The Case-Shiller November index showed more negativity overall, to the delight of the mainstream media. Calls for the double dip will escalate, and soon the government will think they need to intervene. Hopefully they’ll keep their hands in their pockets, and not ours.
From the C-S press release:
“With these numbers more analysts will be calling for a double-dip in home prices. Let’s take a moment to define a double-dip as seeing the 10- and 20-City Composites set new post-peak lows. The series are now only 4.8% and 3.3% above their April 2009 lows, suggesting that a double-dip could be confirmed before Spring. Certainly eight cities setting new lows, and with the only positive news concentrated in southern California and Washington DC, the data point to weakness in home prices,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “With an annual growth rate of +3.5% in November, Washington DC was the strongest market, but still well below the +7.7% annual rate of growth seen in May 2010. The only city with a gain in November was San Diego, up a scant 0.1%. While San Diego, Los Angeles and San Francisco are still ahead from November 2009, their annual rates are shrinking in recent months.
Here is the San Diego Case-Shiller Index history:
The idea of lower pricing will cause more people to consider looking to buy a home, but what will they think when they see over-priced turkeys (OPTs) everywhere they go? What will home-lookers do when they realize the disconnect between media reports, and the reality on the street? Commit to spending inordinate amounts of time and energy searching for the needle in the haystack, or give up?
When they can buying anything else they need within minutes, it’s hard to imagine them devoting the time to dig for the deals. But will they just pay the price?
Looking at that Case Shiller chart, I remember distinctly the reaction I saw (here and other sites) when prices first changed direction back in early 2009.
Denial was all the rage back then “its just a blip”, a “shelf on the way down” were heard often, and in any event the consensus refrain was we were “NOWHERE NEAR THE BOTTOM”.
Sadly, I was one of the biggest denialists going back then. Now, here we are 2 years later, (and with another $50,000+ paid in rent), we are still far far above that early 2009 bottom.
Man, I would do anything to have the Jan 2011 self go back in time to smack some sense into the Jan 2009 version of me.
Glad I live in DC.
My personal crystal ball says that the Fed is going to threaten to raise rates this summer to push buyers into committing before next fall.
Last summer was the buyers credit.
This summer will be the threat of an interest rate increase.
Unfortunately some people will take the bait. Overall homes will continue to lose value.
I’m a very well qualified buyer the 5-800 range and all I see are OPT’s. I think the few people that are buying now are overpaying for stale real estate. Sellers need to get realistic about where the economy and housing market is at. Banks need to get realistic about where to price their short sales and getting them closed quickly. We’re waiting until we start seeing some real value in a home.
The “Ruler Test” . . .I often take an old wooden (or plastic) ruler and overlay it on a stock chart – it often works. If one takes a ruler to the posted above chart, you can see the blip up to 2005, then the crash, and we now seem to be on the “normal” growth pattern. Too bad this chart isn’t available back to say 1970 (Jim,maybe it is?).
We all agree there are overpriced turkeys out there, but there are also some good values. We are seeing a bifurcated (today’s 50 cent word) market out there – the tract homse built in places like Chula Vista, Las Vegas, Phoenix, etc. are a drag on the market and are where the real foreclosure problems are concentrated. Good quality homes in upmarket areas are starting to sell pretty well, and holding their prices.
Let’s face it, we are in the two-tier economy, and those who benefit from the nearly 12,000 DOW, and higher dividends and corporate buybacks have money. Those who still face unemployment or underemployment are still in trouble. I think it is likely the under 400K market will be dead for a long while, but the over 600K market will do well. . .just my 2 cents.
Sean,
How would you rate your own intensity in searching for homes?
Do you search daily (or multiple times per day) on the internet? Do you visit the good ones immediately (first day or two on market)?
Because I think that’s the only way people will ever see good deals – they tend to get bought up in the first few days, and poof, they’re gone.
I had an old friend/client on the auto-notification for the last year, looking to move up in 92009. Last week he decided to remodel instead, because of the lack of deals – we only saw one in the last year, and it was a bogus short sale.
But he is one of the original owners in La Costa Valley, and has it good, so it would have taken a smoking deal to impress him. But there aren’t any of those really, at least not on the open market.
mybleachhouse asked about some lower-end stats last night, and these got buried a few posts back:
SD County detached sales under $200,000:
2009: 3,344
2010: 1,571 -53%
SD County detached pricing under $200,000:
2009: $147/sf
2010: $161/sf +9.5%
The pricing was consistent with the other product-types, but the -53% was a mind-bender.
@Mark,
The “Ruler test my work for commodities, but I’m not sure it works for real estate, especially if you compare real estate across the country. Places in decline like Detroit or Cleveland are cities on decline generally or recovering from a massive bubble (Atlanta, Vegas). DC holds its own because its an above-average income and education area and has job growth. San Diego is at an interesting crossroads. Sure, peopel will always retire there, but the state’s overall fiscal crises may really quell growth and real estate going forward.
I’m looking online daily, usually running queries several times a day and go out at least every other weekend. If I see something that looks amazing we get in asap. I havent really seen anything go before we had a chance to see it. The only real deals that we have seen have been short sales and even those get bid up fast or the banks rejects outright. I think SD prices have another 10% to slide.
An interesting contrast.
You are diligently looking, yet you’ve seen nothing worth buying yet. The only deals get bid up fast.
With that action, why do you think prices will slide another 10%?
In your price range, sales and pricing was on the rise last year:
Detached SD Sales/Avg $-per-sf
$500,000 – $800,000
2009: 4,316 / $273
2010: 4,670 / $279
$800,001+
2009: 1,917 / $438
2010: 2,160 / $420
Still seems like a stalemate between buyers and sellers at this point. Need to see what happens in March/April. Will buyers step up to meet higher asking prices or will sellers be forced to lower their price. Probably the only thing that will be certain is sales volume will be down YoY if this continues.
I figure if sales volume picks up it will be because of sellers bringing the prices down (maybe it’s foreclosures), or government coming in with another incentive package. The one thing I really don’t see is sales picking up at higher prices organically, although who knows. Stranger things have happened.
“SD County detached sales under $200,000:
2009: 3,344
2010: 1,571 -53%”
I wonder how much of this moved into the next tier. I.e. how many under $200K type properties are now selling for 200-250K. Although at the median price per sqft $147 vs $161 it only makes about a 100 sqft difference (1242 sqft vs 1360 sqft). A big drop number of sales in lower tier homes is certainly somewhat expected because of a lack of the tax credit. It made a big difference at that price point.
Keeping an eye on the lower tier is always probably somewhat useful. Anything less than $400K at today’s interest rates is probably within reach of a FHA first time buyer. The thing that we have seen over the past 4-5 years is that the upper tier market seems to lag what’s happening in the lower tiers and that probably at least has something to do with the move up buyer requiring a first time buyer.
San Diego does seem to see a bigger wealth influx but even there it might require a first time buyer somewhere in the chain for it to happen.
DC and NYC will be the last places to correct because that is where the power and money reside.
If the fed/gov were to lose interest in sustaining home prices for some reason (I know, fat chance, but it is possible) it would crater the market. It will be interesting to see how sustainable the current paradigm really is.
Totally agree with Jim in #6 and #11. For NCC anything decent under/around 850k is getting picked up almost instantly, even when its Non-Season and with all the Negative News from Media. Here are couple of most recent examples … First one went pending in 5 days … second one also went pending around 2 weeks.
http://www.redfin.com/CA/Carlsbad/1345-Corvidae-St-92011/home/3768249
http://www.redfin.com/CA/Carlsbad/6629-Sitio-Sago-92011/home/6476653
We’re big fans of this blog, but our home search is concentrated between Thousand Oaks and Goleta. I am in the same boat as Sean. Well qualified 600-800k, looking at lots of listings and open houses. Not inspired to buy. All good homes priced 100-200k too high IMO. Jim’s comment about moving fast on deals is probably true, but I don’t want to make an 800k purchase as a quick decision. I did that in earlier years with corporate relocations and having to pick a house in less than a week never worked out well for us. I am 47 and this next house purchase is going to be the house I die in. I would like to buy this year but the market just doesn’t feel right to me. I have already experienced the joy of paying 100k too much for a house, and the sting of that lasts a lot longer than the thrill of moving into a new home. If the market stays the same, we will continue to rent and let someone else be the hero homebuyer. I would also say that the typical Thousand Oaks comp right now is an OPT that has been on the market for over a year with no takers. Might be different in San Diego. Also up here, most realtors are nice but some are starting to get mean at open houses. Two realtors made rude comments suggesting they dont want to talk to us unless we are prequalified for a loan. I think money is getting harder to come by. I remember the good old days when buying a home was fun, but that is not going to be the case this year.
I guess I’m a member of the “move-up buyer” group people keep talking about. I currently own a condo, but want to rent it out and get something bigger (growing family). I’m looking in the $400K to $500K range, near the 15, between the 52 and the 56.
Unfortunately, in the area I’m looking in, there are very few attractive properties under $600K. Some areas, such as Mira Mesa, have come down a lot, but they were crazy before, so they are just coming back to reality. Scripps Ranch prices seem to have hit bottom in early 2009 and have been going back up ever since, from what I can see. I guess they had more stable and higher paying jobs. Rancho Bernardo and Rancho Penasquitas are in between.
Like a lot of other people, I considered buying in 2009, but held off out of fear. The double-dip in some areas in late 2010 has me interested again. But I’ve always thought that the best time to buy is when interest rates are high and looking to head lower (so you can refi at a lower rate, or sell and get a capital gain), not when they’re low and almost certainly heading higher. What happens to prices if/when mortgage rates go back to 6% or 7%, which is much more “natural”? Will the economy have strengthened enough by then to keep prices from dropping?
Like a person said above, I’ll wait till Spring and see what happens.
Henry
Jim,
Such an awesome blog even though I bought my first home already in Nov. This is such a fascinating industry that I hope you became a quoted historian when we look back at what happened during the melt down in SD.
I agree with you Jim. Diligently looking meant, obsessing on mls listings every 15 mins to see what had been listed. Granted my price range is at least half of what your clients typically look at, regardless, I sat, watched the internet, when I saw something noteworthy, I was there with my agent within hours.
I feel EXTREMELY fortunate to get the home I got for the price I did and at 4.25%!
You helped me become an informed buyer with your videos and blogs.
Keep up at it. You really give RE agents a good name!
To add, I was lucky to have an agent that was ready to go see properties when I was.
She was very experienced, but let me do the computer searching etc as she know I would probably get to a new listing faster than her.
On a side note, the house I bought was not on the market for more than 2 hours, before we drove, saw it and put the offer in at top of the asking price.
The trend is DOWNWARD.
1) Higher priced homes are now coming on the market thus pushing up median prices
2) Higher priced homes are losing value thus pushing DOWN YOY pricing.
Jim said:
The idea of lower pricing will cause more people to consider looking to buy a home, but what will they think when they see over-priced turkeys (OPTs) everywhere they go? What will home-lookers do when they realize the disconnect between media reports, and the reality on the street? Commit to spending inordinate amounts of time and energy searching for the needle in the haystack, or give up?
When they can buying anything else they need within minutes, it’s hard to imagine them devoting the time to dig for the deals. But will they just pay the price?
We are indeed those buyers. We see complete garbage still out there for stupid prices. Sellers are completely delusional and buyers are simply too stupid to see what’s going on. Desperate and greed trump all.
We are seriously on the fence now. If we can’t find a good Realtor to help us, we’re going to soon say F*K it…it’ ain’t worth this much headache to own a home…it simply isn’t.
By the way, my review of that Realtor that screwed us over with bad behavior is now on Zillow..he’s crying about how to remove the review…lol.