Spring Housing Prediction

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Submitted by sdrealtor on November 17, 2008 - 10:16pm

Ok, time for someone who actually sees whats going on at the street level to stick his neck out. I'm going to go against the popular wisdom and declare that it is going to be a very good Spring for real estate. Sales will be strong and pricing may even creep up a little in some markets. Based upon what I am seeing, there are lots of buyers out there chasing very limited inventory under $600K. I am getting piles of offers on nice but nothing special homes the first week in this price range. All have at least 20% down and went up from there to all cash. I probably could have had twice as many offers if I didnt chase a few away that were lower than the ones I already had.

Between 600K and 800K I expect a very strong market also. I am seeing lots of folks who sold at the top who are sick of renting wanting back in. They see the market has fallen by at least 50% of what they think is possible and they dont want to wait another 3 to 4 years for the rest of the bloodletting. I see lots of previously priced out buyers wanting back in. Some were priced out by choice (i.e. bubblesitters) and some were truly priced out. Either way, alot of them want back in. From here on out the declines are going to be much slower.

Above 800K and in particular over $1M its still going to be pretty slow.

My advice for the other Realtors on this board is to collect as many listings as you can before February because there is gonna be alot of money to be made this Spring. Happy Hunting!

Submitted by TheBreeze on November 17, 2008 - 10:47pm.

I think I'm going to become a realtor so I can tap into some of this government largesse. There's no reason to work for a living when I can suck off the gubmint' teat.

Submitted by temeculaguy on November 17, 2008 - 10:55pm.

I agree with some of your predictions, but have most areas in sd hit 50% declines? I do think it is a magic number, that and rent multiplier. I actually think it may be brisk sales for areas with the greatest declines and declining sales and prices for areas thus mostly immune. My prediction is that the areas with the greatest declines percentage wise will have the increase in sales. The areas with lower percentage declines will flounder, even if they are better places, status is becoming less chic and economizing is in. Even amongst piggies, there was a long thread about O'side vs. Carlsbad and most felt Carlsbad wasn't worth twice the money since O'side had fallen harder, as the differential spreads wider, so will go the shoppers.

My reason for this thesis is that my valley has already seen sales increase dramatically, despite worldwide economic calamities and layoffs. Bidding wars, multiple offers, 5+ offers on listing day are common right now, in what should be a terrible time, the reason is entirely that the price is now right (for most, but not all listings). If SD sheds another 10-15% in the next four months, or if areas hit 50% off peak or 2001 pricing, it will take off and many will jump off the fence. According to Rich's graph, detached are down 38% and condo about 48%, it just may get there by spring, but my guess is that some areas are down 50% and some are down 25%, so get your listings in the 50% areas. Since half the posters want to buy in Carmel Valley and it has been the stickiest, I predict that if it doesn't start a quick chunk down, they will be looking a town or two over.

Submitted by peterb on November 17, 2008 - 11:12pm.

I think there's a very good chance that the real estate market could experience a "relief rally" just as the stock market probably will going into March or April of 2009. By the same logic that prices are now so low that there are bargains to be had. I will be looking to sell into this myself. My only concern is that unemployment could trump this in a big way if more lay-offs come down the pike in the next few months.

Submitted by socrattt on November 17, 2008 - 11:23pm.

Peterb, you pinned the tail on the donkey!!! Unemployment is going to dash all hopes of an upward trend next year. I love the optimism, but from a realistic standpoint, I just don't see this happening. If unemployment is held in check at under 10% nationally there would be a chance, but we are creeping up very quickly and the likelihood is about as good as the Chargers making the playoffs. I need to see the coastal market down another 15-20% before I call any bargains at the beach. There is a bit of optimism in that phrase, but hey we got a bunch of hopeful people so why not join the club?

Submitted by sdrealtor on November 17, 2008 - 11:35pm.

TG
Most areas have not hit 50% declines off peak but perhaps I didnt do a proper job explaining what I meant. What I meant was that at least half of the potential damage has already been done even in the sticky areas with the possible exception of the high and very high end homes (i.e.$1.5M plus). For example, my own home is about 25% off peak. If it fell another 25% of that peak number it would be too cheap and demand would far outstrip supply.

Here are some hypotentical numbers to show what I'm talking about. If it was $1M at peak its about $750K now. I dont think it is possible that it would hit $500K which would be below the pre-bubble price plus post builder necessary upgrades (i.e. applainces, paint, window treatments, landscap/hardscape). I also dont think all except the most ardent bubblesitters would think $500K was possible. If it was there would be hoards of buyers.

Carmel Valley and other North County Coastal areas will continue to creep down for the next few years. Chunks are very unlikely at this point unless we hit 20% unemplyment. Additionally, Carmel Valley buyers arent going to Oceanside even if housing is free in Oceanside.

Submitted by sdrealtor on November 17, 2008 - 11:38pm.

socratt,
I think you'll see another 15 -20% off the peak numbers at the beach. Are you willing to wait 2 to 3 years for it? There are plenty of folks who wont wait. More than enough IMO to suck up the limited supply that will hit the market.

Submitted by zk on November 17, 2008 - 11:39pm.

sdrealtor wrote:
it is going to be a very good Spring for real estate. Sales will be strong and pricing may even creep up a little in some markets.

When spring comes and most areas drop in price but in some markets the prices "may" creep up "a little," I wouldn't count that as a "very good spring for real estate." In fact, when the (traditionally) best time of year for real estate involves generally falling prices, I'd say it's a pretty bad spring for real estate. I think what you meant to say was that you think it will be a very good spring for real estate agents.

Submitted by peterb on November 17, 2008 - 11:48pm.

zk, you're getting it. For the middle man, it's all about the transactions. Not the investment or the risk. Just bring the volume. Why do you think NAR spends so much time and money blowing sunshine up the media's skirt? The bottom is just about it...etc...and the lower it gets, the more people buy into it.

Submitted by capeman on November 17, 2008 - 11:53pm.

SD-Your experience and argument make a lot of sense for demand and pricing to put upward pressure on the market. The chances of that outweighing what is going to be the biggest downward economic pressure in 80 years is likely to make any rally short-lived if even noticed. There are monstrous layoffs due in all sectors in the next 6-9 months and Qualcomm could be leading the charge locally very quickly.

Is there anyway to track your observational data over time? It's qualitative from just one person but over time I think it will help us get a better picture on the local markets. Buying interest is not something that anyone other than those like yourself in the business can really track.

Submitted by sdrealtor on November 18, 2008 - 12:07am.

capeman
Just watch the volume.

Submitted by sdrealtor on November 18, 2008 - 12:11am.

yes zk, its going to be a good Spring for agents that have the listings. For many previously frustrated buyers it will be good also as they will be able to buy homes they actually like at prices they can afford. I dont think prices will be falling this Spring in the sub 600 markets. Between 600 and 800 I think they will be pretty stable also. Prices wont so much creep in some markets but rather in some price ranges.

Submitted by CA renter on November 18, 2008 - 1:00am.

Agree that this spring will probably see pretty brisk sales...but we'll see slower activity than 2008 (which was very high activity).

Also thinking we'll see major price drops in the more desirable neighborhoods by Q3 2009, for an average of around 30-45% off peak in 92024 and 92009 (that's for you sdrealtor!). ;)

I think 2008 saw the dead-cat bounce in sales which resulted in stickier prices in the upper-mid to high end properties.

After an initial period of elation in the first two quarters of 2009, activity will drop like a rock around August of next year due to macroeconomic trends (massive deflation and unemployment hitting 10%+ in California). This will also be the time that all those "re-worked" mortgages run into trouble again, and we finally see the wall of foreclosures that the govt has been trying to artificially hold back.

Submitted by barnaby33 on November 18, 2008 - 3:05am.

sdrealtor, housing news has been so unremittingly bad for 18 months now it almost has to get better, for a while. Nothing goes straight down, not even the home builders.

I for one would love to see a strong selling (and buying) season come spring. It would help confirm to me that the secular trend is still on a whole moving in the right direction. 91-95 saw several of these rallies.

For prices to end up where I've predicted all along without any counter trend rallies would just be insane. 50% off is a lot of paper wealth vaporized.

Submitted by NotCranky on November 18, 2008 - 8:47am.

sdr,

Have you ever said prices will go down fast sdr?Have you ever said they will go down anything but slowly? The only time "really fast" came up you made a special thread to contest it and were wrong. Yeah, you will be right sooner or later.You have to be. I don't see a point in the last year and half where housing has gone down slowly though.Well maybe a brief pause for a month or two. In the experience of buyers, those little pauses are meaningless.

The statistical median will begin to slow towards the eventual trough with or without hiccups,seasonal or whatever. Prices above that will be compressing.

Sure it is a better market for realtors and buyers. I have definitely tempered my stance from, "don't buy unless you are rich", to well "maybe it won't hurt too badly and maybe it's will be a good investment in some cases". This ought to be better for my business than it was while I was saying "you must be crazy to buy in this market houses are falling fast!" It sucked being the only realtor saying that.

Submitted by SD Realtor on November 18, 2008 - 8:50am.

I am a bit more reserved in my opinion. I have seen brisk activity in the investor stock condos in the central area as well as sub 400k stock in places like Mira Mesa and Clairemont. Ditto for 500k stock in PQ and 600k stock in Encinitas and Carlsbad. I have a buyer who has been scorched on 4 listings in that range in Carlsbad and Encinitas in the past 3 weeks. The home on El Rastro went quite quick and he wanted to save 10k on his asking price and thus lost out because of that.

Good odds that the 600-800k stuff will move in places like CV and 4S but above that I am skeptical. Also we really have to see if/when the tech layoffs will begin. If that starts to happen in earnest things may not be so robust.

It seems like the recession/depression effects will hit San Diego employers in the next year but whether that it sooner or later is the real question.

Submitted by LA_Renter on November 18, 2008 - 11:28am.

Good points made by all. I always respect both realtors opinions given their front line perspective.

"It seems like the recession/depression effects will hit San Diego employers in the next year but whether that it sooner or later is the real question."

In my little corner of the world, this is happening right now and it is getting worse. I deal with in a commodity type product that sales into a distributor based network of business supplies/service providers that encompass most facets of the service, industrial, municipal and energy segments of the economy. Let me give you an example of some of the stories I am hearing out there. One of my distributors services large chain restaurants (Macaroni Grill, Maggionos, Red Robin etc) At the busiest location of one of their top chains in S. Cal they will service 3000 napkins on a Friday, during the turmoil that number dropped to 600 and they have only rebounded to 50% to 60% of original volume. This is anecdotal so take it with a grain of salt but that is what I am seeing. Executives throughout America are getting this type of feedback across the country right now. If you were to ask me the Spring of 09 will be in the throws of one of the worst economic downturns post WW2, I still don't think we will actually hit a depression but there will be times when it will feel like one. How this environment could translate into a strong Spring housing market is beyond me. Up to this point in time we have dealt with a pricing / mortgage issue, we have not dealt with a true fundamental downturn in the economy like we are entering right now. During the Spring of 09 we will be getting headlines of a possible 4% to 8% reduction in GDP during the 4th and 1rst quarters along with layoffs in full force. This will be a time of Max fear and pain of one's own livelihood, not the stock, bond, or housing market, but one's own job. The true financially secure will be out buying, but I don't see enough of them to truly drive the market. Just my two cents. We will see in about 6 months.

Submitted by sdrealtor on November 18, 2008 - 11:37am.

CA Renter
30 to 45% is a huge difference. You'll get your 30% off but not your 45% Q3 2009.

Rus,
For the record I was not wrong. My comments were made regarding my sub-market but I didnt do a good job delineating that. My sub-market has been on a pretty orderly march down without major downward chuns. Sure I was surprised how quickly things chunked down in the outlying areas like Jamul;) but that is not what I follow or know well.

Also you werent the only Realtor saying that. It sucked for me too walking away from over a dozen deals I could have done. I'm sure Adam felt the same way.

SD R,
Your observations mirror what I am seeing and what I believe will happen.

Isn't it nice to be talking about real estate for change?

Submitted by peterb on November 18, 2008 - 11:50am.

Sounds like the most sales activity, by far, is in the $400K and below range. Is this an accurate statement?

Submitted by blahblahblah on November 18, 2008 - 11:59am.

My fiancee is a buyer in a retail store and she reports that the management is cutting purchases of almost everything. They are cutting stock to an absolute minimum. Sales are way down over last year. They sell mostly to upper middle class and the wealthy. So these groups are cutting back on their nonessential spending right now. Maybe that correlates to an increase in spending on houses, what do I know?

Submitted by NotCranky on November 18, 2008 - 12:14pm.

All three tiers went down pretty fast since we had that big chunk thread. Sure some went down faster than others. Some went faster than my predictions none went slower than mine, or as slow as yours. Your sub-market must be "different".

You should be glad to talk real estate with SDR instead of participate in "off topic" because he has always been in your camp on this one. I know participating in "off topic" is as self defeating as much as talking strait about price declines is. To each his own. You guys just keep walking that fine line of catching fences sitters and not pissing off the rest. Pretty soon the market will be good enough that you don't have to do it anymore. That will be fun.

Submitted by BGinRB on November 18, 2008 - 12:38pm.

Debt destruction through inflation is the only solace Spring 2009 buyers can expect in quarters to follow.

Submitted by SD Realtor on November 18, 2008 - 1:26pm.

sdr it is nice...

btw, I thought I read in one of your posts that you made an indication of a different business model. In fact I thought I commented on it but now I am not sure if I did... Are you still with the same brokerage or did you join the dark side of us independents?

Submitted by SD Realtor on November 18, 2008 - 1:33pm.

deleted

Submitted by sdnerd on November 18, 2008 - 1:54pm.

I'm just going to echo the sentiment that it all depends on unemployment.

The end of the year is coming up, and that's when many companies make their cuts. And if you take a drive through any of the various tech hubs you'll see a LOT of vacant office space.

If Qualcomm or some of the other big players start making bigger cuts, it could get ugly.

If unemployment stays somewhat in check into next year, I agree there could be more activity out there.

Submitted by Ren on November 18, 2008 - 2:38pm.

CONCHO wrote:
My fiancee is a buyer in a retail store and she reports that the management is cutting purchases of almost everything. They are cutting stock to an absolute minimum. Sales are way down over last year.

I have an online store, and my revenue was down 63% in October. Luckily I have other sources of income that don't rely on consumer confidence.

Submitted by SD Realtor on November 18, 2008 - 3:01pm.

Peter the statement is a regional statement and obviously does not qualify for mid and upper tier zip codes. One measure would be to compare them to last year. For instance we can look at 600k homes in Encinitas this year as opposed to last year, etc... see what I am saying?

Of course, yes the majority of sales is in the lower price ranges but I am not so certain that it is not like that most of the time regardless of the market conditions. If your point is that nobody at all is buying over 400k homes then no I don't agree. If your point is, well is there a DRASTIC reduction of sales in Carmel Valley for 800k homes and up this year as opposed to last year then I would say lets look at the data. i tend to think yes there is a reduction and whether it is drastic is an unknown until we analyze the numbers.

Submitted by Mark Holmes on November 18, 2008 - 3:33pm.

LA Renter - I think you're closer to the mark than anyone.

But who knows?

I do hope prices keep falling until housing is roughly in line with rents again. I certainly don't want to rent forever.

But I will. I'll rent until I'm in my grave before I'll pay $300,000+ for a shack in Normal Heights or North Park.

I don't have to buy.

But it seems that there are more and more sellers who have to sell, ASAP.

I do hope things in the overall economy start to stabilize in the next couple of years, though. Too many people aare getting hurt in this mess. It never should have been allowed to happen.

Submitted by ibjames on November 18, 2008 - 4:00pm.

Qualcomm is feeling pain because cell phone manufacturers are getting rid of their chip inventory. They are trying to keep as little inventory as possible. For cell phone companies to have problems you know something is wrong.

How many people would give up their cell phone?

Next year at this time is when I really want to talk housing, in the meantime, it's just self torture

Submitted by barnaby33 on November 18, 2008 - 4:09pm.

Mark, hope is a terrible investing philosophy. Real estate is an investment, whether you think so or not.

When reading through this thread its interesting to see the color or context added by the various posters. I think we all agree that RE is decreasing in price. I think what this thread highlights is the varying ways in which we view that and how it exposes our biases.

I don't know why, but a lot of people seem to want to live in Carmel Valley, which is why it garners so much attention. Its also going to be one of the last areas to decline, because it garners so much attention.

Jamul, you forgotten pariah of RE. You are so often maligned. Even though someone once helpfully offered to kick my ass all the way there, it hasn't helped hold up prices.

RE collapses happen outside in and are slow moving, multi year, train wrecks. Don't worry about spring 09, "or worry but know that its about as effective as trying to solve an algebra equation by chewing bubble gum."

Del Mar hasn't come down that much either, nor has Mission Hills. I can wait. Back in 03 I said, shit its going to be till I'm 35 before I buy my first home. Sure seems like thats optimistic now as I'll be 34 next month.

Josh

Submitted by moneymaker on November 18, 2008 - 4:12pm.

I agree with BGinRB that now that the govment has actually starting to dole out the money, inflation is not too far behind. I'm not a union worker, but it will still piss me off when the govment gives the auto industry 50 Billion and then they will immediately layoff 10-20% of their workers. I "feel" like we are sitting on the curve @ around 1993 levels with respect to bottoming out,I'm not sure where the true bottom was in the 90's.

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