Home prices dropped a record 15.8% in May

[Spanky]

Bay area properties are still expensive!

 

[haha]

And this affected me? How?

Not in the sense that it makes a difference in my investments.

Well, you are very unusual then. Do you own an S&P index? A bank?
A REIT? A home furnishings retailer or Home Depot? How about almost any retailer in the world? Maybe a home builder or a carpet maker or forest products company? An auto company? A finance company?

Any company in any business that has had to pay up for its borrowings? The list of unaffected businesss is pretty short.

Ha

 

[honobob]

Well, you are very unusual then. Do you own an S&P index? A bank?
A REIT? A home furnishings retailer or Home Depot? How about almost any retailer in the world? Maybe a home builder or a carpet maker or forest products company? An auto company? A finance company?

Any company in any business that has had to pay up for its borrowings? The list of unaffected businesss is pretty short.

Ha

Ha This was his/her stated parameters. I don't think it is so unusual. I think it's a good reason not to be invested in the stock market. I'm affected now because I'm trying to do some real estate financing and the rules are changing by the minute just because of some perceived problem! Otherwise, I don't see a positive or negative effect except for the little bit I'm in the market, but I'm buying at a discount, right? And I do realize that in the big picture, blah, blah blah but if it wasn't this wouldn't it be something else? I'm curious.

And this affected me? How?

Not in the sense that it makes a difference in my investments.

Assume I hold 100% cash, I own my own home, and I have no plans to sell in the immediate future (e.g. 20 years).

 

[haha]

And this affected me? How?

Not in the sense that it makes a difference in my investments.

Assume I hold 100% cash, I own my own home, and I have no plans to sell in the immediate future (e.g. 20 years).

Even this imaginary person who has perfect control over his life is nevertheless affected. His real interst rates are negative, due to the panicky attempts of the Fed to keep rates low to prop up tottering lending institutions.

Ha

 

[honobob]

Actually in Hawaii the property has to be off by 10% to file an appeal.
I filed my claim back in Jan 2007, I am still waiting (after several phone calls) for a date for a hearing.

Amazed that anything in CA can be handled with a 3 minute phone call.

Thanks for the correction. I'd looked for a friend awhile back and thought it was 5 or 10% but 10% seemed unreasonable.

CA is usually pretty lenient in giving Prop 8 reductions as they are only good for a year and if someone calls in with reasonable comps it's cost efficient to grant a reasonable reduction. Remember that even in a bad market all the underassessed propertied under Prop 13 are going to increase by 2% that year so it's a win/win for revenue.

Now I'm really curious why you think you are more than 10% over assessed! I've watched the market for Waikiki and Diamond Head and made several offers but have seen the market as maybe flat but definitely not decreasing. I've always wondered what the dynamics are between the resort and the residential areas. Do you think that there is a growing gap between the values?

 

[clifp]

I live at the top of St. Louis heights, very nice lot, great diamond head view, culda sac, bordering on a state watershed, below a park. The house is ok but not updated much since it was built in 1960. It is 2100' house made of cinder block which given the big termite problem in Hawaii I like but it is not an architectural masterpiece.

Back in the summer of 2006, my ex-girlfriend and I were splitting up and need to agree on a price for me to buy her 1/2 share out. We had a couple of realtor's give us marketing presentation and they suggested listing in the low-mid 900s.

The house next to door, smaller worse location went on the market in the summer of 2005 for $1,050,000. It finally sold May of 2006 for $760K. Per the purchase contract my girlfriend and I agreed to we hired two independent appraiser to come up with a fair value. One said the house was worth $825K based a lot on our neighbors the other said it was worth $935K based on earlier sales in the neighborhood, we split the difference I bought her 1/2 for $880K in July 2006.


In 2006, the City said the house was appraised at 1,020K as June 2006. In June of 2007 the new appraisal had dropped $832K. I think I have very strong case that 2006 appraisal was out of line,and I think the 2007 is probably accurate, and I would guess 2008 should be below $800K . The city of course is in no hurry to refund my excess property tax.

FYI, for you Zillow basher it said the house was worth 880K at the time more accurate than any of the humans IMO>

 

[rs0460a]

Well, you are very unusual then.
Ha

U R correct; I'm quite "unique" ...

- Ron

 

[saluki9]

Just got our property tax appeal back

Taxes went from $8500 to $6300. Count me in as thrilled for this pull back in housing prices! (Yes, I still feel bad for the people who have lost their homes or life savings in housing)

 

[tryan]

The drops in our area have taken a cut of my wad. What most aren't considering is the recovery time. Last time (early 90's) it took 12 years for prices to turn right side up. That's a long time to be "stuck" upside down OR unable to sell OR unable re-fi OR in a negative cash flow. And the payments on that mortgage or adjustable HELOC will turn your stomach.

 

[Billy]

I do think a lot of the population increase will come from immigration, and I believe (but haven't checked) that the generation 2 ranks (genY?) behind us is bigger than the genXers. They will be buying soon, moving up from their starter condos and townhouses. So I do think the market will recover to "normal" levels, just not the crazy thang we just went through.

Here is immigration data I found;
2006 data Origin country Number Total 1,266,264 Mexico 173,753 China, People's Republic 87,345 Philippines 74,607 India 61,369 Cuba 45,614 Colombia 43,151 Dominican Republic 38,069 El Salvador 31,783 Vietnam 30,695 Jamaica 24,976 All other countries 654,902

These data represent persons admitted for legal permanent residence during the twelve-month fiscal year ending in October of the year designated. Many of the individuals admitted actually arrived in the United States in earlier years.

I have a tough time seeing Mexicans buying 3-5 bedroom homes in the gated communities. I hope you are correct about this. I know the Gen Y'ers are larger but there's a pretty good time gap before they buy these McMansions too.

So, IMO, this is going to take years to play out. That's not to say RE prices will continue to fall, but when I look at supply and demand I do not see a quick fix. Then again, I am no real-estate expert.

Billy
RetireEarlyLifestyle.com

 

[CitricAcid]

First home buyers are drooling too... *come on, give me 3 years market, just give me 3*

 

[rs0460a]

We live 90m west of NYC. There have been a total of five homes within a block of me for sale, the longest being on the market a bit over a year (BTW, three are due to divorce).

Within the last two weeks, three of those homes have been sold. One of the homes has already had their actual sale price posted to the on-line county records, and it sold for $2k less than the original asking price.

I'll assume the other sales were driven by adjusting the asking price a bit lower. BTW, in our case, Zillow seems to be fairly accurate in what they are showing. I realize that this may not be so in those parts of the country that Zillow is not tracking, or those areas that have little turnover.

Not to "prove" anything - just to add to the discussion.

- Ron

 

[ziggy29]

Assume I hold 100% cash, I own my own home, and I have no plans to sell in the immediate future (e.g. 20 years).

With these assumptions, you have almost guaranteed not keeping up with inflation. This is the "insurance premium" extracted by a flight to "safety."

 

[RunningBum]

And even if you do sell - if you buy a house of equal (depressed) value, what difference does it make? If you are going to downsize, or rent, then yes....

And this means bargains are out there for first time home buyers, or people moving up.


-ERD50

Time on the market will be the big effect for those moving sideways. If you're moving out of town, chances are greater you'll be stuck with two mortgages for awhile in a tough market.

 

[haha]

I have a tough time seeing Mexicans buying 3-5 bedroom homes in the gated communities.

Not to worry. Instead of 2 adults and 2 kids, there will be a landlord with 8 adult male renters. Plenty of cashflo to handle the mortgage.

Even though this is against municipal codes in most places, I see it happening every day.

Ha

 

[Billy]

Not to worry. Instead of 2 adults and 2 kids, there will be a landlord with 8 adult male renters. Plenty of cashflo to handle the mortgage.

Even though this is against municipal codes in most places, I see it happening every day.

Ha,
I agree with you, but not in the HOA developments where your "allowed" to paint your house one of three shades of beige, or can only plant certain bushes in designated places. In this area there are loads of these types of developments.

Billy
RetireEarlyLifestyle.com

 

[cute fuzzy bunny]

Near my old neighborhood there are plenty of freshly minted gated communities stuffed full of 2500+ square foot 5 bedroom homes that you can pick up in the $210-240k range.

Population is about 40% hispanic and 40% indian, mostly agriculture work.

With two half decent incomes, thats quite doable.

 

[rs0460a]

Ha This was his/her stated parameters. I don't think it is so unusual. I think it's a good reason not to be invested in the stock market. I'm affected now because I'm trying to do some real estate financing and the rules are changing by the minute just because of some perceived problem! Otherwise, I don't see a positive or negative effect except for the little bit I'm in the market, but I'm buying at a discount, right? And I do realize that in the big picture, blah, blah blah but if it wasn't this wouldn't it be something else? I'm curious.

And this affected me? How?

Not in the sense that it makes a difference in my investments.

Assume I hold 100% cash, I own my own home, and I have no plans to sell in the immediate future (e.g. 20 years).

OK guys (and girls ) - I'm the one that started this "quote" which has been copied and discussed through certain responses to the OP's original question.

While it could apply to "my life", I wanted to be more "broad based" in context. What I was looking at was not those folks that are in the accumulation stage or the "investment experts" represented on this fine forum but rather the currently "mature" indivudial that may be impacted by this current "news".

That indivudial (and I'll use some of my relatives as an example) are either from the post-WWII generation, "boomers" that are entering retirement (or in retirement, like me ), but have the same "financial profile". That is those who are "risk adverse" - either that they have a pension (hey, some still do!) or those (like my BIL who "invests" in GIC's).

They are a conserative group. While they may complain about the rising price of anything, they are not willing to give up the "security" of a cash "investment" (regardless of what it may be, a GIC, MM, CD, etc.)

Include myself, who while understanding that the "market" will probably overcome inflation (in the long term), but understanding that I am also in the group that has no debts (e.g. no mortgage/note, CC, or any other loans) the question still remains does the current "turmoil" in the RE market really affect me?

I can say that the folks that I know (relatives and "others) that are in the same age/financial cohort as me, don't necessarily get affected by the current RE "flux".

Yes, as some have alluded to, it may impact you if you have investments in RE developers, home improvement centers, etc. True. But (speaking for me, since I know my portfolio), these are not "major components" of my investments. Like many others (who belive in "owning the market") I (along with my DW) have our portfolios very "broad based" (much like playing roulette). Sometimes one part of the market goes down - while another goes up. I never place a "straight bet" in roulette (at 35-1 odds). I always split it. Sometimes I win - sometimes lose. But like the market, I've done OK.

As far as my "short term cash bucket" (e.g. 3-5 years gross income), I do have this "in play". That means that the market (be it RE or investments) have a time to "balance out" returns. As far as RE, I remember having a home in the '80's when the market was "hot" - then in the early '90's it turned around. This RE market is no difference.

Again I say, what does it really mean to me (and other "old retired folks with little/no debt"). Hey, if you're young and still trying to "leverage" the market (in the short term), it may make a difference to you. I use the term "short term" since I've sold four homes over the last 35+ years, and yet have not recorded a "loss" ...

- Ron

 

[honobob]

From the late Twaddle not quite a year ago,

“Who, besides a few speculators, actually gets hurt from the popping of the bubble?

If you're a wannabe new home owner, lower prices are obviously good for you.

If you own a $500K home, and you've been eyeing that $1M McMansion over at the next cul de sac, what happens if both of you get cut in half? You sell your place for $250K less, but you upgrade to the McMansion for $500K less. You save $250K in the end!

Let the popping commence!


Personally, I think the subprime-backed paper fiasco is overblown. It may blow up a few more hedge funds (I think one in London blew today), but shouldn't affect the economy. The thing to watch, IMO, is consumer spending and the reverse of the wealth effect.”

Twaddle, you still out there? Come home.

 

[cute fuzzy bunny]

Housing snapshot from my county for Feb and July of this year...average, median and days on market. Looks like we're still losing a little ground...homes are still selling in the ~4 month range though.

 

[honobob]

So the median price on Single Family has dropped 5% and condos are UP 6%. I thought you were in one of the "reportedly" hardest hit areas. Where's the crisis?

 

[cute fuzzy bunny]

Well, we're off about 35% since the 2005 peak.

Theres a particular model of house in my subdivision that was selling in the low to mid 600's two years ago, right now there are three for sale for $420, 490 and 520. No takers.

The median homes in my old neighborhood went from the 150's in 2001 to the 250's in 2003 to the low 400's in 2005 and are now selling in the low 200's. Now thats a rollercoaster ride...

 

[honobob]

Well, there was about a 15-25% drop prior to february of this year...

Theres a particular model of house in my subdivision that was selling in the low to mid 600's two years ago, right now there are three for sale for $420, 490 and 520. No takers.

But didn't you buy within the last year or so at pretty much the alleged top of the market and yet you barely wrangled a 3-5% reduction on your assessed values?

 

[cute fuzzy bunny]

Nah, we bought after prices here had dropped more than 20%, plus I nailed the guy pretty good to get his price down. Knocked almost another 10% off.

I got about a 7.5% reduction in my property taxes. I could probably make an argument to get more than that, but its probably not worth my time.

Sooo...20 + 9 + 7.5...we're in the ballpark.

 

[al_bundy]

From the late Twaddle not quite a year ago,

“Who, besides a few speculators, actually gets hurt from the popping of the bubble?

If you're a wannabe new home owner, lower prices are obviously good for you.

If you own a $500K home, and you've been eyeing that $1M McMansion over at the next cul de sac, what happens if both of you get cut in half? You sell your place for $250K less, but you upgrade to the McMansion for $500K less. You save $250K in the end!

Let the popping commence!


Personally, I think the subprime-backed paper fiasco is overblown. It may blow up a few more hedge funds (I think one in London blew today), but shouldn't affect the economy. The thing to watch, IMO, is consumer spending and the reverse of the wealth effect.”

Twaddle, you still out there? Come home.

this isn't subprime anymore, a lot of Alt-A and even prime rated bonds are doing very badly