The nation’s housing bubble, which evidently is still deflating, should also have deflated a stalwart local myth — that Humboldt County’s housing market is immune from the violent ups and downs of the larger marketplace. It’s not. Granted, our bubble wasn’t as distended as those in Phoenix and Las Vegas, and thus the resulting fallout hasn’t been as ugly.
But make no mistake: We rode the bubble, too. At its local peak, in March 2006, the monthly payment on a median-priced Humboldt County home (including principal, interest, taxes and insurance) was a whopping $2,137. Only one in 10 local residents could have qualified for a traditional loan on such a house.
By January of this year (the most recent stats available), the monthly payment on a median-priced county home had fallen nearly 40 percent, thanks in part to lower interest rates, to $1,294. Almost three times as many residents could now afford to finance such a house — and that’s still fewer than the historic norm.
What do these tea leaves say about the future? Rob Arkley, among others, predicts that the country’s lagging residential real estate sales will continue to plummet for at least a year, dragging prices down with them. (See From the Publisher in this editon.) Curiously, this prognostication runs counter to the trend here in Humboldt County, where houses are suddenly selling like hotcakes. In the latest issue of the Humboldt Economic Index, HSU Professor Erick Eschker notes that home sales rose 35 percent in December and another 34 percent in February to reach their highest value since July 2007. Local Realtors, no doubt, are smiling once again.
But let’s not forget the lessons of the past: If we really want to see where the local housing market is headed, we’d do well to see which way the wind is blowing beyond the Redwood Curtain. The latest reports are less than sunny.
After several months of increases, existing home sales fell sharply last month, dropping 9.6 percent from January’s mark to an annual rate of 4.88 million units, according to the National Association of Realtors. New home sales have also plummeted this year by more than 11 percent. And as the long wave of foreclosures continues to flood the market with excess supply, home prices keep tumbling. They’ve now reached a nine-year low, according to the NAR. The Federal Housing Finance Agency has deemed this the worst housing market crash in seven decades.
When will it end? There are plenty of indicators, both nationally and locally, that the larger economy is improving. Nationally, the economy added 192,000 jobs in February, mostly in the private sector. And locally, not only has the housing market improved but we also saw big increases in hospitality and manufacturing last month. On the other hand, have you seen gas prices lately? As Eschker says in the Index, the price at the pump could stymie a potential turnaround. Ultimately, he says, there’s only one constant: “As always, the outlook is uncertain.”
This article appears in dummy March 2011 (North Coast Journal).
Ryan,
About four years ago an HSU economics prof (Hacker?) predicted Humboldt housing prices would drop by 40%. He was ridiculed in the local press by Humboldt Realtors and other individuals. They went on at length about how real estate was stable and such declines never happen in Humboldt. It would be interesting if someone could dig some of those quotes. The business community really blew it on that one, and it’s some of those same people now giving advice about job creation, planning, etc.
Good memory, Anon. It was Professor Eschker himself, the guy who puts out the Humboldt Economic Index. As we noted at the time, he was ridiculed in a full-page ad taken out in both the Times-Standard and The Eureka Reporter by then-president of the Humboldt Association of Realtors Larry O. Doss. He was also mocked by the editorial board of the ER, whose archives, sadly, have been wiped clean from the digital record. While technically prices haven’t quite dropped by 40 percent (yet), your point is well-taken. Eschker, I think we can all agree, has been substantively vindicated, much to the financial chagrin of those who took Mr. Doss’ advice.
You don’t need to be an economics professor to realize that if only 1 in 10 can afford a home the homes are overpriced.
I think most people really did intutitively understand this, and most did not buy into the bubble.
Unfortunately the relatively small number that did have created hugh problems for all of us.
I hope there’s a growing recognition between the various facets of all things real estate. The housing market, for example, is an entity not like that of the development industry…despite the later claiming to be symbiotic with the former.
When prices are high, new construction is justified as “in demand”. When prices drop (people aren’t buying etc) builders immediately shift their argument to a demand for “affordability”.
Pick up any newspaper, real estate brochure or even look at craigslist. There’s no shortage of any kind of domiciles in Humboldt, yet real estate investors want to blow up their growing acquisition of properties like so many pot growers want to blow up every hollow of their residence.
What more proof of insanity does one need to see, that all over the bay area, homes that were selling for $300k+ even five years ago are collecting dust at less than half that? The prices are inflated, the existing home/rental prices need to either come down or remain stable for a very long period of time.
The bubble is still bursting, and gas prices just shot up. There is no demand but for stability.