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It may feel like a bumpy ride, but today’s local market looks pretty smooth, statistically. Here are detached sales for January:

Some days the MLS statistics don’t work for La Jolla, hard to figure why.

In the last post we were talking about the low volume of sales hamper easy decisions on value.

This is a good example of how a specialty feature – a newer, Spanish-style one-story house - will cause fits for nearby sellers of larger two-story models.   They will get caught up in the cost-per-sf argument, and expect to sell for $100,000 more than this one – but they’ll be lucky to get the same:

Yesterday reader jd asked for an opinion:  Given the way our govt. and financial institutions work, how do you see the next 4 to 5 years going in housing (in San Diego)?

I have a big interest in the future, mostly because I intend to turn over this enterprise to the kids.

The government intervention hasn’t worked much, and I don’t think there is anything left to try – at least anything that will get passed by Congress.  Between them and the banks, they might come up with one more watered-down proposal to grab votes this year, but that should be the end.

We as a society have become numb to the intervention – and now ignore it.  Yes, the low mortgage rates are enticing, but once you see the low inventory and analyze all the other reasons not to buy, the ultra-low rates are a sideshow.  You have to find a house to buy before they serve any benefit.

I think we’re going to see a new phase develop this year around San Diego:

Because the inventory is so tight, recent comparable sales are hard to come by.  All participants will be increasingly reliant on their experience, and have only sketchy data to back it up.  As a result, sone buyers will overpay – or at least so it’ll seem.  But they become the next comp that future buyers, sellers, and agents will try to digest as real or not real.

In some of the hotter neighborhoods, this will lead to a flurry of sales that build to a crescendo – and voila, we’ll see 10% appreciation or so over a six month period.  But it will be short-lived, because the pent-up supply will flood the market, and thwart any momentum.

The end result?

For the next few years we’ll see dramatic swings in pricing – with wild rollercoaster rides up and down.  It will be even more exaggerated by the greedy sellers who won’t be happy with 10% more, they’ll lop another 5% to 10% on top of that, only to be disappointed – though they caused their own demise.

Other things you can count on over the next few years:

1.  Lousy, inaccurate generalized data being spewed forth as reliable truth.

2.  A growing group of uninformed, ill-equipped realtors – which is already the majority.

3.  The big corporate residential real estate companies get out of the business, as agents flock to smaller boutique firms with better commission splits.  The corporate guys have no way to compete, unless they cut mid-and-upper management.

4.  Rampant short-sale fraud that tempers any pricing upswings.

5.  More upstart internet gizmos.

Things we could really use:

1. Either realtor.com revamps and takes charge, Redfin takes over, or a new real estate portal that focuses on what the consumer comes in and crushes all competitors.  This is the big game-changer that would define the future of realtors, and the role we play.

2.  Rules and regulations – or just some uniform guidance on how to handle short sales, multiple offers, exposing a new listing to the market, showings, etc.  Currently it is the wild, wild west.

3.  I think financing availability is fine the way it is, if any new lenders want to take a chance on riskier underwriting, go ahead.  A good indicator to watch – if you see it happening, it’ll bring in more amateur buyers and agents.

4.  Transparency would really benefit from a realtor feedback website, with sales history.

5.  I think the real estate bust and re-defined who everyone looks at housing, but it doesn’t make the future any more certain – probably less.  Those who have learned the most lessons are those likely to stay out of the game, so it’ll be the lesser-schooled who make the market.

What do you think?

Hat tip to Booty Juice for supplying more evidence on the impact of mortgage rates on home prices.

http://seekingalpha.com/article/278146-interest-rates-do-not-affect-home-prices

An excerpt:

At first glance, this is one of those things that makes perfect sense:  The same mortgage payment translates to a larger loan value when rates are low. But how does this hold up under statistical scrutiny?

The answer shocked me: They don’t. In fact, history shows the exact opposite is true.

Home prices tend to go up with interest rates:

How Is This Possible? There are two things I can think of to explain what we’re seeing. Either interest rates don’t matter as much as other factors in determining housing prices and the correlation is merely coincidence; or, higher rates harbor, or are harbored in, conditions that favor housing.

The first case isn’t too difficult to imagine. There are many factors that can affect housing: personal income, general economic conditions, supply vs. demand, family formation, population growth, technological innovations like the automobile that enabled suburbia, and so forth. Interest rate consequences can easily be lost in the mix. Maybe, if all other factors were held constant, we’d see a negative relationship to validate conventional wisdom.

The second case is more difficult to explain. Can high rates actually benefit housing prices? High interest rates provide incentive to save. More savings mean healthier consumer balance sheets, better credit and more equity to put down on a home. So higher rates should influence the relative mix between debt and equity capital, but it doesn’t necessarily influence total asset prices.

Click here for more: 

http://seekingalpha.com/article/278146-interest-rates-do-not-affect-home-prices

JtR:  The 1998-2007 mega-boom was fueled by several additional factors besides improving rates – more favorable taxation that encouraged flippers, exotic neg-am terms with fog-a-mirror qualifying, and 100% financing.

For those of you who wonder if it takes an expert to complete a major remodel – buying an old fixer and adding a second story to get a good ocean view – here is the before-and-after video of a house re-build in Old Carlsbad. 

The last four minutes is the owner talking about the project:

A few more of these stories and people are going to take it to the streets. From Reuters:

Remember Jackie Ramos? She caused a huge stir by going public, on YouTube, with her story of working for Bank of America, which fired her for allowing customers to pay off their debts with installment loans.

Now Ramos is back, and her latest story of Bank of America is even worse. The short version: BofA started charging her extra money, on her mortgage bill, for mortgage insurance she’d never asked for. Eventually, when she found out what the charges were for, she agreed to keep on making those insurance premiums, since they would allow her to stay in her home if anything ever happened to the other person on the mortgage, her son’s father Tim.

Then, in April 2011, Tim died — and the mortgage insurance didn’t pay out. Instead, BofA foreclosed on Ramos, and she lost her house. When she tried to ask why the insurance didn’t pay out, they wouldn’t answer her questions, on the grounds that she and Tim weren’t married.

Over email, Ramos told me that the insurance in question was absolutely mortgage life insurance, over and above the standard mortgage insurance which they already were paying for from another provider. That’s what BofA explained when they agreed to keep on paying the premiums. And Ramos also passed on a tax form 1098 from Bank of America to Tim, which clearly shows that Tim had paid mortgage insurance premiums in 2011 — even as the bank is now telling Ramos that there was no mortgage insurance at all.

At the very least, this is a case of Bank of America communicating in an absolutely atrocious manner with one of its homeowners. And at worst it’s a case of BofA foreclosing on and evicting someone who should instead have had her home paid off. One can’t expect that anybody at BofA realized that the person they were talking to was that Jackie Ramos. But it’s unfortunate for them that they didn’t. Because I suspect that this video might prove just as popular as the last one — which received more than 440,000 views, at last count.

Those who have been long-time bubbleinfo.com readers may remember back a few years when we ran Wednesday Rock Blogging.  Exene and I happen to share a birthday, so to commemorate, let’s re-start the WRB!

This song comes from the movie, Decline of Western Civilization, a phrase that may be more applicable to today’s environment. The camera picks up the mosh pit towards the end, which at these old-time X shows was an uncontrolled riot in front of the stage – and most times involved the band too. They do use a swear word in the song, so if you are sensitive, please don’t watch:

It’s John Doe’s birthday tomorrow!

The warehouse-type older tract homes in SE Carlsbad are sitting patiently, hoping that the spring selling season might bring some love their way.  The list would be longer if those who failed to sell last year would have trudged on, instead of renting:

The Del Mar Heights REO has closed for $1,900,000 - well over the list price of $1,749,900.

In the listing under concessions they noted that the buyer received $5,000 towards closing costs.

So we have two winners!

$1,895,000 – swm

$1,900,000 – Joe

Congratulations to you both! 

The winners will receive four tickets to the swanky Del Mar Turf Club for one day during the season (July 18th – Sept. 5th).  

Here is a link to the original post with video tour from January 4, 2012:  http://www.bubbleinfo.com/2012/01/04/new-reo-contest-2

See all the guesses in the comment section – this time almost everyone was low!

More from HW:

The FHFA set off a firestorm of discussion in 2011 when it announced an REO-bulk sales initiative that aims to repair the hardest-hit housing markets by selling off bulk assets to investors who have the ability to turn those properties into rentals.

The FHFA, as conservator for the government-sponsored enterprises, says investors can now enter the pre-qualification process to establish whether they have the financial ability and property-management capacity to bid on transactions during the initial pilot phase of the program.   

“This is an important step toward increasing private investment in foreclosed properties to maximize value and stabilize communities,” said FHFA acting director Edward DeMarco. “I am grateful for the collaborative effort by the many stakeholders including investors, nonprofit organizations, and state and local government officials, who have worked together on this Initiative.”

Investors who qualify will be able to purchase pools of foreclosed properties for the purpose of turning those homes into rentals.

The pre-qualification process will identify which investors have the expertise to manage the properties and the financial capacity to deal with the homes for a long period of time. Investors who participate have to sign agreements, promising to keep certain aspects of the deals confidential.

Investors who want to pre-qualify, can click here for information.