Thursday, June 26, 2008

'Change or Die'

From the SF Chronicle:

[A] subdued, and noticeably smaller, throng of West Coast building professionals gathered at Moscone Center this week for the annual Pacific Coast Builders Conference and trade show. Only 18,000 to 20,000 people are in San Francisco for the event, which just two years ago drew about 35,000.
...
"We get (potential buyers) with the mind-set: I want to pay this price because I can buy a foreclosed home up the street," said Bill Misura, a sales associate with Tim Lewis Communities in Roseville (Placer County). He was among 30 attendees who paid an extra $395 for a daylong session called "Marketing boot camp for a new era: Competing for today's elusive buyers."
From the Mercury News:
Some of the week's conference sessions have titles such as "How to Sell Homes in a Down Market," "Leadership in the Face of Adversity," and "Change or Die."
From the Stockton Record:
California Building Industry Association...chief economist Alan Nevin...blamed the record number of foreclosures and short sales for depressing the market for new homes, but he also said rising high fuel prices have knocked commuters out of the inland housing market from Sacramento to Riverside/San Bernardino. "Folks are no longer willing to make that long drive, even though that house may be $100,000 less," Nevin said. "You can't justify it when the fuel (to commute) costs $1,000 a month." That will hamper recovery prospects, with future inland home construction growth being fed primarily by new jobs, he said.
From the Appeal Democrat:
In the market for a fuel-efficient car? How about a brand new Toyota Yaris with the purchase of a new home? That's the deal developers of the River's Edge community in Knight's Landing are offering potential buyers this weekend..."Our (home) prices are reduced too," said Mark Westphal, owner of Westphal Group. "We find a need and fill a need."
...
River's Edge is a 67-lot community that offers three home styles of up to five bedrooms in Knights Landing. Knights Landing is a tiny farming community of 846 on Highway 113 just across the Sacramento River from Sutter County.
From the Sacramento Business Journal:
The median price of an existing, single-family home in Greater Sacramento was $233,230 in May, a 34.5 percent fall from the price in May 2007....The region's home price drop was slightly better than the statewide average, where the median home price fell 35.3 percent in May compared to the previous year, the California Association of Realtors reported...In Sacramento, sales were up 76 percent from May 2007....
From the Sacramento Bee:
Statistics show that thousands of...[pay option ARM] loans were made in the capital region. In 2005, pay option ARMs were 18.7 percent of all purchase loans and refinancings in El Dorado, Placer, Sacramento and Yolo counties, according to data from First American Core Logic, LoanPerformance. That rose to 26.7 percent of all loans in the first nine months of 2006, according to the firm.
From Rocklin & Roseville Today:
The Sacramento real estate market appears to have lost some of the steam it had developed earlier this spring. There are still buyers out there but the rush to buy a house has slowed. It is hard to tell exactly what is happening but with consumer confidence in the economy running very low and gas prices headed toward $5 per gallon it is surprising anyone is buying anything right now.
From the Sacramento Bee:
California is in a mild recession and has been since the last few months of 2007, according to the latest report from the University of the Pacific...Jeff Michael, director of the university's Business Forecasting Center, said the recession figures to be fairly long-lived but not severe...Sacramento-area unemployment will average 6.6 percent through 2010, he said.
From the CVBT:
"A housing market that has seen historic price drops and foreclosures is certainly a short-term negative economic influence and has created some undesirable social disruptions and property damage. However, the economic damage has not spread much beyond construction and finance sectors with much of the losses being felt out-of-state by those who financed high-risk California mortgages," it says. Mr. Michael believes the rapid price correction will get the real estate sector moving forward again "much more quickly than in previous downturns, and increased affordability will result in a long-run improvement in the state’s quality of life and business climate."

25 comments:

Jacob said...

Mr. Michael believes the rapid price correction will get the real estate sector moving forward again

Not anytime soon. Prices are way down and sales are up, bur foreclosures are up as well.

Off Topic: What is a good source to get info on open houses (dates)? Roseville/Rocklin area.

Jacob said...

Also Alt-A loans are just started to blow up.

From Calculated Risk:

2006 vintage saw 60+ day borrower deliquencies among Alt-A first liens reach 21.22 percent in May, up 10.5 percent in a single month; 2007 fared even worse, with 60+ day delinquencies ratcheting up 22 percent to 18.55 percent.


Then we still have all those Prime loans that will blow up at some point.

Sippn said...

Jacob - metrolist.com and search open houses - the closer you get to the day you go, the more accurate.

craig's list maybe. local paper also.

MarketGuy said...

Check out this commentary about selling your house in this horrible market. It's written by Janet Siderman, who's a pretty big money Malibu realtor.
http://www.greenfaucet.com/real-estate/tips-for-selling-your-home-in-this-market

Main points: first impressions are huge, market history doesn’t matter anymore, and it’s a buyers market.

I feel sorry for anyone selling right now.

Jacob said...

sippn - thanks, Ill check it out.

Main points: first impressions are huge, market history doesn’t matter anymore, and it’s a buyers market.

I am still amazed when I look at a home online and someone wants me to pay, 300k, 400k, 500k or more for a home and there is just one crappy picture of the home.

Seriously you would think for 6% the realtor could take a few more pictures and (I know this is a stretch) actually have them in focus.

James said...

"He said Congress and the state Legislature need to pass housing stimulus bills now being debated, including provisions permanently increasing the conforming loan limit to as much as $729,000 and creating a tax credit for home buyers."

What a freaking moron! He should run for congress.

smf said...

"Change or Die"

That's a funny one. It doesn't matter very much now what anyone does.

This is a tsunami, and the only thing that can be done about it is hoping to survive with as little damage as possible.

Raising the conforming limit does very little if banks and lenders actually care whether the buyer can make a full PITI payment.

And those who are still waiting for the market to return to its glory days have got to ask themselves one question:

'Has the NASDAQ recovered yet from its 2000 high?'

(And let's remember that a stock market moves far quicker than a housing market)

STOP ROSEVILLE CRIME said...

"We get (potential buyers) with the mind-set: I want to pay this price because I can buy a foreclosed home up the street," said Bill Misura, a sales associate with Tim Lewis Communities in Roseville (Placer County). He was among 30 attendees who paid an extra $395 for a daylong session called "Marketing boot camp for a new era: Competing for today's elusive buyers."

Tim Lewis Homes has a reputation of not letting prices go low on their inventory and just letting them rot. I guess he ponied up $400 to send his sales reps to learn how to scam potential buyers into buying while the market is still in a free fall. What do they need to learn? More scare tactics? More phoney headline untruths to publish in Saturday's Bee home section like "Last Chance to Buy a New Home at these Prices?"? I'll give him some free advice. Lower your prices! You bought that land on the cheap, don't be such a tight a$$. Oh, and I bet anyone lunch we'll start seeing Hybrid car give a ways at these new homes events within the next 30 days. And if one of these builders uses my idea, I want 10% of net new sales :)

Jacob said...

MLS 80063645 is 66% off. Was $1.2M in 07, asking $408k now.

Someone wake me up when we get to the bottom.

Diggin Deeper said...

"You can't justify it when the fuel (to commute) costs $1,000 a month." That will hamper recovery prospects, with future inland home construction growth being fed primarily by new jobs, he said

The very reason Rocklin, EDH, Folsom, Roseville, Lincoln, and other outlying areas will lead us to the bottom.

If we're going to get the state involved in any bailout, how about giving a tax credit (a big one) to businesses who locate in property distressed areas?

James said...

"Has the NASDAQ recovered yet from its 2000 high?'

(And let's remember that a stock market moves far quicker than a housing market)"

SMF, don't read more into this and just this.

The NDX more than doubled four years after the bottom. The S&P hit it peak during the same time. The Dow blew past its old highs.
For anyone who purchased anywhere near the lows, they are pretty happy.

The boom and bust periods are looking very similar to the housing market as well.

Diggin Deeper said...

"The NDX more than doubled four years after the bottom. The S&P hit it peak during the same time. The Dow blew past its old highs"

Those that actually traded those markets did extremely well and I have a hunch that this RE market will, at some point, provide the same opportunity...not yet, but with each pricing tick down, the game gets more interesting.

Markets do get oversold just as they get overbought. This one is acting no different.

Sippn said...

Jacob - THAT was over a mil? with $60 light fixtures and $70 faucets in the master bath, plastic sink in the laundry.....

I've seen Zillow (and others) take square footage, no matter where it is and equate it to value.

The crack house and the lake house all the same, as long as the footage is there.

Actually, its a screaming deal under $100 per foot right now. It'll be gone in a week.

But, Wells Fargo, who loaned over $1 mil in September 2007 on this home that sold for almost 1/2 that 2 years prior....what can I say. I almost think that they, as lenders and appraisers, are to blame for this stupidity, how many $million dollar homes have only 2 car garages (out here in the burbs)? This is the smaller lot, tract side, off the golf course, a block from Antelope, and the home was priced higher than some golf course custom homes on the other side of the project on 1/2 acre view lots - and they weren't selling then.

Go back to that transaction and check out the connections.

Jacob said...

Well the 1.2 Million price was the last sale price according to ziprealty.

I am sure it will get multiple bids at that price, but still will sell at over 50% off probably.

smf said...

"The NDX more than doubled four years after the bottom."

Yes, but that was AFTER the bottom. I doubt that we are there, yet.

James said...

Nor was I suggesting we are at the bottom. Just giving a different view of your statement. Also, not everyone bought at the top, and those who did have most likely already bailed and now have a much lower cost basis.

How far are we from the bottom then?

Diggin Deeper said...

James....how about a long boring bottom...maybe 10-15 years? So long that home buying only takes place because people want to own their space...again.

You may have alluded to it earlier, opportunity lies when "total capitulation" pricing happens just before a bottom's put in, like the Nasdaq during the dot.com bubble.

When you get pricing like Jacob's given us, you have to start wondering if we're not beginning to see that window open up.

smf said...

"How far are we from the bottom then?"

Far. Not too much from bottom pricing but getting there.

Some of those 'cheaper' homes look relatively cheap, but the areas they are located in are far from nice.

The global market is unwinding as well. There are still plenty of stories (for those that care to find them) how foreign investors will save _____ market.

We are in for a wild ride.

(BTW, for those not in the know, we very recently bought a home and would feel lucky to only lose $100K in equity)

Diggin Deeper said...

"and would feel lucky to only lose $100K in equity"

What's not to like about that transaction?

You made a business decision to lose equity on a home you wanted to live in for an extended period of time. Not a bad idea since you were going to lose that equity anyway with your previous home...and you probably got a reasonable interest rate which could end up being a bonus over that time period.

smf said...

DD -

Exactly!

We are seriously thinking that we could easily stay here 20 years.

Diggin Deeper said...

Smf, one thing you didn't do is put that transaction in play during the early part of the downturn. Maybe too much risk was at stake? You waited until 30%+ of that risk was off the table. Who wouldn't?

Prices have now fallen over 40% and we're seeing an uptick in activity. We're seeing isolated pricing that's even an additional 50-60% below that discount... Total capitulation? Could be.

You may be right James....We're sure a lot closer to a bottom today then we were a year ago...where we end up from here is speculation at best....

smf said...

I bought the house for $160K more than was paid in 1999. It was about $200K less than what identical models sold at the high.

As I told my wife, a lower house price also translates to lower house payment.

If we had waited more, our downpayment would have also evaporated, since it was all equity from our prior home.

There were a lot of calculations that were done to see which way we should go.

But total capitulation is not here yet.

The low end is pretty much in capitulation mode.

The rest are still hoping for a rebound.

I can find in the MLS plenty of homes in my neighborhood priced well above what we paid.

James said...

which neighborhood did you buy in?

smf said...

I bought in Gold River.

It's a Powell Home.

3000 sq. ft. or so.

norcaljeff said...

Capitulation won't occur until the nicer homes in the more desirable areas of town hit $100/sqft.