Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Friday, April 13, 2007

Our Market Tanks Faster...

"The Sonoma County housing market remains one of the weakest in the Bay Area, with prices continuing to slide here."

"Prices and sales fell in the three North Bay counties -- Sonoma, Marin and Napa."

'"When our market tanks, it tanks faster, and when the rest of the Bay Area comes out of the slump, they come out first," said Rick Laws, Santa Rosa manager for Coldwell Banker, which provides monthly real estate data to The Press Democrat."

"Sonoma County had the second-biggest drop in home prices in March, down 5.5 percent from a year ago. Only Napa County fared worse, with a 9.2 percent drop in prices."

"The DataQuick report shows Sonoma County's housing market is lagging behind most other Bay Area counties."

'"In Sonoma County, the median price of a residential unit stood at $520,000 last month, down from $550,000 a year earlier."'

This is the 9th month in a row that the median price has declined.

'"We took more of a hit in terms of median price and numbers of transactions, and we have more inventory than most of the other Bay Area counties," Laws said."

The PressDemocrat reported: Sonoma County sales fell 19.2% puts the annual sales decline at 22.5% though they break out the condo/vs. single family home sales in order to make the numbers look better than they are. They also reported only a 3% decline in median home price and still claimed it was up to $556k. Since is done by realtors, I am going to say that dataquick's numbers are probably slightly more reliable, but only slightly.

Sonoma County Data

MLS: 3464

Price Reduced: 1038

Foreclosures: 1632

47% of Sonoma County homes on the market are in some stage of foreclosure

Sonoma Valley Data

MLS: 341

Price Reduced: 111

Foreclosures: 89

26% of Sonoma Valley homes on the market are in some stage of foreclosure

In other news...
(from the NYTimes)

“In a stark reversal, it’s now clear that people who chose renting over buying in the last two years made the right move. In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime.”

“It’s almost as if they have thrown money away, an insult once reserved for renters.”

Local company speculates on Boomer demand...

"Reverse Mortgage Advantage Inc., a loan correspondent and brokerage, recently moved to a new Windsor office in anticipation of expected growth of reverse mortgage lending in the North Bay." "Reverse Mortgage Advantage originates and processes loans on behalf of banks, credit unions and mortgage brokers that do not have their own reverse mortgage services."

"Ninety-five to 98 percent of mortgage brokers don't want to be bothered with it," Mr. Nannini said. "It's just too small a product."

"Reverse mortgages have long been available to older homeowners, but once had a reputation for being risky because of penalties for selling a home too early and other pitfalls. "They were full of exorbitant fees and in a lot of cases, it was just not a good decision for the borrower," said Gale Davis, president and CEO of Tracy Federal Credit Union."

"Alan Nannini said that he helped start Reverse Mortgage Advantage in Santa Rosa last August to prepare for the demand for cash by baby boomers nearing eligibility."There's a potential there that it’s kind of betting on the future, but it's a pretty safe bet. I think it's going to be a real strong market. There's a lot of retirees here," Mr. Nannini said."

"Older homeowners who have paid off their mortgage or owe very little can use reverse mortgages to generate cash flow by borrowing against their home equity without having to repay anything until they no longer occupy the house."

"Lenders say that reverse mortgages have become more popular as real estate prices increased, making homes the most valuable asset for many people. A few years ago, Bank of Marin said it saw an opportunity to help cash-hungry homeowners take advantage of soaring real estate prices, and decided to get into the game."

'"We knew that there was a need out there in the community," said Try Aman, the bank's reverse mortgage officer."'

'"We knew that there were people who had a lot of equity in their homes, especially the high-valued homes in the area."'

"Since Bank of Marin was a business-oriented bank that wanted to offer a consumer product, it decided to distance itself by acting as the loan correspondent but not the lender. "We weren't 100 percent sure if this was a product we wanted to book ourselves," Ms. Aman said.Reverse mortgages originated by Bank of Marin are held by Financial Freedom, Ms. Aman said."


At 4/13/2007 01:16:00 PM , Anonymous tom stone said...

Wow,Rick Laws being halfway honest about the market is a shock.And having 47% of the homes on the market in some stage of foreclosure is staggering at this early stage of the correction.will it hit 80%?As far as reverse mortgages go(HECM)even with the tighter regulations now in force,they are suitable for about half the people who get them.they are not a simple product,and bank of marin is wise to stay a correspondent,loan brokers usually get a "finders fee" rather than a commission when putting one of these deals together,which is nice,as it lessens ones liability.It will be a special summer for sonoma county this year.

At 4/13/2007 06:57:00 PM , Blogger Lisa said...

Almost half of the homes on the market in some stage of foreclosure??!! Where's the local press on that lovely piece of information.

Seriously, print up some fliers and put them in mailboxes.

I am still waiting for the Marin smugness to turn to sheer terror. Everyone I know is mortgaged and in debt up to their eyeballs. I don't know anyone who isn't financially stretched.

At 4/13/2007 07:02:00 PM , Anonymous Anonymous said...

The local press is completely useless. They've been doing nothing but accepting their "news" from the ass of the horse itself... the realtwhores. That is where they get the data.

They used crooked sources and they themselves are crooked, but most stupid people still rely on them to get their "news." Methinks that accounts for why there is so much stupidity in this debacle of all bubbles.

If you read the sh*t put out by the local media you actually are more stupid by the time you finish reading.

At 4/14/2007 01:21:00 PM , Anonymous Bob said...

Wow 47% in some state of foreclosure! (or if I were a re broker I would have said "wow 46% in foreclosure!!!!!")

I forgot who came up with the notion that price drops depend more on the mix of bad inventory vs. good inventory than total inventory. Bad inventory being those who have to sell or those who have no emotional tie to price (e.g. a builder does not care if he got last year's price, what he cares about is making a profit and making sales). There are three types of bad inventory -- new homes, people in default, and people facing unexpected events (divorce, death, job loss). I doubt the new homes and unexpected event % of inventory has changed so given that, we can safely say more than 50% of homes for sale are in the "bad" inventory category.

And most of the resets have yet to hit.

Ouch -- message to sellers -- lower your price now or be ready to face a very ugly market in 3 months

At 4/14/2007 01:34:00 PM , Blogger Lisa said...

I remember even after the NASDAQ had crashed, it still took a while for the reality to set in. was never worth it. Travelocity had no right to be worth more than the 3 major airlines combined.

It will come around to housing. $500K for a POS? No one even blinks at that amount, but it's a tremendous amount of money for a house. Buy at 6x, 7x, 8x gross income? Again, no one has thought twice.

But at some point, I have to believe that people will wake up to the insanity that has gripped the RE market the last few years, and houses will go back to what they were. A place to live. A place to fix up. A write-off to help come tax time. A place to pay down or pay off completely for retirement.

When that happens, I'd buy again in a heartbeat. Until then, I'm a very happy renter who was lucky enough to ride the wave.

At 4/14/2007 02:08:00 PM , Anonymous JP said...

Santa Rosa fell to the near bottom of Forbes magazine's annual list of the best places for business and careers in the United States, joining the ranks of Brownsville, Texas, and Flint, Mich.

The Santa Rosa metropolitan area ranked 185 out of 200, only five years after it was No. 2 on the list.

high costs of living and stagnant job growth continue to push down its overall grade. Sonoma County has added only 6,000 jobs in the past five years, when the cost of housing skyrocketed.


At 4/15/2007 10:35:00 AM , Anonymous Anonymous said...


I agree completely with you on waiting for that day again. When a house purchase is really a home purchase at a reasonable cost and reasonable risk/reward ratio. This whole damn mess, I'd hate to say, has exposed the worst of mankind.

I've said it over on the Marin blog and will say it here as well. The RE machine can do whatever they'd like at this point with their fancy arm waiving and feet stomping about impending turnarounds etc, but it will not work in the end. Real estate has always been, and will be again, tied to wages. There will be death grips holding on to the bitter end to prevent this relationship from playing out, but it will play out again.

Just imagine how fast this thing will unravel should a recession set in. Oh, boy on that one !!!

At 4/15/2007 04:32:00 PM , Blogger moonvalley said...

So glad to see this post, I saw the NY xs piece the other day..just as were resigning our lease for another year at the same rate...woot!!

At 4/20/2007 09:34:00 PM , Anonymous tom stone said...

Wherefore art thou,Athena? I am jonesing for lack of your insightful comments and acerbic wit.

At 4/30/2007 12:09:00 AM , Anonymous Friendly Agent said...

This comment has been removed by a blog administrator.

At 4/30/2007 12:33:00 PM , Blogger Athena said...

Dear Friendly Agent- bwahahahahaha!!!! sorry to disappoint you, but no, the blog has not dried up, and there have been no errors in my housing bubble judgment. The real job has taken priority at the moment. Maybe you should try getting one?

At 5/01/2007 01:08:00 PM , Anonymous Anonymous said...

Why should "Friendly Agent" get a job? All he has to do is refi cash out every six months and use that to make the payments (as well as the new SUVs and cruises), because RE prices have nowhere to go but UP! UP! UP!

At 5/01/2007 02:19:00 PM , Anonymous Anonymous said...

I look forward to friendly agent holding their "dear god, please help me!" sign at the corner of 5th st. west in front of Sonoma Market.

At 5/01/2007 02:32:00 PM , Blogger Athena said...

Sorry Tom, and a big thanks to MoonValley for stepping in and pinch hitting again. The day job has grown to epic proportions and missing a beat at the office right now has a much higher down-time cost than missing a couple blog posts. I miss the readers and the feedback and keeping up on the news. But it is safe to say that the bubble blow-out is progressing as expected by those of us who can actually understand basic economics.

Every couple of days I check the MLS and of course keep getting price reduced updates. People are still thinking there are plenty of greater fools with bags of gold that are going to bail them out.

Remember, Sonoma county had pretty high credit scores for a while and a lot of the assinine bubble purchasers had prime and Alt-A loans. They didn't really start to jump in numbers until 2003, 2004 and 2005 in Sonoma County. So if the typical Alt-A and prime loan had a 5 year loan reset rate we won't see their resets start to hit an cause pain until 2008.

My insider information says that the foreclosures and pain we are seeing in the local market are from those who really couldn't afford their purchases though they had a good enough credit score to get a mortgage and their costs done outrun their income at this time. + the subprimers who had shorter teaser resets. + fools who upgraded without unloading their previous house and now have two mortgages.

according to realtytrac close to 40% of Sonoma County homes on the market are in some state of foreclosure.

Those numbers should be scaring people, but they aren't yet.

Anyway, prices are only inching down, but the houses are just sitting, and sitting and sitting and the price reduced list keeps growing. I need to brush up on some perl and write a script that will collect the data for me because the numbers of houses on the list are too numerous.

I think 2008 will be the year of recognition for the idiots who inflated the bubble now collapsing about their pretty little heads. Stay tuned. We will post notable information and data. Please continue to send in ideas, data, and information.


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