A Banquet Partaken in Anxiety
Chuck Ponzi May 24th, 2006
While we have been busy preparing for the great days of summer in Southern California, another set of clouds is looming over this Spring into Summer’s house buying season. In recent years, prices have consistently taken off in late spring and inventories have dipped in most of the local area’s cities. This late spring has been quite different. As of this publishing, San Diego has added nearly 7K units for sale per ZipRealty so far this year, increasing inventory 50%. Los Angeles has added 12.5K, increasing just over 50%. Riverside has added nearly 8.5K up nearly 59%. And the grand total winner in the area has got to be Orange County with an increase of 7.4K up an eye-popping 102% for the year. If the spring bounce is coming, it had better show up in May. With inventories increasing in these areas by several hundred per day, that hope may just be a fleeting dream.
The worst news of all is that affordable at current prices is some of the worst in the nation according to the Sacramento Bee. The worst part of the escalating home prices is shown in the loss of long-term residents and stable families:
Salinas Mayor Pro Tem Jyl Lutes said being squeezed at home makes people less public spirited and more likely to reject bond issues for schools and infrastructure. A cruel natural selection of rising home prices also is pushing people out of hometowns and farther from lifelong associations and jobs. “We lost 900 kids this year in the Salinas school district,” Lutes said. “Where I teach, a small district, we lost 30. It has that ripple effect. It hurts everything.”
The question is whether this is a product of delayed life decisions, or families moving out. The first can revive growth in later years, the latter virtually guarantee a hard landing. However, it is most likely a combination of both; the ratio to which they occur is critical to understand the future. This natural selection has already claimed at least 10 sets of our friends to out-of-state opportunities including their young children. Who replaces these groups (if anyone at all) is the critical question that decides Southern California’s social future.
Last year, we wrote about this phenomenon and Motley Fool’s take on investing in Californian companies. This marks the just over one-year mark that Fluor Corporation announced it was moving its headquarters to lower-cost locales, and just over 6 months that Nissan announced its departure. With Ameriquest’s recent retraction, who knows what will happen with the local job environment.
Greenspan, noted for his often twisting description of all things financial has loosened that tongue a bit to tell us:
“Home sales are off, applications are off, everything is going in the same direction,” Greenspan said in remarks before the Bond Market Association.
Greenspan claimed that while regional housing markets might experience more severe price fluctuations than others, the national housing market itself would remain stable.
Regional housing markets, indeed.
Greenspan’s successor, Ben Bernanke, is coping not only with the incredibly low levels of personal savings among Americans, but rising energy prices, a stagnating housing market, and soaring gas costs.
Seemingly caught between a rock and a hard place, Americans have little savings with respect to outlays. With balooning debt, commitments have substantially increased to where many families find that current payments consume a great deal of current income with little or no buffer. To encourage savings and shore up support to the dollar’s purchasing power, rates need to go higher; exactly the opposite of where construction needs them to go. There may be no way to walk this line; either way may precipitate an event.
Calculated Risk reports that construction employment in California is statistically down, but we have yet to hear of any distress from this slower employment.
A report from Florida:
Joe Passarelli wakes up anxious and sweaty some nights, wondering how much longer it will take to sell his never-lived-in townhouse south of Stuart. Despite slashing his asking price by $55,000 to $285,000 and keeping vigil at sparsely attended open houses for six months, he still has no takers.
Reminds me of a quote from Aesop’s Fable The Town Mouse and the Country Mouse:
A crust eaten in peace is better than a banquet partaken in anxiety.
Better to count your money or cut your losses in a declining housing market and just walk away than to endure the gut-wrenching of putting your life on hold while your house is for sale.
I think one thing that needs to be factored into consideration is that we are in a dead spot at the moment. Those who were waiting to sell at the peak of the market have realized that they missed the boat and are frantically trying to get what they can before prices decline too much more. Those who have been holding off on buying in anticipation of prices coming down are still holding off until prices come down more. No one with any common sense buys when prices are dropping and they are guaranteed to be purchasing a home that will be worth LESS than what they paid before the ink is dry on the title transfer. We expect that kind of depreciation with new cars, not houses….
I just wanted to chime in on leaving Southern California. My husband and I are in our early 30’s. He is a CPA, I own a publicity company. We bring in in the mid 100’s and have a decent savings ($50K). We can afford to buy well… not much and we can’t stomach the idea of a $4 or $5K per month mortgage payment. In two weeks we tour Raleigh, Nashville in Austin with the hopes to relocate.
I work for a public company of around 4000 employees. I use to, process around 5 employment verifications a day for employees applying for mortgages. Now, I barley get one a week. Thank God!
>My husband and I are in our early 30’s. He is a CPA
Isn’t it a bit drastic to leave the area just because you can’t afford housing? If you leave, won’t your current earning potential be drastically reduced?
Building up a clientele takes a very long time.
Have some patience. Rent for awhile. A time will come when you’ll be able to have your pick of properties you can afford.
If you are making mid-100’s you can RENT and live below your means. Maybe a few less dinners out, maybe a few less Mercedes payments? Do you really need a new car every 2 years?
I bet you could easily live on 1/2 of your income. Invest and save the rest for a later time.
Right now you have $50K. That isn’t squat. If you are actually making mid 100’s you could easily save $25-35K after taxes per year. After 3 years you could have $150-175,000, which could be perfect timing when everyone is losing their tookas to scoop something up.
I can’t imagine leaving California for some craphole like NC or Texas.
I considered moving to Dry Heaves, New Mexico where I could’ve worked for Intel and afforded a house. No thanks. Moving to Urinal, NY or Toemold, TX just to buy a house is crazy.
to the idiot who can’t imagine leaving California for NC or Texas:
all I can say, as I look out onto the beautiful intracoastal waterway in NC from a house a normal family can afford, is that I hope fools like you keep thinking that California is the place to be. maybe that’s why NC is so nice and affordable…in teh meantime, Congrats on having seven of the top 10 most polluted cities in the country.
Re families leaving So Calif. My daughter’s class of 19 at Westlake Elementary shrunk to 17 this year as two families moved out of state (CO and FL). Word from the last faculty meeting is that enrollment for next year is down significantly and the school will lose several teachers. Although the exact cause isn’t certain, I think our zip code’s median $1.1M house price has something to do with it. The talk is that they will bus in some kids from other areas just to keep teachers from being axed. It’s funny, but I never thought I would see rich white people promoting the idea of bussing (relatively) poor kids from across the freeway to their priveleged community’s school!
Re lonlieness of stay at home moms, I feel your pain. I’ve been a stay at home dad for the past year. Everybody initially says “oh, that’s just… great” and within 15 minutes the “you’re crazy, what’s wrong… when are you going to get a job?! Why are you renting and missing out on all this free money!?” comments start. I sold my Camarillo house in 11/04 and have been renting ever since. I set up portfolio income, quit my job over a year ago, and haven’t yet had to touch savings. People who spend far more than they make so they can have a bigger McMansion and some toys that will be in a landfill in five years have been telling me I’m crazy for a couple of years now. The Moms I see at the park every day while playing with my kids have finally gotten used to me, but I think they think I’m a bum because I don’t drive a status car.
Well, in Urinal, NY you can have good schools, a 20-minute commute, be an hour away from the Adirondacks, the Great Lakes or some of the most beautiful lakes in the world (the Finger Lakes), America’s best grocery store (Wegmans), etc and you can buy a three-bedroom 2-bath Cape Cod with a big yard for under $100,000. You’ll have a bit of trouble finding day laborers, but that’s because everyone here mows their own lawn because they don’t have to spend 75 minutes on the freeway twice a day. What a shame!
>all I can say, as I look out onto the beautiful intracoastal waterway in NC
In my experience, the south is not the best place to have quality of life. Quality of life is how you define it. If your definition is low housing cost, country life, bugs, high humidity, double-wide trailors, no diversity, no art/culture/music, neighbors with very low IQ’s, poor education, second rate medical communities and a VERY high concentration of rednecks, then I say;
good riddance & Yee haw!
I like surfer – x am mad as hell, bitter and just blatantly pissed off!
Why should a naive average Joe who earns less than one half of my annual salary, be able to buy a new home in South Orange County with little or no money down on a stated income loan. These uneducated idiots have bid up the market so high, that it can only go down in the future.
It’s totally unfair … I have been prudent, I have no debt and I have a FICO score that exceeds 800. Yet a sub-contractor who likely cheats on his taxes, drinks a double-six of Coors Light every night, beats his third wife, and pays 30% of his unreported income in child support, can lie about his salary & put less than 5% down on a new Tuscan designed villa in Turtle Ridge.
It’s F_cked up!
My husband and I earn more money than my parents ever did (or his for that matter). I’ve put myself in school and am currently paying the loans off. I have no “mommie and daddie” to help me get into my first home. Mommie and Daddie aren’t going to give me their equity to help us get on the property ladder.
We don’t take lavish vacations, spend $$ on new wardrobes or drive around in flashy cars. For the record, I drive a 95 Toyota Camary that I bought used. My husband (if you can believe this) has taken public transportation into downtown LA for the last 3 years. We have no debt, except my student loans (about 20k left–20K has been paid off in the last 7 months). And, I got rid of the cell phone about 3 years ago.
I know we are not your typical couple. We feel like we have done so many “right” things but it just goes to show you that even with this much sacrifice, you can’t or rather, shouldn’t get into a loan for a 600-700K “american dream home” with no money down.
Sure, we could buy in Riverside, but then we would be letting a house dictate our lives.
Combined, we make 138K and that figure will rise to about 145K by August. Husband Ficos is 775, mine 820. We should be the “ideal” first time home buyers. Yet, we can not afford forking out 5k for a mortgage.
We found a home we liked months ago. But, when we ran the numbers, it didn’t make financial sense. We wouldn’t be able to max out the Roth’s or 401k plans like we do now.
I remember the early 90’s when my Mom was upside down. And working as a realtor was the worst job to have. People crying about their homes not selling….
I can’t wait for this whole process to speed up, as I would really like to own a home one day.
P.S. We never put an offer in on the house we fell in love with. But, yesterday we got a call from the agent saying the buyer pulled out at the ninth hour (and lost their deposit).
I figured they would rather lose a 5-10k deposit, than lose 5-10% after closing escrow. I guess the agent is looking for another sucker to replace that buyer…..
For those of us hoping to buy in the Conejo Valley area some day, just be patient. This area got hammered in the early 90’s! Ventura County sales have plunged recently. Drive by an open house this weekend for a laugh. Now Westlake Village… that’s a whole ‘nother enchilada. The majority of residents are well off geezers who slurp champagne and put around the lake in their party coffins… errr uh boats. Seems like sellers in Westlake are just throwing out ridiculous asking prices for the hell of it with absolutley no urgency to sell. I hope the greedy investors in the area take a monster bath and end up sleeping out in front of Sav-on next to Freeway Annie. If you know the area, you know her. Anyway, that’s just my little tirade.
“The majority of residents are well off geezers who slurp champagne and put around the lake in their party coffins… “
LOL. I laughed so hard when I read that I spilled my martini on my blazer and had to toodle over to Boccacio’s for a new one before dinner…
I also think the Conejo Valley will get hammered, not least because Countrywide is now one of the major employers in the area; however that will start to change pretty quickly by next year. Amgen is always threatening to move more people to Rhode Island or Longmont. Given their rate of construction I doubt they will, but other employers are having a hard time recruiting because the housing costs are extreme. When I first moved to Ventura County in 1997, housing was 30% cheaper than the SFV. Now it’s higher and with many fewer jobs in a 20 mile radius. Most Amgenites I meet who have arrived in the past two years are renting (they are intelligent and well educated folk for the most part). Countrywide cubicle cogs on the other hand just loooove that 0.5 point employee discount they can get on mortgage products! Freeway Annie may have company on her bench soon. She might have to quit the cigars.
Howdy So Cal neighbors! If you’re curious I’ve updated the monthly charts for the South Bay area.
Cheers,
Susan
How to lowball a seller…
1. Put out lowball offers on multiple homes. If one bites you’re ready to start dealing. Chances are if you put in a lowball offer all sellers will return with a number they feel comfortable with. (Which probably won’t be close to your price) When they do show them what their neighbor is willing to sell for. There’s a good chance when they see the neighbors number they’ll try to go lower. This is the reverse of a bidding war.
2. The second way to lowball a seller requires two buyers working together. The buyer that does not want the house to be lowballed submits a REALLY low offer. What this does is shock the seller into a new realty of what their house is worth. If the seller accepts the offer you “gracefully” try to bow out but, while doing so have buyer number two submit an offer at the same price. The seller will forget about buyer one and sell to buyer two. If the owners don’t accept the offer you play with them a little then get out. At this point you “softened” the seller up to accepting a lower offer. This is where buyer two comes in knowing how low the seller will go.
*The second technique is something only buyers can do together (not agents) and it won’t make friends if people find out about what your doing. So don’t ever tell people how you got the house for the price you did.
Hello..
I wanted to say that my wife and I are considering leaving the US altogether. We’re not only sick and tired of the general direction this country’s overall mentality is going, but we’re tired of involuntarily partaking in this facist government’s war mongering crap.
I’m fed up paying through the nose to live here…RE market and all.
It’s embarrassing that a couple making low to mid 100’s has to struggle to buy a home…embarrassing.
My family came to Cali back in the early 80’s from Europe (UK). Ever since we did, this place has always rubbed me the wrong way. The general mentality of American life and culture is “dominate”, “possess”, “take”, and “beat your neighbor.” There’s never any calm or peace it seems. It’s getting old.
Since we got married back in 2001, we had no money to buy a home then. Now that we’ve saved up an odd $200K or so, we’ve decided to invest overseas for retirement rather than buy here. It makes more sense to us and we won’t be in the rat race here either.
In the meantime, we’re considering moving up to Canada where things are familiar but less hectic. Who knows what will happen..but one thing’s for sure, California really is crap these days…in my humble opinion.
Combined, we make 138K and that figure will rise to about 145K by August. Husband Ficos is 775, mine 820. We should be the “ideal” first time home buyers. Yet, we can not afford forking out 5k for a mortgage.
We found a home we liked months ago. But, when we ran the numbers, it didn’t make financial sense. We wouldn’t be able to max out the Roth’s or 401k plans like we do now.
To anonymous who wrote the above:
I agree that even with your debt, you shouldn’t buy a home now…it’s ludicrous.
But come on, live a little. You guys make plenty of money to enjoy yourselfs. Maxing out retirement accounts is a joke IMO. It’s a great way to have the Wall-Streeters make a bundle of money on YOUR money that you may or may not see (God will you live your full lives!).
My father passed away recently…on the 18th of May. It hit me hard…and I realized that while my wife and I have socked away alot of money in the past 5 year, you’re here today gone tomorrow.
That doesn’t mean that I’m going to hop into a $1MM home and hope for the best..not a chance. But we live our lives well…we take great vacations, we drive decent cars, we enjoy going out to eat. I don’t agree with the penny pincher approach to life at all. Perhaps you are not one of those but from what you said it came across that way.
“My family came to Cali back in the early 80’s from Europe (UK). Ever since we did, this place has always rubbed me the wrong way.”
I agree w/ you about the housing bubble, however please don’t let the door hit you ass on the way out!
Don’t worry…it won’t…the only thing closing in will be the walls your trapped in between. Sorry to have hurt your ego that you live in a dump
Nozferatu
You didn’t hurt my ego, I just think people that live in America that don’t like America should leave. Especially European Tea Bags!
No…it’s clear to me that I did. Sorry about that
As a first step to improving your (or OUR) country, since I pay taxes here as well, is to admit there are huge problems and shortcomings to being here (as there are all over the world and anywhere else) and not be such arrogant self-centered individual.
I know, I know…that’s the American approach to the rest of the world but amuse me for a moment by pretending to be open-minded for a change.
Remember, you’re from Europe too…your neck just became a bit redder that’s all.
Oh by the way, I didn’t realize being “democratic” (yes the latest bullshit buzzword we Americans use to piss on everyone else…even ourselves!) was so un-American…I promise…from now on we’ll all shut our collective mouths, bend over, drop out trousers and shout…YES PLEASE..STICK IT IN AS FAR AS YOU CAN…I LIVE IN AMERICA WHERE YOU CAN GIVE IT TO ME!!!
I think not…
I know there are problems w/ my country; I just don’t want some tea bag pointing them out.
“Remember, you’re from Europe too…your neck just became a bit redder that’s all.”
Did the morons at the BBC teach you that?
You people make me want to vomit … literally all over your shoes. I’ve been there (Europe), and the political correctness is so thick that it makes me extremely uncomfortable. And when you start saying things like this; “I didn’t realize being “democratic” (yes the latest bullshit buzzword we Americans use to piss on everyone else…even ourselves!) was so un-American”, it let’s me know you’re part of that group. Now why don’t you F.O., and for God’s sake, STOP referring to yourself as an American.
BTW, I could call you a:
Limey
Pommy
Rosbif
Rosbeef
Rooinek
Britisher
Angrez
Brit
Redcoat (my 2nd favorite after tea bag)
I live here too so I’ll point out whatever I damned well please…get used to it.
I’m not even from England you jackass…I said I lived there. No one taught me about rednecks…just observations from people such as yourself confirms your miserable existence.
We all know you’re a racist pig but let’s not go there. It’s funny you don’t want an American saying he’s from America…is that how racists you assholes have become?
As I said before, insulting the British is insulting yourself…you’re both cut from the same cloth and have the same dillusional hopes of world domination…albiet the British sort of gave up on that until the latest lunatic of a redneck president became bed-buddies with the latest evangelical jackass from the UK.
Grow some balls…voice an opinion about your stupid country and for crying out loud don’t be such a freaking lemming…
Now take off that RED coat and put it back around your neck.
Go ahead…report me…you brainless lemming. Only a dumbshit like you would think innocent people dying is a good think…all the more reason for facists like you to go and do your own killing…I’m sure you’d have no problems whatsoever to shoot an Iraqi kid in the head right?
As a matter of fact, go and work for the CIA…they need right-wing nutters like you to keep them going.
It’s a sad day to see this country fall in the hands of idiots like you. I probably have more patriotism in my left nut than you do in your whole body. So don’t give me crap about respecting people and garbage like that.
You’re the most dangerous aspect of social human behavior…ignorance mixed with arrogance.
Remember your roots although you dont’ want to admit it…you’re a racist pig from the UK who’s neck’s gotten very red.
Give me your address…I’ll send you some chewing tabacco.
Pathetic excuse for a human being…LOL
Ok, enough name calling. I’m shutting down comments on this post because it has gotten out of hand.
John Doe
As one who lived in the SFV in the early 80’s, and then moved to NYC in ‘83-’97, only to return to live in the Newport Beach area ‘97-’99 (loved it there), and then to return to NYC in ‘99 because of better job stability in the NYC area, as compared to Southern California … I am nervious about now pursing a possible job offer with Amgen (in Thousand Oaks), simply because of the cost of (and lack of) decent housing in the area.
From what I’ve searched on-line, I am disgusted at the general housing I see available in the Ventura County area. Most of the houses featured on-line are of that “cheap” 70’s “fake tudor” look (which I can’t stand), and run anywhere from 600-800,000. From the looks of most of these houses, not much in the way of improvements or upgrades have been made. It jsut seems that most of the housing in the Ventura County and SFV is old, poorly built “crap”.
At least Orange County was newer and had a younger more fresher “Mediterranean” look.
At first I was extremely excited about the possibility of accepting the offer with Amgen, but more and more I think I am going to tell them that I am not interested.
There are just too many other nice areas around the country that still offer affordable “newer” housing. One area in point, with another possible job offer, it he Raleigh-Durham area, which from what I’ve viewed on line, is an area that is really getting it’s act together and growing. You can get a fairly large size newer home for half what one would cost in the Ventura County/SFV area.
I just can’t help but feel that both the Los Angeles area, and Ventura County are going downhill since I was living there in the early 80’s. It just doesn’t seem like a very attractive area to live anymore. As compared to Orange County, Northern California, or even San Diego.
Overall I just don’t see that much community planning in the greater Los Angeles area, especially in the areas of rapid transit, building a new regional airport in the SFV (so everyone doesn’t have to drive to LAX), the emergence of high-rise condos (like in most up and coming cities today - Raleigh for example).
Amgen if you’re reading this …. how about leaving Thousand Oaks, and moving the corporate headquarters to the BioTech center of the world …. San Diego?
For one from the east coast, who as always had a love for living in Southern California (’78 - ‘99), am sad to finally have to admit that from what I hear and see is happening in the Los Angeles area ….. that I will actually say no to a good job offer (in Amgen’s Marketing Department), simply because there are other smaller areas and cities around the country that have a better control on their future and can simply offer a better quality of life than that found in Southern California these days.
I’d hate to see a complete “melt-down” or crash of the housing market out there, but unfortunately it looks like this is what is being set-up to happen one of these years. If enough people can’t finance a home, or are turning down decent high-paying jobs in Southern Cal, simply because things are so out of hand, then this is how it probably begins.
What happened Southern Cal?
I guess the Eagles got it right when they sang … “they called it paradise … the place to be …. kiss it goodbye”!
- Disappointed
yeah southern california - especially the south bay - quality of life sucks. there are too many people here and you cant get a moments peace.
north redondo is a high priced ghetto. basically hundreds of duplexes with concrete yards, or no yards at all. cheap and fake looking mansions sandwiched between slithers of grass. and people BUY these monstrosities!! ARE YOU BLIND?????!!!!!!
these real estate pros are scare mongers. there are SO many OTHER beautiful places in America to live. you don’t have to live in california. is this all these people know? weather is not a big deal if you live a beautiful home thats not breaking your back- and a mortgage payment that’s so reasonable that you don’t give it a second thought.
i blame the buyers. if they wouldn’t be so willing to take it up the ass then we all could live here for reasonable costs. but short-sighted self-centered buyers take it with a smile and pay an arm and a leg and a kidney to live in a shit hole.
californians (Bay Area AND SoCal) are GETTING FUCKED big time. it is a crying ashame. i lived in the bay area for 6 years so i know and its just as hideous up there. the south bay is actually more pricier than the bay area.
i am moving back to the midwest or the east coast (Atlanta,GA’s in mind) where i can get a beautiful 5/4 bedroom home sitting a on 1/2 acre for 300K. with NO neighbors.
that’s reasonable to me. my fiance’ and i will have enough money saved up by then to afford a NICE living.