The Housing Bubble

The Mercury News reports from California. “For what one expert thought was the first time, the number of monthly foreclosures exceeded the number of monthly home sales in California in January, according to data compiled by two research companies. A Discovery Bay real estate research firm said 19,821 California homes went into foreclosure in January, representing about $8 billion in home loans. Meanwhile, DataQuick reported 19,145 home and condo sales in January.”

“‘There’s no way a market that slow can clear these kinds of foreclosures,’ said Christopher Thornberg of Beacon Economics,. ‘What that number says to me is you have more homes getting dumped on the market in terms of foreclosures than there is demand for homes.’”

The Times Herald. “More people should be able to afford a Vallejo-area home now that prices have dropped, though stricter mortgage loan requirements make it difficult, local real estate experts said.”

“Solano County’s affordability rating in February, 2005, was 13 percent, and one would have needed $100,000 annual income to qualify, according to reports at the time.”

“The California Association of Realtors latest affordability index reported that 33 percent of households could afford to buy an entry-level home statewide in the fourth quarter of 2007. That compares to 25 percent for the same period a year ago.”

“‘Prices are significantly lower than they were last year, so they’re more affordable to more people,’ said Solano Association of Realtors president Lori Collins. ‘But credit is still a huge issue. You must have much better credit and a larger down payment to qualify for a loan now.’”

The Morgan Hill Times. “It seems counterintuitive that when housing prices in the free market are falling dramatically that prices for below market rate (BMR) houses are set to increase, but that’s the situation in which Morgan Hill finds itself.”

“Because home builders are having a difficult time selling - even at reduced prices - the free market homes that subsidize the BMR homes, builders say they need a price increase for the BMR homes to make ends meet.”

“As a result, a City Council subcommittee consisting of Council members Greg Sellers and Marby Lee is recommending a price increase.”

The Press Banner. “In a year when the housing market took a considerably hit across the nation, the markets in Bonny Doon and Scotts Valley have remained relatively stable, while the San Lorenzo Valley has seen some downs and more recently some ups, local realtors say.”

“‘The lending bubble collapsed and we had a very quiet fall (season),’ realtor Ronnie Trubek said of the San Lorenzo Valley. ‘The press scared (qualified) buyers, and then the prices did fall.’”

“In mid-January, there were 143 active listings in the San Lorenzo Valley and 16 pending sales. Countywide, however, 63 single-family homes were sold in January, down from 76 in December, which was the lowest number in the past 11 years, according to Real Options Realty.”

“The market has remained fairly stable in Bonny Doon in 2007, despite the first foreclosure realtor Frank Murphy has seen in his 10-year career. ‘Most people prefer to take a financial loss by selling for less than they paid (rather than face foreclosure),’ he said. ”

The Union. “Realtors in Tahoe-Truckee say the word foreclosure has not been spoken in the area since the early 1990s - until now. ‘It is the majority of my listings,’ said Kelly Smith, a North Shore real estate broker.”

“Tahoe City broker Michael Willette said that two to three years ago people began to take advantage of an ‘option R’ mortgage. The initially low monthly mortgage payments ballooned beyond what some homeowners could afford.”

“‘These loans have been resetting with a vengeance,’ Willette said.”

The Lincoln News Messenger. “The effects of a deepening national housing slump are hitting close to home. Even Gladding, McBean, one of Placer County’s oldest businesses and a Lincoln institution since 1875, is feeling the market’s pinch.”

“‘I’ve been here since 1991, and this is the most significant downturn in our market I’ve seen in that time,’ said Bill Padavona, general manager.”

“Padavona said the clay company has seen a 60 percent to 70 percent decline in products tied to home construction, such as sewer pipes and roof tiles. Though Gladding, McBean provides products throughout the West Coast, the market is especially bad in Northern California, where ‘the market has slowed to a near standstill,’ Padavona said.”

“Construction of single-family units in the state was down 37 percent from a year ago, to 67,993, the lowest number since the 51,160 reported in 1982, the state association said.”

“That’s bad news as well for another Lincoln company, lumber supplier Sierra Pacific Industries. ‘It’s had a dramatic downward impact on lumber prices,’ said Mark Pawlicki, a spokesman for the Redding-based business. ‘Prices today go back to about 1992, the last time we had a housing recession.’”

“Average industrywide framing lumber prices were $249 per thousand board foot in January – down from $404 in January 2004, reported Random Lengths.”

From KCRA 3. “Across the country, fire investigators are looking at some homeowners in foreclosure as potential arsonists. In Modesto, Battalion Chief Hugo Patino looked over a charred and nearly destroyed home, a home that was empty and is now set for auction.”

“‘A fire in an empty house is always cause for suspicion,’ Patino said.”

“Sacramento fire investigator Steve Johnson said spite, revenge and pyromania are a few reasons for arson. But firefighters are adding desperation to that list. ‘Nationally, we’ve been told foreclosed homes have been set on fire,’ Johnson said. ‘People are thinking this is the easy way out.’”

“‘That sign in the front yard is always going to be in the back of our head going, ‘I need to really concentrate on why is this an accidental fire? To make it look like an accidental fire? And in retrospect, they are trying to burn their house down to pay it off?’ Johnson said.”

“‘If we have someone set a structure fire that’s an arson and one of our firefighters get hurt, they will be chased harder than anything that’s been chased in their whole life,’ Johnson said.”

The North County Times. “Interest rates on mortgages have increased dramatically over the last few weeks, preventing homeowners from refinancing and making it more expensive to buy a home.”

“Mortgage brokers said the jump in interest rates has caused many refinancing deals to fall through. Dave Hopkins, a broker with Rancho Financial in Rancho Bernardo, said Wednesday he had 12 customers back out of deals over the last week because of the increased interest rates.”

“The housing market this year will see more foreclosures, lower property values and — with higher interest rates — fewer sales, said Kelly Cunningham, an economist with the San Diego Institute for Policy Research.”

‘”With all these things, there doesn’t seem to be any turnaround or recovery anytime soon,’ he said. ‘(Higher interest rates) kind of prolong our housing slump.’”

“When average interest rates hit a low of 5.49 percent a month ago, it was the lowest since mid-2005, according to the bankers association. And then the Federal Reserve, the nation’s central bank, slashed its overnight lending rate by 1.25 percentage points.”

“But the Federal Reserve rate only determines the cost for banks to borrow money and does not directly change mortgage rates.”

“‘When the Fed said it was cutting rates, people had the misconception that it’s going to drop interest rates,’ said Justin Sheftell, director of sales for a mortgage brokerage in San Diego. ‘So they missed the boat and now they can’t refinance.’”

The San Gabriel Valley Tribune. “An economic stimulus package signed into law on Feb. 13 by President Bush should bring some relief to homebuyers and sellers. A portion of the package has boosted the limits for loans purchased by Fannie Mae and Freddie Mac from $417,000 to as high as $729,750 in the Los Angeles area through December 31.”

“Norman Cox, regional VP for Coldwell Banker Town & Country, said that probably won’t bring quick relief to distressed homeowners, however. ‘It’s only legislation that enables Fannie Mae and Freddie Mac to implement (higher loan limits),’ he said. ‘The indications are they aren’t really happy about doing it.’”

“Moreover, loans purchased under the new cap will likely be subject to a different set of rules and regulations, Cox said. And even if the new rules were put into place immediately those loans wouldn’t fund before July, he said, which wouldn’t help the people who need immediate assistance.”

“Robert Kleinhenz, CAR’s deputy chief economist, said today’s housing market is markedly different from recent years.”

“‘I’ve been hearing anecdotally that 25 percent of the home listings in some markets are distressed listings that are either a foreclosure or a short sale,’ he said. ‘In some markets they’re saying it’s 50 percent.’”

The New York Times. “Elizabeth and Ben Kilgore, who live in Tiburon, Calif., are back in the real estate market. All it took was a little-publicized section of the economic stimulus package President Bush signed into law last week that lowered the borrowing cost of buying a more expensive home.”

“‘This will push us into a price range that’s now financially possible,’ said Ms. Kilgore, a real estate agent in Marin County.”

“Prices have dropped 20.4 percent over the past year in Contra Costa County, east of San Francisco, and 13.1 percent in neighboring Alameda County, according to DataQuick.”

“Indeed, California is probably the state hardest hit by the housing slump. As inventories rose in most cities, the median price dropped 16.9 percent from May to December, according to DataQuick.”

“Prices are still high; A public policy advocacy group estimated that a family would need an annual income of $196,878 to afford the median-priced home in San Francisco.”

“In San Diego, real estate activity has dropped off noticeably in the past year. According to DataQuick, the number of homes sold in San Diego in January dropped 34 percent from a year ago.”

“‘The availability of jumbo loans was so easy,’ said said Jim Abbott, a real estate agent there. ‘Now they’re not, and it’s really exacerbated the problem. But I don’t think anyone is counting on it until it actually happens.’”

“Of course, prices for some houses in certain California enclaves and other luxury locations remain so stratospherically high that a change in the conforming loan limit, no matter how drastic, would have little effect.”

“‘It won’t make so much difference here,’ said Edna Sizlo, a real estate agent in Santa Barbara, Calif., where the adjacent suburb of Montecito has homes valued at a median $4.1 million, making them among the most expensive in the nation. ‘There’s nothing you can even live in for under $1 million.’”