Jul252013
House listings increase, but MLS inventory still at very low levels
The good news is that house listings are up. The bad news is that they are still very, very low. It’s still a sellers market.
I recently reported that housing inventory is up: Buyers aggressive, not stupid-aggressive. We have passed the extreme of the sellers market, but there are still far too few properties available for sale to believe deals are to be had.
Ordinarily, housing inventory peaks during the summer and falls off the rest of the year. I don’t foresee that happening this year. First, there are so few houses for sale and the market is so strongly in favor of sellers, that potential sellers won’t be dissuaded from listing for fear that they missed the selling season. Further, rising interest rates will cool demand, and many of the WTF listing prices that came on the market over the last 60 days will likely sit there for quite some time. Although many of these properties are not likely to sell, they will contribute to overall listing numbers until the sellers give up and remove their listings.
Listings in Irvine and Aliso Viejo (courtesy of Irvine Housing Blog) show a dramatic percentage increase this year. Both are up more than 100%, but considering the very low level that forms the base of that calculation, it sounds more dramatic than it is. Taken in a historical context, current listings are still very low, approximately the previous low listing count recorded over the previous six years (see below).
Housing Listings Multiply in June
By Nick Timiraos — July 15, 2013, 6:01 AM
Here comes the housing inventory.
The number of homes listed for sale increased by 4.3% in June to 1.9 million homes, the highest level in the last year, according to data released Monday by Realtor.com.
Housing inventory has steadily declined over most of the past two years. Listings typically climb heading into the spring and summer, when housing activity hits a seasonal peak. But inventories appear to be posting larger-than-usual gains in many markets right now as they rise from their lowest levels in at least a decade.
Percentage changes off a small base always look dramatic. Given how low the inventory dropped, it’s understandable that it looks like many more are coming to market.
Economists say rising home prices could convince more sellers to test the market if price increases keep up.
We have seen that here in OC. The new listings are priced 30% to 40% off the bottoming value from last spring. Anyone who owns a house that they believe they can sell for that much more than a year ago will be tempted to try their luck. It only takes one overly motivated buyer to cash their lottery ticket.
Nationally, the number of homes listed for sale stood 7.3% below their levels of one year earlier. The year-over-year decline stood at 18.6% in February, by contrast.
Among the nation’s 30 largest markets, listings were above the levels of a year earlier in four places. All four of those markets had seen big inventory declines over the past two years. Housing inventory was up by 11% in Sacramento, Calif.; by 10.9% in Atlanta; by 6.2% in Phoenix; and by 2.2% in Miami.
Another five cities posted declines of less than the national average decline of 7.3%: Los Angeles, Philadelphia, Baltimore, Chicago, and Charlotte, N.C.
By contrast, inventories were far below last year’s level in Boston (-35.1%), Denver (-30.1%), Detroit (-25.7%), Seattle (-23.2%), and San Francisco (-21.7%).
A mix of the best and worst performing housing markets still have low inventory. In the best performing markets like San Francisco, the low inventory is likely the result of brisk sales. In the worst markets like Detroit, its probably the result of lender can-kicking and a large slowdown in foreclosure processing.
For the last two years, real-estate agents in a growing number of markets have complained that the low supply of homes for sale has limited the number of transactions—even though the supply constraints have propelled home prices higher.
This is true. We would have had more sales this year if more inventory were on the market. Many people who contact us are frustrated potential buyers who can’t get a property. There is a significant amount of currently active demand that has not bought a house. I believe it’s this group of people who will carry the market through this fall and winter with little slowdown in sales and steady house prices, despite the higher interest rates.
The question now is whether higher inventory will lead to higher sales volumes, and whether it will also slow the pace of home-price gains.
It will do both.
Another wild card: how homeowners respond to mortgage rates that have jumped by at least a percentage point over the last two months.
Compared with May, inventories rose in 20 cities, according to Realtor.com. The data showed a spike in listings in Southern California, with inventories rising by 51.5% in Orange County, by 45.7% in Los Angeles and by 18.1% in San Diego. …
An anecdote on inventory and interest rates
I recently had a conversation about real estate with a gentleman who lives in San Diego. He relayed to me a story about some listings in his condo complex. One of this neighbors listed their property for $450,000 in April. Within a few days, they received multiple offers with the highest being $50,000 over their asking price. They were concerned about finding another property, so they turned the deal down and took their property off the MLS. In June, they found a property the wanted to buy. They relisted their property at $450,000, but several competing listings have since come on the market. The property has sat there with no offers since. The rising borrowing costs may be having more of an impact than many realize.
$3,018 down, $340,018 out
If you calculate the return on investment for Ponzi borrowers, nothing beats California real estate. The former owners of today’s featured REO put $3,018 down to buy their property. Over the nine years that followed, they extracted $340,018 in mortgage equity withdrawal.
- The property was purchased for $150,000 on 5/6/1998. The owners used a $146,982 first mortgage and a $3,018 down payment.
- On 2/27/2002 they refinanced with a $176,000 first mortgage and a $22,000 stand-alone second.
- On 4/6/2005 they opened a $100,000 HELOC.
- On 7/18/2005 they opened a $137,000 HELOC.
- On 3/29/2007 they refinanced with a $417,000 first mortgage and obtained a $80,000 HELOC.
They quit paying in January of 2011, and they squatted until the lender finally foreclosed in May of this year.
[raw_html_snippet id=”newsletter”]
[idx-listing mlsnumber=”PW13144964″ showpricehistory=”true”]
316 West ERNA Ave La Habra, CA 90631
$324,900 …….. Asking Price
$150,000 ………. Purchase Price
4/6/1996 ………. Purchase Date
$174,900 ………. Gross Gain (Loss)
($25,992) ………… Commissions and Costs at 8%
============================================
$148,908 ………. Net Gain (Loss)
============================================
116.6% ………. Gross Percent Change
99.3% ………. Net Percent Change
4.4% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$324,900 …….. Asking Price
$11,372 ………… 3.5% Down FHA Financing
4.37% …………. Mortgage Interest Rate
30 ……………… Number of Years
$313,529 …….. Mortgage
$87,734 ………. Income Requirement
$1,564 ………… Monthly Mortgage Payment
$282 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$68 ………… Homeowners Insurance at 0.25%
$353 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$2,266 ………. Monthly Cash Outlays
($281) ………. Tax Savings
($423) ………. Principal Amortization
$18 ………….. Opportunity Cost of Down Payment
$101 ………….. Maintenance and Replacement Reserves
============================================
$1,682 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$4,749 ………… Furnishing and Move-In Costs at 1% + $1,500
$4,749 ………… Closing Costs at 1% + $1,500
$3,135 ………… Interest Points at 1%
$11,372 ………… Down Payment
============================================
$24,005 ………. Total Cash Costs
$25,700 ………. Emergency Cash Reserves
============================================
$49,705 ………. Total Savings Needed
[raw_html_snippet id=”property”]
Inventory creeping up where I am looking…just at WTF $100k over the comps. The market priced houses are still getting multiple offers.
Over comps?? Multiple offers??
not for long….
LOL
LPS: Delinquency Rate Sees Abrupt Increase in June
After five months of declines, the national mortgage delinquency rate reversed course in June, according to data from Lender Processing Services (LPS).
From May to June, the delinquency rate shot up by 9.9 percent, ending at 6.7 percent, LPS reported. The increased delinquency rate represents the highest level since February of this year. However, prior to February, the delinquency rate is still at its lowest point in over four years.
Additionally, the delinquency rate still posted an annual decrease from last year. Compared to June 2012, the delinquency rate is down by 6.5 percent.
LPS also noted the spike in the delinquency rate is a seasonal phenomenon. Last June, the delinquency rate rose by 3.4 percent.
Foreclosures stayed on track in June, maintaiing both monthly and yedarly decreases. At 2.9 percent, the foreclosure pre-sale inventory rate fell 3.9 percent from May and was down by 28.4 percent from a year ago.
For June, about 4.78 million properties were 30 days or more past due or in foreclosure.
Of that total, 3.32 million were at least 30 days delinquent, but not in foreclosure, while 1.46 million were in foreclosure pre-sale inventory.
LPS’ report also included a ranking of the states with the highest and lowest share of non-current loans (delinquencies and foreclosures).
Florida led with the highest percentage of past due loans, following by Mississippi, New Jersey, New York, and Maine.
The states with the lowest share of unpaid loans were Wyoming, Montana, Alaska, South Dakota, and North Dakota.
Post later yesterday by Perspective
Softened Mortgage Rule Said to Be Proposed Soon by U.S. Agencies
A panel of six financial regulators is close to proposing a softened version of a pending rule requiring lenders to keep a stake in risky mortgages that they securitize, according to five people with knowledge of the discussions.
The Federal Reserve and the Securities and Exchange Commission, among others, plan to suggest that lenders must keep a share in the risk of mortgages issued to borrowers who spend more than 43 percent of their income on debt, said the people, who asked to remain anonymous because the discussions are not yet final.
The move would mark a victory for a coalition that includes the National Association of Realtors, the Mortgage Bankers Association, and dozens of other housing-industry participants and consumer groups who protested when the agencies in 2011 released a more stringent draft of the rule, commonly known as the Qualified Residential Mortgage or QRM rule. That proposal would have required lenders to keep a share of mortgages with down payments of less than 20 percent and those issued to borrowers spending more than 36 percent of their income on debt.
“If what we’ve heard about the proposed QRM rule is true, then we are very pleased that the agencies are moving towards a broad definition that will benefit the American people by ensuring access to safe, affordable options for buying a home,” Gary Thomas, president of the National Association of Realtors, said today in an e-mailed statement.
Dodd-Frank Act
The regulation, mandated by the 2010 Dodd-Frank Act, will reshape who can lend and who can borrow because banks will probably make only those loans that conform to the new standards.
The new proposal, which may come in a matter of weeks, would align the Qualified Residential Mortgage rule with similarly named guidance governing risky home lending: the qualified mortgage, or QM, rule. That regulation, issued by the Consumer Financial Protection Bureau in January, contains no down payment requirement and offers legal protections to banks for loans to borrowers spending no more than 43 percent of their income on debt.
This is the kind of bullshit unintended consequence that the closet communist general public can never see nor admit.
The FEDERAL government is FORCING lending institutions to take risk beyond that which they have appetite for.
This is a sign of massive failure. Any taxpaying citizen with half a spine and brain should be kicking and screaming, no matter how futile. Instead, we roll over and accept it, “it’s the way it is, ho hum, we need the GSEs to play their roll too.” BULLSHIT
I agree it’s BS, but I think it’s the opposite. The banks want to underwrite risky loans and then sell them to the GSE’s with a tax payer guarantee if it fails. So, now the risky loans with less than 20% down will be backup up by the US. It’s another FHA like institution.
BS. The bank have almost no risk for GSE backed loans as long as the forms are filled truthfully. It’s when they are falsified that they might have problems or get a reset buy modification or reissuing the loan to a new owner.
The banks have risk when their own money is used which is single loan over the GSE max.
Is my hope for Fischer completely gone? CR is in big at the Yellen camp.
Fed Chief Choice Shapes Up as Race Between Summers, Yellen
The race to become the next leader of the Federal Reserve looks increasingly like a contest between two economists: Lawrence Summers and Janet Yellen.
Mr. Summers is an Obama administration insider who was at President Barack Obama’s side during the 2009 financial crisis and maintains close contacts with the president and his top economic advisers.
Because Mr. Summers is well-known in the White House, Mr. Obama might have a higher comfort level choosing him.
Ms. Yellen, a Fed insider, has worked closely with the current Fed chairman, Ben Bernanke, formulating easy-money policies during the past three years and was a player in the Fed monetary-policy decisions during the worst of the financial crisis.
Because she is well-known within in the Fed, the institution might have a higher comfort level if she is chosen.
For months, outsiders have seen Ms. Yellen, 66 years old, as the favorite to succeed Mr. Bernanke when his term ends in January. But in the past couple of weeks it has become clear that in Mr. Obama’s White House, Mr. Summers, 58, is seen as a serious rival, based on comments from current and former administration officials.
Both are baby boomer, Ph.D. economists—Mr. Summers’s degree is from the Massachusetts Institute of Technology; Ms. Yellen’s from Yale University—with liberal political leanings. Both worked in the Clinton administration, when the economy was booming and the U.S. was ascendant. Both are known for strong views that they aren’t shy about advocating. And both would likely place a heavy weight on reducing still-high unemployment in an environment of low inflation.
As Mr. Obama weighs his decision in the weeks ahead, the final call will come down to how he weighs the pros and cons of different résumés, reputations and personalities.
Summers has been an Obama adviser from the beginning of his administration. My guess is that this will make him the favored candidate.
It does not matter who gets instated. Monetary policy is the only game in town. They cannot taper, as we have seen recently in the bond market. They must print the dollar into oblivion at this point because we are already too far down the road of cheap money addiction.
Yes, both Yellen and Summers will print money to no end. Fischer might have been more restrained, but that’s also what doomed his chances from the start.
If Sumners is nominated Im leaving Ca.
IR you’re most likely right, but as more houses come on the market and the banks actually start foreclosing so they can get inventory to market ( banks will not want to lose a window of opportunity for sales) as the time limit for foreclosing on squatters looms more and more near, and as builders start ramping up production you are going to have more and more competition for a sale so sellers will either have to make some concessions or have a buyer who walks. All those houses that have been left with no maintenance are gonna be the ones that start going to the bottom of the list. If you can buy a new house for the same price as the beat up one its a easy choice IMO.
And don’t forget that no matter what the pendulum swings back around. It’s not gonna be a sellers market forever. People eventually stretch beyond their means. It’s inevitable. The shiny car or the power boat or RV, the dream vacation will come calling and people will get themselves in trouble. Unless people change their spending habits they will do as before.
Short Sales are making a small come back
All-Cash and Institutional Investor Purchases Down from Year Ago in June But Short Sales Continue to Increase
With the exception of short sales, activity for distressed sales was relatively calm in June, according to data from RealtyTrac.
Last month, institutional investors, or non-lending entities that bought at least 10 properties in the last 12 months, accounted for 9 percent of residential sales. The share represents a slight increase from 8 percent in May, and a small decrease from 10 percent in June 2012.
REO sales remained stable, accounting for 9 percent of sales, down from 10 percent in May and unchanged from a year ago.
Cash sales also saw little change in June. About 30 percent of residential sales were all-cash transactions compared to 31 percent in May and June 2012. Though, several Florida metros held a notably high share of cash sale transactions, including Cape Coral-Fort Myers (70 percent), Miami (64 percent), Sarasota (59 percent), and Tampa (58 percent).
Meanwhile, short sales saw a significant increase over the last year, representing 14 percent of all sales in June, up from 8 percent a year ago. In May, short sales represented 15 percent of sales.
DR Horton On The Real Impact Of Soaring Rates: “Shocked Homebuyers”
Homebuilder stocks are down 4% on the week (and -6.3% from the FOMC) as D.R.Horton’s CEO dares to utter some ugly truths on his earnings call. Despite any and every talking-heads reassurance that rising mortgage rates won’t impact the awesomeness of the housing recovery, it seems the actual homebuilders have a different view:
*HOMEBUYERS ‘SHOCKED AND DISTURBED’ BY RATE JUMP, TOMNITZ SAYS
*D.R. HORTON CEO SAYS ‘DISAPPOINTED’ RATES ROSE SO ‘VIOLENTLY’
*D.R. HORTON CEO SAYS TRAFFIC COUNT HAS SLOWED SINCE RATE RISE
What? No? Un-Possible. With home prices collapsing (despite headlines trying their best to proclaim victory), it seems the fragile ‘recovery’ in an inventory-less housing market is about to pop once again (as we note, mortgage rates have not tracked lower as Treasuries un-Tapered).
http://www.zerohedge.com/news/2013-07-25/dr-horton-real-impact-soaring-rates-shocked-homebuyers
Zerohedge is warping your brain.
*unwarping.
fixed that for you.
I have to go with Matt on this one. Zerohedge has been providing an analysis of data unclouded by a bullish bias. His analysis has certainly been better than the Pollyannas in the MSM.
Bias runs both ways. Bill McBride has a much more accurate track record and has also called out Zerohedge as being over the top.
http://www.businessinsider.com/bill-mcbride-of-calculated-risk-2012-11
“Why do I change my views? I don’t know, I just go where the data leads me. I think it’s better question for some of the other people is why they didn’t change theirs?
And I think the answer is they tend to be bearish all the time. You’ve been around long enough to know that there’s a whole industry of gloom and doom, that the ZeroHedge mentality kind of guys. I’m almost 60 years old. All my life there’s been people telling me that the world’s gonna end for this and that reason in the next few years….“
Uh… question is, ‘why’ the need to call-out ZH?
nonetheless, let’s compare some stats….
per Alexa.com (web trackng info company)
ZH:
global rank: 2414
US rank: 790
bounce rate: 50.40%
daily pageviews per visitor: 3.31
daily time on site: 6:29
CR:
global rank: 76,306
US rank: 21,123
bounce rate: 82.20%
daily pageviews per visitor: 1.8
daily time on site: 1:23
Things that make you go… HMMMM, eh MR?
Thank you for confirming that doom and gloom is indeed a thriving industry. Imagine what those numbers would look like if Zerohedge ever went bullish the way Calculated Risk is accused of doing. They wouldn’t have an audience.
Also, by your reasoning popularity = credibility. If that were the case, then CNN, Faux News, and the Huffington Post would be some of the most credible sources of information in the world.
Silly MR, it was you who reasoned the popularity = credibility. NOT me. Initially, I simply asked a question, then, moved-on and posted some stats/comps.
Tip: the sooner you knock-off the nonsense, the sooner you’ll be taken more seriously. just say’n
details please
Thx in advance.
I read ZH and CR daily, and I think the truth (or reality) lies somewhere in the middle.
To me CR tends to lean “glass half-full” while ZH leans half-empty. Optimism versus pessimism I guess.
Both are interesting and provide data points to make one’s own informed decision.
In terms of housing recovery or not, CR is now in full recovery mode. I do not fully agree with that for So Cal because we are quickly passing rental parity in most zip codes, especially with flat to negative real wage growth.
The popularity of both websites confirm that you can make the same data come to whatever conclusion or bias that you want it to!
Zerohedge can be over the top, but they are the ones calling bullshit on all the blind optimism. It is entertaining. Tyler Durden, welcome to fight club? It is everything mainstream media isn’t. In a way, IHB/OCHN is quite similar. They shed light on the inconvenient truth. And nearing the end of a 70some year debt super cycle, the truth is ugly. Unprecedented monetary policy proves just how bad it is.
Any of these morons calling for greenshoots, real estate rebound (Bull Market? lmfao), and other such nonsense are simply misinterpreting the false signals sent out by artificially low interest rates. Escape velocity in terms of monetary policy is fallacy.
Larry-
Your associate in San Diego no doubt thought he would get an even higher price by waiting, and didn’t see any risk to his decision. What a costly mistake. People need to expect the normal patterns of seasonality in this bull market. There will still be corrections and pullbacks as market participants absorb new information and supply/demand forces fight over equilibrium.
Once the bull market got going, everyone thought it would go on forever, just like in the 00s. These rate shocks, inventory shocks, policy changes, and other factors that will impact the market over the coming years will certainly create volatility. A bird in hand is better than two in the bush.
Our townhouse has been on the market for 30 days and we’ve received no offers with our WTF price. We just lowered the asking to the same price per square foot at which comps have sold. We’re in no rush, but showing a house a few times per week isn’t fun…
Sounds like you’re seeing the same conditions at the condo owners in San Diego. If you’re priced back to recent comps, it will sell, but it looks like the rising rates took the steam out of the over-asking-price offers.
Buyers have been spooked by interest rates and negative real estate articles.
This makes me want to vomit:
Girl’s note seals real estate deal
I am starting to get a sense that we are rapidly approaching an inflection point in supply and demand. A lot of the housing market is driven by psychology. So much so, that, often, market psychology trumps economic fundamentals.
During the first half of the year, buyers saw inventories decline to record lows just as the spring season was beginning. The amount of time new listings were on the market dropped to the point where prime listings were only on the market for less than a week, sometimes a day. The shorter listings are on the market the more buyers stop thinking financially, and start reacting emotionally.
As inventories rise, the amount of time the homes sit on the market will rise as well. The more time an attractive home sits on the market the more time a potential buyer has for reflection and financial analysis. Even if the homes are priced way above market value, the fact that they aren’t selling will change the psychology of the market.
We also saw a couple of financing changes with FHA. Mortgage insurance premiums rose in April (both upfront and annual), and the FHA instituted a “lifetime” MIP on all loans after June 3rd, 2013. These deadlines created buyer demand in the first half of the year by creating a sense of panic to buy any house by the target date.
The rapid rise in rates in May and June caused those who had locked in their loan rate to take whatever was on the market instead of waiting for a better option. Since rates have now more or less stabilized, buyers can now take the time to assess what impact the rise has had on their purchasing power. With homes sitting on the market longer, they have more time to reflect and less panic driven buying will occur.
While there was a lot of excess buyer demand in the spring, evidenced by routine multiple offer situations, the question is whether buyer demand will continue when prices are rising 3% MOM and borrowing costs have durably risen by 30%. How can buyer demand not be impacted at every price point? With investor demand already flagging from rising prices, how is extra demand ever going to match rising supply? Where is this demand going to come from? Venusians? No, it must be Martians.
Since the rates started rising I’ve seen active listings rise from 76 to 110 in my area. At the same time, pendings have been steady at 51 (but fell from 60 to 51 in the last 2 weeks). I don’t feel near the same urgency to go look at homes now that I felt 3 months ago. I’m sure I’m not alone. Seasonality does matter. There are some buyers that simply won’t move after September 1. That is only five weeks from now.
If we continue to see the same rise in listing over the next 3 months and pending sales remain the same or likely fall, then we will have a much different market by November 1. Not all manias pop — some just fade away.
Russ, excellent analysis and post. I hope you’re right.
Russ
Thanks for the analysis and forcast. You are like the weatherman of realestate. Sadly weather forcasts tend to be wrong. I hope your forcast is right as well. But I dont think loan owners have to sell, as Larry constantly states. In the end CA buyers are going to pay peak bubble prices whether they want to or not. Central planning at its finest.
And, like the weatherman, if I’m wrong it’s the fault of those darn Asian butterflies.
Eventually, peak bubble prices will seem like bargains, just as the prior bubble prices do now. Who wouldn’t like to pay 1989 prices for California real estate today? I just don’t think we are there yet. With rising rates, we are getting farther away, not closer to, relative levels of affordability. Considering that rates were over 10% in 1989 and they are 4.5% today, and that bubble pricing was only affordable via a witches brew of no-doc, neg-am, 70%DTI, liar loans, peak bubble pricing may not seem like a bargain for some time. Those that pay speculative prices will pay over and over and over again.
[…] can get better bargains from builders. This will probably leave more inventory on the market, but Larry still shows it’s very historically low. What is hilarious is that many “experts” reassured us that higher mortgage rates […]