September 2022 housing data: inventory ticks up a bit, prices drop a bit

sdrealtor wrote:
FWIW sitting
[quote=sdrealtor]
FWIW sitting where i do and looking at real time data the way i do gives me a really good feel for these things. I think my track record of predictions shows that pretty clearly[/quote]

You’re looking at consumer/retail buyers, but that’s not who will move the market this time around.

The past decade has seen a ton of investment/speculation buyers, including big funds and corps, and they don’t act like consumers.

I’ve been watching for a rush to the exits by this group for years, and now I’m seeing signs of it in the financial press.

sdrealtor wrote:drboom
[quote=sdrealtor][quote=drboom][quote=sdrealtor]
FWIW sitting where i do and looking at real time data the way i do gives me a really good feel for these things. I think my track record of predictions shows that pretty clearly[/quote]

You’re looking at consumer/retail buyers, but that’s not who will move the market this time around.

The past decade has seen a ton of investment/speculation buyers, including big funds and corps, and they don’t act like consumers.

I’ve been watching for a rush to the exits by this group for years, and now I’m seeing signs of it in the financial press.[/quote]

Meh. I’m talking about around here and they are not big players here. real estate is local to a large extent[/quote]

In God We Trust. Everyone Else Bring Data:

https://www.sandiegouniontribune.com/business/story/2022-10-02/investor-home-purchases

sdrealtor wrote:Meh I’m the
[quote=sdrealtor]Meh I’m the only one here who brings that level of data.[/quote]

You haven’t done so here. That which can asserted without evidence can be dismissed without evidence.

Now, is there something wrong with either the U-T’s data or analysis? They gave some detail on both.

As for your other post, people can hunker down for only so long. These arguments for the alleged upward stickiness of real estate prices aren’t any more persuasive in 2022 than they were in 2005/6–or the early 90s, for that matter.

Just like the stock market, assets are valued based on the sale of other similar assets. If a small fraction of owners decide to bail at the same time, it will represent a large fraction of price movement and will have ripple effects throughout the economy.

The fact that the sales in question do not represent someone looking for another place to live (because they are investments) means more “retail” inventory is being added to the market and thus further depressing prices.

The coming recession will just add to all of this.

But by all means, present data to the contrary since that’s what this site is all about.

sdrealtor wrote:Follow my
[quote=sdrealtor]Follow my monitors. Weekly data

You don’t understand how this works then. People hunkering down doesn’t mean everyone. It means more and in this case as the data is showing a lot more.[/quote]

I called the bubble before this site was started and I nailed the 2009 bottom within weeks so maybe I do know something. I heard the same arguments back then, and you still haven’t presented any evidence.

[quote=sdrealtor]Owner of rental properties are seeing rents far above what they ever expected. It seems like a daily occurrence I’m talking to someone whose relative owns 2-5 houses here that’s funding a retirement and when they inherit then they plan on the same. Just regular folks that are long time residents.[/quote]

Selection bias: why are they talking to you? The plural of anecdote is not data.

They are getting those rents because we’ve had $trillions of liquidity pumped into the economy! My own upper middle class family has gotten north of $20k in cash over the last couple of years, and I know a ton of young people who made more on unemployment than they had ever made in their lives.

Now that party is pretty much over, and the investor class I cited will bolt for the exits once they can’t get the returns needed to service their highly leveraged properties. (The grandmas and grandpas who own & rent a few houses in my circle of acquaintances tend to be cheap as hell about updating their paid-for properties and seem content to collect the resulting lower rents. YMMV)

Another downward pressure locally is the well-documented net population loss we’ve seen in the past few years in SD and California generally. It was down by 45,000 from 2019-2021 in SD according to a couple sources I just saw, which is over 1%.

[quote=sdrealtor]Last year we had a huge drop in inventory which at the time i said presaged a market that was a powder key about to explode fueled by low rates

Guess what we’ve got this year? Much lower new inventory than last year! Guess what we don’t have this year? Low rates anymore! So we have anemic new listing counts far below what we’ve seen in past years with even more anemic demand. It’s hard to know what will happen but what wont is a market collapse[/quote]

With investors, especially the big corporate owners, it doesn’t matter how many sell. What matters is what they sell for because they will have to eventually mark their holdings to market.

With retail buyers, it’s all about the monthly payment. If you think mortgage rates will magically return to the fairytale land of sub-4% rates anytime soon, I’d like to hear your reasoning. The result is that the monthly payment devoted to principal will be smaller. Add in the layoffs that have already either happened or have been announced and you have the arrows all pointing in the same direction.

an wrote:drboom wrote:
I
[quote=an][quote=drboom]
I called the bubble before this site was started and I nailed the 2009 bottom within weeks so maybe I do know something. I heard the same arguments back then, and you still haven’t presented any evidence.[/quote]
2009 was not the bottom where I live. The bottom was around 2011. I bought December 2008 and a model match down the street sold for about 5% less in 2011-2012.[/quote]

There was indeed a dead cat bounce after 2009 that ended with a near-2009 bottom in 2011, but I’m talking about the bottom for SD County as a whole. Individual deals are always possible.

“It’s tough to make predictions, especially about the future.”
–Yogi Berra

Having said that, I do have some things to offer for consideration:
– Sale price to rent ratios always return to historical norms, with some period of “over-correction” below the historical average on the downside.
– Rents will have to come down because the gigantic government handouts are done and we’re headed toward a contracting economy. Those who think nominal prices will remain the same while inflation pushes down real prices should consider the decreasing wage pressures resulting from a weak labor market. This will naturally depress house values.
– A good deal of residential real estate has been bought up by investors over the past 10 years. They are equipped and disposed to dump those properties much more rapidly than regular homeowners, and they will be unsentimental about it.

Some data to consider:
– There are about 1,237,000 housing units in San Diego County (US Census Bureau, July 2021)
– Historically, annual sales volume has been around 42,000 “homes” in the last several years, or about 3.4% of total inventory. (Statista, 2022)
– The owner-occupied rate is about 54% (2016-2020, US Census Bureau)

If only a small fraction of that huge landlord group decides to bail at the same time (which is now getting some attention in the financial press–I have been predicting this for years!), they will swamp the market: instead of 4.5k/month of inventory selling into pent-up demand, it could easily be twice that trying to sell into dwindling demand.

an wrote:
Unlike the stock
[quote=an]
Unlike the stock market, with housing, you must live somewhere …[/quote]

That “somewhere” appears to be Arizona, Texas, etc.

The data is pretty easy to find on this topic so I’ll leave it as an exercise for the reader.

an wrote:drboom wrote:an
[quote=an][quote=drboom][quote=an]
Unlike the stock market, with housing, you must live somewhere …[/quote]

That “somewhere” appears to be Arizona, Texas, etc.

The data is pretty easy to find on this topic so I’ll leave it as an exercise for the reader.[/quote]So, you’re predict AZ and TX prices will go up because all the CA owners are selling and all the younger people who are moving out of CA to AZ/TX to buy there?

When and how much?[/quote]

Presumably they have already seen the price increases. They have been building like crazy, too: Texas had, by my arithmetic, 3.58X as many housing starts per capita compared to California in 2021 (ipropertymanagement.com for starts, Wikipedia for population). Arizona was even higher at 3.78X California.

In absolute terms, Texas had about 15k more starts than net immigration (~185k vs ~170k net immigration), while Arizona lagged (~48k starts vs. ~93k immigration). Texas likely over-built if you assume 2.5 persons per housing unit, while Arizona kept pace and maybe a little more.

California had ~69k starts and *lost* ~367k population in the same year!

an wrote:drboom
[quote=an][quote=drboom]Presumably they have already seen the price increases. They have been building like crazy, too: Texas had, by my arithmetic, 3.58X as many housing starts per capita compared to California in 2021 (ipropertymanagement.com for starts, Wikipedia for population). Arizona was even higher at 3.78X California.

In absolute terms, Texas had about 15k more starts than net immigration (~185k vs ~170k net immigration), while Arizona lagged (~48k starts vs. ~93k immigration). Texas likely over-built if you assume 2.5 persons per housing unit, while Arizona kept pace and maybe a little more.

California had ~69k starts and *lost* ~367k population in the same year![/quote]
As they say, there are lies, damn lies, and statistics. As for lost in population statistics, who is moving out? Would these people be in any position to buy a house? If these are renters, why has rent gone up when population went down? Econ 101 would say, if you have decreased demand, price will go down.[/quote]

“A couple trillion bucks’ worth of windfalls and unemployment benefits the likes of which we have never seen increased the supply of money” is what your Econ 101 professor would comment while he gave you a “D”.

As for your shopping preferences, this isn’t a microsite devoted to a specific 80 acres of San Diego County so most of us are going to be writing in somewhat more general terms.

an wrote:drboom wrote:I’m not
[quote=an][quote=drboom]I’m not backtracking one bit. Go look at the Case-Schiller-based charts on this site, which aren’t for a three block section of Golden Hill or whatever, and you will clearly see the bottom of the market in nominal and especially real terms.[/quote]
Since you financed your home like the vast majority of the buyers, the bottom was in 2011. Look at Rich’s chart for real payment. 2011 was ~5-10% below 2009. Also, we all know Case-Shiller number is delayed by a few months, as Rich pointed out in the past, so the “bottom” you saw in the Case-Schiller index already come and gone by the time you see it on the index.[/quote]

These things aren’t mutually exclusive: like a lot of people, I hit the sales price bottom in mid-2009 and then I re-financed a couple years later. I like big bottoms, I cannot lie.

I’m not claiming the mid-2009 bottom was a once-in-a-lifetime golden opportunity, mind you, and I already said I wasn’t trying to time the market in any case.

But the figures are what they are, and from a how-much-money-did-people-sell-their-houses-for perspective (aka health of the market), the buyer’s payment doesn’t matter.

Let me unpack this in detail
Let me unpack this in detail so we’re on the same page:

[quote=an]I already disproved you that for the area I was interested in, the bottom for both price and payment was not 2009.[/quote]

You’ve made some assertions about a specific area, sure, and I guess you and a few dozen others have a long-term interest in it. I and most other people live and work in a larger world, however, so I think you’re unduly limiting the discussion.

[quote]Even though I did exactly what you did, I could have saved even more money if I waited until 2011.[/quote]

Maybe you could have, and maybe not. All sales unique. But again: the health of the market as it is commonly understood is NOT driven by buyers’ payments. We don’t get payment appraisals, REITs don’t mark payments to market, etc. … the sales value, estimated or actual, is what matters in this context.

[quote]sdr have data on the ground at the time as well. City statistics only matter to talk about in generality.[/quote]

I don’t really have time to talk about every house, individually, in San Diego County–do you? It’s obvious that there are exceptions to broader trends at the single house or neighborhood level, but you’ll be hard pressed to find anyone else to share your narrow geographic interests with.

[quote]However, it does not help buyers who try to time the absolute bottom for the area you want to buy in.[/quote]

Timing the market requires a crystal ball. You only know if you achieved it in retrospect.

Bottom line: Sales price is KING. All the lower interest (i.e. payment) rates did in the last several years is allow people to more easily put themselves in a position to be underwater with no way out. Interest rates won’t be going back down to where they were anytime soon, and the share of income that can be allocated to housing is fairly inelastic so something has to give.

sdrealtor seems to think people are going to shackle themselves to their houses indefinitely or something, which I find unrealistic.

sdrealtor wrote:Once again
[quote=sdrealtor]Once again you are completely twisting my assertions. I never said every homeowner would shackle themselves to their homes. I said a lot more people would dig and/or hold onto homes longer.[/quote]

You claim they will do it in such numbers and with enough tenacity that it will put a brake on the market, which I assert would require something like “shackles.”

[quote]So in your larger market theory that doesn’t mean zero inventory it means significantly less inventory. When balanced out against whatever demand is out there less supply naturally keeps prices higher than more supply does.[/quote]

A) What makes you think this layoff tidal wave is going to generate support for anything close to the prices we have now? People don’t actually have to lose their jobs to have an effect on the market: uncertainty breeds caution, and the headlines are full of bad news right now.

B) Because the market is heavily based on comps, all that needs to happen is for some highly leveraged landlords to see rents dropping. They’ll cut their losses and reset the bar downward for everyone else–they’d be fools not to. The market will supply the momentum from there as usual.

The days of financial electroshock therapy are over now that we have a Teahadi House all set to obstruct anything the Cadaver-In-Chief might want to do in the way of bailouts, so the economy is going to have to take its long-delayed medicine.

[quote]As for the market, bottom, during the downturn, I was doing dozens of short sales all over Southern California, not only did I do them in San Diego, but I did them in various parts of Riverside County, Orange County, San Bernardino, county, LA County and even Ventura county. I had as good a sense of what was going on as anyone, as I was negotiating deals all over every single week. I know when the bottom was, and when lenders were capitulating the most.[/quote]

If you know something Messrs. Case and Schiller don’t or didn’t, then OK! I’m just reading their processed data as presented by our host.

Why do I feel like I’m
Why do I feel like I’m arguing with Lawrence Yun? 😛