July Inventory

Submitted by Rich Toscano on August 2, 2006 - 10:23am

San Diego inventory continues to climb, although the rate of growth slowed a bit last month:

SFR inventory grew faster than that of condos:

And downtown resale inventory continued onwards and upwards:

If the last two years are any indication, inventory should continue to grow until about October.

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Submitted by barnaby33 on August 2, 2006 - 1:39pm.

Here is rooting for 25k total by then! I told my friends we would have a bbq at my place when inventory got that high.

Josh

Submitted by lindismith on August 2, 2006 - 2:09pm.

So is our next meeting at your place then, Josh? ;)

Submitted by Diego Mamani on August 2, 2006 - 2:24pm.

I like the fact that the vertical axis starts from zero, so that the graphs don't overstate any trends. It's shocking that there are almost four times as many units for sale than only two years ago.

Submitted by privatebanker on August 3, 2006 - 6:50am.

This is shaping up to be quite the "Log Jam". It will be interesting to see it break loose.

Submitted by barnaby33 on August 3, 2006 - 7:08am.

If you saw my place you would cringe. I live in a 1 bedroom in Northpark, which is dominated by my 4 kids. The eldest is a dining room table, the other three are my wine fridges.

Josh

Submitted by ocrenter on August 3, 2006 - 7:50am.

"We are seeing an increase of inventories to normal levels, but it has dramatically changed the psychology of the market."
Leslie Appleton-Young, chief economist for the California Association of Realtors.

Submitted by lamoneyguy on August 3, 2006 - 11:06am.

"We are seeing an increase of inventories to normal levels, but it has dramatically changed the psychology of the market."
Leslie Appleton-Young, chief economist for the California Association of Realtors.

Going from Euphoria to reality is the same reason Heroin addicts have a hard time with real life.

Submitted by bubba99 on August 3, 2006 - 4:35pm.

Of course it is a bubble!

During the discussion of bubble or no bubble, people tend to cite history and argue that we have seen housing correction in the past and never has there been anything like the crash currently forecasted for California housing. But this crash is not the product of nature, but the product of 9/11

Remember back in late 2000 and early 2001, how the dot com bubble had burst and the stock market began a significant slide. It was not coming back, and then 9/11 struck and the market began to crash. The only thing the United States could do to counter the looming financial disaster was to inject liquidity into the market place. I don’t think the Federal Reserve intended the real estate market to move so quickly, but it was a conscious decision to combat a financial panic after 9/11. Why else would an economy based on growing under employment create a trillion dollars in new wealth?

Like all attempts to control the economy by the fed, this one had un- intended consequences. Housing almost doubling in value was un-intended, but OK as long as it did not get too far out of control. The early increases in housing values must have been read as a positive result by the fed. It allowed people to borrow against their houses and raised consumer sales across the board. As it developed in late 2002 and through 2003, the federal reserve must have been delighted that they were able to stave off the financial disaster from 9/11 and create trillions of dollars in real estate value all at the same time. The stock markets were not only stabilized, but growing with gusto. People speculated with two and three houses, serially refinanced their own home and took full advantage of the liquidity injected by the artificially low interest rates.

But housing grew into the proverbial 200-pound guerilla. Housing had superheated, and interest rates were almost as low as they could go. Lenders had fully embraced the easy money and created financial instrument meant for investors that were being used by mom and pop to buy more house than they could afford. Housing had almost doubled in value by the end of 2005, most of the new debt was “special instruments” – arms, interest only, negative amortization and even more exotic loans. It was time to rein in the monster. Predictably, the fed thought they could fix it by simply un-raising interest rates, and that is where the pop is going to come from. The wide spread between short term and long term interest rates is narrowing.

Unlike when they lowered rates, there is now a lot of special financing out in the market place, and it will begin to have un- intended consequences in a few months. Rates will continue to rise, they must to continue to sell US debt to foreign investors. The dollar has been falling against all major currencies, and “they” will not continue to lose money on US government debt. This will start a rapid move out of real estate. The creative financing will accelerate the move out of real estate, and the bubble pops. This is already too long, or I would continue on why the bubble bursting in real estate is not going to cause a financial crash.

Submitted by cenzo on August 5, 2006 - 7:41am.

Bubba99,

I'm interested in your long comment, however, just as when a commerical starts you left me hanging on your thoughts why there won't be a financial collapse with the burst. I sold my house a month ago, renting, and holding back on investing my equity, because I'm worried that the housing crash will push us into a recession and a down-turn in the financial market.
Another possibility is money will funnel out of the real estate sector and into the financial sector causing a surge.
I haven't decided to go Government bonds vs. mutual funds vs. what percentage to split with each. Curious of your thoughts amongst others.

cenzo

Submitted by rentermike on August 7, 2006 - 7:04pm.

I enjoy this space and agree with most of what is written. I am curious if the feeling is that when the market sinks and it is really time again to buy, if the tone with change as such here, or if the information/comments will be more 'I told you so' in tone. My wife and I are ready to buy a condo financially, but we are willing to wait as long as it takes to do so at the most sensible time (which is certainly not right now). I hope we can expect to use this site during that time as well. Thoughts?

Submitted by Bugs on August 7, 2006 - 8:19pm.

I wouldn't say people here are against making a profit or participating in the market. Several of the regulars here are actively plotting their re-entry into the market and are trying to identify the price points that would make it worth their while to purchase. On that score I think most people here are very hopeful and - dare I say it - bullish on RE in the long term. It's the current trend that most of the regulars here take issue with.

Submitted by lindismith on August 8, 2006 - 8:16am.

yes, Bugs summed it up perfectly.

To add, I have spent the last 3 years thinking, 'what on earth is going on with RE? Is this sustainable?'

People always say, 'you should buy, because ultimately it would go up, in the long term.' They're right, (as the data shows) but I'd also lose so much money in the short term that I'd be foolish to buy now.

When I scratch it out on paper, and look at what I could lose short term, I may as well just wait. It's that simple.

Submitted by LA_Renter on August 8, 2006 - 2:30pm.

Ditto. Short term risk does not warrant purchasing.

Submitted by ocrenter on August 9, 2006 - 6:46am.

put it this way. If you buy now, you'll be stuck in that same home and that'll be the only property you'll own for a real long time because the burden of that home will eat away any possibility of saving for years to come. If you wait, you'll be able to pick up a few properties and still be financially secure.

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