Observations on California Housing, July 2006

By: Jas Jain | Tue, Jul 4, 2006
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Why focus on California housing? Because it is a big deal - it represents some 25% of the dollar value of the US housing, or $7-8Tr.! Someone from North Carolina pointed out to me that the housing is doing great in NC, but it is no more than 1-2% of the dollar value of the US housing. A 20% drop in the price of California homes has the potential of taking the US and the world economy down with it because of the leverage, reckless lending practices, pioneered in Southern California, and the globalization of the financial system.

The most important development during the past two months is the increasing numbers of price reductions in the areas that I monitor on a regular basis. For example, during the past three months the median listing price of SFH (Single Family Homes) in Santa Clara County is down from $895K to $849k and in Santa Cruz County it is down from $820K to $799K. Most of this is due to the price reductions in the listings that existed. Another important development is very low levels of sales for the seasonally strong period. The current pending sales are at the same level, or lower, than what they were during the winter months. The most ominous sign for the future prices is the mushrooming of the inventory on the market. I will let the statistics and a case study do most of the talking.

Santa Clara County

Table 1 summarizes the deteriorating supply-demand situation. The current level of the Sales Pending is the same as during the end of November and February. While the listings are lot higher.

Table 1: Supply-Demand of Single Family Homes In Santa Clara County
  Date Total Listings Total Pending Listings to Pending Ratio
  Jul-04 1300-1500 900-1000 1.3 - 1.6
  11/27/05 2293 578 3.97
  02/23/06 1955 569 3.44
  03/22/06 2146 572 3.75
  04/16/06 2266 623 3.64
  05/11/06 2723 633 4.30
  05/30/06 2899 628 4.62
  06/16/06 3210 592 5.42
  06/26/06 3284 629 5.22
  07/03/06 3272 570 5.74

Santa Cruz County

Table 2 summarizes the supply-demand situation that is indicative of a dead market with very few buyers and increasing number of anxious sellers.

Table 2: Supply-Demand of Single Family Homes In Santa Cruz County
  Date Total Listings Total Pending Listings to Pending Ratio
  03/28/06 769 159 4.84
  04/28/06 821 148 5.55
  05/12/06 853 186 4.59
  05/26/06 938 190 4.94
  06/07/06 1011 168 6.02
  06/22/06 1062 153 6.94
  07/03/06 1100 144 7.64

The situation can be best exemplified by a case study of a listing that I know of and other listing in the same development that was built during the past 6-7 years. I visited the home when it was just bought and the development had the early phase completed.

Table 3: History Of a Listing (4BR+2.5BA, 2006 sq. ft.) in Santa Cruz County
  Date Listing Price Number of Listings In County Below the Listing Price
  02/28/06 $786,900   250-300
  04/23/06 $786,900   312
  05/07/06 $762,000   342
  05/23/06 $750,000   334
  06/07/06 $735,000   349
  06/29/06 $735,000   408
  06/30/06 $695,000   303
  07/03/06 $695,000   307

The homes from this development that are listed for sale are 1-6 years old, as per the listings. Here is a partial list of homes for sale in this development:

97 VISTA POINTE DR
33 VISTA POINTE DR
77 VISTA POINTE DR
21 VISTA POINTE DR
72 VISTA VERDE CI
92 VISTA VERDE CI
52A VISTA VERDE CI
60 MONTEREY VISTA DR
NUEVA VISTA AV
38 QUINTA VISTA ST
10 PORTA VISTA CT
316 SUNSET VISTA
308 SUNSET VISTA
4 YARRO CT
33 PELICAN DR
108 PELICAN DR
63 PASEO DR
123 PASEO DR
50 VILLA ST
18 VILLA ST
62 VILLA ST
54 VILLA ST
126 LIGHTHOUSE DR
30 LA JOLLA ST
Pima St
12 LA HACIENDA ST
39 LA HACIENDA ST

How many of the above are flippers? You can notice multiple homes for sale on some streets. There was an article is the local paper about SIGN POLUTION in the Santa Cruz area! BTW, there is plenty of land around this development for many future developments with changes in zoning. The current housing bubble was a God's gift to the developer who got the development started during the tech bubble when Scam Options money was bidding up the prices in Silly.con Valley.

Tehachapi Area

Table 4 summarizes the situation that is getting worse by the day for the anxious sellers.

Table 4: Housing Data (SFH and Condos) for Tehachapi Area
        Monthly Data
Date Total
Listings
Total
Pending
Listings to
Pending Ratio
New
Listings
With-
drawals
Expired In
Escrow
Closed
Escrow
Apr-05 208 172 1.21          
Sep-05 279 121 2.31 65 41 8 41 58
Oct-05 278 114 2.44 69 46 10 33 52
Nov-05 288 102 2.82 65 22 12 45 45
Dec-05 295 73 4.04 42 23 18 24 52
Jan-06 309 72 4.29 90 28 11 32 32
Feb-06 321 75 4.28 70 23 6 45 26
Mar-06 342 92 3.72 87 19 15 58 41
Apr-06 381 85 4.48 93 23 21 41 42
May-06 439 78 5.63 108 28 9 40 38
Jun-06 470 74 6.35 127 51 21 37 41

 


 

Author: Jas Jain

Jas Jain, Ph.D.
the Prophet of Doom and Gloom

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