Market update...what I'm seeing...and the NEW Ziprealty.com
For those of you having trouble accessing this site from work, I bought another domain name and pointed it to the blog. Use: www.housingbubblecasualty.com and that should get you here...but who knows, maybe the firewalls don't like 'debt' either?!?!?Let's get right down to business...
Last Monday (Jan 23rd), there were 15,568 properties on the market in San Diego per Ziprealty.com. Today (Jan 30) there are 16,188 properties on the market. That is a 4% increase in one week! Let's not forget that about 18 months ago, there were about 3000 properties on the market.
What about the loans? The subprime I'm seeing is getting tougher and tougher to get done. I have had several people ask me about the lowered standards, and how that is impacting things. The truth is that yes, the standards have been lowered even more this year. No tradelines, no problem. BK's, no problem. But before you feel even more dejected that is this never going to end, I will tell you what the big problem is right now. It is ONE word.
INCOME!
The standards are pretty low right now, but the one thing that IS tightening up, is the way my lender (and others) are looking at income. With property prices in San Diego where they are, VERY few people have the W2 income needed to buy a 500-600k homes going full doc. So that leaves many borrowers having to go stated income. It was one thing when rates were at all time lows and more homes were in the 250k-400k range. You could 'get away' with stating income in the 5000-7000 per month range and have it be believable by most lenders. The problem now on those purchases, is that the homes are more expensive, and the rates are much higher. You pretty much need to state 10k+ a month to qualify for many of the 100% stated deals now.
I don't know for sure, but I'd be willing to bet the investors started noticing these high stated incomes, and quit buying loans with 'overstated' income. Since the lenders know that many of these loans are the equivalent of 'junk bonds' they sure don't want to hold them in their own portfolios...so they are scrutinizing the stated income deals much more closely today.
Let's not forget the standard assortment of junk loans that people are trying to get done. The days of refinancing and 'automatically' being able to lower your payments a few hundred bucks are over. The days of pulling cash out a few months after you bought a place are pretty much over. Rates are up, and overall it is a very tough market. From the brokers I am talking to, they are doing more A-paper loans, and lots of option-ARMs. After all, the option-ARM gives the lowest payment possible...and we all know that the 'payment' is the most important thing.
This weeked I happened to met up with some other account reps like myself who are with other companies. One of the reps told of a meeting they had with their manager. The manager wasn't too impressed with their performance, and questioned if their being in the business was "right" for them. The manager said they were not aggressive enough in the 'grey' areas. I know what that means...but I'll leave it up to you to decide for yourself. I'll go ahead and say that none of us that met together are aggressive in the 'grey' areas...maybe that is why I have been spending a lot more time on the blog lately?!?!?
On a side note, I want EVERYBODY to start using ZIPREALTY.COM when they look for property. I know you have to sign up for an account, but it is worth it. Why you ask? Well apparently they rolled some new features over the weekend. I won't get into all of them right now...but take a look at this:
ZipRealty Price Track: | ||||
| ||||
Yes, my friends, ZIPREALTY added a 'price track' feature that tracks the price reductions, and shows the days on market. Not only does Ziprealty update from the MLS several times per day, they provide MUCH more comprehensive information than realtor.com. Don't worry, I have not had any problems, or been bothered by anybody from ziprealty.com trying to get me to buy. Go ahead and register...it is the closest you are going to get to the actual MLS listings. I know they haven't expanded across the whole country yet, but they are in most metro areas. And no, I'm not affiliated with them, or getting paid by them in any way. I have been using them for quite a while now because they are more accurate and provide better info than realtor.com. When I was checking the inventory levels like I do every day, I noticed the new features, so I figured I would pass this information along to YOU!
Thanks for stopping by, and I look forward to the comments!
SoCalMtgGuy
posted by SoCalMtgGuy at 10:07 PM
43 Comments:
Thanks BB!
I think MANY people are in for a 'spring surprise' when they see how fast the inventories are going to swell this spring.
I'm going to make a prediction here...that San Diego will see inventory numbers over 20,000 in the coming months.
I could be way off, but I know of lots of people that have the 'great idea' to wait until spring to list their property.
Yes, that is when families like to move because of schools, etc. But I think things are going to be different this year, and down right painful for people next year. Those 1.2+ trillion dollars worth of ARMs in 2007 that adjust are going to bring lots of 'activity'.
I'll be here...
Thanks for stopping by!
SoCalMtgGuy
I signed up for email updates on searches with ziprealty a few months back. At first it was a trickle (I was hunting for impossible bargains), now updates that match my search criteria are daily.
But in the mean time I started reading this blog and the "bargains" don't look so hot anymore...
I have a friend who works in the industry and was talking to that person last week about her brwrs and what she's seeing out there. In one case, brwr wants a cash out/refi. The equity allowed the brwr to cash out only 7k but it's gonna cost 6k to close the loan!!???
Doesn't make sense right? Well the brwr still wants it anyway and my friend is faced with a moral decision. The sup told my friend to do the loan cause someone else is going to do it even though it doesn't make sense.
This spring, it will be interesting to see what the RE agents will spin to cover up the slowing sales and declining prices.
ZipRealty.com rocks. There new price reduced search is absolutely super. Perfect for a housing bubble blogger.
David
Bubble Meter Blog
SoCalMtgguy, you mentioned about tighten up on income on stated income loan. Right before Christmas, COC/FED has issued some new guideline to tighten up the Stated income/IO/Neg amort loan to bank. The new guideline is being reviewed by the bank etc. now. How does it affect mortgage company? Do you guy has to follow the same guideline (if it get approved) or are you guys going to just charge more if someone don't fit those new guideline and still be able to get the loan done?
The way you have it configured, the new domain redirects to the old one. Corporate firewalls will block access to the site at this point. What you need to do is make the new domain the primary one and the old one redirect to it. That way corporate firewalls will never encounter 'fuck' at any point in the access and will allow it to go through.
From the way the bond market has been acting, I think there we see at a minimum a tightening in March and again in April.
Quite the opposite. The eurodollar futures market is pricing in today as the final hike of 25 bps. With a less than 20% chance of tightening for the rest of the year at this "moment".
Please refrain from making assumptions you have zero basis on making.
Those Zip Realty features made my yesterday. My favorite FB-Realtor turns out to have been listing the same houses with August with no price reductions. I think those are the ones he owns himself (too lazy to go to Vallejo and read the deeds), as any seller would have panicked by now. No wonder he's been rearranging mortgages to put his business partners on more of his!
(This is the FB-Realtor who went on a buying binge at the top of the market this spring/summer. He's on the hook for something like $8 million in property, with negative cash flow of at least $10,000 a month, much MUCH more if some of these aren't rented out.)
I just overheard a conversation between two co-workers. It went something like this:
Lady - "I'm pissed off my stock portfolio sucks, I didn't make anything last year in my investments except those in the real estate fund. I would put it all in the re fund if it wasn't closed. Instead, I'm going to start flipping homes"
Guy - "I'd like to get into that but I don't have any money"
Lady - "Neither do I. I'm doing everything I/O. I will make $40,000 alone on the first house".
Guy - "Well I should look into that, I can do the handy work myself"
I was faced with a moral dilemna, should I try and 'educate' my two worker friends on what is really going on in the Florida RE market or let them hang themselves in financial ruin. I decided that it's not my job to save the world and kept my mouth shut. Plus I hate arguing that the market is on the downhill because some people just don't get it.
What would you do?
Moman,
Speaking from bitter experience, I'd say to let your colleagues wreck themselves. These days, relying on solid numbers and credible economic analysis just proves that we're neurotic and uninformed.
Your coworkers will probably enjoy every minute of the ride and never admit anything went wrong. Let them have their fun.
Bubble Butt...
If I knew you I would bet you money that the Fed is likely DONE after today's 25 bps.
Go look at the Euro Dollar market buddy, the vehicle of choice to hedge rate moves.
Don't go telling me what you do, I am in the industry.
Ignorant coworkers are much better than mean-spirited ones.
Some of my coworkers keep on telling me to buy even they know that the market is going down so that I can contribute to sustain the high prices of their overvalued properties. They are still telling me "the price is going to level off (stablize)", blah, blah. Stablize my as@!!! I'm still better off renting even the price drop 20%.
Moman,
Just give them the address of Ben Jones' Blog and let them know it is bubblicious in most of Florida.
David
Bubble Meter Blog
To Bubble Butt and DTH...that's why there is a market...every tick includes both a winner and a loser.
ps: I'm with Bubble Butt's trade.
ps: to Bubble Butt and DTH all bets are off that we have a major hedge fund blow up between here and 3/28...such a scenario is more likely in 3rd or 4th quarter of 06' which is why I now take BB's side of the market.
GOOD LORD san fran POS reduced 1.75 MILLION!:
ZipRealty Price Track:
Price Reduced: 01/30/06 -- $2,500,000 to $749,950
Days on Market: 90
lol!
http://www.ziprealty.com/buy_a_home/search/home_detail.jsp?listing_num=297907&page=1&property_type=SFR&mls=mls_ca_ba&cKey=8542mt19&source=CABCREIS
OT but not really since I believe the Gramm Leach Bliley legislation was/is the driver (flow of funds) that caused the tech bubble/burst and housing bubble (burst). http://banking.senate.gov/prel99/1104grm.htm
Oh my! I just a call from the local Zip Realty person. I explained why I was all over their Web site -- writing novel about housing bubble bursting, appreciated the new access to accurate numbers on price decreases -- and he was amused.
(If this puppy is published, of course all the blogs I rely on will get a shout-out in the acknowledgements -- I couldn't even consider this project if so many dedicated and knowledgeable people weren't gathering the data and crunching numbers. Zip'll get a thanks, too.)
Go look at the Euro Dollar market buddy, the vehicle of choice to hedge rate moves.
Doesn't the ED rate also depend on the swap market?
Why look at ED when there is a FF contract?
recently I wroet to a realtor who posts market conditions report on realtytimes website.
he was quoting market stats for ventura county for Aug and oct for the past three months. I asked if there is a reson why he doesnot quote latest numbers? is the market tanking etc.
I also told him that I'm a buyer with cash in excesss of 100K and my business would go to a realtorm who would call the TOP. Not just it is a buyers market because market is stabilizing!
Anyway the new ziprealty is great!
Almost all of the 39 homes meeting my criteria have had price reductions. Some on the market for 14-21 days and sporting 2/3 reductions. Amt of reductions is petty, though. More like 1% at a time.
Still it gives me ability yo monitor locations I like and keep track.
If the house is relisted, does Ziprealty keep tack of old listing and price or it reflects new listing in MLS?
any one knows the ans?
"In order to be a good investor a person must have a built-in, shockproof crap detector." - Ernest Hemingway
And I'm smelling alot of crap right now...
"If the house is relisted, does Ziprealty keep tack of old listing and price or it reflects new listing in MLS?"
it depends. I think they do try to catch it, and when they do they put the original date as listing date. But a lot of time they don't and it gets the brand new listing date.
This new feature from ziprealty has allowed for a new stat at my blog, check it out:
Percentage of Reduced Listings Per Market
No one is going homeless selling their 4BR home.
When people SELL, they move somewhere.
Yea, perhaps the flippper paper-built condo speculative bubble can burst from tighter credit.
And yea, perhaps people have been priced out, and there is a levelling.
But get your bearings, people!
You can't generalize.
This is NOT like a stock that goes to zero.
If there is such a SUPPLY of homes on the horizon, where do you think the people are going?
The SUPPLY will CREATE DEMAND.
Is the region is experiencing NEGATIVE population growth? Then maybe you have a point.
Was there MASS EXCESS supply ADDED to the inventory? Then maybe you have a point.
Anon said:
"supply will create demand"
What is the lag time until the excess supply creates demand??
San Diego inventory is up 4% since Monday of last week, and up over 500% in 18 months...I'm sure the readers are curious when all the 'demand' created by this supply will arrive.
If you find out, please, let me know.
SoCalMtgGuy
My point is, where do you think these people are going??? Out of USA? Out of state? into rental apartments?
R.E. is a slightly closed sum game. When these people SELL, they will need a NEW place to live. Hence, DEMAND.
But agreed. Higher inventory means lower prices. That was a shocking stat. 5x more inventory than last year...
I have a FB story for you. An agent in our office was looking for an 80/20- he could place the first, but not the second. Borrower was closing an a condo in Vegas. "2nd home?" I asked. "Spec" says he. $400 negative cash flow once he finds a renter. "Don't let him close" I say- "walk away from the $5000 deposit now or he will be much worse after the close". No such luck. Borrower had another lender willing to do the loan. PS this guy is 5 years out from a previous BK.
For those interested, I didn't say anything to either of my coworkers. We're not friends (or enemies) and don't talk much. I was curious if anyone else would have jumped in.
I'll keep everyone updated though how things progress. It should be informative to all whether good or bad.
Anon who (stupidly) thinks supply creates demand:
-There are plenty of campgrounds, trailer parks, and RV's for sale. If people selling a home are BK, good luck finding a place to live other than those places.
-The "we're running out of houses" argument is getting old; There are plenty of rental units, multifamily homes, and worse case can always move in with roomates, friends, or family.
-People die. Those homes are put back on the market as rentals or sales (albiet a small number)
Fact 1: As long as there are so many people like you guys on the sidelines waiting for a drop in price to jump in and buy a house, the market is safe from a steep decline.
Fact 2: Human beings are not entirely rational and therefore as long as the American dream of owing our home is as powerful as it is today (even for so many of you on the fences), you will not have a steep increase in the number of renters. So be careful on yours assumptions on the demand side.
Fact 3: Most of the over-valued SFH/condo/TH are in desirable neighborhoods where there was a lot of investor/flipping activity. Price decline will be steep but the desirability of those locations has to be taken into account in the forecast of the future demand.
Fact 4: Even if you guys are correct, and we have a massive price decline, it is likely that FED will act to lower rate (effectively bailing out many FB).
Conclusion: we all know that it is impossible to time the market, so the only strategy is to find a decent home (that you can afford using a fixed mortgage!) and plan to stay put for 7-10 years.
One thing that takes a little air out of the "people have to live somewhere" argument is that a large number of homes, and a large percentage of sales in recent years, is people buying second and even third homes. Many of these were bought for 'investment'. A lot of these houses could be put back on the market before anyone has to look for another place to live.
Fact 1: As long as there are so many people like you guys on the sidelines waiting for a drop in price to jump in and buy a house, the market is safe from a steep decline.
See our response at Patrick.net, barnum.
anon 7:21 said,
---we all know that it is impossible to time the market, so the only strategy is to find a decent home (that you can afford using a fixed mortgage!) and plan to stay put for 7-10 years---
I have said the same thing over and over on this blog...and THAT is the problem!!!
In CA, the typical homebuyer is 70k a year SHORT on INCOME to be able to afford a FIXED rate payment on the median priced home!!!
Eventually, this disconnect between income and prices will correct. Eventually, all the ARM loans and 'buy now - pay later' financing will adjust. And when they adjust, most people will not have the increased income to deal with it.
Place your bets...we'll see who is right in due time.
SoCalMtgGuy
As someone who sold a home for $50K loss (in Austin TX suburb) we do move but since we go with our tails between our legs (and lick our wounds), we have downsized and moved to a cheap rental.
In fact we'll be moving to S.Calif later this year, but we won't be able to afford to buy a home -- our current plan is to move in to my parent's home (either we'll add rooms or have them move to a rental apartment nearby).
So, not everyone will continue to be a homeowner -- unless the market craters, we won't be buying for a long time...
Anon who thinks supply creates demand, here are some random thoughts for you to consider:
Not everyone is saying that there will be steep price declines. What IS true is the marginal buyers that are over leveraged will be forced to sell at any price. They will have to rent or move in with parents, etc. This means an increase in supply simultaneously with a decrease in demand.
Immigration is responsible for much of the increased demand for RE. Immigration is expected to stay steady so that will act as (somewhat) of a price/demand floor. This factor assists demand.
Real wages are growing at an incredibly poor rate as the total compensation numbers are weak (people having to spend more on health care, etc.). In addition, high-paying jobs are being sent overseas and being replaced by low-low paying jobs (how much do Black Jack dealers really make compared to union workers at GM?) which means Johnny can't make his mortgage payment. In addition, home loans face increased scrutiny by lenders and the days of easy loans based on stated income are through. This event creates a drop in demand and an increase in supply (refi will not be an option for many that HAVE to get refied).
Since most recent loans are I/O and/or ARMs, when these rates reset and individuals that have overextended have to contend with higher taxes and insurance (the cost to rebuild an existing home is going up steadily thanks to huge demand for raw materials from the developing world), this triple whammy effect is going to force the weak out of the market. EFFECT: Increase in supply and decrease in demand.
Bernanke is a believer in flooding the market with liquidity. He is also known as someone who favors an inflation target range. Increased supply of money means increased inflation. He cannot increase liquidity too much if he intends to keep inflation in check. Without easy money available to lenders (decrease in liquidity, MZM), less money to loan making lenders demand more out of borrowers. He can attempt to cut interest rates, but this effect only prolongs the inevitable and will definitely lead to increased inflation which we know Bernanke doesn't like. EFFECT: Decrease in demand and increase in supply (marginal owners HAVE to sell or face foreclosure).
I see huge supply increases on the coasts and in Denver/Chicago/Las Vegas and owners hanging on as long as possible. Eventually, the weaker owners will be forced to sell at ANY cost just to get out from under the burden. In some of the markets that haven't seen the kind of appreciation that the coasts have seen, the market will be more rational, yet many will be shaken out due to job loss, interest rate reset, etc.
Bernanke is a believer in flooding the market with liquidity. He is also known as someone who favors an inflation target range. Increased supply of money means increased inflation. He cannot increase liquidity too much if he intends to keep inflation in check. Without easy money available to lenders (decrease in liquidity, MZM), less money to loan making lenders demand more out of borrowers. He can attempt to cut interest rates, but this effect only prolongs the inevitable and will definitely lead to increased inflation which we know Bernanke doesn't like. EFFECT: Decrease in demand and increase in supply (marginal owners HAVE to sell or face foreclosure).
+
Too many presumptions some of which will never materialize. Increased inflation does not automatically mean home price reductions, quite possibly the other way around.
That said, in many markets pricing is likely to decline.
I work for hedge funds and institutional firms. I see Fed Funds Future Prices and hear otherwise.
+
Another industry ripe for correction. I bet there will be 50% fewer hedge funds in 3 years.
I admit that I'm coming at this with no formal finacial/econ training, but the material I read by housing market "bulls" (some of them quite rabid!) just doesn't make nearly as much sense as the posts I've been reading by SoCalMtgGuy, Grim (Northern NJ Real Estate Bubble) and some of the other posters here (e.g., Bubble Butt, et al.).
The "not making any new land" argument puzzles me. I live in Jersey City, NJ and believe me they are making lots and lots (pun intended!) of new land and they've been doing so for the past 5-10 years. How? They simply tear down old dilapidated buildings and build large hi-rise buildings in their place. Tear an old building down and voila: land ho! This is how they created an entire residential riverfront community in Jersey City, Weehawken, Edgewater, etc.
The other thing that doesn't make sense to me is the argument that those of us waiting in the wings to buy a house when the market drops will create demand which will propel prices back up. This seems like it would only be true if all of us entered the market simultaneously, which I don't think is a fair assumption since we all have different needs, wants, and financial circumstances.
And what about those 2nd/vacation homes and investment properties? According to the NAR's own numbers, 24% of houses in 2004 (I think it was 2004) were purchased for investment. Isn't the supply/demand issue about the number of homes on the market at a given period in time versus the number of buyers in the same period of time? I wonder if even all of us who are waiting for the market to decrease suddenly entered the market in a few years if that would be sufficient to propel prices upward, given the volume if for-sale homes we might expect to see?
road trip boy..
excellent post!
That is the whole purpose for my blog. I'm not talking big complex economics.
I try to point out data and give personal experiences for why I think things can't last.
It is up to the reader to make a final decision.
The stat from the CAR that said the average joe is 70k a year short on income to afford the median price of a home.
If somebody is short on income, how can they afford the home? Easy, stated income and/or creative 'buy now-pay later' financing.
Plain and simple.
By the way...better get your butt to west texas and buy some land...they aren't making any more...hahahhahah
It's too darn late...GOOD NIGHT!!
SoCalMtgGuy
Anonymous said...
Bernanke is a believer in flooding the market with liquidity. He is also known as someone who favors an inflation target range. Increased supply of money means increased inflation. He cannot increase liquidity too much if he intends to keep inflation in check. Without easy money available to lenders (decrease in liquidity, MZM), less money to loan making lenders demand more out of borrowers. He can attempt to cut interest rates, but this effect only prolongs the inevitable and will definitely lead to increased inflation which we know Bernanke doesn't like. EFFECT: Decrease in demand and increase in supply (marginal owners HAVE to sell or face foreclosure).
+
Too many presumptions some of which will never materialize. Increased inflation does not automatically mean home price reductions, quite possibly the other way around.
That said, in many markets pricing is likely to decline.
**********************************
Agree and disagree. I may be making too many presumptions but many will come true, (but you are correct that they all will probably not come true. HOWEVER, I should have said that flooding the market with money will cause real assets to decline on an inflation-adjusted basis. More money in the system equals more inflation (and with the hedonics and general screwing with the numbers related to CPI, you can be assured inflation is A LOT higher than the Government states) and thus a decline in the real price of real assets.
"Fact 2: Human beings are not entirely rational and therefore as long as the American dream of owing our home..."
Hmmm...Freudian slip anyone?
Just wanted to let people know that you don't have to sign up for ziprealty to access it.
Go to www.bugmenot.com and enter the URL for ziprealty. It should give you several logins that can be used. I tried the first one and it works.
It is worth registering for.
Just don't include a phone number.
If you register, you can save your area, as well as get custom e-mails sent to you.
I get about 1 e-mail per day with the new listings that meet my search criteria.
LaTimes, NYT...great for bug-me-not. If you are going to go there more than 1 time, I definitely suggest registering.
SoCalMtgGuy
SoCal
a) Love your blog. We've not bought in the Boston area because we feared price declines. Unfortunately, we started not-buying in 2001. Nice to find a combination of bearish outlook combined with your expert perspective.
b) Meta-comment: It'd be nice if commenters had to at least enter a name. That way I could figure out which 'anonymous' is replying to which other 'anonymous'.
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