April 2012 Resale Data Rodeo

Submitted by Rich Toscano on May 14, 2012 - 6:18pm
Inventory has remained super tight, and as the historical relationship depicted in the following chart would have predicted, prices have been on the rise:



Of course, we are in a seasonally strong time of year which, as the following graph shows, tends to experience some price strength:



However, months of inventory is unusually low this spring:



This suggests that the spring bounce could be more pronounced this year.  As long as supply (as measured by months of inventory) stays this low, all other things staying equal, the pressure on home prices will be to the upside.  Whether inventory stays this low, and whether all other things remain equal, remain to be seen...

More graphs below:



















(category: )

Submitted by sdrealtor on May 14, 2012 - 8:25pm.

All other things have remained equal since the data you are using and inventory has dropped off a cliff. Who knows whats ahead but it could surprise some folks around here

Submitted by sdduuuude on May 15, 2012 - 9:14am.

Spring bounce no surprise. Big Q is - what happens in the Fall ? The Piggs are definitely split on that one:

http://piggington.com/poll_2012_prices_s...

Submitted by sdrealtor on May 15, 2012 - 3:42pm.

IMO What we are looking at is far more significant than a Spring bounce. Spring bounce is more a measure of demand. What we are seeing is a lack of supply which will lead the demand to start piling up on itself. Prices arent really increasing much if at all but the conditions building up put forth a good case for that coming sooner than most expected.

Submitted by CA renter on May 16, 2012 - 1:31am.

sdrealtor wrote:
IMO What we are looking at is far more significant than a Spring bounce. Spring bounce is more a measure of demand. What we are seeing is a lack of supply which will lead the demand to start piling up on itself. Prices arent really increasing much if at all but the conditions building up put forth a good case for that coming sooner than most expected.

One might suggest that "flat" prices when inventory is this low (how does this compare to spring 2004 numbers?) and interest rates are skidding along the bottom...would be a very, very bearish sign.

But that's just me. :)

Submitted by desmond on May 16, 2012 - 7:30am.

Submitted by desmond on December 8, 2011 - 5:59pm.

There is a lot of effort trying to justify a "Flat or Sideways" market. I can't wait to read the justifications in 3-6 months

Submitted by sdrealtor on May 16, 2012 - 8:24pm.

Not bearish at all. Just still working through and digesting the distress that is left out there. The number of REO and short sales hitting the market is dropping like a rock also. Delinquancies are dropping as reported by all the servicers also. Another year perhaps two more and we should be completely out of the woods with the distress. By then Desmond will be out of the woods too and back in civilization :)

BTW Richs graphs show 4 consecutive months of price gains. The graphs are a month in arrears so we will be up to 5 soon enough with no end in sight. Doom away doomsayers.....

Submitted by desmond on May 17, 2012 - 7:44am.

Remember I am older and it is hard to see any gains on those graphs! If prices rise after all the REO's and SS are basically done with that will be a better indicator then just the low end that is on "going out of business" sale.

Submitted by sdrealtor on May 17, 2012 - 8:19am.

News from the field-its not just the low end that has rising prices. And without my reading glasses I am blind as a bat also.

Submitted by sdduuuude on May 17, 2012 - 4:35pm.

desmond wrote:
Submitted by desmond on December 8, 2011 - 5:59pm.

There is a lot of effort trying to justify a "Flat or Sideways" market. I can't wait to read the justifications in 3-6 months

desmond - not sure that's really fair. I don't think anyone is trying to "justify" anything.

sdr is calling like he see's it and he doesn't see weakness.

I see local buyers out there buying and weak inventory, but global economic clouds forming. Not sure what's gonna happen. It looks side-ways as hell to me.

Looking at that graph we have crossed or come very close to that 40% line 6 or 7 times in the last 4 years.

Submitted by sdduuuude on May 17, 2012 - 4:39pm.

Rates are low, but alot of folks probably lost 9% of their down-payment in the market over the last couple of weeks.

Submitted by desmond on May 17, 2012 - 5:33pm.

sdduuuude wrote:
desmond wrote:
Submitted by desmond on December 8, 2011 - 5:59pm.

There is a lot of effort trying to justify a "Flat or Sideways" market. I can't wait to read the justifications in 3-6 months

desmond - not sure that's really fair. I don't think anyone is trying to "justify" anything.

sdr is calling like he see's it and he doesn't see weakness.

I see local buyers out there buying and weak inventory, but global economic clouds forming. Not sure what's gonna happen. It looks side-ways as hell to me.

Looking at that graph we have crossed or come very close to that 40% line 6 or 7 times in the last 4 years.

dude,
That quote of mine was from last December. So I agree not much has happened. I will concede some small price gains in the near future but nothing to get excited about.

Submitted by sdrealtor on May 17, 2012 - 7:54pm.

In my hood you could have gotten a house for 20 to 50k less than you could get the same house today. Would that excite you as a buyer? Would missing out on a small window like that not bother you? It was a 2 to 3 month window that came and went

Submitted by Jazzman on May 17, 2012 - 11:33pm.

As Rich points out the reason for this apparent price resilience is because of low rates and squeezed inventory, which is ipso facto not a recovery. So all things being pretty unequal, how can buyers build equity, refinance, and move up in the next few years when prices are likely to remain flat, or down if inflation bites?

Submitted by AN on May 17, 2012 - 11:53pm.

Jazzman wrote:
As Rich points out the reason for this apparent price resilience is because of low rates and squeezed inventory, which is ipso facto not a recovery. So all things being pretty unequal, how can buyers build equity, refinance, and move up in the next few years when prices are likely to remain flat, or down if inflation bites?

When's the last time inflation bites and price of RE didn't go up? IIRC, the last time inflation bite really hard (70s/80s) price went up BIG. http://www.jparsons.net/housingbubble/. In 1970s, the median was $25k, by 1986, it was at $75k. We're talking about tripling in price after just 16 years. Take that another 4 years and we're talking about 4x 1970's price after just 20 years.

BTW, that was national median price. Here's the census numbers: http://www.census.gov/hhes/www/housing/c.... Take a look at CA nominal price between 1970 and 1990. We're talking about over 8x increase. Between 1970-1980, price went up 3.6 times. That's what happened in the past when inflation bites.

Now, if you say deflation, then I'd agree with you. But if inflation hit, nominal price will most likely increase if history repeats itself. If nominal price increase, people will build equity and be able to refi/move up. They won't be stuck in their house since they can sell it for more than what they bought it for (in another word, equity).

Submitted by CA renter on May 18, 2012 - 4:26am.

AN wrote:
Jazzman wrote:
As Rich points out the reason for this apparent price resilience is because of low rates and squeezed inventory, which is ipso facto not a recovery. So all things being pretty unequal, how can buyers build equity, refinance, and move up in the next few years when prices are likely to remain flat, or down if inflation bites?

When's the last time inflation bites and price of RE didn't go up? IIRC, the last time inflation bite really hard (70s/80s) price went up BIG. http://www.jparsons.net/housingbubble/. In 1970s, the median was $25k, by 1986, it was at $75k. We're talking about tripling in price after just 16 years. Take that another 4 years and we're talking about 4x 1970's price after just 20 years.

BTW, that was national median price. Here's the census numbers: http://www.census.gov/hhes/www/housing/c.... Take a look at CA nominal price between 1970 and 1990. We're talking about over 8x increase. Between 1970-1980, price went up 3.6 times. That's what happened in the past when inflation bites.

Now, if you say deflation, then I'd agree with you. But if inflation hit, nominal price will most likely increase if history repeats itself. If nominal price increase, people will build equity and be able to refi/move up. They won't be stuck in their house since they can sell it for more than what they bought it for (in another word, equity).

Not necessarily. In the 1970s, women were entering the workforce en masse. The purchasing power of households in the initial phases of women entering the workforce grew tremendously...until prices rose to match that purchasing power, which forced more women into the workforce just to keep up with the cost inflation caused by the initial wave of women entering the workforce. It spiraled up at a time when unions were still strong, so unions were able to demand raises to "keep up with inflation." And on and on it went for years.

We also saw the credit markets take off in the 1980s which affected prices. Interest rates were high in the initial phase, and have been on a downward trajectory to this very day. This supports prices of assets that are bought with leverage (housing!!!).

Interest rates are now at the lowest point in many, many decades. Credit expansion grew to such an extreme that it, in the past 10-15 years, it caused some of the greatest asset price/credit bubbles in history. That is in the process of popping and reversing. We are in the deleveraging stage now.

Additionally, wages are going nowhere for most working people as more and more money is siphoned from the workers to a relative handful of capitalists at the top (aided and abetted by vast swaths of ignorant "private sector" workers who don't even comprehend what's going on and who keep fighting against their own interests, I might add).

Because of all this, workers have very little power, and they are losing what little they have very quickly. There will be no large-scale wage increases going forward, IMO. Any "inflation" will be cost inflation, which is apparently the only kind of "good" inflation according to the Fed (they think rising wages are worse!).

If people have to spend more on food, energy, healthcare, retirement savings, etc., there will be less and less left for housing expenses.

I anticipate more "crowding" as more and more people move into the homes of friends and relatives, more blight, higher crime rates, and a lower quality of life for most working people in the US and other developed nations.

This just doesn't look like a set-up for rising housing prices going forward.

Submitted by desmond on May 18, 2012 - 7:58am.

Your right CA, and don't forget that rents are increasing so anybody renting now it is going to be harder saving any money for a down payment. The "crowding" thing can really be a drag if you live across the street or hallway and you have 2,3 4 families or extra roommates living there. I know I can't take that anymore and need more space or I will probably "lose it".

Submitted by AN on May 18, 2012 - 9:22am.

CAR, in essence, what you're saying is, it's different this time. I guess we'll just have to wait and see if it really is different this time.

I have a few questions for you. Do you think women entering the work force add 8x to their buying power between 70-90?

Here's inflation adjusted income for both men and women: http://en.wikipedia.org/wiki/File:Inflat.... Doesn't look like it went up 8x inflation adjusted.
Nominal price went up over 3x between 70 and 80. Between 80 and 90, it only went up a little over 2x. so credit market taking off statement doesn't really explain why 70s saw a larger price spike.

Interest rate went up from ~7.5% to over 17.5% between 1970 and 1980: http://www.mortgagenewsdaily.com/mortgag..., yet price went up over 3x.

Didn't people have to spend more on food, energy, etc between 70-80?

Submitted by sdrealtor on May 18, 2012 - 9:52am.

Blah Blah Blah go back to the ivory towers. CAR you have far too many ifs and buts to live in the real world. I just ran a search in Mira Mesa for homes in Mira Mesa with at least 3Br and 1400 sq ft up to $400K. These were the houses you told me would be in the 200's by now. There are 33 and 29 of those are pending or contingent. Of the 4 actives 1 came on the market today and another has tenants that wont let anyone in to see it. Good luck finding one if you are buyer.

Submitted by JERRY PHILIP on May 18, 2012 - 1:42pm.

I like your way that graphical representation is the best way to understand someone.

Submitted by Jazzman on May 19, 2012 - 12:58am.

AN wrote:
Jazzman wrote:
As Rich points out the reason for this apparent price resilience is because of low rates and squeezed inventory, which is ipso facto not a recovery. So all things being pretty unequal, how can buyers build equity, refinance, and move up in the next few years when prices are likely to remain flat, or down if inflation bites?

When's the last time inflation bites and price of RE didn't go up? IIRC, the last time inflation bite really hard (70s/80s) price went up BIG. http://www.jparsons.net/housingbubble/. In 1970s, the median was $25k, by 1986, it was at $75k. We're talking about tripling in price after just 16 years. Take that another 4 years and we're talking about 4x 1970's price after just 20 years.

BTW, that was national median price. Here's the census numbers: http://www.census.gov/hhes/www/housing/c.... Take a look at CA nominal price between 1970 and 1990. We're talking about over 8x increase. Between 1970-1980, price went up 3.6 times. That's what happened in the past when inflation bites.

Now, if you say deflation, then I'd agree with you. But if inflation hit, nominal price will most likely increase if history repeats itself. If nominal price increase, people will build equity and be able to refi/move up. They won't be stuck in their house since they can sell it for more than what they bought it for (in another word, equity).

You may be right, and I'm not going to make predictions, but as CAR says this time may be different, since mortgage rates and home prices from 2002 to 2006 behaved contrary to expectations, as a result of subprime lending.

Normally, homes are a good hedge against inflation, since the cost of materials and labor goes up pushing up prices. However, inflation is followed by rising interest rates, which impacts home prices. The effect of interest rates on prices are estimated as having a lag of six months to three years. Although bond prices are a good bellwether for mortgage rates, oversupply of MBSs can drive up rates. I don't know if the end of the Feds MBS purchase program effects supply.

Oversupply of homes also will adversely effect home prices, even if inflation is high. That is possibly why we are seeing a stranglehold on supply of REOs right now.

Deflation in respect of home prices is the enemy, and I see all arguments against further falls in prices spurred by the fear of it, as much as by the fundamentals.

Submitted by CA renter on May 19, 2012 - 3:15am.

sdrealtor wrote:
Blah Blah Blah go back to the ivory towers. CAR you have far too many ifs and buts to live in the real world. I just ran a search in Mira Mesa for homes in Mira Mesa with at least 3Br and 1400 sq ft up to $400K. These were the houses you told me would be in the 200's by now. There are 33 and 29 of those are pending or contingent. Of the 4 actives 1 came on the market today and another has tenants that wont let anyone in to see it. Good luck finding one if you are buyer.

I'm not at all familiar with Mira Mesa, so find it difficult to believe I've made any predictions or comments about that area. I make every attempt to debate only about things I know fairly well; Mira Mesa isn't really on my radar.

Nonetheless, there is no doubt that inventory is being manipulated down on the supply side, and demand is being artificially increased with these low interest rates, etc. I don't see the housing market as being anywhere near a "free market," yet even with these manipulations, prices are still relatively flat during a period with extremely low inventory and extremely low interest rates...and it's "Spring Selling Season!!!" on top of it. That's bearish, IMO.

Submitted by bearishgurl on May 19, 2012 - 9:28am.

desmond wrote:
Your right CA, and don't forget that rents are increasing so anybody renting now it is going to be harder saving any money for a down payment. The "crowding" thing can really be a drag if you live across the street or hallway and you have 2,3 4 families or extra roommates living there. I know I can't take that anymore and need more space or I will probably "lose it".

I'm right there with you, desmond. I haven't lived in multifamily housing for several decades but I can't even stand SFR neighbors on the same street who have too many vehicles and are spilling out of their houses and garages.

This is why I don't like some of the "SD beach areas," even where the lots are somewhat generous. Even 1+ mile from the beach, you have a 17 yo "runaway" from Kansas rinsing sand off themselves with your hose, changing clothes and even going to the bathroom behind your weeping bottlebrush to get ready to catch the city bus on the next corner. Not to mention constantly picking up beer and soda bottles and cans and fast food trash in your front yard and having people sift thru your recycle bins when they're out for pickup. It's a zoo around there for 6+ months per year and the houses aren't cheap!

I would just as soon live on 1/4+ AC or even 100+ feet from the next neighbor, regardless if I needed or used the land ... or not. It acts as a buffer and there is no substitute for peace, tranquility and privacy.

Submitted by sdrealtor on May 19, 2012 - 12:13pm.

More BLah Blah Blah. Who said it was ever a truly free market? Its not only being manipulated to the down side but to the upside as well. Good luck getting something to appraise 5% above comps even though there are stacks of buyers at that price.

You had Summerhill dropping into the 200's along with entry level houses in Mira Mesa and Clairemont. If I cared enough to find the time I could prove it. Prices arent flat anymore or for much longer. Just ran a search for 2BR condos in MM. 26 sales in the last 90 days, about 40 pending or contingent and ONE active (that is priced too far above the market right now).

Submitted by CA renter on May 19, 2012 - 5:46pm.

sdrealtor wrote:
More BLah Blah Blah. Who said it was ever a truly free market? Its not only being manipulated to the down side but to the upside as well. Good luck getting something to appraise 5% above comps even though there are stacks of buyers at that price.

You had Summerhill dropping into the 200's along with entry level houses in Mira Mesa and Clairemont. If I cared enough to find the time I could prove it. Prices arent flat anymore or for much longer. Just ran a search for 2BR condos in MM. 26 sales in the last 90 days, about 40 pending or contingent and ONE active (that is priced too far above the market right now).

Right here:

http://piggington.com/shambling_towards_...

Summerhill dropping into the $300K range (per your numbers), and no mention of Mira Mesa on my part. Like I've said, I won't debate/argue about things I'm not familiar with.

And how in the world do you figure inventory is being manipulated to the up-side?

Submitted by sdrealtor on May 20, 2012 - 10:32am.

Prices not inventory. They are manipulating the market to control price drops (withholding inventory, low rates) and price increases (overly tough appraisals)

Submitted by CA renter on May 21, 2012 - 12:55am.

sdrealtor wrote:
Prices not inventory. They are manipulating the market to control price drops (withholding inventory, low rates) and price increases (overly tough appraisals)

The lenders have (hopefully) learned their lesson. If you were loaning out your own money, and you knew prices/inventory/interest rates were manipulated they way they are -- and knowing how it would affect prices if things should ever return to normal -- wouldn't you institute "overly tough appraisals"?

Submitted by sdrealtor on May 21, 2012 - 8:38am.

What I would and right or wrong are irrelevant. The reality is they are artificially keeping prices down in some areas the way the appraisals are being done.

Submitted by CA renter on May 21, 2012 - 6:52pm.

sdrealtor wrote:
What I would and right or wrong are irrelevant. The reality is they are artificially keeping prices down in some areas the way the appraisals are being done.

Nothing artificial about it...they are **finally** making rational decisions WRT collateralization and lending.

Submitted by sdrealtor on May 21, 2012 - 7:17pm.

So how many appraisals have you seen in the last 6 months?

Submitted by bearishgurl on May 21, 2012 - 10:58pm.

I believe many appraisals for "regular sale" properties currently in escrow have in the past year been forced into the toilet by "crooked" SS closings.

As stated on another thread . . .

http://piggington.com/yet_another_funny_...

. . . by SDR and carlsbadworker, SS sellers (and their lender[s]) "don't give a crap." Why should they? The "sellers" won't recover anything from the sale and their credit will take the same or similar "hit" whether they short sale the property (to stave off a trustee's sale) or squat until they are evicted after the inevitable trustee's sale. It's six of one and a half-dozen of the other for them.

see: http://firsttuesdayjournal.com/short-sal...

Their partially-stiffed lender(s) are obviously NOT minding the store (as the REO benes are, when they're commissioning a local "BPO" prior to marketing the property). Likely out-of-county or out-of-state, these obviously ignorant do-nothing defaulted-upon lenders just automatically assume since their "local broker/agent" is stating the property is only worth a particular amount (because that's all their "friend" or "relative" that they're slipping in the back door is willing to pay), then it MUST BE SO! In many, many of these SS transactions, it appears that the lenders who are supposed to be calling the shots are allowing themselves to get ripped off by trusting the "sellers'" local listing brokers/agents to obtain the highest and best price for them!

The truth is, neither the SS "seller" or their lender give a rat's a$$ what their "selling price" will do to the values of the short-sold property's surrounding properties. It is a travesty that these artificially-low closings are being used to pollute the appraisals for the "equity" or "traditional" market in the same neighborhood, IMHO.

The independent "BPOs" obtained by foreclosing benes are more "legitimate" because the brokers performing the BPOs don't yet have the property listed and a willing buyer on the hook ("familiar" to them ... or not) and thus a commission on the line when they severely "lowball" the unsuspecting out-of-sight, out-of-mind lender (as a SS agent does) with phony "sold comps" that aren't really "comps" to the subject "SS property" at all. Thus, the REO lender has a better idea of what their soon-to-be-marketed REO is REALLY worth, ESP if they are willing to spend $$ on cleanup and cosmetic enhancements.

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