Thursday, March 6, 2008

The Weekly Screen Scrape - Mixed Signals

Well, its a very confusing time to be a buyer. Just finished the weekly screen scrape, and the pending sale ratio is at an all time high. Prices have dropped, and with interest rates lower, I think people are feeling more confident about the market.

On the other hand, NODs and foreclosures in El Dorado Hills and Folsom seem to be heating up as well, which would signal further price declines. According to this week, Folsom has 110 active NODs and 39 active foreclosures with only 292 SFH listings right now. El Dorado Hills has active 150 NODs, 34 active foreclosures and 403 SFH listings last I checked.

Last year, around this time was also saw the peak in my pending sale to inventory ratio, so it could just be a seasonal trend.

Originally our plan was to use the pending sale ratio to figure out if the market was heating up, and jump in before it began to appreciate again. Many fellow bloggers have surmised that this is just a dead cat bounce, but I also know of some who have decided to take the plunge.

What's an average buyer to do?


smf said...

"What's an average buyer to do?"

Watch out for this:

Went to see a house in EDH that my wife liked. The house was OK, with several small faults that aggravated me.

To make a long story short, the last house we saw that day was the same model as the house that my wife liked! (The house was in a location that made it seem like a custom home) Except that this last house looked a lot better than the original house.

Anyways, we are jukmping into the market soon.

Buying Time said...

Congrats SMF. I am very jealous.

We are still negotiating our offer. But we gave them the option to wait for a higher offer, cause we don't plan to go up in price.

mcb44 said...

I'm not sure what an "average buyer" would do, but I suspect that someone as familiar with real estate economics as you are, would look for a sustained increase in actual sales before reaching any conclusions.

By the same token, we can certainly emphasize with your anxiety to own a home again.

Looking_in_EDH said...

My 2 cents.

I will start seriously looking when the prices have receded to early 2003 (plus adjustment for inflation).

As far as EDH is concerned, it looks like REOs are closing in my target range, but the average MLS listing is still in the mid 2004 pricing era.

I'ld give it till fall before the average MLS starts looking reasonable.

BTW - I am renting in EDH and my landlord (what a misnomer!) has been in default since late Jan. Even with my rent covering > 50% of the carrying cost, they are letting the house go. This is a classic case of house ATM. The home was purchased in 2003 and has been a source of $300K of fraudulent equity withdrawal.

I don't think this is an isolated case of "jingle mail". So much for the foreclosure prevention band-aid schemes being discussed in the MSM.

Cmyst said...

Both of you obviously have the smarts and the judgement to make the right call for your situation; in addition, you are both in very good financial positions to negotiate.

Trend-wise, I still think that the areas I've been tracking have a ways to go. I believed 2 years ago that I'd probably be seeing some of the houses that went off my MLS list come back on at lower prices, and I have. Knowing those areas pretty well, and the demographics of those areas, they are still over-priced.

It's like a juggling act, isn't it?
Interest rates, financing (for those of us without huge down payments), stability of area, amenities of area, gas prices, taxes....

Gwynster said...

We're doing the GFE dance again this weekend.

I was getting antzy because I saw a lot of homes dissapear off the market starting in Dec. Most of what I was looking at is back on, in one case with a 70K reduction. When looking at Davis homes out of my price range that have been relisted, it's not unusual to find 100k reductions.

I think this is just like last year, where everyone put in offers over the winter slow season thinking they were getting deals but not really.

Only thing that will get me to bite is if the $ per sqft and location meet my requirements ('98 price plus 3% annualized). We'll see what pops up.

smf said...

Frankly, we are expecting a $100K price drop in the house we want to buy by the time the bottom gets here.

There are several reasons we want to move. But the biggie is that with three kids, having friends closer will help out in keeping them occupied. Plus their school will be within walking distance. That will save us a lot of gas $$.

Having a heated pool visible from the main living areas will also help to keep them busy this summer.

But the process is just starting. If anyone here wants a 2200 sq.ft. custom home, built in 2002, tile roof, .25 ac, easy access to bike trail, etc. let me know!

We still love our current home, but circumstances dictate that a move would be good right now.

Patient Renter said...

That we will have several dead cat bounces is just a matter of examining past declines, but if you're ready to jump you're ready to jump, dead cat bounce or not :)

Gwynster said...

I don't expect my offers to be treated any better then they were last year but who knows. I don't have much hope but at least torturing the banks will give me new material for my blog >; )

Mystere said...

What to do?

Simple. If you find the home you want at a price that's consistent with your financial criteria, then you pull the trigger. Personally, I include a modest contingency factor in my financial criteria, as I'm of the view that I'd pay a bit of a premium for -the- home if necessary, rather than settle for a lesser home at even more of a bargain price (I'm comfortable under my criteria that I wouldn't be buying a bunch of bubble air with the home, in any event).

Patient Renter said...

"at least torturing the banks will give me new material for my blog >; )"

yes, please. your torture tales are awesome :)

Husmanen said...

From past data, housing cycles have a bottom, i.e. no price increases, that is not short and abrupt.

Before the bottom there is a period of decreasing price decreases.

Today, prices are still decreasing at an increasing rate.

When home prices are within rent prices, calculated with PITI (10% down, 30yr conventional), then our "market offers" will be seriosly considered. Until then we keep looking and placing bids on homes that fit our criteria.

Piggington in San Diego has a great blog and supporting data on home price to income, rent and interest rates. Here is the link:

alba said...

No matter what anyone says, its a great feeling to own your own home. Its even greater to own a dream home...even if you own less of it than the banks does.

Even when the economics works, there may be a time that prudence and patience might serve you better, as the steward...

Paul said...

Husamen correctly recalls past real estate cycles. We had local real estate downturns in 1970, 1980, 1990 (are you starting to see a trend here?), all of which gradually bottomed and stayed flat for several years before improving. It was truly a buyer's market, with many choices, much lower (than the peaks) prices, and less of a struggle to get sellers/banks (speaking of 1990), to agree to short sales. My opinion, we are still in free fall with prices and no one really knows where the bottom is ... But I continue to monitor listing in our target area, on a daily basis, and if THE house came along, would make an offer based on my guess as to where the bottom might be. Like Alba says (and the other Sacto blogger who has just purchased a home), there is a value to "owning vs. renting" and we are tired of renting.

mcb44 said...

I've been tracking the inventory to pending sales in Auburn for the past 5 weeks. During this time the ratio of pending sales to inventory has risen from 12 to 15% with most of the change, 5 new PS in the last week. One other interesting change is during the forst 4 weeks the majority of the PS were in in the price ranges below 400k. Today the PS are much more evenly distributed among the price ranges.

I'll be very interested to see how many PS go on to become sales. Particularly in the higher price ranges.

alba said...

I don't see how pending sales is a leading indicator of price change, in the particular cycle we're in. Dead cat bounce, or whatever metric used to predict micro-economic conditions, are just not valid.

While at the same, there's an obvious pent-up demand to buy, buy, buy. And there's (perceived) money waiting on the sidelines for a good buy. The house next door to me gets quite a bit of traffic, drive-bys, as the price declines. This next wave of buyers, whether they're speculators or frustrated renters, will have no effect on the direction of the economy, or housing...just increase the velocity of the downturn. Something that Lyon, NAR, and, quite frankly, the rest of us encourage.

mcb44 said...

"I don't see how pending sales is a leading indicator of price change, in the particular cycle we're in."

I don't either. I think of them as indicators of demand. When I look at the price range where the PS occur, that seems a pretty good indication of the price points where demand is occuring.

I also think of PS as indicators of desire to buy, and sales indicating desire plus capability. With the current credit situation, I would not be surprised to see quite a gap between the 2, particulary in the lower segments of the market.