'We'll Just Wait Until the World Turns Around'
From the Sacramento Business Journal:
Sixells LLC...had planned to build 400 condos around Sacramento has been stung by slow sales, lawsuits, liens and an unusual accusation of forgery against the project manager -- and it won't survive, [developer David] Lonich said this week. "We had a nice run," Lonich said. "All the assets that Sixells owns are encumbered. The banks are going to take them all back and sell them to a third party."From the Stockton Record:
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"I'm somewhat in shock that I could lose my company," Lonich said of the collapse of the housing market. "People have said, 'Why didn't you see this coming?' " He answers them by saying partners, lenders, and much larger real estate firms were blindsided as well.
Terry Hull Sr., who is in real estate, renovated an apartment complex, put up a For Sale sign and announced last summer downtown's first condominium conversion...But the condominiums, each one-bedroom unit costing $135,000, went on the market just as it was collapsing, and less than a year later, the For Sale sign came down. "We decided that it didn't make any sense at all in this marketplace to keep going on the condo thing," Hull said. "We'll just wait until the world turns around."From the Associated Press (hat tip Max):
Meanwhile, the 33 units of Parkside Condominiums, at Oak and Van Buren streets, just north of Stockton Ballpark, are for rent. Six units are occupied for $650 a month each, Hull said.
Jackie Hoffman sifted through a laundry bin filled with aging bread, choosing a loaf of white. Like nearly a third of the first 50 customers to arrive at the Emergency Food Bank of Stockton that morning, Hoffman was new to the pantry. But since she lost her sales job at a local newspaper in December, she has not found work in Stockton, which has the highest foreclosure rate in the country and a hurting job market.From the Sacramento Bee:
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Hoffman, 55, is one of the growing number of "nontraditional" food pantry clients across the country. They include more formerly independent senior citizens, more people who own houses and more people who used to call themselves "middle-class" — those who are not used to fretting over the price of milk.
"We're getting calls all the time from people who want to know how to get here," said Kristine Gibson, community outreach manager at the Stockton food pantry. "And when I ask where they live, they give an address of a nice neighborhood, one where you or I would want to live."
From the lazy byways of the Delta to the shores of Lake Tahoe, a soggy economy and stratospheric fuel prices are hurting Northern California's boating industry...[B]oat sales are down, and marina operators say they're noticing a drop in business.
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David Mayne, a used-boat broker from the East Bay who frequently plies the Sacramento-San Joaquin Delta, said he's run into people with upside-down mortgages who are trying to unload their boats in order to save their homes. But falling prices are making sales difficult. "It's a bad time to be a seller and a good time to be a buyer, just like the housing market," Mayne said.
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Business had been strong until fairly recently. Around Sacramento, some homeowners used their ever-growing home equity to buy a boat. The crash in the housing market brought an end to that. Some people "had a bad home loan and then on top of that, they bought a boat," said Barry Paulsen Jr., owner of Barry Paulsen's Boat Center, a dealership with locations in Rancho Cordova, Fairfield and Oakland. "Those are the people who are selling."
25 comments:
Most of the late model boats I've looked at have owners that are underwater on the loan. They can't buy the loan down to what the boat is worth and I'm not aware of any short-sale process for boats. The dealers are now selling new boats for less than most owe on 2-3yr old boats.
I am in the aviation field. In my travels around the 8 western states, I have seen a marked decrease in activity in the FBO's (Fixed Base Operators), basically the private terminal and gas station for planes. Still some corportate planes, but almost none of the typical privately owned planes around.
Just more anecdotal evidence of how bad it may be getting.
You think it's bad now wait until the Fed starts to raise rates. They have to raise rates -- it's getting to the point they will have to sacrifice GDP growth in order to stop inflation and reverse the collapse of the dollar. Raising rates will cause oil to go down, stocks to go down, unemployment to go up, and house prices to sink deeper still.
Bring on higher interest rates!!!! If prices keep getting lower and lower, I can pay cash for something soon!
Same here, higher rates will just reward my constant saving.
The Fed has lowered the discount rate, what 2% or 3% in a couple yers, and mortgage rates have gone up. So it's not like the lower rates help general people.
Fed will probably hold rates steady for a couple months then start to raise them.
>>>>>
Bring on higher interest rates!!!! If prices keep getting lower and lower, I can pay cash for something soon!
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Be careful what you wish for. That may lead to a depression and we'll all be without jobs. Won't be fun owning a home if we can't afford to pay the taxes and cost of upkeep on it.
Four dollar gas is here! And boy am I glad. It might just put an end to all this obscene wasting of finite petroleum reserves. Maybe kids will start riding their bikes to school again and not be so fat, maybe people will carpool and get to enjoy each other's company, maybe mass transit will become as well developed and efficient as it is in Europe, maybe we can eat local in season produce instead of sour apricots from Chile.
Conspicuous consumption is about to take a long vacation. The excesses of the mid 2000's will fill our grandchildren's history books as the excesses of the disco era filled ours.
The fed has little to do with rates for real estate. Banks tie your mortgage to the 10-year bond that is trading on exchanges. That has been going up, as have mortgages, as fed has lowered rates. This has been going on for at least 8 years.
It's not official yet but here is the next possible Jane abode.
http://stlouis.craigslist.org/rfs/681216439.html
No, we aren't going to be buying right away as renting there just off campus is a fraction of what we pay in Davis. A large 1920s 3/2house right off campus can be had for $1200 mo easy.
We were nervous that that we'd have to take pay cuts but it doesn't look that way at all. Both locations offer similar benefit packages and pay about the same to better then UC.
I was hoping for NC or U Mich (National Primate Center) but it looks like South Bend or St. Louis.
Mr. Hull has finally got his. The egotistical owner of PME trying to sell condos in a ghetto across from an arena that is sucking City of Stockton funds down the drain. lol lol lol
By the way he is the PME owner who rented myself and 81 yr old mother a house in Elk Grove, 2 weeks later I found out house was in fourclosure. I had to move again four months short of the lease we had and he did not return my deposit. I still may sue him. I have until November.
What goes around comes around. lol lol lol
Norcal Jeff is right...the 10 year treasury is the benchmark for mortgage rates and they will rise and fall based on perceived inflation in the marketplace. The dilemma rests with the Fed and in my opinion they are jawboning on rates at this time. They cannot raise rates for fear that liquidity will further crush the financial institutions. They cannot lower rates because inflation will crush the markets and the consumer. They are basically stuck in neutral with only a hope and a prayer that the "stimulus" package will rescue the economy and growth will return...fat chance. Any move or no move from here, has severe consequences. Looks like we have to go through some touph times in order straighten this mess out. In the meantime RE suffers in Sacto.
Oil prices?...Whatever we conserve will be gladly taken up by the demand of emerging nations. The world has already picked the low hanging fruit and we built this country on cheap oil. Major oil fields across the world are in decline,(Mexico, Russia, Saudi Arabia). No new giant finds have been made in nearly 20 years. The world has never produced more than 85 Million oil bbld and that was done in 2005. The demand today is sitting at 87 million bbld. Of that total we use 27 million bbld. If we conserve 10% of our useage, the world gets to haggle over 700,000 bbld, or less than 1/10th of 1% of excess supply with reserves continuing to decline...not a real comforting feeling when you consider that the rest of the developed world already pays $6 plus per gallon.
Get used to $4-7 per gallon gasoline and count $100 oil a blessing.
renttoday--
If you had a lease and were forced to move before the end of the lease, you can sue the landlord for breach. You should include: all cost of moving--the movers, deposits, additional rental cost, if any--the sums are small individually, but they add up to a considerable figure.
Second the lender should have returned your security deposit to you. Under California law, both the former and present owner are responsible for the deposit. If it isn't returned to you, you can sue both the former owner and the lender, and collect from either.
re NorCalJeff: True, the Fed has no direct control over mortgage rates *however* if they begin a long-range campaign of higher short-term rates to combat inflation, the market will buy into the 'inflation is here' psychology and drive the 10-yr and mortgage rates much higher. In that scenario we could see 9% mortgages again like we did in 1990.
renttoday: you should absolutely sue him. why not? it'd be an open and shut case!
>>The excesses of the mid 2000's will fill our grandchildren's history books as the excesses of the disco era filled ours.
Just like the 60s were known as the era of free love, I wonder what the history books will coin the past decade . . . the era of free money, maybe? Is it me or are the word verifications to post getting impossible to read. Damn spammers.
DD --
I understand what you are saying about oil prices, but isn't $130 barrel oil expensive for the developing world too?
Annual Per capita income in Brazil is 6938, China 2461, India 978. How there can be unlimited oil demand at these price levels long term - it will spur too much investment in other energies or changes in lifestyle.
Sacramentia...sure it is as oil is priced in dollars. If the dollar were to strengthen by the 40-50% it's lost in value over the last several years, the price of oil, gasoline, and other energy components would fall dramatically. But it fell for good reasons and will likely continue to fall for the same reasons...heavy debt across the board, subzero savings, huge trade imbalances, entitlement programs that are staggering in cost, war, etc. Any headfake by the dollar to the upside does not address any of the issues that's taken it down to this point.
Emerging nations are not going to stop industrializing their economies just because oil costs are high in US dollare. Their demand continues to rise. While the income levels appear low today, they will go up to meet rising inflation. That's exactly what we did back in the early 70's. Unfortunately that just juiced inflation even more.
Take Brazil for example...it is the only country in the world that is completely energy self sufficient. As the dollar has fallen the real has risen dramatically offsetting the cost per barrel of oil. The rupee is rising, as well as the ruble. China will be forced to allow the reminbi to rise as inflation is rapidly rising in relation to their peg to the USD.
It's all about the dollar...unfortunately, we all have to deal with it...
As for alternate energies...we should have started about 10-20 years ago...
Funny thing about oil prices:
Replace oil with real estate and we can find plenty of parallels between the current price of oil and the burst housing bubble.
Even the 'running out of oil (land)' gets mixed in to good results.
Oil, housing and other commodities suffered from the same disease: rampant speculation.
I can't say for sure when the oil bubble will pop, but that it is for certain to pop in the future.
This period in global history will not be known as the 'Housing Bubble', but as the 'Global Asset Bubble'.
FYI, you only need 4% down to lock in an oil contract.
Hmm...how does that seem so familiar?
High oil prices benefit very few people and countries.
Smf...
I doubt seriously we're running out of oil...imho we're basically out of cheap oil... Sure there's speculation in any market, so the oil market has it's fair share...take $25 off the price or $30 in today's dollars. But the differences between housing and oil stop at three key points. It stops at real demand vs. useful and efficient supply...not the supply that comes from the refinery but the supply that comes directly from the source. Second, it stops with the dollar and it's inability to hold enough purchasing power to push the price of oil down. And third, most availbale oil is held in volatile and hostile areas of the world.
Indonesia recently pulled out of OPEC because it's supplies are declining to the point they have become a net importer rather than a net exporter of oil. Mexico's oil production is down 9% for the first 4 months of this year due to field depletions. 54 out the 60oil producing nations find their oil field declining in production.
The question becomes, can you diminish demand faster than field depletions diminish supply?...some projections state that depletions will strip an addtional 2-3 million bbpd from the supply side by 2010. That's roughly 3% of the world's supply of oil and basically 10% of our needs.
It's apples and oranges when housing is placed in the same argument. Completly different market dynamics.
"Completely different market dynamics."
Is that the same type of argument as to why Florida was running out of a different plane (or whatever the comment was)?
Not to say that the devaluing dollar has nothing to do with the price of oil, because it certainly does.
But we don't have to go into the wayback machine (1998) when a barrel was $10, do we? Has that much changed in 10 years?
Don't fall for the same arguments of those that justified the housing bubble with this oil bubble.
Regardless of what we believe, the world is still way to dependent on the US consumer for their well-being.
And as well documented by now, the housing price bubble is not in the US alone.
And that reminds me. Where is the price of gold now?
smf,
Totally agree about the oil bubble. While I won't make any bets on it, I can see oil falling pretty dramatically early next year - definitely < $100.
"And that reminds me. Where is the price of gold now?"
Right where it should be...basing or correcting for it's next move...Which way? Let inflation decide. And at $880, where is your start point? I feel like I was late to the party at $425 three years ago.
Like I said, it's all about the dollar and what it will buy. We're in a classic period of paper asset(home equity and financial assets) deflation against hard asset(commodities, oil, gold,)inflation. Similar periods have occurred before in our recent history.
"Like I said, it's all about the dollar and what it will buy."
Then let's call it what it is. Because the way I see is that these prices have more to do with the low dollar and speculation than with lack of supply.
It was a few decades ago that gold went thru a bubble as well, where the price eventually did collapse from $800 down to $200.
The only part of this bubble that I have no idea how it will end is because it was global in nature.
When the .com bubble collapsed, it was only a few hi-tech areas that suffered the most.
But with this one, everywhere had its own bubble.
In other news, I have started to notice the beginning of the next step, the short sale of higher end homes.
TIMBER!!
Well oil and other commodities aside, as far as housing goes, prices have only one way to go.
Sure, we have inflation that supposedely would ease some of the losses on homes, however, we do not have wage inflation.
So Joe and Jane that want to buy a house are not getting more money, but are also paying more for healthcare, food, gas, electricity, insurance.
So they have less money to put towards a home.
And remember that for the last couple years of the bubble, many people only barely qualified based on stated income and teaser rates. Those are gone for the most part.
Then consider that we over built and over shot the speculative demand, and way overshot the real demand.
So if there are 100 homes and only 80 renters and buyers then what happens to the other 20? Once people start to realize this more, then there will be a rush to the last remaining exits and noone wants to be left with the assets that they cant sell.
These guys want to wait for the world to turn around. Could work, if they can wait 15 years, and they will never see the $$ they expected when adjusted for inflation.
Some homes I track at ziprealty are coming close to 50% off. These are nice $600k homes now closing in on $300k.
How low will it go? Who knows, but when we get to the bottom and prices level off for 2-3 quarters then we will all have about 5 years at least to buy, very close to the bottom.
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