Reader ‘Native sd’ asked,
What do you think the appreciation will look like as we plateau? Given 21% yoy in sd, half of that or 10% in the next 12 months and halved again or 5% for the 12 months after that or a steeper drop off? Also zillow not only had their zestimate but also their appreciation forecast. How accurate do you think their forecast is?
We did the same frenzy-to-plateau at the end of Summer, 2004. Countrywide had kept the market pumping with interest-only loans, and when the market began to stall, they rolled out their toxic neg-am mortgages. Later they just went to no-doc, FICO-only qualifying, and squeezed out another 2-3 years worth of business, while the median sales price levitated between $450,000 and $500,000:
I don’t think the increase is going to continue this time, and predict that the SD median price will stay in a range of $400,000 to $425,000.
In other words, not much appreciation for the next 12-18 months.
Why will pricing slow down? We’re overdue for more inventory.
The one constant in all markets, good or bad, is that sellers hold out for top dollar. Now that prices are stagnating, sellers who decided to wait for more money are inching closer to the launch button. Their wives are telling them, “you better not screw it up again, like last time.”
I’m guessing that we will endure a flood of inventory next spring.
A flood? Why?
Here’s who will be coming to the party:
1. Banks won’t panic, but there will be more spring in their step.
2. Flippers will panic, but try to hide it.
3. Previously-underwater folks.
4. People who did the loan-mod-for-now program.
5. Legitimate move-up sell-and-buyers.
6. Early-stage baby-boomer liquidations.
One factor that might keep a growing inventory in check is that the recent purchasers won’t be involved. The SF FED touched on it yesterday as a possibility, but those on the ground know it to be a fact – today’s buyers are in for the long haul. There won’t be any panic selling by those who purchased in the last 6-36 months, which should help to temper the impact.
My guess for 2014? Appreciation will be close to zero around NSDCC.
so goes housing so goes the economy?
As hot as it was last year, it looks like we’re going to have more sales this year.
Housing will enjoy a terrific 2014, as far as sales counts, but prices will stagnate. It will be what gets sellers off the couch, and into Home Depot for a few hundred bucks, and then into the housing/moving pool. The overall economy will benefit, and in the end we might wonder why we’re so focused on price.
Native sd,
I couldn’t find the zillow appreciation predictions, but I know that they include a guess for each town on the zestimates.
I don’t know how they produce their guesses, but I’m sure they have sophisticated algorithms, etc.
But every one that I’ve seen is a safe 5% to 10%, which should be the consensus among all prognosticators for 2014.
For instance, CAR is predicting +6% for 2014:
http://www.car.org/marketdata/marketforecast/
2. Flippers will panic, but try to hide it.
The 800lb gorilla.
I’m sorry but I have no insight beyond observing the flippers are overextended.
For flippers who are used to making $200,000 per house, having to live with a $50,000 profit will feel like a disaster.
They have been very accomodating about providing a floor, but they may take it down a notch or two out of spite.
Thermo Fisher acquired Life Technologies earlier this year and that deal will be officially consummated in early 2014. There will be layoffs locally so that could add to the must sell inventory in North County.
But, Genentech announced recently that they were hiring for the Oceanside facility.
So maybe it will be a zero sum event…who knows?
There will be plenty of buyers for anyone who wants to sell – it’ll just be a price issue.
For those wondering how lucky I am with my guessing, here’s one from 2006:
https://www.bubbleinfo.com/2006/09/16/grand-poobah-of-predictions/
Flippers I would think would have sold anything they have now long before 2014.
They are not the buy and hold types generally but maybe I am wrong here.
There are quite a few flipper properties for sale around NSDCC today that look like they will still be with us in 2014.
How about let’s do a contest for 12 months from today?
We may need to go to decimal places. I’m in for 7.20% NCCSD.
I’m good with that – and the winner will get Padres World Series tickets!
How will you measure NSDCC? Average $/sf? Median SP?
I will post both later.
Which comes first……Padres WS or Chargers Superbowl?
I don’t know but I will take the over.
Jim, thank you for your insights. As far as zillow I looked and their forcasting is listed below their zestimate under market guide for each neighborhood. Like for where we are, it is 5% or so like the CAR estimate. We also have a bunch of rentals in inland empire and as an example zillow says 23% appreciation for the next year where we have ours which seems like it would still make it possible for people to afford but it would seem a little painful. I just wonder how accurate these things are but it is good to hear from someone like you who is on the ground and can feel the pulse.
The 5% was in our part of nccsd
Jim, I re-read the link you provided for your post in September, 2006, (and the 31 comments that ensued here on the blog). I chuckled when you wrote this:”Angelo is a brilliant guy, and I have faith that he will get us out of this. If all he does is ease up on his 115% cap, and go back to 125%, it could change the outcome for a lot of homeowners.”
You know I think you’re brilliant! I’ve been a bubbleinfo addict since the spring of 2009, but I’d be interested in your perspective re: the “Tan Man” and the whole Countrywide fiasco. (I know you’ve mentioned him in numerous posts in the past) but a final overview (feel free to add a bit of the famous JtR humor) would be appreciated…
The Tan Man? One slick operator.
I’ve brought it up again a couple of times recently how we watched him cash $17 million in stocks every five days while telling everyone things were fine at Countrywide, but his career summary tells it all – from 2010:
Angelo R. Mozilo, the former chief executive of Countrywide Financial, once the nation’s largest mortgage lender, agreed to pay $67.5 million on Friday to settle a civil fraud case brought by the Securities and Exchange Commission last year. Countrywide itself is paying $20 million of Mr. Mozilo’s $67.5 million payment as part of an indemnification agreement he has with the company.
Earlier this year, Goldman Sachs paid a $550 million fine to settle securities fraud charges. Securities regulators are also investigating former senior executives at Merrill Lynch for possible securities fraud.
The deal came just four days before a jury trial was scheduled to begin in Los Angeles. David Sambol, the former president of Countrywide, and Eric Sieracki, the former chief financial officer, were also sued by the S.E.C. Both men settled their cases Friday as well; Mr. Sambol agreed to pay $5.52 million and Mr. Sieracki consented to $130,000. Mr. Sambol also is barred for three years from serving at a public company.
Mr. Mozilo’s agreement with the government is a humbling moment for one of the country’s most audacious and flamboyant financiers.
For years, Mr. Mozilo was among the highest-paid executives in America and his S.E.C. fine is a fraction of the vast wealth he amassed running Countrywide. In one eight-year period, from 2000 until he left the company in 2008, Mr. Mozilo received total compensation of $521.5 million, according to Equilar, a compensation research firm.
Data on September, 2013 sales of detached homes from La Jolla to Carlsbad (NSDCC):
Number of sales = 259
Median sales price = $1,110,000
Average sales price = $1,448,326
Average sf = 3,173sf
Average Days on Market = 47 days
Average cost-per-sf = $467.09/sf
Median cost-per-sf = $384.12/sf
If all he does is ease up on his 115% cap, and go back to 125%, it could change the outcome for a lot of homeowners.”
If Angelo, or the eventual mortgage holders would have made this one change, they would have saved the U. S. taxpayers billions. The neg-am with a 125% cap is its own loan-mod program.
Still to this day, nobody in charge ever bothered to understand how the neg-am loan worked. Could. Have. Saved. Billions.
Interesting to see your predictions from 2006. Guess they didnt work out so well but at least you are standing up and bringing them forward. Shows some integrity so missing in your industry. With the benefit of being a Monday morning quarterback what would you say the actual declines were for superior and inferior properties. I guess the blended rate came in around 50% also. Is that correct?
I’d say sales prices, end of September 2014.
Guess they didnt work out so well
I think they were right on the money around here.
For those wondering how lucky I am with my guessing, here’s one from 2006:
https://www.bubbleinfo.com/2006/09/16/grand-poobah-of-predictions/
Hey did that jerk in the comments ever make good on the bet? 😉
Yes – and thank you Robert!
Your coffee was so good that once I was done with it, I quit drinking coffee altogether!
Admit it though. What you thought was lock cinch bet barely squeaked through in your favor. And what happened in the months after…
True, I admit.
But for me a normal realtor to suggest a price crash in the midst of the Jenae Era when buyers were gladly paying $100,000 over list that went right in her pocket was a shock.
Everyone else in the business was in Super-Giddy mode.
The severe penalties, disbarment and prison time restored my faith in the profession as a community good.
Yeah, me too.
What was his name?
Am I missing something? I cant think of anything that wasn’t down around 20% in the trough. Also much of Oceanside was down 60 to 70%.
Am I missing something? I cant think of anything that wasn’t down around 20% in the trough. Also much of Oceanside was down 60 to 70%.
It was a very specific and very aggressive wager. Year over year all JtR areas would be down 10% or more. At the time in 2006 it seemed a sure thing that it wouldn’t happen. Turns out by dint of a few laggards towards the great repricing a few locales weren’t down a full 10% when the bet closed. A month later, two months certainly and the results would have been different.
Guess they didnt work out so well
OK, I checked from the peak of the peak to the lowest trough, and you can say it’s around -20% in superior areas.