“A disappointing report. Home prices broadly declined in August. Seventeen of the 20 cities and both composites saw a weakening in year-over-year figures, as compared to July, indicating that the housing market continues to bounce along the recent lows,” David M. Blitzer, chairman of the index committee at Standard & Poor’s, said in a statement.
“Over the last four months both the 10- and 20-City Composites show slowing growth, after sustaining consistent gains since their April 2009 troughs,” he said.
Blitzer said the housing market appears to have stabilized at new lows.
“At this time, it does not seem that any of the markets are hanging on to the temporary momentum caused by the homebuyers’ tax credits,” he said.
Annual growth rates slowed down in the three California cities, with Los Angeles, San Diego and San Francisco posting annual gains of +5.4%, +6.9% and +7.8%, respectively – a significant drop from the +7.5%, +9.3% and +11.2% reported for July.
“The recovery that started in 2009 has petered out,” Karl Case, one of the co-founders of the index that bears his name, said in an interview on Bloomberg Radio’s “Bloomberg Surveillance” with Tom Keene from Wellesley, Massachusetts. He said excess supply was the main challenge to a recovery in housing. “That’s the big negative: the vacancy inventory.”
For the first time in 16 months, the San Diego month-over-month was negative (-0.6%) for both seasonally-adjusted, and non-seasonally adjusted from July to August.
Why should anyone expect people to be able to buy expensive homes? Sunday’s 60 Minutes report on the “99ers” exposes the rapidly growing desperation of former high income earners, who won’t be buying real estate any time soon. Wake up, America!
See for yourself, if you missed it:
http://www.youtube.com/watch?v=CwpdGyIY2fQ
What’s your point, that some people have it bad?
They need to buck up, or “depend on the kindness of others”.
Meanwhile, there are plenty who are doing fine. It’s a good lesson for all.
And there’s plenty of people who are doing better after the recession/depression whatever you want to call it.
A matter of fact, I am doing a lot better after it, looking for an investment property in Carlsbad, cost of my toys/gadgets are cheaper now. The only thing that I can think of that has went up a little is food but I wouldn’t know as my wife does the grocery shopping.
Case-Shiller index:
SD
May 2010 163.11
June 2010 163.82
July 2010 165.02
August 2010 163.99
Although one month does not make a trend, August is lower than July. Let’s keep an eye on it.
By the way, the Aug is actually a smooth-average of Jun, Jul, Aug. So the real drop from July to Aug should be larger.
PS: The above number is “Non-Seasonally Adjusted”.
In my part of TheOC, the local CS was:
June-180
July-181
Aug-175
Sept-165
any trend there yet?
Next few months should be interesting…
Existing Home Sales – Lying Is a Time Honored Sales Tactic
OK, so by now you have heard that existing home sales were up 10% in August. At least that’s what the NAR and the mainstream media reported. Yes, there were some qualifications added to those media reports. Here are a few facts, or as Paul Harvey would say, “The rest of the story”.
Sales were down 8.5% month to month. The seasonal hocus pocus is particularly misleading this month because sales were already extremely depressed for this time of year. The fact is that the market is getting worse. Volume was 379k in September, down from 414k in August. This compares with 498k in August 2009, and 468k in September 2009. Sales are down 19% y/y. This is the worst September in at least the last 10 years.
Median prices were down a whopping 4% m/m and are now down 6.5% since June. This reflects the removal of the artificial price distortion caused by the homebuyers’ tax credit. This is a return to a real market based price, rather than one artificially and falsely inflated. Or at least it’s market based to the extent that it is also skewed by the Fed’s mortgage rate subsidy via its purchases of Treasuries.
In addition to the other seasonal hocus pocus, the NAR also adjusted August inventory up from 3,982,000 to 4,117,000. That enabled them to report an inventory decline to 4,040,000. Inventory is up 330k units, or 8.9% y/y. The inventory to sales ratio stands at 10.66 vs. 7.93 last September.
Any way you look at the real numbers, they are catastrophic. The idea that there’s any improvement at all here is just completely false.
So given that things are already catastrophic, what happens when the Fed finally stops subsidizing mortgage rates? Of course the operative word is “when.” Who knows? My guess is when the commodity futures vigilantes force the Fed’s hand via raging commodity price appreciation (inflation) that gobsmacks consumers into ratcheting down discretionary spending again. I imagine that will come within 6 months.
The amazing thing is that the huge drop in mortgage rates over the past 6 months has not boosted sales one iota. The Fed has wasted our money trying to achieve something that just can’t be achieved. What else is new?
Fact is, you can not stabilize an oversupplied market by artificially propping demand. Such moves are always temporary, and always leave behind a demand vacuum…
FreedomCM ,
Where did you get the Sep CS number? Also I am curious where did you get OC number since CS does not seem to cover OC area.
My point was not that “some people have it bad,” JtR. I stated my point in #1, that MANY “former high income earners won’t be buying real estate any time soon.” Simply put, will this factor (22% of Californians un- and under-employed. and thus subtracted from the pool of potential buyers) cause prices to rise, or to fall?
“Simply put, will this factor (22% of Californians un- and under-employed. and thus subtracted from the pool of potential buyers) cause prices to rise, or to fall?”
Well, perhaps it’s different this time for SD, but if there are better opportunities for investment and/or employment in other regions, you’re gonna need a heck of a lot of independently wealthy RE buyers to keep that bubble propped-up.
IMO it won’t last indefinitely, there’s too many balls in the air…
Newsboy, I’m going to delete you from now on. You keep stating opinions like they are facts.
The idea that there’s any improvement at all here is just completely false.
This is a local-based blog, and around here there has been improvement in every category.
Take your rants to the big blogs where people like to spew the negativity please, or better yet, start your own.
Taxed2Death, same for you.
Keep pumping that bubble, got make those commissions eh’ Jim 😉
It’s not just me, many readers here want the truth, and something that applies to them in this market.
NAR and national stats are useless, as are your negative slants on them.
The detritus of the housing bubble is not only more houses than the local economy can provide buyers for without sub-prime mortgage smoke and mirrors, but also bigger and more costly houses than buyers with real incomes can practically afford to buy and maintain. If all the overdevelopment that took place during the bubble had consisted of 3 or 4 br houses in the 1500-2500 sq ft range, they would probably be occupied sooner or later when a more normal economy emerges from the current doldrums, but my guess is that a lot of the mega-McMansions will go unsold for years to come.
Jim,
Newsboy is reflecting the incredulity that most people have. Even me. I don’t know how people afford housing here. I just bought, and I’m amazed at how much expense I forgot I would have. Renting was definitely a lot cheaper.
Of course, this extreme pessimism is the pendulum swinging the other way from where we were in 2005 when the blind boosterism-meter of housing was pegged at an 11 on a scale of 1 to 10.
I suspect that public opinion is at best a trailing indicator, and in some ways an opposing indicator of future direction. But, what do I know? I will never understand coastal SoCal housing.
Chuck
Overdevelopment in SD??? Not in the residential housing sector–if it were so overdeveloped, why are the builders building again?
You got a good point Jim. I check this blog on a daily basis for local SD real estate trends and facts not for national real estate news.
Thanks, AppraiserDude.
The national news is included here reluctantly.
Two reasons it is:
1. It’s pretty quiet overall, so it fills space.
2. I’m too busy to research more local data.
I’ll work on keeping it local.
The economics of square footage–GeneK pointed out that there should be more 1500-2500sf homes rather than “McMansions.” Do people actually need 3500sf+, maybe not, however, as Jim has pointed out in many past videos–the extra square footage is CHEAP, sometimes almost free. IN NCC, the price of these larger homes (3500sf-4000sf) seem like better buys when compared to the price of smaller homes. Let’s take Carlsbad–$650K for around 2000sf, or, $750-800K for around 3500sf–at today’s interest rates, a buyer would be gaining about 1500sf (nearly double the square footage) for an additional payment of $500-750/mo.
Ummmm, isnt real estate the ultimate free market? You know, willing buyer, willing seller either negotiating a deal or walking away? How can anyone pump a bubble? The agreed selling price with suspensive conditions IS ALWAYS THE FREE AND FAIR MARKET PRICE at that particular instant in time.
How can anyone pump a bubble?
Is that a joke?
I guess you didn’t have one of those NAR pump monkeys whispering in your ear, over & over again to ANYONE shopping for RE from 2002-2006, Buy now, -OR- be priced out forever!.
Let me guess, you were one of Lereah’s favorite flying versions of the pump monkeys LOL
P.S. Being induced to purchase through the use of material misrepresentations and omissions of MATERIAL fact is called FRAUD, and pretty soon that pendulum will swing back were the prosecutions will begin, enmasse.
The truth, right now as I and a LOT of others see it, is Sell now, or be priced -IN- forever.
Jim,
Where do you think the market will be, and the near-term factors that impact the market?
I see too few buyers with borrowing capacity to sustain prices in the mid- to high-end market. Likewise, the CS index of little action-able value given it does not control for short-term shifts in housing distribution btwn low, mid and high-value homes. Correct me if I’m wrong, but my analysis of what’s on redfin shows the low-end market has effectively achieved rent parity so most of the pain is in the mid- to high-tier homes.
Re #19 this of course depends on operating expenses. Admittedly San Diego has among the lowest HVAC expenses in the country, particularly west of I-15 with an equitable climate, so that the expenses of extra square feet are not the same as in Texas or North Dakota. However there is repair and upkeep which add costs.
I agree the question is in general is the climate in San Diego worth as much as it appears as that is the only major factor to contrast it with further northeast.
I really value the two-way discussion and I think this blog would be a lot less interesting if negative views were banished.
And I don’t think just because the focus is local you can ignore macro factors like interest rates, employment, and tax credits. People in NCC San Diego need jobs and mortgages too.
But this isn’t two-way discussion though.
It is carpet-bombing by anonymous people looking to disrupt.
I bust my tail here to put forth evidence of what is actually happening on the street, and I’m not going to let guys come in here and dilute the experience with irrelevant opinions.
Andrewa,
It is a free market. You’re right about that.
But, it’s also a thin market. With only a few thousand transactions per year, and much less in a specific neighborhood, little changes in sentiment and outlook can have dramatic repercussions on volume and pricing.
The nearest corollary is a microcap stock where a few thousand dollars can move the market capitalization of a stock a few million. I jokingly refer to one stock I own as the company that is priced on how the pissant retail investor feels when they wake up. If someone wants to sell a few thousand or buy a few thousand shares, it can move the stock 5 or 10 percent in a day. It’s easy to manipulate thinly traded markets and thereby entice people to think it’s safe and rewarding. I highly recommend watching “Boiler Room”. Great movie.
Chuck
“The truth, right now as I and a LOT of others see it, is Sell now, or be priced -IN- forever.”
That’s just as bad a statement as the “be priced out forever” one. Real estate ebbs and flows in a cyclical manner – that should be common knowledge for everyone here. Yes, we’re in a bad place now. We were soaring a few years ago and the fall is that much harder because of it. But there is no way things are going to stay bad forever – just like they don’t stay good forever.
It might take longer than normal because the fall was so hard, but everything will recover and we’ll be in another boom *someday*.
#12 – Newsboy, Jim doesn’t need this blog to pull in commissions, he does that just fine himself. If you want to complain to someone for painting a rosy picture of the market contact the NAR.
#19 – LocalBoy, maybe buyers of McMansions could “gain” an extra 1500 sqft for $500-$700/mo, but how much extra will they pay to heat and cool that extra 1500 sqft? or to maintain and furnish it? I think buyers are being more practical these days.
Sorry Lyle, I didn’t mean to repeat what you wrote. I didn’t see it until after my post.
I casually track the closings in 92126 as I consider that a good gauge of the average first time/condo move up buyer and the average move up seller (i.e. I sell my 92126 to move into SR, PQ, CV, etc). The number of units have gone up dramatically over the past year but the number of sales hovers right around 50 a month, The market was down to sub 100 units with just over 2 months of inventory for a time but now it’s up to around 230 units for sale. Median price per sqft have been fluctuating between 235 and 265 a sqft with the tax credit boost earlier this year pushing prices up from around $250 to $265 sqft to beat the deadline.
Conclusions
1) Market has remained stable but inventory has risen. Seems to indicator the number of buyers is relatively stable but more sellers are coming to the table.
2) September YoY was about a flat as can be. 49 sales this year 51 last year, average price per sqft $249 last year $251 this year.
3) October 2010 so far is off to a bad start especially compared to last year but the tax credit originally was suppose to expire in October last year so there was atypical surge in October last year.
4) The market is likely to be pretty dead until Feb/March 2011. Sales are likely to be down significantly for the next 4 months, and prices are likely to be slightly down.
Where do you think the market will be, and the near-term factors that impact the market?
I think the local NSDCC region will ebb and flow, and sputter along, based on the smattering of good quality homes coming to market.
There have been very few good, quality homes coming to market at a decent price this year.
But as livinincali pointed out above, the market has been remarkably stable, which means just enough sellers are getting their price right.
I think more people are like Chuck above at #15 – in a state of disbelief that the local market has remained so buoyant. But so far, the demand keeps coming, though no one expects to pay more than the last guy.
A lot of people forget that coastal is just never going to be affordable. The demand is too great. I think the only state with affordable coastal right now is Florida, the drawback is (of course) that it’s Florida. So, Jim is right that national statistics are meaningless when it comes to coastal properties. The closer to the water, the more meaningless the statistics become, take that Solana Beach property from yesterday as an example….
Fact is, until the next big earthquake, they aren’t making any more coastal land. It’s a limited commodity.
I’ve been noticing construction moving forward on a few projects around in my area as well, it just stuns me that there is a buyer for yet more McMansions on postage stamp lots — with oil derricks plainly in view. I guess they are like power lines, you mentally block them out of your view after a while. I guess we’ll see how many sell. Especially with the mortgage interest deduction on the possible chopping block.
About time for an ice-cream-truck break, wouldn’t you say?
“The closer to the water, the more meaningless the statistics become…”.
Well-said Art.
FreedomCM ,
Where did you get the Sep CS number? Also I am curious where did you get OC number since CS does not seem to cover OC area.
positive | October 26th, 2010 at 10:37 am
I have been calculating a local CS index for a near-coast region of TheOC (costa mesa and inland NPB) for three years, using sales of SFR and non-apartment condo sales.
I added a link to the series (by clicking on my name), hope you don’t mind JtR (if so, delete the link).
Just a little local flavor from north of the border!
…oil derricks plainly in view??? What Art thou??
“But as livinincali pointed out above, the market has been remarkably stable, which means just enough sellers are getting their price right.”
Yeah that seems to be the case. If you can hit that $250/sqft price point in a market like 92126 you can make the sale. There is one aspect to realize that the buyer in September 2010 has a better rate than the buyer in September 2009 and is paying less per month.
A $300K loan at 5% in September 2009 is about 1950 per month while the 4.25% loan in September 2010 is about 1825. I guess you could argue that 2010 buyer gets a little more bang for their buck and were better off waiting to buy.
I just got back from Maui. The Encinitas schools are on their 2 week fall break. We constantly ran into neighbors and friends wherever we went and it was a 7 day revolving playdate in paradise for my kids. There had to be at least 50 familes from my kids school alone there spending anywhere from a week to 2 weeks at 4 and 5 star resorts there. Contrary to popular belief lots of people are doing just fine in this economy and those that are find that the World is on Sale right now!
clearfund – Long Beach/Signal Hill. The place is littered with ’em.
Both camps are right.
The economy will remain bad for a long time — especially in California, and prices are still unreasonable in comparison to both history and other areas currently.
But they ain’t making any more coastline, and houses here will likely never be affordable to most people.
And if we get serious dollar devaluation as the Fed is attempting, you’re going to want to own, not rent.
Some pictures..
http://www.life.com/image/80145750
http://www.life.com/image/80145347
http://www.life.com/image/80145268
Hard to believe, but some of these houses were going for over a mil during the bubble. Currently in the area a still over a million and look directly across the street at derricks. The mind boggles.
Loved the pictures Art. Grew up in L.A., last lived in Palos Verdes, so very familiar with this area of L.A. In L.A. you pick your poison so maybe oil derricks are better than what else you could live next to. In S.D. there are the damn power lines and freeway cutting through the coastal communities. Hard to find a house that doesn’t get impacted by one or both that is affordable.
Beyond the practical considerations of cost of acquiring, furnishing and maintaining, the bigger McMansions may also be viewed with a certain degree of stigma as symbols of the bubble’s excesses. Look what happened to sales of Hummers even after people got used to paying $3.50+ for a gallon of gas. Some people who can actually afford these monuments may be embarrassed to be seen in them.
Regarding the current state of “the market,” if I take the original price of my home when it was built in 1989 and add 2-3% a year for inflation, I get a figure that is quite close to what the lender appraised it for when we did our most recent refi this past summer. Are home prices really so bad, or do they just seem that way to people who got used to bubble pricing?
I’m not sure why the title states SD is up again….like LA, it’s in the positive (for now) but the slope is steeply negative.
We’re not on a way to recovery….we’re on the way to double-dipping.
Art – Signal Hill, blast from the past!!! If you are a long time Signal Hill guy you may remember the old Southern California Military Academy school on Cherry. Think the city took it, crushed the old 1920’s architecture and made it a lame public school. Anyway, I went there in the late 70’s/early 80s. Loved the ride to the top of signal hill…could see the oil rigs for miles..
Local Boy,
we’ve been toying with house designs and honestly cannot keep it under 3500 without what feels like painful sacrifice. In a way it’s laughable because we live in 1900 now, but on the other hand there is no reason to build unless you get at least a majority of what you want out of the new design. I expect people buying up have the same thought (as opposed to those who move into an area, who might be more shelter oriented). In the end, the transaction costs are high enough that the small difference in monthly payment on a 30 year between what you need and what you want isn’t big enough to make you sacrifice.