Prices Got A Little Bit Out Of Control
A report from the California used house salespeople. “California’s housing market started the new year still bearing the scars of 2014’s tight housing inventory and low housing affordability as statewide home sales fell from the previous month and year, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said. The median price of an existing, single-family detached California home fell 5.9 percent from December’s median price of $453,780 to $426,790 in January but was up 3.4 percent from the revised $412,820 recorded in January 2014. According to C.A.R.’s newest housing market indicator measuring sales-to-list price ratio, properties are again generally selling below the list price, except in the San Francisco Bay Area.”
“‘While the statewide unsold inventory index in January jumped to the highest level in nearly three years, the increase can be attributed in large part due to the drop in sales,’ said C.A.R. Chief Economist Leslie Appleton-Young. ‘Overall, active listings statewide showed a near double-digit increase from last January, but supply conditions weren’t all positive at the regional level.’”
The Mercury News. “The report from CoreLogic DataQuick shows that Bay Area home sales posted their slowest performance in seven years last month and that the lack of housing supply helped push prices up 9 percent from a year earlier. The median price paid for a home in January fell from the previous month. CoreLogic DataQuik analyst Andrew LePage cautioned that one month’s performance does not a long-term trend make. ‘January isn’t really a bellwether month when it comes to housing trends. For that we’ll have to wait until spring,’ LePage said. ‘But the latest data do indicate the market continues to struggle with challenges that many in the industry hoped would be resolved last year.’”
The Sacramento Bee. “Historically, January is a dismal time for home sales, and last month’s totals lived up to those expectations. CoreLogic DataQuick said Wednesday that January sales of all Sacramento County homes – new, resale and condos – totaled 1,257, down 29 percent from 1,770 in December and a 5.1 percent decline from 1,325 in January 2014. The January drop was similar in the Bay Area. CoreLogic DataQuick said 4,439 new or resale homes and condos sold last month in the nine-county Bay Area, a whopping 40.5 percent drop from December and a 5.5 percent decline from January 2014.”
“The median sales price among all homes in Sacramento County last month was $246,000, up nearly 5 percent from $235,000 in January 2014 but 3.5 percent below $255,000 in December 2014. The Sacramento Association of Realtors said single-family home sales in Sacramento County and West Sacramento decreased 29.4 percent from December to January – from 1,313 to 927. SAR said the December-to-January median sales price decreased 3.7 percent, from $268,000 to $258,000. The January median price is 6.6 percent more than the $242,000 median reported in January a year ago.”
The Glendale News Press. “The median price for a Glendale home in January was slightly lower than the same time last year, while the first month of 2015 saw the second lowest number of homes sold in the past 12 months, according to the latest real estate report. The median price for a single-family home was $742,000 last month, a small slide from $750,000 during January 2014, according to statistics compiled by Realtor Keith Sorem with Keller Williams Realty. Also, only 22 homes were sold last month, the lowest since February 2014.”
“In La Cañada Flintridge, the median price for a single-family home was $1.35 million last month, down from $1.78 million the same time a year ago. The inventory exploded as 168 properties were listed for sale in January, up dramatically from 81 in the first month of 2014. Thirty homes sold in January, up from 25 a year ago.”
From LA Curbed. “The housing market in Southern California continues to descend into a slump as prices rise and the number of sales falls, according to the most recent numbers from DataQuick and the California Association of Realtors. Throughout the six SoCal counties, sales were 21.7 percent below the average for January (starting in 1988). CAR found pretty much the same thing throughout the state. Their data for the metro area (rather than the county) shows the number of sales dropped 7.1 percent over the past year and the median price rose 2 percent, to $387,530, but dropped from December’s $413,150.”
“Not all sales are equal. The market continues to live a double life—the number of sales above $500,000 rose slightly, by 2 percent, but sales under $500,000 saw a double-digit drop—13.8 percent—and sales under $200,000 dropped by a third.”
The Orange County Register. “It appears that Orange County homebuilders have caught a case of the homebuying blues. The local housing market started the year with more of the same, but with a twist. According to the January report from CoreLogic DataQuick, housing transactions continued to dip: January’s 1,982 home sales were 10 percent below the previous year. Price increases continue to erode: January’s 2.3 percent year-over-year gain in the median selling price was the smallest advance in 31 months.”
“The surprise twist was that Orange County builders – among the stars of the recent housing recovery – now look like laggards. My trusty spreadsheet tells me the 190 new homes sold in January were 41 percent fewer than a year ago – the third consecutive month of year-over-year drops after 26 consecutive months of gains. In the last three months, developers have sold 902 homes – down 29 percent from the same period a year-ago and the slowest sales pace since October 2013.”
“Orange County’s median selling price for a new home is up 41 percent in four years, compared with a 30 percent gain for resale single-family homes, according to CoreLogic DataQuick. The recent slowdown suggests that builders may have gone too far. Builder prices, says Erik Franks of John Burns Real Estate Consulting, ‘got a little bit out of control.’ But don’t expect any cuts soon, he says, because developers ‘would rather have homes sit than discount.’”
“Everybody should be watching to see if homebuilders can regain the magic touch with shoppers. If not, you can expect developers to do what they hate to do: discount. And that could be bad news for the overall housing market.”
Check out the tables at the bottom of this page:
http://www.car.org/newsstand/newsreleases/2014releases/jan2015sales?view=Standard
Hardly any that aren’t down in price MOM. But don’t miss the drops in sales to the right. And if you have power point on your computer, click on the price per square foot link also near the bottom.
‘While the statewide unsold inventory index in January jumped to the highest level in nearly three years, the increase can be attributed in large part due to the drop in sales,’ said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. ‘Overall, active listings statewide showed a near double-digit increase from last January’
There’s this:
‘The average California price per square foot** for an existing single-family home was $203 in January 2015, a decrease of 3.5 percent from the previous month, but a 2.7 percent increase from January 2014. Price per square foot at the state level has been showing an upward trend since early 2012, and has been rising on a year-over-year basis for 36 consecutive months. In recent months, however, the growth rate in price per square foot has slowed down significantly as home prices leveled off.’
Whoa Nellie, the price/sq ft growth hasn’t “slowed down” at all according to the CAR power point, it’s gone into reverse. Just as inventory is going up substantially.
It’s deceptive to call contraction “slower growth”.
We have yet to see what contraction of the #3 oil patch of the USA will do to their housing mania.
It’s deceptive to call contraction “slower growth”.
But that’s what our Frisco Frauds have been doing. Calling a clear case of trend reversal “slowing growth” is an egregious lie.
Awe, Ben, now you’ve done it!
Huh, the link from their main page is the same.
http://www.car.org/
No matter, there are press releases all over the place with the same data and power point docs.
I changed the link in the post too. I guess they are re-writing the bit about the price per square foot.
Leave it to car to pen up and cover up with a raft of lies.
Hiding the data won’t change the underlying reality one iota.
Well… this is the same organization that lied about demand every month for 4 years straight. And I think they’re still lying about it.
Housing Demand Plummets YoY In 55 Of 58 California Counties
http://files.zillowstatic.com/research/public/County/County_Turnover_AllHomes.csv
Only 3 counties posted a gain in housing demand. The average of the median sale prices in those three counties was 60% less than the statewide median sale price.This explains why inventory is massive and growing and sellers are slashing list prices across the state.
There’s a whole lot more slashing to come.
South San Francisco, CA Sale Prices Sink 4% In 2014; Declines Accelerate MoM On Ballooning Inventory
http://www.zillow.com/south-san-francisco-ca/home-values/
And the NAR spin will be that the market is stabilizing.
What goes up, must come down.
But don’t expect any cuts soon, he says, because developers ‘would rather have homes sit than discount.
They better bake it, boil it or barbecue it because your gonna have to eat it. Enjoy boys !!
Maybe a wildfire will wipe a bunch of new homes out before any losses are realized, triggering insurance claims payments?
A builder can always hope…
Count on a ton of wildfires this coming season. Starting VERY early this year. The west coast is baking from the uber warm pacific and resilient high pressure off the coast. This has been happening since 2013 and intensifies each year.
It’s not just an anomaly. It’s the new norm. Deal.
The Warm Blob is coming your way!
This is exactly how all the computer programs have predicted what global warming will be like. Baking in the west and more unpredictable with bigger storms in the East. The deep freeze in the East right now proves nothing, but overall global temps are the real canary in the coal mine.
Housing wordwide needs to be much smaller and more energy efficient, and it needs to start in the U.S. if the impending collapse does not come almost immediately.
I thought Obama was pretty decent, but he really dropped the ball in any meaningful way to make society more energy conscious with meaningful legislation that backs it up. The Democrats are only slightly less consumptive than the Republicans.
Thus, the U.S. has no meaningful representation on the great issue of our generation. Shame on all of us. Anyone satisfied with the present political situation needs a further dose of the present-day sedation.
A president who promised to concentrate on improving our railroads, bringing high speed nationwide, and improved housing in Chinese style near all major transportation hubs would deserve our consideration.
If there is collapse?
What are the most important items to have in your possession?
realtors are liars.
This is where the “partnerships” come apart and one or more get thrown under the bus and the fraud charges appear.
Year off to mixed start in real estate
By Jonathan Horn
9:47 a.m. Feb. 17, 2015
Updated 1:16 p.m.
San Diego County’s real estate market got off to a mixed start for 2015, with the pace of annual home price appreciation increasing in January, but sales falling.
Last month, the median price for a home sold in the county was $435,000, up 7.4 percent from January 2014, real-estate tracker CoreLogic DataQuick reported Tuesday. The annual pace was up from 4.8 percent in December, and 3.6 percent in November, but is a far cry from the 24.1 percent peak in June 2013, led by foreclosure resales and investors.
Jordan Levine, of Beacon Economics, said he expects the housing market to remain stable moving forward, with annual appreciation between 4 percent and 6 percent, a pace tied to income and population growth.
“That’s really what should dictate the price of homes, ultimately how many folks are out there in the market and what they’re able to pay,” he said, noting double digit growth can’t be sustained if incomes are not growing at the same rate.
In January, the housing market recorded the fewest transactions since March 2008, the middle of the Great Recession. Last month, 2,233 properties changed hands.
…
ultimately how many folks are out there in the market and what they’re able to pay ??
And whats conveniently left out of the prognosis is the potential impact of higher interest rates on long term mortgages..We know they are coming…We just don’t know when…Even a small 50 basis point move up in the rate is a 12% + move up in the payment…
They keep talking about this, but I’d be quite surprised to see any substantial increase in long-term rates before after 2020, based on the duration of the previous similar episode (roughly 1933-1948).
This credit expansion dwarfs any previous one.
IMO we are about to test something important. We’ve been told for years, “the housing bubble existed because of all those crazy loans.” This is very convenient, because it means prices had nothing to do with it. I’ll point out there are bubbles all over the world that didn’t rise on the back of subprime loans. Some of these markets even have 30-40% down payments. The point is, the bubble is in the prices. You could have an all cash market and still have a bubble. It’s just a question of how you get there. If anything, the absence of some elements of what happened before has only given false comfort to many people. Trees don’t grow to the sky. It’s just as simple as that. Prices are falling in California; without interest only loans, without rate increases.
This credit expansion dwarfs any previous one ??
Yep…And that debt needs to be serviced….Right now its being serviced at ultra low rates…What happens if ??
If anything, the absence of some elements of what happened before has only given false comfort to many people ??
Interesting point Ben…And a point well taken…Around here most in the brokerage industry believes its different this time because of the large down payments…
Mortgage pimps and realtliars believe their own lies.
IMO we are about to test something important. We’ve been told for years, “the housing bubble existed because of all those crazy loans.” This is very convenient, because it means prices had nothing to do with it. I’ll point out there are bubbles all over the world that didn’t rise on the back of subprime loans. Some of these markets even have 30-40% down payments. The point is, the bubble is in the prices.
Agreed, EZ loans were an enabler in the US, but they were not the cause of the bubble.
Look at Singapore. Loans aren’t easy, down payments are high, and the government has been actively trying to pop the bubble for years. It’s even more over-valued than the US. Only now are there 50% haircuts on some segments, mainly luxury. And the guys buying those $5-25 million and up NY condos; we read they are paying cash mostly. That’s one of the most obvious bubbles on the planet. There isn’t any question that a country can have policies or industry that shapes a mania, but that only matters in who loses and how much.
I think the true origin of a bubble is in the minds of the participants. Their psychology, what is motivating them. It gives them away. We hear, ‘there’s no inventory’. Then as price increases slow and reverse, what do you know? Listings increase. If the motivation was speculation and profit, this makes sense. Head to the exits.
+1 Ben….Makes sense…
“Head to the exits.”
More tears of joy.
“I think the true origin of a bubble is in the minds of the participants.”
That’s what I think too, but I also think an enabler is part of the manifestation of mania. If the enabler gets pulled, be it crates of new money or loads of credit, the mania tends to crash and burn. Generally speaking.
It also means that the Fed’s deliberate effort to use QE3 to suppress mortgage lending rates while pumping tens of billions of dollars into MBS purchases after early 2012 had nothing to do with it.
I’m maintaining the hypothesis that ultra-low interest rates may have played a role in ultra-high housing valuations, at least until rates normalize, at which point we will have a natural experiment available to test my hypothesis.
If higher rates follow in the wake of unexpectedly high inflation, then home prices may continue to increase due to inflation hedge demand; but with recent levels of inflation bordering on deflation, especially in wage growth, I can’t see how higher rates wouldn’t lead to lower home prices.
Market Pulse
Mortgage rates rise as 30-year reaches 3.76%: Freddie Mac
Published: Feb 19, 2015 10:00 a.m. ET
By Steve Goldstein
D.C. bureau chief
WASHINGTON (MarketWatch) — Mortgage rates climbed after the strong employment report, Freddie Mac said Thursday. The 30-year fixed rate mortgage averaged 3.76% in the week ended Feb. 19, up from 3.69% last week. The 15-year fixed-rate averaged 3.05%, up from 2.99%. The 5-year Treasury-indexed hybrid adjustable rate mortgage was unchanged at 2.97%, and the 1-year Treasury-indexed ARM rose to 2.45% from 2.42%.
…
With ever more stratospheric CA home prices and vanishing buyers, you would almost think another collapse is at hand.
‘The market continues to live a double life—the number of sales above $500,000 rose slightly, by 2 percent, but sales under $500,000 saw a double-digit drop—13.8 percent—and sales under $200,000 dropped by a third’
Any math people want to suggest what this mix would do to a median price statistic?
Median sale price is likely increasing due to collapsing sales at the low end.
I’m not forgetting that this was explained here before, and what happened next.
Rising interest rates increases affordability dramatically.
‘Almost four of every 10 loans for autos, credit cards and personal borrowing in the U.S. went to subprime customers during the first 11 months of 2014, according to data compiled for The Wall Street Journal by credit-reporting firm Equifax. That amounted to more than 50 million consumer loans and cards totaling more than $189 billion, the highest levels since 2007.’
‘LendingTree Inc., an online-loan marketplace, said it helped arrange nearly 6,700 personal loans to subprime borrowers with FICO credit scores between 500 and 619 last year, up 761% from 2013, a surge the company attributes to growth in nonbank lenders entering the subprime market. “We’re going from an era where for many years credit was extremely tight to an era where credit is now looser,” said Gabriel Dalporto, LendingTree’s chief marketing officer.’
‘Glenn Hill, a 49-year-old dispatcher for an elevator company in the San Francisco Bay Area, said he signed up last month for a $7,500 four-year personal loan at a rate of 30% with Springleaf Holdings Inc. in Evansville, Ind., which lends to subprime borrowers.’
‘Mr. Hill said he used the loan to pay off a higher interest-rate loan he had taken out from another lender a few years ago, as well as to pay for everyday bills. “It was either this or start defaulting on things,” he said. “It was just take this loan and pray for the best.”
Glenn Hill, a 49-year-old dispatcher for an elevator company in the San Francisco Bay Area, said he signed up last month for a $7,500 four-year personal loan at a rate of 30% with Springleaf Holdings Inc. in Evansville, Ind., which lends to subprime borrowers.’
“… at a rate of 30%”
This is truly amazing.
‘Mr. Hill said he used the loan to pay off a higher interest-rate loan…”
(choke)
“… he had taken out from another lender a few years ago, as well as to pay for everyday bills. “It was either this or start defaulting on things,” he said. “It was just take this loan and pray for the best.”
Truly, truly amazing.
So? Some people work, some people don’t.
God’s Plan.
Dumb ‘em down, and profit.
Glen Hill is about to discover there is no God.
I don’t have any loans, but I do have credit cards. Despite my stellar credit score, the interest rate on balances carried on the credit cards is north of 20%. It doesn’t impact me, but I do find it odd, as if the banks consider us all to be subprime now.
Pay off your balance each month and you get the prime rate of zero.
I do. It has been a very long time since I paid a penny in interest.
Then that makes you a prime borrower who qualifies for the 0% short-term lending rate.
LOL, and cash back.
Or frequent flyer miles. Think of that as a negative interest rate for prime credit card borrowers.
Blue Skye - have you considered moving those suckas over to a credit union or two or three? I’m pretty sure your APR would come down by 10 points. I get you that APR doesn’t matter when you pay off the balance every month.
Nevertheless, you feed the machine when you stay inside the infrastructure. More galling, you assent to being treated like a FB with his neck under a jackboot.
ALL fees are lower in a credit union. Like when you go cruising for months and need to get cash from an ATM. Regular bank? $3 a pop minimum. Credit union? $1 a pop. You get this price by using the ATM at any credit union that belongs to one of the nationwide credit union ATM networks. STAR and Cirrus are the ones I know about.
The difference is enough to fuel up with, over the course of an extended trip.
‘Mr. Hill said he used the loan to pay off a higher interest-rate loan he had taken out from another lender a few years ago, as well as to pay for everyday bills. “It was either this or start defaulting on things,” he said. “It was just take this loan and pray for the best.”
Kind of like what Greece is trying to do.
Glenn Hill IS the definition of Debt Donkey!!
No wonder I’ve been seeing so many new cars parked in town with paper plates. Buy now! 60 month terms. Ouch!
Update: Oil Crashes Through $50 Floor
http://www.marketwatch.com/investing/future/crude%20oil%20-%20electronic
dead cats
I wonder how long it will take for the optimistic specuvestors to fill their storage and let loose another round of price discovery. A hundred days maybe? Wishful thinking on my part, since by then I’ll be feeding twin Chrysler V-8s
lucky bastid.
Looks as though the oil price hasn’t quite reached its equilibrium bottom yet…
Market Extra
Crude-oil shocker: API data show supply surging
Published: Feb 18, 2015 6:59 p.m. ET
Bloomberg
By Myra P. Saefong
Markets/commodities reporter
SAN FRANCISCO (MarketWatch) — The oil market got a bit of a shock late Wednesday, when the American Petroleum Institute’s supply data were released.
U.S. crude-oil supplies as of the week ended Feb. 13 saw a whopping 14.3 million-barrel jump from a week earlier, the trade group reported, according to news reports and various sources.
Analysts polled by Platts forecast an increase of just 3.1 million barrels for the week. Prices for March crude CLH5, -4.12% on the New York Mercantile Exchange dropped to $50.48 a barrel in electronic trading after the API data, down from a regular-session settlement of $52.14.
The market will have to wait for confirmation from the U.S. Energy Information Administration, which will release its weekly petroleum supply figures at 11 a.m. Eastern time on Thursday. Supply data are delayed by a day this week due to the Presidents’ Day holiday.
“We would be concerned that much of this big build in crude stocks is taking place in the Midwest, backing up throughout the Midwest district, beyond [storage hub] Cushing, Okla.,” said Richard Hastings, a macro strategist at Global Hunter Securities.
…
‘Silicon Valley — that ill-defined region that leads the world in technology in virtually all sectors of its economy — is doing better than ever economically, with the exception of the infamous “dot-com bubble” of 2000, which became a bursting embarrassment.’
‘But this time it’s no bubble, Russell Hancock, president and CEO of the Joint Venture Silicon Valley, emphasized in introductory comments at a Feb. 4 “State of the Valley” conference in Santa Clara.’
An ad on this page:
http://3745grove.com/
Pretty standard fair for Palo Alto Ben…Unless its east Palo Alto…
1200% higher than construction cost in $/sq ft for a 40 year old run down shack is hardly “standard fare”.
Do you think this might have something to do with the fact that housing demand is at 27 year lows with 4.4 million excess empty houses in that state?
You’d think a $2 million house would have better garage doors than that.
I would think a $2 mil house would have a built-in fire suppression system, but very few seem to. It’s all in the bling.
“40 year old”
I’m thinking that metal awning is from 1950.
It’s all in the bling ??
Well, I would hardly consider that house “bling”…Its Palo Alto..Do a Detailed Profile of Palo Alto and you will get some sense of who lives there…
“Who lives there” has no bearing on the price of materials or dirt.
That house probably sold for $20K when it was first built.
…. and it will again.
Dream on. House is less then a mile from Subway, Taco Bell, AND KFC. Worth every penny.
I realize that now I did a detailed profile. bwahahahahahahaha.
‘But this time it’s no bubble, Russell Hancock, president and CEO of the Joint Venture Silicon Valley, emphasized in introductory comments at a Feb. 4 “State of the Valley” conference in Santa Clara.’
As I mentioned the other day, my Silly Valley colleagues really believe that the local economy is sound and not in a bubble.
With a commitment of 30 years of labor to a 3rd world environment, you’d believe it too.
my Silly Valley colleagues really believe that the local economy is sound and not in a bubble ??
Its because as compared to the Dot Com bubble and the 2005-2007 bubble, (quoting from Ben) there are elements missing this time…So, many believe because of the job growth and massive amount of capital being invested here its not a bubble…
‘But this time it’s no bubble, …’
One sign the bubble is finally over will be the day people stop making inane public remarks like this one.
That is the problem here in the bay area. Some think the party will last forever. I think some have lost sight of how long it takes to earn $1 million dollars let alone pay that back plus interest.
I think some have lost sight of how long it takes to earn $1 million dollars let alone pay that back plus interest.
“Earn”? You don’t get rich earning money. You get rich when someone overpays for your silly startup.
This is anecdotal, but I’ve seen a tidal wave of luxury listings in LA since Christmas - 520 properties over $1 mil in the five westside zip codes I watch, which is unusually high. Of those, 342 are over $2 mil. And more seem to be listed every day. The number of open hoses for luxury listings has exploded too - drive around Beverly Hills/Bel Air and you see several $10 million houses that are actually opening to the general public on Sundays. It all points to a huge oversupply of luxury houses, with very few actual buyers at that level.
Meanwhile, there are hardly any new listings under $1mil, and even fewer under $750k. Anything decent under $750k goes sale pending almost immediately. A bifurcated market indeed!
The problem is that, even if the high end crashed and lost half its value overnight due to oversupply, it does nothing to help the average buyer. A $6 million house slashed to $3 mil doesn’t help the 1 bedroom apartment buyer - it doesn’t even help the move-up buyer.
Same in high-end Manhattan, and high-end London, I guess. Interesting times…
Thanks Ella…Good info…
“Realtor Arrested, Charged With Aggravated Assault”
http://www.pressregister.com/article_0a897726-b6fa-11e4-b194-1f5b719b9606.html
Underskilled, underemployed, drug addicted, shiftless, corrupt and now violent.