bubbleinfo.com

From sddt.com

A housing shortage once the market fully recovers is one of the biggest concerns facing San Diego real estate, according to an economic forecast delivered to local agents by the chief economist at the National Association of Realtors (NAR) on Friday.

Reiterating many issues familiar to anyone in the local market, Lawrence Yun — speaking at the San Diego Association of Realtors’ Real Estate Summit — said the shortage of housing created by the historic lows in new home construction pose a potential crisis two to three years from now.

He said the conditions for an economic recovery in San Diego are in place, though it’s unclear what the recovery’s pace will be.  And if the job situation improves considerably, the all-time lows in homebuilding will be a big problem.

“I’m concerned with the lack of new housing,” Yun said. “There’s always volatility in home prices in coastal areas due to the difficulty of building. It’s possible if the job situation gets better, we could face a shortage when the distressed inventory is out of the system.”

This scarcity of supply would result in quickly escalating home prices that would be good for current homeowners, but bad for the industry.  “There would be more people priced out of the market and far fewer transactions,” he said. “Home building needs to reflect population growth.”

Before his speech, Yun said it was possible for San Diego to recover much faster than the rest of the country. “Coastal markets recover a little faster in terms of prices. All of real estate is local.”

“America is fortunate that it can print money and not have inflation, because foreigners still trust the dollar,” he said. “If the low-probability event happened and countries started to distrust the dollar, mortgage rates would increase very fast.”

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The psycho-babble was flying today. 

First it was McMillin talking the party line like an NAR booster in an article in the U-T, saying it is a great time to buy or sell. 

Then HW features more ivory-tower guys talking about the market, entitling the article: Homebuyer Demand All But a ‘Standstill’, but I couldn’t find where they actually used the word standstill in the text.  Everyone speaking with great certainty as if they know what’s actually happening, and the MSM soaking it up like it’s factual - with editors applying liberal interpretations to sex up the effect.

Here’s a view from street-level:

These types of stories drive me crazy – sellers will skim the headlines and get more over-confident:

Aug. 9 (Bloomberg) — The percentage of U.S. homeowners who owe more than their properties are worth declined in the second quarter as tax credits boosted prices in California and foreclosures surged, real estate data provider Zillow.com said.

The Seattle-based company found that 21.5 percent of homeowners were underwater on their mortgages, down from 23.3 percent in the first quarter and 23 percent a year earlier, according to a report today.

The decline came as property prices in California were bolstered by state and federal benefits for homebuyers, Zillow said. Prices climbed from a year earlier in 28 percent of the markets tracked in California, the most populous state. They gained 5.5 percent in the Los Angeles area, 5.9 percent in San Francisco, and 7.3 percent in San Diego.

“The double tax credits for some California homebuyers have certainly stimulated housing demand there and are partly responsible for the rapid — and likely unsustainable — rates of appreciation in many markets across the state,” Stan Humphries, chief economist at Zillow, said in a statement.

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Hat tip to Susie for sending along this article from TIME/CNN, full of classics:

“The whole market has slowed down anywhere from 30% to 40% across the country,”   Not in San Diego, where we’ve seen YOY and MOM sales be virtually unchanged.

“If you are trying to be an opportunistic seller and you don’t have to sell, there’s no reason to have it on the market right now.” says Trulia’s Shuman. “The demand is not there.”  Huh?  Not in SD, where there is plenty of people willing to buy today if they could find a reasonably-priced house.

“If your home has been on the market for four months and it hasn’t sold, you have to adjust your price.”  Four months?  It’s the middle of July, better make it four weeks, or less!

From the U-T:

San Diego County’s home prices rose 7 percent in May from the previous year, the second highest year-over-year increase in the country, according to the real estate website zillow.com. Nationwide, home prices dropped 3.8 percent in the same time period.

The Seattle-based company comes up with its home-value index by looking not only at homes that have sold but also pending sales as well as homes that are not on the market. In San Diego County, the median home price was $375,400, a 1 percent increase from the previous month. Of course, that’s down 30.1 percent from the peak median price of $538,200 in October 2005.

Here is the breakdown of Zillow’s numbers, which it releases every month, and how they compare with other home-price statistics:

How do we rank? In terms of price increases, San Diego County is second only to the Virginia Beach, Va., metro area. When compared with major metro areas, San Diego is No. 1. Next are San Francisco with a 5.9 percent increase, Los Angeles with a 5.3 increase, San Jose and Santa Barbara each with a 4.7 increase. If the list seems a little California-centric, it is. Of the top 10 markets, six of them are in the Golden State.

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Thornberg hasn’t been a big cheerleader, so this report is curious – from the U-T:

County home prices, which began to recover last year, will continue rising but at a slowing pace as government stimulus programs expire, Beacon Economics forecasters predicted Friday.

In a wide-ranging review of the local economy at the San Diego Hilton Torrey Pines, the San Rafael consulting firm’s economists said single-family resale home prices will trend upward, from the first quarter’s median of $382,788 to $439,000 over the next four years — a nearly 15 percent rise.

“Home prices in San Diego are great news here,” said Brad Kemp, Beacon’s director of regional research.

But the recent increases occurred with the help of federal stimulus dollars, not because of any underlying economic fundamentals, such as significant job or population growth that would spark long-term demand, the economists said.

With foreclosures expected to increase, home-buying incentives expiring and nearly a third of all homes worth less than their mortgage balance, Kemp said sales and price growth will slow down. The $439,000 median price forecast for 2014 would still be 23 percent below the 2006 peak of $571,580.

“I don’t think it will grow at an exponential pace anytime soon,” he said.

The forecast falls in line with other economists and real estate industry analysts, who have predicted a leveling off of prices or a drop of as much as 5 percent for the rest of the year, after federal homebuyer tax credits and low interest rates end. An expected increase in foreclosure properties also is expected to keep a damper on prices.

This guy has been tempering his remarks the last couple of years, but he cuts loose today with one of the more irresponsible comments heard in quite a while – from the latimes.com:

“The stimulus has worked,” said Rick Hoffman, president of Coldwell Banker Residential Brokerage in San Diego and Temecula Valley. “Buyers are confident that we have seen the bottom of the real estate market and that we are on the way back up.”

He can’t speak for buyers - and he should have more respect for his agents who are trying to properly advise their clients.  

Proceed with caution, and buy only if you find the right house, at the right price.

From the latimes.com:

Home sale prices in Southern California showed fresh strength in January, bouncing 8.6% from the same month one year earlier — a period when the market was inundated with steeply discounted bank-owned properties.

But compared with a particularly strong December, the median fell 6.1% to $271,500 in January, ending eight consecutive months of price appreciation or stability in the Southland, MDA DataQuick, a San Diego real estate research firm, said Tuesday.

The month-to-month decline was attributable in part to the higher percentage of cheaper Inland Empire homes that sold in January compared with December as buyers in pricier locales stopped searching during the holidays and investors and first-time buyers made up a larger share of shoppers.

“The [January] numbers reflect, for the most part, people who would be out shopping in the middle of the holidays anywhere from late November to early January,” DataQuick analyst Andrew LePage said. “So it doesn’t surprise me that the concentration shifts a little bit back toward investors and first-time buyers, who probably feel the most urgency to snag what they consider a deal. A lot of other potential buyers would have been focused on other things during the holidays.”

We know that when you hear that the median price went up, all it means is that more higher-end houses were selling.  The media makes it out that prices are rising, and that is not true.

(I spoke to the reporter Alejandro, but didn’t get off any pearls of wisdom.  Got one in here though, with the Financial Times – and I was quoted before I saw CR say the same thing.)

From the FT:

After spending most of the past year focusing on largely ineffective loan modification plans, BofA, Wells Fargo, JPMorgan Chase and other large banks said they were ramping up short sales as a means of dealing with the housing crisis.

“If 2009 was the year of the loan modification, 2010 will be the year of the short sale,” said Jim Klinge, a real-estate broker in San Diego, California.

Some of the largest mortgage servicers are scrambling to make the most of this shift. Wells Fargo is holding seminars to teach real-estate brokers how to conduct short sales. Citigroup created a unit to expedite short sales and recently announced a pilot programme that gives homeowners who turn in their deed to the bank – known as a deed-in-lieu transaction – at least $1,000 towards relocation expenses.

BofA has hired additional staff to handle the increased volume, which is running at about double the level of a year ago. “Short sales are growing faster than REOs [real estate owned transactions] and that’s a new development,” said Matt Vernon, a BofA executive recently named to a new position of overseeing short sales.

Hat tip to Rick the Tuna for sending this article from the North County Times:

“The environment is really conducive to prices rising at this particular point,” said Alan Gin, an economics professor at the University of San Diego’s Burnham-Moores Center for Real Estate. “Interest rates are low, and prices are low.”

Most of the activity in the market is in the lower price tiers, where new homebuyers are trying to take advantage of the 38 percent decline in value since the March 2006 peak.

The index breaks homes into three price categories. The lowest category, comprising homes worth less than $297,000 in San Diego County, had the highest rate of growth for the fifth month in a row. Industry participants say tight supplies are driving up prices, with lenders slow to release foreclosed homes into the market.

I think there is always a 10% swing in what a home is worth. 

If you’re selling and do all of the following – hire a great realtor, spruce up the joint, make it easy to see, and put an attractive price on it, you’ll get towards the higher end of the 10% range. 

If you hire a lousy realtor, leave it ugly, make it hard to show, and price it too high, you’ll get towards the bottom of the range.

There will be more homes selling towards the top of the range when the market feels like it is heating up, but the internet provides all the data to keep buyers from going crazy and bursting out of that range. 

It’ll seem like prices might be ticking up, but they should stay in the range.  There should be plenty of supply just under the surface, waiting to come forth:

• Defaulters
• Loan Mod-ers
• Short Sellers
• Bank-Owneds
• Expired listings from last year
• Unemployed homeowners
• Older folks who need money/no stairs

Don’t be buffaloed by any pundits who make it sound like there is a viable threat of spiking prices.  There will always be an occasional lucky sale, and let’s face it – Southern Californians have a propensity to rush in and gobble up properties at any price.  But there should be plenty of homes to go around.

From the nctimes.com, where Eric has the rather large shoes to fill of Zach Fox – note the trouble he had in finding an explanation:

The median price of detached, single-family homes in North County surged 21.9 percent higher in November compared with the same month last year —- the fourth consecutive month of year-over-year increases, a Realtors association said.

Last month’s big price move owed much to the comparison with abysmal sales in November 2008, along with a shift in the mix of home sales, as the middle tiers of the market showed signs of life after a long recession. The median resale price for houses reached $436,250 last month, according to the HomeDex report from the North San Diego County Association of Realtors.

“My buyers have kind of shifted,” said Diane Conaway, an Escondido-based Realtor and board member for the association. “I’ve still got first-time buyers, but the last four have all been in the $500,000-$700,000 range. Those people are finally coming out.”

Indeed, the report shows a decline in the number of homes sold for less than $300,000 compared with November 2008, but an increase in the number of homes sold in all other price categories below $1 million.

The report shows that inventory grew a bit. There were enough homes on the market for 5.7 months of sales at last month’s pace, up 9 percent from October, but still down 31 percent from last year.

Conaway also credited the increase in November to activity among buyers who thought a federal tax credit would be expiring. Congress later extended it to April.

Real estate agent Jim Klinge thinks the price statistic itself is misleading.

“It goes to show you how whacky the median price is for an indicator,” he said. The median, which is the point at which half the sales prices were higher and half were lower, can be skewed when buying activity shifts to varying sectors of the market.

Homes sold in parts of Escondido, Oceanside and Poway drove much of the growth, with each of those areas showing double-digit increases compared to last year.

The appearance of a sudden jump in annual numbers may also reflect a period beginning in November 2008 when first prices dropped into the $360,000 range, an apparent trough that ended in April.

Still, agents and analysts were surprised by the new median price.

“Wow,” Conaway said. “That’s quite a jump.”