Michael Olenick: Beware of Housing Market Cheerleading

By Michael Olenick, creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick or read his blog, Seeing Through Data

CalculatedRisk has issued another housing cheerleader article, noting the inventory decline, especially in his back-yard, Some more comments on Housing Inventory.

It’s a shorter than usual than piece so here’s a shorter than usual rebuttal: housing inventory is completely divorced from market reality. Much like the laws of physics don’t apply when studying quantum phenomenon the metrics surrounding housing market price discovery are temporarily suspended until the shadow inventory is accounted for and disappears.

CR admittedly slightly tempered enthusiasm stems from an article noting housing inventories are their lowest since 2005, and repeats last month’s post the lower inventory will “lead to less downward pressure on prices.” More tellingly, about twelve hours earlier he posted that CoreLogic’s latest report showing another monthly decline in house prices.

Every day in foreclosure court bank lawyers argue in favor of never-ending delays. Last week I saw a borrower who thought the bank lawyer represented him because the mill attorney faced the wrath of an angry foreclosure judge while arguing for yet another delayed sale date. I went to talk to the borrower but he interrupted me to ask “his lawyer” what he should do now.

Countless homes here in FL are in REO status with no literally no sign of being for sale; no MLS listing, no sign on the front lawn .. nothing. Except for court records, and the lousy job property maintenance companies do maintaining the houses, you’d never know they’re waiting to be sold. Even the NY Times ran an article, “When Living In Limbo Avoids Living on the Street,” noting banks sometimes ask borrowers to stay put after a foreclosure, to live for free, in exchange for maintaining the property and paying the utility bills. Banks even pay the house insurance.

We know that GSE REO volumes are down, but we also know that’s because they’re selling the houses in bulk to investors. That takes the homes out of the shadow inventory counts, which count only foreclosures, but they remain like an off-balance sheet liability. These may be non-liabilities to accountants but they become very real when the costs materialize.

Sellers “waiting for a better market” remind me of my time in Silicon Valley during the dot-com days when people thought their already hyper-inflated stocks would go up higher, only to see their dot-com riches crash and burn. If you want to sell your house anytime soon then sell it now, while the price declines are being artificially dampened by inventory management.

Pump and dump promotion is an ancient problem; promoters pump up the value of an obscure inexpensive stock, sell at the peak, then leave those who received a “hot stock tip” holding the bag as the penny-stock craters. The only difference between traditional pump-and-dump promoters and current housing price cheerleaders are nicer offices, better clothing, and more zeros.

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59 comments

  1. Jim A.

    Well Florida had one of the worst building booms during the bubble. The ammounts of oversupply there are stunning. Really, I think that large areas are just going to end up being Detroit-like gap-toothed neighborhoods of houses and empty lots that USED to have houses. But even if you think that in many less overbuilt areas prices are near bottom, theres ABSOLOUTELY NO REASON to think that we will see significant appreciation. Anecdotally, I hear “waiting for the market to get better” a fair ammount and if by better they mean significantly better prices, they will wait in vain. Bubble prices were supported on the twin pillars of crazy stupid lending as well as the hope and fear of perpetual high rates of appreciation. Both are gone, and unlikely to return for a generation or two.

    1. Ray Phenicie

      But that’s the whole point; a formal eviction along the lines of the sheriff coming and padlocking the door is what is not happening-even though paperwork is in the courthouse (see the line about delays)-even though no payment has been made for maybe 90-360 days.

  2. Fawning Realtor

    Banksters desperately want the millions of shacks to have unreal value, which they didn’t during the house-tulip crisis and don’t now. It’s a horrible time to buy.

    1. Carla

      I don’t know where you live, Hugh. In my neighborhood, houses are selling for less than they did in 1986.

  3. Bam_Man

    Just who are going to be the “buyers” that suddenly materialize and begin to bid up prices on still-over-priced real estate? All I see are broke people whose credit is already shot and young people with no jobs or if they are lucky lousy-paying jobs and mountains of student loan debt. These are the potential buyers “waiting on the sidelines” ready to pounce when the time is right? Give me a break.

    There has been a nationwide (soon to be a worldwide) awakening that housing is a LOUSY investment. Absurdly high property taxes, insurance and maintenance costs all trump “record low mortgage rates”. Owning a home today in most US markets is the financial equivalent of “being shackled to a corpse”.

  4. Jack M.Hoff

    Michael, you wrote;
    “We know that GSE REO volumes are down, but we also know that’s because they’re selling the houses in bulk to investors.”

    How about some examples?

  5. Otto

    It is good to read an article in which you discuss Calculated Risk’s cheerleading for the housing recovery without going into unwarranted vitriol. I agree that “less pressure on price declines” reflects some caution and uncertainty, and that kind of contradicts your characterization of cheerleading.

    You seem to want to rebut aggregate data and their interpretation with anecdotes from Florida courtrooms and some reminiscences of the dot com bubble. I would respect your arguments if you provided another reading of data, or if you would at least provide some reasonable estimates, but anecdotes (though dark and foreboding) do not represent a reasonable response to Calculated Risk’s reading of the market. Furthermore, the dot com bubble comments seem completely off topic. We all know there was a bubble, we all know the bubble burst, so do we really have to regurgitate extraordinary popular delusions and the madness of crowds in market manias every time we write about housing?

    Sadly, your article can be reduced to one sentence. Calculated Risk is hopeful but he ignores the shadow inventory which is huge, huge, I tell you. That is a fair and respectable argument to make but it needs to be buttressed with a little more than anecdotes. Yves Smith has made several good runs at estimating shadow inventory.

    A last point. The plural of phenomenon is phenomena. We study quantum phenomena, and the statement that “the laws of physics don’t apply” is terribly intemperate, wrong, and discredits you with regards to your general education.

    1. Yves Smith Post author

      Michael was the one that made them, and the most respected housing analyst, Laurie Goodman, comes up with similar figures.

      This is not unlike the argument I had with Krugman over oil prices. Visible inventories don’t tell you what is going on.

      1. Jane

        Here is a link to Laurie Goodman’s testimony to the Senate Committee from September 2011. This should be enough to stop anyone from buying a house at current ‘market value’. And the numbers will have changed if she crunched them again today. Prices have fallen over the last 6 months, so more borrowers are underwater now.

        http://www.housingwire.com/wp-content/uploads/2011/09/Laurie-Goodman-Testimony-09202011.pdf

        Now take a look at the most recent house price graphs from Calculated Risk:

        http://www.crgraphs.com/2011/10/house-price-graphs.html

        I don’t see any evidence of a housing recovery anywhere.
        Just to put things in perspective; over 800,000 homes nationwide were taken back by lenders in 2011. In Florida alone (I know things are worse here than the rest of the nation) there is a backlog in the foreclosure courts of 368,000 and the number is growing daily. In Palm Beach County alone, which Michael knows well, there was a 27,000 backlog as of July 2011. That number now stands at over 35,000.

        The shadow inventory is indeed huge, and growing, with no buyers in sight.

        1. nonclassical

          Economic report out last month showed another 15 QUARTERS of bankruptcies
          and foreclosures…knowing what has really happened (rather than blame-game
          media propaganda-scapegoating), how can cities and counties declaring bankruptcy be considered positive economic indicators?

    2. Doug Terpstra

      From DrHousingBubble.com, “Of the two million active foreclosures over 40 percent have not made a payment in well over two years.” So that’s about 800,000 people who’ve been living rent-free for two years, and according to ‘Dr. Bubble’, many are in Beverly Hills 90210 and similarly tony places.

      http://www.doctorhousingbubble.com/million-dollar-foreclosure-hunter-beverly-hills-reos-foreclosures/

      Inventory in Phoenix has plummeted (temporarily) more than a third, from 40K in 2011 to 13K now (from HousingDoom.com, Phoenix), leading to 2005-like investor feeding frenzies. Fannie and Freddie thru FHFA, are withholding homes from the market for bulk sales to investors (hedge funds) who agree to market them as rentals for a specified period. Apparently, they’d rather sell to hedgies cheap than to potential owner-occupants. Phoenix is one of only three cities (incl. LA and LV) targeted for this old-school supply-side, “free” market scheme. (Bloomberg)

      http://www.sandhillsnc.com/bulk-reo-sales-from-fannie-and-freddie.html

      So the extend and pretend crony-capitalist games continue … and will continue until we pry their … fingers from around the levers of power. They will never yield voluntarily.

    3. dirtbagger

      Agree with you on this one. CR is certainly less negative then most housing blogs, but those who follow CR on a regular basis would find the term cheerleading to be a bit unfair.

      CR mostly reports “official data” and does not tend to dwell on the validity or nuances of the data. CR’s charts do give a fair idea how different economic sectors are trending over a longer time period.

      Housing markets can vary greatly even within the same MSA. Our housing median price has decreased 60% since 2006. Sub 150K homes are receiving multilple offers and sell quicky – many are all cash transaction. Homes greater then 300K have difficulty finding buyers and still face downward pricing pressure.

      1. SkyChef

        He probably has an ax to grind and his sloppy writing certainly doesn’t help his case. Yves and others have to come in to present credit & data which he should put in at the first place. His article tells more about him than CR.

  6. John Regan

    This has been the reality for a long time. In NY, where I come from, deficiency judgments haven’t been taken ever since I started and for years before that. (A deficiency judgment is a judgment against the homeowner for any loss on the loan because the house didn’t bring enough in the sale to cover it.)

    The reason deficiency judgments are never taken is…the bank is almost always the buyer at the auction, and they bid in the full loan amount plus any expenses so that there is never any loss on the loan itself.

    This is one of the ways banks were able to market MBS’s as being so “risk-free”: there was never a loss on the loan itself; the bank realized a loss later, after it sold the home it had acquired at the legal auction at full price.

    In other words, the practice of fudging losses on home loans through delay, accounting tricks, legal maneuvering and so on is more than 30 years old and is the result of the “securitization” boom that began in the late 1970’s/early 1980’s. The whole idea is to protect the market for securitized loans such as MBS’s and CDO’s. It is often the case, then, that the bank WANTS to delay, delay and obfuscate so that losses are either not “realized” or at least are not realized in such a way that the very securities markets themselves are threatened.

    These practices are essentially fraudulent. And they are nothing new.

    The housing market in the United States is so fundamentally distorted for all kinds of reasons that it’s hard to know what to believe. But here’s one take on things:

    http://strikelawyer.wordpress.com/2012/02/16/misallocation-of-resources/

    1. Jack M.Hoff

      So John, what you’re saying is that the MBS investors are being made whole by the banks? That sure explains why they haven’t uttered a peep about the fraud the bankers have been practicing. I’d surmise they received their bailouts through fraud also. Hidden in tarp funds. Distributed by the bankers. I wondered why the banks would always buy the foreclosures at the courthouse for full value even when no one was bidding against them. You have answered that question. One more thing banks are gaining by buying those foreclosures is protection of their worthless second mortgages.

      1. John Regan

        I’m glad to get a question on this. No, I don’t exactly mean that the banks made the MBS holders whole, at least not directly. The banks eventually realize their foreclosure losses on their own balance sheets. And when these losses multiplied the banks got into trouble. And then they were taken over by ever larger institutions and then the largest of these these were bailed out, having become TBTF.

        People hardly remember Washington Mutual, but until it suddenly folded in September of 2008 it was supposed to have been the “largest savings and loan” in the US. But like this whole thing, WaMu’s collapse was a process that took place over many years, it wasn’t born during the subprime crisis. The subprime thing was just the signal that the end stage had been reached.

        It is the market for securitized debt assets of all kinds – MBS’s, CDO’, student loans – that the powers that be are desperate to preserve. It’s their cash cow. It’s also what they know. Just like everyone else, they’re reluctant to change, only for them it’s more so because the “way things are” has been very good to them.

        They’re running things, but not even consciously, at least not most of them. What’s been happening ever since this started to unravel in ’07 has been nothing but a bandaid her, a bandaid there, and otherwise following the path of least resistance, keeping things the same as much as possible and acting only when something like soveriegn default is imminent, as in Greece.

        It’s coming to a theater near you because there’s absolutely no difference in principle between Greece and anywhere else.

        1. Jack M.Hoff

          John, thanks for the reply and explanation. You certainly must be in a position to see how large financial firms are run. But I do have to question why you say that they are not bailing out the MBS investors. If the banks are bidding every foreclosure to mortgage value or higher, wouldn”t those MBS investors be made whole right then and there? Doesn’t the check for the foreclosed property go to the investors, albeit through MERS? I realize they are not ‘bailed out’ or ‘made whole’ all at once, but they certainly never have to eat a loss as long as the banks survive and keep play the game they are playing. And any losses the banks do take will certainly be bailed out through TARP funds for the TBTF. Taxpayers in the end will cover any and all losses of the whole housing fraud. Feel free to correct me if I’m wrong here.

          1. John Regan

            >>John, thanks for the reply and explanation. You certainly must be in a position to see how large financial firms are run. But I do have to question why you say that they are not bailing out the MBS investors. If the banks are bidding every foreclosure to mortgage value or higher, wouldn”t those MBS investors be made whole right then and there?<<

            Well I see what you mean, but I'll have to emphasize that I have not seen how large financial firms are run from the inside. I am familiar with what happens in foreclosures at the ground level, though.

            I was more focusing on where the hit was taken, not where it wasn't. Specifically, though, I'm not sure whether MBS investors are made whole or lose something when a note is paid off like it would be at a foreclosure. Since the MBS is an income stream type investment and groups of notes are usually bundled and then insured and then the insurance cost might be affected if there are too many foreclosures even if the notes are paid in full – you see what I'm saying? There's a lot more I'd have to understand about what the specific MBS contracts provide.

            The main thing is that there is such an elaborate loss spreading architecture that it's basically fraudulent. A lot of people get nicked, but someone gets stuck with the entire bill eventually, and as you point out it's the taxpayer, like it is with just about everything else.

  7. Ron

    Inventory levels in lower priced white neighborhoods have gone down in Calif which is were most of the cash buyers and FHA first time homebuyers have been most active. What has gone unnoticed is the large number of unsold mid to higher priced homes say from 500K to 1.5M that get few bids except in the best white better school neighborhoods!
    What CR misses is that competition has been strong in the lower priced housing market and weak in the mid to upper tiers and as inventory levels adjust downwards in the lower end the upper levels will begin to come into focus as the bucket of buyers for these overpriced homes is very limited no matter what FHA loan limits or lower interest might be created in D.C.
    The current RE market lacks move up buyers and large downpayments both were major components of the past RE market so most of the past data points that CR point towards no longer reflect the changing market and are poor indicators of future pricing.

    1. Ron

      “Middle and Upper” 500K to 1.5M is relative. What is a mansion in Iowa pricewise is a Middle Class ranch style home in a suburb with great schools. What is an $800,000 crackerbox in a lousy urban neighborhood with terrible schools can buy a lovely home in a nearby suburb with the best public schools. The point is there are great school districts in relatively lower priced White neighborhoods.

      We bought our home in San Rafael which is twelve miles north of the Golden Gate Bridge. For the same dollar amount that we would have spent in San Francisco we get completely better weather, warm sun instead of wind and fog all summer, little traffic instead of a checkerboard of streets with cars racing through day and night, little crime and most importantly, primary schools that our girls can walk to and are guaranteed admission to instead of an urban crap shoot, are locally controlled and of high quality. There are hundreds of San Franciscans who spend their weekends over here as evidenced by their rented Zipcars with their distinctive logos.

      Near here there are absolutely top flight schools and homes that are not that much more expensive. There are a lot of Asian and Iranian immigrants in financial services and medicine who are most interested in education, maintaining the schools through voluntarism and civic involvement.

      The police do not tolerate any nonsense, thus the level of public safety is high. Smart investors will of course buy homes on the less desirable margins of such neighborhoods. Middle Marin County is such a place. Look especially at Terra Linda and along San Pedro Road near the Frank Lloyd Wright designed civic center.
      The next town to the north, Novato has plenty of buying opportunities.

      Proximity to the urban business center of San Francisco used to be a selling point. Now the little villages and the small city have become destinations unto themselves, especially when they have THE prerequisite, great public schools.

      1. Ron

        Inventory relative to price is the issue that CR and others have pointed towards as proof that the RE market is turning.
        The problem is that competition has been strong in lower end markets even with higher competition but the price point has to stay relativity low to attract cash investors and first time FHA buyers while an 800K house in San Rafael sounds nice the bucket of buyers able to buy those houses is limited and the inventory of 800K plus coastal homes within the Bay Area is very large. My point is that the higher tier homes will come under greater price pressure as Short Sales, foreclosure and smaller buyer pools exact there pound of flesh from the inventory pool.
        The lack of inventory in white/Asian lower priced neighborhoods does not mean prices will rise since those homes have been hunted hard by investors, first time home buyers and flippers. The rising lower end inventory is in the black/Spanish areas that investors have been buying without much competition as rentals or flips but again the price points will not rise much if at all if inventory levels decline.

        1. RonALD

          Sorry about name confusion. Notice the pattern of black and hollow dots ahead of names to show the reply tree.

          What you are saying in short at 12:13 pm is that
          “high priced homes in great school districts are
          [going] to drop in price”. Or just sit there empty awaiting the second coming of a new bubble?

          What I am saying at 1:14 pm is that certain areas are a bargain and will become even more so in the future as the school districts improve even more based on changing demographics of urban self-exiles opting for the affordable suburbs and especially the Upper end homes that will drop in price.

          “Gee honey, do we buy a crackerbox in a hipster neighborhood where we’ll get mugged and our kids’ll get beat up and get a mediocre education or do we spend the same amount to buy a house that used to sell for a million dollars in a fabulous school district that is safe and boring?…Honey, why are you looking at me like that?”

        2. Yves Smith Post author

          You are STILL MISSING THE POINT.

          The visible inventory tells you nothing. The banks are attenuating foreclosures big time to keep inventory off the market. You have no idea what is going on if you look just at inventories.

          1. mario

            We are not talking about fire sale prices, are we?

            There is a possibility that holding such inventory (aka tangible asset) may become beneficial as some point.

          2. nonclassical

            “may become valuable at some point”…certainly after statute of limitations runs
            out on whatever fraud has been perpetrated…certainly after corporate government “forgives” ever more..having already give tax breaks to “investment banks”, then claimed they payed back TARP instead..Bank of America moved poor assets to public account only recently, as Yves described right here..

    1. Ron

      I don’t think the numbers are cooked so to speak but the old data points don’t have the meaning they once did as changing market conditions have made them less important as a method of anticipating price movements. The old market of high equity homeowners moving up with large downpayments has been replaced with low down FHA buyers and low end cash investors all expecting these properties to rise in value over some time frame. The old models are broken and economist that are used to mining data and generating forward looking opinions based on old models are constantly out of touch with real market trends. CR made a name for himself by predicating the bubble in RE but even I did that when I sold off my RE Calif back in 2005! The point is that the RE market is very different today then it was 10 years ago and economist tend to prefer to believe that little or nothing has changed!

      1. RonALD

        The real estate ladies still drive the newest cars–black Mercedes SUVs now, used to be Range Rovers in yesteryear– and real estate writers still write the best works of short fiction in the English language.

      2. LucyLulu

        “The old market of high equity homeowners moving up with large downpayments has been replaced with low down FHA buyers and low end cash investors all expecting these properties to rise in value over some time frame.”

        Hopefully they have projected their timeframe far enough out on the horizon. It will probably be at least several years before their profits are realized. I remember debating with my five sisters in 2009 about whether we should sell my mother’s home in S. Florida or rent until the market recovered. Those of us who advocated selling argued that a recovery might be five years on the horizon. Fortunately, we “sellers” prevailed, priced it to sell, and took our 40% loss off an appraisal before the bust (which in hindsight appears we got off easy, but at the time was a big loss to swallow, esp. given it was sold for a 7 figure price tag) as even we now appear to have been overly optimistic. I myself have looked at buying a retirement home in the mountains of NC but they still seem ridiculously overpriced, just as housing in Florida in 2006 seemed (where I was living at the time), so I sit on the sidelines.

        I would suspect that lower-end (relative to local market) housing in white neighborhoods will recover the most quickly. There will always be people who prefer to own their homes and as wages continue to be depressed and disparity increases, along with a trend towards larger down payments, these will be the most home that the majority of prospective buyers can afford to buy. Also, the current supply is relatively limited, as construction has been geared higher up the income brackets (think McMansions) and people maxing their credit limits the last couple decades or so. I think we will see a trend towards more conservative amounts of debt people are willing to assume, not to mention the baby boomers wanting to downsize. (Had MY McMansion, never again, I love my little house.)

  8. rjs

    my little rant on the same last week:

    there was a lot of blog talk this week as to when housing would “recover”; some of it undoubtedly sprung from warren buffett’s annual shareholder letter (pdf), where he laid out his predictions, even though he’s been wrong about a housing recovery more times than most can count; this week he made headlines with his view that “hormones” would help spark a housing recovery; the problem, as buffett and even some wonks see it, is that young people, at the normal household formation and home buying ages of 25 to 34, are still living in doubled up rentals or at home with their parents, and they represent a large potential pent-up demand for houses, as soon as they move out & start raising families…unfortunately, these potential home buyers can’t use their hormones as a down payment, and for the most part, as dave dayen at FDL points out, they’re still saddled with significant student debt; matt stoller further notes that even college grads with 6 figure incomes cant qualify for a mortgage because of student debt liabilities, and as i’ve noted previously, the BLS projects that 4 out of 5 of the new jobs in greatest demand this decade will be low paying, low skilled positions that dont even require a high school diploma, hardly the type that can qualify for a large mortgage…furthermore, there was a new report out this week from the center for housing policy that nearly one in four working households already spends more than 50 percent of its income on housing; renters have seen their rents rise 4% as their incomes declined, while the annual median income for working homeowners fell from $43,570 to $41,413 over two years, about a 5% decline…furthermore, there’s been a trend in new hires to only open temporary or part-time positions so employers dont have to pay benefits…so until such time as more people are back to work full time at decent wages, and young people get out from under their debt load, the housing glut will persist and home prices will have no where to go but down…

    if anyone wants the hyperlinks to go with the articles cited above, they’re here:
    http://marketwatch666.blogspot.com/2012/03/notes-on-housing-prices-and-other-econ.html

    1. Mark P.

      Thank you. These points apparently have to be made again and again.

      The greater mass of Americans have been so strip-mined by the financialization of housing, education, healthcare and everything else that no matter how much happy horseshit Buffett, Washington, the MSM and TPTB feed us there cannot be any sustained return to business as before.

      1. nonclassical

        Kevin Phillips notes (Nixon’s economist-editorialist=think Bush-Krauthammer)
        circa 2001, “financial sector” generated 19% of U.S. economy-by 2007 that number was 41%…

  9. Ray Phenicie

    Using zillow.com on one’s own zip code can be instructive. I found houses in my neighborhood that were last sold 12 years ago now coming out for some reason on the market-at less than 30% of the sold price. Another one was unoccupied for 7 years and is now being offered for 40% of the last sale value. These scenes are repeated dozens of times in just one zip code listing, the city has several zip codes, population of around 85,000 but is hemorrhaging jobs. However, the housing market is mostly past its prime with homes built right in the middle of the post WW II boom.

    1. CEP

      Sorry Ray, but Zillow is not a good indicator of prices. Their “zestimates” can be inflated, or worse, deflated, sometimes by as much as 30% (average mis-stated “zestimate” is about 20%). The fact is, they often do not have up-to-date information on houses syndicated to their site. (I am a real estate agent, and I study my market very closely)

      I have had clients call me about homes they found on these sites (zillow, trulia, etc), which turned out to have been sold, sometimes as much as a year ago. Or the tax info they provide is completely wrong. And it honestly ends up being a very frustrating mess to straighten out. “But Zillow says…” Puleeseee.

      For the record, I don’t live and work in Florida, but I would love, love, love to see local absorption rates (active listings divided by sales equals months supply) as low as 2.02. I’d even be thrilled with an absorption rate as low as 3.90. Instead I’m sitting, in my neck of the woods, with an absorption rate of 10+ months (18+ months if I look at my entire MLS) and average time on market is over 130 days.

      Bottom line is, real estate is local, even hyper-local. What happens in one county, or one neighborhood, is not representative of the entire state, or country.

      1. Ray Phenicie

        I’ll stay with the zillow.com estimates because in doing footwork-looking at the actual houses-I think the market evaluations are way above what is listed on Zillow-so you may right about them but in the wrong direction-they optimistically list values on the high side. Housing prices have not found bottom yet and won’t until the giant squid vampire banking system can be forced to dislodge its hold on us.

        1. CEP

          Ray writes: Housing prices have not found bottom yet and won’t until the giant squid vampire banking system can be forced to dislodge its hold on us

          Ray, that all depends on your local market. In my local market, prices for most types of houses have been going up for more than 3 months, some are fluctuating. Your local market may be different, it very well may not have seen the bottom yet.

          Thus, real estate is local. What happens in your locality is not indicitive of all localities.

          The biggest problem I have seen particularly as I work predominately with buyers, is lenders not qualifying them for mortgages. It doesn’t matter how low mortgage interest rates are, if lenders won’t lend, very few can buy.

          This does not mean I’m advocating for loosened regulations on mortgages. What I am saying is we have gone from one extreme to another (extremely loose standards to standards so tight most people won’t qualify for a mortgage). And by going from one extreme to another, we are now creating a whole other set of problems, that I feel will be just as detrimental to our economy as the foreclosure/financial crisis has been.

    2. rjs

      ive been in my old farmhouse for 40 years and have no thoughts of moving…but if i could get the price zestimates gives me, i’d be outta here in a heartbeat..

  10. Ray Phenicie

    In following up on real estate listings from the local papers I have found several instances of the listing not matching what’s on the street-different house, wrong address, -so the local real estate agents don’t even know what they have sometimes.

  11. RepubAnon

    One thing that I haven’t seen mentioned is the effect of low mortgage loan rates on housing prices. When the interest rates start climbing back up, so will a prospective buyer’s monthly mortgage payments on a new home loan. This will put downward pressure on sales prices (somewhat buffered if the current owner has an assumable 30-year fixed loan).

    All in all, we’re not in the 1990s any more, Dorothy. I’m not buying a house unless and until I can be reasonably sure that I won’t have to move to another city for work for at least 5 years…

    1. RepubAnon

      Forgot to mention – we’re not likely to see housing prices increase for quite some time due to the double-whammy: once the oversupply of houses have been purchased, interest rates will rise – the higher the interest rate, the higher the monthly mortgage payment. It’s the inverse of what happened when Alan Greenspan dropped the interest rates and people could afford to buy previously unaffordable houses.

  12. Ron

    Zillow is excellent for streets,neighborhoods and the like rather then specific houses given different issues with each house but as a general indicator of value they are the best that’s available and a great tool for those thinking of buying a home in a given neighborhood.

  13. CEP

    The more I look at the original number CR is linking to, the less I like them. Here’s why…

    When determining the absorption rate, one never uses pending sales. Never, ever. You use closed sales to determine the absorption rate.

    I also realize that there is no standard (using the term loosely) in one MLS to another. For instance, I have two different pending statuses. Yet, other localities only have 1 pending status, and some localities use other terminology all together.

  14. Tom Stone

    Lots of comments. And a reminder that Real Estate is local. I am a Broker in western Sonoma County, our inventory is very thin right now. Michael Kelly our local real estate radio savant declared that home prices here are about to shoot up again.Why? Low inventory, low rates, lower prices. I do not agree. There are quite a few completed foreclosures not yet on the MLS in good neighborhoods, there are still plenty of people who are seriously underwater in Healdsburg, Glen ellen and Sebastopol who are at the end of their rope. And most importantly, buyers are well informed and are not willing to overpay. Even if inventory stayed at 2 months supply I would expect prices to drift down. I expect what I have seen before, lots of people heading for the exit at the same time. It is a good time to sell.

  15. H Sniffles

    I believe Calculated Risk to be one of the most thoughtful, balanced, and rational sources of information on the internet. I’d beware of people who are emotionally invested in a specific outcome (like a continued decline in the housing market)and who are the type who miss bottoms over and over and over and over ad nausea. But who never seem to learn.

  16. H Sniffles

    I’d say if there’s one tiny flaw with this site, it’s a tendency to look, maybe even hope for the worst.I think this is due to the sense that if things improve, the criminals are going to be much more likely to get off the hook. My guess is this is what will happen, and that’s a shame, but that it’s a mistake to cloud rational judgement with this mildly neurotic hopefulness. It’s kind of like hoping that your spouse will continue cheating on you so that you will have a chance to catch him/her in the act. And if there’s another (and perhaps much more serious) flaw in this site, it’s the unabashed preference for cats at the expense of dogs.

    1. kris

      Disagree with you.
      I don’t agree with a lot of things on this site, but Ms. Smith has a scary capability of dissecting the crude reality and putting in words we understands, “crude reality” being the keyword and it is pretty bad right now.

  17. H Sniffles

    What people are forgetting is that there will be a massive sentiment change among the banksters when prices bottom out and start back up. It is just possible that once they know that their collateral will be increasing in value, they will open the floodgates and let out the almost unbelievable amount of money they have stolen and parked at the Fed. I’m not saying this is likely, but it’s the opposite of the most widely held view (housing will eventually bottom out, and then just trudge along for years in a stupor) so it’s something to watch for.

    1. kris

      It has already happened. They have already bought up most of the market. But….no suckers to sell to.

  18. H Sniffles

    I think dirtbagger is right. It’s the term “cheerleading” that is really pretty darn offensive and uncalled for with regard to Calculated Risk. People use that sort of loaded, demeaning term when they have a vested (or emotional) interest in a particular outcome whose hair is being rubbed backwards. The term that pops into my mind when I think of Caculated Risk is thoughtful. So at the very least, you should hiss him angrily “thoughtful cheerleader.”

  19. H Sniffles

    “If you want to sell your house…then sell it now.”

    That’s a truly horrible, disgusting thing to tell an open audience. I’ve been in this business for 30 years, and there’s always some CLOWN who is yelling “sell your house! You can buy it back cheaper in a year or two!” They’re forgetting that for most people a house isn’t an investment, it’s a place to live and raise their family and have a garden and a silly, stupid, aloof cat and a very smart and lovable dog. These are the people who are just looking at numbers. They are the McNamaras of the housing war, counting beans into little piles on their desk peering through their coke bottle glasses, and then jumping up out of their overstuffed leather chair and yelling SELL FOOLS, SELL!

    I’ll give you a specific example. I put an offer in on a little house today. It’s in the outskirts of Yuba City, CA.(voted “worst town to live in in America” more than once, and damn proud of it). The asking price is $45,000. It’s a 1000 sq ft 2bd 2ba house on an acre with a tiny guest house and a dozen delightful fruitless mulberry trees. The main house will rent for $800 and the guest house for $450. So that’s a gross annual income of about $14,000 on a $45,000 investment. Excuse my French, but what the fuck do you want? That’s a 30% gross return on your money. If the house falls to bloody ZERO you’ll still have all your money back in 4 years. Being the almost incredibly vicious bargainer that I am, I made a ridculously low offer of $45,000. And since it probably will fall to zero (I mean it almost has to, right? Just listen to the O-Man) I’m going to have to wait for 4 years to get my money back. I think I’ll cancel that offer tomorrow morning and buy a Greek bond fund instead, and some Citibank shares, and maybe put the remainder in a savings account to get that incredible .00001% return they’re touting on the big banner in the bank lobby.

    1. reslez

      You seem to lose track of your argument. You begin by saying that for most people houses aren’t an investment (meaning people will buy them no matter what happens to the price), and close by saying one particular house is a great investment.

      Your point seems to be “NOW IS A GREAT TIME TO BUY!”. I don’t see how that materially differs from the people screaming “SELL SELL SELL” for essentially similar reasons.

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