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16 years ago

I hate to burst the bubble
I hate to burst the bubble here but the reason for this should be pretty obvious and all goes back to thread I started at least one year ago that said homes prices increase in dollars not percentages. It is for this reason we are seeing what we are rather than the credit crunch.

Here’s a simple example:

In early 2004, most of the properties in my area jumped about $150,000 in 2 months. The 300,000 home jumped 50% to 450,000. The 450,000 home jumped 33% to 600,000. The 600,000 home jumped 25% to 750,000. The simple truth is they all went up roughly the same amount dollarwise.

Now we are in reverse and seeing the opposite. The 450,000 property falls 11% to 400,000. The 600,000 home falls 8.33% to $550,000. The $750,000 falls 6.7% to $700,000. They all fell by roughly the same amount.

Thats really all there is to it.

Reply to  sdrealtor

As illogical as it sounded
As illogical as it sounded to me and as much as I believed and stated that it does not make sense that prices would behave as sdrealtor suggested, I have to admit that it appears he was right.

Thinking out loud …
I suppose this could be attributed to the move-up effect. Simplistically, a group of people in starter homes take their $X of gain and put into move-up properties. Pushing these up by similar dollar amounts and so on up the chain.

16 years ago
Reply to  Rich Toscano

or… the dumbing down of
or… the dumbing down of america…

“Prices are going up so i’m going to raise my asking price 50k.

What? that’s a 25% jump in price! you can’t do that!

25 what? no, i’m asking for 50 thousand…

16 years ago

I am not an economist nor
I am not an economist nor did I major in anything close to economy, I am a sales rep that sells high end computer equipment. So please excuse me if my questions/observations seem to indicate I can’t read a graph.

My question, are they using the same numbers $ wise for the whole chart or is there an adjustment as we look back? Meaning would the low-priced on this chart still be considered 482K in 1989?

If so, 95% of the homes in SD would be considered low-priced up until a few years ago.

I don’t understand what Rich is saying about the low-priced being effected differently in the early 90’s, to me it appears the RED LINE has always been on top.

Another observation/possible flaw in this chart I see is this. Say a house was 500K, BLUE line a few years ago, it is counted as Mid-priced, once it dips below 482K, is it then included in the RED line? If so, that could be what is skewing the numbers.

My thought is you can read into this chart whatever you want.

16 years ago
Reply to  Rich Toscano

Good point FSD. Rich’s point
Good point FSD. Rich’s point about the different behavior last cycle is interesting. I think that I need to noodle around with this in my brain a bit more.

While I’m doing that, I’ll amend my comment to more accurately reflect what I intended to explain. Prices rose by dollars this cycle not percentages and when they fall I expect that it will happen in reverse. The truth is I wasnt around last cycle as a realtor or a hopmeowner in SD so I really dont have any expertise beyond the last 10 years.

16 years ago
Reply to  sdrealtor

Pricing going up/down in a
Pricing going up/down in a fixed $ term instead of % doesn’t make sense to me. Is this statement only regarding houses less than $800k-1M? Somehow, I highly doubt houses in the $1M+ range went up only by $150k. Talking about the down cycle, I’m still believing that it’s going down by %. Here are some examples I’ve noticed; I’ve seen several houses in 4S Ranch that was sold around 2005 for $1.1M is now selling as REO for around $850k. That’s about a 22% drop. A $775k house in 4S in 2005 is now listing for $550k, that’s a 29% drop. I’ve also seen many houses in northern Mira Mesa that were sold for around $750k in 2005 now listing for $600k. That’s a drop of about 20%. In Sorrento Valley, I’ve seen houses that were sold in 2005 for around 850k is now listing for around 650k. That’s a drop of about 23%. I’ve also noticed condo/townhouse in Sorrento Valley that were sold in 2005 for around 600k is now listing for 470k, which equate to 22%. Obviously there are many unrealistic seller out there who are listing at 2005 sold price. But this is the worse case I’ve seen in all these different areas ranging from condo to $1M houses. If the condo in SV drop by the same fixed $ amount as the $1M house in 4S, it would be @ 350k right now. The common theme I’m seeing in all the areas I’m watching is that they all are dropping around 20% compare to 2005. With as high as 29% in 4S and as low as 10% in CV. But generally, the cheaper houses went down the smallest in $ amount in the last 2 years but they all come out to the same %. I might be wrong, but that’s just what I’m seeing.

16 years ago

Bottom line is that prices
Bottom line is that prices went up FAR too quickly over what the fundamentals called for. I don’t really care that some people made out or not. IN ANY situation you can think of, some scumbags will make it big in a miserably unbalanced situation and then turn around and preach about how well they did. Always happens.

I don’t understand how anyone can sit here and justify the current housing price issues as being normal or OK when nothing has changed BUT the prices. What has happened is equivalent to Toyota giving their cars away at 0% financing versus 10% for other cars….what you’d expect is people buying more Toyotas and paying more for them because they are “getting a good deal.”

This crash needs to happen and it needs to happen HARD. What needs to happen is for people to get hurt and institutions to fail under all this. What will come out of it is a balance….a correction that has LONG been overdue and will give genuine homeowners-to-be a chance to own a property for what it was meant for…as a home to live in and not a tool for some POS to make a fast buck.

16 years ago

I just went back into the
I just went back into the Case Shiller data and messed around a bit. Just quick noodling in excel, so someone feel free to check my numbers.

Using the San Diego data, I picked three prices of 400, 600, and 800k. These are prices in the low, middle, and high tier. Using the case shiller data, I calculated what there were worth in 2000 (just easiest because case shiller indexes stuff with year 2000 = 100). What this analysis shows is that the low tier (400k) house was worth 155.5K in 2000. The middle tier (600k house) was worth 265.6k, and they high tier (800k) house was worth 387.3k in 2000.

Using these prices, what were these three houses worth in June of 2006 (the peak for the low and high end)? The low end house was worth 461.6, the middle tier one was 667.5, and the high end was worth 849.0. So, at the June 2006 peak, someone who in 2000 bought the low end house had “made” about 306k, the middle tier house about 402k and the high end house about 471k. So, although there was some compression in pricing, you still made about 165k (in absoulte dollars) buying the high tier house than the low tier house. Of course, if you bought TWO low tier (400k) houses instead of one 800k house, you would have made out like a bandit. This was probably the sugar plum fairy fantasy dancing in all those flippers heads….

Even though I am arguing back a bit against sdrealtor’s analysis, I do agree that there was price compression and that this reflected something pretty irrational going on in the market…

ps…since the 2006 peak, the low end house has actually lost more in BOTH percent and absolute dollars than the high end house!

16 years ago
Reply to  brian_in_la

Some numbers to address the
Some numbers to address the dollar vs. % theory.

At the bottom of the last cycle in 1995, 4br houses in 92122 went for 280k and 4br houses in 92126 went for 160k. (Ratio 1.75) (I don’t see what makes 92122 so much more attractive, houses are very similar and weather is only marginally better…)

By early 2003, 92122 hit 550k and 92126 was around 370k. (Ratio 1.5)

By the time prices hit the plateau, 92122 was at 800k and 92126 was at 550k. (Ratio 1.45)

16 years ago
Reply to  Eugene

esmith, based on your #,
esmith, based on your #, 92122 went up $520k while 92126 went up $390k. My personal opinion is that since 92126 is the lower end, there will be more people buying in that price range, so more demand = higher price increase. Especially with the sub-prime, no doc situation.

16 years ago

The shape of this curve is
The shape of this curve is starting to look like Japan:

16 years ago
Reply to  OBecian

This price increase


This price increase differentiation IMO demonstrates the effect of the FINANCIAL component of home prices.

Yes financing was made easier for average and higher tiers of home owners but the huge difference this time around was that people who had bever qualified to buy a home before were given the opportunity to buy with no money down.

It is largely this financial component of valuation which the market is extracting now. Later the fundamental component will come under stress as the local economy contracts then sometime around 2012 things will start to improve.

Happy Thanksgiving everybody!