Central Valley Real Estate

Modesto #6 in USA For Highest Unemployment

It's not cheerful news, but it's important to note: HousingEconomics.com (sponsored by the National Association of Homebuilders, NAHB) recently released March 2009 employment data. Highlights from the report include:

National Unemployment rate: 8.5%

#3 Highest Unemployment Rate: Merced - 18.5%
#6 Highest Unemployment Rate: Modesto - 16.5%
#9 Highest Unemployment Rate: Stockton - 15.7%
#10 Highest Unemployment Rate: Fresno - 15.7%

At least we know where we stand, right?

The full resource can be downloaded here: http://www.nahb.org/fileupload_details.aspx?contentID=55105&channelID=311

Report Shows Modesto, Merced & Stockton As "Most Affordable" In CA

BACKGROUND:
In a recent report issued by the National Association of Home Builders (NAHB) and Wells Fargo, the NAHB/Wells Fargo Housing Opportunity Index (HOI) report tracks home affordability by comparing the median home sales price to the median income for each metropolitan area, and issues a HOI rating that indicates the percentage of homes that are considered affordable to families earning the median income for that area. A rating of 50, for example, indicates that 50% of the homes are affordable to median-income-earning families. The higher the rating, the more affordable the area.

FINDINGS:
The HOI report for the 4th Quarter of 2008 shows that Modesto, Merced, and Stockton were the three most affordable areas in the state of California, with affordability rates of 71.1% for Modesto, 70.9% for Merced, and 66.4% for Stockton. Sacramento/Roseville was next in line, then Yuba City, then Vallejo/Fairfield.

 

As noted in an earlier post, the 71.1% affordability rate for the Modesto area makes it more affordable than at any time in Modesto's past, since 1998.

The least affordable? No great surprise there: San Francisco/San Mateo/Redwood City. It's very interesting that the least and most affordable areas are within commuting distance of each other!

More Foreclosures Coming To Modesto/Turlock Areas

by (local writer) J.N. Sbranti
The Modesto Bee
April 23, 2009

The lull in foreclosures is about to end.

While it hardly seemed that way, the foreclosure rate was relatively low the past six months in Stanislaus, Merced and San Joaquin counties.

But things are going to get a whole lot worse... (continue reading original article here)

Central Valley: Worst in Nation For Negative-Equity Homes

As prices have continued to decline across the Central Valley, several local communities, including Stockton, Modesto, and Merced have been given the dubious honor of being among the MSAs (Metropolitan Statistical Area) with the highest percentage of homes with negative equity in the first quarter of 2009. Negative equity occurs when the mortgage loan balance is more than the home's current market value.

As shown in the graphic, Stockton, Modesto, and Merced are ranked as #2, #3, and #6 in the country for percentage of homes with negative equity, at 51.1%, 50.8%, and 44.4% of all homes, respectively. Only Las Vegas, at 67.2% of all homes with negative equity, did worse.

Experts, including Thomas Lawler, an independent housing economist, explain that borrowers who owe 30% or more than their homes are worth are far more likely to walk away from their property than those who owe just 5% or 10% more and expect prices to rebound soon. While the graphic shows only the percentage of homes with negative equity without detailing the negative equity percentage, it is clear that if roughly 1/2 of all homes have negative equity, an ENORMOUS amount of them will have negative equity rates of 30% or more, resulting in high foreclosure rates.

Making Home Affordable, the federal government program driven by Fannie Mae and Freddie Mac--who together own approximately 70% of all U.S. mortgages--will only apply to homeowners that have up to 5% negative equity (i.e. owe $210,000 on a home worth $200,000). So again, when roughly 1/2 of all homes have negative equity, many many of them will be in excess of 5% negative equity.

What does all this point to? A continued upward trend in foreclosures throughout the Central Valley of California.

This article on the Wall Street Journal website shows the graphic and analysis and is worth a good read.

California Foreclosures Are Back With A Vengeance

From Diana Olick's "Realty Check" blog, posted at CNBC's website on 4/22/09:

We knew it was coming, and now it's here...the return of California's foreclosure crisis.

Okay, it wasn't exactly gone, but maybe just on hiatus thanks to a new state law that went into effect last fall. That law requires lenders to take additional steps to keep troubled borrowers in their homes. Then of course there were various bank and Fannie Mae and Freddie Mac moratoria on foreclosures.

Today DataQuick reports "lenders filed a record number of mortgage default notices against California during the first three months of this year, the result of the recession and of lenders playing catch-up after a temporary lull in foreclosure activity."

Default notices surged... (continue reading original post here)

How long after a bankruptcy, foreclosure or short sale until I can buy again?

If you are a homeowner in distress, there are several reasons why you should attempt doing a short sale rather than simply allowing your home to be foreclosed on by your lender. Here is yet another reason--much less time before you are again eligible to purchase another home.

According to Fannie Mae Announcement 08-16, dated June 25, 2008 and implemented as of August 1, 2008, this is how much time must pass before a borrower can get another Fannie Mae-backed-loan:

Bakersfield is Upside Down

What will it take to get you to buy a house?

Seriously, what more do you need? Low prices? Try great first-time homes for around $100,000. Lower interest rates? Rates are varying these days between 4.5-5.75% for well-qualified borrowers. That puts a home within your reach for as little as $600-$850 a month--almost guaranteed to be less than your rent.

Nationally syndicated columnist Kenneth Harney had a great article that appeared in the San Francisco Chronicle recently on just this topic that you should check out. And that was before Congress extended and increased the size of their first-time homebuyer tax credit (read: free money) to further stimulate home purchases across the country.

The only half-credible excuse I've heard is, "yea, but what if prices go down even more after my purchase?" While that may have been true before, prices over the last 4 months or so have not decreased among the $70,000-$170,000 price range for smaller first-timer-type homes, and in many cases have begun to increase in value.

Case in point: we have a very nice home overall that went up for sale recently at 2404 Dana Lane, Modesto, CA (see it on my website here). The comparable homes suggested a value of around $95,000. This was the conclusion that my team came to about the home's value based on what similar homes had been selling for in the same neighborhood within the last few months. We even confirmed that the second opinion Broker Price Opinion and the Appraisal concurred with that general finding. But what happened? A few dozen offers within the first week, with most offers well above that list price.

What does that show? It shows that the market is making a comeback. Today's buyers are starting to get more aggressive with the prices we know have. They are willing to pay more than they would have 6-9 months ago. And that means that some homes may be starting to appreciate once again. So don't make the mistake of waiting another year or so before you decide to take the plunge and buy, because you'll likely be paying more for that house than if you bought it this year.

Massive inventory decline could spell bottom of market

Because Econ 101 teaches us that lower supply leads to higher prices, the decline in housing inventory signals that we are getting ever-closer to the proverbial "bottom of the market," if we're not there already.

(CLICK ON TABLE TO SEE A FULL-SIZE IMAGE)

The Wall Street Journal today reported on a survey it conducted of 28 metropolitan areas across the country, to see where housing is headed. The Sacramento area, whose MLS includes Stanislaus County, had the largest decline in housing supply than any other area in the study, at 32.1% fewer homes listed for sale in June 2008 compared to the year-ago period. And that was just looking at June inventory numbers.

Inventory is in a noticable decline in most parts of Stanislaus County, as confirmed by these figures. Two key questions are: what is causing this trend, and what does it mean for real estate activity going forward?

Inventory has been shrinking in this area for three reasons:

(1) First and foremost, prices have declined to the point where buyers with area incomes can now afford to purchase them, and there is significant interest to purchase homes when you can find a good home in the mid- to upper-$100s.

(2) Increased loan modifications and workout plans have allowed more troubled homeowners to stay in their homes, rather than lose them to foreclosures, which all end up as future bank-owned homes for sale.

(3) The flood of short sale listings has finally begun to decrease. There are several factors that help to explain this trend, but the reality is that the short sale market of 2007 did not result in many successful sales. This means that many homeowners who tried to sell, real estate agents that tried to negotiate them, and homebuyers looking at them, all ended up, in many cases, wasting their time. Unfortunately, the successful close rate of short sales is abysmal, due mostly to slow response times and unreasonable terms by banks who would have to agree to the short sale terms. As a result, many home buyers have chosen to skip over short sale listings. Many real estate agents have been much more choosy about which short sale listings to take on--after all, if it won't sell, then why spend time, money, and effort trying to do it? And many homeowners have decided either to try to do a loan workout and stay in the home or just walk away from it without even trying.

But getting back to the trend of declining inventory: we all know that decreased supply of any asset or commodity results in future price increase. This is one of the basic laws of economics, and it applies in any market, industry, and situation. So if this trend continues, expect to see prices begin to rise from here on out.

Hey, Bargain Hunters! Where Are You?

As the Briefing.com assessment of today's stock market performance explains, "There are volatile markets and then there are volatile markets.  Wednesday's session was the latter variety, which is to say it was truly volatile.  To wit, the swing in the S&P 500 between its low of the day, reached around 12:45 p.m. ET, and its high of the day, reached around 3:50 p.m. ET, was 69 points or 5.4%."

A 5.4% swing in just one day--not for one particular stock, but for the entire S&P 500--is just unimaginable. And yet, it just happened. Today.

Why did it happen? And what's it got to do with local real estate?

Peter Cardillo, chief market economist at Avalon Partners, explained today's stock market performance: "There does come a point and time when the market itself recognizes that it got out of hand, and that is when bargain-hunters can come in."

It's just a matter of time before our local real estate market also realizes that it is out of hand too, "and that is when the [real estate] bargain-hunters can come in."

A few cases in point:  this bank-owned Patterson home at 544 Peregrine Ave was built in 2001, has 5 bedrooms, 3 baths, 3-car garage, 4041 sq. ft, and was asking $250,000 before going into contract about a week ago. That's a $62/sq. ft. asking price! And in case you were wondering, it has a very nice (though dead) landscaped backyard, cherry/maple cabinets and granite counters.

In case you were wondering if you missed the boat, this second bank-owned home is just down the road in Newman at 682 Hagerman Peak Drive that was built in 2005, with 5 bedrooms, 3 baths, 3-car attached garage and 4117 sq. ft. asking $329,000. That's still less than $80/sq. ft., and that's just a starting asking price--it's only been listed for 14 days.

So bargain hunters, you need to wake up and realize this for what it is--complete and utter mayhem. If you agree that the market has gotten out of hand, you can now come in.