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How are short sales affecting the market?

This chart divides Actives by Pendings (A/P, our gauge of the relative ‘health’ of each market). We’ve seen in the past that a 2.00 reading seemed healthy, and 3.00 was tolerable. I included contingents in the Pending counts because now they are much more likely to stick, and if a buyer does cancel, it’ll be because they found a better one and replaced it.

The two columns on the right side of the chart show the number of short sales in each Pending count, and the total number of short sales closed last year in each town:

Oceanside and Vista are smoking red hot with 1.05 reading – they literally have almost as many pendings as actives. Why? Because sellers AND buyers AND agents have embraced short sales. Comparing the pending short-sale counts of current vs. last year, it looks like Oceanside and Vista will probably set new records this year – and received a lot of experience in 2011.

But in NSDCC (the last six categories), it appears that short sales are a relatively new concept – but coming on strong. The difference is capitulation – Oceanside and Vista sellers have conceded on price, and buyers are responding. As a result, the market is working.

We need some old fashioned market clearing in NSDCC, where it is stale and stagnant.

In the last six towns on the list, there are 1,086 detached homes for sale. Even with the dozens of “refreshed” re-lists in the new year, the average market time is 121 days – with 21% of them having been on the market for more than six months!

How many sellers are in the ‘pre-distressed’ stage, and are just testing the market today at higher pricing to see if they can get out with at least enough for a steak dinner?

There must be quite a few – what will be the effect when they finally cave?

Specifically, would it hurt the market if they lowered their price and entered short-sale status?

Based on areas that have already seen capitulation, it doesn’t look like it (capitulation = lenders and listing agents getting sellers off the fence, price-wise).

Oh but wait JtR, Oceanside and Vista is a whole different socioeconomic class; there aren’t that many rich people. OK, we’ll see, but when there are 18 offers submitted on a funky older house on a busy street in La Jolla, I’ll stick to my guns that there are plenty of buyers….waiting.

Short sales are the device being used to ensure a softer landing, and the lenders/servicers will control the pace as needed. But they would be smart to recognize that market clearing is working great where implemented!

In the not-so-distant past, both buyers and agents avoided short sales. They took too long, and the outcome was very uncertain.

But closings of detached-home short sales are increasing around the county:

We saw that the banks’ approval rate of recently closed NSDCC short sales was less than 60 days – helping to keep buyers interested in sticking around. With banks typically pricing REOs at retail, short sales might be the only place where you can find a deal.

Those who want to buy a foreclosure near UCSD might find this attractive:

Google Earth link: http://g.co/maps/67cyj

We’ve seen the detached sales/price statistics be fairly flat around here the last couple of years.

If anything, the year-over-year stats in most most zips are down slightly, but check a couple of interesting hot spots – Del Mar and Rancho Santa Fe.

There will be some late-reporters, but as of today, this sums up the 2011 sales and pricing:

Updated 1/20/12

I made this statement at the end of 2010:

The average cost-per-sf for detached sales in SD County rose 9% in 2010. I think it’ll increase another 9% in 2011, fueled by the red-hot lower price ranges. But sales will struggle, possibly 20% fewer sales overall, because buyers will want to hold out for the best. The bar is rising on what buyers are willing to tolerate, but they’ll spend the money on a top-quality house.

I’m not sure where I got the 9% YOY increase in 2010, because looking at the detached MLS stats below, the average cost-per-sf change between 2009 and 2010 was only +7.4%.

The year-over-year change in the average cost-per-sf between 2010 and 2011 went DOWN 4.5%, not up. Maybe that had something to do with the 2011 sales actually increasing slightly over 2010.

Our focus is on selling detached homes between La Jolla and Carlsbad.

How did North San Diego County Coastal do?

Changes of 1% or 2% can be considered noise, and they reflect that the NSDCC market has been flat for the last two years. Sales are holding their own, thanks to the low rates and just enough decent listings.

What is JtR’s prediction for 2012 around NSDCC?

There were 188 REO listings and 275 short-sales closed in 2011, or about 18% of the overall sales. Short-sellers should abound, due to the expiration of the tax exemption on debt relief at the end of the year, because if it is extended it probably won’t happen until the last minute. There will probably be commotion around the election and politics, but it won’t stop buyers from grabbing the deals.

My 2012 guess: NSDCC detached sales +10%, and their avg. cost-per-sf drops 5% from 2011.

What is your prediction?

The sales history of this property is displayed at the end of the video.

With a 20% down payment and adding 0.50% to what the 30-year conforming rate was during the month it closed, here are what the payments would have been:

Happy New Year!

Will 2012 get off to a fast start? It is somewhat predictable, let’s consider some data.

The quarterly detached sales in NSDCC:

The first half sales have been stronger the last two years, but it’s probably due more to the improvement we’ve had since March 2009 in both housing and the stock market.

Will we have 500 sales in the first quarter of 2012?

Let’s review the categories to estimate:

1. The MLS shows that are 275 listings in the pending category, and 187 of those were marked pending on December 13th or prior, so they are beyond their 17-day contingency period and pretty likely to close. Let’s say 170 will close in 1Q12. Of the other 88, let’s say half will close, or 44.

2. There are 119 listings marked contingent, but they tend to be flaky, and drawn out. Let’s say only 50 of those will close in 1Q12.

3. There are currently 1,100 active listings – how many will close in 1Q12? They are a picked-over bunch, so they will have to be lowering their price aggressively to get back in the game – but how many sellers will resist, thinking that the spring selling season is just around the corner? Plenty, so let’s say only 10%, or 110, will close in the first quarter.

4. There were 137 listings that closed in 1Q11 that also listed in 1Q11 – they weren’t messing around. Coincidentally, there were 136 like that in 2010, so let’s use 137 for 2012.

170 + 44 + 50 + 110 + 137 = 511 estimated sales in the first quarter of 2012.

I think 511 sales in the first quarter is conservative. With 30-year mortgage rates averaging under 4%, the market is ripe for a quick start – it will take a boatload of stubborness of behalf of sellers for us not to sell more NSDCC houses this quarter, than in recent years.

But that seller stubborness is certainly possible!

There will be realtors who see this video and think, “Jim, you have it all wrong.”

“The listing agent’s duty is to the seller only, not the bank.”

But that is the short-sighted, greedy viewpoint.  For agents to hide behind that simple thought, and ignore the big picture so they can pad their wallets is how we got here in the first place.

The big-picture viewpoint:

1. It’s wrong because it’s wrong.

2. To purposely cause banks to accept less than full value increases the eventual taxpayer bailout, which our children and grandchildren will inherit.  If you are OK with that, you are a dirtbag.

3.  To perpetuate the fraudulent activity increases the chances that banks will shut down the realtor program, and find a way to liquidate these properties without us.

4.  I encourage you to sell my listings, you should allow me to sell yours.  It is how the co-op realtor business was designed in the early 1960s, and should be respected – or disbanded once and for all for the kill-or-be-killed program.

If you are a realtor and still have a problem with this, then submit your name and license number with your comment so I can turn you in too:

What’s in store for 2012? I think we can assume that 80% or more of the listings are going to come on the market priced at least 10% to 20% too high over the next 4-6 months. 

The banks aren’t pushing defaulters, and the elective sellers aren’t going to give it away. 

But sellers have been like that for a while now – heck, it’s another example of how market conditions are fairly normal, or at least they aren’t radically out of kilter.  Mortgages are available at the most attractive rates ever, buyers are using healthy down payments, and the inventory is tight. 

There is no problem with the demand - it’s just the price: 

One of the better-looking houses that sold this year in Carlsbad: