It’s a glorious Monday morning in San Diego and here’s what’s happening:
Quick Hit #1- Now that my Principal Partner and Chief Technology Officer, Kris, has had her brain fried by our new and exciting Tempo 5 MLS software, I should probably be thinking about a new career. Obviously our value to our clients was not foremost in the minds of the San Diego Association of Realtors (SDAR). So I’m thinking about going into the software biz myself. The fact that I am totally unqualified shouldn’t make a difference. I have found the perfect client - SDAR. If they bought the Tempo 5 piece of (insert favorite, colorful expletive), I’m certain they will buy just about anything I have to offer. I’m sure glad SDAR is here to better serve me.
Quick Hit #2 - The National Association of Realtors (NAR) reports this morning the Pending home sales took and unexpected jump in April, up a much greater than expected 8.3% in the West. Based upon the fact that Kris and I, along with our two Buyers Agents, John and Lisa, are currently working with a dozen active/serious buyers, I can’t say I’m surprised. Add to that the fact that we are actually short on inventory in the market areas and price segments within which these buyers have interest, and we may be getting closer to stabilization than many think.
Quick Hit #3- Scripps Ranch closed sales stats for May, 2008 showed mixed results. There were 26 closed escrows (If we can trust Tempo 5). This is down from May, 2007 when we had 31 closed escrows. However, it was also the fifth straight month of increasing sales in 92131. The average “sold” price was also up 6% from the previous month to $296 per foot, but still down approximately 10% from May, 2007.
Quick Hit #4- While our fearless leaders in Washington D.C. contemplate another big and creative (but totally worthless) incentive program for the many homeowners on the path to losing their homes (throw them another $600 check), maybe they should be thinking about real solutions. Instead of focusing on the Supply side, maybe they should attack the problem from the Demand side. How about the “Home Investment Act of 2008?” Buy a home (Primary owner-occupied residence) over the next 24 months with a minimum 5% down payment and get a supplemental tax write-off of 10% of the purchase price, not to exceed $50,000, taken pro rata over the 3 tax years subsequent to the purchase. Driving demand will solve the supply-side problems, including the government sending out billions of $$ that are essentially worthless to solving the housing recession.
Those are my thoughts this morning. I’ve got to go take Kris to therapy now (I will be forwarding the bill to SDAR). Hope everyone has a great week.
{ 4 comments… read them below or add one }
Sven
06.09.08 at 5:19 pm
My 2c, which is only worth like .012 Euro now
#1 - Maybe it’s time for a new system to take root and take over. We just need all the agents in union to switch…. Cmon… swich! Like the Apple commercials. (http://www.openmlsinstitute.org/) This is the age of information, and I think it should be an age of the informed consumer, competition, more efficiency, and better tools
#2: I dunno Steve, you’ve always been bullish on real estate. I remember in 2006 when you were pointing out a possible bottom in the housing market. According to Sandicor, the number of closed sales in April of last year was 2,444 in San Diego. The number for this April was 2,260.
Here’s the progression:
April 2001 - 3152
April 2002 - 3572
April 2003 - 3345
April 2004 - 3952
April 2005 - 3956
April 2006 - 2626
April 2007 - 2444 (dubbed, year of “le suck” in real estate)
April 2008 - 2260
April 2009 - Step 1, Collect Underpants… Step 3, Profit!
If you create a trend line, the sharpest drop in volume was obviously from 2005 to 2006, but we’ve had a consistent and significant drop since then in volume. Until volume shows a YOY improvement, prices really won’t stabilize, and they likely won’t stabilize for a short time after that does happen.
Skipping #3
#4 - I don’t like any programs that encourage homes to be more unaffordable. History has shown that every single program that was implemented to “encourage” home ownership has led to home prices becoming more unaffordable. This includes the FHA program at the end of the depression, the personal property tax exemption, and the interest rate writeoff. If you make houses 10% more affordable, you just make houses 10% more expensive.
We have found that we don’t need to encourage home ownership in America. Everyone wants a house already. As early as 40-50 years ago, people could buy a house for 3-4 times their annual income in nice areas like San Diego. As long as housing prices appreciate faster than inflation, we gradually become a nation of renters. Let’s just let supply and demand solve the problem. Government intervention is bad.
Steve Berg
06.09.08 at 8:30 pm
Hi Sven -
Darn! I forgot people actually read this.
#1 - I agree with your “age of information” comment. It is. But the reality is that we (agents) are a captive audience to system. Kris and I have always believed that information such as the MLS should not be proprietary. Competition is a good thing. Consumers should be empowered. But there is already so much out there now that many consumers are having trouble sorting it all out. Where do I go?? Zillow? Trulia? Craig’s List? Yahoo? Realtor.Com? It would also start to define the true value of agents. We have (and have had) many buyers who prefer to do their own searches for homes. We have the luxury (or the curse) of doing it most of the day, every day. Most of our clients have real jobs and don’t have the time to do this. Checking the “Hot Sheet” four times, or more, every day in eight different Zip Codes allows us to actually feel the trends as much as react to them. This benefits us, which, in theory should be of benefit to our clients. It is also why we are so frustrated when we are interrupted by this silly Tempo 5 changeover.
#2 - If you look back in the archives (which I’m certain you did) I admit I was always a bit on the Pollyanna side of things. I also admit that the market adjusted much more drastically than we envisioned and I have copped a plea with many Bubble Babies during this period. But I did chose my words carefully. I am also proud to say that we have never been the NAR or CAR clones who screamed “It’s a great time to buy!” You will also find many references to how we were advising our clients as early as 2005 that we were close to or at the peak and that any purchase for should not be with the expectations that they could spin it in a year and make money. Most listened, but some didn’t. Hence we are getting more experience with short sales then we ever wanted.
More to your point though, in the markets we work, we are seeing the trend lines flatten out and that suggests stabilization. We are seeing the perception by many that we work with that prices may be near the bottom. I certainly cannot say that for certain markets in San Diego County that I do not regularly work. For example, Eastlake/Chula Vista, Ramona, portions of Escondido, Mission Valley have much higher inventories and distressed properties and therefore, more sorting out to do than most of the coastal communities and certain inland areas such as Carmel Valley and Scripps Ranch. As I’m certain you know, San Diego County is an area of numerous micro-markets which vary greatly with respect to the supply and demand variables at any given time.
#4 - Personally, I agree that government involvement usually screws things up. Just like Mother Nature, it’s not nice to fool with free markets. In this case, my thought was simply to try a very short term incentive, not to push up prices, but to accelerate the road to stability in a very simple, understandable and cost effective manner. Just a thought, not a thesis. At least I didn’t suggest an abatement of the Federal Gas Tax for the summer. That would be downright embarassing.
Rational expectations
06.12.08 at 8:10 pm
Here we go again. Sales are up “8.3%” (is that counting foreclosures?). We see “stabilization” (which means the worst rate of sales in 20 years has become the new now). Sales have been “up for five months” (You mean May was better than January? Hooray! The housing bust must be over.)
Oh, and then there is the bit about would Congress please pay people to buy homes. Do you see any disconnect? For Christ sake, what stimulus is needed if things are stabilizing? Compulsive spin is no better from Realtors than from politicians, but then maybe we are talking the same bed here. Sales are AWFUL. They would appear even worse if it was not for the fact that the banks are unloading mountains of unwanted properties. Things will stabilize when prices are no longer going down (remember when you could say that “real estate always goes up” with a strait face?), which means that banks have first to work through their backlog of foreclosures, which is currently growing at an astounding pace in California. Real estate must be the only business where supply and demand are not mandatory topics in training courses.
Rational expectations
Steve Berg
06.13.08 at 2:15 pm
RE - You are not comparing apples to apples. I was referring to our little micro-market of Scripps Ranch while you are (I think) referring to the big picture nationally or at least county-wide. There is no disagreement that there are many pockets of severely distressed areas around San Diego, other areas of CA and nationally. But there are also pockets of stability and even, dare I say, strength.
Nationally, 2008 sales should hit the same number that occurred on 2000. Worst rate of sales in 20 years? Who’s spinning what here? I’m just providing the micro data straight from SANDICOR (for however accurate that is at the moment) and reflecting the direct demands from our own clients who are wanting to buy homes in Scripps Ranch, Sabre Springs, Carmel Valley, Del Mar, PB, La Jolla, Mira Mesa and Rancho Penasquitos. I’m seeing a lot of homes in these markets and I’m saying there isn’t a ton of inventory that meets their needs and their needs are not that extraordinary. Maybe my perspective is different because I’m actually in the trenches every day.