bubbleinfo.com

When I say, “the inventory is thin”, it really means that the demand for good-looking-properties-that-are-priced-reasonably is healthy.  While that would seem obvious in any market, it is worth repeating when all you hear is how bad the real estate market is from the mainstream media. 

We have also seen that there is a relationship between inventory and sales/pricing. 

When there are fewer houses on the market, buyers feel pressed to gobble up the ones that are available – and end up paying whatever it takes.  Flash back to 2003 to remember the max-frenzy conditions!

Here are the comparisons of the total number of detached listings/number of solds between January 1st and October 31st in North SD County Coastal (La Jolla to Carlsbad).  There isn’t a direct connection between them – some sold this year were listed last year – but the TL/S-ratio trend is worth watching:

This year we’ve had the fewest listings since 2000, and more sales since 2007, the height of easy financing. Yet the balance feels relatively healthy, and like the old Jim Ratio of actives-to-pendings, I think we can say that a 2.0 TL/S-ratio is about right.

(For those with MLS access who are checking, because Sandicor deletes withdrawn listings from previous years, I deleted them from all years – there were only 211 this year. The expireds and cancelled listings are included.)

While it feels like there are very few good deals available, does it mean that there has been pressure on pricing lately?  Let’s compare detached sales and pricing in the same January 1st-to-October 31st period of this year, to last year:

With the exception of the Del Mar explosion, those numbers look as steady as possible.

Hat tip to DB for sending this in from businessinsider.com:

More and more people are jumping on this bandwagon about the housing market finding some floor, a topic we’ve covered a lot.

Citi’s Josh Levin writes:

The Most Interesting Thing You May Not Know About the Housing Market — Amidst the continuous stream of housing data points and housing headlines, we think one has been overlooked: the inventory of existing homes for sale has been declining on a y/y basis for the past eight months and now stands at a multi-year low.

According the National Association of Realtors (NAR), in September there were 3.48 million homes listed for sale. Although it is still high when considered over the long-term, September’s 3.48 million homes marks the lowest inventory of homes for sale in the month of September since September of 2005.

Given the seasonality associated with home sales and the fact that the NAR does not seasonally adjust its inventory figures, investors should focus on y/y changes when thinking about housing inventory.

Even then, we would note that over the past five years, only four months showed a lower inventory of home for sales than September of 2011 and each of those months was either December or January, the low points in the year for home sales activity and inventory listings.

Interestingly, we have had no discussions with investors about this topic and have seen almost no media coverage of it.

It’s worth noting that the homebuilder ETF — XHB — is up over 31% since early October (it’s currently at 16.02 up from an October 3 bottom of 12.21), so while most media isn’t covering it, the market has picked it up.

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The mainstream media won’t know what to make of those numbers, but I’ll give my opinion.  It helps show that there is demand for well-priced homes, and virtually all of those have sold.

This is the time of year when we’re looking at the OPT leftovers – the ones that didn’t sell during the regular selling season, and whose owners are still reluctant to lower the price.

The fact that inventory is down is probably a result of the combination of fewer elective sellers in general, distressed sellers getting their price right, and OPTs cancelling their listings well before the holidays.

In SD County today there are 10,408 detached and attached active listings, which is among the lower counts – this needs to be updated, but a historical look:

The level of inventory can sway the market - if we see a flood of new listings, it could cause buyers to hesitate.

How are we doing so far?

New detached listings in NSDCC, Jan 1 – Feb 6:

All-San Diego County:

It looks like the regular sellers are getting a jump on the rest.

It was suggested that the market over $750,000 was “becoming non-existant”, and in yesterday’s seminar, a realtor said that demand in general was ”non-existant”. 

Does a market exist? Let’s look at MLS detached active, actives on market more than 90 days, contingents and pendings, sold-in-last-30-days listings, plus the NODs and NOTS counts:

The under-$500,000 groups are running well under a ratio of 2:1 actives-to-contingents+pendings, which has been a healthy sign in the past. As long as the servicers can keep dripping out the short-sale approvals and loan mods, we could call the lower-end market survivable – though, surprisingly, it’s where the bulk of the defaults are.

The $500,001 to $700,000 market is 2.28:1 on their actives-to-contingents+pendings ratio, and the defaults are well under the number of active listings, so apparently there are elective sellers in this group that could cancel and try again later if they don’t find a buyer. Plus, a few from above should drop into this category to keep everyone hopping.

More than a third of all active listings are priced over $700,000, yet no big rush to the exits with 45% of those languishing on the market for more than 90 days. The low amount of defaults seem to justify the loitering, but with only 77 sales closed in the last 30 days, you have to wonder when sellers and agents are going to figure it out – isn’t it obvious that something is wrong after 90 days and no deal and 80+% of those around you aren’t selling either?

A commenter suggested that the higher-end sellers can’t lower their price, due to loan balance – we’ll review that next.

A couple of posts back there were commenters mentioning their frustration, with some buying a house to end the uncertainty and move on with life.

Our reader named “Waiting to feel the magic”, who is closing escrow soon, said, “Effectively there’s almost no inventory”.

The recent statistics reflect the same.  There were 2,895 detached and attached SD listings marked pending in July (as of today) and there are 12,038 active listings. – or generally about one out of four listings that is finding a buyer currently. 

But after removing the fallouts and the over-zealous buyers, we can probably guess that only 1,000 or so of the 2,895 pendings were decent-quality buys that’ll close.  Considering that there are 2,264 listings marked as sold in July (S/AI=19%), plus that the bubbleinfo buyer is fairly picky, we can conclude:

Less than 10% of the active listings are worth considering.

After paring those down based on location and price, there are roughly 1-3 houses per month for buyers to consider seriously. Add the fatigue and discouragement that comes from 90+ percent of the homes being a waste of time, and you can’t blame buyers for wanting to get it over with – most have been looking for months or years!

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Will it get better in the coming months?  Will there be more quality inventory to consider? 

If you’re looking for a SFR in North SD County Coastal, it doesn’t look like it.

Let’s examine the current foreclosure rolls:

Though the trustee sales have increased by 51% Y-O-Y in North SD County Coastal, they aren’t flooding the market, and overall in San Diego County there are fewer being foreclosed this year.

The cancellations are a curious bunch.  A review of the 62 cancellations in May, 2010 found that NONE of them have made it back onto the NOD or NOTS lists.

It looks like the cancellations are being caused by loan mods or short sales (unless servicers are just letting borrowers off the hook altogether) so it’s likely that the properties won’t be coming back to market in the short-term.  The servicers will be deliberate in their review of those in the pipeline, and auction off 20-40 every month in North SD County Coastal. There were 193 closed MLS sales in July – we can handle 20-40 REO listings per month.

What are the prospects for additional inventory?

1.  Over-encumbered sellers?  They don’t have equity, don’t care, and are working the free-rent program.  You might see them raise their prices.

2.  Equity-sellers?  They don’t have to sell, and they aren’t going to give it away.

3.  Loan servicers increasing foreclosures?  No chance, program is working great as-is.

4.  MERS debacle?  It’ll likely be a drawn-out legal battle, and won’t help home-lookers over the next 6-12 months.  If anything it’ll probably slow down foreclosures/trustee sales.

5.  Unforeseen event?  Those usually freeze the market, not loosen it up.

Homelookers – expect more of the same for the rest of the year, but keep looking – there should be less competition over the next few months, than in early 2011. It only takes one!

Are the choppy market conditions causing more sellers to give it a go?

Specifically, are new listings on the increase, flooding the market when older reluctant listings are stagnating?  If so, it would sure give buyers another reason to pause.  The new-listing count has been higher than last year, but still historically low – here are the San Diego detached numbers:

No big flood to report, but the water has been rising due to inaccurate pricing. Not enough are selling, and a backlog is forming.

Today’s active inventory is 8,144 detached listings, and 3,908 attached listings, for a total of 12,052, which is 5% higher than it was four weeks ago.

July detached closings are probably going to be 20% to 30% lower than last month.  There were 2,074 detached sales in June, and so far in July we’ve only had 1,238 actually close.  So far there have been 1,656 detached listings get marked pending this month, so closings are going to be modest for the next few months, unless the short-sales can save the day.  Of the 1,238 detached closings this month, 196 were marked as short sales, or 16%, and 226 as REOs, or 18%.

We’ve seen the trustee-sale stats slowing down, could it be a problem with processing, and a backlog of properties beginning to clog the system? 

According to foreclosureradar.com, since January, 2009 there have been 15,471 SFRs and condos in San Diego County that have had their trustee sale, and gone back-to-bene.  In the same time frame, there have been 14,313 new REO listings hit the MLS, so it appears the processing is keeping up – that’s only a 1,158 difference:

It looks like the servicers are able to handle the current workload, and that it’s purely the banks’ decision to stop foreclosing, and switch to loan mods and short sales instead.

The MLS shows that last month there were 3,288 total sales in San Diego County, with about 40% of them being bank-related (1,953 regular, 684 short-sales, and 651 REOs).

In the second half of 2009, there were 18,646 closings on the MLS, with 43% being bank-related .If buyers flock to the sidelines for the second half of this year, the lower-motivated regular sellers will likely cancel, and the REO and short-sales will likely be moderated by the servicers to maintain calm.

The current inventory count isn’t alarming, but it is growing.  There are 9,444 regular (75%), 2,231 short-sale (18%) and 956 REOs (7%), or a total of 12,631 active listings in SD County currently.

I think we could average 2,000 – 2,500 sales per month for the second half, and still have an orderly market.  Mortgage rates in the mid-4s will help keep buyers interested, and hopefully there will be some discounted quality homes for sale! 

Here is the inventory trend of detached and attached active listings in San Diego County, with the counts taken in the middle of each month.  Look at how the inventory was flying off the shelf in Spring, 2009, and has been relatively low since…well, at least until a couple of months ago.

The recent spike means the current list-price exuberance is a lot of hot air.  There hasn’t been a rush to lower list prices yet, but sellers, it’s mid-July – it’s about time!

Hat tip to Schahrzad for her help with the numbers.

Lately I’ve been using the inventory numbers from housingtracker.net.  Today Schahrzad quietly pointed out that the actual inventory count is different everywhere you look.

Here’s how the San Diego Inventory is being reported:

Zip Realty is showing 12,691 homes for sale in San Diego County. 

Housingtracker shows 16,501 SFH+condos for sale this week, “derived from online listings”.

Redfin is showing 17,266 homes for sale, with 142 for-sale-by-owners, but it’s their count for May.

Sandicor MLS shows 11,446 actives, split between 7,758 detached, and 3,688 attached homes for sale.  Do with it what you will, and I’ll attempt to set up a way to track the inventory here.

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BMIT was the best at it – ocrenter we miss you!  Here is the last SD County chart from BMIT, for historical comparison:

Comparing July numbers are interesting, if we have around 3,000 detached and attached sales this month, we’ll be about the same as July 2006, and 2007, with substantially fewer actives to sell. 

Here are the current MLS stats for detached and attached homes in SD County:

ACT: 11,446

CONT: 4,285

PEND: 5,148

SOLD: 2,902  (June, 2010 – 1,873 det, 1,029 att)

SOLD: 16,278, $244/sf (Jan-June 2010)

SOLD: 16,289, $216/sf (Jan-June, 2009)

The number of sales are nearly identical year-over-year, while the average $/sf increased 13%. Sellers really have no excuse for not selling; market conditions are good if there are almost as many contingent and pendings as there are active listings.  What are the differences between the reporting websites?  I’m not sure, maybe they include contingents and FSBOs? We could add 2-4 units (431 active listings) and mobile/modular (779) and still only get 12,656 from the MLS, similar to ziprealty.com.