Tuesday, August 04, 2009

Inventory

I've been lazy tracking inventory. One data point in a month. oh well... at least I have detailed past data to compare with. The quick summary is that inventory is starting to climb up in many areas, but is still low compared to the last few years.

Note: DC and Houston are starting to look quite healthy; since their job situation is 'ok,' they could be done with the downward trend. The only question is hidden inventory.

Here in California, 9% of the mortgages are in default. That's a HUGE hidden inventory. If those mortgages are fixed so that the 'owners' can afford the mortgage, that's the same as cutting the home sales price.

Note on the upgrade market: Its dead here in California. I do not expect it to return for 5 to 7 years. Since the areas I want to buy are at inventory levels at or near the levels before everything fell apart... and Alt-A is just starting to tickle the market... I'll wait.

I still think the bottom in prices (National and South Bay LA) will be February 2011. I expect a long 'churning flat' after then as ALT-A and prime implode. Between now and then... we exit this 'calm of the storm.' I'm coasting until I see the August data (in September). July is a non-event for Real Estate in California. No conclusions should be made off July data (good or bad, same is true for November). But to get through this storm, we have the seasonal October-February "Buyers Market" to get through.

Let's just say the OC Register's attempts to make it sound like bidding wars are the norm amuse me; the best strategy for a home seller is to price below market and let the market work (bids up the home to market). Yawn. I've been suggesting that strategy to sellers for two years. Now let them mention how many chase the market down...

Keep in mind Realtytrack's latest on foreclosures:
"In spite of the industry-wide [foreclosure] moratorium earlier this year, along with local, state and national legislative action and increased levels of loan modification activity, foreclosure activity continues to increase to record levels,” noted James J. Saccacio, chief executive officer of RealtyTrac. “Unemployment-related foreclosures account for much of this increased activity, and the high number of borrowers who find themselves owing more on their mortgages than their homes’ are now worth represent a potentially significant future risk…."

There is no Real estate price recovery until incomes improve.

But the whole point to my plotting data if for you to make your own conclusion. Just realize how hard it would be to do a worse investment than SoCal Real Estate during the last five years.

Got Popcorn?
Neil




13 comments:

The Anonymous said...

"Note: DC and Houston are starting to look quite healthy; since their job situation is 'ok,' they could be done with the downward trend. The only question is hidden inventory."

As much as I used to criticize you, for not seeing this, I now have to praise you. Sure, you were late to realize this compared to me, but you were far far ahead of most of the people on the DC bubble blog where denial reigned til early this year.

Amazing to me how many people will not accept reality and see only what they want to see. Early this year, some clung to their pre-conceived idea that Arlington would suffer a big fall. They only shut up in April when the median prices started going up YOY, and case shiller started going up (seasonally and non-seasonally adjusted).

Speaking of which, do you plan to continue your case shiller series? I really liked the graphical views, and you said you would do that even after the bottom. However as far as I can tell you havent done that for months now.

As another aside, I hope you are doing ok. Has your wife found another job/ is she looking or just staying home with the baby for now? Either way, I hope you are doing OK - in hindsight you in no way deserved all my misplaced anger of years past.

Westside Bubble said...

Westside inventory is still holding strong compared with the last few years in my July numbers.

Elliott Wave Trader said...

You can chart price movement of the RE market like you can with the stock market. This notion that the RE market has found a "bottom" is a sign of a peak of the upswing wave after a severe downswing. What comes next is a leg down that will pierce thru the lowest point made on the first leg down. So this is probably the best as it will get for sellers in the next year or so.

wannabuy said...

So this is probably the best as it will get for sellers in the next year or so.


Yep. We're entering the seasonal time of the year where its difficult to sell.

Wife is going back for a 4th interview...

Got Popcorn?
Neil

The Anonymous said...

Wife is going back for a 4th interview...

Sounds promising. Keep us updated.

John said...

It is been awhile. I keep posted this post and hoping to hear from you soon.

jinnie said...

great post for readers.

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