The media is enjoying the latest weak housing data, this from cnbc.com:
Several other analysts started to question the strength of the recovery as well, with some just hoping that perhaps a warm winter had pulled some demand forward from spring. Despite a miss on existing home sales in February, the headline pointed to, again, big gains from a year ago.
Yes, we are ahead of where we were, but as we’ve noted so many times here on this page, rising foreclosures will put added pressure on this market, and we may not be out of the woods yet.
“Despite an extraordinarily mild winter, home sales just plod along at a pace last seen during the mid-1990s,” notes Mark Zandi in his monthly report from Moody’s Analytics. “Thus, the underlying pace of home sales may not yet be strong enough to support a long-lasting upturn by home prices.”
Tomorrow we get the monthly reading on the S&P/Case-Shiller home price index. This index hasn’t been improving nearly as much as home sales, but the ever-hopeful housing lobby keeps blaming that on the fact that prices always lag sales, which is historically true, but what in today’s market has followed history?
Home prices are still falling not because of some lag, but because this housing market is running on sales of distressed properties at the very low end. The rest of the market is still stalled.
They don’t think about any other possibility, they just make up the hot soundbites and push hysteria.
There is another explanation – sellers have gone crazy with their list prices, and buyers – loaded with ample market data – aren’t going for it. As a result, sales will suffer.
Here a examples of the seller exuberance, and how buyers are reacting:
San Diego:
Carmel Valley:
Del Mar:
Encinitas:
SW Carlsbad:
There would be a surge of sales if list prices were more reasonable – and about 10% less would probably be enough. But the media won’t look deep enough – just a casual look, and off to the usual panic phrases.
Look how steady the SOLD $/sf trends are in every market – the buyers aren’t biting, rates are going up, and it’s almost April. If you are trying to sell, and your list price hasn’t worked by now, it’s probably time to beat your neighbor to a “price adjustment”.
“the buyers aren’t biting, rates are going up, and it’s almost April.”
Don’t you mean rates AREN’T going up?
Regardless, it is a Mexican standoff right now between buyers and sellers. The buyers are way more educated and have more tools at their disposal to evaluate the market. Buyers are not in the mood for realtor gimmicks. Unfortunately, you get a few but enough of the “Suzanne researched this” buyers who blow everything by buying at any price.
Buyers are indeed more educated. Flippers arm with paint brush, granite counter top, SS appliances and tacky Made-in-China staging decos do not work any more; at least to most people I know .
High HOA put off buyers too. HOAs need to get rib of the pool, reduce landscaping and fire the gate guy.
Any fancy talks from real estate agents piss off buyers too.
There’s the old wisdom: “Volume precedes price”.
Its common that in the early spring, sellers will try to push the price envelope as far as they can. With very low inventory (even for recent times), buyer frustration is taking hold. However, being frustrated, and being able to do something about it (pay more) are 2 different things, and I’m not sure the recovery is yet strong enough to product consistent results in price appreciation.
Just some guy:
In case you missed the move in rates, about 5-6 weeks ago, you could get super conforming at 3.625 with zero points. That’s now 4.125 with zero points. That’s >10% move. Buying financed houses will cost you about 10% more today than about 6 weeks ago. Moves like that are not unnoticed, at least by me. What seemed like a great deal 45 days ago does not seem like a great deal today.
Chuck
The C-S index looks at same home sales over time. However, the last sentence goes to the same hogwash about low end foreclosures driving down the index. Sorry, the C-S adjusts for this.
This just in from HW – but there should be a lot of fallouts:
Pending home sales shot up in California during the month of February as more buyers signed contracts to acquire homes, the California Association of Realtors said Monday.
C.A.R.’s pending home sales index grew from 102.3 in January to 127.8 in February.
The index is based on the number of pending sales contracts signed each month. Contract activity is a sign of future home sales activity, and a sign of just how strong the home sales market is in certain areas.
In February, the share of distressed sales recorded in California fell due to a lack of inventory in the bank-owned segment and in the short-sale market, CAR said.
“In fact, REO inventory declined 24% in February from the previous year, while short sale inventory dropped 17% during the same period,” said C.A.R. President LeFrancis Arnold.
Equity sales in California made up 51.1% of home sales in February, compared to 49.9% and 44.8% of all sales in January 2012 and February 2011, respectively.
@Ponzi
yes, that is a big move. Fortunately, I am not in the super-conforming loan range.
you got a bump too – though flat now, from MND:
Mortgages Rates have been nearly identical for the past 3 sessions. That means that Conventional 30yr Fixed Best-Execution Rates begin the week at the same 4.0% level where they ended last week.
Jim,
Please correct me if needed: It seems to me that a majority of SD and OC coastal buyers ARE in the super conforming range, though the conforming rates are similar, though lower by about 1/8 to 1/4 point.
MND really only tracks week by week, nonlocal, and only for conforming <417K limits.
If you're buying a house between 520K and 780K (much of the middle tier) and planning on conventional financing, you're in the super conforming range. 6 weeks ago, things were CRAZY. It's still pretty hot, all things considered, but I had never seen a frenzy like that, even in 2005/2006.
Chuck
Agreed, there was a buyer hot-surge where every house that was well-priced got snapped up in February, and dribbled over into March. Remember the video with Mike from Scottsdale? He was caught in the middle of it, like an Arizona duststorm where it blows through with little or no notice. He had several good listings in mind and felt no urgency to drop everything at work, but then by the time he did make it out, most of his choices were gobbled up.
Now what’s left are the OPTs, and based on how buyers are acting (conservatively), the sellers need to lower their list prices – which were too optimistic to begin with.
Sellers (and agents) who think we are early in the selling season aren’t reading it right.
We have had the Spring Kick, it lasted 4-6 weeks, and now it’s over. Now we’re back to trudging through the OPTs, hoping to get lucky with a lowball, or pick off a hot new listing – which there are very few.
All I wanted to ask is – “What is OPT ?” but the web site is making me write more than 3 words.
Over-Priced Turkey.
Floyd Wickman coined the phrase/abbreviation years ago.
Thanks.
This market is definitely strange. Shrinking inventory but prices coming down. Buyers out in droves but not slinging around big offers. Some sellers giving in to lowball offers but others getting lucky with a big offer. Lots of OPTs going nowhere.
I have to think that potential sellers are expecting the market to turn upward in a big way and that is why they aren’t coming to the party. The real-estate industry has tried so hard to convince everyone that things are turning up, they have scared away all the sellers. Oops.
It seems whether or not prices come up soon, sellers are going to have to come to the party – either prices will come up and they’ll go for it, or they will get tired of waiting or situational forces will require it (not distressed, but situational – i.e. a new job, recent empty-nesters, etc).
On the buyer side, the jumbo-loan limit has to be the driver for keeping prices from coming up and higher rates have to slow some of them down, too.
Even Bernanke says we have a long employment hill to climb.
Got to be some pent-up inventory (not shadow, but pent-up, wanting to sell but waiting for a better market) out there. Not a Tsunami, but some volume has to show up this Summer. Pent-up sellers combined with the end-of-year change in short-sale forgiveness, it bodes poorly for prices late in the year.
Short term, though, it seems that it can’t possibly slide further. Maybe even a Summer bounce in prices instead of Spring.