The mid-tier correction in California housing – Burbank California shadow inventory three times the size of non-distressed MLS inventory.

The mid-tier correction is likely to continue well into 2012 for many Southern California cities.  While this may not make national headlines it certainly is an important trend to follow for millions of Californians.  While national markets might be finding a more stable price bottom that is certainly not the case in shadow inventory filled Southern California.  It seems like more people are realizing that home prices even with significant corrections are still inflated in many cities.  This is trending because with FHA insured loans, practically anyone with a tiny down payment and a decent income has the leverage to purchase one of these inflated homes.  Add to the mix the incredibly low interest rates and you would think that all stars would be aligning for a booming market.  Not in Southern California.  And certainly not in the mid-tier cities.  Let us take a look at Burbank very carefully and parse through the entire housing inventory.

Distressed inventory three times as large as non-distressed properties

Burbank has an enormous amount of properties in the shadow inventory pipeline.  In fact, the shadow inventory is three times as large as the non-distressed MLS inventory.  We also have many new distressed properties hitting the MLS.  For example, 44 percent of all listed properties are either short sales or foreclosures:

burbank housing data

What can we gather from the data above?  First, most of the distressed properties are off on the sidelines in the shadow inventory.  Even with listed properties, nearly half are distressed and you also have roughly a third with their prices reduced.  Now why would you reduce prices in a mid-tier city if there was a large amount of pent up demand and sales were booming?  The demand really isn’t there at these price points and even FHA insured loans will now become more expensive because these low down payment loans are defaulting in mass.

Sales and prices falling

I’m not sure why anyone would even rush to buy in one of these mid-tier cities right now.  If we look at prices and even sales, we see that there is no sudden reversal to the upside:

Burbank Calfornia homes

After hitting a median home price above $620,000 the median Burbank home is now going for $400,000 (over a 35 percent fall).  On top of that, you can see that sales volume has fallen.  What we are seeing however is a larger amount of short sales hitting the market in mid-tier locations including Burbank.  As the first chart highlights, every 3 out of 4 distressed listed MLS properties is a short sale.

Why would prices not be surging with record low mortgage rates and risky low down payment loans?  It has to do with household incomes:

california household income

The median household income in Burbank is roughly $62,000.  So a $400,000 home for your typical family is still going to be incredibly expensive.  The misnomer that these families have giant down payments is nonsense (otherwise why would one third of SoCal buyers opt for FHA insured loans with a 3.5 percent down payment and more expensive monthly payments?).  Let us be generous and say that the median household income for a family buying is $80,000 or even $90,000.  Is it a good time to buy?  Probably not given incomes are back to levels last seen in 2003 and more shadow inventory is leaking onto the market.

This trend is playing out all over California as demonstrated by the low sales volume across the state:
home sale volume

2012 is looking like the year of the short sale.  In other words, lower priced properties will be dominating the market.  The notion that you must rush in to buy today almost implies that if you do not buy right now that you will be priced out tomorrow (aka prices will go up).  There is no evidence for this and to the contrary, prices are still falling.  Interest rates are unlikely to move lower.  FHA insured loans will be getting more expensive because default rates are now putting this method of loaning money into another potential bailout.  Even Jaime Dimon, CEO of JP Morgan Chase had this to say:

“I suspect that the mortgage crisis will be the worst financial catastrophe of our lifetime. What the world experienced was almost a collective brain freeze … It was a disaster hidden by rising home prices and false expectations, and once that price bubble burst, we all were in trouble.

We need to write a letter to the next generation that says, “Never forget: 80% loan to value and verify appropriate income.

When you have the CEO of one of the biggest banks mentioning 20 percent down payment loans you realize that he has had a front row seat with one of the too big to fail banks.  Chase bought out toxic mortgage superstar WaMu that made some of the most absurd loans in California.  You think the nation and these banks are itching to get the bubble going in California again?  Unlikely.  The mid-tier will continue to fall because it is overpriced.

I was looking at the inventory for Burbank and a large number of homes were built in the 1920s, 1930s, and 1940s.  These places need major updates.  So your front-end costs don’t include all the rehabbing you will need to do unless you want to live like they did back in the Great Depression.  Some people still think a $500,000 Great Depression shack is still valuable but looking at sales volume and the immense number of shadow inventory properties, many people are waking up.  Home prices and incomes absolutely matter and so does the quality of the home and location.

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67 Responses to “The mid-tier correction in California housing – Burbank California shadow inventory three times the size of non-distressed MLS inventory.”

  • I think in my humble opinion, that one very important element about homeownership is missing in all of these comments. The natural order of things. In our instant gratification society that corporations have manipulated and designed the “natural order is all missed up” People, families, etc., in the natural order: when you have accomplished financial success, meaning professionally and financially, then, AND ONLY THEN, come the fruits of your labor. Meaning house, nice car, maybe a boat (if your a plastic surgeon in O.C.) It is not the natural order to buy these things and then have to work your life away trying to pay for them.. These are just my thoughts.

    • We have become a culture that is addicted to buying things we don’t need, with money we don’t have, to impress people we don’t know.

      Pretty sad, to say the least.

    • I LOVE EVERY THING YOU SAID. THAT WHAT HAPPEN TO ME . THEN I MOVE TO GEORGIA WHERE YOU CAN BUY AT HOUSE FOR ( $ 4,000. )

    • as for the comments regarding “a plastic surgeon in oc owning a house, a car, and a boat”. Where do these people get this info???
      Plastic surgeons in oc can’t even afford to buy a house these days, certainly not a boat and barely a reliable car…
      I am one and also a 3rd generation californian who is still renting a crappy hole in the wall. My kids don’t even have a yard to play in…

    • So true, and the instant gratification worshipers have no one to blame but themselves for their current financial peril. Instead of saving, investing and living below their means to achieve financial security, they have run out and purchased every glittery object, newfangled tech gizmo, lease cars, biggest house you can find, granite countertops and hardwood floors are a must you cannot live without them, don’t forget the stainless appliances, hey I need a blackberry, Iphone, Ipad and laptop and I need a flat screen tv on every wall, it really has been amazing to watch these people consume. I swear that retail has not crashed harder and faster because these people stopped paying their mortgages and are spending the money on more junk, they just cannot control themselves. What a disease. But in the end they are going DOWN, they are all going down and will be crushed under the debt load, their lack of control, their reduced job opportunities with diminshed income with no wage inflation, oh boy we are only just beginning this debacle, hold and and watch the most amazing crash you have ever seen in slow motion.

  • apolitical scientist

    Again DHB has a fine analysis of home values and their dependence on both income and the levels of distressed inventory in the pipeline. Unfortunately value isn’t necessarily well correlated with price in the short term.

    So long as inventory can be kept low even the current reduced demand may well keep prices from falling much further. Two factors will keep inventory low for a while yet. One that is discussed here a lot is the de facto government subsidy of large banks allowing them to hold inventory off the market indefinitely at minimal cost. The other is that with the current level of unemployment even many of those with good jobs now regard those jobs as both more valuable and more precarious – and thus are less likely to want to move in the near future. So we have a situation in which both the distressed inventory (controlled by banks) and the conventional inventory (controlled by nervous and now much less mobile home owners) are both suppressed. At least in the short term (perhaps the next several years) I suspect this means that the tidal wave of lower priced homes all DHB’s readers crave is unlikely to appear.

    So again, DHB’s claim that real prices remain inflated is certainly valid, but we should all realize that this doesn’t mean anything’s likely to get better anytime soon. Like it or not, the game of musical chairs stopped about 5 years ago. Whatever housing situation you are in now is the one you are likely stuck in for the next several years.

  • I have to question the argument of median household income @ $62k in Burbank. median is 1/2 are above and 1/2 are below, meaning 1/2 of Burbank makes over $62k. There are a ton of TV, graphic, and movie jobs in that area that pay quite well. Which brings me to housing supply…

    How many SFR’s of any way-shape-or-form are there in Burbank? Would one be too far off saying that over 1/2 of Burbank lives in an apartment, or a home converted to multiple rentals? How much housing stock is left in the city to actually sell.

    Now take an educatedm successful husband and wife team that both make $75k or more. That’s a household income of $150k which from what I’ve seen in SoCal, is not uncommon. Those people can buy a $400k to $500k home pretty easy, while the rest of the serfs (self included) rent smaller places.

    I agree that some places have farther to fall, and the worst fundamental this year is all the “unknowns”. But even saying “mid-tier” seems too macro as every mid-tier city has a different economic engine powering it.

    • Just because a $150k couple can buy a $500k house doesn’t mean it makes financial sense to do so. Whip out the NYT rent vs own calculator and it gets ugly fast. Burbank median remains at least $100k overvalued based on the bubble graph above.

    • We household units make more than $150k and there is no way we could afford a $400K house. We would save absolutely nothing each month if we FHA’ed a $400k house, and, why would we risk all our savings on a 20% down payment for the $400k house?

      • YOU ARE RIGHT. OVER 30 YEARS IN REAL ESTATE IN CALIFORNIA. YOU ARE IN A DEPPRESSION ( 30+ YEARS ) NOT A RESCISSION ( 10 TO 13 YEARS )

    • “Now take an educatedm successful husband and wife team that both make $75k or more. That’s a household income of $150k which from what I’ve seen in SoCal, is not uncommon.”

      There are errors in your logic. You are assuming that those above the median are making much more which is not the case if you look at Census data. 1 out of 4 households make more than $100,000 as a family in Burbank.

      The next issue is you assume both incomes will remain the same once they buy and expenses won’t rise. Many will cut back on one income when they plan to purchase a home because of growing the family or before going back to work. I do not need to tell you but kids can be big money drains. This is an added cost that most under estimate.

      Also, the median income does matter because this applies to other major areas in the U.S. where you don’t see bubbles. Keep in mind you are paying for a home in Burbank that hasn’t changed much in the last decade but for a price much higher than inflation would justify and income growth has gone cold over this time.

      I believe you were looking to buy in the Inland Empire correct? It seems like you are set on buying and prices in the Inland Empire make sense in many cases. But trying to justify that a couple making $150,000 in Burbank would want to live in the current $400,000 home on the market that was built in the FDR administration is silly in my opinion. $400,000 is still a good amount of money.

  • No income, no house. That’s the fundamental issue. Solve that problem, solve everything. The rest is just icing on the cake. And besides, I don’t believe any craps any CEO said. They all have 2 agendas, one for the 99% and one for the 1%.

  • “Low sales volume”? It looks like sales volume is back to 1996 levels. This may be “normal” as opposed to “low”. Remember, 2002 to 2007 was unusual, not normal.

    • I don’t know where you got your figures for housing supply but I recall 96 as a great year to buy a house at a great price. The market had bottomed from the prior bubble of the late 90s, hud properties were everywhere from Toluca Lake to Yucca Valley. In 96 the market embarked on a strong slow (at first) recovery that morphed into the bubble that is strangling us now.

      • That was a small bubble, picture the kind you blow with chewing gum. This is the size of a Goodyear blimp. The prices are still too high particularly with the low interest rates.

  • From the income graph, it looks like 6% of people make $150-200k, and 6% make over $200k. The way I see it, based on income alone, only 12% of homes in the area should be priced above $450k.

  • For you east Ventura County Buyers, I’ve got to say Kreg Gable kicks butt. We can’t believe how much about HVAC, construction, pools and the equipment, the cost to fix or replace stuff this guy knows. He’s a LL/Broker, so when we go out to view a home (for our primary) he has kept us from BIG mistakes. Of all the people in the business, this guy has really been great, and we haven’t even closed a transaction with him yet. At least he knows what we need to be aware of. We just let an offer expire. I would say he’s not just a pretty face. He rocks. – Now ask me what I think of the Listing Agents?

    • You mentioned in the last entry that you placed a bid on a home standard sale. What city was this home located? Simi, T.O. Westlake, Newburypark? Keep on keeping on!

      • Hi Valley Girl
        It was in a very nice part of Simi. (Not Wood Ranch-hate it)Simi kind of scares me. The demographics and a church on every corner thing has me wondering if I can fit in. We don’t even own a TV. I am learning piano and I read. What do you think of Simi?

  • Thanks Dr. for the Burbank info. While shortsales are out there they are generally dumps, and they are probably going to end up REO as the owners and banks are both or either going to screw up the process. The REO’s in Burbank are cash bought and flipped unless they are tear downs. The one REO by BofA had so many hoops for the average buyer that it was a bad “bet” and had so many people bidding it up it was no longer a deal (3/2 listed at 399). So… What does this lead to? Very few standard sales and lots of upper income buyers. Anything decent that hits the MLS has multiple offers. Under these conditions how much downward pressure will there be? Banks slowly leak. Defaults go into shortsale with no intention of cure, and a few standard sales get pent up demand and multiple offers. The price reduction properties have major flaws and wouldn’t sell in any market. Those are the 1940 houses that you are talking about. Any Burbank home bigger than 2/1 has been remodeled. Burbank has big lots so here are lots of remodels which are 3/2 selling in the 500K range. There are enough entertainment jobs with Disney, NBC, ABC, WB, NICK to float those 500K homes indefinitely. Does it stink… Yes!

    • A common mistake is confusing “starter home” with “starter market”. Not many young 1st time buyers are west of the 605. Yes, I said 605.

      Many in aerospace commute to Riverside, Corona, MoVal, etc. for 10+ years before they can move up and into a home in LA County. And that’s assuming pre-bubble yearly inflation of 5 to 7%

  • You are assuming $450K house for $150K couple is sane. Quite the opposite. In today’s
    economy you are assuming both of them will continue their jobs for 30 years. What about a round of lay-offs or downsizing of income? I would only buy house affordable with 1 income.
    Save the rest and pay off a small house first. Then go for a second one once the 1st gets sold. DHB is right. We are still in bubble times even with $150K income. There is no concept nowdays of being conservative with finances and delaying gratification for a big house.
    This all assumes low inflation and gas prices. See theoildrum.com and energybulletin.net to expect gas shortages coming to an area near you!

    • Sam, Landlord, and Fellow40…

      If a person is making $75k, and it’s not that hard to do that, they should be taking home $1849 per paycheck, after benefits and 10% to a 401k. That’s $7396 per month of pay for the couple (4 paychecks).

      If they buy a $450k house, and put 10% or less down, their monthly nut PITI will be between $2800 and $3000 per month. So $7396-$3000 = $4396 a month to live off of, after the mortgage is paid. That is PLENTY of money to live off of…I take home about $5k a month and manage to live, and that’s pre-rent. So post rent, $5k a month to live is pretty loaded.

      As far as the 30 year job security argument…really? Are we going to let fear dictate our lives? There are layoffs at my place but I’m not scared. Why? Maybe I’m rare but there are other jobs, I’m in a technology field, and through the 100’s of layoffs the last 2 years everyone I know has found a new job in the L.A. area. College degree U3/U6 is much lower than non-skilled labor.

      Even Gerald Celente is saying now is a decent time to buy if you have a family and hold onto the house for years. I agree prices are probably not at bottom, but they are a lot closer than they were before. Plus you have to account for the FACT that whether we like it or not, the Fed and banks are manipulating the markets and our 30% drop in prices overnight just aint gonna happen. Even if it did it would bring to an instant supply/demand question, which is if prices were 30% lower and everyone ran out to buy, wouldn’t that naturally drive prices back up somewhat from so many people trying to buy?

      What about the fact rents are high. If we do get laid off, rent in this market should cover the monthly nut.

      On top of all that, what about the spirit of good ol fashioned taking a risk? Isn’t that what we do here in the US? I’m 6th generation european descent, Ellis Island material. My great grandparents farmed with outhouses and wood stoves in the 1930’s and they made it. I’m bearish, but I’m also becoming acclimated after 7 years of it and starting to think differently, sick of being down and perhaps ready to try something even if I do fail.

      • I agree with you completely about the timing and risk etc.. If you can afford to buy, and you have a good enough credit to borrow, this is a really good time. I know there are calculations about the renting vs buying and costs etc., and there are many different arguments against buying. That’s precisely the time to buy. Housing has lost favor for 6 years. There is a value under the roof regardless what economic books you read. The other thing is real estate is local, and personal. You can only control what you do, not others.
        I know the market is not functional properly. Banks, real estate agents, flippers, investors are all involved one way or another. That’s why you have to know the market. I put offers on 4 properties last year, some of which were above the listing prices. I got one finally I am really happy about at the end of last year.

      • A person making $75K a year is most certainly not taking home $1800+ a week. Your math is way off.

      • Paycheck= every 2 weeks usually

      • See my response to Fred below. It’s $1800 per bi-week paycheck, claiming Married 2, deduction 20% pre-tax for bene’s and 401k

      • He said per paycheck not per week and is assuming bimonthly or every other week paychecks (4 paychecks a month for a *couple* both working). The math seems pretty good.

      • 1). Making 75k is not the easiest thing to do. Please don’t trivialize that task.

        2). Kindly direct me to job opportunitites that pay 75k per year and yield a take home pay of 1800+ after 401k contributions etc.

        3). How do you work in tech with math skills like that?

      • Lets just make it a rule to show your work if you are going to do any math.
        Bad Math runs of to wasted tangents at light speed.

      • Papatobe,

        75k per year is about 1440 per week BEFORE taxes & 401k.

        Are you a realtor? Seriously bad math.

  • What does the flip do to median prices in an area. I live in Atwater Village. Any property below $400k is bought by a flipper and sold for $150-$200k more. If both sales are used in the median price for the area it will look like $400k (assuming $200k mark up) but really “we” are paying the $600k. I wonder how much this is affecting local markets?

    • Great point. Also does it drive up the recorded sales volume and affect inventory levels. Can you imagine, if so, how truly constipated this market is without the flippin flippers!

    • I hate flippers. Sometimes they make the houses really beautiful. Sometimes they ruin the good bones of an old house by implementing a cheap/generic remodel. Either way, they are charging a huge premium for their efforts in the sale price. More importantly, in this market, they are also denying everybody else the opportunity to buy an old, run-down house for a reasonable price, make it what they want it to be, and actually live in it. It seems there is no “worst house in the best neighborhood” anymore.

      • There appears to be two markets out there, first, the take it “As Is” market, and second, the “Ready to move in” market. If you are buying with cash, and plan on investing more money into the rehab, you are in the first market. If you need financing, and plan on renegotiating the price after the home inspection, you are in the second. I think that the need for an appraisal for financing, may keep many buyers out of the “fixer” market, as they may be difficult to value.

  • It would have been better to have a LINEAR scale rather than a LOG scale [trulia chart shown above] for the number of sales shown in one of the charts above. Log scales sometimes gives an illusion.

    What do you think?

  • I like the good doctor, but Jamie Dimon is a blatant crook, stole MF Global client segrated funds, and refuses to return them. Who gives a rat’s behind what he jabbers about?

    NOW he is all about proper critieria for making home loans? Golly, he IS a banker, no? Gee, he didn’t perform due diligence when acquiring WaMu? He gets paid 99% too much for being a crooked, lying, scumbag silver price-manipulating weasel?

    We should all be so lucky.

    He should be in lock down for sociopaths.

    Any thought that Housing is nearing any sort of “bottom” anywhere in the US is sheer fantasy, the worse is yet to come.

  • My girlfriend and I started looking for a home about two months ago. Within 2 weeks I basically gave up. Prices are still ridiculously high. Inventory is awful. Most homes are a “fixer upper” yet priced as if it were brand new. Those that are reasonably move in ready are over-priced and have multiple offers with buyers paying over listed price. I’m done. I’m saving my money and maybe moving into a better rental. My girlfriend on the other hand, still believes. And I don’t have the heart to tell her otherwise.

    • Fred if you don’t mind the IE, there are places in Riverside, Corona, Norco, Upland, and Rancho Cucamonga for $200k to $300k and very very nice. I know, it’s the IE but getting used to the commute is simply a part of long term CA life, I’ve accepted that. Or moving to Phoenix :)

      As far as the $1800, that is per bi-weekly paycheck, per person. Go to paycheckcity and enter the data in the calculator yourself. Change the state to CA, yearly salary of $75k, claim Married 2 for both state and Fed, deduct 20% (for bene’s and 401k) and click the State/Fed boxes below to make them pre-tax deductions. Your end result will come up $1849.

      • I stand corrected Big Papa. You’re numbers are spot on. As far as the IE, that commute would kill me.

      • Sorry. Got fooled because studio workers all get paid weekly (and that’s what you were replying to) and then you calculated based on 4 paychecks. You’re right math works with two biweekly paychecks for couple. But wouldn’t taxes be significantly higher for joint filing couple? They don’t both get to claim two dependents and kids …

      • I went to paycheckcity and the way I ran the numbers, you had to be pulling in 165,500 a year to make 1849 a week. What am I doing wrong?

      • Paycheckcity

        Bi-weekly Gross Pay $2,884.62
        Federal Withholding $222.12
        Social Security $121.15
        Medicare $41.83
        California $44.61
        SDI $28.85
        $576.92

        -Net Pay
        Net Pay $1,849.14 <————————————————

        -Calculation Based On
        Check Date 04/12/2012
        Gross Pay $75,000.00
        Gross Salary YTD $0.00
        Pay Frequency Bi-weekly
        Federal Filing Status Married
        # of Federal Allowances 2
        Additional Federal Withholding $0.00
        State for withholding California
        Additional State Withholding 0
        Additional Allowances 0
        Regular allowances 2
        California SDI true
        Supplemental Type NONE
        Exempt State false
        Filing Status M
        20

  • Upper tier is now starting to feel it. We just had a house in Westwood sell for 64% off of it’s 2008 price! Keep up to date on neighborhood sales transactions at your fingertips. Rolling weekly transactions at the push of a button for all neighborhoods on the Westside. This is just starting to get interesting now.

    http://www.westsideremeltdown.blogspot,com

  • I am an avid follower of your articles and a new resident to California (2 years). Your info is very useful in assessing the California real estate market.
    I understand your point with inclusion of the Dimon quote but I believe using the words of a hippocrite like him takes away from it.

  • Thank you Doc for all your hard work. I love this blog.

    We live in Encino, rent a huge apt for under $1,500. We want to buy a small house
    betw 1500 to 2000 sqft in Sherman Oaks, Encino, Tarzana or Woodland Hills UNDER
    $500K. There is no shortage of houses for sale. There are lots of properties out there.
    We are thinking of putting more than 25% to 30% down to make the mortgage payment AND property taxes AND insurance under $2,000 a month. We have no
    other debt. We are tired of renting and would like our own home. For us, home prices are still too high, way too high.

    There was a single mother living in our building, working at a supermarket. She
    got a settlement from ex-husband and she bought a decent 3 bedroom house in West Hills with 10% down, her payments are around $1,700 with insurance and taxes and
    she had no problem getting a loan. The house needed some work and was bank owned
    and I think it was $330K.

    I have another friend who is not super rich but has a few million, he is self-employed
    and can’t ge a loan. He probably could pay cash for a small house but doesn’t want to
    pay cash.

    Just wanted to share my situation.

    • $330k, $30,000 down, and $1700/mo? That doesn’t make sense.

      Even @ 4%, the PITI payment on $300k is $2091/mo. Of that $2091, I’m getting $96/mo for homeowners insurance and $219/mo for PMI. That’s $315, now subtract $315 from $2091 and you get $1776/mo, that’s the only way your story makes sense and if that’s true, the single mother is going to be in for some big surprises when all the bills come

      • Papa, she is probably taking the tax benefits into account when claiming her PITI payment is only $1700/month. Like you said, many people underestimate all the true costs of “owning” a home. PMI, maintenance, upkeep, paying much more for utilities all are hidden costs. Throw in a leaky roof or a slab leak and the costs go into the thousands.

      • LB – To add to your point, many people OVER-estimate the value of the tax deduction, especially with sub-4% interest rates, the benefit of the deduction will be minimal.

  • Here’s some more crazyness, and I have seen this more than 5 times at my company within my circle of people, I would say the cirle of people is at least 100 persons, lowest pay $60k and highest $120k. Ethnicities are diverse.

    What I have seen – are people buying homes in the hood to live in. The races of these buyers, and incomes, don’t seem to matter. The only thing in common I see is none have children. Inglewood, Pomona, San Bernardino, and downtown Riverside are the locales…all homes under $200k, post-bubble. The Pomona person is quite interesting, she is from a small town up north, very sheltered, quiet, textbook all american girl. Yet she chooses to buy a home off Garey and the 10 Fwy, there have been 5 murders within 4 blocks there in the last 2 months.

    The things people do, the neighborhoods, commutes, all of that amaze me out here in L.A.. Then, you have the renters who will never leave Silverlake or Torrance, simply because they don’t care, they want the area and that’s what matters. There really is no ‘one size fits all’ life out here, you gotta do what you can do to find happiness.

    • Circle of 100 people and the only thing in common is none have children.

      That is very interesting and kind of alarming!

      What will happen in 25 – 30 years? Who will support all the elderly (not only financially but also emotionally?) and many many questions which most readers can imagine and list.

    • Don’t worry. The Duggars and Octomom are making up for them..

  • Anyone else thinking what I am thinking about late this year and next?

    If Obama wins, one of the first things he must deal with is getting the Republicans to raise the debt limit.

    History shows that when Republicans are out of power the deficit suddenly becomes important to them. The forced austerity by the Republicans will at the very least take us back into recession and at the worst, who knows…… One thing for certain, the housing market would not hold up well at all, under that situation.

    On the other hand, if Romney wins, the financial spigots of the Federal Government will be opened as they were under previous Republican Presidents. Under that scenario, with the Federal Government no longer concerned about deficits, (like during Bush, Bush 2 and Regan) the FED will have the ability to raise interest rates, and will probably need to, thus, putting a stop to the Real Estate bubble in coastal California.

    Republican win or Democratic win, the result should be the same for coastal California.

    • Are you saying that only under Republican presidents, the federal government is no longer concerned about deficits. I think the Obama administration might take offense to that comment. :) Their spending would make any drunken sailor envious!

    • Forced austerity? Where has it been the past 3 1/2 years while the federal govt has run deficits of $1.5 TRILLION per YEAR? Four years ago I couldn’t have imagined deficits like that in my wildest dreams. Now it’s EVERY YEAR. And they’re all reluctant to cut spending because doing so would throw the economy into recession RIGHT NOW. The whole thing is being held together with extend & pretend, the government IS the mortgage market, massive government deficit spending and the printing presses at the federal reserve. How can this end well?

      • Lets not confuse what I was talking about. I agree the FED is warped in its thinking but it is an independent body. I don’t think anything is going to end well.

    • Long on rhetoric and bereft of any facts. Please provide information outlining where the Federal deficit increased dramatically under President Reagan – and please use objective sources for your conclusions only.

    • I don’t believe Martin was looking to get into an ideological political debate. Rather, my read is he was putting the housing market into the context of presidential politics in trying to decifer where the market is heading in a presidential election cycle, which is a more than reasonable framework for many obvious reasons.

      Dmac proposes that this forum is only about the financial aspect of the housing market, which ignores other important aspects already recognized and debated by DRB and others such as human psychology, demographics, immigration and emmigration, governmental intervention, etc. Additionally, to argue that politics doesn’t impact financial outcomes is absurd on its face.

      Me thinks thou dost protest too much seems to apply with the reaction to Martin’s post.

      • In case my response wasn’t clear enough, it should be plainly obvious that I wasn’t responding to Martin at all, but the post outlined below:

        “Oh! Oh! Oh! Don’t talk about our “father” Ronnie…
        If Regan ran today the right wing hijackers of the so called Republican party would laugh him out of town. Yet dare not speak his name in vain or those same wackos will crucify you.”

        That’s an inane comment that has nothing to do with my original request, and I responded in kind. So by all means let us discuss the politics, but if I may be so bold to request that we do it in an objective and informative manner.

  • I could care less about Reagan, Trollboy. What I was asking for was a realistic appraisal of the issue at hand – and going by the chart provided, Reagan’s deficits were about the same as during the Eisenhower era. Bush II increased the debt compared to Clinton (not a surprise in the least), and then the current admin took the ball and broke the piggy bank completely in two. Go argue the politics somewhere else, this is a financial discussion about the housing market.

  • Brilliant article, as always! I’m in the Phoenix suburbs and sadly, in the market to buy a home here in the fall. I say sadly because the market here has suddenly gone crazy! We were just like Cali in that prices went up really fast then started crashing. They had steadly been going down until late last year now the inventory is low and people are fighting over homes again and bidding them up thousands of dollars over asking price! A friend of mine knows an escrow agent and he said the majority of the sales are to Canadians or overseas investors. It doesn’t help that our local paper, The Arizona Republic, writes the rosiest articles on the housing market! Last week when AZ finally bumped Vegas from the top foreclosure spot it didn’t even make it to the paper (or their website) yet it made national news! I flat out refuse to buy in this market because of the shadow inventory. Almost everyone I know has neighbors, friends that haven’t made a mortgage payment in months or years and are living rent free. Well that has to end at some point. It’s all fake and rigged!

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