Saturday, July 26, 2008

Sacramento Real Estate Market - July 2008 Water Cooler

Post off-topic links, observations, and stories about the Sacramento real estate market here. Please read the comment policy before posting.

98 comments:

norcaljeff said...

I've seen at least 7 more NODs/REOs since June 1 up on Hillwood Loop in Lincoln Crossing. Hope they enjoy their last 4th of July in a home.

Perfect Storm said...

ALT-A disaster coming fast!

According to a recent analysis by Lehman Brothers, option ARMs that originated in 2006 performed about as well as fixed-rate Alt-A debt for the first 12 months. But by the time they were 2 years old, about 2.1% of performing loans were going 60-days delinquent each month. Compare that to a 1.2% of current loans going delinquent with other Alt-A loans. The rate of increase in delinquencies is even beginning to approach that of subprime, which is about 2.5%.

“It’s a better quality borrower but the rate of increase in delinquency is looking closer to subprime than Alt-A,” said Akhil Mago, the head mortgage credit strategist for Lehman Brothers, said.

Anybody who buys a home now is going to lose big.

Were right on track for a 50% decline by 2009.

Jacob said...

Well I was watching 2008 episode of my house is worth what (I like watching to see the different upgrades people have done to give me ideas... anyway...) and I noticed something different.

The people that the show was on bought many years ago. Before the shows were were people bought in 04 and "appraised" in 2006 for 50-100% profit.

Anyway one home was bought in 2000 and 8 years later appraised for 30k more. Home was around 500k. The second one was bought in 96 and after 12 years went from around 400k to 500k.

So are we back to normal appreciation even for the cherry picked homes for this show? They fore sure cant show any homes boght after 2002 if they want to still show homes that made a good investment.

waiting_for_the_fall said...

We'll be back to normal appreciation when someone who bought 10 years ago will have negative profit if they sell now.

James said...

"We'll be back to normal appreciation when someone who bought 10 years ago will have negative profit if they sell now."

Is that what you really want? Do you think it will be best for your and the country?

Sippn said...

Boy - not a lot of blogging during the past 4 days out there. Did we'all not have anything to discuss? Waiting for the next shoe to drop? Or just hiding from the smoke?



Bored, cruising through links in OFHEO data, etc. (what a geek!) looking at historical appreciation data in Sac, SJ and LA as well as looking at historical wage data, adjusted for inflation.

All 3 markets showed multiquarter 20%+ housing appreciation rates 3x in the past 30 years. All showed several negative quarters during the same period. Yes I remember some of those. Sometimes Sac was lagging, this time preceeded the other 2 markets.

Also interesting, was real wages actually declined during 1999-2006, coinciding with the last price run up (per Case-Schiller chart). But think about this. . . . Case-Schiller's chart is adjusted for "income" so a flat or declining income during that period makes the chart show huge housing price spikes. . . the chart is a "housing vs income"


With fuel prices coming, inflation coming through the drop in the dollar (have we really felt the full effect yet?) and costs increasing hugely in our supplier countries (China w/11% inflation) won't there be real wage pressure coming here soon?

Anybody have employers handing out money for fuel increases? above IRS rate? If you have a company car and gas card, you already have received a wage increase this year through fuel.

Jacob said...

People were I work dont want to drive since the amount we get ($0.505 / mile) doesn't cover the gas for most of them. Of course they also have the big trucks that get 10-15 miles per gallon.

Good excuse to just work remotely thought.

I am just waiting for the other shoe to drop. Waiting to see what the Alt-A loans do. Already we are seeing the default rates rising. Forecasters are now estimating 1.5 Trillion in losses, so that $300B bailout congress is working on probably wont make a dent in this tsunami.

I have given up on 08. Will just save my $$ and wait and see how 09 looks.

Ollop said...

Does anyone have the name of a good buyer's agent Relitter familiar with neighborhoods along the 50 corridor, from the Southport area of West Sac through to Folsom? And preferably, one with experience handling foreclosures/REO/short sales.

Thanks.

waiting_for_the_fall said...

"Is that what you really want? Do you think it will be best for your and the country?"

Uh...no, since I bought two Roseville homes in 2005. I don't want prices to fall that far, but I know they'll have to fall so people can afford to buy without toxic loans.

And yes, I think it will be good for the country to have homes affordable again for the average Joe.

norcaljeff said...

Boy - not a lot of blogging during the past 4 days out there. Did we'all not have anything to discuss? Waiting for the next shoe to drop? Or just hiding from the smoke?

What's there to blog about? Same news every day, well, I guess the only change is how bad it gets each month. Everyone knows it but you. Before you used to b_tch about the bears had nothing to do but post here, told them to get day jobs. Now that we don't post because the news is the same, you b_tch because no one posts. You really don't add anything substantive to this blog. Can't someone put sippin on mute? He got old after about his second post.

jack said...

Any predictions on where we end up on $ per SF? Just asking because I am considering putting in a bid on a house. Sold for about 900k and I am predicting it will go for 400 -500k. It is about 3700 sft. in a nice neighborhood that has had very few foreclosures so far.

Patient Renter said...

What's there to blog about? Same news every day

Yep, pretty much, except the media still has a problem seeing the big picture.

This morning on Fresh Air (NPR) Terri is interviewing some guy who wrote a book on the mortgage mess and they're talking about the "subprime" meltdown. I love Terri, don't get me wrong, but I think the media, even NPR, is simply incapable of recognizing something until they're looking at it in the rear view mirrow. Why are they still calling this the "subprime" crisis? It's the same on Marketplace, or on TV (if you watch it). Why aren't they talking about Alt-A and reset schedules and refinance rates and all of the devastation that is yet to come? They missed the first wave and right now they're in the process of missing the second and the third.

Any predictions on where we end up on $ per SF?

It depends on the area, but I'd guess that we end up closer to $100 a sq. ft. than not.

Deflationary Jane said...

Sippin I can deal with. His clue box is still full with plenty of vowels left, he just takes small vacations away from it, mostly out of hope. I get more productive chat accomplished with Sippin then all the others. We may not always agree but then he doesn't display the fanaticism that the newcomers seem infected with. It's the new wave of "investards" that showed up here that just aren't worth the effort.

Y said...

Now that House prices are finally at a reasonable price, does any of you veteran blogger of this site know any real good buyers agent that are experience and have good knowledge of buying foreclosures.

Hey Lander, why don't you create a topic where your well known and trusted bloggers of this site can recommend to some of us quiet and unspoken readers of some honest and upstanding buyers agent.

campbeln said...

We're looking in Rocklin (was looking in Antelope in 2006, heh) and my personal belief is that we'll see $100 per sqft in Rocklin before this is all over. 'Course I reserve the right to say this is for REO/handyman's special places... but at this point I'm thinking the vanilla houses in Rocklin will get there too. Antelope is already in the $100/sqft range if you're smart (but there's no way in hell I'd buy over there now!).

We were looking at a 2163 sqft'er over there, 4 beds, 2.5 or 3 baths, nice floorplan (look for 2163 in Antelope, you'll find one!). Anyway, it had dropped to $365,000 and we were thinking of offering $330,000 (the same floorplan 2 doors down sold at the top for about $430,000). A full year later that home finally sold for ~$285,000, and there's another one that's been pending for 2-3 months now at ~$211,000! Thank goodness we avoided that poison pill!

Moral here is, be patient! Wait for a bottom, then a sustained uptick. So what if you miss the bottom by 10%, better then jumping in too early and missing it by 20% =)

Cn

Patient Renter said...

Wait for a bottom, then a sustained uptick. So what if you miss the bottom by 10%, better then jumping in too early and missing it by 20% =)

I've posted this many times, but it always seems to be called for again. Housing bottoms are WIDE.

http://img408.imageshack.us/img408/7254/shillerqk7.png

jack said...

Thanks for the input patient renter and campbeln. I appreciate your input.

mopar777 said...

Anyone want to bet that the full ramifications of the FANNIE/FREDDIE bailout or failure will not be known until after the election? It's going to be interesting seeing the money men in Washington backpeddle, obfuscate and outright lie to avoid panic before November 4th.
Expect all kinds of good sounding programs and proposals from the candidates and then the finger after the 4th. And may the cash savers be rewarded and may the prices fall to earth when whoever is lending out there demands 20% or more down and a reasonable DTI.

Jacob said...

I've posted this many times, but it always seems to be called for again. Housing bottoms are WIDE.

Yea many people seem to miss that. Look at any past boom/bust and the top is a spike and the bottom is flat.

People still think we will "recomver" to 2005 prices in a few years.

When we hit the bottom we will bounce around there for 5-10 years. So there will be plenty of time.

I also think $100/ft2 will be close to the bottom. A nice home for around $300k for a 3000ft2 home with a decent sized yard seems good to me, I will buy at that price. Otherwise if the bottom is higher then that, I will just save for another year while the prices are flat and then buy and lower my mortgage.

Tyrone said...

Is that what you really want? Do you think it will be best for your and the country?

Uhhhhhh... WTF!

Did we want:
- loose lending practices?
- rampant mortgage fraud?
- poor underwriting?
- criminal 'subprime lenders'?
- high inflation?
- whoring realtors shamelessly hyping unaffordable houses?
- mortgage backed securities?
...

Years ago I knew this WAS NOT good for my country, but hey... real estate ALWAYS goes up. Fu**ing bull**it!

It's time for all of us to pay for the insanity, even if you didn't join the jackass party!

paranoid renter said...

>>>>>>>>
It's time for all of us to pay for the insanity, even if you didn't join the jackass party!
>>>>>>>>

Very true and what I have been most worried about all along. Even though we didn't go to the party, we're all going to be paying for it!

I work in tech. Our industry hasn't been affected yet, but I'm guess layoffs in 6-9 months given the way the stock market has fallen recently.

norcaljeff said...

Lander, do we have a term for a foreclosed home which was bought recently and is being foreclosed on again on the new buyer? Something like Foreclosure buyers in trouble? I have 2 neighbors who bought early in the bubble pop and they look to also be in trouble. Wonder how big this trend will get.

luca said...

$237,000 for a brand new 2800 sq. ft house in lincoln!

If you guys believe $100 sq. ft is bottom then we are overshooting the bottom as we speak $84 per sq. ft.

How low will lincoln crossing to then $75 per sq. ft.? $60?

Is this the bargain of a century?

Jacob said...

For $100 / ft2 the home must have a decent sized yard, 8000 min, none of that 4500 ft lot crap.

Also Lincoln has high Mello Roos and HOA, so subtract the cost of those from the cost of the house.

Diggin Deeper said...
This comment has been removed by the author.
Diggin Deeper said...

Check you wallet...The Fannie/Freddie bailout is now on the table.

Tally up the results. Lehman on the ropes and headed down, IndyMac taken over by the feds, Fannie and Freddie are bailed out...Who's next????

The GSE's had better get a strong reception to short term bond sales this morning from overseas. If it busts, watch the rates on the longer bond yields take off. We can't afford to lose the confidence of our overseas creditors. The TIC report comes in later this week. It's been dismal on average over the last qtr and shows that foreign confidence and investment in our Treasury debt is beginning to wane. That better turn around quickly or we'll have to turn up the volume on the printing presses and finance our debt through money supply growth...further reducing the purchasing power of our dollar...all the while pumping more and more money in to keep the Humpty Dumptys firmly propped up on the wall.

We've got a perfect storm in play...

Diggin Deeper said...

Paulson did a good job keeping the GSE's in their present "form" by guaranteeing their debt and allowing their stocks to perform as true equities. The markets responded quickly and moved up nicely. Freddie bond sales were very successful. No silver lining though as the dollar which moved higher on the news has come to its senses and is now reversing course. It seems that guaranteeing $5.3T in mortgage debt is a pretty big pill to swallow...

sacramentia said...

Luca -

Someone closer to the production side of the business can probably correct me, but I think hard costs on a track home run in the 55-60 range, so 2800 would be $160,000, plus the lot, fees, cost of sales, etc.. At 237k these guys are probably just keeping the lights on by the time you add in the lot and fees.

In order to keep chasing the prices lower, the houses are going to have to eventually get smaller. You may end up with the best deal ever on a 2800ft only to have one of the larger, more expensive homes in the area in a few years.

If I were buying in this market I wouldn't buy anything that didn't have a spectacular location. In any neighborhood if you aren't buying a lot that is in the top 10% of the lots in the area (location, size, view, etc..) you aren't taking full advantage of the situation.

Patient Renter said...

If I were buying in this market I wouldn't buy anything that didn't have a spectacular location

Agreed, and just by way of it being in Lincoln, combined with the fact that our region is overbuilt, and it'll be a while before the location of anything in Lincoln Crossing becomes desirable again (IMO).

Deflationary Jane said...

Any lines forming outside the banks in Sacramento? I heard that WaMu now has lines along with Indymac. It's all quiet out here.

Diggin Deeper said...

"I heard that WaMu now has lines along with Indymac."

I spoke with a good friend who is a broker and well connected to the bond markets. Says Wachovia and WaMu are next in line. I don't know what B of A was smoking the day they decided to buy Countrywide..but they just might be in the category of the GSE's...failure is not an option!

If main street makes a run on the banking system, and sentiment goes negative on all banks, things could get very interesting overnight.

Deflationary Jane said...

Right there with you DD. Actually, I'd worry about Wachovia before WaMu. But it looks like people are more concerned about WaMu's CA, AZ, NV and FL exposure then Wachovia which was heavy on pick a payments. If Wachovia doesn't fail before labor day, I will be surprised.

Any words on CRE exposure for Schools and Golden One? I remeber those being the big CUs out there.

Patient Renter said...

I don't know what B of A was smoking the day they decided to buy Countrywide

I was always under the impression that the Fed compelled BofA (any big bank would have done just as well) to step in (remember, Fed = Big Banking). I don't hear this mentioned at all anymore though.

Diggin Deeper said...

Word just out from the talking (scratching?) heads is that conforming loan delinquencies have risen to 681,000 loans vs. 300,000 last year. Hey, these are the people who played it straight! Either inflation has caught up to these people or they're just not going to wait for anymore equity deterioration...probably a bit of both...

Diggin Deeper said...

There are 90 banks on the FDIC's "watch list" as banks in trouble...IndyMac wasn't on that list...go figure!

MickeysDad said...

What is a "GSE" ?

sacramentia said...

//en.wikipedia.org/wiki/Government_sponsored_enterprise

James said...

"Any words on CRE exposure for Schools and Golden One? I remeber those being the big CUs out there."

CU's don't do CRE.

James said...

"There are 90 banks on the FDIC's "watch list" as banks in trouble...IndyMac wasn't on that list...go figure!"

Thank Schumer for that. OTS put a statement out his morning blaming him for IndyMac.

Patient Renter said...

Thank Schumer for that. OTS put a statement out his morning blaming him for IndyMac

The OTS can blame Schumer all that they want, just like the President can say all that he wants about the GSEs being just fine, or that subprime is contained, or that we are not in a recession... it doesn't make it true.

From Barry Ritzholtz:

"Why is it that all these rumor-mongerers and shorts are only bringing some firms to their knees? How come they always seem to be the over-leveraged, under-capitalized, unhedged, most poorly-managed companies?"

James said...

True, IndyMac is an overleveraged pile of you-know-what, but could it's demise been a little more orderly? Starting a run on a bank helps nobody. The people with mortgages in workout with IndyMac have to start all over dealing with whomever is going to buy what is left of the company after the FDIC is done. The depositors will get their money back, but when? In the S&L crisis, the FDIC paid depositors back, $200 per quarter in some cases. Not what we need in this liquidity strained economy.

Wachovia is next, then WaMu. Panic starts setting in and even very well capitalized banks will start having deposits withdrawn to the point of destruction.
Where do you keep your money? How many old ladies out there had IndyMac MMA's and CD's which they rely on for income. How many of these people were not as savvy and connected as you and kept their $100,000 on deposit because they have been receiving such great rates for the last several years, thinking the FDIC would take care of them. IndyMac and Countrywide deposit accounts were widely used by retirees as "safe" places to earn interest. As the office of Thrift and FDIC discovered this weekend, IndyMac was not teetering on the edge of immanent default, it was Schumer who caused an 11 day run of nearly $2 billion that brought this bank down. I am sure if you were one of the $11 billion in depositors you would have rathered a buyout than a takeover by the feds.
Where do you keep your money?
It's a wonderful life?

HOUSE2008 said...

Got a question that may get a lot of arrows my way.

Why doesn't the Federal Goverment levy a 1 cent sales tax on ALL stock trades & have this as a rainy day/ hurricane fund for moments just like this? It seems to me that companies when their doing well like to take the profits & have their CEO make millions but when there's HUGE losses they want the public to pay for it.
This Fund would be no different than the tax on your phone bill.


So lets see how well deregulation has worked: LTCM, S&L, Enron, now this...

Patient Renter said...

HOUSE2008: The economist Dean Baker, who many of us respect, advocates something similar to that. I don't really have a position on it one way or another (I suppose it is a hell of a lot better than an income tax), but I'm sure it's worth being looked at.

Regarding Schumer and Indymac, sure, maybe his letter brought them down, but it completely inevitable. The situation facing them (and all mortgage lenders) is only going to get worse. It sucks that it had to happen, but if it was last week or next month, does it really matter? If not Schumer, but someone else who started it all, does it really matter?

I feel I should mention that I despise much of Schumer's work, but in this case, I don't blame him.

norcaljeff said...

When to go get my weekly Pita Pit fix today. Opps, store is closed, for good. Went next door to get a nice iced tea at Teaz Me, ooops, sign on door said closed. Moving boxes were all over the place. Sign taken down.

Add these to the list of businesses in Roseville that have been 86'd. You can pretty much bet on these same businesses, and similar, to be shut down in Laguna, Natomas, Elk Grove, Folsom, Lincoln, Cameron Park, etc. if they haven't already been shut down.

Washington Mutual traded at 35% lower than it did on Friday. That will be gone by year's end. National City is next, probably this weekend. Lehman Brothers by end of year.

The PPI Index is supposed to spike 10% this month when that number is released later this week.

Gold at $980/ounce is looking pretty cheap.

James said...

In the commercial lending area in Sac, I had lunch with a few colleagues today and found this conclusion.
Money is tight. duh... Citi is only lending to existing borrowers and at elevated rates. Lehman Bros stopped lending all together. Sonoma National (now owned by Sterling) was unable to fund on a couple of recent transactions. A couple of the de novo banks in Folsom do not have enough deposits to lend or are going to be acquired. River City facing a few problems. American River Bank is facing similar issues as RCB. Wells Fargo is lending as normal at decent rates. B of A seems to be status quo as well. Umpqua is still active. WaMu is offering last ditch effort stupid pricing in order to get some loans on the books.
SBA purchases are actually picking up for some CRE brokers.
In any case, that is the word on the street.

James said...

"Regarding Schumer and Indymac, sure, maybe his letter brought them down, but it completely inevitable."

Yes, but it can be much more orderly and controlled if jerks like Schumer would work to keep the public calm, not panicked.

"The continuing stampede on IndyMac suggests that Americans either don't understand deposit insurance or have lost faith in the banking system."

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/07/14/BU4I11P019.DTL

Diggin Deeper said...

If some politician has the power to bring down the likes of IndyMac, can you imagine what a group of politicians in committee could do or an entire Congress attempting to bail out the GSE's might come up with?

inpd said...

Need Advice Did I Get It Wrong
==============================

Everywhere I looked, homes were
over-priced except in the heavily
effected REO areas.

So I bought a 3000 sq foot home
in Laguna West Elk Grove. Two streets
from a lake in a school district
(Joseph Sims) that ranks 9's and
is a CA distingished school.

It cost $310K. Floor plan is great,
but fixtures are cheap (i.e. no tile,
oak versus cherry cabinets, tile
counters not granite etc.)

I thought I made the right decision
but am now worried it could sink even
further?

I don't want to time the bottom, but
I don't want this to sink to $255K
which is what the home sold for new
in 2000.

Patient Renter said...

inpd: Sounds like you did alright. Just by way of you having bought into a declining market though, the value of your home will surely go down more, but how much, who knows. As long as you plan on staying in the house for a while (long term is good when buying a house), what happens to the value of your home in the short-term shouldn't matter.

inpd said...

But I hate being stuck and I really don't want to live in Elk grove!

But its the only place I see that isn't overvalued.

I hope to move again in 3-5 years time
when areas like Lands park, Davis etc
have corrected.

paranoid renter said...

inpd,

If you didn't want to stay long term, it was not a good decision to buy in this market. Chance are Elk Grove will fall faster and harder than areas like Davis.

Diggin Deeper said...

PR...maybe that happens, but don't you think that areas that have fallen as much as Elk Grove, Natomas, West Sac. etc. will give way to areas that are overinflated relative to the current market? I know location makes a difference, but when you get into a freefall like we've been in, I would think that no area is all that safe.

inpd said...

PR,

So you think that the price of homes built around 2000 could go back to near the original prices
when they were new?

Patient Renter said...

In theory, prices will revert to their historic mean plus whatever appreciation they would have gained for inflation. So assuming that prices were nice and level in 2000, prices at the end of this bubble would still be higher than they were in 2000 after appreciating with inflation. But, this is just a generalization.

It's possible that prices could "over-correct" below the historic mean (just as they shot up way beyond the historic mean during the bubble), particularly in areas that are substantially overbuilt or generally undesirable. I have no idea where things are going to eventually end up. All I know is that the current direction of things is still down, and that an overcorrection is a big possibility.

Patient Renter said...

BTW, anyone catch Jim "Badass" Bunning's commentary? It's about time Congress had another voice of reason amidst all the insanity.

paranoid renter said...

Patient,

I think we will over correct. Based on where the stock market is right now (and probably headed lower) I foresee layoffs in the next 6 to 9 months. At that point, unemployment will rise way beyond where it was in 2000. I'm getting really pessimistic about the whole economy...I just don't see what can possibly pull us out of this slump. From what I understand things are _much_ worse than are being reported by banks.

norcaljeff said...

So I bought a 3000 sq foot home
in Laguna West Elk Grove. Two streets
from a lake in a school district
(Joseph Sims) that ranks 9's and
is a CA distingished school.


I believe Lincoln is a better place and they have stuff fully loaded at $100/sqft now. I think EG and the rest of the south area will go below $100/sqft easily. $255K is the max I would pay now, but I know it's going lower. They are in bad shape, basically, North Stockton, subprime bubble capital of the world.

waiting_for_the_fall said...

inpd,
you're screwed.

Jacob said...

If you planned on moving in a few years you should have just rented.

When the desirable areas fall in value, the homes in the less desirable areas will get crushed. It doesnt matter how far they have fallen already.

Diggin Deeper said...

The TIC (Treasury International Capital) report today, for May, was another disappointment. Showed a $67 Billion of net Foreign purchases of Long Term Securities which is shy of the approximate $85B needed each month to finance our debt. The disturbing number was the "all in" financing by foreign concerns which includes long and short term debt bought by foreign concerns, which came in -2.5B.

Why should this matter? It's becoming clear that foreign countries are losing confidence (and money) by investing in our Treasuries and withhout their cash, we've got to print our own in order to keep the lights on.

More liquidity, weaker dollar, higher inflation, lower RE affordability factor...tougher Sac real estate market.

inpd said...

I agree with some of you and disagree.

Firstly, I disagree comparing EG with
Lincoln. Lincoln is 30 miles away from
downtown and Laguna West 12 miles.
Also, LW has 3 distinguished schools
all side by side. Only Davis has that.

But I do agree that areas like Lands
Park, Davis etc will fall and fall
hard. I checked that those 1200 sq ft
homes in Lands park that now cost
$400K cost $120K in 2000.

Whether other areas fall even more
will depend, what's the cause,
what's the effect. I would argue that
the sudden drop in decent areas like EG
will pull the more affluent areas down.
LP is of course better than LW, but
$100K better for a half half the size?

The way I see it, EG, Natomas and
West Sac have corrected. Other areas
have not

James said...

"I checked that those 1200 sq ft
homes in Lands park that now cost
$400K cost $120K in 2000."

inpd: you will be just fine in the long run, can't say much for the next 2-5 years though. The best thing is to just get to know your neighbors, keep you house and neighborhood looking nice, and all will be well in 5 years or more.

You ask why those Land Park homes sell for so much? It's the community. Also, there were not many $100 sq ft homes in LP in 2000, you might be confusing Hollywood Park, South Land Park, or Curtis Park. If it was that cheap, it was a pile of junk and $150,000+ in improvements has probably been done to it. That same 1200 sq ft LP house also probably rents for $2000 per month, can't say that for most Elk Grove homes.

Diggin Deeper said...

"When the desirable areas fall in value, the homes in the less desirable areas will get crushed. It doesnt matter how far they have fallen already."

Unless they've already been crushed. More likely the reverse is true...You now regularily see sub $120per sq ft in the hardest hit areas while the more desireable areas are still up close to $300 or more. That's a big disparity, even adding in a solid premium for location.

inpd said...

Diggin deeper,

So you agree with me.
That the low prices on EG, Natomas
etc will drag down the prices
of LP and these foreclosure
hit areas can't drop too much
further.

I just ran the math.
The home I will buy cost
new $256K in 2000, adjusting for
2% p.a. inflation the home in today
dollars is about $300K and I paid
$310K.

inpd said...

Hi James,

I live in mid town and a few
sets of friends bought those
1200 sq foot homes for $400K
recently.

I checked up on trulia and
in 1999, 2000 they went for
$120K. Now these are in lands
park but not anywhere near the
park, but they are certainly not
in CP or HP.

Also, rentals in LP are now down
to $1600-$1700 per month for a 2BR
1000-1200 sq ft home.

Diggin Deeper said...

inpd...

Yes for the most part I do agree. I believe that the price decreases experienced in the hard hit areas will eventually weigh on the more desireable locations rather than the other way around. Buying at close to $100 per sq ft can't be all bad as you've already picked nearly 50% off the highs... as long as you favor a longer time horizon. Who knows, you may have bought close to the low for that area while the Curtis and Land Park areas still hold up close to that $300 per sq ft level. Got to believe when its all said and done, it's these areas that will contribute most to what's left in the general price reductions for the Sac area.

norcaljeff said...

The way I see it, EG, Natomas and West Sac have corrected. Other areas have not

Good luck with that. You better buy two if you're certain the bottom is in.

Diggin Deeper said...

inpd

This risk is this is not a traditional market of sellers. It's a market of dispassionate banks unloading unwanted foreclosed inventory, upwards of 60-70% of all sales each month. You could see prices overshoot the mean as Patient Renter pointed out...but those prices probably won't reflect what the true market is for very long.

As pointed out earlier, time horizon is the key...the longer yours is the better chance you have of having made a good decision.

We're quickly returning to California homeownership for sake owning your own place, raising families, schools, etc.

What a concept

inpd said...


We're quickly returning to California homeownership for sake owning your own place, raising families, schools, etc.


Getting a good deal is important,
but moving on with your life and
settling down is more important.

I could have got my home for $20K less
in a few months, but when I'm 60 it
won't matter too much.

wimpyVO2max said...

Credit Suisse says US housing bottom Spring 2009

"Lack of construction activity to help reach a peak in inventories in spring '09 - the key to our Overweight stance. Based on our
supply-demand analysis, we believe the sharply lower construction activity we've seen (and even further declines from current
depressed levels) will help reach a peak in housing inventory in spring '09, as lower permit activity should translate into
significantly lower new home completions in coming months (completions are currently 29% above June permit levels, with a
typical lag of 6-7 months) and as improving affordability trends should help demand to gradually stabilize (absent a
meaningful increase in rates). We see this as an inflection point for both the cycle and our stocks, as the bottom in
homebuilding stocks has historically been coincident with a peak in inventory, since this peak tends to signal the beginning of
a gradual return to price stability."

inpd said...

wimpyVO2max,

Creditsuise is a respected source
and they have a nice chart showing
the number of sub-prime home loan
set to reset by month which also
suggests Spring 2009 is the end.

This of course ignores the ALT-A
problem (if it is as big as people
say). Does anyone have a pointer
to a nice chart or figures for the
ALT A problem?

inpd said...

Okay I found

http://www.bubbleinfo.com/statistics-2007/2007/3/15/arm-reset-schedule.html

But is ALT-A the same as option-arms?

If so, there is going to be another bust,
but it may be a bust on a different
type of borrower (perhaps Davis, LP ...
buyers) since ALT-A is between
prime and sub-prime.

James said...

Alt-A is not the same as option arms. You are confusing an assigned credit risk with a credit product.

Diggin Deeper said...

Aren't loans for second homes and non-owner occupied properties considered Alt-A with various type of loan products under the Alt-A umbrella?

Patient Renter said...

Does anyone have a pointer to a nice chart or figures for the ALT A problem?

This is one of the infamous credit suisse reset charts.

http://www.irvinehousingblog.com/wp-content/uploads/2007/03/reset.PNG

Note, the real damage from alt-a doesn't begin until 2011. Some of this stuff was refi-ed since the chart was created, but it's safe to assume that most of it hasn't since values have deteriorated so much making refis difficult.

Thus, the housing bust is far from over.

James said...

"Aren't loans for second homes and non-owner occupied properties considered Alt-A with various type of loan products under the Alt-A umbrella?"

Being a second home or investor property do not, on its own, make a loan Alt-A loan. A mortgage on a second home can be conforming and eligible under GSE guidelines if it meets certain LTV, Debt to Income, and other ratios. Alt-A is only a classification of risk as measured against agency guidelines for conforming "prime" loans.

bubblemachine said...

The U.S. economy will need months to recover from a growth slowdown caused by a home mortgage crisis, turmoil in financial markets and high energy prices, Treasure Secretary Henry Paulson said on Sunday.

Months? LOL

Everyone on this blog knows that the economy will probably be worse a few months from now.

Patient Renter said...

I think Paulson meant that the economy only needs a few months to recover, but after that, who cares since he won't be Treasury Secretary anymore and this whole mess which he played a part in creating (and profited greatly from) will be someone else's problem!

God I love America!

Deflationary Jane said...

Holy Cow, looks like I just got in time!

Schwarzenegger plans to cut state worker pay to cope with late budget

http://www.sacbee.com/749/story/1104742.html

Patient Renter said...

Schwarzenegger plans to cut state worker pay to cope with late budget

His plan sounds like it is targeting the lower income workers since it knocks them down to minimum wage. Why not cut the pay of higher income state employees?

norcaljeff said...

Pimco Boss: $1 trillion housing losses seen
"The worst conditions in the housing market since the Great Depression have put many existing mortgages at risk. A total $5

trillion of mortgage loans are in risky asset categories, Gross wrote, adding that "nearly 1 trillion dollars of cumulative losses will finally mark the gravestone of this housing bubble."

U.S. homes purchased in or after 2004 are now at risk of their mortgages turning "upside down" otherwise known as "negative equity," Gross noted. That's when the value a house can fetch falls below the mortgage the homeowner owes. Some 25 million U.S. homes are at risk of falling into negative equity, which in many cases results in foreclosures, Gross wrote.
http://tinyurl.com/648oww

Patient Renter said...
This comment has been removed by the author.
Patient Renter said...

U.S. homes purchased in or after 2004 are now at risk of their mortgages turning "upside down" otherwise known as "negative equity," Gross noted.

It might have been helpful for that worthless greedy fool to "note" this 3 or 4 years ago. Perhaps if he did, he wouldn't have had to blow so much money on the hill lobbying for the bailout which it now looks like he'll be getting, and we all would have been a lot better off.

Anyone who think that these hotshot wall streeters know what they're doing, even most of the time, is a fool. They can be just as clueless as J6P. Bill Gross is a fine example. Of course, as you see, he'll still come out on top because he had a boatload of lobbying money and direct contacts with various high level government officials. It's hard for an average guy to compete with that.

James said...

PR, Bill Gross was warning of this 3 years ago. Do you really think he could have stopped the whole bubble and subsequent crash? Do you even know what his business does?
His calls on interest rates have been spot on. What makes you think he is blowing all his money lobbying? If you think he has an advantage over the average guy, then you are right, that is why average guys like me put my money in Pimco bond funds.

norcaljeff said...

PR, Bill Gross is a good guy.

FDIC takes over 2 more banks
http://tinyurl.com/6p3ovh

Jacob said...

Well I was at an open house today (a few actually) and one of the realtors out of the blue tells me since I am a first time buyer I qualify for a $7500 tax credit.

I then told her, well no, it is a loan that must be paid back.

And she was like, oh you know about that, can you tell me what it is about.

So I explained it to her.

I was left wondering why I should pay a realtor 6% when they are less informed than me, lol...

Then I was at another place and was told I would have to pre qualify with their lender right there if I wanted to make an offer. I told him I didnt care about that and was just looking, but incidentally the broker (or whatever he was) worked for indymac). I was going to ask him what standards indymac even had for loan qualifications since the FDIC took them over, but I was nice and didn't. He must have worked for the federal indymac or whatever it was called that took over the failed one.

Patient Renter said...

Bill Gross is a good guy.

Let me explain otherwise...

He's been begging for price supports in housing for about two years. He's also advocated for artificially low interest rates (subsidized by the GSEs) since in his opinion it's the only way to grow our way out of the housing mess. Finally, just recently with the coming crisis with the GSEs, he tripled his mortgage debt holdings just as the implicit government backing of the GSEs was about to become explicit, another policy he strongly advocated for.

All of these policies that Gross advocated for have two things in common, they all benefit him at the expense of taxpayers and they all came to fruition. It's foolish to think that powerful financial players such as Bill don't shape policy, particularly when our Treasury Secretary calls everyone on Wall Street to approve his major decisions and almost everything that the men of money want, they get.

If you think he has an advantage over the average guy, then you are right

By average guy I meant taxpayer. As nice as it might be to make a buck off of Bill right now, the policies he advocated for will burden our children with debt for generations. We all lose something.

norcaljeff said...

Bill Gross has been telling people real estate was over valued for years, as opposed to your buddy Sippin who's been lying and misrepresenting himself and telling people real estate is over sold. I'll let the sheeple make their own minds up. Damn, we get all kinds of whackjobs in the internet. I thought there was more common sense on this blog than others, I stand corrected.

James said...

"the policies he advocated for will burden our children with debt for generations. We all lose something."

I do not think there is a plan out there which will not burden the tax payers beyond belief. Most of the tax payers did benefit greatly on the way up, however. Too bad they didn't save that net worth rather than spend it on foreign made junk. Same goes for out wonderful government. If they would just learn to save and cut during the good times, these bailouts might no seem so bad.

I think Bill is just trying to find a reasonable solution, and make a buck at the same time. That is his job.

Patient Renter said...

as opposed to your buddy Sippin who's been lying and misrepresenting himself and telling people real estate is over sold. I'll let the sheeple make their own minds up

Huh? You must have me confused with someone else. What does my name say? Patient Renter. Maybe others thought or think that real estate is over sold, but I'm not one of them.

we get all kinds of whackjobs in the internet. I thought there was more common sense on this blog than others

What of my last post is incorrect? Bill Gross advocated for price stability, low interest rates, and government backing of GSE debt - and each of those create a direct impact on taxpayers. Those are facts, not whackjob statements.

Most of the tax payers did benefit greatly on the way up

I wouldn't say most. Owners would only truly benefit if they sold their homes and rented, otherwise the only benefits involved plenty of opportunity to take on more debt against their homes.

I think Bill is just trying to find a reasonable solution

I don't think that it's reasonable to burden people who had absolutely no involvement in this mess with making whole the "victims". This might be a philisophical difference we have - I don't believe in bailouts and think they do more harm than good over long (very long) periods of time, including incentivizing behavior that leads to further bailouts.

James said...

"Owners would only truly benefit if they sold their homes and rented, otherwise the only benefits involved plenty of opportunity to take on more debt against their homes."

I have to disagree. A large number of people pulled huge amounts of equity out of their homes at cheap rates to purchase cars, vacations, home improvements. They traded today for tomorrow, but it did benefit them. The large amounts of consumer spending kept unemployment artificially low. I guess the government could have increased in size and hired even more useless jobs or programs to keep the economy moving at such a pace. But this would have simply added enormous amounts of debt, just like a bailout. I would say many people during the boom indirectly benefited from bubble. I didn't own a home in the latter part of the boom, but made a good chunk of money financing residential and commercial land developments. I gather SMF owns a construction related business, and while he did not pull all the equity from his home, he most likely had some pretty darn profitable years. Tax receipts were way allowing increased pointless gov't spending.
I would rethink your statement that the only ones who benefited are the ones who cashed out and rented.

James said...

tWASHINGTON (Reuters) - The U.S. Federal Reserve should set a price stability goal based on headline inflation rather than core inflation, which strips out food and energy costs, a Fed official said on Monday.
Fed Governor Frederic Mishkin said core inflation contains important information for policy-makers, but can be a "biased" measure of long-run inflation.

Mishkin had said earlier on Monday that the U.S. central bank could improve communication and better anchor inflation expectations without losing policy flexibility by agreeing on a specific goal for price stability.

Patient Renter said...

Some cool housing graphs and stuff from the IMF.

http://www.imf.org/external/pubs/cat/longres.cfm?sk=22179.0

Apologies to the bottom callers.

STOP ROSEVILLE CRIME said...

Whitney Tilson states prime mortgage borrows are starting to default. He's a good mutual fund manager too. Says housing won't bottom for 18-months, or longer. Good video.
http://tinyurl.com/6exrzp

STOP ROSEVILLE CRIME said...

Merrill Lynch sold off over $30B in mortgage loans to a private equity firm for $6.7B. Do the math on that and figure out what your home is worth now. If there's competition in the market to sell off this debt, just think about how low these numbers will go. Haven't hit the bottom yet folks, not even close.

waiting_for_the_fall said...

Even people that got a home makeover cashed out their equity.
What could they need $450k for?

I think it will make people think twice about volunteering on one of those shows.

http://apnews.myway.com/article/20080728/D92712Q8Q.html

Patient Renter said...

I think it will make people think twice about volunteering on one of those shows.

That's exactly what I was thinking.

I'm wondering how they managed to blow through 450k in less than 3 years. No pity.

James said...

"I'm wondering how they managed to blow through 450k in less than 3 years. No pity."

Trying to start up a construction business in the worst construction/housing market in decades. They should have a clause that no equity could be taken out for the entire time they occupy the home. The show pays your mortgage, gives you a million dollar house, pays your property taxes and insurance. Come on, you got setup perfectly and you blow it. Perhaps that is why they were on the show in the first place, they didn't have the brains to make it on their own.