Many property owners are frustrated when their taxes rise as the market value of their property falls. Due to the decrease in local property values, many property owners believe their property’s assessed value is greater than its fair market value and have been contacting local REALTORS® to assist in locating sales of comparable properties. Once the property owners have this information, they can submit a form to the Madera County Assessor’s Office requesting a reduction in property taxes. This is permitted via Proposition 8, which amended Proposition 13, to reflect declines in property value.
Proposition 8 allows for the reassessment of qualified properties; thus, a reduction of property taxes. However, Proposition 8 reductions in value are temporary reductions due to the fact that the current market value of a property has fallen below its current (Proposition 13) assessed value.
“The market downturn has impacted those who bought when property values were high,” said Tom Kidwell, Madera County Assessor. Therefore, the Assessor’s Office is currently reviewing approximately 37,000 transactions dating back to 2004. Kidwell estimates that about 15,000 properties have declined in value—about 25 percent of the total number of properties in the county—below their Proposition 13 values and will automatically be reassessed by his office this year. Last year, they reduced about 1,500 property values.
Kidwell said, “Over the next two months, staff will be working on this. They will take a look to determine if the value is accurate and to determine what the right value should be.” When they are done with this automatic review, the Assessor’s Office will send out notices to the property owners they’ve identified as having property that has declined in value. They will then begin processing the written requests for review.
Keep in mind that because of the protection already offered by Proposition 13, the majority of properties in Madera County will not qualify for this reduction in value for property tax purposes. However, if you think your property might qualify, you’ll need to complete a form. You can find this form by going to http://www.madera-county.com/assessor and selecting “Decline in Value Prop 8” in the left side menu. The form may then be accessed at the bottom of the page. You can also call 559-675-7710 and ask to have the form mailed or faxed to you. You can make this request up to December 1, 2009, and it is a free service to you.
The form requests comparable sales information. It is important to note that the information should be from sales prior to January to no later than March because the review will be reflective of market conditions as of the lien date, the first of January, of the tax year in question. If you ask a REALTOR® to assist you in identifying property, make sure to share this detail with him or her. Generally when REALTORS® look up comparables, we look at a different window of time based on the date of the request and recent sales.
If you submit a request to the Assessor’s Office, they cannot guarantee to process it right away—especially over the next two months. However, Kidwell said they will review all requests; if a property owner disagrees with the Assessor’s Office findings, they can file an appeal with the Assessment Appeals Board.
However, if the assessed value is reduced, it must be reviewed annually thereafter and can be raised or lowered by any percentage in value the first of January (Proposition 8 assessments are not restricted to the 2 percent maximum of Proposition 13). Though, according to Kidwell, “In no case may a value higher than a property’s Proposition 13 factored base year value be enrolled.”
He added that Proposition 13 continues to protect all property taxpayers throughout Madera County and the State of California by putting a ceiling on increases in assessed value for property tax purposes. In most cases, the assessed Proposition 13 factored base year value is still below the current market value.
Although statewide sales in January 2009 increased 100 percent when compared with the same period a year ago, the median price of an existing home fell 40.5 percent according to the California Association of REALTORS® (C.A.R.). The median price of a home for January 2009 was $254,350 compared to the January 2008 revised median of $427,200. Thus, although we are seeing an increase in real estate purchases, prices are down. Therefore, while buyers are taking advantage of the favorable home prices and historically low mortgage rates, now might be a great time for existing property owners to take advantage of Proposition 8’s ability to seek tax relief.
Saturday, February 28, 2009
Thursday, February 19, 2009
Protect Your Home from this “Silent Killer”
It’s important to safeguard your home from carbon monoxide (CO) gas because it is impossible to see, taste, or smell the toxic fumes of CO. Therefore, it is often called the silent killer since it can kill you before you are aware it is in your home. CO accidentally kills about 170 Americans each year. About 70 of those deaths were associated with home heating equipment. In addition, several thousand people go to hospital emergency rooms each year to be treated for CO poisoning.
A few months ago, an Oregon family purchased—as part of a school fundraiser—a Thanksgiving weekend getaway in an $8.9 million home in Colorado. Carbon monoxide leaked into the home from a snowmelt system in the crawl space causing the deaths of the parents and their children (ages 10 and 8).
In another instance, the mother of someone I’ve known for years had health and memory issues. This prompted the family to place a CO detector in her Oakhurst home to determine if CO was a possible factor. Within 24 hours, the meter registered 280. The manufacturer’s instructions state that 100 is considered hazardous. Thus, she left the dwelling at once. It is fortunate that this family thought to even test for CO. They are currently working with a local HVAC (heating, ventilating, and air conditioning) company trying to determine the cause of the readings the detector obtained.
Most confuse the symptoms of CO exposure with the flu or food poisoning as the symptoms are similar. Exposure to CO can impede coordination, worsen cardiovascular conditions, and produce fatigue, headache, weakness, confusion, disorientation, nausea, and dizziness. High levels of CO exposure can result in death.
Thirteen states have laws mandating the use of CO detectors; California is not one of them. Our state requires smoke detectors but not ones for CO. Placement of the detectors is crucial. Homeowners should not install CO detectors directly above or beside fuel-burning appliances, as appliances may emit a small amount of CO upon start-up. A detector should not be placed within 15 feet of heating or cooking appliances or in or near very humid areas such as bathrooms. CO rises with warmer air temperatures and so mounting the device on or near the ceiling is often recommended. Additional detectors on every level and in every bedroom of a home provide extra protection.
Ken Card, with Advanced Home Inspections, said that improper or weakened furnace seals are a common occurrence, especially in older homes. Review of your furnace is recommended as a cautionary measure to protect the inhabitants of the home from the possible mixing of combustion gases, such as CO, with the circulating air in your home. If your home inspector or HVAC professional advises repair, immediate attention to this concern is recommended. “When completed, you can call the gas company for a final inspection,” said Card.
Card added, “One way this fatal mixture can occur is through small gaps at the base of the furnace. This is where the air from your home is drawn into the furnace to be reheated and then blown back into the rooms of your home. The blower unit performs this function by creating a vacuum. If the base of the furnace is not sealed to the platform, this vacuum can pull exhaust gases from the furnace into the air stream. These exhaust fumes can then be circulated to every heat register in the house, to the obvious detriment of you and your family.”
A CO hazard, especially in our mountain area, also includes chimneys, which can be blocked by birds' or squirrels' nests. This can cause deadly CO gas to enter a home. This danger can be lessened by having chimneys professionally cleaned each year.
Homeowners should be aware of the risks of CO exposure. CO is produced as a result of incomplete burning of carbon-containing fuels including coal, wood, charcoal, natural gas, propane, and fuel oil. According to the U.S. Environmental Protection Agency, CO can be emitted by combustion sources such as unvented kerosene and gas space heaters; leaking chimneys and furnaces; back-drafting from furnaces, gas water heaters, wood stoves, and fireplaces; gas stoves; generators and other gasoline powered equipment; automobile exhaust from attached garages; and tobacco smoke.
Visit the Consumer Product Safety Commission (CPSC) website for information on CO at http://www.cpsc.gov/CPSCPUB/PUBS/466.html. One of the items on the site includes what you should do when the CO alarm sounds. Most importantly, it stresses that you should never ignore an alarming CO detector. It is warning you of a potentially deadly hazard. If the alarm signal sounds, do not try to find the source of the CO. Instead, immediately move outside to fresh air and call 911. After calling 911, do a head count to check that all persons are accounted for. Do not reenter the home until emergency services responders have given you permission. You could lose consciousness and die if you go in the home. If the source of the CO is determined to be a malfunctioning appliance, do not operate that appliance until it has been properly serviced by trained personnel. Also, make sure that motor vehicles are not, and have not been, operating in an attached garage or adjacent to the residence.
CPSC also urges consumers to have a professional inspection of all fuel-burning appliances—including furnaces, stoves, fireplaces, clothes dryers, water heaters, and space heaters—to detect deadly CO leaks. CPSC recommends that every home should have at least one CO detector that meets the requirements of the most recent Underwriters Laboratories (UL) 2034 standard or International Approval Services 6-96 standard.
A few months ago, an Oregon family purchased—as part of a school fundraiser—a Thanksgiving weekend getaway in an $8.9 million home in Colorado. Carbon monoxide leaked into the home from a snowmelt system in the crawl space causing the deaths of the parents and their children (ages 10 and 8).
In another instance, the mother of someone I’ve known for years had health and memory issues. This prompted the family to place a CO detector in her Oakhurst home to determine if CO was a possible factor. Within 24 hours, the meter registered 280. The manufacturer’s instructions state that 100 is considered hazardous. Thus, she left the dwelling at once. It is fortunate that this family thought to even test for CO. They are currently working with a local HVAC (heating, ventilating, and air conditioning) company trying to determine the cause of the readings the detector obtained.
Most confuse the symptoms of CO exposure with the flu or food poisoning as the symptoms are similar. Exposure to CO can impede coordination, worsen cardiovascular conditions, and produce fatigue, headache, weakness, confusion, disorientation, nausea, and dizziness. High levels of CO exposure can result in death.
Thirteen states have laws mandating the use of CO detectors; California is not one of them. Our state requires smoke detectors but not ones for CO. Placement of the detectors is crucial. Homeowners should not install CO detectors directly above or beside fuel-burning appliances, as appliances may emit a small amount of CO upon start-up. A detector should not be placed within 15 feet of heating or cooking appliances or in or near very humid areas such as bathrooms. CO rises with warmer air temperatures and so mounting the device on or near the ceiling is often recommended. Additional detectors on every level and in every bedroom of a home provide extra protection.
Ken Card, with Advanced Home Inspections, said that improper or weakened furnace seals are a common occurrence, especially in older homes. Review of your furnace is recommended as a cautionary measure to protect the inhabitants of the home from the possible mixing of combustion gases, such as CO, with the circulating air in your home. If your home inspector or HVAC professional advises repair, immediate attention to this concern is recommended. “When completed, you can call the gas company for a final inspection,” said Card.
Card added, “One way this fatal mixture can occur is through small gaps at the base of the furnace. This is where the air from your home is drawn into the furnace to be reheated and then blown back into the rooms of your home. The blower unit performs this function by creating a vacuum. If the base of the furnace is not sealed to the platform, this vacuum can pull exhaust gases from the furnace into the air stream. These exhaust fumes can then be circulated to every heat register in the house, to the obvious detriment of you and your family.”
A CO hazard, especially in our mountain area, also includes chimneys, which can be blocked by birds' or squirrels' nests. This can cause deadly CO gas to enter a home. This danger can be lessened by having chimneys professionally cleaned each year.
Homeowners should be aware of the risks of CO exposure. CO is produced as a result of incomplete burning of carbon-containing fuels including coal, wood, charcoal, natural gas, propane, and fuel oil. According to the U.S. Environmental Protection Agency, CO can be emitted by combustion sources such as unvented kerosene and gas space heaters; leaking chimneys and furnaces; back-drafting from furnaces, gas water heaters, wood stoves, and fireplaces; gas stoves; generators and other gasoline powered equipment; automobile exhaust from attached garages; and tobacco smoke.
Visit the Consumer Product Safety Commission (CPSC) website for information on CO at http://www.cpsc.gov/CPSCPUB/PUBS/466.html. One of the items on the site includes what you should do when the CO alarm sounds. Most importantly, it stresses that you should never ignore an alarming CO detector. It is warning you of a potentially deadly hazard. If the alarm signal sounds, do not try to find the source of the CO. Instead, immediately move outside to fresh air and call 911. After calling 911, do a head count to check that all persons are accounted for. Do not reenter the home until emergency services responders have given you permission. You could lose consciousness and die if you go in the home. If the source of the CO is determined to be a malfunctioning appliance, do not operate that appliance until it has been properly serviced by trained personnel. Also, make sure that motor vehicles are not, and have not been, operating in an attached garage or adjacent to the residence.
CPSC also urges consumers to have a professional inspection of all fuel-burning appliances—including furnaces, stoves, fireplaces, clothes dryers, water heaters, and space heaters—to detect deadly CO leaks. CPSC recommends that every home should have at least one CO detector that meets the requirements of the most recent Underwriters Laboratories (UL) 2034 standard or International Approval Services 6-96 standard.
Sunday, February 8, 2009
Going Green: Doing Our Part
What is the bigger producer of green house emissions? It may surprise you that it is not cars but homes. With the nexus of real estate transactions and the green movement being homes, it makes sense for REALTORS® to get involved in helping California consumers make more sustainable choices in the office and home setting.
According to the Wall Street Journal, “American businesses could save $1.72 billion each year merely by getting employees to shut off their computers at night or allowing the machines to enter an energy-saving mode.” However, there is so much more than we can all do besides turning off our computers at night.
When the Yosemite Gateway Association of REALTORS® built their new building in 2004 and 2005, it was important to incorporate items considered green into and around the structure. We installed motion sensors throughout the building; thus, our lights turn off if motion is not detected within a certain pre-set period of time. Our heating and cooling system is zoned for efficiency when areas are not in use. We have low-watt fluorescents and CFL light bulbs. We incorporated low-flow water fixtures in our bathroom and into our exterior water features. Our landscaping irrigation is on timers and programmed according to the water company schedule for conservation and our plants are low-water tolerant. In addition, the parking lot lights are on timers and settings adjusted monthly.
The California Association of REALTORS® (C.A.R.) is also doing its part to become a more environmentally friendly organization and is leading the way toward a greener world. One of the things that C.A.R. has done to assist with this effort was to create a green website with the goal to provide information to homeowners, REALTORS®, and the general public on how to green their living spaces. The website is http://green.car.org.
The C.A.R. green website has many helpful features. One feature goes over the most common misconceptions about green homes, such as, green homes are more expensive; anything that claims to be green is green; a new home is always a green home; green homes look unconventional, and; green homes are uncomfortable.
There is also a section on water conservation. Did you know that using less hot water can same you money? Water heating accounts for about 13 percent of home energy costs. Also, reducing water usage reduces energy usage.
Resource conservation, which refers to the usage of renewable and eco-friendly materials in building and construction as well as reducing waste and recycling products, can also save the environment by reducing waste during construction. An average 2,000 square foot home produces about 7,000 pounds of waste.
Improved air quality is also important. The air in homes can be 10 times more polluted than outdoor air from contaminants such as mold and bacteria, chemicals, allergens, etc. Much of the indoor pollution that exists in homes stems from materials in the house. Pressed-wood is often made with adhesives that release chemicals in homes for years after installation. Also, many paints, floor finishes, and sealants emit unhealthy volatile organic compounds.
At home, the electricity load is increasing due to the use of miscellaneous electronic devices such as television (TV) converter boxes (cable, satellite, and other) and other devices such as VCR’s, DVD players/recorders, stereos, computers, printers, fax and copy machines, toasters, and coffee makers. These devices can draw as much power when they are turned off as when they are turned on. In fact, one converter box consumes about half the electricity of a new Energy Star refrigerator. In my household, we have six converter boxes. However, using a power strip helps. Power strips make it easy to cut off the power to your devices by easily flipping the switch rather than unplugging each individual device. Just be sure to get a power strip that is designed and rated for the devices you plan to plug into it. Power strips are also good for plug-in loads for items such as mobile phones, blue-tooth devices, portable music devices, and more.
Other ways to reduce green house emissions in your home or office is to buy all-in-one models (for example, a printer, copier, fax, and scanner) and Energy Star equipment. Energy Star estimates that swapping to a new, efficient refrigerator would save enough money to light the average household for nearly four months with an overall payback of about three years. Using natural resources for energy such as solar and wind is also helpful.
It’s important to note that newer doesn’t always mean more energy efficient. For example, plasma-screen and LCD TV’s use significantly more energy than older tube sets. However, today’s more efficient refrigerators use half the power of refrigerators made before 1993. Replacing old computers with new computers is also helpful in reducing energy.
I challenge you to set a goal to do what you can to make your office and home more green prior to Earth Day, which is coming up in about two months on April 22. Share with others what you are personally doing to reduce green house emissions and encourage others to join you in doing their part. Together, we can make a difference.
According to the Wall Street Journal, “American businesses could save $1.72 billion each year merely by getting employees to shut off their computers at night or allowing the machines to enter an energy-saving mode.” However, there is so much more than we can all do besides turning off our computers at night.
When the Yosemite Gateway Association of REALTORS® built their new building in 2004 and 2005, it was important to incorporate items considered green into and around the structure. We installed motion sensors throughout the building; thus, our lights turn off if motion is not detected within a certain pre-set period of time. Our heating and cooling system is zoned for efficiency when areas are not in use. We have low-watt fluorescents and CFL light bulbs. We incorporated low-flow water fixtures in our bathroom and into our exterior water features. Our landscaping irrigation is on timers and programmed according to the water company schedule for conservation and our plants are low-water tolerant. In addition, the parking lot lights are on timers and settings adjusted monthly.
The California Association of REALTORS® (C.A.R.) is also doing its part to become a more environmentally friendly organization and is leading the way toward a greener world. One of the things that C.A.R. has done to assist with this effort was to create a green website with the goal to provide information to homeowners, REALTORS®, and the general public on how to green their living spaces. The website is http://green.car.org.
The C.A.R. green website has many helpful features. One feature goes over the most common misconceptions about green homes, such as, green homes are more expensive; anything that claims to be green is green; a new home is always a green home; green homes look unconventional, and; green homes are uncomfortable.
There is also a section on water conservation. Did you know that using less hot water can same you money? Water heating accounts for about 13 percent of home energy costs. Also, reducing water usage reduces energy usage.
Resource conservation, which refers to the usage of renewable and eco-friendly materials in building and construction as well as reducing waste and recycling products, can also save the environment by reducing waste during construction. An average 2,000 square foot home produces about 7,000 pounds of waste.
Improved air quality is also important. The air in homes can be 10 times more polluted than outdoor air from contaminants such as mold and bacteria, chemicals, allergens, etc. Much of the indoor pollution that exists in homes stems from materials in the house. Pressed-wood is often made with adhesives that release chemicals in homes for years after installation. Also, many paints, floor finishes, and sealants emit unhealthy volatile organic compounds.
At home, the electricity load is increasing due to the use of miscellaneous electronic devices such as television (TV) converter boxes (cable, satellite, and other) and other devices such as VCR’s, DVD players/recorders, stereos, computers, printers, fax and copy machines, toasters, and coffee makers. These devices can draw as much power when they are turned off as when they are turned on. In fact, one converter box consumes about half the electricity of a new Energy Star refrigerator. In my household, we have six converter boxes. However, using a power strip helps. Power strips make it easy to cut off the power to your devices by easily flipping the switch rather than unplugging each individual device. Just be sure to get a power strip that is designed and rated for the devices you plan to plug into it. Power strips are also good for plug-in loads for items such as mobile phones, blue-tooth devices, portable music devices, and more.
Other ways to reduce green house emissions in your home or office is to buy all-in-one models (for example, a printer, copier, fax, and scanner) and Energy Star equipment. Energy Star estimates that swapping to a new, efficient refrigerator would save enough money to light the average household for nearly four months with an overall payback of about three years. Using natural resources for energy such as solar and wind is also helpful.
It’s important to note that newer doesn’t always mean more energy efficient. For example, plasma-screen and LCD TV’s use significantly more energy than older tube sets. However, today’s more efficient refrigerators use half the power of refrigerators made before 1993. Replacing old computers with new computers is also helpful in reducing energy.
I challenge you to set a goal to do what you can to make your office and home more green prior to Earth Day, which is coming up in about two months on April 22. Share with others what you are personally doing to reduce green house emissions and encourage others to join you in doing their part. Together, we can make a difference.
Tuesday, February 3, 2009
Mortgage Meltdown to Financial Freeze to Slight Thaw
About a month ago, I shared local real estate statistics for our area. Although statistics vary by region in California, it is often helpful to know what is happening in the real estate market in the state and in the nation. The global and domestic financial markets also play a role in where we are today in our real estate market. In fact, the recent slowdown in housing prices has gone hand in hand with a slowdown in a number of industrial countries’ economic growth.
The deterioration in housing was initially tied to real estate finance, and we saw the credit crunch and recession choking off business and consumer spending. Prior to the credit crunch hitting the real estate market in September 2007, residential properties for sale for more than $1 million were relatively unaffected. In reviewing the sales in November of 2008 to 20007, there is a marked reverse trend. In 2008, the higher the price, the longer the home was on the market versus 2007 where the higher priced homes were on the market for a shorter period of time. Now, approximately 80% of sales are under $500,000. Sales of properties that are $500,000 or more have continued to decline. In addition, although United States sales have remained flat since September 2008, California sales are up 102%.
When we look at a more thorough breakdown of the credit crunch, first-time homebuyers with zero down payment has gone down dramatically since 2006 when it reached a high of more than 40%. In 2008, that number dropped to 5.7% for first-time buyers. The 2008 average for all home buyers was 3.4% with a 2% average for repeat buyers.
The number of residential sales in California went up in 2008. California hit its low in 2007 (October 2007) and dropped 44% from 2005. Previous lows were in 1982 (down 61% from 1978) and 1992 (down 25% from 1988). Estimated sales in 2008 increased about 23% with sales in 2009 expected to increase by 8%.
Prices of residential property in California reached its peak in April 2007 at $594,110. The 2007 median was approximately $558,000. The November 2008 median price was $285,680 (down 52%). The estimated 2008 median price is $372,000 with a forecast for the 2009 median price of $300,000 (down about 19%). Oscar Wei, C.A.R. Senior Research Analyst, said, “With the economy deteriorating and the financial system struggling to stay above water, distressed properties with deeply-discounted prices will continue to affect the market. Home prices may not show clear signs of stability until mid 2009.”
The decline in home prices has brought the cost of housing more in line with household income, improving affordability across the state. This should be especially helpful for first-time buyers who can qualify for a home loan.
According to the Mortgage Bankers Association, the long-run average of foreclosures is 0.9%. However, as of the third quarter of 2008, that had increased to 3.9%. The delinquencies long-run average is 3.9% with the 2008 third quarter delinquencies at 5.8%.
C.A.R. economists don’t believe inflation will be a problem in 2009. Consumer confidence though is at its worst level in decades. The December 2008 index was 38. In 2000, it was over 140. In 1992, another low point of residential sales, the index reached just under 50. A lot of people have a wait and see attitude regarding our recent presidential election; so, we may see the consumer confidence creep up.
Our current recession is anticipated to be the worst in our working lives. However, the first two quarters of 2009 will be extremely weak with an expected turn around in the second half of 2009 due to monetary stimulus programs. In 2010, we expect a positive growth rate in the U.S. Economy.
Job numbers track economic activity with a lag. When it looks like we are getting better, unemployment is getting worse; California is approaching 10%. However, California is doing better than the rest of the nation regarding jobs.
Some of the short-rate treasuries paid negative interest and we were upside down. This was the case for a period of time. We have moved away from that distressing period of time and corporate lending has begun again. Other indicators of stress have also improved. More liquidity is being pushed into the system. In addition, the spread between mortgage rates and underlying securities has never been higher. We still have a lot of risk built into mortgage rates that consumers are facing at this time.
Former President Bush and other leaders had a meeting to discuss the global market. An agreement is likely to come to pass and will be coordinated with our domestic market. Matt Roberts, C.A.R. Federal Government Affairs Manager, said it would be an effort as it is an international effort to reform the financial market and getting constituents to understand this is a hurdle.
Leslie Appleton-Young, C.A.R. Chief Economist, said the banking system is unregulated and this has to change. Thus, from crisis to stabilization, we now need restructuring. “With a system like we have, a certain amount of transparency is what we need so we can look at risks.” She added that people don’t trust the loan being described to them as accurate. In fact, 22% of those obtaining a loan didn’t understand the terms of their loan according to a C.A.R. survey.
*Statistical information from the California Association of REALTORS® (C.A.R.). Other information, unless otherwise specified, is from two C.A.R. economists (Leslie Appleton-Young and Robert A. Kleinhenz) speaking at the C.A.R. January Strategic Planning and Finance Forum or the International Real Estate Forum.
The deterioration in housing was initially tied to real estate finance, and we saw the credit crunch and recession choking off business and consumer spending. Prior to the credit crunch hitting the real estate market in September 2007, residential properties for sale for more than $1 million were relatively unaffected. In reviewing the sales in November of 2008 to 20007, there is a marked reverse trend. In 2008, the higher the price, the longer the home was on the market versus 2007 where the higher priced homes were on the market for a shorter period of time. Now, approximately 80% of sales are under $500,000. Sales of properties that are $500,000 or more have continued to decline. In addition, although United States sales have remained flat since September 2008, California sales are up 102%.
When we look at a more thorough breakdown of the credit crunch, first-time homebuyers with zero down payment has gone down dramatically since 2006 when it reached a high of more than 40%. In 2008, that number dropped to 5.7% for first-time buyers. The 2008 average for all home buyers was 3.4% with a 2% average for repeat buyers.
The number of residential sales in California went up in 2008. California hit its low in 2007 (October 2007) and dropped 44% from 2005. Previous lows were in 1982 (down 61% from 1978) and 1992 (down 25% from 1988). Estimated sales in 2008 increased about 23% with sales in 2009 expected to increase by 8%.
Prices of residential property in California reached its peak in April 2007 at $594,110. The 2007 median was approximately $558,000. The November 2008 median price was $285,680 (down 52%). The estimated 2008 median price is $372,000 with a forecast for the 2009 median price of $300,000 (down about 19%). Oscar Wei, C.A.R. Senior Research Analyst, said, “With the economy deteriorating and the financial system struggling to stay above water, distressed properties with deeply-discounted prices will continue to affect the market. Home prices may not show clear signs of stability until mid 2009.”
The decline in home prices has brought the cost of housing more in line with household income, improving affordability across the state. This should be especially helpful for first-time buyers who can qualify for a home loan.
According to the Mortgage Bankers Association, the long-run average of foreclosures is 0.9%. However, as of the third quarter of 2008, that had increased to 3.9%. The delinquencies long-run average is 3.9% with the 2008 third quarter delinquencies at 5.8%.
C.A.R. economists don’t believe inflation will be a problem in 2009. Consumer confidence though is at its worst level in decades. The December 2008 index was 38. In 2000, it was over 140. In 1992, another low point of residential sales, the index reached just under 50. A lot of people have a wait and see attitude regarding our recent presidential election; so, we may see the consumer confidence creep up.
Our current recession is anticipated to be the worst in our working lives. However, the first two quarters of 2009 will be extremely weak with an expected turn around in the second half of 2009 due to monetary stimulus programs. In 2010, we expect a positive growth rate in the U.S. Economy.
Job numbers track economic activity with a lag. When it looks like we are getting better, unemployment is getting worse; California is approaching 10%. However, California is doing better than the rest of the nation regarding jobs.
Some of the short-rate treasuries paid negative interest and we were upside down. This was the case for a period of time. We have moved away from that distressing period of time and corporate lending has begun again. Other indicators of stress have also improved. More liquidity is being pushed into the system. In addition, the spread between mortgage rates and underlying securities has never been higher. We still have a lot of risk built into mortgage rates that consumers are facing at this time.
Former President Bush and other leaders had a meeting to discuss the global market. An agreement is likely to come to pass and will be coordinated with our domestic market. Matt Roberts, C.A.R. Federal Government Affairs Manager, said it would be an effort as it is an international effort to reform the financial market and getting constituents to understand this is a hurdle.
Leslie Appleton-Young, C.A.R. Chief Economist, said the banking system is unregulated and this has to change. Thus, from crisis to stabilization, we now need restructuring. “With a system like we have, a certain amount of transparency is what we need so we can look at risks.” She added that people don’t trust the loan being described to them as accurate. In fact, 22% of those obtaining a loan didn’t understand the terms of their loan according to a C.A.R. survey.
*Statistical information from the California Association of REALTORS® (C.A.R.). Other information, unless otherwise specified, is from two C.A.R. economists (Leslie Appleton-Young and Robert A. Kleinhenz) speaking at the C.A.R. January Strategic Planning and Finance Forum or the International Real Estate Forum.
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