patrick.net

Not all the "inventory" is held by home sellers- the banks are holding back inventory

http://smaulgld.com/real-estates-underwaterdown-side-sticky-catch-22/

smaulgld says

Not all the "inventory" is held by home sellers- the banks are holding back inventory

That's only a small part of the equation. Besides, if it were ALL about negative equity, then we would be seeing a lot more inventory as more homeowners are in the black.

The Fed article even stats (towards the end) that the areas with the most price appreciation (like SF) have the lowest inventory. These are the areas that would also have the fewest underwater homeowners, meaning that equity or the "banks" aren't the issues here at all.

There's something deeper going on. Herd mentality.

I wonder how interest rates are influencing things. Owners with equity should all have refinanced in 2012 or early 2013 at rates that may never be seen again.

That seems like a fairly large disincentive to sell.

I certainly will agree with your questions: "Is something today fundamentally different? Is this some sort of new economic model?" I hope someone writes about it someday.

This listing this morning caught my eye, enough to write about it, because I think it is saying something.

http://www.redfin.com/CA/Sherman-Oaks/14960-Dickens-St-91403/unit-113/home/4877101?utm_campaign=listings_update&utm_content=address&utm_medium=email&utm_source=myredfin

1.) It's nearly 2014 and it's still an available short sale.
2.) The bank upped the price 114k since May 2013 when it was first listed by them from 275k to 389k.
2a.) This is not a 'liquidation' sale. Appears they have no desire or need to sell the property quickly.
2b.) This tells me this is a pure profit motive. They may have even killed the first deal at 275k.

In a word: Greed

David9 says

This tells me this is a pure profit motive

Of course it is. It's a bank, which is a business, and it's job is to make money.

Not in the Bay Area.

Out here I'm seeing more sellers put houses in the market now, but mostly when they are moving elsewhere or it's inherited property that children don't want to keep. Flips are rare, which is a sign of stability.

I think LA is back to the norm. Sure explains why large funds exited the market.

The shock and awe of the last year may be settling down as more units finally come on line:
Average rents for all unit types at Santa Clara County communities larger than 50 units flatlined - rising just $12 in the third quarter, RealFacts said.
The pause came as occupancy dropped to 94.4 percent, a 1 percent decrease compared to a year ago. In the key apartment market of San Jose, occupancy dropped 2.1 percent year over year, to 93.4 percent. Average rents in San Jose jumped $26 a month, to $2,015.
http://www.bizjournals.com/sanjose/news/2013/10/16/silicon-valley-rents-show-signs-of.html

Do you suppose this is considered?
http://patrick.net/?p=1219038&c=999083#comment-999083

Or this:
http://patrick.net/?p=1230886

Ducky, According to your sfgate link, Santa Clara County experienced the most population growth. I'm trying to reconcile that with the 1% drop in occupancy rates in Santa Clara County. Certainly will be an interesting trend to watch.

gregpfielding says

There's something deeper going on. Herd mentality.

Herd mentally doesn't capture it.
Speculative mentality would be more correct.

The Feds trained people to think in terms of large speculative booms and busts.

No one wants to sell at the bottom. They will all rush to sell when the time comes.

gregpfielding says

There's something deeper going on. Herd mentality.

Also in CA, prop 13 probably reduce churning, as people can't afford to pay taxes based on the actual price of the property.

Heraclitusstudent says

The Feds trained people to think in terms of large speculative booms and busts.

It's also human nature. Everyone wants to get rich without working for it.

Heraclitusstudent says

Also in CA, prop 13 probably reduce churning, as people can't afford to pay taxes based on the actual price of the property.

Prop 13 has been around for 4 decades. This issue is a sharp change over 18 months.

gregpfielding says

Heraclitusstudent says

Also in CA, prop 13 probably reduce churning, as people can't afford to pay taxes based on the actual price of the property.

Prop 13 has been around for 4 decades. This issue is a sharp change over 18 months.

Prop 13 has probably become more of a factor as time passed and prices increased (more and more people trapped). It doesn't explain the short term change in the last 18 months, but note that your graph also shows a big jump in inventories in 2006 that is reversed now. So it appears there is a low baseline, outside the speculative bust.

egads101 says

More people will list, as they become above water. But, they can't lower their prices, so it won't drive prices down.

As more people list, Supply begins to trump Demand, and prices fall. Any individual seller may choose to take their home off the market, just as many did in 2007, but the value of their home will still fall.

Some sellers may choose to wait another five or ten years. Other will absolutely drop their prices to compete for buyers.

Can't speak to the Bay Area, but Los Angeles and Long Beach are definatively getting more dense. There's currently 8 residential buildings going up in downtown LA. There's only a handful more properties in downtown proper(bordered by the 101/110/5/10) available for development. It really looks like the flippers will hit Boyle Heights and Lincoln Heights next, leaving the area to the west of the 110 as the least problematic to develop high rise residential units. While those are already dense neighborhoods, packing 5 salvadorians per unit in 20 unit buildings cannot compare to 200-300 unit high rises in terms of accomodating population increases.

Point being that when the need arises, locales find ways to profitably provide housing.

egads101 says

10 to 1 odds, I am right an you are wrong.

I'll take that bet every day. You miss the point completely and don't have any grasp of how markets work.

One thing to consider is that it's human nature to view selling at 500K now compared to at the peak when the same house was worth 900K as locking in a 400K loss.

It's quite possible that those that don't need to move are not only waiting out getting right side up on their loans, but thinking now in terms of how much equity they've lost from the peak and hope to see those levels again.
May be a very long time....

egads101 says

If you owe $200K, and list your home for $210K, you can't lower your price. PERIOD. EVER!

That's an idiotic statement, probably from a guy that doesn't have $10K in savings and thinks no one does.

egads101 says

the idiotic statement is from you, a dipshit who knows next to nothing about housing markets, challenging what I say with zero knowledge to his credit.

Everything I read from you so far was either a trivial note on short-term trends, arrogant blathering on irrelevant past monkey-thrown darts, or just plain false.

The latest being your blatantly false negative statements followed by "PERIOD. EVER!".

egads101 says

the above is what you said, on July 2011... Great call dumbfuck! how much did prices go up since you made that gem of a prediction?

The context of that quote was on the question of continuing to rent or believing that that was indeed the time to buy.

For all of the reasons I gave, and with the information we all had back then, there was no reason to believe prices were about to take off. It was the right advice at the time.

What happened since then, ironically, is the topic of this thread: that inventory has rapidly declined at a time when sellers are more enticed to sell. Nobody expected inventory to drop 60+%.

And if inventory hadn't collapsed, prices would not have skyrocketed.

gregpfielding says

It was the right advice at the time.

I never cease to be amazed at the nerve of some of the people here. It was absolutely NOT the right advice at the time. How the hell can you write that it was the right advice??

egads101 says

If you owe $200K, and list your home for $210K, you can't lower your price. PERIOD. EVER! I don't care if there are tons of homes in that predicament, they may not get to sell, but they still can't lower their price.

Yep for that sliver of the market that have so little equity that is true unless they short it. But for everyone else they can still sell and they want to get out at the top or as close to it as they can. Once the market peaks and starts to fall, the 2005 bubble buyers have two choices, sell now (even at a loss) or be willing to stay put for another 5 to 10 years.

egads101 says

I love it when a dumbfuck realtor thinks he can take on a mathematical economist on economics!

Where is the mathematical economist? Or do you mean community college teacher who post online to inflate his ego?

Once again you turn to name calling when you can not win an argument.

Damn oracle, for someone who has a crystal ball crammed sideways up their arse, and is so succesful, you sure don't seem too content with your posting-all-night-and-day-on-patnet life.

What's the matter?

Mo money, mo problems?

egads101 says

Once again you turn to name calling when you can not win an argument.

This argument is already won by me, you are just too fucking stupid to know it.

Hehe, looks like you are proving my point.

Making the all knowing enlightened loose his cool and start cursing at people puts a smile on my face :)

homeowners en masse are simply holding out for the most money. And, then homeowners en masse decide that they had better sell

That would be about now.

And guess what, the longer homeowners wait to sell, as of now, the less they will get.

Reason: Big money investors pumped it 11% and now are dumping. After that...no more buyers.

CDon says

And since 2009, prices in DC have been rising in a continuous, moderate pace.

Price movement is a function of Supply and Demand. Your Supply has been about 1/3 of what it is supposed to be. Combine that with 4% interest rates and of course prices are going to rise.

If inventory had been more normal during that stretch, prices probably wouldn't have risen as much, or maybe even fallen.

Why do think fewer sellers than normal have been deciding to move?

To me this isn't a sign of fundamental strength. There are clearly reasons why potential Sellers are choosing not to sell, and those reasons are temporary. At some point, inventory will correct.

The Fed believes that the reason is simply that potential sellers are all trying to squeeze every dollar out of their homes as they can. Perhaps the ups and downs of the last 20 years has conditioned us to be that way. But if this is true... if there are masses of potential Sellers all waiting until the last minute... then we could see inventory climb very quickly.

CDon says

Granted, while the economy has been better here than elsewhere, these people have been buffeted from OMG CRISIS! to OMG CRISIS! for the past 3 years. Yet as you can see by the tight grouping of inventory levels 2010-2013, for each crisis, the sellers as a group have basically not given the slightest shit whatsoever.

None of the crises you mentioned were a direct threat to home prices.

gregpfielding says

Fact of the matter is, until maybe a month or two before they decide to list the average potential seller doesn't do any more research than pick up the paper and see an occasional generic report on housing (prices up 2% YOY, down 2% MOM) only halfway understand it, and then go about their day without giving the slightest shit whatsoever.

Accordingly, I think is a real mistake to assume any massive, collective, herd movements of any type.

I agree that most potential sellers don't pay as much attention as the should. However SOMETHING is causing inventory in DC and the Bay Area here in CA to be about 1/3 of what it is supposed to be. SOMETHING us causing sellers, collectively, to not list their homes for sale.

As a homeowner in the Bay Area, I'll be curious to see what happens with the RE market. I'd actually welcome a slowdown and a return to a more normal market. That said, the Bay Area is possibly due for a severe upswing in supply mainly because way too many investors bought in a short time. But most of those were in crappy or up-and-coming areas, so the only ones who might suffer the fallout from that might be those same investors. I suspect the more desirable areas less so.

Potential sellers who have skin in the game (large down payments) will not sell for a loss or foreclose unless they absolutely have to. At this point, most of the deadbeat zero-down borrowers have already exited the market (foreclosed) and have replaced with buyers who have skin in the game.

In a downturn, we should not see a massive inventory increase like we had with all of the "strategic defaulters". In fact, we should see an inventory decrease. This will put a floor on prices and prevent a free-fall (unless the banks start loaning to deadbeats with no money down again).

egads101 says

It takes foreclosures to get the slide going.

No. Foreclosures, en masse, happen after home prices fall. Otherwise most people would sell instead.

Unaffordably-high home prices are the disease.
Falling home prices are the cure.
Negative equity, short sales, and foreclosures are all symptoms.

egads101 says

So, worrying today, that A. people will decide to sell. B. all at once. and C. reduce prices in a race to the bottom is ridiculous, when there is zero sign of it at all.

There are signs. Sales have slowed more than normal, and inventory is beginning to tick higher. Maybe it's nothing. Or maybe it's the beginning of a change.

For your discussion, please see my post:

http://www.thefiscaltimes.com/Articles/2013/10/17/Feds-Fisher-Warns-US-Housing-Bubble-Signs?source=Patrick.net

Fisher Warns US housing Bubble...

egads roberto says

plus calling lots of people fucktards and nitwits on here quite cathartic;

Can't really do either during the day gig :-)

there you go!

The Professor says

Tweedle.

History will tell.

History already tells the story. Some folks just choose to ignore it.

coriacci1 says

gregpfielding says

plus calling lots of people fucktards and nitwits on here quite cathartic;

Can't really do either during the day gig :-)

there you go!

That wasn't me saying that...

gregpfielding says

That wasn't me saying that...

sorry, it was meant for egads101 roberto.

The Professor says

You are actually quoting Roberto. He would get fired if he treated his JC students like he does the users here.

my mistake. sorry all. i changed the original comment.

gregpfielding says

Granted, while the economy has been better here than elsewhere, these people
have been buffeted from OMG CRISIS! to OMG CRISIS! for the past 3 years. Yet as
you can see by the tight grouping of inventory levels 2010-2013, for each
crisis, the sellers as a group have basically not given the slightest shit
whatsoever.

None of the crises you mentioned were a direct threat to home prices.

Are you kidding me? For about a month before each of those events (especially the sequester & shutdown) local media would daily tell us about the thousands of federal workers who were going to lose their jobs, or at least take major pay cuts. Don't you think that the nightly reports of DC centric doom would cause some people to get out while the getting is good and list their homes for sale?

Maude: Say Honey, the Wash Post is reporting that 20% of the staff in our department will get laid off - WUSA9 is reporting imminent economic doom. Home prices have been rising here for 3 years... you want to list now and move back to home to Iowa where homes cost 1/4 as much?

Harold: No dear, I say, lets roll the dice and see if we get laid off...I want to squeeze as much profit from this home as possible!!!

Really?

gregpfielding says

However SOMETHING is causing inventory in DC and the Bay Area here in CA to be
about 1/3 of what it is supposed to be. SOMETHING us causing sellers,
collectively, to not list their homes for sale.

While I cant speak to the BA, I dispute the idea that inventory in DC is 1/3 of what its "supposed to be". If you look again at this chart:

http://www.recharts.com/nova/nova.html

the huge inventory numbers (06-08) resulted in -20% declines. Likewise, the very small inventory numbers (05 & earlier) resulted in +20% price increases. What makes you think the 09-13 inventory levels (and the corresponding +3% to +7% annual gains) is abnormally low?

coriacci1 says

While I cant speak to the BA, I dispute the idea that inventory in DC is 1/3 of what its "supposed to be". If you look again at this chart:

Maybe "supposed to be" was the wrong phrase. Your charts go back to 2005 and it looks like 2013 is about 1/3 of the average on those charts. Or no more than half of what it has been.

Even with the uptick on your charts in September, Nova looks to have about 6,000 homes for sale. This is down from roughly 9,000 in 2010 and 2011, 12,000 in 2005, and between 15,000-20,000+ in 2006-2008.

The whole point of the The Fed's paper and my analysis of it is that number of Sellers (inventory) is down (6,000) from 2010-2011 (9,000), even though the price of homes has risen substantially since then.

We would expect MORE sellers to want to sell at higher prices, not fewer.

CDon says

Are you kidding me? For about a month before each of those events (especially the sequester & shutdown) local media would daily tell us about the thousands of federal workers who were going to lose their jobs, or at least take major pay cuts.

I'm not sure what it was like actually living in DC for all of that. Personally I believe that those were all made-up crises, exaggerated by politicians so they could all make their speeches, but there there was never any real threat of anything bad happening. I can't believe anyone in DC would have sold their home thinking that a potential government shutdown would cause their home to plummet in value.