Good for you! The LA Times had more courage, and went to the heart of the matter. I saw the link on Ben’s Blog. The U-T took a conservative stance.
These reporters should really get a realtor’s license and MLS access, so they can research their own stories. They rely on the Dataquick reports, and interviews from Karevoll and Ms. Young. Thus, they are easily misled, and mislead others.
Everything that follows below is credited to my friend, who wishes to remain anonymous.
The biggest disservice that the media is perpetrating on the public is the pounding out of the median price. While mathematically correct, it does NOT tell the whole story. The + $2mil home market is hot. Those buyers are not affected by interest rates, but by stock market returns. There is weakness in the low end market, because those buyers are sensitive to higher interest rates and rising home prices. This reduction in lower end homes sold and increase in $2 mil and up homes, is skewing the median up. [In reality, each home is worth less today than it was in 2005. Most are priced at 2004 values.-my comment]
Some say that our inventory will shrink this fall, as it usually does, and our market health will return. False. Demand is declining. Inventory is not as important as the demand/supply relationship. The months supply is more important than the inventory number, and the months supply is growing. Inventory will drop in September, but so will demand. The adjusting ARMs have the potential to be a real big deal.
Another myth, propagated by economists, is that so few people have ARMs, and so many people own their homes outright, that the $2 trillion of ARMs adjusting will be a blip on the radar. What they fail to realize is that the homes on the market set the value for the entire market.
Let me explain. San Diego has about 1.1 million homes, and 55% are owned by the person living in them. That gives a housing inventory of 750,000 homes. But each year, only about 42,000 homes are sold. That is 6% of the market. (BTW, it also indicates the average San Diegan stays in his home for 13 years.) This year we are on track to sell 30,000 homes. This small percentage of San Diego homes is setting the value for the other 1 million homes.
Now consider, that 60% of San Diegans last year used ARMs. If even half of the listings are ARM sellers, who must sell (or bank REOs or foreclosures, this will impact the resale market severely. This will impact all homeowners, whether their home is paid off or not. The resale market drives the price.
So the next time someone tells you it doesn’t matter about the ARMs because they are only .01% of the market, you say, “Yes, but they are 50% of the resale market, and the resale market sets the price for all homes”.
That’s the end of my myth busting for today.
I sent this to the U-T writers (my 2nd e-mail to them today), and ended with this:
“I hope I have educated you, because you certainly are NOT educating
me!”
