Business is Tough
"Bay Area home prices rose by less than 10 percent in March, the first time in more than two years that appreciation rates dipped into the single digits and further evidence of a gradual slowdown in the region's once-blistering housing market."
"The number of houses and condos sold, meanwhile, declined for the 12th consecutive month, as recent interest rate increases put a damper on buyers' spending power. A total of 9,745 homes changed hands last month, nearly 14 percent below March 2005's tally of 11,310."
“Sales were down 22.7 in Napa County, 22.5 percent in Solano County, 18.7 percent in San Mateo County, 17.5 percent in Marin County, 15 percent in San Francisco, 14.9 percent in Alameda, 12.2 percent in Sonoma County, 11.7 percent in Contra Costa County, and 8.9 percent in Santa Clara County.”
“The year-over-year decline was the twelfth in a row.”"The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,958 in March. That was up from $2,889 in February, and up from $2,636 for March a year ago. Adjusted for inflation, mortgage payments are 18 percent higher than they were at the peak of the prior cycle sixteen years ago.”
The Foreclosure Report
"California reported 11,073 properties entering some stage of foreclosure in March, the second most of any state, and the state’s foreclosure rate registered slightly above the national average thanks to a 22 percent increase from the previous month."
"In February, there were 3.03 million previously owned homes for sale, a level not seen since 1991, when 1.91 million homes were up for sale, according to the National Association of Realtors."
“Business is tough. The inventory of available properties has increased,” said Martin Bouma, a real estate agent. “You are looking at (the number of) buyers going down, and inventory is going up.”
"Spring is typically the busiest time of the year for home sales. But with mortgage rates rising and sales slowing, sellers find they have to work harder to get a sale."
"The first signs of an ebbing in demand appeared last summer and have continued into this year. Applications for home loans, a gauge of future home sales, are down 20 percent from last year, according to the Mortgage Bankers Association."
"The process of selling a home, meanwhile, is taking longer, a trend reflected in heightened demand for lengthier rate locks, a guarantee offered by lenders to keep the rate on a mortgage at a set level for a certain period. In recent years, rates for mortgages were guaranteed for 30 to 45 days because homes could be sold quickly. Now, borrowers ask for 120-day rate locks."
"While some homes can be taken off the market place by their owners, home builders cannot afford to hold on to empty homes. So, some have offered their own incentives, such as helping to pay mortgage closing costs or upgrading kitchen appliances."
"“You can have the biggest circus on the street, but it comes down to price and having the right price,” said Bouma."
"Maria Janeidas, an information technology consultant based in Manhattan, looked at about 24 homes in six weeks on the north shore of New York’s Long Island, but didn’t find any bargains."
'“There is still a disparity between what a seller believes their home is worth and what buyers are willing to spend,” Janeidas said."
Voice of San Diego
"California's wealthy investors are choosing to invest less and less in real estate, a trend that local experts say should serve as a beacon to all real estate investors."
"In San Diego, financial advisors who work with some of the region's wealthiest people are advising their clients to sell their investment properties. After a monumental run-up in home prices, they say, their clients are weary of holding onto investments too long and repeating the past mistakes of the dot-com bubble."
"Nationwide, only 21 percent of wealthy people who plan on making additions to their investment portfolios intend to invest in real estate, according to data collected by the Phoenix Affluent Marketing Service, a New York-based market research and consulting firm. That figure is a lot lower in California, where only 16 percent of wealthy investors said they would be buying more real estate, down from 21 percent a year ago."
"If wealthy investors are choosing not to rely on real estate for a good return, their decision is probably based on sound economic advice. Most wealthy real estate investors have made a good profit on their properties over the last few years, but as price increases slow, sales drop and inventory spikes, many of those speculators are choosing to invest elsewhere in order to avoid any risk of a downturn in home values."
"The message some financial advisors in San Diego are giving wealthy investors is clear: Those clients who can afford to sell their investment properties should do so."
'"If you have an investment property, this is a wonderful time to get the heck out," said Richard Ashburn, an investment manager and financial columnist in La Jolla."
"Ashburn said that unless a residential property is paying for itself through the rent it is generating, an owner should sell. Any owner paying $1,000 or $2,000 a month to cover the mortgage payments and taxes on their investment property should realize that it's time to get rid of that investment, he said."
'"If you're in a negative cash flow situation, you're nuts to hold onto it," he said."
"According to the latest Experian-Gallup Personal Credit Index(SM) survey, 71 percent of consumers say it is likely that a housing bubble and collapse of prices could occur in the United States within the next year."
"Twenty-four percent say such a housing bubble is not likely. In contrast, a much smaller number of consumers, 32 percent, expect the collapse of a housing bubble within their own area in the next year, and 65 percent say it is not likely."
"A third of homeowners have a home-equity loan or line of credit. The main reason for taking out an equity loan or line of credit was to finance home improvements, mentioned by 43 percent of borrowers. Another 10 percent cited debt consolidation as the reason for such a loan. Credit card debt, mentioned by 4 percent of borrowers, followed by an emergency (4 percent), education expenses (3 percent) and medical expenses (2 percent), round out the specifically named reasons. Another 30 percent cite some other reason."
'"Increasing home prices and the ability of consumers to cash out their growing home equity has been a key driver of consumer spending over the past several years," said Dennis Jacobe, chief economist for The Gallup Organization. "As the housing market slows and housing prices stabilize, consumers are less likely to draw on their home equity, suggesting consumer spending will also decline."'
"Consumers became more negative about their credit situation this past month, as the Experian-Gallup Personal Credit Index declined by nine points to 84. The decline comes equally from concerns about the present and future. Only 15 percent of consumers say now is a good time to borrow more money, down from 20 percent last month. Future concern about extending debt also contributed to the drop in consumers' feelings about their credit, making the debt extension issue -- now and in the future -- account for more than half (five points) of the overall nine-point decline in the index."