2013 Predictions

by | Dec 31, 2012 | Forecasts, North County Coastal, Thinking of Buying?, Thinking of Selling? | 7 comments

Predicting anything correctly in this frenzied, government-supported marketplace takes some luck. My recent predictions were conservative – on July 1st, I guessed that sales would taper off during the second half of 2012, and then after a robust 3rd quarter, I still thought thought that the fourth quarter would slow down too.

Why?  Because inventory was dropping and prices were rising. I didn’t think buyers would go for it – but they did.

The chart below is from July 1st, where I predicted that we’d have fewer than 2,000 houses come to market during the second half of 2012 – which corresponded with the trend from previous years.

At least I was right about fewer listings:

Year 1H New Listings 2H New Listings Chg.
2009
2,878
2,168
 -25%
2010
2,966
2,320
-22%
2011
3,046
2,176
 -29%
2012
2,522
1,861
 -26%

But also I thought that the lower inventory would cause second-half sales to drop under 1,200, which seemed to be in line with previous years. I ignored the momentum building in 1H12, and looked what happened – 2H12 sales went ballistic, posting a 27% increase over 2H11:

Year 1H Sales 1H Avg $/sf 2H Sales 2H Avg $/sf
2009
899
$394/sf
1,324
$393/sf
2010
1,231
$383/sf
1,229
$378/sf
2011
1,281
$374/sf
1,281
$376/sf
2012
1,439
$369/sf
1,631
$385/sf

At the beginning of 2012, I predicted that this year’s NSDCC sales would be 10% higher than in 2011, and the average cost-per-sf would drop 5%. But the ultra-low rates did their trick:

Year # of Sales Avg. $/sf
2007
2,479
$468/sf
2008
2,037
$438/sf
2009
2,222
$393/sf
2010
2,460
$380/sf
2011
2,562
$375/sf
2012
3,105
$377/sf

The 2012 sales increased 21% year-over-year, and average pricing was flat, so I wasn’t too far off. Who would have guessed that we’d see an extended period of mortgage rates under 3.5%?

2013 Prediction

The recent momentum around NSDCC (which happened during a boisterous election) deserves to be reckoned with, but December’s pricing cooled off after the hot November:

2012 # of Sales Avg. $/sf
Jul
258
$365/sf
Aug
298
$381/sf
Sep
287
$372/sf
Oct
296
$388/sf
Nov
240
$414/sf
Dec
251
$397/sf

I’ll predict that the debt-tax exemption gets extended, and the banks surprise everyone and escalate foreclosures due to the CA Homeowner’s Bill of Rights (see this link). There will be some isolated sales at 10% to 20% over comps that will make it look like the market is on fire. In the end, the NSDCC sales for 2013 will be up 10%, and average-cost-per-sf increased 6%, and be around $400/sf.

What do you think?

Higher-End Isn’t As Hot

by | Dec 30, 2012 | Bubbleinfo TV, Del Mar | 6 comments

While the talking heads of the media will point to the increased median sales price and declare that “prices are going up”; all you have to do is look at some of the tonier parts of town to find contrasting data.

For instance, how about Old Del Mar:

Changing Prop 13, Door-To-Door

by | Dec 30, 2012 | Prop 13 | 7 comments

Thanks to DOB for sending in this article about how Prop 13 is being challenged :

Nancy Feidelman wasn’t interested in a political discussion when she saw a solicitor on her Oakland doorstep as she was preparing dinner.

But after canvasser Erica Bleicher started explaining her organization’s campaign to roll back a provision of Proposition 13 that benefits corporate commercial interests, Feidelman opened the door, cut a check and wrote a letter to her Assembly representative.

Bleicher’s nearly 2-year-old, Bay Area grassroots organization, Evolve, is getting unusual traction going door-to-door talking about something that has been unmentionable upon penalty of political death for three decades: repealing parts of Prop. 13, the 1978 ballot measure that capped property taxes and set high thresholds for how government can raise taxes.

There’s no doubt how liberal this Grand Lake neighborhood is. “Obamanos” is written across one home’s living room window; a sign saying “We are the 99 percent” sticks in the front yard of another. But across the state, many other Californians – even some Republicans – are ready to talk about changing Prop. 13.

“This has been an issue that has upset the community for years, and the Oakland public schools are suffering,” Feidelman said. Nodding toward Bleicher, she said, “This seems like an immediate, local, direct way to do something about it.”

Evolve, as do some other groups, wants to close a provision of the law that deals with how commercial properties are taxed.

Under the law, an assessment is triggered only if a single entity owns more than 50 percent of the property – a loophole that many corporations easily circumvent, robbing the state of billions of dollars in tax revenue.

Over the years, politicians including former state Sen. Quentin Kopp, an independent from San Francisco, and Assemblyman Tom Ammiano, D-San Francisco, have tried to close this loophole. Ammiano intends to try again.

Today, the atmosphere may be more receptive. The presidential campaign brought a more intense focus on wealth inequities in the United States, education funding continues to drop in California, and the state’s voters are seemingly open to tinkering with the tax structure after approving Proposition 30 in November, which raised taxes.

“I don’t think the public is ready to go crazy on this, but they’re ready to listen to arguments that they wouldn’t have a few years ago,” said Mike Herald, a legislative advocate for the Western Center on Law and Poverty, which advocates for the state’s poorest residents.

“And if anything is going to happen, it is going to have to come from the public,” Herald said. “The Legislature and the governor are not going to be in front on this. They’re going to wait and see where the public is going.”

In addition to Ammiano’s move on commercial property, state Sen. Mark Leno, D-San Francisco, introduced a bill that would lower the majority required in local elections to raise parcel taxes to fund schools from two-thirds to 55 percent.

That measure would have to pass both chambers by a two-thirds majority and be signed by Gov. Jerry Brown before it could be put before voters on a statewide ballot in the fall of 2014.

That will give organizations like Bleicher’s some time to rally supporters in areas of the state less liberal than Oakland. Evolve organizers believe they’re there.

Read more: http://www.sfgate.com/politics/joegarofoli/article/Prop-13-revision-efforts-pick-up-steam-4144515.php

NSDCC Short-Sale Counts

by | Dec 30, 2012 | Short Sales, Short Selling | 3 comments

Attorney ‘Kingside’ concurred with sdbuyer that the California debt-tax exemption mirrors the federal-law deadline, and will expire tomorrow unless something changes:

The California act (SB 401) was designed to conform with existing federal law and both are scheduled to expire at the end of the year. sdbuyer’s link to the FTB site is accurate as far as I know.

I heard that the California legislature was willing to extend if the Feds were going to extend. With a democratic supermajority sounds like it would happen. But who knows with the Fed extension up in the air at this point.

Its the kind of thing that could still happen after the fact, January or February or even later.

Has there been a big rush of short-sales being completed leading up to tomorrow’s deadline? Furthermore, was 2012 the Year of the Short Sale, as predicted?

Here are the quarterly stats for detached-homes sales from Carlsbad to La Jolla (NSDCC):

Quarter #Shortsales Avg. $/sf #Non-Shortsales Avg. $/sf SS% of Total
1Q11
70
$308/sf
483
$381/sf
13%
2Q11
52
$283/sf
676
$383/sf
8%
3Q11
82
$291/sf
617
$396/sf
12%
4Q11
74
$283/sf
508
$379/sf
13%
1Q12
78
$291/sf
499
$373/sf
14%
2Q12
89
$268/sf
810
$382/sf
10%
3Q12
99
$302/sf
744
$383/sf
12%
4Q12
80
$273/sf
687
$412/sf
10%

There wasn’t a big rush around here as the deadline approached, and the pricing trend is disturbing. The banks have stopped the foreclosure machine – there were 21 REO listings closed in 4Q12, at an average of $345/sf. But banks should wonder if short-selling is the answer, when you compare the pricing.

With potential short-sellers faced with losing out on possible future appreciation, and having to pay high rents if they sell, it seems unlikely there will be much change in the SS count next year.

If the debt-tax exemption doesn’t get extended, then potential short-sellers will have another good reason to not sell. With the California Homeowner’s Bill of Rights taking effect on Jan. 1st, it would be a great time for them to just not pay, and wait.

Home Values Adjusted For Rates

by | Dec 29, 2012 | Graphs of Market Indicators, Thinking of Buying?, Thinking of Selling? | 7 comments

Homesellers should consider the pricing resurgence as a temporary opportunity, and not think that we’re back on track and expect big gains every year.  By looking at this graph, it appears that the recent gains are almost entirely attributed to lower mortgage rates.

Here is a look at how the change in rates have impacted this house value index.  There was an inflection point in early 2012 where the combination of dropping rates and low home prices reached its ideal mix, and now values have bounced back some to compensate.

But if the rates dropping into the low 3s are what caused the turn-around, then there won’t be much propulsion to keep it going from here except Shiller’s idea of “animal spirits”:

(click on image to enlarge)

Americans are payment shoppers, and don’t mind paying a higher sales price as long as the payment stays about the same.  This alone should keep a throttle on rising prices.

NSDCC December-Sales Preview

by | Dec 28, 2012 | North County Coastal, Thinking of Buying?, Thinking of Selling? | 8 comments

We’re not done yet with December, but it looks like we will surpass the monthly sales count of the last two years.  Last year we had 28 NSDCC closings over the last two days of 2011, and we also will still have the stragglers too – let’s estimate around 230 closings for December, 2012: 

Year Det-Home Closings Avg. $/sf DOM
2010
205
$388/sf
93
2011
220
$351/sf
86
2012
199*
$385/sf
63

*this morning’s total

I agree with sdduuuude’s comment yesterday, that we are just re-gaining ground that was lost in 2011 regarding pricing, with some spectacular exceptions that drifted into the peak-pricing stratoshpere. But you can see in the days-on-market stat that the buyer anxiety is rising, which might cause some people to pay too much – could it end up being a trend?

There are plenty of homes listed at peak prices, hoping for a lucky sale, so we’ll see.  It might be a good idea for both buyers and sellers to settle at retail in January, and put it to rest.

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