Thursday, June 19th, 2008 at 2:29 PM
Higher-End Hurtin’
A certain blogger keeps saying the local market will be toast in another 30 days, if it’s not already. To back it up, here are the stats of monthly closed sales, which were decisions made 30-60 days prior:
SD County Detached Closed Sales
Year  
2007  
2008  
% chg
Mar
1618
1102
-32%
Apr
1590
1541
-3%
May
1593
1640
+3%
Jun
1711
Jul
1467
Aug
1477
Sep
930
Though we had a 3% increase last month, that can be attributed to a late Spring Kick – the market started slower than normal this year (see March). Between mortgage rates creeping up and the MLS debacle, this year is likely to show fewer sales this summer. Where will the most problems be? Even Lawrence Yun has said that it’s been the higher-end market that’s had the most trouble, due to the lack of jumbo financing available.
SD County Detached Closed Sales, $800,000 and higher
Month  
2007  
2008  
% chg
Mar
393
164
-58%
Apr
359
226
-37%
May
412
241
-42%
Jun
462
Jul
386
Aug
369
Sep
217
It is conceivable that we’ll see 100-200 closings per month of houses over $800,000 for the rest of the year. Currently there are 2,904 active listings in SD County that are $800,000 and up. If you are in this category, you need to sell THIS WEEK! Knock 10% off your price today, and if that doesn’t work, do it again!
We can get a glimpse of what’s ahead by looking at the recent pendings:
SD County Detached Pendings, as of 6/19/08
Week    
# of PEND  
# over $800K
5/1-7
8-14
15-21
22-28
29-6/4
5-11
12-18
The pendings from last month have already passed their 17-day inspection period and presumably signed off their contingencies, so most of those should close over the next 30+ days. There have been 723 closings this month so far, so we might see as many as 1,300-1,400 total closings for June – but still lower than last year. There have been 105 closings over $800,000, so if that number gets up to 153, it’ll equal one-third of the sales of June, 2007.
Posted on Thursday, June 19th, 2008 at 2:29 PM in Thinking of Selling? | 30 Comments » | 
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Now those are interesting numbers. Thanks Jim.
FirstTimeRenter | June 19th, 2008 at 3:50 pmI’d expect most home buyers at this time, at this price range, are knife catchers. Sellers would indeed be wise to listen to you. But, the others, the stubborn ones who believe their house IS special, shouldn’t lose all hope. There’s a growing pool of Buyers ready to bail them out WHEN prices eventually revert to longer-term historical growth rates!
doug s. | June 19th, 2008 at 4:21 pmSo, wanna-bee (need-to-be) sellers, who’ll be first to cave in to the mounting pressure, you or us? I’m renting in a comp to what we’d like to purchase, BUT am paying less than 2/3 what my carrying costs would be at current pricing, how about you?
If they’re buying their houses as investments rather than homes, I’d say there’s an undeniable "knife-catching" element involved. Or, depending on the house, it could be like this big, weird-looking antique art glass thing my wife just bought; it’ll probably never be resellable at what she paid for it, but they’re hard to find, we could afford it and she loves it.
GeneK | June 19th, 2008 at 5:01 pmIt is truly amazing to now watch the high end follow the EXACT pattern the low end followed. The question is will it occur quicker than the low end. If it occurs at the same speed it means there will not be significant price declines and sales in Carmel Valley, Encinitas, etc until 2010. When do you think we will see the "High End" pick up?
LV Renter | June 19th, 2008 at 5:56 pmI wish I can remove all the non-serious sellers from the market. There are sellers here that RAISE the price after being unsold for like 2-3 months. Whatever.
housebuyer | June 19th, 2008 at 6:19 pmI can’t wait to piss off these high-end sellers by offering them 35% less than their asking price. Muahahahaha…
robj | June 19th, 2008 at 6:26 pmSo, assuming a lot of the higher-end inventory (present and future) is being driven by Alt-A resets; is it safe to say prices will erode in a similar fashion as sub-prime properties? I’m trying to understand if PMI will prop up prices higher end when owner distress over Alt-A loan resets. Thanks! mab
mab | June 19th, 2008 at 7:55 pmSome people just do not understand that in order to obtain a loan for 7-8-900,00 dollars, one actually needs a job tha actually qualifies. The days of these home prices are historic for at least 10-15 years (unless we hyperinflate).Housing has a long way to come….DOWN>
jay davis | June 19th, 2008 at 8:12 pmJim,
I think I am going to start including a link to your blog with every lowball offer I submit. Maybe then I would get a response.
mkl | June 19th, 2008 at 8:14 pmNAR has a new brochure out for homebuyers, and they’re only $39.95 per 100! I want to make sure I get enough for everyone, can you take a look and let me know how many you need?
Click here for link to snazzy NAR brochure
Jim the Realtor | June 19th, 2008 at 9:17 pmJim, you can put me down for one, seeing as how Confederate dollars and Edsel brochures have been too expensive to collect for years.
GeneK | June 19th, 2008 at 9:38 pmGot enough junk mailings trying to take my money with false and/or deceptive advertising, thanks. Although, you might want to keep a couple around; they might come in very handy in a couple of years if someone reveals an internal email from NAR with anything close to an honest evaluation of the actual market, and the justice department needs an Exhibit A…
Nick | June 19th, 2008 at 9:58 pmI’m sure no one will believe this excerpt from an article in San Diego Metropolitan Magazine by Alan Nevin but some think the high end is actually in good shape:
"In San Diego County, for instance, two-thirds of all of the homes foreclosed and resold in the first quarter of 2008 were in 20 of the 90 communities in the county. Thus, 700 of the 1,100 foreclosed single-family home sales were in those 20 communities, all inland. In 20 of the 90 communities, there were no foreclosure sales. As you might expect, most of those “0” foreclosure sales were in communities near the coast. Of those low foreclosure communities, most were in the highly ranked school districts.
The 10 communities with the highest rates of foreclosure sales had single-family homes averaging $394,000. The 10 with the lowest foreclosure sales had sale prices averaging $1.6 million."
These high-end purchases typically would require a jumbo loan but these are also not first time home buyers. Most buyers are bringing equity into the purchase.
Time will tell. Here’s the link for the full article: http://www.sandiegometro.com/2008/jun/property.php
Mozart | June 19th, 2008 at 10:20 pmI really like that article in Dream Homes about La Jolla. The appreciation decade by decade was brought into the future- and a prediction of $60 million dollar homes all over LJ was made. I’m ready to buy at $60M– are you?
inlander | June 19th, 2008 at 10:29 pm"These high-end purchases typically would require a jumbo loan but these are also not first time home buyers. Most buyers are bringing equity into the purchase."
Not everybody who bought a house in the past few years was a first-time buyer, foolhardy enough to finance a home with adjustable subprime mortgages or use it as an atm cash machine, so not everyone whose home is losing resale value is feeling the hot breath of foreclosure on the backs of their necks. Some are just watching the paper wealth their homes accumulated over the past few years – which they always recognized was unsustainable – drop back into the smoke and mirrors from which it originally came.
Sooner or later we’re going to hear from someone who bought a rundown fixer in a terrible neighborhood in the early 90′s, fixed it up, watched it run away in value for 10-15 years, then rolled the equity into a better place in a better location in 2005 and is now making payments on a $200k fixed rate mortgage for a $1M+ home that is on its way to becoming a $700k home. Right now I think that person is still too busy rolling on the floor laughing to post.
GeneK | June 19th, 2008 at 10:49 pmMy guess is, I’m one of the guys NAR is trying to convince, but frankly I’m at a loss why they don’t have more respect for me. After all, we sold at the highs, back when they advised to buy! Further their cover is sending mixed messages. Do they want to convince me "it’s time to buy", or do they want to "help (me) make an informed decision in this changing market"?
doug s. | June 19th, 2008 at 11:15 pmTypical NAR, trying to use a faultily reasoned approach to forward what must be in these "changing times" a VERY weak sales pitch. I suggest you forget the brochure; it appears to me your contacts are way beyond the sophistry of NAR analysts. Instead, I suggest you hold another of your well-received lotteries – maybe for lunch at a local dive.
That NAR brochure is a joke.
The people who were holding out during the run-up are NOT the kind of people who follow herds or make big decisions based on someone else’s advice — especially if the advisor has been painfully wrong for so many years, and has an obvious self-interest.
Did I mention their apparent lack of liability? Looks to me like they are making definite predictions about future prices (always going up). Not sure how well that will go over if prices trend down for many, many years to come.
CA renter | June 19th, 2008 at 11:23 pmJust read the SD metro article. Once again, apparently there are no economists at any of our fine local universities to call and ask intelligent questions, such as:
"If the bottom of the market continues to deteriorate, how will the top of the market stay stable or even (LOL) appreciate in price?"
Answer, it can’t.
Lower pricing at the low end means less equity, and therefore less wealth, to move up. Without equity, there are just not enough hh incomes of $500K or more to pay for $1million mortgages in La Costa Greens or any other tract housing. It’s just a matter of time before we see the full “trickle up” effect.
As long as the super rich keep looking for nice, warm places to live, I’m sure La Jolla and RSF will continue to be desirable to outsiders with REAL money. But you can bet your last rent check that multi-millionaires from Connecticut wont be moving to Bressi Ranch or San Elijo Hills in the near future.
I’m reminded of the old Looney Tunes cartoons, specifically those featuring Road Runner. Whenever the coyote would chase RR too far, and run off a cliff, he would hang in mid-air as moment; but when he finally looked down, gravity would catch up to him and he’d plummet like a rock.
Gravity is going to catch up with any over extended homeowner, in any neighborhood, very soon.
GLG | June 19th, 2008 at 11:24 pmDoug – you and me go way back, so I know that you know.
But for those new to the blog here, whenever I post something from NAR or some bonehead article from Fortune, it’s all tongue-in-cheek, and for entertainment purposes only.
Jim the Realtor | June 19th, 2008 at 11:28 pmGravity, to put it lightly, is a bitch.
Barnaby33 | June 19th, 2008 at 11:50 pmI assumed the NAR brochure was going to be something we’d all be reading for laughs…
GeneK | June 19th, 2008 at 11:52 pmI can use the NAR as toilet paper…maybe not, it will be painful
dejams | June 20th, 2008 at 12:09 amGreat info. Correct me if I’m wrong, but would one factor in the drop in $800K+ sales be that many houses that used to be $800K+ are no longer?
In an extreme scenario "high end" houses could sell just as well, but at substantial discounts. Not saying that’s happening, but I think the numbers are the result of a combination of factors (both sales and price change).
Put another way, sub-$800K house sales are up more than 10% in May using the same logic..simply because the same house that used to be one category now gets counted another. This is why price per square foot is a better indicator of home prices, despite its own flaws.
BDiego | June 20th, 2008 at 12:09 am"Would one factor in the drop in $800K+ sales be that many houses that used to be $800K+ are no longer?"
I’m sure that’s true, but there are all those formerly $1M homes dropping down to take their places.
GeneK | June 20th, 2008 at 12:13 amThough we had a 3% increase last month, that can be attributed to a late Spring Kick – the market started slower than normal this year (see March).
There were 5 Fridays in May 2008 compared to 2007. 2007 also had Memorial Day the 28th leaving only 3 days at the end of the month. Sometimes the calender explains variations.
Rob Dawg | June 20th, 2008 at 2:13 am"I’m sure that’s true, but there are all those formerly $1M homes dropping down to take their places."
I’ve often wondered about this effect with the case-shiller breakdown index. In a declining market the high-end pool is shrinking and the low-end pool is growing. It seems like houses exiting the high-end and entering the low-end will distort the index. What I would really like to see is all of the houses frozen into the group (low, middle, high) they belonged to in, say, 2005. and then track their value over time…
jay_cee | June 20th, 2008 at 3:23 amOK, so sales on the high end have fallen through the floor, along with median prices… This is 18 months ago in reverse, where the median appeared to be increasing because the higher end market was healthier than the low end stuff. Now prices look like they are worse than they are because the lower end market is doing relatively better. We might expect to see this cycle several times… and NAR will be calling a recovery every time median prices improve temporarily. A roller coaster ride has ups and downs.
Rational expectations | June 20th, 2008 at 5:34 amand then you have The Lakes in 92127 trying to sell over 350 high end homes each at $500 HOA and 1.6% mello roos in the middle of this high end bust.
ain’t looking so good for Lennar…
ocrenter | June 20th, 2008 at 5:41 amI’ll say that 10% seems like what the high end should probably be. I realize some people are saying, hey wait its only a little over 3/4 of a million dollars. That is just California goggles. (I just coined that and kind of like it.)
If Larry Yun is speaking "at" the jumbo loan max and it’s previous limit and subsequent drag on sales in this range as the cause of the problem nationally he is not speaking to most of the country. I’ll bet you 90% of this country sells at 100/sqft and maybe even a higher percentile than 90%.
It is fantasy to think that 800k and up houses should be more than 10% of the market in todays dollars.
Pseudo | June 20th, 2008 at 6:08 amBressi and San Elijo: cracker box ghost town housing, North County ghettos in 10 years
. | June 21st, 2008 at 8:40 am