Friday, May 7, 2010

Are we there Yet?

Dare I Say Bottom? I know we have had a lot of fits and starts, especially in the spring time, when you typically get a little bounce, but the market around here is really beginning to firm up (of course it's hard to say with all the tax credits flying around these days).

This winter things were looking pretty bleak for my beloved neighborhood, almost 10% of the homes were up for sale, several still left to be sold by the builder, some short sales, a couple foreclosures etc. When I checked this morning, all but one are now pending sale. That's a pretty dramatic turn around.

And as much as I would love to think everyone else has discovered how wonderful our little community is, I know our situation is not unique. Melissa Data average prices in El Dorado Hills hit a bottom in November (09), and have been slowly (but erratically) climbing since then. Similarly, Folsom has had 3 months since their last low (back in Jan 10). And year-over-year sales have increased for both those zips since December 2009.

The fact that price and quantity are beginning to move in tandem, which hasn't happened consistently since Mid 2005, is a big deal in my book. After 2005, prices were still increasing, but sales started dropping. In the last year or so, sales have been increasing, but prices were still dropping.

So what do you think....are we there yet?


Buying Time said...

I'm sure some will argue that its all because of the tax credits. But I will argue back, that I don't think they are relevant in these two zips. 1) Folsom and El Dorado Hills are mainly a move-up community, and 2) the tax credit is a very small proportion of the overall home price, like 1-2%.

husmanen said...

BT. I like that you have tried to disperse a potential argument beforehand. I use this method a lot and it tends to work well. My favorite example is from the movie 8 Mile when Eminem used it against his rapping opponent. But I digress.

If not tax credits and incentives then what could be causing the increases? Maybe:

* Improved overall economy
* Improved local economy
* Restriction of supply
* Increase in demand
* Decrease in unemployment
* Decrease in potential foreclosures
* Increase in move-up buyers

Do you think the current average price increases are in line with long term fundamentals?

I see evidence of homes I would consider a good value in Folsom/EDH. There are, of course, some sellers bubble dreaming and others testing just above what I would consider good value.

Also, could the averages be pushed up by a few very expensive homes selling?

husmanen said...

Interesting Trendgraphix data for EDH too.

EDH Equity Sales .17… 16… 30…29.
EDH EqPend …….....23….26.…38…33

EDH Short Sales…..19.…12.…12.…13
EDH SS Pend ….....20….12…..32.50

EDH REO Sales.....9.…12.…7.…21
EDH REO Pend.....12….6….15.…23

Notice the dramatic increase (approx 50%) in Pendings from the Short-Sales and REOs in Apr?

Besides the credit what would make the pendings rise so much in March and April?

Buying Time said...

Interesting stats Hus. BTW - Where do you get EDH specific stats from trendgraphix? an Agent?

I seem to remember hearing jumbo mortgage rates have come down...

Relatively speaking, I figure, tax credits has a little to do with it, mortgage rates has a bit more to do with it...but beyond those two...I'm just not sure.

patient renter said...

tax credits has a little to do with it, mortgage rates has a bit more to do with it...but beyond those two... inventory :)

We talk about publicly available quantity, while there is still a private unavailable quantity facilitated by balance sheet swaps that have yet to be unwound.

husmanen said...

BT, yes I do get my Trendgraphix data from an Agent. Good call.

PR. Yes I believe there is constrained supply, not just by the banks but most of the organic sellers that just don't want to put their house on the market for non-bubble asking prices.

It hurts too much and could mean they really aren't 'organic' but are actually a short sale. I have seen plenty of Non-REOs and Non-Short Sales finally turn into SS once they hit a market price.

sacramentia said...

Absolutely not. Still too many underwater borrowers and inventory that hasn't hit the market.

Giacomo said...

Not a chance.

Jacob said...

I don't think we are there yet. Certain zips will fair better or worse than the average of course.

Price declines for Sac have increased since the tax credit expired. It will take a few months to see a trend I think. Fall / Winter could devestating to home prices or they could show that the market is improving, we'll find out soon enough.

But I think along the lines of husmanen. There are still lots of people out of work and CA has budget problems that won't be fixed anytime soon. So even if the state doesn't shed more jobs they certainly won't be adding very many anytime soon.

Next is inventory, there is a ton of shadow inventory out there, until those get sold it will keep prices down. If prices start to go up then we will see a bunch of inventory come out of nowhere to sell at the higher price.

I suppose the next question is how much longer interest rates can stay below 6%. As those go up to the 6s and even 7s that will put a hurt on prices for sure.