It’s Monday, and I thought Doomers might appreciate these two rather different assessments of real estate in the Bay area. According to the San Francisco Chronicle:
Instability in the region’s housing market is making it difficult to determine values, according to mortgage brokers and real estate appraisers. "It’s miserable," said Karen Mann, who runs a small East Bay appraisal firm called Mann & Associates. "I’ve been in the business 28 years, and this is the worst downturn I’ve seen."
Here’s the assessment of the same market from Leslie Appleton-Young, California’s own "Mini-Yun".
What’s the assessment of Doomers this morning? Any links, stories, insights for us today? This is an open thread, so speak what’s on your mind.
Igor says, “overdue.”
“Don’t risk using normal distribution”, by Lisa Goldberg, Financial Times, August 18, 2008.
I’ve been waiting for the time when appraisers would be up in arms, and I think it’s starting to happen. I thought they would be busier, but apparently it’s easier to appraise up than down.
http://news.yahoo.com/s/ap/20080817/ap_on_bi_ge/mortgage_mess_appraisers
You would think these would be boon times for appraisers with the run up and run down.
The two assessments aren’t all that different in that their perspectives aren’t necessarily covering the same points. Without doubt, the “region’s” housing market has been battered making the valuation process a difficult one for lenders. On the other hand, real estate remains local when addressing critical issues such as value, inventory, demand and absorption. Some local markets or specific neighbohoods will continue to greatly outperform regional results. Also, so long as appraisers, underwriters and lenders remember that the appraiser is charged with viewing yesterday’s activity rather than forecasting tomorrow’s trends, the task is indeed simply factual or historical from the appraiser’s perspective. The lender, on the other hand, must consider market changes likely to occur on the near to mid-term horizon, a much more challenging assessment.
As I’m writing I sitting looking out at all the high-priced commercial real estate in the San Francisco business district (I’m right by the Palace Hotel–you know, where Florence Harding killed her husband with homeopathy).
Anyway, there are “For Lease” signs on virtually every building. This has only happened in the last six weeks. But it’s the next leg down for the northern California economy.
It means business activity in this area is decreasing very drastically.
And that’s what will take down housing here. As long as there are jobs with high incomes, people will buy housing at ridiculous prices. Their flighty bourgeois idiots, grasshoppers living for the moment. What do you expect?
So what’s keeping it all going? Tech. However, tech is discretionary and a lot of the business is with financial institutions.
That has stalled now. One measure of it is the serious reduction in H1B transfer petitions (where one foreign software engineer moves from one employer to another). When there are a lot of those petitions, it means business is being none. There are very few now.
In the end, in the Bay Area it was all about the jobs and how much you could spin this dump.
The average Bay Area house is worth–in a real economy–maybe $40000. What’s it priced at? $700000.
Actually, it amazes everyone around here that it’s lasted so long. How dumb/coerced can the world be? During the last recession business simply stopped–the highways were clear during rush hour. Traffic is also starting to decline here.
The main problem is that there is absolutely no idea what to do about it, except spin the news, as your guys are doing. Partly it’s their abysmal ignorance, partly their greed.
And in part, no one wants to use the D word. But again, there is absolutely nothing policy-wise in place to stop it. So we wait as the bad news dribbles out of the most overhyped economy in human history.
San Francisco is a port. Inherently, it has nothing. It’s like all ports–fundamentally a working class pit. It’s one of the publicity marvels that people have been able to spin it as having some inherent economic value. It doesn’t.
What’s on my doomy mind?
What’s it gonna take for this RE industry to finally take it’s last breath? I’m in Las Vegas and, even though the news may be dismal….new condo towers stopping construction…it all seems business as usual about 15 min’s West of the Strip. Not exactly an eye-popping number of foreclosures. Still the new Hummers, bigger than ever, and the pickup trucks that look like condos themselves. Lots of happy breast implants and puffy lips. Happy Hours start at 3:00 and they’re jammed. I do not see for-sale-signs on cars. My whole neighborhood has ONE house that even looks questionnable, as in dry landscaping and vacant. Other than that, everybody seems to be chillin. I give up.
I sold a lot of property in ‘05 and ‘06 and have been lurking like a snake in the grass, waiting for something to swoop down on. Even in SoCal (Long Beach), I hear all the doomy and gloomy stuff but when I walk the desirable streets, it’s pretty nice - stable, groomed, alive, and very little for sale. Maybe that’s it - desirable. Is this meltdown confined to the undesirable areas? I’m missing something here. Sorry, but you did ask.
AGENT - My immediate nieghborhood does not accurately reflect the bigger picture out there but more than half the people I know here have had their income cut to a great degree. Everyone is generally maintaining their usual lifestyle along with some cutting back and people are supplementing lower income with money made in the past. Everyone is just waiting “until things get back to normal.”
If you made a decent chunk of money over the past few years (and didn’t blow it all) there’s probably a cushion you can draw from. (One guy I know was hoping to retire in 3-5 years. He’s 45 and now business is down 75%.)
I think this is what’s going on in many zip codes that have appeared comparatively immune.
A lot of money was recently made and it’s not all gone yet. And some of it is going to supporting current day-to-day. How long it lasts - and how long current conditions last will determine where things go.
There’s a lot of downside potential anywhere when money runs out and can’t be made. If things don’t change in the next year or (especially) two there could be a lot of carnage right here on my street.
FWIW, I live in Scottsdale 85258 - I rent and am very much NOT rich. lol
“Here in San Francisco, you’re probably in *the* best market in the state!”
Stop it! Stop it! You’re killing me!!
Loved the “bouncing along the bottom” comment and the mythical foreign buyers riding in on their white money horses, torn between Rome, London … and San Francisco?!
WHAT?!
Delusion can be entertaining when viewed from a distance.
Big industry and big projects operate on one to two year delayed time frames. Many of those projects are now coming on line with financing that has been in place for a long time. However, there are few such projects in the pipeline. Soon, many of the big construction projects will be built and sitting empty. The companies that built them will be laying off employees. 2009 is going to be a difficult year.
Steve-
We’re already seeing it in higher vacancy rates around the Valley. The Republic was saying yesterday that Mortgage Ltd. projects were “closer” to having new funding. I’m wondering if it’s really going to happen.