by Jack
27th week of 2012: Recent [solds] indicate that home values continue to weaken under a stalled economy and lack of local jobs.
The homes that have taken the biggest losses are generally newer and priced over $400k. You could also say, the more expensive they were originally, the more the sellers are likely to lose. This trend means less tax revenue for the city. I think the Chico City Finance Director should be watching these numbers very closely. If they are not in line with projections, then the City better start making adjustments or risk being caught underfunded again.
Take a look at the stats shown below. Those outlined in red are homes sold for less than their purchase price. Homes in blue are sold for more, but it does not take into account improvements and it could be that these are homes are bringing in less than what the owners invested. Taking out the 6% commission, they are almost certain to be upside down at sale time. I’ve also included a couple of pending sales, take a look at the huge hit the seller is taking on that million dollar home! Ouch!!!
This is a horrible real estate market and home owners are losing their shirts! And this list does not take into account those homes sold by other than a realtor, so it could be worse. How much more of these tax revenue losses can the city take and what can be done about it? That’s the sort of questions that should be before the Council, not diddling around with a plastic bag ban!
“I think the Chico City Finance Director should be watching these numbers very closely”. That would require responsible leadership, sorry to say, Chico is lacking that in spades.
thanks Jack.
home owners are losing their shirts!
No. Not home owners, home sellers. If you still own and live in your home, you have not lost a penny, and you still have a place to live.
Why do you think you should be able to sell your house for more than you paid? Can you sell your clothes or your car for more than you paid? Maybe, if it is a 1967 Shelby Mustang.
Soaps, the Mustang is a great analogy! It held its price well because it’s what people want, supply and demand determine value once again.
There was a time when you could have said that about your old Levis, when Japan was paying big money for them. It’s all about supply and demand, even for old pants.
Initially we must conclude a home is sold for exactly what it’s worth, then we make certain improvements, to create a better home, which in theory would increase the demand.
The home is a great hedge against inflation too and if it’s in the right location, location, location, that too ups the price, again all driven by that original supply and demand ratio. Most homes do appreciate for that precise reason. In fact, I can’t recall a time when real estate didn’t appreciate over the long haul say 15-20 years. Maybe this will be the first time?
I seem to recall that about 2% is the typical return on a house and the longer you own it the more likely you are to get that 2%. But, it’s actually better than that if you factor in the depreciation schedule that you deduct on your income tax.
The good news is that certain areas are showing signs of recovery. Chicago is one of them and they were really hit hard. However, maybe their recovery is only due to an oversold situation and it’s merely finding the proper level, I dunno, time will tell.
“The homes that have taken the biggest losses are generally newer and priced over $400k.”
Jack, say it after me … “bubble”.
In my own way, I’m going quite conservative. Anybody who, in the last twenty years, plunked down (or contracted a mortgage for) a $400K house in Chico … can just take their lickin’s. No way on God’s earth anything in Chico is worth $400K. Think WWII … or even the War of the Roses … collaborators should be pilloried.
Back in ’09, there was a teeny, tiny, one-bedroom bungalow on Delaware in Berkeley going for $725K. Somebody actually plunked. We’ve never seen them. They hide. And small wonder. They’re likely eternally at work. Psychos.
Alas … that still leave the citizens of Chico to figure out … are they going to do without public services … or raise revenue some-how-else.
Libs you know what they say, a fool and his money are soon parted.
Great reading, thanks! Sometimes I just happen to stumble over info that arrives in a timely manner. Spot on 😉
Libby repeat after yourself…Bubble! Bubble!!
Government regulation and involvement, whether the insane CRA, collusion between politicians and lenders, or regulators asleep at the wheel/looking the other way, encouraged home buying which created increasing demand which artificially pushed prices higher and higher. The house of cards ultimately crashed the housing market and destroyed the property tax base.
The average home buyer “plunked” in good faith. Buyer beware is always the bottom line, however there is no way the average buyer would or could have anticipated the tangled mess that stupid government regulation, enacted by ignorant, opportunistic, pandering politicians, had wrought.
Government at all levels has been living beyond its (our) means and mismanaging the peoples hard earned money for decades. Most have lied to the people about the real reasons for budget woes and shamelessly used the threat of ending services as a way to extract even more tax dollars which they then use on fun projects and payback for votes to stay in power.
If business managed as cities (all government) have we would be living a permanent depression (think North Korea). As it is we are working (those of us who still are working) until mid-July to pay for government.
Only idiots think that government can continue to take more and more from private sector producers without affecting the tax base and collapsing the economy and governments. WAKE UP!
Here in Chico the progressive tendency to spend for votes (including public sector benefit packages) and pretentious, trendy goodies rather than services, has our city mirroring the failure of others across the country.
Progressives had better learn how to have a healthy respect for wealth producers and money management or get the he** out of the way so that others who do know how can step forward to manage the difficult task of digging out of the hole.
Look to governors in states that are digging out successfully for clues.
“The average home buyer “plunked” in good faith.”
No. They plunked in delusion. How could anybody, in their right mind, ever think, for a moment, that a residence in Chico, even a McMansion, could ever be worth $400K. No. I’m sorry, not ever, not for a hundred years.
You’d have to be deluded by the workings of a reckless financial sector to believe any such thing.
And many people were.
My how you do protect those big government manipulators.
Of course Real estate goes up…even in Chico..along with everything else!
Creating artificial market demand (BUBBLE) is a specialty of dumb-assed government intervention at the federal, state and municipal levels. In addition to the CRA it turns out urban planning also plays a significant role:
http://www.cato-at-liberty.org/blame-urban-planning/
The result of all this this government intervention and manipulation is ugly:
Those of you interested in Chico politics will want to read the entire article.
Libby the American people are just doing the best they can to save, invest, and make a decent nest egg for themselves. Government intervention is mucking up every opportunity at every turn. It’s time to expose all of the shenanigans.
“Government intervention is mucking up every opportunity at every turn.”
“Countrywide” was not a government entity.
Countrywide was colluding with government officials…Democrats like Chris Dodd.
I refuse to go over the insane government laws and regulations that made the housing bubble and melt down inevitable, including government regulators that failed to do their jobs and politicians that refused to heed warnings from President Bush. Now we find that land-use regulation also contributed.
Every problem we face today can be traced directly to government intervention.
Now that idiot Obama is out saying that if Americans have started a business “they didn’t do that on their own; somebody else did that.”
What an A**H**E!
“Every problem we face today can be traced directly to government intervention.”
I suppose, … Clinton’s ill-advised repeal of Glass-Steagall is probably the root of both the bubble and the crash.