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OC Prudent BearsOC Prudent BearsPricing information and commentary for future home buyers in Orange County, CA Articles
90% Marginal Tax Rate for the Middle Class
2008-05-12 04:55:00 I gave some thought about how those making above $160K (for a couple) aren't welcome to receive the $7,500 First Time Buyer's tax credit and realized that we're actually getting more screwed than I originally thought.You see, the phase out for this tax credit starts at $140K runs to $160K; so it's a total of 20K in income that determines whether you get the full $7,500 or zilch. It works the same way for the Bushie tax credit: with two kids at $140K in annual income you'd get $1,200, but at $160K in income again, you'd get zilch. That is one expensive $20K in income, but how expensive is really?On 2oK we suffer the following losses and taxes:$7,500 exclusion from First Time Buyer's Credit$1,200 exclusion from Bushie Tax Credit$7,200 Federal Taxes (would have paid regardless)$1,800 State Taxes (ditto)For a grand total of $17,700 in taxes or loss of tax credits or the equivalent of a 90% marginal tax rate. 90%! I defy any reader to find a single group in America that pays the s... More About: Middle , Class , Middle Class , Rate , Middle-Class
Feds Set to Screw OC's Middle Class Again!
2008-05-09 19:51:00 Many of middle-class families in OC are still stinging from being excluded from Bush's tax rebate program. While many of our friends got checks of up to $1,200, we got nothing. The reason? We made a bit too much money to be included and were summarily "phased out" of that particular gravy train.Guess what? You're about to be "phased out" again.Yesterday, the House passed HR 3221 aka the American Housing Rescue and Foreclosure Prevention Act of 2008 on May 8, 2008. This piece of homedebtor rescue legislation spends billions helping those folks in trouble keep their homes, to refinance existing mortgages, for cities buy blighted properties and so on. So, if you're were unfortunate enough to have bought a house that you couldn't afford, the taxpayers are here to bail you out.You're welcome.Then there's this little provision called "First-Time Homebuyer Credit" which essentially says that if you are a first-time homebuyer then you can get a $3,750 federal tax credit if you are an ... More About: Middle , Class , Screw , Middle Class , Middle-Class
Why are OC Inventories Flat?
2008-05-04 05:41:00 I've seen some anecdotal evidence that inventory levels of are essentially flat since the end of January this year and on year-on-year basis as well. This causes me a great deal of cognitive dissonance; it may do the same to you.As examples, I'll site the inventory graph from IHB which show inventory levels flat for Irvine and the OC inventory numbers found on Bubble Tracking which show inventory flatness for OC.If you have a close look at the OC inventory data, what you're going to see is that according to Redin on Jan 30, 2008 there were 17,151 homes for sale in OC; on April 30 there were 17,358. A couple of hundred more homes in April than January, a bit more than 1% which I would call essentially flat. So for the year, inventories are essentially flat.Even if you don't consider the 1% increase to "flat", I'd point out that in the same period in 2007, we saw inventories rise 28.5% rise from roughly 13,200 units to just under 17,000 units and that historically a rise in inven... More About: Flat
Moving On...
2008-03-31 22:02:00 Today is my last day with my current employer. With that in mind, I've pulled some of my favorite work-related video clips together for your viewing pleasure. Enjoy.Okay, this R-rated one has little to do with works, but I had to include it regardless: More About: Moving
Contest: What Day Will the OC Median Drop Below $500K
2008-02-23 03:37:00 I'd like to have some fun and encourage some discussion here on the blog; so I am going to sponsor the first-ever OC Prudent Bears Real Estate Prediction contest. Here are the rules.Readers of the blog will try and predict the day that the median price of the Orange County All Homes Median Price as reported by DataQuick will fall below $500,000.Readers are to add a comment to this post that includes the date of he predicts the median will drop below 500K and their nickname as they are generally known around the RE blogosphere. (See example prediction in Comments section)The reader guessing closest to the actual crossover date (actual event date, not reporting date) will be considered the winner.If two or more readers guess the correct day, the reader who entered his guess first/earlier will be considered the winner.Readers can revise their guess as many times as they like, but only a reader's last and latest prediction will be considered for purposes of determining if he is a winn... More About: Contest , Drop
It's Funny Because It's True
2008-02-21 03:13:00 Another classic posted by Trooper on IHB.Oh, and Treasury Secretary Henry Paulson, feels as thought the "worst is just beginning" for housing which, depending on your perspective may or may not be more funny than the comic above: More About: Funny , True
Bernanke Bearish on Economy
2008-02-14 18:22:00 Helicopter Ben seems more than a bit dour on the prospects for the economy:"The outlook for the economy has worsened in recent months, and the downside risks to growth have increased," Bernanke said. "To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so." Bernanke also said that the "virtual shutdown" of the market for subprime mortgages ? given to people with blemished credit histories or low incomes ? and a reluctance by skittish lenders to make "jumbo" home loans exceeding $417,000 have aggravated problems in the housing market.Unsold homes have piled up and foreclosures have climbed to record highs. "Further cuts in homebuilding and in related activities are likely," Bernanke cautioned.Read the full story here.... More About: Economy , Bearish
S&P: LA/OC Home Prices Set to Drop 17% in 2008
2008-02-10 01:39:00 If there are small children or LA/OC homeowners in the room, you might want to have them leave before you have a close look at this chart: I think we've covered the methodology for interpreting this kind of chart frequently enough that we can dispense with any explanation. The net-net is that the S&P futures market is predicting that real estate prices are set to drop in the an additional 16-17% in 2008 in the LA/OC market.With the current median selling price at just under $600,000 for the median existent SFDU in OC, that means that we can expect to see prices drop an additional $100,000 for a median EOY 2008 price of just under a half-million dollars.I will write more on this topic later, including the fact that these S&P number align very-closely with reader-poll-derived predictions from this blog, but I have to head out to Costco and pick up a bottle of Dom for me and Mrs. HB Bear. We have some celebrating to do.Viva Los Friggin' Osos! More About: Home , Drop , Prices
A Little Fed Humor for the Weekend
2008-02-09 05:52:00 A great find from our friends at the Irvine Housing Blog. Just hilarious. More About: Humor , Weekend
Shiller: Current Housing Bust Comprable to The Great Depression
2008-02-03 19:16:00 If you are buying or selling a home, the video below should be considered mandatory viewing. More About: Depression , Current , Great , Housing , Bust
Readers Say Prices to Drop 15 to 20% in OC!
2008-02-01 01:18:00 The results of January's reader poll are in and they paint a very dismal picture for OC's housing prices for 2008. Thanks to everyone who voted in the January poll regarding their predicition on this December's YOY pricing change. While being a died-in-the-wool bear myself, I have to admit that even I was a bit surprised by the outcome as reader's of this blog have an such an overwhelming negative view of pricing strength here in OC.As one can see from the chart above, the most common sentiment (30%) expressed in the poll (the mode) was that prices in OC were set to drop between 16.1 and 20%. The weighted average of the votes (the mean) expressed that readers felt collectively that prices would drop 15.6%. If you recall, the median price dropped in OC 10.2% between Dec2006 and Dec2007. So, the largest plurality of poll respondents seems to believe that this year prices will drop between roughly 150 to 200% as much as last year! And on average they expect to see prices by 150% as... More About: Readers , Drop , Prices
Stock Market See OC's Economy as Weak
2008-01-23 00:51:00 From the Bloomberg.com website:BLOOMBERG ORANGE COUNTY SNAPSHOT"The Bloomberg Orange County Index is a price-weighted index designed to measure the performance of Orange County's economy. The index was developed with a base value of 100 as of December 30, 1994."The most-current performance is plotted here:If Bloomberg is correct and this collection of local stocks is reflective of OC's economy, it would seem as though the stock market has a very poor opinion of our short term prospects. Last year we actually had a net job loss here in the county, is the stock market predicting more? More About: Economy , Stock Market , Market , Stock
New Poll: Where are Prices Headed?
2008-01-17 02:33:00 The last pricing poll had too many votes toward the high end of the scale, so I've rejiggered the categories to be more expansive and inclusive of higher rates of decline.Please vote again! More About: Poll , Prices
Lies, Damned Lies and Realtor "Statistics"
2008-01-06 18:57:00 I went to an open house in my neighborhood today, just to check it out. While I was there the realtor made the comment that "any home purchased in OC has appreciated over a five period." I'm not going to call the guy out by name, though I am tempted to, but I am going to call bullshit on this oft-cited "statistic."Have a look at the chart above. It shows the Case-Shiller index for LA/OC for the period Jan 1990 to Dec 1999. The line in this chart shows the relative price for homes in the area on a monthly basis. Does it look like a house purchased any time in 1990 had regained it's value 60 months later? How about 1991? or 1992? No, no and no. In fact, it's not until roughly the Spring time frame of 1993 that they typical home purchased would any appreciation over a five-year period.Put another way, for roughly 39 months starting in Jan '00, the typical home did not seen any appreciation over a five year period. In fact, for the poor bastards who bought in Jan '00, had to wait 1... More About: Statistics , Realtor , Lies
Off Topic: Lester Burnham and Mike Huckabee
2008-01-04 22:10:00 Have you ever noticed how you never see fictional American Beauty character Lester Burnham and presidential hopeful Mike Huckabee at the same party?Coindence? Maybe, maybe not. More About: Topic
Price per Sqauare Foot Off 12% in OC
2007-12-23 21:36:00 I was tooling around the DataQuick site and found an interesting stat I thought I'd share with readers.According to the most-current data found (October LA Times chart) on the DataQuick website, prices per square foot are down versus the 2006 median a whopping, mind-bending 12.2%. This is more than double the change in the of the median which was reported at 5.2% for the same period.The disparity between these two numbers leads me to believe that:The change in housing prices for OC as reported by the median is historic in magnitude, but is still under-reporting the actual decline in housing prices. As a result, many sellers are still pricing their homes at $/SF prices above the market rate.Seller's, once they understand that they are actually priced above the market (in $/ft) they are going to lower their prices further, and possibly dramaticaly so, in an attempt to undercut one another, exacerbating pricing weakness. There are big pockets of this activity in OC already, but I exp... More About: Price , Foot
OC Median Asking Price Down Almost $120,000
2007-12-16 19:32:00 I poured myself a cup of coffee this morning and decided to have a look at asking price data at one of my favorites sites Housing Tracker.According to the data at Housing Tracker, the median asking price for homes in OC reached it's peak in May of 2006. At that point, the median seller was asking nearly $700,000 ($694,600)for her home. Today, she is asking nearly $120,000 less.Over life of a 30 year loan at 7.5%, a buyer purchasing a home at today's median versus the median at the peak will save almost $300,000 in principal and interest. That buyer would also save rouhgly $53,000 in property taxes, for a total savings of about $350,000.That is an amazing amount of money and a tremendous reward exercising bearish prudence. You should be proud of yourself.Viva los Osos! More About: Price , Median
OCPB/Lansner Reader Demographics
2007-12-03 17:17:00 Quick summary of the survey results; details of bet later.In general, when I consider the 'icon' associated with my current outlook on OC residential real estate, I consider myself:Bear 93.9%Bull 6.1%In terms of political party, I most consider myself to be a part of:Registered Unaffiliated (Independent) 31.8%Republican 30.3%Democratic 27.3%Other Party 10.6%Which best describes your living situation: I rent or lease the property I live in. 62.5%I own the property I live in. 37.5%Choose the location that best and most-specifically describes the locale in which you live? I live in Orange County 67.2%I live elsewhere. 15.6%I live in Southern California 10.9%I live in California 6.3% More About: Reader , Demographics
Help Me Setttle a Bet!
2007-12-02 16:49:00 A buddy of mine and I are using reponses to a survey to settle a bet. I can't tell you anything about the bet, in part because my buddy is a bit of a cry-baby, and also because we don't want to bias the results.The survey is very, very simple and is only four questions long. It takes less that minute to complete. We don't ask for any personal information and there's no need to register, provide an email address or anything else that might make a respondent uncomfortable.So, please, do a Bear a favor, take a minute to answer the simple survey. And remember, let's keep things honest :)Click Here to Take the SurveyThanks!
S&P: Home Prices to Drop 7% Next Year
2007-11-30 03:32:00 7% reduction in OC home prices - 0 dollars.Shaving roughly $40K off the price of the typical OC home - 0 dollars. Saving nearly $100,000 in PIT over the life of a 30-year loan - Priceless. For increasingly cheaper housing there's the implosion of the OC RE Market, for everything else there's MasterCard. Regular readers will recognize this format of chart as being sourced from our friends at http://www.paperdinero.com/. The chart shows the S&P Case-Shiller price index for by month for the last few years as well as the monthly predicted index value as derived from futures prices traded on the index. The line of demarcation between historic values and predicted value is the left-most of the vertical dashed lines on the right-hand side of the chart.This chart is pretty easy to understand given that each of the predicted values is at roughly -7%. That means for the futures market expects prices to be off 7% on a year-on-year basis at least for the next 12 months. At the current pri... More About: Home , Year , Drop , Prices
Profitting from the Weak Housing Market
2007-11-28 17:00:00 Bear or bull, there's money to be made in the declining real estate market.I found a great little ETF that allows investors to short the DJ Real Estate Index. By definition, because the ETF shorts the index, its price goes up with the DJ Real Estate Index goes down proportionately. Conversely, if the index goes up, the price of the ETF falls. The name of the ETF is UltraShort Real Estate ProShares and its trading symbol is SRS.Now, from where I sit, there is very little positive to say about the housing market these days. And, if I am to believe what I read, things look primed to be much worse next year. While there are few guarantees in life and nearly none in the stock market, it seems like betting against the DJ RE Index makes a lot of sense.What I find so interesting about this ETF is that that it can benefit those bearish on the RE market whether they own a home or not. For owners, buying an ETF like this one can act as a hedge against dropping home prices. For future owners, ... More About: Market , Housing
What Do You Make Out of This?
2007-10-20 18:12:00 I wrote the following in late October and wasn't going to publish it, but a buddy convinced me to get it out. Sorry it's more than a bit late.I find this graph fascinating:It shows a snapshot of recent year-on-year (YOY) price and volume changes for four segments of OC Real Estate: new homes, existing homes, existing condos and then an 'all' category encompassing the other three. The horizontal axis is used to plot year-on-year price changes ,while the vertical axis plots YOY changes in volume/demand. Thus, line the plots the YOY relative change in demand versus the relative change in price for each of our four housing segments.This first thing I noted on this graph was the fact that prices of new homes had fallen the most of any segment while prices for existent houses had fallen the least. I believe that difference is caused by price different price 'stickiness' between those to segements and that prices for new homes are more 'fluid' and reponsive to market changes than p... More About: Make
Couldn't Have Said It Better Myself
2007-10-12 02:57:00 California Association of Realtor chief economist Leslie Appleton-Young was quoted recently as saying, "?We?ve had a fundamental change in the mindset of the buyer,? she says. ?There is no reason (for a buyer) to act.? I couldn't agree more. Of course, I was writing about that very topic on this blog back in February.Would seem Ms. Appleton-Young's trend indicators seem to be lagging mine by about eight months. So, in case you're wondering, Ms. Appleton-Young, the next eight months are going to be epically bad. The vast majority of buyers lack the interest, means or both to buy a home. Smart buyers are going to continue to sit on the sidelines at least through 2008. They are too smart to be interested in buying. Those buyers that aren't so smart are going to try and buy, but many, many of them will not be able to qualify. They will not have the means to buy.The implications are that: volumes are going to slow to a trickle, real prices are going to drop much further, seasonally-a...
Formula 409: Wiping Out Dirt, Grime AND High House Prices
2007-09-09 19:56:00 Back in May, I posted an analysis on the remarkable similarities between the prices declines we are seeing now versus the last housing price decline we saw in the early 90's here in Orange County. In that post, I showed that during the last decline, according to the Case Shiller index, prices fell fully 40% over the course of roughly nine years.With all of the talk about prices "stabilizing" and "bounces" set to occur next year, I thought I'd better come up with an easy way for people to remember the depth and duration of the last decline, lest they forget and make bad decisions in the absence of that context. The last decline wasn't pretty and to be quite candid, I'd to see as few of my friends and neighbor burned this time around as is possible. My guess is that if you're reader of my blog, you probably feel the same way.So, here goes. With a 40% price decline ('40') over nine years ('9') and a little concatenation ( '40' & '9'), we get the handy mnemonic '409'; jus... More About: House , House Prices , Formula , High , Dirt
Housing Sales to Drop 25% in 2008?
2007-09-08 18:21:00 It was reported in the Orange County Register that executives at Countrywide Funding expect retail loan volumes to drop 25% next year and that they are going to lay off 12,000 people as a result. I don't think it's any stretch to say that this also means that there is going to be a 25% drop in home sales as well.Let's have a look at July sales for the last three years and my estimate for 2008 based on Countrywide's figures:Clearly sales in Orange Country are falling precipitously year on year.What's most striking and a bit difficult to derive from the graph, is just how far housing sales volumes are going to drop from their peak in 2005. In 2005, OC saw 4,341 homes change hands, based on estimates derived from Countrywide's numbers, we we only see anemic sales of only 1,793 units in 2008 or over 2,500 fewer units. That's a decline of nearly 59%.So ask yourself this question: "Would I want to buy stock in a company where sales were going to drop nearly 60% over a four-year per... More About: Sales , Housing , Drop
Deadly RE Sins: Gluttony
2007-09-03 19:55:00 Every day or so, Redfin sends me updates of market activity in a few areas of OC that I care to study. In essence, these updates tell me two things: new properties that have been listed and properties where their prices have changed for one reason or another. I always enjoy seeing what properties are coming on the market, but I've got admit, I find the prices changes the most interesting.As I've been reviewing the pricing changes, I've found that there are essentially three elements to a price change: direction, magnitude and frequency. Direction is simply whether a seller is lowering his price or raising it, magnitude is the amount of the change and frequency is essentially how often the seller adjusts his prices.Today, I thought I'd noodle a little on that first aspect of price changes: direction. And I'd thought I'd start by looking at people clever enough to raise their prices in today's market, and introduce the first of our Deadly RE Sins : Gluttony.You might be tempted ...
OC Inventory Passes 20,000 Units
2007-08-30 23:13:00 .Consider this: two years ago, in August, we had 7,209 homes for sale in OC. As of yesterday, ZIPRealty.com showed that there were 20,024 homes for sale in OC, or nearly three times as many as we had just two years ago. Three times as many properties and probably a third as many interested/qualified buyers--its a recipe for an epic market decline.In February of this year, I wrote about a bet I had with a real estate agent friend. In that post, I explained that he and I had a bet as to whether or not the total amount of inventory of residential properties for sale would pass 20,000 units at any point in 2007. We kept the bet friendly at $100. I spoke my Realtor friend this morning (who I think was kidding when the threatened me with bodily harm if I revealed his name (besides, I could take him)) and he's agreed to pay on our bet. Now don't get me wrong, the $100 is nice. Being right is even nicer. But 20,000 homes is one hell of a lot of property. With the profound tightness of the... More About: Inventory , Units , Tory , Inventor , Unit
More Help for the NAR
2007-08-30 06:28:00 According to the data available from the Melissa Data website, unit sales volumes are down dramatically over the last two years. According to them, in August of 2005 5,227 homes were sold in OC while last month only 2,253 were sold. That's a reduction of nearly 3,000 units or 56.9%. Brutal market.Another interesting stat I was able to create from the fine Melissa Data information was the total value of homes sold by month here in OC. In August of 2005, roughly $3.65 billion dollars of residential real estate changed hands. Last month, only $1.76 billion worth the residential real estate was sold. That's a reduction of nearly $2 billion dollars. Epically brutal market, especially for RE agents.Consider this, with a reduction of roughly $2 billion in transactions, at a 6% commission rate, Realtors collectively made $120,000,000 LESS in commissions than they did just 23 months ago--those poor bastards.I've tried to help these poor souls in the past, but they keep on with their 'buy...
More than a Year of Inventory in OC RE Market
More articles from this author:2007-08-28 01:23:00 Steve Thomas at Remax Real Estate in Aliso Viejo calculates Orange County now has 12.2 months of inventory of homes currently on the market. Inventor y numbers are certainly very high compared to the last two years, but the real culprit here seems to be a collapse in OC housing demand.The following areas have inventories of less than ten months: Anaheim Hills, Brea, Canyon Areas, Cypress, Foothill Ranch, Huntington Beach, Laguna Woods, Mission Viejo, Rancho Santa Margarita and Seal Beach.The following areas have inventories greater than fourteen months: Anaheim, Corona Del Mar, Dove Canyon, Garden Grove, Laguna Hills, La Habra, Lake Forest, Portola Hills, San Clemente, San Juan, Santa Ana, Talega, Tustin, Villa Park and all ranges above $2 million.Read more here. Very interesting analysis, to be sure...then out of nowhere, Steve suggests that it's probably a good time to buy and even employs the tired, noisome 'get off the fence' metaphor. With home sales as sluggish as they are, ... More About: Market , Year , Tory 1, 2, 3 |
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