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Wednesday, Jan. 30, 2008 | As economists and real estate professionals offer split opinions on what’s ahead in 2008, data released Tuesday recapped an indisputably dreary end of 2007 for those on the selling side of San Diego County’s housing market.
The year’s foreclosure filings in San Diego County totaled 38,917 — triple the total in 2006 and eight times as many as 2005, foreclosure tracker RealtyTrac reported Tuesday morning.
And Standard & Poor’s/Case-Shiller released its home-price index for November 2007, showing San Diego County’s prices for resale detached homes dropped 3.4 percent in one month, a significant monthly drop surpassed only by Los Angeles among the 20 cities examined in the index.
Between November 2006 and November 2007, prices declined 13.4 percent, a yearly decline second only to Miami’s 15 percent drop. And the county’s prices were down from the peak in November 2005 by 16.3 percent.
In the same month, sales activity for all homes dropped 26.1 percent last month compared to November 2006. New home sales were down 31.1 percent, resale condos down 8.6 percent and resale detached homes down 29.6 percent in the same time period, according to DataQuick Information Systems.
With all the sales broken down into thirds, the lowest-priced tier sustained significantly worse drops than the middle- and highest-priced tiers.
Homes sold in the bottom tier — priced less than about $446,000 — plunged 20.89 percent between November 2006 and November 2007. The middle tier, to about $651,000, dropped 14.64 percent over the year. The highest tier, however, dropped only 6.84 percent compared to November 2006, according to the index.
Rob McNelis, president of One Stop Lending and Realty in Santee, wasn’t surprised by the weakness in the numbers, especially in the bottom tier, but said the trend is likely to continue downward. The new Case-Shiller numbers refer to homes that closed escrow in November, meaning many of the transactions began in the two months before that.
McNelis said there’s an industry understanding that any homes that come on the market between the second week of November and the second week in January are desperate sellers — most sellers prefer to deal with open houses and for-sale signs after the winter holidays. And so since Tuesday’s data referred to deals struck before that time, he expected the data to get worse in the next couple of months.
“Scary as it may sound, that’s not going to be the scariest number,” he said. “December and January are going to be worse.”
James Hamilton, a University of California, San Diego, economics professor, spoke to the causes of the housing downturn at last week’s economic roundtable for the county.
“It seems to me the worst is yet to come,” he said, pointing to the unusual occurrence of home price declines despite continued job growth. Should the country slip into a recession, he argued, those drops would only intensify.
University of San Diego professor Alan Gin was more optimistic. Though he said he thought the county was already in a “recession, San Diego-style,” he disagreed the county was bound for massive job loss in any sectors other than real estate-related industries.
Still, the forecasters agree the county’s bound to see more foreclosures than it already has.
John Robbins, immediate past chairman of the national Mortgage Bankers Association, spoke to USD’s 12th annual real estate conference last week.
“We are experiencing … the effects of someone who’s drank too much wine,” Robbins said, describing the boom for the mortgage industry from earlier in the decade. “The good news is we’ve stopped drinking. The bad news is we’re going to have a hell of a headache.”
After dipping in November, the number of foreclosure filings in December was 4,509, bringing the fourth quarter total to 11,784 — more than triple the number in the same period in 2006.
And as those homes move through the stages of foreclosure, bank-owned homes constitute a large portion of the homes on the market — 31 percent of all home sales in December, according to analyst Andrew LePage from DataQuick.
Such a portion of the market can’t grow without having a negative impact on prices, McNelis said. Sellers don’t have the scores of homes to get off of their books that the banks do, he said, but they’re forced to compete with some basement prices.
“The obvious is that it’s gong to influence the way that they’re able to market the property,” he said. “It becomes a very cold and kind of calculated decision by a bank,
but when it’s someone trying to sell their home to move up, it’s an emotional decision as well as a financial decision.”