Hat tip to kwaping for sending along this U-T article on San Diego being 21% undervalued:
An excerpt:
San Diego County used to be one of the nation’s most overpriced real estate markets, as much as 40 percent above historic norms, according to the IHS Global Insight financial analysis company.
Yesterday, in a dramatic turnaround, Global Insight said housing prices in San Diego are 21.2 percent undervalued.
“It’s definitely coming back from the boom,” said Global Insight economist Jeannine Cataldi. The median price for a single-family home was $327,300 in the first quarter, the company said. Based on historic trends for household income, affordability and appreciation, the “normal” value should have been $415,300. That contrasts with the peak of the boom market, in the third quarter of 2005, when Global Insight found the median price of $506,500 was above the norm by $144,100, or 40 percent.
From the peak, local housing prices have fallen 35.4 percent, back to a level last seen in the fourth quarter of 2002, the company said.
This was the fourth consecutive quarter that San Diego housing prices were below what the company considers to be the normal price. It was the biggest gap since the second quarter of 1999, when the median price of $190,400 was $53,400, or 21.9 percent, below the theoretical norm.
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“Undervalued” is a strong word, but we could describe today’s market as “red hot”.
Oceanside’s 92057 zip code has 85 active listings of detached homes, and 227 PENDINGS,
If you’re looking under $200,000, it’s even hotter – 10 actives/61 pendings!
Here are the detached actives and pendings around town, and how they compare to last year:
Active/Pending Listings Ratio of Detached Homes
| Town or Area | Zip Code | 4/08 | 9/08 | 6/09 | Act/Pend 9/08 | Act/Pend today |
| Bonsall | 92003 | 14.5 | 7.67 | 2.56 | ||
| Cardiff | 92007 | 8.00 | 6.86 | 4.10 | ||
| C-bad NW | 92008 | 4.48 | 2.63 | 3.00 | ||
| C-bad SE | 92009 | 5.12 | 4.06 | 1.12 | ||
| C-bad NE | 92010 | 2.45 | 3.93 | 1.45 | ||
| C-bad SW | 92011 | 5.04 | 3.53 | 2.85 | ||
| Del Mar | 92014 | 7.58 | 9.64 | 4.90 | ||
| Encinitas | 92024 | 3.87 | 3.88 | 2.58 | ||
| La Jolla | 92037 | 5.81 | 9.42 | 5.15 | ||
| O-side W | 92054 | 5.76 | 2.86 | 0.94 | ||
| O-side SE | 92056 | 4.83 | 1.97 | 0.43 | ||
| O-side NE | 92057 | 3.55 | 2.23 | 0.31 | ||
| Poway | 92064 | 3.25 | 3.65 | 1.31 | ||
| RSF | 67&91 | 14.6 | 22.00 | |||
| San Mrcs N | 92069 | 3.30 | 1.91 | 0.41 | ||
| Solana Bch | 92075 | 3.62 | 6.00 | 6.83 | ||
| San Mrcs S | 92078 | 3.24 | 3.50 | 0.63 | ||
| Vista S | 92081 | 3.34 | 3.68 | 0.50 | ||
| Vista Mid | 92083 | 7.31 | 3.11 | 0.41 | ||
| Vista N | 92084 | 8.00 | 3.87 | 0.84 | ||
| 4S/S-luz | 92127 | 4.48 | 3.87 | 1.62 | ||
| RB | 92128 | 4.85 | 2.22 | 1.03 | ||
| RP | 92129 | 2.53 | 2.07 | 0.47 | ||
| Carmel Vly | 92130 | 3.35 | 3.94 | 3.29 | ||
| Scripps Rch | 92131 | 2.51 | 2.67 | 0.81 | ||
| Dtwncondo | 92101 | 5.98 | 2.79 | 2.02 | ||
| SD County | All | 4.48 | 2.88 | 0.92 | 11,741/4,082 |
Folks in Rancho Santa Fe sure are resilient, aren’t they?
In the 2000-2004 time frame, the ratio was around 2:1, with the hottest times as low as 1:1. Today there are TEN areas UNDER 1.0!
Score Guide
0-3 Hot market
3-4 Regular market
4-5 Market in trouble
5-7 Too many choices
7+ Freefall
Overshoot; now for the run up.
Here’s a preview of my newest rant; people should have held on to their houses and not walked away. Those who got in during the 0% era will be thinking how lucky they were as their friends and peers who are renters or were former homeowners are now priced-out with either bad credit or the inability to raise 20% down.
So why are there less listings at all locations? Did people stop losing their jobs? Did foreclosures stop happening?
This is a false bottom. The only reason the market is hot is because inventory is insanely low right now. Demand, especially as you move up in price, is also low, just not as low as inventory. Demand is also extremely price-sensitive right now-as prices increase, demand drops off quickly.
There is still that huge pile of shadow inventory, most of which will be placed on the market as an REO-eventually. It’s just going to take forever to pass this particular kidney stone.
Yay! Happy days are here again. Remind me again where the money’s coming from to reflate the bubble? There can’t be THAT many prison guards and firemen in SD.
Jim, Is there still a moratorium on foreclosures in CA?
No official moratoriums, but the market isn’t being flooded with REOs.
Last month there were 624 attached and detached REO listings added to the MLS, and so far in June there have been 105, so we’re increasing.
But the MLS has only required that the REOs be marked for the last week or so.
Ward already has his May counts in – there were 3,292 NODs issued last month (second lowest month of year) and 1,007 trustee deeds.
Here’s a link to his site:
http://www.foreclosureforum.com/stats.html
Thanks for the link Jim. Looks like for the first 5 months of this year there were 17,985 NOD’s. Wow. Back in ’05, in the same time frame there were 1,984. Wow.
Surely no one is overly surprised that low end properties that have already suffered harsh devaluation are moving. When the mid and high end prices come down more substantially, they will move as well. Until then….
Jim,
Are you sure your numbers for La Jolla are correct? I believe there are about 273 active detached houses listed (not including condos), but I don’t think the pending number is 53. Did you include condos in the pending number?
Spotty
I’m not so sure we’ll see such a big drop in the mid to high tier, and if so, it’s probably happening right now as the selling season peaks and those who have to sell will capitulate.
I do think that we’ll see more of the low end go up sharply. This probably sounds crazy, but after looking at historical data my guess is that we’ll see an 18% increase in the county median sales prices by this time next year. Because of both a return of mid-range sales and improving economic conditions. Nearly everything sold lately has been distress sales which distort values downwards. Even a limited amount of mid-range sales will shoot the median up causing more media attention, fueling more people to buy out of fear.
People have been holding back on buying for a few years now, and income somehow is still going up. It’s a realty cliche, but, the pent-up demand will now be a factor in sales. Plus the banks are playing their cards well by holding back on supply.
Spotty,
I included the listings marked CONT too, figuring that they are off the open market and heading for escrow. Because there is probably 2 buyers for every short sale that has the right price on it, they are similar to pendings.
I think we’ll be experiencing record fall-outs of escrows though, as summer winds up. Don’t be surprised if the final sales counts are lower than expected.
Thanks Dacounselor:
Thanks for the link Jim. Looks like for the first 5 months of this year there were 17,985 NOD’s.
It would appear that if you wanted to buy a bank deal, 2010 will be a good year!
This silly article is going to make RE bulls downright giddy!
Better buy now or get prices out FOREVER!
Gimmie a f’n break.
Forgot to say… IMO, SD RE won’t be FAIRLY valued until prices come down to 1998-2000 levels.
Remember that there is about 9 months NOD-NOT-on Market delay (maybe more with the regs on the banks requiring attempts at working the loan down). What puzzles me is the ratio between NOD/NOT. Are these being held back (people being allowed to live in property, in default until bank can get around to it</i) or are the mortgages being renegotiated (and may result in yet another NOD.. and possible NOT?).
About the graph, I find it interesting that they only go back to 1999.. and not earlier. They project a valid ‘doubling’ between 1999 and now.. I don’t think most people’s salaries have doubled during that time. We got into this mess by projecting straight-line increase in the value of properties.. and not looking at fundimentals.. are we going for a repeat?
Thanks for the link Jim. Looks like for the first 5 months of this year there were 17,985 NOD’s. Wow. Back in ‘05, in the same time frame there were 1,984. Wow.
If pent up demand for housing is what is going to drive the prices back up, then what about the pent up supply? Not just the foreclosures, but the sellers who are renting their underwater homes out and taking a monthly loss hoping for the prices of 05-07 to return? The way I see it, if the market takes one step forward, it will take two steps back. Who has the stones to hold out more — the renter or the landlord going negative each month?
LMAO
From I-news, this real head-shaker:
Q: About a year ago, I obtained a loan modification from WaMu that dropped my interest rate about 1.25 points, turned my adjustable-rate mortgage into a fixed-rate loan, and reduced my monthly payment by about $100 per month. I would like to see if I can get the payment down even further under the stimulus plan. Is there any reason I can’t go back and request a second modification?
A: All loan modification agreements are different, so first things first — read your entire agreement from the modification you got last year to see what, if anything, it says on the matter. It’s rare for one loan modification to expressly prohibit another modification in print; what’s not quite as rare is that some lenders have a company policy of allowing only one modification in a 12-month period of time.
Even if your lender has such a policy, it does sound like you’re close to the one-year mark, so that shouldn’t stop you from trying to get a Home Affordable modification, which is what we’ll call modifications made under the provisions of the Home Affordability and Stability Plan (www.MakingHomeAffordable.gov).
well this article may be hype and speculation, but it is somewhat encouraging. Weird that it came out the same day that I finally closed on my short sale in the low/mid range of east oceanside. I think it’s going to turn out to be fairly good timing.
JAP, I don’t know what you consider to be ‘fairly’ valued, but I purchased for the same monthly cost it would be to rent the house.
Government Cheese for everyone!
It’ll be a real head shaker when prices are 35% undervalued too!.
I don’t know who these IHS Global Insight people are, but they must be smoking some powerful stuff. According to their chart, “normalized” home prices have gone up 100% in 10 years. That’s 7% a year, compounded every year. How are people paying for those 100% “normalized” homes? Wages haven’t gone up 100% in the last 10 years. At this rate, a “normalized” house will be worth $800,000 in 2019. Smoke them if you got them.
Smoke them if you got them.
Mozart’s certainly smoking something good. Unfortunately, nobody puts any stock in your rants when you’re stoned. 🙂
I think Mozart is freebasing the housing crack 😉
This has to be a false bottom.
Everyone and their brother is unemployed including me and 46,000 of my closest friends.
Real Estate never goes up.
The bubble has not even begun to burst.
There are billions of NOT’s in San Diego coming on really soon.
Nobody has any cash.
Everyone is in debt.
I have always rented and always will but I am still Spartacus!
PS: Good stuff Jim – always enjoy your DATA.
As I tell my clients and friends:
People lie…
DATA never LIES.
Cheers Mate!
Who picked the trend line such that SD was underpriced in 1999? SD was well into the bubble by 1999, and is was underpriced then? Yeah sure.
spartacus needs a hug or something, this article sure didn’t cheer him up
Yeah I’m with all of you about how can so many be unemployed and people shell out 500k for some house.
But… markets are like people. They do what the hell they want at the end of the day. I’m considering that perhaps for a couple years we may go in to bull or no loss territory. Games are being played, high stakes chicken with our futures.
I think no bubble here got the really good point!
It is still the best time to buy or sell a property.
Osidebuyer, congrats.
Please do stick around and keep us informed. Oceanside has such a nice name, it has to be wonderful place. Plenty of ice cream trucks, too.
Well,
XFZ, I love to contradict no bubble here… 🙂 nothing personal, I just like taking the counter position to see if the logic can hold up. BTW, drives my wife nuts and gets me in trouble.
The big difference in affordability in the last 10 years is interest rates. When initial affordability is critical (the light inflationary environment that we’ve all be conditioned to), the initial payment is made up of about 82.5% interest of PITI at 10%, while it is only about 62.5% interest of PITI at 5%.
This is a profound mix difference.
Said another way, the change in rates allows a person to buy 63% more house at 5% than at 10%. Voila’ a 63% raise!
The remaining 37% would be an annualized 3.2% raise per year. Not low, but not unreasonable. I personally think that with global wage arbitrage, US wages have been definitely not keeping pace with inflation (about 2%) for the past 10 years, but don’t ask me, see what people were getting paid in the same positions 10 years ago. It is probably pretty close to 30%. I’ll not dicker with the accounting.
The real risk is rising interest rates if you ask me.
So, ask me.
We have a serious budgetary imbalance on the national level with a significant risk of either inflation in the medium term or at least higher rates due to organic growth.
Do I think that 7% or 8% rates are possible?
7% would only yield savings of 39% instead of a 63% raise. Houses would have to come down another 14%
8% would only yield savings of 26%. Prices would have to come down another 27% to be even.
You see, the I feel the inflation that we are about to see is going to be nothing like the inflation of the 70’s. That was what was called a “wage-price spiral” where wages drove inflation which drove wages. That happens only in a closed-loop environment where all parties are similar income footing. Competing demands for resources crowd each other out to higher prices.
No, the inflation that is coming is an entire different animal. It is one which is not a closed-loop. It involves a secular lowered standard of living for Americans relative to other countries. This is what Peter Schiff has been screaming about for 5 years. This is why Ron Paul was worried about monetary policy. This is why I started my blog.
You see, this is much more insidious. I am paid roughly 5X as much as an Indian that can do my same job. Yes 5X. So, why is it that I can afford a luxury automobile, gas, insurance, a large house with property, and he or she cannot? He or she can do the same work on the same time and has the same skills. Employers want to lower costs, so why wouldn’t they simply send that job oversees? You see, nothing is stopping them anymore. Videoconferencing, internet, VPN, web-based applications, cloud computing, this is all designed to level the global playing field so that companies can tap any resource anywhere at any time. Trust me, that is not good for overpaid, fat, lazy Americans. They are coming for your job and they are going to eat your lunch.
At that point, it won’t matter if you’re competing with Bob your neighbor for a house. You’re competing with a man who lives in a grass hut without running water but with 3 PHd’s for your job. You won’t like the outcome.
Sorry to be the bearer of bad news, but it’s bad.
PS. don’t jump off a bridge. We’ll all manage just fine at a lower standard of living or one that is only relatively lower in comparison to the past. US Hegemony is over.
Just an FYI on nod/not/reo listing.
I have been following a place since it’s NOD in Jan 2008. The trustee sale has been postponed 4 times. If we assume it goes back to the bank in June and is listed as REO in July (which would be really fast) that would be 18 months from NOD to REO. Oh ya, if you follow the trustee sale’s you will notice the amount of postponements keep rising. All that inventory still needs to be resolved.
In my opinion unemployment is not a huge factor in the housing market right now. Even if the unemployment rate is 15% that means that 85% still have jobs. That is a lot higher than the percentage of people that own homes.
Interest rates are probably more significant. The prices in San Diego started to rebound when rates became obnoxiously low. If the government fails to keep them low the housing market will suffer.
It would probably be more accurate to normalize the housing prices over 20-30 years considering the unusual run up over the last 10 years.
I was being facetious with my initial posting.
Okay TJ & shadash- I’ve marked my calendar for one year to see what median prices have done. 18%.
Thanks for the happy faces.
Jim…
La Jolla currently has only about 10 detached homes in escrow. Their act/pend ratio is similar to RSF.
Mozart – You have the right #, just the wrong sign in front of it. Will be -18%, not +18%.
Game,
Today’s MLS detached count for 92037 is:
40 pendings
14 contingents
Are you saying there are some shaky escrows???
P.S. Check your mail today!
Jim
I don’t have access to the MLS. I’m not a realtor ‘agent.’
For Zip 92037, HouseRebate.com reports:
Detached: 11 pendings
Attached: 21 pendings
Usually HouseRebate.com’s numbers are accurate. However, I checked a few other zips. They are all lower than your pending counts. Probably a timing issue. Things are moving pretty fast right now.
I (for once) actually agree with Mozart!
I too think that the median selling price will be up (18% is a good bet), since the mix of housing that will be selling one year from now will be quite different. Many more formerly $750k houses selling at $500k than formerly $500k houses selling at $200k. Remember median is the middle sales price.
But if you look at the Case-Shiller paired sales number, I predict that Del Sur Renter will be correct.
The CS index will be *down* 18% next year.
(Actually, I’m hoping for more than an 18% decline, but not holding my breath until the fed and state gov’ts butt out of FCs and stop with the moritoria.)
Are the banks holding back on listing some REO’s and delaying the foreclosure on other loans? YES.
They do this to limit the losses they take in a quarter. If they took all of the losses now, then many of the banks would be insolvent and have to be taken over by the FDIC. Unfortunately, the FDIC is not staffed up to handle this flood of insolvent banks. They FDIC is working on it and hiring like crazy in their Irvine office and Dallas office (the central location they use to liquidate the assets).
Also, the banks use this delay to help limit their losses they occur in each quater in the hopes that the spread they earn between their deposits and thier good assets will help them absorb those losses. In other words, they are trying to earn themselves out of the position. This can work but it takes a long time and hurts a lot during the interim period.
So if the banks have a good enough quarter they will list more REO’s for sale and foreclose on more loans. To them, it is about timing of the losses.
Jim / other agents,
How doe the banks actually decide which agents get to list/market their REOs?
Thanks
doe=do
To all of those that believe this is a great time to buy, I sincerely wish you would make the jump!!!
The more of you we have believing in the mantra of “bottom is here”, the worse real bottom will be in about 5 years.
Unless you have 500K in cash, I am not sure why people are dying to buy a house. The reality is if you finance your mortgage, you are not buying. You are renting! You are renting from the bank rather than the owner of the property. Anyway, all those waiting on the sideline, please buy now! Buy as many as you can. Thanks for making the real bottom much worse than it should be.