patrick.net

" In January, the median sale price of a California home fell $17,500 or 4.8 percent, to $345,000 from $362,500 in December 2013, the largest monthly decline since January 2013."

Meanwhile, renters saved cold hard cash between Dec/13 to Jan/14. Welcome to the banquet of consequences. The proceedings will only commence when everyone has been seated. D-D-D-DOWN we go.

No ifs ands or buts in where things were eventually going to end up

I'm starting to smell that pungent aroma already!

Home sales dropped and prices slumped in January! Shocking... Because that only happens like almost... EVERY FREAKING JANUARY!

I've been watching the market for a long time. This has a different flavor, and I don't see spring showing higher numbers this year like expected.

hrhjuliet says

This has a different flavor, and I don't see spring showing higher numbers this
year like expected.

That's pretty insightful considering that it's not spring yet. ESP?

BoomAndBustCycle says

Home sales dropped and prices slumped in January! Shocking... Because that only happens like almost... EVERY FREAKING JANUARY!

Huh? I talked to a realtor in December and he said prices always go UP. You saying he is wrong at least once a year? I don't believe it. He was driving a SL500 FCOL. How can he be wrong.

Forget medians, this is the real news:

• In January, cash sales fell 11.1 percent for the month and are down 21.2 percent from January 2013.
• January flipping (reselling a property within six months) fell 19.8 for the month and down 15.3 percent from a year ago.
• Institutional investor purchases continue to trend lower and in January were 52.1 percent below their December 2012 peak. Rising prices have reduced the return on investment making homes less attractive as an investment option.

This is all that drove the market since the "bottom" of 2011/2012. Now that they drove prices up on themselves they walk away. Cheers.

JH says

Forget medians, this is the real news:

• In January, cash sales fell 11.1 percent for the month and are down 21.2 percent from January 2013.

• January flipping (reselling a property within six months) fell 19.8 for the month and down 15.3 percent from a year ago.

• Institutional investor purchases continue to trend lower and in January were 52.1 percent below their December 2012 peak. Rising prices have reduced the return on investment making homes less attractive as an investment option.

This is all that drove the market since the "bottom" of 2011/2012. Now that they drove prices up on themselves they walk away. Cheers.

Well, did they really believe people were going to keep buying at any price? Actually, don't answer that, the answer is too depressing.

Rents are going up faster than house prices...wow and just not true.

Anyway, I'm sure it's just due to the weather :p

Call it Crazy says

Homeboy says

Same chart but of existing homes showing even more exaggerated and useless price swings:

That's not the same chart; that's NAR data. As a general rule, I would not trust ANYTHING that came from the NAR.

I was going to point that out too... The duck rags on NAR data then tries to use it in his arguments when they fit his narrative..... FAIL...

"The Duck" is hanging by a thread and he grows angrier by the day............he knows its GAME OVER

Prices dropped...hahhahahhahahahahahahahahahaha

hrhjuliet says

I'm seeing some pretty big drops in price in the too big to fail Bay Area, and I've also noticed a lot of houses going off the market? Some homes come back on the market within a week with new photos and a reset on the how long it's been on the market. It's the same home almost the same price, but the home pops up on the real estate sites like it's a new listing? There are some very weird things going on the market right now. It seems as volatile as the faultline that runs through it.

SF/bay area is the most unsustainable housing market in the country. Lived there for nearly ten years, left last year. When the stock market takes a dive unprofitable/massively over valued companies like Tesla, Zygna,Netflix, facebook, twitter Trulia will be hit the hardest and layoffs will ensue causing the housing prices to plummet once again.

CaffeineAddict says

Now most of us are stuck renting (at rapidly increasing prices). As fast as housing prices increased, rents are going up even higher.

As a renter in the silicon valley I notice that there is a lot more rentales on the market and a lot more being built. My rent has stayed stable over the last 4 years but if my rent does go up I have little to worry about since there are a lot of landlords out there willing to drop their price to compete with the new multi-family rentales that are coming online.

thanks for calling out the obvious - less sales in winter - thats revolutionary news!!

not

:)

After this season Patrick.net should change the headline to ..

It's a terrible time to buy an expensive house...AGAIN - if you listened to us you sure missed getting in...but then again...there is always another crash 10 years later...just wait

JH says

But what happens when cash pulls out?

Not going to happen unless the TP gains ground in 2014, takes over in 2016, and actually walks their talk then.

Chances of that happening aren't that great.

If the mainstream conservative GOP takes over in 2016, I expect we'll see a replay of 2001-2006, massive tax cuts coupled with back-end monetary juicing to make everything feel-good again.

I think it's a given that we'll monetize the $2.7T in the SSTF via mild Fed printing, not higher income taxes. Easier to print $100B+/yr than tax it!

http://research.stlouisfed.org/fred2/graph/?g=snh

is Japan showing us the way.

If the current Dem-GOP power split continues, my crystal ball is murkier.

But I don't see much of a Fed taper from here on out. What would be the point of it? Strengthening the dollar? That doesn't help us at all, actually.

http://research.stlouisfed.org/fred2/series/NETEXP

http://research.stlouisfed.org/fred2/series/MANEMP

"Cash" ain't going anywhere, 'cuz it's got nowhere else to go.

I don't know, are all so sure? Another house in Los Gatos we were looking at sold yesterday for $677,000, and it was listed at a million. I've seen some really strange things in the market in the last few months and the media numbers don't always match? We have been watching the ups and downs for 15 years and things seem so odd lately. I don't think the Bay Area is going to suddenly not be a popular place to be. There are a few cities in this country that will always be desirable to a degree. I don't think it's going to be a massive bubble this spring, but I doubt there is going to be the usual spring rise. I am not an expert, but this market seems shady and there are a lot of sensible people staying out of the buying side and I really think that the loss of the prudent middle class as buyers will show in the overall numbers.

Homeboy says

I said I don't care what NEW home prices are doing because I'm more interested in the overall housing market. You see, I'm not a dunce like you who uses the wrong data set to try to make a point.

Just--whatever you do--don't use percentages!

JH says

But at some point the diminishing ROI makes it pointless to buy in

RE is a timing game, too. If you can see 5 years ahead, you can adjust your portfolio.

But the trend is their friend.

http://research.stlouisfed.org/fred2/graph/?g=snr

The System simply has to do the helicopter-money thing into the economy again, to keep the game going another decade.

Can't raise taxes. Can't cut spending.

http://research.stlouisfed.org/fred2/series/W068RCQ027SBEA

There's no other option.

And the landlords are waiting, patiently, knowing they'l exact their cut of rising nominal wages, as they always have.

http://research.stlouisfed.org/fred2/graph/?g=sns

housing / nominal wages

hrhjuliet says

this market seems shady and there are a lot of sensible people staying out of the buying side and I really think that the loss of the prudent middle class as buyers will show in the overall numbers

It's weird by me too. Flippers bought older homes for $500-600 last year and are trying to flip them for $800+. Meh.

I went to some open houses a couple weeks ago. The realtors were in my face...the selling realtors. In the past it has been a mix of sellers and other realtors making connections. These idiots were busting veins in their heads to try convincing me to buy THIS house TODAY. It was gross. To me it signals desperation. Could just be seasonal, though, with this cold weather and all in socal. hehe

JH says

and didn't want to deal with renters

property managers cost a fraction of the rent. Dunno how many properties one can sanely manage, but 30 doesn't sound outlandish, and $200/mo per would work out to $70,000 for the manager, a perfectly decent income.

My rent in Sunnyvale rose $200/mo on more than one occasion, LOL. Hell, it's up $1000/mo compared to what it was 8 years ago.

JH says

but granite and tile do not cost 300k.

your competition isn't the seller, it's the next bidder(s).

hrhjuliet says

Another house in Los Gatos we were looking at sold yesterday for $677,000

hrhjuliet, I am curious why you are looking at homes since you have stated that buying a home in this market is for fools?

hrhjuliet says

I don't think it's going to be a massive bubble this spring, but I doubt there is going to be the usual spring rise. I am not an expert, but this market seems shady and there are a lot of sensible people staying out of the buying side and I really think that the loss of the prudent middle class as buyers will show in the overall numbers.

yeah, certainly something can snap deep down in the economy and only become apparent months or years later.

I had a funny feeling about the economy in the 2004-2005 period, reading the same stories about rising cash buyers etc, but it was only when the Casey Serin story broke in late 2006 that I fully understood how much outright fraud had been going on, fraud that was the main driver of prices being bid up to where they got 2005-2007 (the calm before the storm).

My analysis now is difficult.

http://research.stlouisfed.org/fred2/graph/?g=snP

is not what I was expecting to see in 2014 (blue is nominal Case Shiller, red is 2009-dollars), though in real terms we're not much above 2010 still.

Here's my prior opinion from 3 years ago:

This is going to be the year that breaks or makes the trend I guess.

HAVE the greatest fools been found again? Is this 2005 again?

Dunno. Corporations are still doing great:

http://research.stlouisfed.org/fred2/series/CP/

but the rottenness underneath is visible if you know where to look:

http://research.stlouisfed.org/fred2/series/TCU

As for the Bay Area -- fortresses especially -- all bets are off. Supply is minuscule and the number of google / apple / social media millionaires being minted is no doubt MUCH greater than the dotcom good times, and the area still has those 1990s OG dotcommers still around taking up space for that matter.

I visited the Goog campus this week and boy the amount of building going on was comical.

http://research.stlouisfed.org/fred2/series/CASANM0POP

the spirit is willing, but the space is weak.

Call it Crazy says

Carolyn C says

hrhjuliet says

Another house in Los Gatos we were looking at sold yesterday for $677,000

hrhjuliet, I am curious why you are looking at homes since you have stated that buying a home in this market is for fools?

I think she stated it here:

hrhjuliet says

We have been watching the ups and downs for 15 years and things seem so odd lately.

I didn't ask you.

Carolyn C says

I am curious why you are looking at homes

"were looking" is the past continuous/progressive tense, implying actions completed in the past.

Bellingham Bill says

Carolyn C says

I am curious why you are looking at homes

"were looking" is the past continuous/progressive tense, implying actions completed in the past.

Thank you for that.

Carolyn C says

hrhjuliet says

Another house in Los Gatos we were looking at sold yesterday for $677,000

hrhjuliet, I am curious why you are looking at homes since you have stated that buying a home in this market is for fools?

My cousin from Los Angles would like to be here where the majority of her family lives. It is foolish, but my grandma is getting harder for my dad to take care of on his own, and my cousin can help. Her job is more flexible than mine. My grandma lives in Santa Clara and Mandy's brother lives in Los Gatos, my sister lives in Aptos and my brother, who I also help take care of, lives in Morgan Hill. Her only other relatives live in France, and that is not an option. She wants to buy here, and I want her to live here. I am stuck here for various reasons and it would be a huge plus to have my cousin close; we are like sisters. I also keep my eye on the market in hope that things will go down for my former students just starting their lives. My poor students feel like they are in exhile from their hometown because they can't afford the rent or to buy a home. It would also be very reassuring to see the market go down. It would be a sign of a thriving middle class and a future for my students and other young people, including my own children.

BTW - My cousin does a lot of her own research and then sends it to me. She is (now don't go off some of you) a realtor. She works for a very small firm out near Canyon Country. I don't know much about LA, but she thinks says she is in the best spot in LA, but she is there alone and recently divorced. If any of you need a good and honest real estate agent, she still lives there and she is amazing.

hrhjuliet, thanks for the explanation. I also think that lower home prices are better for society as a whole. My children will also need to buy a home someday.

Carolyn C says

hrhjuliet, thanks for the explanation. I also think that lower home prices are better for society as a whole. My children will also need to buy a home someday.

I think that's the hardest part watching prices go up. I would love for my family to all live here, and I would love for my boys to be able to move home after college and settle near us someday. My family has such strong roots here. I would also love to see my students be able to move home. One of my students, who danced for Ballet West, and went to school for chemical engineering at BYU wanted to move home to Gilroy, but can't. Now she is stuck in Oram, miles from her really large family. That's one story of many. It's sad. I have been hosting an alumni barre at Christmas for all the college students who come home for 15 years and each year their stories seem more hopeless and more discouraging. Pretty soon I will be hosting my little alumni barre tradition to an empty studio. No one will be able to come home. The Bay Area children of the middle-class are in exhile, and not for a crime they committed.

hrhjuliet says

the Bay Area is for investors collecting cool places to own

even with billions of Chinese and Indians, that's not that big a supply drain. what is happening though is that the bay area is like a rich person roach motel, they check in but they never leave.

Say 2% of techies each year win the dotcom lottery and are set for life. After 25 years, that adds up to ~50% of the tech population.

http://research.stlouisfed.org/fred2/series/SANJ906INFO

throw in the health care sector also getting fat fat fat:

http://research.stlouisfed.org/fred2/series/SANJ906EDUH

be in tech or health care, and you can make it in the valley.

or some other professional position:

http://research.stlouisfed.org/fred2/series/SMU06419406000000001A

meanwhile, new supply is measured in the hundreds:

http://research.stlouisfed.org/fred2/series/SANJ906BP1FHSA

this is why it's screwy there.

Another sad aspect to the housing dilemma is the length of time it takes a family to save for the down payment. My oldest was 14 yrs of age before we purchased our first home. Half of my kids childhood was spent living in small cramped apartments. It has not been healthy for them constantly coupled up indoors. Too many families live in small, unsanitary, dangerous neighborhoods subjecting children to play out in the open accessible to child predictors. Meanwhile the wealthy hoard land to the detriment of our children.

Bellingham Bill says

Supply is minuscule and the number of google / apple / social media millionaires being minted is no doubt MUCH greater than the dotcom good times

But are these kids millionaires on paper or have they cashed out? And if it is MUCH greater than 2000, then is it more sustainable this time?

hrhjuliet says

I have been hosting an alumni barre at Christmas for all the college students who come home for 15 years and each year their stories seem more hopeless and more discouraging. Pretty soon I will be hosting my little alumni barre tradition to an empty studio. No one will be able to come home. The Bay Area children of the middle-class are in exhile, and not for a crime they committed.

Are you talking about the very pricey BA? Like Palo Alto, for example? Or simply somewhere moderately expensive like San Jose?

If the former, well, that happens in fancy cities everywhere. If the latter, it is very sad. But I don't think the latter can be sustained. If NOBODY can come back home and live where they grew up, who is going to buy those homes? The market will have to reset to a price that the average Gen X and Y can afford. There will be neighborhood exceptions, of course there always are. But I don't believe people who say cash will rule and to hell with the next generation of 99% of Americans. That's not how it works. Gen X and Y need roofs with a couple of walls. As boomers retire and die, housing demand will drop and kids will start moving out of their parents' houses. What sucks is they will be 40!

hrhjuliet says

I would love for my family to all live here, and I would love for my boys to be able to move home after college and settle near us someday.

Most people would, hence, we eventually have a math problem here. Consider - you your husband and boys constituted one household. If they come back (with wives and kids in tow of their own) you now need three households (one for you, one for each of them).

Now take this (I want them to live nearby) dynamic, and multiply it by say 100,000 households. In one generation, you need 300,000 houses in an area that was considered "built out" when 100,000 were there. Where are you going to fit those 200,000 other households? You either need to build upward, (which most people deem inferior to SFH living), or keep building further and further away (i.e. Tracy, Stockton).

So at the end of the day, your boys (along with everyone elses kids) do this to one another. They compete (via price) with one another for the ability to live just like you do. And at the end of the day, the math doesn't add up - some will have to lose.

Granted, not "everyone" wants to stay here, some will want to move away. But again, others will want to move here from elsewhere (east coast, china, etc) such that at the end of the day, the math simply doesn't add up end up with a fundamental imbalance - and the only way to satisfy that imbalance is price.

If you really think about it, you will see it too. Its not fun, or "fair" or whatever, but again, it is what it is.

Problem with expensive places like Cupertino and Los Gatos and Palo Alto for me is that traffic is HELL to get to Santa Clara in the work day commute. It is a parking lot. That is why I will never buy in Los Gatos, the 85 is a nightmare traffic jam daily.

JH says

But are these kids millionaires on paper or have they cashed out?

I don't think the present tech boom is as ephemeral as the 1990s.

back then there was a lot of outright fraud and the booming 90s irrational exuberance.

Now it's more cautious exuberance about the Valley's success in remaking tech again. 10 years ago today's tech and social media successes did not exist; 10 years ago all the best (and best-selling) phones were designed in Europe and Japan.

Now, the place is selling a billion phones a year (!) and has also incidentally kicked Microsoft in the balls. There was no money in selling pet food online, but search, advertising, and connecting people is apparently money.

As for "sustainability", it doesn't matter. A retired engineer with FU money in the bank is still going to occupy space in the Fortress.

Redfin has 24 listings for Palo Alto currently. That's not enough for one subpopulation -- Health Sector, Chinese, Moneybags, Professionals, Tech people.

PA is still housing retirees from the 1960s tech boom, let alone the 70s, 80s, 90s . . .

I don't know what the wider picture looks like, but I suspect the state will continue to rally around the bay area.

http://research.stlouisfed.org/fred2/graph/?g=soy

High housing costs repel some industries, but a lot of people with a lot of money living here attract others.

JH says

re you talking about the very pricey BA? Like Palo Alto, for example? Or simply somewhere moderately expensive like San Jose?

They would be happy to live anywhere near home. Some even look in Hollister and other outlander towns. My students span a big area, from Salinas to San Jose. I even have some Campbell and Santa Clara students, but my students are mainly from Morgan Hill and South San Jose.

hrhjuliet says

My students span a big area, from Salinas to San Jose

Can I ask where you teach?