Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Monday, August 28, 2006

Downturn Hit Harder & Faster...

"Lockboxes hang from front door handles. Some houses are obviously empty, though lawns and shrubs remain well groomed. Others are immaculately staged with plush furniture, lavish drapes and homey touches."

'"Price reduced" and "price reduction" are common inducements on the signs in front."

"It is a scene repeated across Sonoma County, from neighborhood to neighborhood, cul-de-sac to cul-de-sac. Behind those for sale signs are sellers who have put their lives on hold as a market that stayed red hot for so long has turned cold."

"And for every owner, the cooling trend could influence a lifestyle built on the financial bedrock of their home. As homes rocketed in value, the new riches changed spending habits."

"Once viewed simply as shelter and a piggy bank for a modest retirement, the home became the path to a financial windfall. As interest rates fell and home sales rose, values went up and deals abounded to draw money out of homes like an ATM for cars, remodeling projects and other consumer spending."

"Some forgot that home prices could go down, as they did in Sonoma County in 1993 and 1994, when prices dropped a total of 4.2 percent over those two years. That downturn lasted four years."

"Now the market has reached a kind of psychological standoff, withsellers reluctant to accept the reality of falling prices and buyers holding onto the expectation of even deeper cuts. Now, homeowners face an uncertain future."

"Selling a home in Sonoma County is more challenging than at any time in the past decade. Sales dropped to an 11-year low and homes on the market climbed to a 10-year high in the latest Press Democrat monthly sales report."

"The housing downturn has hit harder and taken hold faster than expected, catching many homeowners off guard and forcing price cuts as they wait months for homes to sell."

"Gone are the days of selling a home in a week or two in Sonoma County."

"And no more are the days of pricing a home a percent or two above what the neighbor's house sold for a month earlier."

"Homeowners are hanging onto what one broker describes as mental equity - the price a house might have sold for several months or even a year ago. "A year ago, you got away with murder. You sold a house no matter the condition," said Sandy Geary, broker and owner of Remax North Bay Realty in Rohnert Park."

'"Buyers have almost too much choice. I have buyers who come back and every week something is cheaper," Geary said.Price cutting is accelerating. About 50 sellers on average each day reduce prices on listings in Sonoma County."

"A better strategy is to set the initial price under comparable homes in the same neighborhood. Even then, prepare to wait two to four months for an offer that still could be for less money."

"A year ago, buyers were jumping into homes. Very low interest rates and an array of adjustable and interest-only loans often allowed first-time and move-up buyers alike to buy more expensive homes once out of reach."

"Buyers aren't finding the financing deals available a year ago and more buyers no longer can afford to purchase a home because monthly mortgage payments are more expensive."

"There also are fears the house they buy today might go down in value just months later.So there has been a sort of stalemate between buyers and sellers."

"It is a change reflected not only on the North Coast, but across California and the nation. Sales are in steep decline and supplies of unsold homes are mounting, particularly on the coasts where housing inflation has been most dramatic."

'"Today's market is slowing as sellers maintain often unrealistic pricing expectations and buyers have more properties to choose from," said Vince Malta, president of the California Association of Realtors."


At 8/28/2006 12:57:00 PM , Blogger marin_explorer said...

"Some forgot that home prices could go down, as they did in Sonoma County in 1993 and 1994..."

More than just some observers "forgot" that. Do we know of any regional papers who ballyhooed real estate--until it was just too obvious to deny? However, a downturn (or crash) has been obvious for almost a year, so where's the big surprise?

Now that the market has completely stalled, I'm hardly surprised the CAR has changed its tune, where the once "unstoppable" market now needs to adjust their "unrealistic price expectations" (gee,where did they get that?). Whether it's in "New Sausalito" or the old one, this will play out the same (imo).

At 8/28/2006 02:28:00 PM , Anonymous Anonymous said...

just got out of a meeting with a broker with 15 years experience who told me he expects the price decline to level out by the end of this year and for the downturn to be no more than 10-12%.then a recovery in 2 more years.he was serious.i asked him about resets.not a big deal according to him.the fact he has a spec house for sale might affect his judgement,but i don't think it is consciously doing so.from talking to a number of brokers,i think his is a consensus opinion among local brokers,with the exception of a few with a more skeptical,and thoughtful outlook.hope he sells his place soon,he did a nice job on it and is a nice guy,but i don't think i'd bet that way.

At 8/28/2006 02:41:00 PM , Blogger Lisa said...

How can prices stay anywhere NEAR current levels once appreciation is off the table? It's been that expectation of guaranteed riches that's been the motor for price increases. Without that, how many people are going to be willing to have 40% of their take home pay going to a mortgage??

At 8/28/2006 04:06:00 PM , Blogger Marinite said...

a downturn (or crash) has been obvious for almost a year, so where's the big surprise?

And will bloggers get any credit? Has the bloggosphere proven itself superior to the MSM? Nope. If anything, we'll get blamed.

At 8/28/2006 11:46:00 PM , Blogger Athena said...

Anon said...just got out of a meeting with a broker with 15 years experience who told me he expects the price decline to level out by the end of this year and for the downturn to be no more than 10-12%.then a recovery in 2 more years.he was serious.i asked him about resets.not a big deal according to him.

I totally believe this is true. There are quite a few in town that believe themselves. I heard a newbie real estate agent say that people should hurry up and buy now while there are so many houses to choose from, and that waiting for prices to drop is stupid... real estate never goes down in price.

When reminded about the most recent downturn in the 90's she actually said it didn't really happen... it was a little slow for a bit but prices really didn't come down... and if they did it was no more than 5%.

I gave an example of a friend's house that sold for 180k in 1993 and 119k in 1997 and then 150k in 1998...

only 5%? really?

From what I remember there were many more examples of houses like this one, in fact MoonValley had posted some actual advertisements from the last crash. Seems prices declined much more than 5% but apparently the new agents are using the "new math" here in the new sausalito. :-D

I also noticed the latest broker ads in the paper are also appealing to FB's and promoting more I/O loans with a low teaser rates for 5 years... they are actually recruiting the FB and saying refinance now into this option before your current loan resets... they should add... "before your property value tanks."

At 8/29/2006 09:57:00 AM , Anonymous Ben said...

One of the most annoying things about this housing bubble, has been the endless qoutes from "experts" in the real estate business. Asking them about the direction of the market is like asking a butcher his opinion about vegeterians.
When listening to peoples opinions I generally try to determine how educated they are. Realtors, I've come to find out are pretty uneducated. That's why I get so annoyed when the MSM quote realtors opinions.
To become a succesful realtor requires a high level of denial. When asked about the direction of a market, the ability to change one's thinking from "what do you think the market will do" to "what do you hope the market will do" is paramount. That's how they manage to stay employed.
Unfortunately this bubble has gone on too long to negotiate a soft landing.
Housing prices will decrease significantly.
Realtors and their cohorts in the mortgage industry will go the same way.

At 8/29/2006 10:07:00 AM , Anonymous tom stone said...

hi athena,some radio ads actually do say "get your equity out now before prices fall farther..." i heard a radio ad last friday near sacto advertising a "half off sale" on million dollar homes in lincoln,by jts builders,it played every 5 minutes.also i looked at a 6 week old appraisal of a fountain grove home showing a value of $869k,by an honest appraiser...looking at listings in the area i think it would sell now for $780k,which is not a 5% decrease either.i see one heck of a lot of people chasing the market down,and hitting the wall when it becomes a short sale.this happens pdq for many who used their homes as atm's or bought with 100% financing and neg am loans.speaking of which i see that in q4 of 2005 47% of WaMu's net profit was unpaid accrued interest on neg am loans...that is not "pie" in the sky,but it will hit hard when it lands.we are not far from total screaming panic soon as these folk's can no longer afford xanax and stoly it's gonna get loud.

At 8/29/2006 10:33:00 AM , Blogger Marinite said...

This comment has been removed by a blog administrator.

At 8/29/2006 10:48:00 AM , Blogger Marinite said...

which is not a 5% decrease either

Prices can drop 30% (for example) across the board and the market's median value can still be positive or just a small drop of 5% if the mix of houses that sold changes towards more expensive houses. This is not a mystery. The more skewed the sales distribution is the easier this can come about. Housing sales in Marin, Sonoma, Napa are hugely skewed distributions...skewed towards the lower end of pricing.

At 8/29/2006 01:58:00 PM , Blogger Athena said...

remember that e. macarthur property we discussed a while back that had a sales history not passing the smell test?

I believe Reskeptic let us know it sold... however, it is back on the market again. $1.28 or something like that.

Listed with the same real estate service, but two different agents are selling it this time... hmmm...


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