July 2006 Archives

BY THE NUMBERS

Home sales numbers for the state and the nation always come out at the tail end of every month.
The National Association of Realtors releases its release and so does the California Association of Realtors.
And different reporters have a different take.
Two dispatches I saw on the wire reported that sales nationally fell 1.3 percent in June.
Only one included the year-over-year decline of 8.9 percent.
That's not surprising, since the NAR put the monthly decline at the front their releases second paragraph and the annual number at the back.
Here's the headline. “Existing-Home Sales Flattening, Prices Cooling.�
CAR, on the other hand, cast its weight with the year-ago. Here's their headline. “CAR reports median price of a home in California at $575,800 in June, up 6.2 percent from a year ago; sales decreased 26.3 percent.
Which one offers a better sense of the market.
Robert Kleinhenz, the deputy chief economist at the state association, said that the monthly market moves get a lot of national attention.
That might not be a good thing.
Real estate markets are lethargic beasts.
“The housing market is being viewed and treated a lot more like financial markets which turn on a dime. This moves at a somewhat slower pace,� he said.
Market analyst Nima Nattagh agrees.
“Month-to-month trends tend to be influenced by seasonal factors where on a yearly basis there is a much more long term view of the changes in the markets.�
That's why publicly traded companies earnings reports are compared to the year-ago period, a former editor once told me.
The bottom line: To get a sense of where this market is headed, look back a while in time.

NEWS ALERT
The California Association of Realtors will issue its June market report on Tuesday (7/25) and I expect it will be similar in tone to last week's assessments from DataQuick Information Systems and the Southland Regional Association of Realtors.
Median price increases will mostly be in single digits and a few areas could fall below levels.
Sales will be well under June 2005. Inventory will be well above a year- ago.
The bottom line: The good news for potential buyers continues.
RATE WATCH
Two big rate trackers crunched last weeks numbers and here's their take.
First the Web suite bankrate.com
MORTGAGES
Rate: 6.89 percent (30-year fixed) Average Points: 0.3 ...
HOME EQUITY PRODUCTS
Rates: 8.23 percent (line of credit); 7.87 percent (loan) ...
AUTO LOANS
Rates: 7.96 percent (60-month, new car); 8.91 percent (36-month, used car)...
CERTIFICATES OF DEPOSIT
Yields: 3.80 percent (1-year CD yield); 4.28 percent (5-year CD yield)...
CREDIT CARDS
Rates: 13.08 percent (standard fixed); 14.64 percent (standard variable)...

And here is HSH Associates Market Trends snapshot.
The biggest tracker of mortgage information found that rates eased back a bit last week averaging 6.88 percent, down .03 points from the prior week, for the a 30-year fixed rate home loan. The rate for a 15-year loan averaged 6.53 percent and the one-year adjustable was 6.15 percent.
Average rates were slightly higher in California: 6.93 percent for the 30-year, 6.58 for the 15-year and 6.18 for the one-year adjustable.
The company notes that the Fed has been on a rate hike warpath with 17 consecutive increases, in its battle with inflation.
But inflation is still powering ahead. The next Fed meeting is Aug. 8 and it was thought another rate hike is likely. But last Wednesday Fed Chairman Ben Bernanke told Congress the Fed is not convinced another rate hike is warranted. And some of those earlier rate hikes are starting to slow economic growth in some sectors, like housing construction, HSH noted.
Here's their take.
Two related but time-gapped arcs are at play.
The first is growth. Ultra-low interest rates goosed it to life several years ago and then it was propelled by cheap money. It climbed the first third of a rainbow arc over a couple of years, and powered through the second portion in a hot streak over the past year or two, and is now entering the third stage, one with rather a more downward trajectory (and hopefully slowing its momentum as it does).
Inflation is the second arc. It had a later beginning, when in trying to stave off deflation and boost growth, the Fed (and other central banks) flooded the economy with cash and low interest rates. After starting sluggishly, this arc too -- now probably well into its second stage -- seems to still be on an upward trend, with higher inflation readings now and more still likely to come for a time.
The question is: When will this arc hit its third section, where inflation has peaked and begun to dwindle? The answer will depend upon how quickly and how far the first arc travels, the company reasons.
“In order to get the inflation arc to reach and pass its apex, we'll need the growth arc to move past - maybe well past - its own. Growth will likely need to be substandard for a while, perhaps well below the Fed's forecast of 3.25% GDP for 2006 in order to exert meaningful influence on the inflation arc. As well, this will require patience by investors in the face of what could be at times unpleasant inflation news, and a steady hand on the part of the Federal Reserve to not overdo monetary tightening,� the company said in it's analysis.
The bottom line: It will all play out in the months ahead.

Home sales reports on the San Fernando Vallery and Southern California are due out on Tuesday (7/18/06).
The Bottom Line: This market is continuing to back-slide into the 1990s.
Someone who bought a median-priced home ($578,500) last June saw a 3.7 percent return on their investment investment in the ensuing 12 months.
Those who bought at the median in June 2004 reaped a 14.6 percent gain.

Transaction:
Madison Partners has arranged the $12.2 million sale of Toluca Lake Medical Center in Burbank to Lexham Private Investors, LLC.
Built in 1964, the property consists of a 5-story plus-penthouse building of 41,388 square feet of medica and office space.
It's on a 43,579 square foot at the southwest corner of Riverside and Screenland drives. The property also has a 31,080 square foot parking lot.
This is part of a portfolio of 12 properties. The owner Blue Real Estate hired Bob Safai, principal with Madison Partners, to sell it off. The medical center is the second sale and five are pending..
“The brisk pace and volume of investment sales in the market has not yet let up,� Safai said in a statement. “The Tri-Cities area is a supply constrained market with an extremely strong medical office market �.
Madison Partners is a Los Angeles-based commercial real estate firm.

Foreclosure Update
Also on Tuesday Realty RealtyTrac _ an online marketplace for foreclosure properties _ will release its June 2006 U.S. Foreclosure Market Report. Here's a peak. It will show that 88,195 properties nationwide entered some stage of foreclosure during the month, a decrease of 5 percent from the previous month, but still a 17 percent increase from June 2005.
The report also shows a national foreclosure rate of one new foreclosure filing for every 1,311 U.S. households during the month.
The Bottom Line" Activity is moving up from historic lows.

Reader John Hess sent the following note regarding my Sunday column headlined "Housing future uncertain, but certainly not good."

Hello Greg,
I just wanted to comment on the article. I thought that it was more inline with whatÂ’s going on than the spin normally generated by Realtors and people within the RE industry. On another note, there are places that are already affected negatively on real estate and cannot get back their 2004 prices that they paid on their home even though we are supposed to be in the strongest selling period and with much of their equity gained from 2005. I created this within a day and found these listings very easily. Here is the link: http://forsakencraft.com/proof.htm At the moment there are 70 bank owned homes and 1416 total for sale in the city of Temecula. ThatÂ’s 1 in 20 homes for sale that have been foreclosed on. South Riverside County is not looking great for now.

I followed up his note with a phone call Monday morning.
Hess is a roofer and his wife is a teacher. They live in San Bernardino and he has good reason for interest in the Temecula market.
His wife has applied for a teaching job there.
Follow the link above to check out his research.
The results are giving him pause about buying right now, though he has the cash for a downpayment.
Hess sold a quarter-acre lot in Califrnia City and netted $85,000.
And he's content to sit on the sidelines and watch the market.
It's the peak buying season but the market he's interested in is soft.
It should soften more in fall and winter and that might be the time to make a move.
And he's not worried about interest rates moving up.
"From my view interest have no impact on what I'm going to buy. The price does. I don't care about the bottom line (not this blog) in the future I care about paying off the home.. Rates have no impact on what I'm going to buy. The price does."
We'll see where he is in the fall.

FORECLOSURE CHECK
Sunday's column also carried the opinion of Inland Empire investor Bruce Norris that foreclosure activity will soar 1,500 percent by 2010, which could be a good buying opportunity if folks like Hess are inclinded to wait that long.
DataQuick Information Systems analyst did a quick check on foreclosure active this year for the Woodland Hills zip code 91367.
He reported that four homes have were foreclosed on and that 32 owners received default notices, the first step in the process.
As for Norris' prediction it might not be out of lince since activity is still close to record low levels, Karevoll said.
So maybe that might not work out to such a great buying opportunity after all, just a more normal market.
Karevoll also knows Norris, saying he's interesting even when he's wrong.
And Norris has been right in the past, sort of.
"Back in 1997 he was the only one who though prices would double in five years. And he was more than right."

I'll be on vacation until next Monday.

I caught up with DataQuick Informatioin Systems analyst John Karevoll on Monday and had his check the foreand went over some of Hess' concerrns.