San Diego Housing Bubble News and Analysis

Evisceration....

1) Can't rent out that investment property to cover your costs
2) Can't sell because the homebuilder is offering your exact same model for 30% less (see Sacramento)
3) Can't afford carrying costs
4) Fall behind on mortgage for 2nd or 3rd property...perhaps lose the house
5) Screw up your credit so no more REFIs, no more purchases for a LONG time
6) Your I/O negative amortizing loan resets and you start to lose your PRIMARY residence
7) Your Hummer H2 breaks down and you can't afford to fix it.
8) You learn that there is no such thing as a secondary market for a USED Hummer H2 so you can't sell it.
9) Gas goes up 1-penny per gallon and pushes you completely over the cliff as you couldn't afford any of this S*%t to begin with...
10) Finally, they come and take that McMansion off your hands (they=the bank w/his buddy the sheriff)
11) From here on out the only thing you (the former investor) will be "camping out" for is government cheese.

Since I feel somewhat sorry for your gullibility...feel free to "dive my dumpster"...trash day is Wednesday.

Evisceration....

1) Can't rent out that investment property to cover your costs
2) Can't sell because the homebuilder is offering your exact same model for 30% less (see Sacramento)
3) Can't afford carrying costs
4) Fall behind on mortgage for 2nd or 3rd property...perhaps lose the house
5) Screw up your credit so no more REFIs, no more purchases for a LONG time
6) Your I/O negative amortizing loan resets and you start to lose your PRIMARY residence
7) Your Hummer H2 breaks down and you can't afford to fix it.
8) You learn that there is no such thing as a secondary market for a USED Hummer H2 so you can't sell it.
9) Gas goes up 1-penny per gallon and pushes you completely over the cliff as you couldn't afford any of this S*%t to begin with...
10) Finally, they come and take that McMansion off your hands (they=the bank w/his buddy the sheriff)
11) From here on out the only thing you (the former investor) will be "camping out" for is government cheese.

Since I feel somewhat sorry for your gullibility...feel free to "dive my dumpster"...trash day is Wednesday.

Not anymore...

17,126 as of 2/24.

What? Just 100 more in 3 days? Common San Diegans you can do better than that.

They must have heard you cheering because there have been 50 homes added since TEN MINUTES AGO (17,176 as of 6:45 p.m.)

Thank Zod for "SpringHopeMania" to the rescue! Heck I was starting to think that maybe trees didn't grow to the sky. Not!

Let the bleeding commence...

Erparadise

When I go to MLS Wizard I get 19,066. I've been following this every few days since January 1st and the number has been increasing by about 200-250/week every week through Jan & Feb.

I'm not sure the difference between where the 17,024 and the 19,066 comes from.
Check out the link @

http://isistage-websql.istrategy.com/mlswizardnet/(2bvp5lrpoipvkt454urts545)/MlsSearchRegion.aspx

San Diego County

There are currently 19066 listings in San Diego County

1. North County Coastal (2986)
2. North County Inland (6092)
3. Central San Diego Coastal (1288)
4. Central San Diego (3853)
5. South Bay (2142)
6. East County (2705)

17,450 ish today - it's really starting to crank up fast this week.

This is going to be very very ugly indeed - and it's going to hurt a lot of young couples who fell for the BS badly - I'm just glad I was smart enough to stay out.

Supply is going up about 300 this week. I'm still waiting for the day supply goes pass 19000 and the y-o-y to turn negative. Those are the two big mile stone for me.

We've been hearing that the sellers are ready for the spring take-off. The question is, are the buyers ready, too?

Why is 19k the magic number? I have heard that it was the highpoint of inventory last bust, but why is that significant? As with most things piggington related, shouldn't we try to arrive at a number of listings which has some underlying significance? Say the number at which 2% or 5% will be in foreclosure? I ask this because I don't think that the number of listings is particularly important. Its what it implies that is important and thats what we should be trying to gauge, seller "motivation."

Josh

19K is a landmark. It's the highest inventory we had, and occurred during the last bust in July 1995, when layoffs and a recession caused thousands of workers to leave San Diego.

Since rising inventory increases DOM and decreases price, the inventory is a leading indicator of a price decline.

I guess the 19K number is a past glass ceiling, and surpassing it implies we are in another bust.

Once we pass 19K, the media headlines will announce this "Inventory at highest level since 1995 signals housing bust", decreasing consumer confidence. And that will lead to even lower sales. The media reports caused by the 19K figure should depress seller motivation, the a factor which you noted.

I don't recall if Pigginton mentioned the 19K number. It has been done by others, on RealtyTimes and the Voice of San Diego, and perhaps they can explain why they consider it a metric worth writing about

I wasn't implying that you had mentioned it, only that we shouldn't look at the number in isolation. "All things piggington" was really meant to mean, hey lets crunch some numbers. You mentioned what I was thinking. 19k was the highpoint last time, but we had less people less houses etc. Even just doing a straight extraction of listings/vs population would drive that number up.

Josh

Certainly the quadruple in inventory since early 2004 should be of some significance. Or how about more than a double since same time frame 2005? I don't think the NUMBER of homes for sale is of so much significance, rather it is the arrival of something that wasn't suppose to arrive....decreasing sales volume along with increasing prices (indicative of a market top) which leads to another downswing in sale prices. This will effectively kill all speculative demand and topple the first of MANY dominos yet to fall here. Bye bye RE sector/RE finance jobs (even if we just go flat) and bye bye "goldilocks" local economy, hello death spiral.

Cock-a-doodle-doo

Hey teatsonabull,

You sound happy that a lot of lives are going to be ruined. This will be very painful for a lot of people. The only bright side that I can see (other than selfish gain) is that people will learn a valuable lesson. Hopefully we will not see another bubble like this for a while (wishful thinking).

Bubbles are bad for economies. The irrational volitility they create make it very difficult for a prudent intelligent investor to make sound decisions.

I hope a lot of the people who get "cut" by this falling knife, are young enough to recover and smart enough to apply the lessons learned.

Let's get back to viewing a home as "shelter" instead of an investment.

Rock

My perspective is that people who have been extraordinarily greedy deserve to be extraordinarily punished. When someone pulls out home equity and goes to the desert to buy that "investment" home, who are they hoping to capitalize on? The same "young" people you mention in your e-mail. I want the same thing you do...I want those poor innocent young to be able to buy a house for shelter, rather than an investment. I recognize that there will be some lives ruined...it certainly won't be my fault or yours when that happens. There WILL be some people responsible, however, who will NOT recieve any punishment for their sins...the "economists" of the RE groups, the PERMA-BULLS, and, yes, the lowly RE agents and mortgage brokers who have NO-ONE to answer to, even while providing "investment advice".

Happy...I am not...nor will I be. This bubble should never have been allowed to develop, nor should have NASDAQ 5300+...by getting involved in a grass roots way, I feel we can alert some folks who would "march over the edge" forever oblivious to what they are doing.

Watch out for those canes over there...I understand they can be a bitch.

Cock-a-doodle-doo

Erparadise

Where does this 17,024 number come from?

When I check the S.D. MLS I get the following as of today:

San Diego County

Please Select a District
There are currently 19385 listings in San Diego County

1. North County Coastal (2988)
2. North County Inland (6204)
3. Central San Diego Coastal (1310)
4. Central San Diego (3979)
5. South Bay (2166)
6. East County (2738)

The number I'm seeing as of today (3/5/06) is 19,385

erparadise

Adjusted for population growth, I recall someone on a blog estimate that about 23,000 of today's inventory would equal the peak of 19k in 1996.

I would be interested to know what inventory was in 1990 or thereabouts, when the market here in SD peaked and began it's downward correction, and then compare that to when inventory peaked in 1996 to see what % change we had. Rich, do you happen to have those numbers?

I think we will eventually end up blowing that 19,000 number away. I wouldn't be surprised to see 35k to 40k in the next few years. There are just too many people who I think are going to lose their homes when their loans adjust and when job losses occur due to fallout from the correction; we've just barely begun to see that. Phoenix, with a population slightly higher than San Diego, has gone over 37,000 of inventory. I believe they've had much more speculation than us, however. But have they had as much creative lending as we've had here? If they can get to 37k inventory, why not us?

That number probably came from ZipRealty.

Josh

erparadise - do you have MLS access, or are you using realtor.com or another MLS-sponsored site? Why are ziprealty's numbers lower?

Some sites do not show all the listings. Some only show the listings in certain towns in the county. There are currently 19,491 listings shown on parkplace.com today March 7. The listings are rising fast.

From SDHomePix.com;

There are currently 19561 listings in San Diego County

1. North County Coastal (3000)
2. North County Inland (6278)
3. Central San Diego Coastal (1338)
4. Central San Diego (4002)
5. South Bay (2216)
6. East County (2727)

there were about 2.5 million people in san diego county in 1995. today there are around 3.1 million (or thereabouts), so the population has increased by around 20% over the last decade, most of that coming between 1997 and 2002. so, if we adjust the 19,000 inventory figure upward by 20% we get to around 23,000 as a "population-adjusted" high water mark. for what it's worth.

on a side note, everyone here is aware of all the reasons we have a bubble and the fact that it will eventually burst. math and common sense rarely lie... over the long term. but, let's put aside the "logical" arguments for the moment. the reason i've known we've been in a bubble for quite some time (aside from all of the quantitative arguments) is simple: too many dumb people have been making too much money. it's not unlike the stock daytrading phenomenon of 1998-2000. a bunch of dumb people were making too much money and 90% of them ultimately ended up losing their asses. that's how markets work. rarely do idiots (or perhaps i should say the "less informed") get to keep their gains.

i'd imagine that 90% of the real estate speculators, etc. will ultimately lose their asses in the next real estate correction; most don't know when to stop, after all. they'll keep leveraging up until it all goes *poof*, kind of like most gamblers in vegas. of the other 10%, about half are probably "skilled" and the other half are lucky.

the role of markets is to make people bullish at the top, bearish at the bottom and confused in between. that's just the way markets work.

Can anyone hazard an estimate of monthly income spent on mortgages? I know this is a little vague but I was just thinking I hadn't heard anything about the affects of increased spending on mortgages on the economy.
Everyone seems to agree there will be a general increase in mortgage payments when ARMs begin resetting. Assuming that there AREN'T massive forclosures and bankruptcies and people ARE able to meet there payments. To what degree would this impact the economy considering these people will be consuming less?

17,648 as of 3/10 but who is counting anymore. The important news is that February sales are down from January and off 25% from February 05. In addition, sales price to list price ratio fell to 93%.

With at least two more rate hikes to go, we have inventory at the highest level since 98 (by far) and sales at the lowest level since 98. It doesn't look good for the bubble.

Source of sales data: http://rereport.com