Menu
TwitterRssFacebook
More Links

Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

Carlsbad
(760) 434-5000

Carmel Valley
(858) 560-7700
jim@jimklinge.com


Category Archive: ‘Bottom Talk’

Bubble Schmubble

These ivory-tower guys keep wasting their time debating whether to call this is a bubble or not using vague, mind-numbing graphs. From HW:

There is a lot going on right now in housing and mortgage markets. But one of the debates that continues to rage on is whether or not U.S. housing markets are in a bubble or not.

HousingWire’s own monthly HW Magazine talked about it in detail in our January issue.

So too has CNBC’s John Carney, in a post from late last year with the headline: Yep, it’s another housing bubble. And then on January 14 of this year, Peter Wallison at the American Enterprise Institute wrote a breathless op-ed proclaiming: The bubble is back.

But is it really a bubble just because home prices are rising again?

Read More

Posted by on Jan 16, 2014 in Bottom Talk, Bubble-Era Pricing | 10 comments

Happy New Year!

NickTNick at the Wall Street Journal has been doing a great job covering the real estate market lately.  He likes to stir it up on Twitter, and yesterday he got a few experts to chime in about pricing in 2014:

https://twitter.com/JedKolko/status/418044040395763712

There is always a lot of banter and hyperbole, but pricing is somewhat predictable.  Sales are the leading indicator – and when sales start lagging, typically prices will follow shortly thereafter.

Here are the quarterly NSDCC sales counts for the last three years.  While it looks like there was a big drop-off last quarter, the sales in 4Q13 were actually higher than they were in 4Q11, when rates were comparable and pricing was 32% lower – so no panic yet:

Quarterly Sales
1Q
2Q
3Q
4Q
2010
496
736
653
576
2011
553
728
699
582
2012
577
900
845
832
2013
672
996
883
631

I think we will see the same ingredients in early 2014 that led me to believe we’d have little or no appreciation.  What changed was the how I think sellers will react to it.

They will likely tack on the usual 5% to 10% (or more) onto the recent comps, and tell their agent that they aren’t in a hurry, and don’t have to sell.  Buyers will hesitate, and the only homes that will be selling are the best-quality buys.

But instead of lowering their price to help cause a sale, the remaining sellers will wait or cancel, chalking it up to the ‘changing market’, and not to their unwillingness to sell for what the market will bear.

So while it might appear that pricing is on the rise, it will be on thin trading.  Once it becomes obvious that sales are falling – after being compared to strong counts from the frenzy – then we’ll see if the usual market fundamentals cause prices to follow.

They may not – after all, it is the new normal now.  We could see sellers put their home on the market every spring until they get what they want – the ultimate ‘Make Me Move’ market.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I’m expecting more bubbleinfo engagement in the social media this new year.  For those so inclined, here are my links:

Bubbleinfo.com on Facebook, the only place that has each bubbleinfo post uploaded automatically:

https://www.facebook.com/bubbleinfo

Bubbleinfo on Twitter, where you’ll find links to additional articles by others, with the first line authored by me as a tee-up.  Each new bubbleinfo tweet is posted in the right column here on the blog (and if you access via a mobile device, underneath the posts):

http://www.twitter.com/bubbleinfo

Our Pinterest account, full of housing-related photos and videos:

http://www.pinterest.com/klingerealty/

Have a Great 2014!

Posted by on Jan 1, 2014 in About the author, Bottom Talk, Bubble-Era Pricing, Jim's Take on the Market | 0 comments

No Housing Bubble

From HW:

A panel of esteemed housing experts speaking at the ABS East 2013 conference underway in Miami disagreed on Robert Shiller’s recent call that U.S. housing is in a bubble.

cautionModerator Howard Esaki, managing director at Standard & Poor’s, who himself puts out regular morning emails encapsulating finance news, played a video on Bloomberg of Shiller talking of a housing bubble.

Shiller co-developed the S&P/Case-Shiller Composite-10 Home Price Index and actually said housing was looking bubbly. His words were later moderated in a column in the New York Times.

The panel elaborated on whether or not U.S. housing is actually in a bubble. No one believes it is.

Mark Fleming, chief economist of CoreLogic, said price appreciation is slowing down, and is only correcting for an overshoot in price collapse. He didn’t think it would return to the inflated pricing before the housing bust.

“We are certainly not in a housing bubble,” said Laurie Goodman who heads up a housing thinktank at the Urban Institute. Both Goodman and Fleming said housing could absorb higher interest rates and remain attractive. Goodman posited that even with a 6% interest rate, affordability would remain at 2000-2003 levels, which were pretty stable compared to 2006-2007.

“I don’t see interest rates going to 6% any time soon,” she added.

Esaki then addressed the crowd at ABS East, where attendance is at a record high (3,500+) with an estimated 1,000 investors, according to data released by organizer Information Management Network.

Esaki asked for a show of hands: “Do you think there is a housing bubble?”

Not a single hand went up.

Later an audience member pointed out that “no one raised their hand, so maybe we are.” The devil’s advocate then sat back down and the panel moved on to talk about the slim chance of near-term GSE reform.

http://www.housingwire.com/articles/27270-abs-east-panel-says-shiller-wrong-on-housing-bubble-call

Posted by on Oct 8, 2013 in Bottom Talk, Frenzy, Market Conditions | 3 comments

Bubble Or Sustainable?

The folks at www.1worldonline.com like to poll their audience, and last month they used a bubbleinfo.com blog post in one of their surveys.  Their readers voted on this question:

Is the increase in real estate value a sustainable trend?  Home prices have increased substantially in the last year compared to the previous seven years.  Is the increase a sustainable trend, or just a miniature housing bubble?

https://1worldonline.com/#!/poll/773

Chris says 55% of respondents believed another crash was going to come, with more Republicans strongly believing in a crash.

Those who voted for another crash may have been influenced by the opposing blog post to mine, which talked about the millenials facing a weak job market, and shrunken workforce in general.

This was his summary paragraph:

With investors fleeing the real estate market because of higher interest rates, with fewer people working and those that are working are earning and saving less, who is going to be able to buy houses in sufficient volumes to keep the real estate “recovery” going? It doesn’t matter how low interest rates are if people don’t have the incomes, savings or credit to buy homes. Rising interest rates can only make a bad situation worse.

My rebuttal, which, like my blog post, pertains to our local market:

  • Investors fleeing?  Supply evidence please, or is that just a guess?  I still get emailed every day by investment groups wanting me to send them deals.  If there are fewer investors buying, it’s because there are fewer deals, which would mean prices are holding up or going higher – too high to make sense for flippers.  Investors are supplying the floor to the market.
  • Unemployment has been terrible, with little or no improvement in the last few years - yet our real estate prices have gone up 20%.  Apparently, the local real estate market is NOT influenced by unemployment.
  • Savings or credit?  You can obtain an FHA loan up to $697,250 with 3.5% down payment and a FICO score as low as 580.  PacTrust Bank will give you a 30-year fixed rate around 5% even if you have had a short sale in the last year.  Most anyone can get a mortgage if they want it bad enough.

Even if it’s not as bad as he says, we keep hearing how ‘demand has been pulled forward’.  If so, it’s a good question - who will be the future buyers?

The future buyers will be the first-timers and others who want to finance their purchase, especially with a lower down payment, who have been shut out by the big-money investors and cash buyers in general.  This future-buyer pool will likely have a limit on their resources, so the appreciation trend will probably moderate, and prices will fluctuate from area to area.

But with a county population of 3.14 million people, we don’t need everyone in the pool – we only sold 3,466 homes in the county last month.  You could exclude 90% of the population from the market and we’d still have enough demand…at least until the baby-boomer liquidation sale starts around 2020.

Posted by on Sep 10, 2013 in Boomers, Bottom Talk, Double Dip, Forecasts, Jim's Take on the Market, Market Conditions | 15 comments

The New Abnormal

From my favorite reporter!

The perception of affordability, combined with the fact that home prices compared with rental rates are at levels last seen in the early 2000s, is making it tempting for people to think now’s a good time to buy a home.

“We are currently in a carnival funhouse mirror,” says Stan Humphries, chief economist at Zillow. ”Homes seem quite affordable when at base they are not.”

Humphries says there’s a lot that worries him. The main tool the Federal Reserve uses to fix the broader economy—lowering rates—”could, if it hasn’t already, reinflate a bubble in the housing sector.” If incomes start to grow more, home values could move more into line with historic norms, but that’s not likely.

More likely, in his view, is that as rates rise and push mortgage payments higher, people are going to realize that homes—and not just mortgage payments—are overpriced for what the nation as a whole earns, which in turn could send home prices tumbling again.

Humphries’s outlook is unsettling. He says many people think that once home prices corrected from their overinflated bubble levels, the market would be back to normal. But that’s not the reality he sees. “It’s really a period of oscillations that will be disorienting for buyers and sellers, and I think we are far from done.”

pricetoincome

http://www.businessweek.com/articles/2013-04-10/cheap-mortgages-are-hiding-the-truth-about-home-prices

padresdodgersbrawl

Posted by on Apr 12, 2013 in Bottom Talk | 15 comments

“Significant Price Inflation”

Hat tip to Kingside for sending this along:

Remember the days when residential real estate gained equity each year?  It’s happening again in California, and a year from now homeowners could see as much as a 20 percent increase in the median price of homes across the state, according to Bruce Norris, a Riverside-based real estate analyst and principal of The Norris Group.

“My best guess is that California we will have significant price inflation. Prices could escalate so strongly that we will think we are in 2004 instead of 2013.”

Some may ask how this is possible.  But Norris has experience predicting the unpredictable.

A real estate consultant, investor and educator for the past 30 years, Norris publicly predicted the current sub-prime lending and foreclosure crisis in January of 2006, more than a year before the nation’s leading economists and real estate industry analysts would even acknowledge the possibility of a downturn. Norris also correctly forecast both the real estate boom that began in 1997 and the subsequent doubling of home prices.

Norris now says he has identified three reasons why median home prices in California will go up.

For starters, he said, policy decisions have resulted in record low inventory levels.

“In many areas,” Norris said, “there’s one month of inventory. Inside of that one month of inventory are very few REOs and a lot of short sales that may or may not really be available to buy and close anytime soon. The properties that would normally be purchased by owner occupants are being snapped up by billion dollar hedge funds. These hedge funds, unlike the smaller investor types, are keeping all of the properties as rentals. There’s a little inventory for sale by ‘normal sellers with equity,’ but, right on cue they are getting the idea their property just might be worth more than the last sale.”

With the absence of inventory, Norris predicts, prices will escalate.

A second factor paving the way for the rise in median home prices in California is the return of the former homeowner who was foreclosed on in 2008 and 2009.

“The numbers of trustee sales in those years were staggering,” Norris said, adding, “As a percentage of whatever had happened in the past, 2008 and 2009 will go down in history as the California Real Estate Collapse of all time. The numbers differ across the state but the percentages are similar. In San Bernardino, the numbers of foreclosures exceeded the number of sales in 2008 and 2009. Fast forward to 2012 and you now have those same people ready and capable of buying a home again.”

So, how is it these people can buy homes so soon after going through a foreclosure? The answer, Norris says, resides with FHA, which will now make a loan to a buyer who lost their home via foreclosure after three years. “Buyers have realized that their house payment would be less than their rent, and that’s fueling demand and pushing up home prices,” he said.

The third factor setting the stage for a significant increase in median home prices is interest rates. “Interest rates are at all-time lows, and that allows for price increases to take place without significantly increasing mortgage payments,” Norris said, adding that he expects California’s median prices to up by as much as 20 percent during the coming year.

http://www.thenorrisgroup.com/blog/news/real-estate-analyst-predicts-a-20-percent-increase-in-median-home-prices-in-california-during-the-next-year/

Posted by on Dec 12, 2012 in Bottom Talk, Bubble-Era Pricing, Market Conditions, Real Estate Investing, Thinking of Buying?, Thinking of Selling?, Tips, Advice & Links | 16 comments

Selling Off Buzz

When Grant Fry spotted a listing one night for a four-bedroom house in Orange that seemed to be exactly what he was seeking, he knew he had to move fast.  He showed up at the home the next day: “We were here. Bam.” He submitted an offer five hours later, at the full asking price of $479,000.

The seller’s photos weren’t even up on the MLS yet.

“I kept hearing about bidding wars,” said Fry, 51. “I did not want to get into that.”  He said he was successful “by staying on top of the listings. They change every day.”  In addition to online searches, he drove as much as 45 miles a day looking at houses.

With an extreme shortage of homes on the market in Orange County and many places around the nation, homebuyers have been swarming homes for sale and open houses, driving up prices and pretty much leaving any dream of scoring a “deal” in the dust, real estate agents say.

In Huntington Beach, Realtor Bill Smith describes an open house that “looked like a carnival. There was almost no parking on the entire block.”

In Rancho Santa Margarita, Realtor Cindi Powalski saw more than 50 people attend her open house. A loan officer worked on site. The four-bedroom house, which got several offers, found a buyer that day.

In Ladera Ranch, real estate broker Brian Doubleday sold a five-bedroom home listed for $888,000 in less than a week, at full price.  “The demand was outrageous,” says Doubleday, co-owner of IML Real Estate. “All the properties right now, you get a tremendous amount of response right away.”

The same scenario is playing out around the country, with inventory shrinking by 19 percent over the past year, according to a report last week by Zillow.com. In California, it was down 38 percent, the Zillow analysis shows.

“First-time homebuyers are being squeezed out of the market by falling inventory and the rapid influx of investors looking to buy basic homes to rent out to the growing population of people who have recently been foreclosed upon,” said Stan Humphries, Zillow chief economist.

Nashville real estate broker Brian Copeland told Inman.com that his agents are being “brutally honest” with buyers, advising them not to even bother to look at houses unless they’re ready to make an offer that day. “We sold two (homes) off of buzz ,” he said.

Read More

Posted by on Oct 16, 2012 in Bidding Wars, Bottom Talk, Frenzy, Market Buzz | 0 comments

Another Index Rising

Home sellers like reading the happier news these days, and buyers don’t mind thinking that it’s safer to jump in.  The lower volume could make for more volatile swings though – in either direction!  From dsnews.com:

The picture gets rosier for housing as home prices continue their climb back to the top.

One recent price index puts the July increase for prices at 0.9 percent, with prices achieving their first sustained recovery on a year-over-year basis since the market went bust in 2007.

According to FNC, which recently released the Residential Price Index, property values also went up in July, securing gains for the fifth straight month.

More notably, the index shows that for the first time since the housing market collapsed in 2007, home prices are beginning to recover on a year-over-year basis, highlighting a major turning point in market trends.

Home prices also ticked up more than 4.6 percent since January this year, the firm said.

Figures for indices covering prices across the country and 40 metro areas revealed a sustained pickup, with home prices gaining cumulatively by 3 percent over the last three months.

The firm found two much larger indices reporting 12-month highs, with positive growth marking a first in five years. Prices rose in several cities, including San Francisco (4.4 percent), Detroit (3.6 percent), Boston (3.4 percent), San Diego (2.2 percent), and Riverside (2 percent).

Chicago showed signs that it may be suffering from a seasonal setback, according to FNC, with prices down 0.9 percent in the Windy City.

Roughly half of the markets showed signs of growth, helped along by Phoenix (10.1 percent), Detroit (7.2 percent), Houston (5.8 percent), Miami (4.3 percent), and Dallas (4 percent).

Some of the same cities also saw prices appreciate. Those included Detroit (10.1 percent), San Francisco (9.1 percent), Dallas (8.7 percent), Boston (8.1 percent), and Washington, D.C. (7.7 percent), FNC said.

Posted by on Sep 22, 2012 in Bottom Talk, Market Conditions, Sales and Price Check | 0 comments