Mixed signals for buyers

[raptorduck]

I occasionally post my own experience as a buyer in this market, for those who would be curious about such things. Alas, it is my limited exposure, but a sample is a sample.

First, my banker tells me that lending stardards in slightly higher end markets ($2M-$5M homes) are getting tighter and most banks are asking for an extra 5% down (so 25%-30% down payments) for traditional mortgages. They also spend more time looking at sources of income and excluding certain things they would exclude last year.

The conclusion from my banker is that there will be fewer buyers in these markets due to fewer folks qualifying and so I will have less competition, which means I can get better deals. Really what this means is that buyers get pushed down one level in home purchases for the most part, downward compression.

Ok, so first both my RSF agent and my Bay Area agents tell me that they are both seeing a surge in buyer activity and homes are moving again and the market is “picking” up significantly. Stats don’t support that, but stats don’t tell us about January yet so we will see.

So up here in the Bay Area I went to look at 5 homes in the above price range. Yes we are still looking in both markets with a plan to buy in both.

Home #1 almost 8,000 square feet and 4 yrs new in the hills (not LAH, San Jose hills instead), but still most expensive house of the 5. Went on market in Sept. I did not get to see it on Sunday. Saturday, 6 folks saw it and it got 3 offers on the spot and sold above asking literally over night. So the selling agent cancelled my appointment b/c it was a cash offer with no contingencies. WTF. Bear in mind that an 8k sf house is about as common up here as a republican. They do exist, but people don’t admit they exist.

Home #2. Almost the same price, less than 1/2 the size, on 1/10th the lot, in Palo Alto. Overpriced for what you get. On market for 1 year, not one price drop.

Home #3. Near #2. 6,000+sf (unheard of in Palo Alto). Seller is also the agent. Ok, she lied about it being built in 2008. It was built in 2004. She lied that it is vacant and nobody lived there. We got there early. She was cooking in that “new” kitchen and clearly was living in the house. Picture this, take a 11ksf lot, now build a 2 story home with a basement on it with 9 bedrooms. If you picture a rat maze you get the picture. To add insult to injury, the neighbor came out and threatened me and my family for parking in front of his house, with a broom stick mind you. The guy lived in ancient tiny ranch house accross the street. He is surrounded by these overbuilt monster homes. I think he is the reason the house has not sold in a over a year (yes, you read right, listing agent actually lists the house as being built after she first listed it).

Home #4. 6k sf near my current house in San Jose. Very nice, but again way overpriced for the area. Seller has not lowered the price in a year.

Home #5. Los Altos, smalish, old, not updated, but priced accordingly and we saw it on Saturday and it sold by Sunday after its first open house. Don’t know what it sold for. I suspect very close to asking.

Not a lot of info here other than yes homes can sell shortly after listing here and at or above asking, but others do sit. And yes, sellers and their agents do lie, they lie a lot. My agent got into it with a prior listing agent who told me they were getting an offer the same day I looked at a house above asking. No such offer ever was submitted. She was bluffing. Same old triks from the bubble market are being used in this market by agents who have not business in this business.

[XBoxBoy]

Raptor,

None of what you write surprises me in the least. The one thing I will comment on, is that you should expect to see small spurts of buying even though the overall trend is going to remain down for quite a while. You see this in a bear market in the stock exchanges too.

Personally, I fully expect to see the beginnings of a bounce this spring. There will be plenty of people that think there will be a turnaround, and they’ll want to get in before the rush. But the fundamentals are still exactly where your banker pointed out they are. And that means this spring bounce won’t hold. Personally, I don’t expect to see seller capitulation in the higher priced areas until fall 2008.

Just my 2cents worth though,

XBoxBoy

[XBoxBoy]

Raptor,

None of what you write surprises me in the least. The one thing I will comment on, is that you should expect to see small spurts of buying even though the overall trend is going to remain down for quite a while. You see this in a bear market in the stock exchanges too.

Personally, I fully expect to see the beginnings of a bounce this spring. There will be plenty of people that think there will be a turnaround, and they’ll want to get in before the rush. But the fundamentals are still exactly where your banker pointed out they are. And that means this spring bounce won’t hold. Personally, I don’t expect to see seller capitulation in the higher priced areas until fall 2008.

Just my 2cents worth though,

XBoxBoy

[XBoxBoy]

Raptor,

None of what you write surprises me in the least. The one thing I will comment on, is that you should expect to see small spurts of buying even though the overall trend is going to remain down for quite a while. You see this in a bear market in the stock exchanges too.

Personally, I fully expect to see the beginnings of a bounce this spring. There will be plenty of people that think there will be a turnaround, and they’ll want to get in before the rush. But the fundamentals are still exactly where your banker pointed out they are. And that means this spring bounce won’t hold. Personally, I don’t expect to see seller capitulation in the higher priced areas until fall 2008.

Just my 2cents worth though,

XBoxBoy

[XBoxBoy]

Raptor,

None of what you write surprises me in the least. The one thing I will comment on, is that you should expect to see small spurts of buying even though the overall trend is going to remain down for quite a while. You see this in a bear market in the stock exchanges too.

Personally, I fully expect to see the beginnings of a bounce this spring. There will be plenty of people that think there will be a turnaround, and they’ll want to get in before the rush. But the fundamentals are still exactly where your banker pointed out they are. And that means this spring bounce won’t hold. Personally, I don’t expect to see seller capitulation in the higher priced areas until fall 2008.

Just my 2cents worth though,

XBoxBoy

[XBoxBoy]

Raptor,

None of what you write surprises me in the least. The one thing I will comment on, is that you should expect to see small spurts of buying even though the overall trend is going to remain down for quite a while. You see this in a bear market in the stock exchanges too.

Personally, I fully expect to see the beginnings of a bounce this spring. There will be plenty of people that think there will be a turnaround, and they’ll want to get in before the rush. But the fundamentals are still exactly where your banker pointed out they are. And that means this spring bounce won’t hold. Personally, I don’t expect to see seller capitulation in the higher priced areas until fall 2008.

Just my 2cents worth though,

XBoxBoy

[EconProf]

BobS
Wow…knife catchers still out there, esp. in the few still- strong pockets of prosperity in this sinking economy.
Methinks the opposing sides on the ongoing debate about the future of RE prices underrate the the growing likelihood of a deep and long old-fashioned recession. Historically, RE prices simply have to react to deteriorating fundamentals such as incomes, spending, unemployment, growing gov’t deficits at all levels, etc. during such declines.
BTW here in Santaluz, a neighborhood you have looked at, prices are softening, inventories growing, and short-sales popping up among my previously overconfident neighbors. Happy hunting…time is on your side.

[EconProf]

BobS
Wow…knife catchers still out there, esp. in the few still- strong pockets of prosperity in this sinking economy.
Methinks the opposing sides on the ongoing debate about the future of RE prices underrate the the growing likelihood of a deep and long old-fashioned recession. Historically, RE prices simply have to react to deteriorating fundamentals such as incomes, spending, unemployment, growing gov’t deficits at all levels, etc. during such declines.
BTW here in Santaluz, a neighborhood you have looked at, prices are softening, inventories growing, and short-sales popping up among my previously overconfident neighbors. Happy hunting…time is on your side.

[EconProf]

BobS
Wow…knife catchers still out there, esp. in the few still- strong pockets of prosperity in this sinking economy.
Methinks the opposing sides on the ongoing debate about the future of RE prices underrate the the growing likelihood of a deep and long old-fashioned recession. Historically, RE prices simply have to react to deteriorating fundamentals such as incomes, spending, unemployment, growing gov’t deficits at all levels, etc. during such declines.
BTW here in Santaluz, a neighborhood you have looked at, prices are softening, inventories growing, and short-sales popping up among my previously overconfident neighbors. Happy hunting…time is on your side.

[EconProf]

BobS
Wow…knife catchers still out there, esp. in the few still- strong pockets of prosperity in this sinking economy.
Methinks the opposing sides on the ongoing debate about the future of RE prices underrate the the growing likelihood of a deep and long old-fashioned recession. Historically, RE prices simply have to react to deteriorating fundamentals such as incomes, spending, unemployment, growing gov’t deficits at all levels, etc. during such declines.
BTW here in Santaluz, a neighborhood you have looked at, prices are softening, inventories growing, and short-sales popping up among my previously overconfident neighbors. Happy hunting…time is on your side.

[EconProf]

BobS
Wow…knife catchers still out there, esp. in the few still- strong pockets of prosperity in this sinking economy.
Methinks the opposing sides on the ongoing debate about the future of RE prices underrate the the growing likelihood of a deep and long old-fashioned recession. Historically, RE prices simply have to react to deteriorating fundamentals such as incomes, spending, unemployment, growing gov’t deficits at all levels, etc. during such declines.
BTW here in Santaluz, a neighborhood you have looked at, prices are softening, inventories growing, and short-sales popping up among my previously overconfident neighbors. Happy hunting…time is on your side.

[Allan from Fallbrook]

BobS: As I’m sure Raptor will tell you, areas like Palo Alto and Los Altos are very different than what you find down here. Call it the “Google effect” or the “Apple effect”, but prices are remaining stubbornly high, and houses continue to move, even at those prices.

I have friend that lives in Los Altos, and he is telling me stories about 16,000sf lots in LAH going for $2MM.

I don’t doubt that the market will come down, but it will probably take much longer than San Diego, OC or LA.

[Allan from Fallbrook]

BobS: As I’m sure Raptor will tell you, areas like Palo Alto and Los Altos are very different than what you find down here. Call it the “Google effect” or the “Apple effect”, but prices are remaining stubbornly high, and houses continue to move, even at those prices.

I have friend that lives in Los Altos, and he is telling me stories about 16,000sf lots in LAH going for $2MM.

I don’t doubt that the market will come down, but it will probably take much longer than San Diego, OC or LA.

[Allan from Fallbrook]

BobS: As I’m sure Raptor will tell you, areas like Palo Alto and Los Altos are very different than what you find down here. Call it the “Google effect” or the “Apple effect”, but prices are remaining stubbornly high, and houses continue to move, even at those prices.

I have friend that lives in Los Altos, and he is telling me stories about 16,000sf lots in LAH going for $2MM.

I don’t doubt that the market will come down, but it will probably take much longer than San Diego, OC or LA.

[Allan from Fallbrook]

BobS: As I’m sure Raptor will tell you, areas like Palo Alto and Los Altos are very different than what you find down here. Call it the “Google effect” or the “Apple effect”, but prices are remaining stubbornly high, and houses continue to move, even at those prices.

I have friend that lives in Los Altos, and he is telling me stories about 16,000sf lots in LAH going for $2MM.

I don’t doubt that the market will come down, but it will probably take much longer than San Diego, OC or LA.

[Author]

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