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Home sellers and realtors still in denial?

Original post made by Homeowner on Feb 14, 2008

The Pleasanton Weekly won't print any actual facts like this (instead regurgitating propoganda from the national association of realtors or local realtors/mortgage brokers), but PRICES ARE DROPPING and will continue to drop. See the latest report below. Oh and please don't complain that is just the lower-priced houses that are selling and that the recent raising of the conforming loan limit will make a difference - it won't matter. People still cannot afford the current house prices now that, especially now that qualifying for a loan and having a down payment actually matter again.

We are going to retrace a lot, if not all, of our unhealthy run-up in house prices.



Bay Area home sales lowest for any month in two decades
February 14, 2008
La Jolla, CA.----Bay Area home sales plunged below 4,000 transactions for the first time in over 20 years last month as the market remained hamstrung by the credit crunch and uncertainty among buyers, sellers and lenders. Price declines steepened, especially in inland markets hit hard by foreclosures, a real estate information service reported.

A total of 3,586 new and resale houses and condos sold in the Bay Area in January. That was down 29.2 percent from 5,065 in December, and down 41.9 percent from 6,168 in January 2007, DataQuick Information Systems reported.

Last month's sales were the lowest for any month in DataQuick's statistics, which go back to 1988. Sales have decreased on a year-over-year basis for 36 consecutive months. Prior to last month the slowest January was in 1995, when 4,326 homes sold. The strongest January, in 2005, posted 8,298 sales. The average for the month is 6,319 sales.

The median price paid for a Bay Area home was $550,000 last month, down 6.4 percent from $587,500 in December, and down 8.5 percent from $601,000 in January last year. Last month's median was 17.3 percent lower than the peak $665,000 median, last reached in July, and was the lowest since February 2005, when the median was $549,000.

"There will be plenty of debate over the meaning of these extraordinarily low sales and the bigger drop in the median price. Some will insist demand has dried up in the absence of loose lending standards, with no turnaround in sight. Others will argue it's just a lull caused by temporary market turbulence, with brighter days just ahead," said Marshall Prentice, DataQuick president.

"What's clear to us," he continued, "is the credit crunch that struck in August had a sharp and immediate impact on Bay Area sales and median prices. The 'jumbo' loans the Bay Area relies on so dearly got pricier and harder to get, and their use has plummeted. The statistical picture could change quickly, though, if the government's effort to raise the conforming loan limit reignites $500,000-plus home sales. We could see significant gains in both our transaction totals and median prices."

Last month the percentage of Bay Area homes purchased with jumbo mortgages, or loans over $417,000, fell to 34.5 percent, down from 39.6 percent in December and down from about 63 percent before the credit crunch hit six months ago.

While last month's lower median price does reflect depreciation in the market ? especially in inland areas ? it also reflects the steep decline in sales of more expensive homes requiring jumbo financing. Purchases with jumbo loans have tumbled about 74 percent from a year ago, while those financed with conforming loans ? up to $417,000 ? have declined 29 percent.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Due to late data availability, the December statistics for Alameda County were extrapolated from the first three weeks of the month.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,503 last month, down from $2,744 the previous month, and down from $2,804 a year ago. Adjusted for inflation, current payments are 4.9 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 24.8 percent below the current cycle's peak in June last year.

Indicators of market distress continue to move in different directions. Foreclosure activity is at record levels, financing with adjustable-rate mortgages or with multiple mortgages has dropped sharply. Down payment sizes and flipping rates are stable, non-owner occupied buying activity is edging up, DataQuick reported.




All Homes
Number Sold
Jan-07
Number Sold
Jan-08
Percent
Change
Median
January 2007
Median
January 2008
Percent
Change

Alameda 1,279
780
-39.0%
$570,000
$487,750
-14.4%

Contra Costa
1,158
667
-42.4%
$550,000
$463,000
-15.8%


Bay Area
6,168
3,586
-41.9%
$601,000
$550,000
-8.5%



Source: DataQuick Information Systems, www.DQNews.com

Comments (11)

Posted by Janna, a resident of Mission Park
on Feb 15, 2008 at 12:28 pm

Of course they are! There's a house on my street on the market for $939k. It's about 1,800sf single story ranch with some remodeling. Sure, it looks like a nice house, but is it really worth that? Of course not. If it sells at that or at all, I'll be surprised.


Posted by True Value, a resident of Amador Valley High School
on Feb 18, 2008 at 8:51 am

Value in a home is just like the value of a stock on the exchange. The value is exactly what a buyer is "willing" to pay. In my opinion the flaw with the real estate market in general is that once a high price value is established, the industry believes a standard range of price per square foot applies and all houses are equal? Anyone who has been house hunting realizes that quality and finish vary dramatically from house to house. Even in upscale Ruby Hill, you'll find houses that are incredible, next door to houses that are "tract like", but it seems they both are asking for per square foot prices in a similar range.

I believe the segment taking the biggest hit in this downturn are the houses mentioned above ie... less than 2000 sq. ft. and close to $1M in asking price (around $500 per sq. ft.), for tract homes? I believe that many are trying to "cash out" and leverage the CA profits to move to a more affordable market and retain some cash.

Everyone wants to blame the sub-prime mortgage market for this problem, but many consumers chose to ammortize debt over 30 years in order to finance great vacations, home remodels etc... all based on a temporary high market valuation for homes. Anyone who has owed stock that has fallen from $50 to $2 per share can probably relate to what it going on currently. Just like the stock market it ulitamtely comes down to real value. The media like always want to sensationalize everything, and fear is a great motivator to get people to tune in.

Markets and trends go in 5 to 10 year cycles and we are simply in a cycle of return to actual or real value.


Posted by Stacey, a resident of Amberwood/Wood Meadows
on Feb 18, 2008 at 9:50 am

Exactly. Purchasing something when the market is high is dangerous. It is best to purchase when the market is down or flat. Unfortunately California real estate hasn't had much volatility until the sub-prime house of cards came tumbling down. Things usually rose then flattened then rose again. So people were lulled into false hopes like what happened during the dotcom bust. Time to learn how to be more conservative with money.


Posted by Values, a resident of Another Pleasanton neighborhood
on Feb 18, 2008 at 5:08 pm

Funny. The home I grew up in on the West Bay was purchased new for $42,950.00 in 1968. It was just over 1,700 sq. feet, the smallest ever built in what is called "Belmont Heights." My parents sold it at an all time high and everyone said the market had capped out. It just sold again for $1.1 Mil. Had my parents held out another 16 years, they stood to make another $600kr, but they were happy walking with over $450k free and clear when they sold.

Anyone who thinks the sub-prime crisis played no role in the recent down-turn is fooling themselves. However, the biggest factor is supply and demand, and the availability of money.


Posted by Karen, a resident of Vintage Hills Elementary School
on Feb 19, 2008 at 9:33 am

Everyone associated with real estate made big money during the past 5 years. Look at all the ads for Realtors and Lenders. The Pleasanton Weekly would go out of business with out all of the realtor ads.

Personally I am sick of having some air brushed realtor on my shopping cart, park bench, newspapers, bill boards and especially the dividers between groceries on the conveyor belt. Obviously Safeway and Rayles are making money in this after boom too. When will they all spend their last marketing $ and go find a real job?

Then there is the junk mail! If it isn't from a realtor it is an ad to refinance my home, buy rental property or buy bank owned property in foreclosure. BTW I don't want your recipes either.

They are a part of the over inflation of house prices and now they will have to be part of survival of the fittest. Some areas are really down (like Tracy) while Pleasanton has not been hit hard yet. Time will tell.

The sad thing is a friend of mine bought her first house, now she is going to loose it and her credit will be ruined. It will take years for her to recover. She isn't loosing it due to a drop in value, she is loosing it because her loan was falsely low just to get her into the house. After it "corrected" it was too much to pay each month.


Posted by Falsely Low???, a resident of Another Pleasanton neighborhood
on Feb 19, 2008 at 11:58 am

Posted by Karen, a resident of the Vintage Hills Elementary School neighborhood -- "She isn't loosing it due to a drop in value, she is loosing it because her loan was falsely low just to get her into the house. After it "corrected" it was too much to pay each month."

**********

Falsely low as in sub-prime? Those were people who really shouldn't have qualified in the first place. Compound that by clearly not understanding the dynamics of the loan she committed to when she signed the loan documents.

How is personal stupidity a realtor's fault?


Posted by Stacey, a resident of Amberwood/Wood Meadows
on Feb 19, 2008 at 1:23 pm

How indicative! If Karen's friend were smart, she wouldn't have taken a loan that "gets her into the house in the first place", but taken one that she could actually afford over the life of the loan. Hardly the fault of anyone but Karen's friend.


Posted by Victimized, a resident of Amador Valley High School
on Feb 19, 2008 at 2:27 pm

Great points Falsely Low, and Stacey,

While I realize there truly are people who feel "duped" by the sub prime loan debacle, I am also tired of the "poor victim" angle being taken by the media and the portrayal that these "poor victim's" have lost everything? When you have no real equity in your house and you put nothing down, what did you really lose....? NOTHING! Yes their credit will be affected, but aren't these the same people living the credit card mentality of spend and pay later (or never)? At some point it would seem people might realize that "if it sounds too good to be true" maybe it is. Unfortunately it has become acceptable to buy things (big and small) that we can't really afford, then blame someone else when it comes time to pay the actual bill.


Posted by Karen, a resident of Vintage Hills Elementary School
on Feb 20, 2008 at 10:15 am

Yes, you are right there is a learning curve for a first time home buyer that risked everything and lost their house. But owning a home is a goal of most everyone that lives around here.

Just because someone took as risk doesn't mean they have "personal stupidity". Sometimes you guys are just mean.

For so many years house prices were rising faster then anyone could save for a down payment. I don't blame anyone for trying to geton the the homeownership band wagon.

Actually I don't blame the Realtors either (I just don't like their marketing info everywhere).

It boils down the banks. They knew when they offered 100% loans to people who won't be able to afford them, after the rate corrects. Yet the offer these programs, which ultimately result in the bank owning the house!


Posted by Falsely Low???, a resident of Another Pleasanton neighborhood
on Feb 20, 2008 at 11:05 am

Posted by Karen, a resident of the Vintage Hills Elementary School neighborhood -- "It boils down the banks. They knew when they offered 100% loans to people who won't be able to afford them, after the rate corrects."

First, many of the lenders associated with sub-prime loans were not banks. One of the largest sub-prime lender was New Century Financial Corporation -- a real estate investment trust. NOT a banking institution! Sheesh!

Second, what these lenders knew is questionable. How can one anticipate how another individual's rate of income increase? I know the raises I've seen recently are no where near what I anticipated getting based on past years. But I personally had to think ahead to what "could" happen and plan accordling BEFORE signing any loan documents.

So mean or not -- I still ask how is personal stupidity a realtor's -- or now a lenders -- fault?


Posted by Victimized, a resident of Amador Valley High School
on Feb 21, 2008 at 10:50 am

This discussion reminds me of my first adult brush with a police officer. I turned a corner at my old high school and found myself being pulled over by a cop. I asked what I had done wrong and was told I ran a stop sign. I told the cop I've lived here all my life, there's never been a stop sign at that corner? He said, well they just installed it last week? I asked, can you let this go as I wasn't aware the stop was put in? He stated "ignorance is not an excuse for not following the law"?

Sorry if the tough opinions come off as mean, but at some point people can't simply plead ignorance to get out of situations. "I didn't know" and "I can't recall" have become the most uttered phrases in the english language.

I reiterate. Little or nothing at all is "lost" by most people that are chosing to walk away from thier sub prime loans, other than credit being hurt, but they didn't likely have much credit to begin with, and since they made a bad decision to buy a house at the height of a market the definately aren't walking away from any equity? The net effect is having to "pay cash" for these folks which really isn't a bad thing. People have been taking advantage of low interest rates for many years now to "afford" things that they really can't afford.

At least now the media is starting to see some positive side to this news. Some really smart folks are going to be able to take advantage of Bank foreclosures by purchasing homes at realistic prices that just a couple of years ago they couldn't afford. Given the qualificaton for loans now on the other end of the spectrum, anyone getting a loan at any level is a pretty well qualified customer.



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