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Home sales offer hope to some
Realtors association says more people buying as prices decline
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More from BusinessTwo reports this week showed an uptick in Ventura County home sales in April that some see as good news for the real estate market.
On Friday, the California Association of Realtors reported that sales of existing homes increased from a year ago, while the median price was down 28.2 percent.
The last time Ventura County saw a year-over-year improvement in home sales was in September 2005, said Robert Kleinhenz, deputy chief economist for CAR.
It was a very slight improvement — 0.5 percent — but an improvement nonetheless.
The median price decline from $691,710 a year ago to $496,530 in April was the sharpest drop on record, Kleinhenz said.
Still, both the sales increase and drop in median price are in alignment with what's happening elsewhere in the state, reflecting that sellers are coming down in price and people are purchasing more lower-priced homes compared with last year.
"Significant price declines are spurring home sales to bargain hunters and first-time buyers at the middle- and low-end of the market," Leslie Appleton-Young, CAR's vice president and chief economist, said in a statement.
A year ago, homes priced at less than $500,000 accounted for 40 percent of sales in the state; in April, those homes accounted for 64 percent of sales, she said. The credit crunch has limited financing for homes that cost more than $500,000.
Home sales across the state increased 2.5 percent in April from a year ago, while the median price fell 32 percent. The median is the point where half of the homes sold for more and half for less.
Things just might be headed back toward a normal market as homes become more affordable and sales start to reflect the typical ramping up toward the summer months, Kleinhenz said.
"We probably have pretty much dug out of the worst of what we have seen in the market during the worst of the credit crunch," he said.
Earlier in the week, DataQuick Information Systems reported 771 new and existing homes and condos sold in the county in April, up 40 percent from 549 in March. CAR's figures focus on existing homes, which represent about 76 percent of all residential transactions. The agency provides only percentage changes in sales.
On Friday, the National Association of Realtors reported the number of unsold homes across the nation has risen to the highest level in more than 20 years.
As a testament to the weak housing market, there are a lot of homes with "For Rent" signs in the window these days.
Ronald Ormsby, whose property management office is in Camarillo, said there are about 55 houses for rent in the city right now. The housing market has put some people into the rental market who weren't planning to ever become landlords.
"People that might have to move and are having difficulty selling and can still manage to make the payments without going into foreclosure, I think they'll rent by necessity rather than as an option," Ormsby said.
He estimates it could take another year before the market hits bottom. Ormsby has been through housing cycles before, including the one in California in the early 1990s.
"I don't think the recession we had then is anywhere near as severe as the one we're having now," he said.
Some economists contend the continued drop in prices is keeping potential buyers sitting on the fence, waiting for prices to fall further.
"With prices collapsing, the incentive not to buy a home is increasing by the week, and with inventory showing no sign of improvement, prices will keep falling," predicted Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Dale King, president of the Ventura County Coastal Association of Realtors, said the bottom is always determined a few months after it has passed, but he's starting to see some of the characteristics of reaching bottom.
He said more buyers stepped forward with offers in April and May as homes came down in price and interest rates remained low.
"Intuitively, it's feeling better than it was, say, two to three months ago," he said.
— The Associated Press contributed to this report.
Posted by SmashyCrashy on May 24, 2008 at 1:59 a.m. (Suggest removal)
$195,180 drop in median in one year for.. sales barely rose and the author writes that this is "good news" for the market. Good news for home buyers, everyone else is kind of sick about it.
I love the people trying to rent out their house because they "can't" (more apt, unwilling to accept market price) sell. Like the market is going return to the bubble price days.
Buyers are sitting on their hands because prices are still out of line with income in the state. The people buying now, thinking they are getting a "deal", will realize just how bad a deal (and bad advice from their realtor) they are getting as we move through the year.
As prices move down, inventories should start falling and sales should rise. That is simple economics. But charting current sales and prices versus history it is clear we are seeing a very tepid "spring bounce" (seasonality). And looking at what has sold it is clear the banks are the one getting the money. Short sales and Foreclosures are what are driving the market.
A home owner trying to sell has to be aware of their competition and price accordingly. Fewer and fewer are willing to do so. They either think the market will bounce back, not understanding that the loose lending practices that drove the boom will never be seen again in our lifetime, or are underwater and have no choice but to pay off their debt.
The realtor quoted as saying that April/May feels better than 2-3 months ago is amazing. Show me one April-May period that wasn't better than 2 or 3 months before. Sales always increase in the spring over January and February (the two slowest sales month of the year).
The advice to anyone thinking of selling is the same as it's been since the bubble burst in August of 2005. Whoever gets out soonest get the most. The longer a house sits on the market the more it loses value. The sellers that swallowed their egos and took market price 6 months, a year, and 2 years ago aren't regretting their decisions one bit. Lending standards continue to tighten and June 1st marks a very important date for the new Fannie/Freddie guidelines to go into effect as well as many PMI guidelines. Those sellers going into June/July are going to face significant headwinds over and above what they face today.
A return of rational lending means a return of rational prices. An informed seller will take this knowledge and do what it takes to get out before price rationality returns. I would talk about smart buyers but a smart buyer simply wouldn't be buying, they would rent.
Posted by p.oherlihy on May 24, 2008 at 6:25 a.m. (Suggest removal)
SmashyCrashy, the people buying right now would be in disagreement with you.
There has been two "bounces" this year. The first in January and now April. They coincide with the most favorable availability of loans. Right now there is a good FHA loan that buyers are using.
What will drive prices down? Higher interest rates and more restrictive credit will. If this happens, your monthly payments will not go down even though prices may drop. People buying at todays prices and low interest rates realize this.
According to this article, competition for low end housing is increasing. This will continue, which is another reason why buyers are stepping up now.
Ventura County is the most affordable beach county in Southern California. It usually outperforms statewide statistics.
Posted by clementine on May 24, 2008 at 10:19 a.m. (Suggest removal)
You have to live somewhere - so now is a very good time to buy. Who can afford the ridiculously high rents in Ventura County - specifically Oxnard? At least, with a house, you own it and they don't raise the rent every 6 months to a year. You can also hang things on the walls, paint the house, etc. without them charging you for damages. You're building up equity & have a great tax write-off. Just realize that you need to own the house at least 5 years and you'll be OK.
Posted by Fred on May 24, 2008 at 12:55 p.m. (Suggest removal)
My darling Clementine,
I rent a 4 bdr, 2 ba house in Newbury Park for 2300/month. I'm guessing that my mortgage, taxes, and maintenance would be about 4K for a similar house in the area - so why again should I buy a house that is decreasing in value each month?
(to others - I used to want a house, I dont even want one now... I am saving a ton of money, I can move, and I am not married my mortgage/property taxes).
Posted by daleeks on May 24, 2008 at 5:08 p.m. (Suggest removal)
Clementine,
Nobody is building equity in Ventura County now when property prices are falling 2-3% every month. Your argument against renting is absurd. I rent a house for $2800/month. I can easily afford to buy this house with 20% down but I would have to be brain damaged to do so. Transaction costs would be $40K and taxes, insurance, and maintenance alone would run $20K/year and those costs are BEFORE the depreciation. The house price depreciated by about $120K last year. Although a tax deduction would be nice, I can get one when the degree of depreciation is much smaller, that is when unsold inventory starts decreasing and maybe Congress passes a tax incentive for buying foreclosures in 2009. Catching a falling knife costs much much more than renting. Those who are buying a mortgage now are renting a pot of money pinned to a declining asset. Many if not most of them will never get their "deposit" back and end up walking away after prices decline another 30% as predicted for the next 18 months in Ventura County.
Posted by SmashyCrashy on May 24, 2008 at 5:38 p.m. (Suggest removal)
p.oherlihy,
You just keep repeating the "now is the time to buy" phrase. Anyone listening to you last year at this time has seen a dramatic drop in home prices AND lower interest rates. I know your one overpriced listing hasn't sold and you need the paycheck but you should consider that giving people such bad advice can ruin them financially.
We will never see real prices (inflation adjusted) like we have just seen in our lifetimes. Lenders going back to regular standards with people needing down payments and proving incomes means prices will return to normal. Foreclosure are at record levels, the amount of distressed inventory is staggering. Sure someone can get a great "deal" today relative to a year ago but relative to next year and the next few years it will be shown clearly to be a poor choice.
You need the people to buy because your livelihood depends on it so you have to come up with arguments for buying. You've clearly never looked at the statistics because you would realize what horrible and dishonest advice you are giving people. This tremendous April "rebound" in sales still represents one of the worst Aprils in the history of Ventura county in terms of sales.
May and June sales will be even better looking at pendings (they won't even match historic average sales for their months much less a boom) but the June 1st lending standards going into effect should change the market from July forward. Short sales and foreclosures will continue to dominate the market and prices will continue their meteoric drop. Once we hit beginning 2003 level prices something very interesting happens. There was a huge refi boom that happened at the end of 2002 many of these people took option arms and will be underwater. This will be the catalyst of the next wave of foreclosures and short sales even absent the worsening economy.
There is no reason or rush to buy now every month renting is a month making money. Clementine thinks you can build equity in a falling market, equity is simply the difference between what you owe and the value of your house. If a $500,000 house goes down 1% , you'd have to pay your loan down by more than $5,000 to "build equity" over above the interest costs. If you put that money in the bank while renting instead that is money you can touch and use. As for paining and hanging pictures, The last place I rented I painted the walls and hung pictures.. it cost me something like a total of $140 dollars when I moved for painting, cleaning and repairs.
For those looking for a signal to buy, wait for positive YoY price numbers for a couple months in a row. You will have missed the bottom by maybe 5 or 6 months but you won't get slaughtered like you would by buying now. Realtors care about sales rather than pricing so any uptick in volume they will tell you that is the bottom. But that is just a signal that prices are starting to drop, simple economics.
Posted by p.oherlihy on May 24, 2008 at 9:26 p.m. (Suggest removal)
SmashyCrashy, I'm not sure what your beef with realtors is. But don't take my word for it. Reread the article. Last month, 771 people disagreed with you, put up money , and bought.
I just gave reasons why people are buying, that's all.
Right now, a low fixed mortgage is appealing. The total home buying equation includes price plus financing. Even if prices fall due to higher interest rates, it won't matter if you buy now or wait. The monthly payment will be similar because you'll pay higher interest.
Fred, you should stay a renter because of the short term nature of your needs. However, if you have a long term job and want to stay nearby. Or, let's say, if someone else wanted to be in a certain school district for a long time, then buying in a low market might be a good option. So to each his own.
Fred, you are also close on your estimate. A 4/2 in NB would average about $540k. Depending on your downpayment (not more than 20%)and loan, your monthly payments will be around $3200 to $3700 per month.
Posted by SmashyCrashy on May 24, 2008 at 10:16 p.m. (Suggest removal)
You do know that was the second worst April for Ventura county since Dataquick has been keeping records? An appeal to popularity ("everyone else is doing it, so you are wrong!") logical fallacy kind of breaks down when you realize that tens of thousand bought during the boom in Ventura County and are now underwater. Following the crowd without thinking gets you nowhere. We are at record levels of foreclosures and near record low for sales. Sales will pick up as prices fall, that is the basic economics of Supply and Demand.
To suggest we are anywhere near the bottom is just ignorant. Foreclosures will have to start dropping, prices will have to stop falling before a market bottom can be reached. There are also the serious economic issues facing the county, unemployment rising and the issues facing major employers like Amgen and Countrywide. Pricing pressure will clearly be with us for awhile, the advice of "don't try and catch a falling knife" is related to real estate for a reason.
Posted by daleeks on May 26, 2008 at 11 a.m. (Suggest removal)
'Last month, 771 people disagreed with you, put up money , and bought.'
Unless Countrywide and Amgen suddenly start hiring again, that means there will be another 400+ foreclosures in 2009-10.
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