Update on Marin’s January, 2006 RE Median Sales Price Results

Hmm, let’s see… the Marin IJ said this today about Marin’s January, 2006 real estate results:

The median price was $867,000 last month, down from $900,000 in December but up from $850,000 in January 2005, according to DataQuick Information Systems of La Jolla.

This is what I see over at DataQuick for January, 2006 data:

And this from DataQuick for the December, 2005 data:


And let’s not forget what West Bay RE said:

The median price of single-family homes in Marin County also took a nose-dive in January, falling 8.6% from December to $877,500, and, gasp, down 5.7% from January 2005. This is the first year-over-year drop since June 2003. Also, it’s the first time the median price has been below $900,000 since December 2004.

The Marin Assessor’s Office has January, 2005’s median price at $785,233.

So let’s compare all of this:


So there you have it — Marin’s year-over-year real estate median price appreciated either a paltry 0.1% or 2% (either way a loss after taking inflation into account [real or otherwise]) or declined -5.7% depending on whose data you want to use and whether or not you want to throw condos into the mix (the Marin Assessor’s figure combines both SFRs and condos and I am guessing that the one for DataQuick also combines the two whereas the IJ and West Bay RE figures are presumably just SFHs). We will have to wait until who-knows-when for the data from the Marin Assessor’s Office.

It is interesting that the Marin IJ’s figures and those of West Bay RE’s, both of which presumably do not include condos, show such disparate results; the IJ’s is positive whereas the realtor’s is negative and the difference is nearly eight percentage points. I won’t speculate on what that might mean.

I will say this however, it sure would be nice if property sales data were made publicly available by a disinterested third party so that these analyses would not only be more straightforward to do, but could be done more easily and by anyone. As it is, the industry covets the data and only shares bits and pieces. The truth is out there and sooner or later we will know what it is.

I hope you found this useful.

Update: It is good to keep this in mind when thinking about where prices are ultimately headed:

“At some point we have to come to grips with the basic affordability question. This is not an affordable market,” said Stephen Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto. “I think prices could drop, and once these things start, they have a snowball effect.”

Levy, who estimates prices could drop by as much as 20 percent in the next couple of years, said rising interest rates are quashing the segment of buyers who can only get into the market using riskier, adjustable loans, such as interest-only mortgages. Such products are attractive because they usually carry lower initial monthly payments than traditional mortgages. But when principal payments come due, those payments jump — even more so if interest rates have risen.

“People chose to bet on future appreciation by choosing loans where they knew payments would go up by a lot — but they got in cheap,” Levy said. “There are no cheap loans now.”

Joe Cortright says that higher gas prices are hurting suburbs and places without strong urban cores

He writes:

…high gas prices are not only implicated in the bursting of the housing bubble, but that the higher cost of commuting has already re-shaped the landscape of real estate value between cities and suburbs. Housing values are falling fastest in distant suburban and exurban neighborhoods where affordability depended directly on cheap gas. In metro areas around the country, housing prices are down most on the fringe, while close-in neighborhoods are holding more of their value–or in several cases, still continuing to see price appreciation.
And the analysis also shows that those metropolitan areas with the strongest close-in neighborhoods–as measured by the core vitality index we developed in our 2006 City Vitals report–have weathered the housing collapse far better than other metros. House prices have performed best and foreclosures have been lower in those metropolitan areas with vibrant core neighborhoods.

Far from being a short term or transitory event, our view is that this shift in real estate market valuations implies a fundamentally different path for future urban development in the years ahead. As my colleague, CEO’s for Cities President Carol Coletta puts it, “In short, vibrant cities just became a whole lot more valuable.”

There are tremendous opportunities for the nation’s cities to build on this shift in value, promoting redevelopment, mixed uses, higher densities and better transit. These strategies will also play a key role in helping reduce energy demand (and the trade deficit) as well as putting us on a path to dealing with the challenge of global warming.

The paper has lots of interesting pictures relating location to changes in house prices. But I think a key policy question is whether “strong urban cores” can be created by design, or whether they are organic phenomena.

Renter News: Lowering GSE and FHA loan limits will lower house prices

During the housing bubble rally, the grass was greener and the light was brighter. At higher prices with boundless hope, we reached the dizzying heights of real estate wealth, a dreamworld of unlimited appreciation and personal spending power. Currently our housing market is completely supported…
Lowering GSE and FHA loan limits will lower house prices


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USA Today says College Students are Spending More–without getting more

Yesterday’s story is based on this report. The change is particularly pronounced at public universities, in part because cuts in state funding have required sharp increases in tuition.

I am personally conflicted about how much to subsidize students at State U. One of the things I loved about the University of Wisconsin when I taught there was that it provided access to a great education to anyone in Wisconsin who qualified academically. (when I began on the faculty in 1990, tuition was very inexpensive at about $2,000). Now in-state tuition there is about $7,000 per year. At this price, it is still a bargain, in the sense that it provides extraordinary value per dollar spent, but it has become sufficiently expensive that it turns some students away because of financial considerations. And this is a shame.

On the other hand, the life-time income of UW grads is, on average, much higher than the life-time income of Wisconsin taxpayers. It is reasonable to ask whether lower income people should be subsidizing higher income people. But on the other hand (again) the spillover benefits of having college graduates is large (see Ed Glaeser and others on this point). As I said, I am conflicted…

American Dream to Become a "Roach Motel Nightmare"?

I’ve written about the “reset problem” before and how, if for no other reason, it does make it “different this time”. Of course, other bloggers before me have also put the spotlight on this issue; the best discussion IMHO can be found at this blog where it is pointed out that the interest payment rates on about $360 billion worth of “exotic” loans will reset in 2006 and in 2007 it is roughly a staggering $1.2 trillion (that’s $1,200,000,000,000!). This article says it’s $330 billion in 2006 and just $1 trillion in 2007. And this one says it’s $2.5 trillion that will be resetting. What ever the exact amount turns out to be, if these 2007 figures are even close to being accurate, then I think it is going to be a complete “show stopper” if a way to lesson the shock of the reset is not found. And it has been pointed out before that going to 40 or 50 year mortgages will not have a significant effect on monthly mortgage payments as such terms only decrease the monthly payment by about $100 or so.

And remember, house sale prices are “set at the margin”. So all house owners who think they might want to sell within the next 10 or 15 years or so will feel the fallout of this reset problem.

This fun, made-up site isn’t too far from the truth.

Anyway, here is another article (‘Coming Home to Roost‘ By Jonathan R. Laing, February 13, 2006, Barron’s) that discusses the problem. Thanks to the reader who sent this in.

Some choice quotes:

THE RED-HOT U.S. HOUSING MARKET MAY be fast approaching its date with destiny. Indeed, inside the mortgage trade, much anxiety is being focused on a looming “reset problem.” Over the next two years, monthly payments on an estimated $600 billion of mortgages to borrowers with checkered or no credit histories — the “sub-prime” market — may zoom as much as 50% higher, as the two-year teaser rates on hybrid adjustable-rate loans expire and interest payments hit their fully indexed levels.

In the past, such resets caused little disruption. For one thing, the sub-prime market was strikingly smaller. Only $97 billion of such mortgages were originated in 1996, compared with a mammoth $628 billion last year and $540 billion in 2004, according to the trade publication Inside B&C Lending. Sub-prime loans outstanding now account for more than 10% of the total U.S. mortgage debt of $8.4 trillion. Moreover, the reset triggers on sub-prime mortgages have dramatically shortened, with the loosening in underwriting standards.

Surging property values in much of the country in the past four years helped bail out many sub-prime borrowers, letting them refinance their loans as painful resets loomed. Many borrowers not only refinanced old debt at attractive teaser rates, but also sucked additional equity out of their homes with cash-out refinancings, to pay off higher-rate credit-card debt. Meanwhile, delinquency rates and credit losses remained artificially low. A tapped-out borrower always could sell his home into a soaring real-estate market to pay off his mortgage debt and regroup.

But now the refi window may be closing for the sub-prime crowd. The Fed’s hikes in short-term interest rates have pushed up fully indexed ARM rates. At the same time, evidence is mounting that home-price appreciation is slowing or, in a few areas, reversing. And the secondary market in mortgage-backed securities, which provides some 90% of the liquidity in the sub-prime market, is starting to balk at the easy lending practices in this sector.

“The implication of all this is that many sub-prime borrowers who took out loans in recent years may not be able to refinance unless their income increases or interest rates drop significantly,” he [Xu] observes dryly. In other words, the American Dream of home ownership could turn into a Roach Motel nightmare.

Richard DeKaser, senior vice president and chief economist of Cleveland-based National City (ticker: NCC), has more than an academic interest in what’s happening in housing. National City is not only a top-10 originator and servicer of prime mortgages, but it also owns a major sub-prime lending concern, First Franklin. These days, his attention is riveted on National City’s quarterly survey “Home Prices in America.” As of 2005’s third quarter, the latest period for which data are available, it showed 38% of the U.S. housing market at an “extreme” overvaluation level of 30% or higher. The champ, or chump: Naples, Fla., where National City believes homes are 84% overvalued.

Experience in the 299 metropolitan areas covered in the survey shows that such levels of overvaluation are typically followed by price declines of about 15% that take an average of three years to unfold. If systemic and not merely localized, he asserts, any correction this time around could have nasty side-effects: “Individuals will suffer a wealth decline and spend less freely. Lenders will suffer elevated loans losses and credit conditions will tighten. Mortgage-backed securities will lose value and consumer confidence and home building will decline.”… “Thus, loss severities in key, overheated markets like California and New York could skyrocket by eight-to-10 fold even if home prices growth just moderates markedly rather goes negative.”

The Bottom Line

Cause or effect? Sub-prime mortgages have helped to push up home prices, which in turn have boosted sub-prime lending. This virtuous circle may be about to turn vicious.

Quoted in a Sacramento Bee article this weekend about the spring Sacramento real estate market…

I was quoted in a Sacramento Bee article by Tony Bizjak over the weekend about the local market conditions. True to the norm for this time of year, the Sacramento area real estate market is going nuts. It’s spring. And this is what predictably happens here every year. And in the hot (temperature) part of the summer, things will likely slow down a little, and that too will be normal and part of the predictable Sacramento real estate cycle.

In any market, the key is to be strategic.

If selling, how does the home present online and in person? If the property does not look amazing, buyers may not be as interested or willing to pay market value. Is it priced correctly and in line with comparable sales? If it is not priced correctly, you will miss your target buyer audience. Have you properly disclosed inspection reports, known material facts, and issues up front? Not disclosing potential issues up front before and during contract negotiation will be an engraved invitation for a renegotiation later. Are you realistic in your expectations? Most homes do not sell to the unicorn bay area buyer over-paying with all cash.

If buying, what are your short and long term goals? Are you rushing into things? Contemplate your options. The best decisions are usually not made impulsively. Are you comfortable with this monthly payment in the event of an economic issue? Don’t get in over your head. Are you doing enough due diligence and property investigation? Inspect, inspect, INSPECT. Please know what you are buying before you close the transaction. What are the comparable sales? Is the listing over or under priced? Look at comparable sales with your agent and make an appropriate offer whether that is below the listing price or above. Sorry, looking at Zillow doesn’t count. What does the seller need out of the transaction? Especially in competitive situations, tailor your offer to the seller’s needs – often, the right terms may be a win for the seller over highest price. Are you realistic in your expectations? I know your parents, favorite uncle, and BFF said to make a lowball offer because that is what they did 30 years ago or that’s what worked in Texas or what they saw on HGTV, but seriously that may be a total waste of your time.

USA Foreclosure: Reverse mortgages are a really, really bad idea

I have made mistakes in my life that made me want to go back in time and undo them. Sometimes you can, but sometimes you can’t go back and reverse the damage. Taking on a reverse mortgage is one mistake that is very difficult to undo. I don’t like reverse mortgages. I don’t…
Reverse mortgages are a really, really bad idea


Visit the OC Housing News, and read the OC Housing News blog. Learn why you should use a home guide. Meet the Akason Realty Consulting home guides and housing market analysts, and read our real estate agent testimonials. Discover why you should register with the OC Housing News and how to use the OC Housing News. Utilize the advanced property search, or the MLS map search.

See our special real estate offers: property search guide, housing market reports, home ownership cost guide, guide to rent or own decision, home financing guide, foreclosure 101, short sale guide, how to sell your home without a realtor, The Great Housing Bubble free PDF, 1.5% rebate on new home construction, no cost home sale program, and maximum impact real estate marketing.

Also read Renter News, SD Housing News, Housing Bubble News & Information, Housing Market Forecast US, Housing Market News & Information, Real Estate Ruin, USA Housing News, California Real Estate News, Housing Market News, USA Foreclosure News, Mortgage and Foreclosure News, Mortgage Refinance News, Real Estate Loan News, Debt Default News, Ponzi Debt, Loan Modification and Default News, Mortgage News Clips, and Fay Mortgage News.