Friday, November 21, 2008
Well, Patrick Killelea of Patrick.net might be a little happier this month than last after the drubbing that home prices in the Bay Area took in October. Have a look at the damage as reported by the San Francisco Chronicle.
The year-over-year change in the median home price was a whopping -45 percent!
That makes the reported 33 percent annual home price decline in Southern California look tame by comparison, though that minus 45 percent figure does look a little suspect given all the numbers above it (i.e., Contra Costa had the most sales and the biggest decline, but, at first glance, it doesn't seem like it's enough to pull the overall figure as low as indicated.)
In correspondence some time ago, Patrick indicated that prices weren't coming down quite fast enough to suit him and, at the time I had to agree. The Bay Area had long been a stalwart, holding onto price gains while real estate in other parts of California plunged.
As shown in the graphic above, the raft of foreclosure sales are finally pushing down prices in the lower cost, outlying areas with higher priced areas likely to suffer the same fate in the period ahead - it seems that home prices are "sticky-down" until banks start realizing that the only way they're going to get rid of their portfolio of foreclosed properties is to slash prices.
With banks unloading a record number of foreclosures, Bay Area home sales soared and the median price plummeted in October, according to a real estate report released Thursday.As has been the case for some time now, the relatively higher volume of lower priced homes, almost half of which are now distressed sales, has pushed the median price lower than it would otherwise be.
Most of the action - and the bargains - were in areas where bank repossessions have become a fact of life. Almost half of all existing homes sold were foreclosures. Their bargain-basement prices sent the Bay Area median tumbling 45 percent during the past year to $375,000, according to research firm MDA DataQuick of San Diego.
Besides investors, first-time home buyers who had been priced out of the market now are able to gain a foothold.
"I always dreamed, but never thought I would be able to swing it," said David Prazniak, 46, a United Airlines flight attendant. He is days away from closing on a two-bedroom stucco home near the Oakland Zoo.
He's paying $170,500 - about one third of the property's $495,000 price in early 2007. His monthly payments of around $1,100 for principal, interest, taxes and insurance will be less than his rent.
In a sign of the bargain-hunting competition, Prazniak was outbid on four foreclosed homes.
In many areas, higher priced homes (e.g., $400K to $800K) are just sitting, waiting for some dumb buyer to come along and make a foolish offer or for the seller to either start slashing the price or take the house off the market.
Looking back two years at this archived DataQuick report, it's easy to see how the volume of sales has changed, on a relative basis, in places like Alameda and Contra Costa County versus San Francisco and Marin.
What used to be a ratio of about four or five-to-one has become a ratio of five or ten-to-one. This pushes the median price down regardless of how well prices may be holding up at the high end, something that is likely to change soon enough.
Surely, the high end is not immune.