burger007 – are you refinancing your 5 year ARM, or hoping that 2009 rates will be lower than today? An 8% cap, if it happens, could almost double your mortgage payment.
sdr – I think the inventory is climbing because sales are down, not because we have more listings. Because sales are down 25% – 30%, the new inventory is just piling on to the old inventory. Some sellers have to take their property off the market if they can’t get their hoped price. My neighbor falls into this category: after listing for 6 months and not getting the needed offer to buy his move-up home in Temecula, he had to stay put. He couldn’t bridge the gap without getting the top dollar.
Also keep in mind that while we had a population increase of 50K annually for 10 years, we are now seeing people leave: 44000 people in the year ending June 30, 2005. I read a different figure of 8K recently, so I don’t know which number is correct. But the trend is there, and likely to pick up as jobs are lost.
So people are leaving, occupancy rates are decreasing, vacancies are rising, and the sales price goes down. Remember too that builders are still adding to the inventory. When will this ever stop???
Bottom line: inventory is rising because sales are down by 30%. Sales are down due to the loss of population. Each sale lost affects several other home sales lost. With 44K people leaving, or 15K families, that’s about 8K home sales lost.
Docteur – when comparing to the last downturn, factor in the tax law change that allows people to pocket up to $500K of tax free gain. This encourages home sales more than in the past. Also remember the ARMs and the pressure put on borrowers who have loans at 33% of income, and now that payment goes up 35%. Ouch – what to do? Add the reversal of population, slowing economy, and I see a trend for more inventory.
I heard that 30% of homes are vacant, from a friend who attended a Data Quick meeting. Add some other percentage to represent the 40% of ARM buyers in recent years, and we have a solid base of sellers who are not testing the waters, but trying to get out while they can.
sdr – I give you permission to discuss my ideas, opinions, and analysis, but not my personal life. Why would you call my house location a meth capital? Perhaps Lakeside, 9 miles away, has some meth labs? My property was closer to Poway than Lakeside. By the way, Poway has the most open space and lowest crime rate in the County.
For anyone considering selling their home, I will correct a statement made about me. We sold it purely for the money. After the move, I came to love this rental house and the advantages of renting.
I disagree about the advice of “buying the gap in a better market (less inventory)”. First, you cannot buy/sell to your advantage in the same market. You either benefit as the seller, or as the buyer, but not both. Less inventory means you have the seller’s advantage when you sell, but you will not have the buyer’s advantage when you buy. It’s either a seller’s market, or a buyer’s market.
Second, although inventory may drop off in the fall, so will sales. The market will keep getting worse, because sales will drop even faster than inventory, and the DOM will keep going down. Some day, the market will get better, but we are at least 5 years away from that.
I agree it is better to wait to buy up to get the lower tax base.
OTOH, interest rates may keep going up. We could end up with a federal funds rate of 7% or 8%. With worldwide inflation increasing, the dollar losing value (which makes imports more expensive) and commodity prices rising, the Fed may have to raise a lot to keep inflation in control.
