For Housing Crisis, the End Probably Isn’t Near

[Sbane]

Torie - Two questions...

What are house prices like now in the area where you have rentals or where you own?  Also, what is the average salary of those specific areas?

They are down around 20% from the peak where I live in Orange County, about 40% in the desert, and about 15% in the Los Feliz and Silverlake districts of Los Angeles.  In Portland, Oregon, prices are down maybe 15% as well as a guess, but I am less sure. I don't know about average salaries; that would have to be looked up. I read an article that stated that in some areas incomes to housing prices were reaching "normal" ratios for those areas. In the area around my census tract very little is on the market, and there are almost no foreclosures. The same is true in the LA neighborhoods that I mentioned. Folks just are holding on and not selling, waiting for better times. Also it is hard to find jobs elsewhere, so folks are staying put. The housing market in the desert is a mess because it is a resort area, incomes are way down, and it was way overbuilt anyway, with a lot of speculation.

Yeah there haven't been that many foreclosures in the posh areas of the Bay area as well but things will change when the short sales start coming on the market. Many of these people who bought overvalued homes are going to look for any way to get out of that mess. The only good news may be that the banks won't allow prices to fall as much as in the case of foreclosures.

Also Sam why is there such divergence in housing markets across the country if you think it is so interrelated with income? The LA housing market is valued much more than Dallas or Houston but I doubt incomes are that much lower in those cities compared to LA, if at all. And IIRC this has been the case since before the bubble.

[phk]

Torie - Two questions...

What are house prices like now in the area where you have rentals or where you own?  Also, what is the average salary of those specific areas?

They are down around 20% from the peak where I live in Orange County, about 40% in the desert, and about 15% in the Los Feliz and Silverlake districts of Los Angeles.  In Portland, Oregon, prices are down maybe 15% as well as a guess, but I am less sure. I don't know about average salaries; that would have to be looked up. I read an article that stated that in some areas incomes to housing prices were reaching "normal" ratios for those areas. In the area around my census tract very little is on the market, and there are almost no foreclosures. The same is true in the LA neighborhoods that I mentioned. Folks just are holding on and not selling, waiting for better times. Also it is hard to find jobs elsewhere, so folks are staying put. The housing market in the desert is a mess because it is a resort area, incomes are way down, and it was way overbuilt anyway, with a lot of speculation.

Yeah there haven't been that many foreclosures in the posh areas of the Bay area as well but things will change when the short sales start coming on the market. Many of these people who bought overvalued homes are going to look for any way to get out of that mess. The only good news may be that the banks won't allow prices to fall as much as in the case of foreclosures.

Also Sam why is there such divergence in housing markets across the country if you think it is so interrelated with income? The LA housing market is valued much more than Dallas or Houston but I doubt incomes are that much lower in those cities compared to LA, if at all. And IIRC this has been the case since before the bubble.

Prop 17

[Torie]

Prop 13?

[Sbane]

Torie - Two questions...

What are house prices like now in the area where you have rentals or where you own?  Also, what is the average salary of those specific areas?

They are down around 20% from the peak where I live in Orange County, about 40% in the desert, and about 15% in the Los Feliz and Silverlake districts of Los Angeles.  In Portland, Oregon, prices are down maybe 15% as well as a guess, but I am less sure. I don't know about average salaries; that would have to be looked up. I read an article that stated that in some areas incomes to housing prices were reaching "normal" ratios for those areas. In the area around my census tract very little is on the market, and there are almost no foreclosures. The same is true in the LA neighborhoods that I mentioned. Folks just are holding on and not selling, waiting for better times. Also it is hard to find jobs elsewhere, so folks are staying put. The housing market in the desert is a mess because it is a resort area, incomes are way down, and it was way overbuilt anyway, with a lot of speculation.

Yeah there haven't been that many foreclosures in the posh areas of the Bay area as well but things will change when the short sales start coming on the market. Many of these people who bought overvalued homes are going to look for any way to get out of that mess. The only good news may be that the banks won't allow prices to fall as much as in the case of foreclosures.

Also Sam why is there such divergence in housing markets across the country if you think it is so interrelated with income? The LA housing market is valued much more than Dallas or Houston but I doubt incomes are that much lower in those cities compared to LA, if at all. And IIRC this has been the case since before the bubble.

Prop 17

I guess you meant prop 13? You are absolutely right about that. People are still paying property tax for $300,000 on million dollar homes, thus there is no push for them to sell and move on. Just ing ridiculous. But I am not sure if it explains everything. It seems like home prices are higher in most parts of the country than Texas. And its not as if Dallas and Houston are low income cities. Not at all.

[Torie]

Plate tectonics (there is that word again), with God moving the mantles to generate the mountains as a veritable necklace around the sea, has fenced us in sbane. 

[Sbane]

I guess..... It is a better explanation for the ridiculous bay area home prices IMHO. Land use laws are much more liberal down here in socal and developers just build wherever they feel like. I don't feel there is a supply problem down here, and even if there is it is substantially less than in the bay.

[Sam Spade]

Also Sam why is there such divergence in housing markets across the country if you think it is so interrelated with income?

Because we're still dealing with contraction of the various housing bubbles in the various markets within the various asset classes.  Obviously, there are some housing markets where there was never much of a bubble to start off with, so there won't be much change there, but the variation was great.

As a rule, lesser properties with lesser owners (in terms of income, credit, loan type) tend to default first and then we go up the income line.  As Torie said, the rich are holding on, but not buying.  Certain areas tend to go first (California, Nevada, Florida - where the loosest lending was and second home exposure) and certain areas tend to go last (we've finally started to see the break in Manhattan housing over the last quarter, the area close to DC is being held up by government, for now, whereas the areas further away have already gotten killed, but that deals with factor #1 moreso).

Anyway, so the 2.0/3.0 figures are broad-based, but with a specific housing market you have to analyze that market first (and the neighborhood).  Or so is my point.

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Reasons
1) Property taxes
2) Lending practices - More important than you might think.  Texas has some of the strictest lending practices in the nation, if not the most.  It's always been that way, but the reqs got much more strict after the S&L crisis during the 1980s, which hit Texas harder than anywhere else.  None of that $40,000 income $400,000 loan crap there.  If you had $40,000 income, you'd be lucky to get $100,000 loan unless maybe you had stellar credit.  HELOCs weren't legal until 2000 and even then you can only get 80/20 loans.
3) Availability of open land for building.

There are some others that I've missed, but these are the big ones.

[Ban my account ffs!]

Sorry to derail the discussion here... but I was just checking over housing sales for my area.

Sales have decreased since the 2nd quarter of 2008 when they peaked, but housing prices have remained constant. 

Also, home sales still remain way above even the numbers from 2006... and new plans for development of 30 new housing units were just approved as well another several dozen that are already in development.  (this isn't too bad for a county of 44,000 residents)

I had thought that home prices had dropped significantly, but when I actually saw the data, I was pretty shocked to see that we've held our own.

We've never had the booms or busts that other areas had, though.  After the county population exploded from 1890 to 1920, it fell during the '20s as the logging industry collapsed.  The population boomed again during the '30s as people were able to find work here during the depression.

After the war, the population fell for 20 years while it boomed across the country.  Since 1960, however, we've had steady, constant growth which has accelerated since the early '90s to about 1.5% per year.