The expiration of the latest government program has curtailed demand more than most analysts thought possible.
Irvine Home Address … 37 EXPLORATION Irvine, CA 92618
Resale Home Price …… $1,649,000
We're going down,
And you can see it too.
We're going down,
And you know that we're doomed.
We're slow dancing in a burning room.
John Mayer — Slow Dancing In A Burning Room
As a worker in the homebuilding industry, it pains me to see bad news. Our industry is barely limping along dependent upon a plethora of government subsidies and facing a potential avalanche of distressed properties to compete with us for sales. The amend-pretend-extend policy of lenders has created a small degree of demand for our product, but with the overhang of distressed properties, it feels like we are slow dancing in a burning room.
By ALAN ZIBEL (AP) – June 23,2010
WASHINGTON — Sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.
The bleak report from the Commerce Department on Wednesday is the latest sign of a precarious housing market that is struggling to recover and could weaken the broader economic recovery. It follows a disappointing report issued earlier in the week showing sales of previously occupied homes had dipped in May.
Analysts linked the sudden drop in new-home sales to the expiration of federal tax credits of up to $8,000. But double-digit unemployment and slow job growth have also weighed on the market, even with mortgage rates at near-historic lows.
In most markets — at least those away from the California coast — affordability is not a problem. In Riverside County, houses are as affordable as they have ever been thanks to low interest rates. Right now, what the market lacks is wage earners who can qualify for a mortgage and absorb the inventory.
"We fear that the appetite to buy a home has disappeared alongside the tax credit," Paul Dales, U.S. economist with Capital Economics," wrote in a note to clients. "After all, unemployment remains high, job security is low and credit conditions are tight."
To sustain the economic rebound, the Federal Reserve is expected to leave interest rates at record lows and repeat a pledge to keep them there for a while. The Fed resumed its two-day meeting Wednesday with policymakers having some cause for optimism as well as caution.
Fed Chairman Ben Bernanke has expressed confidence that the nation won't fall back into a "double dip" recession. At the same time, the recovery remains vulnerable to threats and chief among them is a fragile housing market.
If a strong housing market is what is necessary to avoid a double-dip recession, then we are going to see a double-dip recession.
New-home sales fell in May from April to a seasonally adjusted annual sales pace of 300,000, the government said Wednesday. That was the slowest sales pace on records dating back to 1963. It also was the largest monthly drop on record. Sales have now sunk 78 percent from their peak in July 2005.
Each month I go to the Building Industry Association's Riverside County Chapter meeting on Governmental Affairs. Each meeting we are updated on the number of building permits in the county. At the peak in 2005, we pulled about 35,000 permits. In 2009 we pulled about 3,500. This year — assuming demand does not drop off further, we may issue about 5,000 permits. Riverside County has seen a 90% drop in new home construction, and the recovery is very sluggish. When we finally get back to the sustainable rate of 20,000 houses a year, business will have picked up 400% from 2010 levels.
The tax credits expired on April 30. Buyers who signed sales contracts by the deadline have until June 30 to close on their homes and qualify.
The new-home sales report measures contracts to buy homes rather than completed sales. So it offered a glimpse of what the housing industry will endure throughout the summer.
"We all knew there would be a housing hangover from the expiration of the tax credit," wrote Mike Larson, real estate and interest rate analyst at Weiss Research. "But this decline takes your breath away."
Breathtaking! Yes, the decline has certainly felt breathtaking to the homebuilding industry.
Sales of previously occupied homes are recorded when buyers close, so there were expectations for strong numbers in that sector through June. The 2.2 percent drop in May from the previous month showed the entire industry is weakening.
New-home sales fell nationwide from April's levels. They dropped 53 percent from a month earlier in the West and 33 percent in the Northeast. Sales in the South dropped 25 percent. The Midwest posted a 24 percent decline.
Builders have sharply scaled back construction in the face of a severe housing market bust. The number of new homes up for sale in March fell 0.5 percent to 213,000, the lowest level in nearly 40 years. But due to the sluggish sales pace in May, it would still take 8.5 months to exhaust that supply, above a healthy level of about six months.
The median sales price in May was $200,900. That was down 9.6 percent from a year earlier and down 1 percent from April.
New-homes sales made up about 7 percent of the housing market last year. That's down from about 15 percent before the bust.
The drop in new-home sales means fewer jobs in the construction industry, which normally powers economic recoveries but has remained lackluster this time.
Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders. The impact is felt across multiple industries, from makers of faucets and dishwashers to lumber yards.
The only bright spot — if you want to call it that — is that Southern California doesn't have any standing inventory of unsold new homes like many other markets. If demand picks up, homebuilders will go to work and build more houses.
Now we need people to start getting jobs again in California….
This was not a wise purchase. The owner of today's featured property paid $1,422,000 on 2/29/2008. He used a $995,400 first mortgage and a $426,600 down payment., then he defaulted.
Recording Date: 06/03/2010
Document Type: Notice of Default
Rather than put the property for sale at a reasonable asking price to try to recover his investment, this owner is asking a WTF price hoping to make over $100,000. Good luck with that.
Irvine Home Address … 37 EXPLORATION Irvine, CA 92618
Resale Home Price … $1,649,000
Home Purchase Price … $1,422,000
Home Purchase Date …. 2/29/2008
Net Gain (Loss) ………. $128,060
Percent Change ………. 9.0%
Annual Appreciation … 6.0%
Cost of Ownership
$1,649,000 ………. Asking Price
$329,800 ………. 20% Down Conventional
4.80% …………… Mortgage Interest Rate
$1,319,200 ………. 30-Year Mortgage
$333,710 ………. Income Requirement
$6,921 ………. Monthly Mortgage Payment
$1429 ………. Property Tax
$600 ………. Special Taxes and Levies (Mello Roos)
$137 ………. Homeowners Insurance
$175 ………. Homeowners Association Fees
$9,263 ………. Monthly Cash Outlays
-$1520 ………. Tax Savings (% of Interest and Property Tax)
-$1645 ………. Equity Hidden in Payment
$605 ………. Lost Income to Down Payment (net of taxes)
$206 ………. Maintenance and Replacement Reserves
$6,909 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$16,490 ………. Furnishing and Move In @1%
$16,490 ………. Closing Costs @1%
$13,192 ………… Interest Points @1% of Loan
$329,800 ………. Down Payment
$375,972 ………. Total Cash Costs
$105,900 ………… Emergency Cash Reserves
$481,872 ………. Total Savings Needed
Baths: 4 full 1 part baths
Home size: 4,209 sq ft
($392 / sq ft)
Lot Size: 7,192 sq ft
Year Built: 2008
Days on Market: 27
Listing Updated: 40344
MLS Number: P736173
Property Type: Single Family, Residential
Community: Portola Springs
This beautiful house is so unique and highly upgraded throughout. Totally custom fisnishes and awsome amenities. Imported chandelier, French doors that look out into the middle courtyard. Master suite w/walk-in closet and custom designed cabinets. Built-In security camera system monitored by computer.
so unique? I don't think the word unique can be modified.
Do you think the realtor allowed her teenage daughter to write this description? Totally awesome!