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Category Archive: ‘Market Conditions’

Housing Costs and the Future

In the last video, the presenter speculated that prices could go up 700% by year 2027, which would make homeownership all but impossible for regular folks.

Prices seem likely to rise over the long-term – what could keep a throttle on their gains?  Building more homes could slow down prices, and this week L.A. Mayor Eric Garcetti suggested a host of ideas and changes in order to achieve 100,000 new housing units by 2021:

The two best ideas?

1. The permitting of more granny flats is a viable solution for homeowners with larger lots.  An excerpt:

Dana Cuff, director of cityLAB at UCLA’s School of the Arts and Architecture, has spent years studying so-called backyard homes — or “granny flats” — that can house a renter, an in-law or a still-at-home 20-something. They exist all over town, often illegally, and regulations make them hard to build in many neighborhoods. Permitting more could go a long way toward helping L.A.’s housing shortage, Cuff said.

“There’s a half-million single family-houses in the city of Los Angeles,” she said. “If 10% of those added a granny flat, we’d be halfway [to Garcetti’s goal]. And it’s free land.”

2. The lack of available land located within driving range of San Diego is a real problem.  If there was a concerted effort by governments to make it easier to change zoning from commercial/industrial to residential, they could unlock additional parcels for development – like this one:

It’s likely that any new developments would be higher density, which would provide an interesting choice for future homebuyers. Are you willing to live like sardines to get a new or newer home, or will older homes on bigger lots be preferred – and retain their value better?

Rob Dawg said in the beginning, “Forget all previous assumptions about real estate”.  With the cost of living on the rise, will the newer, smaller, and less expensive homes topple the traditional SFR as the preferred choice of tomorrow’s homebuyer?

Posted by on Nov 9, 2014 in Market Conditions, The Future, Thesis, Thinking of Buying?, Thinking of Selling? | 2 comments

The Real Story on SD Inventory


Yesterday we saw Diana rolling out the new ‘Recovery Watch Map':

She mentioned that the supply of San Diego homes for sale has risen a “whopping 31%” year-over-year, and in an instant judgment, says, “You can bet those prices will ease more – the question is, will they go negative?”

(their map now says that our inventory is up 44% Y-o-Y)

With no other explanation, it’s easy to conclude that the sky is falling. Is it?

They are using the Zillow seasonally-adjusted numbers for September:

Active Inventory
% change

Yep, the inventory was 44% higher than it was than last year – when summer’s interest-rate rise caused buyers to gobble up anything resembling a decent buy, leaving the cupboard bare in September. To ignore that fact is short-sighted, especially when you compare to recent history.

When you compare the total number of listings for the first 10 months of the year, you don’t see much of a flood either – only a 3% increase Y-o-Y, and all of those could be re-lists:

2013: 42,746

2014: 44,234

Don’t make decisions just based on the soundbites – look deeper to separate the facts from the hysteria. Get good help!

Posted by on Nov 7, 2014 in Inventory, Market Conditions | 3 comments

SD Case-Shiller Tiered

We saw this week that the local seasonally-adjusted Case-Shiller Index has been trending negative since April.  Here we see how the recent gains have been driven by the lower-end properties:

CSI tiered

The difference could simply be a percentage thing – a home’s value that goes from $300,000 to $400,000 has risen 33%, while a $700,000 home that goes up to $800,000 has only increased 14%.

But the underlying story is that the upper-end home values haven’t done much over the last 18 months.

Read more here:

An excerpt:

As in 2010, today’s price movement is the tail end of a mini-bubble, set into motion some 18 months earlier. This price rise was produced by short-lived speculator interference in 2013 (not a tax stimulus, as in 2009). This pricing activity is under pressure from insufficient personal incomes, rising fixed-rate mortgage (FRM) rates and new construction.

Prices are expected to continue to fall in the coming months, bottoming in 2015 and retreating toward the mean price trendline. The cooling of speculative fever and continually rising mortgage rates will prolong the falling trend in sales volume, pulling prices down in turn. Remember, real estate prices track and run with bond prices due to interest rate movement. A lag time of a couple of months exists due to remaining perceptions of past real estate price movement — the sticky price phenomenon.

Posted by on Nov 6, 2014 in Jim's Take on the Market, Market Conditions, North County Coastal, Same-House Sales | 4 comments

Chinese Influx Winding Down?

Alisha Chen

Hat tip to daytrip for sending this in:


“At first, they were a little leery,” she recalled. “They’d say, ‘OK. I’ll buy one property as an investment.’ Six months later they were amazed at how much they were getting back. They call and say, ‘I want to buy more.'”

Today, the transpacific trade in Southern California real estate is big business. Chinese citizens bought $22 billion worth of homes in the United States in the 12 months that ended in March, according to estimates by the National Assn. of Realtors. And with its direct flights to China and large Asian communities, the Southland is their favorite destination.

They’re buying homes for themselves to emigrate, for their children to attend college, or for rental income. Neighborhoods from Irvine to Arcadia are being transformed.

Chen now employs eight people — who, combined, speak eight languages — to buy and manage properties. She has offices in Irvine, Chino and Taiwan. When she hears grumbling about Chinese money pricing out American home buyers, she notes that it helped revive the housing market, and that all those transactions keep people working at banks and title companies and contractors.

“This has created a lot of jobs,” she said.

But even she’s starting to wonder how much longer this influx of cash from across the Pacific will last. The Chinese government keeps making noise about clamping down on currency leaving the country. The U.S. government is talking about taxes on foreign investors, which could make buying here a little less attractive. Buyers are starting to get a bit spooked. And there’s only so many of these deals she can do.

All that has Chen wondering what trend might come next.

“I think I’m not going to be putting as much energy into this,” she said. “I think the next few years are going to be a good time for first-time buyers.”

Posted by on Nov 4, 2014 in Market Buzz, Market Conditions | 0 comments

Fewer First-Timers


Hat tip to shadash for sending in this article:

Here are excerpts:

Advocates of looser lending standards may point to the NAR’s latest survey to highlight problems on the mortgage market. But it’s worth noting that the share of first-time buyers didn’t increase during the housing bubble, when it was too easy to get a mortgage. That’s because home prices were rising. The share of first-time buyers fell to 36% in 2006, at the peak of the bubble, from 40% in the prior three years.

And even though credit was much tighter in 2009 and 2010, the share of first time buyers jumped to 47% and 50%, respectively. Lower home prices helped. So, too, did an $8,000 federal tax credit for first-time buyers, which expired in June 2010.

Home prices have been rising for the last two years—and first-time buyers have accounted for a falling share of sales in that time.

Rising prices have fixed a number of ills ailing the housing market. They make consumers more willing to purchase homes or fix up the ones they live in. They make it easier for owners to sell if they get into trouble on their mortgage, limiting foreclosures.

But rising prices also make homes less affordable, especially for the marginal buyer, which in many cases is also the first-time buyer.

The NAR survey also found that people are staying in their homes longer than in the past. The median age of tenure–that is, the amount of time a typical homeowner stays in one house–rose to 10 years in the most recent survey, from six years in 2007.

The typical first-time buyer last year was 31 years old, while the typical repeat buyer was 53.



It’s not just the first-timers who are getting shut out – there are others too:

1.  Those with average incomes.

2. Those with above-average incomes who are picky.

3. Self-employed and others who don’t have beefy tax returns.

4.  Anybody with bad credit.

Yet the affordability has declined rapidly – from CAR:

CAR’s Housing Affordability Index – which tracks the percentage of households that can afford a median-priced, single-family detached home assuming current interest rates and 20% down – fell from 33% in the first quarter of 2014 to 30% in the second quarter, a 26% decline from a peak of 56% in early 2012.

While home buyers needed to earn an annual income of $56,320 to purchase the median-priced house two years ago, today they need an additional $37,270, or $93,590 total annually, to qualify.

The $93,590 annual income is needed to purchase the state’s median-priced home of $457,140.  Around NSDCC, the current median price is over $1,000,000!

Comparing the first nine months of 2014 to the frenzied first nine months of 2013, the NSDCC detached-home sales have dropped 15% this year – which is still pretty strong if you ask me.  We live in an affluent area!

By this time next year we should know if we have enough ready, willing – and able – buyers to keep prices at these levels or higher.

Posted by on Nov 3, 2014 in Jim's Take on the Market, Market Conditions | 5 comments

Estate Sales

We’ve explored a few of the alternative groups of potential sellers, but none are emerging as major contributors.  In a ‘normalizing’ market, it means we are back to the Big 3 sources of new listings; Death, Divorce, and Job Transfer.

Carmel Valley doesn’t have much to worry about here – the oldest CV homes were built in the mid-1980s.  But in the remaining areas of San Diego’s North County coastal region, where houses go back to the 1940s and 1950s, there are many long-time owners who will stay for the duration.

Back in the old days, it was routine to sell your parents’ home and split the proceeds with the siblings.

But that was when everyone could afford their own house.

Today, one of the siblings might want, or need, to take possession because they can’t afford these prices.  As a result, what used to be a steady flow of new listings may not be as fruitful as before.

It will be relative to the quality of the home.

Yesterday I was in Oceanside, where a past client had purchased in the 55+ community of Oceana.  I had sold her house about 10 years ago, and she moved there with her husband thinking it would be the final stop.  It was for her husband, but now she needs assisted living, so she is exploring those facilities.

Oceana is an average senior community – the homes are 1,000sf to 1,600sf and sell in the $200,000 and $300,000s.  Sales are increasing – here are the number of closed sales between Jan 1 and Sept 30:

2010: 57

2011: 57

2012: 50

2013: 69

2014: 66

There are 22 active listings today, which is no shortage of supply is you are thinking of living there, and it is an affordable option.

But in the swankier parts of town, when a homeowner dies, their home is more likely to stay in the family today just because the siblings having such a difficult time buying their own home.

The condition of these homes is usually less than spectacular, and those that do come up for sale will be great flipper food.  You’ll see more of them in areas where homes were built in the 1960s and 1970s, because those original owners have had no better place to live for the money!

Posted by on Oct 29, 2014 in Boomers, Jim's Take on the Market, Market Conditions | 15 comments

Who’s Selling?

Yesterday we wondered if there was a possible threat of a baby-boomer liquidation sale in the coming years, and we had a load of comments – thanks for participating!.

Can we get a feel for what’s happening now?  Here’s a check of the 67 NSDCC houses that have sold between $750,000 and $1,000,000 in the last 30 days.

These are the years when the sellers purchased:

Years Purchased
Number of Sellers

Only a couple sold for less than the price they paid, and there were 3 short sales too (no REO listings).  The newer homes in Carmel Valley bolstered the more-recent stats too.

About 36% of the sellers bought their home prior to 2001, and are probably baby-boomers (or older). Most will at least be empty-nesters by now, and could be candidates for the ‘downsize and travel’ crowd. If their numbers increased, they would most likely be offering older fixers upon which flippers can feast, and eventually be sold to those looking for a substitute for new homes, which are in short supply.

Posted by on Oct 24, 2014 in Jim's Take on the Market, Market Conditions, North County Coastal, Thinking of Buying?, Thinking of Selling? | 16 comments

90% Same As 1986

Owning a house is one of the few ways to try to get ahead. From the Atlantic:

Today, the top 0.1 percent of Americans—about 160,000 families, with net assets greater than $20 million—own 22 percent of household wealth, while the share of wealth held by the bottom 90 percent of Americans is no different than during their grandparents’ time.

What does this look like at the household level? Perhaps the most striking chart produced by the economists’ efforts to measure U.S. wealth is the one below, which shows that after a long march upward, and then a steep decline, the “average real wealth of bottom 90 percent families is no higher in 2012 than in 1986.” Meanwhile, the top 1 percent of wealthy families has almost completely recovered from the ill effects of the financial crisis.

rich get richer

Read the full article here:

Posted by on Oct 21, 2014 in Market Conditions | 2 comments