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 ...
The data I see out there in the bond market on these tranches of debt is not pretty. That’s where I keep coming at this from: the bond market. I ignore everything the realtors say, everything the housing companies say, etc.
I’m looking at ONLY the parameters of mortgages, securitized mortgages, bonds, etc.
As of this past December/January, when people finally started to get interested in the mortgage issue in earnest, some quick analysis of the 2005,2006 vintage Option-ARM’s showed that at least 75% of people who took out OA loans in ‘05 and ‘06 were making the minimum payment on the note; this results in a neg-am on the missing interest portion.
That can’t go on forever.
The Option-ARM product was never intended for Joe-n-Jane Average to use to buy houses. It was a product pitched at people with substantial assets in comparison to the debt on their house, not as a vehicle to allow people who were strapped for cash flow to get into over-valued real estate.
The stats indicate that in the 2005/2006 vintage (and perhaps more), that a whole lot of people (once again) could not really afford the house they purchased. The house price was inflated, the buyers were strapped for cash. The only differences between this situation and the sub-prime situation are these:
1. These borrowers had better-than-subprime credit - often, they had “prime” credit ratings.
2. The amount they borrowed was often much more than in the sub-prime space.
“It’s unlikely he’s correct.”
There’s no chance he’s correct!!!
I look for at least another 20% drop at least in So.Calif.
You’re right that not all ARM loans (or rather, the people taking them out) are bad credit risks.
However.... far, far, far too many ARM products (whether we’re talking Option ARM, interest-only, sub-prime ARM, etc) were used by the real estate marketing machine to shoehorn people into housing far, far, far above the historic norms for what people should be allowed to buy.
Here’s the background (very quickly): In the “big picture,” mortgage lenders used to allow you to take out a mortgage that was between 2.6 to 3.0 times your household income - that would be all incomes in a household combined, husband, wife, Heather’s two mommies, whatever.
In many places in California, in 2005, 2006 and even early 2007, new-fangled mortgages were being written for amounts that were 4, 5 and 6 times household income. These are aggregates I’m talking about across regions - eg, San Diego, Orange County, LA, the Bay area, etc.
There’s no way out of this for people, even people with good credit. Absent their ability to suddenly make a whole lot more money, they’ve been sold into financial servitude by their lenders with these notes.
What lenders have to do is learn how to say “No.” As in “No, Mr. and Mrs. Smith, we can’t give you a mortgage, any mortgage, on that amount of money because your combined household income is only $100K, and you’re trying to buy a house that costs $800K with only $100K down. The numbers don’t work and won’t work until you have a combined household income of $200K and another $100K down.”
That’s what needs to be said.
You do what you want. I'm in the insurance program.
I’m the agent. I found the guy a great deal. Many of them around. Just couldn’t understand the bank on that one.
They won’t get the 225. But they paid 144 and put about 6 in. So let’s say they have 150 in. If they sell for 200 and pay an agent 6% they’ll still do okay.
That could well be the stupidest form of lending ever conceived.
Probably...But no one pays 6% to RE agents nowadays. Many have no problem listing for 4.
We steer our clients based on the deal or type of house, btu I know some agents who search the MLS by the comp they get and won't show if it's under 3%. Not good for the client, but it's being done.
All areas are not created equally, with some that experienced much bigger hits than others.
I tend to agree with this article, (for my area anyway) it seems the bottom has come and is probably behind us.
Then again, I'm not selling, so it isn't a big deal.
I live on the farthest southern part of Riverside County. We border with San Diego county. The prices here have soared and collapsed too. Our community is 8 years old and has incredible amenities like a mini Olympic sized community pool, golf (for a fee) and a very strong HOA that can be a pain in the rump, but they keep everyone in line with the bylaws. Our community hasn’t seen the dead lawns for the most part because the HOA could fine or sue you for not keeping up your property. We have had our share of depreciation because of the overall market in the area etc. but I have noticed a much slower rate of depreciation in our particular community in the last 6 months and that may because of supply and demand. The repos that occurred have worked or are working their way through the system, but the great majority of the homeowners are holding onto their homes. This creates a supply issue for those interested in buying here.
I’m not trying to paint a rosy picture but for those of us not mortgaged and refied up to our eyeballs, we can wade this out to the other side. I do believe it’s possible prices could go down another 5-10% but if you are in it for the long haul, you can wait it out.
I would never *ever* pay 6 percent for someone to list a home and do some paperwork. With the big increase of housing prices, (in my area), even in a slow market, 6 percent was a huge pay raise to the RE agents. I never got that large of a pay raise, so I am not prepared to give a RE agent that kind of raise just to list a home. Again, I am talking my area.
Sales commissions are all negotiable and I would urge anyone selling a home to vigorously negotiate the sales commission.
Bump
Now that sounds like the real Bush economy.
It seems to me that giving away our manufacturing economy, which adds value, to becoming a service economy of burger flippers, strippers, computer programmers, gamers, lawyers, mowers, real estate flippers and debtors that we have gone down the scuppers.
Services have market value just like goods.
LOL, I know all about that. That was the old days before computers. Anyone looking for properties now are using a computer, and it'll show the listings regardless of what some RE agent prefers to show due to commission percentages.
The only way out for the feds is through mega inflation. how else can they pay off a 54 trillion dollar debt? I think they will just keep printing up money. After all it is free. The cost of ink..paper and the full faith and credit of the US federal government. Where are those million dollar bills???
Market value? Well, I guess they do have a little bit.
Instead of acknowledging the point you spun the conversation to yourself. I wasn't talking about what you would pay or what I would charge.
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