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CommentThe housing industry, both construction and sales, provided the engine for robust economic growth that lasted more than five consecutive years. Clearly, it is the decline of that same housing industry that is leading the economic course towards recession.
Land scarcity, great weather and fine wine give us somewhat of a buffer to the economic devastation affecting other communities. However, just like a rising tide floats all boats, a falling tide leaves some touching bottom and some hard aground.
Land scarcity, great weather and fine wine give us somewhat of a buffer to the economic devastation affecting other communities. However, just like a rising tide floats all boats, a falling tide leaves some touching bottom and some hard aground.
The relative deep pockets and built-up equity of many Napa Valley homeowners have enabled most residents to steer clear of the subprime mortgage crisis and ride out the impact of declining home values. Not all are so fortunate.
On the national level, Merrill Lynch & Company this week accepted an unpleasant reality by writing off $15 billion of subprime mortgage-related investments, resulting in the company’s largest quarterly loss in its 94 years of existence. Unfortunately, this major cleaning of laundry may not do the job. Further foreclosures loom on the horizon as more than 1.8 million sub prime loans are scheduled for interest rate increases over the next 24 months.
On the national level, Merrill Lynch & Company this week accepted an unpleasant reality by writing off $15 billion of subprime mortgage-related investments, resulting in the company’s largest quarterly loss in its 94 years of existence. Unfortunately, this major cleaning of laundry may not do the job. Further foreclosures loom on the horizon as more than 1.8 million sub prime loans are scheduled for interest rate increases over the next 24 months.
The ripple effect of a declining economy on Bay Area home values was documented this week as the median priced home value from December 2007 to December 2008 fell 4.9 percent and sales fell 43.2 percent in the nine counties represented. In keeping with these numbers, Trendgraphix Incorporated showed the City of Napa to have a 5 percent decline in price and a 35 percent drop in the number of sales over the same time period.
This current decline in home sales reflects a lack of available home loan programs for first time buyers, even with fixed rates below 6 percent for the conventional loan of $417,000 or less. The decline of home buyers is reflected in the demand for rentals and the cost of rental housing has increased 9.4 percent over the last year. Another indicator of a declining economy is that new home starts are currently at their lowest level since 1980.
This current decline in home sales reflects a lack of available home loan programs for first time buyers, even with fixed rates below 6 percent for the conventional loan of $417,000 or less. The decline of home buyers is reflected in the demand for rentals and the cost of rental housing has increased 9.4 percent over the last year. Another indicator of a declining economy is that new home starts are currently at their lowest level since 1980.
Searching to see if we are observing the tip of the iceberg or the light at the end of the tunnel, our economic plight is a daily process. This week found the Federal Reserve Chairman Ben Bernanke endorsing government efforts to stimulate the economy, referring to packages at the $50 to $150 billion to be “reasonable.” With that mandate we can look forward to the president, congress and every presidential hopeful bringing forward the cure to our economic ills.
Just within the past week, the key issue for debate by presidential candidates shifted from the war in Iraq to the state of the economy. This change of focus will likely bring needed attention to the current credit crunch and to the actions needed in Washington to turn us on a positive economic path.
With our own primary just a month away, California voters are watching other states with personal concern. A surprise visit by Bill Cinton to the Napa Valley Opera House this week added energy and enthusiasm to locals on both sides of the aisle. With change in the air, economic recovery cannot be far off.
Charles Bogue, a broker with Coldwell Banker Brokers of the Valley, 1775 Lincoln Ave., Napa CA 94558, can be reached at 258-5221 or e-mail: cbogue@cbnapavalley.com.
Just within the past week, the key issue for debate by presidential candidates shifted from the war in Iraq to the state of the economy. This change of focus will likely bring needed attention to the current credit crunch and to the actions needed in Washington to turn us on a positive economic path.
With our own primary just a month away, California voters are watching other states with personal concern. A surprise visit by Bill Cinton to the Napa Valley Opera House this week added energy and enthusiasm to locals on both sides of the aisle. With change in the air, economic recovery cannot be far off.
Charles Bogue, a broker with Coldwell Banker Brokers of the Valley, 1775 Lincoln Ave., Napa CA 94558, can be reached at 258-5221 or e-mail: cbogue@cbnapavalley.com.
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petebo wrote on Jan 19, 2008 11:28 AM: