Man, this is getting really ugly really fast... and we're just getting warmed up.
One word comes to mind: Devastating.
Home Price Drop Largest in 13 Years
The overall median home price in the county in September was $22,000 lower than it was last year, dropping 4.42 percent to $476,000, DataQuick Information Systems reported Wednesday.The drop was the biggest dollar-amount plunge observed year-on-year by DataQuick since it started monitoring the San Diego market in 1988.
"It is a big drop," said Peter Dennehy, vice president of the Sullivan Group Realty Advisors, of the median price change. "But sales prices have even come down more than that. The median price is finally coming starting to come down with what we're seeing on the street."
"To me, the more serious aspect is the slowing of activity," he said. "Fewer sales, fewer commissions, fewer loans -- that will result in job loss in those industries."
Then, of course, there's this sicko's quote from the REIC.. Just disgusting - do these people have no shame?
Neither does San Diego Association of Realtors president Charles Jolly, who hailed the DataQuick release as "great news for buyers." The increased inventory and dropping prices are two indicators of San Diego's becoming a "buyer's market," he said.
October 15, 2006
San Diego housing bubble pops. The only question left is how far will prices fall during this devastating real estate crash?
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53 comments:
San Diego will drop 60-80% this time around.
Earth to the REIC: From your standpoint, it's always a great time to buy. I suppose a dirty bomb going off in San Diego would also signal a great time to buy as well.
SD might now be a "Buyer Market" but the buyers STILL can't afford it.
The SD Association of Realtors is now pumping radio ads all over the airwave on the virtue of home buying. the benefits they mentioned: no more renting! you can decorate as you please! tax benefits!
they just failed to mention for all of the above you just have to pay $2000 more/month compared to renting a comparible home.
got a couple of posts up on my blog. One is on a guy featured in today's SD Union-Tribune. Apparently the guy fraudulently purchased 30 condos in his clients' names with their money and now 25% of the units in the complex is in some stages of foreclosure.
the other post is also mortgage fraud as well. looks like a flipper that did not pay a single payment on his million dollar flip in Carlsbad. trying to sell the home for $100,000 profit. what's amazing is you got a total of 9 million plus homes for sale on that street, 6 are from flippers and 3 are from the builder.
"what do you mean bubble?",
"economy is on fire, i mean look at the stock market"
"i dont know where you get your information but whereever it is you are being misled"
"im not worried"
"you cant trust blogs"
-------------------
Obviously he has been sniffing the colone out of the colone dispenser in the mens bathroom on wallstreet.
economy is on fire
WHERE!!! please tell me so I can relocate to this Great fire.
No offence panicearly but he sounds Brainwashed like the other 33%
Your friend may be correct the economy is just great...
Bubble - Bubble Toil And Trouble
While I may be a bit premature about attaching a Halloween oriented motif to this piece, at the same time, it fits the situation better than any other in mind so we'll just have to go with it. And to what does it refer, a witches brew perhaps? Well, in a way yes, that's it in a nutshell all right. Of course alternatively one could just as easily characterize it as a 'big mess' in less dramatic terms. What mess is this to which we are referring? Why it's the next asset bubble, in progress as we speak. Actually, it's been there for quite some time now, but not too many see it for what it is in reality. It's the bubble to replace the housing bubble, which of course was the bubble that replaced the tech bubble, all of which being a product of an insane credit bubble, undoubtedly the primary source of our undoing in the end
http://tinyurl.com/wydku
Kieth you really should be ashamed of yourself. That was the most blatent lie you ever posted.
You draw a line above the year ago sale price and then benchmark a load of crap off of the line?
You are sounding more and more like a loser on a Yahoo stock message board that is down 40% and striving to change the world or his bank account with his BS.
Tell us why you lie. What do you fear?
....and we still can't afford anything!
Prices need to drop 40 to 60% at least
NEW JERSEY !!!
Alarm bells ringing
Wobbling real estate market sparks fears of banking implosion
Posted by the Asbury Park Press on 10/15/06
BY JASON METHOD
STAFF WRITER
When Kara Homes filed for bankruptcy this month, Amboy National Bank of Old Bridge was listed as the largest creditor with $58.2 million in loans.
When local real estate mogul Solomon Dwek's $400 million empire was frozen by a judge following charges of bank fraud, Amboy was again the largest creditor — for $49.7 million.
Just as Amboy has been surprised by the loans gone bad, a real estate market in decline could spell financial trouble for other local banks and thrifts that have lent heavily for housing developments and commercial real estate, bank analysts and federal regulators say.
Industry analysts recall the savings and loan crisis from the late 1980s and worry that a new round of bank bloodletting could start if a once-robust real estate market founders.
"It's a disaster waiting to happen out there," said Gerard Cassidy, bank analyst for RBC Capital Markets, an international firm based in Toronto. "We've seen this movie before, and it doesn't end very well."
If another crisis hits the financial community, small-time bank customers would likely be hurt if credit becomes tight or banks fail outright. Tight credit especially impairs owners of small businesses, who look for loans to finish a job or cover expenses during lean times.
Regulators are proposing new guidelines meant to warn banks about overlending. The guidelines would recommend that banks do not lend more than three times their capital for all commercial real estate combined.
That means if the bank has $100 million in capital, it should be careful about making more than $300 million in loans to businesses or developers, or it could face regulatory scrutiny.
In New Jersey, 47 percent of the 95 national- and state-chartered banks are already over the proposed guideline, an Asbury Park Press analysis of federal data showed.
Federal bank regulators say they are not overly worried about bank failures.
Bank regulations are much stronger since the 1980s, and banks are much less inclined to grant speculative loans, which had been a major cause of the S&L crisis.
"Are we alarmed or very concerned? The short answer is no," said Steve Fritts, an associate director at the Federal Deposit Insurance Corp., which regulates banks and insures depositors against losses of up to $250,000 each. "But every bank is different. In some (specific) cases, we might be concerned."
Pressure to make loans
Vincent M. D'Alessandro, vice president of Shore Community Bank in Toms River, said the real estate market downturn has put more pressure on banks to beat last year's earnings.
"I know there are loan officers out there making loans because they have budgets to meet and job security issues," D'Alessandro said. "Banks get focused on hitting numbers, growth targets, making sure their loan officers are hitting their numbers — and you set yourself up for making bad loans."
Shore Community has $96.8 million in real estate loans to developers and businesses, about five times the bank's capital. D'Alessandro said the bank is confident it has made wise loan decisions, but nonetheless it is tightening requirements for new borrowers.
Unfortunately, D'Alessandro said, that hurts little guys, such as self-employed carpenters, plumbers, electricians or small businesses.
"It's all about a credit crunch right now," D'Alessandro said. "You hate to say that, but banks like us will have to tighten the screws — the guy who wants to develop his house, or the roofer that needs some funding — we'll be looking at that much more carefully. The fear is that you won't have loans that people use to support themselves. Some people may have to borrow for their living expenses, but those are the people you have to cut off."
A national problem
MORE: http://www.app.com/apps/pbcs.dll/article?AID=/20061015/NEWS/610150396
The only question left is how far will prices fall during this devastating real estate crash?
Yes, how far prices will fall and how quickly. Will there be a gentle correction, or an ugly crash?
The real estate market is a confidence game, just like the stock market and banking system. When people have confidence that their money is safe, everything is just fine. But when people lose confidence in an investment, things go down in a hurry. A bank will quickly fail when all of its depositors panic and try to withdraw their money at the same time. The stock market quickly tanks when many investors dump their stock at the same time.
The real estate market is now about to lose all creditability as a smart, safe investment. Dwindling confidence is real estate's only remaining prop and anxiety is rapidly eating away at any remaining confidence people may have in real estate.
Right now, some buyers are confident that the drop in real estate prices represents only a slight correction and that a buyer's market has finally emerged. These are the greatest fools of all because they think that if they don't buy now, they will be priced out of the real estate market forever. Some sellers remain confident that they will be able to get their ridiculous asking prices, so they continue to hang on. Unfortunately, sellers who are now in default will not be able to sell for enough money to cover their loans and the number of foreclosures will continue to rise. Huge numbers of foreclosed properties on the market will cause prices to plummet. Lending institutions, facing horrendous losses, will severely tighten lending standards. At this point, all confidence in real estate will be lost.
As real estate prices continue to drop, panic will set in. Fewer and fewer people will be willing to purchase a house whose value is constantly declining and many sellers will drop their prices to whatever level is necessary to cut their losses and get out of the real estate market.
The real estate market is now passing through an anxiety phase and quickly heading into a panic phase. A few positive blips of what will seem to be improving market conditions will be nothing more than dead cat bounces. Here is a perfect example of the disgustingly-hopeful and optimistic spin that Realtors are putting on the housing crash: Housing bust? It's not a bust, it's a correction.
So, how far will real estate prices fall? They will have to fall back to the traditional mean price, which historically has experienced yearly appreciation of approximately the rate of inflation plus 1%. Around the year 2001, real estate prices began to deviate from this historic mean and trend quickly upward. Therefore, the approximate formula applicable to the calculation of today's real estate prices would be the value of a home around the year 2001, multiplied by 1.3. For 2007, the approximate formula would be the year 2001 value multiplied by 1.35. For 2008, the multiplier would be around 1.4 to 1.45, depending upon the rate of inflation. However, as real estate prices plunge, the overall economy will plunge as well. Therefore, real estate prices could very well drop below the historical mean, before they begin to rise again.
How quickly will real estate prices fall? They will fall at least as quickly as they went up, but more likely, they will fall even faster than they went up. It is entirely possible that the ongoing real estate crash could hit bottom within the next 2 years.
If one just does the math 12 months X 4.42%= 53.4% annual drop. This statistic may be off! Howerever, this time of year is historically one of stength in San Diego. At this pace the house bubble will look like a crater. Only the people how bought in the 1960-80's will have equity left. It is the melt down this blogg has been talking about.
A 53% drop in prices in a year will make the S&L Crisis from the 80's look like a walk in the park. People will be bleeding from every orific in their body. It will be a bloody mess. Like New Orleans but without the hurricane.
Last ANON (Sunday, October 15, 2006 4:59:56 PM )
Thanks for the well thought out post - very informative.
My sister closed on a house here in Phoenix on 9.12. I simply asked her if she was concerned about the market. She said ,"we will be fine".
I hope so.
Question- If someone bought 5 houses in San Diego saying he was the owner/occupier, and the loan agent turned a blinds eye. Will they go after him if he defaults? What if he doesn't default?
Anonymous said...
Question- If someone bought 5 houses in San Diego saying he was the owner/occupier, and the loan agent turned a blinds eye. Will they go after him if he defaults? What if he doesn't default?
This looks like a question that Casey Serin will soon be able to answer.
You are sounding more and more like a loser on a Yahoo stock message board that is down 40% and striving to change the world or his bank account with his BS.
------------
Well you read this blog to ..so welcome to the losers club ..loser
The article mentioned that we should not be as concerned because the drop in value with overwhelmingly the fault of new home prices while existing home prices had barely fallen. Unfortunately the person quoted and the writer of the article do not realise that new home sales/prices are largely seen to be a leading indicator. After all, the large builders are professional businessmen who have generally been in the industry for quite a long time. If they're reducing their prices to move the inventory weighing down their balance sheets then then they obviously believe that it is the right thing to do. Individual homeowners on the other hand, with less experience and less of a view into the market, are probably just holding out for what they think they should get. I'd guess that the builders are more likely to be right.
Lived in San Diego 6 months - trust me the market is falling like a rock - places I looked at one year ago are now 50-100K less! and many are still on the market - this is very true for downtown, but now spreading out quickly -
Will this California housing crash be as bad as the 90s? Find out here.
the real median house price fell an avg. 34% in socal from '90 to '95 to as late as '96-'97. real prices were no higher than in '82 by '95-'97, whereas it took until '00, believe it or not, for LA and riverside/san bernardio real median prices to bottom at the '82 level and start rising again.
adjusting for the CPI trend of that time, nominal prices fell a more modest 15-20%; however, this was enough to be a catalyst for the biggest real estate bust and banking crisis since the great depression.
this time around prices diverged much further from comparable rents owing to the fed giving away reserves in real terms. don't be surprised if real prices fall 50-60% and prices don't bottom for 7-10 years or longer. we might even get outright deflation along the way, making the nominal decline closer to the real price declines, as occurred in Japan since the early to mid-'90s.
also, the global economy's growth has been so dependent upon US real estate credit growth that the world economy is set for a protracted slowdown lasting much longer than anyone dares imagine.
the monetary base, yield curve, real m2 growth, home equity growth, consumer credit growth, payroll growth, Q3 real GDP growth, ECRI's WLI (they are loathed to forecast the recession they know is coming), and CEO sentiment are all pointing to 2% real Q3 GDP growth or less, 1% Q4 GDP growth, and the increasing risk of no growth or even recession in Q1 '07.
wall street and mainstream economists are on crack if they think this is the makings of a soft landing. these guys are hazardous to a person's financial health.
the stock market has gotten it just plain wrong. stocks, real estate, commodities, and corporate bonds are a cyclical sell. buy treasuries or CDs/MMFs. we are facing 2-3 yrs. of recession and bear market, including emerging markets, europe, and asia.
liquidity will be paramount to most people's financial survival in the yrs. ahead.
salt lake guy, good article! thanks!
people forget or were not old enough to have experienced the last bust as an adult. but one cannot blame people for wanting to forget such a disastrous period.
most people are far more financially extended than in those days, plus we have the unprecedented boomer demographic drag bearing down on us for the next 7-9 yrs. or so.
people will blame the fed, politicos, iran, al-qaeda, banks, fraudsters on wall street and main street, china, opec, aliens, and whatever else they can point a finger at instead of themselves and focusing on the overwhelming demographic drag from boomers having reached their peak spending, with the millennials indebted, in dead-end jobs, and having to compete with chinese, mexicans, vietnamese, indians for falling wages.
bork, YOU HEARD IT HERE FIRST: the next bubble will be in US treasury notes/bonds, with the 10-yr. yield falling below 3% and the 30-yr to 3% and perhaps even below. 30-yr. mortgage rates will fall below 5% WITH HOUSE PRICES FALLING, EQUITY CONTRACTING, AND LENDERS RUNNING SCARED AND TIGHTENING STANDARDS.
US treasuries could outperform stocks by a net 10-15%/yr. in the years to come. we will hear the yen-carry trade fade to become the US$-carry trade, with wall street borrowing at 2-3% and speculating in asian stocks, bonds, and real estate after '09-'10.
gold could fall to the low $400s or below $400. oil to the $40s or even below.
china is headed for a hard landing, just in time for their olympics and social unrest and more tiananmen sq. episodes.
money will flee asia back to the US as part of Asian Crisis II.
the US$ will firm and then STRENGTHEN from slow money velocity in the US, repatriating money from US firms abroad, and a flight to safety in the US.
the good news is that those with cash will be able to leverage up on lower stock, bond, and real estate prices in asia when the time comes in 2-3 or more yrs.
deflation is the risk now, not inflation.
don't be caught in debt and in paper assets other than gov't paper.
Question- If someone bought 5 houses in San Diego saying he was the owner/occupier, and the loan agent turned a blinds eye. Will they go after him if he defaults? What if he doesn't default?
If the authorities do go after Casey he will be the guina pig because he was up front with his "fraud". he should have kept his mouth sut.
If they start to go after the "fibbers" they will be spending a lot on prosecution. I'm for it in concept, but not practical. There is just too much fraud out there.
The_professor made some good points about So. Cal. I wish all buyers would read his posting. But I'm afraid too many are lost in "LaLa Land". It must be all the silicon enhancements and get rich quick seminars out there.
CEO survey is bearish for the stock market and economy. and here.
How soon will the east coast catch up to the west coast in regards to lower house prices. It is getting tiresome seeing 3 bedroom 1.5 bath outdated ranches listed for half a million dollars. The realtors and sellers are getting dumber and dumber.
jr
Although San Diego may be experiencing some issues, I don't see a bubble in San Francisco.
One particular condo I saw go up for sale went pending in just under 5 weeks! this was a one bedroom asking $750k with no parking!
the_professor said...
bork, YOU HEARD IT HERE FIRST: the next bubble will be in US treasury notes/bonds, with the 10-yr. yield falling below 3% and the 30-yr to 3% and perhaps even below. 30-yr. mortgage rates will fall below 5% WITH HOUSE PRICES FALLING, EQUITY CONTRACTING, AND LENDERS RUNNING SCARED AND TIGHTENING STANDARDS.
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So what your saying is maybe dump some cash into some Treasuries or run from them?
or stay all cash for a few months?
I have no debt other than of course my home, which is cheap for me, & $15,000 in cash as well as quite the silver coin collection.
would this be a good start Sir?
http://www.savingsbonds.gov/
Keith, this is B.S.
Call me once prices for a 3 bed, 2.5 bath single-family home in San Diego are hovering around $250K and 300K, and send me the link.
I want proof.
Then I'll believe you.
When we see homes still priced at$600K to $500K for concrete shit boxes, that tells me that the bubble may have popped but that it's got another layer and is still inflated...
Where is that realtwhore AssMan, I mean Osman?
I have not seen him on this blog in some time. I guess he's too busy selling his ass, I mean real estate in Boulder.
...once prices for a 3 bed, 2.5 bath single-family home in San Diego are hovering around $250K and 300K...
Still waiting for that on the east coast as well. A slow and painful wait.
Keith -
Thus is not a "devestating" RE crash.
It is a MUCH NEEDED correction.
The true devestation would be if it did NOT crash fast and hard. The harder the better.
Buck up, better now than never. Better today than tomorrow.
not devastating? tell that to the families and investors who bought a the peak. they'll lose everything - their home, their family, their savings, and in some sad cases, their lives
I'm afraid this will be, in the end, the most devastating financial event in the history of the United States.
Necessary, yes, but also devastating, on an epic scale.
" oil to the $40s or even below. "
Could happen, but VERY unlikely without a massive contraction of the economy, massive unemployment, a depression of the greatest proportions and WWIII.
even if prices fall 50% people who bought 3 years ago would still be in the black
Northern California economy is booming
condos in SF still selling for over 600k
also, La Jolla condo inventory/prices seems to be about the same as in late 2005 when going by search results from coldwell
wonder how much of these asking prices is not the house, but a conpilation of broker commisions from multiple flippings, trying to be recouped, some coild add up to 30 or more oercents, just another thing, im not buying into, as my house
Devestment said: "It takes money and jobs to support healthy increases in real estate prices".
SO true Devestment. I can understand RE prices quadrupling back in the mid 70's because jobs were abundant - especially in the new computer industry, but now that all the good paying american jobs have been shipped overseas, how can RE prices ever rise to what they are now - ever again?
wonder how much of these asking prices is not the house, but a conpilation of broker commisions from multiple flippings, trying to be recouped, some coild add up to 30 or more oercents, just another thing, im not buying into, as my house.
I think it is the house, lot of negitive equity out there..
IE: To much koolaide from the house ATM Machine... But hey look at the Landscaping, And yes that is Granite. :)
the "mini bubble" in the 90's was different because the prices were such that a person could afford to walk away and : rent it and cover, absorb it, declare bankrurupture.
the prices/laws today are such that you need to rectify the situation before moving on with your life.
Sea of liquidity...mountain of debt. I agree with the professor except for the outlook on gold. Gold is and has always been real money. The USD will depreciate further than the 30% it's already dropped in the past 4 years. Gold is priced in USD and will rise. It could even suck money out of the sea of liquidity and become a tidal wave.
Got gold?
Having already cashed-out by selling my house and renting, I know that I will enter the Real Estate market again, once I feel like I won’t get had.
I know what I can afford and I know what I want. I want a 3Br/2Ba (or 2.5Ba) for under $300,000.
I have just started monitoring the number and location of homes that fit these criteria.
I am seeing them in San Bernadino and Riverside counties (in California).
I want to buy in Orange County, where I presently rent.
There are no houses of this type in OC. They start at about $450,000.
I will be watching as these 3Br/2Ba homes for less than $300K get closer and closer to where I live.
This will take some time, but it should provide concrete measurable progress on the housing crash-drop-correction-slowdown- whatever.
My future home will be heading my way.
Of course I wouldn’t consider buying the $450K home that is presently in the OC, even when it goes to $300K. I’m looking for the same type of house that presently goes for about $550K (or $650K).
FYI, the size of the homs that I'm watching is 1,500 ft. min.
The age is any number of years.
I would really look for one that is not older than ten years, but the ages of the homes will get skewed as time goes on, so I can't really look at 1996-2006.
To anyone who remembers,
I talked to my buddy in victorville yesterday. He admitted to a huge slow down in the area, but said he has not noticed huge price declines in recent sales....yet. He may not be the most real estate savvy guy in the world though, and probably does'nt even pay much attention to the market. (He saved for a long time, and put down a LARGE percentage down payment). I'm thinking he has no real intention to sell in the forseeable future. (Though he is getting tired of government aid to the criminal invaders, who have completely ruined most all of what is now called Mexifornia). Anyway, thats my report back, as worthless and incomplete as it may be.
forclose you,
Good idea (San Diego, post pop).
I found this small booklet, written by a financial expert. He tries to explain all the areas of finance, in terms that a child could understand. It is very well written. I just wish he'd given his name!
(He's not selling anything...just trying to help people get out of debt, etc.)
I'm going to use his advice myself.
http://www.savefile.com/files/163815
Enjoy!
Thomas
" he has not noticed huge price declines in recent sales....yet. "
This is because people would rather foreclose than lose $100,000 to $200,000 on their house.
In other words, people are pathetic fools.
"what do you mean bubble?",
"economy is on fire, i mean look at the stock market"
"i dont know where you get your information but whereever it is you are being misled"
"im not worried"
"you cant trust blogs"
This is great ... clueless people.
Save your crash and buy a house in 2013 for 50% off current values.
why would anyone pay these bizzare prices, unless they thought that borrowed money would make them more money, wonder what cash only deals would bring, and bring without the brokers buy/sell buy/sell compounding, and need to recover, as break even ammounts or all of the costs in borrowings, as 35,000 in the bank enables 350,000 in borrowings, and inflation and low yeilds bankrupts the value of 35,000 cash in the bank!turnaround will require, a long time if ever
forclose you,
I expect it to take at least two years to hit bottom.
But my crystal ball might need cleaning.
I'll be watching OC and SD.
gonna have to know, one bolt at a time, shit!!!
pardon, that belonged on the trump spawn site
The whole median graph doesnt make any sense. The graph might be considerably ugly if we considier the amounts of incentives and footage involved. Ex.
2 houses sold each 300k ( 2000sft) would result in median of 300k on year 1999
2 houses sold each 300k (2000sft) with upgraded floors+kitchen upgrades( around 20k) would still result in 300k median. But the guy is getting more bang.
Same thing.
2 houses sold each 300k (3000sft) would still result in 300k median. But the guy is getting sexy bang.
I belive we need to start having a median for sq foot & year sold..This is good graph to look at price increases and decreases overall.
I know from inside info that some builders are unloading units in new developments in the Carmel Valley area at 60%-70% of the asking price, but using lenders who will show the full sales price using gimmicks like a 2nd TD that gets forgiven entirely right after the COE to avoid having the others owners find out what the true sales price was and sue.
I also know of several large condo developments that were bought nine months ago and just sold for 30% less.
Ask any lenders if they are financing condo conversions or if they are offering permanent financing on new developments and then you'll know why the developers are so scared.
It will be a bloodath in San Diego \"/
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