Archive for March, 2009
What A Difference A Year Makes!
March 1st, 2009 Categories: Weekly Real Estate Activity In Ventura County
Based on data provided by the Federal Housing Finance Agency the last quarter of 2008 and addressed in http://www.venturacountyretalk.com/2008/11/26/its-not-pretty-picture-review-of-the-national-real-estate-market/ was a disaster for the real estate market.
As shown in the graph below very few places in the United States was spared by the real estate down turn.
Comparing the National real estate market to the 4th quarter, 2007 it quite evident which areas have been hit the hardest and those that have remain relatively calm (Texas, North and South Dakota and Wyoming).
Even my favorite investment areas of Missouri, Louisiana, Mississippi and some parts of Texas have been hit.
Most of the real estate comments relating to this latest quarterly report have been discussed in other articles written and for this blog. Those wanting to review these can refer to the following articles:
Waiting For The Next Shoe To Drop/
Out With The Old. In With The New/
National real estate.
Brokers and agents have known for quite some time that the real estate market was going South. They are also witnessing good properties being given low-ball appraisals, exascerbating the problem in their particular geographic area.
People want to remain clueless as to what is going on. 
There is the political slight of hand and talk being banter about.
Last week for example the President suggested that those earning over $ 250,000 per year will be unable to take mortgage interest as a deduction.
I got news for you folks. If this group loses this deduction everyone will lose the deduction regardless of income.
Remember credit card interest was taken away as an itemized deduction a number of years ago. People at that time thought it would not occur but it did.
The tax code is a vehicle used to distribute wealth. Unfortunately it has never worked.
What one may see within a few years are no itemized deductions, a scaled back of credits and basically a flat tax (it will not be called that for political reasons) but rates will be as high as 70% to 75% for the those earning over $ 250,000. Canada has that kind of tax program as well as some European countries. Guess who we are trying to follow?
The $13 per week increase that everyone will get in their pay check. This is not a decrease in tax. These monies (credits) will be taxed next year as additional income. So you may want to reduce your exemptions if you think you will have to owe taxes.
Is a real estate contract worth anything today? Probably NOT. Will any contract be worth anything or sustainable?
Banks and other people are concern about the prospects of having real estate mortgage contracts “cram-down” with contractual changes of either interest rate, the principal or whatever. Why now?
Well these same people (banks and appraiser’s collectively) “cram down” ridiculus appraisals over the last year on seller and nothing was said. Now that banks have to face the same problem it becomes an issue. One gets what they sow.
Contract law is going to stand on its head and will be put to the test as to the meaningfulness of any contract.
California.
When looking at California itself the State is a disaster. States vying for the crown of having the worst real estate markets are Arizona, Florida, California and Nevada (ranked as 48,49,50 and 51. Yep…..California is ranked #50).
Area continuing to be the worse of the worse in California are:
- Merced
- Stockton
- Modesto
- Vallejo-Fairfield
- Riverside-San Bernardino-Ontario
- Salinas
- Yuba City
- Bakersfield
- Madera-Chowchilla
- Fresno
- Sacramento-Arden-Arcade-Roseville
- Visalia-Porterville
The area ranked as the lowest in the United States is West Palm Beach.
There is a Japanese expression “genchi genbutsu” which basically says ‘get out of your office and visit the source of the problem’. I was schooled in this philosophy and it is an appropriate approach that should be undertaken in Washington and Sacramento by both Senators and Congress people.
We need to elect better people to office and retire those that have been in office for an eternity. They have lost perspective.
Activist and special interest groups are setting National, State and Locals agenda’s which are a hindrance to all.
I suspect that 90% of the voting population hasn’t the slightest idea of who they vote for nor what the individual(s) running for office stand for.
If promised something that will not cost them anything they will vote for that person. Unfortunately when they find out they have to pay too, its to late and a lot of damage has been done. People WANT and politicians promise. So the thinking is if someone else is paying for it, it’s OK. It doesn’t work out that way for long.
Much is being directed towards statements by Lincoln, Regan and Franklin Roosevelt made in the past. Perhaps Thomas Jefferson would be worthy reference. Jefferson stated “Honesty is the first chapter in the book of wisdom“. That is what we need on the National, State and Local government levels.
Ventura County.
Surprisingly residential sales are up approximately 40% when the first two months of 2008 and 2009 are compared. Most of the increase in sales were in Oxnard and the buyers are generally foreigners (from China for the most part).
Listings continue to decrease but it appears that prices want to resist further downside erosion (see second chart).
The recent February % of -36% is significantly down from the -47% recorded a few months age. This suggests to me that while prices may still fall there appears to be some resistance to further decreases.
If this % factor continues to fall over the next few months Ventura County may be out of the woods. It would also suggest that November, 2008 was the bottom of the downside for the Ventura County market.
It will be interesting to see if this trend continues because what the politicians want to do and what the market is doing seems to be at odds with the purpose of each.
The job market will be especially hurtful to the real estate market if the unemployment rate in Ventura County exceeds 10-11% (it is now 10% in the State) and if businesses elect not to make new jobs.
If this should occur the market will tend to go side ways for a period (with perhaps some downside but not much). Unfortunately the numbers will not be available until 2-3 months after the fact.
Your comments are welcomed.
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