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powayseller
ParticipantTo what do you attribute the strength of the high end market? Do the high end buyers have homes to sell? If they don’t it would explain the strength of the high end market.
I know the bottom end weakenend first, and that affected the 2nd tier, as the moveup buyer couldn’t sell his home. Next, comes the 3rd tier. Also the bottom end is more interest rate sensitive.
While there are plenty of people making over $400K per year to afford a $1.3 mil house, I doubt there are enough to buy all the houses built for them. So I wonder how we will get buyers for all those $1.5 mil and up homes? It seems like a small pool of buyers.
Participantsdr, I can see that representing both buyer and seller helps to increase sales volume, since the $1.25 mil counts twice, once for buyer side, once for seller side. So good for you. I hope it goes through. But what do you think about dual agency?
ParticipantNovice, I am sorry you were offended. It was not my intent. I was raised to value education over sports, so how is that bigoted? I am explaining my own upbringing. I am a minority race too. How can I be bigoted? I agree that political correctness has gone too far. Crediting a race with valuing academics is not even remotely similar to calling someone’s home a crack capital.
sdrealtor, congratulations on your success. How many million dollar homes did you sell this year versus last year? Do you think the high end is staying strong? You say your sales volume is up, but how is your number of sales this year versus last year, which is what we keep reading about: we read that sales are down 30%, and I wonder if your own sales are down 30% too. Perhaps you have fewer listings, but they are more expensive ones. That would be a way to keep up your revenue in a declining market, to get the higher priced listings. Hopefully there are no contingencies where your buyer must sell a property first. Those are kind of risky. But it sounds like you would not accept that type of offer anyway. I wish you the best, even if we don’t see eye to eye on many things. I value your role as a breadwinner to your family, and hope you can keep providing for your family in the manner you like. I hope you can feel the sincerity of this wish for you.
ParticipantThat’s why I get my current market data from piggington and Bob C. I speak with him regularly about the market. You really need to work with a good realtor like Bob to keep yourself in the know. The media lags by one year. The DataQuick and NAR reports lag by 3 months. And they don’t give you the whole story.
DataQuick was showing median price rising until just last month, whereas I knew from Bob C. that the low end stopped rising in 2004 and the mid and high end in 2005. When the market turns back up, the realtors will know. The media will still write that RE is dead for one year after the market has turned.
Look at inventory, DOM, HAI (home affordability index), and stay in touch with a realtor to help you figure out the proper market price and make good negotiations. A good realtor is worth their fee. I am now convinced that a good realtor is essential in structuring a good deal. Unless you have your own MLS access and can make the necessary research. Two big IFs.
ParticipantLookOut, thank you for your views.
Whether home prices in higher API areas are justified or a proxy of the demographics of the area, whether construction costs would be higher without illegal labor are certainly home related topics.
I am certainly open to buying a house in a lower API area and paying less, if it could be shown that the API does not matter. This is definitely housing related to me. I paid much more to buy a house in Poway vs. El Cajon or Mira Mesa, under the belief that test scores matter. Perhaps they don’t. I wanted to explore this belief, but regretfully, it seems some here are too easily offended.
Pretending differences in housing markets and the reasons that people pay more for certain areas don’t exist in the guise of political correctness would diminish our quest to understand the housing market.
I am now reluctant to post today’s story about an Escondido ordinance that would ban illegals from renting, because I don’t know if some people on this forum could handle it.
We are all loved. You are loved.
ParticipantWhat a gem of a post. I think we all must face the recession, and position ourselves accordingly.
Did anyone read my post Sell Now? I wrote so many posts about the cutback in consumer spending, that I’ve lost track. To summarize in one sentence: 70% of GDP is consumer spending, which has been sustained by taking equity out of ever rising home prices since wages have been stagnant, and when housing prices flatten our economy will come to a standstill, and the export oriented Asian economies will suffer as well.
Commodities and global stock markets are dependent on American consumer spending, and both categories will decline.
lindismith, you might like Ahead of the Curve by Joseph Elliott (#1 ranked retail analyst for 18 years, formerly at Goldman Sachs). His website aheadofthecurve-thebook.com updates the book’s charts every few months. He found a few decades ago the business cycle works like this:
wages –> consumer spending measured by PCE–> manufacturing/production –> capital spending –> employment –> wages
Each stage is delayed 0-9 months off the prior stage. Thus, while consumer spending is now slowing, capital spending will remain strong and employment will remain low causing the market analysts to believe the economy is strong whereas it is already weakening.
The stock market prices feed off this loop. PCE, personal consumption expenditure and the other items are measured by year-over-year changes, not the quarter-over-quarter that is reported by the government agencies and in the news. The yoy takes out the noise better.
Market analysts make the mistake of seeing employment numbers and gauging economic health from that, whereas employment is the MOST lagging indicator. If you want to track the future of the manufacturing sector, look at PCE, and wages. By the way, he found that interest rates are correlated with PCE, not predictive. The best predictor is the first indicator: wages. His model does not take into account MEW, so I would include “rising house prices and ability to borrow against it” along with wages. His book provides a road map to where we are going. So does Sell Now by John Talbott.
Elliott’s charts indicate we are heading into a recession.
My friend is a salesman at a high end kitchen appliance store, and he told me it’s been very slow lately. Another friend got laid off his job as a window shutter company manager, and is now cutting hair full time.
It is incumbent that, armed with this knowledge, we position ourselves to remain financially secure, and to help others do the same. That is the part I haven’t figured out yet.
lindismith, how can you position yourself for the recession? Can you sell things which people need regardless of the economy? For example, people will keep buying toothpaste and gas, while cutting back on dining out and home remodeling. Sell your busines while it is at its height, cashing out? Diversify your products? Perhaps your line will be in high demand regardless of the economy? By the way, the 2000-2001 recession was only in capital spending; the consumer kept shopping, so the recession was brief and mild. This next recession will be much worse, because it will be consumer led. Also read The Dollar Crisis if you like that kind of financial stuff. I read it twice, just to make sure I understood it all.
Here’s a link from the bubble blogger section. Right on with the stuff I just wrote about Elliott. I am editing this post to include this from The Big Picture.
ParticipantDid you convince him to wait?
If it’s not too late to join the discussion: Ask him to read Rich’s Evidence of a California Housing Bubble and Risks of a Serious Home Price Decline. Both article on main piggington page. Those articles convince me to sell my house, that I had just built and lived in for a few months.
Why buy now? How can we be sure prices will drop only 10%? Could they drop 25%, 50%? Why not wait until prices start to turn up, so we know for sure the bottom has passed? Look for the leading indicators by working with a realtor. Media lags the market by one year. When DOM and inventory reduce, then the supply/demand imbalance is shifting and prices will go up. The answer is we do not know how far prices will drop, so what would be the reason to buy now, to catch a falling knife? Buying now is like gambling, because you are making a wild guess that prices will drop only 10%. What is his proof? I am interested in his logic. Perhaps he or you can post it.
ParticipantI have not bought them, but have been warned often to stay away. We asked our landlord, who owns many SD rental properties and started his career with buying foreclosures here in the 90’s, and he said, “Foreclosures are nothing”. The price is too high now. Buyers bid them up, thinking they are getting a good deal.
Now, foreclosures might start off at 10% below market value, and are bid up to market value.
Privatebanker had a post a while back, where he described REOs going for 20 cents on the dollar. There will be a time you can buy foreclosures at 50% off. In a few years.
Foreclosures don’t allow you to do a home inspection. Would you catch the IRS liens? Can you do a title search? Preview and inspect the house? I’m not sure.
With the big RE boom came many books advocating foreclosures, crowding out the market. Some years back, a handful of investors came to auctions, and now you’ve got hundreds of people. This demand pushes up the price.
Wait until banks own hundreds of properties and are willing to discount them heavily, as in the 90’s.
ParticipantYes, check your address on the assessor website.
Participantdesmond, you’re right on! Funny comment, I have to laugh at myself.
I think Bob’s comments about the high vacancy rate are very important, and haven’t been covered enough. He told me sales are down by increasing increments every quarter. Down 10%, then 20%, then 30% in this last quarter. If we keep going at that rate and don’t pick up any speed, we will be down 40% in the Q3 06, and down 50% in Q4 06.
Bob also explained that the high inventory is due to fewer sales, not more listings. This is a big misunderstanding floating around. People think desperate investors are unloading their properties. That is not contributing to the high inventory. I believe when people start dumping their homes because their mortgages adjust, inventory will skyrocket.
ParticipantI’m sorry I started a discussion that drifted off course.
I strongly disagree with the genetics stuff, and I did NOT write that. So please be careful in what of the above is attributed to me.
I was explaining the API scores, and that the difference is NOT genetic, but cultural and environmental. I tried to convey that academic success is the the most important thing in life. Perhaps API is overrated.
I am half Iranian, and my race is disliked. So if you have a racial bone to pick, you are barking at the wrong person! I believe the API scores reflect environmental, income status, and values, not ability or potential. I regret I wasn’t able to convey that. I must work on my communication.
As far as Bob’s name, he’s my friend, so I was sticking up for him. If he thinks it’s funny, I have no problem with the joke.
ParticipantI got this off Jim the Realtor’s blog. Jim is another honest hard working realtor.
QUOTE
“I mentioned in a deleted comment about losing a listing recently.
I had made a professional presentation that included a 20-page analysis of the property, and detailed the current market conditions. I recommended a list price of $749,000 for an old beach house that was purchased a year ago for $750,000.
When I followed up the next day, the seller told me she spoke with another agent who told her $795,000. She listed with him. I had to ask, “Did he give you a presentation that proved he could get that?” She said no, but she could use the extra dough.
Today, after just 12 days on the market, the agent put it on the value range of $695,000 to $795,000. There’s no doubt that the agent told the seller that she doesn’t have to take the $695,000, “it’s just to get the conversation started”.
We know what’ll happen next, right?
They’ll get an offer in at $695,000, and the agent will throw his hands up, blame the ‘market’, and tell her to take it.
This is realtor malpractice.
If you are thinking of selling, don’t fall for the old ‘high-ball’ trick. Examine the evidence closely, and ask a lot of questions of the agent you’re interviewing. Do they have a clue about the bubble? Do they have any way to justify their outrageous price? Or are they just trying to get the listing, so they can work you over 12 days later for the $100,000 price reduction?”
END QUOTE
ParticipantMy prediction was based on the fact that trends grow before they sizzle out. I figured if 44K people left last year, we would see more leave this year, because the factor that started the outmigration (high housing costs) is still in place.
ParticipantI agree they will fall, as will almost all retailers. The stock market in general is going down.
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