patrick.net

No HARM,

The new California is apparently the "Gold Coast" of New Jersey, er, wait, make that Alpine, New Jersey, home of many prominent rap artists, er, wait a minute, make that Saddle River, NJ. Oh wait, is that Chewbacca I see over there?

I'd buy a condotel if it came with en suite Chewbacca!

Okay, no I wouldn't.

http://finance.yahoo.com/expert/article/futureinvest/43359

Post Mortem

I think the Fed made the right moves at the right time. But the fallout from this crisis will be with us for a long time. Stocks are thought to be riskier than bonds and much riskier than mortgage bonds. Those that believed they could automatically make junk bonds safe by "backing" them with assets, be they homes or railroad cars, have been proven wrong. It turns out that the best credits are general obligation bonds based on all the firm's income and assets, not debts backed by dubious assets.

In the long run, all this is a good development for the stock market. In the last decade, more than one trillion dollars has migrated to hedge funds and untold billions to complicated debt and derivative securities. Who will buy those assets in the future? I believe quite a few investors will return to stocks and general obligation bonds - assets that they can buy and sell at any time they want.

Wall Street has rediscovered liquidity and transparency. Stocks and old-fashioned bonds have them; new-fangled collateralized debt obligations and hedge funds do not. A return to basics will be good for both the economy and the financial markets.

RandyH said:
I feel like everyone is running around concocting elaborate schemes to “solve the problem”, when all that’s needed is so simple it’s stupid: lower your fucking price.

It is starting to happen. My wife sent me a link a couple of hours ago to a property in Cupertino Foothills, which appears to be priced around $1.8M when all its comps (sqft, lot, age, etc.) are in the $2.2-$2.6M range. I have not had time to look into the details on this, but it sounds promising.

Two other anecdotes from people we know - one is a seller in the Saratoga golden triangle, whose buyer fell through because they couldn't swing the financing. Their realtor is balking at relisting at the original asking price, and is recommending that they "start" with a $50K price reduction.

Another is a potential buyer who is having trouble getting approved for a 600K loan. They own a starter home in Fremont with 400K equity and were counting on the 600K loan plus 200K savings to pitchfork them into a 1.2M home in Cupertino. They now may not get the loan, plus they may not be able to get all 400K equity from the sale of their current home... which means the ceiling for their next purchase just fell to 1M...

So far, just as we predicted here. :-)

SP

Holy Run-On Sentences, Batman!
Sorry about my previous post. I am all hopped up on an acai smoothie...
SP

SP, are you a fellow Jamba automatic-reload-card addict? I'm partial to the Bright Eyed Blueberry breakfast (though I assume all the "boosts" are powdered snake oil, so I just tell them to throw in whatever they feel like).

As someone who lives in Modesto, I can confirm that prices have come down significantly, though I can't vouch for the 33% figure. I know asking prices haven't come down 33%, but nobody gets asking price around here anymore, so it's possible the 33% figure is accurate.

Bap33 is right about the new investor-heavy developments turning into slums. I rent a new 4/2.5 in one of these slums and have a view of about 10 other homes' back yards. My back yard is the only one with grass, and about half of the homes on my street have let their front yards go brown. Lots of "for sale" signs in the development too.

I'm looking to buy in about two years, so I'm not exactly unbiased, but I can definitely see a 50% reduction in most of the Hwy99 corridor by 2009.

If we were "typical" ostrich buyers, then "our price" would have just dropped by slightly over $500,000. That's real money.

Patrick wrote:

> I was just talking to a realtor this morning, and he said
> that typical prices in his area (Modesto) are down from
> $450K last year to $300K this year. He was lamenting
> the fact that there are so few buyers and wondering how
> he can keep making a living.

He should consider a new line of work… I have been a “Former” Apartment Broker since 1993, but I should have moved on at the end of 1991. Now is the time to get a job with a bank dealing with REO property (not waiting a couple years thinking that things will turn around like I did)…

> I was wondering how the official statistics can be so wrong
> compared to numbers from someone on the front lines.

The only “official” sales that Realtors ™ report are “full price” “market” sales. Short sales, foreclosures and even distressed sales (where someone needs to sell in a hurry to take a job in a new town) do not count at “official” sales.

> Even at $300K, prices are still not low enough. By traditional
> measures, a $300K mortgage should require a $100K income.
> The typical income in Modesto is definitely under $100K.

Prices do need to drop in Modesto, but remember that the typical income in Modesto (and other parts of Mexifornia) is a lot higher than the “official” numbers since so many people are illegal and work off the books.

@Bap33,

:lol: My patience with trolls (like Sir Randall) is wearing mighty thin these days. Not a one of them has *ever* conceded being wrong on the bubble before today, much less apologized for their previous bragging, juvenile taunts, bear-baiting, etc.

Now that it's obvious they were --as DinOR pointed out-- 100% wrong, while we got it 99% right, not the faintest whisper of acknowledgement or regret. It's always the same old re-hashed B.S. and "let's change the subject" anytime someone calls them on it.

I saw a little report that said that even Prime Pacific Heights prices had dropped 4%. I'll have to see if I can dig it up and see if that was average or $ per/sq ft. I do remember that it wasn't median, but that it was larger houses that were actually still selling.

Randy H Says:
SP, are you a fellow Jamba automatic-reload-card addict? I’m partial to the Bright Eyed Blueberry breakfast

No, the smoothie was from a cafeteria at work. I haven't been to Jamba for years, literally. Got sick after I had some hot soup there around Y2K - don't know if it was caused by the soup - but I think that was the last time I went.
SP

FAB: if the "off the books: crowd here in Modesto is making more than the median household income, it doesn't show. I live in a neighborhood full of these folks. Few of them can afford to water their lawns (or perhaps they simply choose not to), and my '96 Ranger is actually one of the nicer cars on the block.

Bap33: Would love to see prices come down that far, though I'd be happy if we even returned to 2004 prices. Would be even happier if they designated the remaining farmland here in the Valley as Williamson Act land so we wouldn't have to watch developers pave over any more of the world's best agricultural land.

Does anyone one know what latitude realtors have in reporting sales prices when a house is sold? I can see an incentive for them to not report in order to keep comps high.

I know houses here in Dallas are routinely not reported per the contract. In this case it is because the county jumps on the sales price and jacks up the value and taxes the crap out of real estate. Over 3% per year. Houses are cheap here, but when you add the $1000 tax per month on top of a mortgage on a $400,000 house, it's not that great of a bargain. My total taxes almost doubled when I made the mistake of moving here two years ago.

I saw a little report that said that even Prime Pacific Heights prices had dropped 4%.

Was riding my bike along the Marina the other day, and happened to see two houses next to each other on Marina Blvd with both For Sale and For Lease signs up. I quick search on craigslist shows that one is renting @ 12K mo, while its asking price on Realtor.com is $6.1M (er, way too rich for my blood, of course). Would be interesting to know what the story behind them is, though.

I still don't get the attraction of Marina. Isn't Sea Cliff much nicer?

Marina is way too busy.

Marina is sand.

Marina is attractive because if you don't like your $4mm shitshack, just wait a few years and you'll get a chance to rebuild it from ground up.

Marina is sand.

That too.

Also, San Francisco is not Monaco. The marina does not even have pretty boats.

Marina is attractive because if you don’t like your $4mm shitshack, just wait a few years and you’ll get a chance to rebuild it from ground up.

Ah... Natural demolition permit

A great feature in commie SF. :)

I love the smell of nephon in the morning... smells like victory!

-- PS get the Super Piggy Bank

December 14, 1989
Decline Seen In Home Prices In New Jersey

http://query.nytimes.com/gst/fullpage.html?res=950DEEDF1F3EF937A25751C1A96F948260&sec=&pagewanted=print

The authors said that although their data were drawn just from New Jersey the trends and general conclusions can be applied to the entire New York metropolitan region. Cooling in Mid-1988

Using computers, the authors examined all house and apartment sales in the state from 1965 to mid-1988, a total of three million transactions. They show that although house prices here remained at or below national levels through the beginning of this decade, they soared starting in 1985.

From 1980 to mid-1988, the median sales price rose to $141,900 from $57,500, with many communities, among them Alpine and Saddle River in Bergen County and Mantoloking in Ocean County, exceeding that by hundreds of thousands of dollars.

Since then, however, prices have cooled considerably, with no increases seen. In some cases, there have been declines, a trend that could continue, depending on the economy.

Although the high prices eventually shut out many people from the housing market, the authors warned that the end of the decade of rapid appreciation could strand those who bought at the peak between 1985 and 1988. Significant social shifts could also develop, among them an increase in traditional forms of savings and a decrease in the number of moves that people make. 'A Super Piggy Bank' ''A house is not merely a home in America; it's a super piggy bank,'' said Professor Sternlieb, former director of the Rutgers Center for Urban Policy Research and now university professor at the school. ''We're starting to see some cracks around the end, but it still may be the best piggy bank around, if people just hang on.''

Mantoloking might be atypical because it is on the beach. But other towns in the 10 highest-priced communities show similar increases. In Bergen County, Alpine saw prices rise 530 percent in the decade, to $880,000, and Saddle River had a 340 percent increase, to $875,000.

The housing bubble burst after Wall Street started laying off stockbrokers in 1987. Companies started to cut back, the high prices made many corporations move employees elsewhere and the demand for housing eased. Houses that had sold in three months were sitting on the market for nine months or longer, and sellers began lowering their expectations.

Isn’t Sea Cliff much nicer?

yes, but too late for the idiots to figure it out... they most likely never been there. like they never been to Marin ... lots of idiots out there..

http://www.zillow.com/Charts.htm?chartDuration=10years&zpid=19632429

http://www.zillow.com/Charts.htm?chartDuration=10years&zpid=19630680

I cant imagine why someone would pay $2M or even $1.8M for a home in the Cupertino foothills (when many were selling well under $350K...) did our economy have that much inflation. Sure your not catching a falling knife.

(Sorry for the repost from the previous thread.)

Regarding problems in Jumbo mortgage.

I have been hearing similar stuff but not in so clear terms. I have been arguing for a longest time that in spite of the strong job market the market in BA cannot sustain the madness in the face of rates near or over 8. Even at 7 the market started stalling and falling, but with 8% even the Fortress can stall.

Whatever the bailout is, it will have zero impact on BA. It’s one thing to take a political posture of bailing out a poor FB who was tricked into a subprime mortgage. It’s completely another to bail out a Software Engineer who earns over 120K and bought a 1M+ home. Not going to happen.

The real question is what will happen to jumbo mortgage market ? How long the crunch will remain ? Will it keep getting tighter and/or have higher interest rates ? What will be the effect of rate cut(s) by FED ?

I think we need to revisit the topic of ZIRP. It has far more probability of happening now. We discussed it over 1.5 years ago.

Sea Cliff is much more suburban- you drive everywhere and it is socked in with fog most of the time. The Marina is far more walkable and has much better weather. Sea Cliff is, for the most part, geologically more stable. The Marina liquifies, periodically bits of Sea Cliff/Lands End slough off into the ocean or a giant sinkhole eats a house.

TOS says to Eliza…

1- Eliza, you have to remember that I’m just a realtor troll.

You see on bubble blogs, they use REAL price as opposed to NOMINAL prices simply to confuse people like me

2- The picture is exactly the same if you use repeat sales numbers including jumbo loans from the Case-Shiller index (the very index that haunts me in my sleep because I’m too fucking stupid to understand it)…

= = > CA experienced a 100%-150% increase in prices between 2002-2007. That’s why you guys call it a bubble

Conclusion: Don’t listen to me. I’m a looser.

3- so tell me, who wants to buy a house from me, please i’m getting desperate

---------------------------------------------------------------------------

1- It clear that I did not write the above post... I also see a lot of desperation...

2- After trying to silence me by deleting my posts, the "deleter-in-chief" is now is trying some covert-posts-modifications... ha ha ha ... :-) ... I guess calling me a troll is no longer enough ...

3- you can not hide the truth about my post on REAL versus NOMINAL prices .... even if you call me a troll or casey serin :-)

Bottom Line: stupid question of the day:

who is most desperate today?
a) RE agants,
b) mtg brokers,
c) or permaRenters desperate by current jumbo rate, current talk of bailouts, the rising rents and the *slow* pace of prices decline.....

Conclusion:

I can understand that you don't believe the NAR numbers, but how about the Case-Shiller index, of your idol shiller???? It is showing a -3% to -7% decline and *not* a -33% ...

ha ha ha ... talk about alternate reality, wishfull thinking and perverse logic .... :-)

TOS Says,

2- After trying to silence me by deleting my posts, the “deleter-in-chief” is now is trying some covert-posts-modifications… ha ha ha … :-) … I guess calling me a troll is no longer enough …
...
who is most desperate today?
a) RE agants,
b) mtg brokers,
c) or permaRenters desperate by current jumbo rate, current talk of bailouts, the rising rents and the *slow* pace of prices decline…..

ha ha ha … talk about alternate reality, wishfull thinking and perverse logic

---------------------------------

1- This is clear troll tactics at play again. If you can't get the discussion side-tracked off from the truth, you start using scare tactics (see her previous posts on being careful what you wish for wrt recession

2- If scare tactics don't work, start claiming persecution by other posters, even though said other posters have (at first at least) politely and repeatedly offered to debate on your claims

3- If the persecution complex doesn't work, start straight-up mocking re: "idol shiller" or "wishfull" thinking and "perverse logic".

4- Are YOU a desperate RE "agant"?

Bottom Line: stupid poster of the day:

TOS

Conclusion: TOS is a POS

TOS :

Case-shiller is a lagging indicator, but a more accurate one. 3-7% decrease on that BEFORE the jumbo reset is nothing to celebrate if you're a RE bull.

As a 'bitter renter', I'm celebrating the higher loan costs and tighter standards. I could have paid over 1 mill for a house. One of the houses I was looking at was listed at 890k and never sold. It went repo, and is back on the market in the mid 700s.

Yah, I'm REALLY sweating things right now. Not.

A decline of 7% over a few years is a 33% decline.

The reason I didn't even look in the Marina in 1994:
http://www.youtube.com/watch?v=5u3xGVE20Tw&NR=1

>> Conclusion: TOS is a POS

TOS is a POS
TOS is a POS
TOS is a POS
TOS is a POS
....

Besides, I don't really think anyone here, or for that matter, most anywhere else takes the Case-Shiller index as the be-all and end-all housing indicator. It's more representative than OFHEO data, especially for bubble areas since it takes into account all repurchases, using both conforming and non-conforming loans, and it samples geographically diverse cities/regions. It's drawbacks are that it's only SFH's, which in SF and other cities is representative only of the suburbs, it is very much so a lagging indicator as sfbb points out, and it only includes resales.

OFHEO again only accounts for conforming loans, so it has a scant representation of Bay Area homes of interest to most posters and lurkers here. The NAR data for existing home sales is lagging, accounting only for purchases that have gone to closing, and is subject to reporting bias by local and state realtor groups. The NAR pending home sales is a bit more current-looking, but is again subject to realtor reporting bias. Finally, the NAHB new home sales index is nearly useless other than as an indicator of homebuilder status, in that (a) it is only for new home sales, (b) it is constantly revised post-facto due to cancellations, which currently run as high as 30%.

Besides, if anyone else has taken the time to see Shiller's interview from Jackson Hole or to read his paper, you won't be very impressed. He's a bit of a one-trick pony, IMO, and he's not the most articulate or engaging speaker and/or writer.

I enjoyed Ed Leamer's presentation much more.

Sorry about the It's vs Its misuse in line 6...

Peter P Says:
Also, San Francisco is not Monaco. The marina does not even have pretty boats.

You got that right - as a kid, the first time I watched F1 in person was at the '85 GP from the balcony of a family friend's apartment. Had a great view of Prost tearing out of the tunnel, with Alboreto in pursuit. Senna, who was my (and every schoolboy's) hero, blew out an engine a few laps into the race...

I only noticed the boats after the race was over! :-)

SP

SFWoman,

I still remember that time - even though I had never been to SF as of 1989. Everyone in the financial press was so excited at how bullish an event it was to have death and distruction.

I told myself at that point if I every went for my Doctorate in Economicis my thesis would be to disprove that distruction of capital is good for the economy. Well, the highest education I have achieved is an MBA but I still keep that idea in the back of my mind. Of course the last 7 years have given me about a dozen other great thesis ideas too!

Paul

Permarenter,

You don't even have to apply the equivalence factor, TOS will do fine by itself. Just substitute "Tonne" (or Ton) for "Piece".

I gotta reluctantly admit there's some truth in the arguments about pricing, however. Nominal price movements are far more significant in RE calculations than Real price movements. Especially for heavily geared borrowers.

SFWoman Says:
The reason I didn’t even look in the Marina in 1994:
http://www.youtube.com/watch?v=5u3xGVE20Tw&NR=1

I knew about the sand, but watching that made it very real in a way nothing else would. Someone I know recently moved there - I am less worried for him than for the rare exotic car he keeps in the garage most of the time...

SP

It is showing a -3% to -7% decline and *not* a -33% …

Well if I recall prices declined single digit year over year which added up to 40% decline in my area. The declines lasted a few years and the sellers were far more motived to unload as soon as possible. Several articles point to a much more accelerated decline to come. Sounds great to me. Im a buyer after 50% decline.

SF Marina in 1989? you should have seen Santa Cruz which was the center of the quake. Residence didnt get a chance to return until a week later.
Far more a mess than SF. If there was a real quake in centered in SF, the place would be a mess for years to come.

Bap33,

Where I live green lawns front and back are starting to be looked on as Irresponsible Conspicuous Consumption (of water).

There is feverish research going on trying to create grasses which would produce reasonable lawns without needing irrigation (in effect) in the Australian climate.