May 2012 Resale Data Rodeo

Submitted by Rich Toscano on June 23, 2012 - 2:41pm
Apologies for the tardiness of this month's rodeo.

I'll start with the chart I've been watching most closely -- months of inventory (inverted) in blue, and annualized monthly price change in red:



Months of inventory is now at the lowest level in many years, and as foreshadowed by the above graph, prices have been on the rise.

Zooming in on that month of inventory figure a bit, here are the monthly patterns since 2009.  Last month we were just above 3 months of inventory... compare that to the black line on the prior chart, which denotes the 6-months level above which prices have tended to rise.



Active inventory has continued to drop like a rock, in defiance of the seasonal tendencies of the prior couple of years:



Here's a look at prices.  For the month, the median price per square foot was up 1.6% for single family homes, 1.8% for condos, and 1.8% in aggregate.  Nothing too dramatic, but the price increase has been pretty steady since the start of the year. 



If the Case-Shiller proxy is sending the right signal, the CS index should start to rise more sharply starting with this next week's release:



Until inventory increases, or until something else changes in the economic or interest rate climate, I would expect further upward price pressure in the months to come.

More graphs below...













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Submitted by Sandiegosurf on June 23, 2012 - 3:50pm.

Our long dark night may be ending at last.

Submitted by spdrun on June 23, 2012 - 5:21pm.

Dark night? Since when is it a bad thing that home prices are at a level affordable by the average person, and payments+taxes are lower than rents (landlords provide a service that homeowners don't receive, so they're entitled to make a profit)?

The good thing is that at least months of inventory seem fairly flat since last month. And it's heartening to think that:
(a) spring buying season is winding down
(b) while there will be a lot of writedowns and short sales, now that the settlement happened and banks know where they stand, there will no doubt be some foreclosures released.

A house is an investment, not an entitlement. I have ZERO sympathy for people who made a bad investment during the Bubble and have been getting screwed over the past 4 years.

Yep, I'm particularly heartless in that respect. My family was foreclosed on in the 1990s, but I fully realize that it was due to some bad business decisions, and I don't blame the bank one bit.

Submitted by Sandiegosurf on June 23, 2012 - 5:37pm.

Deep breath spdrun.

While i appreciate the pontificating lecture, I'm not blaming any banks. I take full responsibility for my own actions

I'm just feeling a bit hopeful that I may soon be able to sell the condo I bought at the beginning of 2008 for at least a dollar more than I paid for it. prices going up and inventory going down is a beeeyouteeful thing.

Cheers!

Submitted by spdrun on June 23, 2012 - 5:51pm.

For me, the opposite (or at least stability) is a lovely thing, since I'm in the market to buy rentable property in the next few months. And rent it to people who are reaping what they sowed in the Bubble. Really the only question is whether I'll buy in the NYC area (NJ/Staten Island, where the market is fairly steady right now) or CA.

As to your condo, sorry to say but you picked a bad time to buy. You should have thought "can I rent this place at a profit after deducting PITI?" This should be the ONLY metric to use when buying real estate, except in rare cases where you know something about the market that others don't.

(And yes, the exact same rule applies when buying a place to live. If I can't theoretically stick it on Craigslist, rent it out for a month or two at a profit, and go travel the world, it isn't worth owning. Anything that you own should make your life easier, not be a noose around your neck.)

Submitted by sdrealtor on June 23, 2012 - 9:12pm.

FWIW sp you are in SoCal now and seasonality is far more muted. Nov, Jan and Feb tend to have lower volume but other than that it's always Spring buying season here

Submitted by spdrun on June 23, 2012 - 9:40pm.

Fair enough. But I stand by my comment that anyone who bought at market price in 2005-2008 has it coming, and I have ZERO sympathy for them when the bank comes knocking on their door. Or when I come knocking on their door after winning a trustee auction, should I decide to go that route.

Submitted by sdrealtor on June 23, 2012 - 9:58pm.

Dude
You just got here. We have been saying that around here for the last 6 years. Yes many of us have been on this board that long. You are preaching to the choir.

Submitted by AN on June 23, 2012 - 10:32pm.

spdrun wrote:
Fair enough. But I stand by my comment that anyone who bought at market price in 2005-2008 has it coming, and I have ZERO sympathy for them when the bank comes knocking on their door. Or when I come knocking on their door after winning a trustee auction, should I decide to go that route.

I would say more like 2004-2007, not 2005-2008 (for some area). I bought in 2008 and to this day, I haven't seen a house like mine in this development that close for less than my house when you factor in the condition. Also, my PITI BEFORE tax deduction is less than comparable rent. So, not all us who bought in 2008 (have it coming).

Even then, there's a house in my development that I wish I could have (due to the lot location). It was bought in 2004. I thought it would be in foreclosure by now. But when I looked into the loan they have, it's 2/3 of the original purchased price and it would put them at about 80% LTV today, even after the crash. So not all who bought at the peak (have it coming either).

Submitted by AN on June 23, 2012 - 10:34pm.

sdrealtor wrote:
Dude
You just got here. We have been saying that around here for the last 6 years. Yes many of us have been on this board that long. You are preaching to the choir.

I didn't notice we've been here that long. I just checked and it said I signed up 6.5 years ago. That's when the forum started. Piggington itself probably started 6 months before that. Man, how time flies.

Submitted by moneymaker on June 24, 2012 - 8:14pm.

If you take what a house will rent for, subtract out PITI, then subtract 20% for management fees(you're not going to actually work on the property right!) then I would say you probably shouldn't be buying property yet, as a rental situation. At least not here in southern CA.

Submitted by spdrun on June 24, 2012 - 8:34pm.

If you expect a management company to do everything but wipe your butt, then perhaps you shouldn't be buying rental property at all :) I'd rather make friends with a trusted electrician, plumber, and handyman, and call them in on a case-by-case basis.

As far as tenants, no damn way I'll trust a management company to find them for me. I'd rather spend a week every year when I'm down there anyway conducting interviews.

Submitted by ctr70 on June 24, 2012 - 9:07pm.

spdrun wrote:
Dark night? Since when is it a bad thing that home prices are at a level affordable by the average person, and payments+taxes are lower than rents (landlords provide a service that homeowners don't receive, so they're entitled to make a profit)?

The good thing is that at least months of inventory seem fairly flat since last month. And it's heartening to think that:
(a) spring buying season is winding down
(b) while there will be a lot of writedowns and short sales, now that the settlement happened and banks know where they stand, there will no doubt be some foreclosures released.

A house is an investment, not an entitlement. I have ZERO sympathy for people who made a bad investment during the Bubble and have been getting screwed over the past 4 years.

Yep, I'm particularly heartless in that respect. My family was foreclosed on in the 1990s, but I fully realize that it was due to some bad business decisions, and I don't blame the bank one bit.

Awesome post spdrun! My sentiments exactly. I think it's disgusting how the American media has made homeowners to be the "victims" in so much of the reporting of this whole downturn and have blamed everything on the banks. What those articles never mention is how many of these so called "foreclosure victims" did cash out refi's & blew the money on consumer shit, lied on their loan apps, bought out of greed b/c they saw their neighbors house go up $100k that year. But now they sit in their house for 3 years not making a payment and whine for a loan mod or principle reduction or get a "foreclosure chasing" attorney to force the bank to do something on a technicality. And What a disgrace how our Government has supported thiw behavior the last few years.

Submitted by sdduuuude on June 25, 2012 - 10:15am.

Sandiegosurf wrote:
Deep breath spdrun.

While i appreciate the pontificating lecture, I'm not blaming any banks. I take full responsibility for my own actions

I'm just feeling a bit hopeful that I may soon be able to sell the condo I bought at the beginning of 2008 for at least a dollar more than I paid for it. prices going up and inventory going down is a beeeyouteeful thing.

Cheers!

I'm curious to know if you actually intend on selling it or if you are just hopeful that you will see some appreciation ?

Are you waiting until your selling point reaches your buying point to sell ?

Submitted by Sandiegosurf on June 25, 2012 - 5:06pm.

I'm not in a hurry to sell. I suppose that once I start seeing condos in my neighborhood selling for at least what I paid for it or even better 10% plus more than what I paid for it I would consider moving up the property ladder.

Submitted by deadzone on June 25, 2012 - 10:34pm.

So why is inventory so low? I assume a big reason is very few people are actually in a position to sell their house due to being underwater. Of the inventory that is out there, a large % is short sales.

Submitted by sdrealtor on June 26, 2012 - 8:23am.

Being underwater on purchase price doesn't mean you are in trouble. My neighbors two houses over are down $125k on their purchase. They still have tons of equity and just invested about $30k on upgrades. They have great jobs and kids in the local schools for another 10 yrs. they aren't going anywhere.

Another issue is displayed 2 posts above. As soon as owners getting a whiff of potential appreciation they hold on. They have seen hyper appreciation before and will wait to see if it comes again.

We turned the corner this Spring.

FWIW, my brokerage handles a very large volume of short sales and we have for the last fours. New inquiries dropped rapidly the last year

Are you still on the sidelines DZ?

Submitted by sdduuuude on June 26, 2012 - 12:28pm.

sdrealtor wrote:
We turned the corner this Spring.

Redfin "sold price charts (for 92130, at least) starting to show the end of the selling season. Stock market languishing. Mish called a recession for late this year. Credit availability is fairly tight. Appraisers not being aggressive enough to justify higher prices. Still a huge gap between asking and selling prices. Europe going to shit. China right behind. Fed still not ready to pull out the artificial support systems.

It was a good Spring and we did turn a corner. Not sure if we have turned the corner.

Submitted by deadzone on June 26, 2012 - 1:14pm.

I'm not insinuating that a lot of underwater people are in trouble, just that it may explain why inventory is so low. Basically other than the short sales, there is not a lot of motivation for people to sell.

Going forward, there may be more sales pressure. I still think there is a lot of shadow inventory in general. And for San Diego specifically, it will be interesting to see the affects of the upcoming defense budget cuts. That is definitely not going to be good for the SD economy..

Submitted by spdrun on June 26, 2012 - 1:54pm.

From what I heard, activity from other bases that are getting cut is actually being pulled in to San Diego bases. i.e. Pendleton may expand in the next few years. National cuts don't necessarily always lead local negative effects.

Submitted by sdrealtor on June 26, 2012 - 3:03pm.

DZ,
Actually its a great time to move up if you have equity. Lower and mid range homes are increasing faster than high end. If you have equity the gap between your current home and move up home may never be smaller. Throw in low interest rates and there is actually solid reasons/motivation for a segment of the population to sell.

Submitted by deadzone on June 26, 2012 - 7:35pm.

Sorry sdr, but high end never really fell that much. You just said it your self about Carmel Valley. Not seeing a lot of move up buyers from Clairemont to CV these days are you?

Submitted by The-Shoveler on June 27, 2012 - 6:50pm.

There but by the grace of god go I

If there had been inflation the last decade like we had basically from 60’s to the late 90’s
There would have been a different tone on this board IMO.
No/low inflation is the oddity, not the norm.
I am still blaming the Euro.

Submitted by spdrun on June 27, 2012 - 7:15pm.

Blame the Euro? Low inflation is a GOOD thing. Hug a Greek or a Spaniard tonight, for me.

Submitted by The-Shoveler on June 27, 2012 - 7:21pm.

"low inflation is a good thing"

I would say hug a German, but they are a little stand offish at times.

Hug a Greek if you love inflation !!

Submitted by sdrealtor on June 27, 2012 - 9:54pm.

deadzone wrote:
Sorry sdr, but high end never really fell that much. You just said it your self about Carmel Valley. Not seeing a lot of move up buyers from Clairemont to CV these days are you?

I don't think CM owners ever moved to CV en masse. UC would be a more reasonable move up from CM.

When I said it was a good time to move up I meant within a specific sub market. For example, someone living in a 1500 sq ft 35 yr old starter home in South Carlsbad since the mid 90's could easily move up to a 2500 sq ft 10 yr old home. The price and payment gap are very small right now.

Submitted by deadzone on July 4, 2012 - 2:14pm.

sdrealtor wrote:
deadzone wrote:
Sorry sdr, but high end never really fell that much. You just said it your self about Carmel Valley. Not seeing a lot of move up buyers from Clairemont to CV these days are you?

I don't think CM owners ever moved to CV en masse. UC would be a more reasonable move up from CM.

When I said it was a good time to move up I meant within a specific sub market. For example, someone living in a 1500 sq ft 35 yr old starter home in South Carlsbad since the mid 90's could easily move up to a 2500 sq ft 10 yr old home. The price and payment gap are very small right now.

Are you serious? Anyone who bought a "starter home" in the mid-90s has already moved up long ago, probably more than once (remember that housing bubble we had?). That's a terrible example. Not saying there is no market at all for move-ups, just not much on a macro scale.

Submitted by sdrealtor on July 4, 2012 - 5:56pm.

Funny but I know tons of people who never moved up. I also know people who moved up during the bubble, brought all their equity with them when they moved up, still have tons of equity and are looking to move up again. Gross generalizations like that are very dangerous and misleading.

Submitted by deadzone on July 4, 2012 - 6:59pm.

sdrealtor wrote:
Funny but I know tons of people who never moved up. I also know people who moved up during the bubble, brought all their equity with them when they moved up, still have tons of equity and are looking to move up again. Gross generalizations like that are very dangerous and misleading.

Those who bought in the 90s and never moved up during the housing bubble are most likely never going to move up. Generalization, sure. But dangerous? You'll have to explain that to me. I find generailizations quite useful. Most people who are mathematically inclined do (oh no, another generalization.. Danger Will Robinson..).

Submitted by sdrealtor on July 5, 2012 - 7:06am.

I said dangerous because it is very misleading to base individual housing decisions on generalization. The housing market is very different than most marketplaces in that it is characterized by exceptions. Every house and location is unique. The circumstances behind each sale are unique as sales are often emotionally based. I would estimate that only 2 to 3% of properties turn over each year.

Trying to help a client right now who fits the example I put up nearly to a tee. Bought starter house in early 90's, had kids later in life and now looking to move up from a house that is owned free and clear.

Last year I helped a friend buy a trophy house west of the 5 in Encinitas. He sold his starter level RE at the bubble and had been renting. He's now in 4800 sq ft house on nearly 1/2 acre. Exceptions abound!

Even if you assume that 75% of homeowners were bubble crazy that leaves 25% who werent. That is a crazy high assumption but the point it that there are a lot more fiscally conservative people out there than you give credit to. They dont all reside on Piggington.

With such a thinnly traded market the exceptions can dictate the market as easily as your generalizations.

If there is no move up market why does nearly every move up house listed in NCC sell within 30 days?

Submitted by deadzone on July 5, 2012 - 11:17am.

THere are always exceptions. But there is a reason they are called exceptions, because they don't follow the general trend. I'm just trying to theorize on why inventory is so low right now. One logical reason is lack of move up buyers due to so many people being unable due to being underwater, no equity, etc.

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