Bay Area Foreclosures Lead the Way
April 21, 2008 by Glen Bell · View Comments
Anyone having read this years headlines has been hearing the same message about real estate; Inventory is up, Sales are down and Prices are down. However, little has been said about the relationship of foreclosures to our markets except in a very general manner, at least not until a recent article in the San Francisco’s Chronicle finally got it right. “Housing market muddle,” written by Carolyn Said, ran in this Wednesday’s paper.
The article talks about how foreclosures are influencing the markets. As always, these articles are never specific enough, nor quite up to date. The article uses DQ News as a source. This is definitely a great source to be using. However, the numbers used are always based on last month or the prior month. The principal message in it’s article “Bay Area home sales remain at a 2 year low,” is that “Last month’s median price in the Bay Area was 19.4 percent lower than the peak median of $665,000 reached last June and July.” The spreadsheet breaks down numbers by counties.
I’ve taken this a step further because markets are much more localized. You can view “Glen’s Numbers” (taken as of April 15), and broken down by city, HERE.
The influence that foreclosures have on markets is becoming greater than ever. The relationship between inventories, sales, prices, and REO (foreclosures), becomes a little clearer. Since February 1, 2008, in the last 2 and half months, 36% of all sales in the Bay Area have been foreclosures. Typically, banks do not spend much on curb appeal, repairs, clean-ups, staging, etc. They lead with price, and are finally becoming very aggressive as a means to lead the way in sales of those cities with far too much inventory.
Investors and buyers are now recognizing that foreclosed properties for sale are running at a discount. The message, “More people can afford to buy,” is clear, and REO (foreclosures), are getting picked up as bargains.
Those cities that have been influenced the least with price reductions are areas that typically have very little foreclosed properties and lower inventories;
Berkeley has a 2.7 months supply of homes on the market. Only 4% of its sales since 2/1/08 have been REOs.
On the other extreme, Pittsburg has a 27.3 months supply of homes on the market. 81% of its sales since 2/1/08 have been REOs.
Again, I encourage you to view the complete list of the 38 cities in the East Bay Area in the above link.
If This Stimulus Package Goes Through…
January 25, 2008 by Andy Kaufman · View Comments
…expect a big pickup in Bay Area real estate activity.
Besides its core purpose of providing tax refunds, the tentative package – which still has several hurdles to clear – essentially rewrites the definition of “jumbo” loan, raising the cap from its current $417,000 to as high as $729,750 in high-cost areas for one year.
The proposal would allow Fannie Mae and Freddie Mac to buy loans up to 125 percent of an area’s median home value – up to $729,750 – well above their current $417,000 limit. While the new limit would vary based upon how expensive an area is, almost all of the Bay Area would automatically merit the $729,750 cap by virtue of having medians above $600,000.
Fannie and Freddie are government-sponsored entities that inject liquidity into the mortgage market by purchasing loans and then either keeping them or packaging them into securities sold to investors – with a guarantee in case they default.
Ever since the credit crunch hit last summer, banks have been skittish about writing mortgages that don’t qualify for Fannie/Freddie backing. That’s why jumbos got so expensive relative to conforming loans, and jumbo borrowers needed to have good income, a big down payment and a stellar credit score.
Now what’s the catch, you say?
2. The new limits are supposed to only last for 1 year. Which means that if this passes, 2008 is going to be a mad sprint.
flickr photo credit reversezer0 tag: bay bridge (ironic eh?)
Bay Area Housing Forecast
January 1, 2008 by Glen Bell · View Comments
What’s in store for real estate in the Bay Area for the coming year?
Most in the real estate industry agree that it will get worse before it gets better. However, predictions vary among our “experts.” What are we in store for in 2008? When will prices begin to recover?
Hear what some of them are saying…
“Don’t count on market rebounding in ’08, experts say.” – Marni Leff Kottle of the San Francisco Chronicle.
“A real recovery in the housing market is probably at least a year off,” said Robert Kleinhenz, deputy chief economist for the California Association of Realtors.
California Association of Realtors’s forecast for 2008; sales volume will continue to fall, 9% in 2008, as will the median price of a home, at 4%. Take a look at the 2008 California Housing Market Forecast (CAR membership required) presentation by Leslie Appleton-Young, Vice President and Chief Economist for the California Association of REALTORS® (C.A.R.).
“The best guesstimate most can come up with these days on a residential housing recovery is that 2008 will be more than half over before housing prices even stabilize. Right now, it’s anybody’s guess as to when they will start to grow positively.” – Ryan Fuhrmann, an article printed in The Motley Fool.
It may take until the end of 2008 or beginning of 2009 for the market to hit bottom, said Mark Zandi, chief economist at Moody’s Economy.com.
“But the one thing that economists and real estate agents seem to agree on is this: As bad as it may get in the Bay Area, the region is weathering the downturn in the real estate market much better than most other places.”
“The housing market is fairly strong in the vast majority of the Bay Area,” said Ken Rosen, chairman of the Fisher Center for Real Estate at UC Berkeley. “It’s slipping a little, but it’s not the free fall you have in some parts of the country.”
“When you look at the rest of the state and even the rest of the country, the Bay Area has held up quite well,” said Larry Klapow, president of Coldwell Banker’s San Francisco Bay Area region. “The market has shown incredible resiliency.” – “So Long, ’07″
“Builder’s expect recovery in second half” – Jessica Saunders, East Bay Business Times. “At least two builders expect to see some recovery in the East Bay housing market in the second half of 2008, but another expert thinks it will be 2009 before demand and supply balance out.”
“Once we get through the credit crunch, and buyers realize the world didn’t end, they will come back,” said Scott Menard, SummerHill Homes’ chief operating officer, who predicts the market will continue down through at least the first quarter. “Next year will probably be a bit of an adjustment year.”
Which brings us to the question; Will 2008 be a good time to invest in real estate? See what a recent survey showed taken by the East Bay Business Times. 60% say that now is a good time to buy! Read their comments as to why.
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