Will there be a big squishdown from above?
It was noted yesterday that 35% of the active detached SD listings in SD, but only 20% of the sales in the last 30 days are over $700,000. Are the higher-end sellers who have been on the market for over 90 days motivated enough to dump on price, causing a ripple effect below?
Or will higher-end sellers hold out, either due to high loan balances or high equity positions/low motivations?
Here is a review of the 100 active $1M+ listings in 92009 (23), 92024 (43), and 92130 (34).
(There just happens to be exactly 100 houses listed today at, or above $1,000,000 that have been on the market for more than 90 days in those three zips.)
The calculations were based on the original loan amounts, unless they looked like a neg-am which then 10% or more was added. Using the ranges as categories should give us a general feel for the equity positions, and potential for dumping on price. The first category describes the ratio of mortgage balance-to-list price, and if they were on a value range, the low end of the range was used:
| Loan-to-LP | # of $1M+ listings |
| 120+% | |
| 110-120% | |
| 100-110% | |
| 90-100% | |
| 80-90% | |
| 70-80% | |
| 60-70% | |
| under60% |
Other factoids:
1. Thirty have had no price reductions during their listing.
2. Another 17 have reduced their price less than $100,000.
3. Eight were marked as short sales (some with high balances were not marked)
4. One was an REO listing.
5. At least two were on the foreclosure list.
6. Twenty have been on the market more than 300 days on this listing.
What can we deduce? Only 30% to 40% of the current listings are in immediate trouble (those with less than 20% equity), and that’s only if they need to move for whatever reason. We can guess that the 47 who have loads of equity are likely to cancel unless they really need to move. The in-betweeners will make the difference between more sales at lower prices, or more stagnation. My guess is that less than half of these sellers are motivated enough to lower their price enough to sell.
20% have been listed for more than 300 days. Hilarious. Why even bother to list it at all?
Med-High end is so cooked. I have followed key neighborhoods that I would consider a move to in North San Diego County and my own if I had to sell for 5 years. Focusing on value around the 750k range. It used to be fun but now its like trying to quit smoking…
Great info Jim- How do you find the mortgage balance on a property? Does that include first and seconds? Thx!
I took the balances off the tax rolls that come with our MLS. I still haven’t found a public source for the county records.
I did include second mortgages.
More texture – comparing their current list price to what they paid, and when:
Under what they paid, and when they bought:
2% under 2007
4% under 2007
4% under 2005
8% under 2008
18% under 2005
25% under 2005
29% under 2005
(and still unsold)
Those listed higher than what they paid, and when:
14% above 2006
14% above 2007
16% above 2006
18% above 2009
23% above 2005
27% above 2005
56% above 2007
83% above 2005
(only a sampling, there were 24 on the ‘over’ list, and none were new-builds)
When the banks quit forgiving debt via short sales this market will recover.Right now everyone who overbought is trying for a short sale.As long as they let it happen this market will be a mess.A lot of people are getting family members to buy short sales and then agreeing to sell back to them.
It’s not a lot of people. Maybe 1 out of 50, unless you have stats?
The housing market seems to be going to form at least so far. The number of sales are down, in areas where the tax credit mattered sales are down a lot in areas where it didn’t matter as much sales are slightly down. The number of listings are going up and months of inventory is up. Prices haven’t budged. Looks a lot like 2006 and 2007. Prices firm, sales volume down, months of inventory up. It’s fairly clear to me that this will resolve in one of two ways.
1) Prices will come down and sales will go up and inventory comes down.
or
2) Prices will stay firm, sales will stay down, and inventory will be removed by cancellation.
Lets see…
Houses aren’t being foreclosed on… Check
Homeowners are being allowed to live for free not paying the mortgage for month/years at a time… Check
Beranake is signaling that he will lower interest rates even further… Check
Seems like a healthy government subsidized banking/housing market. Prices are guaranteed to keep going up.
How does inflation work again?
Hi Jim,
If you see a house on the range that you like, and it’s been on the market 60+ days with no change in price, think it’s safe to offer 8-10% below the low end of the range?
-Erica
Let’s add that buyers have another 159 listings over $1,000,000 in these three zips that have been on the market 90 days or less, for a total of 259 choices.
In SD County there are 1,907 active detached listings over $1,000,000, with 964 of them at 90 days or less, and 943 at 91+ days.
This year there have been 862 that closed at $1+ million, or about 110 per month average.
18-month inventory?
What’s the average sales volume & DOM for NCSD $1M+ homes?
Historically speaking (pre-bubble), that is.
Jack, the market will recover for real when prices finish adjusting to the historical stable state.
http://www.ritholtz.com/blog/2010/07/updating-the-case-shiller-100-chart-forecast/
Before then, any “recovery” is just due to artificial stimulus. Short sales to cousins or not, it turns out to not matter what brings prices down, just that they get there.
Households only have X to spend on housing, period. Given the greater than cost of living increases in education and health care, one might begin to suspect households have < X to spend on housing, in fact. Just because houses have gotten twice as big, that doesn't suddenly magically change how much scratch there is available to pay for them. (shy of adult kids and grandparents in the workforce all banding together under a roof, I suppose…)
Erica,
Yes to offering 8-10% below the bottom of the range….if you make the offer through me. 🙂
But seriously, any lowball offer needs to be accompanied by a compelling case on why it’s realistic, and why the seller should jump on it.
Most times agents just ship an offer, and hope for the best – no wonder they don’t go anywhere.
Erica, I would definitely offer 10% below. If the house hasn’t sold in over 2 months then it’s overpriced, especially considering it was on the market at the peak selling season and we’re headed into fall. Use Jim or other good agent that will prove your case as to why the house is worth less than list price. I think that last part is really important.
If you look at other segments of the market, SD is doing much better. A little over a year ago a unit in my complex a 1b/1b went for 64% less then the peak price for similar units in the complex.
The last 1b/1b unit that sold in my complex closed in less then a month from when it was listed at 44% less then the peak price. That one was a REO. This was after expiration of the federal housing credit. Watching comps closely, I have seen a lot of flipping activity.
If you want investment deals you just have to broaden your scope of where to look. If you are a first time home owner looking to score a McMansion that overlooks the ocean, you might have to wait until you win the lottery.
Erica – My suggestion is to pretent there is NO LISTED PRICE for a home. Don’t let the seller frame the debate on their terms.
You should figure out what that particular home is worth to you and your family by doing your own reserarch. Come to a value independent of what the seller’s agent is pretending.
Make up your own value, with your own justification, and submit it. This way you will always feel good and not overpaying.
When your needs and a seller’s overlap, a deal will happen. Don’t limited by artificial limits of 10%, 8%, etc…those are just arbitrary/meaningless lines in the sand.
Erica,
If you love the place, decide what it is worth to you and go in with your best offer. Don’t try to guess a seller’s mindset. There are many different types of sellers out there right now, noone can guess which is which. If the house really has been on the market that long, they may have already gotten dozens of low-ball offers. If it is only worth 10-15% lower than list to you, give it a shot. What’s the worst that could happen, you insult them and get rejected or ignored? If its worth more to you, then offer appropriately. If you insult them and they don’t counter, they may not trust your intentions if you write a new offer later. (They may think you are trying to pull an appraisal game which will tie their house up for months and associate a low buyer-purchased appraisal with their house).