Tag Archives: real estate recovery

Armchair Quarterbacking the Real Estate Market

Blog01Stay where you are. Don’t get up. Ride the mellow wave of that Turkey-induced, tryptophan high for a couple more days. In the meantime…relax and raise the footrest on the ol’ Barcalounger. Let’s look at the big picture – as real estate rounds into the homestretch of 2012.

Reclining is much better than declining. And real estate has earned a few days off for good behavior while racking up some very positive stats the past few months.

Spoiler Alert: Anyone looking for proof that the market is speeding back towards the heyday of 2005-07 is setting themselves up for disappointment. Take things for what they are – better. Let go of that other dream.

Median Price: We’ve been consistently in the $500,000 range most of this year – after hovering closer to $450,000 last year. The median peaked out well above $750,000 between 2005-2007.

Average Price: Running in the high $500,000s to low $600s recently. Compared to the low to mid $500s last year. Still a far cry from the lofty $800 to mid $900s range Santa Cruz County averaged at the peak.

Number Sold: Sales in 2012 are up over last year – close to 25% more. Not shabby. We may reach 1800 + single family sales this year – not far off from the combined average annual sales between 2005-07.

Surprise Stats: The average and median price of condos has risen dramatically in the last few months – close to $410,000 in both categories in October. Both up more than $100,000 from October of 2011. Go condos.

Corresponding Data: The percentage of short sales and REOs was down significantly in the condo/townhome sector which has absorbed more than it’s share of distress since the downturn. Continued improvement in the condo market will be a sign of better things to come – first time buyers, more organic listings, upward price pressure in at least the lower price ranges of the market. Go condos.

Translation – Organic Sales: Regular people selling regular houses under relatively normal conditions. Not bank-controlled short sales or REOs because banks aren’t people too. Getting back to a more normal market dynamic in the future is predicated on having more organic listings. The catch? We still have huge vaults of unsold distress properties casting their long shadow.

Rental Market Irony: Bubble bursts. Prices go down. People lose their homes. Fewer people can qualify to buy. There are suddenly lots more renters competing for fewer rentals. Demand exceeds supply. Rents rise significantly.

Buyers’ Irony: The perfect buyers market? Historically low interest rates. Prices down 30- 40% from the peak. Distress sales on every block. The catch? Nothing to buy. Short sales take too long. REOs are almost always awful. Lack of choices means competing offers on the few good listings that do come on. And – it’s still not easy to get through the loan qualifying process to access those great rates.

Sellers’ Irony: If you have a decent home listed in the sweet spot – $550,000 – $750,000 – chances are you’ll see multiple offers in the first week. Eager buyers who may drive the price up and cooperate on inspection issues. What’s wrong with this picture? That same sweet zone would have been 40% higher in 2005-07.

Dead Zone: Check it out. How many listings are there on the market between $800,000 and $1,000,000? Very few. How many are selling? Fewer. Call it the market’s designated no man’s land.

Elephant in the Marketplace: Lack of Inventory. There are only 400 listings available in the County. The fewest I’ve ever seen. Until mo’ better homes come on the market – the number of sales and the prices can’t/won’t increase dramatically beyond current levels. But prices have to rise to convince more Sellers to list.

Question: If you were a Seller – wouldn’t you want to be on the market when there was the least amount of competition? Supply and demand? Remember? Perhaps it’s time to make that New Year’s Resolution.


We Won’t Get Punk’d Again?

In the old days, I would have written my annual April Fool’s column a few weeks ago. Made up some patently absurd, playfully deceitful premise. Spent 600 words trying to suspend everyone’s disbelief. Selling the ol’ presumptive close. Not allowing anyone to buy into the notion that they hadn’t already bought in.

In the end, I would have confessed I was kidding. We would have laughed. Then gotten on with the business at hand – serious real estate.

But those were the old days. These days? I’m not sure who’s fooling who anymore. What’s serious. What’s not.

We’re well into April and the rites of spring. Hopefully headed for showers of new activity and a vibrant, blossoming marketplace. But I can’t shake the feeling that there’s still some kind of joke lying in wait out there. Preparing to yank our chains. Trying its darnedest to fool some of the people all of the time and at least all of the people some of the time.

Including me. Recovery? Presto change-o. Now you see it. Now you don’t.

When I look at the layered vagaries buyers and sellers are experiencing, consider the potential good news that’s welling up in the wings and then juxtapose the whole kit and kaboodle of high weirdness that continues to roil around in the wake of the bust all I can say is: a) Folks, I couldn’t make this stuff up. b) Realty is stranger than fiction. c) My belief that anything definitive can be said about the market is officially suspended.

Just warning you. If real estate wakes up six months from now and the volume is cranked up on “We Won’t Get Fooled Again” and one of the seemingly endless pantheon of two-faced, real estate trickster gods jumps out from behind door number three masquerading as Ashton Kutcher shouting “You’ve been punk’d!” … don’t pretend there wasn’t anything to be slightly suspicious about all along.

Then again…maybe real estate will be safely awash in throngs of Facebook Millionaires by that time! Apple shares will be trading at a thousand! Buying and selling houses will be the talk of the town! We’ll be headed merrily in the direction of another robust run up! Money talking! Bullsh*t walking!

Even if the long boom never lasts as long as promised. And towards the end of every cycle the bull always talks while money takes a hike.

If we’ve just opened escrow on the real estate recovery, we better strap in. Shaky deal ahead with plenty of twists and turns. More ups and downs than Mr Toad’s Wild Ride.

Depending on where you look and what angle you look from, there’s a good news/bad news whammy attached to just about everything the market has to offer.

Buyers? Good news! Incredibly low interest rates! The Case-Shiller Index says prices are down 40% from the peak! It’s spring! More listings coming on!

Bad news? The loan process can still resemble a Guantanamo waterboarding experience. Inventory sucks. Anything decent is getting snapped up with multiple offers in a week.

Sellers? Good news! Multiple offers left and right! Bad news? See above – re: Case-Shiller Index.

First time buyers? Here’s a special introductory conundrum for you. You can probably own for less than you pay in rent. Catch? You’ll be competing with all-cash investors for quite awhile.

All this. And more.

Last week’s TIME Magazine piece was: Recovery for Real? …surprising signs – like underwear sales – that point to yes. Apparently there’s been a 6.6% jump in the Underwear Sales Index, once made famous by Alan Greenspan. Bad news? Per tooth payouts from the tooth fairy fell more than 17% last year. I kid you not.

Given this kind of definitive news, we should probably move forward with cautious optimism. Keep an eye out. Make sure Ashton Kutcher doesn’t jump out dressed like the tooth fairy and pull the underwear over our heads again.


The Calculus of the Narrative

Ok. Oly Oly Oxen Free. Here it comes. Ready or not.

The holiday hiatus is over. The furlough has expired. The sabbatical from real estate everyone seemed more than willing to take at the end of the year, with or without pay, has run its course.

When the principal actors (buyers, sellers, agents) tacitly agree to shut things down for a month – it’s the perfect excuse to limit expectations. No one can be too disappointed because nothing much was supposed to happen anyway.
Real estate lite. Tastes bland. Less filling. But a great self-fulfilling prophecy that helps lower the bar.

Wouldn’t it be tempting to stay here in our real estate of unanimated suspension forever? Floating weightless? Going through slow motions? Void of emotion? Thoughts adrift?

A no man’s land-escape filled with the illusion that there’s always going to be plenty of time to fix things? Maybe this spring!! For now…the market dissolves. The future seems a long way off. And life is but a dream… until it isn’t again.

The real world calls. The gravity of the situation is kicking into gear as we re-enter earth’s atmosphere. Time to re-engage the thrusters. Push the reset button. Get back to business as unusual.

It’s the cusp of a brand new year and here we are. Game on.

So where exactly is here again? Where did we leave off before we were so rudely waylaid by the holidays? Hard to figure.

Real estate in 2011 came and went. Moved in and out like a ghostly apparition. A lingering echo but no tangible progress. No mandate. Firm footing. Wholesale change. Or proof positive.

If real estate was going to reinvent itself and design a comfortable new place to live in our hearts and minds in 2011, it didn’t get very far. The as-built structure looks nothing like the plans on the drawing board last January.

Looks more like the architecture of surreal estate. Unfinished doorways leading to narrow precipices. Windows opening onto tight corridors. Escher-like stairways incorporating strange tricks of perspective. A series of never-ending steps looping back on themselves.

We went back to the future with interest rates from the 50’s but ran head-on into the credit crunch. So we went forward into the past as the median price receded to 2000-2001 levels.

More Buyers wanted to buy and waited for better properties. Sellers didn’t offer better properties because more Buyers didn’t buy. By default, distress sales loomed larger. Values declined further. Short sales weren’t short. Closure didn’t arrive at the end of the foreclosure tunnel. The shadow inventory got shadowier. First time buyers couldn’t compete with all-cash investors. Rents rose counter-cyclically.

While the economy was waiting for Real Estate to lead, Real Estate was still waiting to follow.

Newsmakers are working hard to conjure up a few bold headlines to start the year. Spinners are spinning. Indicators are indicating. Pundits are postulating. Everyone is positioning for change.

It all feels disingenuous. Like the little boy crying recovery. We back-dated the end of the recession to 2009… shouldn’t it feel better by now? Shouldn’t good news sound more like good news and less like the rehabilitated absence of bad news?

The real story of Real Estate right now is: there’s no discernible narrative. Just competing storylines that don’t fit. And the calculus of the narrative doesn’t add up. No one can possibly do the math and figure it out.

The goal of 2012 has to be a completely new story. Enlist some real resolutionaries to come up with a radical new set of New Year’s resolutions. We were still looking at the tip of the iceberg last year. Not the tipping point.


How Low Can We Go?

And the dips just keep on coming…

Turns out this isn’t the Catfish Recovery afterall. One of the creative metaphors swimming around out there. Refers to a real estate market sustaining itself in the murky depths at the bottom of a stagnant pond.

Nah. This is the Baskin and Robbins Recovery.   The one of Double Dips and Great Recessions 2.0.   Do they make triple dip cones?  I scream, you scream, we all scream for …. Neapolitan anyone?

I’m just hoping we don’t go for the Chubby Checker Recovery.   Remember the Limbo Rock? Chubby chuckling  “How low can you go? ”  in demonic undertones.  Participants lined up for St. Vitus gyrations set to an Apocalypso beat.  Trying to  underachieve the continuously lowered bar of their own expectations.   “Great to dance to Dick.  I give it a 9.0 on the Richter Scale.”

Anyway, this is one of those times when real estate throws  “location, location, location” out the window.  Before the window closes .  When’s the last time you heard someone use that sage piece of advice ?  Who cares where you are buying, if you aren’t buying in the first place

The popular corollary to  “location, location, location” has always been: “I’d rather have the worst house on the best block instead of the best house on the worst block.”

Problem is that they all feel like the worst house on the worst block when the shadow inventory of scary “things to come”  looms  larger in the boogeyman-infested closet of our vivid imagination.   Walked through one of those bank-owned distress properties lately?   That awful fishy smell is also a metaphor for the market we’re in.

Ah, the bad good old days before our unrelenting greed got us into trouble.

A rapidly appreciating market cures all ills.  At least for awhile. Tough to make a mistake in a market shooting through the roof.  The choices are simple because the results are either going to be great or less great.

Second story addition?   Go for it.  Spent too much on the remodel?  No problem.  A little appreciation over time covers it.  More termite damage than you anticipated? Last month’s rise makes up the difference.  Flat out bought the wrong place?  Voila!  Just sell it for a profit tomorrow and go pick yourself out a new one in the grand scheme of musical houses.

It’s all good. Or so it seemed…at the TIME.

That’s right. TIME.    The 4th dimension is the operative gambit here.  It’s when that’s most important at this point on the space-time continuum. Not where.  And most people don’t have a clue when to say when –  not knowing whether the market is coming or going.

Instead of shooting through the roof it feels like the market is somehow shooting us all through the foot.  If not here? Where?  If not not now??? See what I mean.

So we are retiring Location x 3. Putting it out to pasture.  Giving it a gold watch and moving it down the list of popular coinages in the realm of real estate.  Looking for a worthy replacement to trot out in its stead to assume the mantle of conventional wisdom.

How about Fear and Greed?  The simple juxtaposition of two seemingly opposite (although both negative) aspects of human nature.  Qualifies as one of the longest running threads in real estate. In almost continuous use since Adam Smith first began strumming our neurons with his “invisible hand” of the marketplace.

But I’m going to simplify things even further since we’re in such a pinch.  Let’s just say that Greed is the FEAR of not having enough.   Make that little alteration in the alliteration and we are simply left with FEAR.  Naked FEAR.  FEAR as the sum of all FEARS.  FEAR that FEARS nothing but itself.   FEAR with a sprig of loathing thrown in like parsley on the side.  FEAR in the time of cholera – or the great flux, as some might say.

There’s a mindfulness meditation certain Buddhist schools practice. In this impasse they might recommend sitting in your real estate office or in your listing or in your car in front of some new place for sale, simply repeating:  “Feeling Fearful. Feeling Fearful.  Feeling Fearful. ”
A worthy mantra. By definition, you can’t repeat a mantra too many times.  That’s the whole point. You’re supposed to keep repeating it over and over again.  Say it loud. Say it often. Say it like you mean it.

Through acceptance rather than denial comes transformation.   Ok. We’re human. We’re feeling fearful.   No judgment.  Just acknowledgement.    Holding it in gives fear life and longevity. When you begin to name that which isn’t supposed to be named, you-know-what’s grip weakens. And we are free to move on.


Surreal Estate of Mind: Conspiracy or Confederacy of Dunces?

la_condition_humaine-magritteIn solidarity with the times, I’ve renamed today’s column Surreal Estate of Mind. Surreal is often used, when something real begins to take on an altered, disorienting, dream-like quality. You know. Like real estate. Like right now.

I don’t think Oswald acted alone. Drones and Chem Trails populate the sky. Fluoridation is a communist plot. Old, fat Republicans regularly get naked at Bohemian Grove. Freemasons? Bavarian Illuminati? The pyramid on the dollar bill? Yes. Yes. And more Yes! Sasquatch is alive and well and living wherever he wants. And to be completely honest …I think Eisenhower cut a deal with the aliens at a remote airplane hanger outside of Palm Springs in 1957.

It is all of the rest of life and the way things aren’t working in real estate that I’m not sure of…

Maybe it’s a little-known side-effect of the swine flu pandemic but I keep meeting respectable, hard-working, middle class people infected with an odd, feverish, lingering malaise that causes them to imagine they are deer in the headlights, standing nervously in the eye of a hurricane, waiting quietly for the proverbial other shoe to drop.

I may be a conspiracy buff but I’m not a conspiracy nut. I don’t really want to believe there is some giant, premeditated, not-so-secret, conspiracy going on between the Government and the Big Banks when it comes to controlling the hearts and minds of the collective real estate community. I’d prefer to think there weren’t any additional pairs of unseen hands tugging on puppet strings attached to the invisible hand of the marketplace. Or any Machiavellian plot trying to control and manipulate the entire system that controls and manipulates the entire system that I watch real people interact with and try to feel some modicum of control over in the real world of real estate.

So I’m hoping that some of you, with far greater experience than I – those with more formal training, studied insight, astute knowledge, honed perspective, rational answers, intuitive powers – will step up and shout me down. Because I want you to be my passionate and rabid de-bunkers. I really, truly, don’t want to believe that there is a conspiracy afoot trying to suspend my disbelief and convince me to accept the notion that all is well in real estate land and bank land and economy land. Please, tell me I’m wrong. Tell me I’ve got nothing to worry about. And that my clients have nothing to worry about. Make the surreal-ness of it all make sense just a little sense.

None of us, working in real estate, have ever been in this place before. This is undiscovered country. No map. No pre-packaged GPS system issued with each listing or each buyer’s pre-approval letter or with every escrow that gets opened. No soothing software voice-over ready to dole out directions on how to get there from here (wherever there is and wherever here is.)

So maybe the things I am seeing, aren’t really there at all. Maybe I’m making them up. Maybe they are just the usual suspects that are always around. Maybe they are mere figments of my imagination rather than the shadowy outlines of something more scary and nefarious lurking in my neck of these dark, dark woods. Maybe no one is responsible for the mysterious machinations I see people wrestling with daily. Maybe it’s just bio-rhythms. Or a ginormous confluence of bad hair days. Or Mercury in Retrograde. Exponentially. Up the yin yang.

All I know is, there are lots of trails leading off in different directions in these woods. I don’t know if any off them will eventually lead the real estate industry back home or not. For the time being, if you follow the scattered bread crumbs on any tangent you care to take, it all just gets curiouser and curiouser…

Why doesn’t it feel better in our guts while reaching for each small bone of good news thrown our way?…What happens when big banks control supply (shadow inventory) and demand (credit crunch) simultaneously at the same time?… If the conspirators achieved their immediate goal of heading off total collapse, when are the real changes and reforms in the system going to start?… If real estate is really getting that better, why would we consider paying everyone to buy a home by giving them all tax credits?…Let me repeat that – paying people to buy homes as a sales gimmick to sell the recovery!…Why not force the banks to release the huge inventory of homes locked in their foreclosure vaults?.. Wouldn’t more supply lower prices for first time buyers?…Who is going to pick up the slack and buy the loans the banks are making, when the Feds bow out soon, as they say they are planning to do?… Won’t interest rates go up?… In a jobless recovery, when incomes are necessary to qualify for full doc loans and interest rates go up and so many people who ought to be buyers already can’t afford the low-end clunkers that investors are paying all cash for…how will the market sustain itself?… How can there be recovery?…Where will the demand come from to meet the supply that eventually has to be released?

Inquiring minds want to know. Conspiracy? Or Confederacy of Dunces? Let me know what you know …