Home prices continue to tumble

January 24, 2009
The bottom of SLO County's real estate market may be deeper than anyone imagined.

The bottom of SLO County's real estate market may be deeper than anyone imagined.

By KAREN VELIE

Combinations of short sales and foreclosures due to unaffordable mortgage payments, as well as hard money lending schemes, are propelling an incredibly rapid deceleration of San Luis Obispo County home prices.

Throughout the area, homes are selling for as little as 50 percent of what they sold for a few years ago. An end to the slide appears far off.

For example, a home on Sheridan Road in Arroyo Grande sold for $849,000 in May 2005. Today it is on the market for $449,000. Last summer, a home buyer purchased a home on Adina Way in Nipomo for $227,250. The same home sold for $448,000 in September of 2005.

In the North County, a home on Shetland Way sold for $339,000 in January 2006. Today, it is listed for $159,000.

High-end tract home prices appear to be tumbling alongside their more affordable counterparts. In Paso Robles’ Montebello Estates, homes sporting granite countertops, three-car garages, and four bedrooms and four baths have fallen in price from the low $600,000 to a variety of prices in the mid $300,000 range, with many being either short sales or foreclosures.

A short sale occurs when the price of a home is below the loan amount owed on the property. Foreclosures occur when lenders take possession of a property to satisfy a debt.

Individual banks work with a group of brokers specializing in bank-owned properties. First, these specialists analyze the properties through a broker price opinion in which three “sold” and three “active” comparable property listings are used to help the broker arrive at a suggested price.

Some banks, like Bank of America, often price the property below the suggested amount in an attempt to quickly move their foreclosure inventory, according to a local broker. Properties with soiled floors and dirty countertops are sold “as is.”

However, not all banks work their foreclosure inventory with a quick sale in mind. For example, Wells Fargo Bank has been known to reject early purchase offers. Instead bank officials attempt to increase the value of the property though maintenance and repairs.

Even so, a local broker who asked to remain unnamed said this practice sometimes results in a lower price being paid for the property due to the rapidly declining market. For example, a local bank received a bid shortly after foreclosing on a home for $270,000, substantially below the note owed on the property. After rejecting the offer, the bank made a number of improvements and covered utility bills for approximately a year before accepting a bid of $240,000.

Home prices peaked in July 2006 and according to the Walnut Creek-based insurer’s Market Risk Index, prices are expected to plummet through September 2010.

Further risks of continuing declines appear to be concentrated in California and the Eastern Seaboard, according to PMI Mortgage Insurance Company. Market analysts predict prices will decline another 15 percent before leveling off.


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4 Comments

  1. ccn_debate says:

    Member Opinions:
    By: George on 1/29/09
    from the Seattle PI
    Both retired FBI officials asserted that the Bush administration was thoroughly briefed on the mortgage fraud crisis and its potential to cascade out of control with devastating financial consequences, but made the decision not to give back to the FBI the agents it needed to address the problem. After the terrorist attacks of 2001, about 2,400 agents were reassigned to counterterrorism duties.
    By: George on 1/29/09
    Actually the cops who are supposed to watch for fraud in the housing finance sector were redirected to the war on terror instead.
    By: Panicmanic on 1/29/09
    Black_Copter_Pilot……….Put the blame where it belongs.That filthy little Barney Frank pervert and his minions.It's enough to make you puke.The whole Congress should be driven out of office.

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  2. ccn_debate says:

    By: Nameless on 1/28/09
    Joe

    The conventional way of buying and selling real estate will be gone soon. There are more and more sites taking homes on the internet displaying them and any one can bid on it just like on the New York Stock Exchange. High fees will be gone. However, there will be still those who wants to have their hands held and willing to pay for it. Most people also wants to be reassured by someone who makes them beleive that they know. Thats why we still selling and buying realestate the way it wasdone 500 hundred years ago.
    By: Joe on 1/28/09
    What really needs to happen, is for "Realtor's" to be exposed for the useless pieces of feces they are. The only reason they are not more publicly loathed is most of us do not buy a home as often as we buy used cars. In the past 18 years and 8 homes, I have not met one who actually listens to what their clients say nor one who is not insulated by the BS of their own scam industry to believe the BS they recite about "the market" or "the trends". I'm thinking, I've done lots of jobs in my life, why not get my brokers license and get in on this scam before it's gone.
    By: Nameless on 1/27/09
    Home values will find its own level. The price will be determined by the rental value, cost, taxes and interest rate.
    For now, property taxes must fall below where it is now. Many association dues must change and their is Mello-Roos it must balance against the value of the home. Interest rate is a big factor along with available credit.
    Twenty perscent down payment and good credit will still be a norm and a stable job is a must. There is more room to go down.
    On the coast and highend luxory homes are valued different. It has everrything to do with desire and cash. Prices along the coast are holding up well comparing to Iland.
    There is tomorrow and the clouds are clearing
    By: JorgeEstrada on 1/27/09
    This is worse than a divorce, my cash worth has been cut in half and I have no wife to get rid of. ( Humor for those who need a laugh, best therapy ).
    By: calvertworthington on 1/27/09
    Where they going?
    If they're like me, they're looking anywhere that they can afford, and can find a job. If you like California, that means away from the coast and ski resorts. Avoid failing developments. There are many. Me, I'm looking out of state. Wash., Oregon, Utah, Idaho. Much less expensive

    Better to ask: "Who lives (buys a house) here?"
    Investors with cash to buy-in.
    Retirees with cash to buy -in.
    Rich parents buying place to dump their kid to go to college.
    And that rare someone that has a job that pays enough to buy a house here (not many).
    Oh, and the fast disappearing someone descended from long-time resident that inherits the homestead until they lose it to bad debts.
    This lot doesn't make for a crew likely to et involved in local issues.
    By: insider on 1/27/09
    Well Mccdave

    If people aren't buying and people aren't renting where are they going. Maybe this board of Supervisors can do for homelessnes what they have done for affordable housing. Did anyone notice how the price of housing went up when the local governments got in the business. The government needs to take two steps back from everything.

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  3. ccn_debate says:

    By: mccdave on 1/27/09
    Actually, Sharibaby and Booty Juice, the local market isn't getting enough press attention, and outlets like the Tribune and others still try to put a positive spin on it after years of shoveling sh*t on the subject. And CalCoastNews is just reciting anecdotes, not aggregate statistics, so there's no real data here. There are some nefarious angles and glaring conflicts of interest in our local property bubble — aside from hard money lenders — but CCN seems to be as blind to them as other local press and doesn't listen to tips about it.

    Even commenter Insider is shoveling with both hands: "If your [sic] buying for the long haul real estate will always treat you good. … the rents collected every month has gone up. [sic]" For the U.S. as a whole, property has not been a great long-term investment, even if California has beat the national averages. And I believe I saw even local data showing softening rents, and one sign of a bubble in recent years was that prices were outrunning rents.
    By: keithb on 1/27/09
    I'm a Realtor but one that believes that there's no reason to hold back information about the market from Buyers and Sellers.

    Foreclosures are driving down the prices faster in the cities that have them but the examples in this article are pretty extreme. Looking at the 2008 median home prices for individual cities, Arroyo Grande, Atascadero, and Nipomo have dropped the most (26%) from their peak year. Other cities are less than 10% off their peak but those (SLO, Pismo, Cambria) haven't had that many foreclosures that have hit the MLS (which is where my data comes from). Santa Maria is down 46% from the peak.

    If you want to look at data and charts – my stats site is http://www.SloWatch.com.
    By: insider on 1/26/09
    While the value of property has certainly dropped the rents collected every month has gone up. Now for the second and soon third year in a row property taxes are being reduced. Oh and did I mention the fact that all of us with ARM loans have seen a 3.5 % decrease in interest across the board. So although I am not happy about the state of the housing market in general owning real estate even in a bad market in which you over paid is not near as bad as owning stock. My point is you can lose value in real estate and actually make more money in the process. I expect to see a final decline in interest rates at about 4% below where they were a couple of years ago. If your buying for the long haul real estate will always treat you good. If you think its quick money you will always loose. When these forclosures are out of the way watch out. Booty will be licking his I'll just say wounds at that point and complaining about the cost of housing.
    By: Booty_Juice on 1/26/09
    Securitization (MBS’s, CDO’s, and CDS’s), lax lending, and loose regulatory control. Those were the drivers of the boom and those conditions will not return for quite some time.

    One third of the market was speculative flipping, and another one quarter of the market were liar loaners who received a check at escrow – got paid to buy a house they couldn’t afford when the loan reset.

    Those buyers are gone. Over half of the buying pool is gone. The $300k to $900k market that they trolled in has puked it’s guts out and is now dry heaving like a freshman frat girl. The $1M and up market has held value much better but it too will soon see similar declines as even the well-heeled cannot hold out forever.

    If you are 50 y.o. or older you will likely never again in your lifetime see home values where they were at the peak.
    By: insider on 1/26/09
    Everyone was climbing over each others backs usings knifes for a hand hold when necessary to get property they all said was overpriced when the market was hot because they thought it was just getting hotter and they could make a quick buck. Now when prices are low and afordable and even cheap no one is interested because it might get cheaper. Human greed what a wonderfull thing. We had a housing shortage right? No one is building and no one will be building for some time to come right?
    The economy will recover at some point right? When the economy recovers and all the young adults come out of Mommy and Daddy's garages and illegal second units where will they go. I wonder what will happen to the price of housing then?
    By: Truthbeknown on 1/26/09
    Ho-hum. Methinks the cutting edge needs sharpening.

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  4. ccn_debate says:

    By: Booty_Juice on 1/26/09
    Yet more cutting edge reporting from our intrepid reporters. Bang up job. I suggest you hang a catchy name on this like “Housing Bubble” and see if the story has national legs.

    As an aside, I hear the auto industry is headed for rough waters and may even need public money to survive – the "Auto Bailout" might be yet another national scoop for you.
    By: Newsome on 1/26/09
    Sharibaby, Real Estate brokers have a hard time delivering bad news. If it is a seller's market, and they say so, they alienate buyers. If it is a buyers' market, and they say so, the sellers spook. Truth is secondary to sunniness in that business.
    By: sharibaby on 1/26/09
    Yes, such amazing reporting. Someone had to blow the lid off those evil real estate types who are hiding the fact that housing prices are dropping. And again, according to Laura it is the media's fault. I think I see about a thousand stories a day saying housing prices are falling. Thank god there is a blog that uncovered the obvious. Again, for those of you who don't know: The sky is blue, Bosses are mean and real estate prices are dropping.
    By: Black_Copter_Pilot on 1/26/09
    Gosh, Pixie..can't you read? I am not affraid due to big expectations and I wrote no malace of President Obama.

    I am full of hope is all.

    Sensy a little bit?
    By: pixieboohoo on 1/26/09
    No said he's a savior-he's sure alot better than the dunce and his evil chain man that has been spiraling the country down hill for 8 years. Give him a chance-open your mind-maybe something good will happen-it couldn't get worse than the republican path of late…negativity
    By: Black_Copter_Pilot on 1/26/09
    I'm not worried about the home prices, my tanking EFI account, the 35% hit on my my stock portfolio or anything that has to do with money, because the savior has been elected and he will fix everything.

    I know this because he said so.
    By: Cindy on 1/26/09
    Oh Yuk,
    I was under the impression that if we waited this out for a couple of years that the property prices would come back up. Now it sounds like the market will continue to be flooded with foreclosures and short sales for the next 20 months with prices dropping another 16%? I know your reporting is always accurate but I sure hope your wrong this time. Is there any good financial news for anyone around here?
    By: Laura on 1/26/09
    Sharibaby,
    Why would any broker who has intimate knowledge of bank owned homes want to piss off the boss = bank? It's my opinion that the citizens are currently being mislead by the local media regarding home purchases and a leveling of market prices. This market is farther "down the tubes" than what is being reported. Real estate does continue to plummet. A person purchasing at this time could well find themselves upside down next summer. Sorry I don't like it either but "them's the facts baby".
    By: sharibaby on 1/26/09
    And water is wet. Masters of the obvious. Now even cal coast news readers can move out of their cars and into a home. It is surprising that you could not get a broker to go "on the record." Such radical and unreported news warrants anonymous sources.

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