Excerpt from Diana’s Realty Check at cnbc.com:
A new report from Redfin shows new listings of existing homes dropping across the nation compared to a year ago. Seattle listings down 20 percent, Chicago down 17 percent, Boston down 7 percent and Atlanta down 21 percent to name a few.
When you look closer at what type of inventory they’re talking about, it’s the regular, non-distressed inventories that are falling the hardest. Bank-owned new listings are down too, but that’s largely thanks to all the robo-signing delays. It’s simple math. Sellers are afraid of still-falling prices.
“In most of the major markets, at least on the coasts, we’re seeing inventory down 20 to 35 percent, so regular homeowners are not going to list their homes at these prices,” says Redfin CEO Glenn Kelman. “If you had a home to sell, you’d probably wait a year if you could. You’d have to have a hole in your head to list it now because prices are down.”
REO (bank owned) and short-sale inventory is high and will likely get higher in the coming months as banks process more foreclosures and push through short sales more efficiently. But organic, non-distressed sellers are holding off, and that is actually creating a phenomenon we haven’t seen since the housing boom.
“We’ve had bidding wars in Seattle, Portland, San Francisco, Atlanta, Washington DC, across the U.S. We have seen increased demand and limited supply, especially for those pretty homes that are listed by regular owners rather than the distressed inventory that’s listed by the banks,” claims Kelman.
I have to say I believe him, because in my DC neighborhood, where there are very few foreclosures if any, there are also precious few listings. I’ve been watching my local listings for years, from boom to bust, and the current pickings are slim.
Could this inventory issue be the catalyst to home price stability? I’m not talking about the big bad foreclosure markets, but the rest of the country, where demand is rising and the number of listings are falling. I hate to go back to that boring old theory of supply and demand, but might it actually prevail?
In San Diego we are running about 1,000 listings behind last year, so down 2-3% Y-O-Y.
(we hit 29,000 listings YTD today, last year we were at 30,000 on this date)
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The number of detached and attached listings YTD in NSDCC:
2010: 3,305
2011: 3,289
’bout the same.
Supply and demand usually prevails except in a distorted, bubble market.
We no longer have the bubble but we still have the distortion. Real estate markets have always been local, but the financing arm of real estate has been centralized on a national scale for a good while now. The consolidation of “banks” that occurred at the end of the bubble made it more so.
So, the epic fraud that happened during the bubble is still with us. The criminals who made the bubble happen are still with us. The huge distortions in the market are still with us. Until the fraud and the criminals are taken out of the market, the distortions will remain.
My prediction: supply of homes for sale remains tight, supply of eligible buyers remains small, home prices continue to decline for a few more years, KB Homes, Pulte, etc. transition to building apartments or go out of business.
I agree with Consultant. This article seems to imply that supply will be down so low that it will be impossible to buy a house without a bidding war, “so buyers buy now”.
In reality, one of the key fundamental truths in economic models is that volatility always follows volatility. Thus, the volatility from the bubble will create more volatility post bubble. We haven’t seen the bottom yet. Therefore, you must have a hole in your head if you want to buy in this market.
Not sure if this is anything you can get a stat on, but it would be interesting to see the statistical trend (chart) of homes selling with multiple offers MoM and YoY.
Anecdotally, it seems to me that every decent property at a fair price has multiple offers, and if you are a buyer and you don’t have competition on your offer, then maybe you need to take another look at the property.
My close-in DC-area neighborhood has had minimal decline and had had 3 listings in 3 years. Next door neighbor is moving to Atlanta, and they listed and sold their house in a week, and closed two weeks later with a rent back.
I think the current market will be a good for all the realtors like Jim in America.
This market is going to cut loose all the assorted folks who found their way into selling real estate over the last 15 to 20 years.
To me, that will be one of the best things to come out of the bubble.
Leave selling real estate to professionals like Jim.
LOVE THIS INFO and really appreciate the sharing and the stats. I come at it from a different perspective I guess. I browse the San Diego MLS most mornings and I publish a “daily deals” newsletter. And again this morning there are some amazing, simply amazing deals… I focus on 2-4 units. 2 of the 4 of these deals I published today are conventional sales with profits at purchase — NOT foreclosures or REO’s. So, if you are in it for the long term (not trying to flip), this is a wonderful market to buy your HOME or your investment regardless of the stats. I even have numerous situs where owners will provide the financing, or at least some of it. It’s simply a VERY VERY different market than what we had 4-10 years ago. It’s not a bad market, just different. I also know, from several of my clients who are struggling to keep their home, that several lenders are actually reaching OUT to home owners about the mortgage affordability program, offering to temporarily reduce mortgage payments (in exchange for extending the actual mortgage) or temporarily reducing the interest rate. To me these are signs of increasing stability. Not saying we are out of the woods but these are very good signs.
I suspect this sort of thing can help home price “stability”, but won’t induce a home price recovery.
There are a lot of potential owners out there. Those who have managed to keep a good job and waited out the bubble want to get in as long as the price is right [as I did at the end of last year].
So I don’t know how much downside risk is left for desirable [entry-level to lower-mid price] homes in desirable markets. I suspect the downside risk is in the single-digit percentage range.
That said, there is a seller inventory overhang. At the first hints of price recovery, more homes will come on the market, suppressing that price recovery. But price decreases cause the inventory to come off the market. So there is some stability there.
I think we’re looking at several years at least of stagnant house prices. The only thing I see that could upset the apple cart is a major event in either REO/foreclosure activity, or a major political event with our national debt situation & interest rate spike. Both are possible, but absent those outside forces, I think we’ve hit a period of stasis in the market.
Sure hope these people taking their homes off the market can hold them a LONG time. There is no stability at these prices, there is, however a LOT of short term intervention and even that is now cracking as prices head on down to sustainability. Problem is these “low” prices are actually quite high when you have to pay 8% or 10% interest rates… where they should (and will) be when the government stops backing just about every mortgage in the country.
What’s really interesting is that all the government intervention designed to “help” is really screwing the people who are buying now as well as the responsible people who waited (and wait) when the market doesn’t make common sense. Much better to pay much less for an asset at a higher interest rate than a much higher price with an artificially low rate.
The criminals who made the bubble happen are still with us.
I don’t think they are going away.
There are no laws, few rules, and no enforcement whatsoever.
New people will keep gravitating towards selling real estate as a way to make a fast buck, find out how hard it is to make an honest living, and opt for the easier shady short-cuts.
As long as short sales are around, there will be graft and corruption everywhere.
Grizzly,
I don’t think you can say that around North SD County Coastal.
It is very stable around here statistically, the Fed stopped buying MBS last March, and nobody talks about housing tax credits anymore either – past or future.
We’re not going to see rates at 8-10% just because Fannie/Freddie goes away, and even that will be years down the road.
what I am seeing in the market at least here at ground zero(las vegas)- is that offers on our REO inventory have basically collapsed in the past 2 months when it is usually the strongest time of year for sales. This time last year(with the help of the govt) we were seeing 5-10 offers on any decent REO property. Now we are lucky to get one – even when the home is priced at 1993 levels around $50 a sq ft.
Sure RE is local. We know that . All I have to say is that anything you have seen in the past year as far as (stock)market gains is basically a mirage . We never got out of the recession, in fact its deeper now than it was in 2008/09.
And the best part is when I do my property inspections and notice half empty subdivisions with most of the vacant ones not even listed and in some kind of unknown void.
I have my sailboat docked at Harbor Isle in San Diego for past 4 years. 5 years ago the wait list for a slip was 10 years long. Place was at 100% occupancy for these “luxury” items for the previous 15 years. fast forward to 2010. Place at about 95% occ and you can get a slip. Now this year its 75% full. its boating season and other marinas are reporting 60-80% occupancy.
Dont know if this a barometer ,but I see it as major.
People are tighting their belts that’s for sure and cut down on discretionary spendings like sailboats.
Low inventory has some to do with the fact a lot of the homeowners can’t afford to sell at today’s price without having to bring a big wad of cash to the closing table. The other two options are foreclosure and short sale, both of which are the last resort.
The fed stopped buying MBS? How so? If any MBS is moving it’s by the cabal banks that are being given money by the government at basically 0% backed by nothing. And how about QE? (Fed give banks money for nothing, Fed then sells them bonds paid for with the money they’ve already given them, a couple weeks later the Fed gives them MORE money to buy back those same bonds at a nice profit to the bank)… How about Freddie and Fannie and the government backing 95% + of all mortgages? You think rates cant hit 8% soon? What do you think it will take for banks and investors to risk their own money on home loans? Where do you think rates would be if the government wasn’t distorting the market?
Even in a market like SD that many people may call stable, would you personally loan money to buy a house with 20% down? 3% down? And that’s SD, what about in every other market in the country which are still falling?
So now that we have 8 million reasons why were going to muddle along for another 2-5 years, which way is the surprise going to go.
Discretionary sellers who think waiting a year will improve the selling situation might want to consider how waiting over the past one or two years has worked out for the likely value of their home.
If you’re ok waiting until 2013 or more likely 2015 for the bottom to have been found and prices to have begun slowly rising, then maybe you should hold that asset.
But if you’re only prepared to defer for a year, you’d probably be better off listing it today at a sharp price that will draw multiple offers, because the market is highly unlikely to be significantly better this time next year.
Grizzly, the non-GSA backed jumbo loan market is already answering your question. Rates there are from 5%-6% for the credit worthy. When QE1 ended, the 10 year bond yield FELL, and the indications are that the same is happening now as markets price in expiration of QE2. Could rates go to 8% in a few years if GDP growth goes up to 4% per annum? Sure. But this year or next? Look at Japan.
A very timely post, as we were just looking this morning at the listings for our building downtown (Electra) and nearby Grande, Bayside, etc. Last year there were 42 listings at the Grande and now there are 13. Ditto for many downtown buildings. Whatever the reasons, we have noticed in the past month, those organic sales have commanded good prices because there are so few available. I would guess that the upper end of the housing market (places like Carmel Valley, La Jolla, waterfront downtown, etc.) prices are starting to go up a bit.
Sean;
Not sure what your point is about Japan, home prices there have been falling for decades. And that 10 year bonds fell at the end of QE1 is probably not related to that event because there’s so many other forms of government intervention (and Greece, etc). I’ve heard reports that 60% of US bonds are bought by the US government or it’s dealer banks, grossly distorting the real demand. The markets today assume everyone will continue playing along with the charade that is the capital markets which works great until it doesn’t anymore… just like in 2007. The reality is that if the government doesn’t helicopter several trillion into the markets this year, like the last two years, you’re back at 2007 (like Vegasandre and KD point out) only with more debt and fewer weapons. And you better believe all the pro money in the markets is assuming they’ll get out first regardless of what lies they tell on CNBC.
And, yes, rates are 5-6% if you have 30%+ down and great credit and a great job and a full body cavity exam…. but that is artificially low for the same reasons, the money they’re borrowing from the government to make the loan is artificially low.
Grizzly, it’s clear that you don’t understand QE. You’re spreading false information.
I think all things considered there’s money available to be lent at 5-6% interest to the upper tier of borrowers. For Jim’s previous post we see the parties that are offering private financing at 5-6% don’t really want to get locked in at 5% for 30 years and would prefer to offer an ARM type product, but for a zero risk borrower they might offer 30 year fixed at 5-6%. There’s plenty of money that would love to be parked in a 5%, 5 year CD right now.
With all that said the fringe FHA borrower might be facing something more like 10% if they went into the private financing market. Personally I think that’s the way it should be, but it would have an impact on the lower tier areas of San Diego. North County Coastal would certainly see less of an impact.
We’re dealing with two markets; distressed and organic. The indices are not telling the whole story as the bulk of sales are distressed.
There is an opportunity to sell for some now but they are only going to go with what it’s worth to them to sell it. This is criticized unfairly as being greedy or delusional.
Home prices are up over the past 2-3 years.
And, the new howl is that interest rates will go up and crush home values again. More than likely with interest rates up it will mean we have inflation and an overheated economy, meaning higher prices.
How this thing settles out over the next few months between sensational headlines and misleading indices will be interesting and fuel uncertainty.
“As long as short sales are around, there will be graft and corruption everywhere.
Jim the Realtor | May 18th, 2011 at 10:30 am”
Second that thought. Also, I can now after being in short-sale mode, vouch that the Seattle Market has low-life scumbags in each real estate and banking discipline that I’d put up against The Best of them. Now I am reversing the roles. I am dedicating my existence to head f*ck those that did it to me “short” recently… Have to admit, they are good at it.
The chicanery is positively INSPIRING. Makes me want to run for public office (well, not really).
Mozilo should look into another company specializing in short sales. Orange Ange Baby could team up with Bernie from prison and offer webinars… Fasto from Enron at halfway house and expected to be released to run loose on the public again soon. Andy babe would be a perfect Front Man.
Grizzly, my point on Japan is that if stagnant versus robust growth takes hold as the paradigm, decades of extraordinarily low interest rates are possible. Inflation or hyperinflation are not the only forward looking possibilities for our economy in the aftermath of a still not resolved financial crisis induced recession.
As long as short sales are around, there will be graft and corruption everywhere
I’m sorry, but, what? Short sales certainly can create an opportunity for graft and corruption, but so can foreclosures, refinancing, and even simple sales. In theory if a lender and the borrower agree on a release via short sale, then that’s a legitimate transaction. I see nothing wrong with it. The way to limit this corruption is to have better finanical oversight and consumer protection, such as through the “Know before you owe” program from the new CFPB that the GOP is trying to block.
Why is it that most presume North coastal SD is immune to most housing recessionary events?
Its always that:
“they dont have areas to build in this area anymore”
“peopele will always pay a great premium for the ocean ”
“The Govt and Qualcomm are providing great many higher paying employment opportunities in the area”
“The weather is the best in the world”
and so on.
Folks – The higher end is always the last to fall. And fall it will – big time. You will be able to get basically any home at 1999/2000 pricing in the coastal areas within a few years.
Its a certainty – Just ask the Mayan’s 🙂
Bifurcated market fer sure. Need to look close to figger it out.
vegasandre,
Higher End of North County Coastal is not the same as higher-end of Columbus, Ohio (no-offence to Columbus). Higher-End in North County Coastal has already fallen significantly and taken the due-beating … ask any one looking in the range of 1.5 Million plus … some of the best deals are in this range of 1.5 to 2.5 million. We have seen several examples in this range right here on bubbleinfo.
600-850k is not the High-end here … Its probably the most saught after range and anything decent in this range has been flying with multiple offers.
Not sure if it will ever return to 1999/2000 pricing … I had been betting on same for past 3+ years and hoping to score that Ocean View SFH home in Aviara for $500k (1999 price)… not happening … not even remotely .. Its now getting sold for a Mllion Plus (all cash) with multiple parties bidding on it.
Kishan, it would be happening (and will) except the incredible amount of distortion in the market is making it happen slowly.
Aztec, why don’t you explain it to me then? I look forward to your expertise and genius.
Sean, totally agree, there are so many markets that are so liquid and require so little to trade in some things will inflate (food, fuel), others will deflate (real estate, equities), rates may do many different things.
Vegas Andre, It must be really depressing out there in the desert.
Grizzly,
Yes I agree, “theoratically” ONE DAY it may come down to $500k …Is it going to happen this year, next year, 3 years, 10 years, 20 years …? Do you know? … does anyone know?
Whats the point of buying that SFH for $500k or less, when the kids are all grown up and its time to downsize anyway? … just for the bragging rights (reminds me of that 80 year old marrying a 20 something).
For owner-occupied SFH only, the “phase-of-life” when you buy it has a price-tag on it, and we can not discount much on that (give or take 5 years).
Kishan;
You are absolutely right and it is what’s so hard trying to balance the increased cost with how long can the government continue to screw it up… NO one knows. And believe me, I feel your pain. But keep in mind it’s not just about the bragging rights, it’s sound financial policy. Buying a house for less makes a huge difference when you’re 80 and need the money and the real question is are the $’s large enough to really make a huge difference either way. The 200k difference between 800k and 600k is not going to kill you (and certainly not as bad as the 1.3 – 600k you would have gotten a couple years ago.
Kishan I have been betting like you, watching and waiting for further big declines. It’s happened in most SD zips but as you know some have been very resilient. We’ll see what the next few years brings.
Regarding a $200K difference in price – it’s funny Grizz but that’s about the drop I am waiting for. Assuming no interest rate spike and 20% down, a $200K drop means $40K less in a downpayment, which would go lump sum into the market, and close to $1K/mo. less in mtg/tax/ins payments on the smaller loan, which also gets fed into the market every month. Assuming moderate market performance around 5% returns, that scenario results in an extra $1 million cash pre-tax after 30 yrs.
Lots of variables and certainly no guarantees, but with a reasonable upside estimate of $1 mil and what I see as a mild downside if any to waiting, you can find me at the end of the bench right now as to the NCC SFR market. But there is no argument that that market to date has been very strong in comparison to what has happened county-wide.
5% is probably high but I think exactly like you… if someone wanted to give you 15k tax free dollars every year would you take it? Hell yes? Well that’s what paying 200k less for a house is.