Curb Your Enthusiasm

BusinessWeek is usually so pro-housing; immune to negative news and results; always a way to spin things in housing's favor. That's why I was so surprised by this article. It's even in their so-called "Smart Strategies" section of the print version of the magazine. Maybe they figure no one will read it now that we are in the pre-Holiday season. Or maybe their spinning machine is broken. Or maybe they've decided that the truth cannot be ignored any longer.

Housing booms are short and exciting. Housing busts, on the other hand, are long and painful. So don't put much faith in those oft-heard assertions that the worst is already over.

A BusinessWeek analysis of the past three decades shows that if history repeats itself, it's likely to take 15 years or more for many parts of the country to get back to their inflation-adjusted peaks.

The major markets that do least badly will be "revenge of the nerds" cities like Dallas and Houston that the boom bypassed. Even if all they generate is low-single-digit price gains, they will look good by comparison.

Advice to homeowners: If you need to sell and you're not getting much interest, cut the price by an extreme amount. If you make halfhearted cuts, you'll remain overpriced and you'll follow the market all the way to the bottom.

Advice to buyers: Bargain hard. Many sellers are still asking for too much.

...now is not the ideal time to buy or move up, even with the recent price declines.

Housing prices were pushed up in part by get-rich-quick speculation. Now real estate has lost its grip on the public's imagination. Says Richard J. DeKaser, chief economist of National City Corp. in Cleveland: "We're looking at several years of weak home prices. It'll return to the time when no one is talking about real estate." Oh, well. You can still take a flier on Google Inc

And by the way, that "15 years before a recovery" idea isn't theirs or at the very least it is not unique to BusinessWeek -- the same prediction was made by the folks over at iTulip (the same people who called the .com bubble) a long time ago.

November, 2006 Results for Marin

Thornberg says "pop" for the Bay Area:

“Absolutely, the bubble has popped," said economist Christopher Thornberg. "When a real estate bubble pops, it’s a slow-motion train wreck. Things don’t happen overnight."

But it's not so clear for Marin, not yet anyway; we'll be the last to go. And over at the Ben Jones blog he is reporting that "buying a California house 'doesn't make sense right now'"; can't deny that.

Anyway, here are the "official" results for Marin in November, 2006:

Like last month, DataQuick's initial release of their data has Marin bucking the trend:

Vision RE posted this data for their sampling of Marin:

What jumped out at me in Vision RE's data set was Larkspur. Larkspur has been on fire lately (go check out past data in the Marin Data blog) but not in November.

Here is the "price reduced" activity for Marin SFRs as of mid-December, 2006 care of ZipRealty:

As promised, here is the graph showing the numbers of Marin properties in some stage of foreclosure (and more) according to RealtyTrac (recall that I am taking a "snapshot" of the data on or about the first of the month; so, for example, the November, 2006 data probably best represents October, 2006, etc.):

The above graph indicates that foreclosure-related activity was up slightly last month. I don't yet have a feel for how fast this data changes from month-to-month.

Another Grotesque DOM Manipulation in Marin

Yes, it really is that small POS house in Mill Valley, on Shoreline Hwy, across the street from the 7-11 (699 sq ft, 2 br 1 ba, built 1923). The reason why I am bothering to mention this one again is two-fold:

First, the listing agent's write-up now starts off with "Motivated sellers are considering all offers!" (well, maybe that line has been there for a while but I've just noticed it) which is ironic considering it is quite obvious that this house is a flip-gone-bad (the sellers had first tried to sell it about five months after purchase) and the sellers have already reduced the price to their break-even point. Given how long this house has languished on the market at the current break-even asking price, the sellers have implicitly indicated that they will not sell for less than what they owe. So what does it really mean when the listing agent says that the sellers are "motivated" and "considering all offers"? What it means is that the sellers have not been receiving any offers above their asking price. If they have received any offers at all those offers must have been below their asking price. Such offers were rejected as the sellers would have to take a loss. So "motivated" simply means that the sellers still believe that they can screw over an ignorant buyer.

Second, the DOM statistic for this listing now reads 94 days. I first started blogging this house back in December of 2005 (because at that time it was such an obvious flip and that was a time on this blog when certain readers were desperately trying to make the case that there was no flipping going on in Marin because we're just too damn special, etc.)! So the real DOM statistic for this crappy little yellow house should read closer to 365 freaking days on the market!

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For the record, my first post on this tiny house was here. I then dug deeper into the financials of the sellers here and was able to surmise that their then (and now) current asking price is in fact their break-even point whereas the fair value for this house is about $100k less than their break-even point. I then included it in this post here.

Buyer Beware in Sausalito

I was poking around the listings today as I am known to do and I found this beaut. I'm frankly not sure if this house belongs on the Marin POS blog or here.

But anyway, this Sausalito house (pictured below on the left, but both appear to be for sale) comes in at 2 br 1 ba, built 1907, last updated in 1927 (according to Zillow.com), 1028 sq ft, and has been on the market for a whopping 648 days.

The sellers are asking an even $1,000,000 for it; there have been no price reductions in the last 648 days as far as I can tell. Zillow.com reports its "zestimate" at $762,743. So no wonder it hasn't sold: at $973/ft^2 it's grossly over priced.

The owner purchased the house in 1972 and owns it free and clear and is using it as a rental (thanks to a reader for that bit of info). So they can afford to wait for their wishing price (they've waited nearly two years so what's another two?). But then again, they can also afford to cut its price by quite a lot. Any buyer worth their salt should come to the bargaining table armed with this info.

In addition to the price range given for this shack, what I like about the following picture (from Zillow's web site) is the market value graph for the last year. These days you see this pattern for a lot of houses in Marin -- declining values from some peak to the present (and is it just me or does that graph's profile have an uncanny resemblance to Mt. Tam?). According to Zillow this house has lost 16.5% of its value since its peak value. This graph makes it pretty clear what the sellers are trying to do -- sell it for what it would have sold for at the market peak.

Here is the same graph as above except for the last five years. You can see that it has had a pretty flat year from mid-2005 to the present which forms an overall peak and the market is now sliding from that peak.

Bad Karma

"The days when real estate agents were the gatekeepers for the housing market have gone the way of typewriters and printed MLS books. The key to coping in today's online housing market is to provide as much information as possible and let the consumer decide."

-Steve Brown, Dallas Morning News

(Kudos to the Sacramento Land(ing) blog for this quote.)

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A Chicago district court cleared the way Tuesday for the Department of Justice (DoJ) to proceed with its antitrust lawsuit against the National Association of Realtors (NAR).

The DoJ contends the NAR is engaging in anti-competitive behavior against online home brokers.

According to the DoJ, the NAR is concerned online sites might lead to lower commissions for real estate brokers. In 2003, NAR passed rules allowing traditional brick-and-mortar brokers to block their home listings to brokers operating Virtual Office Web sites (VOWs).

The DoJ claims online brokers can deliver brokerage services more efficiently, resulting in better services and lower prices.

I can't help but wonder if realtors and real estate agents as a whole (as an industry) had acted with greater integrity, had not engaged in fear mongering (e.g., "buy now or forever be priced out", etc.), had not promoted false expectations and "mythology" (e.g., "real estate always goes up", "now is a great time to buy" (when prices are racing upwards), "now is a great time to buy" (when prices are falling), "we here in [insert your favorite locale] are immune", etc.), had not effectively privatized information, had committed to making more honest public statements regarding the state of the market, and if the house buying process fairly emphasized the buyer's interests as much as the seller's interests, that public perception of their industry would not have become so dour. Now they face extinction. Like dinosaurs, they had their chance, they had their moment in time when they could prove their utility; but alas, in the end, as an industry, they could not adapt their behavior and move beyond their self-interest.

A Bayarian Takes the Red Pill

This rant was left on the Boycott Housing site and I think he makes some valid points. I can certainly understand his frustration. And I am glad that some people here are questioning the status quo. Maybe there will finally be change.

The previous post [on the Boycott Housing blog] is an excellent example of why this state is consistently bankrupt. Thanks to the outdated legislation of the 70s like proposition 13 and all the anti-development NIMBY measures that are in place, taxation levels from property is dismally low compared to other states. And thanks to the huge preponderance of anti-development and anti-business practices being employed by the state, housing prices are skyrocketting as the general wages of those in the business sectors are stagnant. Meanwhile, to combat the high cost of living, the state increases the salaries of its own employees (firefighters, teachers, etc) driving it further into debt and making the rest of us scratch are heads wondering why we took student loans and busted our asses in college just to make the same salary as some of the individuals the previous poster mentioned. Here is an interesting thing: when Ahhh-nold was voted into office, he sought the advice of Warren Buffett on how he can best balance the budget. You know what Warren's very first suggestion was? Increase property taxes and repeal prop 13. And of course, that idea was shot down faster than an Iraqi jet fighter. Now why is it that everyone and their mother in the world of economics and finance can see the unnecessary pressures being placed on the working middle class of this state just to basically pay for the retirement of some assholes who bought their houses 30 years ago? Our school system ranks amongst some of the worst in the country now. Our roads battered, torn, clogged and congested to nightmarish levels. Our housing is sky high and our income taxes are ridiculous. Meanwhile, a segment of the population lucky enough to be born at the right time sits back and enjoys a pleasant retirement at a cost to us. My personal opinion: this is a big country. And its a big planet too. Why sit here and wait for some POS 60 year old house to drop from $650k to $500k? Just do the math everyone. It could drop to $350k and you would still be getting screwed. Now I consistently hear about the repeated notion of "the fabulous bay area" and all it has to offer. Somebody, please enlighten me: WHAT EXACTLY AM I PAYING FOR AROUND HERE? The weather? And some nice cliffs with views of the Pacific. Well, that's swell. Certainly worth a premium of a home worth 10 times what it is anywhere else. (And by the way, that $650k home ain't anywhere near the ocean or the nice hills) Just wait and see what this place will be like 20 years from now. After continued outsourcing, both foreign and domestic, continues to send more and more high technology individuals to greener pastures elsewhere. I am sure your "fabulous bay area" will have a striking resemblance to Detroit in a few years. Except with slightly better weather.