WatchWe are already in a gridlock situation where everyone that bought in 2004-2007 that hasn't foreclosed is basically TRAPPED in their home. The only way they can move is via short sale or walking away.
Lower home prices just equals more inventory gridlock... You can't buy a home from someone that doesn't have the cash to make up the difference to sell you the home.
So, rolling back home prices will lead to less inventory because 1996-2002 buyers now won't have enough equity to sell their homes. It's a catch-22, renters want/need lower home prices, buyers can't AFFORD to sell at lower prices.
Maybe Boomers will be forced to sell you their paid off home/ retirement fund.. But I think the majority of them will stay put.
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San Jose, CA
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House Sheriff says
That's the thing. For whatever reasons, some people on here believe that investors want to see house prices go up. No we do not. We want to see prices come down especially in the low to mid-end markets. Investors do not buy high end properties to rent out. They only buy high end properties to flip or live-in.
At this point, the competition for the low to mid-end markets, or even in some high-end market along the Peninsula, is out right crazy due to the lack of housing inventory. However, they will call us names for saying what doesn't fit their preconceived notion.
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Goran_K says
There is a LOT of squaters now... but since the robo-signing agreement is done, I expect the foreclosure "train" to pick up speed. I think you'll start seeing more REO inventory becoming available this Summer.
In my state, recent foreclosure starts are up last month by 180%!!
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San Mateo, CA
The point I'm making here is that certain areas are seeing upticks/recovery/low inventory. That can't be denied. Will it last? Who knows. Banks seem perfectly happy to trickle out their properties ever so gradually. Now saying "buy later when prices crater..." -- not sure that will apply to certain areas anymore. If there's a frenzy here at fairly "affordable" prices, I doubt there will be room to go down a lot further.
E-man, agreed. Any buyer wants to see depressed prices. We want to believe that the market will cool or slump sometime in the future. I'm looking for opportunities.
Here's a question: How many talking heads here are actually pushing out offers and doing the work to try to secure a house at this time? I'm reporting what's going on in the field as a buyer right now in California.
Call It Crazy, I'm waiting....
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San Mateo, CA
Margaret Has A HorseFace says
Lying about low inventory? Now you're terribly misinformed and your responses are frankly, terribly juvenile.
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San Mateo, CA
Margaret Has A HorseFace says
Whenever you are pushed into a corner and have lost an argument, you always resort to the same replies. It's rather amusing, really. Nobody here has a handle on ALL local markets, and neither do you. So chances are, you won't know that prices are up in certain neighborhoods where inventory is very tight. Simple supply/demand right? Now if that inventory increases, then prices will decrease, which is what I'm hoping will happen.
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House Sheriff says
There are lots of delusional sellers right now, thinking they can get inflated prices. Asking prices are, indeed, up. Selling prices are still going down, as reflected by the C-S index. Besides, the uptick is due to high season, and the uptick this year, is no bigger than what we saw last year. In my area of Almaden, selling prices are, at best, flat. But the summer selling season is winding down, and, come fall, lots of these investors buying now, are going to be heavily disappointed. The next leg down in housing, we are going to see a major paradigm shift in investors' attitudes.
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dunnross, I'm *really*, *really* hoping (cross my fingers) that you are right. And when you say:
The next leg down in housing, we are going to see a major paradigm shift in investors' attitudes.
you are referring to investors who bought right now? Well if this happens, investors in the sidelines who keep their powder dry will be absolutely enthralled.
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House Sheriff says
You should continue to wait!!!
I'm not denying that there is limited inventory, so when a decent house comes on the market, all the vultures want to pounce on it. If you are so set on buying NOW, plan on competing for the house.
In my neck of the woods on the east coast, house prices are continuing to fall. Just like in the OP above, those who want to sell, CAN'T because they are underwater. This situation keeps a lot of potential houses off the market.
It should be the Spring time bounce here, but sales volume is way down... and so are the prices...
I look around all the time and what I'm seeing ain't good!!! The sheer amount of "shadow inventory" is amazing. I have never seen this many vacant and empty houses since I've been around this planet.
Who knows when these REO houses will be released into the inventory?? But, they are and will be a definite drag DOWN on house prices for a LONG time.....
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Look at Dunnross's chart above... look closely at the RED line!! Everyone is chanting that sales and prices are up! But guess, what it's the normal Spring bounce!!
Take a closer look at that RED line... the Spring "bounce" has been lower the last few years. This year it's even lower and as soon as it passes, prices will continue their downward spiral!!
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Many realtors are increasing staff in anticipation of a surge in underwater sellers. The end of the debt foregiveness act in December is the main reason for this. Together with yesterdays dataquick report that SFR prices are still falling and todays news that mortgage rates have risen it is all looking very good for buyers watching and waiting.
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Strategic Renter says
Sorry, if you haven't listed your short sale by now.. it's highly doubtful you'll close on a new short sale listing by December.
It's far more likely the deb forgiveness act will be extended than any significant surge in short sales by years end.
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BoomAndBustCycle says
The goverment do not want to extend it because it forces loan owners to stay in their houses. The act is an easy out for them. Also with the new short sale regulations coming in requiring an answer in 30 days then there is still plenty of time. Realtors know this. That is why they are increasing staff.
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Call it Crazy says
I dont' think sales prices are up or going up much if at all... But i also don't see a sharp 20%+ drops on the horizon like so many bears predict. I think it's going to be all about rental parity... and monthly payments from here on out will continue teetering around whatever median rents are in the area.
I also don't see interest rates rising anytime soon. (If something causes rents to crash, then all bets are off for the housing market though.. one concession I will make). I think we'll risk massive inflation with ultra-low rates.. before risking massive deflation by raising interest rates.
And yes, i think the whole market is rigged... and the FED and global banking system can keep rates as low as they want for as long as they want.
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dunnross says
The latest CS index list reflects sales for about ~6 months ago. Selling prices were going down then, but the CS index says nothing about what is happening now.
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Call it Crazy says
Why do you keep perpetuating this lie. I've already proven it to be factually incorrect.
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I see a lot of downside to housing. I can be bearish or bullish on housing depending on the market factors, and right now they are all bearish.
Even with 1/4 to 1/2 the inventory, the Spring bounce is one of the weakest in years. The banks tried to create a false bottom by restricting supply but if there is no DEMAND, then their strategy fails, which is what is happening now. No one is dumb enough to just hop into a $700,000 mortgage these days, the bubble implosion happened only a few years ago and it's fresh in people's memories.
Now the banks have a tough choice; let people continue to squat creating more moral hazard, or start foreclosing again and pass this giant kidney stone. It looks like recent news says they are doing the latter.
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tatupu70 says
C.A.R.’s Pending Home Sales Index (PHSI)* declined from a revised 138.9 in March to 128.0 in April, based on signed contracts
C.A.R.’s Pending Home Sales Index (PHSI)*. The index was 118.3 in May
June and July's completed sales are going to be very bad. Also Dataquick reporting SFR still falling and mortgage rates rising then the only way for prices is down
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Goran_K says
Why do you think the spring bounce is over? The last reports we've gotten were from April, right? That's closer to winter than to summer...
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Pending sales dropped drastically from April to May. That's what happens when you cut inventory artificially.
All this to keep bad assets on the books as good, and letting people squat for free.
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Strategic Renter says
I hadn't seen that data-I was just looking at actual sales volumes. While part of that could be due to the low inventory, I agree that pending home index is a pretty good indicator of future sales and prices.
How could dataquick be reporting mortgage rates rising?? That is obviously false. Rates declined quite a bit from last week and are at pretty much all time lows.
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1st rise in mortgage rates in 7 weeks
http://lansner.ocregister.com/2012/06/14/1st-rise-in-mortgage-rates-in-7-weeks/163651/
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Strategic Renter says
OK--I don't call a slight rise for 1 week out of 7 to be a trend...
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Strategic Renter says
OK--looked up the CAR index. Didn't know it was California only. Nationwide pending homes sales were down in April 2012 from March 2012, but up from April 2011.
I'd be careful to draw too many conclusions from that yet. Still seems like this year is stronger than last year IMO. Even with the lower inventory.
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tatupu70 says
Because they do the old trick of revising down April. Next month they will revise down May. so they can report June up etc etc
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BoomAndBustCycle says
THIS.
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Laws of supply and demand (fundamentals) will still be in effect. The only question is what will underwater buyers will be willing to bear. I think you'll see a lot of short sales this year due to the buyers who are walking away while tremendously upside down.
Those who are comfortable and are underwater will probably not care and just accept to live with a certain loss ratio.
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Emeryville, CA
Call it Crazy says
Me, too. Anecdotal, to be sure, but there are a lot of vacancies where nothing is happening.
My own former home just sits there growing weeds while the grass dies.
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FortWayne says
If they don't they will be bankrupted by the IRS.
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CL says
It's funny you say that... sold a previous house in a different state in 2001 when moving back here. The guy who bought it re-sold it in 2005. My son was in that old area and decided to take a ride past the old "digs"... He told me the house was foreclosed and was sitting and rotting empty...
I took a look online, house was foreclosed in 11/2010 and has been sitting in the shadow ever since.... This was a custom built home in a very nice subdivision.... Based on what is owed on it, the bank is about 100K underwater based on market value, so who knows when it will come out of the "shadow"...
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tatupu70 says
I've given you chart after chart of data, all you have done is to be a keyboard commando.... step up to the plate and produce some facts or charts to support your keyboard!!!
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Call it Crazy says
lol. You post charts of zillow home values. Which are pretty much meaningless. I've posted link after link showing actual sales. Yet you continue to say home sales are down.
Here you go again:
http://www.nasdaq.com/article/us-april-existing-home-sales-up-34-20120522-00914
Oh yeah, I forgot, you don't like NAR numbers. Unless they agree with you, of course. Then they are OK.
And I just posted the pending home sales, which are down from March, but up from April 2011.
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San Jose, CA
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Goran_K says
Why do you think banks dropped the inventory so much? They knew that prices were about to crater, so, they figured, they could take advantage of these stupid investors and sell a little more inventory (albeit very little) at over-inflated prices. Once the current pool of fools dries up (and there are less and less of them by the hour), it's Willy Coyote time, again!
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tatupu70 says
CS index is only 2 month old, not 6 month old. On May 30, they released data through Mar 29. Since high season starts after Super Bowl, the C-S index showed 2 good month of high-season prices:
http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----
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dunnross says
If the banks sold all the shadow inventory to all the housing bears in waiting at 10 cents on the dollar how would this help our current situtation? What would really change? Those underwater would still be underwater and there would be zero inventory rather than the slow trickle we have now.
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BoomAndBustCycle says
It would help the economy recover much faster, that's for sure. In fact, if the FED didn't liquidate mark-to-market, bail out all those deadbeat banks, and kept interest rates artificially low, we would be enjoying a real recovery right now. Prices would be 80% lower, but sales would be back to their normal levels. Instead, we have an 80% drop in sales and only a 20% drop in prices (so far) and Japan-style multi-decade decline. You decide which one is better.
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dunnross says
Subtract out the time between offer accepted and closing date (another ~6 weeks) and realize that CS is a 3 month average so you've still got sales from November in there..
I stand by my statement.
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Laguna Beach, CA
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dunnross says
This.
Right now the U.S major banks are zombies that are cannibalizing the U.S economy. If we just "liquidate" the infection (bad assets), we can take the short term shock, but steadily return to normal much quicker than Japan which still has a very weak housing market over two decades later.
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Boom/Dunross-
Please don't qoute Goran_K. I have him on ignore because he pretends to be above the whole bull vs. bear debate, but really is just a permabear in disguise. And I don't want to see his drivel anymore.
thanks in advance
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BoomAndBustCycle says
I've been rolling what you posted around and around in my head to find an angle, but I can't find one. The one positive that could come is that the bears would get very affordable housing so they would have more money to spend out in the open economy.
I think the BIGGEST kicker in the mess is JOBS.... Until more people get back into the job market and wages increase, things stay the same. It will take cash flow from wages to pay back all the overhanging debt before we can move back upwards....
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BoomAndBustCycle says
No you become the poster child of the RE bubble for many others to remind them of your mistake... therefore they wont in anyway overpay like you did. Eventually the owners will sell, take a loss to get rid of their own low savings rate.