Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Monday, May 29, 2006

Prices Unhinged from Income Reality....

...Will Fall

(MONEY Magazine) - "Home sales are slowing. Condo prices are slipping. Sellers can't get their asking prices. And even real estate bulls are now waving the caution flag."

"If you're expecting a short-term gain, "you should be looking elsewhere," says Christopher Mayer, a Columbia University economics professor who not long ago argued that land shortages and rising populations would translate into ever-rising prices in "superstar" cities like New York and San Francisco."

"Clearly, it's time for a re-think, whether you're mulling over buying, selling, refinancing or remodeling a home or investment property. Or if you're just wondering, Is our house still worth what we think it is?"

"If you reside in one of the past decade's boom markets along the coasts or in the Southwest, brace yourself. Prices there were powered by two kinds of fuel: low interest rates and the willingness of buyers to pay up for the American dream."

That tank is almost empty.

"In Los Angeles today, the median dream goes for 10 times the median income. That's unsustainable no matter how creative banks are in coming up with new hybrid loans."

"Prices will flatten in most ex-boomtowns this year, and next year will be worse, says David Stiff, Fiserv's chief economist. "A lot of markets - particularly those where prices have increased dramatically compared with income - will see drops by late 2007," he says."

"The more unhinged prices are from local incomes, the more likely a fall."

"Since World War II, notes Stiff, the housing market and the economy have moved largely in sync. The caveat, of course, is that if the economy falters, housing will really start to look overvalued."

"So what do you do? If you've got a place you like, a mortgage you can handle and no plans to move or build a new wing, relax. But if you're active in the market, or you soon might be, rethinking is indeed in order."


At 5/29/2006 03:01:00 PM , Blogger Athena said...

MV... I was just looking at Montini's new plan. Apparently they are now offering 5 houses as part of the Affordable Housing Program of the City of Sonoma. (complete with resale restrictions)

Apparently 2 are avaliable to Loc Income buyers with a maximum income of $58k

and 3 are available for Moderate Income with a cap of $89k

They say home prices have not yet been established but will likely range from $300k-$400k.

Hmmm... interesting. Because that family friend I mentioned who almost bought a Montini place said that they were all sold and she was being offered one very choice house that had 3 people waiting to buy it already.

So I wonder just how many they actually did sell at their $900k+ prices?

At 5/29/2006 06:09:00 PM , Anonymous tom stone said...

LOW INCOME BUYERS! AT 58K! jeez the folks that only make the median income must be REALLY POOR.athena you could have a lot of fun doubleteaming a montini person asks about market stability,the other about the local economy,the first about inventory,the second aboutprices, responds to the salesmans answers with "that's incredible" the other with "unbelievable" is a bit cruel,but scummy crooks should be made to gibber publicly,imo.

At 5/29/2006 08:30:00 PM , Blogger moonvalley said...

OMG!!! I thought the average income in Sonoma county was something like 42k a year..what's with the 58k for LOC buyers??
Also, whilst cleaning out the garage and unpacking scads more boxes I stumbled across some Homes and Land of Sonoma RE magazines from back in '95.
Now this was right after the market tanked and so many people found themselves like so many people will soon find themselves..desperate.
If only all those who believe that Sonoma RE is magaical and never goes down could read these blurbs...let me quote a few examples.
Seller is Taking A Bath! Their loss is your gain. 3bd,2ba, formal dining room, living room family room..the picture shows a house looking like most of those going for upwards of 800k nowadays, the price:214k
Bank Foreclosure Sale! This house is woned by the bank and they want it SOLD NOW!! 3bd gourmet kitchen, formal dining room,family room 3/4 acre, with views. The bank will finance with as little as 10% down. Thehouse looks like one of those 1m. dollar wonders.The '95 Price: 349k
Both Owners Have Lost Their Jobs and Must Sell!
Custom Eastside home. 3bd,family rm,Master suite has attached den/nursery, large corner lot. Recently reduced. Today this house would be 1.5m easy. The '95 price:209k
Desperate Seller..(these are their headlines folks not mine)
must sell this Healdsburg home on 3.61 acres. Room for vineyard. Unbelieveable views. 3m??? Nah, the '95 price:369k..ask for Angelo.
40k Below Market!!! 5bd/3ba 3000sq ft house. Hardwood floors, cauffered ceilings, huge open kitchen with Italian tile, Jen-air stove. Master suite with fireplace, two other fireplaces in home on 1/2 acres.....Today 3 m ....'95 price: 385k
Eastside Treasure, 3bd 2bath secluded garden. What is now selling for 2m, in '95 was 349k.
Gorgeous esstside house, 3bd,2ba on landscaped 1/2 acre parcel with pool and spa.....387k.
I could go on and on, looking at these pictures I recognize houses that I have seen for sale lately with insane bloated prices, not a one of them is going for more than 400k ,of course that was the asking price who knows who they really sold for back in '95/96.
It happened once, prices inflated people got overextended it can easily happen again.

At 5/29/2006 08:37:00 PM , Blogger Athena said...

- loc

LOL... typo

At 5/29/2006 08:39:00 PM , Blogger Athena said...

That Healdsburg one... with Call Angelo was my uncle!

Save those... next coffee meeting I will bring my digital camera and snap pictures of some choice ones and we can play deja news. Perhaps even some of those in that flyer are on the market now and we can have some before and like before pictures of them as history repeats.

At 5/30/2006 01:00:00 AM , Blogger moonvalley said...

Will do! I've got a bunch of them. I only wish I had a time machine...oh wait, I do. It's called the future.

At 5/30/2006 10:19:00 AM , Anonymous tom stone said...

mv,can i please see some of those magazines?i would love to show copies to a couple of the people who have been telling me how real estate is always a good investment,get in anyway you can,it always goes up! altough most of those folks have been real quiet,or avoiding me the last month or so...i reminded one gal in february that only bulimics have their cake,and eat it too.did you notice all the price reductions in sunday's paper?

At 5/30/2006 11:48:00 AM , Blogger moonvalley said...

sure thing. We all ought to get together for another RE coffee. I knew those property magazines wouyld come in handy one day.

At 5/30/2006 12:13:00 PM , Blogger Athena said...

ok... Thursday MV & Tom. MV- you pick the place. Send by email... some place Tom can get a good cup of tea. ;-)

At 5/30/2006 04:56:00 PM , Blogger moonvalley said...

what time are we talking about on Thursday?

At 5/30/2006 05:11:00 PM , Blogger Athena said...

would have to be morning to mid-afternoon for me as I have a "to do" that evening.

At 5/30/2006 05:45:00 PM , Anonymous tom stone said...

that works for me,and don't worry about the tea,i can handle lipton's fine...starbuck's just has bad tea..and if that is a good spot i'll bring some peet's teabags.late morning,early afternoon works.

At 5/30/2006 08:49:00 PM , Blogger moonvalley said...

I'll have to check my schedule as we have conference calls with the Hollywood boys tomorrow and Thursday. I don't know what time we'll we free.


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