With foreclosures representing a smaller portion of home sales, median home prices in Southern California rose slightly in May, showing the first month-to month price increase since July 2007.
The one-month gain was not reflected in Inland Southern California, and analysts hesitated to say prices wouldn't fall further. In Riverside County the median home price -- where half sold for more and half for less -- was unchanged from April at $180,000, while in San Bernardino County the median price slid by $1,500, from $138,500 in April to $137,000.
More sales of expensive homes in coastal counties and fewer sales of cut-priced foreclosures in the Inland counties caused the price elevation in Southern California, according to MDA DataQuick, which on Wednesday released its May housing report.
DataQuick spokesman Andrew LePage said it is uncertain whether the leveling of home prices means they have hit a solid bottom. The median home price has dropped more than 45 percent in San Bernardino County and nearly 38 percent in Riverside County in the past year.
"It is still a pretty nasty recession, and we know more foreclosures are coming, but we just don't know how many," said LePage. "The uncertainty over foreclosures and the depth of job losses makes it very tricky to call a bottom right now."
Chapman University Economist Esmael Adibi said the most promising trend is a surge in sales, as first-time home buyers and investors have jumped in to buy bargains. Home sales were 28 percent higher last month in Riverside County than in May 2008 and 51 percent higher in San Bernardino County than a year earlier.
"Sales are reducing the inventory and laying down a foundation for prices to go up," said Adibi. He predicted that if the job market improves as he anticipates, in a year the Inland counties will see median home prices that are higher than today's.
Sue Acker-Bare, an agent with Century 21 Showcase in Highland, said she has seen first-time buyers drawn into the market by a $8,000 federal tax credit and low home prices. Also an increase in interest rates -- from about 4.5 percent a month ago on a fixed-rate conforming loan to nearly 5.9 percent Wednesday -- has convinced some not to wait any longer, she said.
"I think it is a good time," said Mayra Gomez, 24, who with her husband and two children moved a week ago into a three-bedroom house on a golf course that they bought from a bank for $254,000 in Riverside.
Gomez said they're overjoyed to buy a house with a Federal Housing Administration loan that required only a 3.5 percent down payment. When they first went house-hunting 18 months ago, she said, lenders wanted 20 percent down, and houses cost a lot more.
Real estate agents say because the number of foreclosed properties on the market has declined substantially this year, buyers are forced to bid against one another for what is available, with successful offers frequently above list price.
"Just about every property now has multiple offers. The market is looking more and more like a sellers' market," said Mike Teer, broker-owner of Teer One Properties in Riverside
Ed Leamer, director of UCLA's quarterly Anderson Forecast, said an unknown is the impact of mortgages that were extended often without income documentation and with alternative payment plans to home buyers and homeowners who refinanced a few years ago. These mortgages are scheduled to reset to higher monthly payments in coming months.
Homeowners with such mortgages may not be able to refinance because of lower property values and could decide to let their homes go to foreclosure, said Leamer.
Leamer said he believes the number of such mortgages that fail will be fewer than the subprime mortgage failures that fueled the initial wave of foreclosures. Also he said this second round of foreclosures would not be as concentrated in the Inland counties.
DataQuick noted that with fewer foreclosed houses for bargain hunters, sales have begun to rise for higher priced houses. In Riverside County between April and May sales of homes priced less than $100,000 remained the same, but sales of homes priced more than $400,000 rose 5 percent.
http://www.pe.com/business/realestate/stories/PE_News_Local_S_dataquick18.4510c05.html
Foreclosure activity in Inland Southern California declined from April to May, with fewer notices of default and bank repossessions than a year ago.
But real estate experts say the numbers reflect special circumstances apart from market trends and do not offer homeowners reason to hope their pain is ending.
Daren Blomquist, spokesman for RealtyTrac, which released its monthly foreclosure report late Wednesday, said the current decline in defaults and foreclosures should not "give people a false sense that the problem is solved before it actually is."
RealtyTrac said Riverside County recorded 4,694 notices of default in May, down from 6,019 in April and 5 percent fewer than in May 2008. Homes repossessed dropped from 1,519 in April to 1,296 in May, which was 44 percent fewer than a year earlier.
Chapman University economist Esmael Adibi said the root causes of foreclosure remain: the resetting of mortgages to monthly payments that borrowers can't afford and job losses in a weak economy.
"If you look at these two elements, I don't see how we will see a significant drop in either notices of default or foreclosure until at least the end of this year," Adibi said.
San Bernardino County saw notices of default fall to 3,521 in May from 4,661 in April and 13 percent from May 2008. The number of homes repossessed declined from 1,580 in April to 1,296 in May, 45 percent fewer than a year earlier.
Still, last month all combined foreclosure-related activity -- which includes the notices of default plus notices of trustee sales and bank repossessions -- increased by more than 16 percent in Riverside County and by more than 20 percent in San Bernardino County compared to the previous May.
Last month Riverside County ranked third and San Bernardino seventh among California counties in rate of foreclosure filings, with Riverside County having one filing for every 70 households and San Bernardino County one filing for every 81 households.
Month-to-month foreclosure activity has ebbed, Blomquist said, probably because of state legislation that delayed notices of default and foreclosure moratoriums that lenders adopted in anticipation of a mortgage modification program the Obama administration launched in March.
While foreclosure moratoriums officially expired after the winter holidays, some lenders continue to hold off foreclosures for borrowers who they determined may qualify for help under the new federal loan modification guidelines.
"I am hopeful that right now, with a more firm plan in place by the Obama Administration, there will be a better chance of not only delaying foreclosure but preventing foreclosure in more cases," Blomquist said.
But he added that Obama's modification program is so new that he doesn't think its effectiveness will be known until the third or fourth quarter.
"If we see another wave of defaults hit, that is indicative that it is not working well," Blomquist said.
He noted that in an effort to stave off foreclosure, a group of mortgages were altered last year under other modification programs, but by the year's end many of the modified loans had re-defaulted.
http://www.pe.com/business/realestate/stories/PE_Biz_S_foreclosure11.4559e2d.html
Commentary By Peter Schiff
This week, Team Obama took their dog and pony show on the road. Treasury Secretary Geithner went to China, Fed Chairman Bernanke to Capitol Hill, and the President himself began a Mideast tour in Saudi Arabia. This full-court press is not coincidental, and comes just as the federal government has begun unloading trillions of dollars in new Treasury obligations. The coordinated charm offensive is meant to assure the world-at-large that the United States can repay these obligations without destroying the dollar.
Given the renewed weakness in the dollar and the recent expressions of concern from China, our largest creditor, about the safety of its current holdings, this is no easy sell. Not only must our leaders convince holders of our debt not to sell what they already own, but to back up the truck and buy a whole lot more. The hope is that a dream team consisting of a charismatic politician, a skilled Wall Street banker with longstanding ties to China, and a respected Fed Chairman, can close the deal. However, no matter how slick the sales pitch, no amount of lipstick can dress up this pig.
The most obvious fear the trio must address is that oversized deficits will persist indefinitely. Reading from a carefully scripted rebuttal book, all three proclaim that as soon as the stimulus revives our economy, the government will take all necessary steps to reign in the deficits that result. Bernanke’s testimony showcases this rhetorical shift. The Fed Chairman claimed that catastrophe has been averted and that the recession is nearly over. As a result, he advised Congress to now focus on debt management. How he expects them to do that was left unexamined.
Setting aside the fact that the recession is far from over and that the stimulus will actually weaken the economy in the long run, Bernanke’s words were less a practical guide to Congress than a bromide for our foreign creditors. Meanwhile, Obama carefully peppers his speeches with calls for Americans to live within their means, to save more and spend less, to produce more and consume less. But nothing in the government’s current fiscal or monetary policy will encourage such behavior. In fact, the objective of economic stimulus is to prevent such changes from taking place!
The laughter of Chinese students that greeted Secretary Geithner at Peking University shows how ridiculous this spiel sounds overseas. Actions speak louder than words, and the actions of the current Administration are deafening. Multi-trillion dollar deficits, bailouts, nationalizations, quantitative easing, and grandiose plans for government-provided healthcare, education, and alternative energy, render all their claims of future prudence meaningless. If our leaders will not make tough choices now, why should anyone believe they will do so later when those choices will be even harder to make?
Of course, it’s not just major holders, like China and Saudi Arabia, that need to be convinced. Since the largest holders are already in so deep, they have the greatest short-term incentive to play ball. While throwing good money after bad is certainly a lousy investment strategy, it is politically expedient as it delays the need to officially acknowledge losses. The spin is designed to keep all the smaller, more nimble holders from dumping their Treasuries. The major holders can publicly pledge their commitment to Treasuries, while they privately planning their exit strategies, as long as they feel that the smaller holders won’t spook the market by front-running their trades.
However, once the psychology turns, there is no way to stop the rush for the exits. Remember how quickly the secondary market for subprime mortgages collapsed? One day, investors were lining up to buy; the next day, the stuff couldn’t be given away. Make no mistake about it, we are issuing subprime paper and no amount of political spin can alter that reality. Bogus credit ratings aside, I think the world already knows this and it’s just a matter of time before someone admits it.
In the meantime, by continuing to lend, our creditors merely supply us the shovels to dig ourselves into an even deeper economic hole. Their credit enables our government to grow when it needs to shrink, finances bailouts of companies that should be allowed to fail, and enables a nation that should be saving and producing to continue borrowing and spending. As a result, the more money the world loans us, the less capable we are of paying it back. I really wish the world would stop doing us favors, as neither party can afford the consequences.
For an timely example, just look at California. With an unmanageable $20 billion deficit, California recently asked Washington for a bailout. With none immediately forthcoming, California was forced to make real and needed budget cuts. The hard choices, which will benefit California in the long run, would not have been made if federal funds had been committed. We all should be so lucky.
For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read Peter Schiff’s book "Crash Proof: How to Profit from the Coming Economic Collapse".