The $64 question: Are we at a bottom in Real Estate prices?

Below is a quote from Barron’s Cover article on July 14, 2008 which has been repeated by most every other news organization this last week and reprinted by California Association of Realtors (“CAR”) in their July 17th Money Matters newsletter that I receive. Granted, Barron’s is a widely read and highly regarded publication and CAR is my appointed leader and is suppose to let me know what I may expect in the future. However, being in the real estate trenches for the past 25 years and having experienced three such down-turns, granted this being the worst, if you want my opinion, Barron’s is wrong and CAR is looking to promote any good news they can find.

  Barron’s

Bottom’s up: This real-estate rout may be short-lived

Home sales and prices may be down, foreclosures may be mushrooming and the blowback from the subprime mortgage crisis may be threatening banks and secondary mortgage lenders, but there are some early signs the real estate market is trending in a more positive direction — although you may not know it if you rely on the mainstream media for your real estate news.

MAKING SENSE OF THE STORY FOR CONSUMERS

· Recent data suggest real estate market pessimism may be overblown. Even economist Karl Case, father of the S&P/Case Shiller Home Price Index, admits many industry pundits and members of the media are ignoring key facts – as demonstrated by their focus on negative year-over-year price figures rather than more recent monthly data. An example: Home prices actually increased slightly in eightof 20 Case Shiller markets between March and April. Instead, the focus of most media reports was on year-over-year figures, which continue to support the notion that the market may not have hit bottom, let alone begun to improve.  

· Transaction-related indices may be skewed at present by a far larger than normal share of subprime-derived default and distress sales. In the San Francisco Bay Area, for example, more expensive homes (those priced over $721,548) have dropped in price by only about 10.7 percent from their peak, compared with homes priced under $473,711, which have tumbled by 40.9 percent.

· Even new housing construction numbers suggest an improvement, according to Case. He notes that housing starts, which fell to 975,000 in April from 2.27 million in January 2006, have fallen by similar percentages three times during the last 35 years. Case observes that each previous time this has occurred the market has staged a surprising upturn within a quarter. Only a slide into a recession would temper his optimism about the potential for a similar recurrence of this trend.

To read the full story, please click here:

http://online.barrons.com/article/SB121581623724947273.html?mod=googlenews_barrons&page=sp

Why do I say Barron’s is wrong and CAR is hyping? In a nutshell: there are still an awful lot of properties that still need to come to market which are under-water due to the newly established, lower foreclosure-set pricing for every home sold in 2006 and 2007, especially for newer subdivision properties; and secondly, loans are becoming very difficult to get and are going to be more so over the next year. Heck, the next article in the CAR Money Matters newsletter was:

  Los Angeles Times

Fed stiffens restrictions on mortgage lenders

The Federal Reserve is clamping down on what it called “deceptive acts and practices” by some mortgage lenders that it says helped lead to the subprime mortgage crisis. The new rules, which apply to all banks and other lenders and specifically target subprime loans and borrowers, will take effect Oct. 1.

Since I work and do about 90% of my business in the Napa Valley here is proof from there for the first part of my argument, the new realty in the value of your home. On Wednesday the Napa Valley Register, our biggest local newspaper, ran a front page article from our County Assessor, John Tuteur, ” Tuteur cuts assessed values ………..cutting $600 million from the assessed value of 5,200 Napa County Properties.” To quote the article:

Tuteur is reducing assessments on 1,824 American Canyon homes — 40 percent of the city’s housing stock — by an average of $127,000. The assessed value of some American Canyon properties is dropping by as much as 35 percent.

In Napa, 3,062 homes, or 20 percent of the city’s residences, were dropped in value by an average of $97,000 for 2008-09, Tuteur said.