Below-median home inventories may not recover for years

 BREA, NEWS
Oct 182012
 
Below-median home inventories may not recover for years

For home inventories to recover, sellers must come back to the market. Since so many loanowners are underwater, particularly at lower price points, very few organic sales occur on below-median properties. Further, since below-median loanowners have a strong incentive to squat until foreclosure, few of these properties are coming to market as short sales. That leaves us with a depleted market that is only be replenished by foreclosures. And as I noted on Monday’s post MLS inventory is NOT coming as foreclosure filings dry up, banks are in no hurry to process foreclosures and bring these properties to the MLS. [Read More...]

MLS inventory is NOT coming as foreclosure filings dry up

 LAGUNA BEACH, NEWS
Oct 152012
 
MLS inventory is NOT coming as foreclosure filings dry up

Since the housing bust began in 2007, housing analysts focused on lender activity as the best indicator of future housing supply and the direction of future housing prices. The reasoning for this is simple: lenders control the housing market. Prior to the housing bust, the housing market was a collection of individual homeowners unrestrained by their mortgage obligations. Once prices began to fall, many would-be sellers submerged beneath their debts and required lender approval for a sale. The short sale was born. Many others defaulted on their loans, and lenders foreclosed on the delinquent borrowers until lenders became overwhelmed with [Read More...]

Despite record low mortgage rates, home sales volumes are weakening

 ANAHEIM, NEWS
Oct 042012
 
Despite record low mortgage rates, home sales volumes are weakening

The spring rally is over. Every year prices and sales volumes increase from January through August, then they decline for the remainder of the year generally hitting bottom on the last business day in December. The pattern repeats every year, and it’s not new or surprising. realtors generally take advantage of this phenomenon to call the bottom every year and to stoke fears of being priced out to generate more spring and summer sales. By fall, many buyers stop looking, particularly those with families who don’t want to disrupt their children by moving during the school year. Over the last [Read More...]

Housing recovery in question as California home sales fall

 LAKE FOREST, NEWS
Sep 272012
 
Housing recovery in question as California home sales fall

Recently I wrote that a durable recovery would be demand driven, not supported by restricted supply. Reductions in supply may temporarily force house prices higher, but a sustained recovery requires higher prices and higher sales volumes. In other words, a durable recovery requires a resurgence of demand. Reduced supply threatens to choke off the recovery as buyers lose interest in a market where little is available for sale, and the prices being asked are too high. In a high demand market, buyers don’t wait on the sidelines. In a supply restricted market, they do. And wisely so because educated buyers [Read More...]

A durable recovery would be demand driven, not supported by restricted supply

 ALISO VIEJO, NEWS
Sep 242012
 
A durable recovery would be demand driven, not supported by restricted supply

A durable recovery begins with increasing demand. More and more people have both stronger desire and more money to spend on housing when a sustained market rally takes hold. Both sales prices and sales volumes rise when demand increases. If you don’t have both, the rally is suspect. Right now, overall demand is slightly higher, but this is almost entirely due to an increase in investor activity. Despite record low interest rates, demand from owner-occupants is moribund. The truth is the recent increase in prices is almost entirely due to restricted supply, and durable recoveries are not built on weak [Read More...]

What happened to the MLS inventory?

 FOUNTAIN VALLEY, NEWS
Sep 192012
 
What happened to the MLS inventory?

Since the housing bust began, the banks have largely controlled the inventory of homes on the MLS. At first, they flooded the MLS with subprime foreclosures, but with mark-to-fantasy accounting, they were able to slow their foreclosure rates and store delinquent borrowers in shadow inventory. Since early 2009, the number of properties available for sales has been completely controlled by the banks. They determine when to list their standing inventory of REO, and they control the approval on every short sale. Between those two sources, the banks control the market. Banks decided early this year to slow the rate they [Read More...]

The housing market’s staircase recovery

 GARDEN GROVE, NEWS
Aug 222012
 
The housing market's staircase recovery

With the acute shortage of resale inventory across the Southwest, it’s hard to imagine prices going down, and in the short term, they won’t. Of course, circumstances could change quickly as they did this spring, so anything is possible. However, if the federal reserve can keep interest rates at record lows, and if the lending cartel can process the backlog of distressed loans without causing resale inventories to spike, then prices will not go down in the future. But is it realistic to think both of these circumstances will come to pass? Mortgage interest rates hit all-time lows because the [Read More...]

Prime season existing-home sales plummet 6.9 percent in West

 NEWS, WESTMINSTER
Jul 232012
 
Prime season existing-home sales plummet 6.9 percent in West

The consensus among economists for June home sales was that sales volumes would continue to increase. Proving their fallibility, the consensus of economists was wrong — very wrong. June and July are typically the best months for sales volume in the prime selling season, and sales volumes dropped in every region in the US. A large decline in existing home sales is further evidence that the house price bottom the consensus of economists is also predicting is in jeopardy. Nominal prices are moving higher, but it isn’t based on the strength of demand, it is due to the restriction of [Read More...]

Will dwindling housing supply cause resale prices to rise or sales volumes to fall?

 ANAHEIM HILLS, NEWS
Jun 252012
 
Will dwindling housing supply cause resale prices to rise or sales volumes to fall?

As anyone watching the housing market in the Southwest in 2012 can attest to, inventory is falling. At its current rate of decline, there will be literally no houses for sale by the end of the year. We established that banks are cutting standing REO inventories by reducing new acquisitions by 50%. They are reducing their inventory by allowing delinquent borrowers to continue to live payment-free in houses. Of course the perpetual shadow inventory extends housing downturn and creates uncertainty, but lenders believe they can force house prices to bottom by restricting MLS supply. Perhaps they are right. The success [Read More...]

Is the current housing affordability an illusion?

 NEWS, ORANGE
Jun 152012
 
Is the current housing affordability an illusion?

Payment affordability is very high by historical standards. That means people who borrow most of the money to buy a home — which is about 70% of buyers — the cost of monthly payments is low relative to a borrowers income. But is this a good measure of affordability? A recent paper argues it is not. Further, they argue that affordability is still a major problem hindering demand. I recently wrote about this issue in Record low interest rates fail to spur demand. Interest rates are at record lows, and prices are at or below rental parity in most markets, [Read More...]

Planning to buy a home this spring? Why not wait?

 MISSION VIEJO, NEWS
Jun 112012
 
Planning to buy a home this spring? Why not wait?

Several months ago, I had a meeting with a representative of the OC Register who wanted to sell me ad space. During the conversation, he said the realtor community in conjunction with the OC Register needed to create a “buying frenzy” to help liquidate the abundance of distressed inventory. Obviously, he was not a reader of the blog. Perhaps in the era before blogs, a coordinated mis-information program conducted by realtors and the local media would succeed in persuading buyers to act when it is not in their best interest to do so. We have certainly seen consistent examples of [Read More...]

California home sales plummet 8% in May, spring rally slumps

 HUNTINGTON BEACH, NEWS
Jun 052012
 
California home sales plummet 8% in May, spring rally slumps

Quite predictably, pending home sales have declined precipitously due to the lack of available inventory. Lenders have a variety of reasons for withholding inventory right now, but among the biggest reasons is their desire to cause house prices to bottom. Lenders make the false assumption that supply and demand controls all pricing. It does not. Withholding supply may help buoy prices in the short term, but affordability puts a cap on prices stopping them from rising. Lenders hope active buyers raise their bids and push prices higher. After all, that’s what buyers did during most of the housing bubble. Buyers [Read More...]

OC house prices are relatively payment affordable, but nothing is available to buy

 ANAHEIM HILLS, NEWS
May 102012
 
OC house prices are relatively payment affordable, but nothing is available to buy

For those planning on a long term of ownership, interest rates below 4% have made payment affordability the best its been in years, perhaps ever. The prices still seem ridiculously inflated, but record low interest rates make borrowing such large sums possible. Those low rates even drive the cost of ownership below the cost of comparable rentals, in some markets substantially below. It should be no surprise that many of the bubble-era communities and the less desirable older communities have prices well below rental parity. The less desirable communities always have a slight discount to rental parity, so when mortgage [Read More...]

Sales down, prices down, shadow inventory abundant, and Shiller says prices may never recover

 FOUNTAIN VALLEY, NEWS
Mar 282012
 
Sales down, prices down, shadow inventory abundant, and Shiller says prices may never recover

The frenzy over the possibility of a bottom in the housing market needs to be tempered by the reality of the current market situation. Despite relative affordability, sales volumes are low and declining, resale prices are still falling, we have a huge overhang of supply in shadow inventory, and as economist Robert Shiller points out, we may be on the Japanese path of decade-long deflation in housing. Any one of these conditions would warrant market pessimism. All at the same time calls into question the viability of any market bottom. OCHN Presentations, Wednesday, March 28, 2012, 6:30 and 8:00 I [Read More...]

Record low interest rates fail to spur demand

 NEWPORT BEACH, NEWS
Feb 062012
 
Record low interest rates fail to spur demand

Interest rates are at record lows, and prices are at or below rental parity in most markets, yet demand is low and sales volumes are weak. Most real estate shills blame intransigent buyers. Many realtors believe legions of buyers are fence-sitting due to falling prices. In their world, if buyers could just be cajoled into buying, everything would be okay. The main reason buyers aren’t buying is because they can’t. The buyer pool has been depleted by the recession. Fewer buyers qualify for loans because they have bad credit from excessive debt loads or a recent foreclosure or short sale. [Read More...]

Lower conforming limit causes 84% decline in loan volume

 COTO DE CAZA, NEWS
Dec 162011
 
Lower conforming limit causes 84% decline in loan volume

In Los Angeles and Orange Counties, the conforming loan limit dropped from $729,750 to $625,000 on October 1, 2011. Many market bulls claimed this would have no effect on sales. In November sales of houses with loans between $625,000 and $729,750 declined 84% as compared to last November. So much for having no impact. In other news, the falling prices are beginning to motivate some buyers as evidenced by the small increase in sales volume. Falling prices and increasing sales are prerequisite to forming a durable market bottom. SoCal home sales rise on declining prices by KERRY CURRY — Wednesday, [Read More...]