Sunday, July 15, 2007

"Exceedingly Patient"

From the Stockton Record:

The latest quarterly new-home sales figures confirm the Valley housing market is continuing to slow under the shadow of tighter lending standards and buyer concerns that prices will continue to drop.

Still, even with sales dropping to the lowest point in recent years - second-quarter sales of 474 in San Joaquin County fell by nearly half from the previous quarter - there are more building projects than ever in the county, according to the latest report on the new-home market by the Gregory Group, a real-estate information and consulting service in Folsom. There were 90 building projects last quarter, up from 70 in the first quarter of 2005, the peak of the long-running boom market when buyers snapped up anything builders could put up.

There also are more unsold homes than ever in the county, the report said. In the second quarter, there were more than 1,000 new homes waiting for buyers - the highest number in the past several years. That compares with only eight homes unsold in the first quarter of 2005.

Interviews with housing experts and home builders said the growing number of new homes on the market is partly a result of tighter lending criteria after the meltdown of the subprime market earlier this year. That knocked many would-be buyers out of the market and led to sales cancellations, said Greg Paquin, Gregory Group president.
Builders say there are buyers and potential buyers out there, though they seem to be exceedingly patient and either look for the best possible deal or just watch market prices.


Cmyst said...

I love the way they spin this stuff: "buyer concerns that prices will continue to drop". Riiiight.
Another of the houses I track went inactive today. The house had gone from 438K to 389K in asking price since April, and it's empty. The only reason I'm even bothering any longer is that the blogs give me hope that eventually the prices will come into my range, and this has become almost a hobby. But without the HOPE the blogs give me that sane prices will return, I'd frankly have given up even looking.
Sometimes, even with all the support and knowledge of the bloggers here and elsewhere, I really feel like just throwing in the towel. I'm not looking at neighborhoods or homes that are obviously out of my league. These homes are all in working class to middle/middle neighborhoods where the median household incomes are well below mine. Of course I'm patient; what other choice do I have? I can't afford to buy at these prices.

Embdddsgnr said...

You've expressed your concerns before, and I share them. Sometimes it seems hopeless, but just look real hard at what's happening out there. There is no way in hell this can continue. Plus, we're following the same trends from the last two bubbles; how can it be any different (other than worse)?

I won't bother to cite any numbers or figures, that's been done endlessly. But I will go completely on gut feelings here, and predict we'll see some asking prices in East Sac (at least the east part, mostly 1960s vintage) drop to the lower 300s by the end of this year. The East Sac and midtown areas are where I'm tracking homes, and aside from a small rash of pendings the last month, most places that have been on the market since the beginning of the year have either lowered the asking price or expired. Many of these are vacant. Remember, this is one of the "desirable" areas.

If it weren't for these blogs I'd die of despair. Those of us who earn above the median and control our debt (oh, and save!) must be patient; we will be rewarded soon.

norcaljeff said...

I guess this is the politically correct way of saying buyers are too stupid to know RE prices are such a deal right now. I saw an ad by Shea Homes telling buyers "To Get Off the Fences." Seems like these guys forget RE is priced at multiples never before seen in history. I'm sure Paquin's talking point to RE insiders has been using that "get off the fences" phase lately because that's all I hear from these guys of late.

I read quote in the SacBee a few weeks ago by a RE "professional" who actually stated that he didn't care what other were saying or what the sales data showed, he was never going to believe the RE market was in a down turn or could even turn lower.

Like the good Book says, good things come to those who wait...hang in there cmyst.

paranoid renter said...

If it weren't for these blogs I'd die of despair. Those of us who earn above the median and control our debt (oh, and save!) must be patient; we will be rewarded soon.

It's not a given. There's too many moving pieces. If inflation kicks in - which it certainly looks like it is, home prices may stagnate while everything else catches up. I'm quite surprised (and releived!) that prices have fallen this far. But I'm also a bit paranoid. For me, the rule of thumb would be to buy if monthly cost of owning is similar to the cost of renting. We are still a long ways from there. If I see a 6 month period during which prices stabilize, I would think that would be the bottom. Doesn't look like we're there yet.

I can't afford a single family home yet, but condos are starting to fall into my price range finally.

Cmyst said...

I still hear and see ads for home loans or refi's that make me wonder if the lending standards really are that much tighter. Statistically, I have to believe they are, because people would still be buying if they weren't.
I think a lot of my anxiety now is because I'm more than midway through what should be my earning years, and I have the nagging voice in my head that tells me I have to make the very best deal possible on a house that I can reasonably pay off in 15 years -- not 30. For me to be able to truly afford to buy a home in a decent, but modest, neighborhood prices will have to drop by at least 100K. That's a lot of money. It's not really a question of me getting off the fence, because I know what I can afford. Ultimately, the cost of renting really does control this, although I am willing to pay a couple hundred more to be able to buy (and I'm probably paying about $200-300 more in rent here than I'd be paying for nicer places in less affluent - but still safe and clean - zip codes). When I think of how far these prices logically need to come down, it just seems impossible.
Thanks for the words of encouragement, especially from those of you who've seen it before. I saw it before, too, but I wasn't really paying attention and I had moved here from a place where houses cost less than 1/4 what they did here at the time, so even though we profited from the last bubble bursting, it still seemed way too expensive to us.

Gwynster said...

"I think a lot of my anxiety now is because I'm more than midway through what should be my earning years, and I have the nagging voice in my head that tells me I have to make the very best deal possible on a house that I can reasonably pay off in 15 years -- not 30."

I'm in the exactly the same position. What keeps me going is watching the prices decline even here in Davis. If the sale down the street from me goes through, the price of a almost identical home at 5th and J has dropped 75K (from 560k to 485k) since 4/06.

The one upshot to all this is that I've lost 22 lbs just from taking a run everytime I get frustrated with the situation >; )

Maybe I'll run the Bay to Breakers next year.

Mike said...

Whenever I feel that home prices are coming down too slow and they might start to swing up.

I remind myself of my Sacramento housing market experience between early 90's to late 90's. When I was out purchasing my second home in early 1999, I still remember the desperate homeowners trying to unload their houses.

In particular, I remember visiting one fairly new 3bed/2bath home in Elk Grove selling for $120,000. The house was on the market for awhile and I could see at least 100-150 real estate agents business cards thrown on the kitchen table (meaning house was on sale for long time and had lots of visitors but there were no buyers). That image still reminds me that Sacramento housing market is nothing special and needs to correct significantly before it is reasonable to buy again.

Therefore, I am still happily renting until prices come back to reality.

Patient Renter said...

"I still hear and see ads for home loans or refi's that make me wonder if the lending standards really are that much tighter."

Standards are indeed getting tighter, often in the form of lenders simply not offering certain products that they used to offer. There's a headline just today from the Blown Mortgage blog:

"In an amazing development Option One has eliminated the 2-year fixed subprime ARM loan from its lending portfolio."

Moves such as this have and will continue to take a sizeable chunk out of the potential homebuyer pool.

Kwitchyerbelliakin said...

I am not merely waiting or fence sitting. I have been a serious buyer and was scared away from the market when the mortgage interest rates dropped and the prices went into orbit. I am glad I waited! The money I saved (the difference between rent and my projected PITI on a house - if I bought one - is substantial). My focus is on one neighborhood of custom houses. I learn about them and watch them carefully every day. Houses that were in the $200-$250K price range in 1999 are now slowly dropping from the $800's last year to the mid $500K s today. I have even found some selling in the mid $400's. What holds me back? - better deals are available! I have been watching as one house which was at $720 3 months ago just fell out of escrow last week at $660K. In this area, Zillow runs high by 50-100k ( I watch the closed sales very carefully). The $680K deal just failed as Zillows ZINdex gave it a $630 value (which is too high according to my theory). Its true houses have been selling in the mid $ 700's earlier this year, but Zillow only shows results from CLOSED sales from 30 days ago. There are two new listings this week within one block of the hosue that failed selling during escrow. Both of these houses are larger and newer and on bigger lots for an asking of $580k. THATS a huge difference of 100k. Buyers will see this differential forcing this failed sales house to drop so that it can be sold. It was purchased a few years ago for $320K and the seller hasd 2 years until retirement. The seller wants out now to get his equity out while the prices remain high (That is a 360 K difference - I smell a HELOC in there) . Many of these houses were purchased for less than $300k only a few years ago. I have tried working with the listing broker but he is a liar and a cheat. He lied to me and tried to cheat me several different times. He has an attidude that needs adjusting- he thinks buyers and sellers need him. I can do everything he can except get first dibs on a listing. If the there is a good deal- HE WILL BUY IT- He has flipped enough to have plenty of cash -- and he brags about it on his website! Disgusting and so predictable. He is the president of the local Realtor board and represents the worst of everything in a broker(He tries to corner his suckers into HIS mortage company. If you don't play his game - he won't talk ti you no matter how qaulified you are - there are that many suckers out there. He neeerds to be in jail. Someone will catch him? Thats why I am a "fence sitter". My biggest problems are NOT the cost of the house but its having to compete with REALTORS for the house that I want. Like vultures, if they smell any fear by a seller, they will strike and buy with cash. I have to compete with these con-artist/Realtors. My other problem is that so many people, including educated and smart ones are buying HELOCS. Zillow doesn't indicate whether a HELOC is on the property in this zip code. If there is a HELOC that means the price won't drop. Any short sales - will prompt a 1099 to the IRS from the mortgage company and that can cost more than a foreclosure. So I am now facing the possibility of having to run property profiles on every house in the area (over 300) to eliminate HELOCS as possible House buys. By the time I get the correct data, I know that many of the "clean" houses may have new HELOCS on them. I have been a willing and qualified buyer for about 8 years when the bubble started to grow with low interest rates. I am glad I waited because I can almost pay CASH for a house with the money I saved (the difference between my rent and projected PITI). I am starting to get addicted to all the cash I saved---that causing some cognitive dissonanace. You see I have NOT had ANY debts no plastic no car payments---My FICO score is probably in the dumps since I have no debt except old mortgage payoffs. I have LOTS of cash and I am renting and waiting for the correct opportunity. If I can only get the Realtors out of here so I can buy a house. Most buyers in this area are reliant on mortgages. Mortgages -- and house prices are sensitive to the interest rates. When the interest rates go up, my affordability INCREASES, since I have a large cash reserve to spend on a house (from savings between PITI and my monthly rent). Prices will decline when interest goes up. Yes to my housing prospects - crap for my stock investments. So if I find someone who has lost their job, is going through a divorce, has a disabling disease that an HMO won't pay for, has NO HELOC and doesn't know a Realtor- I may have a chance. If I fail to find my house, the prices drop or the good deals are grabbed up by brokers, I'll just stay in my holding pattern and remain a cash rich renter and continue with my investment strategies. Last year I made big bucks on HMO stocks. I made an average of 30-50% on each stock. I heard about the movie SICKO, sold out and am watching as the HMO stock prices drop. Maybe I'll be lucky in Real estate as well.

cba said...

....So if I find someone who has lost their job, is going through a divorce, has a disabling disease that an HMO won't pay for,....

Wow...good luck with that.
Sorry, but I could not wish that on anyone, not even RE agents.

Perfect Storm said...

Builders say there are buyers and potential buyers out there, though they seem to be exceedingly patient and either look for the best possible deal or just watch market prices.

These guys see home buyers in their sleep.

Sittin' Out This One said...

Is the Sacramento housing market about ready to meltdown?

Consider the following:

New homes sales 1st Qtr = 1700 (6800 annually)
Inventory = 18,000 (all time high)
Re sale homes = 1500/mon
Implode-O-Meter at 99 lenders
and now, get this
Foreclosures in Sac Area in June = 3400!

Lenders foreclosed on more homes last month than the builders are realtors could sell on a combined total.

And I see not reversal for any of the trends in the foreseeable future.

Perfect Storm may prove to be an optimist!

Fanchew said...

Cmyst, I can understand your frustration. Although at the beginning of my earning years (I have a good 30 years left), the fact that a forward thinking girlfriend of mine was able to buy a house a few years ago while earning a salary that was much lower than my current income is discouraging. How are young people expected to replicate the properity of a generation ago when they can't even get a foot in the door? It might contribute to a attitude of if I can't ever buy a house, why don't I just blow it enjoying my youth. I've certainly fallen prey to that type of defeatist mindset during the boom, where I thought I would never be able to afford a house. I still can't btw but as paranoid pointed out, condos are inching within range.

Perfect Storm said...

Perfect Storm may prove to be an optimist!

In 1989 I purchased a condo in a nice City in Southern California. I rented it out and the funny thing was I could actually rent it for the price of my mortgage payment and HOA dues. With tax deductions I acutally broke even considering repairs. However, I was shocked to see five years later the same unit sold for almost 50% less than what I purchased mine for. Did I sell and lose money no I held onto it because I was not losing any money. I sold it in late 2003. How some of these idiots today purchase an investment property and lose money monthly to the tune of several hundred dollars is beyond me. That is why I say this market can go down 50%.

roger said...

Fanchew, marry me. Seriously, the baby boomers have screwed Gen X, and Gen Y will eat us for lunch. Thorstein Veblen predicted this long ago, and the boomers took it to the extreme. I recognize a lot of people on this site are probably boomers or can identify with them, but they need to recognize the damage their generation has done. When our FICA taxes are at 10%, and without a calculated deflation our wages are essentially worthless, hopefully someone will have the guts to make a permanent solution to this generational problem.

paranoid renter said...

By the time they figure the whole generation thing out, our generation will be too old. I think it's better to spend and enjoy your youth. That's what I did. When the dot bomb bust happened, I was living in the Bay Area and definitely couldn't afford a house. So I took my saving and bought the car I had always dreamed of owning. Now I get to smile every time I drive. I'm not talking about being reckless - just opening the purse enough so that my youth is not spent in poverty in the hope that the golden years will be better. I may be sick or dead long before I get there.

Diggin Deeper said...

"When our FICA taxes are at 10%, and without a calculated deflation our wages are essentially worthless, hopefully someone will have the guts to make a permanent solution to this generational problem."

These problems may be generational, but more likely they are systemic and due to many generations that have allowed debt to mount unabated. Nothing in this country ever gets paid off or paid for! I'm not taiking about budget surplusses (which are probably phony to begin with), I'm referring to a simple balance sheet where what we make and sell to the world covers what we need to run this country and serve our people.

Since the 70's this country has gone from a creditor nation to the world's greatest debt machine. And our people aren't doing much better, internally, with their own finances.

Maybe we ought to demand that all state/federal employees join us on our SS and Medicare programs. I'd bet they'd start fixing the problem pretty quick, if they didn't have their own private programs in place.

HappyinSF said...

Yeah, the boomers came into this world during the most prosperous time in the history of the country, yet seem hell bent on leaving it bankrupt. As captains of industry they are sending our jobs to other countries only to create jobs that service them (healthcare, retail) And the jobs that stayed have become permanently temporary (Thanks Bill Gates, what a humanitarian). So, Thanks for Globalization. Oh, and thanks a lot for George Bush, his Jihad may just end this world, which seems to jive with the Boomers hope that the world will end when they leave it. Worst Generation ever. All the boomer infomercials on PBS with their Doors montages will not change this.

Fanchew said...

Roger, if you're good in computers and have a good job, you're on. Seriously, althouth every generation claims that they have it harder than the previous one, this generation has some legitimate gripes. A recent study showed that American men in their 30s earn less than their fathers' generation did at the same age. However, there is little we can do but cope with the situation. Just continue to save and watch the market and hope for the best. I'll take Paranoid's advice and enjoy my youth in the meantime.

Diggin Deeper said...

As a boomer I do fear for our children. Indeed we have allowed our government to build the largest debt ladened economy ever. But one could take it another one or two generations (back to FDR and then to Nixon) , when this country was taken off the gold standard. On it, today, we'd wouldn't have this problem because there's not enough gold in the world to support it the kind of debt we've run up.

Most boomers I know have planned for the future and have invested and saved their way into a fairly favorable retirement situation. Certainly, far better than our parents and far better than their parents before them. Most don't count on SS to be their only source of income and most are concerned that it just won't be there at the end of the day. What's ever left over, when they pass, will go to the next grow or squander at their whim. And this will, imho, be one the largest transfers of wealth this country's ever seen. Medicare is the only wildcard but healthcare, in general, is everyone's problem.

It's truly a shame that some of our young people don't see the opportunities that still exist in this country. Thousands of successful new businesses are created every year that support families with great lifestyles. It requires a bit ingenuity, and a lot of hard work, but the dream is still available to those that want it.

Patient Renter said...

"Indeed we have allowed our government to build the largest debt ladened economy ever. But one could take it another one or two generations (back to FDR and then to Nixon) , when this country was taken off the gold standard. On it, today, we'd wouldn't have this problem because there's not enough gold in the world to support it the kind of debt we've run up."

I hate to throw in plugs for politicians, but this comment was just begging for a Ron Paul plug.

He wants to eliminate the Fed and the IRS (seriously), return to the gold standard (if possible, at least would like to) and a whole mess of other promising stuff. Check out his campaign.

HappyinSF said...

Most boomers in my family have one or multiple pensions coming in on top of the SS they are currently collecting. I wouldn't worry about SS so much if I was about to be eligible in a couple years, sure it might not last the rest of your life. Try paying into it for a whole career and collecting squat though. Further, I don't know a single person my age who has a job that offers a pension, they mostly have unmatched 401k.
I agree that there is going to be a major transfer of wealth as the boomers kick off. The problem is we are beginning to factor in assistance from the boomers to their children to justify real estate prices, education costs, etc, the problem is that boomers either took advantage of all the opportunities provided to them and are well off now, or squandered everything, so there will be the trust fund haves and have-nots in the rich/poor future. In any event, it sure isn't a great system to have family hoping you'll take a dirt nap so that they can own a house someday, boomers could buy on one state workers income (my Dad did) we have to have two upper middle class incomes to barely squeeze into a ghetto house that costs 1/2 or more our take home pay.

Fanchew said...

I think it all depends on your age and prespective. Sure, the SSN I'm paying is going down a sinkhole in which I'll possibly never see a return. However, on the other hand, being an immigrant from a third-world country, I can appreciate that my parents were able to buy a home in just ten years after arriving in the U.S. with nothing. Perhaps in another ten years, I will be able to do the same. Though it might be a little harder, the possiblity and the hope of a dream realized is still here.

norcaljeff said...

Fanchew, I have a good computer job, does that count? :)

Diggin Deeper said...


You are absolutely right...there is opportunity abundant in this country. Your parents probably afforded the purchase of a home by SAVING MONEY over that 10 year period. Sorry to say, we don't save any money in this country anymore. We're looking for instant success based on a structured 8 to 5 (no earlier no later) job with maternity leaves, sick days, comp days, etc.

Things are constantly changing in this country. When I worked for companies in the 80's we had medical plans that paid everything down to the Kleenex...people abused it by running to the emergency room for every little ailment, costs rose, and companies began scaling down those plans. We had matching 401K's, life and disability insurance, stock options, and other perks. These cost were driven higher each year and slowly faded away.
There's no such thing as a pension any more unless you want to work for the govt. Imho, the only way our younger generations will survive, and afford to buy property, is to save like your parents did, invest wisely, and find multiple sources of income through those investments.

It's tough going to do this but its the only way outside of winning the Lotto and I don't like those odds.

HappyinSF said...

When did they buy? Not really fair to compare today with say 10 years ago, or whenever Fanchew's parents bought. If the youth of today can save with the high cost of everything what will they afford with the insane prices when wages won't pay a mortgage on anything. Yeah save, I guess save the whole price, or just 200k or so to get in the door? Great advice.
Not to take away from Fanchew's families accomplishment..if they did it this century with median or slightly above median wages (or even less) bravo.
It's pretty easy to just say people are not working or saving enough. Everyone can't be a doctor or a lawyer, further how would a society working late all the time work out since apparently working 8 to 5 is not ambitious enough.

HappyinSF said...

Also, we already work more than any other Industrialized nation, even longer hours than Japan with less time taken off. America couldn't get much worse when compared to other nations unless we are looking at the third world. Working longer hours and doing away with basic rights such as maternity leave is not the answer.

Diggin Deeper said...


I agree with most of what you say. There are options if you and yours have transferrable skills. Imho the Bay area is not a place for a first time home buyer. Even the inland areas might be a bit too rich. Have you considered other area's that arnen't so pricey? Texas, the Carolinas, most of the southeast, and areas in the Midwest have reasonable home pricing. A heck of lot more for the money than anything you'll find out here.

If home ownership is a top priority, California is probably not a good place to start. But then again, maybe you have to live here. If so, your outlook is a bit tougher but others are doing it somehow, someway.

HappyinSF said...

We are tied to northern California by our whole lives having been lived here and all or friends and family living here. As far as housing costs, I'm mostly talking about Sacramento and other low rent towns with over inflated prices, especially when wages are so so low. San Francisco has skilled national and international (not just Mexico and former Soviet Union) immigration and according to online job postings, jobs pay about twice or more what the same positions pay in Sac. S.F.'s minimum wage is the same pay as Sacramento admin. jobs, they could earn more money here working at Mc.D's. Me and my wife could buy a modest house in Sac with cash right now, we have been saving for 8 years and the remainder could be pulled from our 401k, if prices go where they should we wouldn't even need to touch the 401k.

I'm not really just talking about housing, I'm talking about all aspects of our quality of life being decreased..And how sad it is that people just accept this as permanent change, for instance you accept that whole states like California are no longer able to support first time buyers.
By the way, they were doing it with toxic mortgages which as we've seen, hasn't worked out so well.

Diggin Deeper said...


I do expect that to change, but it could take time. Any first time home buyer who finally can and does buy in California, should be applauded. They remain the backbone of the entire real estate industry regardless of what the RE agents will tell you. They're new blood and they don't self consume what's already on the market.

Hang in there and let this market come to you...There are some things that will eat away at your buying power, like food, energy, and commodity inflation. But, imho, home prices will retreat a lot faster than inflation will increase.

SF...more power to you when you do finally buy.

Fanchew said...

Norcaljeff: A good computer job works. Now we can negotiate the bride price. =P

My parents bought their house in 1991 for $120,000. I think it was a simpler time back then. They simply drove by, saw the for sale sign, liked the house because of the curtains and proximity to my aunt, and bought the house with a naivete that's appalling. They didn't work with a realtor, they didn't tour multiple houses, didn't demand a inspection and didn't understand English well enough to understand any of the loan terms. If they had bought in recent years, they would have been prime candidates for a subprime loan.

Diggin is right that the instant gratification mentality prevalent in our spending habits has warped the expectations, and limitiions, one would in buying a house. If everyone had waited to save a 20% down payment and bought less home than they could afford, we wouldn't be in this mess.