Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Thursday, October 12, 2006

Falling Hard and Fast



PressDemocrat: "The housing industry, which propelled Sonoma County out of recession three years ago, is now shedding jobs as builders, mortgage brokers and real estate companies feel the impact of the slowdown."

"After an eight-year run capped by unprecedented sales and price increases, Sonoma County home sales have fallen hard and fast. Sales have dropped for 11 consecutive months, when compared to levels from a year earlier."

"The sector, which employs one in six workers in Sonoma County, lost 1,300 jobs in the three-month period ending June 30, according to a new study. It could lose 2,000 more jobs before the shakeout is expected to end next year, reducing employment to 28,700, the study forecasted."

"Job losses on that scale would be comparable to the previous housing downturn, when the county lost 3,800 housing-related jobs from 1990 to 1992, according to Moody's Economy.com."I remember those 2½ years like they were yesterday," Blankenbaker said."

"It marks an abrupt turnaround for the housing sector, which almost single-handedly pulled Sonoma County out of recession in 2003. Over the past five years, the housing industry added 2,900 jobs in Sonoma County while the rest of the region's economy lost 7,400 jobs."

"For many of the newcomers, this is the first housing downturn they have experienced."For five years it was a bull market in this business. All they saw was their incomes go up and the loans flowing. You never saw the other side of it," Blankenbaker said."

"New real estate agents and loan officers flocked to the industry, attracted by the opportunity to make good money from the boom in home sales and mortgage lending. What agents, lenders and builders see now is the toughest real estate market in a decade."

"The job losses - the largest since the housing market was in retreat in early 1990s - have been deeper than anticipated, even in an industry accustomed to employment swings as housing cycles run hot and cold."
"Mortgage companies and real estate sales companies have been hit hardest, Cochrane said. Many had expanded over the past five years, employing a new crop of agents and loan officers who were drawn to the booming market as home sales - and commissions - soared."

"The effect on the economy will be magnified because many of these workers earned $60,000 to $70,000 or more a year during the housing boom, far more than the typical worker in the county."It's going to be painful," said Steve Cochrane, an analyst with Moody's Economy.com, which prepared the study on employment in the county's housing sector."

'"They were coming into the industry in droves. There's definitely going to be a purge in the real estate industry," said Rick Laws, Santa Rosa manager for Coldwell Banker, which dropped 20 agents two months ago. "I'm sure there will be more to come."'

"Real estate agents and loan officers who logged long, often hectic days to serve customers during the real estate frenzy now are scrambling to drum up business. Those who can't generate enough deals to keep commissions coming in could leave the field."

"During California's eight-year housing boom, the number of licensed agents and brokers jumped 70 percent. Sonoma County had 6,195 in September - 1 for every 55 adults, according to the state Department of Real Estate.But now, the winnowing of the real estate field is under way."

'"We downsized when it was obvious the business was going away. It's kind of a weeding-out process," said Randy Blankenbaker, regional manager for Chase Home Mortgage, who lost five loan officers in Santa Rosa earlier this year because of a lack of business."

12 Comments:

At 10/13/2006 06:56:00 AM , Anonymous tom stone said...

nice to see you posting again,athena.these are q2 figures,and it will accellerate from here for a while.we may see an uptick around xmas due to trumps latest seminar,promoted at 630 every morning on channel 6.i had someone in santa rosa who has been in the same home 20 years tell me their home had never lost a dollar in value...last tuesday.she wants to buy her son a home in sr,and i suggested she wait a year or so since prices were coming down.i offered to show her the figures,not interested,she told me that since i was a renter,i clearly did not understand.and i don't.i don't understand paying more than i have to for an expensive,depreciating asset in a falling market.ah well if i had a masters degree too,it might be different

 
At 10/13/2006 12:46:00 PM , Blogger sf jack said...

athena -

Thanks for all of your work on this blog.

It must be gratifying to finally see an article like this one in the PD, that paints a realistic picture.

Now, if only the IJ or the piece of sh** also known as the SF Chronicle would get their act together and do some real reporting...

 
At 10/13/2006 02:35:00 PM , Blogger Marinite said...

she told me that since i was a renter,i clearly did not understand

Classic.

 
At 10/13/2006 05:48:00 PM , Blogger Lisa said...

Take Sonoma and multiply across all the other U.S. markets where RE has been a big employment driver over the past few years. And what will replace those good paying jobs??!! And how many of those folks are homeowners themselves?

 
At 10/13/2006 05:52:00 PM , Blogger Athena said...

What kills me is the level of shock they summon up regarding their new reality. Where does the shock come from? What the heck do they think is going to happen when Joe Shmoe actually puts 2 + 2 together in how this whole pyramid scheme has been working? Think about the number of people who may currently call their realtors and mortgage brokers their friends... at some point the picture will get crystal clear. It should already be pretty clear to the average hockeypuck.

 
At 10/13/2006 06:18:00 PM , Anonymous tom stone said...

more happy news! a broker who shares our office finally dumped his flip after 10 months on the market and a 250k price reduction.had a $100k haircut.i congratulated him on getting out.4 months ago,when i told him it was going down fast,he gave me a lecture about "prices never go down in sonoma county,they just flatten out".he told me today that the market is picking up,and there are lots of buying opportunities,which he intends to take advantage of no he isn't bleeding $5k a month.good for him! we should never get too old to learn,and i expect he'll get educated right smart if he buys in the next few months.

 
At 10/13/2006 07:45:00 PM , Blogger Lisa said...

The last downturn in CA was only in the early '90's, but NO ONE seems to remember it. It's been out of control for the last few years, but everyone thinks we'll have a 3-month correction and then business as usual. I can't wait for reality to start setting in.

 
At 10/13/2006 11:08:00 PM , Blogger Athena said...

a 3 month correction... guffaw. 2/3rds of mortgages being I/O or Negam and we are going to have a nice tidy 3 month correction? People are already feeling the pain of their every growing mortgage payments, and apparently the foolish amongus haven't gotten the memo about the incomes not supporting the price inflation.

 
At 10/15/2006 06:19:00 PM , Blogger Lisa said...

I'm hearing that banks are already having to buy back loans that have defaulted. If this picks up steam, and I'm sure it will, banks will start to tighten of their own accord, as the MBS doesn't hang on to mortgages that go bust. Once the pool of "qualified" buyers keeps shrinking, that will further prolong the bust, not to mention the shift in psychology.

 
At 10/15/2006 08:51:00 PM , Anonymous trailer trash said...

Enough of this gloom and doom, already! Here are a few gags to brighten things up:

David Lereah, Chief Economist for the National Ass. of Realtors, said the housing market is showing signs of life and that sales may be leveling out. "Many potential home buyers who have been taking a wait-and-see attitude or taking their time and being methodical in the search process are being enticed by lower home prices," he said. "Given a positive economic backdrop of lower interest rates and job creation, we expect sales activity to pick up early next year."

Walter Molony, David Lereah's sidekick, went on to say:

"Existing-home sales are forecast to be fairly stable in the fourth quarter and sales for all of 2006 are expected to drop 8.9 percent to 6.45 million – still the third strongest year after consecutive records in 2004 and 2005. New-home sales are forecast to fall 17.3 percent this year to 1.06 million, the fourth highest year on record. Housing starts should be down 10.9 percent to 1.84 million in 2006."

"With a recent correction in the market, the national median existing-home price is likely to rise 1.6 percent to $223,000 for all of 2006; it’s anticipated prices will remain slightly below year-ago levels before gaining positive traction in the first quarter of 2007. The median new-home price is projected to decline 0.2 percent to $240,500 – largely the result of builder price cuts to move unsold inventory."

The rest of the NAR's October laugh festival can be found here: NAR Lies

But wait, there's more!

For those who may have missed them, here are some classic Lereah lies from September:

"Households and investors are now sitting comfortably and patiently on the sidelines waiting to get back into the real estate game, but only when property prices come down to more suitable levels."

"The good news is that prices are beginning to soften."

"With price reductions come gains in home sales. If prices continue to fall, the decline in sales might have bottomed out in July."

"Most homeowners today have enjoyed substantial equity gains on their properties during the real estate boom years. Cutting prices by 5 or 10 percent will not wipe out their home equity gains."

((Unless the homeowner has one of the many interest only loans or a negative amortization loans which have been so popular lately. If this is the case they probably didn't have any equity to begin with, so they are upside down in their houses.)

"Going forward, restoring buyer confidence is the key to ending today’s real estate contraction."

(Restoring buyer confidence in a real estate con game that is completely played out won't be easy.)

"Only price reductions can bring confidence back to the market. So let’s give a round of applause for prices taking center stage for a brief turn."

(Applause for "brief turn" of crashing real estate prices: "Clap, clap, clap! Whistle! Rah, rah, rah, rah, rah!")

"The sooner home prices drop, the sooner we can stop the bleeding. Expect home prices to fall for most of the remainder of this year. Although it may seem to go against your better judgment, this is a good thing for the long-term health of housing."

(Crashing home prices are a good thing? Does the NAR have Martha Stewart ghostwriting this crap?)

The rest of the lies can be found here: Laughable Lereah Lies

 
At 10/16/2006 10:24:00 AM , Anonymous Ben said...

Latest Sonoma stats are out:
Y-o-Y sales down 40%!!!
(Of course this is "normal seasonal slowdown", pity realtors IQ precludes them from understanding the concept of Y-o-Y)

 
At 10/16/2006 02:46:00 PM , Anonymous tom stone said...

i just had to sit through a meeeting with the office broker,and was informed that the market was rebalancing,and that big price gains can be expected in the spring.this from someone who just took a $100k plus haircut on a flip.yup,the economy is strong,rates are low,and there are lots of bargains.no mention of peace and democracy in the middle east or family values.guess you can't have everything.

 

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