patrick.net

Troy says

I agree with pkennedy above. We’ll see the Fed printing money for the Treasury to loan at 2.5% before home prices fall another 20%.

Japan's now at 2%. And they printed like no other country with a modern currency. That didn't stop prices from falling for 20 years. I seriously doubt the Fed will monetize bad debt. Not in the foreseeable future.

Some people seem to think the Fed and Treasury are all powerful and can just magically make home prices go up, make lending and inflation happen, etc. They have not been paying attention to what's been happening over the last few years. I'm kind of baffled by comments like pkennedy's. Declining assets values would be bad for most people, so the government will stop it? It makes no sense. Asset prices are just what people will pay for them, or credibly promise to pay for them, and you can't force that.

My guess: Nationally we've seen the worst of the fall, now it's just a slow 5 year bottom scrape. This web site will be long gone before people even consider homes as an investment class again.

The logic is that,

1 house price fall
2 less house get build so some people out of job
3 these out-of-job people don't buy house, so house price fall some more
4 more people out of job
5 go back to step 3 and 4

Eventually, everyone will be out of job.

No need to get snarky - nomo & tat have points too. You are posting your opinion, and they're calling you on it because they disagree with the hypothesis based on your evidence.

Nomograph says

You are just making this up.

You respond with:
robertoaribas says

No sir, these are facts. The 40% cash buyers is from the Arizona School of Real Estate. Also, I am showing homes all the time. In the 150K to 250K price range, over half the homes I show are flips. I look up there tax records and see that it was bought at auction, or off the MLS in the past 3 or 4 months. [plus the listing says so]

Wouldn't you agree that you are quoting a private real estate school in an area that is hardest hit by the recession - and that the facts you present may not be applicable in other areas? You are also providing anecdotal evidence - and many wise men have said, "the plural of anectodote is not data." Just sayin'.

tatupu70 says

There are new reports coming out the health of the housing market almost every day. This was a bad report for sure. But I try not to read too much into 1 data point.

You respond with:
robertoaribas says

taputu:Except for calling me wrong with zero knowledge about each of the issues, what is your point? do you have ostrich dna that you try so hard to stick your head in the sand? its ok dude! your home value is going to drop, get used to it before you cause yourself psychological damage from all the mental contortions!

You say:
robertoaribas says

As the flippers have trouble moving their projects, they will slow down their purchases of bank owned properties, and their buying at auctions. So, by fall, I expect the signs of a supply /demand imbalance to be too big to ignore.

So, my question is this: if there is an unforeseeable catastrophic event - something that could never happen in a hundred years - something that could only happen through a comedy of errors of epic proportions that would negatively affect a huge area of the country and multiple industries - and the environment which includes tourism and housing sales in the area - something such as, well, an oil spill in the Gulf that is carried by the currents to far away tourist spots and rendering expensive beachfront mansions unusable and virtually unsellable - if this event WERE to ever occur, would the resulting economic impact upon the housing industry in that area be directly correlated to your theory on flipping and reflipping driving another drop in housing?

I don't agree, or disagree with your hypothesis. I do, however, question your methodology and the ability to apply your conclusion across the board. The people who've posted responses deserve better than

"robertoaribas says

sorry if facts interfere with your pretty picture of the world, but don’t worry, you can bop along as ignorant as ever, and accuse someone who knows what is going on of “making things up”

Troy says

I agree with pkennedy above. We’ll see the Fed printing money for the Treasury to loan at 2.5% before home prices fall another 20%.
Unless the tea party and “teh socialism!” twits take over Congress this year. Then they won’t have the tools to do anything but watch the mutherf—er burn.

That's a big "unless." Right now, unfortunately, we seem to be on a clear path to reverting right back to where we were in 2000 by 2012, Repub controlled Congress and instead of George W. it's gonna be Palin. If that happens, I could completely see them saying no to more spending/printing.

San Francisco rarely builds new single family homes. Ditto for any true prime area in San Francisco Bay area.
This is true; however, condos were constructed during the boom. They are starting to crash in the urban core. For example, here's a building I profiled recently in SF: The Beacon. They also are having their share of building problems (with a lawsuit outstanding against the developer).
They've had quite a few foreclosures already, and this is what's up and coming. You can go here to resolve parcel numbers (APNs) to Unit numbers.
APN 8702012* - NOTS May 27, 2010 (CitiMortgage, May 2, 2007)
APN 8702013 - NOD April 30, 2010 (National City, May 8, 2007)
APN 8702018 - NOD April 20, 2010 (Americorp Funding, July 28, 2006)
APN 8702054 - NOTS Jan. 15, 2010 (CitiMortgage, May 2, 2007)
APN 8702058 - Cancelled NOD on April 26, 2010 (NOTS on March 10, 2010). CitiMortgage, April 16, 2007. Will be interesting to see if the owner stays current.
APN 8702068 - NOTS Dec. 22, 2009 (JPM, June 14, 2007)
APN 8702084* - NOTS Dec. 30, 2009 (JPM, April 30, 2007)
APN 8702113* - NOTS May 25, 2010 (CitiMortgage, Nov. 15, 2006)
APN 8702129 - NOD Feb. 25, 2010 (Wells Fargo, Oct. 16, 2007)
APN 8702141 - NOD April 29, 2010 (Wells Fargo, March 16, 2007)
APN 8702152 - NOTS April 15, 2010 (Astoria Federal Mortgage, Sept. 21, 2007)
APN 8702157 - NOTS July 16, 2009 (Wells Fargo, March 27, 2006)
APN 8702160 - NOD April 12, 2010 (Wells Fargo, April 25, 2007)
APN 8702213 - NOD April 6, 2010 (MortgageIt,Inc., May 23, 2007)
APN 8702242* - Trustee Deed May 14, 2010 (ABN AMRO, May 7, 2007)
APN 8702245 - NOD Feb. 9, 2010 (Beneficial California, Inc., Aug. 20, 2007)
APN 8702264 - NOD May 4, 2010 (America's Wholesale Lender, June 21, 2006)
APN 8702273 - NOD March 3, 2010 (WaMu, July 21, 2006)
APN 8702299 - NOTS March 2, 2010 (WaMu, April 5, 2006)

*Ebrahim Jalili (also owns at The Odeon and One Rincon)

In addition, I ran across several folks not paying their HOAs, which, on occasion, is a prelude to foreclosure. I think we're going to get into a push pull scenario soon, where folks in outer areas begin to find the core more "affordable", this, in turn, will affect the areas that have already been hard hit (which entices folks looking for a SFH out of the core, which in turn lowers core prices -- and so on, for the next 10 years?!)

robertoaribas says

An unforseeable chatestrophic event could effect real estate in one area: You really going to go with this? Looking at macro econmic data is a waste because, somewhere, some town might go counter to the trend? ok, then just don’t think at all! that would make all discussion of real estate trends useless!

Looking at macro data isn't a waste of time at all, but extrapolating from Phoenix data is. Phoenix, Las Vegas, Miami, CA central valley are the special cases.

EBGuy says

This is true; however, condos were constructed during the boom. They are starting to crash in the urban core. For example, here’s a building I profiled recently in SF: The Beacon. They also are having their share of building problems (with a lawsuit outstanding against the developer).

You can add many more smaller developments that have gone up in and around the city. What was a vacent parking lot we saw 6-8 units go up.

robertoaribas says

tatpatutu: LARGE sections of the Bay area are for more like Phoenix, than they are like the Fortress.

Not really--Phoenix has lots of new housing devlopments. It was very easy to build and as a conseqence, the area became vastly overbuilt. I don't live in the Bay Area, but my feeling is that new housing developments weren't going up at the same rate as in Phoenix.

@tatupu70

Most of the new building in Phoenix wasn't actually in Phoenix. Living in northern Arizona, I have watched the exurbs creep further and further away. Most of the new building done in the last three to five years have been in areas with at least a 45 minute commute from anything resembling a large job site. Anthem is a good example (http://en.wikipedia.org/wiki/Anthem,_Arizona), and Phoenix has already annexed a number of outlying communities such as Surprise. Phoenix doesn't build up for the most part (some new highrises go in, but nothing compared to the amount of exurbs), just out. So the central similarity between Phoenix and SF would be the ridiculous price increases seen in the surrounding areas with long commutes, and that the communities around SF (Tracy? not really sure of the surrounding towns) grew rapidly just as the communities around Phoenix (Anthem, Surprise) grew rapidly while the city centers themselves remained mostly unchanged. From what I can tell, the large increase in available "housing" in Phoenix itself was the large amount of apartments converted into condos.

New housing developments in the bay area went up in insane areas. Building out Brentwood, Los Banos, Tracy, etc.

Anything with a limited commute isn't going to plunge like those areas, but also new homes weren't built in bulk in those areas, because they were already built out.

SFace has had the best information so far.

It makes sense that housing starts have little to do with established areas in the BA.

The problem is a great many people already living there can't really afford it. Personally I think the next few years will be ugly for them. While I don't expect a 50% drop from the peak, it still wouldn't surprise me in the slightest.

Unless we start creating jobs, and high paying ones, housing will continue to decrease.

Man this whole situation is freaking me out. I've saved up 100k and paid off all my debt. I'm currently crammed in a one bed room apartment and really want to purchase a house for a higher standard of living. I'm in the DC area where many of the homes I'm looking at sold for $150k in 2001, sold for 500k in 2006, and are now selling for 300k.
I don't know if the market is going to go down or sideways but it sure can't go up (there are too many short sales and foreclosures). I've looked at three short sales and all of them were completely trashed or needed 30k worth of work to live in (bringing the price up to 300k).
I'm tempted just to buy using an FHA and hold on to the bulk of my cash. That way I can keep the liquidity and if deflation or inflation happens I can quickly make investments to follow the market.
In the DC area I'm unsure if prices will drop. Prices have increased dramatically since the late 90's (200-400%). But the DC area (Maryland and NOVA) have the highes incomes so I think housing will stay high here. Plus with tax rebates I will be paying close to what I'm paying for in rent. I figure is there is a double dip in housing the banks will collapse and our currency will lose it's status as a reserve currency. At which time inflation will probably kick in and owning precious metals will be a safe haven. Well this post is longer than I expected it to be but so be it.

newhomebuyer7 says

Well this post is longer than I expected it to be but so be it.

yup. We all have this same discussion with ourselves. What to do, what to do.

ahasuerus99 says

Most of the new building in Phoenix wasn’t actually in Phoenix. Living in northern Arizona, I have watched the exurbs creep further and further away.

Are they still maricopa county? that's where the data he is quoting comes from - and that's the area that he's using as a model to predict that the country will continue to go to hell in a handbasket.

But many areas are different - I live in Southern Utah, where prices rose almost to Vegas proportions. Then they dropped - not as badly as Vegas, but quite a bit in several areas. Huge developments were stopped overnight, and there are still houses on the golf course near my house that are half built. My friends, who live in Northern Utah, were laughing about the roads to nowhere, partially built overpasses, and subdivisions with walls, roads and a couple of half-built houses with for sale signs out front - the signs referring to the entire development, not just one house.

There are multiple houses with short-sale signs out front within a couple of miles of my house - and all of this was foreign to my friends. My area has been hard hit, theirs has been hardly hit.

If one were to take the numbers here and attempt to apply them across the board, it would certainly skew the numbers.

So let's just agree with the realtor/investor who wrote the op; in Maricopa County, the evidence that he produced shows that prices will drop. But in some other areas, prices will remain stable and in some areas prices may increase. We all try to correlate what's said here to our little corners of the world.

robertoaribas says

By fall, the bulls on these forums will have been proven completely wrong.

I'm just sayin' that's awful strong language - applying maricopa county numbers across the board doesn't work. Not every buyer is a flipper, housing might not drop astronomically as you predict. Congrats on making money. Many people did. Many people didn't.

But the sky isn't falling everywhere like it is in your neck of the woods.

Sky's creaking everywhere tho.

@elliemae

Most of the exurbs are in Maricopa County, though a very small amount are as far north as Yavapai County (the county that I live in). I work with a few people here who have spouses who commute all the way to Phoenix for work everyday (for them it is about an hour and a half) because the housing was so much cheaper in areas like Dewey and Spring Valley, but those are definitely the exceptions.

It was interesting to hear about your area. I had never personally much identified Utah with the housing bubble, thinking it might have more in common with states like Texas, but it sounds like your area is somewhat similar to mine. In Prescott the price of housing significantly more than doubled (some houses that sold for 120k in 1999 topped out at a cool million in 2007, but the average price for a house that sold for 100k in the late 90s was close to 300k at the height of the bubble). Our area was driven by the number of California retirees who moved here, especially after we were featured in a retirement magazine as one of the nicest places to retire. Prescott went from being a tourist town of 25k to a retirement town of 40k with the only jobs being in healthcare for the retired, a diminished amount of tourism, and construction. Now all the people I know in construction have moved back down to Phoenix hoping for work (we had about ten major contractors in Prescott itself during the boom, now we are back down to two; some went bankrupt, a few were caught cutting a few too many corners and moved on to continue their shady dealings in New Orleans after Katrina).

One of the big differences I could see between Phoenix and a place like San Francisco is the number of jobs that were dependent upon the boom. I don't know what percentage of people worked in construction in each city, but it seemed like a lot of Arizona's economy was construction driven, and I wonder how much that was the case in San Francisco, or in your area in Utah. I would think that the more a given are was dependent on construction for job growth, the harder it will be for that area to recover.

ahasuerus99 says

One of the big differences I could see between Phoenix and a place like San Francisco is the number of jobs that were dependent upon the boom. I don’t know what percentage of people worked in construction in each city, but it seemed like a lot of Arizona’s economy was construction driven, and I wonder how much that was the case in San Francisco, or in your area in Utah. I would think that the more a given are was dependent on construction for job growth, the harder it will be for that area to recover.

Construction is/was a huge part of our economy - and the other part is tourism. One is nearly gone, the other crippled. There's a little agriculture, but many people sold to developers.

The Other heavy construction industry has lost the largest amount of employment in terms of percentage, losing 59.3 percent of the jobs from the 2nd quarter of 2005 to 2nd quarter of 2006.

In Washington County, there were a total of 48,777 housing units in the year 2005. This represents a growth in housing units, adding in all 10,335 housing units since the year 2001, or 26.9 percent.
http://www.ecanned.com/UT/Washington_County.shtml

elliemae says

Construction is/was a huge part of our economy - and the other part is tourism. One is nearly gone, the other crippled. There’s a little agriculture, but many people sold to developers.

You better hope its not, else welcome to the third world economy.

It is 110 degrees today in Maricopa County, and will reach 120 deg in July and August.

Anyone wants to buy my house :)

I totally agree price will come down......
GREED IS STILL IN CONTROL
WHAT WE NEED IS 15-YEAR 2% LOANS !!

thomas.wong1986 says

elliemae says

Construction is/was a huge part of our economy - and the other part is tourism. One is nearly gone, the other crippled. There’s a little agriculture, but many people sold to developers.

You better hope its not, else welcome to the third world economy.

I don't have to "hope." It is what it is. I'm not sure what you mean by that...

elliemae says

I don’t have to “hope.” It is what it is. I’m not sure what you mean by that…

Are you gonna just accept that or be a leader in your community and turn things around ?

I'm gonna accept it. As a social worker, I've chosen to save the world, one old person at a time. I doubt that I could change the community doing this. But I'm trying - and I'm damn good at it.

It took 100 years to create and build upon the tourism industry here - it won't be changing any time soon. We're home to a marathon, a triatholon, Huntsman Senior Games, hiking, boating, Mormon history stuff, a college, the regional hospital and associated treatment centers, a low-crime lifestyle for people whose primary homes are in the northern areas of Utah, regional shopping areas, etc. That won't be changing any time soon.

The construction industry tanked along with real estate. That, too, won't be changing any time soon.

Any other suggestions? What have you done to change the economic climate of the area in which you live, and how successful have you been?

Now that corporate America is creating a big push towards amnesty for illegals, no doubt the hidden millionares who've been waiting on the sidelines will rush in to save the day.

UnitedSocialistStatesofAmerica says

You’re OBVIOUSLY a RE agent. OR a used car salesperson. Either way, I think I don’t like you.

Hilarious. Anyone who disagrees with you is a RE agent? Or is it just anyone who calls you out for your erroneous statements?

You're the new McCarthy, huh? Finding RE agents posing as regular Americans at every step...

Nomo, you're just making friends everywhere. Did you quit the doctor thing and become a real estate agent? Or have you been in the high-priced, over-valued closet all of this time?

USSA, I mean ray ray, I mean OTS, raise an interesting point. I'm not sure what it is, and it certainly isn't interesting to me...

maybe the border will be closed and the invaders sent home to save California some cash too?

Normograph said:

"...I just don’t buy into the whole meltdown thing just yet. The citizenry of CA is extraordinarily wealthy despite any government budget issues."

Some citizens have money and redistributing that wealth is how they plan on closing the $19 million dollar deficit. If they cannot raise property taxes they will create myriads of other "use" taxes on things for which you already have paid.

Despite a huge budget deficit, they still can find money for $10,000 tax credit for new home buyers. Why? Future tax slaves.

We do not have to believe in the melt down for it to occur.

Nomograph says

You can rant and rave all you want, but it won’t change the facts one bit.

The only people wanting to change Prop 13 are non-Californians. More accurately those who came from the East Coast over the past few years who favor MORE MORE govt spending. Its a dead issue.

I am sure politicians would like to change it too. The Democratic mantra in Sacremento is "we need more revenue not budget cuts."

Here's an idea for the Sac Politicians. Cut the enterprise zone credit.

When downtown San Francisco is considered an enterprise zone and lawyers, bankers and controllers who work within those skyscrapers are considered "eligible" based on where they live like SOMA, something about that credit is terribly wrong. It is extremely lucrative too, not some 1K per employee, it is worth up to 36K per qualified employee.

"The EZ program has been one of the more expensive of the state's many economic development programs, costing the state treasury about a half-billion dollars a year and thus contributing to its chronic budget deficits."

Read more: http://www.sacbee.com/2010/06/29/2856142/dan-walters-fight-over-californias.html#ixzz0sHvdf0Oq

I personally prefer eliminating rather useless sections of govermment like the the bridge authorities, CAL EPA, and Cal FDA. I am sure there are a hoard of other redundant functions I do not even know about.

I just got a post card in the mail from a Realtor bragging about selling a house up the street in Sunnyvale, CA (94087, Heatherstone St. for those that keep track) for $751,000. Kinda funny though cause the listed price was $980,000 and was on the market for at least three months. I feel sorry for the buyers as you could rent a nearly identical house for less than $2,500 a month. I say less because there is a house for rent three blocks to the north on S. Mary Ave where they are trying to find renters and asking for that amount and it still hasn't been rented out.

I think the sellers made a good decision.

Sell now. Do not look back. Do not try to hold out for some fantasy sales figure. Sell NOW!

Ryan are you talking about this house? Looks like the original list price was 839k

http://www.zillow.com/homedetails/972-Heatherstone-Way-Sunnyvale-CA-94087/19538727_zpid/

I also noticed that there's hardly anything for sale
some redfin facts about that area:
inventory down 10% vs. April
inventory down 19% vs. last year
sale-to-list at 101%

I wouldn't count on prices falling there unless there's some shock to the system an earthquake may do it.

That's what 700k gets you in California? Wow I don't feel so bad spending $290k

newhomebuyer7 says

That’s what 700k gets you in California? Wow I don’t feel so bad spending $290k

BTW, a house at fox run looks way better than that 700K sunnyvale house.

Toothfairy: Yep, that's the place. I walk around the area and pick up the fliers, it was $980,000 in the beginning. I would hardly say there is no inventory in the area. One went up on S. Mary Ave. (closest cross street is Heatherstone St).I don't know if it is listed on MLS yet, but the asking price is $725,000. (I would say there is a price drop right there.) Not to mention, the other house on S. Mary that is closer to Fremont St. that has a "sale pending", the house on S. Mary close to Remington St. advertising a guest house, the other house on Heatherstone St. less than a block down from the one that just sold. I could go on.

I go check them out cause they are on my walking path and keep track of them. For example, there is another house close by that sold about a year ago for $780,000. The people are trying to sell it now for $789,000 (this one is not on MLS). So far they don't seem to be having any luck.

So, Toothfairy, I would not only count on prices falling further, but I'd say if the people who bought the place on Heatherstone would have waited, they could have got a better deal simply by pointing to the place on S. Mary that had an asking price of $725,000. Not sure how you determined area, but I look specifically at 94087. I measure by taking a walk through the neighborhood and dropping in at the open houses on weekends. Prices will continue go down though the pace of the fall may vary.