The new year is barreling down on us, and before you know it we’ll be in the ‘spring-kick’ season. How is it looking so far?
I want to update the previous stat check from a week ago – it wasn’t balanced due to fewer business days/more weekends. Let’s compare the first 15 days of January, that way every year will have two weekends included, instead of the previous Jan. 1-11 comparison.
We can refer to the 2003-2007 period as the ‘steroids era’ of mortgage lending, and consider those stats hyped up. All years are included below:
January 1-15
| Year | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
| Closings | 125 | 103 | 78 | 86 | 90 | 108 | 100 | 65 | 71 | 36 | 46 | 61 |
| $$/SF | $273 | $264 | $304 | $262 | $310 | $422 | $471 | $502 | $521 | $494 | $410 | $368 |
| DOM | 71 | 107 | 41 | 77 | 69 | 81 | 62 | 72 | 89 | 67 | 80 | 84 |
You can see a historic timeline just in these numbers. In 1997, Bush passed the $500,000 tax exclusion for couples who owner-occupied for two-out-of-five years, and by 1999, the specuvestors were flipping houses. They lost some steam after 2001 because the thrill was gone after the second move, and buyers were drying up, right in line with the usual 10-year real estate cycle – in fact, a downturn was overdue.
About then there was an audible gasp from the Calabasas area, and the next thing you know CFC was flooding the streets with neg-am mortgages – and by 2003 the market took off like a rocket. So let’s call the 2003-2007 period the ‘steroids era’ of mortgage lending, and not use those numbers for comparison.
Instead, let’s look at the 1999-2002 era as at least being more normal than any year since (but in reality we haven’t had a normal year around these parts since 1985!). In 1999, the flipper tax exclusion helped to boost sales, plus the interest-only mortgages were the loan du jour – and both are still available today. In addition, we have much lower rates, and higher loan limits today, so let’s at least call the 2010 market, ‘semi-juiced’, and compare to the 1999-2002 era which had some juice to it too:
| Year | 1999 | 2000 | 2001 | 2002 | 4YR AVG | 2008 | 2009 | 2010 |
| Closings | ||||||||
| $$/SF | $273 | $264 | $304 | $262 | $494 | $410 | $368 | |
| DOM |
So we’re not quite back to turn-of-the-decade numbers, but there is a slight resemblance with the number of sales. Could we call it ‘close-enough’, just because the ultra-low inventory is impeding sales? What are other factors? The number of sales should be higher once the late-reporters wrap up, that usually adds 10%. Currently there are multiple offers on every decent-priced listing today, and if it weren’t for the graft and corruption among agents, there would be more sales at higher prices, probably at least 70-90 sales for this period. But the price has to be right – look at the disparity between active and pending listings in North SD County Coastal:
1,124 Actives: LP=$680/sf, 121 DOM
289 Pendings: LP=$375/sf (x 95% = $356/sf SP), 71 DOM
There shouldn’t be any fear of additional foreclosures, in fact; the more, the better. They are the best chance of finding more reasonably-priced homes that you can buy!
Great numbers. When you look at the drop off in 2001/2002 I would think it directly relates to the terrorism of 9/11.
I recall that sales probably dropped to near zero for the 4th qtr ’01 and 1st qtr ’02. If you add another qtr’s worth of sales (+/-25) you get right in line with the prior two years.
We actually bought an acre+ lot in RSF in 12/01 as we gambled that it was a good risk for the reduced price at $760k. Turned out very nicely, but it was pure speculation, not investing.
Bush was not the president in 1997.
…but it still his fault (i believe everything is his fault…at least that is what people tell me???)
I presume the $/SF shown are nominal dollars and not real dollars.
Yes, the 1997 Tax Exclusion Act was signed by Clinton, and it was overwhelmingly supported by both parties, although much more unanimously among Republicans (225-1 House, 55-0 Senate) than among Democrats (164-41 House, 37-8 Senate).
Those who voted against it include: John Conyers, Ron Dellums, Barney Frank, Dennis Kucinich, Maxine Waters, Henry Waxman, Russ Feingold, Chuck Robb and Paul Wellstone.
Everyone always tells me it’s George Bush who caused all of our problems going back 30 years! George Bush should have never signed that 1997 tax exclusion act!!!
Out of curiosity, would flipper transactions be counted twice (first when flipper bought and second when flipper sold)? If the flipper bought at the court house steps, then I don’t think it would be. But I think it would be counted twice if they bought an REO and then flipped to a normal buyer.
I assume more flipper transactions are occurring now than during the prior “more normal” period. So comparing the sales of the two periods may not be an apples-to-oranges comparison?
I’ll go along with that, flippers are being counted twice when comparing sales over the last 12 months.
I’m going to try and count them, and then we’ll talk. But for flippers to be able to make a killing with relative ease shows how dysfunctional the market is.
Clinton? One of them guys did it.
It really doesn’t matter as both parties and their respective members suck.
Yeah, at the end of the day both parties suck.
In 1999 my jr. college RE professor said “throw a dart at the map”, it would be hard to go wrong.
There are four types of flippers:
1. People who buy a house at auction and flip it without doing anything.
2. People who buy a house at auction and fix it up before selling it again.
3. People who buy a house on the open market and flip it without doing anything.
4. People who buy a house on the open market and fix it up before selling it again.
Only #3 really adds no value to the house. #1 adds no actual value, but normal people who only have 20% down (or less) can’t buy those, so they take houses that they weren’t able to buy and makes it so they can, probably at prices not much higher than the bank would list them at as an REO, so it’s kind of a wash. I suspect doing a #3 is very hard; the others are easier.
I think the pendulum is swinging towards another Dead Ball Era
http://en.wikipedia.org/wiki/Dead-ball_era
In addition to the “flipper” tax exemption, the 1999-2000/2001 period was when we were at the peak of the stock market bubble. I personally knew many people who were making tens of thousands a month on stock speculation (and all have lost it since). That certainly helped the rising prices and sales numbers, IMHO.
Then, we had the recession after that (which still hasn’t ended, but has been hidden by the credit expansion and now govt expansion), which explains the slowdown. I agree that ~2001 was the peak of the **natural** housing cycle in Southern California. Most of the gains from that point on were/are due to speculation, loose lending, and (now) govt intrusion into the housing market.
I think sales would be much, much higher today if only we had the inventory. There is NO inventory right now. Bring on the foreclosures already!