San Diego Housing Market News and Analysis

Inventory always falls this time of year and begins to climb after the Super Bowl. I just checked at there are about 7,858 active houses, townhomes and condos. I hadnt checked in a long time and that seems awful low. Hope we start getting more inventory soon.

Agree with the seasonality.. but to be 31% below the two year low seems odd..

Since sales are not driving down inventory its a supply side problem..

This is pretty much what some of us have been saying. As sdr said, alot of it has to do with seasonality. Some of it also has to do with demand and an improved local market. Some of it also is a supply side issue.

There is a post about the foreclosure tsunami and lack thereof.

Also the continuation and even growth of the current govt manipulation of the market with regards to what would be distressed supply will continue. In fact there was another announcement today just about that.

Get used to it. (the manipulation that is). Supply will grow as sdr said.

I am not so sure that it will grow and match the level's we have seen the last two years.. even with demand bought forward in 2010. Lower low's and a lower highs says that sellers are exhausting at current price levels..

In the last two years.. rolling 3 month demand hasn't even been close to supply levels.. but looks like its touching now..

if supply was being manipulated.. i don't think they would wait far below the two year minimum..

Supply has been manipulated for the past 4 years. Manipulation takes many forms. If we didn't have the manipulation you would have seen astronomical inventory over the past few years. Manipulation takes many forms. Remember the govt 10k incentive to buy back in 09? Do you ever wonder about the tens of thousands of squatters and people who havent paid a penny to the mortgage servicing company in months and sometimes years before being kicked out? How about all of the programs to modify loans and forgive debt?

These are all forms of manipulation because the end result is that these homes did not come to the market in a timely manner and they should have. We should have seen a glut of inventory and that would have pushed prices down.

None of this just started... it has been in place quite awhile.

Do you actually think it is a free market?

Out of curiosity I ran my own zip code, similar results, inventory is incredibly low. I have a theory. When I broke down the numbers there were about 160 normal listings and 100 shorts. These don't count those already in escrow/pending. 2 or 3 years ago, these totals were at least double, but mostly they were shorts. From 07-09 shorts took forever, foreclosures took forever. Shorts sat on the market for 6 months listed as active when in fact there were a dozen offers, it skewed the stats. Now shorts seem to happen faster and are more likely to be accurate about pending or not.

The total number combined, shorts, active and pending is at 300 today, it was 500 at it's two year peak and this week last year and the year before it was at 450ish, so it's down by a third, so it's not the seasonal variation mentioned above.

I unchecked everything except for sales records and picked the largest span available of 3 years. That number was 4,800. The zip code has 40k people and just under 15k housing units. So in the last three years, 1/3 of all of housing units turned over, at lower prices and rates. This doesn't include 2008, it doesn't include when I bought, and doesn't include this particular zip code's bottom. It's probably closer to half because Temecula was experiencing tsuinami like conditions in 2008. So with half of all the houses having new owners, not underwater and not having exotic financing, they are running out of people who want to move, most people just did.

That's my theory, it only applies to my zip code, but it's not a case of manipulation here, just a market dynamic. There will always be divorce, death and relocations, but they will not be huge spikes, rather slow, small and steady. The spike, the reset, well, it already happened. Wait ten years, it will happen again.

I don't want to start a riot, but there is one inevitible thing that happens when the supply begins to dip. Nah, I don't want to upset anyone.

I didn't say it wasn't being manipulated.. I said that manipulation by itself can't explain what's different over the last 6 months...

If we set a lower high in inventory during the spring/summer.. then prices have to increase to create more supply..

I think I saw something where now if you’re in the short sale process, then they cannot simultaneously start the foreclosure process on you, but I could be wrong,
Me myself I think the banks are planning to wait until demand comes on line. I think they learned their lesson on the beating they took at the low end; I don’t think they could not survive that again,
Then again I would not want to be looking in CV after QCOM’s and Broadcoms earnings either.

Sorry if I was mistaken yoyo... I think there are alot of factors involved and manipulation is just one of them. I think Temeculaguy brought up a good point. To summarize this is simply the acculated results of everything that has happened over the past few years. We will see price increases over the next few years as well AS LONG AS interest rates stay low.

It is easily explained by the robo-signing scandal.

Another thing is the banks keep thinking Obama is going to keep bailing them out and incentivizing the consumer to take these properties off their books by some crappy-screw the tax payer-program. The banks have no incentive to liquidate. They have been trained they can hold a gun to the head of the GOV and get bailed out.

The market will crack back really hard one day soon. Something fairly unexpected will crush it. I'll vote the derrivates market, but I don't really know at this point.

Dont forget Ligand under hostile takeover attack also

All excellent and well thought out reasons, nobody mentioned that with such low listing and lower selling prices many cannot even afford to sell their homes, and many are probably waiting for "better prices", just a thought. I would imagine when prices "heat up" inventory will adjust.

We can only hope that happens.

That's a good comment. I'm seeing in Carmel Valley that sellers have definitely started to cave-in to the low offers. The homes that are on the market are there because they have a reason to sell, with a few high-priced exceptions that have no hope of selling anyway. Other would-be sellers are, as you say, waiting for higher prices.

Seems that buyers expectations of lower prices have started running into sellers that are willing to concede.

Take a peek over at the little Redfin chart to the right, with the red and blue lines. Tells the same story.

In order for prices to pick up, pricing expectations and willingness to pay on the demand side has to pick-up as well. There's little that I see to suggest it will.

This means a continued slow decline in prices, with occasional bounces. Like a ball bouncing down a gentle slope.

I agree there is no tsunami coming but we don't need one for prices to dip a bit. Then again, it is coming into the selling season. We'll see if the Spring brings buyers, sellers, both or neither.

I think sduude is right with respect to that micro market, certain areas that saw very little turnover and very little distress have more pent up supply/possibly some pent up demand, but the smaller group wins. I also think in my micro market I'm right too, because it has a different history. Wasn't it the modern day poet, David Lereah, who said "all real estate is local."

I just think it is hard to generalize in this market. I see homes that should sell sitting at what look like reasonable prices. I also see homes that appear to be overpriced with multiple offers. Its a mixed mess out here and every situation is different. I just wish there were more situations as I have a bunch of buyers looking and having trouble finding what they want at fair not even great prices.

Yes, VERY low inventory in our area and also in the parts of LA County that I follow. Supply has been dwindling, YOY, for the past couple of years.

I think it's a combination of manipulation (#1), and sellers deciding to wait it out. Not seeing any reason for them to be optimistic about price increases, though. Even with interest rates at these unbelievably low levels, lots of houses are not selling that would have sold fairly quickly in recent years.

The combination of low sales along with these low rates makes me very bearish about prices going forward.

My answer to the OP question is simple. Prices are at 2001 levels in many if not at this point most of the desirable levels. Prices are even lower than that in the second tier areas.

CAR, I agree that most sellers have decided to wait it out and I would go further than that and say that most sellers have conceded that things are NOT going to get any better soon.

IMHO, the smart money is now taking a 10-20 year time horizon and saying let's lock in a low rate (assuming they are a strong hand and have enough equity to refinance) and dig in deep to make it through this unfortunate but completely predictable (and necessary) downturn in housing.

Meanwhile the strong hands with a good part of their money in stocks have to be even more confident now that for example the QQQ is at an 11 year high in large part because of apple but qualcomm is doing well again too.

It is one thing for the strong hands to panic and blow out property at late 1980s nominal prices when the DOW has a 6 handle but with a 12 going on a 13 handle I just don't see the panic in the air.

Not so sure demand is really low, just stifled.
Really prices are low enough in most area's now (OK maybe not Coastal SD)

http://www.worldpropertychannel.com/nort...

U.S. Homebuilders Applaud Fed Report on Tight Lending Standards

Maybe they are waiting for them to flip the switch ?

Manipulation works both ways sometimes.

ok, I went back and pulled data of SD county inventory of for sale homes during the peak for comparison:

01/2006: 16,161
01/2007: 17,109
01/2008: 20,581
01/2012: 7000

so we are looking at inventory being 1/2.5 to 1/3 from peak levels. most of the reasons are already touched on by prior comments. but just looking at my neck of the woods of roughly 50 homes in my tract. there's 2 homes currently for sale. there are 2 homes that want to sell but can not. there are 2 additional homes that really should have been foreclosed on but due to "manipulation factors" the nonpaying owners are still squatting in them.

so in my little world the inventory is 2, but it really should be 6. that means current inventory is 1/3 of what it could be. match up pretty well with current county-wide inventory pattern.

so there you have it, remove 1/3 of would be sellers by "manipulation via government or banks," then remove 1/3 of would be sellers due to "seller holding strategy," you are left with inventory that is 1/3 less than max potential.

the end result is home prices will stay flat for probably a decade. because every time the price appear to increase, that 2/3 of "manipulated and held inventory" will try to test the market and the uptick in price would get hammered down as a flat line once again. and we'll just keep doing this until that "manipulated and held inventory" eventually get gradually taken care of.

OC, I agree with everything you posted except the last paragraph as you are essentially assuming that the demand will stay constant or low enough for the next decade to be satiated by a few nibblers testing the market that are content to get out at nominal prices circa 2 or 3 decades ago.

This certainly isn't how things played out in so cal during the last downturn, so what you are saying is a variation on "it is different this time".

If we are looking at "a few nibblers" you would be right. But we are looking at 2/3 of would be inventory that will serve as future nibblers. That's a lot more than a few nibblers.

We actually saw a bit of this when the 10k government incentive temporarily caused an uptick in prices. The inventory in my neighborhood doubled with a lot of unrealistic prices. Of course those lingered for a few months and got pulled back into hibernation.

We are both guessing at this point, but I think things could change somewhat radically over the next decade or two. For example, one could have made similar predictions as you in 1995 but a decade later in 2005 we were at the top of the biggest housing bubble of all time.

My "hypothesis" is that we are at a turning point..

Banks and other financial institutions supply are slowing down.

Demand will pick up with unemployment improvement this year (see initial jobless claims trend..)

Interest rates are very low and will remain low until mid 2013 at the earliest.

I know these thoughts are heresy on this site, and can 't be proven today... so go easy..

Even though it is entirely contrary to my very nature, I am always open to the slight sliver of a possibility that conditions could improve....but only temporarily. And illusorily.

I don't think that is a bad hypothesis at all yoyo. Statistics seem to be pointing your way even though some people don't want to hear that. It doesn't happen all at once but it is slowly happening.

My "educated" guess is that the hardest hit areas (the ones with the most "distress") will stay flat for years to come. The areas with little to no distress will sell at prices according to what buyers will pay in accordance with its level of desirability. If a buyer refuses to pay the prices of a non-distressed area, they will go to a more distressed area to purchase property in which they can make a deal in their price range or continue to rent in their (non-distressed) area of choice until they cave in and pay what the market will bear there.

I agree with pemeliza in that longtime-owner-sellers with substantial equity who do not have to sell can wait this market out indefinitely, unless they are already very old. In that case, their heir(s) will either take title to the property, rent it out or sell it for whatever they can get today.

"Distressed areas" include those with substantial "shadow inventory" even though there is currently little active inventory there.

OCR
Remember that nearly every property in your new hood was sold at the peak price levels. Most arent like that so yours is an extreme case. Also the 3rd category is limited and will eventually empty the tank on itself.

Just an FYI in late 2003/early 2004 prices went crazy because inventory was about 4000. This was before the worst of the liar loans came online. If we dont get an inventory build up prices could bounce up a little this year.

FWIW I dont beleive that and dont see that happening but it wouldnt shock me if it did happen. I wrote a $1.2M offer yesterday on a property listed this weekend. Great property that is pushing the price so definitely not a giveaway. We were the 4th offer in.

I think this is the year to get your house if you havent already. Price on average should be 3 to 10% lower than last year. Finding one you like and can be the buyer on will be the challenge for most. Thats what I see...I could finally be wrong

Slow and steady , hmmm
These things seldom work that way for long.

But maybe this time is different

not so much slow and steady, but more of small waves of up and down, without significant increase upward.

I really should back up and say the decade I'm referring to started in 2008, so more or less half way through.