"Housing Crisis or Opportunity, Only history will show" screams one headline in a newspaper ad that features a reassuring chart of the median price in San Mateo County rising dramatically. "Sensational newspaper articles are running headlines talking about the 319% increase in the foreclosures in San Mateo County. ...This is absolutely the time to be buying" shouts another ad in our local paper.
Is it really? I would have thought the larger crisis of credit tightening and financial giants teetering on the edge of bankruptcy would give pause. Well, let's look at the Bay Area in general :
"Home prices tumbled further during the month of October in Solano and Sonoma Counties. Alameda and Contra Costa also saw declines. Although median home prices were up in other areas, asking prices fell in every county within the nine-county region."
"Bay Area home sales fell once again during the month of October. The number of homes sold slipped 35.7 percent in a year-over-year comparison—the lowest level seen in decades. Including October, sales have decreased on a year-over-year basis for 33 months in a row."
"With the exception of San Francisco, every county within the nine-county Bay Area region saw a year-over-year sales decline of at least 28 percent. The largest declines occurred in Napa, Solano, and Contra Costa Counties."
"Fair market rents have changed very little in the last year. Average rents have increased slightly; however, it is still less costly to rent in the Bay Area than it is to buy. The average mortgage payment was $3,000 in October—much higher than average rents for homes and apartments in the same area."
(Source: DataQuick)
Our local real estate agent in her full-page ad in the Pacifica (Calif.) Tribune assures us: "According to a panel of sucessful REALTORS(r) speaking to other REALTORS(r) the advice is to buy now."
Talk about self-reinforcing logic! Truth to tell, though, if I saw my living evaporating in front of my eyes, I might panic as well. But listen to what a slightly less biased source says:
"Most experts believe that 2008 will be a tough year for the Bay Area housing market. Mortgage resets are expected to flood the market with more foreclosed properties. Sales and prices are likely to decrease as a result. At a recent real estate symposium hosted by the UC Berkeley Fisher Center for Real Estate and Urban Economics, economist Ken Rosen predicted price drops of 20 percent in some parts of the Bay Area. A rebound isn't expected until 2011." (Source: HomeGuide123)
Now what person would look at that and not want to wait for the possible fire sale prices in the next couple of years? And what about those darned "mortgage resets" that are going to cause loans to blow up in the faces of many parties who never should have been loaned the money in the first place?
Well, here's a chart put together by those nutty, madcap gnomes at Credit Suisse, which shows the timing and quantity of ARM resets for the next eight years. Kinda gives us a good idea why the turnaround in real estate prices isn't expected until 2011, or later:
(Courtesy of Mish's Global Economic Trend Analysis)
Number of foreclosures in the Pacifica Tribune this week: 29.
monkframe
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