Jay’s No BS Real Estate – November 2011
COMMENTARY: If this isn’t the best time to buy, I don’t know how to recognize it. The media is still trying to scare us. “More than 2.6 million borrowers are delinquent.” “Home prices fall in October (Case-Shiller).” “6 million estimated foreclosures by 2016.”
They don’t tell us the reassuring or positive aspects. These would be my headlines: “Home sales up over 17% from last year.” “Over 20 local zip codes have positive price momentum.” “Median prices are staying in a more narrow range over the last 12 months.” “Short Sales are selling in record numbers and have increased over 50% in the last 12 months.”
After absorbing the individual data points, the trends and momentum, and what is happening each day in the market, my opinion is that we are at the tail end of the contraction. After contraction comes recovery. As we have experienced, however, the length of this phase is being corrupted and lengthened by politicians who want votes and/or absolute power. The boom period was corrupted and lengthened by politicians who wanted votes, banks who wanted
favors from the politicians, and borrowers who wanted another cash-out refi. The hyper-inflated boom created a loud and elongated bust. The business cycle
reflects reality. And the data, not the media, tells the truth.
The market is on a slow road to recovery. But most amazing is that the damage done by the years of corruption are being healed just like an open wound in a living organism. Lenders need to lend. Builders need to build. Sellers need to sell. All of these forces make it increasingly possible and decreasingly costly for buyers to buy. The wound is clotting. I hope we remember and avoid the same kind of injuries but new skin will grow; new loan products will appear; 600 will be a justifiable credit score; new homes will be built; sellers will adjust their expectations and buyers will benefit from choices, lack of urgency, and low costs. Congratulations, buyers.
We all know that election years bring surprises and treats for the voters. With a fragile economy and European trend-setters showing us the wrong way, this year may be remarkably stable and sideways. Depending on the results in November, the variability can change dramatically.
Interest rates are being held low. The dollar is getting stronger and other commodities are behaving in strange ways. In my opinion, some companies are over-priced and others are staying quiet until the storm passes or the storm promises 4 more years of Chicago-style politics. God help us.
Just beyond any storm cloud, the sun is shining. That is certainly true in our current market. And the phenomena are not hard to fathom given the tourniquets being applied in spite of the natural healing. Homes are being maintained and improved in larger numbers. Fiscal discipline is taking hold in more municipalities and households. The wheat is getting separated from the chaff.
One of the election-year treats that many of my fans are anticipating is the HARP II (Home Affordable Refinance Program). This may provide the perfect relief for some while others may use it to postpone the inevitable. We are all waiting for the lender’s guidelines but it is difficult to grasp the validity of HARP’s objectives since logic is being reduced to “give them a refi”. Without an appraisal of value, the lender is throwing their money into a caldron of soup mixed with chocolate pudding. Who knows what you are tasting but it’s nasty.
There is much more to my opinion of the market. And I have learned the best ways to help clients accomplish their goals. Call me to start your game plan today.
Major Indicator Summary
iceberg that comes when you hire me to represent you. Action is the key.
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Indicator #1 – Existing Homes Sold — November was a good month relative to last November but lower than a month ago; not stellar but certainly a good showing. Opinion: The bears are waking and the rains may be coming.
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Indicator #2 – Distressed Sales – REOs are under 35% of homes sold – that’s a low since February 2007. And Short Sales spiked to over 30% of the month’s sales and were up over 54% YOY. Opinion: At this rate, the purchase experience will be different but the inventory “should” be maintained by Short Sellers as we all await the lender’s decision(s). Banks are involved in most transactions so be prepared to wait, then hurry.
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Indicator #3a – Median Price (SA) — Sacramento has been sideways all year. Even the momentum is flat-lined. Opinion: This range will continue for the foreseeable future as supply is low and demand is now starting to grow.
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Indicator #3b – Median Price (ED) — The El Dorado County median has been choppy and has let off what may be the last gasp as the momentum shows stability since July. Opinion: El Dorado County accommodated many high-end homes which have helped the overall price resilience. And, let’s face it, the beautiful homes on the hills bring it closer to heaven.
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Indicator #3c – Median Price (PL) — The Placer County median has been the most stable over the year and the momentum has not been negative since March. Opinion: Placer County, like parts of El Dorado County, accommodated many high-end homes which have helped the overall price resilience.
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Indicator #3 – Median Price (All) — This chart shows the comparison of the 3 counties. It doesn’t include the momentum indicators but it’s interesting to see the responsiveness of Sacramento’s price changes compared to the other 2 counties. It is easy to notice the bubble is gone. In fact, the entire decade of appreciation is gone. Whether the appreciation was merited or not, we are back to 2001. To appreciate again, at a valid rate, many regulations and issues must be remedied.
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Indicator #4 – Foreclosure Notices – November NOD filings were down 13% compared to October but NOTS (Notice of Trustee Sale) surged over 50%. Opinion: Banks are growing weary of the REOs on their books and are commencing final foreclosure actions. The best way to avoid foreclosures and REOs (and neglected homes) is to do Short Sales (or Deeds In Lieu).
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Indicator #5 – New Home Permits – Wow! Not only was this data posted in a timely manner, there are new homes being started. November was lower than October but still up 34% YOY. Opinion: Permits probably won’t be higher in the coming months as the weather may not “permit”. It’s still cheaper to buy than build.
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Indicator #6 – Mortgage Interest Rate— They are standing on the rate but momentum is heading toward the zero axis. Some are warning of rate increases, which is logical. The cost of funds is almost free. Opinion: It is easy to get a quote. It is much harder to get a lender to commit to their quote. Ask me for a lender who has integrity. The politicians want YOU to have today’s rates (HARP).
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Indicator #7 – Listing Inventory — Supply is low. Equity sellers are only 30% of the market. Short sales are going into Contingent status at a greater clip. This chart now includes Contingent short sales – these are quasi-available, may become available, and may be occupied. Opinion: Inventory will slowly increase as will Short Sales successes.
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Indicator #8 – Months’ Inventory — Also known as “turn-over” as it equals the number of months required to sell all listings at the average Days on Market. This is a low number. The media is yelling “12 months” and that may be true for Gary, Indiana. It is not true for our 3 counties. Opinion: Throughput will remain low as buyers take time (or remain on the fence) and suppliers wait for sunshine.
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Indicator #9 – Swing Indicator — This indicator shows the aggregation of momentum “swings” for all zip codes and Counties tracked. For November, 21 zip codes went up, 14 were unchanged, and 19 went down. Opinion: The pattern in the chart suggests that the cycles have been expanded with much more “red” above the half-way point. The green hump from June ‘09 to December ‘10 is what economists call the “upsurge between the two dips”. Whether the down-ticks continue to retreat depends on the supply and demand forces mentioned throughout this piece.
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Indicator #10 – Consumer Confidence — This indicator shows the aggregate level of confidence as tracked by the Conference Board. The indicator is up for the last couple of months. Opinion: Merry Christmas and Happy New Year! That changes a lot of attitudes.
In: As Goes California…, Data, Data, and More Data, Fresh Perspectives, Takin’ It In The Short Sales, What You Need To Know About Buying and Selling Real Estate · Tagged with: commentary, data, El Dorado, Existing Home Sales, Home Prices, indicators, Interest Rates, momentum, Opinion, Placer, Sacramento, Short Sales
Jay’s No BS Real Estate – September 2011
COMMENTARY: The market, no B.S., is waiting for a shoe to drop or for a drastic change in regulation, confidence, and employment! The government is too frequently part of our daily lives. If we ever needed a change [and reduction] of government and social engineering, it is now. God help us bear the next 13 months of indecision, platitudes, and apathy.
“Dad, why do most issues have a political theme?” It’s all related, as I tell our 14-year old son. Whether you dig trenches each day, swing a sign on the corner, or perform brain surgery, your daily activities are impeded (“corrupted”) by government regulations, fees, penalties, and the requisite government employees ready to “help”.
So, in effect, we are paying MORE taxes in order to make LESS progress and wealth. Is that reasonable to anyone? Are there really people reading this that think we are spending and/or regulating too little as a nation? Appraisers have all but lost their livelihoods. Banks were motivated to fund the housing bubble and now they are demonized by their motivators. Title companies can barely breath in the general direction of a REALTOR® without fear of violating “RESPA”. And our job… Well it may be easier to show you the mess called our process workflow. You would be amazed at the number and purpose of the hoops through which we have to jump to convey a property. I pray we return to reason today.We have to know that rational humans will eventually get the attention of the voters and that there will always be voters who are unaccustomed to and unaffected by reason.
It is still true that some people want to or have to buy or sell. The tasks and deliverables from me and my clients have to be planted in rational purposes or the entire experience will suffer. Consumer protection, at some point of extreme implementation, becomes consumer destruction.
I don’t want to talk around the issue. As the real estate experience gets daily bad press, it impacts my livelihood. I will never force anyone to sell or buy but it seems the government is motivating otherwise qualified and motivated buyers to sit on their hands. That is demand destruction.
For my clients, I offer a legal protection plan, a home buyer warranty, and an experience that starts with trust and understanding. The first decade’s irrational appreciation has been replaced by irrational depreciation. We are now closer to equilibrium than any time in the last 10 years. Could the bubble have become a vacuum? Vacuum’s pop too, in a sense. We are hearing the opposite message but are falling for it in the same way as in the first decade.
The over-depreciation won’t last and reason will overcome.
Major Indicator Summary
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Indicator #1 – Existing Homes Sold — September volume was slightly lower than August and momentum is now above the zero axis for the first time in 2 years – in trader’s lingo, it’s time to buy. Opinion: The season and “shoe-drop waiting” have slowed the sales of homes. While you wouldn’t know that our season has changed other than the number of daylight hours, the lack of sunshine has an effect.
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Indicator #2 – Distressed Sales – REOs are still under 40% of sold inventory. Short Sales comprised 26% of the month’s sales and momentum is above zero. Opinion: REOs and Short Sales are here to stay. There will be more REO inventory and, depending on employment, more short sales. Banks are involved in most transactions so expect irrational and unsavory decisions from them.
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Indicator #3a – Median Price (SA) — The 12-month moving average (EMA) for the median price has gone below $170K for the first time since February ‘02. It is slightly down from last month and down 8% compared to September 2010. The momentum is retreating from the zero axis. Opinion: This range will continue for the foreseeable future as supply is low and demand is waiting.
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Indicator #3b – Median Price (ED) — The El Dorado County median is down 8% MOM and 15% YOY. The momentum hit resistance last year at this time and has refused to turn around. Opinion: I think El Dorado County homeowners will always enjoy a premium although they are not immune. Actually, nobody was immune.
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Indicator #3c – Median Price (PL) — The Placer County median has been more consistent although dropping over $20K in a year and now near the 10-year low. As are the other 2 counties, Year Over Year decreases have been negative since July ‘06. Imagine that! Opinion: Momentum is on a better path than the other counties although it has stalled at -8 for the last 3 months.
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Indicator #3 – Median Price (All) — This chart shows the comparison of the 3 counties. It doesn’t include the momentum indicators but it’s interesting to see the responsiveness of Sacramento’s price changes compared to the other 2 counties. It is easy to notice the bubble is gone. In fact, the entire decade of appreciation is gone. Whether the appreciation was merited or not, we are back to 2001. To appreciate again, at a valid rate, many regulations and issues must be remedied.
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Indicator #4 – Foreclosure Notices – Compared to August, this month’s filing were down 13%. The NOTS (Notice of Trustee Sale) tells a borrower that their home will be a auction in about 21 days. Those notices have been dropping for a year. Opinion: The new 3 words for real estate are “Timing, Location, Location”. Since nobody was immune to the bursting bubble, “Timing” has to trump “Location” as the first word in real estate.
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Indicator #5 – New Home Permits – There was a slight increase in August but not a trend. Homes are aging while we produce fewer new ones. There is more and more blithe and a lot of deferred maintenance. The condition and age of a home are major factors in pricing. No amount of lipstick will help some of the pigs I see in a week. Opinion: Permits probably won’t be higher in the coming months as the weather may not “permit”.
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Indicator #6 – Mortgage Interest Rate — And yet even lower. How can this be sustainable? The market for money is corrupted. Added fees and process steps are making escrows more fragile. Get your ducks in a row. Opinion: It is easy to get a quote. It is much harder to get a lender to commit to their quote. Lenders have learned how to avoid the regulatory costs. It’s not rocket science, congress.
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Indicator #7 – Listing Inventory — Supply is still slipping downward. Equity sellers are only 30% of the market. Short sellers want to ride it through the winter. Banks don’t want to release too many at once. And the “robo-signing” issue affected the pipeline. Opinion: Inventory will slowly increase and the proportion of Short Sales will stay steady as will REOs.
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Indicator #8 – Months’ Inventory — Also known as “turn-over” as it equals the number of months required to sell all listings at the average Days on Market. This is a low number. The media is yelling “12 months” and that may be true for Gary, Indiana. It is not true for our 3 counties. Opinion: Throughput will remain low as buyers take time (or remain on the fence) and suppliers wait for sunshine.
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Indicator #9 – Swing Indicator — This indicator shows the aggregation of momentum “swings” for all zip codes and Counties tracked. For September, 20 zip code momentums went up, 11 were unchanged, and 23 went down. Opinion: The pattern in the chart suggests that the cycles have been expanded with much more “red” above the half-way point. The green hump from June ‘09 to December ‘10 is what economists call the “upsurge between the two dips”. Whether the down-ticks continue to retreat depends on the supply and demand forces mentioned throughout this piece.
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Indicator #10 – Consumer Confidence — This indicator shows the aggregate level of confidence as tracked by the Conference Board. Opinion: Even in a down market, these are perfect times for some buyers.
In: As Goes California…, Banking and Finance, Data, Data, and More Data, Fresh Perspectives, Home Economics, What You Need To Know About Buying and Selling Real Estate · Tagged with: commentary, data, Foreclosures, Home Prices, indicators, momentum, No BS, Sacramento, Short Sales
Class Conflict, by Example
Ladies and Gentlemen,
I feel it’s necessary to let you in on a rumor. Namely, each MLS is about to make a drastic change to the fee structure for Brokers and all subscribers. That is, those who made their respective Masters Club in the previous year, your annual dues for your MLS will be increased by 50%. And those agents who did not make their Masters Club will get their subscription fee waived! But there is an explanation for this: “The agents who have recently enjoyed success should pay more while we encourage the others to continue in their efforts to sell one, maybe two, homes in a year.”
OK. Most of you realize that this is a sad metaphor. This is how an MLS could inflict a class-based conflict in our real estate profession. We know that ours is a 90-10 rule: 10% of the agents do 90% of the business. And about 5% of agents reach Masters Club levels.
But do you also realize that the description of Marxism is: “class struggle plays a central role in understanding society’s allegedly inevitable development from bourgeois oppression under capitalism to a socialist and ultimately classless society.”
Now do you see the metaphor? The White House is practicing (not just preaching) marxism every day. I refuse to pay more so others who don’t work can continue to not work.
Those of you who think the class struggle is necessary, please get a job and don’t vote for the marxist in the White House.
That’s all.
In: Fresh Perspectives · Tagged with: MLS, Opinion
Jay’s No BS Real Estate – August 2011
NEWLY INCLUDED INDICATOR: Although not new, it is helpful to correlate Consumer Confidence with these other major indexes. The CCI is now re-stated here as Indicator #10. (I wish it was being included when it was high.)
The contrast between August 2006 and last month is eye-opening. Five years ago, there were 1,186 sales, the median was $371,000, there were 6,200 homes on the market, 33% of the sales were in the range of $350-$450K, and only 0.2% of buyers used FHA financing. We sold 44% more houses last month at 44% of the median price with only 63% of the supply and 29% of buyers used FHA financing. We have come a long way in five years.
For some, the ride was less than enjoyable. For those who purchased before 2002 or after 2008, and didn’t refinance between 2003 and 2007, you are among the minority of homeowners with (maybe) some equity. Yours is an enviable position. But if you aren’t in the market to sell, it doesn’t matter. If you are in the market to sell, you are competing with distressed sellers, banks, and otherwise corrupting forces.
Each zip code is now officially updated for August. See the new summary graphic (click on it for a better view).
Major Indicator Summary
For August, there was an 84% month-over-month increase in Notices of Default (Sacramento County). Banks have stacks to go through. Borrowers may or may not have steady income and can’t or have not investigated a short sale BEFORE stopping their mortgage payments. About 3 months after not paying, the lender can report the borrower as “in default”. Hence the term “Notice of Default”. Once the first payment is missed, the clock starts ticking. Call me BEFORE you make a decision that could make your winter dreary. I am not a lawyer so I make borrowers “lawyer up”.
This is still a challenging market. But the value is still there and the mortgage rates are at historic lows. If lenders would let Realtors borrow, I would jump at this opportunity. Alas, I get to live through my clients.
This commentary is my opinion of the Sacramento, El Dorado, and Placer County real estate markets using major market data, momentum analysis, current conditions, and the forces which affect our area. This is not a crystal ball and I am not a financial advisor. I am a licensed California Real Estate Broker with a passion for information and knowledge sharing. My method of collecting and analyzing this information (“momentum analysis”) is similar to commodity trading. This is a speculator’s tool to predict the direction of the NEXT data point. But they analyze momentum in order to take fairly immediate ACTION for a lot of money. Traders can’t let the media paralyze them and they can’t ignore the various forces in play – beyond the obvious change in plotted data.
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Indicator #1 – Existing Homes Sold –August volume was higher than July and momentum has made it to the zero axis with this months’ up-tick. We are still on pace to exceed 2010 volume. And 2010 was a good year. Opinion: Transaction surprises are affecting more purchases. Seasonal differences have been small over the last four years and the supply of homes will give buyers a great number of choices.
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Indicator #2 – Distressed Sales – REOs are still under 40% of sold inventory. Short Sales comprised 23% of the month’s sales and momentum is now at zero. Opinion: REOs and Short Sales are here to stay and will increase as lenders serve up the foreclosures. But not all short sale agents are competent. And banks are obviously not prepared to be competent in real estate sales. Be wary.
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Indicator #3a – Median Price (SA) — August median price is slightly down from last month but down 11% compared to August 2010. This price represents all of Sacramento MLS sales (single family). The momentum is unchanged. Opinion: This range will continue for the foreseeable future as supply creeps upward and demand stays light but persistent. High-end areas will see more impact. Momentum should oscillate around the zero axis.
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Indicator #3b – Median Price (ED) — (not available for a couple of weeks)
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Indicator #3c – Median Price (PL) — The Placer County median has been more consistent although dropping over $20K in a year. There are fewer inexpensive homes and, hence, the county median stays higher but more sensitive to changes. Opinion: Momentum indicates an unsure future.
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Indicator #3 – Median Price (All) — (not available for a couple of weeks)
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Indicator #4 – Notices of Default (NOD) – Default filings jumped. Opinion: We’re not finished re-pricing the over-appreciated assets. Banks will have to play catch-up. For every 1 REO listing, there are still 50 homeowners in distress. And most of us are under water.
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Indicator #5 – New Home Permits – (not available for a couple of weeks)
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Indicator #6 – Mortgage Interest Rate — It’s harder to get a loan and fees are on the rise. But at these rates, if you have to get a loan, now is the time. Opinion: Rates are being held low and banks are making up for it in fees and charges. It is easy to get a quote. It is much harder to get a lender to commit to their quote. The new regulations are forcing new procedures to avoid the regulatory costs. It’s not rocket science, congress.
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Indicator #7 – Listing Inventory — Supply took another dip for the last two months. While up a little in August, the supply of homes has slowed to a trickle due to the “robo-signing” issue which froze the REO market. Opinion: Inventory will slowly increase and the proportion of Short Sales will stay steady as will REOs.
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Indicator #8 – Months’ Inventory — Also known as “turn-over” as it equals the number of months required to sell all listings at the average Days on Market. This is a low number. The media is yelling “12 months” and that may be true for Gary, Indiana. It is not true for our 3 counties. Opinion: Throughput will remain low as buyers take time (or remain on the fence).
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Indicator #9 – Swing Indicator — This indicator shows the aggregation of momentum “swings” for all zip codes and Counties tracked. The picture can be compared to EEG output. For August, 18 zip codes had momentum up-ticks, 12 were unchanged, and 24 had down-ticks. August resembled the firmness that returned in July where momentum has shown some positive turns. The sensitivity of the math makes small changes more visible in the Swing chart. Opinion: We could use a couple more zip codes on the up-swing. Equilibrium requires a balance. And this is a step toward that equilibrium.
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Indicator #10 - Consumer Confidence – This indicator shows the aggregate level of confidence as tracked by the Conference Board. Opinion: Even in a down market, these are perfect times for some buyers..
In: As Goes California…, Data, Data, and More Data, Home Economics, What You Need To Know About Buying and Selling Real Estate · Tagged with: commentary, data, El Dorado, Existing Home Sales, Foreclosures, Housing Inventory Reports, indicators, momentum, No BS, Opinion, real estate, Sacramento
Jay’s No BS Real Estate – August 2011 (Prelim)
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The Swing Indicator may show a little more firmness than anticipated by the pundits and “economists”. We are still selling houses to people for whom the timing is right. Timing, location, location… Those are the new 3 most important words in real estate.
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For August, there was an 84% month-over-month increase in Notices of Default. Banks have stacks to go through. Borrowers may or may not have steady income and can’t or have not investigated a short sale BEFORE stopping their mortgage payments. About 3 months after not paying, the lender can report the borrower as “in default”. Hence the term “Notice of Default”. Once the first payment is missed, the clock starts ticking. Call me BEFORE you make a decision that could make your winter dreary. I am not a lawyer so I make borrowers “lawyer up”.
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We are still selling a healthy number of homes. Existing home sales are up over 12% compared to August 2010. Bank-owned homes increased the most by almost 10%.
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And the success rate for Short Sales can’t seem to climb much higher. There are consistently about 2,000 homes in “Contingent” status each month and although the number that sold in August increased by 10%, it is not on par with the number available. Well over 30% of the available homes are Short Sales.
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This is still a challenging market. But the value is still there and the mortgage rates are at historic lows. If lenders would let Realtors borrow, I would jump at this opportunity. Alas, I get to live through my clients.
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The official version of this piece will get updated in a couple of weeks. However, expect a lag in getting Permit data. Some of my data sources are not as regular as desired.
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Remember, clients get a Legal Protection Plan when I am hired by them. It is priceless. As a risk-averse Realtor (it’s not my money), my clients get to “lawyer up”.
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Indicator #1 – Existing Homes Sold (Unofficial) — August (unofficial) volume was higher than July and momentum has made it to the zero axis. We are still on pace to exceed 2010 volume. And 2010 was a good year. Opinion: Transaction surprises are affecting more purchases. Seasonal differences have been small over the last four years and the supply of homes will give buyers a great number of choices. But daylight will dwindle.
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Indicator #2 – Distressed Sales – REOs are still under 40% of sold inventory. Short Sales comprised 23% of the month’s sales and momentum is now at zero. Opinion: REOs and Short Sales are here to stay and will increase as lenders serve up the foreclosures. But not all short sale agents are competent. And banks are obviously not prepared to be competent in real estate sales. Be wary.
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Indicator #3a – Median Price (SA) — (not available for a couple of weeks)
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Indicator #3b – Median Price (ED) — (not available for a couple of weeks)
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Indicator #3c – Median Price (PL) — (not available for a couple of weeks)
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Indicator #3 – Median Price (All) — (not available for a couple of weeks)
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Indicator #4 – Notices of Default (NOD) – Default filings jumped. Opinion: We’re not finished re-pricing the over-appreciated assets. Banks will have to play catch-up. For every 1 REO listing, there are still 50 homeowners in distress. And most of us are under water.
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Indicator #5 – New Home Permits – (not available for a couple of weeks)
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Indicator #6 – Mortgage Interest Rate — It’s harder to get a loan and fees are on the rise. But at these rates, if you have to get a loan, now is the time. Opinion: Rates are being held low and banks are making up for it in fees and charges. It is easy to get a quote. It is much harder to get a lender to commit to their quote. The new regulations are forcing new procedures to avoid the regulatory costs. It’s not rocket science, congress.
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Indicator #7 – Listing Inventory — (not available for a couple of weeks)
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Indicator #8 – Months’ Inventory — (not available for a couple of weeks)
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Indicator #9 – Swing Indicator — This indicator shows the aggregation of momentum “swings” for all zip codes and Counties tracked. The picture can be compared to EEG output. For August, 18 zip codes had momentum up-ticks, 12 were unchanged, and 24 had down-ticks. August resembled the firmness that returned in July where momentum has shown some positive turns. The sensitivity of the math makes small changes more visible in the Swing chart. Opinion: We could use a couple more zip codes on the up-swing. Equilibrium requires a balance. And this is a step toward that equilibrium.
In: As Goes California…, Data, Data, and More Data, Home Economics, What You Need To Know About Buying and Selling Real Estate · Tagged with: commentary, data, El Dorado, Existing Home Sales, Home Prices, Housing Inventory Reports, indicators, Interest Rates, momentum, Opinion, Placer, Sacramento, Short Sales
Jay’s No BS Real Estate – July 2011
This commentary is my opinion of the Sacramento, El Dorado, and Placer County real estate markets using major market data, momentum analysis, current conditions, and the forces which affect our area. This is not a crystal ball and I am not a financial advisor. I am a licensed California Real Estate Broker with a passion for information and knowledge sharing. My method of collecting and analyzing this information (“momentum analysis”) is similar to commodity trading. This is a speculator’s tool to predict the direction of the NEXT data point. But they analyze momentum in order to take fairly immediate ACTION for a lot of money. Traders can’t let the media paralyze them and they can’t ignore the various forces in play – beyond the obvious change in plotted data.
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The national media is not instilling confidence. But then again, neither is congress [at the State or National level]. In my almost-fifty years, I don’t recall such a perfect time to buy real estate and yet such a confusing time to make any large decision.
There are many factors that are useful and true when explaining the local real estate market. Remodeling has reached a low point. Builders are obviously waiting. Vacant homes are getting neglected. REOs and short sales are also experiencing deferred maintenance. Municipalities are cash strapped. Neighbors are wary and watchful.
If there is another shoe to drop, I can’t imagine it would be more serious than the events we currently see around the planet. Personally, I am blessed to live in this country, build the business that adds value, and have the freedom to speak my mind. And my mind is frequently opinionated. But it’s the facts that help me form my opinions.
The July sales volume was healthy at 1,579 single family homes (per MLS). The momentum made a significant move toward zero and the 12 month moving average increased. And the Sacramento median price showed a slight increase. When both sales and price increase, it is a favorable sign.
There is still a build up (and slow closure) of short sales. The supply of REOs that sold is lower in raw and percentage terms. The new short sale deficiency law (SB 458) may end up making junior lien holders more likely to let properties foreclose. This consequence is unintended (I hope) and could kill any short sales with multiple loans being shorted. Trying to negotiate with multiple lenders is already reason to disqualify a short sale listing. This new law can make it a foregone conclusion that listing or selling a home with multiple shorted loans is a waste of time and money.
Price changes across each county are not as volatile as the stock market but the media has been yelling “double dip” and doom for months. The Case-Schiller index, built for a paying customer, is usually NOT indicative of our area. Where we have a large variation in monthly pricing is due to housing variation, not sudden spikes in supply or demand.
The heartwarming news in this month’s data is my Swing Indicator (below). There was a major increase in the number of Up-Ticks across the zip codes tracked. Let me know if you want a detailed explanation of this aggregated depiction of market equilibrium.
What kind of story appears for you from these indicators? This depends on your situation but here is my opinion:
- If you are a buyer, ask me for your own Buyer Workbook to get a great understanding of the process. Rates are unbeatable. Choice is tremendous. Call me. You need my competence, counsel, cushion, and commitment.
- If you are a seller, ask me for your own Seller Workbook. The workbook will help you understand how to prepare your home, manage your emotions, and what to expect in this market. It’s a seller’s market BUT you have to be realistic. If you are stressed about losing your home, hire me. I team with a law firm. Don’t let a REALTOR® give you legal advice.
This market is active. Sellers are selling, lenders are lending, and buyers are buying. If you or anyone you know needs a great broker who teams with lawyers, knows the contract, has a vast network of professionals, minimizes surprises, and gets ‘er done with no BS, call me today! 916-517-9606.
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Monthly Indicators (http://www.JayEmerson.com/Indicators.html)
Indicator #1 – Existing Homes Sold — July volume was lower than June and momentum has made a material lunge toward the zero axis. We are still on pace to exceed 2010 volume. And 2010 was a good year. Opinion: Transaction surprises are affecting more purchases. August may be similar or lower than July. Seasonal differences have been small over the last four years and the supply of homes will give buyers a great number of choices.
Indicator #2 – Distressed Sales — REOs dropped to under 40% of sold inventory for the first time in a year. Short Sales comprised 23% of the month’s sales and momentum is now in positive territory. Opinion: REOs and Short Sales are here to stay and will increase as lenders serve up the foreclosures. But not all short sale agents are competent. And banks are obviously not prepared to be competent in real estate sales. Be wary.
Indicator #3a – Median Price (SA) — July’s median price is slightly up from last month but down 10% compared to July 2010. This price represents all of Sacramento MLS sales (single family). The momentum is still moving down. Opinion: This range will continue for the foreseeable future as supply creeps upward and demand stays light but persistent. High-end areas will see more impact. Momentum should oscillate around the zero axis.
Indicator #3b – Median Price (ED) — The El Dorado County median has been volatile and represents the diversity of housing prices. Momentum is heading downward but the most recent variability may be occurring around a relative bottom. Opinion: I think El Dorado County homeowners will always enjoy a premium.
Indicator #3c – Median Price (PL) — The Placer County median has been more consistent. There are fewer inexpensive homes and, hence, the county median stays higher.. Opinion: Momentum indicates a possible bottom. But we have seen other bottoms become staging areas for new bottoms.
Indicator #3 – Median Price (All) — This chart shows the comparison of the 3 counties. It doesn’t include the momentum indicators but it’s interesting to see the responsiveness of Sacramento’s price changes compared to the other 2 counties. It is easy to notice the bubble is gone. In fact, the entire decade of appreciation is gone. Whether the appreciation was merited or not, we are back to 2001. To appreciate again, at a valid rate, many regulations and issues must be remedied.
Indicator #4 – Notices of Default (NOD) — Default filings haven’t been this low in four years. Trustee Sale filings are slightly up and reflect Default filings that are at least 3 months old. Opinion: We’re not finished re-pricing the over-appreciated assets. Banks will have to play catch-up. For every 1 REO listing, there are still 50 homeowners in distress. And most of us are under water.
Indicator #5 – New Home Permits — We are still not building. Our homes are aging. There is more and more blithe but still a lot of deferred maintenance. The condition and age of a home are major factors in pricing. No amount of lipstick will help some of the pigs I see in a week. Opinion: Population increases, job recoveries, and general aging of homes will require more housing. But builders don’t bet on the come any more.
Indicator #6 – Mortgage Interest Rate — It’s harder to get a loan and fees are on the rise. But at these rates, if you have to get a loan, now is the time. Opinion: Rates are being held low and banks are making up for it in fees and charges. It is easy to get a quote. It is much harder to get a lender to commit to their quote. The new regulations are forcing new procedures to avoid the regulatory costs. It’s not rocket science, congress.
Indicator #7 – Listing Inventory — Inventory is again lower but the release of HUD listings and high-end foreclosures has yet to happen. “Active Short Contingent” listings are still only 15% successful each month. And the new recourse law is not going to help. Opinion: Inventory will increase and the proportion of Short Sales will stay steady as will REOs.
Indicator #8 – Months’ Inventory — Also known as “turn-over” as it equals the number of months required to sell all listings at the average Days on Market. This is a low number. The media is yelling “12 months” and that may be true for Gary, Indiana. It is not true for our 3 counties. Opinion: Throughput will remain low as buyers take time (or remain on the fence).
Indicator #9 – Swing Indicator — This indicator shows the aggregation of momentum “swings” for all zip codes and Counties tracked. The picture can be compared to EEG output. For July, 17 zip codes had momentum up-ticks, 14 were unchanged, and 23 had down-ticks. July is the first in the last 12 months where momentum has stalled or turned positive. The sensitivity of the math makes small changes more visible in the Swing chart. Opinion: We could use a couple more zip codes on the up-swing. Equilibrium requires a balance. And this is a step toward that equilibrium.
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See my Communities page for review of the 51 zip codes analyzed in my system: http://www.JayEmerson.com/Communities.html
In: As Goes California…, Data, Data, and More Data, Featured, Home Economics, What You Need To Know About Buying and Selling Real Estate · Tagged with: data, El Dorado, Existing Home Sales, Home Prices, Housing Inventory Reports, indicators, momentum, Opinion, Placer, Sacramento
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In: Fresh Perspectives, Making a Difference, Social Mood Swings
Jay’s No BS Real Estate – June 2011
- See major indicators and charts here: http://JayEmerson.com/Indicators.html
- See Community indicators and charts here: http://JayEmerson.com/Communities.html
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If you are a buyer, ask me for your own Buyer Workbook to get a great understanding of the process. Rates are unbeatable. Choice is tremendous. Don’t sit on the fence – you will regret it. Call a broker who understands how it all works whether you get an REO, a Short Sale, or a prized commodity like an equity sale, you need my competence, counsel, cushion, and commitment.
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If you are a seller, ask me for your own Seller Workbook. The workbook will help you understand how to prepare your home, manage your emotions, and what to expect in this market. It’s a seller’s market BUT you have to be realistic with pricing and repairs. If you are stressed about losing your home, hire me. I team with a law firm whom WE PAY to guide and advise you throughout and thereafter. Don’t let a REALTOR® give you legal advice. It’s against the law and it may be bad advice.
In: As Goes California…, Data, Data, and More Data, Home Economics, What You Need To Know About Buying and Selling Real Estate · Tagged with: commentary, data, El Dorado, Existing Home Sales, Home Prices, indicators, momentum, Opinion, Placer, Sacramento
Jay’s No BS Real Estate – May 2011
No BS Real Estate
My commitment to providing data is unsurpassed in this area. With the data, I support my opinions with no B.S. This month there is even more information for you to consume, interpret, validate, and hopefully trigger you to call me.
Beyond the 9 Major Indicators (below) and the 50+ Community indicators, you now have direct access to 250+ trends and indicators for each zip code:
Zip – Homes For Sale, Sold, Pending, New Listing
Zip – Average Price per Square Foot
Zip – Days on Market, Sold/List Price %
Zip – Average Price For Sale & Sold
Zip – Months of Inventory
That is a whopping 300+ monthly data points that you have at your fingertips. But remember, pricing and market activity is even more local than zip code so call me if you want to drill into your area of comparables.
The national media is again spewing generalities that aren’t necessarily true for our region. For example, our multiple listing service recorded 1,650 residential sales in May – not a bad volume. And our turnover or throughput rate was only 2.5. That is a very low number and it holds for most zip codes too. Inventory is either low or homes are priced well and sell quickly. Since inventory has slipped a little, it follows that seller expectations of price are close to equal of buyers expectations for price. Analyzing each zip code (Avg Price For Sale & Sold), you can see that sales are typically only 5-10% below the asking prices. This is a sign of equilibrium trying to find its place in the supply/demand curve. Any time minds are trying to meet is a good thing.
Distressed sales comprised 65% of the sales in May. The momentum of this data point is approaching zero again. It has been negative since November 2009 and, all things remaining equal, will get into positive territory by the end of the summer.
After being flat for most of the 2010 Fall and Winter, the momentum of Sacramento’s Median Price is heading back down. The county’s median price matches that of the national number but that’s where the similarities stop.
The throughput rate (Months’ Inventory) for Sacramento, Placer, and El Dorado Counties along with the foreclosure rate and sales volume are not similar to the national data points. If you want a true local picture, you have found the best web site. Take comfort in hiring me.
The Sacramento Median Price is back at the April 2001 level. We all know the bubble was gone but, since May 2009, there appeared to be a bottom behind us. Now we are bouncing off that same bottom. The data can certainly be interpreted as a “double dip”. But rather than quibble about definitions, there are many people who are unsure of their next action. If you are stressed about losing your home, hire me. I partner with a law firm who guides and advises you throughout and thereafter. Don’t let a REALTOR® give you legal advice. It’s against the law and it may be bad advice.
Placer County’s median price has shown a little more resilience than Sacramento’s. But the change in May’s price has pushed the momentum a little further south. Five of the top 10 zip codes in May’s median prices are Placer County zip codes. Granite Bay usually sits atop the crowd and the momentum of the Granite Bay median price is one of the very few that have gotten above and stayed above zero. As a commodity investor, crossing the zero axis into positive range is a trigger for “purchase”.
El Dorado County has shown a similar pattern although not as defined as Sacramento. There is still more value attached to an El Dorado County purchase. The entrance into the declining market took longer for ED and has not been as sharp. Placer and El Dorado are similar in this regard.
However you slice it, this market is still very active and sellers are selling, lenders are lending, and buyers are buying. But it is still a Cracker Jack market… A surprise in every box.
Call a broker who understands how it all works whether you get an REO, a Short Sale, or a prized commodity like an equity sale, you need my counsel, cushion, and commitment.
Call today! 916-517-9606
In: As Goes California…, Data, Data, and More Data, Home Economics, What You Need To Know About Buying and Selling Real Estate · Tagged with: commentary, data, El Dorado, Existing Home Sales, indicators, momentum, No BS, Opinion, Placer, Sacramento
Jay’s No BS Real Estate Indicators – April 2011
No BS Real Estate Indicators
April is typically the start of surges in sales and slight bumps in median sales prices – the indicators do not prove that seasonal blip. We are anything but typical ever since the government and greedy investors took their profits. As you may know, if you follow the money, us Pee-Ons did not benefit from the temporary surge in prices between 2001 and 2005. We may have benefited temporarily but we are feeling the hangover effects. The insiders are still buying yachts and vacation homes with the profits from our “bubble”.
But I’m not bitter. Life is temporary and we all suffer from same pre-existing condition. (Are we insurable?) It is important to remember that our homes should NOT be used as ATMs or sources of appreciation beyond the cost of living. If you are a real estate investor, unless you get a screaming deal and have the resources to flip the asset, your focus has turned to cash flow rather than appreciation. By the way, if you want to find deals and flip, be careful, do your homework, and call me. Use the Community indicators and rent charts to see where it may be most probable to find a positive cash flow. The rental survey is also posted for the zip codes which I track – this is a quarterly indicator. Rents are mostly stable and because prices are still low, a positive cash flow should be very probable for some zip codes.
Pundits are now saying we are entering a “triple dip”. I’m tired of the whole “dip” language. That word presumes a level of normalcy below which we have dipped. Is our 2001 median price normal? I can’t put my finger on it either. But my Swing Indicator chart (below) still shows only 13% of zip codes (7) experienced an increase in their median price momentum in April. That is a sad showing, except for those 7 zip codes.
Last month, my Commentary alluded to the fact that Realtors cannot give legal advice. Well, the lawyers are awake and starting to drum up business. They are finding plenty of clients who feel violated by their lenders, Realtors, and even appraisers. Because of this increase in litigation, we have partnered with a law firm to offer protection and advice for buyers and sellers. This is a unique partnership to help our clients. If you want to hear more, please call or email me.
The change in jumbo loan rates, loan origination costs, customer protections, and government sponsored entities are still looming. Although our elected representatives are slow to act on our real needs, these looming changes are already having an effect on sentiment. Just like a trader who buys on rumors and sells on facts, the enthusiasm of buyers and sellers who are slower to learn the facts are sitting on the fence until the facts are unveiled. But, in my opinion, there is a LOT of money invested to keep the facts veiled. The election cycle has begun and the ROI is a precious goal for these major money sources.
For this reason, my data and derived indicators are a bright spot since the data doesn’t lie. I don’t hide the truth from you. I may comment in a way that doesn’t jive with your interpretation. And I would love clients to hire me IF they are realistic about the market, their motives, and the possible situations. But lawyers are waiting in the shadows to hold me to my words. So here are my words: “This is the market in which to buy. If I had the cash, I would be buying”.
Selling, on the other hand, is a tricky endeavor in this market. Your competition may not be in the same zip code and may even be a smaller or larger home. And while you investigate the market with an intent to sell, call me to get a custom analysis of comparables and my opinion. Don’t let a Realtor lie to you about the price you could get. But if you do let a Realtor win your business with a lie, call me when they come back to get a price reduction. I would love to be your second and final Realtor.
Dirt is still my favorite commodity under this sky (I had a short crush on silver). But buy a home for your family. Buy an investment for cash flow. Sell if you have to or if you want to amass some cash to buy the homes sitting vacant.
Whatever your favorite flavor, I cannot force you to buy or sell and you should really talk to me before you make a decision. My goal is to compete for your business. When I win your business, my goal is to protect you and your money.
Hire me. You won’t regret it and you will have a Realtor for life.
P.S., I am also a Broker and a Masters Club performer.
In: As Goes California…, Data, Data, and More Data, Fresh Perspectives, Home Economics, Real Estate Investing, What You Need To Know About Buying and Selling Real Estate