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Riverside County Commercial, Riverside County homes, the Riverside County MLS, Riverside County land, and Riverside County real estate!
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Recent Articles:
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Deflation with Inflation: No Recession, but Depression? "06.15.08 .. in order to survive, we will be forced to become a fascist aggressor or a socialist state. With the failure of Iraq, the latter seems more likely..."
.. Bank of America & Countrywide: A signal of a housing bottom? The lender will once again have the position of strength....
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Riverside-San Bernardino tops the list... Of locales most likely to tank this year....
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So what do we do now? Where to put money - when everything is so ugly?...
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Ongoing Article:
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Next for the Economy: The Greatest Bull Run in History? An analysis of the stock market and economy since the Bear Stearns incident in March '08...
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No Recession, but Deflation? The March '08 UCLA economic report so far is 'right on target.... .... .... 
Office Space for Lease: 12,625 Sq Ft divisible ...
Commercial Properties 5.5 acres
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The UCLA Anderson Forecast Highly Recommended!
..... Most Recent Articles: .. The Schizophrenic FED Gambit .. Bearish on Housing, Bullish on Stocks .. Analysis of California Bank Earnings Highly Recommended!
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San Diego County Visit the San Diego blog center..
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Palm Springs area blogs ..
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Featuring Riverside County Commercial Riverside County homes Riverside County MLS Riverside County land and Riverside County real estate
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California Blog Connection for Real Estate and Economy - Riverside County Edition
View: Most recent article dated 06.15.08
Month of June, 2008 Southern California Real Estate Sentiment:
Stay far away from housing, local bank earnings missed big in Q1 '08. Tight banks means less buyers, all amid April '08 record foreclosures and increasing new home inventory. Asset class commercial properties should weather the storm with owner rate flexibility, low 'loan to value' financing, and credit tenants.
Question: "Should I 'invest' in a house now? The market seems to be bottoming out."
Answer: "Hold. Do not buy yet".
As far as investing, buying a house in today's market is very risky. Your down payment could disappear as the market continues its downtrend, and you would not be liquid. If you take out a loan, your 'loan to value (LTV)' on the property could tick to 100% as the down payment equity deteriorates. Why run at a loss for the foreseeable future? We need evidence of recovery before buying here in California.
If some California regional banks go bankrupt this year, then expect even more inventory saturation. The threat is there. Wait until these local community banks prove they are recovering in quarterly results. So far, their Q1 earnings have been dismal; much weaker than expected. We also need to see a sustained reduction (not just stabilization) of foreclosures over an extended period of time.
Fact is, bank risks run beyond sub prime - now to conservative fixed rate 20% down loans made within the past 3-4 years. What was 80% loan to value in '05 is now negative equity. This means more foreclosures, and more downside price risk. The vicious circle is: Tighter lending -> less qualified buyers-> less speculation-> lower prices -> more foreclosures -> tighter lending. Click here for quick California bank earnings and foreclosure rate updates ---> Analysis of California Bank Earnings & Foreclosures Update
On a positive note, some of the larger cap banks appear to be recovering Q4 '07 to Q1 '08. Bank of America went from .05 (Q4 '07) to .23 (Q1'08) a share; Union Bank of CA improved a penny, and US Bancorp went from .53 Q4 to .62 a share in Q1 '08. Some concerns are that these improvements may be just spooked money, moving from the smaller banks. Before we make any conclusions on this positive trend, we must see recovery to the smaller regional banks, and consistency in Q2 and Q3 results. We are waiting for the Q2 '08 results to see if a trend occurs.
On 06.05.08 FED approves Bank of America acquisition of Countrywide. This may provide a limitation of foreclosures to those that really are behind, and prevent speculators from walking away from loser mortgages to preserve credit with BAC. Additionally, the lenders position is strengthened with Bank of America holding the note, and not Countrywide. Overall, good for any housing recovery.
Here is really why we don't trust this improvement data: on 5.14.08 it was reported that April '08 saw 65% more foreclosures than April '07. On 5.16.08 a report said new home and apartment construction was up in April, the highest in two years. Without a reduction in current inventory or increased sales, this just means more product hitting the market. We're currently at 11 months of inventory, possibly going as high as 18 months inventory. 5.26.08 report US home sales dropped over 14% in Q1 '08, biggest drop in 20 years. On 5.17.08 Forbes AOL listed California metro areas are set to drop at least another 19% more this year: (See Article: Riverside-San Bernardino tops the list...)
Conclusion? To many adverse economic conditions exist in California that can weigh on future bank earnings. We cannot give too much credibility to the implied 'recovery trend' inherent to the Q4 '07 to Q1 '08 results at this time.
Commercial Property: Asset class commercial properties 80%-100% leased should be ok, with typical conservative financing, owner rate flexibility, and credit tenants. Why does commercial get a break? The sub-prime crisis is not expected to spread significantly into commercial, because lending conditions for commercial are typically more stringent and based on income fundamentals, not blue sky appraisals. Loan to values are much lower than on residential homes, even though the risks are lower with commercial. There will be vacancy exposure by properties dependent on financial related tenants; but due to low ltv buffers, the foreclosure threats are reduced. Land investments are a long term hold of 5 to 10 years. Be sure to understand zoning, growth patterns, environmental issues, and political trends before investing in land.
For info on the author of this blog: Welcome to the California economic & real estate blog! See Disclaimer at bottom of page.
**Most Recent Article: 06.15.08**
I am having second thoughts about the Greatest Bull Run in History.
When considering a downward progression in economic growth, with increasing debt and consumer pressure; is there a threat of a full blown depression? Is the US going bankrupt as our credit as a nation deteriorates? Does this mean our ingrained 'forward looking ' investment philosophy is just 'denial' of the inevitable? Being bullish as assets drop in price, and fearing a depression at the same time is truly a sign of the times. With deflation and inflation, we have to consider which is the true harbinger of the economy.
Deflation and Inflation are happening simultaneously; But how is this possible, and why is it still happening? It's starting to look like U.S. paper assets and equities are losing credibility; perhaps there is less willingness of foreign investment in America. We're seeing the consequences now. This is also why I think the dollar rally cannot hold.
Unfortunately, the US has politically made so many enemies that there is a unified, underlying drive to set us to ruin. China. Russia. The Middle East. These are governments that have the means and the method to turn our economy upside down. By default, Europe may replace the US as the stability center. The corruption, greed, and manipulation of our financial and investment core is becoming synonymous with that of an African third world country. As our economy implodes, in order to survive we will be forced to become a fascist aggressor or a socialist state. With the failure of Iraq, the latter seems more likely. The American people will elect Obama and we'll probably see some record government bailouts.
Problem is, with our economy growing at under 1%, our revenues are not keeping up with inflation. Our trade deficit widens, and our debt soars. We have baby boomers entering retirement, meaning more pressure on social security and gov't sponsored medical care. These same retirees are liquidating their portfolios, getting out of the market to insure they at least have some retirement assets. They also can be relied upon to lobby that social security remains as it is; meaning more pressure for socialist measures from those that have the political power to enact them. Other countries have this general knowledge of our economy as well. Would you invest in a country that has the detrimental economic fundamentals of privilege and entitlement that our country has? Or would you invest in a credit debt culture living well beyond its means, rooted as deeply as the everyday consumer?
Looking through the telescope into the future, it looks like continued oil and commodity strength, and US asset weakness: all while inflation results from the speculation in even the most basic of commodities. "The greatest bull run"; may be only a blip which we have already seen. Looks like gold, silver and tech may be the plays for the rest of the year.
It's scary to be exposed to any American market right now; especially when our only hope of recovery is government intervention...not only in housing, but financials, commodities, and the dollar itself.
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Articles, Opinions, and Topics of Interest
. . .. Q2 2008: Deflation with Inflation: No Recession, but Depression? "..in order to survive, we will be forced to become a fascist aggressor or a socialist state. With the failure of Iraq, the latter seems more likely." Click Here to read .. .. Q2 '08: - Oil and war speculation "..the markets have reacted to oil price surges driven solely by speculators, and a preemptive strike possibility that has not even occurred...."Click Here to read . .. Q2 '08:- Bank of America & Countrywide: A signal of a housing bottom? People are les likely to 'screw around' with Bank of America than they are with the struggling lender Countrywide.."...Click Here to read . . Q2- '08: So what do we do now? Where to put money - when everything is so ugly?...Click Here to read . . Q2- '08: Analysis of CA Bank Earnings "It's hard to imagine another run up in housing like we saw before any time soon. ..." Click Here to read . . Q2- '08: Bearish on Housing, Bullish on Stocks "to buy a house today is MORE RISKY than buying quality stocks..." Click Here to read . . Q2- '08: Riverside-San Bernardino tops the list... "of areas most likely to tank this year.." Click Here to read . . Q2- '08: The Schizophrenic FED Gambit "The squeeze is on the FED because they cannot immediately raise rates
without dampening any recovery that hasn't occurred yet.. ." Click Here to read. Q1- '08: Next for the Economy: The Greatest Bull Run in History? "As the credit crisis weighs in on our very faith in the system: we are forced to stay in it. It may be the ultimate survival mechanism of the financial system; the simple fact that there are no viable alternatives." Click Here to read . Q1- '08: No Recession, but Deflation? "UCLA Anderson continues to report "no recession" (3.11.08): This gives the bears a moment of pause: They (UCLA) are historically reliable and not biased by the media. " Click Here to read . Q1- '08: True Market Analysis, or Self Interest? "When conducting your own analysis of the markets, you really must 'read between the lines' and try to see the motivations behind the article or person." Click Here to read . Q1- '08:- The Counter Intuitive Market Force: But Housing is the Exception "Most markets, are counter intuitive: They always seem to run opposite the general sentiment. However, housing is the exception to that: Why? Because housing is really a liability.." Click Here to read . Q1- '08:- The 5% Income Rule "Residential housing as an investment is difficult to justify in a 'negative equity expectation market'...I suspect the term 'investment' was introduced by those "in the business" of real estate, to add another tier of consideration for residential buyers. Click Here to read . Q1- '08:- A Compelling Argument for Alternative Investments "...Look around and you'll see many investment houses try to manufacture a sense of impending anxiety .. they are also angling for commissions on stock sales...So that leaves 'alternative investments': Alternatives to what is considered a normal course of investment. This is an area of great interest to many people, as we've been led to believe real estate and the stock market are the only places to invest money" Click here to read . Q1- '08: - The Perfect Storm of Economic Downfall "...Politically, we are on the verge of chaos... Click here to read
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................................................. The Schizophrenic FED Gambit The FED rut .. Analysis of CA Bank Earnings Highly Recommended! .. Oil and war speculation ".. the markets have reacted to oil price surges driven solely by speculators, and a preemptive strike possibility that has not even occurred...." ... Bearish on Housing.... Bullish on Stocks Stock rally, housing folly .. San Diego County Visit the San Diego blog center.. .. Other Articles ... Visit the housing time bomb blog. Highly Recommended!
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