Dataquick reported home sales for Ventura County for August 2010 today. Home sales came in at 682 down 13.0% YoY and down 5.1% MoM. The median sales price came in at $370,000 down 0.5% YoY and flat MoM. I noted in my early month estimate that my normal model predicted sales of 700-720 but due to changes in the underlying data used for estimates I thought closings would come in lower and that was what in fact happened. Currently October is running at 20% below September closings month to date so this horrible performance is continuing. To put these numbers in perspective the last time numbers were worse, 2007. Countrywide had just imploded and all that was left was FHA (which few were equipped to underwrite at a large scale) and the GSE's had a $417,000 limit. Additionally prices were much higher as were interest rates so the gap between buyers and sellers was much much wider. But right now we have a $729,000 loan limit, 4% mortgage rates and lower prices and sales are anemic. Prices are still too high.
2 comments:
Prices are too high or access to loans is too limited? There are many buyers that want to buy a home, but loan restrictions are so tight they are left out of the market. So what are you basing your "prices too high" on? If homes were sold for $500/ea I'm sure banks would be willing to provide the loan, but does that make $500 the right price just because it meets a banks loan requirements? I think we all have seen from prior misteps that the banking industry may hold the money but they don't necessarily understand how to value an investment.
I'd challenge the notion that the access to loans are too limited.
Relative to the boom. Yes, access to the loans are more limited but relative to any other time to history both Debt to Income ratios are down payment sizes are equal too or looser. Add in lowest interest rates since the 1950's.... Prices are too high.
There are two segment of society who maybe can afford a home but can't get a loan.
First is a new small business owner. The banks want to see some sort of history of success for the small business because the first few years is when the businesses often fail. So they have to show 2 years of solid business before they can count their income as real. This may be frustrating for that person but this is a legitimate underwriting guideline for the bank based on default trends for small businesses.
The second group, many of which are related to this first, is basically people who are hiding income from Uncle Sam. They have the money monthly but can't "prove" it on their taxes. There is clearly a large swath of these buyers in So Cal, the boom showed that (there are legitimate accounting which reduces taxable income, I'm not talking about those and the banks are aware of them). If they want a home, start paying taxes on your income and legitimize it. Would you want the banks giving loans to criminals? Neither would I.
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