Marin Real Estate Bubble

Fiscal Crisis Brings Prop 13 Up For Discussion (Again)

2009-06-29T19:47:00.000-07:00

Well, this is certainly blogworthy and so I am forced to break this hiatus.

It seems that the fiscal crisis in California -- Californians' long overdue day of reckoning -- is fueling discussion regarding the viability of Proposition 13.

It's about time! But don't get too excited. Talk like this has happened before following other crises, but there was always some new boom just around the corner to derail any serious reconsideration of Prop 13; the last one being the .com bubble. I can only hope that there won't be another boom anytime soon to distract determined discussion of at least seriously modifying Prop 13. But it'll never happen, of course; Californians form opinion using their pocketbooks and not their brains.

The Quiet Coup

2009-04-22T22:14:00.000-07:00

Please check out this article in The Atlantic by a former chief economist at the IMF.

Fellow Americans, you have been duped long enough. Considering to whom the government is giving your hard-earned money, how do you feel about having just paid your taxes? When do you finally say "enough is enough"? When you no longer have anything left to lose? By then it will be too late.

Summary:

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

Open Thread

2009-04-12T09:48:00.000-07:00

We desperately need a new thread. Discuss what you want.

South Park: How the Financial System Really Works

2009-03-27T13:49:00.000-07:00

Dollar Devalued Yet Again

2009-03-22T11:55:00.000-07:00

Check out this post. Here's a summary (emphasis mine):

On Wednesday, right around the time the US markets were winding down, the Dollar was deliberately devalued. Everyone in the world watched it happen, except for Americans, who were outraged or offended by some manufactured distraction, as usual. The Federal Open Market Committee {FOMC] published an historic press release. Here's an excerpt:

"Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession...."

So what does that mean?...

It means the Federal Reserve is now printing its own money. It's a defacto devaluation of the U.S. Dollar, with a promise of more to come. The Federal Reserve is going to buy everything in America that's not nailed down, throwing another $1,150,000,000,000 lifeline at markets...

President Obama may have no other choice than to take this route as foreign investors grow wary about the capability of the USA to service its debts. We will see less participation in Treasury auctions, since sovereign wealth funds will likely decide that domestic investment is probably a better idea that depreciating Treasuries. For the time being gold investments will look like a safer place to hold wealth, along with oil, silver, and certain other commodities.

Maybe Ben Bernanke will be able to do what no central banker has ever done before: put in just the right amount of inflation... not too much, not too little.

[How successful will Bernanke be at 'quantitative easing'?] In the past, they tended to overdo it.

There are not many examples. France, England and America in the 18th century. Practically no examples we know of in the 19th century (they'd learned their lesson!). And in the 20th century - only marginal countries... or countries with nothing left to lose... engaged in 'quantitative easing.' Germany did it in the 1920s, because her war reparations burden was greater than she could sustain. Argentina did it in the 1980s, because it owed too much money to too many foreigners. And Zimbabwe did it in 2003-2009, for reasons of its own.

There are not many examples because the consequences of over-doing it are so horrible, central bankers have generally not done it at all. Quantitative easing was always a possibility... but it was always a last resort... like blowing up the powder and spiking the guns; it was something you did when you knew you'd lost the battle already.

While all this was happening, the American people were off gnashing their teeth over the relatively miniscule AIG bonuses. And then Obama went on Jay Leno, which had to be discussed, and then he spoke to Iran, which was a big deal. And then there's Limbaugh and Beck to bash. Plus, the Special Olympics. And so it went.

Want more? How about this post over at Seeking Alpha which probably should have been titled "The United States of America is Now a Banana Republic".

Anyway, I think it's pretty clear that the U.S. government doesn't need our money. I mean, if the Fed can manufacture money, any amount, at will, out of "thin air", whenever it feels like it, then the Federal government doesn't need nor deserve our hard-earned tax dollars. We might as well keep it for ourselves (to buy gold, as kindling for a fire, you know, for stuff of real value).

DataQuick, January, 2005 to Present

2009-02-20T13:02:00.001-08:00

(Click on picture for larger view)

As one commentor over at CalculatedRisk said, "it is nice to see marin get bitchslapped".

Source

Note: I forgot to mention that these data points are year-over-year percent (de)appreciation.

Update February 22, 2009: Due to the incredulity of one commentor regarding the previous chart, I made the following chart using the same DataQuick source:

(Click on picture for larger view)

For the Marin data series in the above chart, peak (June, 2007) to trough (January, 2009) is a -45.4% decline. For the Bay Area series, it's a -54.9% decline.

Foreclosure Is Part of the Solution, Not the Problem

2009-02-01T10:48:00.000-08:00

As the Obama Administration rushes to prove that it is just as clueless and fiscally irresponsible as the previous administration vis the "credit crisis", I found this Wall Street Journal article refreshing. Yes, foreclosure is a perfectly acceptable choice for people who find their precious house price is less than their mortgage -- that is precisely why the house is held as collateral. There is absolutely nothing wrong with "walking away", "jingle mail", or "mailing in the keys".

The cure for the current economic "illness" is not greater and greater amounts of what got the economy sick in the first place. It's not effectively 0% interest rates. It is not massively punishing savers. It's not more lax lending. It is not more artificial asset price inflation. It's not more housing tax incentives. It is not forcing tax payers to bail out failed businesses that deserve to be weeded out of the business "gene pool". It's not the Fed buying bad assets at ridiculously inflated prices or setting up bogus banks to hold the bad assets. And it most certainly is not preventing or delaying foreclosures.

How long will it be before the myopic, short-sighted, entrenched group-think in Washington is finally forced to admit or shamed into admitting this simple truth? How impoverished must our country become, how much crushing debt must we pile on to the younger generations before they understand this?

The cure for the current economic mess is what's been needed for the last decade or more: to allow the free-market to remove the excesses in the economy and to price assets based on what people earn for themselves. Foreclosure is the free-market in action doing exactly what it should be doing and what needs to be done.

Government and government-sponsored market interventions and manipulations are the exact opposite of what the markets need.

Preventing foreclosures has become a top priority of politicians, economists and regulators. In fact, allowing foreclosures to happen has merit as a free-market solution to the crisis.

If the intent is to help homeowners, then foreclosure is undoubtedly the best solution. Household balance sheets have been destroyed by taking on too much debt via the purchase of inflated assets. With so little savings, a household with negative equity almost implies negative net worth. Walking away from the mortgage immediately repairs the balance sheet.

Credit may be damaged, but homeowners can rebuild it. And by renting something they can afford, instead of the McMansion they cannot, homeowners are most likely to have some money left over each month that they can save toward a down payment on a house they can eventually afford.

If the intent is to help the credit markets, then foreclosure is undoubtedly the best solution. The securitization model has proven to be flawed...

...The intent of [loan] modification programs to date is to create a generation of mortgage slaves. Fortunately, mortgage slaves can free themselves via foreclosure, and the masses are choosing to do so.

Just In Case You Were Wondering

2009-01-09T10:42:00.001-08:00

I was out in west Marin the other day and drove past the boat-garage-pretending-to-be-a-desirable-Marin-abode. It's still for sale. I last blogged it in a post entitled Waiting for Mr. Market to Catch Up to Their Marin Wishing Prices. Apparently, the sellers are still waiting for a Mr. Right buyer to come along "with a bucket of money and a box of stupid".

I first blogged this POS back in November, 2005. So that makes its real DOM something in the neighborhood of 1130 days (give or take). They are currently asking the bubblicious, staggering price of $525K for this 1br, 1ba, 543 ft^2 boat garage (but to put things in to their proper context, $795K was the highest, delusional listing price I've seen for this POS). Three cheers for Marin seller obstinacy, wishful thinking, and denial!

Price Decline from Peak

2008-12-31T15:05:00.000-08:00

I found the following graphic over on Mish's blog. Please check it out for the whole story.

A -44.55% decline from the peak in single family residence prices in the San Francisco Bay area in just 18 months! Anathema!

November YOY Results for "Immune" Marin

2008-12-19T11:43:00.000-08:00

More year-over-year declines for Marin. Rather surprising considering we were supposed to have "dodged the subprime bullet". At least that's what the Marin IJ once quoted our esteemed local real estate industry as saying.

From the Marin IJ:

Another month of plummeting home sales in Marin included a price drop of nearly 30 percent from November 2007, as discounted foreclosure sales continued to drive the Bay Area market. The median price of a single-family home in Marin last month was $790,000, down from $975,000 last year, MDA DataQuick reported Thursday. In October, the median single-family home price in Marin was $850,000. Realtor Peter Harris in Novato said bank-owned properties and short sales have made up about 85 percent of his business over the past year. ‘Prices are half of what they were,’ Harris said. ‘Condos are selling in the low $100,000s. We haven’t seen this for a long time.’

From DataQuick:

By the way, the graphic for this post is from a May 16, 2007 IJ article. I saved it knowing this day would come.

This Thanksgiving I Give Thanks to All of You Who Made this All Possible

2008-11-28T15:59:00.000-08:00

This post over at the Mess That Greenspan Made blog is down right scary -- by some estimates the potential cost of the bailouts will reach $8.5 trillion. Can we survive that? No way that is going to get paid back. Or this at Calculated Risk showing that the current bear market is the worst ever (on a percentage basis).

It seems to me that the genesis of this "crisis" was in the 1980s, the rise of yuppiedom, and has gotten progressively worse by an ever growing populous that more and more chose to finance their lifestyle with debt vs. wealth earned until it reached the point where people willingly paid ludicrous prices for houses, a college education, etc. For kids who came of age during this 28-year span, living on debt has been the norm. I feel the most sorry for them, the unwinding will be the hardest on them as they don't know any better. But for the rest of us boomers who have witnessed, and in far too many cases gleefully participated in, the entire life-cycle of this debt-investment craze, I have little sympathy. Blame Wall St., bankers, financiers, etc. all you want but in the final analysis no one held a gun to your head, no one made you agree to pay a stupid price for your house.

Really, is cheaper housing such a bad thing? Maybe it is for you who listened to the self-interested persuasion of a realtor/agent, you who bought in to the ludicrous pricing and was hoping to retire on the sale of a house. But think past yourself (if you're able). Think about your kids and your grandkids. Do we really want a future where so few can afford something as simple and as basic as a house? Do we really want to live in a nation so impoverished by desperate attempts to prop up prices that we know in our heart of hearts are insane, even still? Besides, we have truly important things to worry about, like a world wracked by global warming, the solutions to which will require personal sacrifice on a scale we of the post-war generations can hardly imagine, and an ability to think beyond our own selfish wants and desires.

But at the very least let's not ever forget the people who got it right, early, when action could have made a difference:

I hope you all enjoyed your Thanksgiving.

It's Official

2008-11-20T18:55:00.000-08:00

I'm sure you all remember that classic April 10, 2007 Leslie Appleton-Young quote in the Marin IJ that went "When is the 30 percent decline in Marin County's [real estate] market going to happen? Not in my lifetime"? I promised you then in a post that I would be "keeping this link for future use so we can rub it in her face when the time comes". Well, that time has come:

Leslie Appleton-Young: Consider your face officially rubbed in it.

From DataQuick:

When will people finally stop giving credibility to realtors and RE agents (and all others paid to have a particular point of view) by asking for their opinion on real estate? When will the mainstream media stop quoting them?

Two Ways to Say the Same Thing

2008-11-08T17:14:00.000-08:00

Here are two ways of saying the same thing. The first in 2007 and the second in a letter written 1802.

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802), 3rd president of US (1743 - 1826)

The reason why we are in this mess is credit -- too much of it, too cheap. That's why housing, tuition, etc. went through the roof. Now our country is desperately dependent upon it and doing everything it can to prop up these phoney prices.

Withdrawal's a bitch, ain't it? Price things based on what people actually earn for themselves and it would all be reasonably affordable and "the economy" would still be humming along nicely. Stop meddling in the market Mr. and Mrs. Congressperson, Mr. Bernanke, Mr. Paulson. Let the free markets work; let them discover the correct prices of assets. Yes, it would be painful in the short term but we'd all be better off for it in the end.

As credit tightens and the credit pendulum swings the other way, those of you who bought with borrowed dollars thinking the sky's the limit and those of you who are planning to do so now had better watch out.

Canadian L33t

2008-10-28T22:21:00.000-07:00

I've tried very hard not to get political on this blog, but....

I think I found a program that should appeal to Bay Arean ego in the unlikely event that the republican candidate for the US presidency is elected:

Where Are You?

2008-10-26T20:10:00.000-07:00

Starting with some quotes from someone who has been nothing but sober and sane (Robert Shiller) when the majority of people were drunk on the notion that houses were going to make us all rich and 20% per year appreciation was our God given right:

What have we learned from all this?

I think we've learned some very elementary lessons. Don't think that because something didn't happen for the last 30 years it won't happen. It's amazing how people thought home prices can only go up.

One thing people haven't learned very well is home prices can stay down for 30 years, too. I'm not saying it will. It certainly can happen. Most people still think this is just a temporary interruption and real estate prices are going to soar soon. The real estate market is not cheap yet. It's not to where this bubble started (in late 1998).

And one from another independent thinker:

"People are saying the reason prices are falling are because of all of the foreclosures, but the foreclosures are happening because the prices are falling.

They've got it backwards. The prices are falling because they're too freakin' high."

Chris Thornberg, August 27, 2008

Enough bad news. Now for the good news, care of our friends at DataQuick (these days I like using DataQuick's numbers because when the bubble was still in inflation mode here in Marin, Marin RE bulls liked to use it as proof-positive that real estate in Marin can only go up because we are so damn special): Marin real estate was down only 16% last month (so sales that were committed to in late summer, before the recent financial shister hit the fan):

I think it is now safe to say we have a trend here in Marin. I eagerly await the unambiguous cratering of South Marin. Only then can our arrogance and hubris be taken down a notch or two (I can hope, can't I?).

Oh, and lest I forget some choice quotes from our local rag that has been nothing but a flagrant cheerleader of the housing market when "things were good" and the Marin real estate industry's poodle. But first, the article's title:

"Condo sales buck up Marin home sales as prices continue to fall"

Since when do condo sales "buck up" real estate in Marin? Isn't that ars-backwards for us? What does that imply for single family residences? So bottom fishers are buying the cheapest properties. Isn't that a little like the floor dropping from under your feet?

Marin's home sales increased on the strength of condominium sales last month while prices continued to drop...

DeSalvo [a Coldwell Banker broker] said county foreclosures weren't [!!!] confined to condominiums or property sales in San Rafael or in Novato, where foreclosures and short sales make up 30 percent of the real estate market.

"Houses that were selling for $675,000 are on the market for less than $450,000," he said.

In Marin, foreclosure sales - homes sold in September that had been foreclosed on in the prior 12 months - accounted for 14.9 percent of total sales, continuing a steady increase from 13.5 percent in August and single digits a year ago.

"My personal opinion is until buyers' fears are allayed and the jumbo loan market is at equilibrium, we're going to continue to see uncertainty. We're going to see this for the next 18 months."

So where are the Marin RE bulls who used to visit this blog and try to explain how confused the rest of us were? RE Junkie? Where are you? Fredtobik, where are you? (For me, the two most memorable ones; perhaps you recall others.) You were all so (how do I put this politely?)... "adamant" about your opinions. And what about the legion of anonymous realtor cowards? Where are you? You can still wear your shorts in the winter and play golf; and it's still only a two hour drive to the slopes! All your self-serving justifications and rationales are still intact. Ok, so maybe the "gas prices are going up so people will want to live in South Marin" thing isn't working out for you at the moment. But where are you? And where's that fellow who fairly recently came on this blog explaining to us why CDOs and other financial wizardry were such great ideas and, despite what we thought, were here to stay? Where are you?

Look, others had the courage to start blogs saying "it's not necessarily so" at a time when house prices were doubling about every year or so; true mavericks like Patrick.net, BubbleMeter, The Mess Greenspan Made, Mish, Calculated Risk, just to name a few. Now is your best opportunity to show us what you're made of, to stand up for what you really believe. Lay it on us...

Just one rule, spare us the "things will get better, prices always go up eventually" line of reasoning. No one here will disagree with you as it is necessarily true given our inflationary system.

2008-10-10T13:01:00.000-07:00

Welcome Again to the "Ownership" Society

2008-10-10T10:24:00.000-07:00

No need to discuss recent events (of course, you may if you wish); they speak for themselves. Suffice it to say that Patrick.netters said it best: the American people got "owned" yet again.

I encourage you to re-read the U.S. Declaration of Independence (here to see the original) for inspiration. It's a beautiful document; it represents the founding spirit of our nation; read it with pride.

The following sentence represents the essential message of the document:

But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

In other words, for those who have the means it is not just their right but their responsibility to effect change.

Recent events are the culmination of "a long train of abuses". The only real question now is what do we do about it?

"The Mother of All Bailouts"

2008-09-22T09:11:00.000-07:00

Nope. Housing prices make a whole lot of sense; completely justified. Yup. No housing bubble here.

WASHINGTON (AP) — The Bush administration insisted Sunday that Congress must move quickly to approve what one lawmaker called the "mother of all bailouts" — a $700 billion proposal to buy a mountain of bad mortgage debt in an effort to unfreeze the nation's credit markets.

However, congressional leaders said the administration's spare three-page plan must be expanded to include help for people on Main Street as well as the big Wall Street financial firms who have lost billions of dollars through their bad investment decisions.

The plan the administration has developed with support from the Fed would have the government buy up to $700 billion of the bad loans, taking them off the books of financial firms... Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, said the government's efforts would be the "mother of all bailouts" that could well cost $1 trillion when the cost of the government takeovers of Fannie, Freddie and AIG were included.

The whole congressional debate [on the bailout] is occurring just weeks before voters go to the polls.

And

(CBS) Treasury Secretary Henry Paulson defended the Bush administration's proposal to spend up to $700 billion to buy up bad debt of financial institutions struggling with illiquid assets (such as defaulted mortgages), saying not acting would have jeopardized the possibility of anyone getting a loan - and may have jeopardized Americans' savings and retirement funds.

Oh, and while we're at it, let's have the U.S. taxpayer bail out foreign financial institutions and governments too.

Of course, bailing out incompetence, failure, fraud, speculators, and the like (foreign or otherwise) is wrong as wrong can be. But for some reason that last quote from CBS really got to me... the one about how we have to save people's retirement accounts.

Don't get me wrong. Despite what you read on this blog, I don't like the idea of people losing their house and/or their retirement funds any more than the next gal. But come on! People gambled. People have been gambling with their retirement! That's what it means to pay obviously ridiculous prices for houses (and doing so as part of your retirement plan). That's what it means to put you retirement in the stock market (401K, mutual funds, what have you). It's gambling and no one can claim ignorance as people make a point of highlighting the risky nature of the markets even clear way back when the move to 401Ks first started and was viewed with some skepticism. The stock and bond markets (etc.) are inherently risky. It's little different than putting your entire retirement on red 99 (refer to the graphic for this post). Don't put your money into those markets if you cannot afford to lose it. That's rule numero uno in the investing world.

[Begin sarcasm]
But if we are going to bail out risk-takers who lost, then shouldn't we just bite the bullet and remove all risk from the stock market? Let's make it more like the housing market which is rigged to (almost) always go up. Let's say that it is now illegal (not just temporarily stopped) to short the market; no more puts. Let's say that you can only buy a stock as long as you are willing to only pay more than the last price paid for that stock. In fact, let's call it what it is and not call it a "market" anymore... certainly not a free and open one. Let's call it "Social Security 2.0".

I like kleptocracy*. You will like it too (not that you have any choice anymore). And besides, Paulson will make for a good king of America.

*"A kleptocracy (sometimes cleptocracy, occasionally kleptarchy) (root: klepto+kratein = rule by thieves) is a term applied to a government that extends the personal wealth and political power of government officials and the ruling class (collectively, kleptocrats) at the expense of the population.

The effects of a kleptocratic regime or government on a nation are typically adverse in regards to the faring of the state's economy, political affairs and civil rights. Kleptocracy in a government often results in a severe deficit of foreign investment prospect, and drastic weakenings in the market and exportation/importation affairs. As the kleptocracy often embezzles its money from its citizens by misusing funds derived from tax payments, or money laundering schemes, a kleptocractically structured political system can be degrading to the quality of life of the general populace. In addition, the stolen funds that kleptocrats take to their own gain is often removed from funds that were to go towards public improvements, such as the building of hospitals, schools, roads, parks and the like, bringing about yet further adverse effects on the quality of life of the citizens living under a kleptocracy."
[End sarcasm?]

Update: Mish has a convenient way for you to blast emails, all at once, to all senators with a single click of a link. Check it out.

August Results for Marin Care of DataQuick

2008-09-18T18:11:00.000-07:00

According to DataQuick, Marin prices were down -25% year-over-year in August; 13.5% of sales in Marin were foreclosures. Sheesh! Alt-A and Prime resets haven't even started yet.

"Mortgage money for homes above the half-million-dollar mark is hard to come by right now, even for well-qualified buyers..." said John Walsh, MDA DataQuick president.

The use of so-called jumbo mortgages, until recently defined as over $417,000, has plummeted since the credit crunch hit in August 2007, making jumbo loans more expensive and harder to obtain.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,121 last month, down from $2,218 the previous month, and down from $3,171 a year ago. Adjusted for inflation, current payments are 18.5 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle.

Foreclosure activity is at record levels, financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages.

And if bailing out incompetence and failure right and left (at taxpayer expense) isn't enough of a show for you, well how about Paulson's latest grand scheme to set up an entity to buy all that toxic paper from the current bag holders at the lowest bidding price? Don't want to mark to market? We'll let you do it to each other! Since that cannot really be allowed to happen, because, you know, everyone has to be a winner and our rickety system cannot tolerate losses of any kind, you know there is going to be a lot of behind-the-scenes monkeying around. I can't wait.

Today is Your Day

2008-09-07T09:53:00.001-07:00

As anticipated a couple of years back, Fannie Mae and Freddie Mac have finally failed, are getting bailed out, and we are one big step closer to nationalizing the mortgage market; from here on out, you and I will be supporting the U.S. mortgage market. Welcome to what will likely be revealed to be the (second) largest public bailout in the history of the world (this might have been bigger)!

To those of you who argued that there was no housing bubble, that it was a New Paradigm, that property prices are justified because of blah, blah, blah bogus, mythical, because-my-realtor-said-so, wishful thinking sorts of reasons: your collective work has come to fruition. Aren't you proud to have contributed to it all? Aren't you happy to have been able to ignore all common sense, logic, and data to the contrary so as to so willingly and blindly pay such a patently stupid, ridiculous price for a house? Today is your day! Celebrate.

Generations to come will remember us all as the most callous, profligate, spoiled, narcissistic, and self-entitled generation in the history of America (or maybe even all of mankind). When thinking of their ancestors, your children, your grand children, and your great grand children will look back at you in their dusty old genealogy books and photo albums with hatred and disgust for strapping them with your crushing debt.

But you will be dead; so what do you care? Right?

Update 09/09/08: Here is what Jimmy Rogers had to say about the Fannie & Freddie bailout:

"America is more communist than China is right now. You can see that this [the F&F bailout] is welfare of the rich, it is socialism for the rich... it's just bailing out financial institutions."

You can hear him yourself by watching this video.

July, 2008 Results

2008-08-20T19:09:00.000-07:00

According to DataQuick Marin prices are down -13.2% this past July, year-over-year:

The following graphic, also from DataQuick, shows that Bay Area prices are down almost to the peak of the last, normal, housing cycle (2003-04 timeframe) from which the recent housing bubble launched prices to the stratosphere. So it seems reasonable to wager that we have much further to fall:

The SF Chronicle had this (and this) to say:

The percentage of households able to buy an entry-level residence in the state reached 48 percent during the second quarter, double the level from a year ago, according to the California Association of Realtors. The Bay Area remains the least affordable part of the state, but 32 percent of its households can now afford a first home, up from 18 percent during the second quarter of 2007, the report said.

Now is that affordability calculation based on the one using your new method (which is now invalid given that it depends on the existence of the loose lending standards which got us into this mess, almost nothing down, non-fixed rate loans; refer to item 14 in the linked-to post) or the traditional method?

Andrew LePage, an MDA DataQuick analyst, said he thinks the bottom is not imminent - and is unlikely to usher in a quick turnaround. "Recent history suggests you could be looking at at least two or three years of price stagnation," he said. "It’s looking like the bottom will feel more like a bog than something you just bounce off of."

"The bottom is not imminent"? Now there's a change of tune.

I know I should not give that hack, Leslie "over my dead body" Appleton-Young, any of my attention, but:

"People are off the sidelines, stepping in, trying to gauge the bottom of the market and feeling that, even if this isn’t quite the bottom, it’s looking great," said the group’s chief economist Leslie Appleton-Young. "They’re able to get into something they never thought was possible a year or two ago."

Sorry Leslie, at the moment those "knife catchers" are mostly in places like Napa where people are buying the discounted houses thus solidifying the new (lower) price structure:

Sonoma County’s summer home sales surge continued in July as buyers snapped up discounted properties shed by lenders and financially strapped homeowners.

And I hate to do it, but here is what the Marin IJ had to say (after weeding out their attempts at happy-talk and feel-good journalism):

In Marin, foreclosure resales were 11 percent of total sales. Valerie Castellana, an agent in Greenbrae and past president of the Marin Association of Realtors, said sellers need to be "really astute in their pricing strategy these days."

Yes, in other words sellers need to substantially lower prices if they hope to sell sooner rather than later.

Buyers remain anxious. "They want to make sure they’re not overpaying," she said. "Many of them are holding off because of that anxiety level."

Smart buyers.

He said such buyers are facing a more restricted market for home loans. "We’re in a knee-jerk reaction from where we were before," Hickman said. "The pendulum has gone back 180 degrees. It’s extremely difficult to get money right now."

I beg to differ. Lending is returning to what it was prior to the bubble and where it should be. We are not even close to where it was at the start of the last, normal, housing cycle. So the pendulum has swung only about 90 degrees; we have another 90 or so to go.

There is no way in hell anyone (other than sellers, of course) should want lending standards and practices to return to the way they were during the bubble. This is exactly the sort of false hope people like Hickman are trying to instill and is akin to the fear mongoring ("buy now or be priced out forever", etc) his industry routinely engaged in during the run-up. The fact is, Mr. and Mrs. Marin Seller, the only way bubble-level pricing can be maintained is to return to bubble-era lending practices. Of course, there are other ways to support your wishing prices, such as buyers suddenly getting a mass windfall, 300% raises, etc., but I wouldn't count on it.

Chronicle Chart

2008-08-06T20:56:00.000-07:00

The SF Chronicle's chart of our "immune" housing market:

The important columns to look at are the percent change in sales and price/ft^2.

This is just a "flesh wound" from the subprime bullet (that wasn't even aimed at us) and the resultant disintegration in the financial markets. What will this chart look like when the real problem, Alt-A loans, etc., soon begins to blow up I wonder?

Conflicts of Interest

2008-08-03T10:45:00.000-07:00

I saw this Glenn Beck video posted over at the Housing Panic blog (kudos). Very funny.

Takeaway message:

"If you want honest advice about your home, don't listen to the people who are trying to make a living selling them."

Lawrence Yun, Leslie Appleton-Young, David Lereah, and all you Marin six-percenters, take note.

Of course, the irony of all this is that people like me, who have spoken out against the biases and the inherent conflicts of interest in the real estate industry and who have tried to make the case that a real estate bust was likely, had to rely on data that came, for the most part, from the real estate industry (the "REIC") itself. This is sad for two reasons: 1) It indicates how much we need an unbiased, third-party source of real estate information; and 2) The "REIC's" own data, spun and massaged as it was by realtors and agents, still made the case for a real estate bust.

"Honey-poo, Why Is the Kitchen Glowing?"

2008-08-02T12:25:00.000-07:00

Granite countertops were all the rage and the latest brain dead, "must have", keep-up-with-the-Joneses housing accouterment here in Marin (and pretty much everywhere else in bubble markets). Well, it seems that if you are shopping for a trendy Marin house you would be wise to bring your Geiger counter with you.

Thanks to a reader for sending me this link.

Case-Shiller Index for May, 2008

2008-07-29T11:18:00.000-07:00

Here's the latest on the Case-Shiller Index.

Line up all those lying real estate "economists", realtors, and agents who said it couldn't happen here, it's different this time, a permanently high plateau, etc., and just cover them in tar and feathers and parade them around their neighborhoods (metaphorically speaking, of course). All they managed to do was to line their pockets with another 6% and screw a lot of people.