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Excerpted from a San Francisco Chronicle article
by James Temple, Chronicle Staff Writer
Friday, February 15, 2008
The largest price drops for existing single-family homes last month occurred in Solano and Contra Costa counties, at 22.5 percent and 20.4 percent, respectively, to $333,000 and $450,000. The largest gain, 5.9 percent, was in Marin to $990,000. Not coincidentally, those three counties also had the highest and lowest percentage of homes sold that were foreclosed upon at some point in 2007: 43 percent in Solano, 33.1 percent in Contra Costa and 1.8 percent in Marin.
SAN FRANCISCO -- The Bay Area housing crisis is worsening as the lack of credit and growing economic uncertainty extinguished hope for a quick turnaround in the new year. January data show regional home sales dropping to a 20-year low and the median price falling nearly 9 percent. Nearly one-fifth of the properties that did trade hands in the Bay Area last month had been foreclosed upon last year . . .
Another key reason sales are slowing is the continuing tightness in the credit market, LePage said. Since the liquidity crisis sparked last summer by rising default rates, it's become more difficult for people to qualify for mortgages, especially the jumbo loans above $417,000 that are critical for many people hoping to get a piece of the region's costly real estate.
However, President Bush just signed the "federal economic stimulus package," which includes a provision to temporarily raise the cap on mortgages that Fannie Mae and Freddie Mac - quasi-government mortgage guarantors - can purchase to as high as $729,750 in high-cost areas (which includes all of the immediate Bay Area).
That could lower interest rates for people who would otherwise have needed a jumbo loan by a full percentage point. The office of Sen. Barbara Boxer, D-Calif., a proponent of the change, estimated that on a $650,000, 30-year, fixed-rate mortgage, the eased limit could save homeowners $417 a month.
This would enable people who weren't even able to buy a home to get into the entry level and it will enable people to refinance out of some unfavorable loans. Some real estate agents feel this will open up sales.
The median price paid for Bay Area existing single-family homes was $585,000 last month, down 8.6 percent from a year ago - and the lowest level since February 2005 when it was $576,000.
San Francisco resale home transactions declined 32.1 percent year-over-year to 152, another 20-year low, while the median price increased by 5.8 percent to $820,000.
"There's a clear correlation in statistics, whether at the county, city or ZIP code level," DataQuick analyst Andrew LePage said. "It's tugging down prices."
Banks want to unload foreclosed properties as quickly as possible to get them off their books, even though it typically means selling at a discount. Mary Coffin, executive vice president of loan servicing at mortgage giant Wells Fargo Home Mortgage, said bank-owned properties generally sell for 10 percent to 15 percent less than the amount that was previously owed on them . . . they are priced to sell . . . which can depress the value of nearby homes that weren't foreclosed upon.
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