The Repercussions Of Artificially Inflated Prices
The Los Angeles Daily News reports from California. “Home sales fell across Southern California in November as investor activity continued drying up and buyers struggled with higher prices. Last month, sales of new and previously owned homes and condominiums across the six-county region fell 10 percent, to 17,283 properties from 19,285 a year earlier, said DataQuick. That was a drop of 14 percent from 20,150 in October. But the total was 20 percent under the November average of 21,559 dating back to 1988, when DataQuick started tracking the market.”
“In San Bernardino County, the median price increased 19 percent, to $218,500 from $183,000 a year ago, but was down 5 percent from October. ‘This is the second month in a row we’ve seen sales fall below last year’s levels, and I think were seeing not only an impact from the lean supply, but on top of that prices have increased so much that affordability has taken a plunge,’ said Robert Kleinhenz, chief economist at the Kyser Center for Economic Research in Los Angeles.”
From KPBS. “San Diego’s slump in sales last month mirrored the regional trend, as 10.5 fewer homes sold last month compared to the same time the year before. Some owners are still unwilling to sell because they are ‘upside down.’ ‘The inventory of homes for sale still falls short of demand,’ said DataQuick president John Walsh, who added the high prices will eventually prompt people to sell. ‘This spring could bring a substantial surge in inventory as more homeowner look to cash in on higher values.’”
The Press Enterprise. “Southern California home sales plunged in November, falling with a 10.4 percent thud across Riverside County and by the same percentage in the entire six-county region, the latest report from DataQuick said. Faring the worst was Ventura County, with new and existing home sales plummeting 16.5 percent from November 2012.”
“Gene Wunderlich, government affairs director with the Southwest Riverside County Association of Realtors, said there are still a lot of unresolved variables out there, citing the unknown variables of the Affordable Care Act, rising mortgage rates and consternation over the new maximum Federal Housing Administration loan limits for Riverside and San Bernardino counties homebuyers that take effect on Jan. 1.”
“‘The combination of all that has consumers still a bit rattled,’ Wunderlich said. ‘The two entities that drove our market the hardest — investors and first-time buyers — are backing out of the market right now.’”
The Press Democrat. “Buyers purchased 349 single-family homes last month, according to The Press Democrat’s monthly housing report compiled by Pacific Union International VP Rick Laws. Sales fell 16.9 percent from a year earlier. The median price declined less than 1 percent from October to $453,000. Scott Adams, owner of Adams Realty in Bodega Bay, said the picture is more mixed around his coastal community. ‘We are seeing comparatively lower prices than last year and much fewer million-dollar homes sold,’ he said.”
The Sacramento Bee. “Driven by the roaring economic engine of Silicon Valley, home prices in some Bay Area cities have neared or exceeded the record highs reached in last decade’s housing bubble. Claire Walters bought a high-water bungalow in Sacramento’s leafy Curtis Park neighborhood four months ago for $340,000. Walters, who works in social services, decided to move from her hometown of Palo Alto after realizing she could never afford a home anywhere near Stanford University, where she worked at the time.”
“Walters said she was tired of paying $2,200 a month in rent for a two-bedroom condominium in Palo Alto and wanted to be near her parents and brothers, all of whom had relocated to the Sacramento area. She was stunned at what she was able to afford here, even with home prices going up this spring and summer. ‘To me it was ridiculously cheap coming from the Bay Area,’ she said.”
The Merced Sun Star. “Recent news that Wal-Mart is at least a year away from breaking ground on its distribution center in Merced might be difficult for the city’s unemployed to swallow, but area leaders and experts believe an economic recovery is on the horizon. Terry Ruscoe, owner of Merced Yosemite Realty in Merced, said he continues to see interest by investors from the Bay Area and Southern California. ‘You’ve got some pretty savvy investors that are not looking at short-term profits,’ he said. ‘They’re looking at long-term growth.’”
“Ruscoe said those investors have many options where to put their money, so it’s a good sign they see something in Merced. ‘They kind of set the stage, and then you start getting more money to follow,’ he said.”
The Bakersfield Californian. “Former real estate mogul David Crisp and his wife, Jennifer, admitted in federal court Monday to taking part in a massive mortgage fraud scheme that shocked Bakersfield, forced foreclosures throughout the city and cost banks millions of dollars. The former chief executive of Crisp, Cole & Associates faces up to 30 years in prison and a $1 million fine at his sentencing, set for March 3. Jennifer Crisp, 31, will be sentenced March 3 and faces up to 20 years in prison and a $250,000 fine.”
“‘The defendants falsely inflated real estate prices knowing that the foreclosures that followed would do harm to local builders, consumers and lenders,’ said U.S. Attorney Benjamin B. Wagner. ‘The conduct of Crisp, Cole & Associates was emblematic of the recklessness and lawlessness in the mortgage industry in the mid-2000s that caused the financial crisis.’”
“Carl Cole pleaded guilty in November and faces a maximum sentence of 30 years in prison and a $1 million fine when he is sentenced Feb. 18. Cole said he hasn’t spoken with Crisp for two to three years. It was a far cry from the high living those two and their business enjoyed following Crisp & Cole’s meteoric rise through Bakersfield real estate circles in 2006. The company and its principals were the picture of real estate excesss, with employees and agents required to drive high-end cars and David Crisp renting a private Gulf Stream jet and using bodyguards.”
“‘The guilty pleas submitted…offer little solace to victims who suffered devastating losses and the community that continues to suffer the repercussions of the artificially inflated home prices generated by this large scale conspiracy,’ said Special Agent in Charge Monica M. Miller, of the FBI’s Sacramento field office.”
