Bay Area home market slump widens
Sales, prices still going down; economists see ongoing trouble
By Barbara E. Hernandez, BUSINESS WRITER
Article Launched: 01/18/2008 02:39:18 AM PST
The housing slump continued to spread throughout the Bay Area at the end of 2007, as sales continued to drop for the 35th month and prices fell to 2005 levels, a real estate information company reported Thursday. Sales continued to drop dramatically across the Bay Area counties with Sonoma charting the biggest drop at 48.5 percent and Contra Costa falling 45.7 percent from December 2006, DataQuick Information Systems Inc. reported. Sonoma median home prices also dropped the most, from $525,000 last year to $410,000 this year. Contra Costa dropped down 11.3 percent to $505,000, Solano County dropped 15.8 percent to $370,000, Alameda fell 8.3 percent to $540,000 and San Mateo dropped 0.2 percent to $733,500.
The continued slide in sales and prices seems to indicate the housing slump is not going away and will affect the entire Bay Area, economists said.
"I think most economists agree that this is not going to change quickly and we may notreach the bottom this year," said Cynthia Kroll, senior regional economist for the Fisher Center for Real Estate and Urban Economics at UC Berkeley.
Kroll said buyers should buy if they can afford a home and would like to live there for a significant period of time. The other alternative is renting for now and investing the money saved on a mortgage payment.
With many anticipating a continued, if torturously slow, drop in home prices, most buyers would rather take their chances and wait.
"We need that sense of urgency to commit to a pretty big investment," said Ed Leamer, director of the UCLA Anderson Forecast. The tougher lending criteria and few prospective buyers to qualify for entry-level homes is affecting the entire Bay Area, he said. Without entry-level buyers buying, move-up buyers can't buy either.
"If you remove the bottom of the pyramid, it's pretty hard for the rest of the pyramid to stay up," he said.
The median for homes financed with conforming loans was $470,000, up 6.8 percent from $440,000 a year earlier.
"I think the mortgage market is in a continuing state of dysfunction," said Ryan Ratcliff, an economist at the UCLA Anderson Forecast. "It's going to be a marginal improvement this year at best."
Alameda County had the largest declines in its resale house and condominium markets, but new home prices rose 7.3 percent although new home sales fell 5.3 percent, DataQuick reported.
Contra Costa County saw a drop in all home sales, but prices rose 1.5 percent on new homes.
San Mateo County seemed to be hit hardest in its resale condominium market where sales dropped 55.6 percent while new home sales increased 83.9 percent.
Solano County continued a big slide in both resale houses and condominiums, with sales dropping 51.8 and 41.7 percent respectively, while new home sales fell 9.7 percent.
"For people out there looking for bargains, builders are the only ones really offering them," said Andrew LePage, an analyst with DataQuick. "If a homeowner can't get the price they want, they take it off the market and try again in 2009."
A total of 5,065 new and resale houses and condos sold in the Bay Area in December. That was down 1.2 percent from 5,127 in November, and down 39.5 percent from 8,372 in December 2006, DataQuick reported. Due to late data availability, the December statistics for Alameda County were extrapolated from the first three weeks of the month.
In December, jumbo loans dropped 80 percent in Alameda, 78 percent in Solano, 68 percent in Contra Costa and 52 percent in San Mateo counties, LePage said. Conforming loans fell 29 percent in both Alameda and Solano counties and 25 percent in Contra Costa and rose 19 percent in San Mateo counties. Jumbo loans have become costlier and harder to qualify for since a cash crisis hit the lending industry last August.
There were 2,459 Bay Area home purchases financed with conforming mortgages up to $417,000, down 15.9 percent from 2,923 in December 2006.
"You just can't ignore the incredible drop-off in jumbo loans," he said. "It's like a switch was flicked in August."
The typical monthly mortgage payment that Bay Area buyers paid was $2,756 in December, down from $2,963 in November and $2,828 a year ago.
Patrick Lashinsky, president of ZipRealty Inc., an online and full-service real estate brokerage based in Emeryville, said that price will become more important throughout 2008 as fewer people can qualify for more than a $417,000 loan and make offers close to that amount.
"I think there will be more seller acceptance ... starting now and in February," he said. "More than 50 percent of homes in Contra Costa County had price reductions. That means the seller came in too high."
Barbara E. Hernandez covers real estate. Reach her at 925-952-5063 or bhernandez@bayareanewsgroup.com.
