patrick.net

To add to your points Bap33, if the now under $200k subprime disasters (which were selling for $650k-$850k in places like East Palo Alto and Antioch) have been sold off and are reducing in turnover, then logically, average sold home prices will go up, even if sales of more expensive homes stay flat or even go down a little. I believe C-S is supposed to track same-house sales over time versus aggregated regional sales because the former is more reflective of pricing moves, and the latter could be distorted by shifting inventory concentrations.

At the higher end I see plenty of homes in the area reducing prices and sitting on the market. For example, one near us was listed around that April 2010 timeframe first at $1.65M, then reduced eventually to $1.5M before closing last week at $1.42M. So in this case who cares about whether that was a rising asking price... the thing still didn't sell until 14% below asking. And that price is also lower relative to its peers' sales last year.

So glad I don't have pets! :-)

Methinks AF watched Book of Eli and The Road in one sitting.

APOCALYPSEFUCK says

We are not even half way to
TERMINAL VELOCITY!
Brace for 1970s housing prices and catastrophic waves of arson and homeowner suicides as howling despair sets in and buyers realize they can’t flip for 2x in 12 months and the last-suckers-left-holding-the-bag sit watching the bank seizure crews kicking down the front door and raping their spouses and pets.

NA! Chill awhile! There was a world before the bubble.

Purely anecdotal observations follows: I really haven’t even been looking much in the last year in my area (Southern Sonoma County CA), as prices have been fairly sticky. The other day I went to realtor.com to see what was on the MLS. Fair amount of houses noted as foreclosures (this must now be a sales gimmick) but more interesting many many price reduced notices (also a sales gimmick). While a price reduced notice is clearly a type of advertisement it also opens the door to bids below asking and shows the weakness of the market. This market certainly does not seem to be rising in price and is still over priced IMO.

The low end is done crashing, the middle is halfway down, the top has just begun.

What concerns me now is those poor people who are putting down $200k on $600k properties (that are overpriced by $200k) thinking it's ok, best they'll ever do, maybe they'll make money on appreciation. Well actually, it doesn't concern me that much. ;)

pkowen says

What concerns me now is those poor people who are putting down $200k

200K cash down? Those people aren't poor. Or at least they weren't when they put down the 200K

I must have a sick since of humor because I find AF's posts hilarious.

Poor people put zero or less than that down (105% loans, and such). That was how ridiculous this all got.

APOCALYPSEFUCK says

We are not even half way to
TERMINAL VELOCITY!
Brace for 1970s housing prices and catastrophic waves of arson and homeowner suicides as howling despair sets in and buyers realize they can’t flip for 2x in 12 months and the last-suckers-left-holding-the-bag sit watching the bank seizure crews kicking down the front door and raping their spouses and pets.
It’s gonna get really deeply truly apocalyptic out there with commercial RE crashing; ALT-A resets kicking in; Section 8 program reductions due to budget reductions (speculators should at least be able to eat their S8 tenants) and continuing meltdown of an economy that has no jobs left that it can’t or hasn’t already shipped to China.
Plant potatoes. Teach kids and spouse to shoot, at close range and without remorse and full in the knowledge that cannibal anarchy means choosing who gets to be dinner - them or the starving psychopath climbing in through the kitchen window.

If I had a sister, I'd want her to marry you so we could sit and visit at Christmas and Thanksgiving. I love you man!

APOCALYPSEFUCK says

We are not even half way to
TERMINAL VELOCITY!
Brace for 1970s housing prices and catastrophic waves of arson and homeowner suicides as howling despair sets in and buyers realize they can’t flip for 2x in 12 months and the last-suckers-left-holding-the-bag sit watching the bank seizure crews kicking down the front door and raping their spouses and pets.
It’s gonna get really deeply truly apocalyptic out there with commercial RE crashing; ALT-A resets kicking in; Section 8 program reductions due to budget reductions (speculators should at least be able to eat their S8 tenants) and continuing meltdown of an economy that has no jobs left that it can’t or hasn’t already shipped to China.
Plant potatoes. Teach kids and spouse to shoot, at close range and without remorse and full in the knowledge that cannibal anarchy means choosing who gets to be dinner - them or the starving psychopath climbing in through the kitchen window.

Stick around here. I find your comments very amusing. :)

San Francisco, Heading down ? Over all index is heading down as well.

SA = Seasonally adjusted

July/June Change
NSA SA
0.5% -0.5%

May/June Change
NSA SA
0.3% -0.4%

PRICES ARE GOING DOWN

The Case-Shiller numbers always lag. In a couple months the numbers will show substantial declines. If you go to Zilliow and others and take a look at how many real estate agents are reporting price declines vs. increases, it's obvious. Over 85% of houses either had prices lowered or the selling price was below asking price in the last couple months. And there were very very few sales, all time record low.

The market is headed towards the cliff. The only thing moving at all is low cost houses, typically below

Yet again.

1314.90 and 22.04 for ag!

Two words...gor-geous!

b8c0d50b says

PRICES ARE GOING DOWN
look at how many real estate agents are reporting

I'd believe the data but not any words coming out of realtors mouth anyday.

Parabolic?

I heard Shiller on the radio last night on the way home from work (AM 910, Bay Area, around 6pm) and he predicted continued falling prices.

@PolishKnight.

I went to openhouses last sunday, I saw whole lot of delusion there. This townhouse was listed at 595K, while another townhouse next to it sold at 460K in a month ago. I always ask the realtor why owner is selling it, and this case, realtor told me that he already bought bigger house and that's why he is so motivated to sell because he is paying two mortgages. Yeah, right, good luck with that price. I went to 3 more townhouses in the area, and the answers were kinda the same. They already moved or about to move to bigger house. Then I saw a moving truck and workers taking things out of another townhouse. This townhouse is not even listed, yet still they're moving out.

Homes selling fast there when the price is right. But those nice townhomes are sitting there for 100+ days, and I knew couple of them sitting there for 2 years on and off the MLS listing. Of course, people living in that area are doing quite well in general, and they can stick with kool-aid price though, some of them are getting desperated. I can say there's lots of potential buyers waiting in sideline, but not much suckers.

While we don't care what happened in California or Florida, but when we recall situations earlier this year, there's no homes for sale in snowy winter, then homes showed up in the market in spring like mushroom popping after rain, and lots of them suddenly disappeared in May. Not much new listings for couple monthes till Aug, then little more homes to the market in Sep w/ higher price tag. CS index in July went up, of course. It should be at least in this area, since it tracks the sales price. For sales volume, I don't think so. Last summer was not hot at all. NoVA alway is special. no recession ever happened, ehh... mabye recession for couple monthes, people still are sticking with 2007 price and starbucks are crowded than ever. But you know what? somehow, I feel like the time is comming soon in the area. So, keep your finger crossed. :P

This shouldn't be hard, Palin & Co. have identified that White Boomers have suddenly decided to become energized about something other than lawn care. They have money and savings that can be raided, so it will be. They are irrational and illogical and shit-scared about nearly everything, which plays right into her hands. All you need is the right sound-bites and watch the checks roll in.

Is it me or does this conversation smack of splitting hairs? Not even sure what the argument is about anymore? So we all agree that house prices continue to fall in some or most areas, we're just not agreeing how much, or who's graph is correct.

Who here really believes we're over the worst and it's pay-day again... take one step forward.

Side note: I just got back from Provence where I put an offer on a home for $275K. Out the door cash. The exchange rate is working me $1.36 to the €. Yet still the house is a deal compared to what I get here in CA. I can rent it out as a holiday home and make more than I'm getting in a US bank. Not to mention I'm getting paid in Euros. Paris is 2 hrs away on the TGV. Marseilles 1 hour by car. Cote d'Azur is 2.5 hours away on the motorway.

I know it's apples vs oranges, but seriously... what the fuck we fighting over? Overpriced, crappy cardboard boxes burning in the desert sun.

If it truly is a global economy... I just threw down an alternative.

junkmail says

Side note: I just got back from Provence where I put an offer on a home for $275K.

C'est génial! Avec un petit porche au soleil , et des tournesols ...

It's simple - interest rates are far too low. When a government shows that it does not value its own currency, there is nothing "bubbleicious" about a move towards precious metals. We've seen trillions of dollars borrowed and printed in the name of bailouts and handouts with near-constant reminders that the Fed will attempt even more of said to ameliorate today's pathetic economic situation.

Question for you: Where do you think the gold price would've gone had Volker not increased interest rates to 21%+?

ANOTHER question for you: When do you think Bernanke/the Fed will be able to raise rates to even a paltry 5-6%? HINT: Once you go ZIRP it's EXTREMELY difficult to go back up without imploding the entire system.

Doesn't all of this discussion of the "market is up" have to be in the context of what market you're referring to? For example, the sub-$200k crappy homes in certain slummy parts of the SF Bay Area are as expensive as some nicer homes in Nebraska. Are they the same market? Likewise, the $1.5-2M market in, say, Palo Alto appeals to a different set of buyers and goals.

If you're just thinking about it just from an investing standpoint, you can't buy and rent those Palo Alto houses at current market rates for anywhere near break-even cash flow, while perhaps you can for the $200k homes.

So these big national numbers seem so meaningless. What is an "average" house?

I say again - Shiller was on the radio last night saying prices were still falling and that he would not buy, absolutely nothing about being at a bottom.

FalconMaster says

HOUSING HAS NOT BOTTOMED!

Oh, wait a second. If you say it in all caps with an exclamation point after it, then it must be true.

Consider me convinced.

Look, we all know there's a lot of money in San Fran, Los Angeles, and San Diego..... Not everyone is going broke.... In fact, the wealth divide is just getting even LARGER in these cities, as it is in the united states in general.

The ghettos are becoming more ghetto... and the top "fortress" areas are thriving, but getting smaller. Naturally as the boundaries of fortress areas erode and the ghettos expand real estate values will go up in the fortress areas and down in the borderline areas. I'm seeing this first hand in Los Angeles county.

I'm waiting to buy partly because I can only afford to buy in the "border" areas of fortresses that are ERODING quickly.. So why on earth would I lock myself in a 30-year mortgage in a place that in 10-15 years could be a GHETTO!

Renting is the only sensible option for me personally at the moment. Is anyone else out there scared to commit to a mortgage for fear of school districts getting worse ect. Personally I like the idea of renting, possibly even until my wife and I have kids and they are ready to go to elementary school.... With impending budget cuts in CA and economic uncertainty in general.. a month to month lease is much less scary than realizing in 10 years you bought into a ghetto in the making.

thunderlips11 says

I think the new numbers are going to be real bad. Whether it’s coincidence or if they have other proprietary means of checking information, banks are suddenly moving to “pause” their ongoing foreclosure proceedings:
http://patrick.net/?p=541362

Couldn't one interpret banks "pausing" foreclosures many ways?

Spin 1 - prices are going higher so banks are waiting to foreclose to sell the houses next spring when prices are higher.

Spin 2 - few people are buying so banks aren't bothering to foreclose since they can't sell them.

Depending on the situation in Spin 2, if banks know prices are going to completely plunge, shouldn't they be trying to unload now and get 80 cents on the dollar instead of 50 cents? Or do they expect more government help?

Los Angeles Renter says

Renting is the only sensible option for me personally at the moment. Is anyone else out there scared to commit to a mortgage for fear of school districts getting worse ect. Personally I like the idea of renting, possibly even until my wife and I have kids and they are ready to go to elementary school…. With impending budget cuts in CA and economic uncertainty in general.. a month to month lease is much less scary than realizing in 10 years you bought into a ghetto in the making.

That's EXACTLY what we're doing... and saving several thousand dollars every single month along the way! Renting a nice big house in a non-ghetto area for half the cost of buying it (and with rent fixed for three years). And that's savings versus the real, fully-loaded cost including property taxes, insurance and maintenance, minus any potential tax deductions. Oh, and no capital or major maintenance risks at all. :-)

It's a great strategy right now, which will set you up for 2013 or so with a bigger bank account to boot. And besides, if interest rates do go up, which should lower capital costs proportionally, you can use all those savings to pay down the (smaller) mortgage and lessen the interest hit. OR, if the duck is right and property goes up over the next few years, I calculate the rental savings will roughly offset the higher future capital costs assuming even a 5% annual price inflation (as if). So with no near term capital or maintenance risks, it sure seems win-win.

"More modifications have become permanent and no longer counted as delinquent, and Fannie Mae and Freddie Mac are foreclosing again (they have a record number of REOs) - so there has been a decline in the delinquency rate."

This is nothing but FCs and mods eating through the weak and the dead.

From the graph they'll have a full plate for a very long time still.

From the source data:

The total mortgage portfolio decreased at an annualized rate of 5.2% in August.
Total number of loan modifications 114,568 for the eight months ended August 31, 2010

This is not evidence of a recovery and has nothing to do with affordability.

This is just pure semantic GARBAGE. Fewer deadbeats are being strung along for months (and years) on end and are instead having their butts tossed more expediently to the curb in FORECLOSURES (and justly so).

Foreclosures hit an all-time record in August. September stats aren't out yet.

You wanna guess what they'll be?

Recovery? US median household income WENT DOWN AGAIN FOR THE SECOND YEAR IN A ROW according to census data we just got. Another 3% overall median decline for the US. Some states, like ones in the Rust Belt, have seen declines of over 6%.

This is not at all bullish for spending and/or any imagined "recovery."

That's fine, but the published statistics clearly show that involuntary foreclosures ARE BREAKING RECORDS.

August 2010 (the most recent month for which we have available data) was the WORST EVER for foreclosures.

July 2010 (at the time the August numbers were published) then becamse the SECOND worst ever month for foreclosures.

This is not a very positive trend.

"There’s more money out there than you can possibly imagine, and it’s all desperate for higher returns. Not only does real estate hedge against inflation, but it pays a dividend. If the investing public ever decides that interest rates are headed up, there isn’t going to be enough real property to go around."

Actually, the trillions pumped into the economy are precisely to keep interest rates _LOW_. If interest rates rise, that's bye bye overpriced housing flipping!

I love the logic that goes that if the economy goes into the toilet then buy overpriced housing because, hey, real estate will go up with inflation and people will buy it then. Generally speaking, that's like saying that if Y2K had really gone bad and the end of the world came, then an overpriced McMansion in the near city suburbs would be your best bet.

Gold buyers and canned food hoarders are not going to buy overpriced real estate. In addition, as the economy falters that will undermine consumer confidence overall.

This isn't terribly difficult to figure out.

What market has prices that only move in straight lines? Any/all market(s) can go down, go up and retrace some of the previous drop only to resume the drop. This is what I think is going to happen to housing (as well as the rest of the US economy). We had our initial plunge followed by unprecedented government prop-ups which brought some stability, but the background fundamentals have not improved one iota.

Are those three metro areas in CA experiencing an increase in household formation? Most of the USA is not - it's just the opposite. This is a very bad fundamental for housing.

Are those three MAs experiencing significant job growth recovering what was lost during the bust? Most of the USA is not - another very bad fundamental for housing.

Have the debt levels of the average citizen in those areas declined to the point where they can comfortably handle more debt? Most citizens are still in the process of deleveraging. Young people are under unprecedented debt burdens.

Are wages and incomes rising for those in those MAs? In the entirety of the USA, median household income is declining and has been for two years straight now (census data out today).

and on and on and on. When I look at the fundamentals, I see housing (along with the rest of the economy) going on to resume its drop in the relatively near future. Government tricks won't work forever - gold and silver are already screaming this out loud.

Seaside comments about the craziness of Moscva on the Potomac: "NoVA alway is special. no recession ever happened, ehh… mabye recession for couple monthes, people still are sticking with 2007 price and starbucks are crowded than ever."

I never viewed Starbucks as a very high end place. On the contrary, the coffee there is quite good and well priced if you get a venti coffee, about 2 bucks. While that certainly is higher than the 50 cent coffees at Denny's I remember 30 years ago, they still taste a lot better than that stuff at Denny's :-)

The high end of the market is a bit more sticky because these people are playing with the banks' and taxpayers' money but also sometimes their own. When they cash their 401k's, it's a lot more than your or my 401K's. It's just taking them longer to go belly up.

If there's an suburban leftist American nightmare, I can only imagine that it would be a dual income career wonk family with a total of $300K per year salary (before taxes, lots of NEW taxes coming up!) and TWO mortgages with the smaller unit they're trying to offload (probably for about the same price as their new McMansion) with equity being eaten away month after month. So... go into denial and say that it MUST be worth 2007 prices! They DESERVE a half a million profit after buying 10 years ago because, hey, the world owes it to them. Or at least the buyers.

When they go belly up, it's not some Discovery card they're going to get cut up but rather their platinum AMEX and perhaps even life's savings. It couldn't happen to better folks since, after all, they're RICH! :-)

Didja ever see those condos on the waterfront in Georgetown? If you go just before dark, you can see the rats returning (or is that leaving) the potomoc and watch what's on their big screen tvs (yeah, really, you can see their whole loft place including what they're doing.) Yep, worth a cool million for those 600 square feet...

Another cool aid denier tried to tell me I should buy now before it's too late and I told him how much I paid in rent including utilities. He turned pale and couldn't believe it. He pays that much in taxes alone. Shut him up quick.

"Meanwhile there’s a Saudi family somewhere who could afford to buy every single home in Fremont……..literally…….and pay cash."

Ah yes, the newest Democrat special interest voting bloc. I'd love to see them and Steven Spielberg get together to discuss the newest Democrat talking points... :-)

OK, seriously though, didn't we take out the bank of Iceland and the Treasury of Russia because they had already taken a massive hit on our "you can't lose prime credit!" loans? :-) Hey, the Euro was doing great so real estate in 2007 was a sure bet! You better hurry up before you miss the next boat!

Really? Are you REALLY thinking this logic is still going to fly?

Yeah, sure. Saudis are going to buy all the spare homes in Fremont because nothing like an Arab sheik loves more than a split level ranch to land his helicopter on. Hahahaha!

How about this: Why don't the Saudi's just.. invest in more oil! Or better yet, windmill factories in Germany for American taxpayers to buy? Or Chinese CPB factories?

I have lived through three housing recessions now but I have never seen anything like this! The problem that is unique to this downturn is the number of houses that have been allowed to fall into ruin in Yuma and Phoenix, the two markets with which I am most familiar.

I was raised in San Diego and get back there now and then and have even looked at a few homes for sale on the low end of the market. I have not seen a real scraper there yet like the countless properties in that condition here in AZ.

These houses are setting on the bank's balance sheets but have not yet been marked to market which is even less than the land value because of the cost of demolition when you consider the lead-based paint and asbestos issues since the majority of the homes in this condition are older.

Someday that chicken has got to come home to roost and when it does I believe we will see even more bank failures. This is another time bomb waiting to go off that is national in scope; the view from some markets that have faired better notwithstanding.

schmitz_kris says

Question for you: Where do you think the gold price would’ve gone had Volker not increased interest rates to 21%+?

ANOTHER question for you: When do you think Bernanke/the Fed will be able to raise rates to even a paltry 5-6%? HINT: Once you go ZIRP it’s EXTREMELY difficult to go back up without imploding the entire system.

So I guess you are saying that Japanese did great buying gold, right after their central bank tried to inflate their way out of a very similar situation.

schmitz_kris says

When do you think Bernanke/the Fed will be able to raise rates to even a paltry 5-6%

IT seems like you are arguing that if we are going to have a gold situation similar to '79-'80, it is many years off, that is after inflation very slowly builds and interest rates follow. Maybe I'll write my post for 10 years from now. I'm going to title it "2020 hindsight."