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So what is traffic like at the few new developments that are going up these days? Are buyers camped out the night before a new release like they were back in 2004? If demand is so great all of the sudden, is construction going to go through the roof? Or are new homes still priced too high relative to existing?
rooemoore
2012 May 3, 10:53am
It costs a lot of money to put in the infrastructure for a subdivision (it's $4 gas driving those earthmovers), pay building permit costs, build a condo building, etc. Until you see prices support the development of additional land for the construction of new homes, supply will be limited, and prices will rise.
May I introduce you to the future of home construction?
Seriously, pre fab housing was gaining lots of steam until the crash. The advantages of building a home in a factory are huge - both in cost saving and quality of homes. They can be super energy efficient.
This may not be right around the corner, but the day when robots build homes in factories is closer than most realize.
everything
2012 May 3, 10:55am
Glad the buying window is over, no can afford, but obviously investors can, and that's what housing has become in many ways, something for investors to make or lose money on.
So what is traffic like at the few new developments that are going up these days? Are buyers camped out the night before a new release like they were back in 2004? If demand is so great all of the sudden, is construction going to go through the roof? Or are new homes still priced too high relative to existing?
I spoke to a guy yesterday who said one subdivision in Phoenix was seeing more than one sale per day...this is raging, "good" sales at a subdivision is 1 per week. Traffic is up to some subdivisions in CA from what I hear as well, surprisingly strong demand in subdivisions in places like Manteca. I hear of wait lists at some subdivisions in Reno, not yet camping out.
These developments are moving forward because the builders either wrote their land down to low values, or bought it distressed at prices less than replacement cost. This allows them to compete with resales when building a new home.
Once this inventory of cheap finished lots (ie. infrastructure, roads, curbs have been constructed already) has been built on, there will not be significant numbers of new lots developed until prices rise to a level that supports the cost of development.
In sum, I actually think that new construction will go DOWN for the near term (dwindling with the supply of finished lots) until there is an uptick in home prices sufficient to justify the development of new land. Once you see new lots being developed in your market, I would assume that the trajectory of home price recovery will flatten out from there.
rooemoore
2012 May 3, 11:44am
I spoke to a guy yesterday who said one subdivision in Phoenix was seeing more than one sale per day...this is raging, "good" sales at a subdivision is 1 per week.
I would like to know where this is. Could you share this info?
I would like to know where this is. Could you share this info?
My understanding was that it was West of Phoenix in (or near) Buckeye, selling very inexpensive homes.
rooemoore
2012 May 3, 12:58pm
I would like to know where this is. Could you share this info?
My understanding was that it was West of Phoenix in (or near) Buckeye, selling very inexpensive homes.
So you have no idea if this is true? Could you research this a bit more and post exactly where this is. You understand, we see a lot of bs on this site.
So you have no idea if this is true? Could you research this a bit more and post exactly where this is. You understand, we see a lot of bs on this site.
I certainly understand the BS meter flashing. The best I can tell you is that I don't know firsthand that this information is true--I couldn't unless I was actually the sales agent at the property. The Buckeye information came from someone who was formerly in the homebuilding industry and was recounting a conversation from a friend who works for a homebuilder. Could be total BS--but consistent with Phoenix rising as I think we're all reading in various places.
I know a fair number of folks related to the homebuilding industry. What I will say is that I heard the information about sales in Reno, Manteca, and Buckeye from three different (credible) sources. When I hear similar stories in three markets from three different people, it lends credence to what seems to be a trend of stronger homebuilder sales.
I'm totally OK if you don't want to believe it, and won't try to convince you that it's Gospel--because I can't say that it is. This is just information that I've heard.
REpro
2012 May 3, 2:20pm
I am not suggesting that prices go back to 2006/2007 (or anywhere close, especially in areas with lots of land available), but they need to go back to prices that support the development of new homes, and they are not there right now.
In my observation, on South Bay, new development never stopped completely. It wasn’t robust like before 2006, but new houses are offered all the time. That means developers still able to make profit with current prices what is not possible with far away areas.
May I introduce you to the future of home construction?
Seriously, pre fab housing was gaining lots of steam until the crash. The advantages of building a home in a factory are huge - both in cost saving and quality of homes. They can be super energy efficient.
The landed gentry scum in the fortress areas with good schools will never allow a new crop of middle class to put these types of homes anywhere near their NIMBY castles, their I GOT MINE castles, where they and they alone get to live on the hill watching over the rest of us commute and struggle like mad.
RentingForHalfTheCost
2012 May 3, 8:21pm
High rent? Where do you live? If the BA then your rent should be much less than the cost to own. Not the same elsewhere though.
I would say that anyone with "crappy credit" or not enough income to afford their home already foreclosed long ago. I do know a bunch of highly paid upper middle class dual income professionals who bought in 2004-2006. I'd imagine another HUGE leg down in housing would make this round of buyers seriously consider strategic default.
Here's the thing though: We have been looking for about 6 weeks and believe it or not, you'd be amazed at just how many foreclosures there are that seemingly came from those making high incomes. We're talking about nice houses in places like Piedmont Oakland, Rockridge, and other somewhat semi-affluent upper middle income type areas. Its not just poor and middle class people who are losing their homes. Its also those who "could" afford a home but probably only with two incomes at all times. All it would take is a job loss and they lose the home, and that's probably what's happened in a lot of these cases.
The deal with the BA is that a lot of buyers get a home and pay for it by the skin of their teeth. This is regardless of income. There's very little room for error and thus why a surprisingly large amount of upper income earners sit tediously on the edge of getting foreclosed come any sort of shift in their financial fortunes.
Its not just the bottom feeder investor fodder that's getting foreclosed. Its also the nice Craftsman houses with the 2 bimmers parked out front as well.
1sfrenter
2012 May 4, 1:25am
High rent? Where do you live? If the BA then your rent should be much less than the cost to own. Not the same elsewhere though.
San Francisco proper. My once working-class neighborhood has turned shi-shi (I've been in the same nabe for 15 years, same SFH rental for 12).
Single family homes in SF are not rent controlled.
As someone posted previously, if you need anything bigger than 2 bedrooms (we have kids) and want a garage and a yard (kids=car) and pets, then apartments can be hard to find.
Our landlord raising the rent by $200 month is what made us start thinking that now is the time to buy.
Apparently everyone else, including the infestors, decided the same thing.
1sfrenter,
We too are looking for houses. I am going to gently suggest that you need to maybe take a look at the situation differently. It sounds like you've been saving for years and have your ducks in a row. If that be the case, then don't worry about it. We too have been renting and saving for a long time. If you waited 15 years, then you can wait a bit longer. We fully expect it to take us a good year to find something. We're not going to get into any bidding wars and we will find the house for us, in our price range.
What I think is going on now is probably temporary. But even if it isn't, there will always be the "right" house out there, even if it takes awhile longer. So don't worry if people are freaking out and buying houses at random. Just take it easy and take your time.
KILLERJANE
2012 May 4, 1:54am
Worst time to buy is spring/summer. Very best time to buy is to put your offer in between December 23 to January 5. Much less competition and better acceptance of your offer. People are too broke and recovering to get out there. Their moods are all off.
freak80
2012 May 4, 1:59am
This may not be right around the corner, but the day when robots build homes in factories is closer than most realize.
I hope so!
1sfrenter
2012 May 4, 2:40am
Worst time to buy is spring/summer. Very best time to buy is to put your offer in between December 23 to January 5
If inventory is low right now (height of selling season), it might be nonexistent by fall/winter.
Unless all the underwater owners see the multiple bids and higher prices and start flooding the market.
One can only hope.
rooemoore
2012 May 4, 2:44am
The landed gentry scum in the fortress areas with good schools will never allow a new crop of middle class to put these types of homes anywhere near their NIMBY castles, their I GOT MINE castles, where they and they alone get to live on the hill watching over the rest of us commute and struggle like mad
1sfrenter
2012 May 4, 2:45am
Just take it easy and take your time.
Thanks for the reassurance. This is about where we are, too. Resigned to be patient and kissing a$$ to our landlord so we don't find ourselves in a desperate situation.
It's also given us some time to re-evaluate our priorities. Although we know we want to buy, we have decided to get something a lot smaller and cheaper than originally planned.
It's easy to get caught up in the realtor's and mortgage broker's way of doing things (borrow and buy as much as you can).
It may be a blessing in disguise that we have not gotten any of our offers accepted. A smaller, cheaper house means the difference between possibly paying off the mortgage in 15 years vs. debt slavery until the day I day.
RentingForHalfTheCost
2012 May 4, 2:52am
High rent? Where do you live? If the BA then your rent should be much less than the cost to own. Not the same elsewhere though.
San Francisco proper. My once working-class neighborhood has turned shi-shi (I've been in the same nabe for 15 years, same SFH rental for 12).
Single family homes in SF are not rent controlled.
As someone posted previously, if you need anything bigger than 2 bedrooms (we have kids) and want a garage and a yard (kids=car) and pets, then apartments can be hard to find.
Our landlord raising the rent by $200 month is what made us start thinking that now is the time to buy.
Apparently everyone else, including the infestors, decided the same thing.
Run the full numbers and expenses and compare you rent verses a comparable house to buy in you hood. I think you will be surprised how much better of you are right now to rent.
freak80
2012 May 4, 2:53am
APOCALYPSEFUCK is Tony Manero says
A friend who did two of these in different states said the catalogs these days for factory built homes are incredible.
But do they come with pre-fab arsenals and gun-ports?
1sfrenter
2012 May 4, 3:11am
Perhaps another question would be what about renting until you retire?
But let's say you rented for another 10-15 years, then retired, then moved either out of the Bay Area or out of state?
Been renting for 30 years. Don't want to anymore. Too old (and have kids and pets) to have to move whenever house gets sold (owner-occupied eviction has happened to us twice!) and single family homes are not rent controlled here.
I've said it before: when you are young it's no big deal to chase cheaper rentals and get boxes off craigslist and borrow a truck and get your pals to help you move with a case of beer and some pizza. Throw in some kids, a few pets, a piano, a bad back, etc., not so much.
And JOBS. We have stable jobs with seniority. Moving to work in another school district given the cuts in education just doesn't make sense.
And this is our home. Yes there has been a mass exodus of middle class folks out of San Francisco, but the idea that hundreds of thousands of people (ie., anyone who makes less than 250K a year) should leave their home and the place they love is ridiculous. That's what happens during a war.
I guess this is a war. Class War. And we are losing.
rooemoore
2012 May 4, 3:14am
APOCALYPSEFUCK is Tony Manero says
Given the advancement in the art, sure, very likely.
Get off the grid and the only weapons you'll need are fishing poles and a knife
I hear what you're saying. Moving sucks... for everyone. Young, old, and those inbetween. Trust me. We have a TON of crap, and yes- we too are attached to where we live. But where we live is semi-desirable and thus we've made some exceptions to where we will buy simply because to us the additional costs of living where we live aren't really worth it.
True, we don't have kids and that alone makes a huge difference. But I still think you have options. Plenty of people buy or rent homes in the East Bay and commute to SF. I did it for 2 years and it wasn't that big a deal. Its easy to forget that SF is about 15-20 minutes from the east bay. So its not like we're talking some huge chasm.
But everyone has their own idea of what they place value on and how much they're willing to pay for the privilege.
bubblesitter
2012 May 4, 3:42am
I guess this is a war. Class War. And we are losing.
I think Buffett would agree.
LOL. Then why are we arguing about home prices here?
1sfrenter
2012 May 4, 4:17am
But everyone has their own idea of what they place value on and how much they're willing to pay for the privilege.
You are so very right. As a gay surfer, I am willing to pay to live in a place where people don't throw eggs and empty beer cans at me out their car windows (been there, done that) and will pay extra to be able to catch a few waves before I have to be at work.
AND, I can still complain about class warfare.
I don't think decimating the middle class and passively watching as we all become beholden to the landlord class is a good idea.
That's why I appreciate these online forums and the Occupy movement and anything else that brings these issues to light.
I also believe that the suburbs will be the new ghettos. I prefer the city.
TONS bought in 2003-2006 with crappy credit and little wiggle room and now TONS can't sell
I would say that anyone with "crappy credit" or not enough income to afford their home already foreclosed long ago. I do know a bunch of highly paid upper middle class dual income professionals who bought in 2004-2006. I'd imagine another HUGE leg down in housing would make this round of buyers seriously consider strategic default. They already feel manipulated and cheated.... so while the sub-prime mortgage crisis is over. If home prices are allowed to fall another 40% like some are calling for.. We'll have an entirely new crisis on our hands... the strategic default crisis.
I know many dual income (Tech Industry) couples with kids who bought in 2005-08 with 20-30% down payment. Even though their houses have dropped 10-30% They can still afford the mortgage and recent price bump is helping with lower rate refinancing. Some have even paid more money to makeup for the gap in appraised value and remaining loan amount to get lower rate financing. Many of them are in decent to excellent (as measured by API) school districts i.e. Cupertino, Fremont(Mission/WarmSprings/Ardenwood), Palo Alto, San Ramon, Dublin and Pleasanton. Million dollar home buyers refinanced to 2.5% 5/1 ARM. They are betting on low interest rate for a while (10+ years). Some of them are counting on stock grants to pay off the mortgage after 5 years if interest rates rise.
I also believe that the suburbs will be the new ghettos. I prefer the city.
Guess we all have our own preferences. I personally don't find the Bay Area suburbs- at least the immediate bay area burbs like Oakland, Berkely and so on as being that different in regards to attitudes and open-mindedness. I'm also not sure how the suburbs could become ghettos if they're getting filled up by priced-out city dwellers. But then again, the cities have undergone a transformation from being mostly ghettos to newly-minted gentrified playgrounds.
Its also sad that no matter where you live, there are ugly people everywhere. I grew up in the very rural, very conservative South. There were good aspects and bad. Open minded people and those who weren't so much. I've now lived on both coasts and many different places. People are people just about everywhere.
That said, I fully admit that I too am paying a rather huge premium to buy a house here. I suppose I could make an effort to relocate to somewhere else that has the jobs I am in- like Austin or something. But I've been here long enough and getting the an age where change is increasingly difficult. I complain about the BA but in the end its been good to me so far. Its also been good to a lot of other people and they too are willing to shell out the dough to stay.
know many dual income (Tech Industry) couples with kids who bought in 2005-08 with 20-30% down payment. Even though their houses have dropped 10-30% They can still afford the mortgage and recent price bump is helping with lower rate refinancing.
Oh no doubt, The bulk of these such couples are probably fine. But as mentioned above, some of them would be in pretty deep doo-doo if one or both of them lost a job because they bought at the absolute peak at the absolute top of their price levels counting on those 2 jobs to pay for the mortgage.
We too are one of those fairly high, dual wage earning couples. Even so, there is no way I would pay anything close to the 650-900k some of these folks are paying even though we would qualify. 450-500k is more like it and that's sadly still more or less a starter home here. Insane given what we make and what it costs to buy here.
bmwman91
2012 May 4, 4:49am
I don't think decimating the middle class and passively watching as we all become beholden to the landlord class is a good idea.
Absolutely. It is shrinking across the US as a whole. CA is seeing it even more, and to top it off, lots of middle class people are leaving. Since my job isn't tied to any particular locality, I am working out the logistics of a move to Seattle. This area is an odd mix: many aspects of it feel like a sinking ship for middle class folks, while at the same time there is this boom in web services companies and a lot of people thinking that the sky is the limit here.
freak80
2012 May 4, 5:02am
I am working out the logistics of a move to Seattle.
Stock up on anti-depressants. It's even cloudier there than where I live.
hanera
2012 May 4, 9:48am
It costs a lot of money to put in the infrastructure for a subdivision (it's $4 gas driving those earthmovers), pay building permit costs, build a condo building, etc. Until you see prices support the development of additional land for the construction of new homes, supply will be limited, and prices will rise.
The most logical reason for low inventory.
The most logical reason for low inventory
Really? Sounds like tautological used house salesman mumbo jumbo to me.
bmwman91
2012 May 4, 10:15am
Stock up on anti-depressants. It's even cloudier there than where I live.
I am up there for work weekly. I have been going there for work for the last 4 years. It really isn't as bad as people say. You just gotta sack-up & get out and live regardless of rain, shine or otherwise.
freak80
2012 May 4, 10:28am
You just gotta sack-up & get out and live regardless of rain, shine or otherwise.
lol. Good point.
Really? Sounds like tautological used house salesman mumbo jumbo to me.
It's more like economics and capitalism. Think of housing like a manufacturing process:
There are inputs to the process, raw materials, land, a regulatory environment to work within (permits, building standards, cost of improvements to hook into local sewer/water/electricity/drainage, etc.), and a process used to convert the raw materials to the product (energy and labor).
If the cost of the inputs, regulatory environment, and process exceeds the market price for the product, no one will produce the product.
Some people believe that in fact, if there was demand at current prices, builders could and would build at a cost that allows them to make a profit. In some parts of the country, this may be the case. I do not believe this is true in many parts of California based on my experience (land is too expensive, regulatory environment too expensive--build it green initiatives, permit costs, etc.). If it were true, you would see more grading of new lots...what we see instead is predominantly building on existing inventory of finished lots.
So, if you are in an environment where cost>price, there will be no new supply. If there is no new supply, but a growing demand for the product (in a location with a growing population, there is a growing demand for shelter), simple laws of supply and demand dictate that eventually prices will rise.
Land is the plug number...it's value is the residual of what's left after you back out all the other costs and a profit margin. If after you back out all the costs, the number is negative...no new development. If after you back out all the costs plus a profit margin, you get $X, then a builder will generally pay $X for the land.
Today, near the coasts, this calculation yields a number >$0, if a builder can find a willing land seller at a price of $X, and a municipality willing to grant entitlements, then they can buy the land, build the home, and turn a profit. If there is no land available at a price that makes sense in the calculation, they won't buy, and they won't develop/build.
Farther inland, the calculation in many places yields a number of less than $0, so the only way builders generally have been able to make sense of the math in those markets is either a) they have existing partially/completely developed land in their inventory that they can justify building on because they already have sunk costs in land and infrastructure, or b) they are buying finished lots at less than the cost of the infrastructure from distressed land sellers or financial institutions.
There is a finite amount of lots that fall into categories "a" and "b". Once they are gone, there will not be additional development in the negative residual land value locations until the math makes sense again to develop more lots. The cost of the inputs needs to fall, or the value of homes needs to go up. With the Fed printing money, thereby weakening the dollar, and interest rates low (and affordability high), the likely outcome is prices rising, not cost of the inputs falling.
Perversely, exacerbating the situation is that many builders (public and private) sold finished land inventory for big losses to investors when times were the worst (2009/2010) because in addition to raising some cash in the sale, they could claim huge losses on the land sale, and get tax refunds from Uncle Sam for income taxes paid in prior years. This reduced the number of lots they can build on now--some of those investors are selling the lots back to the builders today at less than replacement cost, but above what they paid.
Other investors are just sitting tight on the finished lots, under the theory that eventually the math will need to make sense for homebuilding to occur on raw land again, meaning the lots will eventually be worth much more than they are today in that particular market.
Apparently everyone else, including the infestors, decided the same thing.
No, despite stagflation one income and huge inflation in gas , food, rent and tuition, people are still trying the real estate ponzi scheme because helicopter ben is shoveling free money at the problem interest rates are basically zero in real terms.
Despite this the middle class is crushed, pay is stagnant and ever departing from the cost of living increases, and the scam and ponzi artists pretend that they will retire rich in real estate instead of like, you know, actually being an honest and productive worker, entrepreneur or business owner - not that that's rewarded anymore.
The world is for those who take massive risks, and the 1-2% of those who take said risks they get to be elevated and walk on the middle class. And those 98% who fail, well, we the hard working middle class with kids get to carry them around on social programs until they go off and bet the farm again.
What a joke. The bay area, for all its prosperity, is a stinking, moldy outdated trafficy pile of crap. And now the NY-style gordon geckos are coming and running the place, long gone are the guys with sandals running cool new businesses in a relaxed way and in come the rats from afar here to try and milk the last vestiges of the systems for whatever.
Joke. Innovation is basically dead.
many aspects of it feel like a sinking ship for middle class folks, while at the same time there is this boom in web services companies and a lot of people thinking that the sky is the limit here.
The only limit in the sky is the pie. Its bull. The failure rate is astonishing, and if you see, in just about every case, the success is ordained, as in, Instagram guy and Zuck had met before... And google bough ad words from Oingo/Applied Semantics, they bought Andriod and youtube.
Innovation is dead. Rainmakers rule, and the rest is robotic global 500 type companies kicking the employee in the nuts.
If you arent executive management or high end sales, you are getting screwed to the wall in the bay area.
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Or (I hope) 6-12 months too early. Last falls sales comps got us ready to buy, but the low inventory, multiple bids, and all-cash buyers came on with such a fury that we are stepping back and wondering WTF.
Put an offer on a house on Monday, 20K over asking. 25 offers by Tuesday. Went to all-cash, no-contingency buyer. Last fall we probably could have gotten it for list or under. Now, no way.
How many more years of high rent will I be paying??