Friday, April 27, 2007

SL's Water Cooler - April 2007 (Part 4)

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64 comments:

Patient Renter said...

Picking up on a conversation from another thread, with the Spring selling season dwindling and Summer coming up, inventory growing but still a lot of uninformed people floating around, how much room do we have for a whole new slew of FBs?

I can't explain why, but for some reason, negative housing signals like the rising forclosures seem to be prompting some people I know to buy now (as opposed to after the forclosure mess has played out and prices have dropped). Same with inventory, like higher inventory now is a good reason to buy now as opposed to after the inventory has stagnated and prices have dropped, even a little.

Again I have to just conclude, people are stupid. I point them to information and they shoot themselves in the foot over and over.

Anu said...

You can lead a FB to information but you cant make him think

Gwynster said...

I think people are anxious because they feel they were locked out if they didn't buy in 00 or 01. Now they want to make damn sure they aren't going to miss the deals this time.

The problem comes when they think 10% less then a late 2005 price is a deal. This just locks them into a home so they can't bid on any of the good stuff when it comes around. Too bad, so sad.

This also means less competition for us when the market gets good.

Diggin Deeper said...

There'll always be buyers no matter what the market. Stupidity probably takes up a small portion of what's out there and not enough to make difference in the present market. This thing's on life support, with nothing tangible to prop it up.

I can't blame the RE agents. This is their chosen profession and its not easy to stand out and be successful when you have to deal with a market like we're in. If this was group of true professionals they'd really tell buers and sellers the real story. All the past cheerleading chants really don't cut it today. Buyers want value, sellers want the same prices they got last year. The two mix like oil and water. Agents side with sellers because they produce the income and they do this cobra/mongoose dance with buyers that goes nowhere. It's the agent's job to inform and coach a seller into a price that will move his home in a reasonable period of time. Unfortunately, most listing agents don't have the b**ls to walk away from a listing because a seller is unrealistic with his pricing. If they did, this market would settle out allot quicker. Agents would make more money, sellers would lose less money, and buyers would get the realtime pricing.

Sittin' Out This One said...

Patient renter,

The world can not stop turning. Keep in mind that there were buyers in the stock market in 1929 who bought at various stages all the way down...to the bottom where stocks equaled 10% of their highs.

This is exactly why I will not buy until the market has bottomed and maybe even recovered by 5%. The downside risk is still so much greater than any upside gain.

While prices are still falling, the uptick in sales is a dead cat bounce, tossed off a 10 story building.

smf said...

Stupidity STILL reigns supreme. Most buyers that I know are willing to hold on because they expect the market to go down further.

The only ones I know who want to get into RE market right now are speculators (they are not investors in the current form).

I know plenty of first hand accounts of people ready to jump into RE for 'investing' purposes.

Just sad...

Patient Renter said...

smf: The idea of buying an "investment" that is currently losing value (such as is the case with housing) is a joke. I am incapable of comprehending this. At least buying a house with the intent to live in it has an emotional factor that can explain a foolish purchase. For an "investor", there's just no explanation.

Sittin' Out This One said...

Countrywide Lending has over 150 homes for sale in Sacramento. Reportedly, another 150 are in the pipeline. With 300 homes on the market, they probably will own more homes than any other entity in Sacramento, even the home builders.

When the lender owns more real estate in the area than anyone else, and it is likely they will be doubling and tripling their inventory, is it a good time to buy? If you think you can get a good deal today, wait until you see what is available in 24 months. It is pretty clear houses are dropping in value 1% per month. $4,000/mon savings for 24 months is $100,000. Think about it.

AgentBubble said...

Just a quick note that inventory has now surpassed 16,000 (currently at 16,158) and inventory is at 10.5 months! Will we reach 20,000 this year????

Cmyst said...

"It is pretty clear houses are dropping in value 1% per month. $4,000/mon savings for 24 months is $100,000. Think about it."

I think Sittin' is right. Hopefully, that 1% drop will accelerate a bit going downhill. But however you cut it, it's looking like at least 2 years until prices drop to reasonable levels for the average buyer.

I keep telling myself that I should just back off from the housing blogs and the MLS, because the ride down is going to be so slow. But now, watching this whole debacle has become an obsession.

Gwynster said...

I'm still on the amiling list for an auctioneer in the area.

They announced more auctions in Elk grove

Condos
http://www.westcoasthomeauctions.com/live_auctions.htm

Sittin' Out This One said...

Gwynster,

Did you see the minimum bids on those auction houses? You can find better deals on MLS or Countrywide’s REO list, at prices way below their auction minimums. It is a joke and it will be interesting to see the outcome. My prediction: they lower the minimums or only sell the first house on the list.

Cmyst,

I am right there with you on this obsession thing. It is like watching a slow motion train wreck or having a golfing addiction. It takes up way too much time, but it is hard to not partake.

Agent Bubble,

Yes, we will hit 20,000 listings. The population adjusted record is around 19,000. I wonder if more people will wake up when we break that barrier.

What is really interesting is how the publicly owned home builders keep building. They can sell for less than all the FB's from 2003-2007 (yes, the April '07 buyer is newest May '07 FB).

In 2004-2005, the economists said the housing downturn would not be severe this time around, because the publics did not build spec houses (though they sold to spec buyers). What no one thought about was the publics would just write down the land values in 2006, reduce their building costs in '07, '08, & '09 and just keep on building new inventory, which they can sell at ever lower prices. They can sell the 2005 $500,000 model, in 2009 for $250,000 and still make a "profit" in 2009, assuming they wrote the land down far enough in 2006.

Amazing, it is like the builders are going to start eating their own young. What will be interesting now is they will have to start battling the lenders, who will begin to impact the market to ever larger degrees in the coming 3 years.

a_builder said...

Sittin' is right. We keep keepin' on albeit in a much more measured pace insofar as building new inventory is concerned. As an employee of a large builder- I can tell you that we ALL took a hint from Lennar's shocking "retro active" rebates! All the project managers got a kick outta that story.. Anyway, I am here to tell you that we build for LESS than $85/q ft and although our current land costs are historically high we've walked away from bubble era new land deals and we're waiting for the inevitable reductions on new projects. Once that happens- all bets are off- Our pro-formas will have room for 40+% reductions in sales pricing. In 2009 you'll be able to pick up a 5000 sq. ft Serrano McMansion for under 500K mebbe WAAAAY under...

Anybody catch the "Grand OAKening" in Serrano/Folsom today? I duly noted that Shea homes' "Bramasole" (wtf does that mean?) project has reduced prices from 800+K to 600+K inside the gates of Serrano- that's a 25% REDUCTION from 2006 numbers!!!

Toll was giving out free massages!
The custom guys are knocking 20% off and selling upgrades (tile appliances etc) at 90% OFF!

Patient Renter said...

a builder: Good update, tnx.

Sippn said...
This comment has been removed by the author.
Sittin' Out This One said...

a_b,

Thank you for the input. It is so interesting to see the dynamics of this unfold. The downward spiral has different characteristics this time, but it is still all the same as 1990 to 1997.

anon1137 said...

There are several regular posters on this blog that use a suspiciously similar writing style.

Just an observation . . . . could be a coincidence.

Sippn said...

Sitin, a_ builder - you guys are smoken something

Gwynster said...
This comment has been removed by the author.
Sippn said...

The least expensive 5000 sf home in El Dorado Hills is $1,150K, 17 years old and pending.

Gwynster said...

Builder, I noticed that lumber and concrete prices are down too. I know that you mention the 85/sqft but everyone is selling at 200+. Someone mentioned earlier that new homes in the late 90s sold for 78 sqft. That tell you how far down we have to go.

The DH wanted to go out and look at new homes. So we made the rounds and there haven't been any price cuts where we are looking since last year. After looking, I've decided that Beazer and Lennar make the worst homes out there.

The rep at KB's Artistry really hates me after I gave her my frank opinion of what it would honestly take to get me to buy. They think their prices are perfect. I think their about 30% overpriced.

One of the Centex reps told me that new homes were going to lead the market down, just like we discussed here. I almost wanted to buy a home from him just because he was honest.

I didn't make it to any resale openhouses. While at the new homes, I spent a lot of time easedropping on other people's conversations. Seems like a lot of people want to buy a new home but they can't sell their old one. Everyone seemed to have a story about homes sitting on the market with no offers.

AgentBubble said...

Unless I'm mistaken, a_builder's $85/SF price to build a house does not include land. I've built two custom houses for my family in the past, and they cost $85/SF in 1998 and $112/SF in 2002 (including land). I just priced out our next house and it would be $125/SF not including land. All three homes are comparable in size and amentiies too.

Gwynster said...

Thanks agent. The DH actually really likes a KB home. I just can't stand the 200 sqft price.

Now I know how you men with women with nesting urges feel.

I have seen some bank owned properties in west Sacramento for $140 sqft. Too bad they were 2700 sqft monsters.

stfu said...

a_b, what are you guys building for $85 a square foot? Townhomes? My most recent experience for a 2,500sf SFD 2 story has been at least $20-$25 a foot less (not to get into too much detail how I know this, but I'm talkin' Elk Grove 1st move-up, Top 5 largest US builder). And no, the builder I have in mind is not Lennar (the b*lls on those guys!).

On a related note, it'll be interesting to see how the cities and counties make due during this fall out in regards to impact fees and mello roos revenue. Where's Elk Grove in terms of permit and development fees (for example, Vineyard Springs)? $70k per unit? That's a lot of extortion to add on to the price of a home. Who's going to pay for your crumbling infrustructure now, you greedy a-holes!

And Gwyn- tell DH that everyone knows KB builds crap homes. Arguably the worst of the public builder lot.

Sittin' Out This One said...

Agent B,

Thanks for the input. If you build a custom house for $125/sf, then a 2,000 SF house is $250,000. Land is the big variable. If you get a lot for $150,000, then you are at $400,000.

Sippn's 5,000 SF house in EDH costs $625,000 plus land. That shows you prices have a long way to drop from the current $1,150,000.

I will tell you this: Countrywide and Deutsche Bank will both sell you 5500 sf homes today for $800,000 to $900,000 in Catte Verdera. And there are about 15 more in foreclosure right behind those houses.

And Anon1137, what is your cryptic message? Do you think some people here post replies to themselves under different names? Please spill the beans. Do you think Gwynster is really just Sippn, talking to himself? We are all adults here so please tell us. Lander can probably confirm your point, if there is one.

Sittin' Out This One said...

Sippn said...
"...The least expensive 5000 sf home in El Dorado Hills is $1,150K, 17 years old and pending...."

Sippn, do you mean the home that has been foreclosed on by JP Morgan Chase bank? The one that was assessed for $700,000 last year? The one where the lot was purchased for $47,000 in 1984?

I think you can see this market could fall a long way to get back to fundamental values. Land is the biggest factor and it is being written down very rapidly. Construction costs are dropping from 2005 peaks.

The only people smoken something are those in denial about the market and the unemployed painters with nothing to do.

Sippn said...

1984?

Why not use 1958 when the land was $1,500 or so?

Sittin' Out This One said...

Sippn,

Yes, the 1984 price is irrelevant to this current discussion. I just thought it was interesting that 23 years ago the property sold for that amount. If you double the price every 7 years (the standard rule of thumb), the property would be worth $380,000 in 2005. I wonder what lots were selling for in EDH at the top of the bubble?

Sittin' Out This One said...

Sippn,

Just for grins, I pulled the last 4 sales in EDH listed in the Sunday Bee. One sale is genuine. Two could easily be funny money mortgage fruad cash back sales. The fourth one is owned by a company relocation service.

There are 158 listings in EDH for over $1 million. Last week, there was one real sale, perhaps 2. You can't really count the relocation service sale, as it is back on the market. So let's assume 2 houses per week sell in EDH. That is 18 months of inventory.

Now look at pending sales. There are 8 pendings. Assume none of them fall out, and it takes 45 days to close a pending, then you have a rate of 5.3 sales/mon. That suggests 29 months of inventory on the market.

Sippn, any way you look at it, prices are not going up anytime soon.

And please try to get a post in between now and noon. Anon1137 is going to accuse me of posting twice under the same name, possibly to hide my true identity as patient renter....or does he think I am diggin deeper?

Sippn said...
This comment has been removed by the author.
Sippn said...

Sittn - your wish is my command.

How bout we assume that 3 of the 4 sales were legit and that felonies don't happen in 2/3 of real estate transactions!

Your price for land is about right for 2005 depending on location, but land is where you are going to see the most elasticity the most varibility in pricing... when home prices go up dramatically, its the undelying land that is abosrbing the $$, a little is going into the building costs, then counties see they have an opportunity to raise fees and they do.... but fees never, never, retreats.... land has, but not much.

Most construction in the high end slowed down dramatically by early 2006 so the inventory you see is not being added to much by new stuff.

I'm thinking best case in El Dorado Hills, the cheapest tract lot with fees (permits, transportation, parks, schools, fire, etc.) included puts a base of $250-300K into a home before the home is built, financed, managed, sold, etc and the builder's stockholders won't let it get started without profit possibilities.

I'm sure someone will come up with a -$25 per foot to build in order to get these back to fundamentals!


BTW, love these sticky keyboards! sometimes I say somethin I don't really type!

a_builder said...

Everything Toll has for sale at Pinnaclein Seranno is over 5k sq ft and is selling for less than 1 mill right now. (after incentives)BTW out of 7 sales reported by Toll, at least 5 have cancelled (according to workers on site I have spoken to).

Lots were selling last year on Greenview Dr. for ~487,000. The custom guys snapped most of them up. (These are the lots right next to the two F'ed builder houses that mysteriously burned to the ground last summer- interestingly enough. Now their down to 399-420.

Parker Developement has submitted for a grading permit for at least a 100 more lots on the last pristine bit of oak forest in Serrano. PLus they are grading new roads on an older permit just north of Toll. (the NEW grading permitmentioned above was submitted to eldo county very recently is for land due east of toll- actually right behind their const. ofc. trailor. Building permit fees go up by $12,500 in August so look for a large inventory of new starts to happen soon.

My 85/sq ft of course does not include land- just hard building cost. Economies of Scale my brutha.. Lot costs with a mass grading permit (not the onesey-twoseys that amateurs and custom guys do) is UNDER 350K turnkey with streets& utilities

Shea builds for less than 70 (my estimation looking at their lumber and cheap foundations) It is interesting to note that none of the builders in Serrano/EDH save ONE are building to the WIND ZONE requirements... A blatant code violation overlooked (intentionally?) by the ED county country bumpkin plan checkers/inspectors. CAn you say "stucco cracks'?
Side note:
ED county hired a new inspector who had just left Monterey County (where building depts are not beholdin' to builders!) He caused such a stir in Serrano/EDH that he got fired. (stir := enforcing code BTW!)

My main point is this: I am concurring with the above posters who surmise that builders will lead the charge to the bottom, not because we want to, but because we CAN...

a_builder said...

HEY just saw that Channel 3 is going to air an expose on REIC FRAUD monday night at 23:00

Wish I had a TIVO, (I can't stay up that late, gotta go to sleep early so I can keep building inventory in the morning!!! Hopefully Lander will give us a synopsis

Patient Renter said...

a builder: Good update again. Any more info about the situation with the inspectors in El Dorado County? Sounds like a news story. Do you know if it got any coverage from local reporters?

I saw a commercial for that Channel 3 thing too. It could be good for the public to see... that is, if the "investigative reporter" doesn't do a pathetic job. I have extremely low expecations for local television news, but we'll see.

Cmyst said...

Hey, a_builder and Agentbubble --

How hard is it for individual buyers to purchase lots? If one purchases some open land in a residential area,
with intent to build on it, how do you check to make sure that building is allowable? How do you hook into the water, sewer and electric grid?

AgentBubble said...

cmyst,

It's actually pretty easy. Get the parcel number and go down to the county building department where the parcel is and talk to the zoning department and easement folks. They're usually in two different windows (at least in Sac county). They'll verify zoning on the property, and if it's a parcel that's a few acres, you'll want to look into vernal pools/wetlands. That's a BIG issue in the Wilton/Galt area and a potential nightmare if you buy it unaware of the situation. You'll usually purchase land with a construction loan that includes the cost to build your house and the cost to purchase your land, then you'll roll the construction loan into permanent financing at the completion of your house. Building your own home is not for the uninformed though. Costs can easily escalate if you're not prepared. We've learned from some mistakes both times, and each time it gets easier. But, I honestly think it's the best way to go in any market. If done right, you'll have at least 10-20% equity right at completion. For example, we were looking at a parcel of land that would be around $325K. Cost to build the house would be $350K. I could sell it for $775K in a weekend when compared to the other comps I've looked at. But, with building costs dropping and land values dropping, we're sitting tight for right now. If you want more info, just let me know and we can talk offline and I'll give you more information that you'll want to hear :-)

On your question about hooking into utilities, that depends on the property. If it's a country property (usually), you'll have to drill a well and septic system. You'll also add a propane system for your gas. Elecricity is ran to the nearest box from your electrical panel by your electrician. If it's a house in a residential area, all of these issues are just tapped into by the specific contractor (plumber, elecrician, etc) you've hired. It's really very easy.

Cmyst said...

Thanks Agent!

It's not something I'll do tomorrow, but the more I think about it the more it seems like building what you want is best, especially if you want something that the current builders are just not putting up.

I have already researched building the type of home I want, and found nationwide companies that are experienced and even specialize in building it. But one needs to have the land to build it on, and then one needs to have someone local "finish" it -- I guess put down the interior wall surfaces, counters and cabinets, plumbing, electrical and flooring.
How hard is it to get financing for construction?

AgentBubble said...

cmyst,

There are fewer "construction" loan type lenders out there, but the process is nearly identical to applying for a normal home loan with the exception that you have to present your completed/stamped plans to the lender. They will "appraise" your home based on the plans and surrounding comps just to make sure the house is worth what you say you need to build it. They also will need an estimated cost for construction, which the general contractor will be able to provide. During construction, you/the contractor receive "draws" on the construction loan amount to complete each phase of the property (i.e., you may take $20K out for the foundation). You pay interest as soon as the draw is taken out (not the entire loan amount), so you have to plan carefully so that you only take out as much as you need each time a new phase begins.

rivercat said...

Retards in Davis:

Davis housing market anticipated to rise after slump

http://media.www.californiaaggie.com/media/storage/paper981/news/2007/04/30/CityNews/Davis.Housing.Market.Anticipated.To.Rise.After.Slump-2888028.shtml

They think it is over and prices will start rising...

Patient Renter said...

"Home prices in Davis, which saw a steady decline during the past year, have leveled off and are anticipated to increase, local real estate experts said."

That explains it. Any prediction from Real Estate agents is going to be that the near term future is looking up, almost without exception.

Sippn said...

Davis = supply vs demand.

They are hardly building units as fast as the UC is growing, much less other people who want to live there.

Even Gwynster can hardly keep herself and DH away from Davis, as expensive as it is.

I don't know what the draw is.... Must be the burgers!

buying time said...

I would be looking at Davis too if it weren't for hubby's job in Folsom.

But if they started building all over Davis, I think the small town charm that draws people there would be lost....(Its been a while since I visited....so some of the college town atmosphere may have been lost over the last couple years).

Gwynster said...

The draw to Davis is schools. it's all I ever hear about.

The reason I'm drawn to Davis (no kids) is because we want to be able to bike to work. If I worked for Sac State, I'd be buying around Sac State. Davis isn't magic by any means. The bloom came off that rose from me years ago.

I expect gas to keep going up as well as the costs of everything that has to be shipped. If I can keep our gas comsumption down to under a tank a month like we currently do, staying in Davis becomes my gasoline inflation hedge.

I don't envy those people who will have to commute into Sacramento. I used to commute from Midtown to Davis and if I did nothing else it was still a tank a week easily in my little eclispe.

Now what happens to DavisJoesixpack's household budget if both husband and wife have to commute - ouch.

And then there is always that tempation to get the hell out of CA.

Gwynster said...

Buying Time,

UCD is about to build units that are only available to UCD staff - no students or Daddy purchases!

http://www.westvillage.ucdavis.edu/community/plan.html

Gwynster said...

Well I've had a bunch of people from campus email me that CalAggie article. The thing is, they were all making jokes.

Cmyst said...

Once again, on the same page as Gwynster. I think any logical person has to look at world events and believe that we have reached peak oil. Of course, this goes so far beyond mere gasoline, but my goals for housing include buying closer in to where I'm working, and now I'm beginning to seriously consider constructing a very energy efficient and secure home vs. buying something that at least aesthetically appeals to me. A bit of land, doesn't have to be much -- my current lot in EDH is way more than I need -- so that I can put in raised vegetable beds.
One big tip off to me that we're coming to the bottom of the oil barrel is that my employers have switched from emphasizing face-to-face evaluations and have embraced telephone management of clients. This has been talked about for years, but now we are doing it.
They have also changed the way the reimburse mileage, which prompted me to finally ask for a transfer to the zone that EDH is located in vs. the South Sac zone I'd worked for a couple years.
Everything is pulling in tighter.

norcaljeff said...

RE: the auctions in EG. Well, last time they sold those builder model homes thru an auction they also had very high minimums, and yet sold at least 2 of the properties at below the min bid, so don't believe what they print.

In terms of when to buy back in, Sippin got bearish in RE there for a while, about 10 min, now he's bullish again. Pull the trigger on buying a home one he/she's bearish for at least 6 straight months.

A_Builder: Those lack of code enforcements are causing cracks from the wind, which is behind the HUGE mold problems in EDH, so that makes sense. Someone asked if the media would cover this news. Well it was reported on numerous times by all three local TV networks and in the Bee. You mentioned some builders doing not A level type work; care to mention a couple who build "quality" homes?

fishtaco said...

the allure of davis is not hard to put your finger on. it has a feel and life quality that fewer and fewer places have anymore. because it has not been engulfed by surrounding cities it still has its own identity. students and couples that met while they were at davis all remember it as great town to raise their children. by today’s standards, the streets are essentially safe. one does not have to worry much about crime. the community in davis is strong and if one wants that in the place they live it is simple to tap into. it is hard to go to the arts, sports, markets and schools without running into people you know and take the time to chat. i have never lived in the midwest, but i have heard that the feel of davis is similar. compared to other places i have lived, it is inexpensive if one can tolerate not owning. in the valley it has a big target on its back and it is easy to take cheap shots and point out that "it is good place for your car to get hit by a bike" or that the city council is plain wacky or that it is gourmet green or a company town. but obviously, the good far-far-far outweighs the negative and there will always be demand for reasonably priced housing.

Patient Renter said...
This comment has been removed by the author.
Patient Renter said...

"Someone asked if the media would cover this news. Well it was reported on numerous times by all three local TV networks and in the Bee."

This isn't really what I was referring to. What I would like to see investigated is the claim that 'a builder' made that these houses are not up to code and that inspectors are looking the other way.

Diggin Deeper said...

Cmyst

Having been in the oil and energy field for 30 years, I find it refreshing to find anyone who knows anything about "Peak Oil". The general public has yet to understand that we have a serious problem replacing the oil we are using. The world has hasn't found a giant oil field in nearly 30 years.

Today, the middle classes of China and India combined are greater than the population of the US. These people want what we have and they will continue to place great demand on oil, natural gas, coal, and nuclear energy. The world uses over 80 million barrels of oil per day. By 2020, the demand for oil will is projected to rise to 120 million barrels per day.

People don't realize that we lack the refining capacity, the inground volumes, or the infrastructure to satisfy this demand. We are at the limit of today's production capacities and there's little hope that we can ever again increase inground production to meet demand. Those that believe that $2 gas is just around the corner will be sorely disappointed when they have to pay $4-5 a gallon in the future. The price of energy is built in to everthing we consume. As it rises it will continue to take more and more spendable dollars out the pockets of the public and, imho, this will affect their ability to afford real estate. Especially at the over inflated prices we see today. Those that buy into Peak Oil will invest, conserve, and adjust their lives to meet these ever rising costs. Those that don't will complain that the oil companies are to blame. Alternate energy and fuels are at least a decade away. This story is just beginning to unfold and it will drive the economy for years to come.

fishtaco said...

I saw an investigative report about lending fraud on KCRA last night. It is the first of two parts. Wow the lenders are absolute crooks ands the "investors" fell into the age old trap of, "if it sounds to good to be true..."

http://www.kcra.com/news/13226878/detail.html

Since these stories make for good TV I would expect many more of them to come.

Gwynster said...

Fish,

Because of the work I used to do, both in IT and later in research, I got to visit a lot of midwest towns.

Davis does feel like a midwest college town. Ames, IA and Lawrence KS are two that are remarkably similar. That similarity is exactly why I keep thinking that getting out of CA is a good idea.

Sure Ames and Lawrence get snow but with housing prices 2/3 of what they are here, I'm willing to take that hit >; )

Want a town like Davis with almost no snow and no suburban crowding? Try Berea, KY. Some of the most beautiful country out there right at your doorstep, low cost of living and a very progressive collegetown.

Now apparently Davis did take a big hit in the early 90s housing crash. Rental vacancies went to 15% from 2%. People who used apt complexes got hammered. Now I understand why the natives are nervous. I expect more "we're different and the losses are contained and we've hit the bottom of the slump" article from the cheerleaders here as we get deeper into it.

BTW in today's Aggie where was this ad:

Attention UCD Parents - this 4bdr, 2 bath home with 1800sqft is perfect for your student. why throw $$ away on rent? Close to campus, $499,000. Leslie XXXXX, Coldwell Banker.

The rent on a place like that is down to 1950. That's way I throw $$ away, Mr and Mrs stupid UDC parent. 3/2s are down to 1400/1500 although some try to get more but they are gobbling up advertising dollar and sitting vacant.

I know lots of people like this place but I hate it. I love the progressive nature of Davis but it's really all wrapped up in a thick layer or NIMBYism and classism.

Opps I got a little carried away

/rant off

Patient Renter said...

Diggin: You're right that most people aren't aware of the idea of Peak Oil, but you should expect that informed blogreaders such as us wouldn't fall into that category :-)

"Those that buy into Peak Oil will invest, conserve, and adjust their lives to meet these ever rising costs."

Are there are strategies, investment, life adjustment, that go along with what you're saying here?

Patient Renter said...

By the way, I caught the KCRA mortgage fraud story. It wasn't bad, although it focused exclusively on fraud where the buyer was basically victimized, and didn't touch on other, potentially more common types of fraud, such as the kind that involve inflated appraisals and selling homes back and forth.

The bubbletracking blog has a lot of coverage of the various types of fraud going on and how they work.

Gwynster said...

KCRA is supposed to air the second part tonight at 11pm which focuses on the involvement of the Feds (FBI and DOJ).

Diggin Deeper said...

PR

Cmyst's comment was the first I've read regarding "Peak Oil" on this blog, although certainly its come up before? When I mention it at social gatherings, the biggest reaction is a blank stare, or doubt in general.

"Are there are strategies, investment, life adjustment, that go along with what you're saying here?"

Life adjustments are fairly obvious and mean higher prices in almost everything we consume. Call it a cost of doing business, inflation, or whatever. Companies will pass the high cost of energy on to the consumer regarldess of how low WalMart's prices are today.

Years ago renewable energy like solar and wind had horrible investment paybacks when the price of oil sat below $20. Now they look pretty interesting as state governments will pick up as much as half the costs in the form of tax credits. If you could spin the meter in reverse during prime time and only pay $20-30 against a bill that might be running close to $300, it gets significant over time. SMUD is pretty damn cheap today compared to other utilities and people in Sacramento take it for granted. But that could change overnight if feedstock costs keep rising and demand continues to ramp up.

Using Peak Oil as an investment theme... Oil and Gas, Uranium, Precious Metals, commodities, solar, wind, and other renewables etc. are all in bull markets and likely to remain so unless there's a fundamental change on supply and demand side. This is regardless of what the Dow does. If nothing changes (and if one believes Peak Oil it won't for a long time) ride the bull until something does.

Gwynster said...

SMUD is damn reasonable. I'm stuck with PGE and have missed SMUD every month since I've been here. Personally I was pissed when Sac county didn't annex us. Trust me when I say that PGE is not loved in Yolo county.

Peak oil is the reason I stay in Davis. I just don't often use the term. To me it's common sense.

Patient Renter said...

"Cmyst's comment was the first I've read regarding "Peak Oil" on this blog, although certainly its come up before?"

I came across it first on some economics blog a while back, maybe Mish's. I don't know that it's come up here, but I'm sure we all read a lot of the same blogs so I'd assume we're similarly informed about stuff like this. As Gwyn said though, aside from the term, it's kinda common sense - although common sense is still a rare commodity itself.

Patient Renter said...

New Sacramento forclosure data from bubbletracking via forclosure.com. Forclosures are BLOWING UP!

Forclosures / Pre-forclosures (% of pre-forclosures converting to forclosures)

10/31/06: 671/3,059 (21.9%)
11/30/06: 908/2,985 (30.4%)
12/30/06: 1,062/3,167 (33.5%)
01/30/07: 1,322/5,000 (26.4%)
02/27/07: 2,804/5,209 (53.8%)
03/30/07: 3,581/5,467 (65.5%)
04/30/07: 4,627/5,791 (79.9%)

Notice that nearly 80% of all pre-forclosures are turning into forclosures!!!! This is a massive change from even a few months ago.

norcaljeff said...

Davis is a great place to score hemp, but other than that, I think Placer Co is much better, and safer.

Patient Renter said...

There's this funny ad on sacbee.com right now:

"The Happily Ever After Sales Event - Up to $175,000 off! This weekend - Centex homes"

As has been raised before, who are the prominent advertisors in the SacBee? Draw conclusions as you will..

Lander said...

PR-

$175,000 off? Impossible. I thought all those incentives were going away ;)

Cmyst said...

Diggin, I am pleased to get positive feedback from someone who works in energy.

I once again passed out this blog address to a contact today. Interestingly, this is one who is trying to sell his house, and thought he had it sold but "the kid" couldn't get financed. We had a great time discussing sub-prime, real estate bubbles, median price vs median household income, price/rent ratios, etc. He wants to drop his price, having already dropped it 50k, but I get the impression he is concerned about what his grown kids or his neighbors will feel about that.
He doesn't live in the house any longer, and has less than 50k owed on it.

Then awhile later, my daughter called to report that a family friend who had bought a home 2 or 3 years ago was evidently in trouble on the payments. He is a good guy, and he makes a decent income well over median, and has no family to support. He bought a working class existing home in a marginal area. I really thought that he could afford it -- he didn't buy in the new developments, and he didn't buy a McMansion. But evidently, he could not. My daughter says he's never even furnished the place, because he can't afford to, and that he is likely going to be foreclosed on. The only thing I can figure is that based on a prior bankruptcy that we know he filed years ago, he could only qualify for a sub-prime and probably got an ARM, at the height of the market.
It used to be 2 or 3 housing stories a week, now it's up to 2 personal stories a day.