patrick.net

Which major cities are in Sacromento (Sacto?) county?

Anybody have any numbers from other Metro areas (YOY inventory)?

Are there any accurate sources for inventory stats for the SF bay area?
Those I've checked seem rather suspect, given the boom in "for sales" I've observed.
For instance, I'm not sure I buy this inventory graph for Sonoma; it doesn't track what I see:
http://tinyurl.com/9cf7j

Btw, I don't think we'll see real inventory until Joe sixpack investor realizes the spot they're in (Spring '06?)

The sales price to list price ratio is still very high. With the incredible appreciation, it makes no sense to wait.

Huh. If you look around at Sonoma real estate, you'll notice plenty of "price reduced" signs. Of course, to any realtor, NOW is the time to buy--despite the obvious.

I’m not seeing an inventory graph. All I’m seeing is a sales volume graph. If this Realtor bothered to put in an inventory graph, the situation would look increasingly questionable, though “record inventory” is admitted in the text.

Ah, did I misread that "red line" as inventory? Perhaps that explains things...

I have no doubt that some major fudging is going on with regards to RE stats in the Bay area in general, and Marin in particular.

We have a ton of anecdotal evidence of chicanery going on in Marin, including back & fro 1031 transfers, unlisted private listings, MLS manipulatoin, und so weiter. In fact, one of my agents up here just showed me 2 more "private listings" last weekend in Larkspur. These were both empty houses which she said probably won't list publically because the owners are "looking for the right buyers". Isn't all this stuff illegal? Does anyone even care, for crissakes.

As to price stickyness: the thing to remember about sticky prices (in this case downwards), is that prices won't ultimately fall any more than if they were smooth. It's kind of a herd mentality or rubber-band effect. The only thing that sticky prices imply is a greater risk of overcorrection, and a much shorter time-period during which rapid price changes occur. Most things aside from commodities and energy are at least a little price sticky. It just happens that RE is very price sticky.

P Chechele,

We did the same thing in April. We sold our home on the Peninsula for a good, but not great appreciation. We've now banked the gains from that and our 2 previous peninsula homes and we're renting an almost equivalent home for half our PITI. We hope to buy in sometime in 2006, but that's wishful thinking. We can wait as long as we have to, within reason. By the way, our home took us about 45 days to sell, and we only ever had one serious offer, but the MLS on our home never showed more than 15 days on market...you can figure out how.

Just be sure your wininngs are inflation protected and safe. We used a combination of TIPS, Treasuries and CA Fed/State tax free bonds. Vanguard has some good options, as do other big funds.

***Not investment advice, unless you chose to do the same of your own free accord.***

"Looking to buy back in around May 2007 when I hope to find a good buy in better neighborhood."

I think you're sitting very pretty.

In fact, one of my agents up here just showed me 2 more “private listings” last weekend in Larkspur. These were both empty houses which she said probably won’t list publically because the owners are “looking for the right buyers”. Isn’t all this stuff illegal? Does anyone even care, for crissakes.

Just curious, but how does this work in the seller's favor? Are they trying to imply exclusivity with a "private listing", and somehow justify a higher price? Doesn't that also limit the pool of potential buyer traffic?

That strategy actually works quite well in Monopoly. Too bad it won't in the real world.

There will be many who will be forced to sell at the buyers price.

I still think house prices will be sticky in this down cycle. Sellers will attempt to hold out, and some will indeed do so if they have enough wealth and/or equity. I know quite a few folks who can easily afford their McMansions, have over 50% equity in their 1M+ homes, have ample savings, and are sitting on ARMs for the rates. They would have no trouble refi'ing into a 15year fixed, even at a much higher rate. These people won't sell for a loss because they don't have to. They'll instead reorganize their lives a bit.

This will probably hold up prices for a short while, until those on the lower end--those who really can't afford their homes--get caught by the waves of forclosures and panic selling. Remember: in a herd you don't have to be the fastest runner to avoid being the lion's dinner, only faster than the slowest in the herd. (ok, not sure how that fits, but I wanted to use the metaphore anyway cause I like it so much)

Just curious, but how does this work in the seller’s favor? Are they trying to imply exclusivity with a “private listing”, and somehow justify a higher price? Doesn’t that also limit the pool of potential buyer traffic?

It seems counter intuitive, because one would think the house would sell faster with more traffic. Best I can guess is that the prices are so out of whack that the owner would rather sit on an empty house for 6+ months and get their price rather than sell earlier at a discount. Actually, at current rates, a quick calculation supports this theory; the price premium wouldn't need to be much to clear the lost TVM. I get the feeling that these homes are 100% owned or investment properties. One I saw was just completely remodelled and updated--quite extravogant inside. The agent said it was a rental previously, and the owners had decided to finally sell it (but they would only sell to a "special buyer" who they thought would appreciate it).

Perhaps this is why the “days on market” listings are being hidden more often lately. The stigma.

Hidden--unless you happen to live down the street and know full well what's going on!

The problem with the measure "average time on market" is that it is a lagging indicator by many months, at best.

The problem with "months of inventory," is it has to be based on the instaneous rate of sales. Consequently, if sales are dropping at a precipitous rate, then "months of inventory" at any given time may be a very deceptive number. Further, if sales hit a particular high or low, then the "months of inventory" is going to ramp up or down in response.

In the end, the best measure would be one that indicates the direction of the market at a given moment in time.

I've offered the rate of change of inventory as a good measure. Any other thoughts on other measures?

Best I can guess is that the prices are so out of whack that the owner would rather sit on an empty house for 6+ months and get their price rather than sell earlier at a discount.

While it's been true in the past, it will be interesting to see whether sitting for 6 more months will get the "right buyer, right price." Of course, nobody in Marin needs to panic sell, do they? At least not yet...

"Sounds good, if set against seasonal norms, and seen in the context of recent past AND distant past."

I'd suggest YOY %change in inventory. It accounts for the 12 month market and removes seasonality as an issue.

This, IMO, yields a nice weather vane.

Perhaps the buyers fall for the price more often when there is no obvious way for the buyer to see that nobody else is interested. Keeping the house a seceret, removes the chance for buyers to see how long it has been on the market also. Then a buyer might be more easily led to believe that he or she better snap it up “before anybody else sees it” when in reality they have no way of knowing if anybody else HAS.

Interesting theory...If true, perhaps they're hoping for some out-of-town buyer who isn't clued into the local market? (the greatest fool) That's my only explanation for someone buying a condo down the street for $950K.
OTOH, I'm sure more savvy buyers have come to similar conclusions as Randy H, you or yours truly. Despite whatever tricks realtors can muster, it will be increasingly hard to fool people on the realities of the market.

I dont see why it would be illegal to sell your house privately, as opposed to openly

I'm not sure about how fair housing laws work either. I'd guess that private sales wouldn't be a problem so long as you were fair about considering buyers. But, how would this be verifiable if the listing was never public in the first place?

Regardless of the legality, can't the agents lose their licenses over this? It's not that these are actually private owners selling and buying in private contracts; they are using agents. It's just that the agents are choosing to privately solicit buyers. I'd think the CAR would frown upon this for a variety of reasons. Then again, even if you went around getting every agent you found doing this kicked out of the association, it would only serve to waste a lot of your time and it wouldn't correct the market so long as there's an ample supply of similarly minded agents.

I’ve both sold and purchased numerous “pocket listings” before, and probably will again. There are various reasons why one would not wish to list ones property on the MLS.

What legitimate reason(s) besides trying to get a better price or discriminating against potential buyers? I'm not saying there aren't legit reasons; I just don't know what they might be. As to pocket listings, I know we had a Coldwell agent back in 96 who said she wasn't allowed to do such a transaction for a home we wanted to buy on the Peninsula. Was this just company policy perhaps?

...pocket listings, not as clear as Mr. Sideways would have it...:

Apparently they _are_ illegal in CA unless there is a written, retained record from the seller requesting/demanding that the property not be listed on MLS. This record is subject to inspection resultant from any discrimination claims, and must be retained by the realtor and the seller. Further, failure to list on MLS is explicity a violation of CA MLS Board rules, and theoretically can result in an agent's suspension from MLS access. (I love FindLaw and the Columbia University integrated online library system)

Aw, your name calling really hurts my feelings. I take back my offer.

Sorry, I can't keep track of all your aliases. No offense intended, Mr. ____

How far do people think houses will drop in the bay area? 25%? More!?

Another way to approach the issue: how far do prices need to drop until they're supported by local economics? I would daresay we've diverged from those fundamentals since '99. But since I think prices are so far out of control it's hard to how much % drop without sounding a little foolish.

Personally, I think we'll know more about inventory (and the inevitable correction) when the investors get scared. And frankly, judging from the Bay Area stats I've seen sofar, I don't think most of them are breaking a sweat.

"But since I think prices are so far out of control it’s hard to how much % drop without sounding a little foolish."

I will risk sounding foolish (I do every time I open my mouth ;-)) and guess that prices in the BA in general will drop 30-40% in the next five years. But given how long the market has defied all common sense, I also wouldn't be surprised if there were no significant drop at all. That's not very helpful though...

"excluding Novato) perhaps only 10 per cent over 4 years"

Total ignorance here: what about Novato makes it less desireable? Is it just that it's further from SF, or something else?

"I wouldnt be surprisd to see Godzilla come over Mt. Tam at this point either…."

LOL. I'm thinking that might negatively impact Marin's many PIB's. ;-)

"Look inflation has even hit playboy! lol."

One wonders if pornography is considered a contributer to core-inflation...

Cheers,
prat

Total ignorance here: what about Novato makes it less desireable? Is it just that it’s further from SF, or something else?

I hear the town often mentioned in disparaging terms; I'm sure we could suspect why (mixed ethnicity perhaps?)

Marin County (excluding Novato) perhaps only 10 per cent over 4 years.
Do you mean across the board, or specific properties? If S. of Novato drops only 10% in 2 years, the beer's on me.

"The first cut of the sword can be so painful…"

It's a bit frightening that they talk about grandfathering in existing tax structures however. Then, indeed, those of us who were unlucky enough to have not bought in the late 90's early 00's will have missed the boat. Or, at least, a boat.

For what its worth, I think prices will be less sticky in this housing bear market simply because there is so much speculation. People can sit on houses when they own them, or are renting them at something approaching break-even. But if they are sitting empty houses/condos or renting at a large loss, people are eventually going to just sell, damn the torpedos. This will be especially true when the reality of declining prices hits and when banks tighten lending practices right as people start refi-ing the teaser loans they took in the early 00's. All of this is fairly standard bubble head boilerplate.

So... 50% DROP BY JANUARY! Or, more realistically, I think prices will be down 10-15% by next summer, and will continue downwards over the next few years until historical averages are reached. Peak to trough, I would guess 30% inflation-adjusted corrections on average. In about six months I think will be able to definitively look back at summer 05 as the peak, with Peter the sage having called October correctly.

Now, on the other hand, please bear in mind that I'm a moron.

Cheers,
prat

Science is concerned with trying to make sense of the physical world. Understanding the world, trying to make sense of it. In the America's for instance we know that the cultures are young, why?, because there are over 1000 psycho active plants in use by the natives (Jack, book your tickets now :) I kid I kid), why?, because they need them to talk to the gods. In the Western world we long ago abandoned these things, (well not the 1947-1960 crowd) in favor of mathematics. Science is still however based on trying to understand, now through math, the physical world. Ok, let me ask you this, what is more difficult, climbing the mountain or coming back down? So why the fuck would real estate not have an amazing plunge after it climbed such a large mountain?

I am thinking of setting up "headventure tourism" outfits to the Amazon, complete with porters toting 75lb sacks of Doritos, to take advantage of all the psycho active compounds.

Do you mean across the board, or specific properties? If S. of Novato drops only 10% in 2 years, the beer’s on me.

If South Marin drops that much, then I'll move to Novato (since it will drop by twice that and there will be a lot less gridlock in San Rafael 101), and the Congac's on me.

For what its worth, I think prices will be less sticky in this housing bear market simply because there is so much speculation.

Just for reference, I think we are in the "sticky" phase right now. If house prices weren't sticky, then they would already be pricing in alot more of the expected downturn.

Now, on the other hand, please bear in mind that I’m a moron.

Not a chance. You're one of my favorite posters, so that would mean that I must be an idiot; which objectively cannot be (lol).

"Just for reference, I think we are in the “sticky” phase right now. If house prices weren’t sticky, then they would already be pricing in alot more of the expected downturn."

Good point! Indeed, it would difficult to recognize the sticky when you're in it. It's funny, looking at RE data plots in 6 mos, we might look back to jul-october timeframe & say: "Ahhh, back then we were in the sticky; now we're in the freefall."

Further, regarding The Sticky: PERHAPS something keeping it sticky, & continuing to keep it sticky for (?) months, is the relative spotlight on rising interest rates. Although the Fed has been tightening for quite a while, I think Katrina really served to publicize this a bit more...since there was some controversy regarding the move to continue rate hikes. Since then, there has been nothing but hawkish remarks (from the Fed et al) regarding the need to control inflation aka rising rates.

My point? In light of this spotlight on rising rates, more people who've been considering buying are looking seriously at buying now...especially with long term rates rising at a higher rate lately. So I think these buyers will continue to propagate The Sticky for a little while...but we all know with high ownership levels (60% in Cali, 70% nationwide), and with tightening lending standards, there is not an endless supply of said buyers.
Oh, and by the way, The Economy's Not Making Any More Buyers (R).

Nothing WRONG with Novato ,it just gets a bit of the snob treatment from the rest of Marin, thats all. (And I am not aware of any “ethnicity” issue whatsoever)

For the record, I would agree. Conversely, I find some places like Tiburon or Ross a bit of a turnoff. Just passing on some comments I heard about "ethnicity" (struck me as rascist), as a possible explanation when some turn their noses up at Novato.

I’ll take you up on that Kurt, just for fun.
Cool...it's all in fun, right? (Just in case I sound too serious in my predictions).
If Marin never drops, I suppose it means we'll have more equity when we finally move.
Cheers either way!

"Actually, a realtor, who is an agent of the seller, is not at liberty to disclose how many days a house has been on the market, as this might lead a buyer to believe that the seller would accept an offer below the listed price."

ScottC, given your adamant insistence that the price is determined solely by a buyer and a seller agreeing on a price, and that both parties have the prerogative to NOT buy, or to NOT sell, if they don't think the price is fair, I would think that you would think this "rule" is complete & utter bull$hit. Do you think differently? It would not seem consistent to me, but I may not be thinking about it right (?).

OX, that's an interesting read; thanks for the link!

Excerpt:
"What is not debatable is whether the rate of home equity extraction will revert to the mean rate of about zero, from the current rate of more than $250 billion annually. It will. "

Jack and KurtS, thank you for the explanations. I've had Novato on my radar screen recently because of the warmer weather and more "affordable" (heh) houses. Nice to hear a little more from a local's perspective.

Jack is a bear that lives in Marin. Not a housing bear, but an actual bear, a honey loving, bee hating bear. Don't trust him, as he's about to go underground until spring, at which time he'll venture out an proclaim, INTANGIBLE.

One wonders if pornography is considered a contributer to core-inflation…

Grooooooooooan. I can't believe this passed without comment. Goofball.

Interesting timing btw. Aren't vice businesses like porn/booze etc. supposed to do well in a lagging economy? Seems Playboy is maybe planning on doing more business soom.

SQT, funny you should mention.
Just the other day I was at 7-11. The guy in front of me, middle aged w/sagging "say-no-to-crack" jeans & wifebeater tank top, plops down a porno magazine...$9.59 (had no idea it would've cost that much...honestly!).
The guy behind me, elderly--probably around 70'ish--requests one each of the whole front lineup of lotto tickets...you know, the rolled up tickets under the glass window on the checkout counter. Made me a little sad.
Oh, what about me, the guy in the middle--what did I buy? 6-pack of beer.
So there you have it: vice-vice-vice...Trifecta!
I just thought it was an odd sequence...but maybe I don't frequent 7-11 enough to know.
Perhaps vice sales should be a leading economic indicator. :)

SJ_Jim, sorry but I'm losing a bit of respect for you, living in San Hosebag and you go to the 7-y and don't buy a fotay (note: this means a 40oz screw top bottle of malt liquor, it gets your jimmy quicker) and nachos? Jim, Jim, Jim, where did it all go wrong?

surfer-x, long gone are the days when I indulged in the fotay...probably not since I spent a hellish year in beautiful riverside california (one positive about riverside is that the receding smog on occasion provides for very nice sunsets... kind of like after a volcano eruption). But don't get me started on riverside.
Just so you'll respect me less...the 6-pack was [gasp] Newcastle. Alas, not to be found in a fotay; a 22, maybe. [ponders: what does it mean when 7-11 carries Newcastle?]