February 27, 2008
Just when it was looking like things couldn't get any worse in the housing market, government officials announced Tuesday that home prices had their biggest fourth-quarter drop in 17 years.
At the same time, foreclosure filings in California soared 120% in January from a year earlier to 57,158, according to Irvine-based market researcher RealtyTrac. California's foreclosure rate was second only to Nevada nationwide.
And this was good news for Dan Porcupile, a 40-year-old San Diego resident and a full-time member of the Army National Guard.
Not that he's rooting for anyone to lose their home. Rather, he's looking for a little plot of land to call his own.
The topsy-turvy housing market is a blessing in disguise for people who never imagined they'd have a shot at owning property in Southern California, where prices are so ridiculously high that many recent college grads are forced to live with their parents.
The median home price in the state last month was $430,370, according to the California Assn. of Realtors. The median household income in California as of 2006 was $64,563, according to Census figures.
It's a cruel imbalance that keeps the American dream out of reach for far too many people.
On the other hand, for those trying to sell a house or condominium, or those (like me) who look on their home as the bedrock of their retirement plans, you can almost feel the money slipping between your fingers as prices keep plunging.
"People who are selling now are really feeling it," said Doug Willis, a Pasadena real estate broker. "After taking money out of their homes for years, they're realizing they might have a significant loss on their property compared to what they owe for it."
In San Diego, Porcupile moved into his rental house in late 2006. He immediately set about sprucing the place up -- painting, landscaping, replastering the ceiling. He didn't own the house, but he still wanted it looking good.
"It's my home," Porcupile said. "I live here. I take pride in my home."
The housing slump came knocking a few weeks ago when Porcupile found a foreclosure notice on his door. (As I wrote earlier this month, renters are increasingly getting blindsided as landlords miss payments and foreclosure proceedings begin.)
Porcupile worked out terms on Monday to vacate the property and will move into another rental house within the next couple of weeks.
But he's also looking around his current digs and wondering if he might not want to make an offer when the house hits the market.
"I've invested a lot of blood, sweat and tears in this house," he said.
As a member of the military, who saw action in Desert Storm, Porcupile said he always figured his annual pay of less than $50,000 and uncertain life would preclude home ownership.
Now he's thinking otherwise.
"I'm paying $2,000 a month in rent," Porcupile said. "If I could pay about the same amount in mortgage, absolutely I'd do it."
It would all depend on how low the price goes. An index of home prices nationwide compiled by the Office of Federal Housing Enterprise Oversight found that prices had their biggest fourth-quarter drop since 1991. Home prices were down in every state except Maine.
Porcupile is thinking that the price of his house could be as much as 50% below what it was worth when he moved in. Even so, he'd still have to cut a doable deal with a lender.
At the moment, most lenders are raising the bar for new loans as they continue reeling from the meltdown of the sub-prime mortgage market.
But Porcupile knows that his steady government paycheck should count for something if he decides to take the plunge.
On the other side of the housing divide is Effie Micheals, 45, who placed her three-bedroom, three-bath South Pasadena condo on the market last August for $750,000. Great neighborhood, great school district. She figured she'd get top dollar.
And why not? The Southern California property market had been minting money for years. Buy a home, sit back and let the dollars pour in. It was as close as you could get to a sure thing.
Kind of like buying tech stocks in the late 1990s. But the thing about bubbles is, they have a habit of popping.
A few months after Micheals' condo was listed, it was reduced in price to $725,000. When that didn't work, it was knocked down again several weeks ago to $679,000.
Micheals bought the nearly 1,700-square-foot condo for $675,000 in 2005. She saw it as a steppingstone to another home in the vicinity, and planned to use the cash from its appreciated value to buy something even nicer.
"There was no way I thought I'd ever let my home go for less than $800,000," Micheals said. "Everyone wants to live in South Pasadena."
Now she figures she'll take a loss once all the fees are taken into account when the condo's sold at its current bargain-basement price -- if it's sold, that is.
"It's very disheartening," Micheals said. "I'm very upset."
On Monday, the California Assn. of Realtors reported that home sales statewide fell about 30% in January from a year earlier and that the median price of an existing home was down 22%.
If things get any worse, I may have to introduce Porcupile to Micheals. They have a lot in common.
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