patrick.net

I feel your frustration.

Basically _most_ people who bought in the last 10 years can't sell, b/c they are underwater and they don't want to take a loss.

So where is the 'supply' going to come from?

_may be_ banks will trickle some shadow-inventory?

Strange market indeed!

What I am hearing from the Realtor I'm working with is that tons of people are basically stuck. A LOT of them bought during the bubble and in many cases their houses are worth 30%-50% less than what they paid. So they are sort of stuck more or less.

Sure- there's "Pent up demand", but that doesn't necessarily equal more sales seeing as how a far smaller percentage of those who want to buy can as they could in 2005 now due to much greater, stricter credit and financial requirements. That's the rub: TONS bought in 2003-2006 with crappy credit and little wiggle room and now TONS can't sell, thus there is less inventory overall. That doesn't mean that suddenly everyone now somehow has more money and homes are gonna' go right back to 2006 prices...

1sfrenter ,
Have you thought of looking somewhere else other than SF? I have friends that live there who are also looking and it sounds absolutely nutty over there. To me there is SF and the Peninsula... and then there's everywhere else. We're not even considering SF or SV as its basically out of our range entirely.

I'm going throught he same thing in the East Bay.

I've made 5-6 offers in 2012... All multiple offers, all well above asking. My offers have been in the $20K above asking price range and I am being told I was not even in the ballpark.

Things weren't all that different last fall. Bidding wars have been going on at some level for the last 3 years - I recall seeing stories in 2009 of dozens of offers on certain SF properties. It's not like the market was totally dead from 2009-2010 because it wasn't -remember the tax credit frenzy/incentive to buy? One problem is you are looking at what is traditionally the busiest time of year.

spring/summer is sheep shearing time in RE

At least wait until the fair weather 'must buy b4 school starts' buyers are gone (sept/oct)

edvard2 says

TONS bought in 2003-2006 with crappy credit and little wiggle room and now TONS can't sell

I would say that anyone with "crappy credit" or not enough income to afford their home already foreclosed long ago. I do know a bunch of highly paid upper middle class dual income professionals who bought in 2004-2006. I'd imagine another HUGE leg down in housing would make this round of buyers seriously consider strategic default. They already feel manipulated and cheated.... so while the sub-prime mortgage crisis is over. If home prices are allowed to fall another 40% like some are calling for.. We'll have an entirely new crisis on our hands... the strategic default crisis.

Only in opposite land.

A "normal" market is one where if price fall for whatever reason, supply decreases, and demand increases to get back to equilibrium.

With leveraged assets, and specifically in this housing cycle, this dynamic can be an unstable one. Once assets fell to a point where a certain number of owners were "underwater", the psychology of it all turned "normal" supply/demand economics on its head. Price drops caused more people to hand the keys to the bank, and frightened more people away from buying (supply INCREASED with lower prices, demand DECREASED at the same time).

Nasty spiral down that is tough to break.

However, once the supply of distressed sellers goes away in a particular market (the number of homes is finite, after all), you would expect to find very few willing sellers at the bottomed market prices, a firming of prices, and then a flood of people coming back to the market as they feel better about buying, with evidence of pricing having hit bottom.

The snap back of prices could be vicious in the markets where distress has been sufficiently reduced. Seems like we are seeing it real time in SF and Phoenix so far. I fear judicial states haven't cleared their distress enough for a snap back to be sustained (so I'm not convinced that places like Miami have turned a corner). Which market is next?

Rental Watch says

The snap back of prices could be vicious in the markets where distress has been sufficiently reduced. Seems like we are seeing it real time in SF and Phoenix so far.

Are you suggesting that prices will "snap back" to 2006 or 2007?

san diego is hot as well

rowemoore says

Are you suggesting that prices will "snap back" to 2006 or 2007?

I am not suggesting that prices go back to 2006/2007 (or anywhere close, especially in areas with lots of land available), but they need to go back to prices that support the development of new homes, and they are not there right now.

It costs a lot of money to put in the infrastructure for a subdivision (it's $4 gas driving those earthmovers), pay building permit costs, build a condo building, etc. Until you see prices support the development of additional land for the construction of new homes, supply will be limited, and prices will rise.

Also perversely driving this is the fact that non-judicial states will lead the way (also in new construction jobs, etc.). Judicial states I fear will be a mess for a while longer. So, as long as judicial states are a mess, the Fed will keep rates low, which COULD cause any price increases to go on for longer in non-judicial states than they would if there was such a thing as a Federal Reserve Bank of Arizona setting rates for that particular state.

So what is traffic like at the few new developments that are going up these days? Are buyers camped out the night before a new release like they were back in 2004? If demand is so great all of the sudden, is construction going to go through the roof? Or are new homes still priced too high relative to existing?

Rental Watch says

It costs a lot of money to put in the infrastructure for a subdivision (it's $4 gas driving those earthmovers), pay building permit costs, build a condo building, etc. Until you see prices support the development of additional land for the construction of new homes, supply will be limited, and prices will rise.

May I introduce you to the future of home construction?

http://news.cnet.com/8301-17938_105-57389515-1/ikea-designs-$86500-prefab-house-instructions-included/

Seriously, pre fab housing was gaining lots of steam until the crash. The advantages of building a home in a factory are huge - both in cost saving and quality of homes. They can be super energy efficient.

This may not be right around the corner, but the day when robots build homes in factories is closer than most realize.

Glad the buying window is over, no can afford, but obviously investors can, and that's what housing has become in many ways, something for investors to make or lose money on.

tannenbaum says

So what is traffic like at the few new developments that are going up these days? Are buyers camped out the night before a new release like they were back in 2004? If demand is so great all of the sudden, is construction going to go through the roof? Or are new homes still priced too high relative to existing?

I spoke to a guy yesterday who said one subdivision in Phoenix was seeing more than one sale per day...this is raging, "good" sales at a subdivision is 1 per week. Traffic is up to some subdivisions in CA from what I hear as well, surprisingly strong demand in subdivisions in places like Manteca. I hear of wait lists at some subdivisions in Reno, not yet camping out.

These developments are moving forward because the builders either wrote their land down to low values, or bought it distressed at prices less than replacement cost. This allows them to compete with resales when building a new home.

Once this inventory of cheap finished lots (ie. infrastructure, roads, curbs have been constructed already) has been built on, there will not be significant numbers of new lots developed until prices rise to a level that supports the cost of development.

In sum, I actually think that new construction will go DOWN for the near term (dwindling with the supply of finished lots) until there is an uptick in home prices sufficient to justify the development of new land. Once you see new lots being developed in your market, I would assume that the trajectory of home price recovery will flatten out from there.

Rental Watch says

I spoke to a guy yesterday who said one subdivision in Phoenix was seeing more than one sale per day...this is raging, "good" sales at a subdivision is 1 per week.

I would like to know where this is. Could you share this info?