Big Shuffle

by | Sep 21, 2011 | Sales and Price Check, Same-House Sales | 1 comment

For those focused on pricing, here’s another angle to examine what’s been happening lately.

We’ve been worried that the higher-end homes would cause pricing squishdown, but there hasn’t been any obvious big drops lately.  The Case-Shiller Index for San Diego has given back almost all of it’s increase generated since 2009, but it’s in slow-motion, and the average cost-per-square-foot and median sales price measurements have their limitations too.

For example, here are Carlsbad and Encinitas detached sales (combined) between Jan-Aug:

2010: 918 sales, avg. $303/sf

2011: 929 sales, avg. $291/sf 

A simple look, and not alarming – a measly 4% drop on price with a 1% increase in sales.

But let’s check the average square footage to see if you’re get more for your money, and how the number-of-sales-per-price-range has changed using the same data:

Price Range 2010 Sales 2010 Avg. SF 2011 Sales 2011 Avg. SF
$1,100,000+
96
4,419sf
101
4,334sf
900-$1.1M
90
3,650sf
80
3,512sf
$700-$900K
249
2,837sf
211
2,959sf
$500-$700K
416
2,108sf
384
2,281sf
0-$500,000
67
1,573sf
153
1,664sf

These are fairly large sample sizes, yet the action appears to be going in opposite directions. The higher-end homes look to be getting smaller, but in the under-$500,000 group not only is the average square footage growing, but there are almost 2.5 times as many sales this year than last!

Carmel Valley’s highest-end category has had a 70% increase in sales YOY, but much can be attributed to the surge of sales in the $2 million-plus Rancho Pacifica. In 2010, there were only three sales in RP between January and August, this year there have been twelve!

Price Range 2010 Sales 2010 Avg. SF 2011 Sales 2011 Avg. SF
$1,500,000+
23
5,422sf
39
6,034sf
$1.1-$1.5M
60
3,734sf
38
3,918sf
$900-$1100K
58
3,128sf
71
3,166sf
$700-$900K
96
2,420sf
87
2,552sf
0-$700,000
44
1,844sf
51
1,914sf

The other CV categories are showing a little weakness, but with their smaller sample sizes there is more room for variance. But generally it feels like there has been some hesitancy in the Carmel Valley steamroller lately.

Generally, today’s buyers are getting more bang for their buck – and at mortgage rates in low 4%s!

Fed Move Won’t Affect Housing

by | Sep 21, 2011 | Bailout, Market Conditions | 9 comments

The Fed’s annoucement of buying longer-term treasuries is a nothing-burger for housing.  Any benefit of lower mortgage rates will be scooped up by the lenders, not us.  You might see an occasional high-3% offering, but is it even necessary? 

I don’t think so, buyers are happy with the prospects of 4% mortgage rates.

The Fed/Gov needs to address consumer confidence, and none of these multi-billion dollar T-sprees are going to change how people feel about buying a house. They should do something for the folks who pay their bills on-time, save money in spite of 0% interest, and allow politicians to live cushy livestyles.

What can they do?

1. Ramp up foreclosures.

Don’t just issue a few extra NODs, let’s get down to business.  Fannie/Freddie owns the most REOs, and the Fed/Gov pulls their strings.  Let’s blow out sxome real volume, and show America that the government is about doing what’s right, for a change.

I am a REO listing agent for Fannie Mae, and not much is coming my way.  This month I receives two more assignments, after a 6-week dry spell.  Another 2-bedroom house in City Heights that was in short-sale limbo with a buyer who would have paid more than I’ll get for it.  The other is a National City triplex clouded with title issues that will take months, if not years, to resolve.

The powers that be fear that more foreclosures would mean lower prices, why don’t they consider the disgust they are causing with buyers?  The erosion of consumer confidence in our leaders is more damaging to the real estate market than expediting the foreclosure process – because plenty of buyers are going to wait this out until the shenanigans are done (chime in if you are one of those!). 

The foreclosures are going to happen anyway, it’s just a matter of time – let’s have some market clearing and cause consumer to have more confidence in our leaders!

2.  Declare a specific exit strategy from the mortgage market. 

The Fed/Gov may not get out altogether, but whatever the policy is, put it on the table and let’s go.  Private lenders aren’y going to surface until there is a need.  There is no need if the government policy is to coddle the mortgage market.

3.  Make decisons

Make specific policy about 1) allowing foreigners with means to emigrate if they buy a house, 2) MID, 3) increase/decrease capital-gains tax, 4) putting the Tan Man in jail.

If people sensed that there was clarity and direction in government policy, they’d be more likely to take positive action.  With today’s psuedo-policy, people just want to put their dough in jars and bury it in the backyard.

The definition of leadership is ‘demonstrating the ability to lead’.  Now is the time.

Home Prices Limit Productivity?

by | Sep 21, 2011 | Market Conditions | 9 comments

From the WaPo (click on link to see some good comments too):

Americans have been migrating from coastal states such as New York and California to Sunbelt mainstays such as Texas for quite some time now. But why? Are wealthy New Yorkers fleeing from oppressive tax rates? Are poorer residents in cities such as San Francisco being priced out?

Alon Levy sifts through the IRS data to get a better sense of who are actually packing their bags. And most of the migration, it turns out, appears to involve middle-class families who are seeking affordable housing: “The people moving to the Sunbelt,” he concludes, “really are being priced out.”

A few noteworthy tidbits in Levy’s data: First, richer coastal residents, when they do leave, tend to migrate to other coastal states, not to the Sunbelt, suggesting that high taxes aren’t necessarily scaring them off.

Second, in a state like California, the households that depart tend to be slightly bigger than households coming in—but still much smaller than the average household. As Levy notes, “This is only partially consistent with the explanation that those regions attract singles and [childless couples] and turn away families.”

Still, the main conclusion seems to be that housing policies on the coasts that make it harder to build and hence keep prices high are driving middle-class families southward. But why should California care?

Ryan Avent, whose new book, “The Gated City,” makes the economic case for less-restrictive housing policies, offers a case study. In the 1990s, sky-high home prices appeared to have put a major crimp on the dot-com boom in Silicon Valley, as housing costs rose faster than wages and forced workers to leave the area. That, in turn, “reduced the potential economic impact of the tech boom” and—because those tech workers were unlikely to be quite as productive outside Silicon Valley—“reduced national productivity.”

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Click here: a case study, for an excerpt from his book. Here’s an excerpt from the excerpt:

And what did that mean for the American economy? The workers that moved elsewhere didn’t give up working. They found employment in other metropolitan areas, many of which developed thriving tech sectors. Those sectors weren’t fallow fields for new firm creation; entrepreneurship rates, remember, were higher nationally than in the Bay Area. But what the economics of metropolitan geography tell us is that many small collections of firms will often be less productive and less innovative than fewer, larger firm clusters.

The forces that repelled workers from Silicon Valley, which was the intellectual heart of the country’s tech industry, reduced the potential economic impact of the tech boom. And in a not unimportant side effect, it reduced national productivity and total compensation in the economy.

During one of the great innovative periods in America’s recent history, high housing costs poured a bucket of cold water on the nation’s entrepreneurial capacity. That’s a problem. And what’s especially troubling about this example is that it wasn’t an isolated incident.

On the contrary, the same forces that drove workers away from Silicon Valley during the tech boom appear to operate in a systematic fashion, undermining the productive potential of America’s great cities and holding back the country’s job creation machine. For two decades now, the country’s internal migration has amounted to a move away from productivity, and toward stagnation.

By now, the American economy should have come farther, developed more online business models, and created more jobs. The internet has been underexploited, if you can believe it. We have been wasting years and opportunities — in part because of things like the price of a 3 bedroom house in Santa Clara.

WAG

by | Sep 20, 2011 | Psycho-babble | 18 comments

From sddt.com:

The outlook for California’s residential real estate market may be dubious, but there are some bright spots in San Diego County.

Leslie Appleton-Young, California Association of Realtors chief economist and Robert Kleinhenz, CAR deputy economist, delivered their pronouncements during a webcast Tuesday.

Appleton-Young said it is difficult if not impossible to have a strong housing market, when the statewide unemployment rate is higher than 12 percent as it has been for most of the past 18 months — especially since that doesn’t tell the whole story.

“If you include those who have given up and the underemployed, the figure climbs to 16 percent,” Appleton-Young stated.

The good news is “that housing affordability looks really great,” Appleton-Young said.

Appleton-Young noted that the median price of a resold home in the state is slightly less than $300,000 at present, and while that is still twice the national average, it is considerably more affordable than when it was closer to $500,000 at the peak of the market in the middle of the last decade.

San Diego is more affordable, as well. Whereas the percentage of those who could afford a median-priced home here was generally in the teens in the middle of the last decade, the CAR pegged the number at 41 percent at the end of June.

The median price of a resold home was $379,270 in San Diego County in June, after having been closer to $600,000 in the middle of the last decade.

While bank sales and short sales played a significant role here, particularly in eastern Chula Vista, both Appleton-Young and Kleinhenz said that San Diego will be much quicker to return to a normal market than the Inland Empire, which had enormous job losses during the recession.

“San Diego is way ahead of the curve in this regard,” Kleinhenz said.

The CAR reported about 8 percent of the resales in San Diego County were REO or bank-owned sales, and another 19 percent were short sales in August.

The distressed sales are much closer to 50 percent and higher in places, such as the Inland Empire, that are still in a much more painful recovery than here.

Still, there seems to be improvement just about everywhere in the state.

Statewide, Appleton-Young said last month traditional transactions accounted for 58 percent of the sales in August, 19 percent were REO and 22 percent of the state’s residential resale transactions were short sales.

“We’ve seen good improvements in these numbers,” Kleinhenz said, adding there still could be room for a few more REO sales added to the mix in the state, to help bring inventories back up higher than the 2.6-month level at present.

Despite all that has happened during the past three to four years, homes are still in such short supply that the CAR says multiple bids are becoming the rule rather than the exception, regardless of whether the transaction is a traditional, bank-owned or short sale transfer.

Inventory levels may be low, but Kleinhenz said there are plenty of causes for concern at the state level.

For one thing, while default notices were headed downward, there was a bump up in California last month. He worries this may be more than a blip lasting the rest of the year.

As for what all this means for San Diego, Kleinhenz said he expects sales will be modestly higher for the remainder of the year, sales will increase by about 1 percent next year and prices will increase by something less than 2 percent in 2012.

Other issues are expected to be part of the mix. These include the upcoming lowering of Federal Housing Administration loan limits in the beginning of October from $697,500 to $625,500.

While that amount may not seem like a huge reduction, given that it is still more than $600,000, Appleton-Young noted that San Diego remains relatively expensive compared to other areas.

What’s more, much depends on where in the community a person feels he/she needs to live.

“This impact of this reduction will be felt in San Diego,” Appleton-Young said, “but it will be more pronounced along the coast.”

Senior Does Strategic Default

by | Sep 20, 2011 | Strategic Defaults | 19 comments

From foxbusiness.com:

Gene Kessler, 67, may be the new face of mortgage default. The tech industry retiree is in the process of walking away from the home he purchased for $166,000 in 2004 in a small town 75 miles southwest of Minneapolis.

Its value has plummeted to $111,000, wiping out Kessler’s $45,000 down payment and leaving him with a mortgage that’s more than the home is worth. He stopped paying the loan six months ago, and estimates he’ll have to vacate by March 2012.

But Kessler isn’t in financial trouble, and he could afford the monthly payments. He has no other debts and two pensions from former employers, as well as Social Security. He also has a woodworking hobby, and runs a small business selling the artisan lamps he makes in galleries. He’s single now, and his two children are grown and gone.

“I was looking for a way to get back to a larger city, and this was the only way I could get out of this house,” says Kessler, who paid $800 to YouWalkAway.com to help guide him through the process known as strategic default. He’s anticipating a move to a warmer climate and a more active art and dating scene in Santa Fe, N.M.

There’s no data on the demographics or financial histories of the people receiving recent default notices. But among them are some homeowners who have never defaulted on a loan before, at least according to one poll. YouWalkAway.com surveyed several hundred of its clients earlier this year, and just 23% said they had previously shirked a financial obligation.

“The people we are now seeing are nearing retirement age, who never missed a payment on anything in their lives,” says Jon Maddux, co-founder and CEO of the Carlsbad, Calif., firm. “They are trapped. They can’t sell or get a modification and they need to downsize or move for a job.”

Attitudes toward default have also shifted, Maddux says. “Back in 2008 people were very emotional, very scared, in disbelief or denial,” he says. “Now they are simply fed up. It’s a very calculated, black-and-white business decision. People feel very relieved.”

(more…)

Auction Bust

by | Sep 20, 2011 | Auctions

A “reserve price” spoils another auction – from latimes.com:

The auction of a custom-built mansion along Malibu’s “Billionaire’s Beach,” so named for its wealthy homeowners, hit a snag Sunday when it failed to generate an acceptable bid.

Although the bidding started at the minimum $22 million opening price, it stalled there short of the  “reserve price,” the undisclosed value at which the owners are willing to let the property go. The sellers, William and Cheryl Chadwick, rejected the bid.

Now Westside Estate Agency listing agent Carol Bird and Premiere Estates Auction Co. are working on securing written offers from the four bidders and an international buyer who was unable to attend the event and will view the property this week.

The beachfront home was listed at $65 million when it first came on the market in 2008. The 10,500-square-foot house, built in 2005, has 150 feet of beach frontage.

Carlsbad Approves Desal Deal

by | Sep 19, 2011 | Local Government | 3 comments

From the U-T:

A water agreement between Carlsbad and San Diego County will mean clean drinking water for residents but could ultimately defer some of the city’s redevelopment dreams.

City Council members Tuesday approved a contract with the San Diego County Water Authority to ensure that Carlsbad will keep receiving property taxes from the long-anticipated desalination plant set to be built on its south coast if the county takes over operations within the next 10 years.

A stipulation of a prior contract, however, has been thrown out and the guarantee of a $5.5 million payment from the county to the city’s redevelopment agency has gone by the wayside.

A contract signed in 2005 required the county to contribute nearly $6 million to the city’s redevelopment agency in exchange for some of the rights to the purified water. The terms of the contract approved Tuesday could mean the delay of street enhancements like the realignment of Carlsbad Boulevard, studies into how to lessen the effect of power plants on the coastline and improvements and additions to the city’s boardwalk.

Debbie Fountain, Carlsbad’s housing and neighborhood services director, said the city has not yet decided which projects will have to be halted.

“The city is losing a good degree of those benefits, and it still is a favorable project for the city,” said Mayor Matt Hall during Tuesday’s meeting. “But I am saddened that we lost a lot of the things we had anticipated to be benefits for the city.”

Like other California cities, Carlsbad relies on property taxes to fuel its redevelopment agency, the organization charged with defining blight and eliminating it. That money typically goes toward low-income housing, revitalization of the Carlsbad Village and other beautification projects that dot the city’s landscape.

(more…)

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