This guy has been tempering his remarks the last couple of years, but he cuts loose today with one of the more irresponsible comments heard in quite a while – from the latimes.com:
“The stimulus has worked,” said Rick Hoffman, president of Coldwell Banker Residential Brokerage in San Diego and Temecula Valley. “Buyers are confident that we have seen the bottom of the real estate market and that we are on the way back up.”
He can’t speak for buyers – and he should have more respect for his agents who are trying to properly advise their clients.
Proceed with caution, and buy only if you find the right house, at the right price.
Home sale prices in Southern California showed fresh strength in January, bouncing 8.6% from the same month one year earlier — a period when the market was inundated with steeply discounted bank-owned properties.
But compared with a particularly strong December, the median fell 6.1% to $271,500 in January, ending eight consecutive months of price appreciation or stability in the Southland, MDA DataQuick, a San Diego real estate research firm, said Tuesday.
The month-to-month decline was attributable in part to the higher percentage of cheaper Inland Empire homes that sold in January compared with December as buyers in pricier locales stopped searching during the holidays and investors and first-time buyers made up a larger share of shoppers.
“The [January] numbers reflect, for the most part, people who would be out shopping in the middle of the holidays anywhere from late November to early January,” DataQuick analyst Andrew LePage said. “So it doesn’t surprise me that the concentration shifts a little bit back toward investors and first-time buyers, who probably feel the most urgency to snag what they consider a deal. A lot of other potential buyers would have been focused on other things during the holidays.”
We know that when you hear that the median price went up, all it means is that more higher-end houses were selling. The media makes it out that prices are rising, and that is not true.
(I spoke to the reporter Alejandro, but didn’t get off any pearls of wisdom. Got one in here though, with the Financial Times – and I was quoted before I saw CR say the same thing.)
From the FT:
After spending most of the past year focusing on largely ineffective loan modification plans, BofA, Wells Fargo, JPMorgan Chase and other large banks said they were ramping up short sales as a means of dealing with the housing crisis.
“If 2009 was the year of the loan modification, 2010 will be the year of the short sale,” said Jim Klinge, a real-estate broker in San Diego, California.
Some of the largest mortgage servicers are scrambling to make the most of this shift. Wells Fargo is holding seminars to teach real-estate brokers how to conduct short sales. Citigroup created a unit to expedite short sales and recently announced a pilot programme that gives homeowners who turn in their deed to the bank – known as a deed-in-lieu transaction – at least $1,000 towards relocation expenses.
BofA has hired additional staff to handle the increased volume, which is running at about double the level of a year ago. “Short sales are growing faster than REOs [real estate owned transactions] and that’s a new development,” said Matt Vernon, a BofA executive recently named to a new position of overseeing short sales.
Hat tip to Rick the Tuna for sending this article from the North County Times:
“The environment is really conducive to prices rising at this particular point,” said Alan Gin, an economics professor at the University of San Diego’s Burnham-Moores Center for Real Estate. “Interest rates are low, and prices are low.”
Most of the activity in the market is in the lower price tiers, where new homebuyers are trying to take advantage of the 38 percent decline in value since the March 2006 peak.
The index breaks homes into three price categories. The lowest category, comprising homes worth less than $297,000 in San Diego County, had the highest rate of growth for the fifth month in a row. Industry participants say tight supplies are driving up prices, with lenders slow to release foreclosed homes into the market.
I think there is always a 10% swing in what a home is worth.
If you’re selling and do all of the following – hire a great realtor, spruce up the joint, make it easy to see, and put an attractive price on it, you’ll get towards the higher end of the 10% range.
If you hire a lousy realtor, leave it ugly, make it hard to show, and price it too high, you’ll get towards the bottom of the range.
There will be more homes selling towards the top of the range when the market feels like it is heating up, but the internet provides all the data to keep buyers from going crazy and bursting out of that range.
It’ll seem like prices might be ticking up, but they should stay in the range. There should be plenty of supply just under the surface, waiting to come forth:
Defaulters
Loan Mod-ers
Short Sellers
Bank-Owneds
Expired listings from last year
Unemployed homeowners
Older folks who need money/no stairs
Don’t be buffaloed by any pundits who make it sound like there is a viable threat of spiking prices. There will always be an occasional lucky sale, and let’s face it – Southern Californians have a propensity to rush in and gobble up properties at any price. But there should be plenty of homes to go around.
From the nctimes.com, where Eric has the rather large shoes to fill of Zach Fox – note the trouble he had in finding an explanation:
The median price of detached, single-family homes in North County surged 21.9 percent higher in November compared with the same month last year —- the fourth consecutive month of year-over-year increases, a Realtors association said.
Last month’s big price move owed much to the comparison with abysmal sales in November 2008, along with a shift in the mix of home sales, as the middle tiers of the market showed signs of life after a long recession. The median resale price for houses reached $436,250 last month, according to the HomeDex report from the North San Diego County Association of Realtors.
“My buyers have kind of shifted,” said Diane Conaway, an Escondido-based Realtor and board member for the association. “I’ve still got first-time buyers, but the last four have all been in the $500,000-$700,000 range. Those people are finally coming out.”
Indeed, the report shows a decline in the number of homes sold for less than $300,000 compared with November 2008, but an increase in the number of homes sold in all other price categories below $1 million.
The report shows that inventory grew a bit. There were enough homes on the market for 5.7 months of sales at last month’s pace, up 9 percent from October, but still down 31 percent from last year.
Conaway also credited the increase in November to activity among buyers who thought a federal tax credit would be expiring. Congress later extended it to April.
Real estate agent Jim Klinge thinks the price statistic itself is misleading.
“It goes to show you how whacky the median price is for an indicator,” he said. The median, which is the point at which half the sales prices were higher and half were lower, can be skewed when buying activity shifts to varying sectors of the market.
Homes sold in parts of Escondido, Oceanside and Poway drove much of the growth, with each of those areas showing double-digit increases compared to last year.
The appearance of a sudden jump in annual numbers may also reflect a period beginning in November 2008 when first prices dropped into the $360,000 range, an apparent trough that ended in April.
Still, agents and analysts were surprised by the new median price.
As housing experts cross off 2009 as the fourth year of the real estate downturn, they see a “dim light at the end of the tunnel” and a “glimmer of hope” in 2010.
“It’s not great, but it’s less bad than it was six months ago,” said Alan Gin, a University of San Diego economist who addressed USD’s annual real estate outlook conference yesterday.
Gin said his glimmer of hope means that San Diego “is on the verge of bottoming out” in the economic downturn. USD economist Ryan Ratcliff’s dim light means, “The recovery is about to begin, but we have a long way to go.”
Alan Jay Brinkmann, chief economist at the Mortgage Bankers Association in Washington, said California will find recovery difficult because it, along with Arizona, Florida and Nevada, saw high housing price appreciation and construction during the boom and now is wrestling with massive foreclosures and widespread construction shutdowns.
He said homes for sale have dropped from 322,000 in October 2007 to 187,000 this past October. That’s a sign that buyers have reduced the large inventory of unsold properties that existed at the outset of the recession. But, over the same two-year period, distressed properties that are 90 days delinquent or in foreclosure have skyrocketed to 690,000 from 160,000. If 75 percent of those properties — 517,500 — eventually end up on the market, that would swell inventories and depress prices.
“I see the market holding on in the low end,” he said, but falling at the high end, above the $700,000 mark.
Nov. 12 (Bloomberg) — U.S. foreclosure filings surpassed 300,000 for an eighth straight month as unemployment made it tougher for homeowners to pay their bills, RealtyTrac, Inc. said.
A total of 332,292 properties received a default or auction notice or were seized by banks in October, up 19 percent from a year earlier, Irvine, California-based RealtyTrac said today. One in every 385 households received a filing. The tally fell 3 percent from September, the third consecutive monthly decline.
“The foreclosure problem is still with us and will keep prices down,” Stephen Miller, chairman of the economics department at the University of Nevada at Las Vegas, said in an interview. “The real issue is we don’t know what inventory banks are holding that they have yet to put on the market.”
Distressed real estate transactions accounted for 30 percent of all home sales in the third quarter as the median price fell 11 percent from a year earlier to $177,900, according to the National Association of Realtors. U.S. unemployment surged to a 26-year high of 10.2 percent in October as payrolls fell by 190,000 workers, the Labor Department said last week.
Housing will reach a bottom by March 2010, with lower- priced properties recovering value more quickly than expensive homes, First American CoreLogic said last month.
“The fundamental forces driving foreclosure activity in this housing downturn — high-risk mortgages, negative equity, and unemployment — continue to loom over any nascent recovery,” James Saccacio, chief executive officer of RealtyTrac, said in the statement. “We continue to see foreclosure activity levels that are substantially higher than a year ago in most states.”
California ranked second, with filings for one in every 156 households. Florida was third, at one in 168, RealtyTrac said. California led in total filings, with 85,420, up 50 percent from a year earlier. Default notices in the most populous state more than doubled and auction notices rose 73 percent, according to RealtyTrac.
Nationally, the pending home sales have increased 8 months in a row, and are up 21% YOY. Looney Larry says that prices have over-corrected and that the $8,000 tax credit is better than home prices going down $8,000. Why? Because if the national housing stock went down $8,000 it would be an aggregate destruction of $700 billion in housing wealth and raise more foreclosures. The tax credit only costs $10 billion.
First, let’s note how ridiculous the ‘Pending Home Sales Index’ is, when 30% to 50% of escrows are falling out these days.
But let’s also look at the October detached sales for North SD County Coastal, from La Jolla to Carlsbad. There will be late-reporters for 2009, but in spite of low mortgage rates, tax credit, and NAR hype, we’re still strugging:
Year
# of sales
$ per sf
Avg Freddie 30YF Oct
2001
224
$283
6.62%
2002
309
$297
6.11%
2003
306
$369
5.95%
2004
229
$453
5.72%
2005
218
$468
6.07%
2006
186
$424
6.36%
2007
145*
$483
6.38%
2008
195
$406
6.20%
2009
181
$394
4.93%
* The October 2007 wildfires had an impact on closings.
In spite of pricing being 16% lower than 2005, mortgage rates being the lowest they’ve been in October, and the nutty tax-credit hype, you can’t say the local market is cooking.
I think we’ll be in for more of the same over the next few months, but next year is shaping up to be an all-out war between short sales and REOs in the higher-end markets.
It has been a wild 6-7 months – ever since March when mortgage rates dropped under 5%, the buyers have been very active. Many here thought that worsening economic news would temper buyer enthusiasm, but lately it’s ramped up instead.
Why?
In our first installment we noted the biggest reason – prices are lower than they used to be, and apparently there are motivated buyers that want/need a house bad enough that prices must be low enough for them.
We also noted how the internet has empowered people to search for homes, and serves as a gut check when people see properties they like, go flying off the market – the anxiety starts rising.
The realtor shenanigans being deployed don’t seem to turn off the motivated buyers, if anything they appear to get more anxious the next round, and bid stronger. Their realtor should control the situation, but they get anxious too, and tell the client to keep bidding higher.
Then you have people who just buy because they want to buy real estate, and in many cases don’t put any more thought into it.
The CAR president sent a letter to realtors this week that Kris quoted on her blog:
The upshot is that, statewide, we can expect the median home price to rise 3.3 percent to $280,000 in 2010, while sales will moderate to a more sustainable pace, posting a 2.3 percent decrease next year. 2010 should mark the beginning of a “new normal” for California’s housing market, and likely will feature a steady stream of sales driven by distressed properties in the low end of the market, coupled with moderate home-price appreciation.
I commented that the guy is talking out his ear, and that 2010 sales in San Diego would be 20% higher than 2009 – maybe we’re different here? (I don’t think so). I know that might sound somewhat bullish, but I’m not enthusiastic about prices increasing.
I think as prices go lower, next year’s demand will get even hotter, as long as the Fed doesn’t mind throwing another trillion or two at MBS market.
Here’s why. Increasing sales counts will be fueled by the lower-end, but even the higher end buyers should be delighted to see more REOs coming to market, giving some relief to the stand-off.
Look at this chart of SD attached and detached sales, and cost-per-sf:
Year
# of Sales
$-per-sf
2001
35,421
$213/sf
2002
39,922
$228/sf
2003
43,666
$267/sf
2004
43,390
$356/sf
2005
41,267
$372/sf
2006
31,331
$365/sf
2007
25,501
$346/sf
2008
29,764
$259/sf
2009
25,905
$219/sf thru 3Q
If we just see the same number of closings in 4Q09 as we had in 4Q08, this year’s total will be 34,392, a 15% increase Y-O-Y. But with the tax credit motivating additional November sales, this year’s count should end up even higher. Here is how monthly sales look on average, using the nine months of 2009:
Buyers have already been reading in the MSM that prices have been going up for 4-5 months straight, and when they hear that sales are spiking, it’ll provide more anxiety. If they don’t extend the tax credit, I think we’ll still see more sales, buyers have the fever. If they do extend, look out!
The lower prices go, the more sales there will be!
While this video has some interesting information about FHA, I was more entertained by the people involved, the backdrop, and the overall addiction to hype. Note her voice-over at 1:37:
Alan Gin had to comment on the latest SDAR report:
from sddt.com:
The median price of detached resale homes in San Diego County rose for the fifth straight month in August, while sales dipped slightly.
A report from the San Diego Association of Realtors (SDAR) showed the median price of a detached single-family home sold rose 0.8 percent from $372,000 to $375,000.
Attached homes, such as condominiums and townhomes, had their median price rise nearly 8 percent from $210,000 in July to $226,000 in June.
Mulitple bids on lower-priced properties is driving up the median price, said Alan Gin, University of San Diego economics professor.
The five-month trend may show that the market has hit bottom, or even shows proof that the housing market has turned the corner, he said.
But it does not mean the local economy as a whole is out of the woods.
Gin said the positive news in the housing market is a good sign, but questions about unemployment linger.
Should unemployment continue to rise and a new wave of foreclosures enters the market at an inopportune time, Gin said the housing market could take a turn for the worse.
However, he said it is not likely.
Last time the median prices of attached and detached homes were this high were September 2008.
The total number of attached and detached homes was down 11.3 percent from August to July with 2,622 sales.
However, the drop off is not something to “take much stock in,” Gin said.
“I wouldn’t consider (an 11.3 percent decline in sales) a big change given that June and July were pretty big months in terms of housing,” he said.
He said an activity drop in August is a normal, seasonal change.
Last month’s sales were a 6 percent increase over August 2008.
Year-to-date, 2009 is out-pacing 2008 by almost 4,500 units sold, a 28 percent increase.
One thing that has been driving sales this year is the first-time homebuyer tax credit offered by the federal government.
The tax credit is equal to 10 percent of the home’s purchase price or $8,000 whichever is less. It expires on Dec. 1.
Erik Weichelt, president of SDAR, said Realtor associations, particularly in California, are pushing Congress to extend and expand the tax credit.
Aside from extending the deadline to sometime in 2010, Realtors are hoping to increase the limit of the credit to $15,000.
However, not much headway has been made lately as Congress has been focusing on other issues like healthcare, Weichelt said.
Six-year Realtor Jane Loveday said she started noticing buyers heating up the market in March; she added activity has been increasing steadily since.
Even more buyers have contacted her within the past few months, specifically trying to obtain the tax credit.
“I do have a couple of buyers who are specifically wanting to close by November 30 but whether they can find a property and get an accepted offer I can’t guarantee. That (the tax credit) is a huge stimulus to them.”
One of the problems facing potential buyers is a lack of inventory at lower price points.
Weichelt said there is less than a month and a half supply of inventory priced below $250,000.
He said almost every property that comes onto the multiple listing service in that price range has multiple offers on it within days.
Gin said that an activity drop is a normal, seasonal change?
Here are the total sales history for July and August. It looks like August is usually a big month for closings, culminating a summer’s hunt for homes:
All Residential MLS Sales, San Diego County
Year
July
Aug
diff
1997
2,767
2,793
+1%
1998
3,595
3,095
-14%
1999
3,717
3,629
-2%
2000
3,018
3,445
+14%
2001
3,488
3,786
+9%
2002
3,555
3,651
+3%
2003
4,359
4,634
+6%
2004
4,165
3,880
-7%
2005
3,736
3,897
+4%
2006
2,639
2,844
+8%
2007
2,360
2,416
+2%
2008
3,007
2,788
-7%
2009
3,382
2,816
-17%
Normal drop-off? Sales haven’t slowed this much all decade between July and August. What does it mean?
Factors that could cause sales to drop more sharply than usual:
1. Fewer condos closing due to financing? Nope, condo sales last month were higher than August of the last 2 years.
2. Tougher financing? On the high-end yes, qualifying for jumbos is hard, but FHA loans have created a firestorm under $700K.
3. Higher rates? Nope, mortgage rates (5.68%) are lower this August than ever before.
I think sales are hampered by the lack of quality inventory, and many buyers are wondering if they should step up and pay more to win a bidding war. PROCEED WITH CAUTION. As REO listings are dripped out and anxious buyers jump on them, it’ll look like the market is getting hotter. But keep an eye on # of sales, and don’t listen to any of these cheerleaders who refuse to check facts before speaking!
