It's not that sales are through-the-roof, but they certainly are very high compared with the number of properties for sale. The Supply/Demand balance is looking like 2005.
The East Bay is on Fire
By gregpfielding Follow Thu, 3 May 2012, 2:13pm 11,858 views 177 comments
In Danville CA 94526
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... and once more we have an argument between the house investors who will naturally always project housing as the best thing ever since their financial futures count on it and the home buyers or would be buyers who want prices to fall dramatically and perhaps unrealistically.
Both will be disappointed.
Anyway, there's nothing amazing going on here. There is less supply. Thus less supply means more demand and more demand means more sales per capita.
Secondly, yes- the population of California is increasing. But its also losing population as well as the middle class moves out and more working class moves in, thus if that's the case that would actually indicate future home value declines.
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Lafayette, CA
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pkowen says
No, they aren't always going up. Why are you attributing that to me?
pkowen says
1% is 377,000 new people in California each year.
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edvard2 says
It's not the case. California's net population is increasing by around 1%.
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Doesn't really matter if the population is increasing. It's about household formation. Lots of people can't afford to live entirely on their own anymore for a variety of reasons, but mostly economic ones. Population growth doesn't necessarily tell the whole story. BTW, construction being dead is not unique to California.
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Oakland, CA
Yes - Mr. Fielding has chosen the more affluent areas, so the thread title is misleading. What if you include Oakland, San Leandro, Hercules, Pinole, and San Pablo? They're part of the East Bay too.
I wonder what the shadow inventory is like in those affluent cities - and how many squatters there are who haven't entered the foreclosure pipeline yet.
Last week I did searches at foreclosureradar.com and Redfin for the city of Oakland, where I'm hoping to buy my first house. I found about 600 active listings and 1,650 houses in some stage of foreclosure, for a ratio of 2.75 to 1.
According to the author of the ochousingnews.com blog, for every loan owner in the 'preforeclosure' stage, there are two others who have defaulted but who have not yet received a notice of default.
So yes, while the market manipulation by the banks and the spring season seem to be driving a 'rally', it sure doesn't seem to be a healthy market, at least not in Oakland. Maybe those more affluent areas were less affected by the bubble.
As for CA population trends, here's another perspective:
http://tinyurl.com/7zhbkq3
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iwog says
I don't think you might have understood what I wrote. Yes- I would agree that maybe... just maybe the population is going up. But I would assume such a statement would be made to further an eternally rosy outlook for future housing gains, which of course would benefit people that invest in housing.
But just like anything, you have to look at the type of population that's moving in. If we were talking more middle and upper middle class domestic migration into Cali then that would mean a healthier, more robust housing market future. But instead all indications show an increase in populations primarily in the working class- none of whom can afford 400k-500k starter homes.
I've mentioned this a few times here, but if I believed in housing investment ( which I don't) I'd be buying in states that ARE getting an influx of middle class workers: states like NC, TX, GA, and other states in that region. Why? Because those are states that people in the middle class are flocking to because they can afford them.
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Larkspur, CA
Marin is pretty quiet. Perhaps it will pick up soon?
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Larkspur, CA
I just spoke with a friend who owns a home in the east bay. He told me that he's received postcards from two realtors in the past week telling him the time is ripe to sell. Should be an interesting summer.
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Los Angeles, CA
Housing is luxury item like diamonds. NO ONE needs one (SFR that is). Might as well complain about the Debeers diamond monopoly as well as the 'governemnt making prices always go up in RE'.
Only purpose of diamonds is to make jewelers rich, enhance ego/status of buyers. Same with housing.
Anyway I still like complaining.
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Santa Clara, CA
rowemoore says
We receive those postcards regularly, doesn't mean anything. Some realtors are even go door to door :) When we rented a few years ago some realtors knocked asking if we're would like to sell...
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zhanka says
Did you? I read about these scams every once in a while.
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Los Angeles, CA
edvard2 says
Yeah, when I moved to LA 5 years ago, there were usually only about 10 illegal migrant laborers hounding me at the Home Depot parking lot entrance. Now there's at least 15 or more. There's your 1% yearly population increase.
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Santa Clara, CA
APOCALYPSEFUCK is Tony Manero says
what do you mean? sell a house that we rent?
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Larkspur, CA
zhanka says
I have rec'd some of these here in Marin -- but only 1 every month or 2 - saying that the market could be like this for years and since interest rate are so low now is the best time to sell.
My friend said the cards he got referenced the same info as the OP saying the if you've been waiting , the wait is over!
If I was looking to sell, I'd probably do it this summer.
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Sebastopol, CA
Greg, thanks for the graphs. Inventory is low in Sonoma County as well, nice stuff is selling at 1997 prices in nominal dollars.
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zhanka says
That would be hell of cool. :)
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Sure, crap like that happens all the time.
Just read about a racketeer who sold a guy's house from underneath him after 21 years of paying down a 30 year note.
Spanish speaking guy he defrauded through a translator making him believe he was taking out a HELOC when he was selling the place.
This is what the RE trade is all about!
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iwog says
I think this chart is pretty remarkable. Basically it says active listings are 1/3 of what they were in 2007 and 1/2 of what they were in 2010-2011.
I find it difficult to believe that this is only or even primarily driven by (lack of) new construction. Even during "normal" (or bubbly) times new homes is a pretty limited proportion of total sales. I think other factors are the major drivers
- Banks holding back supply
- Individuals hope they can get more if they sell later
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For California, I would point to three statistics:
1. Homeownership rate is approximately 50%...ie. the median home price needs to match up with approximately the 75th percentile earners (under the assumption that the top 50% buy, the bottom 50% do not--not a perfect assumption, but you get the point);
2. Vacancy rates in CA are now 5% for rentals, and 2% for owner occupied homes...this is quite low; and
3. If you simply look at the number of people in CA relative to the number of housing units, you come up with a ratio that is the second highest in the country (second to Utah). We have more people per housing unit than 49 of the 50 states.
All three of these will fuel price increases and new home development once the distressed sales begin to decrease.
I'm a new poster here, but I sense iWog and I think alike.
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Here's one of the disturbing trends of the out migration from California to other states. According to Mr. Kotkin, most of those leaving are between the ages of 5 and 14 or 34 to 45. In other words, young families.
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Santa Clara, CA
EBGuy says
Reminds me of mess we had in Russia in 1990s, many people back than lost their properties in exchange for "another" one which was just a worthless piece of paper that looked like a real one with all needed signatures.
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Larkspur, CA
Rental Watch says
How do employment numbers and income factor into this?
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Rental Watch says
These are very good statistics.
Let me add one more.
73.63% Of All Statistics Are Made Up.
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xenogear3 says
http://www.census.gov/hhes/www/housing/hvs/rates/index.html
Tables 1, 2, and 3.
I did exaggerate a bit, CA's homeownership rate is estimated at 54.4%, not 50%.
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rowemoore says
The low homeownership rate helps on both counts (meaning there are generally more people who have been renting and can step off the sidelines if they see an opportunity). But absolutely, employment and income matter. Most of the unemployment however, is caught with people who have lesser educations and generally lesser incomes (ie. renters for the most part). Factoring in affordability, homes in CA are actually quite affordable historically relative to incomes and interest rates.
http://www.car.org/marketdata/data/haitraditional/
I know...can't believe the CAR (they have a dog in this hunt)...take a look at the historical numbers to see what affordability used to be. Based on rents I'm seeing compared to home prices, their numbers do make sense.
I also think there will be a bit of a positive feedback loop created once construction improves...lots of construction jobs were lost that haven't come back. The construction workers will generally spend the money that they earn.
I think the bigger issue in CA is actually availability of credit, and appraisers (which will take a while to make the leap that markets have turned and values have improved).
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Larkspur, CA
Rental Watch says
Agreed. But jobs -- or that lack thereof -- will continue to keep the market relatively flat for years to come in all markets except the fortresses.
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rowemoore says
I just looked at some of the jobs data in CA yesterday...over the past 12 months, they have added a fair number of jobs, something like 180,000...CA still plenty to go, but this is not an insignificant number relative to the vacancy rates in the state, which I consider the best indicator of slack in the housing market...after all, we're talking about supply of shelter as it relates to number of people who want shelter...a high vacancy rate is the best indicator of a supply/demand imbalance, IMHO.
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Belmont, CA
Rental Watch says
Yeah, now take away the service jobs. Or check out the jobs which pay over some living wage, say 80K. Nothing.
Yeah, we can all pay 650K for houses on starbucks jobs.
The world has been poisoned with printed fiat money, and the wages seem to be the last things going up.
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Mountain View, CA
bmwman91's website
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The roof, the roof, the roof is on fire.
We don't need no water, let the motherfucker burn.
Burn, motherfucker, burn.
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gregpfielding says
Again?
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Laguna Beach, CA
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Must be talking about Oakland two days ago, that was just burning cop cars.
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Danville, CA
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eastbay19 says
It's been that way for 6 years now and the bulk of those foreclosures have not and probably will not come to market. Most will be modified or maybe even sold to institutional investors. It's true that the shadow inventory is huge, but Uncle Sam and the big banks have been able to keep those home off the market and I don't expect them to change.
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Danville, CA
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drtor says
The main factor is that all of the homes that would be for sale as short sales or foreclosures are in the process of modifying and/or waiting to see if there will be some sort of principal reduction program announced.
Why bother selling short if you are living in your house for free and there are rumors that Uncle Sam might write down your mortgage?
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Danville, CA
gregpfielding's website
rowemoore says
Unemployment will reduce demand. But with supply so low, it doesn't make any difference.
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Larkspur, CA
gregpfielding says
High unemployment will affect prices in most markets. Mostly because lenders will stay or become more restrained. There are a lot of reasons for the uptick in sales and low inventory, but none of these point to significant increases in prices.
So, my advice to those looking to buy is to wait 6 months. Of course, I own, so that's easy for me to say.
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Mountain View, CA
bmwman91's website
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gregpfielding says
I agree, this is probably a big factor. Being an election year & all, I think that there is even more hope among these folks that the candidates will make promises to give them free money during the campaign season. I don't expect any changes in the low inventory until after inauguration day (or some time after than when it becomes clear which promises will be kept & which will be broken).
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Los Angeles, CA
wow RE is completely broken in this country.
millions of people living for free not getting foreclosed waiting for free principal reductions? WTF country is this?!?!?!
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bmwman91's website
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PockyClipsNow says
USA, babay! Land of the FREE(loaders)! The system is broken, no doubt about it. Just because the cogs are still moving, doesn't mean it is WORKING.
The day of reckoning is coming. It may not even be in my lifetime, but it is coming. That much is crystal clear.
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Corning, NY
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bmwman91 says
Yep. History shows that when complex societies unravel, it's sudden and nasty.
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gregpfielding says
That's right. There is no inventory demand is so smoking hot and all those unforeclosed homes sitting on dead notes - JUST A RUMOR. Ten X is right around the corner and condos in Stockton will be crossing the seven-figure frontier ANY MOMENT.