House prices in the S&P/Case Shiller index fell 5.3% over the last two quarters of 2010, wiping out the 4.9% growth seen in the previous year and a half and sending the housing market into a double-dip, analysts at Capital Economics said Tuesday.
Not everyone is so pessimistic however. Anthony Sanders, a real estate finance professor at George Mason University said underwhelming home sales, at least in the later months of 2010, should have been expected.
“It’s important to remember that this is winter and it’s normal for sales to be lower,” Sanders said. “The real test is when spring comes in April. That’s when we’ll know if we have a recovery occurring.”
Still, Capital Economics said further price declines are ahead, just how steep remains in question.
“We expect they will slide by a further 5% this year,” analysts said. “The danger, however, is that a vicious circle of falling prices and rising foreclosures pushes prices even lower.”
Distressed home sales, with an estimated market share at between 36% to 47% are a key contributor to the sharp decline as home prices fell in 18 out of the 20 MSAs, according to Scott Buchta, head of investment strategy at Braver Stern Securities.
Buchta said that the downward trending is not likely to end soon.
“We expect to see home prices continue to fall throughout 2011 as the housing market continues to struggle under the weight of high unemployment, growing inventories of distressed properties and rising interest rates,” he said. “Year-over-year comparisons will be difficult as the impact of the 2009/2010 home buyer tax credits will continue to skew the data for the next several reports.”
More insistence from the “experts” that more foreclosures cause lower prices.
Although I agree about the real test being in April, but for a different reason.
Will the ‘mature’ sellers (those on market more than 60 days) wake up and start lowering their price to get in the game?
If so, we could have a jump in sales, igniting some frenzy-like activity.
But sellers and agents alike are so resistant to such an idea. Their price is right, by golly, and waiting for the lucky sale is the preference.
It was also noteworthy that they included the graph above, but no commentary about how it shows that housing is under-valued.
Okay, here’s more mumbo-jumbo/buzz from the resident bull;
The claim is the non-distressed properties do in fact sell for about 20-40% more than REOs or short sales. The reason being largely quality of the home and upkeep by the seller trying to get top dollar. Whereas the typical REO or short sellers don’t give a damn about how much they get.
My take as a lowly buyer, who isn’t waiting for the market to go up or go down, just trying to find the ‘right’ home, is that not a blooming sole knows what’s happening or going to happen. Stats can be sliced and diced omitted and included to meet the needs of the ‘analyst’. The NAR doesn’t even know how many homes were moved http://news.yahoo.com/s/nm/20110222/bs_nm/us_usa_economy_housing.
The era when people like me flocked to North County in droves is finished. North County San Diego is entering a “new demographic normal”. There will be no more “sun tax”, or “paradise premiums”, just cold hard economics to justify Real Estate pricing. Of course NC will continue to grow. It might even return the kind of place I dreamed it once was…
When I first moved to NC in 2000 I was a young 30 something with a new family in tow, I had just started a new tech services company, and I wanted to live in CV. I spent most of the 1990s traveling back and forth to San Diego, I believed it was a special place and I was determined to make a better life there.
After the Tech Bubble burst (on the day my family arrived in California in April 2000!), I started to look around, and increasingly, I didn’t like what I saw.
Too many silicon injected freaks of nature, too many guys 10 years older than me driving German sports cars meant for guys 10 years younger than me. Too many sad, dejected, illegal “international consultants” waiting hand and foot on everybody. It was like the whole place was filled with a sick & twisted “landed gentry” (including me); in short, it was just plain weird…
By 2003, I was ordering a moving company to get my family the hell out of dodge and back to where I came from.
For the first year or two after I left NC I missed all the standard stuff, the sun, the sand, the surf, the ice cream trucks… But then one day, just like Paul Haggis, I woke up and realized I didn’t miss NC at all anymore.
In fact I found that I really liked living in a community where people were engaged in really living their lives, where no one cared what car I drove, or how many “square feet” my house contained. A place where people went to the local fair trade coffee house because it was better coffee and more fun, not the place to show off a diamond ring. I liked living in the place I dreamed North County would be all those years ago…
Wassup is the typical story of someone coming to California trying to get away from somewhere else that they also hate, (usually because they thought they were too cool for that town as well), only to find that the problem is within them and not easily fixed by geography. The reliance on stereotypes is the tip-off. Enjoy your coffee and hope it works out for you.
Home prices won’t stabilize until two things happen:
A. Toxic debt is cleared from the books, encouraging private capital formation.
B. Median home prices become congruent with median incomes, which are at about 1995 levels (except in the “We’re different cause we’re rich” neighborhoods).
Unless you’re willing to lose 30-60% of your home purchase price, it is wise to wait for the market to fully correct, which won’t happen until the .GOV/FED stopped supplying liquidity (probably this year unless QE insanity continues).
With interest rates rising, a cash buyer with any brains is waiting for the liar loans, RE pump monkeys and the flippers to be removed from the equation 😉
On the commercial side financing has been vastly removed from the equation (except quality multi family where the gov is still funding it).
Because every loan is difficult, even under 50% LTV is a crap shoot, prices are coming down hard on weak owners. Its a much more ‘true’ market than residential except w/o JTR videos to enjoy…
So far it has been to the banks advantage to trickle their “toxic” assets. Flooding the market their inventory all at once would cause prices to drop thus, creating more “toxic” assets. If they can continue this trickle until they are all gone bye-bye, prices should remain stable–it will, however, prolong the next cycle, flatting things out.
As far as the income part–renting is expensive and rates are low. As Jim has pointed out, people are buying rental properties again, because they seem to be able to justify it–high rents/low rates and they need a place to park cash.
Wassup, sorry that NC dream died for you. I visited here over the last 30 years and dreamed of being able to live here some day. Now I do, and for the last 1000 days I have awakened thankful to be here. As I drive my 1967 VW beetle down the coast to surf Cardiff Reef, share a wave with some other old men and women, or have a fish taco at Roberto’s, my only regret is that I didn’t do it sooner. Good luck in your current home.
$1.5 million….elevator….in Leucadia west of the freeway! Probably the only house with one (although one of the semi-built Nantucket ‘homes’ has one).
Wassp, sorry to hear about your experience … but at the end of the day, we still have a Net inward migration to California. I personally think it will continue like this atleast for the next decade or two. Internet and Globalization (two of several factors) are the catalyst that have been fueling this trend.
Cant speak for rest of America … but my case in point comes from another corner of the world. … last trip to India over a family function .. ran into a group of distant relatives … “so you live in California … Wow that must be paradise-like, we have been trying to immigrate there”. These are the business folks with tons of cash at hand. They still cant touch a prime ocean-view apartment in Bombay but can easily buy a big McMansion in North County … and a lot of them want to move here. Real Estate prices in California are peanuts when compared to Indian (Read Asian) cities like Delhi and Bombay.
IMHO Legal Immmigration from hyper-populated competing economies, is the key trump card that can make things interesting if played correctly.
Uh, Jim, you might want to tell this realtor that her photos have been taken over by someone else. Look at the pictures of the house! It’s a naked native man with a nose piercing and a different ‘interesting’ pictures of a woman.
Joe, you’re killing me here – shouldn’t you be at a frat party?
The listing you mentioned is not listed with a realtor – just somebody goofing around.
Here is another example of realtor photography:
Sounds like wassup was hanging in the wrong parts of NC (or maybe it was LA/OC and he thought it was NC). Anyhow, a place like Pannikin Leucadia might be more his cup of tea–or coffee!
“Unless you’re willing to lose 30-60% of your home purchase price”
WOW – OK show of hands here, who believes the market will still lose 30-60% from where we are now? Anyone? Anyone?
Unless this is a troll, I think we have found, the single most bearish person on the face of the earth…
Narl-No kidding. My personal unprofessional opinion would be a generally flat housing market nationwide for the next five years or so, followed by increases at about the general rate of inflation. Of course, local markets will vary wildly. Areas in high demand and short supply (say, anything within twenty miles of the coast) may have higher increases.
Wassup, if you hated NC so much then why are you reading this blog? You just can’t compare the “keeping up with the Joneses” mentality of Carmel Valley to the rest of NC. Did you ever even visit other parts of NC? I’m astounded.
My interpretation of this graph is: Housing is not bottomed, but getting close (maybe 10% to 15% more drop). The deviation is still large and pointing down. I think once the two lines cross then the bottom is in place.