It was suggested that the market over $750,000 was “becoming non-existant”, and in yesterday’s seminar, a realtor said that demand in general was “non-existant”.
Does a market exist? Let’s look at MLS detached active, actives on market more than 90 days, contingents and pendings, sold-in-last-30-days listings, plus the NODs and NOTS counts:
| Price Range | ACT | 90+ | %90+ | CONT | PEND | C+P | SOLD | SOLD09 | NOD | NOT |
| 0-$300K | 1,389 | 399 | 29% | 995 | 1,112 | 2,107 | 1,429 | 1,937 | ||
| $301-$500 | 2,572 | 748 | 29% | 886 | 1,304 | 2,190 | 1,482 | 2,498 | $501-$700 | 1,691 | 546 | 32% | 217 | 522 | 739 | 474 | 886 |
| $701+ | 3,058 | 1,374 | 45% | 117 | 486 | 603 | 365 | 593 |
The under-$500,000 groups are running well under a ratio of 2:1 actives-to-contingents+pendings, which has been a healthy sign in the past. As long as the servicers can keep dripping out the short-sale approvals and loan mods, we could call the lower-end market survivable – though, surprisingly, it’s where the bulk of the defaults are.
The $500,001 to $700,000 market is 2.28:1 on their actives-to-contingents+pendings ratio, and the defaults are well under the number of active listings, so apparently there are elective sellers in this group that could cancel and try again later if they don’t find a buyer. Plus, a few from above should drop into this category to keep everyone hopping.
More than a third of all active listings are priced over $700,000, yet no big rush to the exits with 45% of those languishing on the market for more than 90 days. The low amount of defaults seem to justify the loitering, but with only 77 sales closed in the last 30 days, you have to wonder when sellers and agents are going to figure it out – isn’t it obvious that something is wrong after 90 days and no deal and 80+% of those around you aren’t selling either?
A commenter suggested that the higher-end sellers can’t lower their price, due to loan balance – we’ll review that next.
That’s funny, considering RSF actually doubled sales volume this year. Must be smoking the good stuff to say there is a magic $700K price above which the market doesn’t exist. The reality is other blogs are too lazy to report the facts like Jim does and simply pull things out of thin air for publicity.
Welcome to the internet.
“The low amount of defaults seem to justify the loitering, but with only 77 sales closed in the last 30 days, you have to wonder when sellers and agents are going to figure it out – isn’t it obvious that something is wrong after 90 days and no deal and 80+% of those around you aren’t selling either?”
I would say that at least 50% of the houses listed in 92103 have virtually no chance of closing anywhere near the list price in the next 12 months. As an educated buyer it is virtually trivial to ignore the overpriced listings and focus on the motivated sellers, bank owned deals, etc. Is it really that hard for buyer’s to find a deal over 700k these days?
Jim, in the markets I’m watching (over $700) in my favorite areas, I get auto-updates. Almost all seem to be price reductions, a few are “new” listings (many of which are really “re-listings”) and I see so few “solds” that I was actually shocked when I did see one recently. It had been so long since I saw a “sold” I actually had forgotten that I was not just receiving listing info, but also sales!
Seems to jive with your post–high end is not moving!
From the LA Times (online). Two Frank Lloyd Wright historical homes are languishing. “Dramatic, Historic and Prices Slashed, Yet No Buyers Are Biting”.
Full article: http://www.latimes.com/entertainment/news/arts/la-et-0827-wright-houses-20100827-50,0,6914410.story?page=1&utm_medium=twitter&track=rss&utm
I know someone who owns a million dollar+ house that has not made a payment in a year and is working on a loan mod. He told me he has not received a NOD. He is a realtor and hasn’t sold a house this year. I’m thinking he may not qualify for any loan modification and it’s possible his place will eventually be a short sale.
I wonder how many other high end homes are able to hold on by the mere fact the banks aren’t filing NODs.
I would say that market still exists. In my opinion it would only cease to exist if there were no sales at that price for the next 20 years or more.
People just hate the literal use of language now. Did T.V. cause us all to use words such as COUNTLESS and ABSOLUTELY when the correct statement of conditions being described by those two words is several, or many, or thousands and most of the time or almost all of the time or most likely or almost certainly?
Oh well. The existence of slang and many thousands (not countless) of abbreviations in use sort of gives the middle finger to my irritation anyway.
It’s also been noted that this is a recession that is differentially affecting the less well-off. That doesn’t mean there aren’t people who were formerly in the top brackets who have been hit hard, but proportionately this recession has hit the bottom brackets a lot harder.
That’s consistent with the top brackets being able to wait (or wait longer) for the price they want.
The academic view on this:
http://www.wired.com/wiredscience/2010/08/the-real-estate-collapse/
(last three paragraphs are the most relevant)
Jim, what do you make of the high ratio of pending:contract in the 700+ category? Is this normal or just statistical noise? Does it mean the pipeline is “emptying out”?
Excellent link at #8, thanks enplaned. The last paragraph:
I’d argue that the same thing is happening right now, except on a nationwide scale. The housing market will only recover when we get over our collective bias, and realize that home prices have fallen and aren’t coming back (at least not anytime soon). Our irrationality got us into this mess – we binged on credit cards and took out unreasonable loans and mistook a bubble for a boom – and the only way we’re going to get out of it is to see through a new set of irrational quirks, which prevent us from fully equilibrating to our new financial reality. Sometimes, the wisest thing to do is cut our losses and run.
Here’s another must-read article for understanding how Wall Street kept artificial demand going for CDO securities (and thus provided artificial supply of mortgage money for the housing bubble).
http://www.propublica.org/article/banks-self-dealing-super-charged-financial-crisis
Along the same vein as John’s comment, Episode #405 (titled “Inside Job”) of the This American Life radio show/podcast details another ProPublica investigation about how the bubble was kept growing when it should have died on it’s own. It’s truly infuriating to listen to it.
http://www.thisamericanlife.org/radio-archives/2010
Is this kind of thing illegal yet?
Very good link, John.
It also shows that Fannie and Freddie were not the main perpetrators of the “financial crisis” as some would alledge. F&F were pulling back after their problems in the 2003-2004 period. The most toxic stuff was produced by Wall Street — and we still haven’t seen any prosecutions yet (because NOBODY could have seen it coming, right?). Oddly enough, these same Wall Streeters are being sought out to “help solve the problem.”