Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Thursday, August 24, 2006

A Little Scary?

"The housing market is deteriorating by the month."

In the latest and strongest indication that the home buying and selling frenzy is over, the National Association of Realtors reported yesterday that sales of previously owned homes fell to the lowest level in July in more than two years, prices flattened and sellers waited longer and longer to find buyers for their homes. The supply of unsold houses on the market hit a record high.

"July’s data showed that prices fell in most areas of the country. Only in the South are prices still rising: the median home there sold for 3.2 percent more last month than a year earlier. If prices there had not been so strong, the national median home price in July would have declined on a year-over-year basis. That has not happened since April 1995."

'“It does feel a little scary right now,” said Celia Chen, director of housing economics at Moody’s “I think these markets will correct. The price gains that they have seen have exceeded what can be supported by the economic and demographic fundamentals.’’'

'“Certainly, the housing market is undergoing a measurable adjustment,” Lawrence Yun, senior economist with the Realtor association, said. “It’s a continuing cooling trend.”'

"The bloated inventory levels, Mr. Yun said, indicate “a very sudden change which I have never seen before.”'

'“That’s a good indication of an unexpected decline in demand,” said Michael Carney, a professor of finance and real estate at California State Polytechnic University, Pomona."

"The sales and price declines were most pronounced on the East and West Coasts, where the housing market had overheated the most."

"The slowdown means that housing, the sector of the economy that has helped carry the country through a period of rapid expansion, now could act as a drag on growth."

"Sales of new homes dropped in July by the largest amount since February while the inventory of unsold homes climbed to a record high. Piling on more proof that the housing boom is over, the Commerce Department reported Thursday that new home sales fell by 4.3 percent last month."

"The July level of 1.072 million units sold was down 21.6 percent from a year earlier and below the 1.100 million that had been expected by analysts."

"The data follow another report Wednesday that also provided evidence of how much the once-sizzling housing market has cooled. Sales of previously owned homes dropped 4.1 percent in July from June to a 2 1/2-year low, while the inventory of unsold homes climbed to a record high, the National Association of Realtors reported."

C.A.R. reports sales decrease 29.9 percent in July

"Closed escrow sales of existing, single-family detached homes in California totaled 453,980 in July at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 29.9 percent from the 647,910 sales pace recorded in July 2005."

'“Today’s market is slowing as sellers maintain often unrealistic pricing expectations and buyers have more properties to choose from,” said C.A.R. President Vince Malta. “In addition, unlike the slowdown we experienced in the 1990s, homeowners today are not under duress to sell due to job losses. The urgency that characterized the market for the last few years is now gone for all but well-priced properties.”'

"C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in July 2006 was 7.5 months, compared with 2.9 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate."

Real Estate: About to Get Worse

by Steve Sjuggerud, PhD

'It’s looking like 1990 all over again… "

"1990 was the last time homes were unaffordable. The confidence of homebuilders was at a record low (and about to go lower). And the U.S. economy was starting to cool…"

"Home prices fell hard. Nationwide, new home prices fell from around $200,000 in 1990 to around $175,000 by 1992 (in inflation-adjusted terms)."

"By 1993, home prices were affordable once again. Home buyers slowly crept back into the market. Prices crept higher, and they didn’t surpass the 1990 highs for over a decade (in inflation-adjusted terms)."

"Over a dozen years have passed since new home prices bottomed back then… enough time for people to forget real estate is not always a sure thing. Just ask the Japanese how bad it can get… they just lived through 16 straight years of falling home prices."

"Also, homebuilder confidence has been falling for seven straight months, just like we saw in 1990. Homebuilder confidence is now down to its lowest level since February 1991, according to the National Association of Home Builders (NAHB)"

"The homebuilders have been particularly accurate in gauging the market in the past…
Builders were particularly optimistic in 1999, and home prices rose in the following years. Builders maintained their enthusiasm, and prices continued to rise through 2005."

"Now the homebuilders are hanging their heads. It signals trouble."

"We’re setting up for a repeat of 1990. Back then, new home prices nationwide fell by double-digits, percentage-wise, over two or three years. Speculators got crushed."

"Again, the last time around, prices peaked around 1990. It took a decade for new home prices to get back to 1990 levels (in inflation-adjusted terms)."

"We could see the same today… a fall in prices for a couple years… and then a slow rise again, as people who got burned are slower to touch the fire."

"So if you’re looking to buy real estate, but don’t have the money now… there’s no hurry. If we see a repeat of 1990, you may be able to buy cheaper two years from now."

"And if you’re overextended in real estate, but you’re holding out for your price, you’re doing the wrong thing. Get out now. The cost of carrying that real estate will eat you alive."


At 8/24/2006 10:30:00 PM , Blogger M.S.A. said...

I've been tracking 3 bedroom homes in the price range of 500-550k thousand in Santa Rosa on the Press Democrats realty search. I started early Spring of this year. Inventory has been growing steadily until a couple of weeks ago, the inventory stabilized at around 170 homes within my criteria.
After the bad housing reports over the last few days I noticed a spike to 183.
I thought house selling season petered out after school started up.
The main stream media is starting to say things like the bubble has popped. Fear is in the air.
I believe that right now, the last few weeks of August, the dog days of summer, will be remembered as the begining of Americas greatest real estate sale.


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