San Diego Housing Bubble News and Analysis

Why bother listing if you did 100% financing and are already 20% underwater and can't afford the short sale?

Uh, what about the tidal wave of ARM resets over the next two years?

Stabilizing or falling inventory could be due to any number of bearish factors, including banks and private sellers holding on, hoping for prices to improve.

I agree with nsr, why bother listing when you know you can't afford a short sale and you're under water. Might as well enjoy it while it last before the ARM tidal wave hit. Also, check out the sales #. It declined 24.4% yoy. Which mean even w/ a decline of 4% in inventory, the month of supply is still going up. No bottom here, move along.

aggree with asianautica,

If Sales are not increasing (ie.. decreasing), The Number of listing being stable for the moment is not of much relevance.

I don't see it. I just got back from a listing appt in Valley Center from a flipper. He is going to get creamed. Half of the agents he called wouldn't even come out to see him.

Also there are several sellers I know of who are holding off the market as they think it is will improve next year.

Of course the distressed properties will dominate either of the two cases listed above.

SD Realtor

We had about 2,250 sales of SFRs and condos through the local MLS last month. The total number of sales through for 2006 was 29,086; this is less than 2,500/month average. So far, 2007 shows to be running about 15% lower in sales volume than 2006.

Until the number of available listings gets down to the point where there is more balance between supply and demand I don't think it makes any difference in terms of price stability whether we have 15,000 actives or 25,000 actives. Too many is too many; and it will be those sellers who are compelled to sell at any price, regardless of loss, who will compete hard enough in pricing to close the sale. Everything else will sit while those sellers await better days or a more realistic perspective, whichever occurs first.

Come on back with this argument when the inventory of active SFRs and condos hits 9,000 or so and we can BEGIN to talk about prices becoming more stable. Until then.....

i agree with guy.

if the number of people agreeing with each other doesn't increase, but the number of people disagreeing is falling,
more people will be agreeing than disagreeing.

I'll ignore the subtle implication that all housing bears are doomsdayers and point out one element that I think alone answers the question:

Foreclosures - they take roughly 6 months to reach the market. May was up 90% YOY nationally, CA has 1 in 300 foreclosing, mostly in the cooling markets. People here know this.

The word "stabilized" means nothing. Supply/demand are far more relevant. If inventories (currently in excess) stabilize in the excess, meaning the number of months supply available remains constant, prices will still fall.

Ask this question again in November.

November of 2010 that is

From Bob Casagrand: (6/08/07)

Inventory was 20,904, over 9 months supply. The supply range for inventory varies by size of home with the lowest being 8 months and the high being 12 months. The supply is up 17% from last year and almost 100% from this time in 2005. Year-to-date listings totaled 34,431 which is inline with last years listing number but up 40% from the same period in 2005. Expired, cancelled and withdrawn listings totaled 17,382 up 224% from last years 7,763 and 525% from 2005. These numbers indicate how many times a home is re-listed before it sells or the sellers give up trying to sell.

The 224% increased in expired, cancelled or withdraw listing means there is a lot if inventory "waiting on the sidelines". People are just renting out, waiting for the market to pick-up or just giving up on selling and going into foreclosure.

BTW I agree that listed inventory is slightly lower this year than last year.

I'm with you 4plex. I do wonder what affect blogs like this one will have when we actually do reach the bottom. In previous cycles, very few people had any substantive knowledge about cycles, etc. This time, information is out there for the masses. When the majority of posters here start agreeing that we have reached or are close to the bottom, will that be a catalyst for large numbers of people to start buying? It all depends, of course, on how many people actually read Piggingtons (and others). I would really like to know how many people are lurking. I read a number of blogs daily but only ever post here, so I am invisible one these other blogs. Calculated Risk is my favorite (after here). I just love Tanta!

FYi, the vast majority of expired and cancelled listings are relisted within one week which kinda pops the bubble of the inventory on the sidelines argument. The real invenory on the sidelines isnt these, it's all the NOD's and potential short sale properties out there.

You guys, please don't scare off people who are less bearish than the majority here. I am a bear, but I did buy in February and my situation is unique and I think the blog will get boring if some of you shout down newbs with different opinions or call them trolls. No, I don't think I'm "special" or that San Diego is immune and I'm equally pissed off that the MSM didn't move on this story until recently. But let's keep the dialogue going. Thanks. Been lurking here for a year.

As long as you think that you didn't buy home as an quick investiment and this for standard living for a while with which that you can aford then you are not able to worry about this forum comments. It's like something you invest like a stock and worried about all for immediate returns:-)

5yearwaiter, I didn't. I'm here till I die and I'm a Boomer. Thanks for your comments. I could not have gotten in except I bought before the crash became MSM and I have family who did not want this house to go out of the family. I am simply asking that we treat the newbs not as trolls but as people who found the board and are interested in our viewpoints. I do not like the idea that NO ONE should buy right now. For some people--not many--that is bad advice. BTW, not in NCC. Old close-in suburb that is south of I-8. Very happy here.

That is such a good point "no such reality". It is truly a new horizon in the recent Real estate history that so many people could get into a trust deed so underwater.

It still shocks me when I keep reading how many people bought this way.

p-dude

I really don't get the "V" shape analogy that "schizo2buyORnot" is talking about. In order for a fast recovery to occur prices have to move up dramatically for few months in a row. IMHO people have different ideas and wishes regarding real-state recovery. Some in this web side believe a "V" or "U" shape will be there after 50% reduction in prices. Some like me a 25% drop in price would be enough to jump in the market and hope for recovery. But calling it bottom this early is wishful thinking at best. If you can find a V shape recovery in below graph please let me know!

http://housing-watch.com/regionview.aspx...

I won't call anyone a troll and I don't think Schizo is a newbie.

Even if you were looking for a reason to buy the NOD/NOT graph that is curently on the home page of this site has been reposted three times for three months with updated data and the picture only worsens. That is not a U or a V it is a straight line. You can look at that graph going back a decade or two and it trends up or down but it is always a jagged line. I sent that graph to my broker of 20 years but I only sent him the graph, none of the text or numbers. I wanted him to think it was a stock because for twenty years he always says "stocks don't go up or down in a straight line." His first thought "Did that company cure cancer." The I told him it was the NOD/NOT graph for S.D. and then he said words that would make a sailor blush. Try it for yourself with your broker.

That graph has a lag time of 3-9 months before those nods and nots hit the market and the effects are seen, so the answer is: This is not the time to buy but if you need to unload some property, get very agressive with your price and have the sign out before dawn.

I bet your broker is thinking really hard about his real estate holdings today. :)

"Why bother listing if you did 100% financing and are already 20% underwater and can't afford the short sale?"
_______________________

nsr - what do mean by "can't afford the short sale?" Can't someone submit a deal to the lender where there is little if any $$ out of pocket from the seller?

the scenario where someone is already 20% underwater on a 100% financing deal (80/20) is pretty interesting, since 2nd position is already wiped out and has no incentive to approve a short sale. if it's an original non-recourse purchase money loan, i wonder what would happen if the owner just stopped paying the 2nd but kept paying the 1st. what is the 2nd going to do, start the expensive foreclosure process when they already know they're going to come out with nothing? or will they simply sit in 2nd position, hope that the owner stays current on the 1st and wait it out until the property appreciates before taking some action? hmmmmm....hadn't thought of this scenario - very interesting.

The largest loss I've seen a lender agree to on a short sale is about $50,000. There probably are some that are higher but I haven't seen any yet.

Not agreed to yet, but look at 6941 Santa Fe Canyon in 92129. That's looking to be a $250k loss....ouch!

Jeeman

I've got four homes w/in a quarter mile that have been empty all year. No for sale/no signs of life/no nothing. What about those homes and who in the heck can hold an empty house for 6 months w/o some kind of activity. I stopped counting for sale signs and start looking for piling trash, unkempt landscape and newspapers composting in the driveway.
If there is a bottom the initial glut on a minor upswing will be devastating on prices and allowances. A ways to go for capitulation.

what do mean by "can't afford the short sale?" Can't someone submit a deal to the lender where there is little if any $$ out of pocket from the seller?

They can, but as Bugs pointed out, the banks aren't biting. In fact, many of the banks are in as denial as the delusional sellers asking 20% more than peak prices.

If you don't have enough money to make the loan whole on sale, a short sale is very low probability at this point.

Bugs brings up an interesting point regarding halting the 2nd, I wonder if they could buy time doing it, or if penalties compound too quickly. Or more likely, much like tax provisions, if a defaulted second becomes a reason for the 1st to call the loan?

I just spoke with a REO specialist that hasnt been very busy. In the last 2 weeks he got 25 new listings. Seems to me that's a sign the banks are starting to understand what they are looking at.

Bugs,

The house that recently sold at 1090 Crimson in San Marcos just before the trustee auction appears to have been a pretty large short sale.

Countrywide held a first at $680k and a second at $170k on a sale they approved at $710k. The loss here is $140k plus expenses and carrying costs on a property they never received a payment on.

I did an appraisal on a home this week in the Bonita Long Canyon / Rialto area that is going to be a short sale of $300,000+. It sold in 2005 for $1,200,000, with an 80/20 loan, It's now in the foreclosure process, but it's selling now as a short sale for just under $900,000.

What I've noticed in the last several months, is that I'm surprised how relatively stable the market seems in some areas, like parts of Carmel Valley, Scripps Ranch, La Jolla, Rancho Bernardo, and Rancho Penasquitos. I'm also surprised at how horrible things are in other areas, specifically Eastlake and Otay Ranch. And the market is so bad in parts of Riverside County, like Perris and Lake Elsinore, that there really aren't any words to adequately describe it.

i'm assuming you've never been to eastlake. or perris.

for crying out loud, in 2000ish when i was working a job site in eastlake, i was appalled that people were camping out waiting for their turn to sign up. 350k to live in a tract house in the boonies with crap traffic in crap chulajuana.

i dont think those people were speculators, either. rather, they were stirred up by the constant media reports of a housing shortage.

I did an appraisal on a home this week in the Bonita Long Canyon / Rialto area that is going to be a short sale of $300,000+. It sold in 2005 for $1,200,000, with an 80/20 loan, It's now in the foreclosure process, but it's selling now as a short sale for just under $900,000. What I've noticed in the last several months, is that I'm surprised how relatively stable the market seems in some areas, like parts of Carmel Valley, Scripps Ranch, La Jolla, Rancho Bernardo, and Rancho Penasquitos. I'm also surprised at how horrible things are in other areas, specifically Eastlake and Otay Ranch. And the market is so bad in parts of Riverside County, like Perris and Lake Elsinore, that there really aren't any words to adequately describe it.

It's pretty easy to explain this. There hasn't been enough price differentiation yet in house prices. There are some areas where it just doesn't make sense for home prices to be above a certain level no matter how big, how upgraded, etc.

$900k for a home in the boonies isn't nearly the same thing as $900k inland in for example Rancho P, Rancho B, or CV. I think it's a lot to do with the income levels of the home owners where they are buying. Statistically, people living in the boonies, or in temecula, otay, etc probably aren't the higher income earners that have the financial means to sustain a 800-900k home/
Also, newer areas bordering sketchy neighborhoods are also an issue. The Otay Ranch area doesn't surprise me one bit. Look around the area outside of the new development. Chula Vista isn't an area necessarily known for it's great schools and high income earners. I wouldn't live there even though the immediate neighborhood is nice, just because of the surrounding. If I really needed a home, I'd rather stretch and buy something in a better surrounding.

All the housing issues are going to start hemorraging in these outlyer ereas first, and then depending on how long this correction lasts, starting moving into the more desirable locations. We're already seeing the fallout from Temecula... It wouldn't surprise me if Oceanside get hit pretty bad soon (if not already). Sorry, don't follow oceanside. It also doesn't surprise me that a lot of the fraud happened in the outlyer areas, as statistically the less financially savy are the ones usually the easiest to be taken advantage of.