Evaluations 1, Appraisals 0

[Randolph Kinney]

Easy money will draw renters into buying homes. We are in the last throws of easy credit with lose credit scores and little down financing.

Notice the homeownership rate is back to 1990 level.

Notice that the national home price index is at a new high, higher than the peak of August 2006.

 

[George Hatch]

What I am seeing is that active listings declined across the board ti shortage levels in 2012 and all prices came off lows. Then from there active listings in desirable / prime location areas flattened out at shortage levels and remain there today. In the less perfect locations, the active listings increased and prices stabilized off lows but did not continue higher to new highs. But in the less perfect locations active listings are now back to shortage levels. So this is why now the regional active listing data is showing fresh lows. I think the areas that did not fully recover now begin moving back to prior highs and eventually to new highs.

The last time around we broke supply and demand in to its user vs investment components. If all the action is at the margins it is that last 10% of demand (in an increasing market) or that last 10% of supply ( in a declining market) that drives the trend. So if the investors added that extra demand on the way up they will also add to the supply on the way down, thereby enhancing the effects of each.

Anyways, in a still-increasing market (which is where we are now) the homes sell pretty quickly. You don't start running into longer exposure times until the inventory starts stacking up, which in turn is what will drive the prices toward stability, and later on into decline. .


In our region, (San Diego County)

6,098 sales from 01/2004 - 04/2004 (median of 17 days on market)
5,711 sales from 01/2005 - 04/2005 (median of 41 days on market)
Some segments in this region started peaking a couple months later, while others didn't peak until 2006 or even 2007
4,578 sales from 01/2006 - 04/2006 (median of 51 days on market)
3,971 sales from 01/2007 - 04/2007 (median of 56 days on market)

Then it levels out for a bit before we start seeing the most motivated sellers surrender and start lowering prices.


5,282 sales from 01/2017-04/2017 (median of 19 days on market)
4,769 sales from 01/2018 - 04/2018 (median of 16 days on market)

There are currently 4,057 actives. Not quite 3 months supply. That's more than 51 days. Obviously, some of them will never sell so the ones that do will have shorter exposure times than the 10.2 weeks of actives would otherwise suggest.

 

[George Hatch]

The reason i bring up SD county is (firstly) because it's easy for me to do since I work here. The second reason I bring it up is because SD county was among the first in/first out of the last bubble, and was among the first to enter into increase during the current cycle. If your market got going later then it would most likely peak later, too. But we should all be mindful to refrain from conflating "it hasn't happened yet" with "this time it's different".

 

[Randolph Kinney]

Question: How many of the condos and homes are rentals versus owner occupied?

Question: How has AirBnB changed the demand for rentals?

 

[Joe Flacco]

The last time around we broke supply and demand in to its user vs investment components. If all the action is at the margins it is that last 10% of demand (in an increasing market) or that last 10% of supply ( in a declining market) that drives the trend. So if the investors added that extra demand on the way up they will also add to the supply on the way down, thereby enhancing the effects of each.

Anyways, in a still-increasing market (which is where we are now) the homes sell pretty quickly. You don't start running into longer exposure times until the inventory starts stacking up, which in turn is what will drive the prices toward stability, and later on into decline. .


In our region, (San Diego County)

6,098 sales from 01/2004 - 04/2004 (median of 17 days on market)
5,711 sales from 01/2005 - 04/2005 (median of 41 days on market)
Some segments in this region started peaking a couple months later, while others didn't peak until 2006 or even 2007
4,578 sales from 01/2006 - 04/2006 (median of 51 days on market)
3,971 sales from 01/2007 - 04/2007 (median of 56 days on market)

Then it levels out for a bit before we start seeing the most motivated sellers surrender and start lowering prices.


5,282 sales from 01/2017-04/2017 (median of 19 days on market)
4,769 sales from 01/2018 - 04/2018 (median of 16 days on market)

There are currently 4,057 actives. Not quite 3 months supply. That's more than 51 days. Obviously, some of them will never sell so the ones that do will have shorter exposure times than the 10.2 weeks of actives would otherwise suggest.

Leading up to the prior decline, you see the closed sales declining with DOM increasing. Your 2017 vs 2018 shows closed sales decreasing with DOM decreasing. Its only one quarter year over year but that seems to suggest that the declining number of closed sales is due to not enough inventory/supply.

 

[Joe Flacco]

Gotta look at the whole picture together. Prices, closed sales, active listings, DOM.

Looking at the full picture, the outlook to me is very positive.

 

[George Hatch]

The median price of housing for 02/2018 was $326,800. The avg interest rate reported by FRED for 02/2018 was 4.38%. Payment is $1632/mo x 12 mo = $19,584/yr.

Going back to interest rates, if the rate went up another point to ~5.4%, that monthly P&I would change from $1632/mo to $1,835/mo. We've only had sub-6% since 2008. It's not as if they're an entitlement or that we can expect them to remain below 5% in perpetuity.

 

[George Hatch]

Gotta look at the whole picture together. Prices, closed sales, active listings, DOM.

Looking at the full picture, the outlook to me is very positive.

I never said the end is upon us, only that we need to be mindful of what's going on.

The market needs participants who see things the way you do. Market psychology is one of the fundamentals.

 

[Joe Flacco]

I dunno. When I look at rates vs prices, I see no correlation. Or minor correlation. Rates were shooting higher in the 70's and prices increased anyways. And 90's when rates declining prices declined.

 

[George Hatch]

In general, I pretty much ignore NAR's talking points, *especially* when it's coming out of the mouth of their pet economist. They always think now is a great time to buy.
That's because a house is more than a house; it's a home.