Yesterday’s radio show (now available on their website) only lasted 32 minutes, and was a call-in Q&A format – so there wasn’t a full exploration of relevant topics of the day. 

There are other topics to discuss, let’s do it here!

1.  San Diego County attached and detached sales are slowing down:

Sales & Cost June # June Avg. July # July Avg.
2009 3,229 $226/sf 3,334 $231/sf
2010 3,227 $252/sf 1,691 $252/sf

We still have the rest of this week, and there’s always a big rush the last week of every month due to less money needed to close for pro-rations.  But if we tack on the same 974 closings we had between July 25-31, 2009, we’re still going to end up well under any of the monthly totals seen above. 

What will happen?  Will it scare more buyers back to the sidelines?  Perhaps, but hopefully it’ll serve as a wake-up call to sellers that they need to reduce their list price if they want to sell this year.

With servicers being reluctant to foreclose, I think there will be little pressure for sellers to adjust, and we’ll likely see the Big Standoff for the rest of the year. We’ll probably see either sales stagnate and the average $/sf stay above last year’s, or if sales pick up, it’ll be because sellers can live with 2009 pricing. But that’s about as bad as it’ll be.

2.  What is the real threat from the shadow inventory? 

The servicers flat-out tell their borrowers that if they want to be considered for a loan modification or short sale, they need to be delinquent.  This is causing the defaulter counts to swell, but how many are doing it just to get in the adjustment line?  If anything, the defaulter counts are a measurement of the number of future short sales coming over the next 1-5 years, and not a count of those going to be foreclosed in the next six months.

The bank-owned properties not on the open market are a fairly insignificant amount, and if they would push them out faster, it would give home buyers more better-priced inventory to consider – which isn’t a bad thing, when released in limited amounts.

The biggest threat? The borrowers who casually enter the default ranks, then get ticked off at how the servicers treat them, and who then decide to strategically default as a result.  The servicers are on a slippery slope that I don’t think they fully appreciate here.

3.  How much of a discount will be required by lookers, in order to become buyers in 2010?

I think if buyers got a 10% discount combined with 4.5% mortgage rates, they’d be happy.  Would the 10% discount need to be real, or just imagined?  In some areas, if a seller just came off their unrealistic list price by 10% it would be enough to put them well under the other active listings, because they all seem inflated.  Here’s an example:

They started June 3rd with a list price of $1,350,000 after several attempts to sell over the last 2 years.  They lowered the list price early and often, now down to $1,179,000, and you’ll see it go pending any minute – and it sounded like it’ll close near the list price too.  The seller was not in distress, just smart – given the market conditions and other listings nearby.

I doubt that many sellers will do it, and as a result, the rest off the year is likely to be very stagnant.

4.  Double Dip.

I think with mortgage rates in the fours, there will be a buyer for every seller who is realistic.  It might take coming off their list price 10% to 20%, but the demand is there.  Will the double dip materialize in the second half of 2010?  Not according to Wells Fargo Securities: 

A couple of excerpts:

Current market conditions appear much too balanced for a repeat performance of steep California housing price declines. We reach this conclusion even as we expect a rising supply of distressed home selling to reemerge over the near term.

So the signs of healing we saw in the California housing market in December have only solidified further over the past six months. It would now take sizable economic or financial shock to fully reverse the progress that has been made. Historically low mortgage rates should provide an important offset to expiring tax credits and a steady supply of distressed properties that are expected to continue to spill onto the market. 

Most likely, only a double-dip recession in California could recreate the conditions necessary for another plunge in California home prices.

I think we can expect more of the same; lots of loitering, and enough sales to get us into 2011, where there will be renewed buyer frustration that things aren’t moving fast enough.

What do you think?

Pin It on Pinterest