WatchFrom DQ News..
California October Home Sales
November 16, 2011
The median price paid for a home last month was $240,000, down 3.6 percent from $249,000 in September, and down 6.3 percent from $256,000 for October a year ago. The median has decreased on a year-over-year basis for the last thirteen months. The bottom of the current cycle was $221,000 in April 2009, while the peak was at $484,000 in early 2007.
Distressed property sales – the combination of foreclosure resales and “short sales” – continued to make up more than half of California’s resale market.
http://dqnews.com/Articles/2011/News/California/RRCA111116.aspx
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San Francisco Bay Area prices down
Bay Area Home Sales Up From 2010, Prices Down
November 16, 2011
La Jolla, CA.----The Bay Area housing market logged another month of lackluster activity in October as some of the recent signs of incremental market improvement began to fade. High-end sales dropped markedly, likely the result of changes to “conforming loan” limits, a real estate information service reported.
The median price paid for all new and resale houses and condos sold in the Bay Area last month was $350,000. That was down 4.1 percent from $365,000 in September, and down 8.6 percent from $383,000 in October 2010. Last month’s median was the lowest since last February when it was $337,250.
http://dqnews.com/Articles/2011/News/California/Bay-Area/RRBay111116.aspx
Alameda….340,000 …….. -6.8%
Contra Costa...250,750…. -3.6%
Marin….602,909…………. -4.3%
Napa….310,000………... 1%
Santa Clara….450,000……... -10.4%
San Francisco….635,000 ………. -2.6%
San Mateo….525,000 …... -6.5%
Solano….188,000 ……... -8.5%
Sonoma….283,500 …….. -8.3%
Bay Area...350,000 -8.6%
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http://www.ocregister.com/articles/percent-327167-price-october.html
"Median home prices fell in every Southern California county except San Bernardino, where prices were unchanged from a year ago, according to DataQuick Information Systems."
Considering San Bernardino is down to long term trends.. sounds reasonable its at or near normal pricing..
http://www.housingbubblebust.com/OFHEO/Major/SoCal.html
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REpro says
REpro. I don't know that is entirely the forum here. I lean more towards Patrick's intent. I guess I am a little more like him in philosophy and understanding. More of kind of sympathetic to humanity. Understanding of oppression.
In short. I like seeing little guys like me win. Strange. However I was kind of brought up like that. Compassion dosen't escape us or me necessarily. We are taught inclusion no matter how big we are or get. I guess Patrick found all of this rental stuff, interesting. Which makes him a natural for Real Estate. As a lot of others that come in here. Even you. Some people have natural talent. I like real estate and people that are interested in it.
Lot of you guys don't even see that yourselves and what you write. You actually understand this stuff. Real estate. You don't even realize it. Not trying to flatter. Its just what I see.
Loose change I have seen it before several times. Simple Reich-stag film. Had the pentagon few other things. I did not like Iraq at all. Those people were inspected with flyovers every country on earth was making sure they did nothing. That one pushed all of my buttons to be sure. Not to mention no chem weapons or nukes.
After Cuba, Russia learned its lesson. It's pretty much all conventional now -Red Dawn. I like to speculate of course. I feel I may be right. I won't stake my life on it of course. Just dosen't make sense to me. Daddy Ho looked up and said. Oh so they carpet bomb. Rather than get into it they got back on their ships and headed back to America. Not being able to work things out. So, I am starting not to take it seriously. Russia and China quietly sitting watching them bomb the shit out of their allies not saying a word.
By the way China and Russia and the United States have never really gotten into it with each other even before 45' and have always been good buddies for the most part. They all made lot of cash in the arms game but hey WTF. Whos paying attention to that. Some pay attention to Bush and Rockefeller and the nazi's. I pay attention to this continual game of these nitwits arming both sides of the game. Them sitting back and laughing. While the simple people of the world blow each others heads off. Simple peoples that have never encountered these assholes and what they do. They mostly probably don't understand like we understand.
Or they arm both sides of the game and they just waiting for them blow each others heads off. Opposing sides always have potential. They get a lot out of it. Not to mention the stripping of a countries resources in exchange for arming them. If the war ever happens. Lot of senario's there of course.
Can get complicated as real estate deals can get complicated. Putting it that way so you as you can understand.
WHAT we are dealing with here is idealistic philosophy. At the core of it all is business. And as you know any good businessman could give a fuck about philosophy. He may have pictures of flowers on the wall. Make you think he shares your outlook on life. The downtrodden love that every once in a while and a pat on the head. What it is really about is cash. Resources. Business. You guys aren't suckered. You have been around. It's always hard reality with a businessman. They love control and getting their fucking hands on everything they can get their hands on.
They sucker you with philosophy and walk away with the goodies. Get the game?Countries do that to believe it or not. Possibly they even get together on such things they sure travel to each others countries a lot for some fucking reason or another. I guess for a chat on philosophy. I highly doubt it however.
What I do consider the problem here. Isn't robber baron that lends itself way to much to stripping the earth bare. However robber lender. Or robber reserve. With paper used as the shell game to replace the really good stuff coal, food all kinds of things. Swindel countries out of these things. Capture all kinds of labor with it. To get those things. Transport them. Warehouse them. Send to market. Have people shelving it and checking it out for other people that do similar things that derive from the paper swindel.
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Patrick says
Median sales price again.
Median as a measure of the real estate market was mercilessly attacked 5 years ago, but seems to be a board favorite now.
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Bellingham Bill says
We're talking about California in this thread. Aren't those national?
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I appreciate IWOG's consistent counter arguments regarding Bay Area housing prices and what the future holds.. he helps keep this discussion interesting.. however, there is only one way for prices to go IMO, and that is down.. I know Bay Area real estate does behave rationally, at least over the short term, but eventually the mathematics of it all will work out as it almost always does... with nothing driving our economy forward (now that the real estate game is largely over), everything will continue to work back towards the historic mean, including the historic mean relationship between wages and home prices... when Congress swallows the $1.2T in cuts that are coming, that will shake its way through the economy as well ... the math will also show that the US economy cannot get back on track with high housing prices... we seem to think it can, but it can’t and it won’t.. too much disposable income and capital tied up in real estate is not good for this economy, given real estate is really a non-wealth producing asset class.. all it does is shift wealth around except for the occasional foreign buyer..
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"does not" behave rationally .. that is..
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There is no reason a 3/2 in Stockton should not be valued at $1 million+ in a year or two.
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Median and other such statistics are for a population where all of the individual differences between individuals are RANDOM.
The individual differences between individuals that arise from lumping together sales prices in wealthy-foreigner Coveted Fortress communities with places like Stockton, Fairfield, Riverside, etc. are not random, so statistical claims like "median", etc. are bogus.
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iwog says
CA is doing that too.
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Fort Wayne, take a stats class. Medians reported like this are meaningless-dians
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If median is meaningless, why is mean any better? Both measures can be revealing, but both can be misleading if not examined against the background data used to create them.
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B.A.C.A.H. says
Ah! When Palo Alto becomes too expensive many will just shift to SoSan Jose and other places. If you have the means and as some have, they may move to Silver Creek and Almaden Valley.
You can either stroll down University Ave on a Sat afternoon or shot a game of Golf at Silver Creek with your buddies. Which is better. Besides, SC homes are much better.
kmo722 says
Yes, Eventually these "numbers" go back down to some sanity.
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FortWayne says
Please show me where Case-Shiller has California lower than early 2009.
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No one can ever, ever explain to me the sense of paying 100% interest on house. Sometimes more. Another words. I could put up the example again the Am chart. No matter what it is. I won't do it. Just won't as an investor. I just look and say to myself shit your willing to work for 30 years for a house that took three months to build? Even including the material? 6 months for a nice sized house. Then they try to screw you again by refinancing the house and starting you into pure interest again.
Interest is always FRONT LOADED on an amortized loan. Not on simple interest mind you. But an amortized loan. I feel bad for California you have been through this before. I think it was in the early ninties where values spiraled and crashed. Those condo's aren't helping you much either as far as I can see.
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ArtimusMaxtor says
On amortized mortgage interest is BACK LOADED NOT FRONT. Your tenants pay your interest at FRONT.
Percentage per year is a Base for all interest rate. You don’t pay a 100% interest on your borrowed money. You pay 3, 4, 5% or whatever. You are taking in consideration entire 30 years which is wrong approach. If bank makes 4% on money they borrow to you and you are making 9% on Your investment by using bank money so a do not see a problem.
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thomas.wong1986 says
Yep.
But those examples you gave, hypothetical or real are not from random-ness. Whether prices are going up, or down, or staying flat, or whatever, to lump them altogether as a single population-distribution and then spout statistics is misleading at best and disingenuous at worst.
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No matter how you shake it out. Your still paying 139% on the 100,000 you borrowed thats a fucked deal in my opinion. In addtion they have the asset to get back IF you fail. Keeping whatever you paid in. You have 90 days to get out and we are keeping it all. Its highly exhorbitant. The numbers don't lie. When you have a system that operates on paper. It's just not in your favor. Since they print the cash. Your the labor. Not them. I am all for this government coining its own. Which it does now. Believe it or not. They have this seperate cash system that sucks. Its a private corporation that sucks down everyones labor. Imagine being able to print your own cash. It really very simple to understand. It's all done entirely on credit. THAT THEY ISSUE. I don't like it. The U.S. Government needs to take over this entire deal and NOT issue credit. Thats all that Federal Reserve really does is issue credit.
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Um, news flash. Money today is worth more than money tomorrow.
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madhaus says
What kind of money is worth more today than tomorrow? Scrip money or gold money?
Worth more what? More sq ft of house in Detroit or more sq ft of house in The Fortress? Worth more hours of illegal alien labor or worth more units of college tuition?
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Im sorry if I got upset. I got liquored up last night. I shouldn't do that and try to write. I'm an angry writer when I drink to much. My abuse of financial institutions. It almost doubles. I want to slap the shit out of the nearest loan officer or manager. The police would probably call this domestic abuse of financial people. In fact the occupy people are suspect for the same indicies. "You slap a whore" a pimp told me once. "You gots to".
My parents didn't raise me like this. I just fell in with the wrong crowd I guess. Yes our financial institutions are whores. I feel. Or was that politicians. I forget. By the way I don't feel there is any such thing as prostitution. It's just sex. As far as I am concerned. Just people that enjoy sex. Call me liberal. I guess.
So I won't drink and write. Them Heineken's sure taste good though. I have to go up there now and correct some run on sentences. Quell my anger a little. Behave like a good citizen.
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iwog says
Two thoughts:
1) S&P is relevant to Bay Area housing because there is a correlation between ridiculously high-priced housing in SF and the stock market. Pacific Heights does set some sort of ceiling on the price of houses in the area, and other areas have to fall in line.
2) I am the first person to say that housing prices will probably be very close to flat in nominal prices for the next few years. Pricing is dropping relative to inflation, of course, even when it's flat.
iwog says
Well, no because of inflation. Flat nominal price is down.
Also, I'm not sure if Case-Shiller is a gold standard or not. It is a very good indicator of things, but it is not flawless. It is still subject to mix. When distressed sales are a disproportionate number of overall sales, Case-Shiller can be skewed slightly. Morgan Stanley did an analysis of this once:
http://www.housingwire.com/2010/08/04/for-investors-sake-morgan-stanley-questions-power-of-home-price-indices
Many people theorize that Case-Shiller actually overshot reality when it hit that supposed March 2009 bottom because distressed sales were taking over the real market. Then when distressed sales calmed down a bit, so the index of course went up again, but then came back down. It is well-documented that foreclosures did peak in California in the first quarter of 2009 ( http://dqnews.com/Articles/2011/News/California/CA-Foreclosures/RRFor110125.aspx ). Housing is seasonal, so it's no surprise to see a summer bump.
iwog says
FWIW, agree with iwog here. Median is not the end-all indicator. It is subject to mix. Case-Shiller is subject less to mix than median, much less, but is still not perfect because any analysis of data requires some amount of interpretation.
By the way, the Prestige Index is still down from its 4th quarter 2009 bottom, more so if you look at real vs. nominal:
http://www.firstrepublic.com/lend/residential/prestigeindex/sanfrancisco.html
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I agree that "median price" is a flawed metric to use, on its own. It would be a bit more useful if the average and standard deviation (and maybe 2-sig or 3-sig values) were also listed. A CS Index plot with 1/2/3-sig bands would be nice, although I guess that they would need to plot averages then...so yeah, a single number isn't really a great way to summarize a complicated system like real estate. Most people probably wouldn't have interest in full statistics of the market..."just give me THE number so I know when I should buy!"
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bmwman91 says
More like, NAR or CAR, give me your favored number to manipulate me to buy. :)
Yes, the real story is always more complicated. It would be nice if this data were more widely available so that more people could run analyses and give us more than the baseline analyses. It works better in smaller discrete areas. I've seen some housing bubble blogs for single cities that have run really great stats because it's a discrete set of data points that's easy to collect.
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We're talking about California in this thread. Aren't those national?
Well, here's some cherry-picked (read flat) SF Bay Area C/S numbers. With the August downturn, I still foresee new relative Bay Area lows in January (down year to year).
Nov. 2008 135.28
Oct. 2009 135.81
Jan. 2010 135.63
Aug. 2011 135.20
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corntrollio says
I've discussed this and will again point out that to MOST home buyers, inflation is almost irrelevant.
The reason is that the cost and payoff price of a mortgage will decline at EXACTLY the same rate that the house will depreciate because of inflation. In fact in an environment where interest rates are dropping, like they were from 2008-2011, the decline in cost and value of a mortgage will exceed the drop in value of the home due to inflation.
Someone with cash in the bank is in the same boat. The cash will decline in value at the same rate that the house does due to inflation. Inflation should NOT be considered when you're waiting to jump into a home purchase and watching a flat market.
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I can't see inflation as irrelevant. Money is still capital, yes?
So when you put your capital into a house, and then after 15 years you have only what you put in, it means you have gained nothing. You might have even lost. In any case, you sure didn't move forward.
So, it (inflation) is a VERY big deal and one that most homeowners are oblivious of. They don't think about it, and they don't want to. Why? Because it freaking HURTS, is why. To realize you've missed opportunities for investing. Yes, buying a house can feel really good. Its an emotional investment and one which has a non-monetary reward. But when you have to look at it rationally, its painful.
If you had cash in a non interest bearing account, you're an idiot. Ditto if you had it in Checking or Savings. I cannot believe you really compared homeowners to people dumb enough to leave their money in a bank account! LOL.
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Fantom says
So your capital was where again? The stock market? Money market account? Municipal bonds?
The only people who have a right to claim the cost of money argument are people who put their money in federal bonds or precious metals. Everyone else saw close to 0% appreciation in the last decade and THAT is assuming they didn't fall for a Bernie Madoff or put their money in AIG or GM.
You didn't address a single point I made. You CANNOT analyze a highly leveraged investment like a home purchase without also considering what happens to the value of the mortgage. This is critical and you ignored it completely.
My first real estate loan in 2007 was at 5 7/8%. That same loan is now at 3 7/8%. The debt I used to buy real estate is now a FAR lesser liability than when I started. Meanwhile the price of real estate has remained flat and rents have risen.
Do I care if inflation has made the homes I own worth a little less over the last three years? Are you fucking kidding me??? If I had the means to borrow $10 million in 2009 and put it all into real estate I would have done so and retired.
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iwog says
Yes, we have discussed this before, and I said earlier that if you already have a mortgage, inflation is irrelevant with respect to being able to pay down that mortgage because the cost and payoff price depreciate at the same rate. With respect to all other circumstances, including buying or selling that house, inflation is still relevant.
iwog says
Disagree -- there are a number of instruments you can consider to ensure the return on your cash is not flat and that have either zero or almost zero risk. Inflation makes you able to buy more in such scenarios.
Mortgage interest rates being lower has nothing to do with whether inflation matters. You're just trying to muddy the waters.
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corntrollio says
Like what?
Not stocks, not municipal bonds, not money market accounts.
Federal bonds? You can take a large risk on a 10-years or an EXTREMELY large risk on a 30 year and perhaps you'll get 2-3% before taxes.
Gold and silver? That boat has sailed.
In fact the ONLY low risk, high yield investment I can think of right now is residential rental property.
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corntrollio says
That's not correct and it's easy to explain why. We already agreed that a mortgage and a house will depreciate at the same rate in an inflationary environment.
In an inflationary environment AND A DECLINING INTEREST RATE ENVIRONMENT the mortgage will depreciate MORE than the house will.
Why? Because if you initially buy a house at 6%, and refinance to 5% and then 4%, the cash value of that mortgage drops independent of inflation. Add inflation, and you lose liability on the debt faster than you lose equity in the home.
Lets say you borrow $400,000 and buy a $400,000 home. Lets assume that your costs are exactly the same as the rental value per month to eliminate cash flow as a factor. (this is not hard to do in today's market)
Now lets say inflation drops the value of your home and the value of your mortgage by 20%. It's a wash, you lose nothing
However during the same period, interest rates have dropped from 6% to 4% and you refinance.
A 33% drop in interest rates translates DIRECTLY into a 20% loss in the value of the mortgage. The borrower sees this as a reduction in payments, however an investor who holds the original mortgage views it as a royal screwing. His 30-year 6% investment just got called.
Want to cash out? Easy. Just refinance for $500,000 and put $100,000 cash in your pocket. Now you're back to par and your house payment is exactly the same as the rental value, but you have another $100,000 to play with.
Understanding interest rates is critical and it's probably the main reason why some people are able to use credit to get rich while other people only use credit to go bankrupt.
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iwog says
Well, I set a very low bar. I said as long as cash is not flat. If I can get even 1% in a savings account, cash is doing better than flat. Your time horizon matters too. It was not hard to get far more than 1% for a 5-year CD not too long ago.
iwog says
That is currently true, although Treasurys have done quite well for the last 10 years.
iwog says
Well, flat + depreciation is probably worse than just plain flat or even flat + shitty return.
iwog says
That's not true in the current environment. It is highly unlikely that interest rates will drop too much from what they are right now. Refis won't save you much money going forward. That may have been true before, but is not true now and is completely irrelevant.
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corntrollio says
There are people posting to this board who are making double digits buying and renting out property in Antioch. There's no comparison. Low end rental property is currently the highest paying safe investment in the United States. It's not even close.
You really think someone who's earning 12% a year plus paydown and tax breaks gives a crap if his house in Antioch is going to lose 5% in equity next year? He'd laugh at the question.
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corntrollio says
You seem very ready to use "may have been true before" with regards to cash earning income, so how come I can't use it when determining how well a real estate loan does?
Remember that moves in the interest rate ALWAYS benefit the buyer. If rates go down, the buyer will refinance. If rates go up, the buyer has a declining payoff for his loan and the value of his house is probably going up too.
Inflation is simply not relevant to someone buying a house on credit. I don't know why you keep arguing the point. To an owner who has a mortgage, inflation attacks both the loan and the house. To an investor paying cash, inflation jacks up rents. (as is happening now) You CANNOT calculate real estate values using the CPI. You'll get answers that run contrary to your best interest.
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iwog says
Sure, I don't doubt that some people who bought well are getting good returns on rental housing. Most of us are talking about owner-occupied housing, however, I'd point out. Second, renting out a house is not low risk. A month or two of vacancy or non-payment would kill most people because most people do not get great returns. I know plenty of real estate geniuses who still think it's acceptable to lose money on renting a house and haven't been convinced otherwise by the bubble deflation.
iwog says
No, I actually acknowledged that returns suck on cash right now. The rate on a 5-year CD is still well over 1% right now unless you're stupid and can't find a bank that pays that much, just not as high as it was earlier this year when it was more like 2.5%. There is not much room for these rates to drop further.
Compare that to 6% interest rates -- when did we last have that? Mortgage interest rates are highly unlikely to drop too much in the current environment, so it's futile to say that you can benefit from additional interest rate drops.
Inflation always matters when comparing costs across years. There's no other way to do it. You're saying inflation doesn't matter in certain contexts, and I agreed with that. I'm saying it definitely matters in other contexts. My argument is far more nuanced than yours.
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corntrollio says
I don't think you've provided a context where it matters.
Inflation drives rents higher for the cash buying investors, and drives debt lower for the borrowers. I suppose someone who pays cash for a place to live in might lose value due to inflation, however you'd be crazy to assert that he could have held on to his cash and made a safe return matching the rate of inflation. He could JUST as likely lose it all on GM stock or a bad Muni bond while the guy who "risked" his cash on a piece of land is worried about nothing more than the water bill.
A 1% return on a 5-year bank CD beats the inflation loss on a house by a whole 1% a year at the cost of locking your money away for five years. I've had the cash required to buy many houses over the last four years and I have bought many houses with both cash and debt. I simply do not entertain the scenarios that you consider problematic in the real estate market. Inflation does not matter, in fact now that I've locked in a large position and a 3 7/8% interest rate, high inflation would be the BEST possible outcome. No question.
To simplify, the guy who bought his house with cash in 2009 has paid down some of the principle, locked in his interest rate at the lowest possible level, built a new fence and a doghouse, and watched his neighbor's rent increase.
The guy who didn't buy in 2009 is still renting, still watching interest rates, still worrying about finding the bottom, still dealing with a landlord, and still being given 30-days notice on a whim.
On a list of the 50 things to worry about when dealing with your housing situation, inflation is #50 for both the owner and the renter. IT DOES NOT MATTER!
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iwog says
My income keeps going up every year partly due to inflation and partly due to my good performance and my savings keep increasing. If housing prices stay flat, I'd certainly care about inflation because it means that I could get more for my money if houses didn't keep up with inflation. It definitely matters in certain contexts.
Someone renting would care about inflation. If rents are up and housing is flat, they might want to buy. It works both ways. There are any number of reasons to care, and it's silly to say flat out that it doesn't matter.
And I said you could get far more than 1% on a 5-year CD if you aren't stupid. No reason to mislead there.
Have you bought any houses since 2009? If not, why not? I certainly know people whose rent has gone down since then. It's quite popular to point out that rents have risen quite a bit for corporate rental-dominated apartments, but haven't always risen for other things.
iwog says
If you did that on your rental houses, I'm sure I know an Assistant US Attorney who'd love to know that.
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corntrollio says
I've bought a home or homes every year since 2008. I've raised rents on all my single family homes save the last one I bought in 2011. I don't know what you think the market is doing, but it's not screwing people who bought since early 2009. Instead it's making them happy.
corntrollio says
I guarantee you can't find a single attorney in the country who would be willing to pursue a possible document fraud case in a loan paid current and with the 12-month occupancy declaration expired.
It's totally absurd even suggesting it.
That being said, the 3 7/8% mortgage is on my Lafayette house and paid for three Concord homes.
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corntrollio says
No it certainly would not because you're paying RENT now which is increasing with inflation. Perhaps not for you personally, but OVERALL which is what we're talking about. San Jose rents went up 6.8% last year.
How great is earning 2% on your down payment savings when your landlord increases your rent by $1200 over 12-months?
You simply CANNOT APPLY INFLATION ADJUSTMENTS TO HOUSING AND GET MEANINGFUL NUMBERS. Housing is a cost everyone must pay and it never stops. Maybe it makes you feel good, but you can lose every single cent you thought you were saving in a single day. Didn't Greece teach you anything?
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iwog says
Somehow I don't believe you on this.
iwog says
Well, the market is largely flat overall since early 2009. That's for a variety of reasons, but the overall market is not back to normal. Your slumlording in Concord is not representative of what's happening for higher end properties.
I already posted a chart in another thread from Morgan Stanley that indicated that the mix of properties being sold has significantly affected the statistics.
iwog says
Sounds like strawmen. You picked the highest rent increase for a local town you could find (which is probably for apartments and not for houses) and then you made up that $1200 figure (which could only be applicable for apartments, likely in SF South of Market or Mtn View, that are in areas that would be used for corporate housing).
Anyway, I agree to disagree on this. To say that it didn't matter that many houses in 1997, for example, cost the same nominally as in 1993 seems disingenuous to me. In most housing busts, the back end of the bust tends to be mostly flat with seasonal increases visible. This bubble thus far has been particularly strange because we've seen far more government intervention in the housing market than is typical.
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12,445 comments
47 male
Lafayette, CA
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corntrollio says
Based on what? It's absolutely true regardless of what you believe. I even posted a couple of the vacancy ads on this site.
corntrollio says
It doesn't matter what example I picked, because it demonstrates one of many ways the cost of money dividend can be wiped out in an instant due to inflation.
We can agree to disagree if you want, but keep in mind that leverage in real estate has created many millionaires in the USA. It's probably the easiest way for an untalented hack to become rich, and I doubt that any of them ever considered for an instant how much they were losing due to inflation. They just held and waited for the inevitable.