Great News: Prices Have Fallen In California!
The LA Times reports from California. “The median sales price for homes in the region fell to $300,000 in October, a level not seen since 2003 and a 41% drop from the peak price set in the spring and summer of 2007, according to MDA DataQuick. Los Angeles County’s median home sales price was $355,000, down 29% from a year ago. Just a year ago, several market analysts interviewed by The Times predicted that Southern California home prices would drop 15% to 25% from their peak.”
“It took only until July for the median price to fall 25% below its 2007 peak of $505,000, and it has kept falling since. Those earlier forecasts proved off because ‘it was hard for people to get their arms around just how bad lending standards had gotten,’ said Thomas Davidoff, a UC Berkeley economist.”
“In October 2007, 16% of the homes sold in Southern California had been foreclosed, compared with 51% last month. The ripple effect from that put even more homeowners underwater — owing more on their homes than they were worth — and led to more foreclosures.”
“Now, ‘we’re probably seeing an over-correction’ in the most depressed inland areas, Davidoff said. In communities overrun by foreclosures, ‘you couldn’t build a house for less than what [existing homes] are selling for,’ he said.”
The Union Tribune. “San Diego’s prices have come down so much – off 37.5 percent from the peak in November 2005 – that the area ranks as only the 31st least affordable out of 222 markets surveyed. That’s the best showing since the builders began tracking affordability in 1991. Just four years ago, San Diego ranked as the least-affordable market nationally. MDA DataQuick reported yesterday that…prices dipped to a median $323,500, a number not seen in six years. Foreclosures made up nearly half of all resales, their highest proportion so far.”
“The National Association of Home Builders’ Housing Opportunity Index is based on how many homes of all types sold that are affordable to households earning the median income and at prevailing interest rates for both fixed-rate and adjustable-rate mortgages. While nearly 39 percent of San Diego homes sold were affordable in the third quarter, the New York City area was deemed the least affordable with only 10.6 percent of homes sold at a median $500,000 and within reach of the median-income household earning $63,000.”
“Four of the least-affordable markets were in California: San Luis Obispo, 13.4 percent; San Francisco, 16.6 percent; Los Angeles, 20.7 percent; and Napa, 23.2 percent.”
The Press Enterprise. “The median home price in Riverside County fell to $230,000 in October, a drop of $7,500 from September and a decline of 35.4 percent in the past 12 months. In San Bernardino County, the median price declined to $200,000 from $205,000 the previous month, but fell 39.4 percent from October 2007.”
“DataQuick analyst Andrew LePage said about 68 percent of Riverside County sales and 65 percent of San Bernardino County sales in October were foreclosure-related. Both counties were well above the 51 percent figure for Southern California as a whole.”
“Steve Johnson, a director in the Riverside office of MetroStudy, said bargain hunters and investors are currently drawn primarily to resale homes in older neighborhoods, sometimes being sold in the foreclosure process at up to 50 percent off their original list prices.”
“San Bernardino County plans to use $22.8 million in federal funds to help the local housing market get through the foreclosure crisis. About 42,000 homes in the county are now in foreclosure, said Mitch Slagerman, director of community development and housing for the county.”
The Ventura County Star. “Ventura County’s median sales price was $375,000, down 2.6 percent from $385,000 in September, but off 29.9 percent from $535,000 a year ago. Kay Wilson-Bolton, broker in Santa Paula…estimated that about 60 percent of the housing inventory countywide involves short sales or bank repossessions. ‘Those are the homes being offered at the most affordable prices,’ she said. ‘Now we’ve got mortgage payments bumping up against rent payments.’”
“People want homes and they can’t pass up a bargain, said Dennis Torres, executive director of real estate operations at Pepperdine University’s Graziadio School of Business and Management. ‘Yes, more and more people are being laid off, and those people can’t afford to buy a house,’ Torres said. ‘But the majority of people are working.’”
The Modesto Bee. “Great news: Home prices have fallen! At least that’s great news for people buying homes. New statistics show home affordability has soared in the Northern San Joaquin Valley. ‘About 90 percent of the loans we do in our office are for first-time home buyers,’ said Kim Arivett, owner of Residential Pacific Mortgage and president of the Mortgage Lenders Association of Stanislaus County.”
“‘The buyers are just absolutely thrilled to get their house keys,’ Arivett said. ‘It’s heartwarming for our staff because we know they really can afford these homes.’”
“But many workers in the region have lost jobs this year, and unemployment is rising. ‘Income numbers often lag,’ cautioned Dr. Stephen Endsley, a Modesto real estate investor. ‘It may look like we have housing affordability, but do we really consider unemployment? First-time buyers have to have confidence before they go out and buy, but many of them have questions about (the stability of) their employment.’”
“Endsley said nearly 11 percent of Stanislaus’ workers are officially out of work, and he estimated an additional 4 percent are underemployed and another 4 percent have become discouraged and dropped out of the job market. But home prices have fallen so low, Endsley said, that ’speculative investors have come heavily back into the market.’”
The Press Democrat. “Falling home prices stoked Sonoma County’s hot housing market. Two out of three of the 512 homes sold in October were either bank-owned houses or properties unloaded by sellers who could no longer afford their mortgages. The drop in home values has sent the median price tumbling 42 percent from its record high in 2005, according to The Press Democrat monthly real estate report.”
“Agent Deke DeKay has a Healdsburg listing for $370,000 that is $205,000 below the price the owner paid two years ago. The owner must sell because monthly payments on his adjustable-rate loan are set to go higher and he will take less than he owes to avoid foreclosure. ‘Some of the buyer expectations are kind of unreasonable. People are just thinking the sellers will sell for anything,’ DeKay said. ‘This is severe.’”
The Sacramento Bee. “Gasoline prices have fallen $1 in a month and more than $2 since the all-time high in June. But motorists aren’t dancing. The effect of cheaper gas is being overwhelmed by the housing crash and the financial crisis. So-called ‘equity extractions’ in California – the dollars generated by home equity loans, refinancing or outright sales – have fallen by $41 billion this year, according to MDA DataQuick.”
“Not surprisingly, Californians aren’t suddenly reopening their wallets. ‘We’re doing the same things that we did when gas was almost $5,’ said Marty Walter of Orangevale during a stop at a Union 76 station in Roseville on Monday. ‘We’re getting into the pattern of saving – let’s not do anything unless we have to.’”
The San Francisco Chronicle. “Jing Hua Wu, the engineer who police say fatally shot three executives at a Santa Clara startup company last week just hours after being fired, spent the last few years amassing a large portfolio of investment properties. Records show that Wu and his wife went on a property-buying spree starting in 2004. From June to October 2005, they bought two rental homes and five vacant lots for $526,000 in Hot Springs Village.”
“The couple also bought at least five homes and six lots in Washington north of Portland, in the communities of Anderson Island, Vancouver and Ocean Shores. In California, they bought a modest home in Elk Grove and a bare lot near Lake Shastina in Siskiyou County.”
The Pine Tree. “Governor Arnold Schwarzenegger today launched Global Entrepreneurship Week at the first-ever Governor’s Conference on Small Business & Entrepreneurship. ‘The important thing also is that’s why we have a special session now where we deal with the unemployment rate, where we want to stimulate the economy. And where we also want to make sure that we keep people in their homes, because there are too many people that go through foreclosure. And I think that it is terrible to see the mistakes that were made by the lenders and also by the borrowers but that doesn’t help us to look back now at where the mistakes were made. The key thing now is to keep our people in their homes, which will also help our economy.’”
“‘I talked yesterday again to some builders and they are in a disastrous situation because a lot of homes are half-finished, people are not interested in buying it — even though those numbers are coming back right now of more and more people buying homes again because the prices are so low. But we really need to go and do everything we can to keep the people in their homes right now, so I hope that we solve this problem also in our special session.’”
“A proposed four-month foreclosure moratorium that would crank up the heat on lenders to rewrite more of California’s troubled mortgages downshifted to the slow lane Monday. Assemblyman Ted Lieu, D-Torrance, agreed to delay a committee vote on his plan to speed up the pace of loan modifications. Last week, he said he expected the committee and full Assembly to vote on it this week.”
“California Department of Corporations Commissioner Preston DuFauchard said the Schwarzenegger administration deliberately limited its moratorium proposal to 90 days. ‘We felt that over 100 days you’re probably sending a message that it’s OK to stop paying your mortgage, and we want to discourage that,’ he said.”
Dow Jones Newswire. “Historical evidence suggests that even when lenders modify mortgage terms for at-risk borrowers - cutting interest rates, principal or extending the loan’s life - a hefty portion of those borrowers default within a year or two anyway. Besides, in many cases with subprime loans, so many borrowers had so markedly inflated their income status, that even a vastly modified loan still won’t make it affordable for their true earnings.”
“According a 2007 Fitch Ratings report, 35% to 40% of borrowers default on their modified loans within 12-24 months. Research from Moody’s Investors Service and other firms have found similar, albeit bleaker, statistics.”
“Dr. Joseph Mason, a banking professor at Louisiana State University’s business school, cites research suggesting that borrowers substantially inflated their incomes in about 70% of loans. ‘If modifications are given to borrowers that are not well suited for homeownership in the long term,’ Mason writes in his report, ‘the loan modification only serves to delay the inevitable.’”
The Voice of San Diego. “San Diego plans to spend $9.4 million to help homebuyers purchase foreclosed homes, and buy foreclosed homes itself to rent out to low-income families, as part of a federal grant program intended to stabilize neighborhoods ravaged by foreclosure.”
“Those potential 122 houses that would be purchased with the help of grants represent about 2 percent of the 6,111 homes in the county that went through the entire foreclosure process between July 2007 and September 2008, according to the agency’s report.”
“Lynn Hastings, a local real estate broker who sits on the task force, said it seemed unlikely that a buyer’s offer would be accepted contingent on the money coming in from the government. She said the winning offers in neighborhoods where low-priced foreclosures are getting competitive are from buyers paying all cash or making a large down payment.”
“‘I’m not sure how the program matches the marketplace,’ she said.”
The Legal Newsline. “San Diego City Attorney Mike Aguirre will look for new ways to protect homeowners facing foreclosure despite losing a bitter re-election campaign on Nov. 4, he told Legal Newsline. Aguirre thought a populist campaign that reached out to minorities, the working class and faithful Democratic voters would be enough to win. He admitted being surprised by his defeat despite the obvious opposition.”
“‘I was not anticipating getting the s— kicked out of me in the election,’ Aguirre said. ‘I got it from every angle: North, South, East and West. I united people who never worked together before. Unfortunately, I united them against me.’”
“Despite the political setback, Aguirre said the enormity of the housing crisis and the problems within it will continue to motivate him as he returns to private practice. ‘People have no idea of the massiveness of the subprime problem,’ Aguirre said. ‘It became literally the financial highway that everyone rode on to create trillions of dollars.’”
The Santa Cruz Sentinel. “A new Web site created by the State Bar Association to help people facing foreclosure sounded promising. But after seeing what’s available for local residents, I was disappointed. There’s plenty of free information, but good luck finding free legal advice unless you’re over 60 or your family of four makes under $26,500. Which raises the question: How can a household income of $26,500 be enough to buy a home in Santa Cruz County?”
“It’s not as if Santa Cruz County has escaped the wave of foreclosure activity. So far this year, 1,557 default notices have been issued and 780 homes sold at foreclosure sales — double the numbers from a year ago.”
“About a dozen people showed up for a free workshop Friday. One woman related that she and her husband had been unable to pay their mortgage since he lost his construction job. Another man was looking for information relating to foreclosure on a mobile home.”
“An 84-year-old Aptos man was frustrated. ‘Unless I’m in default, no one will talk to me,’ he said. ‘It’s easier for me to buy another house than to stop a foreclosure.’”
