Bad News

In what can only be said to be bad news for the overall economy, homes entering the foreclosure system rose 18% in California and 12% overall in June over June of last year. This is the second straight month of increasing foreclosures being initiated in California, and indicate an impatience on the part of lenders to tolerate people not paying their mortgages.
(Right here in The Meadows, I know of homes where no house payment has been made for several years but the banks have not yet proceeded against the owners. Every indication is that the banks are stepping up the process.)
According to an Associated Press report, there are more than 3 million households who are behind on their payments (Mortgage Bankers Association), and 13 million US homes that owe more than the current value of their homes.
Overall, it takes 378 days from the time a homeowner gets notification of bankruptcy proceedings untol the home is actually taken over by the bank. Banks historically hold onto the home for some time so as not to flood the market.
At the end of June the banks had 629,000 homes on the market, and not sold. (RealtyTrac)
Many of the homes will go into Short Sale, rather than be taken over by the bank. Nationally, it takes 318 days for a Short Sale home to be sold.

Last year, the lenders seized about one million homes, according to RealtyTrac and the Associated Press, and the prediction is that another 700,000 homes will go into bankruptcy this year.
These are scary numbers, particularly the information that lenders are starting to proceed against those who have not paid their mortgage.
More Short Sales and Foreclosures spell trouble for home prices. We have had solid sales over the past few months in the under $500,000 price range, but few sales above $500,000.
The numbers in the Associated Press report spell trouble for future sale prices, and could depress the housing market further, or at the very least extend the poor housing market time to recovery, and keep the overall economic market limping along.
The answer to one of the questions on the California Broker’s Exam that I took more than 30 years ago was, “Housing markets lead recessions, and lag recoveries.”  That has always been the case, and indicate more years of economic struggle.

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July 7, Weekly Analysis

The single new listing in the Meadows this past week is highlighted on the list.

There were no Meadows homes going into Pending this past week.

There was only one home that Closed Escrow this past week: 10228 Oak Spur Way, a 4/3 of 2,601 s.f. which sold at a closing price of $390,000.

If you do not recall a more sparse report in recent memory, neither do I. We have not had such a slow week in a long time. It is just possible that we have reached an equilibrium and there are few available Buyers. One of the imponderables in real estate is the pool of available Buyers – it is the unknown in every market equation.

The one thing we do know is that when Buyers think the interest rates are falling, they will wait – hoping they fall still further. And, when interest rates are rising, Buyers jump in to get the rates before they rise further.

Recently, interest rates have fallen, and that discourages immediate purchases.

Nevertheless, showings continue at a high rate, calls continue and flyers disappear at a reasonable rate so there is some confidence that this week was just a temporary hiatus. If this week is duplicated for several weeks, then we know there may be trouble but other indicators are still positive.

In a presidential election year there is always uncertainty, and when that happens in the midst of a recession that uncertainty is multiplied. The recent job numbers have been insufficient to even fill the ranks of the new workers who come into the job market every month, much less eat away at the ranks of those who have been unemployed for quite some time.

The bad job growth numbers are partially the result of bad economic policies but some of it is the result of structural changes in the labor market – companies have found that through the employment of technology they can make good profits even with a slimmer labor force. Consequently, we find the stock market growing, while the unemployment numbers remain high. When companies shed their excess labor force, they did it without penalty to bottom line, and there is no incentive for them to change.

We may be looking at a “new norm” of a future unemployment rate of nearer 7% than 4%. Among other things, that equates to a slower recovery of the housing market PRICES, if not sales. The construction industry has been hit hardest by the recession, and contractors will try to start building because that is what they do. If they come back too fast that will again depress prices.

There are still foreclosures held in inventory that the banks will slowly feed into the market.  I look forward to sales continuing, but at these lower prices for at LEAST five more years.

June 30, Weekly Analysis

No new listings this past week.

Three Hidden Meadows homes went into Pending this past week; 28120 Glenmeade Way, a 2/3 of 1,932 s.f. which had been listed for $269,000; 28125 Hamden Lane, a 3/3 of 2,070 s.f. which had been listed for $343,000; and, 27746 Willow Trail, a 3/3 of 3,065 which had been listed for a variable price of $429,000 to $459,000.

Four homes closed escrow this past week: 28142 Par View, a 3/3 of 2,169 s.f. sold for $405,000; 28218 Glenmeade Way, a 3/3 of 2,387 s.f sold at $465,000; 10575 Laurel Path, a 5/5 of 3,920 s.f. sold for $505,000; and (drum-roll, please) 27245 Lotus Pond, a 5/7 of 6,000 s.f. which sold for $2,150,000 s.f.

This last sale demonstrates why there is so much current activity on my Alps Way property, and certainly sets the marker for executive and luxury homes.

Technology has changed the real estate landscape forever, by-passing Realtors as the gate-keepers to information. Buyers who want to find which homes are for sale, at what price can get that and a lot more.

In one of my previous lives, I was Core Adjunct Professor of Computer Science, so even though I am old I am very technological and have a new iPad and an iPhone 4S. Just last night I downloaded a new (free) app called HomeSnap by Sawbuck, which allows a potential Buyer to take a snapshot of a home with a Realtor’s sign in front and the computer gives the photo-taker the information on that listing. I have not yet tried the app, so I do not know how good it is, but more available real estate information is never a bad idea.

Realtors are hardly being replaced, but some of their functions are being replaced. Buyers do not buy homes on the Internet, but they DO reject certain properties based on the Buyer’s known likes and dislikes, and then present the Realtors with a greatly diminished list for viewing.

In Hidden Meadows, Buyers are usually younger and more technological than Sellers, but then they need to be. This next week a Buyer is coming into San Diego for only one day with a list only five County homes they wish to see, and fortunately two of those are my listings. The Buyers have done their shopping on-line, and most Buyers do these days.

It is a new, technological real estate world.