Watchhttp://dqnews.com/Articles/2012/News/California/Bay-Area/RRBay120216.aspx
Bay Area Housing Market Logs Higher Sales, Lower Prices
February 16, 2012
La Jolla, CA.----Bay Area home sales rose last month to the highest level for the month of January in five years, boosted by lower prices, ultra-low mortgage rates, a modestly improved economy and a record level of investor purchases. The median price paid for a home fell year-over-year for the 16th consecutive month as “distressed” sales rose to the highest level since early last year, a real estate information service reported.
A total of 5,479 new and resale houses and condos sold in the nine-county Bay Area in January. That was down 26.9 percent from 7,494 in December, and up 10.3 percent from 4,966 in January 2011. The year-over-year sales increase was the seventh in a row, according to San Diego-based DataQuick.
The December-to-January drop was normal for the season. On average, sales have fallen 28.0 percent between those two months since 1988, when DataQuick’s statistics begin. Last month’s sales were 10.5 percent below the average number of homes sold during January. Since 1988, January sales have varied from 3,586 in 2008 to 8,298 in 2005.
The median price paid for all new and resale houses and condos sold in the Bay Area last month was $326,000. That was down 2.8 percent from a revised $335,500 in December, and down 3.6 percent from $338,000 in January 2011. Last month’s median was the lowest since April 2009, when it was $304,000
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Hold on to your panties IWOG, it just gets more and more interesting...
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How shocking! Just as we thought worst is behind us and nothing affects BA cuz it is so special. LOL.
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SoCal equally moving downwards.p>
Perhaps some from SoCal can chim in with their observations.
http://dqnews.com/Articles/2012/News/California/Southern-CA/RRSCA120215.aspx
Southland Home Sales Flat, Prices Edge Down
Februry 15, 2012
La Jolla, CA---The Southland housing market started 2012 with slightly higher sales and slightly lower prices despite record-low mortgage interest rates. Home sales skewed toward the lower price ranges, which is normal for January, as many traditional buyers retreated and investors snapped up homes at a record level, a real estate information service reported.
A total of 14,523 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 24.5 percent from 19,247 in December, and up 0.4 percent from 14,458 in January 2011, according to DataQuick of San Diego.
Sales have increased year-over-year for five of the last six months. The sharp sales decline from December is normal for the season. Last month’s sales count was 17.8 percent below the 17,671 average for all the months of January since 1988.
A total of 669 newly built homes sold in January, the lowest number for any month since DataQuick started keeping track in 1988.
“January numbers have never been very good at providing an indication of what upcoming activity will be like. For that we need to wait until March. What we can determine is that the mortgage market remains dysfunctional. It will be interesting to see how a potential surge of refinance activity plays into the purchase market once the administration’s new guidelines are implemented,” said John Walsh, DataQuick president.
The median price paid for a Southland home last month was $260,000, down 3.7 percent from $270,000 for both December and January last year. The median was the lowest since $249,000 in May 2009. The median’s low point for the current real estate cycle was $247,000 in April 2009, while the high point was $505,000 in mid 2007. The peak-to-trough drop was due to a decline in home values as well as a shift in sales toward lower-cost homes, especially inland foreclosures.
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San Francisco, CA
Malkovich's website
With a little luck the fear will spread. Fear. Fear. Fear.
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Malkovich says
I like to think of it as sobriety.
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San Leandro, CA
I have never seen a financial chart showing a straight line to the bottom. With all the gubmint's kneejerk "save the banker fraud programs", house prices will porpoise downward til the "E word" is once again enjoyed.
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Oakland, CA
the 60% decline should be coming any day now.
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All I can say is:
Thank you investors!
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toothfairy says
When all is said and done... yes!
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C'mon Thomas,no one will agree with your scary graph. :)
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http://articles.businessinsider.com/2012-01-29/news/30675216_1_housing-bubble-house-prices-robert-shiller
BLODGET: Going back to the point about interest rates... People make a huge to-do about the affordability of houses. In your research on house prices, do interest rates actually matter? Or is mortgage finance such a new concept in the history of home ownership that you just don't have enough data?
SHILLER: I think historically, if you look at it, interest rates don't seem to matter very much in determining home prices. In terms of forecasting, which you're asking me to do, to forecast the change, the big thing in forecasting home prices is momentum. It's different than the stock market. So if it's been going up it will continue going up and if it's been going down it will continue going down. By that model, which is the most successful forecasting model for home prices, prices will keep going down.
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Where is the bottom ?... where the first time buyers are, if there any and have any money.
http://www.bloomberg.com/news/2012-02-16/student-loans-approaching-1-trillion-hurting-first-time-buyers-mortgages.html
Student Loans Near $1 Trillion Hurt Young U.S. Buyers: Mortgages
By Bob Willis - Feb 15, 2012 9:00 PM PT
As outstanding student debt approaches $1 trillion, it’s one more reason record-low interest rates aren’t doing more to boost housing. The tighter lending standards that have emerged in the wake of the recession weigh particularly on younger, first-time home buyers, according to a Federal Reserve study sent to Congress on Jan. 4. These households tend to be younger, often have relatively new credit profiles, lower-than-average credit scores and fewer economic resources to make a large down payment, the report said.
“Potential first-time homebuyers have been disproportionately affected by the very tight conditions in mortgage markets,” Federal Reserve Chairman Ben S. Bernanke said at a homebuilders conference last week. “First-time homebuyers are typically an important source of incremental housing demand, so their smaller presence in the market affects house prices and construction quite broadly.”
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thomas.wong1986 says
Interesting. I've been called all sorts of names on here when I posted this earlier. Historically, interest rates don't have a correlation with home prices.
Hopefully, other posters will think about this before they post that home prices are going to crater when interest rates rise..
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I think the direction of the interest rate has something to do with the house price.
If people expect that the interest rate will go up, they will jump in and lock the low rate.
If the interest rate will go down, they WAIT ...
If the house price is going down, they stop buying no matter the rate is.
Oh no.
These young people have a tendency to overpay things (like ipad, BMW).
Now they cannot push house prices up.
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tatupu70 says
Here you go.. historically no movement on price from 1945 to 1980 as interest rates spiked, and no price movement as interest rated declined from 1980 to 2000, but after 2000 it was "not buying the home.. but buying the payment" and the mania.
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Pacifica, CA
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thomas.wong1986 says
1. When people are thinking of it as buying the payment, are interest rates more likely to impact prices?
2. When we are at the edge of what is possible, namely, in bay area still buying houses at 5 or more times income, might you expect interest rates to impact prices, even though it isn't a historical trend?
3. When lending is so tight, might you not expect interest rates to be tied to price?
Do you know what the relationship of income to home price looked like from 1945-1980?
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Oakland, CA
Stats and historical trends may point to further declines, but I still see houses in the East Bay (Oakland/Berkeley) listing and selling for prices that seem crazy to me. Maybe not full-blown-bubble-era prices, but high enough that either 1) there are lots of people around here with lots of money; or 2) the bubble is still deflating; or some of both.
Just up the street from where I live (a 'decent' but by no means high-end neighborhood - gunfire has been more frequent in the last year than in any of the previous decade I've lived here), there's a bank-owned house that has been empty for several years - maybe as long as six. Per Redfin, it sold in 2003 for $450k:
http://www.redfin.com/CA/Oakland/3863-Patterson-Ave-94619/home/1742970
In March 2005, asking price was $589k. Two months later, it hadn't sold, so the agent did the logical thing - he raised the price, to $635k. (I still have the flyers.)
For a long time last year, it was pending at $299k (no longer in the sales history). Then it went into foreclosure. Then listed at $350, and now back to $320. I've heard there might be an underground creek running beneath either part of the house or part of the back yard.
Next door is a house I viewed last summer. It was a mess and clearly needed renovation. The layout was strange, and the lot was small, so I passed it up. It sold in September for 224k. It was renovated, and now lists for a jaw-dropping (to me at least) $498k. The renovation looks decent, but they don't appear to have replaced the foundation or roof. And even if they had, there are much nicer (and larger) houses in much nicer neighborhoods that have sold for less than that.
http://www.redfin.com/CA/Oakland/3867-Patterson-Ave-94619/home/1880885
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thomas.wong1986 says
I don't think so: it may be true for some individuals, but the schools are full of kids with money.
Every time I go rafting on the South Fork, the UC Davis club is there, in large numbers. Every time I go to Boreal, the UC Davis ski club is there in large numbers. Mostly those students had chic-looking clothes for the occasions, something my family still doesn't spend for. Those are expensive recreations that require sufficient discretionary money. Certainly not the kind of thing students struggling with loans can afford.
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San Jose, CA
Today one of my realtors sent me the following home statistic for Silicon Valley:
JANUARY MARKET STATISTICS
Sale of single-family, re-sale homes started the year in a slump. The 556 sales were the lowest monthly total since February 2008. Home sales were down 35.9% from December. Condo sales were off 38.3% from December.
The median price for homes was down 8.5% year-over-year. This is the fifteenth month in a row the median price for homes has been lower than the year before. The median price for condos was up 1.8% compared to last January. See graph for cyclical trends: prices typically increase February on and peaks in summer months.
Inventory of both homes and condos continues to be weak. Home inventory was down 31.1% compared to last January: 1,382 homes actively listed. Condo inventory was down 46.2% year-over-year.
Pending sales of homes rose slightly from December, but were off 6.8% year-over-year. Condo pending sales were up 1.8% year-over-year.
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Pleasanton, CA
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thomas.wong1986 says
This data is hard to compare 1-to-1. The problem is that the interest rate adjustments are in response to the housing market direction. Think about what would have happened if we kept interest rates at 7% from 2000 to now. The medium price would have caved horrendously (not just the 40% we see). So, you will see swings in interest rates in the effort to stop the collapse of the housing market. Your graph show it well. At the first sign of a negative direction in the medium, the rates are adjusted intentionally down. Then when people are all convinced that the housing is so resilient and never goes down, the medium will stay flat or start the rise. Just like Shiller said, the current direction determines the future direction in peoples minds with housing.
Now to todays problem. We can't go much lower with the interest rates. The last 70 years of "housing never goes down" crap has finally caught up to us. Because of this, the fed is forced to basically give away money trying to stop a medium direction shift. Did it work? Not a chance. Now the direction is finally down and the game is up. Nothing anyone can do now will reverse the momentum. The government has tried by throwing us all further under the bus, the feds are running the printing presses at full rate and giving away money to banks. The banks are digging their hardest to cover up the mess they don't want anyone to see. It is a nightmare and anyone that thinks this will not come to a disastrous ending is looking through rose-colored glasses. This of it like this. If now is not the time we pay for all the backward economics of the housing scam, then when? The reset happens in this this decade folks. Hold on.
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Pleasanton, CA
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thomas.wong1986 says
What IWOG said things were getting better right? Must be something wrong with this data then. IWOG has all that experience and education behind him. He is also a saint with no hidden agenda. Say it ain't so there IWOG.
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RentingForHalfTheCost says
And I meant to say "2000 to now". The end of the crazy dot com days should have also been a hit on the housing market. Especially in the bay area. However, the interest rate drops ensured that this didn't happen. To me the medium of 2000 is still the mark that we need to drop below in order for any order to be re-establish. We were much better off as a country in 1999, so you can't tell me that current prices should he higher now. We have done very little to improve workers efficiency. Too many people are making crap that just hurts the efficiency. What makes headlines today? A company that gets most of its earnings from selling virtual items in online games. Yah, that is helping us compete globally alright. We all should be ashamed of ourselves.
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bg says
So, what you're saying is--data be damned. In my mind there should be a correlation, so therefore I will continue to say that there IS a correlation.
What you are missing is that (historically) interest rates don't rise in a vacuum. And the effect of rising interest rates has always been outweighed by other factors (namely rising incomes).
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tatupu70 says
Very true, and also like I said in a previous post. Interest rate changes are done in protection of real estate wealth. They are tightly related and not two independent data sets. Therefore, you cannot just put them side by side looking for the correlation. The correlation is inherent in their definitions. One (medium house price) is the product of many forms of manipulation from people and organizations that benefit from them. While the interest rate is one of the tools used to manipulate.
It is not unlike plotting plane speed and gas consumption trying to find the correlation and not taking in consideration the winds, temperature, altitude, cargo weight, etc. You could incorrect deduce that gas consumption and speed have no correlation. The head wind is the macro economics, the cargo weight is the crippling debt, the Occupy Wall Street is the temperature. Add in the all the parameters and things start to fall out properly. ;)
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RentingForHalfTheCost says
No you wouldn't. Not over a long time period. You would see the correlation, if one existed.
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RentingForHalfTheCost says
Forget what your buying...
Your income is (X)
(1) you borrow the first 100K and the bank will charge 5% based on current rates and default risk.
(2) you borrow the second 100k and the defualt risk has increased, therefor your cost of capital is now 5.5%
(3) you borrow the third 100K and the defualt risk has increased even higher, and your cost of capital is now 6.0%..
The more you borrow, the higher rates due to default risk to the lender..
Price of what you buy.. has nothing to do with it.
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RentingForHalfTheCost says
Yes, it should of! what happened ? the crazy hype continued !
We have yet to correct for all that .. even though by some measures we may be alot worst than the early 90s recession.
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RentingForHalfTheCost says
Alot of things have to change not just how people view homes in the Bay Area. But its overall impact on jobs and growth of the local economy.
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Pleasanton, CA
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thomas.wong1986 says
Not following your logic.
Here is an even easier way to say it. If you see NAR and realtors screaming for lower interest rates, then I would put all of my money and all I can convince my family down on the fact a drop in rates increases demand. To me, asking the question about a correlation is the problem. It is as correlated as my hip to the socket. Kinda like asking a frog to jump after cutting off his legs, and then concluding that the amputation made him deaf. I see this type of reasoning more and more in times of stress. People trying to justify what they want to happen by not really recognizing the relationships between the parameters.
My point? Interest rates right now can't go up. That used to be a useful tool when you were working in a reasonable environment. Now, though, the wheels fell off and aside from going to war with other countries to steal their resources, this country has to go through the process of healing. We are still bleeding...