Thursday, March 26th, 2009 at 10:21 AM
Righter or Wronger
Pardon my fascination for the dynamics of the higher-end market, but here’s one more chart to measure the dysfunction.
People have commented that the numbers are skewed because prices have dropped, but I’m purely looking at the number of sales, because that is the best sign that sellers are getting their price right. The fewer the sales, the wronger the list prices are.
The ‘New Listings’ are every house listed from La Jolla to Carlsbad between March 1-25, and the ‘Closed’ are those that had their final recording during the same time. They are two separate categories, but let’s compare them to previous years:
Detached Listings Above $600,000, March 1-25
| Year | New Listings | Closed | NL/C |
| 2000 | |||
| 2001 | |||
| 2002 | |||
| 2003 | |||
| 2004 | |||
| 2005 | |||
| 2006 | |||
| 2007 | |||
| 2008 | |||
| 2009 |
For every house that closed this month over $600,000 between La Jolla and Carlsbad, there have been AT LEAST FIVE come on the market.
While the MLS may have deleted a few from the older years, and there are going to be some late-reporters, the out-of-balance is incredible. Back in the day $600,000 was a lot of money, yet every year in this decade had more sales than 2009 – and today rates are helf of what they used to be.
Is the market heating up?
Here are the pendings – previous years have all closed, while this year’s paltry number will have some fall out:
Detached That Went Pending between March 1-25
| Year | New Pendings |
| 2000 | |
| 2001 | |
| 2002 | |
| 2003 | |
| 2004 | |
| 2005 | |
| 2006 | |
| 2007 | |
| 2008 | |
| 2009 |
If you are thinking of buying a home between La Jolla and Carlsbad over $600,000, you need to proceed very cautiously, and grind for the best values – and get good help! If you are selling, do what you have to do to get out – lower your price early and often. You’ll know when you’re getting the price righter, offers start coming in!
Posted on Thursday, March 26th, 2009 at 10:21 AM in Thinking of Buying?, Thinking of Selling? | 26 Comments » | 
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That is why the housing market is no where near bottom, unlike the stock market, real estate is based on comps which takes months to establish new values.
m | March 26th, 2009 at 10:30 amJust heard from someone in the real estate dept at B of A that they are finally selling their houses in bulk discounting by 40% of MARKET VALUE if you but 10 at a time, what do you think that will do to the housing market!!!!!!
For every house that closed this month over $600,000 between La Jolla and Carlsbad, there have been AT LEAST FIVE come on the market.
Exactly. These are the people waiting for the market to “recover.” These are the hidden inventory. These are the knife throwers hoping for a knife catcher.
I said 3 years ago about how this would happen. Over the last 3 yers any number of houseowners have graduated their kids, hit the buyout at their employer, etc.
Welcome to slinky tail wave two.
Rob Dawg | March 26th, 2009 at 10:48 amIt’s always a great time to buy.Lawrence yun and david lereah told me so.
arizonadude | March 26th, 2009 at 11:48 amThere is a ton of product coming to the market this selling season. Though we also now have jumbo loans made available only very recently. My guess is people are pricing in a 10% drop in price. The would be seller who doesn’t get what they want will just pull their house from the market and sit back and wait for better times ahead.
If this stock market rally sticks we’ll see some more confidence in the upper tier market as well.
Mozart | March 26th, 2009 at 12:22 pmMozart,
Again, why would sellers who want to stay in a house they don’t want just to make their peak-buying neighgbors feel better about themselves?
Like Rob says, there are many people whose kids have moved away, people who want to downsize or relocate to other parts of the country or world — for retirement, jobs, etc. If they bought before the bubble, their houses (especially in the high end) are still worth more than most of them ever though possible. If they didn’t HELOC themselves to death, many of these houses are paid off or close to it. There is absolutely NO guarantee that prices will rise to bubble levels — remember, it was a BUBBLE. These peolpe can sell at market price and get out **today** with more money than they ever thought possible, pre-bubble. Then, you have the estate situations where these paid-off owners pass away and their heirs need to sell in order to settle the estate.
So…why should these people put their lives on hold? Do you honestly think they care about the peak buying neighbors’ sense of entitlement?
CA renter | March 26th, 2009 at 1:30 pmDang. Please excuse the spelling and grammar mistakes.
CA renter | March 26th, 2009 at 1:31 pmI can count the number of people I personally know on all my appendages. All but one bought homes they couldn’t afford. I would say the ages are between 26 – 35. I would think these are the majority of home buyers. Bubble went bust because the market consumed, chewed and spit them out. Really, who or what groups is left to buy? Certainly not enough to make a difference. I’m still waiting for the false bottom (increase in median price) when the jumbo/super jumbo/alt-A/neg am loans start defaulting except the median price keeps dropping. Hmmmm, may have to wait a bit longer.
3clicks from da Beach | March 26th, 2009 at 3:54 pmJim,
Spotty | March 26th, 2009 at 4:38 pmThanks for your ongoing coverage of the high end. As someone who is planning on buying in La Jolla (someday when the sellers get realistic) it’s good to see this brought out.
Given what’s happening to people’s retirement funds — be it pensions, 401ks, IRAs, whatever — they’re looking to cash and salvage whatever’s left before it evaporates altogether. These people won’t be buying back in at this level ever again, too.
p.s.: Genius, spent a few years in Northglenn as a kid and the rest of my youth about 25 miles due north. Economy sucked when I graduated, so I left.
tj and the bear | March 26th, 2009 at 4:38 pm3-clicks… of all the people I know, all bought very conservatively and can afford their homes with no problem. Even one that’s underwater is hanging on.
Jim, you keep referring to the upper end and then throw numbers like $600K or sometimes $1 mil out there. Is that really the high end? I would be thinking at least $1.75 to be high, the upper middle 1.0-1.75m, middle is $600-$1 mil.
Aztec | March 26th, 2009 at 4:40 pmCA renter- I didn’t say anything about supporting peak bubble prices. My guess is the upper tier has maybe a 10% drop ahead this year. You might be right about downsizing senior homeowners but what I see first hand in my neighborhood is that most of these older homeowners bought so long ago, and have so much equity, that they don’t need to sell. Usually they or their spouse had to be a fairly savvy in business to end up here as well. I meet them in my neighborhood all of the time. I believe it’s far more typical for them to stay in the big house even when the spouse dies. Plus, the older ranch style homes on the coast, west of the 5, are usually single level. I don’t see a wave of seniors closing down and selling.
Mozart | March 26th, 2009 at 4:50 pmAztec – I say ‘higher-end’ out of respect for all, and because up until now the above-$600,000 probably put most into ‘above-conforming’ loans.
I’ll see if I can feature the ‘high-end’ later.
Jim the Realtor | March 26th, 2009 at 5:00 pmNEW YORK (Dow Jones)–Freddie Mac (FRE) on Thursday sold $3 billion of
Jim the Realtor | March 26th, 2009 at 5:02 pm10-year notes and $5 billion of two-year notes to persistent investor demand.
This time, however, both deals were smaller in size from the massive debt
offerings that the government-sponsored enterprise has issued in the past
couple of months. Market participants cautioned that the sizes are no
indication of investor appetite, and it has more to do with Freddie Mac’s
preference to keep its issues to manageable size. “We really wanted to do
transactions that were back to our normal size of $3 billion to $5 billion,”
said Peter Federico, treasurer and senior vice president at Freddie Mac. He
added that concerns about saturating the market also prompted the company to
cancel its regularly scheduled bond offering last week. “While there was
still demand out there, the market was starting to feel heavy with Treasury
supply, the FDIC [Federal Deposit Insurance Corp.] paper and GSEs
[government-sponsored enterprises],” he said
(Dow Jones Newswires 05:48 PM ET 03/26/2009)
CHICAGO (Dow Jones)–Gamblers who have cut back on junkets to Las Vegas amid
Jim the Realtor | March 26th, 2009 at 5:03 pmthe market downturn may have found a way to replace at least one of the vices
they enjoyed there: betting on big swings in American International Group
Inc.’s (AIG) daily share price. Despite AIG being in hock to the government
for nearly three times its fourth-quarter book value, with no clear way to pay
off the money anytime soon, more than 145 million AIG shares trade on a
typical day. In the space of the last few weeks, the price of those AIG
shares has ranged from 33 cents to $1.50. (It was recently at $1.16.) This
price volatility makes the stock attractive to speculators who are looking to
make a quick profit by buying or shorting the stock. “If it goes up 35 cents
today, as soon as it goes up I sell it and make some money,” said Andrew
Barile, an insurance consultant based in Rancho Santa Fe, Calif
(Dow Jones Newswires 02:00 PM ET 03/26/2009)
“and today rates are helf of what they used to be.”
Only pointing it out because it made me laugh.
And 3 Clicks – for whatever it’s worth, I know at least 5 couples who are ready to buy once prices soften a bit more in addition to myself.
There are buyers, and cash all sitting on the sidelines. I keep a short list of friends, so if I know 5 there has got to be a whole lot more out there!
The question is who will still have jobs when they are ready to buy. That’s the question the wife and I ask ourselves.
sdnerd | March 26th, 2009 at 5:50 pmJim, you keep referring to the upper end and then throw numbers like $600K or sometimes $1 mil out there. Is that really the high end?
Anchoring bias on display! A housing bubble of historic proportions can do that.
Jim’s right, everything that required a jumbo loan used to be considered luxury properties. Prices above a mil were relatively rare, too.
tj and the bear | March 26th, 2009 at 7:07 pmThere are buyers, and cash all sitting on the sidelines.
Sure, always have been and always will be. Hell, I’m one of them. Doesn’t mean there are nearly enough to drive the market.
tj and the bear | March 26th, 2009 at 7:21 pmAztec,
I just re read my post and I did a very poor job of sentence construction in my haste to get out the door this morning. I should have said acquaintances. Did your friends purchase during the bubble? We did, and I’ve been out of a job since January, but we are sitting on some good cash at the moment. We transformed into mattress stuffers after the .com bust and we’re waiting for the right time to make some moves.
sdnerd,
Good that you keep a short list of friends, but I think your supporting argument is biased – in a good way. Most who visit this site are well informed as you can tell by the content and quality of the posts and comments. I wouldn’t expect those that are SOL frequent this site =P
Anonymous | March 26th, 2009 at 7:33 pmJim, you keep referring to the upper end and then throw numbers like $600K or sometimes $1 mil out there. Is that really the high end?
“Anchoring bias on display! A housing bubble of historic proportions can do that.
Jim’s right, everything that required a jumbo loan used to be considered luxury properties. Prices above a mil were relatively rare, too.”
TJ,
No anchoring bias here. I pre-date the bubble.
Back when a mil was rare, $100K incomes were kinda rare, too.
I remember looking as POS homes right on I5 in the DM to Solana area in 1996 and they were $400K+. !!!! We had to just about double that to get a quirky home in a great area even way back then. We skipped it and bought in the SF area (more $ but $$ income, surprisingly a better overall economic deal).
Aztec | March 26th, 2009 at 7:59 pmAztec,
Not to disagree, but $100K incomes weren’t that rare. Several hundred K, yes.
We arrived in CA around the top of the prior bubble and house-hunted for years thereafter. Only the finest properties with location, large lots and killer amenities rated $200/sf brand new.
Oh, and last time I was weekending in SD I read a salary survey in the magazine at the hotel. Incomes aren’t that much better these days, really.
tj and the bear | March 26th, 2009 at 9:03 pmYou sure about that? For instance, what was a 5000 sq ft on 2 acres going for in RSF? (say the typical $3 mil mediocre and dated place today). I know 3000 ft in La Jolla was $1+ mil all day long. Pity I couldn’t afford one back then! Closest I got was ~$600K for a semi-fixer nearby. Pass.
I think we tend to all assume that people we know, their incomes, prices we’re most familiar with, etc., are “normal”.
Aztec | March 26th, 2009 at 9:27 pmBy “large lot” I meant upwards of a half-acre. 5k sf on 2 acres in RSF would definitely be 7 figures.
Back in the early 90′s we toured brand new, gated BHPO properties in the hills that had 5000+ sf, pools, tennis courts and views between 1 & 2 mil.
Another custom in Bel Air I remember had 10000 sf and views for 2 mil even.
tj and the bear | March 26th, 2009 at 11:16 pmWe checked out a number of homes in Malibu during the last downturn.
One I remember in particular, was on about an acre on the west side of PCH. It had a 3/2 SFH, a four-unit apartment building, and a duplex unit with one studio and the other was either a one or two-bedroom unit, IIRC (all going from memory here). Sounds tacky, but it the buildings were awesome if you like kinda creative, quirky stuff, and the 4-unit was designed to look like a castle.
There were gorgeous, huge trees and an ocean view, obviously.
Price? $1 million. Probably could have been negotiated down from there because it was either a foreclosure or short sale (can’t remember which). We toured lots of foreclosures in the pricier neighborhoods back then.
Nothing is immune from price drops. If anyone can identify an established area that never experienced a price drop, I’d like to see the data.
CA renter | March 27th, 2009 at 3:23 amThis is still my first trip around the RE boom/bust cycle, but it’s hard to see how (real) prices go up from here.
It’s interesting how clearly the 2001 recession shows up on your chart.
NateTG | March 27th, 2009 at 6:52 amNothing is immune, however, in So Cal, the Coastal areas have always held-up better and increased more than non-coastal areas. Back in the late 60′s and early 70′s my father was buying up rental properties in central OC (Westminster, Garden Grove, Anaheim) in the $17,000-$25,000 range. Needless to say he did quite well. However, at the time he could have bought on the water in Newport beach for $55-70K, 3-4 times more expensive–now they are at least 10 times more expensive–He felt they were “too expensive” and not worth the extra money to invest. Does the same hold true today, will Encinitas and Carlsbad (costal) slowly step up to the Del Mar, Solana and La Jolla Range??? In comparison, I find them to be a good value, especially Carlsbad–If you go up and down the So Cal coast, I can’t seem to find a better value–I know a LOT of folks from LA and OC coastal that feel the same way–we have came across many who have, or are planning on, uprooting from LA or OC and and buying in Carlsbad for all cash, or close to all cash.
Local Boy | March 27th, 2009 at 10:03 amIt is INCREDIBLE how much inventory has built up in the better areas of San Diego County over the past three months.
Prices in the best areas, (except for entry-level homes), in LJ, Del Mar, RSF, and Coronado are in for a major meltdown in the next 12 months.
R.C. Collins | March 28th, 2009 at 8:24 am