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Local Price Declines Slowing, National Home Sales Increasing

Audio

Aired 7/31/09

What's going on with the local housing market? The decline in housing prices is slowing down, and home sales are on the rise. Yet, the number of foreclosures is increasing, and unemployment remains high.

This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

GLORIA PENNER (Host): The stubborn recession began with the housing market and loans gone bad so now analysts and observers are looking at home prices and home sales for a sign that the severe economic downturn might be improving. Andrew, this week Standard & Poor’s Case-Shiller Index, which tracks home prices in 20 metropolitan areas, registered the Index’s first monthly increase after 34 months of decline. Also up were home sales and housing starts. So is this consistent with what is happening in the San Diego area?

ANDREW DONOHUE (Editor, voiceofsandiego.org): Well, I think first of all an important point is if you seasonally adjust those numbers, which most people think you should, the prices didn’t actually go up, but the most important trend that we’re seeing in all these sort of figures is that the numbers aren’t dropping as fast as they were. So you’re starting to see an actual slowdown of the slowdown, or a slowdown of the free fall, so I think that, more than anything, is giving people at least some sort of positive signs but it is an important point to make, I think, that this just means that this free fall that we were in is starting to slow down. I don’t think, you know, there’s not any – many economists that are calling bottom or saying that there’s a turnaround right around the corner. It’s just that, you know, all these sort of – we’ve been pounded day in and day out for how long now with continually negative news, and at least the pace of a lot of those falls is not what it once was.

PENNER: I’m just wondering if it’s in the eyes of the beholder? I mean, I read that that one day, July 28th, I read a variety of stories. I read Voice of San Diego in which Kelly Bennett on your staff reported that prices are still falling but at a slower pace, just what you did. But Thomas Kuper at the Union-Tribune cited that – the Case-Shiller Index, and he said the county home prices increased by 0.4 percent. An Associated Press headline, also on that day, said, quote, big jolt in new home sales seen as huge recovery sign. Is this – What is your read on all these differing opinions?

DONOHUE: Well, I think that is a testament to where we are right now. There are so many different, conflicting opinions that the economists that we talk to say, first of all, they’ve never seen anything like it, and second of all, they’re having a hell of a time trying to actually figure it all out because you have basically two different housing markets right now. On the lower end, houses are getting snapped up with 30 offers on the table within a matter of hours. I mean, it’s sort of like the frenzy that you had during the boom because prices have fallen so far because these are, you know, foreclosed homes or short sales. But on the upper end, a more expensive…

PENNER: Again, explain short scale – sale. We use that term…

DONOHUE: Sure.

PENNER: …and some people say what’re you talking about?

DONOHUE: A short sale is when somebody puts a house – somebody is able to sell their home for less than it – less than they bought it for in sort of an agreement with the bank. So in the upper levels of the housing market, people are still having real – a lot of troubles getting the financing to buy those homes and so those homes are laying on the market longer and the prices are dropping. So you have continued problems with unemployment but then you have other economic signs that are starting to creep up. Even today, we found out that while the economy’s still – was falling, it didn’t fall nearly as fast as people had thought it would. So you have a lot of different conflicting things out there. We’re in a time, I think, that nobody’s really experienced before and that’s why it is so difficult to get your finger on the pulse.

PENNER: Okay, so let me check with our listeners and see how you’re feeling. Are you feeling somewhat optimistic about the housing market? If you were in the market for a home, are you at a point where you’re really thinking about buying or are you waiting for the market to truly bottom out? Our number is 1-888-895-5727, 895-KPBS. Ricky, what about that? Some folks who want to buy are still waiting for the market to bottom out. So, you know, why buy now if you can pay thousands less in six months?

RICKY YOUNG (Government Editor, San Diego Union-Tribune): Well, I think that they may have waited too late already but you’ve heard me on here be more optimistic than the Voice tends to be. And even this week in the coverage, you know, as Andrew noted, we use different figures. They used the seasonally adjusted figure, and we noted, you know, that prices were up from April to May. If you adjust that, you know, because they would typically be up in May anyway, then that’s not the case. But I think a lot of people are just looking for some good news and, you know, obviously if you own a home, that’s good news. If you’re looking to buy one, that’s not good news. But, you know, there’s a lot of broader implications for the economy based on what real estate is doing. Sales are up as well, so there’s a lot of signs of a recovery out there.

PENNER: So, Miriam, whether home prices are declining at a slower rate or actually rising, is this a sure sign that the recession is over? Are you sensing that people are more optimistic or that it’s close to being over?

MIRIAM RAFTERY (Editor, East County Magazine): I do believe that there’s more optimism out there in the market. The biggest issue seems to be that it’s a buyer’s market right now. I’ve interviewed some real estate agents and there really are bargains to be snapped up and, of course, the new supply housing – the supply is going down. The biggest issue is – remains the financing. It’s great if you’re a cash buyer. If you need credit, the credit market is still very tight right now. And, of course, we may still see, you know, a little bit more of a dip as – if we see more unemployment. The latest round of budget cuts will probably still see some more layoffs to come but I do think that the end is in sight, Gloria.

PENNER: Yeah, I think Miriam has a point there, Andrew, and that’s there’s still lots of rumbling about lenders, especially banks not allowing their bailout money to flow to borrowers. Is the credit market still inhospitable to mortgage lending?

DONOHUE: It is, and especially like we were talking about on the – on those higher – the higher end homes. And, you know, one of the things that’s sort of tempering a lot of the optimism for people, I think, is the fact that we have – there very well could be a whole flood of foreclosures to hit the market again. You have a whole different set of either exotic or risky loans that are resetting again, which is what happened at the start of the whole freefall. And then, secondly, I think a lot of people are seeing investors that are snapping up these homes so one of the key things you’re looking…

PENNER: Still? Now?

DONOHUE: Yeah, one of the things you’re – key things you’re looking at in the housing market is how much inventory is there out there. And so what a lot of people are seeing is that the lower priced homes are getting snapped up by investors who are just turning around and putting them right back on the market so you’re having the same amount of inventory.

PENNER: This sounds very similar to what was happening a number of years ago when the condos started to be built in downtown San Diego and you had investors go in there, snapping up the condos and then turning them and making several, you know, hundred thousand dollars in some case. It’s not like that anymore, is it, Andrew?

DONOHUE: No, in the down – the downtown condo market is a great example of why, I think, you know, there still are a lot of really interesting things to watch in the housing market. You just had the single largest residential property ever built downtown in Vantage Pointe and that’s just flooding the downtown market with condos. They lost all of their buyers because they couldn’t get the building built in time, so there’s still a lot of hairy things out there.

PENNER: They’re renting now instead of buying at this time?

DONOHUE: No, I mean, they lost – they’re trying to figure out ways that they can dice the building up into different buildings because financing is so difficult that they’ve got to – they’ve basically got to rig it so it looks like a number of different buildings rather than just one.

PENNER: Okay, let’s hear from Tony in Temecula. Tony, you’re on with the editors.

TONY (Caller, Temecula): You know, we live in brand new construction in Temecula and in January my unit was selling in the new construction for about $310 and they’re selling them now for about $345 and that was just in a period of six months. And they’re – people are snapping these things up like crazy and we can’t believe it. They’re in the process of building 16 houses at once where they were down to two at a time back in December.

PENNER: What accounts for that, Tony?

TONY: I – All I can tell is, from what I hear from people, is the government money. There’s $18,000.00 between the state and the federal government. That’s a lot of money for people to build these units for a down payment and closing costs. And so there’s a lot of people coming and buying up these houses.

PENNER: Well, thank you very much. So the government is coming in to help out, Ricky?

YOUNG: Same thing going on with new cars for the moment. You can still get that credit but, you know, I mean, it seems to work. I think – I think you’ll see car sales go up and apparently it’s working in Temecula, too.

PENNER: Okay, our number is 1-888-895-5727, 895-KPBS. If you’d like to tell us about your experience, are you seeing a turnaround in the housing market? Have you had a house on the market and now it looks like there may be some interest in it or are you a buyer and you’re finding that, yes, indeed, maybe this is a time for you to buy. And so we’ll take your calls after our break. This is the Editors Roundtable and I’m Gloria Penner.

# # #

PENNER: This is the Editors Roundtable and I’m Gloria Penner. We’re talking about the housing market. Some people see a turnaround, some people don’t. And we’re kind of getting the editors’ opinions on whether there is a silver lining in this black cloud that we’ve been calling the recession. Our number, if you’d like to join us, we have another few minutes to talk about this one, is 1-888-895-5727. And the editors with me today are Miriam Raftery. She’s from East County magazine. And from voiceofsandiego.org we have Andrew Donohue, and also Ricky Young from the San Diego Union-Tribune. And now we have Jacob in Carlsbad joining us. Jacob, you’re on with the editors.

JACOB (Caller, Carlsbad): Hi, Gloria, how are you?

PENNER: Great. Go ahead, please, Jacob.

JACOB: Yeah, well, my wife and I, we just bought a house, a condo in Carlsbad about – in February and we got the stimulus from the government, which was great, but is there any other information you guys can just review about that?

PENNER: About – about what?

JACOB: For – about the stimulus? You know, the cash back from the government.

PENNER: Let me find out. Editors, do you have any information on cash back from the government? Andrew?

DONOHUE: Well, that – that seems a little – a little broad. I mean, obviously we’ve been talking about the fact that the government is basically subsidizing, you know, you to help buy a home but beyond that, I don’t have anything to add.

PENNER: Okay, I’m afraid that’s all the information we can give you, Jacob. But let’s – And thank you for your call. Tony, let’s hear from you, Tony in Pacific Beach.

TONY (Caller, Pacific Beach): Yeah, we’ve been looking, my wife and I. We have a young son and we have another baby on the way, and we’ve been looking in the UC area for the last four or five months. And that’s only because the prices have come down enough that it’s almost obtainable at this point and…

YOUNG: And now you’re looking in the airport area for the…

PENNER: Where – Ricky thinks you’re at the airport.

TONY: Well, we are sort of. I’m actually heading to work right now. But we are – we see the prices being pretty flat, softening, slowing going down, not like the precipitous fall we had over the last year. But I’d say the prices have somewhat firmed up but still soft. Every month, you know, ten thousand off of the asking price of similar homes. So it feels like we’re still going down. It’s just not – you’re not seeing the 10 points every month that we were seeing early in the year or last year.

PENNER: That’s interesting.

TONY: So that’s – that’s hopeful.

PENNER: It’s – Yeah, and it…

TONY: It’s hopeful for us.

PENNER: It’s also a little different from the report we just got from Temecula where the housing prices went up there about $35,000.00. Andrew?

DONOHUE: You know, a key point, during the boom, the biggest piece of evidence that it was unsustainable was that housing prices grew so far out of whack with income that it was – that it was clear that nobody who actually lived in these houses could afford them. Well, that’s come back into line and now housing prices are actually much more in line with incomes, which is what our caller was saying. And so that’s a really positive sign. However, you know, there’s a number of external forces like unemployment, like the second wave of foreclosures that are still giving people, like the caller, uncertainty.

PENNER: But I think that’s interesting. It’s hopeful, that’s what – that’s what Tony was saying and we haven’t heard that word in a long time. So on that note, we will move on to our next subject, and I thank all our callers for calling in.

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