April 2009 Resale Data Rodeo

Submitted by Rich Toscano on May 8, 2009 - 5:27pm

As noted in the prior post, the size-adjusted median actually experienced a bit of a monthly bump for the first time in 2 years:

The month-to-month increase for detached homes was just barely positive at .1 percent, but condos popped for 8.7% (though that number is less impressive in light of the whackage to the condo size-adjusted median in recent months).

The plain vanilla median bounced also, with detached homes up 1.5% and condos up 3%.

The Case-Shiller home price index is based on single family home sales, so this month's data didn't have too much effect on my little HPI proxy:

Volume was decent once again, beating out the prior two Aprils:

And inventory continued to decline... a phenomenon that has been much discussed on the Econo-Alamanc forum in recent months:

Months of inventory came in at just 4.9:

I've been keeping tabs on the disparate increase in condo vs. single family sales... here's another way of looking at it, with months of inventory for each property type:

There were actually only 4.4 months of detached inventory, compared to 6.2 months of condo inventory.

Inventory, and especially single-family inventory, is really quite tight right now. Again, nothing new to the Piggs. There may well be a lot of new must-sell inventory in the future as a result of homes in foreclosure, not to mention homes that aren't in foreclosure yet but will be. There is a lot of pent-up inventory (and pent-up must-sell inventory at that), though as discussed in a couple recent forum threads (here and here) there is some question as to when and even if that pent-up inventory will be released into the wild.

Whatever may happen in the future, the fact remains that as of right now inventory is tight. That's just the reality of the situation, and the imbalance between short-term demand and supply is liable to put some upward pressure on prices.

The previous post discussed the potential causes and significance (or lack thereof) of the increase in the median-based price indicators, so I won't rehash that all here. The summary is that in addition to the little run on inventory we have going, spring is a traditionally strong time of year for housing. In fact, spring price rallies are par for the course even during secular housing downturns -- I imagine the only reason we haven't seen many spring rallies in this particular downturn is because it's been so brutal.

So even if the rise in the median price indicators represents a legitimate rise in actual home prices (versus a median disortion), it's nothing to get too worked up about, except perhaps for the novelty that we finally got a month-to-month price increase. Watch that months-of-inventory figure, though. If the foreclosure dam holds and inventory remains this low for a while, things could get interesting.

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Submitted by MMrenter on May 9, 2009 - 3:53am.

In less than 2 months, the number of listings on SDLookup in Mira Mesa has gone from 169 to 111. For low end listings, asking prices are really opening bids. Real bottom or false bottom, things have changed.

In these neighborhoods, almost every sale is either short or REO. Could the banks have figured out that they completely control the market right now? By sitting on foreclosures, they don't have to account for losses (if I understand the mark-to-market change) and they protect the value of the properties they are selling. Maybe the banks are focusing on the short-term now and leaving the risks of increasing incentives to become delinquent to a later date and another CEO.

Submitted by jpinpb on May 9, 2009 - 11:33am.

There definitely is a lot of kicing-the-can down the road.

Submitted by peterb on May 10, 2009 - 11:30am.

I believe this is what Japan allowed their banks to do as well in the early 1990's. They let them hide their worthless RE assets on the books without having to recognize them as such. The end result has been many, many years of stagnation, with the slow and steady decline in values.

Submitted by jpinpb on May 10, 2009 - 2:16pm.

MMrenter wrote:
In less than 2 months, the number of listings on SDLookup in Mira Mesa has gone from 169 to 111. For low end listings, asking prices are really opening bids. Real bottom or false bottom, things have changed.

In these neighborhoods, almost every sale is either short or REO. Could the banks have figured out that they completely control the market right now? By sitting on foreclosures, they don't have to account for losses (if I understand the mark-to-market change) and they protect the value of the properties they are selling. Maybe the banks are focusing on the short-term now and leaving the risks of increasing incentives to become delinquent to a later date and another CEO.

MM has something very strange going on. Their inventory is greatly reduced, yet so far this year there's close to 170 NODs filed

I don't monitor MM, but started to list the NODs for someone. I can't tell you whether any of them are listed, pending, sold, short sale or squatting, but that's a lot of distress in just a couple of months in one ZIP.

As I said, I'm not really tracking that area, but I'd keep an eye out on the ones from January. Very possible the banks will be scheduling foreclosures. I've noticed that on some of the ZIPs I'm tracking.

Submitted by an on May 10, 2009 - 11:17pm.

jpinpb wrote:

MM has something very strange going on. Their inventory is greatly reduced, yet so far this year there's close to 170 NODs filed

I don't monitor MM, but started to list the NODs for someone. I can't tell you whether any of them are listed, pending, sold, short sale or squatting, but that's a lot of distress in just a couple of months in one ZIP.

As I said, I'm not really tracking that area, but I'd keep an eye out on the ones from January. Very possible the banks will be scheduling foreclosures. I've noticed that on some of the ZIPs I'm tracking.


170 will hardly make big enough dent to completely change the current condition in Mira Mesa. If anything, it'll make an extremely under supplied situation into a slightly under supplied situation. You're still under supplied, even of all 170 goes listing tomorrow. For an area that have 74,222 people and 23,079 household, 170 is only 0.7% of total house hold. In March there were 51 closed sales and in April, there were 39 closed sales. Currently, per SD R's post, there's 67 pending right now. That's between 2.5-4.3 months of supply. Current supply is between 1.6-2.7 months of supply. So, if we use 67 number, you'll have a total of 4.1 months of supply and if you use 39 number, you'll have 7 months of supply.

Submitted by jpinpb on May 11, 2009 - 7:24am.

That is, of course, also assuming that the NODs stop today. Over the past week, there were about 3 NODs a day.

Submitted by an on May 11, 2009 - 7:34am.

jpinpb wrote:
That is, of course, also assuming that the NODs stop today. Over the past week, there were about 3 NODs a day.

Nope, not assuming that at all. At the current sales rate, even if all the NODs get to the market as REO, it still won't push the supply number into the over supply territory.

NODs have been filed in MM for many months now. It didn't just start now, yet months of supply is shrinking. How do you explain that?

Submitted by jpinpb on May 11, 2009 - 7:43am.

AN wrote:
NODs have been filed in MM for many months now. It didn't just start now, yet months of supply is shrinking. How do you explain that?

We have all been discussing that on this board and trying to figure out why they're not to market. I did not post the NODs on SDL for MM from 2007 and 2008, but I assure you, I know there were an infinite supply as I scanned through the list. As I said, I don't monitor MM. I couldnt' take the time to list those.

The ZIPs that I do monitor, I can say this. I'm just now seeing some places that had NODs in 2008 be put on the market. It's crazy. I made notes in the comments, like "finally" or "it's about time" or "that took a while"

I cannot explain the delay. Everyone has their speculation or theories. MM is not the only place that has NODs that are backlogged. I won't argue that some get redeemed, some get short sales, some get re-worked, some are just squatting and some are in limbo, twisting in the wind.

I can say this, a high percentage of the investment properties are more likely to get bank owned. As for the others, your guess is as good as anyone else's.

Submitted by an on May 11, 2009 - 7:51am.

jpinpb, I do follow MM and I can tell you, REO is the MARKET in MM for a while now. A lot of the REOs in MM are priced extremely well and get plenty of multiple offers and goes off the market w/in weeks, if not days. Most end up selling for above asking price. That's how I explain the current supply situation.

Submitted by jpinpb on May 11, 2009 - 8:04am.

I thought we were questioning the NODs that are twisting in the wind.

As I said, since I don't follow MM and only go by what people say, MM has really seen declines enough that listings sell fast and above the low list, yet significantly less than peak. It still does not explain what's happening w/the NODs.

Submitted by an on May 11, 2009 - 8:32am.

jpinpb wrote:
I thought we were questioning the NODs that are twisting in the wind.

As I said, since I don't follow MM and only go by what people say, MM has really seen declines enough that listings sell fast and above the low list, yet significantly less than peak. It still does not explain what's happening w/the NODs.


That's the key point, selling significantly less than peak. THE ONLY reason it's selling fast now, is because people (general public) view them as reasonable price and are jumping en masses to bid up these properties. My interpretation from you posts is that you expect these NODs to change the market psychology in areas like Mira Mesa, and I just don't think that'll happen, unless we get 2x more NODs and they all become REO and hit the MLS soon.

Submitted by jpinpb on May 11, 2009 - 9:16am.

I would think the market psychology might change when we're not in spring and if and when the NODs come to market. Are you calling bottom in MM? I am not arguing the present MLS inventory is low, but I just don't want to negate the potential of future inventory.

Submitted by an on May 11, 2009 - 9:24am.

jpinpb wrote:
I would think the market psychology might change when we're not in spring and if and when the NODs come to market. Are you calling bottom in MM? I am not arguing the present MLS inventory is low, but I just don't want to negate the potential of future inventory.

No, I'm not calling bottom for MM. It's too early to tell. If we go through 2 winters and the market condition gets worse (for us bears) compare to what it is today, then I'd call the bottom then. All I can do is state what I'm see at the moment. I'm also of the mindset of L shape recovery. Which means, even if we hit bottom today, 2-3 years from now, the nominal price will still be around the same.

Submitted by surfer00 on May 12, 2009 - 10:59am.

I occasionally lurk here and haven't been here in a while. If what I have to say has been discussed over and over, I'm sorry, I haven't read all the posts.

I'm an REO agent out of L.A. county. The bump in pricing is a result of the foreclosure moratoriums that were put in place by various banks. This has resulted in a huge decrease of properties hitting the market and the inventory has been hit hard, resulting in multiple offers on anything decent.

The last of the moratoriums was lifted on April 30th and we are expected to see a big increase in inventory by the end of this month, building throughout the summer.

The moratoriums have been devestating to reo agents, as we have all been hiring any experienced reo staff we could get our hands on and then the business died out.

I don't see an end to price depreciation for a few years at least.

Submitted by Rich Toscano on May 13, 2009 - 10:03am.

Thanks surfer00... we would love to hear updates on what you see happening ahead if you don't mind popping out of lurker status from time to time.

Rich

Submitted by carlsbadworker on May 13, 2009 - 10:12am.

One question I have is how much visibility does an REO agent have into the future? I mean if you guys didn't successfully predict the moratorium last time, how did you know that you can predict correctly for the next few years?

Submitted by surfer00 on May 13, 2009 - 11:49am.

"One question I have is how much visibility does an REO agent have into the future? I mean if you guys didn't successfully predict the moratorium last time, how did you know that you can predict correctly for the next few years?"

The moratorium caught everyone off guard for the simple reason it had never been done. Who would have thought the gov't would intervene so dramatically?

As far as the market's future, my opinion is based on the fact that there are tons of reo's that havent hit yet that have already been taken back and there is even more in-process. HUGE numbers. The reos that have driven prices down so far are a fraction of what is still coming.

I worry that some other program will pop up that will freeze them again, but at some point the banks HAVE to sell the bad assets.

My opinion is the govt needed to stop the free fall for a while to get things moving again. I imagine when they hit again, the stock market will go back down, foreclosures will be the main story on the news, etc etc.

This is my opinion and it's an opinion only:

The r.e. market is worse than you've heard any real estate 'expert' talk about. When the flood gates open, there will be way too much inventory and the prices will crash hard.

There will be a real
housing 'crisis' as the economy worsens, unemployment increases and the r.e. market is flooded with bank owned properties as the banks under-cut each other to get their properties off the market first.

A seldom talked about problem that I deal with on a weekly basis is the innocent tenant. I knock on the door to tell the occupant that the bank has taken the house back and find that the occupant is a renter that has been faithfully paying rent each month to the owner who is not paying the mortgage and all their money is tied up with their deposit, which they obviously will never get back. I think this is criminal and some sort of law should be enacted that would punish a landlord who continued to receive rent payments but are letting the property go into foreclosure.

These tenants also pose a big problem in the future and I always do my best to fight the banks to get them the most 'Cash for Keys' money that I can. The owner took on a bad investment, but the tenant pays for it.

Since the Fannie moratorium was lifted, we have seen an increase in BPO requests (broker price opinions, which is the start of the banks figuring out what a property is worth and what to do with it) by about 500%. These are the reos that will hit in the summer.

I work with about 10 banks and outsourcers and the consensus I'm getting from the asset mgrs I deal with is get ready - it's going to get ugly.

Submitted by peterb on May 13, 2009 - 12:07pm.

surfer00, thanks for your insight. It's what all of us here are forced to guess about as the govt's intervention is creating dislocations that are of historic proportions.

Any BPO updates would be greatly appreciated as they're the first step towards REO market release, as you've said.

Submitted by carlsbadworker on May 16, 2009 - 10:34am.

surfer00, thank you for your insight. But I still want to debate on this. Yes, I too believe that "the reos that have driven prices down so far are a fraction of what is still coming". But unless the unemployment condition severely deteriorates or the interest rate increases suddenly or the REOs hits the market at the same time. I still doubt the price implication of that inventory release.
Now, it is said that the median time an American homeowner changes his primary residence is 7 years. So for simplicity, there are 50% of the homeowners who bought in the last 7 years when the price is higher than the market place. A big portion of them wouldn't go to REO but at the same time there're a big portion of homeowner who bought at lower price but re-financed at the peak to use their homes as ATM. Assume these two evens out, so at the maximal I think 50% of the all housing units will have REO potential.
Now, let's just take Temecula as an example since I'm more familiar with it. There're roughly 20K housing units in Temecula Perhaps, 70% of them are houses instead of apartments. So we have 14K total inventory and 7K REO potential. The houses are selling at an annual rate of 3K here and assumes 70% of them are REO, that's an annual rate of 2K. So the maths is that it will take 3.5 years for the REO potential be cleared and we are almost half way there end of this coming summer (assume the eager ones who bought early 2008 will be doing fine).
My point is: if the government (whether the federal or the state) can keep on pushing the moratorium, at times it may seem that they are only delaying the unevitable for 6 months out of the future. But given enough time, the end of the tunnel will be coming and I think that's what the governments are hoping for with their moratorium programs.

Submitted by mongote on May 20, 2009 - 5:22pm.

I was wondering if you had the raw data behind all the charts? If so, can you post it? thanks!

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