“See-Through Homes” A “Consequence Of Speculation”
A housing report from the California realtors. “Affordability concerns continued to impact the residential real estate market in California, with the share of first-time buyers declining to their second lowest level from 30.5 percent in 2005 to 27.1 percent in 2006, according to CAR.”
“The CAR survey also found that the share of buyers who used a second mortgage climbed from 38 percent in 2005 to 43 percent in 2006, more than triple the percentage since 2001 and the highest percentage since 1982. The use of alternative loan products also registered a sharp increase.”
“‘Home buyers with zero-down payments increased significantly from 4.5 percent in 2000 to 21.1 percent in 2006,’ said CAR Chief Economist Leslie Appleton-Young. ‘Two out of five first-time buyers made a zero-down payment on their home purchase.’”
The Press Enterprise. “In the fourth quarter of 2006, 1.9 percent of for-sale homes in Riverside and San Bernardino counties were unoccupied, up from 1.3 percent in the same period of 2005.”
“Inland Empire economist John Husing said he believes the figures reflect the burgeoning supply of homes built toward the end of last year but still unsold and the difficulty facing speculators whose hopes to ‘flip’ homes were dashed by a slowing market.”
“‘We are going into this season with more finished vacant inventory than we have had in the last decade in the Inland Empire,’ said Steve Johnson, director of MetroStudy.”
“Johnson said at the start of this year, construction was finished on 7,542 homes that were still unsold, more than double the 3,655 homes that builders held in standing inventory a year earlier.”
“Vacant homes on the resale market also have become more common. The Multi-Regional MLS, which tracks resale homes in western Riverside and San Bernardino counties and eastern Los Angeles County, reports that about 30 percent of the homes listed last year were vacant, up from an average of 25 percent in 2005.”
“Broker Lance Martin in Moreno Valley, said demand for his company’s property-management services has grown significantly. Martin said investors and other home sellers have given up in frustration because competition is making sales take longer and making it impossible for them to get the prices they expected.”
“As of Jan. 31, 30,080 homes were listed, compared with 19,288 a year earlier. ‘You also have a certain number of people trying to rent the houses out, and they can’t get the rent they want,’ Martin said. ‘Most people have very substantial mortgage payments on their homes, and the rents aren’t coming close,’ he said.”
“Borre Winckel, director of the Riverside chapter of the Building Industry Association, said although investors are no longer buying new homes, ‘the consequences of their speculation in a shrinking market is now coming out in that we see an uptick in these see-through homes.’”
“Winckel said investors will be discounting their homes as sharply as possible, especially if they made purchases with very low interest rates that will be adjusting upward.”
The Hollister Free Lance. “Local home prices held steady in January, but prices remain far below where they were a year ago. Twenty-nine San Benito County homes were sold last month, with a median price of $589,000, according to REInfoLink, a real estate database that tracks home sales.”
‘In January 2006, when 31 homes sold, the median price was $669,000. Home prices fell throughout most of 2006, reaching a monthly low of $539,000 in November. Prices have increased since then, but local real estate agents said there hasn’t been a significant upswing in the market.”
“‘I don’t think things have changed at all in the last two or three months,’ said broker Dee Brown.”
“Broker associate Jack Markle estimated that most homes are now selling for between 10 and 20 percent less than their value last year.”
From Reuters. “(In) California, exurban housing markets have softened more than those close to urban centers. Riverside and San Bernardino counties, which are on the eastern edge of Los Angeles’ suburban frontier, saw sales volume plummeted 40.6 percent. High Desert, about 80 miles from downtown Los Angeles, sawa 39 percent drop in the number of sales.”
“Some observers blame the sales stall in the Los Angeles area on home builders who for years gobbled up available land in exurban tracts and overbuilt. Areas closer to the city are already built out and have not faced a big injection of new homes, said Leslie Appleton, an economist with the California Association of Realtors.”
“Now, real estate agents in the exurbs trying to sell a glut of new homes, along with the inventory of previously owned houses. ‘There is intense competition in the inland areas of the state between the existing stock and new homes,’ said Appleton. ‘The absorption of this new product is going to take some time.’”
“And while new buyers are needed to sop up the housing stock, many investor-owners are losing their properties through bankruptcy, said Jesse Ramirez, a real estate agent in Riverside.”
“‘There were some investors thinking that the market was going to continue going up,’ said Ramirez, who has noticed a spike in the number of bank repossessions. ‘When things go up, they creep. When they go down, they go down fast.’”
The Orange County Register. “Realtor-economist Gary Watts believes prices will rise slightly in 2007. Although his 2006 forecast was overly optimistic, Watts remains confident that local house prices this year will increase 7 percent and that condo prices will go up about 4 percent.”
“‘This will be, I think, a pivotal year,’ Watts said in a telephone interview. ‘If the housing correction is behind us, we’ll be in pretty good shape.’”
“He said he was surprised by a huge increase in the number of homes being offered for sale last year, which held prices in check. Many sellers last year were expecting the same types of double-digit gains seen in recent years.”
“If the inventory of homes listed for sale balloons again this spring and summer, Watts warned, the market won’t appreciate as expected. ‘We’ll just have to see and hold our breath for the inventory numbers next spring and summer and see if that explodes again,’ he said.”