patrick.net

How about this offer:

http://tinyurl.com/9plsx

It's good to finally see a homebuilder publicly start scrambling to react to the burst. Why January 21? Why can't it be January 28, or the third Saturday of every month that has 31 days?

My right date to buy is when I'm in a good mood, my girlfriend is not having PMS, and home prices have adjusted down to their fair values (which should be at least 30%).

Is Centex a reputable homebuilder? If it is, it's even better! Even a good homebuilder starts having a gimmick to sell their stuff.

Assuming that the RE market continues to operate business as usual, then prices will be very sticky on the way down. Condos and less desirable areas will fall the fastest--they already are in many parts of the BA. Desirable areas--those between the former and the exclusive neighborhoods--will have a lot of sellers refusing to take lower prices for as long as they can wait it out.

So the bigger question is about jobs and incomes. If the BA hits a recession, even a short, but substantial jobs recession, then these areas will fall faster. But, if jobs stay flat, enough people will hold on to keep prices from falling too fast. It only takes a few "hangers on" in a neighborhood to keep prices propped up. This is the reason that in places like south Marin RE agents play so many price games (like the infamous inflated, tax-free property swap between agents).

However, assuming that the NAR is forced to open up MLS, then we'll see some serious optimization of the RE market fundamental. Direct price comparison will become accessible to average buyers, and RE agents and sellers will become price takers, not setters. This means less sticky prices, more volatility in prices, and a much easier time for buyers (an sellers who are realistic about things--they'll be able to sell much faster).

In this case I'd predict a faster price fall than previous RE downturns, but less of a rise in days-on-market. This might break the historical correlation between inventory and market condition.

Fake P says:
Ooo…has the bubble burst already? Any bubbleheads care to show me any evidence or link to a median price decline in the bay area?

Year-over-year comparisons are a trailing indicator. You'll see the first declining year-over-year figures in early summer. By then, prices will have been dropping in absolute terms for 6 months already, and by then the fall will be accelerating.

The following are in order of most likely to most morbid
1. Internet lottery
2. Free cars, appliances, painting, carpets, etc.
3. Zero down along with seller carrying the mortgage financing
4. Lease with option to buy
5. Interest only for 5 years with balloon so that buyer can walk away after 5 years
6. Owner selling to an investment “scavenger” trust or mutual fund for shares
7. Selling to a government agency setup to house the poor and unemployed
8. Turning the house into a bed and bath or renting rooms as a boarding house
9. Arson for the insurance proceeds
10. Suicide for the mortgage insurance or life insurance to the survivor

Fake P says:
Ooo…has the bubble burst already? Any bubbleheads care to show me any evidence or link to a median price decline in the bay area?

Price movement turned negative in month-on-month comparisons in October/November, in real-price terms. Some of this has been because of the acceleration in inflation during that period. We're seeing nominal month-on-month data start to slip now, which will drive buyer psychology (since most people don't ever internalize real-prices, just sticker prices).

The CAR's economic reporting discrepancies with this data are the focus of the State's recent demand for explanation, and the CAR's pathetic attempts to explain why they've been skewing/spinning/fudging/fabricating. There is a real move now to revoke the CAR's status as the source of authority for economic RE data.

However, assuming that the NAR is forced to open up MLS, then we’ll see some serious optimization of the RE market fundamental......

Is that possible, or is it in the works, to force NAR to open the MLS.....is there some sort of petition we need to sign......more info or link please....

briana,

There is a (now public) federal case against the NAR by the Justice Department and Federal Trade Commission into anti-competitive behaviors by the NAR and their subordinate state agencies (like the CAR) regarding MLS. Specifically, a number of brokers and internet startups have alleged the NAR is illegally blocking their access to and use of MLS data unless they "comply with MLS board rules". The MLS boards are free to set their own rules, but the contention is that these rules illegally prevent competition and thereby harm consumers.

These cases have been brought against the NAR before, but they managed to use their powerful lobby in DC to escape. This time around may be different given the current athmosphere in DC regarding lobbyists and corruption.

Now this is closed, you'll see a lot more discussion about how the RE industry is about to change dramatically. The ballot initiative is still an open question, but the portions of the Act are already law, and the OpenMLS system will become reality. This should shave the lower 80% of unproductive agents right out of the system in a very short period of time.

---

California Initiative Authorizes Competition for Open MLS Operator; Bidding Closes Jan. 11, 2006
Wednesday December 21, 4:41 pm ET

SAN FRANCISCO, Dec. 21 /PRNewswire/ -- A ballot initiative filed with the California Attorney General seeks to establish a California-wide residential multiple listing service open to the public and realty agents alike.

If established, the open MLS would likely serve over 170,000 users, making it America's largest, three times the size of the nation's second largest MLS.

The initiative's proponent, David Barry, also announced the sponsorship of a competition for open MLS operator. Bidding opened immediately on Dec. 21, 2005, and closes 21 days later at noon, Jan. 11, 2006, Pacific Time. The competition seeks a firm to own and operate the open MLS on a paid basis.

To qualify for the ballot, initiative supporters need 373,700 signatures, usually obtained through signature firms at $1.50 to $2 per signature, putting the qualifying cost close to $1 million.

Wealthy bidders might find the expense worthwhile. Since MLS system costs run $7 per user per month or less, even a low-bid offer of $20 could achieve gross profits of over $25 million per year in California. If the open MLS expanded to the nation, as planned, gross profits could exceed $100 million per year.

The initiative guarantees the public free access to all sale and rental listings, along with the right to freely download the entire MLS with no copyright restrictions.

The initiative cites the low productivity of the real estate industry (averaging only five homes sold per agent yearly) and high, uncompetitive commission rates, themes described in Nine Pillars of the Citadel, authored by David Barry, posted at barryfirm.com.

The initiative and bid rules may be obtained from David Barry, Barry & Associates, Pier 9, Suite 112, San Francisco, CA 94111, email david@barryfirm.com, phone 415-398-6600. The initiative is expected to be posted on the web sites of the California Attorney General and Secretary of State within several days.

Sealed bids are to be physically delivered to David Kirstein, C.P.A, Rossmann MacDonald & Benetti, Inc., 3838 Watt Avenue, Suite E500, Sacramento, CA 95821, phone 916-488-8360, fax 916-488-9478, email dvk@rmb-cpa.com, along with a bid fee of $1,000, payable to Rossmann MacDonald & Benetti, Inc., prior to bid opening at noon, Jan. 11, 2006, Pacific Time.

Bids may be no less than $20.00 per subscriber per month, and no more than $50.00 per subscriber per month, and bids that qualify or condition the bid will be rejected.

All bids must be in sealed bid form, with the name, address, phone number, and email address appearing on the outside of the sealed envelope, and the bid inside the envelope containing the name, address, phone number, and email address of the bidder, the bid, and a signed statement certifying that the bidder will, if declared the winner of the competition, operate the open MLS according to the terms of the Open MLS Act.

The proposed law:

http://caag.state.ca.us/initiatives/pdf/sa2005rf0145.pdf

Many of us are, have been, and/or will again be homeowners. Timing a bubble does not constitute "bashing" anyone. Bashing the REaltor(tm) cartel is, however, most deserved.

RE prices have been negative in real-price terms for 3+ months now. This hasn't happened since the early 90s. Even if Joe Homeowner doesn't grasp "real-prices", he surely will when he sells and suddenly realizes his proceeds don't buy him nearly what he expected.

What further evidence do you wish? Perhaps a burning bush?

So there were no holidays last year? Month-on-month data compares 12/05 to 12/04, etc. Both in aggregate, and taken monthly, prices are negative in real terms. My datasources are DataQuick and proprietary data compiled by the economics department of a well known local institution. Perhaps you should look somewhere else for your data than the CAR's largely fraudulent, entirely spun, partial data.

If inflation ticks up, as I suspect, then prices in "prime" areas like the Marina and Marin, Woodside, etc. will not go negative in nominal terms, but they will be very negative in real terms.

Here's an idea "waitingandold" go fuck yourself, whoops, sorry, I meant is the marina prime? Go buy some. Shit fuckhead buy two.

Can someone kindly let me know why the fucking trolls keep on coming? Inflation is around 2%, are you really that fucking stupid? Ok shit for fucking brains, what did gas cost last year? What does it cost now? I hope your fucking SUV bursts into flames. Die piece of shit die.

why bash homeowners so much? It's easy your fucking feces for brains fuck, they aren't "homeowners" they are NAAVLP payers. I wonder how an aluminum bat would sound against your skull. Would it sound hollow or would the shit in your head dampen the sound?

In case you haven’t noticed, inflation is around 2% a year

Funny how RE appreciation has been so far above that.

CPI has been around 2% a year, in national aggregate. BA CPI is quite a bit higher, and accelerating. Even so, the 2% is not the inflation suffered by you and me. We don't have the luxury of excluding fuel, energy, and food from our budgets. If you add that in, RE MoM for Q4 are down in the San Jose Metro census area.

Or then again, maybe your one case of some bozo overpaying in the Marina--who woulda thunk people overpay to live in $hitboxes built on fill--contradict all this actual data.

...and just what are you going to do for a living anyway, after the Open MLS Act passes and people can overpay for Marina properties without paying you a vig?

The Open MLS Act will require, by law, that *ALL* listings are presented in one database which is equally accessible by sellers, buyers, and agents regardless of their affiliation or membership. (1)This will eliminate steering (whereby current MLSs --there are like 50 in CA--eliminate discount brokers or self-sellers). (2) It will eliminate information hiding. Current MLSs have important info in them which they only show agents, not the public. Open MLS will show everyone the same information, including commission rates, days on market, number of times listed, etc.

The FTC asserts that an open MLS system would reduce agent fees by over 50%, nationally. I think this is a conservative number.

WAD you cock sucking little faggot, tomorrow I send all the posts of yours I saved, with all the profanity, and with CSFB's ip address to your fucking manager. You piss of shit, cum gobbling little fucking troll, go back to jacking off to the sears lingerie catalog. Answer this, if you've made so much fucking money on RE, why do you feel it necessary and why do you have the fucking time, you cum gobbling faggot, to waste on a shitty site full of losers like this? Wouldn't that just make you another cum drunk loser? Wouldn't it, faggot?

brightc, do your job as admin, delete the fucking troll posts

WaitingAndOld says:
All I’m saying is that time waits for nobody. Before you know it, you’ll hit 30, 35, 40 years old and you’ll wonder where all the time went.

Well, yeah, happened to me.
Then again, wait a bit longer till you're dead, and then nothing matters anymore. The only thing that matters is how well you've lived your life, and I really can't see a correlation between that and home ownership.
Especially these days.

WAD,
I'm watching financial crisis' unfold in my neighborhood. People that recently bought are in trouble. They had a real positive attitude about buying a house but they ignored the fundamentals. Now they are trying to do a For Sale By Owner in hopes of breaking even. They realize that it takes more than a positive attitude to prevent an ass pounding.

I own a house and believe this market is headed for the shitter

Fuck it, the trolls win, good bye.

WAD,

You are amusing even for a troll. You have failed to counter a single fact presented contradiction your assertions. You make broad assumptions about the RE bears here. I think you'd be surprised to find out what many of us do for a living. In fact, a lot of the regulars are currently home owners who are here to figure out how to best structure themselves to weather the downturn.

I, for one, don't believe you're CSFB. I doubt you even know the first thing about WACC, Black Litterman, or SEC-10e. You come across as a REaltor(tm), complete with your "license" which I'll bet you actually had to take a study course in order for which to pass the "examination".

(but I'm really thinking what surfer-x says; I just like to purty up the language a bit)

ajh, how's melbourne? I'm thinking of applying to a researcher position there.

Per surfer-x's request, trolls' postings will be deleted at sight.

From Patrick's news collection:

http://tinyurl.com/868sp

"The basic median-priced home in December in the county was a 1,540-square-foot, three-bedroom, two-bath home. With a 20 percent down payment, the buyer would spend $3,836 per month for mortgage, property tax and insurance with a five-year, interest-only loan."

My comment: Why the hell are we still evaluating a home purchase using the monthly payment of an interest-only ARM? Haven't people gotten carried so far away they've forgotten buying a home is to stay in there, not to sell it around like having an annual spring garage sale or buying and selling their favorite stocks?

The ARM only makes sense if interest rate were near the bottom, so you can take advantage of the low rates for a few years. It should, and never is, the "workaround" for you to buy a house that's way overpriced which you can't normally afford.

This bubble burst now has spelled the end of the adjustable-rate mortgages. As interest rate keeps climbing, and house prices keep declining, fixed mortgages now make more sense than ever, to insulate you from the post-bubble effects.

Also, from the same article:

"Home prices in San Mateo County continued to fall in December, slipping to their lowest level in nearly a year, a new report released Friday revealed.

The December median price of a single-family home in the county dropped to $819,500, though it was still up a modest 4 percent from December 2004, according to the San Mateo County Association of Realtors.

The median price has plunged more than $100,000 since a record of $921,000 was set last April. The last time the county median price was lower than December was last January, when it hit $783,500.

Prices heated up to record levels in the spring and early summer of 2005, staying at $900,000 or above in April, May and June. They began to tail off in July, when they slipped to a still-whopping $880,000. In November, they dipped to $854,888.

The median price refers to the midpoint, with half the houses selling for more than the median figure and half selling for less.

"To come down that much is significant. That's approaching a 10 percent drop," said Richard Calhoun, a Realtor at Creekside Realty in Santa Clara who also follows the local market. Calhoun said rising interest rates are increasing the cost of home ownership, boosting monthly mortgage rates. While interest rates are still low (around 6 percent) historically, they've headed higher this year.

Many buyers left the marketplace in mid-October, said Calhoun.

Sales fell 13 percent in December compared to December 2004. About 420 homes sold in December, down from 478 in December 2004. Some 472 homes sold countywide in November.

Calhoun noted that the median price could bounce back to $850,000 this month, but "

I don't care what that "but" is gonna say. Just love it when hearing realtors saying home prices going down, but still up x and x percent comparing with the same time last year/last month/previous quarter, whichever convenient for their "statistics". Well, if prices going down faster than a hobbit in a bar fight, I would love to see if they can repeat the same "comparison" a few months later.

Even so, the appreciation rate is rather anemic. Only 4% appreciation? In the "prime" Marin County? Whoa, sure as hell beats the inflation rate of 2% someone just mentioned here, doesn't it?

brightc, thank you ;)

You keep giving 'em hell, surfer-x! :-)

Typical reators' (tm) home value appreciation statistics:

January 2005: House values have gone up 20% since January 2004, and will very likely to continue going up another 20% by the end of this year, then perpetually, forever and ever!

December 2005: House values are tanking, which is somehow a good sign that we're returning to a "normal market". Still, prices are up 10% comparing to the second quarter of 2005!

January 2006: House values are now officially tanked, but we're still up 4% from 2004! Forget 2005, we like 2004 better.

It's must be a good time to apply for an interest-only, one year ARM before house prices go back again in spring!

official gov’t propaganda figure of 2% for inflation

I don't believe we're having a 2% inflation, either. Just went to get some gas today, $2.57/gallon at the Shell station in San Jose. Last year, the price was $2.37/gallon, so it's about 8.5% increase. The 2% inflation is truly out of touch.

I've heard they've excluded energy and food out of the inflation calculation because we all accept to get screwed to get these items anyway. Too bad San Mateo house values only increase 4% from December 2004. Boy, how can you buy food and gas with this kind of equity appreciation? Hope I'm not sounding too desperate! :-)

Surfer-X,

I have pals and family down in Melbourne. Shoot the questions this way, will try to answer as much as I know.

CPI has become oxymoronic. It is no longer primarily a *consumer* index. In fairness to the government, there are quite legitimate economic reasons for this shift. Mainly, the many forms of annuity expenses that have been linked to CPI, like pensions, business contracts, and entitlement payments. However, the inflation measure for governments, businesses and other organizations requires a different mix (like exclusion of energy, food, and other inelastics). People, however, can't exclude these costs.

The true FPI (family price index) is closer to 6% by most figures I see. Some go as high as 10%, but most of that relies upon wage inflation which isn't high enough in the BA to carry our local FPI that high.

No matter how you slice it, RE prices in the BA are trending negative in real terms. We may see negative nominal trends by the end of this year, but not if we finally get enough wage inflation. Instead we may see flat nominal prices in RE, but a more rapidly decreasing real price.

I like to remember the saying: "Inflation is the cruelest tax of all". People don't usually get it. They think they're getting ahead because their paycheck is going up. But they are "getting it", just in the wrong end.

BSAS EXPAT
Went to this arts musem on liberdad ave. saw the painting by lucogiardino,
the mathemetician. this is a painting of an elderly lady but with so much poise and dignity. also saw "elgreco". then as i was coming back i heard this chants in the recoleta church.
I saw so many old people there praying.
these people can hardly move but there is the faith.. I have seen that same thing in the old people when they come to the temples in India. The services were in spanish which I can hardly make out. There are these clositers which were used by the ?fransiscan monks. Do u know any small book that i can easily read and comrehend about their life? BTW i got a small book about evita peron in english. I am going to read it.
thanks for the suggestion about tigre. it has been raining so much that i cannot do anything except may be go to the museums.

Help me with the inflation number. Does the government once a year publish the number including gas, etc. to adjust Social Security? This would not be the artificial "core" rate that no one experiences.

The Federal Reserve banks publish CPI data. FRED from the St. Louis fed lets you download different filtered datasets, or take the entire set. I think they publish it monthly, but there is daily data in the downloads.

You have to check each entitlement program to figure out just what period and formula it uses to index inflation. But most all of them are linked to CPI or a derivative of CPI.

ReneeInSF

Save all the cash you can and be very long term patient before you decide to move up to a condo. The housing market in Japan has been declining for 15 years from 1990. So, wait, wait and wait some more. You will need a good credit history and maintain your employment for the consolidated remaining banks to give you a mortgage when you want it.

The home buyers in SF and through out Southern California have taken out interest only or option ARM mortgages on 1/3 up to 1/2 of sales. Plus, the equity of current owners has been removed by HELOC's, etc. With a drop in value from the peak price of say 20 percent, all these heavily in debt owners in Southern California will not be able to refinance their homes.

The downhill avalanche will follow the ripple effect of lost construction, insurance, service sector and major purchases in Southern California.

Cold feet will put the entire new inventory and soon to be inventory under water. Foreclosures and bankruptcies will follow.

One can not refinance without equity. A drop of 20 percent wipes out the equity of the I/O's and option ARM's. Equity in conventionally mortgaged homes has been dropping severely for cars, vacations, education etc. Borrowing against homes added $600 billion to consumers' spending power in 2004, according to research by Federal Reserve Chairman Alan Greenspan.

Refinancing will be dead.

ReneeInSF,

Many here have faced similar decisions to delay a purchase, sell and rent (like me), or simply sell vacation homes/investment properties. It's a scarry step to take, especially when the mainstream is blasting "buy now or be forever regretful" in your ear.

There was a time, not to long ago, when .18 - .25 of your gross income was considered a full burden to pay for ownership (including taxes, insurance, interest and mortgage). Even today I wouldn't recommend anything north of .33; .50 is way way too much. Your exposure could well have turned out to be a financial catastrophe.

If you want to protect yourself against further home price inflation, then just pretend you bought the place and put the difference in a fund that will meet or beat inflation (preferrably one with a low/no tax profile, like a tax free Muni). You won't make any windfalls that way, but you'll go a long way towards plugging the gap in any upside that might be left in the RE market before it corrects in your target purchase area. (And despite what you might read here, don't run out and by gold for crissakes, lol)

If the price of the home goes down 10% you’ve lost half your investment, if it goes down 20% you’ve lost 100% of your down payment!

In the spirit of fairness, there is a time factor. If you are one of those extremely rare people who view their house as a homestead--one in which you will likely live out most of the rest of your life--then the above does not apply. However, very few people in any major metro area fit this profile anymore. But, if you plan on living there for 25-30 or more years (long enough to actually own the place), then you only need to worry about paying the mortgage, not about the equity position.