La Jolla Homes for sale & La Jolla Real Estate

In a dour year for the economy, the housing market has offered some glimmers of hope. La Jolla homes sales have improved, recently hitting their highest level in more than two years. There's been talk of bidding wars resuming in places like Silicon Valley and New York City. And cocktail party chatter everywhere has started to turn to talk of a bottom. So at least where housing's concerned, things are looking not so bad -- right?

 

If that's what you think, you may not want to invite Mark Zandi to your next cocktail party. The chief economist of Moody's Economy.com, Zandi has some sobering predictions: Home prices are going to fall 5% to 10% more -- and over 30% in places like Miami -- between now and this time next year. Then they might start turning around. (Emphasis on "might.")

 

At the top of Zandi's list of worries are La Jolla foreclosures -- specifically, the millions of loans that are in foreclosure or headed there that can't or won't be modified. According to RealtyTrac, nearly 2 million housing units in the U.S. are in foreclosure or bank-owned, and millions more are likely to join them. 

 

Zandi estimates that 2.4 million homes will find their way into foreclosure next year. He expects banks to start putting those properties on the market more aggressively during the first half of the year, resulting in a flood of cut-rate inventory that will drag prices down.

 

It would be one thing if banks could sell into a hungry real estate market. But that brings us to Zandi's second concern: skyhigh unemployment.

 

October's 10.2% figure was higher than what most economists forecast for the peak. A soft job market, especially one this soft, means potential buyers don't have money to pour into new homes or the confidence that they'll be able to hang on to their jobs and pay the mortgage on their existing home.

 

Another concern: Policymakers will pull their support from the market prematurely. Aggressive government moves, like the recently extended first-time-homebuyer tax credit and the Fed's purchase of mortgage-backed securities, have been propping up the market.

 

The purchase plan is set to expire in March, which Zandi says could bump mortgage rates up as much as a full point. "That raises the cost of buying a home, and in this fragile market people won't buy," he says. "And that's a problem."

 

All those factors are figured into Economy.com's housing price outlook for 2010 -- as are local figures for income, population, interest rates, and foreclosures.

 

The results are broken into 100 metropolitan areas. (Last year the projections were pretty accurate, forecasting a 14.5% decline in 2009; the actual figure is likely to come in around --13.2%.)

 

As the sea of red above shows, the numbers are negative across the country.

 

The weakest areas are Florida, California, Nevada, and Arizona -- what Zandi calls the "usual suspects" -- where foreclosures are highest and likely to rise. The worst market: Miami, where the 2009 median home price of $183,530 is expected to fall 33%.

 

But Zandi also points to less discussed regions where prices are still inflated relative to rents, like the Pacific Northwest and New York through Virginia.

 

If there's a bright spot, it's pockets of the Midwest -- states like the Dakotas, Kansas, and Nebraska, which have stronger economies based on agricultural and energy industries.

 

Then there's Pittsburgh, which didn't have much of a housing bubble to begin with and is the only market projected to grow next year, up 0.41%.

 

The good news? "It's clear we're closer to the end of this crash than the beginning," says Zandi. Housing is more affordable, and construction is still low, so sales will eat up excess inventory. "We're moving in the right direction, and that's reason for optimism," he says.

 

Another plus: He says there's almost zero possibility of another U.S. housing bubble anytime soon.

 

Rank by 2010 price change	Metro Area	2009 median house price	Projected price change 2010	Projected price change 2011
1	Pittsburgh, PA	114,750	0.41%	2.23%
2	Rochester, NY	114,630	-0.39%	1.93%
3	Birmingham, AL	139,330	-0.78%	1.29%
4	Memphis, TN	107,690	-1.53%	2.41%
5	Buffalo, NY	108,170	-1.54%	0.86%
6	Houston, TX	146,350	-1.75%	0.38%
7	Kansas City, MO	135,420	-1.81%	0.16%
8	Louisville, KY	124,660	-2.24%	1.05%
9	Little Rock, AR	130,380	-2.27%	2.01%
10	Charlotte, NC	185,880	-2.30%	1.42%
11	Wichita, KS	115,260	-2.32%	0.42%
12	St. Louis, MO	115,720	-2.39%	0.28%
13	Dallas, TX	149,320	-2.57%	0.39%
14	Fort Worth, TX	118,920	-2.59%	0.44%
15	Columbia, SC	135,980	-2.66%	1.96%
16	Omaha, NE	131,290	-2.75%	1.46%
17	Denver, CO	204,570	-2.79%	3.02%
18	Greensboro, NC	135,920	-2.80%	0.95%
19	Albany, NY	188,600	-2.82%	0.78%
20	Baton Rouge, LA	160,370	-2.85%	0.39%
21	Tulsa, OK	131,600	-2.86%	1.50%
22	Syracuse, NY	122,420	-2.87%	2.32%
23	New Orleans, LA	158,900	-3.10%	-0.69%
24	Indianapolis, IN	105,100	-3.23%	0.73%
25	Gary, IN	101,180	-3.30%	0.44%
26	Austin, TX	187,590	-3.33%	0.96%
27	Seattle, WA	340,050	-3.42%	6.54%
28	San Antonio, TX	148,580	-3.71%	0.71%
29	Grand Rapids, MI	76,620	-3.88%	0.83%
30	Milwaukee, WI	199,820	-3.92%	-0.22%
31	Oklahoma City, OK	127,740	-4.02%	0.98%
32	Greenville, SC	140,430	-4.10%	1.26%
33	El Paso, TX	131,350	-4.27%	1.03%
34	Chicago, IL	200,650	-4.30%	2.24%
35	Raleigh, NC	215,510	-4.38%	1.91%
36	McAllen, TX	62,280	-4.54%	2.29%
37	Boston, MA	315,020	-4.56%	3.42%
38	Cambridge, MA	341,430	-4.73%	4.17%
39	Oakland, CA	360,660	-4.97%	11.96%
40	Minneapolis, MN	178,870	-4.99%	2.31%
41	Atlanta, GA	117,910	-5.12%	1.71%
42	Lake County, IL	223,770	-5.39%	1.10%
43	Richmond, VA	203,100	-5.50%	1.29%
44	Tacoma, WA	210,430	-5.57%	10.82%
45	Knoxville, TN	141,240	-5.76%	0.90%
46	Toledo, OH	74,940	-6.00%	2.40%
47	Washington, DC	288,280	-6.26%	4.61%
48	Nashville, TN	166,150	-6.36%	0.64%
49	Warren, MI	142,450	-6.40%	2.59%
50	Columbus, OH	129,030	-6.54%	2.02%
51	Cleveland, OH	86,910	-6.98%	1.34%
52	Allentown, PA	219,080	-7.17%	-0.78%
53	Worcester, MA	199,410	-7.39%	1.70%
54	Dayton, OH	91,420	-7.43%	1.17%
55	Bridgeport, CT	377,710	-7.62%	2.30%
56	San Francisco, CA	510,210	-7.97%	14.30%
57	Cincinnati, OH	113,320	-8.30%	1.19%
58	Akron, OH	68,030	-8.42%	1.17%
59	Virginia Beach, VA	202,660	-8.58%	-2.37%
60	Portland, OR	241,650	-9.01%	5.35%
61	Hartford, CT	228,810	-9.02%	4.89%
62	Springfield, MA	181,150	-9.18%	4.48%
63	Peabody, MA	292,300	-9.23%	4.80%
64	Philadelphia, PA	209,070	-9.23%	5.20%
65	Detroit, MI	83,360	-9.40%	2.82%
66	New Haven, CT	226,560	-10.50%	3.97%
67	Youngstown, OH	60,330	-10.71%	1.61%
68	Bethesda, MD	332,910	-11.02%	1.05%
69	Albuquerque, NM	177,680	-11.03%	2.89%
70	Poughkeepsie, NY	220,170	-11.24%	0.72%
71	Newark, NJ	367,380	-11.29%	4.53%
72	San Diego, CA	325,600	-11.65%	9.62%
73	Providence, RI	208,170	-12.09%	3.51%
74	Honolulu, HI	551,910	-12.81%	3.31%
75	Sacramento, CA	169,100	-12.87%	6.10%
76	Nassau, NY	368,260	-13.14%	-3.65%
77	Santa Ana, CA	436,680	-13.15%	6.32%
78	Edison, NJ	323,260	-13.25%	2.77%
79	Wilmington, DE	199,940	-13.28%	2.34%
80	Salt Lake City, UT	215,530	-13.31%	2.31%
81	Baltimore, MD	243,980	-13.87%	2.65%
82	Camden, NJ	197,470	-14.12%	1.36%
83	San Jose, CA	461,660	-15.28%	6.14%
84	New York, NY	416,730	-15.63%	-1.33%
85	Tucson, AZ	170,650	-15.93%	2.97%
86	Stockton, CA	166,300	-15.98%	10.08%
87	Bakersfield, CA	159,070	-16.31%	9.82%
88	Oxnard, CA	283,240	-17.52%	8.58%
89	Fresno, CA	184,720	-17.71%	7.19%
90	Riverside, CA	162,240	-18.90%	7.71%
91	Los Angeles, CA	260,250	-19.41%	8.43%
92	Phoenix, AZ	122,770	-20.50%	0.74%
93	Jacksonville, FL	145,250	-22.31%	0.09%
94	Tampa, FL	135,260	-22.77%	1.26%
95	Las Vegas, NV	137,410	-23.65%	-0.93%
96	West Palm Beach, FL	223,470	-23.85%	1.39%
97	Bradenton, FL	152,640	-25.98%	0.60%
98	Fort Lauderdale, FL	187,170	-30.16%	-1.59%
99	Orlando, FL	142,920	-30.73%	-2.40%
100	Miami, FL	183,530	-32.99%	-4.20%

http://www.middletonandassociates.com/00A689

Prices have risen more than 3% since May, according to S&P/Case-Shiller.

 

But most forecasts predict price declines in 2010, with possible losses ranging from anywhere from 3% on up. Fiserv Lending Solutions, a financial analytics firm, forecasts that prices will fall in all but 39 of the 381 markets it covers, with an average drop of 11.3%.

 

We've seen recent price stabilization because of low mortgage interest rates and the impact of the first-time homebuyers tax credit. But there are really good reasons to think prices of La Jolla CA homes for sale will now start going down.

 

There are three main reasons for the reversal: a coming flood of La Jolla foreclosures, rising interest rates and the eventual end of the tax credits.

 

 

More foreclosures

For Gus Faucher, the director of macroeconomics for Moody's Economy.com, the huge number of La Jolla foreclosures that remain in the pipeline is the big problem.

 

Moody's upped its estimate of defaults recently because of shortcomings of the government-led mortgage modification programs. Trial workouts are not being made permanent and completed modifications are redefaulting at high rates.

 

"There are going to be fewer [successful] modifications than we thought.

 

Even so, he added, much of the price decline has already occurred and Moody's forecast is for only another 8% drop. The worst-hit markets will be the ones suffering the most foreclosures, places like Arizona, California, Florida and Nevada.

 

Resetting option ARMs (adjustable rate mortgages) will also aggravate the foreclosure problem. These mortgages allow borrowers to pick their own payments, which can be so low they don't even cover the interest. Balances swell.

 

For many of the more than 350,000 option-ARM borrowers, it's time to pay the piper. Their loans will change into fully amortizing mortgages that will carry much higher monthly payments. A very large percentage of these homeowners will default, according to Shari Olefson, author of "Foreclosure Nation: Mortgaging the American Dream."

 

"We've still only seen the tip of the foreclosure iceberg," she said.

 

She also predicts more strategic defaults, people deliberately walking away from even fixed-rate mortgages as the value of their La Jolla homes dips well below the amount they owe.

 

Olefson's forecast is for price declines of 5% to 15%, depending on the area, with a national median price drop of about 10% for 2010.

 

 

Rising interest rates

Also affecting prices will be higher interest rates. Some analysts, according to Newport, think rates for a 30-year mortgage will pass 6% next year as the government curtails housing market support.

 

The Federal Reserve has helped keep rates low through purchases of mortgage-backed securities. But that program is winding down and will end in March.

 

"The government is throwing everything at the market but the kitchen sink," said Peter Schiff, president of Euro pacific Capital. "It can't prop up housing markets forever."

 

Schiff is among the bigger bears. Though he gave no specific prediction, he thinks prices -- already down 29% from the peak -- are only halfway to the bottom.

 

 

The end of the tax credit

As a tool for supporting housing markets and prices, the tax credit for homebuyers is a two-edged sword. It reduces taxes dollar-for-dollar by up to $8,000 for new homebuyers and $6,500 for buyers who already own a home and should support home prices. But it ends at the end of April.

 

Many buyers will push their deals forward to get in before the deadline and then demand for La Jolla CA homes for sale could sink afterward.

 

One of the few bulls out there is NAR, whose chief economist, Lawrence Yun, is counting on the tax credit to provide temporary support for housing markets until the economy recovers enough to start fueling sales. He predicts price improvement in 2010 of more than 3%.

 

"The headwind we face is rising mortgage interest rates," Yun said, "but the compensating factors will be the homebuyers tax credit in the first half of the year and increased job creation in the second half." 

http://www.middletonandassociates.com/00A687