September 2012 Resale Housing Data Rodeo

Submitted by Rich Toscano on October 8, 2012 - 12:38pm
Inventory dropped again, prices rose again, and "The Chart" continues to do a bang-up job in indicating home price directionality...

Here's inventory, lest people thought last month's rise was the start of a new trend:



And prices continued to rise in a very orderly manner.  We are not far from the mid-2010 post-crash peak at this point:



Here's The Chart.  Blue line is months of inventory (inverted, to show the correlation better).  Red line is monthly price change (annualized):



There is a strong correlation here, and I think the causality is clear... lower inventory pressures prices upward, and vice-versa, with the 6-month line marking the historical turning point between upward and downward pressure.

Months of inventory notched up a wee bit last month, but remained at very low levels.  Thus, the upward price pressure appears poised to continue directly ahead.

More charts below...



















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Submitted by CA renter on October 11, 2012 - 4:05am.

So glad we're not still looking. This has to be an incredibly frustrating environment for prospective home buyers.

Submitted by urbanrealtor on October 11, 2012 - 3:49pm.

Interesting to see the months of inventory go up while total inventory went down.
To me that indicates longer aggregate market times for a small number of actual properties (probably by definition).
In other words, lots of short sales and unappealing non-shorts.

Not fun.

Submitted by carlsbadworker on October 12, 2012 - 10:49am.

CA renter wrote:
So glad we're not still looking. This has to be an incredibly frustrating environment for prospective home buyers.

That would be me. I am still waiting for a pending short sale approval and has given up looking at new listings for months.

Submitted by Mayze on October 12, 2012 - 12:22pm.

Just opened escrow this week after a 2 year+ search. I cannot express enough gratitude to Rich and the Piggs for the incredible insight and generosity with their time and knowledge. Even through primarily lurking on the forum, I have learned so much!

And, yes, the frustration level is very high. Not only waiting for a property to come open, but then to know, for a desirable listing, that you don't have much time to evaluate it, lest it be gone.

It's fascinating to think about where things go from here. Prices aren't rising that much, even under all this inventory pressure, the low rates, and the buzz around 'finally bottoming out'.

Here's hoping Rich will be up for continuing the series - "Shambling Towards Affordability: Year-End 2012 Edition" :-)

Thanks again to you all.

Submitted by ocrenter on October 12, 2012 - 12:45pm.

it's amazing how low the inventory is these days. most sub-markets around the county only have about 100 condo + houses combined.

if someone is looking for a SFR in Tierrasanta, they only have 24 homes to look at.

do we have data on inventory that goes back to the last bottom of the market? did it ever hit this low in proportion to population size in the past?

Submitted by spdrun on October 12, 2012 - 12:58pm.

There's also a lot of stuff bouncing in and out of contingent for weeks to months.

Submitted by AN on October 12, 2012 - 4:39pm.

spdrun wrote:
There's also a lot of stuff bouncing in and out of contingent for weeks to months.

No there isn't. Not around here.

Submitted by AN on October 12, 2012 - 4:41pm.

ocrenter wrote:
it's amazing how low the inventory is these days. most sub-markets around the county only have about 100 condo + houses combined.

if someone is looking for a SFR in Tierrasanta, they only have 24 homes to look at.

do we have data on inventory that goes back to the last bottom of the market? did it ever hit this low in proportion to population size in the past?


Totally agree. In MM right now, there are only 39 SFR AND condos available. For an area that have 23k household and over 70k+ people, that's just crazy, IMHO.

Submitted by spdrun on October 13, 2012 - 10:03pm.

No there isn't. Not around here.

Put an offer last week (didn't get it) on a condo in Mission Valley that was in and out of contingency several times in the last 90 days.

Submitted by AN on October 14, 2012 - 12:57am.

spdrun wrote:

No there isn't. Not around here.

Put an offer last week (didn't get it) on a condo in Mission Valley that was in and out of contingency several times in the last 90 days.


So you mentioned one condo. Since you didn't get it, care to share the address? Why was it in and out? Why didn't you get it? How many times did it bounce in and out of contingent? How many places are you seeing bouncing in and out of contingent that would qualify as a lot? When it bounce in and out, did the price drop?

BTW, Mission Valley currently have a grand total of 28 property active. It also have 45 properties in pending or contingent. In the last month, there were 29 closings. So, there's less than 1 month supply of active and 1.5 months of pending. The numbers points to a very tight supply right now.

Submitted by peterb on October 14, 2012 - 1:43pm.

If money gets much cheaper, I don't see how anyone that's interested would not be a buyer. Mortgage rates are amazingly low and look to be headed a bit lower.

Submitted by CA renter on October 14, 2012 - 7:39pm.

carlsbadworker wrote:
CA renter wrote:
So glad we're not still looking. This has to be an incredibly frustrating environment for prospective home buyers.

That would be me. I am still waiting for a pending short sale approval and has given up looking at new listings for months.

You have my sympathies, carlsbadworker. Maybe it will slow down a bit in the winter. Keep your eyes open October-January, as that's usually when things naturally slow down and the best deals are typically seen.

Best of luck!

Submitted by Jazzman on October 15, 2012 - 7:03pm.

CA renter wrote:
So glad we're not still looking. This has to be an incredibly frustrating environment for prospective home buyers.

I don't recall it being a good time to buy for the last decade. Although many have simply moved on, there's always the up and coming who missed the seminar and get ensnared. Either that or they simply won't be home owners.

Submitted by Jazzman on October 15, 2012 - 7:11pm.

peterb wrote:
If money gets much cheaper, I don't see how anyone that's interested would not be a buyer. Mortgage rates are amazingly low and look to be headed a bit lower.

Great time to borrow does not mean great time to buy. How can you expect buyers to maintain interest when as someone put it, it's like shopping in the former Soviet Union ...long lines and all sold out.

Submitted by Jazzman on October 15, 2012 - 7:18pm.

ocrenter wrote:
it's amazing how low the inventory is these days. most sub-markets around the county only have about 100 condo + houses combined.

if someone is looking for a SFR in Tierrasanta, they only have 24 homes to look at.

do we have data on inventory that goes back to the last bottom of the market? did it ever hit this low in proportion to population size in the past?

Not sure about the bottom of the last market, but depending on where look levels are 40-50% below the peak, and 20-50% below earlier this year. Those are drought conditions, and it must be hurting Realtors as well. So. why isn't the NAR lobbying to force more foreclosures onto the market with restrictions on wholesale investors?

Submitted by AN on October 15, 2012 - 8:17pm.

Jazzman wrote:
I don't recall it being a good time to buy for the last decade. Although many have simply moved on, there's always the up and coming who missed the seminar and get ensnared. Either that or they simply won't be home owners.

With hind sight behind us and hind sight is always 20/20, I would say late 2008-2009 was a good time to buy.

Submitted by moneymaker on October 15, 2012 - 9:24pm.

That's when I bought Feb 2009. Though a good time and a good house it stills occurs to me now and then that for the same price elsewhere in the country I could have got a house twice the size on twice as big a lot and half as old elsewhere in the country, for the same price.

Submitted by Bubblegirl on October 15, 2012 - 11:22pm.

As someone who waited out the bubble for almost 10 years now I'm certainly a little frustrated. 5 offers, all over asking, all beat out by flippers paying cash. A large majority of the active inventory of late in north county has been flipped properties purchased in summer. I'm certainly hoping for an end to the madness. Anyone care to speculate on what may change the current market dynamic and when?

I'm probably the only one rooting for Ben to allow rates to rise as they naturally would minus all the interference!

Submitted by Jazzman on October 16, 2012 - 7:38pm.

Bubblegirl wrote:
As someone who waited out the bubble for almost 10 years now I'm certainly a little frustrated. 5 offers, all over asking, all beat out by flippers paying cash. A large majority of the active inventory of late in north county has been flipped properties purchased in summer. I'm certainly hoping for an end to the madness. Anyone care to speculate on what may change the current market dynamic and when?

I'm probably the only one rooting for Ben to allow rates to rise as they naturally would minus all the interference!

Bubblegirl, you are not alone. There seems to be several factors which are contributing to the current housing market woes, but the overriding one is the battle between home price deflation and poor economic performance. If the economy picks up momentum, there will likely be less interference as you aptly put it. In the short term, inventory is unlikely to improve even if investors eased up on snapping up foreclosures. A flood of homes on the market would drive down prices. We know rates are likely going to remain low for some time, and monetarists argue inflationary conditions do the opposite to what most expect ie rate rises. The problem is not unique to CA. I'm currently in Europe where inventory is low as well. With few investment options available money in piling into RE even in countries like Germany, which has hitherto been immune to the housing bubble. Many are looking to 2013 and the fiscal cliff as a turning point and the possible danger of protracted adverse conditions. Whatever, it's hard to see a return to more normal conditions for some time. I know many FTBs have indefinitely postponed plans to buy in spite of low rates, simply due to the frustration of over-competition. In fact, Redfin did a survey which concluded it is the major concern of buyers. Concentrating on finding a good rental would seem to be a sensible alternative, and has its merits.

Submitted by spdrun on October 16, 2012 - 8:01pm.

Market conditions are local. I can name at least five good markets in the US where prices are as low as they've ever been in the last 10 years, and where there's little competition.

Submitted by Jazzman on October 17, 2012 - 12:26am.

spdrun wrote:
Market conditions are local. I can name at least five good markets in the US where prices are as low as they've ever been in the last 10 years, and where there's little competition.

Would you care to share which local markets this is not true? Are you a Realtor? Low prices do not necessarily mean normal inventory nor do they mean no or fewer restrictions on obtaining credit. IE saw big declines but there's a dearth of homes for sale. I've searched and bought in over a dozen markets, and either one or both complaints seem pretty universal. In France, agents complain of low inventory and few buyers due to credit tightening and very high fall through rates.

Submitted by Jazzman on October 17, 2012 - 1:18am.

http://www.latimes.com/business/money/la...

Pretty shocking really, no?

Submitted by CA renter on October 17, 2012 - 3:50am.

Have to agree with Jazzman here. I've been hearing about inventory shortages all across the country. These low interest rates are killing "organic" RE buyers, mostly because there's a feeling that stock and bond markets are offering very little return and/or too much risk. The only place one can get any kind of decent, fairly low-risk returns is the RE market. That's why all the cash is going there.

I also think that the primary trigger to change this will be interest rates. Until then, buyers are pretty hosed. The central banks are destroying our economies (for working and fixed-income folks) in order to save asset holders. It's a great way to reward those who've tried to be most prudent over the past decade, no?

Submitted by AN on October 17, 2012 - 9:26am.

CA renter wrote:
I also think that the primary trigger to change this will be interest rates. Until then, buyers are pretty hosed. The central banks are destroying our economies (for working and fixed-income folks) in order to save asset holders. It's a great way to reward those who've tried to be most prudent over the past decade, no?

Uh, interest rates wouldn't affect these investors because most of them buy it for cash. So, if price does go down like you think it would when rates goes up, investors would jump in even more, since their net cost will decrease and their profit will increase. The only way to get cash investors to get out of the market is to have price increase to a point where it would no longer make sense in term of ROI.

Submitted by spdrun on October 17, 2012 - 11:27am.

Most INITIALLY buy for cash, then do delayed financing. Interest rates are very much a part of it.

Submitted by AN on October 17, 2012 - 11:55am.

spdrun wrote:
Most INITIALLY buy for cash, then do delayed financing. Interest rates are very much a part of it.
And?

Submitted by sdduuuude on October 17, 2012 - 12:15pm.

Good thread. Nice to see some of the less-active posters getting involved, too.

I have altogether stopped looking in CV. Not even checking Redfin regularly anymore. Got tired of looking at the same 6 houses that met my Redfin search criteria but that I didn't really like. Literally - it's 6 houses. Hasn't changed in about 4 weeks now, except a couple of houses that I "X-ed out" sold.

I know many say there is a recovery afoot due to increasing prices, I can't help but think of this market as anything but broken - recoveries are not based on weak inventory.

I started a thread about the Nov 1 short sale rules recently. I'm hoping that brings some inventory out but I'm not so sure it will happen. It may be exactly what the market needs.

If it were an active topic in the news or blogs, one would guess that there is pent-up inventory - people current on their upside-down mortgage who want to sell waiting for this rule change to list their house. But, nobody is talking about it so I don't know if it is a non-issue or a surprise on the way. Even if it is significant, it will take time for the effect to show up in inventory, then sales, then stats.

I'm hoping this is the peak in prices for the year but I'm not counting on it or betting on it. Things seemed soften just a bit after Aug and we should start to see $/sqft prices come down as things that went into escrow in Sept (vs. Aug) start to be reflected in the stats as they close.

Submitted by sdduuuude on October 17, 2012 - 12:17pm.

AN wrote:
spdrun wrote:
Most INITIALLY buy for cash, then do delayed financing. Interest rates are very much a part of it.
And?

There is no and. He is saying that even though investors use cash to make a purchase, they eventually refi the place, then use the cash for the next sale.

Being a cash buyer helps them get houses, but they are sill affected by rates as any borrower because they go into the deal knowing they are going to borrow the money back.

It's a good point, methinks.

Submitted by spdrun on October 17, 2012 - 12:29pm.

Would you care to share which local markets this is not true? Are you a Realtor?

Not a realtor, though my business works with quite a few. As far as which markets -- let's say certain judicial foreclosure states on the East Coast.

Submitted by AN on October 17, 2012 - 1:45pm.

sdduuuude wrote:
AN wrote:
spdrun wrote:
Most INITIALLY buy for cash, then do delayed financing. Interest rates are very much a part of it.
And?

There is no and. He is saying that even though investors use cash to make a purchase, they eventually refi the place, then use the cash for the next sale.

Being a cash buyer helps them get houses, but they are sill affected by rates as any borrower because they go into the deal knowing they are going to borrow the money back.

It's a good point, methinks.


So what if they refi after they bought the house for cash? What do you think will happen if rate rise? As long as the ROI stays the same, why would it matter if rate rises? Do you suspect ROI will go down as rate goes up? I.E. rate rise, price stays the same, and rent stays the same? What's the likelihood of that happening?

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