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The NAR Pending Home Sales Index was released today.  They reported a 30% decline in May pendings (vs. April) and it didn’t even garner it’s own post at Calculated Risk, so either nobody cares about what’s coming out of NAR (most likely), or the drop was expected.

The index is a national reading, how are we doing in San Diego County? Here are the detached closed sales for SD County:

*June, 2010’s number of sales will probably increase 10% or so, due to late-reporters.

Compared to last year, the demand looks steady, even with average square-foot costs up about 10%. The tax credits probably helped, but now that they’re over, can we get a better feel for what’s coming?

Here’s a look at the current detached pendings.

Those from last year have closed, while about half of this year’s numbers are still pending, and subject to fallout (20% to 25%?).  But the 2,392 listings marked ‘contingent’ (short sales) are not included, and should pick up the difference, so I think we can make some decent comparisons. These are detached listings grouped by the month they were marked pending:

SD County Detached Pendings

Only 315 of April’s remaining pendings are still eligble for the fed tax credit, and none of these will get state cheese. The local detached market has been resilient!

Once you add in the contingents, this summer’s closings are shaping up to be stronger than last year, without the tax credits, and in the face of unemployment, economy, etc.

The inventory is on the rise though, according to housingtracker.net, which is probably more due to so many over-priced turkeys (OPTs) not selling, than anything else.  Expect that to continue for a couple more weeks before we see the motivated sellers quicken their pace to the exits:

The inventory rise/fall is measuring the list-price accuracy. There are plenty of buyers who would like to take advantage of the sub-5% mortgage rates, and if sellers can live with just a little less, we will have a very productive third quarter (might be a big ‘if’ though).

Shiller starts at 1:45 of this video, and lays out two historical examples to counter the 2% to 3% improvements predicted by most professional forecasters:

Let’s look at the most recent stats for North SD County Coastal detached homes, under $800,000:

The solds are those that closed between May 24 and June 23, and include the double-dippers, those that could have qualified for both the state and federal tax credit. The actives-to-pendings ratio was most noteworthy, given that those not closed by now could miss out on both tax credits, yet it’s still better than 2 to 1.

Over $800,000 (ineligible for federal tax credit)

The above-$800,000 market is where the insanity continues, though the demand has been stronger than last year, comparatively. The silly season should be wrapping up over the next couple of weeks, and those sellers who really want/need to sell, will have to get off their price if they want to close this year.

Let’s keep a running tally of new pendings/contingents up to April 30th, to see if there is a last-minute surge to buy before the housing-tax-credit deadline.

Detached listings:

A pricing convergence; the all-county trend is upward, while north coastal pricing is coming down. The Active-to-Pending/Cont ratio is cooking in both; 1.02 in the county, and 2.40 in north coastal.

Just the fact that so many more higher-end sales are closing these days is noteworthy, the NSD County Coastal sales of detached $1,000,000+ homes have increased 55% on a year-over-year comparison (and if you take out La Jolla, the others increased a total of 79%!)

Let’s chart the $1,000,000-plus market. Here are the number of active and pending detached listings, the 2009 and 2010 closed sales between Jan. 1 and March 10th, and the number of trustee sales YTD of SFRs that have a Foreclosureradar value of at least $1,000,000:

Sales are healthier, how does pricing compare?

Price will fix anything!

The ratio of active listings to pendings has been a decent gauge of the market’s relative health.

Here’s our scorecard, historically, of the ACT/PEND ratio:

0-2 Hot market

3-4 Regular market

5-6 Market in trouble

7-8 Too many choices

9+ Freefall

Here are the active and pendings listings:

The market is smoking hot when actives-to-pendings ratios are under 2:1 in a number of areas. The restricted inventory is the cause, and now a primary market indicator. But if inventories start to increase, some pent-up demand may gobble them up – where does it start to balance (or tip over)?

Let’s rely on the numbers to tell us more about the current market activity, and use the comparison of actives-to-pendings help guide us to see what buyers think of current list prices.

Let’s break SD North County Coastal into two groups:

NW GROUP = Oceanside, Vista, and San Marcos

SW GROUP = Carlsbad, Encinitas, Cardiff, Solana Beach, Rancho Santa Fe, Del Mar, Carmel Valley, and La Jolla

Thge chart below includes contingents with pendings, like June’s does, because they’re off-market – you can’t go out and buy one today.

Active/Pending Listings + Ratios of Detached Homes

NW GROUP

We’ve seen the ratio of actives to pendings be around 2:1 in a ‘normal’ market, so to see every area under 1.00 for the last few months is incredible. But the velocity has slowed down a little, and whether it’s seasonal or not probably doesn’t matter – the future hinges on the flow of new REO listings coming to market, and any adverse reaction to the fate of the $8,000 tax credit.

There hasn’t been much drop off since June, and these numbers look hot. But getting them to the finish line is tougher than ever. The escrow fall-out ratio is probably running around 50% these days, adding to the frustrations.

How are those short sales closing? It was about 3-4 months ago that short-sale listings had to be marked accordingly on the MLS, so their closings should be starting to show. Currently there are 2,116 detached short sale listings that are contingent/pending, and only 216 closed last month.

The tonier areas have fairly normal-looking numbers, but are weaker compared to the overall county ratios – the lower-end is what’s hot, the higher-end is not so much. Expect that the Y-O-Y number of sales will be reported lower in coming months – here’s the summary of the SW Group:

SW GROUP

If the lower-end is so hot, could it trickle up?

Only for those who sell and then buy, which would still take some decent equity appreciation to enable that to happen en masse. Not many possible move-uppers will be able to keep their previous home as a rental – the ‘anti-buy-and-bail’ guideline is still in effect, where you have to qualify for payments on both houses without rental income. Could there be enough renters to create sufficient demand? Looks like it so far, let’s check back in December!

Our regular scorecard:

0-2 Hot market

3-4 Regular market

5-6 Market in trouble

7-8 Too many choices

9+ Freefall

We’ve been hearing about how the real estate market has hit bottom from a variety of sources, this today from the White House:

WASHINGTON (Reuters) – The U.S. housing market appears to be bottoming out, White House spokesman Robert Gibbs said on Friday after an industry survey showed sales of previously owned U.S. homes jumped 7.2 percent in July.

The White House, meaning your president, is telling you that the market “appears to be bottoming out”. All cheerleaders and media outlets are pushing the positive spin – could it work?  Will it work?

Most potential homebuyers who are actively looking at houses aren’t going to read any further - because they are already willing to buy if they can just find the right house.

But will improving headlines cause them pay more for it?

I don’t think so.

The positive spin might get buyers (and definitely sellers) more excited, and bring in from the sidelines some new potential buyers, but I think the spin is a turnoff.

People don’t trust the spin-masters, and they tell themselves that they aren’t going to get fooled.  Expect that the majority of potential buyers are going to stand pat, and be more willing to wait, rather than pay too much.

Keep your eye on the better statistics, and ignore anything you read in the mainstream media.

Compare the number of detached listings, and vs. those in some stage of foreclosure:

We do need to make up some new measuring sticks though.

Acceptable limits?

More foreclosures than actives = trouble?
Foreclosures more than 5x last month’s sales?
Foreclosures in triple digits?

Let’s use 92010 as a guide, because it’s probably been the healthiest of the bunch.

If you have more pendings than actives, Y-O-Y sales are higher, and your foreclosures are about 3x actives, your favorite zip is doing OK.

My baseball coach used to say, don’t believe anything you hear, and only half of what you see!

Hat tip to kwaping for sending along this U-T article on San Diego being 21% undervalued:

Link to U-T article

An excerpt:

San Diego County used to be one of the nation’s most overpriced real estate markets, as much as 40 percent above historic norms, according to the IHS Global Insight financial analysis company.

Yesterday, in a dramatic turnaround, Global Insight said housing prices in San Diego are 21.2 percent undervalued.

“It’s definitely coming back from the boom,” said Global Insight economist Jeannine Cataldi. The median price for a single-family home was $327,300 in the first quarter, the company said. Based on historic trends for household income, affordability and appreciation, the “normal” value should have been $415,300. That contrasts with the peak of the boom market, in the third quarter of 2005, when Global Insight found the median price of $506,500 was above the norm by $144,100, or 40 percent.

From the peak, local housing prices have fallen 35.4 percent, back to a level last seen in the fourth quarter of 2002, the company said.

This was the fourth consecutive quarter that San Diego housing prices were below what the company considers to be the normal price. It was the biggest gap since the second quarter of 1999, when the median price of $190,400 was $53,400, or 21.9 percent, below the theoretical norm.

*******************************************************

“Undervalued” is a strong word, but we could describe today’s market as “red hot”.

Oceanside’s 92057 zip code has 85 active listings of detached homes, and 227 PENDINGS,

If you’re looking under $200,000, it’s even hotter – 10 actives/61 pendings!

Here are the detached actives and pendings around town, and how they compare to last year:

Active/Pending Listings Ratio of Detached Homes

Folks in Rancho Santa Fe sure are resilient, aren’t they?

In the 2000-2004 time frame, the ratio was around 2:1, with the hottest times as low as 1:1. Today there are TEN areas UNDER 1.0!

Score Guide

0-3 Hot market

3-4 Regular market

4-5 Market in trouble

5-7 Too many choices

7+ Freefall

This is the Redfin graph of sold $/sf vs list $/sf for San Diego. For some reason the two lines are no longer tracking. Can anyone help me figure this out? [Click for a clearer picture.]

Is the ’spring selling season’ getting started?

It depends where you look. The areas that have been hard hit by foreclosures and have seen rapid depreciation have been selling like hot cakes (San Marcos, Oceanside and Vista), and the higher-end areas are loaded with sellers that “aren’t going to give them away”.

Here are the areas ranked by the lowest ratio of actives to pendings, plus their number of new active listings since February 1st/number of new pendings since February 1st:

Detached Actives/Pendings

In the 2000-2004 time frame, the ratio was around 2:1, with the hottest times as low as 1:1.

Score Guide

0-3 Hot market

3-4 Regular market

4-5 Market in trouble

5-7 Too many choices

7+ Freefall