San Diego Real Estate Viewpoint

San Diego County home prices take a tumble

SignOnSanDiego.com > News > Business -- San Diego County home prices take a tumble: "By Roger M. Showley
UNION-TRIBUNE STAFF WRITER
11:45 a.m. June 13, 2006
SAN DIEGO – San Diego County's home prices took their biggest tumble for any spring on record last month, DataQuick Information Systems reported Tuesday.
The median price of all homes sold in May was $490,000, down $15,000 from April, although it was still slightly higher than a year ago.
Snapshot: Home/condo sales May '05– May '06

Sales slowed for the 23rd straight month on a year-over-year basis, reaching 4,217 transactions in new and existing homes and condos.
Local real estate agents reported about seven months' worth of unsold inventory, but argued that the pace of activity reflects a normal market rather than a crash. "

Global property cycle's peaked, Morgan Stanley says - MarketWatch

Global property cycle's peaked, Morgan Stanley says - MarketWatch: "Growing evidence of real-estate 'bust'
Fallout for consumers and corporate profits, eonomist says
E-mail | Print | | Disable live quotes By Chris Oliver, MarketWatch
Last Update: 6:47 AM ET Jun 29, 2006

HONG KONG (MarketWatch) -- Evidence is mounting that the global property cycle is turning down, as rising interest rates and heightened inflationary pressures combine to put the brakes on demand for real estate, according to a Morgan Stanley report.
The shift ushers in an end to what's been a six-year rally during which the twin forces of globalization and financial innovation fed an upturn in the property cycle that became a worldwide phenomenon, said economist Andy Xie, in an Asia Pacific strategy report released Thursday.
'Due to deflation shocks, global inflation has been low, which allowed major central banks to keep interest rates very low, in turn fueling property,' Xie said. 'As inflation picks up simultaneously around the world, interest rates are rising everywhere, and the property boom is turning into a bust.'

Interest Rates Move Up!

The chart below shows how Mortgage Bond prices have been progressively worsening, which in turn means home loan rates have been rising. But you can see how they are now hitting a tough technical "floor" of support that may help them gain some ground higher and bring improvement to home loan rates. Because Bonds tend to rise in price when negative economic news hits, the heavy news week ahead will provide some opportunity for that to happen.

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Payment Shock in Store For ARM Borrowers, More Foreclosures in Future? - NationalRealtyNews.com

Payment Shock in Store For ARM Borrowers, More Foreclosures in Future? - NationalRealtyNews.com: "Payment Shock in Store For ARM Borrowers, More Foreclosures in Future?
Thursday, June 22, 2006 - By Staff Writer, National Realty News

STUART, FL - Many borrowers who mortgaged their homes with adjustable rate mortgages while rates were at historic lows will soon be in store for a payment shock and the economy overall will certainly feel the effects. Some experts say prepare for a rise in delinquency rates and foreclosures.

Bankrate.com reports that over the next 18 months, more than $1 trillion of adjustable-rate mortgages will be hitting their first reset date. Assuming the average loan amount is $200,000, that amounts to 500,000 mortgages. The typical homeowner will be forced to seriously readjust their monthly budget when they go from paying on an interest only loan or a loan with a low starting rate to one that now requires playing catch up on the principal. Many borrowers will simply not be prepared for a sudden change that may require them to pay double more than they paid the previous month for their mortgage. Industry experts say this will fuel another year of increases in mortgage delinquency rates and foreclosures.

The effects will be evident in the economy overall, as well. That consumer who is suddenly paying more for their mortgage - and who is already feeling the heat due to high fuel prices - is most likely forced to cut back on spending money elsewhere - especially for consumer products and services. "
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BUILDER CONFIDENCE FALLS TO LOWEST POINT SINCE APRIL 1995

The confidence level of the nation's home builders continues to decline in 2006, falling this month to its lowest reading since April 1995, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The seasonally adjusted HMI stands at 42, down four points from May's revised reading of 46. An HMI above 50 indicates that more builders view sales conditions as good versus poor. According to NAHB, declining demand from investors, rising mortgage interest rates, and continued affordability issues all contributed to the decrease in builders' outlook for the new home market.

All three HMI components declined in June. The component measuring sales expectations declined five points to 50, while the components gauging current single-family sales and buyer traffic decreased to 47 and 29, respectively. Home builder confidence edged down across the nation in June, and in the West builder confidence declined one point to a seasonally adjusted HMI of 61.
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Smart money is leaving the real estate market

Rockford's Newspaper Rock River Times | rockford illinois news information: "Dr. Christopher Thornberg, a member of the forecast staff, told a blog called The Housing Panic: “Actually, what we are seeing is a very typical slowdown in the market so far—there is nothing particularly soft about it (the landing in bubble markets). The claim is that because unit sales are falling but prices are still going up, that this is an unusual slowing. The fact is that most breaking markets start with activity, and it takes three to four quarters for that to take all the wind out of price appreciation. How hard it will be, remains to be seen.”"
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CA Foreclosures way UP!

Foreclosures Continue to Rise in Southern California, Says Default Research: "Real estate bubble continues to deflate in Southern California, expert says

RISMEDIA, June 20, 2006—The number of foreclosures escalated throughout Southern California, with a rise of 29.09% since January 2006, according to Default Research (www.defaultresearch.com), the rapidly growing real estate research company for foreclosure properties.

While Riverside had the highest increase of 56.45%, San Diego County had an increase of 49%, followed by Los Angeles up 16.2%.
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Inflation Outlook Likely to Push Rates Still Higher

Inflation Outlook Likely to Push Rates Still Higher
Wednesday, June 14, 2006 - By Staff Writer, The Originator Times
Click to Review

STUART, FL – Mortgage professionals everywhere have been wondering if interest rates will continue to rise and whether the Fed will hike short-term rates for the 17th consecutive time on June 29.
Looking at this week’s key economic briefings and results, all signs points to yes. The Fed will likely increase short-term rates by a quarter of a point. Anticipating this action, the bond market is apt to similarly push long-term mortgage rates higher. "
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Bubble Trouble? What to make of all the real estate trend news

Bubble Trouble? What to make of all the real estate trend news: "On a basic level, the real estate experts can't really quibble about the basic facts: Many once-hot markets are showing signs of a cold front this summer. The Federal Reserve Board is expected to raise interest rates again to ward off inflation, and banks have begun to curb their promiscuous dispensing of risky, low-down loans. These factors will contribute to making real estate less appealing to many investors. Sure, people still need to live in houses, but the people who need to pour extra dollars somewhere may take a breather from speculative acrobatics to search for other investment circuses. (Can you say 'oil futures' three times fast?) "
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DQNews - California Press Release

DQNews - California Press Release: "California April Home Sales
May 2006
A total of 47,250 new and resale houses and condos were sold statewide last month. That's down 13.3 percent from 54,500 for March and down 22.4 percent from a revised 60,900 for April 2005. Last year's April was the strongest April in DataQuick's statistics, which go back to 1988.
The median price paid for a home last month was $468,000. That was down 0.4 percent from a revised $470,000 for March, a record, and up 10.4 percent from $424,000 for April a year ago. California April Home Sales
May 18, 2006
A total of 47,250 new and resale houses and condos were sold statewide last month. That's down 13.3 percent from 54,500 for March and down 22.4 percent from a revised 60,900 for April 2005. Last year's April was the strongest April in DataQuick's statistics, which go back to 1988.
The median price paid for a home last month was $468,000. That was down 0.4 percent from a revised $470,000 for March, a record, and up 10.4 percent from $424,000 for April a year ago. "
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Cooling Housing Mkt. - Fed Chief

Housing Cool-Down Is 'Orderly,' Fed Chief Says: "Housing Cool-Down Is 'Orderly,' Fed Chief SaysBy Tomoeh Murakami TseWashington Post Staff WriterFriday, May 19, 2006; Page D01Confirming what home buyers suspected and real estate sales figures have indicated for months, Federal Reserve Chairman Ben S. Bernanke said yesterday that the U.S. housing market was showing clear signs of cooling off.

Bernanke said the slowdown is 'moderate' and 'orderly' and pointed to the overall strength of the economy

Economist Dean Baker of the Center for Economic Policy and Research expressed concern that rising interest rates were squeezing homeowners who took out interest-only and adjustable-rate mortgages. Even when interest rates were at historically low levels, Baker said, stretched buyers were taking out exotic loans to get into pricey homes.

Baker said a rising inventory of homes in the Washington region could fuel a double-digit price decline if interest rates climb higher. Condo prices could fall by as much as 30 percent, and prices of single-family homes could drop by as much as 15 percent, he said.
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Inside Bay Area - Bay Area real estate sales hit 5-year low

Inside Bay Area - Bay Area real estate sales hit 5-year low: "Bay Area real estate sales hit 5-year low
By Eve Mitchell, BUSINESS WRITER

Sundays — the days when many real estate professionals set up open houses — have been a lot quieter lately for Daniel Joe, a Redwood City-based Realtor.
Call it one of the hidden signs of the slowing real estate market, which last month saw the lowest level of Bay Area home sales in five years, according to a report Thursday from DataQuick Information Systems. It started last spring, when sales dropped off as the number of homes on the market began to rise and so did interest rates. Now sales are sliding, interest rates are even higher and prices are increasing at a lower rate.
When the housing market was hot, so was attendance by prospective buyers at open houses. Not so in today's cooling market.
'I don't see a whole bunch of people walking through the properties all at one time,' said Joe, who works at Realty World Hirsch & Associates in Redwood
City.
The Bay Area median price did reach a new record in April, DataQuick said. But the new peak of $628,000 is not that much to get excited about, given that sales volume dropped 25.1 percent from a year ago.
Some 8,358 new and resale condominiums changed hands in the Bay Area last month — the slowest April since 2001 when 7,193 homes were sold, and a 14.2 percent decline from March. " >Bob Schwartz, CRS, GRI, is a Certified Residential Specialist
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Five Year Low for Home Sales

May 16, 2006
La Jolla,CA----Home sales in Southern California decelerated in April to their slowest pace since 2001, the result of higher mortgage interest rates and less buyer urgency. Prices rose at a single-digit appreciation rate for the first time in more than four years, a real estate information service reported.

A total of 24,748 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in April. That was down 16.1 percent from 29,509 in March and down 21.3 percent from 31,431 in April last year.

The year-over-year sales decline was the steepest since April 1995, when home purchases slowed 24.0 percent. Last month's sales count was the lowest for any April since 24,120 homes were sold in April 2001. DataQuick's statistics, which go back to 1988, show an average April for the nineteen years saw 23,660 sales.

"March and April have shown us that the boom phase of this cycle is behind us, so now it's just a question of how the cycle ends. Right now it looks like changes in the real estate market are happening gradually. But there's a lot of uncertainty among analysts regarding the effect of higher interest rates and how fast the economy is generating demand in regional markets," said Marshall Prentice, DataQuick president.

San Diego downtown real estate agent .

Southern California real estate

DQNews - Southern California Press Release: "Southland passes half million mark
April 18, 2006
La Jolla,CA----The median price paid for a Southern California home passed $500,000 for the first time last month as sales continued to decline, the result of higher mortgage interest rates and a real estate cycle that has passed its frenzy phase, a real estate information service reported.
The median price paid for a home in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties was $501,000 last month. That was up 4.4 percent from $480,000 in February and up 14.1 percent from $439,000 for March a year ago, according to DataQuick Information Systems.
The regional year-over-year increase in median has varied from 12.9 percent to 17.0 percent the last 12 months. Last month's increase ranged from 5.7 percent in San Diego County to 23.2 percent in San Bernardino County.
'We still expect the annual increase in median to go down into the single digits sometime this summer. San Diego County is still the market furthest along in this cycle. Price increases there have been below ten percent the last eleven months,' said Marshall Prentice, DataQuick president.
A total of 29,509 new and resale Southland homes were sold last month. That was up 48.2 percent from 19,905 in February and down 9.7 percent from 32,674 for March last year.
An increase from February to March is normal for the season. Sales have declined on a year-over-year basis the last 4 months. "
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Unmaking the Myths

Unmaking the Myths: Weekend - Yahoo! Finance: " Real Estate
Unmaking the Myths
FORTUNE on CNNMoney.com
By Shawn Tully

Real estate survival guide: The sudden shift in the nation's housing markets is exploding some long-held beliefs. Here's the conventional wisdom you should ignore.

NEW YORK - The sudden shift in the nation's housing markets is exploding some long-held beliefs. The first is that a scarcity of buildable land on the coasts keeps a cap on supply and prevents prices from falling.

But high prices inevitably work their magic, encouraging more people to sell existing homes and sparking new construction. Sure enough, prices are already tumbling in Boston, where a swarm of downtown condos is swelling the number of properties for sale and punishing the price of all housing.

A second myth is that today's big homebuilders learned their lesson in past downturns and now launch projects only when they have firm buyers lined up. But housing starts are still running at near-record levels of some two million units a year.

Go to CNNMoney.com to see which markets are hot and which are not.

Big builders, notably D.R. Horton and Pulte Homes, are starting 20 percent to 30 percent of their units on spec, without signing up buyers in advance. Risky move.

A third tenet holds that home values never drop in areas where employment is rising. But today some of the hardest-hit regions rank among the strongest job machines, notably Northern Virginia and San Diego. The reason: Young buyers filling those jobs can't afford the houses for sale.
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Cash Out Refinance Transactions at Highest Level in 15 years

McLEAN, VA – In the first quarter of 2006, 88 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least five percent higher than the original mortgage balances, according to Freddie Mac’s quarterly refinance review. This percentage is up from the fourth quarter of 2005, when the share of refinanced loans that took cash out was a revised 81 percent, and is the highest since the third quarter of 1990

“Refinancing activity still remains very strong, even with higher interest rates,” said Amy Crews Cutts, Freddie Mac deputy chief economist. “Total mortgage originations were down in the first quarter by an estimated 24 percent.
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San Diego Foreclosures Up 60%!

First-quarter foreclosure activity in the state jumped to its highest level in two years, including a nearly 60 percent rise in San Diego County, a real estate information service reported Tuesday.

"A number of factors are driving defaults higher," said Marshall Prentice, president of La Jolla-based DataQuick. "The main one right now is that home values are rising more slowly than they have been the past couple of years, which makes it more difficult for homeowners to sell their homes and pay off the lender."

According to DataQuick, lenders sent 18,668 default notices to California homeowners in the first three months of the year. That's a 23.4 percent increase over the previous quarter and a 28.7 percent jump over the same period last year.

In San Diego County, lenders sent 1,533 default notices in the first quarter, a 59.7 percent jump over the same quarter of 2005, when 960 notices were sent.

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SignOnSanDiego.com > News > Business -- County building permits fall 41%

SignOnSanDiego.com > News > Business -- County building permits fall 41%: "Housing output on pace to be lowest in 10 years
By Roger M. Showley
UNION-TRIBUNE STAFF WRITER
April 26, 2006
San Diego County builders took out 41 percent fewer housing permits in the first three months of the year compared with the same period last year, putting the area on track to have the lowest output of new housing in 10 years, the Construction Industry Research Board reported yesterday. "
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Prices Up - Sales DOWN

Central Valley Business Times: "California home sales plunge as prices jump

LOS ANGELES
April 25, 2006 11:27am

• Prices up 13 percent; sales down 15 percent statewide
• Prices up 8 percent, sales down 24 percent in Central Valley

The median price of an existing home in California increased 13 percent in March to an all-time high of $561,350 in California, according to figures compiled by the California Association of Realtors.
But as prices were headed upward, sales were headed down, plunging 15.1 percent compared with the same period a year ago.
The real estate market in the Central Valley was not in step with the state as a whole.
The California Association of Realtors says the median price rose just 8.1 percent to $350,930 while sales dropped 24 percent compared to March 2005."

The median number of days it took to sell a single-family home was 44 days last month, compared with 30 days for the same period a year ago.

In a separate report covering more localized statistics generated by the Realtors and DataQuick Information Systems, a La Jolla real estate information company, 89.8 percent or 369 of 411 cities and communities showed an increase in their respective median home prices from a year ago.
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Interest Only Mortgages - The Way to go???

The popularity of fixed-rate interest-only mortgages is skyrocketing.These loans, in which the borrower pays nothing toward the principal and can feel confident the payment will remain level, typically for the first 10 or 15 years, were virtually unknown two years ago. They now account for 8 percent of all new residential mortgages, according to UBS AG, a financial services firm.U.S. Bancorp, Quicken Loans Inc., GMAC Mortgage, and Bank of America Corp. are among the lenders offering the product. The downside for buyers is that they build no equity in the property beyond its increasing value. And the monthly payment will rise precipitously once a borrower begins repaying principal.
Source: The Wall Street Journal, Ruth Simon (04/19/2006)
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San Diego home sale fall 17.4%

For March 2006, The number of homes sold continued to drop across Southern California -- with the exception of Riverside County, which saw a 6 percent increase in home sales.

In San Diego County, there were 4,146 home sales last month. That represents a 17.4 percent drop from the 5,018 sales in March 2005.Across Southern California -- including Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura counties -- there were 29,509 home sales last month, down 9.7 percent from March 2005, when 32,674 homes were sold.

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San Diego 67% - Overpriced!

From a CNN article published 4-7-06 and a Local Market Monitor calculation the following California cities were shown to be overvalued as to their equilibrium value -- what the typical house should sell for!

San Diego CA - 67% - Overpriced
San Jose CA - 62% - Overpriced
San Francisco-Oakland CA - 53% - Overpriced
Sacramento CA - 57% - Overpriced
Riverside-San Bernardino CA - 63% - Overpriced
Los Angeles-Anaheim CA - 56% - Overpriced
Fresno CA - 51% - Overpriced
Santa Barbara-Santa Maria CA - 83% - Overpriced

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Hot to Cool/Soft

Red-Hot Housing Markets Cooling Down(April 12, 2006) -- Housing that last year was selling in a matter of hours — Florida coastline condos, townhouses in Washington, D.C., and desert haciendas in Arizona — are now languishing on the market.Home sales have declined 20 percent in Florida, according to the Florida Association of REALTORS®. And in California, sales dropped 15 percent. Sales were off by 19 percent in Washington. D.C., and down 25 percent around Phoenix. Experts blame a number of factors, including a sell-off among investors, worsening affordability due to soaring property prices and rising interest rates. In Florida, last year’s active hurricane season discouraged some buyers.But economists note that while sales in some markets are weaker, they aren't collapsing — just settling into a normal market pace. Inventories are rising but not to an alarming level, and demand for homes is actually posting gains in cities where prices are still considered bargains, such as Indianapolis and Houston.Source: The Wall Street Journal, by Michael Corkery (04/12/06)
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Mortgage Rates Move Up

McLEAN, VA -- Freddie Mac released the results of its Primary Mortgage Market SurveySM in which the 30-year fixed-rate mortgage (FRM) averaged 6.49 percent, with an average 0.6 point, for the week ending April 13, 2006, up from last week’s average of 6.43 percent. Last year at this time, the 30-year FRM averaged 5.91 percent. The 30-year FRM has not been higher since the week ending July 12, 2002, when it averaged 6.54 percent.

The average for the 15-year FRM this week is 6.14 percent, with an average 0.5 point, up from last week’s average of 6.10 percent. A year ago, the 15-year FRM averaged 5.46 percent. The 15-year FRM has not been higher since the week ending June 13, 2002, when it averaged 6.17 percent.
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Buying a House - MSN Real Estate

Buying a House - MSN Real Estate: "Las Vegas: What goes up must come down. Fortune lists Las Vegas dead last in its list of 100 metro markets for housing appreciation in the next two years, predicting a two-year combined decrease in housing values of nearly 13%. Local Market Monitor reported a 33% increase in appreciation between 2003 and 2004, and then a 14% increase by the third quarter of 2005, evidence that prices have begun to cool.
'Las Vegas is a very interesting market,' Winzer says. 'A lot of people moved in, but construction has kept up with the pace. For a long time until recently, I didn't consider it an overpriced market. I don't think the price increases will last. There's really not an inability to produce new homes out there if there is a demand for it.'" Latest new real estate sites still
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Application Volume Drops - OriginatorTimes.com

Application Volume Drops - OriginatorTimes.com: "WASHINGTON, D.C. - The Mortgage Bankers Association released its Weekly Mortgage Applications Survey for the week ending April 7. The Market Composite Index, a measure of mortgage loan application volume, was 579.4, a decrease of 5.5 percent on a seasonally adjusted basis from 612.8 one week earlier. On an unadjusted basis, the Index decreased 5.1 percent compared with the previous week and was down 14.7 percent compared with the same week one year earlier.

The seasonally-adjusted Purchase Index decreased by 4.7 percent to 417.7 from 438.2 the previous week whereas the Refinance Index decreased by 6.6 percent to 1532.4 from 1640.8 one week earlier. Other seasonally adjusted index activity includes the Conventional Index, which decreased 5.0 percent to 854.9 from 900.3 the previous week, and the Government Index, which decreased 10.2 percent to 120.0 from 133.6 the previous week."
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Rising inventory of unsold homes points to a cooling of the market

Rising inventory of unsold homes points to a cooling of the market: "Rising inventory of unsold homes points to a cooling of the market
Kathleen Pender
Sunday, April 9, 2006

In another sign that the real estate market is cooling -- but not collapsing -- the inventory of unsold homes in California is roughly double what it was a year ago.
Inventory is calculated by dividing the number of homes for sale in a region by the number of homes that have closed escrow in the past month. It tells you how many months it would take hypothetically to sell all the homes on the market.
Statewide, the inventory of unsold single-family homes in February was 6.7 months, up from 3.2 months in February of last year.
'For the better part of 2005, it was in the 3- to 3.5-month range,' says Robert Kleinhenz, deputy chief economist with the California Association of Realtors. 'We saw a rather dramatic increase at the state level beginning in January of this year and continuing in February.'
Inventories are generally higher in Southern than in Northern California. "

Mortage Rates Jump

The average 30-year fixed mortgage rate jumped to 6.43 percent from 6.35 percent during the week ended April 6, according to Freddie Mac.Interest on 15-year fixed loans edged up to 6.10 percent from 6 percent over the same period. Meanwhile, the one-year adjustable mortgage rate rose to 5.57 percent from 5.51 percent; and the five-year hybrid ARM surged to 6.11 percent from 6.02 percent. Source: The Wall Street Journal (04/07/06)
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Housing Bubble Trouble - CBS News

Housing Bubble Trouble - CBS News: "If something can't go on forever, it won't.'
Herb Stein

With new home sales down 10.5 percent in February, and with home prices declining for the fourth month in a row, it's high time for a sober look at the consequences of a major housing correction. The Federal Reserve, Wall Street economists, and other observers of the U.S. economy are closely watching the housing market because it has been a key driver of economic growth over the past several years.

Roughly a quarter of the jobs created since the 2001 recession have been in construction, real estate, and mortgage finance. Even more important, consumers have withdrawn $2.5 trillion in equity from their homes during this time, spending as much as half of it and thus making a huge contribution to the growth the U.S. economy has enjoyed in recent years (consumer spending accounts for two-thirds of GDP).

But consumers cannot keep spending more than they make. Eventually, home prices will flatten, the flood of 'cash out' refinancings will become a trickle, and consumer spending will slow, as will job creation in housing-related industries. The big question is this: Will the housing sector experience a soft landing and slow the economy or a hard landing that pushes us into recession? "
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MSN Money - Associated Press Business News: Stocks Up As Housing Data Eases Rate Fears

MSN Money - Associated Press Business News: Stocks Up As Housing Data Eases Rate Fears: "The latest report on the housing sector showed new home sales tumbling 10.5 percent in February, according to the Commerce Department -- the biggest one-month drop in nine years. With slowing housing demand, Wall Street felt that would make it easier for the Fed to stop raising rates soon."
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Housing bubble Implosion - Double Digit Decline

Could this be a preview for the already soft San Diego real estate marke?

Shanghai’s housing market into double digit decline! The LA Times ran a story on March 4th.on the bust of the Shanghai, China, real estate market.

In one of the world’s hottest housing markets, the last three years saw a doubling of prices. Things are now so bad now that thousands of real estate offices have closed, many homeowners have loan amounts that are greater than their properties resale value, recent buyers are fighting with developers to rescind their purchases, and banks are awaiting a wave of mortgage defaults.
Morgan Stanley's chief Asia economist said “Shanghai's housing slump is only going to worsen and imperil a significant part of the Chinese economy”. About the property now under construction, this same economist said "They'll remain empty for years!”

The similarities to our hot US bubble markets, makes me believe this is preview of what we are already starting to experience (though at a much slower pace).
The first signs of trouble in our real estate markets were very subtle and only picked up, or acknowledged, by very few real estate (http://www.brokerforyou.com/blogger/index.html ) professionals. Since mid 2005 the red flags have been quite obvious to even the layperson. Yet, the forever optimistic ‘it’s always a good time to buy’ industry line is embraced by the mass media (they certainly do not want to lose their immense source of real estate advertising revenue) and the naive general public.

In San Diego in particular and most other major metropolitan real estate markets, it’s quite acceptable to acknowledge and embrace the double digit real estate appreciation of the past. Yet, even the thought of depreciation of real estate is looked on with the same disbelief and distain as if a child molester moved in next door.

There is a proven saying in our stock market: “You can never go broke taking a profit.” In many US markets, seasoned investors can still turn a profit. However, if Shanghai’s real estate market is any indication of what awaits the hot US markets…..the window of opportunity is closing very fast!

AbOUT THE AUTHOR Bob Schwartz, is a Certified Residential Specialist , and a CA licensed San Diego real estate broker with. Bob has over 27 years of residential real estate experience, authored a number of published articles and served as an expert witness for San Diego lawyers . You can contact Bob via his highly popular San Diego real estate website .---This work is protected under copyright and may not be published in other works without express written permission from Promotions Unlimited or the following procedures are implemented: Please feel free to publish this article (as long as no changes are made (all hyper-links to remain and not be modified in any way) and the author's name and site URL's are retained) in your ezine, newsletter, offline publication or website. A copy would be appreciated at seo711@gamil.com

San Diego Real Estate Bubble - Down thru 2010

Top San Diego Mortgage Broker - Opinion on our real estate market

Waaay too many "investors" were in the market, many of whom have no investing experience, nor the cash reserves to handle vacancies or repairs. i think the downtown condo market will get really really soft (maybe 30%+ decrease in prices over the next few years) due to this very reason.

Mortgage money has become way too easy. many MANY clients took out arms and interest only loans (i saw one estimate that 81% of loans in sd county in 05). in addition, many of the loans were "stated income" loans. this is because the people WOULD NOT QUALIFY if they had to based on actual reported income.

The actual amount of $$ spent out of pocket (down payment and closing costs) was LESS in 2004 than in 1998. this is because in 1998, many 1st time home buyers used fha loans, and still made a 3% down payment and paid some or all of their own cloisng costs. in 2004, most 1st time buyers were 0 down, stated income.
i believe (and we are starting to see it) that lenders will tighten their guidelines on credit score, etc. this combined with increasing interest rates will take buyers out of the market.

Market sentiment has changed. buyers are no longer worried about getting in "now" before prices get out of reach. buyers are aware that if they wait, they may have more to choose from, and potentially at lower prices.

Ultimately, two things drive purchasers of property for investment.

#1 is cash flow and #2 is appreciation. The "smart money" has not been buying investment prop in sd for a couple of years or more. Obviously the idea of buying a property in sd county as a rental and receiving a positive cash flow is unlikely as is the idea of any great level of appreciation over the next few years.

Two things also drive the purchasers of property for primary residence.

#1 is income. household income in sd county went from about 56k in 2000 to 60 k in 2005. not exactly a formula that would translate to a doubling of home prices (can you say "speculation" anyone?).

In fact, based on 60k annual income, you have monthly income of $5,000 a month. Prudent underwriting guidelines would dictate that no more than a 3rd or so if gross monthly income go to housing. If we push this to even 40%, we are talking about a 2000 monthly house payment. try getting a payment like that (including taxes and ins) on the "typical" 600k house in sd. It doesn't take a rocket scientist to see the writing on the wall.

#2 thing is the comparable rental market. If a renter is paying $1,500 a month for rent, and can buy a prop for a $2,000 month payment, it can be justified with a Fed income tax write off and so on. However, right now, avg rents are $1,500 or less and avg payments for the "median" 600k house on even an int only arm (with no neg am) are well over $3,000 even with a 10% down payment (that most 1st time home buyers do not have).

No soft landing in my opinion. I think that prices will erode through at least 2010. if lending rules are not eased (esp for very high ltv loans) we could see a TON for foreclosures.
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Real Estate bubble - Fed says...Let Them Slide!

Fed won't act to preserve high home prices!

The Federal Reserve has no intention of preserving all of the recent gains in home price values, said Federal Reserve board governor Donald Kohn on Thursday."If real estate prices begin to erode, homeowners should not expect to see all the gains of recent years preserved by monetary policy actions,' Kohn said in a speech prepared for delivery to a European Central Bank forum in Frankfurt, Germany."The same consideration apply to homeowners: All else being equal, interest rates are higher now than they would be were real estate valuations less lofty; and if real estate prices begin to erode. Homeowners should not expect to see all the gains of recent years preserved by monetary policy actions," Kohn said.

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San Diego Foreclosures Up 34.5%

There were 14,999 default notices to California homeowners during the October-to-December period. That was up 19.0 percent from 12,606 for the third quarter, and up 15.6 percent from 12,978 for 2004's fourth quarter, according to DataQuick Information Systems.

In San Diego the increase in default activity was 34.5% great than the fourth quarter of 2004.
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New Home Sales Fall

The National Association of Home Builders reported at the end of February that "sales of new single-family homes fell 5 percent to a seasonally adjusted annual rate of 1.233 million units in January following upward revisions to the November and December rates.The January sales rate was 3.3 percent above a year ago."
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San Diego Housing Market - Real Estate Bubble

Long-term Mortgage Rates Highest Since September 2003

McLEAN, VA -- Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market SurveySM (PMMSSM) in which the 30-year fixed-rate mortgage (FRM) averaged 6.37 percent, with an average 0.6 point, for the week ending March 9, 2006, up from last week's average of 6.24 percent. Last year at this time, the 30-year FRM averaged 5.85 percent. The 30-year FRM has not been higher since September 5, 2003, when it was 6.43 percent.
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Evidence of a California Housing Bubble - Page 5 | Piggington's Econo-Almanac | Southern California Housing Bubble News and Analysis

Evidence of a California Housing Bubble - Page 5 Piggington's Econo-Almanac Southern California Housing Bubble News and Analysis: "When prices are high only because market participants expect prices to go even higher, that's called a bubble. And Californians have bought into this bubble with great enthusiasm. Consider the following statistics, all from 2004:
80% of San Diego mortgages were adjustable-rate, meaning that many borrowers were speculating that their salaries or home equity would increase faster than their mortgage interest payments. (San Diego Union-Tribune)
47% of San Diego mortgages were interest-only, meaning that many borrowers were speculating that their salaries or home equity would increase faster than their mortgage interest payments and the eventual addition of mortgage principal payments. (Business Week)
27% of San Diego mortgages involved no down payment, meaning that many borrowers could (and did) use ultra-low rate interest only ARMs with no money down in order to afford far more house than their incomes would typically allow. (San Diego Union-Tribune)
37% of San Diego condo conversion buyers were investors, meaning that, given the comparitively low rents discussed above, the only possibility of these people not losing money is for condo prices to rise enough to cover the current negative cash flow. (San Diego Union-Tribune)
A poll of Los Angeles homebuyers indicated that the buyers expected, on average, that their new homes would increase in value by 22% per year for the next 10 years. (The Economist) "
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The Big Picture: Riskiest Housing Markets? (PMI Market Risk Index)

The Big Picture: Riskiest Housing Markets? (PMI Market Risk Index): "Interesting (if understated) article in WSJ yesterday about the PMI U.S. Market Risk Index report; The PMI Index suggested that about 'half of the 50 markets are overvalued by 10% or more, the report said. Only 11 markets are undervalued.'
Recall that I have been saying that Housing is an extended asset class, and not a bubble. That makes overvalued regions vulnerable to a pullback, as opposed to a full blown crash.
Here's the Ubiq-cerpt:�
Home prices in some of the nation's largest markets are poised for a fall, according to a study that says homes are overvalued in many cities.
The PMI U.S. Market Risk Index report, released yesterday, named Boston, San Diego, Long Island, N.Y., Santa Ana, Calif., and Oakland, Calif., as the markets facing the biggest risk of a price correction. The index showed these markets have a more than 50% chance of experiencing price declines during the next two years. New York City ranked 14th, with a 33% chance . . .
The markets facing the biggest potential correction are Los Angeles, Sacramento and Riverside, Calif., where prices are estimated to be overvalued by 33.7%, 31.3% and 30.7% respectively, the report said. New York City's prices are 16.3% overvalued, according to PMI."
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Real Risky Real Estate -The Big Players - Tell The Truth

Countrywide Mortgage CEO Angelo Mozilo believes that the "housing market officially turned south in January," according to Banc Investment Daily, and that some overheated markets may see prices plunge by up to 40 percent. Mozilo mentioned Las Vegas as one of those risky markets.

PLUS

The Associated Press reported .... “The five-year housing boom is indeed over, judging from growing statistical evidence and the performance of some of the nation’s leading builders, and the slowdown is already rippling through the economy. Explanations for the recent cooling-off vary.”

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San Diego real estate investors . . . Don’t ignore the Facts!

San Diego real estate investors . . . Don’t ignore the Facts!
Or ‘Know when to fold them’
By Bob Schwartz, CRS, GRI ©2006 http://www.brokerforyou.com/ All rights reserved.

The Commerce Department reported Monday that sales of new single-family homes dropped by 5 percent to a seasonally adjusted annual rate of 1.233 million units last month.
More importantly, this is the second time in three months that housing sales have dropped! This 5 percent drop was under the 7 percent November drop.
Another important fact that this report showed was a 5.2 month supply of new homes in January. This is up 2.5 percent from the December ’05 figures and an astounding 20 percent from the same figures one year ago (January ’05)!

AbOUT THE AUTHOR Bob Schwartz, is a Certified Residential Specialist, and a CA licensed San Diego real estate broker with. Bob has over 27 years of residential real estate experience, authored a number of published articles and served as an expert witness for San Diego lawyers. You can contact Bob via his highly popular San Diego real estate website.---This work is protected under copyright and may not be published in other works without express written permission from Promotions Unlimited or the following procedures are implemented: Please feel free to publish this article (as long as no changes are made (all hyper-links to remain and not be modified in any way) and the author's name and site URL's are retained) in your ezine, newsletter, offline publication or website. A copy would be appreciated at seo711@gamil.com

San Diego real estate...real estate bubble is delflating

Carefully read the excerpt below as another major news organization reports the FACTS! …..

By Chris Isidore, CNNMoney.com senior writerFebruary 24, 2006: 2:49 PM ESTNEW YORK (CNNMoney.com) - Home builders are growing concerned about an increasing number of cancelled new home orders, which experts say could be a sign of an underlying weakness in the recent run in home prices.
Specifically, the cancelled orders could be the latest warning sign that buyers who were turning to real estate as an investment, rather than for their own housing needs, are shifting out of real estate. And that could mean that in many hot markets, the air is about to come out of over-inflated real home prices overall.

AbOUT THE AUTHOR Bob Schwartz, is a Certified Residential Specialist, and a CA licensed San Diego real estate broker with. Bob has over 27 years of residential real estate experience, authored a number of published articles and served as an expert witness for San Diego lawyers. You can contact Bob via his highly popular San Diego real estate website.---This work is protected under copyright and may not be published in other works without express written permission from Promotions Unlimited or the following procedures are implemented: Please feel free to publish this article (as long as no changes are made (all hyper-links to remain and not be modified in any way) and the author's name and site URL's are retained) in your ezine, newsletter, offline publication or website. A copy would be appreciated at seo711@gamil.com

San Diego Real Estate Bubble - The Ride Down!

San Diego Home Sales Dive!

San Diego home sales took the largest drop ever recorded in January 2006! Sales were off 31% from December 2005! This was the lowest monthly sales since January 1998, when these records were first tracked!

From January 2005 the loss was 26.8%, and marked the seventh month in a row where home sales were lower than the year before.Also, the sales price to list price ratio for single-family homes has also continued to fall.

For well over 18 months now I’ve been predicting a deflation cycle in San Diego. Now as the hard facts are actually showing up the ‘industry’ has changed strategy from pooh-poohing the coming fall to now predicting a ‘short term softening’ of our market.

Believe what you will, but after a ten year spectacular ride up, with the last five years actually doubling most home values, do you really believe the down side will be over in a few months?

Our last down cycle in San Diego ran from approximately 1990 to 1995. My prediction for San Diego real estate is that the downward cycle has only begun. Be sure to fasten your seatbelt.

ABOUT THE AUTHOR Bob Schwartz, is a Certified Residential Specialist, and a CA licensed San Diego real estate broker with. Bob has over 27 years of residential real estate experience, authored a number of published articles and served as an expert witness for San Diego lawyers. You can contact Bob via e-mail at bob@brokerforyou.com or visit his highly popular San Diego real estate website.

---This work is protected under copyright and may not be published in other works without express written permission from Promotions Unlimited or the following procedures are implemented: Please feel free to publish this article (as long as no changes are made (all hyper-links to remain and not be modified in any way) and the author's name and site URL's are retained) in your ezine, newsletter, offline publication or website. A copy would be appreciated at seo711@gamil.com

Pending Home Sales Index Down

Wednesday, February 01, 2006

WASHINGTON,D.C. – Pending home sales continue to according to the National Association of Realtors®.

The Pending Home Sales Index,* based on contracts signed in December, was down 3.0 percent to a level of 116.4 from 120.0 in November, and is 5.5 percent below December 2004. Pending sales have trended steadily down from a record index of 129.2 last August

The index in the West fell 8.1 percent to 117.1 in December and was 11.8 percent lower than a year ago.

ABOUT THE AUTHOR Bob Schwartz, is a Certified Residential Specialist, and a CA licensed San Diego real estate broker with. Bob has over 27 years of residential real estate experience, authored a number of published articles and served as an expert witness for San Diego lawyers. You can contact Bob via e-mail at bob@brokerforyou.com or visit his highly popular San Diego real estate website. ------------ This work is protected under copyright and may not be published in other works without express written permission from Promotions Unlimited or the following procedures are implemented: Please feel free to publish this article (as long as no changes are made (all hyper-links to remain and not be modified in any way) and the author's name and site URL's are retained) in your ezine, newsletter, offline publication or website. A copy would be appreciated at bob@websitetrafficbuilders.com

San Diego Housing Market - Real Estate Bubble

San Diego Housing Market - Oh, It's Just Back to 'Normal' …Yea, Right!

By Bob Schwartz, CRS, GRI ©2006 www.brokerforyou.com All rights reserved.

"It's just back to normal', "Just a seasonal slow-down', "A normal minor adjustment', "A great time to buy, with a much wider selection', "A cooling market'", "A soft landing", "A slight tapering off" etc. Yes, these P.C. phrases are now replacing the "We should have a strong market for the foreseeable future" industry line prevalent just a few short months ago.

The sad fact is people are still in self-denial here. We're "special" because of our weather. We are known as America's Finest City after all. It's still common to hear someone say, "If you don't buy now, you're going to get priced out of the market!"

Talk about your irrational exuberance in the Southern California real estate market. In a 2004 summer poll in the LA area, residents believed prices would continue to go up by more than 20% a year for another decade!

What will be the industry P.C. phrases we'll be hearing in about six to nine months? "It may well go as: "This home is a great buy, why just nine months ago you would have paid $25,000+ more…what a great savings." Naturally, you would be talking to a buyer. For a seller (who has owned for some years) you might say: "Well, you are still making a profit. Who could have even known that the market would have turned down so fast?" For the downtown high-rise buyer who though they got a real deal on the final phase of their Gas Lamp digs, a real estate agent may be saying: "Well, because the resale value is actually below your 100% interest only trust deed, you really should consult a real estate attorney and/or meet with your lender to propose they accept your deed in lieu of foreclosure".

Are you reading this and thinking I'm way off base? Here are a few recent headlines:

National Association of Realtors reports, in part: Total existing-home sales - including single-family, town homes, condominiums and co-ops - were down 5.7 percent in December from November.

Time Magazine reports that 'Vegas Condos Go Cold."

The Washington Post reports "Real estate groups in the Washington area have also reported declines to varying degrees."

"The bloom is definitely off the housing rose. Housing peaked last summer and has been weakening ever since," said Mark Zandi, chief economist at Moody's Economy.com.

New York City Mayor Michael Bloomberg recently said the real estate market was slowing "dramatically" and only a "miracle" could stop soaring mortgage rates from eating into housing prices. "The real estate market is slowing down dramatically and we're going to have a problem down the road," Bloomberg said.

"If people who want to sell their houses have to wait a longer time before someone comes along and buys it, it would be a miracle if prices didn't start to go down," he said.

'The market has definitely peaked,' said Jack Kyser, chief economist with the L.A. County Economic Development Corp. 'The fever has broken and now the question people are asking themselves is if there is a crash ahead.'"

This is my own opinion on a realistic view of what lies ahead as far as the San Diego real estate market : A multi-year depreciation that could easily take 30% off the highs which reached this market's peak during the summer of 2005! Plus, I foresee headlines, maybe even national, announcing how the San Diego high-rise downtown boom has turned into a foreclosure city!

As a realistic San Diego Realtor , I provide these facts to my sellers. If their property is not generating meaningful activity within the first month of being listed, it would be prudent to consider a revised marketing plan similar to what many San Diego real estate developers are doing. This would be a combination of value-range reduction as well as agent and buyer incentives to position the property as the best total value for the area.

I think as Realtors we must adapt and not deny. To otherwise will have a dramatic impact on your financial health and community reputation

ABOUT THE AUTHOR Bob Schwartz, is a Certified Residential Specialist , and a CA licensed real estate broker with www.Brokerforyou.com . Bob has over 27 years of residential real estate experience, authored a number of published articles and served as an expert witness for San Diego lawyers . You can contact Bob via e-mail at bob@brokerforyou.com or visit his highly popular San Diego real estate website at: http://www.brokerforyou.com
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This work is protected under copyright and may not be published in other works without express written permission from Promotions Unlimited or the following procedures are implemented: Please feel free to publish this article (as long as no changes are made (all hyper-links to remain and not be modified in any way) and the author's name and site URL's are retained) in your ezine, newsletter, offline publication or website. A copy would be appreciated at bob@websitetrafficbuilders.com