Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Sunday, April 30, 2006

It's the Data Stupid!

Interesting Sonoma County Facts:

* Adjustable-rate mortgages accounted for nearly 70 percent of all new purchase loans in the county in 2005 compared with 15 percent in 2001.

* Interest-only loans accounted for about half of all home purchase loans last year compared with 2 percent four years earlier.

* Also, popular are loans featuring minimum payment options and 40-year mortgages to keep down monthly payments.

The Press Democrat recycled an article they already ran last month and added some minor touch ups. Their claim is that it is now a balanced market.

Sometimes you just want to say... "Don't be a horse's ass!"
I mean really. If it were a balanced market, more than 7% of the population of the county would be able to afford to buy a median priced house. If it were a balanced market there would be buyers for all the houses sitting on the market. I do emphasize the word sitting...

If it were a balanced market the cost of ownership would roughly be in the same ballpark as the cost of renting. At this time the cost of ownership is at least double the cost of renting, and the prices of homes long ago outpaced wages and job growth in the county. They have lost their grip on reality.

It is not rational, reasonable or based in reality for home prices to double in five years. That is a bubble. The bubble peaked in August 2005. We are now on the decline. This is the stage known as the knife falling. Your father may have given you that advice when you were young... don't run with scissors and don't catch a falling knife.

Sonoma County
'"The pendulum is in the middle and it's more of a balanced market between the buyers and sellers. I think our market will show positive signs of growth this year," said Ross Liscum, a broker in the county for nearly three decades and co-owner of Prudential California Realty in Santa Rosa."

'"The California real estate market is beginning to experience the soft landing that we expect," said Leslie Appleton-Young, vice president and chief economist for the California Association of Realtors."

"A year ago, the county's housing market was hot with bidding battles that pushed prices to new highs, reaching $619,000 in August. But federal money managers have raised rates the past year to curb inflation. That, in combination with record high prices, is enough to push more buyers out of the market. Then rising mortgage rates and already sinking affordability triggered a slowdown."

"What has worsened is the ability of more buyers to crack into the homeownership ranks. Affordability has long been a hurdle to homeownership in Sonoma County and the Bay Area. With the run-up in home prices, only 7 percent of county households are able to afford the median home price here, according to the latest studies."

"The combination of high prices and rising interest rates has pushed buyers out of the market."It does hurt. That's part of the reason the market is slowing a little bit," said Dale DeGennaro, president of the North Bay Chapter of the California Association of Mortgage Brokers."

"Slowing price gains also have buyers more cautious about stretching their finances to get into a home. In the past, they could count on soaring prices to build up equity. Prices have flattened. Sales so far this year have dropped off more than expected."

"One reason could be buyer concern that interest rates will continue rising, making monthly mortgage payments even more costly."I think it's a psychological thing," said Robert Kleinhenz, deputy chief economist for the realtors' association."

"With appreciation slowing, foreclosure activity is on the rise because households facing financial trouble may have more difficulty selling homes. The number of default notices sent by lenders to California homeowners increased more than 15 percent at the end of last year compared with a year earlier."

"The number of foreclosure notices in Sonoma County increased 32 percent, according to DataQuick Information Systems."There's always going to be a certain amount of financial distress."

"Because of the rise in home values, much of that financial distress has been covered by the increasing amount of equity that people have had in their homes. That equity is now being created at a slower pace and default activity is inevitably on the rise," said Marshall Prentice, DataQuick president."

'"I still see us having a great year."said Jeff Schween, a Coldwell Banker agent. Sonoma County's housing market should sustain solid growth this year, Ross Liscum (realtor) said. Prices remain lower here than all but Solano County in the nine-county Bay Area region and Sonoma County remains a desirable place to live, he said."I don't think it's going to hurt up here because we're still a draw," he said."

Sonoma County MLS: 2898
(Bareis MLS)

Sonoma County listings progression
3/20/06 = 1742
3/26/06 = 1766
4/03/06 = 1888
4/19/06 = 2828
4/25/06 = 2868
4/30/06 = 2898

Sonoma Valley MLS: 315

Sonoma Valley listing progression
2/14/06 = 172
2/14/06 = 183
2/24/06 = 193
2/25/06 = 200
2/27/06 = 214
3/01/06 = 219
3/04/06 = 220
3/12/06 = 230
3/20/06 = 236
3/26/06 = 238
4/03/06 = 268
4/19/06 = 291
4/25/06 = 305
4/30/06 = 315


At 5/01/2006 09:33:00 AM , Anonymous tom stone said...

lessee,8-05 median $619k,sf chronicle says march '06 median $557 k,and prices are "flattening" and appreciation is "slowing". prices are flattening alright,like an elephant stepping on a mouse.anyone who can say appreciation is "slowing" with a straight face should be playing poker professionally,or working as a government spokesperson.

At 5/01/2006 09:37:00 AM , Blogger Athena said...

well I think our next project Tom, is how many real estate agents do we have in Sonoma County?

I didn't bother counting them in Sonoma Valley... but I did note something this weekend... How sad is it when the real estate section of the newspaper is thicker than the whole newspaper all put together and folded?

Everyone of course thinks their house is worth upwards of half a million dollars. ;-) funny how little it took to convince them of that, being their houses weren't worth 2/3rds of that 4 years ago!

At 5/01/2006 01:26:00 PM , Blogger Marinite said...

Email these people and ask if they will run a query for you for the total number of realtor listings in the area of interest:

At 5/01/2006 02:06:00 PM , Blogger marin_explorer said...

"...the total number of realtor listings in the area of interest"

Yes, and it seems that Marin is not underemployed for realtors.

At 5/01/2006 02:47:00 PM , Blogger Athena said...

will do... thank you!

At 5/01/2006 03:38:00 PM , Blogger Bubble-X said...

It's balanced only if you look at where the market was, not where it is, AND you're trying to sucker buyers in so you don't loose your realty job.

At 5/01/2006 05:48:00 PM , Blogger Athena said...

Don't you love that even in the face of the data... the numbers of homes for sale, the numbers of defaults, the interest rates, the number representing the % of households that can afford to buy... the totally artificial speculation driven price run ups that defied fundamentals and these guys still say... its going to be a great year?!?! o.k. Pollyanna!

LOL... ;-D

At 5/01/2006 07:00:00 PM , Blogger moonvalley said...

KSVYs RE show this afternoon was a hoot. We put it on driving back fromlunch. The English accented RE agent from Sothebys' who is the host of the show had a CPA on who was talking about house buying and financial responsibilty of all things! She talked , basically from her own experience of wanting a hohse so badly that she ignored the fact that she couldn't afford to keep it. Amidst all the talk of falling sales the RE lady was totally silent, it was great.

At 5/01/2006 09:14:00 PM , Blogger Athena said...

bahahahaha!!!! MV- you have GOT to start taping this stuff! Priceless! :-D

At 10/06/2007 12:34:00 PM , Blogger Omar Cruz said...

This comment has been removed by a blog administrator.

At 10/06/2007 01:51:00 PM , Blogger Athena said...

just say no to costa rica realtwhore spam


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