Excerpts from the latimes.com and dataquick.com:
Southern California’s housing market couldn’t shake off the doldrums in February despite record demand from investors and all-cash buyers.
The median home price increased 1.9% in February from January to $275,000. That was unchanged from the same month a year earlier, according to DataQuick Information Systems of San Diego.
Sales remained weak, declining 0.6% from January and down 6.4% from February 2010.
With the spring selling season approaching, many real estate professionals found little reason for optimism.
“I don’t see any basis for prices to climb at this point,” said Glenn Kelman, chief executive for the online brokerage site Redfin. “I am not one of those people who think they are going to fall much further. What I am mostly worried about is just the stalemate. The buyers we are talking to are just frustrated. They feel that there is nothing good to buy.”
Robert Kleinhenz, deputy chief economist with the California Assn. of Realtors, said that aside from their concerns over the direction of the economy, potential buyers face difficulties getting a mortgage.
“When they finally get around to looking seriously at a home and wanting to make an offer, they have difficulty finding financing,” Kleinhenz said. “The trouble with trade-up buyers — they may have lost equity because home prices have fallen.”
Although the sales pace remains sluggish, it would not take much to see an improvement, DataQuick analyst Andrew LePage said.
“There is a lot of pent-up demand,” LePage said. “If the economy can improve and people begin to feel more confident about their employment situations, then sales could increase significantly. It’s easy to go up from here.”
Cash-rich investors are likely to continue to constitute a big part of the market in coming months because these buyers can close deals faster than regular buyers, who must wait for their loans to be approved by banks.
In Southern California last month, the number of distressed sales — the combination of foreclosures and short sales — accounted for well over half of the market for previously owned properties, DataQuick said.
Foreclosures made up 37.1% of the market and short sales 19.8%. Absentee buyers — mostly investors and some second-home purchasers — bought a record 26.1% of Southland homes sold in February, paying a median $198,000. Buyers who paid cash accounted for a record 31.7% of February home sales, paying a median $200,000.
Investors scooping up properties at low levels are keeping prices down.
Stan Humphries, chief economist at Zillow.com, said the main reason the median home price that DataQuick publishes had not fallen further was because more sales were occurring in higher-priced neighborhoods. The proliferation of big-ticket sales boosts the median price — the point at which half the homes sold for more and half for less — disguising that values are actually continuing to fall, he said.
“The January and February sales data can be interesting, but we always caution that historically they’ve been a poor barometer for the rest of the year. What the past two months do tell us is that lots of people have bet, often with cash, that housing at today’s prices will prove a solid investment,” said John Walsh, DataQuick president.
“This spring we’ll see an infusion into the market of more traditional buyers, who aren’t necessarily purchasing with an investor mindset. If the stars line up right – low prices, low mortgage rates, available credit, higher job growth and higher consumer confidence – we could see sales shoot back up to more normal levels. There’s pent-up demand out there. Lots of people have been waiting for the right time to buy. But they’ve got to feel more confident in their jobs, they’ve got to qualify for a loan and, for some, they need to be convinced prices are at or near bottom. One group will still be stuck on the sidelines, though: Those who owe significantly more on their mortgages than their homes are worth.”
North County Coastal was up over 6% year over year;
http://www.dqnews.com/Charts/Monthly-Charts/SDUT-Charts/ZIPSDUT.aspx
Thanks Mozart!
Analyzing the psycho-babble:
1. Kelman’s point: “I don’t see any basis for prices to climb at this point,”, and then later in same breath says, “The buyers we are talking to are just frustrated. They feel that there is nothing good to buy.”
Frustrated buyers = higher prices
2. Kleinhenz’s point: “When they finally get around to looking seriously at a home and wanting to make an offer, they have difficulty finding financing,”
Blantantly not true, mortgages are available everywhere, using the same underwriting guidelines that have been on the books for decades. FHA is still 3.5% down, and you can add as many applicants as needed until you qualify – what’s so difficult?
3. Both Dataquick guys said that there is pent-up demand, but offered no proof.
Walsh’s point: “This spring we’ll see an infusion into the market of more traditional buyers, who aren’t necessarily purchasing with an investor mindset.
Just a hunch? Link please.
All of these so-called experts continue to talk the company line from the ivory towers. Alejandro, get down to the street level and talk to competant agents who are doing the business!
Pent up demand…..difficult financing….
the propaganda just rolls off their tongues just like all the other psychobabble they have been spewing pre-boom and post-bust years. I have been pre-approved for traditional financing and FHA financing for amounts way above what I can afford. So no, financing is not difficult.
I have been looking in the Carlsbad area in the range of 400-450 and most of what I have seen that is available are beat up pretty badly or have serious flaws (e.g. backing up to 6 lane roads). So, yes, I agree to some extent that the the current inventory leaves much to be desired. However, the real problem I have seen is that pricing in certain neighborhoods are all over the place because there are bank owned, short sales, and normal/equity sales all competing on the same street.
Overhere at OC, houses are still way overpriced. Unless one has a big down payment or some helps from Mama & Ppapa’s Banks, there is no way a typical two-income family can really afford a 2000 SQ ft house.
I have to run out the door right now, but…I think the +6% number from DQ needs to be examined more carefully. The underlying data listed doesn’t seem to support that conclusion.
As a byproduct of the ongoing stalemate, frustrated buyers are helping to weed-out not-so-desirable properties … Anything selling today is in general “better-off”. These products would command a relatively premium price going forward … future buyers can use current period to gauge the “premium-ness” of a property.
The DQ’s North County Coastal omits La Jolla and Rancho Santa Fe, but includes Oceanside.
These are the February detached stats from the MLS for the same DQ territory; Carmel Valley to Oceanside, not counting RSF:
2010: 213 sales, median = $530,000, $291/sf
2011: 213 sales, median = $580,000, $290/sf
+9% increase in median.
DQ showed 252 sales, and a median of $461,909, so there must have been a lot of FSBOs selling cheap?
P.S. Yes, the MLS shows the exact same sales for both years – I checked it three times.
Speaking as a potential buyer, I have to say that there is some credence to the idea that buyers are frustrated and there is no reason for price to go up.
Economically speaking, yes, high demand and limited inventory suggests higher pricing, but the problem is that buyers like me (don’t have to buy, but really really want to buy and have the means to buy) are so frustrated that we have now crossed the line into stubborn.
So this means we look at what little inventory is out there, continue to expand our parameters of what would be considered “acceptable,” but still only find junk. I’m so sick of walking into homes that stink like cat pee, I just can’t stand it.
And I’m sick of seeing the closed homes that look great, were priced well, but that I never had a shot at!
So, for me this translates into “not going to overpay, no way no how.” I guess the issue is how long I can hold out, eh?
profhoff… ditto!
qualified and ready to go, but extremely frustrated and not going to drop $800K just to get into something…
The DQ report shows the following for North County Coast:
252 SF Resales +00.8%
91 C Resales -10.71%
45 All New Sales -25.46%
Then magic happens and:
388 Total Sales +06.02%
None of the sub-components of the total is higher than +.8%, but the total is +6.02%? How is that possible?
ProfHoff and LCV Wannabe,
I am in the same boat. Looking for past 3 years in Coastal Carlsbad 92011. Anything decent is either already picked up or gets priced out with multiple bids. Anything under 800K and within the reasonable parameters is just an illusion … its just not out there. Also most of current owners on the coast in 92011 (Greater Aviara) area baught in before bubble (pre-2003), at much lower price point, so not a whole lot of stress here, unlike the inland areas. All-in-all very low chances. Then there is the “opportunity-cost” angle … standard “kids are growing up” cause … it may not be practical to be stubborn and wait for another 3-4 years to buy. If kids, family and other related factors are not applicable then whats the point of waiting and buying a SFR anyway.
One option is to continue renting and be happy with being “priced-out-for-a-long-term”, and then possibly retiring in a condo/town-home when kids are out. Even though I hate to pay “mostly-increasing” rent, to make someone else the “owner”, but it seems more and more reasonable given the coastal-scenario. Either that or bite the bullet … its as bad as any other day in coastal market. We still have it better here in NCC … look at SFO, LA or OC coast.
I understand why the potential Buyers here are frustrated but this area is in demand and will stay that way.
You have to ask yourself this; do I want to live in a bigger, newer home in a hotter more remote, sterile, suburb? Or do I want to pay more for the same or similar near the coast? And if the answer is yes, how much? As a dumb rule of them $600/month = $100,000 in borrowing power.
For me, I’d always rather have a nice place than a nice car. It is a choice.
Life is short, kids grow up fast, I say overpay a little get a house you and the spouse love, and be done.
I’d be very happy to overpay a little. The reality now is buyers are expected to overpay a lot. Lower prices 10-20% and you’ll find plenty of evidence for pent up demand.
Moz – Was the area any less in demand when prices were sane? I agree that SD will always command a premium, but that premium is currently (imo unsustainable) much higher than what it was a decade or so ago.
Regardless of the statistics, I’m seeing desirable houses edge closer and closer to reasonable pricing.
I have had my differences with Mozart before, but generally he’s right on here. There is a lot of pent up demand, especially at the lower ends with FAVORABLE financing. Financing is not stupid like before, but it is cheap and plentiful with respect to overall history. However, buyers today are not like buyers of 2005. They are generally more committed to buying on the whole, and have a good chance at buying something if someone else doesn’t beat them to it.
I still think it’s an incredibly thin market, but that is on both sides (realistic sellers, realistic buyers), and it’s weighted towards the realistic seller. The unrealistic bunch need to be considered, as they’re simply not in the market, and until the market changes to match their principles, or they change to match the market, are not a meaningful part of the equation.
Chuck
Genius,
You are correct about a lot of locales … inland parts of SD county are very much inline with your thinking, premium-wise.
But coastal is a different game. In my experiece, typically premiun increases non-linearly as you move from inland to coast.
Last time the prices were sane in Coastal North County was parhaps in Mid-90s before the coastal Carlsbad/Encinitas were
even “discovered” (East of 5 were mostly orchards and strawberry fields!). As mentioned by Jim and others, these areas have been evolving
in the past 10 years and are now turned out to be some of the nicer and finer parts of Southern California. Coastal Carlsbad appears to be very well positioned.
Perhaps the last So-Cal coastal town where we can touch a decent McMansion SFR under a million, within a mile or two to the beach,
with good schools, family environment and good city amenities. Folks who could not afford it in Bay Area, LA and OC coast can still buy here.
I still see it as an opportunity (sort of new coastal LA/OC in the making; even better than the original 🙂 ).
This may be incintive for hessitant buyers to get off the fence:
http://realestate.yahoo.com/promo/rents-could-rise-10-in-some-cities.html