets, but I also had work flexibility and didn’t increase my commute. The point of the story isn’t that my option is for everyone or even anyone but me, it is that it wasn’t really affordable 20 years ago, nor has it been since, sure it has better years than others, but it was never really user friendly and probably wont be again. Sure there was a day when a plumber could buy a nice home in encinitas, maybe when it was considered out of the way, but in 1990, I had two incomes, good incomes, no debt, and i couldn’t make it work, at least not comfortably. In retrospect i probably could have swung it, but I went to the extreme, paid 1.5 our annual income, and just didn’t lose sleep. A few years later, we were making a lot more money, decided to upgrade to a bigger place and that one was 2x our income, my hand shook when I signed the papers, I was terrified, wtf was i doing, I was leaving a house that i owed less money on than i made in a year. I could have it paid off before I was 30, why do i need more (of course i didn’t need more, but i was married at the time and was not permitted full use of my brain by contract, but I digress). So yeah, I break out the mapbook joke now and again when i read about people making the same money as I make talking about 600k houses, I think to myself, these people are nuts. Maybe you are, maybe you aren’t, but until you can make everyone else sane, it is what it is, during an epic financial meltdown, during record unemplyment, they still line up, how you still watch the lines without throwing your hands up in the air, perplexes me sometimes.[/quote]
You might be referring to us regarding the similar income buying a $600K house.
Please understand that we do NOT want to buy a house for $600K, and we are not attracted to the coast because of the weather or the ocean — the weather is more humid, and we’d actually like a place that’s warm enough for a pool. And you absolutely know (I hope) that we are anti-yuppies and totally not into the “uppity” reasons for living where we do. Socially, we fit in better with the Vista or Escondido crowd more than the “higher-brow” Encinitas crowd.
We’re stuck here because of the commute. Both of us have had to do the commute thing in the past, and we jointly agreed that we would not do that again. Whereas you moved to Temecula because you wanted more money for living (we’re on the same page here, BTW), we want more **time** for living. Unfortunately, my DH just so happens to work in one of the most “bullet-proof” areas. 🙁
We’ve searched a lot around Escondido, and prefer the houses and lots there (nice, often custom, single-story ranch homes on decent lots) than the mostly tract homes on small lots along the coast, but we get back to the commute via Del Dios — which will probably get worse over time, and can be very dangerous. And the good parts of Escondido haven’t fallen all that much, either!
In the meantime, we live in a very nice rental in a very nice neighborhood at a very affordable price, just a few minutes from work…so it’s difficult to pull away from this and pay the same (or more) to get a longer commute in a “less desirable” area…or pay a lot more and get much less house than our rental, locally. So,we wait.
Also, we have a fairly significant down payment (well over 20%), so it’s not all about the income for us. However, putting that much of your own money down really does make one cautious when it feels like you are overpaying, and that prices still have a ways to fall. We will not be the lucky FBs who put 0-5% down and get free rent; we’ll be the suckers who simply lose our down payment if prices fall. We can easily afford today’s prices, but don’t want to lose such a large sum of money. That’s really what’s driving our decisions.
CAR, I wasn’t referring to
CAR, I wasn’t referring to you, I have the basic jist of your financial situation and you probably can afford it, you just don’t want to for the reasons you stated, mostly because the rent parity is still wrong. Math drives you more than emotion, you are doing the right thing.
BTW, you don’t lose your downpayment if prices fall, you lose your downpayment if prices fall and you sell. I’ve been upside down before on houses, didn’t sell so I didn’t lose a nickel, I’ve been up 300% and didn’t sell so I didn’t make any either, as long as you buy a place that doesn’t need to appreciate, something in line with rent, with a fixed payment that is comfortable and one that you are going to live in, it’s paper value is academic. If it were to rise in value, nobody gives you money, if it falls, nobody takes any. Home purchases should not be considered investments, just really long term rental agreements.
temeculaguy– Cogent posts
temeculaguy– Cogent posts and I understand exactly what you’re talking about. Agreed too that San Diego has always been challenging pricewise. I think an awareness of that is what makes times like now tough. That is, some don’t really want to overpay in an already high priced region. For me personally, it’s not too bad. I can handle some amount of that. I’ve been upside down, right side up and known plenty of people in similar and different boats. I know what I can stomach and what I can’t. Right now, it’s tough for a lot of people to feel great about any choice, including me specifically, but yours certainly seems to work splendidly.
temeculaguy wrote:Weberlin, I
[quote=temeculaguy]Weberlin, I think you only have part of the story, jp and car are looking to buy in the stickiest of zip codes, what you said is true for most areas, just not theirs, yet.
CAR, because you said that you are sidelined until something reasonable comes along, what happens when it does? Do you have goal house for a goal price in mind, what happens when it hits that goal and marcoeconomic conditions are still crappy (because in all liklihood it will not hit the goal during good times), will the news and the uncertainty scare you or will you just decide that it came down in price to meet you, you didn’t have to rise in price to meet it. Then you will be forced to take a position in my camp, the one that thinks affordability is the biggest fundamental. I still feel most people buy when their own calculator says they can, not when the newspaper says to.[/quote]
TG,
I have always been in your camp WRT affordability. We do NOT disagree at all, and I have said for about a year that the lower end was getting close enough to a bottom that there was substantially less risk than a few years ago, and less risk than buying in the areas that haven’t dropped much, so far.
As a matter of fact, we have always been actively looking — I come from a family of brokers/investors, so watching the RE market is a life-long thing. Hubby’s family was in commercial RE (developers/builders/property managers), so we both are comfortable around RE, and enjoy keeping an eye on things. We’ve even thrown around a few offers over the years, and have a fairly solid idea of what we’re looking for. We will either go for the middle tier when it compresses, or might go for a higher tier (“higher tier” for us is **not** a fancy home in RSF, but a decent home in an upper-middle-class n’hood), if things really become tempting.
It’s all about the numbers for us, and keeping an eye on macroeconomic trends do matter, but if I believe the worst has manifested itself, I won’t have a problem with buying. Contrarian here, by nature. 😉
I agree completely with what jpinpb wrote about the compression from the high end. That’s what we are waiting for, and expect it might take some time for everything to work its way through.
CA renter][quote=temeculaguy
[quote=CA renter][quote=temeculaguy]
It’s all about the numbers for us, and keeping an eye on macroeconomic trends do matter, but if I believe the worst has manifested itself, I won’t have a problem with buying. Contrarian here, by nature. 😉 [/quote]
If you are even starting to beleive the worst could have manifested itself, it sounds like you are about ready to treat me to dinner;)
sdrealtor][quote=CA renter
[quote=sdrealtor][quote=CA renter][quote=temeculaguy]
It’s all about the numbers for us, and keeping an eye on macroeconomic trends do matter, but if I believe the worst has manifested itself, I won’t have a problem with buying. Contrarian here, by nature. 😉 [/quote]
If you are even starting to beleive the worst could have manifested itself, it sounds like you are about ready to treat me to dinner;)[/quote]
Ha! 😉
We have until 2012 for our bet, sdr. Still not feeling that we’ve seen the worst just yet. Is the govt supporting things pretty well? Yes…however, I think they will **eventually** be limited as to what they can do. This could very well take until 2012, or even later (in which case, you will probably win).
Still looking forward to the dinner, no matter who pays. 🙂
I completely disagree because
I completely disagree because taxes are going to go up dramatically on on the income bracket that purchases homes. The federal government can’t keep interest rates at 1% forever, they are going to rise. Imagine lending rates at 7-8% where they should be, what that will do to housing. The bankers took the bailout money and paid off their debts, they are still insolvent but because of fantasy accounting rules they claim their fine. We are going to have to pay for those trillions, the bankers are just waiting till the money is untraceable and gone before they hand us the bill, but its coming believe me then comes the inflation, then the shadow inventory. In another 10 months, just like the cash for clunkers, everyone who could buy will have bought and that’s the edge of the cliff. Just watch what the auto industry goes through in the next 8 months. We are in for years of stagflation just like Japan. The politicians saved wall street, why not thats where they keep their money.
Just for the record…SDR,
Just for the record…SDR, Rich and I are on the same page WRT the short to mid-term. Anyone who thinks prices are going to fall significantly while all this stimulus (supply and demand side) is aimed at housing isn’t thinking straight.
I fully expect sales to stay fairly high, competition to be fierce, and prices to remain flat or even rise.
The question remains: how long can they continue? I certainly don’t know, but my guess is that it has to end sometime. It could be next year or even ten years from now; however, if they continue for many years, **something** has to give, and I’m guessing we will see a currency event. While we’re still not buying houses, we are fairly heavily invested in a basket of foreign currencies, and we own some equities that are supposed to perform as an inflation-hedge, etc.
Also, I’m wondering about all the delinquencies that have not had a NOD recorded yet. IMHO, that’s where much of this “shadow inventory” lies. There seems to be no shortage of people who are either paying less that what they owe, or are paying nothing at all, but still haven’t received a NOD. Is this affecting the “official” default numbers?
Read some interesting numbers
Read some interesting numbers on Alt-A loans today.
28% of the 2.5 million Alt-A loans outstanding are in California.
80% of these loans are negative amortization.
If accurate this means that California has 560,000 negative amortization loans that will recast in the next couple years.
I dont know about you guys, but I have a hard time believing these loans aren’t going to be as troublesome as subprime.
(numbers are from financialoven dot com)
Thanks, one and all for your
Thanks, one and all for your thoughts.
SDR and other realtors, although I may hate the tidings you bring sometimes, you are “eyes on the ground” and your reports are valuable for that.
I wish my job were nearer to Temecula; I would have done what Temeculaguy did many years ago. Unfortunately, Temecula would represent a horrible commute for me. TG, you are very lucky.
I think Mr. Mortgage’s problem is that he expected the process of handling foreclosures to proceed as it has in the past, i.e. in a sane fashion. Used to be, after XX months a NOD turned into a NOT, and after XX more months it turned into an REO and wound up on the market. This time, the NODs pile up and then…. crickets. It’s not that he’s a dope– it’s just that we are in an Alice-in-Wonderland market run by crack-smoking hookah-caterpillars. I.e. it’s the market that’s on dope– behold poor Adam Smith, gagged and hog-tied.
Another thing I fear is that San Diego has already gone the way of the Bay Area– prices for the decent housing jacked up to heights unreachable by ordinary, middle-class folk– never to come down again. If prices in my desired “sticky” area were to come down to inflation-adjusted 1996 bottom values, I could be right in there buying. Yes, there are places in the county that would be affordable to me now, but they are either a hideous commute away, or cardboard shacks in gang-banger-land, or both.
If all the damn white rabbits would stop jumping up and down and blocking my view of the market, I could tell if the area I want to live in is stuck high, like the Bay Area, or will eventually come down. I need to know so I can decide whether or not to remain in California.
CricketOnTheHearth wrote:Yes,
[quote=CricketOnTheHearth]Yes, there are places in the county that would be affordable to me now, but they are either a hideous commute away, or cardboard shacks in gang-banger-land, or both.[/quote]
Is it really that black and white for you? IIRC, you’re looking in 4S right? Are you commuting to RB west for work as well (i.e. anything greater than 10 minutes is hideous)? South Escondido isn’t that far from RB and Eugene got 2000 price there. If I work in RB, I’d definitely pick South Escondido over 4S most of the time.
Hey, AN, thanks for the tip.
Hey, AN, thanks for the tip. But…
There are indeed some pretty homes in South Escondido (think “old Southern California”) and I’ve been tempted– but southbound traffic absolutely piles up behind the bridge over Lake Hodges in the morning.
In the summer of ’06 I lived in an apartment on the north edge of Escondido and my commute to RB was 45 minutes. 35 of those minutes were spent on Via Rancho Parkway waiting through the long lines to get onto I-15 southbound. It doesn’t matter which onramp in Escondido you use, either (I tried them all)– traffic on I-15 is a parking lot from El Norte Parkway to Via Rancho Parkway from 5-5:30 am til 8:30 or 9. I tried getting up earlier in the morning than I’ve ever done and would still hit traffic. My coworker lives in Temecula and leaves at 4:30 or 5 am and he still hits the traffic too.
And you can’t get there without using the I-15, at least there is no faster route. Once out of desperation I tried going east to San Pasqual– driving through the San Pascual valley around the east end of Lake Hodges, and coming out on Highland Valley Road onto the very north end of Pomerado. It was a very pretty drive but took just as long as waiting through the traffic jam north of the bridge.
As a result I refuse to live north of Lake Hodges, at least as long as my job is south of it. It’s too bad– that cuts off a number of affordable options. (The areas further north of Escondido are pretty nice too. Sigh.)
smshorttimer, so it seems
smshorttimer, so it seems like houses in your area that rent around $2000-2200 are probably going for around high $300k to low $400k. Which I personally think is reasonably affordable.
CricketOnTheHearth, I used to commute from O-side to Scripps everyday, so I know the commute you’re describing very well. I’ve tried many arteries in Escondido, to try and go around the North of Via Ranch Parkway Parking lot. That’s why I mentioned only south of Escondido. Houses that would be near Via Rancho Parkway, so that you’d miss the whole parking lot situation.
Followup to AN’s comment and
Followup to AN’s comment and my comment above:
I just checked with another coworker who lives in west-central Escondido and takes the Via Rancho Parkway onramp direct to West Bernardo Drive offramp to come to work. (i.e. just hops over Lake Hodges). He says since they added lanes in that area the drive is much better– 15 or 20 minutes vs 45 or so in ’05 – ’07.
However, I just took a look on Zillow at south Escondido there, and the prices are still a little out of my reach (some of them a LOT out of my reach). Thanks for the thought, though, AN.
CricketOnTheHearth
[quote=CricketOnTheHearth]Followup to AN’s comment and my comment above:
I just checked with another coworker who lives in west-central Escondido and takes the Via Rancho Parkway onramp direct to West Bernardo Drive offramp to come to work. (i.e. just hops over Lake Hodges). He says since they added lanes in that area the drive is much better– 15 or 20 minutes vs 45 or so in ’05 – ’07. [/quote]
I can confirm that – the Via Rancho Parkway onramp and the bridge across Lake Hodges are non-issues as far as traffic is concerned. It takes me 25 to 40 minutes to get to or from UTC. Can be slightly less if it’s late at night. 805 south is a parking lot 4 to 7, and so is 56 east 5 to 6:30 or so … so if I have to go home before 7 (or after 9), I take Miramar to 15. My personal best is around 22 minutes, office parking lot to my driveway.
[quote]However, I just took a look on Zillow at south Escondido there, and the prices are still a little out of my reach (some of them a LOT out of my reach). Thanks for the thought, though, AN.[/quote]
I don’t know what’s your reach, but here’s a place that went pending @ 590k this week. Built in 1979, 3300 sf, 2 acres. Zillow values it at 500k as of January 2000. It’s roughly comparable to my place (a bit larger, and 2 acres instead of 1, but older and arguably a worse location):
http://www.sdlookup.com/MLS-090044926-3444_Laredo_Escondido_CA_92025
CricketOnTheHearth wrote:–
[quote=CricketOnTheHearth]– it’s just that we are in an Alice-in-Wonderland market run by crack-smoking hookah-caterpillars. I.e. it’s the market that’s on dope– behold poor Adam Smith, gagged and hog-tied.
[/quote]
There is an interesting take on the stock market of which much I think applies to the housing market.
This may be in another thread somewhere, but I find it mildly amusing.
Market Seems Broken
As he says:
“I’ve been optimistic, now I am clueless.”
“..the idiots that we have running the country. Pelosi, Barney Frank, who will do the opposite of whatever is right”
VERY interesting inverview,
VERY interesting inverview, RS.
When a professional stock trader is so utterly confused, it’s time for me to stay the hey away from the stock market altogether.
If I only could, I would put 90% of my 401(K) into gold and silver. Unfortunately, my employer does not give that option.
CricketOnTheHearth wrote:VERY
[quote=CricketOnTheHearth]VERY interesting inverview, RS.
When a professional stock trader is so utterly confused, it’s time for me to stay the hey away from the stock market altogether.
If I only could, I would put 90% of my 401(K) into gold and silver. Unfortunately, my employer does not give that option.[/quote]
Not the same thing, but you could reduce or eliminate your 401(k) contributions and put that money toward a brokerage acct that you can use to buy precious metals stocks, ETFs or mutual funds. My company canceled matching earlier this year, so I have pondered canceling my contributions so that I can put more into other investments.
Shorttimer:
I wonder if you
Shorttimer:
I wonder if you and I work for the same company? Mine canceled matching too. I have indeed reduced my contributions but am currently stashing them in cash.
As far as gold, I prefer the metal itself to mining etc stocks, it seems a more direct peg to the value.
However, I’m ambivalent as to whether gold itself is at a peak. All those people are out with ads on CNN to “buy gold now!” and the last time I saw this kind of buy-gold-ad action was at the last gold peak, in the early ’80’s. So I’m suspicious.
Will baby boomers hit in
Will baby boomers hit in 2011?
I am also pondering the effect of the baby boomers starting to hit retirement age en masse in 2011 (the very same time that many are predicting the bottom). It has occurred to me that some number of them may hit San Diego looking for retirement homes and quickly drive the prices back up. But I also see some caveats to this:
[1]:
This survey was run earlier in the decade, and as we all know boomers’ retirement accounts have been decimated since.
[2]:
[3] (Anecdotal): I have older cousins in the Phoenix Arizona area. The husband retired in the ’80’s as a fairly high-up guy in an oil company, and they proceeded to shop around the southwest for their retirement home. He told me they chose Arizona over San Diego because the San Diego properties were “higher priced and lower quality” than what they could get in Arizona. When I recently visited them, the house across the street, very nice, was selling for the high $200k’s as I recall, when an equivalent house here would still be in the $500K’s.
So while it can be argued that starting in 2011, still-rich retiree baby boomers will start putting pressure on our housing market here, I think it can equally be argued that they will gravitate to Arizona more. It’s also a question of how many of them will be able to afford to move to either place. I guess we will see in a couple of years.
Finally got to read the
Finally got to read the article in Rich’s post.
Just some contrarian thoughts.
‘40% are 90+ days behind on payments.’
How many of those are actually recorded as NOD’s? It isnt the whole 40%, hell I hear about it now and then, Person X hasnt paid their morgage since……. and hasnt gotten an NOD yet. BTW I dont know that many people; let alone people with home loans. The market tends to focus on #NOD’s/NOTs (non-performing loans on houses not on the market dont effect the price of housing much), and if the banks are sitting on more than a few then the market pain hasnt flushed even if this guy is counting them as already flushed.
(Also, I realized he is looking at this from a banking perspective. Loans that are non performing are not necessary on the market/resold/refied, so may still be clogging up the housing market, even if they are written off in the loan value market. And piggs care about the housing market much more than the loan market.)
‘37% of loans are paid off’
True for that loan pool, but I seriously doubt that many people plunked down the hundreds of thousands of dollars they needed to pay off their loans. Meaning, they refinanced. The author doesnt state when this pool of loans was created, but gives his general timeline as 2005-2007. Loans written in 2005 may very well have still been above water in 2007-early 2008, and refied into a differnt loan pool. Doesnt mean the garbage wont be flushed out, only that it already financed out of this pool. Nearly everyone with an Option ARM intended to REFI out of it, why does it suprise us that alot of them did? We will need to wait and see how more recient loans that these people financed into behaive before we can know if we should be writeing them off as non-defaulters.
We know that the biggest indicator of default is being underwater, not recasting/resets. Alot of people who wern’t underwater in 2008 are now. The artifically low rates can very easily be hiding these people until the rates go back up. Does it really matter to the market if they defaulted on a 2005 loan vs a 2008 loan?
‘Worth noting that the pools with mostly option ARMs are about 2.5 times the delinquency level of the full amortization loans.’
This isnt a suprise to anyone here. However, I am willing to bet that number closes up some when rates come off the floor they are on now. The rate of change started to fall about 6 months ago, so lets go back and look what happened in Feb/March of 09. OH, FED drops interest rates to 0-0.25%. Many resets now go LOWER payment on people because of this. Eventually they will have to go back up, and these homeowners are beting that it does only AFTER their house is above water. Well see on that one, maybe they are right.
But the gist of his article is that the wave has crested, that total banking defaults wont go higher in number. Politically a celinig has been set on how many foreclosures will be allowed. But by his own numbers, 23% remain in the pool, 37% refied out of his pool but are likly underwater or will be very soon, and a unknown % are in techinical default but are in limbo without a formal NOD filing. That still leaves 60%+ of houses in originally in that pool that COULD be must sell inventory soon. Will they all, no way. But the percentage is still above 60% if you look at it this way.
On a seperate note, have the banks actually written off 40% of their risky (ie this kinda loan pool) assets? Last I heard it was never really more than 20%, because the loan accounting rules were changed this year, and allow them to ‘extend and pretend’. (I really dont knowt the answer to this one, so if you have some facts Id love to hear them.)
I also feel that there will
I also feel that there will be a second severe leg down in the housing market. Supply of homes is still way too high and demand is still falling. And all of the deficit spending is going to eventually drive up interest rates as well. And I believe that the govt knows this, which is why the Fed will most likely maintain their easy money policies for a long while still. So for investors, I think the dollar will continue to decline and one of the few areas that will rise will be gold related assets.
What happens when builders
What happens when builders for all practical purposes stop building for three years ???
If there is a big wave coming , we are going to need it just to keep up with demand.
Timely bump.
Timely bump.