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Welcome To The Bottom: Housing Begins Slow Rebound (AP)


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2009 Aug 1, 1:42am   57,022 views  286 comments

by WillyWanker   ➕follow (0)   💰tip   ignore  

"It was — note the past tense — the worst housing recession anyone but survivors of the Great Depression can remember.

From the frenzied peak of the real estate boom in 2005-2006 to the recession's trough earlier this year, home resales fell 38 percent and sales of new homes tumbled 76 percent. Construction of homes and apartments skidded 79 percent. And for the first time in more than four decades of record keeping, home prices posted consecutive annual declines.

A staggering $4 trillion in home equity was wiped out, and millions of Americans lost their homes through foreclosure.

Now take a deep breath and exhale. The worst is over."

Read the rest here:

http://news.yahoo.com/s/ap/20090801/ap_on_bi_ge/us_housing_mid_year_outlook

This was on Yahoo! News.  You know people are reading it and gobbling it up.  I know the market will remain flat and on the bottom for some time to come, at least here in Southern California.  But, I bet some fence sitters are going to start jumping into the housing market sometime soon.

This does not bode well for those who are calling a return to 80's prices in the Westside of Los Angeles, you know the one's who say that $400 will get you a 3000 square foot house on a 15000 square foot lot in Santa Monica, north of Montana.  :P


#housing

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1   WillyWanker   2009 Aug 1, 1:57am  

LOL, I guess this was not the news some of you wanted to read. Just remember that sticking one's head into the sand did no good for those who denied the existence of the real~estate bubble. It will do no good for those who have been preaching that real~estate will be worthless for decades to come and that no one will ever want to buy real~estate again. You know who you are: the one's who have been saying that the West~side of Los Angeles would become available for 80's prices. The one's saying they are waiting to buy in 2011. 2011 may be a bit too late and you may not be able to buy that house in Old Bel Air for $850K after all.

I must say, I kinda like that story: I'm kinda tired of reading bad economic news and I'm ready for some positive reports on housing, for a change.

2   dont_getit   2009 Aug 1, 2:35am  

Yeah..Yeah..Keep dreaming. I am not predicting the bottom, but all I know is in bay area(where I live and would like to buy), we are not even close to the bottom. May be other places in nation, sure, not here. This article is nothing but:

3   WillyWanker   2009 Aug 1, 2:58am  

@ dont_getit

I agree with you. You shouldn't buy ANYTHING until 2015 or later. Bay area housing will go back to 70's prices. You will have your pick of houses on SeaCliff, Russian Hill or any neighborhood you want. Why you will probably be able to buy a 5K square foot mansion in Pacific Heights for 100K or less.

Just make sure you don't buy anything yet wait a good 3,4 or 5 years for the bottom to really settle in. :P

4   pinnacle   2009 Aug 1, 3:57am  

I notice in todays newspaper they are suddenly hyping the "end" of the housing collapse and using the same
"buy now before it's to late" language they used at the height of the bubble.
It's like a pre-fabricated public relations campaign where somebody gave the order to start the hype
everywhere at once.
The idea of a "housing recovery" ignores all the millions who have lost their jobs and lost their credit
worthiness and even those who are still working who taken 10 to 15 percent pay cuts and will not be able to qualify for loans under the present much tighter conditions.
So who is supposed to buy all this property at increasing prices?
Everyone where I work has been forced to take a 10 percent pay cut for the next two years, yet the Bureau of Labor Statistics does not even collect any data on pay reductions by employers.
In fact they recently reported a 1.8 percent INCREASE in average income which
totally ignores millions of real world pay reductions and distorts the data for all other calculations.

5   Claire   2009 Aug 1, 4:26am  

I think I'll wait and take my chances and see what happens after the Alt-A resets start hitting the banks, thanks all the same - seeing as I would be stupid to buy one of the over-prices houses in MV area anyway, might as well wait and see if the prices will drop some more.

6   bob2356   2009 Aug 1, 5:47am  

Before I broke out the champagne I would take a look at this chart from calculated risk.

I'm all for good news, but if a statistically meaningless one month bump in 5 years of data is best result we get from all trillions of BORROWED dollars being dumped into the system, not to mention massive political manipulation of the system, then I'm not that impressed. Somewhere the stimulation has to end because we can't continue to borrow unprecedented amounts of money forever. What we have done is shift massive unsustainable borrowing from individuals to the government. No country in history has borrowed it's way to prosperity unless the money was used as an investment in infrastructure, like the US did in the late 1800's.

I agree with Claire, all the garbage has to shake out first. There will be a bottom, there is always a bottom. Some places may even be there now. But a lot of places aren't.

7   Claire   2009 Aug 1, 5:50am  

True, but when you’ve got bidding wars for foreclosures in places like Las Vegas, Phoenix and Los Angeles, it’s time to call the bottom.

Look at the price differences though - hell even I'm tempted to buy a house in AZ when they are so cheap - $100-200,000 for a 2500 sqft house!!!

Maybe some of you not in the Bay Area don't realize this but house prices in Mountain View in an okay school district are priced at +/- $1,000,000 (1300 sqft) - that is not a sustainable price. The housing market may be at the bottom for AZ, but definietly not the Bay Area.

9   justme   2009 Aug 1, 7:51am  

Wanker, this is the **4th** time in less than two weeks that you have planted (yes, planted) one of these nonsense ideas that the RE market has hit the bottom and that it is A Good Time To Buy (TM).

This is how Wanker does it: First he posts a link to some yahoo story, Then he follows on with some not-so-subtle hints that it is a good time to stick your toe in the water (or stick his Wang in there).

Knock it off, Wanker. You're not fooling me. You're an RE Troll, and you know it.

10   dont_getit   2009 Aug 1, 9:32am  

WillyWanker says

@ dont_getit
I agree with you. You shouldn’t buy ANYTHING until 2015 or later. Bay area housing will go back to 70’s prices. You will have your pick of houses on SeaCliff, Russian Hill or any neighborhood you want. Why you will probably be able to buy a 5K square foot mansion in Pacific Heights for 100K or less.
Just make sure you don’t buy anything yet wait a good 3,4 or 5 years for the bottom to really settle in.

Just because you or CAR or NAR says its bottom, its not bottom. I am not an idiot to think that the prices are going back to 70s prices. If you dont know the history of great depression, I suggest you get a good book and read it and remember how many people called bottom before even the crash started.

As Claire said, I am looking at MV/PA area and am not expecting a decent house for 100k. But, I wont pay this ridiculous prices, if that means "I will be priced out", thats fine, I will be a renter.

11   WillyWanker   2009 Aug 1, 10:46am  

justme says

Wanker, this is the **4th** time in less than two weeks that you have planted (yes, planted) one of these nonsense ideas that the RE market has hit the bottom and that it is A Good Time To Buy (TM).
This is how Wanker does it: First he posts a link to some yahoo story, Then he follows on with some not-so-subtle hints that it is a good time to stick your toe in the water (or stick his Wang in there).
Knock it off, Wanker. You’re not fooling me. You’re an RE Troll, and you know it.

justmoi, I have no desire to fool you as you do well in that department on your own. Besides, I have not 'planted' any stories, I am just posting them here because they are topical. Nothing surreptitious about it. Besides I am no more an RE Troll than you or your mama. So quit hurling accusations when you don't have anything better to say.

12   Joyous Tenant!   2009 Aug 1, 11:24am  

HAHAHAHA! You have to be kidding...... Its a scary, sad thing to see so much of the US economy predicated on poorly made, wildly overpriced housing.

13   homeowner_for ever_san jose   2009 Aug 1, 3:46pm  

all the folks who are 100% sure that housing is still a long way to bottom.....i have a suggesting for you.
why don't you short the cme housing futures (http://www.recharts.com/cme.html) and make free money ??

*** Not an investment advice ****

14   homeowner_for ever_san jose   2009 Aug 1, 4:14pm  

Many areas with good schools have couples earning 250K+ combined...3 times would be 750K. I already see these prices...so is it a bottom ?

15   P2D2   2009 Aug 1, 4:24pm  

snmr1234 says

Many areas with good schools have couples earning 250K+ combined…3 times would be 750K. I already see these prices…so is it a bottom ?

If those $250K salaries make median of those areas, then yes.

16   justme   2009 Aug 1, 5:18pm  

Wanker,

Pay attention. I did not say that you planted the link. I said you planted a nonsense idea.

Look at what you did: You created a thread, posted a link and some excerpt. Then you post the very first comment TO YOUR OWN THREAD, and try to plant an interpretation that fits your agenda. And as if this is not enough, you salute your own thread by starting your own comment with a LOL.

Is it possible to get any lamer?

17   indianguy   2009 Aug 1, 6:21pm  

I am fairly certain thatthe overall US housing market is yet to see bottom and the snob outposts, viz. Palo Alto, Mtn View, Walnut Creek, Los Altos etc, are long due for a sharp fall.
However, I am sure it would not affect the stock market and the overall US economy as much. Yes, so far housing bubble burst contributed to the economic mess that we are in and is fairly correlated. However, the housing crash would have lesser and lesser impact on the overall US economy and hence should have no negative effect on the stock market. Let me explain why it will be that way.
Of all the homeowners, majority of them owned those homes before this bubble started, before Yr 2000. For them, the housing bubble was a feel-rich-good event that lasted for a few years. It just made them feel rich without having much impact on their life. Some, indeed used their homes as ATMs, to splurge on cheap plastic stuff. However, for the vast majority of homeowners who bought their home before the bubble period, it was just a feel-rich-good event. Having already established their roots in the community, does it matter to them whether prices go up or down? They would sell their home only when they have to. Bottom line is that home price fluctutations would not have any real impact on their lives.
I wish somebody poke holes in my argument. bring it on! :-)

18   Indian   2009 Aug 1, 6:34pm  

I read that too...it is now the main article on yahoo finance. Quality of articles on yahoo finance is very pathetic. National enquirer comes to mind....

Look at who is writing these articles....articles has such a naive tone to it...Journalist really believe that it is better to keep moving the pen or (hands in computer age) rather than writing a piece that would actually require some brain and thinking before writing....If you are paid by the number of articles you have to produce in a week...how can you avoid writing such articles...

Most of these so called news articles are just opinions disguised as facts...
We want everything fast in internet age.....housing crash to another housing boom in few years....:-)....

Housing takes 7 years to bottom usually...

19   Austinhousingbubble   2009 Aug 1, 6:42pm  

End of the day, your the only winner.

...and we, the lowly taxpayers, are the losers who get to suck it up.

Ah, well.

Many areas with good schools have couples earning 250K+ combined…3 times would be 750K. I already see these prices…so is it a bottom ?

It may be that many areas do have such couples, but there are not MANY areas with MANY such couples. What percentage of the community do these power earners actually account for? You can very easily research the local mean salaries for any given zip code online. You might be surprised at just how much people depend on credit/HELOCS for adjunct wealth.

20   Austinhousingbubble   2009 Aug 1, 8:34pm  

However, for the vast majority of homeowners who bought their home before the bubble period, it was just a feel-rich-good event.

I don't know if it's true to say the vast majority. Are there specific numbers you're referring to? It seemed to me that most people who smelled easy money followed the scent of blood all the way to their lender. I'm guessing there's a LOT more Equity wealth that was sucked out of the bubble era prices by established buyers than you might think.

21   bob2356   2009 Aug 1, 10:24pm  

"I’m guessing there’s a LOT more Equity wealth that was sucked out of the bubble era prices by established buyers than you might think"

There's no guessing involved. Home equity has historically been around 57-59% for decades, never dropping below 57.2%. Somehow the price of homes in most area's rose dramatically (189% nationally according to schiller) between 1996 and 2005 while equity remained flat then started falling and has now reached an astonishing 43%. Think about that. Housing values almost tripled while equity dropped. If you owe 100,000 on a 200,000 home you have 50% equity. Double the house to 400,000 then you have 75% equity. So where did the extra equity go? The housing atm of course. This completely unprecedented increase in debt doesn't even include an equally unprecedented increase in credit card debt during the same period.

Who owes the vast majority of this debt? The baby boomers, who should all theoretically be retiring over the next 20 years. Which means drawing down (as in selling their stocks) and reallocating (as in selling stocks) their retirement accounts. Green shoots? Housing bottom? Dow 14,000? Maybe, maybe not.

22   jetfuel4   2009 Aug 2, 2:15am  

HAHAHAHAHAHAH…..This place is hysterical. I get a lot of enjoyment reading all these posts and have sent this link to a lot of my friends. Keep on believing this crap you keep spewing…..housing prices returning to the 70’s, 80’s or even 90’s. HAHAHAHAHAH…..what a bunch of fucking morons who never have bought or sold a single piece of property in their life….HAHAHAHAHAH

23   knightparzival   2009 Aug 2, 3:22am  

chrisborden says

When ALL houses are 2.5 to 3 times MEDIAN incomes for ANY area, THAT is the bottom. Period.

I think that is a pipe dream. Price are not and will never be based on 2.5x-3x medium income unless we become a completely socialized system. Prices are based on supply and demand not some ideal affordability number someone made up. Affordability often comes down to what one is willing to sacrifice to live in an area not what others beleive they should sacrifice.

24   jetfuel4   2009 Aug 2, 3:24am  

A properties value is what someone is willing to pay for it....period. I have no idea what your point is but......

25   OO   2009 Aug 2, 3:32am  

I am not sure of Indianguy's argument.

I don't have any data to backup, but if you are diligent, you can easily do so buy using up propertyshark's free quota of 8 inquiries per day to scope out your dream neighborhood.

I have been going to open houses for the last 3 weeks in the area south of 9 and Foothill expressway, typically properties ranging around $2M. I looked up on the owner profile of every single house I checked out. Based upon the ~35 samples I looked at, I'd say 1/3 of them are almost paid off (and typically really crappy shacks that you don't want to live in, you are purely buying for the value of the land).

For anything that has been updated, the owners are precariously levered up, the better the update, the worse the leverage ratio. A few owners are flippers caught in a downturn, having taken on over $2.5M in loans in multiple properties (google and people search are awesome). I'd say a couple of houses I checked out are about to be drastically reduced because the owner will reach his limit very soon.

It is really understandable why updating will suck up so much home equity. The realty agents use the total remodel cost as a selling point, but I inquire about it to assess how much the owner may have ATM'd. For a house of 2500-3000 sqft, the average remodel cost in the last few years is over $150 in these areas for above-average finish. If they want something fancy, we are looking at $200/sqft (newly built costs $350 per sq ft). So the updated houses cost mostly $300K-500K in update, and I assure you I have seen so many houses with $1M+ remodel cost. After checking with friends who did remodels, I believe these $1M quotes. There are quite a few discussions on remodeling cost on gardenweb, and that is the number that has been floating around.

Let's face it, how many people in the Bay Area have more than $300K in savings AFTER they've bought a house? The one astonishing aspect of this is, a very big portion of houses are remodeled, and think about how much total expenditure that represents in the last few years?

26   Jeremy   2009 Aug 2, 3:43am  

chrisborden says

When ALL houses are 2.5 to 3 times MEDIAN incomes for ANY area, THAT is the bottom. Period.

You guys are absolutely correct, but only for certain areas. example:

Antelope Valley (Palmdale/Lancaster) Median household income - 45,000.... median home price - 120,000 = bottom (assuming no spike in interest rates)

45 minutes south Santa Clarita Valley (Valencia/Saugus/Canyon Country) Median income 78,000.... median home price - 425,000 = bottom? I doubt it. Much nicer area to be sure. but still nearly 6 to 1. Time will tell

27   jetfuel4   2009 Aug 2, 3:49am  

and…
Demand can’t exceed affordability, and unfortunately unless you have a nice nest egg, the reality is actually tied to your pay check. Even with a winfall or a nice chunk of change that you saved up for the purchase out right. You’re still bound to the ass holes at City hall raising your property taxes because some dude over paid for the house next to you.
Don’t for get the people that owned before the bubble started, never intended on selling, up sizing or pulling any equity out, that is now burdened with the extra tax imposed because of idiots with more credit than brains next door to them.

Tenpound.....isn't home ownership great!!!

28   pinnacle   2009 Aug 2, 3:54am  

If we are now "at the bottom" why did the House of Representatives just pass a bill on July 29 allowing banks to
keep foreclosures off the market for five years by leasing them at inflated prices until the RE market "rebounds"???
If we are starting to "move up" now why do they have to they have to keep houses in foreclosure limbo for five more years to prevent a total collapse in real estate prices?

29   jetfuel4   2009 Aug 2, 4:09am  

Surprised???? Tell me of any market you know not manipulated or “regulated”….

30   indianguy   2009 Aug 2, 4:21am  

zetabeos1 says

“Of all the homeowners, majority of them owned those homes before this bubble started, before Yr 2000.”
You mean before Yr 1998 ?

Yes, you are right, 1998.

31   indianguy   2009 Aug 2, 4:54am  

bob2356 says

“I’m guessing there’s a LOT more Equity wealth that was sucked out of the bubble era prices by established buyers than you might think”
There’s no guessing involved. Home equity has historically been around 57-59% for decades, never dropping below 57.2%. Somehow the price of homes in most area’s rose dramatically (189% nationally according to schiller) between 1996 and 2005 while equity remained flat then started falling and has now reached an astonishing 43%. Think about that. Housing values almost tripled while equity dropped. If you owe 100,000 on a 200,000 home you have 50% equity. Double the house to 400,000 then you have 75% equity. So where did the extra equity go? The housing atm of course.....

Nice analysis Bob! With this in mind, I do not think we will ever get into inflationary economy anytime soon because the average discretionary income will reduce. So, no need to hoard up on gold or commodities.

But, I am not sure if the deflation continue over long term, I mean more than 15 to 20 years. If so, we could be better off just investing in long term treasury bonds. Their yield looks icky now, but if deflation is protracted, it would look better compared to other investments.

Can anyone make an argument for the return to the goldilock economy, where we can just invest in a few good company stocks and wait out for 10 to 15 yrs?

32   jetfuel4   2009 Aug 2, 5:11am  

Gregory Gardens Market Update!
Property Address List Price Sold Price BD BA Sq. Ft. Days to Sell
314 Betty Lane $300,000 $309,000 3 1 1040 43
1660 Shirley Drive $316,900 $315,000 3 2 1194 8
137 Vivian Drive $299,900 $325,000 3 1 1042 8
161 Hazel Drive $302,250 $330,000 3 1 1322 15
254 Betty Lane $375,000 $365,000 2 1 1042 91
242 Evelyn Drive $390,000 S390,000 3 1 1112 114
1948 Maybelle Drive $399,900 $400,000 3 1 1040 6
1861 Lucille Lane $389,900 $400,000 3 2 1725 32
1630 Shirley Drive $499,000 $400,000 4 2 1503 8
166 Hazel Drive $415,000 $415,000 4 3 1847 12
36 Mazie Drive $375,000 $419,000 3 1 1484 11
1613 Onley Drive $394,900 $420,000 3 2 1462 7
107 Kathryn Drive $370,000 $420,000 3 1 1195 19
1749 Ruth Drive $470,000 $445,000 3 1 1226 15
208 Doray Drive $449,000 $460,000 3 2 1412 44
294 Belva Lane $449,900 $480,000 3 2 1679 8
31 Vivian Drive $499,500 $478,000 3 2 1522 13
1572 Ruth Drive $489,900 $484,900 4 2 2235 138
324 Maureen Lane $519,000 $500,000 2 1130 15
342 Belva Lane $565,000 $565,000 3 2 1484 21
1931 Ardith Drive $564,900 $580,000 2 1938 3
Gregory Gardens NewsLetter

33   jetfuel4   2009 Aug 2, 5:13am  

Sorry....some problems with converting and formatting....this is reality folks...like it or not

34   jetfuel4   2009 Aug 2, 6:08am  

huh?????...Oh I get it....reality is wrong, stupid me.

35   jetfuel4   2009 Aug 2, 6:32am  

Lowball....hahahahahah. My grandparents bought these same houses for $78K. I bought several of them from $145-185K. I'm not even trying to claim what or who is right and wrong. All I am saying is if you want one….this is what is costs. Who knows tomorrow….but I’m betting most of the mantra here is wishful thinking.

36   jetfuel4   2009 Aug 2, 6:56am  

Ooooooh.....I'm so impressed...an actual finance/econ background no less. You wouldn't be one of the guys that used his "finance/econ" background to get us to where we are today, would you?

37   jetfuel4   2009 Aug 2, 9:25am  

that is all I was saying.....even if I don't have a finance/econ background

38   Latesummer2009   2009 Aug 2, 11:54am  

When you look at national numbers, this may appear like the bottom due to govt trickery. Don't be fooled. Much of this is nothing more than seasonal variation and weak hands needing to buy before school begins. This Fall we could see another stock market disaster and along with it the "hope" of the housing bottom dashed. I would agree that some lower end markets have stablized due to the clearing of inventory by foreclosures.

The mid to high end is at least still 25% overvalued here on the Westside of Los Angeles. The oncoming ALT-A and Prime loan defaults, along with job losses will take care of that .

www.westsideremeltdown.blogspot.com

39   WillyWanker   2009 Aug 2, 12:11pm  

@ justmoi,

I 'planted' an 'idea'? Sorry, but you must be on drugs or otherwise incapacitated. You don't make any sense. Besides, since when is posting to one's own thread considered a problem?

You need to find an outlet for your hostility~~~something that does not involve controlled substances or spirits.

Get well soon.

40   bob2356   2009 Aug 2, 12:31pm  

"well in many areas, houses are going for less than the COST OF RAW MATERIALS TO BUILD THEM."

In some places houses cost less than a week at disney. Until there is a shortage of unoccupied houses in those places the cost of building isn't really relevant. Almost half of the houses in the boom years were second homes or investment properties. They weren't built to supply a fundamental need for shelter. When supply and demand and price and income all are in alignment in the majority of the markets then we will see the bottom overall. This will obviously be at different times for different places, but more places are out of sync than in right now.

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