September 08, 2007

Lets Play "Mark to Market"!!! What % overvalued are America's housing bubble cities?

HP'ers, the game today is "Mark to Market" the HP US top 10 bubble city list.

From the city's fraud-and-speculation home price peak to today's mortgage-meltdown-reality, what % off do you think a home should be marked down in order to move? And what other cities should be up for consideration?

1) Phoenix
2) Tucson
3) Vegas
4) San Diego
5) Sacramento
6) Miami
7) Tampa
8) Naples
9) Boston
10) DC

Let's play!

My answers

1) 36%
2) 38%
3) 42%
4) 36%
5) 47%
6) 55%
7) 35%
8) 45%
9) 20%
10) 22%


Anonymous said...

I live in the boston area my whole life and outskirts , worcester, marlboro, etc and I can say its definatelly overvalued by 35-40% not 20.

Anonymous said...


Anonymous said...

I saw The Departed last night. Somehow all of the head shots seemed like a lot of guys being marked-to-market. I think the banks refusing to lend to each other now because of fear of what they're holding is the same thing.

Anonymous said...

Here in Phoenix: For your average house inside the 101, I would say 40% overvalued. For the same house outside the 101 50%. For the morons who thought a tiny lot alone was worth a million dollars, and did not realize that being in the desert meant lions, scorpions, rattlesnakes, bobcats, javelina, gila monsters, and coyotes, I have no idea, but I am enjoying the show!!

Wonky said...

Boston's gotta be more than 20%. You should see the half-falling down triple-deckers built for immigrant factory workers 100 years ago, they're now condo converstions and priced at $400k +!

Anonymous said...

Dude, this is a year old! Update your article.

Anonymous said...

I think you are way off. I dont think any of them are less than 50%, at the minimum. There are too many cities to list. Just in California alone, right off the top of my head without even thinking for a moment Los Angeles, Newport Beach, Santa Barbara, San Francisco, San Jose etc...etc..etc..

Is your question, value as of today or what it should be when this mess is done ?

Anonymous said...

I can only intelligently speak to DC's bubble drop, as I've not been in the other big bubble cities in the last 5 years or watched their markets closely.

I'd say 25-30% drop from peak to trough for Metro DC. Exburbs will see more of a drop, inner ring and city proper less. So far I've seen a 10% drop over the last 2 years, so we got another 10-20% do go over the next 3 years I'd say.

Anonymous said...

First of all, Boston's gonna fall a lot more than 20%.

But I'm just disappointed that L.A. isn't on your list. 5 years ago you could buy a nice 2 bedroom condo in Brentwood for $450K. Today that same condo is listed at $950K. It's really hard for me to believe that that same condo won't be in the $500K range before this is all over - in fact it's flat out impossible to believe UNLESS our dollar goes into freefall (a very real possibility if the markets lose CONFIDENCE in Bernake).

Veronica Lodge said...

RE: From the city's fraud-and-speculation home price peak to today's mortgage-meltdown-reality, what % off do you think a home should be marked down in order to move? And what other cities should be up for consideration?

One formula that is fairly accurate takes the price of a house from the year 2000 and increases it by the rate of inflation plus 1% for 7 years. The multiplier becomes a figure between 40% and 45%.

Therefore, if a house in a big-bubble area was worth $150,000 in 2000, multiplying this figure by 145% determines that it's value in 2007 should be somewhere around $218,000. Unfortunately, houses like this have sold for $450,000 to $500,000 within the last year. After adding in a generous 15% to cover another two year's worth of normal appreciation, the meltdown rate for this $250,000 house in 2009 would still be around 40% to 50% from its current "value."

The problem will be finding qualified buyers who are willing to purchase houses while the prices are falling. This will determine whether there will be a soft landing or a crash landing. There is every indication that qualified buyers will be few and far between, so a crash landing appears eminent.

Most of the cities around Lost Angeles, CA -- particularly those in Riverside and Orange counties -- should be on the list.


Anonymous said...

I live in LA . I'm not buying until we get a 33% haircut.


lionstone said...

You got to read this!!

robert said...

Real estate agents advised to limit listings to serious sellers

Anonymous said...

1) Phoenix 30%
2) Tucson 15%
3) Vegas 30%
4) San Diego 20%
5) Sacramento 40%
6) Miami 25%
7) Tampa 40%
8) Naples (no idea about it)
9) Boston 15%
10) DC 15%

Anonymous said...

I love this blog and have been quietly visiting this site daily for two years and have never posted.

Well, here goes...I just moved into my cozy rental in the hills of the San Gabriel Valley two weeks ago after living in Santa Barbara for 11 years. I have a nice job now making $80K and am savings like mad to snatch up my first house in a few years.

Nevertheless, across the street is a 700 sq. ft. pad for sale that the neighbors say is going for $550K. Open house today. I am salivating for my first opportunity to "discuss" the property with the realtor. This should be fun. Based on what it could fetch in rent, the price should be $350K.

I am wondering how long it will take before I get thrown out by a delusional realtor.

I'll report back with my experience

keith said...

Mark to Market - that means mark the price to the price the market would legitimately pay TODAY. Not 2 years from now, not two years ago.


So what discount by city would it take to move dead inventory. Take Phoenix - 60,000+ homes sitting in the desert dust, over a year's worth of inventory, no buyers, no lenders, foreclosures everywhere, new spec homes everywhere, and FSBOs too.

So what would it take - what DRAMA PRICE - to get a buyer. And remember - that buyer still somehow needs to find financing. Good luck.

Gwynster said...

Sacramento resident - been watching this madness since 98' which is when our prices really started to spike.

Sacramento 56%

You can take the MHI and using FHA loans, see what you can afford. This is far shy of the median home.

Another way is to take a sampling of home that sold in 97 to 99 and adjust the selling price by 5% (fed inflation number plus a little for general appreciation) and the number you get is about half of the current selling price.

Remember - wages have been flat to declining in the past 7 yrs. This makes either of the above calc work.

Anonymous said...

DC metro - 30%

Anonymous said...

Phoenix has lots of inventory and foreclosure is rampant but the funny thing is that the unemployment rate is 3.8%. Thousands of people are still moving into the area monthly. Rents are rising as people wait on the sidelines for prices to drop. And then more people move in.

The house across the street sat vacant for 9 months at 1.2M. Someone bought it finally last week at 965K. By your standards for Phoenix, it should have gone for less than 600K. I do not see that happening.

I sold 3 properties FSBO in 2007 in Phoenix at 97% of my asking price. I no longer am a landlord, but I may have been premature.

There is pent up demand here and it is rising. When this thing breaks, I see another rush to buy homes, but this time it will be people who want to live in the house and not speculators from California.

In the mean time, lots of idiots who bit off more than they could chew and doomed speculators dominate the MLS listings. Prices will decrease markedly on the vacant inventory but once it does, it will not last long.

And then another 30 or 40 thousand people will have moved here.

They are developing huge tracts of land north of the 101 near 56th street over the next 4 years to underscore the potential, bidders are already lined up for the auction.

keith said...

FYI Phoenix unemployement is NOWHERE near 3.8%. Remember, that's what the government tells you.

All those mexican homebuilders, roofers and pool builders? All those realtors on commission? All those mortgage agents? All those developers? They're not counted. But add 'em up.

There is massive unemployment in Phoenix today, and it's getting worse

Anonymous said...


keith said...

Again, it's not "how overvalued do you think homes are"

Today's question is what % discount would a seller have to give vs. the peak price in order for a home to sell TODAY.

Seattle is probably 0%. The crash hasn't hit there yet, homes still selling, inventory not bad. London another example - 0% today, homes still selling.

But oh, that will change.

Anonymous said...

2007 04 3 3.2
2007 05 9 2.7
2007 06 9 3.0
2007 07 2 3.2

Ya sure, massive unemployment?

Ever try to hire anyone here?

I have been paying 50K for inside sales, 15hr for warehouse workers.

I have extensive National Corporate HR department help and still have vacant positions.

There is virtually full enmloyment here, you have no idea what you are talking about.

stuckinthecity said...

Chicago's median income is $46,000, but the median home price is $270,000!

It will take a 50% cut to line those 2 number up correctly....

Anonymous said...

DC area will fall till it reaches 2001 levels. Statistic is meaninless in DC area because amount of bubble depended on how much exotic/subprime money was used to buy houses in price range. Houses that were $90,000 in 2001 were $300,000 in 2006 (overvalued by 70%), houses that were $450,000 in 2001 only reached about $800,000 (overvalued by 50%), and houses that were $1,000,000 only went up to about $1,500,000 (overvalued by 33%)because exotic/subprime is not as much as a factor (buyers ususally not exotic/subprime, though they still depended on exotic/subprime to buy their old house which paid for the downpayment). Also houses above $2,000,000 in 2001 did not see much jump at all over past 6 years.

Anonymous said...

DC Metro should fall more than 50%. I know people who bought in 2003. By the end of 2006 their house is being valued by zillow for almost 150%.

mark to myth said...

Keith, did English banks securitize and re-package their MBS into cdo's like we did in the US?

If so, have you got any english based ADR's that are new HB's that we can short because it appears our friends on the other side of the pond are years behind us in the US concerning this meltdown, and I sure would like to catch a plump, juicy, unsuspecting HB or 2 at their apex for a nice profit on the shortside?

Stocks just seem to fall a lot faster than they rise, as it may be a gravity thingie.

As to fair market value of house prices in the states, it is my contention they need to go back to 1998-2000 levels, and then the averege income could afford the averge home maybe...Its just a guess, and think about the tax savings and insurance savings too?

Now I see why it is so tough to get lower homeprices, hell the municipalities, and the insurers want no part in neither...

Anonymous said...

I guess West Palm Beach is a big enough city, but overall it is part of larger metropolis called South Florida. West Palm Beach to me seems to under your radar Keith! Everyone talks about Miami or Tampa, Sarasota but WPB has over 30,000 listings and only 1500 homes are pending sales. Only about 550 were pending since the end of July till today and about half of those I would say will not close due to uneducated realtors with contract prices above appraisal value and also the stricter financing rules. Yes I am in the business and we recieve about 20 dead deals a week!!(appraisals not making value after doing initial research before taking the assignment) Therefore the appraisal firm I work for is dead! Got any ramon for me? In general I would say right now people should lower by about 20% but believe it or not there are some tards still buying. I got to tell you about a new 1/1 condo building which was contracted in early 2005 at $323,000! It's only 800 sq ft. Well after doing adjustments to the new current prices I ended up coming in at $285,000. The funny thing is by the end of the year it will be $250,000. The builder is not willing to renogiate either! Her dummass put $50,000 cash down so she pretty much has two choices walk away and lose the deposit or buy a 1/1 condo in which she will be upside down in 6 months! I thought I would share this! WPB is doomed! Can you give my area some attention Keith?

Anonymous said...

Honolulu is going to crash big time, but unlike other bubble areas, there's been no downward price movement yet.

k.w. - southern ca. said...

It doesn't matter what any of us *think* housing needs to be marked down by in order to start selling.

We'll know just how far once there
starts being consistent buying of the excess inventory - of which there is at least 2-years of.

Anonymous said...

#8 Naples.

Prices are already down nearly 40% from high. A $300,000 condo is now selling for $180kish and you think another 45% which would be $100k? Yeah right Keith. My phone is ringing off the hook now with Buyers.

Naples Realtor Man Whore

Anonymous said...

Phoenix -55%

Westchester Chick said...

Even NY metro area prices are bending a little - albeit slowly. Unless you're in the uber-rich category - since those people are apparently snatching up 6-7 coops at a time to build luxury sky mcmansions. Things are sitting longer and I don't see people expecting to get what they're listing for but somehow realtors here think they're immune because of all the Wall Street/Hedge Fund money. I would guess if someone really wanted to move something in what is genuninely known as a bubble area they would have to cut their prices 20% today. But I agree with whomever said earlier it will be 50% in most areas by the time it hits bottom and NY and Seattle will be joining the rest of them soon.

Anonymous said...

"I can only intelligently speak to DC's bubble drop"

No, you really can't. This place is is gonna get assfu*ked with a horsedi*k as a result of this bubble, the next terrorist attack and the government finally pulling the plug on its drunken sailor spending. And, to tell you what, I cannot wait and am going to revel in it.

Anonymous said...


Nobody wants to play mark to market, but here are a few of my numbers to move inventory today.

Phoenix: 45
Vegas: 55 - low wages and rigorous underwriting has killed this hyperfraudulent market.
Miami 50 (condos) 40 sfh
Tampa 55-60
Boston 25
DC 20

Anonymous said...

For my fellow Massachusetts readers, I grew up in southern Worcester county and went to college in Worcester.

Background: I left MA 17 years ago to work in Silicon Valley, lived in Pacific Heights (San Fran) and returned to MA June of 2005. If you think Boston is high (it is), check out San Fran! I bought a 2 bedroom condo (garden apt conversion) for 295k in the early 90s. Sold it for 650k when I left San Fransicko.

I didnt buy when I returned because I knew the market was peaking. I'm still renting now, still waiting for a bottom to form.

Anyway, a good friend from high school is running a small MA real estate brokerage firm. He showed me his actual sales #s. Right now, the prices in southern Worcester county prices are down, on ave. 12% from May 2005. (% down varies from town to town, and Mass peaked a bit earlier than the national average of August 2005). Most buyers right now are making serious low ball offers at 20% belowing asking price! He also says on the last three houses he's sold, the buyers accepted bids 9% lower than the asking prices. Sellers have lowered the asking prices by around only 5% since the MA peak. So there's no strong capitulation yet. Mass. foreclosures on ave. are 66% YOY. Mass. inventory still setting records. Sales volume continues to slide. Mass. population continues to go lower as more people are moving out of state. Hi tech jobs continue to leave Mass.

He's looking for other business opportunies outside of real estate now.

That's the real deal, RIGHT NOW, TODAY, in southern Worcester county, MA.

BTW, don't forget, coming soon.

Anonymous said...


Anonymous said...

Don't forget San Francisco, one of the few big cities that's actually been losing population over the past few years due to the insane COL, and yet they were still adding condos and townhomes all the while.

keith said...

Naples realtwhoretroll - if you read the question it's markdown FROM THE PEAK and I said 45% for Naples so thank you for confirming that prices have ALREADY crashed 40% there.

Our work here is done.

By the way are you refunding your commission to clients you've screwed these past couple of years?

You should be.

JimAtLaw said...

LA, 45%.

Anonymous said...

I say everything back to 1997 value, we should have paid back in 2000 but the low interest rates and funny money loans changed everything. The FED can not lower, or the dollar will collapse, it is below 80 now! Its gonna be ugly, stock market ready to drop like a stone next week. The FED is propping up the banking sector only now, and gold over 700.

Anonymous said...

Anon 5:29, you didn't give a rent number for that shack across the street so I can't make a specific comment about the appropriate price, so you might have a look at this calculator before you offer them %350K.

Be sure you use a 5-year holding period, because no one could survive longer than that in a 700 sq. ft. hovel.

SoCal realist (not realtorwhore) said...

"Ya sure, massive unemployment?

Ever try to hire anyone here?

I have been paying 50K for inside sales, 15hr for warehouse workers.

I have extensive National Corporate HR department help and still have vacant positions.

There is virtually full enmloyment here, you have no idea what you are talking about."


the fact that you have vacancies at your company does not mean anything. If there is an illegal immigrant who does not know how to speak English sitting outside Home Depot, would you hire him to be part of your sales team? Even if he was legal? I live in SoCal I can direct you to more than one location for find candidates for your positions.

Also, if you paid attention during your economics class you would have remember that the mayor factors that affects employment are location and skills. What good does it do for a construction worker in the Central Valley of California who is unemployed right now that there is employment in Alabama in his field? Also, can we have this unemployed construction worker be working at your mayor pharmaceuticals research lab if he does not have the skill to perform the job?

Anonymous said...

Miami will fall at least 30%, there is a lot cashback deals going on. It helps keep the numbers higher than they should be.

borkafatty said...

Look out below!!!!!

Anonymous said...

San Francisco, San Jose and the majority of Silly-con Valley are grossly overvalued. My opinion is that, depending on area, you will see a drop of between 35-50%. Areas outside of the core valley like Stockton, Tracy, etc. will drop even more.

I have two friends who recently lost their jobs. Both are home debtors and both now currently hold property whose mortgage value exceeds its current worth. And both on interest only loans. Needless to say, they are in for a rough ride.

I've lived in this area since 1998 but have never purchased anything. Real estate always seemed to be outside of my reach. I think I will stick around for another year or two and bank my high salary before I head on out of here. My opinion is that even with a 35-50% haircut, you are still not getting value for your money. The vast majority of the homes here were built in the 50s and 60s. Most need a tremendous amount of work even after you fork over a huge sum of money just to buy these pieces of junk.

Personally, I am headed for Texas. I have several friends in the Austin and San Antonio area and they continuously speak about how high the standard of living is there and how affordable homes are. I'm fed up with Silicon Valley, Prop 13 and this bubble mentality. The only thing this place has to offer now is the weather. And the cost to buy doesn't justify even this weather.

Only hope this housing debacle doesnt turn into another depression. The parallels to the 1930s are almost scary.

Good luck everyone. We are all going to need it. said...

I just returned from Phoenix having moved out of there 6 months ago.

Now that I'm not a resident trying to "make the most of it" and can see Phoenix and Scottsdale subjectively, I can see what a dump the entire place really is.

Phoenix is not only the #1 bubble city but also the most overrated and the worst value overall. It may not be the most expensive place in terms of straight price but it's the most expensie and biggest ripoff in terms of what you get for your money.

Anonymous said...

Everyone wants to live in SoCal so the affordability doesn't mean anything

Anonymous said...

Boston will drop 40%

People are going to get sick of dumping 50-60% of their pay into a house. I already hear everyone quietly complaining about the cost of buying over the past few years...I am a renter.. I need to work 4.2 days of the month to pay for living. Life is good :)

Anonymous said...

I am from Bay Area California and when the market was about to go south one of my realtor friend told me that most of the realtors are telling their clients to overprice their homes by 10 percent because they don't expect to see multiple biddings on a house. And most of the people who overpriced these homes are not willing to budge on those home prices. If realtors would stop taking listings for over priced homes and market comes back to normal, you can see a lot of homes selling fast and the economy back on track. What fools are always going to be fools no matter how much you try to talk to them and try to put a sense in them.

Vandal said...

No way DC is going to drop that little to homes in Loudoun county were $110/sq ft. in 1999, those homes are currenty marked nearly double that. Many home in Fairfax and Montgomery counties are marked well over triple that.

texas toast said...

-94.5% in Crawford, Texas.

The whole village fled the scene.

sam said...


They are now at the top of the list. If only they were substantial enough to make it to the Case-Shiller (rather than being a suckling DC's teet), they'd be the best short in the country.

Anonymous said...

Merced/Atwater, CA 67%

Anonymous said...

Miami and the rest of Florida's got to be 60%.

That entire state is f*cked!

manicpanic said...

Manassas, VA 20109 - 40% correction w/in the next six months from current still very unrealistic asking prices. Wanting to sell at $449,000 - better plan on $269,000.