The Housing Bubble

Bloomberg reports on California. “Sales of houses and condominiums in San Francisco jumped 50 percent in the first quarter from a year earlier and the median price rose 5.4 percent to $685,000, according to a multiple listings analysis by Terradatum Inc. Hyuck Jae Lee and his wife beat a dozen other suitors last month for a three-bedroom, 1,400-square-foot house in San Francisco’s Inner Richmond. The couple won by offering $875,000, or 14 percent above the asking value, after losing a nearby home that sold at that price. ‘We feel like we’re stepping into our San Francisco life,’ said the Silicon Valley engineer.”

“‘San Francisco has conditions of very restricted supply and lots of things that can push demand: an attractive climate, innovative economy and high quality of life,’ said Harvard University economist Edward Glaeser, who has studied U.S. housing bubbles. A city such as Houston, with an abundance of land, ‘tethers prices to reality,’ while San Francisco’s geographic barriers and global appeal keep values high, Glaeser said. ‘In supply-constrained and highly attractive markets there is no natural landing point for prices,’ he said.”

The Mountain View Voice. “The Santa Clara County Assessor’s Office announced $21.4 billion in property value reductions on approximately 118,000 properties in the county. In comparison to this time last year, 90,000 properties received assessment reductions totaling $17.2 billion. Last year, the average reduction for a single-family home was $185,000. This year the average reduction is $175,000. County assessor Larry Stone said the figures represent by and large the values of residential properties and that a review of the value of commercial and industrial properties has yet to be done.”

“‘We’re seeing an erosion of property values in some of the higher-end more established areas,’ Stone said.”

The Mercury News. “In the East Bay, banks own more than 10,000 homes, only a fraction of which are listed for sale. Another 20,000 are in foreclosure, headed toward bank ownership, according to RealtyTrac. For the moment, banks are still paying the higher taxes associated with the original values. ‘There is no question government services at all levels are going to suffer because of this,’ said Contra Costa County Assessor Gus Kramer. ‘(Banks) are not dumping all these properties on the market at once. If they spoon-feed them out, it just spreads out the pain a little bit longer.’”

“The root of the problem is the drop in property values. In April, Bay Area homebuyers paid an average of $370,000 — just over half the region’s peak of $665,000 in the summer of 2007, according to MDA Dataquick. In some areas, particularly in East Contra Costa County…many homes are listed for sale at less than a third of the price they sold at a few years ago. A new wave of foreclosures may be on the horizon, said Alameda County Assessor Ron Thomsen, as interest rates jump upward on another set of adjustable rate mortgages.”

“‘We’re going to have the same situation that we had a year ago,’ he said.”

The Union. “Median sale prices for houses and condominiums in Nevada County dropped to $303,000 in April, down from the median in April 2009, which was $320,000, DataQuick reported. Western county prices continue to be depressed by the sale of bank-foreclosed properties, said Gene Lehman, broker at Century 21 Davis in Grass Valley. ‘Foreclosures were closing at a rate of less than $225,000 in median price’ in the western county in April, Lehman said. But local foreclosures have ‘dried up’ recently, added Linda Kaneko of ERA Cornerstone Realty, though agents do expect to see more in the future.”

The Monterey County Herald. “A short sale of real estate can be lengthy and frustrating for agents, buyers and sellers, real estate agents were told at a seminar for 25 agents sponsored by Sotheby’s. It’s also the most common scenario for home sales in Monterey County these days. Of 322 pending sales on the Peninsula, 153 are short sales and another 44 are foreclosures, Monterey County Association of Realtors figures show. The numbers include Marina, Monterey-Salinas Highway, Carmel Valley, Carmel Highlands, Carmel, Pacific Grove, Monterey, Pebble Beach and Seaside.”

“In Salinas, the Salinas Valley and South County combined, 87 percent of the pending sales are distressed — 544 short sales and 176 foreclosures out of 828 pending sales. Another reason there are more short sales than foreclosures is that ‘the banks are holding back inventory’ on homes they’ve foreclosed on, said Janet Reilly, Sotheby’s managing broker.”

The LA Daily News. “While the number of foreclosures in the San Fernando Valley jumped in April compared with a year ago, the number of homeowners behind on their mortgage payments slowed dramatically, a research center said. Default notices have fallen on a monthly basis for five consecutive months. Actual foreclosures increased 59 percent to 567 in April from 359 a year ago and rose 12 percent from 507 in March.”

“Economist William Roberts, director of the San Fernando Valley Economic Research Center at California State University, Northridge, said lenders do seem reluctant to dump large numbers of repossessed properties back on the market. ‘It’s like there is a huge pile of foreclosures in a back office and they are keeping the door locked because they don’t want them to get out,’ Roberts said. ‘It would hurt their balance sheet.’”

“Some 405,000 Los Angeles County homeowners will have up to 1,800 reasons to smile this year following the latest reassessment of property values. The average annual tax bill for affected homeowners will fall between $1,500 and $1,800, county Assessor Robert Quon said. Similar reviews done last year and in 2008 resulted in lower property taxes for more than 330,000 homeowners.”

“For single-family homes, the average value reduction was $162,000. For condos, the average reduction was $133,000. After peaking in February 2007, the median price of a home in the county dropped from $616,230 to $295,100 in March 2009. Since that time, the median price of a home has fluctuated and, in April, stood at $338,970. ‘What you are seeing is an industry that looks like it’s looking for a bottom, but we are not willing to say it’s there yet,’ said Jack Kyser, the founding economist at the Kyser Center for Economic Research at the county Economic Development Corp.”

“Quon noted that nearly all of those homeowners whose property values were reduced in previous years will either see the lower assessment continue this year, or, in some cases, reduced even further. Quon said most of the people who will see large property tax reductions this year were those who bought their homes from June 30, 2008, to June 30, 2009.”

The Desert Sun. “When Joseph Anfuso came to work for Florsheim Homes in Stockton in October 2006, he saw early signs of a housing industry on the verge of its breaking point. Three years later, Stockton was described by national media as the foreclosure capital of the nation. But Anfuso said the company has made gains. It reduced prices by 60 percent, putting them in the low $200,000s as other home builders held tightly to the $450,000 range. ‘From the day I shut my car door, the first thing I did was lower prices,’ he said.”

“Now, the company is buying bank-owned and bankrupt neighborhoods. One project it selected was Santoro Estates of Cathedral City. The neighborhood of homes, which were 65 to 95 percent complete and while idled created an eyesore with flocks of pigeons, bent garage doors, broken windows and dying lawns, are about three weeks away from being finished out and landscaped. ‘We’ve sold 19 of the 32 homes,’ he said. ‘Our goal is to be completely sold out by the end of the year, and we’re well on pace.’”

The Bakersfield Californian. “Vacant houses are undesirable for a lot of reasons. It’s in a city’s best interest, then, to do what it can to prevent unoccupied homes, or at least mitigate their negative effects. One community has taken a different, more proactive route that targets new construction. McFarland, a city of about 12,000 in northern Kern County, won’t issue professional homebuilders a building permit until they’ve landed a committed buyer.”

“But Matt Towery, owner of Bakersfield homebuilder Towery Homes, said he doesn’t like the inflexibility of the rule. ‘As much as I think you’ve got to have some regulation, that goes too far,’ he said. ‘I can tell you there were some crazy things going on in the boom years with all the stated income loans and all that, but we’ve gone from one wild extreme to the other.’”

The Union Tribune. “It pays to rent — not buy — for most people in San Diego County, says Trulia. ‘We’re not suggesting that it’s unwise to buy in these areas, though,’ said Trulia co-founder Pete Flint, ‘just that it’s significantly more expensive than renting.’”

“Robert Pinnegar, executive director of the San Diego County Apartment Association, said he was not surprised by the findings. ‘We’re a coastal California city,’ Pinnegar said, ’so it’s always going to be more expensive to buy than to rent.’”

The Orange County Register. “Yes, Newport affordability sounds silly, but 92663 had a median selling price of $962,500 in the first quarter — cheapest of the six ZIPs around Newport. This year’s sales momentum in Newport Beach 92663 did come at a price — fat price cuts, that is. Buyers may pay more, but owners are getting maybe half what they could have at the boom’s peak. ‘On the average, homes sold at about 90 percent of the most recent list price but only 71 percent of the original list price,’ says real estate agent Andrew Karigan at Prudential California Realty of 2010 pricing trends ‘So prices have definitely come down.’”

“Real estate agent Zachary Evanish points to the sale of a home on the Newport peninsula as a prime example of what it takes to move a home in 92663: Four discounts over 10 months — from the original $3.25 million listing to a sale at $1.9 million. ‘The increased volume points to the fact that the discrepancy between buyers and sellers has narrowed. The narrowing has come from sellers being more realistic and buyers being more optimistic,’ Evanish says.”

The Voice of San Diego. “San Diego Unified school board member and county supervisor candidate Shelia Jackson lost her home to foreclosure in 2007, she confirmed in an interview. Jackson owed $15,336.86 in past due payments on the home when she received a notice of default in June 2007, records show. Five months later, her lender repossessed the home. Jackson purchased the property for $255,000 in July 2002. She then refinanced the property four times over the next four years, the last for $467,500 in November 2006.”

“Jackson said she “did not have the finances to keep the property” after the state cut funding for her teaching and administrative position with a math program. She said she couldn’t find another local job to supplement her district stipend (the school board is a part-time job that pays $1,500 a month) and Navy pension.

“‘I decided to sacrifice and refinance my home to keep myself afloat,’ Jackson said.”

“Jackson said her foreclosure shouldn’t affect her campaign. ‘There are several people in this economic climate who have gone through that process,’ she said. ‘If no one who went through that process was qualified, then a lot of people couldn’t run.’”