California screamin', part two

Posted by: Peter Coy on October 26, 2007

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Way back on June 30, 2005, the day after this blog debuted, Chris Palmeri wrote a prescient blog item, which bears re-reading.

Chris wrote that based on projected prices and incomes, “only one out of every six Californians will be able to buy a typical home in the state,” adding, “Incidentally, the last time that affordability index fell below 20% was 1989, shortly before California housing prices crashed.”

Got that? Crashed. So don’t say we didn’t warn you.

Reader Comments

Brian R.

October 29, 2007 9:09 PM

Kudos to Chris, but not only were there more than a few of us voicing the same position, we were doing so well before mid-2005. When the market ignores the fundamentals - - prices versus incomes, the market generally does so only briefly. The ignorance during the recent market was extended because lenders were willing to hand out idiotic loans, and buyers, for their part, were idiotic enough to take them. Risk is a great thing, so long as it is an educated risk. On the other hand, vultures do have their place in nature, so we should not dwell on others' losses, especially since we played no part in them.

Todd F.

November 2, 2007 1:37 AM

I finally gave up my cushy job at a major Southern California mortgage company. I will say matters could go from bad to catastrophe for the average home owner or current home seekers in the area. Practices throughout the industry are becoming more and more unscrupulous between appraisers and the industry to over inflate the market. Setting up generations of foreclosers seems to be the ethic. For every forclosure, there is a line of newcomers coming in to test the water. The first years of interest are the most lucrative for the lenders, and finding a replacement mortgagee to start the process all over again is not as messy as it seems and could easily generate far more revenue if played right. I could no longer play the shell game in Souther California market. I have moved to a neighboring state, work in a more ethical atmosphere. And guess what, the weath is nice here, no crowds, and the firm still maked a healthy profit. Au revoir Orange County!

your ol pal

November 3, 2007 3:23 PM

hey todd, just hope its not oregon because it's already been californicated. thanks folks..lets just keep bidding up the price of the middle class...any chance of conspicuous consumers staying south?..nah, too late..regards

john doe

November 11, 2007 12:01 PM

Hello my name is John Doe i worked for a big real estate company. The real estate blame is on the loan officers gready to make fast dollar,shaddy aprasiers who over price homes for more than what they are worth,banks that give loans to people that cant afford homes that banks never verryfy their income their legal status in this country. So i say we here in California are getting what we deserve for this mess.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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