The figures in the media on California foreclosures are astonishing. Numerous articles seem to be saying that almost every home in California and Los Angeles County is now or will be in foreclosure. Many feel that the Beach Cities.... Manhattan, Hermosa, Redondo and El Segundo will soon see prices plummet by 40%-50% within the next few months.
I'm not saying we won't see our share of troubles if the credit crunch continues but I'm not as sure as others seem to be that we are going to see massive foreclosures and prices dive through the floor in our little slice of paradise.. No question that sales volume is down and sellers are getting realistic about the value of their homes. At this time it appears that homes that were priced way too high are finally being priced at the level they should have been 6 months ago. That doesn't mean prices won't decline... they will as the market is changing and financing is more stringent but perhaps not to the level of many predictions.
As far as foreclosures... maybe there are lots of Beach homes that will wind up in foreclosure in the next 6 months but right now the number of homes in the Beach Cities that are in serious trouble is fairly low. Take a look at these two websites. Countrywide is the largest lender in the nation and in big trouble at the moment.. they should have lots of loans going bad in the Beach Cities but I couldn't find many on their website. Click here for Countrywide Foreclosures by city in California. Foreclosures: How Does your Zip code Fare ....This site is for homes that have actually gone through the foreclosure process and are now bank owned. Again there are not a lot in the Beach Cities. Here is another site from Movoto on their blog California Real Estate and Homes about foreclosures in CA. Another site to check.. Current Foreclosures which I believe may be a leads site. ( See comments below for what I found when I looked at the site)
RealtyTrac is a favorite for many but the fact is their figures are not very accurate. If a home has two loans they show each loan separately which makes it look as if there are two homes being foreclosed on.. when in fact there is only one. They also show a late payment as a problem when it may be a one time event.
I usually check the Daily Breeze for Notice of a Trustee Sale which must be published 3 weeks prior to the actual foreclosure sale. So far there have been about 5 in North Redondo, one in El Segundo, one in Manhattan Beach, none in Hermosa and a number in Harbor City, Lomita, Torrance, Hawthorne, Lawndale, Gardena and a few in Palos Verdes.
No area will escape the problems brought about by the stupidity of the financial markets. We will be no exception. Last week I didn't think the FED would lower rates but after the reports on Friday I'm willing to bet they will not have much choice. Lou Barnes has a great post about this in his Boulder West newsletter. So far he has been fairly accurate on the market... but no one is 100%.
Let's assume Lou is right and we do see lower rates.. what will that mean to our market. Well first the market won't crash which really is a good thing. I know... I know... most think a crash is just what we need.. but believe me it's not. In an orderly market you won't see a crash or big price increases as we saw in the past. You will however see major adjustments. Last year we saw a Buyer revolt as many Just Said No and did not buy. Interest rates were low and qualifying was still easy.. but buyers stepped to the sidelines for about 6 months and prices did drop... in a very orderly manner. I believe if the credit market does stabilize Buyers will continue to be very disciplined about what they are willing to pay which will force prices to remain flat if not actually push them down. An orderly response to high prices is a much better response then mass chaos.
A recession may sound like just the ticket to punish those predatory lenders and greedy homeowners but trust me on this.... they are nasty and touch everyone. Once you have any type of economic collapse there is no controlling where it will go or who will be affected by the fallout.
OTHER POSTS:
Southern California Home Prices: Are We really in Trouble?
Manhattan Beach Home Prices: What's Happening?
Foreclosure: You Can't Always Walk Away
Manhattan Beach: Home Prices vs Income
Manhattan Beach: Are You a Bull or a Bear
Manhattan Beach-Beach Cities Real Estate: Foreclosures.. Big Trouble?
5 comments:
If you are interested in this bank-owned property market in California, I have just published a California Home Foreclosure Market Statistics report that details the availability of foreclosure/distressed properties, home price movements, and housing inventory statistics by the different areas of California. For those who are interested to seek out these properties, this should give you some hints of where to find these properties.
- Henry
California Property Search
Henry- Thank you for posting this.. I'm going to add your site info to the main part of my blog if you don't mind.
I wasn't aware Movoto was keeping this type of information.. thanks for updating me..
One thing everyone has to keep in mind is the inexorable return to sane underwriting standards. When we go back to mortgages of no more than 3 or 4 times gross income, the beach cities will hurt more than the Inland Empire because of its high prices. I wouldn't be surprised to see a 60% drop in MB.
I am often amused to hear people's reaction to this prediction. They are incredulous. They seem to have "gotten use" to these insane prices (in relation to income). What they don't realize is that the current price levels are a result of one thing and one thing only - free money. When the free money supply dries up, the bubble bursts.
Anon- I agree.. in part with what you have said.. stricter guidelines will change the market.
However the ratios are more generous then in the past.. you are looking at 40%-42% front end and 50%-55% back end on a fixed rate... With good FICO scores you can still do an 80/10/10 jumbo loan. Also if you have 20% down.. which many people have.. you can do a stated income loan with verified assets.
I agree that the run up in prices was tied to "cheap" money. In the scheme of things money is still "cheap" just not as "cheap". I also agree prices will drop as a consequence of the price of money increasing.. I'm just not sure they will drop as far as you believe.
For prices to drop 60% I believe two assumptions would have to be met...
First.. 90% of those who bought in the last 5 years would have to have a loan that is in trouble and be facing foreclosure...There will be areas in CA where this will seem to be true and may in fact be true. However it is not likely to happen in the beach cities.. although we will have problems they will not be to that extent.
Second there would have to be a complete economic collapse not a recession but a complete collapse..which no one is predicting. Certainly the problems within the housing industry will be of great concern.. but whether they cause the entire economy to dive is another matter.
At this point I don't believe either scenario is going to happen... however as my crystal ball is often more cloudy then crystal.. I could be proven wrong..
Trent- I checked out your site.. and will add it to my article...
I went through all the properties listed on the site for Los Angeles and found 5 in Carson, 1 in Gardena, 2 in Hawthorne, 3 in Torrance , 1 in Lawndale, 1 in San Pedro a few in Inglewood and the rest in Long Beach, Palmdale, Lancaster and other areas that saw most of the subprime loans.
I did not see any in the Beach Cities, the City of Torrance or anywhere on the Palos Verdes Peninsula. I know there are some in these cities but at this time the numbers appear to be extremely low.
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