Thursday, May 17, 2007

April Results for Marin

Well, the Marin IJ really out-did itself today with their making a big hoopla about the Marin median house price crossing the million dollar mark. I hope they didn't break anything or soil themselves. As if rising prices are a good thing. Are rising medicare expenses a good thing? Is the rising cost of education a good thing? Is the rising cost of gas a good thing? Is the rising cost of food a good thing? Is abysmal affordability, the flip side of rising house prices, a good thing; is it something that a community should be proud of? Is having to be forced to build affordable housing a good thing? Is forcing people to drive an ungodly number of miles to commute in to SFO and Marin because of the out-of-control cost of living closer-in a good thing (and don't insult me with that classic Marin denial BS about them making that commute by choice; they have no choice)? And are all those miles driving, many of them through Marin, a good thing for the environment which Marinites claim to care so much about? No, we'd rather complain about whether someone builds a rock labyrinth in open space.

As far as I'm concerned the Marin IJ has lost all respect and any dignity it might have had. They have whored themselves out to the highest bidder, which is our local real estate industry. Yes, whored. As much as that word offends me, I don't know how else to describe them. Any newspaper worth its salt would have at least stopped and asked some basic questions, dug down at least a little below the surface, instead of taking things at face value. But I guess doing their job is too much to ask of the IJ. Short of starting a rival newspaper, I ask anyone who feels like me to cancel your subscriptions and never pay for that lame excuse of a newspaper ever again; I myself have not paid them a subscription in years.

Anyway, the following is a graph showing the percentage of houses for sale in each April since 2005 by price category. The data I used came from Vision RE:

What the above graph shows is what we (you and me) have been saying for a while now. In 2005 and 2006 the percentage of houses that sold in the below $1 million category, in the $1 million to $2 million category, and in the above $2 million category was essentially constant within each category. But in 2007 the bottom began to drop out of the "low end" of Marin's housing market. This is shown by the shorter yellow bar in the below $1 million category. Clearly, tightening lending standards, which have only just begun and have not yet had much of a bite, and the subprime "meltdown" have had an effect contrary to what Marin RE shills would have you believe. Furthermore, the number of houses in the $1 million to $2 million range increased in 2007 relative to 2005-6.

Hence, the reason why the Marin median price crossed the $1 million dollar mark in April, 2007 was not because houses suddenly became more expensive (err, more special). It was because the mix of houses that sold changed due to the deteriorating market conditions...only the higher end still has buyers that can still buy and their numbers are sure to dwindle as time goes by. Marin real estate agents with at least some shred of courage have admitted that this is in fact what is going on at the moment.

And if you are the proud owner of a "lower end" Marin POS you can be fairly confident that your crack-box has lost value and for good reason. Just look at that Mill Valley house that I've been tracking in my previous post; it has been on the market for 1.5 years (despite the fact that it has a DOM reading of five days) and the only reason why it didn't sell after the first few weeks is because the seller refuses to lower the price down to market rate. As it is, they are bleeding cash and will continue to do so until they finally throw in the towel either by choice or by default. And yet they are just one of many making up the "low end" in Marin.

Moving right along... the following data comes from Vision RE again. Look at all those negative "appreciations"! Not exactly indicative of a strong market.


The IJ and Vision RE as well made a big deal about the fact that SFR sales in April did not go negative like many of the previous months. The reason why is that April, 2007 is being compared to April, 2006 which itself was a strongly down sales market at -26%. The fact that April, 2007's sales were only slightly better than that of April, 2006 only means that our market this spring is as pathetic as it was last year.

The following graph is from Vision RE's (and West Bay RE before it became Vision RE) own dataset. Clearly, April's sales activity was nothing to be too excited about and, with the exception of the April, 2006 data point, April, 2007's sales activity was the lowest it has been since April, 2001.

The next graph is from data I've been collecting from ZipRealty.com. It shows the number of SFRs on the market in Marin since September, 2005 that were asking between $100,000 and $10 million. The point of the red lines is to demonstrate to you that Marin's inventory is currently about 16% greater than it was this time last year. Also note that the peak inventory in 2006 was about 45% greater than the peak inventory in 2005 (green line) and which current 2007 inventory has already surpassed... and it's still very early.

The next graph is also from data found on ZipRealty.com. It shows the number of SFRs (asking between $100,000 and $10 million) that are advertising "price reduced". What I find interesting about this graph is that this spring's selling season started out with about 12% more "price reduced" offerings than the same time in the spring of 2006. Again, it is hard to explain this based on your typical Marin RE industry shill's "everything is great, Marin is special" blather.

And finally, below, is the historical view of the Marin Market HEAT Index. The fat orange line is the Index for this year. The blue line is the Index for last year. Clearly, 2007 is turning out to be a lot like 2006; in fact, it's a little worse. (Incidentally, the Index is currently reading 0.63...well into a so-called "buyer's market".)

Now, don't get me wrong. I wouldn't be maintaining this blog if I didn't enjoy it. Heck, I've even survived desperate death threats. But mostly I do it because I have to...because the Marin IJ, as the local RE industry's propaganda outlet, cannot, no, has not been able to act in accordance with it's name... independent. I think it is utterly disgraceful that a nobody blogger, with a budget of exactly $0, can (at the risk of sounding self-congratulatory) perform a better job of portraying the Marin RE scene than a multi-million dollar (at least) industry which is so anxious that it must spend millions of dollars on a "propaganda blitz" to convince people to buy. Again, I ask any of you who are like-minded to cancel your subscriptions to the Marin IJ; they don't deserve your hard-earned money.

23 Comments:

Blogger Akubi said...

Murst!
And thanks for reminding everyone (yet again) that the IJ is a sorry excuse for journalism.

May 17, 2007, 7:44:00 PM  
Blogger Marinite said...

Murst!

I hope "Murst" is a good thing.

May 17, 2007, 8:01:00 PM  
Blogger Electrical Contractor said...

Great post! You're right on the money with the IJ. When I saw the cover of the IJ getting gas this morning I just rolled my eyes. I knew instantly that the only reason for the median increase was activity in the multi million dollar market. Developers that I have worked for are loosing their shirts in marin. There's tons of new sped houses in Novato that have been sitting for over a year. Tons of bankrupt contractors in marin.
Anyway, love your blog and read it daily. Keep up the good work.

May 17, 2007, 9:11:00 PM  
Blogger rdm said...

Marinite, that is a very well done and cogent post. While I admit to having a personal interest in seeing RE prices drop I really dont see "the good" for any but a few in the RE biz for the type of boosterism put forth in the I.J. They are singing hosannas that a new record price of over a Million for the medium price of houses sold in Marin. Yes of course it is a skewed number due to the stagnation and collapse at the bottom of the market, non the less it reinforces the image and the unfortunate reality that it is impossible to live here and not be filthy rich. You can live here, you just can't/shouldn't buy here(for now). It will no doubt cause more people to delve into their HELOC's on the false assumption that Marin is really an impregnable fortress and not effected by the normal financial/ home price cycles that occur in the country, thus leading to more pain in the future,IMO very irresponsible.

May 17, 2007, 9:43:00 PM  
Blogger Holland said...

Just got the following news that China might allow faster appreciation of their currency. If this happens, what does it imply? My guess is that 30-year interest rate in the US is going to go up since more money would come out from the US treasury and go to China.

Yuan Climbs; China May Allow Faster Gains to Narrow Trade Gap

By Christina Soon

May 17 (Bloomberg) -- The yuan had its highest close since the central bank ended a dollar link in July 2005 on speculation the central bank will allow faster appreciation to help narrow China's record trade surplus.

Chinese Premier Wen Jiabao yesterday said his country will gradually boost exchange-rate flexibility and take measures to balance trade flows. A stronger yuan increases export prices and cuts import costs. Vice Premier Wu Yi will meet U.S. Treasury Henry Paulson on May 22-24 in Washington.

``We've seen pretty strong numbers all these months and we're approaching the next strategic dialogue,'' said Huang Yiping, chief Asia economist at Citigroup Inc. in Hong Kong. ``The risks of overheating, over-investment and too much surplus and liquidity all point in one direction. The currency definitely needs to go stronger.''

The yuan rose 0.15 percent to 7.6707 against the dollar at 5:30 p.m. in Shanghai, its highest close since the end of the fixed exchange rate, according to the China Foreign Exchange Trade System. The central bank has allowed the currency to rise 7.9 percent since China dropped the link in 2005.

China's trade surplus ballooned 63 percent in April from a year ago to $16.9 billion, the General Administration of Customs said on May 11. Foreign-exchange reserves rose by a record $136 billion in the first quarter to $1.2 trillion.

Faster Appreciation

Export revenue is flooding the financial market with cash and making it difficult for the government to cool economic growth, which exceeded 10 percent for the fifth quarter in the first three months.

``China will gradually increase the flexibility of its currency regime,'' Wen said at the African Development Bank's annual general meeting in Shanghai, without being more specific. The economy still faces the risk of excessive liquidity, he said.

Some U.S. lawmakers say China keeps an undervalued yuan to benefit Chinese exporters, causing a widening trade gap between the two nations. The U.S. Commerce Department on March 30 levied duties on imports of coated paper to compensate for the Asian nation's subsidies to its exporters.

The yuan may rise 7.5 percent this year, Huang said. The forecast compares with the 3.5 percent gain to 7.41 by the end of this year, according to the median of 25 contributors in a Bloomberg survey.

``The central bank has allowed faster appreciation and they'll probably continue to do that,'' Huang said.

May 17, 2007, 10:04:00 PM  
Blogger Matthew said...

Interesting insight from the electrical contractor.. not surprised, but I / we appreciate that kind of honesty..

Have not fully digested the Chinese currency posting yet (thanks for it), but I'm also not surprised given their booming economy and the need to protect the yuan through the 2008 Olypmics.

What the IJ and the RE machine fails to acknowledge is where their bread is really buttered. Buyers bing the cash to the transaction and their corruption, hype and shenanigans have chased the buyers out.

I think I've said it before, but it's worth repeating. I believe (honestly) that those few "true" RE professionals will look back at this bursting bubble, and all the regulatory and lending checks that will follow, as the best thing that's happened to their (pathetic & corrupt) industry in a long time.

Oh yes, great post Marinite (thanks)..
Matt..

May 17, 2007, 11:48:00 PM  
Blogger Westside Bubble said...

Am I missing something? The DataQuick median price for Marin County rose $100K, from $825K in March to $925K in April?? It sure reinforces your point, Marinite, that the mix of sales has to have changed.

May 18, 2007, 12:17:00 AM  
Blogger mountainwatcher said...

Regarding Marinite's original post.....

Thanks for this well constructed piece of journalism.
You are approaching this in a scientific manner.
You post data from respected sources.
You dig deeper and analyze the data.

This is journalism of the highest degree.

You are doing what the "Independent" Journal should be doing.

You are in fact independent.

The IJ is not.

May 18, 2007, 2:00:00 AM  
Blogger mountainwatcher said...

FYI

The dictionary definition of independent.......

independent |ˌindəˈpendənt| adjective 1 free from outside control; not depending on another's authority : the study is totally independent of central government | Canada's largest independent investment firm. • (of a country) self-governing : India became independent in 1947. • not belonging to or supported by a political party : the independent candidate. • (of broadcasting, a school, etc.) not supported by public funds. • not influenced or affected by others; impartial : a thorough and independent investigation of the case. • ( Independent) historical Congregational. 2 not depending on another for livelihood or subsistence : I wanted to remain independent in old age. • capable of thinking or acting for oneself : advice for independent travelers. • (of income or resources) making it unnecessary to earn one's living : a woman of independent means. 3 not connected with another or with each other; separate : we need two independent witnesses to testify | the legislature and the judicature are independent of each other. • not depending on something else for strength or effectiveness; freestanding : an independent electric shower. • Mathematics (of one of a set of axioms, equations, or quantities) incapable of being expressed in terms of, or derived or deduced from, the others. noun an independent person or body. • an independent political candidate, voter, etc. • ( Independent) historical a Congregationalist. DERIVATIVES independently adverb ORIGIN early 17th cent.(as an adjective): partly on the pattern of French indépendant.


Hey Marin Independent Journal,

You gotta drop that "Independent' thing.
It just doesn't fit you these days.

You are totally dependent and you know it.

A new name would be so good for you.

Any ideas out there?

May 18, 2007, 2:11:00 AM  
Blogger Matthew said...

I'm out of here today folks for a while (out of country)..

I hope you can keep up the great work Marinite... I know it's a time sink for you, but you're doing a great job.. I hope some of the posters here can lend you a hand with a blog or two once in a while to help keep the interest high and the full court press on.. Remember, our kids will thank us for our efforts..

I'm sure my departure will be missed by the RE Machine... NOT!.. Ya know what I say to that...

Final thought and related to Marinite's accurate comments on skyrocketing prices of everything (and in memory of #41)..

"Remember, it's the price, stupid"..

Matt..

May 18, 2007, 7:32:00 AM  
Blogger Matthew said...

Oh yes, I'll be rolling my sleeves back up when I return, you can bet on that..

May 18, 2007, 7:33:00 AM  
Blogger Lisa said...

No wonder the bottom end is caving in. Lending is slowly getting tighter, even for those with good credit scores. 100% piggyback loans will be harder to get, and how many young couples have a downpayment saved for that $750K "starter" cottage in Marin?

I also have to believe that all the negative press and sob stories about IO/Neg Am resets have to be making people think twice about taking out those loans. And without them, we know most people can't "afford" these prices.

May 18, 2007, 8:10:00 AM  
Blogger bob said...

I'm not at all in favor of rising prices and as everyone here also agrees- the "median" is by industry definition based on a slippery slope, meaning if it can be leveraged to show the most positive side of the story, it will be.

While I am not necessarily defending the IJ as I don't read it,I imagine that its probably equally worthless as the one in my East Bay town. Most of the RE articles in our rag is written by Real Estate professionals.

I look at it two ways: First of all, like Marin, most of our town's inhabitants are a bunch of oldsters who bought back when the gettin' was good. About 50% of the population owns while the rest rents, which is surprisingly high. Despite this, it is safe to say that the longtime homeowners have far more disposable income to spare. The same is true in Marin. So if you're going to publish something that could have economic implications or the possible falling out of the most financially influential readers, then it would probably be best to cherry-pick information enough to make it pleasant for the readers.

Happy and financially smug homeowners means more business for the companies that advertise in the newspaper. Its one of those If I pat your back, you can pat mine kind of good-ole-boy relationships. If the newspaper were to say:" Medians are up but only because the upper end is selling.", then I'd imagine there would be a whole slew of businesses unhappy with that report. Think about it- As Marinite pointed out, Marin has no real industry. But it is probably like most Bay Area towns in that there are plenty of service industries made for the idle rich to indulge themselves in: Granite countertop, stainless steel appliance, and trinkety door hardware stores along with the zillions of other stay-at-home-mom type places- all which precariously exist on the willingness of people to feel confident that their 'disposable' incomes are assuring them access to luxuries such as more Saabs, Volvos, Mud baths, and overpriced groceries. If they suddenly hear that all is not exactly well in town, then they might tighten up those wallets. That's my assumption anyway.

Besides- do any of you actually real the local newspaper and think it is really all that important anyway? Ours is full of stupid stories like: " Mom opens a decorative balloon shop", or " the city celebrates the 20th annual Hot-dog cookoff" and other such disgustingly cute topics.

May 18, 2007, 8:57:00 AM  
Blogger marinite2 said...

Am I missing something? The DataQuick median price for Marin County rose $100K, from $825K in March to $925K in April?? It sure reinforces your point, Marinite, that the mix of sales has to have changed.

No, you are not missing something. I am missing something. I didn't even notice that and you are quite correct in your conclusion, it only makes the point that more obvious that the bottom has dropped out (is dropping out).

Matt -

It's a drag you won't be leaving comments for a while.

May 18, 2007, 9:56:00 AM  
Blogger Holland said...

The US should watch out for what it is wishing for - appreciation of Chinese currency. We got what we wanted this morning from the Chinese government. Guess what happened? The 30-year interest rate went up, gold went up, and oil went up. The market is saying inflation is on the rise. How high will the 30-year interest rate go? Will we see 5% or above very soon?

May 18, 2007, 5:49:00 PM  
Blogger hadrianswall said...

One thing you forgot to mention is that the change in mix of what is selling is outweighing the drops in price at the high end. So everyting is tending to sell for less but the fallout at the bottom outweighs the price cuts so the median still goes up.

May 19, 2007, 11:16:00 AM  
Blogger Lisa said...

In the Saturday IJ, Open House listings ran for almost 4 pages. And to think that's just the inventory that's OPEN this weekend.

Where are all the buyers for these houses? Don't they realize how happy they'd be dedicating 50%+ of their take home pay to be a FB in Marin?

No wonder the Marin Heat Index is in the low '60's. Inventory is through the roof, but you'd never know it from the la-la-la the Marin IJ prints.

May 19, 2007, 1:45:00 PM  
Blogger Suz said...

Thanks for the insight and additional data, Marinite. I'm an avid reader of your posts and, thanks to you, when I saw the IJ article, I knew immediately the real story behind the headline.

I'm one of your readers who does not usually post a comment but I couldn't resist on this post. These sentences (Casetella is Valerie Castellana, president of the Marin Association of Realtors) stood out for me:

"Castellana said the median has been pushed up by sales at the high end of the market. Drawing upon Bay Area Real Estate Information Services, a regional database, Castella said 59 homes above $1.5 million were sold in Marin last month, a 40 percent increase over the previous April.

"Sixteen homes over $3 million were sold in Marin last month, up 77 percent from the nine sold in April 2006, she said.

"Whether the $1 million threshold will hold is difficult to say, she said."

I found it noteworthy that she's trying to manage expectations and was upfront about the reasons behind the increase.

May 19, 2007, 1:50:00 PM  
Blogger Marinite said...

suz -

Welcome. I am glad that at least one of the "silent many" has decided to leave a comment. Please do so again.

I also saw that comment by Castellana and almost decided to comment on it in the main post. But the post was running long so I didn't. Too bad the IJ decided to bury that comment so far down in their article as it cuts to the heart of the truth.

FYI: I updated the inventory graph in this post to show just how much inventory has been growing since 2005. It's a backlog and I fully expect peak inventory in Marin (around September) to set a new record over recent history.

If you find this site useful please tell other people about it. I don't go around advertising myself as I naively hope that readers who use this site will do the advertising for me. I want to help the "little guy" and the non-investors... people who just want a house to live in and raise a family in... so the uber-rich and the investors are not the readership I am looking for.

May 19, 2007, 2:05:00 PM  
Blogger Lisa said...

The SF Chronicle did the same thing. Lead with the pumped up headline of 6% appreciation, then bury the reality mid-article. If the higher median is so easily explained by sales skewing towards the higher end, why all the crap about how we continue to be so special, so immune to price declines, blah, blah.

I can only assume the writer is sitting on an IO mortgage and doesn't want to be the one to break the news to the Greater Fool he's counting on.

May 19, 2007, 3:28:00 PM  
Blogger Marinite said...

Every community thinks they are special and immune. Coming up with reasons for why your community is different is easy. But market forces and economic fundamentals are indiscriminate. Just the other day I was reading a story about RE in Bakersfield and the agent the paper was quoting was going on about how special they were and whatever problems in the market there today those problems were temporary because they were so special and everyone wanted to live there. The list goes on, Phoenix, San Diego, Las Vegas, Miami, Reno, Sacramento, the Inland Empire, Orange County, Sonoma, Napa... all of them claim or have claimed at one time that they are special and therefore immune.

Even agents in Manhattan, NY were going on and on at one time about how special they were and because everyone there is rich and makes big money on Wall Street they were immune. Sound familiar? Well, they are not doing so hot today. Prices there are down by over 18% due to the breaking of the move-up chain:

http://tinyurl.com/3dapqf

As Mish (listed in right margin of this blog, near the bottom) says about this development in Manhattan:

“Anyone [in Manhattan] who did not expect this is the greater fool.”

May 19, 2007, 11:07:00 PM  
Blogger Lisa said...

"Every community thinks they are special and immune."

The kicker is that this is such deja vu with the NASDAQ meltdown. There were so many reasons why money in those stocks was safe....all the retirement money in the market, people were comfortable buying the dips and my personal favorite, "the new paradigm" for valuing companies. Like it made perfect sense for Travelocity to be worth more than the 3 major airlines combined.

That's why I'm baffled about the denial here in the Bay Area about RE. We've seen first hand what happens when markets disconnect from fundamentals. It's a lovely ride up, but when reality hits, it's very, very ugly. Job losses. Stores and restaurant closings right and left. Nothing saved all that speculative money. I can only assume nothing will save housing, either.

May 20, 2007, 8:48:00 AM  
Blogger vfsv said...

"The Last 30 Days (Apr'07 data)" publishes similar data for Santa Clara County at:
http://www.viewfromsiliconvalley.com/id330.html

Coming soon: a breakdown of the implied size of the 2005, 2006 and now 2007 median house...

Thanks!

May 20, 2007, 10:34:00 AM  

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