Here's recent history of the Fed’s policy committee and its Fed Funds rate. Next Fed decision is June 24/25.
Sellers want more for O.C.’s pricier homes. Again!
June 12th, 2008, 12:01 am · 87 Comments · posted by Jon Lansner/O.C. Register columnist
May numbers from HousingTracker show a growing tale of two cities for Orange County real estate. At least, from a price standpoint looking at this accompanying chart.
We see at the top, so to speak, a 5-month string of sellers raising their typical listing price, as measured by the 75th percentile (median of the top half.) HousingTrack pegs this benchmark for May at $848,500 — up 0.4% from April and down 5.6% from a year ago. All told, the 75th percentile’s asking price is up 6.1% since January.
Now look at how the other half lives in O.C. Or, well, how they sell. For May, the 25th percentile’s asking price (that’s the median of the lower half) was $359,950 — 13th consecutive monthly drop
off 3% from April and down 27.7% from May ‘07.
The grand question is whether the top half is living in a fantasy world or the bottom of the market dealing better with reality. Or, is it an example of the sharp drag created by a wave of lower-priced homes being slogged through the foreclosure wringer.
Other local pricing news …
• Local appraisers found SoCal pricing at its weakest in 43-plus years.
• Price cuts make the typical O.C. house more affordable than it’s been in five years.
• Buyers may be noticing that the O.C. rent-vs.-purchase math has improved.
• And, pipeline of new purchases put into escrow by brokers is at 2-year high.
June 12th, 2008 at 12:50 am
It’s been a while since I had a stats class, but my SWAG opinion is that the middle 50% has pulled itself off of the market and the bottom 25% is swelling.
The bottom 25% is garbage. Garbage that fetched $550K for SFRs in the heart of Santa Ana’s worst neighborhoods that rent for MAYBE $1450 a month.
Anyway, you could write a thesis on this one topic. Interesting story here, Jon.
June 12th, 2008 at 12:51 am
The first paragraph should of ended “, the combination thus skewing the data set”. Sorry.
June 12th, 2008 at 6:05 am
Bottom 25% - read “banks that loaned money to a stiff on an asset without verifying what is was worth, or inflating what is was worth so they could make ‘more money.’”
June 12th, 2008 at 6:14 am
EM concepts are backed by 10 years experience, helping to manage private clients’ international property investments.
When an industry member or other person who enters into a guaranteed sale agreement with a seller purchases the seller’s real estate pursuant to that sale agreement, no commission is payable to that industry member or other person by that seller in respect of that trade
Please correct me if I am wrong, but I read that and does this mean that the buying agency cannot collect a commission? I know that they will factor that into the guaranteed sale price but still would like clarification.
June 12th, 2008 at 6:47 am
Maybe … just maybe, that’s the reason why the homes in the 75 percentile just kinda sit on the MLS like Christmas ornaments.
My suggestion — sellers better get off the piece pipe because the game is over … the jig is up … and the music has stopped.
June 12th, 2008 at 7:01 am
“The grand question is whether the top half is living in a fantasy world or the bottom of the market dealing better with reality”
I think the answer is that they are living in a fantasy world.
June 12th, 2008 at 7:13 am
John-
It would be very interesting if you could get data for monthly sales in the same ranges as you see above.
I agree with Lee in Irvine.
If you look at Dataquick’s zipcode tables, the sales volumes at the top have fallen off fairly dramatically. So you can really tell by the median alone:
Through May 20:
City Sales Change from Last Year
CDM 14 -44%
DP 28 -28%
LB 13 -60%
LW 23 -40%
NB 40 -40%
VP 6 0%
Versus
GG 92 +25%
SA +10%
June 12th, 2008 at 7:16 am
Should’ve been, “So can you really tell by the median alone?”
The median is skewed, yes, but think what it would be if sales volumes at the top matched those at the bottom…what would the prices have to be to match the sales volumes at the bottom?
June 12th, 2008 at 7:53 am
The higher end folks are clearly still in fantasyland. It’s like they all got a check in the mail for $500,000, but now that they’ve waited to cash it, the rumors are circulating that the account to be drawn on will soon be empty. No one wants to believe that it is true.
June 12th, 2008 at 8:04 am
It’s a seasonal bump in prices that goes along with the seasonal spring home demand. The lower end seasonal bump in pricing has been overwhelmed by the foreclosure tsunami. I predict that by July the numbers will show a resumption of the downturn in the high end–you can see that it has already flattened out in the past couple measurement periods.
June 12th, 2008 at 8:05 am
I’d say the top is not dealing with reality, there’s over two years of inventory in the upper-end market, but the train wreck is coming to that price range soon as it must follow the lower-end. People are only willing to pay so much for the difference between price ranges. I liken it to the difference between cars; a BMW is only worth so much more money than a Toyota. As an example, yesterday in Lemon Heights, a very nice home built in 2001 with a view and 6,800 sq. ft. reduced $500,000. Ater starting at $2.8, then $2.5, it’s now $1.999,999. In 2001 it sold for $1.7 with no landscaping and pool! It is not a short pay, the Seller has just decided he wants out. This will continue to happen and these new sales will be the comps for the higher-end, driving down sales prices. The upper-end is poised for a huge crash in prices and I define the upper-end as any home that’s more than double the median for a given area.
June 12th, 2008 at 8:20 am
greed & stupidity, greed & stupidity. but I’m sure Thoughtless will chime in any second telling us all those higher listings have multiple offers and will be closing any day now.
June 12th, 2008 at 8:29 am
Housing Tracker combined with the information from DataQuick on homes sales give a great view of the market.
a) Asking prices are still falling indicating that we are nowhere near the bottom of the market.
b) Homes above 500K seem to be taking longer and longer to sell.
By this time next year my estimate is that the median sales price will be 450K, and in two years the median will be 350K.
June 12th, 2008 at 8:52 am
Those darn sellers. It just is not fair. HA HA HA.
You all are pathetic.
June 12th, 2008 at 9:11 am
Ever since “jimmy” began his manic claims of the invincibility of Corona del Mar’s pricing I have occasionally looked at zip realty’s site and watched inventory and the ever growing number of listed properties reducing their prices.
Recently the ratio crossed over the 50% mark - meaning over 50% of the MLS listings have had price reductions since they were listed…..I have no idea how many others were listed, withdrawn and then re listed with a reduced price, but that does happen in other areas ………..
Speaking of “jimmy”……..
June 12th, 2008 at 9:20 am
This guy is the chief justice of the 9th circuit court of appeals…
http://apnews.myway.com/article/20080612/D918EA180.html
Yeah…nothing like this moralistic fiber presiding over cases.
June 12th, 2008 at 9:25 am
It seems that a lot of realtors in the OC are doing what I am doing and finding great success at it!
June 12th, 2008 at 9:35 am
I found out when I moved here to California several years ago that sellers list homes for whatever they want (my sister in law was listing her house over $200,000 above the zillow price in area with a reputable realtor). In Colorado when I tried to sell my house for $20,000 above the comps, the realtors told me to take a hike. Most realtors in California will list the home irreguardless of comps. That is the only explanation I can see for the disconnect between the listing price and the medium price dropping (which impact more the comps and not the seller listing price).
June 12th, 2008 at 9:39 am
Hedge fund manager banking on housing rebound…with a ton of cash exposed.
http://online.wsj.com/article/SB121321901442365679.html?mod=residential_real_estate&rejpartner=mod=hpp_us_real_estate
June 12th, 2008 at 9:40 am
I can’t understand the bulls leaping at every crumb of good news, but an obvious effect is that some sellers will up their price or sit tight waiting for a better deal. I think it is a head fake for the competition. It is dog eat dog out there if you are trying to dump your American Dream.
June 12th, 2008 at 9:41 am
Market forces will continue to drive down prices. But eventually these prices will stabilize. Unfortunately, it is likely that the strategy of Dallas-wing of the Fed reserve of raising interest rates is gaining ground (following the lead of the European and Asian central banks.) What does this mean? A longer, more sustained beat down of prices. This time by a different force than the current ones.
June 12th, 2008 at 9:49 am
# Scott Says:
— “Those darn sellers. It just is not fair. HA HA HA.
You all are pathetic.”
—
Come on Scott, don’t be nasty.
Those “sellers” are the ones who want to sell ….. there might be a few buyers out there but those who want to sell are going to have to compete for those few buyers.
This isn’t complicated; it’s called a market.
June 12th, 2008 at 9:57 am
you are right pdu….and it is your little local market where you are buying and/or selling which matters most.
June 12th, 2008 at 10:27 am
It isn’t just denial. Sellers have a price in mind and think that by listing +10% the offers will pour in at 10% below that. Remember the vast majority of people sitting in those high end homes know nothing except appreciation and bidding wars. Then too there is the problem of needs based pricing where the would be seller needs $xxx to pay off the notes.
June 12th, 2008 at 10:29 am
lwps
1. I am not a bull.
2. I am only pointing out what I have over and over again. The higher end homes will hold up better than low and middle class areas.
PDU
Reductions in listing prices mean nothing. Sales under comp value are something to discuss.
June 12th, 2008 at 10:36 am
If theres one thing that lansners good at its
the art of spin– read the titles …..
sellers want more for oc’s pricier homes
could read
high end homes are languishing on the
market with two years worth of inventory
price cuts make the typical oc home the
most affordable in five years
could read
home prices in OC are back at 2002 levels
its all in how you word your premise dear readers
its called SPIN
June 12th, 2008 at 10:37 am
Hey Mulliganville … that hedge fund manager you make reference to, isn’t doing to well with those investments.
Per Diana Olick @ CNBC:
So there’s a bit of a blurb in the Wall Street Journal today about billionaire hedge-fund manager Edward Lampert and his ESL Investments Inc. buying into a few home builders
He made these buys sometime in the first quarter of this year, so now everyone’s asking if his supposed bottom feeding was a tad premature.
The home builder stocks rallied briefly in the late winter/early spring, but now they’re down 15 percent in the last three months after already plummeting close to 60% in the last year.
So why did Lampert make the move, given the fact that he’s already way down on his investment? Maybe he feels that the stocks are low enough now that the downside is more limited than the upside potential. Of course, he’s also got a lot of money to burn.
Just because you made a lot of money in the past and you a have a somewhat, solid reputation as a money manger, DOES NOT mean you will be a wise fiduciary in the future.
June 12th, 2008 at 10:45 am
As with any investment lee…if he is long on them, historically he should be fine…and I am sure, given the climate of the RE markets perception, his position is very very long.
June 12th, 2008 at 10:47 am
I am only pointing out what I have over and over again. The higher end homes will hold up better than low and middle class areas.
Lee thinks it’s okay for you to entertain the idea and keep telling yourself that, but he strongly disagrees.
Kaput:
http://www.redfin.com/CA/Laguna-Beach/1420-Del-Mar-Ave-92651/home/4896859
June 12th, 2008 at 10:52 am
the bond market is finally waking up to
the fact that.. yes martha there is rampant inflation
hey gilligan what happens to the real estate market
when mortgage rates go up? take your time with
that one……
http://www.housingwire.com/2008/06/12/fixed-mortgage-rates-hit-eight-month-high-as-inflation-concerns-mount/
June 12th, 2008 at 10:55 am
Mulligan, Scott,
Trends, guys, it’s all about trends. Downward is the direction.
It’s all relative. A “nice” area carries a premium; always has and probably always will. However that premium needs to make sense from an emotional and a logical sense. Not all our purchases are only emotion based. Don’t forget it needs to make sense economically, which brings us full cycle to the affordability issue.
There are many things one might like to have and could even afford to have, but for most the money supply isn’t infinite and it becomes a question of priorities. What is one willing to give up in order to have something they might desire?
When that spread between a decent area and a “nicer” area becomes too great, something has to give. When is it too great? Who knows, since there are so many individuals involved, however there does appear to be a pattern developing with a slackening of sales at the high end and a growth of sales at the low end.
June 12th, 2008 at 10:55 am
if he is long on them, historically he should be fine
Oh really? Well, if history says anything about homebuilders, it is this — Enter at your own risk. Many went BK during the last real estate cycle. Since this cycle is turning out to be much more severe that the last one, we don’t know how these investments will turn out.
June 12th, 2008 at 11:07 am
pdu: I would counter that every purchase is emotional at its core. Once the need or desire is satisfied with the decision to purchase, then the financial haggling begins. It could be as simple as which jacket is the best deal, or as complex as wihch mutual fund to invest in. The emotion of not having the jacket or not having the money for retirement is the driving force for the purchase.
June 12th, 2008 at 11:20 am
Prices are at 4 year lows! Buy soon or dont complain in 5 years when there up 25% from today!
June 12th, 2008 at 11:38 am
“Lee thinks it’s okay for you to entertain the idea and keep telling yourself that, but he strongly disagrees.
Kaput:
http://www.redfin.com/CA/Laguna-Beach/1420-Del-Mar-Ave-92651/home/4896859”
This is anecdotal.
The consistent news speaks for itself.
June 12th, 2008 at 11:53 am
We are 4 years away from a market stabilization!
In 2004/5/6 the ARM’s suckered the buyers in…those 1, 2, 3 and 4 year bandits still have 1 or 2 years to go before they all expire & demand much higher payments.
Once that is done the backlog on the MLS needs to be sold but the banks will look at the buyer 3 times before they give anyone a loan….. .
My forecast for all levels? In the next 2 years another 7 to 12% down in price..which is different from value!
June 12th, 2008 at 11:57 am
hey gilligan I’m talkin to you
was my question too difficult?
lets try again….
what happens to real estate
prices when interest rates go up?
June 12th, 2008 at 12:09 pm
rantsid: are you speaking about IR in general or mortgage rates?
June 12th, 2008 at 12:17 pm
Mulliganville Says,
“As with any investment lee…if he is long on them, historically he should be fine”
You’re about as bad an investor as you are a realtor.
You want people to get raked over the coals now because in 20 years they will have recouped their losses?
More like you desperately need a commission or two so you can survive your reset.
People can wait this bubble out and save a few hundred thousand and live a comfortable life at that.
Only a fool would listen to your stupidity.
You were probably telling clients the same line in 2005 and we can now see what they’re currently going through.
Forget your commissions for once and tell the truth.
June 12th, 2008 at 12:18 pm
Hi William… : )
June 12th, 2008 at 12:21 pm
ok class, remedial posting time…
there =/= they’re =/= their
loose, looser =/= lose, loser
it seems many pb’s overwhelmingly have these problems, why I can’t explain
June 12th, 2008 at 12:22 pm
I make comments about a hedge fund manager and you equate that to my commissions…yeah, there is a correlation there you incompetent bafoon. Just what on earth does going long on LEN have to do with my listing in CDM? Nothing. What an idiot you are. So omniscient. So forthright. You are one grumpy old man who got burned by somebody in the RE industry and you spew garbage on a daily basis directed at me…that is called misdirected anger and you should seek help. Seek it fast.
June 12th, 2008 at 12:25 pm
that is due to many being uneducated bp…i can live with the typo and occasional misspelling. But, butchering the English language on a daily basis is quite comical…and it lowers the MEDIAN iq around here.
June 12th, 2008 at 12:31 pm
oh c’mon the median is not accurate, we all know that
I was about to go off and rail against the current housing market but this is more fun
FYI class:
Main Entry: rail (4)
Function: intransitive verb
Etymology: Middle English, from Middle French railler to mock, probably from Old French reillier to growl, mutter, from Vulgar Latin *ragulare to bray, from Late Latin ragere to neigh
Date: 15th century
: to revile or scold in harsh, insolent, or abusive language
June 12th, 2008 at 12:33 pm
You may think sellers are in “fantasyland” but the reality is that their perception affects price. Please try to remember that price is established by demand AND supply. If home owners in the higher end have the desire (and ability) to refuse to sell at drastically reduced prices, you have bargain buyers chasing fewer homes. In other words, the real “supply” of homes in this part of the market is relatively small, even with reduced demand. That is why prices have not reduced as much at the higher end where the sellers some believe are in fantasyland simply have a different opinion of the price at which they should sell. At the lower end, the sellers, by in large, have no choice but to sell or are banks who often will do what it takes to sell now. This isn’t unique in the real estate market. Personally, I think most modern art isn’t worth any more than the canvass it is painted on. Because some pretentious dolts (you know, someone like Nano) likes the stuff, they wouldn’t sell it for $2.50, even though I think that would be a fair price. Pretentious dolts support the market price of these art pieces because they won’t sell them for anything less than they think they are worth.
June 12th, 2008 at 12:39 pm
The rich getting richer and the middle class get poorer. Before long there won’t be a middle class Amercia.
June 12th, 2008 at 12:43 pm
Wait…I thought just buyers determined price…I must be missing something.
June 12th, 2008 at 12:59 pm
# Mulliganville Says:
“that is due to many being uneducated bp…i can live with the typo and occasional misspelling. But, butchering the English language on a daily basis is quite comical…and it lowers the MEDIAN iq around here.”
–
Just wondering Mulligan, should your first sentence have started with a capital letter?
Also, would this median iq you speak of perhaps be a reference to IQ?
Would this median IQ be weighted by number of posters or by the individual posts? If the latter we might come up with a very low IQ number as those who deny the market seem to post an inordinate number of times:)
June 12th, 2008 at 1:04 pm
I would welcome a literary upgrade on this blog. But, before we set the ground rules, you may wish to inform rants.
as i am sure he is going to be
miffed at out decision to utilize the
proper use of punctuation and
capitalization while we proved our
opinions on a market in which we
simply have no control over
June 12th, 2008 at 1:07 pm
I’m willing to sign a waiver for rants; it’s quite hard to rant and rave effectively with all that messy punctuation getting in the way.
June 12th, 2008 at 1:14 pm
smoe htnigs aer ipmotrnat - ot hlep ohtres ot ese hwta ew aer tyrnig ot sya.
June 12th, 2008 at 1:21 pm
Interesting analysis by CB – implies that as the amount of bank owned RE bottoms we will most likely see a very steep jump in prices as those that are currently waiting out the storm put their house on the market.
If I was a fence sitter waiting for the bottom I would be very nervous because unless my timing was perfect my RE choices at that point would be cheap junk that nobody wanted as the market went down, or an over priced stucco box from a seller that has a price not based on reality.
Very scary!
June 12th, 2008 at 1:27 pm
werty:
you need to beat rants up a little more to get his attention.
June 12th, 2008 at 1:32 pm
rants/jake/eat have attention decifit disorder.
June 12th, 2008 at 1:33 pm
Dr. GilliganVille - why don’t you put your money where your mouth is and learn to use capitals, periods and correct spelling on your own sentences?
“out decision to utilize the
proper use of punctuation and
capitalization”
That is ironic.
June 12th, 2008 at 2:01 pm
Money = Control
June 12th, 2008 at 2:19 pm
Active Buyer: What do you mean? Those that are currently waiting out the storm have already sold and are on the sidelines renting.
June 12th, 2008 at 2:20 pm
CB says:
Because some pretentious dolts (you know, someone like Nano) likes the stuff, they wouldn’t sell it for $2.50, even though I think that would be a fair price. Pretentious dolts support the market price of these art pieces because they won’t sell them for anything less than they think they are worth.
So what this guy is looking for is another pretentious dolt to buy his over priced home? How soon do think’ll he’ll find one? BTW, that current asking price is around 2006 pricing, me thinks he’ll have to swing a bit lower find that next dolt.
27696 Torija
Mission Viejo, CA 92691
Price: $845,900
Beds: 4
Baths: 3
Sq. Ft.: 2,609
$/Sq. Ft.: $324
Lot Size: 9,600 Sq. Ft.
Year Built: 1977
Listing Price History
Date Price
Feb 27, 2008 $939,000
Mar 18, 2008 $899,900
Apr 24, 2008 $879,000
May 05, 2008 $849,900
Jun 03, 2008 $845,900
Sales History
Date Price Appreciation
Apr 19, 1999 $427,500 —
Jun 18, 2001 $517,000 9.2%/yr
June 12th, 2008 at 2:43 pm
We can listen to permabulls on this blog or we can listen to what the big boys think is going to happen…
http://www.reuters.com/article/pressReleasesMolt/idUSN1147167220080611?sp=true
June 12th, 2008 at 2:53 pm
Jeff: “Prices are at 4 year lows! Buy soon or dont complain in 5 years when there up 25% from today!”
I predict the comment next year will be:
Prices are at 5 year lows! Buy soon or dont complain in 5 years when there up 25% from today!
And the one after that:
Prices are at 6 year lows! Buy soon or dont complain in 5 years when there up 25% from today!
June 12th, 2008 at 2:57 pm
eat it,
Thank you! I knew you would support what I have been saying all along. Thank you again.
June 12th, 2008 at 3:15 pm
Active Buyer: “If I was a fence sitter waiting for the bottom I would be very nervous because unless my timing was perfect my RE choices at that point would be cheap junk that nobody wanted as the market went down, or an over priced stucco box from a seller that has a price not based on reality.”
Another person bullish on OC RE attempting to use fear as a marketing ploy.
First off: someone waiting to buy right now - what do they have to be nervous about? You are insinuating several things here:
(1) that the inventory of distressed properties is shrinking significantly right now
(2) that the inventory of distressed properties will be shrinking in the near future
(3) that the inventory of distressed properties is difficult to track
(4) that the majority of sellers fall into the same category as those attempting to sell $800K+ priced homes - those that prefer to wait over a year to sell to get the price they want
(5) timing must be perfect - what are you kidding me?
You forgot - that there will ALWAYS be sellers that have to sell.
You forgot that the inventory of distressed properties have not shrunk as a percentage of overall inventory and the banks are still sitting on a ton or props that haven’t even hit the market already
You forgot that tracking that kind of inventory is not difficult by any means
You forgot that there are resources people can tap into to purchase certain information that can be used to determine what is in the pipeline - and the pipeline is quite fat right now
You forgot that their timing can be off by months if not by a year + and they will have plenty of time to score a deal - show me a time in history that this kind of inventory with that percentage of distressed props ever existed? Or the price run-up has been significant right after the bottom?
Lastly, you forgot that those that buy out of fear are plain idiots that should have spent the time researching and planning instead of believing the first fear mongering comment they read.
But I will give you kudos to a nice attempt at instilling fear. A better one than the usual: “they aren’t building any more land” - which happens to be the name of a frickin’ TV show
So far - I have been right on
Thoughtful: thanks for pointing that out for me on the thread concerning the use of fixed rate loans
OK - this will be my last comment: To those realtors out there, if you have a client that states, “I am buying right now mainly because I am afraid of getting priced out of the market,” what will your response be to them, if any?
Will you simply ignore the fact they are buying out of fear - a fear that is based solely on a lack of information?
Or will you ask that they go back and do their research and come back only when they are buying as a confident buyer and not making a decision based on fear?
or will you attempt to justify the fear with comments such as that made above?
What’s weird is that I am VERY bullish on OC RE but am in the process of picking up a third prop within the last 24 months - just not in this state. GREAT DEALS OUT THERE!!! Just not here yet.
June 12th, 2008 at 3:20 pm
Keep dreamin Scott…the high end while meet it destiny soon enough, even if you believe otherwise. If very little is selling because prices are too high, asking prices will be lowered until activity is found..right now, as you can plainly see, the prices are too high for many of these perceived high end areas (hence the slow sales activity). I have no allusions as to even hoping to purchase a home in these areas but, none-the-less, the market dynamics are clear to see. If the owners of high end homes can hang on then by all means..hang on but don’t expect everybody to just wait it out. Thus setting the comps for the neighborhood despite the holdouts. Here’s an example:
House listed between 500K-1Million in Eastwing in Also Viejo:
Address City Asking Price Bd/bath sqft $/sqft DOM
1 Heatherwood Aliso Viejo $684,900 3/3 2,085 $328 50
14 Meadowpoint Aliso Viejo $849,900 4/3 2,768 $307 62
30 Sandbridge Aliso Viejo $690,000 4/3 2,200 $314 121
25 Tanglewood Aliso Viejo $799,000 4/3 2,322 $344 155
2 Coppercrest Aliso Viejo $779,999 4/3 2,322 $336 195
11 Crestview Aliso Viejo $774,900 4/3 2,800 $277 131
1 Eaglepoint Aliso Viejo $899,000 4/2 2,185 $411 32
2 Sandbridge Aliso Viejo $699,250 4/3 2,0