Try as they may, newspapers face challenges in being reliable sources for real estate information: They depend too heavily on real estate ads, so there’s always a tendency to see the glass as “half full” or to be “weak kneed.”
In The Union this morning, a realtor tries to see the bright side in our area, observing that equity and short sales are gaining ground, and it’s presented as a one-source news story.
Short sales, however, are still loans that are “upside down.” Equity sales are growing modestly again, but you have to wonder at what price range and whether it’s sustainable. I would suspect the lower range.
Here’s the real killer: Sales of distressed properties make up nearly half of all sales in the western county in the first half of 2010. That’s a lot. It’s also occurring against a backdrop of double-digit unemployment here.
It shows how heated our local market became in the “go-go” days with real estate speculators — many of them real estate agents — rather than people who merely wanted to buy a home to live in.
It shows the weak underpinnings of our local economy, having failed to diversify beyond real estate and construction, making us vulnerable to “boom and bust” economic cycles.
Here’s some of the reality:
•Grandmere’s Inn — a landmark home and B&B in downtown Nevada City— was auctioned off for barely $600,000 — after being listed at $849,000. It previously sold for higher than that.
•The Holbrooke Hotel — a landmark hotel in downtown Grass Valley — is in foreclosure proceedings, with an auction set for Aug. 23. It is listed at $1.4 million, down from $4.4 million in 2008, as I reported. It sold for $2.35 million in 2005.
There are many other example of prominent properties around here being sold as distressed properties — both commercial and residential.
Another is Villaggio di Vigneto — a bank-owned “Tuscany” in Penn Valley — which I reported previously. It supposedly is in escrow.
They all pull down the median price for commercial and residential properties — often used as a bargaining chip in sales.
“If the asking price for the Holbrooke has dropped by $3 million in less than two years, consider for a moment the ripple effect it will have on local commercial real estate,” as former Nevada City Mayor Steve Cottrell wrote on this blog.
From a consumer’s view, having no or little equity in your home is not going to help jump-start consumer spending. It makes you feel “poor.”
People who borrowed against what equity they did have during the recession to expand their business remain at risk.
We also have an aging, declining population, and many retirees will need to sell their home in coming years to get into assisted living as they become elderly.
Our local governments, meanwhile, depend on property tax receipts to pay for services. The county depends on property tax more than sales tax.
In short, we’re in a very precarious situation in our local economy.
If there’s a bright spot in “resetting” the value of our real estate, it’s that homes are more affordable for young families. But we’ll need to create some better paying jobs to go along with them or it won’t matter.
We will have to wait until year-end to get a better grasp of how far we have to go to get out of the real estate hole in our western county, some of it self inflicted.
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