Sunday, November 2, 2008
California Real Estate Update-5
"While the volume of existing-home sales across the U.S. fell 10.7% in August from the previous year, according to the National Association of Realtors, there are signs that the most damaged of markets are starting to heal themselves. Across hardhit California, sales volumes rose 65% in September compared with a year ago said MDA DataQuick, a San Diego-based real-estate information service. ... With home prices already down 66% from their peak [in Los Banos], most homeowners owe more on their houses than their houses are worth. ... In 2006, 45% of the home mortgages and refinance loans in Los Banos were high-rate loans, most of which would be considered subprime, compared with a national average of 29%, according to a Wall Street Journal analysis of federal mortgage data. Claudia Pedroza ... figured that with her husband bringing home $3,200 a month as a house painter, the family could afford the monthly mortgage payment of about $2,000. ... Pedroza lost her home to foreclosure when her husband's painting jobs vanished and the couple fell six months behind on their payments. The Pedrozas are now paying $750 a month to rent a two-bedroom apartment in downtown Los Banos, where their 10-year-old daughter and 11-year-old son share a room", Michael Corkery and Johnathan Karp at the WSJ, 22 October 2008.
Amazing. Making $38,400 a year, Pedroza thought she could afford to buy a $375,000 house, paying 62.5% of her monthly income for it. What idiots underwrote her loan? While California real estate may continue to fall, I suspect it's only 9-18 months from a bottom.