California will face another lost decade in housing!

5 reasons why California will face another lost decade in housing – 493,000 real estate agents and brokers for 219,000 homes listed on the MLS. 7 percent of 90+ day late loans in California have no foreclosure filed. State budget depended on real estate bubble jobs for revenues.
How many real estate agents and brokers does it take to sell a California home? 2 ¼ if we look at current inventory levels and the amount of Californians with a real estate or broker’s license. One of the early observations of the housing bubble was how much money was being spent in the economy because of high wage California housing bubble jobs. Toxic loan after toxic loan provided wonderful commission checks but also provided the state with a nice chunk of tax revenue. Year after year this went on. Our fate has been intertwined with real estate and since real estate has busted so has our state economy. I remember a few colleagues that were pulling in high six-figure incomes as mortgage brokers and real estate agents and were spending every dime as quickly as it came in. Many have downsized drastically and don’t have a penny to their name. Ironically many of these people drank their own Kool-Aid and bought million dollar homes with the same mortgage sewage they were passing onto their clients. A few are now in bankruptcy and many have lost or will lose their homes.

California is likely to face a lost decade in housing. Do I mean from 2000 to 2010? In some areas we have already reached a lost decade. Yet many areas will face their lost decade from 2010 to 2020. Here are 5 reasons why California real estate will have a decade of slow or no growth ahead:

Reason #1 – High paying finance and real estate jobs are gone
Reason #2 – Too little inventory and sales for the amount of workers
Reason #3 – California budget and revenues shattered
Reason #4 – Shadow inventory
Reason #5 – Consumer psychology and jobs

The mantra that real estate prices never fall is completely shattered for an entire generation of Americans. Those who lived through the Great Depression are largely absent from our current economy and can’t share their wisdom. And given the preference of Americans to watch Dancing with the Stars instead of reading some history, many have forgotten that real estate can crash and crash hard. But if history is any guide, we will have a generation of Americans who are more cautious and thus will put a lid on any mega jumps in appreciation for the next decade.

On Friday the California unemployment rate came out and we are still at a record high of 12.6 percent. Adjusted for the underemployment rate we are closer to 23 percent. Even the running average at the BLS shows us over 21 percent:

Futures market predicting housing bottom for Los Angeles and San Diego in May of 2012

LA to drop 12.8 percent and San Diego to drop 26.8 percent. San Francisco future predict increase in prices?
The futures market is betting on a housing bottom for Los Angeles and San Diego out to May of 2012. This prediction seems to coincide with many of the toxic mortgage reset/recast charts that we have now etched to memory. These futures contracts reflect real money at play. People that invest and understand these more “sophisticated” investment products are betting on still significant price declines for the Los Angeles and San Diego Case Shiller measures. Interestingly enough, for San Francisco the futures market is predicting increase in prices although this is by the far the most over priced market in the state. Two out of three winning bets in Vegas makes you rich.

Are you interested in losing $42,000 or $55,000 in two years because you decide to purchase today? Keep in mind these are actual money bets predicting additional price declines from where we stand today. I would venture to say that in some areas like Culver City and Pasadena price declines will be much steeper. The futures markets do not see any price increase for the next few years. So the rush to purchase a home today doesn’t seem to be grounded on any facts or market trends.