From Peter Y. Hong:
In Southern California, sales are brisk for homes priced near or below the current $265,000 median. The majority of those homes are foreclosures, so prices are often low enough to draw multiple offers from potential buyers.
Richard Toscano, who in 2004 started a popular San Diego housing-bubble blog called Piggington’s Econo-Almanac, lately has been posting data showing home prices are favorable compared with incomes and rents in lower-priced parts of San Diego.
He’s drawn fire from some, but others who have followed the blog for years have recently posted comments detailing home purchases. Toscano, who sold his San Diego condominium in 2002 (he said the sale was due more to a job transfer than his belief in a bubble then), is still holding off on buying for various personal reasons, he said.
But he thinks it’s no longer dangerous to buy in some areas.
“We have this weird, disparate bottoming,” he said. “In some areas we may be there already, but others are not nearly as close.”
The link:
http://www.latimes.com/business/la-fi-bubble-timers17-2009aug17,0,6997492.story?page=1
and
There are good properties for good buyers. That’s almost the definition of a normal market. Unfortunately the financial component is priced to perfection. If mortgage lenders keep collapsing the secondary market for MBS may drive another leg down for people who need to borrow to purchase (or sell).
In areas where prices are down 50%, buy.
In areas where prices aren’t (yet) down 50%, don’t.
Certain areas might be taking a pause from the initial downturn, but anyone that thinks this is “the” bottom is sadly mistaken.
Yeah, but the government is going all in:
WASHINGTON — The Federal Reserve and the Treasury took another cautious step on Monday toward unwinding the sprawling emergency credit programs they erected in response to the financial crisis.
The two agencies said they would extend their joint program to finance consumer and business lending for up to six more months. But they pointedly added that they did not plan to expand it any further.
“Conditions in financial markets have improved considerably in recent months,” they said. “Nonetheless, markets for asset-backed securities (ABS) backed by consumer and business loans and for commercial mortgage-backed securities (CMBS) are still impaired and seem likely to remain so for some time.”
At issue is the so-called Term Asset-Backed Securities Loan Facility, or TALF, a program under which the Fed buys up securities backed by automobile loans, credit card debt and business debt ranging from equipment leases to commercial real estate mortgages.
From some of your recent entries, it appears buyers and investors are going all in as well. 🙂
Not sure how long either party can keep it up, but they sure are going all out!
Interesting times.
Stock market this morning appears to be realizing consumer spending never showed up at the party.
Although one stock market day doesn’t mean much, the Chinese Index being down 6% in one day gives one pause. . .The summer rally (both in stocks and housing) may be coming to an end. I talk with scores of people during each week, and the stock market runup has made people more optimistic. . .if it falls back to 8200 or so, this could have a big impact on housing.
Would agree here with Rich and others, that the low end of the housing market is probably priced about right, but the over one million is still in big trouble.
I just can see how anyone can call bottom when the market is clearly being engineered so highly with the Fed monetizing $1.25 trillion in MBS purchases, $200 billion in agency debt and $300 billion in treasuries in a bid to (temporarily) keep long term rates around 5%.
This won’t continue and rates will rise, most likely back to last years 6-6.5% range. IMHO, Anyone buying for appreciation is nuts.
We’ve also had this tremendous interference trying to slow down foreclosures while the defaults continue to build. If/When that wave ever breaks we will have a problem. They should have let the liquidation happen over this last buying season while they were spending so much to keep rates low.
IMHO, foreclosures will rise, rates will rise.. prices will fall. It is all a matter of when and it is starting to feel like sooner rather than later. The recognition of the “rentership society” (that buzz was coming out from a REO conference a couple weeks ago and has hit the mainstream), the rising defaults and unemployment and all the people who won’t qualify for mods will have to be dealt with.
I agree…
Too bad I’m not looking to buy in any of the “bottomed” areas.
Well in Las Vegas – its the same deal. Some are calling the bottom. I guess when you have prices below 1999 levels (and some lower)- Many people may take it as such. However when most of Las Vegas(80% and rising ) is under water at least 100k (more like 150-200)-WITH NO HOPE OF IT GETTING BACK TO EVEN FOR A GENERATION AT LEAST here, I would tend to think the bottom is not in . There isnt a stimulus out there to get rid of mass negative equity . Because if you did it for the non payers you would have to do it for the payers . And if you did it for las vegas than you would have to do it for everyone.
Check out this about vegas falling into the realm of the Planet of the Apes in 100 years
http://vegasandre.wordpress.com/2009/08/16/whats-next-for-vegas-a-great-rebound-or-planet-of-the-apes/
I guess if you spend enough time and money driving around, looking at places, wasting weekends, and what not, you’ll find a deal…but the point is it’s NOT supposed to be that difficult.
If people are still outbidding each other, and cutting each others throats for a house, then it’s not a good time to buy…I don’t really care what anyone says.
If we have our annual September/October stock market sell off, there could be a number of folks who made out quite well over the past 6 to 12 months. They would probably look to put that money into an undervalued asset, which could be interpreted by some as distressed real estate on the low end.
As Jim has pointed out recently, there is plenty of demand out there.
Of course, this won’t stop the job losses or the price declines in the mid to upper tiers, but the bottom of the low end will probably find some solid ground this winter. All those Option ARM, Alt-A folks will need some place to rent after they’ve walked away or been foreclosed upon.
This…
http://www.federalreserve.gov/releases/chargeoff/chgallsa.htm
…hardly looks like a bottom.
Yep, I think were in some new process. Call it bottoming if you like, recovery is another term thrown in too. The larger issue is not that.
Uncle Ben and Uncle Sam can pull off a lot tricks. David Copperfield has nothing on them. No, the larger issue is California in particular SoCal and where it’s headed. California doesn’t have many tricks, if any at all.
We may see 12-15% unemployment in SoCal through 2011…
“At issue is the so-called Term Asset-Backed Securities Loan Facility, or TALF, a program under which the Fed buys up securities backed by automobile loans, credit card debt and business debt ranging from equipment leases to commercial real estate mortgages.”
This is the craziest thing this side of a bad hand of poker, after a week of losing at the worst casino in Vegas.
As long as stuff like TALF is still happening, we can’t climb out of this criminal collapse.
I heard mention of prop 13 on the radio this morning. The voice said that politicians were too afraid of it, but what would happen if it did come to the forefront? I’m not saying that anything would actually change, but what if serious debate started regarding reforming certain aspects of prop 13? Would people get nervous about how much they spend on a home if there is uncertainty about changes to prop 13?
It’s certainly possible that we’ll see a restructuring of Prop 13. We really don’t have a choice.
It should not affect owners of primary residences, but I would not be the least bit surprised to see investment and second-home RE (maybe commercial?) affected. It’s high time, too — and I’m a staunch advocate for Prop 13…for a single O/O residence.
The anti-tax folks (Harvard Jarvis, etc.) are too powerful in California for prop 13 to be weakened. My personal opinion is that it should not apply to commercial, second-home, or rental property, and that there should be a (fairly high) income limit. If you are worth fifty million dollars, but still live in the mansion you inherited from your parents thirty years ago, you should be able to pay property taxes on the full market value of your estate, not the ridiculously tiny prop 13 value.
Don’t emss with Prop 13–what will be left for them to mess with after that??? California simply needs to cut expenses–The Governmnet does NOT have a revenue problem, it has a SPENDING problem. It is no differnet from a household–we all need to spend within our means, and so should the Govt.
Local Boy, I agree that spending is a problem. However, Prop 13 could use some tinkering as suggested by Geotpf: commercial, rental and second home residential should not have protection of Prop 13. Prop 13 for residential should also reset after any changes to title (no more intra-family transfers to keep the rate.)
A restructured version of prop 13 that applied the same objectives but had less emphasis on the most recent home buyers would smooth out our revenue stream, with smaller increases in the up years, and smaller decreases in the down years. Both would help us. If we had had less increase in the bubble years spending wouldn’t have shot up like it did. If we had less decrease in the bust we wouldn’t be in such a big hole to dig out of.
Oh, and by the way, regarding “weird, disparate bottoming” — nice quote Rich. 🙂
Still thinking about Jim’s comments on sales up to $900K being red hot in CV. Can’t help but believe that the FHA to $700K — combined with ~5% rates — is really holding up the upper middle.
What would happen if the old GSE formula kicked in and the conforming limit went down to the low 3’s? Those $900K homes would be $500K overnight.
Again–Adding more revenue to the Govt. of California’s wallet will not solve it’s fiscal non-responsiblilty–take in $1 spend $1.30.
“A restructured version of prop 13 that applied the same objectives but had less emphasis on the most recent home buyers would smooth out our revenue stream, with smaller increases in the up years, and smaller decreases in the down years. Both would help us. If we had had less increase in the bubble years spending wouldn’t have shot up like it did. If we had less decrease in the bust we wouldn’t be in such a big hole to dig out of.”
Yea I bet you and all the rest of the boomers would like that. You get the prop 13 savings all your life but expect everyone else to subsidize you now that you want to retire. You suck.
Flowclosure?
Prop 13 inexorably led to the situation you currently enjoy in California. I would think that much is obvious. One can argue from one side or the other about what should be changed or whether or not prop 13 is an untouchable law but it’s clear enough that prop 13 led directly to many of the problems taking place right now.
Florida’s done things like this to themselves several times over the last century. Now it’s California’s turn.
I hope you guys figure it out.
Ice Weasel,
Why do you only think not taxing enough (prop 13) is the answer? It doesn’t matter what you tax the population it will never be enough for all of governments goals and needs. The answer to California deficit problem is to stop the spending. Not enable the junkie by providing more drugs.
Those in power want to stay in power. There will be no change. And the separation of classes will continue, but faster.
It’s only Monday, but that could be the quote of the week.
Right on Shadash–Well put–Enough is never enough–Plug the holes and make some cuts!
We can only tell it when we look backward. Every individual stock might be up and down all the time, when did the S&P 500 reach its bottom in last a couple of years? When everyone realizes it, the bottom should have been over.
Yea I bet you and all the rest of the boomers would like that. You get the prop 13 savings all your life but expect everyone else to subsidize you now that you want to retire. You suck.
This would be a good comment except for the fact that I’m not a boomer and have many, many years until I retire.
Wait, I take it back, it’s a foolish comment either way. Less fluctuation in revenues would help everyone in California, young and old.