San Diego Housing Bubble News and Analysis

I'll say this much: things have gotten very busy at open houses just in the past few weeks. This is in the North County area (Carlsbad, Encinitas, Escondido, and Olivenhain, in particular).

We're seeing traffic like it was 2004/2005 again. When we pull up to an open house, two or three cars (or more!) are pulling up behind us. A number of families with kids and heard a few people asking the agents about REOs because they wanted to buy more "investment" properties. VERY busy, and even the realtors seem to be taken by surprise.

It will be interesting to see if anything actually goes through and for what price, but there is definitely some activity right now. Hope it's short and shallow. We'll see...

Could be Piggington types that sold in '05 and are sick of renting.

If I made a 200% profit over a few years, the thought of absorbing a 25% loss over ten would not seem so bad. Especially if I got into a super-rad place.

I received an email on Monday from Centex in Temecula thanking everyone who has provided references, because they just sold 6 houses last weekend alone!

I think it's pure BS.

I'll say this much: things have gotten very busy at open houses just in the past few weeks.

Mortgage rates were again at historic lows the last few weeks. This has spurred buying and refi interest. That's good.

Conversely, today, mortgage rates jumped the most ever in one day. That's not good.

All in all, the low rates did not last long enough for what is necessary to heal this housing market. Higher jumbo lines will help. Seasonality will help, but you have to compare year over year, and not Jan to Dec.

This market is still overpriced. But it won't be for long if our government keeps going crazy with the money supply.

I was driving home today when I hit the remains of a cat on the road. Man that sucker bounce!

Have we officially entered the dreaded "dead cat bounce" phase? I was out this weekend looking at REOs and a few new developments in Riverside and they were actually quite busy. One development had NO open parking spaces in the parking lot. I thought I was starring in an episode of the twilight zone....

The bulls can say whatever they want, but none of that changes the current supply/demand dynamic. There are way too many listings, way too many of those listings are distressed sellers (and that percentage is increasing), and there are too few real buyers to make a dent in the inventory.

Based on what's happening right now, prices can basically only do the one thing. The luxury home market isn't moving as fast yet, but their turn is coming too.

I just reviewed a residential appraisal on a 1950s dogbox for one of my clients today. The appraiser in that assignment used 3 sales that had closed within the last 90 days as well as a pending sale and an active listing, and based on the active listing he still had to value the property lower than any of the closed sales. By $20,000. The property was only valued at $400k.

In 22 years of appraising I have NEVER seen prices decrease this quickly. Some of you may remember when I mentioned last year that a 10% - 12% rate of decline is a lot of movement in a residential market. Well, it still is, but a -20% movement in a single year is positively smoking. It's the polar opposite of the bulls' "hot market".

I have been following the Mission Valley (92108) market for the past 2 years as a potential investor for a rental condo. 2 years ago there was NOTHING listed for under $200K. Currently there are 31 units available for under $200K. If I were not very educated in where the market is going, I would probably think that now is a good time to jump in and start picking up investment properties.
However, there are also 95 properties in Mission Valley that are currently in default. I think I'll wait until the default numbers start to decrease before I even think about jumping in.

Bugs - Thanks for your comment. For a minute reading through this forum, I thought I slipped into a Twilight Zone episode and I was back in time a few years ago. Was breaking into a cold sweat and thought all those economists saying on their most positive moments that it would be a year before there's any recovery was just BS. My heart was beginning to race and I was beginning to hear the mantra from the Realtwhores about "Now's the time to buy" again.

Thanks for the reality check. That's right. Too much inventory and much more on the way. Everyone wants to buy, BUT few are qualified, so less demand. That can only mean one thing.

It is impressive to have a 20% drop in a year. It's also impressive how you can't bring the realtors down and they are perpetually positive on the market always. Astonishing.

From Wiki:

A dead cat bounce is a term used by traders in the finance industry to describe a pattern wherein a moderate rise in the price of a stock follows a spectacular fall, with the connotation that the rise does not indicate improving circumstances. It is derived from the notion that "even a dead cat will bounce if it falls from a great height".

Yea..things are looking "golden" at about $926.00 per ounce today.

If you want to buy a home that will appreciate very nicely over the next few years make sure you build it with gold and platinum and start drilling for oil in the back yard.

Let that dead cat bounce...he will be back on the ground before you know it.....this was to be expected.

Sincerely, Contraman

Trading places ???

In most the L.A. area from what I can tell it (home prices) have been holding close to the all time high’s just yet (has not seen the large drops like in SD and Temecula surrounds) .

Could be some getting while the getting is good going on, Also the last time I saw the Cramer dude on TV, he was saying It’s time to BUY !!!

Maybe that has had some impact in SD & Temecula valley.

It's hard for floppers and irresponsible buyers to take a 50% hit, so kind knife catchers are here to help.
Let them.

If enough people and media believe the cat is back from dead, the insane bailout incentives may prove unpopular and will be abandoned. And that will buy us the necessary 18-24 month of downfall.

In terms of pricing it appears to that LA has started a fairly steep decline in prices (according to the median anyway) starting about August 2007. I think LA is about 1 year behind the San Diego market. This year may be the steepest declines of the current down-cycle in LA as I believe 2007 was for San Diego. We'll see.

An example of LA median price history ...
http://bp2.blogger.com/_EnQkWGlwm7M/R7PF...
from

http://www.westside-bubble.blogspot.com

My view of the pricing remainig the same is this:

People put zero down. There is NO wiggle room. Hence, they cannot reduce (w/out approved short sale).

So the process is first, from what I'm gathering, people can live in their homes and not pay their mortgage anywhere from 4 to 9 months. Therefore, dragging this out longer.

Initially I was thinking 3 months after not paying, the place is bank owned. But since the inundation of people not paying their mortgage is so overwhelming, I guess this is delaying the foreclosure process.

Therefore and consequently, all these places that are not moving in price will either get bought (I read something about greater fool theory) or will eventually get bank owned down the road up to 9 months later, and reduced accordingly.

I do not believe we have even begun to see the vast inventory that will rear its ugly head. When you have completely run out of the greater fools and the banks catch up w/their paperwork, stand by.

By then, there should be significant drops. Just checking various areas in San Diego county, I've already seen 20% drops in a year's time.

From what I understand, regardless of the interest rate reductions recently, there will still be some loans resetting in June 2008. I suppose that means up to 9 months later, potentially more bank owned homes.

And lastly, we will have those who are walking away that can make payments.

What is most amazing to me is how people can still believe the real estate market is healthy, w/all this glaring inventory and shrinking demand. Shrinking demand b/c less greater fools, people who want to buy who refuse to pay the over-valued price, and few qualified buyers in view of the tightening credit standards. How can one still insist the market is healthy? Maybe they have inside information that the economists and media haven't gotten wind of.

BTW - the appraisal I was talking about a few posts up isn't for a San Diego county property. That property was located in the O.C., and is within 3 miles of 4 freeway junctions. You just about can't get much more central than this. We're not talking about some property that is in some ghetto or is out in the sticks.

So I guess O.C. is doing about as well as S.D. The range I've seen is between 10% and 30%.

Based on what other appraisers have told me as well as what I've been seeing, the OC entered into decline well after we were already in it. I think what's happening right now is they're playing catch-up.

Guys relax, the escalade-driving soccer moms have moved on from their christmas-shopping frenzy highs in december onto their get-rich through real estate by brow-beating their husbands-to-death buying dreams. Same thing happens every year. Last year the Pigs reported almost mob scenes at open houses/new home communities throughout February (go look through the threads if you don't remember), followed by the spring thud. I personally won't attend an open house or even pick up a flyer until prices approach sane levels again, it just adds to the mob mentality which is now shifting to picking up cheap foreclosures before the big turnaround. I'm not going to worry about missing the bottom until NODs/NOTS start to drop off which I don't expect for at least 3-5 years at the earliest.

not to plug my own site. but if there is a whole bunch of foreclosures that are being postponed, and the level of foreclosures are still breaking records every month, what does that tell you about the amount of foreclosures a few months down the road. how anyone can even think about buying 'investment properties' knowing the amount of REOs coming down the pipeline is simply unreal.

For those who think that we're "near or at the bottom", read this article. The ARMs are failing even BEFORE the resets.

http://money.cnn.com/2008/02/20/real_est...

unbiasedobserver,

Agree with you 100%.

BTW, I hope nobody took my post above as being "bullish." I've long said that I don't expect things to turn around (prices going back up in a sustained way) until around 2012, and that's IF there's no severe recession/depression and IF the govt doesn't get involved. With a recession and govt "help", the downturn will last even longer, IMHO.

This made me want to go and find this gem again:

http://www.gold-eagle.com/editorials_01/...

1927-1933 Chart of Pompous Prognosticators

1. "We will not have any more crashes in our time."
- John Maynard Keynes in 1927

2. "I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future."
- E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928

"There will be no interruption of our permanent prosperity."
- Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

3. "No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment...and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding."
- Calvin Coolidge December 4, 1928

4. "There may be a recession in stock prices, but not anything in the nature of a crash."
- Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929

5. "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."
- Irving Fisher, Ph.D. in economics, Oct. 17, 1929

"This crash is not going to have much effect on business."
- Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

"There will be no repetition of the break of yesterday... I have no fear of another comparable decline."
- Arthur W. Loasby (President of the Equitable Trust Company), quoted in NYT, Friday, October 25, 1929

"We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices."
- Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929

6. "This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan... that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years."
- R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929

"Buying of sound, seasoned issues now will not be regretted"
- E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929

"Some pretty intelligent people are now buying stocks... Unless we are to have a panic -- which no one seriously believes, stocks have hit bottom."
- R. W. McNeal, financial analyst in October 1929

7. "The decline is in paper values, not in tangible goods and services...America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin."
- Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929

"Hysteria has now disappeared from Wall Street."
- The Times of London, November 2, 1929

"The Wall Street crash doesn't mean that there will be any general or serious business depression... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before."
- Business Week, November 2, 1929

"...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation..."
- Harvard Economic Society (HES), November 2, 1929

8. "... a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall."
- HES, November 10, 1929

"The end of the decline of the Stock Market will probably not be long, only a few more days at most."
- Irving Fisher, Professor of Economics at Yale University, November 14, 1929

"In most of the cities and towns of this country, this Wall Street panic will have no effect."
- Paul Block (President of the Block newspaper chain), editorial, November 15, 1929

"Financial storm definitely passed."
- Bernard Baruch, cablegram to Winston Churchill, November 15, 1929

9. "I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress."
- Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

"I am convinced that through these measures we have reestablished confidence."
- Herbert Hoover, December 1929

"[1930 will be] a splendid employment year."
- U.S. Dept. of Labor, New Year's Forecast, December 1929

10. "For the immediate future, at least, the outlook (stocks) is bright."
- Irving Fisher, Ph.D. in Economics, in early 1930

11. "...there are indications that the severest phase of the recession is over..."
- Harvard Economic Society (HES) Jan 18, 1930

12. "There is nothing in the situation to be disturbed about."
- Secretary of the Treasury Andrew Mellon, Feb 1930

13. "The spring of 1930 marks the end of a period of grave concern...American business is steadily coming back to a normal level of prosperity."
- Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930

"... the outlook continues favorable..."
- HES Mar 29, 1930

14. "... the outlook is favorable..."
- HES Apr 19, 1930

15. "While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."
- Herbert Hoover, President of the United States, May 1, 1930

"...by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent..."
- HES May 17, 1930

"Gentleman, you have come sixty days too late. The depression is over."
- Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

16. "... irregular and conflicting movements of business should soon give way to a sustained recovery..."
- HES June 28, 1930

17. "... the present depression has about spent its force..."
- HES, Aug 30, 1930

18. "We are now near the end of the declining phase of the depression."
- HES Nov 15, 1930

19. "Stabilization at [present] levels is clearly possible."
- HES Oct 31, 1931

20. "All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."
- President F.D. Roosevelt, 1933

Colin J. Seymour, June 2001

Thanks for sharing that. Sure puts things in perspective. I'm not convinced that the housing prices are going to plummet. Some of you are pretty sure about that. I do think the prices will come down b/c of the huge, unjustified rise due to all the factors associated w/lax lending. I'm not planning on buying yet. I've waited for a while, surprised they were able to propel the market as long as they did. I can wait a little longer. Hopefully they will not drag it out too long and prices will adjust w/out delay, but judging from the resistance and "assistance" it looks like I better pack a lunch.

On the bright side, the cheerleaders were kinda right. They are letting the air out sloowwly. And it doesn't matter, b/c in the end, that balloon won't have any air left. Pop or not, the result should be the same, back to before this whole mess started. JM2C

OMG - doofrat - did you read the Reuters story http://users.ixpres.com/~gtriphan/

Read some of the stuff Zandi is saying. It's like he just read your post and modified and changed some of the quotes. Kinda scary.

"He expects home sales to hit bottom this spring, housing starts to reach a nadir this summer, and house prices to trough in the spring of 2009"

So we just need to ride it out for a year and everything will be honky dory. We are we on that chart?

I like this: "For each foreclosure on a street block, it reduces the value of all homes on that block by almost 1.5 percent, he said."

How low can it go? Limbo time.

UCLA Anderson "There will be job loss in the construction sector, as well as real estate-related financial services, but not nearly enough to trigger a recession.”

Who to believe?

"Recessions have traditionally trailed a housing peak by no more than a year; at this point, the business cycle is trailing the housing cycle by seven quarters without a recession"

Funny. It's been trailing b/c the banks can foreclosre fast enough and sell fast enough.

Are they kidding here " an expected rise in Chinese visitors and several local attractions such as the new ‘Simpsons’ ride at Universal Studios Hollywood theme park.”

I hope our economy is not solely relying on that.

1. "I'm not convinced that the housing prices are going to plummet."
- jpinpb February 20, 2008

Just Kidding :)

Is this the bottom?

Nope, just propaganda.

Piscitelli also adds that one of his best mortgage broker clients is working on 15 deals “which never would have happened a month or two ago.” He adds, “Most of the work is refi's but there are some sales in there as well.”

Most are refi's, but SOME sales are in there.

The sales are probably foreclosures, and the refi's pre-foreclosures. I've noticed realtors putting sold on houses that the following month are for sale again. Tighter standards?

Refi's are probably the result of lower rates, proactive people trying to avoid foreclosure, and Hope Now.

We know this will happen. Just wait until after 3 dismal month-to-month price declines for an uptick in median resale. The bulls on parade lead by the NAR will shout the bottom is here. The parade will last until next omnth's data comes out.

Last Downturn: This is the Case Shiller HPI last downturn. The HPI smooths out single month bounces and even it shows numerous bounces last downturn. Coincidentally, it seems a few happened starting around this time of the year (1991, 1992, 1994). Really not anything to

"A lot of the indicators say there's a significant amount of black work being done, and a lot of that is being done in Southern California," Kyser said."

"It's a two-track economy. You've got housing, finance, the auto industry struggling, but you've got other industries growing very slowly," said Jack Kyser, chief economist for the LAEDC."

http://www.dailybreeze.com/ci_8310186

~

So, let's see, here are the factors that will prevent a recession in SoCal:

- new ride at an amusement park
- black military projects (so classified that they don't exist)
- Chinese visitors spending the night

~

I feel loads better now - I was concerned that SoCal might be in for a tough time ...

I mean, as long as we have "other industries that are growing slowly" we should be OK shouldn't we?

Coincidentally, it seems a few happened starting around this time of the year (1991, 1992, 1994).

That's a seasonal phenomenon, you'll see it every year in every city. HPI peaks approx 1% above 12-month moving average in August and bottoms 1% below the average in February. Probably has something to do with the fact that people with kids don't like to move during the school year.

This time it may be irrelevant for the following reason