California Home Prices on the Rise

[Parsad]

Well, I guess no more condos for the price of a corolla!  You'll have to look to Vegas for those deals.  Cheers!

 

http://money.cnn.com/2010/09/15/real_estate/california_home_price_rebound/index.htm?source=cnn_bin&hpt=Sbin

[Parsad]

Yup, definitely Vegas!  Shadow inventory to still affect many states:

 

http://www.bloomberg.com/news/2010-09-15/u-s-home-prices-face-three-year-drop-as-inventory-surge-looms.html

 

Cheers!

[smw397]

Well, I guess no more condos for the price of a corolla!  You'll have to look to Vegas for those deals.  Cheers!

 

http://money.cnn.com/2010/09/15/real_estate/california_home_price_rebound/index.htm?source=cnn_bin&hpt=Sbin

 

I don't know that I can refute the numbers in that article but it sure seems to me like they did some cherry picking to try to paint the rosiest picture possible.  They talk about the tax credits like they were such a good thing but fail to mention what most everybody acknowledges, which is that all the tax credits did was pull demand forward and now that they're over we're seeing prices plummet.  I don't monitor the whole state but I have definitely seen a good number of houses in my market (far NorCal) fall significantly just in the last two months, like from $329K in July to $279K as of last week.  I see more and more houses on the market all the time and I'm not detecting a whole lot of movement.  Commenters at the end of the article indicate the same thing is happening in upscale coastal markets north of San Diego.

 

The elephant in the room of course is the HELOCs, which got not even a mention in that article.  With unemployment still hovering around 10% and the affordability index (ratio of house prices to annual incomes) at historic lows, who exactly is buying?

[Guest valueInv]

I get a daily email of listings from Redfin. I have yet to see a single listing that has raised its price.

The article talks about median home prices. So if fewer short sales or foreclosures occur, it may not push up the price of an individual home but result in higher median prices. Also, if more activity occurs in upscale areas, higher median prices but it does not mean your home is worth more. What is more accurate is the variation of value of a fixed set of homes over time.

[Guest ValueCarl]

Trends which continue to be absolutely BOLSTERED by ARTIFICIAL INSEMINATION and banker deceit referenced by opaque accounting inclusive of "inventory" being dripped rather than moved onto the market expediently if opaque accounting rules hadn't enabled them to operate so fraudulently.

 

Wait till PROP 13 is REPEALED! Meg is going to do it with Prop 25 being the precursor. Then, the same type of "artificial insemination" today, whereby tax savings for a year or slightly more on incumbent buyers are being shoveled into mortgage payments temporarily, you will see property taxes surge and house prices drop to much lower levels.

 

Finally, so far in my lifetime, I have never seen a government handout turn magically into PROFITS, i.e., overnight equity, for citizens who became "hooked," and one paycheck away from being unemployed. Importantly, the frictional costs of those "often", useless MIDDLEMEN, especially real estate and mortgage brokers on top of escrow and title officers, also eat up 6-8 percent of gross sale proceeds from those who God forbid, lost their job again and need to sell!     

 

   

 

<Condos for less than the price of a Corolla

Finally, the California state government has not sat idle. "California provided markets with more significant price support," he said, "That played a role in elevating prices."

 

The state support came in the form of tax credits of up to $10,000 for first-time homebuyers and buyers of new homes. Some purchasers were able to combine the state credit with one from the federal government to reduce their costs by $18,000.>

[opihiman2]

Well, I guess no more condos for the price of a corolla!  You'll have to look to Vegas for those deals.  Cheers!

 

http://money.cnn.com/2010/09/15/real_estate/california_home_price_rebound/index.htm?source=cnn_bin&hpt=Sbin

 

I don't know that I can refute the numbers in that article but it sure seems to me like they did some cherry picking to try to paint the rosiest picture possible.  They talk about the tax credits like they were such a good thing but fail to mention what most everybody acknowledges, which is that all the tax credits did was pull demand forward and now that they're over we're seeing prices plummet.  I don't monitor the whole state but I have definitely seen a good number of houses in my market (far NorCal) fall significantly just in the last two months, like from $329K in July to $279K as of last week.  I see more and more houses on the market all the time and I'm not detecting a whole lot of movement.  Commenters at the end of the article indicate the same thing is happening in upscale coastal markets north of San Diego.

 

The elephant in the room of course is the HELOCs, which got not even a mention in that article.  With unemployment still hovering around 10% and the affordability index (ratio of house prices to annual incomes) at historic lows, who exactly is buying?

 

I concur.  Prices around here in California have actually begun dropping again since Federal tax credit props were removed.  Also, the new California tax credit is overburdened with restrictions, conditions, and all sorts of non-sense to be meaningful or helpful.  I've been in the market for a home for over a year now, and it's a mess.  I'm pretty turned off by what the governments are trying to do by propping the market.  Not so much in the way of price discovery, but the mental dysfunction it has caused in the marketplace.  First, I had to deal with aggressive realtors hoping to land a buyer.  Then, I had to deal with stand-offish realtors as prices were coming back.  Now, I'm dealing with desperate realtors trying to prop up their sales again.  It's basically a bipolar marketplace, and I'm pretty unnerved by it.  I'll give it some time, because I believe home prices will stay flat for a long time to come. 

[goldfinger]

Totally.

I know of a few areas (I live in California) where condo prices are dropping very quickly right now (I am talking about from 155000 to 140000 to 127000 in less than a month as 3 condos of exactly the same type in the same building got sold for those prices in the last month in Walnut Creek).

 

Properties for sale have been mushrooming in the last 2 weeks like crazy too (anywhere I go in the Bay Area).

 

Here is another point of view on house prices nationwide:

 

http://www.safehaven.com/article/18195/home-prices-drop-in-36-states

 

(Mish is an ultra bear but he brings good points).

[smw397]

I've never understood why a specific metric like $/sq ft isn't more commonly used when talking about real estate prices and trends.  It sure would remove a lot of the noise from the discussion...how useful is it to talk about median home prices if we don't know the physical characteristics of this mythical median home?

 

What I do know is that I currently rent very comfortably in a house that was new when I moved into it six years ago, it's on five acres close to town, and I'd have to find a comparable house selling for about $125/sq ft for the mortgage to compete with my rent.  Granted, I'm not gaining equity, but I don't have to pay for the water heater when it goes out either.  I'd still happily pay a premium if I could find a house just a bit bigger on a one acre lot for $150/sq ft, but I'm not seeing anything that even comes close.  Most acceptable properties are still asking well over $200/sq ft ... not that they appear to be selling.  I reckon I'll just write out the check for another month's rent and keep waiting.

[smw397]

By the way, I could never live in a condo...but my wife does drive a Corolla  ;)

[opihiman2]

I've never understood why a specific metric like $/sq ft isn't more commonly used when talking about real estate prices and trends.  It sure would remove a lot of the noise from the discussion...how useful is it to talk about median home prices if we don't know the physical characteristics of this mythical median home?

 

 

I very much agree with this point.  I think it's the most important metric in valuing a home.  However, there are some other variables that should be also be considered in conjunction with this metric; e.g., the $/sq ft for the total lot size and for the house size, the age of the home (this is important since old homes need much more maintenance), and the usable lot size (i.e., is part of the land on a hill?). 

 

Finally, if you believe median incomes are going to stagnate in the U.S., then you should adopt the view that housing prices should not increase.  I believe median incomes will stagnate, as they have been, in the years to come.  Why?  Unemployment should lead to wage pressures as supply is mopped up.  Also, overseas outsourcing will likely increase wage pressures for certain industries like I/T, customer service, manufacturing, etc. 

[rmitz]

I've never understood why a specific metric like $/sq ft isn't more commonly used when talking about real estate prices and trends.  It sure would remove a lot of the noise from the discussion...how useful is it to talk about median home prices if we don't know the physical characteristics of this mythical median home?

 

 

I very much agree with this point.  I think it's the most important metric in valuing a home.  However, there are some other variables that should be also be considered in conjunction with this metric; e.g., the $/sq ft for the total lot size and for the house size, the age of the home (this is important since old homes need much more maintenance), and the usable lot size (i.e., is part of the land on a hill?). 

 

I think you've still oversimplified things quite a bit.  Is your driving time valueless?  How about the costs in using a car at all?  Proximity to stores, jobs, etc. are huge factors.  How about the ratio of the $/sq ft against the local average wage?  The build quality of the home (types of materials, craftsmanship factor) is also important.  There are plenty of very old homes which remain in good shape because they were built well by someone who cared (with much higher quality materials than used today!), and the maintenance isn't really that much out of line with relatively new homes.  Access to good schools, level of crime/quality of neighborhood, infrastructure quality, tax burden, ability to use property for other purposes...etc, etc.  I'm sure I'm leaving a bunch out.

 

Some of these things become very difficult to quantify, which is why reducing value to a single number doesn't really work that well.