Long time…

It’s been a long time since I posted because I’ve been super busy with life and also things just continued down the same path (declining home values, rising unemployment, futile government intervention attempts) with no major change. Over this past summer things definitely stabilized a bit on the home value front in the Eastvale area with the first time home buyer tax credit, record low mortgage rates and lots of interest from investors all conspiring to prop up prices. Hopefully this is not just a temporary bottoming and these price levels will hold. Nobody really knows what the future holds but if you’re planning on staying in the house for a while (read > 7 years) and the monthly payment is something comparable to what you’d pay in rent then I’d say go for it. But definitely lock in the lowest possible mortgage rate you can get for 30 years. Forget about taking on anything that is adjustable, etc… because there is only one way for mortgage rates to go from here and that is UP which will make your monthly payment rise to a level you have not planned for. Be smart and learn from the past few years and don’t get in over your head.

If anyone has some interesting/funny/irritating Eastvale housing experiences to pass on let me know and I’ll write about it.

great SNL clip on the bailout

I meant to post this several weeks ago but forgot to. Anyways, check it out. This is just awesome.

SNL – Bailout

Decision ’08 Presidential Results

here we go!

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foreclosure help and loan modification scams everywhere!

Hey everyone,

A lot of people are seeking help with their foreclosure or loan troubles. Everyday I am bombarded by google ads, billboards on the freeway, those small signs shoved into the ground and attached to poles at the major intersections, banners in the newspaper and pretty much everywhere else I look with ads proclaiming things like “stop foreclosure now!” “fix your mortgage now!”, etc, etc… Many people are getting roped in by these promises because its what’s in front of their face every day and they are are desperate for assistance. Please understand that most if not all of these are scams of one sort or another. These companies are not there to truly help you. They are there to help themselves first. Having said that I compiled a short list of the best places to go for help. They are all HUD-approved and many are actual HUD sites.

HUD Guide to Avoiding foreclosure:
http://www.hud.gov/foreclosure/

HUD Approved Housing Counselors:
http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm

HOPE For Homeowners:
http://www.hud.gov/hopeforhomeowners/index.cfm (some good info on the program here)
http://www.hopenow.com/ (official site for the program)

Homeownership Preservation Foundation:
http://www.995hope.org/

Hopefully by spreading the word about these “real deal” resources this will help someone prevent foreclosure or at the very least prevent someone from being scammed.

the listing reality gap

I’ve been watching the numbers over several months now and one thing in particular I’ve noticed is a “reality gap” between what houses are being listed at and what houses are actually selling at. I call it the “listing reality gap”. It has definitely gotten smaller over time but it is still substantial. Here are the current numbers for the 92880 zip code. Notice the gap between the average sales price and the average listing price. Yes the time frames are slightly off but you get the idea…:

 

 

 

 

 

 

 

 

 

 

One could predict that a wider gap would mean future price drops and a narrower gap would mean price stabilization. This is somewhat obvious but it is interesting to see it in action and to see banks and resellers coming to terms with the reality of the true market values of their properties.

open houses getting some good traffic…

I keep a close eye on the bank owned properties in my neighbourhood and this past weekend several of them had open houses. There have been open houses in past months but not a lot of traffic. This past weekend though I noticed a ton of people stopping in. The latest report from DataQuick shows home sales up big in the southland and prices still going down but at a slower pace. California real estate was the first to implode and I think we’re starting to see it become the first to slowly but surely slow its implosion and hopefully begin to show something that remotely resembles “recovery” albeit weak at first. No doubt there will be many more foreclosures, prices will go down further, unemployment will rise more giving way to more “traditional” foreclosures and less qualified buyers but as for right now I think a lot of people that have been on the sidelines for the past couple of years are fed up waiting and see value in the current market and are jumping in in large numbers. I dont think they are doing it because they think we are at some sort of “bottom” whether it be temporary or final. I think it is occuring because they are seeing value and just want to get on with their lives. I wouldn’t even try to call some sort of “bottom” but the fact that prices have gone down SO much and people are jumping in certainly signals a shift from “wait and see” to either “buy and hope” or “buy and ignore”. Buy now and ignore it if it goes down a little more because if you’re going to stay in the house a long time (5+ yrs) its not really going to matter because it will recover eventually and there certainly wont be anymore 300-400k losses to take unless the US economy goes into some kind of death spiral it cant get out of. Houses in my area now are quite simply cheaper than renting (on a monthly payment basis) and of course monthly payment shouldn’t be the only thing people look at but it certainly is a large factor.

don’t buy stuff

Okay so it looks like my predictions last week of the marketing dropping into the 7000s or 8000s on friday did not come true. At least it didnt come true that quickly. It’s just going to take a few days longer. Either way the market tanked.

On another note I was going to do a post on personal budgeting and living within your means and then I found a video that said it all very simply and with a good laugh too…

http://www.hulu.com/watch/1389/saturday-night-live-dont-buy-stuff

predictions for tomorrow – duck and cover

Tomorrow is likely to be a bloody day in the stock and credit markets. Because of the upcoming election and the incredibly strong public backlash to ANY bailout for Wall St, house reps are likely not to pass the “sweetened” bailout in an effort to save their own skins/jobs. The failure to pass this legislation or provide any meaningful alternative will send the stock market plunging down 20 to 30% (i think it will end somewhere in the 7000s or 8000s) wiping out trillions in stock market equity value. The credit markets will be 100% frozen, not just kinda frozen like they are right now. Within days it will be nearly impossible for anyone to get a loan for anything. Businesses will begin to layoff thousands and perhaps millions of people because they will not be able to make the next payroll.

I really hope my predictions are absolutely incorrect or at best exaggerated but I really don’t think they are. Dark days are coming fast. Do whatever you can to prepare. I really don’t know how you do prepare for this type of thing. It’s a once in a lifetime thing.

havent posted for a while

Well I havent posted in a while and partly that is laziness but partly it is because I’m frankly speechless. The news speaks for itself. The US economy is headed off a cliff and this is now far far bigger than simply housing problems in Eastvale or anywhere else for that matter. Of course it all started with the collapse of the housing market though. A good little video i saw this morning about the 15 freeway corridor referring to it as “Foreclosure Alley”. Nice. Check it out:

http://calculatedrisk.blogspot.com/2008/10/foreclosure-alley.html

On a side note I know some people who are totally qualified, have good credit and the ability to pay and are getting consistently outbidded on homes. Homes in the high 200s and low 300s are seeing a very high level of demand similar to how things were during the boom years when there would be multiple bidders on each house. I guess this proves that when the price is right people WILL buy. The problem is that even though prices are getting low it still may not be greatest time to buy because it could fall much further since current values are still above what is normally considered “affordable” based on median incomes. Also, with unemployment going up we’ll now see the regular process of increasing foreclosures which typically occurs in a recession. Just throwing more gas on the bonfire… But, of course, not everyone makes the median income and not everyone is being laid off, and many people are able to pay for these houses at current prices which is why we’re seeing a lot of them jump in. This is great as a whole because at least it shows our homes are not entirely worthless… We sure have come a long way since 2005………..

Hang in there people. If you’re staying put for several years (let’s say 10 for safety sake) and you can afford your monthly payments then it may be a good idea to just ignore what is going on. Paper losses don’t impact you until you sell…. Always remember that. Same goes for the recent crash in your 401(k) plans. Yes it sucks to watch it lose value but hopefully you’re not retiring in the next 5-10 years…..

As for that nutty bailout that the government is trying to do. I can think of many reasons why it is a good idea and many reasons why it is a very very bad idea. I dont like that they are going to rush it which means it will suck like everything else that is rushed. I dont like that it will add to the deficit but thats a lost cause anyways so F it, add another trillion, its not going to change the fact that the US is headed into a very bad economic downturn. It will probably make it worse yes. But if they dont do it it will get bad really quick which people in this country just aren’t ready to handle (not that they ever would be…). I still see people driving new luxury cars, builders still building and people still buying starbucks every morning. Do you really think the average person is ready to really truly sacrifice what they “believe” is their standard of living (even though its a farce that is debt-financed)???? I dont. I think it will be forced upon them though at some point. Its just a matter of time now. The clock is ticking…

I dont know what else to say really. Like i said, these days I’m relatively speechless.

back to the future – 2003

Well in just a couple short months we have gone from 2004 prices back to 2003 prices. Homes are consistently selling in the mid to high 300s in Eastvale with a few on the very low end going for the low 300s. This my friends is 2003 pricing when the Providence Ranch section of the neighbourhood was filling in and the Home Depot was opening signalling the arrival of Eastvale Gateway and all the amenities that this area sorely lacked prior to that. It is also coincidentally when I purchased my house so I am now on the precipice of real house value decline. It feels crappy! Just a couple years ago when things were slowing down and the hot market was losing its steam I bought in to the talk about how it would just sort of level off or maybe go down 10%. Well reality sucks! I’ve read that a good rough measure of a home’s affordability compared to local rents is the following. Take the rent you’d pay per year (monthly rent x 12) and then times it by 15. That is a nice rough estimate of what the same house should be somewhat reasonably purchased for. Rents seem to be stable in the 2000-3000 range in Eastvale depending on the size of the house. Let’s run the numbers for rents of 2000, 2500 and 3000.

$2000/mo rent x 12 x 15 = $360,000

$2500/mo rent x 12 x 15 = $450,000

$3000/mo rent x 12 x 15 = $540,000

Since most homes are being sold closer to 360,000 but many rents are above $2000 it looks like what I expected in terms of an overcorrection is occuring in earnest. Here are the possible reasons:

1) Lack of availability jumbo financing (>$417,000 loan amount) as well as much higher rates when you can find it (approx. a full percentage point higher)
2) Out of control gas prices making far flung exurbs like Eastvale without much local employment base less desirable places to live and thus not as valuable  (by the way the Valero on 6th and Hamner in norco is consistenly the cheapest in the area but BRING CASH to get the better price. Ralphs and Vons have a monopoly on gas up in Eastvale proper so they are always about 5-10cents more per gallon). To check current prices go to Gas Buddy. Oil prices may bounce up and down but the days of cheap gas are LONG GONE. Peak oil is finally making the headlines on mainstream media after years of people trying to raise the alarm.
3) Weakening employment picture (California is currently at 6.9% and more than a full percentage point above the national average due to the collapse of construction and related jobs)
4) An accelerating decline in home values in the OC may be leading some to keep renting and wait it out until the OC is “affordable”.
5) Lack of smaller more energy efficient homes in Eastvale. They built ’em big out here to attract buyers but in many ways that strategy may be backfiring in these frugal times….
6) People are just generally tapped out on debt and are unable to take on a house as they realize it is just not a great investment like everyone pumps it up to be not to mention the fact that we’re still in a declining market with no real clear end in sight and people don’t want to be knife-catchers. You might get a better ROI right now buying Indymac stock or day trading Fannie and Freddie!! In fact, the Inland Empire is the #1 riskiest real estate market in the entire US of A right now…

In the last downturn the IE registered 22 quarters of price declines between 1991-1996 and oh by the way the downturn in the early nineties was not anywhere near what we’re seeing now and we’re only 10 quarters into it.

 
What do you think is happening?
Are you sitting on the sidelines waiting for prices to fall further?
Is something else holding you back from purchasing a home right now?
What is your personal price point when you’ll jump in?