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California is a bottom-feeder in the latest house price index from the Office of Federal Housing Enterprise Oversight, which has been tracking home values since 1991.
The index, which is based .. from home sales, shows home prices in California in the fourth quarter of 2007 fell 6.65 percent from the same quarter a year ago -- the worst of any state in the country.
Of the 26 California communities tracked, all recorded negative appreciation in the fourth quarter of 2007.
But real estate is local, and the picture in Redding is not nearly as grim as in Merced or Modesto, where home values last quarter plummeted 18.98 percent and 15.48 percent, respectively, compared with a year ago. Merced had the dubious honor of leading the nation in depreciation.
Fourth quarter 2007 home values in Redding dropped a relatively miniscule 4.55 percent over a year ago. In fact, only Chico (4.29 percent), San Luis Obispo (3.33 percent), Los Angeles (3.23 percent), San Jose (2.28 percent), Santa Cruz (1.36 percent) and San Francisco (0.86 percent) experienced less depreciation.
So where are the hot housing markets?
Topping the index last quarter was Wenatchee, Wash., Houma, La., and Grand Junction, Colo., where home values shot up 13.67 percent, 12.15 percent and 12.03 percent, respectively. But the boom might be fizzling in those communities as values there rose less than 1 percent from the third quarter of 2007 to the fourth quarter.
Looking for an up-and-coming city? How about Bismark, N.D.? Home values there jumped 10.72 percent in a year, but they rose 4.27 percent from the third quarter to the fourth quarter of last year.
Trend breakers
If they haven’t already, Redding officials should give San Luis Obispo a call.
Bucking what seems to be a trend, the Central Coast city didn’t cough up any incentives to get Delta Air Lines to start daily flights to Salt Lake City last summer, said Dave Garth, president of the San Luis Obispo Chamber of Commerce.
Delta wants $1.22 million in subsidies from Redding in exchange for Salt Lake City service. This request comes after the carrier got Humboldt County to hand over $1.12 million in perks for Salt Lake City service. Delta Air Lines last year coaxed Yakima, Wash., and Salem, Ore., to give it money in exchange for service.
"Where does it stop?" Garth said of government subsidies.
Don look for the housing market to improve until the daffodils bloom next spring.
For home sellers, the continuing pain means that that homes likely won sell unless they are well-kept, priced below the competition and are marketed aggressively. Adding incentives like seller financing or lease-options can help bring in buyers who are having trouble getting conventional financing.
The latest S&P/Case-Shiller Home Price Index shows that new and existing home prices fell 12.7% in February from a year earlier.
According to economists who convened at the spring construction forecast conference of the National Association of Home Builders in Washington, D.C., last week, the trend will continue until early next year, dragging down prices.
The consensus view was far gloomier than a few months ago, when housing economists predicted the bottom would be reached in late summer or early fall. But now the U.S. is in a mild recession, although it hasn been officially declared, and the pain is spreading to more parts of the country, according to the associations chief economist David F. Seiders. "Foreclosures keep getting worse," he said. "Where in the world does it stop?"
Foreclosures push homeowners out of their homes and simultaneously ruin their credit, making it difficult for them to become owners again, he said. The drop-off of demand from these owners, as well as would-be buyers who don want to purchase while prices are still falling has become a "diabolical feedback loop," he said.
Home builders have put the brakes on building -- total annualized housing starts are down 34.5% to 1.035 million in the first quarter of this year and will likely stay at under 1 million until the middle of next year. But demand is still too weak to absorb this pace of building, according to Mark Zandi, chief economist for Moodys Economy.com. It would take 11 months at the current sales rate to sell the new homes now on the market.
Mr. Zandi expects three quarters of the countrys major markets to experience new and existing-home price declines. In places that have been losing jobs, prices could drop as much as 40% from their peaks. "The coast is not clear," he said.
Eric Belsky, executive director of Harvards Joint Center for Housing Studies, noted that declining home prices, which eroded the equity of many homeowners, "caught people by surprise." He expects to see more households doubling up in shared homes as job loss, foreclosures and the credit squeeze continues. "People are being forced to sleep on floors," he said.
But not all of the economists were as pessimistic about the coming years prospects.
Nariman Behravesh, chief economist of Global Insight, said that while lack of regulatory oversight on Wall Street and interest rates that stayed too low, too long, helped create the current housing debacle, "the worst may be behind us." He noted that theres now a substantial amount of capital available to fix the subprime mess.
Economist James Glassman, a managing director of J.P. Morgan Chase & Co., said that the current quagmire is partly due to creditors overreacting to the subprime-mortgage crisis, leaving only good savers with enough cash able to buy homes. But overall, he said, the American economy is sound, and the crisis will eventually subside as credit becomes freer and home prices stabilize. "The wheels aren coming off the wagon," he said.
By Jim Wasserman - jwasserman@sacbee.com
Last Updated 1:21 pm PDT Thursday, April 17, 2008
Sales of new and existing homes in the Sacramento region registered a typical seasonal bounce in March, with 2,522 transactions closing escrow, according to the newest statistics from DataQuick Information Systems. Still, the prolonged housing slump continued as median prices fell throughout the area and sales of new homes dropped sharply.
Marchs numbers were a change from the 2,162 homes sold during February in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties.
The sales price statistics showed that investors and first-time buyers continue to focus on bank repos. The Sacramento Association of Realtors reported that almost half of March closings in the county and West Sacramento were for homes valued at $250,000 or less.
Yuba County saw median sales prices dip below $200,000 for the first time since January 2004, DataQuick reported. Median is that point where half cost more and half cost less.
Overall, Sacramento county sales of new and existing homes combined were up 19 percent in March from the previous month. While encouraging in light of a slumping housing market, the 20-year average is 36 percent, according to DataQuick.
Closings on new homes showed the weakest March numbers as many buyers shop for bank-owned bargains. DataQuick reported that year-over-year sales of new homes were down 35.6 percent in Sacramento County, down 42 percent in Placer County and down more than 70 percent in Sutter and Yuba counties.
By contrast sales of existing homes were down just 9 percent in Sacramento County. That was the lowest year-to-year sales dip of all eight counties.
Other March highlights:
• Sacramento Countys 1,501 March closings on new and existing homes combined were the fewest since March 1997, according to DataQuick. The tally was down 14 percent from the same time last year.
• Median sales prices also dipped to $247,000, a level not seen in the county since May 2003. Median prices are now 36 percent below August 2005 highs of $387,000.
• Placer Countys 464 new and existing home sales were the lowest since March 1996, and were down nearly one-third from the same time last year.
• The countys March median sales price of $355,000 is 19 percent below a year ago and off one-third from the August 2005 high of $525,000, DataQuick reported.
• The El Dorado County median sales price dipped again in March to $362,250, down 21 percent from the same time last year.
• Yolo Countys March median sales price fell to $327,500, down 16 percent from a year ago.
Standard and Poors released the February data for the S&P/Case-Shiller Home Price Indices showing a 12.7 percent year-over-year decline for the 20-City Composite Index, the steepest decline on record. Indices for individual cities are shown below:
David M. Blitzer, Chairman of the Index Committee at Standard & Poors noted:
There is no sign of a bottom in the numbers. Prices of single family homes continue to drop across the nation. All 20 metro areas were in the red for the February-over-January reading. In addition, 19 of the 20 MSAs are still reporting negative annual returns. The monthly data show that every one of the MSAs has now declined every month since September 2007, marking six consecutive months. On top of that, the declines have remained steep with eight of the 20 MSAs and both composites reporting their single largest monthly decline in February.
In tabular form, the data looks like this:
Three cities now sport year-over-year declines of more than 20 percent - former high-fliers Las Vegas at -22.8 percent, Miami at -21.7 percent, and Phoenix at -20.8 percent. Two areas in the Golden State - Los Angeles at -19.4 and San Diego at -19.2 - look like they
are ready to join that club next month.
Charlotte remains the only metropolitan area in the index with a gain from year ago levels with a modest 1.5 percent increase.
Thanks to Californias Proposition 8, passed back in 1978, homeowners in the state can get a temporary reduction in their homes assessed value—and, accordingly, their property taxes—when the housing market enters a slump. Recognizing that that applies to virtually everyone who purchased property in the state within the past few years, Prop8.org is a new consumer advocate group that was formed specifically to help California consumers take advantage of the law.
Prop8.org provides tax-assessment appeals services for commercial, industrial and residential properties throughout California. With a team thats professionally trained in tax appeal rules, procedures and requirements specific to each California county, Prop8 can provide market data and analyses needed to advocate the lowest possible tax assessed value. Clients get full-service representation, from the initial filing of the assessment appeal application and supporting documentation, through negotiations with the county assessor—even including a formal hearing before the County Tax Appeals Board, if necessary. Prop8s services are available on a contingency fee basis for 50 percent of the first years tax savings or via a flat-fee plan that covers the entire process—with a three-year guarantee—for USD 495. For homeowners who bought their homes between 2004 and 2006, the average savings that result from hiring Prop8 are between USD 1,500 and USD 2,500 per year, the companys founders say.
Prop8 is currently seeking affiliates to help extend its service throughout California. Meanwhile, of course, there are also many other situations in which consumers are legally entitled to compensation but are unaware or too busy to claim it. Find one of those, and you just might have something to build a business on! (Related: Claiming compensation for duped passengers.)
Dropping a brick
May 29th 2008
From The Economist print edition
House prices are falling even faster than during the Great Depression
“A DESTABILISING contraction in nationwide house prices does not seem the most probable outcome...nominal house prices in the aggregate have rarely fallen and certainly not by very much.” Alan Greenspans soothing, if rather verbose, words on Americas housing market in 2005 rank high on historys list of infamous predictions. But to be fair, most American economists shared his view that it was highly unlikely that average nationwide home prices would drop. That was the sort of thing that happened only during a deep depression, like the 1930s.
Unfortunately, new figures this week reveal that house prices have already fallen by more over the past 12 months than in any year during the Great Depression. The S&P/Case-Shiller national index fell by 14.1% in the year to the first quarter. Admittedly, other property indices show smaller drops, but most economists now favour this measure. The index goes back only 20 years, but Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back more than a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, at the worst point of the Depression.
And things are even worse than they look. In the deflationary 1930s, Americas general price level was falling, so in real terms home prices declined much less than they did nominally. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year. In nominal terms, the average home is now worth 16% less than at the peak in 2006, and the large overhang of unsold houses suggests that prices have further to fall. If so, this housing bust could well see a bigger cumulative fall in prices than the 26% real drop over the five years to 1933. Most people would call that a pretty destabilising contraction.
The Housing Wipeout: The Next Leg
By: Marc Courtenay Thursday, May 22, 2008 1:41 PM
Sectors: Finance
We learned today that U.S. home prices posted their sharpest first-quarter decline since the government began tracking the data 17 years ago.
The Washington-based Office of Federal Housing Enterprise Oversight said Thursday that home prices fell 3.1 percent in the first quarter compared with last year. The index also fell 1.7 percent from the fourth quarter of 2007 to the first quarter of 2008, the largest quarterly price drop on record.
One of the more brilliant innovations in the mortgage industry in the last four years -- the option ARM -- allowed homeowners to pick their payment each month for a few years. As the borrower, you decide how much to pay each month… bare minimum, interest only or -- gasp -- interest plus part of the principal.
Great while you get to choose. But when the option expires, the bank resets your [budget] with a hefty fixed rate.
That second wave of adjustable-mortgage resets won’t even begin until next year. And as you can see from the chart above, the quantity dwarfs the amount that caused Wall Street, the Fed and Congress to vomit in unison already this year. [We thank Agora Financial for sharing this with us www.AgoraFinancial.com]
The Prime Mortgages can include the ARMs, and there were many, many ARMS originated between 2002 and 2006 that are hanging on the edge of the "reset precipice". Then in the next 3 years the many option ARMS and "Alt-A" ARMs (Alt-A loans are the no document "liar loans" that were originated by the millions during the housing and mortgage bubble). These resets and expired, low interest rate Alt-A ARMs will peak in 2012...oh my God, 2012!
This indicates that we have at least 3 more years of the mortgage meltdown and the housing wipeout to deal with and that is not a promising indicator of the health of the US, British, and Canadian economies in the the foreseeable future.
Agora Financial goes on to say, "“The credit crisis will extend well into 2009,” opines Oppenheimer analyst Meredith Whitney, “and perhaps beyond.”
Whitney became somewhat of a contrarian demigod last year when she brazenly forecast Citigroup’s massive write-downs before the crisis dominated headlines. Her report yesterday had “investors” racing for the exits.
"Multitrillion dollars of loans were underwritten,” writes Whitney characterizing the root of the problem, “with the false assumption that home prices would go up in perpetuity on a national basis.”
Unfortunately for many… the assumption was false. The road to hell is paved with good intentions and false assumptions.
“We see no near- or medium-term comeback,” she says of the firm’s outlook. “We believe losses will only accelerate further and be far worse than even the most draconian estimates. Due to continued deterioration in consumer liquidity, we are raising our loss expectations significantly for the group and lowering our earnings estimates significantly."
As the crisis unfolds, it’s not just Wall Street fat cats getting the shaft. “There are 12 parking lots across Santa Barbara that have been set up to accommodate the growing middle-class homelessness,” CNN reports. Counseling centers there have urged the city to lend parking lots during the night, as this atypical breed of homeless car owners needs a legal place to sleep.
"The way the economy is going,” said Nancy Kapp of the New Beginnings Counseling Center, “its just amazing the people that are becoming homeless. Its hit the middle class." Knapp said these parking lot hostels are overwhelmingly populated by senior citizens and single mothers.
In a related domain, "From time to time we find ourselves wondering: How could all of this happen? This morning we have our answer: It was all a big mistake.
A “computer glitch” prompted Moody’s to incorrectly assign billions of dollars of worthless debt their coveted AAA rating. An investigation by the Financial Times reveals many of the AAA ratings Moody’s assigned in 2007 should have been “up to four notches lower,” but were left AAA... well... because the computer said so. [No wonder there has been a massacre in ABCP, CMO, and MBS type debt "securities", which perhaps should have been more accurately labeled "insecurities"].
Moody’s officials were well aware of the error, but did nothing. According to the salmon-colored rag, Moody’s fixed the glitch by quietly reducing errant ratings during their massive wave of downgrades late last year.
“It’s so absurd,” writes our managing editor, Chris Mayer, by e-mail this morning, “it might just work. I’m telling you… if a fiction writer wrote this story, we’d laugh our ass off. ‘That’s ridiculous,’ we’d huff, ‘no one would believe that.’
“You can’t make this stuff up.” And that is why we see home prices plunging more over the next 3 years, even in coveted areas such as Santa Barbara, CA or Jupiter Beach/West Palm Beach, Florida, not to mention Portland, OR and Seattle, WA. These areas have been perceived as "immune" or "different" and up to recently that has been the case. But that is about to change over the next 18 to 36 months in a dramatic fashion.
No one knows for sure how bad the rest of the housing tragedy will be and how far home prices will fall from here. All we have are the clear and documented "early warning signals" and the evidence (see the graph at the top of this article) as well as many anecdotal pieces that foreshadow things to come.
Heres our official prediction, and it is worth about as much as you are paying to read this. House prices will fall another 30% as a nationwide average. In some over-inflated areas we might see another 50% from here, believe it or not. Our biggest regrets and sorrow are for those who will suffer as a result, and that is why we hope we are wrong
After navigating a tight credit market and securing a home loan, a big property tax bill really hurts.
And nowhere is it felt more than in New York and New Jersey, where residents pay more in these taxes than anyone else in the country. The hardest hit? Homeowners in western New Jerseys Hunterdon County. Last year, the median yearly property tax bill amounted to a whopping $7,999 here, according to the Tax Foundation, a nonpartisan research group in Washington, D.C, which compiled data based on 2006 figures.
Things aren much better in New York. In Nassau County, Long Island, the median homeowner drops $7,706 a year, while up north, Westchester County residents pay $7,626 a year.
In Pictures: Americas Priciest Property Taxes
In fact, New York and New Jersey residents can expect to pay up to $6,500 more in yearly property taxes than the national average. The reason: The regions homes are among the priciest in the country, and tax rates there are high as well.
Related Stories
Americas Most Stable Housing Markets
Most Expensive Zip Codes
"They spend more on government [in the Northeast]," says Gerald Prante, an economist at the Tax Foundation. "In New York and New Jersey, they
e high on every tax."
Elsewhere, its one or the other, not both. California properties are among the countrys most expensive, but property tax rates there are a third what they are in the Northeast. Property tax rates in the Midwest and South are comparable to the Northeast, but the homes there are often half as valuable, making the amount paid in taxes significantly less.
Dishing The Duty
Many homeowners are paying taxes based on assessments done during the real estate bubble. Now that its popped, they
e overpaying--home values have not kept pace with the decline in prices.
In other parts of the country, prices continue to climb. The Virginia Beach and Norfolk areas have seen four straight years of price increases, and homeowners there are finding themselves writing bigger and bigger checks to Uncle Sam.
"We are not angry about rising assessments, because that shows that theres genuine increase in wealth in terms of equity," says Brian Smith, president of the Norfolk Tea Party, a tax relief advocacy group in Virginia. "But just because market rates have increased doesn mean the government is entitled to the windfall."
Whats more, many local governments are using the tax revenue boost from the boom to set up programs that continue to require funding--even though the market has cooled, and in many cases, tax bases have shrunk.
"If they spent the windfall on some new program, what happens when the property values go down, or when the base falls?" says Prante. "Are you going to raise the rates or cut the program?"
Other parts of the country have laws in place to make sure property taxes don swell. Californias Proposition 13, passed in 1978, caps property tax rates for residents in the Golden State. Other states, like Arizona, which doesn have property values as high as Californias, have slightly higher property tax rates, but lower income taxes.
"[Californias] higher average property values produce more local income," says Anthony Sanders, a professor of real estate finance at Arizona State University. "Arizona makes up some of the difference in total tax revenues by having slightly higher sales taxes."
Warm summers, mild winters and tempered taxes. Sounds like a mix sure to make Northeasterners envious.
WASHINGTON - A home-price index considered to be the most comprehensive reading of the U.S. market posted the sharpest decline in its 17-year history, and analysts say housing has yet to bottom out.
Rapidly falling home prices in California, Florida and Nevada skewed the national results.
The Office of Federal Housing Enterprise Oversight said Thursday that home prices fell 3.1 percent in the first quarter compared with last year.
It was only the second quarter of price declines since the index started in 1991. The price index first declined on a year-over-year basis in the final quarter of 2007, when it dropped 0.45 percent.
Another widely followed reading, the Standard & Poor’s/Case-Shiller index, has shown larger declines for major U.S. metropolitan areas. But analysts say the government index provides a more comprehensive reading of nationwide housing market.
That’s particularly true for midwestern states, where prices never skyrocketed and have been less affected by the real estate downturn.
“Most people don’t live in a Miami condo,” said Michael Englund, chief economist with Action Economics in Boulder, Colo.
Still, declines in the government index, which focuses on less expensive properties and includes fewer houses bought with risky home loans that have gone sour over the past year, show the depth of the housing market’s troubles.
Prices fell in 43 states, with California and Nevada showing the biggest declines. Home prices dropped by more than 8 percent in those states.
The government index also fell 1.7 percent from the fourth quarter of 2007 to the first quarter of 2008, the largest quarterly price drop on record.
“The large overhang of real estate inventory awaiting sale continues to force price declines in many areas, but particularly in places that had seen very sharp appreciation,” Patrick Lawler, the agency’s chief economist, said in a prepared statement.
The government index is calculated by tracking mortgage loans of $417,000 or less that are bought or backed by the government-sponsored mortgage-finance companies Fannie Mae and Freddie Mac.
Wall Street analysts have tended to focus on the S&P index, an update of which is due next Tuesday, as a way to measure the value of securities backed by subprime mortgages and loans to borrowers in big metropolitan areas.
Earlier this month, economic forecasters surveyed by the Federal Reserve Bank of Philadelphia projected the government index would show a 5.4 percent annual decline in the fourth quarter of 2008. The survey projected the reading would not recover until early 2009.
Adam York, an economic analyst with Wachovia Corp., said Thursday’s data was unsurprising. “It was pretty widely expected that we would see declines this quarter and for some time to come,” he said.
The housing market is facing numerous troubles as buyers stay on the fence and rising mortgage defaults dump more homes on an already glutted market. In addition, many banks have raised their lending standards in response to the surge in mortgage defaults.
Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 5.98 percent this week. That was down from 6.01 percent last week and the lowest level in five weeks.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
In 1978, California voters passed Proposition 8, a constitutional amendment to Proposition 13 that allows a temporary reduction in assessed value when property suffers a "decline in value." A decline in value occurs when the current market value of a property drops below the current assessed value. A reduction is assessed value results in lower property taxes thus saving the property owner often hundreds, if not thousands, of dollars each year. Due to recent housing market conditions, virtually everyone that purchased property in California within the past few years can take advantage of Proposition 8 and save money by lowering their property taxes.
So with that in mind, if you are a California homeowner that purchased between 2003-2007, your property tax bill is probably too high! Many home owners don know that, under Proposition 8, they are entitled to file an appeal to have their home reassessed, more accurately reflecting todays lower property values. Since a home owners property tax bill is based on the assessed value of that home, a reduction in assessed value will yield a reduction in property tax!
Time is running out for California homeowners to file for a reassessment of their homes for tax year 2008-2009. There are 58 counties in California and each county has their own time lines, rules and regulations. Interested homeowners should contact a knowledgeable individual, who can research comparable values to help in preparing your appeal, and, very possibly, reducing their property taxes. Why pay more tax than you have to? Not to mention it is FREE!
For more information call Shane at 916-570-3577 or email me at shane@prop8.org
Posted on May 30th, 2008 in Mr Mortgages Personal Opinions/Research
I have spoken loudly for well over a year that the housing crisis, especially in bubble states such as California, will be much worse than most can imagine and at present is much worse than most think. (also see my Youtube version of this report) My top reasons are:
The total loss, over the past 9-months, of most ‘affordable/exotic’ loan programs relied upon so heavily over the past five-years.
Out-of-control supply with Foreclosure and Bank REO inventory surging to levels that now make the foreclosure market, ‘the real estate market’. In CA in April, 2008 Total Sales equaled 31,250, banks took back 22,328 homes from foreclosure auctions, and Foreclosure Resale’s were 38% of Total Sales. In April 2007, they were 5% of Total Sales.
The ‘mortgage crisis’ moving up the credit spectrum from subprime to alt-a, and finally to a much larger percentage of the prime market than ever before thought…the latter primarly being due to the ‘negative equity effect’ and what was considered ‘Prime’ over the past five years, being far from it.
A catastrophic 27% fall in CA median housing prices in the past 11-months, pushing a massive amount of home owners into a negative-equity position and increasing their likelihood of loan default across all borrower types.
New home buyers not having a large enough down payment or income/credit level to be able to qualify for new-vintage fixed-rate, fully documented mortgages.
Potential, qualified buyers not being able to sell their present home to raise the down payment; not wanting to rent or yielding enough from renting their present home to buy a new home; or just not wanting to enter the market due to depressed confidence levels. Remember, most home buyers are existing home owners and not first-time home buyers or renters.
A large percentage of home owner who used second mortgages or high-LTV single-lien financing to avoid a down payment and existing home owners who leveraged-up their homes by pulling cash-out to maximum LTV/CLTV levels having no ‘skin in the game’, defaulting and moving to the rental pool.
Homes are still too expensive and it is still cheaper to rent in most cases. Buy vs rent ratios are still closer to peak levels than historic norms in many major metropolitan areas around the nation, especially in the bubble states. CONTINUED…
I have also said for a long time that ‘unless people plan to pay cash, with all of the exotic loan programs suddenly gone, home prices will gravitate to the most readily available financing, which is still Fannie/Freddie <=$417k conforming’. The new Fannie/Freddie ‘Jumbo’ loans remain far too restrictive to serve as a replacement for what was lost. They are not even close. It just so happens that exotic loans were so pervasive in CA that our home prices are ‘gravitating’ lower from much loftier levels than anywhere else in the nation.
The fact is home prices are collapsing and there is not even a hint at that stopping. As a matter of fact, DataQuick reports that CA home prices reached a record median level of $484k in Mar 2007 and remained there through the summer. Then suddenly in Sept 2007, the median price fell sharply to $430k, as the Spring/Summer sales season ended at about the same time most lenders pared back what was left of their ‘exotic/affordable’ mortgage offerings.
Prices continued to fall each month since and are still falling. Last month, the median home price hit $354k, which is 26.86% off of the high in 11 short months or 23.9% from the end of the 2007 selling season. Before you jump all over me, I am a Case-Shiller fan but since I was using other data from DataQuick, I wanted to keep it consistent.
Most think the CA ‘housing crash’ has been ongoing for a couple of years. That is not the case. Total Sales have been steadily declining for a couple of years, but values kept increasing through summer 2007 despite that.
Most frightening is that CA has not seen a Spring/Summer selling season without ‘exotic/affordable’ loan programs in years. 2008 is the first. We are in uncharted territory.
What I have known in my head, blogged about and scribbled on the back of napkins for months, I actually found the time to chart (Please see spreadsheet below and attached). I used sales data from DataQuick, foreclosure data from ForeclosureRadar and listing data from Movoto.
I began tracking from 1/1/2007 through the most recent data available, which is April 2008. However, columns D & E on the accompanying spreadsheet do capture sales from 1-yr prior or 1/1/2006. The spreadsheet also captures:
Total Sales and Foreclosure Resale’s: include new homes, existing homes, SFR’s, condos and co-op’s.
Median Sales Price: as reported monthly from DataQuick.
New Bank REO: total monthly foreclosures sales that went back to the bank from the foreclosure auctions, which is running at the 98% level lately according to ForeclosureRadar.
Total Listed Inventory: 275,000 estimate by Movoto. This inventory does NOT include FSBO’s or most REO and Builder for sale inventory.
Inventory Burn: Total Sales less New Bank REO
Column ‘O’, Inventory Burn, is where things get a little tricky and some may not agree with my math. I am open to debate this, as I consider this piece ‘a work in progress’ and this subject the largest threat to real estate in most bubble states.
For Inventory Burn, I backed out New Bank REO from Total Sales to come up with an Inventory Burn divisor for which to calculate Total Months Inventory by factoring it into the Total Listed Inventory figures. I averaged the past four months Inventory Burn of 21,566 to come up with a monthly divisor of 5,392 units per month leaving the CA inventory pool. This maybe an overly simplistic way at which to look at this, but given all of the wildcards, these are the data we have here and now.
*Also see Breaking CA April Foreclosure Stats - Very revealing
One can argue that I should have added the New Bank REO inventory, or ‘Shadow Inventory’, into the Total Listed Inventory figure and divided by the true number of Total Sales, but I didn’t think that was appropriate. This is because New Bank REO counts are absolutely surging as of late (up 100% in 6-months) and will continue to surge according to data provided by ForeclosureRadar in their past four Monthly CA Foreclosure Reports. If it were stable, or within the reasonable thresholds, for the past year and I was able to estimate a total past ‘Shadow Inventory’ count, then this method could have been used as well.
What I show is seven month’s consecutive reports showing significantly increased Notice-of-Default and New Bank REO counts, which constitute a trend and do predict the future. These reports show that in the next four months, there will be 30,500 homes per month on average turn into New Bank REO. This is at a pace twice that of the beginning of 2008 and several times greater than 2007. Therefore, factoring in historical New Bank REO counts, which were much smaller, and adding them to the Total Listed Inventory was not appropriate.
I needed a starting point, so I decided to start right here with:
a known Listed Inventory quantity of 275k units. This does not include most builder or REO inventory.
a known monthly New Bank REO inventory count in the present and looking forward four months into the future as predicted by the past four month’s Notice-of-Defaults
and a present Total Sales count
With this I can determine what the Total Sales count must be in order to achieve an Inventory Burn rate great enough to absorb the existing 275k Listed Inventory and the monthly New Bank REO. Even at the present Total Sales count for April of 31,250, which was much higher than at any other time in 2008, the numbers show very little Inventory Burn.
I considered utilizing ‘annualized’ data but if I annualized sales, then I would have to annualize the New Bank REO and given the upward curve in REO, that measure would have been even worse. This is because home sales will decline, as they always have after the Spring/Summer selling season, and New Bank REO may very well continue to accelerate due to Alt-A loans defaulting at a greater rate and the negative-equity effect forcing more borrowers of all types into default.
Last year, there were 383k homes sold in CA and this year the pace is about 20% lower. However, the foreclosure rate is surging and the New Bank REO annualized pace is at 360k. ‘Annualizing’ would make for ‘infinite inventory’. Again, reducing the Total Sales count by the New Bank REO to get an Inventory Burn seemed like the only logical measure.
The final results are about what I expected. California has YEARS OF INVENTORY to burn through. The numbers show 4.25 years of listed and ‘Shadow’ inventory is out there and that is using the most liberal April Total Sales figure of 31,500 units, which was large in comparison to past months but appropriate, as we are in the Spring/Summer home selling season. I was also conservative by using the April New Bank REO figure, which we already know will increase over the next several months.
If New Bank REO counts hover around the 30k mark where they should be for the next four months at least, in order to burn through the current 275k CA Listed Inventory at a rate consistent with the national Month’s Supply levels of 11.4 months and/or the perceived CA Month’s Supply levels of approx 10 months, Total Sales will have to double from the current two month average pace of 27,500 per month. This will be tall order, however, as the biggest purchase month in years was March of 2006 when 57,635 homes changed hands. At that time, we had a full menu of exotic loan programs to choose from.
This is the first Spring/Summer selling season in five years without a full menu of ‘exotic/affordable’ loan programs to drive affordability.
You may think that as prices fall, more homes will sell and that will solve the inventory problem. That is not totally correct. As prices fall, more homeowners are thrown into a negative equity position, which leads to more defaults and even more Bank REO, as explained in further detail in the following paragraphs.
New Bank REO, or ‘Shadow Inventory’, is a real problem and a real threat to values across the nation. On average, banks are discounting this inventory by 25% of the original note value with nearly half experiencing discounts of 30% or more. Remember, most first mortgage note values were originally at 80% loan-to-value, meaning many homes are being discounted nearly 50% from the original appraised value at the time the loan was done. What about all the comparable property owners who bought at the same time and are now 50% upside down in their home, and not in default? Yet.
Bank REO inventory is now ‘the market’. Banks are the market maker. According to DataQuick, in March and April 2008 Foreclosure Resale’s were responsible for 38.4% and 37.7% of Total Sales respectively. Last April, Foreclosure Resale’s were 5% of Total Sales.
With discounts as large as banks are offering, entire neighborhoods and regions are being marked-to-market overnight. This is pulling thousands of other home owner’s values down sharply forcing them into a negative equity position, heightening their chances of loan default.
In a nutshell and simplistically speaking if 10k people get a ‘great buy’ on REO, 100k home owners could have the value of their homes fall by 30-50% overnight. Of those 100k, 35% get thrown into a negative equity position, 35% of those experience loan default and 75% of those (9,200) go back the bank as REO. The banks sell at a 30-50% discount and the process repeats. Again, no inventory has moved. Values just continue to fall. It is a vicious cycle.
Please take a look at the accompanying spreadsheet above and YouTube version of this report reviewing the spreadsheet. My itemized findings are as follows:
CA home Total Sales fell significantly from 2006 to 2008, down as much as 41.09% year-over-year.
The CA Median Home Price kept rising through May 2007 to a record $484k and stayed relatively flat until Aug 2007, despite Total Home Sales volume declining sharply.
In 2007, most months’ Total Sales figures were the weakest for that particular month since DataQuick began tracking in 1988.
Only recently have sales picked up with 31,150 Total Sales in April 2008, however, this number is still 10.87% lower than 1-year ago and last year’s number was 28.52% lower than 2006.
In Sept, 2007 the Median Home Price fell sharply to $430k
In the subsequent 7-months until present, the Median Home Price continued to plummet. It stands at $354k today as measured by DataQuick, which is a whopping 26.86% decline in 11 months. This is unprecedented.
The massive fall in housing prices coincides with not only the end of the Spring/Summer selling season, but the elimination of most lenders ‘exotic’ and Jumbo loan programs and/or loan types, which include but are not limited to: subprime, Alt-A, interest only, pay option arms, stated income, no ratio, no doc, home equity loans/lines, no money down etc.
CA has NOT gone through a Spring/Summer selling season without the above mentioned ‘exotic’ and jumbo loan programs and/or loan types in 6-years.
As Total Sales and the Median Price fell, foreclosure and New Bank REO activity increased sharply and continues to do so with 22,324 homes add to REO inventory in April, 2008. This is up 100% in 6-months. Most of this ‘Shadow Inventory’ is not part of the estimated 275k MLS listed homes, traditionally used to calculate Month’s Supply.
In the past several months Foreclosure Resale’s have also increased to 38% of Total Sales in the state of CA in April. In April 2007, they were 5%.
New Bank REO is now the market and the banks the market-maker. On average, banks are discounting inventory by 25% of the original NOTE value with nearly half experiencing discounts of 30% or more. Most first mortgage note values were originally at 80% loan-to-value, meaning these homes are being discounted nearly 50% from the original appraised value at the time the loan was done.
Entire neighborhoods and regions are being marked to market overnight due to Bank REO sales. This is pulling thousands of other’s home values down sharply forcing them into a negative equity position, heightening their chances of loan default.
New Bank REO as a percentage of Total Sales has been steadily climbing since 2006 and even reached 101.45% in Jan 2008 before backing off to 71.67% in April 2008.
Backing out Foreclosure Resale’s from Total Sales in April 2008, leaves you with 19,406 Organic Sales, which is the below the lowest number since DataQuick began keeping records in 1988.
New Bank REO as a percentage of Total Organic Sales was 115% in the month of April 2008 showing infinite inventory.
True Inventory Burn, which is Total Sales less monthly New Bank REO inventory, has been steadily decreasing and in Jan 2008 was a negative number. The past four months true Inventory Burn totaled 21,566 units or 5,392 units per month.
If the rate of New Bank REO remains steady, (however we already know it will increase to 30,500 units for at least four months out due to the past four months Notice of Default data), and the rate of Total Sales stays at the elevated April levels, given the true Inventory Burn, it will take 51 months or 4.25 year to sell all existing MLS Listed Inventory. This does NOT include FSBO or unlisted Builder or past bank owned REO inventory.
If the rate of New Bank REO steadily increases as it has for 16 consecutive months and Total Sales do not increase due to rising mortgages rates, tougher lending guidelines, the absence of loan programs, and historical seasonal patterns, then CA has infinite inventory, as the rate of New Bank REO will continually exceed Total Sales as it did Jan 2008.
If the home prices are not only based upon affordability but supply and demand fundamentals, then CA real estate prices could stay depressed far longer than anyone has predicted to date.
United States of America (Press Release) June 12, 2008
What is Proposition 8?
In 1978, California voters passed Proposition 8, a constitutional amendment to Proposition 13 that allows a temporary reduction in assessed value when property suffers a "decline in value." A decline in value occurs when the current market value of a property drops below the current assessed value. A reduction is assessed value results in lower property taxes thus saving the property owner often hundreds, if not thousands, of dollars each year. Due to recent housing market conditions, virtually everyone that purchased property in California within the past few years can take advantage of Proposition 8 and save money by lowering their property taxes.
So with that in mind, if you are a California homeowner that purchased between 2003-2007, your property tax bill is probably too high! Many home owners don know that, under Proposition 8, they are entitled to file an appeal to have their home reassessed, more accurately reflecting todays lower property values. Since a home owners property tax bill is based on the assessed value of that home, a reduction in assessed value will yield a reduction in property tax!
Time is running out for California homeowners to file for a reassessment of their homes for tax year 2008-2009. There are 58 counties in California and each county has their own time lines, rules and regulations. Interested homeowners should contact a knowledgeable individual, who can research comparable values to help in preparing your appeal, and, very possibly, reducing their property taxes. Why pay more tax than you have to? Not to mention it is FREE!
For more information call Shane at 916-570-3577 or email me at shane@prop8.org
If you have purchased a home within the 2003-2007, your property tax bill is probably too high! Many home owners don know that, under Proposition 8, they are entitled to file an appeal to have their home reassessed, more accurately reflecting todays lower property values. Since a homeowner’s property tax bill is based on the assessed value of that home, a reduction in assessed value will yield a reduction in property tax!
Time is running out for homeowners to file for a reassessment of their homes for tax year 2008-2009. Interested homeowners should contact one of our Prop8.ORG customer service representatives, who are very knowledgeable in researching comparable values to help in preparing your appeal, and, very possibly, reducing their property taxes. Why pay more tax than you have to? Not to mention it is FREE!
I, Shane Barker, am one of the founding CEO of Prop8 Associates, LLC, which I co-founded after serving on the Board of Director’s at RCG. In addition to my leadership of Prop8 Associates, LLC, I am also the co-founder of Cashout Options, Equity Flips, Bailout Help and a number of other real estate websites. I graduated from California State University of Sacramento, Business Administration and Intensa, Costa Rica Spanish Language School is an accomplished entrepreneur, investor, foreclosure specialist, traveler and father. My desire to educate others about real estate is driven by my love to help others.
Please visit our website, http://www.prop8.org for the answers to Frequently Asked Questions. If you still have questions or concerns, contact me via phone or e-mail. I look forward to hearing from you and answering your questions. Call 916-570-3577 or email me at shane@prop8.org
# # #
About Prop8.ORG:
Prop8.ORG is a consumer advocate group that was formed specifically to assist California Property Owners to reduce their property taxes in a declining market. We are here to assist, guide and manage that process on behalf of the property owner.
We have written here about the changes in Cincinnati’s property values over the last two years. A part of the real estate downturn that is being overlooked is the assessments for property taxes. Locally we have seen our home value decline between 5% and 11% depending on where we live but it has not been as bad as California. Their property value has declined so much that there is now a company that will help homeowners obtain a break on their property tax reasons.
Prop8.org takes advantage of a California proposition that allows for homeowners to get a reduction in their property taxes. Prop8.org charges a fee to help homeowners navigate the legal paperwork, and submit the necessary papers. We do not have this luxury in Cincinnati but it is important that the next time your property is assessed that you pay attention and gather the recent sale data for your neighborhood so you understand you new property assessment.
Thanks to Californias Proposition 8, passed back in 1978, homeowners in the state can get a temporary reduction in their homes assessed value—and, accordingly, their property taxes—when the housing market enters a slump. Recognizing that that applies to virtually everyone who purchased property in the state within the past few years, Prop8.org is a new consumer advocate group that was formed specifically to help California consumers take advantage of the law.
Prop8.org provides tax-assessment appeals services for commercial, industrial and residential properties throughout California. With a team thats professionally trained in tax appeal rules, procedures and requirements specific to each California county, Prop8 can provide market data and analyses needed to advocate the lowest possible tax assessed value. Clients get full-service representation, from the initial filing of the assessment appeal application and supporting documentation, through negotiations with the county assessor—even including a formal hearing before the County Tax Appeals Board, if necessary. Prop8s services are available on a contingency fee basis for 50 percent of the first years tax savings or via a flat-fee plan that covers the entire process—with a three-year guarantee—for USD 495. For homeowners who bought their homes between 2004 and 2006, the average savings that result from hiring Prop8 are between USD 1,500 and USD 2,500 per year, the companys founders say.
Prop8 is currently seeking affiliates to help extend its service throughout California. Meanwhile, of course, there are also many other situations in which consumers are legally entitled to compensation but are unaware or too busy to claim it. Find one of those, and you just might have something to build a business on! (Related: Claiming compensation for duped passengers.)
June 18 (Bloomberg) -- Every time a housing statistic emits a faint heartbeat -- last weeks 6.3 percent increase in the April pending home sales index, for example -- theres a flurry of pronouncements that the residential real estate market has bottomed.
Hope springs eternal. Housing has been down so long it looks like up, especially with the graph turned upside down.
New and existing home sales peaked in July and September of 2005, respectively. It took a while for homebuilders to catch the drift: Starts didn top out until January 2006, leaving a huge inventory of unsold homes in their wake.
Single-family starts, which are the most sensitive to changes in interest rates, are down 63 percent from the January 2006 peak, easily topping the 38 percent peak-to-trough decline in 1973-1975 and 57 percent 1984-1991 dive, and vying for first place with the 65 percent plunge in 1977-1981.
No wonder homebuilders are glum. In a departure from normal practices, the National Association of Homebuilders elected to release its monthly builder survey to the media via conference call on Monday. I received so many advance e-mail alerts I was starting to wonder if the index had sunk to zero in June, and the NAHB wanted to soften the blow.
The quantitative results weren that bad: The housing market index fell 1 point to 18, matching the all-time low of December 2007.
The qualitative context was awful. David Seiders, NAHB chief economist, called the ``persistence of the low level\ of the HMI, a measure of housing demand, ``pretty troublesome.\
Price Option
The index ``has been in a tight range for a 10-month period,\ he said, ``unlike the 1990s, when there was a quick rebound. None (of the news) is encouraging at this point.\
As downbeat as Seiders was on the June survey results, the builder responses preceded ``the run-up in interest rates,\ he said. ``I haven factored that into the outlook yet. The risks are piling up to the downside.\
While homebuilders are pressuring Congress to enact a tax credit for first-time buyers, they are resisting the one thing that requires no legislative action to spark buyer demand, according to Thomas Lawler, founder of Lawler Economic and Housing Consultants in Leesburg, Virginia: Cutting prices. ``Builders are reluctant to do that\ to compete with the growing volume of distressed sales of properties in various stages of foreclosure, he said.
Forget the Granite
In Southern California, for example, one of the areas where the bubble started early and ended hard, median home prices are down 27 percent in the past year, Lawler said.
``If you look at observed transactions on distressed sales, you could make a case that we are closer to a bottom because prices have plunged so rapidly,\ he said. ``But thats no solace to non-distressed prices.\
In Florida, another epicenter of the boom-bust in real estate, ``sales are 20 to 30 percent below year-ago levels, but prices haven moved very much,\ Lawler said.
Builders have been reluctant to slash home prices for fear of alienating previous customers and encouraging current buyers to wriggle out of their contracts.
``Once clearing prices are way down, you can attract buyers with granite countertops and gold trim,\ Lawler said.
Foreclosures rose to a record 2.47 percent in the first quarter, according to the Mortgage Bankers Association.
Future Inventory
Using the MBA and other data, Lawler calculates that there are 1.34 million one-to-four family first-lien mortgages in the foreclosure process, which amounts to 27 percent of the inventory of existing unsold homes. A year ago, foreclosures represented about 18 percent of the unsold inventory, he said.
As scary as that number sounds, so far its just on paper. It takes about a year for todays foreclosures to be dumped on the market, adding to the already-bloated inventory of unsold homes, according to Michael Carliner, a former NAHB economist and now an independent housing economist in Potomac, Maryland.
The foreclosure process varies from state to state and in the length of time it takes from the first default notice to the assumption of the title of the property by the bank.
A few relationships are constant. New home sales lead housing starts. It is starts (residential construction) that contribute to gross domestic product. Housings drag on growth won lift until builders whittle away their backlog. Lower prices seem to be the quickest means to that end. (At lower prices, the quantity demanded increases.)
``We are unlikely to see a sustained increase in nationwide new home sales until builders are willing to cut prices to match the plunge in the prices of existing homes in seriously distressed areas,\ Lawler said.
If and when they do, you might not have to turn the home sales graph upside down to see the improvement.
(Caroline Baum, author of ``Just What I Said,\ is a Bloomberg News columnist. The opinions expressed are her own.)
To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net.
Home prices continued to tumble in San Diego County last month, with the median of $380,000 reaching its lowest level since September 2003.
A trio of factors – surging foreclosures, tougher lending standards and a weak economy – further pressured prices and demand for housing, according to La Jolla-based DataQuick Information Systems. Mays median price was down nearly 23 percent from a year earlier.
San Diego County index
San Diegos median home price peaked in November 2005 at $517,500.
The number of home sales inched up last month compared with April, as bargain hunters sought out good bank-owned deals. But overall, demand remains soft. The 2,979 sales last month represented a 12 percent decline from the same month last year.
Moreover, sales volume last month was lower than any May since 1995, when San Diego County was considerably smaller in terms of population and employment.
Advertisement Foreclosure sales continue to cast a widening shadow over the housing market. Sales of bank-owned homes made up 36 percent of all sales last month. That compares with just 8 percent a year ago and 0.2 percent during the peak of the housing boom.
“What horsepower this market can generate right now is mainly fueled by bargain shopping, especially by first-time buyers and investors in inland areas,” said Andrew LePage, an analyst with DataQuick.
“During the housing boom, we came to expect discounts on everything we buy except housing,” LePage said. “Now weve re-shattered the notion that home prices can fall. The expectation is everybody is going to get a deal.”
Re-sales of of single-family homes were down 3 percent from a year earlier to 1,782. But prices of resale homes fell from $557,000 last May to $420,000 this May.
LePage said the median might be skewed lower because sales are occurring mainly in less expensive neighborhoods. There have been relatively few sales in higher-priced, mostly coastal markets.
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Mike Freeman: (760) 476-8209;
mike.freeman@uniontrib.com
Foreclosures helped fuel the sharpest decline in California housing prices in at least 20 years last month, and thats attracting an influx of first-time buyers who had been priced out of the market or were waiting for prices to bottom out.
The median home price in California plunged 30% to $339,000 in May, the steepest decline for any month going back to 1988, when DataQuick Information Systems began keeping records.
Home buyers are now seeing median prices they haven seen since February 2004, when the price was $322,500, the firm said Wednesday. The statewide median home price, the point at which half the homes sold for more and half for less, peaked at $484,000 in May 2007.
"All of a sudden, [homes] are in our price range," said Elizabeth Trezza, a paralegal in Oakland.
Trezza has been on the hunt for a foreclosed property and placed offers on at least six in recent weeks.
The 24-year-old made an offer Tuesday on a two-bedroom, two-bath bank-owned home in Oakland listed at $234,000 -- just below her maximum spending limit, $250,000.
"Right now our mortgage would be relatively close to what we pay for in rent," she said.
For California, epicenter of the nations housing boom and bust, the drop in home prices has sparked a home-buying rally thats beginning to reverse more than two years of monthly year-over-year sales declines.
Though observers are cautious to call the surge in foreclosure sales a bellwether for a wider turnaround, it suggests some buyers are feeling less skittish about diving back into the market.
"Inland markets hit hardest by foreclosures and falling prices are now the most likely to post higher sales than last year," said Andrew LePage, a DataQuick analyst. "These communities have been attracting first-time buyers, first-time move-up buyers and investors."
Prices in those markets are now more in line with family incomes, and some buyers feel they are getting better deals, LePage said.
Sue Ansel, chief operating officer of Gables Residential, a luxury apartment rentals operator, says she has seen an uptick this year in renters moving out to become homeowners.
DataQuick said a total of 33,024 homes were sold statewide in May, down nearly 11% from a year earlier. About 38% of the resold homes in May were foreclosed properties.
Some foreclosure hunters are finding themselves having to bid against rival buyers on properties, said Richard Cosner, president of Prudential California Realty.
"Homes that are $200,000 to $250,000 today were $400,000 18 months ago," Cosner said. "For the first-time home buyers and for that bottom tier of homes, weve found what the bottom of the pricing is."
Homes priced below $400,000 drove the surge in sales. Many were financed with loans backed by the Federal Housing Administration, mortgage brokers say.
"FHA financing has really skyrocketed," said Dustin Hobbs, a spokesman for the California Mortgage Bankers Assn.
Sales, on the other hand, were weakest in many higher-end coastal markets, where there are fewer foreclosed homes and sellers are more reluctant to cut prices.
In San Francisco, for example, foreclosures made up only 5.8% of resold homes. The median home price there slipped 5.4% to $790,000 last month.
In contrast, more than half of all resold homes last month in nearby Solano County were foreclosed properties, DataQuick said.
That helped drive the median home price down by about 30% to $300,000 compared with May last year.
By Alex Veiga, The Associated Press
Article Last Updated: 06/18/2008 09:23:50 PM PDT
The median price of a home in the San Francisco Bay Area tumbled 21.7 percent in May to the lowest level in nearly four years, a real estate research firm said Wednesday.
The annual decline drove the median price to $517,000 in the nine-county region, according to DataQuick Information Systems.
The median price was $660,000 in May 2007 and $510,000 in September 2004.
Last months drop was fueled by a surge in sales of heavily discounted foreclosed homes, a trend that appears to be building across many inland areas of the state.
Earlier this week, DataQuick reported the median home price in May plunged 26.7 percent to $370,000 in a six-county region of Southern California.
Despite increased sales of foreclosed homes, overall home sales in the San Francisco Bay Area notched their slowest pace for any May in DataQuick records, which go back to 1988.
Some 6,216 new and resale homes were sold last month, down 23.1 percent from May 2007, when 8,080 homes were sold, the firm said.
Sales declined 1.5 percent last month from 6,310 in April. The median price remained flat during the same period.
Some 25.6 percent of the homes resold last month had been foreclosed on sometime in the previous 12 months, up from only 3.3 percent in May last year, the firm said.
In Solano County, where the median home price sank 31 percent to $300,000 compared with the year-ago period, more than half of all resold homes
were foreclosed properties.
In Contra Costa County, which saw its median home price tumble by nearly 34 percent to $390,500 compared with last year, foreclosed homes accounted for 43.3 percent of all homes resold.
In contrast, foreclosures made up only 5.8 percent of resold homes in San Francisco County, where the median price slipped 5.4 percent to $790,000 since May 2007.
Six Southern California counties experienced a similar trend. Nearly 38 percent of all the homes sold in the region last month were in foreclosure at some point during the past 12 months.
By Les Christie, CNNMoney.com staff writer
Last Updated: June 24, 2008: 11:16 AM EDT
NEW YORK (CNNMoney.com) -- U.S. home prices posted record declines in April, extending a painful losing streak for U.S. home prices.
The S&P/Case-Shiller 20-city Home Price Index fell to a record low of 15.3% on a year-over-year basis, and was down 1.4% from March. The 10-city index was down 16.3% year-over-year and 1.6% for the month.
The 20-city index is based on data going back 19 years, while the 10-city index is 21 years old.
There is one sliver of hope. Although every city surveyed posted year-over-year price drops, the month-to-month pace of declines did slow in many cities. And eight metro areas actually posted gains from March to April.
Hard-hit Cleveland was the biggest winner, with prices up 2.9%. Charlotte, N.C. posted a slight gain of 0.2%, up for the second straight month, while Dallas prices were up 1.1% in April, also up for the second month in a row.
"There might be some regional pockets of improvement, but on an annual basis the overall numbers continue to decline," said David Blitzer, Chairman of the Index Committee at Standard & Poors.
Indeed, there are anecdotal reports that investors have begun to snap up distressed Cleveland properties at very low prices, according to Dean Baker, Co-Director of the Center for Economic and Policy Research, a Washington-based think tank.
"The data suggests that Cleveland has found a bottom," he said, "although its just one months data and I wouldn make too much of it."
The overall price declines have been remarkably consistent through the past two years with prices on the 20-city index dropping for 21 straight months, since July 2006. The 10-city index has fallen every month since June 2006.
Whats more, recent drops have been particularly steep. The 20-city index fell 2.2% in March, 2.6% in February and 2.3% in January, and now it has gone down another 1.4%.
"In the bubble markets, we continue to see very rapid rates of price declines," said Baker. "If anything, it may be accelerating."
Las Vegas prices plunged 26.8% compared with April of 2007, the worst drop among the 20 cities Case-Shiller covers. Prices there fell 2% in April.
Other hard hit cities include Miami (down 26.7% year-over-year and 4.1% in April), Phoenix (25% and 3.4%) and Los Angeles (23.1% and 2.2%).
Plummeting prices could derail some of the foreclosure prevention efforts underway across the nation. As home prices fall, that wipes out home equity, often leaving homeowners underwater, with mortgages worth more than what their homes are worth.
Some 10 million homeowners are now underwater, according to Moodys Economy.com, and that number will continue to grow as home prices plummet.
Underwater borrowers have higher rates of foreclosure than those with some home equity, since they can tap their homes for cash in case of an emergency. And some owners are simply walking away from homes that have lost so much value rather than continuing to make expensive payments every month.
Foreclosed homes go back on the market, often at distressed sale prices, pulling down home values further, and adding to the downward spiral of prices.
Case-Shiller is one of the most respected gauges of home prices available because it tracks the sale prices of the same homes over the years. That removes some of the seasonal variations that exist in other home prices indicators such as the median home price statistics from the National Association of Realtors.
By Rex Nutting, MarketWatch
Last update: 2:02 p.m. EDT June 24,
WASHINGTON (MarketWatch) -- Home prices across 20 major U.S. cities have dropped a record 15.3% in the past year and are now back to where they were in the summer of 2004, according to the Case-Shiller home price index released Tuesday by Standard & Poors.
Prices in the 20 cities are now down 17.8% from the peak two years ago.
Prices were lower in April than they were a year earlier in all 20 of the major metropolitan areas as tracked by the Case-Shiller index.
Las Vegas, Miami and Phoenix saw the biggest declines, with prices falling by 25% or more in the past year. Prices in 10 cities have fallen by more than 10%.
Home prices in Charlotte, N.C., which was the last holdout to show gains, have now slipped 0.1% in the past year.
Prices were down a record 16.3% on a year-over-year basis in a smaller subset of 10 metropolitan areas that have been tracked over a longer period.
With so many homes on the market and foreclosures rising, prices are likely to keep falling, said Patrick Newport, an economist with Global Insight. He foresees prices dropping a further 10%. Listen to the interview with Newport.
All the same, its worth noting that prices for April fell 1.4% compared with March, the smallest monthly decline in seven months. "It seems that at least the pace of decline has started to lose momentum," wrote Harm Bandholz, an economist for UniCredit Markets, in a note to clients.
But other economists noted that the slower pace of decline in April could be due to the seasonal trend toward higher prices in the spring; the monthly Case-Shiller data are not seasonally adjusted.
A separate index published Tuesday by the federal government showed a smaller 4.6% annual decline.
The Office of Federal Housing Enterprise Oversight index is based on a broader geographic reach, but its restricted to homes purchased by conforming loans and therefore doesn capture the gains in the hottest markets where subprime loans and jumbo mortgages once dominated and where foreclosures are surging and prices are plunging.
What goes up, comes down
Home prices surged in 2003 through 2006, climbing by a cumulative 52%, according to Case-Shiller. Since then, however, the housing and credit bubbles have burst and homeowners have given up half of their gains from earlier in the decade.
Falling prices have eroded Americans wealth, cutting into their ability to borrow against the equity in their homes or refinance or sell for a profit. Millions of Americans now owe more on their homes than they
e worth.
The falling home values could also trigger higher monthly payments for many homeowners with negative amortization loans.
But falling prices are likely a necessary ingredient if the housing market is to get growing again.
"We expect the 20-city Case-Shiller composite to fall another 15% to 20%, to a bottom at the end of 2009, translating to a peak-to-trough drop of 30% to 35%," wrote Michelle Meyer, an economist for Lehman Bros.
The Case-Shiller index tracks sales of the same homes over time, so its not influenced by the mix of homes sold in a period. Unlike the home price index from the OFHEO, the Case-Shiller gauge tracks homes with nonconforming loans, such as subprime loans or jumbo loans, which were common in the frothiest markets.
"There might be some regional pockets of improvement, but on an annual basis the overall numbers continue to decline," says David Blitzer, chairman of the index committee at Standard & Poors.
Home prices fell in 12 of 20 cities in April compared with March. Prices have fallen in those 12 cities for eight consecutive months.
Heres the city-by-city breakdown in the Case-Shiller index:
Las Vegas, down 26.8% in the past year; Miami, down 26.7%; Phoenix, down 25%; Los Angeles, down 23.1%; San Diego, down 22.4%; San Francisco, down 22.1%; Tampa, down 20.4%; Detroit, down 18%; Minneapolis, down 15.5%; Washington, down 14.8%; Chicago, down 9.3%; New York, down 8.4%; Atlanta, down 7.5%; Cleveland, down 6.8%; Boston, down 6.4%; Seattle, down 4.9%; Denver and Portland, both down 4.7%; Dallas, down 3.4%; and Charlotte, down 0.1%.
In the OFHEO index, heres the regional breakdown:
Pacific, down 15% in the past year; Mountain, down 4.9%; South Atlantic, down 4.8%; New England, down 4.6%; East North Central, down 3.8%; Middle Atlantic, down 3.3%; West North Central, down 2.4%; East South Central, up 0.1%; West South Central, up 1.9%.
After accounting for 4.5% inflation over the past year, real home prices are down in every region.
Rex Nutting is Washington bureau chief of MarketWatch.
James Temple, Chronicle Staff Writer
Wednesday, June 25, 2008
(06-24) 09:54 PDT SAN FRANCISCO -- A closely watched real estate market analysis found regional home prices fell at an accelerating pace in April, setting yet another record low, but some experts warned that the growing sales of foreclosed properties are skewing the numbers.
The price of a typical single-family home in the San Francisco area plunged 22.1 percent compared with a year earlier, according to the S&P/Case-Shiller Home Price index. The study, published by New York credit rating agency Standard & Poors, defines the region as Alameda, Contra Costa, Marin, San Francisco and San Mateo counties.
"Prices are dropping and they
e probably going to drop quite a bit more," said Patrick Newport, U.S. economist with Waltham, Mass., research firm Global Insight. That said, he and others believe the index may be overstating the extent to which average homes already have declined in value. In fact, a government study that tracks federally backed mortgages reported much lower declines.
The disparities, which result mainly from data-reporting services applying different number crunching methodologies to different geographical areas, can leave people scratching their heads.
But the overall direction of the market remains clear: downward. A third study released Tuesday found that U.S. homeowners have lost more than $4 trillion in real estate wealth since the market peak, or about $50,000 each.
Case-Shiller is a repeat sales index, meaning it tracks only the actual price gains or declines for homes that have traded hands at least twice. In the current market, the homes that have done so recently increasingly tend to be foreclosed properties, said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley.
Last month, foreclosures represented 43.3 percent of all home sales in Contra Costa County and 26.8 percent in Alameda County, according to DataQuick Information Systems.
"Its biasing the numbers in a way that makes it look a lot worse than it really is for the typical homeowner," Rosen said. "Im a bear, so Id go with it if it were true."
Outside of areas particularly hard hit by foreclosures, the average Bay Area homeowner has probably experienced no more than a 5 to 7 percent decline in value, he said. Some neighborhoods in markets such as Silicon Valley or San Francisco have even enjoyed appreciation.
The S&P/Case-Shiller 10-City Composite index, tracking major U.S. markets, decreased 16.3 percent, also the largest decline in more than 20 years of data. In its 20-city index, 13 posted record annual lows and, for the first time, all stood in negative territory. Las Vegas and Miami were the worst off, with prices down 26.8 percent and 26.7 percent, respectively.
Another set of April housing numbers released Tuesday, by the Office of Federal Housing Enterprise Oversight, said prices declined only 4.6 percent from a year ago across the United States and 15 percent in the Pacific region. The agencys report is also a repeat sales index, but tracks only mortgages backed by Fannie Mae or Freddie Mac, which are less likely to include foreclosed properties.
"Case-Shiller is exaggerating the decline, and the other one is understating it," Newport said. "The truth is somewhere in between."
One notable trend in the April Case-Shiller figures is that eight of the 20 regions showed month-over-month gains, compared with none just two months prior, said David Blitzer, chairman of the index committee at Standard & Poors. Part of that may be attributable to a seasonal sales bump, but the sheer extent of the change could be an early sign that prices are bottoming out in those areas, which include Boston, Cleveland, Dallas and Denver.
