Monthly Archives: May 2010

Number Wonking

I’m never going to be a very good numbers wonk.  Or geeky statistics guy.   It’s not my nature.  I’m much more comfortable wandering off-leash in the obscure realms of tortured introspection, existential angst and abnormal psychology.

I can crunch a dozen zen koans at a time and make sense of them all. I can distill one single universal truth out of the hundreds of universes that populate 2,000 pages of the Urantia Book.  But when it comes to those sales figures the real estate market provides us each month, I’m not sure I can determine anything useful.  My perceptions just don’t seem to jibe with the rest of realty.

This week, I’m throwing caution to the wind. Going against my own grain. Undoubtedly rubbing some of you the wrong way in the process.   I’m foisting my own list of real estate stats on you – those that I personally find most interesting.

I’ll keep my editorial comments to myself and let the numbers speak for themselves. I invite you to log onto the blog. Register your opinions. Contradict my data with your data. Or tell me why I’m full of it.

But first…my all-purpose CYA disclaimer. The following information is not exact. There are many ways that info can be pulled off the MLS System. There are often mistakes Agents make inputting their listings that throw off the results.  Like all aggregate compilations these numbers may be subject to spin, the sins of (c)omission or errors in interpolation or extrapolation. You might not like what you see.  You may find the right side of your brain in vehement disagreement with your left.

I don’t speak for any group or officially represent any organization.  I have no particular allegiance to any thing other than my own thing . Proceed at your own risk. But if you do go forward, be advised that you might want to do so in the company of an experienced real estate attorney, a licensed CPA, a braniac cousin or a well-balanced idiot savant.  Feel free to enlist a priest, shrink, shaman or bartender or, of course, a real estate broker. Moi? I’ve really got no expertise in analyzing numbers. I only know what my gut tells me.

It’s May 22st.  Five more business days till the end of the month.  We’re rooting for you May. Real estate is cheering you on. You’ve got a long way to go in a short period of time if you want to boost our spirits and continue to shore-up our optimism. We draw hope and solace from the fact that a lot of closings often get crammed in right before the end of the month.

As of 11am yesterday, 98 homes had sold in the County during May.  Of those, 3 closed for a million dollars or more, 2 closed between 900 and 1 mill, 10 in the 800’s, 8 in the 700’s, 13 in the 600’s, 17 in the 500’s, 16  in the 400’s, 14 in the 300’s. And the rest…lower. All the way down to a $30,000 shack in the boonies.

Of the 98 properties sold 14 were short sales and 21 were REOs. Eighteen of the properties sold were listed above $800,000 at the time they went into contract. All but one of those 18 sold for less than what they were listed for, at the time of sale.  Most  sold for far less than what they were originally listed for.  Going back to the original listings of all 18 properties, the average property sold for  $316,961 less than what someone was hoping to get, in the beginning. These 18  properties had an average time on market of 254 days.

There are approximately 680 active single family listings (homes not in escrow) on the market – 212 are listed above a million dollars.  Let’s reiterate: 3  properties above a million have sold in May, 9 sold in April,  12  in March, 6 in February, 7 in January.

There are approximately 414 properties currently in one form of escrow or another – euphemistically known in the real estate world as Status 2, 3 or 4 (pending release, pending show, pending no show.) Of the 414 properties under contract, 16 are listed above a million, 11 are in the 900’s, 19 in the 800’s, 33 in the 700’s, 39 in the 600’s, 46 in the 500’s, 72 in the 400’s, 61 in the 300’s.

Of the 414 properties in escrow 216  are short sales and 56 of them are REOs.  Roughly 65% of all properties in escrow are officially – distress sales.

There’s my shorthand synopsis of the stats. What do you make of it all?  Time to roll up our sleeves and apply a little transactional analysis to the marketplace?

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The Shadow Knows…

Shhh. Sh-sh-shhhh. Oops. Sorry. Shhhhh. No, I’m not shushing you. Honest. This is an Advertorial. We’re here to talk about real estate – not keep it on the QT.

My recurring speech impediment has flared up again. Maybe it’s a mild form of Tourettes. Part of my brain is trying to stop another part of my brain from blurting out bad words that aren’t supposed to be heard in public. My inner Gallant is trying to shut up my inner Goofus before he acts out in front of polite company.

Shh-Sh.-Shhh. See, every time I attempt to get a word in edgewise on myself, I begin stuttering. The last time this happened was in 2005 when my lips started twitching every time I tried to talk real estate. A series of b-b-bu-bu-bubs issued forth involuntarily whenever I opened my mouth. It was like some invisible finger of fate was flicking itself across my lower lip. I sounded like I was b-b-busy making goofy b-b-baby noises while there was a really serious rogue elephant stampeding the marketplace.

What finally came stammering up out of my subconscious in a cathartic moment of release was the one word that no one wanted to hear at the time – bubble. By then, it was too late. And the rest is real estate history. History we are still trying to muck our way through in the present tenseness.

But now, I’ve got this sh-sh-sh thing going on. Thankfully all that therapy I had in the past is helping me get to the bottom of my speech pathology quicker this time. So everybody be quiet for real now, ok? Listen up. Shhhh.

I’ve got two important words to say to you. Actually it’s four words, but bear with me. Ready? Sh-sh-sh-shadow inventory. Sh-sh-sh-short sales. Whatever else I say and whatever else anyone tells you and whatever else you believe, these are two of the most important things you can pay attention to right now.

No one is talking about either of these things in a way that does them justice. Sure the words get tossed around. Casual catch-phrases floating through the open house ether. But truly meaningful conversation and analysis in the context of the big picture is conspicuously absent. The silence surrounding both is deafening. All I know, is that the growing size of the shadow inventory and the growing number of short sales are both exerting a huge gravitational pull on the marketplace, in ways we can’t quite grasp or comprehend yet.

Shadow inventory is the name for that the hidden underground vault full of foreclosed properties the banks are hoarding. For reasons we can only guess at, they aren’t ready to recycle their REOs back through the marketplace. They’ve been dribbling a few out here and there but the vast majority haven’t seen the light of day since they fell off the court house steps into the abyss. In fact, apocryphal stories from local REO Agents suggest that the tiny flow of post-foreclosure listings has grown even more constricted these last few months. The drip of damned-up inventory has stalled below a snails pace. Why? Inquiring minds want to know.

At the same time the number of REOs coming on is decreasing, the number of short sales is increasing exponentially. Short sale has to be the dumbest term anyone ever invented for anything having to do with real estate (other than the word “real” itself.) Short sales aren’t short. And to date, not a lot of what we sorta, kinda, wanna think of as short sales as in actual “sales” – have really turned out to be sales at all.

The whole concept of the short sale is fuzzy at best. A clustered FUBAR at worst. A Seller is nominally the Seller, but in the end, after hiring an Agent and marketing the property and negotiating an offer, it is the bank(s) that decides whether a property sells or not. Once a possible sale disappears into the bowels of short sale negotiation anything can happen – including nothing. How do things get decided? How long is it going to take? Who knows? Everything is open- ended. A hope and a prayer with Jiminy Cricket as escrow officer.

Short sales are really just a shadowier kind of inventory than the other kind of shadow inventory. Add them to the huge supply of homes already residing in the limbo of bank land. Sitting on the sidelines. Twiddling their thumbs. Collecting cobwebs. Waiting to be released and unleashed upon the market someday when something or someone decides it’s the right time to let ’em rip right through the tender balance between supply and demand.

As conventional wisdom says Sh-t Happens. As these unconventional times also suggest… a lot of ShSh is going to happen too.

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The Bends

This just in.   A team of Medieval scholars and forensic academicians has uncovered evidence that earlier translations of Nostradamus’ famous work  – “Les Prophecies” – contain numerous misinterpretations.  Decipherings of the notorious 16th Century Seer’s oft-quoted quatrains, predicting world-changing events, ranging far into the future, have now been revised in light of this recent news.

Californians living in the fault zone, will be relieved to hear that Nostradamus did not actually foresee our State (The Golden Bear) suffering a series of cataclysmic earthquakes literally causing chunks of real estate to fall into the ocean.  He simply had a vision of the early part of the 21st Century, when large portions of the Western United States (The Eagle), would suddenly fly into the default zone and struggle to find a way home to those once-eyrie nests that had somehow become figuratively and eerily trapped upside-down, underwater.

Some of you may have taken time off to wander around on a  wine tasting tour up in Napa this past weekend but I was busy working. I drove through the Central Valley on a fact-finding mission and defacto whine tour. I was determined to plumb the depths of the market and dive into the true state of real estate in Merced, Fresno, Bakersfield and the even fallow-er ‘fields’ of the great Inland Empire sprawling outward from the desolate SoCal hubs of San Bernardino and Riverside.

I brought my real estate snorkeling gear along as a precaution, just in case I needed some fresh air and a few long, cleansing breathes while exploring the rough, underwater terrain I expected to find. But by the time I hit 20,000 leagues and then got a few more kilometers further into the kill zone, I was so deep into it,  I had to strap on my full scuba regalia replete with reserve air tanks.

And then I pulled a MacGyver and jerry-rigged my submersible BMW with a rusty old periscope I found dry-docked along the Salton Sea. It wasn’t far from Rancho Mirage and all those other desert mirages ringing the dried-up lake bed of housing tracts in the Coachella Valley. Those that had sprung forth like a flood from Palm Springs over the last couple of decades – only to finally hit the wall of a tsunami lying in wait.

Sitting on a stack of telephone books, with periscope pushed up out of the sun roof as far as it could go, I tried to navigate my way inside out, from Central California back towards the shores of Santa Cruz and what I hoped would be the safer habitats of Coastal California.

All the while,  I was moving through a vast red tide of toxic assets resembling the Great Pacific Garbage Patch. Like the island of suspended plastic particulates, twice the size of Texas, that has been found residing in the middle of the Pacific Ocean, there is a huge horizon of crumbling stucco facades and cracked tile roofs stretching for miles, as far as the eye can see and the brain can envision, sucked up into the complex, swirling gyre-like current of current events.

As the irony of life reminds us in such eloquently simple terms: Garbage in/Garbage out.  We are what we eat. Consumers consume and then they get consumed by their consumption. Chewed up and spit out from the rear end of each binging boom cycle we can’t stay away from.

My big worry, as I got closer to the coast and higher land prices and places that I thought would get me nearer to the surface of the market and the light of day and the clear blue sky I am so used to seeing, was that I would rise too high in value too quickly.

I was afraid that all those bubbles in those underwater markets sitting under such tremendous strain and pressure would decompress so fast, my joints would spasm. My central nervous system would revolt.  The strain on my broken heart and in my crazed head would throw me into such a terminal case of the bends that even a few years of r and r in a hyperbaric marketplace wouldn’t be able to cure me.

Fortunately or unfortunately, my fears were completely unfounded. There wasn’t even a hint of the bends waiting for me as I came around the bend from the Salinas Valley and traveled up Highway 1, gunning it towards home.

Suddenly I began to notice how many sea birds there were that looked like albatrosses, littering my own landscape. How many people here in Santa Cruz County had them hanging around their own necks.  And then I realized, just as Coleridge’s Ancient Mariner had.  No one gets to escape the encumbrance and the wearisome burden. We all have to carry the curse and the metaphor of our times.

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