Inventory Watch

The inventory ‘shortage’ is limited to the lower-end.  If you can spend more than a million, there are 785 choices today, which accounts for 92% of the houses for sale between La Jolla and Carlsbad.

How the mix has changed:

NSDCC Total Number of Listings Between Jan 1 – Sept 30:

# of Listings Under $1M
# of Listings Over $1M
% over $1M

As rates head back towards 4% and more and more homes list for more than a million, expect increased sluggishness next year as affordability continues to diminish. Unless, or course, you are Lawrence Yun:


Fannie Says

From RISmedia and

Thanks to strengthening in consumer spending and growing policy clarity at the end of 2010, the economy is finally poised to accelerate and sustain above-par, less volatile growth, according to the January 2011 Economic Outlook released by Fannie Mae’s Economics & Mortgage Market Analysis Group. The economy is expected to grow by 3.6% in 2011, compared to an estimated 2.8% in 2010. The group expects some increase in housing activity during 2011, however, a growth-oriented view of housing is not expected until 2012.

“The economy has regained momentum entering 2011 and we see significant improvement in the economy’s ability to grow compared to 2010,” said Fannie Mae Chief Economist Doug Duncan. “We expect a small rise in home sales this year, but significant amounts of supply and shadow inventory of expected foreclosures will continue to hamper a robust housing picture for some time.”


Other comments found at

  • After controlling for age, income, wealth and a number of other factors, regression analysis indicates that married couples are 2.5 times more likely to own than other respondents.
  • Having children is cited as a major reason to buy a home by approximately three quarters (76 percent) of all households.
  • The immigrant population in the U.S. is projected to grow by nearly 130 million people over the next 40 years, according to the U.S. Census Bureau.
  • Sixty-six percent of respondents say they believe that housing is a safe investment – as safe as a savings or money market account.
  • More than half say they believe that owning is a good idea, even if they plan to stay in the home less than three years.
  • Eighty-six percent identify tax benefits as a reason to buy, even though tax benefits are small or non-existent for many homeowners.
  • The substantial majority of homeowners (89 percent), as well as nearly half of renters (44 percent), believe they would be better off owning their homes, given their current financial situations.
  • The housing crisis has had the greatest impact on younger Americans. Since the housing crisis, homeownership for those 25 to 29 years old has declined 10 percent since peak rates, compared with a decline of 5 percent among those 35 to 44 and less for those 45 and older.

“Our research helps us better understand the views of homeowners and renters across specific demographics, ethnicities, and regions so that we can provide the best support possible for the market.”
 – Doug Duncan
Vice President and Chief Economist

SD 2011 Price Forecast: -1.8%

Clear Capital released its monthly Home Data Index™ (HDI) Market Report, reporting a year-over-year national price change in 2010 of -4.1 percent, and expects another -3.7 percent year-over-year change in 2011.

The HDI Market Report provides the most current (through December 2010) and granular analysis of how local markets performed compared to the national trend in home prices, as well as a 12-month forecast of what to expect in 2011.

“In terms of home prices, this past year has certainly been characterized by uncertainty,” said Dr. Alex Villacorta, senior statistician, Clear Capital. “Tax incentives and high levels of distressed sale activity had counter effects on home prices which contributed to the fragility of the markets.”

“Some housing markets are well on their way to recovery, while others are experiencing a renewed downturn reminiscent of the housing crash only two years ago,” added Dr. Villacorta. “Understanding which path a given market is likely to follow is dependent on several key factors, but the two clear drivers are local unemployment rates and the prevalence of distressed homes.”

Clear Capital Home Data Index: National Home Price Trends

(Jan. 2006 – Dec. 2011 Forecast)

National home prices in 2010 posted a -4.1 percent year-over-year price change, after a very turbulent year where prices increased 9.7 percent over a 21 week span (late March to mid August), only to be followed by a -9.4 percent price change over the following 19 weeks (September to December).  Click for larger image:

In 2011, national and regional metrics will still provide general price indicators, but more granular analysis will be required for market participants to truly assess price movements. The wild spikes experienced in 2010 will likely be replaced with more gradual price trends this year. Price forecasts show varying levels of decline across all four regions in 2011, with local markets in the West expected to accumulate the largest overall losses.

California markets typically showed a faster rebound than other hard hit states as six of the 15 markets managed price gains (Riverside, San Diego, Los Angeles, San Jose, San Francisco, and Fresno). The only major California market to decline was Sacramento (-1.4 percent price change).

Year-Over-Year Stats

General 2010 stats from the San Diego MLS:

Total listings:

2009 – 70,744

2010 – 73,437  (+4%)

The additional were probably all re-lists.

Total Sales, Detached and Attached:

2009 = 35,240

2010 = 32,727  (-7%)

Lower sales reflect the difficulty of finding good deals – most buyers would rather wait.

Cost-per-sf, Days-on-market:

2009 – $223/sf, 63 DOM

2010 = $238/sf, 70 DOM  (+7% on pricing)

The cost-per-sf metric is going to fluctuate 5% or so in either direction most years from now on.

Detached solds only:

2009 – 22,571, $229/sf, 61 DOM

2010 – 20,641, $247/sf, 66 DOM (-9% sales, +8% on pricing)

Part of the squeeze for quality – SFRs better than condos.

North San Diego County Coastal, Detached and Attached Solds:

2009 – 3,632 sales, $371/sf,  74 DOM

2010 – 3,861 sales, $363/sf, 72 DOM (+6% sales, -2% pricing)

Remarkable stability for a higher-end area.

North San Diego County Coastal, Detached Solds, by price range:

Price Range 2009 2010
0-$800,000 1,044 sales, $304/sf 1,106 sales, $312/sf
801-$1.2M 653 sales, $354/sf 717 sales, $364/sf
$1.2M+ 541 sales, $616/sf 623 sales, $527/sf

All but one category improved this year, with total sales up 9%.

J. Mann, flipper

2009 – 292 sales, $214/sf

2010 – 356 sales, $215/sf

They need to make a movie about this operation.

San Diego SFR Foreclosures (trustee sales from

2009 – 8,732 (6,883 REOs/1,849 third-party buys)

2010 – 7,441 (5,132 REOs/2,309 third-party buys)

15% drop-off, could use a surge just to catch up.

NSDCC SFR Foreclosures (trustee sales)

2009 – 437 (365/72)

2010 – 450 (316/134)

There were only 196 sold REO listings on the MLS in 2010, so there are some NSDCC bank-owneds laying around somewhere. But 100 or so properties in process aren’t enough to tilt the scale. There are some REO listing agents who aren’t marking their listings as REOs on the MLS too.

Highest Sale:

2009 – $18,150,000 for 1900 Spindrift, La Jolla:

2010 – $10,000,000 for 9882 La Jolla Farms Rd., La Jolla:

More Doomsday

Excerpt from Peter Schiff’s article seen in the WSJ:

How has the market found the strength to stop its descent? No one is making the case that fundamentals have improved. Instead, there is widespread agreement that government intervention stopped the free fall. The home buyer’s tax credit, record low interest rates, government mortgage-assistance programs, and the increased presence of Fannie Mae, Freddie Mac and the Federal Housing Administration in the mortgage-buying business have, for now, put something of a floor under house prices. Without these artificial props, prices would have likely continued to fall.

Where would prices go if these props were removed? Given the current conditions in the real-estate market, with bloated inventories, 9.8% unemployment, a dysfunctional mortgage industry and shattered illusions of real-estate riches, does it makes sense that prices should simply fall back to the trend line? I would argue that they should overshoot on the downside.

With a bleak economic prospect stretching far out into the future, I feel that a 10% dip below the 100-year trend line is a reasonable expectation within the next five years, particularly if mortgage rates rise to more typical levels of 6%. That would put the index at 114.02, or prices 28.3% below where we are now. Even a 5% dip would put us at 120.36, or 24.32% below current prices. If rates stay low, price dips may be less severe, but inflation will be higher.

From my perspective, homes are still overvalued not just because of these long-term price trends, but from a sober analysis of the current economy. The country is overly indebted, savings-depleted and underemployed. Without government guarantees no private lenders would be active in the mortgage market, and without ridiculously low interest rates from the Federal Reserve any available credit would cost home buyers much more. These are not conditions that inspire confidence for a recovery in prices.

In trying to maintain artificial prices, government policies are keeping new buyers from entering the market, exposing taxpayers to untold trillions in liabilities and delaying a real recovery. We should recognize this reality and not pin our hopes on a return to price normalcy that never was that normal to begin with.


Robert Shiller got in on the action too:

Summary of Bears’ Case

 By Ash Bennington, NetNet writer, special to

According to economist Nouriel Roubini, the housing market is in a double dip.  And negative Case-Shiller Home Price numbers out today only confirm that unpleasant truth.

“It’s pretty clear the housing market has already double dipped,” says Roubini. “And the rate of decline is stronger than in previous months,” he said of the new housing data.

Aside from below trend economic growth, there are two factors specific to the housing market that are putting downward pressure on home prices.

The first factor is the expiration of federal home buyer tax credits for first time home buyers.

“If you look at the data, Case Shiller has been falling every month since the tax credit expired in May. Everyone who wanted to buy a home did so by April,” Roubini said.

“That tax credit stole demand from the future and its expiration led to another 30% fall in home sales, pushing Case & Shiller lower for the last few months,” Roubini wrote in a text message earlier this morning.

The second factor putting downward pressure on home prices is the ongoing chaos with mortgage documentation, and the consequent suspension by banks of mortgage foreclosure proceedings—which has actually worsened the underlying problems in the housing market.

“There has been an effective moratorium on foreclosure,” said Roubini.


NSDCC Sales and Pricing

The detached sales in North San Diego County Coastal have been holding up pretty well in 4Q10.

The 4Q09 sales were somewhat enhanced by the tax credit, yet the last two months aren’t too far behind.  This quarter should only end up about 10% lower than the 4Q09 total of 642 sales.

In the peak 2005-2007 era, the pricing for most months was range-bound between $450 to $500/sf, so we’re about 20-25% lower now.  It looks pretty steady too –  we would need a surge of well-priced inventory to create frenzy, and push pricing higher:

I tacked on 10% to December, 2010’s total to adjust for tomorrow’s closings, and late-reporters.  Currently there are 1,261 active listings whose list prices are averaging $619/sf, and have been on the market for an average of 131 days.

Manhattan’s 2010 – Sound Familar?

Hat tip to the Coronado Kid for sending this 2010 summary from The Apple, Peeled:

BUYERS – Top 7 Lessons of 2010:

1.     Bears will always be bears: Many bearish voices in 2009 were calling for the NY Real Estate market to fall off a cliff … at the very least for prices to drop another 20%.  In 2010, feverish discussions continued on StreetEasy and Urban Digs, making the case that the downturn seen to date was only the beginning.  And yet few could argue that things have not at least stabilized, if not improved, as compared to 2009 – some may even call it having formed a bottom.

2.     Deep discounts are so 2009: No longer could buyers negotiate 10-15% off asking prices.  Buyers felt a sense of disbelief in having to often pay full ask, sometimes even engaging in bidding wars in what they thought was a buyer’s market.  This was the result of too many would-be-buyers chasing too few properties.  Good inventory was hard to find in 2010.

3.     A deal is not a deal until a signed contract’s in place:  Although a very questionable strategy, to be sure, this year was the year of multiple contracts being sent out by sellers to hedge their bets after hearing of so many deals that fell apart due to financing issues.

4.     Parallel offers help avoid attachment: Frustration rose for many buyers who had accepted offers on the table, only to then find out the seller reneged and sold the apartment to someone else.  In turn, buyers began negotiating in parallel to avoid putting all of their eggs in one basket.

5.     New developments come with their own headaches: It used to be that buying new meant buying better quality than an older building would offer, saving you money by not having to fix the apartment’s infrastructure or renovate its looks.  Yet many new buildings drew a flurry of lawsuits due to shoddy construction and cut corners.  It paid to do your own due diligence about the developer and the building’s reputation.

6.     Easy money is dead: Getting qualified for a loan became the biggest obstacle to getting a deal done in 2010.  Buyers had to have great credit, great debt-to-income ratios and click their heels three times while repeating “there’s no place like home” to get a mortgage.  (Even then, signing a contract without a mortgage contingency was akin so Russian Roulette.) If they looked to get a Jumbo mortgage, then they had to throw in a sacrifice to the mortgage gods to make the mortgage go through.

7.     Technology rules (to a point): So many buyers leveraged the internet and its real estate advances this year.  They became expert at finding the right properties, researching them, comparing them, and using the information at their fingertips to fuel their negotiation strategies.  The frustration kicked in when sellers budged no more and buyers realized that real estate is not such an efficient market, neither on the buy nor sell side of the equation.

SELLERS – Top 7 Lessons of 2010

1.  New York is not Miami: We’ve all heard it so many times, perhaps it’s even escaped your own lips at some point: “But New York is different!”.  The country underwent the most significant downturn in our generation, middle-America is suffering, housing prices are down north of 50% in some areas of the country and unemployment hovers around the double digit barrier … and the worst that the NY Real Estate market could do was down 20-25% on average from its 2006 peak?  Yes, the higher the pricepoint, the more significant the down-turn, but … one must admit, it’s still damn impressive!

2.  Renovations sell, fixer uppers don’t:  2010 was the year of the first-time home buyer and of the turn-key purchaser.  This means that newly renovated properties sold faster than ever before, particularly now that buyers no longer had access to home equity lines of credit to use towards fixing an older property.  Those who chose to buy wanted to a prêt-a-vivre home, ready to live in from the start.

3.  Proper pricing is so now:  Sellers who tried to “test the market”, hoping for that one special buyer who would happen to give them their high asking price saw themselves on the market for a loooooong time.  Then the enemy became time on market, with buyers neglecting price-improved properties out of the skepticism that comes along considering a stale listing.

4.  Renting is a real option:  With the rental market making a real comeback this year, many sellers on the fence of parting with their properties found it lucrative to rent.  Inventory was slim and having a tenant in place for 1-2 years to ride out the storm paid off.

5.  Cash is still king:  With the turbulence felt in the credit markets, sellers had to contend with the very real tradeoff between accepting an ok all-cash offer and a higher, mortgage contingent one.  Many chose cash, over bearing the risk of the deal falling through after months of buyers slugging it out with their bank.

6.  Appraisals matter:  Just because you were lucky enough to get the price you wanted for your apartment, it didn’t mean the negotiations were done.  Appraisals became the Achilles’ heel of the industry as they seemed to consistently come in below the contract-signed price, throwing a wrench in the whole process.  Appraisals became commoditized and many began criticizing the process, now driven by volume versus quality and experience.

7.  Your building has its own credit rating:  Many sellers felt stranded by the inability of their buildings to get approved for financing, an issue that often popped up at the tail end of the entire process.  After going through the motions of putting the property up for sale, negotiating the price, and moving towards a close, many owners in land-lease buildings, or those with too great a concentration of rental units or owners found themselves having to rationalize staying in their home.

2009 – Thank You!

I am eagerly anticipating the new year because of the challenge of trying to beat 2009, the greatest year a guy could have!

On February 25, 2009, I spent the afternoon with Peter Y. Hong from the L.A. Times – it would be a day that changed my life forever.  Here’s how it started:

Peter somehow crafted our conversation into a story that was published April 2nd on the front page of the newspaper, right under the photo of the Obamas meeting Queen Elizabeth II for the first time. 

By 7 am my phone was ringing off the hook, and for months I received well-wishes from people all around the world, from Japan to England.

One of the first callers was Matt Stuart, from ABC News Nightline, which catalputed my 15 minutes of fame into warp speed.  I spent a day and a half with him and Vicki Mabrey, and on April 16th, this aired on national television:


Thank you Peter, Matt, and Vicki!!

With the generous support of blog readers here, I was determined to stay in the game, and be true to what got me here – bringing transparency to the pertinent facts about our local real estate market.  Today, I am fulfilled that together we have done just that!

I am eternally grateful for the support from:

The folks who have become clients as a result of what they have seen here!

The well-wishers!

Readers who comment – thank you for adding depth and breadth to the experience.

Readers who don’t comment – I know you are there, thanks for being here!

The 14 people of Klinge Realty.

My family and friends.

Donna, my dearly-beloved wife, and our two kids – I love my life!

I didn’t run these numbers until this morning, and had to rub my eyes for a minute in disbelief – I am humbled to report:

2009 statistics:

Bubbleinfo posts: 671 

Unique visitors:  167,906

Visits:  738,965

Pageviews:  1,376,283

Avg. time on site:  3:02

Youtube videos:  252

Youtube channel views:  818,678

The numbers are mind-boggling – thank you everyone for your participation!

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