California Foreclosures Driving Sales
You need only two things to fix the housing crisis: Readily available consumer credit, and lower real estate prices.
The second part of that equation is being helped along by Foreclosures:
Southern California home sales rose 51 percent in December as a surge in foreclosures pushed prices of single-family houses and condominiums down from a year earlier, MDA DataQuick said.
A total of 19,926 new and existing houses and condos sold last month in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties, up from 13,240 a year earlier, the San Diego-based research company said today in a statement. The median home price in the region fell 35 percent to $278,000…
Foreclosures, which often sell at steep discounts, lured buyers as President-Elect Barack Obama worked on plans to revive the housing market using the second half of the $700 billion Troubled-Asset Relief Program. Lenders including Bank of America Corp., and financial institutions such as Goldman Sachs Group Inc. benefited from the government’s initial distribution of bailout money as their mortgage-related assets plunged in value.
Foreclosed homes accounted for 56 percent of Southern California’s December sales, more than double the amount a year earlier, MDA DataQuick said. Such transactions made up almost 70 percent of sales in Riverside County, where the median price plummeted 41 percent to $209,000. Sales jumped 77 percent to 4,435, MDA DataQuick said.
The median price for all of Southern California plunged as a smaller proportion of properties changed hands near the coast and more were sold inland in areas including Riverside and San Bernardino, where mortgage defaults have surged.
The bottom in Housing won’t be in until prices come closer to historical means. One of the factors driving pricing is the ongoing foreclosures.
I don’t have any problem with the government engaging in assistance to those people who 1) did not engage in reckless behavior; 2) can reasonably afford their homes with a modest modification.
It is unfortunate, but for most of the homes foreclosed upon, there aren’t many other options.
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Source:
Southern California Foreclosures Push Sales Higher
Daniel Taub
Bloomberg, Jan. 19 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=a9tuBSHCY5JM&
See also:
Banks Foreclose on Builders With Perfect Record
JOHN COLLINS RUDOLF
NYT, January 19, 2009
http://www.nytimes.com/2009/01/20/business/economy/20builders.html
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January 19th, 2009 at 8:55 pm
What inning are we in again? And who’s pitching now?
January 19th, 2009 at 8:59 pm
Some think foreclosures are in the first inning or so…and now it is commercial real estate…
http://www.thecuttingedgenews.com/index.php?article=1050&pageid=37&pagename=Page+One
Ghost Malls Will Be Appearing
Whiner. We’ll be saved after tomorrow.
January 19th, 2009 at 10:24 pm
Don’t look now but Asian markets tanking. U.S. futures market doesn’t look too hot either.
January 19th, 2009 at 10:55 pm
“I don’t have any problem with the government engaging in assistance to those people who 1) did not engage in reckless behavior; 2) can reasonably afford their homes with a modest modification.”
Those two rules should apply to anyone or any business that seeks government assistance. Does it? No.
January 19th, 2009 at 11:17 pm
Barry,
What do you consider modest modification exactly? I had heard banks were using a rule to work with borrowers who’s home mtg payment was roughly 38% of AGI. That is absolutely irresponsible. I could be wrong about this number but I think that is what it was.
January 19th, 2009 at 11:18 pm
can we please stop with the inning shit. this is not baseball.
January 19th, 2009 at 11:49 pm
Don’t look now but Asian markets tanking. U.S. futures market doesn’t look too hot either.
BTW does anybody know who Obama nominated for the PPT?
January 19th, 2009 at 11:58 pm
You need only two things to fix the housing crisis: Readily available consumer credit, and lower real estate prices.
You forgot the 3rd thing – a reliable job generating steady income that allows you to pay your bills including the mortgage on the foreclosed home you brought or want to buy.
January 20th, 2009 at 12:28 am
Any sort of Gov’t manipulation will only prolong the housing crisis.
January 20th, 2009 at 12:48 am
The various state agencies that are enacting legislation to prolong or freeze the foreclosure process are dramatically hindering the very necessary correction and price discovery that will get us out of this mess.
I also believe the government’s best course of action is to ensure adequate credit for qualified borrowers through FHA and FNM/FRE, not taking an activist approach to ‘cram downs’ or modifications. Place more emphasis on a potential buyer’s current situation (debt ratios, income stability) and less on their past credit history. This will allow former homeowners or “foreclosees” who previously overextended themselves to immediately purchase homes that they CAN afford, without having to wait years for their credit scores to rebound.
Anything else, IMHO, is just prolonging this inevitable reversion to historical norms.
January 20th, 2009 at 2:23 am
>You need only two things to fix the housing crisis: Readily available consumer credit, and lower real estate prices.
Actually home prices can stay more or less unchanged and still go lower – via the magic of wage inflation. This, I believe, is the long term plan. Cheap money will give/has given rise to goods inflation which, in turn, begets wage inflation. Corporations however will fight like mad to keep wages down in an effort to benefit their balance sheets and their executives (surprise!) – till they can’t hold back any longer. Then, if we are lucky, we’ll get wage inflation. And runwaway inflation if we’re not.
January 20th, 2009 at 2:31 am
A fundamental problem with mortgage bailouts is that bailing out one home owner spawns more than one additional mortgage-holder looking for a bailout. What incentive do I have to be productive if my good-for-nothing neighbor gets bailed out? Thats one reason why the problem keeps getting, and will continue to get, bigger. To put it mathematically the number of beggars is propotional to some exponential power of the number of hand-outs. Thats a race in which you are bound to lose. And the magnitude of your loss is greater the longer you play.
January 20th, 2009 at 7:21 am
Barry,
Everyone has had a chance to comment on that…ok, would you give a post on how to invest against the US dollar…this was on CNBC this morning, and without a timeline, this fellow is early. But if the O administration keeps printing money, and we get out of the doldrums, there may be serious inflation, and other than physical gold, how would you proceed?
Thnx
http://www.cnbc.com/id/15840232?video=1005419227&play=1
Dollar is “Absolutely Doomed”
January 20th, 2009 at 8:27 am
Ok, if we are still in the early innings of the foreclosure baseball game, and the utility players (commercial real estate) are now beginning to falter and the triple A players that moved to the bigs (McMansions) are already hurting, will we now see more of the big name players (blue bloods & celebs) leave the game? It seems a little early to call the bottom of this game, I mean we have a new commissioner (Obama) who will take revenue sharing to a new level. So I am guessing we will see several new players step in front of the pitch and take a walk making this foreclosure ballgame more than a little boring. Does the us taxpayer become the new DH and the TARP the relief pitcher?
January 20th, 2009 at 9:27 am
The fact that we are this far into the “crisis” and nobody has a clue to how it plays out, says it all. Until we can trust someone, this will be continue to be a FUBAR. Does anyone trust Lewis? Does anyone trust Dimon? Why Obama put a tax dodger in Treasury is beyond me, but does anyone trust him?