Thursday, November 30, 2006

Agassi's House

I saw this over at Ben Jones' blog. Apparently, Agassi's Tiburon house finally sold for $20 million. Since the majority of Marin houses sell for a lot less than that, expect the Marin sales price average to bump up as a result but the median to be hardly affected. Don't be fooled.

The San Francisco Chronicle. “Retired tennis stars Andre Agassi and Steffi Graf finally have found a buyer for their Tiburon estate for $20 million, or about $3 million less than what they paid for it in 2001.”

“The property was put up for sale because Agassi and his family were using it infrequently and the tennis star’s financial advisers wanted him to dispose of it, said Bill Bullock, whose firm represents Agassi and Graf.”

“‘When they considered the annual cost of that property to sit there vacant, they decided that they needed a little inducement for the marketplace and they started reducing the price,’ Bullock said.”

“After initially listing the Agassi property at $24.5 million, the price was reduced several times before Agassi dropped it six months ago to $21 million. The tennis stars have branched out into real estate development and have invested in a condo hotel project in Idaho with Miami developer Bayview Financial.”

Monday, November 27, 2006

Who Are You Calling a Slacker?

And to those of you who call me a slacker for not updating the Marin POS blog, well, all I have to say to you is... well ok, so I am a slacker. Gah! It's not like there have been many new listings out there you know. In fact, the number of listings are shrinking daily and are down a good 25% or so from the peak. And so many of the ones I've already featured are still on the market. But anyway, I've added a couple of beauts so check it if you want. Slacker indeed. Hmmph!

Sunday, November 26, 2006

Flipper Nation: Episode I


A Call to Arms

In my opinion, Greg Swann is a slimeball real estate agent. He operates out of Bloodhound Realty in Phoenix, Arizona. Mr. Swann has a blog and he has been using it, among other things, to repeatedly attack Keith over at the Housing Panic blog simply because Keith tells it like it is and Mr. Swann doesn't want it told like it is; he wants it told the way that will increase his RE business.

From what I have seen, Mr. Swann likes to engage in copious amounts of name calling, character assassination, ad hominem, various other forms of "mud slinging", and is, in my opinion, all-in-all a rather childish sort. Mr. Swann will take literally any and every opportunity to assail his target no matter how low the blow or how baseless.

So anyway, Keith of the Housing Panic blog gave Mr. Swann a choice: cool it (i.e., a truce) or total war.

Mr. Swann chose total war.

Now I've been silently following this exchange for months and I am utterly disgusted by Mr. Swann and damn glad he doesn't come here. But it wasn't any of my business and until it was my business I chose to stay out of it. Now I am making it my business and coming to the aid and defense of a fellow blogger who contributes tremendously to the housing bubble "conversation".

I ask you readers to familiarize yourself with these events and take a stand. I have no doubt that you will also choose to aid Keith.

Bloodhound Realty
Bloodhound blog

Friday, November 24, 2006

A Letter From a Clueless Marin Realtor

Ah ha ha ha! Marin County real estate agents must be getting desperate. Here is a letter from a clueless Marin agent along with the blog owner's comments. And here is what that same data looks like when corrected for inflation and normalized:

Thanks to the reader who brought my attention to that letter.

Revised DataQuick Results for October, 2006

Well, it appears that as was the case for September, October's DataQuick results have been revised downward too:



The Buyer's Predicament

We've done seller psychology. Now it is time for buyer's psychology in this so-called "buyer's market".
"Buyers don’t want to buy in a buyer’s market, buyers want to buy in a seller’s market, they like the comfort of it...If I’m the only one [buying], there’s this fear that it might not be the right thing to do" [said agent Kathi Hammill].
Ah yes, the fear of looking stupid in front of friends, family, and neighbors.

But the more rational side of it is:
“What they’re worried about is, will prices decline further, so if they buy now, could they get a better bargain later?" said Delores Conway, at the University of Southern California. "No one can predict that.”
Maybe not. But consider that affordability is so abysmally low in the Bay Area that without significant year over year appreciation it doesn't make sense anymore (assuming it ever did) to take out a "suicide loan" (neg. am., IO, no down, stated income, etc.) because it is no longer likely that if you have problems with that mortgage that you will be able to sell above what you owe.

Yep, why buy now if the prices are coming down? The averages don't mean anything since they only reflect what actually sold. There is no way you can determine by just looking at the average/median price the quality of what sold, its desirability due to location, etc. You cannot assume that if the average is $X that your house is worth about $X. If you really want to understand what houses in your market are worth you have to come up with a way to figure out how much a house that didn't sell is worth.

The people who will do well are those who resist our genetically programmed social urge to follow the herd that is our family members, friends, neighbors, co-workers, friends-of-friends, people we read and hear about, etc. and just wait it out. This is a waiter's market; a procrastinator's market. Realtors and agents may not like anyone to say it, but it's true all the same.

And to think that if seller's would just get over their sense of entitlement and stubborn pride and lower their asking prices by significant amounts en mass, this housing downturn would be over by now. Yep, seller's are the problem now. Need help? Just ask yourself one quesiton: "Would I buy this house at this price?"

Bay Area Tax

Once upon a time not at all very long ago I lived in a posh area of South Orange County (CA) and would drive up to visit my family for Thanksgivings and the like. I would often mention to my family members that things like milk cost at least 20% more in Marin than where I lived yet the per capita income was actually higher where I lived and heck, dairy farms are right here. So what's up with that? I was met with blank stares and disbelief. Well, now the enterprising blogger at Burbed has done some research which bolsters my point. But after all, we're so special so it is only right that we should have to pay more for the basics.

Post-Thanksgiving Stories Anyone?

So does anyone have any post-Thanksgiving real estate stories to tell?

For me, unlike Thanksgivings past when people were tolerant if not a little amused by discussions that entertained the possibility of a Marin real estate downturn, this year there was outright hostility. People were angry at me for saying that Marin housing would go down more.

In one odd instance a dinner guest was angry with me when I said you could not simply subtract the purchase price of a house from its sale price so as to calculate how much profit you made by your housing investment; you have to at least adjust the purchase price by inflation -- translate that purchase price to today's dollar value and then subtract the adjusted purchase price from the sale price. I think the reason why people were mad when I made that point is that some of them, if they did that adjustment for inflation, know perfectly well that they didn't do so well. Of course, their ire could also be due to my mention of the increased frequency of defaults in Marin and some pointed examples of people dropping their asking prices 20-35% So who is the turkey now?

It seems so obvious to me -- that is, adjusting the purchase price for inflation. It got me thinking of why people don't want to do that adjustment for inflation when bragging about their RE acumen. Is it because the math is too hard? Is it because doing so would let some wind out of their sails? Is it because people are so needy of good news that they are willing to pretend that bad news is good news?

Thursday, November 23, 2006

Turkey Time

It looks like I am the turkey this time around. Back in October there was a poll on this blog to see where the Marin HEAT Index would be come Thanksgiving, 2006. At that time the Index was at a new all-time low of 0.42; today it's at 0.60. Well, when you're wrong, you're wrong and you just have to admit it; clearly the poll's scale went in the wrong direction.

Here is what those who responded to the poll thought:

And here is where the HEAT Index is at today:

Granted, 0.60 is far from impressive and is still lodged well into "buyers' market" territory but it is significantly higher than the 0.35 which the majority of respondents predicted (but in all fairness to the respondents, the scale was, in retrospect, biased in the wrong direction).

Maybe the current activity implied by the Index is the result of all those houses that didn't sell (as they normally would and so would not be on the market now) this past year and are still on the market, slowly getting sold.

Or maybe it is the result of all those year-end bonuses one commentor (mktmakr) said (in a previous post) was scheduled to be granted to money managers and the like this year:
Don't mean to rain on everyone's parade, but check out the flood of cash that's about to hit (mainly)Wall Street, but also San Francisco/Marin:

I know it's hard to comprehend, but the AVERAGE bonus for ALL 25,647 employees of Goldman Sachs will be $397,707! Check out the numbers. $36 billion in bonuses from just the 5 largest investment banks!

Don't be surprised if you see an uptick in prices and sales in Marin real estate in January!
Here is what the RE agent and keeper of the Marin HEAT Index has to say:
The San Francisco Market HEAT Index (SFMHI) has had an incredible upward surge in the last two months, especially in the city’s upper end price ranges. In that time the Index rose a remarkable 41% for all of San Francisco, and now stands at 1.01. In the city’s upper end price ranges, truly staggering rises are recorded: a 225% rise in the above $4 million range, a 207% rise in the $2-4 million range, and a 186% rise in the $1-2 million range. These statistics are measuring what appears to be a radical shift in market activity in San Francisco.

What significance does this have for Marin? Marin’s upper end tends to follow San Francisco. When things heat up in the city, market spill-over usually happens in Marin a few months later. If this San Francisco market surge holds up and continues then it could be the harbinger for a genuine rebound for Marin and, likely, for other regional real estate markets.

For Marin itself, the Marin Market HEAT Index (MMHI) is 24% higher (warmer) than one month ago, and is now at 0.56. Remarkably, with one exception, every price range measured rose. The rise was 21% in $2- 4 million properties, and a substantial one-month jump of 46% in $1.5-2 million properties. Oddly, the above $4 million range has simply collapsed and reflects a 67% decline in market intensity from two months ago. This contrasts sharply with the same price range in San Francisco noted above.

These markets are back in a state of flux after 15 months of steady, gradual activity decline. Any assumptions that market conditions are flat, stable, and/or predictable need to be shelved for awhile. All that we really know is that big changes are in process. Whether you’re a buyer or a seller, the next few months should be an interesting ride.
I hope everyone had a great Thanksgiving. My family and I sure did.

Tuesday, November 21, 2006

'Obstinate Sellers Will Drag Out the Decline' Says the CAR

From the Chronicle (emphasis mine):
"It may take the California housing market three years to recover from its downturn because homes have simply gotten too expensive for most buyers, whose salaries haven’t risen nearly as fast as housing prices.

We are at the beginning of the correction in the housing market in terms of prices," said Stephen Levy, director of Palo Alto’s Center for Continuing Study of the California Economy. "The prices now are way out of line with the income and income prospects of people.”

The California Association of Realtors [CAR] predicts a more-modest decline of 2 percent next year, according to Leslie Appleton-Young, the group’s chief economist. "It’s going to take another 18 months or so to work itself out," she said.

Appleton-Young, like Rosen, said that sellers who are refusing to drop their asking prices are dragging out the decline. Sellers will need to readjust their expectations, and lower prices, in order to get the market moving again, she said. "The period from 2002 to 2005 was unique — we had an extremely strong market and it was not sustainable," Appleton-Young said.

“The number of buyers who purchased their homes with unconventional loans, or mortgages that start out with extremely low payments and in some cases allow borrowers to rack up more debt than equity, also raise concerns about the stability of the housing market, Rosen said. "Anyone who could fog a mirror could get a 105 percent loan," he [Rosen] said. "And that means anybody.”
So there, take that sellers. The long, drawn-out decline you have to look forward to is all your fault. LOL. Of course, no mention of the part real estate agents and their ilk played in the irrational run-up in prices. Let's not forget the fearmongering. Let's not forget the myth creation. And let's not forget the shameless lies of David Lereah.

Sunday, November 19, 2006

Updated September, 2006 Results for Marin

Remember back when I reported Marin County results for September, 2006 and DataQuick was reporting that Marin "appreciation" was up +1.4%? Well, I just noticed that number for September, 2006 was revised downward to -1.24%.



According to DataQuick these two tables represent sales of the same things: SFRs, condos, townhouses, new houses.

I wonder what October, 2006's results will get revised to?

"Buyers Have the Power"

From The Chronicle (emphasis mine):
Meanwhile, the decline in new-home sales in the Bay Area has been apparent in Contra Costa County, where the price of a new home fell 20.5 percent from $717,000 to $570,000 between October 2005 and October 2006, according to DataQuick.

The market is strongest in the South Bay, where developers say they are offering few, if any, price breaks.
The article also mentions that in the Sacramento area new-home prices have fallen more like 33% presumably due to the greater supply there.

In both areas builders are saying "Buyers have all the power at the moment". At the moment? Buyers have always had all the power because they are the ones with the money.

It seems worth reiterating Marinite's Rules for Buyers (with help from Athena in Sonoma):
  1. First, as a buyer, realize that you have the money and so you have the power. You dictate the terms of the deal.
  2. The asking price is not the price that you should pay. It's the price the seller hopes (for whatever reason) you will pay. It is the "wishing" price; the greater fool's price.
  3. Understand that the actual sale price is not determined by what the seller owes or by how much the seller wants to profit; the sale price is determined only by what you, the buyer, is willing to pay.
  4. Figure out how much that Marin house you are interested in cost five years ago when Marin was just as special as it is now, when the sky over Marin was just as blue, the beach was just as close, people wanted to live here just as much as now, the constraints of "no more land" were just as constraining as now, the weather was just as nice as it is now, the intangibles were just as intangible, and incomes were about where they are now.
  5. Adjust that price from five years ago by +25% to conservatively take into account five years of inflation. If improvements were made, adjust the offer price by how much those improvements are worth to you now, today and not by how much it cost the seller to put in those improvements. You are done; that's how much you should offer to pay.
  6. Don't worry about angry or so-called "insulted" sellers or even an embarrassed agent. Who the heck cares? It's not your fault if the seller overpaid for the house and/or HELOCed out most or all of their equity and don't want to sell for less. Why should you overpay just because the seller did? If the seller overpaid (or even squandered their equity), you are not obligated to do the same nor are you required to absolve them of their foolishness by paying off their debt. If they paid for their lifestyle with funnymoney how is that your problem? It’s not, so don’t pay for it.
What we really need is a way for buyers to network and work together. Sellers already implicitly work together via comps. Buyers need something similar. Maybe online tracking of offers made on a house (low-balls and all). That way a potential buyer could see for any particular period of time how much the average buyer thought the house was really worth in comparison to the seller's "wishing price". And of course, any incentives that were thrown in need to be recorded and made available and reflected in the comps.

One thing I can say for sure: If it was me out looking to buy a house in Marin today, I wouldn't even bother to consider a house that was purchased within the last five years or so. Why? Because anyone who bought in Marin in the last five years bought into bubble pricing and cannot cut their asking price to where it needs to be without selling for less than they owe. Such sellers will not negotiate and I wouldn't waste my time with them. The sellers who are willing to wheel-and-deal are the ones who bought more than five years ago (and presumably who also didn't extract all of their equity to live beyond their means). But that's just me.

Saturday, November 18, 2006

Time Bomb

TIME-BOMB: America's Debt Crises, Causes, Consequences and Solutions

TIME-BOMB is a powerful new documentary that puts the spotlight on America's exploding national debt and the fact that our leaders are risking our economic future through shortsighted fiscal policies. With each passing day that we do nothing to address our twin deficits, we increase the chances that we will soon be facing an economic crisis of major proportions. TIME-BOMB shows why the hard-earned assets of all Americans are at risk and, on a more profound, level shows why Democracy itself is threatened...
Thanks to the reader who sent this in.

Bottom? What Bottom?

Regarding the US market, this is food for thought:
...Indeed, if the bulk of the housing recession is behind us, then this would go down in post-war history as one of the shallowest housing corrections on record.

This week, the news out of the Homebuilders belied the "Housing is Bottoming" meme. The simple truth is that 46 year low interest rates (~5.125%) created a generational boom in Housing construction, sales, investment, and speculation. Now that rates have increased as much as 40%, and home prices have nearly doubled in 7 years, all the while inventory built to record levels -- the blush is off the rose.

How likely is it that this housing correction will be milder than average? To answer this we need to first determine whether the current housing cycle is less extreme than prior cycles. If you look at the dollar-volume of single-family home sales to GDP (chart 2), you will notice that this is hardly the case. The dollar-volume to GDP ratio reached a record high 16.3% in 2005, almost double the median percentage of the entire series dating back to 1968.

So, the current housing cycle isn't less extreme than prior cycles, but is the correction near the bottom? Not according to the supply-demand balance. Chart 3 shows the year-over-year percent change in single-family homes for sale vs. the year-over-year percent change in single-family homes sold. In September of this year, homes sold fell 15.7% year-over-year while homes for sale increased 30.4%. The sold - for sale spread in September was minus 46.1% - the most negative spread ever except for minus 53.2%, which occurred in July.

More charts, more discussion. Check it out.

And from the Nouriel Roubini's Blog:
For the last few weeks and months I have been writing dozens of detailed notes and blogs (see my latest here) rebutting the utter nonsense that has been spewed - based on little or no data - on the alleged bottoming out of the housing recession. Even Alan Greenspan - the allegedly careful reader of macro data - had joined this cheerleading clown show and the NAR spin of half-lies that "we are near the bottom of the housing recession". The actual data that were coming out of the housing market in the last few weeks were clearly inconsistent with this cheerleading non-sense and spin. So, maybe these delusional optimists will now shut up for a while and listen to the numbers after today's announcement that housing starts fell over 14% last month and that they are now at their six year low. Even worse, building permits, that are THE leading indicator of future housing activity, fell further by 6.3% and they are now at their lowest level since 1997.

And even at these low levels of permits and housing starts the housing sector is nowhere near its bottom. In previous housing recessions, housing start fells as much as 40% to 50% from their peak; so, with starts now being only 27% down, the housing bust has still a very long and ugly way downward to go. And lower permits today mean lower housing starts ahead, and lower starts mean lower construction and lower construction means much lower construction jobs; expect over 800K jobs to be lost in housing in the next year.

So beware of the new spin that you will hear soon claiming that, with starts now down 27%, the bottom of the housing bust is near; building permits and housing starts are likely to fall at least another 20% in the next 12 months before any bottoming out of the worst housing bust in the last five decades is reached in 2008.

Be One with the Herd

I found this comment left over at Mish's blog. It recaps fairly well the situation as far as I am concerned. As long as "suicide loans" are made easily available to anyone "who can fog a mirror" then people will take them, the housing bubble will be allowed to persist, even if at a slowing or flattening pace, until it doesn't work anymore. In the meantime society has to deal with declining affordability/ludicrous pricing (which matters only to those folks who don't want to use "suicide loans" or who want to own for the long term or who, for whatever reason, are not buying a house to speculate with).

You either become one with the herd, party now, and share their fate... or not.
As far as people still buying into this market, why not? Prices are flat or dropping (price pause?) People, if they are still breathing, can still get 0% down along with ARMs to make the numbers. What is there to risk? The bank or Credit Union takes the risk. They then pass the worst of it on to the GSEs, who then pass it on to the hedge and pension funds. So with no skin in the game there's nothing for the home buyer to loose. You get a tax deduction and a nice place to live with no neighbors 10 feet away, unless you buy in CA., then your neighbors are five to six feet away. When you go underwater you just get up and walk. I saw it happen in Palmdale CA in the '80s. Now days there's a little glitch in the works. I'm hearing that the balance written off by the lenders will be classified as a gift by the IRS and taxed accordingly. Are these new buyers aware of this? Gee, in all the excitement of buying a new home do you think this little tidbit is over looked? Anyway, all this will not end till the banks and other lenders take it in the shorts via defaults. Then theres no telling how far the FED will go to help the banks. The S&L crises was patched (covered?) up and the S&Ls were liquidated. There will be no end to the game untill that 6 sigma event happens. According to the Mogambo (11/1/2006) the banks have reserves of $40 billion to cover savings deposits of $5.5 Trillion. That works out to $0.0073 (or .73 cents) per dollar. Hope everybody does not need their money at the same time. I think this time the banks will be the epicenter and the shock waves will reach out all the way out to the hedge (dervative) funds which had a $344 trillion turnover value in the 4th quarter of 2005. (Again, Mogambo 11/8/2006.) That works out to an annualized 1.4 Quadrillion dollars. Makes me dizzy.
By the way, the reference to "Mogambo", or more properly "the Mogambo", is a reference to one of the main writers for The Daily Reckoning.

* * *

This company makes loans to people who need to pay their bubble-inflated property taxes but can't. Ah hahahaha! I'm sorry, but I have little sympathy for such people. Nope. No bubble here. Move along...

Thursday, November 16, 2006

Where is Honesty in the US?

The Record reports from New Jersey. “When the housing market gets tough, sellers offer incentives. In Demarest, builder American Properties of Iselin is offering to park a Maserati (worth about $125,000) in the garage for any buyer who forks over $2.2 million to $3.6 million for a new luxury town house in a 34-unit complex in a French chateau style.”

“Offering the car is better than simply cutting the house price by $125,000, said spokeswoman Karen Kessler, because ‘our buyers are not looking for a bargain; they’re looking for some pizazz and some excitement.’”
So is that how the wealthy think? Now we know. They don't care about how much they spend on something (like houses); they're too bored; they just want pizazz. Now we know why the median sales price is such a useless measure in Marin.

* * *
Why can’t we in the US get some of this honesty (emphasis mine):
Banks told to predict effects of a 40% crash in house prices

BANKS in the UK have been ordered by financial regulators to assess how they would cope in the event of house prices crashing by 40 per cent.

The instruction to include a housing slump scenario in their stress-testing models comes after the Financial Services Authority found that some banks were failing to include gloomy enough assumptions in their modelling.

The FSA said yesterday that an “appropriate” benchmark was to assume property prices fell by 40 per cent and that 35 per cent of mortgages in default ended with homes being re-possessed.

It stressed that this was not a forecast but a “severe but plausible scenario” and one that banks should examine when deciding how robust their balance sheets were.
Or maybe some of this honesty (emphasis mine):
‘South Korea’s finance minister apologized Wednesday for the failure of the government’s real estate policy. In a press conference, Minister of Finance and Economy Kwon O-kyu unveiled another set of measures to cool down the real estate market. ‘I would like to take this opportunity to apologize to the public and the people who do not own houses for the recent surge in housing prices,’ Kwon told the nationally televised news conference…
I guess for honesty in the US we just have to make do with this: David Lereah (National Association of Realtors chief (so-called) economist) says price drops of as much as 40% in California and other bubble markets are “nonsensical” yet he can’t offer his own prediction (of which he has never been short of before so what's the problem now?), while at the same time saying that one has to look to the Great Depression to find a housing market as unique as our current market.

Did Lereah actually equate today’s housing market to that of the Great Depression? That makes sense given how well the economy supposedly is yet housing is faltering in pretty much all bubble markets. I mean, if this market is as good as it gets now when times are good, what happens when the economy goes bad as it eventually must? Do you really want to be holding on to over-priced housing when the day of reckoning comes a knockin'?

October, 2006 Results for Merry 'ol Marin

So here is the tabulated data for October, 2006 care of DataQuick:

One thing I'd like to know about the above data is how is it that for 6 out of 9 Bay Area counties the YOY percent change in the median price is negative yet for the entire Bay Area it's 0%? Something doesn't add up.

Anyway, here is the price "appreciation" history, based on data like the above, according to DataQuick:

This is what DataQuick had to say about their results (emphasis mine):
Bay Area home sales held steady at a five-year low in October as buyers and sellers circled each other in a game of wait-and-see. Prices remained flat...

A total of 7,979 new and resale houses and condos were sold in the nine-county region in October. That was up 0.9 percent from 7,907 for the month before, and down 24.1 percent from 10,508 for October last year...

Last month's sales count was the lowest for any October since 2001...

"The market is in the midst of its post-frenzy rebalancing phase. The sky is probably not falling, as some have predicted. But there will be those who bought near or at the peak, and who could find themselves in financial trouble if they need to sell and move sooner than they had planned," said Marshall Prentice, DataQuick president.

Indicators of market distress are still at a moderate level.
And here is what the surprisingly candid Marin IJ had to say about DataQuick's results (emphasis mine):
The median single-family home price in Marin County rose slightly in October, reflecting a housing market that was stagnant but at least not declining, a leading research firm reported Wednesday.

The median home price was $915,000 last month, compared with $914,250 in October 2005, according to DataQuick Information Systems of La Jolla. Single-family home prices in Marin declined 3.3 percent from September 2005 to September 2006.

Median condo and townhouse prices in Marin rose from $530,000 in October 2005 to $552,000 last month, DataQuick reported. That represented a 4.2 percent year-over-year increase, helping to pull Marin's overall real-estate market up 3.3 percent.

[Patti Cohn, a broker with Frank Howard Allen said] "It's [the Marin RE market] turned over. We're probably going to be [in] a flat cycle for several years, but at least it's stabilized and buyers can feel confident it's not going down any more."
So according to the Marin IJ YOY SFR results for September were down -3.3% and were flat YOY in October. Thus, the only reason DataQuick can report Marin being up 3.3% in October is because condos were up YOY in October by 4.2%. So in other words, if you were trying to sell a Marin SFR in October you were probably bumming unless you were selling one of the nicest of the nice in the nicer locations.

Ok, moving right are Vision RE's results (a subset of the overall Marin market):

And here is what Vision RE had to say about their results:
Home Sales Bounce Back in October

So much for the "seasonal" slow-down! Home sales gained 24.7% over an abysmal September. Year-over-year, home sales are off 15.1%, and year-to-date sales are down 18.8%.

The median price for single-family homes also rebounded in October, gaining 6.6% to go back over $900,000. The median price is now 0.2% higher than last October. The average price for homes fell 4.5%, an annual gain of 2.2%.

Condo sales plummeted 14.3%, but were flat compared to last year. Condo prices also fell with the median price down 0.3% to $548,750 and the average price dropping 1.1% to $588,210.
Now, is it just me or is Vision RE trying to claim the opposite of what DataQuick and the Marin IJ are saying? And are terms like "bounce back", "rebounded", "so much for...", etc. really what a sane person would use? I'm sorry, but I think Vision RE has hit a new all-time low for shameless, unabashed public relations-isms. If it were not for the fact that Liz McCarthy now works for them I'd have lost all respect for that organization. But I am grateful that they publish their data, such as it is.

Just for fun, here are the YOY percentage median price "appreciations" for all of Marin County from Vision RE's own tabulated data (which I save each and every month). When I had a whole year's data I show that whereas for 2006 I switch over to monthly data (and no, I am not hiding January, 2006's data; I just don't have it for some reason):

Now that (the above chart) is pretty dang pathetic if you ask me. That is Vision RE's own data! I mean, this is Marin after all, MARIN! I think a more somber tone is more appropriate than their upbeat wording.

And lastly, here is my historical chart of the percentage of SFRs advertising "price reduced" care of ZipRealty:

Looking at this overall, it seems to me that there was some pent-up demand last month as people were not sure about the Marin market and so held off buying. But they came in at the last moment before the holidays. Sales were way off again YOY (how many months in a row is that now?) and that excess inventory will likely be added on to the market next year in addition to the "normal" inventory that one can usually expect. And lastly, for an economy that we are told is doing just fine, inflation contained, salaries and wages on the rise, jobs aplenty, mortgage rates are still low, suicide loans (which we here in the Bay Area are so dependent upon) are still widely available, and everything is essentially peachy-keen economy-wise, then why are the housing markets in the Bay Area faltering? Why are foreclosures way up?

Sunday, November 12, 2006

Californians Say "Party On and Let Our Kids Pay For It"

Nothing needs to be added to the wisdom of the Mish re California's passing of a boatload of bond measures this past election:
"Voters in California approved all $43 billion in bonds they were asked to consider this year..."

Anyone voting in favor of those bonds wants something for nothing. Did voters think for one second about how all of this will be paid and what it truly means? The answer should be obvious. Californian's have no chance in hell to be able to afford this. Housing is slowing, there is an exodus of citizens from California, cities like San Diego are technically bankrupt, property taxes are capped, and the US economy is headed for a recession.

What California did is deeply immoral and economically suicidal to boot. But once again, as long as total toxic waste like this keeps getting a bid, things will appear to be OK. Inquiring minds may be asking "Who is buying this junk?" The answer is state and federal pension plans, all sorts of government bond funds, and hedge funds chasing yield without any regards as to risk.

Rest assured a massive "Credit Event" is coming. When it happens, no matter how bad it seems at the time, try to remember that it will be a good thing. Unless and until there is a total and complete repudiation of these excesses, the ultimate consequences will just keep rising. The sooner we have a debt purge the faster the recovery will be. Japan fought deflation for 18 years. Is the U.S. doomed to follow suit?


No, this is NOT the golden age of financing, unless of course you have been investing in gold on account of it. Consumer credit did turn down, but the next question (assuming this is not an outlier) is: "Will total credit follow?" For a county so totally hooked on "borrow and spend" the consequences will be enormous when (not if) it happens.

Saturday, November 11, 2006

Schadenfreude With Facts and Figures

Even though we in Marin don't have many of what I think of as "McMansions" it still gets me thinking of all those supposedly "green" 5000 sq ft+ houses on acres of Marin hill tops with their non-native landscaping... Anyway, below is an edited-for-my-personal-standards-of-decency version of the article; you can find the original here.

McMansions Are For McIdiots

November 10th, 2006

Is anyone else as gleefully excited by the housing bubble burst as I am? I mean far be it for me to delight in the misfortune of others, but—

Ah, who am I kidding? I revel in the misfortune of others (especially if those on the receiving end are well deserved morons) and this real estate crash is punishing fiscal idiots left and right. Trends like this are how I know there’s justice in the world.

One of my favorite things to do is to go to open houses for the many, many McMansions in the area. Often, I am the only one to show up and the strained, panicked look on the realtors’ face pleases me to no end. They actually think I’m dumb enough to buy one of those dumps!

When are people going to realize square footage is not indicative of a nice house, but instead, a hindrance? What is the point of a dinette and a formal dining room? How many times a year do you actually use the formal one? Once on Christmas and once on Thanksgiving? What about a den and a great room? I’m sure you get... tons of use out of that great room, don’t you? How about a four bedroom house when you only have 2 kids? I bet that’s useful, huh? Three and a half baths? How often does everyone in your house need to use the restroom at the same time? Sunroom? Library? Playroom? Two offices? Three car garage and only two cars?

All ridiculous status symbols disguised as sound investments. I hope your neighbors are... [thanking you big time]... considering how much you’ve paid for the address, buddy.

If you need further proof that owning a McMansion is financial suicide, try the following experiment. You will need:

Measuring Tape
Debit card

1. First, calculate the total cost of living in a house of your size including mortgage, taxes, electricity, insurance, and gas. This is number A.

2. Using your measuring tape figure out the square footage of all the rooms in your house that are not in use daily. Subtract this from the total square footage of your house.

3. Now, using your telephone, call and find out the total cost to own a house that is the smaller square footage. Include the mortgage, tax, average gas and electric bills. This is number B.

4. Again, use your calculator to subtract number B from number A. Write down the dollar amount.

5. Now, go to an ATM and using your debit card, withdraw the dollar amount you calculated in step 4.

6. Bring the money home and put it in your kitchen sink. Using the lighter, set it all on fire. You heard me right. Set all that money on fire.

Oh. You don’t want to do that? Why not? You’re doing it now every...[fricking]... month.

Don’t stop there; you’re not finished yet! Now you’ve got to calculate the cost of furniture to put in all those rooms you never use. Go ahead and set that money on fire, please. Oh, and the pictures on the walls and the window...[fricking]...treatments? That’s right, into the fire pit with that money, too.

Feel good about that McMansion yet? I guess now is not a good time to remind you that even rooms that you never use still need periodically cleaned, dusted and vacuumed. I’ll let you just calculate that little inconvenience all on your own.

The icing on cake is that people who didn’t calculate the full cost of their status symbol before putting themselves into debt are now forced to sell in a market where houses like theirs are sitting empty because savvy homeowners want no part of them.

I guess the neighbors...[didn't thank you well enough] after all.

Thanks to the reader who sent this in.

Marin, Welcome to the Down Side of the Housing Bubble

Consider this Kentfield house:

(Click on image for a larger view)

The above listing languished on the market for well over 200 days. It was then taken off the MLS, relisted, and it's new DOM statistic now shows less than a week. The sellers are currently asking $1,895,000 -- $1,000,000 off the original asking price -- a 35% reduction from the original asking price, and it still hasn't sold!

When this house was taken off the MLS and then relisted, it appeared as a brand new listing, its DOM statistic reset, and it's pricing history was effectively erased to all but the most inquisitive people. Shouldn't the pricing history of such houses like this one be made easily available to anyone thinking of buying a house? Isn't this pricing history useful and relevant information to buyers? Can this (resetting the DOM statistic, that is) be considered a long-entrenched form of fraud or at least deception? When will the buyers' interests be more fairly represented in this pro-seller system of buying and selling houses that we have?

So which is it? A new listing or a 233 DOM listing that has gone stale?

Bottom line: Until we have a system that treats buyers' interests equally to those of the sellers', if you are thinking of buying a house in Marin, do your homework first. All the information you need is on the Internet (as reviewed elsewhere on this blog):
  1. Find out how long the house you are interested in has really been on the market.
  2. Find out what its real original listing price was.
  3. Find out how much the sellers owe on the house and if you can, what kind of loan(s) they have.
  4. From the above you can determine how much the sellers can really afford to sell the house and how desperate they are.
  5. If what you think is a reasonable offer is below the seller's break-even point, don't make an offer, just move on. There's plenty of inventory out there and Marin sellers are still in denial and feel entitled to their asking prices.

The more information you have, the better you can make an informed decision.

Thanks to the reader who sent this one in!

Tuesday, November 07, 2006

Trick Or Treat?

I just noticed this:

Price Reduction History:
Price Reduced: 07/13/06 -- $1,495,000 to $1,395,000
Price Reduced: 08/29/06 -- $1,395,000 to $1,295,000
Price Reduced: 09/15/06 -- $1,295,000 to $1,245,000
Price Reduced: 09/21/06 -- $1,245,000 to $1,199,000
Price Reduced: 10/02/06 -- $1,199,000 to $1,050,000
Price Reduced: 10/20/06 -- $1,050,000 to $945,000
Sale History
10/18/1994: $418,500
02/27/1998: $430,000
That's a 37% drop in the asking price for this over-priced 5 br 3 ba (although Zillow has it at 3 br 3 ba), built 1979 house. The assessed value is $515,920 so I am guessing these owners can afford to reduce the price a lot more. That's the sort of information you need if you are thinking of making a sensible offer on this house.

Monday, November 06, 2006

Fed Admission and Updates on Some Favorite Marin POSs

Kudos to the Housing Panic blog for this find.

Apparently, one Fed member admits that the Fed caused the housing bubble. This is news-worthy to me only because back in August the Greenspan Fed published a very academic paper that they used to pull a Pontius Pilate on us -- to wash their hands of any responsibility of causing the housing bubble.
In an apparent and rare in-house critique, the president of the Federal Reserve Bank of Dallas said that because of faulty inflation data, the Fed kept interest rates too low for too long earlier this decade, fueling speculative housing activity.

Mr. Fisher noted that subsequent revisions show PCE inflation was actually a half a percentage point higher than originally estimated. "In retrospect, the real Fed funds rate turned out to be lower than what was deemed appropriate at the time and was held lower longer than it should have been," Mr. Fisher said.

"In this case, poor data led to a policy action that amplified speculative activity in the housing and other markets. Today...the housing market is undergoing a substantial correction and inflicting real costs to millions of homeowners across the country. It is complicating the [Fed's] task of achieving...sustainable noninflationary growth."
Greenspan was recently heard muttering these words which the NAR has made much ado about:
"This is not the bottom, but the worst is behind us"
He must be talking about the rest of the year. If so, I have to agree with him. But what happens when houses come back on the market early next year? Will buyers' opinions have changed? Will suicide loans look good again? Will those million dollar Mill Valley POSs look like a good deal again? I don't know; anything could happen. I do expect a "dead cat bounce" in Marin next Spring. But that's just me.

Later, this was dropped on us:

Greenspan also touched on the potential adjustment in loan costs for home buyers with nontraditional mortgage products.

While some individual buyers may feel the pinch as their payments rise, Greenspan said those changes were "very unlikely to have a macroeconomic effect."

I don't know if Greenspan used the word "pinch" or if it was chosen by the writer of the article, but either way I don't think the people who are foreclosing on their homes would consider themselves "pinched" exactly. But I am sure he is right that there won't be much of an impact of these "pinched" buyers on the broader macroeconomic scene. Just MHO.


Remember this beaut in San Rafael? The one that overlooks the San Rafael industrial landscape? You know, the one that was featured in the New York Times so long ago? Well, despite the fact that we are in the "off season" it is still on the market with yet more price reductions. So I guess that "job transfer" to Atlanta wasn't all that urgent or are they holding two mortgages now?
Price Reduced: 06/06/06 -- $1,695,000 to $1,649,000
Price Reduced: 07/06/06 -- $1,649,000 to $1,625,000
Price Reduced: 07/12/06 -- $1,625,000 to $1,575,000
Price Reduced: 07/27/06 -- $1,575,000 to $1,535,000
Price Reduced: 09/03/06 -- $1,535,000 to $1,499,000
Price Reduced: 10/02/06 -- $1,499,000 to $1,395,000
That's a drop of 18% from the original asking price. Not much. I expect ultimately twice that. But anyway, sellers can ask whatever the heck they want. What it actually sells for is another matter. Buyers set the selling price, not the sellers.


And my all-time favorite yellow POS on Shoreline (the one across from the 7-11) is still for sale too. What a surprise. They haven't lowered the asking price since the last time I blogged it but that is no doubt due to the fact that the asking price is still right around their break-even point which is way more than a sane person wants to spend for that dinky, noisy shack.

So Mr. Seller: what's it like fearing that you will never sell that piece of shister without taking a loss? Are you praying each and every night, making solemn deals with God (or in Mill Valley is it Buddha, Krishna, purple crystals, or whatever?) to be a better person and all that as long as He gets it sold? Are you doing the whole St. Joseph thing now? Inquiring minds want to know what it's like to be another Marin FB. After all, this is God's Country dontchya know. Not being able to sell overpriced housing is not supposed to happen here.


And finally, this one is still on the market too. Same asking price. Hasn't budged. Same story -- they are at their break-even point and can't go any lower without taking a loss.

Mr. Seller: same questions to you as above.


Yep, I'm definitely in a belligerent, irreverent mood tonight.

Sunday, November 05, 2006



Here are the five stages of the Bay Area housing grief:
1. Housing bubble? What housing bubble? A national severe price distortion (in housing) seems most unlikely in the United States. (Alan Greenspan, October 2004)

2. Theres a little froth in this market, but we dont perceive that there is a national bubble. (Alan Greenspan, May 2005)

3. Housing is slumping, but despite what you hear from some of the Eeyores in the analytical community, a recession is not visible on the horizon. (Richard Fisher, president of the Federal Reserve Bank of Dallas, August 2006)

4. Well, that was a lousy quarter, but I feel good about the U.S. economy, I really do. (Henry Paulson, the Treasury secretary, last Friday)

5. Insert expletive here.
And for those who prefer something a little closer to home, click here.

Some Ideas on Countering NAR Propaganda

Oh, and do you want to do something to counter the NAR's propaganda campaign? Here's some ideas (share your own):
  1. Paste links to bubble blogs in popular on-line forums like craigslist, etc. Do the same to RE agent blogs.
  2. If someone in the MSM (that's "main stream media" by the way) writes an article that strikes you as honest and truthful about housing and is not just towing the party line, then write the author a letter/email praising him/her. Reinforce good behavior, punish bad.
  3. Write a letter to the editor of your local news paper. In the letter, include links to your favorite bubble blogs.
  4. If you have actually read one of David Lereah's books, go to and write a review of it. In the review, drop links to your favorite bubble blogs.
  5. Go to open houses. Print your name (or a name anyway) and leave the URL to a bubble blog.

Saturday, November 04, 2006

My View From Some Trail on Mt. Tam

At some point in time during the last few years real estate prices became unhinged from their fundamentals (rents, income, etc.). People willingly paid what they knew, either consciously or not, were ludicrous prices for houses for no other reason than the belief that prices would continue to increase and, if worse came to worse, they could always sell their overpriced asset for more than what they paid; there'd always be some "bigger fool"; right? At least, that's how a lot of people rationalized it to themselves. Friends and relatives saw other friends and relatives seemingly making money and so they wanted a piece of the action too and dove into the frenzy with full gusto. Never mind the fact that higher prices only benefit people who are willing to sell and then either buy down, move some place less expensive, or rent... or people who were speculating with something other than their primary residence. This cycle was repeated over and over and fed back into itself with the final result being that real estate entered into a speculative mania seemingly with a life of its own. I think we can now all safely say that the real estate market is in fact a speculative financial bubble the likes of which the world has never seen.

The main stream media were there front and center fueling the hype by publishing a disproportionate number of articles that reinforced what people wanted to believe and what their sponsors wanted people to believe; no care was given to the risk people were taking nor to the cost to society. Prominent RE talking heads with seemingly impressive credentials, like David Lereah (who is labeled as "chief economist" of the National Association of Realtors but who, IMO, is more properly labeled as "chief salesman" for the NAR), gave seemingly rational reasons for why the mania made sense and why everyone should be jumping into RE without asking questions -- debt is the new wealth, so don't worry about it; if you paid off your mortgage then you were doing something wrong. No one bothered to point out that such people have a vested interest in promoting that particular point of view. Lereah even published three books to make his case (the themes of which seem to change as the housing situation changes) and to make a few extra dollars for himself -- "Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade", "Why the Real Estate Boom Will Not Bust -- And How You Can Profit From It", and more recently "All Real Estate is Local: Why Understanding the Housing Trends in Your Area Is Essential to Building Wealth". Leslie Appleton-Young (chief economist of the California Association of Realtors) was there too spewing the self-interested party line. Even your local realtors and agents were there saying the same things. Everyone in the entire RE industry was doing what they could to bolster what they wanted you to believe. Everyone was gambling and everyone was making money and so who cared? It's different this time, right?

And as long as prices kept rising, it all made sense; it worked, at least for those willing to play with fire.

And so here we are. I ask you, what is worse...that prices fall to levels that make sense in terms of fundamentals, such as income, or that they stay where they are at the utter extreme of unaffordability for many years to come?

I was out walking today. I sat down at the side of the trail and wondered to myself why I started blogging. I wondered why do people care whether or not I stop blogging or even slow down? Why did I start blogging anyway? I certainly didn't start out wanting to be a blogger. The last thing I want is notoriety or fame or public attention. And I don't entertain grandiose notions that I can actually affect the course of the housing market. As one callous reader said, any inane person can start a blog. I'm not a particularly good writer and I certainly don't have profound insights like some of the bloggers over in the right-hand margin of this blog (e.g., Mish, The Mess Greenspan Made, Charles Hugh Smith, iTulip, and too many others). Nor do I have access to privileged data. I guess I was a bit disturbed by the fact that my blog (and many others) was recently mentioned in SFGate. It's just that like a lot of people, I woke up from "the Matrix", questioned my assumptions and what the so-called experts claimed as the truth, spent a lot of time collecting the data that the RE industry doesn't want anyone to have access to, and wanted to share it. And the fact that I owned property during the last RE bust and lived through the Bizzaro World that was the NASDAQ stock bubble didn't hurt either. Someone once left a comment on this blog (or was it an email; I forget) that said that I was the only rational voice in Marin. Ha! I'm sorry, but no, there surely are a lot of people in Marin who see the absurdity of our RE market but who just kept their mouths shut. I started blogging because I wanted to share what information I had and because I wanted us to return to a world where houses are seen as places to live, to raise a family in, and not as objects of speculation or an ATM. I want to again live in a world where a person does not have to earn a top 10% income to even begin to hope to afford a median (or is it now less) priced house in a run-down "working class" neighborhood. My esteemed (and opinionated) fellow blogger, Keith of the Housing Panic blog, said it well:
I want an America where a young couple out of school can save for a down payment, take out a 30-year fixed, and for a reasonable share of their monthly income buy the house of their dreams again. A place they can raise a family, and make a home.

I don't ever in my lifetime ever want to see people treating houses as get-rich-quick lottery tickets. I'm sick of watching over-consuming Americans, and their obsession with physical things, and how they look to others.
In a way, I am proud to have taken a stand. This real estate bubble will be talked about and analyzed for generations to come. It will be one of the prominent text book case studies in future economics courses. It may even be a defining moment for us as a society. Who knows?
There is now a propaganda war being waged by the real estate industry. I am not going to go to a lot of effort to prove it to you but it's true all the same. As just one (glaring) example: the National Association of Realtors has been waging a propaganda campaign for some time now with the sole purpose being to get buyers to come back in to the market and start buying again.

I ask you, if house prices are justifiable based on sound economic fundamentals, if incomes are rising, inflation contained, the economy is doing just dandy, if people are moving here in droves and they aren't making any more land, then why is it necessary to appeal to emotions and popular mythical talking points to get people to buy?

This is what our own Peter Sealey of the Sausalito Group, Inc. had to say about the NAR's latest propaganda campaign: "It’s preaching to the choir and goes in the face of objective reality"..."‘I predict it will have zero effect on the marketplace."

Some RE professionals are even blaming buyers now for their RE woes.

And as a reaction to bloggers, many RE professionals have suddenly become hip having discovered blogging which, after reading quite a few of them, seem to be nothing more than a new attempt at "spreading the faith", to promote their pro-sales talking points. And never mind that comments made by readers who disagree with the RE-affiliated blogger are generally deleted.

Even the Marin Independent Journal now has a real estate blog that is run by the Marin Association of Realtors. There you will find all sorts of reasons for why Marin is special, different, and immune to price declines...the data be damned. There you will not find any mention of facts such as that this speculative mania in housing was fueled by loose lending standards and a seemingly endless pool of credit all of which is agnostic to location. And if ever there was reason to believe that the Marin IJ is in bed with the local real estate industry, that the IJ is the local RE industry's poodle, then its allowing itself to be an exclusive forum for industry blogging has got to be it.

The fact is that realtors are hurting; buyers are no longer buying at a rate that supports their commission-based income. In general, most of them don't care about you, about whether you can sell for a profit, about whether you can really afford that suicide loan. They don't give a damn about declining affordability. They care only about their commission and to get that commission, a sales transaction must be made. You see, the RE markets are finally changing. Buyers seem to be finally, slowly waking up from their debt-intoxicated slumber and are realizing or finally admitting to themselves that it no longer makes sense to pay ludicrous prices for houses; why take on insane amounts of debt when houses aren't appreciating at a rapid clip anymore? When the time comes to sell because of some change in one's life circumstances, how can the debt be repaid during the transaction? And so buying has slowed down and realtors and agents are whining about it. Hence, the propaganda campaign.

Real estate markets in the "bubble zones" are stalling/falling from their own weight. They are not falling because of rising mortgage rates (they are still relatively low). They are not falling because lenders have finally grown a conscience and are tightening lending standards (such tightening is still a "work in progress"). They are not falling because the rates on ARMs are resetting (only the first wave is resetting). They are not falling because suicide loans are no longer popular and, frankly, a necessity (something like 80% of loans last year here were some form of suicide loan). No, the markets are falling because prices have gone so far beyond absurdity that they are at last exhausting themselves. Just imagine what will happen when mortgage rates do reach significantly higher levels, when lending standards really are tightened, when ARM rates reset en mass.

Below is a graph showing the number of properties in some stage of foreclosure in Marin -- like the rest of California, there has been a steep increase in foreclosure activity. The data for the following graph comes from RealtyTrac. Unfortunately, I only have the RealtyTrac data broken down in this way for July and November of 2006; it didn't occur to me to start collecting this data in a more systematic manner until recently. I will now be collecting this data on the first day of each month so as to track Marin foreclosures as rates begin resetting and Marinites struggle to sell their over-priced POSs at their break-even point. I should also say that these data are consistent with the Marin IJ's report in late October where the headline read "Foreclosures Spike in Marin".

According to ZipRealty SFR inventory is about 35% above normal for this time of year and 54% of all SFRs currently on the market, more than half, are currently advertising "price reduced".

And so is this what we have to look forward to? People losing their homes, ruined credit ratings, going into bankruptcy just because we have an RE industry that is engineered to push prices ever higher? An industry that sides with the seller with almost no representation of the buyer's interests? Is this right? I only hope that when the pain reaches its maximum that there will be some meaningful effort to restructure and regulate (or something) the RE industry so that it fairly balances the interests of both buyers and sellers.

I wanted to work these quotes into the above post somehow but couldn't. I think they are quite telling, as relevant to Marin as any other housing market, and so worth reproducing.

The first is from the SacBee:
“Real estate agents have spent much of the year complaining that homeowners were in denial and refusing to cut their price despite daily evidence to the contrary. Many are still resisting. (Broker) Mike Lyon says the market may decline another 10 percent, and still sellers aren’t convinced.”

“‘About half the sellers are out in la-la land,’ he says. ‘That’s better than before. Half are serious and are starting to reduce their price. I still think only 10 to 20 percent of the market is priced to sell.’”

“That doesn’t surprise Barry Schwartz, professor of psychology and economics at Pennsylvania’s Swarthmore College, who has studied the issue. For most people, he says, the joy felt when investments such as housing gain in value is greatly outweighed by the pain felt when those same investments lose money, even when the loss isn’t real at all.”

“‘If the baseline is their initial asking price, then people are consigned to misery,’ Schwartz says. ‘They will feel their loss on what’s probably the best single financial transaction of their lives.’”

“One huge issue that most sellers don’t pay attention to: New-home builders are exempt from such personal distress. ‘They have the ability to discount more than you do,’ Lyon says. ‘They look at it more from a business sense, and it’s easy for them to cut prices because they’re not in love with their homes.’”
The other is from SF Chronicle:
“The number of permits issued for new-home construction last month tumbled in California, the most-recent piece of statistical evidence to show that the housing market has turned sour. Builders received permits for 11,590 homes, including houses, apartments and condos, in September, down 47 percent from a year ago.”

“More than half of the decline in permits issued statewide can be attributed to a decrease in construction in Southern California, particularly in San Bernardino and Riverside counties outside of Los Angeles, as well as in Sacramento and San Diego.”

“New housing permits in most of the Bay Area also declined. New construction permits in Alameda and Contra Costa counties fell 42 percent compared with a year ago, while new starts in San Francisco, San Mateo and Marin counties dropped 71 percent.”

“‘The first and sharpest corrections are always in new homes, because existing homeowners have the option of waiting and they are wedded to the price their neighbors got,’ said Stephen Levy, director of Palo Alto’s Center for Continuing Study of the California Economy. ‘New homes have a high carrying cost and developers need to move that inventory.’”
And this one on seller and buyer psychology (from psychologists and psychiatrists no less) found here on Ben Jones' blog is priceless (underlining mine):
“Behavioral economist say that those involved in real estate are not immune to the same pressures and need for conformity as, say, high school students sporting pompadours in the ’50s, love beads in the ’60s and platform shoes in the ’70s.”

“Real estate elation, too, inevitably faded, and fear now drives people’s actions instead. In this new era, nobody, it seems, wants to be the first on the block to lower their price, to be first among their friends to leap into a purchase. It’s in real estate, psychiatrists and economists say, that interesting psychological dynamics come into play. Terms such as ‘denial’ and ‘loss aversion’ begin to fill the notebooks of industry watchers and shrinks alike.”

“‘In a changing real estate market, buyers and sellers freak out and come up with their own strategies, which actually affect the market,’ said Christopher J. Mayer, a Columbia Business School economist. ‘Buyers waiting for prices to bottom out can cause prices to drop, and in the ’90s that led to a recession.’”

“So far, there is no recession, economists say, but there are signs of buyers and sellers slipping into well-worn psychological patterns, following their neighbors’ advice instead of solid economic fundamentals.”

“Once in, overextended buyers often become victims of ‘bubble thinking,’ said psychiatrist Richard Peterson. Buyers gamble that the value of their homes will increase, even if they’re losing money every month due to negative amortization loans and lack of equity actually accruing.”

Sellers are another story. The word ‘denial’ must have been created for them, psychiatrist Peterson said. As applied to real estate, denial is a condition in which sellers cannot bear to part with their homes for less than what they believe they’re worth, experts say.”
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