Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Monday, February 27, 2006

High Priced Housing, Slowing Sales, People Moving? Oh... was this a Secret?





"Sales of new single-family homes declined to a 1.233 million unit annual pace from an upwardly revised 1.298 million unit rate in December, the Commerce Department said."

"The report illustrates the fact that housing is not defying gravity and is not likely to do so this year," said Anthony Chan, chief economist at JPMorgan Private Client Services. "We're going to see chipping away of housing."

"Sales of new U.S. homes fell 5 percent in January to their slowest pace in a year while the number of homes on the market hit a record high."

"The number of new homes available for sale at the end of January rose to a record 528,000. At the current sales pace, that represented 5.2 months' supply -- the largest inventory since November 1996, the government data showed."

"The U.S. housing market has begun to show signs of cooling after a five-year rally that shattered sales and construction records, and sent prices soaring more than 50 percent on average nationwide."

"Home prices, however, have been more resilient, and economists chalk that up to stubborn sellers trying to cash out at the market's highs."


Meanwhile... in the Bay Area...

"The Bay Area Council's annual poll found that concerns about housing ranked as the region's second-most-vexing problem, behind transportation woes. "

"Two out of five residents of the nine-county region have given serious thought to moving away -- mostly because of high housing costs, according to a survey released today by a business and public policy group. "

"Even with some recent cooling in the local housing market, the price for a middle-of-the-road single-family home hovers around $628,000, or about triple the national average. That means many families with two income-earners are having a hard time managing. "

"In 1996, as the real estate market began to recover from the early 1990s recession, only 1 percent of respondents cited housing as a big concern."

"The annual survey, which takes the public's temperature on a range of issues, echoes similar findings by the Public Policy Institute of California, which in 2004 found that exorbitant home prices were forcing 31 percent of those ages 18 to 31 to ponder moving away from the region or out of the state."

" There's a ripple effect as people leapfrog from the Bay Area to the interior parts (of California)," said Rob Wiener, executive director of the California Coalition for Rural Housing. "As housing becomes less affordable, people who earn wages in those communities have to move farther out as well." Some of them don't stop at the state line."

"Such sentiments worry Wunderman, whose group represents many companies that are struggling to recruit workers to the high-cost Bay Area. At the same time, Wunderman and others say Northern California is increasingly divided between the wealthy and not-so-wealthy -- particularly teachers, firefighters and midlevel managers who are priced out of the market or who must endure long commutes to far-flung suburbs. "

Survey Questions:

"Question: If you have seriously considered moving out of the Bay Area, how much of a factor is the high cost of housing in your considerations about moving -- a major factor, a minor factor or not a factor?"

Major factor 70%
Minor factor 15%
Not a factor 15%

"Question: Which of the following two ways do you favor more to address the shortage of housing in the Bay Area -- building more new homes and apartments on vacant lots or underused spaces within existing Bay Area communities; or building more homes on land outside existing Bay Area communities?"

Infill housing 58%
Expand into rural areas 25%
Neither 6%
Both 6%
No opinion 5%

Source: Bay Area Council

4 Comments:

At 2/27/2006 11:30:00 AM , Blogger marin_explorer said...

Two out of five residents of the nine-county region have given serious thought to moving away

"Was this a secret?" Exactly. It's funny how the media is just picking up on this story, when people began moving out after the dot-bomb. Population stats have suggested this exodus for a few years. I suppose the tech downturn masked the real issue?

So, despite lax lending standards, home prices are obviously still a huge issue. I suppose that tired realtor argument that a strong economy supports these prices is finally debunked?

How many college grads (or let's be honest: many seasoned professionals) want to work here for the paltry reward of living in some dump? Despite local hubris that the SF Bay is forever the center of innovation, what will keep local companies from moving to locations where workers are better motivated for far less? Something's gotta give.

 
At 2/27/2006 11:50:00 AM , Blogger Athena said...

actually I saw something in the CNN story about the Fed acknowledging that the low interest rates mopping up the dot.bom mess created this new issue... and I love how the commentator praised Heli-Ben for also being the sort of Fed to mop things up rather than keep the bubble from popping.

1. it acknowledges further the low interest rate created bubble...

2. it actually serves as a warning- that people are going to be hammered by the coming mess... and the fed will react only AFTER they see how much collateral damage has been done to average joe who believed the counterintuitive magical thinking that real estate only goes up, and you can't lose.

We are going to see who the losers are and just by the comments alone about mopping rather than popping... that should be a caveat to all those who have been starring in the financial follies for the past 5 years.

3. The comments also indicate that whatever the fed does to mop up after they see how big the mess actually is... also lends itself to being a benefit for those who have stayed OUT of the financial follies... and will likely be more terra firma for the economy.

 
At 2/27/2006 12:26:00 PM , Blogger Marinite said...

3. The comments also indicate that whatever the fed does to mop up after they see how big the mess actually is... also lends itself to being a benefit for those who have stayed OUT of the financial follies... and will likely be more terra firma for the economy.

My fear is that those of us who had enough sense to stay out of this mania will be called upon to bail out (with our tax dollars and savings) the legions of the mindless brood that could not resist their animal biology to join the herd.

 
At 2/27/2006 01:38:00 PM , Blogger Athena said...

My fear is that those of us who had enough sense to stay out of this mania will be called upon to bail out (with our tax dollars and savings) the legions of the mindless brood that could not resist their animal biology to join the herd.

well, then there is that... :-O That is definitely a possibility- especially if we see financial institution failures... however, I think the financial growth and pace post rock bottom crash will be a more sane and reliable- seeing how the economy grows sans getting in debt up to one's eyeballs will expose areas of opportunity and where we really are behind the curve in having a stable economy. I mean seriously... if all it takes to artifically prop up the economy is lax credit standards and magical sound bites of buy buy buy, real estate only goes up, you can't lose, buy now or be priced out forever to give this country the appearance of prosperity... we are in trouble,... and the only way to get on a course to real economic growth is to expose the weakness and fix it. (mop it up...) ;-)

 

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