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What to Talk About Over the Holidays
Wednesday, December 20, 2006
With all the year-end retrospectives coming up in the next two weeks, where the business segments are sure to highlight the precarious state of the nation's housing market, there should be plenty to talk about with friends and family over the holidays.
It's already started (the retrospectives that is, not the holiday talk).
This is what you'll find at the Yahoo! Finance page right now - the lead story minces no words:
Associated Press writer Ellen Simon ranks the decline of housing above all other business news stories for 2006 including options backdating, the conclusion to the Enron scandal, energy prices, and the disturbing difficulties of U.S. automobile manufacturers.The nation's house party ended with a thud in 2006, leaving everyone from condo flippers to Federal Reserve chairman Ben Bernanke waiting to see what would happen next.
Again, note the absence of reassuring words from National Association of Realtors Chief Economist David Lereah or former Fed chief Alan Greenspan.
The sudden stall in home sales, home construction and home prices -- and what that will mean for the economy -- was voted the top business story of the year by U.S. newspaper and broadcast editors surveyed by The Associated Press.
At the housing market's peak, buyers rushed to open houses, blank checks in hand. Lenders gave big-money mortgages to people who could barely afford their monthly payments. That ended in 2006, when home builders scuttled projects, walked away from land they'd hoped to develop and would-be buyers canceled orders.Moody's Economy.com, a private research firm, projected that the median sales price for an existing home will decline in 2007 by 3.6 percent -- the first decline for an entire year in U.S. home prices since the Great Depression. One reason: Speculators fled the market. Not only did they stop buying, they put properties they owned up for sale.
There's probably better than a 50-50 chance that housing will be the number one business news story for 2007 as well, that is if mortgage lending doesn't sneak in.
"Investors were a bigger part of the market than many thought, including ourselves," Ara K. Hovnanian, the president and chief executive officer of homebuilder Hovnanian Enterprises Inc. said in June.
What's that expression?
When the tide goes out we'll all see who's been swimming naked?
As the books close on 2006, it's still a lot closer to high tide than to low tide.
1 comments:
Since no one else has left a comment on this one, I'm going to post this lengthy excerpt from the local assessor's office (I live in Ventura County too) - people might be talking about his over the holidays.
Review Due to Decline in Value
The Assessor’s Office is required to lower the assessed value of any real property if it is higher than the current market value. Each case is reviewed individually upon request of the property owner.
Adjusting Assessed Values in a Volatile Real Estate Market
Between 1991 and 1996, real estate prices in Ventura County slipped to their lowest levels during a statewide economic recession. The Assessor's office reduced approximately 75,000 property assessments below their Proposition 13 factored base year values. These properties were in a temporary, decline-in-value status. Under Proposition 13, the base year value established at their time of purchase must be increased by an inflation factor, not to exceed 2% per year. This adjusted value is known as the factored base year value. There is no limit as to how rapidly the Assessor could reduce a value to track market conditions. While there is also no limit as to how rapidly we restore values in a recovering market, our policy has been to phase in the restoration as we follow the market over time. The assessment's upper limit remains the Proposition 13 factored base year value.
In 1998, we followed the market and restored some properties to their factored base year value, while only partially restoring several thousand other properties. In 1999, the market restored many more properties to their factored base year value, and we partially restored about 30,000 assessments. During 1999 and early 2000, the market has recovered further with some properties selling for more than the asking price after multiple offers. Many prices being paid are still above the prices paid during the last peak in the market in 1989 and 1990. This boom has impacted almost all classes of property in Ventura County. The Assessor's office has now reviewed agricultural, commercial/industrial, oil, multi-family apartment, and single-family residential properties, which were in a decline-in-value status. For Year 2000, we will be fully restoring about 17,000 of the 60,000 properties that were still in a partial decline-in-value status to their Proposition 13 factored base year values. However, over 40,000 single-family dwellings, condominiums, multi-family apartment and commercial/industrial properties will remain in a partially restored status from their decline-in-value status this year.
To understand the process let's look at a hypothetical example. In March 1990, Jack and Jill purchased a home for $250,000, at the height of the market. By 1995, their Proposition 13 factored base year value had increased to $279,275. However, the real estate market had suffered a severe decline during that same period and as of March 1995 their home was only worth $200,000, which we enrolled as a temporary decline-in-value. By 1998, the factored base year value had gone up to $293,800. However, the real estate recovery was just kicking in and the market value of their home as of January 1998, had only recovered to $245,000, which we enrolled for that tax year. By 2000, the factored base year value of their home had increased to $305,200. The market had now fully recovered in their neighborhood and the market value as of January 2000, was now $320,000. Thus for 2000, we will enroll Jack and Jill's factored base year value, which is now once again below the current market value. All owners whose properties are restored to their Proposition 13 values or remain in a decline-in-value status with a partial restoration will have received a value notification card in July from our office.
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