The Housing Bubble

The Marin Independent Journal reports from California. “Marin home sales continued to slide as prices dropped dramatically across the Bay Area last month. Though Marin remained the only Bay Area county with a $1 million median price for single-family homes, the median was down from $1,125,000 a year earlier. In May, the median single-family home price in Marin was $1,102,000.”

“Marin’s condominium market matched Bay Area trends. The median price dropped 26 percent to $410,000 in June from $470,000 in May.”

“‘Once again the quest for a bargain kept Bay Area home sales out of record-low territory,’ said John Walsh, DataQuick president.”

The San Francisco Chronicle. “With bargain-priced foreclosures glutting the market, the median price paid for a Bay Area home in June plunged below the half-million-dollar mark for the first time in four years.”

“The $485,000 median price for resale homes, new homes and condos was a breathtaking 27 percent drop from the peak $667,000 median reached just one year ago, in June and July 2007, according to DataQuick. It was the lowest median since March 2004, when the benchmark stood at $469,500.”

“Even pricey areas like Marin and San Francisco, which until now had seemed relatively immune to price erosion, saw prices decline by 11.1 percent and 11.3 percent, respectively.”

“Among resold homes, foreclosures accounted for 28.7 percent of all sales, up from 3.5 percent in June 2007. ‘The bulk of what is selling is distress stuff,’ said Andrew LePage, an analyst with DataQuick.”

The Mercury News. “Prices of homes sold last month in Santa Clara County were down 15 percent compared to June 2007. The median price of the previously owned, single-family houses sold in June in the county was $670,000, according to DataQuick, down 15.3 percent from $791,000 a year earlier. The last time the median price was so low was in March 2005, when the figure was also $670,000.”

The Milpitas Post. “Though Santa Clara County has remained insulated from much of the national fallout in housing, growth in the assessed value of county residential property has dropped to 5.5 percent.”

“The Assessor’s Office has taken what it called a ‘proactive’ approach to the decline in the housing market by voluntarily reducing the assessed value of 41,866 properties for a total reduction of more than $5 billion in value. Those figures include 2,310 Milpitas properties, totaling more than $466 million in reduced value.”

The Sacramento Bee. “Sacramento County’s 2,053 sales of existing homes was the highest since October 2005. Sales of new and existing homes combined were the highest since June 2006, up 45.7 percent from the same time last year.”

“Falling prices still tell much of the story. With bank-repossessed homes dominating sales activity, June’s median resale home price of $214,000 for existing homes in Sacramento County is the lowest since $210,000 in February 2003. Median prices for new and existing homes combined slipped to $220,000 in the county. That level was last seen in August 2002.”

The Recordnet. “Sales of existing homes - primarily foreclosures still - continued to climb in June in San Joaquin County for the fifth consecutive month while the median sales price slipped to the lowest level since spring 2002.”

“Jerry Abbott, president of Coldwell Banker Grupe in Stockton, said that because of foreclosures, prices have declined 41 percent in the previous year after a 36 percent drop the 12 months before that.”

“‘We needed a correction in the market,’ he said. ‘The foreclosures - even as painful as they are - are part of a correction that has to occur.’”

“Mike Collins, broker associate in Stockton, said the number of listings is dropping not only because foreclosures are selling so strongly but also because many traditional homeowners who would like to sell have either pulled out of this foreclosure-dominated market or aren’t bothering to list at all.”

The Bakersfield Californian. “To homeowner Ernie Montes de Oca, the Windermere development looked like the happiest place on Earth. But now, developer Castle & Cooke is proposing changes to the remaining unbuilt areas. Montes de Oca believes market conditions may be driving changes to Windermere’s concept.”

“‘At the end of the day, if they’re not making money, they need to somehow figure out how to make money,’ he said. ‘It’s understandable where we’re at in the economy; there’s lots of houses. It’s a bummer for us. We’ve spent our life savings on a product they’ve glorified, marketed (and) now they want to change it.’”

The LA Daily News. “A wave of foreclosures that flooded the market with homes for sale pushed down the median price from $502,000 in June 2007 to $355,000 last month across the six-county region, said DataQuick. The median price fell 4 percent from May.”

“Prices fell in all six markets, including a 23 percent drop in Los Angeles County, from $545,000 to $415,000. That means a house purchased just a year ago lost $130,000 in value.”

“Foreclosure sales have dominated the region’s market for months, and in June accounted for 41 percent of transactions. That compares with 7 percent a year earlier and 39 percent in May.”

“Leslie Appleton-Young, chief economist at the California Association of Realtors, said statewide sales appear to have bottomed out last October and have increased every month since then.”

“‘I think it’s a positive sign,’ she said. ‘I would just hate to characterize this thing as a V-shaped recovery.’”

“This turnaround will look like a U, with the bottom being very bumpy, she said.”

The Daily Journal. “Bob Hamidi, an Orange County-based real estate agent, said few of the potential buyers he represents have the spotless credit histories, large down-payments and other requirements now demanded by jittery lenders.”

“He said buyers who can’t afford to purchase houses outright or who don’t qualify for loans backed by the Federal Housing Administration are largely shut out of the market.”

“‘We’re getting limited to people who want to pay cash - who have put money aside and want to make an investment - or first-time home buyers who fit the guidelines of FHA,’ Hamidi said.”

The Union Tribune. “San Diego County’s foreclosure share in June was 39.8 percent, up from 37.5 percent in May and 11 percent in June 2007.”

“‘We’ve never been there before,’ said DataQuick analyst Andrew LePage, noting that the company’s records on foreclosures go back to 1995, when the region was in the midst of a real estate recession. ‘Foreclosures have a growing role in the market and we know they tend to sell at a discount. And with a growing share of sales, that helps pull the median down.’”

“Prices were down the most in San Bernardino County, off 34.2 percent to $240,000; Orange County was down the least, off 23.3 percent to $495,000. San Diego was down 25.3 percent to $370,000.”

“According to DataQuick, the typical mortgage approved last month throughout the region carried a monthly payment of $1,671, down from $1,713 in May and $2,430 a year ago.”

The Press Enterprise. “Riverside and San Bernardino counties in June saw the steepest year-over-year decline in median home prices in Southern California, while also posting the only year-over-year increases in home sales.”

“DataQuick analyst John Karevoll said home prices in the Inland market are ‘too low’ based on economic indicators, including household income and demand, and he predicted ‘the market will come back up once it reaches bottom.’”

“But Karevoll added that foreclosures are expected to keep coming.”

The Daily Bulletin. “There have been no offers on the five-bedroom, three-bathroom home at Church Street and Ramona Avenue. The 1950s steel-frame, single-level house has a huge playroom, a large kitchen and family room and a swimming pool.”

“‘This is a very rare piece of property because it is in the heart of Rancho Cucamonga,’ said real estate agent Michael Bushnell.”

“The property, which includes the 2,600-square-foot house, has been vacant for four years and on the market for about a year and a half. The original owners died, and their children have been tending to the home.”

“The original asking price was $1.3 million. Nine months ago, the family brought the price down to $960,000. It’s now at $795,000. Bushnell said the property received an offer of $750,000 when it was priced at $960,000 but the owners wanted at least $850,000 at the time.”

“‘They don’t owe anything on the house. Whatever we sell it at, they’re going to walk away with,’ Bushnell said.”

The Pasadena Star News. “Local credit unions are getting calls from panicked IndyMac customers seeking a safe haven for their money. Mike Theodore, CEO of E-Central Credit Union in Pasadena, said his company has already fielded a fair amount of calls.”

“And the tone of those calls? ‘Panicked,’ he said. ‘Normally when we have people call who are thinking about joining they ask what our rates are. But now it’s ‘What is your insurance?’”

“On Friday, the Office of Thrift Supervision revoked IndyMac’s charter and put the bank under control of the Federal Deposit Insurance Corp. ‘It’s bad,’ Theodore said. ‘It was greed related. That’s the difference between a for-profit company and a not-for-profit company.’”

The Daily Breeze. “In the second quarter, the Torrance apartment occupancy rate dropped by 1.8 percent to 95.5 percent, signalling a softening of rental demand.”

“Rent increases puttered out at the end of last year as rising inflation and stagnating personal income forced renters to tighten their belts, said Kyle Kazan, whose firm owns and manages apartment buildings throughout the South Bay and other parts of Southern California.”

“‘I’d say a lot of the juice was last year,’ Kazan said. ‘This year, I’m getting a lot of push back (from renters).’”

“Kazan expects a souring economy to force rental prices at his properties to remain relatively flat or even drop over the next year. As a result, the firm is trying to keep tenants from leaving by offering better service.”

“‘As a company, our management team is totally focused right now on keeping tenants happy, customer service and retention,’ Kazan said. ‘The feeling is the storm is already starting to shake the shutters.’”

The California Aggie. “Since January 2008, roughly 20 condos and single-family homes have entered the foreclosure stages in Davis, according to foreclosures.com. In Davis, only one foreclosure was documented in 2006. Six were documented in 2007, which is a small number but an exponential increase over a short period of time.”

“This can be attributed to different financial situations, according to Sarah Mohler, economic development director for the city of Davis. One scenario is when homeowners who ’sort of got into the market only paying interest [and having] no equity’ get caught with ballooning payments and can’t sell their house for what they paid for it.”

“‘People were doing anything to get into the market,’ Mohler said, and as a result were ’setting themselves up thinking the values are going to increase.’”

“The high rate of foreclosures will end up mitigating the instances of artificial inflation as seen in areas like Sacramento, said Tia Boatman-Patterson, special assistant to state assembly speaker Karen Bass.”

“‘The median income did not support the median price [of a] home, and so [some argue] this will bring housing prices down to a more affordable level,’ she said.”

“‘I don’t think Davis is immune to the housing bust at all,’ said economics lecturer Erick Eschker. ‘You just have to look at the rest of California and the Bay Area. The price of housing in Davis will be higher than West Sacramento and there might be some differences in how the prices come down, but the direction it’s going is clear.’”

“Eschker said his best advice was to look at the housing prices compared to renting in order to decide which option is more advantageous for you right now.”

“‘Especially if you’re considering to buy a house in California, renting is a wonderful thing to do right now, and buying a few years down the road,’ he said, ‘[then] you’re coming out ahead.’”