Wednesday, January 30, 2008

Mike Lyon: 'This is Going to Get Ugly'

From the Granite Bay PT:

Michael Lyon, chief executive officer for Lyon Real Estate...told the audience the market has changed drastically. In 2001 about 800 homes were sold throughout Placer County in about a month. "Today there are about 2,460 homes for sale in Placer County and only about 219 are sold each month," he said.

Lyon warned that the market is not expected to get better anytime soon. He predicts more of a downtown by the summer and a second wave of falling prices in the spring of 2009. "This is going to get ugly," he said.
From CBS 13:
Thousands of homes sit empty in Sacramento because of the housing crisis, so it may come as a surprise to learn that Sacramento city leaders want to build 3000 more homes in an area ruled unsafe.
From the Sacramento Bee:
In the fourth quarter, 7.3 percent of the Sacramento region's retail space was vacant, up from 6.3 percent a year earlier. Some of the hardest hit areas – Roseville/Rocklin, Elk Grove and Natomas – were retail hot spots not long ago.
From the Stockton Record:
A total of 3,746 notices of default - the first step in the foreclosure process - were filed countywide in the fourth quarter of 2007, according to the real-estate research firm DataQuick Information Systems of La Jolla. That was a 189.7 percent year-to-year increase, compared with 2,961 default notices in the third quarter, up nearly 230 percent year-to-year.

Jerry Abbott, president and co-owner of Coldwell Banker Grupe, Stockton, said he expects foreclosures to continue streaming in for at least 18 more months, putting enough downward pressure on home prices to shrink prices between 10 percent and 15 percent this year. "We're seeing a steady stream of foreclosure listings," he said. "We're not seeing any let-up in it at all. We've still got a lot in the pipeline. It's going to be a tough two years."
From the Lodi News-Sentinel:
Animal rescue organizations in Lodi have had to deal with animals that have been given up by people whose homes were foreclosed."It's just mind boggling," said Patricia Sherman, president of Lodi Animal Friends Connection. "We've got a lot of them — at least a dozen or so calls in the past two months."
From the Modesto Bee:
Restaurants and furniture stores aren't the only businesses struggling to make a go of it in the Northern San Joaquin Valley these days. The ripple effects from the housing market downturn, credit crunch, inflation jump and unemployment increase are putting the squeeze on consumers of all kinds of goods and services...[I]t's sad to note that Salon DeVille and Day Spa in Modesto has closed its doors...At a time when folks likely are cutting back to save a buck, hair care may be one of the things getting trimmed from family budgets.


Diggin Deeper said...

If you've got too many homes and not enough homees, you've probably got too many retail outlets as well...not surprised by vacancy rates rising. Would expect it to rise even further as the economy soften in the area...

Perfect Storm said...

"This is going to get ugly," he said.

Come on Mike just say it with me "were right on track for a 50% decline by 2009", now that wasn't so bad was it.

Gwynster said...

I'm looking at some listings now that are just a short and curly from 50% off (all REOs obviously).

I'm starting to think your 50% off was pretty optimistic PS >; )

Cow_tipping said...

Yes, a hair care salon closing due to housing tanking is I think the dictionary definition of "Fake economy".
The only industry in that area was RE and all the junk to support it, distribute it, pluck it, preen it, and make it look like its been perfectly manicured.

Perfect Storm said...

50% nominal decline, which should be about 3x median income for any given area, historical trends always come back in style even for the greedy realtors, those who listen to an uneducated so called professional are bound to get burned.

Those who stand against the storm will fall, better to take shelter and wait.

Perfect Storm said...

Oh why the frown Gwynster?

Jacob said...

How many business provide a service that people need as opposed to providing services people want.

People need to eat, they want $6 coffee cause it is cool or some other bs reason.

Lots of businesses in this area will be hurting for a while.

Diggin Deeper said...

If we're not careful, those dozen Hawaiian Bar b Que franchises in every strip mall, might be the hottest eats in town. I hear they're still serving Spam...

bubblemachine said...

Jerry Abbott, president and co-owner of Coldwell Banker Grupe, Stockton, said he expects foreclosures to continue streaming in for at least 18 more months, putting enough downward pressure on home prices to shrink prices between 10 percent and 15 percent this year.

Real estate shills like Abbott are just pathetic. They can no longer tell everyone that the bottom is just around the corner and everything will be fine, so they try to put a happy face on the situation by stating that prices will go down (only) between 10 percent and 15 percent this year.

Yo, Jerry... how about a 10 percent drop during the 1st quarter of 2008?

smf said...

stating that prices will go down (only) between 10 percent and 15 percent this year.

They 'may' not be lying...

Didn't Mark Twain state once that there a 'lies, damn lies, and statistics'?

You will notice that some comparisons are made according to a certain date range, so as to get a truthful, if misleading, answer.

Compare foreclosure statistics, which are made YOY. But if you go back to 2005, they look significantly worse in comparison.

Prices 'may' decline 'only' 10%. but overall they could be close to 45% or more from the high. Just add a couple of 10% drops till they add up to a real discount.

During the bust, we never heard of how far down the market really went. It went like this:

Down 15%...
UP 10%!!!
Down 20%...
UP 10%!!!

People kept paying attention to the up days (really dead cat bounces), not realizing that each up day never fully recovered from the down days.

Was the DOW not at 14,000 not too long ago? It is now at 12,500.

Gwynster said...

Emoticon dyslexia, lol that's a wink and a grin!

You are still one of my favorite posters.

SacramentoCrash said...

Lyon is two years behind the curve.... AGAIN!

That is why anyone who listens to a _____ (can't say the name because it is trademarked)for economic advice and trend analysis is as prudent as someone that tries to do brain surgery on themselves!

PeonInChief said...

How many Home Depots and WalMarts can Sacramento support, ferhevensake? Pretty soon they'll be on every street corner, next to the Starbuck's.

norcaljeff said...

Has anyone thought of lowering prices yet? Not sure why its such a difficult concept.

Diggin Deeper said...

Jobless claims pushed upward by 69,000, now sitting at 375,000.

Consumer spending for the 4th Qtr was up a .6%, its weakest showing since 2003. (C'mon people, you can do better than that! Without a better showing, this engine will do nothing more than idle.)

Monoline bond insurer, MBIA, posts over $2 Bil in losses. Projected mono bond losses now pegged up to $200 Billion, not to mention that multi-line insurance companies have yet to chime in. In Switzerland, UBS will post a $4 Bil loss due to additional writedowns (ala our subprime paper) for '08. Same for Credit Suisse. Starbucks will close 100 stores (gasp!)

That about sums up the "containment" theory.

I'm taking tomorrow's job report with a grain of salt. Too easy to mess with.

Anyone believe that total available incomes, as they apply to affordability in this town, will be lower next year.

Protect your ASSets, pay down debt, and be ready to jump on some great opportunities.

Now as you were saying Mike?

Sippn said...

REOs need to be less, they are distressed in more ways than just a bad loan usually. I drove past one yesterday @$699K, was one time listed over a mil. Pile of cabinets on the driveway, needs paint, etc. Never was a million dollar home.

If you pay more than 80% of market for an REO, it better be close to perfect.

Mike IS behind the curve. Early January pending sales for Placer Co are around 350 - 50% higher than his 2007 history - but listing prices have come down and as these sales get recorded, the median price will reflect the price drops that are already happening.

On the 50% drop, no doubt you are seeing close to it on tract REOs (I'm pretty amazed at what a few sold for at high)

Cmyst said...

From the admittedly limited observations that I've made so far -- because I'm not going to waste anyone's time asking to do a walk-through on any of the houses on my list, and none of them have had open houses -- the REOs don't look any different than the others. In fact, more than a few of these houses have been "updated" in ways that have severely compromised the vibe of the house. Aside from basic structural integrity issues, all the cosmetic stuff is not that big a deal to me. Now, sure, if someone who had an appreciation for modern homes and had updated with polished concrete floors or by removing popcorn ceilings or putting in some really cool not-granite counters were to offer their project for sale at a price a little above the REO's, that would be something to consider.

Diggin Deeper said...

There's no clear pattern that's developped outside of escalating price reductions needed to move property. I'll give Mike Lyon some credit. While he may not have seen the onslaught coming, few people, from Washington on down, did. What he does see is tough times getting tougher.

When you can't identify or quantify all the variables in play, there's no chance knowing what the outcome will be.

Fun to predict, but it all boils down to guesswork from here.

Gwynster said...

The REOs I've seen have run the spectrum, everything from just needing some paint and a new lawn to total gut jobs. Pricing seems runs the spectrum too.

I'm just waiting for the late 07 to early 08 defaults to cycle through and begin popping onto the market in late 08.

smf said...

"When you can't identify or quantify all the variables in play, there's no chance knowing what the outcome will be."

There was so much fraud, that actual real #s are hard to come by. Since most used 'owner-occupied' for their 'investment' properties, we don't really know the excess number of homes.

And since this whole bubble is global in nature, the end is completely cloudy.

Diggin Deeper said...

Smf....agreed. The question will soon become, who's got the cajones to jump into this market, when the flames are still dancing across the rooftops.

The feds have panicked, homeowners and banks are beginning to panic, and savvy investors are starting to stir.

G Spot1 said...

I met a title co. employee in South Placer recently who said they've had a real spike in new files opened recently. Always a good leading indicator. Seems that there is a spike in pendings. I think pent up demand plus low interest rates and some lower prices are getting people out in the market. However, I doubt it will last once the pent up demand washes through or if interest rates rise. If you are a seller, cut your price immediately to take advantage. This will probably be the best selling opportunity for at least a few months.

In other words - we are in the middle of a dead cat bounce so sellers should take advantage before that cat crashes through the floor.

smf said...

"who's got the cajones to jump into this market"

Cloudy the future is. Saw the international section of the HBB, a little surprised to find the level of housing speculation in other countries. No idea what demand was real or fake.

"I think pent up demand plus low interest rates and some lower prices are getting people out in the market"

With all the commercials about how you can make money with foreclosures, we really don't know how much housing inventory is being removed by actual buyers buying, as opposed to those purchasing homes expecting a fat return in a few years.

MOST of the people I know realize that the bubble has popped, but they still expect prices to RISE in the next few years.

Diggin Deeper said...

"I think pent up demand plus low interest rates and some lower prices are getting people out in the market."

No doubt...interest rate could be the lynchpin that holds this market together for awhile. While history says that lower Fed funds rates equal lower mortgage rates, there's no guarantee these rates will stay low in the face of credit meltdown. Higher risks usually mean higher rates. Up until now everyone's turned a blind eye to risk.

The historical rate cut/lower mortgage rates worked pretty well when the consumer was spending and the economy was growing. It may or may not work in the present environment.

A single point rise in mortgage rates equals about 11-12% rise in PI payments as rates stand today. With economic conditions eroding, and other daily living expenses rising, that 11-12% could be a decision maker.

Patient Renter said...

Today's WSJ: "Fort Knox is empty".

Just had to share that.

Diggin Deeper said...


They must of bricked a path to Goldilocks house with all that yellow stuff...

Seriously, our gold holdings are the only backstop we have.

Sippn said...

Lyon DOES have better data than the FED - he knows daily the number of sales in his company, etc. where the FED seems to be looking at data that measures months old closings vs the prior month or year. THe data he looks at today, the FED wont see their top level version for 4-6 months.

The FED could do a lot better using different indicators. The growth rate was so low in Dec it will show regional recessions...