Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Friday, April 21, 2006

Too Much Inventory = Price Declines


Sonoma Country readers... did you see that? If you weren't fortunate to be living here between 1992-1997 when home values declined, it looks like you may be lucky enough to see a repeat performance, or maybe it will be different this time....

"Bay Area home values are expected to decline next year because of rising interest rates, a glut of homes on the market and lower affordability levels, a housing economist said Thursday."

"Ken Rosen, chair of the University of California, Berkeley's Fisher Center for Real Estate & Urban Economics, said at a conference attended by dozens of real estate professionals.
Rosen did not provide exact numbers on how much he expects home prices to decline next year, or give a forecast for sales volume."

'"The decline (in home price appreciation) will happen because unsold inventory is getting so high," he said."

"In coming up with his outlook for next year, Rosen cited an increase in the number of homes on the market as measured by what's known as the unsold inventory index."

"The index is the number of weeks or months it would take to sell the supply of homes on the market in an area at current prices."

"California Association of Realtors chief economist, Leslie Appleton-Young said, "Only one factor can lead to a significant decline in prices, and it's too much inventory."'

"While home price appreciation has been slowing in recent months, the Bay Area is still one of the most expensive housing markets in the country."

"Only 12 percent of Bay Area households could afford the median price of $712,940 for an existing single-family house in December, according to association figures. In December 2004, the figure was 13 percent."

"If fewer people can afford to buy a home, that results in more homes on the market, which can lead to lower prices. Rosen said shrinking affordability levels are linked to household income being outrun by high housing prices."

'"Housing prices have risen dramatically relative to income. Low interest rates and easy credit is what caused housing prices, relative to income, to rise so fast," he said."

"But, Rosen noted, interest rates have started to rise in the last few months, which is slowing home sales."

'"We are going to see the market soften," he said."


Our Inventory:

Sonoma County MLS: 2828
(Bareis MLS)

Price Reduced: 564
(zip realty)

Sonoma County sample listings progression
3/20/06 = 1742
3/26/06 = 1766
4/03/06 = 1888
4/19/06 = 2828

Sonoma Valley MLS: 291
(GMAC)

Price Reduced: 66
(ziprealty.com)

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

In the past 30 days:

Sonoma Valley home values declined: -2.4%
Sonoma County home values declined: -3.6%

Home Sales in the County for March 2006: 459
March sales still fell 13 percent from March 2005 levels.

According to the Press Democrat article they claim there is a 3.5 month supply of homes on the market signifying a more "normal market." Someone's got to call BS on that... at the rate of sales using the March sales number we actually have a 6.16 month supply of existing houses on the market.

"Sales began to slow in September as buyers increasingly found themselves priced out of the market, the result of high prices and rising interest rates. Since then, prices have bounced up and down, leaving no clear indication of where the market is headed.In March, the median price rose to $575,000, up more than 3 percent from February. But it was level with the median price a year ago."

"One sign of the change in the market: The typical home sold for $4,000 under its asking price in March, Connell said. A year ago, homes normally sold for $5,000 above the asking price."

""You might need a couple of price reductions to get it sold," he said.Laws agreed that pricing is more critical now than it was a year ago, when bidding battles could drive up prices."If someone priced their home with last year's mentality of 'I'll get what I want,' it's not going to happen," Laws said. "Homes that are overpriced simply need a price reduction to become attractive, and yet attractively priced homes still get multiple offers."'

""There's much more negotiating between buyers and sellers now. Buyers are just much more conscious that they have more to choose from than a year ago," Connell said."

"More homes are staying on the market longer before selling. The supply of homes also is building as more homeowners look to sell during the busy sales season."


12 Comments:

At 4/21/2006 03:14:00 PM , Blogger Bubble-X said...

I hereby call BS on that. Everything passes normal on the fast path from awesome to crap! They forget to mention that!

 
At 4/21/2006 03:20:00 PM , Blogger Athena said...

I don't understand why more people who are right in the thick of things can't pipe up and call BS too!

The PD article itself was pretty useless as again all the quotes were from the real estate industry. I read online that they won some awards for reporting and photographs and had to ask myself if they really just gave themselves those awards. Certainly on the real estate front nothing they have reported in the last 6 years at least even passes the smell test for journalism let alone news. It doesn't even get into the neighborhood for news.

 
At 4/21/2006 05:11:00 PM , Blogger fredtobik said...

""The decline (in home price appreciation) will happen because unsold inventory is getting so high," he said.""


Hi Athena

Just thought I would point out the part about decline in price appreciation.

keep bloggign!

 
At 4/21/2006 06:21:00 PM , Blogger moonvalley said...

An orderly retreat??!! I know GU Krueger really well, the guy has had Thanksgiving dinner at our LA house more times than I can count..now I'll have to call him and ask what kinda crack have you been smoking?

 
At 4/21/2006 08:48:00 PM , Blogger Athena said...

Thanks Fred. ;-) But how much appreciation is going to decline? I say they give up at least 3 years worth of unearned appreciation. That is still giving them a couple of years of unearned gain... so yes... the appreciation will slow... but in actuality people have grown accustomed to appreciation that wasn't real... so when this bubble fully deflates, at the very bottom people will have lost several years worth of what they felt was entitled value...and it will feel like a bigger loss to those who heloc'd their gains... and who bought well above their means and can't get out from under their albatross with a garage.

 
At 4/21/2006 08:49:00 PM , Blogger Athena said...

See to it MV! Get an insider scoop!

By the way... ;-) did you see one of our favorite realtors who was advertising about not fearing bubbles has changed their advertisement? LOL... I am sure it had nothing to do with it being blogged about... but the new ad is quite different.

 
At 4/21/2006 11:12:00 PM , Blogger moonvalley said...

ooooo...was it Sothebys'?? Did you see that the house on West Spain was sold..hmmmm, that was fast.

 
At 4/21/2006 11:22:00 PM , Blogger Athena said...

no... not sotheby's... a different one who kept posting an ad that said: "what bubble? I'm not afraid of bubbles!" ;-)

But I did dedicate the whole price reduced list to the sotheby's ads... you know, the ones that are still inviting suckers to jump into this hot sellers market...?! LOL

But I DID see that w. spain house today with sale pending... I was pondering it the rest of the afternoon... and wondering just what kind of financing the person will be using and who it may be... I wonder if it is an out of towner?

So my daughter and I were in starbucks this afternoon reading and reading the RE section of the IT and when low and behold a gentleman sits down and begins a conversation with a guy who was busy on his laptop. They did the hi how are you... my name is... and so what do you do? The first guy answered that he was a bike tinker and fiddled around fixing things, but he dutifully asked the laptop guy what he does...

and he replied that he is in real estate. That he is a real estate agent, but right now he works on contract cleaning up properties and getting them ready to sell and hooking up buyers with sellers.

My daughter and I just about BUST out laughing in the place and had to hurry out. (this conversation was loud by the way, as we were clear across the room from them) and hot caramel machiatto almost came out of my nose. So of course we ran out and laughed out side all the way to the car.

We of course had been reading our paper dutifully and making fun of the POS listings and marking which open houses we will be attending this weekend when we became audience to this conversation.

Mr. Contract Realtor gave some details about what his compensation looks like too... he said because he works on contract he has to give a date for when the property will sell by... and if it doesn't sell by that time he does not get paid.

Interesting huh?

I am working on dissecting the wonderful real estate advice column we read. I have to admit I was almost laughing out loud just reading that by the time we heard this conversation. Had already been repeating choice snippets to my daughter about how to buy a house when you have no money... LOL ;-) I will hopefully finish my editing and comments in the morning and be able to post it.

But did you see it? bahahaha... it was priceless, and I think a real indicator of who those in the industry think are the last buyers they are seeking to keep their butter on their bread. ;-)

 
At 4/22/2006 07:38:00 AM , Anonymous tom stone said...

this is off topic...last night i dreamed that scott mcclellan announced that he had accepted a position as spokesman for the car,"i will be buying a condo in sacramento with my fiancee', jeff guckert,and will be moving to the capital of the golden state,this wonderful opportunity to lend my skills to an organization renowned for its integrity was too much to pass up,and besides,jeff was tired of wearing his ollie north mask when he visited me to avoid scandal."

 
At 4/22/2006 10:23:00 AM , Blogger moonvalley said...

ooooooo...you guys are bad

 
At 4/22/2006 10:28:00 AM , Blogger moonvalley said...

I just had a call last night from my friend in SoCal who sold her house last fall just under the wire. Of course we got around to bubble talk and she patiently explained to me how in special areas, like SoCal and up here in Sonoma where I live, it would just keep going up. I congratulated her on getting out in time.

 
At 4/22/2006 10:43:00 AM , Blogger Athena said...

bahahaha! Tom that is priceless.

MV... I talked to a good friend of mine who just moved home from D.C. and she just bought a place in Burlingame. I let her tell me all the gory details, the hassle of moving home without a job but yet buying this place in Burlingame and how stressful it was. She did get a job and her dad helped her with advice about how it would be a stretch to buy this place but she could do it... and I just sat there and listened. Couldn't bring myself to ask any questions that would get me into trouble. If I had been there in person I would have only been able to nod and smile and look away.

My daughter told me after I got off the phone that I had done real good! ;-)

 

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