Tuesday, April 17, 2012

March report from DQ

The report looks decent. Prices are up slightly in the IE (normal spring bounce). Sales are slightly down from last year. Don't know why, with the low rates sales should be up. The only factor holding them back might be the lack of inventory. Especially inventory that can be sold quickly. Most of it still seems to be short sale inventory which just clogs up the pipline.


Southern California home sales shot up last month from February amid the usual surge in late-winter shopping, but the gain over a year earlier was modest. Sales of $500,000-plus homes, though a bit lower than last year, jumped 36 percent from February, helping to lift the region’s overall median sale price to a six-month high – and to about where it was in March 2011, a real estate information service reported.

A total of 19,953 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 28.1 percent from 15,573 in February, and up 2.8 percent from 19,412 in March 2011, according to San Diego-based DataQuick.

It’s normal for sales to jump between February and March. On average, they've risen 37.0 percent between those two months since 1988, when DataQuick’s statistics begin. On a year-over-year basis, Southland sales have increased for three consecutive months, and for seven out of the last eight months. However, last month’s Southland sales total was still 18.6 percent below the average for all the months of March since 1988.

As in recent months, March’s year-over-year gain in sales wasn't seen across the price spectrum. Last month the number of transactions below $300,000 rose 2.3 percent from a year earlier, while the number sold between $200,000 and $400,000 rose 4.2 percent. Sales between $300,000 and $800,000 fell 0.6 percent year-over-year, and sales above $800,000 dipped 5.6 percent.

March sales of newly built homes rose almost 9 percent from a year earlier, marking the second consecutive month with a year-over-year gain. But March’s new-home tally was still the second-lowest for that month in DataQuick’s records back to 1988. Last month’s sales of existing (not new) single-family detached houses were the highest for a March since 2010, while resale condo sales were the lowest for that month since 2009.

“The year is young and lots could still change, but the results from the first big sales month of 2012 suggest the market is stuck in low gear. This remains a very gradual – not to mention fragile – recovery. Last month's big gain in sales from February was seasonal. A lot more people get out and shop after the holidays and as spring approaches. More telling was the relatively small gain in sales activity compared with a year ago. It's a reminder that, for many potential buyers, lower prices and amazingly low mortgage rates still aren’t enough to get them over their hurdles: tight credit, home values below what they owe on their mortgages, and uncertainties over the economy and home prices,” said John Walsh, DataQuick president.

The median price paid for a Southland home last month was $280,000, up 5.8 percent from $264,750 in February but down 0.2 percent from $280,500 in March 2011. The March median was the highest since the median was also $280,000 last September. The year-over-year decline in the March median was the smallest since February 2011, when the $275,000 median was unchanged compared with a year earlier.

Last month’s median was 13.4 percent above the low point for the current real estate cycle – $247,000 in April 2009 – and 44.6 percent below the $505,000 peak in mid 2007. The peak-to-trough drop was due to a decline in home values as well as a shift in sales toward lower-cost homes, especially inland foreclosures.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,063 last month, compared with $998 in February. Last month’s figure was down from $1,185 for the same month last year. Adjusted for inflation, current payments were 54.8 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They were 63.0 percent below the current cycle’s peak in July 2007.

Sales Volume Median Price
All homes 11-Mar 12-Mar %Chng 11-Mar 12-Mar %Chng
Los Angeles 6,590 6,772 2.80% $320,000 $306,000 -4.40%
Orange 2,615 2,856 9.20% $430,000 $400,000 -7.00%
Riverside 3,843 3,756 -2.30% $198,000 $200,000 1.00%
San Bernardino 2,544 2,512 -1.30% $150,000 $150,000 0.00%
San Diego 3,063 3,237 5.70% $325,000 $320,500 -1.40%
Ventura 757 820 8.30% $349,000 $350,000 0.30%
SoCal 19,412 19,953 2.80% $280,500 $280,000 -0.20%

Monday, April 16, 2012

Another bank gets screwed?

Without knowing the details this transaction looks suspiciously like a case of an inside deal. The bank gets screwed and the investor makes $100k (maybe).

17789 Scottsdale rd in Riverside was a foreclosure. It went back to the bank in August 2011 when they found no takers at the asking price of $391k. It does not seem to list until Dec 28th and then there is a record of the sale posted on Dec 30th? Even all cash deals don't happen in 2 days. So this property may have never been listed, listed out of area or who knows. But regardless it sells for $326k, which is well below comps for this area. Now looking at the pics I don't see any indication the property was thrashed. It's obviously the original kitchen because no flipper would put in that kitchen. The floor tile is horrific too. The only thing that might have been done is new carpet and paint. It's now listed for $420k after a couple of price reductions. That's a tidy profit of $95K if they can find a buyer. It's probably still $30k too high given the lack of landscaping and the low quality finished inside. I've seen much nicer homes nearby sell for $400k so he may still need to come down a bit. The only thing that might help him is the lack of inventory.

Tuesday, April 3, 2012

Flat line

I thought I would throw up a few charts to show the price trends in the IE. Basically the prices have been flat since late 08. There are of course minor fluctuations due to the season. Sale prices fall in the winter and rise in the summer. There was a small bump in mid 2010 when the homebuyer tax credit caused the prices (and sales numbers) climb a bit. But overall the prices seem to be bouncing along "the bottom". Price to income ratios are back in line where they should be. Price to rental ratios are far, far in favor of buying. It's WAY cheaper to buy versus renting similar properties. The only "gotcha" is that you need to be sure you are going to stay put. You cannot rely on appreciation to cover selling costs if there is a need to sell. So if you need to sell within say 5 years of buying you may not come out ahead versus renting.

Looking at inflation adjusted prices, the IE is about the same level it was in the late 80's. However, the crazy low interest rates make payments actually less, even when not adjusted for inflation. For example I own a rental that sold new in 1988 for $110k. Payments on that home back in 1988 were $1200/mo (PITI). Today that home is worth approx $150k. Buying that home today would result in a payment (PITI) of approx $900/mo. Adjusted for inflation today's payment is MUCH lower than the 1988 payment for the same home.

Obviously there are still loads of distressed properties. This will hold prices low for until those are worked through the system. But can prices go lower? It's hard to imagine that will happen. With the rental values and the home prices at these levels, investors can make more money buying and renting properties than they can in the markets or the banks. This alone should keep the prices from falling. I now have two rentals and would pick up a few more if I had the cash. I'm under no illusion of making money on appreciation of these properties but the rental income is a welcome addition to the monthly bottom line.

Here's a few of those charts

This one is the median sales price for Riverside. As you can see it's been relatively flat for a few years now.

The price per square ft char is also pretty flat since late 08

And finally the long term chart with the inflation adjusted prices.