Friday, April 10, 2009

Springing to Life?

I couldn't help but notice, that Housing Tracker is showing price increases for the last couple periods, since Feb 2009....the first increase since May 2006 (at least for the bottom 25th and median).

It is rather shocking to see that the 25th percentile, back in Apr 2006, at 344k, isn't all that far from what the 75th percentile is now...389k. Kinda puts it all in perspective.

Inventory continues to fall, even in the face of the higher asking prices. This is a very good sign.

And for all you perma-bears out there, yes there are caveats, these are only asking prices, individual zips will bottom at different times, and once interest rates start to creep up the market is likely to stagnate.

22 comments:

Jacob said...

No one will be happier than me when this whole mess is over and I can feel safe in buying, but...

Are we at a bottom?

First there are those supplements you get for buying. $18k for a new home and $8k for a resale ($10K CA New Home, $8K Fed Any Home).

Interest rates really have nowhere to go but up. When that happens look out.

And a big one, most sales, 50%+ are going to investors, and rents are starting to give. If that home was cash flow positive at $150k, will it still be when your vacancy rate doubles and your rent falls by 25%?

And of course all these foreclosure moratoriums and banks just being overwelmed have kepts some homes out of foreclosure for the time being, but they will eventually get foreclosed.

And finally you have a lot of pent up inventory out there hiding. Either from banks that haven't processed them or are holding them back to regular sellers that are "waiting for a better market".

I will be interested to see an update of Lander's chart:

http://1.bp.blogspot.com/_oqQI_LytgCE/SFg6S29nifI/AAAAAAAAAto/saUkSrxtWW0/s1600-h/SpringLedge.JPG

Prices bounced up in 2006 and 2007 but in 2008 they just leveled off.

Still when we start to see more and more YOY improvements that is getting us moving in the right direction.

Bryan said...

I'm no perma-bear (I'm excited for the day when I can feel safe buying a house, wherever things land), but I think the "caveats" are probably the tail that wag the dog. The interesting numerical relationships you point out may turn out to be the caveat, the curious anomoly. But I'm rarely right about most things (a fact I have learned to live with), and it maybe likewise in this.

Vanda said...

You can call me perma-bear, I consider myself a realist.

Asking prices don't mean a thing.

According to Mr. Mortgage California foreclosures will be soaring this year, and the upper end housing market will take a beating.

Sales will be picking up, but prices (actual sale prices) will continue going down. Mark my word.

Buying Time said...

I'm not suggesting everything is coming up roses....but recovery has to start somewhere....and this is definitely a sign we are no longer in freefall.

Nothing happens overnight...a trickle here, a data point there. Eventually we turn a corner, with out many realizing it. Just as many chose to ignore the initial signs that housing was about to collapse, we shouldn't ignore the initial positive signs now. This is the first uptick in almost 3 years. In my book, this is a very big deal.

Jacob said...

Yea that's true, I guess the real test will come next month and the month after to see if the trend holds or if it was just a random blip in the data.

the most important indicator for me is the job loss numbers. No way I am buying a home when we are shedding half a million or more jobs each month.

When jobs improve that will indicate that the bottom has passed since it is a trailing indicator, but I don't mind missing the bottom, I just don't want to ride the final leg down.

Vanda said...

Funny you mention "free fall". I recently read an article that compared the economy to a skydiver: The parachute is open, we are not free falling any more, but we are still falling. We are not yet in recovery, the economy is still contracting, but slower.

So the economy is bad, unemployment is still rising, foreclosures are still going strong (any recent drops are caused by moratoriums), Alt-A and Option Arm loan resets (many argue these are worse than subprime) will peak the next two years. The only opposing force is the wishful thinking of sellers.

Husmanen said...

Or the wishing of recent buyers...

smf said...

'Dead Cat Bounce'

Enough said.

PeonInChief said...

If we have an L-shaped recession, it's likely that prices will bounce around a bottom for a fairly long time, so "timing the bottom" will be measured in years, not months. Also, does anyone know if, after the 1981-82 recession, house prices began to rise before unemployment declined? Or did unemployment rates fall, leading to motion in the housing market?

Mike said...

"'Dead Cat Bounce'

Enough said."


I totally agree. Same thing with Stock Market as well.

Randy said...

I'm itching to buy a NEW house within the next year (by the end of 2010 if I don't buy by this summer). I also believe that house prices will stay depressed for a long time, and that more foreclosures are on the way (moratoriums, Option ARMS, etc.).

If I bought this year, with the 10k CA credit, and 8k FED credit, as opposed to waiting until next year, when prices are estimated to drop another 12.5%~ in Sac, do you think I'm making a fairly balanced decision? I'm looking at the $310,000k range in Rocklin/Roseville.

Jacob said...

The $10K for CA is only for new homes. So if you are looking at resale homes then you won't get this. But you say you want a New home so you would qualify, just saying.

Of course with new homes you also get mellow roos and hoa likely.

I think the big variables are, how much the prices go down (I think everyone, even NAR conceded they will go down more) and what interest rates will do.

So let's see:

If you get a loan of $310k for 4.9% the monthly payment is around $1662 for a 30 year fixed.

Now if home prices go down 12.5% but interest rates go up 1% you get $1626.

Of course if the rates hold around 5% then you would be way better off waiting, same thing if prices fall another 20%-30%.

12% seems optimistic. YOY this year is around 40%. Even if things improve you could still easily get another 20% YOY next year.

And things are not getting better. Job losses are getting worse and practically every bank has failed the governments BS stress test. I assume they failed cause the government is not releasing the results and if it was good news they would be spreading the propoganda in every media format available.

patient renter said...

"timing the bottom" will be measured in years, not months

Historically, it always it.

Randy said...

Thanks, Jacob. I'm still contemplating it... hehe.

Sold in '05 said...

Randy,

Here's what I know about Roseville's west side home builders.

Stay away from anything north of Blue Oaks Blvd. When the air is very still or the wind is from the north, the stench from the landfill can be overpowering. That leaves only the WestPark and Fiddyment Farm areas.

The $10k state tax credit had a $ limit and only goes to approx. the first 10,000 new homes to close and will probably be gone by July.

The Mello Roos / bonds / assesments in the WestPark and Fiddyment developments are about $170/month. I don't think any of the developers there are currently doing HOA's.

Thinking of future resale consider that when the house is sold to the NEXT buyer, there is a 0.5% "conveyance fee" that goes to Seirra Club types for nature preserves. This fee applies to each sale for the first 20 years after the inital owner.

All of the Lennar and Centex homes come with 2000 watt solar systems as standard. Most people with these systems seem to be running around $50 / month for summer electric bills on Roseville Electric.

For a July completion home of approx. 2500 sq/ft, with a sticker price of $378,000, one of the solar builders accepted a final offer of $332,000 and included $23k of upgrades and $5k toward closing costs at any lender.

There are some deals right now, and you won't be uside down $200k like if you'd bought 3 years ago. You'll still probably end up losing value but the rent vs. buy equation in Roseville is getting pretty close at today's rents.

Hope this helps.

-CD

Randy said...

Thank you, CD. It was very helpful :) I'm looking at buying in the Whitney Ranch (Rocklin) area. I'm eyeing some homes going for about $310-340k, but I think I can knock down the prices on the higher range to a more manageable price. They're about built out there, and if I don't jump in soon, I'll have to wait years until they start Phase 2 of the Whitney Ranch area. I'm guessing that'll happen when the home market eventually picks up and the builders decide its worth buying land and developing it again.

Roseville's West Park and Fiddyment Farms area are my fallback areas if I end up not being able to live in Rocklin. I'd really prefer Rocklin because it is where I work, and I can save considerable commute and lunch money by being local (I could go home for lunch).

Sold in '05 said...

Randy,

The real downside to Rocklin is PG&E being the electric company. Compared to Roseville Electric, the rates are CRAZY. R.E. is the cheapest in the area with rates somewhat cheaper than SMUD but PG&E will cost you double for the electric. I'm guessing any savings from the commute will be more than sucked up by the electric bill. At least if you're buying new the home will be efficient. Of course if the M/R is less then you can offset that. If you're considering already built, the area north of Hwy 65 around the Nuggett is also under Roseville Electric.

-CD

sacramentia said...

"PG&E will cost you double for the electric."

This is half true. PG&E only costs double if you are using a lot of power. It is actually cheaper if you less than an average/baseline power.

You can check the average power consumption on a home by calling the power company.

norcaljeff said...

Its amazing how one tends to get bullish once they are a buyer. Let's chat in Feb '10 and see how those prices look...

Randy said...

If you're referring to me, I haven't changed my opinion of where I think housing values will go (down). However, based on my own personal circumstances, I do have a desire to purchase now, even in this economy.

I'm planning on 20% down on a 300k house, giving me about 60k in equity as buffer. Can the markets go below that? Yes. But I'm not in it for the equity. Just seeking something long term, and I've already waited through the bubble years for this.

I'm still on the fence about closing though, it can go either way depending on how the final monthly bills will look.

Buying Time said...

Randy -

There are many non-financial reasons to buy a home.....it sounds like you are well aware of the downside financial risk.....and you plan to live in the home for a while. Could you get a better deal in a year or so, perhaps. But that means waiting another year, and another year of rent paid. For us it wasn't worth it anymore to wait, for both financial and non-financial reason. Good luck, whatever you decide.

Max said...

First there are those supplements you get for buying. $18k for a new home and $8k for a resale...

Example: If you closed an FHA loan with 3.5% down on June 30 for $250K, your out of pocket would be just over $16K and a monthly payment close to $1800 at ~5.5%. With the $8K "credit" from BO, and about $10K in closing cost and interest writeoffs, house purchase becomes compelling. You need to run your personal numbers, and see if it makes sense. Timing the bottom is impossible, especially in this environment.

That said, I doubt we'll be at a bottom until the whole concept of house buying as an "investment" is banished from the zeitgeist. There has been no psychological capitulation; every dip is seen as a buying opportunity. Even today's Bee has a story of a former foreclosee-turned-landlord.

I think it's a good idea to start talking about different types of bottoms (minds out of the gutter guys!). We're probably well past the "speculative bottom" which is a result of the bursting of the credit bubble. Hard money rules the day. However, we're still in a severe recession, which means job losses and income reductions will drive any further declines. If unemployment stays in double digits for another 12 months, I don't see how housing can keep from falling further. (There's also the Alt-A recast bomb to look forward to, although the FNA 125% LTV guidance will blunt that problem.)