***This article talks about California property, though it may be a surprise for Californians to realize that they aren't the center of the universe and the rest of the nation isn't in the same boat. But it does contrast the two schools of economic thought*** Begin article: US housing boom gone, but prices still out of reach in California By Mark Trumbull, Staff writer of The Christian Science Monitor Mon Mar 12, 4:00 AM ET SAN DIEGO - The beige stucco townhouses and palm-lined cul-de-sacs of San Diego County exude a quiet tranquility, but that demeanor hides a difficult reality: Even after a sharp housing slowdown, cities in California are still America's least affordable places to live. This means that California, which helped lead a nationwide real estate boom, could face more downward pressure on home prices. Statewide, just 25 percent of households can afford an entry-level home, according to an index released this month by the California Association of Realtors. That's far below the national average of 61 percent who can afford to purchase a home. Forecasters don't expect an outright plunge in California prices. With those palm trees and the Pacific Ocean beckoning, the Golden State appears sure to retain gilt-edged home values. But if there's a floor under home prices in the nation's most populous state, there is also a ceiling. "Home prices have gotten out of balance with incomes," says Mark Milner, a real estate analyst at PMI Mortgage Insurance in Walnut Creek, Calif. "Over time, those have to come back in balance." The figures are eyepopping. First-time homebuyers paid a median price of $477,400 in California last year â 2-1/2 times the US median, according to the California Association of Realtors. The median entry-level condo in California sold for $360,160. What happens here will be important, not just because California is home to nearly 1 in 8 Americans. It will help set the tone for the nation's housing market in the next year or two. Moreover, the state's struggle over affordability represents, in extreme form, a national trend. Across the US, rents and home prices have risen faster than incomes over the past seven years. In many large cities from Washington to Dallas, home prices have jumped in remote exurbs by nearly the same percentage as in the inner suburbs. For many buyers, a long commute is no longer a ticket to an affordable home. Rapid price gains are over California's affordability crunch doesn't ensure that house prices will fall. But clearly a period of rapid gains has ended. Prices last year fell 4.2 percent in San Diego, sagged 1.4 percent in San Francisco, and rose 2 percent in Los Angeles, according to Standard & Poor's Case-Shiller indexes. Many analysts say the market here, and nationally, will stabilize this year. The economy remains generally healthy, they say, and builders have slowed down to avoid a pileup of unsold homes. "There is reason to believe that [price] appreciation will be coming back soon," says Luke Tilley, a Philadelphia economist at Global Insight, who follows the California market. Another camp of forecasters says California prices probably have further to fall. They note that housing downturns often take several years to hit bottom, and that high prices have sidelined many would-be buyers. "We're expecting ... a sharper and deeper contraction," says Celia Chen, a housing economist at Moody's Economy.com in West Chester, Pa. She says the state's price run-up went beyond what could be justified by income or population growth. The firm has predicted that several California cities will see prices drop further â some by 10 percent or more â and won't hit bottom until sometime next year. In one measure of how high prices have soared, the California Building Industry Association recently found that 18 of America's 20 least affordable metro areas are in California. Affordability has long been a challenge for the state, thanks to its sunny beaches and relative scarcity of buildable lots. Building more condos, fewer houses In San Diego, one result is that new construction is increasingly dominated by condominiums and multifamily units, not the traditional single-family home. Those are what buyers can afford, and what zoning rules call for in a region of smog and sparse water supplies. "The day of the ... house with the white picket fence, for at least this part of the state, is really over," says Robert Pinnegar, executive director of the San Diego County Apartment Association, a rental trade group. Land here is limited in all directions: by the Mexican border to the south, the ocean to the west, the Marine base at Camp Pendleton to the north, and the Cleveland National Forest east of the city. In turn, high land prices make it hard for builders to finance affordable developments. Townhouses here can cost $400,000 or more. A low ownership rate Such prices explain why just 57 percent of California households own homes â far below the national average of about 69 percent. Those prices also explain why a growing share of San Diego workers now live outside the county, in some cases commuting more than 50 miles or living across the Mexican border. "It's kind of impossible to stop" that migration, says Susan Baldwin, a senior regional planner at the San Diego Association of Governments. But she and other local officials have been trying to craft solutions. A new light-rail route, for example, will link the city of Oceanside, to the north of San Diego, with Escondido and other nearby communities. Stops along the route are candidates for new high-density housing, she says. Nonprofit organizations are also stepping into the breach. Wakeland Housing recently opened Lillian Place, a 74-unit development near San Diego's downtown baseball stadium, with rents about half the typical rates. Partnering with local governments and others, the company has helped create 6,000 units of affordable housing around the state. A spreading affordability crisis But that barely begins to address the need. "We used to think of affordable housing as something that was for extremely poor people. [It] is now something that seems to be sneaking closer and closer to the middle class," says Ken Sauder, Wakeland Housing's president. "Our kids can't afford to live here." For now, if fewer Californians can afford to buy, it's also the case that many homeowners have decided not to sell in the current market. "The market is kind of pulling back to [only] people who are really motivated" to sell, says Peter Dennehy, senior vice president of Sullivan Group Real Estate Advisors in San Diego. That's a recipe for a slower pace of sales, but not necessarily lower prices, he says. The state has seen down markets in the past, however. In the early 1990s, the end of the cold war hammered southern California's aerospace industry. Home prices in Los Angeles took six years to bottom out, 27 percent below their 1990 peak. In the past year, there hasn't been a similar shock to the economy. No one is forecasting a repeat of L.A.'s 1990s experience. But several uncertainties stand out, that could have wider ripple effects in the state's economy: Will a rise in foreclosures prompt banks to curb the flow of credit to buyers? Will large numbers of jobs in construction and other real estate activities be lost? Will consumer spending be affected by a cooler housing market? These are all real risks. It's not a time for homeowners to panic. Any price declines are unlikely to wipe out their gains of recent years. But the affordability squeeze, says Ms. Chen, "leaves the market very exposed."
If anyone thinks 1990 couldnt happen again they are smoking something. Foreclosures jumped 250% over last year. Less then 5% of people can afford a home using a regular loan and regular risk. Only couples with combined incomes can afford to buy a home now. Most spend an entire paycheck on the mortgage and the 2nd paycheck is spread thin. Lending standards are tightening up washing out buyers left and right. A huge percentage of job growth in san diego was in construction and real estate. Everyone and their brother has a realtor license now, its a joke. San Diego population has gone down over the last few years because people are moving to cheaper states. Wages including inflation are flat in san diego for years. With the buyer pool drying up at an alarming rate, interest rates up from the bottom, no more crazy ARM's with zero salary verification, who is left to buy? Right now we have a situation in a san diego where the home owners are putting a fantasy offer out there, and the bid has dropped out of site. They refuse to lower their offer price because it would hurt too much. As rates click up, and interest only loans reset, and ARMs reset, and those mortgage payments start hitting 4,5,6K a month, we'll start seeing more owners hitting the bid. The banks are also dropping foreclosures on the market which will drive prices down. 1 out of 10 homes for sale in san diego are bank owned foreclosuers! :eek: There is a shit storm brewing.
Just got back from NC......not as bad as Florida according to the locals ...BUT ...a lot of speculators with land are flooding the market.... saw an unbelievable thing last night on the way home...a bunch of signs leading up to a house with " MUST SELL TODAY"..MAKE ME AN OFFER....NO REASONABLE OFFER REFUSED..
maybe China, instead of buying Treasury bonds, they will buy American Real Estate. Then they can convert all of these silly McMansions into Bases for their Military.
SoCal February home sales in Southern California sank to a decade low for the month amid the broader housing slowdown while the region's median home price edged up to a new high largely on price gains in Los Angeles County, according to a report released on Wednesday. The median price paid for a home in the region rose to a record $495,000 in February, marking an increase of 2.1 percent from the prior month and 5.3 percent from a year earlier. --- Even with all the hoopla with sub prime, yoy prices in LA up and surrounding area. For the ones claiming its 1990's where unemployment led to a housing collapse, your right in part as its happening in the Midwest - Housing woes deepen in U.S. industrial heartland. Interesting tale of 2 markets.
median prices can move up if they are getting dataquick data. apparently dataquick records a foreclosure as a sale. Since the minimum bid is the the mortgages plus fees you can see that as foreclosures become a more significant part of the market prices might move up until the houses get resold as reo.
Houses cheaper than cars in Detroit By Kevin Krolicki Mon Mar 19, 11:48 AM ET DETROIT (Reuters) - With bidding stalled on some of the least desirable residences in Detroit's collapsing housing market, even the fast-talking auctioneer was feeling the stress. "Folks, the ground underneath the house goes with it. You do know that, right?" he offered. After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: "The lumber in the house is worth more than that!" As Detroit reels from job losses in the U.S. auto industry, the depressed city has emerged as a boomtown in one area: foreclosed property. It also stands as a case study in the economic pain from a housing bust as analysts consider whether a developing crisis in mortgages to high-risk borrowers will trigger a slowdown in the broader U.S. economy. The rising cost of mortgage financing for Detroit borrowers with weak credit has added to the downdraft from a slumping local economy to send home values plunging faster than many investors anticipated a few months ago. At a weekend sale of about 300 Detroit-area houses by Texas-based auction firm Hudson & Marshall, the mood was marked more by fear than greed. "These people are investors and they know the difficulty of finding financing. They know the difficulty of finding good tenants. They're cautious," said realtor Stanley Wegrzynowicz, who attended the auction. HOW LOW IS LOW? The city, which has lost more than half its population in the past 30 years and struggled with rising crime, failing schools and other social problems, largely missed out on the housing boom that swept much of the country in recent years. Prices have gained less than 2 percent per year in the five years since 2001, when the auto industry entered a renewed slump. Steve Izairi, 32, who re-financed his own house in suburban Dearborn and sold his restaurant to begin buying rental properties in Detroit two years, was concerned that houses he thought were bargains at $70,000 two years ago were now selling for just $35,000. At least 16 Detroit houses up for sale on Sunday sold for $30,000 or less. A boarded-up bungalow on the city's west side brought $1,300. A four-bedroom house near the original Motown recording studio sold for $7,000. "You can't buy a used car for that," said Izairi. "It's a gamble, and you have to wonder how low it's going to get." Detroit, where unemployment runs near 14 percent and a third of the population lives in poverty, leads the nation in new foreclosure filings, according to tracking service RealtyTrac. With large swaths of the city now abandoned, banks are reclaiming and reselling Detroit homes from buyers who can no longer afford payments at seven times the national rate. Michigan was the only state to see home prices fall in 2006. The national average price rose almost 6 percent but prices slipped 0.4 percent here, according to a federal study. The state's jobless rate of 7.1 percent in January was also the second highest in the nation, behind only Mississippi. HOW MUCH CAN YOU BUY FOR $1 MILLION? Mayor Kwame Kilpatrick was greeted with applause when he announced last week that two condominiums in the city's revitalizing downtown sold for over $1 million each. But investors, including some from out of state, proved far more cautious at Sunday's auction. In the most spirited bidding of the day, a sprawling, four-bedroom mansion from Detroit's boom days with an ornate stone entrance fetched just $135,000. Dave Webb, principal at Hudson & Marshall, said Michigan had become a "heavy volume" market for his auction firm in recent years, although bigger-money deals were waiting in California, a market he said was ready for the first such auctions of repossessed property in years. "These people that are buying have got to look at holding on for five to seven years," he said. "The key is holding power." Even with the steep discounts on Detroit-area properties, some buyers handed over their deposits with a wince. "I'm not sure it's congratulations," said Kirk Neal, a 55-year-old auto body shop worker who bought a ranch in the suburb of Oak Park for $34,000. "My wife is going to kill me." Realtor Ron Walraven had a three-bedroom house in the suburb of Bloomfield Hills that had listed for $525,000 sell for just $130,000 at the auction. "Once we've seen the last person leave Michigan, then I think we'll be able to say we've seen the bottom," he said.
thanks,good article. the prices of houses are cheap in detroit, but if there are no tenants or jobs what good are cheap houses? bgp
Don't worry, many areas will 'catch' up with Michigan - Ohio is already very close. Anyplace with a manufacturing heavy economy is being decimated: http://www.elitetrader.com/vb/showthread.php?s=&postid=1404011#post1404011