Disappearing Demand

Submitted by Rich Toscano on February 28, 2006 - 11:50pm

Will Carless at the Voice of San Diego writes about January's steep home sale decline. While the January year-over-year decline was particularly dramatic, the trend towards shrinking sale volume has been firmly entrenched for months. And, complete lack of concern on the part of the interviewees notwithstanding, long-term trends in declining San Diego sales volume have usually lead to declining home prices in the past.

I will examine the latest housing market data in great detail in the next Monthly Housing Report, which I hope to release tomorrow.

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Submitted by sdduuuude on March 1, 2006 - 9:26am.

From the article:
"'As the market starts to cool, everybody gets afraid that all of a sudden there's going to be a freefall, so the market even cools a little bit more, until people recognize the fact that maybe the volume of activity is slowing down, but prices are still increasing.'"

HAHAHAHAHAHAHAHAHAHAHA
Good thing there isn't alot of inventory.
HAHAHAHAHAHAHAHAHAHAHA

Submitted by powayseller on March 1, 2006 - 9:40am.

Rich, when you post your next analysis, can you help explain why median price is up, although everyone can see all around us that DOM are increasing, and price reductions abound?

The January data would include the sale of my home. We listed our house at the end of October, and had our second offer in December, which closed in January. The buyer's realtor wrote on her cover letter that the offer was firm and final, and was lower than our list price due to the cooling market. She also informed us that the buyers had 2 other properties that interested them. Since this was our 2nd offer at that lower pirce, and we were concerned that if we didn't accept they would make an offer on one of the other properties they liked (effect of rising inventory) we accepted their offer. On a side note, these were first-time buyers financing $780K with a 100% ARM. Their monthly payments must be close to $5K/month. I had some guilt about selling to them, since they have a double whammy of buying at the peak of the biggest housing bubble in history, and getting an adjustable rate mortgage. I wondered if in a few years, when they are in foreclosure, I might buy the house back. Is that mean???

Anyway, it's interesting to see the data finally come in for the December sales offers.

My personal experience is that prices are coming down, so can anyone explain why median price is up? Are more high-end homes sold, pushing up the median? Are first-time buyers eliminated due to higher interest rates, again pushing up the median?

Submitted by sdduuuude on March 1, 2006 - 9:51am.

Deleted a reply that didn't make any sense whatsoever.

Submitted by smfj on March 1, 2006 - 3:34pm.

The car giveaway thing is hilarious. I think I laughed out loud when I heard a radio commercial about a PB condo conversion doing just that. This, as well as the near daily emails I keep getting from a realtor friend talking about why there is no bubble and - my favorite realtor claim - that this is a great time to buy because the increased inventory gives a buyer so many choices - but doesn't signal an overpriced, oversaturated market.

The thing is that realtors, mortgage brokers, etc. have suceeded in keeping a lot of people convinced that there is no bubble, that real estate is still a fantastic investment, that things are different this time and the market will not self-correct, blah blah blah.

Personally, I think you're still seeing some people who have been hesitant to enter the market being convinced that it's now or never since interest rates are rising, prices keep rising, and if they don't take the plunge they will remain renters forever. Also, purchasers who for whatever reason feel they need a home now (perhaps they moved in from out of town with a family, or they are just ready to be a home owner) and just figure, this is how the market is, there's nothing I can do about it, I'm just going to suck it up. I have a few acquaintances that have purchased homes within the last couple of months, and they fall into these categories.

But this is all antecdotal, of course.

Submitted by Bugs on March 1, 2006 - 8:59pm.

The effects of the new home subdivision sales should not be overlooked. When a single subdivision closes 15 or 20 units at a time and they're all in excess of $800k that has an impact on the averages. This impact is even more pronounced in a market where the resale activity has dropped and there are fewer sales that are being averaged together. The developers are so skilled at packing those sales prices it's almost impossible to see what's going on with them unless you're asking the sales office - and they're telling you - about the base prices and options and any sales concessions that together comprise those sale prices.

Submitted by equalizer on March 2, 2006 - 11:57pm.

Troublemaker realtor on realtytimes.com (Bob Casagrand):
"We are still seeing a strong decline in the under $400,000 buyer, down about 36% from last January, while our total unit sales are down 29%. This change in buyer demographics explains the total increase in average price year over year; it is a distribution increase for the most part. The important item to remember is that January 05 was down in sales 47% from January 04 and now 06 is down 29% from 05. These are significant negative demand trends and could portend a very mediocre year ahead."

Heres another agent:Dawn Lewis

"The San Diego real estate market has been slowing down for almost 2 years now. Flat with some good deals here and there is a good description. Some reasons for this are that many agents kept trying to push the range on listings, anticipating the next jump. This caused a false sense of home values still rising when in fact they just stayed about the same."

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