DataQuick: SoCal Home Sales "UItra-Low"
Submitted by
CalculatedRisk on Thu, 03/13/2008 - 10:06am (25 comments)
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With the vast majority of foreclosures still not having hit the 'for sale' market yet, soon enough nothing will be selling except foreclosures in some of the worst areas...
That would be a complete and total meltdown, who knows where prices will land. We are getting very close to government intervention on a grand scale.
Who says foreclosures are a bad thing? They're the driving force behind real estate commissions in SoCal.
"The S&P comment was a positive for the market because investors were relieved to think that the subprime problem may be behind us," said Al Goldman, chief market strategist at A.G. Edwards. "The question is whether investors will be relieved enough to continue to come in and buy what I think is a bear rally. I think the market has a good chance to feed on this news and go higher."
However, on the other side of the planet, not connected to NAR-reality: Rates on about 3.25 percent of subprime-loan balances are scheduled to start to adjust in September, October and in April 2008, said Peter DiMartino, an analyst at RBS, the Greenwich, Conn.-based unit of Royal Bank of Scotland.
A total of 32 percent of balances face rate adjustments over the next 12 months, he wrote in a report, citing data from First American Corp.'s LoanPerformance unit.
Payment resets will range between 1 percent and 3 percent of outstanding subprime balances in the other months between this May and November 2008, and then fall below 1 percent in December 2008, DiMartino wrote. Another 5 percent of subprime loans will hit reset dates after 2008, he said.
CA probably has the highest raw number and concentration for these types of transactions. This may not translate into contagion for other real estate markets, because I think the fundemental underlying problem in most markets is not price comp's to what So Cal is doing, but that people can't afford the interest only let alone the principle. Their hours were cut, they lost a job, they had an injury, they didn't know they couldn't work 3 jobs to make the mortgage (because apparently sleep is as vital as 42inch cherry wood cabinets...)...So I think many people might want to drive up to the rust-belt and see what life may look like for a lot of areas...that being said, yah, contagion every for mbs all the other crap that is backed by foreclosed houses in CA.
The median price paid for a Southland home was $408,000 last month
Well, maybe there was no need to raise the conforming loan limit after all.
The stats are terrible for San Diego for February if you look at sales compared to defaults and foreclosures.
Sales: 1954
Notices of Default: 3212
Trustee's Sales: 1398
Notices of default are at >160% the rate of sales and foreclosures are at 71% of total sales! The entire market will be foreclosures by this summer.
Compare that to last year's February.
Sales: 2863
NOD: 1368
Trustee's Sales: 408
This is going to be a serious bloodbath.
Hey Lit Nerdz, is it foreclosure Purgatory when they file the NOD and don't finish to the NOT and foreclosure Limbo when they keep postponing the NOT? Or is it the other way around? I know the two have separate meanings in theology but I'm unclear which applies. Either way it's a lot of shadow inventory.
Well, if I understand/remember my Dante, Limbo is for the Virtuous Pagans and dead babies because I guess God (or at least Dante) got cold feet about throwing them into the fiery pits. So they're stuck off in the a sort of preamble to hell with nothing much to do and nothing much to look out for.
At least in Purgatorio you get to wander about miserably carrying rocks or burning cloaks (UP the hill, not down the pit) for some defined period of time. So, maybe if they identified "Virtuous Borrowers" somehow and agreed to permanently hold off foreclosure and bankruptcy you might have an analogy but I don't see that flying. "Virtuous" would probably just be equated with "Investment Banks" and then where would we be? (Looks vaguely familiar actually.)
Might be fun to work out the different punishments for the different actors though.... Realtors could get red-hot tongues and thus have to talk constantly in a vain attempt to work up a breeze.....
What is the median income for this area?
I sold my house in Corona last month. Cash buyer who was only looking at forecolsures. My realator snaged him and he offered 400k which was 100k below my ask. I agreed to "as is" and me renting back for 3 months. closed escrow in 20 days. Neighbors hate me but there are 10 REO's in the tract and it is just a matter of time IMHO
Girlbear,
We sold a condo in March '07. The neighbors yelled as us for selling a 760 sq. ft, 400k$ condo for 10k$ less than they thought it was worth...
Absolutely amazing...
Strangely enough, houses in my SoCal neighborhood ARE selling fairly well, although at much lower prices. Having a top-rated school district helps a lot, although with Arnie creating techer cuts, who knows how long that will last. Our district is slated to lose about 100 teachers. Not good.
Question about Bay Area and Manhattan:
If you look at any of the available data of incomes in the core of the Bay Area (which means I'm excluding towns not on the peninsula), household incomes around the median are about $60K and at the 80 percentile level are around $100K. Manhattan incomes are similar. Yet, these areas are not dropping in price. More significantly, during past recessions the prices have dipped but by very small fractions of the dips (percentage-wise) in other areas. First, is this true or is there some mirage in the statistics? If true, why is this so? Is it because there is a lot of housing stock in these areas that was bought long ago at sane prices and only a little port of it comes on the market, allowing the bulk to continue paying older priced mortgages while just the select few who enter the market now pay the high price? What's going on in these areas? Any explanation would be appreciated.
houses in my SoCal neighborhood ARE selling fairly well, ... a top-rated school district helps a lot, although with teacher cuts, who knows how long that will last
Interesting observation Donna.
People are taking 30-yr obligations based on educational conditions that may not exist in 1 year.
Interesting.
I live in Manhattan. From what I understand, anecdotally only, demand here is propped up by European and other non-national buyers. It's a great market for them thanks to the weak dollar. San Fran is probably the same. Vanity addresses for the global rich.
Curious - In the greater Bay Area, prices are dropping.
In the inner Bay area, prices are dropping, perhaps not as quickly as in other areas.
As a historical note, Hoyt observed that in 19th century boom & bust chicago real estate market, the "most desirable" "fashionable" chicago areas always dropped the least, even though they were the most expensive. Seems the workers, who lived in the outskirts, got hit harder than the capitalists in the "fashionable" areas.
I live in Manhattan. From what I understand, anecdotally only, demand here is propped up by European and other non-national buyers.
When that ends, a market turns south really quick a la LA in 1994/1995. They will panic too. They don't have to hold and won't when if falls apart. Europe is far from immune to this downturn. e.g., the failed hedge fund this morning.
Got Popcorn?
Neil
Curious:
I would guess that many homeowners who live/bought in the core Bay Area more than 5-10 years ago could not afford to buy their own house today based on income, but that says nothing of assets. Many people who live here have some serious savings, which i have not found good statistics for.
As you suggest, the supply/turnover of homes in some desirable areas is lower than the amount of people who are making upwards of 400k/y and want to buy... the only way you will see serious declines in places like palo alto, is if the jobs leave or mass retirement/relocation happens. Until then, there are barely any houses for sale, and plenty of googlers/applers/ciscoers to pay millions. In other areas where supply is decent, like east bay/south bay, prices will plummet for a long time...
Question for Buck and Curious -
Would you include Oakland as part of the "core" bay area?
Speaking of Riverside foreclosure rates, I just remembered a photo I snapped off in Riverside whilst visiting family over xmas. Apparently the house had been like this for several months at the time.
http://thumbsnap.com/v/B7EuoRAg.jpg
At this point maybe walking away from the house isn't enough...you have to burn it first
jus me,
No - I don't count Oakland from the center.
Stanford is a reasonable point to consider as the epicenter since so many startups and venture capitalists emerge from around it.
sidneymoncrief,
I have seen statistics (sorry, can't recall the reference off the top of my head) that say that international buyers form roughly about 1% of the market in both areas.
Curious:
In LA, prices in affluent areas are decreasing less rapidly also. I'd speculate the following causes:
- Wealthy buyers less likely to have used risky loan products (no need)
- Wealthy buyers likely to be more educated, less likely to be overextended
- Jumbo loans were harder to securitize, so there were stricter and more rational loan requirements
Prices will drop in those areas too; it'll just take more time, and be less pronounced. I'd expect many more people in those areas to be able to hold their housing assets and not be forced to sell at a loss, which will prevent the rapid large corrections that mass foreclosures precipitate.
Hope that helps.
Wealthy buyers also buy unique properties, while the further down the scale you go the more generic and substitutable the property is.
"If it wasn't for foreclosures, sales would be really awful".
Good one CR, and how true. Lower prices are exactly what the doctor ordered to fix this mess. If the way to lower prices is through foreclosures, then bring 'em on.