Low-Priced Zip Codes Still Selling Fastest

Submitted by Rich Toscano on February 20, 2009 - 4:50pm

After last week's note on the topic of dramatically disparate buyer interest in different property types I thought I should update the stats on which zip codes have seen the biggest increases in sales activity. To change it up a bit this time, I sorted the list of zip codes based on January 2009 median price instead of sorting zips by growth in sales volume as I had previously. (The median price is a flawed indicator, for reasons often discussed here, but it's the only thing available at the zip code level and besides, it is good enough for gauging the kinds of broad trends we are looking for with this study).

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Submitted by davelj on February 20, 2009 - 5:04pm.

This makes sense. The bid-ask spread at the low end is getting tighter every month (as lenders cave and former renters and investors buy), while the bid-ask spread at the high end gets wider (as sellers and buyers don't want to budge from their disparate price positions). The former group moves while the later group languishes.

Submitted by peterb on February 20, 2009 - 5:31pm.

I wonder what the ratio of owner-occupied to investor is at the purchases of the low-end homes? I've heard loan requirements have become more restrtictive.

Submitted by sdrealtor on February 21, 2009 - 1:58am.

Anecdotally, the investors are getting the houses because they have more cash but the owner-occupiers want the homes because they can afford them now.

Submitted by capeman on February 21, 2009 - 9:23am.

This is a great example of assets becoming illiquid and improperly valued. I'd bet that YOY price decline accelerates very fast once the product starts moving.

Submitted by pencilneck on February 21, 2009 - 12:40pm.

When the higher end homes start selling again, even at discounted prices, the median sales price could jump significantly. The media will have a field day with this.

Not to mention the 2009 $8k Federal tax subsidy that will also help create an illusion of price stability...

Its going to be a rough year for those of us waiting to buy.

Submitted by capeman on February 21, 2009 - 7:15pm.

With unemployment up well over 10% I don't see how it's going to be a rough year even with tax credits. The state tax credit only goes for new homes so that's not going to get utilized much.

Submitted by SD Realtor on February 21, 2009 - 11:09pm.

I agree with you pencilneck. My advice would be to put the blinders on and sit tight for awhile.

Submitted by massey on February 22, 2009 - 8:57pm.

Doesn't a doubling of the sales volume at the low end there signal a floor to the deflation?

Also, what are the figures for 92010 and 92056, two that I'm watching fairly closely.

Submitted by creechrr on February 24, 2009 - 3:11pm.

massey wrote:
Doesn't a doubling of the sales volume at the low end there signal a floor to the deflation?

I would say no. With run up in prices for nearly a decade, the current price levels seem like bargains. I'm sure there are buyers that are still worried about "being priced out forever". It doesn't seem like the creative financing has completely vanished.

Coupled with reduced employment. I find it hard to believe that the job losses experienced last year won't be repeated to some degree this year. And, let's not overlook the affect job seeker competition has on wages.

I've also learned that the uninformed usually outnumbers the informed by a large margin. I'd be willing to wager that a significant number of recent buyers loose their homes in the relatively near future.

The $8,000 Federal home buyer credit won't have much affect on So. Cal. The pool of buyers that can afford to purchase a home and meet the income and First-Time Buyer requirements is problably pretty small.

Submitted by peterb on February 24, 2009 - 4:57pm.

Unemployment is a strong indicator of real estate prices in CA. A partner in one of the biggest employment law firms in the country was interviewed the other day. Based on their activity, he said he thinks we will see another 2M persons laid-off by summer time in the US.

Submitted by cr on February 25, 2009 - 2:11pm.

pencilneck wrote:
When the higher end homes start selling again, even at discounted prices, the median sales price could jump significantly. The media will have a field day with this.

Took the words out of my keyboard.

This hit me the other day. Right now the median is plummeting because foreclosures are all the volume.

Once the Alt-A, Option Arm assault hits full force we should expect foreclosures in the high end.

That will lift the median, but it will not be a sign of a turn around. As you said SDR blinders will be required.

Rich, I know you've mentioned that SD was earlier in the ARM cycle, but do you have any read on the coming pain in the high end that would support this idea?

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