Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Friday, August 17, 2007

The Bonfire of the Housing Vanities



Savanarola take note. The days of the 1 million dollar starter house appear to be over. Those of us who goggled and gasped in disbelief at the lying fraudulent don't ask don't tell no doc , no down payment mortgages have now been justified. They have rolled up the free lunch counter and taken it away, no more seconds.

So then why did house prices rise in almost every county around here even as the sales numbers dropped faster than Lindsay Lohans' Seven For All Mankinds ? Simple, when the lower end ie: first time buyer is effectively knocked out of the box the only thing left is the higher price house.

The median price was $738,500, up 7 percent from $688,955 a year ago.
The median rose because a greater proportion of expensive homes were sold, said Andrew LePage, an analyst at DataQuick. Tighter lending standards after the subprime loan debacle have knocked many entry-level buyers out of the market because they lack down payments, good credit or solid income proof. "If you yank out a bunch of low-cost sales, then guess what happens to the median?" he said.
"The higher you go up the price ladder, the more stable (the market) appears, with the big caveat that things could change, even if temporarily, in August because of the credit crunch," LePage said.


Remember kids, these are Jluy figugres we're talking about. Stuff from before the market went all medieval on everyones ass. Good times.

Jumbo loans are't going to save the day either .

In the latest developments in the mortgage market, "jumbo" loans above $417,000 have become more expensive and harder to get, and more lenders are falling by the wayside. All of that could hurt the high-end sales that have been strong up until now. Because sales typically take a month to close, the fallout will not be reflected until data are collected for this month and next.
"We anticipate it will be an especially weak August because of all of this," LePage said. "A lot of people are waiting."


That is an understatement.

Ok. So the median price is going up everywhere even as the sales languish. Everywhere but three places.

Despite the drop in sales, median home prices rose in all counties except San Joaquin, Solano and Sonoma. In San Joaquin County, the median home price dropped 13.6 percent to $380,000.

Hey! I thought everybody wanted to live in Sonoma. Stuff never goes down here, right??? Maybe those now hard to get jumbo loans had something to do with it...or not.

Most of the Bay Area reported sales drops year-over-year in the single digits. In Contra Costa County sales dropped 24 percent, and in San Joaquin County sales dipped 43.1 percent. San Francisco reported the only rise in home sales — 4.1 percent.
Foreclosure sales accounted for 4.5 percent of the state's July's sales activity, up from 4.1 percent in June, and up from 1.5 percent in July of last year. DataQuick said they have not had a large impact on regional sales.


Not yet they haven't. Just wait.

The Vallejo Times Herald has some figures in an article about what's going on housing wise.




Interestingly enough, they have different foreclosure sales figures, different by quite a large margin.

Home sales were down 21.9 percent last month compared to July 2006, and down 8.1 percent since June, the firm said.

Statewide sales have decreased for the past 22 months on an annual basis.

Meanwhile, the median home price in California in July dipped slightly to $478,000, down 0.2 percent from $479,000 in June.

Foreclosure resales accounted for 7.8 percent of sales in July, up from 2.0 percent in the year-ago period and from 7.0 percent in June, the firm reported.


For some reason my feeling is that over in Vallejo they got it right. Maybe they just have more common sense over in Vallejo, maybe they're just more grounded.

In all, 7,423 new and resale homes and condos were sold last month in Alameda, Contra Costa, Marin, Napa, Santa Clara, San Francisco, San Mateo, Solano and Sonoma counties.

Sales have decreased on an annual basis in that area for the past 30 months.


It's not just realtors hurting this week, but builders too, who've been feeling the pinch for awhile. The term Perfect Storm is now being bandied about.

For California's home builders, it has gone from a perfect storm to a pathetic one.
Each week, it seems, there is more bad news as potential buyers stay away in droves. A recent wave of discounting has lured some shoppers to subdivisions, where a backlog of unsold dwellings await ... something ... anything.
But the price cuts, ranging from $10,000 to more than $150,000 on $1 million-plus homes, have yet to turn many of the looky-loos into buyers, according to anecdotal information from homebuilding executives.
"This is the first recession (in the housing market) that isn't being driven by job losses," said Steve Delva, president of the South Bay division of Standard Pacific Corp., a major Northern California builder. "Somebody called (the housing bubble of 2005-06) a perfect storm of cheap interest rates, a lack of supply and rampant speculation. Then, when the air went out of the bubble, everybody turned back into pumpkins."


The thing that jumps out at one in this article is the term the first housing slump that hasn't been driven by job losses. That I think is the missing link. For a long time I have been wondering about the true unemployment figures. There were massive job losses after 9/11 and the tech bust. I personally know people, executives, who lost there jobs in the last several years and were unable to get new employment. They're now "consultants". Who they are consulting with remains a mystery as the way ends are being met is not with consulting fees but with credit cards, and money being pulled from rapidly appreciating houses, that are appreciating no longer.

So I surfed on over to the BLS....that is the Bureau of Labor Statistics and found some interesting numbers. Officially they talk about unemployment figures at about 4.5 %, but if everything is counted in the numbers are much higher.

Table A-12. Alternative measures of labor underutilization

HOUSEHOLD DATA HOUSEHOLD DATA

Table A-12. Alternative measures of labor underutilization

(Percent)



Not seasonally adjusted Seasonally adjusted

Measure

July June July July Mar. Apr. May June July
2006 2007 2007 2006 2007 2007 2007 2007 2007


U-1 Persons unemployed 15 weeks or longer, as a percent
of the civilian labor force....................... 1.4 1.4 1.5 1.5 1.4 1.5 1.5 1.5 1.6

U-2 Job losers and persons who completed temporary
jobs, as a percent of the civilian labor force.... 2.2 2.1 2.4 2.2 2.1 2.2 2.2 2.2 2.4

U-3 Total unemployed, as a percent of the civilian
labor force (official unemployment rate).......... 5.0 4.7 4.9 4.8 4.4 4.5 4.5 4.5 4.6

U-4 Total unemployed plus discouraged workers, as a
percent of the civilian labor force plus
discouraged workers............................... 5.2 5.0 5.1 5.0 4.6 4.7 4.7 4.8 4.9

U-5 Total unemployed, plus discouraged workers, plus
all other marginally attached workers, as a
percent of the civilian labor force plus all
marginally attached workers....................... 5.9 5.6 5.7 5.7 5.3 5.3 5.3 5.4 5.5

U-6 Total unemployed, plus all marginally attached
workers, plus total employed part time for
economic reasons, as a percent of the civilian
labor force plus all marginally attached
workers........................................... 8.8 8.5 8.6 8.5 8.0 8.2 8.2 8.2 8.3

NOTE: Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and
are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached,
have given a job-market related reason for not currently looking for a job. Persons employed part time for economic reasons are those
who want and are available for full-time work but have had to settle for a part-time schedule. For further information, see "BLS
introduces new range of alternative unemployment measures," in the October 1995 issue of the Monthly Labor Review. Beginning in
January 2007, data reflect revised population controls used in the household survey.



Now I may be math challenged but those numbers don't look to me like anything close to 4.6 %

My guess is that the credit crunch that's going on right now, is finally going to shake out those unemployment numbers and stop people lying to themselves. One can only "consult " with air so long, whatever goes down, also goes up.

Labels: ,

10 Comments:

At 8/17/2007 03:37:00 PM , Anonymous tom stone said...

When countrywide lays off 25,000 or so at once,i think people will take notice.as has been mentioned before,many illegals worked in the construction industry,and many who work in the real estate field are not "employees" but independent contractors.Countrywide is now making conforming loans only,which was about 25% of their now disappeared market,and they are living on a bank line of credit...so I expect big layoffs,and I expect them to be among the first to dump their REO's to raise some cash.Real Estate in Sonoma county is already toast,and the fire just got turned up.

 
At 8/17/2007 04:25:00 PM , Blogger moonvalley said...

The stone grifter girlfriend of an LA pal of ours went to work for them last year at an inflated salary. I figured they were in trouble if she was working there. She's the kind of rat that gets on a sinking ship.

 
At 8/17/2007 04:46:00 PM , Blogger moonvalley said...

Evidently there was a bank run in Los Angeles this afternoon. Countrywide was swarmed by depositors
eager to get their bucks out.
The link is here
A rush to pull out cash
Worried about the stability of mortgage giant Countrywide Financial, depositors crowd branches. In Laguna Niguel, Bill Ashmore drove his Porsche Cayenne to the bank's office and waited half an hour to cash out $500,000. "It's got my wife totally freaked out," he said.


Further down in the article it mentions how this dude is the president of Irvine's Impac Mortgage Holdings, which escaped bankruptcy itself recently by shutting down virtually all its lending and laying off hundreds of employees....
Hmmmmmmm, wonder why he wasn't keeping his 500k there?

 
At 8/17/2007 06:45:00 PM , Anonymous tom stone said...

MV that is funny!personally I am waiting for Mozillo to announce he is retiring in order to spend more time with Karl Rove's family.

 
At 8/18/2007 11:14:00 AM , Anonymous Kurt said...

Last fall, a neighbor relocated south for an "executive position" at CFC. Since his mind was thoroughly mired in Marin RE, he waved off my concerns about the market's fallout on his livelihood. I suppose it's hard to see a downside when someone waves money in your face. He's back in town, without a job--and a mortgage on his home here.

 
At 8/18/2007 12:26:00 PM , Blogger Marinite said...

kurt,

Did you leave Marin for up north or are you still here?

 
At 8/18/2007 12:52:00 PM , Anonymous kurt said...

Marinite,
I'm mostly away, lost touch w/Marin's RE situation, but I do drop by your blog. It appears that "interesting times" are ahead for Sonoma and Marin!

 
At 8/18/2007 01:05:00 PM , Blogger Marinite said...

kurt,

It would mean something to me if you left a comment on my blog as you were literally the earliest supporter of my blog.

I've sort of lost direction on my blog as we are now past the "is there a housing bubble"/"the housing bubble is bad for our community" phase and in to the "who's to blame" and "how bad is it going to get" phase.

The good news is that there are some pretty cheap houses now available in central and especially northern Marin (by peak bubble standards anyway). Of course, it will only get better for those who can wait. Still, unfortunately, not so overwhelming that it cannot still be denied, not like Sonoma now. I still stand by my 2008 prediction.

 
At 8/18/2007 01:31:00 PM , Anonymous Kurt said...

Marinite,
Sure, I'll comment sometime soon; I haven't bothered w/that google login. And, perhaps like you...I have fewer comments on Marin RE, and more concerns about systemic risk to our economy.

Ok, sorry for the OT on this blog, but I suppose systemic risk is a relevant concern even in Sonoma? I'd love to get the pulse of that town now...it's been ages since I've dropped by.

 
At 8/21/2007 07:58:00 PM , Blogger Tyrone said...

Message from my Zip Realty Realtor:

Subject:
Good evening Donald, the market is saturated with short sales and REOs, can I help you make sense out of the current market turmoil?

Text:
I have been extremely busy in this market. Many of the buyers that are taking advantage of the current market are picking-up properties at a reduced price. How can I help you leverage your current real estate position?

Saturated he says? He hasn't seen saturated, yet.

 

Post a Comment

Subscribe to Post Comments [Atom]

Links to this post:

Create a Link

<< Home

My Zimbio
Top Stories Bloggapedia - Find It!

Estate Real, House New

Housing Crisis

Free Site Submit by
SiteSubmitService.COM