Friday, December 21, 2007

Bay Area sales numbers plummet; prices mixed but mostly down

If leading indicators mean anything to you - and they should - then the Bay Area took another big step in November in the wrong direction (for sellers and owners anyway).

DataQuick's November report shows a 20 year low in sales volume for the month at 5,217 sales - almost 800 fewer sales than the previous low in 1990. This is down a sharp 36.2% from 8,042 sales in November 2006. And sales have decreased on a year-over-year basis now for 34 consecutive months. It remains yet to be seen just how big of an impact the credit crunch, and specifically the jumbo sector, has had on recent numbers. Notwithstanding can anyone say "trend"?

Prices are already coming down across the board from recent peaks - from a 21.9% drop in Solano County to a 2.4% decrease in San Francisco, which has shown the most stability thus far. The median price for the nine-county Bay Area region is down 5.4% to $629,000 from its peak of $665,000 in June and July of this year.

Hang on for an interesting 2008, kids.

Wednesday, December 19, 2007

Update on 721 Rosal in Oakland

Jump here for the update on this interesting home in the Crocker Highlands district of Oakland.

Are Fed's proposed ideas to regulate lending industry any good? Actually... maybe

The Federal Reserve is proposing numerous changes in lending practices to cut down on questionable underwriting and protect people from lenders, and quite frankly, themselves. Most of the ideas make sense, but they are dependent on implementation and then enforcement. The key topics are as follows, along with my thoughts, of course:

Prohibit giving people unaffordable loans.

This has good intentions as the jist of it is to qualify buyers' affordability based on the reset rate of an ARM, and not on the teaser/introductory rate. Now, my question is what are they going to consider the threshold of "affordability" and will it be an appropriate benchmark? Reserving final judgment for that.

Restrict use of "liar" loans.

I have mixed feelings on this as it will do some good and some harm to unintended recipients. Yes, many buyers used this product and gladly paid the slightly higher rate to get more house than they should have during the boom. But this product is also the only option for many newly self-employed professionals, so this could cut many of them out of the picture unintentionally. Again, good intentions by the Fed with this.

Prohibit or limit prepayment penalties.

This is a no-brainer and good for all buyers and owners. Just another clause that guaranteed higher fees or a prolonged higher rate for lenders.

Curb or better disclose broker incentives.

Another strong proposal from the Fed, if implemented this should prevent or limit brokers from increasing your rate above what you should qualify for. This is a direct attack on what is known in the mortgage industry as the "yield spread premium" - fairly self-explanatory - and pays said broker a nice premium for jacking up your rate.

Require or encourage escrowing of taxes and insurance.

Not a terrible idea, but I am one who does not like to give anyone an interest-free loan at any time, and that is what this is. My simplified take is this: if you are responsible enough to be able to purchase a home - and assuming all of these other rules whittle that down to a qualified pool - then you should really be able to manage your finances and pay your insurance and taxes when they are due, no matter when that is.

Prohibit coercion of appraisers.

This one has been attacked already in California with the passing of SB223 in November, making it a federal crime to coerce an appraiser. Might as well make it a national/federal crime.

Prohibit loan servicers from engaging in unfair practices.

This deals with the administrative angle and general customer service. Basically, credit the customer's account the day the payment comes in, and don't double- and triple-charge for the same late fee more than once. Wait... is this a wireless phone bill we are talking about? Next.

Require better disclosure overall.

Though vague and generalized at this juncture, this is a necessary attack on the incomplete and misleading mortgage advertisements we have all heard, seen, or read. If you have ever turned on the radio in the Bay Area, you most certainly should have heard Wesley Hoagland of Lenox Financial touting his 1% loans with no closing costs, free appraisals and the fact that it is "the biggest no-brainer in the history of mankind." Seriously.

These proposed changes are apparently open to public comment for 90 days, at which time the Fed will review comments and then make decisions on implementation. Overall, I have to say it's a good start, but it's too little too late for this phase of the real estate cycle/credit meltdown. They are basically working on what will transpire in 5-10 years from now.

Tuesday, December 18, 2007

Marin mansion to set record with $65M sale

Locksley Hall on the island of Belvedere in Marin County is under contract for the full asking price of $65M, and is set to close escrow in January. This is believed to be a record sales price in Northern California.

Not a bad "fixer upper" investment for the owner who purchased the property in 1995 for $5.5M and then sunk $32M in renovation costs. The rich get richer...

Monday, December 17, 2007

I surely don't feel sorry for these investors

The cover article in Sunday's Chronicle about investors losing homes to foreclosure reads like a poor attempt by its authors aimed at sympathy for these so-called "investors." We will be having none of that around here. These people thought the market could never go down and it didn't matter if rents could not cover their holding costs - they would more than make up for it with continued insane appreciation!

For those of us who did get out in time, we can actually thank some of these investors for helping accelerate the run-up in prices. So to those of you who helped to increase my capital gains, I thank you now.

These numbers are only beginning to materialize here in the Bay Area and it is a matter of time before pre-foreclosure, short sale and finally, foreclosure listings, are everywhere. San Francisco seems to be the last place that is holding up and very well might do better than most in coming years, but it isn't "insulated" as many like to suggest.