The Scariest Housing-Related Chart Ever

Posted on December 30th, 2008 in Mr Mortgage - News Picks of the Day!, Mr Mortgage's Personal Opinions/Research

Below is a chart of CA median home prices as reported by DataQuick. I am working on a project, which I will get out to you shortly.  These data are part of it.

Take this opportunity to write your own blog post in the comments section below about what this tells you.  I am curious to hear what is the first thing that comes to your mind when seeing these numbers. Have fun. -Best Mr Mortgage

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159 Responses to “The Scariest Housing-Related Chart Ever”

  1. 46%!! Ouch!! It’s almost hard to believe that CA real estate could drop that much that fast. On the other hand, prices increased dramatically too. Another 46% in 2009 and housing will again be affordable. Let’s not blow it next time.

  2. What’s scarier is that the CME data collapsed again today and shows further declines in the Golden State. Click my site to see an updated graph for SF.

  3. It must be nice if you are in a the market for a dump. The good houses are only down 15% tops.

    I am beginning to wonder, will they be able to stroke the fires of inflation,(stopping the decline and actually increasing the low end housing)before housing in decent neighborhoods come down to a realistic level.

  4. “The good houses are only down 15% tops.” Just wait.

  5. martin I don’t know where you live just sold so. cal beach property for 26% discount. And was happy to get it!!!! To MM’s point fasten your seatbelt. It is going to be a bumpy ride.

  6. Sorry I have to chime in on this one again. Martin your comment only makes me wonder how far in the dark you are. “Good areas are only down 15%” wow. Where do you get your comps Zillow? Another fabrication for the masses. If you are using zillow look at the lowest value and drop 20% off that and that is todays price. In 2009 forget about it!!!!! Sorry truth is truth.

  7. you tell me how someone who bought a home TO LIVE IN , in jan-may 2007 wasnt screwed

  8. And in the process you also screwed the rest of the world. Not to worry yous are paying for the bailout. Happy New Year in the USA and a merry country bankruptcy !

  9. Javagold,

    If you bought the house “to live in” then why are short term movements so important to you?

  10. Check out our web site, I think we just topped it.

  11. This decline of housing values in CA is absolutely going to destroy seniors who had counted their house value in their net worth, and planned on that being there for retirement. Add to that what has happened to the value of CA bonds that they were booking income off of. If they were planing on selling those and CA is on the rocks they might be in for a surprise there. Now add in every other asset they held is likely down as well and lots of blue chip dividends they had relied on might be chopped entirely.

    Plus add in that CA is going to raise taxes. Where does this leave CA seniors? Those that had planned to retire in CA may no longer be able to retire here. This is going to send them state shopping for sure for a low tax retirement state that they can afford.

    There are two kinds of housing supply. Building new houses and population shifting out of California. Because of this housing supply due to shifting out, we are going to have a smaller tax base for Sacramento to hit on to pay for all of their bonds that the unions pushed through on the voters. That means that after the tax hit, we are going to be taking now, they are going to be coming after us again with more state cutbacks and more taxes.

    Remember too that empty houses are not paying utility bills and tax income is derived from that source as well. What do you think they are going to do? They are going to raise the taxes on your utility bills to take up the slack. That sewer line still cost the same amount of money to maintain. We are just scratching the surface of how bad this is going to be for CA. Assume that for every dollar your property tax goes down they are going to try to replace that with something else. At the same time, your employer may be cutting your pay to match business conditions or laying off employees. That cuts the tax base down further and squeezes the money you have to spend each month on other local businesses.

    What about DMV fees? We know that new cars are not selling and property tax is levied on your registration. If people hang on to their cars longer in hard times, there is yet another bite in the tax take. A lower average age car for Californians means lower values and DMV fees on your renewals.

    Now let me tell you about my mom. She grew up in the depression era and when I bring her into work she shows people how to save money on everything they do. Everything revolves around saving money, to which they say “your mom is cute”. Don’t laugh, she will save a dryer sheet fabric softener for a reuse as a dust wipe so you can save a paper towel. Old things turn into new things and second uses. A saved dollar is worth more than an unearned dollar because the saved dollar is tax free verses earning one to replace it. Anyone having trouble making ends meet, I will send my mom over to your place and she will have you whipped into shape in no time lol.

    The worst part on seniors is low interest rates sets them up to be scammed when they try to go out and earn a higher return over what the bank is offering. We will probably be reading a lot about senior scams popping up in the low interest rate environment.

  12. This time next year will see the higher end homes much cheaper. But will anyone want or be able to buy them? Funny thing about a deflationary spiral, it kinda make you want to wait for prices to get cheaper. Couple that with rising unemployment and you’ve got one slippery little slope for home prices.

  13. Scary figures.

    In Michigan you can pick up a house for less than the price of a new mini-van.

  14. EEP! (That’s about as intellectual I can be after looking at this chart.) I know this has to happen. I WANT this to happen so my godchildren have a shot at owning a home someday. But OMG!

    The bummer is that I bought early enough that I can’t get my property tax reduced yet . . . but I’m ready and waiting for the opportunity.

  15. Hello Mr M. I read your articles for many months and slowly understand more and more. I had 2 questions for you: Why is California so much worse than most of country? Upstate New York where I live is only down 5% to 10%. Also, in other thread a few days ago, I didn’t understand why lower interest rates would lead to more defaults? Wouldn’t millions be able to refinance? You didn’t really explain your idea, as good as you usually do. Thanx for great articles this year. Is commercial real estate the next shoe to drop? How bad will that be???

  16. Marc Authier

    I assume that you are not from the USA. I have to appologize for the Americans we have today. This generation is totally wrong headed and we are going to get a cleansing that is going to make the housing fiasco look tame. Americans think they have earned some entitlement to the world and they are going to find out that is just not so.

    Americans have no clue what it is like to earn a hard currency so that they can buy things on the world market. This is going to come as such a shocker. Americans think the housing crisis is bad but wait until the currency collapse comes. It is going to be like the housing crisis, everybody will suddenly discover at once there is a problem. Yet all the signs are there.

    We used to have strategic stockpiles of everything. Those stockpiles have been sold off. We now have “just in time inventory”.

    When the currency crisis hits, the USA has no manufacturing capacity to meet its own internal needs, nor does it have the manufacturing capacity to meet the need to obtain hard currency.

    One saving grace is that congress has the power to set the value of money, so as long as all USA debt contracts are denominated in USD, all of that debt can be wiped out with the stroke of a pen.

    We screwed the rest of the world and we are going to screw the world again when they reset the value of the dollar. America is going to find out what it is like to not have strategic stockpiles, no raw material inventory and no manufacturing capacity.

    What manufacturing capacity we do retain and build will be directed to earning hard currency and not internal consumption. None of this is going to be pretty for Americans or the rest of the world.

    Let me say “sorry” in advance of the event.

  17. Great posts Mr M. Have been reading your post for well over a year. You have been right on. I know homes prices have dropped dramatically to say the least. One point that has not been brought out is that people are only getting conforming loans. Since the conforming loan limit is a $417K, only homes of lower value are selling, bringing the median price down quite a bit in Ca. When was the last time any LO has done a jumbo loan? Anyone…Anyone…Anyone?

    Thanks for all of your valuable info.

  18. Michael to your point BINGO 417k is the market.To bertdilbert why do you have to talk about how USA sucks now. This situation was created by wall streat nothing more nothing less. We will face hard times here in the USA but you can’t lay this on the average joe that bought into it. They just thought they where doing what everybody told them was right.I can’t blame joe six pack on this one it is the very government that we thought had a checks and balance system.How could Madoff screw the public out of 50BBBBBilion dollars. Lets start looking in the mirror!!!

  19. 60 minutes just put out a report on the housing market. It pretty much says the same thing that MM has been saying all year.

  20. ALoHa !!

    All Wall Street did was create the vehicle by which most Americans happily jumped onboard the GREED TRAIN! The whole basis of the AMERICAN DREAM is simply DEBT! Who in America saves first then buys? Who in America does not have five or six credit cards? Who in America would voluntarily vote for FISCAL RESPONSIBILITY … The US COMPTROLLER GENERAL head of the GAO< David Walker, quit because nobody did anything even after he warned of the huge unfunded liabilities in Social Security and Medicare when he went on 60 MINUTES. He even toured the USA and abroad telling everyone that America is BROKE! Yet who did we vote into the White House? FDR, JR!!!

    In the 1930s the US National Debt was $16.2bilUSD. In 1939 when FDR was done with the NEW DEAL spending he more than doubled the US National Debt to $40.4bilUSD and then of course shortly afterward he got us into WW2. Our current US National Debt is around $11trilUSD if you at least follow the calcs of the first FDR you would end up with $27trilUSD after FDR, JR is done. I think it could go higher simply because now we have MOUSE MONEY(click, click)and a whole lot less inhibitions when it comes to TOTAL IDIOTIC GOVERNMENT WASTE!

    So whenever someone claims it is just Wall Street’s fault or just Bush or just Clinton I have to say BS! Who voted for this two party aristocracy(rep & Dem)over and over for the past 95 years since the US FED was created? Don’t forget the US CONgress and their part and who votes in the members of the US CONgress?

    Look in the mirror if you need someone to blame!

  21. Lex great piece saw it a while back. Want the boards input on this one. I have been looking for months for good rental property to buy in the palm springs area. Please give me your thoughts This is 32% from peak of market. I used to think I know what I was doing it apears if I balk at this deal I no longer have the upper hand. Thoughts!!!!!!

  22. mark, Joe sixpack is responsible for electing honest government that is going to look out for the interest of America and not special interest. If Joe sixpack does not do his duty in placing the right people in office, there is no one else to blame other than Joe sixpack. The root cause of the problem is thus Joe Sixpack. Taking responsibility is making change where change is necessary.

    Let’s fall into a concrete example. The stockholders of financial institutions got wiped out. Yet they were responsible for electing the BOD that vote for the CEO. Question, did the shareholders take responsibility in policing their company? All I had to do was observe Wells Fargo pushing home equity lines and knew it was headed for disaster. At that time I wanted tell the manager that “you guys are going to destroy your bank”.

    Well, where are we now? If Americans are not going to act in the same way to take charge of their government then it is going to go down in the same fashion.

    There is a thing I call “tracking down the root cause” Let me give you an example. Mr. Mortgage says “I found the root cause of the problem, it was lax lending standards and low front end lending rates that presented an affordable payment for a time” or something close to that. I follow it further. Who was responsible for oversight? Who did they report to?

    Let’s look at California, the Reserve Bank of SF is responsible for this area. The shareholders of that bank elect the BOD who elect the President who is responsible for reporting to the Board of Governors of the Federal Reserve. Who are the shareholders of the SF Reserve bank? The same banks making the lax loans.

    Lax loans obviously then may not be the root cause of the problem! The root cause could run all the way to the President of the United States overriding the Board of Governors to take action on the housing bubble in the early stages.

    Regardless of who/what was responsible for the housing crisis, Joe sixpack is responsible for America, there is no one else to rest this burden on.

  23. Anybody have any data or thoughts about CA houses near the coast?
    Driving around I don’t see any distress,it looks the same as always. Certainly it’s a hole other world from the Inland Empire scene.
    Will there be significant prices drops along the coast?

  24. BertDilbert, your point is well taken as misguided as it may be, if I get what you are saying joe is the root of the caause. How can joe be if he cann’t even read his 401k statement let alone his loan docs? If you don’t think the whole game is not rigged you must live in sheltered life in PHD land. Joe six pack can’t read his cable bill let alone his financial statements. Sorry your thesis does not hold water.

  25. Mark, stop being a victim. If JoeSixPack can’t read a 401(k) statement or any financial statement for that matter, it’s his fault. I’m ashamed at the greed and ignorance of my fellow Americans, and I’m not only talking about Wall Street. The average Joe has become so lazy, so entitled and so ignorant that he’ll go along with whatever the government tells him, thinking it’s all good. Open your eyes, Mark. We’ve been screwing the world over for at least the last thirty years and now it’s time to take our medicine. I live in NYC and will certainly be affected by the downturn, so I’m not just speaking from some ivory tower. We, as a nation, suck c**k, and the world would be right to smile smugly as we go down. But they can’t do that since they’re busy bailing out their own ships.

    Good for us.

  26. Mark, I completed the 10th grade, in 11th grade the counselor caught me having lunch and says “Bert, you have 27 absences in your English class and the first quarter isn’t over yet. I suggest you drop out.” That was the end of formal schooling. That doesn’t make me a PHD or put me in PHD world.

    That said, if Americans are not willing to take up the broom and dustpan and clean up government, then expect more of the same. The problem is that when you go to clean up government, you have to take away entitlement and people view these special entitlements as their candy. People cry when you try to take their candy away.

    Let’s look at one of those candies, the banker subsidy of the home interest deduction. That is a special entitlement candy and is viewed by the homeowner as “the only tax break we have”. Try and pull that special entitlement away and people will scream.

    The home interest deduction encourages debt over savings. We have this problem that our debts are too high and our savings too low. We can go over a whole list of candy that does not make for equal footing in society.

  27. First thing that pops into my mind is the effect this will have on tax revenues and what that means for a state that is already insolvent.

  28. Several thoughts come to mind based on this trend. One of the foremost is if a mortgage lender has not ceased making California RE loans already when will virtually every lender cease making loans until the trend has stabilized or confidence in the market starts returning?

  29. First thing that comes to my mind, is that the pace of decreasing prices is increasing and accellerating rapidly. If calfornia leads the market, then we have a great more losses to come in the housing market. Buckle Up

  30. It’s not all bad. I’ll be getting married in the early summer and will need to buy a big house for my new, blended family. This chart looks great to me!

    I’ve got a good friend who’s about half my age starting a new family, too, who wants to buy a house. This is great for him, too.

    Dave Ramsey followers ought to be in really good shape.

  31. Why all you people do not understand is that most of the house are owned by Wall-Street, NOT Ameicans.

    US Banks are completel 100% bankrupt because those loses should be on the LENDER (true owner) for make stupid loands.

    Bush, Paulson, Bernake, are doing all they can to save banks (lenders) and screw main street and to push the crisis onto Obama’s administration so they can blame Obama next election.

  32. BertDilbert, while I could not agree with you more about peoples foolish voting records, I fail however to see how Joe 6-pack is responsible for the actions of others. Can we do a much smarter job at electing our officials and get many of these incompetent fools out of office? Absolutely! Are we responsible for what those that do get elected do? Now way! Not everyone voted for these idiots as some narrowly got back into office as well. The issue boils down to lax lending standards and low interest rates. The people in power to oversee all of this are the Congress, Fed, Treasury and SEC. Those bodies of individuals are in charge and in control of everything related to that. Nobody in any of those bodies did a damn thing about it and while sitting on their hands we witnessed the largest bubble in history form. Now as we watch it pop you want to blame people who only have 1 vote each to elect the people in Congress who then appoint the other folks mentioned. You can’t do that in fairness to the people who didn’t vote them in as well. I voted every incumbent out of office and I have the last 3 elections. I bought with a 30-year fixed with 20% down and have no debt except my mortgage and you want to blame me? My home is under water right now, but I can afford it as my payment has not and will not change. Plus I am retiring in it so I could care less anyway. It is also not part of my retirement portfolio either because I am not selling it, but rather leaving it to my children as I will die in it. Money on paper is not money you can use unless you sell. Joe 6-pack has one vote each to try and make a difference, but these other folks control the situation. They did a very poor job at it and are the root cause of the issues we face today. Look at them continuing to make even more mistakes to compound the problem even further by bailing out everyone with future tax dollars and against the peoples will. Who is at fault there? Joe 6-pack is against this and has not even seen a dime of any of the money that is rightfully theirs. The money is going to banks, AIG, Fannie, Freddie etc. They are not lending and salaries are not coming down and bonuses are still going out in these companies so who is to blame their? Are you also going to say that Joe 6-pack created the massive inflation that will ensue within a year or two and devalue the dollars worth and hence Joe 6-packs wealth? Mr. M. has hit the nail on the head as far as what caused this and who is accountable and responsible for that is who is at fault for it. It is as simple as that.

  33. Things like this happening are NOT Joe 6-packs fault, but rather shear lunacy on the part of Government and in this case the Fed directly. Incompetence is not someone elses fault who did not have a say in the desicion and is forced to live with the results of it.

    The Federal Reserve will print money to buy $500 billion worth of mortgage-backed securities by June, specifically MBS issued by Fannie, Freddie and their sister Ginnie Mae. And guess who the Fed has hired to manage the purchases? PIMCO, Goldman, BlackRock and Wellington.

    This is quite a scam for all of them, especially PIMCO. The ultimate self-bailout you might call it. As of June 30th, 61% of the PIMCO’s assets were invested in MBS. $500 billion in total. No doubt the others also own a pile of Fannie/Freddie/Ginnie bonds.

    In sum, these firms just got hired by taxpayers to buy assets from themselves. (see link for full story)

  34. I’m with Martin, the good houses are down less than 15%. Volumes are way down, but sellers are sticking to their prices in the decent neighborhoods. For 2 years I’ve been looking everywhere in the SF peninsula from Burlingame to Palo Alto and the only thing moving at a great discount is on the bad side of the tracks, shoeboxes and teardowns.

  35. I’m with Martin, the good houses are down less than 15%. Volumes are way down, but sellers are sticking to their prices in the decent neighborhoods. For 2 years I’ve been looking everywhere in the SF peninsula from Burlingame to Palo Alto and the only thing moving at a great discount is on the bad side of the tracks, shoeboxes and teardowns.

  36. Beyond the predictable, but insane declines are the 3 months of peak prices. Funny how this was at the same time Paulson et al were discussing how problems were contained in the subprime market. I find it hard to believe that the data reflected the exact same numbers for 3 months.

    In my county (Santa Clara)median prices are down by over $300k in the last 12 months from $865k to $350k.

    Did anyone see this “doozie” from Goldman in October 2007

    Californian Home Prices are over-valued by 35-40%…”Our hitherto highly-predictive model broke in 2004, when sales of “affordability products” (e.g., subprime, option ARMs, home equity) spiked as a proportion of total mortgage originations.

    Available at

    Or how Dodd grew a pair when he was running for President, but was soon after silenced.

    If America does not wake up soon we will have much more serious problems than financial.

    Our government’s horrific public policies had been bankrupting us for years, but are now doing it at light speed. Our Constitution is in shambles and rule of law has been completely tossed out the window.

    100:1 odds that most of the unknown TARP money was spent buying up toxic waste from foreigners and most likely the recent request to buy up Fannie/Freddie MBS will do the same.

    We need to put together a sizable campaign to alert our reps that we demand rule of law, leadership, disgorgement and indictments.

    If we sent a message by no one making any revolving or installment payments until the FBI started indicting the criminals who created this mess; maybe that would help, but few would be willing to damage their credit.

    At the minimum call your reps today and tell them to stop the fraud and printing presses.

  37. I would like to see these numbers next to “Real incomes” for the area. I believe that home prices will continue to fall until they reach a level where house payments are only 30% of average family (Household) incomes.

  38. My first thought is that this is once again mainly a California-Arizona-Florida problem and the rest of the US taxpayers are going to pay for it. This is partly because of a Democratic-controlled government upcoming and because with all of the forced bank mergers, pretty much every major bank in the US has huge CA exposure.

    Housing got overheated nationwide but most places probably had a bubble in the magnitude of 10-20% value loss upon deflation of the bubble rather than the 46% or higher in California and South Florida. Go ahead, cite some metro area like Detroit or Cleveland where the economy has hammered values but the vast majority of the country (remember, not everyone lives in the top 20 metros in Case-Shiller – they only have one Texas city in the index I believe) is going to end up down 10-20%, a substantial amount but not back-breaking.

  39. Those declines don’t reflect reality at all in two places I watch carefully, the Westside of Los Angeles and our favorite vacation location.

    Discounts are running maybe 10-20% on well cared for housing on the Westside but that’s it. McMansions and spec houses are the ones I see the most selling at these discounts. Condos are discounted better, but still ridiculous.

    Mark, your logic is deeply flawed and reminiscent of so many privileged people who can afford very many choices. There are no choices like yours for most people. Certainly now more than 20 years ago.

    >>If JoeSixPack can’t read a 401(k) statement or any
    >> financial statement for that matter, it’s his fault.

    Is it your fault when you can’t read your own medical test results? There are definite limits to personal financial responsibility and your black-and-white thinking conveniently ignores all of the difficult details. Ignore all that messy thinking and nasty details. It’s too much work.

  40. a bird? a plane? no its a downward hyberbole… :p

  41. Debt, Wall Street, and Joe Six pack. Debt is the abused drug, Joe Six pack the Junkie, Wall Street the drug dealer, the pols are the cops. Who do you blame ? I agree with Bert, the unfolding situation is going to provide some lessons for all of us.
    Yep Stu, that toxic debt will have to be monetized. They are just trying to set up a process to make it run as smooth as possible. Current housing deflation aside, in the long run, the dollar just won’t go as far as it use to. Penny candy ? Five and dime ? 10 penny nails ?

  42. Mr. M. the WSJ today is reporting today that principle reductions appear to be on their way soon enough. The Democrats are discussing “Cram Downs” again to allow judges to do it if the lenders won’t. In your vast connections are you hearing anything on this? I knew it was being discussed, but this is the first major source to report it that I have seen. I think we will see principle reductions start to occur in January by some lenders as a result of this story and others that will be coming out now. Any thoughts on this?

  43. It’s a new paradigm, and everybody who doesn’t buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.

    Renters, and anybody born in a future generation, will not be able to afford a $10,000,000 starter home in 15 years. They will live in tent cities, and Hondas.

    This asset bubble is different from all of the others – it will never slow down, or pop. The gains are permanent.

  44. >Regardless of who/what was responsible for the housing
    > crisis, Joe sixpack is responsible for America,
    > there is no one else to rest this burden on.

    Even though the logic before the statement is fatally flawed, the bottom line is right. It is the way a Republic like the U.S. is supposed to run. No, it’s not a Democracy.

    Instead of casting blame and relying on comfortable political doublespeak it’s up to citizens to force transparency into their government and expose the working details.

    Step 1: disconnect the cable tv and put the money spent on it into savings.

  45. The first thing I did was plot the data and get a best fit mathematical model. The best fit curve is linear (r squared = 0.994, which indicates a highly correlated data set for the linear model).
    Then I came to the scary conclusion. In the absence of other data, one has to assume that California median house prices will continue their decline on this curve until the bottom is reached. Pick a time in the future that you think will be the bottom and you’ll have the peak to bottom loss. If one arbitrarily chooses a bottom in June, 2009 (this is just an example, there’s no evidence for this being the case), one obtains a final median value of 172000.
    The decline of California median house prices is devastating.

  46. As a experienced realtor (12 years) in So. Ca. (N. Orange Ct.; I have found thatthe price for desirable properties has declined about 20-25%; not 45%.

    Trash properties located in undesirable school districts are unsellable at any price. A home located in an area with good schools still sells at about $300/sq ft. The inventory and prices are stable in the areas I service with few foreclosures unless located on a major street. The
    banks seem to be delaying forclosure proceedings in order to keep prices stable.

    I understand the markets are a disaster in Fresno, Bakersfield, and Riverside. So it all goes back to location, location and location.

  47. In Santa Monica, CA, there are now a few SFRs available for under 1M but I don’t know who would want to buy them. They are normally repos/foreclosures, next to the airport or have some other drastic flaw. You see the same properties over and over.

    The bottom end of the condo market has come down significantly. It is now possible to buy a slum for under 500K – 2 years ago that was not the case. And because of rent control, it is now possible to buy a slum studio/condo for under 300K as they become available, and to not be allowed to live in it or to get rid of the current occupant, and to not be able to get enough rent out of the occupant to cover the HOA and taxes never mind anything else.

    I saw one decent looking place ‘looking for backup’ at around 700K, but our income isn’t enough to afford that yet. I live here so it would be convenient to own, but I have to tell you most of the accommodation available here isn’t fit for the family pet, never mind the family. Anything decent priced right moves very quickly – of course there is very little decent priced for normal people.

    To those who scream how the prices are coming down fast -no they aren’t. Not for anything worth having. There are a staggering number of people out there paying cash. They may be bringing prices down a bit but a lot less than you or I would expect.

  48. […] The Scariest Housing-Related Chart Ever Mr. Mortgage […]

  49. Thanks MM for all your great work. The chart is great, somebody should send it to Countrywides REO department. The banks were negotiating in FL up until Bernanke said he was going to buy MBS then all of a sudden they quit trying to sell their REOs. Do you think after yesterdays statement that the banks will start to try to move these REO’s again? Would love to hear from others on there experience with the REO departments and all their Online submitting of offers with no human to contact. Happy New Year LOL

  50. Well, I live in a coastal town in CA and about 15 miles away in Watsonville homes that sold for 700-900K are selling for 175K to 300K in foreclosure. People are just walking away now even if they can pay. Thats the next big wave coming, people can pay but why do it when you are down 50% plus if you dont have a ton of equity in it there is no reason to stay in your home wiht those kind of losses.

    Second thing, I have a friend that works in banking, about 1/2 of people coming in for refinancing arent able to get it because they either dont qualify income wise or their house has dropped too much in price. So those are walkers too.

    The biggest spike in prime resets is 2010-2012 so I think the next big wave of problems is right here.

  51. “First thing that pops into my mind is the effect this will have on tax revenues and what that means for a state that is already insolvent.”

    Kaimu and BarbedWireSmile: Props to you guys.

    If I’m a politician (or a savvy VC) in a neighboring state, I’m rubbing my hands together… Low (or no) sales tax? Low corporate tax? Low regulation? No Neo-Communists in the legislature? Budget surplus? Other incentives maybe?

    While there are still remnants of ‘States Rights’, freedom-honoring states need to be aggressively pursuing business interests in neighboring states that are ‘Broke’, to migrate across state lines into lands more accommodating to entrepreneurship, manufacturing, productivity and Low Taxation. This will in turn lead to Savings and affordable housing.

    The ‘Blame-game'; Finger-pointing and scape-goating is about to go non-linear, as I have suggested in earlier posts and what seems to be an increasing sentiment of many posts on this forum.

    As long as you’re lying tits-up in your personal financial hell, it’s always gonna be someone else’ fault – Wall Street, the bank, the lender, the appraiser, the title company, etc.

    The government to be sure is to blame for the much of this, but then again, just who is the ‘government’…? Savings starts with you & me, not with the government. If that means renting for 10 years while you save to purchase a home, so be it.

    And if the house you want is still too expensive, you rent a while longer and wait – hey, until a time like now – or better yet, in a year or so! You knew these unrealistic housing prices of the past 20 years were an absolute Farce of historic proportions, right? $650,000 for a 25 year-old ‘starter’ home in 2005, the agent tells you there’s a line outside if you don’t jump on it and you still can’t smell Ca-Ca…?

    Kaimu: Game on Dude –

    Peace –


  52. for those with questions about prices decreases in different areas:

    I have homes in Il and AZ–the AZ home is a small sno bird type of place that appreciated wildly from 2000-2007–laughable when it surpassed my Illinois place in valuation. Illinois stayed to small gains and was reasonably priced all along. Now–AZ is dropping while Il has slipped only a little.

    In addition, the areas both are in established areas–only resales since 2000 and not many of those—so not too many in over their heads for various reasons. Yet prices falling since if somebody is selling (37 units available out of 1385) a potential purchased just invokes the “I can get a similar house for 20% less 7 miles away” which does bring in negotiation, cause 7 miles away is not as nice a location and a little less in amenities in house and development, not to mention condition of house (there should be a penalty if a house has been trashed or neglected, even if repaired)

    So there are a lot of factors to cause the different rates of declines. But pristine wow factor homes are still declining as are the lower end.

    But still–I think owning your own home–which means having real equity is the way to go viz a viz lifestyle–rents are high and there are stil nice tax breaks for owning–assuming of course you have income to pay for house and taxable income.

    but the trend is obviously decline

  53. Good chart. The bubble was biggest here, so we have the farthest to fall. I believe we’ll see another 33% to 50% decline this year in CA. The first part of the tsunami will be when foreclosure moratoriums expire, second when the next wave of layoffs from the retail and government sectors occur, third when “cram downs” are stalled in Congress. Then housing will actually be affordable again. Problem is, property taxes will reset to the lower values, and with Prop 13 requiring supermajorities and limiting the amount of any property tax increase, the state will default. I don’t see how it can be avoided, given the dearth of leadership in Sacramento. The property tax base will be cut in half, but half the population won’t be leaving to compensate. Raising other fees and taxes will drive business away, so get ready for some truly draconian cuts in public services over the next few years.

  54. My thought – CA housing has been horribly overpriced for decades. Looking at the chart it is a linear decline with no end in sight. I think this is an unwinding not of the past decade bubble, but of the CA housing overpricing that has been going on for 20+ years. Excluding the last 3 years of insane increases, why should a house cost 50% more in CA than other parts of the country? CA may end up being hurt much worse than people think. And those that have a house in CA – good luck – they won’t be able to sell it for squat. And then they are really stuck because taxes are going to be raised on them – they are trapped. The only way out that makes financial sense is to walk out on the mortgage. I just don’t see the governemnt forcing the banks to “resell” houses to owners for the “true” value (whatever that turns out to be) and have the banks eat the losses. Refinancing doesn’t matter at all, really. 2009 is going to be disasterous for markets like CA. And that’s not even looking at the commercial real estate problems coming soon.

  55. Mark,

    Thanks for an interesting chart. Of course the first thing that does jump at you when you look at the chart is that the decline is accelerating so far.

    I think that is a beautiful chart, not scary. I don’t want to flush anything significant into a place made out of cheap drywall by a government code. I’d rather keep my assets. So, it would be nice if houses fall another 50% to 75%. I might buy something then. Do you own RE? Why is it scary to you?

    The decline seems to accelerate in summer and slow down in winter. That makes sense, since spring was traditionally a time to grow prices, meaning it was a time of short consequence of higher supply and even higher demand. It moved prices up in a short order.

    Today, when people put their homes for sale in spring, they see hugher supply with even lower demand, but they will procrastinate in disbelief that they weren’t really “smart, seasoned investors”. Why? I think they were dupes of dupes and I believe that easily! Anyway,with the additional delay due to their procrastination, the market will post lower prices in summer.

    Very good job, Mark, thanks for your blog. I think you’re the best in tracking the housing.

  56. Mr. Mortgage:

    Nice job. The chart proves your point that lower interest rates won’t help. If anything we see a recent acceleration of the down trend.

    I don’t see how this can end until the government takes over and auctions off REO properties and forces principal reductions. I’m not sure if that’s even possible.. the cost would be many trillions. That might be what breaks the buck.

  57. Need to compare apples to apples. That median price may not be representative of the typical house over time. More information can be gleaned from comparing the median price per square foot. Also, examine the trend below the maximum GSE financing threshold (Don’t know what it is in CA) as the lack of jumbo financing would severely skew the top end.

  58. The value of housing is not going down, the value of the dollar rising in the short term. I.E., fewer dollars buy same house, gas etc. What we are seeing is like the tide going way out right before the tidal wave tsunami of dollar INFLATION.

  59. i keep looking to buy a house in the bay area…..i have finally decided it will be financial suicide because you know the ca gov is going to tax the crap out of home owners (that cant leave ca) to cover the budget problems. i dont even want to move back to ca and rent because i am afraid of the new taxes coming.

    as soon as the media picks up on these issues home prices will fall even faster and harder……..

  60. While the Fed is buying MBS’s, non-government holders of MBS’s will be selling. Especially PIMCO. The Fed’s MBS purchases are supposed to be done over the first half of 2009. Well before they’re done, it will be obvious that once they’re done trying to force down rates, no one will want to be left holding MBS’s (hot potatoes). So rates could rise well before the end of the Fed’s MBS-buying scheme, as traders want to get out early. Bernanke is such a moron. Rates could be UP in 3 months despite his having dropped $300 bil into MBS purchases. Every buyer I have wants to buy for 20% off of current (reduced) list price. Sellers are unwilling to take their offers (other than REO’s), so deals aren’t coming together. Low interest rates will not boost property values, since buyers can see that it’s a gimmick – like the $7,500 tax credit. Buyers can intuit that once the gimmicks are gone, there’s a danger of a further drop in values. They might as well wait for prices to drop further. Even if prices don’t drop much, they’re unlikely to climb anytime soon.

  61. The first thing that comes to mind for me, is an interview I heard a few weeks ago with analyst Meredith Whitney. Ms. Whitney sounded downright worried concerning banks with undisclosed losses, “junk in the trunk”, as she put it, on their balance sheets. Realistically, anyone that far underwater who had once considered real estate to be a safe investment, is walking. FICO be damned.

  62. Stu

    I followed your link and read the second comment and I see a post asking where are all the joe sixpacks. I look at Karl Denniniger’s blog and I see him calling for Americans to protest. That would be joe sixpack too. There are other ways to protest other than taking to the streets. You can do economic protest which means that you do not buy anything. When you eat, do not eat out and when you eat at home, do not buy any value added foods. In other words, eat plain bulk oatmeal, not packaged flavored or prepared breakfast cereals. Eat fresh fruits and vegetables. Frozen OJ is value added etc. If the government you are protesting against is say Russia, don’t buy Russian products.

    You can have voting impact other than in the voting booth by the way you spend your money.

  63. Of course the median is being dragged down because the low end homes are selling like hot cakes in some areas like Oceanside, CA. This really just indicates that the volume of high end inventory closings is very small in comparison, right?

    If you could separate historical sales prices into 3 categories of equal size (low, middle, high tier) and show the median price in those categories from peak until now we would probably not see the high end median move much more than -15%… albeit volume would be very low.

    Higher end homes still have a long slow drop ahead.

  64. Report from the ground visited home in Marin County CA for the holidays:

    Saw lots of for sale signs on normal houses driving in from the airport.

    A friend of a friend in the area had their nest egg with Madoff are now are totally wiped out and kicked out of their under water 2nd mortgaged million dollar home. Considering Madoff used exclusivity as part of the pitch, I’m absolutely sure a multitude of pompous Marinites are in the same boat.

    My grandmother’s trust is going through a liquidation of properties that she had owned in the area. The trustees have to sell at fire sale prices to get the money out of the properties. The trust never bothered doing remodels while times were good and now they are stuck with a bunch of dumps that buyers can heavily discount in this market. I’m guessing at the end of the liquidation the trustees are only going to see 60% (hopefully that much) of the money that they figured they were going to get off of the properties before the decline.

    Jobs are scarce for those who have to work for a living, and it is forcing my Mom to move out to Arizona where I currently live. Retirement is not realistic there with rents and home prices the way they are for middle class folks. The only people that seem insulated are the very rich or the people that owned houses prior to the 90’s.

  65. Looks like we’re about halfway there.

  66. Sorry, misleading data. Since much of the the CA housing data is about foreclosure sales in the central valley and San Bernardino county, and many of those homes are the ARM, first time home buyer houses, they represent distressed sales at auction of the houses at the low end.

    The real data that matters (comparing same house and neighborhood data over time) shows a drop, but more like 25%… so far.

  67. come on people lets get back to earth PLEASE yearly income X 3 == house price!!and with all the layoffs in cali and the state going broke you will not be able to give these houses away because just the staples are going to exceed your income good luck “carlton sheets”

  68. There are so many housing markets in California, that state wide averages are irrelevant. Trends everywhere are downward but to varying degrees.

  69. Some perspective.

    During the last six months I have been able to buy houses at foreclosure auctions for around $230,000, put $30,000 in to renovate them and resell them in 90 days for around $340,000. I think the chart is reflective of both ends of this type of transaction. What is the true stabilized value? I think it is somewhere in between.

    Let me explain. I am able to do this for three reasons. First, foreclosure auctions require cash on the barrel head which is not possible for most home buyers. This is essentially a discount for illiquidity. Second, the houses auctioned houses are altogether unpresentable. This is essentially a discount for attractiveness. By the time a house gets to a foreclosure auction it is a mess. It has often been empty for months. The landscaping has died or is wildly overgrown. What’s more, the unfortunate former homeowners usually abuse the house in their last months out of anger and frustration. Third, the banks often want to get these homes off their books as fast as possible. The initial bid price at the auction is set low to facilitate this. This is the desperate seller discount.

  70. 1st thought is a depression in our future.

    Principal write downs, if acted on, affects the tax base, derivative values and selling/worth values of surrounding homes.

    This things are not good.

    Mopping up RE investments extends debt owed into next generations as we have to deal with a dollar crash now.

  71. These things are not good.

    (In couple of more years, I’ll have this typing thing down pat)

  72. Big Daddy Kane – the ratio of cost vs income has NEVER been 3x yearly income in southern California. In other parts of the US, yes. At the peak, one was looking at 10x or more, which wasn’t just amazing, it was honestly impossible. Right now it is running right about 7x, which sounds “better” when compared to 10, but still is not affordable. California can count herself lucky in a “never again” way if we manage to get to 4x in a TRUE average, meaning not talking about only the REO dumps being used to calculate average price. In the Valley, the ‘average’ home is still running a listing price of about 385k, while yearly income is slipping, but was at around 56k. Homes in areas you’d actually *want* to live are higher…a lot higher. Add in, that now unless one has stellar credit and at least 20% down, banks simply are not writing loans. Can’t blame ’em. I keep seeing the same places falling out of escrow over and over, and eventually they become yet another foreclosure.

    Historic times, indeed.

  73. If in fact we start to see increasing walk-aways and foreclosures in the mid to high end in 2009 (I believe we will), I expect that may result in an increase in the median sales price, particularly if the majority of the price declines in the low end has already been achieved. I believe we are getting closer to finding a bottom for the low end, particularly in the SoCal exurbs. No we are not there yet, but we are getting there. They have felt the brunt of devaluation to date.

    The mid and particularly the high end are just getting started in my opinion. I think the mid range devaluation will really pick up steam in ’09 and carry into ’10, with the high end following behind. If you are looking to buy in the mid to high end, just wait until you see what is on the market in ’11. Very good prices, I believe.

    On a related note, be careful regarding % decline analysis based upon market segments as the actual $ losses are what count in my book. For instance a 50% decline in a $300K condo is a $150K loss. To get a matching $150K loss in a million dollar home, you only need to see a 15% decline. Just sayin….

  74. Currently, most sales are happening in the more affordable (subprime-heavy foreclosure-savaged) areas, which brings the median price down. Sales have come to a halt in the more expensive areas with good schools, which further skews the median price.

    In the coming year, foreclosures and short-sales will spread into middle and upper(middle) class neighborhood and we will see house prices fall in those areas. We may see the state median price go up in the process, but everyone starts seeing the wreckage of the housing bubble up close.

  75. A FOOL,FOOLS AND THERE MONEY ARE SOON PARTED.I DO FEEL SORRY FOR THE HONEST FOLKS OUT THIER THAT WERE SCAMED AND THOSE WHO JUST HAD BAD LUCK. The crooks liers and scam artist need to be punished to the full extent of the law. all of them.

  76. Mr. M,

    I have been following your posts for quite some time and you have been ahead of the curve. It is my speculation that we are only half way through the correction in CA… would you agree? What do you think the chances of the Federal Gov’t engineering a bottom in housing? Would “no appraisals refi’s” be the one thing to watch out for?

    Thank You for keeping the unwashed masses informed.

  77. BD, good point, but what if nobody has any money to spend? You know like the position a lot of people are in right now. Then doesn’t that part of the equation become moot? It is tough to control what you don’t have and even tougher to control what others have.

    I like the point however because in better times it would matter.

    I also see less people eating value added food (fresh) due to cost. That means this approach is being controled by economics and not your decision on what to buy. That makes this a moot point as well.

    The thought has merit, but only if enough people were to go along with it, and(history tells us that doesn’t work – See last elections for an example or gas protest) it really could have a profound effect on things. One can hope someday that it works as you draw it up, but until then voting is the only thing to really open their eyes I am afraid. At least one that is doable with the right movement and a great speaker on aboard. Well off course you need a palatable candidate for the job (Perot, & Paul for example are not) and it has been quite a struggle just to find that.

  78. KATE!!!!!!!!!!!!!!!! WE HAVE A WINNER – The mother of all false bottoms is housing comes when median prices move up because higher paper grades default. I am tracking it very closely.

  79. I bought in November ’08. So this chart means, I’m a genius or I’m lucky.

  80. Here is a good blog post on why the CA housing market may not bottom out until 2011.

  81. Markytom, you have a good point. California is a housing bubble (state) superimposed on a housing bubble (nation). The cycles to the downside are in resonance. I can see why some might want to quietly move closer to the exit doors.

  82. just wait for hyper inflation to kick in and see how much you have extra to spend on thease homes with no work good luck it will take about 1.7 yrs to be in full force just remember the next 20 yrs will not be the same as the last

  83. Good conversations and info, keep it coming people. I have pretty decent condo up here in WA, anyone want to move up north? :)

  84. Mark,
    Does it make you feel better to belittle posters?

    First of all, when the Principal told you ought to drop out because you missed so much school, that does not illustrate your lack of education as much as your lack of intelligence for not telling that Principle to “shove it” because you want to stay in school.

    Secondly, as you can read from all the posts, many agree with my sentiments. And no, I do not go by Zillow values I go by recent sales.

    Any other questions?

  85. What I found even scarier was the other side of the chart, when prices were going up.

  86. First thing that comes to mind – lots of houses are selling in the lower end of the market consisting of newly built construction in inferior areas. We should all recognize that a 46% drop in median prices is a very different thing than a metric coming from an index that is constructed from same property repeat sales.

  87. markytom, The author attributes the rise in home prices are due to population growth. We know it was lax lending and teaser rate front end loans. The author lists three reasons why prices will continue to fall. Fails to address number one issues of negative equity and loans that have a payment that is going to double when the loan resets. Also does not mention buyer mentality as ATM/investment. I submit that as proof that no matter how pretty a post may look, if you want the real deal, you have to read Mr. Mortgage.

    Talked to one company today, they are laying off 10 workers, going to offer them early retirement due to economy. That is a significant amount of their staff. Forgot to ask how many of them intended to stay in CA or move to a cheaper state. Might get a chance later. Cited slump in worldwide sales and CA housing market products. This is not pretty.

  88. Fails to address number one issues of negative equity and loans that have a payment that is going to double when the loan resets.

    Agreed – but maybe the author thinks this is a given? I don’t know.

    Also does not mention buyer mentality as ATM/investment.

    This is something that people don’t talk enough about. Many people were taking out large second mortgages and basicaly pissing the money away – using the money to go on lavish vacations, buying expensive cars, boats, etc. – and not using the money for investments or assets that appreciate. These people have dug a very deep hole and I don’t see any good way for them to get out of it – the holes are too deep. More credit or refinancing doesn’t help these people – they are drowning in debt already.


  90. Mr. M – happy new year! my hubbie turned me on to you and I am addicted to the info now… especially being in the business.. when will my colleague call me a realist and not a pessimist? Didn’t Arnie freeze the NODS and NOTS? Should we see a flood of Bank Owned in Jan?

  91. So the overall situation in CA is:
    1) Few are buying right now due to falling prices.
    2) Realty investors have been the first to walk away or foreclose from their expensive loans.
    2) Most people in CA with mortgages are underwater and facing rate resets.
    3) People on the internet and now in the MSM are suggesting that these people walk away from their mortgages (or foreclose) and go back to renting because it will be at a saner expense.

    Aren’t we approaching a point where there will be very few people to rent houses from?

  92. Mr. Mortgage

    Before we got all distracted on other issues, here are my thoughts on the table you presented. The table of loss from peak does not tell the real story. The real story comes out when you do a month on month decline. Did not double check my math but here are the results for the YTD. Month on Month shows we just fell off a cliff…. My thoughts are that since people are becoming educated and now have the chart of resets in hand, that nobody is going to buy because everybody can see the chart of the defaults!!! 60 minutes now has blown the story, it is mainstream.

    Jan -4.8%
    Feb -2.7%
    Mar -5.1%
    Apr -1.2%
    May -4.3%
    June -3.3%
    July -3.1%
    Aug -5.4%
    Sep – 6.0%
    Oct -1.8%
    Nov -7.2% Oh shit…. acceleration… Shoulda invested in T bills

  93. Mr, Mortgage

    Further to my above post, I think what we are going to see is the Japanese syndrome of “cheaper tomorrow” syndrome setting in and total situation of “no bids”. We aer seeing closings in Sept/Oct in the Nov numbers so we don’t have a full “hit the fan” yet.

    Since everyone is calling for a bottom in 2011 or later, why buy now? In 2011 you can put in a larger down and have less debt to service. It is also safer because in deflation, prices of goods are not the only thing affected, wages go down as well.

  94. first reaction was “free fall” which would mean an accelerating trend
    “realist” said the trend was linear so mathematically it is linear
    housing market is not like the stock market so a 46% drop over 23 months is a free fall
    “RJ” referred to Meredith Whitney junk in the trunk

    “Innocent ByStander” sees a depression in the future – but what happens right now is important – if you can afford to fight for the “common good” do so and if you cannot fight for your good – you decide how and when to fight.

  95. If you want to see a scarier graph. Baltic Dry Index down 95% in six months. Which means countries have stopped trading.

    In Mission Beach (San Diego) 30’x80′ dirt lots (or tear downs) not on the oceanfront got up to 1.4 million dollar two years ago. You would build two 1400 sq. ft. units. A dirt lots just sold for 1 million.

    In the early 90s in this area. Property sales held their value as it slowed down to 10 proerties sold for the year. People held out. Then, the next year it started dropping 10% a year for the next three years. It looks like a repeat as to condos/houses as 2008 had only 10 sales this year.

  96. Mr M,

    You and Kate point out the mother of all fasle bottoms happens when higher grade / higher value properties start to default and raise the median price. Then it seems to me that the “aggregate median” data chart is too crude a tool for proper analysis.

    I suggest you break the data into three separate monthly categories (bottom 33%, middle 33%, and top 33%), and possibly include volume in each cagegory. This way your tool would have so much more utlity and we’d be able to see whats actually happening with each market segment.

    Not complaining, just a suggestion. Your work is greatly appreciated.

  97. I wish we were only down 46% and I wouldn’t be upside down on my house here in Manassas Park, Va. outside DC. We got crushed and are still getting crushed. I am down over 60% from peak. We also have the distinction of having the highest property tax rate in the state as well. What do we get for this honor you might ask: trash blowing around on the streets, illegal aliens 10 to a house, putrid water that eats your plumbing alive not to mention what it does to your hair and skin, and of course my personal favorite: such drastic property loss values that living in California would be like a windfall to us. It can always get worse folks.

  98. In my area… North OC. we are down approx 35%(so Far)

    ..Boom Boom Out go the lights…

    Bailouts anyone…

  99. @Mr Mortgage,

    Is this your “mother of all false bottoms in housing?”

    Median prices up $5k in San Diego.

    This is one reason why ‘median prices’ is less than adequate for understanding the market. Ditto Case-Schiller. They only are two pieces of the puzzle. (Mr. M has already made this comment)

    In my view, what would be extremely useful would be a price-segmented chart showing NUMBER of properties in various segments at estimated prices. I would look a bit like the Michelin Man, and over the past year we would see him getting fat ankles.

    Does anyone have a chart like this?

  100. Hey can I get a San Fransisco report from somebody out there? SF has a lot of corporate HQ’s. Chances are that in a deep recession that we are going to get relocation’s to cheaper cites and the SF Landmark is going to dry up. Any sign of corporate move outs yet as cost cutting corporate moves?

    A little off topic here but What is going to play out on life insurance companies? I am going to say that they do not have deflation of assets figured into their scenarios and a three year deflation and repricing of assets are going to screw with their mathematical formulas that they base their whole basis of returns and existence on. For instance, they have preset payouts based on compounded returns. What happens with low interest rates and repriced assets? I am going to assume that the math blow up and big taxpayer dollars are going to have to come into play. They are likely to get hit bigger on the commercial.

  101. HAPPY NEW YEAR EVERYONE – I AM BUZZED! Baltic Dry – what a short! Shit, crude for that matter. The devastation over the past 90-days will revirbirate for years and be written about for centuries…if we are still around.

  102. Make that “It would look a bit like the Michelin Man.”

  103. “Tingling 2/28s Batman! Los Angeles median is up 4% in one month!”

  104. 2.56% average monthly decline for the last 18 months. In another 12 months (nearly everyone agrees 2009 will be a bad year), that will bring another 30.76% decline for a total of 76.9% drop. Can we imagine $111,804 for a median CA house in Dec 2009? That’d be less than 2x 2007 median income, so houses should be a good deal at that price. Factor in a huge rise in unemployment and exodus, that could be just the correct price.

  105. […] drop in October home prices – SF GateMortgages: What You Need to Know in 2009 – BusinessWeekThe Scariest Housing-Related Chart Ever – Mr. Mortgage, M-L […]

  106. As Realist did, I plotted the data and came to the same conclusion: the trend is almost perfectly linear. Ie, there is no acceleration or deceleration, which doesn’t make any sense at all since the growing supply of foreclosed homes should precisely lead prices to stumble faster. If we were going to reach a bottom, then we’d expect the decrease to falter, but the data doesn’t show that either.

    I currently can think only of two explanations : either it’s because this is aggregate data and some peculiarities in CA explain how properties of very different prices evolving at different rates have a median linear variation in aggregate, either the prices are artificially kept high by banks which refuse to (sell at) accept more than a linear decrease in prices over time (at the cost of an ever growing inventory).
    I don’t know if the latter hypothesis is realistic but if it is then it’d seem highly likely that they’ll fail at containing a tide that is far too big for them and we should see that trend line abruptly broken down sometime soon.

  107. I too don’t see property values (in good areas) down 50%. But its no picnic to sell right now.

    I just (in 11/08) sold a condo in West Hollywood for $370k that we originally bought for $430k. I think that’s a 14% decline. I bought at the Jan 06, and closed late Nov 08. It was a very nice condo, on a good street, in a good complex, in a good location. I had exactly one offer, after 3 months on the market, and after dropping the asking price in two jumps down $45k.

    So while I was only down 14%, I feel extremely lucky to have had the sale go through. Total loss including selling costs: 21% on original purchase price, or $91k. And oh by the way, it’s a personal loss, so it’s not deductible against all those capital gains this year. Ouch. :)

    At the time of sale, Zillow rated my property at $398k. Now Zillow rates it at $368k.

    Honestly, who could afford my 1 bedroom condo, even at my reduced sale price? You’d need to make $120k/year.

  108. Happy New Year everyone!

  109. It’s accelerating.

  110. Mr. M & Gentlemen: Happy New Year to all!

    “HAPPY NEW YEAR EVERYONE – I AM BUZZED! Baltic Dry – what a short! Shit, crude for that matter. The devastation over the past 90-days will revirbirate for years and be written about for centuries…if we are still around.”

    Keep an eye out for (all) things geopolitical this year and use them as forward sentry’s to plan for gains (or simply protection from loss) with yer ca$h.

    For while we fiddle & diddle with what’s right in front of us, events on the horizon are going to dictate much of our future all the same. I’m speaking of energy, of course. Today, Medvedev and boss-commrade Putin just shut the spigots of natural gas to Ukraine. Meanwhile, we’re (rapidly) stepping up our presence in Afghan/Pakistan involvement (Powder-keg alert!).

    You saw the short ‘blip’ in crude prices the past few days – what with all the same-‘ole-shit going on the Gaza border. Negligible events for major energy producers, but look at what the psychological impact was in oil markets…

    Don’t get used to these low gas prices. We are at any given time, 72 hours away from $50 – $100 geometric spikes in oil/energy prices at the whim of a geopolitical event or natural disaster.

    The geopolitical situation in the unholy sh!thole that is the central Asian arena, is on a hair trigger – not likely to be calmed down anytime soon either.

    Mortgage fiasco’s and Pakistani militants? Well, you’re certainly not concerned about the plight of his sorry existence – just like he cares little about the plight of your financial upside-down-ness.

    But the two shall meet at the intersection of higher energy prices, diminished purchasing power and disruption – both personal and national. Many things in 2009 are going to converge. That, you can count on.

    Peace –


  111. This should not be surprising. I have been saying that “Historic bubble highs will produce historical lows.” We are seeing historical lows. This is about time.

  112. Here is the data on graph and it shows generally shows a smooth decline. However we must accept that this line is only due to government intervention into the banks where the banks have the means to keep the REO in-house and not dump en mass onto the streets.

    A natural correction is never a straight line and the line we are looking at is very straight indeed when averaged out. While government intervention may mask the true state of affairs, withholding of inventory will lengthen the period of decline.

    Bottom line, the excess inventory will have to come out eventually, adding perhaps another year or more to the suggested bottom, if you were just going by contract resets alone.

  113. The decline line is so smooth you might think Bernie Madoff made it! The decline line does not reflect the number of homes with underwater mortgages. A big step declien should be on its way!

  114. I believe we still have a long way to go. We are in Oregon and I’m just starting to see numbers hit the down motion.

    Your chart is telling me that prices started to slide before I realized they were sliding but like a rock going over a cliff- it’s going to get real interesting and there is a bumpy road ahead.

  115. 46% off peak is a real number in Florida. Just drove the streets of Palm Beach, FL this morning, the “for sales” signs are all over the place. Bernie Madoff wiped out the rich of the rich in Palm Beach. House prices were up in 07 in that zip code area. The Realtor sales brochure I looked at today showed a house that was on the market on the island was $4.2m is now $2.5m. My wife and I looked at a home that was built in Palm Beach County in 06 last week. It sold for $416K it is now on the market at $260K. The scary part is there are 9 other homes on that street that are in the beginning phase of foreclosure plus 2 other home that are now banked owned. How long can the banks hold back this mounting pressure of foreclosures that are worth half of what they are owed. Prices will drop like a rock when they decide to let the historical “Price to Income ratio” take over and auction off the houses.

  116. […] California real estate Chart courtesy of Mr Mortgage […]

  117. With 40 months of inventory, no sales volume, and no lending pipeline except a morally corrupt and financially bankrupt US government, the bottom is no where in sight.

    Prices should level down 90% from peak according to history’s glaring but apparently unlearnable lessons.

  118. Short everything for 2009.

  119. These numbers are biased downwards as cheap foreclosed housing comes to dominate sales activity.

    Having said that, Case Shiller is biased up because it excludes most of the houses built in the last ten years and does not pick up any autumn action yet.

    So the truth is somewhere between perhaps

  120. As a European I offer the following thought on why principal reductions will be of little help in stopping the downward spiral in your property prices.

    The bursting of the American housing bubble has highlighted a significant difference between the US market and the rest of the world.

    In most countries, mortgages are not non-recourse i.e. when the bank/borrower forecloses on a property, the borrower is liable for the difference between the price the bank sells the property for and the remaining outstanding unpaid amount on the mortgage.

    Because of this liability borrowers do not simply walk away from their homes because of negative equity. This in turn reduces the avalanche of foreclosure properties that pressures the prices further down in a bear market.

    So, unless the principal reductions that are advocated are so significant the borrower gets at least a significant positive equity position in the house, they will not help.

    Why? Because if normal lending standards and normal financing products are imposed on new home buyers, house prices will still continue to decline since the absence of no-down-payment/stated-income/teaser-rate/minimum-payment loans still still has downward pressure on home prices.

    Therefore, unless you are able to reduce principals for all borrowers with negative equity at the same time and size the reduction so that the mortgage corresponds to the fundamental value of the house (adjust house prices for inflation before the bubble and extrapolate until today), the principal reductions that are advocated will not solve the problem.

    They will only delay the downward slide as borrowers that have received principal reductions once again find themselves under water and decide to walk away from the house.

    However, a combination of principal reductions together with converting the mortgages into recourse loans might be political viable to sell to the general public and might be sufficient to home market to drop far below its fundamental price level.

  121. […] great blogs I like to read are Dr. Housing Bubble, Irvine Housing Bubble, and Mr. Mortgage.  I subscribe to all their blogs so I get to read them on a regular basis.  They make great […]

  122. Graham you are one of those douche bags that wants to digest the info. based on how it works to your benefit. Case in point all the high end thought they where imune to the the sub-prime fall out {that does not happen to us just the little people) now we are seeing the high end get hit , it had to happen(we just had more cash reserves than the little people).Wake up folks it is here this year for thw +middle class. So what do we do now??? This is going to take many years to work out(IE Japan lost decade).

  123. Mark ,
    I am a UK based international economist with no skin in the game as they say.
    My remarks were purely statistical. That is how Mr Mortgage works. Note this link to illustrate mix issues

    Incidentally the pattern of low end going first followed by high end is universal.

    However your remarks betray an element of ignorance. The high end, even in the bubble states, did not have anywhere near as large a price bubble as the low end. It stands to reason therefore that the high end will never share the scale of losses from the peak suffered by the low end . If you hope for the latter, you will be disappointed

    But, all of the relative super bubbling of the low end is now eliminated (as it has fallen so much) and with job losses mounting high end prices are likely to falling as fast or a little faster than the low end : which sounds like what you want to hear.

    PS I don’t know what douche bag means but it sound rude and illustrate the need to control the quality this blog’s comment strings which contrast with the quality, professionalism and polite language of Mr Mortgage.

  124. Okay, How is mediam incomes doing??? IE: Can the median income worker afford to buy the median house udsing only 32% of his gross income?? If not, house prices must fall further, If yes, then we are at the bottom of house prices. Also, the average house price and 32% of the average income must also be considered before coming to any conclusion about house prices

  125. Graham

    Obviously if something appears to be on sale or heavily discounted it will motivate buying action. In the end game, I believe it is going to boil down to population verses housing units in CA and along those lines, rents verses owning.

    Naturally, there is a desire to buy when prices are seen as only going up and a house purchase leverages you to rising values. With attitudes changed and “sure thing” mentality taken out of the system, we could have a rather subdued market after this all settles out.

    California is going to be a tough rebuild state. High taxes and too many laws that discourage/limit business.

    One thing that CA needs to do is push out the unions. On a national level, Davis Bacon Act has to be axed. On a state level, all similar Davis Bacon type laws need to go. Here is why. CA is in such a deep mess because we have all of these bonds that voters pass that place us into debt. When economic prosperity rolls the other way, we are stuck and lose the flexibility to adjust our budget due to debt payments. That is why the state is in such a rotten position now, they are committed to debt.

    That means that in order to keep from defaulting, the state employees have to suffer as well as citizens, forcing layoffs, cutbacks and higher taxes. Naturally these actions come at the worst possible times, exacerbating the conditions.

    These debts come about primarily due to proposition bond measures on the voting ballot. These propositions are heavily supported by the unions. If they do away with these laws that ensure that unions employed, there will not be a union for the simple reason that the real world does not pay these wages and benefits. Naturally everyone can see that looking at the US automotive industry, yet they put up with it with every construction dollar spent. Hello!

    Did anyone stop to think that we could build a lot more stuff for less money if the unions were out of the picture? It is the Unions that push for all of these bond measures that place us into debt. They are behind every one of them. It is the unions that are now responsible for our current poor position, or at least the extent of it.

    What can we learn from this? Simply that our politicians are far too willing to keep “labor” as a source campaign revenue at the expense of our citizens. If you are a state worker reading this and you just got furlough stuffed down your throat, accept the fact that it was unions that is part of the problem. Unfortunately, you are just seeing round one. There will be a round two, and you might get a round three.

    If CA is ever to get on the path of sound financial footing, this union stuff has got to go. Otherwise, ten years from now we are going to be back in this same situation. The only way to bring CA back to competitive status as a state is get our future under control. Recovery of the real estate market hinges on competitiveness as a state. CA needs to operate with this competitiveness in mind or suffer the consequences.

    What eles can we do? Allow voting for bond measures by aptitude test only! Questions like “If you vote for a 30 year bond to pass this proposition, and your child is 5 years old today, how many years will your child be paying for this after he/she turns 18…

    Answer: 17 years.

    We need to stop this silliness and adhere to a pay as you go system. If we knock out high priced union labor, projects become much more affordable and we can stop mortgaging our future. It also eleminates the extent of agressive regressive taxes and cuts when we can least afford them. Oh well. Hopfully we can make progress in this area but I doubt it. Why? Because politians are unwilling to give up labor candy.

  126. Additionally, the 32% of gross income comes from the many mortgage calculators available on the net. However the total debt load from these calulators must not exceed 40% of gross imcome. These numbers are MAXIMUM amounts. If you do the math… you will find that they are almost impossible to make work. IE: on 100,000 income 40,000 total debt load, 40,000 taxes, leaves only 20,000 to pay for ALL other expenses.

  127. In no particular order:
    -higher priced areas now stalled will start sinking
    -families now have an economic interest to leave their homes and buy across the street (breakeven now at 40% equity)
    -cash-rich speculators will have their money go farther, cash-poor income-earners will see assets wiped away

  128. I am a person who saw the bubble coming and rented and saved. Now I confess to feeling like I did the wrong thing. Many of my peers are living in McMansions here in the Boston area and while they are house poor (though not enough that they can’t still afford to go out to eat and paid the maid and the nanny!) they are set with 30 year fixed mortages on houses that with jumbo rates and new mortgage rules I will not reasonably be able to afford.

  129. Personally, I have never been a big fan of median house price index. Its a broad view of different segments and does not provide enough specifics.

    I would rather see (although will never be done due to red lining issues) where different segments are represented:

    Low End of market (600 sf to 1299 sf)

    Low Mid range of market (1300 sf. to 1500 sf)

    Mid range of market (1501 sf to 2200 sf)

    Low High end of market (2201 to 3100 sf)

    Hight end of market (3101 +)

    With each of these segments, take 3 sales of similar sq. ft. in those ranges and arrive at an average sales price. Due that at different periods of time and then you can see how each segment is impacted. My guess of this type of statistic would show the least impact in the lower ends and bigger impact in the higher ends. But… that is just educated guessing.

  130. First impression is a qustion.Why would anybody commit hard earned dollars(250,000+)by buying a depreciating asset on a small lot? Housing prices will have to fall,to become a sound investment.

  131. Mark:

    I totally agree with your thoughts; I live in Central California and the price drop at the high end of the market has not been as significant as the low end. Case in point, my parents own a house in a nice neighborhood that only dropped about 30%, in comparison I am currently looking at a place that is in a decent middle class neighborhood but has dropped 61% since the peak. Yes, California has been hit hard but it also depends where and what you bought.

  132. RSS the only thing proping this whole house of cards up is the mid to high end (650k up) its only logical. That market has way more staying power and they will stay to the bitter end (keeping up with the jones is in their blood). The point he has been making all along is that the next wave is Alt-A (Iknow you don’t want to hear it) but having been in the industry for a spell I don’t think you guys are getting it. This is going to hit the mid to high end very hard. Look at it this way if you live in a 600k area and forclosures start to infest your area as they have in the subprime you are now looking at competing with a bank that is going to REO that house next door for 300k. This is not fiction this is a fact. I don’t want to be get everybody excited I just know what the hell I am talking about. And thanks for all the critical comments at least I know you are starting to think. As always MM great work.

  133. PHil, you played your cards right just sit back and wait ab=nother 2 years and all your dreams will come true. Keep the faith

  134. @Martin, they asked me to leave school but I stayed (what a dumb ass I was) these are the same CALPERS people that are killing the tax roles. To Graham in England on these blogs we are very open to say what we feel. My apology for anything I may have said to upset you. I do wish everyone the best here but if you have knowledge I was taught you need to share, (Martin not in school my dad).

  135. jketzetera: MOST states in the USA are recourse as well. The states that aren’t recourse on the primary loan or recourse after the homeowner has refi’d, which let’s face it, everyone and their brother has done at least once. The problem with this is that there are so many job losses now and so many people that have lost their homes and have no net worth that it wouldn’t be worth the banks to start up the process to come after these folks. The vast majority of Americans are in debt up to their eyeballs and live hand to mouth. Can’t squeeze blood from a turnip.

  136. Should be : The states that aren’t recourse on the primary loan ARE recourse after the homeowner has refi’d,

  137. Agree, at least in California, on the recourse issue… except that California also has the one form of action rule which means if you foreclose using a non-judicial foreclosure, you cannot seek a deficiency. The impact is more related to junior lien holders. Regardless, bankruptcy can address that. A debt as large as a mortgage would assist most persons to qualify under the means test for a Chapter 7. The most severely impacted by anti-deficiency laws are the wealthy who merely are walking from their homes that were refis. But mainstream consumers are not really impacted. At least that is my arm chair opinion.

  138. Quit freaking out people. If you can wrap your mind around this whole mess as being temporary. All the stuff you have just mentioned to the enth’ degree are typical signals and reactions to a global depression. No market is safe currency, housing, bond, stock…they all get hammered. If you bought a home after the market skyrocketed up 400% in 5 years…you are a dumb shit. If you refied your house to max LTV during that run…you are a dumb shit. If you own a home in those areas before the run and actually want to LIVE there….hang on. You probably have lost money on paper and if so, little actual equity. You market is CALIFORNIA….How many other states have what you have to offer? I sure as shit cannot go surf or ski all within an hour drive where I live. Your real estate that is located in the high end areas (those thought to be high in price prior to 2000) are still going to command a premium and probably jump faster than the rest of the Nation…when things DO TURN…AND THEY WILL. QUIT PREACHING THE END IS NEAR….ENOUGH. Maybe EVERYONE should have jumped out bank windows in the 30’s to save themselves from having to apply common sense to financial transactions.

  139. The first thing that comes to my mind is that the initial monthly price decreases were in the range of 8 to 12 thousand dollars, The last several months the decreases are at 20 thousand per month, a huge increase in percentage fall and a sign of tremendous momentum building, TO THE DOWNSIDE.

    God help California homeowners.

  140. Mortgage litigation, I can tell you are not an appraiser. You are not looking at a market overview. You are trying to perform an appraisal by picking 3 similar sized properties to obtain some crazy average. You must 1st consider location and in CA….as in Atlanta, there are many different homes built on the same street from “Rosie the Riviter’s ” to “McMansion on the Hill”. The median is THE indicator because it discounts all the oddball rwally high and really low sales from a defined market area. The subject’s neighborhood is considered to be where potential buyers will live, work, and play… There are many factors that can skew your theory. There are many of those small to mid sized homes that have MACK DADDY kitchens, baths, and upgrades. You CANNOT sit and tell me that looking solely at the size is logical….This is how we got in this mess by having people do exactly what you are talking about. Appraising homes BECAUSE similar sized homes sold. STUPID is as STUPID DOES!

  141. With regard to Money Man:

    Hey Jim (Cramer) is that you mate? The real deal is that this market is unprecedented in our history. At NO other time has something like this happened in the housing market. Even in GD1 there is no comparison, and we are only in the 3rd or 4th inning of this at best. There were no sub-prime, Alt-A, 70% DTI approved loans, NINJA loans, illegal aliens and other assorted cretins with no ties to the country or its ideals purchasing homes, et al in GD1. Assuming this will all get better on its own in a few months or years is your prerogative if you want, but don’t presume to tell us that believing in cold hard facts is paramount to wearing a sign around our neck that states “Repent, for The END is nie”.

    The simple fact is that there is a huge glut of homes on the market, huge unemployment ramping up to double digit numbers within 2-4 quarters and gobs of folks out there, myself included, who are stuck in a house that loses 10k a month in value while the neighborhood turns to crap as the section 8 type renters move in after the bank has sold the house for pennies on the dollar to some scumbag slumlord group. These people are seriously mulling the idea of walking away as their neighborhoods dilapidate before their eyes. It aint all going to get better if we sit on our butts and wait it out like you suggest.

  142. That which you speak of is NOT all of America. Yes, out there in the “bubble” states it is a FACT. Those people had NO financial sense. THAT SIR is NOT the END GAME.

  143. P.S….Cramer is a trader. He would be classified as an investing idiot because he is not a long term investor. When you buy real estate you are automatically a long term investor…Hince..the 30 year terms.

  144. Money Man… we disagree and since you dont know what my occupation is really or my education background, you merely have a theory as to what knowledge I have or dont have. As with most theories, they are wrong. Median price does not take into account the impact at different market segments. It is highly flawed and is used mainly by the real estate industry to promote their products. If I am buying in the 250k range, I could care less what impact the 600k market has on median prices.

    It is flawed and I stand behind it. I would bet my MBA and JD degrees on it…

  145. I agree that you have to separate the market segments to track a particular home type but you cannot accurately compare those from several years ago to those being sold today. The value back then is irrelevant because market factors have undergone a huge change. That is to say, my house was worth 500K 3 years ago…so it must be worth close to that today. This is flawed logic. The recent data IS the relevant data, no matter the circumstances. Frankly, on your education or expertise, I don’t care if you are Mr Shiller or Mr Case himself. Good for you you have spent much on higher education….I am not impressed because so did the folks running Bear Stearns, Citi, Lehman, AIG …etc.

  146. Money Man said “I am not impressed because so did the folks running Bear Stearns, Citi, Lehman, AIG …etc.”

    Ah, but I am not running those companies so please do not generalize and put me in their category. I believe that I have used my education for good and do not deserve to be in the category you attempt to put me in. But, back on point… we are in agreement, its application seems to be in disagreement. The relevance of any segment today to what it was has very little bearing on someone buying today. What it is used for is for comparison in an intellectual discussion, when comparing median home price today to 3 years ago has little value too. But, if in a segment like the 250k range, if you could see that segment has been reduced by 10% or 40% that has some relevance in viewing how that segment has been impacted overall. Taking it a step further, you need to look at it the context of what is losing value. The land. The structure costs x amount of dollars to build with a certain amount of fluctuation. At some point we reach of nexus of the value of the land will be reduced to zero and only the structure has value. In reality, that is pretty close to not possible. Otherwise, as you can imagine, if your house burns down, the insurance company would just right you a check for the full value of the property and not re-build your house as it would be cheaper for you to buy a house for sale then to re-build.

    In some respects, that is closer to a reality on the 3600 sq. ft. super homes that were built. Many of those homes are selling for $100.00 per sq. ft. today, yet… it might cost you that to replace it. However, a 1200 sq. ft. house may cost $60.00 per sq. ft. to build, making its cost to be about $72,000.00. I think this really highlights the builders dilemas today. They paid to much per lot in the land, their off-site improvements and other developments costs are killing them. A lot that cost them 100k is most likely really only work 25k today. Tough place to be. Anyway, when comparing segments, median price does not have a big place for me and it does not tell me where the overall market really is. Just tells me, that on average, where most of the buyers are buying. Ho-hum.

  147. I am seeing that the vacant land and land with structure/homes both tanking. There are premiere areas where it is cheaper to buy the new home already built “spec’ than build it today because of the massive amount of standing inventory. This phenomena is more associated with new construction. Land (vacant) in my area is declining pretty rapidly because of the halt in development. Existing homes seem to be doing fine (built pre 05′) but those (built post 05′) are suffering the most. You have to break down each individual market to decipher which part of the value is taking the worst hit…land with dwelling or vacant land. Zoning is also a major factor.

  148. Best part of this story is for those who want to buy instead of rent, they can acutally afford to do so now!

    Lastly, the only folks really hurt in this mess are the flippers. Any loss of value in my home (BTW the market here has GROWN at a stable 10% for a decade)is only a paper loss until I sell it. SO DONT SELL IT!!!!!!

  149. Ken

    The only people hurt in the housing mess are those buyers who reached into their own pockets and pulled out their own money for a down payment. Anyone who got 100% financing or did a cash out refi where they cashed out more than they used as down payment are ahead of the game. They are out nothing.

    Flippers…if they knew their business they could have reduced their exposure. If they didn’t know what they were doing they diserved to get slaughtered without a bailout. Just like other businesses that are under capitalized, including automakers.

  150. I wonder if I graph the numbers a Fibonacci spiral will appear :)

  151. Great chart, so as billions of our tax dollars go to banks that gambled for 5 years (making billions), automakers who (other than jobs/that are left in the USA) were headed strait to BK-they need the banks to lend as well, now retailers want a piece of the bail out money and who’s next Ruth Chris Steak House or the Las Vegas Casino Community.

    I think there’s about 95% of you that are against bailing out the American Homeowner, with American “TaxPayers” own dollars, yet you are willing to allow ‘O’ let’s say 270 billion dollars get handed out since what January 2008 to financial firms (mostly) by “Paulson and the wall street fleecers” and the fact that our situation in even worse day then it was one year ago-somehow is justifiable as long as that family next door doesn’t get to keep their home because Joe over there bought a pool with his refi money.

    To you 95%, have you ever seen the three monkey’s (statue) figurine-with one -hands over eye’s-over mouth-ears, etc… that’s YOU when our money is given to the groups that have been stealing from us anyways-why not a few hundred billion more-RIGHT… When common sense and human compassion says save families from losing there home-the natural desire to help is paid back 10 fold…

    If a year ago 350 billion dollars went strait towards modifying the 12 Trillion in outstanding mortgage obligations, offset Junior liens with IRS incentives as well as investor losses-Does anybody really believe as Paulson & the Great financial minds directing our 700 billion did and does still-remember the other 700 Billion to purchase a corrupt Fanny & Freddie-those great minds told us that would fix it-nope you don’t remember do ya monkeys.

    Anyways, with each morning as you 95% walk out your front door and see another homeowner lose there home to the bank (that received 25 billion free the day before)and you say to yourself I didn’t like them anyways, and yell no charity loser as they are forced to leave by the sheriff. As you turn to walk back into your home feeling like a million bucks since you said what the TV or the media at large tells you to believe to be right. Remember this these unique times will be remembered for a very long time in American History. How are you going to be remembered, as one of the heard that gets lead around by the media-you know want to be on “E” or just like some CEO or relevant to the guys on CNBC/Bloomberg that you’ll never know and they will always have job security with you watching. Or can you use that over priced college education to make a difference, Obama has been given a reality check and he is a great speaker but our government officials behind closed doors are in the “know”-they know it’s bad and just going to get worse. So he will blame Bush. Wall Street for the most part has become a huge burden and seems more like a Pon-zi scheme and the American Taxpayer is the “mark” and you still think the balance sheet approach is reality “Housingrealist”?

  152. This I find amusing. Mr. Mortgage said to see what comes first to mind when you see the deterioration of the Ca. housing market. Most of you look directly down at the bottom number and say “Wow dude the Ca. Housing market is down that far?”
    Where are you living you ignorant SOB’s? This is only affecting the lower priced homes? Are you smoking crack? Upper end housing is taking it in the shorts across the board because investors in the secondary market are not buying jumbo loans. The jumbo loan market is dried up like the Mojave Dessert. The only thing keeping our market going is the lower end of the market. And be thankful for that!!!!

    Now onto what Mr. Mortgage is getting at.

    Look at the time when the prices started falling off the cliff. It was when the exotic loans started to go away and then the momentum of the market losing its pricing became apparent. Then it became the perpetual snowball where most of these loans ( many exotic (POA’s) loans) had no place to catch themselves and hence the start to the default problem we are now watching happen minute by minute. The faucet was turned off when the exotic loan programs went away in August of 2007. From there we have seen a major free fall.

    Is this going to get better anytime soon? If you think so then let me know your drug dealers number so I can smoke the same stuff as you. This is going to get much uglier before it gets better.

    Rock on Mr. Mortgage! You know your stuff. Keep preacing the truth!

  153. News Flash….the whole market is a ponzi scheme as is our Social Security system. The big concern on Wall Street is how can Wall Street overcome the perception by main street that the system is NOT fixed.

    Why do you think the government created all the retirement accounts? So the little guy has a way to participate in the markets. Who benefits most? The market makers at the top.

  154. Vegas,
    see you in march 7-11

    The Winners are: intermediaries, wall street investment bankers & depository lending institutions
    The Losers: borrowers/tax payers (Americans)
    Since the Government stepped in to help the America People
    The new Winners: Banks-their paying off their wall street investors.

    The market is now a Ponzi scheme, the only risk from wall street is if the government doesn’t believe them when they say your going BK, unless you bail us out-then we’ll lend. Works every time.

    Before the little guy had a retirement account government or private.

    The debt or securities are insured so where is the pay off for these dead assets????


  155. […] Het probleem waar het allemaal mee begon, dalende huizenprijzen, is nog lang niet voorbij. De daling van de huizenprijzen in Californie gaat heel snel.. bron: […]

  156. If there is 12.1 Trillion Dollars in outstanding mortgages, with 1 out of every 10 homeowners with a mortgage deliquency of 60 days or more(10%) or there are 4.6 million homeowners deliquent, both deliquent quotes came from Moody’s and NAMB in an article dated 1/09, so lets assume the fiqures are correct.

    Now in an earlier statement around 10/08, Moody’s estimated that 1 out of every 5 homeowners was near or already underwater. Using the same fiqures of 46 million mortgaged homeowners equals 20% or 9.2 million homeowners are underwater and half of them have trouble paying the mortgage already. The reason I said already, is there is still alot of adjustable mortgages waiting to re-set.

    If we just use the total outstanding mortgages of $12.1 trillion dollars times the 20% that are underwater and persuade/force/mandate the banks to give a principal reduction of 50% , it would only cost them roughly 1.21 Trillion dollars.

    Heck, they paid more than that in 2007 in bonus to 600 executives.

    600 executives versus 9.2 million homeowners

  157. Hello again,

    Let’s be fair, according to some posters, about half of the outstanding mortgages have no reason to worry about being underwater, just about having their equity disappear.

    Lets say the half of the outstanding mortgages were taken out in the last 5 years, thru purchases or used as an ATM, roughly 6 trillion dollars.

    If we wanted to use the same 50% reduction fiqure that would equal 3 trillion dollars,

    ***a little more than one third of what the taxpayers have already extended to the banks with funds, usuage of funds or guarantees, excluding AIG and Citibank.

    But again to be fair, a homeowner who purchase or refi 5 years ago would not receive the same reduction percentage as a homeowner who purchase or refi 3 years ago. (reduction would be to the current fair market value)

    To reduce every underwater homeowner to the current value of the area, taking into consideration different areas decreases, lets average out the percentage to 40%(still high) would equal a loss of 2.4 trillion dollars to the banks and investors.

  158. All modifications and even the proposed cram downs(bankruptcy 13 changes) only affect the deliquent borrowers, if they can prove they couldn’t pay the previous mortgage payment, nothing to do with having negative equity

    I will agree that the modifications and the proposed bankruptcy 13 changes will delay the foreclosures, extending the time of the housing decline.

  159. Admin:

    According to my plan, if the above chart was correct and verified by appraised value, the principal reduction would go to $242,000.

    If the median income was %59K as stated, more than half of your neighbors would be ok, if fact they would be better than ok since the principal and interest payment would be $1299.11 at 5%.
    ( it wouldn’t matter even if their first mortgage was a 1% POA, the payment still would be lowered due to the loan amount)

    Real estate was location derived when they purchased, refinanced, or want to sell, that is why different areas of similiar type homes sell for different amounts, regardless of who WANTS to live there, it was always based on affordability.

    Loans that are current do not need to be re-underwritten unless you want to get rid of no income check loans entirely. They are already offically dead, but there are a number of them on the books that pay.

    I thought the object of your web site was to show how the banks increased the values as a result of their actions and how the values are decreasing also as a result of their actions.

    Translation–defective mortgages , think about it

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