California Home Prices Drop Record 41% in August Amid Defaults
Started by NYC10013
over 17 years ago
Posts: 464
Member since: Jan 2007
Discussion about
California Home Prices Drop Record 41% in August Amid Defaults By Dan Levy Sept. 25 (Bloomberg) -- California home prices tumbled a record 41 percent in August from a year earlier as foreclosure sales pushed down values in the biggest U.S. state. The median price of an existing, single-family detached home fell to $350,140 and will likely fall further, the Los Angeles- based California Association... [more]
California Home Prices Drop Record 41% in August Amid Defaults
By Dan Levy
Sept. 25 (Bloomberg) -- California home prices tumbled a record 41 percent in August from a year earlier as foreclosure sales pushed down values in the biggest U.S. state.
The median price of an existing, single-family detached home fell to $350,140 and will likely fall further, the Los Angeles- based California Association of Realtors said today in a report. Sales increased 56.7 percent from August 2007 and 1.8 percent from July.
``While sales appear to have turned the corner, the median will experience additional downward pressure as we move into the off-peak season in the coming months, and will continue to face pressure from distressed sales,'' Leslie Appleton-Young, vice president and chief economist of the association, said in a statement.
More than 101,000 California households received a default notice, were warned of a pending auction or foreclosed on last month, RealtyTrac Inc., a seller of default data, said on Sept. 12. That was a third of the nation's total and represented one in 130 homes in the state.
Eight of the 10 metropolitan areas with the highest foreclosure rates are in California, led by Stockton in first place, according to RealtyTrac. Merced, Modesto, Vallejo-Fairfield and Riverside-San Bernardino ranked second through fifth. Bakersfield, Salinas-Monterey and Sacramento ranked eighth through tenth.
To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net
Last Updated: September 25, 2008 14:44 EDT
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Response by nyc10022
over 17 years ago
Posts: 9868
Member since: Aug 2008
holy bajesus.
unfortunately, this stuff can affect the bailout and wall street for some time. If the assets underneath all the MBS are hurting, then the MBS could be hurting for some time as well.
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Response by West81st
over 17 years ago
Posts: 5564
Member since: Jan 2008
nyc10022: Let's see... Suppose you securitized a pool of neg-am, no-doc, Libor option ARMs with usurious life caps. Now it's 2008. Haircut the property values by 45%, and assume sustained decline of perhaps 1% of sale price per month for the next year. Slash the median borrower income by 25% (which might just be enough to flush out the lies on their loan applications, let alone any actual loss of income since origination). Say 5% of the loans default on the first payment, and another 20% default in the first year. Then comes the first reset date...
Historic experience says those bonds are worth, uh... pick a number. We are in completely uncharted territory. There's no precedent, and no supportable model. (But hey, if PIMCO says the price is 65, that's good enough for me!)
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Response by ccdevi
over 17 years ago
Posts: 861
Member since: Apr 2007
to be fair to Gross, he said some are worth 20 some 80. I do think you could model it, like any model there will be assumptions, sure you may believe there is increased variability in the assumptions, but then you can/should just be more conservative.
The 41% is a shockingly high number though.
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Response by nyc10022
over 17 years ago
Posts: 9868
Member since: Aug 2008
Well, I have to figure this... even if they were all borrowing 100% of purchase price and ALL stopped making payments, a 45% decline still means they're worth 55% of original loan amount, no? Even take out 5-10 for transaction costs....
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Response by notadmin
over 17 years ago
Posts: 3835
Member since: Jul 2008
Nice! Congrats to all those who remained (and still do) on the sidelines.
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Response by ccdevi
over 17 years ago
Posts: 861
Member since: Apr 2007
admin is probably someone who looted on 9/11
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Response by nyc10022
over 17 years ago
Posts: 9868
Member since: Aug 2008
Any looting opportunities now?
There are probably a LOT of pens to steal at Lehman.
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Response by Topper
over 17 years ago
Posts: 1335
Member since: May 2008
To my fellow-bears, color me skeptical as to the veracity of the indicated 41% decline.
The year-over-year (June 30, 2008) Case-Shiller figures for the following metropolitan areas:
Los Angeles: -25.34%
San Diego: -24.18%
San Francisco: -23.69%
Not pretty, but not -41% either. Methodologies differ and Case-Shiller requires a fair amount of time to scrub the data before it is released.
That said, residential futures prices trading on the CME point to substantial west coast additional weakness. November, 2009 futures trade at the following discounts:
Los Angeles: -19.8%
San Diego: -17.4%
San Francisco -17.4%
Admittedly the volume for these contracts is low. The indicated declines are significantly worse, though, than what is seen for east coast cities.
Fortunately, the bulls tell me New York is different and that could never happen here. Phew!
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Response by nyc10022
over 17 years ago
Posts: 9868
Member since: Aug 2008
I have a feeling that its a basket issue. A whole lot of inventory in CA is the foreclosure kind, and that might be shifting the averages toward crappier places... Case Shiller is weighted, so it removes the basket issue.
I'm not really thinking that Bel Air mansions are down 41%. 25% sounds more like it... but, would not be surprised if that continues downward.
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Response by dco
over 17 years ago
Posts: 1319
Member since: Mar 2008
Nothing like we have ever seen..... Keep trying to compare it and you will continue to get hurt. That's what makes this $700B meaningless. It does nothing to correct the problem. Once the banks sell their garbage they will just hoard the cash. Least we forget that the "real" economy is in a world of hurt.
The banks don't have to lend a dime they get. They will just sit on the cash until they see the tide turn and in the mean time getting a loan will actually get worse.
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Response by Topper
over 17 years ago
Posts: 1335
Member since: May 2008
dco: Nothing like we have ever seen.....
We actually had somewhat similar declines from 1930 to 1933. That said, that truly was an extraordinary period.
It ain't over yet.
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Response by tenemental
over 17 years ago
Posts: 1282
Member since: Sep 2007
One stupid celebrity anecdote that surprised me...When Flea from Red Hot Chili Peppers lost his house in a fire not too long ago, the article mentioned that he had paid $8.5MM, but had it listed for sale at only $4.5MM. He probably made out better collecting insurance money.
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Response by petrfitz
over 17 years ago
Posts: 2533
Member since: Mar 2008
hey surdi - are you still bragging about the home values in ORange county????? Can you say house of cards?
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Response by notadmin
over 17 years ago
Posts: 3835
Member since: Jul 2008
ccdevi, tons of youngsters couldn't buy cause of the housing bubble. what's wrong about celebrating that is over? this is just a transfer of wealth. for the last decade young people starting out were unable to afford a home. now they will have a chance. it's happy news for some, even if you don't care about them.
holy bajesus.
unfortunately, this stuff can affect the bailout and wall street for some time. If the assets underneath all the MBS are hurting, then the MBS could be hurting for some time as well.
nyc10022: Let's see... Suppose you securitized a pool of neg-am, no-doc, Libor option ARMs with usurious life caps. Now it's 2008. Haircut the property values by 45%, and assume sustained decline of perhaps 1% of sale price per month for the next year. Slash the median borrower income by 25% (which might just be enough to flush out the lies on their loan applications, let alone any actual loss of income since origination). Say 5% of the loans default on the first payment, and another 20% default in the first year. Then comes the first reset date...
Historic experience says those bonds are worth, uh... pick a number. We are in completely uncharted territory. There's no precedent, and no supportable model. (But hey, if PIMCO says the price is 65, that's good enough for me!)
to be fair to Gross, he said some are worth 20 some 80. I do think you could model it, like any model there will be assumptions, sure you may believe there is increased variability in the assumptions, but then you can/should just be more conservative.
The 41% is a shockingly high number though.
Well, I have to figure this... even if they were all borrowing 100% of purchase price and ALL stopped making payments, a 45% decline still means they're worth 55% of original loan amount, no? Even take out 5-10 for transaction costs....
Nice! Congrats to all those who remained (and still do) on the sidelines.
admin is probably someone who looted on 9/11
Any looting opportunities now?
There are probably a LOT of pens to steal at Lehman.
To my fellow-bears, color me skeptical as to the veracity of the indicated 41% decline.
The year-over-year (June 30, 2008) Case-Shiller figures for the following metropolitan areas:
Los Angeles: -25.34%
San Diego: -24.18%
San Francisco: -23.69%
Not pretty, but not -41% either. Methodologies differ and Case-Shiller requires a fair amount of time to scrub the data before it is released.
That said, residential futures prices trading on the CME point to substantial west coast additional weakness. November, 2009 futures trade at the following discounts:
Los Angeles: -19.8%
San Diego: -17.4%
San Francisco -17.4%
Admittedly the volume for these contracts is low. The indicated declines are significantly worse, though, than what is seen for east coast cities.
Fortunately, the bulls tell me New York is different and that could never happen here. Phew!
I have a feeling that its a basket issue. A whole lot of inventory in CA is the foreclosure kind, and that might be shifting the averages toward crappier places... Case Shiller is weighted, so it removes the basket issue.
I'm not really thinking that Bel Air mansions are down 41%. 25% sounds more like it... but, would not be surprised if that continues downward.
Nothing like we have ever seen..... Keep trying to compare it and you will continue to get hurt. That's what makes this $700B meaningless. It does nothing to correct the problem. Once the banks sell their garbage they will just hoard the cash. Least we forget that the "real" economy is in a world of hurt.
The banks don't have to lend a dime they get. They will just sit on the cash until they see the tide turn and in the mean time getting a loan will actually get worse.
dco: Nothing like we have ever seen.....
We actually had somewhat similar declines from 1930 to 1933. That said, that truly was an extraordinary period.
It ain't over yet.
One stupid celebrity anecdote that surprised me...When Flea from Red Hot Chili Peppers lost his house in a fire not too long ago, the article mentioned that he had paid $8.5MM, but had it listed for sale at only $4.5MM. He probably made out better collecting insurance money.
hey surdi - are you still bragging about the home values in ORange county????? Can you say house of cards?
ccdevi, tons of youngsters couldn't buy cause of the housing bubble. what's wrong about celebrating that is over? this is just a transfer of wealth. for the last decade young people starting out were unable to afford a home. now they will have a chance. it's happy news for some, even if you don't care about them.