Who cares about all the hoopla about listings flying into escrow – ARE THEY CLOSING?
Here’s the graph of weekly sales of detached homes from La Jolla to Carlsbad – the most recent three years are in bold, with three previous years included with thin lines for flavor:
(click on image for slightly better clarity)
Sales tend to increase towards the end of every month because of pro-rations (the buyers’ responsiblity for interest and taxes go down as they approach the end of the month).
With the dip in interest rates back in March, you’d figure that the end-of-May sales this year would have been at least as good as 2008. But they aren’t. While sales perked up in June last year, this year the North County Coastal region is looking weak – only 30 closings reported so far for June 16-22, 2009, which would send the red line even lower.
Yes, there will be late reporters, but if we don’t see a surge in closings over the next couple of weeks between La Jolla and Carlsbad, we’ll start wondering if this spring/summer selling season is going to fizzle out.
The biggest concern? In the first half of June, 2005 there were 34 houses that closed in Rancho Santa Fe and La Jolla. This year? 13.
Currently there are 593 active detached listings in those two zip codes!
“The biggest concern? In the first half of June, 2005 there were 34 houses that closed in Rancho Santa Fe and La Jolla. This year? 13.
Currently there are 593 active detached listings in those two zip codes!”
What’s that you like to say? “Nothing that price won’t fix.”
Hey Jim. Get yerself a cuppa $3 coffee. Coffee is for closers. 😉
I have to imagine “closing” is getting harder every day. That’s not going to help.
Despite the low number of sales and the record breaking inventory, most sellers of SFR’s in La Jolla are holding out. Not sure how long it lasts, but seems to me capitulation of pricing is the only thing that’s going to change things. That spring bounce in outlying areas is definitely not translating into move up buyers, that’s for sure.
The stock market collapse last autumn and recognition of the recession would naturally depress the upper end coming into 09. I would bet that sales for these areas will be about 85% of list price.
All the same, most people will hold on in these areas and sit tight. Nothing scientific, but, just recently I’ve noticed that there are more sales on the coast for the high end homes after big discounts from list price and an uptick in purchases of tear-down/land purchases.
It’s almost like a game of chicken. On one side you have buyers like me that have been looking for a home for 9 months and are just so tired of looking at crap by the ocean that is overpriced. On the other side you have the people with houses holding out with their delusional pricing thinking the market will come back. Yeah…we lost 50k jobs in the past year. It’s not coming back anytime soon.
The question is who will blink first.
Lawrence Yun is out today complaining that low appraisals are scuttling sales at the last minute. He seems to think having independent appraisers is a bad thing for the industry right now.
http://www.cnbc.com/id/31509964
I would expect some sales in the high priced coastal areas to be at risk if there is an appraisal contingency.
The interesting part is that the elected officials may agree with Mr. Yun. The Congressional office already asked for a transcript of the report referenced above.
Appraisal problems surface in areas where recent comps are lower, which is happening throughout Oceanside. The sales have been so hot that comps from 30-60 days ago are low.
But in prime higher-end coastal areas it’s more a problem of not having enough sales, and having to go further away than a mile – which appraisers hate to do. But at least the few recent comps should be at, or above, your sales price.
If you are buying a million-plus house and notice that the comps are below you, cancel your sale today.
“Hey Jim. Get yerself a cuppa $3 coffee. Coffee is for closers.”
__________________________
I heard Mitch & Murray no longer stock the coffee machine.
I had not thought about markets where the prices are rising faster than the appraisals can keep up. Now that make sense. Thanks.
One way to fix the appraisal problem is to make a larger down payment. I guess that isn’t an option for most buyers? (sarcasm)
It’s funny how our government complains about overleveraged banks that were levered maybe 15:1, but is out there encouraging homeowners to lever up 33:1 with FHA loans.
What about areas like Clairemont and Mira Mesa, the places are on fire with sales. You can’t keep houses on the market there. It seems anything 450k and lower flies off of the shelves
also.. why are independent appraisers a bad thing? I think they are good for housing, a realtor shouldn’t be able to go to the appraiser and tell him the values they are looking for.
After a while, the prices will flatten out and independent appraisers will be able to come up with closer appraisals. I can’t imagine why independent appraisers are a bad thing.
If 13 closed in the first 5 months of this year, that approximates 31 for the full year, not including seasonal adjustments. So for the sake of seasonal adjustments let’s call it 40 for full year 2009.
With 593 active listings in inventory it will take 14.8 YEARS to clear out existing inventory assuming no one else lists.
This is a simple micro economic supply and demand graph. Excess supply with a given demand
requires the price to move significantly lower.
This is not just a RSF issue. Take a look at Newport Beach they have sold 20 homes this year at price over $2,000,000.
The upper end homeowner is priced based on the past, the lower end REO is based on the present.
Brokers need to do a much better job educating sellers and stop taking the riduculously priced listings.
The stock market collapse last autumn and recognition of the recession would naturally depress the upper end coming into 09.
Yep. Just think what the stock market collapse *this* autumn and recognition of the depression will do to the upper end coming into ’10?
We had a flurry of activity caused by rates below 5%. Many of those who didn’t lock rates will not close. It will take lower rates or more government bribes to get buyers going again.
Lawrence Yun is as fugly as his advice is. I hope he gets into a fatal car accident soon. Appraisals are a big part of the problem.
http://lawrenceyunwatch.blogspot.com/
Who picked red and blue for the 08 and 09 years? If that was intentional then it’s priceless. Red pill, please.
So much psychology in this market, as it is with amateur investors in the stock market. Once things start trending down they hang on and hope for better days. Solvency is forsaken long before the time of said better day.
‘There’s nothing price won’t fix’
– Jim the F’ing Genius Realtor
There aren’t any appraisal issues I can’t handle.
The part about logging the area’s median price and being within x percent, or whatever extra hurdles they throw in the appraiser’s way, then the agent should handle them. That’s part of the job.
It’s when an appraiser purposely dodges me, or punks me for $4,000 like one did the other day, even though I kissed up (I even pulled off the road to talk to her) that it gets irritating, but an agent’s job is get to find a way to the finish line.
NEW YORK (Dow Jones)–The federal government set the tone for credit markets
Tuesday, as the Federal Reserve commenced its two-day policy makers’ meeting
while the Treasury sold the first of three large note auctions this week.
Corporate activity was somewhat subdued as attention turned toward Washington.
Rich Lee and his team at New York-based broker-dealer Wall Street Access said
that all eyes are on the Federal Open Market Committee, adding that a majority
of market participants expect the easing to continue, but that “bond
vigilantes are looking for the signs of how the Fed will take liquidity out of
the market.”
“Yep. Just think what the stock market collapse *this* autumn and recognition of the depression will do to the upper end coming into ‘10?”
Nope, no permabear here!
So, if 13 houses closed from June 1 through June 15th or so, and there are 593 active listings, that means there’s a 22.8 month supply. That’s insane.
Jason,
I’m not a permabear if I’m right, and so far I’ve not been wrong.
From Mauldin’s newsletter:
To summarise: the world is currently undergoing an economic shock every bit as big as the Great Depression shock of 1929-30. Looking just at the US leads one to overlook how alarming the current situation is even in comparison with 1929-30.
The good news, of course, is that the policy response is very different. The question now is whether that policy response will work.