From the Central Valley Business Times:
Is California’s housing boom bust?
The rocket engine of the California economy for the past 16 years – the booming housing market – is broken and, if not headed for a total crash, the next several years won’t be pleasant, warns a top economist with the University of California, Los Angles.
“There is nothing in the historical record that suggests we can get quickly back to normal – after all we are going to have to get prices back in line with affordability, and that will take some considerable period of time. In the meantime, sales are sure to be way down,” Mr. Leamer says.
Thursday, September 28, 2006
From the Central Valley Business Times:
Posted by Bakersfield Bubble at 9:31 AM
Wednesday, September 27, 2006
I am still trying to figure why a newspaper would avoid reporting the facts of the housing bubble and the potential effects on the local economy. Instead, they do the bidding of a pair of local realtors. Instead of reporting the pontential problems associated with negative amortization loans and pay option arms, they placate these guys so they will increase the dollars spent on advertising? Instead of discussing the problems associated with families spending 50% of their income on housing and the damaging effect on their personal lives, they choose to do ANOTHER puff piece and make us all believe how great these guys are.
This blog has never been about these guys. This blog is dedicated to discussing the issues the local news outlets refuse to address because so much of their revenues come from REIC sources. Yes, they are part of the story, along with loose lending standards, mass speculation and cheap & easy credit.
Posted by Bakersfield Bubble at 1:20 PM
Monday, September 25, 2006
August 2006 permit numbers are out. The number of permits pulled in August 2006 was down 60% from August 2005.
290 permits pulled August 2006
726 permits pulled August 2005
Calif Homes 12
Hardt Homes 10
A few more months like this and that could mean less contractors needed, less pick-up trucks purchased, less big screen tv purchased...
Posted by Bakersfield Bubble at 10:18 AM
Friday, September 22, 2006
This is the headline at KGET. "Crisp Responds to Rumors". Watch the video. Does he really respond to the rumors?? Not sure.
BAKERSFIELD - David Crisp of the Bakersfield realty partnership Crisp & Cole said rumors about the duo’s personal integrity and private lives have been detrimental to their daily business.
The rumors have included allegations that Crisp is under investigation by the IRS or the FBI, or he was arrested over the weekend, along with other variations.
Crisp said the rumors are simply untrue and the local real estate market is changing so they are trying to adapt to the changes.
Crisp said he is moving ahead with their new office building across from Cal State, and with plans for the $350 million tower condominium project with Cal State.
He said while some investors have begun to ask questions about all the rumors, many have recently given the business partners reassurance of their support.
Posted by Bakersfield Bubble at 9:18 PM
Wednesday, September 20, 2006
Thanks to desi dude for the tip-
Countrywide blames housing sales slowdownBy Jim McLain, jmclain@VenturaCountyStar.comSeptember 20, 2006
The end of the real estate market boom is forcing one of Ventura County's largest employers to cut 5 percent to 10 percent of its work force over the next few months, a top executive told workers Tuesday.
Countrywide Financial Corp., the country's largest mortgage lender with about 5,700 workers in Simi Valley, Thousand Oaks and Westlake Village, instituted a 60-day hiring freeze and plans to reduce staffing in several areas, Dave Sambol, president and chief operating officer, said in a memo obtained by The Star.
The memo does not mention layoffs, but several workers leaving the company's Westlake Village office as security guards roamed the parking lot declined to discuss layoffs or said they were told not to talk with the media.
A Thousand Oaks woman who did not give her name said she received two weeks severance pay after working for the company the past 2 years. She clutched a packet she said contained information to help her find another job.
She added that layoff rumors that had been swirling on the Countrywide campus for weeks were confirmed Tuesday morning."You found out because your vacation time on your paycheck was gone," she said.Countrywide officials did not return The Star's repeated calls for comment.
The Calabasas-based holding company, which offers a range of financial services, has more than 56,000 employees and some 900 offices nationwide. That means the cutbacks might directly affect as many as 5,600 workers.
Posted by Bakersfield Bubble at 2:10 PM
Tuesday, September 19, 2006
California housing bubble about to burst
Several U.S. real estate markets including Fresno and Stockton in the Central Valley are facing a bust as real estate prices driven to unsustainable levels by years of activity by real estate speculators and increased reliance by homeowners on low down-payment, short-term adjustable rate mortgages have created a glut of motivated home sellers, says House Buyer Network, a Marietta, Ga.-based company which buys and sells distressed properties.
“You’ve got the makings here of the perfect storm,” Mr. LeGate says. “I can see prices going down by a good 20 percent in the markets we’re calling ‘bust.’
Posted by Bakersfield Bubble at 2:32 PM
Monday, September 18, 2006
From realtytimes.com we get an update from local realtor Chuck Doremus:
"The experts predicted a soft landing with the real estate market; however, it seems we have landed on too short a runway for some. Some of those investors who purchased properties to "flip" them for a quick profit have found they are on that short runway, and are now faced with having to dump the properties or rent them at a negative cash flow. As of mid-September there were 4,697 single family residences on the market"
Posted by Bakersfield Bubble at 12:52 PM
Sunday, September 17, 2006
From today's www.Bakersfield.com two local articles:
Housing slowdown could mean painful adjustments for Kern
The housing market’s slowdown, and the resulting loss in jobs, could mean a painful adjustment is in store for Kern County’s economy, experts say.
Jobs slip as building slides
Then the market ground to a halt last fall. And house sales didn’t pick up as much as many had hoped in the spring.
That’s when the layoffs started
Sales have been dragging for both national builders and local ones like Barbara Smith, whose custom and semicustom homes typically sell for $600,000 or more.
Anything priced above $400,000. has been really, really slow to sell, Smith said on a recent afternoon
I wonder how many of the real estate offices built on Coffee Road will be vacant in the next year?
Posted by Bakersfield Bubble at 10:24 AM
Saturday, September 16, 2006
I have to go all the way to DC to find evidence of a housing bubble in Bakersfield? Why are the local reporters asleep at the wheel?
Some mortgage lenders and relocation companies now expect appraisers to examine a wide range of data they never emphasized during the boom years. Gary Crabtree, owner of Affiliated Appraisers, based in Bakersfield, Calif., said that besides the traditional "recent comps," he now factors in at least eight other types of data in determining the value of a house:
Pending sales under contract.
· Listing prices of houses in the area.
· Market supply and demand.
· Length of time unsold on the market for current listings.
· Price reductions or increases on current listings.
· Notices of defaults and notices of trustee's sales
· Known concessions provided to buyers to facilitate sales.
· Personal interviews with real estate agents on what they're experiencing with sellers and buyers
Crabtree said one house he tracked was first listed in October at $299,900. It sat unsold for 122 days. Then the listing agent pulled it out of the system briefly and brought it back as a new listing, but this time at $269,000. When it didn't sell in 30 days, the agent again yanked the listing and reported it as a new one with an asking price of $259,000.
The house is now on the market for $229,000, "but it's still not selling."
Thanks to Ben Jones for the tip. http://thehousingbubbleblog.com/
Posted by Bakersfield Bubble at 4:23 PM
Thursday, September 14, 2006
In is 9-13-06 update Local weatherman, err... realtor George Lindsay Young is using some good old fashion NAR scare tactics to convice people to buy. If you don't buy you are a chicken little. Forget that prices are overvalued by 50%, forget that median incomes are flat in the last 7 years, forget that the prevelance of liar loans and speculators have left many sellers holding the bag - NO George needs some transactions, otherwise how is he going to eat! Thanks to the reader who sent this in.
Better Than You Think!
Remember Chicken Little? In the popular children’s fable, a small acorn falling on the feathered fowl could only mean one thing: THE SKY IS FALLING! It’s a cautionary tale about the dangers of overreacting to incorrect conclusions and misguided information. The screaming chicken incites mass hysteria, which leads to further danger for herself and her friends. In many ways, much can be learned from this story and the parallels between it and our current real estate market. If you wanted to find irrational exuberance in the real estate marketplace, you don’t have to look much further than the last three years. Thin inventory, eager buyers, & low interest rates all served as a catalyst to fuel explosive growth in home prices. But rapid price growth is rarely sustainable, and left unchecked, can lead to precipitous drops in prices. Fortunately, that’s not the case for our area, yet the slowdown in our current home market has led some to believe now may not be a good time to buy or sell a home. Cue Chicken Little! But I’m here to tell you, when you get past hyperbole and focus on the facts…“The Market Is Better Than You Think!” Take a close look at statistics and real estate market data for the Bakersfield area and another picture begins to emerge: Managed growth and stability. These are two factors that will likely keep our home market healthy for quite some time. Over the last two months more than 900 homes have sold in the Bakersfield area, and here at the Scott Rivera Real Estate Team, we sold an average of one home every day. It’s a new market reality that has returned us to a normal real estate market. The problem is, normal is a relative term. When things are abnormal for a very long time that can begin to feel normal for many people. Why is the Bakersfield real estate market holding its own when other areas of California may not be fairing as well? While price is big factor, it’s only part of the story. Our economy, diversity, community, and location are also part of the puzzle. Kern County has much to offer when it comes to job growth and quality of life. Also a recent fall in mortgage interest rates will serve to continue to keep the wheels of the real estate machine humming with precision for many months to come. So next time a Chicken Little you may know tries to rule the roost with declarations of doom, just smile. While some will run around with their hands on their head afraid of a piece of the sky falling, you’ll know the home you’re buying or selling will be a piece of something much bigger. It’s the peace of mind that comes from knowing that real estate always has been and always will be part of the American dream.
Posted by Bakersfield Bubble at 5:23 PM
Wednesday, September 13, 2006
Robert Price had an interesting piece in today's paper on why CSUB can't attract more students. The campus has the capacity for 15,000 to 18,000 FTE yet they have only 8,000 of current enrollment. Why don't more students attend college was his question. My question is - Why attend college? The greatest job opportunity in this town is to become part of the REIC (Real Estate Industrial Complex). It is clearly the easiest path to riches in Bakersfield.
Why would a reporter ask such a question? He should know the answer. The newspaper loves to lionize all of these quick buck real estate show boats by splashing their material possessions on the front page of the local paper and glorifying them as visionaries. When in fact, they are simple salesmen with expensive suits and sub-standard high school educations. This "boom" was built on the back of the FED keeping rates way too low for way too long. It had nothing to do with great vision or business sense but shear luck. Who knew being in the right place at the right time made someone a real estate genius.
Why spend 4 years and $75k to attend college when you can make that in a week flipping homes or signing FB's into pay option arms. Why try to build a career that will contribute to society when, in fact, you can find one that allows you to prey on society?
Posted by Bakersfield Bubble at 7:02 PM
Tuesday, September 12, 2006
Hovnanian CEO: Housing market changing dramatically
BOSTON (MarketWatch) -- The chief executive of home builder Hovnanian Enterprises Inc. at an industry conference Monday said housing markets are changing "quite dramatically" and that new-home prices have effectively reversed through the use of concessions and incentives. Speculators and investors were a greater part of the market than anyone realized, and are now contributing to the inventory overhang of homes as they stop buying and relist homes, said Ara Hovnanian at the Credit Suisse Homebuilding Symposium in New York. "Buyer psychology has shifted . . . buyers are more content to wait on the sidelines than they were," the CEO said. "Cancellation rates have been creeping up."
Posted by Bakersfield Bubble at 2:33 PM
D.R. Horton CEO says 2007 will be worse than 2006
By John SpenceLast Update: 2:00 PM ET Sep 12, 2006
BOSTON (MarketWatch) — DHI : D.R. Horton, Inc.Last: 23.80+1.45+6.49%1:46pm 09/12/2006
Don Tomnitz, chief executive of D.R. Horton Inc., Tuesday said the company is preparing itself for a tougher housing market in 2007 compared to 2006, with prices finally stabilizing in 2008. “We have never seen housing prices and demand slow as quickly as they have during this downcycle,” said the CEO of the nation’s largest home builder when measured by 2005 deliveries. “Demand has evaporated to the extent of about 20% to 30% for the industry, and in a tighter timeframe than we’ve seen before.” The use of incentives by builders to move homes in a slower sales environment will continue for the next three to four quarters, Tomnitz estimated at the Credit Suisse Homebuilders Symposium.
Posted by Bakersfield Bubble at 11:41 AM
Greed, speculation helped overheat housing market: Toll CEO
By John Spence
Last Update: 11:27 AM ET Sep 12, 2006
BOSTON (MarketWatch) — Toll Brothers Inc. (TOL: 27.95, +1.33, +5.0% ) Chief Executive Robert Toll said the U.S. housing market got ahead of itself due to greed on the part of buyers and sellers, and that it now likely faces the highest level of speculative inventory ever. Toll said the current downturn is unique in his experience because it wasn’t driven by a “macro-event” although interest rates have risen steadily. “Every day there’s an article about how lousy housing is now and how dumb you have to be to buy a house now,” the CEO said Tuesday at the Credit Suisse Homebuilders Symposium. “I don’t know what it will take to turn this market — it could take two years, or it could take someone getting quoted in the New York Times saying the market has hit bottom.”
Posted by Bakersfield Bubble at 9:16 AM
Housing market conditions won't improve in near-term: Beazer
BOSTON (MarketWatch) -- Beazer Homes USA Inc. (BZH :
Beazer Homes USA, Inc.
BZH38.70, +1.40, +3.8%) Chief Financial Officer Jim O'Leary said the company doesn't see conditions in the U.S. housing market improving in the near-term as home cancellations rise. "About 50% of the people canceling on us now have home-to-sell issues . . . and some are looking for better deals," the CFO said Tuesday at the Credit Suisse Homebuilders Symposium. "A lot of buyers are having trouble closing [on their existing homes], and they don't want the risk of owning two homes in this market," O'Leary added
Posted by Bakersfield Bubble at 7:59 AM
Monday, September 11, 2006
I continue to wait for the Bakersfield Californian to be a leader in dicussing the local angle on this housing bubble bust. However, I continue to be disappointed. Meanwhile, other Central Valley cities have reporters who put journalism before Advertising Dollars:
The shakeout continues for Sacramento home builders. From the Sacramento Bee:
Ax falls at home buildersFirms shed executives, field staff in wake of slowdown.After months of sales cancellations, production slowdowns and costly incentives to win customers, Sacramento-area home builders have turned to staff reductions and consolidations to help improve bottom lines, analysts and some executives say.Several public and private home builders have shed executive and field staff in recent weeks, industry officials acknowledge. At least one builder has consolidated offices and another, Colorado-based Richmond American Homes, reportedly shifted its local operations base to Pleasanton after laying off approximately 25 to 30 staffers...Schleimer, owner of Market Perspectives, said Richmond American made a sizable reduction in its regional work force in recent weeks. One of those laid off said the publicly traded Denver builder cut 20 to 25 management positions. The reduction followed five earlier position cuts, said the former staffer, who requested anonymity because final paychecks have yet to be received...
Fresno's "Go-Go Days Are Gone-Gone"
The Fresno Bee reports on the rapidly changing Fresno housing market.
During the go-go days, home sellers put their houses up for sale and sat back as would-be buyers jacked the price up with every bid. Those go-go days are gone-gone. With home sales in Fresno County off from last year by a third, sellers and real estate agents are more willing to negotiate...Some people have been surprised at how quickly the real estate market softened because, unlike previous declines, this downturn is not accompanied by higher unemployment or a fundamental change in the economy.
The Porterville Recorder. “As Tulare County enjoys a bustling economy and housing market, officials at the County Administrative Office said Thursday they are keeping their spending in check.”
“Assistant County Administrative Officer Jean Rousseau said they have learned from the state’s mistakes. ‘We have more money that we have had in the past,’ said Rousseau, who compared the counties upswing in assessed property value to the dot-com boom in the early 1990s. ‘We don’t want to put that growth into program spending.’”
“Just like when the bubble burst on the technology industry, the county is preparing for an eventual downturn in the housing market. Rousseau said that means basing their budgets on historically normal revenues as opposed to the inflated numbers in recent years.”
“‘We want long-term fiscal stability,’ Rousseau said. ‘What’s the point in spending when you will have to come back the next year and cut it?’”
Thanks to Lander and Ben Jones for these great valley stories. I guess I will have to carry the torch for the southern SJV until the newspaper gets some BALLS!
Posted by Bakersfield Bubble at 4:28 PM
Tuesday, September 05, 2006
Hot real estate market gets chilly in Bakersfield
Housing inventory quintuples as boomtown of 2005 returns to Earth
BAKERSFIELD, Calif. (MarketWatch) -- Just 12 months ago, this sun-baked Southern California city was one of the hottest real-estate markets in the country. With inventories at razor-thin levels, properties would sell in a matter of days, sometimes even hours, as multiple bids poured in on each home. "For Sale" signs were almost nowhere to be found.
Those days now are dust in Bakersfield's gusty winds. The housing stock nearly has quintupled and prices are virtually flat when compared to last year's levels. Home sale time-frames now are measured in months, not days.
"Yeah, we miss those times," Darrell Muhammed, a local agent, said of last year's market.
While average prices have yet to tumble, concern mounts that an ever-increasing housing inventory, coupled with coming hikes for variable rate mortgage holders, could send the market south in a hurry.
Trouble signs are everywhere. At Lennar Corp.'s (LEN :
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LEN44.79, -0.05, -0.1%) Artisan/Terra Vista tract on the city's west side, about 20 homes only a year old are back on the market.
They compete with dozens of other new houses Lennar is building in later phases of the same development, which agents say makes the older homes tougher to sell. Six of the resales are within view of each other on the same street.
"It's very tough market," said Joginder Gill, the agent trying to sell one of the six houses. "If you look at past history, it's going to go way, way down."
Tucked into the southeast corner of California's San Joaquin Valley about 90 minutes north of Los Angeles, Bakersfield suddenly became a hot real estate market two to three years ago when prices in the L.A. region skyrocketed out of reach for entry-level buyers. See full story.
Those variable mortgages with low initial interest rates catapulted most homes in the L.A. area past the $500,000 mark. Meanwhile, Bakersfield remained somewhat more affordable with a good selection of homes still under $300,000 for those willing to brave the long-distance commute, or others lucky enough to find work nearby.
The region also captured a lot of interest from investors looking to make a quick buck. As many as one in four homes bought during this time were from out-of-town investors interested mostly in flipping properties, experts say.
The city led the charge of eastern California towns like Fresno, Modesto, Visalia and Merced where home price hikes beat out more high-profile areas to the west such as Los Angeles, San Francisco and San Diego in percentage gains.
According to the Office of Federal Housing Enterprise Oversight, Bakersfield edged out Las Vegas in the first quarter of 2005 for highest average property growth with a 33.7% increase. Las Vegas was up 33.3%.
More recently, OFHEO ranked Bakersfield 19th and Las Vegas 83rd during its survey for the first quarter of 2006. For the first quarter of 2006, OFHEO said Bakersfield's average home price rose nearly 27% when compared with the year before.
Local experts say those figures are outdated.
Gary Crabtree, a local appraiser who compiles a monthly report on Bakersfield market trends, says median home sale prices in the region rose 2% in July compared with the year before.
The time that unsold inventory remains on the market has jumped 400%, from 1.7 months to 8.5 months. And the time homes have spent on the market has more than tripled, from 12 days to 38 days.
Even that last figure can be deceiving, Crabtree says. He thinks agents are playing what he calls the "re-listing game," or taking a property off the market and then putting it back on again so that the "days on market" clock starts anew.
One property he was eyeing spent more than eight months on the market. But through several relistings, it appeared to buyers as though it never spent more than a couple of months up for sale.
Crabtree, though, says the market should be put in perspective. Last year was extraordinary, with property values skyrocketing in the face of high demand and extremely low supply.
"We're back to being normal again," he said. "We're tracking right along with the rest of the state."
Leslie Appleton-Young, chief economist for the California Association of Realtors, said sales are down 30% statewide from what they were a year ago. She said the market is correcting but it's not recession-fueled. The interest rate environment remains favorable.
Simply put, the market that saw 40% jumps in housing prices the past two years has gotten a wake-up call.
"It's been completely unsustainable," she said.
To many, the Bakersfield situation was inevitable.
"Why shouldn't there be retrenchment in housing?" said Stuart Gabriel, director of the University of Southern California's Lusk Center for Real Estate. "It's appropriate that housing take a breather."
Competing with builders
Karen Siggel probably wishes it wasn't happening now.
She's tried to sell her spacious, two-year-old custom home in an east Bakersfield development for almost five months now. She's competing not only with other resale homes, but the builder in the neighborhood, Corky McMillan Companies, is offering incentives to move the new homes it's building.
So she's looking to do the same, carrying some of the closing costs for buyers, as well as other options.
"We've drastically lowered the price, too," she said. Corky McMillan officials didn't return phone calls.
Many agents insist the Bakersfield market isn't crashing. To them, it's simply behaving like a normal market with a reasonable supply of homes - more than 2% of the housing market compared with last year's levels that were a fraction of a percent.
"It's what I would say is balanced," said Don Cohen, president of the Bakersfield Association of Realtors. "You're seeing what I saw in the '90s but you haven't seen since 2000."
Chuck Doremus, a longtime Bakersfield agent, said sellers are getting a reality check.
"We're seeing people put out their price based on what things have sold for," he said.
Others, however, wonder whether the Bakersfield real estate market adjusted too quickly and will keep heading down. Agent Ryan McDonald said the jump in inventory is disturbing.
"I don't think it's normalized," he said. "I definitely think it's reverted to the buyers."
Gill, the real estate agent trying to sell the home in the Lennar tract, says it was about a year ago that the market started turning. He's about to take over as agent for one home that was put on the market a year ago for $950,000 -- a high price for the region. It, like many other homes, has been reduced several times. He's about to re-list it for $785,000.
Another house listed in late 2005 was on the market eight months. It had to be reduced from $390,000 to $345,000.
The Artisan/Terra Vista home sits on a street where five other houses are on the market. It was an investment vehicle that the owner now is trying to flip for a profit, but may end up having to cut expectations.
Complicating his job is the fact that Lennar keeps building, as do other homebuilders in the area.
"People like to go to the new homes," Gill said.
Lennar spokesman Marshall Ames said in an e-mail that "we do not comment on individual markets in between our quarterly conference calls [with analysts]."
Lennar is seeking anywhere from $365,555 to $461,555 for homes ranging in size from 2,148 to 2,969 square feet. It has 19 homes listed as available for sale on its Web site, but it may find it difficult to sell those.
Just a few blocks away, a tract built by Centex Corp. (CTX :
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CTX51.13, +0.18, +0.4%) is offering a wider range of home sizes at lower price points. A home at 1,821 square feet starts at $279,990 while the largest Centex offering measures 3,518 square feet and tops out at $433,990.
Centex officials didn't return phone calls.
No building slowdown
Despite the more competitive climate, it doesn't seem as if builders intend to slow down at all. Jim Eggert, a city planner, says there only are about 300 to 350 fewer building permits taken out throughout Bakersfield when compared with last year.
They're still out building, but I don't know if they're selling," Eggert said. "These prices have to come down a little bit. They have to."
One impetus for builders is that the region's population continues to grow. Metropolitan Bakersfield had 451,800 residents at the beginning of 2005. That grew to 467,900 a year later and is expected to reach 483,800 on Jan. 1, Eggert said.
Does it all mean that current trends will continue to snowball, sending the Bakersfield market crashing? The next 12 months should be revealing, said Crabtree, the appraiser.
He said the bulk of variable-rate loans issued three years ago will start to mature. That means buyers will start paying several hundred dollars more each month for their homes.
"I do think we're in for a period of some foreclosures in 2007," Crabtree said. A flood of resold homes could also hit the market.
"It could very well be that some of these people are looking at these interest rate increases and are trying to get out," he said. Russ Britt is the Los Angeles bureau chief for MarketWatch.
Posted by Bakersfield Bubble at 6:39 AM