La Jolla Homes for sale & La Jolla Real Estate

The Great Recession has ravaged savings and boosted unemployment rates, forcing people become more conservative with their cash. It has also made La Jolla CA homes for sale a lot more affordable -- at least for those people still working.

 

The typical American family, making the nation's median income of $64,000 a year, could afford to buy 70.1% of all homes sold in the United States during the third quarter, according a quarterly report from the National Association of Home Builders (NAHB) and Wells Fargo (WFC, Fortune 500).

 

That's down slightly from the previous quarter, when 72.3% were considered affordable, but way up from the third quarter of 2008 when only 56.1% qualified.

 

The NAHB judges La Jolla CA homes for sale to be affordable if a family making the metro area's median income could buy it if they devote no more than 28% of their gross pay toward housing costs.

 

The affordability pushed many buyers into the market last quarter. Plus, they wanted to take advantage of the $8,000 homebuyer's tax credit that was scheduled to expire on Nov. 30.

 

Those that procrastinated, however, got lucky: The credit was recently extended and expanded to include more buyers.

 

"At a time when housing is at its most affordable, we applaud the recent actions taken by Congress and President Obama to stimulate housing by extending the federal tax credit beyond its Nov. 30 deadline and expanding it to a wider group of eligible home buyers," said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla.

 

"With interest rates now lower than last quarter, the tax credit will encourage even more home buyers to enter the market and help stabilize housing and the economy by creating new jobs, stimulating home sales, reducing foreclosures, cutting excess inventories and stabilizing home prices."

 

 

Extremes of affordability

All real estate is local, of course; it doesn't matter much to someone buying in Peoria what homes sell for in Pawtucket. The fact is, though, that housing markets across much of the nation have been and remain quite affordable for most working households.

 

In Indianapolis, for example, the median household income is $68,100 a year. Figuring conservatively that no more than 28% of household income should go to pay for housing expenses, buyers could afford a house costing well over $250,000.

 

Although, they could do much better: The median home price in the Indiana capital -- which has been the nation's most affordable town for 17 consecutive quarters -- was a mere $105,000.

 

Affordability is highest in the industrial Midwest, where home prices have been kept down by slow population growth -- even population loss -- and wages that remain relatively high.

 

The second most affordable metro area found by NAHB and Wells Fargo was the Youngstown, Ohio, area. The median home price there came in at just $72,000 last quarter and the median income was $54,300. That meant some 93.9% of homes sold were affordable.

 

At 92.2%, Detroit was the third most affordable metro area with household income averaging $57,100 and the median home selling for $84,000.

 

The least affordable metro area was New York, where prices are high (a median of $425,000) and income is moderate ($64,800). Only 19.2% of homes sold there were affordable to households earning the median income.

 

Second least affordable was San Francisco, followed by Honolulu and Santa Ana, Calif.

 

 

One man's meat . . .

What's good for buyers is pure poison for sellers, who are the big losers as affordability improves. Prices have fallen more than 30% from their peaks, according to the S&P/Case-Shiller Home Price Index and many people selling La Jolla CA homes for sale these days are taking losses.

 

According to data from Zillow.com, the real estate information Web site, 27% of all sellers during the quarter received less than what they paid for their homes.

 

The losses were especially common in erstwhile bubble markets. Nearly two-thirds of sellers in the Orlando, Fla., metro area took losses; as did 60% of Lakeland, Fla. sellers; and 57% of those in Stockton, Calif.

 

Less than 5% of Fayetteville, N.C., sellers took less than what they paid; and slightly more than 5% of those in Yakima, Wash., sold for less.

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Propelled by the first-time homebuyers tax credit, nearly half of La Jolla homes sales are now being made by first-time purchasers, according to an industry report released Friday.

 

In fact, 47% of all Americans who purchased homes this year had not owned one during the previous three years, according to a press release Friday from the National Association of Realtors (NAR). That was up from 41% of sales in 2008 and 36% in 2006.

 

The tax credit boosted markets by giving first-time buyers a credit of up to $8,000 they could deduct from their income taxes. The credit is fully refundable: Even a buyer who pays less than $8,000 in income tax gets the full amount of the credit back.

 

The credit was recently extended through the middle of 2010 and expanded to include many existing homeowners. That has the industry buzzing.

 

"The credit is working better than first projected -- it now looks like we'll have 2.3 to 2.4 million first-time buyers this year," said Lawrence Yun, chief economist for NAR. "With expansion of the tax credit to additional buyers through the middle of next year, and no major unforeseen events impacting the economy, home prices should rise between 3% and 5% in 2010."

 

NAR forecasts that existing-home sales will total slightly over 5 million in 2009, a 2% increase compared with 2008. Next year, they predict a gain of 13.6% to 5.69 million units. That should draw down inventory and prop up La Jolla CA homes for sale prices, according to Yun, but, he cautioned: "Risks, such as unemployment, remain."

 

Critics of the tax credit call it a poorly targeted method of boosting sales. The credit added, by nearly the most positive evaluations -- including NAR's -- fewer than 400,000 sales to the total this year, about 20% of all first-time purchases.

 

Since all first-timers get the credit, whether it persuaded them to buy or not, that would mean about $40,000 was spent by the government for every extra sale, critics say.

 

 

Most affordable housing in years

Indeed, many in the industry trace the improvement in the housing market to much better affordability, rather than the tax credit.

 

Not only have home prices fallen more than 30% from their peak, according to the S&P/Case-Shiller Home Price index, but mortgage rates have remained extremely low all year, keeping monthly payments low.

 

Most sales have been of existing homes. New home sales, as well as new home construction, have remained mired in the doldrums.

 

NAR predicts total new home sales will total a mere 397,000 this year, rising to 549,000 in 2010. During the housing boom, new home sales were far higher, more than 1.35 million in 2005, for example.

 

While new home sales are still very low, the inventory of new La Jolla homes for sale has been dropping. That's because very few new homes are being built. Existing home inventory has also fallen a bit.

 

"We've seen a steady downtrend in housing inventory for well over a year," said Yun.

 

Any home price rise will also have a healthy impact on the foreclosure plague. Falling prices are a major contributing factor driving La Jolla foreclosures. As home values fall, homeowners are less able and less likely to continue to make monthly payments.

 

Mortgage borrowers often fall behind because there's no home equity cushion to tap should they run into unexpected expenses.

 

Too, when home values really plummet and owners fall way underwater, owing far more than their home is worth, it sometimes makes good financial sense to give up trying to pay for the home.

 

Under those conditions, some homeowners simply walk away.

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 Actor Nicolas Cage lost two homes in New Orleans worth a total of $6.8 million in a foreclosure auction Thursday.

Birmingham, Ala.-based Regions Bank purchased Cage's 1140 Royal Street property in the French Quarter appraised at $3.5 million for $2.3 million. The bank, which has about 1,900 branches throughout the South, Midwest and Texas, paid $2.2 million for Cage's 2523 Prytania Street property appraised at $3.3 million in the Garden District.

New Orleans's civil Sheriff Paul Valteau said no other bids were made on the houses.

Cage owed $5.5 million in mortgage payments and $151,730 to the City of New Orleans in real estate taxes, according to Valteau.

Hancock Park Real Estate Co., a corporation through which Cage purchased both homes, is listed as the official property owner. Valteau said attorneys representing Samuel Levin, Cage's former business manager, set up the corporation so that Cage's name would not appear on the mortgage documents -- a common strategy among celebrities.

Levin also was listed on the mortgage document as the agent for service of process, Valteau added. That agent is the officer appointed by a corporation to receive legal notices.

Last month, Cage filed a lawsuit against Levin in California claiming that Levin duped the Hollywood actor out of more than $20 million since 2001 when he was hired.

The suit said Levin "lined his pockets with several million dollars in business management fees while sending Cage down a path toward financial ruin."

The suit went on to say Cage has "discovered that he is now forced to sell major assets and investments at a significant loss and is faced with huge tax liabilities because of Levin's incompetence, misrepresentations and recklessness. Rather than attaining financial security, Cage has been forced to dispose of significant assets in order to pay for Levin's gross misconduct."

A reporter's calls to Levin's office for comment were not immediately returned.

CNN reported that Cage owes more than $6 million in back taxes and his properties in California and Las Vegas have also been foreclosed on and are designated for auction later this month.

The actor, who's known for his roles in Leaving Las Vegas and National Treasure, has 5 projects slated for 2010, according to the Internet Movie Database.

Cage's publicist Annett Wolf said she had "no information and can't help" when reached for comment.  

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Rates on 30-year mortgages remained almost flat this week as the Federal Reserve said it would keep rates near record lows to help the economy recover.

The average rate on a 30-year fixed mortgage was 4.98 percent this week, down slightly from 4.99 percent last week, Freddie Mac said Thursday. Last year at this time, the average rate for a 30-year fixed mortgage was 5.10 percent.

Rates are still above the record low of 4.71 percent set in early December. They've been held around 5 percent by a Federal Reserve program to pump $1.25 trillion into mortgage-backed securities to try to keep rates low and make home buying more affordable.

On Wednesday, the Fed said it still expects to end the program as scheduled on March 31. However, the central bank did say that it remains open to changing that timetable if necessary.

Low interest rates also tend to lure borrowers to refinance. In last year's fourth quarter, 33 percent of borrowers who refinanced their mortgage chose to lower their principal balance rather that extract cash from their home equity, the highest share since Freddie Mac started tracking refinance transactions in 1985.

In turn, only about $11 billion in home equity was cashed out by homeowners who refinanced their conventional prime mortgage, the smallest quarterly amount in nine years, Freddie Mac said.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, often in line with long-term Treasury bonds.

The average rate on 15-year fixed-rate mortgages fell slightly to 4.39 percent from 4.40 percent last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.25 percent, down from 4.27 percent a week earlier. Rates on one-year, adjustable-rate mortgages dropped to 4.29 percent from 4.32 percent.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac's survey averaged 0.6 point for 30-year, 15-year and five-year loans. It averaged 0.5 point for one-year loans.

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