Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Wednesday, March 01, 2006

Indentured Servitude for the Mortgaged Masses

CAR released the January 2006 Median Price numbers today. Remember when Sonoma County's median price at the end of 2005 was $614,000 and 7% of the population could afford to buy a home?

Sonoma's median price at the end of 2005 was around $686,000 - So fewer than 7% of residents could afford to buy a home.

What do you think that % is going to be now?

Sonoma County
January 2006 median price: $562,500.00
January 2005 median price: $480,500.00

YoY change = 17.1%

Petaluma
January 2006 median price: $620,000.00
January 2005 median price: $555,000.00

YoY change = 11.7%

Rohnert Park
January 2006 median price: $489,000.00
January 2005 median price: $450,000.00

YoY change = 8.7%


Santa Rosa
January 2006 median price: $520,000.00
January 2005 median price: $475,000.00

YoY change = 9.5%


Sonoma
January 2006 median price: $785,000.00
January 2005 median price: $440,500.00

YoY change = 78.2%

Windsor
January 2006 median price: $642,000.00
January 2005 median price: $467,000.00

YoY change = 37.5%


Meanwhile the number of Homes for Sale in Sonoma priced under $950,000 reached 160 today.

Homes priced above $950,000 rose to 59.

I received a listing of more new price reductions as well. Stay tuned as I verify which homes received the reductions and total the price changes. That 78.2% gain may be the kind of height that makes for a most painful fall.

When 0% can afford to buy a home do they sign up for mortgage payments for life and sign away their the earning potential of their first born child?



I went over to Ben's place tonight and asked....

"so what happens when 0% can afford to buy a house because joe shmo houseATM mortgage owner pumped so much helium into his bubble looking for his next HELOC?"

Being that I can always find a reliably smart group of people there, it was but mere seconds before my question was answered.


" Comment by Auction Heaven in '07
2006-03-01 23:43:32

This happens at 0%…

Dated February 28th, 2006.

They said it couldn’t happen there, because it was
different.


Housing market in Shanghai
collapses


American homeowners wondering what follows a housing bubble can look to China’s largest city. Once one of the hottest markets in the world, sales of homes have virtually halted in some areas of Shanghai, prompting developers to slash prices and real estate brokerages to close thousands of offices.

For the first time, homeowners here are learning what it means to have
an upside-down mortgage — when the value of a home falls below the amount of debt on the property. Recent home buyers are suing to get their money back.

Banks are fretting about a wave of default loans. Shanghai’s housing bust comes after a doubling of prices in the previous three years, a run-up fueled by massive speculation.

With China’s economy booming and Shanghai at the center of
worldwide attention, investors from Hong Kong, Taiwan and elsewhere were buying as fast as buildings were going up. At least 30 percent to 40 percent of homes sold were bought by speculators, says Zhang Zhijie, a real estate analyst at Soufun.com Academy, a research group in Shanghai.

“Ordinary people had no option but to follow the trend,'’ Zhang
said."




on another note...

Isn't it getting tired to say "it can't happen here?" How about the comparisons with the "last housing bust" that "wasn't that bad?" Is anyone else getting tired of these faulty comparisons?

How many know that indirect and direct effects of housing on US GDP is about 3%?

If you take away the housing market of the last four years do you know what you get?

Probably somewhere around nada growth, bupkus, maybe somewhere near zip.

Does anyone know how much credit has been created in the last 20 years in the US?

$40 trillion DOLLARS.

Is there anything risky about this?

Only if the credit bubble collapses under the strain of its own load. But that won't happen right? Because this time its different? Right?

Joe Shmo has been using his house as an ATM and spending himself silly. The US has reached a negative savings rate, and the masses are in debt up to their eyeballs.

There is more consumer debt now than the last "crash."
There were ARMs in use, but the crash was not compounded by this because they were not commonly in use for the typical homedebtor. Not so today.

Now, last year alone 82% were ARM loans in the bay area. 69% in Sonoma. A large percentage those are I/O or negative amortization loans.


Sonoma ARMs
2003 - 36.8%
2004 - 59.4%
2005 - 69%

Anyone notice any significant differences between that last crash and this one yet?

12 Comments:

At 3/02/2006 01:12:00 AM , Blogger moonvalley said...

Yow! Great work! Scarey too.

 
At 3/02/2006 09:08:00 AM , Blogger marin_explorer said...

"...At least 30 percent to 40 percent of homes sold were bought by speculators"

It's been a global mania, with perhaps global implications (that's really scary). And, I'm sure there's a "hidden" foreign investor segment who bought in the greater bay area. Once things really hit the fan in Asia, do we expect those investors to hold on to properties here? Anyone think this could get really ugly?

 
At 3/02/2006 09:18:00 AM , Blogger Athena said...

I heard from a guy I was talking to in the store the other day that an asian investor came and bought his whole subdivision in Santa Rosa a few years ago. (out off stony point road) A whole subdivision? good lord!

 
At 3/02/2006 09:24:00 AM , Blogger marin_explorer said...

A whole subdivision? good lord!

LOL...that's what happens when someone doesn't know the market. Anyone seen SR inventory lately?

 
At 3/02/2006 12:46:00 PM , Blogger Marinite said...

"so what happens when 0% can afford to buy a house because joe shmo houseATM mortgage owner pumped so much helium into his bubble looking for his next HELOC?"

I asked the same sort of question a while back on my own blog and I got back snobbish answers like "well, if you can't afford it or you are unable to earn the kind of money to afford it (you loser), then move to where you can afford it." Marin is full of snobs so I wasn't surprised by the answer.

 
At 3/02/2006 12:47:00 PM , Blogger Marinite said...

A whole subdivision? good lord!

Yes, well the dollar is not worth much outside of the US anymore.

 
At 3/02/2006 12:51:00 PM , Blogger Marinite said...

Where did you find the number of ARMs in Sonoma? I want t find it for marin.

 
At 3/02/2006 01:45:00 PM , Blogger Athena said...

I found it on an economic development department study I found by yahooing the search terms. Let me look tonight and see if I can find some for you.

as for the snobby answers to teh 0%... must be from wholly uneducated folks. I mean look at it this way, when you can make 100k a year and live in marin and sonoma and you can't afford to buy a liveable house, then you have a problem.

When I say affordable housing I don't mean affordable to the people who spend their lives making 25k jobs in dead end careers who have never forecasted a financial goal for themselves.

I mean affordable to the kind of people who do think about their prospects, do push themselves to be in good careers, work hard and make probably more money than their parents ever dreamed of...

I know that I make more than my parents ever did put together. But a house in my town still is not "affordable" to me. I can qualify for a 30 yr fixed just fine... but the economics of the price and the payments are not affordable to the standards I have set for what makes financial sense to me.

So the snobs who have such HUA attitudes can KMA.

 
At 3/02/2006 03:05:00 PM , Blogger moonvalley said...

the economics of the price and the payments are not affordable to the standards I have set for what makes financial sense to me.
ditto that for me! Just because one can do something doesn't mean one should.

 
At 3/02/2006 03:39:00 PM , Blogger Marinite said...

This comment has been removed by a blog administrator.

 
At 3/02/2006 03:46:00 PM , Blogger marin_explorer said...

This comment has been removed by a blog administrator.

 
At 3/02/2006 03:52:00 PM , Blogger Marinite said...

I also have this one guy who acts like a very immature 20 year old (and is a definite marin snob) on my blog who keeps logging in as either "himself" or as anonymous and thinks he is fooling everyone and spams us with his BS. It is very annoying. I hope he doesn't come here.

 

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