bubbleinfo.com

What is the difference between peak pricing and today? 

Many considered that 2006 was the peak of the market in 92130, here is a youtube tour of a few recent sales, and how they compared to previous comps:

Hat tip to Rob who sent this in:

SAN DIEGO — The safest place to live in San Diego includes parts of Rancho Peñasquitos and Carmel Valley, according to a new study by a private company.

NeighborhoodScout, a company that specializes in helping families and businesses make relocation decisions, took a variety of crime data from the nation’s 50 largest cities and came up with a ranking of 1 to 100, with 100 being the best score. It recently posted an article on WalletPop.com that scored Rancho Peñasquitos/Carmel Valley at 97. The chance of becoming a victim of crime in the area — which included ZIP codes 92130, 92129 and 92121 — was listed as 1 in 769.

Data included reports from local agencies and the FBI and looked at violent and property crimes, including murder, rape, theft and burglary. According to the study, the nation’s average crime index is 50. The company’s Web site said the area around and west of Carmel Mountain and Black Mountain roads is in the top 15 percent of the nation’s wealthiest communities and has a median home value of $746,668.

A fraud follow-up by Kelly at the Voice of San Diego:

All of the 81 condos from the Sommerset Villas, Sommerset Woods and Westlake Ranch complexes involved in the scam have been repossessed. Twenty-four have yet to find new buyers. But the other 57 have resold for prices drastically lower than the mortgages were worth, let alone the initial purchase prices.

The U.S. taxpayer is paying for the mounting losses. Across the complexes, the cost to taxpayers is at least $7.8 million.

When the units were just in the beginning stages of foreclosure, it was too soon to tell whether the government-sponsored mortgage companies, Freddie Mac and Fannie Mae, had definitely purchased the shaky loans. Now that the units have gone back to the bank and resold, public records clearly show the majority of these units had mortgages that were sold to Fannie and Freddie — now largely owned by taxpayers.

Take Sommerset Villas. The 26 units previously owned by McConville’s straw buyers that have resold as foreclosures have sold, on average, for 71 percent less than the purchase prices in 2008. And some have been worse: A 480-square-foot studio apartment that sold for $265,000 in 2008 sold in October for $47,000 — an 82 percent drop.

That’s added up to at least $3.8 million in losses for Fannie and Freddie so far in just that complex. Add to that estimate a $2.7 million loss in Sommerset Woods, and a $1.3 million loss in Westlake Ranch, according to an analysis of property records.

From an article in the sddt:

The commercial mortgage-backed securities market is making a comeback, and capital appears to be slowly returning, but construction financing may be elusive for a very long time.

These were a few of the conclusions reached by Mark Gibson, Holliday Fenoglio Fowler vice chairman and executive managing member during a session at The Grand Del Mar resort in the Del Mar Heights area recently. 

Gibson, whose mortgage banking and financial services firm has closed more than $235 billion in 11,000-plus transactions, contends that despite reports to the contrary, there isn’t a liquidity problem. “I don’t think it’s a lack of capital … it’s a question of price …” Gibson said adding that those who might sell are unwilling to at these depressed values.

Holliday Fenoglio, which sponsored the event, reported that by its calculations, prices are currently between 30 percent and 40 percent off their 2007 peak in the county according to location.

Read the rest of this entry »

A youtube tour of recent detached sales in Carlsbad:

Robert Shiller discussing the real estate market – thanks doughboy!

We have discharged all previous assumptions, and are open to what the future may bring for the local real estate market. 

Let’s examine – what are the possibilities, given these conditions:

1. Low sales volume.

2. Low pressure on pricing.

3. Not many foreclosures.

4. Abundant realtor fraud.

5. Lots of buyers willing to buy, but picky on price & condition.

Last year’s Spring Kick was a dud, by all accounts.  Sellers came out blazing with high prices, but buyers didn’t bite - and the sales volume was lower than usual.  When sellers succumbed, and got more realistic later in the year, then more sales occured (almost as many as 2005):

Buyers are holding tough, but I think we’ll probably see this year’s number of Spring Kick sales be better than last year, helped somewhat by the expiring homebuyer tax credit.  But sales will still be low, compared to previous years.

Won’t low sales volume + anxious buyers = rising prices? 

It has in the past, but thankfully we have jettisoned all previous theories. 

What are the barriers to increasing prices? 

The fraud will play a role in keeping a lid on pricing, and I think we’re seeing enough low/fraudulent sales that it’ll temper buyers’ enthusiasm.  Buyers would need to see a flood of higher-priced closings for them to panic.  A wider price variance could cause more confusion, as sellers focus on high comps, and buyers use the low sales for decision-making – and lead to The Big-Stallout.

The average cost-per-sf statistic is less then perfect, but in the graph above shows a limited decrease in pricing since the peak.  It there had been a huge dive in pricing, there would be ample room for a spike, but that’s not the case.  If there was a flurry of higher sales it might be noticable, but an occasional high comp won’t create a trend.

Where does that leave us?

Without a Spring Kick game-changer we’re just going to plod along.  A few buyers will get lucky with the trickle of well-priced listings, and the remainder will be left wondering what to do.

Possible game-changers:

1. More over-priced listings = The Big Stallout.

2. More well-priced listings (REOs and short-sales) = more sales/frenzy that could possibly lead to upward momentum on pricing.

3. Higher mortgage rates (over 6%) = The Big Stallout.

What can buyers do?

1. Hang in there – be patient.

2. Compromise on parameters – area, size of house/yard, etc.

3. See if you have any deposits left at the Bank of Mom and Dad.

4. Eliminate or reduce other expenses to afford higher mortgage payments.

5. Wait until 4Q10, and hope that a Spring Kick frenzy might exhaust demand.

6.  Stay tuned to bubbleinfo.com!

If you’d like some assistance, I’m here for you.

It is customary for bubbleinfo to stand down during tragic events, and yesterday afternoon was one of those, with the Chelsea King case.

While the story will be with our community forever, we should put some immediate attention on it.

We’ve been discussing how we can’t depend on the government to provide as much as before, though many will say that the sex-offender program has been woefully inadequate for years.  Hopefully this case will bring more attention to the program’s failings.

What can we do as private citizens?  We need to be more aware of our surroundings, and take action to protect and defend ourselves from harm.

It is a mandatory disclosure in the real estate industry to encourage clients to review the Megan’s Law website, where registered sex-offenders are listed by name and address: http://meganslaw.ca.gov/

As we’ve seen in Chelsea King’s case, the perpetrators can move around, but let’s note where they are registered today:

What can you do? Here’s a link to an article and video that covers the basics of self-defense. Hopefully the community will also create a non-profit foundation or other entity to which we can contribute, to help further the cause.

Chelsea’s case has deep personal concerns for me, being a parent of two teenage daughters. But there is also another personal tie, going back to the 1950s. As some of you know, my grandfather (I’m his namesake) was District Attorney of Alameda County back in the day. He prosecuted a very similar case that was captured in a book, Shallow Grave in Trinity County, that gripped our family then, and shows that this has been a problem for a long time.

EDIT:

This is the perpetrator’s parents’ home in RB, photo taken from the UT:

Our old friend Zach Fox has moved on to more illustrious things than the NC Times, he now works for a big-time financial publication back east.

But he hasn’t forgotten us little guys, especially the data geeks:

Jim,
 
We’re finally sending out some free links as we move toward getting our brand more to the public and not just Wall Street. I thought these stories might interest you and was hoping to piggy back on your ever-growing fame:
 
I got an update on that infamous Credit Suisse ARM reset chart, along with some interesting speculation from Greg McBride at Bankrate:
 
http://www.snl.com/interactivex/article.aspx?CDID=A-10770380-12086
 
I also thought this piece by one of our banking/insurance gurus was interesting. It runs through responses to FDIC’s securitization reform:
 
http://www.snl.com/InteractiveX/article.aspx?CDID=A-10788544-11055
 
Also, here is our bare-bones free site that has some TARP info. News is on the left-hand side, let me know if you see any links you can’t click on and would like to check out:
http://www.snl.com/Sectors/Financial-Institutions/FIG/Home/Tarp.aspx
 
 
Best,
Zach

Worm brought up some valid concerns about our future, and how certain events could impact the real estate market.  Anyone considering a move should seriously consider any and all potential hazards, so let’s examine.  My comments are in italics:

1.  The Fed quits buying mortgages at the end of March. Interest rates go up a half percent.

Buyers should tolerate up to 6%, with home pricing likely to reflect impact of rates over 6%, but not dollar-for-dollar (sellers slow to react).

2.  Option Arm begin to hit the market. That will do wonder for comps.

Very  few neg-ams in area (less than 10%), and we could use the extra inventory.

3.  We go into a double dip recession this fall.

Local market weathered the first dip pretty well, and buyers are impatient.

4.  China economy burst. That will take down all of Asia. Tall office building still being built in Shanghai with a current 50% vacancy.

The Chinese will have to learn to adjust all previous assumptions, just like in USA.

5.  A blow up the the 60 trillion derivative market.

Will make for sexy headlines, but as long as there are mortgages, buyers will shrug it off.  Fed to rescue.

6.  Banks this time don’t get a bailout because the American people are mad about their conduct in the past year.

After all we’ve been through, we’re numb.  Will the masses riot? Support a renegade politician? Not likely that a renegade could get traction due to media collusion with mainstream politicians.

7.  Home prices continue to decline like they did in Japan for fifteen years.

I could name several areas that already have houses selling for more than what they were selling for 12-18 months ago.

8.  Buyers go back to buying houses 3 to 4 times their yearly income.

Already there, due to more stringent underwriting guidelines and big down payments being utilized. 

9.  Banks acquired too much shadow inventory and have to put more houses on the market than the market can handle.

Very few REO properties currently, and gov’t programs stretching out timeline nicely.

10.  Asteroid hitting earth.

Highly concentrated disasters will have big impact on that area only, hopefully not here!

This list is a start, but for every concern there are several possibilities of how it could turn out.  Take a look at all options, and decide for yourself what course of action is within your comfort zone. 

The general complaint/argument that the government is propping up the market will apply to the MBS-purchasing, and as they turn off the spigot over the next six months we’ll see the impact, if any.  CR expects a mortgage rate increase of 3/8 to 1/2%, and I think buyers will live with mortgages under 6%.  The loan-mod madness is here to stay, and will prolong the insanity, and while that may be infuriating, there’s not much you can do about it except not participate.