The mainstream media, hungry to proliferate the most negative news possible, is struggling to see an actual housing double dip. So cnbc.com has decided to just go ahead and call the “double dip“.
Here are excerpts:
Sellers on the market today have cut $29 billion off their collective home equity. (they didn’t lose equity, their list prices were too high!)
They say today’s buyers are only looking for great deals, so if you price the home at its actual value, nobody’s interested. You have to go below. (huh?)
Some of you responding on the blog yesterday said that your markets are just fine, even seeing competition in offers again; I’m sure this is true in many local areas. The trouble is that those areas are in the vast minority. Unless we see a marked, widespread increase in home sales over the next several months, prices will go from flat to down once again.
The last sentence is old-school, and today’s market environment is going to continue to baffle those who can’t shake off the past.
1. To begin with, we don’t have an accurate way to measure pricing when some houses/areas sell for more, and some sell for less. The Case-Shiller is too general and vague for me. But that’s not stopping Diana from talking her book, insisting that prices will be going down.
2. Regarding her last line, in today’s world we CAN have sales can go down and not affect pricing. Why? Because no one HAS to 
move. If you are in distress, you can stop making your mortgage payment and stay for a year or two. Back in the day when banks would foreclose on you, it was different – we had regular market clearing. Not now.
3. If the housing market got worse, the government will create a new basket of cheese.
Considering Dataquick’s report yesterday on the August sales, our market is looking pretty good. When all we’ve been hearing about is the lack of demand, in San Diego County it seems there were plenty of sellers who were able to get their price right:
The housing double dip, and for that matter, ALL real estate market conditions should be discussed on a case-by-case basis. It’s local!
(hat tip to clearfund for pointing this one out!)
So, this is a “local” recession/depression and some areas are still robust Jim?
You think the fact that job creation is more negative now than anytime since the last Great Depression doesn’t mean anything across the board nationally?
True. Local also is the general rule for retail.
( No wine for the cheese? Surely you can think of
some California for the occasion )
Backward looking observation: last month sales, current inventory, etc.
Forward looking speculation: shadow inventory, potential willing/able buy pool size, intensity of next leg down on economy and possible rising unemployment with more lay-offs.
I like your analysis on the shadow inventory via NOD/NOT and 180-delinquency counting.
The missing piece of the puzzle is potential willing and able buyer pool.
Jim,foreclosures are taking 414 days in my zip code which comprises several small towns and a good amount of rural land. Even in a town of 8,000 or so there are these things called neighborhoods.
Jim, So we are entering circa 1992~1993 with a stable low end and mid- to upper-end homes feeling the pinch?
I saw 29 months supply the last time I did a redfin query on RSF. The mean may rise, but it appears a different calibre of home now getting pinched.
Mike S.
a bit OT but check this out
http://www.appraisalinstitute.org/ano/Share/Default.aspx?volume=11&numbr=17/18&id=11647
I think Olick’s piece is based on the July Corelogic index combinded with the Dataquick sales volume data for August. And I’m sure that on a national basis it’s accurate that prices will see declines from July through next March, with the only question being how much of a decline. But as JtR points out, since RE is local, those national numbers don’t mean much if the local RE you want to buy is behaving differently.
RE is local sure. But that pre-foreclosure pool isn’t a secret to buyers. If buyers have brains they will examine the target neighborhood and try to know the real possible inventory. I really do think that the buyers are going to drive down the prices by bluntly low-balling the delusional sellers. We’ll see.
In my neighborhood (the lower end of the market south east of the Twin Cities) if I walk south on my street 4 blocks I pass six houses that are for sale. Two of them were foreclosed on in the last 3 months. That’s worse then September last year.
I can’t imagine the government rolling out another truckload of cheese but a lot of things I couldn’t imagine have happened these last two years. Time will tell.
You think the fact that job creation is more negative now than anytime since the last Great Depression doesn’t mean anything across the board nationally?
It only means something to those who use it to push their agenda forward.
All I know is that I get calls every day from people who want to buy a house in North SD County Coastal region. At least one a day, and usually more.
Citi sponsored a bankers conference call today featuring two more jokers who are REO agents. A gracious reader allowed me to listen in, and they spewed the same garbage you hear on TV.
1.There are between 3 million and 8 million in the shadow inventory, depending on who you believe.
2. They will trickle out the REO listings, no matter what, and will not crash the market. Could take until 2018 to see the end.
3. One brand-name servicer has already decided to rent out every single REO and wait until the market clears.
4. BofA owns 60,000 REOs.
I’ll add more later once I review my notes, but there was nothing in their 60 minutes that scared me – other than their insistence that there is a bad storm ahead.
I’m tried of hearing it. There isn’t going to be a bad storm ahead. Between the government and bankers, the old system that we knew has now been gamed by greedy profiteers.
There does seem to be an effort to paint the housing market a bleak as possible these day’s by the media ,
Not sure why.
I would think that for most of America (the 300K and below market), the declines will be minimal from here. I think that for now the mid to high end are feeling the heat.
My two cents on this is that the down turn after the tax rebate expiring is being over blown and maximized for media exposure (projecting current trend farther into the future than it is likely to go).
Sure there was a vacuum after the expiration but I think that by spring home sale will rebound some.
The link at #6 is another joke being perpetuated by the media. (thanks for providing it ‘renting’)
The headline makes it sound like the value of your property determines whether borrowers get foreclosed or short-sale. Rubbish!!
The people who short-sale are those who have figured out that it’s another way to game the system. Price it high, and if an offer comes in then jerk them around by countering over $5,000 or $10,000, and add other insanities like demanding a super long escrow or buyer to provide seller cash outside of escrow.
Just another OPT not selling, and one the bank clerk can keep at the bottom of the pile.
The media is brain-dead.
Two more points, if there does happen to be another price decline then I would say most of the organic listing will disappear over night.
the Other thing, being 50 something,
Virtually everyone I grew up with and am still in contact with, has had their kids and grand kids move back home,
That’s got to get old at some point.
Thanks jiji, two very good points.
We could say that a bulk of the organic sellers today aren’t really in the market. They are priced comfortably high, and if someone comes along, then great – they might consider selling – but if not, no problem. Heck, there’s a listing on my street that is coming up on it’s three-year anniversary.
I also think the multi-generational homestead will get old for all involved. At some point, won’t the kids feel enough pressure to buck up and make a living? Plus, I would think the parents could get tired enough of the invasion that they’d pay for a house to get their peace and quiet back.
“the Other thing, being 50 something, Virtually everyone I grew up with and am still in contact with, has had their kids and grand kids move back home.”
Good point.
Jim, let me challenge you, if I may. You’ll have a daughter graduating college in a few years. She’ll get a job and soon look to buy a house. The market will be looking to her and her friends for stability. Will they be able to afford something in North County with 20% down at or above today’s prices?
We are going to see a huge further decline, bet on it. It is inevitable. come to grips with reality.
The problem is that even with a rising economy at four or five times incomes, or more, houses are not affordable. Nothing can be done to fix this, other than to dramatically increase wages.
Historical lows interest rates only have one direction to go for mortgage: Up
Since the rate environment has been artificially suppressed, the price correction necessary to fix the problem has not been able to occur.
A 4.5% fixed rate to a reasonable 7%, will drop a $200K home down about 25%
Welcome Bigjeza, make yourself at home.
Grab a drink, take a good look around, and try to stay open-minded.
If you think Helicopter Ben and Co. will allow interest rates to go to 7% in the near future, then you plainly have no been paying attention.
Oh, I have been paying close attention.
The Fed shows no sign of backing off its idiocy when it comes to manipulation of the market and neither does our government. As a consequence, I fully expect that we’re going to recognize this risk “the hard way”. All risks like this seem to be in the background and “out over there somewhere (Greece)” until they blow up in your face. By the time the risk becomes “apparent” the door is small and the crush of the crowd large. Maybe you’re good enough to get through first, maybe not. But history provides a multitude of lessons, and few people learn them in time.
When it comes, whether it is in a few months or a few years from now, I will simply sit back and hoist my sign: “Told Ya’ So”
Homo Sapiens think they are so intelligent, but they take the recent past and make it absolute Truth for all time just like my dog and cat do.
I have no idea what’s going to happen, but I do agree with the thought that it’s becoming a bit like the boy that called wolf too many times. The housing market is going to crash the housing market is going to crash only to see it just meander along.
As of right now I don’t see an imminent crash but I also don’t see an explosion in price increases either. I expect it to be a slow winter. Not much will be selling but prices won’t come down either. I’m curious to see next spring. Will the buyer show up in force or will the sellers get off their high prices and meet the market.
So much can happen between now and the future. I wouldn’t be surprised by another significant leg down but not until people are back to a more optimistic mind set.
You would think that maybe some of these negative articles would get sellers to lower their prices a bit but they don’t seem to be interested.
Pretend and extend is working quite well right now, I don’t see them changing course any time soon.
I don’t agree with the strategy, but to whistle past the grave yard and ignore what is happening is just a bad case of denial.
The SD Coastal market is going to just bump along for the foreseeable future. The trend may be slightly downward, but waiting for the other shoe to drop may prove to be a long wait.
Eliminating the mortgage interest deduction could be a game changer:
http://www.economist.com/blogs/freeexchange/2010/09/mortgage_interest_deduction
Jim said “3. One brand-name servicer has already decided to rent out every single REO and wait until the market clears.”
Jim, how does this not put downward pressure on the housing market? It will depress rents, which will tip the “rent vs. buy” calculation towards the “rent” side. Rent prices are often used to justify investment property purchases, and are considered a “fundamental” base for home prices.
Thing about the housing market is – it’s a slooooooooooooow-moving beast. Things in the global economy can take two or three years to affect actual prices. It also seems that Jim’s part of the world (No Co SD) is at the far end of the “affected by global economics” chain. This leads to the “crying wolf” scenario. Remember, though – eventually the wolf eats him.
As much as my intuition tells me that the macro-economic situation should be affecting NoCoSD, I have to admit – it is currently in it’s own little economic world. It’s just wierd.
I have to conclude, then, that this is a “boiling frog” type of situation. There is nothing in the long term to push prices up and plenty of gov. cheeze to keep it from crashing. We’ll see lots of ups and downs in this area for the next 10 years. There could be little net movement in either direction, though my intuition still says net pricing will be negative in 5 years. One of the next few years will see a Fall/Winter with a good-sized pricing drop. Maybe 2011 or 2012.
Keep in mind – this situation where sellers were pricing homes high and hoping for a bite was very common in the “average” neighborhoods in 2005, just before the prices crashed.
I just don’t see how the US can avoid another recession, and I don’t see how NoCoSD can avoid being affected by it in the long-term.
Bigjeza,
Not that whether the housing market has upward pressure, downward pressure, or is sucking wind, prices are set by the margin. It is not an ordinary market in the sense you are implying where average buyers have to be able to afford the average offering for price stability. Not even close.
For now, that means Jim’s shadow demand (I’ll give him the bene of the doubt that it’s there) is a bigger market driver than shadow inventory (which isn’t on the market at all and therefore cannot set price) or delusional sellers, who aren’t selling and therefore are also not setting price. The shadow demand, even if their numbers seem small, will create a floor in the market and will continue to do so until their ranks are exhausted. In SD with its ongoing population growth, their ranks may never be exhausted.
This marginal effect is the same one that let a handful of fraudulent brokers drive up the market by finding straw buyers. In a normal market such a small percent wouldn’t make any difference.
I’m all over gloom and doom, btw. Forget “I told you so’s”, I’ve got my cash money riding on it. China, Australia, Canada even, they’re going down. If Europe goes too, that will make it great for traveling there again 😉
Here’s one that is more positive. Not sure who they surveyed but 70% think prices has bottomed already. Maybe there’s more optimism then we thought.
“Most Americans believe the housing market has bottomed, but after the unprecedented boom and bust of the last few years, not everyone is ready to dive into home ownership, according to a survey released on Sept. 16 by Fannie Mae.
Some 78 percent of respondents said they expect home prices to hold steady or increase over the next year, according to the poll of 3,500 homeowners and renters conducted between June and July. That was up from 73 percent in a survey conducted six months earlier. Seventy percent of Americans think it is a good time to buy a house, up from 64 percent six months ago.”
http://finance.yahoo.com/real-estate/article/110681/housing-study-finds-optimism-and-ample-caution-on-market
Here’s one that is more positive. 70% surveyed think housing prices have bottomed.
http://finance.yahoo.com/real-estate/article/110681/housing-study-finds-optimism-and-ample-caution-on-market
Some 78 percent of respondents said they expect home prices to hold steady or increase over the next year, according to the poll of 3,500 homeowners and renters conducted between June and July. That was up from 73 percent in a survey conducted six months earlier. Seventy percent of Americans think it is a good time to buy a house, up from 64 percent six months ago.
sdduuude said,
23.Jim said “3. One brand-name servicer has already decided to rent out every single REO and wait until the market clears.”
Jim, how does this not put downward pressure on the housing market? It will depress rents, which will tip the “rent vs. buy” calculation towards the “rent” side. Rent prices are often used to justify investment property purchases, and are considered a “fundamental” base for home prices.
Didn’t we throw fundamentals out the window? I think we did here in NSD County Coastal, the Antarctica of the real estate market.
Jim, you want local real estate data, read your local paper!
Every month I publish in the North County Times a chart of median price and sales numbers for every ZIP code in the North County, and I include median change. The data is based on sales records from the county. Seems like that might give you perspective on the market. Here’s August’s story:
http://www.nctimes.com/business/article_16ee1f94-384d-5cec-a596-d8fa484fd591.html
That said, inventory for houses has been over 6.5 months two months in a row, North County sales have been plummeting, and now foreclosures are up. Seems like the upcoming ride will be bumpy.
August Foreclosures: http://www.nctimes.com/business/article_2e8e642f-b188-5723-9809-7909c59f36d7.html
Direct from the Diana Olick school of journalism…
You have a lot of nerve coming in here thinking you know more than me about local real estate. How long have you been on the beat? 1 year?
In your post, you said you don’t trust broad national numbers. In my comment, I pointed out that I publish local real estate data on a regular basis. The information is available.
I never at any time said I know more than you.
HA. Sorry. I missed the memo. Let me open the window and get rid of these …
It’s a whole new paradigm, sdduuuude. You must have missed the memo. 😉
“No one HAS to move.” really Jim? what about people who … um have jobs and get laid off and need to relocate.
I would argue “No one HAS to buy.”
Thanks for doing a good job on your blog posts.
Laid off? Extended unemployment benefits, then quit making the mortgage payments. It should give anyone 3-4 years of breathing room.
If someone felt like doing a responsible thing and relocate to take an actual j-o-b, then good for them. Rent out the house, and, well, um, I hope they make their payment too.