I am a proponent of realtors getting the word out, yet very few are willing to publish data or opinions to help consumers.  I don’t know if it’s because local agents live in Kris Berg’s shadow at her witty http://sandiegohomeblog.com/ or because agents generally have nothing to say?
But I support the agents who do blog – because consumers deserve more information, and every opinion is worth considering.
A few years back, Schahrzad Berkland, aka ‘powayseller’, a very vocal bear on the blogs, became a realtor. Out of her commitment to help buyers and sellers, she runs her own blog:  http://www.californiahousingforecast.com/Â
I’ve been encouraging her to do more videos:
She has experienced how the homebuyers’ want and need for buying a house has been much stronger than she expected. We noted how hard it is to find the right house, at the right price – and how that difficulty makes buyers more determined, and more anxious. It takes everyone working together patiently to make smart, logical decisions.
Powayseller,
What happened? I understand that everyone needs to eat and that both yourself and Jim are providing excellent service and product. But when you go into a restaurant and everything on the menu is crap it doesn’t matter what you order or how good the service is you’re still going to be served crap.
I’m with you on not accounting for the government intervention going on in the housing market. It makes me sick to have enough cash to put together a 20% down when I have to compete with 3.5% idiots that have never learned to save and sacrifice to get something they want. What’s even more annoying is all the “I told you so’s” that say how great the market still is. The ONLY reason prices haven’t fallen is all the crazy deficit spending that’s going on. Which btw both China and now Germany are starting to raise red flags about.
I think you had the right idea initially regarding the housing bubble. But now you’re just too close to source to see the “forest through the trees”.
write you congressman
I have written my congressperson Susan Davis and urged her to support Ron Paul’s Audit the Fed bill. The last I heard she’s not signed up to support it.
Shadash – I don’t think you’re getting the point.
Government intervention isn’t the only reason prices haven’t fallen, the demand among buyers is surprisingly high in spite of all the negatives. She was surprised to find that many buyers don’t care about all the bubble talk, they just want to buy a house.
You can opine that those who use FHA “have never learned to save and sacrifice” but you don’t know that. Many think it is the smart way to go to hedge their bets.
And where do you hear this? I don’t hear this:
What’s even more annoying is all the “I told you so’s” that say how great the market still is.
http://sandiegohomeblog.com/ Ugh.
Terminally cutesy, and so, so familiar. Isn’t this the standard “realtor blog” formula everyone else has?
“You can opine that those who use FHA “have never learned to save and sacrifice” but you don’t know that. Many think it is the smart way to go to hedge their bets.”
I don’t know, you are correct. But I do know that if you give idiots credit they will spend it.
“And where do you hear this? I don’t hear this:
What’s even more annoying is all the “I told you so’s” that say how great the market still is.”
From every home owner and home seller trying to defend their position.
Shadash,
The 3.5% down buyers are low-hanging fruit. Go get ’em!
I understand many people are disappointed that the $1 mil home did not fall to $300k. Watching when/if the prices keep falling should be an interesting journey.
Keep reading our blogs, and tell us what you’d like to read more about.
Raymond,
Cutesy and sweet, yes, but there are posts where she gives very helpful advice that only a seasoned veteran could do.
Schahrzad sent this over:
Check out this guy, Denny Oh, very nice blog and a great guy! He volunteers at CCDC and gets a lot of business from people who go down there.
http://www.sandiegoh.com/
Hi Jim,
Great to see your face on this video!
What many people miss is that this downturn has the potential to go on for years. We are still in early innings here. 20-25% of those putting the 3.5% down now will default in the next 3-5 years. There will be a lot of turnover in the market.
Those with the patience to wait some of this froth out (like the tax credit) and purchase later, with more cash, will be rewarded. Prices are still falling despite inventory being down — and foreclosures show no signs of slowing down.
Right now, I think we should all be happy with what we have. Owning a home isn’t a panacea and neither is renting. Both are what you make of them. I am thankful for the house I live in now and happy to keep investing and saving my income. Really, compared to most of the world, we have it great here.
-Erica
Erica is right, the downtown does have the “potential” to go on for years— perhaps many years if the propping continues at the present rate.
Meanwhile, while homes are bid up at trustee auctions and flippers prosper “A private task force of prominent local business leaders formed by San Diego Mayor Jerry Sanders is recommending the city file for bankruptcy…”
The full article — http://www.voiceofsandiego.org/articles/2009/11/20/government/215committee112009.txt
I guess this is what a “recovery” looks like.
Yes, when we talk about economy this and that, California and San Diego are not, repeat NOT the same as Sugarland Texas.
Most of you, who do not know about the world outside SD, would fall down and be very angry about how badly mis-managed and in default California is.
The effects for CA, not Sugarland TX, will be on for years, and years and years.
Sugraland has likely seen it’s bottom.
jmho.
Thanks for the extended commentary, but surely you do enough video work to know that shooting outdoor video is asking for trouble. Traffic noise, crowing birds, billy-bob’s honking their horns becuase they think you might be live on the tee-vee. C’mon, Jim, we really do want to hear what you are saying . . .
Dear Mrs. Berkland,
You are *not* wrong, just early (as most bears have been). The entire market is running on government-supplied fumes. The restricted supply and easy money is what allows those still enamored with “homeownership or die” to help slow (but not stop) the overall price declines. Fundamentals are fundamentals, though, and prices will go where they belong… eventually.
Keep up the good work, and thanks for putting Jim on the spot, too!
Though the desire to own a home in California might be high, the ability to pay the current high prices is dictated more by the lending environment and tax treatment of housing/mortgages (including MID, tax credits, etc.). On top of that, they are destroying our currency and reducing our global purchasing power strictly because they are trying to defend high prices and high debt loads. Not sure that’s a wise choice.
I think what Shadash is saying (and I agree) is that without the govt intervention, prices would be much lower. Does anyone disagree with that?
Huh…..I would have pictured *Powayseller* as being this frumpy little troll of a lady- holed up in a dark room and getting her jollies by stirring up crap on Pigginton’s.
Who would have ever thought that she is a MILF!
Murf2222
CA renter,
I won’t disagree as long as we can also mention the counter-balance from a stronger-than-expected demand.
Where does the price teeter-totter wind up?
My guess? It’ll be at least 10% higher than rock bottom. Think about how many more people will get interested if/when prices are lower?
If rates go over 7% though, all bets are off.
CA Renter, I agree with you, and have recently seen Wall Street Journal articles about other countries complaining about asset bubbles in their countries caused by the weak dollar. So the lightbulb went off in my head – we surely have asset bubbles here too.
Government intevention is stimulating demand (low interest rates, 3.5% down, 50% DTI, tax credit, etc.) and suffocating supply (allowing banks to ignore half of 90+ day delinquencies, pressure on FASB to change mark to market rules).
I met a lady from FL today while I was interviewing people for a blog story – the market there is in freefall. She said they built too many homes for speculators, that are now sitting vacant.
In San Diego, the 50% homeownership rate, held low due to high prices, means there is a big unmet demand which starts to be met as prices fall. FL’s demand was already met during the boom, so their inventory, built for speculators, is sitting vacant.
Florida is in better shape(overall)than CA.
Home ownership rate is not a good guide because not everyone makes exactly the same salary. Therefore if 50% could buy in 2003, it does not automatically follow that 75% could buy in 2009.
But even if everyone did make the same $$$, suppose that in 2003, 50% of people made 100k per year but by 2009 only 35% made 100k. Lower prices would mean little in a city/state in decline. Key word there.
That is probably more like the SD equation as higher income people move out(to Sugarland) and lower income migrants move in(from Mexico)..
“I think what Shadash is saying (and I agree) is that without the govt intervention, prices would be much lower. Does anyone disagree with that?”
Housing prices in some places in the county are getting precariously close to late 1980’s levels when interest rates where 9-10% which is kind’a scary when you think that rates today are 4-5% and we did have a significant amount of inflation since 1988 (check the government’s inflation calculator). Yes some areas are still trading closer to 2003-2004 levels but there are plenty of opportunities throughout the county at 2002-2003 levels and some even at 2000-2001 levels and lower.
People live large in cali.Have you guys ever watched the real housewives of orange county?This will give you a little insight into CA thinking.We are living in differnt times my friends.
It’s a funny world we live in when using 4-to-1 leverage (20% down) is viewed as the veritable model of thriftiness.
“SoSad”–Jim has posted many examples of how high the percentages of ALL CASH buyers are lately–More and more people are buying houses mortgage free, even in more-expensive coastal areas!!! How is that for thrifty!
LB
Quite right!!! My comment was mainly in reference to the top post.
Kris is wicked smart and highly entertaining. Her style is very different from JtR’s style, and (for reasons of her own) Kris appeals much more to other realtors, whereas Jim appeals directly to the “I want a deal” buyer.
I’ve always been a big fan of Ms. Berkland/powayseller, but the home ownership rate argument makes no sense to me at all.
She seems to be saying that because things peaked out (nationally) at 68% at the peak, that that represents some kind of natural point of inflection, because that’s the point where everyone who wants to own a home does. I don’t get it. The problem is that *that is the peak* and it includes the mirror foggers who ended up in houses they couldn’t afford. Correct me if I’m wrong, but I believe San Diego peaked in the high 50s at the top of the bubble. Who is to say that the current level of 50% is not a healthy rate (given that SD always has high rates with respect to incomes)?
I am not arguing with the observation that demand is very hot right now. JtR demonstrates that clearly every day. As it appears that buyers are showing up with wheelbarrows full of cash to make these purchases, we are clearly not in the sort of bubble situation we were in a few years ago. But how long is that going to last? How many people have the kind of cash it takes to buy even at these prices, even with interest rates at these ridiculously low levels?
From the perspective of a realtor and buyers who want (and apparently can afford) to buy now, the joint is jumping. But even looking at it in a 1-2 year time frame, I think the jury is still out.
You would be a fool to pay cash when 28.57 to 1 leverage is available courtesy of the US taxpayer. When one looks at overall affordability (in monthly payment terms), taking into account interest rates and inflation, the average house in San Diego is about as affordable now as it was at the last bottom (roughly 1997). I bought a house in 1997 for $200,000 with 10% down at 7% for 30 yrs (about $1200/mo) That house is worth roughly $350,000 today (compounded inflation during that time alone is roughly 50%.) So we would expect a payment of about $1800/mo in todays money. $350,000 at 5% yield a monthly payment of $1878. That being said, the upper middle and above market has a ways to go to the downside 🙂
I for one took the plunge partly because I realized this truth: Americans would rather have a loaf of bread cost $10 bucks instead of seeing their $600k house return to $300k. This is the government of the PEOPLE, and the government is just delivering what the PEOPLE want.
of course, hitting the sweet spot back in late ’08 was a lot of luck and perfect timing: it was a time when even a mortgage payment to income ratio of less than 25% was still a tight squeeze to qualify. we had everything a buyer needed at that time to score a deal, picture perfect credit, cash for over 20% down, and a decent job.
I thought wrongly that the credit squeeze would last a lot longer. I figured at the time I’ll look back a year from then and realize I caught the knife a bit too soon.
here’s where Schahrzad/powayseller is right, we were simply tired after 4 years of renting and simply wanted a home. I was bearish but figured the downside will be made up for by the dollar devaluation.
Schahrzad got another thing right, there’s a lot of people that got locked out of the housing market during the bubble that were equally if not more desperate to get in. That was the one main reason why the bubble blogs were so popular, they were a huge virtual group therapy session for the downtrodden.
here’s where Schahrzad/powayseller is right, we were simply tired after 4 years of renting and simply wanted a home. I was bearish but figured the downside will be made up for by the dollar devaluation.
Exactly — you wanted your own home and had the money to buy, and prices are not bad right now. In fact, you probably had the money at the peak but knew better than to take the plunge then, and that gave you a few more years to save even more cash. I think this is where a whole lot of the current buyers are coming from. But in terms of the medium-term trend, how much of a supply of ocrenters and powaysellers are out there? More than a lot of people thought, apparently, but I have serious questions about how long this will keep going. As you said, there are irrational forces guiding the market. I would say irrational and unpredictable.
how long this will keep going?
I’ll take a stab at that one.
My take on the buyer-to-seller ratio. How many buyers are there for each reasonably-priced, attractive listing?
Carmel Valley – 3:1
Carlsbad – 1:1
RSF – 1:10
Carmel Valley could levitate another couple of years, and maybe make it through (??)
Carlsbad could go either way, but newer McMansions are under heavy pricing pressure from REOs. Floor could form in the $600,000 to $700,000 range due to govie financing.
You could knock 20% off an active listing in RSF right now and I don’t think it would make a difference. I’m not sure anyone would notice.
“taking into account interest rates and inflation, the average house in San Diego is about as affordable now as it was at the last bottom (roughly 1997).”
I think you are right about this kk and I try to make similar points frequently. Let’s take a particular example. Interest rates in the late 1980’s were 10%. If you finance $300,000 at a rate of 10% the monthly P and I is $2632.71.
Meanwhile if you finance $500,000 at a rate of 5% the monthly P and I is $2684.11.
So without taking into account property taxes and down-payments we see that it costs about the same monthly payment to finance $300,000 in the late 1980’s as it does to finance $500,000 now.
Why is this significant? Because I am starting to see houses in top areas selling at prices that are at or under (5/3)*(1980’s prices). So even without considering inflation we are in some cases back to 1980’s pricing.
Speaking of knocking off 20% and nobody noticing….
http://www.msnbc.msn.com/id/34022275/ns/business-forbescom/from/ET
More than a lot of people thought, apparently, but I have serious questions about how long this will keep going.
a lot of folks that were renting and did not buy during the peak simply kept quiet during parties and around the water cooler at work. the ones that were priced out would be given pitiful looks. the ones that choose not to buy would be given the speech that if they don’t buy they’ll be lifetime renters.
therefore, it gave everyone the perception that there were very few people holding out.
“therefore, it gave everyone the perception that there were very few people holding out.”
There were also a lot of people that cashed out at bubble prices to wait for lower prices.
Blissful – you could be right on the homeownership rate. I said in the video that about 68% of people want to buy, and we know this because that is the level reached in the boom when anybody could buy.
In San Diego, high prices prevent us from reaching this 68% rate, so we are at a lower rate, and as you say, we won’t reach that 68% rate.
So that still leaves a large pipeline of want-to-buyers, and when they sense an opportunity, they enter the market.
After the credit crunch, we had 9 years’ worth of backlog of priced-out buyers, who came out quickly and bought these REOs.
Yet I am still amazed that we are not running out of cash buyers in all price ranges.
However, if inventory were higher, their small numbers would become much more obvious.
Jim and Schahrzad,
Thanks for the comment and kind words. I’m amazed at how many people have commented on this single post…it looks more like an IM chat screen rather than a comment thread.
Anyhow, going back to the actual post, I think there’s a fine line between agents voicing their opinions and forcing their views onto their clients. Buyers and sellers can get all the stats and pictures they want, but they probably don’t know which HOAs are stricter than others, or which homes/condos have the most protected views. It’s the agent’s job to give the consumer the info and insight that can’t be found on sites like Zillow and Redfin.
Also, while I do volunteer at CCDC, I don’t think I’ve ever gotten a deal from there. Mostly I use this time to catch up on what’s going on downtown and to keep up with the development news(or given the current status of the economy, the lack of development). Almost all of my new clients come from my blog.
“Schahrzad got another thing right, there’s a lot of people that got locked out of the housing market during the bubble that were equally if not more desperate to get in.”
______________________
Desperation is not exactly a desireable component of making sound financial decisions…
Certainly we have seen enough desperation in this low-interest, low-inventory, govt. subsidized, low-ball steal-one-from-the-bank environment to keep transactions brisk, at least on the low end. What will become, however, of San Diego’s vast swath of mid to high-end properties? What will become of our beloved CV, RSF, LJ, MH, C-BAD, etc.?
CA renter,
I won’t disagree as long as we can also mention the counter-balance from a stronger-than-expected demand.
Where does the price teeter-totter wind up?
My guess? It’ll be at least 10% higher than rock bottom. Think about how many more people will get interested if/when prices are lower?
If rates go over 7% though, all bets are off.
Jim the Realtor | November 21st, 2009 at 6:27 pm
——————-
There’s no question about the high demand. As you know, I’m one of the few bears who conceded to high buyer interest/traffic all along.
I just question the size of the buyer pool that would qualify if interest rates were a more normal 7-9%, and if the majority of buyers had to use 20% down payments and have DTI ratios of 28/33%.
I also think a lot of these “all cash” deals are either hard-money borrowers (could be owner-occupiers or investors), cash-rich investors, or investment groups. It would be interesting to see how many end up refinancing their houses within a year of their all-cash purchase. Additionally, how many of these transactions are being done because cash-heavy investors cannot get a decent return in the fixed-income market? Even I have toyed with the idea of buying investment properties/MBSs because of all the manipulation.
Still, until (and IF) the govt stops manipulating the market, I have to agree that prices will be rather firm and inventory will remain low. Note my inventory prediction for December 1st on the prior thread — they are succeeding at keeping inventory low and prices high!
“The ONLY reason prices haven’t fallen is all the crazy deficit spending that’s going on. ” – shadash | November 21st, 2009 at 8:47 am
In case you haven’t noticed, prices HAVE fallen … by record numbers.
I disagree that the current market sales are comprised heavily of buyers who were “priced out of the bubble market”. The bubble market is precisely when those people bought (no down payment, poor credit,low income, etc. – NO ONE was turned down, remember?). That’s what made it a bubble! Plus, if someone was so low on the qualifying totem pole just a few years ago that they didn’t qualify, they won’t qualify today either, because of the stricter lending terms and the fact that San Diego really has median housing prices that are way too high for the median SD income. I go more with the theory that a lot of buyers right now are people who sold at peak, waited, and are now using their profits to get back in (and still overextending themselves, but that’s for another blog!). The rest are investors.
“In case you haven’t noticed, prices HAVE fallen … by record numbers.” Scooter | November 23rd, 2009 at 9:05 am
Prices aren’t falling in areas you can purchase with FHA 3.5% loans. AKA the New Subprime, only this time taxpayers are on the hook not banks.
“The ONLY reason prices haven’t fallen is all the crazy deficit spending that’s going on. ” – shadash | November 21st, 2009 at 8:47 am
In case you haven’t noticed, prices HAVE fallen … by record numbers.
____________________________
In many zip codes this is true, scooter, which is why I am a bit confused by the “humble pie” comment in the video. I suspect that if someone calculated the average devaluation of property across San Diego County, her prior bearish prediction of something along the lines of 50% down may be pretty accurate. Vista, Oceanside, Escondido, East County, South Bay, Clairemont – all these areas have been pummeled.
If it were me, my position would be “I told you so. I called for massive devaluation and look at what has happened.” Good call Ms. Berkland, you were right. All that remain now are the top most desireable zips in the county. You can look at RSF, where Jim has nailed it – they are probably going down and going down hard. So it’s only a matter of time until RSF joins the ranks of other zips that have been punished badly. Some of the remaining zips are hanging tough so far – CV is the usual example. Can CV hang onto its lofty valuation in the face of massive declines county-wide? We’ll see.
At the end of the day, no humble pie can be served – the numbers are what they are and they are baaaaad. Good call.