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| Image: North Valley new home prices. North Valley
includes Butte, Glenn, Sutter, and Yuba counties on this chart. I saw a presentation last week by the Gregory Group, a consulting group out of Folsom (www.thegregorygroup.com). They create studies on the housing market for the building industry and banks. Some of their presentations are also located on their web site. There was quite a bit of information that was provided during the presentation. Much of it carried the vernacular of the building/financing industry which I'm not entirely familiar with, but I still found it interesting. For example, a steep increase in home foreclosures that has occurred recently in California was proceeded by a couple of years with a steep increase in no interest and negative amortization loans. I wonder if they are related? Also, California had ~38,800 (Butte County 1424) foreclosures out of ~176,000 in the United States. That means our state accounts for about a fifth of the foreclosure turmoil. No time frame was given for that statistic. Other information included anticipated population growth in California. Southern California will experience more growth in both population and as a percentage increase than the north in the coming decades. Us northern counties will see an increased population and an influx of people escaping the urban areas to the south of us. All of these facts are stating the obvious, but I always like to see numbers that "describe" why the obvious occurs. There are lots of reasons why people will want to move to our neck of the woods. The difference in home prices alone is probably magnet enough to draw people into our woodsy realm. This also allows enterprising young business people a way to target market our future neighbors. To equity refugees coming from SF we might sell sourdough bread and crabs from the Sacramento River, not to mention homes with itty-bitty yards. For the affluent escapees from further south a combination boob-job/tanning salon might fit the bill. And to do our part to make them feel at home we could all drive larger cars to produce a higher density traffic effect. Although at some times of the day that's hardly needed in Chico. Below are the average home prices for northern and southern areas of California, with northern including the hyper-priced bay area. |
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CI Challenge: Can you guess what it is? Winner: He who feeds at the manger of the CI Challenge, Gregg Payne. See comments below for the answer. |
Cribs
9 Comments
Lon
About Me: Fasten your seatbelts for an exhilarating trip through Chico's public policy; I guarantee it's marginally better than public access TV.
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A old stone kiddy crib?
Or a food bowl for your pet saber tooth tiger.
regarding one significant factor which caused our current situation:
Excerpts From a DOW JONES NEWSWIRES story July 28, 2005 11:53 a.m:
“WASHINGTON -- The Office of the Comptroller of the Currency said Thursday it has found "a significant easing" over the past year in underwriting standards for both retail and commercial credit.
The findings come amid increased concern by U.S. regulators about novel credit products and potentially lax lending standards in a period of low interest rates and sharply rising real estate prices….
…The government agency found the laxity in retail credit was concentrated in real estate-secured products such as home equity and first-mortgage loans. The latest results showed the first overall easing in retail underwriting standards in the OCC survey's 11-year history.
"Ambitious growth goals in a highly competitive market can create an environment that fosters imprudent credit decisions," said Barbara Grunkemeyer, the OCC's deputy comptroller for credit risk.
The OCC has been leading an interagency effort to issue uniform guidance as soon as this fall on riskier mortgage products. In May, U.S. bank regulators issued joint guidance on risk management for home equity lines of credit, citing concerns about rapid growth and eased underwriting standards for these products.
Top regulators have also been highlighting their concerns in public remarks. Last month, Federal Reserve Chairman Alan Greenspan said "apparent froth" in some housing markets may have spilled over into the mortgage markets. Mr. Greenspan cited an increase in "interest-only" loans and other relatively exotic forms of adjustable-rate mortgages.
"Retail lending has undergone a dramatic transformation in recent years as banks have aggressively moved into the retail arena to solidify market positions and gain market share," Ms. Grunkemeyer said Thursday in a prepared statement accompanying the survey.
The OCC official said retail portfolio risks have risen with higher credit limits and
loan-to-value ratios, lower credit scores, lower minimum payments, more revolving debt, less documentation and verification, and lengthening
amortizations.
"While performance remains sound, banks should be wary of the unseasoned nature of many of these portfolios…..”
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But then conversely many of the very same lenders have previously been strongly criticized for being too strict with their lending standards. Particularly when and where, even if as an unintended consequence, those stricter lending standards were perceived to discriminate against certain demographics.
In some cases social pressure or legal pressure pushed them to loosen standards and develop methods to broaden mortgage availability.
It really does look like an old stone trough. I'd guess the wooden ones all got chewed up.
http://www.nypost.com/seven/02052008/postopinion/opedcolumnists/the_real_scandal_243911.htm?page=0
THE REAL SCANDAL
HOW FEDS INVITED THE MORTGAGE MESS
By STAN LIEBOWITZ
Did what gov't asked: Countrywide CEO Angelo Mozilo.
February 5, 2008 -- PERHAPS the greatest scandal of the mort gage crisis is that it is a direct result of an intentional loosening of underwriting standards - done in the name of ending discrimination, despite warnings that it could lead to wide-scale defaults......
Mark,
I wonder why California seems to have such a large number of foreclosures? It wouldn't seem like loosened loan requirements on a national basis would cause California to produce more bad loans than other states. I wonder if we were moving through a boom and just got nailed by the bad lending practices.
The article you linked is interesting. If the government demanded that mortgage loan requirements be loosened, then I guess bailing out some of the failing banks is more warranted than I had assumed.
None of this excuses people from applying for loans they couldn't afford. Everyone should maintain their own financial health and never expect the government to do that for them.
Lon
"I wonder why California seems to have such a large number of foreclosures?"
I do not know... perhaps someone in the the business could answer.
Though, I would speculate that it is largely due to:
-Our state's higher housing costs (relative to household income).
-Big housing market in terms of raw numbers (problematic in these economic times)
-Big housing market in terms of growth in the past 10 years (EG: lots of folks bought at market highs with “creative” financing)
So we as a state recently racked up a large number of mortgages in raw numbers, and a disproportionally large number of sub-prime loans due to our housing vs household income disparity.
It is either a flange for an ancient rain gutter downspout or a sarcophagus converted for use as a thermal bath.
Is this pricing for homes insane or am I just out of touch completely? How can any middle income family afford to buy?
Hey David,
I did get your comment related to the tin solder post. I close of comments whenever I get spammed on a post. So yes, solder has been made with tin for quite some time. Lead has been found to reduce tin whiskers. The removal lead is expected to lead to many quality issues that occur from manufacturing through the life of the product. I think silver fares better than zinc, and there is a gold process that was recently recommended to us.
On home prices, a middle income family in Chico cannot afford much. There are older homes in the 200's.
I was just thinking that I have a pretty good job for the area, and the average Southern California price is not something I'd try to purchase here in Chico, let alone LA.
Lon
The challenge is a manger. Which in the Christian religion served baby Jesus as a crib. (please recall the "Talledega Nights" clip for the grace given in the name of baby Jesus, and you'll see the grand connectedness of all things).
But a manger is actually a trough, as Gregg guessed.
From Wikipedia:
A manger is a trough or box of carved stone or wood construction used to hold food for animals (as in a stable). Mangers are mostly used in livestock raising. They are also used to feed wild animals, e.g., in nature reserves. The word comes from the French mangeure, from Latin manducare, meaning 'chew'.
A manger is also a Christian symbol, associated with nativity scenes where Mary placed the baby Jesus in a manger. (Luke 2:7).
Manger is also the last name of Yiddish poet Itzik Manger.
Lon