Tuesday, August 21, 2007

Affordability Equilibrium

From the OC Register:

O.C. real estate consultant John Burns is telling his clients: "For prices to return to their historical median ratio of housing costs/income, national prices would need to revert back to mid-2004 levels."...The timing varies significantly by market, however.
[H]ere’s a look at the top markets in the U.S. and what period’s price level would return these towns to Burns’ median affordability equilibrium:

2003 Q1: New York, NY; Orange County; Sacramento
From PRNewswire:
Six California metropolitan areas reported foreclosure rates among the top 10 in July: Stockton at No. 2; Merced at No. 3; Modesto at No. 4; Vallejo-Fairfield at No. 5; Riverside-San Bernardino at No. 8; and Sacramento at No. 9
From the Merced Sun-Star:
The Merced City Council took aim Monday night at a growing nuisance: foreclosed properties falling into disrepair and blighting city neighborhoods. At the suggestion of Councilman Rick Osorio, the council directed city staff to look at ways the city could better maintain empty houses.
Osorio, who is running for mayor, said when homeowners move out or abandon properties in foreclosure, the empty houses become magnets for a host of problems. With water turned off, grass turns yellow and becomes a fire hazard. Stagnant water in swimming pools becomes a breeding ground for mosquitoes. Worst of all, dark houses with no signs of life houses attract vandals, drug dealers, and other criminals, said Osorio.

"In order to protect our citizens, we need to have some type of emergency ordinance so we can go in there and maintain the properties," said Osorio before Monday's meeting...City Attorney Greg Diaz said the his staff would look at ways the city could maintain abandoned property on an ongoing basis and still be reimbursed for those costs.
[Councilman Jim] Sanders, who heads a non-profit that organizes Neighborhood Watch groups, said empty houses in disrepair have become a top complaint at Neighborhood Watch meetings over the past year.


Patient Renter said...

"For prices to return to their historical median ratio of housing costs/income, national prices would need to revert back to mid-2004 levels"

I didn't realize local and national prices forcibly stuck together in this way. It was good of John to provide convincing evidence to support this idea.

paranoid renter said...

We're already at mid-2004 price levels, no?

RMB said...

Or 2001ish for Sacramento if you bother to actually look at the data and see what has happened to prices over the last few years.
Using "new" parameters and then saying we just need to get to those doesn't really cut it.

smf said...

"We're already at mid-2004 price levels, no?"

Easily, and I have already seen a few 2003 prices, PRIOR to the latest mortgage troubles.

paranoid renter said...

In the meantime, I'm getting more and more impatient...have to read these blogs several times a day or I'd be in a stucco box by now!

Gwynster said...

Mid 2004? depends on the seller. I've seen everything from people still clinging to 200k over Summer 05' prices to Fall 02' prices for REOs that went to auction.

As to the target prices? I stand by my 1997 price adjusted for inflation anually plus 3% appreciation. In most areas, that gets us to Fall of 01' or spring of 02.

Gwynster said...

And one more tidbit:

From Bubble Markets in Trouble-

"All-time Record high inventory: 17,342 homes, August 2006.
Previous Record high inventory: 13,507 homes, April 1992.
Realty Times 11/20/2005
Population 1992: 1.55 million
Listing to poputation ratio 4/1992 1:115
Population adjusted record high inventory: 17,913."

We just passed the population adjusted inventory #

08/20: 18,067

I feel like I should throw a little party or something.

Giacomo said...

"...national prices would need to revert back to mid-2004 levels"

This is damage control by a "consultant" allied with the REI. Admit there is a problem (when its existence can no longer credibly be denied) but assert that it is contained (but offer no evidence). The aim, as always, is to influence public opinion without technically "lying."

More about the game, interesting:

Cmyst said...

I read the blogs before work, after work, and before bed. I check Zip Realty once a day. If blogs are slow, I check the Bee's business section.
This is a dangerous time. Prices are beginning to drop, and especially for people who have very specific criteria for a home it is tempting.
I find that looking at the charts on Zip of what the home's "value" was prior to the bubble helps a lot.

paranoid renter said...

I find that looking at the charts on Zip of what the home's "value" was prior to the bubble helps a lot.

One problem with that is the dollar has a lost a lot of its value over that time so prices may not revert to what they were back then.

I think gwynster's estimate for fall '01/spring '02 sounds about right where they would stabilize.

Westside Bubble said...

To see what this could look like, I graphed John Burns' estimates for Los Angeles, Orange, and San Diego Counties at Westside Bubble.

These would be 35-40% declines, based on DataQuick median prices.

Patient Renter said...

"We just passed the population adjusted inventory #

08/20: 18,067

I feel like I should throw a little party or something."

I'm having a drink in honor of the occasion :)

serenity said...

the good old days ....

Lender: "This is America! Everyone deserves a break, a second chance, a piece of the pie. I don't even want to know the details. Do you have a dollar in your pocket?"

Borrower: "Sure!"

Lender: "That's your down payment! Simple as that. Now, how big a mortgage do you want?" ... a bit of fun reading from the chrnoicle and sf gate. http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/08/21/DDI0RKNQA.DTL&ref=patrick.net

Gwynster said...

OK some days you really should be allowed to drink heavily before noon. After seeing this listing, I think today is one of those days.

MLS #: 70089707

Sac_Sol said...

750k for 2500 sq ft in Woodland?!?!?!?!? hahahahaha. That's good comedy.

Mike said...

From what I've been monitoring in specific areas, (Areas I've lived in before), the prices levels are:

Gold River: Late 2004/Early 2005

Natomas: Late 2003/Early 2004

Elk Grove: Early/Mid 2003

Elk Grove has been going back on prices the most with Gold River not going down much. Unfortunately, Elk Grove is the least desirable area for me to live out of three locations so it does no good for me if the prices are plunging there.

SacramentoCrash said...

2002 price levels is what I have been saying all along.

That was the year before mortgage madness and incompetent investors and buyers flooded the Sacramento market.

The mainstream media must be reading these blog comments.

Keith Gregory said...

I'd agree with the notion of going back- this whole thing really started to take off when Wall Street was able to essentially feed capital through MBS/CDO sales into real estate- the rise of subprime & alt a was the result- and it became a positive feedback loop- the more capital that came in, the more people needed to bid, the easier it became to borrow.