patrick.net

Actually, understanding the math, as the market continues to contract, the median price will actually move UP, not down. Weird huh. The problem is the word "median". If 10000 houses sold last year for 200K, the median is 200K. If one house this year sells for 220K, the median is 220k, a 10% rise in prices. Now that we all know why median is a screwy statistical measure in an illiquid market, let's see why the median is actually about to move UP as house prices decline. Think of people in Jumbo territory. That market has come to a virtual halt. People can't get loans big enough to pay for the prices the delusional owners are asking for. So only the low end homes are selling. Let's say unemployment goes up a bit. The few on the border of jumbo-conforming that lose their jobs will go "Screw this, take a lil haircut, and this place will sell cos a bank'll make this loan". And then all the homes that were hiding behind the jumbo bushes come out to play. The prices will be lower than what the owners were originally asking for, but the median home price in that area will actually rise. Using economic statistics designed for functioning markets during a crisis is like driving off a cliff and looking at your speedometer to see how fast you're falling.

angrish: Yes I agree with you. As Option ARMS and Alt-A's reset, the median will go up simply because many of these properties coming on the market are mid to upper end having been purchased by buyers with better-than-subprime credit histories in mid to upper-end neighborhoods. Although I think the median will go up, eventually it will (I think) go down simply because the fundamentals in our economy are not there to support former pricing. Jumbo loans aren't being made, generally as before. So up then down.

Agreed. See how the media plays the first "up" move though. It'll be quite a spectacle.

The math isn't what is confusing. What is confusing is how everyone supposedly has no money, banks aren't lending, etc. etc., yet every listing of houses that I look at has a significant number "sale pending" right now and the other part of the news article comments on the number of sales which is up by a large amount. Theory (people can't afford to buy) and reality (people are buying) are not meshing.

I couldn't find the LA times article on it, but I found a few others. All the rises are in "%" m-o-m. 1 sale rising to 2 is a 100% jump, so that's says nothing. It definitely doesn't say "people are buying" in any statistically significant number. And the article I found says exactly what I said above, high-end distress. I guess the "price rises" have started. And you were right the first time. People don't have money, and banks aren't lending. It's just that the numbers are so small, that everything is noise.

From my quoted article above: "DataQuick also says 8,644 homes were sold in the region in June, the highest number in almost three years. The figure was up more than 16 percent from 7,447 in May and more than 20 percent from 7,178 in June 2008. " I'm not sure how many sales there should be in a typical market, but according to this: http://filelibrary.myaasite.com/Content/1/1403/4545338.pdf there were 10,492 in 2003 and 14,104 in 2004. Obviously, we're way off of 2004, but unless you label 2003 a down year, 8,644 isn't a huge difference from 10,492. We're certainly not talking 1 going to 2. I want to believe you are correct, it's just hard when everything I actually see tells me otherwise.

It really depends on what listings you are looking at. It is really not shocking that all of the lower end listings are getting sold so quickly. On dqnews.com, it states that the average mortgage payment on a new loan taken out in the bay area is around $1500 per month. Thats a very low number when compared to rent in the bay area. To relate that to the purchase price of a house, $1500 a month can buy you a $225,000 house with 3% down on an FHA loan. The total payment would be slightly over $1500 a month. Someone only needs to make $3600 a month before taxes to qualify if they have no debt. Not to mention all of the investors competing for these same houses which they can cash flow right away. The median was a deceptive number on the way down and it will be a deceptive number on the way up. Based on the numbers from Data Quick, the median in the bay area is now up 21% from a low of $290,000.

angrish says

And you were right the first time. People don’t have money, and banks aren’t lending. It’s just that the numbers are so small, that everything is noise.

These numbers are very insightful http://dqnews.com/Articles/2009/News/California/RRCA090716.aspx 44,167 sales in the state of California in June The average sales number in June dating back to 1988 is 50,698 The numbers are not small. The peak was 76,669 in 2004

Thanks for the numbers. There was a 3 month moratorium on foreclosures. once that finished, they got swept off the market. That number was bound to bounce. Add it up for the first half of the year. That might be less "noisy"

angrish says

Thanks for the numbers. There was a 3 month moratorium on foreclosures. once that finished, they got swept off the market. That number was bound to bounce. Add it up for the first half of the year. That might be less “noisy”

So you are saying that the moratorium on foreclosures has caused the increase in sales? I dont follow it. It seems likely to me that sales have increased because prices have fallen...Econ 101. Your comments were that people dont have money and banks arent lending but the statistics are contrary to that. Sales are up dramatically from those lows. EIther people are getting loans to buy those houses or they have enough cash to buy them without loans

Haha. What's Patnet?

Falling prices definitely contribute to rising sales. But they're not the only factor. It's like someone holds your nose and mouth closed for 2 minutes and then lets go. The next breath is bound to be bigger than it otherwise would've been. Sure, people breathe in general, but the artificial constriction caused the larger than normal breath.

angrish says

. Sure, people breathe in general, but the artificial constriction caused the larger than normal breath.

I'm not sure that makes sense. If there are less houses available, you would think less sales would occur. If I have 5 apples to sell, at most I sell 5. If I have 500 apples to sell, I would likely sell more than 5. I don't know much about econ, so maybe there's more to the story.

It's not about less sales. It's about the number of sales "in June". Say you sell 5 apples every month from Jan to June in a year. The next year, you're prevented from selling apples from Jan-May, and then sell 6 in June because people are craving apples, and since they haven't spent any money on apples all year, they have more "apple money" lying around for the month. They may be poorer in that they can no longer spend money on 5 apples for 6 months, but they can definitely spend money on 6 apples for one month. You've actually sold more in June, but the actual number of apples you sold this year are way off. And your May to June number is actually astounding. These are only m-o-m and y-o-y stats. The cumulative would be less noisy, I think.

Btw, I'm no econ major either. Just common sense, which is why there're probably a lot of holes in my theories.

I see what you are saying, but I'm not sure if the moratorium had the effect you are assuming. The inventory was actually higher in Jan/Feb than it was in May/June (at least in the areas I've been watching). The moratorium was on foreclosing obviously, not purchasing, so people didn't necessarily need to hold their breath while the moratorium was in place. On top of that, CA had its own moritorium that started June 15th. I'm not sure how that would fit into your theory. We're talking absolute numbers here. 8,600+ sold in June 2009. 10,400+ sold in June 2003. These numbers are not that far off. The bottom line is that according to news article after article: banks aren't lending and people have no money...obviously banks lent to a portion of the 8,600 entities in the Bay Area which means theory/news is different from reality. Maybe it is mostly REITs and other big companies; I don't know.

EIther people are getting loans to buy those houses or they have enough cash to buy them without loans

There are a LOT of folks who are still sitting on their bubble equities. Don't omit them as a factor. If they didn't move from CA to Austin and pay for their 500K house in cash, they are likely diving back into the market there in CA. There is no big secret. Almost no one has any money right now, unless it's funny.

Inventory was high, but with foreclosures looming, I know if I was looking to buy a house I'd wait for the 3 months worth of foreclosures to hit the market. The moratorium that started in CA on June 15th will show up, if I'm right, as a spike in Sept sales, when the 3-months worth of foreclosures hit the market. (assuming they dont extend the moratorium). The second para though, I'd still say the same thing. To make an extreme case, 0+0+0+0+0+8600 would much less than ~10+~10+~10+~10+~10+10400. What I'm fishing for, if someone has them, are the numbers for the sales y-o-y for the last 6 months...or at least from March onwards when then moratorium began. Banks aren't lending. Even if there's any lending, it's all Fed and Treasury lending, either directly or thru Fannie/Freddie. That's why the jumbo market is frozen. Banks are only "making the loans" that they know will be taken off their books by Fannie Freddie. So they do technically "make the loan", but it's taken off by Fannie and Freddie, or ultimately, by you and me.

Weird, it didn't strike me PatNet was patrick.net. I guess since I've only ever clicked on links to get here, the name of the place never really sank in.

Hmmm, maybe I should sell patrick.net T-shirts with catchy anti-debt slogans. So far I've resisted advice to put the ads more in the way to get clicks, since this is all kind of a personal mission rather than a business. But T-shirts seem like a fair thing to sell. Anyone know a quality maker/printer that won't take 95% of revenue? I tried Cafe Press, but gave up immediately upon complaints from buyers. And Cafe Press overcharges and keeps most of the money.

@angrish I think the pent up demand came from the slightly higher mortgage rates which were then pushed extremely low by Fed. That makes more sense. But that's a side story. It doesn't matter who is lending, someone is lending since 8,600+ people didn't all pay cash for their homes. So the statements that people can't get loans does not appear to be true. I don't know where to fit this in, but a couple of more points to consider. The link I posted said the % of homes sold that were REOs was actually lower this month than previous months. So the argument that everyone was waiting for and is buying foreclosures may not be valid. Also, every REO I've attempted to offer on in the last few months has required at least 20% down. So any discussion of FHA 3% loans is irrelevant if the argument is that people are buying REOs (unless those requirements have changed). If 20% is required for these REOs, people have money.

I agree with the first statement. And you're right...people do seem to be able to get money. How much, isn't clear. But money's definitely flowing ever since the fed started it's printing press.

>>Where the government really needs to step in, is in creating transparency in pricing for medical procedures and visits. Something we can all agree on?

elliemae, the physical therapy rehab facility are always keeping the seniors for the max time Medicare allows. I have never seen one senior getting discharged after 3 days even though the injury is minor. There is so many Medicare abuses that this is not even funny. I understand what you mean by Medicare reimbursing far less. But the problem is, those of us who are not on Medicare, if one day we lose our jobs along with our insurance, will have to pay sky-high prices that is not a Medicare-negotiated price. Medicare is able to compress reimbursement because WE ARE PAYING THE DAMN DIFFERENCE. Medicare is a transfer system in which We subsidize the senior's lifestyle. If we abolish Medicare altogether, first of all, the major consumers of the medical system will have to shop around and drive the price down. Now, the seniors are going to hospitals and doctors left and right because it only cost them ~$15 co-pay so they are essentially using doctors as psychologists to talk about their personal problems. If the biggest component of the medical market does NOT care about price at all, those of us who rarely use the medical product will have to suffer. And we pay for the FXXXing Medicare. That's why I said either we have universal coverage for everyone based on the principal of equity, so that those who PAY for the system get to use the system as well, or we just adopt completely private medical system and let the poor old seniors go the natural way. I am fine either way.

I have had no problem getting pre-qualified. I haven't sealed the deal yet so I don't know what hoops I'll need to jump through. By the numbers though, I should have no problem. First time buyer, credit score of 714, zero debt, 10% down on a 200K loan in Southern California, conventional. There is plenty of money out there for those that qualify so I'm assuming many more qualify then we expected. No house for me though. I'm not willing to buy at todays prices. Another 12-15% drop in the Inland Empire will push me into the market. Lets see if it happens in the next few years.

I will say that at least this L.A. Times reporter, Peter Hong, is honest enough to admit he recently bought a house and thus stands to profit from any price uptick. Of course, this hardly makes up for his unabashed industry cheerleading and bias. The L.A. Land blog, which he now partially runs, has really gone down hill too since he took over from Peter Viles. Numerous recent comments to his blog have predicted this very type of false uptick in median prices, explaining (as DataQuick did in its press release this week) that the increase in median would reflect a SOFTENING of the mid and upper price ranges. Peter H., it seems would rather ignore this reality and instead trumpet a "home sales price surge". Apparently some people learned absolutely nothing from the abysmal reporting that fed the bubble frenzy and helped get us to this point in the first place. Sad.

Some Guy says

You’re nitpicking.

I'm just sick of people throwing those terms around without understanding what they actually mean. The overuse of "socialism" in particular bothers me because the "bad" aspects of socialism are irrelevant if you don't even understand what socialism actually is. There's this bizarre knee-jerk reaction to any government spending as "socialism" with the implied "failures" of socialism that are simply wrong. You can argue against Keynesian economics all you want, but to equate the practice with socialism itself is absurd, and with communism is illogical. Socialism is definitely a failed system, just as capitalism is a failed system. It's a good thing that all rational countries have mixed economies, then, isn't it?

Socialism is definitely a failed system, just as capitalism is a failed system. It’s a good thing that all rational countries have mixed economies, then, isn’t it?

On paper, at least, they both have their merits - especially/only if you remove the human fallibility factor.

Kevin, Right on. 98% of the US population (I made that number up from experience) has no idea what socialism actually is.

I watched sicko last night finally. What a powerful movie. Love or hate Michael Moore, if you have the tinies bit of an open mind he makes you think.