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CR’s bottom call caused many to scoff, and point to various ivory-tower theories to refute it.

This is what he said, which is more of a technical call about home-price indexes:

And it now appears we can look for the bottom in prices. My guess is that nominal house prices, using the national repeat sales indexes and not seasonally adjusted, will bottom in March 2012.

The house-price indexes are good for measuring the general regional or national trend, and reflecting some consumer sentiment.

The naysayers are using either general theories with little or no specific current evidence to support them, or they declare that history always repeats itself so we don’t have to consider relevant facts.

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Let’s examine these theories, and use actual evidence from the street in rebuttal. 

These apply to my local market, but because San Diego is not different, they could apply to other areas.  You can decide for yourself:

1. Wages/Incomes haven’t risen, high unemployment/no jobs, and household formation is lagging.

There are people who are struggling, and I have empathy. 

But in spite of the unemployment/no jobs/no raises, there has still been a healthy demand for houses that are priced correctly (around recent sales), and it is building steam.

Consider my listing at 554 Meadowbrook, which was mentioned on the talk show with Bill.  We ended up having to take the one owner-occupied offer because Fannie gives them special consideration for the first 14 days on market.  But he had a tax lien on him that he couldn’t resolve.

The house went back on the open market, and open to investor offers.  Between Friday and Tuesday there were eleven all-cash offers submitted, and it sold over list price. 

There is nothing about this house that would warrant such a fanatical response – see for yourself:

MLS listing: 554 Meadowbrook   Map: http://g.co/maps/wu3dg

Richard’s video: http://www.youtube.com/watch?v=yUt4hxHt2lE

Could unemployment/no jobs/no wage increases cause people to have to sell their house?  Yes, but there were 11 cash investors that are willing to pay retail or close for this dog, plus another couple dozen phone calls from people who would have paid less and didn’t offer. 

Investors are providing a pricing floor to the market, and either flipping or building their portfolio.  If the market runs out of steam and they can’t flip, they will be stuck renting them, but that is their problem – they are paying cash.

Furthermore, virtually every offer I make on behalf of clients finds itself in a bidding war.  We are like most buyers and only chasing the good buys, but there is competition literally on every single offering.  There could be hundreds of additional sales if sellers would get off their high horse, price-wise.

2.   Shadow inventory/underwaters – Laurie Goodman is still the current record-holder of the highest guess – she expects 10 million more foreclosures.  Four or five million houses sell every year in America, so if a third of those are distressed sales, we could clear out the entire inventory of those underwater in 5-6 years.  But have you noticed how reluctant people are to give up their house?

Let’s note how hot the market is now – San Diego County detached-home listings:

Active detached-home listings:

REO/SS: 1,558

Non-REO/SS: 3,930

Total active detached listings: 5,488

Pending/Contingent detached-home listings:

REO/SS: 3,405

Non-REO/SS: 2,142

Total pending and contingent detached listings: 5,547

There are more listings that are pending/contingent than active!!!

In addition, the REO and short-sale listings are the hot sellers.  We are regularly seeing short sales get approved in 60 days (we got two approved this week) and buyers are more willing to wait, due to the overall low inventory. 

Bring on the distressed properties, buyers are waiting!  The Fed/Gov/Banking troika will ensure that they are dripped out in an orderly fashion.

3.  Overshoot

Overshoot already happened in San Diego, at least at the lower-end where everyone thinks recovery has to start.  I’ll use Oceanside for an example, one of the largest towns in the county and full of regular folks.

Detached-home sales under $200,000:

2008: 101

2009: 214

2010: 80

2011: 79

2012:  6 houses currently for sale under $200,000 in Oceanside, and three of the six are priced at $199,900.

4.  Higher-end hasn’t corrected yet.

These are the houses worth keeping, and owners will try harder to find a way.  There are only 654 properties (in a county of 3 million people) that are on the default lists with loans over $800,000.  Last year we sold 2,248 SD County properties over $800,000 – we can handle more higher-end distressed sellers.

5.  Can’t get mortgage financing.

An bold-face lie spewed by those not in the business, and just scraping for headlines.

6.  When rates go up, everyone is toast.

According to the Fed statement, they won’t be raising their rates until late-2014.  If the bond market went nuts, and mortgage rates jumped more than 2% (we’d handle anything less) the Fed/Gov will find a way to ease the pain.  They’ve given their banking buddies too much help to screw it up now.

7.  The trillions in government debt has to come home to roost.

The USA will conduct a strategic default if/when needed.  Every county does, and at some point, there won’t be any other choice.

We’ve been in these market conditions for almost three years.  Whether we label it ‘bottom’ or not, this is what we have – a trading range of about 10% for any property, with swings in that range based on the quality of the physical condition/sellers/agents.

People should question the application of old theories/history in an environment that is unprecedented.  Consider the upside surprises – the two big ones are how much cash is in play, and how resilient underwater sellers have been so far.

What say you?

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