Beneath Market Punditry, Underlying Strength
by Robert Freedman
With some 5 percent of subprime mortgage borrowers facing trouble and global investors wondering if prime mortgages remain a smart investment, these are indeed challenging times for real estate.
In one of the most unsettling headlines of all, Robert Shiller of Yale University and one of the developers of the widely tracked S&P Case-Shiller Home Price Indices, has said mortgage troubles are only beginning and that some home prices could fall 50 percent in the next few years.
Dire predictions like that do more than grab the attention of the media; they can shake consumer confidence and help make such predictions self-fulfilling as home buyers stay on the sidelines, pressuring sellers to lower prices—in effect fueling a downward spiral.
But the prognosis is considerably different than the scare scenario forecasters would have us believe, says Lawrence Yun, NAR vice president of research. In this interview with REALTOR® Magazine, Yun puts the state of the economy into perspective, explaining just how contained the subprime problem is and why the trend lines are already contradicting many of the predictions of woe.
REALTOR® Magazine:No doubt the general media tend to play up negative market news like continuing soft home sales. Is there truth in these market concerns?
Yun: It’s all a matter of perspective. Home sales do continue to be soft. We’re predicting existing-home sales to be down 7 percent year-over-year at the end of 2007, but that’s coming off a five-year boom. We’re forecasting a sales level near what we had in 2002, a very good year, and a level that’s far closer to normal than what we’ve been seeing over the past four years.
At the same time, price appreciation is holding up better than media reports would have us believe. In data we collected this fall, two-thirds of markets reported positive price growth in the third quarter, up from half of all markets in the second quarter. In markets where prices continue to be down, the declines are minimal, 1 percent to 2 percent. Only a very few markets are seeing declines higher than 5 percent.
To read the rest of this article click here.
Wednesday, October 31, 2007
Friday, October 26, 2007
C.A.R. Reports sales decrease of 38.9% in September
Home sales decreased 38.9 percent in September in California compared with the same period a year ago, while the median price of an existing home fell 4.7 percent, C.A.R. reported today.
"While it is typical for the median price to dip seasonally as we move from August to September, this decline -- which was both the largest month-to-month percentage decline on record and the first year-to-year decline in more than 10 years -- was mainly the result of the credit or liquidity crunch, which also drove sales below the 300,000 mark," said C.A.R. President Colleen Badagliacco.
"California's sales fell more steeply than those of the U.S. as a whole because of its heavy reliance on jumbo loans -- those above the conforming loan limit of $417,000," she said. "This speaks to the need to raise the conforming loan limit in higher-cost states like California to more accurately reflect the cost of housing."
"While it is typical for the median price to dip seasonally as we move from August to September, this decline -- which was both the largest month-to-month percentage decline on record and the first year-to-year decline in more than 10 years -- was mainly the result of the credit or liquidity crunch, which also drove sales below the 300,000 mark," said C.A.R. President Colleen Badagliacco.
"California's sales fell more steeply than those of the U.S. as a whole because of its heavy reliance on jumbo loans -- those above the conforming loan limit of $417,000," she said. "This speaks to the need to raise the conforming loan limit in higher-cost states like California to more accurately reflect the cost of housing."
Wednesday, October 24, 2007
Realtor groups pitch in to assist wildfire victims
Realtor groups pitch in to assist wildfire victims, evacuees
Half a million people displaced by Southern California fires
By Glenn Roberts Jr., Inman News
Realtor trade groups and individual members have worked to assist residents displaced by several major wildfires ripping across Southern California.
Mike Mercurio, executive vice president for the San Diego Association of Realtors, said the group has been working with the San Diego mayor's office, the county, and an apartment association to quickly locate rental property for victims and other evacuees. Meanwhile, Mercurio himself was forced to evacuate his home and has been staying at a hotel.
The group sent an e-mail to its 12,000 members this week asking for assistance in identifying available rental properties, Mercurio said.
Also, the statewide California Association of Realtors trade group announced that it is offering grants of $1,000 to $5,000 for Realtor members and associated staff. And the statewide group seeks contributions to a disaster relief fund.
To contribute to the fund, make checks payable to California Community Foundation and write "C.A.R. Disaster Relief Fund" on the memo line. Checks can be sent to: California Community Foundation, 445 S. Figueroa St., #3400, Los Angeles, CA 90071-1638. Contributions can also be made online at the following Web site: http://www.calfund.org/8/giving/calrealtorsrelief.php.
Mercurio was among a group of more than 500,000 Southern Californians this week who've evacuated their homes to escape wildfire danger. The fires raging in the region have so far caused two deaths from burns, four deaths during the evacuation, and an estimated $1 billion or more in damage to San Diego County alone, according to reports. The fires, which range from north of Santa Barbara to the Mexico border, have collectively destroyed about 1,500 homes and scorched about 665 square miles.
Half a million people displaced by Southern California fires
By Glenn Roberts Jr., Inman News
Realtor trade groups and individual members have worked to assist residents displaced by several major wildfires ripping across Southern California.
Mike Mercurio, executive vice president for the San Diego Association of Realtors, said the group has been working with the San Diego mayor's office, the county, and an apartment association to quickly locate rental property for victims and other evacuees. Meanwhile, Mercurio himself was forced to evacuate his home and has been staying at a hotel.
The group sent an e-mail to its 12,000 members this week asking for assistance in identifying available rental properties, Mercurio said.
Also, the statewide California Association of Realtors trade group announced that it is offering grants of $1,000 to $5,000 for Realtor members and associated staff. And the statewide group seeks contributions to a disaster relief fund.
To contribute to the fund, make checks payable to California Community Foundation and write "C.A.R. Disaster Relief Fund" on the memo line. Checks can be sent to: California Community Foundation, 445 S. Figueroa St., #3400, Los Angeles, CA 90071-1638. Contributions can also be made online at the following Web site: http://www.calfund.org/8/giving/calrealtorsrelief.php.
Mercurio was among a group of more than 500,000 Southern Californians this week who've evacuated their homes to escape wildfire danger. The fires raging in the region have so far caused two deaths from burns, four deaths during the evacuation, and an estimated $1 billion or more in damage to San Diego County alone, according to reports. The fires, which range from north of Santa Barbara to the Mexico border, have collectively destroyed about 1,500 homes and scorched about 665 square miles.
Thursday, October 11, 2007
C.A.R.'S 2008 California Housing Market Forecast
Home prices throughout most of California will post modest declines next year while sales of existing homes will stabilize from the precipitous decrease experienced in 2007, according to C.A.R.'s "2008 California Housing Market Forecast" released today.
The forecast was presented on October 10th during the CALIFORNIA REALTOR® EXPO 2007, running from Oct. 9-11 at the Anaheim Convention Center in Anaheim, Calif. The median home price in California will decline 4 percent to $553,000 in 2008 compared with a projected median of $576,000 this year, while sales for 2008 are projected to decrease 9 percent to 334,500 units, compared with 367,500 units (projected) in 2007.
"Tighter credit standards, affordability concerns, and a continued standoff between buyers and sellers will contribute to continued weakness in the market going into next year," said C.A.R. President Colleen Badagliacco. "Now is not the time for homeowners to test the waters, only serious sellers should put their homes on the market in what will continue to be a challenging sales environment."
The forecast was presented on October 10th during the CALIFORNIA REALTOR® EXPO 2007, running from Oct. 9-11 at the Anaheim Convention Center in Anaheim, Calif. The median home price in California will decline 4 percent to $553,000 in 2008 compared with a projected median of $576,000 this year, while sales for 2008 are projected to decrease 9 percent to 334,500 units, compared with 367,500 units (projected) in 2007.
"Tighter credit standards, affordability concerns, and a continued standoff between buyers and sellers will contribute to continued weakness in the market going into next year," said C.A.R. President Colleen Badagliacco. "Now is not the time for homeowners to test the waters, only serious sellers should put their homes on the market in what will continue to be a challenging sales environment."
Tuesday, October 9, 2007
Santa Cruz County Real Estate Report for October 2007
ANALIZING, COMPARING, DECIPHERING, AND GUESSTIMATING........
Big changes happened in our Santa Cruz County market for September, but to me they are just a continuation of the cycle over the past 6 or 7 years. Since that time, our local real estate market has been on a roller coaster ride. In 2001, the number of sales dropped over 26% from the year prior when we had 23.5% appreciation. Sales have continued to decline every year until 2004 when once again we had double digit appreciation and sales were higher than in the prior 25 years. Then as you know everyone jumped on that bandwagon and 2005 had still greater appreciation but with 20% fewer sales. So the inventory goes up and down but the average sales price is 64% higher today than it was in the year 2000.
Looking at the individual niche markets since January 2007:
*Aptos had 192 sales, average sales price $1,008,324, 103 days on market, 11 months of inventory.
*Capitola had 33 sales, average sales price $931,075, 103 days on market, 9 months of inventory.
*San Lorenzo Valley had 202 sales, average sales price of $556,413, 101 days on market, 19 months of inventory.
*Santa Cruz had 340 sales, average sales price of $920,713, 81 days on market, 10 months of inventory.
*Scotts Valley had 136 sales, average sales price of $938,137, 99 days on market, 11 months of inventory.
*Watsonville had 93 sales, average sales price of $635,777, 105 days on market, 48 months of inventory.
Housing slump could reset itself: This is from the Sep. 25th Wall St. Journal: “One dismal milestone may soon move into the housing market’s rearview mirror, potentially giving rise to hopes for a rebound soon. Homeowners owning $31.8 billion in sub prime adjustable-rate mortgages began paying higher interest rates this month, according to Moody’s Economy.com. That is the highest amount of sub prime ARM’s due to reset over a one-month period in this housing cycle. By December, resetting sub prime ARM's are forecast to drop to $25.2 billion. By the end of 2008, they will have fallen to $3.6 billion, because lenders have largely stopped making such loans to borrowers with spotty credit histories. The tsunami of interest-rate resets has been a big factor in the jump in defaults ruling credit markets this year. Optimists might argue that a record supply of homes for sale, combined with a peak in ARM resets, means the housing market is near a bottom.”
Forecasts say area economy will do better than 'sluggish' state in 2008: California will manage to avoid sliding into a recession even as the credit crunch and housing meltdown take their toll on jobs and growth. A number of economists and studies predict the state will squeak by with sluggish growth and revive toward the end of 2009, while the nation's economy endures what one forecast called a 'near-recession experience.' At the same time, Silicon Valley and the Bay Area are performing better than the state or nation because of rising global demand for high-tech products. 'The Bay Area economy is actually the bright spot in California,' said Ryan Ratcliff, an economist with the University of California-Los Angeles Anderson Forecast, which released a report recently.
Here is what is happening in our local Santa Cruz County market:
----------------------------------------------------------------------
September Monthly Statistical Highlights for Single Family Homes:
* Inventory down slightly 1.25% compared to September 2006, and decreased 1.6% from August 2007
* Sales down 42.8% compared to September 2006, and substantially down 43.3% from August 2007
* Days on the market increased to 90, month prior 73, one year ago 77
* Median home price decreased from the prior month to $699,000, and decreased 6.58% from September 2006
* Sales price vs.listing price ratio decreased to 95.99% from August
* Month's worth of inventory County wide equals 16, compared to 9 in September 2006 and 4 months in 2005
-----------------------------------------------------------------------
(These statistics are believed to be accurate but not guaranteed)
Big changes happened in our Santa Cruz County market for September, but to me they are just a continuation of the cycle over the past 6 or 7 years. Since that time, our local real estate market has been on a roller coaster ride. In 2001, the number of sales dropped over 26% from the year prior when we had 23.5% appreciation. Sales have continued to decline every year until 2004 when once again we had double digit appreciation and sales were higher than in the prior 25 years. Then as you know everyone jumped on that bandwagon and 2005 had still greater appreciation but with 20% fewer sales. So the inventory goes up and down but the average sales price is 64% higher today than it was in the year 2000.
Looking at the individual niche markets since January 2007:
*Aptos had 192 sales, average sales price $1,008,324, 103 days on market, 11 months of inventory.
*Capitola had 33 sales, average sales price $931,075, 103 days on market, 9 months of inventory.
*San Lorenzo Valley had 202 sales, average sales price of $556,413, 101 days on market, 19 months of inventory.
*Santa Cruz had 340 sales, average sales price of $920,713, 81 days on market, 10 months of inventory.
*Scotts Valley had 136 sales, average sales price of $938,137, 99 days on market, 11 months of inventory.
*Watsonville had 93 sales, average sales price of $635,777, 105 days on market, 48 months of inventory.
Housing slump could reset itself: This is from the Sep. 25th Wall St. Journal: “One dismal milestone may soon move into the housing market’s rearview mirror, potentially giving rise to hopes for a rebound soon. Homeowners owning $31.8 billion in sub prime adjustable-rate mortgages began paying higher interest rates this month, according to Moody’s Economy.com. That is the highest amount of sub prime ARM’s due to reset over a one-month period in this housing cycle. By December, resetting sub prime ARM's are forecast to drop to $25.2 billion. By the end of 2008, they will have fallen to $3.6 billion, because lenders have largely stopped making such loans to borrowers with spotty credit histories. The tsunami of interest-rate resets has been a big factor in the jump in defaults ruling credit markets this year. Optimists might argue that a record supply of homes for sale, combined with a peak in ARM resets, means the housing market is near a bottom.”
Forecasts say area economy will do better than 'sluggish' state in 2008: California will manage to avoid sliding into a recession even as the credit crunch and housing meltdown take their toll on jobs and growth. A number of economists and studies predict the state will squeak by with sluggish growth and revive toward the end of 2009, while the nation's economy endures what one forecast called a 'near-recession experience.' At the same time, Silicon Valley and the Bay Area are performing better than the state or nation because of rising global demand for high-tech products. 'The Bay Area economy is actually the bright spot in California,' said Ryan Ratcliff, an economist with the University of California-Los Angeles Anderson Forecast, which released a report recently.
Here is what is happening in our local Santa Cruz County market:
----------------------------------------------------------------------
September Monthly Statistical Highlights for Single Family Homes:
* Inventory down slightly 1.25% compared to September 2006, and decreased 1.6% from August 2007
* Sales down 42.8% compared to September 2006, and substantially down 43.3% from August 2007
* Days on the market increased to 90, month prior 73, one year ago 77
* Median home price decreased from the prior month to $699,000, and decreased 6.58% from September 2006
* Sales price vs.listing price ratio decreased to 95.99% from August
* Month's worth of inventory County wide equals 16, compared to 9 in September 2006 and 4 months in 2005
-----------------------------------------------------------------------
(These statistics are believed to be accurate but not guaranteed)
Friday, October 5, 2007
Forecasts say area economy will do better than 'sluggish' state in 2008
California will manage to avoid sliding into a recession even as the credit crunch and housing meltdown take their toll on jobs and growth. A number of economists and studies predict the state will squeak by with sluggish growth and revive toward the end of 2009, while the nation's economy endures what one forecast called a "near-recession experience." At the same time, Silicon Valley and the Bay Area are performing better than the state or nation because of rising global demand for high-tech products. "The Bay Area economy is actually the bright spot in California," said Ryan Ratcliff, an economist with the University of California-Los Angeles Anderson Forecast, which released a report recently.
The collapse of the subprime loan market unfolded with dizzying speed over the summer. Mortgage defaults and foreclosures soared as borrowers found themselves unable to make payments on adjustable-rate loans, major lenders announced layoffs and stopped making many loans, and the housing industry experienced a decline in sales and in prices in some markets. The question has been whether increasing mortgage-interest rates will shrink consumer spending and slow the economy even further. So far, the impact has been relatively small, according to the UCLA forecast and one released by the University of the Pacific Business Forecasting Center.
"The consumer continues to spend," said Sean M. Snaith, who helped prepare the University of the Pacific's California and Metro report, which foresees a decline in housing prices through 2008 that "will not remotely resemble a bursting bubble."
UCLA's Anderson Forecast on the California economy also found "little evidence that mortgage defaults have led to wider financial distress for consumers." Defaults on home loans will peak in the first half of next year, the UCLA study said. Real estate markets will continue to be a drag on California growth for at least a year to come. But the economy should return to more or less normal levels of growth in 2009. UCLA's economists are predicting "sluggish" growth but "no recession" in California, though they added that "the difference between the two is getting smaller all the time."
Nationally, UCLA foresees 1 percent growth in the national economy for the next two quarters, with spending on consumer goods shrinking some. Silicon Valley and the Bay Area are outperforming the state and nation in terms of job growth, said Stephen Levy of the Center for Continuing Study of the California.
----------------------
San Jose Mercury News Reporter, Pete Carey
September 12, 2007
The collapse of the subprime loan market unfolded with dizzying speed over the summer. Mortgage defaults and foreclosures soared as borrowers found themselves unable to make payments on adjustable-rate loans, major lenders announced layoffs and stopped making many loans, and the housing industry experienced a decline in sales and in prices in some markets. The question has been whether increasing mortgage-interest rates will shrink consumer spending and slow the economy even further. So far, the impact has been relatively small, according to the UCLA forecast and one released by the University of the Pacific Business Forecasting Center.
"The consumer continues to spend," said Sean M. Snaith, who helped prepare the University of the Pacific's California and Metro report, which foresees a decline in housing prices through 2008 that "will not remotely resemble a bursting bubble."
UCLA's Anderson Forecast on the California economy also found "little evidence that mortgage defaults have led to wider financial distress for consumers." Defaults on home loans will peak in the first half of next year, the UCLA study said. Real estate markets will continue to be a drag on California growth for at least a year to come. But the economy should return to more or less normal levels of growth in 2009. UCLA's economists are predicting "sluggish" growth but "no recession" in California, though they added that "the difference between the two is getting smaller all the time."
Nationally, UCLA foresees 1 percent growth in the national economy for the next two quarters, with spending on consumer goods shrinking some. Silicon Valley and the Bay Area are outperforming the state and nation in terms of job growth, said Stephen Levy of the Center for Continuing Study of the California.
----------------------
San Jose Mercury News Reporter, Pete Carey
September 12, 2007
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