The Distressed Market Is The Market In California
The Whittier Daily News reports from California. “Los Angeles County’s median home price for May was down 8.5 percent from the year-ago price of $297,410, the California Association of Realtors reported Wednesday. Sales fell 16.7 percent from May of 2010. California’s median home price plummeted 10.9 percent from a year earlier and year-over-year sales were off 14.4 percent. Leslie Appleton-Young, CAR’s chief economist, said the downturn was also driven by an unusually strong performance in May of 2010 when ‘expiring tax credits pushed home sales and prices to extremely high levels.’”
“Marty Rodriguez, who owns her own realty firm in Glendora, said it’s no wonder prices continue to drop. ‘Your market is first-time homebuyers who are buying in the lower price range,’ she said. ‘That’s why prices have gone down. A year ago, 85 percent of the buyers were under $500,000, but now I’d say closer to 90 percent of them are buying homes under $500,000.’”
The Press Democrat. “May home sales dropped to their lowest level in Sonoma County in four years. Analysts said the May figures revealed a significant drop in the sales of distressed properties. Allen Seelenbinder, a Bank of America portfolio retention manager, told a gathering of 250 real estate agents Tuesday morning in Santa Rosa that the bank now receives four requests to approve short sales for every foreclosure property it has taken back at auction.”
“Seelenbinder and fellow panelist Ivan Choi suggested to the real estate agents Tuesday that the current housing market isn’t poised for a quick turnaround. Choi, a regional director in Irvine for Primary Residential Mortgage, called the foreclosure market ’somewhat constipated’ and said he doesn’t expect a ‘tsunami’ of distressed properties. Instead, he said, the current market ‘will be with you for four years, at least.’”
The Reporter. “Solano County led the way in steep drops when comparing year-over-year numbers in the Bay Area. The median price of $189,000 in May was 13.7 percent less than a year ago when the median was $219,000. The median price paid for all new and resale houses and condos sold in the Bay Area last month was $372,000, down 9.3 percent from $410,000 in May 2010. It was the largest year-over-year drop in the median since August 2009, when it fell 19.5 percent from a year earlier, to $360,000.”
“The median has fallen year-over-year for eight consecutive months, following 12 months of annual gains. The median peaked at $665,000 in June/July 2007 and dropped to a low of $290,000 in March 2009. Around half of the peak-to-trough drop was the result of a decline in home values, while the other half was a shift in the sales mix toward lower-cost homes, especially foreclosures.”
The Mercury News. “Last month was the third lowest May in sales volume in the South Bay in 13 years, DataQuick reported. Sales of single-family homes in Santa Clara County fell 22 percent from May 2010 and 7 percent in San Mateo County. ‘The problem is jobs,” said Susan Gable, broker with Realty World People’s Choice Properties in San Jose. ‘Until people feel secure in their jobs, they won’t buy real estate.’”
The Manteca Bulletin. “Manteca is outperforming every city in the Northern San Joaquin Valley as it has for the past three years in new home starts. Joe Anfuso noted that Floresheim Homes targeted homes in Valley Blossom at the first-time buyers market coming up with a price point of right around $170,000. The vast majority of the sales at Valley Blossom are to first-time buyers with 80 percent of them coming from Manteca and surrounding valley cities with the balance from the Bay Area.”
“He noted the countywide unemployment rates for both Stanislaus and San Joaquin is in the 17 percent range. ‘Until people feel comfortable they won’t lose their job or that they can get another one quickly if they lose the one they have there won’t be a big improvement (in housing sales),’ Anfuso said.”
“Anfuso noted that the shadow inventory – homes that are delinquent but banks have either yet to start the foreclosure process or are holding on to them – will take a long time to work through the market.”
The Bakersfield Californian. “Funded by the federal Hardest Hit Fund, the California Housing Finance Agency’s Keep Your Home California program is designed to help homeowners who are considered hardest hit by the recession. But some, including Cal State Bakersfield economics professor Mark Evans, are still skeptical about Keep Your Home California’s widespread effectiveness.”
“According to Evans, principal reduction is where the program has the most potential — and it’s also where ‘the big banks,’ like Bank of America and Wells Fargo, have been less willing to commit. ‘They must be reluctant to reduce mortgages, even with the PRP program putting in a dollar for each of their one-dollar reductions,’ he said in an email. ‘My guess is that they think they can prevent another large price collapse by controlling the pace at which they foreclose and put properties back on the market — and that they are better off using this strategy than writing down the mortgages.’”
The Ventura County Star. “In Ventura County, 1,083 properties in May were subject to foreclosure activity, about the same number as in April but down from 1,326 a year ago. Bank repossessions fell in May to 205 from 263 in April and 282 in May 2010. However, Sung Won Sohn, professor of economics and finance at CSU Channel Islands, cautioned against thinking the foreclosure crisis is coming to an end.”
“‘Banks have been beaten up for not doing it right, and so they are holding back. There’s a big backlog of new foreclosures to hit the market,’ he said.”
“In Ventura County, 693 homes were sold in May, compared to 815 the same time last year. Ventura County’s median price also dropped by 5.1 percent in May compared to the same time last year. Janet Dorsey, president of the Ventura County Coastal Association of Realtors, said DataQuick’s numbers reflect the general trend in the housing market since the beginning of the year.”
“Dorsey said some buyers also are choosing to hold off until they see other foreclosed and bank-owned properties that have yet to be released into the market. ‘What we are seeing is buyer cautiousness,’ Dorsey said. “Buyers know there is inventory out there…’”
The Informer. “Things were looking up there for a second, right? Unemployment was creeping down, people were starting buy houses again, you got the new iPhone. And then, boom: Housing prices went toilet-bound again, unemployment barely budged, and the stock market is experiencing Charlie Sheen-like mood swings. People are talking double-dip recession again.”
‘Now the UCLA Anderson Forecast has to put an exclamation point on that bad news. It’s titled … “No Recovery in Sight.”
The Malibu Times. “They all start out with the highest hopes and a most elevated view of their property value. Firmly convinced their special little slice of heaven will be further branded an investment success as well, the Malibu home owner lists their home with a broker and awaits their due bounty. And they wait. And wait. And they reduce their price. And reduce their price again. A small percentage are the fortunate ones. There are also the unlucky ones, who lose their house to foreclosure along the way.”
“In times when 80 percent of the listings in Malibu result in no deal, it is not surprising many listings experience drastic price reductions before finding a buyer, or spending very long periods on the market. Or both.”
The Auburn Journal. “Housing has been trending downward for the last 57 months straight. Even with all the government support, various moratoriums, delays, refinances, loan reworks and a plethora of other gadgetry the trend still remains. In a normal RE market distressed sales made up about 2% of total sales the remaining could be broken out into new homes and organic resales. Today we have anything but a normal market. Just released for Sacramento RE in May 2011, 65.6% of all resales (single family homes and condos) were distressed sales.”
“This is down from 66.8% in April but this is a very high percentage of distressed sales for May. A full two thirds of the market IS DISTRESSED sales in the Sacramento region. For the state it is over 45%. Foreclosures are selling for over 30 percent price reductions and in many areas including California foreclosures are a large part of the market.”
“A high level of distressed sales suggests falling prices. Some have tried to spin it that distressed and conventional are two different worlds, they are not. Home sales are set by the buyer, not the seller. The seller can set any price they want but reality is the DISTRESSED MARKET IS THE MARKET and anyone wanting to sell must compete in that market.”
“On October 1 the GSE’s (Fannie, Freddie, and FHA) will drop the loan guarantee amount from $729,750 to the original amount of $417,000 for most areas of the country. For Sacramento, Placer and El Dorado counties the amount will be dropped to $474,950.”
“Since 2008 the GSE’s have backed 90% of the market. When banks can no longer offload ‘affordable’ mortgages to the USGovt all homes currently priced in what is essentially the jumbo market will have no buyers. Prices must drop.”
From KFSN. “The move to a new Downtown Fresno apartment four months ago has meant a change in lifestyle for Travis Sheridan. Before the housing crash, Sheridan lived in 28-hundred square foot home in North Fresno. Now he says the two bedroom, 11-hundred square foot unit at the new Broadway Lofts, is all he really needs. According to a just-released report by the UCLA Andersen forecast many Californians will be downsizing, like Sheridan has done.”
“Sheridan said, ‘Before the recession we were at a time of surplus and everybody got very greedy, myself included, buying things we didn’t need, taking home equity loans and being frivolous with it.’”
‘Leslie Appleton-Young, CAR’s chief economist, said the downturn was also driven by an unusually strong performance in May of 2010 when ‘expiring tax credits pushed home sales and prices to extremely high levels’
Recall how CAR and other industry groups pushed hard for the GSE limits to be raised, for the tax credits? What do you have to show for it now, Appleton-Young? Maybe many thousands of people who paid “extremely high” prices and will now go into foreclosure?
Will the media remind the public who pushed for these programs when these foreclosures come rolling in the next few years? I know I will.
Of course the media won’t. They need the realtor’s advertising money.
Leslie Applehead-Dung : Proving Realtor’s are idiotic lying aholes one media quote a time.
I’m seeing houses last purchased in 2008 come on the market as short sales and REOs (two in just this past week that I recall specifically). Those 2010 vintages will be interesting.
Kim:
I wonder when the cash for clunkers cars are coming back on the market?
How long can people pay a new car payment and FULL insurance before they run out of $$$ and their registration is pulled and the repo man comes?
You take advantage of the “urgency” when you buy multiple sandals on sale at a store (put away for a later date), not for 100’s of $1,000’s of mortgage debt. What is wrong with this country?
I prefer to push, not pull, my home buying transaction decision.
Ben, good job of picking out the money quote as the headline. The sooner sellers realize this the sooner we reach a market clearing price.
Thanks. I think we forget what these levels mean. Way back in 2005, I remember reading articles about the subprime defaults in NC which Beazer Homes had done. It was mentioned that foreclosure rates of 1.5% in any given neighborhood indicated waves of future defaults. So look at the distress rates for the whole state of California!
And at 1.5% it actually IS reasonable to ignore foreclosures when calculating comps. They are uncommon enough that they don’t effect the marke in proportion to their lower price. But at these levels, they ARE the market. You’re as likely to find a foreclosure or short sale that meets your requirements as an equity sale. So it surprises me that they’re still selling at a pretty good discount.
Just to try and clarify my point above. In a normal market foreclosures are rare enough that they’re kind of like the lottery. Even if 50% of the ticket price goes the the single winner, that doesn’t mean that if you buy $12 of tickets you can expect to get $6 back from your “investment.” In fact that’s not even possible. You should expect to lose all $12. Similarly, in a normal market, the off chance that you just might possibly find a distressed sale that met your requirements is small enough that it shouldn’t affect what you’re willing to pay. By contrast, in todays market they’re more like a lottery where 25% of the tickets pay back double the price. If you bought $12 of tickets it isn’t at all unusual to anticipate that you would get $6 back from your investment.
Foreclosures at a rate of 1.5% were usually due to an external personal event like divorce or illness or job loss, little to do with the housing market.
These new waves of foreclosures are due to people who bought with I/O ninja ARM option whatever mortgages where the payment was guaranteed to go up. These forclosures would have happened anyway, even if everybody stayed healthy, employed and married. Anyone who glanced at the Credit Suisse graph five years ago would have known this. It’s clearly part of the housing market, and so should be part of the comps.
I see no reason to ever exclude foreclosures when calcualting comps. Perhaps some of these houses are in poor condion, but so are others that sell in the market every day–extate sales, divorce settlements, for examples. Comps should be comparable houses, whatever the reason for their sale.
“Just released for Sacramento RE in May 2011, 65.6% of all resales (single family homes and condos) were distressed sales.”
Not sure of exactly how that 65.6% of resales in the distressed category stacks up against the foreclosure rate, but I am thinking foreclosures must be running at unusually high levels in order for two thirds of resales to land in the distressed category.
Malibu remains an appealing place to live-it is the system that has fundamentally devalued real estate as an asset. It will eventually normalize, allowing market values to rebound and correct, possibly to a strong degree.
LOL!
Fun quote from the original post:
“My guess is that they think they can prevent another large price collapse by controlling the pace at which they foreclose and put properties back on the market — and that they are better off using this strategy than writing down the mortgages.”
To which I say:
Control fraud expert William K. Black is the author of a book called The Best Way to Rob a Bank is to Own One. And I’m going to go all HBB Librarian on you and recommend it. Again.
Any-hoo, Black has been writing articles over on the HuffyPo. In one of them, he said that the slowness to foreclose is very typical of the behavior found in control frauds.
In essence, he said that the foot-dragging allows the top executives to keep looting their companies. And looting is what control fraudsters love to do.
An anti-dote to Ben Jone’s National HBB observation: “A vastly over-sold debacle…”
Extra! Extra!, read all about it! News from “The O.C.!”
Renting grows in popularity in O.C.:
June 16th, 2011, by Jeff Collins / OC Register
The proportion of renters increased in nearly three-fourths of O.C. communities from 2000 to 2010, due in large part to the housing crash and foreclosure boom. Twenty-two out of 30 O.C. communities for which figures were available had gains in rental households, census figures show.
In Costa Mesa, 60.4% of its nearly 40,000 housing units are occupied by renters, according to the U.S. Census Bureau. In Los Alamitos, 53.3% of its 4,200 housing units are renter occupied.
For the politically astuteness eyes only! Enjoy!
Where’s the birth certificate?! Where’s the Saudi-prince-of-evil’s body?!
New low for Jimmy Carter: 99 cents
June 16th, 2011, by Brian Martinez
Hardcover editions of President Jimmy Carter’s book, “Beyond the White House,” are for sale at 99¢ Only Stores in Southern California, according to this week’s advertisement by the retailer.
The book, published in 2007 by Simon & Schuster, had a retail price of $26.
Popular opinion, academic historians and political scientists rank Carter among the worst presidents in recent history. However, his stature as an ex-president has grown as he has worked to help the poor in Third-World countries across the globe.
We went to the 99¢ Only Store at El Toro Road and the 5 freeway in Lake Forest and nabbed our own copy. Aside from Carter’s book, we found these other political publications on sale for just a buck:
“The Obama Nation” by Jerome R. Corsi (More on Corsi below)
“Looking Forward” by President Franklin D. Roosevelt
“40 More Years: How the Democrats Will Rule the Next Generation” by James Carville and Rebecca Buckwalter-Poza
“Third Term: Why George W. Bush (Hearts) John McCain” by Paul Begala
“Speaking of Freedom: The Collected Speeches” by George H.W. Bush
“President Ronald Reagan‘s Initial Actions Project” by White House staff
“The War Within: A Secret White House History 2006-2008″ by Bob Woodward
All for 99.9 cents.
No limit.
Such a deal.
Back to Corsi, the right-leaning rabble-rouser who has written several books attacking Obama. His newest book, ‘Where’s the Birth Certificate? The Case That Barack Obama Is Not Eligible to Be President,’ was recently listed at No. 6 on The New York Times best-seller list for hardcover non-fiction.
What’s interesting is that there was a little dagger next to his name on the list, indicating that many of the sales were in bulk.
Total Buzz will be counting just how long it takes for those bulk copies to end up at the 99 cents store.
Posted in: Democrats • Miscellaneous • Jimmy Carter
Sorry Mr. Ben, eyes meant this fer the bits bucket…
Hwy
I found Corsi’s “America For Sale” Tree and Silverstein’s book “Treasure Hunt” (Americans trading down in brands and lifestyle/ tales from the marketing world) at the Dollar Tree. “Search” was another great find there. It was about what search engines/govt do with their information on you.All were good reads.
Does the lack of sales in part represent a disillusionment in our broken political system regardless of the message in each book?
For political books that are still selling, how many of those are actually being read by anyone?
‘Your market is first-time homebuyers who are buying in the lower price range,’
Back in the day, first-time homebuyers were folks in their 20’s-early 30’s, starting a family and a career. With such a dismal labor market, particularly in California, I’m wondering how many qualified and interested traditional first-time buyers are on the market. The only folks I know who have bought in recent years are either trust fund babies, or at least people with sufficiently wealthy and generous parents to chip in a large share of the purchase price.
With such a dismal labor market
Geez, that steady employment x2 incomes for 30 years is a tough nut financial reality, no?
And without first time buyers the housing food chain breaks down as the “trade up” crowd gets stuck in underwater mortgages.
And how can you get first time buyers when the median price is still in the 300K range and is a crapshack?
That would be first time buyers in their 40’s. A growing segment of the previously gold plated 20 somethings out of college find their credit ruined by school loan debt before they get to first base, so of course they are taken out of the equation. Small business owners are getting slaughtered in large numbers, so they are taken out of the equation and of course a year of unemployment is enough to do in most peoples credit score and they are taken out of the equation.
Leaving only ? to buy “entry level” homes at $300k
PB
Our competition in high 300’s-low 400’s, are FHA 3.5% down first time buyers. Most are under the impression the bottom is close. Most are letting the “professional” lead them and haven’t done their homework. Completely green.
Then 7-8 weeks later, the house shows up again as available. They can’t come up with any additional money needed to close. I agree about the constipation of first time buyers. I think our price point is going to get busy as people bail out of their McMansions and get hit with reality of a lower standard of living in our area of So Ca. But I think that’s a couple of years away.
It’s the slowest train wreck in the history of man, that’s for sure.
“For Sacramento, Placer and El Dorado counties the amount will be dropped to $474,950.”
Is there any current demand in these counties for homes priced north of $475K?
“The median price paid for all new and resale houses and condos sold in the Bay Area last month was $372,000, down 9.3 percent from $410,000 in May 2010.”
The first-time buyer tax credit is up in smoke for anyone who took them as incentive to buy in the Bay Area last spring.
The fact that folks won’t pay top dollar to live in hell holes like Bakersfield, Fresno, or Manteca (or even Sacramento) is getting to be old news.
Wake me up when prices on the coast become reasonable.
Hmmmm, we’d better let sfrenter sleep for a while longer.
They paid top dollar to live in those hell holes in 2006! And of course, they reverted to being hell holes, maybe doubly, for those who bought at the peak!
If they invent a way to chase out all the air pollution that is caused by farm dust and farm machinery exhaust, as well as caused by all the pollution coming into the SJV via the Carquinez strait, the Valley would be a great place to live. Clear air! And one hour drive to skiing or 90 minute drive to the beach. Better than can be said from many parts of Southern California.
“Sheridan said, ‘Before the recession we were at a time of surplus and everybody got very greedy, myself included, buying things we didn’t need, taking home equity loans and being frivolous with it.’”
EVEN in times of “surplus” - you STILL had to pay the money back.
“Los Angeles County’s median home price for May was down 8.5 percent from the year-ago price of $297,410, the California Association of Realtors reported Wednesday.”
I recall reading that Robert Shiller conducted a survey of LA-area home owners circa 2003 where the median expected annual increase for the next ten years was 23%. How’d that work out for them?
we haven’t seen anything yet, the market here in MA is in the midst of a huge leg down. So much for “it’s different here.”