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Housing market is still in cellar
Sales rise, prices fall as foreclosures sell
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STORY TOOLS 
More from BusinessMichael Greaves has two words when asked to describe the real estate market.
"It's dead," the Ventura real estate investor said. "This whole year has been a joke."
November looked bleak, extending a yearlong slew of bad news across the nation: sluggish sales and declining values.
In Ventura County, sales of existing detached homes surged 111 percent in November compared with a year ago, while prices continued to erode amid economic distress, the California Association of Realtors reported Tuesday. While the spike in local sales appears promising, it's largely attributed to people scooping up bargains — which doesn't boost home values.
The county's median price fell to $382,590 last month, down 38.6 percent from $623,510 the previous year, according to CAR. The median, the point where half the homes sold for more and half for less, fell 10.5 percent from $427,650 in October.
The month-over-month decline was surprising but can be attributed to the amount of distressed homes selling, said Bill Watkins, executive director of the UC Santa Barbara Economic Forecast Project. According to his team's research, a foreclosed home in California sells for $200,000 less than a traditional home.
Until foreclosures are worked through the market, "we don't think the real estate market can clean itself up," Watkins said. "There's no reason for a big turnaround in the market — the economy is weak, which is going to depress demand, and foreclosures are going to provide excess supply for months."
Watkins projected foreclosures to peak next summer, a result of the weak economy and resetting interest rates on adjustable rate mortgages.
"Next summer is going to be bloody," he said.
Despite a nose-dive in prices and historically low interest rates, many buyers are treading cautiously because they are concerned about the economy, stock market losses and bleak job market.
"There's a nervousness in the herd," said Dennis Torres, executive director of real estate operations at Pepperdine University's Graziadio School of Business and Management. "People don't know what to expect. They're asking, ‘Am I going to get laid off?'"
Torres called himself a "major optimist," yet his forecast is gloomier than many economists who have projected a turnaround by the second half of 2009.
"My old gut feeling has not really changed — we're in for a bad 2009," Torres said.
He predicted that the recovery, when year-over-year prices increase and sales start to stabilize, won't happen until 2015.
Others are more optimistic.
Greaves, the real estate investor, said he doesn't think prices will drop much more than they already have.
But if prices continue plunging, he said he'd be able to weather the storm. He paid cash for a five-bedroom house he bought in Ventura eight months ago that he fixed up and listed for sale by owner three months ago for $435,000.
He hasn't had a ton of calls, but there's been some interest among investors and "ridiculous" offers as low as $280,000.
As much as he'd like to snatch up more bargains, he said, he can't because his money is tied up in the Ventura property.
"I've thrown in the towel until next year, just like everyone else," Greaves said.
Reacting to worsening economic conditions, statewide sales were down month to month for the first time since the first quarter, CAR President James Liptak said.
Closed escrow sales of existing single-family detached homes in California totaled 514,710 in November, up 83.2 percent from 280,920 for the same month a year ago, according to data collected by CAR from more than 90 Realtor associations.
The California median was $285,680, falling below $300,000 for the first time since early 2002. It was down 41.8 percent from $490,511 a year ago.
Median prices declined across all regions of the state, with the largest declines occurring in areas with higher concentrations of distressed sales, said Leslie Appleton-Young, CAR vice president and chief economist.
Nationally, existing-home sales fell 8.6 percent to 4.49 million units last month, 10.6 percent below the 5.02 million-unit pace in November 2007, according to the National Association of Realtors.
The national median existing home price for all housing types was $181,300 in November, down 13.2 percent from November 2007.
Sales have softened overall, but they are rising in areas with large numbers of distressed properties — California, Nevada, Arizona and Florida — as bargain hunters take advantage of discounted home prices, Lawrence Yun, NAR chief economist, said in a release.
Recovery will hinge on how effectively Congress and the new administration can help facilitate the short sales process and unclog the mortgage pipeline, Yun said.
"Falling home prices would lead to faster contraction in consumer spending and further deterioration in bank balance sheets," he said. "More importantly, falling home values would lead to higher loan defaults, including those recently modified distressed mortgages."
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Worst housing markets
Fortune magazine ranked the worst residential real estate markets in the U.S. based on information from the National Association of Realtors and Moody's Economy.com. Eight are in California.
1. Los Angeles
2008 median home price: $375,340
2009 projection: -24.9%
2010 projection: -5.1%
2. Stockton
2008 median home price: $248,050
2009 projection: -24.7%
2010 projection: -4.0%
3. Riverside
2008 median home price: $256,540
2009 projection: -23.3%
2010 projection: -4.8%
4. Miami-Miami Beach
2008 median home price: $293,590
2009 projection: -22.8%
2010 projection: -6.4%
5. Sacramento
2008 median home price: $225,140
2009 projection: -22.2%
2010 projection: +2.3%
6. Santa Ana-Anaheim
2008 median home price: $532,810
2009 projection: -22.0%
2010 projection: -3.5%
7. Fresno
2008 median home price: $257,170
2009 projection: -21.6%
2010 projection: -3.3%
8. San Diego
2008 median home price: $412,490
2009 projection: -21.1%
2010 projection: -2.9%
9. Bakersfield
2008 median home price: $227,270
2009 projection: -20.9%
2010 projection: -2.5%
10. Washington, D.C.
2008 median home price: $343,160
2009 projection: -19.9%
2010 projection: -5.7%
Posted by Smashy_Crashy on December 24, 2008 at 12:43 a.m. (Suggest removal)
http://img340.imageshack.us/img340/86...
Easy year over year comparisons and sales are still weak historically. Sales are only this "good" (second worst November on record I believe) because of foreclosures and short sales which make up around 60% of the market. If the market was just left to normal sellers and normal buyers sales would be just as bad as last year. Unrealistic sellers and buyers who can only get loans from banks who all the sudden care if they can afford the house they are attempting to buy would ensure that sales stay low. The people dependent on transaction volume are lucky short sales and foreclosures are keeping their business going.
We are still a ways off from the bottom, this next year the mid to high level sellers will be hurt more than the bottom end. Loan limits are dropping and down payment requirements are increasing. The lowered interest rates for conforming loans aren't making their way up the price scale while more stringent qualifying is working its way down.
Posted by Tanker on December 24, 2008 at 6:49 a.m. (Suggest removal)
The reason the median price has fallen so low is because the majority of sales are under $400k. Many of these short sale houses are really a mess.
The banks now have stricter lending requirements, higher down payments, and higher fees.
The banks, who caused this sub prime debacle, now treat hard working buyers like they are unworthy. Unless you have perfect credit and 20% down, the banks don't want to lend to you.
Posted by Twslv05 on December 24, 2008 at 7:59 a.m. (Suggest removal)
Tanker I agree with you 100%.
I am also more pessimistic today than I was this time last year because the economic forecast for the next one to two years and possibly more is very weak for California.
My other concern is the possible increases in property tax being considered in Sacramento and the shape of home equity loans that were taken out on houses that more than doubled peoples mortgages on homes that are now well below loan value.
Its going to be a rocky ride for sometime to come.
Posted by ecarson1958 on December 24, 2008 at 8:01 a.m. (Suggest removal)
The banks lent the money because they had a lot to lend. But, the real culprits to this fiasco starts with the appraiser. The appraiser starts the ball rolling by using existing sales to establish a base price. If the appraiser on the other hand did the job the way it was supposed to be done, and not listened to the banks that needed the higher appraisal to make the higher loan, most of the problems wouldn't have developed so quickly. There are more people to blame than there are houses to buy. Starting from the regulators during the Clinton administration who rewrote the rules concerning qualifications to purchase a house and qualify for a loan. When welfare payments can be included as income, it throws a whole new mix of people into the market that shouldn't other wise be there. Greenspan was tripping over his own feet and wouldn't listen or believe what he knew was happening. All of the counties reaping the benefits of higher property taxes weren't going to say anything. The people who knew where this was headed wouldn't be believed. I personally tried to convince a number of my friends and even my ex-wife to get out of the market in 05 and rent. My ex was sitting on 350K in equity and wouldn't budge. She like all of the other suckers and greed mongers just kept thinking it would keep going up, the prices that is. One guy actually believe his little shack would hit a million by the end of the the decade. He'll now be lucky if it turned out to be a million quarters he hits. Because I'm afraid that most people will end up right back where they started in the year 2000. Those that came after will be owing the difference in what they bought versus what it is worth.
Posted by rebel123 on December 24, 2008 at 8:46 a.m. (Suggest removal)
The appraisers didn't loan money to people who could not afford to buy the houses. Countrywide and other lenders who made huge bank on ridiculous loans created this mess. Blaming the appraisers is a little crazy. They just agreed with the inflated values, they didn't affirm credit worthiness.
Posted by cassandra2 on December 24, 2008 at 8:50 a.m. (Suggest removal)
People talk about when we will recover.
There will be no reovery. Not in real estate, not in retail sales, not in employment. and so.
What there will be is adjustment. We will all live closer to the bone and closer to the home. Globalization is moribund, the wastful paridigm of perpetual growth is waiting to be shoveled away with the detritus of other economic truisms like elephant poop after the parade.
Let us hope we face the future none of us every dreamed of with grace and with compassion for all.
Posted by CAPEDad on December 24, 2008 at 9:14 a.m. (Suggest removal)
I agree with all of you - especially you cassandra2.
To add to the discussion on appraisers, they actually DID provide one of the three elements of a proper appraisal - comparison. The other two elements that were totally ignored were capitalization and cost. Capitalization is the value of the home to provide an adequate return as a rental for an investor. The cost approach is the actual cost to build the home. The value arrived at by ALL THREE elements should be reconciled to arrive at a BALANCED value. This was never done in the build up to the bubble.
Believe me, this bubble era will be discussed in great depth at appraisal schools for many years to come.
Posted by cslaurie on December 24, 2008 at 9:52 a.m. (Suggest removal)
If you are not growing you are dying. Now who said that?
Posted by cslaurie on December 24, 2008 at 9:56 a.m. (Suggest removal)
The value of anything is the value a willing buyer will pay and a willing seller will accept. Period.
Posted by twcanale on December 24, 2008 at 11:29 a.m. (Suggest removal)
I'll take grace and compassion any day!!!
Do you own stuff, or does stuff own you? Who said this?
Posted by modaltheory on December 24, 2008 at 11:29 a.m. (Suggest removal)
This is awesome. Now young guns like us can afford a home. $800,000 for a pathetic Camarillo home....yeah that was going to lost. The housing market fell, wow what a shocker. Did anyone really think a Camarillo 3 bedroom home would soon be a million clams. If you invested in a home and spent $800,000 for it and its not in the Spanish Hills. You deserve what you got!
Posted by JWFOXNEWS on December 24, 2008 at 11:45 a.m. (Suggest removal)
Breaking news-records show most spanish hills home buyers payed large sums down and more then half paid cash for their properies. That does not include the $250,000 dollar fee charged for the country club. Stand by for more breaking news.
Posted by horsespinner on December 24, 2008 at 1:06 p.m. (Suggest removal)
I am starting to look. But it will be in Vegas baby. No income tax, no treason from the Nevada Legislature. California had a robust economy, all the companies have left for greener pastures due to taxes, workmans comp and agency derived burdens (AQMD etc). Got to make a profit to tax it, the state just does not get it. Now, hopefully it will get it, right in the wallet. See you there are 48 billion reasons to say bye bye.
Posted by CAPEDad on December 24, 2008 at 3:18 p.m. (Suggest removal)
cslaurie - that is precisely the moronic attitude that most lenders/buyers/insurers took as the prices departed from all reality (especially from rents/capitalization values).
The last fools bought while the smart ones kept renting and paying a THIRD of what it would cost to buy the very house they were renting while they were told by the real estate community that they were "throwing their money away on rent". Funny when you think about it really.
BTW, why no cheery CAR economic forecasts?....LOL.
Posted by ElectricSpeed on December 24, 2008 at 4:16 p.m. (Suggest removal)
I am moving out of the country soon... To many negative lazy people in America now. There is no hope. I feel bad for the people who built this country.
Posted by dcsfancy on December 24, 2008 at 8:17 p.m. (Suggest removal)
coming in the near future here?
Average home price $18,513 - Unemployment rate 21%
December 21, 2008
The Great Depression has reached Detroit. The average price of a home is now $18,513 and unemployment has reached 21%, and it’s expected to get worse. Detroit is facing a crisis of epic proportions that officially puts Detroit statistically (and real term) on par with the great depression. Many readers of Tribble Ad Agency are advertising centric.. and due to the rash of layoffs within all Detroit Advertising firms has put the city on the map for the wrong reasons.
It has become the center of all that is wrong with America… and nothing of what is right.
http://www.youtube.com/watch?v=1r_NMq...
Posted by Smashy_Crashy on December 25, 2008 at 12:19 a.m. (Suggest removal)
dcsfancy: "coming in the near future here?"
Well I definitely dont think it will get nearly that bad in Ventura. But we will face significant headwinds. Higher state taxes, fewer state, federal and county jobs, fewer good paying private sector jobs and lower home prices are all baked in the cake for Ventura. Everyone is just trying to figure out how far things will go because the argument over whether or not it will happen is over.
Something like 9% unemployment that could happen this next year (imho) would still understate just exactly how bad the job situation is in the county as many people who were overemployed during the boom are now taking on jobs and salaries in line with their skills and experience. Overtime and full time hours for many will be cut back and people pay will be hurt because of it.
So while the bottom in sales volume for housing was hit this last January we are still a ways off from a pricing bottom and I think we will hit a price bottom and drag along it for awhile because of the negative issues facing the nation, state and county.
Posted by KathrynAsh on December 26, 2008 at 11:36 a.m. (Suggest removal)
I was thinking of trading up to a bigger house, the prices are becoming quite affordable. I keep scanning the Ventura County MLS site and am amazed at the deals.
But then all this talk of higher taxes and the State Legislature trying to pass an illegal tax hike, and I decided it wasn't smart to buy a new home with a property tax bill 5x higher then my current home if CA is going to start raising all my other taxes through the roof.
I think a lot of people are in the same situation as I am. The new lending standards have taking 1st time buyers out of the market, and those with good credit and equity still left in their homes bought well before this housing bubble. I know I don't want to pay a ton more in real estate tax, especially when the bums in Sacramento will just squander my tax money away.
Posted by daleeks on December 29, 2008 at 9:51 a.m. (Suggest removal)
When no more of these "investors" are reported on (other than perhaps the odd human interest piece about their new careers cleaning tables at Subway or dressed up in the rat suit at ChuckECheese), we will know the market is approaching a bottom. I suspect this will be around 2012-15. There will be free houses in Detroit next year and in Florida the year after. Why would anybody pay $300K to live in Ventura?
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