Posted: 16 Mar 2011 03:30 AM PDT
The median home price declined on a year-over-year basis in February for the first time since October of 2009. Home sales hit a three-year low.
Irvine Home Address ... 38 WILLOWGROVE Irvine, CA 92604
Many buyers purchased for appreciation, and they got the property they wanted, but now that they are underwater, they can hardly see it through. Many walk away.
They make a list of what they need before they give back the deed because they know the pressure on prices is not going to stop.
Wise up! Record low sales, high rates of foreclosure and falling prices are not good signs for the real estate market.
March 15, 2011
How do they know what motivates buyers? Aren't those statements really just bullshit? Dataquick has consistently cheerleaded for the realtor community, and it comes through in their press releases where they always have some positive spin they put on the data.
In other words, rather than showing normal seasonal strength coming off a January low, the market actually deteriorated. Is this spin true "A small change in sales – up or down – between January and February is normal for the season?" Well, the OC Register did some digging, and according to them, "This early year decline is a bit of a rarity: It’s only the 9th time since 1988 that homebuying activity was lower in February in January." 9 times out of 23 seems rather rare.
See those huge down spikes on the chart below? Those are January sales numbers.
See those huge up spikes back to the normal range? Those are February's typical gains.
We have more houses than we did in 1988. We have more people living in Southern California that we did in 1988. How is it that sales are not at least in proportion to the increase in the number of homes or the number of people? I think we all know the answer, but it is worth noting that sales rates are very low by any standard measure.
Irvine is different, right? New home sales continue to outperform, right?
Whenever the percentage of distressed sales exceeds 40%, prices generally fall.
People portray this as some kind of investor conspiracy trying to squeeze out the little guy. The reality is that investors are stepping into the void left behind by owner occupants who could not sustain ownership. If there were an owner occupant capable of sustaining ownership, their bids for properties would almost certainly be higher than an investor's bid. Investors do not crowd out owner occupants. To the contrary, as the economy improves, it will be owner occupants that bid up prices and crowd out investors.
Did you recover from that kool aid overdose?
Notice that they buried a key piece of information in the middle of the article as if it wasn't important. I used this as a headline because it is important news.
Wow! the median in Southern California declined more than 50% from peak to trough -- assuming you believe that was the trough.
Do they have any more excuses for the market's poor performance?
The beaten down markets are bottoming and starting to recover while the previously immune markets are beginning to falter.
And none of that is going to change. When you hear pundits describe this situation, they make it sound like a temporary overreaction. Happy days will not be here again soon.
It is good to know that only 7.8% of buyers are foolish enough to take out an adjustable rate mortgage at the bottom of the interest rate cycle. It's amazing that the market typically has 38% of its loans as ARMs. That will change as interest rates begin they cyclic climb.
Jumbo loans will not be 40% of the market any time soon. Since these loans are not government backed, the interest rates are about 3/4 of a point higher. That translates into a significant loss of affordability once jumbo financing is required.
Now we are seeing real payments based on real incomes. During both housing bubbles, toxic financing became common, and payments became detached from reality.
Irvine Shadow Inventory
realtors have been consistently denying the existence of shadow inventory. It's always rather surprising to me to see people deny the obvious. Did they think the shadow inventory would never surface or never be identifiable?
Todays' featured property was first profiled on 7/30/2008. Back then, an asking price of $569,000 was one of those ridiculous short sale prices well below market. Today, that would represent a $35,000 profit from today's asking price -- plus the lender has eaten two years worth of lost payments. Today's featured property was purchased by the bank as REO on 6/11/2009. What have they been doing with this property for the last two years? If that's how fast their renovation crews work, they need better help.
The former owners paid $745,000 on 3/2/2006 using a $633,250 first mortgage, and a $111,750 down payment -- now gone. They refinanced on 6/25/2007 with an option ARM. They obtained a $78,000 HELOC, but it is unclear if they used it to withdraw their down payment. If they didn't, I bet they wish they did.
This house was in shadow inventory for the last two years. Perhaps properties like this are picked up on a report somewhere, but it was not for sale on the MLS, and it was not rented out. It sat there empty. It makes more sense for the property to sit empty rather than sell it and lower prices -- at least that's what the banks believe.
Expect to see more properties like this, particularly if lenders believe there is some demand to sell into. It's these properties coupled with the ongoing distress still hanging over the market that will prevent any meaningful appreciation for the foreseeable future.
It's more than an abstract idea. You will see it happen house by house here at the IHB.
Irvine Home Address ... 38 WILLOWGROVE Irvine, CA 92604
Follow up story
Remember the attorney advising his clients to break in and squat in their old homes?
He is being reprimanded by the State Bar.
Posted Mar 14, 2011 5:13 PM CDT
Posted: 15 Mar 2011 02:13 PM PDT
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