Just when we think it’s getting better, the news comes out that we are in for a double-dip in housing prices. Last year in 2010 things were starting to look up in many municipalities as sales were brisk and housing prices were even starting to inch up again. This year, though, the situation has turned from hopeful to grim. Now it appears that the price increases of last year were mainly due to the home buyers’ housing credit extended by the U.S. Congress to buoy the market. Buoy it they did, but now we’re in for a let-down. In September of 2010 as the last of the home buyer credit buyers closed on their properties, housing started to slide. Of course, it’s natural for sales of homes to slide after Halloween and throughout the winter, especially in cold-weather states, but this year’s slide began earlier and lasted longer.
Compounding the problem was the “robo-signing” scandal which halted foreclosures for several months last fall. Regular sales and short sales continued to pile up as inventory on a stagnant market, then the banks resumed their foreclosures. Foreclosures hit at perhaps a more rapid rate as banks rushed to close out their books at the end of the year. Now, at the end of February, here in Southern California we have not only a huge inventory, but I would even characterize it as a glut of properties clogging up the market.
Another issue adding to the misery is the difficulty borrowers are having obtaining financing. After the bailout, as we all know, banks, instead of spreading the wealth around as was intended, instead simply stopped lending. Belatedly realizing their folly during the bubble years, banks, always ponderously slow and bureaucratic, finally reacted–by clamping down on lending! Too late, banks. It has been estimated that half the population now has bad credit due to the recession in one form another, either a short sale, foreclosure, bankruptcy, late payments on credit cards or, at a minimum, too much debt. Lenders now will not lend to these people
For an analysis of what the near future holds for lending, check out my Pasadena Short Sale Blog. Hint: it’s another downer.
All of these factors have played a part in the current housing glut and consequent stasis. The inevitable result will be–yet lower prices as banks, short sellers and those who must sell for one reason or another, all compete with one another for the few buyers out there. Already this year, analysts have indicated that the scant 2.25% gain in L.A. housing last year has been wiped out. Some experts are predicting that we are in for another dip of approximately 15%. I am not in the prognostication business, but I can say that it’s not looking good.
Already from 2006-2008 many cities in five states, California, Nevada, Arizona and Florida and Michigan, according to Federal Housing Finance Agency data, have lost significant value in housing. Starting with Stockton, which lost 75% of its housing value in those two years, the dreadful list continues with Modesto at negative 73%, Vallejo negative 64%, Salinas at negative 60%. These are horrible numbers. Imagine losing 75% of the value of your home in just two years through no fault of your own!
The roll of California cities continues with Riverside-San Berdo-Ontario tied with Bakersfield at negative 47%, Fresno at negative 45%, Sacramento area at 44%, Oxnard-Thousand Oaks at 41%, Santa-Barbara-Santa Maria-Goleta tied with Santa Rosa at negative 40%. The l ist goes on-Oakland area -38%, Santa Ana-Anaheim-Irvine -36%,LA-Long Beach-Glendale -32, San Luis Obispo-Paso Robles -29% and even Santa Cruz-Watsonville lost 29% in two years.
That just us. Of course, Vegas lost 54% of its value in those years and is still hemorrhaging. Reno-Sparks lost 41%; Phoenix-Mesa-Glendale was down 31% and is still falling. Then, like California only worse because it has a less diversified economy, is Florida which was and still is a disaster zone. Cape Coral-Fort Myers lost 60% of its value, followed by Naples-Marco Island at 54% negative, Ft. Lauderdale -45%, West Palm Beach-Boca Raton down 45% and on and on.
That was the story three years ago. Much as we would like to say it’s getting better, really, it’s not over yet.
Louis XIV of France, styled the Sun King, famously opined, “Apres moi, le deluge.” After me, the flood. He was right, of course, for his excesses so infuriated the people that his successor was guillotined and his monarchy overthrown in the French Revolution.
SoCal Plunge In Foreclosure Filings
Something similar seems to be brewing in Southern California and maybe even nationwide as lenders ratchet up their foreclosure filings after the “robo-signing” lull. Though foreclosures dropped dramatically in SoCal this fall, so, too, did all home sales. The reasons seem to be many: the end of the home buyer tax credit, stubbornly high unemployment and the generally still-moribund economy. In fact, sales are down a full 16% from November of 2009. This at the same time foreclosure filings fell 14% from the previous November after a 22% decline in October for a two-month total 36% decline. Nationwide, the filings fell 21%.
December is traditionally a slow month in real estate as consumers focus on retail buying, parties and holiday travel plans. Typically, though, also in December smart investors are out there snapping up last-minute bargains of the now-extremely motivated sellers still on the market. Competition is almost always much less, to put it mildly, and sellers are determined to close out their books for year’s end. This year seems to be different as even investors are holding back.
That may be because the huge drop in foreclosure filings this fall has ominous repercussions for home prices in the new year. With the foreclosure freeze over, informed observers now expect to see the banks ratchet up their foreclosures with a vengeance, restarting filings begun in October and November and barreling ahead with new ones in January. Executives from RealtyTrac, a real estate data collection firm, speculate that the housing recovery could be set back three months, if not more, as the foreclosures pile up. In fact, we can expect ” an avalanche” of foreclosures shortly.
SoCal Home Prices
The most immediate effect of an avalanche of foreclosed properties on the market will be to further depress prices in Southern California which had started a slight upward movement. Los Angeles County home prices had dropped 1.2% over November 2009 to a median of $325,000. Riverside and San Bernardino Counties, the hardest hit by the bursting of the real estate bubble, lost 2.5% and 5.0% respectively to medians of $195,000 and $152,000. But, that is a huge improvement over the 30% and 40% drops of previous years. Other SoCal counties actually gained in value. Orange County eked out a .6% improvement for a $435,000 median home price. San Diego topped the charts with a 3.1% improvement over last year to a median of $335,000 with Ventura County just behind at 2.7% uptick to a median of $375,000.
Future: More Underwater Homes
These hard-earned gains will soon be lost as the promised avalanche of foreclosures hits the market. Perhaps sales will pick up as buyers and investors are lured back into the game. But, bargain-hunting fun aside, another price drop for already distressed homeowners will plunge yet more homeowners underwater. That, in turn, spirals down into more foreclosures and more equity loss in future.
Like Louis XIV, banks see this as well as anyone, yet still refuse to modify loans in any serious way. Like Louis, they see, but, obviously, don’t give a damn as long as they get their bonuses. Short-term is the only term.
Sales in Southern California counties are slowing. While this is normal for this time of year as most of the population is occupied with holiday preparations and parties, the amount of real estate inventory continues to grow. The rise in inventory will, in turn, lead to a further decline in home values as home sellers, including banks, attempt to price their properties competitively.
This is the latest real estate info for Southern California counties. Compare to one month ago here. Time on the market is lengthening and prices are dropping–again…
Here’s the latest housing values news for many Southern California counties. Compare to one month ago.
Loan Mods Are Not Working
Despite high hopes and great fanfare, loan mods, it seems, are just not working. Various figures have been bandied about. At the beginning of December, Treasury Department officials determined that about 700,000 mortgage modifications were in process under the federal HAMP [Home Affordable Modification Program], announced in March 2009, but only about 31,000 had actually been made permament.
Those figures are dismal enough, but here’s the kicker–about 25% of homeowners who received mods have already fallen behind on their payments!
Banks Just Don’t Want To Do Loan Mods
Many excuses have been offered for these pathetic figures: paperwork gets lost, homeowners lose patience with the tedious process, the process is so long homeowners’ situations have changed drastically. Some blame the Obama administration. Here’s what I see.
No matter how much the Obama administration admonishes banks to do these mods, the banks are clearly dragging their feet. Good old B of A, for instance, claims 158,000 trial mods, but only 98 have been made permanent. In a year! Then, there’s JP Morgan. It approved 16,000 loan mods in a year, but says it’s a “struggle” to make them permanent because only half of those who have completed the 3-month trial program had completed all the paperwork, read financial statements.
Banks Make the Process Tedious
There’s the real issue…Banks require a ton of paperwork, far more and far more complex than most homeowners have either the time or the capacity to supply. It’s a huge job. I know because I have helped many homeowners complete it. As with everything else, the banks take forever to process the paperwork, yes, often losing it and requesting replacements or updates, drawing out the time frame to 6,7, or 9 months before even a 3-month trial period begins. In the meantime, the homeowner who often waited until he was up against it to even apply for the mod is supposed to continue making the regular payment.
Homeowners Must Qualify
Oh, and did I mention, that losing a job or having hours cut back may eliminate the chance to even get a mod. Why? Because although homeowners focus on the hardship, banks focus on the income. If you want a loan mod, you had better have sufficient income. How much is enough? Good question? The problem is the answer changes from month to month and bank to bank. But, here’s the bottom line: if you have real financial hardship, you probably won’t get a loan mod.
So far, I haven’t seen any official statistics on what amount of relief the loan mods already processed have actually offered to the homeowners. One survey says $640 a month or 40% reduction. If that’s true, not bad. Unfortunately, I don’t think it’s accurate. The ones that I have seen offer much less and usually require a several thousand dollar payment to get into the trial period.
Loan Balance Reduction Is a Dream
What is most significant to the homeowner and why most start this tedious loan mod process is to obtain a loan balance reduction. In my experience, that is completely fanciful. None that I have seen include a principal reduction, though many I meet claim to know someone else who got one. I’ve never met one of these mythical creatures.
Think about it: prices around here have dropped 40% or more in the last 2 years. How do you feel about paying your $600,000 mortgage when similar homes in your area are now selling for $300,000? Yet, the banks are not offering these homeowners struggling to make their payments any reduction in their principal balance. Extending the loan to 40 years, yes–but no reduction in loan balance.
What’s the answer? Try doing the loan mod if you are willing to put in the time and effort involved. At the same time, though, I recommend attempting a loan restructuring. Next post will explain the process.
Say it ain’t so!! Sorry, but all those rumors that home values are finally rising again are just silly rumors. Values are slipping less than before, but, countrywide, values continue to decline by about 1/2% per month. As always, location is terrifically important. It matters greatly where your home is located or where you want to buy. Some areas are tanking while others are increasing slightly.
So, which is which? Do we want the good news or the bad news first? Let’s mix it up a bit. S0me local areas that continue to sink in value include Pomona down around 10% in all ZIPs to around a median of $200,000. El Monte took a pretty big hit dropping about 18% to a median of around $250,000 in all ZIPs. Remember the Station fire? Buyers apparently do as La Canada Flintridge values are down 27% to a median of $876,000. La Puente which has already lost huge value has sunk to a median of about $250,000 across all ZIPs. Trendy during the boom, both Highland Park, Eagle Rock are down substantially [18% and 32% respectively, to medians of $286,000 and $365,000].
So, is there any good news? Well, yes, some local areas are doing quite well, thank you very much. Glendora has slipped less than the county average to a median of $378,000 in 91740 down 2% while 91741 is down almost 7% to $470,000. LaVerne is down 4%, less than the county average to a median of $420,000, though San Dimas has sunk 25% to a median of $378,000. Covina dropped by about the county average across its ZIPs to about $330,000.
But, there are a few standouts. Altadena has posted a healthy 23% gain over last year to a median of $517,000. Alhambra in 91801 and Monrovia are up by about 1% to a median of $549,000 and $490,000 respectively. Alhambra’s other ZIP is down about 1% to $426,000. But, buyers are also flocking to Arcadia, up 8.5% to $807,000 and up 17% to $970000 in 91007.
Then, there’s Pasadena also a winner overall. This is where buyers seem to want to live and they are driving up the prices. 91103 is up 5% to $405000, 91104 and 91107 are up by whopping 23% and 26% to medians of $550,000 and $670,000, 91106 is up 1% to a median of about $1.1 mil–not bad! 91105 is the only Pasadena loser, down by a substantial 28% to $675,000.
What about trends? Any new trends across the county? It’s a bit early to say, but it looks as though more pricey areas, especially at the beach are starting to lose value. Palos Verdes is down 44% to a median $1.17 mil along with Rancho Palos Verde down 20% to $850,000. Manhattan Beach is down slightly to a median $1.139 mil. Malibu is down 36% to a median of $1.363 mil.
Why might this be happening? Rich folks may be different from you and me, but they can count pretty well. Being underwater by $200,000, $300,000 orn $400,000 just doesn’t make economic sense even if you can afford the payments. Better to just walk on by, and that’s what many wealthy home owners are now doing. My big prediction? More will do the same in 2010 as prices continue to decline. Buyers today, rich or moderate income, are all interested in only one thing: value for their money. Pasadena appears to offer that–at least for the time being–while Malibu does not.
Home prices in the greater SoCal region continue to decline, though the declines are slowing. Finally! Some counties are hit harder than others, of course, with San Bernardino and Riverside leading the way as they have throughout this ordeal. The good news is that home sales of these now-bargain homes are increasing during these spring months, traditionally the most active of the year.
So, let’s see, what’s the bad news in San Bernardino? It’s a massive 45% decline to median $135,000 over last April when prices had already been plummeting for six months. Some San Bernardino City ZIP codes are down over 60%, approaching 70% in one year. This is truly horrendous for the homeowners involved. In the six San Bernardino City ZIPs, only one median value is above $100,000 [$123,000 in 92407]. Other hard-hit areas include the high desert cities of Hesperia [down 53% to $89,000 in 92345], Lucerne Valley [down 62% to median $67,000], Apple Valley [down 50% to $100,000 in 92308], Victorville [down 58% in 92395 to $84,000 median, both others down 48% to just over $110,000 median] and Barstow [down 68% to $48,000 median]. These prices are so low, they are undoubtedly below replacement costs in many areas, clearly unsustainable.
Down in the basin, other San Bernardino County cities are also devastated. Fontana is down 50% in 92335 to a median of $127,000, though its other ZIPs are not so hard hit [92336 down 23% to $262,000 and 92337 down 27% to median $192,000. Rialto is down 45% to a median of $116,000 in one ZIP and down 28% to $195,000 in the other.
A few cities have escaped the worst, so far at least. Upland, an upscale suburb close to L. A. County is down around 23% to a median of $434,000 in 91784 and $270,000 in 91786. Chino Hills, another upscale community, is down 14% to median $400,000 while Chino is down 30% to a median $301,000. The City of Ontario is down about 35% overall to a median of about $200,000.
And, what of pricey Orange County, what has happened there? As expected, the devastation there is less with a countywide drop of 23% to a median $430,000 since last April. In fact, many cities in Orange County have done much better than that. Most of the beach cities either didn’t have enough sales to count or did fairly well. Capistrano Beach with a few sales is up significantly.Huntington Beach stayed the same as last year in 92646 [median $580,000] and lost 13% in 92647 [median $450,000]. San Juan Capistrano is up 8% to a median $527,000 while, perhaps surprisingly, Laguna Beach is down 31% to a median $1,160,000, still pretty pricey by our new standards. Newport Beach, too, lost value [79% down in 92661, 59% down in 92663 and 47% down in Newport Coast] but all ZIPs maintain medians well over a million.
So, what cities did reasonably well? Irvine, for one, the family-friendly city either stayed the same of slipped considerably less than the county median but in all ZIPs values are over $600,000..these days–not too shabby. Laguna Hills jumped up 28% to a median of $655,000. In general, the drop in values has hit Orange County, but the strike is much less severe than to its neighbors Riverside, San Bernardino and even L.A. County.
Santa Barbara, devastated by fires in the last six months, has also lost 24% of its home values county-wide. Interior cities like Buelleton [down 39% to $440,00], Guadalupe [down 33% to $120,000], Santa Ynez [down 53% to a median $551,000 with very few sales counted] and Santa Maria. Summerland is actually up 10% to $1,375,000 and most of Santa Barbara city is down as well, though its lowest median is $540,000  while 93103 is up 60% to a median of $1.5 million and 93110 is up 15% to just over $1 mil. 93108 still maintains a median $2.4 mil despite a 16% drop in value.
As we have noted previously, more expensive homes have not really suffered the tremendous drops mainly because more affluent home owners can hang on longer and do not put their homes on the market. As time marches on, however, this will change and even more expensive homes will come on the market, including as foreclosures and short sales, forcing prices lower.
Think things are getting better? Not really…at least not in the housing market. The good part is that homes are actually selling. The bad part for homeowners is that prices continue to slide.
Median home prices in L.A. County–remember it’s one of the biggest, if not THE biggest county in the entire country–are down 26% from May 2007 to $435,000.
Some parts of the county are far below that–Palmdale, down a whopping 46% to a median of $170,000, La Canada/Flintridge down 36% to a measley $905,000 median, Maywood down 45% to $286,000. There are others, of course, but the outlying areas are hardest hit, followed by working-class cities where folks are the first to feel the effects of a recession in job loss.
Of course, our government continues to tell us we’re not in recession with facts and figures to prove it. For most of us out here in the trenches, it sure feels like a recession.
What about the San Gabriel Valley? How are we doing? For the most part, we are doing better than average. Azusa is down 26% to a median of $334,000. That’s an average percentage drop for the country and Azusa’s median price was always lower. Baldwin Park, LaPuente, Pomona and El Monte are all down more than average [30%, 28%,28%, 34% respectively]. The new medians in those cities are $311,000; $315,000; $295,000; $307,000. All are lower than the county median and always were. Again, these are lower-income communities where the recession will hit first. The foreclosure crisis is hitting here hardest as well.
Then, what about the rest of the San Gabriel Valley? Well, the rest is mostly better than the county average, though home prices are still considerably lower than last year. Covina in all ZIPs is down about 20% to around $400,000. Glendora in 91740 is down 20% to $390,000 while 91741 is down 16% to $496,000. Most Pasadena ZIPs are down. Diamond Bar is down 17% to $557,000.
In some of the better news, some cities are down by far less than the county average. Claremont is down, but only by 13% to $485,000. San Dimas is down 15% to $434,000 and LaVerne is down 14% to $527,000. The shifts from month to month are mainly due to the number of homes sold. And which homes are sold. More and more now, only the lowest-priced homes are selling quickly or the highest-priced homes which are, nevertheless, priced considerably less than last year.
East L.A. County even has a couple of success stories. San Marino continues to do well, rising 15% over last year to a median of $1,800,000. Pasadena’s prestigious 91105 is up 16% to $1,800,000 and 91106 is up 18.5% to $736,000. Well done, Pasadena! Whittier is down in all ZIPs, except 90601 which is up 6% to $491,000.
What does this good news say? To me, it says that buyers are just waiting to snap up bargains, even to the point of driving prices up to get into desirable neighborhoods. The proof is in the rest of L.A. County where other areas are also increasing in value–Rancho Palos Verdes, Palos Verdes Peninsula, Bel-Air, Venice, though areas perceived as over-priced are still losing–Brentwood, Beverly Hills, most of Santa Monica, Malibu...
Values are shifting. Buyers are selecting bargains and leaving the rest.
The lesson? If you’re a buyer, now’s a good time to buy, particularly as mentioned in a previous post, mortgage rates are starting to rise. For homeowners who are happy in their homes–please ignore this and just continue to live there. Prices will rise again in a few years. If you do want to sell, though, you must price your property appropriately or it will never sell.