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Real estate is going to get killed again in 2009, but its going to be a different demographic of housing this time around. The stew of subprime crap will start to cook off in 2009, so the low end will decline but not as much as seen this year.
The mid/higher end homes are going to get killed now. There is no move-up market and the stew of toxic pay option ARMS will aggressively start to default in 2009. These loans...are nearly impossible to "modify" successfully without huge principle reductions.
Anyhow, its really unlikely the national market bottoms in 2009, although perhaps 2009 will be the last year of very aggressive price adjustments.
Realtors have been calling a bottom since prices started to decline.....
Real estate is going to get killed again in 2009, but its going to be a different demographic of housing this time around. The stew of subprime crap will start to cook off in 2009, so the low end will decline but not as much as seen this year.
The mid/higher end homes are going to get killed now. There is no move-up market and the stew of toxic pay option ARMS will aggressively start to default in 2009. These loans...are nearly impossible to "modify" successfully without huge principle reductions.
Anyhow, its really unlikely the national market bottoms in 2009, although perhaps 2009 will be the last year of very aggressive price adjustments.
Realtors have been calling a bottom since prices started to decline.....
hmmm... where are all these people to go? From the California Department of Finance E-5 Housing Estimates (http://www.dof.ca.gov/research/demographic/reports/estimates/e-5_2001-06/ - broken link), the average household size is around 3 people and that vacancy rates are around 5.9% for the State.
County Vacancy And Occupancy Rates (1/1/2008):
Los Angeles County : 4.2% / 3.12
Orange County: 3.33% / 3.09
Riverside: 13.23% / 3.06
San Bernardino: 11.61% / 3.3
San Diego: 4.4% / 2.79
Ventura: 3.41% / 3.07
Obviously the sub-prime zones (Inland) have higher vacancy rates over the last year... but the more coastal zones are where the mid/higher end homes are located. Aren't they the ones that are more likely to default in the coming year with the Option Arms / Alt. A loans resetting?
So? The question remains... with lower vacancy rates... where are these people going to go? Is there enough housing to accommodate the glut of displaced people at affordable prices/rent? Or would they move to the areas with disproportionately higher vacancy and lower costs (both rent or buy)? Instead of a "move-up" trend... what about a "move-down" trend? or totally leave the State? Bunk up? I don't know.... but the people will have to go somewhere.
So? The question remains... with lower vacancy rates... where are these people going to go? Is there enough housing to accommodate the glut of displaced people? Or would they move to the areas with disproportionately higher vacancy and lower costs? or totally leave the State? Bunk up? I don't know.... but the people will have to go somewhere.
Under a bridge? Obviously with the high unemployment rate in California many will just leave the state, I would suspect unemployment is higher with the housing gamblers that are losing their house than the general population. Some will move in with relatives, some will find rentals, some will move to other areas, and perhaps some will become homeless.
Looking at numbers from last year isn't going to tell you much though....obviously the situation has changed dramatically since then.
The house vacancy rate is at record levels. There's more than enough housing out there. It'll either be priced reasonably or be kept vacant.
Also, household sizes tend to increase during bad economic times as people move in with relatives or otherwise share living arrangements to cut costs. Expect that to provide further downward pressure on rental rates as fewer houses will be needed.
As for the Southern CA rental market, things are improving - for renters, that is
Under a bridge? Obviously with the high unemployment rate in California many will just leave the state, I would suspect unemployment is higher with the housing gamblers that are losing their house than the general population. Some will move in with relatives, some will find rentals, some will move to other areas, and perhaps some will become homeless.
Looking at numbers from last year isn't going to tell you much though....obviously the situation has changed dramatically since then.
California has a long way to go....
The thing is, is I would think the Alt-A and Option Arm loans folks is a little bit of a different breed than that of the sub-primers.
I would think they would have better jobs and credit but used these loans to get into the more exclusive/expensive markets and gambled. So, I would think the behavior of these people would be slightly different than the pure breed sub-primers? Who are the lower rung folks that have to bunk up or have to leave the State.
I would think these people, if they still have their jobs after the resets, would find places to rent, or move to the higher vacancy areas with lower costs. But of course, that is just my guess... basically they'll just down-grade since they should have a bit more mobility than the sub-primers. Essentially a class shift... the sub-primers/middle to poor classes become even more poor... while the alt-a/option arms go from upper middle/middle to middle / poor.
I know there's going to be more vacancies... I'm just trying to figure out how this upcoming group behavior is different than the previous group (ie, environment, mobility, and how they'll shift/move and how this would influence the market).
The thing is, is I would think the Alt-A and Option Arm loans folks is a little bit of a different breed than that of the sub-primers.
They had better credit scores....
Quote:
Originally Posted by chuck22b
I would think they would have better jobs and credit but used these loans to get into the more exclusive/expensive markets and gambled. So, I would think the behavior of these people would be slightly different than the pure breed sub-primers?
Sure, their behavior will be different. Many of these purchases aren't even primary residences, so walking away is the natural response. These loans are also less likely to be modified.
Quote:
Originally Posted by chuck22b
I would think these people, if they still have their jobs after the resets, would find places to rent, or move to the higher vacancy areas with lower costs.
These people are going to have destroyed credit, as a result finding rentals will be somewhat hard. They will have the choice of a crappy rental or perhaps living with family. I would guess that those that are youngish would do the latter. After all.....what would you do if you walked away?
There seems to be little evidence that people losing their primary residence are renting in the area in large numbers. The vacancy rates are getting worse. Although, it could be that more rentals are coming on the market too.
People aren't going to be packing their bags and moving to the inland empire.
Sure, their behavior will be different. Many of these purchases aren't even primary residences, so walking away is the natural response. These loans are also less likely to be modified.
These people are going to have destroyed credit, as a result finding rentals will be somewhat hard. They will have the choice of a crappy rental or perhaps living with family. I would guess that those that are youngish would do the latter. After all.....what would you do if you walked away?
There seems to be little evidence that people losing their primary residence are renting in the area in large numbers. The vacancy rates are getting worse. Although, it could be that more rentals are coming on the market too.
People aren't going to be packing their bags and moving to the inland empire.
hmmm, if it was me, it would depend on where family lives... if I have no family in the area... then I'd rent. And... if I didn't want to rent in the expensive area, I'd move to a less expensive area buy/rent a place and foreclose afterwards (buy/rent and switch). The denser parts of Southern California didn't really have a building boom during the run-up, so there is still some structural constraints that would keep vacancy low (house prices may have gone up, but vacancy was still low). It's mainly the inland areas that is hurting from higher vacancies and investors. Furthermore, for those with families, it'd be more difficult to move into other family or parents' residences. Especially if you still have a job and incomes. I wouldn't move out of State but to a cheaper area.
Other States don't really have much more of a rosier situation. Texas faced a nice boom as commodities and Oil sky rocketed and steadily increased in the first half of the decade. Philip T already said a lot of R&D into Oil exploration and development has greatly dropped which would affect the economies of the Gulf Coast. Furthermore, populations of States surrounding California increased largely because of the rising costs of housing in California. As these costs dissipate, California could become very attractive.
California will recover. We're at the forefront of some of the leading technologies going to come online and global trade. We're the face of the US for commerce with Asia and a good chunk of all goods flows through our ports. California will retrench and prosper, mainly because it has a diverse economy (ranging from high tech, entertainment, energy, to agriculture), and is strategically located. We just need to get Sacramento to screw its' head on straight.
Other States don't really have much more of a rosier situation.
Nonsense. California has the 3rd highest unemployment rate and has one of the worst tax situations (and is likely to get worse if the democrats have their way) and hence has little business appeal. California's economy never really corrected from the collapse of the dot-com bubble. The situation is even worse today as technology has diversified outside of California. California major asset at this point is it work force....but its leaving.
Quote:
Originally Posted by chuck22b
Philip T already said a lot of R&D into Oil exploration and development has greatly dropped which would effect the economies of the Gulf Coast.
The Texas economy has become pretty diverse, so although this will effect the state it won't be the same as in the past. This will also effect California....though.
Quote:
Originally Posted by chuck22b
Furthermore, populations of States surrounding California increased largely because of the rising costs of housing in California. As these costs decipate, California could become very attractive.
Yes and perhaps they can fish in the ocean for food? The prices don't matter if people can find jobs in the state.
Quote:
Originally Posted by chuck22b
California will recover.
Yeah, this is what people in Western PA, Detroit, Ohio etc etc thought. Guess what? Never happened..... Why will California be any different? Let me guess...the coast?
Quote:
Originally Posted by chuck22b
California will retrench and prosper, mainly because it has a diverse economy, and is strategically geographically located. We just need to get Sacramento to screw its' head straight.
People in California are far too deluded to get "Sacramento to screw its head straight". Face it the unions and special interest own the state now, bleeding them to death is the only way Sacramento is going to change. But with the high number of ivory tower liberals in the state that is not going to happen.
Your attitude is just part of the problem, "The state will recover, its California!". A bunch of rubbish, really.
Nonsense. California has the 3rd highest unemployment rate and has one of the worst tax situations (and is likely to get worse if the democrats have their way) and hence has little business appeal. California's economy never really corrected from the collapse of the dot-com bubble. The situation is even worse today as technology has diversified outside of California. California major asset at this point is it work force....but its leaving.
The Texas economy has become pretty diverse, so although this will effect the state it won't be the same as in the past. This will also effect California....though.
Yes and perhaps they can fish in the ocean for food? The prices don't matter if people can find jobs in the state.
Yeah, this is what people in Western PA, Detroit, Ohio etc etc thought. Guess what? Never happened..... Why will California be any different? Let me guess...the coast?
People in California are far too deluded to get "Sacramento to screw its head straight". Face it the unions and special interest own the state now, bleeding them to death is the only way Sacramento is going to change. But with the high number of ivory tower liberals in the state that is not going to happen.
Your attitude is just part of the problem, "The state will recover, its California!". A bunch of rubbish, really.
Ok, I agree with you in part... there are changes that must be made in California that will allow it to better prosper and there's never a guarantee. Mainly the burdens on small businesses should be addressed (competition is key to innovation and productivity - government shouldn't be a large part of the barriers to entry).
I also agree its' the people that will make California prosper... but the natural resources, diversity, and location are key environmental factors that help businesses/individuals develop. In the most part, Texas, in terms of size of economy is still a long ways from California. This is both good and bad as it gives Texas a lot of room to grow but, it'll highly depend on the credit markets. Also, although it is ideally located for domestic trade, it is far from either coasts for international trade.
Either way, I think all States have their pros and cons, and hopefully contribution to the Union. Ideally, I'd like to see the US in its' entirety to grow and prosper. But, realistically, some things benefit some regions more than others. I think location is a key factor for growth and the viability of California. You may think the "Coast" is nothing... but being a post for global trade and commerce is a huge perk for economies. There's a reason why a lot of major cities are by ports and transportation hubs.
In the most part, Texas, in terms of size of economy is still a long ways from California. This is both good and bad as it gives Texas a lot of room to grow but, it'll highly depend on the credit markets.
Yeah, this isn't true. Per capita the Texan economy is just a bit less than California. The housing bubble pushed California's up a bit recently, but its going move downward now.
The things Californians think about the rest of the country are sort of funny.... Yeah Texas is just oil...nothing more...lets ignore the fact that Dallas as the most corporate headquarters of any city.....
Quote:
Originally Posted by chuck22b
I think location is a key factor for growth and the viability of California. You may think the "Coast" is nothing... but being a post for global trade and commerce is a huge perk for economies.
These perks already exist and aren't going to improve California's economy going forward. Furthermore, as consumption declines what exactly do you think is going to happen in those Long Beach, LA etc ports? What is happening to them now? This industry is contracting heavily.....
All this denial and happy talk isn't going to help the state...or you personally.
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