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San Diego October Sales

From sddt.com:

Add another data point to housing’s ongoing bounce along the market bottom.

Sales activity of existing homes in San Diego County slipped on a monthly basis in October, falling roughly in line with its year-ago level, according to recent data.

The San Diego Association of Realtors (SDAR) reported that buyers purchased 2,292 total homes last month, virtually unchanged from the 2,297 sold last October but down 9 percent from a month earlier.

Of the homes sold in October, 1,546 were single-family homes. The single-family total is 10 percent fewer on a monthly basis but 3 percent above October 2010.

The 746 condos sold last month represented declines of 6 percent from both the previous and year-ago months.

Among single-family homes, the median sales price — measuring only the cost of the median home of all properties sold during the defined period, rather than a broad change in housing values –fell 1.3 percent from September and 7.6 percent from last October, to $355,000.

The median condo sold for $207,500, down 1.1 percent from September and 2.8 percent from last October.

The most pronounced change in the SDAR numbers, on an annual basis, is the average time properties spent on the market last month.  Single-family homes sold in an average of 91 days, 18 percent more than the 77 average days spent on market last year, and 12 percent more than a month earlier.

The for-sale inventory, especially on the low end of the market, has grown picked over as the distressed properties in the best condition are quickly snatched up after going on the market. Making matters worse, sellers who would typically be looking to enter the move-up market have abstained due to low prices and an unstable labor market.

“People go out and they get very discouraged looking at what’s on the market,” said Alan Nevin, principal of The London Group Realty Advisors last week, reached last week to discuss housing affordability in San Diego. “The number of listings of homes under 500 in acceptable areas is negligible.” (I think he means under $500,000)

Russ Valone, president and CEO of MarketPointe Realty Advisors, said the increasing prevalence of short sales might also account for the rising days spent on market average.

The average is calculated from the time a property is listed to the time it closes, not when it enters escrow. The notoriously lengthy transaction timeline of short sales could push up the average, even if other properties aren’t necessarily spending additional time on the market.

(JtR: The paragraph above is inaccurate, the DOM is calculated from listing date to pending date)

Short sales account for roughly 8 percent of all home sales this year, up from 7 percent in 2010, 5.5 percent in 2009 and 3 percent in 2008, according to CoreLogic.

Valone said the increasing share of short sales is also in part responsible for the softness in prices.  “We’ve been bumping along the bottom for a good year,” he said. “Look at housing market, and softness, has little to do with housing, has to do with larger macroeconomics.”

The market needs echo boomers — children of baby boomers — to leave the rental market and become home buyers, according to Valone.

As long as the labor market remains weak, though, they’ve opted for flexibility over building equity.

“People who don’t own now should be coming into the market with zeal, with good interest rates and prices, and instead they’re saying ‘I don’t know if I’ll be full-time employed in San Diego,’ so they want the flexibility that staying in the rental market affords them,” he said.

While some analysts’ predictions have surpassed the general forecast that prices won’t fall more than another few percentage points, and have suggested they could come down as much as another 7 percent, those losses still don’t represent a great deal of money in the long run, according to Valone. More than a fear that values are still on the way down, it’s a fear of the current labor market that’s keeping young would-be buyers on the wrong side of the fence, he said.

“Housing won’t lead us out,” he said. “Instead of it being the lead engine pulling the train, it’ll be in the back pushing the train.”

Through ten months, total home sales have slipped 3 percent from last year, when the homebuyer’s tax credit propped up sales early in the year, led primarily by a decline in condo sales.

County buyers have purchased 8,902 condos this year, down 8.3 percent from the year-ago period’s 9,709.

Meanwhile, 17,565 single-family homes have been sold this year, down less than a percent from last year’s 17,603.

The average days on the market for the entire year among single-family homes has increased 13 percent, from 74 to 84, while condos are now spending an average of 96 days on the market, up 14 percent from 84 during the first 10 months of 2010.

The median sales price of a single-family home sold this year, $368,000, is 4 percent less than the median home’s price last year. In the condo market, the median price has fallen 5 percent to $207,500.

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JtR’s research:

Now that there are so many companies reporting sales and pricing, the numbers tend to vary. 

I don’t know where CoreLogic gets their “8% of sales this year were short sales”.  Of the detached and attached home sales in San Diego County this year, the MLS shows that 21% have been short sales, and 23% have been REO sales.  

San Diego County sales counts for first ten months (1/1 – 10/31)

Type 2010 # 2010 % 2011 # 2011 %
All Sales
27,433
26,669
Shorts
5,303
19%
5,548
21%
REOs
6,235
23%
6,089
23%

B of A’s Lease-to-Own?

From Originator News:

Bank of America is working “very hard” on a short sale-to-lease program for distressed borrowers who don’t qualify for government-backed refinance programs.

But the much-maligned bank won’t move forward until it gains assurance from regulators that borrowers are being treated fairly.

As outlined late this week by B of A executive Ron Sturzenegger at the Urban Land Institute’s fall conference in Los Angeles, the bank would regain title to mortgaged properties under a short sale arrangement, and then lease the houses back to their occupants for three years for rents that approximate the average for their particular areas.

At the end of the 36-month lease, Sturzenegger said during a panel session on capital markets, the institution would re-sell the houses to renters who wanted to buy them back. He did not say what price buyers would have to pay to reclaim ownership from the bank.

Sturzenegger, who is managing director of legacy asset servicing at B of A, said investors are interested in the program, as are borrowers. But two obstacles still need to be overcome before the program becomes operational, he said: governmental clearance and finding someone with the ability to run it.

Has Housing Overshot?

Hat tip to DOB for sending this in, from AdvisorOne:

After years of housing market decline that has weakened the economy and depressed consumer sentiment, a number of analyses are strongly suggesting that a turnaround in the beaten sector may finally be at hand.

Indeed, the market seems to be adding its endorsement to these analyses, with the SPDR S&P Homebuilders ETF (XHB) up 23% in the past month. (Even with the recent surge, the index is down more than 50% over the past five years.)

In a sweeping report titled “Housing: A Time to Buy,” JPMorgan Asset Management analysts David Kelly and David Lebovitz argue that trends in supply, demand and inventories all point to rising home prices. The two analysts offer lots of data that show how extreme the changes in the housing market have been in recent years. Their conclusion is shared by their counterpart, Citi analyst Joshua Levin (see more on Levin’s research on the next page).

Take housing starts, for example: The best month in the past years of housing crisis resulted in just half the average level of building activity over five decades. Kelly and Lebovitz present the data as follows: “In almost 50 years, from January 1959 to September 2008, the lowest annualized rate of housing starts recorded for any month was 798,000, and the average rate was more than 1.5 million units. Since January 2009, the highest rate recorded for any month has been 687,000, and the average rate has been just 575,000.”

Other stark findings include the fact that the value of home equity today totals less than half the level reached in 2006 –$6.2 trillion compared to $13.5 trillion five years ago. And the effect of the housing bust has been profound in that the fall in construction employment alone accounts for 30% of U.S. job losses in a sector that accounted for no more than 5.7% of U.S. jobs at its peak. All these and many more statistics account for today’s depressed consumer sentiment, whose current index value of 57.5 is nearly 30 points below its average of the past 40 years.

From an investment point of view, the JPMorgan valuation data is similarly robust. Kelly and Lebovitz show that the ratio of median home prices to personal income over the past 45 years has hovered over 200% (and peaked at 251%), but has fallen now to a historic low of 153%. To get back to a normal ratio, home prices would have to rise by 27%, they say. And with the fall of mortgage rates, mortgage payments for the median home have fallen to just 6.9% of personal income – a ratio of less than have the 14.4% average since 1996.

Comparing mortgage payments to rental rates, the JP Morgan analysts show that “home prices would have to rise by 35% just to get back to their average relationship to rents.” Kelly and Lebovitz also compare prices to the cost of construction – “a sort of price-to-book ratio for the housing market” – and find that housing today costs just 26% more than the cost of rebuilding compared to an average 55% premium since 1975.

The JPMorgan analysts also look at home inventories, which remain high, but they show these inventories in rapid decline – a conclusion shared by their counterpart, Citi analyst Joshua Levin who, in a report highlighted by Business Insider, calls the lowest inventory of homes for sale in September since 2005 “the most interesting thing you may not know about the housing market.”  Business Insider’s Joe Wiesenthal  has also reported on still another uber-bullish case for housing by Harvest Capital, which similarly points to favorable valuations, declining inventories and increased demand.

JPMorgan’s Kelly and Lebovitz bring much more data in their analysis, but they distill their points in the conclusion of their report:  “Home prices, housing demand and home building are very low, but they all seem set to increase. Housing inventories remain too high, but they are on a downward trend. And while the attitudes of both home buyers and home lenders remain very cautious, they should become less so in the years ahead.”

Their bottom line is that just as the peak of the home-buying euphoria five years ago was a time to rent, current data suggest that housing today is a strong buy.

 

REO Sales to Peak Someday

REO sales will peak when the banks decide to peak them.  From HW:

The sale of properties repossessed through foreclosure may not peak until 2013, keeping home prices from a meaningful recovery for some time, analysts estimated Monday.

Nearly half of the more than 552,000 REO properties liquidated in the first half of 2011 were held by private banks. In the years ahead, the government — including the Department of Housing and Urban Development, Fannie Mae and Freddie Mac — will begin taking a majority of the activity.

In 2013, REO sales could reach 1.48 million properties, according to estimates from Bank of America Merrill Lynch analysts, a 10% increase from projected amount in 2012.

“We do not expect to see anywhere near the downward pressure on home prices that we had back in 2008, since the expected percent changes in liquidation volumes are so much smaller,” BofAML analysts said. “But home prices are starting from a negative point, so the implication is that home prices will continue to decline as the foreclosures transition through the pipeline.”

Most of the projected increase will come as the government begins to unload its backlog. The government-sponsored enterprises and HUD, analysts estimate, will liquidate roughly 595,000 properties in 2013 alone.

Total REO liquidations wouldn’t drop below 1 million until 2015, according to BofAML.

The Obama administration began work last month developing new strategies for selling this mass of properties, which may involve renting more of them. The Federal Housing Finance Agency is also working on a way to refinance more underwater borrowers to entice them from walking away.

“I would essentially rent the house back to those who are living in them now,” said Susan Woodward, an economist with Sand Hill Econometrics. “I don’t think it makes a lot of sense to push 4 million people out of their homes when they’re victims of a slower economy they had nothing to do with.”

Other analysts were skeptical of anyone who could predict accurately what the GSEs or Washington would do, especially after the elections in 2012.

“Do they really think that the government under any administration would let 500,000 homes hit the mark and crash prices all over again, six years after the first crash?” said Scott Sambucci, chief analyst at Altos Research.

He said even if unemployment improved by a full percentage point or two — which he said would be a stretch — the market would still struggle to meet such a supply influx.

“It would crash the market, so no, it’ll never happen,” Sambucci said.

Daren Blomquist at RealtyTrac, which monitors foreclosure filings across the country, said the sale of REO is on track to reach 825,000 by the end of 2011.

“We do expect the REOs to pick back up in 2012 as lenders push through some of the foreclosures delayed by processing and paperwork issues,” Blomquist said, adding the inventory needed to be sold could reach well into the millions.

(more…)

Solving the Housing Crisis

While you’ll deserve the three minutes of your life back after watching this NAR video, at least our president says he is looking for answers.  The NAR Expo is in Anaheim next month, so I’m going to take him up on his offer when he is here and deliver recommendations to solve the housing crisis:

WAG

From sddt.com:

The outlook for California’s residential real estate market may be dubious, but there are some bright spots in San Diego County.

Leslie Appleton-Young, California Association of Realtors chief economist and Robert Kleinhenz, CAR deputy economist, delivered their pronouncements during a webcast Tuesday.

Appleton-Young said it is difficult if not impossible to have a strong housing market, when the statewide unemployment rate is higher than 12 percent as it has been for most of the past 18 months — especially since that doesn’t tell the whole story.

“If you include those who have given up and the underemployed, the figure climbs to 16 percent,” Appleton-Young stated.

The good news is “that housing affordability looks really great,” Appleton-Young said.

Appleton-Young noted that the median price of a resold home in the state is slightly less than $300,000 at present, and while that is still twice the national average, it is considerably more affordable than when it was closer to $500,000 at the peak of the market in the middle of the last decade.

San Diego is more affordable, as well. Whereas the percentage of those who could afford a median-priced home here was generally in the teens in the middle of the last decade, the CAR pegged the number at 41 percent at the end of June.

The median price of a resold home was $379,270 in San Diego County in June, after having been closer to $600,000 in the middle of the last decade.

While bank sales and short sales played a significant role here, particularly in eastern Chula Vista, both Appleton-Young and Kleinhenz said that San Diego will be much quicker to return to a normal market than the Inland Empire, which had enormous job losses during the recession.

“San Diego is way ahead of the curve in this regard,” Kleinhenz said.

The CAR reported about 8 percent of the resales in San Diego County were REO or bank-owned sales, and another 19 percent were short sales in August.

The distressed sales are much closer to 50 percent and higher in places, such as the Inland Empire, that are still in a much more painful recovery than here.

Still, there seems to be improvement just about everywhere in the state.

Statewide, Appleton-Young said last month traditional transactions accounted for 58 percent of the sales in August, 19 percent were REO and 22 percent of the state’s residential resale transactions were short sales.

“We’ve seen good improvements in these numbers,” Kleinhenz said, adding there still could be room for a few more REO sales added to the mix in the state, to help bring inventories back up higher than the 2.6-month level at present.

Despite all that has happened during the past three to four years, homes are still in such short supply that the CAR says multiple bids are becoming the rule rather than the exception, regardless of whether the transaction is a traditional, bank-owned or short sale transfer.

Inventory levels may be low, but Kleinhenz said there are plenty of causes for concern at the state level.

For one thing, while default notices were headed downward, there was a bump up in California last month. He worries this may be more than a blip lasting the rest of the year.

As for what all this means for San Diego, Kleinhenz said he expects sales will be modestly higher for the remainder of the year, sales will increase by about 1 percent next year and prices will increase by something less than 2 percent in 2012.

Other issues are expected to be part of the mix. These include the upcoming lowering of Federal Housing Administration loan limits in the beginning of October from $697,500 to $625,500.

While that amount may not seem like a huge reduction, given that it is still more than $600,000, Appleton-Young noted that San Diego remains relatively expensive compared to other areas.

What’s more, much depends on where in the community a person feels he/she needs to live.

“This impact of this reduction will be felt in San Diego,” Appleton-Young said, “but it will be more pronounced along the coast.”

Low Appraisals?

Hat tip to daytrip for sending in this article from Reuters about the alleged appraisal problems.  These people need to buck up and get a life – low appraisals are the realtors fault for not supplying enough good comps to justify the price:

When Sean McGowan signed a contract to buy a New Jersey home in November, he didn’t expect he’d still be living with his parents nearly a year later.

The deal fell through after two appraisals came in tens of thousands of dollars below the contract price, part of a wider trend of differences over property valuations that is compounding the U.S. housing crisis.

“It was very frustrating. We really wanted to move in,” said McGowan, a 31-year-old real estate lawyer.

Many housing experts say low appraisals are yet another headwind for a housing market already suffering from a plunge in prices, high unemployment and tight credit.

(more…)

Razor Auction

From Channel 10:

An architectural marvel that has become one of the most photographed homes in the country is now on the auction block.

razorThe 11,000 square foot home dubbed “The Razor” is hollowed out from the cliffs over Black’s Beach. It boasts floor-to-ceiling glass, polished concrete surfaces and picturesque views.

The home was designed by top architect Wallace Cunningham. It filters light in a way that changes the home’s look depending on the hour.

“To quote Wallace Cunningham, ‘It’s his masterpiece,'” said Hurwitz.

The four-bedroom, six-bath masterpiece also boasts a glass elevator, theater and a two-story guesthouse. The house has been featured in commercials for Calvin Klein and Visa’s Black Card. It has also been showcased in “Architectural Digest.” A commercial for Aston Martin will film later this week.

The home’s owner, software engineer Don Cooksey, spent $34 million in the last decade to build it before he declared bankruptcy and turned it over to a trustee for auction. The bidding will start at $16 million.

The home that has defined luxury now represents another high-priced trend. According to RealtyTrac, million dollar mortgages now make up about 2.3 percent of all foreclosures. That is double the number from 2007, which makes it the fastest growing segment of the foreclosure market.

(psycho-babble alert below – the Razor has been for sale since May, 2008, and been in bankruptcy court for 1+ years)

“What this means is people that had means to sustain an economic downturn are finally being hit,” said Nathan Moeder of The London Group.

However, one owner’s loss is a home buyer’s gain. “I definitely think it’s a steal,” said Hurwitz.

The auction takes place Sept. 28th, and go up in increments of $100,000.

Part of the home, including the kitchen and bathrooms, remain unfinished.

 If you would like more information on the auction, plus photos, visit HurwitzJamesCo.com

The commercials below that feature the house nicely:

The Hits Keep Coming!

From dailyfinance.com:

By the end of the year, financial-services-technology firm Fiserv expects housing prices to stabilize in two-thirds of metropolitan areas, according to the latest analysis of home prices in 380 U.S. markets – based on the Fiserv Case-Shiller Indexes, released Tuesday.  That number will increase to 95% of all metro areas by the first quarter of 2013. 

“Relative to family income levels, the average U.S. home is now only 5% more expensive than it was in 2000”, said David Stiff, Fiserv’s chief economist.

He added that Monday’s S&P downgrade of Fannie Mae and Freddie Mac could hurt consumer confidence, but ‘the resurgent demand for Treasuries could cancel out’ the downgrade.

During the next two years, Fiserv projects that these markets will see the biggest price increases: Tacoma, WA (24.9%), Palm Bay, FL (18.3%), Seattle (10.2%), Tucson (10.2%), and Memphis (10%).

The company also expects prices to grow in areas such as Washington D.C., San Diego, and the San Francisco Bay Area, where strong labor markets and desirable geography will prompt home buyers to get in at low prices. 

Housing Shortage Looming?

Hat tip to Kwaping for sending this along from the U-T:

With a roiling stock market and stagnant housing market, it may seem premature to think about another boom and how to cope with a potential housing shortage in San Diego County.

But that’s what area builders of for-sale and for-rent homes are talking about.

The concern is that supply will lag behind demand and lead to low vacancies and spikes in prices and rents.

Alan Nevin, vice president at MarketPointe Realty Advisors, a consulting company to the industry, says a shortage already exists in apartments, as evidenced by a 4.1 percent vacancy rate recently reported, and a looming shortage in for-sale homes in three to five years once renters with good credit want to buy.

“If we continue to grow 15,000 to 20,000 jobs a year in the private sector, I think we will definitely result in a shortage,” Nevin said. “There will be an imbalance between supply and demand, and that will gradually drag up prices, and most of that increase will come at the bottom end of the market, starter homes.”

The area has been losing jobs in recent years, but SANDAG projects a growing job market over the next few years.

The solution to shortages in the past has been to:

  • Speed up development in master-planned communities;
  • Sprawl out to southern Riverside County, Imperial County and even into Mexico;
  • Liberalize building regulations and lighten up on developer fees to stimulate production.

But Nevin said the conditions have changed and some of these actions aren’t feasible. The result, he fears, is a reduction in homeownership — going from the present about 55 percent to 45 percent. The national rate has tended to be two-thirds owners, one-third renters.

“To me, that’s sad,” he said, but he doesn’t think Generations X or Y will lose the American dream of ownership once they start families and pine for a home of their own.

On the other side of the debate are the demographers at the San Diego Association of Governments. Chief economist Marney Cox said a shortage of for-sale homes is not likely “because prices will be too high to afford.”

He agrees with Nevin that San Diego is headed toward a renter society and points to large urban areas like New York, where less than a third of residents are owners. He figures even fewer than 45 percent of households will be homeowners.

But to handle that shift, he said, more land will have to be zoned for apartments.

“That’s where the change has to occur,” he said.

No one knows what will emerge from the economic storms. SANDAG simply tries to look at the long term and ignore monthly gyrations.

But already, their projections are off-kilter. Their current draft of 2050 population projections indicate that 7,822 dwelling units will be approved by local jurisdictions this year. But for the first six months of the year, only 2,977 have been authorized, according to the Construction Industry Real Estate Board. Even if that pace continues in the second half of the year, which history shows usually doesn’t happen, the 5,954 total would be 23.9 percent below expectations. Next year’s projection of 10,298 homes could only result if there is a sudden burst of job growth and economic recovery.

“When we forecast average growth that’s going to occur,” says SANDAG’s Edward Schaefer, “there’s no way we can hit the cycles. That means sometimes we can be a little low and a little high.”

And, he acknowledges, current economic projections point to job growth that is “pretty slow.”

“I think the housing industry will have plenty of time to react,” he said.

Click on link to read what builders have to say at bottom of article:  LINK

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