Jumbo loan problems, jumbo price drops

Yesterday, DataQuick released the Southern California real estate sales data for the month of September - just look at what happened to prices in Orange County.
The jumbo decline in Orange County home values was apparently the result of a jumbo decline in jumbo loans, due to a jumbo realization that lending a half million dollars to someone making only about a tenth that much in wages might not be such a smart idea.

The scale on the chart below had to be adjusted once again to handle the double-digit year over-year declines now appearing in the Inland Empire Counties of Riverside and San Bernardino - another ten percent is now available to the downside and, from the looks of the current rate of decline, that might not be enough in the months ahead.

What a fall from grace it has been in the Inland Empire as the area was heralded as the last mecca for double-digit housing growth with strong annual gains as late as last summer when other areas were moving headlong into negative territory.

Marshall "almost all if not all of those gains are here to stay" Prentice, President of DataQuick, had these comments:

Some of last month's drop was part of the longer-term slowing trend, but most of it was due to mortgage market turbulence and difficulties in getting jumbo financing. There's a good chance there will be some "catch-up" sales activity between now and the end of the year as jumbo loans become more available. Still, we can't expect the market to re-balance itself until sometime in 2008.

Don't bet on any "catch-up" activity in this real estate market - just as the "can't lose" housing stories circulated in 2003 and 2004, the "can't win" housing stories are starting to become the subject of cocktail party chatter these days.

The consumers' mood toward housing is changing quickly, reinforced by the mainstream media having finally grown a brain and appointed government officials finally waking up - just as August brought a global credit market wake-up call, September real estate data brings a housing market wakeup call.

Can't we all just somehow be transported back to 2005, when the money was easy, everyone laughed that "all you have to do to qualify for a home loan is fog a mirror", and everyone was getting richer than they could have ever imagined?

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UPDATE: Wed, Oct 17th 11:35 AM PST

Here's what it looked like on the front page of the LA Times today:


That headline probably won't help out too much in the "catch-up" sales activity between now and the end of the year.