San Francisco, Los Angeles and San Diego are included in the nation’s top ten metropolitan areas with the biggest drop in home values since the Great Recession. The latest Standard & Poor/Case-Shiller Home Price Index indicates the composite price of single family residences (SFRs) in the ten cities decreased 2.7% last year. Their composite values are now 30% below levels from the housing market’s peak in April 2006. Worse, no sign exists that price levels will rise soon.
California price levels in 2010 decreased near 2% for both San Francisco and Los Angeles. San Diego was an exception to the general plight of California’s cities and recorded a paltry price level increase of 0.1%. All three cities recorded a drop in the month from December 2010 to January 2011. Prices dropped month on month 1.9% in San Francisco, 0.6% in Los Angeles and 1.2% in San Diego.
The S&P predicts weak SFR price trends for the remainder of 2011.
first tuesday take: If they have not already, California homeowners, buyers and real estate brokers and agents need to snap out of the money illusion of high home values perpetuated during the Millennium Boom. Prices continue to slip downwards toward their true dollar value and the illusions of past are honored at one’s peril. [For more information on the drop of home values in San Diego, Los Angeles and San Francisco, see the March 2011 first tuesday Market Chart, California Tiered Home Pricing.]
The current price decline we are witnessing was fully expected to follow the premature home purchases induced by government subsidies in 2009 to mid-2010 ― by its end the public was not buying homes on their own volition. Market momentum of the artificially-inflated home prices built up and culminating with the housing price peak in 2006 was ill-fated to collapse, forcing home prices to return to historical trend levels. The continual drop in prices is a result of the real estate market correcting itself as property prices stabilize at their lower and more accurate evaluation. A reversal of the current decline in consumer confidence would be helpful.
The price adjustment will likely run into 2013 and our relatively jobless recovery underway will not make it quicker. When the California economy does begin to produce 400,000 plus additional jobs annually in California, it is imperative for real estate brokers and agents to steer the thinking of buyers and sellers away from the illusory sticky price of Boom years past. Until these jobs are created and this advice is taken, the housing market will simply not get up and running. [For more information on how sticky prices affect recovery, see the December 2009 first tuesday article, The flat line recovery: a side-effect of sticky housing prices.]
Re: “House prices: Weather warning” from The Economist and “Home values drop in S.F.,other big metro news” from MercuryNews.com
The mtge debacle was simply a ponzi scheme perpetrated by our liberal idealistic govt. so anyone with poor credit and low income would qualify for a home loan. Anyone with half a brain (except our govt.) knew this would crash one day. They all belong in jail, unfortunately they protect each other and they have the power….so live with it and have another drink.
Agreed, Mr Donaldson – Longo’s ideas that the goverment step in and make them anyone do something is ludicrous. This is the same government that stepped in during the Clinton administration and esentially forced bank to lend to people utterly and completely unqualified to buy homes. The Reg Z on adjustable mortgages clearly shoed the future effects of interest and payment increases yet peoiple just chose to sign away with the hope that they somehow woold be able to keep up the payments. Most of those loans had an annual payment increase cap of 7.5% – who in their right mind after the dot com implosion in 2000/2001 thought their income was going to increase a corresponding 7.5% to cover the increased payments?
This was and is good old all American Greed.
And to you, Mr Longo – to go off with some stupid diatribe about America going thrid world is proof of your own stupidity. From what you write oit sounds like you always have the answer to every problem despite the fact that you’ve not even shown that you’re able to identify the problem needing solving. No one’s interested in you r pie-in-the-sky schemes to “fix” this, it was this kind if dopey thinking that got us in this position to begin with. Why should there be any mortgage modifications? – a contract is a contract and not a single one that I know of has been held up to be an illegal mortgage with illegal terms that would make it either void or voidable period, and even if the payment was lowered by 10%, 20% or even 50% – if you don’t have a job you can’t make ANY payment. What you and those like you are looking for is not equal opportunity, your looking for equal outcome.
Take some responsibility for YOURSELF, sir and if it’s wealth re-distribution you’re looking for and one size fits all even though it’s a poor fit, go somewhere else for it – I hear Fidel has just turned over the reigns to Raul this week.
Pat, get over it. If you or others have lost position in the real estate market, it is NOT the responsibility of others to “make nice.” That includes the government or investors. Stop looking for the sperm to worm help from the “government.” Who do you think the government is, it’s other tax and non paying tax folks. Stop looking for someone to blame. Take some personal responsibility. Real estate is NOT an absolute hedge against loss.
To Eddie H.
I would be surprised banks have MI insurance to cover the losses on most of the foreclosures in majority of conventional loans. Values are down 40% in some areas since the 06 peak – the use of piggy back loans (2nd TD’s) to eliminate PMI from -03 – -07 for conventional financing made for even less MI protection on conventional loans. I have no more sympathy for big insurance companies than big banks – ___ em all.
To cure the Housing Slump: The gov’t needs to step in and require ALL loans be modified upon request with a simple reasonable supported payback plan written by the BWR, with MTG insurance req’d /paid for by the BWR for sickness / job loss / death. BWR Plans to repay could include alternative income including rents, income form 3rd parties not on the notes, etc, To make it worthwhile for the banks BWR sign a deed in lieu of; fully notarized with a clause that it ONLY becomes effective after the 3rd consecutive missed payment and at that time BWR loses ALL legal or other remedy to cure the note – unless the insurance company provides written notice the BWR has a claim in process. Then its Shit of get off the pot for all – if u can repay at a reduced rate – do so – if not – banks take the property – done. Also – all BWR’s with timely payments should be allowed to participate and receive a rate at least 1/4% lower than the loosers in arears
The good guy should be rewarded – rt now we BKR’s like my self fund loans in the high 4’s for prime BWR while defaulters get 3% MTG = total BS!!!
Look on the bright side. This time is the golden opportunity to buy investment properties. Any fool can buy high and sell low, but some will buy low and sell high (later). Gather up all the cash you can and buy, buy, and buy. We all will look back three to five years from now and hopefully we will not say something like, I could have bought this or that for …
One only has to be in this business for awhile to see what happens in any given10 year period.
So rejoice, this is Christmas in the Spring.
Real Estate Broker for more than 30 years.
No Surprise to me. USA will be a 3rd world country just look at our roads, Our leaders have been bought out by multi national companies and are judges as evidenced by the recent ruling stating the corporations can contribute to political contributions just like individuals.
There will be just 2 classes of people – rich/ property owners and poor / slaves to the internet.
meanwhile have another beer….
As long as the banks are allowed to cash in on MI, the problem will not go away. Lenders will continue to foreclose, claim the insurance money and then turn around and sell the property for less than sales price being negotiated in a short sale process, which said process has been nothing but window dressing for the most part. MI rates continue to rise as a result, property values continue the decline and the nations economy remains stagnant. Eliminating this option for banks would force them to negotiate with homeowners, stabilize the market and property values, which in turn would boost our private sector investments and help to stimulate our economy.