Real Homes of Genius: Forget Buy 1 get 1 Free Deals. How About 3 for the Price of 1. Today we Salute you Riverside.
Even though the California numbers were once again setting record lows, our sister state Florida is now leading the way in fire sale housing marketing. It is incredible how little attention was given to the dropping prices in the recent home sale reports. In fact, if you were to only look at lower to middle class areas the numbers would be much more hard to digest. In fact, today listening to the radio I heard an economist say, “if you look at the +$1 million range, prices actually held up.” Thanks for showing the rest of the 95 percent of the state that you do not walk in their world. The perception is being given that the bottom is now reached because sales are looking like they are hitting absolute lows. Well guess what? The reason we can’t go much lower is because the entire kitchen sink is being thrown out there and some people are coming back into the market. Yet the major reason for this isn’t so much that we are reaching a bottom or market sentiment is changing. The reason that we are seeing a bit of stability is many sellers are now doing swap meet style deals. Let us go back to Florida for a second. In Cape Coral they are now offering get this, a sort of buy 1 get 1 free deal. Do you mean buy 1 flat screen and your second is free? Nope. Prices are being slashed so fast, we are now seeing buyer frenzies once again. You can head over to YouTube to watch the short news clip.
*Click to watch swap meet style housing sales in action
Here are a few memorable quotes:
“It’s almost like buy one get one free…”
“You can’t beat $86,000…”
Brand new homes being sold for $86,000? Doesn’t Florida have sunshine like California? You may be thinking that we will never ever see prices like that in California but keep in mind, we are a gigantic state and believe it or not, some areas are already seeing fire sale prices. You also have to keep in mind with this orgy of home sales such as the one in Cape Coral, lower prices are going to depreciate the market further for future sellers. With the flurry of buyers and considering that data reported at least in the mainstream media takes 45 to 60 days to be recorded, we are bound to see dismal statistics in this area for the next few months. Good deals for the buyers, horrible data for the state. In fact, watching this video made me nostalgic of the major waitlists here in California where people were fighting one another to get onto waitlists for homes or condos not even built! You want to get some sales going here? How about slashing prices like they are in Florida? Yet the argument instead of sunshine will now be something about us having Hollywood or how amazing our freeway system is therefore trying to justify high prices.
Keep in mind that we are still facing a $14 billion state budget shortfall which of course will probably be even higher after tax season since we know that they are using Pollyanna models of expectation. Has the budget miraculously disappeared? Of course not. In fact, I’m hearing from multiple places that many governmental departments are starting to get a sneak peak to tax revenues and they are not good at all. The delusion train has run out of tracks. Given the fiscal year for the state runs from July 1 to June 30, the budget needs to be hashed out by May. For all intents and purposes March is a done deal and the April tax gods are not going to bestow a windfall to patch this things up. Either more job losses are coming or taxes need to be raised. What other options are there? Since the state budget is incredibly large, these things need to be hashed out long in advance and whether you think taxes are going to go up, we are already seeing the impact of higher fees down the pipeline:
“When fees rise, qualified and hard-working students are blocked from attending the University of California,” Hendrickson said. “The UC system needs to reach out to [Schwarzenegger] and the legislature to let them know that the governor needs to find other alternatives for the budget rather than force students to make up for deficits.”
The governor’s proposal does not provide funding for a student fee “buyout” as in the 2006-07 school year, and assumes a student fee increase of at least 7 percent in educational fees for 2008-09, along with a 10 percent increase in the 2008-09 registration fee. The combined total amounts to a proposed fee increase of $490 for undergraduates and $546 for graduate students.”
This from the University of California in Santa Barbara, which is only 1 of 10 UC campuses throughout the state. These increases will probably be hitting the 109 community colleges and the 23 California State University colleges as well. Either way you slice it, education is going to go up a lot more for the next year. What happened to that zero percent inflation rate reported by the Bureau of Labor and Statistics?
Now going back to the sale in Florida, what this is now telling us is we have gone from the denial stage to the flat out, “give me whatever you can because we are teetering on bankruptcy” stage in a few months. These prices are meant to simply push inventory. Lower prices are deflationary and we can expect to see continued declines in the price of many Americans’ most valuable asset, their home while facing ever increasing prices in energy and food. Even if energy does calm down, we are entering the travel season so we have a few good months where higher prices are simply baked in.
Let us now give you a prime example of major fire sale prices here in Southern California. Today we salute you Riverside with our Real Home of Genius Award.
Slash it Till its Hot on the Grill
I hope that first you watched the clip of the brand new homes being sold for $86,000 in Florida and compare it to this 1,098 square foot home. I know, your first reaction was of hesitation but after seeing the grill on the lawn with two chairs, you are now sold. Again, why don’t banks simply pay a few thousand, clean up the lawn, slap some paint on and at least make the place presentable? Maybe they’re too busy twiddling their thumbs and calling Boom Boom Bernanke for more funds since they made such great deals on these places. “Hey Ben, if you extend us a line we’ll throw in a stainless grill so you can cook some of those Federal Reserve Notes you have laying around.” This home is case and point why many lenders and banks should be allowed to fail completely; even now when they are given the chance to step up and sell homes, they are too lazy to clean a place up and try to increase the value of the home and the neighborhood. I know, not their “job” but they were sure happy to collect those checks during the good times.
Let us look at the Alice in Wonderland sales history here:
Sale History
12/19/2006: $325,000
Okay, so we now have that bubble price for perspective. But let us take a look at the manic pricing action on this place:
Price Reduced: 10/01/07 — $309,000 to $299,000
Price Reduced: 10/09/07 — $299,000 to $289,000
Price Reduced: 10/15/07 — $289,000 to $279,000
Price Reduced: 10/23/07 — $279,000 to $269,000
Price Reduced: 10/31/07 — $269,000 to $259,000
Price Reduced: 11/09/07 — $259,000 to $249,000
Price Reduced: 11/14/07 — $249,000 to $239,000
Price Reduced: 11/21/07 — $239,000 to $229,000
Price Reduced: 11/28/07 — $229,000 to $209,000
Price Reduced: 12/05/07 — $209,000 to $199,000
Price Reduced: 12/26/07 — $199,000 to $189,000
Price Reduced: 01/22/08 — $189,000 to $179,000
Price Increased: 02/11/08 — $179,000 to $236,000
Price Reduced: 03/06/08 — $236,000 to $149,000
Price Reduced: 03/10/08 — $149,000 to $129,000
Price Reduced: 03/13/08 — $129,000 to $109,000
Bwahaha! So in 6 months, we went from $309,000 to the current $109,000. The person that bought in 2006, you know ancient history, can now buy 3 of these same homes in the same area. Forget Florida, we are having our own fire sale here in sunny Southern California. If there was a Real Home of Genius Award for most price movements in 6 months this place would win it. And what is going on with the increase in February? Maybe that was when the grill was thrown on the lawn. In fact, this home has gone down $127,000 in one month! At this rate, it may be free by year end. What this tells us on a more profound level is the bubble prices were pulled out of you know where and on the flip side, declining prices are being slashed at a feverish pitch just to get someone to make an offer. What many of us feel in our gut but probably haven’t verbalized is this inherent truth: prices were made up during the boom and people simply got whatever they could get away with. Now, prices have to reflect some market fundamentals since none were used during the boom. This home would rent for $700 to $800 in this area. So the current price is getting closer to a break-even point where an investor may take a look at it. Plus, how can you say no with two lawn chairs?
Today we salute you Riverside with our Real Home of Genius Award.
Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information
Subscribe to feed
19 Responses to “Real Homes of Genius: Forget Buy 1 get 1 Free Deals. How About 3 for the Price of 1. Today we Salute you Riverside.”
And to think we still have all the alt-a and option arm garbage to wade through. The wreckage in bubbleicious states is going to be epic. The wheels are finally starting come off the wagon and in 2009 the wagon will have flown off a cliff.
What is Wrong with this picture. Everything looks so great, but as we all know that extreme mesures had to be used to bring out the buyers. What about Miami & the intercoastal region with it’s condo & single family home markets. Everything must be in shambles, or very close to it.
SAW HUNDREDS OF NEW DESERT 3 BD/2 BTH 2 CAR GARAGE WITH POOL ON PRIVATE NON HOA HOUSES IN 2002 FOR 87 THOUSAND WHEN THE PLACE IM IN COST 87 THOU IN 1980 AND I STUPIDLY CALCULATED IT AS WEAR AND TEAR, NOT EVEN LOOKING AT THE AGRICULTURE………………….
Did anybody hear McCain’s recent speech on the housing bubble? Finally we have a presidential candidate besides Ron Paul which understands what the hell is going on. I would love to sit Hillary and Obama down and show them a list of the RHG to see if they still firmly believe in bailing out the lenders and borrowers. Let the lenders and Wall St. take the hit and learn from their mistakes. People say you can’t time the housing market but I am starting to believe that the best Prognosticating Tool we can use to date is the 2 Tsunamis of Mortgage Resets Chart DHB has provided us with. I will be on the fences until 2011/2012.
I would be very cautious about committing to a home purchase at this time. No matter how low the price if your job is not really, really, really secure or you don’t have independant means I’d sit the rest of this year out to see what the future holds. There are some really ugly macroeconomic trends stewing and brewing. The Banks are in a helluva mess. The Fed is fast running out of ammo ( and treasury bills) and interest rate cuts are nearing their limit. Remember that 30% of homeowners own their homes free and clear and they, and those with substantial equity in their homes, are the ones that are really losing money as housing prices fall, not those who used borrowed money to buy a home they couldn’t afford. The couple a few years away from retirement who last year thought they had $500,000 in equity in their home might be learning that they only have half that. Add to that Bernanke’s foray into negative real interest rates, rising food and fuel costs and the American public is going to be squeezed like they have never been squeezed in the entire postwar era. As a note aside, given the huge inventory of REO on some banks books and their desperate need for capital I wonder if one of these Sovereign Wealth Funds or even China, Taiwan or some other nation with a glut of US dollars might just buy the entire inventory of homes of a WAMU or Wachovia rather than take an equity position in these sinking ships.
The high end is holding up, umm no. Have a looksee at 517 Vineyard, Simi Valley, CA. Sold for 1.5 million in ’06 then they helco’d out 250K and surprise surprise REO, back on the market at 899K. Thats a 500K drop on the high end.
I understand that banks now require appraisers to actually drive by houses and may even require pictures! In that case someone at the bank may even look at the picture and realize that they are going to loan money on something that has no value except for the land. If you are a bank that’s underwater, you won’t be loaning on anything like this for years.
Good point Scott. With the dollar sucking wind vs. other currencies this is not too far fetched. Since our jobs are being outsourced, we may as well be a nation of renters. Man, even a local landmark strip club just shut down! A sign of the apocalypse?
Eric, agree. I’m just wondering why most media outlets are ignoring this. Talk about a one-two punch. And at this rate Mr. B won’t have an ounce of dry powder left.
Compa, I read McCain’s transcript. Senators Clinton and Obama are speaking only to those that know no better. Also, on Fox business yesterday, there was and editorial saying we should have listened to R. Paul. Funny how that works
McCain isn’t going to take a hands off approach to the economy any more than Bush has. It’s an election, he’s a politician and he’s gonna say what he thinks people want to hear. It doesn’t matter who is elected their corporate handlers will get all the bailouts they ask for. Please don’t be so naive. A vote for McCain isn’t a vote for Ron Paul.
Haven’t you all heard? It’s bailouts for everyone anyway:
http://www.bloomberg.com/apps/news?pid=20601068&sid=aLBZXQGhAaAg&refer=economy
Brought to you by the current republican administration, you know those guys who promote free markets.
The government is going to do all they can to prop up prices. Their biggest fear is deflation.
uh..wouldn’t you call THIS deflation>!!
Let us not forget about the cost of oil & all that goes with that. Oil heat trippled in my area in just a few years. You may have a house, but can you aford to cool & heat it? Oh yeah, what about the cost of food, wow all those verryables. It’s not getting any easyer is it.
“we are entering the travel season so we have a few good months where higher prices are simply baked in”
Yeah, right. Who can afford to travel?!?
“In fact, this home has gone down $127,000 in one month! At this rate, it may be free by year end.”
Actually, at this rate by year end they’ll be paying someone good coin to take it off their hands. Which might finally be the right price for this dog.
I don’t understand why the banks are so difficult to deal with – why don’t they hire some staff to handle all these REO properties and get them sold off? Getting something is better than nothing. They should take their losses now before it gets even worse.
Uh… McCain stated that he believes in supplying more “liquidity” to the markets and to a Fed bailout of banks, in order to stave off a financial collapse.
Yet he does not believe in more regulation of our out-of-control financial institutions.
McCain is no better than Obama and Clinton, and in some ways he is worse. I can’t think of worse public policy than a total lack of regulation combined with the guarantee of a bailout on the grounds of maintaining stability.
I would support complete deregulation, but only in combination with the disolution of the Federal Reserve and the removal of all other government supports to the financial and housing markets, including the FOMC, FHA, HUD, and government-sponsored agencies such as Ginnie Mae and Fannie Mae. Let there be a completely free market totally absent government intervention of any sort. Dereg only works if you also restore Moral Hazard, which has been absent since the 80s.
But that’s not likely to occur. Don’t kid yourself-the Republicans will never cancel corporate welfare.
There are no deals in Florida until the state does something about its high real esate taxes and home owners insurance. If you are an out of state investor, and you own a $200,000 house on the Florida coast free and clear, all you need are 2 vacant months a year to have a negative cash flow after paying all expenses. Appreciation, of course, does not exist.
Just looked at a map of Cape Coral-wow, they do love their canals. About 1/3 the places are canalside. Who pays for canal upkeep-and mosquito and alligator control? It is really close to Fort Myers. The question is, why so cheap, what’s REALLY wrong with it?
I talked with a real estate agent in Cape San Blas, Florida and she is very concerned about the market. Her comment was there were more people looking this year, but less contracts as compared to last year. Which tells me that people are looking for good deals and wanting to buy low.
Remember this is America the best real estate in the world and this too will pass. What goes down will come back.
Leave a Reply