Friday, July 13, 2007

Months of Inventory

40 comments:

Sittin' Out This One said...

The question posed by your graph? Have we reached the top for inventory? It is not easy to determine. Look at the other "false tops" in your climbing graph. Then, read the story below. I think we will see records broken in 2007. The real question is will records be broken in 2008?

Looking_in_EDH said...

I noticed two houses in my neighborhood this week with "Sale Pending" signs. These have been on the market for at least 4 months.

One house directly opposite the one I'm renting sold within 2 months of being on the market (for the same amount that it was bought in 2006 -- $970,000). There is something suspicious about this activity, for soon after the sale some serious construction activity has begun and several expensive cars (BMW, Hummers, etc.) are constantly parked outside the house.

The reason I'm suspecting fraud is that 1) all other houses in the zip-code seem to have been reduced in price and 2) the amount of new upgrade activity seems out of whack with the price paid for the house.

I track inventory in El Dorado Hills religiously. Some observations:

1) Inventory is definitely heading lower ... it is about 5% lower this month based on my screens in Ziprealty.

2) Several homes have been taken off the market. Some are REOs that have gone off the MLS, so we could have a shadow inventory building up ...

3) When I look at the lower end range, prices have receded to mid 2004 levels. One can see that pricing is getting realistic because the list price is sometimes way below the Zillow estimate

4) In the high end range (Serrano Country club), I heard that at the rate of current sales it will take FIVE years for homes there to clear. I went there last week and the listings have mushroomed very dramatically (particularly on Sur Mer and Breese). Pricing is still at 2006 levels ....

Sippn said...

Its interesting that this bump in # months inventory was not due to more inventory, but less sales activity.

Sittin' Out This One said...

Sippn,

Lookin' says it is both sales dropping and inventory building up. It is all interconnected. Just like when the market price drops in El Dorado, eventually it makes itself felt in Arden Park.

Perfect Storm said...

Inventory will continue to climb as compared to 2006. Realtytrac.com indicates an increase of 400 banked owned homes in the Sacramento Area this week, not as good as last weeks 700.

Housing/Mortgae Doom 2007/

Were right on track for a 50% decline by 2009.

smf said...

I have started to notice some houses that disappeared last year come back on the MLS, with price reductions.

What would these sellers say to the realtor who told them to wait a year to get a better price?

Sippn said...

Sittin - inventory is very similar to this time last year, it was the drop in sales volume that caused the almost 2x rise in # months inventory over the past year... in fact, its all been sales volume drops driving the inventory up.

smf said...

"its all been sales volume drops driving the inventory up."

Pointless to really dwell on WHY the inventory is up, the end result is still the same.

The sales level right now might still be higher than the average number it should be w/o the bubble happening.

So if the sales go down to 'normal' levels, the inventory would still take plenty of time to drop.

Sippn said...

That is a very good point you bring up. Sales are down to record lows... if they got back close to normal, the # months inventory would drop overnight.

Can't find much data to back this up right now (lyon database down), but pretty sure sales vol is about 1/2 normal, about 1/3 peak.

Sittin' Out This One said...

Sippn,

These numbers from Sacramento MLS in Augst of each year show you are correct. The average sales rate over 5 years is 1801 units each August. The 2006 sales rate was 1186, or 34% below trend. I have no idea if the stats are accurate, but it is interesting. Of course 2002 was a bubble year in many books. It will be interesting to see Trend Graphix's numbers when the web site is up.

MLS for August of each year:
2002
2003
2004
2005
2006

For Sale
5,383
5,558
6,075
7,135
6,293

Sold
1,665
1,890
2,217
2,052
1,186

Average Price
$245,708
$333,849
$336,423
$425,655
$411,560

% Change in Solds for Year
5.4%
-17.9%
23.0%
0.3%
-36.3%

Perfect Storm said...

Credit tightening has reduced buyers in the Sacramento area by 40%. Speculators have the left the market, move up buyers from hood areas of Sacramento are having a difficult time selling their hood home to find a place in a better area. Household formation is down 70%, that means the first time buyer is basically extinct. Population growth in the Sacramento area has slowed to a crawl and may go negative. No sales will continue to decrease and inventory will continue to increase. Bank owned properties in the Sacramento area will triple in the next year. Realtytrac.com has listed 8,600 bank owned homes in the Sacramento area. We know the majority of these homes are not even listed for sale, but are just sitting empty. The end result is the bad times are ahead of us not behind us.

Housing/Mortgage Doom 2007.

Were right on track for a 50% decline by 2009.

Perfect Storm said...

http://www.city-data.com/city/Sacramento-California.html

Intersting data on Sacramento:

Estimated median household income in 2005: $44,867 (it was $37,049 in 2000)

Sacramento $44,867
California: $53,629

Estimated median house/condo value in 2005: $341,400 (it was $128,800 in 2000)
Sacramento $341,400
California: $477,700

Median gross rent in 2005: $852.
Percentage of residents living in poverty in 2005: 19.2%

Perfect Storm said...

http://www.city-data.com/city

The funny thing is that this site has Bakersfield with a higher median household income.

Sippn said...

Thats the "City" of Sac data only, its the stuff outside of city lines that is counting here now.

Rancho Cordova has a higher income and avg home value.

PS - Bakersfield is higher for the same reasons Dixon and Vacaville are... closer to larger cities LA and SF.

Ouch!

lexi said...

Inventory today reminds me of
Christmas decorations...on the day
after Christmas.

Perfect Storm said...

Bakersfield is 101 miles from Los Angeles.

Sacramento is 86 miles from SanFrancisco.

Now why is Bakersfield median household income higher than Sacramento?

Perfect Storm said...

From the Sac Business Journal July 13, 2007.

We knew it would go over last year. That’s too much food on the table, and the buyers are going for the caviar,’ said Lyon CEO Michael Lyon. ‘It goes to show that any sellers who thought there would be a quick recovery need to get that out of their heads.
Things are selling when they’re priced below the last comparable sale.’”


Do you think what Mike Lyon really wanted to say was that sellers need to get their head out of their axx?

Gwynster said...

OK I did a little girl time at Arden yesterday.

I had certain depts in Nordie's almost to myself. The lower middle class shopper is out in force but not in the better stores. Budget sportwear (low end retail) looks like it did well with most shoppers heading straigth for the sales racks even in the cheap ass stores.

I have a degree in fashion design from a rather famous NY school - one of my now useless pieces of paper. But I love taking the economic temperature of a region via sales estimates. I looks like the moneyed crowd have left the building. This type of customer mix reminds me of 1993 through 2001.

PS,

City data has the worst stats. I know it pains me to agree with Sippin >; )

Go with BEA or USC. Skip CDoF, they have too much riding on good news and their formulas were "reassessed" lately to make things look better then they are.

I posted a bit on Sac co stats and trends on Ben's blog over the last few days. I can repost them over here if you want.

Perfect Storm said...

Thanks Gwynster,

I know the household median income for the Sacramento County is higher than the City. It has to be higher because the City of Sacramento is pretty much a bunch of hoods surrounding East Sacramento. However, I think during the bubble a lot of the homes that sold in brighter areas of the greater Sacramento region were move ups from the hoods of Sacramento. Lets say a moderate income family buys a house in Oak Park for $80K in 1996 and then sells it in 2005 for $250K to some idiot, then they probably moved where? Well I'm not saying they moved to Fab 40's, but maybe Roseville, Rocklin, or Elk Grove. Then the Roseville person sells their house for $450K and moves where? It is the circle of life in the housing market.

HappyinSF said...

I honestly don't think anybody bought a house in Oak Park in 1996. I don't think anybody had bought a house in Oak Park since the 1950's prior to the bubble. Besides all the condemned houses, I think very unfortunate people inherited those houses as their elders passed on, probably 3 generations living in a house their great grandparents bought. A lot of the hookers, pimps and drug pushers probably rent.

Perfect Storm said...

From Ben Jones Blog

Readers reacted to this thread on a brokers forum for a weekend topic. “Similar to you know your a redneck when? You know your subprime when? The borrower calls in and has a f i c o ( all spelled out) of Four. ‘You know your subprime when? When the Borrower doesnt know there loan amount, interest rate or mortgage payments (no joke i just had one)’”

“‘You spend your closing cost money on a motorcycle 2 days before closing. Happened last fall.’”

“‘You are adding your boarder’s kid’s SSI to the ‘household’ income’”

“‘You are cashing out your equity to go on vacation. Again.’”

One posted, “My favorite so far: your FICO score and total assets are the same number.”

Perfect Storm said...

Ben Jones Poster Jingle

All the sub prime & alt-A 100% (80/20) loans have NO IMPOUNDS for taxes or insurance payments.

In California, taxes and bonds can easily equal 2%/year. Say a $600,000 house has a sub prime 80/20 loan. The 20% second is history the day the sale closed (hello HSBC!). So the $480,000 first is the only loan in play. With a 30% drop in value, the asset is now worth $420,000. Subract 12 months interest ($27,300) and 1% foreclosure costs ($4,200), plus 6% selling costs ($25,200) and then, to add insult to injury, add in 24 months of back taxes and bonds ($24,000). That nice AAA rated RMBS tranch marked to the model is valued at $480,000 plus accrued interest.

The marked to market value is $140,700 less, or $339,300! A total reduction of 30% of the first mortgage. Back tax payments represents 17% of that loss ($24,000/$140,700).

Do you think the investors will start requiring impounds in the near future and using the tax, bond & insurance costs as part of the qualifying criteria for the borrower’s expenses?

Sippn said...

PS - wishful thinking on your part, do you wish a lot of discomfort?

They should require impounds but right now you're looking at about 10% off the peak price and most of the problem in the $300-400k range, and most of hte time taxes are 1.125%. I don't have bonds on any of my properties.


But there's probably a house out there that matches your example.

Perfect Storm said...

I don't have bonds on any of my properties.

What's this have to do with your properties?

It appears to me that there are 8,600 banked own homes in the Sacramento area that could fit this example. How many of those do you think have unpaid taxes and insurance? Considering the number of banked owned homes in the Sacramento area will triple in a year to over 20,000 it appears there are several thousand homes that will fit my example. Plus by viewing flippers in trouble there are plenty of homes down 30% plus and those are only homes that are actually listed.

I say it as I see it.

Housing/Mortgage Doom 2007.

Were right on track for a 50% decline by 2009.

Sippn said...

"Considering the number of banked owned homes in the Sacramento area will triple in a year to over 20,000 ..." really! where do you ge that?

Housing Tracker has Sac at just under 500, Sac real stats shows 4,031 as sellers in distress (FIT).

You mentioned bonds... I just commented.

Perfect Storm said...

Realtytrac.com hs 8,608.

Perfect Storm said...

Realtytrac.com has been adding 400 to 700 homes to their list of bank owned homes in the Sacramento area. Right now they list 8,608 homes as bank owned. At this rate the Sacramento area will have well over 20,000 bank owned homes.

Perfect Storm said...

Adding 400 to 700 weekly that is.

Sippn said...

Got me excited there for a minute - Realty trac shows 4600+ Bank owned, another 4000+ in "preforeclosure" plus they also list homes for sale, etc. But yea, a lot more than Housing Tracker, I must conceed.

Should we just doze the homes and grow corn?

Lander said...

That pesky "fine print" on the Housing Tracker site:

The numbers presented here are a measure of the REO property avalable from the institutions listed below and do not represent the total REO inventory for Sacramento, California.

Sippn said...

Gawd, maybe they should retitle it...

Perfect Storm said...

Its cool Sippin, I have a lot of respect for you. It takes guts to come on this pretty much bearish blog and post as you do.

When I give respect it is very rare, well at least in this Country.

As for the housing market there are a lot people who deseves no respect who drove this thing up and profited from it greatly.

Gwynster said...

Sippin,

I never knew you were a RE investor. I thought you just liked arguing with me >; )

Sippn said...

practice what I preach

James said...

I think you need to reassess your use of numbers from realtytrac. In addition to double or triple counting homes, their numbers also do not remove a home when it is sold. You can go to the site and see the same home listed once as TBD for loan and then listed again with the loan amount or the same thing for rooms/bathrooms. I doubt anyone has the time or energy to actually check the data put up by realtytrac but you can see the errors simply by looking at zip codes with little activity like 95615 (Courtland). Clearly, this is the same property listed twice. Or, go to 95638 (Herald) and you will see 3 bank owned properties but 1 is listed as sold and one seemed to be repo'ed despite having a loan balance of only $13K. Who would walk away from a $400K home when only $13K remains on the mortgage? Is this reporting wrong or do they list the same property twice, once for the first mortgage and once for the second mortgage? Searching 95680 gives the same double count on the same home but at different dates. Maybe I just don't understand how realtytrac calculates their data, but it seems like they are way off. If I were to venture a guess, I would say that realtytrac is off by a factor of ~2x.

Gwynster said...

LOL,

Sippin hon, for some reason I remember you saying way back that you had no vested interest in the market and I was still working on that assumption. Well I guess my little lightbulb just went off.

Back to getting another GFE this week-bleh. A house I'm considering in Woodland is going up for auction. It'll most likely go higher then I'm willing to pay but just in case, I'm ready. If it goes low enough, looks like the move to NC is out.

Sippn said...

G - Sorry about your lightbulb.

James - forgot about the dirt on Realty Trac. Can't grow inventory as fast if you have to clean up the numbers. So somewhere between Housing Tracker and Realty Trac we might have a number.

Perfect Storm said...

I would say that realtytrac is off by a factor of ~2x.

So do you think Realtytrac.com is not a viable source of information? Do you think the media who uses Realtytrac.com to report on the housing market is issuing false information? Right now according to your opinion Realtytrac.com favors housing bears view of a crashing housing market. Do you think Realtytrac.com has an interest to report false information to such a large degree of 2x?

Sippn said...

Sometimes I think the only interest these sources have is getting information out quickly with a lot of "bang" so they get advertisers hits.

Realty trac needs to clean this up.

There is an inherant lazyness in all data collection and analysis these days - as though if there was a chip in your computer that already had the answers, all we have to do is push a button.

Zillow has the same problem ... if you dig out some of the data strings ... the quarterly median price data by zip code, you would see that it is impossible for the market to have behaved as they show.... some years with almost 100% appreciation. Is this important? yes it is a part of the equasion they use to forecast.... garbage in, garbage out.

For some reason we expect reasoned statistical analysis from people with journalism degrees.

The problem in real estate data, is there are several ways it is reported and a lot of it is privatly reported to associations, voluntary as far as we're concerned. We get pretty good results to work with, but you have to understand the limitations. There's no "HAL" out there knowing all.

But you know us blog commenters, we want data perfection, when the home closed, how many times the toilet was used that day.

norcaljeff said...

Pefect, hold your ground. Your thoughts and assumptions are correct on this crashing market so don't like Sippin or anyone else try and spin the real news. They are just out to line their own pockets since they profit by getting people to try and catch a falling knife.