Shiller starts at 1:45 of this video, and lays out two historical examples to counter the 2% to 3% improvements predicted by most professional forecasters:
Let’s look at the most recent stats for North SD County Coastal detached homes, under $800,000:
| Status | # of | $/sf | DOM |
| ACT | 343 | $329 | 61 |
| PEND | 183 | $312 | 42 |
| SOLD | 86 | $306 | 55 |
| SOLD “09 | 85 | $285 | 62 |
The solds are those that closed between May 24 and June 23, and include the double-dippers, those that could have qualified for both the state and federal tax credit. The actives-to-pendings ratio was most noteworthy, given that those not closed by now could miss out on both tax credits, yet it’s still better than 2 to 1.
Over $800,000 (ineligible for federal tax credit)
| Status | # of | $/sf | DOM |
| ACT | 1,019 | $639 | 108 |
| PEND | 186 | $397 | 78 |
| SOLD | 99 | $415 | 81 |
| SOLD “09 | 78 | $429 | 74 |
The above-$800,000 market is where the insanity continues, though the demand has been stronger than last year, comparatively. The silly season should be wrapping up over the next couple of weeks, and those sellers who really want/need to sell, will have to get off their price if they want to close this year.
Pretty simple to see that you need to list at $400 per sq ft to get in the game at 800k+ It is just math!
Then I have a flash back to Carlsbad parties I have been to in my olde tract hood and the topic between neighbors is mainly and sometimes only about….you should see my UPGRADES!
double dip is in the bag.
Jim,up here in Sonoma County the double dip is also obvious. I looked at a couple of genuine mansions yesterday on the Broker’s tour. The nicer one was $450k cheaper. both were nice,if different styles,similar square footage,same construction quality, same acreage.
I have been hearing ‘Double-Dip” for well over a year now, maybe 18 mos. Inventory is low and things are selling–2-1 ratio is LOW. If the next downward trend in prices were to happen as part of a regular cycle (say 4-6 years) those that are calling a “double-dip” will say–“See I told you so, there was a Double Dip!!!!”
LB – you may recall a chart I posted awhile ago showing the housing downturn in the 90’s lasted 6 years and had 6 up/down steps over that period until it hit it final bottom….why would this be surprising again to you?
Housing moves slowly and doesn’t crash overnight like stocks. It turns like an oil tanker, slow but once it starts its hard to stop.
Simply put, the economic factors that guide housing on a macro scale are 99% negative (the 1 positive is low interst rates). The 99 is no job creation worthy of buying homes.
Thus, with the tide still going out, how would one logically expect homes to have upward pressure on pricing. Wishing it so, doesn’t make it true.
I track the number of houses listed in my city (Riverside) under $175k, excluding short sales and under contract (pending). The inventory number is the highest it’s been in about six months. Now, it’s little more than a third what it was a year ago, but it has been climbing since the Federal tax credit expired and probably will climb even faster once the state one does as well. Prices are about 10% higher than a year ago (due to the still low (but climbing) inventory), but I would expect them to fall again soon.
Keep your eye on the inventory. . .Zip MLS shows 12,400 houses on the market this morning in SD County. . .a few months ago it was 10K, and during the massive downturn it was over 20K. But during the 2003-2005 years, it was often only about 2,000. We are closer to the top than the bottom, but if this increases to over 14,000, then we will see a double-dip.
The pending number is inflated with short sales that stay in that cateogory for 6-9 months, and then many of them never close. So the true active to pending ratio is higher.
I remember seeing the chart that Clearfund posted, and I have seen charts of other cycles in SD dating back to the 1960’s. IMHO–those “dips” that you are speaking of were minor fluctuations associated with a normal cycle and not to be confused, or feared, with a “DIP” similar (or anywhere close) to what we experienced in 2007-2009. A 25-60% drop (what we have recently experienced in local marklets), stablization, then another 10-25% drop is a “DOUBLE-DIP.” A few more minor corrections, especially after a fall such as that should be expected, NOT feared. My prediction: Stablization with a few small ups and downs until 2013, then a new cycle.
Prices where we are looking – CV – are still 5-10% too high. Simple.
1500 sq ft homes in the Pines, only basically remodeled, for $700k? San Raphael (detached condos) at $720k? Sorry, should be $620-630k and $660k.
I have 20% $ in the bank and waiting for the right price OR I’ll just by new 2200 sg ft in Carriage Run (top of Torrey Hill, ~$230 MR/HOAs for) $730k.
Listen up sellers … You want to sell your house, price it right!
Over & over we hear the same thing about sellers not adjusting to the realities of today’s market-place. My anecdotal evidence (the stories of whiny acquaintances) suggests too many buyers believe they’re savier than they are. MSN real estate provides a list of “6 ways to craft an offer a seller can’t refuse” and guess what? Their #1 recommendation: “Hire a skilled negotiator.”
http://realestate.msn.com/article.aspx?cp-documentid=24645268&icid=msnre_moneyhp
Video not working for iPhone FYI
The Dow looks like it’s about ready to triple dip. Look out below. Most people in my area are still listing at a premium to 2006 prices. I guess the crash never happened.
Congrats on shipping, Osidebuyer. You’re enjoying some vacation I hope.
“Video not working for iPhone FYI”
Video requires Adobe Flash.
Steve Jobs doesn’t like Flash.
So, no Flash on iPhone.
Solution, get a real phone with Android 2.2;
http://blogs.computerworld.com/16310/android_22_upgrade_list
“still 5-10% too high”…..not surprising that the sentiment of the majority of bloggers (wannabe buyers) here is that we’re headed for a double dip.
I remember seeing the chart that Clearfund posted, and I have seen charts of other cycles in SD dating back to the 1960’s. IMHO–those “dips” that you are speaking of were minor fluctuations associated with a normal cycle and not to be confused, or feared, with a “DIP” similar (or anywhere close) to what we experienced in 2007-2009. A 25-60% drop (what we have recently experienced in local marklets), stablization, then another 10-25% drop is a “DOUBLE-DIP.” A few more minor corrections, especially after a fall such as that should be expected, NOT feared. My prediction: Stablization with a few small ups and downs until 2013, then a new cycle.
Local Boy | June 24th, 2010 at 9:07 am
————————-
As we know, medians skew the reality a bit. During the RE downturn from the 1989 peak in Los Angeles, we easily saw nominal 30-45% declines, even in some of the best areas. Mind you, this was during a “normal” RE cycle in California.
If the Fed hadn’t juiced the debt markets after 2001, housing prices would have fallen from those levels a bit, then we might have had a true rebound beginning in about 2007 or so. What happened is that the market wasn’t able to clear the excesses in 2001, and we added so much debt on top of that, that we ended up with the largest national (and global) credit/RE bubble this country’s ever seen.
While the lower end areas were getting very near fundamentally sound levels in late 2008/early 2009, the flood of “investors” (who were forced into the RE market by the Fed’s rate actions) have pushed prices back up to levels that cannot be sustained over time, IMHO.
The mid-higher end properties (those listed at around $500K+ at this time) are ripe for a much larger fall than most seem to expect, IMHO.
Sean,
I didn’t include contingents, and typically agents don’t mark a short-sale pending unless they have SS approval.
Sorry for not mentioning it.
Contingents not in the count:
Under $800,000: 56
Over $800,000: 63
I see a lot of the double flip people running for the exits.
For a double dip to happen, we’d have to break new lows within the next few years. We’re not that far off from that, but it won’t necessarily happen either. Normal fluctuations will not produce a double dip, and that’s not what we’re talking about here.
I’d put the odds of a double dip as low but not insignificant, say 20%-30%.
markets go up for a reason & they go down for a reason. The ONLY reason for the recovery we’ve seen was the ASTRONOMICAL injection of free & unaccountable money & credit (coupled with the absolution of debt) for our money-center banks. THEY proceded to buy the market rather than pay down their debts or actually do lend.
It’s a reasonable bet markets will not fall a whole lot until these same Biggies are forced to sell or are given a darned good reason to sell. In the meantime why should they sell? So what if the market goes down 15%? They’re up a LOT more than that in the time frame they look at.
Forget market noise, forget “economic indicators”. Get nervous when the Gov’t stops printing money & requires these OUT OF CONTROL INVESTMENT “BANKS” (hah) to pay for what they buy & cover they lose.
Does ANYONE see any sign of this happening? In our lifetime?
I pretty much agree 100% with clear fund and “doug s”. However the one thing that they are not putting into the equation is the mental aspect. Most people have a mind set that if you rent you are a second class citizen. I don’t agree with that but it can play a fairly large role. It is a collective mental virus americans have . People will stretch themselves because they believe they have to own. There is no way to know how much of a factor it is other than how much chatter you hear at parties and the water cooler.
I just found a nice new rental in bressi next month as I continue to wait for some of the risk to leak out of the market.
Speaking as a former renter, if you rent you are in fact treated as a second class citizen. Here’s how: you pay taxes so that homeowners get mortgage interest deductions, you pay taxes to bailout deadbeats, and you are denied said deductions and benefits. I could go on. So yes, you are a second class citizen in the eyes of our government.
That doesn’t take away from the fact that you’re totally right about people buying more than they could afford, which is even worse than being a renter.
Waiting for ever – Welcome to Bressi, home of lost dreams, lost retirements, lots of kids, a poop in the pool…we love it here!!!
not surprising that the sentiment of the majority of bloggers (wannabe buyers) here is that we’re headed for a double dip
It always cracks me up when people think of themselves as contrarian when — since they’re on a contrarian blog — they’re actually siding with the majority… which is pretty much always wrong.
TJ – Let’s see if I understnd your logic. So siding with the majority of the minority makes us wrong and thus, the opposite majority, the original majority, must be right?? However, according to you if the majority is always wrong then how can the original majority be right since the majority is usually wrong??? One of the majorities has to be right…right??? I’ll stick with the majority of the minority as being correct.
JTR, thanks.
sdbri, just go take a look at 1991-1997 in SD, OC and LA – there is no historical reason to think that we couldn’t have new lows in 2010, then another set of new lows in 2011, etc. What happens to demand when people realize that 4.5% mortgage will be around for years because of deflationary macroeconomic pressure? Throughout 2010 and 2011 the steady trickle and flow of distressed property continues. What happens in 2011 and 2012 when Ma and Pa Kettle start seeing mainstream media articles explaining the 2013 Obamacare tax of 3.5% on unearned income does NOT have an exception for any portion of your gains on real estate, even your primary residence? Dragging bottom or meat grinder is probably the better descriptor than double dip.