Author Topic: Low inventory?  (Read 43416 times)

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Offline irvinehomeowner

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Low inventory?
« on: April 05, 2012, 09:26:05 AM »
I remember back when people were more active on the IHB blog, the bears kept pointing out how Irvine inventory (at the 700s at the time I think) was rising and it was going to go through the roof.

I've been reading reports that while sales numbers (not prices) are high, the number of homes available are not, so I checked the IHB chart and was surprised to see that Irvine is now at 526:

http://www.irvinehousingblog.com/inventory/



The last time numbers got that low was late 2009 and it's less than half the high in July 2007 (1270).

And it's not just Irvine, if you look at the graph, Aliso Viejo has the same ups and downs... which I find very interesting.

It seems like a chicken/egg thing... low inventory keeps prices from dropping quickly but dropping prices may also keep people from listing their homes.

I wonder where these numbers will go as we approach the usually active summer selling season.
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Offline IndieDev

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Re: Low inventory?
« Reply #1 on: April 05, 2012, 09:51:11 AM »
It's not just OC (Irvine, AV, etc), it's all over the country. Bay Area neighborhoods, where I am actually currently searching for a property, are down 20% to 40% YOY.

I think Calculated Risk has the best take on what is transpiring here:
http://www.calculatedriskblog.com/2012/02/comments-on-existing-home-inventory.html

If you don't want to read the entire article, it comes down to 4 points:
1) Sellers waiting for market to improve. I'd like to add to CR's take that some are hoping for a loan mod or principal reduction based on the news of the BofA deal. Additionally, some (actually many based on my searches of sale history in neighborhoods I'm scanning) may not be able to "traditionally" sell their properties based on current market conditions making their homes more part of shadow inventory than active inventory.

2) Some percentage of this is seasonal. We'll see what happens in the Summer.

3) Active listings as reported by the NAR don't report contingent short sales which if you look at just OC, there are many.

4) Robo-signing scandal dropped foreclosures by about 1/3 YOY in 2011. That definitely has an effect on inventory.

Notice #1 and #4 are at least partially created by artificial conditions.

The effect however is that pricing is dropping slower than it normally would with normal inventory levels.
"You are just a whining loser here hoping that Irvine house price can be 50% off so that you can afford a house here." - NonFCB
"690k... 20% down 4.25 int rate .36 dti and you need a salary of $ 90,500" - VillagePeople
"People are paying for something else, and labeling it "good schools". - PatStar

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Offline USCTrojanCPA

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Re: Low inventory?
« Reply #2 on: April 05, 2012, 10:29:00 AM »
I track the area of where my dad lives in Vegas and there isn't much out there for sales either.  It'll be interesting to see if the summer selling season brings more listings because in Irvine we are down about 40% from the number of listings there were last April. 
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Offline USCTrojanCPA

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Re: Low inventory?
« Reply #3 on: April 05, 2012, 10:29:41 AM »
It's not just OC (Irvine, AV, etc), it's all over the country. Bay Area neighborhoods, where I am actually currently searching for a property, are down 20% to 40% YOY.

I think Calculated Risk has the best take on what is transpiring here:
http://www.calculatedriskblog.com/2012/02/comments-on-existing-home-inventory.html

If you don't want to read the entire article, it comes down to 4 points:
1) Sellers waiting for market to improve. I'd like to add to CR's take that some are hoping for a loan mod or principal reduction based on the news of the BofA deal. Additionally, some (actually many based on my searches of sale history in neighborhoods I'm scanning) may not be able to "traditionally" sell their properties based on current market conditions making their homes more part of shadow inventory than active inventory.

2) Some percentage of this is seasonal. We'll see what happens in the Summer.

3) Active listings as reported by the NAR don't report contingent short sales which if you look at just OC, there are many.

4) Robo-signing scandal dropped foreclosures by about 1/3 YOY in 2011. That definitely has an effect on inventory.

Notice #1 and #4 are at least partially created by artificial conditions.

The effect however is that pricing is dropping slower than it normally would with normal inventory levels.
I think it's definitely #1 and #4. 
Martin Mania, CPA
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Offline WoodburyDad

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Re: Low inventory?
« Reply #4 on: April 05, 2012, 10:32:16 AM »
It's not just OC (Irvine, AV, etc), it's all over the country. Bay Area neighborhoods, where I am actually currently searching for a property, are down 20% to 40% YOY.

I think Calculated Risk has the best take on what is transpiring here:
http://www.calculatedriskblog.com/2012/02/comments-on-existing-home-inventory.html

If you don't want to read the entire article, it comes down to 4 points:
1) Sellers waiting for market to improve. I'd like to add to CR's take that some are hoping for a loan mod or principal reduction based on the news of the BofA deal. Additionally, some (actually many based on my searches of sale history in neighborhoods I'm scanning) may not be able to "traditionally" sell their properties based on current market conditions making their homes more part of shadow inventory than active inventory.

2) Some percentage of this is seasonal. We'll see what happens in the Summer.

3) Active listings as reported by the NAR don't report contingent short sales which if you look at just OC, there are many.

4) Robo-signing scandal dropped foreclosures by about 1/3 YOY in 2011. That definitely has an effect on inventory.

Notice #1 and #4 are at least partially created by artificial conditions.

The effect however is that pricing is dropping slower than it normally would with normal inventory levels.

Whether through mods or other means, the fact that they’ve been able to stem the wave of foreclosures while reducing inventory it's taken the pressure off pricing temporarily.
Ultimately, stronger wage and job growth is needed to help offset the growing number of foreclosures already present in the pipeline.

Offline IndieDev

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Re: Low inventory?
« Reply #5 on: April 05, 2012, 11:14:07 AM »
The artificial effect on pricing is apparent, but what is also apparent is that prices are still dropping even when supply is being constrained by 40% in some areas. That's very telling on the health of housing right now. It actually hurts the market in the long term, because those who don't get a loan mod, or principal reduction are going to be even more underwater by the time they realize there is no hope.

For instance in choice areas of Marin County where I'm currently looking, I've seen neighborhoods where the sales history indicated that over a dozen owners in the neighborhood were underwater by $400,000 or more based on recent comps. You have to believe that these guys, even with a loan mod or even principal reduction are going to bail, or simply not have enough cash in pocket to get out cleanly. I see all the signs of a blood bath.

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« Last Edit: April 05, 2012, 11:20:17 AM by IndieDev »
"You are just a whining loser here hoping that Irvine house price can be 50% off so that you can afford a house here." - NonFCB
"690k... 20% down 4.25 int rate .36 dti and you need a salary of $ 90,500" - VillagePeople
"People are paying for something else, and labeling it "good schools". - PatStar

Offline irvinehomeowner

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Re: Low inventory?
« Reply #6 on: April 05, 2012, 11:20:49 AM »
The artificial effect on pricing is apparent, but what is also apparent is that prices are still dropping even when supply is being constrained by 40% in some areas. That's very telling on the health of housing right now.
Totally agree. Even with "record low" interest rates... prices are still dipping.

I realize some say that 2009 was the low based on median price but I really chalk that up to a lower priced housing mix being sold at that time... because prices in the SFR ranges I'm looking at seem to be lower than 2009.
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Offline IndieDev

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Re: Low inventory?
« Reply #7 on: April 05, 2012, 11:57:39 AM »
Housing mix is a big part of that 2009 low.

Since sub prime was the first to go (taking WaMU and Indymac with them), you have to surmise that the homes of sub prime owners were of lesser square footage, location, and price compared to those who actually had skin in the game during the bubble.
"You are just a whining loser here hoping that Irvine house price can be 50% off so that you can afford a house here." - NonFCB
"690k... 20% down 4.25 int rate .36 dti and you need a salary of $ 90,500" - VillagePeople
"People are paying for something else, and labeling it "good schools". - PatStar

Offline WoodburyDad

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Re: Low inventory?
« Reply #8 on: April 05, 2012, 12:10:39 PM »
How soon before we get another round of stimulus/QE to address this situation?

Offline IndieDev

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Re: Low inventory?
« Reply #9 on: April 05, 2012, 12:23:43 PM »
QE? Stimulus?

The U.S is purchasing its own debt to prop up bond prices and low yields as part of the Fed's ZIRP strategy. You simply cannot "create" liquidity out of thin air by printing paper without negative consequences. We've already tripled the U.S monetary based since 2008, and what has been accomplished because of it?

.....

I rest my case.

"You are just a whining loser here hoping that Irvine house price can be 50% off so that you can afford a house here." - NonFCB
"690k... 20% down 4.25 int rate .36 dti and you need a salary of $ 90,500" - VillagePeople
"People are paying for something else, and labeling it "good schools". - PatStar

Offline WoodburyDad

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Re: Low inventory?
« Reply #10 on: April 05, 2012, 01:16:43 PM »
QE? Stimulus?

The U.S is purchasing its own debt to prop up bond prices and low yields as part of the Fed's ZIRP strategy. You simply cannot "create" liquidity out of thin air by printing paper without negative consequences. We've already tripled the U.S monetary based since 2008, and what has been accomplished because of it?

.....

I rest my case.

I agree, adding more debt is not the answer.
The fact that it’s done nothing to solve the underlying problems should be a big wake up call.
Lately, they’ve gone with European banks to help monetize the debt.
European banks buy US Treasuries in a swap deal.
The Treasuries are then used for collateral to get cheap loans from the ECB. 
The process continues 

Offline akim997

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Re: Low inventory?
« Reply #11 on: April 05, 2012, 02:09:06 PM »
very good points being made here.   

It's so funny hearing the story from the "other side" (realtors)...   what I'm hearing:

 - demand is so high with the market firming up...  you should really buy now...   
 - buy now or be priced out...  the economy is recovering so strong.   this is the only chance for you to buy a house with these rates...

What im actually seeing is a larger disparity between sale prices and asking prices...   there are a few wtf sellers out there listing their homes in irvine at close to $400/ft.    other than that, there really isnt anything out there...    personal opinion is that it's 1) in the article - sellers are just holding at this point.

Offline USCTrojanCPA

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Re: Low inventory?
« Reply #12 on: April 05, 2012, 02:19:20 PM »
very good points being made here.   

It's so funny hearing the story from the "other side" (realtors)...   what I'm hearing:

 - demand is so high with the market firming up...  you should really buy now...   
 - buy now or be priced out...  the economy is recovering so strong.   this is the only chance for you to buy a house with these rates...

What im actually seeing is a larger disparity between sale prices and asking prices...   there are a few wtf sellers out there listing their homes in irvine at close to $400/ft.    other than that, there really isnt anything out there...    personal opinion is that it's 1) in the article - sellers are just holding at this point.

Yeah, those realtards are blowing smoke up your butt.  Yes there are buyers out there, but no significantly more than last year at this time.  The problem is a lack of good inventory and yeah you'll have to get into multiple offer situations on good standard sales prices around comps because of the lack of inventory but the prices aren't going over list price.   All 3 of my last sales were all REOs if that tells you anything (all Fannie/Freddie REOs at that) with another BofA REO set to close in a few weeks.  I think there are a handful of sellers out there who see that their is a very low inventory of homes on the market so they throw up those WTF prices to see if they can find a desperate buyer to pay their price (most of those homes are sitting on the market collecting dust).
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Offline akim997

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Re: Low inventory?
« Reply #13 on: April 05, 2012, 03:09:38 PM »
uhhh... you mean like this?

http://www.redfin.com/CA/Irvine/22-Torrey-Pne-92620/home/5931664

This house sold originally in 2006 for $926K (ouch)... and they are trying to say that prices are down only 5% from Dec 06???

What's more insane is when you bring in comps:

same floor plan:
http://www.redfin.com/CA/Irvine/28-Grape-Arbor-92620/home/5931538

bigger floor plan:
http://www.redfin.com/CA/Irvine/25-Bamboo-92620/home/5931615
http://www.redfin.com/CA/Irvine/20-Grape-Arbor-92620/home/5931513

Even if you start looking at averages of the 3 per sq ft, you are looking at low 330's per foot.    So how reasonable is it to think that you can sell for about $100K over comp?   Even if that is your starting price, I'm assuming they are not taking any offers in the "comp" range.     What is the realtor's role in this situation?   Are they advising their clients ("listen, you are smoking crack"), or do they just go along for the ride (in which case they are not earning their keep)...

Offline akim997

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Re: Low inventory?
« Reply #14 on: April 05, 2012, 03:14:02 PM »
Does anyone feel like paying Newport Beach pricing to live in Santa Ana (well, Tustin)... 

http://www.redfin.com/CA/Santa-Ana/1241-Landfair-Cir-92705/home/4761406

 

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