The good news on Wall Street: JPMorgan has raised its bid for Bear Stearns to about $10 per share. The cumulative bad news on Wall Street: 34,000 jobs have been lost over the past nine months.
The good news from the National Association of Realtors: The pace of U.S. existing home sales unexpectedly rose 2.9% in February (but remains 23.8 percent off the pace of 2007). The bad news from the National Association of Realtors: The median existing-home price was 8.2% lower on a year-over-year basis (and 13.4% lower in the West).
And the mixed news (depending upon your perspective and portfolio) and reaction to both bits on The Street: Treasuries fell and yields are up (which should increase rates).
∙ JPMorgan Raises Bear Stearns Bid to Woo Shareholders [Bloomberg]
∙ Wall Street Firms Cut 34,000 Jobs, Most Since 2001 Dot-Com Bust [Bloomberg]
∙ Existing Home Sales Rise In February [NAR]
∙ Treasuries Fall as Stocks, Mortgage Purchase Ease Haven Appeal [Bloomberg]
This is one of those weeks where you look at the news and numbers and think, “Wow, maybe the worst is over.” I’ve had more weeks like that than I can count since last summer. And then every time some new bit of horrible news comes along and things end up looking worse than before.
I’m just waiting for that next bit of horrible news. Meanwhile, the author of “DOW 36,000” is one of McCain’s economic advisors.
Call me scared.
out here in the east bay, homes in the “luxury” areas of gourmet ghetto/solano/elmwood berkeley and rockridge oakland have been selling within weeks if not days of their first open houses with multiple offers. there just seems to be too much wealth out there in the market for this train to stop anytime soon. its absolutely frustrating!
Ugh.
That is all.
More NAR spin doctoring headlines. While homes sales are up from January by 2.9% they are down 23.8% YOY.
http://www.forbes.com/afxnewslimited/feeds/afx/2008/03/24/afx4806357.html
” Despite the increase, the February sales pace is 23.8 pct below the pace set in February 2007.”
mrbogus-
I completely disagree. I know of 2 homes in Rockridge that sold in a week. They were both fantastic homes that were appropriately priced (read – priced to reflect the current housing economy).
For example – a 4 bedroom, 2 bath, 2000+sqft home listing at $850,000. Needs no work (except maybe central heat). I believe it sold on its first weekend – this was in November. Good for them.
The other one I can think of was a few weeks ago – home sold in about a week. It was a 2br 1ba craftsman. Perfect condition and restored to look like an actual craftsman. Upper end everything. I think it listed at $800,000. A little pricey – but it was in perfect condition. I expected it to sell right away.
Compare these 2 with homes that are not impeccable – they are sitting there, and require price drops to get movement.
Like you, I’m waiting to get into this type of neighborhood. We’ll get there. Wait another year to 18mos. The homes that are sitting there – are dropping in value and become the new comps. I’m kind of fortunate enough that I have to wait – given the new tighter lending standards, I don’t have 20% to put down. So, until I do, I can’t jump in. Otherwise I would have been tempted to go for the 2br house described above. It would have been a mistake as it’s a little bit on the small side for me.
I even spoke with some of the listing agents showing open homes in Rockridge and they are frustrated. It’s a declining market there with a much lower number of buyers in the market.
Does anyone know if existing home sales rose in Feb 07 compared to Jan 07 and if so how much? and with current sales pace how many will it take to clear the inventory?
Thats probably a better indication, wouldn’t it?
Sales have gone up because sellers are adjusting their prices…which is a good thing..
hi treeman,
yes, i believe the 2/1 you’re talking about is on hudson. i also noticed the house on ivanhoe (which was not in impeccable condition) priced at $799,000 but sold rather quickly (like a week). another home that was on the market for awhile seems to have been sold (5438 lawton), a 4/2 priced at 859,000, this one was esspecially distressing since 859,000 was a drop from 899,000 which appears the market has a base of $535.00 p/sqft.
several other north berkeley properties that weren’t gems either (edith, keoncrest) moved rather quickly (a few days to a few weeks).
i’m starting to wonder that in the next few weeks, we’re probably going to see the few “distressed” or “overpriced” properties left in these neighborhoods move at higher prices. and folks like you and me, we’re going to have to move northward or “ghetto-fy” our search.
for the nation, sales in February ALWAYS are higher than sales in January.
In fact:
Numbers of sales nearly always rise every month from January until June
Then June/July/August sortof plateau
and then sales nearly always fall every month from August through December.
this is why they ‘seasonally adjust’ the numbers, to help account for this.
Socketsite has posted info about sales here in the metro area in their older threads… there are also good economic blogs that dissect the national data and put it into table format.
Remember, however that Used home data is based on the date of CLOSING, not when the contract is signed. (this is different for new home construction that is based on date of contract signing).
so if a used/existing house goes into contract on February 10th and then closes in March 5th, it is a MARCH sale. And that march sale would be reported in April.
So the numbers we just got (for February) are mainly telling us what the market was like from End December through the first part of February!
Likewise, many of the sales that go into contract in March will not close until April- and many of the sales that go into contract in April won’t close until MAY.
In general, I don’t use Jan or Feb data very much, because it’s a down time for RE..
I’m most interested in what happens in March and April.
thus, I personally don’t think we’ll know if 2008 is a bust or boom until June and July, when the May and June numbers come out (that reflect homes that went into contract in April and May).
(for what it’s worth, this is the reason that many people look at the Existing home data as a lagging indicator, and the new home data as a forward looking indicator. one caveat: if a contract is signed for a new home but the sale doesn’t go through it’s still counted as a sale)
As to the bit about mortgage rates, their relationship to the 10-year and/or LIBOR has been totally unpredictable of late. I believe that it is a mistake to assume that falling 10 year Treasuries = lower 30 year fixed rates (editor, you have pointed this out in one fashion or another, repeatedly). Likewise, higher 10 year treasuries are not necessarily equal to higher mortgage rates. What matters here is the spread, and the perceived quality of even high quality mortgage backed securities.
IF the broader equity and capital markets are recovering, the ten year will fall in price and the yield will fall. If however, these markets recover, we can expect a significant narrowing of the spread between the 10 year and MBS. With recent spikes in the spreads, this became the bigger factor. Historically, it is the 10 year yield. If and when we get to a normal market (will we ever, and what is normal anyway), then yes the 10 year yield will play a critical role, but right now, it really is a complete guessing game to figure out which way mortgage rates will go even if it is obvious which way the 10 year yield will move.
And oh yes, one other thing. I know we have the lazy Google indicator around here, but what about the lazy Visa indicator? Been to a bunch of open houses over the past few weekends with friends who are actively looking, and quite frankly, this market is still very frustrating. Everything we have liked for the (rather expensive) price has gone into contract within days of seeing it, and then there is a bunch of stale garbage that is just not worth buying at current prices. It seems that if you want something nice (3/2, 1500+ sq ft, good area of the city, outdoor space) you are fighting other buyers for a 1.2+mil property. Where are the good deals on these types of properties. It seems the market is very soft in 1brs and small 2brs, but the good stuff is just still too expensive. Where are the deals?
mrbogue-
I just don’t see these homes flying. Yes, there are a handful that are selling relatively quickly (a week or so) – but there will always be buyers who are looking. A 4/2 selling for about $850,000 (in Rockridge) is a drop from 1 year ago – and we don’t know what contingencies the seller had to accommodate (i.e. put $20k in to fix the foundation, bring the electrical up to code, etc.). These are concessions we don’t know about that didn’t exist 1-2 years ago. It’s still a buyers market.
I’m not moving my search area. I’m completely positive that the price of today’s $800,000 home will be $700,000 at some point in the near-enough future for me. And think about that. I’m dying for a nice $700,000 starter home in a nice neighborhood. That comes out to about $4000/mo (assuming 100% financed) for my starter home. Rents in Rockridge are cheaper than that. So why should I make the purchase?
The answer is: I shouldn’t and I should rent. The facts remain unchanged this month, than they did last month and the month before. Supply is up, demand is down.
Supply – Pretty self evident it is up.
Demand – People are realizing they can’t afford these types of homes. If the average household salary in these areas is $125k/yr, then realistically, that household can’t afford more than $600,000 for a home. Banks and people are starting to adhere to this. Combine that with banks not allowing people to come to the table with less than 15% down, and it further stifles demand.
I’m no econ genius, but I know what happens when supply goes up and demand goes down. There is no alternate reality where this leads to prices going up. None. Are you seeing resistance to prices coming down to where they should be? yes. This is partly due to sellers sticking to their asking price or there-abouts, and not wanting to believe the housing market has softened. It is also partly due to the current crop of buyers hearing from their land-owning co-workers tell them that prices never fall – so get in. So the buyers are scared to wait. At some point both sets of people will be shook out.
Again, I’m no economist but there is a litmus test – and that test is: Can the average person in the area even come close to making the purchase? If the answer is “no”, then the prices are too high. The answer is “no” and will remain “no” until we see a 15%-20% correction. Don’t get caught up in the frenzy – especially when it’s just starting to die after 10 years of running rampant.
enonymous writes: “Where are the deals?”
part of the problem as you state very clearly is that there is an imbalance of housing in the city.
Most of what has been built are studios and 1Brs and small 2Brs.
very little is larger 2Brs or 3+BRs
thus, there is intense competition for the desireable properties and a relative glut of the rest.
Mr. Bogue:
I would recommend to you the following blog:
http://berkeleycrash.blogspot.com/
You will find there a very simple inventory of Berkeley properties that are subject to markdowns – sometimes of the multiple sort – many after sitting available for sale for months.
Yes, some properties are still transacting quickly and above asking.
But you are missing the Berkeley pricing forest for some trees.
IMHO,
Debtpocalypse
Oh, Mr. Bogue is obviously a realtor or a seller. Anyone who uses the term “frustrated” to describe themselves on a blog usually is not a real buyer.
That berkeleycrash blog is amazing. Some of those homes are in fantastic neighborhoods. To see something sell for a bit more than 2X its 1990 price (when 1990 wasn’t exactly a barnburner year) or 5K under its 2004 price is really amazing.
i’m a realtor? a seller? oh come on now! though i admit i own a small condo that i bought way back when (i’m not trying to sell however) the reason i’m “frustrated” is because i’m trying to find a house for my toddler who’s growing by the minute, so yes, i am very “frustrated” that the houses i’m tracking are being scooped up with multiple offers, etc.
i’ve also tracked the houses on the berkeley crash site, but each one i’ve visited had some strange problem:
1) overpriced ($1MM+)
2) broken garage, bad foundation, etc.
3) overpriced for the neighborhood.
4) flipper background
5) not a desireable neighborhood in berkeley (i don’t want my house/fence tagged, or my kid’s ass whooped on down the street)
etc. etc.
what i’d really like to see are some houses that are actually worth buying come around, and possibly stay on the market for awhile so I can make a realistic offer, but i seriously don’t think that will be the case with the “multiple offer” music still playing. i’ve been on the sidelines for a couple years now, and yeah, i’m getting pretty “frustrated”.
Anyone who dare to say anything, however slight, against the extreme doomday prediction of the extreme bears is either a seller or a realtor.
So, yes, by that definition, mrbogue, you are a seller or realtor. You just don’t know yet.
mrbogue-
Well, it sounds to me like you’re looking for the trifecta. Great neighborhood, great house, and no work needed. Even in bad markets, homes like these will be desireable. It sounds like you need to drop some of requirements as you’re not independently wealthy (and neither am I).
A few homes out there right now:
5708 Broadway – In Rockridge, on the market for over 70 days.
hi treeman
thanks for the list. some notes:
5708 broadway – broadway can get pretty busy, and i still keep wondering if anything past broadway can be even considered rockridge, since crossing the huge freeway-like broadway sort of takes away from the “walkable charm” thats rockridge.
5499 Kales – a bed & breakfast delight, but without a garage this house seriously has a crutch. I also think its on a *very* small lot. I’m pretty sure sooner or later the owner will have to budge on this one.
371 Hudson – yes, i’ve been watching this house for awhile too, and it has indeed dropped from 799 to 749. Though its way better than a house next door that went for like 649 (flipper house) it still has a really miniscule lot, which i believe is under 3000 sqft.
Vincente – this one also might be ripe for dealing on, but then again its close to telegraph (near the freeway) i know this neighborhood pretty well and its not very secure, alot of section 8 apts and run down fast food joints. if i was younger without a child i’d probably think about it, but then again, i’d probably just stay put in my current housing situation.
Keep one thing in mind when you look up “all them sales” – REO(s) sell much quicker then the long drawn out short sale process. REO(s) make up a very large portion of the current inventory – more so in certian areas.