Has the real estate market really changed?

It's a fact, historically low mortgage rates have, in a de facto sense, extended the first time home buyer credit. Also, the billions allocated to residential properties via extraordinary and unprecedented actions of large funds, distorts comparisons.

California Housing Market

California Housing Market

San Diego Real Estate broker - http://www.brokerforyou.com/
California Housing Market

The National Association of Homebuilders just released a report listing US housing markets showing measurable and sustained improvement from their respective market troughs in housing permits, employment and house prices for at least six consecutive months.

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San Diego real estate agent - Bob Schwartz
"Making Dreams Come True" is the slogan Bob Schwartz has been using throughout his career in residential real estate. Bob gets a tremendous sense of satisfaction in assisting people with the largest purchase in their lives. The first home, the move-up home, the vacation villa, and the retirement home, are all major milestones in one's life-cycle. He takes great pride in making his clients' dreams come true.

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Bob Schwartz, San Diego real estate broker - CA Lic. # 00706331

California Housing Market

San Diego real estate

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San Diego real estate agent provides his opinion on the San Diego real estate market.

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Bob Schwartz, San Diego real estate broker CA Lic. # 00706331


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San Diego real estate

2011 San Diego Real Estate Market Direction

2011 San Diego Real Estate Market Direction

After the $8,000, Federal and California home buyer credits expired, the local San Diego real estate market entered into a double-dip continued erosion of home values.

After the homebuyer credits concluded, San Diego home values saw modest price appreciation. Now even this modest appreciation has disappeared. Even more troubling is that the resale home sales volume has been dropping at double digit rates for the last few months.  Just from April to May the western states sales dropped a reported 20.9%. Huge double-digit declines in home sales are a major red flag that cannot be ignored.

When will the government learn that you cannot artificially create lasting demand?  (Statistics show the vast majority of government housing programs, costing billions, are outright failures and have only prolonged our malaise.)  I believe the best thing the government can do is to stay out of the housing market and let the open market clean up the mess.

Think about this: Bernanke initially spent almost $2 trillion to drive long-term interest rates down.

The $600 billion QE2 has no effect to date. Actually, interest rates have moved up substantially. There are a few months left, but I am sure Bernanke will use the "it would have been much worse" argument and declare success. The reality is that there will be no QE3, not with Ron Paul now as the watchdog of the Fed.

Our aging population, combined with a decreased standard of living can't equate to housing starts comparable to prior generations. I think our government’s relentless destruction of the middle class is making this different from prior real estate cycles.

Foreclosure moratoriums are beginning to expire.  I believe the banks will push to clean up their portfolios through increased foreclosures.

Except for cash buyers, home pricing is derived from the affordability of the monthly payment. Should interest rates and taxes go up (a good bet), the purchase price will have to come down to establish a market. Construction labor is already about as cheap as you can get it and inflation for materials is already present. This spells very bad news for homebuilders.

As far as pent-up buyer demand goes, the gurus again have it backwards. It’s not buyer pent-up demand, but seller pent-up demand to unload their homes.

The depth and longevity of this San Diego housing value depression has been imbedded into the consciousness of the usual first wave of home buyers in their late 20’s and early 30’s.  The high cost of living in San Diego has been further stressed with continued multiple raises in utilities, increased state taxes/fees, higher education costs and $3.00+ per gallon gas prices. This all equates to over-priced homes in the current world of qualifying for a home mortgage.

I just believe there are major problems with our economy at play that we have never seen before and that will have a deciding call on what happens with housing. I see demand based on finance rather than population at this point.

During the mid 2000's, almost the entire mortgage universe had been refinanced. This included many baby boomers that were in the last half of the 30-year mortgage they took out when they purchased their home. Some of this was hopefully to pay down other expenses and not to maintain their fantasy of the luxury lifestyle.  The refinancing bubble that resulted from the irresponsible actions of Greenspan reset the 30-year mortgage clock. All borrowers looked at, was how the refinance lowered their house payment by $X per month, without giving a second thought to the fact that they have also extended the term to a new 30-year loan.

Another round of refinancing occurred when Bernanke pushed rates down to the 4% range. The only borrowers left who have not refinanced are those with no equity and/or are facing foreclosure.

In either case, now many Boomers who are reaching the traditional retirement age, find themselves strapped with 20+ years left on their refinanced mortgages. Instead of preparing for the mortgage burning party that their parents had when that generation retired, they are wondering how they can make house payments on a lower income during retirement.

Since this is the first year of the boomers reaching 65, it is going to be a negative drag on housing for years to come.

For the San Diego and California real estate market we have to contend with our own Cap & Tax laws going into effect in 2011 that will increase utility costs by 20% over the next five and speeding up the loss of manufacturing jobs. We also have a new, old governor who was against proposition 13 which sets a maximum cap on property taxes and will likely propose new massive state taxes to deal with a $25.4 billion budget deficit.

I will end my prediction with a challenge.  I have 30+ years in residential real estate, I accurately foretold the 2005 bubble burst, and despite wanting to be wrong with previous “low” opinions I usually haven’t been.  Do you want to bet against me?

My San Diego California real estate site provides full, unrestricted access to search the entire San Diego MLS .  Also, if you want to see the actual current San Diego real estate sales activity and actual closed home prices, please visit San Diego home sales. San Diego real estate home market blog     

San Diego California real estate agents

brokerforyou Bob Schwartz

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Associations Pay For California Mortgage Moratoriums

While some people struggle to keep their mortgage payments current, others are living in their houses for free. Not only are they not making mortgage payments but they are being offered incentives when they don’t.  The Federal government has pressured lenders to work out foreclosure alternatives because of the larger number of foreclosure activity.  There are also both Federal and state foreclosure moratoriums extending this “live free” courtesy.

The media outlets continue to show hard working families with five or six kids being ‘forced’ to leave their home.  It makes for good emotional ‘news.’ There is another side to the story. Sadly, the taxpayers (and future generations) end up paying.

Last week Citigroup announced plans for a pilot program. Delinquent borrowers who don’t qualify for, or decline, mortgage relief would be allowed to stay in their homes without making payments for up to six months. In return, the owner/tenant are to keep the property in good condition.   Let’s look at this a different way.  Hypothetically, say the monthly payment is $1,900.  Can the bank not get a gardener and a security service for MUCH less?

Who will make the property tax, insurance, and utility payments?  In the case of condominiums and planned communities, who pays the monthly homeowners dues? My first post on this topic: New California Law Offers Free Living for Many Homeowners was published on 6-6-09.

In San Diego, and probably all of California, many of the foreclosures involve condominiums or communities with homeowner fees. Typically, if after a number of months a homeowner is delinquent in their dues, the Association files a lien notice. In severe cases the Association will foreclose on this lien. Now with all the ‘underwater’ homeowners, many homeowner associations are not even incurring the expense of filing a lien.  Since there is negative equity the associations are rendered impotent.

If that is not bad enough, the California legislature in its infinite wisdom passed two new laws last year that effectively more than double the time before a lender can think of a foreclosure. If they had added a provision that moratoriums only applied to homeowners who kept up with their tax, insurance, and homeowner fees it wouldn’t have been so bad.  In my opinion a portion of the regular monthly mortgage payment should have been included.

Perhaps that is too much common sense to expect from the government. Unfortunately, this has created a problem for California homeowner associations. Had the government stayed out of the process and not pressured lenders, the normal foreclosure time frames would not have hit the homeowner associations as hard.

In California, a foreclosure previously took 90 days plus a 21 advertising period. If there are no buyers, the property reverts back to the lender. Once the lender owns the property the monthly expenses, including the homeowner’s fee became the responsibility of the lender.

In California and many western states, on a first loan to purchase your principal residence, the lender’s ONLY recourse is to take back the property. They are barred by law from any other actions against the troubled homeowner (liens, pay garnishments, personal property repossession, etc.). Whether the owner is $100,000 under water or stays rent free for another year and becomes an additional $25,000 under water, it really does not matter. The credit rating is going to take a toll for normally 7 years.  With the extent of the current housing problem this credit hit will likely have a lessened impact.  Even with the negative hit to credit, many are deciding walking away/staying without paying is an easy way out of the substantial negative equity position.

It's becoming common for troubled Californian homeowner to live payment free for a year and possibly longer.  Unfortunately for the paying members of homeowner associations, they will have to cover the delinquent dues.  Adding insult to injury, they have no hope of recovering these additional costs without raising dues or imposing special assessments.

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