Musings about current market conditions – the sellers aren’t happy about my lowball offers, but what else do you got? Expect that listings will be cancelling in disgust, with sellers thinking it’ll be better next year.
But selling won’t be “better” in spring or summer or whenever, not as long as the internet is still working – because buyers know the score….and the comps.
I do expect prices to come back before the Raiders win the world series.
Dat’s right!! or the Padres to win da supa bowl.
Sellers looking for another opinion can click here:
http://sandiegohomeblog.com/2010/10/19/san-diego-home-prices-trending-sideways-at-best/
Jim, I believe we need at least another 10% to 20 % reduction in price to move market.
Hard to make general predictions but would agree that if you aren’t selling today, your list price has to be at least 5%, and more like 10% too high.
Expect more stagnation if the market floods with inventory in springtime, because the buyers will smell blood.
And in other news…
Junior Seau has only minor injuries:
http://www.sportsnet.ca/football/nfl/2010/10/19/junior_seau_crash/
Jim, I believe that last year’s homebuyer’s tax credit is largely to blame, because it temporarily helped prices inch up a bit, sellers assumed that the bottom was in the rear view mirror, and that home prices were going to continue going up. Once the credit expired, demand fell, home prices stopped going up. But the sellers, and many of the inexperienced listing agents you mention, are unaware or don’t want to believe this.
Sellers mistakenly point to 2005 prices, as if those prices were rational, and feel that selling their home at less than peak prices is giving it away. What they don’t understand is that those prices were an anomaly, a freak result of a once in a lifetime bubble / ponzi scheme, made possible due to the creative financing that existed then. Now those loans are gone, and lenders are actually checking to make sure people can afford to buy a home (shocking, I know). With stagnant (and falling, in many cases) wages, combined with the threat of more job losses, and general uncertainty about the economy, especially in California, buyers have every right to be cautious about buying a home in this environment. In many cases, they can’t qualify anyway to buy a home because the prices are still too high.
Buyers are frustrated, and rightly so. Many of today’s buyers have closely followed the housing market, and are very knowledgeable about what a fair price should be. They are frustrated that the government has stepped in to keep these home prices inflated. They feel the game is unfair, rigged, fixed against them. Add seller’s sense of entitlement, and the latest foreclosure mess, and it’s not a surprise that many buyers have decided to just keep renting.
Currently, we are renting in the neighborhood where we would eventually like to buy a home. However, my opinion is that prices are still about 25% too high in our neighborhood. So when our lease expires in January, we are going to rent for another year. I would be interested to hear if other buyers are as put off with the current market, and have decided to keep renting.
Troubled Loner,
You’re preaching to the choir. There’s lots of us that have been waiting for a long time.
I’m still angry but not as bad as I used to be. The fraudsters/deadbeats are running out of options.
I waited over 6 years. I know the drill.
There are more important things than the housing market… at least that’s what I’ve read.
Chuck
We could have a nice orderly liquidation if listing agents would demand that their sellers lower their price early and often.
It’s all we need now.
Don’t worry, the endgame is coming soon.
Housing prices are still stagnant or falling with the lowest interest rates in fifty years.
Sooner or later, the massive monetary intervention by Helicopter Ben will trickle through into a bear market in treasuries. When that happens and interest rates start rising again the true bear market in housing will begin.
It’s hard to say how long that will take. 3 years? 5 years? 8 years? I don’t know, but it’s coming.
The standard argument, thanks for repeating it for the millionth time.
I know that a lot of buyers would like to buy a house at reduced prices, but those who are more demanding will have to wait longer.
You can’t underestimate the importance of the available information on the Internet. I see too many listings removed and then re-listed just to reset the DOM timer (I assume). You can also find homes that were listed at high prices a year ago and didn’t sell and then they re-list now.
Maybe they are hoping for a dumb buyer or a buyer that won’t do his or her homework.
I loved your “rant”, Jim; in fact, I love anytime you rant, because I think you tell the real truth of what’s going on. That’s my two cents and I’m sticking to it.
What ever happend to Mozart? We haven’t gotten his take in a while.
Troubled Loner,
I know I couldn’t of said it better, you are 100% correct. My lease is up in December and will sign for another year, been waiting for 5 years. Finally my wife sees what is going on and she agrees with another year of renting.
Finally my wife sees what is going on
What does she see?
Scary headlines, and bloggers gone wild?
I see a gov/fed that spends whatever it takes to keep it all afloat.
Jim, I’m a potential buyer but I’m not waiting for lower prices but rather more inventory to choose from. There’s too many people sitting on their houses like me waiting for the cycle to end. If I found the right place (and right now I don’t want to spend the energy to do so) I’d be willing to list my existing place 3-5% under comps to quickly leverage into a better one in the neighborhood I want to be in.
To your point above, it seems like most of the “good” inventory is overpriced by sellers but even if those prices were lowered I would still want more of the “keepers” to choose from.
P.S. I’ve exchanged emails with you before so let me know if you are ever in the La Jolla Village area.
kind of falls in line with the saying “any offer is a good offer” – still not buying that one!
Nobody has to buy a house. It’s simple, if a home is overpriced, then don’t buy it. There seems to be an ongoing narrative aimed at potential homebuyers, that it’s the buyers that are being unreasonable, that the buyers need to just accept that they’re going to have to overpay if they want to buy a home, that it’s the buyers fault that we’re in this mess because they want the seller to give it away. I don’t believe that the majority of potential buyers are looking to steal a home from someone, they just want a fair and reasonable price, and they are still not seeing that.
There’s a lot of emotion surrounding the purchase of a home, and many have given in to it, and now regret it. It’s a house, a place to live, I believe people have really gotten carried away with the need to own a home. Why go through all of the hassle that is inherent in the current housing market, just to end up paying too much? I don’t think it unreasonable that we eventually will see a more level playing field, with less manipulation and interference in the housing market, and with homes selling at fair prices. And yes, it could take several more years.
Great rant, Jim!
Amazing that those listing agents would rather NOT get paid.
Greenlander- Why wait 8 years for the market to drop and rates to go up? if you find the right house now at a reasonable price you can get a 15 year loan at an incredibly low rate and pay it off. At that point, so what if you lose another 10%? Your loan will be paid off and the market has always risen over time, history has proven that.
We bt. in 1990 & watched prices go down for the next 6 1/2 years. We never whined, we never stopped investing in our home. We certainly never considered “walking away”.
Just like the stock market, I’m sure there will always be those hold-outs who want to buy or sell but are terrified the market will crash (or sky-rocket) the moment after they do. I’m also sure there are cautious “r.e. investors” who will always find a reason why the guy on the other side of the deal is whacko unreasonable.
The delimiter for me is, everybody’s got to live somewhere. CARenter said it best, I advise all to reread her perceptive sharings, obviously she learned them the hard way.
My reasoning is simpler. If you’re happy renting, rent, the market’s probably not going up any time soon. If you’re one of us who NEEDS to own his/her home to enjoy life, consider how much of your life is sliding by while you fret. Also consider how much today’s low mtg. rates will offset the premium you feel you’d be paying to buy now. I can absolutely guarantee, mtg. rates WILL go up. And, consider what you think land value in the Paradise we call home is & how much it would cost to restore the home you’d like to buy. Then, consider hiring a Realtor Jim, listen closely to him, make a decision, any decision, & let your family get on with its LIFE.
I understand Realtor Jim’s discomfort with this marketplace, it’s NUTS, it’s his livelihood & he cares for his clients. But, I swear, MOST buyers & sellers are just not up to it. And, I’d bet a dollar to a dime the great majority of these folks will overpay dearly in emotional cost before they resolve their angst.
Here’s my story. I apologize for the length of the post. Last month, I literally rolled my eyes with a seller’s counter to my offer. I made the offer on a Saturday; another offer came in on the same day. A “multiple counter offer” came back to both of us the next day. The listing agent surprisingly called my (out of state) agent early the next morning (10 hours before the expiration) and said they were shocked that they hadn’t heard back yet and she asked why. The LA said the other buyers were “driving the sellers nuts”.
My agent called to let me know of the conversation. I told my agent to simply explain I wasn’t happy with their counter and wouldn’t accept it or even counter back. The LA called my agent again a bit later and said the sellers reconsidered and would accept my original offer.
When my agent called me with that news, I told her honestly that in the space of less than 18 hours, I had “completely lost interest in the house” due to the seller’s counter (read greed). There really can be a delicate balance during negotiations between a seller and a buyer–just like JtR has advised.
I then took a more serious look at a house again that had once been on my short list. I realized it was the house I wanted. And there was no reason to keep searching endlessly. The seller countered my offer—not on price–but agreed to three items that were most important to me. I then countered back with a small change and the seller accepted.
I am a buyer that did an extraordinary amount of research and used the internet on a daily basis—usually checking 2x/day for any new inventory.
I’m pre-approved for a 30-year conventional loan/20% down payment. I’m just waiting to lock in hoping I can get below 4%. My loan amount is much less than what I’m approved for. Tonight, I feel almost giddy as the journey to find my house I liken to a marathon (over a few years because of the housing bubble). On reflection, I’m stoked that I persevered and had patience. I also believe an invaluable tool was the info I learned here on bubbleinfo in the last 1 1/2 years to make me a smarter buyer and a better negotiator.
Bubbleinfo… don’t leave home without it!
Congratulations, Susie!!! 🙂
Troubled Loner nailed it.
Buying a house should not feel this frustrating, nor should buyers feel like everything is stacked against them. I’d much rather be a seller than a buyer in this market.
Congrats Susie! Very glad to hear it!
“I’d much rather be a seller than a buyer in this market.”
Not if you bought in the last 8 years.
If you prior to 2002 and didn’t HELOC, yes you might have a little equity to pay a commission and some deferred repairs but if you bought in 2002 or later you are likely bringing money to the table at least in my neck of the woods. The only houses that really seem to be moving these days are bank deals or sellers who bought in the 80’s or 90’s and are motivated to sell (probably found something else they really like) or just need the money to cover some bills, etc.
The major winners are those who bought when interest rates were high and are now able to refinance at an ultra low rate. These owners are going to be very strong hands going forward. Especially with prop. 13 behind them.
Pemeliza,
I think you hit the nail on the the head…
“The major winners are those who bought when interest rates were high and are now able to refinance at an ultra low rate”
Also consider this. The people that bought when rates were high likely made decent returns on bank cd’s 7-9% or maybe higher. Not only were the people that bought in the 80’s and 90’s getting decent returns on their money. It was safer to invest. High interest rates also push down home prices which means it’s easier for buyers to save up a 20% down.
I always laugh when I hear people say that low interest rates help home buyers. Home prices are relative to what people can afford. Low interest rates = high home prices high interest rates = low home prices.
A little more on low interest rates…
Banks are the only ones that benefit from low interest rates. The way banking is currently set up in the US the Federal Reserve makes money out of nothing and loans it to member banks at 0%. Member banks turn around and loan money out at 3-4%.
If you lend banks money in the form of a CD they give you a return of 1-2%. Which SUX!
Here’s the catch. Although banks make money off interest. The make 100 times more money charging fees.
The net effect is that it’s in banks best interests to keep interest rates low so people will pay FOREVER on a loan. The longer people pay back the loan the longer banks can charge them fees.
If you guys are waiting for prices to fall significantly, you will wait until you die, since that ain’t happening. I seriously doubt prices will ever fall below the bottom in spring or summer of last year. Prices may fall back to that level (about 5-15% below current pricing, depending on the market), but I doubt they will go below that. Prices may also be stable or continue to rise slowly.
Jim – I think you need to give this speech at NAR or CAR convention/meeting. Slap a few newby realtor faces. I wish you were a realtor in the ZIP that I look in. You’re my hero.
Troubled Loner – I agree that the tax credits boosted sales and sellers are looking at those comps and want more. It’s laughable b/c those sales were boosted. Take that tax incentive away and prices should be even lower. Sadly, I’ve seen some places sell close to 2005 pricing and I feel like I stepped in some time porthole. Crazy.
I’ve seen places sell w/in hours of listing. As soon as I see it, I call right away and it’s gone, as I was hoping it wouldn’t be.
Those are rare. Most are languishing and chasing the market, reducing every so often.
Jim – My favorite new line is what you said, “Priced to sit or priced to sell.”
Jim, your comment about the seller trying to get $5k with a counter-offer made me wonder why the same logic does not apply to a buyer. If the buyer gets a counter-offer from the seller that is $5k more, then why not just accept and move forward?
“Priced to sit or priced to sell” Another JtR classic! Oh how I wish you could have a real estate show, Jim, and educate both buyers and sellers. (I don’t know where you’d find the time though.) As a confirmed groupie of bubbleinfo, I’d watch every episode online, but I’d be sure to get “keyboard insurance” in case your humor made an appearance when I least expected it…
Geotpf, how can you be so sure that home prices will not fall below spring / summer of 2009? What factors are you basing this opinion on?
Troubled Loner:
1. At some point, there will be general inflation.
2. At some point, the economy will recover.
3. Currently, there seems to be a shortage of market priced properties (excluding those with pie-in-the-sky pricing that will never sell), which leads to price increases, not decreases.
4. There’s only so much land, especially land that is in desirable areas and zoned for housing and can be practically built upon.
5. Costs to build additional housing (material, labor, and political/paperwork) aren’t going to go down.
6. Real world data is all upwards. That is, not predictions, but actual $/per sq foot is consistant going up since last year.
7. The banks are doing a great job managing inventory, leaking it out slowly.
8. This whole MERS thing and the robo-signing stuff should keep REO inventory low for the short term.
These reasons overlap and have different time frames (#1 and #2 are long term things and #8 is a short term thing, for instance). But they all support at least a stable if not increasing market.
Now, I don’t think prices are going to go up quickly. Nor do I think properties in not-so-prime areas will reach 2005/6 levels again within a decade or two. (Properties in prime areas are already kind of close, mainly due to #4 and #5.)
My prediction would be slow growth, at about the rate of inflation, from now on. I seriously doubt we will drop to 2009 levels and certainly not below them.
Geotpf,
Advice me and enlighten me.
Normal home , Good school, some parks to take the kid around and make some friends :
650K + 500 Mello per month.
Now if I have to pay 130K cash & do this for 30 years, is this worth it at 4.3% interest rate.
I am assuming my property tax & HOA comes back to me in form of taxes.
Now lets say, if i have to sell this house in 5/7/9 years due to loss of job, health issues, kids college fund, do I even make a penny out of it, seriously ??. Let me know the numbers.
** Now if someone says, we dont have mello roose and its a new home, then I am interested.
Geotpf- I completely agree. You could not have said that any better.
Hey Jim, any update on what that house on chestnut near the powerlines went for at that auction ending last sunday?
btw, does the right side wiper on the Ghost flex while sweeping, or is it an illusion?
I could shred Geo’s arguments, but I’ll just let future events do that for me.
LongTimeRenter8Years-At this point, you’d probably more or less break even (depending on whether prices go up slightly or are stable or go slightly down and whether or not you have to make repairs to sell it and a million other things). Which ain’t all bad, since you didn’t have to pay rent for that time period.
tj & the bear-Hey, I could certainly be wrong. But prices are continuing rise slowly pretty much everywhere. And remember, in marginal areas, prices fell by half or more off peak, which caused lots of renters and investors to jump in the game.
Geotpf, it could be argued that prices are not continuing to rise slowly pretty much everywhere. However, even if it were true that prices are rising, that trend can change. Just because prices are rising now, doesn’t mean they will continue to. Far too often people look at the current trend and assume that it’s going to continue. Lots of people were very excited about real estate back in 2005, and assumed that the then current upward trend would continue. It did not.
Troubled Loner-I’m not saying it’s not possible for the upward trend to reverse. I’m just saying it’s very unlikely to go below the absolute bottom that occured during last sping/summer. The bottom (especially in non-prime areas) was such a drop from peak that dropping below that seems highly unlikely. And prime areas remain prime due to schools and land shortages and low crime and close to jobs or the beach, none of which will really change.
My opinion differs from Geotpf.
#1 I agree that at some point we will have inflation.
Unless we have wage/income inflation, how will people be able to afford higher priced homes? People that actually have to prove they can make payments barely qualify for loans today (are you thinking banks will be doing liar loans again any time soon). If we have inflation w/out incomes rising, people will be more concerned w/buying food than buying a house. If we have inflation, will there be more jobs? B/c since banks are really cracking down on lending and U6 numbers are double digits, the mere fact that we have inflation won’t matter unless there are good paying jobs to pay for higher priced homes. Otherwise, you are not going to have the demand to actually push prices up.
#2. At some point the economy will recover. With the way they are dragging this out, for some of us, it may not be in our lifetime. But you will eventually be right about #2.
#3. The shortgage is temporary for now. There’s plenty of inventory that eventually will need to be disposed of.
#4. Only so much LAND. Land that developers will develop. There’s plenty of houses. Buy some land. Sure.
#5. Costs to build are going down. We are having deflation right now and construction is slow. They will cut wages to get jobs and bid lower.
#6. PPSF has gone up slightly since last year. Do not discount the coupon factor in the way of about 18k tax credits/incentives to get some people off the fence. That’s expired. Might be a return to pre-tax incentive prices.
#7. Banks are leaking it out slowly for now. What makes you think that will continue to be the case? What if one bank is worried about getting out before the others and starts to push more through. The others might want to do the same. Could be a race to the finish.
#8. Starting to look like it will matter little to CA and they’ll be back to business as usual.
Geof :The bottom (especially in non-prime areas) was such a drop from peak that dropping below that seems highly unlikely.
Well, I didnt think feb 2009 was the bottom at 5.25% interest rate and say 600K price point on the home.
I think 4.25% interest rate on 650K is still cheaper.
Somewhere like 3.75% interest on 650K+ mello roose house makes more sense.
Big fan of your blog. As a buyer, I have gone through the past 6 months putting offers in. What I have noticed is that the response times have been overall much quicker when a home is listed with a larger brokerage vs some of these little 2 man brokerage shops.
I dont understand why some of them took over a week on solid offers that I had made.
Finally after months and months, I am in contract for a traditional sale for some folks that were retiring and heading out of state. Their agent actually had a code of ethics and has been quick to respond to any concerns and questions, as we would were as well.
Thanks for the wake up call on what is going on out there. Some sellers are still drinking Kool Aid and these inexperienced agents are just making the whole cumbersome process seem like there is gold at the end of the rainbow.