Friday, May 19, 2006

Real Estate comments

Real Estate comments

Alright, here is my second posting. Basically, I have started reading up on the other online real estate blogs out there. I cannot over-recommend a few if you're starting to look into buying a home:

Basically, I have become of the opinion that we're in a flat market until about mid-September. Then... expect your world to be rocked as the market falls out.

Let's take the example of where I want to buy, the "south bay" region of Los Angeles county. About 29% of the buyers in 2005 were "flippers" (aka, speculators) looking for that "greater fool." Many of them realize they're sunk. So basic math says the "for sale units"/"buyers" is going to go up by:

Note, I assume that flippers jump out of the market as a whole at the same rate they bought in. I also just assume the rest of the market stays the same. But let me tell you why the buying and selling will get further out of ballance (in my opinion):

1. Buyers "panic bought" last year (2005) in bidding wars with speculators. No need for that in 2006!
2. Nice housing inventory coming online. :) I can't believe all of the new construction in the South bay.
3. It seems like everyone I know who is retiring is getting the *ell out of LA. It doesn't matter where they go, their retirement is being padded by the sale of their house. (Maybe they cashed out, maybe they had no choice. That doesn't matter, what does is high income people seem to be leaving LA.)

We're almost at the inventory point where enough sellers will discount to drive down the median price. Please read the other blogs as to why the median price doesn't matter when most of the sales are rebuilt or new housing. Yes, new in the south bay! Drive around North Redondo and look at the McMansions being completed/sold. Those $700k box homes are now each a pair (or more) or $1.05 mill McMansions. Since the contracts for many of those were written in the "buy at any price" 2004/2005 season... of course what's selling is pricey.

But look at the sales rates plummet. Others have noted that 8.7 months of supply seems to be the market breaking point. With inventory growning and sales weak, when will be hit that point?

Do note I predict that before the market crashes we'll see a final "end run" on housing. It wouldn't shock me at all to see one last 10% boost in median sales prices. But by September, the floor will fall out.

Will it start in San Diego? Pheonix? Sacramento? DC? Miami? Somewhere else in Florida? Las Vegas? Denver?

Have no doubt, by Christmas 2006 even the major media will be clued in to the housing bubble burst. Yes, even realtor subsidized rags like the LA times will have to face up to the facts. Its going to be too brutal to ignore.

Knowing the market will fall is easy. Now when do I buy in?

Supposidly 40% of all new California white collar jobs since 2000 have been real estate transaction related. Why? Shouldn't the internet have cut the number of required jobs per transaction?!? My next loan will be internet based. My "buyers realtor" will almost certainly be a discount realtor that I find on the net. No way am I paying $12k+ to have someone help me buy a home when I'll do 80% of the work ahead of time. :)

Interesting times ahead.