Thursday, December 18th, 2008 at 2:42 PM
Actives/Pendings on Dec 18th
2009 is two weeks away!
What is the momentum going in?
We’ve used the ratio of active listings to pendings as an indicator of the relative ‘health’ of the market. During the frenzy in 2003-2004 there were areas that had a 1:1 ratio of active and pending listings – these were as many in escrow as there were for sale.
We’ve been following the same stat over the last three years, and there have been areas and segments of the market (higher-end) hit double digits. In December 2007 we saw the million-dollar market get as high as 15:1.
Today the total number of active listings is about 20% lower than last year – there are 15,945 detached and attached homes for sale in SD County, compared to just over 20,000 in December 2007.
Here are the active/pending breakdowns for different price segments – and included in the pending listings’ counts are the 1,632 active listings that are also marked as short sales that have an accepted offer, awaiting lender approval:
ACTIVE / PENDING LISTINGS
Under $600,000
10,114 / 6,643 = 1.52
$600,000 TO $1,000,000
2,062 / 485 = 4.25
$1,000,000+
2,137 / 212 = 10.08
With conforming rates at 5.0% or under, it looks like the lower-end market will be cooking after the holidays, while a couple of thousand sellers of $1 million-plus properties will be wondering what the Obama Administration is going to do for them.
Posted on Thursday, December 18th, 2008 at 2:42 PM in Afternoon Data | 13 Comments » | 
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Ohhhh, that’s clever. Where ever did you get the idea for the graphic? Thanks.
Rob Dawg | December 18th, 2008 at 3:57 pmI spent 20 minutes looking for that graphic – gotta love google images.
Meanwhile…..
WASHINGTON (Dow Jones)–The National Association of Home Builders wants to see mortgage rates fall even lower than the 4.5% the U.S. Treasury had been mulling a plan to offer.
The association is pushing a plan to bring mortgage rates to 2.9% for the first half of 2009 and 3.5% for the second half of the year, its Chief Executive Officer Jerry Howard said in an interview Wednesday.
“Some of the homebuilding companies have tried 4.5% and found it not to be as stimulating as it could be,” Howard said. Such a rate reduction could be brought about in a similar fashion to the plan Treasury has considered to lower rates to 4.5%, he said.
Alternatively, “the federal government could provide banks with whatever the difference is between the yield on a 2.9% mortgage and what the regular marketplace demands,” said David Crowe, the association’s chief economist, said of the home builders’ proposal
Jim the Realtor | December 18th, 2008 at 4:18 pm(Dow Jones Newswires 07:37 AM ET 12/18/2008)
Are these stat’s for No. County only? And Jim, when did you start considering 600k an ending point to the lower end market? Just curious.
Joe Renter | December 18th, 2008 at 4:41 pmOne think I remember from my economic history class and the depression was the period when rates were finally pushed very low but nothing happened. No one wanted to barrow. I think that is where we are now with the exception for the few investments that are seen as a steal (translation, nothing price drops cannot fix and why low end homes near stable employment bases — e.g. military bases — are selling).
I then consider the following. In the irresponsible lending days I know I could have qualified for a loan 2x to 4x larger than what I could barrow under normal underwriting.
So isn’t the problem that many people did this and by enough doing this they drove prices up to a level that anyone who wanted in had to barrow 2 to 3x more than they could really afford? I think yes.
And if I am right, then consider the following. If I could normally barrow $1.0 million, then during the crazy times I took a $2.0 million loan. I could do this because of neg am and teaser rates and the hope of selling for more. But the bottom line is the 2 x loan has a carry cost well above the $1.0 million loan I could afford. The $1.0 million loan had a carry cost of $65k assume 5% 30 year fixed) but for those who took out the $2.0 million loan, once it resets to normal, even if if I cut that 5% down to 2.5%, I still have a 95k a year carry cost vs. the 65k I could typically afford. Only by dropping it to 0% can I get back to the 65k carry cost that under normal guidelines I could afford.
This is the key item I think most “experts” and politicians are missing. I do believe that there are many a folk who clearly barrowed at least 2x what they could afford and no interest rate cut will solve this problem.
So again I say “there is nothing price can’t fix” and to all those homes above 417k plus 10% down, drop your price by at least 20% if you want the market to get back to normal.
This is also why I think Jim Cramer is dead wrong that housing will recover by mid 09. The high end is still too sticky and the fix won’t be in until the high end also drops its price by 20% to 40%.
Bob | December 18th, 2008 at 4:41 pmWASHINGTON (Dow Jones)–The National Association of Home Builders wants to see mortgage rates fall even lower than the 4.5% the U.S. Treasury had been mulling a plan to offer.
The association is pushing a plan to bring mortgage rates to 2.9% for the first half of 2009 and 3.5% for the second half of the year, its Chief Executive Officer Jerry Howard said in an interview Wednesday.
It would be a really dumb thing to do because rates will eventually have to go back up and we would be back where we were in Sept 07. I wouldn’t put it pass the new administration though. Affordability involves more than just the monthly payment. When signing on to a mortgage, you are signing on to the total debt involved! It is also important to realize that for ‘04 through ‘07, median income was biased by flipping Realtors and mortgage brokers as well as an unusually active construction segment. When factoring for affordability, the long term average interest rates should be used (since buying a house is a long term commitment).
ucodegen | December 18th, 2008 at 4:48 pmJoe Renter,
These numbers are for detached and attached home listings in San Diego County. I was thinking of the under-$600,000 market because of the $546,250 conforming limit.
I was also trying to make it look like a quartile-type thing for those looking for that. I tried earlier to calculate the monthly $/sf by quartile and it came out remarkably flat for the last few years. I must have been doing it wrong, right?
Jim the Realtor | December 18th, 2008 at 5:45 pmI heard about that Home Builders’ plan a few weeks ago, it was just a rumor at that time. At that point it was 3.5% for the first 6 months of 2009 and 4.5% for the second half. Also, they wanted the government (tax payers) to GIVE 20-30K to buyers to use for down payment/closing costs. This is in addition to the $7500 loan(paid back over 15 yrs interest free) the government currently gives first time buyers.
I have been joking with friends and family for a few years now that I would “buy” when they were paying me every month to stay in the house. Looks like we are getting closer to that point every day!!!
SMC | December 18th, 2008 at 6:38 pm“I was thinking of the under-$600,000 market because of the $546,250 conforming limit.”
With a 20% down, that comes to a price of $683,000. Should probably be “under-$700,000 market.”
GeneK | December 18th, 2008 at 9:07 pmForgive me for being stupid, but aren’t interest rates supposed to factor in risk (of default)? I mean, that’s the whole reason why sub-prime rates are higher than prime, right?
Doesn’t it seem like we’re severly underpricing risk (again)? Especially in a declining market?
I see this big, big push for lower and lower interest rates, and I think, what sane business would want to take a 30-year mortgage for 4.5% in a declining market with increasing unemployment?
I mean, I know they’re just pushing everything onto the government anyway, but we’re not talking about $17.5B dollars here.. the mortgage market is HUGE – like GDP huge.
Big E | December 19th, 2008 at 8:46 am“Doesn’t it seem like we’re severly underpricing risk (again)? Especially in a declining market?”
If the reduced rates are only available to people who rate as “prime,” and are subject to traditional qualifications and restrictions, probably not very much. If they’re offered to people who don’t meet the rating, then I’d say here we go again.
As for who would take a 30-year 4.5% mortgage in these times, that’s easy: someone who currently has a 30-year 5.5% mortgage.
GeneK | December 19th, 2008 at 9:44 amBuying a home at 4.5% doesn’t make any sense if you ever want a profit out of it within the next 15 years. As interest rates go up, the paper value of your house has to go down (unless everybodys incomes increase). The people who end up with these low low interest rates on their mortgages will be sorry.
garbler | December 19th, 2008 at 12:27 pmThis will end up just being “economic stimulus” for people in the refi business.
GeneK | December 19th, 2008 at 12:48 pmAny chance Robert Toll and his home builder CEO buddies will donate some of the $1b+ they made selling company stock in 2005 and 2006 to kick start this program ?
http://www.usatoday.com/money/economy/housing/2006-10-04-builder-sell-usat_x.htm
That article is dated as they sold plenty more in 2006. I think the Toll brothers themselves cashed in for over a billion total.
FuturesWatcher | December 22nd, 2008 at 9:56 am