We went garage sale hunting yesterday. My wife and I cruised our weekly route around the San Marcos Vista area. There were quite a few garage sales and we couldn’t help but notice a lot of for sale signs (I picked up a real nice rice cooker for $2).
We stopped in an over 55 community in Vista. Houses in that area are going for 270K to 300K (1,200 sq ft). The owners are quoting these prices with a straight face. I just can’t believe it, the houses are “Tear Downs."
In a nicer section built before Mello Roos, there were three in a row for sale, all for between 525K and 619K (The one with the dead lawn was definitely an REO).
Then over in our area, there were three houses looking at each other 550K to 650K. All three have Mello Roos payments besides taxes. One was a “Help You Sell” another was a “For Sale by Owner,” and the last was a Realtor listing. It sure is great to be able to park your car and look at three listings facing each other, it saves all of that driving around!
A lot of people have been suggesting that the real estate bubble has popped. For this area, I tend to doubt it. The owners have no concept of current market conditions. They bought it for 600K and by golly they are going to sell it for 600K.
On one hand, we have the owners who have extracted their equity and bought new cars, vacations, breast augmentations, and what ever. On the other, you have people that didn’t get on the wagon, they missed the boat. They don’t have the bills, but they have no exotic toys either. My wife has classified us as being in the latter group, and it’s all my fault. And of course, we know the wife is always right, cough, cough.
This bubble seems to be bursting from the outside in. The financial institutions have stopped offering the 2/28 and 3/27 loans (It was kind of like using a Bic lighter to trim your nose hairs. It worked great, but you won’t do it again). The time lag right now seems to hang on property appraisals. Housing prices are still far from what many would consider realistic.
Your typical home owner believes their homes will sell, it’s just going to take a lot longer than they anticipated, times are tough (the sign of a real plugger). The rising median home price will confirm the owner’s perception that home prices are rising, when in actuality, it’s an indicator that the lower price houses are just not selling.
Right now in this area, it looks like we are in a lateral shift, a waiting game. Nobody wants to buy at these prices and no one wants to sell for less than what they bought for. The monthly mortgage payment will bring reality back (once every 30 days). Your 2/28 is going to turn into a 24/7 headache. I wonder if that’s what St Joseph’s Aspirin is for--house headaches.
9 comments:
Up here in Ventura county (Moorpark) the houses I pass every day that are for sale have been so for quite some time.
I did a quick search on MLS and find that they are all asking prices that I would have expected to see a year or more ago- which are not reflecting today's market reality.
Thus the long time on market.
Two are right next door to one another and happen to be directly across from us. One is long time owned and paid off, vacant, the couple retired and are seemningly in no hurry to sell or rent it.
The other was a recent purchase (2005) and it was rented, but is no longer, and has been on the market for about six months.
I also saw the return of multiple "Open House" signs today along the main road- more than has been usual lately (I noticed 'cos I had been missing them after the last few years of Realty-a-go-go).
I imagined Realtors(tm) have banded together and with a burst of nothing but naked optimism and enthusiasm are gonna get some houses sold, by hook or crook.
Yet nobody wants to be the first to drop their price.
Oh yeah another blog had a link to this up north which is kind of reflecting a sawtooth profile that while some shady practices might have slowed, they certainly haven't stopped (late bloomers?).
That this can still happen in Sac. (Casey land) has me agog.
Hi Paco
I quite agree. The thing that bothers me, is that there is no bottom in sight for this mess.
You know you have hit bottom in a market when you can't give them away and no one is interested.
Well nobody is interested, but they are not giving them away either. So we are not there yet.
Thanks for your comment
Kick the prices back to 2000 levels. Then add approxiamtely 35% to that price(normal appreciation for 7 years) and you have a bottom.
Since it wil take several years to fall completely, add 3-4% a year to that in 2008, 2009, etc/
Everyone keeps talking about reversion to the mean in housing prices. This means we take away the large gains we have had in prices and return to where prices would be if we had normal gains. Bob Shiller even talks about this and says we could have a 50% correction.
My problem is reversion to the mean is logical if prices went up just for the demand factors, such as buyer psychology, low interest rate, easy credit, agressive realtors, mortgage brokers and appraisers.
No one is talking about the supply problems we created with all the excess building and now all the vacant homes. This is in addition to reversion to the mean.
This could be ugly
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I live in the east bay / Castro Valley and the effects of low housing demand are obvious without having to study too hard. It seems the cute little two bedroom homes will no longer sell. These are nice little homes -- but for over 500k asking price. There are numerous vacant homes which is unusual but here is something even more interesting. One house was on the market for 6 months offered at 550k, taken off the market --no takers-- and then offered as a rental for 1595.00/month. In less than a week, it is rented. THAT says alot about the market. I saw the other comment about pricing based on 2000 levels which would make sense if the 2000 prices were not out of whack already.
I love the bic lighter metaphor!
Sellers don't want to blink?. Some have already cashed out equity. If they sold lower they would have to pawn the shirts on their backs to pay the banker. But for how long can they keep writing that check every 30 days?...something has to give...
what would your advise to sellers be? to buyers?
Tracy
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