The State of Real Estate April 2007

Nationally, Chief Economist Mark Zandi of Moody’s Economy.com, said on March 22, 2007, that very aggressive loans, such as sub prime loans, "alternative a" loans, prime loans that are interest only, or negative amortization loans, accounted for 40% of origination volume last year and one quarter of all mortgage debt outstanding.

When prices are readjusting, or not on a steady upward climb, these riskier loans are the first loans to have an affect on the economy. They are the loans that people squeaked into to buy a home. When pushing limits with a housing purchase, the risks are high.
Zandi said that the current state of the US housing market is “struggling” and that the correction in the housing market that began almost two years ago is on-going. He stated that sales are off by 10 to 15 percent since the peak (it took almost two years for that), housing starts are down by one-third, and prices are falling in one-half to two-thirds of the nations markets.

He noted that the weakest areas of the country include CA, primarily Southern CA - San Diego (If one were to stop here without seeing the big picture, they may have heard that California's housing market is one of the weakest in the whole United States. Continue on to local information for the facts.); AZ, Phoenix; NV, Las Vegas; FL, most of Florida, particularly South; Washington D.C., Boston and areas around Detroit MI. This correction is the most broad we’ve seen since the great depression, he commented.
He said the strongest markets, are in TX housing, Carolinas, The Farm Belt, and The Pacific Northwest, where prices are still rising at a double digit pace. He also comments that it is typical that a correction be “uneven” throughout the nation because the housing market is a very local market.”

"The housing market is a very local market." I can’t agree more.
Statewide, Robert Kleinhenz of the California Association of Realtors (C.A.R.) says that high risk loans that are getting people into financial trouble account for just 15% of mortgages in California (Much different than 40%). He says there is a housing shortage still in the Los Angeles, Inland Valley, and San Francisco areas of California and that the consumers should not expect huge bargains. (Housing shortage = low inventory.)

The median price of an existing, single-family detached home in California during February 2007 was $564,700, a 5.7 percent increase over the revised $534,400 median for February 2006, C.A.R. reported.

Statewide, the 10 cities and communities with the highest median home prices in California during February 2007 were: Manhattan Beach, $1,880,000; Laguna Beach, $1,655,000; Newport Beach, $1,412,500; Los Gatos, $982,500; Danville, $951,750; Santa Barbara, $932,270; San Clemente, $824,000; Arcadia, $815,000; Dana Point, $790,000; Cupertino, $776,500. (Cities in bold are considered part of our “local” citites.)

Statewide, the 10 cities and communities with the greatest median home price increases in February 2007 compared with the same period a year ago were: Culver City, 34 percent; Diamond Bar, 26.5 percent; Moorpark, 25 percent; Lake Forest, 22.2 percent; Mountain View, 19.7 percent; Laguna Beach, 18.6 percent; Baldwin Park, 16.1 percent; Newport Beach, 15.3 percent; Pasadena, 13.4 percent; Fontana, 13.1 percent.

The median number of days it took to sell a single-family home was 70 days in February 2007, compared with 53 days (revised) for the same period a year ago.

Locally, meaning San Benito County, Monterey County, Santa Cruz County, Santa Clara County and San Mateo County, we show more sales volume month over month for every county mentioned.

Also, every county mentioned showed the average percent of asking price received to be 97% to 101%, with the exception of Monterey County who posted a 93.16% of list price received for single family homes, yet still a 97.5% received on condos/townhomes. So locally, sales price and volume is picking up from an already strong beginning of the year.

Taking into consideration the five counties we include in our report, March 2007 showed an average median home price of $750,200. (Compare again to the statewide median price of $564,700.)

Single family homes in all five counties took an average of 105 days to sell. Please see attached sheet for a breakdown by county.
We will all hear information regarding housing from several different sources. They may be speaking about a nationwide, statewide, or local market. When relating the information to your particular investment interests, be sure your information is current, thorough, and local.