With inventory of homes being half of what it was two years ago, buyers and agents are having to consider short sales – besides, they are EVERYWHERE now.
Here are the detached listings that have been marked pending or contingent this month:
| Town or Area | Zip Code | Shorts | REOs | Flips | Reg. | July PENDs | Active Listings |
| Carlsbad SE | 92009 | 32 | 1 | 1 | 27 | ||
| Carmel Vly | 92130 | 17 | 0 | 0 | 26 | ||
| Encinitas | 92024 | 19 | 7 | 1 | 20 | ||
| RSF | both | 8 | 1 | 0 | 10 | ||
| Totals | 76 | 9 | 2 | 83 |
If the banks cut loose, and there were dozens of REOs to choose from, the short-sales would fall out of favor immediately. Plus, also note how many listings are not selling (896) – there were only 598 closed sales in these same zips for the entire second half of 2008!
The real question is: How many of those pending short sales stay pending for six months, never close, and turn into REOs anyways in a year?
Across the country, it’s going to take years and years to clean up this mess.
What’s the new bottom? Is. It is what it is.
As a buyer watching the market, I’ve seen a big gap in price between regular listings and short sales. The handful of well priced normal listings almost always went pending in the first week. So two types of houses are selling: Well priced short sales, and well priced regular sales. Most of the listings on the market are 5%-20% above this price. In most cases, the owners literally cannot afford to sell any lower.
This is also consistent with the data JtR posted a few weeks back. Some analysis on the numbers:
http://www.sdlookup.com/Forums/General/tabid/57/forumid/270/postid/74504/view/topic/Default.aspx
By sticking around on MLS for 12 months at a time, they really distort the stats because a 12 month DOM house is displayed 48x as long as a house that goes pending in a week. So any ratio that compares to active listings is going to be distorted by this – the best stats are in transactions (whether going pending or closed sale).
sdbri said, “In most cases, the owners literally cannot afford to sell any lower.”
The question is still… How long can they afford to ‘own’ the home?
sdbri,
“he who shall not be named”???
You take my data to a different blog and criticize it there? If your intention is to wear me down, and eventually get me to stop altogether, it’s working.
If you take out RSF the picture changes. 548 listings, 151 pending. Using JtR active/pending ratios that a 3.63 = healthy market.
RSF is a fairy tale land that does not involve reality as most of us know it. Never mind that place.
And, in these areas people will often hold on and wait. It doesn’t matter how long it takes. sdbri makes a good point about what really matters when looking at the data.
And, just to blow a big hold in the lack of quick sales for over $1MM, in Cardiff, west of 5, there have been (5) recent sales with the follow DOM:
86
129
126
295
240
They all sold after a 15% drop. I think new listings have this discount built-in.
You misunderstand, sdlookup bans people for referencing realtors. I don’t know why. I’ve always had the best things to say about you, I’m not aware of any criticism in what I wrote.
There are three terms that are apparently banned in sdlookup: redfin, zillow, and Jim the Realtor. The entire list is much longer but that’s what I’ve noticed.
Whoa, nothing but respect for JtR, his info, data and blog.
Thanks fellas, I’m breathing again.
Brian, you said ‘misleading’ which is a real hot button for me – that’s the last thing I want to see attached to anything I’ve said. But on third glance, I think you meant that the numbers were misleading due to the length of short sales in pending, and not necessarily to the way I presented?
No you presented the numbers perfectly, and I apologize for causing any alarm.
Essentially I was rambling about how normally having pendings higher than actives would be equivalent to a month or two of supply. But the rule of thumb doesn’t work because short sales take so much longer than actives, that at 1:1 pending:active ratio really means many months of supply.
Actually Brian I hear is one of the people involved in sdlookup. I don’t have any relation to him but as you know I love to shoot my mouth off. =)
The main reason I made a point of this is because of similar discussions on median house pricing. Median house prices are also “misleading” through nobody’s intent because especially in recent years, they have everything to do with which neighborhoods are selling. If Oceanside is selling thousands of houses and Del Mar is selling dozens, then the “San Diego median price” will simply ironically be reflecting Oceanside prices.
Then when Oceanside cools down, even if it is still moving a lot of inventory, by definition the median price will climb even if prices everywhere continue to drop. This would be like saying the median price of items sold at Walmart went from $2.05 to $2.20, which is easily possible even if Walmart had a 50% sale on every item.
The theme is that people sometimes draw conclusions from an average, even if the exact opposite is provably true.
“Misleading” doesn’t refer to intent, it refers to common assumptions that 95% of people make when they hear about a number. I didn’t mean it in a negative context, but a mathematical one.
A better but still flawed measure is price per square foot. As with median price, the more localized you can make it (i.e. a single condo complex, or a zip), the more precise it can be.
Knife catching is the new black!
Ugly but the Dow is over 9,000 so the recession must be over…yeah!
sdbri,
I’m thinking briansd, the other blogger. That you?
Agree with flaws in both “median” and “cost-per-sf” methods. Dawg had the best formula, maybe we should revisit that?
Thanks for the local info as always Jim….I’m sure the lenders that do not accept those short sales will be wishing they did once they go REO shortly after!
I’ve never heard of him, I’m always sdbri. Also, I’m one of the 95% of people who make bad assumptions when I hear about numbers like median price. But I work hard to correct my own first impression. =)
I’ve noticed that cost-per-sf only seems relevant among houses of comparable size in a given area. Sellers of smaller houses want prices similar to what the larger houses are going for, driving up their cost-per-sf. This can be aggravating for a buyer!
So to clear up some confusion on my part after reading sdbri’s comments, do the short sale pendings listed in JtR’s post only include short sales that were first marked pending this month? Or does it include short sales that may have been marked pending months ago, but are still sitting in short sale approval purgatory?
My post today only includes this month’s pendings, and sdbri’s point is that when you look at the pendings in general, they are bloated due to the longevity of the bank’s approval process.
Jim, remind where we left off on my formula and I’ll try to refine it a bit more. I’d specifically like to look at lot characteristics for things like the pool to usable yard ratio we just visited.
Anyone see this LA Times story (online) tonight? “San Diego High-Rise Condo Market Goes From Frenzy to Fizzle”
First sentence “Drive through California’s sprawling inland suburbs and you’ll spot the familiar mileposts of a real estate bust: foreclosure signs, brown lawns and abandoned subdivisions. To see the damage in downtown San Diego, walk a few blocks. Then look straight up.”
But it’s the last few paragraphs that really caught my eye:
“The real shame, some real estate veterans said, is that San Diego should have seen it coming. A spurt of condo development in the early 1990s put hundreds of unwanted units on the market. It too was a spectacular crash.
No one knows better than Michael Berg, a.k.a. “the Naked Guy.” From 1993 to 1995, Berg was the only resident of the 41-story twin-tower One Harbor Drive condominium complex. The project had gone bankrupt, and Berg was the only buyer to move in.
He became a local legend after the hometown newspaper, the San Diego Union-Tribune, printed a front-page feature on his luxurious existence. The lawyer confided he sometimes took the trash out in the nude, since no one was around.
Eventually, the building filled up and Berg was elected president of the homeowners association. Now 54, Berg sold his condo last year and moved to the suburbs.
Berg said the recklessness behind the current crisis was as bare and brazen as his old garbage runs.
“It’s greed,” he said. “People are always quick to look the other way when they think there’s money to be made.”
Here’s the full article if anyone is interested:
http://www.latimes.com/business/la-fi-condobust27-2009jul27,0,881890.story?page=1
The LA times article was interesting. How did that work without a HOA? Wasn’t there an owner in a complex in Escondido that was going to get kicked out because every other unit was in foreclosure and the HOA owed the city $tens of thousands in water fees?
I am not sure if this has been a trend or what, but I notice when the trust sale date getting close and the seller will lower the price to an incredible number to attract any offer, so they will get more free rent.
They dropped the price to a number that the lender will surely reject, on the scheduled TS date. Like this 3400 sqf carmel valley house with a view for $909,900:
http://www.sdlookup.com/MLS-090014420-
Whoever bites will sure waste their time for rejection….
This ties in with that NY Times article of a couple days ago.
What if people start to wise up to the fact that a loan mod will not happen and they decide to just ruthlessly default (while collecting their free rent!). According to these studies, banks would rather foreclose than do a loan mod. Maybe they should be careful what they wish for. Things should get very interesting over the next year or so…
http://www.calculatedriskblog.com/2009/07/wapo-foreclosures-frequently-best.html
Government initiatives to stem the country’s mounting foreclosures are hampered because banks and other lenders in many cases have more financial incentive to let borrowers lose their homes than to work out settlements, some economists have concluded.
Policymakers often say it’s a good deal for lenders to cut borrowers a break on mortgage payments to keep them in their homes. But, according to researchers and industry experts, foreclosing can be more profitable.
****
Lenders also worry that borrowers may re-default even after receiving a loan modification. This only delays foreclosure, which can be costly to the lender because housing prices are falling throughout the country and the home’s condition may deteriorate if the owner isn’t maintaining it. In some cases, lenders lose twice as much foreclosing on a home as they did two years ago, said Laurie Goodman, senior managing director at Amherst Securities.
To me it looks that some realtors who take on a short sale challenge mark them as contingent from day 1 of the listing! Which in some respect is true even if they do not have an offer as everything is contingent on the banks willingness to accept less than owed. But it is a 100% BS practice of you ask me…
contingent or short sale?
or is it the same?
http://www.sdlookup.com/MLS-090035748-1351_Savannah_Carlsbad_CA_92011
they are everywhere
When my agent explained the extra hassles involved in a short sale, I told him that I didn’t want to consider those properties. Guess what I ended up buying…