US house prices in freefall -- redux

[Aeson]

The deflation of the housing market is a good thing. It should have happened several years ago. The longer it went on, the bigger the eventual price was going to be.

[Victor Galis]

Originally posted by Kontiki


Why would prices drop if demand remained the same?

Increased supply? Lower costs of production combined with competition? Lower interest rates (since these things are bought on credit mostly)?

[Kidlicious]

Originally posted by Ben Kenobi


Good. There was an oversupply of houses. This was needed.

That's funny because a lot of people still don't have one, and less are going to have new houses in the future than got them in the recent past. In fact, I know a lot of poor people who own houses who need to sell for economic reasons but can't without getting a terrible deal.

[Spiffor]

Originally posted by Kidicious
That's funny because a lot of people still don't have one, and less are going to have new houses in the future than got them in the recent past. In fact, I know a lot of poor people who own houses who need to sell for economic reasons but can't without getting a terrible deal.

And where will they live, if they sell their house?

[Ben Kenobi]

That's funny because a lot of people still don't have one, and less are going to have new houses in the future than got them in the recent past. In fact, I know a lot of poor people who own houses who need to sell for economic reasons but can't without getting a terrible deal.

It would be better for them to lose their house altogether because they can't afford to make the payments since the property taxes have risen sky high?

Yes, there are a few people who benefit from sky high real estate, sadly I don't think the poor are among them.

[Kidlicious]

Originally posted by Spiffor

And where will they live, if they sell their house?

They plan to rent. They are seniors and right now they are having a lot of trouble making ends meet. I don't know if they will sell or not though if they can't get a decent price.

[Kidlicious]

Originally posted by Ben Kenobi
Yes, there are a few people who benefit from sky high real estate, sadly I don't think the poor are among them.

Everyone benefits from stable markets. Hell, what we have right now isn't even a market, because people can't agree on prices. You used to be able to predict what the price of a house would be in the future. Now there is too much uncertainty. That means that people won't be able to sell or buy for what they think house is worth. And then of course there's the problem of actually getting a loan for the house. The banks are going to be extra cautious about the loans they give because they are also uncertain.

What I'm saying here is much more important to understanding this problem than supply and demand analysis for the simple fact that there really isn't a market right now.

[Agathon]

I know a few people who bought their first home in the last five years. The prices were insane, but they are now sitting on what looks like becoming a massive loss. It's not that they won't be able to pay off the mortgage, but that they will end up paying far more than the house is worth in the long run.

That sucks.

[DanS]

Originally posted by PLATO
The good news is that the losses will not be as bad as the write downs. The math is pretty simple when dealing with what the actual returns will be on large packages of loans. The current write downs are based on a "mark to market" movement, not pricing them to the expected return. In nearly every case, these loans are still worth more than what the market will pay. The problem is uncertainty on what they will eventually be worth and investors just don't play that game.

There is a reason that all the portfolios of "failed" lenders are being bought by the big banks. They know the long term truth. When this finally breaks, look for huge profits from people like BoA and Citi.

It seems possible that the loan packages are worth more than they are being marked to. However, isn't it true that the true value of the loan packages continues to decline as well, based on the information that is being released?

[Dinner]

Housing prices off 19.2% in S.D. area

By Roger Showley
UNION-TRIBUNE STAFF WRITER

April 30, 2008

Las Vegas, Miami, Phoenix, Los Angeles and San Diego, five areas that saw home prices rocket ahead in the housing boom, are now leading the retreat backward, as prices fall in the wake of mortgage-financing troubles and an economic slowdown.

The Standard & Poor's/Case-Shiller home-price index for February, which was released yesterday, showed San Diego County prices down 19.2 percent from February 2007.

San Diego, which ranked fifth out of 20 markets surveyed, trailed Las Vegas, which was down 22.8 percent; Miami, down 21.7 percent; Phoenix, down 20.8 percent; and Los Angeles, down 19.4 percent over the same period.

“There is no sign of a bottom in the numbers,” said David M. Blitzer, chairman of the S&P index committee. “Prices of single-family homes continue to drop across the nation.”

Graphic: Change in home price index for the county
San Diego was ranked ninth nationally for default and foreclosure activity in the first three months of the year. Irvine-based RealtyTrac said there were 15,315 filings countywide for properties at various stages of distress. That works out to one in 74 homes in trouble, the basis for the ranking. The national rate was one in 194. In California, it was one in 78. <> Six of the most troubled areas were in California. Besides San Diego, they were Stockton, ranked first nationally with one in 30 homes with default or foreclosure notices; Riverside-San Bernardino, second, with one in 38; Bakersfield, fourth, with one in 51; Sacramento, fifth, with one in 55; and Oakland, 10th, with one in 75.

In the S&P/Case-Shiller report on price trends, San Diego County's nearly 20 percent decline was the biggest in 20 years of record keeping. The downturn has accelerated since August 2006.

The 20-city national index, including San Diego, was down 12.7 percent year over year, and a 10-city index, also including San Diego, was down a record 13.6 percent over the same period.

The index is based on homes sold in December, January and February as compared with previous sales of the same properties. The results are translated into index values with 100 for all areas as of January 2000. Percentages then are derived from changes month by month and year over year.

San Diego County's February index value was 190.34, down from 197.45 in January and 235.54 in February 2007. The all-time peak was 250.34, set in November 2005, meaning that prices soared 2½ times their level in January 2000 before falling back 25.1 percent.

Of the 20 areas tracked, Los Angeles, Miami and Washington, D.C., still posted index values above 200. Detroit, at 97.61, is the only area where prices were below 100 and thus selling for less than eight years ago.

The county's performance on the index mirrored median-price trends of all houses as reported by DataQuick Information Systems. The February median of $430,000 was down 20.4 percent from February 2007's $540,000, according to DataQuick.

James Hamilton, an economist at the University of California San Diego, said the downward trend is likely to continue because of the “overhang” of unsold homes, numbering about 19,000 in the county – several times the typical listings count at the peak of the boom in 2003-05.

“It's not a shock that we're seeing this decline now, and I think we'll see some further declines yet to come,” Hamilton said. “That overhang of unsold homes is still there.”

The S&P/Case-Shiller index also includes figures for low-, middle-and high-cost houses that sell each month. It showed that lower-cost homes below $405,020 in the county were down 31.5 percent from the peak, midlevel homes up to $609,200 were down 26.1 percent from the peak, and houses above that figure were off 17 percent from their peak.

Hamilton said the low-cost homes have lost more value because of tightened mortgage-financing rules for prospective buyers. Higher-priced properties have not declined as much because those buyers' incomes have held up through the economic downturn.

In explaining the San Diego area's high ranking among declining markets, Hamilton said, “The common element there is those were the communities that had the biggest run-up.”

http://www.signonsandiego.com/news/business/20080430-9999-1b30housing.html

[DanS]

This month's figures are a little better, but still dreadful. On a nationwide basis, house prices in March were off 2.18% from February.

Only 2 cities out of 20 had positive months: Dallas and Charlotte. On the other hand, poor Las Vegas was off 4.44% from February, after drops of 4.77% and 5.10% in the two previous months, respectively.

[asleepathewheel]

I wonder how worried local gov comptrollers and auditors are about next years and beyond's property taxes...

[Dinner]

At least in California the amount of property taxes paid is fixed at the value of the last date of sale. It doesn't go up or down no matter how the market value changes.

[DaShi]

No, you shan't be on top. I command it!

[DanS]

I guess it just depends on the area. DC had a big run-up in assessed values before the plunge, but the annual increase in the amount on which the tax is applied is capped. Even so, and even considering that the city of DC hasn't had too bad of a drop-off in prices compared to other parts of the metro area, there is a small budget shortfall from prior expectations.