Sunday, April 20, 2008

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

8 comments:

The Anonymous said...

Once again, your lack of understanding about this area shows up with these bogus "Alexandria" graphs. Notice how the Trulia graph on sales spikes at nearly 2,500 - how can that be given your own alexandria graph (3 entries ago - the one where you ran away without answering questions) shows an absolute peak of only 400 sales back in 04?

The answer is Trulia and other sites like this define Alexandria as including hundreds of sales and listings in FAIRFAX COUNTY! (you know fairfax, one of the outer areas around here where prices are falling fast). By contrast, MRIS and VirginiaMLS define alexandria to exclude Fairfax County.
http://www.mris.com/reports/stats/
http://www.virginiamls.com/charts/index.htm

Again, had you lived around here you would know that this discrepancy ties into the 400 year old land grant the Crown to Lord Fairfax versus the land privately held by Captain John Alexander (1711-1763). http://en.wikipedia.org/wiki/Lord_Fairfax

This is but one of the many, many, things that escape you due to the fact that the object of your obsession is thousands of miles away from you.

The Anonymous said...

Hey Neil – take a look at this: http://www.virginiamls.com/ As I noted in the discussion the other day (you know – the one where you ran away) Arlington inventory isnt increasing like in years past. In fact, today (4/21) is now LOWER than it was on 4/21/06. Also, not only is Alexandria’s inventory LOWER today than it was on 4/21/06 it is now LOWER than it was on 4/21/07 as well!

Personally, I don’t put much stock in absolute inventory numbers without also looking at sales. However, I know you like to look at this from time to time (i.e. your earlier comments predicting an inventory spike this summer). Thus, if I wanted to show the inner counties were DIFFERENT in that the inventory peak was 2006 – what word would I use to describe this to you. Ahh yes – BWAAHAHAHAHA!!!!

wannabuy said...

The anon,

You're so argumentative it isn't possible to have a conversation with you. You're obsessed.

I plotted Austin, Palos Verdes, Alexandria,

oh wait. Then I plotted two areas where it is worse! Ashburn!

Then as a California ex-urb example... Corona.

Which you ignored.

Since you find those sources so interesting... start your own blog. I'm all for learning. But I do take the data from Harriet's site that is already nicely organized. I'll keep with my current sources. If you want to compile the data and graph, knock yourself out and join the blogsphere.

Got Popcorn?
Neil

ps
If you think your harassment is going to have me stop graphing Alexandria... it won't. I'm keeping my national perspective. I'm going to keep posting accurate data. The regions I blog will continue to be focused on what effects my coworkers.

Its funny how the Alexandrians are so hostile to real estate statistics.

The Anonymous said...

I will admit it was nice to see you post Ashburn despite the quasi condescending "but but but" remark.

My point here is that you were consistently posting results of "Alexandria City" that Harriet's site uses. However Trulia uses a definition of Alexandria used by the post office which is much larger. It is a remnant of a place called "Alexandria County" which hasnt existed for 150 years. If you want to stay consistent with your results, stick with Harriet's data.

Incidentally, had you actually read my posts you would know I rent in Arlington not Alexandria. Then again, its all the same to you right?

The Anonymous said...

"If you think your harassment is going to have me stop graphing Alexandria... it won't. I'm keeping my national perspective. I'm going to keep posting accurate data"

Key word here is ACCURATE. Harriet uses MRIS data which is accurate to Alexandria City. Trulia data uses Alexandria City and parts of Fairfax County (all part of the no longer existing Alexandria County) which is NOT ACCURATE.

wannabuy said...

I'm still waiting for your graphs...

Feel free to do your own blog if you disagree with my data.

Oh... you ranted when I plotted Harriet's data before. You're very inconsistent. Except... in your push to get other people to buy homes.

If you think its such a good investment, I'd be happy if you bought now.

Got Popcorn?
Neil

The Anonymous said...

“I'm still waiting for your graphs...”

Do you read? Forgetting for a sec that I told you I am computer illiterate (just figured out how to get a screen name), did you even look at these:

http://www.virginiamls.com/
http://www.mris.com/reports/stats/

Consider them "my" graphs - I have NO problem with these.
I have A problem with Trulia because they use a different definition of Alexandria (happens a lot when people like you and Trulia aren’t from here and don’t know the differences between Alexandria City (hint, this exists) and Alexandria County (hint it hasn’t existed for 150 years, yet Trulia still cites it.) Again, READ what I said above and TRY to understand it. If you don’t, ask and I will try to help you.


“Oh... you ranted when I plotted Harriet's data before. You're very inconsistent”

Sigh – more failed reading. What I was ranting about was not Harriets data (I love her data – it’s the same data I use and keep sending you) – I was ranting about YOUR skewed interpretation of that data.

By my last count, I have answered 5of your questions and you have answered 0 of mine. Perhaps you can try to answer any of the unanswered questions of mine (you know the ones where you always run away).

For example:
1. In the 39 months of “months of inventory” I showed you, please tell me where Arlington “fell apart” as you said?

2. When looking at that 39 months of “months of inventory” do you see any difference between ARL and PWC?

3. Do you see a difference between (-6.7%...the median price drop for Alexandria March 2006-2008) AND (-32.5%...the median price drop for PWC March 2006-2008).

For context, here is the link where you ran away (if you want to now answer)http://recomments.blogspot.com/2008/04/inventory.html

Your move Neil...Your readers are watching you...

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