Posted by bob on February 13, 2008 at 11:47 a.m. (Suggest removal)

And to think this is only the start still, just wait until the summer. The $/Sq ft price is plummeting so fast right now. There are 264 bank owned in Simi per Realty Trac, just wait a few months until that number is higher then the inventory number. Ouch, hope you didn't listen to the Realtors and buy in the last few years.

Posted by tsu.lee on February 13, 2008 at 11:56 a.m. (Suggest removal)

It is now 2 straight years for year over year declines in January.

Sold Jan 06 - 731 Median Price - $608K
Sold Jan 07 - 689 Median Price - $565K
Sold Jan 08 - 423 Median Price - $478K

Time to break out the Bobby Mcferrin song Don't Worry, Be Happy.

Posted by fpecar4525 on February 13, 2008 at 11:59 a.m. (Suggest removal)

Median prices means very little. The listings in Ventura contain about 50% foreclosure/distress properties and people who do not have to sell are simply holding their houses off the market. Unless there is a major economic bust, many sellers will simply wait this out. There isn't enough housing in the good places anyway.

Posted by solvingadream on February 13, 2008 at 12:11 p.m. (Suggest removal)

Minus $88,000 in one year, ouch.

I see many homes on the MLS below their 2004 prices and not selling.

The foreclosures and short sales are driving the market quickly downward. In January 2009 we will be talking about how 2008 was the worst year for housing on record. Sellers are still in denial, realtors simply have no idea how to find market price and buyers are being finally told that "You can only afford X amount" and need a down payment by the banks.

FHA and Fannie/Freddie wont save the day, FHA is full doc and has guidelines of 29% of income spent on TOTAL housing costs (PITI, hoa, etc). Fannie/Freddie are 28% max.

This is why sales are so slow. Buyers are not qualified to buy under normal guidelines. And the old way around (lying about your income and going stated) is no longer widely available. It is ok if the sellers and realtors cant find the market, the banks can and will. And I guarantee you it is far below where it is at currently. Do the math yourself using the Fannie/Freddie/FHA guidelines to see where we are going.

Posted by solvingadream on February 13, 2008 at 12:23 p.m. (Suggest removal)

fpecar4525:"Unless there is a major economic bust, many sellers will simply wait this out."

Well, IF (huge if) interest rates remain where they are it will take about 10 years for incomes to match current housing prices.

If interest rates come up off their HISTORIC lows then it will take much... much longer. If interest rates just revert to the mean (around 8%) we are looking at a 20 yr housing recovery assuming sellers "holding out". With extremely low sales for that time. I'd hate to be a realtor or loan officer.

As for economic bust.. maybe major employers such as Countrywide getting absorbed by BofA and moved to lower cost areas? Amgen hurting? Government spending decreasing due to lower revenues. The 3 biggest employers in Ventura (Gov't, Amgen, Countrywide) are all looking very shaky right now.

So far, for those of us that watch such things, the inventory on the MLS isn't suggesting that sellers are waiting this out. They are trying to sell and get ahead of the downturn but have been unable to cut fast enough. Only the banks are close to getting the prices right. I see homes at 200k (i've seen some as much as 400k) below their **2006** selling prices, 2004 price points are the norm now heading on down to 2003.

Posted by eduardocenter on February 13, 2008 at 12:44 p.m. (Suggest removal)

It is bad, and going to get worse. However, it can't go off the table as some of us might wish. Rents are not going down as far as I can tell. If rents don't go down, then that is the absolute bottom in my experience. You can't usually buy a home for lower payment than rent with 20% down in Southern Cal.. If that happens, then I will be really shocked, and I would think investors would come back in and prices would climb rather quickly. But if I was a genius I would be enjoying the money from the house I sold two years ago--but I can't 'cause I still own it.

Posted by jw1000 on February 13, 2008 at 2:17 p.m. (Suggest removal)

Outstanding news. Let them keep dropping.

Posted by freethought on February 13, 2008 at 2:52 p.m. (Suggest removal)

fpecar4525 said, "Median prices means very little." I agree. Prices in my old (only ten years old) neighborhood in Oxnard have dropped further than the median suggests - by more than 20% during the last year and a half in most cases. In Camarillo, median price drops aren't much better.

solvingadream - I also agree with you. Although 2009 won't be so good either, 2008 will definitely be the worst year during this housing bust.

Posted by freethought on February 13, 2008 at 3:03 p.m. (Suggest removal)

eduardocenter - We haven't seen rent prices drop, because they haven't yet matched or surpassed mortgage payments for a new loan. That day will come, though. When it does (and it always does), rent prices will then chase mortgage payment prices down.

Also, prices did drop in the '90s to a point where renting the same house was more expensive (when factoring in tax and other benefits). As prices moved down, so did rent prices. To say that prices won't "fall of the table" shows that you may just get yourself into financial trouble some day. Prices can always fall way below what we expect. We see this all the time in the stock market, and we've seen it before in the real estate market. You may very well be correct, but I suggest also being safe. The only way to know that a bottom has been reached is about six months of steady price increases from the absolute low. History also shows that investors don't come running back when they think a bottom has been hit. They always wait for the market to go into a frenzy.

Posted by tsu.lee on February 13, 2008 at 5:13 p.m. (Suggest removal)

Well in theory renting should be higher than owning a home. When you rent, the owner of the house assumes the liability for fixing things like a leaky roof, termites and things of that nature.

If you rent a house that you own, you should be able to charge 20% - 30% more than your mortgage payment. This takes into account taxes, insurance, maintenance, a management company if you have one, and a small profit. In the market we are in now this is not the case, instead people are hoping to get their money back after they sell the "investment property".

Posted by Fred on February 13, 2008 at 6:31 p.m. (Suggest removal)

477k.... and the median income is 80K? Seems like 350 is more in the ballpark (this is very generous, and could even be 300). Guesses from others??

Fred

Posted by SmashyCrashy on February 13, 2008 at 7:57 p.m. (Suggest removal)

I dont think the median income is 80k in ventura, the 2004 census was 59k median income.

But if we assume the median home buyer income is $80,000 and we are blessed with a no down payment 6% 30 yr fixed loan using FHA guidelines (the loosest guidelines available currently). That would mean the median housing price calculates to $265,000.

$80,000 * .29 = $23,200 available for total housing costs or $1,933 a month

$265,000 houses 0% down and a 6% interest rate (and I am being generous and saying no PMI and a favorable rate for such a risky loan. Note all FHA loans and this high LTV have PMI) the fully amortizing 30 year fixed payment is $1,588

Property tax (1.25% of the purchase price) is $276

Insurance (generous) $75

PITI is then $1,939

Down payment increases purchasing power but lowers the available pool of buyers further.

Again, I am being tremendously generous. All people have to do is the math themselves. Most people can't afford the house they live in currently but assume people richer than them will want to live there.

It's a credit bubble that inflated housing prices. They stopped lending like that and the prices that were inflated by false financing now have to deal with reality. That means documenting income and having to obey debt ratios. Again, the math is quite clear. This is the new reality, which is as it has been since the end of WW2.

Posted by freethought on February 13, 2008 at 10:32 p.m. (Suggest removal)

Actually, the median household income as stated by Fred was pretty close to 2007's estimate of $79,500 (source: http://auditor.countyofventura.org/ac...). SmashyCrashy, I appreciate your efforts above. It's hard to convincingly argue the number, but some will try anyway.

Given the average increase in household income over the next couple of years and the fact that price corrections almost always OVER-correct, $265,000 deosn't seem that much of a long shot. $300K is definitely do-able.

Posted by freethought on February 13, 2008 at 10:34 p.m. (Suggest removal)

"numbers", not "number" - sorry

Posted by SmashyCrashy on February 13, 2008 at 11:15 p.m. (Suggest removal)

Thanks for the link FT, all the census data was different but I have no problem with a higher number. The numbers dont make sense even in the most optimistic of scenarios. In reality the mortgage insurance alone would take a tremendous bite out of purchasing power. And those people in new home tracts with high HOAs.. that is a huge loss of purchasing power. The new home tracts HOA fees are ~$250 in many locations. This equates to $41,000 less in purchase price. And many built during the boom have Mello-Roos.

Since low/no down payments are rapidly becoming extinct there is going to be a long lull between where buyers want to buy and are able to do so.

Posted by DrJackpot on February 14, 2008 at 4:15 a.m. (Suggest removal)

"It is unclear how much of the downturn is driven by market fundamentals, and how much is due to turmoil in the lending industry, DataQuick president Marshall Prentice said in a statement"
I say it is unclear how much of the downturn is due to everyone getting on the forclosure bandwagon simply because everone else is doing it and therefore making it somehow socially acceptable like divorce and smoking pot. Secondly, the media made the housing boom and the media is now breaking the housing boom. With the internet, etc. perception and compliance with the trend spreads like wildfire. Whereas one might have felt shame before, it's now ok to jump out of a speculative venture under the shield of 'bad times'. It's the domino effect and the game of musical chairs. I don't think most people misunderstood that payments would rise in the future when they took out a mortgage. This thing that "I didn't know" just doesn't swallow well. Now there's the 'too big to fail' result and the government is stepping in to appease the union of foreclosures. It's clear that the real intent is not to help the individual but to save the financial institutions. If you are elderly or depend on interest income to live, your annual income is now plunging because the Federal Reserve has taken your savings (in the form of low interest) and passed it on to the gamblers. The bottom line on housing cost is this: Eventually inflation in material and labor cost will surpass lower prices to the point where it will be impossible for further declines. But this won't help you much because gas will be $10 a gallon and bread $8 a loaf. But you're in the game and you can't get out.

Posted by freethought on February 14, 2008 at 7:37 a.m. (Suggest removal)

DrJackpot - There are a few things you mentioned that should be addressed. There are loads of peole now pointing fingers at homeowners who are simply walking away. Why, then, didn't those same people point a finger at the lenders who turned a blind eye on loans to people who clearly couldn't afford them? The driving factor behind every party's (lenders, buyers, and realtors) agreement to loan half a million dollars to a divorced waitress with three kids to support was simply greed. Now, all are reaping what they sowed.

Also, don't underestimate how far prices can fall. You and many others can lose big time trying to guess the bottom of this and any other market. Material and construction costs don't mean a thing when there's no building going on.

Posted by tsu.lee on February 14, 2008 at 9:47 a.m. (Suggest removal)

Personally I dispute the thought that the media created the boom and bust in the housing market. I will ask you this How many houses in the new developments have never been lived in? Depending on where it is at I would bet a lot (the Phoenix market comes to mind). So to me it looks like people were looking for the next scheme for easy money (not all but a lot, you can always find MLS houses that state never lived in) after the stock market crash. The biggest difference between stocks and houses is the liquidity of stocks and houses. With stocks you can always sell a portion of what you have (i.e. I have 10K of GOOG I put in a sell order it would not be hard to sell it to 20+ investors) but with a house it is all or none.

I also put a lot of blame on the fed. Check out this link to freddie mac
http://www.freddiemac.com/pmms/pmms30...
You will see interest rates being the lowest it has been since 1971. The Fed gave the banks easy money, then the banks then gave us easy money and then the banks tied those loans into securities that took the banks risks away.

Also people are walking because they did not have to put any money down. That makes it a lot easier to walk away. If I had to drop $150K down payment for that 700K home it would take a heck of a lot convincing to make me want to leave.

Posted by freethought on February 14, 2008 at 3:01 p.m. (Suggest removal)

tsu.lee - Good points. The media only reports what is going on. That was the case during the boom, and it is now the case during the bust. When the media quotes reports and number, they didn't just dream them out of mid-air.

I think that you will find that those screaming foul at the media will usually have some skin in the game. Either they are recent home buyers, realtors, or someone else in the industry.

When it comes to people simply walking away from their payments, I don't blame them for doing so. These folks are just making a business decision, just like the lenders made business decisions to loan "easy money" to these home owners. They have to choose between losing loads of cash and living off of mac and cheese, or destroying their credit for several years. If I were dumb enough to be in the same position, I'd probably walk away, too. I'm not saying it's right. I'm saying that survival always comes first.

Posted by Fred on February 15, 2008 at 10:23 a.m. (Suggest removal)

Smashycrashy - thanks for the numbers - this puts the current situation in a very real perspective. Freethought, tsu.lee, DrJ make me think that 300K could indeed happen (although as DrJ pts out, 300k might not be worth as much in real terms)... If such drastic decreases are imminent (as much as 40% more decrease...), how many more people will walk?

The one thing I dont get is the banks who bought and sold these mortgages... they have clearly seen this before because "jingle mail" is an old term. Dont they have an army of people graphing reward vs risk? Wasn't someone saying "hey, if this turns to the downside we are F'ed?"