Wednesday, January 16, 2008

'Price is King'

From the Chicago Daily Herald:

Kimball Hill Inc. today warned it might become the latest Chicago-area victim of the national housing crisis. The Rolling Meadows-based homebuilder said in a filing today it has "substantial doubts about whether we will be able to continue as a going concern."

If it does file bankruptcy it will be the area's second major homebuilder to do so in recent months, following Warrenville-based homebuilder Neumann Homes last fall. Kimball Hill has developments in 12 markets, including in Dallas, Ft. Worth, Houston, Las Vegas, Sacramento and southwest Florida.
From the Sacramento Business Journal:
Sales of previously occupied homes in the four-county Sacramento area fell to 1,179 homes in December, down almost 18 percent compared with the 1,430 homes sold during the same month last year, according to real estate analyst Trendgraphix...Sacramento County's median home price dropped to $282,000, from $300,000 in November.
From the Stockton Record:
Existing-home sales are picking up momentum in San Joaquin County. Pending sales jumped from 392 in November to 459 last month countywide, a 17 percent increase, according to figures from the latest Coldwell Banker Grupe-TrendGraphix sales report, based on Multiple Listing Service data.
...
Meanwhile, the median selling price continued to slip, falling to $293,000, the first time the countywide median has been less than $300,000 since April 2004, when the median selling price stood at $290,000. "Price is king," said Jerry Abbott, president and co-owner of Coldwell Banker Grupe, Stockton. Foreclosures are accounting for about 70 percent of the monthly sales, he said, and investors are accounting for about half the buyers.
From Roseville & Rocklin Today:
[N]o one knows for sure what will happen in the real estate market, here, California and beyond. In the Sacramento area, I believe we still have some pain to go through with the mortgage loan crisis and the general tightening of credit but hopefully most of that will be sorted out by mid-year. There are clearly buyers out there in our market and many of them appear to be watching very closely trying to time their purchase with what they believe is the bottom of the market...If there is any kind of firming of prices and some media coverage about “recovery” we may see a flood of buyers. Unfortunately for sellers that may not happen in 2008.

40 comments:

Buying Time said...

"If there is any kind of firming of prices and some media coverage about “recovery” we may see a flood of buyers. Unfortunately for sellers that may not happen in 2008."

As an average buyer its gonna take a hell of a lot more than MSM media telling me that I should buy. Does this person think we are sheeple that do everything the news tells us to? I am a bit insulted by all these insinuations as of late that the media coverage is driving my home buying decisions.

Jacob said...

and investors are accounting for about half the buyers.

By investors they mean the kind of people that buy homes and will lose money monthly on rent (if they can rent) and will later try to sell for profit since they bought it cheap (based on past values which are irrelevant).

So lets see, 70% of the sales are foreclosures and 50% are to specuvestors.

So of the 30% homes that were sold be sellers and not banks only about half were sold to people that will live in them...

So forclosures continue to outpace sales and of those sales only ~30% are to people that will live in them. The other 70% will be back for sale in a few months.

I think there is more than a little pain left to come...

Buying Time said...

Following up on my earlier comment...
I don't know what its like in other parts of Sac, but our local papers use any shred of evidence (no matter how feeble) to tell folks its time to buy. Interest rates are low, prices are lower....there were 5 more sales this month than last month.....buy, buy buy.

None of these folks were complaining when the MSM got us into this darn predicament....so they have no right to complain now.

From the first paragraph of a Village Life article in late Dec:
"There is an old saying that "truth is the first casualty of war." While the current housing slowdown and accompanying credit tightening may not amout to a war, they certainly have led to one-sided news coverage that could end up costing potential home buyers a golden opportunity."

She also goes on to refer to home buyers as "consumers". Last I checked shelter wasn't exactly an optional item on my list.

Ironically she ends with a "don't let missinformation stop you from taking advantage."

My kids were asking me what was wrong cause I was yelling at the newspaper.

Okay...sorry rant off....very grouchy today.

Patient Renter said...

"There are clearly buyers out there in our market and many of them appear to be watching very closely trying to time their purchase with what they believe is the bottom of the market...

I don't need to "try to time" my purchase with "what I believe" will be the bottom. I'll look at a nice wide moving average and when it stays flat for a while (as historically is the case during housing bottoms), then I'll buy. This is just more industry/media propagandam, implying that timing a bottom in housing is hard. It is not.

"If there is any kind of firming of prices and some media coverage about 'recovery' we may see a flood of buyers."

Don't count on it. If we cared what the media says, we would have bought long ago, and we'd likely be underwater for it.

Patient Renter said...

buying time: I feel your anger - this stuff pisses me off too, a lot. Not only does the media (and the industry) think we're stupid, they mock us for even trying to be prudent by waiting for prices to drop.

Yes, insult me, like that's gonna make me buy a house faster.

Jacob said...

Well I dont really understand why analysts seem to think there are all these fence sitting buyers just waiting to buy.

Even with all the bs loans at 10x income there were still less than 10% of people that could even afford the median home.

There are more homes than buyers and there is little credit to go around.

Then people will say there might (might lol) be a 10% more drop. They ignore all the auctions that start at 50% off with no bids...

Patient Renter said...

"Well I dont really understand why analysts seem to think there are all these fence sitting buyers just waiting to buy."

I really think they're referring to all the bubble bloggers (us). Aside from us though, over the last few years, everyone who wanted a house already has one.

Buying Time said...

I certainly wouldn't have excellent credit and a 20% downpayment if I did everything the media told me to (i.e consume beyond my means).

Mystere said...

There's nothing to be pissy about. If you don't want to buy now, then don't. Simple enough. Others may not share your views and opinion, and that's ok, too.

The way I see it is that it's always a good time to buy...and it's always a bad time to buy. What makes the difference are the specifics involved with any particular home -- location, price, features, rates, competitors, etc. I really don't care if I time the nadir of the general market in the Sacto area; all that matters are the specifics on the particular home that I -do- buy.

Patient Renter said...

"There's nothing to be pissy about."

I disagree. We're basically being insulted by the same cheerleaders who's previous advice (BUY NOW! BUY NOW!) would have landed us in debt - yet they think for some reason they still hold enough expertise to tell us what to do now? I find being told what to do in this manner insulting and I'm free to get pissy about it.

Patient Renter said...

"What makes the difference are the specifics involved with any particular home -- location, price, features, rates, competitors, etc."

BTW: This sounds like a Realtor's speach. It does make a difference what the overall market is doing. Even if the specifics of one home make it a good buy at a particular time, the overall market depreciation might be such that this good buy turns into a foolish buy in no time.

Mystere said...

Nobody is telling you what to do. Did you not read the passage quoted at the top of the page? It says "may not happen in 2008." I hardly think that's an exhortation by the author to BUY NOW, BUY NOW.

Julie Jalone said...

Hit a few raw nerves with my comments, "If there is any kind of firming of prices and some media coverage about “recovery” we may see a flood of buyers.”

I am in the industry and deal with buyers and sellers every day. What led me to make the above comment was a flood of offers on a property we listed in Lincoln. It was aggressively priced and we were swarmed by buyers, had multiple offers and it was in contract in three days. This makes me believe there are potential buyers out there who are sitting on the fence and watching prices very carefully. I agree with them, it is what I would do if I was a buyer and I am not afraid to tell clients we are still in a deflationary period and prices will most likely be lower later this year.

Like some Realtors, I don’t blame the “slowdown” on the media; they report what is happening and draw more attention to it. If and when this market starts to recover I anticipate there will be articles, blogs and news reports that it is happening. If prices firm up I believe we will see more buyers. I would like to see this happen later this year but suspect it may be later in 2009.

Patient Renter said...

"I hardly think that's an exhortation by the author to BUY NOW, BUY NOW"

Obviously you're either unfamiliar with or have forgotten what bubble era housing reporting looked like. Rocklin Today was cheering on the bubble just as loudly as anyone else.

Anyways I was referring to the media/industry in general mocking us for attempting to "time the bottom".

Diggin Deeper said...

That's right PR....there's absolutely no volatility left in this market. It's flatlined and public expectations are that prices will drop dramatically from here. Maybe they will, maybe they won't. With so much inventory to consume, so many faulty home loans that are about to go bad, and the affect the overall credit/home ownership crisis has on the economy, it doesn't take much of an IQ to figure out what to do next. It certainly doesn't take the media to explain it any further.

As you've mentioned, if we do go through a protracted period like the Japanese did, we'll have years of real estate prices grinding along the bottom. The window of opportunity will be as wide and long as its ever been. As I've said when real estate in California ceases to be perceived as an investment, when people actually realize that their home is just that, when it's not the hot topic of conversation everywhere you go, when sellers have completely capitulated with prices, and when the media finds something else to report, it might become an investment idea again. That could happen this year, 5 years from now, or maybe it takes a decade or more. The perception of real estate as a "no brainer" money machine has got to change before buyer sentiment turns the corner and looks at it for what it was intended.

Mystere said...

Oh brother, here we go with the "you're a realtor!" Sorry to disappoint you, but no, I'm not.

And, sure, it "might" turn out to be foolish. And getting out of bed on any particular day "might" turn out to be foolish, too. The reality is that I'm buying for the relatively long term, prices in general already are down substantially -- to the point where I belive the majority (though surely not all) of the decline already has occurred, and if I find the right deal at present on the right home, I very well may choose to buy. It's ok for me to have a view of things that differs from yours, right?

Patient Renter said...

"It's ok for me to have a view of things that differs from yours, right?"

Sure, but your own comment contradicts your previous response:

take 1:

"I really don't care if I time the nadir of the general market in the Sacto area"

take 2:

"to the point where I belive the majority (though surely not all) of the decline already has occurred"

So you don't care what has happened in Sac but at the same time you think that most of the decline is what has happened in Sac. Um, ok. Of course you're free to go into debt based on whatever assumptions you want.

Jacob said...

It is always a great time to buy a home, ask any realor. They just leave off the end of the sentance about WHO it is good for, and let you assume.

Patient Renter said...

"Oh brother, here we go with the 'you're a realtor!'"

I didn't see anyone call you a Realtor. I implied you sound like one though.

Gwynster said...

The more the local papers pontificate about how "we're all sitting on the sidelines", the more I smile. At least now they admit they got my memo on their overpriced pieces of stucco >; )

BT, it's not you. I think everyone is grouchy. You wouldn't believe how ummmm interesting it's been here the last week.

Buying Time said...

Yes, nerves are raw. I am tired of renting, but know I need to wait till the rent/home price differential gap has closed up more.

Bucking the buy now, buy now, trend has led to many uncomfortable moments, where the person you are talking to obviously thinks you are an idiot for not purchasing a home (its a great investment don't you know).

It all gets old quick....

Patient Renter said...

gwyn - how are your people at the office doind? has some sort of news already come down the pipeline? i thought it was too early yet...

Mystere said...

They aren't contradictory at all. "Nadir" means the lowest point. The fact that I believe the majority of the decline already has occurred in the general market is not contra to saying that I don't care if I buy at the absolute bottom of the general market.

Patient Renter said...

"where the person you are talking to obviously thinks you are an idiot for not purchasing a home (its a great investment don't you know). "

yea i know how that is. just be sure to ask them how their 'investment' has faired lately. that's a topic changer.

Buying Time said...

"yea i know how that is. just be sure to ask them how their 'investment' has faired lately. that's a topic changer."

And that's the other side of the coin....now people I talk to are annoyed when they find out I am waiting it out, cause their house is losing value (like I could really stop that from happening).

Its a no win situation...and I am especially bitter about it today.

G- sorry to hear you are having the same kinda week.

Gwynster said...

What's funny is now Mr. Gwynster is nore of a housing bear then I am.

Accounts payable is now challenging all sorts of expenses (which I actually applaude). People at work know that our budgets are going to be cut and the scramble is on to move money around to pay research staffers.
I expect to see less student hires and less lab help as UC money dries up and fed and state flow through from grants don't cover them either.

As those who following my UC ramblings know, we have lots and I mean LOTS of retirements coming up. The big thing now is indecision - do they retire now or wait for better packages due to cuts? Is inflation going to destroy their savings? Should they wait a few more years and save? If they wait, what will that do to the price of the home they are going to be selling? No one thinks prices will get higher in the next few years. It's really a change from the mindset of even 12 months ago.

I could go on and on. The noose hasn't really tightened yet but everyone seems to be preparing for it.

I think that etsy poster which I was going to put in my hallway will be coming to work >; )

Gwynster said...

"now people I talk to are annoyed when they find out I am waiting it out, cause their house is losing value."

LOL I get that too! Like I'm the evil genius that collapsed their universe.

On the plus side, one of my professors stops to talk to me about midday everyday to pick my brain after he found out I did well shorting builders >; )

SacramentoCrash said...

Omar don't come in here to pimp your website. What the hell has Costa Rica got to do with Sac real estate.

You think Sac real estate is over priced? Try looking at international markets. Those are huge bubbles waiting to pop!

G Spot1 said...

"There are clearly buyers out there in our market and many of them appear to be watching very closely trying to time their purchase with what they believe is the bottom of the market."

I'm one of those buyers, but I'm not trying to time the market. I'm trying to find a house for my family without losing my shirt. Every agent I meet at an open house cautions me against trying to "time the market" like this thing is going to whip back to 2005 price before we have a chance to move. Stupid. I guess the good thing is that every time I have this encounter I can rest assured that the market still has a way to go....

G Spot1 said...

"What led me to make the above comment was a flood of offers on a property we listed in Lincoln. It was aggressively priced and we were swarmed by buyers, had multiple offers and it was in contract in three days. This makes me believe there are potential buyers out there who are sitting on the fence and watching prices very carefully."

Julie, do you know how many of the buyers were investors? Serious question. I know in my neighborhood where I'm renting in Roseville, most of the recent sales have gone to "investors." Unfortunately, the P/E ratio still doesn't make sense - as someone else said, these people are planning to rent for less than it costs them for the home in hopes that they've gotten a bargain and an sell in a few years. I really think this speculative activity is propping up prices a bit. Things won't bottom out until the supply matches the demand of people who are actually planning to live in a home, not flip in 2-4 years.

BT, remember what I said before - when everyone thinks you are a genius for renting (albeit reluctantly, since they will have lost $$$), then it is time to buy!

Tyrone said...

Pending sales jumped from 392 in November to 459 last month countywide,...

They're not counting "sales" back to the bank are they???

BWAHAHAHA

Beagle said...

Speaking of supply, shouldn't the news on this site also include a reference to FEMA's announcement yesterday that it is placing Natomas in a flood hazard zone, which essentially will bring all building there to a screeching halt? It's tantamount to a de facto building moratorium in that vicinity. Given its geography, I anticipate that the same may occur in South Sac.

This is pretty significant stuff in the grand scheme of things. Apart from the general implications for supply, I recommend that anyone with an interest, and especially those who may be considering buying in such areas, to get up to speed on it.

Beagle said...

Here's a link to today's story in the Bee.

http://www.sacbee.com/220/story/637772.html

smf said...

"The fact that I believe the majority of the decline already has occurred in the general market.."

Fine, act upon your belief, and we'll see who comes up ahead in the future.

Remember, in 5 years we have only managed to pay off $20K of our house principal. Hard to recover that lost value if we purchase now expecting a little further decline.

Again, those who see the bottom soon are cherry picking information. The median priced home is STILL NOT AFFORDABLE to most people. And if you 'price them out', the whole entire RE market freezes up, because you will have no one to sell to.

"Julie, do you know how many of the buyers were investors?"

Have I not said this, that a good chunk of the sales have been to the same people that caused the problem in the first place?

Some of them are expecting appreciation to give them a good payday.

Some may actually be willing to become landlords.

But as I have told some, even if your rent is enough to cover the mortgage, there is no guarantee that you can find renters with the amount of inventory out there.

Buying Time said...

We should be grateful for folks like Mystere and thanking her for providing us with a recent comp, since so many listers (I refuse to call them sellers) continue to look at 2005/2006 comps.

anon1137 said...

When I'm having a bad day I just pour myself a nice cabernet and zillow some of the houses in my neighborhood that have sold in the past few years. Down $125K? Ouch!

We also have the December DQ report due either tomorrow or Friday. That should put a smile on everyone's faces.

paranoid renter said...

For now people are losing jobs left and right. Are they really going to be getting in line to buy?

lexi said...

Natomas theme song...by Led Zepplen
If it keeps on rainin' levee's goin' to break
If it keeps on rainin' levee's goin' to break
When The Levee Breaks I'll have no place to stay.
Mean old levee taught me to weep and moan
Lord mean old levee taught me to weep and moan

sacramentia said...

These comments really made me laugh. you've been calling the media dumb for as long as I've been reading this, and now they are mocking you and you get pissed? come on.

Odds are you won't call the bottom, you might, but it doesn't matter. Real Estate is not like a stock, it is an imperfect market and the data is always 30+ days old.

Jacob - you only lose money if you don't put enough down. And the more you put down the lower your rate return. Real estate is a good store of value over the long term - what kind of risk premium would you like to see over a 10yr treasury? If you can't put a number on this then you are not being logical - at some point it is worth buying.

Jacob said...

Well Im not an investor or anything. If you can buy a place and rent it out to cover your costs (not just on paper, but can get a real renter) AND you plan on keeping the home for many years, then it might be a good deal.

Especially if you can low ball and or pay a lot down.

But then the question is, do you put that $200k (or whatever amount) in housing which requires a lot of management to rent out and may lose value, or stick it in a CD at 4.5%-6% and have it be FDIC insured and you dont have to do anything but spend the interest.

But the investors you have now are not investing, they are speculating. The only value the place on their investment is what they can sell it for later. Now if you can hold the investment for 10+ years great. But if you want to sell it in 6 months for a nice profit then you have a proble.

Maybe we are within 10% of the bottom, who knows for sure. But there are so many homes and so few people that can actually afford to buy them, add in credit tightening and what do you get?

Few people could afford to buy even with 10x income no doc liar loans that banks were giving away. So how many people can qualify when they need 20% down (cash).

What banks are going to loan out the 20 on a 80/20 now? Knowing that if it goes into foreclosure that they won't get a penny.

Even with the BS numbers that the government and banks use we are in trouble. Even with their cherry picked data and BS accounting we ARE STILL SCREWED.