Category ArchiveBay Area Housing
Bay Area Housing 02 Oct 2007 09:44 am
um, that’s one interpretation
In it’s earnings report yesterday, Citigroup announced that it’s profits were down 60%. Apparently, this sent Cititgroup stock up because investors took it as a sign that the worst of the credit troubles might be over. Maybe the bad news is all priced into the credit markets now. Or, perhaps thats wishful thinking — after all, the worst of the mortgage rate resets are still ahead of us.
Bay Area Housing 21 May 2005 12:38 pm
The Fed starts backing down health of Real Estate Market
From the Wall Street Journal: The Fed Starts to Show Concern Over Bubble.
For a long time, Federal Reserve Chairman Alan Greenspan dismissed suggestions that the U.S. was in the early stages of a housing bubble. He talked about the extraordinary demand for houses among hard-working immigrants. He emphasized that housing, unlike stocks, is a local market, so it’s almost impossible to have a national housing bubble. He explained that it’s hard to speculate in a house that you own because to sell it you have to move out.
But there has been a little more concern creeping into his commentary in the past few months. “We do have characteristics of bubbles in certain areas, but not, as best I can judge, nationwide,” he told a House committee in February. Mr. Greenspan speaks to the Economic Club of New York at lunchtime tomorrow. If housing comes up in his remarks or if he is questioned on the subject by one of the prominent economists there, look for the Fed chairman to mention — as Fed Governor Donald Kohn did recently — the upturn in people buying vacation homes, second homes or other homes on the risky bet that housing prices will continue to rise as they have lately.
Mr. Greenspan hasn’t yet hit the “irrational exuberance” gong, the phrase he used to warn about the stock market in December 1996. The Fed and other bank regulators, however, this week warned banks to take more care with home-equity loans, noting that such loans are “subject to increased risk if interest rates rise and home values decline.” (Did you say decline? Gulp.) Even a slowing of the pace of increase in housing prices probably would dent consumer spending, which, for the past couple of years, has been helped by Americans tapping their home equity.
Other Fed officials have begun to express some anxiety. In a speech last month, Mr. Kohn said, “A couple of years ago I was fairly confident that the rise in real-estate prices primarily reflected low interest rates, good growth in disposable income and favorable demographics.” Mr. Kohn was a longtime adviser to Mr. Greenspan before his appointment to the Fed board.
No longer. “Prices have gone up far enough since then relative to interest rates, rents and incomes to raise questions; recent reports from professionals in the housing market suggest an increasing volume of transactions by investors, who…may be expecting the recent trend of price increases to continue,” Mr. Kohn said.
Interestingly, the one place I saw these speeched headlined, the headline was “Greenspan say no real estate buble”. I guess the story is the improbable rise of real estate, not the risk of the real estate market.
The thing is that Greenspan only ever speaks about the national market in the aggregate because that’s his job. Its not his job to manage regional economies (in fact, that might interfere with his management of the national economy). When he finally recognizes a real estate bubble, it will only be because it has reached national proportions.
Bay Area Housing 21 May 2005 09:29 am
anybody need an agent?
The LA Times ran A Glut in the Market for Homes last week, an article about how much interest in being a real estate agent has surged.
More than 22,000 applicants took the state’s real estate exam in April, nearly three times as many as in April 2003, according to the Department of Real Estate. To handle the surge, the department has rented six test centers around the state to supplement the five it already has.
The last time so many people wanted to sell real estate in California was in 1990. In what might be an ominous sign for the current boom, that year marked a peak in the housing market.
There are 437,000 agents in California, enough to form the state’s eighth-largest city. With only 680,000 home sales a year, competition for listings can be savage.
The last time so many people wanted to sell real estate in California was in 1990. In what might be an ominous sign for the current boom, that year marked a peak in the housing market.
There are 437,000 agents in California, enough to form the state’s eighth-largest city. With only 680,000 home sales a year, competition for listings can be savage.
I guess all those day traders had to find something to do. So, each agent gets an average of less that 1.5 sales a year. If the average house price was $500,000, and they kept all of their 3% (which they don’t), that’s $20k a year. Wow. You’d think the numbers alone would be enough to discourage them. Guess all we need to do sell more houses for more money 
.
Bay Area Housing 16 May 2005 11:20 am
infested.
hm. I’m thinking about dusting off my blog and firing it back up. It’s become completely infested with comment / trackback spam. Guess I’ll have to rebuild it (better, stronger, faster).
Bay Area Housing 27 Sep 2004 10:07 pm
WSJ: Coastal Homeowners Are Now Cashing Out
WSJ.com has an article about coastal homeowners cashing out and using their profits to buy less expensive houses outright in less expensive markets.
Is it time to take profits on the real-estate boom? The huge rise in prices in thriving cities on or near the coasts has created an arbitrage opportunity for people who have the flexibility to move: Sell Manhattan, buy Montana.
Over the past five years, raging real-estate markets in some coastal areas have more than doubled housing prices, while farther inland prices have risen more moderately. That has stretched the price gap between the middle of the country and the coasts far beyond the norm. The typical home price for the 10 American metropolitan areas with the highest housing prices has jumped to 230% of the national median from 155% five years ago, according to an analysis by Economy.com for The Wall Street Journal.
The main justification for the current house prices that is given is the shortage of supply in hot housing markets. While I think that argument doesn’t have much merrit on its face, it’s worth pointing out that this is one way a supply shortage could reverse itself.
Bay Area Housing 01 Sep 2004 01:56 pm
ok, now you know there’s trouble
Thanks to a Web Alert over at Google, I’ve been reading just about every article printed on housing prices in the Bay Area. After you’ve read a dozen or so, you begin to see a pattern — an economist will say the values in the market have departed from fundmentals; a realtor or someone from a realtor association will sat “no they haven’t – there are more buyers than houses for sale”. In other words, scarcity is all that matters.
Well, now even the realtors ar forced to concede there is more than one force at work in setting house prices; and that a new one is about to start exerting itself:
“In San Francisco, the median home price is $648,000. That tells the story right there,” said David Lereah, chief economist at the National Association of Realtors. “You need a very high median income to qualify for that mortgage. At some point, the cup has runneth over, and something has to give, and that may be prices.”
The tide seems to be turning in the coverage of housing — from “oh my gosh, those crazy house prices just keep on climbing” to “ok, we all know this isn’t real”.
Bay Area Housing 30 Mar 2004 10:43 am
zero down mortgages.
You have to know, right now, at many banks, they are going to great lengths to get your mortgage business — the low interest rates present a great opportunity to grab up customers from other banks through re-financing and bring in new customers through new mortgages.
Now, they’re starting to encourage people to take zero-down mortgages — higher interest rates, but lower barrier to entry for first time buyers.
Mortgage brokers say those who believe they cannot afford a house because they don’t have money for a down payment are wrong. As housing prices have climbed – leaving more and more potential home buyers behind – the mortgage industry has responded with loan programs that allow even those with a short credit history to use, for example, cell phone bills to prove their credit worthiness.
So, this increases the risks for banks, since they initially have no buffer to protect them against default — in a state like California, it really is no protection as the bank is only entitled to the collateral (the house) if the buyer defaults. There’s no going after the buyers other assets.
This is essentially a bet that house prices will continue to rise. Is it rational? Or is this a short sighted maneuver to grab more mortgage businesses? I’d be willing to bet there are more than a few bank employees who’s future bonuses are determined by the volume of their mortgage business.
This might also explain why mortgage rates continue to go down despite a steady rate from the Fed.
Even Greenspan is worried about this one.
Bay Area Housing 04 Mar 2004 09:19 pm
Housing Affordability Worsens in California
According to a monthly survey of house prices by the Realtor’s monthly housing affordability indexhousing in California has gotten less affordable.
In the San Francisco Bay Area as a whole, just 21 percent of households could afford to median-priced home in January, down from 25 percent a year earlier.
Bay Area Housing 03 Mar 2004 08:44 am
SFGate.com: Bay Area home prices not rising as quickly as other areas
So the Fed has released a study of housing prices nationwide that shows Bay Area home prices not rising as quickly as other areas . Fresno and Riverside, on the other hand, top the list, appreciating at about 20% in the last quarter.
Homes prices in Santa Clara County grew at one of the slowest rates in the nation during the fourth quarter of 2003, while seven other metropolitan areas in California ranked among the top 10 with the highest year- over-year gains, according to a new federal report.
House prices in other Bay Area towns also slowed, tho not as much. Alameda and Contra Costa counties slowed the least.
Seven California metropolitan areas ranked among the top 10 in year-over-year home price appreciation in the fourth quarter of 2003. The Bay Area’s three biggest cities were far down the national survey of 220 cities, with San Jose finishing third from the bottom.
One thing that the article that I wasn’t aware of was the two ways that housing prices are measured: DataQuick uses median house prices from recent sales. The Fed uses data from Freddie Mac and Fannie Mae. The Fed data seems a bit more restricted (no jumbo loans) and tends to move more slowly. Right now, they disagree about how the Bay Area housing market is performing
Still, some homeowners’ experiences suggest that prices may be stagnating, in line with the federal agency’s results. Financial adviser Dan Goldie purchased his Palo Alto home for about $1.1 million in April 2002. Since then, he and his wife, Karole, have refinanced three or four times.
Bay Area Housing 25 Feb 2004 01:05 am
Greenspan: Fannie and Freddie are carrying too much debt
It seems like it should have been obvious that these kinds of trouble were going to appear: Greenspan says that Fannie Mae and Freddie Mac have expanded the portfolio of loans their financing too far ($4 trillion) — so far that the risks could not be adequately hedged in the event of a financial crisis. They’ve been able to do this because, as government sponsored entities, they’ve been give better terms because many believe the government would bail them out in the case of trouble. However, this has never been stated and may not be true.
It seems like this might start mortgage rates heading north — that money that seemed so easy to make on mortgage refinancing may not turn out to be so easily made.