1-in-3 mortgages underwater
by Broderick Perkins
© 2008 DeadlineNews.Com
Unauthorized use of this story is a copyright violation -- a federal crime
Deadline Newsroom - Home sales in some California regions are rising and inventories are falling, but as most Californians know, the Golden State's housing market is still on the ropes.
A one-two punch from rising sales and falling inventories is hardly the combination necessary to put the recession down for the count.
The state suffers a 10.5 percent unemployment rate, home values are down as much as 50 percent and 30 percent (nearly one in three) of Californians are living with upside down mortgages -- mortgage balances higher than the value of their home. Nationally the rate is only 20 percent -- about one in five.
That's the assessment of California's real estate market from Richard Green, director of University of Southern California's Lusk Center For Real estate.
"Things are pretty bad out there," Green told Suzanne Pratt a senior news producer, during a recent edition of Public Broadcasting Service's ongoing series covering the recession "Reviving the Economy."
But there are also signs the bottom may be near.
"Depending on where you are in the state, house price have declined between 10 and 50 percent. Thirty percent of people in California who have a mortgage have a mortgage whose balance spread is more than the value of their house," Green said during the interview.
The problem is jobs. While there have been increased home sales in the Inland Empire areas of San Bernardino and Riverside counties, California's unemployment rate is a staggering 10.5 percent, compared to the 8.5 percent national average.
"And again you get away from the coast, the unemployment rates are even higher than that," said Green.
It's tough to buy or keep a home with both values and incomes falling.
Hope for renewed California Dreamin'
Green said he's hopeful federal stimulus money that raised conforming loan limits on Fannie Mae and Freddie Mac loans will help more homeowners refinance for lower interest rates.
Other federal economic stimulus money should also put money into rebuilding California's infrastructure and that will put more people back to work.
"Once jobs come back, I think you'll start to see the housing market come back here pretty quickly," he said.
Real estate is an economic growth generator, some would say an economic cornerstone, and as goes California, so goes the nation.
As in the past, California real estate market can move the state out of recession and California can lead the nation out of recession.
From a real estate perspective that's because the state avoided much of the overbuilding -- at least in the coastal population areas -- that occurred in Nevada, Arizona and Florida.
Said Green, "In part, the regulatory environment here makes it very hard to build so if you look at the vacancy rate in Los Angeles, that's vacancy in detached homes and apartments, it's among the lowest in the country, which means as soon as there's demand, we should see a return to some health in the housing market here."
California consumers looking to buy should keep close tabs on market conditions. California's volatile housing market could produce a bottom that comes and goes in the night.
"The inventories have been dropping pretty rapidly here so that's very good news. The other thing is: Does owning look good relative to renting as a bargain? Right now, with the lower prices and low interest rates, I think it does," Green said.
"But the employment picture really clouds everything else at the moment and until we see those jobs come back, it's going to be hard to be really bullish about the housing market here."
© 2008 DeadlineNews.Com
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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!
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