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Show ALL Forums  > California  > The California RE market [LOCKED UNDER REVIEW]      Home login  
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 MermaidSari
Joined: 2/4/2007
Msg: 1
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The California RE market [LOCKED UNDER REVIEW]Page 1 of 18    (1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18)
If you've been following the dropping Real Estate prices here in CA...when do you think we are going to hit bottom? Do you think we already have or is this 'bottom' yet to come as predicted by economists (some suggest June/July 2008)?

Share you wisdom/thoughts in this area.
 MermaidSari
Joined: 2/4/2007
Msg: 2
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Posted: 12/27/2007 11:01:55 AM
Thanks Grneyedgt. Loan agents are good sources. :-)

In consideration of the recent moves by the fed (federally financed 'make-ups' on foreclosures/interest rates dropping, etc.) ... we are still seeing a lot of people relunctant to come down on thier home price and falling into foreclosure. The difference in 'timing' on these foreclosures along with moves by the feds are making it very difficult to forecast.

I sincerely believe that it would be better to let the ball drop versus the aid given that doesn't appear to be helping much beyond the banks (interest rates were not necessarily passed on to those seeking loans in the recent i drops we have witnessed).

Assistance to lender/mortgage companies, etc. is an understandable mark of an 'overall' bad U.S. economy [in attempts to keep foreign and domestic lenders on board offering loans...and shhhh, should we mention the talks of recession] -- but I'm not seeing it helping in any great measure those seeking home purchases. Currently, FICO scores have to be quite high or higher cash downs are needed for people to get loans.

My brother who owns a home that devalued from $500k to $400k tried to refinance his home in order to have a single bill (not even needing money) and was turned down for more than $380.00 (he has an excellent credit score and job/asset profolio).

So what will change in June/July 2008 that will make a difference (in determining 'why' this is the predicted 'bottom)?
 Paddy O Furniture
Joined: 9/15/2006
Msg: 3
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Posted: 12/27/2007 11:02:03 AM
Nobody knows when its going to rebound. And anyone who says they do is full of it.

This current decline is not like previous declines such as job losses, etc...

This decline was caused due to the fact that the real estate market for the past several years in parts of California was built with smoke and mirrors. Faulty and fraudalent loans made to people who had no business getting them. Inflated appraisals, no down payment loans, no documentation loans, it goes on and on and on

And now that the mirror has broke and its making it harder for even those worthy to make a deal. Especially those needing the Jumbo Loans, which are needed in many parts of California.

When a house's equity go's up $75,000 -$100,000 or more in a year, as it did in some markets, something is seriously, seriously wrong.

The market will rebound eventually, but it will never be like what it was before because the banks and their investors are going to lose billions of dollars when all is said and done and theres a good chance they won't want to make the same mistakes twice.
 MermaidSari
Joined: 2/4/2007
Msg: 4
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Posted: 12/27/2007 11:04:02 AM
Whirlybird -- About the talks of recession, don't under estimate yourself...that is 'exactly' what many economists suggest as well. Thank you. :-)
 MermaidSari
Joined: 2/4/2007
Msg: 5
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Posted: 12/27/2007 11:13:02 AM
Paddy -- thanks for your thoughts as well.

In consideration of the 'rise' in RE prices we witnessed in a two year period...how do you think that scores with the 'decrease' we see now? (wondering if anyone has tracked this accurately as it might be the 'best' predictor we have in determining when the 'bottom' is in sight). :-)

I'm seeing as much as 33% decrease [some areas are hit greater than others] in a 1/2 year...which was similiar to the rise we witnessed. Yet it continued for a min. of a two year period (accounting for the faulty interest only's and inflated appraisals, etc.).
 Paddy O Furniture
Joined: 9/15/2006
Msg: 6
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Posted: 12/27/2007 11:20:35 AM
I think the property values are receding to what they normally should be. Everything that goes up, must come down.

As far as predicting, a person may as well get out their Magic 8 Ball or Ouija Board. They'll have better luck. Theres so many factors involved. Energy Prices, Inflation, Wars, Taxes, etc.....
 RUFOREAL
Joined: 10/28/2007
Msg: 7
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Posted: 12/27/2007 2:04:15 PM
The real estate market is cyclical..
I have been in the field for over 35 years (although im not a day over 30) ;) , in
my personal opinion based on closely following and working thru the cycles over the years, we are going thru a normal dip complicated by the overly inflated market we experienced not so long ago. I prefer to call it an adjustment period. For years these cycles could almost be predicted five years up and two years down.... the times they are a changin....and its not that predictable anymore, but I do feel that things will settle/level out by the summer of 08... but the investors need to be patient...

Anyone who CAN hang on... should... the ones in the most trouble are those who purchased purely for short term investment purposes via risky financing or bought beyond their means because of all of the creative financing that was made available... which is always a risk unless you have the right timing (as in any investment) ... this is actually a great time for LT investors if they do their homework.... so many who bought during the last MAJOR real estate depression.. made out like bandits when the market turned.
But hey, Im on vacation now... who wants to think about biz... (waiting for the holidays to pass before heading back to work) Happy New Year
 RUFOREAL
Joined: 10/28/2007
Msg: 8
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Posted: 12/27/2007 2:12:20 PM

Currently, FICO scores have to be quite high or higher cash downs are needed for people to get loans


the above USE to be the criteria that was necessary in order to purchase a home.... one needed to prove that they were worthy of the credit and that they were willing to invest some hard earned cash along with the lenders in order to purchase a home.... (with the exception of VA loans/ and some FHA programs ) where the down payments were guaranteed by those admins... the other exception was for those with extremely high credit ratings and $$$$$$$'s in the bank that could get 100 percent financing easily


I saw some people purchase homes for over half a million dollars who couldnt keep a credit card account with a five thousand dollar credit limit in tact. ( for me it was always a bit shocking) lol
 spitfire6844
Joined: 6/30/2007
Msg: 9
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Posted: 12/27/2007 2:52:00 PM
I'm in that field. Like some of the other posters have said, it looks like it will hit bottom in summer of 2008, and then slowly start to recover. Obviously, nothing is for certain in real estate.
 kjamesb
Joined: 3/24/2007
Msg: 10
The California RE market
Posted: 12/27/2007 4:05:02 PM
I work in the industry as a computer geek, not a loan agent. I hear everyone saying 12-24 months before things start to rebound.

I have an INTUITION that SOMETHING is going to happen in Feb or March. Some report is going to come out, the Fed is going to lower rates...SOMETHING and all of a sudden people are going to realize that it's not all doom and gloom and start doing business again. I don't know what that SOMETHING that triggers it will be and like I said it's just an INTUITION with absolutely NOTHING to back it up. It won't be crazy busy like it was 2 years ago or so but with so many of the bottom feeders gone (and some big fish too) at won't take much to get the companies that are still around back to profitable.

At least we're still in business and that's more than a lot of them can say!
 MermaidSari
Joined: 2/4/2007
Msg: 11
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Posted: 12/27/2007 7:51:28 PM
Thanks everyone for your posts and Happy early New Years to you. :-)

Dirt expanding? Population is expanding, but the earth isn't expanding, is it? As usable land is less scarce in larger cities, we witness urban sprawl (we are super sprawly here in Ca :-p). The increase in demand for inner city 'dirt' usually drives up prices, but we are witnessing the opposite occur during this adjustment period...the question is how long will this occur? I have to agree with Caliboomer that dirt held is one of the safer investments regardless of the current adjustment period.

NathanInT.O. -- Thanks. I have made the argument for 'depression' over that of recession (ppplllease...nobody suggest prozac to cure my situation :-p). Unemployment is already increasing in some areas [unemployment is the major defining difference between the two]. Could the 'made in china' label/tag that we see on everything have something to do with this (versus the RE market)? *shock* (Outside of tariffs versus pushing the burden on taxpayers...my magic eight ball sees a long economic recover for our rather new republic).

RUFOREAL and Nath -- In total agreement about cycles. I've been comparing the decrease we see now against the increase of yesterday as an indicator for timing of investments which effects the stock market as well as RE development/investments...(I'm such a boring gal :-p)!

Of course I might just resort to Sockman's method and give Cleo a call.

kjamesb -- Your hunch might be right if you consider the stock/bond market and the fact that interest rates were lowered at a time they should have been raised (I support Grenspan's economic theory). Our gov. doesn't like sudden crashes as it upsets folks (we wouldn't want to do this during an election period), but investors who circulate money here in the U.S. and who study and wait...love these.

A wise man might have sold when the RE was high and relocated in community housing and then waited to repurchase a home. What do you think of this theory?

How much could be have been made...100-200k in a 4 years period of time for a simple move isn't bad extra spending money for a simple move. **wink**
 MermaidSari
Joined: 2/4/2007
Msg: 12
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Posted: 12/27/2007 8:31:17 PM
onthewestside -- Wonderful assessments and argument against the June/July 2008 predictions. Thank you.

We are forgetting some agitation variables though. We see arm foreclosures, etc...but popluation factors (younger investors [babyboomers's next generation] seeking homes many who buy 'whatever' whenever. Here's an article about boomers. http://www.realtor.org/press_room/news_releases/2006/babyboomerstudy06.html

We see 'multiple' investments held during the approaching 70 million Boomer retirements (this will also have an distinct impact on urban sprawl in the near future).

'Boomer children' are getting parent's signatures together in their desire for the American dream and obtaining cosigned loans. So will the Ipod generation even consider what a good time to buy is?

Another factor is 'impulse' predictions (such as the suggestion of June/July 2008 being a significant time): I saw such a spike here in San Diego last year when homes dropped only a small amount...and sales increased 11%. Foreclosures bought then have lost around $50k in value already in the particular area I was studying.
 MermaidSari
Joined: 2/4/2007
Msg: 13
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Posted: 12/27/2007 8:39:32 PM
Sockman -- Hell is a miserable place...you sure you want to jump aboard?

As far as the higher rungs on the intelligence ladder having to pay? Why is this?...I will ask you the same question I asked kjamesb above --

A wise man might have sold when the RE was high and relocated in community housing and then waited to repurchase a home. What do you think of this theory?

How much could be have been made...100-200k in a 4 years period of time for a simple move isn't bad extra spending money for a simple move?
 MermaidSari
Joined: 2/4/2007
Msg: 14
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Posted: 12/27/2007 9:17:21 PM
Thanks again onthewestside...so do you have any answers on where to park our dollars while waiting then?

(this guy is good) ! Albeit...I think the variables that will cause agitation to the RE market (I mean temporary movement) will bring about larger 'short-term' effects than suggested. As well Schiller has a similiar to NAR report on Boomers that can be read side by side (I wasn't meaning to post anything about median prices).

You are very insightful and I apprecriate you bringing 'inflation' into the equation (very wise). So your suggestions on parking our dollars while waiting would be? :-)
 MermaidSari
Joined: 2/4/2007
Msg: 15
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Posted: 12/27/2007 9:28:40 PM
Sockman -- 3 out of 5 years is the change in primary residence/tax law I believe. No captial gain for the 4 year period.

Luck? I have only 'bad' in that category. (and boy is it bad)! I know many who did exactly as I have...no luck required.

Since you agree with Onthewestside. Is he talking about luck? Knowledge is a premium in our society (a wonderful product to sell a matter of fact, since many fail to study and fail to consider the possibilities available outside of a 9 to 5 job like those working the psychic hotlines [not Cleo though -- she no doubt has staff employed who does that] ).

Onthewestside...Your grammar?? I am thinking about heading back to college thanks to POF!! :-p
 cncgandolf
Joined: 7/29/2007
Msg: 16
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Posted: 12/27/2007 9:32:10 PM
Start with your basic supply/demand curve and it reached a high where even with super creative financing the desires to buy at any price could not come up with the money to buy at such high prices. So, the demand dropped. When the "buy at any price" demand dropped then the "flippers" lost their market and the curve went out of balance two ways. This rippled into foreclosures of the flippers who couldn't find buyers. Add to this the creative financers getting to a point of needing to refi when their ARMs and interest only loans got to higher interest and the need to pay princpal. Another set heading for foreclosure.... which is why the supply is larger than the population needing housing.

What hasn't been addressed is the rental market. When people do not buy they must rent. Part of the unmentioned issue has been that the cost of houses has been too high for the amount that can be charged for rental. So, the rental purchase demand dropped, too. Yet, this might be the first market to recover. Why? Because we all need shelter. You might suggest moving far outside the city, but we are all also facing a related cost increase - fuel. So, we may have to live closer to our jobs to afford to get to them somehow ... at least until mass transit is safer and more available. Then again, maybe business will move out to where there is affordable housing.

Buyers who can qualify are now waiting for the best deals and betting that they haven't come yet. But, not everyone can wait. Some have to move due to various reasons and they will buy in the current market the best deal they can find. As the ability to wait decreases the supply/demand curve - having corrected - will begin to balance again.

Now we have at least one more mitigating factor - politics. The revenue for the state is disasterously dropping due to the dropped property values. Will the next election pass the 4 Indian gaming initiatives to provide that increased revenue? If they do, will it be enough to offset the property tax revenue crash?

If the state tax and politics isn't enough, let's add the national politics .... and how candidates and the current administration will choose to impress voters with their actions relative to the housing market. They've already passed one rescue act... will they do more?

I've watched the corrections in prior realestate markets .... after it corrects they will go up again. One hopes that laws will be passed to prevent lenders from entering into more irresponsible loans ... foreclosures waiting to happen. If they do, it might help curb the speed of rise.
 MermaidSari
Joined: 2/4/2007
Msg: 17
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Posted: 12/27/2007 9:59:26 PM

What hasn't been addressed is the rental market. When people do not buy they must rent. Part of the unmentioned issue has been that the cost of houses has been too high for the amount that can be charged for rental. So, the rental purchase demand dropped, too.[endquote]

Thank you cngandolf -- Indeed...and investors are desiring to hold previous values (which I find particularly telling). I had a fourplex on offer for $350k (not coastal apparently) with a listed MV of over $600k. I pressed my 'luck' [which as you can read above I don't have. lol] and passed over the $400k counter (which with the steady renters would bring in at least 10% gain after taxes--which isn't bad to ride out the tides with). The owner pulled it off the market and decided to ride the changing market himself. Regrets I have a few...[yikes that is an old song]. :-p

I read a report on rents increasing as the RE prices go down...I am watching 'many' investors raise rents 'to promote sell' of their rental properties though (as was the case with the 4-plex I looked at). I think you are correct that rentals might be the first to correct, since more folks are in need of rentals which is keeping rents high. (Does rent ever decrease much either though and is this an indicator that i rates 'have' to be increased as Grenspan suggests)?
 MermaidSari
Joined: 2/4/2007
Msg: 18
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Posted: 12/27/2007 10:00:40 PM
Sorry -- I messed up my quote tags again.
 MermaidSari
Joined: 2/4/2007
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Posted: 12/27/2007 10:06:47 PM
Lily Grace...I don't believe in luck (not just for the 'bad' luck I have, but scriptural reasons). I congradulate you on your inner wisdom though and wish that God continues to bless you. :-)
 MermaidSari
Joined: 2/4/2007
Msg: 20
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Posted: 12/28/2007 8:33:03 AM
Thank Kzin and Justcrazyenough...

The question about google is will it crash? The climb google took is questionable despite the cutting edge innovation outside of search engines.


Foreclosures go up, so do rents


The article I mentioned was from a stock watch group -- not economists or RE and held statitics that went beyond Ca. I think other states might have some catching up to do in the stabilization. I dated a developer here who is now developing a 'retirement' community out of state in consideration of all the changes occuring. It will be interesting to see his final profit or loss (most developers have gotten themselves in quite a situation).

In Ca, I've witnessed investors increase the rent as much as $200.00/month (unincorporated areas under county versus city regs) in order to make their rental property more attractive for resale and to get out from underneath it as RE prices drop. The rent increase established though remains after the property is sold.

Okay so this is what I found:

There is a 3 story home that was $530k three months ago. It is now selling at$300k. With the feds moving in and offering 'make ups' to lenders in foreclosures...how much of this over $200k drop is federal assistance...and how much indicates a 'true' decrease in homes in the area. Comps are not showing compariable [no recent sales at the $300k mark. The most recent was $480k last year].

Any thoughts on this 3 story home?

2nd scenerio...a foreclosure in east county -- a nice sized home with a pool/spa that is possibly bought at 250k (single story). Comps still report in at $400k with *recent* sales in the area. Again how much is federal asst. to lenders versus an 'actual' decrease in value?

Thanks. :-)
 RUFOREAL
Joined: 10/28/2007
Msg: 21
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Posted: 12/28/2007 11:10:18 AM
JUst Crazy Enough

Pretty good post for the early morning!!

Basically you put it all in a nice neat package and hit the nail on the head. Well done!

Your comment about foriegn investment groups buying paper and in some cases originating some of the loans was right on the money too!

Im in a rush this morning so I wont have time to read all of the posts so I dont know if anyone covered this, but another concern of mine was some of the bogus appraisals that were done on some of the properties purchased with 100 percent/125 percent or more financing. I was not personally involved in any of those types of sales (as I have always offered conservative advise to anyone that I work with), but noticed many properties that reported final sale prices that had nothing to do with comparable sales at the time. Lots of concessions made that were not reported, and in so many of the cases I would venture to guess that the appraisers involved made some unwarranted upwards adjustments in their reports!! Waiting til after the first of the year to start dealing with the wreckage!
 MermaidSari
Joined: 2/4/2007
Msg: 22
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Posted: 12/28/2007 6:59:07 PM
Onthewestside...just keeping beneficial conversation and interesting discussion moving. Emotional investor? -- I know real estate agents that wished it were true. :-p No offense taken...btw.

You are leaving out the variable of 'government loan make-ups' that are occuring with foreclosures. The home on Dictionary Hill I talked about earlier -- it will sell for more than 3ook...even with the current market. I've been watching this occur. Are people foolish for the purchase. No--not as a primary resident in which to live for 7-10 years. More folks seek primary residence over investments.

Thanks for your contributions to thread.

Hershey Kiss...the Dow reports would agree with you as well as others. I'm not certain it is 9-11 causing this reaction though. We have agriculture and service and spending. American's 'want' higher wages, higher min. wage, National Health coverage, lower taxes, etc. [we are spoiled in all honesty and as all economists know ... there is no free lunch]. How do you think we fair in consideration of China's labor force? I agree that things will get worse. I also see opportunity for folks in all markets though if they are willing to educate themselves [and see the worth in it]. :--).
 MermaidSari
Joined: 2/4/2007
Msg: 23
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Posted: 12/29/2007 5:47:44 AM
Just Crazy enough -- Ron is my second vote after Duncan. I don't think either have much of a chance though. I was polled yesterday by the Republican party (Paul's and Hunter's name was mentioned only once as far as the primaries in a lenghty discussion over other candidates). The gold standard? Not sure we could handle this. Metals sure have been good in terms of investment though. :--)
 MermaidSari
Joined: 2/4/2007
Msg: 24
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Posted: 12/30/2007 6:08:42 PM
Thanks everyone for your posts....one thing is for certain...it will be interesting to watch the RE market this coming year (and years to come). :-)

Happy New Years to you all.
 MermaidSari
Joined: 2/4/2007
Msg: 25
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Posted: 1/2/2008 10:06:04 PM
alwaysalotoffun...


This is EXACTLY what I did.


(That is what I like to hear). :-)

Considering inflation rates (as were normal before) and the average home price before the surge in price...that would indicate as you said...a longer wait for the bottom than predicted by many (June/July 2008), but not as long as predicted by some perhaps (we have to watch the lowering prices and consider the variables that will cause 'spikes' in the market, but 'not' recovery). Needless to say, the bottom as well will last a while prior to any form of recovery (indicated by home prices increasing in a normal fashion again).

************************************************
Gold...as I said...it 'was' a good investment if following and adhering to the Dow theory, but I'm not so sure I'd buy high at this moment. It all makes sense though -- in economics. As stated we would collapse if attempting to return to gold standard! Well, according to the Dow theory though -- our economy might collapse anyway *shock*!! I agree with one thing...it is going to get worse and we might want to consider this so we won't be whining when it does. I don't care for complainers? Anyone else care for these?

Thanks everyone for your thoughts on the market. :-)
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