A couple of posts back there were commenters mentioning their frustration, with some buying a house to end the uncertainty and move on with life.
Our reader named “Waiting to feel the magic”, who is closing escrow soon, said, “Effectively there’s almost no inventory”.
The recent statistics reflect the same. There were 2,895 detached and attached SD listings marked pending in July (as of today) and there are 12,038 active listings. – or generally about one out of four listings that is finding a buyer currently.
But after removing the fallouts and the over-zealous buyers, we can probably guess that only 1,000 or so of the 2,895 pendings were decent-quality buys that’ll close. Considering that there are 2,264 listings marked as sold in July (S/AI=19%), plus that the bubbleinfo buyer is fairly picky, we can conclude:
Less than 10% of the active listings are worth considering.
After paring those down based on location and price, there are roughly 1-3 houses per month for buyers to consider seriously. Add the fatigue and discouragement that comes from 90+ percent of the homes being a waste of time, and you can’t blame buyers for wanting to get it over with – most have been looking for months or years!
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Will it get better in the coming months? Will there be more quality inventory to consider?
If you’re looking for a SFR in North SD County Coastal, it doesn’t look like it.
Let’s examine the current foreclosure rolls:
| Y-T-D | SD Co. ’09/’10 | NSDCC ’09/’10 |
| REO | ||
| 3rd Pty | ||
| Totals |
Though the trustee sales have increased by 51% Y-O-Y in North SD County Coastal, they aren’t flooding the market, and overall in San Diego County there are fewer being foreclosed this year.
| NSDCC | As of 8/1/10 |
| NODs | 399 |
| NOTs | 270 |
| July TS | 25 |
| July Canc | 83 |
The cancellations are a curious bunch. A review of the 62 cancellations in May, 2010 found that NONE of them have made it back onto the NOD or NOTS lists.
It looks like the cancellations are being caused by loan mods or short sales (unless servicers are just letting borrowers off the hook altogether) so it’s likely that the properties won’t be coming back to market in the short-term. The servicers will be deliberate in their review of those in the pipeline, and auction off 20-40 every month in North SD County Coastal. There were 193 closed MLS sales in July – we can handle 20-40 REO listings per month.
What are the prospects for additional inventory?
1. Over-encumbered sellers? They don’t have equity, don’t care, and are working the free-rent program. You might see them raise their prices.
2. Equity-sellers? They don’t have to sell, and they aren’t going to give it away.
3. Loan servicers increasing foreclosures? No chance, program is working great as-is.
4. MERS debacle? It’ll likely be a drawn-out legal battle, and won’t help home-lookers over the next 6-12 months. If anything it’ll probably slow down foreclosures/trustee sales.
5. Unforeseen event? Those usually freeze the market, not loosen it up.
Homelookers – expect more of the same for the rest of the year, but keep looking – there should be less competition over the next few months, than in early 2011. It only takes one!
I have an unrelated question, what ever happened to the “Tuna Melt” in Arrowhead? Did you ever hear back? Did they sell?
The Tuna Melt flamed out.
To recap, it was an offer made that was already 25% under list price, and was good for four months – but the offer price went DOWN $100,000 every 30 days.
It was on a lake-front house in Lake Arrowhead, where all the agents are addicted to the ‘seasonality’, so nobody wants to negotiate off their insane pricing in May because it’s “early in the season”.
Kiss off, our price goes down the $100,000 every 30 days to reflect the seasonality, because if it’s not selling during the season, the price must be wrong – we just don’t know by how much.
But my Mrs. Buyer really wanted it, so we ditched the tuna melt strategy and made a deal at the sellers’ price, but then backed out for unrelated reasons.
It is still on the market, at the same list price – no price reduction:
http://www.realtor.com/realestateandhomes-detail/Lake-Arrowhead_CA_92352_1116838948
Is it me, or does the area around Lake Arrowhead appear to be a bit overcrowded?
Off-topic, San Diego was prominently featured on the last episode of Cops! 😀
From this morning’s NPR on shadow inventory.
About half the way down here: http://www.npr.org/templates/story/story.php?storyId=3
Banks need to develop a trade in program! Banks are to housing what auto dealers are to cars! That would move some homes!
The banks own all the homes anyhow. They would make more money on fees/points/moves or trades. Jim the Realtor becomes a day trader/trade in broker.
Wild West out there anyway right Jim?
Trade credits are what you owe on your house, trade up, down, across whatever it takes to make everyone shiny-happy-people!!!
Saw this article on the San Francisco Chronicle’s Web site today. This one’s right up your alley, Jim:
Allan Kleer – Nice sales pitch on JTRs blog.
Illiteracy and fast money do not go well together. The difference between home speculation and Vegas is in Vegas people don’t expect their money back when they lose.
7.Allan Kleer – Nice sales pitch on JTRs blog
I don’t mind insight from other markets, but that felt more like a sales pitch – it got the boot.
@sdbri, No, the difference is the rules of the games in Vegas are posted in advance, not made up as they go along like the banks do.
ewhac,
Definitely interesting piece. I’m most interested in their anticipated move out of California. That speaks volumes about our state’s ability to attract and retain people. I suppose one could argue that these are not the kind of people that you want around anyway, but then what does that say about you?
We’re stuck with the best government money can buy.
But, the people, jeez. Does everyone still think they are mini-trumps? What ever happened to investing in something other than real estate? Do we need a lost decade or 2 to cure them of their stupidity?
Chuck
Somehow people think real estate is 1)simple, 2)quick path to $$$. The people in the story are much too common of a story. I dare say JTR would have prevented that loss if they had inquired.
Investment Real estate should be used mainly for above average yield (7% or above with nomial/minimal credit risk), and long term wealth creation via paydown of debt + appreciation.
It should rarely be for flipping or quick gains unless you are a seasoned, full time professional real estate investor/developer who has gone through ups/downs of the cycle a couple of time.
It just isn’t liquid enough and requires too much debt on your personal balance sheet.
Don’t underestimate the cost of operations, tenant rollover, downtime, etc. It will cost 2x what you budget, take 2x as long, and your returns will be 1/2 of what you planned, unless you are patient and buy/invest with good advisors at your side.
It’s easy to get the idea that real estate is being sold on the courthouse steps. What this story clarified for me is that, at a trustee sale, you’re not buying property, but a lien against property, which may or may not ultimately get you the underlying property.
As second lien-holders, I imagine they can — theoretically, anyway — stand around with their hand out until a buyer pays them off to erase their lien, or a court cancels the lien. Does that sound about right?
Ewhac – close. You are actually buying the real property, not the lien/loan. The loan disappears at the foreclosure sale and you go on title as the owner.
However (and its a big however), you are buying the property SUBJECT TO ALL OTHER LIENS AHEAD OF THE LIEN POSITION YOU ACQUIRE. The 1st position lender still had a claim against the asset and took it. You could pay them off and keep the property.
as of the sale on the steps, you have all the rights, and responsibilities, of the property owner.
Your second part is close enough to correct. The foreclosure of the 1st position erases the 2nd position from the asset.
Very smart of the lender to toss out the 2nd position at foreclosure and see if anyone bites.
So what does this “almost no inventory” situation do to the idea that REOs and other distressed properties define “the market?” Do the under-10% of homes that are not a waste of time constitute some sort of “micro-market” that stands apart from the others and is priced differently?
my favorite RE phrase of all time they (or we) aren’t going to give it away
Buyers set the price, not sellers. Sure, don’t accept a ridiculously low ball offer without first trying price drops. But when a Seller tells me I’m not going to “give it away” I have to restrain myself from laughing out loud.
“Do the under-10% of homes that are not a waste of time constitute some sort of “micro-market” that stands apart from the others and is priced differently?”
Yes, at least for me. They were the only homes I’d seriously look at. All of the other stuff might as well not even have been on the market as far as I was concerned. I knew the comps in the neighborhoods I was interested in and I knew what factors affected a price up or down. The crazy stuff got ignored.
“So what does this “almost no inventory” situation do to the idea that REOs and other distressed properties define “the market?”
Sometimes the REOs WERE the crazy priced stuff. Case in point, check out the REO listing 12178 AVENIDA CONSENTIDO. Listed on 5/10/10 for $771,900 ($243/sf). Now at $744,900 and 86 DOM and counting. I ask you does it look substantially different from 12154 Avenida Consentido, the same floor plan that sold for $703,250 on 10/8/09? How about another floor plan match at 16553 Calle Pulido that sold on 06/10/2010 for $735,000. True it had been listed at $785k, but it had also been on the market for four months before it went pending. But what about 12308 Avenida Consentido that sold for $785,000 on 7/16/2010? Listed on 6/6/10 and went pending in three days!! But check out the killer view, the pool, the spa, and the house showed nicely (though it was a bit dated in places inside). I’d say that it was in a different league than the other three, and the quick pending makes that point.
The point is the bank should have been able to figure all of this out and price the REO house correctly in the first place. They’re likely still too high. Unfortunately for them they didn’t get it right and they’re still sitting on it 86 days later.