Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Friday, November 16, 2007

Slacker Blogger

Hi All,

Mea Culpa for being the housing bubble's slacker blogger. There have been many other time consuming projects at the job that pays me.

Additionally, I just haven't felt that what is happening now is anything unexpected. In fact it is expected, predicted and pretty much yawn material.

We already knew we were right about the last 5 years (at least) of real estate prices being disconnected from fundamentals. We already knew that the housing market was nothing more than Fools and Greater Fools playing pass the potato. We already knew what was going to happen when the Greatest Fools of all found themselves holding the potato and it turned into a big bag of flaming poo right before their eyes.

You know, on that note... why don't the stupid ever know they are stupid?

We knew that without all the toxic financing, jumbo loans, IO, suicide loans and take it in the butt products, this market would never have existed at all. The price run ups never would have happened. The disconnect between incomes of residents and prices of houses would never have happened.

We know that 40-50% of the price of current homes is totally unsupported.

Why didn't the Stupid Bell go off in the heads of the Ponzi participants?

Ah, well, those who fail to learn from history is one of the greatest history lessons for the rest of us.

Did you see this?

The Associated Press. “Wells Fargo & Co. President and Chief Executive John Stumpf said Thursday the housing market is experiencing its worst decline since the Great Depression.”

“Stumpf said…that rapidly declining housing prices are likely to put even more pressure on delinquencies and defaults. ‘I don’t think we’re in the ninth inning of unwinding this,’ Stumpf said, relating the declining housing market to a baseball game. ‘If we are, it’s going to be an extra-inning game.’” “Stumpf said the downturn resulted in part from ‘froth, unscrupulous lenders, (and) borrowers who got too greedy. In 2006 the music stopped.’”

You got that right Johnboy! No, we are not in the 9th inning. First pitch just went out. Game just started. Grab your popcorn and get cozy. It is gonna' be a while.

Press Democrat
“‘In so many ways, what we’re seeing today was caused by all this crazy borrowing and lending,’ said economist Christopher Thornberg, who has repeatedly warned of a looming real estate crisis. ‘I can’t emphasize this enough. This was imminently predictable.’”

“No one takes responsibility for the inflated incomes that many borrowers submitted to justify a mortgage, especially in 2005 and 2006 after three years of soaring home prices. One lender’s review of 100 loans made without proof of income found that nine out of 10 applications overstated the borrower’s income.”

“There’s a greater than 50 percent probability that the financial system ‘will come to a grinding halt’ because of losses from mortgages, Gregory Peters, head of credit strategy at Morgan Stanley, said.”

Larry Mizel, CEO of M.D.C. Holdings, put it, ‘Everyone forgot that there are cycles in housing.’ Since builders have ‘borrowed demand from the future,’ says Burns, the industry is in the second year of a 3-to-5-year correction."

"When the downturn ends, he says sales activity will correct back to 1995 levels.

From Bloomberg. "Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide, Deutsche Bank AG analysts said."

From Reuters. "Blackstone Group president and chief operating officer Hamilton James said on Monday that the subprime mess that hit Wall Street banks appears to be getting worse. ‘The subprime black hole is appearing deeper, darker and scarier than they thought,’ James said.

"(**PDF Alert**) This chart shows the resets peaking in March 2008. Guess what is going to happen to the jackholes wishing, hoping and clicking their heels for things to improve in the Spring?

From the report: "2. What happened in 2004? The relationship between Californian house prices and disposable income as a multiple of long rates broke down in 2004; we believe that aggressive sales of ‘affordability products’ (e.g., subprime, option ARMs, home equity loans), which spiked in 2004 (see Exhibit 2), drove Californian home prices well-above levels supported by economic conditions."

"Now that the secondary market for these affordability products has all but evaporated, we expect home prices in California to return to normalized levels (i.e. levels implied by current and forecast disposable income in California as well as U.S. ten-year treasury yields); this implies a 35-40% fall."

Yawn! Yes, that means you Sonoma County. Especially you!

“Joseph Stiglitz, a Nobel-prize winning economist, said the U.S. economy risks tumbling into recession because of the subprime crisis and a ‘mess’ left by former Federal Reserve Chairman Alan Greenspan.”

“‘Alan Greenspan really made a mess of all this. He pushed out too much liquidity at the wrong time… He encouraged people to take out variable-rate mortgages,’ Stiglitz said in an interview in London today.”

“‘That game is over,’ Stiglitz said. ‘As house prices are going down, people are not going to be able to take more money. We are looking at a major slowdown.’”

“Stiglitz, who stepped down as the World Bank’s chief economist in 2000, and now works as professor of economics at Columbia University, estimated U.S. consumers borrowed up to $950 billion last year against the value of their homes to finance spending.”

Meanwhile in Sonoma County, the median dropped nearly 12 percent.

"Sonoma median price drops to 473K per DQNews. Back to October 2003 levels folks."

Thanks Fred!

"Sonoma County’s housing downturn deepened in October, when sales tumbled to a 16-year low."

"The median resale price fell for the 16th consecutive month returning prices to levels not seen since October 2004." (still HIGH and solidly in bubble mania territory)

"Sales are declining across the Bay Area, but Sonoma County has been among the hardest-hit places in the region." (You ain't seen nothin' yet)

"The housing downturn is worse in Sonoma County and other counties on the Bay Area’s edge largely because more homeowners relied on risky loans to purchase homes around the market’s peak and may be forced to sell. Soaring foreclosures have led to tightened lending requirements that push out some buyers." (edited to remove realtwhore spin)

'“We’re still trying to work through the inventory and the bad loans. said Rick Laws, Santa Rosa manager for Coldwell Banker."

"At the end of October there were 2,597 (this is what realtwhores are claiming. MLS says something different) houses for sale in the county, October’s highest level since 1992, when the county was last in a housing decline."

"The housing market's decline has accelerated as other economic indicators are worsening across Sonoma County, increasing the chances the region will dip into a recession."

"What began as a correction from an eight-year run of record home sales and price increases has been made worse by soaring loan defaults and tighter credit, the consequences of loosened mortgage lending standards."It's becoming a drag. There is a rising risk of recession," said Steve Cochrane, regional economist for Moody's"

"Chris Thornberg, a Los Angeles economist, said rising unemployment and housing's tumult are hammering the state's economy, including Sonoma County. There is now a 75 percent chance of recession by early next year, he said."

'"This thing is already in the process of creating a recession in California," he said. "Consumer spending will be the ultimate driver, but consumer spending slows because of housing price declines. It is housing that is the show stopper."

'"Home sales have been falling for more than two years in the county and price declines have kicked in the past 15 months, yet the economic blow is just beginning to hit here." (Right on the money, baby)

"Sinking home sales have triggered layoffs by mortgage and construction companies in the county and real estate agents are leaving the business. Those job losses have helped drive up unemployment to 4.5 percent, up from 3.7 percent a year ago. Moody's estimates unemployment will be 4.3 percent next year."

"The local economy is expected to get worse before it gets better as the housing downturn deepens."

"We are in the heart of the storm. I think there's still more pain to be felt," said Greg Jahn, who tracks the economy as chief investment officer for Exchange Bank. "That leads to less jobs in the housing industry, less consumer confidence in the ability to go out and spend. It's just a vicious cycle."

"Housing markets in regions with higher concentrations of those loans, (read: Toxic Loans) including Sonoma County, already are suffering even deeper defaults and foreclosures. But housing's decline is taking an even broader toll on the economy as falling home values lead even homeowners not facing the loss of their residence to take a closer look at their finances."

"The latest national consumer confidence survey hit a two-year low this month. Conditions are no better in Sonoma County. The region's economy may not bounce back until 2009 because the mortgage mess is expected to extend housing's downturn, Cochrane said."

"Once a symbol of Sonoma County's housing boom, Bellevue Ranch is now emblematic of hard times in neighborhoods across the region.More than 20 of the 35 homes for sale in Bellevue Ranch are on the market either because banks took them back or owners must sell to avoid foreclosure."

"Many homebuyers bet values would continue to rise, allowing them to refinance into more stable, longer-term loans. But the downturn beat some of them."That's one of the biggest risks of this whole mortgage mess, that it can infect house prices broadly in neighborhoods," said Steve Cochrane, regional economist for Moody's"

"For Sale" signs on every block and a handful of vacant homes are the only apparent signs of stress in a neighborhood that otherwise looks like any new subdivision in Sonoma County.

Number of purchases made by homebuyers and investors using high-rate subprime loans:

2004: 400 purchases 4.4 percent of all first mortgages
(California rate was 7.2 percent)

2005: 1,657 purchases19.5 percent of all first mortgages
(California rate was 28.9 percent)

2006: 1,148 purchases19.2 percent of all first mortgages
(California rate was 30.1 percent)

Top five subprime purchase lenders in Sonoma County, 2004-2006:

Long Beach Mortgage Co., Anaheim, $232 million
Status: Absorbed by parent Washington Mutual in September

New Century Mortgage Corp., Irvine, $148 million
Status: Chapter 11 in April

Fremont Investment & Loan, Brea, $109 million
Status: Closed subprime arm in March, Massachusetts sued for predatory lending in October

First Franklin Financial,San Jose, $105 million
Status: Sold by parent National City Bank to Merrill Lynch in 2006

WMC Mortgage Corp., Burbank, $72 million
Status: Closed this month

Percent of Latino homebuyers using subprime loans:

2004: 9 percent
2005: 44 percent
2006: 41 percent

Percent of non-Latino buyers using subprime loans:

2004: 3 percent
2005: 10 percent
2006: 12 percent

Subprime homebuyers by ethnic origin

2004: 152
2005: 867
2006: 560

2004: 166
2005: 564
2006: 489

Ethnic origin not listed:
2004: 82
2005: 226
2006: 99

Subprime borrowers in Sonoma County strained their pocketbooks to get a first mortgage. Buyer's loan compared to their income (median spread):

2004: Sonoma County: loan 3.3 times larger than income
(U.S.: 2.3 times larger)

2005: Sonoma County 3.4 times larger
(U.S.: 2.6 times larger)

2006: Sonoma County 3.1 times larger
(U.S. Not available)

bwahahahahaha!!! This one cracks me up and is just as false forthe Alt-A and Prime borrowers too. Remember the auditor above who in auditing the loan documents found the income reported to be false in 9 out of 10 applications?

All that data is based on what was reported according to the loan documents in terms of income to loan ratio.

We already KNOW 9 out of 10 of the applications had the income falsely inflated. They were fraudulent. They falsified the income so they would meet the traditional lending standard and stay within the fundamental expectation of housing being 3x income.

The impact of investors on the market, 2004-2006:

15 percent of all purchases, prime and subprime.

3,594 investor purchases,$1.5 billion.

Many home buyers used subprime second mortgages to make their downpayment, consolidate debt or take cash out:

2004: 823 second mortgages, $67 million. Average loan size: $81,510

2005: 1,364 second mortgages, $138 million. Average loan size: $101,060

2006: 1,144 second mortgages, $119 million. Average loan size: $103,881

Number of prime and subprime loans, both first and second mortgages, used to buy a home:

2004: 10,211 prime, 1,223 subprime

2005: 7,867 prime, 3,021 subprime

2006: 5,931 prime, 2,292 subprime

Number of prime and subprime refinances, both first and second mortgages:

2004: 19,579 prime, 882 subprime

2005: 17,312 prime, 1,709 subprime

2006: 12,746 prime, 1,862 subprime*

First mortgages with an annual percentage rate (APR) of at least 3 percentage points over U.S. Treasuries of similar duration, and second mortgages at least 5 percentage points higher.

Sources: Sonoma County Recorder's Office, Traiger & Hinckley LLP, Home Mortgage Disclosure Act records, U.S. Department of Housing and Urban Development, Federal Financial Institutions Examination Council at

Reluctant buyers and tightened mortgage lending combined to drag down home sales in a nine-county region around San Francisco Bay last month to the lowest level in more than 20 years, a real estate research firm said Thursday. It was the slowest October since DataQuick began keeping records in 1988.

Many lenders have tightened underwriting guidelines in recent months amid rising home loan defaults and foreclosures, which rocked the secondary market for mortgage-backed securities.

"Angry disputes are erupting between struggling homeowners, who claim they didn’t understand the terms of their loan or the risk they were taking, and lenders and loan brokers, who say they fully informed all their clients and point with pride to the many homeowners they helped get a loan."

"As stressed borrowers seek help, every link in the chain of loan production is coming under attack, from the borrower, to the real estate agent, to the mortgage broker, to the lender."

"Some say that their broker put them into the risky loan just to earn a higher commission. Latino borrowers say their weak English skills made them particularly vulnerable. Small investors say they followed advice to borrow from their home and buy a rental or two and now they will lose everything."

“Lenders had a fiduciary duty to do the right thing for their people,” said Bob Accornero, a real estate broker with Creative Property Services in Santa Rosa. “Lenders needed to get warm and fuzzy with their people and say, ‘Can you really do this?’ That’s what they didn’t do.”

"The breakdown of trust between borrowers and lenders is already forcing changes to the way home loans are made, and more are on the way. Lenders are tightening standards that once allowed borrowers to get a subprime loan without documenting their income, proving employment, having decent credit and coming up with a down payment."

"Not in dispute, though, is the heartache striking families and small investors across the North Coast and nationwide as they lose homes to foreclosure."

'“In so many ways, what we’re seeing today was caused by all this crazy borrowing and lending,” said economist Christopher Thornberg, who has repeatedly warned of a looming real estate crisis. “I can’t emphasize this enough. This was imminently predictable.”'

"While many Americans benefitted from the loan opportunities, others abused them, an outcome that’s becoming painfully clear in Sonoma County where foreclosures and fingerpointing rile the industry."

“The lenders are trying to make the biggest mortgages they can. It’s up to you to say, ‘Wait a minute. I don’t think that makes sense for me to bite off this much,’” said Harper, whose service has seen a 300 percent increase in demand for housing counseling this year. People don’t ask enough questions, he said.“Simply because a lender tells you that you qualify for a certain amount doesn’t mean you can afford it,” he said.

(Don't buy stuff you can't afford, Stupid!)

"Nearly one out of five homes sold in Sonoma County during the easy-money years of 2005 and 2006 was bought with a high-risk loan, triggering a chain reaction of financial misery that has rippled through the county’s housing market all the way to Wall Street."

"For many, the American dream of owning a home has turned into a nightmare of sinking home values, forced sales, empty houses and ruined credit. A growing number of homeowners are locked into rising mortgage payments they can no longer afford and trapped in a home worth less than they paid."

"Already, lenders have seized 630(cq) houses this year, up from 129 in all of 2006, guaranteeing that 2007 will be the bitterest year for homeowners since the county began keeping computer records in 1964."

"Another 400 troubled properties are on the market, and lenders are threatening 300 homeowners a month with foreclosure if they can’t bring their loans current. Last year lenders averaged 93 foreclosure threats a month."

"Nor is there any hope that the shakeout will soon be over."

"Next year interest rates will adjust upward for the first time on many of the 1,148 properties bought with risky loans in 2006. One-fourth of these homeowners could lose their homes, the U.S. Department of Housing and Urban Development said." (See PDF for reset schedule)

“We are going to have waves of foreclosures,” said economist Christopher Thornberg, who tracks the Sonoma County economy and predicted the current real estate crunch. “This thing has a long ways to go before it shakes out.”

"Most high-rate borrowers in 2005 and 2006 said they had annual incomes between $100,000 and $200,000."

"However, many borrowers exaggerated their incomes to qualify for loans, sometimes at the direction of their brokers and lenders. During the housing boom, many lenders did not require borrowers to submit documents proving they earned enough to afford the monthly payments."

(so we know those who lied, which is 9 out of 10, could not afford the home they were buying. As their toxic loans reset they will be even less able to feed their alligator.)

"Rippling outward, hundreds of mortgage and real estate workers in Sonoma County are losing their jobs. Dozens of lenders nationwide are bankrupt, or laying off thousands of people, and those that remain have stopped lending except to the most creditworthy borrowers. Meanwhile, pensions, 401(k) plans, mutual funds and banks are losing billions of dollars, as the mortgages they hold lose value."

(oops... all these lost jobs can't be good. people without jobs might find it hard to pay their mortgage.)

"In Sonoma County in 2005 and 2006, prices jumped 69 percent in three years." (again... due to lax lending standards, the madness of crowds, and fools and greater fools anxious to play the musical chairs ponzi scheme where debt = wealth. How you like me now, huh?)

"Many people, with good credit and bad, grabbed whatever loan terms they could get just to snag a house before prices and interest rates escalated beyond their reach. Many took adjustable-rate loans, even though interest rates were rising."

"Their plan was that home values would keep going up and they would refinance out of the high-rate loan in a couple of years."

"They were helped by sales people who raked in six-figure incomes getting borrowers to accept high-rate loans, and by lenders who made a bundle selling the high-yield loans to Wall Street investors unaware of the risk. Interest rates on these loans have turned out to be 2 percent to 3 percent higher than a conventional loan."

"Some buyers dearly wanted to own their own home. Others simply wanted to get rich quick. Some didn’t understand the terms of their loan or the risk they were taking. Others just hoped they could get in and get out before the bubble burst."

"The unraveling of years of easy money, fueled by record low interest rates and promiscuous lending, has begun."

'“A lot of people were gambling, playing the revolving refinance game. Now that the music has stopped playing, all sorts of people are standing with no chair. These people are in big, big trouble,” said economist Thornberg, who is the founding partner of Beacon Economics in San Rafael and Los Angeles."

Blogger's Comment:

Something I have noticed that will only add to the pain and the time it takes for reality to set in here in Sonoma County... is the realtwhore PR engine, the Press Democrat seems to take the position that the bubble was really confined to 2005- 2006 and caused really by the Latinos and a few others taking out Subprime loans.

Oh my, but they do like perpetuating stereotypes here don't they? As long as they keep reporting like that, the Boobus Sonomanus will pretend it is not happening to them. It is. It is happening all over the county because fundamentally the high majority of people buying were playing a ponzi scheme where they bought houses they could not afford. Indeed, my prediction is the subprime components are going to turn out to be but a drop in the bucket here in Sonoma County.

It will turn out that the biggest boobs, fools and greatest fools will be the stupid people who had good credit scores, but still made stupid decisions to take out loans for more than they could afford to repay. Those will be the ones that bring it all crashing down. Of course, they will even then, try to blame it on someone with tanner skin than their own. Such is the way of Sonoma County.


At 11/17/2007 12:21:00 AM , Anonymous Anonymous said...

You are back!
I stopped checking this blog, but happened to look tonight.
So much new info and insight!
Thank you, thank you, thank you, for the update.
I've been waiting to buy and the RE pros have been telling me that now is the time.
I think not!
What a mess!
I hope RE doesn't sink our whole ship.

At 11/17/2007 10:19:00 AM , Blogger marin_explorer said...

"We are in the heart of the storm..."

Uh no. I think Mr. Jahn has seen that same CS mort reset chart too. We've only felt the pre-quake; the big one is still to come.

Oh, and welcome back!

At 11/17/2007 11:07:00 AM , Anonymous Anonymous said...

And don't forget while 30% or so of home loans were the teaser type of loans, many of those loans went to finance the down payment others made on second purchases. So while RE whores will claim less than 50% were bought with these risky loans, in reality these risky loans likely fueled the action in the vast majority of sales since 03. No more risky loans at the bottom, no more mid level sales no more high level sales.

At 11/17/2007 05:30:00 PM , Anonymous Anonymous said...

Great post, also, I did not mind the your long layoff, the sexy devil kept me checking each day.

At 11/17/2007 09:25:00 PM , Anonymous Tom Stone said...

Welcome back Athena! as far as the economy here i am already seeing signs of recession,and I think the odds of systemic collapse are well above 50%,we will at least see credit tightening well beyond what we saw in august and september,soon.the PD is simply obscene,and even when the big wave of Alt-a resets starts to hit in late I don't expect them to improve.BTW the problems with the Alt-a loans are MUCH worse than subprime,and it will be harder to blame that problem on minorities...although I am sure it will be tried.Oh and the inventory figures are laughable,no honest opinion of mine about michael coit or rick laws is printable.

At 11/18/2007 03:00:00 PM , Anonymous fred said...

Tom, I'm curious. Why are the alt A loans "much worse than subprime"?

At 11/18/2007 03:51:00 PM , Anonymous Tom Stone said...

Fred,the Alt-a loans have larger balances,worse underwriting,and affect wider geographic areas.Another reaso it will be worse has to with the psychology of the market "subprime"= poor prople=minorities in the minds of those who write for the PD,and in the minds of many readers..."THEM" not "us".Alt-a loans were used by what used to be the middle class to buy homes in the last few years as both shelter and "Investment".So it ay be necessary to blame the jews again,or the chinese rather than Blacks or hispanics.The Alt-a resets are going to absolutely squash some nice areas...hello Marin County,can you hear me? I expect prices in Sebastopol,where i live to drop at least a further 40% in inflation adjusted dollars even without a severe recession,and that would not even restore the prices to historical income/price ratios or gross rental multipliers.The current deleveraging is going to severely constrict the availability of $ within 6 months,especially for real estate.the landing will be like bouncing your way down a 1,000 foot cliff with occasional pauses on tiny ledges and loose scree.Fugly does not cover it.

At 11/18/2007 10:45:00 PM , Blogger marin_explorer said...

the landing will be like bouncing your way down a 1,000 foot cliff with occasional pauses on tiny ledges and loose scree.Fugly does not cover it.

What a should include a fiery car crash, Hollywood-style. Tom, I give you credit for predicting this meltdown way before the MSM got wind of it. Quite frankly, the implications of this credit implosion are staggering.

At 11/19/2007 10:05:00 AM , Anonymous Fred said...

Thanks for the explanation Tom.

At 11/21/2007 11:57:00 AM , Anonymous Anonymous said...


At 11/28/2007 08:14:00 PM , Blogger Lisa said...

"The Alt-a resets are going to absolutely squash some nice areas...hello Marin County,can you hear me?"

We hear you loud and clear! I have definitely noticed that the Debt Zombies are getting pissy around here. People seem so stressed, lots of bad behavior on the roads, in the stores, etc.

BTW, I'm thinking of Petaluma for the next house, a cute cottage near the downtown, so I'm sure you all will let me know when it's safe to buy. I'm assuming not before 2009?

At 11/29/2007 08:33:00 AM , Blogger Lisa said...

"The Press Democrat seems to take the position that the bubble was really confined to 2005- 2006 and caused really by the Latinos and a few others taking out Subprime loans."

The Marin IJ does the same. Apparently, we have little to no subprime in Marin, so we'll be fine. No mention of all those nice AltA (or even Prime) couples who stretched themselves into $800K starter homes or $1MM+ family homes.

Bottom line, buying at high multiples of household income isn't affordable over the long haul. And think of all that money that could have been put into savings for retirement or the kids' education or, heaven forbid, that proverbial rainy day.

At 11/29/2007 02:51:00 PM , Anonymous Anonymous said...

I expect prices in Sebastopol,where i live to drop at least a further 40% in inflation adjusted dollars even without a severe recession,and that would not even restore the prices to historical income/price ratios or gross rental multipliers.

Do you really think 40%? I sure hope so. We're on the verge of moving to Sebastopol. We'll start out renting, of course, but we want to buy soon. Even with the downturn in the market, prices of homes are still ridiculous. We're just not crazy enough to spend 700k on a shack, even if it's located in relative paradise.

Forty percent would be just what we need. I hope you're right.

At 12/03/2007 12:38:00 AM , Anonymous pookie said...

Hey Lisa,

Great to see your posts.
I agree... heaven forbid, that rainy day.

Any info on what happened to the Marin RE Bubble site?
It's been turned off to posts and no new info for a while.
Kind of strange.

Maybe the IJ made him an offer he couldn't refuse.

At 12/03/2007 11:38:00 AM , Anonymous Anonymous said...

Current poster child:

2236 Cummings in SR, 3/2, 2242 sqft, 1/2 acre, view of hidden valley.

Sold last year for $755k; active again this sept, now down to $610k!

If the "owner" get's that, they are out at least $180k (including commission) in one year. Leverage works both ways.

At 12/04/2007 09:04:00 AM , Blogger Lisa said...

"If the "owner" get's that, they are out at least $180k (including commission) in one year. Leverage works both ways."

Leverage is deadly on the way down. Letting people buy homes with 5% down, 0% down, was such a cruel hoax.

Re: The Marin Housing Bubble webiste, Marinite may just be busy...he's done this before, switched the site off, and then will post anew. I'm hoping so! I miss that site when it's switched off.

At 12/07/2007 12:20:00 AM , Anonymous pookie said...

Thanks Lisa,

I'm bummed about the turn off at Marin RE bubble.

I think he has some responsibility to the loyal viewers.

I wouldn't even say this if I didn't think he had incredible insight into the truth of this whole situation.
So much is transpiring now with the Bush bailout etc.

Hey Marinite!!!!!
Are you there??

At 12/09/2007 05:55:00 PM , Anonymous Tom Stone said...

Anonymous 2:51,sorry about not responding sooner,but Athena has been hanging out with Fabio's smarter brother and not posting much,so my visits are sporadic.definitely rent for at least a year,and two would probably be better.yes I really do expect a further 40% drop in prices barring hyperinflation.We have a lot of overextended people in this area,prices are set at the margin,and people HAVE TO SELL,due to divorce,illness etc,however NO ONE HAS TO BUY,EVER.I expect a return to historic rent/own ratios with a premium for the location,which is more than 40% below novembers prices.THIS WAS A BUBBLE!!! NOT A SANE MARKET!!!!and the correction will be very painful.If tou decide to buy sooner,let me know,i'll be happy to act as your Agent...

At 12/10/2007 12:19:00 AM , Anonymous mangrove said...

Hey Tom, great to hear your input.

I was just looking at a Mill Valley house offered at $1.3.
The agent assured me that this is a great time to buy.
She said that southern Marin is special and will prices will never go down here.
She also said that interest rates will never be this low again.
I would be a fool not to buy something now.

I'm looking at the current stats, and it looks like she might be right.
Mill Valley is still holding tough.

I don't understand how the market can sustain these obscene prices.
Are there that many rich folks who aren't affected by the fundamentals?

I pray that you are right about a 40% correction.

I liked your "NO ONE HAS TO BUY, EVER!" statement.

I'm hanging in as a renter for now.

At 12/10/2007 05:48:00 PM , Anonymous Tom Stone said...

Mangrove,areas like Mill Valley will take longer because buyers were using Alt-A products rather than "Subprime".There were plenty of ption arms,I/O loans and hybrids used to buy and refi throughout Marin,They were just fixed for 3,5,7 or 10 years rather than 2 years.You should see some movement in the summer of '08,and the bottom somewhere in 2011-2012.wait 'til late '09 and start offering half the asking price.And noI am NOT JOKING,I am a Broker,my Dad was an Appraiser for 40 years,and this is not my first cycle,it is BY FAR the biggest,wait,and buy right,and if you lack the nerve to offer 50%,I would be happy to act as your agent because I KNOW A PROPERTY IS WORTH EXACTLY AS MUCH AS SOMEONE WILL PAY CASH FOR IT TODAY.CASH,TODAY.

At 12/11/2007 01:09:00 PM , Anonymous Anonymous said...

Thanks, Tom, for your response and your insights on Sebastopol and beyond.

At 12/15/2007 02:02:00 AM , Anonymous mangrove said...

Tom Stone...

The RE folks I have been in contact with are so full of sh*t.
Their advice is totally self serving.

I'm looking for a win/win situation.

Any advice?

At 12/15/2007 04:44:00 PM , Anonymous Tom Stone said...

Certainly Mangrove.Wait until october of next year at the earliest,select several properties that meet your criteria,and make an offer that makes sense,which would be 125 times monthly rent for a home in good shape in a solid middle class neighborhood.since you will be one of very few potential buyers,you will have a good chance of getting the property no matter what the listing price is.And yes,I am advising you to only offer a sensible amount even if it is 40% of the asking price.Be ready to stick to your price,and it may not be a bad idea to have a buyers agent unless you enjoy having spittle sprayed in your face while being deafened by outraged fools.An agent also makes it seem less like a personal attack to the people who are forced to sell and are delusional about the market's reality.

At 12/18/2007 05:36:00 PM , Blogger Lisa said...

A message to Marinite, who has a new post on the Marin RE blog....only team members can post, so I can't leave a comment. Can you open up the latest post for comments?? Thanks, Lisa

DQ numbers are out today for So. Cal. Not pretty. 15% off peak pricing as of November. Just wait 'til next year.

At 12/21/2007 04:25:00 PM , Blogger marinite2 said...

The Alt-a resets are going to absolutely squash some nice areas...hello Marin County,can you hear me?

No. We are deaf, blind, and dumb to any suggestion that we are not immune.

At 12/21/2007 04:34:00 PM , Blogger marinite2 said...

This comment has been removed by the author.

At 12/21/2007 05:06:00 PM , Blogger marinite2 said...

Any info on what happened to the Marin RE Bubble site?
It's been turned off to posts and no new info for a while.
Kind of strange.

Maybe the IJ made him an offer he couldn't refuse.

No offers. And why is it people always accuse me of being "bought off" or having thrown in the towel and bought a house (I guess making the assumption that I rent or something) when I stop posting for a while? Nope, I've received no bribes and one house is quite enough thank you very much.

I've stopped posting for a while like I have done a few times in the past. I will no doubt resume posting. And yes, this "new" job (I've had it for about a year now) keeps me really, really busy. But the truth is I've found another obsession which has not yet gotten old enough for me to lose interest in it. That's all I am going to say about that.

Also, I got really turned off when a while ago the Marin Independent Journal printed a quote from a Marin RE agent who basically said that blogs like mine were "financial pornography". They didn't say "blog" but if that agent was talking about news papers then you could be certain the IJ would not have published it. Anyway, that popped my cap. I know, I know... deal with it Marinite. But sheesh! RE agents can get away with saying (and being quoted in news papers) whatever self-interested twaddle they want but when someone who dares say "no, it's not so" to the quasi-religious RE fanatics what happens? She gets death threats and labeled as a financial pornographer? Glad I kept my anonynimity.

And yes, this whole 'subprime = hispanic/not white' mentality is rampant here in Marin. Now where did I put my barf bag...?

At 1/09/2008 01:44:00 PM , Anonymous Anonymous said...

Has this site died? We are now in 2008. I am looking at Sonoma Co. property to purchase in 2010-12 and look to this site to get a " pulse" on the market as although I am a California native I am currently living out of state.

At 1/09/2008 01:55:00 PM , Blogger Athena said...

Hi Anon,

No, the site hasn't died and thank you for reading. Much like Marinite I have found that a lot of what is going on is "I told you so" material and I just feel like such a bore. I am bogged down with the paid job right now, so while I will be posting, it likely will be when there is turning point news or interesting asides happening in Sonoma.

Interestingly enough I was doing some research for a post I am working on right now and there is a 4/2 condo for sale in Sonoma for $299,000. I believe this to be the lowest priced domicile in Sonoma. It still isn't worth that, as it still needs a haircut of at least 100k to be a viable buy... but it is something to note. Additionally, I know from previous priced reduced research that this particular property has been bank owned for some time, but Zillow actually does not even offer any house history for the property. It is very odd. You know how they have the link usually about the sales history of the house and will state if there is no sales data available? It doesn't even offer it as an option for this house. Methinks something fishy is going on.

Anyway, thanks for checking in. I will be posting some. My apologies if you and other readers have emailed and I have been unresponsive. Something happened to the site's email account and I lost the history of all messages and the address book of email addresses from previous posters who were prolific in sending great quotes, articles and research. The email address is back up,( but it is empty and has no history of the previous emails. If you sent great tidbits, research or anecdotes please resend and I will try to catch up and be responsive.



At 1/10/2008 05:06:00 PM , Anonymous Headless Unicorn Guy said...

Judging from the Zillow 10 years graph of my past and present places, I'm expecting a 50% drop where I am behind the Orange Curtain. (Downtown Anaheim, CA. Anaheim (TM) is a registered trademark of The Walt Disney Corporation.)

I bought a 2 story, 2 BR, 2 1/2 BA repo townhouse in downtown Anaheim for $100K in '97, when prices had bottomed from the last RE crash.

Since then, according to Zillow, the price went up slowly but steadily until about 3 years ago, then it took off like a dot-com just before that crash. Projecting the price appreciation without the boom-and-crash gives me a Zestimate of around $200k in value.

The actual price (from comps) peaked at $450K last spring and has been dropping. We have one unit on the market for the past year at $400k and a straw-purchase flipper foreclosure that the bank just unloaded for $230k. You could hear the screaming "WHAT THAT'LL DO TO *OUR* PROPERTY VALUES!" on the East Coast, never mind Sonoma.

Again, I think $200 would be a fair price for my place, but I expect the panic-selling to overshoot that equilibrium level and bottom out well below it. If it does, I'm still not losing money and I might be able to move up to one of those 100-year-old Craftsman bungalows a block or two away.

We also have massive loft-condo construction downtown; you know the type -- zero BR, 2 1/2 BA, granite flipper kitchens, starting at ONLY $450+K. Building that looks so much like a European Bauhaus Industrial refurb they ought to have a Joe the Worker statue on the roof and a Trotsky lookalike haranguing the Masses at the entrance. Well, they're now starting at $385K; when I pointed this out to the RE pimp at their sales office, I was told they ALWAYS started at $385K and that Prices Will Never Go Down You Must Buy Now Or Be Priced Out Forever bla bla bla bla bla...

At 1/10/2008 05:15:00 PM , Anonymous Headless Unicorn Guy said...


Just checked some of the links to other blogs after a long time away.

A lot of them seem to have Accepted Ron Paul As Their Personal LORD And Savior.

Just like my parents did Ross Perot (remember him?) some 16 years ago.

At 1/12/2008 11:19:00 AM , Anonymous Tom Stone said...

Athena,glad to hear we are going to see your bi-monthly post soon.I still think that the earliest time to buy will be mid september this year when some sellers be willing to accept low ball (sensible) offers because they will be the only offers on the table.

At 1/14/2008 02:07:00 PM , Blogger marinite2 said...

Again, I think $200 would be a fair price for my place, but I expect the panic-selling to overshoot that equilibrium level and bottom out well below it. **If it does, I'm still not losing money**...

What you really mean is that you are "not losing money" in a nominal sense. Thanks to inflation, your purchasing power is about the same. You can't take the price you paid (call it X) and the price you sell (call it Y) and do this:

Y-X = my juicy profit

You can pay back your loan, and that is good. But if you want to know if your purchasing power went up; if you want to know if you are wealthier, then you need to factor in an adjustment for inflation.

When people blindly do the Y-X calculation they implicitly assume, I think, that if they had not paid X for a house decades ago, then that X amount of money would have just been sitting under the mattress, not growing. If that is in fact what people do with their money, put it somewhere where it won't grow, then the Y-X calculation is ok I guess. But most people would put that X dollars into some sort of growth account even if a measly savings account.

At 1/17/2008 03:26:00 PM , Anonymous Anonymous said...

How about those condos on 516 B St. in SR.

$575k for a 1300 sqft condo + a HOA.

Hmh; foreclosured 3/2's with double the square footage and a nice yard are available less than a mile away for $100k less.

But then you miss out on unique "urban color"; i.e. bums pissing on your wall and people getting shot dead less than a block away.

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