SD February CS Index -1.8%

I was out today, but we should cover the San Diego Case-Shiller Index, which dropped for the first time in 15 months.

Isn’t that to be expected?  The changes over the last few months have been very small – January’s reading was a scant +0.1% – and we’ve been expecting it to bump up and down for the foreseeable future.

A few years back, Rob Dawg said that because of the extraordinary nature of this collapse, we should question all of our theories and assumptions from now on. 

My first thought was that if prices did continue going down, it would be great for sales – more buyers would be interested in getting a lower-priced deal.

But as we’ve seen, without more of the better-priced foreclosed properties, we’re left with just retail, or retail-plus offerings (sellers with big equity/lo mo, flippers, and needs-based pricing).

If prices went down, sales could get worse, not better.  A downward pricing trend, interest rates, qualifying, etc. – none of those matters if nobody wants to sell for what the market will bear.

Sales are looking a little soft too – here are the San Diego County detached numbers from the MLS:

April, 2010:  1,886, $248/sf

March, 2011:  1,845, $234/sf

April, 2011:  1,250, $246/sf

The rest of the week will see more closings (there were 319 that closed over the last three business days of March, 2011) but it’ll take a big push to catch last month.  If it keeps going this way (downward trend for pricing and sales) then the media will want to believe that there is no demand – when it’s far from that now, at least around NSDCC.


Coastal-SFR Foreclosure Count

At the beginning of the year it looked like foreclosures were picking up.  But those pesky lenders are teasing us again – the April foreclosures have slowed considerably.

Here are the counts of SFRs foreclosed in North SD County Coastal, YTD (La Jolla to Carlsbad):

January: 49

February: 26

March: 43

April: 15

Without more foreclosed properties to sell, the inventory will continue to be bleak – homeowners with equity and lower motivation are either priced to sit, or on the sidelines.

Yet sales keep happening – consider this one that hit the market Friday at almost $500/sf:


The seller, who just got his license and is working on his first sale, did some smart things, like install a moderate line of Frigidaire stainless appliances to help disguise his original kitchen that needs a full renovation.  There are plenty of windows and light, and the yard has been tastefully arranged. 

But with only 2,258sf built in 1948 and just a peek ocean view from the upstairs master only, the $1,074,000 list price still sounded optimistic……and he got a full price offer on Easter Sunday!

We need more foreclosures just to add something to inventory!

“False Buyer’s Market”

From our friend Nick at the wsj.com:

Falling home prices should give aspiring homeowners the upper hand this spring, but in a growing number of locations, it doesn’t feel like a buyer’s market.

Blame the nearly five-year slide of home prices. Those declines, which accelerated over the past two quarters, have left many sellers unable or unwilling to lower their prices. Meanwhile, buyers remain gun shy about agreeing to any purchase without getting a deep discount.

That dynamic has fueled buyers’ appetites for bank-owned foreclosures. Those homes often hit the market at bargain prices, but they are being snapped up by investors who are paying in cash.

At a focus group earlier this month, the mood among buyers was “nasty,” says Glenn Kelman, chief executive of Redfin Corp., a Seattle-based brokerage that operates in nine states. “There’s a shortage of attractive inventory,” he says. “Customers just keep getting outbid on the houses that they want.”

It took Susan Hunter just one month to unload her home in Redondo Beach, Calif., last fall. But she has been outbid on four homes at a lower price point in Eagle Rock, an emerging neighborhood in northeast Los Angeles. Some sold to investors who paid cash. Other listings, she says, are being resold by investors at prices that she says are too high.

“It’s the Wild West out here. It’s a daily, tireless search,” says Ms. Hunter, who works in television production and marketing. Demand is up because “we haven’t been able to find homes here below $500,000 since the 1990s.”


The Future of Housing?

From the nytimes.com:

Taylor Morrison, a housing developer based in Arizona, was set to break ground on a 304-unit condominium development in Sunnyvale, near San Jose, when the bottom fell out of the housing market in 2007.

The company went back to the drawing board, and last month it gained approval for a drastically different plan: a town house project aimed at extended families, where children, parents and grandparents can all live comfortably under one roof.

Such multigenerational housing is specifically aimed at the booming immigrant population in the Bay Area, and is emerging as one of the few growth niches in a moribund housing market.

“If you’re selling in certain areas of the Bay Area, you have to be more extended-family-oriented,” said Cheryl O’Conner, government affairs consultant to the Building Industry Association of the Bay Area.

Asian buyers, in particular, “come with the whole family,” Ms. O’Conner said. “They come with their parents and grandparents, uncles, aunts and cousins.”

Even when several generations are not living together permanently, more and more families are looking for housing alternatives that can readily accommodate extended visits from overseas relatives.

Census figures released last month show the Bay Area’s Hispanic and Asian populations each increased by more than 350,000 over the past decade, while the region’s non-Hispanic white population declined. Those groups are about twice as likely as whites to live in multigenerational households, according to a 2010 study by the Pew Hispanic Center.

In 2008, an estimated 49 million Americans lived in a house that included at least two adult generations or a grandparent and at least one other generation, the study showed. In 1980, that figure was just 28 million.

“Immigrants are a source of growing demand, and their household composition is different in fundamental ways from the domestic-born,” said Kermit Baker, a senior fellow at the Joint Center for Housing Studies at Harvard and the chief economist of the American Institute of Architects.


Strategic-Default Studies

From the WaPo:

Some borrowers can’t keep up with their mortgage payments because they’re struggling to make ends meet.

Others choose not to keep up even though they can afford their monthly payments, and a new picture is emerging about who these borrowers are and why they walk away.

A growing body of research shows that these so-called “strategic defaulters” defy the tell-tale characteristics of most people whose loans go bad. They pay their bills on time, rarely exceed their credit-card limits and hardly use retail credit cards, according to a study released Thursday.

And they plan ahead.

They know their credit scores will take a hit after they fall behind on their mortgages, so they tend to open new credit cards in advance of defaulting, according to Thursday’s study, conducted by FICO, the firm that created the nation’s most widely used credit scoring system.

“These are savvy people who organize themselves,” said Andrew Jennings, FICO’s chief analytics officer. “This is a planned activity, not an impulse activity.”

This relatively new type of behavior is the latest sign of just how profoundly the mortgage crisis has reshaped consumer attitudes toward their homes and their finances. It is largely driven by plunging home values, which have left nearly a quarter of the nation’s homeowners underwater, or owing more on their mortgages than their homes are worth.

So some do the math and walk.

A team of researchers estimated that 35  percent of defaults in September may have been strategic, up from 26 percent in March 2009. But they acknowledge in a report published last month that the numbers are tough to tease out because “strategic defaulters have all the incentive to disguise themselves as people who cannot afford to pay,” according to the report by researchers from the European University Institute, Northwestern University and the University of Chicago.


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