Digging In.
January 4th, 2009 Categories: Weekly Real Estate Activity In Ventura County
OK. Now what are we doing? You don’t know? Well I am packed and ready to go. Just let me know.
The “bail out” line gets longer. Every type of business imaginable is now asking for federal help. OK, I am jealous because I didn’t get in line .
That $ 600 incentive that most Americans received last year is chump change compared to what banks, investment houses, auto manufacturer, etc., are getting.
What is galling is that banks used part of the bail out money for year end pay incentives to their executives (I thought I had read that $ 1 billion was paid out as incentives to bank and investment executives. That is really rubbing salt into the wound).
Add to the mix now are our 50 States. At last count States have asked for a total of $ 1 Trillion to help them through their economic mess. By all estimates this is a low number. Heck it has to be low. Why California can spend a trillion dollars in a day and not bat an eye doing it. In fact the Sacramento people will holler that isn’t enough.
I think this States action is the other shoe dropping. In a previous article Waiting For The Next Shoe To Drop it was pointed out that Government will tax until people get fed up with taxes and make drastic political changes. We haven’t gotten there yet but we will shortly.
The next group to add to the “bail out” line will individual cities and towns and who knows when it will stop.
Consumers have dug in. Spending it is said will be minimal for durable goods and the like. The reason is simple. Consumers know that they will be facing tax increases at every level, food price increases, durable goods price increases, gasoline prices will start increasing, tax will be assess on the number of miles an individual drives.
So it is not that consumers aren’t spending. Their money is being redirected to tax, tax, tax, tax, fees, fees, fees, fees, and rate increases for sewer, water, electricity and the list goes on and up.
There is only so much money to go around. And unlike our institutions Mr. and Mrs. Main Street cannot get bail out money.
There is talk that savings are beginning to increase so do not be surprise if someone comes up with the idea of taxing savings. Oh…..they do that already. What ever interest one earns is taxed.
Where has all of the money gone? No one has an answer and no one is interested (so it appears).
Spend and tax big time is the model that has been set and it appears there are no (or limited) hooks or explanation required as to how bail out funds received were spent. Now that is an ideal situation.
We do need an upgraded infra-structure (roadways, bridges and the like) but we also need to manage the funds and that isn’t going to happen.
Getting a mortgage loans continues to be difficult. The Federal Reserve has once again admonished banks and publicly reminded them that their business is to make loans.
That isn’t happening. Banks are more interested in acquistions than making loans. Read my related article Quiet Before The Storm / for additional Federal Reserve thoughts on the topic.
Is it possible that we need a new vehicle for consumer/mortgage type loans? Banks have other interest and they are not consumer interest.
The general real estate market is changing. Homes will be getting smaller. Mega-mansions are now and will continue to have difficulties getting approved.
Those with connections may be successful but in general mega-mansions have seen their day for now.
Tract homes will be closer and it appears that most entities will be mixed with a combination of homes, small stores and some park type areas. Planning departments are going to squeeze as much as possible into small areas, creating bigger tax revenue streams for respective communities.
So small and tight fitting may be on the horizon for most new home buyers.
Ventura County Real Estate.
The “jack in the box” spring is being set. Listings in the County are down; sales continue upward but most of these are due to foreclosures which is good that these properties are now off the market.
Foreclosures certainly have put a dent in neighborhood values, exacerbated by banks and appraisers continuing to low ball property values.
Ventura pricing is now at the year 2003-2004 levels. This appears to be close to the bottom. Time will tell.
As noted in my article Out With The Old. In With The New. real estate in Ventura County will start heading upward. It is estimated that Ventura County as a whole will appreciate about 8.4% in 2009. Referring to the article other areas of California will do well except for Los Angeles which will appreciate some but not as strongly as other areas.
All in all Ventura County and real estate in general will weather the economic storms far better than other investments.
Your comments are welcomed.
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Out With The Old; In With The New.
January 3rd, 2009 Categories: National and Local Real Estate Appreciation Forecast
Some areas of Ventura County really took it on the chin in 2008, especially the last quarter of the year.
Ventura Beach properties did remarkedly well in the year 2008 (appreciating about 12%); all other Ventura County areas were hit with a -12% to -57% decrease in property value.
Fillmore was hit extremely hard with a -57.2% (yes that is a negative sign) decrease in values between the period of year 2007 and the end of 2008. Why?
Ojai/Oak View, Santa Paula, parts of Oxnard and of course Fillmore have had high foreclosures and lending institutions and appraisers have been low balling values in these communites for quite some time. Lenders perceive these areas as too risky.
Not all was bad. As noted in the following chart over the course of the last 15 years Ventura County has done well in maintaining property values. Over this time span Ventura County has enjoyed approximately a 10% annual growth in property values.
Even with the sharp declines witnessed during 2008, prices today resemble prices in the County for the years of 2003 and 2004 (which ranged in the $ 460,000+ to $ 579,000 price area). As noted on the chart there were three years of 25% appreciation in the County before signs of an adjustment starting to take place (starting in 2005).
What is in store for the County in 2009? As noted in the first chart above Ventura County will have an appreciation rate increase of about 8% ending in the year 2009.
This estimate is based on 3rd quarter, 2008 information issued from the Office Of Housing, Washington, D.C. Yes there will be some adustments when the 4th quarter information is released but the change should be insignificant.
Should unemployement exceed 10-11% in the County and job creation is zero or negative then there will be a significant impact to the numbers. But it is not expected that unemployement will reach 11%.
Noted in the graph below is the expected growth for the County into the year 2022. The year 2009 should be a good year.
After that just watch out. In 2020+ prices will exceed prices set in the 2005-2006 time frame. Gads! If I can live to 2020+ and see if all of this really happens will be great but the numbers suggest that the Ventura area will start an upswing with a vengence around 2014. Prices in 2020+ will probably double the 2005-2007 prices we have just witness. So hang on it is going to be a great market.
For those of you interested in areas outside the State of California or other California sectors the next table shows the expected price appreciation for these areas. So if you are an investor prepare yourself for some good investment opportunities starting in 2009.
Outside of the State of California, Boston, Detroit, Phoenix and Reno look like they may be good investment areas.
But……invest in areas where you would like to live. Who knows….circumstances may change and you may see yourself having to live in Boston or Detroit.
One of my tenets for investing is to invest in areas that I might have to live in and the second part to that is to buy only NEW anything. I do not want to inherit somebody else’s problems. By buying new I know that the problem didn’t exist before and while that may be some consolation (for me) I recognize that whatever the problem may be the correction, cost wise should be minimal (I hope).
Directing attention to areas in California. Chico, San Luis Obispo, Santa Barbara and of course Ventura County appear to be good places to invest. The problem I see in these areas will be “can one break even monthly” or will they be faced with a negative monthly cash flow.
Again one has to take pencil to paper and figure it all out. What looks golden to one may be a rotten egg to another.
Your comments are welcomed.
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We’ve Lost Our Compass.
January 1st, 2009 Categories: Neighbor Helping Neighbor
Today is the first of the year and I am sitting here musing and like many trying to figure out what went wrong with the year 2008.
It then came to me that we have lost our bearings.
Our problems are decades old and as citizens we have become complacent with the goings on especially when it comes to our institutions.
It is certainly an unraveling feeling when one realizes that the political world has become a haven for the inept. It appears to be a “good old boy network” where connections are more important than doing the work and seeing to the needs of U. S. citizens.
2008 simply has shown that we have been screwing things up for quite some time and we have been taught some lessons with more to come.
Citizens are beginning to recognize that there are only a few people who control and manage the U.S. economy. And these people take actions for political and connection purposes rather than improving and expanding this country’s ideals and enriching individuals.
The citizendry may be wishing and looking forward to a redistribution of wealth in this country. When people think they will get something for free they lose their bearings and it becomes a fetish of “I want more” without consequences. Unfortunately when redistribution is tried the wealthy get wealthier and the poor get poorer. The middle class shrinks.
Many wish not to recognize that our basic institutions have failed US citizens. Be it the Courts, Credit and Bank Institutions, Congressional System or whatever other system you wish to add, they have failed us. These institutions are proving to be as greedy or greedier than the private sector. Again we all saw this for decades but chose to ignore it because it did not impact “me”. If things that we hear and see today were undertaken in the private sector most if not all of the people would be dismissed.
Enron can be viewed as a poster model of excellence when compared to the United States House and Senate and various State legislative bodies. We as a people have placed low expectations on our selves and have become willing accomplices in institutional, governmental and political mediocrity. Illinois and Nevada are examples of how politics works.
Today many think that Government is the savior and willingly give their souls to have government bail them out. There is a thought process that no one can fail and any number of excuses are created to justify government institutionalization of our commerce.
The impact is all around us. It is evident in the government sponsored real estate market started in the 1990’s (a house in every pot).
The associated credit impact we now experience is due to government mis-management.
And the elected people in government who created this mess, now are charged with creating legislation to increase and hold their government flight of fancy. And the United States citizens accept this garbage without complaint. We have put the fox in charge of protecting the chickens.
Recently I heard a “learned professor” outline the great economy of Cuba. People in Cuba are waiting for their government to make them well off. Well nothing constructive has occurred in Cuba for 50 or more years (because, in his opinion, of the United States stand against Castro). It should come as no surprise that it will be another 50 or more years before the Cubans recognize that their government won’t do anything for them.
Venezuela was another great country he suggested that we emulate. I recall my mother telling me that at times “learned people seemingly become so smart that they end up sounding, looking and acting like the stupidest people in the world”.
This “learned individual” also noted how great the health care system was in Canada and suggested that we copy their system. Well from what I hear one has to wait months if not years for an operations in Canada. It is no mystery that Canadians come to the United States for critical operations. So it is beyond me what Canada can offer in the health care system.
In California I recently read of an individual who felt that more money had to be directed to the school system. 60% of this States budget plus how much more from the lottery goes to education. If education were given 100% of the States budget it still would not be enough and the system would remain inferior.
In the 1960’s and 1970’s US Custom agents were being prematurely retired because they would do the right thing and round up illegals. However meat packing plant owners and farmers/ranchers would contact their Congressman or Senator and tell them to stop the raids on their establishments. The Custom agent would then be reassigned or retired to pacify these business and political entities. Today we still have illegals and no one really cares. In many communities there is still the wink, wink when it comes to this problem.
My dad was born in Switzerland; my mother in Ireland. I recall my dad telling me of the hurdles that he had to go through to get into this country. He was 16 when he arrived here and at that time he needed to prove that he had a job and $ 100 in his pocket plus all of the other procedural items to become a citizen.
But he as well as my mother did what they had to do to become citizens. It was their aspiration to do well in this country. Dad spoke German and his English was limited but he focused on learning English. My mother passed away when I was young but my step-mother was German and both parents made it a point that they would speak English to the kids. It was the thing to do in their new home land.
This drive by my parents to become citizens of the United States isn’t as readily evident today by people who come to this country today (often illegally). Today it’s the thing to use our Country simply to get money to send home to their own country. Illegals do not want to become citizens and have been schooled to think they have a right to use our resources in order to better themselves and family’s in their own land. We’ve done a flip-flop.
As a people we are complacent and have allowed ourselves to be used. Recently I read where Gale Sayers (I think it was he) wrote in his book that he kept his perspective by recognizing that there was a God, there were others that he had to serve and then their was him.
Today people see only themselves. There is no God and no others. Yes our children will inherit a great debt but we also leave them the worse of ethics and morals that one generation can give to another.
It was not long ago that a persons word meant something. A handshake was a contract. Today even if written, contracts are challenged as being no contracts. Our legal system and the people who work and use this system have change the rules so that in effect there are no rules.
Connections now are the key to getting things done and at what cost? Re-visit the real estate and mortgage markets and you have an introduction to connections.
Your comments are welcomed.
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Hit The Reset Button
December 21st, 2008 Categories: Weekly Real Estate Activity In Ventura County
Let me off now. Something is rotten and it is all starting to smell.
What in the world is happening on the National level.
A few billion dollars here; five billion there; here a billion, there a billion……what are we doing? Does anyone know?
The logic appears to be that if we throw a lot of whatever against the wall (money, excrement) something will stick. It gives the appearance that something is being done and that will make people happy and feel good.
A lot of flim flam in the papers and other media. The story line being that a lot of people are being helped as well as a number of businesses.
Before pursuing that line of reasoning I found it of interest that countries such as France and other European nations whom have been described as Socialist are now becoming capitalistic in their approach and we in the United States are doing everything possible to become Socialist.
Well let’s see. Fixed interest rates are hovering around 4.5%. Strange how that happened.
Somebody in Washington states that interest rates will go down to 4.5% and low and behold within days they are at 4.5%. Just imagine if the individual stated 1%. Where would the rates be? Which suggests that if the markets are doing what they are supposed to do (supply and demand) why weren’t rates at 4.5% or lower previously?
Reminds one of gasoline prices. We are experiencing managed economics going sour.
Who is helped with these lower rates? We are being told qualified home buyers (and even some of these are not being helped) including first time home buyers. But there are not many of these people around.
Then another article tells us that of the number that have been helped to renegotiate there mortgage rate and principal, approximately 50% of those people are again behind in mortgage payments and are again flirting with foreclosure.
Hmmmm……that doesn’t appear to be the right correction. Or maybe its me. I must have fallen off the turnip truck and the “new” new math is beyond my comprehension. But none of what is happening makes much sense.
Here is an example of a real world situation. A Pasadena real estate agent told me last week that he had a buyer with a credit score approaching 800; his client was putting down nearly 25% on a property worth a little less than $ 500,000 and the buyer was refused a loan because within a quarter mile of the property being purchased were five foreclosures. The bank felt it was too risky an area.
The questions before the house are: Why do we have banks? What is their business? Who was first in line getting government bailouts? And who is putting the screws to the consumers? To direct you to the correct answer the first letter is “b”, I think you can add the rest of the letters.
Banks (me talking) appear to be holding onto the cash for the purpose of acquisitions and the like and have forgotten their business purpose.
Folks that would like to take advantage of the low rates cannot because they are upside down in property value (thank you Mr. Frank, Mr. Dodd, banks and appraisers who are now low balling property values in a a number of areas).
When looking at the Fitch Report (www.fitchratings.com) for the year 2009 the new home builders appear to be a sorry sight. With the exception of M.D.C Holdings, NVR, Inc., Standard Pacific and Toll Brothers other new home builders appear ready to be taken over (which will probably occur) or are ready to get in line for government bail out money. So the new home building sector appears to be in for a rough year in 2009 as suggested by the following listing.
–Beazer Homes USA (’B-’; Outlook Negative);
–Centex Corp. (’BB’; Outlook Negative);
–D.R. Horton, Inc. (’BB’; Outlook Negative);
–Hovnanian Enterprises, Inc. (’B-’; Outlook Negative);
–KB Home (’BB-’; Outlook Negative);
–Lennar Corp. (’BB+’; Outlook Negative;
–M.D.C. Holdings, Inc. (’BBB-’; Outlook Stable);
–Meritage Homes Corp. (’B+’; Outlook Negative);
–M/I Homes, Inc. (’B'; Outlook Negative);
–NVR, Inc. (’BBB’; Outlook Stable);
–Pulte Homes (’BB+’; Outlook Negative);
–Ryland Group (’BB’; Outlook Negative);
–Standard Pacific Corp. (’B-’; Outlook Stable);
–Toll Brothers, Inc. (’BBB-’; Outlook Stable).
Unemployment is heading upward, consumers are tightening their belts and not spending, the recession appears to be getting deeper (maybe the “D” word will start to appear. “D” for depression) and we are watching and listening to the Washington soap opera which is forever trying to blame others for their incompetence. State politics is in the same position.
Why it is that Americans as bright and innovative people hire representatives who are not bright is beyond me. It is what it is and fortunately we can change the cast of characters every two and six years in Congress and four in the White House.
Unfortunately the administrators that have been in place for too long appear to be the people running the operation. Congressional people are figure heads for the grey force.
Eventually when someone takes the time and follows the money we will know who was helped and to be sure the politicians will be a lot richer.
What kind of a legacy are we leaving the next generation? They most certainly will be over whelmed with the debt that they inherited.
Ventura County Level:
On the local level things are becoming squeezed. It is the same story as in prior weeks:
- Listings continue to decrease;
- Properties sold (especially in the price range of less than $ 500,000) have increased;
- The variance between list price and sales price appears to be tilting downward (but the numbers do not show it yet).
The squeeze is taking place and when the jack in the box pops all heck is going to break loose.
Within the County it appears that banks (and appraisers) are low balling property values in a number of areas throughout the County needlessly and they will continue to do this until a seller or a group of sellers sue banks, their officers and appraisers who work with them. Then it will stop.
This managed economics as stated earlier has gone sour and there appears to be too many cooks in the kitchen making different dishes that are at odds with everything else.
Unfortunately one has to clean out the whole kitchen and get things back to normal.
The cleaning processes has to be initiated by sellers who are fed up with current property value actions being taken and will constructively attack lending institutions who appear to be selectively low balling a number of areas within the County.
The common denominator is money and it does outpoint greed eventually.
The change made for Ventura County is the forecast appreciation for the County has been increased from 7.6% to 8.4% for the next 12 months. So if the numbers are right it appears that Ventura County will start seeing positive upward growth starting right about now.
Again if unemployment increases significantly and there is no new job creation then things could get a little uglier for the County. With pending layoffs at the State level, County, and local government levels one should see unemployment increase about another 1/2%. This will put a damper on the timing of when real estate prices start going up but as of today we should see a good appreciation in the County.
Comments are welcomed.
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Year 2009 Fearless Forecast for Ventura County Real Estate.
December 14th, 2008 Categories: Real Estate News
The year of 2008 has been a disaster for Ventura County. As shown in the chart below areas that basically held their own were beach properties especially Ventura Beaches. Oxnard Beaches and the Santa Rosa Valley property decreased approximately 10%.
As stated previously owners of beach property are holding onto a gold mine. If you can keep it, do so. The rewards will be outstanding for you.
The inland areas of Santa Paula, Fillmore and Ojai were devastated with property decreases of approximately 50% or more.
Conejo Valley, Moorpark, Simi Valley and Ventura saw property values decreased approximately 25% overall.
Since July, 2008 the downward trend has accelerated significantly and this most often shows the signs of a bottom taking place (which I think has happened) Ventura County Real Estate Doing’s For Week Ending July 26 2008.
The year 2008 was not very kind to real estate.
What will real estate look like at the end of 2009. It appears that 2009 will be a better year with a growth rate of approximately 7.6%.
Two economic situations can change this forecast: unemployment and job creation. If unemployment increases significantly and there is no (or a decrease) in jobs then 2009 can be another disasters year for the County.
Expect unemployment to increase at State and Local levels. Companies will more than likely not increase hiring especially small companies. There will be some exceptions but companies may keep a lid on hiring until the last quarter of 2009.
Self employment will increase significantly.
Of greater importance is the consumer. For the first time in decades debt is being lowered, people are saving money, and people are not spending. This will not bode will for the overall economy.
See article Killer Debt Is Like Quick Sand where it is outlined how people can help themselves shred debt. It will take time but it can be done.
With the new administration one can expect tax increases, however these will not be noticeable until the end of 2009 and 2010. Then its’ a wait and see game.
The States will definitely increase taxes somewhere along the line, earlier than Federal. Hints of an increase in sales tax, auto registration and State income tax are already on the table.
Any increase in taxes will force people to lessen spending except for food and gasoline. Oh….a State gas tax increase is also on the table. Remember when gas was $ 4.00 per gallon. Well expect that again except in this case most of it will be attributed to State tax increases on gasoline.
Foreigners, especially from China, are in frenzy in their purchases of United States real estate.
Your comments are welcomed.
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Red Lining—Alive and Well in Real Estate.
December 12th, 2008 Categories: "Say What? Just Some Real Estate Talk
Red lining. An insidious act that creates barriers and walls off people and neighborhoods by either financial or some other type monetized quantification.
It’s negative transformation at it’s best. Collusion between financial institutions at all levels and appraisers either willingly or unwillingly, directly or indirectly with greed as its motivation.
It appears to be quite prevalent in real estate today and I suspect if one were to undertake a study they would find a correlation between high foreclosure areas such as San Bernardino County, Santa Paula, Fillmore areas and red lining.
The starting point for this disease I suspect is high up in the bundling of mortgages for re-sale on the secondary market (Freddie Mac and Fannie Mae). Meaning that most lending institutions and banks who do not maintain mortgage notes that they have negotiated as part of their own portfolio become active participants to this cancerous disease.
Redlining is a word used to describe an illegal practice of discrimination against a particular group.
It occurs (unilaterally) when, for instance, lenders decide certain areas of a community are too high a risk.
The net effect is that real estate lending institutes who red-line generate barriers by either refusing to give a mortgage to buyers who want to purchase property in those areas, regardless of their qualifications or creditworthiness or make it so difficult that the purchase cannot be pursued.
Today what appears to be occurring regularly are properties in high foreclosure areas are being re-evaluated days before the close of escrow and a pre-conceived (contrived) opinion made and justified (ie., drive by appraisal) designed to decreases a property’s value from 10% to 35% less than the original appraisal taken a few weeks earlier.
Now the lending institution is not saying that it will not make a loan but the action pits the buyer and seller against each other with the buyer wanting to purchase at the lower appraised value and not the contract price negotiatied and agreed to previously.
This slight of hand by the lending institutions generates a depressed sale if the seller has to sell or forces the buyer to come in with more funds to complete the purchase.
The instigator (the bank) sits by and waits for the chips to fall, immune of any responsibility or wrong doing. If challenged it becomes a case of finger pointing and feign incredulity that they would be accused of doing something of this nature. There appears to be limited or no re-course for a seller to challenge these contrived actions.
Is it illegal? The Federal Community Reinvestment Act of 1977 supposedly put an end to real estate red lining. However over the years it appears that legislation may have been enacted which minimized the intent of the 1977 Act or the intent of the act is simply being ignored.
Today, because of the current foreclosure mess, it appears that anything and everything is allowed using the excuse that normality has to be brought into the market place. Essentially it is turning a blind eye to a bad situation.
The amusing thing (if one can call this amusing) is that the institutions who created the foreclosure mess with exotic mortgage products now have flipped to the other side and appear to be the van guards in red-lining high foreclosure areas. Why? They will probably say these areas are poor economic risks.
In effect what is being created is a false market (relative to property value) at the expense of sellers in those areas and supporting the continuation of a down market.
Your comments are welcomed.
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40%/60%.
December 7th, 2008 Categories: Weekly Real Estate Activity In Ventura County
The headlines are shouting this morning that 40% of homeowners (at least in California) who purchased homes over the last five years are upside down.
Which means that 60% of those who purchased within the same time span are upside right.
Why are 40% upside down?
If you lived on a different planet you probably wouldn’t know that the 1990’s Congress(Sen. Dodd and Congressman Frank take a bow) instituted legislation that basically told anyone that could breath ”you can have a house”. And the banks (indirectly I suspect should be the acceptable wording) catered to the wishes of this legislation and today we are witnessing the impact.
Those exotic loans that people were lead into basically represent a good portion of the 40% who are now upside down.
But lending institutions are part of the problem with their desktop (drive-by) appraisals. Lending institutions in the 1990’s gave the store away with exotic loans which the tax payer will have to pay. They were buyer oriented.
Today these same institutions are screwing sellers with their drive-by (desktop) appraisals by unilaterally generating and perpetuating an artificial downside market.
Side bar: Yes. I am still miffed that I lost a real estate transaction because of a drive-by appraisal. Two appraiser valued a property above $ 440,000. One at $ 440,000; another at $ 479,000. The lender a few weeks later says no…..it’s only $ 405,000. Dead deal.
If anyone in the blog world (and I am sure there are many) has had similar experiences let me know and if you would mentioned the real estate area. I have heard of an individual agent who experienced a $ 90,000 decrease in Santa Paula/Fillmore area via a drive by appraisal. I am sensing that lender actions are directed to the more depressed areas with these drive by appraisals. Just my suspicions.
Back to the general topic. Another headliner most read in the papers today are the actions that the Federal Reserve and lenders are taking to help people keep their home. It has been stated that the Reserve wants to get the mortgage interest rate down to 4.5% or lower.
Interest rates should have been 4.5% months ago (if not years ago) but lenders have been keeping interest rates artificially high for years. If oil companies or any other large corporation undertook what lenders have been doing for years, these corporations would be investigated for collusion and all heck would break loose. Not so with financial institutions.
So where is all of this help going? Some to financial institutions, banks, it appears that auto industry will get help, some mortgage help limited to a narrow group of people who are W2 wage earners, have equity in their home and very good FICO scores. But the list for assistance continues to grow.
Those who are self-employed or who are 1099 people are having difficulties getting any kind of a loan. Most of these people have excellent credit, are professional people with good incomes, good FICO scores yet they cannot get reasonable loans because they do not have W2 income. Maybe it is me but there is something wrong with this picture.
Keep in mind another group of folks who are W2 wage earners with good FICO scores, making very good money who cannot get help because their property is upside down. Now that is a group in need of help. I wonder how helpful lenders have been with their drive-by appraisals in these areas?
Most certainly I am glad that some people are getting help. But there are a great many others (the self-employed, other professionals and others) that need help as well and these people are being ignored. Again if you see this happening in your areas let me know.
Overall these actions will create more harm than good in the long run and the impact to real estate on both the National and local level (Ventura County, CA) will suffer significantly.
Ventura County.
It’s the same story as shown in the chart below.
- Listings DOWN.
- Properties Sold-FLAT.
- Days on the market….basically flat.
- Variance between list price and actual average sales price holding at about -5%.
As mentioned in last weeks article everything is being pushed down and like the little box with a spring inside is opened things will break out in an all out frenzy and prices will escalate beyond your imagination. The prices of 2003-2005 period will be exceeded significantly within a short period of time.
Unemployment which has increased substantially over the last several months will act as a temporary brake but once jobs are found and unemployment decreases watch out.
The above chart illustrates the decrease of property values since January, 2008 in Ventura County based on the average actual sales price. Not pretty.
Comments please.
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Quiet Before The Storm!
November 30th, 2008 Categories: Weekly Real Estate Activity In Ventura County
It’s Thanksgiving week and relatively quiet on the residential real estate front.
Storm clouds are forming and the surf is starting to get rough. We know we are in for a good drenching, it is a matter of when and how much.
Various articles addressed the fall of mortgage interest rates but as mentioned in Get In Line and prior articles, interest rates should have been falling for a number of months but banks elected not to pass the cuts down to the consumer.
Banks will continue to play games on the mortgage and appraisal front (see article Desktop Appraisals) which will infuriate many people. This will continue until a number of people refuse to sell at any price and that is starting to take root now.
A lenders business is to make loans. People bulk, loan activity becomes slow, and soon banks begin to recognize that they have to bend with the market. Loan standards will still be tougher so this will eliminate a number of borrowers.
Commercial properties are beginning to tilt to the downside. Similar to residential loans, commercial loans are becoming difficult to get.
In a recent article, Its Not A Pretty Picture, it was noted that the National real estate market, especially in the South, has held up very well. In fact a number of gurus are stating that the bottom has been reached. But be careful where you buy. Location, location, location is still the major consideration in the purchase of a residential or investment property.
It is going to take time for all the pieces to come together as noted in the article uncle-sams-enron- but once they do watch out because the real estate market will explode upward. Needless to say one of the major pieces needed is consumer confidence.
When this occurs there will be a big change in who has real estate property and who doesn’t. Owning real estate will feel heavenly. The only thing that will be more important than real estate itself will be water.
But for the moment, the consumer is going to be very selective in how money is spent. The big sale is going to be scrutinized and the consumers sense of value becomes a premium.
Side Bar: Little is being said but the general population has lost confidence in its major institutions and government (federal, state and local). The feel they have been betrayed and understand that it is they that will have to pay for the financial chaos that was created for them by both Wall Street and Government.
In a recent article in the Wall Street Journal, “Some Consumers Say Wall Street Failed Them”, by Eleanor Laise, it was pointed out that many of safety nets that had been advertised and sold have exploded to the detriment of Main Street. Both Government and Wall Street created risks that are now the responsibility of the consumer.
Ventura County Real Estate.
It is the same story (as has been the case for the last several months).
- Listings are falling.
- Number of properties sold remains stable.
- Days on the market continues to show some decrease.
- Variance between list price and actual sales price is approximately 5%.
- Most property sales are occurring below $ 300,000.
- All of this will continue for a few more weeks before most see a trend change.
Your comments are welcomed.
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It’s Not Pretty. Picture Review of The National Real Estate Market.
November 26th, 2008 Categories: Real Estate News
The real estate market has changed significantly over the last quarter and dramatically since the 4th quarter of 2007.
And with it, the National (and a number of regional) economy appears to be in the toilet.
Summarized on the United States real estate maps below is the reported 3rd quarter, 2008 reported National real estate market results issued by Federal Housing Finance Agency (FHFA). For comparison I have included the real estate landscape of the 2nd quarter, 2008, the 1st quarter, 2008 with the last quarter, 2007 noted.
The southern States (Texas, Oklahoma, Mississippi, Louisiana and Alabama) continue to hold their own and continue to be good investment areas although they have weakened over the last quarter.
Another investment area to consider is Tennessee.
Montana, Wyoming, North and South Dakota are areas that one should view as investment areas. Especially North and South Dakota. But for me those States area TOO COLD. (Remember one of my conditions for real estate investment is to invest in areas that you may have to live in. Needless to say I prefer not having to live in the Dakota’s).
I have been reading various articles that perhaps Florida would be a good place but most guru’s suggest that 2010 is probably the year to start investing in this State. I have not been a fan of Florida so you are on your own regarding that State.
Washington and Utah (as expected), Colorado, Pennsylvania and New Mexico real estate have weakened somewhat decisively since the last quarterly report. Both Washington and Utah are expensive areas that make real estate investing a challenge. To break even or have a positive cash flow will mean a 30-50% down payment.
Arizona has reverted back to weakness. At the 2nd quarter, 2008 it appeared that it my have started back on the upswing but that was a false break out.
California, Nevada, Arizona and Florida negativity has doubled from the 1st quarter, 2008 to the 3rd quarter, 2008.
California in the 1st quarter, 2008 showed a negative growth of -10.6%. Now in the third quarter it is showing a -20.8 %. Nevada was a -20.9% up from -10.3%; Arizona earlier in the year was -5.1% and the 3rd quarter is accelerated to -13.5%. Finally Florida was -8.2% in the first quarter of 2008 and increased to -16% in the 3rd quarter of 2008.
Within California, the worse of the worse continues to be Merced; Stockton; Modesto; Salinas; Vallejo; Riverside; Bakersfield; Yuba City and Fresno.
Which prompts me to suggest that one should add California to their watch list. But getting investments at an extremely low price (about $ 125,000) will be difficult in California (if one wants to have a positive cash flow, with minimal down). Candidate areas for investment are the worse of the worse areas mentioned above.
It appears that high end homes (approximately $ 1 Million or more) have decreased approximately 20% during this down cycle, while homes valued at approximately $ 400,000 or less have decreased about 45%. This is quite a variance and I suspect that homes valued at less than $ 400,000 will accelerate upward faster within the next few months.
Help is coming. Mentioned in this blog on a number of occassions (the latest being get-in-line) is the disconnect between the Federal Reserve and banks regarding mortgage interest rates. But this disconnect appears to be have been spliced together and it now appears that mortgage rates will start falling to (are you ready) 5-5 1/4% rates (or less) shortly.
Side bar: The real estate market is one of the elements that will drive this economy. Upgrading the United States infra-structures for bridges, roads, water is the second leg that will help the economy upward. Manufacturing (autos being one) is the third element necessary to get the economy going upward.
A redirection of corn for ethenol should be reviewed. Sugar cane appears to be a better option to use for fuel use. Brazil is going wild developing this oil alternative. Sugar cane is not produced significantly in this country BUT we are smart and can grow anything. It becomes “is the price right”.
Side bar: (Be quite). Ventura County real estate has certainly decreased but not at the rate of most areas. In fact it has performed remarkedly well and it is expected to do extremely well over the next 4-5 years.
The damper to Ventura County real estate will be unemployment. Unemployment in the County is currently about 7+%. 5.5 % or less should be the target to have an extremely good real estate market.
Back to the subject. Pictured below is the 3rd quarter, 2008 picture of the National real estate market.
This is what the real estate market looked like at the end of the 2nd quarter, 2008.
This is the 1st quarter, 2008 real estate picture.
This was the appearance of the National real estate market at the 4th quarter of 2007.
Your comments please.
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Time To Go Back To The Future. Ventura County Real Estate Doing’s for Week Ending Nov 22, 2008
November 23rd, 2008 Categories: Weekly Real Estate Activity In Ventura County
Real estate is on the rebound.
A recent article in Forbes listed five cities on the re-bound. Aside from Seattle, Los Angeles was #5 on the list. They also stated that Detroit was the place to stay away from.
Side bar: For investors I still think that Oklahoma, Texas (not as much now but it is still OK), Mississippi, Louisiana and Tennessee (I’m late on this one) are great areas to invest. Detroit still has a ways to go but keep an eye on Michigan because within the next year or two it will be a great place to invest.
So there is an attitude change in real estate with a number of guru’s voicing optimism that the bottom has indeed been reached. So what now?
Remember our domestic shock and awe experience with gasoline. When gas hit $4.00 or more per gallon, this put a shock into the system. People were stunned with such a quick run up and even today with gasoline prices declining people have not been able to put that shock behind them.
Side bar: Coal. There are applications of converting coal into oil. From a military standpoint this is the way to go with the current world conditions. Our military cannot be held hostage to the oil cartel. We need the capacity to defend ourselves. To be sure no one else will defend us.
People just do not believe what they are seeing with oil and think the current down turn is only respite. People expect prices to go up again. (What ever happened to those investigations that were to isolate the culprit(s) and reasons for oil prices to run up so quickly. How soon we forget.)
Expect the same attitude from the consumer regarding real estate. They want to see a sustained balance in the market before acting. A great number of people were shocked at the high prices during the period of 2001-2005; now they are more shocked at the home price declines.
Do not expect a buyer’s rush into the market. People are nervous and will be slow to act. But real estate prices will go up and they will go up farther than the previous peaks.
Add to the mix ”what is the new administration going to do?” My thoughts suggest that we are going to take time to go back to the future.
Despite all of the news reports history tends to balance what administrations can and won’t do. Lincoln, Franklin Roosevelt, Clinton, Kennedy are being highlighted in most news accounts as to what one can expect from the new administration.
What did these folks have in common. They created changes starting from a base of war and people’s exasperation’s.
But (and this is a characteristic with Americans) we have and know there is opportunity and optimism, so we do not dwell on the negative too long. We are growth and future oriented. It’s a gene that has been passed down from our Pilgrim parents and others that have made the United States their home.
Politicians know that big changes if done quickly will impact people and the economy, negatively (in general). So there will lots of balloons released to get readings of the national mood before implementing wholesale “new deals”. People can always change whose in office. They may have to wait two or four years but eventually they get what they want.
Ventura County.
It continues to be the same story. Listings are decreasing; number of properties sold continues to show increases; days on the market for actual home sales appears to have settle in at about 3 months and the variance between list price and actual sales price continues to hover around 5%.
But watch for the surprise. The spring is being pressed down into a small container and once it pops prices will go upward, not quickly at first, but with a vengeance within a short period of time. There is a pent up buyer’s need building. View the last chart of this article to get a sense of prices that will occur.
Look at inventory noted in the second chart below. It has decreased from 15 months down to approximately 4 months within the year. This suggests a neutral market at this time. Generally when inventory decreases to 3 months or less it becomes a sellers market. We are almost there.
Unemployment (approximately 7+% in the County) will initially act as a control on real estate prices but this control will be short lived.
2008 Ventura County monthly SALES. Inventory is spiraling downward. Good news for sellers because shortly it will be a SELLERS market in Ventura County.
And this is what one can expect happening when people sense that the market is balanced and they have a feeling of certainty. It is happening now.
Comments please.
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