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Re: 2011 Wrap: More Sales, 2004 Median | Manhattan Beach Confidential

Anon07 — Sat, 07 Jan 2012 20:23:38 -0000

Data driven post: Bravo!
Still holding the conditional opinion that prices will soften further over the course of the next two years... we are down 20-ish% relative to the peak and I don't sense the bottom in the tea-leaves yet -- one would expect, as you suggest MBW, that MB and other coastal areas to hold out better than less affluent areas.
The magic as many of you know from previous comments in 2004 was a dramatic reset in median home prices from about a $1M in 2003 to $1.3M in February 2004 (yes, THAT year again), just as ARMs with shoddy underwriting swamped the market in SoCal. If the downward trend has any equivalent deflection, then one can expect further price pressure with a much slower deflection -- home prices increased across the board in coastal SoCal, unmoored from underlying fundamentals during 2004-2009, largely driven by the ease of imprudent mortgage availability; 'Twas a bubble!
Data and comments as posted by MBW: http://www.mbconfidential.c...
click on the graph to enlarge to see this dramatic upswing in this watershed year of "2004".

Re: Open Forum (8/1- ) | Manhattan Beach Confidential

Anon07 — Wed, 16 Nov 2011 12:39:45 -0000

The anticipated drops in median home prices are now visible in the data for SoCal due to the lowering of FHA backed loan thresholds.

Its impact on MB will likely be further downward pressure over the next few years.

----------
LAT:

Home prices fall in October as mortgage changes take hold

November 15, 2011

Uncle Sam’s steps to exit the mortgage market took a toll on Southern California’s housing market in October as fewer higher-cost homes sold.
The median price, the point at which half the properties sold for more and half for less, dropped because sales of more expensive homes took a dive with government-backed financing for those homes scaling back last month...

More: http://latimesblogs.latimes...

Graph: http://www.latimes.com/medi...

Re: Open Forum (8/1- ) | Manhattan Beach Confidential

Anon07 — Wed, 19 Oct 2011 12:01:55 -0000

latimes.com/business/reales...

Foreclosure activity soars in third quarter, ending lengthy lull

The number of notices of default jumps 25.9% from the second quarter. The increase comes as settlement talks have stalled between banks and state attorneys general over the robo-signing scandal.

By Alejandro Lazo, Los Angeles Times

9:31 PM PDT, October 18, 2011

Banks fired up the California foreclosure machine in the third quarter, breaking out of a nearly yearlong lull that began in the midst of widespread revelations that banks were improperly seizing homes from delinquent borrowers.

A big August surge in foreclosure actions, led by Bank of America, sent the numbers up in the third quarter, according to DataQuick, a real estate information service in San Diego.

Notices of default, the first formal step in the foreclosure process, jumped 25.9% over the second quarter, when such filings had dropped to a three-year low...

Re: First 3Q of '11: More Sales, Median Surprise | Manhattan Beach Confidential

Anon07 — Fri, 07 Oct 2011 20:12:53 -0000

What's refreshing about your comment MBW, is that there is now a forum like this, where the "error" can be called -- trying to be generous.

Agree with Mrs, it's plain wrong to spit out this information as a "talking point", which becomes senselessly and uncritically regurgitated by the sales crew. Makes me cringe at the potential lack of integrity -- wanna bet, you'll hear this nonsense stat this weekend -- hot off the press!

Do tell of the telling should you hear it.

Re: Open Forum (8/1- ) | Manhattan Beach Confidential

Anon07 — Tue, 27 Sep 2011 12:12:03 -0000

The much discussed decrease in FHA loan threshold is starting to take effect:

http://www.latimes.com/busi...

Its main relevance to MB will likely have to do with a crimp in the supply of "move up" buyers.

Re: First Speedy Speckie Snagged | Manhattan Beach Confidential

Anon07 — Thu, 22 Sep 2011 12:00:12 -0000

All the numbers I've discussed historically were normalized to median HOUSEHOLD income in MB, the 7.5-4.5 drop during the last down-cycle '90-'94 and the huge upswing '02-'07 peaking in late 2007 with the median home price relative to the median HOUSEHOLD income peaking at a multiple of 14.

Using a different matrix, such as median "family" income is a bit of a red-herring. The two, household and family income are correlated, but not interchangeable as you've chosen to do.

You are welcome to do the work of looking up US Census data from the 1990s on and create a similar matrix for median "family" income..., but I'd venture to guess that the gist will remain similar... we are still substantially above historic norms by 2-4 multiples, even when taking into account the now larger median home size, the gentrification of MB...

The bottom line is that the leverage gravy-train is sputtering badly; and its effects will likely be seen for several years to come.

I'll wager that median home prices will end up dropping at least 10% further. Care to take the opposing gambit?

Re: First Speedy Speckie Snagged | Manhattan Beach Confidential

Anon07 — Thu, 22 Sep 2011 00:15:39 -0000

Ah, no WTB! ;-)

My concluding statement:

"Imho, we are still a substantial ways away from the "bottom" of this downturn."

Our facts disagree:http://www.city-data.com/ci...

Median household income MB: $125,816 (2009)

9 x 126K = 1.13M

And then there is this minor issue of a double dip recession... which perhaps does something to the median income.

Don't ya think?

Re: First Speedy Speckie Snagged | Manhattan Beach Confidential

Anon07 — Wed, 21 Sep 2011 20:17:26 -0000

WTB:

Medians are what they are and they are grossly imperfect. Median homes for example, are larger now than they were a decade ago, so they should reasonably cost more.... But it is a tool that is widely used and when used in historic context, it can be informative. My argument hasn't been that we'll get back to historic norms; rather, that they are on their way down. It's hard to know exactly there they'll end up, but a 7-9 multiple relative to income, imho isn't out of the question.

If we could continuously figure out what the hypothetical home buyer's median income is, then it would as you suggest be a better guide as a denominator of the housing market buying potential. It's not clear to me that that statistic exists; particularly historically.

It's reasonable to argue that buyers of home have substantially higher incomes than the median income in MB, but that has likely been the case historically as well. For example, where the homes sold in 2000, when the market was relatively stagnant also a time when buyers had higher incomes than the MB median? Very likely.

The higher median incomes of buyers WASN'T the cause of the massive price increases from 2004-2008. What drove that was imprudent lending. That's been well documented... All of a sudden, circa 2004, anyone could afford anything... when income verification was either optional or glossed over... now though, we're back to more sane lending with restoration of checks/balances... and thus far less leveraging, which shows up in the housing market as decreasing prices.

Although there are home buyers out there, the escalator of buyers is relatively diminished, which leads to the housing distress moving up the housing food-chain.

Not to get lost in the details is my basic point -- this downturn was self-evident for anyone who looked at the cyclical historic record of housing bubble, with MB specific data.

Imho, we are still a substantial ways away from the "bottom" of this downturn.

Re: First Speedy Speckie Snagged | Manhattan Beach Confidential

Anon07 — Tue, 20 Sep 2011 13:42:20 -0000

Amen for the flashback MBW! ;-)

For MBW's enlarged image of the builder's prediction:

http://tinyurl.com/3en4mxp

The last sentence by the builder made an even bolder prediction:

"Watch the value of your home rise in value by 20% over 5 years."

Ahem, we are nearly four years out and the value of homes have in fact dropped by ~ 20%.

It turns out, this DQ dataset as graphed by MBW lead to a startling set of facts, which clearly the builder ignored to take into account, as did a lot of the commentary (presumably commission driven) on this blog circa 2008:

http://www.mbconfidential.c...

* Median home prices in MB jumped in early 2004 by 30%, in a month, coincident with the availability of option-ARM loans with very poor underwriting. This jump is broadly documented across coastal SoCal.

* At the peak of the housing bubble, median homes in MB were worth 14 times median household income in MB. Historically, the figure fluctuated from 4.5 - 7.5 median household income.

Given these facts and extrapolating from what happened during the last downcycle:

http://www.mbconfidential.c...

It was reasonable to make the prediction in 2008 that median home prices would eventually drop 30+% before the "burn" was over.

Re: A Rent/Buy Example | Manhattan Beach Confidential

Anon07 — Fri, 26 Aug 2011 13:16:39 -0000

One way to think about sales trends (gains/losses) WTB, is to view it as a regression plot over time -- plotted as a percent gain/loss for each sale. For every data point like 523 14th, there are at least ten data points in the other direction, which suggests that the aggregate trend is substantially in the negative direction.

I wonder if the MLS database allows one to do such plots? It's like the C-S data-set but for a particular zip code.

Re: A Rent/Buy Example | Manhattan Beach Confidential

Anon07 — Thu, 25 Aug 2011 20:39:34 -0000

Fantastic post MBW and interesting commentary folks.

It's hard to argue with the numbers that the "better to own" mode makes financial sense in coastal SoCal, given that the likelihood of home price depreciation is still substantial over the next 2-3 years, which changes the graph substantially in favor of "renting is better".

To use your Elm example, imho, we are likely to see home prices decline a further 10+%; which skews the calculus further in the "rent" direction. The mere notion of significant price appreciation in residential real estate is many years away... perhaps as much as a decade away given the current debt ridden status of most households.

http://tinyurl.com/3l9ypc7

As many have stated to "rent" vs "sell" in the last few years has resulted in owners/speckies holding onto depreciating properties and as a rule haven't done well with that strategy -- in effect they have followed their home prices dropping further.

Re: Ocean Views for Less | Manhattan Beach Confidential

Anon07 — Sun, 21 Aug 2011 23:29:58 -0000

Very interesting developments @ 329 19th.

What's predictable about 19th is that buyers get more picky as the market softens and they can sense that time is on their side. I gather that the buyer reset their price expectation downward thrice... leading to the relisting. The currently approved bank price is just short of 20% less than the purchase price in 2006 and suggests that the softening is increasingly approaching the Pacific.

To ask a rhetorical question:

I wonder what the price would be if one waited another 12-24 months (Not at 329 19th of course; but at a relative comp...)?

Re: Quick Check-In on the Speedy Speckies | Manhattan Beach Confidential

Anon07 — Thu, 11 Aug 2011 10:30:42 -0000

MBW: What would you have pegged these properties to have sold for @ the peak of the bubble?

Re: Open Forum (8/1- ) | Manhattan Beach Confidential

Anon07 — Tue, 09 Aug 2011 02:18:14 -0000

Another take on the economy:

Second Recession in U.S. Could Be Worse Than First

By CATHERINE RAMPELL

If the economy falls back into recession, as many economists are now warning, the bloodletting could be a lot more painful than the last time around.

Given the tumult of the Great Recession, this may be hard to believe. But the economy is much weaker than it was at the outset of the last recession in December 2007, with most major measures of economic health — including jobs, incomes, output and industrial production — worse today than they were back then. And growth has been so weak that almost no ground has been recouped, even though a recovery technically started in June 2009.

“It would be disastrous if we entered into a recession at this stage, given that we haven’t yet made up for the last recession,” said Conrad DeQuadros, senior economist at RDQ Economics.

When the last downturn hit, the credit bubble left Americans with lots of fat to cut, but a new one would force families to cut from the bone. Making things worse, policy makers used most of the economic tools at their disposal to combat the last recession, and have few options available.

Anxiety and uncertainty have increased in the last few days after the decision by Standard & Poor’s to downgrade the country’s credit rating and as Europe continues its desperate attempt to stem its debt crisis.

More:http://tinyurl.com/3ujosrz

Re: Open Forum (2/15– ) | Manhattan Beach Confidential

Anon07 — Mon, 01 Aug 2011 12:48:11 -0000

Homeowners who want to trade up are stuck waiting

Before the bust, rising prices fueled the housing market, enabling buyers to start small and climb the ladder. Now that promise of upward mobility has been all but shattered, gumming up the market.

By Alejandro Lazo, Los Angeles Times

August 1, 2011

http://www.latimes.com/busi...

Re: East MB Overbid? | Manhattan Beach Confidential

Anon07 — Thu, 30 Jun 2011 16:20:50 -0000

The magic of the vanishing decimal point never ceases to amuse!

Re: Open Forum (2/15– ) | Manhattan Beach Confidential

Anon07 — Tue, 31 May 2011 19:05:34 -0000

H4M:

Clearly, the C-S doesn't track MB in particular and looks at 20 metropolitan areas and tracks paired property sales. So, this isn't data directly extrapolatable to MB. But, what it does say is that there is a lot of distress out there and keeps showing a pronounced double dip, which many had predicted... the distress in that sense continues at large and could well effect MB.

So, what could it say about MB in particular... hard to tell, but to me it suggests that the overall housing distress isn't over.

MB in my view remains a fantastic place to live, but isn't immune in the slightest to what effects the rest of the housing market. Cyclically, this has been true for the last 23 years as shown by the DQ data set:

http://tinyurl.com/3l9ypc7

"It" -- the bubble did happen here; the deflation can also happen here!

Re: Open Forum (2/15– ) | Manhattan Beach Confidential

Anon07 — Tue, 31 May 2011 09:52:59 -0000

May 31, 2011

Housing Prices Fell in March for Eighth Straight Month

By DAVID STREITFELD

Housing prices fell in March to their lowest point since the downturn began, erasing the last little bit of recovery from the depths achieved two years ago, according to data released Tuesday.

The Standard & Poor’s Case-Shiller Home Price Index for 20 large cities fell 0.8 percent from February, the eighth drop in a row. Prices are now down 33.1 percent from July 2006 peak.“Home prices continue on their downward spiral with no relief in sight,” said David M. Blitzer, chairman of the S.& P. index committee.

Housing is in persistent trouble, industry analysts say, not only because so many people are blocked from the market — being unemployed, in foreclosure or trapped in homes that are worth less than the mortgage — but because even those who are solvent are opting out.

“The emotional scars left by the collapse are changing the American psyche,” said Pete Flint, chief executive of the housing Web site Trulia. “There was a time when owning a home was a symbol you had made it. Now it’s O.K. not to own.”

Trulia, a real estate search engine for buyers and renters that is based here, is a hive of renters, including Mr. Flint. “I’m in no rush at all to buy,” he said. He expects homeownership to decline further to about 63 percent, a level the country first achieved in the mid-1960s...More: http://www.nytimes.com/2011...

Re: Open Forum (2/15– ) | Manhattan Beach Confidential

Anon07 — Wed, 11 May 2011 01:57:44 -0000

A drop in federal loan guarantee from 729K to 625K in LA County is expected per the NAR... with likely impact in beach communities...

http://www.nytimes.com/2011...

May 10, 2011

Federal Retreat on Bigger Loans Rattles Housing

By DAVID STREITFELD

MONTEREY, Calif. — By summer’s end, buyers and sellers in some of the country’s most upscale housing markets are slated to lose one their biggest benefactors: the deep pockets of the federal government. In this seaside community of pricey homes, the dread of yet another housing shock is already spreading.“We’re looking at more price drops, more foreclosures,” said Rick Del Pozzo, a loan broker. “This snowball that’s been rolling downhill is going to pick up some speed.”

For the last three years, federal agencies have backed new mortgages as large as $729,750 in desirable neighborhoods in high-cost states like California, New York, New Jersey, Connecticut and Massachusetts. Without the government covering the risk of default, many lenders would have refused to make the loans.

With the economy in free fall, Congress broadened its traditionally generous support of housing to a substantial degree.But now Democrats and Republicans agree that the taxpayer should no longer be responsible for homes valued well above the national average, and are about to turn a top slice of the housing market into a testing ground for whether the private mortgage market can once again go it alone. The result, analysts say, will be higher-cost loans and fewer potential buyers for more expensive homes...

Re: Open Forum (2/15– ) | Manhattan Beach Confidential

Anon07 — Wed, 13 Apr 2011 01:06:35 -0000

Ahhh, a nit-pickin' ad hominae attack on Prof Romer.

No less, from Zerohedge!

Keep um comin' -- for entertainment value!

;-))))

Re: Open Forum (2/15– ) | Manhattan Beach Confidential

Anon07 — Tue, 12 Apr 2011 15:17:59 -0000

A well written synopsis of inflation viewed through an empiricists vs. theorists lens by Christina Romer (UC Berkeley):

http://www.nytimes.com/2011...

Re: Open Forum (2/15– ) | Manhattan Beach Confidential

Anon07 — Mon, 11 Apr 2011 17:58:34 -0000

My contention is that all this talk about "inflation" has had little impact on real estate prices. Real estate is a DEFLATING asset across the nation and currently is losing ground on an yoy basis in most places. As an asset class, it offers little protection from inflationary concerns.

What's more, this deflation has little directly to do with inflation and most everything to do with less (imprudent) money flowing through the mortgage system.

It's reasonable to argue that CPI indexed inflation measures are not accurate... that's a given!

BUT, how does that EXACTLY effect real estate prices???

Re: Open Forum (2/15– ) | Manhattan Beach Confidential

Anon07 — Mon, 11 Apr 2011 01:08:20 -0000

WTB:

My primary point isn't that there is "minimal" inflation -- much has been written on why the CPI core index which excluded energy... isn't a great way to measure real inflation... Rather, that this whole "inflation" issue is overblown as a concern when it comes to discussions about currently deflating real estate. Overall, prices haven't dropped from the peak of this bubble b/c of inflationary concerns, they've primarily dropped because of the money spigot running drier.

Imho, "cash" in the sense of having it to deploy is king in the lending market of the last few years; that's what I mean by "cash is king".

Cash certainly isn't a hedge for those with inflationary concerns, but that's a completely different beast. Imho, neither is currently deflating real estate.

Should inflation really increase dramatically -- certainly possible..., which it hasn't thus far, interest rates will likely increase, which could put further downward pressure on real estate prices -- another reason to be wary of using real estate as an inflationary hedge.

Re: Open Forum (2/15– ) | Manhattan Beach Confidential

Anon07 — Sat, 09 Apr 2011 12:48:28 -0000

WTB:

I long stopped trying to making logical sense (or taking seriously) any of a_non's pronouncements. But, for the sake of discussion, let's examine what we know.

If you look at the actual data of home prices in MB, what's clear is that prices escalated exponentially through early 2008, unsupported by changes in actual income or inflation. This is true in MB as it is in every coastal SoCal community I've looked at.

CPI based inflation from 2000-2008 was 24% -- median income in MB barely kept pace with inflation! SFR median home prices though increased 161%!

What that tells me is that home prices increased primarily due to lax lending standards, not as a result of inflation -- which is econ speak for "dollar in your pocket is worth much, much less".

Data: http://www.westegg.com/infl...

From 2008 to present, inflation has been minuscule -- about 1.5% cumulative -- we lived through 2009 which on aggregate was a deflationary year.

Historic Inflation Data:

http://www.inflationdata.co...

SFR prices in MB have dropped approx 20% from peak -- we are transactionally living in '04-'05 prices.

So, in the real world, bounded by facts, the exact opposite of what is posited above is actually occurring:

- Inflation is minimal -- money is holding value.

- Overall, relative to the peak, home prices are dropping primarily due to tightening of the money spigot -- real estate is currently a DEFLATING asset class.

In reality, one can get more value for money when buying a homes now than in 2008! The adage "Cash is King" is for real!

But, never you mind reality -- loopy, nonsensical gibberish delivered with conviction "I still believe beyond the shadow of a doubt" -- without supporting facts tends to be the usual fare! ;-)

Though it is worth some entertainment value! ;-)

Re: Open Forum (2/15– ) | Manhattan Beach Confidential

Anon07 — Fri, 08 Apr 2011 17:38:04 -0000

The 30% "quantal" increase in MB SFR prices b/w January and February 2004 referred to in the post above was amazing b/c these sorts of increases don't occur on a community and region-wide basis without the chicanery we now all know about too well; so, if by "it" we mean "the bubble", it most assuredly DID happen here in MB.

This graph can't be explained otherwise:

http://www.mbconfidential.c...

The other more longterm matrix worth keeping in mind is the cumulative magnitude of the increase in median home prices, say from 2000. (I use that b/c the graph is already plotted... you could use any starting point from late '90s or early '00 to make the same general point.)

Trailing annual median home prices in Jan 2000 were 631K and peaked in Jan 2008 at 1,647K. That's a 161% increase in median home price over 8 years!

Data: http://www.mbconfidential.c...

During this time, median household income in MB went from $100,750 in 2000 to $125,816 in 2009 -- an increase of 25%!

Data: http://www.city-data.com/ci...

This median income data is corroborated by other projections.

So, during an equivalent eight year time, median home prices increased 161% for a corresponding 25% increase in median household income in MB!

"It" (the bubble) did happen here! These numbers, like the graph above, can't be explained otherwise.

This is how the last unwinding of prices in MB looked ('90-'94):

http://www.mbconfidential.c...

So historically "it" (the unwinding) also did happen here -- a drop of 27.7% relative to a peak which was about half as inflated relative to income.

Notice, if you focus on monthly medians in the above graph, it's easy to make arguments which suggest that prices are not worsening... it takes looking at the data over snapshots of quarters or even annually to see the decline.

The gradual unwinding from the current housing peak is already occurring "here" -- we are living in '04-'05 prices -- as such, we are already on the downside of this bubble peak which occurred in early '08.

So, Dasguy -- things are not all that "different here", when you are willing to be humble and look at the known LOCAL data.

But, don't expect factual reality to play much of a role in "it's different here" Fantasyland! ;-)

Through all these real estate price changes, MB was, is and will remain a fantastic place to live!