Waiting To See If Prices Might Drop A Bit
The Santa Cruz Sentinel reports from California. “The median price for a single-family home in Santa Cruz County plunged in February to $380,000, the lowest since January 2000, prompting one agent to declare the market has bottomed out. Gary Gangnes of Real Options Realty tallied 92 sales, with homes in Watsonville, the area hardest hit by foreclosures, accounting for a record 33 percent. And 66 percent sold for less than $500,000, the highest percentage in years, according to Gangnes.”
“In Watsonville, banks sold foreclosed homes at discounts of 30 percent to 50 percent. A few examples: 124 Grant St. sold for $166,000, down from $490,000 in 2004. 38 Lower Cutter Drive sold for $215,000, down from $420,000 in 2003. 518 E. Lake Ave. sold for $235,000, down from $395,000 in 2002. Those are not condo prices; those are single-family homes.”
“Only four homes sold in February for more than $1 million. Longtime appraiser Glenn Fuller reported 212 listings in that price range at the end of last week. ‘That’s a lot,’ he said.”
“‘We’ve hit our bottom in South County in single family,’ said Dee Dee Vargas, president of the Watsonville Association of Realtors. ‘If you’re waiting to see if prices might drop a bit, you might miss the boat.’”
The LA Daily News. “The relentless wave of foreclosures across Southern California helped push February home prices down to early 2002 levels, even as home sales spiked on healthy bargain-hunting, a market tracker said. Last month, 15,231 new and previously owned houses and condos were sold in the six-county region, said MDA DataQuick. That was up 42 percent from the previous February. But the median price fell 39 percent to $250,000, with foreclosures accounting for 56 percent of February sales.”
“In Los Angeles County, the median price fell 35 percent to $299,000, and sales increased 32 percent to 4,590 transactions. In Ventura County, the median price fell 26.5 percent to $327,000, and sales rose 10 percent to 545 properties.”
“Adjusted for inflation, current payments were 50 percent below typical payments in spring 1989, the peak of the previous real estate cycle. They were 59 percent lower than the current cycle’s peak in July 2007.”
The Press Enterprise. “Last month the median price of houses sold in Riverside County was $190,000, down from $195,000 in January and almost 42 percent lower than the $325,000 median price in February 2008. In San Bernardino County the median home price dropped from $162,000 in January to $153,000, down more than 47 percent from a year earlier.”
“New home sales continue to fall. Last month builders sold 277 homes in Riverside County, down from 557 a year earlier and 2,109 at the height of the housing boom in February 2006. In San Bernardino County, 109 new homes sold last month, a drop from 304 a year earlier and 792 in February 2006.”
“It was the first time in 10 months that the Southern California median home price did not decline. ‘If we get more than a month of this I will begin to believe we will see a major change. The market should be near its bottom,’ said John Husing, a Redlands economist specializing in Inland Southern California. ‘The problem is that the supply of foreclosures has been overwhelming demand, causing prices to keep going down. I think we are very close to the bottom in price and if any of the policies of Obama work, we are at the bottom.’”
“Leslie Appleton-Young, chief economist of the California Association of Realtors, said, ‘You are seeing a very strong recovery in sales activity, especially in areas where prices have fallen the most.’”
The Sacramento Bee. “Free-falling home prices and thousands of bank repos have pulled investors back into the Sacramento housing market at levels not seen since the headiest days of the housing boom, new statistics show.Preliminary estimates from researcher MDA DataQuick indicate that 28.4 percent of February buyers in Sacramento County were investors aiming to buy, repair and rent out their new acquisitions.”
“‘I bought about 31 houses last year, and I’ll buy some more this year,” said Duane Lyons of Granite Bay, a longtime investor, ‘but not as fast as I did last year. ‘I think for a lot of investors right now, nobody’s quite sure where the bottom is. Things are still dropping down. Guys like me aren’t buying as much as we were.’”
“The veteran said a lot of investors jumped in too early, a year or more ago, and are stressed now by debt, falling values and downward pressure on rents. He said many owe more than they collect in rent, which may result in a new series of foreclosures. ‘A lot of them aren’t able to get their mortgage payments,’ Lyons said.”
“El Dorado Hills investor Scott Arbuckle said he and his partners have also slowed their purchasing after buying 10 area bank repos last year. ‘The buys have been good and they’ve cash-flowed well and make great sense as an investment,’ he said. ‘But the prices … keep sliding. You just scratch your head. How is it possible that they keep declining?’”
From KPBS. “Faced with shrinking incomes and home values, more people are opening up their houses to strangers. We’re talking about the modern boarding house, where homeowners rent out bedrooms in order to keep making the mortgage payment. Marianne Russ reports.”
“Christin Barron’ and her husband Efrain paid $400,000 for their four-bedroom, three-bath home a couple of years ago. Now it’s worth maybe $300,000. It’s in an Elk Grove neighborhood where foreclosure signs are about as common as mailboxes. The Barron’s landscaping business went south with the housing market. Christin says she’s been late on the $2100 dollar mortgage payment for five months straight.”
“‘I’m afraid of that roller coaster. I don’t want to get behind. I don’t want to miss my bills,’ she says ‘So I made a list of things I could do to bring in more income and one of them was renting out the room.’”
“She put an ad on Craigslist for two of the four bedrooms. At first, no hits. Then she lowered the rent from $525 dollars to $400. A woman in her 60’s is taking one. The other’s still up for grabs. The Barron’s 1900 square foot home is already pretty full. There’s Christin, her husband, 5-year old Ally, 5-month old E.J. and Efrian’s mother, Ernestina. They’re giving up the office and Ally’s playroom to make space for new housemates.”
“‘I hope that you know, it works out because I, myself, we’re just hard workers. We know whatever it takes we’re just going to have to push to make ends meet. If this is the first of many things we have to do to keep the house, we’ll try our best to do it,’ she says.”
“Corey Koehler is with the Rental Housing Association of Sacramento. ‘The challenge is you’ve got an apartment-type setting inside of a single-family home,’ he says.”
“He says there are several potential pitfalls: for example, homeowner’s insurance typically won’t cover a renter’s belongings. Or there could be local codes restricting the number of cars in a driveway. And he says homeowners are still required to follow fair housing guidelines when screening potential housemates: ‘If they screen wrong and they get a fair housing complaint. Perhaps they get the wrong person in there who vandalizes the place, or the homeowner does need to contact an attorney or spend money to try to get the person out of there,’ Koehler says.”
The San Francisco Chronicle. “After a year of fruitlessly asking Washington Mutual to lower her mortgage payments, Stacey Rustrum of Pittsburg took her twin toddlers and marched into an Oakland bank branch on Tuesday, hoping that in-person help would accomplish what her hours of phoning had not. What she’d heard about was a ‘homeownership center,’ a new concept designed to help struggling borrowers initiated by banking giant JPMorgan Chase, which now owns WaMu, as well as EMC, the former lending division of Bear Stearns.”
“Rustrum’s…family’s finances are tight because the economy has cut into her husband’s income as an ironworker, and she had to give up her real estate job to care full time for their son Austin, 4 1/2, who has cerebral palsy, epilepsy, chronic lung disease, asthma and brain damage. ‘I applied a year ago to WaMu,’ she said. ‘They asked for additional information, like pay stubs. I sent them four times. Then they declined me because they said I didn’t have enough income to pay my mortgage’ - even though she was current on her payments at the time.”
“Now the family is three months behind, largely because of buying a van to transport Austin and his wheelchair. They are hoping to shave $400 off their $2,250 payment and get a fixed-rated loan instead of their current interest-only loan, which is scheduled to adjust higher in five years.”
“They owe $445,000 on a house worth about half that. ‘There’s no way the market is going to come back that much in (a few) years,’ she said.”
The Union Tribune. “A slumping housing market and grim employment outlook have apparently persuaded thousands of county residents to stay put – a sharp departure from recent years when far more people left the area than moved here. Last year, 420 more people moved into San Diego County from elsewhere in the United States than left. That’s a reversal of the year before when there was a net movement out of the county of 15,500.”
“‘In this market, people see their investments aren’t doing well, and for many people their home is their investment, and that, plus high unemployment, will make people more cautious about making a move,’ said demographer William Frey of the Brookings Institution in Washington, D.C. ‘This is clearly a reaction to what’s going on in the housing market.’”
“‘These are about the most dramatic numbers I’ve seen in a long time. I was expecting some trend like this, but this is much more dramatic than I was expecting,’ he said.”
“For more than a decade, San Diego County workers have clogged the freeways commuting to southern Riverside County, where they found much cheaper housing. ‘During the peak of a housing market, you see spillover into other areas, and you feel you can justify the commute because you’re buying a house you think will appreciate and you need the space and the backyard,’ said Andrew LePage, an analyst with DataQuick. ‘But when the market turns, people don’t have the sense real estate is a great investment and they’ll find something that will do them well closer to work.’”
“Ed Bass, a transplant from the Bay Area, moved to San Diego County in November after landing a job as a global marketing manager for the San Diego biotech company Gen-Probe. Unlike many of his colleagues, whose homes now are worth less than what is owed on them, Bass was able to sell his home in Danville for a profit and last month purchased a home in Encinitas.”
“‘I have colleagues who are up to half a million dollars under on their homes, so they could not leave,’ Bass said. ‘And I have other colleagues who have been trying to sell for two or three years and have not been able to, so they just stay. I had a great opportunity with a great world-class company, and I’m two miles from the coast, with an ocean view. I couldn’t have afforded that before the downturn.’”
From Reuters. “Ron Barnard is throwing in the towel. Like a growing number of the 8.3 million American homeowners who owe more on mortgages than their homes are worth, he’s ready to just walk away. Barnard and others like him are starting to worry market experts and economists, who fret that the growing trend may deal a blow to an economy on its knees while swelling an already ample pool of bad loans.”
“In California’s Inland Empire east of Los Angeles, where Barnard lives and sells real estate, median home values have plunged more than 40 percent in the last year as formerly sidelined buyers snapped up foreclosed properties.”
“Deflating home prices thus threaten to accelerate a negative feedback loop that has sent prices lower, said economist Ed Leamer, director of the UCLA Anderson Forecast. ‘Should the downward spiral in home prices, neighborhood condition and equity deterioration continue, more and more mainstream borrowers are likely to walk away from their homes,’ Credit Suisse said in a December report.”
“More than half of Nevada’s mortgage holders now owe more on their mortgages than their homes are worth. Arizona holds second place with 32 percent of homeowners have negative equity, and Florida and California follow with 30 percent each, according to First American CoreLogic. The total value of U.S. residential properties fell to $19.1 trillion in December 2008 from $21.5 trillion a year earlier. California’s losses came to more $1.2 trillion — roughly half the nationwide decline, the firm said.”
“‘I’m able to keep my head just above water right now,’ said Russ Sweet, 61, who is now living with his son and renting out his underwater home in Temecula, California, at a loss after an injury ended his career as an electrical lineman in San Diego. While he fights to stay afloat, Sweet says some of his neighbors in Temecula — a haven for commuters who work in more expensive coastal cities — already have walked away.”
“Barnard, who already has stopped making payments on five investment properties purchased in 2005, is on the verge of giving up on his own home that is now worth roughly half its $800,000 purchase price. Barnard and some financial planners say that, in certain cases, giving up is the only option. ‘People are hurting,’ said Barnard, who includes himself in that group. ‘They’re scared or they’re angry.’”
