Dreaming of a 'Soft Landing' in Stockton

From the Stockton Record:

Thank heavens for the stock market. Just when our false sense of wealth was waning along with the real estate market (as in, "What do you mean my house isn't worth a half-million?"), the Dow flirts with 12,000.

The "wealth effect" is back. The "wealth effect" is the economists' code language for feeling rich when you're not. And rich is how a lot of American homeowners felt, especially if they also were Californians, as they rode the real estate wave upward in double-digit bounds for five years or so...

It's a recession, as the saying goes, if the other guy is out of work. It's a depression if you're out of work. By extension, you're in a real estate soft landing, slowdown or what ever euphemism you like, if your neighbor can't sell his house. The bubble has burst in real estate if you're trying to sell your house and can't. That was the situation for the 4,733 San Joaquin County homeowners who had houses on the market in September. Or if you were among the 898 homeowners who received foreclosure notices in the third quarter, a figure up 178 percent from the same period in 2005. Those numbing realities should knock a few digits off your "wealth effect" number.

From the Wall Street Journal:

Some 2.33% of mortgages were delinquent at the end of the third quarter, the highest level since 2003, according to Equifax and Moody's Economy.com. Among the areas that saw the biggest jump in the delinquency rate since the end of last year were Stockton [3.15%] and Merced, Calif. [3.30%], and Las Vegas-Paradise, Nev...

The increase is particularly notable because bad loans normally climb when the economy weakens and job losses rise, leaving more borrowers unable to make their monthly payments. By contrast, the latest increase appears to be more closely tied to looser lending standards, borrowers tapping their equity and slowing home-price growth. "We're seeing rises in delinquencies and loan losses that are unrelated to what's going on in the job market," says Mark Zandi, chief economist of Moody's Economy.com. "It's very unusual."

Several articles about the Stockton/San Joaquin housing market appeared in the Stockton Record over the last week:

-S.J. rental market booming

The rental market is better now partly because the area is seeing a rising wave of foreclosures, she said, as people who bought homes with flexible loans tied to interest rates are caught with higher payments after rates rose. And there are a lot of people who haven't hit foreclosure yet who are in trouble, she said.

There is a plethora of houses for rent on the market these days, owned by investors who bought when values were jumping 25 percent to 40 percent per year during a five-year period that ended last fall. Since prices began dipping, the investors have been unable to "flip" the properties for a profit, she said, and they need to rent the houses to get some kind of cash flow.

-S.J. home sales hit 'soft landing'

A new quarterly study shows that new-home sales in San Joaquin County took a nearly 33 percent dive from the third quarter of last year to the recent third quarter, but prices slipped 2.3 percent.

"Things clearly couldn't keep going at the same pace," said Greg Paquin, president of the Gregory Group, a real estate information and consulting service in Folsom. "We may have hit the soft landing..." Paquin said some markets, including Sacramento, have seen a worse downturn.

-S.J. home sales down; prices up

The most striking news from the new report was that the number of houses on the market dropped countywide, said Jerry Abbott, president and co-owner of Coldwell Banker Grupe. So how much did inventory drop?

"Only five houses less, but it is less," he said.

Even better:

"...prices rose slightly overall, despite being down from a year ago."

Yes folks, the San Joaquin County median home price increased by $4,000 (1%) from August to September. I guess the party is over for all you doom-and-gloomers. Oh wait. What did you say? Something about prices falling? That little green chart in the top corner? Oh, O.K.

Change in median price from September 2005 to September 2006:

Stockton: -8.8% ($25,000 loss)
Tracy: -2.8% ($15,000 loss)
Lodi: -4.8% ($20,000 loss)
San Joaquin County: -5.9% ($25,000 loss)