Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Thursday, May 25, 2006

We Regret To Inform You...

... That Muckraking Journalism is Dead

-and has been replaced by lazy advertising subsidized glorified PR service masquerading as your local newspaper.

(New story From Michael Coit at the Press Democrat)

"The North Bay housing market is losing steam, but solid job growth continues bolstering the economy and should keep home prices from declining across the board, a senior Federal Reserve economist said Thursday."

What are these solid job growth numbers? Last time I checked, job growth was anemic at best... Sonoma County Economy & Job Lost and Found

I guess posting stats to sanity check these unsupported conclusions would be too much effort for the newspaper. Here are some recent facts, figures and numbers.

Let's review the facts again...

"Sonoma County experienced slow job growth throughout 2005, gaining only about 600 jobs in net, with the unemployment rate at 4.2% as of November 2005."

This is what was predicted for 2006:

"The county will add about 1,900 jobs this year, a 1 percent increase. That's not a lot of growth, but still an improvement over last year, when the county added only 1,000 jobs for a 0.5 percent increase."

* Employment peaked in Sonoma County in 2001 at the end of the tech boom when the county had 196,700 payroll jobs.

* By 2003, the economic downturn had wiped out 7,600 of those jobs, based on average annual employment.* Through 2005, only 2,400 had returned.

* The number of jobs in the county is still 3.3 percent, or 6,500 jobs, below 2001.

* In Sonoma County, the average wage is $42,171

* The Press Democrat study found that 58 percent of the new jobs created between 2003 and 2005 paid below the average wage.

* It is estimated that 60% of the new jobs added between 2001 and 2003 were lower-paying service jobs that are below the county’s average wage of $42,171 per year.

* Fifty-eight percent of new jobs between 2003 and 2005 paid below the average wage.

** Per-capita income fell 2.6 percent in 2005.

*Adjusted for inflation, per-capita income in 2006 will increase 1.9 percent, to $29,113.

* Only 7 percent of households could afford a median-priced home in Sonoma County at year's end 2005 compared with 12 percent a year ago.

* In 2005 a Sonoma County household needed a minimum income of $152,595 to buy the typical home, based on prevailing interest rates for a 30-year mortgage.

* In 2004, the minimum income needed was $124,650.

(Did you note the per capita income is only: $29,113? Did you note the average wage is $42,171? Did you note that of the new jobs created nearly 60% are paying below that average wage? Did you notice even if they ARE paying the average wage it still is nowhere near the income needed to buy a median priced home? Did you notice that even if you double the average wage it still isn't enough? ok... just checking)

* Adjustable-rate mortgages accounted for 69 percent of loans to buy Sonoma County homes last year and only 31 percent were 30-year, fixed-interest loans - a reversal from just two years earlier.

* Buyers had to increasingly stretch financially to purchase homes. A majority turned to interest-only and other adjustable-rate loans, often making little or no down payment when purchasing homes.

* As interest rates rise, and there are conversions from adjustable rate mortgages to fixed, defaults are likely to rise.

* Default notices are rising, signaling business instability and consumer insolvency.

Reasons foreclosure rates have increased:

* People stretched themselves financially to get into homes using adjustable rate mortgages, interest-only mortgages and more exotic loan products.

* Banks relaxed lending standards to make it easier for people to purchase homes; however, for some of those homeowners, once they have an unexpected financial hardship, such as medical bills, a lost job or necessary car repairs, they stop making mortgage payments.

* Many homeowners put little to no money down when they bought their homes and currently have little or even no equity in their home and thus nothing to fall back on. And in some cases, these homeowners then took out home equity loans or lines of credit and now owe even more.

* Homeowners have relied on the recent double-digit increases in home prices to build up equity in their home instead of paying down more in principal. As housing prices increase more slowly, many homeowners will not be able to rely on high home values to cover their debt loads.

'"The slowdown appears to have taken hold in the North Bay and across California, said Gary Zimmerman, regional economist with the Federal Reserve Bank of San Francisco."'

Ya think?

April Sales Data

"Home prices could level off, Zimmerman said Thursday at conference on North Bay real estate trends. But the housing market should hold its own unless there are major job losses and a flood of homes hit the market, Zimmerman said."

"The April median resale price was $596,925, the second consecutive month with little change compared with prices a year ago."

In Sonoma the median is: $618,000
Glen Ellen: $714,000
Sebastopol: $618,500
Petaluma: $649,500
Healdsburg: $655,000P
enngrove: $942,500
Cotati: $672,000
Windsor: $594,475
Rohnert Park: $580,000
Santa Rosa: $570,000

If you don't call this a flood of homes hitting the market... what DO you call it?

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
5/07/06 = 3052
5/13/06 = 3187
5/18/06 = 3310
5/25/06 = 3412

norcalmls

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
5/07/06 = 328
5/13/06 = 346
5/18/06 = 363
5/25/06 = 372

According to rereport.com's April Data for Sonoma County the average count for Days on the Market is: 85.

In April of 2005 it was 59

In Sonoma: 100
Glen Ellen: 217
Santa Rosa: 90
Rohnert Park: 69
Petaluma: 55
Sebastopol: 87
Penngrove: 98
Healdsburg: 90
Cotati: 132
Windsor: 75

“It takes a really big hit to the economy to get those falling prices."

According to Ziprealty the number of houses with recent price reductions is: 871

'"The good news here is we’re pretty strong,” Zimmerman told the conference at the Hyatt Vineyard Creek Hotel in Santa Rosa, presented by the North Bay Business Journal."

Even the sponsor for the Press Democrat's printed real estate informercials says this: (from a previously posted article)

"Increasingly, sellers must reduce their prices to attract buyers, agents and brokers said."Last year people got more than their asking price. This year it doesn't look like that and people need to price accordingly," said Rick Laws, Santa Rosa manager for Coldwell Banker, which prepares the monthly Press Democrat home sales report."

13 Comments:

At 5/25/2006 04:33:00 PM , Anonymous burbed said...

>>id you note the per capita income is only: $29,113? Did you note the average wage is $42,171? Did you note that of the new jobs created nearly 60% are paying below that average wage? Did you notice even if they ARE paying the average wage it still is nowhere near the income needed to buy a median priced home?

Truth be told, maybe you area will become the Hamptons - where the only residents are gardeners/etc living in guest houses or really bad condos. And that all the homes will be owned by the super wealthy as vacation homes ore etc.

 
At 5/25/2006 05:05:00 PM , Blogger Athena said...

Yikes... what a thought. I think we would be seeing more county migration out of town by the former middle class before that happens. That isn't happening yet. We currently have many an FB who fancied themselves middleclass who left other areas and came here only to indenture themselves to their house. Then we have the longtimers and generational residents who were just fine and dandy until this outrageous run up in prices from speculation. sonoma county has had pretty conservative real estate growth over the years... only the last 5 years did we see the ridiculousness that has plagued more economically diverse areas that could support faster appreciation. This too will bite Sonoma in the butt. We are not the new Hamptons. We are not the new Sausalito.

 
At 5/25/2006 11:07:00 PM , Anonymous Bluzer said...

Athena,

Heard a significant one from a reliable source today. It seems there is a very good chance that Cisco and/or Alcatel are in the process of moving out there operations from Petaluma. Both moving to Texas. Alcatel and Cisco employ over 800 folks - and these are good solid (many of them 100K+) jobs. Should either of these companies leave Petaluma think of what it does to the average wage - and affordability. To say nothing of the many more houses that will doubtless enter the market. A nightmare scenario indeed - but one with a very high probability of coming to pass. You heard it here first.

 
At 5/25/2006 11:27:00 PM , Blogger Athena said...

Bluzer Thank you! You're the best! That is a HUGE scoop!

I heard grumblings about that but had not had any independent confirmation. I used to work for Alcatel and a former colleague said they had already done a quiet round of layoffs of non-essential staff but that more would be on the horizon... as they were going to bail since there was no reason to be there anymore. It was no longer a recruitment lure, and there isn't a talent pool to sustain the industry. Sonoma County just isn't interested in turning out the next generation of rocket scientist engineers. Everyone is too busy studying for their real estate license. ;-)

Anyway...I know Cisco did a round about 8 months ago that was very quiet...

Texas would make perfect sense for both companies as the heart of the telecom/networking and switching technology industry is in Richardson, TX.

Used to have a HARD time recruiting those folks from there to go anywhere. Cost of living is cheaper. Wages for technical talent are not much less than here... so the workers get a lot more for their money, no state tax, bigger houses, Time with their families, and big ass yards with lots and lots of land. Texas just keeps on making it. ;-)

It is a great retention factor. Even when telecom shat the bed Tx was headquarters for the heavy weights and the largest losses were in more costlier satellite offices though Tx had her fair share of the collapse too.

That area also does something that Sonoma County hasn't caught on to yet... they home grow their talent for the industries they want to stay put... you have Texas Tech./A&M and UT turning out buttloads of engineering technical talent... just feeding the industry and folks from all over falling all over themselves to get into the schools and go work for TI, Alcatel, Nortel, SBC yadda yadda yadda... they have industry, and feeder talent pool. Something Sonoma County hasn't paid any attention to building. They keep walking around, heads where the sun don't shine muttering to themselves: "everyone wants to live here, eveyone wants to live here, its different here, you can't lose, real estate never goes down, everyone wants to live here, need more pixie dust."


ohh...ohh... ohh... pick me... pick me... here is more stuff that I found:

* Real Estate represented 50% of jobs created in the State of California 2004-2006

* Overall, Sonoma county now has 191,400 jobs, a gain of 2,900 jobs

* Since March 2005.The construction industry added 1,300 construction jobs over the past year

* Construction-related industries and temporary labor agencies, added nearly 1,500 jobs

* Construction jobs now account for one out of every 10 jobs in the county

* Tourism, added 800 jobs

* High-tech manufacturing, lost more than 300 jobs.

* OCLI has done some layoffs, and Agilent is planning to drop jobs by end of this year.

* Employment Development Dept. showed the county lost 600 jobs between February and March 2006.

242,800 Sonoma County residents are working, including those who work in other counties.

Some 10,700 residents are looking for work, resulting in the 4.2 percent unemployment rate.

These numbers do not include people who are no longer looking for a job or are working fewer hours than they would like.

 
At 5/26/2006 12:14:00 AM , Blogger Athena said...

ok... I just had to pilfer this comment by CBass from Ben's Place

It rivals the poetic and profane majesty of one of my posting heroes, SurferX

Comment by Cbass
2006-05-25 16:54:29

GRRRRRRRR.

This bear is getting angry. NBC Nightly News just did a story on foreclosures and ARMs. They said foreclosures are up nationwide by 79% this quarter over last year apperantly.

Then they did a piece on a family in Dallas. You know the type where they focus in on a family about to lose their house and make them look like good people who we should all help out.

Well funk them!!! They are the dumb ass that bought too much house. Their payment jumped from 1300 to over $2000 and they were like I am angry, confused, and upset. Like shit bitch whose fault is that??? F’in dumb ass! Be pissed at yourself!!!

Then the snake David Lereah appeared and had the gall to say that we could possibly see a decline in that trend if jobs pick up.

Shit bag we got the unemployment rate under 5% even with 12 million parasites in the country!!!

What a shit bird!!! He knows exactly what is going on and I could see it in his weasly little eyes.

That is all.


bwahahahahahahaha!!! :-D

 
At 5/26/2006 10:04:00 AM , Blogger marin_explorer said...

Lazy journalism: due to lack of data or perhaps "the experts" simply weren't cautious until recently? I have to hand it to Merrill for their long term, consistent voice, warning of risks as far back as 2004(pdf). Yet in 2004, most papers said you couldn't lose in real estate; there was no sense of alarm. Now it's 2006, and what's their excuse--they can't claim ignorance anymore. Perhaps we should just assume they're perennial morons? Or worse yet: craven tools of the NAR. (PD, IJ: If you're not--prove it.) When homebuyers (or journalists) don't do their homework, I say the criticism is well-deserved.

 
At 5/26/2006 10:33:00 AM , Blogger Athena said...

Better add the Index Tribune to that list ReSkeptic. They are bought and paid for by the community of real estate companies and mortgage companies. I am surprised when they even write anything, and then again surprised that they didn't just invite one of the agents to simply write it themselves. Oh wait... they do write it themselves. ;-)

 
At 5/26/2006 12:20:00 PM , Anonymous tom stone said...

in an area where "everyone wants to live" the traditional price for the median home has been no more than 4 times the median income...which leaves quite a bit of room for correction in sonoma county...when i look at traditional rent multipliers i get the same figures,160k-170k. this is 110-115 the monthly rent.as far as the reporting..does the I-T attribute their info to an individual,or are they like the press democrat"provided by coldwell banker" to avoid any potential problems...like individual responsibility for false or misleading statements?

 
At 5/26/2006 12:25:00 PM , Blogger Athena said...

You know, they have published so few articles as news that I can only remember one right now. Generally, in the real estate section of the Friday edition of the paper they have articles written by realtors. So the actual news and editorial staff does not bother covering real estate as news at all. I think they keep mum as they are on the take big time.

In fact... in a just a bit I need to venture out and pick up the new paper and see what we have this week. Hasn't been anything noteworthy in the last couple issues... just begging for buyers.

 
At 5/27/2006 10:12:00 PM , Anonymous Anonymous said...

Commercial development in Northwest Dallas (Collin and Denton counties) is booming. I wouldn't be surprised if Alcatel or Cisco moved here. I see large new office building cropping up every month. Job growth is around 5%, after a few years of stagnation. Richardson is not only a telecommunications corridor, they are poised to become the Silicon Valley of Nanotechnology.

The median price for a home here is $150K. Even if prices in Sonoma dropped by 50%, it would still be twice as expensive to own there. If a company is interested in attracting a cheap, young labor pool, they need to be in a market with affordable housing. Texas recently passed a bill to cut property taxes by 1/3, making owning qa house even cheaper, plus we have no state income tax.

California has so many things going for it - beautiful climate, mountains, great beaches, forests, etc. But, with the money saved buying cheaper housing elsewhere, one could afford to take a really nice family vacation to scenic CA every year and put the extra tens of thousands into savings.

 
At 5/27/2006 10:23:00 PM , Blogger Athena said...

Yes. Yes. and Yes. Those are things precisely on the mind of many companies who already know the benefits of being headquartered in less expensive locations. Companies that haven't known the benefits are exploring it that's for sure. TX & North Carolina are very difficult places to recruit from, they are hubs of specific technology talent, both well educated and with good work experience from local companies that take advantage of feeder schools and utilize them in their org. development plans. They also have compensation programs that are on par with California salaries. Salaries aren't determined by cost of living... they are determined by market competition... who is a company competing with for the same talent? How prevalent is the talent? etc... It has been this way for quite a while with the brand name companies.

What also some people don't know is that in the metroplex area Texas has some of the best schools out there. Keller school district for example, in my opinion puts any school district and every school district in California to shame. I don't even think we have a single private school in California that can rival what Keller does for its students. This issue is very important for well educated parents... they want their kids to also go to good schools and have opportunities and school programs... So the argument for going to a place like Texas

* for a name brand company
* at the same general salary
* with no state taxes
* be able to buy a really nice house for 1/3 of California prices and...
* send your kids to great schools for free
* where your property taxes go to your local community is an argument that is hard to beat for those who aren't emotionally attached to the idea of California.

 
At 2/23/2010 02:57:00 PM , Blogger Mark said...

I just stumbled across your article. Pretty hard to say that there wasn't a bubble, huh? Here's an article over at NorthBay Biz with their take on Real Estate coming back in a sonoma housing journal.

 
At 2/23/2010 03:01:00 PM , Blogger Athena said...

Thanks, Mark!

 

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