Cheap Homes Selling Faster, But Not Anything Like Before

Submitted by Rich Toscano on September 2, 2009 - 12:06pm

For a while I've been tracking a set of statistics that highlighted the great disparity between homes sales in higher-priced and lower-priced areas of San Diego. What we've been seeing for quite some time now is that compared to the expensive areas, the cheap areas had fallen a lot more in price but had experienced drastically higher sales volume on a year-over-year basis.

As of July, this disparity was still in place to some extent -- but the gap had closed substantially.

continue reading at voiceofsandiego.org

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Submitted by carlsbadworker on September 2, 2009 - 12:32pm.

Isn't it because there's not much left for sale in the least expensive areas?

Submitted by ucodegen on September 2, 2009 - 1:29pm.

There is a moderate amount of high end inventory.. but the people don't want to take the hair cut.

There is nothing that price will fix...

Submitted by SD Realtor on September 2, 2009 - 1:41pm.

One thing I am wondering about also, is if you are starting to run into the point where the lower end volume was already picking up. You see what I am saying? That is, I believe we started to see the lower end volume moving up in 2008, so when you run yoy stats for 08 vs 07 you see dramatic numbers. However when you run 09 vs 08 you will not see a big delta at some point... I am just wondering out loud.

Submitted by JimB on September 2, 2009 - 2:48pm.

I suspect, however faint, some of the lack of buying in the upper areas is because rich people are aware CA's future is very uncertain. SD has such a long tail, using median price is somewhat useless.

If you had the means to support a 4 million dollar home and all the BS of life that goes along with that, would you do this in CA?

I don't think I would. This state has an awful reputation right now to the rest of the nation.

Submitted by sdrealtor on September 2, 2009 - 3:43pm.

Agree with SD R. The low end sales volume has been increasing for a while and you can only have greater than 50% sales volume increases once before the denominator gets too large for them to recurr.

Submitted by UCGal on September 2, 2009 - 3:56pm.

To state the obvious question - would there be a 21% increase in sales on the high end if there was a corresponding 24% price drop.

The higher end isn't selling because the prices aren't dropping. Even at the high end if it's priced aggressively, there are bidding wars... but very few properties are priced aggressively.

Submitted by Rich Toscano on September 2, 2009 - 6:45pm.

To both sdr's... I agree completely that this has a lot to do with the yoy comparisons getting "harder" on the low end sales (ie comparing to a progressively higher year-ago number). But that's kind of the point... things are stabilizing on a yoy basis such that we aren't having this vast disparity between growth in low end sales and that of high end sales.

rich

Submitted by CA renter on September 3, 2009 - 1:07am.

Also agree with SDR/sdr.

Interestingly, it looks like prices are down for the lower end from April to July of 2009; while the median price of the higher end is up slightly during that same period.

It does appear as though there's more activity in the mid to higher-mid homes ($550K-$850K) homes, too -- just anecdotally, from what I'm seeing on the street. With the slight drop in prices in the better areas, and the ultra-low interest rates, maybe more people are willing to try buying in this segment instead of the competing in the wild bidding wars on the lower end. Just thinking out loud.

Submitted by moneymaker on September 3, 2009 - 2:51am.

I say it's a tough nut to analyze. On the high end the only price that matters is the sellling price. Houses tend to be more unique, how many times can you sell the same house in a year? Do the numbers come out the same if you use ppsf, if so then I would lend credence.It makes sense, I am just a little surprised that the high end homes are selling right now,those with cash should wait.

Submitted by lubenthrust on September 3, 2009 - 10:18am.

I'd like to see what the zip code breakdown is, but accessing the link in the article (http://www.voiceofsandiego.org/storyart/...) gives me an "Element not valid" message.

Server problem or incorrect URL?

Submitted by Rich Toscano on September 3, 2009 - 10:44am.

Thanks, the link in the article is fixed. This is the correct link:

http://www.voiceofsandiego.org/storyart/...

Rich

Submitted by justinmac on September 3, 2009 - 5:55pm.

Hey Rich,

Here's a comment that Matt Battiata made to KPBS today:

"...Well, you know, there are – what we've seen in the last few months is that there's been news come – that's come out in the media that, you know, for a particular month the median price has tracked up by a percentage point or – and so forth, which is new because it hasn't happened over the last handful of years. But, unfortunately, there's a lot of false, you know, I'd call those false positives. Just because the median price bounce – you know, might in – actually go up by one or two percentage points in a given month, unfortunately is not cause to say, you know, the bad – you know, the good times are back and that the residential market has recovered. The reality is in San Diego County, we've dropped, really, the reality is, about 50% because you have to remember that when the bank takes back a property as a foreclosure sale, a trustee sale at the courthouse, typically what happens is the bank forecloses on your home, you owed $700,000.00 on it. They start the bidding, not always but usually, at $700,000.00 and no one's going to bid $700,000.00 on your house because it's not worth anywhere near that. And so what happens is, no one bids on it, the bank takes it back. That becomes what we call an REO, a real estate owned by the bank. The County Recorder's office records that as a sale at $700,000.00..."

Now I had NO idea that these figures may be at play in "boosting" the local median...Can you verify?

Yes...Here's the second part of Battiata's (who's business IS real estate) response which seems to indicate that these figures may be at work in boosting sales numbers as well...

"...Now, obviously, that's the exact opposite of a sale, number one, and it sure as heck is not a sale at $700,000.00. So when DataQuick pulls the numbers, they factor that $700,000.00 sale into the median price. So when you have lots and lots of foreclosures, guess what? It looks like there were more sales than there were in previous months and it also looks like the median price has gone up a little bit because those numbers are not accurate. So when we have – You know, we've had several – We've had more than – We've had three or four moratoriums that have gone into effect, foreclosure moratoriums. There's a huge, huge, number of residential foreclosures that are still coming down the pike. They're going to be around in San Diego County until, I would say, 2013. There's also a huge number of short sales that are coming because there's a lot of people who bought at the peak of the market. There's also a lot of people who refinanced and pulled their equity out at the peak of the market. So for – until the values in San Diego come back up to 2005 and 2006 levels, which is going to be, unfortunately, quite a while, anyone who needs to sell, they're being – their job is getting transferred, they're moving out of the city, they're getting divorced, they lost their job, whatever the reason is, they're going to be a short sale and short sales and foreclosures put a lot of downward pressure on real estate values. So I would say at the bottom of the market, yes, we're – we are kind of bouncing around the bottom, we're getting close to the bottom. The upper end, you know, we've got more to go, unfortunately. But the reality is, you know, we're not at the bottom. It doesn't mean that it's not a good time for a first time buyer to go out and buy because there's a lot of positive factors as well. Interest rates are low. You know, it's much more affordable, etcetera. But it's really just not accurate. I don't see how anyone can look at this market and look at all the data and say, you know, like – like I think the Association of Realtors said recently that, gee whiz, we're at the bottom and we're going to start rocketing up. It's just not accurate..."

Thanks in advance, Rich.

Submitted by Rich Toscano on September 3, 2009 - 6:08pm.

No, foreclosure sales wherein the bank takes back the house aren't boosting the median. They aren't counted in the data.

Rich

Submitted by SD Realtor on September 3, 2009 - 9:22pm.

I love Battiata... the more short sale listings he gets, the more foreclosures we see. Check out his statistics for how many successful closings he has verses expirations and cancelleds.

Submitted by 34f3f3f on September 4, 2009 - 1:12am.

As a buying member of the public, and one that is looking to buy in the 'upper' price range, my expectations of price declines has probably increased greater than the actual declines. That is a side effect of protracted waiting. I see very little choice, and asking prices that in my view still don't reflect good value. Now I could wait for ever, or I might just move on. I may not be typical, but from reading other blogs/forums, I know I'm not unique.

Submitted by FormerSanDiegan on September 4, 2009 - 8:14am.

Regarding the Matt Battiata comments ...

He may be right on other factors, but I stopped reading at the point where he said foreclosure actions in which the bank takes back the property were counted as sales in DataQuick.

I'm not a real estate professional and even I know that.

Submitted by temeculaguy on September 4, 2009 - 9:01am.

Once someone says something that is inaccurate and it is about a hard fact and not an opinion, I can't help but ignore everything else they say, nor do I ever want to see them quoted again. Like formersandiegan, I'm also not a r/e professional and if I know more than a professional, then they no longer will be considerd one.

regarding the reference to 2013, you just can't plan that far out right now, you can't discount the very real threat of inflation. If the moratoriams and other interventians fail to achieve the desired effect by the end of 2010, inflation wont be a unintended consequence, it will actually be the strategy. I still believe that fence sitters have until spring to get the price drops they are looking for, it may not shoot up after that but it will done going down. One of two things will happen, the economy will turn around (not a full recovery but head in the right direction) or they throw in the towel and cause inflation as a way to decrease debt for both the government and homeowners (thus saving the financials as well). The inflation button is like a fire alarm, it clearly says "do not break glass except for emergencies" on the button, but if we start on a another leg down, they will break the glass and hit the button.

Submitted by Nor-LA-SD-guy on September 4, 2009 - 9:07am.

I am with TG on this but ...

I know so many people waiting for this proposed/wish-for fall winter housing sell-off I think you guy’s may end up a little disappointed (but who knows maybe).

In my opinion that would probably be the last best chance for a bottom deal (at least in Temecula valley area and surrounds).

After that I think you may have to pay a bit more in TV but I don’t see 2005 prices anytime soon either.

Submitted by Nor-LA-SD-guy on September 4, 2009 - 9:21am.

carlsbadworker wrote:
Isn't it because there's not much left for sale in the least expensive areas?

CBW may have a point here as well, A lot of the good ones at the low end are already gone (the Sub-Prime thing being about exhausted already).

There are still a lot of trashed or not so nice ones about however.

Submitted by SD Realtor on September 4, 2009 - 11:18am.

As far as Temecula goes I think TG nailed it so well there, it is ridiculous. I am hunting for an investor up there and it has bounced there already in a non trivial amount. Also agreed guys like TG and FSD and others are far more competent then many professionals.

Submitted by temeculaguy on September 4, 2009 - 2:18pm.

I wasn't really talking about temecula, it was a macro statement, but my screen name always seems give the impression I am making a micro analysis.

SDR, if you want to send me a private message for input on where to direct your investor, I have a lot of tips/insight into the rental investments here, I've been tight lipped about it for personal/greed reasons but I'm not ready to make that decision just yet and they don't last more than a few days/hours so it wouldn't hurt to steer you into the few cherry patches I've found with sub 100x rent multipliers.

regarding my area, I am noticing an uptick in trustee sale notices but a stable number of nods, not sure how many are just being sold short or are being pulled back since I don't track that, but it does seem that banks are putting down the hammer more lately. Since those usually come to market a month or two later, there may be some opportunities this winter.

Submitted by zerospeed on September 5, 2009 - 8:55am.

Tg,

Thanks for your input. Some food for thought. Unfortunately, I don't think it will be this simple. Inflation is a tricky beast as not everything inflates equally. For one thing, higher inflation will drive interest rates up. And once that happens, affordability goes down...with a subsequent drop in housing prices (at least downward pressure). The only way around this is for wages to increase proportionately, which I personally don't see happening to a significant degree (not with our current unemployment rate and most likely jobless recovery, which is probably best in the long run anyway). If incomes do rise, higher incomes create higher tax barckets, which puts downward pressure on expendible income). So while inflation may salvage the national debt (or it may not, it may only dilute the value of the dollar without fixing anything), I don't see it really boosting housing prices until wages can catch up and interest rates fall post-inflation. This is a LONG process.

Cheers,
Zero

Submitted by AN on September 5, 2009 - 11:03am.

zerospeed, inflation of goods can't out run wage inflation for long before people won't have any money to spend. So, long term, inflation will have be accompanied by wage inflation. Also, doesn't tax bracket also rise along w/ inflation? It has been so far, AFAIK.

Submitted by justinmac on September 5, 2009 - 11:23am.

Thanks for your response, Rich. I thought I would've heard that before had it been accurate.

Zero, I agree that it's all about the total payment for the majority of buyers out there. Higher rates must at least exert downward pressure on the median and sq foot price. However, I think this prediction needs to be tempered with the concept that real estate investment has historically been seen as a hedge against inflation. There will be some that buy in advance to hedge against the perception of coming inflation.

Submitted by Nor-LA-SD-guy on September 5, 2009 - 1:33pm.

AN wrote:
zerospeed, inflation of goods can't out run wage inflation for long before people won't have any money to spend. So, long term, inflation will have be accompanied by wage inflation. Also, doesn't tax bracket also rise along w/ inflation? It has been so far, AFAIK.

We Americans are the spenders of the world (the spenders of last resort), Sure Oil may go up and maybe food can go up (heck food has been on a deflation course for the last 20 years anyway),
But IMO there can be no inflation without USA wage inflation.

Submitted by FormerSanDiegan on September 9, 2009 - 11:42am.

I could use some wage inflation.

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