Tuesday, September 26, 2006

'Perplexed' by the "Slowdown"

From the Stockton Record:

Cheryl McFall, broker and manager of the Manteca office of Remax Executive, said the Manteca market had a slower than usual summer, with prices dropping between 5 percent and 10 percent this year. "So, I don't see that we're turning a corner this year," she said. "I'm hoping for next spring."

The main competition for the existing-home market is new homes, because builders are not only offering incentives of between $80,000 and $100,000, they're also offering sales commissions to real estate agents, she said. "It hurts the real estate market, because you can't compete with that new-home smell."

McFall said many would-be buyers seem to be hesitating because they're watching prices, but this slowdown boggles her mind. During the last slowdown, interest rates were running at between 13 percent and 14 percent, and there were not nearly the variety of today's loan products designed to get people into homes, she said. Interest rates are in the 6 percent to 7 percent range, and the economy is good, she said. "I'm perplexed in a way as to why we're going through this."
Why are we going through this? Columnist Eric Grunder provides some answers:
Last year, as the real estate market reached the apex of its nuttiness, more than 40 percent of mortgages in San Joaquin County were interest-only, according to Loan-Performance, a San Francisco mortgage-research firm.

When home prices are increasing by double digits every year and the Fed isn't boosting interest rates every other month, you can get away with such things. But home prices have flattened - a word that may be way too charitable about what's going on in the real estate market - and interest rates are climbing, the Fed's temporary hiatus last week notwithstanding. (Mortgage rates last week did dip to their lowest level in six months.)

Homeowners servicing an adjustable-rate mortgage are likely in for a shock as rates on those loans are adjusted. We're probably not where we were in the early '90s when some homeowners got upside down on their mortgage - owed more than the house was worth - but the latest foreclosure figures show a troubling pattern.

In the first quarter, the latest reporting period, foreclosure notices statewide jumped more than 23 percent from the same period in 2005. In San Joaquin County, they jumped by 30 percent. And those figures are from the January-March period. Since then, the county's homes-for-sale inventory has skyrocketed, buyers have become at once more choosy and more nervous, and home prices have softened. Do you want to be servicing a funny-paper mortgage in that situation?


JR said...

Cheryl says "I'm perplexed in a way as to why we're going through this."

Cheryl, Home prices are 2 to 3 times what the median income can support, even at these interest rate levels. Flippers, who are stuck with homes they can not sell are finding the rent barely covers 1/3 of the carrying costs, and they have huge negative cash flow burdens. Builders can still build new homes for 30-40% less than the peak prices of 2005, and they are, because they must produce product to earn income and satisfy their stockholders.

Get a clue. Look at the facts.

rocklin renter said...

JR -

A realtor, "getting a clue" or better yet, "looking at facts"?????


Wait, there's more


Whew. Ok, I am done. That was a great laugh man, thank you.

tom stone said...

servicing a mortgage? a lot of people are going to be "serviced" by their mortgage.and hey,cheryl is like,faith based ,you know,so dude,don't be rude.

hemorrhoidforhousing said...

Prices are completely disconected from reality much like the Real Estate people are.

Why do these people seem so clueless about basic economics. When prices outpace income, prices have to give or incomes have to increase to match price. But that's called inflation and the Fed isn't going to let that happen so interest rates would rise.

It is a true bubble and Cheryl needs to understand her and the other Real Estate people helped blow it up with all of their BS.

Anonymous said...
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Anonymous said...

There were 19 or 20 foreclosures notices in the Lincoln News Paper today...lived there for over 30 years and NEVER have seen this many...WoW Most of them were in Folsom...

Anonymous said...

I have been calling the Banks/Lenders on some foreclosures listings...Most of these have already gone to the Auction, and DID NOT SELL..they have gone back to the lender/bank...they still won't come down on the prices....they want whats owed on the property....help me here...don't they see that they already tried to get whats owed at there dumb sale...I just dont get it........DAZED AND CONFUSED AND lol

Anonymous said...

Keep in mind, if these loans are recourse loans, the lender may have the option of suing the homeowner (or ex-homeowner in this case) for the difference between the loan balance and what they actually get for the property.

SCProfessor said...

As to "recourse," if the lender proceeds with a non-judicial foreclosure under California Civil Code Section 2924b (and that happens about 99% of the time), then after the foreclosure sale there is no right of "recourse." To retain that right the lender needs to proceed with a judicial foreclosure.

Anonymous said...

The homes I was calling about had been to the auction block 2-3 months prior...they wanted to cut me a deal, one said that they had already been offered 500K for a property they were asking 575K for, "He said lets make a deal " at that I said GOOD LUCK?>_)(*&^