This is the Redfin graph of sold $/sf vs list $/sf for San Diego. For some reason the two lines are no longer tracking. Can anyone help me figure this out? [Click for a clearer picture.]
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We discussed this at the pigg a while back… some ideas here (make sure to read comments): http://piggington.com/a_spring_bounce_in_seller_delusion
Rich
If the ratio of listed:sold houses in high-priced areas is far greater than the same ratio in low-priced areas, that would explain this divergence. That would also be consistent with the fact that the low end seems to be selling much much faster than the high end. Does that make sense?
Wouldn’t that roughly correspond with the new home buyer credit (really a seller payout) and various foreclosure pauses initiated at the start of the year? If most of the new listings are delusional owner-occupied sellers instead of REO’s, that would probably account for the up-trend disconnect in new listing prices. That theory should be tested soon, when the pending REO’s start hitting the market again.
That’s another good point, sperlyjinx… this would also be expected as the foreclosures move up the price ladder.
Sellers always list high in the spring and eventually come to their senses during the summer as the see houses selling around them while they just sit waiting for a miracle.
Also banks aren’t foreclosing on properties artificially causing a limited supply.
People are in major denial and highly optimistic
Redfin shows the same trend in LA and SF. It’s not showing up in all their markets, but it’s not just SD. Perhaps markets where subprime debris has nearly run out?
The problem with sperlyjinx’s theory is that higher priced homes often have lower $/sq ft. So if the MOS is dropping in lower price areas, that could cause $/sq ft to go down, because the higher priced areas have more listings.
I think it is increased demand from bargain hunters focusing on units in poor condition to fix up and rent or sell.
“The problem with sperlyjinx’s theory is that higher priced homes often have lower $/sq ft.”
Not sure I agree. Look at La Jolla, Del Mar, Olivenhein, Cardiff, and Solana Beach $/sq ft. And this, of course, is where the most delusional sellers are.
In some situations/areas, jon would be right. For example, expensive properties where the land-size affects the value, for example, can so skew them as to make $sf compaisons fairly worthless.
But in coastal NSD, I’m with The Blur. At the beach, the high-end areas and their homes seem to stll be MUCH higher per square-foot than low-to-mid-range ones.
A lot of high-end listings in areas I am following went off the market and are now dipping their toes back in, probably because of all the NAR hype about the “market comeback.”
What they don’t realize is that this market is NOT hot at the owners’ still-delusional price levels.
Rich,
Some very good comments on your site, as referenced above.
I think the one that struck me the most, but not touched on here is the time lag between listing and closed sales. Even a home that goes under contract very quickly after listing may not actually close (and then report the actual sales price) for 30, 60 or 90 days.
So while homes may start out with high list prices, the ones that sell, either cut quickly and often (as preached by Jim) or start out priced well to generate some buzz.
Also with a higher-priced home, there are more $ that are likely to be cut before closing. i.e., a 10% cut on a $1M is $100k cut. in contrast, the hottest part of the market now is under $300k, where you’d NEVER get a 100k cut–there’re being priced well and getting bid up! So the influx of more high-end toe-dippers can skew that listing line way up.
Radar logic is a more reliable source for sold PPSF.
Current summary data here:
http://www.radarlogic.com/daily%20price%20chart/DailyPublication.html
You can download historical data in csv format:
http://analytics.radarlogic.com/radar-logic-home/historical-data.aspx
However, the radar data shows similar trend in sold PPSF and does not explain the discrepancy to list PPSF that you note.
If you spend time typing individual zip codes into Redfin you start to see a pattern. The coastal areas plus downtown show the divergence strongly, while the more inland areas do not show this effect. So it looks to me like it’s partly the reasons people have already said about the higher end houses not selling, plus expensive downtown condos that nobody wants coming on the market.
I noticed when the FHA loan limit went up to $697,000 in SD new homes listing on the MLS jumped in price. Homes that were selling in the $650,000 range all of the sudden listed for $799,000. And other higher end homes for $850,000-$950,000 all of the sudden appeared.
What’s the third line on the bottom? It looks like it would be the volume line if it was a stock chart.
My answer: Wishing Price.
In the past, you have a situation where there are 10 homes for sale. 3 are listed for $200/sqft, 4 are listed for $300/sqft, and 3 are listed for $400/sqft. The average listing price is $300/sqft. Now let’s say 4 homes are sold, one from the $200 range, two from the $300 range, and one from the $400 range. The sold $/sqft would average out to $300/sqft.
Now, we still have 10 homes for sale, 4 are listed for $100/sqft and 6 are listed for $400/sqft. The average listing price is $280/sqft. Now only the 4 homes that listed for $100/sqft sells, so the average sold price is $100/sqft.
this is why you have the divergence. Only the low $/sqft homes are moving!
“Only the low $/sqft homes are moving”
we are seeing the end of subprime.
the homes of the poor are closing out
In describing the graph, I can’t decide between:
Hope. Springs. Eternal.
or:
Reality. Is. A. Bitch.
Option arm.
People are getting nervous about the recast. They have held off putting their houses on the market. Now they do not have a choice because their recast date is coming in the next six months.
Saw an article in the last few days that 30% of homeowners want to sell but can’t for various reasons.
Enjoy Carmel Valley. There were and are not enough new familes to qualify for $700,000 to 800,000 loans at 20% down. Check the record on how many family make over $200,000 a year in San Diego County. Then guess how many families live in Pt. Loma, La Jolla, Del Mar etc that are in a home built before 1995. There are not that many families to buy your house. Plus we are going to see how many families living in Carmel Valley can refinance their arm when there payment go up to $5500 a month plus taxes and Mello fees.
One recent thing I am seeing on the market is flippers who have picked up subprime foreclosures and are flipping them “like brand new!” This increases the price per sq.ft. even in low-end areas. Could account for some of the divergence.
-Erica
Flippers are definitely in the game again — big time. This is not a “real” rally, but an echo bubble.
People still believe flipping homes is the way to prosperity. Money is still loose, and people are still buying homes based on the assumption that prices will soon rise to peak levels++ after this little “blip” of a downturn is over.
The bubble is not over. The duration of the downturn is what will kill the RE market, IMHO.
We’re all subprime now.
The recent loan limit increase to $697k is having a big impact. I’m also seeing a disturbing trend of a lot of houses being removed from the market. Perhaps sellers are afraid of selling to cheap? This market seems to have turned on a dime. If the inventory continues to crash, delusional sellers may yet get bailed out. I’m tracking Poway pretty closely and it seems to have gotten stronger at all price points.
The list price / sale price divergence is roughly tracking with the listed / sold divergence that seems to have stated sometime in November. Based on that, I’d guess that there’s some kind of two-tier pricing going on.
As CalculatedRisk has pointed out on his blog, there’s a disparity between the sales of new and old homes as well.
Regardless, the phenomenon could be explained by something like 1,000 grossly overpriced listings that are basically being ignored by buyers.
No shocker there. Happens right after the foreclosure moratorium. Fewer affordable houses come on the market, but the pool of buyers hasn’t changed. Idiot sellers are still in a bubbled world. Sorry, mr. seller, a guy making $80k cannot afford your $600k house. Sellers are such morons.
It’s a combination of cheap stuff selling/expensive stuff not selling and lots of dreaming organic sellers who believe the market has turned overpricing their houses. This is happening in most markets.
Is this looking only at new listings (i.e., each listing captured once when listed) or a snapshot in time (all listings on the market at a given point in time)? If the latter, rapid turnover at the low end, with overpriced listings sitting on the market for months, could be an explanation.
Could it be that bank foreclosures, that were never listed, are lumped into the sold category.
That would bring down the sold $/sq ft while not affecting the list $/sq ft.
Multimillion-Dollar-Home-Price-Cuts
by Matt Woolsey
Forbes.com
Saturday, May 16, 2009
http://finance.yahoo.com/real-estate/article/107090/Multimillion-Dollar-Home-Price-Cuts?mod=realestate-buy
All great points here.
The fact of the matter is that CA housing is still way overpriced. There is not such thing as a V shaped recovery in any asset class.
Buyers need to have patience, sit tight and horde their cash. When RE is considered to be the worst “investment” out there, that will be the best time to buy. There are too many optimists out there right now for this to be the bottom.
When the good deals sell in 10 days and the crappy houses stay on the market for 100+ days, the crappy houses are worth 10x as much weight in the PPSQFT average because they stay up there 10x as long. It’s a basic statistical principal here. PPSQFT sold uses price per sale. PPSQFT list is actually implicitly weighted by DOM x price per sale.