FreedomCM brought up the new data from Mr. Mortgage on the San Diego real estate supply and demand, and mounting foreclosures:
http://www.fieldcheckgroup.com/2009/04/21/213/
He has his usual colorful charts and commentary – here are a couple of his notes:
(T)he housing market — particularly in the mid-to-high — is highly unbalanced with supply outpacing demand at levels never seen before.
Unless sales demand more than doubles from here, this market will remain under significant pressure. But the doubling of demand would take total sales back to peak levels seen in 2005 and is unrealistic.
While I think we’ll all appreciate his reasoning, I disagree with his last sentence here. I think the doubling of demand/sales is VERY realistic – and PRICE IS THE ANSWER!
For an example, let’s look at Carmel Valley. To confirm his ‘doubling of demand’ to get back to 2005 levels, let’s look at the period March 15 to April 15:
| Year | # of sales | $-per-sf |
| 2005 | $393/sf | |
| 2009 | $345/sf |
It would actually take more than doubling of sales to get back to 2005 levels, but we have foreclosures to help get us there! We saw 36 foreclosures brewing in the CV shadow inventory, what price will it take to move them?
Of our 24 closed sales this year:
TWO were under $300/sf, and both were bank-owned.
Thirteen of the 24 sales were under $340/sf, and their average time on market was 10 days from their last price reduction.
The banks don’t have a problem listing at the right price, and if 36 REOs came on the market EVERY month around $300/sf, I don’t think there would be any shortage of buyers. If you’re on the street, you’ve seen hordes of folks looking at the marginal buys, and jumping at the good buys.
Take a good look at his charts, because the evidence is clear – there are loads of foreclosures coming to the county. It’s great news for the buyers who have been waiting patiently for better pricing, and there should be enough to go around.
There’s no doubt the upper end needs to come down, and it will. Even I’m saying it.
But, do higher end homes typically stay on the market longer? It seems they do, and, they are withdrawn regularly if they don’t sell.
I guess the defaults will be the source of supply for Carmel Valley and other newer communities. Other NC San Diego areas might be in the older neighborhoods, probates, etc. that make up the rest of the supply and sales.
Longer market time = more stubborn sellers not getting their price right.
Recent history shows that yes, longer market time for more expensive houses, but ONLY because they are more stubborn. The buyers have the same micro-second notification of new listings and price reductions, and have the ability to step up and buy just as fast as the lower-end, if only the price was righter.
Agreed, unfortunately we are dependent on the foreclosures to set the pace, because the sellers and agents refuse to adjust, and will be left behind.
“But, do higher end homes typically stay on the market longer? It seems they do, and, they are withdrawn regularly if they don’t sell.”
If someone doesn’t have to sell, yes. But other than REOs, what portion of homes currently listed belong to sellers who have that option?
It is possible for supply to simply swamp demand. We can see that in places like Detroit. That’s not likely to happen in blissfully sunny San Diego though.
CR suggests that sales volume may have bottomed, but everything I can think of suggests that prices should continue to drop for a while.
from an email today:
As of 4/15/09, there have been 3,589 NEW HOMES SOLD IN CALIFORNIA using up $34,939,035.00 of the $100,000,000.00 allocated for the NEW HOME TAX CREDIT IN CALIFORNIA. Don’t let your clients miss out on this truly golden opportunity!
Also heard today:
Fannie, Freddie, WaMu, EMC, and Chase have self-imposed freezes on foreclosures through June 1st.
“self-imposed freezes on foreclosures”
Sigh…
Nothing price can’t fix!!!!!!!!!!
With the federal, state and local governments doing everything in their power to keep prices artificially high, this could take awhile to sort out. Don’t you just love government? Heh heh, oh oh, both parties have got to go!
Can Meg Whitman save California?
In a bad economy, this sorry state has the worst credit rating and the highest taxes. The former eBay chief wants to run it like a business. Is that a good thing?
http://money.cnn.com/2009/03/13/news/economy/sellers_whitman.fortune/
self-imposed freezes on foreclosures and resisting more bailout money, must be good times for banks?
Re: Self-imposed foreclosure freezes – any reasons given?
Give the Obama Plan a chance to do its magic.
I don’t think this is a joke – the state should start selling stuff:
Late-night comics are loving this notion of eBay’s former CEO in charge of America’s largest state. “Well, that makes sense,” said Jay Leno. “I mean, the state’s broke. If we’re going to start selling stuff, who better to be governor than the head of eBay?”
Can we start with a mile of the 17-mile stretch of beach at Camp Pendleton? I’ll be the realtor!
Let’s make it liek 8.5 miles–I like having that buffer area separating us from The OC/LA.
By the way, New York has the highest taxes. California is usually in the top (10) but in the middle depending on the measure, (state, income, local, gas, property, etc.).
Can Gavin Newsom save California?
Any link on the new foreclosure freezes, or is that just a rumor/bullshit? A Google News search didn’t give me anything useful.
Mozart.
Gavin Newsom is to politics as what Gary Watts is to real estate.
Either you believe him or you don’t, but he’s a gift that keeps on giving.
Chuck Ponzi
Yes, Jim, yes, price will fix it! *Chuckle* Will you please get that message across to that listing agent of the foreclosure I told you about?
Jim,
I’m with Local Boy regarding Pendleton… not much unspoiled coastline left in SoCal. Heck, I was upset with the whole Liberty Station thing.
I say develop Pendleton and auction off the land to pay down state debt.
Will anyone step in and make the banks foreclose on all the non-performing assets?
Isn’t there some language in the CDOs specifying a fiduciary duty on the servicing banks that would require them to turn the assets into cash after X days of non-performance?
(and I wonder if we could interest the Chinese in Bakersfield in exchange for a few hundred billion in cash?)
shadash,
Um, that’s federal property. Besides, CA has a spending problem, not a revenue problem; afterwards you’d still have a dysfunctional state less one asset.
tj and the bear-What spending should the state cut? Schools? Road construction? Police? Fire?
What spending should the state cut?
All pensions should go to 60% of last year’s salary, not the current 90% (which is further abused in various ways such as ‘promotion for a day’ and packing vacation into the last year).
The buyers are out here, we’re just very shrewd. There’s a reason we didn’t follow the herd, and now that it’s being validated we’re dragging prices down as far as we can.
Carmel Valley will have to get well under $300/ft to capture my interest. I think it’s coming, though.
What spending should the state cut? Schools? Road construction? Police? Fire?
You can’t seriously believe that’s all the state spends money on (although there are serious abuses in those categories — as daveg notes — too).
“Fannie, Freddie, WaMu, EMC, and Chase have self-imposed freezes on foreclosures through June 1st.”
Fannie & Freddie have stated publicly that they are no longer in a moratorium. But there clearly are major servicers still holding off. April is better than March already but considering how fews sales there were in March that isn’t saying much. Whenever they flip that light switch hopefully it will stay on. But I imagine they will do it just in time for another holiday moratorium.
“You can’t seriously believe that’s all the state spends money on (although there are serious abuses in those categories — as daveg notes — too).
tj and the bear | April 22nd, 2009 at 8:58 pm”
I see no other suggestions from you as to what to cut. People always yell “Cut wasteful spending!!!”, but when you ask them exactly what to cut, they mumble something under their breath and walk away. Thank you for providing another example of this phenomenon.
The fact is, there is very little wasteful spending, perecentage-wise to the total budget, and what waste does occur is impossible to cut by waving a magic wand over it.
As for daveg’s suggestion, he wants to take away benefits from employees. He’s basically saying cops and teachers make too much money. Not exactly a winning argument either.
Geotpg wrote:
The fact is, there is very little wasteful spending, perecentage-wise to the total budget, and what waste does occur is impossible to cut by waving a magic wand over it.
As for daveg’s suggestion, he wants to take away benefits from employees. He’s basically saying cops and teachers make too much money. Not exactly a winning argument either.
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You’re right, many people don’t understand that there’s very little identifiable wasteful spending because the waste is packed in with legitimate expenses.
Since schools and prisons are two of the largest expenditures for the state, we could finally agree to stop supporting Mexico and subsidizing businesses — via providing education, healthcare, infrastructure, and legal services for their illegal workers — that don’t want to pay fair wages to legal employees.
Though districts are mandated NOT to collect information on immigration status (precisely because they do not want people to be able to quantify the exact burden on our state and local governments), I can assure you it’s a very large proportion of our educational expenditures. I’ve heard our prison population is about 40% illegal immigrants.
End the subsidies for illegal immigration and our financial “crisis” would likely disappear overnight. If that doesn’t fix it, **then** they can come back to us to explain what other expenses need to be cut or which taxes need to be raised. Until they fix the problems with illegal immigration, they have no business asking us for more tax money or to give up existing services for LEGAL residents.
I think cutting goverment pensions to something more in line with the private sector would be very popular if put to a general vote. Prblem is it is all done in the back room with powerful union lobbies that have bankrupted the state.
This state ran on about half the current budget just ten years ago and things ran fine. The waste is breathtaking.
Dave – I agree. California has doubled its budjet in about 10 years when it only should have gone up 30 or 40%–That means that there is a spending problem, not a revenue problem. The state faces the same economic hurdles that every household faces–unlimited wants/limited resources. It is no different than a family that was not struggling making $75K a year ten years ago, but today brings in $150K and now is struggling–saying they need to earn more money. It is time that the state of California starts to live within its own means–it used to!!!!
I see a few problems with arguments presented here.
1) Meg Whitman is promising to do what the Governator promised… Cut spending. If elected, she or anyone else, is going to find that it’s not as easy as that short soundbite. If there were these golden places to cut spending don’t you think “Ah-nuld” would have done it? It’s easy to make promises, harder to actually do it. I suspect Whitman would/will fail just like Schwartznegger did.
2) To blame the education budget on illegal immigrants is ignoring the fact that the schools educate CHILDREN, who’s parents might be here illegally, but they were born here. Until we change the constitution to say you’re not a citizen unless both of your parents were citizens when you were born, these kids are citizens. If you make that change then my husbands parents might be “illegal” because their parents emmigrated from Italy and didn’t become naturalized citizens until after my in-laws were born. If my in-laws were illegal, then my husband would also be illegal. Which I guess would make my kids illegal. Even though they were born here, as was my husband, as were his parents.
My personal preference in fixing the illegal immigration problem is to vastly increase legal immigration. If you are a Mexican who wants to move to the US and have no special skills (you aren’t a top soccer player or a billionaire investor or a rocket scientist) and aren’t related to anybody already in the US, it is basically impossible to do so legally. There needs to be a reasonable number of these people let in each year so the temptation to do it illegally is lessened. Then, after this is done, get tough on those who still try to come in-there will be fewer so it will be easier.
This way, these people are on the books and are properly paying things like income taxes. Yes, this means there will be more brown people in the country-but I don’t care about that-do you?
ENGLISH ONLY will resolve many issues. I’m not saying one shouldn’t stop speaking their language – I encourage it. My parents and their grandparents spoke, understood, and wrote english and they weren’t from here. They took the DMV test in English. Road signs are in Englsih. Most of the people in the US speak English. English should be a requirment.
ENGLISH ONLY will resolve many issues.
Not that many issues, and it still does nothing for illegal immigration. My great-grandparents came from Norway and never learned English, but all their children did and some of those children never learned Norwegian.
The reason why we don’t have immigration reform, is because big businesses love the current set-up. Illegal immigration provides them with a cheap and pliant labor force.
I meant English only as part of a step to curb illegal immigration. There is really no incentive to become illegal for some. Why when they get many benefits already. Take some of those away is a starting point. Then go after those business who utilize such labor.
Geotpg wrote:
There needs to be a reasonable number of these people let in each year so the temptation to do it illegally is lessened. Then, after this is done, get tough on those who still try to come in-there will be fewer so it will be easier.
—————
Absolutely agree with this. Currently, the requirements for citizenship are rather stupid and tedious.
One of the first things we need to do, though, is get VERY tough on immigrants who commit crimes (even those who are not yet citizens, even if they are here legally).
UCGal,
My mother was an immigrant, and I grew up in the “immigrant community.” It has nothing to do with being anti-immigrant. What I am opposed to is the rampant **illegal** immigration and haphazard immigration policies. We need to allow a certain number of people in each year, and we should be able to choose who can become a citizen.
I am 100% opposed to our current anchor baby/naturalization policies. It favors poor, illegal immigrants — who come here to get free obstetric care and qualify for free subsidies — over legal, more qualified immigrants. It needs to go.