Thursday, January 17, 2008

December, 2007

Ok, so I am going to break my self-imposed rule (ok, guideline really) and comment on DataQuick's latest because, well, frankly, it's been a while since we've seen negative price changes in Marin. And besides, judging by the off-topic meanderings of the comment thread in that last post, I desperately need an excuse for a new post...

According to DataQuick, it appears that Marin and SFO have joined the rest of the Bay Area with not just hefty sales declines, but price declines as well in December, 2007:

Now, we've seen negative price "appreciation" in Marin before from DataQuick (e.g., here, here, here, and here). So it is presumptuous to get worked up over this. If a pattern forms, well, then all bets are off of course. But I will note that this is the largest single month year-over-year decline in Marin prices from DataQuick that I've seen since I started paying attention to their data.

I found this quote from DataQuick's press release interesting (to say the least):
"There's been a significant drop-off in home financing with so-called "jumbo" mortgages. Because homes are expensive in the Bay Area, this has had a much greater effect on the market there. It looks like most non-essential buying and selling activity has been put on hold until things settle down," said Marshall Prentice, DataQuick president.
Until things "settle down"? You're kidding, right?

And then...
The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,756 last month, down from $2,963 the previous month, and down from $2,828 a year ago. Adjusted for inflation, current payments are 5.5 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 16.9 percent below the current cycle's peak in June last year.
How can this be bad? People paying less, I mean. And the "typical" monthly payment is only 5.5% above that of Spring, 1989?! WTF is that? Eighteen years of (under reported) inflation and we are up only 5.5%?
Foreclosure activity is at record levels...
You don't say?


So what about sales? Below is a graph of the number of sales in Marin County for each month of December since 1994 (source: DataQuick archives):


Kinda reminds me of this:


So anyway, yes, that's right; December, 2007 Marin sales were the lowest they have ever been since DataQuick started collecting data.

Here is the historical view of the Marin Heat Index measuring sales activity (annotations are mine):

And what did the Marin IJ have to say... I don't care.

Ok, now it's your turn. What does it all mean? Or does it mean anything at all? Leave your comments at your leisure.

11 Comments:

Blogger mountainwatcher said...

This comment has been removed by the author.

Jan 18, 2008, 1:17:00 AM  
Blogger clemente619 said...

Marinite,

Good post.

You're right to point out that we've seen median prices dip before, but have not seen a couple months in a row yet. Perhaps we've finally arrived.

Regarding the IJ and the Marin Association of Realtors, compare last month's MAR quote to this month's:

Dec 2007:

"If you are an investor or a buyer, now is the time to leap into the Marin County real estate market," said Valerie Castellana, president of the Marin Association of Realtors.


Jan 2008:

"One thing that I always tell my clients is the rest of the nation seems to be a rollercoaster, a pretty wild ride sometimes, but real estate is local," Swift said. "Overall activity in listings is down year over year - that's no surprise to anyone. The average sales price, the median, hasn't gone down like it has in other parts of the country."

The December quote is batsh*t crazy. The January one actually has a grain of truth to it. Yes, there is the outright factual error saying "Overall activity in listings is down year over year" -- no, sales are down, listings are up. But this is true: "The average sales price, the median, hasn't gone down like it has in other parts of the country."

Could this be a new MAR tactic: sprinkle a little bit of truth (albeit missing the larger picture and meant to deceive) into the spin? If so, devious -- and brilliant!

Jan 18, 2008, 7:25:00 AM  
Blogger Matthew said...

One of my least favorite people given her pompous assness (not sure that's a word, but I like it), is Leslie Appleton Young.. lets refer to her as Lez ..

In Ben's blog yesterday, he quoted her saying something to the effect that "bottom is close if not here, and, for you buyers, nobody will be ringing a cow bell to tell you when we've reached bottom, so you should be buying now"...

I want to barf... I'd like to pull a Mo Howard and poke her in the eyes first though..

With that self-serving, misleading and completely inaccurate statement, she will probably reel in a few more FB's who still believe this thing is poised to rocket ahead once again as soon as it hits bottom...

I say baloney... as in all past peaks/busts, we'll have a period of flat to very slow growth over several years as everyone licks their wounds.. Also, please tell me Lez what will be the driver(s) or fuel for the next rocket ship?

Your industry put a fork in the credit and lending markets bag of tricks already, unless you have not figured that out yet.. Employment is slowing or crashing, especially in RE related businesses and wages are relatively flat, so what's the driver going to be after that cow bell rings?

Save your breath and go hit the gym, you could use it..

Jan 18, 2008, 7:40:00 AM  
Blogger Matthew said...

"If you are an investor or a buyer, now is the time to leap into the Marin County real estate market,"

"Leap"... carefully chosen word no doubt.. except, prospective buyers think they'll be leaping to grab the ladder rung on that helicopter hovering off the cliff for the next flight up.. better be very careful as objects seem closer than they really are... look out below..

Jan 18, 2008, 7:45:00 AM  
Blogger Lisa said...

Hey, why not step up and play RE roulette with 100% financing? But now with Jumbo loans harder to get, and down payments and income documentation becoming the norm, I have to believe people are going to think twice before buying.

The fact that sales were down around 30% says to me: 1) People don't have the money for these houses and can't qualify under tighter lending standards, or 2) Those that have the money aren't choosing to buy.

And remember sales in 2007 were down versus 2006, so we're probably 40-50% off peak sales.

Jan 18, 2008, 9:46:00 AM  
Blogger marinite2 said...

And remember sales in 2007 were down versus 2006, so we're probably 40-50% off peak sales.

You can see this quite explicitly by looking at the second graphic in this post. Peak December sales were a little above 400 units in 2003-04. December, 2007 sales was a little less than 200 units. So yes, the total drop is over 50%.

Jan 18, 2008, 9:59:00 AM  
Blogger Lisa said...

In the last California bust, sales fell off first for a couple of years, and then prices followed.

2008 may be the year denial finally starts to crack around here. Peak prices are gone and they're not coming back.

Jan 18, 2008, 10:54:00 AM  
Blogger Kevin said...

I predict the next Marin bubble will be in therapy... talk about having all the elements locally around here for that witch's brew to get cooking... time, narcissism and now the slow death of their mantra..

Anyone have a stock play on this one or should be stick with a drug company like Pfizer (more valium please) as the obvious play?

Jan 18, 2008, 12:05:00 PM  
Blogger marinbizguy said...

It will be interesting to see how the median price moves over the next few months. The high end buyers ( who are still purchasing in large numbers ) are causing the median price to be inflated. Looks like we might have two markets here that are moving in different directions-High end buyers that will continue to purchase as they have the funds and desire to be a homeowner here and the median buyer who is squeezed. Only time will tell. When we had a downturn in the market the last time the buyers sat on the sidelines for months and then all came back at once to drive up prices. My forecast is that will not happen here. Marin is still a wonderful place to live and prices will not drop materially as they have in many parts of the country due to our supply/demand characteristics.

Jan 18, 2008, 5:32:00 PM  
Blogger Marinite said...

The high end buyers ( who are still purchasing in large numbers ) are causing the median price to be inflated. Looks like we might have two markets here that are moving in different directions...

Which is why in general the county-wide statistics are not all that meaningfull at the moment. Yet despite that, the fact that we had negative "price appreciation" last month becomes even more significant. To me that means there were fewer "upper end" houses sold (maybe the upper end is more relaxed/less stressed/less urgent about needing to sell/buy). The negative price is more reflective of what is currently going on in the rest of the market.

That segment of the market which is "immune" to tightening lending, defaulting subprime, soon to be defaulting Alt-A, is getting smaller and smaller, localized in smaller and smaller areas. Things are looking up for the rest, the "normal" buyers.

But no doubt realtors and agents will focus their public relations and opinion pieces more and more on what is happening in the upper end, generalizing it to the whole market, in a desperate attempt to make it seem that the whole market is doing just fine "thank you very much".

Jan 20, 2008, 1:07:00 PM  
Blogger Lisa said...

"To me that means there were fewer "upper end" houses sold (maybe the upper end is more relaxed/less stressed/less urgent about needing to sell/buy). The negative price is more reflective of what is currently going on in the rest of the market."

Or perhaps there aren't a whole bunch of all-cash buyers. Perhaps that's just another one of our urban myths here in Marin...you know, everyone paying cash for a $2MM stucco box in Tiburon as they drive off in their brand new Mercedes.

I can only imagine it's getting kinda tough to qualify for a $1MM+ house unless you are prepared to cough up a big downpayment.

Jan 20, 2008, 8:11:00 PM  

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