I can't believe my eyes. Does this mean we are not as "special" as we thought we were?From the Marin IJ:
As our economy falters because of the housing bubble and the erosion of the dollar’s value, there is less faith in this country’s economic soundness by our creditor nations.And this in the Sonoma Press Democrat:
A clear lesson is that we have for too long been living far beyond our means as a people and as a nation. We can no longer consume so much more in value than we produce.
Many in Marin are lamenting that real estate prices are skidding. We are ‘losing money.’ If we’re honest, we know that much of the equity in our overvalued real estate is ‘funny money’ based not on real values but on the speculative furor of the past decade.
Losing some of our shaky home equity is not the medicine we want. But perhaps it’s needed. It’s as true as ever that it’s better to live within our means and not go too much in debt - especially if it’s for all the wrong reasons.
"The entire real estate debacle is the fault of everybody that was involved. And it was all about greed and speed... The brokers wanted their commission. The lenders wanted their premiums. The borrowers wanted their homes."
40 comments:
Greed. Speculation. Shaky home equity. Wow. I was shocked too that the IJ printed this. Think maybe we're coming to the end of the denial phase here in Marin??
In San Anselmo, I am noticing far fewer people shopping at Andronico's, the town's more expensive grocery store...perhaps people are shifting to less expensive markets. I know I have. And the restaurants downtown look pretty slow as well.
I think as the year goes on, we're going to realize that all the remodeling projects we've seen and designer clothes and shiny new cars in the driveway had little to do with income and everything to do with MASSIVE amounts of debt. Even here in Marin.
BTW, the Marin Heat Index is still below .40.
Hooray!
Though the honesty is both too little and too late, it's still quite a relief.
The blanket denials in the mass media was really beginning to frighten me. I guess it still does.
HALLELUJAH! PRAISE THE LORD!! A moment of clarity from the Marin IJ.... Rare indeed
"Losing some of our shaky home equity is not the medicine we want. But perhaps it’s needed..."
...to keep Marin realtors in business!
--Just my cynical translation.
What jumped out for me was:
"If we’re honest, we know that much of the equity in our [Marin's] overvalued real estate is ‘funny money’ based not on real values but on the speculative furor of the past decade."
I thought we were the only ones who think Marin's housing market is overvalued due to "funny money".
Although it is a bit of fresh air, no doubt, in my view, it is still a little too little, too late..
I'll get excited and perhaps reconsider a subscription to the IJ when I see, in BIG, BLACK BOLD LETTERS, "MARIN HOUSING PRICES PLUMMET AND INVENTORIES SWELL AS BUBBLE HAS BURST LOCALLY"..
After all, if prices went up 10-15-20% from previous years (like they've since decreased from the peak), we sure as hell would see that hype in bold print on the front page...
"You've got your toe in the water IJ on this RE market and the reality of what's transpired around here and everywhere else in cA, so, go ahead, and plunge in with your whole body and tell the real story"...
This basically boils down to the fact that many smaller city newspapers got large amounts of advertising dollars from local RE agencies. Take our hometown paper in Alameda for example. For years it has had a large RE section that's really just a big advertisement disguised to look like a Newspaper. For years all you would see were shiny, exuberant articles written by RE agents about such-and-such featured home.
Even now, the section still remains with only minor changes to the format. The "featured house" is still there, usually some bungalow that of course is convenient to either local shops, schools, or what have you, and it typically has some astronomical wishing price attached. Many of the gushing RE articles about how great the market was doing have vanished and has been replaced by stories about RE agencies giving awards to one another. Lots and lots of "Agent of the month" type stories. Who freakin' cares?
It has only been recently that any mention that trouble is brewing is the that local schools got several million dollars slashed from the budget, which of course has all those parents who paid out the rear to live in beautiful, whitewashed Alameda and it's schools all in a tussy. I guess it might now be occurring to some that perhaps the state budget and it's tie to RE values is now affecting them directly, which is really sad considering that the kids have absolutely nothing to do with the greed and speculation of grownups.
One way or another, even supposedly perfect areas like Marin and so on are now feeling the effects and not admitting to this would make them look stupid.
The following is from Robert McHugh's newsletter:
"Probably the least inspiring quote of the day came from Treasury Secretary Hank Paulson. Yes, Paulson doesn't get a free pass here. Senator Charles Schumer, a Democrat from New York, asked whether policymakers underestimated the severity of the situation. Paulson's response, and I quote, "It's one thing to identify a problem. It's another thing to know exactly what to do about it." In other words, he doesn't have a clue. Just great. The Treasury Secretary of the United States of America doesn't know what to do about the most serious economic crisis in 80 years.
Probably the most accurate remark came from Senator Robert Menendez, a Democrat form New Jersey. He criticized the Master Planners for what he believed was a too slow response to the housing crisis. "We count on those at the top . . . To sound an alarm during a crisis. Instead what we got was a snooze button . . . We've been behind the curve." Yes, just like in the 1930s."
Senator Robert Menendez and Senator Dodd and the whole enchilada of them can kiss my backside... what the hell do they expect Paulson or BB to do ? wave a magic wand ?
All of them, especially Paulson and BB, carefully dance around the central issue, which is home prices are still far too high for Americans and this imbalance cannot be sustained.. PERIOD !! Why ? Well, because the market says so, that's why...
I watched a few segments today at work and watched Paulson squeem very neverously when the subject of "beyond sub-prime" came up.. Of course, he knows the gory details, but never answered the question... from what little I know about body language and facial expressions, he was lying through his teeth and trying deperately to deflect the question and switch the subject.. Bernanke is no better..
Keep lowering rates boys and creating more fancy fed programs and slogans that are nothing more than taxpayer bailouts of a failed industry ...
My last comment reminded me that I'd like to play poker with Secretary Paulson.. I'd take his a__ to the cleaners and back..
An idea on bailouts..
Thought about this one some more and think I've got a win-win here... Lets have the taxpayers loan (not grant) the money to the bankers... set a low teaser rate on the money and have it reset in a few years after they get their shit together... that's what they'd do if the situation were reversed... why shouldn't the US taxpayer handle it any differently... why should their CEO earn a bonus next year (or the year after that or after that etc) for pushing his business to the edge of solvency or beyond where they need to borrow massive amounts of money to survive... screw them...
I seriously think this would be a win-win... the bankers would stay in business and the US taxpayer would get a return on his nickle... above inflation (if anyone knew how to calc that).. Imagine the US treasury/taxpayers earning interest on corporate loans for the next 20-25 years while Wall Street licks their greedy wounds...
Saw this on Patrick Net.. "According to The Economist, the aggregate value of residential housing in just the developed world rose by a staggering $25 trillion between 2001 and
2006!... This massive boom was financed largely by a grotesquely excessive level of debt,
encouraged by former Fed Chairman Alan "It wasn't me" Greenspan.
I don't know what percentage increase this was/is, but I'd wager it represents at least a 100% increase... almost all built on debt.. amazing..
Regardless of whatever plan the Fed or government comes up with, I'm rather tired of hearing about how this "problem" is being debated entirely from one side only, and that would be that of the homeowners. My best guess is that since 67% of Americans " own" their homes, then I suppose the majority must rule. But for people like us, this is perhaps one of the best things to happen to us: We finally get to see an end to the craziness and might actually get a chance to buy a home on reasonable terms.
Instead, this issue is being called " A Crisis" and I've heard no end to how it must be fixed right this very minute. I've heard numerous economists, former Fed memebers, congress people, and so on say that we HAVE to get housing back on track, or in other words- try and continue the appreciation.
All I can think of when I hear these people say this is: " NOOO!" Why in the hell would we want to continue on such a destructive course since the prices are what caused the problems? Don't these people get it? The problem isn't that complicated. The problem is, and has been PRICE and nothing more.
If anything, those in charge need to accept the fact that there will be pain, prices are too high, and if they want people to start buying again without going bankrupt and take the banks along with them, then they MUST let those prices comes back down or else we will be back where we began in August. It really isn't that difficult.
Either that or they just need to admit that they are getting a lot of pressure from financial and lending interests as well as their investors who want their money.
Right on Bob!
The prices are too high!
That is the problem.
Don't the big cheese economists get this?
As one of the 33% non-owners, I would be very happy to see a correction.
What a mess!
Haven't read your blog for a few months and it is great to see your posts. Just wanted to let you know that many of us readers think your work is/has been important.
Thanks
Did anybody read today's real estate section in the Marin IJ? It's revolting. I can't stand this Mary Southall a moment longer. She is a disgusting human being. She continuously bullshits the public in her attempt to fool people into buying property in Marin. She knows that she can influence public opinion because she has been given the power to present the first story of the Sunday real estate section.
Today she says that "Those who were waiting for the market to 'bottom out' before searching for a home: Wait no longer. Business in picking up... Allow me to once again point out that the phrase, 'The market is picking up,' is usually equivalent to 'There is more competition for the available housing'. In Marin County that translates further to, 'Prices will start going up.' If you've even been thinking about buying a Marin County home, consult a real estate professional today."
Hear that? NOW is the time to buy, pitched by the real estate pro herself! Ugh, I don't understand why anybody trusts the so-called "experts".
And as far as realtors go (I don't think she is one but she must get paid somewhere by some realtor or developer or real estate establishment of some kind in order to be so misleading) I have never been lied to as much in my life as I have by realtors. Why in the world do sellers even use them and pay them such a huge profit? They hardly do anything -- if you have half a brain you can do this stuff yourself and save a lot of money, and in this market that has a lot to be desired.
I don't know who Mary Southall is (or care really), but I do know that every prediction so far on how bad this bubble bust will be, and the economic fall out of it, has been on the low side.. Miss Mary will need to explain what the driver is for home values.. new companies coming into the area ? higher wages for the area ? easier lending terms for borrowers? What, pray tell, Mary is going to cause Marin home prices to resume their spikes towards infinity and beyond ?? Get a life sweetheart...
When sales are hitting "record lows", as they have been all over, anything will seem to be a "pick-up in business"... few asset prices move in straight lines forever, but the trend is pretty easy to distinguish... right now, the trend for home prices is down and will continue down until a big economic event occurs or we reach equilibrium.. that means we have a ways to go..
And all this BS about Marin median price rising is just that.. pure marketing / hype BS... show me like - like property prices ... from my research, northern Marin house prices have plummeted 15 percent easily so far from peak and will continue to fall as these mortgages reset and all the FB's work through their savings and 401-K's to pay those mortgages off..
No thanks.. I'll watch from the sidelines and enjoy all the clamoring and belly aching by the RE machine..
Sorry, I've been away.
I did't read the IJ article. Mary may be right about the direction of prices but only for the county statistics as a whole.
But when sales are at historic lows (what, 122 sales last month?) the statistics become meaningless. Furthermore, in a small county like ours where there is a largish number of multimillion dollar houses relative to the rest of the market (e.g., unlike, say Sonoma, where there are certainly many multimillion dollar houses but they are a far smaller proportion of the overall county market), what is going on with the county statistics is not surprising. Realtors/agents here have, of course, used this pattern to their advantage time and time again to fool the general public. But any fool can look at houses that are on the market, roughly the bottom half to two-thirds of the market, and see that prices are off substantially from their peak values.
I just don't have the energy anymore. The system is rigged in favor of the vested interests. Combine that with the general intellectual laziness of the general public and there is not much a single blogger can do. I would hope that the younger and more energetic demographic would stand up and say enough is enough but I guess not.
In my book . . . it doesn't help to announce the hardship when everyone is in the MIDDLE of it and there is nothing one can do.
Too little, too late. Article should have happened a YEAR ago.
We all knew this then too. Big deal they're saying it now.
The system is rigged in favor of the vested interests.
And the typical Marin resident is all too willing to be duped into thinking theirs is an "unbustable" market of inflated values. So go ahead and believe whatever lets you sleep at night, secure in your illusion that the impending de-leveraging of America won't upset your shopping sprees in Mill Valley. So keep those "investment properties" that don't quite break even each month, but convince yourself that someday they will.
I know many Marin residents who still believe their homes are worth whatever the comps were in 2004-05. Their eyes glaze over when I mention the recent front page stories. Whatever--have it your way, lol.
I think this blog has served to raise consciousness of an impending market collapse when it was all but a cautionary blip on the radar. Comparing then and now should serve to justify your efforts.
The thing is that Mary Southall is wrong -- the direction of prices are NOT going up. I have been following houses that are listed on the MLS for 750K or less as neurotically as a real estate agent for the past 4 months, and, with the exception of a chosen few, houses in this price sector are either just sitting with sellers unwilling to budge, or they are dropping significantly in price (from 30K to 100K). There is especially a lot of action in Santa Venetia, which is FULL of short sales and bank-owned properties. That neighborhood is completely falling apart. In other areas of Terra Linda and San Anselmo too, prices are definitely still dropping, and don't seem to be anywhere NEAR bottom from the looks of things. That is what is so infuriating -- that this woman is blatantly LYING. She lies almost every week. She has this cheery, bubbly "expert" attitude that doesn't represent reality. Yuck.
I guess it should be no surprise, though, because the IJ probably gets a lot of its money from real estate advertisements and articles, so there would be an incentive to keep putting up her bullshit articles, among others. Anyway, I'm not so sure they are "coming to terms" yet, but I believe they will.
Prices will still drop. Houses are not selling, and there are massive re-sets coming in March that will add a lot more inventory to the market, not to mention the spring upswing in listings. When you listen to Harvard economists and bankers looking at the books, they confirm the significant drops that need to come. It is the (under-educated) realtors and mortgage brokers that consistently predict that the market has bottomed out (or will in the next couple of months) and are going up. But even with their saying these misleading things, the reality is plain and simple - there are hardly any houses really moving in Marin. The few that sell in Marin are primarily ones that were priced significantly lower than the others in the same category.
People are helped by this blog. It will stop people from buying in Marin. It stopped friends of mine, and it will stop others and get people thinking before making stupid decisions to lose their money. Please don't lose too much energy to keep it up, Marinite. Your influence is valued and needed...
It is the (under-educated) realtors and mortgage brokers that consistently predict that the market has bottomed out (or will in the next couple of months)
I think education has little to do with it. I think their commission (which is not a flat fee but is a percentage of sales price) has everything to do with it.
(Although I acknowledge that the educational bar is quite low for realtors/agents.)
But even with their saying these misleading things, the reality is plain and simple - there are hardly any houses really moving in Marin. The few that sell in Marin are primarily ones that were priced significantly lower than the others in the same category.
Yes, prices can drop X% across the board and yet the median can still go up. How? When significant segments of the market don't sell this can easily happen. If only the nicest houses in each price category sell and/or the most expensive sell, prices can decline X% but the median goes up. You can confirm this for yourself easily enough. And this is in fact what is happening now in Marin. It happens less with less expensive markets and takes markets like ours longer before this behavior changes but change it will.
And yes, it angers me to no end that someone like this Mary Southall can spew garbage and get it published in a high profile article in a news paper whereas the naysayers are given no time at all, but this is the way the corrupt system works. One anonymouos, low profile blogger like me cannot fight that (Ben jones on the other hand could). It takes a concerted effort by a large and vocal group of concerned citizens to demand change. The real estate industry is in sore need of reform. The artificial probs supporting the housing markets desperately need to be removed. But that is not in the interest of the vested interests.
Marinite.. Perhaps it's time to ask for a few buck donations (I contribute to Ben frequently)... With that money we could buy a small ad in the Sunday IJ and reference this blog and the larger HBB..
The ad headline could read something to the effect of "Marin Real Estate Prices Continue to Fall as Fraud and False Inflators are Removed from the Market".. Hell, that could remain the headline of the article forever (and be truthful)... As an image, the ad could contain the simple historic housing price graph and put an "X" on it saying "We are Here" with a projected dotted line back to reality some 30-40% below current prices.. then a few simple www references and that is it ...
Think the IJ would bite ?
The RE price is dropping in Marin for sure. I just saw a listing in Novato with a house adjusting its selling price from $1.2 million to less than $700,000 in six months.
Matthew, I think that is a great idea -- I would contribute in a second. Seriously.
Here is a scary article from yahoo (I'm quoting it in its entirety):
NEW YORK (Reuters) - Banks in the United States have been quietly borrowing "massive amounts" from the U.S. Federal Reserve in recent weeks, using a new measure the Fed introduced two months ago to help ease the credit crunch, according to a report on the web site of The Financial Times.
The newspaper said the use of the Fed's Term Auction Facility (TAF), which allows banks to borrow at relatively attractive rates against a wide range of their assets, saw borrowing of nearly $50 billion of one-month funds from the Fed by mid-February.
The Financial Times said the move has sparked unease among some analysts about the stress developing in opaque corners of the U.S. banking system and the banks' growing reliance on indirect forms of government support.
(Reporting by Mark McSherry)
It's all bound to come down...
J. Rogers was quoted saying "the US economy is out of control" in one simple phrase due to the mounting debt piled up at an astonishing rate. By the way, he sold his house in New York and moved to Asia. He is probably seeing a train wreck coming.
He also thinks the Fed should leave interest rates unchanged and let the economy go through a natural cleansing process. Recession is needed in certain economic cycles. If the Fed postpones the recession, a more sever problem is being created.
The Fed may also step in prior to a full collapse because they are motivated politically to help the homeowners...
Listening to NPR this morning I heard an interesting comment by someone very high up (like top) in the Marin county government (forgot the name, forgot the title) regarding the propose Doyle drive toll. He said that it was "a myth" that most Marin residents are wealthy (and so could easily afford the toll)... that at most 10% of Marin residents could be characterized as such. We already know this fact from looking at median household income data ad nauseum, but what got my attention is that he referred to it as a "myth"; a myth, the moderator said, that usually serves Marin's best interests but in this case did not serve Marin's best interests. More coming to terms?
Re paying for an ad in the IJ: An informative ad with easy to use links could be quite effective IMO. It might help some people from making a mistake. But the time for such action was a year or more ago. Still, no harm even if a little late. So who wants to organize that? I'd make a serious contribution. I would certainly put together some historical data/charts.
Would the IJ run it? Who knows? On the one hand it would fly in the face of their pimps, the Marin RE industry. On the other hand, it is a paying customer and the paper is always in need of money.
Maybe you could open a PayPal Account...
I pledge $100.
Thanks for all the info. More people need to be made aware of this lovely information.The information is very
meaningful to whom needed. Interesting!!
I, too, would like to donate $100.
Sign me up for $100.
Something I've been thinking about for the last few weeks is what the buying environment is going to be from here on out. Naturally, borrowing is now much more difficult for those with bad credit, low down payments, etc etc. That's a GOOD thing.
Even though I'm as giddy as a schoolboy over the prospects of lower home prices, I also have to wonder what it will be like even for people like myself with a sizable down payment, good income, and so on. I get a sneaky feeling that it is going to be difficult for everyone.
As we can see, the stoppage of loans in the Bay Area clearly cut off it's legs and nothing will sell until something along the lines of acceptable loan standards are returned.
In other words, I wouldn't put it out of possibility that way more damage has been done and this could either cause prices to crash dramatically, or that nobody will be buying anything period and current homeowners will simply be trapped.
Just a little clip from an article on MSN today by Jon Markmen, who is researching Satyajit Das (allegedly one of the world's leading experts on credit derivatives and author of a 4,200-page reference work on the subject):
"Das, who knows as much about global money flows as anyone in the world... suggest[s] that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy.
Das is pretty droll for a math whiz, but his message is dead serious. He thinks we're on the verge of a bear market of epic proportions.
The cause: Massive levels of debt underlying the world economy system are about to unwind in a profound and persistent way.
He's not sure if it will play out like the 13-year decline of 90% in Japan from 1990 to 2003 that followed the bursting of a credit bubble there, or like the 15-year flat spot in the U.S. market from 1960 to 1975. But either way, he foresees hard times as an optimistic era of too much liquidity, too much leverage and too much financial engineering slowly and inevitably deflates."
I think that Das just might know a little more than the next realtor who tells us it's a great time to buy...
I had an interesting volley of emails with a Realtor in Nashville, which is a city I've sort of been tinkering with moving to off and on for 2-3 years. The city got a sort of "burp" of a bubble after the rest of the country started to slow down. So naturally, that had me a tad concerned.
But I've noticed that the supply there has also ticked heavily upward during the last 6 months. While looking on craigslist in Nashville, I saw a home listed for over 600k, which seemed insane considering that most homes there are well under 200k. So I emailed her about it. Turns out it is in some 'exclusive' neighborhood fairly close to where a number of famous country music stars live. Most notably, the former home of Johnny Cash.
We discussed RE there. She was actually pretty honest and frank. The shocking thing she told me was that TN is now No.2 in the USA in foreclosures. You heard that right. Secondly, homes in the median range of 150-200k were selling as slow as molasses. Her reasoning was that just like in CA, the money lending well has now dried up and that most who would have qualified no longer do so.
So in other words, despite the temptation to compare the seemingly low prices of Nashville to the Bay Area, both suffer the exact same basic problem. The problem is what we've talked about here for years, which is that real incomes no longer support home prices. In CA, the median income is still something like 50k. In TN, it's more like 30k. So in both cases, the support level for the median home price was violated, and this went on nationally.
It also made me stop and wonder that if Nashville is now having problems despite less of a severe departure from fundamentals, then how bad will it get in the Bay Area where fundamentals were heavily violated?
On any count, whether I decide to stay in the Bay Area or move elsewhere, I believe that anyone who weathered the storm and saved up their income will actually be in pretty good shape come 2 or 3 years from now while everyone else is still struggling to stay afloat.
Just back after a few days out of town.. looks like some folks like the idea of an IJ ad.. I'll make some phone calls next week and see what I can find out..
Of course, and having read some of the threats on Marinite in the past, I TRUST NOBODY, in the RE business in this county except for some of the regular posters on this blog..
Just wanted to note that things are really happening in Marin. I have been tracking multiple properties for almost half a year now and it's clear that people are starting - note: STARTING - to panic and get real in Marin. Prices these last 2 weeks are dropping dramatically in the <750,000 range (esp. in San Rafael and a little in San Anselmo -- I'm not researching Novato but that goes without saying). I'm no longer seeing the measley 10K price drop -- now it is more like 50 to 60K in one swoop. And most houses will make many more rounds of price drops because even these "low" prices aren't bringing in consumers from what I can tell.
A few years ago here, or maybe more recently (I cannot recall), there was a big discussion of NIMBYism in Marin.
Below is a blog posting (at boston.com) regarding the effects of such behavior on house prices in the Boston area.
A University of Washington study says 99% of house price gains in the area from 1989 to 2006 were the result of regulation!??
Apparently, San Francisco has a higher (worse) ranking - see table 4b on page 33 of second link below (pdf); see also specific SF discussion on page 15.
Where would Marin rank?
Posting:
http://www.boston.com/realestate/news/blogs/renow/2008/02/regulating_home.html
http://tinyurl.com/yqlcdu
Study:
http://depts.washington.edu/teclass/landuse/housing_020408.pdf
http://tinyurl.com/2fw44e
(An additional FYI - I recall reading a few years ago that from 1980 to the early 2000's, house prices rose more in Boston than any other metro region, something like 508% before inflation adjustments).
Well the fact that we're all so happy about some honesty coming from IJ is a clear sign how hard the truth comes out and how desperately we yearn for those rare moments. But home prices are still too high and the real estate crisis won't end up so soon...so it's just a little light ray in the dark..
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