Housing Markets
The U.S. Housing Market:
In November, existing home sales volume declined 20% but the median price dropped only 1.7% from a year ago. Even with that drop in home prices, the Federal Reserve reported that by the summer of 2007, U.S. homeowners held a net equity position in their homes in the amount of $10.7 trillion dollars. In an $11 trillion dollar market, a $3 billion dollar give-back (in a cyclical correction) is not a cause for panic. This correction is due to the fact that from 2001 to 2006, inflation-adjusted home prices had the 2nd fastest cumulative growth in the past 110 years.
In 2007, existing home sales totaled 5.65 million units. Prior to 2004, that would have been a good year. New home construction, for December, dropped 14.2% - the largest decrease in 28 years! In a November survey of the 150 largest metro areas in the U.S., 93 of those metro areas had price gains. In a survey, during the second week of January, mortgage applications were up 28.4% - the largest highest increase since April of 2004.
Why hasn’t housing taken a bigger hit? U.S. homeowners are really in terrific shape with their homes: 35% have no loan and 50% have fixed-rate financing, so that leaves only 15% of homeowners holding adjustable rate loans. Of the 15%, half are high-income earners, so that leaves only 7% subject to rate increases.
California Housing Market:
Home sales in December totaled 25,585, representing a decrease of 41.1% from a year ago. The median price was $402,000, down 14.8% from a year ago. Conforming loan purchases were down 29.8% from a year ago. The big hit came from the jumbo loan buyers, where sales were down 69.8% from December of 2006.
California’s foreclosure problem exists primarily in only 293 (20%) of the 1,465 zip codes in the state. Of the foreclosures occurring in these 293 zip codes, almost all are located in the Inland Empire, the Central Valley and the Sacramento area. Of the loans on the properties entering the foreclosure process, most were originated from July 2005 to September 2006, an average of 18 months.
Southern California Housing Market:
December sales were the slowest in 20 years. Sales totaled only 13,240, which was a 45.3% decrease from a year ago. The median sales price dropped to $425,000, the same price it was in February of 2005. This represented a decrease of 13.3% from last December, for the 6 county areas.
In December, loans under $417,000, fell 4.6%, while sales requiring a jumbo loan dropped 40.0%! This was largely due to the impact of the financial mess and the spill-over into the jumbo market.
County Sales % Change Median ’06 Median ’07 % Drop % Gain Since ‘02
LA 4,430 -47.8% $525,000 $470,000 -10.5% 77.5%
OR 1,731 -42.0% $630,000 $565,000 -10.3% 52.1%
RS 2,503 -44.9% $432,000 $355,000 -17.8% 56.4%
SB 1,518 -54.8% $370,000 $315,000 -14.9% 88.6%
SD 2,468 -35.4% $495,000 $430,000 -13.1% 26.1%
VN 590 -42.3% $490,000 $425,000 -11.0% 45.0%
Source: DataQuick Information Systems, California Association of Realtors
Incomes and Wealth
Income:
Never before in the history of the world has a generation accumulated so much wealth as the baby boomers. The Internal Revenue Service will tell you that from 1945 to 1979, incomes increased at the same rate for all tax brackets. By 1979, the early baby boomers had been in the workplace for over 10 years. They were the most educated generation to ever enter the work force, and they had the skills for our changing world. Their income from 1980 to 2004 exploded!
♦ The top 20% of incomes grew by 59%, while the bottom 20% of incomes grew by a measly 7%!
♦ The top 1% of incomes grew by 200% - earning more than the entire bottom 50% of wage earners!
In 2005 the IRS reports, the rise in income represented a 5-year high. If you rank the states by income, California had the 8th highest income wage earners in the nation! What is amazing about this statistic is that individuals in California receive only 68% of their income from wages and salary. The other 32% comes from capital gains and interest income. This means the income averages are really much higher!
♦ The number of taxpayers making more than $100,000 in 2006 grew by 3.4 million and accounted
for more than two-thirds of the growth since 2000!
♦ The top 1% earned at least $364,657, and accounted for 21.2% of all earned income.
♦ Those making more than $1 million grew by 26%, and numbered 303,817 in 2006!
♦ Today there are now 8.9 million “millionaire” households, after 3 straight years of increases.
♦ Half of American wage earners brought in 87.17% of the nation’s income – an all time high!
♦ The top 85% of the nation’s wealth resides with the richest 15% of Americans; the bottom 50% of
Americans holds only 2.5% of the nation’s wealth.
Over the next decade, there will be a 25% increase in the population over 50 years of age. They have more money than any preceding generation, due to having dual incomes, equity growth, and record inheritances (60% goes to the top 40%)! This age group is spending $2 trillion dollars annually! Last year, 2.1 million boomers turned 60, with 25% planning on not retiring. They found a way to mix leisure with work and are not ready to fully retire – they have money and income and they are still investing in real estate.
They are one of 3 major home-buying waves, as 75% plan on moving to either the west or the south for warmth. Eighty percent own their own home, with 25% of those owning additional property.
Wealth:
There are 390 billionaires in the U.S., holding $1.54 trillion in assets. California is home to 88 of them! The rich and super-rich around the world saw their assets surge 11.2% last year, to $37.2 trillion dollars!
The Federal Reserve reports that consumers have $5 trillion dollars in liquid cash sitting in banks and savings and loans! In 2006, households’ net worth rose 7.4% and now exceeds $56.2 trillion dollars! Homeowners real estate equity is $10.7 trillion dollars – representing a 59% equity position! The value of individual stocks and mutual funds held by individuals grew to $10.4 trillion dollars!
Other assets held by individuals include: $3.2 trillion in bonds and credit instruments; $1.1 trillion in insurance reserves; $ 6.7 trillion of equity in non-corporate businesses; $11.1 trillion in pension funds; $2.5 trillion in 401K’s – plus $10 billion in loose change in homes and cars!
Source: 2004/2006 Census, Bureau of Labor Statistics, IRS, Federal Reserve, Forbes, World Wealth Report
home value report
