bubbleinfo.com

We’re up to 292 responses to last week’s survey, thank you readers!

Here are some of the comments:

I know prices are never going to be as low as I would like because of demand and bank and government collusion but I would appreciate it if Jim could focus more on properties that don’t require someone to make 250K+ a year. As a first time home buyer I would love to see more videos showing some glimmer of hope for being able to afford a home.

I’ll make an effort to include a wider range of price-points.  For those looking to spend less than $400,000, the need to compromise is very demanding.  Consider these three: buying a fixer, going further out, or living with something smaller, possibly a condo.  The chance of you finding a decent house, in a decent area, under $400,000 around North County Coastal is remote, at best.

Could there be further market deterioration in the future?  Yes, and it would likely be a result of squishdown from above.  Bubbleinfo.com will help you see any potential erosion in the mid-to-upper-end market that could benefit those below.

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Hat tip to Mr. T for sending this along – excerpted from Bloomberg:

Matthew and Carina Hensley offered $10,000 more than the asking price for a three-bedroom house in suburban Seattle, then lost out to one of seven other bidders.

Their $270,000 proposal last month came with a family portrait and a letter introducing the couple, their eight-month- old daughter, Harper, and their desire to build a family in the Renton, Washington, house with a yard backing onto a woody hillside.

Bidding wars, absent from most parts of the U.S. residential market since its peak in 2006, are erupting from Seattle and Silicon Valley to Miami and Washington, D.C.

The inventory of homes hovers close to a six-year low, while an increase in jobs and record affordability are tempting more buyers. The number of contracts to buy previously owned homes jumped 14 percent in February from a year earlier, the National Association of Realtors reported yesterday.

“The housing crash is finally giving way to recovery in an increasing number of markets across the country,” Zandi said in an e-mail. “The decline in unsold listings and vacant homes and the increase in rents presage better times ahead for single- family housing.”

Asking prices tend to be higher and inventory tends to be lower from March through May, while sales peak by June and inventory reaches a top in July, said Jed Kolko, chief economist for Trulia, a consumer-oriented real estate information service.

“As housing comes out of hibernation in the spring, demand picks up,” Kolko said in a telephone interview from San Francisco. “Prices peak early in the season and inventory peaks later. Buyers should be more patient, but sellers should move faster.”

Agents encountered multiple bids on about half of offers in Seattle, Boston, Washington, D.C. and Oregon this year through March 15, said Tim Ellis, real estate analyst for online brokerage Redfin. In the San Francisco area, Redfin agents reported that three of four offers involved competition, he said.

One home in Palo Alto, California, received 38 offers and sold for $1.65 million, or $452,000 more than its asking price, said Ken DeLeon, a real estate broker in Silicon Valley since 2002. Another client paid $2.56 million for a home in 2007 and is listing it for $3 million, with the expectation of receiving higher offers, he said. The seller wants to use the proceeds to buy a home in Saratoga, about 18 miles southeast of Palo Alto, where the market hasn’t heated up yet, DeLeon said.

Prices are hitting all-time highs, above Palo Alto’s 2007 peak levels, in the 94301 and 94306 ZIP codes, as buyers rush to purchase in advance of an expected flood of newly minted millionaires when Facebook Inc. (FB) has its initial public offering, DeLeon said. The Menlo Park-based social-networking company filed paperwork in February for an IPO that may result in a market valuation of $75 billion to $100 billion.

The Hensleys haven’t given up on living in the Renton, Washington, area, where both sets of parents live. The winning bidder offered $15,000 above the asking price and didn’t make the sale contingent on successful financing or inspection, according to Kimberly Hobbs, the Seattle broker who represented the seller.

“From this experience we learned that we have to move fast, especially if a house is nice,” Matthew Hensley said. “The competition is fierce out there.”

The media is enjoying the latest weak housing data, this from cnbc.com:

Several other analysts started to question the strength of the recovery as well, with some just hoping that perhaps a warm winter had pulled some demand forward from spring. Despite a miss on existing home sales in February, the headline pointed to, again, big gains from a year ago.

Yes, we are ahead of where we were, but as we’ve noted so many times here on this page, rising foreclosures will put added pressure on this market, and we may not be out of the woods yet.

“Despite an extraordinarily mild winter, home sales just plod along at a pace last seen during the mid-1990s,” notes Mark Zandi in his monthly report from Moody’s Analytics. “Thus, the underlying pace of home sales may not yet be strong enough to support a long-lasting upturn by home prices.”

Tomorrow we get the monthly reading on the S&P/Case-Shiller home price index. This index hasn’t been improving nearly as much as home sales, but the ever-hopeful housing lobby keeps blaming that on the fact that prices always lag sales, which is historically true, but what in today’s market has followed history?

Home prices are still falling not because of some lag, but because this housing market is running on sales of distressed properties at the very low end. The rest of the market is still stalled.

They don’t think about any other possibility, they just make up the hot soundbites and push hysteria.

There is another explanation – sellers have gone crazy with their list prices, and buyers  – loaded with ample market data – aren’t going for it.  As a result, sales will suffer.

Here a examples of the seller exuberance, and how buyers are reacting:

San Diego:

Carmel Valley:

Del Mar:

Encinitas:

SW Carlsbad:

There would be a surge of sales if list prices were more reasonable – and about 10% less would probably be enough. But the media won’t look deep enough - just a casual look, and off to the usual panic phrases. 

Look how steady the SOLD $/sf trends are in every market – the buyers aren’t biting, rates are going up, and it’s almost April.  If you are trying to sell, and  your list price hasn’t worked by now, it’s probably time to beat your neighbor to a “price adjustment”.

Gary is a long-time local real estate advisor.  http://londongroup.com/

By: Gary H. London

As published in the San Diego Business Journal, March 19, 2012

With signs of economic recovery finally promising to be sustainably good news, it’s time to reflect on what this means to the residential real estate sector.

In short order, it doesn’t mean much. Most of the for-sale residential real estate sector will lag in recovery. In the long run, the housing sector should fully recover, although new housing will be dominated by apartments and condominiums.

The first to recover has been rental housing occupancy. At its weakest in 2009, apartment vacancy was estimated to have been 7 percent to 8 percent.

That hasn’t lasted long. Rental vacancy now stands at 4 percent to 5 percent and is declining. Average rental rates have increased approximately 14 percent in the last seven years.

This is the undisputed stronghold of the real estate investment and development sector right now. Investment grade apartments have recently been trading at 5 percent to 6 percent capitalization rates, a metric indicating rising revenues and aggressive pricing. New apartment construction totaled fewer than 1,000 units last year, and we are on pace to add more than 2,000 units this year.

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With the tax exemption of debt-relief expiring at the end of the year, we keep thinking that there will be a surge of short-sale listings coming to market.

Not only is there NOT a surge of short-sale listings, there’s not a surge of ANY listings, relatively.

Here are the total new listings that came on the market in SD County between March 1st – 15th:

From Reason.tv:

 ”When I come into a house with buyers, I start picking it apart,” says San Diego’s Jim Klinge, known on the internet as ‘Jim the Realtor,’ a wise-cracking real estate agent who posts his honest, painful, and sometimes hilarious assessment of bank-owned properties on his Youtube channel.

While both the Bush and Obama administration have advocated programs aimed at keeping people in their homes , Klinge argues that this is the exact wrong approach and is only prolonging the agony in the housing market. 

“If they wanted to do what was best for the market, they would just unleash the floodgates and let it rip,” says Klinge. “It would cause a frenzy of buying to see all of these bank deals, and people would come running.”

Reason.tv met up with Klinge for a walkthrough of a bank-owned property in North San Diego County, where he pointed out the issues with the home and talked about the past, present and future of the housing market.

When does he think the market will bounce back and bring values back up to peak levels? “We need to be prepared for it being never,” he says. “I hate this whole investment thing. Buy a house because you like it, and you want to raise a family. The good news is, I think today’s buyer is exactly that.”

You’ve been waiting patiently for the right house – preferably an older home with character.

One that’s been well cared for, and if it were on a canyon lot, great.

You see a video on the internet of a new listing in University Heights, which doesn’t have the refinement of Mission Hills, but is still a pretty good neighborhood.  The last sale on the street was the house next door, which sold for $735,000 in 2008.  So even though the list price of $799,000 seems high, you reluctantly decide to join the bidding war.

But someone with more horsepower blows up the field.

The house on Arch just closed for $900,000 cash, and 13% over list price.

http://www.redfin.com/CA/San-Diego/4448-Arch-St-92116/home/5286660

Hat tip to our friend Auntie Agent, who was involved with the sale:  “Good listings in that area are SO limited. The house is nice but nothing overly special, it is just its siting and location in the neighborhood. It is so highly prized in that area and being on the canyon just brought buyers out in droves creating the frenzy that propelled the price skyward.”