These types of stories drive me crazy – sellers will skim the headlines and get more over-confident:
Aug. 9 (Bloomberg) — The percentage of U.S. homeowners who owe more than their properties are worth declined in the second quarter as tax credits boosted prices in California and foreclosures surged, real estate data provider Zillow.com said.
The Seattle-based company found that 21.5 percent of homeowners were underwater on their mortgages, down from 23.3 percent in the first quarter and 23 percent a year earlier, according to a report today.
The decline came as property prices in California were bolstered by state and federal benefits for homebuyers, Zillow said. Prices climbed from a year earlier in 28 percent of the markets tracked in California, the most populous state. They gained 5.5 percent in the Los Angeles area, 5.9 percent in San Francisco, and 7.3 percent in San Diego.
“The double tax credits for some California homebuyers have certainly stimulated housing demand there and are partly responsible for the rapid — and likely unsustainable — rates of appreciation in many markets across the state,” Stan Humphries, chief economist at Zillow, said in a statement.
Homebuyers seeking the federal benefit had to sign contracts by April 30 to qualify for a tax credit of as much as $8,000, and have until Sept. 30 to complete their purchases. In California, buyers could qualify for a credit of as much as $10,000 under a program that began May 1.
U.S. foreclosures reached a high in June, with more than one of every 1,000 homes taken over by lenders, Zillow said. The number of properties receiving a notice of default, auction or bank seizure climbed in three-quarters of U.S. metropolitan areas in the first half of 2010, Irvine, California-based RealtyTrac Inc. said July 29.
The foreclosures contributed to the drop in the number of homeowners with negative equity, as some underwater properties were seized by banks, Humphries said in an interview.
Across the U.S., home values fell 3.2 percent from a year earlier to a median of $182,500, according to Zillow. They declined 0.6 percent from the first quarter.
About 26 percent of homes sold nationwide in June went for less than the seller originally paid, Zillow said. The closely held company uses public records data going back to 1996. Zillow’s mortgage figures come from information filed with individual counties across the U.S.
Yay, biased reporting will save us all.
There needs to be better access to the data so it’s easier for the media to figure it out themselves. Instead, they rely on what everyone else says.
In 60 seconds they could calculate these SD stats:
July 2009 – 3,424 home sales, $226.71/sf
July 2010 – 2,651 home sales, $244.11/sf
23% fewer sales, but a 7.7% increase in $/sf, which sounds OK, until you look further.
Today there are 2,997 listings that were marked pending in July, which sounds pretty good. But many of those 2,997 will struggle to get to the finish line.
Why? Because sellers get over-confident when they read the headlines, and blow off buyers when they come back with concerns after the inspection.
Of the 2,997 listings that were marked pending in July, 537 of them have already closed.
Their cost-per-sf? $225.74/sf
Either we’re going to have sales at lower price points, or we’re going to have listings not selling. Buyers are holding out, and they are going to win, in spite of all the mis-direction.
Why? Because they have the money.
I thought housing prices were declining still?
“Why? Because they have the money.” (JtR)
I don’t know what I love more, Jim, your simple analysis or your outright honesty.
Front page on SF newspaper: “Bay Area Home Prices Stabilizing”…
Part of the reason there are fewer homes underwater is the foreclosures and short sales that closed in 2009. Remember the market didn’t really heat up with the tax credit until this time last year.
The way I keep looking at is probably 80% of the homes sold in 2005 and 2006 will be turned over in some manner, short sale, foreclosure, principal modification, etc. Maybe 60-70% of the homes sold in 2004 and 2007 will be turned over as well.
You could probably take those numbers are figure out how many homes still need to be turned over to get back to a more organic market. This might take a decade (2015-2017) before we see a market like the 1990’s and then you got to start worrying about how boomer demographics start effecting the market.
“Either we’re going to have sales at lower price points, or we’re going to have listings not selling. Buyers are holding out, and they are going to win, in spite of all the mis-direction.”
Win at what? Buying something that will be 10-20% cheaper in a year or two? The deflation mentality might be hard to shake if this spiral is not arrested soon.
The deflationary mindset isn’t as bad as most people make it out to be because people have different levels at which they’re willing to get in or call bottom. It’s no different from the sellers’ mentality when prices are rising. Everybody has their own idea of what the top looks like, so they’ll sell at different times.
Also, people have different needs, and as long as prices are truly affordable to them, they will buy. I don’t believe for a second that a “deflationary mindset” will make prices go to zero (or even below “fundamental” values). Though prices might be very low, they usually trade within a range that can get fairly wide. It’s no more harmful for prices to trade at those low levels than it is for them to trade at the very high levels. As a matter of fact, I’d say low prices are far better than high prices for most working people.
Corporate margins will take a hit in a deflationary environment — as they should after rising like they have over the past few decades, but that is not the end of the world. Rising asset prices, in the absence of rising wages, are what has caused the tremendous wealth disparity we see today (which is a bad thing, IMHO).