Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Friday, September 14, 2007

Ssshh! The Show is Starting...

Remember how so many blowhards quoted in the Sonoma County excuse for the press touted that the only other downturn of significance was in 1993 and 1994, when prices dropped a total of 4.2 percent over those two years? And they advised reluctant buyers to not wait for more prices to drop because it wasn't going to happen?

August was the 14th consecutive month of median home price drops in Sonoma County.

Darlin' we are only singing the national anthem of this ball game. Make yourself comfortable, and stay away from falling knives. You ain't seen nothin' yet!

"In Sonoma County, home sales tumbled 24.8 percent in August, compared with a year ago. The price for a typical Sonoma County home dropped to $505,000 in August, down from $550,000 a year ago, an 8.2 percent decline. The figure includes new and resale houses and condominiums."

"Housing's downturn has hurt Sonoma County in particular because of a widening gap between incomes and home prices, pushing more first-time buyers out of the market. Increasingly stringent loan qualifications are taking out even more buyers as lenders tighten the money supply with mortgage defaults soaring."

"Slowing sales mean homes are sitting on the market longer. In Sonoma County, supplies have risen to their highest levels in more than a decade."

"Mortgage defaults, the first step in the foreclosure process, are at their highest level in Sonoma County since at least 1992, according to DataQuick Information Systems, a La Jolla firm that tracks real estate trends."

"The soaring number of foreclosures is forcing more homes onto the market as banks attempt to sell houses. Foreclosure resales accounted for 6 percent of all home sales in the county in August, up from 1.5 percent a year ago."

Between April and June 2007, Sonoma County homeowners who lost their homes in foreclosure proceedings were up 806 percent from a year ago.

"A year ago, 88 percent of homeowners in default were able to avoid foreclosure by bringing their payments current, refinancing, or selling the home and paying off what they owe. Today, only 55 percent of homeowners in default are able to hold onto their houses, DataQuick reported."

Even with the decline in median price, it still outstrips incomes of many buyers, making the county one of the nation's least affordable regions.

Facts at a Glance

* The typical monthly mortgage payment for Sonoma County buyers in August was $2,251.

* The median price of a home is still unaffordable for more than half of Sonoma County families.

* The approximate median family income in Sonoma County in 2005 was $58,330.

* Around Sonoma County, an entry-level home is $525,970. The minimum qualifying income for that is $105,960 -- with a minimum of 10 percent down.

Percentage of Sonoma County home buyers choosing some form of I/O, Negative amortizing and adjustable-rate mortgages (this includes subprime, Alt-A & Prime)

2003 - 36.8%
2004 - 59.4%
2005 - 69%

Prices doubled for the typical Sonoma County home between 2000 -2006. But the mortgage meltdown has turned a spotlight on the role loose lending standards, greed, stupidity and pixie dust financing played in the buying frenzy that drove up home prices. Market value for your Sonoma County $hitbox did not rise. Speculation and Greed fueled the ponzi scheme that has been the housing market.

Welcome to the real world, Baby.

More Facts:

* Employment peaked in Sonoma County in 2001 at the end of the tech boom when the county had 196,700 payroll jobs.

* By 2003, the economic downturn had wiped out 7,600 of those jobs. (we were already in a recession in 2003, yet the housing bubble continued to boil with greater fools still rushing in, and the surge in exotic financing due to the unaffordability of prices is proof in the pudding)

* Through 2005, only 2,400 jobs had returned.

* As of the end of 2006 Real Estate accounted for 13% of the jobs in Sonoma County. 40% increase from 5 years ago. During the last 5 years tech and manufacturing were losing jobs. We are still below the number of jobs in 2001 and the non- real estate related jobs we have gained have been lower paying mostly service sector jobs.

* The Press Democrat study found that 58 percent of the new jobs created between 2003 and 2005 paid below the average wage.

* By October 2006 the county lost 3,100 jobs
"Plunging sales led to construction layoffs and job losses in real estate, financing and other housing related areas.

"It seems like Sonoma County is one of the weakest economies in the Bay Area. There's hardly any job growth to speak of. That's essentially the basic building block of the economy," Steve Cochrane, an analyst with Moody's said."

Unemployment in Sonoma County climbed to 4.6 percent in July 2007 -- its highest rate in two years -- as the local economy felt a loss of jobs in the real estate and home loan industries.

'"We may be seeing some early signs of layoffs in the financial area," said Ben Stone, who heads the Sonoma County Economic Development Board."

"At the end of July, National City Mortgage laid off 40 workers at its Santa Rosa call center. Another 60 company employees will lose their jobs by September. The layoffs followed earlier cuts at National City and other Sonoma County mortgage centers."

"The housing sector slowdown led to a loss of 450 financial services and construction jobs in Sonoma County in the first half of 2007, according to Moody's, which tracks local employment."


At 9/14/2007 03:28:00 PM , Blogger marin_explorer said...

As you said: " of the nation's least affordable regions".

In that regard, it's hardly better than "career" locations like Silicon Valley, ie the "Google effect".

Browsing through the Sonoma listings the other day, I saw old homes for as much as $1000/sqft. Athena, MV, Tom--can you shed some light on what's going through these sellers' minds--are the still chugging down the Koolaid? Is Sonoma still "The New Sausalito™" (I love that one!)

2003 - 36.8%
2004 - 59.4%
2005 - 69%

I seem to recall other BA locales with similar numbers. This won't end well.

At 9/14/2007 04:02:00 PM , Blogger Athena said...

You know what ME? I can't even find the numbers for the 2006 loans. I think they are keeping those numbers mum for a reason.

As for the $1000 per sqft. YES! Unbelievably, Sonoma County is still sipping on the last few drops of kool-aid in their cups. Seriously, you can go to the grocery store and smell the desperation on the realtwhores chatting in the aisles, but each seller seems to think their house is different.

Take a look at the chitholes on the market on zip asking for top dollar. Or look at Craig's list at the specuvestors who can't afford their payments and are trying to stop the bleeding from their financial bullet wound by renting their alligator out. Properties are sitting with their wishing prices for rents and selling prices for and the numbers keep piling up.

Like I said... we are just at the beginning of this ball game. We haven't even seen anything more than the parade of players out of the dugouts and just warming up.

Sonoma County had a big chunk of Alt-A and Prime borrowers during 2000-2005. Many of them have 5 year resets coming... so the first wave for us comes in 2008, second and slightly larger in 2009, and then the big chunk from data to date is in 2010. I think some of those will throw in the towel when by year end 2008 property values take a hit and those who haven't refinanced yet will know they won't be able to... this is just the warm up innings.

At 9/14/2007 08:16:00 PM , Blogger Tyrone said...

ZipRealty Santa Rosa homes:
Aug 09: 1600
Aug 21: 1643
Aug 24: 1655
Aug 26: 1659
Aug 27: 1670
Aug 31: 1642
Sep 01: 1624
Sep 10: 1679
Sep 11: 1692
Sep 14: 1697 New High!!!!

Darn! 3 short.

Looking at this home, I kinda like it, but not the price:
List Price: $875,000
Sale History
06/16/2006: $616,000

Zillow estimate: $652K
Tyrone estimate: $350K

At 9/15/2007 02:51:00 PM , Anonymous tom stone said...

Athena,good to see you posting far as prices,there are probably some some houses with solid gold bidet's spouting Iron Horse champagne...but most are like the 2 acre non view lot down my street listed for $460k.It might have brought $320k at the peak.maybe.Inventory in west county is increasing rapidly,there are some sales,but prices need to drop by %50 plus to be affordable.I expect the drops to be jagged and the social costs very you still want the info on 660 e macarthur? the paper is yellowing with age?

At 9/16/2007 05:55:00 PM , Anonymous Anonymous said...

From the Housing Bubble:
The Press Democrat reports from California. “Sonoma County’s housing slide hit the two-year mark in August as prices fell yet again, and the market may not hit bottom for another year, industry analysts say. The county’s typical home sold for $549,990 in August, the 14th consecutive month the price was down from a year earlier. Prices have dropped 11.1 percent from the record high of $619,000 in August 2005.”

At 9/19/2007 08:52:00 PM , Blogger Tyrone said...

ZipRealty Santa Rosa homes:
Aug 09: 1600
Aug 21: 1643
Aug 27: 1670
Aug 31: 1642
Sep 01: 1624
Sep 10: 1679
Sep 14: 1697
Sep 19: 1700 New High!!

And here's a 2bed/1bath gem:
List Price: $299,500
ZESTIMATE™: $406,542
Tyrone-Est: $170,000

Sale History
01/19/2005: $360,000
08/12/2003: $275,000
01/09/1997: $42,500

At 9/20/2007 01:47:00 PM , Anonymous Anonymous said...

This comment has been removed by a blog administrator.

At 9/20/2007 09:10:00 PM , Blogger Tyrone said...

ZipRealty Santa Rosa homes:
Aug 09: 1600
Aug 21: 1643
Aug 27: 1670
Aug 31: 1642
Sep 01: 1624
Sep 10: 1679
Sep 14: 1697
Sep 19: 1700
Sep 20: 1711 Up, Up, and Away!!

Here's a beauty:
4726 Winding Creek Ave
List Price: $699,950
ZESTIMATE™: $606,629
Tyrone-Est™: $350,000

Sale History
06/12/2002: $443,000
03/19/1999: $300,000

At 9/21/2007 12:01:00 PM , Blogger sf jack said...

"Tyrone-Est™: $350,000"

Love that!


Thanks for all of your work here, athena and moonvalley.

BTW - are you working on a script? How's it coming along?

And thanks for your contributions, too, tom stone.

At 9/21/2007 12:19:00 PM , Anonymous Anonymous said...

Some of my favorite comments in MLS listings from out realtor whore friends:

2234 Cummings Dr.

Just Reduced 9/4/07. This home qualifies for a CHFA loan. This is not a short sale.

translation: Try getting a $500k CHFA loan for a low income deadbeats and we'll sell this falling knife to you in a heartbeat - hahhahhah.

507 Alderbrook

Great neighborhood. Unfinished remodel. No reports obtained yet.

translation: repo with exposed chicken wire in the exterior walls!

165 Sherwood Dr

One of Santa Rosa's finest! Wonderful opportunity to live in the classic northeast neighborhood of Sherwood Forest. This 3 bedroom 2 full bath home has been completely refurbished.

translation: $100k attempted flip on a 2/2007 purchase. Please lord, make it 2005 again. Look into my eyes and ignore the comps in the neighborhood for equally tiny houses on tiny lots that are priced at $100K less

At 9/25/2007 08:30:00 PM , Blogger Tyrone said...

We've dipped slightly below 1700 on the ZipRealty listings. In general, I'm seeing lower prices for listings. A lot are listing from $200K-$300K, but not this one--holy cow!! Seriously, this home shouldn't sell for more than $225K in this market.

List Price: $439,000
ZESTIMATE™: $537,778 On crack?
Sale History
09/30/2003: $681,818 typo?
12/15/1998: $185,000

At 9/29/2007 05:13:00 PM , Blogger marin_explorer said...

Last night, PBS ran an hour segment on the '29 stock collapse. It's interesting timing to say the least. Despite Wall St's assertion it can't happen again, there are some interesting parallels to our current "house investor" fiasco. A similar psychology pervaded the late '20s, when small-time investors overleveraged to get into the market. Does that sound familiar to anyone? So was the banker's last ditch attempt to save the market with infusions of liquidity. It didn't work then...will it work now?

At 9/30/2007 10:09:00 PM , Blogger Tyrone said...

There is a god!!!

Or perhaps it's just karma. My favorite Santa Rosa realtor, Chris Nunez, has put his $1M home, financed using an interest-only loan, on the market.

Sonoma Roll:
Parcel Number
173-430-022-000 NUNEZ CHRIS
Price paid: $1,061,312

3646 Bellagio Ct
Santa Rosa, CA, 95404
5 Ba: 5 3761 sqft.
MLS#: 20730428
Price: $1,230,000

This guy convinced many people into "buying" through interest-only loans. In the PBS video he says, "It's still a little surreal here when I come out here and hang out. I just, I think a lot of times, how did I pull it off?"


At 10/19/2007 04:09:00 PM , Blogger linda said...

This comment has been removed by a blog administrator.

At 10/19/2007 04:27:00 PM , Blogger linda said...

This comment has been removed by a blog administrator.

At 10/20/2007 09:23:00 AM , Blogger Tyrone said...

Sorry; gave the wrong link the Nunez listing:

At 10/20/2007 05:58:00 PM , Blogger marin_explorer said...

Chris Nunez, has put his $1M home, financed using an interest-only loan

In a real world, that turreted eyesore wouldn't clear half that listing price. Ahem, so this "realtor," is trying to sell now? Well, I'm not a realtor, but I easily pegged the market peak in Fall 2005. This will be a costly education for this guy.

At 10/21/2007 09:32:00 AM , Blogger Tyrone said...

Mr. Nunez is going to have bigger problems. He purchased 3 homes in this manner--interest only. At least he practiced what he preached; but now he's going to learn a valuable life lesson.

At 10/24/2007 01:29:00 PM , Anonymous Anonymous said...

Dataquest just released the Sept numbers:

Median price of SR homes/condos is down 20% since May 2006! ($536k -> $425k). Funny, no article about that in the Press Democrat :^)

Huge drop ($50k) from 8/2007 to 9/2007, but still 125 sales in 9/2007 so this isn't a weird outlier like you see in data for small towns.

At 10/27/2007 09:59:00 PM , Blogger Tyrone said...

Prices are screaming downward!

Here's a good example:
2791 MCBRIDE LN #154, Santa Rosa
Bedrooms: 3
Full Baths: 2
Partial Baths: 1
Square Feet: 1,324

List Price: $300,000

Sale History
03/16/2005: $385,000
09/19/2003: $280,000

It will probably crash below the 2003 price. It'll be a decent starter home when the price comes down.

At 10/29/2007 10:16:00 AM , Anonymous Anonymous said...

My votes:

1106 Gaddis, 3/3, 2196 sqft in the JC. Current listing price is ... $490k

An identical in same development sold for $721k in 2006

530 Green Ct. 3/2, 1635 sqft, large lot. Currently at $515k. Was listed at $695 two years ago by former owner.

i.e. 25-30% drops on comps from two years ago are now common (and the houses aren't selling even at those prices).

If you're buying here, wait. The foreclosures are mounting and will eventually frighten the FB sham sellers who refuse to "give their house away" into submission.

At 11/01/2007 11:19:00 AM , Blogger marin_explorer said...

In case you haven't seen this:

"Attorney General Andrew M. Cuomo today announced that he is suing one of the nation’s largest real estate appraisal management companies and its parent corporation for colluding with the largest savings and loan in the country to inflate the appraisal values of homes."

I'll wager this is just the beginning of litigation for appraisal fraud.

At 11/01/2007 01:50:00 PM , Blogger said...

Yes, the piper must be paid.

And that means biting the bullet on the losses.

On my site, this month I have free audio files from an anonymous real estate agent who has a lot to say about Short Sales and the mess we're in.

At 11/09/2007 04:37:00 PM , Blogger Out at the peak said...

I made a list of some of the Santa Rosa properties on the market asking for less than their peak price (including at least one 35%/$216K discount).

At 11/13/2007 09:31:00 PM , Blogger Tyrone said...

Something is rotten in Sonoma. My favorite family, the Carnes, sold their $1M home. HOW?!! What is stranger is that Zillow says they purchased another home for $640K, but the assessor has 'Net assessment' at $280,698.

Is something dirty going on here?
APN 161-410-040-000
1086 Elsbree Ln, Windsor CA 95492

Info is also at my blog.

At 11/15/2007 12:21:00 PM , Anonymous fred said...

Sonoma median price drops to 473K per DQNews.
Back to October 2003 levels folks.


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