Tag Archives: real estate statistics

Clean the Windshield & Polish the Rearview

UnknownMid May.  Time for a time out.  Just what the Doctor ordered.

It’s a healthy thing for Agents, Buyers, Sellers and anyone with an interest in real estate to stop on occasion. Take a breath. Gather perspective.   Hit the pause button on Mr. Toad’s Wild Ride.  Check in, check the oil and check assumptions at the door.

These periodic realty checks are meant to power things down. Chase out any ghosts lurking in the machine. Clean the windshield and polish the rear view.  Flush, purge, detox, juice fast and otherwise execute a clean core dump of any and all bogus information we’ve mistakenly internalized as the truth about real estate.

At the count of three we’re all going to turn off, tune out and drop all the mind-numbing noise and well-meaning chatter floating around the market’s ether.

We’ll simply consider where we’ve been and where we are as we head into the great unknown known of the future. (Didn’t Donald Rumsfeld say that?)

This week’s headlines in the Merc, Business Journal, Chronicle, etc. et al,   proclaimed that Bay Area Real Estate is Back!! Or at least back to pre-great recession levels.  Which would mean 2007 levels…since all those mortgages finally hit the fan at the end of 07 before the bubble completely imploded in 08.

So…just a few questions: Is that true? Are we really back? The whole Bay Area? Even Santa Cruz County – here at the southern tip of the Silicon Valley gulag?

There’s so much misinformation and disinformation in information these days that I’m not sure where to start.  Specially cause I know some of you are trying to make important life decisions based on the occasional bones of bold font that the media tosses in your direction.

Here goes:  The notion that real estate prices are back up to 2007 levels is only partly true. Prices are back or above 2007 levels in some of the Bay Areas’ elite local markets like San Francisco, Palo Alto, Atherton.

Los Gatos and Saratoga? Close but not quite there yet.  East Bay? Lagging behind but rising. Santa Cruz County? Definitely doing better – but nowhere near 2007 prices.  In fact, we seem to be at least temporarily stalled for the moment.

Final analysis? Add all those off market multiple offers and wildly crazy overbids happening in a select few areas to the improved market data from most of the rest of the region, average them together and it certainly can look like we’re back to where we left off in 2007 – before we were so rudely interrupted.

But if you are in one of the peripheral areas outside the epicenter  – don’t count your equity before you sell. It ain’t real until escrow closes.  List prices are not comps. Sold prices are.

Here are a couple of warning labels I’d like to stick on today’s column. 1)Santa Cruz is not Los Gatos.  Or Saratoga.  Their $1.5 mill is our $700k.  2) Don’t list your home with the expectation of 22 offers. That’s somewhere else. Not here. It’s an invitation to disappointment.

One more warning about my warnings:  Just because things may not be as good as you imagined them to be doesn’t mean that the market isn’t doing well.  We’ve been terribly spoiled by our checkered past.  We somehow came to believe that if prices weren’t going up at a rapid clip, then they must be falling.

Perhaps a small part of the lesson of our late not so great bubble and recession is that when things are going up too much too fast, that’s the kind of market that’s not real.  And  a healthier market is one that looks more like now. One without multiple overbids and 40% annual appreciation.

Next week:  How, why and where the Santa Cruz County Market is stalled.

Deleveraging the Dream

Welcome to the day after. And the weeks after. And all the months and years yet to come here in the “after-life.”

What died?  Apparently, real estate did.  When a huge wave of statistical evidence washed over the country recently,  reflecting just how poorly the market was really doing, plenty of pundits took the opportunity to surf it. They hopped on their editorial boards, declared the market “dead on revival” and added quick post-mortems on the twin notions of home ownership and the American Dream.

The meme that tsunamied  across the nation, in bold font, was: “Sales Plunge 27% in July.”
Those numbers weren’t surprising to many of us working in the business. When you live it, there’s a gut-level of knowing that doesn’t require trailing statistics for validation.

But those numbers came as a shock to almost everyone else. Specially those sleepwalking through the elaborate smoke and mirrors game created to convince us that all was vaguely going according to plan. A trick of misdirection designed to buy time to build a façade.  An illusion the truth could get stuffed behind.

Fingers have been busy plugging holes in that imaginary dike.  Band-aids of spin and obfuscation plastering over cracks as they appeared. But with the new news, that damn dam seems to be crumbling. Fingers are twisting in the wind.  Pointing in the wrong direction in light of the whole.

Now that this particular dream bubble is bursting, I’m happy and wide awake.  In the odd, contrarian way my real estate of mind works, I’m suddenly feeling much more positive about the future of homes and our relationship to them than I have felt in a long time.  This is an auspicious moment.

That which shall not be named has been said out loud, We can toss out our false recovery and get busy having a real one.  We don’t have to be chickens with our hearts cut off anymore running around in our heads trying to prove what is happening isn’t happening.

We’ve put incredible amounts of precious energy and resources into not saying what we were really seeing.  But we can stop holding up the blue sky now..  We can let it go. It’s ok. In fact it’s more than ok. It’s just what the acupuncturist ordered.  Start treating the causes rather than flogging the symptoms to death endlessly up and down the torturous rack of the ladder of success.

Our real estate recovery has been a fragile house of cards.  It makes sense in a sick kind of way.  Try to recover from the house of cards that fell by putting  together another house of cards in its place. It’s the fragmented language  real estate speaks in.   Leverage is the mortar that holds it all together.  Leverage is the key to astronomical heights.  We can leverage recovery together from the pieces left on the ground.  And leverage works for a while.  Until the tipping point is reached and gravity eventually intervenes.

Expecting the market to return quickly to normal isn’t realistic.  In part, because we’ve been using 2004-2005 as the yardstick for what’s real.  And that normal wasn’t ever normal. It was madness.. It made no sense then. And it makes even less sense now. Unless you are an unhappy seller with blinders on trying to regroup and recoup. Or a buyer still hoping to cash in on the flippant greed of buy-gone days with a myopic vision of what home ownership ought to be about.

Part of deleveraging the old dream is going to mean giving up our manifest destiny to make every single person on the planet a homeowner. That dream was manufactured.  Give everyone free, no-strings-attached money in the form of subprime loans or exotic hybrids. Enlist them on the debt rolls. Everyone becomes an indentured servant.   And debt is a commodity that can be sold and repackaged and resold again.  When that’s exhausted, money can be wagered against it all, betting on the short with credit default swaps.

Just because owning a home isn’t for everyone doesn’t mean it isn’t for anyone. And it doesn’t mean we can’t have a robust market full of happy, well-balanced, ready, willing and able buyers and sellers.  There’s a dream for you.  The one that says that this doesn’t have to be just another circuitous orbit of the real estate market.  Instead of one more cycle of binge and purge this could be fundamental change.  The end of history as we know it.  A new door opening on the future.


The Never Ending Story

Help! I can’t hear myself think! They are tearing the roof off my neighbor’s house. My inner sanctum is invaded by chaos. Overrun by the cacophony of discordant strains smashing and crashing through my windows as the construction crew tries to put another story on.

But it’s not the sound of all that ripping away next door that is wrenching the roof off my brain.  True, I can’t believe what my ears are hearing. But what I really can’t believe is what my eyes are seeing in the news. That’s the real chalk squealing on my optic nerves. The creepy feeling making me shudder and jump out of my skin.

The story that contractors of spin are trying to put on top of the real estate market is driving me stark raving mad.

What story?  The one that starts with…According to the Chronicle, home sales in the Bay Area slumped 23 per cent in July. That’s a belated “told you so” that I take no pleasure in.   It seems the news is finally catching up with the truth that all of us in real estate have known in our guts these past months.

We are reminded, for the upteenth bazillionth time, that what most people think they know about real estate is woefully out of touch with the real thing. Numbers and prices quoted in the middle of August, regarding sales recorded in July,  have almost nothing to do with where the market really was in July or even June for that matter. Let alone where it is at right now.

It is all trailing information folks.  Days late. Dollars short. July sales tell us what the market was doing 60 or 75 days prior. Way back in April and May, when those willing sellers were (or weren’t) coming to terms and making deals with those willing buyers.  And the market wasn’t going all that well then, apparently, despite persistent rumors to the contrary.

We’re almost five months behind the curve now.  Turns out we’ve been running on fumes. The market hasn’t been that busy since mid spring. But the Industry itself and the Feds have been very busy constructing a different story built on lag time.

Yes, we had palpable energy coursing through our veins back in March.  And all those applauding pundits of positivism (perception always creates reality until the house of cards falls and it doesn’t anymore) didn’t let the opportunity pass. They jumped right on it.

They’ve been busy pumping up the volume on real estate ever since.  Trying to leverage the hearts and minds of the marketplace into believing that everything was back  to normal.

So here’s the part that really drives me crazy.  They are still at it. Foisting more missed and dissed information on those who just wanna/gotta believe.

Now that we know sales have been down, what’s the story being used to explain that story?

The Brokers of Illusion have the perfect excuse and aren’t embarrassed to use it. Their answer is simple.  There’s nothing wrong with the market itself.  The end of the Housing Tax Credit in April is the real culprit. The expiration of real estate’s very own cash for clunkers program has somehow sapped the will of those who would otherwise be lining up to buy.

The notion that the loss of  an $8,000 tax credit has much to do with a marketplace like ours is dumb. Dumber than dumb.

Maybe, just maybe, the notion of a one-time rebate of $8,000 could be construed as compelling in a market like Iowa where the price of a decent home is $120,000. But why would any buyer of sound mind and judgment be sold on buying a home, in a place where the median price is $500,000,  just so they could get a check back for that relatively measly amount.  Doesn’t compute.

The average price and median price in Santa Cruz have both fallen 4 or 5 times that number since April.  Interest rates have set record new lows for 9 straight weeks now. Seems like both of those very true facts are way more reason for buyers to step up and buy than the end of the credit would be a reason for local buyers not to buy.

Yes, I know there seems to be a correlation in the time line –  end of tax credit and loss of steam in the market. But could it possibly be that the perfect storm of lack of jobs, an incredibly tough loan environment, all the powerful fears that buyers still harbor and an overall economy seesawing on the cusp of a double-dip recession has more to do with the new numbers we are finally seeing?


My Brain on Real Estate

It’s not even noon yet and my synapses are already misfiring on all cylinders.  The steady stream of data coming in feels like a bunch of square pegs trying to shove themselves into a dart board full of small, round, empty holes.  My right and left hemispheres might as well be ships passing in the night of day because my deepest gut instincts are in direct disconnect with the spin of information  orbiting a world that’s already wobbling woozily around on its own axis in full tilt boogie.

There’s an image of Adam Smith’s invisible hand of the marketplace, looming large on a video screen inside my head.  It keeps cracking eggs open into a sizzling frying pan while the voice-over in my inner ear keeps saying …”This is your brain on real estate…Any questions?”

Well…yeah. I’ve got some questions.  A  lot of questions.  That’s probably all I do have at the moment. Thank you very much.

Like…what happens when the bottom of the market is going up and the top of the market is coming down at the same time?  What do we call that? And how do we explain that to our clients? Do more and more people and places just get stuffed into a never-ending zone of price and property compression somewhere north of low and south of high?

How dense can it get in that space before the gravity of the situation gives – in one direction or the other?  Can the stirrings at the bottom of the market push the top back up? Or will the weight of all those pie’s hovering in the sky eventually get so heavy, they’ll force a carefully crafted façade of positive perception to fall to earth?

Is there a second dip coming to top off the cone of silence surrounding the shadow inventory of bank-owned properties getting held off the market? Not to mention the shadowier  inventory of  loan modifications not getting done, notices of default not getting foreclosed on, delinquent payments not getting issued notices of default and the next cycle of 5/1 Arm’s getting set (and reset) to appear right around the corner?

Why has the Mortgage Application Index (google it) fallen so abruptly at the same time interest  rates have dropped so remarkably low?  Money at 4.5%?!!  Weren’t they just warning us that rates were going to go up when the Fed Mortgage Purchase Program ended?

Shouldn’t the ranks of eager purchasers lining up to get their pre-approval letters be growing by leaps and bounds?  Aren’t more buyers out there chomping at the bit as summer inventory begins to expand right in middle of their very own buyer’s market?

And while we are asking the questions…even though it is probably true that the market is seasonal and the sellin’ is easiest in the summer when the catfish are jumpin’ and the cotton is high…isn’t it also true that more homes (as in a larger percentage of properties that are actually listed) don’t sell in the summer too? So which is it? Do more homes sell in the summer? Or do more homes not sell in the summer? Or both?

Is this just all about the end of the tax credit for first time buyers that expired on April 30th?   Would first time buyers  really have waited until the second or third week in April to get their loan applications in? Wouldn’t most of them have started their processes sooner?  Did we just move the time horizon up on purchases that would have otherwise happened later?  Like a cash for clunker homes program?  Was this just another version of all of us collectively kicking the can down the road to see if something else might happen in the meantime to pull our asses out of the fire?

Will the real, real estate market ever stand on it’s own again without huge transfusions coming from the Feds?  Or without interest rates being propped artificially down?  Will the private sector be able to make its own rain again? Without a house of cards built on liars loans and credit default swaps.?  Can it pick up the loose reins of laissez -faire even if it feels  very laissez-unfair in the short term?

Is there some secret escape route on the horizon the helps us get out of the Pavlovian Paradigm where we can’t help robbing Peter to pay Paul with yet one more hail Mary pass that leaves the answers blowing in the wind for future generations to figure out?

Time will tell. But not any time soon.  In the meantime, I’ve signed up to have my brain frozen at the cryogenics lab. Wake me up when we get there.


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?


The Clan of the Cave Bear

All is quiet on the Western Front. Or in the eye of the storm. Or in the clan of all those cave bears, lulling themselves into self-imposed states of hibernation for the winter.

Like lemmings of lore, Sellers often feel a biological imperative to hang it up when the holidays hit the fan. The approach of Thanksgiving triggers an implacable urge to jump off the market. Migrate away from any serious effort that might result in the sale of a home.

All the cultural bunting we deck our brains with, this time of year, offers plenty of excuse to sound the retreat. Too many parties. Too few shopping days. Too much family. And the all-too-easy assumption that buyers are too engaged with everything else to think about buying a home for the holidays.

Meanwhile, stage right, lots of wanna-be Sellers are also lying in wait. They are making mental lists of all the reasons why they shouldn’t list their homes for Christmas. And why they should hold off until that mythical “better” time in the future called Spring – for lack of a “better” idea of exactly when “better” is really going to be.

The supply of homes on the market grows smaller. Locally, it is approaching 800 – down 30% from last year. The inventory of desirable places to buy is waning like the rays of the sun in the days leading up to the Winter Solstice – the point in time when planet earth reaches its greatest degree of tilt.

Here’s my thought: If we are truly about to hit full-tilt boogie in this crazy pinball game we’ve been bouncing, spinning and wobbling around in for the last year, then, as soon as we get done with the longest night of our lives, let’s just push the reset button!

Go ahead. Take a moment. Do some soul searching into the darker realms of your unconscious and the hidden nooks and crannies of your conscious mind as well. Now quick. What do you really want ?

If the answer is: I really want to change my life and move on, then the rest is simple. Forget Christmas. Forget New Years. Beginning Tuesday, the hourglass of the days of our lives starts getting fuller. Not emptier. Adjust your attitude along with your latitude. Throw away everything you think you know about real estate. Do a complete core dump-ectomy on all that baggage you’ve been lugging around on automatic pilot. Time to clean house and sell house.

Let’s rethink this whole winter/spring gestalt thing-y we’ve grown so chummy with. It is an indulgence, we can’t afford anymore. Just another mind-game that obscures realty.

Yeah, I know the traditional party line: Tons of buyers sprouting up like flowers in the spring. And houses don’t show well during the cold, rainy months, when days are gray and dreary.

But let’s shine some of that soon-to-be-waxing light on a different perspective. There are already tons of buyers ready and waiting to buy. What are they waiting for? For you to put your house on the market! If you wait for them, they are going to continue waiting for you. Someone has to get the ball rolling. It’s literally and figuratively your move.

Assuming supply and demand still has something to do with real estate ….what kind of market would you rather have your home listed in? A market where there is good demand versus really low supply? Or a market where there is better demand but also a huge new influx of supply?

My contention is this: What is most important at any time of the year, in any kind of market, is the actual, real relationship between the total number of homes for sale and the total number of buyers out there.

Do more homes sell in the summer according to statistics? You bet. But, here’s a little secret… Summer is also the same time of the year when there are more homes that don’t sell. Why? Because there are way more homes on the market and never enough demand to buy them all.

Do less homes sell in the first quarter of the year, when it is cold and rainy and homes don’t necessarily show in perfect, pristine fashion? Yep. But guess what. There are also fewer homes that don’t sell too. Why? Because there are less homes on the market!

A greater percentage of the total number of homes listed in January, February and March will sell than the percentage of homes that will sell in the summer time, whether the catfish are jumpin’ and the livin’ seems easy or not. Shouldn’t yours be one of them? Spring is often the time for April Fool’s. The smarter money is going to get carpe diem-ing sooner rather than later this year.