We saw this week that the local seasonally-adjusted Case-Shiller Index has been trending negative since April. Here we see how the recent gains have been driven by the lower-end properties:
The difference could simply be a percentage thing – a home’s value that goes from $300,000 to $400,000 has risen 33%, while a $700,000 home that goes up to $800,000 has only increased 14%.
But the underlying story is that the upper-end home values haven’t done much over the last 18 months.
Read more here:
http://journal.firsttuesday.us/california-tiered-home-pricing-2/1592/
An excerpt:
As in 2010, today’s price movement is the tail end of a mini-bubble, set into motion some 18 months earlier. This price rise was produced by short-lived speculator interference in 2013 (not a tax stimulus, as in 2009). This pricing activity is under pressure from insufficient personal incomes, rising fixed-rate mortgage (FRM) rates and new construction.
Prices are expected to continue to fall in the coming months, bottoming in 2015 and retreating toward the mean price trendline. The cooling of speculative fever and continually rising mortgage rates will prolong the falling trend in sales volume, pulling prices down in turn. Remember, real estate prices track and run with bond prices due to interest rate movement. A lag time of a couple of months exists due to remaining perceptions of past real estate price movement — the sticky price phenomenon.
OK I will believe that if the builders start lowering their prices.
I just don’t think there is that much must sell resell inventory that cannot be turned into rentals in SD IMO.
We will see come spring I guess.
Agreed but not much chance of builders lowering their price….yet. They will wait for another selling season before panicking.
Toll Brothers already has 1,600 people on waiting list for 600 homes in Carlsbad and they don’t expect to be paving roads until June.
I would expect that the new FHFA rules allowing only 3 percent down, far looser loan qualifications, and banks now not being wholly liable for bad loans, will mitigate the rise in interest rates for the next year, as “dumb money” again floods the market. I think next season will be a sellers market again, and may god have mercy on our souls.
First, I love how the top tier starts at $625k! I guess not everything is coastal.
Second, I don’t see how the FHFA rules will make any big difference. They aren’t changing the underwriting guidelines – you need good credit and DTI. And conforming. So in SD that means you’re buying 625k for a $607k loan, 1.1% prop tax, assume .75% PMI, 4.25% interest rate, and some other debt (otherwise you’d have cash in the bank, duh). So $3580 PIT, $380 PMI, $100 taxes, ignore MR, call it $50 HOA, and say $250/mo revolving credit (ignore the lease on the Benz). So to buy that $625k house you’re looking at a two year earning average of $120k – and oh did they waive the liquidity requirement? I didn’t think so. So 6 months of payments in cash in the bank, (50% in retirement account but how do you have that if you can’t save a down payment?). Anyway, that’s 12-22k in the bank after that $18k down.
Anyway if those changes mean all of a sudden everyone can buy a house, gee that’s great. Maybe I’m jaded because I am refinancing right now and it’s a royal pain – with a lot more than 20% equity. But I don’t see these rule changes helping anyone but maybe a recent Harvard law graduate or an MD finishing residency. Maybe we don’t need more homeowners who can’t save up a modest downpayment?