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Category Archive: ‘Coffee Bet’

Collapse Recount

From Bloomberg.com:

http://www.bloomberg.com/news/2014-09-03/case-shiller-retrofit-shows-less-severe-u-s-home-price-slump.html

The collapse in U.S. home prices that stoked the worst recession since the Great Depression wasn’t quite as severe as initially estimated, according to data from S&P/Case-Shiller.

Property values nationally fell 26 percent from the February 2007 peak to the December 2011 trough, not 34 percent as previously reported, revised data showed last week. The index will now be issued monthly rather than quarterly.

The change is the result of CoreLogic Inc. (CLGX)’s $6 million purchase of the S&P/Case-Shiller index from technology company Fiserv Inc. in March 2013. Case-Shiller has spent more than a year retrofitting its model with CoreLogic’s bigger, higher-quality data set, leading to a change in how the index looks.

Posted by on Sep 3, 2014 in Coffee Bet, Same-House Sales | 1 comment

Peak Pricing Coming to CV

There have already been a smattering of CV sales at or above peak pricing, and I said today that within two years the 92130 detached-home sales will be at or above 2006 prices:

Sept 2006: 32 sales, $370/sf.

Sept 2012: 43 sales, $326/sf.

Statistically, we’re only 13% apart in the numbers above, and we could make that up by the end of next summer. When the inferior homes are gaining steam that it really becomes apparently that prices are on the move.  True, the house featured in today’s video hasn’t sold yet, but with only 22 resales listed under $1,000,000, it stands a decent chance of selling.

The same model two doors down from this one sold for $935,000 at the very peak, July, 2007.

This is listed for $929,900:

Posted by on Nov 27, 2012 in Bubble-Era Pricing, Bubbleinfo TV, Carmel Valley, Coffee Bet | 3 comments

NAR Still Doesn’t Matter

From HW:

The National Association of Realtors is in the midst of revising its core home price index. While the move may be a concern to some, fellow HPI service Zillow said it isn’t affected by the revisions.

“NAR’s rebenchmarking is not impacting Zillow at all,” said Zillow Chief Economist Stan Humphries. “We look at closed sales from public records. NAR is a survey. We’ve never used NAR’s numbers for our analytics.”

NAR is currently revising downward its index in what it labels a normal rebenchmarking process. Humphries said Zillow requires no such revisions and stands by his firm’s numbers.

The economist also denies the Zillow numbers, what it calls Zestimates, look at housing through rose-tinted glasses. Zillow calls May 2007 the peak of the housing boom. Since then prices collapsed 23.7%.

Other home price indices are more severe than Zillow’s. CoreLogic calls the peak in April 2006 and accounts for a 32% decline. Lender Processing Services calls the peak in June 2006, with a 30.2% decline.

(JtR’s prediction from September, 2006 here)

Zillow’s numbers follow 83 million homes in about 2,500 counties nationwide, Humphries said, but aren’t as harsh as other HPIs for one simple reason: they don’t include distressed properties.

Read More

Posted by on Dec 16, 2011 in Coffee Bet, Forecasts | 5 comments

Regime Change?

 

Meet the new boss, same as the old boss.

While Jim the Realtor is on a well deserved and long overdue break he has foolishly handed the helm over to me.  Rob Dawg.  

When last we did this it was a different world.  Think back to the halcyon days of 2007.  A bucolic time when people were still discussing “if” there was a bubble and anyone predicting 10% declines was checked for drug abuse.  We certainly have mostly burned off the excesses in normal residential housing.  It still remains to see if the high end will join the rest.  I’ve loved reading JtR getting an education about San Diego and lots of laughs in the process.  

 

So, today’s question:  Are there any more shoes to drop on Southern California?  And please, not the old earthquake meme.  

Posted by on May 11, 2009 in About the author, Coffee Bet | 29 comments

Heteroskedasticity

At the panel discussion the other night, the methodology of the Case-Shiller Index was questioned.

Do they include every repeat sale they find, or just the recent ones?

Because the long-time owners, ones who paid $33,000 in the 1960s, and are now selling for $700,000, could really skew the index.  Thankfully, the folks at CSI have published their methodology:

http://www2.standardandpoors.com/spf/pdf/index/SP_CS_Home_Price_Indices_Methodology_Web.pdf

They exclude properties that were resold within six months, though the REOs being held longer than 6 months are going to be included.  The “purchase price” recorded by the banks at the trustee sale, in almost all cases, will be quite a bit higher than the final sales price – their purchase price was based on appraisals almost a year prior to the eventaul REO sale.

The CSI also excludes those sales which they can’t find a previous purchase price, which will eliminate many of the long-time owners, and they also exclude new homes that were resold too.

The CSI also assigns ‘weights’ based on time between sales, but they said that 85% to 90% are unweighted.  If they are downweighting the older ‘sales pairs’, there has to be some extra emphasis in the index on the more recent pairs. 

Wouldn’t that make the index somewhat biased to the negative?

Posted by on Apr 25, 2009 in Coffee Bet, Same-House Sales, Speaker Panel | 19 comments

Coffee Bet 2

At last night’s panel discussion the question was asked,

“When will the Case-Shiller index hit bottom?”

Other panelists politely side-stepped the question, so I took the plunge.  My last prediction was the infamous coffee bet from September, 2006, where I guessed that superior properties would hold up better, sliding only 10% in value, and inferior properties would get hammered 40% to 50% in value.  The jury is still out on how far off that prediction will be.

Last night I said that the Case-Shiller index would bottom in December, 2011, and be 25% lower than it is today.

Today’s index is 148.25, about what it was in August, 2002.

Knock 25% off and it’ll be 111.19, or about what it was in February, 2001.

The highest reading was 250.34 in November, 2005, so the 111.19 reflects a 56% decline.

I don’t like making formal predictions, let alone ones off-the-cuff.  What was going through my head in the 2-3 minutes preceding my statement?

Oceanside is the test case.  The market has worked perfectly in Oceanside, and properties in any condition, and in any location, that are priced at 50% to 60% off are flying off the shelf.

Will the rest of San Diego County need to hit 50% off to reach bottom? 

I don’t think so, but we’re talking about the Case-Shiller index.

If Oceanside is the example of what to expect elsewhere, then we’ll see a marketplace dominated by bank-involved sales.  Instead of ’giving their house away’, individual homeowners who are comfortable will find other alternative to selling, and the vast majority of the homes selling will be those that the homeowners can’t afford anymore.

It could cause sales to shrink in older neighborhoods, which could have a stabilizing affect on pricing.  The neighborhoods I mentioned in the coffee bet are holding fairly well, though Davidson’s La Costa Oaks has a couple of short sales in the works.

The index measures the decline between the last two sales prices of the same house.  

If the older neighborhoods have fewer sales, then the number of REO and short sales of homes built in 2004-2006 will probably be the determining factor of the Case-Shiller index. The newer McMansions loaded with HOA fees and Mello-Roos are in everybody cross-hairs, and it’s likely that we’ll see further price erosion for the next couple of years.

But the banks are squeezing the REOs out little by little, dragging out the inevitable.  That’ll continue for another 3-4 years at least, but, just like in Oceanside today, there should be over-shoot, so by December 2011 the index might hit bottom.

There are enough buyers patiently waiting for the higher-end homes to drop, and the second half of equasion is how much lower will prices have to go to get them to step up.  I think there is enough enthusiasm, plus the tempting low rates, that many buyers would be buy a home today if they could just find decent ones at 5% to 10% off.  Because the Case-Shiller will be loaded up with bank-involved properties that were purchased in 2004-2006, I think it’ll read worse than it is, but that might be too optimistic.

That’s my justification of a wild guess last night, but who knows?

The Case-Shiller index has been going down 4-5 points per month lately.  It only has to drop 37 points to be 25% less than it is today, so conceivably at this rate we could have a 25% decline in the index by early next year.

I’ll stick with the 25%, when it happens…..?

Here is a youtube of Rich answering the question, “What indicators do you watch?”

http://www.youtube.com/watch?v=gSkzEXpM8JM

And a photo of the after-party, where voiceofsandiego.org staffers carried on all night – what a bunch of partiers!

Posted by on Apr 24, 2009 in Coffee Bet | 37 comments