Tuesday, May 08, 2007

Marin RE Market in a "Depressed State" According to One Marin Agent

It seems that at least one Marin agent is willing to concede what we've been predicting here all along (despite the invective of certain bulls), at least for this still quite early stage of the bubble's unwinding (see quote section, below). Basically, very expensive houses, those occupying the upper 20% of the market (in terms of price), are still being sold with gusto as their buyer's are unaffected by the gradually tightening lending standards. The bottom 40% of the market is tanking. The middle 40% hasn't made up its mind yet.

What to expect: Statistics calculated over the entire county should show the median/average going up, even if slightly, because it is primarily the priciest houses that are driving those calculations. If your house is part of the bottom 50% or so of the market, you can be fairly certain your house has lost value.

Furthermore, expect the further tightening of lending standards to push the dividing line between that segment of the market that is selling vs. that segment which is not to continue working its way up the price scale.

On a related note: I spent much of the evening looking at listings on ZipRealty that are currently on the Marin market and that were last sold around the market's peak, mid to late 2005. What I noticed is that of those houses, the asking price (err, "wishing price") of a good three-quarters of them are only slightly above their original 2005 purchase price (too many houses to make for a reasonable post). After taking into consideration commissions and other costs associated with selling, they will be lucky to break even. More than likely they won't sell at all as sellers are loath to bring a check to the table at closing.

Marin RE bulls like to quip, at least when it is in their favor to do so, that a house is only worth what someone is willing to pay for it. In a free-market (which the housing market most certainly is not) that's true. But what I'd like to know is how much is a house worth that doesn't sell? $0?

Furthermore, many of the POSs that I've made fun of in the past, those that I am very confident didn't sell, are not on the market at present. Why? Maybe the seller gave up? Maybe the seller is trying to rent them? Who knows?

Some choice quotes:
We all have been seeing and hearing in the media about the depressed state of the housing market. Our Heat Index numbers in most categories definitely support this...

BUT--it's fascinating that the two highest-priced tiers of the Marin MHI ($4 million+ and $2 million--$4 million) are as hot or hotter than they were on the same date two and three years ago during our record setting sellers' market. In fact, the MHI reading for homes above $4 million is 25% higher now than three years ago at a most intense phase of the boom market...

On the other end of the spectrum, our Indexes of homes priced Less than $1 million make a dramatically different showing, with current intensity levels down rather shockingly--from 60% to 86% lower than their readings on the same date two and three years ago...

Put another way, current market intensity in the highest 20% of Marin's market (those listings Above $2 million) is at or above the readings during boom years of 2005 and 2004, while Condos and most of the lowest 40% of the market ($1 million and below) are experiencing a sharp drop in intensity levels making those market segments significantly cooler than during the boom years...

By the way, just to follow-up, our first-of-the-year predictions forecast a balanced market by April. While the market in Marin did indeed warm through the early spring, it only approached, but never reached the threshold for balanced market readings [it didn't even come close]. Then the market cooled slightly again...
And for what it's worth: I'd like to say that Nate Sumner (the agent who maintains the Marin Market Heat Index) has earned a "gold star turd" in my book. Any agent who can admit that their predictions for this year were way off and who can (at length) write up a market discussion that does not try to put an obviously bogus positive spin on a down market is worthy of mention if for no other reason than its rarity. Assuming I am correct in my judgment, I wish more Marin agents would follow his lead.

12 Comments:

Blogger Susan said...

Great analysis - but, probably like many readers here, I'm wondering (and hoping) when we're going to see some actual price declines in all price ranges. If the asking price of your Zip Realty sample is above the 2005 level then it doesn't seem like there has been any correction. Will we ever reach the capitulation phase of the cycle?

May 9, 2007, 8:18:00 AM  
Blogger hadrianswall said...

Prices have already started coming down. Did you miss marinite's post of a while back with all the negative "appreciations" by Marin town? Prices are brought down by those people who have to sell and who can get out above their outstanding loan amount. So you would not expect people who bought recently, in the last few years, to be able to sell at a price above their loan amount. Prices are set at the margin.

May 9, 2007, 10:00:00 AM  
Blogger rdm said...

The statement that the top end of the market is holding well while the under a million market is soft makes a lot of sense. I always felt that RE pyramid would collapse from the bottom. When the entry level buyer could not afford an entry level house even with the assorted creative
(read insane) financing contortions that proliferated in recent years, the market flattens and the "must buy now or be forever priced out" psychology that fed the illusion of ever rising prices ends. However, those in the next level(s) up shouldnt be too cocky as I dont see that the pyramid can stay levitated for long, it needs a foundation to keep it a float.

May 9, 2007, 10:07:00 AM  
Blogger Matthew said...

Marinite..

I disagree w/your analysis on the Nate Sumner’s honesty... your “gold star” standards are off my friend. And although he maybe better than the rank and file Realtor shyster, there is hype laced throughout his "analysis"... oh please..

The lowest priced homes will always move faster for several reasons (bubble or not)....

(1) Their cheaper;
(2) Prospective buyers are typically less educated and informed; and, the most important reason…..
(3) The "envy" divide between these prospective buyers and the shysters hocking and lending on these homes is the greatest. So, of course more product will move as more dumb decisions are made in this price range and the RE machine feeds on it.. hence $720K mortgages to strawberry pickers.

The highest priced homes are moving because some residents can afford them and a major market correction is small potatoes in comparison to landing finally at the top of the hill.

The RE machine’s #1 enemy here is not the buyers themselves, but anger and then apathy to their self proclaimed domain. Mine is still chocker block full despite Mr. Sumner’s “analysis”. Where is his mention of the mountain of debt due to reset this fall and the heat index’s projections beyond this very, very cool spring market here in Marin ? Well, it’s MIA that’s where.. What a surpise.

I’m surprised we didn’t see a front page on the IJ showing the heat index jumped to .66 from .64 in the first part of May (now back to .64 by the way)..

Nope, debt is real and forever unless it’s paid. Just like Debeers and his hyped diamonds..

Consumer debt is way out of hand and the real middle class knows it and feels it, so those “mid priced” homes will sit, and sit and sit with occasional buys here and there by the misinformed (or uninformed). In this case, the misinformed outweighs the later by a factor of 20 because of the machine and ingrained hype.

Matt...

May 9, 2007, 11:00:00 AM  
Blogger Matthew said...

Another passing observation here for my fellow bloggers to consider..

Which of the below terms sounds worse?

"Consumer Credit" ... or..
"Consumer Debt"..

Guess which one the RE Machine and MSM (and the Fed) uses in most of it's hype and articles ?

We're emotional sheeple..

Matt..

May 9, 2007, 11:16:00 AM  
Blogger Marinite said...

Matt:

I agree with you that Mr. Sumner's discussion was not without spin. But still, it strikes me a little better than most agents who do nothing more at such times than to pick out only those bits of data that they can positively spin in favor of their commissions.

The golden star thing was tacky. It really should have been my "Golden Turd" award (maybe I'll alter the post):

http://tinyurl.com/ywwvxs

But in all seriousness, I strongly believe in reinforcing good behavior and punishing bad. So, a little praise now and then.

May 9, 2007, 12:00:00 PM  
Blogger Matthew said...

Marinite..

Understand the need to note what little good is written by the RE machine now and then..

And speaking of good, one could say it was good (historically speaking anyhow) to say we were witness to the largest transfer of wealth this country has ever seen probably in it's history and it happened right before our eyes..

Who really made the money on this bubble? Who will be paying for it in the end? A check on Wall Street banking and hedge fund earnings and bonuses will give you a few clues..

Sir Allen & his banking buddies have no skin in this game and are "shocked" at what's transpiring.. yea.. right..

Matt..

May 9, 2007, 5:01:00 PM  
Blogger Holland said...

Yes, theres has been a systemic transfer of wealth from the middle class to the super rich. The wealth is being controlled by the very few people. This transformation has caused millions of people dislocated and disillusioned. Not to mention that since China entered WTO, there have been more than 1 million jobs lost in the US.

May 9, 2007, 5:30:00 PM  
Blogger Lisa said...

Marinite,

Yes, people who bought in 2004 or 2005 and are selling now are either barely at break-even or are losing $$. I'm seeing this in my neck of the woods (San Anselmo). I know the woman who bought my Fairfax house in 2004 (and sold in 2006) lost money, after 2.5 years of mortgage/taxes, $$ in improvements and realtor commission. Sweet. Her agent confirmed my suspicions.

At some point, the sheeple have to figure out that the only people making out like bandits are the ones who got lucky and bought A LONG TIME ago. Everyone else is just stuck with a mountain of debt that's probably impossible to maintain over the long haul.

May 9, 2007, 9:03:00 PM  
Blogger Matthew said...

Getting back from a late night of, well, never mind..

Saw an astute observation on another blog that I thought was worth jotting down over here in Marin before turning in..

"The Silent Partner"..

hmmmm... how interesting..

In this context the individual meant that "appreciating home values" have been the RE machine's silent partner in helping them hype the market and lure more and more unqualified FB's into this mess.. Seems their partner has gone AWOL and their scrambling for a new one..

Well, let me offer this little morsel to the machine..

"The Fed Up Enemy"... Yes, I think that represents me quite nicely…

Good night all..

Matt..

May 10, 2007, 12:57:00 AM  
Blogger Matthew said...

An ugly day in the market today kicked off by much lower reported sales at Wal-Mart..

Not sure what this means really other than... well, perhaps the stretched consumers are speaking?

I'm sure there is a housing silver lining in there somewhere though? ... anyone ?

Still sitting nicely on a few luxury consumer short positions since the beginning of the year as this disaster continues to unfold.

May 10, 2007, 1:25:00 PM  
Blogger mountainwatcher said...

I wish no harm to any investor.

I just want some fair prices here in Marin.

Fair is fair.

I'm requesting a 30% reduction.

The stupid rise up was predicated on so much BS.

I will buy if I love the property and they give me 30% off.

May 11, 2007, 2:08:00 AM  

Post a Comment

Links to this post:

Create a Link

<< Home

Terms of Use: The purpose of the Marin Real Estate Bubble weblog (located at URL http://marinrealestatebubble.blogspot.com/ and henceforth referred to as “MREB” or “this site”) is to present and discuss information relating to real estate and the real estate industry in general (locally, state-wide, nationally, and internationally) as it pertains to the thesis that recent real estate related activity is properly characterized as a “speculative mania” or a “bubble”. MREB is a non-profit, community site that depends on community participation and feedback. While MREB administrators do strive to confirm all information presented here and qualify all doubtful items, the information presented at MREB is neither definitive nor should it be construed as professional advice. All information published on MREB is provided “as is” without warranty of any kind and the administrators of this site shall not be liable for any direct or indirect damages arising out of use of this site. This site is moderated by MREB administrators and the MREB administrators reserve the right to edit, remove, or refuse postings that are off-topic, defamatory, libelous, offensive, or otherwise deemed inappropriate by MREB administrators. You should consult a finance professional before making any decisions based on information found on this site.

The contributors to this site may, from time to time, hold short (or long) positions in mentioned and related companies.