Friday, April 18, 2008

March Results

March results (care of DataQuick) for Marin as reported by the Marin IJ:
The median price of a single-family home last month was $862,500, down from $965,000 a year earlier, and just 110 single-family homes were sold - about half as many as the 218 sold in March 2007, DataQuick reported. Sales totals ‘were easily the slowest March in Marin,’ said John Karevoll, a DataQuick analyst, who noted the research firm’s records date back to 1988.

"This is a pitifully low sales count is more of an illustration of what is not going on, rather than what is going on," Karevoll said, noting March figures were a record low for the Bay Area as well.

"Sellers are still trying to overprice their homes and nobody is falling for it any more," said real estate agent Celine von May.
The county’s inventory of 1,401 homes for sale is up from the 1,087 properties on the market at this time last year, said Levi Swift, president of the Marin Association of Realtors.

The 213 properties in default in March is up 14 percent from February and 167 percent from a year ago, according to ForeclosureRadar.
  • Marin's housing market is described as "pitiful". Check.
  • Marin sellers are still in denial. Check.
  • The median price of a Marin house in March, 2008 has fallen more than $100,000, or 11%, from what it was in March, 2007. Check.
  • There is nearly a 13 month supply of houses on the market in Marin. Check.
  • 15% of the houses on the market in Marin are currently in default. Check.
  • 50% reduction in sales as compared to last year. Check.
And the IJ poll does not suggest people think things are going to turn around any time soon:


And I think this point made by the Calculated Risk blog about the March Bay Area sales results, and made here before as well, is worth repeating:
This is why the Case-Shiller repeat home method is better than the median price method for calculating home price changes. Using the median price method, it appeared prices were holding up pretty well at the beginning of the housing bust simply because the mix changed - fewer low end homes were sold. Now it's the high end being hit. And finally ...

26 Comments:

Blogger see me said...

"March results" Such Joy! I saw an almost new H2 Hummer for sale the other day in Novato. The vehicle was sitting on the roadside with five for sale signs on it. The for sale sign said any reasonable offer considered. I wonder if this FB sold it :)))

Apr 18, 2008, 8:56:00 PM  
Blogger Lisa said...

Marinite: Thank you so much for the new postings! I love the chart showing income needed to purchase the median home in various CA counties. What an utter disconnect there is thanks to bubble lending.

I know that Alameda County is "red-lined" by lenders due to price declines and that higher downpayments (20%+) are required for purchases there to protect the bank against further declines. Now that Marin has gone double-digit negative, I wonder if that will also be applied here as the year progresses. Can you imagine what will happen to prices if buyers can't get in with 5% or 10%, but are required to have at least 20% for a down payment? Who will want to shell out $140K to live in a $700K "fixer"?

Apr 19, 2008, 8:51:00 AM  
Blogger Lance said...

This comment has been removed by the author.

Apr 20, 2008, 10:01:00 AM  
Blogger Lance said...

Sellers just need to hold on till the temporary credit crunch finishes. Prices will return to normal. They always do. The problem is that people get frightened and end up giving away their places to people who'll re-sell them a year or two down the road for their true value. There're "flippers" in all markets ... good and bad ones. These of course are the worst kind of flippers ... taking advantage of people when they feel vulernable!

Apr 20, 2008, 10:02:00 AM  
Blogger Marinite said...

Sellers just need to hold on till the temporary credit crunch finishes. Prices will return to normal. They always do.

Lol! I am sure most sellers are desperately praying prices do not return to normal as that would mean removing the price inflation due to the bubble.

Apr 20, 2008, 6:42:00 PM  
Blogger Lisa said...

"Temporary Credit Crunch?" You mean the return to zero down, no income documentation, pick a payment, buy at 8x gross income, no questions asked?

When the credit crunch "finishes", we'll be back to traditional metrics for qualifying for a home. At least 10% down. 2 years of tax returns. Proof of stable income. Six months cash in the bank. Purchase at 3x to 4x annual income. Debt to income ratio of not more than 30%.

Bubble prices are history, along with vodoo lending practices.

Apr 20, 2008, 7:08:00 PM  
Blogger sf jack said...

Hmmm?

"properties in default"?

Could the below apply to anyone in Marin?

*****

The "money quote":

"I would just say that what we are seeing is that when equity in the home approaches zero, behavior changes."

*****

"Another example of the future tense, present tense, day late and a dollar short situation is with 'the Ponzi finance models'. This is illustrated again in spades with the wording from a Wachavia conference call. Again the trajectory is slow, and the use of 100% LTV remarkably nuts. Still this is an outright admission that they have engaged in Ponzi financing, and further how they tried to squeeze every dime out it! Given what has been, and is transpiring, this kind of rocket science will be laughable soon enough. This is what they pay these boyz the big bucks for?"

"Ken Thompson, Wachovia Corporation - CEO:

'I’ll let Don talk specifically but I would just say that what we are seeing is that when equity in the home approaches zero, behavior changes. And that’s what the model tries to do is to then take that behavior along with house price depreciation and factor that into future losses. Don?'

Don Truslow, Wachovia Corporation - SEVP, Chief Risk Officer:

'Ken, that’s exactly right. And Kevin, it’s just this pattern almost that somewhere — I don’t know where the tipping point is, but somewhere when a borrower crosses the 100% loan to value, somewhere north of that and they presumably run into some sort of cash flow bump, whether it’s reduced income or kind of normal things in life that have created past dues before, their propensity to just default and stop paying their mortgage rises dramatically and I mean really accelerates up and it’s almost regardless of how they scored, say, on FICO or other kinds of character, credit characteristics.'"

*****

From:

http://wallstreetexaminer.com/blogs/winter/?p=1567

Apr 21, 2008, 8:55:00 AM  
Blogger Lisa said...

"...their propensity to just default and stop paying their mortgage rises dramatically and I mean really accelerates up and it’s almost regardless of how they scored, say, on FICO or other kinds of character, credit characteristics.'"

Bingo. This is why, FOR DECADES, down payments and debt to income ratios and proof of steady income were all non-negotiable requirements.

If a FB is in a house they can't really afford and have no equity, it doesn't matter what their FICO score is. Chances are, they're walking.

Apr 21, 2008, 4:40:00 PM  
Blogger rdm said...

In reality the medium income vs. medium price chart is all that is needed to show that prices must continue to fall. Prices pulled down by tight credit, recession, vanishing speculators and foreclosures, slowed by head in the sand sellers.

Apr 21, 2008, 6:40:00 PM  
Blogger mountainwatcher said...

rdm said... "In reality the medium income vs. medium price chart is all that is needed to show that prices must continue to fall. Prices pulled down by tight credit, recession, vanishing speculators and foreclosures, slowed by head in the sand sellers."

Thanks, that makes sense!

These prices are sticky, but so is melting honey.

Apr 23, 2008, 1:03:00 AM  
Blogger bob said...

I too wanted to comment about the amount of income needed to buy in Bay Area cities. The interesting thing is that I feel that even these estimates are actually way under what you realistically need in order to buy and have a healthy amount left for retirement and living expenses.

So Let's say you buy a 600k homes in Alameda, where I live. The payments on a 600k home would be roughly $3,500 per month. This doesn't include property tax, which would be about 10k per year. So add another $900 to the bill. So now we're up to $4,400. But that figure doesn't include inevitable repairs. So let's be frugal and say $3,000 a year, which in my opinion is really unrealistic. Add another $250 per month. Now we're up to $4,650.

So there you have it- almost 5k just for the house, which assumes that you don't have car payments, student loans, grocery bills, vacations, travel, or anything else.

A person making 140k, which is what they suggest you would need in order to buy in Alameda makes approximately $7,000 per month after taxes. Almost immediately, 70% of their income would be used for housing related payments. You would have 2k per month for EVERYTHING else. So in essence, even someone making 140k per year with a house in Alameda would actually be flying by their bootstraps. In reality, you would really need to make more like 250k in order to live like ordinary middle class citizens.

Apr 23, 2008, 9:13:00 AM  
Blogger marin_explorer said...

"Even someone making 140k per year with a house in Alameda would actually be flying by their bootstraps…in reality, you would really need to make more like 250k in order to live like ordinary middle class citizens."

Which I suspect is far more pressure than most people can reasonably bear long-term. Add all that overhead to normal family pressures, and you have a mix that will send you to your coffin, post-haste! No thanks!

So the real question is—will the ensuing downturn markedly improve cost-of-living for local professionals, many of whom earn less than even $140K per annum? Certainly not if you bought into this fiasco! For those remaining "homeless" professionals, I can only imagine you'll sit on the sidelines for years before things revert to the hidden fundamentals of the SFBay. Incidentally, many haven't lived here long enough to have a clue about local fundamentals…does anyone recall the economic landscape of the early 90s?

This raises another issue: given the inevitable slow, grinding nature of a downturn--retarded further by entrenched and entitled home sellers and nimbyism--how many bright college grads should relocate here to face years of hard work, stuffed into a tiny rental, forestalling any plans of having a family, ie "normal" life? Who really considers the life of a pauper as reasonable compensation?

So I'll predict the Bay Area will lurch on in its "progressive" ways, while any proactive strategy on housing and transportation languish in endless debate. By the time any progress is made, the business climate may be different, driven away by needless expenses. Not a rosy future for the Bay Area, imo.

Apr 23, 2008, 1:08:00 PM  
Blogger Lisa said...

My first home was purchased at 2.8x my annual gross income, and that wasn't easy. Mortgage + property taxes + insurance + all the utilities + maintenance. I can't imagine how these folks sleep at night who have leveraged themselves to the hilt.

And any big projects....landscaping, new appliances, painting, replacing carpet....they're all hugely expensive.

I sold in '04 and wouldn't dream of buying again until it looks like the market is bouncing along the bottom. I hit the last bottom in '96, so I learned first hand it's worth the wait. There's no way I want to sink thousands of dollars a month into a house for a flat or depreciating asset.

Apr 23, 2008, 4:33:00 PM  
Blogger bob said...

"This raises another issue: given the inevitable slow, grinding nature of a downturn--retarded further by entrenched and entitled home sellers and nimbyism--how many bright college grads should relocate here to face years of hard work, stuffed into a tiny rental, forestalling any plans of having a family, ie "normal" life? Who really considers the life of a pauper as reasonable compensation?"

Well, secondly, how many young professionals who are already here will stay? I've been here for 8 years. I'm now pushing 31. I've been married for two years. I've been making a six figure income, saving, living frugally, and basically waiting and waiting for prices to fall.

In the back of my head, I realize that prices will take years to fall, and even then, therein lies the possibility that even then, prices might STILL be too high or even more catastrophically, begin to rise at some point.

So I've been thinking about other cities and states for years. NC, TX, TN, GA, and even parts of SC have been on my list for years. But even in cities like Raleigh, Atlanta, and Nashville, these cities are even now experiencing something of a rolling bubble. I watch with growing frustration as the prices in those areas climb from what was once very good prices-100-150k- to upwards of 250k for anything decent. Northerners and people from Florida, who are also usually from places like NJ are moving down in droves. Most with nothing more than cash-out money. This is still happening despite a slowing in sales- usually at the upper end.

So now not only do I have less faith that things will ever be reasonable here in California, but I also feel that I'm also being slowly priced out of my own home turf in the South. So it would seem to me that despite the bust, therein lies the possibility that ALL metro areas are eventually going to suck and be equally difficult for young professionals. The machine seems to be set up to make all of us be placed into eternal debt.

Most people my age have sort of lost faith in this area and don't view it as a realistic long-term living situation.

Apr 24, 2008, 9:19:00 AM  
Blogger Matthew said...

"Sellers are still trying to overprice their homes and nobody is falling for it any more," said real estate agent Celine von May."

Well, if that little tid-bit of admittance doesn't say it all, I don't know what does.. "nobody is falling for it anymore".. In other words, the RE machine in Marin were well aware this was a big sham and scam all along as they eagerly roped more and more people into it and profited along the way...

Although Miss Celine von May is trying to sound like an honest Joe here, I'd like to know here part in this disaster during the run up.. guess she was busy trying to get more people to "fall" for the scam of scams..

Apr 26, 2008, 10:40:00 AM  
Blogger Matthew said...

HELOCs
Foreclosures
Divorces
Hummers
Reduction in Math/Science Students
Boob Jobs
OC Houswives
Flip That House
Tent Cities
Crashing Dollar
Negative Savings Rate
etc, etc...

All courtesy of the RE machine..

Apr 26, 2008, 10:47:00 AM  
Blogger marin_explorer said...

...therein lies the possibility that ALL metro areas are eventually going to suck

It's quite possible that will be the case for years to come. However, I think the market must eventually revert to the fundamentals of what local salaries will bear. I would think that areas with less illusory pricing rationales such as the "Google effect" will be more objective/realistic during the ensuing downturn. However, I may be underestimating how much entitlement has affected other regions.

I now longer feel entitled living in the Bay Area...it's not a privilege, but a liability. Shall we count the ways (again)...

1. An idle, aging population who are entrenched proponents of a form of nimbyism which effectively impedes any practical strategies for long-term growth. Fixing the traffic problems in Marin would just "ruin the neighborhood" you know…

2. Those from the group above, who insist on running companies from the proximity of their retirement home, with little consideration towards relocation to ease the financial burden/increase incentives for employees. They have largely ceased thinking in strategic due to their comfort. If the aging executives "have theirs", then what is your problem?

3. The herd of young wannabes who are deceived into thinking that catering to groups #1 and #2 will get them what they want. These are the children of a self-deceived generation. If they're lucky, they might get the $, but the personal cost will be too high. That's just my observation, anyway.

4. When the inevitable deleveraging hits local corporations, many credit-pumped lifestyles will also disappear. Won't life suck if you can't dine at "French Laundry" every week? And with the end of "easy credit", so will the "special" illusion that typifies Bay Area life. Let's face it: most suburbs here are no different than Flyover, USA. Take the money away, and what's left? What remains is a lot of bitter materialists--which I suspect will hold true for many "hip" metro centers.

5. The social scene that is a product of #1-4 isn't worth the oxygen it burns. I used to own an internet startup and moved in the "entrepreneur" circles until the crash. Perhaps only after you see the downside, do you realize what a scam the whole thing is.

My summation of #1-5: find a growth area that is less beholden to an aging, entrenched population, if such a place exists.

Apr 26, 2008, 11:18:00 AM  
Blogger Lisa said...

"Sellers are still trying to overprice their homes and nobody is falling for it any more," said real estate agent Celine von May."

Wow. How'd you like to read that if you'd bought a house in the last few years?

Apr 26, 2008, 2:43:00 PM  
Blogger diogenes said...

I live in the Research Triangle Park area of NC between UNC-CH-Duke University-NC State University in Raleigh. I have had several post docs in my lab get offered jobs in the SF area only to come back in shock. In my development about 20% of the folks are recent refugees from coastal Californa (Santa Barbara, Monterey, San Francisco to name a few). Keep the jobs and educated people coming our way :-) You folks out there are suicidal.

Apr 27, 2008, 5:44:00 AM  
Blogger bob said...

"My summation of #1-5: find a growth area that is less beholden to an aging, entrenched population, if such a place exists."

This isn't necessarily the problem. I've been reading relocation forums and web sites for a few years. These sites are full of two groups of people: 30-somethings with an itch to produce children and wanting a " place to start a family.", as well as a huge number of snowbird retirees from mostly colder climate areas who despite the bust can still sell for a large profit.

Neither group seems to think very realistically about prices or jobs. Most just want one thing: a house. Coming from the overpriced areas they do, many have no idea that 200k is really not exactly affordable there, and many more are happy to pay in excess of 300k.

They are markedly changing the landscape in primarily lower cost Southern areas. The traffic, prices, and so on are all going up because I witness it when I visit my parents. To think that a huge chunk of the country lives crammed up in New England and the Northeast and there is a large supply of them to fill entire regions.

I've come to the conclusion that I must eventually make a choice about where we are going to live because I'd rather not have to live with some of the same people I chose to move away from since I didn't really like the attitude of many of the folks I lived with in Massachusetts.That and as cynical as this sounds, if they continue to drive the prices higher, most of the allure of the area will be gone.

Apr 28, 2008, 11:03:00 AM  
Blogger Lisa said...

Front Page article in today's Marin IJ: "Assessor Buried by Home Value Requests."

But I thought we were God's Country here in Marin?

Apr 29, 2008, 4:56:00 PM  
Blogger sf jack said...

"... almost $6,000 – per week, that is."

*****

I could be wrong, but I think I recall here at this blog a couple years ago... some thought that the Santa Barbara area was a lot like Marin County.

Or maybe it was Ventura County?

In any case, I'm not really sure what was meant by that, but if true with regard to real estate, the below news is interesting.

[And this is CAR propaganda!]

*****

"US house prices

Published: April 29 2008 14:43 | Last updated: April 29 2008 19:20

Pity the person who bought a house in Santa Barbara county, California, one year ago. Since then the value of their home has dropped almost $6,000 – per week, that is. The median house price there has dropped 34 per cent since March 2007, according to the California Association of Realtors."

http://www.ft.com/cms/s/2/38130794-15f2-11dd-880a-0000779fd2ac.html

Apr 30, 2008, 9:28:00 AM  
Blogger marinite2 said...

Lisa do you have a link to the IJ article? I missed it. I've been home ill in bed for the last few days and have not been doing much reading.

I am planning to post on the Chron's front page cover story later today and would like to roll in the IJ article.

With regard to sf jack's question: I recall that too and I think it was SB and I think the idea was that it was a leafy, desirable place, next to the ocean with a lot of wealthy folks too. The major difference being proximity to a major employment center. I don't think anyone was seriously considering it a safe analogy but still of some use. But I don't really remember.

Apr 30, 2008, 4:21:00 PM  
Blogger Lisa said...

Marinite:

Here's the link! I'm so sorry you're sick, feel better soon!!

http://www.marinij.com/ci_9092042?source=most_viewed

The headlines are getting downright scary. FINALLY!

And I tell you, everyone I know is really feeling the pinch from gas & groceries. If we're not already in recession, we should be there soon.

Apr 30, 2008, 7:14:00 PM  
Blogger marin_explorer said...

...some thought that the Santa Barbara area was a lot like Marin County.

In its heyday, one of the more prominent SB realtors was loudly declaring SB as a "bust-proof" market, due to the "special" locale...yada, yada, yada. Of course, every coastal town from San Diego to Victoria BC was saying the same thing. I wish I could find that SB realtor's article...it was classic group-think.

May 1, 2008, 11:01:00 AM  
Blogger Thus Spake Z said...

I should know better, but sometimes I can't help myself. This is a response to Marin_Explorer's post...

"It's quite possible that will be the case for years to come. However, I think the market must eventually revert to the fundamentals of what local salaries will bear. I would think that areas with less illusory pricing rationales such as the "Google effect" will be more objective/realistic during the ensuing downturn. However, I may be underestimating how much entitlement has affected other regions.?

"I now longer feel entitled living in the Bay Area...it's not a privilege, but a liability. Shall we count the ways (again)..."

-This reminds me of a Pat Buchanan rant... in this case, totally ignore all the positives and highlight a warped view of certain negatives. BTW, although there are those that may feel entitled here, it's not nearly as many as the blogging class thinks, and the entitled group exists everywhere, not just here.

"1. An idle..."
-Unproved, perhaps unprovable assertion, that I believe is wrong anyway, although it may make you feel better about your personal work ethic to believe that.

"...aging population..."
-True, as it is everywhere in the "First World" except where there is a large immigrant population.

"...who are entrenched proponents of a form of nimbyism..."
-I agree.

"...which effectively impedes any practical strategies for long-term growth."
-In 30 years of being an observer and participant in housing issues I have yet to see real strategies that will create meaningful long term growth without the accompanying issues of added traffic, environmental and community degradation, and pressure on the school system, public safety and other infrastructure. If you want big growth you should move to where it is/can happen... parts of Texas, Florida... great places if you like their weather, politics, culture, outdoor amenities, floods, hurricanes (which happen annually-more frequently than our earthquakes)

"Fixing the traffic problems in Marin would just "ruin the neighborhood" you know…"
-Typical smarmy schadenfreude. Anyways, the last time I looked there was at least one major freeway project underway and funding being obtained for several more. What else do you have in mind... monorail, subway, flying cars?

"2. Those from the group above, who insist on running companies from the proximity of their retirement home, with little consideration towards relocation to ease the financial burden/increase incentives for employees. They have largely ceased thinking in strategic due to their comfort. If the aging executives "have theirs", then what is your problem?"
-The single major determinant of where a company up to around $50m in revenue locates, which is true nationally (and probably globally)is where the founder/owner/senior management lives. This is not a Bay Area phenomenon. It is driven by a chain of dynamics that are relatively set by circumstances.

"3. The herd of young wannabes who are deceived into thinking that catering to groups #1 and #2 will get them what they want...."
-Sort of an elitist, snobby thing to say. Who precisely do you mean by that? If you can even characterize a particular demographic in such a way, how would you know what they want?

"These are the children of a self-deceived generation. If they're lucky, they might get the $, but the personal cost will be too high. That's just my observation, anyway."
-Wow. I think this says more about you than it does about anyone else.

"4. When the inevitable deleveraging hits local corporations, many credit-pumped lifestyles will also disappear."
-Which local corporations are you talking about? Bay Area wide or Marin? The answer can't be Chevron, etc., because they aren't local. There just aren't that many corporations of any real size in the Northbay, which is the area I know best, and based on that there aren't that many people that eat at "French Laundry" every week.

"Won't life suck if you can't dine at "French Laundry" every week? And with the end of "easy credit", so will the "special" illusion that typifies Bay Area life. Let's face it: most suburbs here are no different than Flyover, USA."
-Funny how you keep mocking special. What do you mean? What makes this part of the world different from all the other parts... everywhere has its distinctions. What do we have in the Bay Area... what may be the best climate in the world, a world class cultural environment, easy access to every outdoor amenity, from ocean to mountain, major healthcare establishments, clean air, high paying jobs, a variety of institions of higher education... the list goes on. Do we have problems... yes, but so does everywhere else. Do other places have great features. Yes, but not as many all in one place.

"Take the money away, and what's left?"
-See above.

"What remains is a lot of bitter materialists--which I suspect will hold true for many "hip" metro centers."
-Well, there will also be a lot of bitter others, [cough... the original poster... cough] who sound like they have been bitter ingrown toenails for a long time alreay. Maybe they can teach a class to the new guys.

"5. The social scene that is a product of #1-4 isn't worth the oxygen it burns. I used to own an internet startup and moved in the "entrepreneur" circles until the crash. Perhaps only after you see the downside, do you realize what a scam the whole thing is."
-Ahh, the source of the bitterness... failure to hang with the big kids. It's ok to succeed... it's also ok to fail after trying. It's not ok to lose your soul.

"My summation of #1-5: find a growth area that is less beholden to an aging, entrenched population, if such a place exists."
-Lots of the second and third world might meet that description. They have their issues though...

May 2, 2008, 12:31:00 PM  

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