The American love affair with the shopping mall is undergoing a trial separation

Sometimes it take a foreign perspective to really capture the moment. Basically, with news of investment properties losing 2/3rds of their dollar value, I'm not expecting foreign investors to come in and save any market.

One blogger asked how to make graphs of Austin.

I've been playing with www.Trulia.com and the graphs seem ok. Not 100% accurate (e.g., others are posting far more researched price/ft^2 data, but its a great start). It shows that most areas still haven't found their market clearing price. However... some areas are into the next stage of the trend. As prices drop sales accelerate. Its a self feeding trend that brings those areas to a bottom fairly quickly. However, due to the substitution principle in housing, this will only create a price drop wave that will go through those communities still holding onto wishing prices.

Here is an Austin Example. Note how harshly the credit crisis hit the city during the winter. Can they maintain the newly re-found momentum into the summer? I doubt it with the credit crisis:




















How What about prestige communities? We've been reading for a year how only the cleanest and nicest homes are selling. I've seen a 15% BETTER trend than these graphs suggest. Basically, the owners of the less nice homes are trying to price up against the nicest homes. Only a few sell... With four or more months of inventory on the market, those willing to discount for a sale can always undercut the stubborn.

Palos Verdes, CA:




















Alexandria, VA:























But but but... "Its different here." Yes, there are worse selling locations. e.g., Ashburn VA is now selling for a more than a quarter off discount and the trend is the buyer's friend:




















Its worth looking at Corona, CA. Why? Now that large homes are available at conforming mortgage prices, sales have spiked up again! Now, these are only knife catchers, but this is a clear demonstration that at the right clearing price, there is a market. With most buyers locked out of jumbo mortgages, expect to see this trend continue everywhere. Every market has a floor under which sales will be stimulated again. Once that floor is found... it only accelerates the price drop! In this case, getting down to circa 2007 era conforming loans appears to dramatically open up the qualified buyer pool. Ouch at that 1/3rd off price...








Rumor mill from my sources is that jumbo loans are drying up in April; we're in a state worse than the October credit crunch per word off the street. Doubt me? Go to the .mortgage broker forums If true, we should see even further reduced sales from March in markets that require them. The same rumor mills say that in many jumbo markets, prices have had to be discounted 5% to motivate *any* buyers to act. We won't see the data for a bit. I really wish Case-Shiller was available on a zip code basis.

For those looking to buy, the consensus over at the HBB is that we're in the bottom of the 3rd inning. Its the spring selling season so the 'Home team' is up to bat. I'll let the graphs speak to how they're doing. Everyone knows that US real estate is being discounted. Even the BBC. Can you imagine what the headlines will be like once the kids have finished going back to school? I'm still amazed the government is implementing policies that will only increase the overhang of surplus housing rather than letting it be soaked up quickly. Credit isn't done tightening. The Fed can help liquidity, they cannot legislate it.

The number of sellers on the sidelines is mind boggling. For every person I know who is waiting to buy, there are two I know of trying to sell their 2nd or 3rd homes... Eventually those surplus Florida condos will fill up. There will be enough inventory to drive prices back to sane price/Income ratios.

Got Popcorn?
Neil