One of our long-time contributors, Kingside, is featured prominently in this video. The 1br link.
tj and the bear asked about the million-dollar-plus market history in North San Diego County Coastal:
|Year||# of $1M+ sales||Avg SF||Avg $/SF||Average SP||SP/LP||Avg Days on Mkt|
Obviously, the 2010 numbers are year-to-date. There are 137 pendings currently, so we might reach last year’s total of 742 sales, and get about 5% more house at an improved price-per-sf of 14% if these stats stay the same.
Note the pause in sales in 2001, when historically the market should have begun to taper off in a typical 10-year real estate cycle. But mortgage lenders, in particular Countrywide, started pushing the short-term, interest-only mortgages in 2001, and then the neg-ams in 2003. You know how the rest of the story unfolded.
Let’s also note that in 1996 you got a real mansion for a million dollars. There wasn’t a sale over $1,000,000 in 92130 until there was just one in 1998, here’s how other areas have fared since then:
|Area-Zip||Year||# of $1M+ sales||Avg SF||Avg $/SF|
The 1998 sale in 92130? It was new construction in RSF Farms. The seller bought the lot in 1997 for $292,000, built the 4,427sf house and sold it exactly 10 months later for $1,049,000. The agent didn’t put the listing on the MLS for four months, then marked it sold after 2 days, and represented both parties. The house resold 26 months later in 2000 for $1,830,000, a profit of 74%. Those buyers still own the house, and have refinanced four times since. What a country!
This interview with Robert Shiller is 20 minutes long, so here are some markers:
4:00 – He suggests more government intervention, particularly with regards to job creation.
14:00 – Housing forecasters are predicting that ‘nothing’s going to happen’ over the next few years.
17:00 – Deflation will be on and off.
18:20 – Bond bubble = flight to quality
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|
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.
Hat tip to Cheese who sent this in, from Bard College:
Self-reported home values are widely used as a measure of housing wealth by researchers; the accuracy of this measure, however, is an open empirical question, and requires some type of market assessment of the values reported.
In this study, the authors examine the predictive power of self-reported housing wealth when estimating housing prices, utilizing the portion of the University of Michigan’s Health and Retirement Study covering 1992–2006.
They find that homeowners overestimate the value of their properties by 5–10% on average.
More importantly, the authors establish a strong correlation between accuracy and the economic conditions at the time of the property’s purchase. While most individuals overestimate the value of their property, those who buy during more difficult economic times tend to be more accurate; in some cases, they even underestimate the property’s value.
The authors find a surprisingly strong, likely permanent, and in many cases long-lived effect of the initial conditions surrounding the purchase of properties, and on how individuals value them. This cyclicality of the overestimation of house prices provides some explanation for the difficulties currently faced by many homeowners, who were expecting large appreciations in home value to rescue them in case of interest rate increases—which could jeopardize their ability to live up to their financial commitments.
An example of a buyer who took a lowball shot at a listing that had some tell-tale signs:
1. A number of other active listings nearby that weren’t selling,
2. Out-of-town REO listing agent,
3. A World Savings/Wachovia/Wells Fargo original loan amount of $687,000,
4. A newer tract house that was unattractive enough that it probably wasn’t getting any offers.
It was suggested that the market over $750,000 was “becoming non-existant”, and in yesterday’s seminar, a realtor said that demand in general was “non-existant”.
Does a market exist? Let’s look at MLS detached active, actives on market more than 90 days, contingents and pendings, sold-in-last-30-days listings, plus the NODs and NOTS counts:
The under-$500,000 groups are running well under a ratio of 2:1 actives-to-contingents+pendings, which has been a healthy sign in the past. As long as the servicers can keep dripping out the short-sale approvals and loan mods, we could call the lower-end market survivable – though, surprisingly, it’s where the bulk of the defaults are.
The $500,001 to $700,000 market is 2.28:1 on their actives-to-contingents+pendings ratio, and the defaults are well under the number of active listings, so apparently there are elective sellers in this group that could cancel and try again later if they don’t find a buyer. Plus, a few from above should drop into this category to keep everyone hopping.
More than a third of all active listings are priced over $700,000, yet no big rush to the exits with 45% of those languishing on the market for more than 90 days. The low amount of defaults seem to justify the loitering, but with only 77 sales closed in the last 30 days, you have to wonder when sellers and agents are going to figure it out – isn’t it obvious that something is wrong after 90 days and no deal and 80+% of those around you aren’t selling either?
A commenter suggested that the higher-end sellers can’t lower their price, due to loan balance – we’ll review that next.
The mainstream media has really been loading up and blasting the negativity this week, since the housing stats came out. The people they interview get caught up in the hoopla too, and the more negative you are, the more you’ll see yourself on TV!
I went to a seminar yesterday, and it was happening there too. Local realtors were spewing negative statistics that were blatantly false when checked later on the MLS – and not even close to accurate. Question authority!
Readers TJ and the Bear and John both asked about the claim on zerohedge that no new homes sold in July over $750,000, for the second month in a row – and I think he’s referring to the USA.
There were 14 new homes closed in June, and 2 in July in San Diego County. But the new-home stats are based on when escrow is opened, so the claim may be that no buyers signed a contract last month. But how many new homes are being built that are priced over $750,000? I’ll check with Bridle Ridge today, and maybe Davidson in Carlsbad, but there aren’t many around here.
The claim was also that the high-end market is becoming “non-existant”.
There were 469 detached listings on the MLS that were priced over $750,000 that opened escrow in June and July (251 and 218), and 334 of them have closed. So apparently buyers exist. Can the new-home builders compete with existing homes, and will they?
The list price in the MLS is $5,000,000, but it’s going to auction on September 29th. The city has the right to reject the final price, and they need at least $3,000,000 to pay off the park debt.
In the remarks: LAST OPPORTUNITY LIKE THIS IS DEL MAR EVER!
“The City has owned the Balboa lot since 1965. In a purchase agreement dated September 7, 1965, the City of Del Mar purchased Del Mar Utilities (a private corporation) for a total purchase price of $250,392. At that time, the lot had both a pressure treatment plant and cement water reservoir tank which was partially in the ground and partially above ground. It was later deemed obsolete and was no longer needed. Therefore, in 1992, Council adopted a resolution to demolish the plant and tank, and place soil over the remaining concrete. Currently, the land is vacant.”