Rents are up.

[murray]

Asking prices are irrelevant. You can ask whatever you want for property, houses, boats, cars etc but a free market determines the price it is sold at.
It’s pointless to highlight reduced asking prices unless of course the asking prices are less than past sales. More data is needed before this claim can be made.

A 1 month decline of $4.5k (from the previous month’s historic high!) and 2% yoy INCREASE in resale sfr median prices hardly presages a 50% decline. Sure multi-million dollar sales are skewing the median but how is that such a negative for col.

[lendingbubblecontinues]

Murray, OK…sorry to pee in your wheaties, but…

here’s highlighting one exactly like what you’re asking for, with the ad on ZipRealty mentioning that two homes just like it sold for 775 and 800K earlier THIS year, current price of 684K (it won’t fetch that either..I’ll bet ANYONE $500 straight up):

(I posted this originally in the “Observations in my area” thread yesterday)

Here’s one from a neighborhood I’ve been watching for a little over a year now in Rancho Bernardo (SD County)…MLS#066034540.

Per Zip:
Price Reductions:
5/22/06 $760,000 to $724,900
6/20/06 $724,900 to $699,000
7/10/06 $699,000 to $684,000

From ZipRealty:
“Description:
Check out this price! Huge reductions! Motivated seller! Two homes just like this sold for $775,000 and $800,000 earlier this year! Pride of… more”

This is a pretty nice house, too. Listings in the entire meighborhood appear to be chasing the market down, too, with price reductions. More coming on the market soon, too. Sooooo glad I didn’t buy in here last year. What would make a prospective buyer pull the trigger NOW, when all he sees around him is prices being reduced every couple of weeks/months?

Patience, grasshoppa.

[PD]

Murray, the period of decline will be long. We are still just beyond the tipping point. The crazy, easy mortgages that created the bubble will also doom it to collapse. The overuse of margin was a significant cause of the stock market crash of 1929. The housing market will find an equilibrium point. If you believe that current prices are justified, then SD prices (as related to affordability) before the bubble must then be considered too low. The weather is the same that it was four years ago. People lived here then for the same reasons they live here now. There is a new element, however. More and more people are leaving because the cost benefit of the nice weather no longer tilts in favor of SD. Further, people in SoCal are way over leveraged. Something has to give.

[murray]

Sure there are / will be declines in some areas. What about the >20% yoy INCREASES in other areas such as Allied Gardens etc (from yesterday’s UT article).
Again, I’m predicting ~10% decline in SD MEDIAN sfr resale prices over ~ 6 yrs. Could you eventually buy property in certain areas ie Escondido for >10% less than today’s prices? Absolutely. 50% off SD MEDIAN?…no way. I’ll take that $500 bet!
Just like the last downturn outlying areas ie Escondido & Temecula will soften first because of distance from major job centers… especially if gas is $5/gal! ;(

[PD]

I’ll agree with a 10% decline… every year for 6 years. I haven’t broken out my calculator, but that is about 40% decline from today.

[lendingbubblecontinues]

So you’ll bet me $500 straight up that the house mentioned above WILL fetch it’s current asking price? We’ll have to figure out a way to have someone escrow it for us.

[murray]

Sure there are / will be declines in some areas. What about the >20% yoy INCREASES in other areas such as Allied Gardens etc (from yesterday’s UT article).
Again, I’m predicting ~10% decline in SD MEDIAN sfr resale prices over ~ 6 yrs. Could you eventually buy property in certain areas ie Escondido for >10% less than today’s prices? Absolutely. 50% off SD MEDIAN?…no way. I’ll take that $500 bet!
Just like the last downturn outlying areas ie Escondido & Temecula will soften first because of distance from major job centers… especially if gas is $5/gal! ;(
(Why does it take 10 min to post to this site? Server on dial up?)

[an]

I’ll agree with 10% EVERY year for the next 5-6 years. But not 10% total over the next 6 years. If your bet is 10% total over next 6 years, I’ll take that bet anyday since it’s already 1/2 way there only a few months after the peak.

[murray]

Where do you get your “it’s already 1/2 way there only a few months after the peak” data?
SFR resale median peak was May 2006. It’s only down $4.5k.
The sky is falling! The sky is falling!
You bubbleheads sure are entertaining.
Geez.

[an]

Just check the Median price in Nov 05 and Median price now. That’s all I have to say.

[murray]

Bubbleheads confused about the data. Again.
I rest my case.

[an]

What case do you have? Show me your data that show May or June 06 median price and Nov 05 price. According to DQNews, Nov 05 median is $518K and May 06 median is $490K. Tell me who’s confused here? Last I checked, $490k is less than $518k and that’s about 5.4% drop. Maybe you learned your math from Mars or something.

[powayseller]

Please read my post in the U-T thread, where I describe the disservice the media and DataQuick are doing with the median. Here is a reprint of a portion of it:

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.

So you see, the median is telling you nothing about the value of each of your rental homes. To find out the value of each of your rentals today, call a realtor. You will fetch 2004 prices, today.

Did you follow Japan’s property bubble? It was even bigger than ours, and people were in a mad rush to buy anything in sight, because they belived there was a land shortage and “everyone wants to buy in Japan”. Their land prices have dropped for 18 years, and are now 50-70% off the highs, and have just recently started turning back up.

Did you read Rich’s bubble primer? What do you think of the graph which shows per capita income/median home price? Do you think that it is possible that prices will NOT correct this time?

I think you also have the same illusion that I suffered for so long: how can prices be falling, when I read that the median is going up? This question sent me on a quest, and I found the answer when I found Bob Casagrand. He explained this all to me. Well, I await your response. I love a good debate, and you raise good questions.

[murray]

Shouldn’t have to waste this space to explain again but here goes. My posts refer specifically to SFR resale median figures. Now read very s l o w l y and carefully until you comprehend it. Pay close attention to the last paragraph. Public schools…sheesh!

From SDUT 7/12/06:
Last month’s median home price dropped to $488,000, a 1 percent decline from a year earlier and a 6 percent decrease from last November’s peak of $518,000.
The median is the price at which half of all homes sold for more and half for less.
The median price for single-family homes, which represent a significant share of the housing market, reached $565,000, down slightly from May’s record price of $569,500, but up nearly 2 percent over a year ago June.

Note to PowayS: Overall median price numbers are pulled down by condo conversions. Strip them out and SFR resales are stable.

[powayseller]

murray, I know that the median is up 2% from last June, but what does that tell you? Do you really think that a house can fetch 2% more than it could last year? When I sold my house last fall, I fetched 5% below a very competitive market price on 2 offers. My house sold for the same amount as a 30 year old home on 2.5 acres; mine was brand new on 5 acres. The realtor said based on the newness and the gourmet kitchen and 5 acres, mine should go for $830K. Both my offers were $780K. A 3rd buyer asked if I would go under $780K, and when I said no, they walked. So I started to experience the decline myself.

I wondered, howcome my house sold for 5% off, when the median is still going up? My curiosity led me to ask many people, until I found the answer online in Bob Casagrand’s newsletter. He explained what happens with the median, and that you have to dig inside the numbers.

The median is mathematically correct but doesn’t tell the whole story. Let me try again to explain the median.

Say you’ve got 3 CEOS each buying $2mil, $3mil, and $3 mil homes, and you’ve got 2 engineers buying a $300K home and a $500K home. The median is $ 3mil.

Last year the median was $500K, because we had 20 people buying $500K homes. Last year, interest rates were low, and more middle income people qualified. Now these people are priced out: fewer buyers. Sales are down 30%, and that is mostly in the low end. The high end is Hot. THE HIGH END IS HOT!!!

Does everyone get it now? The rich are still buying, because their income is not dependent on wages, and they don’t care if interest rates go up and housing prices go up.

But know this: the $3 mil house was worth $3.8 mil last year, and the $2 mil house was worth $2.5 mil last year. It’s all going down, but the distribution is changing.

So the median is going up because the distribution of homes sold has shifted. But each individul house is worth less today than it was in 2005. The $3 mil home was worth $3.5 mil last year, and the $2 mil home was worth $2.38 last year.

No offense taken with the public school comment, but I have an MBA and computer science degree, and I ran circles around your logic. You’ve got a lot to learn about medians, murray.

likewise, in 2012, when the market turns around, the median willl still be going down, although prices have turned up on individual homes. The median will tell us prices are still dropping, when they are actually going up. So DO NOT Rely on the median, if you want to be ahead of the masses. Smart investors use the leading indicators, not the median. Medians are for dummies!!!

[Author]

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