Something Of A Pipe Dream In California
The Press Telegram reports from California. “Statewide home prices will continue to slide in 2009, but sales should inch up as affordability improves, according to an economic forecast released Wednesday by the California Association of Realtors. Single-family home prices should dip about 6 percent next year, while sales will rise about 12 percent, said Leslie Appleton-Young, chief economist for the association, which is meeting this week at the Long Beach Convention Center. Appleton-Young did not forecast an immediate upswing in prices, which dipped a stunning 32 percent this year.”
“The association projects median home prices will dip to $358,000 from the current $381,000. Unlike 2005 and 2006, when about 40 percent of first-time buyers put nothing down on their homes, the newest buyers are making down payments. ‘That world is over,’ said Appleton-Young of the zero-down era, ‘and I think we would all agree that’s a very, very positive thing.’”
“Those comments were met with applause at a midday luncheon.”
The Mercury News. “Expensive Bay Area communities…may see fewer home sales and lower prices next year if mortgage financing for big-ticket homes does not improve, an economist for a real estate trade group said this week. ‘The higher end of the market may be a little more at risk than in the past because of the question mark about jumbo financing,’ said Appleton-Young in an interview.”
“Appleton-Young…acknowledges that her calculations for 2008 turned out to be wrong by a longshot. The forecast released in October 2007 called for transactions to fall 9 percent this year compared to 2007; instead they will rise an estimated 12 percent by the end of the year. As for the median price, it was forecast to drop just 4 percent. Now, Appleton-Young estimates the state’s median house price for 2008 will be 31.7 percent lower than in 2007.”
“Why such a big gap in forecast versus reality? ‘What we missed was the credit crunch at the high end in the jumbo market,’ Appleton-Young said.”
“Stephen Levy, an economist at the Center for Continuing Study of the California Economy, in Palo Alto, said the Realtors’ forecast for 2009 is ‘at the optimistic end of plausible. Last year they were clearly wrong,’ he said, and he questioned Appleton-Young’s prediction in CAR’s report Wednesday that a California recession could end by the second half of 2009.”
The Press Enterprise. “Association President William E. Brown said a misunderstanding of the depth of the nation’s credit crisis led the association to mistakenly predict a year ago that the median price of a resale home in California would drop only 4 percent in 2008. In its latest forecast, the association assumes that the current economic recession will last through the second quarter of 2009 and then the economy will begin a ‘turnaround.’”
The San Francisco Chronicle. “‘The decline of 6 percent sounds like something of a pipe dream,’ said Chris Thornberg, founder of Los Angeles research firm Beacon Economics. ‘The shear amount of momentum there is … just phenomenal, and I find it hard to believe it’s going to basically bottom out that quickly.’”
“‘The worst is over, but we’re still not out of the woods,’ said Appleton-Young. But all bets are off if the state’s economy - already considered by some economists to be in recession - worsens. ‘This forecast is not taking in a recession with huge job losses,’ Appleton-Young said.”
The Petaluma Argus Courier. “In May, 20-year-old Eddie Gallagher lost his job of less than one year as a window installer. Since then, he’s been ‘looking for work all over town,’ he says. ‘I go to all these interviews, but nobody can give me an idea when they’ll be hiring again, or they never call me back. ‘At this point,’ he says, ‘I’ll take anything, but that’s not looking too good, either.’”
“Ivan Thatcher, 55, is thankful for his steady job of 25 years as chief engineer at Lucasfilm’s Skywalker Ranch. His wife works three days a week for a physical therapist. ‘I’m glad we were able to secure a 30-year fixed loan in 2003 to refinance our house,’ he says. ‘I’d hate to think what would happen if we tried to get one now.’”
‘When asked how much he’s lost in his Lucasfilm 401(k), he jokes, ‘You mean my 201(k)? I’m afraid to look.’”
“Husband-and-wife Realtors Ray and Milli Colaizzi say they saw trouble in the real estate market two years ago. ‘Lenders were offering over 100 percent financing to people who had no business buying a house!’ Milli remembers. ‘When the market’s booming, there’s no shortage of real estate agents, but when there’s a big hit like this, they’re like birds that have flown south. Right now the market is cool, and I don’t mean that in a (good) way.’”
“Lou Sangervasi, 57, the father of three grown sons, is three months away from retiring from the Marin Municipal Water District, where he’s covered by CalPERS. He admits to some trepidation about opting for early retirement, mainly because of his wife, Wilda, who is an elementary school teacher. ‘Teachers, libraries, police and fire are usually the first to be cut in times like these. But,’ he adds optimistically, ‘(this country’s) gone through worse and we’ve pulled through. I’m just angry at the politicians who allowed all this to happen.’”
The Sacramento Bee. “The excesses of the housing boom pushed another major Sacramento home builder and land developer on Wednesday to seek personal bankruptcy protection from creditors. Christo Bardis’ move came six months after his longtime partner in the company, John D. Reynen, sought similar protection. In a statement late Wednesday, Bardis called the bankruptcy filing a ‘difficult decision.’ Bardis said he believes the move is a ‘prerequisite to receiving reciprocal support from those creditors’ and to keep the company alive for future home building.”
The Recordnet. “San Joaquin County home construction remains in the doldrums, based on the latest building permit figures from the Construction Industry Research Board. The frozen home building industry is not unique to San Joaquin County, said Ben Bartolotto, research director for the research board. He said the housing industry may be in worse straits in areas of Southern California, such as Riverside and San Diego counties, where home construction boomed in the early 2000s.”
“‘It’s almost at a fictional level,’ he said Tuesday of the glum picture statewide.”
“Nationwide, rental prices and occupancy rates were ‘virtually unchanged,’ says the report by Novato-based RealFacts, which collects rental data for large apartment complexes. The occupancy rate in Los Angeles County in the July- to-September period was 94.7 percent, down 1 percent over last year. Orange County’s occupancy rate was slightly lower at 94.5 percent.”
“Rents at some apartment buildings rose for Beach Front Real Estate Services, a Long Beach property management and investment firm with 2,500 units across Southern California including the South Bay. ‘I would say they’ve probably gone up a tad,’ said Kyle Kazan, CEO of the real estate firm. ‘But I don’t think that trend will go from the third quarter of this year to the third quarter of next year. I think it
will be reversed. I think we’re seeing the tipping point now.’”
“As the economy weakens, the higher-end apartments have been seeing the greatest softening in tenant demand, Kazan said.”
“‘We had people come in and say, ‘I’ve lost my job and I’ve had to relocate. And I have a lease, but there’s nothing I can do,’ he said. ‘We’ve had people whose work has become more sporadic, so we’ve had to put them on payment plans.’”
The North County Times. “Ambitious efforts aimed at helping thousands of homeowners avoid foreclosure over the last year by the federal and state governments have resulted in little or no effect on local homeowners, brokers said Wednesday. In total, about 372,000 FHASecure refinance loans were issued through Oct. 1, according to FHA data. Of those, 334 were in San Diego County.”
“Also, the loans included all refinancings in which the agency’s loan replaced a private-lender mortgage, said Lemar Wooley, spokesman for agency. That means it is possible some of those 334 loans were not issued to distressed borrowers facing foreclosure. During the time of that program, 17,387 San Diego County properties went to foreclosure, according to ForeclosureRadar.”
“Counting other federal programs such as the Hope Now Alliance, which offers free counseling to homeowners facing foreclosure, the White House has reported 2 million homeowners have been helped.”
“‘That’s absolute baloney,’ said Don Marginson, a mortgage broker in Rancho Bernardo. ‘The FHASecure program they put together was a complete flop.’”
“Hope for Homeowners, the new FHA product calls for a principal writedown to 90 percent of the house’s current value. The new program, launched Oct. 1, faces the same problems that have rendered FHASecure ineffective in dampening the volume of foreclosures, real estate analysts said.”
“‘It’s not mandatory, and the bottom line is, it’s simply not beneficial to the bank to do that. FHA will refinance the loan, but they’re not willing to take on the upside-down market,’ said Dave Hopkins, a mortgage broker in Rancho Bernardo. ‘For example, on a house purchased for $150,000 that is currently worth $100,000, FHA is saying, ‘We’ll do your $100,000 loan, but the bank needs to eat that $50,000 loss.’”
“‘Every day, loans are getting tougher and tougher to get,’ Hopkins said.”
The Press Democrat. “Sonoma County’s housing market has been in transition this year as banks began slashing prices to sell a mounting number of foreclosed homes in the wake of the housing bubble’s collapse. Lenders have taken back about 62 homes each week this year from Sonoma County homeowners who defaulted on their loans. A year ago, the rate was about 13 a week.”
“‘The banks had to sell them because it was a fire sale,’ said Rick Laws, Santa Rosa manager for Coldwell Banker, which prepares The Press Democrat sales report.”
“September’s median of $359,000 is down 42 percent from the peak of $619,000 three years ago. Prices have now fallen 27 consecutive months in year-over-year comparisons. ‘If that’s not a pretty serious correction, I don’t know what is. But that’s the way things should go: clear out the foreclosures and then things should stabilize,’ said Karl Bundesen, owner of Century 21 Bundesen Realty in Petaluma.”
“Lenders have hiked borrowing costs due to lingering uncertainty about the housing market, particularly on jumbo loans needed to purchase homes above $500,000, analysts said. ‘It was a credit crunch and now it’s become a credit freeze. Those buyers are being cut off,’ said Robert Kleinhenz, deputy chief economist for the California Association of Realtors.”
From Asian Week. “When 900 real-estate professionals gathered for the third annual Asian Real Estate Association of America in Los Angeles last weekend, the air was filled with uncertainty. After all, the U.S., and especially California, is experiencing one of the most challenging real-estate markets in recent history.”
“John Lee, AsianWeek real-estate columnist and a top San Francisco real-estate expert, shared this piece of advice on a panel about how to adapt and thrive in the current real estate market: ‘Just ignore the bad news you hear and focus on identifying really motivated buyers and sellers.’”
The Ventura County Star. “Doug Michie, an adjunct professor who teaches real estate finance at California Lutheran University in Thousand Oaks, is less optimistic than CAR economists. He thinks the economy is in a recession that will last at least until the third quarter of 2009. Michie expects Ventura County’s median price, which was $478,410 in August, to fall to $450,000 by the end of the year. He projects the median by this time next year will be $400,000.”
“Banks are going to continue to slash prices on lender repossessions, causing prices to fall, he said. And when homes become more affordable, sales will pick up. ‘I wouldn’t rush out and buy a house,’ he said. ‘Even if prices start to stabilize, they’re not coming up for years.’”
“That’s not comforting to Susannah Abel-Crombie. She put her five-bedroom, three-bath, 2,600-square-foot home in Ojai on the market two years ago for about $839,000. She since has lowered the price to $719,000.”
“‘I could drop it to $600,000,’ she said. ‘I don’t think that will make much difference. People aren’t buying. I think everyone’s holding their breath and waiting. It’s frustrating.’”
“Abel-Crombie takes solace in knowing that home values are also declining in North Carolina, where she plans to move with her family. She hopes to pay cash for a house there.”
