HOUSING MARKET UPDATE
For the Bay Area as a whole and the East Bay in particular, the 2007 housing market continues to show the pattern of flat prices and
falling sales that we’ve seen throughout California – at least in broad terms.
The specifics of these trends in the East Bay have actually proved somewhat
unique. The second half of 2006 saw outright price declines in the East Bay that were among the most severe in California. However, in 2007 both markets have not
only erased these losses but have established all-time highs for median sales
prices. But before we crack open the champagne to celebrate the end of the
real estate doldrums, a more in-depth look at these numbers is required. This
kind of volatility in median sales price suggests that in today’s low volume
market, the month to month changes in the mix of homes sold is obscuring the
longer-term trends of slightly rising prices in Alameda County and slightly
falling prices in Contra Costa County.
Figure 7: Total Sales (area) and Median Sales Price for All
Homes, Alameda County, Not Seasonally Adjusted
Source: Dataquick, UCLA Anderson Forecast
Figure 8: Total Sales (area) and Median Sales Price(line)
for All Homes, Contra Costa County, Not Seasonally Adjusted
Source: Dataquick, UCLA Anderson Forecast
While the overall data on home prices gives the indication
that the housing market in Alameda County is holding up slightly better than in
Contra Costa County, the newly released data on mortgage defaults shows a
much starker divide between the two. The following graphs present Notices of
Default (the official beginning of the foreclosure process) and Trustee Deeds
of Sale (actual loss of the home) recorded per 10,000 households for the East
Bay, along with the data for Riverside and Santa Clara Counties to indicate the
upper and lower bounds of what we’re currently seeing in California. Like
everywhere else in California, Alameda County has seen a surge in mortgage
defaults -- slightly higher than the least affected counties, but still
definitely in the lower half of the distribution. In contrast, Contra Costa
County has been hit hard by mortgage problems -- not quite as bad as Riverside
County, but among the top ten counties in California in both Notices of Default
and Trustee Deeds of Sale per 10,000 households.
Figure 9: Notices of Default Filed per 10,000 Households in
Selected Counties
Source: Dataquick, UCLA Anderson Forecast
Figure 10: Trustee Deeds of Sale Filed per 10,000 Households
in Selected Counties
Source: Dataquick, UCLA Anderson Forecast
There are also some indications that this financial distress
is more widespread than just mortgages. Year-to-date bankruptcy filings in the
Oakland Division of the Northern District of California are nearly twice what
we saw at this point in 2006 (2,029 vs. 1,083). The rules governing bankruptcy
filings were significantly toughened in 2005, which may have artificially
lowered the filing rate in 2006. However, this increase is still striking.
This highlights an important point: while the weak housing market and spiking
mortgage defaults may only be a drag on the economy as a whole, it is a source
of significant hardship for those caught in the trap of a resetting adjustable
rate mortgage in a market where selling is difficult and refinancing is scarce.
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