Shiller on ‘Bubble Mentality’

by | Sep 30, 2013 | Same-House Sales | 3 comments

While the real estate market has been bubbling, Robert J. Shiller doesn’t think we are in a real estate bubble.  At least not yet.  Shiller who, along with Karl Case, developed the S&P/Case-Shiller Composite Home Price Index, wrote a column for the this Sunday’s New York Times explaining why 2013 is not 2004.

The Case-Shiller 10-City Composite Index has seen a real, inflation-corrected rise of 18.4 percent in the 16 months ended in July, Shiller said, only about 4 basis points below the largest 16 month increase during the years-long run-up to the 2008 financial crisis.  Is it possible, Shiller asks, “that we are lapsing into what I call a bubble mentality – a self-reinforcing cycle of popular belief that prices can only go higher?”

He sees a lot of differences between then – the pre-2008 period – and now and uses the results of this year’s installment of a survey he and Case have conducted since 2003 to illustrate them.  The survey involves sending questionnaire to a random sample of recent homebuyers in Boston, Milwaukee, Los Angeles, and San Francisco.  The results from the most recent survey conducted in May and June suggest, Shiller said, that we are not in a bubble now but there are troubling signs we may be heading into one.

Read the full story here:

http://www.mortgagenewsdaily.com/09302013_housing_prices.asp

Inventory Watch – Healthy Week

by | Sep 30, 2013 | Inventory

September, 2013 is wrapping up, and currently this month’s closings of NSDCC detached-homes are averaging $468/sf, which is 7% above last month’s $436/sf, and 25% higher than last September’s $373/sf.

But there have only been 220 closed sales, with one day left plus late reporters. Last September we had 289 closings, back when the frenzy was taking root.

But with much higher pricing, we can expect fewer sales. In September 2010 we had 220 sales, and in 2011 we had 228 sales, and in both months the average pricing was under $400/sf:

The UNDER-$1,200,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
April 29
201
$384/sf
36
2,599sf
May 5
195
$381/sf
36
2,633sf
May 9
207
$387/sf
35
2,624sf
May 18
241
$397/sf
33
2,566sf
May 23
236
$397/sf
34
2,529sf
May 30
230
$391/sf
35
2,591sf
June 5
229
$393/sf
35
2,577sf
June 11
239
$390/sf
34
2,569sf
June 17
246
$389/sf
36
2,577sf
June 24
255
$397/sf
36
2,535sf
July 1
244
$401/sf
38
2,526sf
July 8
256
$398/sf
38
2,530sf
July 15
269
$403/sf
38
2,486sf
July 22
258
$401/sf
39
2,442sf
July 29
262
$386/sf
39
2,493sf
Aug 5
287
$393/sf
38
2,495sf
Aug 12
300
$391/sf
40
2,521sf
Aug 19
304
$395/sf
41
2,491sf
Aug 26
308
$392/sf
41
2,469sf
Sep 2
304
$395/sf
41
2,453sf
Sep 9
303
$402/sf
40
2,453sf
Sep 16
309
$395/sf
39
2,463sf
Sep 23
311
$398/sf
40
2,431sf
Sep 30
293
$398/sf
42
2,448sf

The OVER-$1,200,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
April 29
620
$806/sf
94
5,183sf
May 5
606
$806/sf
93
5,223sf
May 9
628
$808/sf
93
5,150sf
May 18
653
$807/sf
92
5,161sf
May 23
661
$814/sf
92
5,141sf
May 30
659
$805/sf
95
5,222sf
June 5
663
$794/sf
96
5,185sf
June 11
672
$779/sf
96
5,163sf
June 17
661
$787/sf
99
5,164sf
June 24
679
$791/sf
98
5,097sf
July 1
705
$785/sf
94
5,084sf
July 8
702
$779/sf
95
5,100sf
July 15
736
$776/sf
94
5,038sf
July 22
748
$782/sf
96
5,043sf
July 29
736
$782/sf
100
5,057sf
Aug 5
754
$765/sf
100
5,024sf
Aug 12
750
$767/sf
102
5,032sf
Aug 19
742
$769/sf
104
5,009sf
Aug 26
740
$781/sf
106
4,962sf
Sep 2
736
$773/sf
107
4,928sf
Sep 9
724
$781/sf
108
5,006sf
Sep 16
738
$773/sf
107
4,993sf
Sep 23
736
$776/sf
109
4,953sf
Sep 30
717
$765/sf
111
4,954sf

Reader elbarcosr suggested that “it would be interesting to see how different the upper end would look if the numbers were for 1.2-2.5 which would capture the higher end of Carmel Valley, low to mid RSF and most of the coast…. while eliminating the uber high end which, for the most part, is not swayed by buyer frenzies and daily ticks of the interest rates….”.

This is what the split looks like today, I’ll see about re-formatting the whole group for next week:

The $1,200,000 – $2,500,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
Sept 30
361
$552/sf
77
3,604sf

The OVER $2,500,000 Market:

Date
NSDCC Active Listings
Avg. LP/sf
DOM
Avg SF
Sept 30
364
$973/sf
145
6,283sf

We had a strong week below – can the media quit saying that higher rates are killing the market? Once sellers get their price right, there appears to be plenty of buyers. Price will fix anything!

Weekly NSDCC New Listings and New Pendings

Week
New Listings
New Pendings
May 30
70
84
June 5
87
64
June 11
77
69
June 17
73
66
June 24
100
69
July 1
86
64
July 8
81
53
July 15
106
54
July 22
105
89
July 29
71
74
Aug 5
105
64
Aug 12
77
61
Aug 19
88
73
Aug 26
87
77
Sep 2
76
55
Sep 9
85
58
Sep 16
102
61
Sep 23
84
54
Sep 30
73
80

Contemporary Cabin

by | Sep 29, 2013 | Interesting Houses | 2 comments

nara1

Perched on the shores of beautiful Lake Okanagan, this Naramata vacation home is a family’s “dream-come-true.”

Inspired by client sketches and the surrounding geography, the project was designed from the ground up. The result is a modern home that remains true to the idea of “cabin,” being humble and unpretentious.

We used French oak on the ceiling and floors, the pre-distressed, fumed planking provided relaxed yet durable surfaces. Forgiving, not precious, it is the strongest design material in the home. Our goal for the furnishings was to achieve a sense of simple luxurious comfort, that feels curated rather and designed.

Blurring the lines between indoor and outdoor living, the home is relaxing, durable, and rugged, with a defined purpose of summertime pleasure.

nara2

nara3

nara4

nara5

http://www.contemporist.com/2013/09/29/naramata-cabin-by-robert-bailey-interiors/

CV & Chevy

by | Sep 29, 2013 | Bubbleinfo TV, Builders, Carmel Valley

The new homes being sold in Carmel Valley are about the best thing that could happen for the resale market.

Buyers get to secure their place on ‘the list’, and use it as a marker for resale comparisons over the next 3-6 months while waiting for their number to come up.

But it’s a long wait – if you are selected to purchase in the latest phase, then closings are scheduled for June, 2014. Resales offer occupancy months earlier, and for anxious buyers that is a big plus. Just the certainty of buying now vs. maybe-late-2014-or-2015 is worth something – probably 5% to 10%.

Pardee benefits too; they sell every house before they break ground, and can raise the prices steadily along the way:

La Jolla Case Study

by | Sep 28, 2013 | Bubbleinfo TV, Historic Homes, Interesting Houses, La Jolla

Those familar with the mid-century modern homes have probably heard of the Case Study houses, which wiki calls ‘experiments in American residential architecture’.  Unfortunately this video is of the corner house which is two doors down, and then only drives by the Case Study House #23A:

Case Study “Triad” House A
– standing
2342 Rue de Anne, 1960
One of three related houses where the earlier Arts & Architecture puritanical vocabulary of post, beam and glass are now played off against water (reflecting pond). One of only three (hence “Triad”) San Diego examples of the 36 building Case Study program sponsored by Arts & Architecture magazine editor John Entenza and USC’s School of Architecture (1945 -’66) to promote modernism as a stylish, livable architectural form. Situated three feet below street level, House A’s 10-foot front door is reached via a pre-cast concrete path floated over a shallow reflecting pool. This 6-room modified U-plan is the most complex of the three resawn tongue and groove redwood boarding houses decoratively enhanced by the (wood and steel) post and beam (laminated wood) motif.

Story with photos here: Case Study houses – La Jolla

http://tempo5.sandicor.com/DotNet/Pub/GetMapEx.aspx?lat=32.8431

Double Bubble?

by | Sep 27, 2013 | Market Buzz, Market Conditions, Same-House Sales | 3 comments

Two excerpts, the first from:

http://www.businessinsider.com/shiller-starting-to-worry-about-a-bubble-2013-9

In general, real estate markets are hot right now and I know I’ve never seen so  much building and activity in the San Diego area as I do today.  And if you  list a home in a desirable area you better be prepared for a bidding war.

We’ll see if that continues into the winter months.  It usually doesn’t,  but who knows.  As Robert Shiller knows, those animal spirits often get the  best of us.

But San Diego and the other California cities appear to be  outliers.  After all, the national index is still down 20% from its peak  after a 20% climb from the bottom in 2011.

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

The rich getting richer – an excerpt from:

http://www.businessinsider.com/albert-edwards-on-inequality-and-housing-2013-9

The anger of the 99% will ultimately not  be bought off by yet another central bank inspired housing bubble, engineered to  pacify them and divert their attention as their real incomes fall and inequality  continues to grow.

The current bubble will burst, despite  the Fed postponing the event by climbing to ever higher diving boards. All the  time rising inequality is draining the swimming pool dry and the crunch when it  comes will be ugly.

“What society needs to grow in an economically optimal fashion is not  equality of outcomes, but equality of opportunity,” wrote Edwards.

“But with the grotesque distortions of income now prevailing, one’s lifetime opportunities are so increasingly dominated by what one’s parents income is that  the American dream has increasingly become just that a dream, and an  increasingly distant one at that.”

HUD and Short-Sale Dual Agency

by | Sep 26, 2013 | Ethics, Short Sales, Short Selling

Received today from the National Association of Realtors:

NAR members recently received word that the U.S. Department of Housing & Urban Development would be implementing a new policy on Oct. 1, 2013, that would prevent dual agency agreements in FHA pre-foreclosure transactions.

The National Association of REALTORS® immediately began talks with HUD officials on the proposed change. On Wednesday afternoon HUD officials reported to NAR that they would reissue the July Mortgagee Letter (#2013-23) and remove all dual agency language (Part Three of the PFS Participation Requirements).

The result is that the dual agency policy will not be implemented on Oct. 1, allowing NAR to continue the dialogue with agency officials on a formal solution to the dual agency issue.

HUD had proposed the policy change in response to fraud and abuse detected by the HUD Inspector General in the pre-foreclosure sales process.

NAR, working with state and local association presidents, sent a letter to HUD highlighting the concerns about the policy and the disruptive effect its implementation would have on communities across the nation.

The NAR has applied their considerable political weight to stall the implementation, summarized in the linked letter.  It’s a real hoot, scoring high on the David Lereah Comedy Scale:

1.  It quickly dives into the standard NAR blast:  “NAR takes fraud very seriously. Our members adhere to a strict code of ethics.”

2.  He then plays the naive’ card: “One-hundred years after its adoption, the Code of Ethics continues to be what sets us apart as REALTORS.  If there is evidence of fraud by our membership, we would like to be a part of an effort to develop policies that effectively address these issues.”

Come on, Gary – everyone has known about the rampant short-sale fraud for years, and N.A.R. has done NOTHING to stop it.  Now you are going to play stupid, and forge some phony-baloney compromise with HUD?

All national, state, and local associations, as well as every broker charged with supervising realtors, should take immediate action to stop short-sale fraud.  If we don’t, somebody else will.

Why Slowdown Is Good

by | Sep 26, 2013 | Frenzy, Jim's Take on the Market, Market Conditions, North County Coastal, Spring Kick | 2 comments

We keep hearing that inventory is growing, but what does that mean?

In the traditional way that the media reports it, a growing inventory means that there are more active listings of homes for sale.  The assumption is made that this is ‘good’ and ‘getting back to normal’.

But if they would look deeper, they would realize that a growing inventory of active listings means homes aren’t selling.  In almost every case, it’s because they are over-priced.

If the market hits stall speed, where buyers aren’t willing to pay whatever it takes just to buy something, then a slowdown is in order.

Here is my hypothesis why a ‘slowdown’ for the rest of 2013 would be great, and set the stage for an incredible Spring, 2014.

1.  Slowdown means price discovery.

For the last 12 months, the sky has been the limit for sellers, who put any price on their home and buyers paid that or more – often waiving the appraisal contingency.

With over-priced homes not selling, we’ll have additional pricing parameters.

2.  Slowdown means more competition between sellers.

In areas where a few motivated sellers might be doing the stare-down, an old fashioned price war could break out.

With prices having gone up 20% to 25% in the last year, sellers who need to sell might take a little less to get it done, and still call it a win.

3.  Slowdown re-engages the buyers.

The buyers who have been turned off by the frenzy will enjoy seeing more inventory lying around – and keep the demand healthy.

4.  Slowdown gets the attention of agents.

Realtors have gotten away with sloppy pricing this year, but hopefully that will change once their listings start sitting around.

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

While a 4Q13 slowdown might be just the breather the market needs, there are other factors that could, and should, lead to a robust 2014 buying season:

  • More formerly-underwater sellers realize they can get out.
  • More baby-boomers are getting old and need help/money.
  • More previously-foreclosed and short sellers will be eligible for financing.
  • Fannie/Freddie and FHA will still be around.
  • Rates should be higher which makes buyers antsy.
  • Anti-Buy-and-Bail rule is easier to overcome for move-up buyers.

The high-flying price increases over the last 12 months have been great for headlines, but we need more sales to sustain momentum.  The market conditions should be ideal over the next few months to keep the train rolling!

What do you think?

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