Friday, July 11, 2008

"Our prices have fallen about as far as they are going to go"

From the Sacramento Bee:

In a survey released today, the Folsom-based Gregory Group says new home builders sold 1,482 homes during the second quarter of the year in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. That compared with 1,304 in January, February and March. [Sales are down 17.7% YoY.]
The newest sales count – 2,786 during the first half of 2008 – puts the region on track to finish well behind last year's count of 7,407. [Gregory Group's forecast for 2008 is 7,710]
Average home prices continued to fall in April, May and June, dropping below $400,000 for the first time since late 2003. Average second-quarter values of $394,000 are a 4 1/2-year low....
From the Sacramento Bee:
When Carol Wallace sold her Sun City Roseville home two years ago, she got an expensive reminder from her lender. She owed $5,964. Why? She had paid off her adjustable-rate mortgage early. The lender offered to waive it, Wallace said, if she'd buy another house with one of their loans. But here was the point: She had cancer and didn't intend to buy again. She had to pay up.

Two years later, still ill, Wallace still fumes. "It's written in my paperwork when I die to remind my kids," she said. "It says if there's a class action lawsuit, to remember me, to get my $6,000."
Wallace said she knew she had a prepayment penalty. "But I didn't think it would be a problem because I didn't think I would have to move," she said.
From Elizabeth Weintraub's Active Rain blog:
The reporter asked, among other questions, where I felt the market would move over the next year. Honestly, I see signs that we're either at or near the bottom right now. I am not predicting a fast recovery, but things are unlikely to get much worse. Our prices have fallen about as far as they are going to go.
From Canadian Business Online:
Attention, real estate shoppers: the entire U.S. sunbelt is now officially on sale. Prices in many areas of Florida, Arizona, Nevada and California have dropped 40% from their peaks of a couple of years ago, to the point where the deals seem nearly too good to be true...A starter home in Sacramento, Calif., that sold for $215,000 in 2004, is on offer for a mere $129,000.
Are these apparent bargains really as attractive as they appear?...Many believe we’ve seen just the beginning of a monumental real estate collapse. "The size of the U.S. real estate bust on the way down will be proportional to the size of the real estate boom on the way up," says Robert Campbell, a real estate economist in San Diego, Calif., and author of Timing the Real Estate Market. "There’s no slowing down this train. The areas that had the biggest booms will have the biggest bust. Prices are heading lower — way lower."...He believes some states will bottom out in a year or two. Others, such as California and Florida, will have to wait three or four years before prices hit bottom.


norcaljeff said...

Indymac just failed at 4PM, second largest US financial institution to fail.

Patient Renter said...

Another industry clown who makes a living off of the sale of homes calling a price bottom? No way!

I think that nowadays, and particularly as more time goes by, people will stop taking advice from industry folks who were "surprised" by the housing housing collapse, including Liz Weintraub.

Indymac just failed at 4PM, second largest US financial institution to fail.

I love how they wait till after the markets close on a Friday. I guess next week could get downright scary, particularly if the idiots steering this ship attempt to engineer the biggest financial bailout in the history of the world (GSEs) by the most indebted nation in the history of the world (us). Sigh.

Deflationary Jane said...

They do that so the FDIC can move in and establish itsself before the bank reopens on Monday morning.

I know I thought it was a "out with the Friday trash" ploy until someone explained what the FDIC has to accomplish in those 2 days.

Rob Dawg said...

Active Rain. A year ago when people were trying to make the case for merely double digit declines they were attacked without mercy. I think Sacto has another 15% over the next year but damn those who were wrong and still call out the bottom. -IF- this is a good time to buy how come they are selling houses?

Jacob said...

Wallace said she knew she had a prepayment penalty. "But I didn't think it would be a problem because I didn't think I would have to move," she said.

So she knew about the penalty and thought she wouldn't have to pay but her circomstances changed and she is complaining? She knew about the fee.

Although, I thought most prepayment penalties had an out clause if the owner sold the home.

I see signs that we're either at or near the bottom right now

Well which is it? Are we at the bottom or near the bottom or is there just another 5% to go. lol

What are these "signs". All I see are:

--Massive Inventory
--More foreclosures coming, the amount per month has not peaked
--Credit is still tight and getting tighter, which means fewer buyers
--There never were enough buyers to begin with
--Commodity prices are eating into everyones budget
--Interest Rates are going up

We lost 40%, we can lost another 40% from here.

Most of the real deals are in places you wouldnt want to live anyway.

Diggin Deeper said...

The GSE's and their problems far outweigh any credit crisis we've faced to date. With $80B in cash reserves between them, and $5-6T in morgages wrapped up in mortgage bonds, it doesn't take but a very small percentage of those loans to fail before that $80B evaporates and renders them insolvent. Let's not forget what happened to the hedge funds laced with CDO's and SIV's.

Imho, this will require a huge injection of cash reserves into both entities, maybe in the $100's of Billions. Lay that on top of the $100's of Billions already used to prop up the financial system, and pretty soon we're talking about some serious money being pumped into the economy to stave off the problem. It's no wonder we're seeing import prices rising as fast as they are (up 20% YOY as reported yesterday). It's no wonder oil sits over $140 per barrel and gas approaches $5 per gallon. And it's no wonder we're paying higher prices for our everyday needs. Sure there's some speculation in all of this, but its just noise compared to what the dollar buys today versus what it bought two years ago.

It's the money supply required to bail out our nation, that is at fault for the high prices we pay today. Today, the way you temper the problem is to pay less for your home. And if you pay less, those who paid too much, just walk away, adding more fuel and requiring more money supply to neutralize the problem.

The only way this gets better, is if RE prices stabilize, foreclosures abate, and mortgage rates hold firm at current low levels...probably not in the cards...inflation will take care of all of the above.

Jacob said...

Wage inflation would help, but wages are flat and will be so long as companies can hire people in other countries for $10/day.

Inflation without wage inflation will just destroy everyone. Prices on homes come down but prices on fuel and energy and food are going up at a faster rate.

Which means:
--people still cant affort to buy

--if they can they are more hessitant to do so

--people that own that are just barely hanging on will get crushed by the rising commodity costs.

If the fed bails out too many companies then it doesnt help cause we get too much inflation. On the other hand if too many companies fail then the whole house of cards collapses.

norcaljeff said...

They actually do it so the market does freak out so they wait until the market close. Just like Bear Sterns. My prediction is that Lehman Brothers fails by Labor Day.

Diggin Deeper said...

No easy answers, no easy outs. A battle of "flations"...Hard asset inflation vs. paper asset deflation...