Well, no one can say 2008 was boring. The past year was nothing short of a wild and wooly, heart-pounding roller coaster ride—whether you’re talking about the stock market, the credit market or the housing market.
This year will go down in the books as one of the more tumultuous the nation has seen in the financial markets and that had a very real impact on the housing market across the nation and right here at home.
Residential real estate was already slowing early in the year when we were hit by the crisis in worldwide credit markets and the resulting turmoil in the stock market. The problems on Wall Street left all of us on Main Street—including potential home buyers—feeling a lot less wealthy and a whole lot more vulnerable. In addition, it was harder for even well-qualified buyers to get mortgage loans.
What was the result of all this? As of October (the most current figures available at time of writing) the median price for Bay Area homes was down 38 percent from the previous year,according to DataQuick, the La Jolla-based information services company. San Francisco and San Mateo County’s median price held up much better, dipping 12 percent and 21.9 percent,respectively. The hardest hit areas were the more affordable inland communities of Contra Costa County, which endured a46 percent drop in median sales price from the previous year, “A total of 7,613 new and resale houses and condos closed escrow in the nine-county Bay Area in October. That was up4.7 percent from 7,271 in September, and up 38.8 percent from5,486 in October 2007, according to San Diego-based MDADataQuick.”
It’s important to understand that the drop in median price doesn’t mean that your home has necessarily declined by that much. It simply reflects that the mix of homes that sold last year had changed as a result of foreclosures and distressed property sales, and lots of people bargain hunting in the lower end of the market.
More than ever, our market was a story of “micro climates” with dramatically different housing markets depending on where you live. Some parts of the North Bay, East Bay and southern Santa Clara County have been hit particularly hard by surplus inventory and foreclosures. But housing markets in San Francisco and the Peninsula, in general, have remained fairly stable. In fact, even as markets around us struggled, well-priced homes in desirable neighborhoods in our local market still attracted strong buyer interest and sometimes even multiple offers.
As the year came to a close, we began to see an increase in sales throughout the Bay Area—but especially in those regions that had been hardest hit by foreclosures. That’s encouraging news for the market overall. This is all part of a bottoming process; we need to work through this excess inventory in the lower price levels before the entire housing market can fully recover.
So, where does all of this leave us as we prepare for 2009? No one can say for sure, but undoubtedly there will continue to be economic challenges—at least in the first half of the year. The California Association of Realtors is forecasting a 6 percent drop in the state’s median price for single-family homes, but a continued rise in the number of home sales with buyers taking advantage of lower prices.
A lot will depend on whether the financial crisis on Wall Street can be solved, whether the tight credit markets can be unclogged,whether the nation officially slips into a recession and, if so, how deep of a downturn it may be. A lot of questions indeed.
But I remain fairly optimistic. The housing market goes through cycles, and the downturns rarely last very long. We’ve already gone through nearly two years of this cycle. Interest rates remain near historic lows, and homes prices are as attractive as they have been in years. We are rapidly working through the excess inventory of homes in many markets, and the number of sale sis starting to rise once again.
The housing market historically has fared well, especially in the Bay Area. Since CAR began keeping records on Bay Area home sales in 1982, the median price has only dropped six times. And the average annual rate of appreciation has been 8 percent,thanks to our local economy, outstanding quality of life, world class universities and well-heeled residents.
To me, this all adds up to strong reason for optimism as we approach 2009. Here’s to a great New Year!
Tuesday, December 9, 2008
Thursday, November 20, 2008
Week of November 3 - 9
What we are enduring is no longer a national economic crisis. We are full swing in a global financial crisis that has affected at least 11 countries around the world. Brazil, China, Germany, Iceland, India, Japan, Russia, Saudi Arabia, South Africa and the United Kingdom are now all reporting economic declines and many experts agree that their woes are a direct result of the U.S. housing decline.
World leaders gathered in Washington on Friday to talk about what is needed to get the global economy back on track. Leaders from the Group of 20, which includes the United States, members of the European Union, China, Saudi Arabia and Brazil, agreed to the summit late last month at the height of the global financial crisis.
Our government continues to struggle with finding a solid, coherent plan to give necessary aid to the troubled credit and housing sectors. The administration is still working on the best way to deploy the remaining money in the $700 billion financial rescue plan passed last month. Treasury Secretary Henry Paulson said Wednesday that the government will no longer buy troubled mortgage backed securities—the original intent of the legislation—and will mainly focus on injecting money into the financial sector.
The stock market continues its frenetically sharp swings. This week brought further poor unemployment numbers, and then disappointing retail sales which were off, the resulting fear causing sell-offs, which ultimately attracted buyers taking advantage of lower stock prices. Sounds familiar, right? Each week for more than a month and a half, it’s been about the same story on Wall Street.
Keep in mind that California compares to the rest of the country, noting that while our hardest hit areas decreased further and faster than the country as a whole, these areas are also rebounding at a much faster rate than the rest of the country. It is an important fact that consumers should be aware of.
There is an importance for local forecasting noting that it really is a mistake to paint the California real estate market with a broad brush. Markets like the Central Valley were hit much harder than the Bay Area yet are often lumped in to make sensational headlines for real estate stories. Sales, however, are up and two things we know about this sharp rise in Bay Area sales is that they are largely fueled by REO’s, and that they are dramatically pushing median price down. The positive fact is that these homes are indeed selling, and at a fairly rapid rate. As we weed through the bank owned listings, inventory will begin to decline, which will eventually cause the price point to increase.
World leaders gathered in Washington on Friday to talk about what is needed to get the global economy back on track. Leaders from the Group of 20, which includes the United States, members of the European Union, China, Saudi Arabia and Brazil, agreed to the summit late last month at the height of the global financial crisis.
Our government continues to struggle with finding a solid, coherent plan to give necessary aid to the troubled credit and housing sectors. The administration is still working on the best way to deploy the remaining money in the $700 billion financial rescue plan passed last month. Treasury Secretary Henry Paulson said Wednesday that the government will no longer buy troubled mortgage backed securities—the original intent of the legislation—and will mainly focus on injecting money into the financial sector.
The stock market continues its frenetically sharp swings. This week brought further poor unemployment numbers, and then disappointing retail sales which were off, the resulting fear causing sell-offs, which ultimately attracted buyers taking advantage of lower stock prices. Sounds familiar, right? Each week for more than a month and a half, it’s been about the same story on Wall Street.
Keep in mind that California compares to the rest of the country, noting that while our hardest hit areas decreased further and faster than the country as a whole, these areas are also rebounding at a much faster rate than the rest of the country. It is an important fact that consumers should be aware of.
There is an importance for local forecasting noting that it really is a mistake to paint the California real estate market with a broad brush. Markets like the Central Valley were hit much harder than the Bay Area yet are often lumped in to make sensational headlines for real estate stories. Sales, however, are up and two things we know about this sharp rise in Bay Area sales is that they are largely fueled by REO’s, and that they are dramatically pushing median price down. The positive fact is that these homes are indeed selling, and at a fairly rapid rate. As we weed through the bank owned listings, inventory will begin to decline, which will eventually cause the price point to increase.
Thursday, January 24, 2008
Breaking News: The Fed Cuts Rates by Three Quarters of a Percent
The Federal Reserve slashed two key interest rates by three-quarters of a percentage point Tuesday following an unscheduled meeting, citing continued concerns about a weakening economy and turmoil in the financial markets.
So what does this mean for consumers?
The Federal Reserve lowered its federal funds rate to 3.5 percent from 4.25 percent, which impacts how much consumers pay on credit card debt, home equity lines of credit and auto loans,. This marked the biggest one-day rate move by the central bank since it cut its discount rate by a full percentage point in December 1991, a period when the country was struggling to get out of a recession.
The rate cut is designed to stimulate the economy, which includes the housing market, by:
Helping more individuals qualify for loans and increasing an individual’s purchasing power; and
Positively impacting home equity lines of credit.
How will the rate cut affect consumers?
The cut will affect consumers in a variety of ways:
Those who have home equity lines of credit that are tied to prime or short term Adjustable Rate Mortgages (ARM) could see an immediate reduction in their interest rate.
Those consumers who have adjustable rate mortgages that are tied to key indexes like the One Year Treasury Bill, 12-month Treasury Average and LIBOR Index may receive the benefit of this reduction as the indexes start to move lower in conjunction with lower rates.
What the lending experts are saying.
Robert Reid, the President and CEO for Mortgage Banker Princeton Capital released the following statement on Tuesday following the cut, "The rate cut bodes well for both home buyers and homeowners with adjustable rate mortgages. The cut also puts further downward pressure on mortgage rates. Rates have been moving down the last several months with the previous Federal Reserve cuts, so today’s action will continue this movement which increases home affordability. The conforming rates were at a two-year low prior to the cut and will likely decrease further which will help push jumbo rates down further as well. Lower rates increase affordability which should motivate more homebuyers to get into the market sooner rather than later."
Based on interest rates and the current state of the economy, is now a good time to buy?
We believe this may be the time to buy a home, especially if owning a home is going to be a long-term commitment. Interest rates remain at attractive lows; this increases an individual’s purchasing power and makes the mortgage payment more manageable. In some areas, prices have softened as inventory has grown. All this is leading up to a very strong market for buyers.
If you have been thinking about buying or selling, now may be your best opportunity in more than a decade to do so. I would welcome the opportunity to counsel you on the opportunities available in today’s market and help you take advantage of them before it is too late.
So what does this mean for consumers?
The Federal Reserve lowered its federal funds rate to 3.5 percent from 4.25 percent, which impacts how much consumers pay on credit card debt, home equity lines of credit and auto loans,. This marked the biggest one-day rate move by the central bank since it cut its discount rate by a full percentage point in December 1991, a period when the country was struggling to get out of a recession.
The rate cut is designed to stimulate the economy, which includes the housing market, by:
Helping more individuals qualify for loans and increasing an individual’s purchasing power; and
Positively impacting home equity lines of credit.
How will the rate cut affect consumers?
The cut will affect consumers in a variety of ways:
Those who have home equity lines of credit that are tied to prime or short term Adjustable Rate Mortgages (ARM) could see an immediate reduction in their interest rate.
Those consumers who have adjustable rate mortgages that are tied to key indexes like the One Year Treasury Bill, 12-month Treasury Average and LIBOR Index may receive the benefit of this reduction as the indexes start to move lower in conjunction with lower rates.
What the lending experts are saying.
Robert Reid, the President and CEO for Mortgage Banker Princeton Capital released the following statement on Tuesday following the cut, "The rate cut bodes well for both home buyers and homeowners with adjustable rate mortgages. The cut also puts further downward pressure on mortgage rates. Rates have been moving down the last several months with the previous Federal Reserve cuts, so today’s action will continue this movement which increases home affordability. The conforming rates were at a two-year low prior to the cut and will likely decrease further which will help push jumbo rates down further as well. Lower rates increase affordability which should motivate more homebuyers to get into the market sooner rather than later."
Based on interest rates and the current state of the economy, is now a good time to buy?
We believe this may be the time to buy a home, especially if owning a home is going to be a long-term commitment. Interest rates remain at attractive lows; this increases an individual’s purchasing power and makes the mortgage payment more manageable. In some areas, prices have softened as inventory has grown. All this is leading up to a very strong market for buyers.
If you have been thinking about buying or selling, now may be your best opportunity in more than a decade to do so. I would welcome the opportunity to counsel you on the opportunities available in today’s market and help you take advantage of them before it is too late.
Subscribe to:
Posts (Atom)
Posts
