patrick.net

I bought my home in 2010. At current price level, it will be stretching my ability to pay long term. My rule of thumb is, my expense should be such that every 3 years, I will be able to save enough so that I can go vacation for a year without working.

errc says

patrick why doesn’t this link produce an image on pat.net rather than the hyperlinked blue text?

@errc That's because the url does not end in one of these: jpg|jpeg|gif|gifv|png|bmp

See https://github.com/killelea/node.patrick.net/blob/master/node/util.js#L296

I believe we will have a 20% jump in the median home price, in a 12 month period in some California Counties within 2 years.
Desperation is beginning to set in among potential buyers. Not even close to a bubble yet.

Housing tenure .....

Selling Equity is one factor in housing tenure, a lack of a reason to move is another but third which doesn't get talked about much is that if we have been building bigger and bigger homes for decades, especially in this cycle, why would a new home buyer ever move if he already has a 2,4000 4 bedroom room. These factors give legs to pricing at the cost of total sales and a reason why national mortgage demand is still only at 1998 levels.





Homes that sold for $500,000 or more accounted for 51.4 percent of all Southern #California home sales in February 2018. This is up from 49.6 percent in January 2018, and up from 43.9 percent in February 2017. For more: http://ow.ly/6Ezl30jefcx

Logan Mohtashami says

.. this chart proves

Reminds me of this flaming duck who claimed the steep part of a sine wave was the asymptote of destruction.

Some impressive charts, and some fundamentals are more sound this time around.

However, while rents are up, my experience was ALL tenants applying are very shaky.

The main problem for the bulls is to explain how we can possibly have rising foreclosures, if there is still room for more inflation. During a bull run, Calif foreclosures are usually nonexistent. It is almost impossible to lose a house unless additional cash out borrowing happened.

Also, even prevubble 1, the economy was strong and people could afford teaser rates, which are what the rates have been for the last nine years. There is nothing the government can do to lower rates further. On top of that, there is growing supply, including foreclosures, at least in my part of S California.

It might also help to remind people that the state of California is literally giving up to $100,000 to save individual homes from foreclosure; that is not a sign of a bull market.

Malcolm says

The main problem for the bulls is to explain how we can possibly have rising foreclosures, if there is still room for more inflation. During a bull run, Calif foreclosures are usually nonexistent. It is almost impossible to lose a house unless additional cash out borrowing happened.

We don't have rising foreclosures.
Some banks are merely playing catch up due to reasons like lawsuits, fixer uppers and what not.
Many homeowners end up in foreclosure due to job losses, divorce, deaths in family etc.
There will always be some foreclosures when you have tens of millions of homeowners no matter what.

Malcolm says

It is almost impossible to lose a house unless additional cash out borrowing happened.

Late cycle lending risk typically comes with FHA loans or low down payment loans in general.

3.5% down plus the UFMIP added to the loan balance which means negative selling equity right off the bat, if the job loss recession hits the following year, the lack of selling equity could lead toward a future distress sale.

However, outside of that possibility, you shouldn't see that many distress sales when the next recession hits due to vast amount of nested equity accumulated in this cycle.

You can see supply rise from homeowners with equity and investors with no mortgage but distress sales will be limited to a degree because mortgage demand itself was light to start with the past few years

2nd the new home sales demand cycle has been the lightest ever and these home buyers are the best loan profiles we will ever see so the lack of distress sales coming from this sector will be limited as well, let a lone that a lot of the news homes were bigger homes created for the upper income class in this cycle

Thanks, Logan, we may disagree, but you are using some good evidence. I’ll look at it in depth later.

Malcolm says

Thanks, Logan, we may disagree, but you are using some good evidence. I’ll look at it in depth later.

Prices is all about supply and demand.... 2006-2011 was the holy mother storm of bad things happening at once

1. Credit bubble on bad debt ( good demographic patch from 1996-2005 to capture more home buyers)
2. Massive cash out bubble on bad debt
3. Very little equity build up in years 2003-2006
4. Demographics for housing were not favorable for home ownership post 2007 ( 2008-2019) light demographic patch

Add all that together = recasting distress supply + job loss recession supply Near 8.8 million Americans lost their job in the Great Recession

We just don't have that back drop anytime soon to have a similar result.

We are going to break the all time record for the longest economic expansion ever but that doesn't mean a massive supply of home buyers with mortgages in the cycle

Logan Mohtashami says

Prices is all about supply and demand.... 2006-2011 was the holy mother storm of bad things happening at once

Yes, that is why I believe we started tipping right at the end of last year. I will be curious if the data matches my local observation. In my area the listings to sales are 3 to 1 for the last month. It will take a couple of months for the graph to either validate or dismiss my observations. We had 347 listings and 93 closes in 92078.

I sold in October, I did well no matter where it goes, but my agent was very bearish on the high end homes especially. His observations were that the high end homes are a trickle of what they were earlier last year. Also, my observations on my area 92069 since are only a few very upgraded homes are hitting my $/sf. If you look at the general area, most houses are going between 225-350/sf. My home went for over $400/sf.

Again, we should know in two months and I will certainly report my observations whatever they and up being.

If you would, could you share your opinion as to why California has this insane Keep Your House program, where they are literally giving up to $100,000 to prevent foreclosures? How can anyone dismiss this as it is an obvious attempt to shore up available supply and prevent price deterioration.

Malcolm says

$100,000 to prevent foreclosures?

Difference between Judicial states and non Judicial states in terms of length for foreclosure timeline

New York, Florida and New Jersey were running between 800 - 1,000 days before foreclosing on a home

CA had the Homeowners Bill of Right Act passed to try to slow the process down and attempt to save as many homeowners as possible

But in general distress sales are very low now as distress supply has dwindled down




CA specific, In November I will part of a economic housing conference in the O.C. to talk about CA housing and National Housing .. The Head economist from the CAR will be part of the panel and she will provide a lot CA data, where I will be more national data and the data will be firm then As seasonality kicks in August

http://keepyourhomecalifornia.org/programs/principal-reduction

Low interest rates created years worth of low rate locks, and if you move then just rent it because the payment is cheap. Meanwhile, cashing out is only just getting to the point where it could start to go up in frequency again. And, folks can afford higher payments these days, we can tell that from the CC debt bubble, if you want to call it that. Now, with a bit higher rates we could see price ascension slow down some.

Sure, areas can seem bubbly, but affordability and competition, bidding wars, would seem to weigh strongly in bay area.

Here in the midwest, ehhh, RE is boring, boring, and boring, we build allot of sprawl, over priced city lots, luxury apartments, and more, and more condo's. I'm seeing smaller homes with giant yards, are being shunned again some which I think is awesome, I need one.

everything says

Sure, areas can seem bubbly, but affordability and competition, bidding wars, would seem to weigh strongly in bay area.

I am only looking at California as I don't have a pulse on the whole country. Yes, I think wages are a little more in line than before, and we don't have the insane teaser rates, that then became the regular rate to prop housing up.

Question, if you click on the link I posted, how can someone need principal reduction if prices are going up?

And yes, I think interest rates moving just a little are going to hurt badly. I also think interest rates ergo house values have their back against the floor. There is no more lowering of interest rates to prop up the market, that is why the state has resorted to loans that turn into gifts as a hope of preserving current levels.