Bay Area housing market reflects different rebounds
Posted: 07/10/2011 07:10:10 AM PDT
Updated: 07/10/2011 08:15:07 AM PD
Bay Area cities are rebounding from the housing crash in wildly different ways, confirming the adage that the three most important rules for home buying are location, location, location.
Many affluent cities are nearing the stratospheric prices reached during the housing bubble, but others, primarily middle-income and working class, are far from recovering from the depths of the crash.
That disparity can be seen even in communities next door to one another. East Palo Alto's median home price is $246,000 in the current quarter, down 62 percent from $650,000 in the second quarter of 2007. But just across 101, leafy Palo Alto, home to many high-tech companies and entrepreneurs, has a median house price of $1.4 million, just 12 percent below the peak reached in 2008.
Of course, the higher-priced communities never dropped as sharply as cities hit hard by subprime lending and foreclosures, so they have had an easier time recovering. In general, affluent areas today are about 20 percent off their highs reached since 2007, while middle- and lower-income areas are 50 percent or more below the highs, an analysis of quarterly median home prices shows.
The home price data was prepared at the request of this newspaper by DataQuick, a real estate information service. The company compiled quarterly median prices for single-family resale homes in 74 Bay Area cities, with a preliminary figure for the second quarter of this year. The analysis shows how home prices have fared since 2007, the peak year for the Bay Area housing market, and it compares current prices with their high and low points since then.
For many cities, the current levels may be the new normal.
"I think most areas have corrected to affordable levels," said Sean O'Toole of ForeclosureRadar, a real estate distressed property tracking service. Other cities are benefiting from a boom in social media and technology -- and their high incomes -- which has led to a shortage of quality housing in those areas, he said.
But in areas where prices have declined sharply, thousands of Bay Area homeowners appear to be stuck in homes that won't return to their purchase price for years. For them, the venerable practice of trading up to a more expensive home is at best a dream deferred.
"The trade-up buyers are scarce," said Colleen Badagliacco, co-founder of Altera Real Estate in San Jose. "They've lost equity. You used to buy up in a down market because maybe the financing was easier, and now the financing isn't easier and the classic person may not have the equity to move up."
In nine cities, home prices are still at their post-bubble low points or have just hit them. Union City, for example, is a victim of a small double-dip in housing prices, with a median price this quarter of $390,000, the market's lowest point since 2007.
Mountain View, the site of Google (GOOG) and other tech powerhouses, has held its own as well as any Bay Area city, with a $950,000 median home price that's only 9 percent below its peak.
In San Jose, investors paying cash are still driving the low end of the market, buying properties near the median price of about $471,000, Badagliacco said.
Investors buying distressed properties account for as much as a third of the sales in many of the hardest-hit communities, where easy-to-obtain mortgages boosted home buying and inflated prices, only to be followed by a wave of foreclosures as the new homeowners lost jobs, or saw their interest rates reset to payments that were beyond their means.
"Cash investors aren't going to pay $700,000 for a house," Badagliacco said. "I'm hearing that people can buy a foreclosed condo for $150,000 to $200,000, rent it out for $800 to $1,000 a month and get a decent return. That will always moderate prices."
The housing crunch left no city unscathed, the analysis shows.
Two big cities with a more diverse mix of housing -- San Francisco and San Jose -- land somewhere in the middle of the ongoing recovery. San Francisco, with a median price this quarter of $799,000, is about 22 percent below its 2007 median home price of $870,000, and San Jose's second quarter median price is 36 percent below its peak of $700,000 at the beginning of 2007.
"Every sector has been hit with a drop from 2007 prices. It's just how much," said Rick Turley, president of Coldwell Banker Residential Brokerage of the Bay Area.
In the East Bay, prices are recovering at a better rate in cities such as Orinda, San Ramon and Lafayette that historically have higher home prices.
"They will have declined the least. It's really that simple," Turley said.
"Higher-priced communities to start with had fewer marginal buyers, and fewer people took out resetting adjustable loans," he said. "And fewer people have been affected by the overall economic downturn."
But Antioch, Pittsburg and Richmond, cities that were considered more affordable, are struggling to get back to where prices were four years ago.
"There were more marginal borrowers with less of a down payment," Turley said. "So what you are seeing now is many more distressed sales."
That has hit some communities harder than others.
"Some of the areas have had a lot more impact from foreclosures," said Peter McDowell, a real estate agent in the Pleasanton office of J. Rockcliff Realtors, an East Bay brokerage.
Brentwood and Antioch are struggling because they're not close to jobs and don't have the draw of good schools like some wealthy areas.
"A lot of those areas did not have the fundamentals to support prices" once the housing boom was over, he said. People who bought at high prices just to get in on the rising market are having trouble selling now because the commute to jobs is so long.
It's a tale of two cities in some cases. In Berkeley, $662,500 was the median price paid for a single-family house in the second quarter of this year. That's about 23 percent below where it was in early 2007. In Oakland, the median price was $238,000 -- a sobering 62 percent drop from the third quarter of 2007. Both communities, however, are well above their low points, which were reached in 2009.
"Oakland is a hard-hit community. They had lower prices to start with and they had more marginal borrowers" than Berkeley, Turley said.
In Walnut Creek, the median stood at $685,000, down 22 percent from the median price of $880,000 reached in 2007. Next door in Concord, the median price was $275,000, almost 50 percent below the $545,000 median price reached in the first quarter of 2007.
"A lot of people who probably should have been renters were sucked into risky loans that would come back to haunt them if prices didn't keep going up, and bought more house than they could ultimately afford," said Andrew LePage of DataQuick.
Phoenix [Arizona] Housing Market Rebounds in May
One of the most troubled U.S. housing markets saw a sharp increase in home sales in May. More than half of the buyers of Phoenix homes were absentee investors, likely attracted to aggressive discounts on distressed or bank-owned properties, which accounted for more than 64% of sales. Although May’s home sales are good news and even the number of foreclosures also dropped for the month, analysts note that new-home sales remained low as construction prices rise and people search for bargains. For more on this continue reading the following article from The Street.
Phoenix-area home sales rose in May, when resales of single-family houses hit the highest level for that month in six years amid near-record levels of investor purchases.
The region's median price remained at essentially the same level at $120,000 that it's been at the past six months as distressed property sales continued to account for around two-thirds of the resale market. The median price dropped sharply from a year earlier, however, as the number of homes selling below $100,000 shot up nearly 41 percent year-over-year, a real estate information service reported.
A total of 9,837 new and resale houses and condos closed escrow during May in the combined Maricopa-Pinal counties metro area. That was up 0.8 percent from the month before and up 4.9 percent from a year earlier, according to San Diego-based DataQuick, which tracks real estate trends nationally via public property records.
On average, Phoenix-area sales have risen 5.2 percent between April and May since 1994, when DataQuick's complete Phoenix region statistics begin.
May's total sales were the highest since 2007, when 10,112 homes sold, and were 8.6 percent short of the average number of May sales since 1994. However, the number of existing resale single-family detached houses that sold in May was the highest for that month since 2005, while resales of condos were the highest for a May since 2006. The new-home market remained troubled, however, with sales at the lowest level for a May in 14 years.
Sub-$100,000 home sales, which rose 40.8 percent from a year earlier, represented 39.7 percent of all May transactions, compared with 28.8 percent a year earlier.
In May, buyers paid a median $120,000 for all new and resale houses and condos that closed escrow in the two-county Phoenix area. That was the same as the month before but down 13.7 percent from a year earlier. The median has fallen year over year for 11 consecutive months.
The May median was 14.2 percent below the highest median recorded over the past year --$139,900 last June -- and it stood 54.6 percent lower than the all-time peak of $264,100 in June 2006. For the past six months the median has vacillated between $119,000 and $120,000 -- the lowest levels since late 1998. This reflects several factors, including recent home price erosion; the high numbers of investors, who target lower-cost homes, especially foreclosures; and an unusually low percentage of new-home sales coupled with an above-average share of existing (not new) condo sales.
In May 6.8 percent of sales were new homes, which on average are more expensive than other home types, compared with 10.1 percent a year ago and a 10-year monthly average of 26 percent of sales. Resale condos, which tend to be the most affordable home type, made up 12.6 percent of May's transactions, compared with 10.7 percent a year ago and a 10-year monthly average of 10.0 percent.
Absentee buyers, who are mainly investors, purchased 45.3 percent of all Phoenix-area homes sold in May, down from 46.3 percent in April and a record 47.1 percent in March, but up from 37.8 percent a year earlier. Absentee buyers, who paid a median $101,000 in May, can include second-home purchasers and others who indicate at the time of sale that the property tax bill will go to a different address.
Cash buyers represented 42.0 percent of all sales in May, down from 44.5 percent in April and a record 48.0 percent in February, but up from 34.4 percent a year ago. May's cash buyers paid a median $90,000, down from $91,900 in April and $112,9500 a year ago. Specifically, these were transactions where there was no indication of a purchase loan recorded at the time of sale. Some of these "cash" buyers could have used alternative financing arrangements outside of a typical, recorded purchase mortgage , and in some cases they might take out mortgages after their purchases.
Foreign buyers purchased roughly 6 percent of the Phoenix-area homes sold in May, based on a review of public property records where foreign addresses were available. Of the foreign buyers that could be identified, about 93 percent were from Canada. Australia was the next-most-common country, representing about 3 percent of the buyers with a foreign address. Foreign buyers paid a median $115,000 for resale houses, $95,400 for condos and $146,103 for newly built homes.
U.S. buyers from outside of Arizona bought nearly 20 percent of all homes sold in the Phoenix area in May, and represented about 46 percent of all absentee purchases. Buyers from California represented the largest out-of-state buyer group, accounting for 8.9 percent of all absentee buyers and nearly 20 percent of the out-of-state absentee buyers.
In May, distressed property sales - the combination of sales of foreclosed homes and "short sales" - edged higher, to more than 64 percent of the resale market.
Foreclosure resales, defined as homes that had been foreclosed on in the prior 12 months, represented 50.8 percent of May resales. That was up from 50.6 percent in April and 50.0 percent a year earlier. The peak level for foreclosure resales was 66.2 percent in March 2009. Short sales, transactions where the sale price fell short of what was owed on the property, made up an estimated 13.7 percent of Phoenix-area resales in May. That was up from an estimated 12.4 percent in April but down from 14.9 percent a year earlier. Two years ago the estimate was 8.1 percent.
Foreclosures fell month-to-month. Lenders foreclosed on 4.832 house and condo units in the two-county Phoenix area during May, down 8.5 percent from April but up 5.6 percent from a year earlier. During the first five months of this year, 27,112 homes were foreclosed on, up 7.0 percent from the same period last year. The foreclosure figures are based on the number of trustees deeds filed with county recorder offices. The document signals that a home was lost to foreclosure.
This article was republished with permission from The Street.
New Program to Help Home Owners Has Great Benefits, But Tough Rules
If you’re having trouble making your mortgage payment, there are a billion reasons to check out the latest federal government mortgage assistance program. The U.S. Department of Housing and Urban Development’s Emergency Homeowners Loan Program, now running in 27 states and Puerto Rico, will dole out $1 billion in interest-free loans to about 30,000 home owners who are unemployed, under-employed, or suffering financially due to a medical crisis.
It’s a federal program, so of course there’s paperwork. And you only have until July 22, 2011 to get it filled out and over to one of the counseling agencies helping to run the program. Call 855-346-3345 for information about participating agencies in your area.
You’ll know by Oct. 1 if you’ve been approved for EHLP because the money has to be obligated before the federal government’s fiscal year ends on Sept. 30th.
The toughest thing about the program may be the eligibility rules. If you want to be approved for EHLP, you can’t:
»» Have federal tax liens;
»» Have past-due student loans (deferments and forbearance are OK);
»» Have more than one 60-day late mortgage payment in the past two years;
»» Be in bankruptcy;
»» Have family income of more than $75,000 or 120% of the area median income;
Then there are things you must have to get into EHLP:
»» Be a minimum of three months late on your mortgage payment.
»» Income that’s at least 15% less than what you were earning in 2009.
»» The ability to make your full mortgage payment again in two years, because you’re likely to be working or have another source of income again by then.
That last requirement will be hard for HUD to prove; it’ll likely be up to an underwriter to decide who qualifies.
But if you can meet those requirements (as well as a bunch more that the credit counselors running the program will tell you about), EHLP is a sweet deal.
You have to agree to pay 31% of your family’s monthly income toward the mortgage payment (minimum payment is $150). The federal government loans you the money to pay the rest of your mortgage payment.
You can keep getting that subsidy for two years, or until you’ve borrowed $50,000.
The best part is that if you make your mortgage payments on time, the government forgives 20% of the EHLP loan every year. So in five years, your loan is completely forgiven.
If you think there’s even the slightest possibility you’d qualify for the program, you should go for it. You’ve got nothing to lose and a lot of mortgage payment help to gain.
0 comments:
Post a Comment