July 21st, 2008 9:05 AM by Lehel Szucs
Today real estate is less about "location" and more about "duration," according to a recent San Francisco Chronicle analysis based on the Standard & Poor’s Case-Shiller home price index. Californians who bought their house two years ago face the reality that it may be worth less than they paid, but those who bought four years ago probably are not "under water." Those who bought eight years ago, in 2000, on paper have made a tidy profit assuming they haven’t spent all the equity in the meantime. For those who have forgotten that real estate is an asset that matures in value over time, consider this: The recent nationwide decline in home prices was preceded by a decade of year-over-year increases. Nationwide, home prices in February 2008 were 75 percent higher than they were in February 2000 and 15 percent above where they were in February 2004. In the San Francisco Bay Area, prices are down except in San Francisco year over year but up in all metro counties and down slightly in outlaying counties compared with 2004. However, the eight-year change skyrockets to a home price that is 94 percent higher today in San Francisco than it was in 2000. Of the nine Bay Area counties, the lowest eight-year gain was 48.8 percent in Santa Clara County.
Sacramento-based ForeclosureS.com reports a 5 percent drop in foreclosures and a 7.52 percent drop in preforeclosures nationwide between March and April. California recorded the highest number of filings year-to-date with 6.2 per 1,000 households but ranked fourth behind Nevada, Arizona and Florida in the number of preforeclosures (13.9 per 1,000 households) and was down 17.58 percent from March to April. Seventeen states recorded a drop in foreclosure filings between the last quarter of 2007 and the end of the first quarter of 2008. Nationally, 3.8 per 1,000 households have lost their homes to foreclosure so far this year.
For anyone questioning the role of Fannie Mae and Freddie Mac in mortgage lending today and the urgency of protecting their financial well-being, consider these facts from a recent New York Times article: The two government-sponsored companies each year purchase more than 80 percent of all home loans made by banks and other lenders. As a result, at the end of 2007 the two had chalked up more than $5 trillion in debt and other financial obligations.