UnionTrib: 20% of recent home buyers spend half of pay on mortgages

More Californians are stretching their finances to afford the state's ever-more-expensive homes, with 20 percent of recent home buyers plowing more than half their monthly income into their mortgages.

These "house-poor" Californians have been a significant contributor to the state's housing boom, according to a study by the Public Policy Institute of California, a Bay Area nonprofit think tank. ...

In addition to taking on more debt, some recent buyers have tapped creative mortgages such as interest-only loans to get into a house. In San Diego, 62 percent of home buyers opted for interest-only loans in 2004, according to First American/Loan Performance, a San Francisco mortgage research firm.

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AP via NCTimes.com: Californians, banks taking big risks on real estate

Man people are going to get hurt - and its starting already:

"You're a first-time buyer and all you know is that for the past five to 10 years, anyone who's bought a piece of real estate has made money. All they've seen is the market go up, up, up," said Stephanie Vitacco, a Coldwell Banker real estate agent in Los Angeles' San Fernando Valley.

"That's the mentality. But what they haven't experienced is that the market also goes down," said Vitacco, a 17-year veteran who specializes in first-time buyers.

Vitacco says she now routinely shows homes to clients who have agreed to 100 percent or 110 percent financing.

She said she is working with a young couple forced to sell their three-bedroom home after just a year because they can't make the payments, which included a "teaser" interest rate.

The home has appreciated enough that they will be able to afford a security deposit and rent for a new apartment, but not much more, Vitacco said.

"Somebody talked them into it," she said. "But they're barely able to make ends meet, they can't afford to stay there. They should have never been told to buy; they were much better off renting."

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North County Times: "Home prices pull back"

Home prices in Riverside County slipped 2 percent last month, supporting a growing consensus that the housing market is coming back to reality.

Real-estate professionals warned Tuesday not to make too much of the small dip from a record $393,000 in June. Changes from year to year are more important, they said.

But even when compared to last summer, the signs of a slowdown were clear, according to builders and real-estate agents. Prices rose 18 percent from July 2004, about half as fast as the year-over-year increases recorded late last year.

The slowdown comes as prices for single-family homes soar out of the reach of more and more single families. Riverside County's affordability index, a number used by the California Association of Realtors, fell to 14 in June from 18 in May, the group said Thursday.

"It's priced way too many people out of the market," Jim Hamilton, the association's president, said in an interview.

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SD UnionTrib: "Housing appreciation slows to 5.1% in July"

Some more coverage of the DataQuick report on San Diego with some added editorial. Median price up but all other metrics pointing downward.

Check out the graphic at the bottom, sales -15.78% YOY. Hmm wonder what that means...

The year-over-year appreciation rate has dropped 13 months in a row after hitting levels as high as 27.4 percent during the boom of recent years.

San Diego's appreciation rate is lower than in other areas of Southern California, with the overall median for the region of $469,000 up 16.7 percent from last year.

But DataQuick analyst John Karevoll said San Diego appears to be leading the way to the end of a seven-year real estate boom for the entire region as price pressures likely cool.

"It is clear we are closer to the end of the cycle than we were before, and so we're watching it very carefully to see if there's going to be any turn in the market," Karevoll said. "San Diego is clearly the local market that is furthest along."

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North County Times: "Home inventory soars as buyers take their time"

More news on the San Diego slowdown...

Up, up, up. That used to be the three-word description for local housing prices.
Now those words describe a rising tide of homes for sale in San Diego County.

"Inventory has increased dramatically, probably by about three times" since last July in North County, Brownell said.

Unsurprisingly, the average time on market also has increased. Detached homes were selling in about two to three weeks a year ago, Brownell said; now that time has reached 56 days. The average time for condos and town houses to sell is 49 days.

That abundance has even encouraged low-ball buyers to become more active, he said.

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Consumer Reports rates San Diego "Overpriced"

NY Times' Paul Krugman: That hissing sound may be San Diego

Paul Krugman has been writing about the housing bubble in the NY Times for the last couple of weeks and talks about San Diego in this op/ed:

That Hissing Sound - August 8, 2005
"Bubbles end when people stop believing that big capital gains are a sure thing. That's what happened in San Diego at the end of its last housing bubble: after a rapid rise, house prices peaked in 1990. Soon there was a glut of houses on the market, and prices began falling. By 1996, they had declined about 25 percent after adjusting for inflation.

And that's what's happening in San Diego right now, after a rise in house prices that dwarfs the boom of the 1980's. The number of single-family houses and condos on the market has doubled over the past year. "Homes that a year or two ago sold virtually overnight - in many cases triggering bidding wars - are on the market for weeks," reports The Los Angeles Times. The same thing is happening in other formerly hot markets."

And more on the topic today:
Safe as Houses August 12, 2005
"I used to live next door to a Russian émigré. One day he asked me to explain something that puzzled him about his new country. "This place seems very rich," he said, "but I never see anyone making anything. How does the country earn its money?" The answer, these days, is that we make a living by selling each other houses."

"...a fuller answer to my former neighbor would be that these days, Americans make a living selling each other houses, paid for with money borrowed from the Chinese. Somehow, that doesn't seem like a sustainable lifestyle."

LATimes.com; All Eyes on Home Market in San Diego

Sun Aug 7, 7:55 AM ET
"SAN DIEGO — When the housing market here was red-hot 18 months ago, Alex Flores could buy a downtown condominium with as little as $5,000 down and sell it six months later for a tidy profit of $200,000.

Now, Flores says, those easy-money days are over. "

"Amid concern that prices may be peaking, more homeowners are selling, doubling the number of single-family houses and condos on the market from a year ago. Yet fewer are finding takers. Homes that a year or two ago sold virtually overnight — in many cases triggering bidding wars — are on the market for weeks. "

note: Linked to the YahooNews articles to avoid the latimes.com login

http://tinyurl.com/cvafe

San Diego ranked as west coast's riskiest market - CNN.com

NEW YORK (CNN/Money) - "Some of the nation's frothiest housing markets are at growing risk of price declines, according to the most recent survey from PMI Mortgage Insurance Corporation.

The PMI Risk Index is based on economic activity and other conditions that PMI thinks are predictive of home-price declines over the next two years. "


http://tinyurl.com/9kw5x