patrick.net

robertoaribas says

My point is the following: Inventory is low, prices are rising. those are what we call FACTS.

Greg's proposition is that "maybe inventory will rise causing prices to fall later" is what is called pure speculation.

Greg,

It pains me to say this, but Roberto is correct. What you're doing is pure speculation. Ironically, I agree with your speculation. For the housing market to fully recover, two additional indicators must also turn up. Those are unemployment and interest rate. In fact, interest rate has steadily declined while home prices were increasing this year, and unemployment has remained stagnant. In my opinion, the increase in home prices YTD was due to the lack of inventory, lower interest rate, increased in rental cost, some people are somewhat more confident about the economy or their job, some are afraid that they will miss the boat, and some are just ready to get off the sidelines.

I agree with you that home prices will drop when we add more inventory on the market. However, there is that time lag and it takes a while for the inventory to build up so we have time to get out by pricing the property 5% below FMV as suggested by Roberto in another thread. Selling now might or might not make sense because we don't know how the housing inventory will look like in the next 6-12 months.

StoutFiles says

1) Investors.
2) Lower class to Lower-Middle class families living month-to-month.

Both lower the value of their respective neighborhood.

BANG all explained right there and the "dryer cycle" comedy of this is that both groups THINK they are getting a deal!

robertoaribas says

I could probably make a cool fortune just doing the opposite of every piece of advice from you forever!

the good time to sell was 2005 and 2006... Of hey, that is when I sold! funny how that worked out!

You do what you believe in. It's your life.

An attitude of an average man with no ideas or drive is that there is a shortcut in life, that just buying a few properties and renting them somewhere will lead to riches.

But life isn't that way, there are no shortcuts. Those of us who worked and built a business are rewarded for fruits of our labor. But others, permanently looking for shortcuts, end up in a trailer home sitting on a piece of land they can't flip waiting all their life for a wealthy millionaire to fall out of the sky to buy their piece of crap real estate for millions over asking.

Darrell In Phoenix says

ELC says

his offers were either ridiculously low cash offers

Clearly, the house is only worth the amount of those offers.

I was staying at their house so I did every single showing. The offers were from investors that I'm sure needed to add in rehab and profit. Most were ignorant dirtbags. Waste of my time. The other offers were people who could only afford 3.5% down. Out of 12 written offers not a single offer was conventional financing. It sold at the asking price which was the same price as the appraisal. Every credit report I looked at had chargeoffs including the one that bought. They even got some special loan that helped pay the downpayment. It amazed me what FHA was willing to finance. The seller paid the closing costs so a buyer with two charge-offs and no credit granted to them for two years got an almost zero down FHA backed mortgage. They even had to remove the spouse because of his bad credit so it wasn't even joint.

Darrell In Phoenix says

And the truth that Greg is misrepresenting is that housing demand is at 15 year lows and falling.

And housing demand is at 15 year lows because everyone knows it's overpriced.

Home sales here in the Bay have continued to rise year-over-year. That's a marginal increase in demand in the face of a 60%+ drop in supply.

http://dqnews.com/Articles/2012/News/California/Bay-Area/RRBay120815.aspx

E-man says

Selling now might or might not make sense because we don't know how the housing inventory will look like in the next 6-12 months.

I don't disagree. We do know that there won't be more foreclosures on the market because NOD's are still continuing to decline across California. But fewer foreclosures only partially explain the extreme drop in inventory. Sellers holding out to see what happens next make up the remainder. And those sellers could act quickly if the rally begins to fade.

And, let's be clear... I'm not calling the absolute top. I agree that there will generally be some drift upwards even if inventory begins to build. I've made that case myself earlier in this discussion.

StoutFiles says

gregpfielding says

Demand is elevated right now because of 3% mortgages and herd optimism that prices will continue to rise.

Herd optimism? The majority of home buyers are

1) Investors.

2) Lower class to Lower-Middle class families living month-to-month.

Both lower the value of their respective neighborhood.

The majority of people that make money and have the resources to pay off a 30 year mortgage are pessimistic about the economy. They are still on the sidelines waiting to see what happens with the job market. Ignore all that "prices are rising now!" bullshit, all that matters is if the jobs are coming back and at what salary. Jobs will make or break the housing market, not seasonal trends.

Agreed.

robertoaribas says

Greg's proposition is that "maybe inventory will rise causing prices to fall later" is what is called pure speculation.

I agree with you Rob. But I disagree that it's a bad thing.

Yes, Andrew and I are speculating that this recent rally has the potential to fade and that selling this fall may end up being a good move for a lot of sellers.

I owned a home in Modesto in 2005. That September, it was obvious that the market was beginning to change. In October I put of up for sale and we closed in December. While it's true that I possibly could have made an extra $5,000 or $10,000 if I put it on in January, I have zero regrets and am thankful to this day that I sold it when I did.

Every home, neighborhood, and situation is different. We're in a frenzied Seller's market right now... just like 2005. If you have been holding off all year to list your home, now is a good time to consider taking action.

StoutFiles says

The majority of people that make money and have the resources to pay off a 30 year mortgage are pessimistic about the economy. They are still on the sidelines waiting to see what happens with the job market.

The majority of pat.net contributors I'm sure feel that way. But I hear from potential buyers every day and they are overwhelmingly worried that the market is taking off again and they don't want to miss out this time around.

Here in the Bay Area anyways.

Darrell In Phoenix says

WRONG

Sales and demand are down.

Nice try though.

Darrell, here are the actual numbers for Bay Area counties. I'm not exactly sure what your chart shows... For July, SF sales were 27% higher than in 2011.

gregpfielding says

overwhelmingly worried that the market is taking off again and they don't want to miss out this time around.

Sounds exactly like realtor propoganda during the bubble. People who listened to realtors then got financially wiped out.

gregpfielding says

I agree that there will generally be some drift upwards even if inventory begins to build.

I think we're all saying the same thing, but just disagree on the time frame of selling the property. An additional 10% upward from here or 10% downward, especially for San Francisco & the Peninsula, is a lot of money.

Believe me, I have been contemplating on selling a couple of my rental properties where they have appreciated over $100k since I bought during this mortgage meltdown. But then what? Where do I put the money to work after the sales? I don't want to 1031 into other over-priced RE. I've been looking to trade up to 4plexes, but nothing is making any sense around here.

So I guess I will refinance and pull out some more cash from the rental properties and keep my minimal positive cash-flow while the tenants are paying off my mortgages. Since I don't have any skin in the game after the cash-out refi, I'll let it ride. Believe me, I've analyzed the bejesus out of the situation.

Cheers. :)

Darrell In Phoenix says

Given the fact that you're a realtor and all the questionable practices that are involved, post a link to verifiable data.

http://dqnews.com/Articles/2012/News/California/Bay-Area/RRBay120815.aspx

E-man says

Since I don't have any skin in the game after the cash-out refi, I'll let it ride. Believe me, I've analyzed the bejesus out of the situation.

I would do the exact same thing. And, this also makes my point... there are thousands of owners just like you, who are "letting it ride" as long as things are good.

What worries me is that as soon as social mood begins to change, as soon as there are any cracks in the current optimism, there will be a mad-rush to the exits.

Darrell In Phoenix says

Your link shows MoM sales down and doesn't include August. August sales plummeted.

Sales always fall seasonally in July. I'll put some stats from the MLS up here in a bit.

Here's a quote from the DataQuick:

"Home sales in the Bay Area rose on a year-over-year basis for the 13th month in a row in July, the result of increased mid- and up-market buying activity. The median price paid for a home was the highest since August 2008, a real estate information service reported.

A total of 8,461 new and resale homes were sold in the nine-county Bay Area last month. That was down 1.4 percent from 8,577 the month before, and up 22.9 percent from 6,887 for July 2011.

The decline from June is normal for the Bay Area summer season."

Darrell In Phoenix says

The issue is that sales volume began falling in July and accelerated in August resulting in a YoY decline of 3.8%.

Darrell, you are right. Here is data from my MLS - Alameda and Contra Costa counties. Every month was higher on 2012 until August, which showed a pretty healthy reversal.

All the more reason to consider the whole point of this discussion: this Fall may indeed be the best time to sell (or close enough for most of us)

Darrell In Phoenix says

Given the fact that you're a realtor and all the questionable practices that are involved, post a link to verifiable data.

I just posted this at Bay Area Real Estate Trends... some of us realtors are actually trying to give good advice.

And I gave you credit.

http://bayarearealestatetrends.com/2012/09/12/is-buyer-demand-fading/

gregpfielding says

I would do the exact same thing. And, this also makes my point... there are thousands of owners just like you, who are "letting it ride" as long as things are good.

What worries me is that as soon as social mood begins to change, as soon as there are any cracks in the current optimism, there will be a mad-rush to the exits.

Greg,

Why sell when we don't have to? We don't mind if the market dropped 10% or 20%? We have essentially locked in 4.5% fixed interest rate on the property for the next 30 years. If rent dropped 20%-30%, we still haven't lost money yet. Why sell?

The housing supply in the lower-end, sub $350k and I might argue up to $500k for the Southbay is locked in by investors until the next market top. Therefore, I would argue against the rush to sell when supply is building up. Above $750k, I might agree with you. $500k-$750, eh????

At the end of the day, I think we agree more than we disagree.

Cheers.

E-man says

At the end of the day, I think we agree more than we disagree.

Agree.

Agree with Greg.

The Summer rally has ended in a lot of metros. In OC, we're back to early 2011 pricing. So it was a bigger rally than expected mostly because of low inventory. But it's sputtered badly and I expect to see the Case Shiller to be reporting declines for Q4.

APOCALYPSEFUCK is Shostakovich says

It's never been a better time to plant yams.

See, this is what I like about you APOCALYPSEFUCK. You used to religiously push potatoes-potatoes, and then more potatoes.

But, then -- showing what a level-headed reasonable person you are -- when you heard a good argument on how yams are superior, you were able to listen with an open mind, see reason, and change your once tightly held views.

Kudos, to you sir. The world would be a lot better off if more people followed your example!

Just speaking anecdotally, in San Diego there seems to be less inventory, higher asking prices and more competition for comparatively good deals. I could see how people who were waiting to sell would jump in now after seeing it like this for 4-5 months. The question is, will demand keep up with supply if this happens? And the shadow inventory still exists, it's just turning into a heaping, rotting mess.

yams are nice, but potatoes are better for beaning RE agents with when come a knockin.

Where's my pen! LOL

"If you’re looking to buy, it’s really time to get going. ”Well, I was thinking about maybe calling a lender to see if I might qualify…” Nope! Call! If you’d like to buy in this market, get your pre-approval in hand, get your earnest money deposit funds into your checking account, find an excellent buyer’s agent who will represent you fairly and effectively…then get in the car and go! By the way, bring your pen."

Andy Blasquez ~ The last Realtor you’ll ever need to look for.

http://bayarearealestatetrends.com/2012/09/12/very-few-homes-for-sale-in-brentwood-ca-as-home-prices-continue-to-rise-quickly/

During the original bubble-burst, it seemed like northern california lagged behind southern california by about 6 months or so. The market seems slower in SD and OC than in the Bay Area so far.

Will be an interesting Fall and Winter.

E-man says

We have essentially locked in 4.5% fixed interest rate on the property for the next 30 years.

You're saying that as if it's a good thing. You just married your house for 30 years. I hope she's not ugly and is free of disease.

Like a moth to a flame.

Unless you plan to not be in a position to refinace in the future the worst time to buy is when interest rates are low.

It is a question of market timing, the OP is speculating that inventory will increase because prices have increased enough in SF. This increase in inventory will put pressure on prices, so sell now before that happens. This is a reasonable supposition but of course may not be true. I would *guess* given the psychology of home owners in SF that they wont take Greg's advice hoping, and not without reason, that prices will continue to rise. Bubble psychology is alive and well in SF. Will it burst in SF? Without an economic catastrophe I kind of doubt it. Prices may well flatten to what the market can bare, which in SF is quite high. I would hate to be looking to buy in SF. I think it is a unique market and reflective of some but not all areas in the Bay area.

More homes sold than for sale?

ELC says

Can someone tell me how there can be more homes sold than for sale?

For Sale is a shapshot on a day. Here, the 12th. Sold means over a month. Was the norm in a lotta places from 2003-Spring 2006.

badraig says

Sounds exactly like realtor propoganda during the bubble. People who listened to realtors then got financially wiped out.

Lots of them believed their own propaganda and got wiped out too. In 2006 I had an active email list of 100,000 Florida Realtors. Three years later over 70% of those addresses were bouncing.

gregpfielding says

But I hear from potential buyers every day and they are overwhelmingly worried that the market is taking off again and they don't want to miss out this time around.

It's that way in South Florida too. The newspapers are full of bullish press releases (as always). The problem is here they're finding out on the first offer they make how hard it is to get approved for a loan and how hard it is to get the property to appraise for the asking price. How the hell are people over in CA getting these huge loans?

Chart is right here on this website. Scroll down a bit.
http://patrick.net/?p=1211412

Call it Crazy says

I guess you weren't born yet back in 1988..... go pull some charts from 1988 to about 1995...

2008 was the first time anything like this has happened in RE since the great depression, it won't happen again.

I'm in the North Bay (Marin) and closed on our first house since moving here October 2002.

For all that time we were renting and for most of that time miserable...but our bank account loved us for the decision to stick it thru.

I've been fortunate to have an increasingly good income 2007 thru today so we began looking in earnest in January 2012 for a home once our lease ran out in mid-July. It was DEPRESSING. There was much less inventory than we ever saw in our 10 years of casually perusing the market.

The trough to buy in the North Bay was 2009-2011....due to restricted inventories, there was multiple bids offered on the first two houses we wanted to buy this year. We finally got the 3rd house, as it turned out the best of the bunch, but it ended up costing us about 5-7% more than we thought we could've gotten it for in 2011 (it was for sale then, too)

Like Greg, I think it a GREAT time to sell a home in at least close-in San Francisco Bay area today. You have less to compete with than in many years.

It ended up fine for us as we ended up getting a 7 year 0 points loan for 2.9%. So, tho we may have paid 5-7% more than last year for the same home, we are paying less monthly because of the lower rates this year. We have the savings to buy the house outright (we rented and saved all those years!!), but at 2.9% it's simply not smart to use your own money to buy these days.

Given the economic headwinds the US is riding into - no country can simply fluff off $55 trillion in National, State, Municipal, Corporate and Personal debts without major financial harm - this may be a high point in housing for some time to come.

robertoaribas says

your next paragraph shows you for the insulting jacktard you are... Being a longterm investor hardly counts as "looking for shortcuts", but if that's the best you got, go on with it!

Oh but when you insult others that's totally fine? You know where you can stick that double standard bs of yours buddy!

Expensive SFR's are going to drop in price over the decade. Old folks are either dying or downsizing. Interest rates don't have room to go down, and will have to be going up.

This is going to be a decade of a slow decline in expensive housing. Low end, cheaper inventory, don't know. But expensive stuff is going to go down.

Cash is going to be king for a long time in this industry.

Look - there is INFINITE room for int rates to go down.

What is more likely to happen:

1. Fed reserve raises rates or leaves them at 3% mortgage level and 'the world ends', RE prices crater, stock market tanks, riots in streets

2. Fed reserves continues to buy all mortgages/lowers rates to 2% then 1.5% then 1% for the next 20 years and RE prices go up - stock market goes up - cities get enough income to pay cops, no riots.

Easily its #2. They have PROVEN they can make prices go up despite there being no jobs and huge defaults and huge inventory of non payers squatting. Fundamentals did not matter in CCCP and they dont here in US now or in future.

Big hand of big gov only gets bigger (until collapse, then repeat). Its a looooong cycle.

Please explain how/why rates cannot be at 2% for a mortgage? easily they are already there almost.

Pocky, #2 just happened. "This time, the QE will take the form of purchasing $40 billion in mortgage-backed securities a month until the labor market improves (i.e. indefinitiely)." ZIRP confirmed until at LEAST 2015. See for yourself, the stock market got hyper-juiced in the last hour, gold and silver are up. House prices are going up as a result, at least in the SFBA where so many people receive compensation in the form of stock.

We have been driving toward that fiscal cliff. Well, the driver just mashed the gas pedal to the floor.

http://finance.yahoo.com/blogs/daily-ticker/bernanke-bazooka-open-ended-qe3-very-aggressive-says-173314037.html

Real interest rates are already negative. Cash sitting in a bank account loses its value via inflation faster than nominal interest can make up for it.

Thank you Bernanke. Hope you and your buddies in Big Finance enjoy your free money at my expense.

freak80 says

Real interest rates are already negative. Cash sitting in a bank account loses its value via inflation faster than nominal interest can make up for it.

Thank you Bernanke. Hope you and your buddies in Big Finance enjoy your free money at my expense.

We're little fish. We have to play their game, or we're going to lose. If you don't want to get screwed by inflation, do something with your money to get some yields. Where do you go and get some return on your money as well as return of your money? RE seems like a safe bet to me. Gold might go up, but it doesn't produce any income.