(Source: By Rachel Raskin-Zrihen Times-Herald, Vallejo, Calif.) – Solano County homeowners lost about half their property’s value since the housing bubble burst, which, like elsewhere, seriously impacted the area’s economy, experts say.

Four years after the recession hit in December 2007, five Bay Area counties have lost a collective $386 billion in home value, according to the real estate information gathering firm, DataQuick. Among those, Contra Costa County was hit the hardest, followed by Alameda, Santa Clara, San Mateo and San Francisco. There was a wide variation within counties, with some areas hit harder than others, and Solano County was among the hardest hit.

The median Solano County home price in December, 2001 was $355,000, but had fallen to $185,000 by last month, former Solano Association of Realtors president Todd Willis said. The damage was not as bad, although it was still significant, in Napa County, where the median house sold last month for $335,425 compared to $569,450 in December, 2007, Willis said.

The loss in property values resulted in a corresponding loss in property tax revenues for Solano County.

“Overall revenues for the county, basically since the start of 2007, we’ve lost a cumulative $6.6 billion, or 15 percent, in the value of the assessment roll,” Solano County Assessor/Recorder Marc Tonnesen and Assistant Assessor-Recorder Kathy Eodossa said. “That’s about $66 million in property taxes.”

And that translates into deteriorating roads and other quality of life issues, current Solano

Association of Realtors President Paul Winders said.

Solano and Napa counties are by no means alone in this.

The average home in Contra Costa County lost about $343,000 in value; followed by Alameda County with about $291,000. Santa Clara County homes on average lost 245,000 and San Mateo County $222,000, according to DataQuick.

During the boom, home equity loans helped launch small businesses, paid for kitchen remodels, new boats and trucks, vacations, college tuitions and was a kind of security blanket for those nearing retirement. Those have essentially dried up — new bank-originated home equity lines of credit have plunged in the Bay Area by nearly 90 percent — reducing confidence and crushing many of those same businesses. And making matters worse, while the equity went away, the debt remained, further hobbling those who hung on to their homes.

Vallejo’s Vigil Mechanical owner Cam Vigil said his business floundered at the start of the recession, but some strategic adjustments have pulled it through.

“It was bad for a couple years, but we fought through it and we’re doing fine, now,” Vigil said of his heating and air conditioning company. “We started aggressively going after the commercial clients when the residential dried up. We lowered our prices, and our workers are working for less than they ever have before and we’re working mostly out of the area. But last year was a banner year and 2012, looks good.”

Your ads will be inserted here by

Easy AdSense Pro.

Please go to the plugin admin page to paste your ad code.

Taxable sales, an indicator of business health and consumer spending power, were down by double digits in most Bay Area cities between 2007 and 2010, the most recent figures the Board of Equalization has available. There has been a recovery since a 2009 low, but some economists say consumer spending has undergone a permanent change.

“Consumer spending is going to be lower going forward for two reasons,” said Jon Havemen, chief economist with the Bay Area Council’s Economic Institute. “Consumers have waked up to the fact that ‘Wow, I need to save for retirement, and not only do I need to save, but I don’t have all this money in my house.”

No one can be sure what changes the new year will bring.

Benicia’s median home sale price continued falling as of last month, for which Willis could offer no explanation, although in Vallejo they seem to have steadily risen since August, he said. There’s good and bad news in this fact, he said.

“This tells me that Solano County is a very affordable place to buy a home now,” Willis said. “I believe that 88 percent of people who live here can afford a home here. The minimum income to qualify for a mortgage here is $24,180. Payment on that, with taxes and insurance, would be $810.”

The news is less positive for existing homeowners, although Willis said he “gets the sense in my daily work, that fewer homes are available and offers are coming in,” which may signal a reversal of fortunes.

“We’re going to see prices stabilize,” said Ken Rosen, chairman at the Fisher Center for Real Estate and Urban Economics at UC Berkeley. “It’s already happening in pockets like Silicon Valley and San Francisco. If you want to buy a house, it’s probably the best time in California in 30 years.”

MediaNews Group’s Pete Carey contributed to this report. Contact staff writer Rachel Raskin-Zrihen at (707) 553-6824 or rzrihen@timesheraldonline.com.

___

?2012 Times-Herald (Vallejo, Calif.)

Visit Times-Herald (Vallejo, Calif.) at www.timesheraldonline.com

Distributed by MCT Information Services

Article source: http://www.loansafe.org/area-still-feeling-effects-of-real-estate-crash

(Source: By Pete Carey, San Jose Mercury News, Calif.) –Bay Area homes have lost more than a third of a trillion dollars in value since the housing bubble burst about four years ago. And in the process, they have taken a big chunk of the economy with them.

During the boom, homeowners borrowed against that mountain of money, fueling a huge surge in everything from yacht sales in Silicon Valley to home heating upgrades in Antioch. Later, when home prices collapsed, their loss of money and confidence crushed those same businesses.

Adding more strain, while the equity went away, the debt remained, further hobbling those who hung on to their homes.

While the devastation of the housing crisis has been well reported — foreclosures; people stuck in homes they can’t sell; houses sold for a fraction of their value — one issue that has received less attention is the remarkable loss of housing values and its impact on the economy. Home equity loans, for example, are running at about one-tenth the level they hit four years ago.

But it’s probably not overstating the issue to say that the economy’s ultimate recovery depends on restoring stability to the housing market. “Consumer spending won’t fully recover until the housing market stabilizes and people feel that their main assets — their home — will grow in value,” said Jed Kolko, chief economist with the real estate website Trulia. And consumer spending makes up about two-thirds of the American economy.

In a reversal of the “wealth effect”

that had homeowners spending freely during the bubble because their home equity made them feel rich, the loss of equity when the bubble burst “magnified the income and jobs effect in the recession,” he said. “Both of those hold back consumer spending. It especially hurt industries that served a local market — retail, restaurants and local services.”

The loss in home value in five Bay Area counties from 2007 to 2011, calculated by DataQuick for this newspaper based on the average price per square foot paid for housing, was $387 billion, a 33 percent decline. That figure is necessarily an estimate, because it’s based on the value of houses sold, and the types of homes sold in both periods.

Contra Costa County was hit the hardest, followed by Alameda, Santa Clara, San Mateo and San Francisco in that order. There was a wide variation within counties, with some areas hit harder than others.

From 2007 to 2011, homes in Oakland lost an average of $350,000; Concord $289,000; San Jose $267,000 and San Francisco $205,000, according to an analysis by the San Diego real estate information company. That was equity homeowners tapped for kitchen remodels, new boats and trucks, vacations and college tuitions. It also served as

a security blanket for those nearing retirement.

Businesses struggle

The collapse has hit business hard — everyone from remodeling contractors in the wealthy enclaves of Silicon Valley to heating and air conditioning installers in hard-hit Antioch have felt its sting.

“It’s all changed since the equity money died,” said George Sikich, a yacht and ship broker whose Bay Area business dramatically slowed when the housing bubble burst. “There’s no doubt — the business is down.”

Four years ago, Sikich’s customers were only thinking about buying a bigger boat than the one they had. “They were using their home equity, buying boats a lot. They had an ATM in their home,” he said.

Since 2008, boat prices have plunged along with sales, he said. “I have a little market niche and I expect to muddle along and be OK,” he said. “I don’t see things changing a lot until we see the money flowing again. I don’t see things turning around for a year to two.”

The steady slide in home value has also slowed real estate sales. The Santa Clara County Association of Realtors dropped from 9,370 members in 2007 to 6,200 today, the association reported.

“People have lost confidence,” said Ken Rosen, chairman at the Fisher Center for Real Estate and Urban Economics at UC Berkeley. “No one thinks prices go up any more.” But housing prices already are beginning to stabilize in some parts of the Bay Area, he said.

That can’t happen soon enough for Jeff Scalier, who owns Blue Star Heating Air Conditioning in Antioch. Scalier said he’s doing mostly repairs to furnaces that should be thrown out, and installing few new furnaces.

“In the old days, one or two people a week would drop their credit card down on the table and buy a new air and heating system for their families. Now it’s more ‘How much to fix it?’ And when you give them prices to fix it, they always cringe. No one asks to replace it. No one upgrades anymore. People only buy what they need to buy and very little else.”

Your ads will be inserted here by

Easy AdSense Pro.

Please go to the plugin admin page to paste your ad code.

Scalier says the company he worked for five years ago is out of business, as is one of his competitors.

His business “went from having work every day, day in and day out, to the point where you don’t have work every day, you don’t know if you have work for the rest of the week. And if you have work, there’s generally less profit.”

Wary consumers

Taxable sales, an indicator of business health and consumer spending power, were down 17 percent in Alameda County and 14 percent in Contra Costa County between the third quarters of 2007 and 2010, the latest period for which the Board of Equalization has data. There has been a recovery since a low in 2009, but consumer spending has undergone a permanent change, according to some economists.

“Consumer spending is going to be lower going forward for two reasons,” said Jon Havemen, chief economist with the Bay Area Council’s Economic Institute. “Consumers have waked up to the fact that ‘Wow, I need to save for retirement, and not only do I need to save, but I don’t have all this money in my house.’ ”

Fewer lines of credit

New home equity lines of credit originated by banks have plunged in Santa Clara, San Mateo, Alameda, Contra Costa and San Francisco counties by nearly 90 percent, from $6.1 billion issued in the second quarter of 2007 to $674 million in the third quarter of this year, according to DataQuick. That has starved remodeling businesses — among others — for customers. The East Bay has seen a 37 percent drop in the number of specialty contractors since 2007; the Silicon Valley has seen a 28 percent drop.

Antonio Perez, 43, of San Jose, had a flourishing custom cabinet business until work dried up early in 2008. His business is shuttered and he’s back in school, taking courses in San Jose State University’s business department.

“A lot of people I know in the industry are forced to do things they’ve never done before, and take jobs they had never done before. My brother, one of the greatest finish carpenters I know of, is reduced to building fences,” Perez said.

“It’s rough to watch — such fine talent that used to work for me reduced to lot of menial tasks. Someone who spent his whole life in a trade, refining his skills, and there’s no demand for it. You can have the greatest skills, but it’s all supply and demand.”

The struggling small-business man is sometimes also a struggling homeowner wondering when the spiral of equity loss, debt, business hardship and job loss will end.

Jerry Albert borrowed on his Redwood City home to buy a printing business. “We had a couple of good years and were rolling right along, and then ‘Bang!’ The bottom fell out.”

Albert has been negotiating with Bank of America for a loan modification since 2009. “I built my house and I was making money. I could pay my bills, and I was putting money away in a savings account,” he said. “I hate being pigeonholed as irresponsible. I’m a victim of the economy. My business has tanked. I have had clients file bankruptcy owing me money, and I can’t collect it.”

If there’s anything positive to say about the state of the housing market, it’s that if you have the money, it’s a great time to buy.

“We’re going to see prices stabilize,” said Rosen of UC Berkeley’s Fisher Center. “It’s already happening in pockets like Silicon Valley and San Francisco. If you want to buy a house, it’s probably the best time in California in 30 years.”

Contact Pete Carey at 408-920-5419.

___

(c)2012 the San Jose Mercury News (San Jose, Calif.)

Visit the San Jose Mercury News (San Jose, Calif.) at www.mercurynews.com

Distributed by MCT Information Services

A service of YellowBrix

Article source: http://www.loansafe.org/huge-loss-in-home-values-cratered-the-bay-area-economy

It’s not like the housing market needs any more headwinds, so here’s the government potentially giving us another: The mortgage interest deduction is back in big play in the budget deal.

It never exactly came off the table, but the bigger the budget deal, the more likely the mortgage deduction will take a bigger hit.

Right now, home loan borrowers can deduct the amount of interest they pay on their mortgages from their taxable income. This goes for principal residences and second homes. The interest deduction is capped at the first million dollars of debt on the home. For home equity loans it’s capped at $100,000 in debt.

The deduction costs the U.S. Treasury about $100 billion a year. There are proposals now to either reduce the cap to $500,000 and/or to eliminate the deduction on second homes. Eliminating the deduction on second homes would save about $15 billion, and reducing the cap to $500,000 would save another $15 billion, according to economist William Wheaton at MIT. 10.5 percent of existing home sales in June were of homes over $500,000 according to the Mortgage Bankers Association.

Then there’s the idea from the President’ bipartisan commission of turning the interest deduction into a 12 percent credit, limited to $500,000 in mortgage debt, only on primary residences. That could save the Treasury $65 billion.

Page 1 of 2 | Next Page
Show Entire Article

Obama Backs New Debt Plan That Doesn’t Raise Taxes

Debt Talks? Investors Are More Interested in Earnings

Mortgage Interest Deduction Big in Budget Play

Texas Instruments Forecasts Modest Quarter Ahead

Netflix Bracing for Slowdown in Subscriber Growth; Shares Skid

More Top Stories

Article source: http://www.cnbc.com/id/43882179?__source=RSS*blog*&par=RSS