Livinincali left this comment Thursday:
If history is any guide you’d expect sales volume to start dropping before seeing any movement down on price. The sales volume numbers back in winter of late 2012, 2013 were seasonally higher than they have been and that marked the beginning of the price appreciation. Now it seems as the sales volume have fallen off a bit and price appreciation has moderated. If sales volume continues to be soft expect appreciation to be minimal this year. It seems like some segments of the market are still hot but it doesn’t feel like the frenzy of last year around this time where everything in the county was hot.
Historically, sales are the leading indicator, and prices have always followed.
Many are very committed to the fundamentals, and that in itself could help propel the actual market activity – a self-fulfilling prophecy. A loan rep in the OC named Logan has sparred with me about it on Twitter, and he has included the Trulia economist in the conversation – which is fine by me because they share the same view that history will repeat itself, regardless.
Logan is entitled to one man’s opinion. But Trulia stories get published everywhere now, and could carry considerable influence with home buyers. They are a mainstream-media source for market data, and have a responsibility to dig for the truth.
The Twitter war above got started over this article, which is now being published by media outlets everywhere:
Suggesting that bubbles are forming in areas where prices rising faster than those incomes is shallow and incomplete. Let’s consider additional facts.
Do reports of fewer sales have to be contributed to stagnant incomes, un-affordability, employment, economics, DTI, etc., that will drive prices down, or are there other explanations?
1. It was predicted here six months ago that people would be comparing 2014 sales to the ultra-hot frenzy months of 2013, and claim the sky is falling. You could say that the low rates of 2013 alone were driving people to buy; now that higher-and-steady rates aren’t driving the market, sales look pretty similar to recent years – IN SPITE OF HIGHER PRICES.
Detached-Home Sales Between Jan. 1 – March 15:
||SD Co. Sales
Take out the 2013 frenzy-driven era, and sales look similar, or better, than previous years, even though pricing is substantially higher.
2. A preliminary sign of a market top would be more homes not selling, and inventory rising. If inventory was rising steadily, AND sales were flat or declining, then a call for lower prices would be obvious. But the inventory is about the same as last year:
A big difference that is critical to the equation is that 2013 sellers were caught off-guard at rapid rebound in pricing. But the word is out now, and the 2014 sellers are VERY WELL AWARE of the improved market/higher pricing. Yet sales are strong.
3. This year’s sellers are more elective. They didn’t have to sell last year, and waited until they could get even more money this year – and they are only selling if they get their price. Yet sales are strong.
4. Every seller wants more, not less. It is the sellers’ creed – tack on a little extra to what the last guy got. Yet sales are strong.
5. If prices did falter, sellers just wouldn’t sell. The ego of a seller is powerful, and selling for any less than ‘their price’ is ‘giving it away’. Sellers will avoid that at all costs, and just cancel their listing instead. You’ll know that pricing is heading downward when you see inventory dry up further. Yet sales are strong.
6. There is absolutely NO threat of distressed sales undermining the market. Of the 1,180 NSDCC listings this year, 12 have been short-sales, and one has been an REO. Yet sales are strong – stronger than when buyers could have gotten a deal.
7. Multiple offers are everywhere. I can only speak about the north-coastal region of San Diego County, but everywhere I go, there are multiple offers – even on houses that aren’t that great. You will see bidding wars dry up before sales start to drop. Yet sales are strong.
8. We have never seen the inventory sustain at levels this low. There is an awareness and appreciation about one’s home that is superseding price – people aren’t interested in moving, no matter what they could get for it. The Z-man said yesterday that the low inventory is due to 20% of the country being underwater. Did he interview each one of those people? They could have short-sold anytime over the last few years if they wanted to move – but they didn’t.
In summary, buyers are ready, willing, and able to buy homes today – at these prices, and these mortgage rates. There would be as many – if not more – sales this year, than in 2013, if there were just more decent homes to sell at today’s prices.
Homes that aren’t selling today are the ones priced outrageously – anything close to the right price is selling. Hopefully it means there is a price ceiling - and we have arrived at the unaffordable plateau for now.
Sellers are insisting that we stay at these prices, or higher – they aren’t backing down. For now, buyers are agreeing. I haven’t seen any house sell for less than the comps this year – have you?
Until the bidding wars dry up, and then sales start to falter when compared to non-frenzy months, then prices should hang around these levels.