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 cncgandolf
Joined: 7/29/2007
Msg: 51
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The California RE marketPage 3 of 18    (1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18)

I agree that short term investors may not do well in any real estate market right now; but then short term investors are the ones who are running out on the properties they bought, so that's probably a good thing.


My lender - Countrywide - just got bought by BofA today (My least fav financial institution). Sigh. However, my rate is fixed. Yea. I can ride this out. But, my grandchildren's parents (my son and his wife) might do well ... and are keeping a close eye - with the foreclosure market. Their rent is high enough that if they can find a good foreclosure their monthly bills even at current interest and fully loaded would be lower than rent.

So, I can personally say the pusher for buying will be the rent/purchase ratio. As soon as they are equitable and then move into favoring buy it is time to buy.

Gandi
 MermaidSari
Joined: 2/4/2007
Msg: 52
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The California RE market
Posted: 1/12/2008 10:40:16 AM
^ A good real estate agent can provide the loan amount left on a foreclosure. They have access to this information as well as the lenders holding title. I have not looked up the law or ethical consideration in this as far as RE agents (nor do I care in all honesty...I think the information should be provided to potential buyers).

In auctions -- it is important to know that a 'reserve' is often held and the beginning bidding price means nothing.


My lender - Countrywide - just got bought by BofA today


This suggested 'save' [viewed altruistically by some. BofA moved from #5 to #1 with a great deal of foreclosures/loss over gain] is an interesting development to me. Was the discount buy...opportunity or does it say more about our mortgage situation?

Anyone have any thought in BofA's take over of Countrywide?
 cncgandolf
Joined: 7/29/2007
Msg: 53
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The California RE market
Posted: 1/12/2008 5:00:02 PM

cnc: with young people especially, it's important to know that if you buy auctioned properties, you assume whatever debt there is liened against that property. They don't tell you about that part... so if they're going to buy foreclosed property, I'd recommend they make friends with the public records office so they can check oustanding liens against anything they might be interested in purchasing.


Wow. Thanks for this headsup. I'll be careful. I think I need lessons before I put my toe in that water. Meanwhile, my recollection of the last CA market drop was that it lasted more than a year ... and I am not sure when we start counting this one as starting in order to know when to call it stopped. Plus, available jobs and rentals and profitability of renting factors into the duration, too.
 MermaidSari
Joined: 2/4/2007
Msg: 54
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The California RE market
Posted: 1/12/2008 5:23:56 PM
^ Putting it through escrow takes care of the 'lien' problem as well (your earnst money is returned if finding an existing lien beyond the bank selling the property [the property can not be sold until a lien is satisfied -- unless deeding a second]).

The disclosure rules that don't apply are on the property itself [they are not cause to back out of a sale without loosing your Earnst money, auction fees, etc.][cracked slabs, termites, etc.]. What you see is what you get in auction if you don't pay for a property inspector to attend open viewing or have a knowledgeable friend inspect for you.

Quit deeds without a title company involved are just plain skeery -- but my dad did business this way several times amongst trusted family or friends (county records are only as good as they are updated and what is reported).
 lucerosmile
Joined: 1/1/2008
Msg: 55
The California RE market
Posted: 1/12/2008 5:40:12 PM
I would say that as a rule, houses in California should adjust back down to the value the house was worth in 1997. This means that if you had a house built in 1990 and it was worth $100,000 in 1997 and it went up in value about 20% a year, that house would have been worth about $300,000 in 2007. After doing some educated research, I think the value of that house will drop to about 87% of it's accrued value, so that the house by 2009 will be worth about $150,000.

What makes it complicated is that old adage the three most important things in how to be successful in retail sales is location, location, location.

If you live along the Peninsula or San Francisco, your house value may correct down at a slower rate than I predicted. This is because the value of houses is held steady by the amount of money in that area. New millionaires pop up all the time.

If you have a house in Stockton, Antioch or Pittsburgh, this is a realistic correction of what a house will be worth. It could drop even further because nobody moved to Stockton because of the great job opportunities, the fantastic weather or the great schools.
 MermaidSari
Joined: 2/4/2007
Msg: 56
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The California RE market
Posted: 1/12/2008 6:02:36 PM
^interesting philosphy that I too have espoused. I've tracked and calculated inflation and what a house 'should' cost if normal conditions had existed. I come up with a slightly higher figure than yours though for homes in California (roughly 250k for a 3-4 bdroom home in a desireable area [still not La Jolla or Pt. Loma though as I don't a lot of foreclosures coming in the better beach areas]; lesser homes ranging between 150k-187 without major repair needed in good neighborhoods).

There was an Estate sale I found going for 125k in east county last November -- but the repairs would either be extensive or it was a knock down in a medium to bad neighborhood (bostonia area, but across the street from a bar [albeit this might be desireable for some folks though :->] ). It was a tempting rental/investment at that price as it held more than 1/4 acre; the home was around 1700 sq. ft. It was all about location as you stated.
 MermaidSari
Joined: 2/4/2007
Msg: 57
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The California RE market
Posted: 1/12/2008 6:05:19 PM
Ooops...sorry 250k - 350k [left off the range on the first calculation offered]. Sorry.
 fbodyaddict89
Joined: 9/5/2007
Msg: 58
The California RE market
Posted: 1/13/2008 6:14:46 PM
I'm totally waiting for prices to bottom out. Hopefully this August I can look into buying a nice place in South OC and finally get some tax breaks, filing Single w/o any big deductions sucks!
 MermaidSari
Joined: 2/4/2007
Msg: 59
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The California RE market
Posted: 1/14/2008 11:07:54 AM
Yips -- tax savings on interest deductions if carrying a mortgage needs to be calculated into any equity loss that might occur.

Single without any big deductions does suck...(albeit married dual income might suck worse tax wise...without any big deductions or dependents).
 MermaidSari
Joined: 2/4/2007
Msg: 60
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The California RE market
Posted: 2/21/2008 7:06:28 PM
^The market is still going down...but I agree to watch (I think I read another 9% drop this new year).

Now we have a month of 'waiting' with new foreclosures (a new bill passed for those in financial distress).

I think with many things in life that patience is a true virtue.
 StrangerInTheHouse
Joined: 2/9/2008
Msg: 61
The California RE market
Posted: 2/22/2008 8:22:11 AM
I had a friend at work who made an offer on a house in Clayton that was 10K over the asking price and she got outbid.
Spotty market, I think.
I remember the last housing dip in the late 80s...
Houses built in Blackhawk (a gated community in the east bay area) started off at 1 mil... nothing was cheaper than that... and during the drop, they went as low as 600K; BUT, other homes, some in Santa Clara County for example; just kept on climbing.
If houses in a certain market are owned by speculators, I think those homes will drop; but in a home DWELLERS market, I don't think they'll go down nearly as much and I don't think the drop will last very long.
 Miss W
Joined: 12/4/2006
Msg: 62
The California RE market
Posted: 2/22/2008 1:00:17 PM
^^ I just read today that with people not buying right now, there is a big demand for rentals which have gone up considerably.

I moved into the house that I grew up in a few months ago. My mother is elderly and needs full time care and my rent goes towards it. Unfortunately, I have to have a necessary evil known as a "room mate", who I hope to be trading in for a more civilized model soon. A relative had rented it for about 4 years and made a few improvements to it, but it still has a lot that needs to be done. My family and I were overwhelmed with the prospect of dealing tenants and needing to do a lot of things all at once, so we felt that it would be best that I live in it until we get it ready as a rental or to eventually sell. I realize that I will not be living there forever, but I'm trying to make it home while there. I would not want to buy out my sisters because it is really more house than I care to care for as I get older. When I do buy, it will probably have to be a condo, but would never do so without looking into the "health" of the home owners associations for I have heard some doozy stories from friends and coworkers.
 mateo45
Joined: 1/17/2008
Msg: 63
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The California RE market
Posted: 2/22/2008 5:57:39 PM
Just some figures to put things in perspective: according to RealtyTrac, in 2005 there were aprox. 850,000 total foreclosures in the U.S.; in 2006 that rose to 1.2 million total foreclosures. Then in 2007 it rose even more dramatically to a total of 2.2 million.

But it might be helpful to remember that before all the publicity hit in 2007, the economy managed to survive 2005 & 2006 without catastrophe, and in every year the total number of foreclosures has still totaled less than 1%. Even if that percentage doubles, by comparison, default rates during the depression were well over 20%, and in a much less diverse economy.

It seems to me that the mindset behind the past Real Estate 'bubble' is really no different then it's current incarnation, which is the inverse expectation that "prices will keep falling indefinitely, and I'll just wait 'til they're giving 'em away". The negative hype right now seems to be creating an artificially pent up demand, and if that's the case, then it may really be just a small window of opportunity right now for the savvy buyer.
 StrangerInTheHouse
Joined: 2/9/2008
Msg: 64
The California RE market
Posted: 2/22/2008 6:37:34 PM
^What he said...
 onthewestside
Joined: 4/18/2007
Msg: 65
The California RE market
Posted: 2/26/2008 1:27:37 PM
In the 'giving them away' category: In Cleveland, OH, there are 171 properties (actually 172, but one person listed a prop at a $1, so I deducted that) listed for under $5,000. Yes 5k - try it yourself at realtor.com. That's what an excess supply of homes and rising unemployment will do to any area. Prices will decline until price rent ratio normalizes (see prior posts)...watch unemployment and foreclosures...that tends to nudge things along at a faster rate...
 mateo45
Joined: 1/17/2008
Msg: 66
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The California RE market
Posted: 2/26/2008 5:19:49 PM

"In Cleveland, OH, there are 171 properties (actually 172, but one person listed a prop at a $1, so I deducted that) listed for under $5,000. Yes 5k - try it yourself at realtor.com"


Well, if you're waiting for that to happen in California, good luck with that...
 PolarBearKing
Joined: 4/16/2007
Msg: 67
The California RE market
Posted: 2/26/2008 5:47:44 PM

Just some figures to put things in perspective: according to RealtyTrac, in 2005 there were aprox. 850,000 total foreclosures in the U.S.; in 2006 that rose to 1.2 million total foreclosures. Then in 2007 it rose even more dramatically to a total of 2.2 million.

But it might be helpful to remember that before all the publicity hit in 2007, the economy managed to survive 2005 & 2006 without catastrophe, and in every year the total number of foreclosures has still totaled less than 1%. Even if that percentage doubles, by comparison, default rates during the depression were well over 20%, and in a much less diverse economy.

It seems to me that the mindset behind the past Real Estate 'bubble' is really no different then it's current incarnation, which is the inverse expectation that "prices will keep falling indefinitely, and I'll just wait 'til they're giving 'em away". The negative hype right now seems to be creating an artificially pent up demand, and if that's the case, then it may really be just a small window of opportunity right now for the savvy buyer.


You're kidding right? According to your own numbers, forclosures almost tripled in two years. Those are significant numbers! If you consider how many people have mortgages in this state (I do not know - but can guess), a huge percentage of those people are losing their homes. The problem is predicted to get worse. Even the government has recently been saying that they underestimated the problem.

If you figure that a house that cost $500K will require an income of six figures to qualify for, how many Californians are going to be able to qualify (without interest only/adjustable rate loans)?

Basic principles of economics tells us that something has to give (or in this case the bubble has to burst). Home prices will continue to decline until they are affordable again. Coupled with the rising cost of fuel, which will keep incomes down for the average person, I can't imagine this crisis correcting itself anytime in the near future.
 mateo45
Joined: 1/17/2008
Msg: 68
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Posted: 2/26/2008 8:07:48 PM
"Polar"... of course foreclosures have skyrocketed over the past three years, it's even worse in some places, and I agree, things may decline even further. But if you read the rest of my post, the point is that the total number of foreclosures is still a very small percentage of all mortgages, and although that may be small comfort to those losing their houses, overall it's also just a fraction compared what happened in a real catastrophe like the Great Depression.

Sure, you can always look at the numbers and make a case that the apocalypse is at hand, but I'm also suggesting that hysteria about the problem is just as unrealistic as the previous hype of trotting out the stats and the huge profits to 'prove' that the bubble would expand forever. Worse, as some folks (not naming any names here...) keep shouting that "the sky is falling", I think it's not helping the problem to correct itself.

Do the current economics of wages & cost of living seem unsustainable? Of course, no question. But then again, did they ever make sense in any of Cali's previous boom-or-bust cycles either, and did prices ever drop to the affordability of a house in say, Ohio? Besides, this bubble 'popped' mainly because of bad lending practices, greed, and over-speculation, not because of wages and cost of living, however unbalanced they may be. Ask any lender, people are still getting mortgages, just not quite so easily as the last few years, or it's not always the house that they wish they could afford.

Regardless of economics, the simple fact is that as long as people think California's a desireable place to live, prices here will continue to rise over the long haul. And if "average" folks can't afford to live on the coast, then they'll buy somewhere else. That may be unfair, but of course there's always Cleveland, where I hear you can still find something for $5K....
 marzfan
Joined: 2/13/2008
Msg: 69
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Posted: 3/7/2008 9:48:45 PM
Wow, awesome thread Sari. I'm still kinda new to being a homeowner, so when chicken little started screaming it scared the crap outa me. Luckily, I have a decent loan and good L/V, so I won't have to worry about my loan adjusting for several years. I really appreciate all of the posters that have added to this thread. In fact, there is a good chance that this debacle could work out to my benefit. With the feds dropping the rates, I might be able to get a better deal. I'm looking into that.
 s_w_m
Joined: 3/29/2006
Msg: 70
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Posted: 3/8/2008 12:52:43 AM
Japan had RE prices go down for a decade and the underlying problem was similar. Now 2007 was the first bad year so I think we will see prices go up again by 2017.
My prediction:
1. Many small banks and hedge funds go belly up.
then
2. Credit market freeze even more
then
3. Municipalities will find noone at all buying their debt (already happening)
so after 2008 elections...
4. Government payrolls get slashed. Entitlements get reworked.

In 2009-2010:
1. Massive unemployment, many people, esp. elderly on the street. Some analysts already
predict the Greater Depression.
2. Food shortages, both because food delivery is too expensive (gas prices at least double) and imported foods are too pricey (dollar falls like a rock).
3. By 2010 I think riots are likely, esp. in big cities. Lynch mobs in rural areas.
4. Water shortages in SoCal. More wildfires.

Beyond 2010 until about 2015: declining healthcare leads to epidemics. US population stops growing and shows notable declines.

After 2015: if alternative energy sources kick in then economy picks up, RE values start growing. If not - end of civilization as we know it.
 StrangerInTheHouse
Joined: 2/9/2008
Msg: 71
The California RE market
Posted: 3/8/2008 7:36:22 AM
I don't think you can get a clear picture of the economy by just looking at the headlines.
During the past eight years, the federal government has done just about everything wrong that it could and still our economy is pretty much intact. We're not falling apart... not yet, anyway, and my bet is that we won't. If you're looking to get into the housing market, and you see prices that are within reach, I'd advise you to go for it, because they may never be this low again. If you wait, the opportunity could vanish any day.
Conversely, if you're looking for an investment that has a high rate of return, you might want to wait; because you don't really need to buy a home to do this. There are other things now that are better short term investments.
Media is an industry that's paid based on how much they can make people "concerned", or worried, about the stories they write. When they can persuade people to think the sky is falling, it creates a bigger audience and ergo, greater consumption of their products and more profit.
I think if you use the classic instruments of measurement to predict which way the California ecoomy is headed, then it's kind of a long shot bet that it will continue to go down that much longer.
 MermaidSari
Joined: 2/4/2007
Msg: 72
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Posted: 3/8/2008 3:45:37 PM
SWM --- such a gloomy forecast.**sigh. If you were right then gold definately will continue to soar.

I don't see a presidential change making much a difference in our economy. Many think the end of the war will matter, but fail to consider that war is recycling U.S. dollars despite the expenditures (free to disagree with me, but 'civil service' and our war efforts was one of the inventions that helped the U.S. out of the great depression...the other 'buying American' is needed today in a large way for economic change).

Nonetheless, I see the cup half full myself SWM -- not sure that all the predictors of gloom are correct...although I do agree that things will get worse before they get better.

RE works in cycles though just like the stock market. The saavy investor saw a tumble approaching when witnessing the unrealistic RE price hikes. I'm still playing it safe and calculating 4% a year for inflation on yesterday prices (prices prior to the RE bubble) as far as my crystal ball is concerned.

But what do I know -- I'm just a blonde.
 s_w_m
Joined: 3/29/2006
Msg: 73
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Posted: 3/8/2008 11:55:58 PM
Oh, I'll be very glad to be wrong. And I am not all doom and gloom. I think most of the fall in RE will happen in the next two years (construction is only now slowing down and we got many many months supply so it will not be before 2010 that demand will play a big role against supply). Also, we are not done with the sub-prime wave yet and we have Alt-A coming up, so it will surely get much much worse. After that the slow fall in RE will just ve due to massive unemployment and bad economy but if you have a job then, it will already be a good time to buy.
And also, in my observation, blondes who say "I'm just a blond" or "I have my blond moments" - those are the smartest bunch.
Finally, there three kinds of people. The ones who see the glass half empty, the ones who see it half full, and the technical types like me who see a glass over-engineered by a factor of 2.
 StrangerInTheHouse
Joined: 2/9/2008
Msg: 74
The California RE market
Posted: 3/9/2008 7:27:55 AM
I believe another factor will enter into the market sooner than later that will make California real estate prices climb: foreign investment.

Look at the dollar vs. the euro or many other foreign currencies.

If you lived in Japan, or Germany, Italy, Saudi Arabia, or any well-to-do country right now where the currency is soaring, what would possibly be the safest investment you could make?

I don't even think I need to answer that.

Believe it.
 MermaidSari
Joined: 2/4/2007
Msg: 75
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Posted: 3/9/2008 10:38:33 AM
Strangerinthehouse -- I agree that foreign investments indeed need to be considered in our overall economy as well. We are pushing 'cheap' stocks now...how well is that working for us [we see subprime investors still pulling out when it comes to paper notes and the lending industry]?

Yet the wealthy usually travel with the wealthy and wise discernment and the most safest investments is what makes a person wealthy, imo. Is there gold in these there hills?

Consider China whom we over purchase from due to non-competitive rivals...it stumps some that China takes their profit and re-invests it in American stocks. The gov. there knows what it is doing...provided doom's day doesn't occur [and I have to reiterate I still believe things will get worse before they get better].

SWM -- Love this:


the technical types like me who see a glass over-engineered by a factor of 2.[endquote]

What about the glass being overlooked completely though? Some do this. I'm the engineer who factors by two [some might say to the nth power though...but I usually get dizzy before it comes to this point (us blondes and our moments you know)].
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