Sunday, April 26, 2009

Sacramento Real Estate Market - April 2009 Water Cooler

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

71 comments:

campbeln said...

Very sad... I liked this blog. Best to all!

Wadin' In said...

Campbein: Why the sadness? Is Lander terminating the blog, or are you lamenting the fact no one has commented here for a few days?

It is spring time. Everyone is out buying houses! NOT

I would like to share this tidbit. My sister called my two days ago, saying there is an article in this week's New Yorker which states only 10% of the house foreclosure (current and future) have made it out the other end so far. I was taken aback and did not think that could be true. So I went to the web. Guess what? This IS JUST THE BEGINNING. Lander and the bloggers still have years of activity to blog about.

I found a research paper by Ranni Issac with the California Reseach Bureau. Go here to see it.

http://www.library.ca.gov/crb/index.html

Basically, in 2008 there were 240,000 foreclosures in California. Certainly, many of them have not reached the market yet or at least sold (absorbed). Coming soon in 2009: 260,000 FCs. In 2010: 220,000 and 2011: 185,000. This totals 905,000 FCs over the whole 5 years. If we assume half of the 2008 FCs have cleared and sold, that is 120,000 out of a potential of 905,000. That is only 13%, so the NYer seems to be correct.

This is going to get a lot uglier. The pain is just starting. I remember when the market turned in 1990. Each year people said the next year would be better, but it got worse for 5 more years, until it bottomed in 1995 and then stayed on the bottom thru 1997. And this bubble is worse in all regards.

So mourn not this day Campbein. When winter comes and the last tomatoe plant is frozen and witherd, we will still be blogging here about all the foreclosures going unsold in CA. Then you can mourn the economy.

lexi said...

Even Greenspan said recently that
untill the banks start unloading
the foreclosures in earnest we won't have a bottom, and that isn't
happening yet. On a different note, I haven't looked at Folsom
area in quite a while. Boy, they
are finally coming down. It's
about time they started to cave price wise. Still have a ways to
go imho.

Husmanen said...

Yeah, I this was the longest I can remember we have gone was without a water cooler post (5 days). I too was saddened, but now we are rolling again.

Folsom. Yes, it appears the prices are starting to break, we'll see what happens now.

I personally know renters in Folsom where the "owners" quit paying the mortgage and it took the bank over a year to submit a NOD. The auction date was set, and as of that date they quit paying their rent, as they are not sure who owns the house now. That was two months ago.

Jacob said...

Yea there are a lot of foreclosures off the market. I saw somewhere that there was a 5 year supply of foreclosures.

In addition to the foreclosures already owned by the banks you have:

1) More foreclosures each month, amount is increasing.

2) Job losses continue to be really high (600k / month) and are increasing which will lead to more foreclosures.

3) Many pending foreclosures were in limbo with all these moritorums, Fanny and Freddy just ended their and more foreclosures will be processed.

4) 50% of more of sales are going to investors.

a) Investors hoping to flip for a quick profit will be dissapointed and these homes will br right back in foreclosure.
b) Investors buying for cash flow may be dissapointed as supply increases and rent decreases, thus turning them into cash flow negative.

5) Many people are "waiting for the market to get better" before selling. So there are many homes that are ready to hit the market at some point.

6) Boomers start retiring soon en mass. Will they keep thier overpriced CA crapshack or sell for what they can get and move to a more tax friendly state?

7) Buyer sentiment. Do you want to buy while prices are falling, not knowing if you will have a job or not? I know this makes me hesitant cause I don't want to buy in a nice area that turns bad in few years. Safer to wait and see imo.

I don't need to buy at the exact bottom and when we pass the bottom I don't expect home prices to shoot up. I expect we will bounce around the bottom for years giving me plenty of time to buy.

norcaljeff said...

Since many people who bought in the past 5 years are having trouble making their payments, and their home mortgage is upside down right now, what you think that salary and benefit cuts will do to their ability to continue to make payments in the near future?

Husmanen said...

BTW, where is Deflationary Jane or Gwynster. It has been a little quiet on the blog front?

Diggin Deeper said...

Lincoln/Roseville property prices are coming down bigtime. Bank just took an offer at a $345K net on home that last sold for nearly $700K. Over 3000 sq ft, nice neighborhood, pool, etc. At some point schools, neighborhoods, and area don't really matter much. Pricing capitulation in these higher areas could go on for quite some time.

If our esteemed leaders have their way, they will reflate the economy and force home prices, wages, and all other hard asset prices higher. It appears to be the only option left, and the one that will put a floor under the toxic assets that are weighting heavy on the financial system. The only fly in the ointment will be mortgage rates which are being held down by artificial means. Kind of like filling a balloon. There's just so much manipulation that can happen before the market'
s take over and price risk for what it's worth.

Diggin Deeper said...

According to a commentary I read, one indicator some follow to predict housing bottoms, is the price of lumber. Since December it has bounced off the $140 per contract level 4 times, now sitting at around $180 per contract. Should it continue upward, some believe that housing could bottom in the next 12-18 months. As a topping indicator it performed well when lumber topped out in 2004. It wasn't long before RE peaked and headed down. The commentary further indicated that approximately 2/3rds of the entire lumber market was tied to housing. If so, then as an indicator it would appear to have merit.

What would skew its ability to predict this market, though, could be the infrastructure buildout we're about to see. Most of this will be more stimulant demand rather than market demand. That's a bit different than allowing fundamentals to tell the real story.

Jacob said...

I don't see how you can inflate the economy without getting money into the hands of the people. We would need wage growth and that isn't very likely.

And I don't mean a $600 stimulus or the $15 or so a week we are getting on our checks now.

Lumber might be an indicator, but, just for new homes. Even if new homes went to 0 we would still have enough inventory to last several years.

patient renter said...

this was the longest I can remember we have gone was without a water cooler post (5 days).

Sorry I couldn't do my part - life has been calling the last 2 weeks, but hopefully I'll be able to catch up on some reading and posting soon.

norcaljeff said...

Mortgage Fraud Epidemic: How the FBI Blew It and Why There's No 'Perp Walks'
http://tinyurl.com/dbjk7b

Diggin Deeper said...

Wages won't go up because of merit, they'll go up because they have to.

There's no company in America that will lose it's core group of workers to a devaluing currency, unless it's their intention to belly-up. If wages cannot house, feed, clothe, and secure worker's families, the government risks civil unrest, long strikes, and an early exit from political power.

It's no different than buying a home 25 years ago. You're monthly mortgage payment on that home today, if you played by the rules through the cheap money era, will be an insignificant percentage of the total take home pay you earn today. Back then it may have been a huge stretch, because you were only making $30,000 per year at the time. Today the dollar's devaluation, over the same period indicates, you'll make twice or more for the same job performed 25years ago. Ask any anyone old enough what their wages were 25 years ago and you'll likely be amazed at how low they were compared to what the same job pays today.

Now overlay the same concept using quantitative easing, or forced reflation. The government may say it wants a strong dollar, but in practice a strong dollar defeats the ability to pay down the enormous debts we're racking up. Or said a different way, over time it allows the debt to become an insignificant part of our future GDP much like the 25 year perfroming mortgage has become today.

Cheaper dollars down the line are essential to pay off those debts. The same can be said for home ownership when the time horizon is long enough.

Deflationary Jane said...

Hey Husmanen,

I am still around, still happily renting but not posting much. I made my token spring attempt at a purchase and I'm done. It's just not worth the effort yet.

My mother called me on my birthday and asked what I wanted, I said "for all the people I love and care about to be safe, healty, housed, and fed". I got my wish and then some. We're finishing up the squarefoot garden and the boxes in the garage seem to multiply at night but right now I just feel blessed.

I am also living next to many foreclosures and it's bordering on surreal to watch all of these almost million dollar homes deteriorate. I used to get angry but now it's just sad.

Jacob said...

@DD

that's is true for the core group of employees, but I also think if companies have to pay more that will be more incentive for them to shed as many positions as they can.

Also wage increases would lag behind so you would still be just trying to keep up and be able to pay you bills.

Either way it doesn't help people or make people want to buy a home.

Sold in '05 said...

For those pondering the inflation vs. deflation contest; Naked Capitalism has an ineresting posting on "competitive devaluation".

If every country is trying to aviod deflation in favor of inflation... by printing money and debasing their own currency... it sounds like whoever has the MOST VALUABLE currency in the end gets to hold the deflation spiral bag.

Very interesting food for thought.

http://www.nakedcapitalism.com/2009/04/are-competitive-devaluations-starting.html

-CD

norcaljeff said...

Rumors of a major Sacto employer cutting salaries once again, another 15% this time.

Husmanen said...

I don't know the percent but I have heard rumors of layoffs at a major local employet that will be announced in May. My contacts tell me the people are in pure surviver mode.

norcaljeff said...

from the SF Chronicle:
A vast "shadow inventory" of foreclosed homes that banks are holding off the market could wreak havoc with the already battered real estate sector, industry observers say.
Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources.

Link: http://tinyurl.com/c28rmu

Diggin Deeper said...

"Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale"

Leave a home unoccupied for any length of time and maintenance costs begin to multiply. Add in carrying costs and weaker banks will end up failing because of it.

Any profits we're seeing from the banks are total BS. A simple accounting change, initiated about two weeks ago, allows banks to set aside and price their toxic assets at fantasy price levels. Those same assets were determined to be nearly worthless before the change.

So with an edict, a stroke of the pen, and a prayer for RE's future, the banks are now solvent again?

Looks exactly like what Japanese did to lose nearly two decades of economic vitality.

RV6Flyer said...
This comment has been removed by the author.
RV6Flyer said...

http://www.forbes.com/2009/04/03/banking-andy-beal-business-wall-street-beal.html

What a great article on the banker who said no.

DD, I don't know how much the accounting change impacted the bottom line. We will find out in the conference call. There is a high risk of becoming a zombie bank, but I have to agree in some respects the mark to model for a limited class of assets. I am also very suspect of Wells Fargo's earnings--perhaps I just hate them so much I can't see the good in them.

An example are Auction Rate Securities. I was unlucky enough to be holding a large sum of cash in APRS when the credit markets when under and the auctions began to fail. I have recovered all but one of them with Nuveen, but the point is, I could sell them on the open market for 70 cents on the dollar, but they are really worth more. I continue to get paid my weekly dividend, have 250% collateral coverage with insured municipal bonds(there is a lot be argued on safety there, but another dicussion), and will be made whole in the future. Due to lack of liquidity, they have lower value, but because I am holding to maturity, do they really deserve to be marked down on the personal balance sheet?

YikesDallas said...

I ran across this blog today while searching for more info about the Sacramento housing market. I close on a Streng foreclosure at the end of this month, and of course get a bit worried with the talk of a continued drop in prices/value. I THINK, though, that the 'brand name' and the location might provide some kind of protection. Thoughts?

patient renter said...

I don't know about Streng as a 'brand name' being that it's a niche that most people do not appreciate, but nothing is wholly protected from price declines. Anyone who says otherwise is typically tied to the industry.

Further price declines are ahead, how much varies, but so are interest rate increases (potentially big ones). So depending on your situation, if you can afford your home and intend to stay there for a while, it could end up being a wash.

I'd just enjoy the Streng (I'd love to see pictures :) )

Diggin Deeper said...

RV6

I guess my gripe lies in the deception we're being asked to swallow. While WF wowed the markets on Friday, some analysts immediated countered that they would need another $50B to recaptitalize the $120B in toxics on their books. I've contended all along that WF has exposure to the commercial RE markets, and those wheels are starting to come off.

Another example, Goldman Sachs reported a profit of $1.8 Billion for their 1st Qtr '09. What they didn't say is, while they changed from a November ending fiscal year to calendar year accounting, they neglected to report the $1.3B loss they absorbed in the month of December. In effect December '08 became an orphan month that wasn't accounted for in their 1st Qtr numbers. So they print a $1.8B profit when in fact it was only $500 mil. Not to mention they took in $14B on an AIG repayment. Wouldn't that kind of money materially affect a Qtr to the upside if there weren't other losses that money convered up?

I do agree if you are holding a performing asset that is consistently paying you ought be able to mark based on maturity. But I suspect there are $billions of non-performing derivatives that banks can now push forward negating their need to recap losses. I'm not sure there's any distinction between the two in the new rules.

YikesDallas said...

As the owner of a Cliff May in Dallas, I quickly learned the old "only 10% of buyers like that style, but the ones who do, REALLY like it"

I completely understand that nothing is protected, and I'm definitely walking into a completely different market in Sacramento vs. Dallas (where values are either not down at all, or down a couple percent). I made two bids in Sacramento, one on a short sell then one on a foreclosure. In both cases there was at least one other bid, so I guess I wasn't the only other crazy person.

It is amazing to see that a house I'm buying for $165K sold for $385K three years ago. What were you guys smoking out there? That house wouldn't be worth that much in a million years!

YikesDallas said...

And by the way, Beal is certifiably crazy. My company did some work for him a few years ago and it was a totally bizarre experience. But apparently it is working for him!

patient renter said...

What were you guys smoking out there?We like to say that everyone was drinking the Kool-Aid. It was certainly potent.

YikesDallas said...

I'm just happy that a house out there now costs the same as a house in Dallas. But in Dallas, drive an hour west and you are in Weatherford. In Sacramento, drive an hour west and you are in San Francisco, or the mountains, or lots of other MUCH more scenic places than Weatherford, Texas.

Was hoping to buy an Eichler, but they are still a bit pricey. I thought moving to Sacramento would be a good ("more affordable") way to test the California waters.

RV6Flyer said...

"I've contended all along that WF has exposure to the commercial RE markets, and those wheels are starting to come off."

Oh yes, WFB has commercial exposure. For the most part, the WFB book was/is pretty solid. The majority are owner occupied with SBA guarantees or low LTV's. No cash out without controlling disbursement and had to have valid business reason.
Most investor properties were done non-recourse in the conduit market or with the Private Bank where most borrowers had massive liquidity.
Then, about 4-5 years ago feeling left out of the game, WFB began dipping its toe more and more into small transactional investor deals and held them on the books. Generally very conservative underwriting, so it still was rare to see something go non-accrual. Going back 1-2 years and two acquisitions are what is gonna kill WFB in this market. Placer Sierra and Greater Bay. Talk about some of the most insane underwriting/structuring. Some credits can only be described as bizarre. Sac Commercial Bank was very heavy into spec commercial/residential development. I bet 50-60% of those loans are non-preforming. The plethora of strip centers, golf courses, motels, and giant unsecured lines of credit in Greater Bay's portfolio are junk and will take WFB down. They underwrote about like the sub prime mortgage guys; take cash out to make the next two years of payments then refi and take some more cash out. 80% LTV and no leases, no problem!

My guess is 2Q2009 earnings are going to be when Wells' dirty laundry starts to be seen. Loan loss reserves are going to have to be raised. Wells keeps so many of their originated loans on the books and the new accounting changes are not going to help those assets. Lots of charge off's to come which will kill NIAT. I hope they rally to 25 so I can short the snot out of them.

Have you seen how many retail and office properties are popping up for lease and sale all around the midtown market? In a couple of years I am going to be like a kid in a candy store picking up retail on the cheap.

norcaljeff said...

There are no exceptions in this market, no immunity, unless you are, or are related to, a realtor. AP is reporting tonight that foreclosures up are 24% in Q1. Good night bulls!

Diggin Deeper said...

California leads the nation in the rate of foreclosures...1 in every 123 households.

I don't know what that equates to overall but the figure's probably close to 50,000 with some number added for recycled properties that get foreclosed on more than once.

The negative feedback loop has to push foreclosure rates higher because govt intervention encourages it. With pain free "do overs", the incentive to walk is just too compelling. Plus all the money that's been thrown at loan remod programs hasn't helped 10% of those people under water. Nice try but the outcome appears to be the opposite of what was intended.

If you're upsidedown and a loan mod won't help, what options do you have?

The only way to slow foreclosure rates is to make the homeowner responsible for their debts. If those debts mean BK, so be it. Unfortunately, these people vote, and with so many of them, you really don't want to risk pissing them off.

Jacob said...

What were you guys smoking out there? That house wouldn't be worth that much in a million years!
We, the chicken littles with with our tin foil hats were thinking that everyone else had gone insane.

And we have been proven right.

All the others involved were blinded by their own greed. Thought they would become millionaires but owning and refinancing their homes.

Unfortunately, these people vote, and with so many of them, you really don't want to risk pissing them off.
There are more people against these bailouts then for them. There are way more people that are not in danger of foreclosure than those that are.

We should stop picking winners and losers in the market, we should let the chips fall where they want to, and we should spend money on jobs that serve a purpose (like solar or other renewable energy infrastructure), unemployement benefits, job training benefits, and money to help move people from homes they "own" to apartments.

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

"There are way more people that are not in danger of foreclosure than those that are."

While generally that's a true statement Jacob, you don't have to be in danger of foreclosure in order to strategically decide foreclosure is in your best interest.

Subprime resets will eventually filter through the system for those that had no business owning a home...those who cannot pay. We'll also see an uptick in foreclosures because of unemployment.

But there are homeowners who'll walk away from their homes, without much penalty, because they don't like the numbers from an equity loss point. This is an area where it defeats the market from finding a bottom.

I believe that's why we're seeing such an upturn in non performing prime and Alt-A loans yoy.

Diggin Deeper said...

RV6

Here's a followup on WFC

http://www.bloomberg.com/apps/newspid=conewsstory&refer=conews&tkr=WFC%3AUS&sid=a6sv0hG.nW7g

Notably Jonathon Weil is the commentator...

YikesDallas said...

I do get upset when hearing about people walking away from mortgages that they CAN afford, simply because the house isn't worth as much anymore.

patient renter said...

Really though, that's between them and their bank.

The idea of economic freedom dictates they should be able to walk if they want to. But freedom only works when you're free to make good decisions and bad ones. Nobody should be bailed out.

In forcing one man's bad decisions on everyone else, our freedom is violated. Today I go to work to pay for my neighbor's freely made economic decisions, whether I like it or not. That's not freedom.

Diggin Deeper said...

Here's a very good explanation of what we're facing and why. While we all know that our real estate bubble has burst,and our credit system is broken, this a laymen's view of how we got here.

http://www.freebuck.com/articles/afield/081112afield.htm

paranoid renter said...

>>>>
Further price declines are ahead, how much varies, but so are interest rate increases (potentially big ones). So depending on your situation, if you can afford your home and intend to stay there for a while, it could end up being a wash.
>>>>

If prices do continue to decline, you could just put more money down or buy the house for cash. There is no incentive to buy unless house prices are going up.

patient renter said...

you could just put more money down or buy the house for cashThat's our plan. We'll take a shorter term loan (15 years) to offset the higher interest rate. Considering that most buyers don't stay in their homes for 30 years, a smoking 4.5% (or whatever) rate is only worth so much whereas the purchase price is something you're stuck with if/when you decide to move.

Deflationary Jane said...

Patient,

That is exactly my thinking as well. Too much panic buying by too few people but the noise they generate makes it look like a lot of activity. WTH, if it makes them feeling like they are doing something, knock your socks off. It's their money to loose.

In the meantime, I'm loving renting my luxurious place for a 1/3 of what it's costing a BA speculator and I get to stick away even more cash.

Jacob said...

Yea, I want to buy, but dont see the need to rush. First off, these job loss numbers are really scary.

Seoncd there is too much interference in the market. Government causing more problems by trying to help.

And third, there are too many investors.

I don't want to feel rushed to buy because there are a bunch of specuvestors bidding everything up again. I will wait until there is enough blood in the streets that all the speculators are long gone.

Home prices will decline for a while more, and I can save a lot by renting, so the longer I wait the smaller my mortgage will be anyway.

Diggin Deeper said...

Situations are different but paying cash for a house is probably a good bet. We've seen what leverage will do to our country, and if you're only paying taxes, insurance, and maintenance, you're way ahead at the end of each month.

There is a flipside...today's dollars could very well be worth more than tomorrow's. We've a decade or more of low inflation, and there's plenty of reasons to think that could change.

If inflation enters this economy, it will basically drive down the purchased value of past debt. The higher the rate of inflation, the lower the value of that same debt using 2009 dollars.

Using a simple historic norm of 3.5% inflation rate over a 10 year period, a $275K home with a $250K 30 yr fixed mortgage today, is equivalent to paying on a $177K mortgage plus 10 years debt retirement. Adding in very low interest rates and the picture improves.

Even if the price of the property goes down an addtional 20% from here, to $220,000 are you really losing money, taking into account the true value of future dollars?

Again it goes back to time horizons, costs of money, and the value of current dollars.

sac-newbie said...

Will be moving to Sac to work at UC Davis Med Center for 6 yrs. Was thinking about buying a condo in new natomas (90-100K), it would be cheaper than rent. It seems like the group here doesn't think it's a good idea. Any opinion?

Randy said...

I think I'll be signing documents on a new home at the end of this week. It's a $318k home in the Whitney Ranch area of Rocklin. It's a bit pricey, and the timing is still bad, but Whitney Ranch is nearly built out, and that's pretty much the only place I'd like to live. I work in Rocklin, too. I considered Fiddyment Farms and WestPark in Roseville, but the commute is a bit distant, and I can't go home for lunch. Also, it's in the flat lands, and I think value of the home will be much better in Whitney Ranch than in Roseivlle for the long term.

I'm also in a different situation than other folks. I'm early 30's, single, and still living with the parents. Yup. Sounds bad. That's always at the front of my mind. It's embarassing in many ways in American culture (not for my parents' immigrant culture). But in some ways, I'm also glad I was UNsteadily employed during the housing boom, and didn't jump in on no-doc, exotic loans to purchase a house with no down. I was saving up in 2003 for a home purchase, but I lost the job and was unemployed for almost the next 1.5 years. If I would've retained my job, I probably would've bought at the end of 2004, 2005, or 2006. *cringe*

I was hoping to wait until next year, as I would have 20% down AND money for furniture. But jumping in now, I only have 20% down, and I'll just have to piecemeal my furniture as I scrounge up extra spending money. Whitney Ranch Phase 1 is built out, and I'd have to wait 3-5 years for the economy to improve enough before Phase 2 would even start. Too long into my horizon for a single, 30's person.

I've accepted declines will continue for a LONG time, and will get worst before it gets better. I even think this will be greater than the Great Depression, but in different ways (length, etc., but not necessarily 25%+ unemployment). My life situation says I should jump in on a house I absolutely love though, and I think its the right decision for me.

Jacob said...

Congrats on the purchase. What are the HOAs and Mellow Roos in that development?

Husmanen said...

Randy, did you check out renting a home? What is the rental parity (PITI versus rent)?

It might add to your transition as a jump from your current living arrangement to a home owner will be quite a lot. Just a thought.

paranoid renter said...

>>>
Will be moving to Sac to work at UC Davis Med Center for 6 yrs. Was thinking about buying a condo in new natomas (90-100K), it would be cheaper than rent. It seems like the group here doesn't think it's a good idea. Any opinion?
>>>

How much is the rent? Your cost when you buy is mortgage + HOA + taxes + mello roos + expected maintenance. Remember HOA dues go up with time. I think it is a bad time to buy a condo. A single family home is still OK because at least you have control over its upkeep and maintenance. Where all the condos end up after the mess is anybody's guess. Basically unless the rent is > $1200/mo or so, renting would win.

I was also thinking about buying a condo, but after looking at some of the trashed units (and we're still early in this downturn), I decided I'm better off renting.

In case I lose my job and have to relocate for better opportunities, renting is the best option. Given the current economic environment, I could easily be without a job in the next 2 years.

So I've stopped wasting time looking for homes and now spend my weekends relaxing.

Randy said...

Thanks, Jacob. It's not a done deal yet. I'm still ready to walk away if I don't get a little more incentive. My co-worker just bought a house down the street from a different developer, and they offered him over $35k in incentives (downpayment, closing, upgrades). I'm only looking at $10k at the moment. Whitney Ranch mello roos is about $188/month, and $84 for the HOA. I think the HOA is very worthwhile though, just based on the community pool/lounge/ballroom they have there.

Husmanen,
I've decided not to rent for my next big decision. I rented for 3 years in L.A. just prior to moving back up to Sacramento a little over a year ago. I relocated a total of 4 times in those 3 years: Sac to LA rental #1, rental #1 to rental #2, rental #2 to Sac. I'm done with that. I don't want to rent in Sac for 2-3 years riding out the economy, and then purchase a home. I'm eager to settle down and start a family. If I were 5 years younger, I'd worry less about living with parents for another year or two before purchasing a hous at the very bottom of the housing bust.

Jacob said...

Any HOA is almost a deal breaker for me. Mello Roos I can swallow cause at least it is a fixed cost.

But I don't want to pay a group (HOA) to tell me what to do with my house, and on top of that they can raise the fee or worse have special assessments.

So the pool needs to be fixed and now you want me to pay $x thousand ??

No thanks.

But at least buying new you get more energy efficient homes.

Definitely work on getting incentives and use them to reduce the price only. You can likely get the upgrades done cheaper on your own and dont bother buying interest points cause if you refinance within 5-10 years you could be losing money, not worth it imo.

norcaljeff said...

Randy, you sound like a lot of buyers who bought 2-5 years ago, and we all know where that went. Whitney Ranch is not doing well, I don't know why, but people have made their views known, I'd heed their warnings. Not sure why people keep admitting to wanting to buy something they know will be cheaper later on. If you were to buy stocks last summer but knew they would fall during the month of November, would you have still bought? Why is this different? There's no shame in waiting a while longer and saving. But there is finally some shame in getting in over your head just to help your ego.

Anyway, just saw on CBS 13 the bank that owns the L Street lofts will be foreclosing on the builder shortly. I find it amazing that prices were around $500K! You could live in some very desirable cities in this country for less than that. Wow, people need to add a lot of water to their kool-aid habit.

paranoid renter said...

Randy,

I agree 100% with norcaljeff's comments. No sense in buying when you can get something cheaper at a later date.

By the way, there was an article on iTulip a while ago that mentioned that fixing houses will eventually get so expensive that it will be cheaper to abandon them...kind of like cars.
http://www.itulip.com/forums/showthread.php?p=90078#post90078

>>>>>
Can you put today’s economic situation in a historical perspective? Is there any parallel?

More than one-quarter of all homes have negative equity in the US. That’s a bad problem. But there’s a worse problem developing.

I refer to the American housing market as “the big slum.” A slum is where the market value has fallen below the replacement value. It doesn’t make sense to fix anything. You don’t fix it, you just let it go to hell. There’s no way to get your money back.
>>>>>

People in Roseville/Rocklin have deeper pockets than most folks in neighborhoods like Elk Grove. But if the downturn continues for a couple of years (which it is likely to), it will wipe out their savings. At that point, no one can tell what these neighborhoods will look like.

I am glad I found this blog in 2004 otherwise I might have been a proud homeowner underwater. I have one colleague who bought for 470K in 2005 and he is now 130K underwater. I called myself "paranoid renter" because I thought I was taking a gamble...I might be priced out forever. Funnily, once I dealt with that, I have no desire to own. I just see a house as a place to live, nothing to be excessively passionate about.

patient renter said...

I thought I was taking a gamble...I might be priced out forever. Funnily, once I dealt with that, I have no desire to own.The same evolution happened with me. I couldn't wait to buy a house, and was completely distraught at how unaffordable everything had become. Then once I realized what was going on, I became very content as a renter. Here's my (bad) analogy:

It's like watching a glamorous party taking place on a yaught while floating alongside in a dingy. You want to join the party, but you can't afford the price of admission. Then suddenly the yaught catches fire and starts to sink. Some people continue to party, oblivious, while others scramble to find a dingy to get into. As the yaught goes down and everyone is tossed into the water, the dingy you're floating in looks pretty nice.

Husmanen said...

OF, that was a great analogy! I think Ii will use it at parties.

Husmanen said...

Dang I phone! I meant to say...

PR, that was a great analogy! I think I will use it at parties.

paranoid renter said...

Timely article posted on Calculated Risk
http://www.nytimes.com/2009/04/22/business/economy/22leonhardt.html?_r=1

>>>>
[T]he great real estate crash is not over, either. So if you are part of the 30 percent of American households who rent and you’re trying to decide when to buy, relax.
>>>>

Diggin Deeper said...

Another article that suggests 600,000 have yet to hit the market.

http://www.prisonplanet.com/housing-bubble-smackdown-huge-%E2%80%9Cshadow-inventory%E2%80%9D-portends-a-bigger-crash-ahead.html

Here's an exerpt...

"The next leg down in housing will be excruciating; every sector will feel the pain. Obama’s $75 billion mortgage rescue plan is a mere pittance; it won’t reduce the principal on mortgages and it won’t stop the bleeding. Policymakers have decided they’ve done enough and are refusing to help. They don’t see the tsunami looming in front of them plain as day. The housing market is going under and it’s going to drag a good part of the broader economy along with it. Stocks, too."

The replies are worth a look as well especially the bankers' comments with regard to the "shadow inventories" we've been hearing about.

norcaljeff said...

The spring inventory is starting to arrive and it's over flowing my inbox!

BTW Randy, on another blog you were prepared to wait until 2010 just a week ago. I'd get back into that mindset and get comfortable for the next 9-12 months.

Randy said...

NorCalJeff,

I've long figured it could be until 2011 before it's the "right time" to jump in. But, I'm not always in the simply financial mindset. The house I'm interested in is in the only area I'm interested in buying in, backs up into open space, priced at something I can afford, etc. I'm also eager to leave my ghetto of an area, be closer to my job, be able to go home for lunch, etc. I consider a lot of non-monetary decisions.

I signed official documents today, and the paperwork is being forwarded to the lender for official rate and closing cost estimates, etc. The overall price is still just a bit more than I'm comfortable with, and I'll be sitting a shell of a house with little furniture, so there is a very, very likely chance I will still back out. I was betting on the Fed Tax Credit for furniture after tax season, but I don't qualify for it, so I have little incentive to buy now.

If that doesn't work out, I'm waiting until post-Spring/Summer buying season 2010 before I jump in. By then, prices will be even lower, I'll still make 20% down - perhaps even on a larger house, and actually have money leftover for furniture and emergencies. I'm gonna miss this house though... Heh.

Diggin Deeper said...

Jobless claims up, profits down, sales on existing homes falls again...not much hope for RE until the big picture changes.

Congress is now proposing price controls on credit card companies. Hmmmm, we tried that in the late 70's and it was a disaster...dried up credit for all but the A+ cardholders and contributed to one helluva recession...deja vu the days of Jimmy Carter.

Husmanen said...

I put this on the Sac Stat's site but I thought I would share regarding the new moratorium in July.
--------------
I found some info on the extension and a discussion on Piggington's in SD.

http://piggington.com/this_never_ends_quotca_foreclosure_prevention_act_coming_upquotDang this will never end...

Randy said...

I walked away from the home I wanted to buy. It was 318k in the Whitney Ranch area of Rocklin. 2 story, 2193 sq. ft., 3 beds, 2.5 bath. Backyard faces open space. Next door to an elementary school, and just down the street from the HOA pool. Budget was just a bit too tight to make it happen.

I'm relieved now that its all over. I know I'll have free spending money for about another 6-12 months before I jump into the market again. I splurged on a laptop yesterday, and I plan on buying several firearms.

paranoid renter said...

Randy,

A year from now, you will almost (99% chance, perhaps more) consider yourself fortunate to have not bought the house.

Put away the extra money and invest it conservatively. With deflation, it will be worth a lot more than you can imagine. Predictions for home prices call for drops anywhere from 20-50% from current prices.

Prices cannot stabilize until the employment picture stabilizes and even those that are in power and previously said:
- There is no bubble; but then prices started to decline.
- The problems will be contained to subprime; but now the mess is all over.
- The banks are healthy; but now the banks are going bust.
...these same people are saying that employment will reduce sharply for at least the next year. The don't talk about housing because they know that is going to toilet as well.

The earliest housing can bottom would be 2011. The govt. has just slowed the rate of decline. They have not done anything that can reverse the decline. And sadly, I don't think they can either.

Husmanen said...

Randy... I am with PR and you will not regret it. Breath a little now with knowing your postponement will be well worth it.

An interesting write-up on Dr. Housing Bubble that may also quell you frustration. BTW, he is also looking at 2011.


http://www.doctorhousingbubble.com/

patient renter said...

It's finally happening. Homes are being torn down:

http://globaleconomicanalysis.blogspot.com/2009/04/extreme-home-makeover-depression.html

Jacob said...
This comment has been removed by the author.
Jacob said...

Wow, I would expect run down homes to just get torn down, but brand new model homes?

I guess you can't sell homes if the entire sub division in unbuilt...

norcaljeff said...

I was shopping at Wal-Mart tonight, trying to save some money, but I certainly didn't save time my health, I hope you can.

The lady in front of me, with 2 kids, paid with WIC checks. She had 6 different WIC checks which meant 6 different register transactions. Damn, it took 4EVER to get out of that place. Don't ever get in line behind someone with multiple checks. I have no idea why that was needed other than to try and prevent fraud. I found it interesting that she had D&G sunglasses on her head, and the receipts of her 6 transactions went into her Coach wallet, which went into her Coach purse. She bought all brand name food items, mostly prepackaged. Made my Wal-Mart brand items look pretty sad. She also paid for the last transaction with her credit card. I guess some items thankfully can't be bought with tax payer dollars. She used an American Express Optima Card. I guess Amex has lower income standards than they used to, but it seemed really odd.

She also put those groceries in her late model Toyota SUV.

This can't be the only instance of this.

I don't have kids because I can't afford them. I went to college so I could get a good paying job. I eat generic food and drive a 10-year old car to save money. I guess I should just leave my job and go on govt assistance, sounds like a better life, she sure seemed happy.

Rich said...

Where's our May water cooler?

From Brad Geisen, the CEO of foreclosure.com

http://freakonomics.blogs.nytimes.com/2009/05/01/power-question/

Q: How do we know when foreclosures have hit bottom?

A: When property values are cheap enough that they equal rental values. What I mean by that is when you can buy a property with very little money down and finance it at a good rate, and then rent it out for just enough to cover the mortgage, insurance, and taxes, then you’ve hit what I call “economic value.” That’s when the property value is the same as its economic value. That’s pretty close to bottom. Now, when you have a pendulum swinging, and values are still dropping a bit, it may swing a little past that. If the property was already 30 percent less than market value, and property values are still dropping, and it gets down to economic value, then that’s when the pendulum will begin to stop and begin to swing the other way.

patient renter said...

Q: How do we know when foreclosures have hit bottom?

A: When property values are cheap enough that they equal rental values.
This is a pretty simplistic view of what will bring about a bottom based on limited factors, not to mention it's contradicted by history.

The workability Rent/buy isn't the only factor in determing foreclosures. If I put "very little money down and finance it at a good rate, and then rent it out for just enough to cover the mortgage" and then prices drop another 20% - what then? What kind of loan did I have? Am I better off walking?