Pacific Beach Housing Bubble Blog

Monday, December 04, 2006

Contributions from a reader

A reader of this blog has been doing some research of his own, and he recently emailed me the following snippets of information. They relate to the housing market in San Diego, although not specifically to PB. I'd like to thank him for his contributions. Who knows, we may end up seeing a new blog soon.

BTW: I'm going to get back on topic to PB housing next post... I promise., Also I apologize for the text coming out kinda messed up. I didn't have the patience to retype it all and blogger isn't exactly WYSIWYG. After trying to get it to look right for about 20 minutes, I gave up.

(I'm not going to identify him because I don't know if he wants to be identified. I'd be happy to post his name, URL, email, etc... if he would like to be given credit for collecting this information):

Sales are much lower than what the paid media is implying in paid articles with salesmen that the paid media calls "experts". According to this info, the sales for November are horrible. In many towns, the peak of the home debtor frenzy was in 2004.
Take a look at a few towns sales numbers below. I cut and pasted the November numbers from the last 5 years to make it easy to see how much sales have fallen. In many cases Sales are down 50% to 70% from 2004.
Unless home prices are lowered drastically, homes will continue not selling, and the glut of overpriced homes not selling on the MLS will increase even further in 2007.
You can look up sales by the zip code here: https://www.melissadata.com/lists/ezlists/ezhomeowners.aspx
OCEANSIDE, CA Home Sales for ZIP Code 92054
11-2001 45
11-2002 43
11-2003 82
11-2004 117
11-2005 85
11-2006 32
======================================================
Home Sales for ZIP Code 92037 LA JOLLA, CA
11-2001 29
11-2002 25
11-2003 43
11-2004 59
11-2005 63
11-2006 28

Home Sales for CARLSBAD, CA ZIP Code 92009
11-2001 105
11-2002 109
11-2003 120
11-2004 135
11-2005 123
11-2006 44
=======================================================
Home Sales for CARLSBAD, CA ZIP Code 92008
11-2001 57
11-2002 54
11-2003 45
11-2004 65
11-2005 28
11-2006 17
========================================================

County's economy continues to droop
San Diego County's leading economic indicators declined for the seventh month in a row in October, dragged down by the continuing decline in home building and a rise in unemployment filings, according to a report released yesterday by the Burnham-Moores Real Estate Institute of the University of San Diego.

http://www.signonsandiego.com/news/business/20061201-9999-1b1sdecon.html


Economist Robert Shiller made a national home price chart of prices from 1890 to 2006.
From 1997 to 2005, the average national home price doubled as shown on the chart. But we know some borrowers paid 7 times more for a condos on the coast during those years $100K to $700K, and some borrowers paid 4 times what houses cost since 1997.
Now a future projection has been added showing home values falling back to year 1998 prices over the next 5 years.
(Some homes in Carlsbad sold for $100K in 1998)

 Carlsbad, Purchased in 5/2004 for $539,000! Now asking $409,000 = 25% Loss
This Seller is trying to sell for $130,000 less than he paid in 2004. It is still overpriced and will need to be lowered further. This is an example of at least a 25% Loss, and we have years to go in this crash.
So much for: "It is different this time" or "Prices won't fall along the coast" or "Real Estate only goes up" or " Get in now or you will never get in".
=================================================
Zillow.com shows they overpaid
06/18/2004: $539,000
08/14/1996: $165,500
=====================================================

Date: 2006-12-04, 9:03AM PST


Fire Sale! Purchased in 5/2004 for $539,000! We must sell this 3 br / 2.5 ba townhome. Variably priced from $409,000 - 449,000! Located in coastal South Carlsbad, it's within a mile from the beach, shopping, restaurants, Poinsettia Park, and excellent schools. You can hop on I-5 in one minute, yet it's quiet and peaceful.

* 3 br / 2.5 ba, apx 1469 sf
* two car garage
* two patios and a veranda (one is huge and private!)
* end unit
* functional floorplan with tons of storage
* move-in ready
* two lighted tennis courts, pool, spa, clubhouse
* super low homeowner fees ($139/mo)

Variably priced from $409,000-449,000!


* No agents please


6863 Batiquitos at hawthorne google map yahoo map Carlsbad





posted by Sven at 1:01 PM

12 Comments:

  • Text all different sizes... looks fine in the editor, doesn't look good on the webpage. Yeah, this one looks strange to read. Maybe if I do any future copy/pasting to an intermediete source first. (i.e. Microsoft Word)

    Anyone else ever run into this problem before?

    By Blogger Sven, at 1:39 PM  

  • Shiller's graph on the link is really cool.

    By Anonymous Anonymous, at 2:27 PM  

  • Great stuff Sven, thanks!

    Shiller's graph is chilling!

    And melissas data is a great site - i'm adding it to my favorites right now.

    Actually sales in my zip code were decent last month - about half of what they were the last few Novembers, but way above Sept, Oct and slightly above August. Go figure.

    By Anonymous jb, at 8:58 PM  

  • FYI, Both 92009 and 92008 zips were split in two so the volume decline is not what i9t appears on your stats. 2004 92009 numbers = 2006 92009+ 2006 92011. 2004 92008 = 2006 92010+ 2006 92010

    By Anonymous Anonymous, at 10:05 PM  

  • Great stuff sven!

    Thank you and your source.

    Personally I have no problem with the formatting.

    By Anonymous bub, at 8:57 AM  

  • " i expect some correction, but when i eventually get a house i expect to pay more than what my parents thought was reasonable...."

    Here is someone who will buy on the way down, catch that falling knife, and be underwater for a while. I've often wondered what motivated buyers in a quickly deteriorating market. Now I know.

    By Anonymous Anonymous, at 9:52 AM  

  • (requested change - had to repost this to the bottom of the list)

    Now please dont get me wrong. I want to get a house on the cheap-cheap as much as the next person however i dont think we can expect anything like we see in Shiller's graph. IF you look at the trends there are two. (We'll conveniently forget about the founding of America and the noise associated with real estate there) The two trends are two lines that form a step function. the lines have roughly the same slope and a step in between them. What happend in that step and why did it noramilize and stay a much higher percentage. They loan to value ration changed. People use to show up to a bank with 50%+ of the price of a house and require a small loan. The banks wanted to be protected and wouldnt issue notes unless the person was completly committed to the residence. That has changed. I know we are at only the begining of this drop, but i dont think we're going to see old loan to income ratios. I think there has been a paradigm shift in the American consumer. They now think it is rational to pay 40% of their income to housing and banks have found clever ways of selling these liar loans and poorly preforming mortgages in the secondary market (a trend i'm sure will correct itself soon) None the less, i expect some correction, but when i eventually get a house i expect to pay more than what my parents thought was reasonable....

    By Anonymous ~nades, at 10:14 AM  

  • Nades,

    I think the assumption Shiller was making is that you can plot a very consistent and corrected real estate trend line with the graph where the ups and downs always snap back to the middle. Looking at that graph, it's easy to assume that we will correct to 1998ish levels. It's just a chart though. You can't get scientific with a trend because trends are just so trendy.

    I would just wait till you see appreciation. The one truth about Real estate is that it changes inertia very slowly. So if it's moving up quickly, it takes a while to slow down to a halt and it takes a while to start going down fast. Likewise, when it starts moving up again, you'll first see prices stabilize and then barely start crawling up. After 2-3 months of appreciation, it'll be a good idea to call bottom and purchase the house you always wanted.

    Patience is going to win this one. There's no reason to jump in early. It's going to be pretty obvious once we've hit bottom.

    By Blogger Sven, at 10:27 AM  

  • _"Maybe if I do any future copy/pasting to an intermediete source first. (i.e. Microsoft Word)"_

    Good idea, but rather use a text only tool like notepad as your intermediate source. Richer sources like Word, web pages or email often include formatting information that you don't see when you copy it into your posting tool.

    By Blogger David Gibbons, at 6:44 PM  

  • I think i might fumbled my explaination of why people from this day forward might think it is reasonable to contibute a greater portion of their income to the house... the reason are many, the american economy has become more transparent and more efficent, monetary policy is much more understood, (altho with todays current economic conditions it seems like it might still be a connundrum) and these two factors make peoples income more stable. The average person is employable at many levels; all of this, i'd argue, means that banks are able to increasing their loan to income ratio... It also means that people are more daring and more willing to take the risk personally... The fundametnals in america are changing. It happened then and there was a step put in the line. (No one can even imagine showing up to a bank with 50% down) And its happening again. Unless of course the economic fall out is tremendous but I think we to resilient for that. Think about the stock market burst in 01. Technincally it was worse than the depression, more wealth was lost on an inflated rate. But the fact of the matter is we still kept employment at 94%+...

    As for anyone who can call bottoms and tops in markets email me, we could make a lot of money on wall street ! ;)

    By Anonymous ~Nades, at 7:56 AM  

  • My take on the looser lending standards is a little different. During the last few years when interest rates were going down, the owners of capital (rich people) who were looking for safe places to put their money were flooding to REIT's or mortgage-backed securities (many of them were guaranteed by the banks). CD's and treasuries were paying a very paltry sum back then (1-2%), and you could get about 5% "safely" in one of these securities.

    A bank like Countrywide could easily sell a loan to one of those funds with a very healthy margin on the profit. This freed up capital to go make another loan. The lenders were able to make money on the origination, bank fees, and then collect a one time kickback just to hand off the mortgage to a secondary lender.

    Considering that any company with enough money to issue a few loans could jump in on this easy cash cow, competition got fierce and there was a lot of pressure to give loans out to people that they wouldn't have dreamed of giving loans to in the past. (not only that, but exotic, hazardous loans. Which were over 68% of the loans issued last year in California)

    Loose lending is going away for a few reasons. One is that the margins on subprime and exotic loans has shrunk to a razor thin level. (because a lot of money has been leaving the mortgage industry to pursue stocks or federal securities) The second is that the second is that appreciation is negative now, and these banks don't want to be left with a loss due to a foreclosure.

    So, expect to start seeing downpayments soon enough.

    By Blogger Sven, at 8:43 AM  

  • if all the unhealthy lending practices shake out at once i completely concur...

    By Anonymous ~Nade, at 9:41 AM  

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