Wednesday, August 23, 2006

Housing Market "Slump" Has 'Nothing To Do With [6%] Affordability'

From the Stockton Record:

In the middle of a housing-market slump, the Stockton, Sacramento and Modesto areas continue to sit high on a list of the least-affordable metro areas in the country. California cities continued to dominate the least affordable metro areas in major U.S. housing markets in the second quarter of 2006, according to a National Association of Home Builders/Wells Fargo Housing Opportunity Index, released Tuesday.

Of 10 least-affordable metro areas with populations of 500,000 or more, Stockton - basically, San Joaquin County - ranked fifth, behind only Los Angeles, Anaheim, San Diego and New York City. Sacramento ranked eighth on that list. Of 10 least-affordable metro areas with populations of 500,000 or less, Modesto ranked third, behind Salinas and Merced.

A year ago, the Stockton metro area ranked ninth in the least-affordable list. In the new list, the area was 12th lowest out of 199 metro areas surveyed for affordability...In San Joaquin County, where the median sales prices last quarter stood at $435,000, only 6 percent of the homes sold could be afforded by a family earning the area's median income of $57,000...

Greg Paquin, president of the Gregory Group, a real estate information and consulting service in Folsom, said the market is slowing because of affordability - home prices went up much faster than incomes. "There's a gap there that needs to narrow, and I think that's what we're seeing," he said. "Sales are down, and they will continue to be. You're going to see that affect prices to some degree as well as incentives..."

Stockton real estate broker Bruce Davies, of Partners Real Estate, said flatly that affordability isn't an issue at all in the slow market. Interest rates have been going down lately, are still relatively very low, and it's a good time to buy, he said. "People are just wondering whether prices are going to go down," he said. "It has nothing to do with affordability..."

Jerry Abbott, president and co-owner of Coldwell Banker Grupe in Stockton, said that in recent weeks, sellers for the first time have begun really slashing prices in hopes of selling. As the number of homes for sale continues to grow month after month, sales are flat, he said. "A lot of people may be anticipating that prices may be less next year, and they'd better sell now."


Agent Bubble said...

"affordability isn't an issue at all in the slow market."

You gotta be kidding me. I guess all those people chose interest only and neg am loans because they had a choice in the matter.

Rocklin Renter said...

Bruce Davies is an idiot.

Well, either that, or he lives on Candy Cane Lane next door to Mr. Toad and Snow White in Fantasyland.

6% Bruce. 6 out of 100 families can afford to buy a home in your area. This is a huge problem to everyone who does not live in Fantasyland.

And "realtors" wonder why people think they are no better than used-car salesman.

drwende said...

The reason some realtors say affordability is irrelevant (other than lying or being delusionary) is that "affordability" is calculated for 20% down with a conventional loan, while the realtors intend to sell 100% financing I/O ARM.

The problem isn't that houses aren't affordable now -- it's that the houses people already bought weren't affordable, and as their ARMs reset, they're discovering this.

RMB said...

I live in the Stockton area and can attest that the house prices here do not reflect reality. The only people who can afford houses here are govt employees and those willing to take on suicide loans. This are is setting up for a huge downfall and no amount of hoping or praying is going to change that. The realtors, MB's, et. al. have been living LARGE for the last 5 years and they are currently going through something they are not prepared for. I fully expect to see entire subdivision of north and south stockton, Lodi, Lathrop, Manteca, Tracy, and Mountain house hit the auction block in the next 12 to 18 months, if the courts can keep up.

Ruben said...

"It has nothing to do with affordability..."

Where does the Record find these guys?

KCRA 3 was in my neighborhood, Ceres, CA, interviewing a buyer looking at a home that has been on the market since January. The potential buyers didn't know of the all the housing bubble news today, until the news reporter asked them about it.

Anonymous said...

...which means that Bruce Davies is actually a pretty shrewd guy, because he knows there are still sheep out there to be fleeced.

crispy&cole said...


Anonymous said...

Bruce Davies next job will be selling used cars on Charter Way.