Psychological Shift, or Seasonal?

by Jim the Realtor | Oct 23, 2013 | Forecasts, Jim's Take on the Market | 10 comments

Mozart says that the recent hockey-stick change in the data is merely seasonal, and he expects 7.20% more appreciation in the next 12 months around NSDCC – and he has been right before.

This graph would seem to indicate the same – just the usual malaise we see at the end of every buying season that causes lower prices:

The FHFA Index is out today, and though a bit dated in reflecting August sales which began in June or July, it did show an increase:

http://www.bloomberg.com/news/2013-10-23/u-s-home-prices-rose-8-5-in-year-through-august.html

Their first quote:

“Because markets are tight, we are still going to see solid price increases through next year,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, said in a telephone interview yesterday. “Eventually, the growth rate in prices is going to slow down.”

Which was replaced by this quote an hour later:

Competition for a limited supply of available homes has been fueling price gains across the U.S. The increases will slow as higher values draw more sellers to the market, adding to the inventory, according to Paul Diggle, property economist at Capital Economics Ltd. Prices will rise 8 percent this year and 4 percent in 2014, the firm projected.

“Supply is loosening, and clearly that is why it’s going to be a slowdown,” Diggle said by telephone from London. “A lot of people delayed selling at the bottom of the market. As prices rise more, people are in the position to sell.”

The ivory-tower guys agree about appreciation for now, but slowing. The safe bet for all national pundits will be 4% to 8% appreciation in 2014.

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So I might be out on a limb by myself, but I’ll stick with my zero-appreciation for NSDCC in 2014, almost solely due to my expectation of rising inventory. We’ll know if sellers are rushing to market by mid-to-late March.

Frenzy exhaustion is causing buyers to re-calibrate.  If the inventory does rise, it will strengthen the buyers’ resolve to not pay more than the last guy.

The frenzy fever has been broken, but buyers still want to buy – it will just be a price thing. What do you think?

Housing Appreciation 2014 Forecast

by Jim the Realtor | Oct 22, 2013 | Forecasts, Jim's Take on the Market | 32 comments

Reader ‘Native sd’ asked,

What do you think the appreciation will look like as we plateau?  Given 21% yoy in sd, half of that or 10% in the next 12 months and halved again or 5% for the 12 months after that or a steeper drop off?  Also zillow not only had their zestimate but also their appreciation forecast.  How accurate do you think their forecast is?

We did the same frenzy-to-plateau at the end of Summer, 2004.  Countrywide had kept the market pumping with interest-only loans, and when the market began to stall, they rolled out their toxic neg-am mortgages. Later they just went to no-doc, FICO-only qualifying, and squeezed out another 2-3 years worth of business, while the median sales price levitated between $450,000 and $500,000:

I don’t think the increase is going to continue this time, and predict that the SD median price will stay in a range of $400,000 to $425,000.

In other words, not much appreciation for the next 12-18 months.

Why will pricing slow down? We’re overdue for more inventory.

The one constant in all markets, good or bad, is that sellers hold out for top dollar. Now that prices are stagnating, sellers who decided to wait for more money are inching closer to the launch button.  Their wives are telling them, “you better not screw it up again, like last time.”

I’m guessing that we will endure a flood of inventory next spring.

A flood?  Why?

Here’s who will be coming to the party:

1.  Banks won’t panic, but there will be more spring in their step.

2.  Flippers will panic, but try to hide it.

3.  Previously-underwater folks.

4.  People who did the loan-mod-for-now program.

5.  Legitimate move-up sell-and-buyers.

6.  Early-stage baby-boomer liquidations.

One factor that might keep a growing inventory in check is that the recent purchasers won’t be involved.  The SF FED touched on it yesterday as a possibility, but those on the ground know it to be a fact – today’s buyers are in for the long haul. There won’t be any panic selling by those who purchased in the last 6-36 months, which should help to temper the impact.

My guess for 2014?  Appreciation will be close to zero around NSDCC.