Tuesday, October 14, 2008

MLS Inventory "Not a Realistic Picture of the Market"

From the Sacramento Bee:

The number of for-sale signs in El Dorado, Placer, Sacramento and Yolo counties fell in September to a 19-month low of 11,022, Sacramento property researcher TrendGraphix reported [pdf] Monday. The newest tally is down from 11,369 in August – and off sharply from a record high of 16,081 homes for sale in September 2007.
From the Sacramento Business Journal:
[T]here might not be a quick end to those foreclosures, said Mike Lyon, chief executive at Lyon Real Estate. He offered a grim forecast that foreclosed homes might clog the market for an additional four years, a result of adjustable-rate mortgages resetting at much higher rates, further erosion of homeowners’ equity and surrenders by “early adopter” investors who have bought within the past year.

He said at current buying levels there’s about an eight-month supply of owner-occupied resale homes on the market, while there’s less than a two-month supply of bank-owned homes listed. That doesn’t tell the entire story, however, as there’s a large backlog of foreclosed homes that haven’t yet been put to market, he said. So while the inventory of homes for sale is down compared with last year, it’s not a realistic picture of the market.
From the Sacramento Bee:
[Robert] Shiller offers no sunny forecast. The Yale finance professor, and creator of the Case-Shiller Index that tracks home prices, says the subprime crisis that appeared last year may be "the first act of a long and complex tragedy." "We may well experience several years of a bad economy, as occurred, for example, after the profligate mortgage lending booms in both Sweden and Mexico in the early 1990s," Shiller writes. "There could even be another 'lost decade,' like that suffered by Mexico in the 1980s after its spending spree during the oil price boom, or by Japan in the 1990s after the bursting of the 1980s bubble in its stock and housing markets."
...
[Shiller:] I think we've learned some very elementary lessons. Don't think that because something didn't happen for the last 30 years it won't happen. It's amazing how people thought home prices can only go up. One thing people haven't learned very well is home prices can stay down for 30 years, too. I'm not saying it will. It certainly can happen. Most people still think this is just a temporary interruption and real estate prices are going to soar soon. The real estate market is not cheap yet. It's not to where this bubble started (in late 1998).
...
[Shiller's] book is at its best when explaining how so few in authority imagined what has come to pass. Schiller says they were filled with same housing boom faith held by the public.
From Florida Today:
"I wish I wasn't upside-down on my house. But I am," said economist Sean Snaith, who bought his Orlando-area home in 2006 when he joined the University of Central Florida faculty as director of the Institute for Economic Competitiveness. "But I'm fine. I'm not going anywhere."
From the Mercury News:
Dave Cantrell considered loading the U-Haul in the middle of the night and leaving while his neighbors were asleep. He couldn't bear to face them. He had become a community leader here, rallying his neighbors to stand up to the builder that was planning to auction off one-third of their new Paseo West subdivision at 40 percent discounts.
...
As much as he worried about his neighbors, Cantrell never thought he would become a casualty of the housing crunch. He was a retired Navy man with a solid pension. He had a job in construction management and, with his impressive work ethic, was making $250,000 a year, plus a hefty bonus. His credit rating was in the 700s. So in 2006, he bought a $670,000 house, then spent $100,000 to add a pool and miniature golf course in the back. It seemed sensible enough at the time.
...
In March, just five months after the auction, he lost his construction job. He kept up his mortgage payments for a couple of months, but it became obvious that no matter how many résumés he sent out, he wasn't getting any offers. He stopped paying his mortgage and he and his wife, Darleada, moved north...His grown daughter and son-in-law, who live in the tiny town of Seabeck, Wash., took them in. The Cantrells have been married for 34 years and now live in the one-bedroom, 985-square-foot apartment over a garage. He hasn't lived this way since he was a teenager.

11 comments:

Cow_tipping said...

Cantrell never thought he would become a casualty of the housing crunch. He was a retired Navy man with a solid pension. He had a job in construction management and, with his impressive work ethic, was making $250,000 a year, plus a hefty bonus. His credit rating was in the 700s. So in 2006, he bought a $670,000 house, then spent $100,000 to add a pool and miniature golf course in the back. It seemed sensible enough at the time.

Sensible ...
Impresisve work ethic ...

Sorry, sensible is the last thing it is, putting in a pool when you dont own the house ...
And work ethic aint do you no good if you've sold your soul to the devil ... sorry the overbuilding that you over saw with your work ethic landed you where you are right now.
Cool.
Cow_tipping

Jacob said...

And where did all the money go? $250k a year + a bonus? Plus a pension, plus all the money he made in the navy? All pissed away I guess.

He worked in real estate, stretched to buy the most real estate he could, probably had a 401k and stocks tied up in real estate companies... Not smart.

And didn't he get a kick back from the builders when he made a stink about the auction, I seem to recall that they caved and paid something to the existing owners.

And there are plenty of jobs, wal-mart is always hiring... But if you expect another $250k job you will be waiting for a long long time.

At least the economists are getting more and more realistic. 4 years to get rid of the backlog of REOs seems more likely then the 2nd half of 08 turnaround in the economy, or early 09 recovery we were hearing just a few months ago.

And they are right, too many people think that they will see 2005 prices again, real soon. We will never see those prices again (adjusted for inflation), and the way things are going, we may never see those prices again even not adjusting for inflation, in out lifetimes.

smf said...

"Most people still think this is just a temporary interruption and real estate prices are going to soar soon."

And when the investors that bought the multiple cheap homes realize this, version 2.o of the burst will occur.

And we had a good laugh over how 'sensible' it is to spend $100K improving a backyard.

Remember, the more plants in your backyard, the more time and $$ will it take you to maintain it.

Patient Renter said...

The real estate market is not cheap yet. It's not to where this bubble started (in late 1998).

Preach!

It's funny, to me, that the Sac Bee has no problem publishing items that make its previous choices of "experts" seem incredibly foolish.

spent $100,000 to add a pool and miniature golf course in the back. It seemed sensible enough at the time.

It's hard to read those two statements together and keep a straight face.

mopar777 said...

I heard somewhere that by age 40 you should be living in the biggest house that you will ever live in. In other words a house to match the highest station in life you will ever achieve.
Good advice that this guy should have followed. From our early 40's on we should be saving heavily for retirement instead of engaging in a last ditch effort to impress others.

Cow_tipping said...

I impress my neighbors all the time ...
I buy totally trashed motorcycles and build them back into the point where they look and run better than new. I then sell em ... 100-300% profit ... 10 a year in 05 and 06 and 07 was slow due to move to TX, and 08 is even slower due to move back from TX ... dont ask ... work is miserable, I used to work for banks for 90% of the last 5 years.
Cool.
Cow_tipping.

Deflationary Jane said...

Cow,

If you come across a 03 or 04 Triumph Speedmaster and work it over, I have a cash buyer right here >; )

norcaljeff said...

Just throw in the towel. Walk away from stocks and your home. Make the banks eat it, they're stealing from us anyway and trying to take us down with them. Screw em!

Cow_tipping said...

Deflationary jane wrote :
Cow,

If you come across a 03 or 04 Triumph Speedmaster and work it over, I have a cash buyer right here >; )


I dont buy anything unless its been sitting 10 years ... atleast.

I bought a 81 XS650 yamaha that literally can be painted to look like a triumph ... it vibrates and shakes and has a kickstarter like a triumph ... rode it a few 1000 miles, and sold it for a 200% profit. Eevn better I pushed it home at purchase cos I bought it from a neighbor for 200 bucks.
I have a savage 1 cyl 87 bike that has sat since 91. Almost back to life.
Cool.
Cow_tipping.

Deflationary Jane said...

I have a serious lust for old cafe bikes. I even had a line on a Norton but it's just too big for me.

I go to the big Bay Area bike show in the winter every year to test ride everything and anything and they just don't make decent bikes for little women! The Speedster, if it's cafe-ed out, is low enough to the ground for my tiny legs >; )

sallreen said...

With day to day variability, we may drop below that number a time or two, but the trend remains up. Last March according to ARMLS report, the inventory stood at 38384, so 50,005 represents about a 30% increase year-over-year.
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Sally
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