Alan Gin had to comment on the latest SDAR report:
from sddt.com:
The median price of detached resale homes in San Diego County rose for the fifth straight month in August, while sales dipped slightly.
A report from the San Diego Association of Realtors (SDAR) showed the median price of a detached single-family home sold rose 0.8 percent from $372,000 to $375,000.
Attached homes, such as condominiums and townhomes, had their median price rise nearly 8 percent from $210,000 in July to $226,000 in June.
Mulitple bids on lower-priced properties is driving up the median price, said Alan Gin, University of San Diego economics professor.
The five-month trend may show that the market has hit bottom, or even shows proof that the housing market has turned the corner, he said.
But it does not mean the local economy as a whole is out of the woods.
Gin said the positive news in the housing market is a good sign, but questions about unemployment linger.
Should unemployment continue to rise and a new wave of foreclosures enters the market at an inopportune time, Gin said the housing market could take a turn for the worse.
However, he said it is not likely.
Last time the median prices of attached and detached homes were this high were September 2008.
The total number of attached and detached homes was down 11.3 percent from August to July with 2,622 sales.
However, the drop off is not something to “take much stock in,” Gin said.
“I wouldn’t consider (an 11.3 percent decline in sales) a big change given that June and July were pretty big months in terms of housing,” he said.
He said an activity drop in August is a normal, seasonal change.
Last month’s sales were a 6 percent increase over August 2008.
Year-to-date, 2009 is out-pacing 2008 by almost 4,500 units sold, a 28 percent increase.
One thing that has been driving sales this year is the first-time homebuyer tax credit offered by the federal government.
The tax credit is equal to 10 percent of the home’s purchase price or $8,000 whichever is less. It expires on Dec. 1.
Erik Weichelt, president of SDAR, said Realtor associations, particularly in California, are pushing Congress to extend and expand the tax credit.
Aside from extending the deadline to sometime in 2010, Realtors are hoping to increase the limit of the credit to $15,000.
However, not much headway has been made lately as Congress has been focusing on other issues like healthcare, Weichelt said.
Six-year Realtor Jane Loveday said she started noticing buyers heating up the market in March; she added activity has been increasing steadily since.
Even more buyers have contacted her within the past few months, specifically trying to obtain the tax credit.
“I do have a couple of buyers who are specifically wanting to close by November 30 but whether they can find a property and get an accepted offer I can’t guarantee. That (the tax credit) is a huge stimulus to them.”
One of the problems facing potential buyers is a lack of inventory at lower price points.
Weichelt said there is less than a month and a half supply of inventory priced below $250,000.
He said almost every property that comes onto the multiple listing service in that price range has multiple offers on it within days.
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Gin said that an activity drop is a normal, seasonal change?
Here are the total sales history for July and August. It looks like August is usually a big month for closings, culminating a summer’s hunt for homes:
All Residential MLS Sales, San Diego County
| Year | July | Aug | diff |
| 1997 | 2,767 | 2,793 | +1% |
| 1998 | 3,595 | 3,095 | -14% |
| 1999 | 3,717 | 3,629 | -2% |
| 2000 | 3,018 | 3,445 | +14% |
| 2001 | 3,488 | 3,786 | +9% |
| 2002 | 3,555 | 3,651 | +3% |
| 2003 | 4,359 | 4,634 | +6% |
| 2004 | 4,165 | 3,880 | -7% |
| 2005 | 3,736 | 3,897 | +4% |
| 2006 | 2,639 | 2,844 | +8% |
| 2007 | 2,360 | 2,416 | +2% |
| 2008 | 3,007 | 2,788 | -7% |
| 2009 | 3,382 | 2,816 | -17% |
Normal drop-off? Sales haven’t slowed this much all decade between July and August. What does it mean?
Factors that could cause sales to drop more sharply than usual:
1. Fewer condos closing due to financing? Nope, condo sales last month were higher than August of the last 2 years.
2. Tougher financing? On the high-end yes, qualifying for jumbos is hard, but FHA loans have created a firestorm under $700K.
3. Higher rates? Nope, mortgage rates (5.68%) are lower this August than ever before.
I think sales are hampered by the lack of quality inventory, and many buyers are wondering if they should step up and pay more to win a bidding war. PROCEED WITH CAUTION. As REO listings are dripped out and anxious buyers jump on them, it’ll look like the market is getting hotter. But keep an eye on # of sales, and don’t listen to any of these cheerleaders who refuse to check facts before speaking!
I cannot believe people are falling for the “increasing prices” twist of the stats. the past year has had lots of low end sales and the high end was non-existent as the higher incomes were not yet forced into foreclosure (we now know this is changing). Thus, average prices went down.
Now, higher end homes are being foreclosed and resold (read: now there are higher end transactions when there were none before). Thus they are now registering as sales and drawing up the average/median prices.
Problem is, a home that previously sold for $1.5mm, gets shorted/foreclosed resells at $1mm suffers a 30% hit, yet a $1mm sale hits the averages and shazaaam, prices rise…wow, a 30% value crush = increasing prices….be very careful when reading the stats and think through the methodology before jumping back into the pool.
Next leg down, unfortunately, this fall/winter.
For the record:
Average 30-Year Fixed Mortgage Rate, August
2000 = 8.16%
2001 = 7.11%
2002 = 6.41%
2003 = 6.47%
2004 = 6.01%
2005 = 6.00%
2006 = 6.63%
2007 = 6.96%
2008 = 7.00%
2009 = 5.68%
I thought this article on cnn was a pretty good example about what you were talking about in the $700K range. Honestly it blew my mind. In order to qualify for the credit they need to make less than $150 and they are now on the hook for a $700+ FHA mortgage (Read as we had no DP and no one else would approve use). Help me on how this gets approved.
So the question is how long can a couple that makes less than $150K/year continue to make a home payment (Principal, interest, taxes, insurance, etc) of $7,000/month?
PS they admit, “We are tapped out”. They should be able to do some good entertaining, I guess it will be BYOB?
Location: San Carlos, Calf.
Property: 3 bed, 2 bath, 1,600 s.f.
Price: $750,000
My fiance and I were running around making wedding plans and looking to buy a home in San Carlos — about halfway between San Francisco and San Jose. We finally found the right place on Roost.com.
We get married in November, but we’re moving into the house this month. I’m excited because it’s the best entertaining house we’ve ever seen. The house is built around a courtyard, and there’s a barbecue. I love to entertain.
We felt like we had to hurry and buy before the end of the year so we wouldn’t miss out on the tax credit. That turned out to be truer than we thought: As we got closer to the end, we realized how much closing costs and other fees would add to the purchase price, which was high enough already.
The $8,000 tax credit is saving us. Wedding, new house, we’re tapped out. We’re definitely big fans of the tax credit!
Still, we feel good about the purchase. Even though it’s a lot to pay, we feel we got a good buy. The house next door is going for $1.2 million.
Prices have tumbled in this area, so the house is a lot cheaper than it would have sold for a year or two ago, and we got a great rate, about 5.5%, on a FHA loan. We’ll use some of the credit money to updating some of the home’s circa-1950’s decor — fake wood beams and chandeliers, textured wallpaper and the like.
I posted cause I think if you drive 500 miles south it would be called Carmel Valley Heat, right?
Readers of this and similar blogs have to face it. We’re flogging a dead horse trying to knock
some sense into others.
Friends are looking at me as stupid, for saying hold on-still. They belive the MSM hype etc.
For me “have the cash” and am waiting at least 2 years, before I even think about buying. Nothing on the horizon to suggest a lasting uptick.
CA State is in freefall..it’s going to get worse, and stay that way for a long while.
When do you see all these lost jobs coming back, some never.
Hold on, wait it out, when bottom does hit, it’ll be flat for many years.
Affordability will be the final key to house prices. Subsities, IE; $8000 etc just make it more expensive.
Those morons (above post) are future FB’s.
Amazing how something as small as $8K can make people commit themselves to hundreds of thousands in debt. A single month’s price move can wipe out treble that amount.
Heck, they were giving away $4.5K for $20K average cars, so I’ll at least hold out until they start giving out $70K towards $300K average homes. 😉
Wizard,
You must be my twin. My thoughts exactly.
Right down to the moron comment
The San Carlos couple is probably young, and likely misguided by mortgage brokers and real estate professionals. Give them a break.
When did FHA loans become the NINJA loan of the post bubble wreckage?
Fha loans became popular when all the subprime mortgage outfits went out of business.Be interesting to see what percent of loans were fha in 2005 compared to 2009.I would have to guess the amount of fha loans is at least double or not triple the amount they were in 2005.I dont know where the govt keeps getting money for all these fha laons buts seems a little odd to me.Kind of like where they keep getting money to buy treasuries to keep prices high and yields low.The printing press must be running 24/7.
I think the majority of people just look at the monthly payment and don’t think twice about the actual price of a home. A 325k home today at 5.5% is the same monthly payment as a 250k home was at 8% in 2000. Throw in the $22.22 per month over 30 years tax credit and it’s not hard to see why it’s a bidorama at the low end.
I think FHA should require some sort of financial planning course for first time buyers. A little training on how much home improvement projects actually cost would be especially helpful. Anyone who thinks they are going to be able to do much upgrading of a 1950s house with what is left over from an $8,000 tax credit after moving expenses and wedding costs are paid either has a great creative imagination or just doesn’t understand what things cost. New wallpaper and paint are realistic if it’s a do-it-yourself project, but once they get started, the money is going to disappear in a hurry.
And, personally, I think a concrete patio and a portable barbeque works great for entertaining in a starter house. A lower house payment leaves plenty of money for great food 🙂 .
The less informed are the fuel that runs this particular economic engine, perhaps moreso than any other. So yes, to a point, being reasonable and making a case doesn’t matter. And it’s not going to do the industry, either real estate or finance any help. They need the rubes to line up and pay or the whole thing falls down. At which point the rubes pay anyway.
Rinse and repeat.
The 8k credit is the cash for clunkers program – it just generates swirl and increases prices. As others have said, those prices will come down furhter than an outright 8k after the clunker program has expired, and the REO’ speedwagon’s wheels fall of and into the pool.
FHA percent of originations is actually up 10x. They became 2009 equaivalent of NINJA when Barney Frank and Paulson decided the only reason people fell behind was due to ARM resets. Clearly if it is fixed rate there is no level of indebtedness a “tapped out” couple cannot handle.
Mybleachhouse regardless of rate this couple has an home expense of $7,000/month. Since they qualify for the $8,000 tax credit and needed to go FHA (less than 20% DP) this should essentially be all of their take home income. WHO CARES ABOUT RATES IF THAT IS THE CASE!!! If the crane operator loses his job the interest cannot be deducted from no income.
I have seen a huge increase in only the last 2 weeks for interest in all types of business. The cash is coming off of the sidelines. Permabears can keep up their same old, pessimistic grumblings. They think anyone who is buying is an idiot and nothing will change their minds. Look at that interest rate above. Look at the scarcity of inventory.
Now here is my prediction; a mixed-bag of bad news and good economic news over the next 4 months, (bad retail for Christmas, more sad human interest stories that make for a good headline, stock market dropping in October then recovering). In February things take-off like a rocket. This fall/winter will be the ultimate opportunity to pick-up some great real estate if you have the cash or balls to step up.
Duly noted, Mozart.
“This fall/winter will be the ultimate opportunity to pick-up some great real estate if you have the cash or balls to step up”
Where? There is virtually nothing for sale.
Mozart, I truly enjoy your posts. They remind me of that no bull agent who advertises all over the place. You must be selling a lot of houses with your rhetoric.
If you need the $8k you really can’t afford a house. How are all these house-poor people going to kick start the economy.
Wizard, maybe things really are different this time, and fundamentals like high umemployment and a backlog of soon to be foreclosed houses coming on the market, don’t really matter. But I smell a dead cat bounce.
Sorry meant Mozart, not Wizard.
manifest destiny my friends.
Well if Mozart is making predictons, here is my prediction: The FHA will become insolvent sometime in the Spring. This time because the government will not feel comfortable allowing the annual deficit to balloon to $2T, they will need to change policy to make sure only people who can pay back their mortgage receive one. Real Estate will really sink when that happens.
Permabears can go into hibernation soon as the days shorten. When they awake in the spring, 6 months will have gone by and nothing will have changed here!!!! People will buy, people will sell. Loans will be underwritten, the NAR will brag about statistics that are marginally favorable in the housing market and we’ll still be all waiting for a bottom.
Those who are prudent and frugal keep getting outbid by those who are ‘all in’ with our (FHA) money. It’s the greatest show on earth. There is a sucker born every minute. A fool and his money are soon parted. Nothing ring more true in the age of entitlement and a Black BMW/Mercedes in every driveway.