The Train Will Wreck Eventually
The Union Tribune reports from California. “San Diego County’s median home sale price rose to $450,000 in June, up 8 percent from June 2013, DataQuick reported. While that value is at a nearly seven-year high, the pace of appreciation has slowed considerably from just a year ago. ‘Last year everyone wanted to know why are prices rising so fast, and the three main reasons were extraordinarily low inventory, incredibly low mortgage rates and record or near record levels of investor purchases,’ said DataQuick analyst Andrew LePage. ‘This year each one of those has sort of reversed to some extent.’”
“Inventory, while still constrained, is also increasing. In the first six months of 2013, there were 46,146 active listings in San Diego County, up from 26,294 last year, the San Diego Association of Realtors reports. Further, this month, inventory surpassed 8,000 for the first time since February 2012. Across Southern California, homes sold at the slowest pace for a June in three years, with 20,654 transactions.”
“Mark Goldman, a loan officer and real-estate lecturer at San Diego State University, said in retrospect it appeared the price run-up was completed by the end of the 2013 and the market is now returning to normal. ‘It’s better this summer but the first quarter of this year was unexpectedly slow,’ he said. ‘Maybe it was just taking a breath. Houses are expensive and wages aren’t going up.’”
The Los Angeles Times. “In the latest sign of a market that’s plateauing well below its past highs, home prices in Southern California grew at their slowest pace in two years in June, capping a spring selling season that never quite took off. And the furious gains seen this time last year are a thing of the past. In the last 12 months, home prices climbed 7.8%, barely one-fourth their pace in the prior year. A report last week by real estate website Trulia said asking prices in Orange County — a leading indicator of the sales figures DataQuick measures — grew just four-tenths of a percent in the second quarter.”
“Buyers have a lot more to choose from. With prices higher than they were a year ago, investors and all-cash buyers have backed away, constituting their smallest share of home sales in four years, according to DataQuick. At the end of the first quarter, 8.1% of home loans in metro Los Angeles remained underwater, according to CoreLogic. In the Inland Empire, that figure is 17.3%. If prices stall, there’s little they can do but wait out the market and keep making their monthly payments, said Rich Simonin, CEO of Westcoe Realty in Riverside. ‘They might as well hang on,’ he said. ‘You’ve waited out five years. What’s another?’”
“Simonin said this leveling off is a welcome break. For the first time in 15 years, he said, it doesn’t feel as if the housing market is either soaring or plummeting, and there’s no pressure to buy — or sell — now, lest you miss out on a windfall. ‘This is boring and that’s OK,’ he said. ‘The train will wreck eventually. It always does. But for now, we can enjoy a smooth ride.’”
The Mercury News. “Confronted with a shortage of land to build on in the Bay Area, housing developers are getting caught up in the same kinds of bidding wars that have frustrated home buyers. ‘As the good pieces come onto market, multiple builders are bidding on them and the prices are going to just astronomical numbers,’ said Stephen Smiley, a VP of Meyers Research, a consultant to the home building industry.”
“Octavious Mendoza drove down from his home in Elk Grove this week to look for a house to buy in the South Bay for his two daughters. By noon they’d given up on existing homes and were inspecting townhome models in the Berryessa Crossing subdivision KB Home is building in San Jose, where prices start in the $500,000 range. Mendoza said existing houses in his $600,000 price range ‘were old and not very nice.’ ‘These new homes are preferable. If you can get it new, why not?’ Mendoza said. ‘I feel you can’t go wrong buying a house in the Bay Area. The technology industry is not going away.’”
CBS San Francisco. “Everywhere you turn in downtown San Jose new apartment complexes are being built. Some fear overbuilding, which could create a new housing bubble. 12,000 units are either under construction or recently completed. Santa Clara’s Assessor Larry Stone said that could be too many. ‘It’s a very strong and robust market, but at some point in time, the economy is going to level off as it always has and then [the question is] will there be too many apartments having been built?’ he said.”
The Bakersfield Californian. “Bakersfield home prices edged upward in June as listings climbed and total sales slipped from the month before, local appraiser Gary Crabtree reported. The number of homes listed for sale jumped 14.6 percent to 1,163, while total sales closed in June declined 2.2 percent to 539, Crabtree reported. ‘No big surprises as supply increases and demand remains stable,’ he wrote in a note accompanying the report. ‘The market is slowly turning from a seller’s to a buyer’s market.’”
The Calaveras Enterprise. “A sense of cautious optimism rippled through Calaveras County a few weeks back when the county assessor reported an increase in property values. According to the assessor’s roll, property values increased just over 6 percent. Not everybody is quite as confident in the housing market. ‘I don’t think I’m quite as optimistic as far as the assessor’s report and as far as the properties that are selling,’ said Charlene Winkler, the owner of Western Realty in San Andreas. ‘I’m not seeing that big increase like they’re saying. … We’re not seeing as many sales. We’re not seeing multiple offers. We’re actually seeing, on the amount of properties that are coming on and the amount getting reduced, there are more getting reduced than properties coming on.’”
“Another rumor that’s making the rounds in real estate circles is the number of bank-owned properties obtained in foreclosure proceedings that have yet to make it to market. In the Valley Springs area, some homes are still sitting vacant, which implies that ‘they haven’t been released yet,’ according to Linda Frater, a Realtor at Country Oaks Realty in Valley Springs. ‘I think the banks are holding them so they can get a higher price for (their properties),’ she said. ‘If they flood the market, it’s going to change the price right now (by lowering values).’”
The Sacramento Bee. “Born during the housing bubble, this San Joaquin County bedroom town was America’s most ‘underwater’ community six years ago. Mountain House had another unhappy distinction: It was one of the biggest black holes in CalPERS’ investment portfolio. At the depths of the housing-market slump, Mountain House represented a $1.06 billion loss for the California Public Employees’ Retirement System. CalPERS held onto its Mountain House investment. The pension fund’s investment is still deep in the red, with an estimated negative value of around $870 million, but CalPERS officials say they believe Mountain House will eventually turn into a winner.”
“The community remains a work in progress. It has 4,200 rooftops now, and CalPERS owns enough land to build 8,000 more. Housing starts have come back but are still a fraction of what they were during the boom. For every well-tended neighborhood, there’s an empty field of weeds. Even the high school is unfinished. DataQuick said median prices hit $476,500 in May, up from a low of $285,000 in late 2011. Clearly some mortgages in Mountain House remain underwater.”
“Matt Balzarini holds one of those mortgages. A San Francisco firefighter, Balzarini moved his family from Fremont when Mountain House opened a decade ago and paid $500,000 for a home. The property’s value sank to around $200,000 and now is worth something north of $400,000. Balzarini said he has no regrets about staying the course, saying the hometown feel of Mountain House is well worth the one-hour commute and the roller-coaster ride in real estate values.”
“‘I was sold on the dream,’ he said. ‘I want to see everything come to fruition.’”
