California's median home price falls 38 percent

[JCMach1]

Source: Yahoo News/AP

The median home price in California plummeted 38 percent in December from a year earlier as low-cost foreclosures boosted sales but lowered property values, a real estate tracking firm said Wednesday.

The median price for California houses and condos dropped to $249,000 last month from $402,000 in December 2007, according to San Diego-based MDA DataQuick. The median price is the point where half the homes sold for more and half sold for less.

The California median home price is at the lowest point since February 2002, when it was $245,000. It marks a 49-percent decline from the peak of $484,000 in the spring of 2007.

An estimated 37,836 homes were sold in California last month, up 18 percent from November and 48 percent from December 2007, according to DataQuick.

The housing market is being driven by bargain hunters snapping up bank-owned foreclosure properties, which accounted for 58 percent of existing homes sold last month, up from 24 percent a year earlier.

"The processing of these distressed properties is almost reaching a frenzied level," said John Karevoll, a DataQuick analyst. "Many of the banks just want to get these properties off their books...

Read more: http://news.yahoo.com/s/ap/20090122/ap_on_bi_ge/california_homes

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Wow! This is getting REALLY bad!

[LeftyMom]

1. Many areas are lower than that.

A lot of the boom in outlying communities was from people who couldn't afford to live anyplace near work. Since that's not the case anymore, and since people are spooked about the idea of long commutes after gas spiked last year, a lot of the outer bedroom communities are down by more than half. The same is true of less desirable neighborhoods, their prices fell fastest because people who were still buying could afford much better locations for their money.

[w4rma]

2. Good. Housing is finally becoming affordable again. (nt)

[chucktaylor]

3. I heard that, I am hoping to buy another small investment property in the next 2 years.

I don't think I have any equity in my primary residence or my rental today because of the market, but I put 20%down only 5 years ago on both. I am about even. 2 years should see the bottom and I should have some cash saved.

[pnwmom]

6. Bad. With home values free-falling, more and more mortgages will be foreclosed,

putting millions more families out of their homes.

A 38% drop means that even families who put down a 20 or 30 percent down payment no longer have enough equity to secure their homes. In many cases, they've lost all their savings and owe more debt than their house is worth.

And the millions who were pressured to take ARM's won't be able to refinance when their rates sky-rocket (and they WERE pressured, and subjected to fraudulent sales tactics from mortgage brokers who received a bonus with each ARM sold).

[w4rma]

24. There are fixes for that situation that don't require over-inflated housing prices. (nt)

[slackmaster]

25. Which is actually good news for some people who have been waiting for prices to come down

And the millions who were pressured to take ARM's won't be able to refinance when their rates sky-rocket (and they WERE pressured, and subjected to fraudulent sales tactics from mortgage brokers who received a bonus with each ARM sold)

That's partly true, but they were not all pressured. I personally know people who took out loans with things like 5-year interest-only option, no income documentation, etc. because that's all they could qualify for. People like musicians who work for cash, don't report all of their income, and maybe work a part-time job in a bar or restaurant.

[pnwmom]

26. The large majority of ARMS went to people who were subject to deceptive sales

practices and who could have been qualified for conventional loans, if they had pushed for one. Unfortunately, they didn't know enough to hold out under the pressure.

I know a bank employee who understood the risks very well, and even she was pushed hard to take an ARM rather than a conventional fixed rate. She was disgusted by the sales tactics attempted on her, and knew better than to succumb. But millions didn't.

As for your first point, yeah, there are always some people who benefit when it is time to snap up foreclosed houses. It's a tragedy, though, for the families that have lost their homes and, in many cases, their life savings this way.

[slackmaster]

27. Not questioning your honesty, but I'd like to know where you got that piece of data

I'm not aware of any systematic study of who has ARMs or why they went that route.

There are legitimate financial reasons to take out an ARM with a low initial rate even if you have golden credit.

[pnwmom]

29. From the bank employee. I don't have any reason to disbelieve her.

She's working in a different part of the bank, not involved in this mess. And as I said, she knew enough not to take this kind of mortgage herself, and to push for a conventional loan instead, but she doesn't blame the consumers who were lured into these risky loans. She had to dig in her heels to get a conventional loan, despite being fully qualified. They really wanted to sell her an ARM instead.

[slackmaster]

31. One bank's behavior does not necessarily describe that of all lenders

Thanks for the clarification.

[WriteDown]

16. I agree, but for selfish reasons....

I am thinking about buying a property with my sister. Should be some good deals coming.

[Xenotime]

22. Tell that to the people who have lost value in their investment.

[w4rma]

23. A house is something to live in. An investment is and always should be a risk. (nt)

[pnwmom]

28. For home buyers, a house is both. Owning a house is a way of putting down

roots that is important to many families, especially those with children. But few would do it if they thought their entire 30% down payment (or more) could be wiped out in a single year.

Most of the families losing their homes now were deceived as to the risks of the mortgages they received. That deception was built into the system and encouraged by the bonuses received by mortgage brokers who pushed these risky ARMS.

[WriteDown]

30. The investment is not wiped out until the asset is sold...

econ 101. Sorry, not much sympathy here. When I signed my mortgage, I went over the terms with a fine tooth comb. Even walked away from the table for a week until the terms were corrected.

[pnwmom]

32. Millions will have their investment wiped out when their ARMS come due in the

next year or two, and they discover they can't refinance, as they were (falsely) assured they would be able to.

But go ahead and keep patting yourself on the back. Compassion for others is so overrated.

:sarcasm:

[WriteDown]

33. Since when is there ever a guarantee of refinance?

If you can't afford the ARM rate, then you should not have signed the mortgage in the first place. It has nothing to do with sympathy, but has to do with people making informed economic decisions. When you are making the largest purchase of your life, you may want to take extra care. People take more time investigating their car loans then their homes.

[pnwmom]

34. You're more intelligent and suspicious than many of the people who succumbed

to these loans.

The mortgage brokers were trained -- and paid handsomely -- to talk people into taking these loans, using deceptive arguments. I don't blame the victims, as you do; I blame the financial companies that were fraudulently pushing these loans.

[cosmicone]

4. Statisticallt correct but

the more desirable areas in San Francisco, Los Angeles and the coast have not gone down much at all. The median has been brought down by areas in Central Valley and distant overbuilt suburbs where prices have fallen by as much as 50%.

[girl gone mad]

8. Not true at all.

SAN FRANCISCO -- San Francisco area home sales in December rose 19.7 percent from November and 36.0 percent from a year earlier as bargain hunters took advantage of falling home prices during a persistent national housing slump, MDA DataQuick said in a report released Wednesday.

The real estate research firm said the nine-county region's median home price fell to $330,000 last month, down 5.7 percent from November and 43.8 percent from a year earlier.

The region's December median marked its lowest level since March 2000 and was off by 50.4 percent from its mid-2007 peak of $665,000.

"Bargain hunting" dominated the San Francisco region's housing market last month, with purchases of foreclosure properties accounting for more than half of all resales for the first time, according to MDA DataQuick.

http://www.reuters.com/article/marketsNews/idUSN2148694820090121

Jan. 21 (Bloomberg) -- San Francisco Bay Area home prices fell 44 percent last month from a year earlier as foreclosures accounted for a record half of all deals on existing properties, MDA DataQuick said.

The median price declined to $330,000 from $587,500 in the nine-county region, the San Diego-based real estate research company said today in a statement. Sales jumped 36 percent from a year earlier.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aWHDbpTQArBQ&refer=us

I know people who live in very desirable SF neighborhoods and have lost hundreds of thousands in equity. It's not "different" there.

[cosmicone]

9. Well, I stand corrected! n/t

[depakid]

5. Housing prices were insanely over valued

So, this isn't "bad" so to speak- just the inevitable consequences of the real estate bubble.

Having seen the previous bubble burst in the late 80's, this was pretty much to be expected.

[defendandprotect]

7. True .. homes were overpriced ... but many bought anyway ...

and many borrowsed on increased value --

Real estate agents have a lot to do with this increased costs of housing --

and the lobbyists -- etal

Sad situation for many --

[kimmylavin]

10. Yup. Just got our tax re-assessment.

Our house is now worth almost $90,000 less than it was a year ago, when it was worth $50,000 less than what we paid for it.

Whee...

[bluestateguy]

11. Tough medicine

The fact is that California real estate was grossly overvalued. You had people in the Silicon Valley making $100,000 a year who could not afford a home. This had to happen, though it is unfortunate that it had to happen in this particular way.

[radfringe]

12. regarding house sales... interesting phenomenon developing?

Might be something - might not be...

I'm seeing more and more homes with signs "FOR SALE BY OWNER", many of these home previously had for sale signs from realtors.

Wondering if owners gave up on realtors or didn't like the "sale value" quoted by the realtor and decided to try it on their own and hope for more money.

anyone else noticing this?

[melm00se]

13. the reason for the drop

is understandable.

When you see price growth rates that far outstrip the historical trends (aka unsustainable rates) and no real corresponding growth in wages (whose growth would have to mirror the real estate prices - also, long term, unsustainable); a correction is inevitable and the further the pricing deviates from the historical (and sustainable) growth rates, the worse the fall will be.

Now, couple that with the taxation situation and overall economic/political climate. California is almost at (or depending upon who you ask is past) the tipping point where government services and taxation rates and the population will start to migrate away. In fact you are starting to see that based upon this report:

http://www.census.gov/prod/2006pubs/p25-1135.pdf

net migration for the Pacific coast region is negative (more leaving than coming in) and California is second only to NY in negative net migration.

[mike_c]

14. still way too high, IMO....

eom

[depakid]

20. "Burbed" has been documenting this insanity for awhile now

http://www.burbed.com/

There was a thread about it a few years back.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x21775

$500,000 - $800,000 shacks. Some of the interiors were like poorly done garage conversions.

And looking at some of the more recent listings- they're still ridiculous.

[specialed]

15. Another 20 to 25 % and it will be right about where they should be

before they hyper inflated 80% over 2 years.

[Coventina]

17. Stories like this have me shaking my head. How do working families survive in CA?

I don't get it.

The market is "depressed" when the median price is $250,000?!?!?

I love to visit California, but I clearly could never afford to live there.

[ronnie624]

18. It was inevitable.

Property values were being artificially inflated by greedbags looking for quick fortunes at the expense of everyone else.

Already battered and bruised by the nationwide housing slump, Washington Mutual got another black eye Thursday when New York Attorney General Andrew Cuomo accused the company of pressuring appraisers to inflate home values.

In a lawsuit filed in New York state court, Cuomo and his team accused appraisal firm eAppraiseIT and its parent, First American, of knuckling under to Seattle-based WaMu, one of the nation's biggest mortgage lenders.

"Simply put, First American and eAppraiseIT signed over their independence to Washington Mutual, so that Washington Mutual's loan staff could illegally hand-pick the appraisers who would hit the numbers that Washington Mutual wanted," said Eric Corngold, New York's deputy attorney general for economic justice.

Along with complicated subprime mortgages being issued to homebuyers who couldn't afford them, faulty appraisals have emerged as a key factor in the nation's housing-market collapse.

<http://seattletimes.nwsource.com/html/businesstechnology/2003989314_wamu02.html>


Madison, WI - What is Appraisal Fraud?
Appraisal fraud involves the falsification of an appraisal to justify a value that may not accurately represent the true market value of the property. For instance, an appraiser may fraudulently justify an inflated market value by using comps that are not really similar properties or ignoring property defects that negatively impact value. Typically this is done in response to pressure from mortgage brokers, lenders, or even real estate brokers to “meet the mark” – that is, the amount required to sustain the sales price and bring the loan to a close. Often this means that the appraised value ends up equaling the contract price.

What are the Consequences of Appraisal Fraud?
Buyers: A recent report from the New York public policy think tank Dēmos (www.demos-usa.org) indicts appraisers for the increasingly widespread overvaluation of residential properties. “Home Insecurity: How Widespread Appraisal Fraud Puts Homeowners at Risk”
(www.demos-usa.org/pubs/home_insecurity_v3.pdf) warns of the dangers that loom for homeowners if appraisal fraud continues unchecked. When a buyer’s purchase loan exceeds the true market value of the home, there may be dire consequences if the owner is unable to later sell the property for enough money to pay off the mortgage and any other liens on the property. The scenario will be much worse if the “housing bubble” bursts and values tumble. The end of the road for many of these buyers may be foreclosure and potential bankruptcy. Putting buyers into homes and mortgages that they cannot afford is not serving the best interests of these buyers. Homeownership is not the American dream if it ends in the nightmare of foreclosure and possible bankruptcy.

<http://news.wra.org/story.asp?a=197>

[Hepburn]

19. The Inland Empire of California is the only place prices rose.

IMO, everywhere else they fell like a rock.

[slackmaster]

21. They also rose in downtown San Diego and a few of the upper-class neighborhoods around here

The more granular you get the more complex the situation becomes, but in general the places that have seen the largest drops are traditionally poor areas like ZIP code 92113 (Barrio Logan). In Del Mar and Point Loma, they've actually risen slightly.