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Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,957 posts, read 22,307,357 times
Reputation: 6471
I wish people would stop lumping all of CA into one basket. It's a HUGE state and every market in it is not the same. My home is worth about 20% less than it was at the top of the local market, but still substantially higher (75%) than when we purchased it in 2001. It would have to drop 100% from where it is today to even make me worry.
Since it's not for sale, and we're staying put, the market value has no effect on me nor does the market value of millions of other homes have an effect on those similarly situated.
Location: Upstate NY native, now living in Houston
663 posts, read 2,263,316 times
Reputation: 216
Quote:
Originally Posted by DMenscha
I wish people would stop lumping all of CA into one basket. It's a HUGE state and every market in it is not the same. My home is worth about 20% less than it was at the top of the local market, but still substantially higher (75%) than when we purchased it in 2001. It would have to drop 100% from where it is today to even make me worry.
Since it's not for sale, and we're staying put, the market value has no effect on me nor does the market value of millions of other homes have an effect on those similarly situated.
It's that darn media! I really appreciate your clarification and explanation. I was also guilty in my mind of lumping the entire state of CA into one basket myself. I feel a little better about some things now after reading your post!
Location: Georgia, on the Florida line, right above Tallahassee
10,471 posts, read 15,830,626 times
Reputation: 6438
Quote:
Originally Posted by karkyco
I'm certainly not "scared to buy" even though I am well able to do so. If anything, I'm educated, informed, and patient - biding my time to take advantage of potentially the opportunity of a lifetime and ensure my childrens' and their childrens' comfortable future. Certainly there has been a drop, and in my area, there is much more on the way. Why should buyers overpay simply because sellers are hurting and desperate? Sellers should look to the Salvation Army or Goodwill if they want charity.
As for blaming the media - the media hasn't changed. How many times in history has it pumped n dumped? Or used smear tactics/character assassination, glorified villains, etc.? The peak of yellow journalism was 100 years ago. It's nothing new. They certainly amplify the hype, but this has always been the case - they are an accurate barometer of national sentiment because they are made up of people living the events they are reporting. Something has to give if less than 10% of families can afford the median priced home in a certain city/county. That's LA, BTW, where at the peak of prices, it was just over 9%. It went from ~25% in 1999/2000, to 22% in 2001, 19% in 2002, 16% in 2003, 14% in 2004, 11% in 2005, to under 10% in 2006 and into 2007. Now, affordability is bouncing back up rapidly, but of course this is skewed by the number of foreclosures and short sales mainly in ghetto and undesirable locations. Desirable areas have been falling, but have a long way to go.
I also don't think all homes are overpriced, as I couldn't care less about any of the flyover/filler states, the midwest, the south, what have you. My sole focus is on the better parts of Los Angeles (both commercial/income and residential), and to a lesser extent, So Cal. And crunching the numbers, while the median price to income ratio has been higher in So Cal than the national average for decades now, the recent runup has caused the ratio to be so ridiculously out of whack, that it simply cannot maintain anywhere close to its variance indefinitely.
There was a point at which the median So Cal home price was well over 13 times the median household salary. Thus why prices are dropping like a rock and will continue to do so. When below average and GHETTO homes in substandard areas of Los Angeles county are still priced at 500,000, something's got to give. At realistic mortgage levels, your household would have to be making 150K to afford a 500K shoebox in a crappy area. Despite the large numbers of affluent and wealthy families here, the median household income is still under 60K here. And let's not even talk about better (but not the best) areas such as West Hollywood, Miracle Mile, borders of quality places where shoeboxes are 1 million plus still.
This is the same problem I see in Seattle. You have 60 percent of the homes priced in the same category as 20 percent of the buyers.
They are trying to shore up the selling prices, but it can't maintain.
It just can't. There's not enough buyers for the overpriced homes.
The real estate is local. The credit crunch is nation wide.
Well looks like the media is at it again. The top story in the WSJ is "Battered Consumers Turn Glummer". The story goes on to talk about consumer cofidence being at the lowest level since 1992 and "home price declines accelerated in April, according to data released Tuesday."
"Consumer's expectations of the economy six months ahead plunged to the lowest levels since the board began conducting its surveys in 1967."
I'm sure it is all complete media hype/bunk and things will be rosey in the US the rest of '08 and into '09 especially in real estate since "the markets have all ready corrected themselves" [fairmarketvalue] and with respect to inflation, unemployment, growth, etc.
Might be hard to see through the dust down there in TX.
I'm not from Texas, I 'm from the Chicago suburbs. Does anyone read the entire comment of anyone else? Things are constantly removed and taken out of context. I said I don't know much about Texas, other than what I wrote to answer someone else's questions and one who was courteous enough to ask my OPINION on the Texas market.
I love how sellers in today's market blame the media for the housing market slump. As if the media wasn't reporting that home ownership was fulfillment of the American Dream, a great investment, etc., and so on once the ball got rolling upward. No, every no-money-down homebuyer who jumped in the market over the last 8 years somehow got the idea in their sleep. Perhaps the media accentuated both the run-up and the decline, but they are just following the trends that are already rolling.
I agree with your assessment of the extent of the media's role in this fiasco. The media won't report on things that aren't already in full swing as they are not that proactive, don’t have an indepth understanding of subjects they report on and niche stories (as they are categorized until they are mainstream) don't draw viewers or sell papers. Did some sheeple follow the media's lead? Sure, but the vast majority did it on their own during the run up.
The decline is not an invention of the media. It was inevitable as prices reached an unsustainable tipping point (buyers incomes could no longer afford the asking prices and they reached the limit of money that they could borrow) and as living expenses rose or ARMS adjusted, more and more people found themselves instantly over extended.
The media didn't create ALT-A loans (stated income, higher debt to income ratios, subprime and upside down loan to value) and ARMs, nor did they cause lenders to push them or people to use them. Personal responsibility has to enter into the equation somewhere, no matter what some “pie in the sky” fantasy a broker pushes.
The problem in CA was that these funny loans were pushed and some buyers/refinancers signed up for them. Not to mention a lot of loan fraud and liar loans as well.
And homeowners extracted money from HELOCS and spent every dime.
Question: Where there HELOCS in the previous RE crashes?
Twice, when rates looked favorable between 1/05
and again in later 2005, my household tried to refinance from the arm we still have today to a 30 fixed.
Both times we were offered the NEG AM Loan.
Both times we did not refinance.
The first time, we were being persuaded to extract 60K from our home equity and get the neg am loan. We said no thanks.
Well, here we are today with the same loan we got when we bought the house in 04. It is fixed until 2011. NO HELOC either.
The original home we bought in 01, for 186K
1st time buyer program, 0 down CHAFA loan;
Sold it in 04 for 380K;
Bought the least expensive home in 04 for 399K, a divorce sale.
Homes around were selling for 425K and peaked at as high as 570K in mid to late 06.
Now, homes here in our zip are declining and selling for 270K.
Oh and that 1st home we sold in 04 is bank owned. The owner lost it late last year to foreclosure.
Just listed 3 weeks back for 260K and a few days back the asking price just reduced to 245K.
Been a very interesting ride anyways. I am learning a lot from it as well.
The Media makes everything seem 1000 times worse, let me tell you. They really know how to lay it on , that coupled with the DOoM/Gloom Blogs one may be one their way to an early heart attack.
Ask yourself how many people you personally know that have died from a heart attack in the past 6 months??
Cheers all
If it was only a handfull of homes that were selling for $140K less than they were 4 years ago, it would be laying it on thick. But it is 1000 homes in some cities and towns all over the country, not just the hot spots. The dollar figures may not be the same and the percentages may be lower in some of the less hot areas, but it is happening all over. I think that people under estimate the scope of the problem when they blame the media for "hyping" this story.
And that is the mainstream media. Some financial outlets were warning of this problem in early 2006 as they saw a lot of ARMs were set to begin resetting in late 2006.
I'm certainly not "scared to buy" even though I am well able to do so. If anything, I'm educated, informed, and patient - biding my time to take advantage of potentially the opportunity of a lifetime and ensure my childrens' and their childrens' comfortable future. Certainly there has been a drop, and in my area, there is much more on the way. Why should buyers overpay simply because sellers are hurting and desperate? Sellers should look to the Salvation Army or Goodwill if they want charity.
As for blaming the media - the media hasn't changed. How many times in history has it pumped n dumped? Or used smear tactics/character assassination, glorified villains, etc.? The peak of yellow journalism was 100 years ago. It's nothing new. They certainly amplify the hype, but this has always been the case - they are an accurate barometer of national sentiment because they are made up of people living the events they are reporting. Something has to give if less than 10% of families can afford the median priced home in a certain city/county. That's LA, BTW, where at the peak of prices, it was just over 9%. It went from ~25% in 1999/2000, to 22% in 2001, 19% in 2002, 16% in 2003, 14% in 2004, 11% in 2005, to under 10% in 2006 and into 2007. Now, affordability is bouncing back up rapidly, but of course this is skewed by the number of foreclosures and short sales mainly in ghetto and undesirable locations. Desirable areas have been falling, but have a long way to go.
I also don't think all homes are overpriced, as I couldn't care less about any of the flyover/filler states, the midwest, the south, what have you. My sole focus is on the better parts of Los Angeles (both commercial/income and residential), and to a lesser extent, So Cal. And crunching the numbers, while the median price to income ratio has been higher in So Cal than the national average for decades now, the recent runup has caused the ratio to be so ridiculously out of whack, that it simply cannot maintain anywhere close to its variance indefinitely.
There was a point at which the median So Cal home price was well over 13 times the median household salary. Thus why prices are dropping like a rock and will continue to do so. When below average and GHETTO homes in substandard areas of Los Angeles county are still priced at 500,000, something's got to give. At realistic mortgage levels, your household would have to be making 150K to afford a 500K shoebox in a crappy area. Despite the large numbers of affluent and wealthy families here, the median household income is still under 60K here. And let's not even talk about better (but not the best) areas such as West Hollywood, Miracle Mile, borders of quality places where shoeboxes are 1 million plus still.
You are right to look at the fundamental financials. How can someone making the median income for an area afford a house that is 5,6 or 7 times the median? This is why a lot of people complain that they can’t afford to live where they currently do. The reason is that they actually CAN NOT afford to live where they are. The 28/36 rule lenders basically followed before the bubble worked because they found that above those percentages, people had trouble paying back their loans. When they throw out that rule, you have what we have today, people defaulting and walking away from their obligations.
You should care about the coasts and the fly over states because the next story they the media is currently not fully addressing is the personal credit crunch. Since our economy is ever more dependant on consumer spending, removing a sizable chunk of consumer buying power (fueled by home equity that no longer exists) will put a sizable dent in the economy.
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