Rgional default rate

During the last quarter, 6,638 homeowners in our six-county capital region, received official notices from their lenders that their mortgage was in default. A NOD (Notice of Default) is the first step in the foreclosure process. It’s going to be filed in the county’s recorder’s office when homeowners stop making payments. After a NOD is filed, the homeowner has 90 days to bring their payments current or they loose the property to a foreclosure. Most delinquent homeowners are able to cure the default if they take necessary action.

In our region during July, August and September there were 2,772 foreclosures. Sacramento County was hit pretty hard. Seventy-five percent of all defaults and foreclosures occur in Sac County. El Dorado County recorded only 4 percent of the regions defaults with 278 notices of default for the third quarter and 15 foreclosures. Placer County reported 10 percent of the defaults and foreclosures with 728 NODs and 294 foreclosures.

Most foreclosures occur in places where people don’t want to live. In Sacramento, the zip code 95832 (Meadowview in south Sacramento) ranked among the highest areas for foreclosures in the state. Lathrup’s 95330 in San Joaquin County was along side Meadowview as was the city of Parris in Riverside County.

According to DataQuick 24,200 homeowners lost their home during the third quarter and 75,000 received their notice of default. That was the highest number ever recorded. Most of the loans that went into default were purchased or refinanced in 2005 and 2006. Half of all foreclosures statewide are in the central valley or Riverside/San Bernardino counties.

It’s probably going to take some time to sell off all the foreclosures at our current sales pace. The six-county region recorded 7,791 new and resale closed home sales for the quarter along with the 6,638 notices of default.
Our real estate market is not going to improve until the number of default notices decrease. When that happens for two consecutive quarters we will be on the way to a stable market.

Halloween

Now, some interesting information about Halloween. The observance of Halloween, which dates back to Celtic rituals thousands of years ago, has long been associated with images of witches, ghosts, devils and hobgoblins.

Over the centuries, the holiday changed from a deeply religious day of respect for people canonized as saints to a day of remembrance for all the dead and the end of the harvest and the onset of winter. Fairies and witches were said to herald the changing of seasons twice a year. People who chased the fairies used to carry turnips carved to hold candlelight, which changed to pumpkins because they are easier to carve. Witches would gather for parties, arriving on broomsticks with black cats at their sides who carried the spirits of the dead. Trick-or-treats began as far back as 370 A.D., according to The Holiday Spot, with gangs of boys good-naturedly calling upon farms for treats, and causing mischief if no treats were given.

In the U.S. the first official citywide Halloween celebration occurred in Anoka, Minn., in 1921. Today, Halloween is the most celebrated holiday next to Christmas, and Americans are spending more and more money for Halloween costumes, tricks and treats than ever before. According to the National Retail Federation, consumers are expected to spend $5.07 billion on Halloween this year, up slightly from $4.96 billion in 2006 and $3.29 billion in 2005. That's about $64.82 per person.

Halloween customs and rituals have changed, but parties, games, pranks and going door-to-door are as big as they were several hundred years ago when Washington Irving wrote, "The Legend of Sleepy Hollow." Though largely marketed as a evening of fun for children, adults are increasingly making the holiday their own. About one-third of adults will dress in costume, throw a party and/or take their children trick-or-treating. They will spend $1.57 billion on candy (about 94.7 percent of consumers), $1.39 billion on decorations, and about $1.82 billion on costumes, including those for pets. The adult age group most likely to celebrate are those aged 18 to 22.

The U.S. Census estimates that approximately 36.1 million children (the estimated number of potential trick-or-treaters in 2006) aged 5 to 13 were available for trick-or-treating in 2006. They have about 109.6 million doorbells to ring, the number of occupied housing units in 2006. Luckily, about 93 percent of those households consider their neighborhood safe, says a 2003 study. To get ready for the holiday, about one billion pounds of pumpkins were produced in 2006 and their value was about $101 million. About 1,198 U.S. manufacturers produced chocolate and cocoa products in 2005, employing 38,718 people and shipping $13.6 billion worth of goods. California led the nation in the number of chocolate and cocoa manufacturing establishments, with 128, followed by Pennsylvania, with 121. Out o 477 nonchocolate candy makers, 73 were in California. Americans ate about 26 pounds of candy in 2006, most of it around Halloween.

Just for fun

Just for fun, you may want to look at my revised web site at www.kencalhoon.com. Searching for a home is easier and offers more options. You have always been able to search for all properties listed for sale in Sacramento, Placer and El Dorado Counties but I have added Yolo, San Joaquin, Stanislaus and Merced. Lets say you want to see what properties are listed for sale in Atwood. Just go to my web site and click on “Search for your next home.” That will take you to every property listed for sale in the seven counties including all foreclosures and bank repos.

My new site will also allow you to sign up and receive all the information on any new listings in any area.

Then if you have the nerve, click on my newly added Zillow feature and get a zestimate on your home’s value. Zillio will show you a graph of your neighborhood property values and show you what’s happened to your property’s value over the last year.

I have found Zillow’s zestimates to be more accurate in populated areas than in rural more remote parts of the region and some of their comparables are not accurate matches but it is interesting.

Fed cuts rate again

The Federal Reserve yesterday lowered its target rate for the federal funds rate to 4.5 percent and slashed the discount rate to 5 percent.

The 25-basis-point reduction in both short-term rates was less drastic than similar action the Fed took last month as a response to financial market disruption stemming from losses in mortgage lending, but was in line with many analysts' expectations.

On Sept. 18, the Fed slashed 50 basis points off both the federal funds rate -- the rate banks charge each other for overnight loans -- and the discount rate, the rate the Fed charges for direct loans to banks. Mortgage Bankers Association Chief Economist Doug Duncan said earlier this month he anticipated a 25-basis-point reduction in the federal funds rate in October, and predicted it could be the last adjustment needed to reach a "neutral" position that allows for moderate growth while keeping inflation in check.
In a statement announcing today's decision, members of the Federal Reserve's Open Market Committee said much the same thing -- that "after this action, the upside risks to inflation roughly balance the downside risks to growth."

Economic growth was solid in the third quarter and strains in financial markets have eased somewhat on balance, but the Fed said it expects the housing downturn to intensify, slowing the pace of economic expansion in the near term.

Analysts who fear the housing downturn will lead to a recession were hoping for another 50-basis-point reduction in the federal funds rate, but the Fed has to weigh consequences such as further weakening of the dollar and inflation.

Where did all the people go?

The U.S. Census Bureau reported growth in the share of vacant homes, from 16.6 million units in third-quarter 2006 to 17.9 million in third-quarter 2007. Vacant homes accounted for 13.1 percent of the nation's estimated 126.2 million housing units in third-quarter 2006, compared to a 14 percent share of the nation's 128.2 million housing units in third-quarter 2007.

Empty homes are of special concern to home builders, who have been laboring to unload their unsold inventory during this housing slump.

Easements

Q: My neighbor recently extended a retaining wall for a driveway and encroached upon our property by a distance of 12 inches by 9 feet. We had our property surveyed three weeks after the construction and discovered this.

Our neighbor proposes that we settle the problem by providing him with an easement for this use. What would be the implications in this for us?

A: The issue you face is quite common. Frequently, neighbors do not know the exact location of their lot lines. Other times, contractors doing work for the homeowners fail to follow the property lines when making improvements to homes.

The most common problem between neighbors has to do with the installation of fences. Depending on the configuration of the lots, bushes, trees, other obstacles and the location of the home on each lot, neighbors frequently pick a line that usually ends up on one neighbor’s side of the property by a couple of inches to a couple of feet.

If your neighbor had come to you to ask whether he could install the retaining wall on part of your property, would you have agreed? If you would have been fine with his request, you have nothing to lose with giving him the easement. If you would have objected, you now have a decision to make.

The easement your neighbor requests will give them the right to keep the retaining wall on your property without your ability to have them remove it in the future. If you’re planning to sell your home, the easement would also make sure that your buyer couldn’t require your neighbor to remove the wall.

If you go the easement route, you need to make sure that there are provisions in the agreement that state that the neighbor is required to maintain the wall and pay all costs associated with the wall. You could have a provision in the document that would require your neighbor to remove the wall in the future if it needs replacement.

A real estate attorney can assist you in the drafting of the easement agreement. Your neighbor should pay all of the expenses having to do with preparing the easement agreement and having the document recorded.

One issue that you have to consider is the impact the wall has on your property. If the impact is not noticeable, there may have been no harm done by your neighbor. If your lot is narrow and the impact of the wall is large, and having the wall could alter the value of your property, you’ll need to decide how to proceed with your neighbor.

Now, let’s look at the other side. Assuming that you would not have allowed your neighbor to build the retaining wall on your property, even if your neighbor had good reasons to do it that way, you can now require the neighbor to remove the wall from your property or request that he pay you a lump sum for the privilege of having the wall on your property.

You can even structure the easement agreement to have your neighbor pay you an annual fee to keep the wall on your property. If he innocently built the wall on your property, you have him in a rough spot. It’s probably would not be very neighborly of you to demand payment from him or to have him remove the wall, particularly if it does not impact your home, but you might have the right to do it.

You have to decide what you want to do. If your neighbor made an innocent mistake, and you charge him for the easement or make him take down the retaining wall, he could be a less-than-friendly neighbor for many years to come.

On the other hand, if your neighbor just decided to build the wall and didn’t even consider whether he would be on your property, and you’re not all that neighborly to begin with, you may make a different decision.For more information on your legal rights or to draft the easement agreement, consult a real estate attorney.

Most and least expensive place to live

Each year Coldwell Banker surveys the national housing market to discover the most and least expensive places to live. Their example is a 2,200 square foot home with four bedrooms two-and-a-half baths and a two-car garage. The survey of 317 housing markets found Beverly Hills was the most expensive. A home meeting their sample criteria would cost $2.21 million. In Killeen, Texas that same home would cost $136,725. In Sacramento that home would be $380,625.

Sacramento was the most affordable housing markets in the U.S. It ranked 121st. in the affordable housing survey where the average price for that sample home was $422,343.

Eight of the top ten most expensive housing markets are in California. Greenwich, Conn. and Boston were the only areas outside California to make the top ten. The sample home in Greenwich would be $2 million and in Boston $1.3.

The most expensive international market is Dublin, Ireland where the average price for the sample home would be $2.13 million and Milan, Italy at $1.19 million.
Bob Bronswick, president of Coldwell Banker Sacramento Region said about the survey, “Our area remains a very desirable housing market. We benefit from a good job market, excellent schools and universities and a quality of life that is hard to beat.” Bob is a little off there. Our housing market isn’t very desirable right now or we would be having more sales but he and the survey makes a good point, that the region offers good value in comparison to the national housing market. Once we all get through this market correction, Sacramento is in a position to return to a very attractive market for homebuyers.

Employment gains for Capital Region

The housing market is blamed for the slight increase in unemployment for the month of September. There are a few less construction worker and mortgage lenders in the area and I suspect many real estate agents will start looking for a steady paycheck. Still, jobs in other sectors grew and the Sacramento region added 1,700 new payroll jobs for the month. The labor department does not account for us who are self-employed.

The state continued to add 9,300 new people to payrolls although the positions were not in construction, which lost 29,000 jobs since last year. Statewide unemployment increased a tenth of a percent, to 5.6 percent according to the Employment Development Department. A year ago the rate was 4.8 percent.

Besides another off year for real estate the rest of the economy is doing historically well. “For the most part, we’re not seeing the loses spreading to other industries at this point.” Said David Lyons, a labor consultant for EDD. That’s must be with the exception of real estate sales, lending, construction, hardware sales and anything else having to do with real estate.

If I were an unemployed construction worker, I think I would start thinking about the San Diego region. The devastating fire and loss of 1,700 homes will require skilled workers.

Frightening September sales for El Dorado County

September was a frightening month for local agents and their sellers. Home prices and there numbers tumbled. The 111 monthly sales reported by the El Dorado County Association of Realtors, dropped 33 percent from August and 22 percent from September of last year. It was the slowest month for escrow closings since March of 1997. Three years ago, September’s sales were 168 percent higher than last month. The average selling price for county homes closing escrow at $491,000 was a 5 percent decline from August and a $67,000 drop from September of 2006.

El Dorado Hills is normally credited with holding up the county’s average home prices. Last month it didn’t happen. Usually one-third of all county home sales take place within EDH and the number of high-end and multi-million dollar sales prop-up the county’s average price. September sales in El Dorado Hills, fell 39 percent while the average priced dropped $143,700 from $781,348 in September of 2006 to $656,000 last month. The area reported 28 sales, 4 in excess of a million dollars. A year ago there was twice that many. With 475 current listings, the area has no shortage of homes available. The drop in monthly sales pushed the supply levels to a record high of 17 months.

Cameron Park didn’t fare much better than its neighbor down the hill. Currently, Cameron Park has 200 homes for sale. There were only 13 homes sold during the month. The average listing price for a home is $485,000 while the average selling price last month dropped $110,000 from a year earlier to $408,000.

The Shingle Springs, Rescue/Luneman area has 123 homes for sale. Seven sold last month with an average price of $650,000. The Diamond Springs/El Dorado area has 170 homes currently listed for sale. Fifteen sold last month with an average price of $351,000.

The greater Placerville area is usually the third most popular destination for county homebuyers following Cameron Park. That changed last month. Placerville not only had 60 percent more sales than Cameron Park but the average selling price at $432,138 was $24,000 higher. Last year during the same month the average selling price was $384,500.
The area has 176 homes for sale.

Pollock Pines/Sly Park was another area that reported higher selling prices than a year earlier. There are currently 220 residential listing in the Camino/Cedar Grove, and Pollock Pines/Sly Park area. Sixteen sold last month for an average price of $427,700, which was $77,000 higher than September of last year. The Georgetown Divide currently has 170 homes for sale and 7 closed escrow last month with an average price of $450,000.

At our current sales rate, the county has a 14-month supply of homes available provided no new listings come on the market. An unlikely event. Although the number of county residential listings has declined 11 percent from last year, the decreasing inventory isn’t enough to offset the declining rate of sales. A six-month supply of homes is considered balanced so we are definitely lopsided in favor of buyers.

Most the county’s new home sales occurred in El Dorado Hills. The Folsom based research firm Gregory Group, reported 49 new county home sales for the third quarter and 31 were located in El Dorado Hills. The average selling price of $725,500 was 10 percent below last year.

I expect even slower sales and weaker sales prices this fall and winter. The usual September buyer’s rush never happened. October isn’t showing any improvement. Many buyers are waiting on the sidelines for the next calamity to befall the housing market. Others who would like to move into the county are struggling to sell their existing home. Most housing economist are predicting more of the same through much of 2008. In light of the current and anticipated market, I am continually amazed to see many over priced listings and unrealistic sellers.

Last week a lady e-mailed me about what I thought she needed to do to sell her house. The house had been on the market for a year without any activity although she had consistently reduced the listing price several times over the past year. Should she change her agent? Let the listing expire and re-list the property after a rest? Drop the price another $10,000? Her situation is typical of many sellers who have initially listed their property too high and then have been gradually reducing their listed price. Their price reductions, however, never catch a receding tide. My suggestions included a major price reduction of 25 percent off the current listed price. If she was not prepared for a significant price reduction, she should not sell and rent the property or not sell and hold until the market improves. This is not a market for the faint hearted. Trick or treat.

Statewide sales report for September

The sales rate of previously owned single-family homes fell 38.9 percent in September compared to the same month last year, while the median price declined 4.7 percent and the months' supply bloated to 16.6 months, the California Association of Realtors reported last week.

Colleen Badagliacco, association president, said in a statement that the year-over-year drop in median price -- the first in more than 10 years -- "was mainly the result of the credit or liquidity crunch, which also drove sales below the annualized 300,000 mark." A more normal yearly number would be 500,000-550,000. This rate is a projection of a monthly total over a 12-month period, adjusted to account for seasonal fluctuations in sales activity. Last year statewide sales were slow at 450,000 units.

She also stated that California relies more heavily on jumbo loans, which are loans above a federally established conforming loan limit of $417,000, than many other states because home prices in the state typically exceed that amount. "This speaks to the need to raise the conforming loan limit in higher-cost states like California to more accurately reflect the cost of housing," she stated. Conforming loan limits will be increased by the end of the year. The big question is how high?

The national sales rate of single-family resale homes hit its lowest level in about 10 years in September and fell 19.8 percent compared to September 2006. Also, the median U.S. single-family resale home price dropped 4.9 percent year-over-year in September.
Leslie Appleton-Young, chief economist for the California Association of Realtors, said in a statement, "While the entry-level portion of the market has been adversely affected by the subprime situation and tighter underwriting standards for much of this year, the high end of the market also saw a decline in sales, as even well-qualified buyers were affected by the lack of funds available for jumbo loans."

The median price of an existing, single-family detached home in California was $530,830 in September, compared with $557,150 for that month last year.
The Unsold Inventory Index, a measure of the months needed to deplete the supply of for-sale homes based on the sales rate for a given month, skyrocketed from 6.4 months in September 2006 to 16.6 months in September 2007. A supply of six months is generally considered to indicate a buyer's market.

Thirty-year fixed-mortgage interest rates averaged 6.38 percent in September, compared with 6.4 percent in September 2006, according to Freddie Mac, while adjustable mortgage interest rates averaged 5.66 percent in September compared with 5.56 percent for that month in 2006. The interest rates have continued to fall into October. We are not under 6 percent yet but getting closer.

The 10 California cities and communities tracked in the report with the lowest median home prices in September include: Barstow, $163,000; North Highlands, $178,500; Ridgecrest, $180,000; Joshua Tree, $182,500; Yucca Valley, $200,000; Porterville, $202,500; Tulare, $224,000; Madera, $236,250; Crestline, $240,000; and Tehachapi, $243,750.
The 10 cities and communities tracked in the report with the highest median home prices in September include: Newport Beach, $1.44 million; Los Gatos, $1.23 million; Cupertino, $1.05 million; Danville, $1 million; Redondo Beach, $847,500; San Clemente, $830,000; Yorba Linda, $825,000; Arcadia, $805,000; San Rafael, $797,500; and Santa Monica, $796,500.
The 10 cities and communities with the largest decline in median home prices from September 2006 to September 2007 include: North Highlands, down 33.9 percent; Oakdale, down 33.8 percent; Arroyo Grande, down 29.8 percent; Patterson, down 29 percent; Los Banos, down 28 percent; Merced, down 27.8 percent; Spring Valley, down 26.5 percent; Elk Grove, down 25.6 percent; Ceres, down 25 percent; and Santa Ana, down 24.7 percent.

The 10 cities and communities with the greatest median home price increases in September compared with the same period a year ago were: Tustin, up 19.7 percent; Los Angeles, 18.2 percent; Arcadia, 14.2 percent; Carlsbad, 11.1 percent; Laguna Niguel, 10.1 percent; Diamond Bar, 8.7 percent; Cupertino, 8.4 percent; Redondo Beach, 8 percent; Reedley, 7.1 percent; and Newport Beach, up 6.3 percent.Merced, Santa Barbara, Stanislaus, San Joaquin, El Dorado, Monterey and Santa Cruz counties had median-price declines above 15 percent in September compared to September 2006, according to the report. Santa Clara County had the highest year-over-year median-price gain in September, at 3.4 percent. Other counties tracked by the report with price gains include Marin, San Francisco, Los Angeles and Contra Costa counties