Posted on 08/02/2008 9:55:02 AM PDT by SmartInsight
California's battered homes market may be hitting bottom, suggesting a national housing recovery may follow, veteran banking analyst Charles Peabody said on Friday, citing a rebound in home sales as renters become owners.
As goes California, the most populous state, so goes the rest of the United States, according to Peabody...
Reasons to believe California home prices will firm may be found in data from the California Association of Realtors, Peabody said.
Notably, buyers are responding to sharply lower home prices. The realtors' group reports the state's June home sales rose 17.5 percent from a year earlier while its median home price plunged 37.7 percent. June also marked the third consecutive month of increases in home sales from year-earlier levels in the state.
California's backlog of homes for sale shrank to 7.7 months of supply in June from 16.8 months in January. The days a home for sale stayed on the market fell to 49.1 in June from 71.6 in January.
"At last, the carrying cost of purchasing a home equals rental rates, a condition that should lead to more stable home pricing going forward," he said.
(Excerpt) Read more at reuters.com ...
Here's what happened in the last 2 weeks. We offered 169,000 on a list of 175,000. Two other offers. It was a short sale. The bank did not accept any of our offers. They foreclosed and sold the house to a group for 144,000. The group put in grass and paint and is now selling for 225,000 (won't get it in that market).
Question why didn't the bank approve a short sale of 169,000 and avoid the costs of foreclosing?
I’m seing a lot of investors. That may temper the seasonal stats somewhat.
I suggest people build their retirement on Indexed Universal Life insurance with an assured minimum gain. No loss of principle and pay out is tax-free. The stock market and employer based programs are over for retirement, IMO.
With all due respect, I disagree with PythonicCow. And, his advice is neither helpful nor applicable. First, it is internally inconsistent. If the FDIC is going to be overwhelmed, the $ 100K coverage won’t help. So limiting deposits is useless.
And, this type of doomsday argument has been set out every few years for as long as I remember (late 50s till now). The market adjusts and no one can predict all of the things happening between now and the so-called second reset. If folks sell their homes on the normal sale cycle, most of these mortgages will be long retired before becoming due. And, the adjustments of even several hundred dollars can be dealt with from changes to other family habits. If I smoke now, I quit. If I had a boat, the kids are older now and they don’t use it, so I sell it and drop the payment.
He is not “spot on”. And, I submit we all show up here ten years from now and prove it. Will it be simple? No, it never has been simple. Will it be his “revolution” to replace the government? No. That isn’t even an idea worth discussing. Dig in, work hard, be smart. Trust the One who is really running this whole thing. Forget Chicken Little.
It was that bank that probably made the original loan.
and...why did they take 144 when they had 169 in-hand?
I will say homes in our area are now selling much faster here in the past 3 months or so, and for surprisingly higher end prices than we would have figured. Yes, less than 2 years ago, but still got great offers. Two have sold, and one is in escrow in our immediate area. Considering what has occurred in the past 2 years, that is remarkable, and no doubt is a tell tale sign in my opinion.
Homes once prohibitively costly are now affordable to a wider spectrum of the people. The market does its work efficiently and without gubberment interference.
May our paths cross in ten years; I hope that you're the one proved right. But I am arranging my affairs for the contrary.
“
The media is always behind the curve on any real event.
“
Yes and no.
Even the liberal dough-heads over at The Los Angeles Times were
sounding warnings on the dangers of millions of ARMs back in 2005
(or maybe even in 2004).
But yes, they’re usually behind the curve. Even the business writers
of The LA Times admitted they totally missed the impending fall of Enron.
For some, it will be more than a few hundred dollars per month. Alot more.
I don't know but there's going to be another round of foreclosures next year when a host of option ARMs get reset. That means another glut on the market. If I were looking to buy I might want to wait and save for another year and pounce next Spring
This article is great news and suggests a bottom now or in the near future — near being, a year or two, not five. I’ve been assuming a bottom before 2010. Even I have to admit that California house selling prices have fallen WAY faster than I had anticipated. I am familiar with Sacramento, so I’ll speak to that.
Sacramento area house prices have fallen to August 2002 levels, down about 37% from peak. Of course, a drop of 37% of peak value wipes out a gain of 60% on the way up.
$220,000 x 1.6 = $320,000
$320,000 x 0.63 = $222,000
My point being, the meteoric collapse of house selling prices around Sacramento at least is steering us to the bottom much sooner than would otherwise be the case. If a bottom came soon, I would not be overwhelmingly surprised. The prices can’t fall forever. At least, I don’t think they can.
You have brought up the single best point why we may be at a bottom and the bottom. With most sub-prime foreclosures in the bag, and with the government pulling out all the stop to bailout the banks, we are at a calm point. A bottom. But we have yet to work through all the Option ARM and Alt-A loans yet, and that could start a new wave of foreclosures.
I’ll add 2 anecdotes to your valid prediction that a bottom can’t come in until we worth through Alt-As and Option ARMs.
The first is: All of the inventory is CLEARLY not on the market. On my way home from Sacramento to Yuba City, a little cowtown north of Sacramento, I stopped in at the “Plumas Lake” development because I had never seen it. In one upscale subdivision by KB home of perhaps 300 homes, I counted 12 homes for sale. But there were another 25 vacant homes with completely burned lawns overgrown with weeds and NO for sale sign. These were all bank owned or jingle mail that the banks haven’t bothered to list or gotten around to listing because repossessed foreclosures are occuring faster than they can process. This is Shadow Inventory.
I can’t possibly know how many other homes in this subdivision were occupied by people who are in default but have not yet been evicted, so they are living their merry lives with nice green lawns until they get a bank’s lock put on their front door.
Still, two out of 3 vacant homes in the subdivision were not yet listed among the MLS homes. So the inventory stated in this article, while perfectly accurate, is still vastly under-reporting the number of vacant homes that need to be sold before we bottom out.
The second anecdote is a study in pure madness...
I was listening to a finacial program today, might have O’Donnel? A woman called in to ask how the new Housing Rescue Bailout might help her save her home. You are not going to believe there are people on earth this stupid.
This woman bought a home with her daugher in 2006 in a nice older part of downtown Sacramento called “Curtis Park”, in the Land Park area of town.
She paid $530,000. The entire 1st loan was Option ARM and the downpayment came from a second on the home. In other words, $0 down, with an Option ARM and a second. Naturally she paid only the minimum required. The house is now worth $450,000. The loan is more than $530,000 since she was not even covering principal. Now that she lost her job from a physical disability, she is wondering if the housing bailout bill will help save her in her $450,000 home with the $550,000 loan that is being serviced ONLY by her daughter’s $60,000 salary.
I laughed until I cried and then I felt like crying in earnest.
These are the types of morons who have no financial sense whatsoever, who are going to drive the next wave of foreclosures and home inventory escalation when the Option ARM and Alt-A loans blow up. They will generate again as many foreclosures as sub-prime did.
This article is not lying about a thing. California home sales are up over last year and stabilizing. But the article completely ignores shadow inventory and the huge wave of defaults to come from Alt-A and Option ARM.
I don’t suppose we are near a bottom, despite the relative affordability of California homes. Sacramento area homes are at August 2002 levels. I expect to see 1999 prices or below by the time we hit bottom after all the Alt-A and Option ARM loan foreclosures are through.
It is not a bad time to buy a California home. I don’t think it will crash from here. I don’t think Sacramento home selling prices will drop another 38%. But they will go down at least 10%. And they could go down 20%. And they should not but may go down 25% if there is a perfect storm of tight credit and massive foreclosures and job layoffs and hits to income.
I don’t see a bottom before 2010 with all this to come. I hope and pray I’m wrong. I really hope this is nearing a bottom and that the numbers of Option ARM and Alt-A loans heading for default is minor.
Good lord, we haven’t even considered the impact of credit card debt or debt on trucks and SUVs that have plunged in street value.
Don't wait too long friend. Many of those could be sold off or refinanced into fixed rates by then. Remember, not everyone on ARMs are ready to go belly up, and those holding ARMs are a small overall percentage of homes, and those hurting are no doubt even a much smaller percentage of that.
“Question why didn’t the bank approve a short sale of 169,000 and avoid the costs of foreclosing?”
Just when you try to make some sense of the market, something like that pops up. Very weird. Is sure doesn’t make sense on paper.
I hope you find a great home at a great price you may be much happier with than that one.:)
I don’t agree on one of your points. I’m pretty bearish on housing and don’t see a bottom until 2010. That said, it is what it is and a year over year June increase in sales of 17% is what it is. That is nothing but good news, if but temporarily. Winter has nothing to do with it. Springs sales were well down year over year in April and May, so a bump in June year over year sales is just good news, plain and simple.
Everything else you wrote, I agree wholeheartedly.
That is exactly what worked for the MSM in 1992. That, and Perot.
Well, that is true. But, they have the option of selling as the day approaches (head on a swivel, please) and moving to a home they can afford. But, this doesn’t indicate a complete collapse or the kind of destruction that you described. I recall in the NW when the shut down in the forests caused entire mill towns to close (yes, whole towns). The media never covered this and the towns eventually went on. We adapt, we recover, we work it out. That is what we should be saying to each other. Let’s talk to our young friends about being productive, standing up for good hard work, sharing with those in need around, being careful. Let’s be a part of the real change, not the fake Obama-change where the Gov. will finally be pure. We all know that can’t possibly occur. But, don’t pick up the media’s love for disaster. You are playing into their hands. And, if there is a disaster coming, here it is...don’t invest in Newspapers! You will soon seen the reporters standing by the offramps with a sign, “Will write any story you want for food.”
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