Wednesday, September 19, 2007

Moody's Home Price Forecast: Stockton -25%, Sacramento -19%

From the CNN Money:

Over the next few years, more than three-quarters of the nation's housing markets will suffer a decline in home prices. Many will experience double-digit hits in a forecast that has worsened considerably in recent months. According to an analysis conducted by Moody's, price declines will exceed 10 percent in 86 of the 379 largest housing markets. And 290 of the cities will experience price drops of 1 percent or more.
The Stockton, Calif., metro area, where Moody's predicts a 25 percent price drop, will be the hardest hit among the 100 most populated cities surveyed. Prices in Stockton - in California's Central Valley - rose quickly through 2005 as many would-be Bay Area buyers, frozen out of the expensive San Francisco area housing market, moved in. That influx drove up the median, single-family home price to about $375,000. Stockton prices peaked during the first quarter of 2006 and have gone downhill since. Prices likely won't turn around until the end of next year.
100 largest metro areas by population that are forecast to witness a decline in the median existing single-family house price [peak - bottom]:

#1 Stockton: -25.0% [06Q1 - 08Q4]
#5 Modesto: -22.3% [06Q2 - 08Q3]
#7 Fresno: -20.0% [06Q2 - 09Q1]
#9 Sacramento: -19.1% [06Q1 - 08Q4]
#15 Visalia-Porterville: -16.1% [06Q2 - 08Q4]
#19 Bakersfield: -15.6% [06Q2 - 09Q1]
Flashback to Moody's October 2006 predictions:
  • Stockton: -15.7% [05Q4 - 08Q4]
  • Sacramento: -9.9% [05Q4 - 08Q2]
According to DataQuick, the median price of an existing single-family home in Sacramento County has already declined 17.1% from peak.

From the Wall Street Journal:
To make an American mortgage executive wince, just say "Stockton." Last month,, an online property marketplace, cited the central California city as the nation's foreclosure capital....A 26-month backlog of Stockton homes is for sale. Buyers are scarce; prices are skidding.

That's bad news for the mortgage industry, which could use some pointers on coping with adversity. Some shakeout in the housing market was inevitable. But as defaults and foreclosures mount nationwide, there are signs home lenders are responding in ways that aren't making the rout any easier on themselves....[T]he industry has largely neglected the "back end," the grim but vital task of salvaging loans that go sour.

Jerry Abbott sees the consequences of that neglect every day. His Stockton real-estate brokerage seeks buyers for foreclosed homes. Many of his sales are at a 10% to 15% discount to already-weak market prices...To Mr. Abbott's chagrin, many lenders don't grasp the futility of holding out for boom-time prices in a collapsing market. Lenders trying to sell a foreclosed home for $250,000 often don't react pragmatically by cutting a deal when a bidder offers $230,000; instead they might counter with a token -- and potentially insulting -- price reduction of $1,000. In such situations, Mr. Abbott says, homes don't sell for ages, and when they do, they fetch far lower prices.
From Sacramento Bee:
Desperate times call for desperate measures. So over the weekend Richard and Dana Carrigan shoveled out a piece of their Fair Oaks yard, then buried a 3 1/2-inch statue of St. Joseph that Richard had bought a couple of days earlier. The couple are looking for any extra help they can get as their home goes up for sale alongside the 16,000 other area residences already on the market. "We'll try anything," says Richard Carrigan, an English teacher at Jesuit High School in Carmichael.
Catholic retailers say the little statues are flying off their shelves as the once-robust Sacramento-area housing market has slowed....Easter's Catholic Books and Gifts on Palm Avenue in Sacramento says customers have bought 350 St. Joseph kits in recent months. "We have a lot of real estate agents who come in and buy them in bulk," says co-owner Denise Easter-Kramer. Another Sacramento retailer, the Catholic Store on Broadway, claims more than 500 sales in two years. Owner Marilia Perez said sales spiked this summer as real estate listings increased across the region...Even the Sacramento Association of Realtors store on Howe Avenue sells St. Joseph.
From News10:
Homeowners on the brink of foreclosure are refusing to let the banks take away their homes, at least not without a fight. Two sisters from Sacramento are organizing town hall meetings to let other homeowners in on their strategy for holding onto their homes.
"I feel like I have to get a night job to keep my house or something," said Tony Ramirez from Sacramento. Ramirez and his fiancé Clarissa are not in foreclosure but have received notice from their lender that their loan is adjusting up $300 per month. "I'm pretty upset that when they sent us a letter saying that your house is going to go up, they didn't offer help. Like if you have hardship, we have a department that can modify your loan. I didn't even know that," Ramirez said. But he and others at Tuesday night's meeting know it now and are hungry for more solutions to avoid foreclosure.
From the Sacramento Bee:
Would you pay more in taxes to put additional cops on the street? That's the question Sheriff John McGinness wants to ask voters in unincorporated Sacramento County...The county is considering its options, but the most likely route is adding a special charge to property tax bills, a move that would require approval by two-thirds of the voters. County officials would try to get the question on the 2008 ballot.
The cop tax is one of several ideas the cash-strapped county has floated to improve services during gloomy economic times...Last week, the supervisors were forced to trim requests for additional sheriff's deputies and probation officers, as they approved a $2.1 billion general fund budget. Even as the spending plan was being approved, officials worried that a slumping housing market may force deeper cuts next year.
From the Sacramento Bee:
After weeks of troubling news on the real estate front, Sacramento-area housing and financial experts called Tuesday's interest rate cuts by the Federal Reserve a "good first step" in helping the housing market regain stability. But how much it will help and how fast remain an open question, say home builders, real estate agents, bankers and homebuyers. Some said the government should do more to help ease credit restrictions that make it harder to qualify for California's more expensive housing.
But Tuesday's action will bring little relief to thousands of Sacramento-area homeowners who owe more than their houses are worth, experts say. Most say today's tightened lending standards will continue to block them from refinancing their way out of trouble. That means more of the defaults that in August caused one foreclosure for every two home sales locally.
Ron Leis, a real estate broker in Carmichael, said the region's home prices are still too high for many first-timers -- even with interest rate cuts. "The rate cuts will help," Leis said. But they don't dent the affordability problem, he said.
From the Stockton Record:
Congress appears poised to throw beleaguered homeowners a lifeline and help potential buyers qualify for federally backed mortgages as a way to combat the flood of foreclosures hitting the nation...Tuesday the House passed legislation 348-72 to overhaul the Federal Housing Administration, which backs mortgages for moderately priced homes...The House also passed an amendment to the legislation sponsored by Rep. Dennis Cardoza, D-Merced, that would raise the loan limit to the lower of either 125 percent of an area's median home price or 175 percent of the national loan limit...The Cardoza amendment would allow loans for as much as $430,000 in San Joaquin County and $368,000 in Stockton to qualify for FHA assistance.
Most of the San Joaquin Valley delegation voted for the bill; Rep. George Radanovich, R-Mariposa, was the lone holdout. Rep. Jerry McNerney, D-Pleasanton, who represents a large portion of San Joaquin County, was an "aye" vote. "The number of home foreclosures in San Joaquin County and throughout California is startling, forcing many families out of their homes and into financial ruin," McNerney said. "Many of those families took out interest-only or adjustable-rate mortgages because there was no other option. This bill takes major steps to address this and ensure that the American dream is within reach of all Americans."


Sippn said...

So moody is predicting about a 1 year roll back from the peak?

That'll tick off the lawn parkers.

Folks, thats an average. . . . you'll see 30% + in some areas and less than 10% in close.

Perfect Storm said...

Sept. 19 (Bloomberg) -- As many as half of the 450,000 subprime borrowers whose mortgage payments increase in the next three months may lose their homes because they can't sell, refinance or qualify for help from the U.S. government.

Patient Renter said...

-19%? Aren't we close to that already?

Perfect Storm said...

Moody perdicts that Sacramento will decline by 19.1% by 4th quarter 2008, hey wait a second La Jolla-based DataQuick Information Systems reported Thursday that median sales prices are now nearly 20 percent below their 2005 highs in Placer and Sacramento counties.

Oh Moodys is going from 1st quarter 2006, so that puts us around 25% by 4th quarter 2008, according to Moody.

We will be down by 25% by Christmas, easy. Moody's predictions have been in error by 100%.

Diggin Deeper said...

With a track record that's nothing but "ofers" for over a year, I doubt any prediction about this market by local papers, Moody's, college professors, or media pundits, get much credit from this point on. The whole thing was contained or so we were told...

lexi said...

Wow, how do you buy stock in St. Joseph statues... that would be
the only sure money making bet in
the next year or two. :) You
could use greenspans book to help
shovel the dirt to bury the statue.

Cmyst said...

For all the sellers burying St Joe in the yard to help them sell, I think we fence-sitting buyers should meditate at home with our Chinese money-toad statuettes and burn some Monopoly money to help us come up with the cash the buyers are asking.

Sippn said...

Lexi - that and liquor mfg.

lexi said...

yeah, for all those squeezed with
the new resets... two buck chuck
might be a good investment.

golfer_X said...

Those Moody numbers are already out of date in more than a few counties. They better break the calculators back out and start over again.

wrong moves said...

"Many of those families took out interest-only or adjustable-rate mortgages because there was no other option.

Nooooo, there was another option.

Don't buy what you CAN NOT afford. So many people had champagne appetites on beer budgets.

It can be done. I know. I did it.

paranoid renter said...

Don't buy what you CAN NOT afford.

It's very hard to follow that when it's also accompanied by the fear of being forever priced out. It's not like savings were going up at the rate of home price increases, so that fear was real. I am single and I know it was hard for me (hence my pen name), but if I know many folks that were married and for them it was a "now or never" thing and they decided to take the plunge. These are people that really had to stretch their resources in order to buy.

Damon said...

"I know many folks that were married and for them it was a "now or never" thing and they decided to take the plunge."
I do as well and I know a significant number that have since or are about to go into foreclosure. Fortunately my family isn't one of them. We were in the market back in 2004. The last straw came in spring 2005. We looked at an 850 sq ft 2/1 house that was asking for a ridiculous 309k. The only loan at the time that would get us in that price range was an interest only. I said no thanks. We pulled out of the shopping spree and have been renting and saving ever since.

My wife and I, now with our first child, have happily sacrificed traditional expectations on how a young family should live. We live with 3 three roommates in a 4000sq ft McMansion and our monthly savings is significant. Consider that my wife and I gross between $90-110k. I'm hoping the savings will someday go toward a down payment when/if prices ever fall back within fundamentals. If not, we'll just continue to rent and put our savings elsewhere.

I wonder how many others have a similar situation to ours.