Thursday, October 23rd, 2008 at 2:09 PM
Waiting for Squish
OK, so you’re thinking of waiting longer. No problem.
People who are willing to buy now are struggling to find worthy choices because there are so many over-priced listings! When they do occasionally come up, they tend to sell quick.
It doesn’t matter to me when you buy, but I think people should keep looking. The competition between buyers over the sweetheart deals will make them fairly elusive, and if you have a shot at a terrific deal, you should consider buying it.
But it looks like the struggle to find it could be relative to your price range.
Here are the number of detached homes that have gone pending between October 1st and October 22nd. Those in previous years have all closed – only two have closed in 2008, so there will probably be some that fall out.
Number of Detached Pendings between Oct. 1-22 in CBD, ENC, & CV
| Year | 0-$600K | $600-$900K | $900,000+ | Total |
| 1999 | ||||
| 2000 | ||||
| 2001 | ||||
| 2002 | ||||
| 2003 | ||||
| 2004 | ||||
| 2005 | ||||
| 2006 | ||||
| 2007 | ||||
| 2008 |
As you can see, in 2003 the higher-end sales really took off, boomed for a few years, but now it’s settled down. The action has shifted to the lower price ranges.
Here are the actives vs. pendings for Carlsbad, Encinitas, and Carmel Valley:
| Listing Status | 0-$600K | $600-$900K | $900,000+ | Total |
| Actives | ||||
| Pendings | ||||
| A/P Ratio |
There hasn’t been much price squishdown yet among the higher-end active listings, and as a result, not many are selling.
Posted on Thursday, October 23rd, 2008 at 2:09 PM in Uncategorized | 28 Comments » | 
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Does this information say “be ready” or does it say “wait?” Sales are down ~60% in the high range and for sales to pick up, prices need to come down. And come down they will. This means in the lower ranges, you will get more house for the same price or a cheaper house. The “competition” between buyers over “sweetheart” deals is otherwise known as “knife catching.”
150 multiple choice questions | October 23rd, 2008 at 3:33 pmGenius,
This is the guy I was thinking about.
JtR
Jim the Realtor | October 23rd, 2008 at 5:27 pmThat’s me! The guy who keeps on being right, I think you mean.
150 multiple choice questions | October 23rd, 2008 at 6:35 pmWhat are the annual numbers like for these homes/years? It seems like such a small slice of time.
Without some perspective, how do we know these three-weeks-out-of-the-year are not blips?
Also, it struck me that there were a LOT more new developers (of luxury homes) in 2001-2006. So previously to 2001, 600 to 900k WAS high end!
What’s most interesting to me is that so little was sold in the under $600k for so many years and now, this year, there is a huge jump….
Finally, what’s a “normal” active/pending ratio for these areas, at this time of year?
shoppingaround | October 23rd, 2008 at 7:35 pmIMO contrary to the first poster’s reasoning…sales could pick up without prices going down if for some reason people’s incomes go up. Say e.g., this recession is actually a very small dip and we come out of it strong and jobs and payroll and income levels go up. Or say some San Diego company becomes a “Google” and produces 400-500 people who overnight have access to $200-300K in cash.
It isn’t necessary always a given that prices have go down for sales to pick up. Are the scenarios I describe likely? Maybe, maybe not…just putting out an alternate scenario..
To use that overused cliche one more time…”its the economy stupid”…
Byomkesh | October 23rd, 2008 at 7:43 pmI see a lot of people buying RE to rent at a slight loss or barely break-even when rented. Something like 14x rent in a good area for properties (mostly condos) less than 300K.
While this doesn’t seem bad by recent historical perspectives, it is still not a great investment absent appreciation in the next 3-5 years. They will be losing money monthly and/or not getting any return on their fairly substantial deposit.
Also, I think people are underestimating the expenses involved with keeping up a property and also the amount of unrented time. And there is still 10% downside on these properties IMHO, which will go right to the deposit.
It will take a year or two for these people to realize this and for the wannabes to step away from the game. Thus, it may take a little longer for the last chapter of this lesson to sink in.
On the high end side there is going to be a disconnect for some time. It will be a slow grinding trench warfare.
Also, can I add the treatment people receive when bidding on bank owned properties is absolutely appalling.
Daveg | October 23rd, 2008 at 7:57 pmAnd just to provide one specific example to show that the scenarios I described aren’t totally crazy, San Diego biotech company BioSite got acquired after a bidding frenzy by two companies for $92.50 a share. There stock was at about $50 a share before the deal was announced. Typical engineers, would have a 2000-3000 stocks acquired via option grants as well as through ESPP (not even talking about the early guys who would have many more). So a couple of hundred people who have decent salaries, suddenly made close to $100K cash (some made much more…but lets ignore that for now).
As long as San Diego keeps producing such companies…house prices in the coastal areas won’t take a nosedive…
On the contrary, if unemployment rate touches 12%-15%, all bets are off…
Byomkesh | October 23rd, 2008 at 8:04 pm“Genius”. Sorry, but you’re not only NOT right, you’re as WRONG as you are off-base. We sold in ’05, rented for three years (my wife hated it the whole time) & bought a house just last month in a neighborhood that’s pretty nice @ a price that was we consider to be pretty fair). We couldn’t care less what happens to home prices over the next seven years!
What you have no clue about is the benefits of home ownership. We were on top of this mess a year before we sold & not the least bit concerned if the housing run continued for another 6 months or three years. We were willing to put up with all the inconveniences people who’d rather own understand very well.
You, on the other hand, seem to think buying a house to live in is comparable to a Las Vegas bet. My guess is you’ve never owned a house and you’re as disgruntled about most things as you are about real estate.
For the possible benefit of others I’ll relay a few things I think you’d do well to consider: You can almost always buy some thing a little cheaper, we all have to live somewhere, buying a house to live in is a very large decision for most of us and, when considering a house for one’s family you’d do well to consider more than just waiting to buy at the lows.
Bottom line – we bought our last house at the highs and we were “under water” for SEVEN FULL YEARS. SO WHAT? We weren’t losers, We loved that house, the neighborhood and still cherish the friends we made.
Decisions about where & when to buy the home your family will live in for years is very serious stuff for most of us and the more variables we consider, the better the choice we’re likely to make. JTR is relaying valuable information & offering worthwhile assistance FOR FREE for serious people looking to make a very big decision.
doug s. | October 23rd, 2008 at 8:20 pmDoug,
Genius is OK, it’s “150 multiple choice questions” who likes to take pot shots at me.
Thanks for the support, and I hope the new house turns out great!
Jim the Realtor | October 23rd, 2008 at 9:04 pmI think those pending figures show exactly the movement of the bubble through these areas.
Though the vast tracts of McMansions definitely throw off the numbers, I believe most of these numbers are from the MLS and don’t show the new development sales. Is that right, Jim?
If it’s only MLS numbers, the reason we see most homes in 2001 selling for under $600K is because that WAS the high-end! There were very few houses selling for $1MM, and those were true million-dollar homes: 3,000 SF+ on an acre or so, with swimming pool, gated lot, expansive ocean view, CUSTOM built (no tract homes), etc.
So, the homes we’re seeing in the 107 sales are the very same homes (or comparable ones) that rose in price over the years, with 2003 being the strongest year for sales and price increase, IIRC.
Imagine those 107 homes, as their prices rise through the end of 2005, then slowly, one area at a time, they begin to drop in price…that is what those figures are showing us, IMHO.
It’s not that people were buying different homes in 2003, 2004, and 2005, but that they were willing to pay that much more for the same homes that were selling for <$600K in 2001.
Time will tell how far the trend will reverse.
CA renter | October 23rd, 2008 at 9:51 pm150,
I think prices will come down too, but what’s your obsession with pigeonholing and labeling anyone who buys a house they want today? According to you, either everyone should buy or nobody should buy.
The fact is, everybody has a different situation and basis for buying a house. If someone buys a house for 100% cash (as many do), how is that knife catching? It’s possible they have every intention of living in that house forever, paying only tax. In a lot of cases, they sold one house to buy this new house using equity, so it’s not like they’re any more screwed than they were the day before. Elderly get to carry over their basis in many cases.
You also have to factor in that housing markets greatly vary, like with friends I knew who sold relatively high in Seattle and bought relatively low in San Diego.
You’re suggesting that 100% of homeowners should sell their house today. That for one person to sell their house and move into another means they’ve earned an absurd label.
We need to stop assuming a uniform set of criteria onto every potential homebuyer.
BDiego | October 23rd, 2008 at 11:03 pm150 appears to be looking at a house purely as a financial investment. If that’s what you are buying, his comments ring very true.
Everyone knows new cars lose 10%+ of their value the second you drive it off the lot. People still buy new cars, because price isn’t always the main consideration.
Investment first, or home first. Makes a difference.
The demand for lower (correcting) price homes in nice areas is greater then supply right now. All signs today point to a greater supply in the future.
If you are competing for a ‘sweetheart’ deal today, the odds are in favor that either prices will be lower or you will have had a better selection in the next few years if you wait.
That’s the price you pay for being one of the first to get something that is in demand, the question is whether or not you care and/or are willing to pay the premium.
sdnerd | October 23rd, 2008 at 11:51 pmAfter watching the markets close on Japan today and other emergenging crises, if the ecomonic picture gets much worse, I won’t be asking if or when to buy a NC home. I will go into economic hibernation and hope not to get hurt by this impending disaster. This is getting really, really scary. The PTB seem to be losing control. Massive job loss seems inevitable.
Dr. Detroit | October 24th, 2008 at 2:32 amDr. Detroit made the call on the employment. San Diego was flat on jobs in 2007 and down 5000 in 2008. This economy is really going to go in the tank by next summers. Baltic Index has gone from 11,000 to 1300. The world economy is slowing down big time including China.
Now, besides a housing recession,s we are going to have the worst recession in the economy since 1930. Prices in north County along the coast will not be immune. If you lose your job or have to move it will not be fun in a few years to get a fair price for your house.
Will the housing situation turn into Japan 15 year drop in prices??
worm | October 24th, 2008 at 9:14 amLet me clarify a few things.
Jim, I really don’t intend my comments to be “potshots”, but “snapshot” pictures of the markets or their economics are not very useful and often used by realtors to imply things like “great deals” and “it’s a good time to buy,” etc. Certainly not saying that is your intent, but it is there. Sorry if it puts you on edge when I point it out.
Doug S., I’m not making any statements as to the advantages of home ownership and am fully aware of them. But frankly, keeping your wife happy is very subjective and the discussions on these blogs and my comments are not about the intangibles because those are different for everyone, they’re about the real economics. And honestly, you’re arguments sound like all the realtors of 2006 who endlessly pushed people to commit financial suicide “for their families!”
If someone is currently buying in the lower bracket, where prices have fallen ~ 60%, more power to them. At the higher end, the idea that it will “be different” has been proven wrong 100% OF THE TIME to imply that it will be different is irresponsible. Similarly, that some low % used all cash means nothing when there are so few sales and so many listed… sounds like the low end not so long ago, huh? Equally not very important is a few hundred workers from some company. That’s not enough to effect the market and many of them already own homes. Also, people who buy and are underwater are not losers, but they’re (much?)worse off than if they had bought at a lower price. Certainly some people have enough money and don’t really care too much, but most people who buy don’t account for the possibility and I’m pretty sure not many realtors mention it. THAT’S my biggest problem, which is also the reason we’re in this financial mess.
And keep in mind, if you bought a house in 2006 for 50% more than you could purchase it now, it would be 18 years before you could sell it for what you paid at a normal average appreciation (4%). You wouldn’t make one cent after 18 years. (and I certainly understand you have to live somewhere.)
Also, YOU’RE CARRYING THE EXTRA 50% FOR THE WHOLE TIME YOU LIVE IN THAT HOUSE. Say it’s 500k, that ‘s 36,250 A YEAR you’re paying (6% not adjusted for tax write-offs or interest earned on parking the money) or $652,500 over the 18 years. Also, if you bought at 500k, at the same 4% a year you could sell 18 years later for 1 million (1,012,908, actually.) So the real difference in buying at 1mil v. 500k is $1,165,408 (= happy wife). THAT’S HOW YOU BUILD WEALTH IN REAL ESTATE… WHEN YOU BUY!
150 multiple choice questions | October 24th, 2008 at 9:32 amConfused
You did a whole post on how waiting for 2001 pricing would take a while and that things were holding up in North County Coastal. If I read this it looks like the North County Coastal areas is about 9 months from complete meltdown.
If the sales have evaporated it is just a matter of time to all the people with 900K+ listings find themselves in a world of hurt. What do you think?
LV Renter | October 24th, 2008 at 9:34 amQuick corrections.
1. your
150 multiple choice questions | October 24th, 2008 at 9:39 am2. I forgot to account for all the leverage in real estate. Since you only put down 100k to buy at 500,000, when you sell for 1,012,908 you really get $912,908 + $652,500 = 1,565,408 (and a happy wife)
Another correction:
“snapshot” is the wrong term, and that you don’t cherry-pick info is a large part what sets you apart from the overwhelming majority of realtors. It’s the implications in the language like “sweetheart deals” that raises flags.
Also, I’d be interested in info on how many houses for sale at unrealistic prices (which you also point out and I don’t give you enough credit for) were bought in the last three years? I know in my neighborhood, where prices in ’06 to early ’08 were $1000/ft+ and sold in days, sales have imploded and there’s more and more those houses for sale again. Many of those purchases fall into the <10% down HUGE first big 2nd arena. The asking prices on most are around 6% more than they paid and they aren’t going to get it. They’ve held out as long as they can and when these crack, the whole neighborhood will. Having worked two years in North County during the run-up, I’ve seen enough to know it’s the same there.
150 multiple choice questions | October 24th, 2008 at 9:49 amLMAO How many times I’ve seen husbands henpecked into buying, then post on housing forums claiming they don’t care if prices go down, blah blah blah. Sorry, but if you truly didn’t care, you wouldn’t be reading housing forums. It’s called rationalization. Noone posts on forums and blogs they truly don’t care about.
SteveG | October 24th, 2008 at 10:25 amI agree that the top end of the housing market is going fall big in the coming months and years. The Shaver Lake, CA area up in the Sierra foothills just east of Fresno is a second home vacation destination.
Sales have fallen off a cliff over the last 12 months. They have only sold 6 cabins/homes for more than $700K in the last year and right now the area has 40 cabins/homes on the open market for sale that are $700K and above. This is one second home destination that was on fire for at least decade, but everything is changing now.
The demand for vacant lots is crumbling like no tomorrow and sales are off almost 80% in the last year in Shaver.
When you factor in interest rates on jumbo mortgages that are around 9.6% at Wells Fargo for example then who in the world is going to purchase all of these overpriced properties?
How many other people are noticing this weak demand in the second home/vacation markets?
Nathan in Fresno | October 24th, 2008 at 11:26 am150 multiple choice questions,
Where do you live? I don’t mean address – just city, or area within a city, would be helpful. And how do you know what kinds of loans your neighbors have (“Many of those purchases fall into the <10% down HUGE first big 2nd arena.”)? I’m trying to understand where you are coming from (geographically and intellectually).
BAM | October 24th, 2008 at 12:00 pmI live in one of the nicer west los angeles beach communities… So nice “it’ll never go down!”
The loan info is all public. You can try property shark.com, or if you have a realtor/loan broker friend they can get it, and I believe you can also get the info at city hall. (Sometimes the property is held in trust and then this information is shielded.)
150 multiple choice questions | October 24th, 2008 at 3:40 pmA lot of times you can just ask. My mom knew the buy prices of most houses in her neighborhood (all the ones that went on sale), just by asking. When it eventually showed up on redfin, perfect match. It’s not like once you agree to a price you have anything to be ashamed of. In most cases it’s a relief for both buyer and seller.
BDiego | October 24th, 2008 at 5:09 pmYes, redfin is good but takes a while and miss many. Sometimes local realtors post recent sales as well…
150 multiple choice questions | October 24th, 2008 at 7:13 pm150, Why, in responding do you use “2006″ as an example, instead of today – right now? JTR’s point was “It doesn’t matter to me when you buy, but I think people should keep looking.” I agree. You obviously disagree and to support your position you compare r.e. opportunities today to 2006?
doug s. | October 25th, 2008 at 7:13 amNo I totally agree that people should keep looking, but the idea that 10% off after a 100% percent run-up is a “sweetheart deal” or that the high end will somehow be different is where I disagree. The low end has reached historically sustainable (or close enough) prices which match incomes and comparable rents and people who can afford it and want to live there definately should.
“The competition between buyers over the sweetheart deals will make them fairly elusive, and if you have a shot at a terrific deal, you should consider buying it.”
Quotes like the above are where I and I think many others get frustrated. What’s a “terrific deal”? And the collection of vague words that imply strong markets and tight supply.
Similarly, I don’t think people should try to time the bottom perfectly, but you wont need to because it’s not going to spring back.
150 multiple choice questions | October 25th, 2008 at 8:02 amSteve G – Harsh. Yet, I’m not sure it can be said any better.
150, your #15 is right on. My wife and I are waiting on the sidelines, renting in Carmel Valley right now. My biggest fear is buying a house and 3 years later knowing I could have either paid significantly less for it or could have bought a much nicer house if I waited.
As a first-time buyer, if I overpay by $300k, that’s $300k I’ll never get back because I never had a chance to ride this phony market up. I should absolutely look at this as an investment.
The Blur | October 25th, 2008 at 2:50 pmGenius, Apologies.
doug s. | October 25th, 2008 at 4:53 pm150mcq: You’re STILL NOT a coherent argument or even making ANY sense.
You write: “the idea that 10% off after a 100% percent run-up is a “sweetheart deal” or that the high end will somehow be different is where I (150)disagree.”
We closed a month ago on a house we love in a pretty nice area (I believe JTR will support this claim) @ about 53% of 8/07 asking price (& real comp. price) & about 60% of 1/08 asking price. I don’t recall JTR EVER suggesting 10% off a 100% run-up is a “sweetheart deal”. I do recall him suggesting people buy for many reasons & that good & great deals ARE out there to be had. Of course they’re not easy to land, if they were they wouldn’t be GREAT deals would they? But, they are out there. If you’d done any homework on the r.e. deals in the area you’d understand this.