I’m on vacation with Mrs. Piggington so I’m going to make this quick. MLS data shows that for the first time, median prices for both condos and single family homes have gone negative year-over-year.
As the graph shows, the median condo price was hit particularly hard last month.
There is a lot of noise in these numbers, and this doesn’t really change the fundamentally important fact that we at piggington.com were already aware of: that the prices of individual homes (as opposed to the median price of all homes sold) have been declining for a while now.
However, there are two things to think about here:
- Unless this was a one-month anomaly, the median condo price appears to be deterioriating very quickly.
- The median-obsessed mainstream press could make a big deal out of this. (Note that they are working with a different data set, so their numbers might not come out negative. Given the depth of the condo price drop, however, I will be surprised if this happened). If they do turn up negative number, the ensuing panicky articles could increase the rapiditiy of the pendulum swing towards negative sentiment.
Whatever happens, this is the very beginning of a multi-year correction process.
Finally, with the median
Finally, with the median turning negative y-o-y, I no longer have to explain to people why median price are still + even though actual house price is -. It will be interesting to see how they (RE industry) spin this.
Perhaps CAR will simply stop
Perhaps CAR will simply stop reporting median price numbers –the same way they did for HAI (Housing Affordability Index) when it got “too low”.
The real shame here is the
The real shame here is the professor being on vacation when such a momentous event has just occurred! Who is at the helm? Where will the information come from? I’m scared, were all going to sink together. The sky is falling.
Oh wait, sorry got a bit ahead of myself thats 07. Good to see the numbers finally heading down a bit. Here’s to hoping this isn’t noise.
As they would say at thehousingbubbleblog.com, “Woohoo, negative price appreciation for everyone!”
Josh
Interesting this happened in
Interesting this happened in the middle of summer during what’s ordinarily the peak buying season. Lots of green eyeshades working overtime at the San Diego NAR to explain this one, rest assured.
And a big, belated attaboy to the prof on his successful Series 7. His mixture of commonsense, plain-speaking economics and certified expertise of the capital markets could spark a financial revolution. Carnegie and JP Morgan would welcome him into their ranks.
…slowing sales.
…slowing sales. checked
…raising inventory. checked
…slowing appreciation. checked
…increase in foreclosure rate. checked
…flat appreciation. checked
…month-over-month decrease in price. checked
…further slowing sales. checked
…inventory breaks records. checked
…year-over-year decrease in price. checked
…significant increase in foreclosure volume. (pending)
…price freefall. (pending)
Long overdo! Now the big
Long overdo! Now the big question, as Rich has indicated, is this an aberration or the beginning of the end. I’m putting my money on the latter. If the next 3 months are down also, especially if the downward rate accelerates, stick a fork in it. The next questions are how fast, how far and how long.
This bubble has been one of the fiercest and longest lasting in San Diego history, having lived through the 2 previous booms/busts. If there is truth in the adage “The bigger they are the harder they fall”, this bust is going to make the previous ones feel like a walk in the park. In my estimation, this bust will be downright ugly.
In my neighborhood, Point Loma/Ocean Beach, I still see the loons buying these grossly overpriced shacks, although not at the pace they were selling before. The panic to buy is still somewhat out there, although ebbing.
Just found this site. Very
Just found this site. Very interesting. I live on the East Coast (Virginia) and over the last year or so have become very interested in watching West Coast realestate prices. The prices seem so out of line. My wife and I are home owners (actually have paid off our home) and I understand fully why someone would want to own. I love having my own place. But, I could have never bought on the West Coast. The prices are insane. We currently own a home on five acres. The house is around 3000 square feet (walk out basement, garage in part of the basement). We bought the house in 1997 for $155,000. The seller of this new house(a builder) was asking $179K. We checked how long he’d had it on the market and gave a low-ball offer. He was very hungry and sold. Then we paid all we could towards our mortgage until it was paid. Thing is, I don’t really like to see our home’s value rise. We would never take out a home equity loan, so rising home prices just costs us more in realestate tax. Last time the county assessed our home at $233K. I guess when we get old we may want to downsize, but I doubt it. I would love to see home prices drop since we plan on staying put. Good luck to you all out west.
My husband and I live in
My husband and I live in Encinitas (we rent). We like to walk around the area (for exercise, not to shop for homes) but since we’re bubble-bears, we keep an eye on local SFH. We see lots of houses for sale west of the 5 (many of them on the same street, there are probably a half-dozen of them in a 5-block area) that look like they were built in the 60s, overlooking I-5, probably 3/2s by the looks of them, for around 1.15M. One recently reduced from 1.25 to 1.15M. By contrast, yesterday we saw a beach-bluff-front property (3/2 with a 1/1 attached) for around 4M.
People say prices in the beach areas won’t tank (limited land, etc. and everyone wants to live by the beach – I know I do). But I think they are already slipping.
My name is Steven
My name is Steven Krystofiak, President of the Mortgage Broker Association for Responsible Lending. http://www.mbarl.org I have a letter in a word document form that highlights the risks of the current loan industry unrealized by regulators and economists alike, mainly due to stated income loans.
Email me at contact@mbarl.org if you want me to send you a copy.
~ Steve Krystofiak
http://www.mbarl.org
A recent sample of 100 stated income loans which were compared to IRS records (which is allowed through IRS forms 4506, but hardly done) found that 90% of the income was exaggerated by 5% or more. MORE DISTURBINGLY, ALMOST 60% OF THE STATED AMOUNTS WERE EXAGGERATED BY MORE THAN 50%. These results suggest that the stated income loans deserves the nickname used by many in the industry, the “liar’s loan.”
13 main points in the letter are;
1. Stated income loans are associated with fraud, and started to become popular in 2002.
2. Banks originate these loans because they are profitable and then sell them to reduce their risk.
3. Fraud is encouraged by the banks
4. Stated income loans help no one.
5. Exotic loans originated with stated income are now causing foreclosures or forcing homeowners to refinance into negatively amortized loans.
6. Stated income loans are why home prices have skyrocketed. They have caused a large demand in the US housing supply.
7. Banks have sold their loans and have already made their profit. Investors will soon realize stated income loans are too risky and stop purchasing them.
8. Almost anyone can get a stated income loan for $950,000.
9. Stated income loans cost consumers hundreds of dollars a year because of higher interest rates.
10. Stated income loans allow tax cheats to purchase homes easier.
11. Stated income loans are not always faster than fully documented loans.
12. Appraised values are often inflated. Underwriters are basing their decision on inflated home values, inflated incomes and inflated assets. The only “real” number is the FICO (credit) score. This is why underwriters have become focused on FICO scores.
13. Rules are not enough, they must be enforced.
My name is Steven
My name is Steven Krystofiak, President of the Mortgage Broker Association for Responsible Lending. http://www.mbarl.org I have a letter in a word document form that highlights the risks of the current loan industry unrealized by regulators and economists alike, mainly due to stated income loans.
Email me at contact@mbarl.org if you want me to send you a copy.
~ Steve Krystofiak
http://www.mbarl.org
A recent sample of 100 stated income loans which were compared to IRS records (which is allowed through IRS forms 4506, but hardly done) found that 90% of the income was exaggerated by 5% or more. MORE DISTURBINGLY, ALMOST 60% OF THE STATED AMOUNTS WERE EXAGGERATED BY MORE THAN 50%. These results suggest that the stated income loans deserves the nickname used by many in the industry, the “liar’s loan.”
13 main points in the letter are;
1. Stated income loans are associated with fraud, and started to become popular in 2002.
2. Banks originate these loans because they are profitable and then sell them to reduce their risk.
3. Fraud is encouraged by the banks
4. Stated income loans help no one.
5. Exotic loans originated with stated income are now causing foreclosures or forcing homeowners to refinance into negatively amortized loans.
6. Stated income loans are why home prices have skyrocketed. They have caused a large demand in the US housing supply.
7. Banks have sold their loans and have already made their profit. Investors will soon realize stated income loans are too risky and stop purchasing them.
8. Almost anyone can get a stated income loan for $950,000.
9. Stated income loans cost consumers hundreds of dollars a year because of higher interest rates.
10. Stated income loans allow tax cheats to purchase homes easier.
11. Stated income loans are not always faster than fully documented loans.
12. Appraised values are often inflated. Underwriters are basing their decision on inflated home values, inflated incomes and inflated assets. The only “real” number is the FICO (credit) score. This is why underwriters have become focused on FICO scores.
13. Rules are not enough, they must be enforced.