What's in store for real estate in the Bay Area for the coming year? Most in the real estate industry agree that it will get worse before it gets better. However, predictions vary among our "experts." What are we in store for in 2008? When will prices begin to recover? Hear what some of them are saying.

"Don't count on market rebounding in '08, experts say." - Marni Leff Kottle of the San Francisco Chronicle.

"A real recovery in the housing market is probably at least a year off," said Robert Kleinhenz, deputy chief economist for the California Association of Realtors.

California Association of Realtors's forecast for 2008; sales volume will continue to fall, 9% in 2008, as will the median price of a home, at 4%. Take a look at the 2008 California Housing Market Forecast presentation by Leslie Appleton-Young, Vice President and Chief Economist for the California Association of REALTORS® (C.A.R.).

"The best guesstimate most can come up with these days on a residential housing recovery is that 2008 will be more than half over before housing prices even stabilize. Right now, it's anybody's guess as to when they will start to grow positively." - Ryan Fuhrmann, an article printed in The Motley Fool.


It may take until the end of 2008 or beginning of 2009 for the market to hit bottom, said Mark Zandi, chief economist at Moody's Economy.com.

"But the one thing that economists and real estate agents seem to agree on is this: As bad as it may get in the Bay Area, the region is weathering the downturn in the real estate market much better than most other places."

"The housing market is fairly strong in the vast majority of the Bay Area," said Ken Rosen, chairman of the Fisher Center for Real Estate at UC Berkeley. "It's slipping a little, but it's not the free fall you have in some parts of the country."

"When you look at the rest of the state and even the rest of the country, the Bay Area has held up quite well," said Larry Klapow, president of Coldwell Banker's San Francisco Bay Area region. "The market has shown incredible resiliency." - "So Long, '07"

"Builder's expect recovery in second half" - Jessica Saunders, East Bay Business Times.

"At least two builders expect to see some recovery in the East Bay housing market in the second half of 2008, but another expert thinks it will be 2009 before demand and supply balance out."

"Once we get through the credit crunch, and buyers realize the world didn't end, they will come back," said Scott Menard, SummerHill Homes' chief operating officer, who predicts the market will continue down through at least the first quarter. "Next year will probably be a bit of an adjustment year."

Which brings us to the question; Will 2008 be a good time to invest in real estate? See what a recent survey showed taken by the East Bay Business Times. 60% say that now is a good time to buy! Read their comments as to why.

Labels: Bay Area Real Estate, CAR, East Bay Business Times, Fisher Center for Real Estate, Ken Rosen, Moody's Economy, Real Estate Cycles, San Francisco Chronicle, The Motley Fool

"The housing market is soft. Hard times for some can mean opportunity time for others. Could now be a good time to step into the housing marker and pick up a bargain?" Dian Hymer of Inman News asks.

Her conclusion; "There are good buying opportunities in the current market for well-qualified buyers. Just make sure that you pick your bargains carefully." Read her entire article HERE.

Lew Sichelman, United Media Feature, speaks about how most would-be buyers have taken themselves out of the market until prices "hit bottom."

That could be a mistake for those who plan to stay in their new home for quite awhile. "The common wisdom is that if the house of your dreams comes along, go for it. After all, it may not be available six months from now. As long as you remain in the house, any further drop in prices will be offset by rising prices down the road."

If you look at home prices over the past 40 years, there is a very predictable cycle: Home prices increase for several years, are followed by a slight price drop and then stay flat for the next few years. You can see this pattern on a graph. Although they vary somewhat by location, they usually follow the same pattern.

Lew Sichelman states; It's tough to know the precise moment when prices stop falling and start rising once again. It's not even easy to spot a trend reversal. "If it was so easy to find the bottom," Markstein,(a senior economist with the NAHB), said, "we'd all be millionaires."

He goes on to say that "there are telltale signs that smart buyers can look for, evidence that the housing market has finally firmed and is about to rebound."

His key vital signs include;

Existing Home Sales
Building Permits
Mortgage Defaults
Foreclosure Sales
Mortgage Rates

You can read in detail about his five keys to look for HERE.

There are a few sources that can help your with you research. Your knowledgible realtor of course. DataQuick has some of the most up to date news and statisitics on housing markets. CAR, California Association of Realtors, is another good resource. Inman News always has good articles on Real Estate. On a national basis, you can visit NAR, the National Association of Realtors.

Labels: Bay Area Real Estate, CAR, DataQuick, Housing Market, Inman News, NAR, Real Estate Cycles

This is a revision from the July Post as an update for what the months supply is doing on a city by city basis for Contra Costa & Alameda Counties.

What is months supply? Basically, months supply is the ratio of inventory to sales. And what it tells us is how many months the stock of homes for sale would last, if sales continued at their current rate.

See how your City's doing.




We currently have a 8.4 month supply of homes in the entire SF Bay Area. How does this compare historically? "A state of equilibrium" is considered 6 months, a point at which you would have an equal number of sellers and buyers. Considerably less, would be considered a "seller's" market, while anything more than that number would be considered a "buyer's" market. Since 1988, our low in California has been 1.3 months in April of 2004. It was even less than that in the San Francisco Bay Area. Our high was in February of 1991 at 18.8 months. The long run average has been 6.9 months. (Statistics are from C.A.R.)

Labels: Bay Area Real Estate, CAR, Housing Inventory, Housing Statistics, Months Supply, Real Estate Cycles

We've been bombarded by the news; housing inventory glut, price reductions, foreclosures, mortgage crunch, sub-prime lending woes. Some areas are worse than others. As with any real estate cycle, they have their peaks and valleys. This downward trend took it's roots in 2005, moving from one of the strongest seller's markets in history into a strong buyer's market for most areas. Interestingly enough, not all areas. There always seem to be a few areas that do well despite the existing market woes, (some parts of the Berkeley Hills, Albany, Kensington and the El cerrito Hills for example in the San Francisco East Bay Area). It always comes down to numbers, supply and demand.

Have prices hit bottom, or do they have further to go? How long will the housing recession last?

These real estate cycles typically last from two to five years. Most forcasters are pointing towards this winter to be the valley or low point of this down cycle with some relief coming sometime in 2008 or as late as 2009 depending on which source you listen to.

Lawrence Yun, NAR senior economist, said he isn’t looking for any notable changes in sales activity. "Mortgage disruptions will hold back sales over the short term, but long-term fundamentals are favorable. A modest upturn is projected for existing-home sales toward the end of the year, with broader improvement to include the new-home market by the middle of 2008."

"More buyers, and cutbacks in new construction, will eventually draw down the inventory levels and support future price appreciation, but general gains will be modest next year. Serious buyers today have a long-term view of housing as an investment – speculators have left the market."

View the U S Economic Outlook - August, 2007, from NAR, HERE.

"This isn't going to get better until this unsold inventory gets absorbed," said Standard Pacific's Delva, "And this isn't going to happen until the financing issues are resolved; the smart money has the slump ending in the latter half of next year or some time in 2009." Story by Robert Hollis, San Francisco Chronicle. View the full story Here.

Delva and other builders say a key turning point will be when potential buyers return to the market, convinced that the value of what they're buying won't continue to decline.

When that happens, "There's going to be a slew of buyers coming out of the woodwork," said KB Home's Burnstein.

Will this winter be one of the best buying opportunities that we've seen in years?

Interest rates, although much harder to obtain, are still at their lowest levels in decades. Rates on 30 year mortgages sank last week to their lowest point in two months, a dose of good news for people thinking about buying a home. "30-year rates lowest since the end of May.

"As of last week, the market for conforming mortgages was still operating smoothly, and if you qualify for one, you shouldn't have trouble getting a mortgage at a reasonable price." - Kathleen Pender also of the Chronicle.

So far, borrowers with decent credit histories and the ability to document their income - "the majority of the home-buying public" - aren't being shut out from getting a loan. - CNN, "Six Questions Consumers Are Asking About The Mortgage Market," By Amy Hoak

"Sellers can no longer be reluctant to accept offers or reduce prices. Tightening credit and diminishing mortgage products will continue to reduce the pool of qualified buyers. This, along with the increase in national housing inventories, means now is not the time to hold out for the best price possible." - Alexandra Saunders, BGS Financial.

The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950.

Should I wait or buy now?

Alexandra goes onto say; "Potential borrowers cannot wait any longer. For those who are considering buying a home, be aware that the volatile credit market can change overnight, leaving fewer options available to borrowers attempting to qualify for a mortgage. With decreases in home values and fewer available mortgage instruments, delaying any longer could get significantly more expensive."

This isn't fully realized until you weigh in the effect of waiting for prices to drop while interest rates continue to increase. So, you have to ask yourself, in the coming months, do I expect interest rates to increase? If so, how much more must home prices drop to counter the effect of rising interest rates?

The buying season typically slows after the summer months with a drammatic drop-off by mid October. With so much inventory and uncertainty in the mortgage & real estate markets, there should be plenty of "bargains" this winter.

"The key theme is that while it may be a different mortgage landscape, it still can be a good market in which to buy - as long as people are buying for the right reasons and are paired with loans that ensure they will be able to keep the home in the future." - CNN

Labels: Bay Area Real Estate, CNN, Housing Inventory, Housing Market, Interest Rate, Real Estate Cycles, San Francisco Chronicle

Money Supply Drying Up - jumbo loan rates soar, even for buyers with excellent credit.

"Need a mortgage this month? It's going to be harder - and more expensive - to get one. In the past week, turmoil in the mortgage markets has caused increasing problems for home buyers in the Bay Area and around the nation." Read the Full Story, by Carolyn Said & Kelly Zito, in today's San Francisco Chronicle.

Fannie Mae's Berson said the tightening mortgage situation is likely to hurt the already troubled housing market.

"There are people who could have qualified for a mortgage a month ago who can no longer get that mortgage," he said. "That means there will be fewer home sales or else people will have to buy less expensive homes. The practical impact is that some people will choose not to buy now. This is an additional negative factor on housing demand. It means home sales are likely to be weaker than we thought they would be just a few months ago."

Labels: Bay Area Real Estate, Interest Rate, Jumbo Loans, Ken Rosen, Mortgage Lenders, Real Estate Cycles, San Francisco Chronicle, Subprime Loans

"By rushing into the mortgage business big-time, homebuilders helped fuel the housing crisis. Now they're hurting—and so is Wall Street." by Mara Der Hovanesian, BusinessWeek. Go to the Story.

"Traditional mortgage companies and banks unleashed a barrage of loans, many to borrowers with iffy credit histories who didn't bother to read the fine print about upwardly mobile interest rates. Wall Street egged on the often-reckless underwriting by buying vast quantities of home loans for repackaging as securities. Now that the boom has fizzled and foreclosure rates are rising, the important role of large homebuilders as lenders is also coming into sharper focus."

"Even as the housing supply began to exceed demand last year, builders kept sales brisk by pushing adjustable-rate, interest-only, and other risky loans."

STEALING FROM THE FUTURE
Now it's payback time. It is likely to take two to three years, by various estimates, for the excess supply to be soaked up. The boom stole sales from the future as people bought houses earlier than they might have a few years ago. From the same issue of BusinessWeek, by Peter Coy. Go to the Full Story.

Labels: Bay Area Real Estate, BusinessWeek, Foreclosure, Home Builders, Interest Rate, Mortgage Lenders, Real Estate Cycles, Subprime Loans, Wall Street

Subprime problems mean 100% financing harder to get, by Eve Mitchell, Median Staff.

Thinking about refinancing a mortgage or getting a no-money-down loan to buy a home? Something that was relatively easy to do several months ago may be a lot harder in today's stricter lending environment.

In recent months, many lenders have tightened underwriting standards for no-money-down loans, also known as 100 percent financing, in response to the subprime mortgage mess that has seen foreclosure activity soar this year.

The upshot is that today many borrowers are finding it harder to get a loan than a few months ago even though interest rates are at the same level as last year. To qualify, borrowers may find that they will need to document their income, bolster their savings or find a co-signer.

Those who are getting hit hardest by the tightening loan standards are those with low credit scores, subprime borrowers and people who are unable or unwilling to document their income, mortgage experts say.

So what do people need to get a loan if they are having a hard time in today's lending environment? The Full Story and Tips can be viewed HERE.

A related story from U S News; "Lenders Crack Down After Subprime Collapse."

And from BusineeWeek; "The Subprime Mess, Let the Blame Begin."

Labels: Bay Area Real Estate, BusinessWeek, Contra Costa Times, Interest Rate, Real Estate Cycles, Subprime Loans

C.A.R. Chief Economist Leslie Appleton-Young on KNX 1070 AM, June 25, 2007.

C.A.R. Chief Economist Leslie Appleton-Young discusses the housing numbers for May 2007 and what they mean for the California real estate market. You can listen to the audio interview Here.

And here's the report that she's referring to released from C.A.R. on June 25th;

C.A.R. reports sales decrease 25 percent in May, median price of a home in California at $591,180, up 4.8 percent from year ago.

Here's a look at May's numbers for Contra Costa County;

Labels: Bay Area Real Estate, CAR, Continuing Study of the California Economy, Contra Costa Times, DataQuick, Fisher Center for Real Estate, Real Estate Cycles, San Francisco Chronicle

"As soon as a lender raises the red flag, scammers descend. Here's how they wind up holding the deed."

This is an article by Dean Foust & Brian Burnsed of BusinessWeek.

MILLIONS OF TARGETS
In most states, it's not illegal for one person to persuade another to sign his or her home over. And proving it was done through deceptive means can be tricky if the promises to help the owner were made verbally, as is often the case. So many victims have little recourse except through civil proceedings. But with the number of foreclosures estimated to soar to more than 2 million over the next couple of years, more and more policymakers are scrambling to keep the situation from turning into an epidemic by enacting tougher penalties for such practices.

View the entire article HERE.

California Foreclosure Activity Jumps Again. DataQuick

Foreclosures Hit 37-Year High. Realtor Magazine Online

“Legal Guide to Foreclosure-related Transactions" C.A.R.

The Foreclosure Report from Mike at Patagonia Finance

Labels: Bay Area Real Estate, BusinessWeek, CAR, DataQuick, Interest Rate, Real Estate Cycles, Realtor Magazine

The rate of home price appreciation in the U.S. remained slow but positive in the first quarter of 2007. The OFHEO House Price Index (HPI), which is based on data from sales and refinance transactions, were released today by OFHEO Director James B. Lockhart, as part of the quarterly report analyzing housing price appreciation trends.

OFHEO’s full PDF of the report released May 31, 2007 is at: www.ofheo.gov/media/pdf/1q07hpi.pdf .

The following map provided by OFHEA gives you an overall perspective on House Appreciation over the past 12 months on a regional basis.




On a regional basis, the Mountain Census Division continues to have the strongest housing markets, as it was home to the four states with the greatest annual appreciation rates: Utah, Idaho, Montana and Wyoming.

Seven states experienced double-digit appreciation rates between first-quarter 2006 and first-quarter 2007. The states with the fastest rate of appreciation for the period were Utah (17.01 percent); Idaho (12.27 percent); Montana (11.68 percent); Wyoming (11.67 percent); Washington (11.63 percent); New Mexico (11.21 percent); and Oregon (10.77 percent).

At the metropolitan level, prices were up from the previous quarter in 237 of the 285 cities on OFHEO's list of ranked metropolitan statistical areas (MSAs). Another 46 cities experienced price declines, with no change in two other MSAs.

The MSAs with the greatest annual rate of appreciation between the first quarter of 2006 and the first quarter of 2007 were: Wenatchee, Wash. (25.6 percent); Provo-Orem, Utah (19.7 percent); and Salt Lake City, Utah (19.1 percent). The MSAs with the lowest rates of appreciation for the same period were: Punta Gorda, Fla. (-4.6 percent); Sacramento-Arden-Arcade-Roseville, Calif. (-4.4 percent); and Modesto, Calif. (-4.4 percent).

Labels: Bay Area Real Estate, Housing Appreciation, NAR, Real Estate Cycles

"The Bay Area appears to be shaking off the nation's housing doldrums."

"Local home prices are still going through the roof, even though far fewer properties are changing hands. That contradicts the national real estate trend of slumps in both price and sales volume."

"Why does the region's housing seem to defy gravity?"

"It's the wealth effect."

"The Bay Area is one of the strongest economies in the country today," said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. "The upper end of the market in the inner areas (San Francisco and the counties closest to it) is doing extremely well. This is a completely different trend than the rest of the country."

Read Carolyn's entire article from today's San Francisco Chronicle HERE.

"DataQuick's county breakdowns show that existing-home prices rose in April in the six innermost Bay Area counties -- Alameda, Contra Costa, Marin, Santa Clara, San Francisco and San Mateo -- but declined in the area's furthest-out counties: Napa, Solano and Sonoma."

For a complete breakdown by county, view the full story from DataQuick.

Labels: Bay Area Real Estate, Continuing Study of the California Economy, Housing Inventory, Real Estate Cycles, San Francisco Chronicle

The real estate industry was hit with some bad news this week with rising foreclosures and a drop in the nationwide median home price.

Inman News managing editor Jessica Swesey and founder and publisher Bradley Inman discuss the significance of the latest statistics.

Labels: Bay Area Real Estate, DataQuick, Housing Statistics, Inman News, Median Home Price, Real Estate Cycles

There's an article written by Eral Swift in today's Parade Magazine that's definitely worth reading. Read the entire article HERE.

"How the housing market looks in the coming year will largely depend on who is doing the looking: For many Americans, this will be a terrific time to buy a house, even as others struggle to hold on to their homes, and thousands—perhaps hundreds of thousands—succumb to foreclosure."

"Sellers will have a tougher time closing a deal and may have to settle for less as prices around the country stagnate or slide. Mortgages will be tougher to come by. And builders—already competing with a fat inventory of existing homes—will see demand for their wares further erode."

"A good piece of the current slump was just inevitable: Most experts had predicted that the spectacular run-up in home prices from 2003 to 2005 simply couldn’t last—and, in some places, had soared well beyond the reach of most buyers and common sense."

"The superheated markets of those years—Las Vegas, Phoenix and much of California, for example—are now nosing into corrections."

"Mind you, real estate is local, and parts of the country will actually see appreciation—a fact that is masked by gloomy national statistics."

"With fewer qualified buyers on the scene, an already-fat housing inventory will take longer to slim down, Lereah says, (chief economist for the National Association of Realtors). How much longer? Months, he suggests. Years, Kenneth Rosen worries, (a professor of real estate and urban economics at the University of California, Berkeley)."

"If anyone stands to gain from the mess, it’s buyers with good credit, who should be able to navigate the lending straits without hassle, find plenty of inventory to choose from and have the luxury of time to mull their purchases."

Labels: Bay Area Real Estate, DataQuick, Housing Inventory, Months Supply, Real Estate Cycles, San Francisco Chronicle

I see you've discovered another facinating video!




You really need to check out his site; Here.

Labels: Bay Area Real Estate, My East Bay Agent, MyEastBayAgent, Real Estate Cycles

Andy Kaufman, of MyEastBayAgent, has moved and he's started to post some pretty cool stuff. You should check out his site!!!

Here's a sample; a Real Estate Roller Coaster;

"Over at Speculative Bubble, they took US Home prices adjusted for inflation and plotted as a roller coaster. It’s a nice little ride, but the ending is a little scary."

Labels: Bay Area Real Estate, My East Bay Agent, MyEastBayAgent, Real Estate Cycles

Prices also up in Alameda County, down Solano County; sales increase in March but down from 2006 - By Barbara E. Hernandez, CONTRA COSTA TIMES.

The median price paid for a Bay Area home in March was $639,000, up 3.1 percent in a month's time, bucking the national trend and regaining much of the decline since last summer, but the chorus still isn't singing "Happy Days Are Here Again." - George Raine, Chronicle Staff Writer.

"The housing market in the state will show a substantial decline this year, on the order of 2 or 3 percent,'' said Ken Rosen, director of the Fisher Center for Real Estate at UC Berkeley. Moreover, he said he expects the state's housing market to stay soft for a while.

"We had such a large run-up (in home prices) in the state as a whole in the last four years and now there is excess inventory in unsold houses -- in San Diego, Sacramento, Orange County and the Central Valley in particular,'' Rosen said. "Usually, the reaction time to an overheated market is two to three years.''

On the day after the normally glass-is-half-full Realtors trade association said the median price of existing U.S. homes will fall nearly a percentage point this year, DataQuick said that Bay Area prices are holding their only-in-the-Bay Area value.

"Prices seem to have held up surprisingly well, probably because of a relatively strong economy. Additionally, it's starting to look like much of the current sales lull may be due to the strong sales in 2004 and 2005. Some of today's demand probably got pulled into that period because of low mortgage interest rates and the availability of exotic mortgages," said Marshall Prentice, DataQuick president.

Levy, at the Center for the Continuing Study of the California Economy, said that the housing downturn of the 1990s, with slow and flat activity in prices and sales volumes, lasted seven years and that there is no reason to believe the current downturn will be short term. "I think we are closer to the middle of the housing adjustment process than to the end,'' he said.

"What the National Association of Realtors said about the price of homes going down screams volumes,'' Thornberg added. "It says, 'Guess what. This is not over. We have a ways to go.' To think we are out of the woods is silly.''

"The big story,'' said Michael Lehmann, professor emeritus of economics at the University of San Francisco, "was the big surge in prices of homes between 2000 to 2005. That is over here and everywhere,'' he said. "And overall, if the weakness continues across the nation, it will be hard for the Bay Area to resist it in the long run."

Labels: Bay Area Real Estate, CAR, Continuing Study of the California Economy, Contra Costa Times, DataQuick, Real Estate Cycles, San Francisco Chronicle

National decline would be first in record-keeping era - By David Armstrong, San Francisco Chronicle Staff Writer.

"Saying that the housing bubble has truly burst, the National Association of Realtors predicted Wednesday that the median price of existing U.S. homes is expected to fall 0.7 percent this year, the first time that has happened since records started in the late 1960s."

"The forecast was startling, coming from the normally upbeat industry group. Last year, in a sign of the start of the slowdown, the nationwide median price of an existing home rose a modest 1 percent."

"The California Association of Realtors predicted in October that statewide median prices would fall by 2 percent in 2007."

"Economy.com analyst Mark Zandi called for an even sharper statewide drop of 6 percent."

California's struggling housing market is weakening as lenders tighten underwriting standards. "Mounting foreclosures will also be a weight on housing prices as these properties are dumped into the already fragile market at a significant discount," Zandi said in an e-mail. "This outlook assumes that interest rates remain stable and that the job market outside of housing remains stable.''

"The National Association of Realtors has also lowered its 2007 forecast for sales of new and existing homes. Tighter lending standards and the continued fallout from the subprime mortgage meltdown are to blame, said association spokesman Walter Molony."

"The national median new home sale price is expected to rise 0.4 percent this year, after a 1.8 percent gain in 2006, the association said."

"However, these figures, even revised downward, are still overly optimistic, said Ken Rosen, director of the Fisher Center for Real Estate at UC Berkeley."

Rosen expects a drop of 2 to 3 percent nationally, and as much as 5 to 15 percent in some markets. "The Bay Area will do better because it is one of the top five markets in the country. It has a small inventory and good job creation,'' he said.

"In Rosen's view, home prices could appreciate from 1 to 3 percent in the Bay Area this year."

"Despite the unsettled quality of the current housing market, this, too, shall pass, housing industry experts said."

"We still view this as a cycle playing itself out,'' DataQuick's LePage said.

Labels: Bay Area Real Estate, CAR, DataQuick, Fisher Center for Real Estate, Real Estate Cycles, San Francisco Chronicle

Labels: Bay Area Real Estate, Foreclosure, Real Estate Cycles

"Implosion hitting would-be homeowners, desperate sellers hard, but some see a reflection of safe practices."

"It's essentially eliminating 15 (percent) to 20 percent of the market," said Ed Leamer, director of the UCLA Anderson Forecast. "What drove the California marketplace wasn't foreign borrowers but entry-level buyers helped into the market by exotic loans." as quoted in an article By Barbara E. Hernandez of the CONTRA COSTA TIMES. Read the entire article HERE.

"Problems in mortgage lending go "well beyond subprime," and the tightening of loan underwriting standards now underway is likely to push demand for homes down 15 percent and depress prices by 5 percent this year. Quoted from Inman's Matt Carter, Here for the rest of the article."

That's the rather gloomy forecast by analysts who follow the stocks of major home builders for Banc of America Securities LLC.

"In a report issued Tuesday, "Dissecting the Mortgage Distress," BAS analysts said there's already an excess supply of 800,000 existing homes on the market, and another 300,000 will soon be added to inventories through foreclosure."

But the biggest problem facing housing markets may be the tightening of credit that's taking place as lenders put the brakes on risky loans including low-documentation and zero-down-payment mortgages, the report said.

"We expect loans with a combination of low FICO scores and high (loan-to-value ratios) will end or tighten with many buyers choosing to remain as renters," wrote BAS analyst Daniel Oppenheim. BAS is a subsidiary of Bank of America Corp.

"BAS expects home prices to fall by 5 percent in 2007. Coming on the heels of a 2 percent price decline in 2006, the 7 percent cumulative price drop would be the largest decline in home prices since the early 1980s."

"Falling prices are likely to cause even more defaults and foreclosures, BAS analysts said."

"We do not anticipate that the mortgage credit issues are solely a result of the loan underwriting from '06," the report noted. "Rather, our view is that a primary driver of the problem is the decline in home prices, which leaves some households owing more on their mortgage than their home is worth."

"A First American CoreLogic Inc. study released Monday contained a similar finding, predicting that each 1 percent reduction in home prices will result in an additional 70,000 foreclosures." - Subprime lending meltdown seen as threat to economy

"The meltdown in subprime lending could have broader impacts on the economy, as mortgage lenders tighten restrictions on a broad spectrum of loans including those made to small businesses, said Christian E. Weller, senior economist at the Center for American Progress."

"With subprime lenders pulling back, it means fewer people can enter the market, because people looking to sell their homes have a harder time doing so, or must lower their price," Weller said. "Prices stagnate, there are fewer home sales, home construction and home equity cash outs."

Top subprime lenders: Where are they now?

2006 subprime loan performance will be worst in a decade

"Traps of Easy Credit" Reckless lending to blame for mortgage woes - James Grant

Exotic loans become commonplace

"Lenders began offering nontraditional loans that allowed borrowers to purchase homes they might not otherwise have been able to afford, especially in markets where home prices had seen annual increases at double-digit rates."

"These nontraditional or "exotic" loan types, such as payment-option ARM and interest-only loans, allowed borrowers to start out making monthly payments that in some cases didn't even cover all of the interest owed on a loan, let alone the payback on any of a loan's principal."

"If the loans that fueled the boom become unavailable, first-time home buyers who are ready to make the plunge may be unable to obtain loans that suit their needs. Even homeowners with sensible loans could get hurt in the fallout, because of the ripple effect that would take place if sellers who are ready to move up to pricier digs aren't able to sell their starter homes to first-time buyers."

Labels: Bay Area Real Estate, BusinessWeek, Fico Score, Inman News, Interest Rate, Real Estate Cycles, Subprime Loans, UCLA Anderson Forecast

So this is the much-feared "housing bust"? Bust Lite is more like it. Existing-home prices are as high as they were a year ago, while sales have receded only to 2003 levels. The only extreme decline is in construction: Builders are trying to get rid of the houses they've already built before they put up more. The overhang of unsold homes could be back to normal by around midyear.

Read the full article written by Peter Coy from BusinessWeek, HERE.

Low rates are a major factor

There's a related article in the same February 19, 2007 issue of BusinessWeek, entitled, "It's a Low, Low, Low, Low-Rate World," written by Michael Mandel and David Henry, that support "the surprise that low rates are still keeping the floor under housing."

Money is cheap. And some experts say it could stay that way for years. That's creating opportunity—and brand new risks

Labels: Bay Area Real Estate, BusinessWeek, Housing Bust, Interest Rate, Low Rate, Real Estate Cycles