Fear Is A Great Change Motivator.
February 15th, 2009 Categories: Weekly Real Estate Activity In Ventura County
According to the dictionary fear is defined as as being afraid; feeling that danger or evil is near; dread.
Since the beginning of time fear has been used to get people to change. The early Church is an example of this control mechanism and all religions and politicians have used it extensively over time.
This was quite evident with the stimulus package. It was voted on and perhaps 5 or 6 people actually read the whole legislation. All one heard or read is that if this legislation did not pass all heck was going to happened.
Well it past and perhaps fear was not evident to many before its passage but we can see how piggish and greedy it gets when it comes time for political pay back. All of us will see and feel this excess for years to come.
What does the stimulus package do for real estate?
Very little but there will be another piece of legislation that will address real estate. The cost of this new legislation will be another trillion dollars.
Side bar: It is funny but initially everyone wanted to fix real estate first. Now however it is taking a back seat to everything else. I guess the real estate market was not that important.
The stimulus package and all the talk about it is a lot of pork. More candidly it consist of a lot of crap. Crap is crap no matter what kind of package it comes in. Throw enough of it against the wall and hope that it sticks. When it dries we can hose it off. Get ready with the hoses.
Items included in the stimulus package inserted to help real estate included:
- it reset conforming loan limit cap at $ 729,750 up from $ 625,000;
- 1st time home-buyers get a credit of $ 8,000 if they purchase a home between January 1 and December 1, 2009;
- removed from the package was the condition that an individual getting this credit had to live in the home for 3 years.
That was the real estate portion of the stimulus package. Nothing to get excited about.
More interesting was that Fannie Mae and Freddie Mac declared that investors can buy up to 10 properties (up from 4). Also announced were the standards for loans which as expected are getting tighter. The announcement indicated that:
* The minimum credit score goes to 720
* 75% LTV for a Purchase for 1 unit properties
* 70% LTV for a Purchase on 2-4 unit properties
* No Bankruptcies or Foreclosures for 7 years
* No late payments within the last 12 months on any mortgages
* In order to include the rental income from other rental properties, a two year history is required from the borrower’s Federal income tax returns.
* 6 months reserves will be required on each investment property that you own including the subject property.
These standards will be modified as time goes on but as of today investors and home buyers are going to have to ante up more money.
Ventura County.
With the going’s on in Sacramento it appears that we are in store for a big tax hike. Gasoline which has an 18 cent tax plus a 6% state sales tax (this will go up), and a 1.25% county tax plus additional sales taxes and a 1.2 cent per gallon State UST fee will be going up to about 26 cents per gallon plus all the other associated fees. That is approximately a 40% increase in the gas tax.
I suspect that the reason for such an increase is to allow the State to maintain parity. Auto gas mileage is forecast to go up say from approximately 25 miles per gallon to about 35-40 miles per gallon. That is a 40% increase in gas mileage.
The State recognizes that the number of gallons people will buy will decrease therefore they have to increase the gasoline tax to maintain their income. Strange how these numbers work out.
The sales tax is expected to increase about 1%, therefore Ventura County will have an 8.25% sales tax.
Will these taxes impact real estate? Yes a little but the overall projection for real estate is up but it may take a little longer to achieve. I suspect it will approximate an additional one year slip before real estate really gets legs.
Now I think it is time to start making some big changes in Sacramento. Those folks live on a different planet.
The Ventura County weekly real estate market continues to show strength. Properties are selling faster over the last several weeks compared to a comparable period last year.
The Conjo Valley, Simi Valley/Moorpark area have had a significant increase in listings but the other parts of the County show a continuation of downward listings. Prices continue to go lower but the rate of growth appear to have slowed.
The following 15 year average valuation for Ventura County shows a 27% decrease in prices for the year 2008.
However it appears that the bottom of the market occurred in November, 2008 (see table below). Prices for the last two months (December, 2008 and January, 2009) appear to be trying to stablize and the annual Inc/Dec % since 2008 (drop from 46% to approximately 40%) could be suggesting that the upward trend that we have been waiting for may be at hand. That is not to suggest that further price deterioration will not occur, it simply means that the steepness of the decrease may be softening.
If February follows this pattern and it continues into March we have in place that the market is starting to settle out and ready for an upward swing.
A caveat. It appears that Nationally real estate prices are approaching 2002-2003 prices. If this continues than the downward price spiral will continue and one could see significant lower real estate prices in Ventura County. As noted in the above table prices in this time frame were as low as $ 370,000 (average sales price).
Should the real estate market start getting good press and TV coverage it will fix the pattern upward.
Seller’s have to remain patient; buyer’s who are still waiting to buy have missed the bottom.
Your comments are welcomed.
