OC Prudent Bears

RSS Feed Homepage

Articles: 1, 2, 3

Price per Sqauare Foot Off 12% in OC
2007-12-23 21:36:00
I was tooling around the DataQuick site and found an interesting stat I thought I'd share with readers.According to the most-current data found (October LA Times chart) on the DataQuick website, prices per square foot are down versus the 2006 median a whopping, mind-bending 12.2%. This is more than double the change in the of the median which was reported at 5.2% for the same period.The disparity between these two numbers leads me to believe that:The change in housing prices for OC as reported by the median is historic in magnitude, but is still under-reporting the actual decline in housing prices. As a result, many sellers are still pricing their homes at $/SF prices above the market rate.Seller's, once they understand that they are actually priced above the market (in $/ft) they are going to lower their prices further, and possibly dramaticaly so, in an attempt to undercut one another, exacerbating pricing weakness. There are big pockets of this activity in OC already, but I exp...
More About: Price , Foot

OC Median Asking Price Down Almost $120,000
2007-12-16 19:32:00
I poured myself a cup of coffee this morning and decided to have a look at asking price data at one of my favorites sites Housing Tracker.According to the data at Housing Tracker, the median asking price for homes in OC reached it's peak in May of 2006. At that point, the median seller was asking nearly $700,000 ($694,600)for her home. Today, she is asking nearly $120,000 less.Over life of a 30 year loan at 7.5%, a buyer purchasing a home at today's median versus the median at the peak will save almost $300,000 in principal and interest. That buyer would also save rouhgly $53,000 in property taxes, for a total savings of about $350,000.That is an amazing amount of money and a tremendous reward exercising bearish prudence. You should be proud of yourself.Viva los Osos!
More About: Price , Median

OCPB/Lansner Reader Demographics
2007-12-03 17:17:00
Quick summary of the survey results; details of bet later.In general, when I consider the 'icon' associated with my current outlook on OC residential real estate, I consider myself:Bear 93.9%Bull 6.1%In terms of political party, I most consider myself to be a part of:Registered Unaffiliated (Independent) 31.8%Republican 30.3%Democratic 27.3%Other Party 10.6%Which best describes your living situation: I rent or lease the property I live in. 62.5%I own the property I live in. 37.5%Choose the location that best and most-specifically describes the locale in which you live? I live in Orange County 67.2%I live elsewhere. 15.6%I live in Southern California 10.9%I live in California 6.3%
More About: Reader , Demographics

Help Me Setttle a Bet!
2007-12-02 16:49:00
A buddy of mine and I are using reponses to a survey to settle a bet. I can't tell you anything about the bet, in part because my buddy is a bit of a cry-baby, and also because we don't want to bias the results.The survey is very, very simple and is only four questions long. It takes less that minute to complete. We don't ask for any personal information and there's no need to register, provide an email address or anything else that might make a respondent uncomfortable.So, please, do a Bear a favor, take a minute to answer the simple survey. And remember, let's keep things honest :)Click Here to Take the SurveyThanks!

S&P: Home Prices to Drop 7% Next Year
2007-11-30 03:32:00
7% reduction in OC home prices - 0 dollars.Shaving roughly $40K off the price of the typical OC home - 0 dollars. Saving nearly $100,000 in PIT over the life of a 30-year loan - Priceless. For increasingly cheaper housing there's the implosion of the OC RE Market, for everything else there's MasterCard. Regular readers will recognize this format of chart as being sourced from our friends at http://www.paperdinero.com/. The chart shows the S&P Case-Shiller price index for by month for the last few years as well as the monthly predicted index value as derived from futures prices traded on the index. The line of demarcation between historic values and predicted value is the left-most of the vertical dashed lines on the right-hand side of the chart.This chart is pretty easy to understand given that each of the predicted values is at roughly -7%. That means for the futures market expects prices to be off 7% on a year-on-year basis at least for the next 12 months. At the current pri...
More About: Home , Year , Drop , Prices

Profitting from the Weak Housing Market
2007-11-28 17:00:00
Bear or bull, there's money to be made in the declining real estate market.I found a great little ETF that allows investors to short the DJ Real Estate Index. By definition, because the ETF shorts the index, its price goes up with the DJ Real Estate Index goes down proportionately. Conversely, if the index goes up, the price of the ETF falls. The name of the ETF is UltraShort Real Estate ProShares and its trading symbol is SRS.Now, from where I sit, there is very little positive to say about the housing market these days. And, if I am to believe what I read, things look primed to be much worse next year. While there are few guarantees in life and nearly none in the stock market, it seems like betting against the DJ RE Index makes a lot of sense.What I find so interesting about this ETF is that that it can benefit those bearish on the RE market whether they own a home or not. For owners, buying an ETF like this one can act as a hedge against dropping home prices. For future owners, ...
More About: Market , Housing

Must See TV: Home Prices Tumble
2007-11-27 23:44:00
Home Prices Tumble
More About: Home

What Do You Make Out of This?
2007-10-20 18:12:00
I wrote the following in late October and wasn't going to publish it, but a buddy convinced me to get it out. Sorry it's more than a bit late.I find this graph fascinating:It shows a snapshot of recent year-on-year (YOY) price and volume changes for four segments of OC Real Estate: new homes, existing homes, existing condos and then an 'all' category encompassing the other three. The horizontal axis is used to plot year-on-year price changes ,while the vertical axis plots YOY changes in volume/demand. Thus, line the plots the YOY relative change in demand versus the relative change in price for each of our four housing segments.This first thing I noted on this graph was the fact that prices of new homes had fallen the most of any segment while prices for existent houses had fallen the least. I believe that difference is caused by price different price 'stickiness' between those to segements and that prices for new homes are more 'fluid' and reponsive to market changes than p...
More About: Make

Couldn't Have Said It Better Myself
2007-10-12 02:57:00
California Association of Realtor chief economist Leslie Appleton-Young was quoted recently as saying, "?We?ve had a fundamental change in the mindset of the buyer,? she says. ?There is no reason (for a buyer) to act.? I couldn't agree more. Of course, I was writing about that very topic on this blog back in February.Would seem Ms. Appleton-Young's trend indicators seem to be lagging mine by about eight months. So, in case you're wondering, Ms. Appleton-Young, the next eight months are going to be epically bad. The vast majority of buyers lack the interest, means or both to buy a home. Smart buyers are going to continue to sit on the sidelines at least through 2008. They are too smart to be interested in buying. Those buyers that aren't so smart are going to try and buy, but many, many of them will not be able to qualify. They will not have the means to buy.The implications are that: volumes are going to slow to a trickle, real prices are going to drop much further, seasonally-a...

Formula 409: Wiping Out Dirt, Grime AND High House Prices
2007-09-09 19:56:00
Back in May, I posted an analysis on the remarkable similarities between the prices declines we are seeing now versus the last housing price decline we saw in the early 90's here in Orange County. In that post, I showed that during the last decline, according to the Case Shiller index, prices fell fully 40% over the course of roughly nine years.With all of the talk about prices "stabilizing" and "bounces" set to occur next year, I thought I'd better come up with an easy way for people to remember the depth and duration of the last decline, lest they forget and make bad decisions in the absence of that context. The last decline wasn't pretty and to be quite candid, I'd to see as few of my friends and neighbor burned this time around as is possible. My guess is that if you're reader of my blog, you probably feel the same way.So, here goes. With a 40% price decline ('40') over nine years ('9') and a little concatenation ( '40' & '9'), we get the handy mnemonic '409'; jus...
More About: House , House Prices , Formula , High , Dirt

Housing Sales to Drop 25% in 2008?
2007-09-08 18:21:00
It was reported in the Orange County Register that executives at Countrywide Funding expect retail loan volumes to drop 25% next year and that they are going to lay off 12,000 people as a result. I don't think it's any stretch to say that this also means that there is going to be a 25% drop in home sales as well.Let's have a look at July sales for the last three years and my estimate for 2008 based on Countrywide's figures:Clearly sales in Orange Country are falling precipitously year on year.What's most striking and a bit difficult to derive from the graph, is just how far housing sales volumes are going to drop from their peak in 2005. In 2005, OC saw 4,341 homes change hands, based on estimates derived from Countrywide's numbers, we we only see anemic sales of only 1,793 units in 2008 or over 2,500 fewer units. That's a decline of nearly 59%.So ask yourself this question: "Would I want to buy stock in a company where sales were going to drop nearly 60% over a four-year per...
More About: Sales , Housing , Drop

Deadly RE Sins: Gluttony
2007-09-03 19:55:00
Every day or so, Redfin sends me updates of market activity in a few areas of OC that I care to study. In essence, these updates tell me two things: new properties that have been listed and properties where their prices have changed for one reason or another. I always enjoy seeing what properties are coming on the market, but I've got admit, I find the prices changes the most interesting.As I've been reviewing the pricing changes, I've found that there are essentially three elements to a price change: direction, magnitude and frequency. Direction is simply whether a seller is lowering his price or raising it, magnitude is the amount of the change and frequency is essentially how often the seller adjusts his prices.Today, I thought I'd noodle a little on that first aspect of price changes: direction. And I'd thought I'd start by looking at people clever enough to raise their prices in today's market, and introduce the first of our Deadly RE Sins : Gluttony.You might be tempted ...

OC Inventory Passes 20,000 Units
2007-08-30 23:13:00
.Consider this: two years ago, in August, we had 7,209 homes for sale in OC. As of yesterday, ZIPRealty.com showed that there were 20,024 homes for sale in OC, or nearly three times as many as we had just two years ago. Three times as many properties and probably a third as many interested/qualified buyers--its a recipe for an epic market decline.In February of this year, I wrote about a bet I had with a real estate agent friend. In that post, I explained that he and I had a bet as to whether or not the total amount of inventory of residential properties for sale would pass 20,000 units at any point in 2007. We kept the bet friendly at $100. I spoke my Realtor friend this morning (who I think was kidding when the threatened me with bodily harm if I revealed his name (besides, I could take him)) and he's agreed to pay on our bet. Now don't get me wrong, the $100 is nice. Being right is even nicer. But 20,000 homes is one hell of a lot of property. With the profound tightness of the...
More About: Inventory , Units , Tory , Inventor , Unit

More Help for the NAR
2007-08-30 06:28:00
According to the data available from the Melissa Data website, unit sales volumes are down dramatically over the last two years. According to them, in August of 2005 5,227 homes were sold in OC while last month only 2,253 were sold. That's a reduction of nearly 3,000 units or 56.9%. Brutal market.Another interesting stat I was able to create from the fine Melissa Data information was the total value of homes sold by month here in OC. In August of 2005, roughly $3.65 billion dollars of residential real estate changed hands. Last month, only $1.76 billion worth the residential real estate was sold. That's a reduction of nearly $2 billion dollars. Epically brutal market, especially for RE agents.Consider this, with a reduction of roughly $2 billion in transactions, at a 6% commission rate, Realtors collectively made $120,000,000 LESS in commissions than they did just 23 months ago--those poor bastards.I've tried to help these poor souls in the past, but they keep on with their 'buy...

More than a Year of Inventory in OC RE Market
2007-08-28 01:23:00
Steve Thomas at Remax Real Estate in Aliso Viejo calculates Orange County now has 12.2 months of inventory of homes currently on the market. Inventor y numbers are certainly very high compared to the last two years, but the real culprit here seems to be a collapse in OC housing demand.The following areas have inventories of less than ten months: Anaheim Hills, Brea, Canyon Areas, Cypress, Foothill Ranch, Huntington Beach, Laguna Woods, Mission Viejo, Rancho Santa Margarita and Seal Beach.The following areas have inventories greater than fourteen months: Anaheim, Corona Del Mar, Dove Canyon, Garden Grove, Laguna Hills, La Habra, Lake Forest, Portola Hills, San Clemente, San Juan, Santa Ana, Talega, Tustin, Villa Park and all ranges above $2 million.Read more here. Very interesting analysis, to be sure...then out of nowhere, Steve suggests that it's probably a good time to buy and even employs the tired, noisome 'get off the fence' metaphor. With home sales as sluggish as they are, ...
More About: Market , Year , Tory

A Tale of Three Markets
2007-08-20 00:32:00
There's been a lot of hoopla lately about the median home price in OC bumping up close to historic highs. The data, such as they are, seem to indicate that is the case, but remember here, that's true only if you're looking at the county-wide median price.In the past, you've seen me and others deride the county-wide median price stat because of the sheer size and/or heterogeneity of OC. Talking about the county as a whole, particularly when using the flawed median as a metric, just doesn't tell one a whole lot. Parts of the county could be collapsing, while other parts rise, but when you throw every neighborhood in the county into one big bucket, all of that movement is washed out, all of the uniqueness statistically smoothed over. County-level stats just aren't granular enough to truly convey any meaningful information.For the vibrancy and dynamism of the market to be seen, we need to analyze the market by segment. Simply by bucketing areas of the county together by similar ch...
More About: Markets , Tale

How Many Can You Find?
2007-07-23 05:10:00
Fourteen for sale signs (and two others)at the corner of Saybrook and Heil last weekend. Seems though HB's Harbor area is getting a little, if you will forgive the pun, liquid.My guess is that this intersection has got to have the highest concentrations of for sale signs in the county, but I bet there are some that have nearly as many or maybe more.If you find an intersection, stretch of road or a street corner with a lot of for sale signs, send it to hbbear at ocpredicts dot com and I'll post it on the site.
More About: Find

HB Joins the 1,000 Club
2007-06-16 01:18:00
Huntington Beach has joined the ranks of infamy by passing 1,000 real estate units for sale within its boarders. To get just a little idea of how happy this makes your blogger, click on YouTube vid below...the video is fun, but the music conveys, partially, the joy in my heart!
More About: Club

Are They Sure It's "A Good Time to Buy"?
2007-05-26 18:13:00
We've been hearing a constant stream of propoganda from the NAR, NAHB and unscrupulous agents that it's a good time to buy. I submit it is time for them to put their money where their mouths are.We've seen the ads in the paper and on TV and also heard them on the radio where those who benefit to profit from housing transactions are claiming it's "a good time to buy." You've seen me write about how absurd and unethical I believe their claims are, but yet the assault on our sensibilities continues. Go figure.Clearly these salespeople must know something we don't. Maybe huge amounts of inventory, increasing defaults and foreclosures, historic credit-tightening and affordability actually don't matter and all those years of studying finance and economics have be, in fact, for naught. Apparently, these guys are on to some big secret that they aren't willing to articulate outright, but that feeds their certainty that real estate is still an excellent investment. But they aren't sh...
More About: Time , Good , Sure

Mission Viejo Breaks 1,000 Inventory Units
2007-05-24 20:29:00
Congratulations to the newest member of the One Thousand Club, Mission Viejo!According to ZIP Realty, Mission Viejo joined the infamous ranks of inventory-laden cities this morning at 1,007 units of inventory for sale. If you're shopping for a home in that city, be sure to whack an extra 10 or 15% off of your offer.Mission Viejo sellers, gird your loins, you officially have lost ALL leverage in any price negotiations. Good luck.Vivo los Osos!
More About: Inventory , Sion , Breaks , Units

OC Inventory Passes 18,000!
2007-05-20 20:10:00
ZipRealty shows that there are more than 18,000 units for sale in OC.We all have already heard that cities like Anaheim, Santa Ana and Irvine has more than 1,000 units for sale, but did you realize that there are other OC cities getting ready to join the 1,000 Club? Leading the pack are Mission Viejo at 993 units and Huntington Beach at 930 units; that these cities will pass 1,000 units for sale this year, is a foregone conclusion. At over 650 units for sale each, I would say that Garden Grove (732), Fullerton (681), Orange (753) and San Clemente (692) have a better than even money chance of passing 1,000 units this summer.20,000+ units and unrestrained seller panic, here we come!
More About: Inventory , Pass , Vent , Tory , Inventor

Deja Vu All Over Again
2007-05-17 17:02:00
If past is prologue, then bears have a lot to celebrate and recent buyers have much to mourn. The graph above shows the historic and futures prices for the S&P Case-Shiller price index for Los Angeles-area homes inclusive of Orange County through the end of this year. The vertical lines in the body of the chart, demarcate the beginning of the futures contracts prices and as you can see, traders in that market have a pretty grim view of prices going forward.But what's most striking is how similar the curves look when we compare 1990-1991 to 2006-2007: Eerie, isn't it? Now I realize it's impossible to predict with any certainty that this housing cycle will be will turn as ugly as it did in the 1990's, but when the beginning's of two cycles line-up as well as these two do, you have to believe that they are going to, at least, be similar.Will this time be better? Will it be worse? That's anyone's guess, but if we look at history, we know one thing: it's going to be bad. From pea...
More About: Over

Everyone Selling a House in OC, Raise Their Hand!
2007-05-16 16:39:00
According to ZIPRealty, the total number of properties for sale in Orange County is 17,779 which is already higher than the peak amount seen last year of 17,758. Not bad, considering it's only May16th and last year's peak happened at the end of August. Looks like it is going to be a long summer for sellers.All of this is great news for buyers. Though it's still far from a good time to buy, things are lining up for some real bargains, maybe as early as next summer. Be patient, you will be rewarded.Vivo los Osos!
More About: House , Selling , Ever , Sell , A House

Sorry So Long
2007-05-03 01:36:00
Dear Readers,As I write this from Terminal 'K' at Chicago Ohare Airport, I want to apologize for the long absence, but the day job has me on planes, trains and automobiles frequently. With that, and trying to be a good dad and husband and the desire to have a modicum of a social life, I just haven't had the time post lately. Hopefully soon I will find the time to catch up on the market and post a little analysis and commentary.I have to be honest as well that I've lost a little of the steam behind my motivations for posting. You see, I started this blog to debunk the idea that housing prices were going to continue to rise in LA/OC. Now that I consider it a foregone conclusion that prices are set to drop and the bulls have been acting more like geldings, some of the passion's gone. But don't lose heart. I am certain that some some bovine idiot will say something stupid in the days to come and that will stoke my ire, causing me to make the time for the odd posting now and again...
More About: Long , Sorry

Buyer Demand: Running on Empty!
2007-04-09 05:03:00
With the best of intentions, I asked readers in March's poll to tell me the price level at which they were very likely to buy a house, but things didn't work out exactly as planned.You see, I posted the poll to test a theory that I had where buyers would be willing to buy at prices points much lower than I had anticipated. In fact, I had already begun writing (at least in my head) a story about how sellers could access significant incremental demand, just by lowering their prices a little. Well, the data didn't work out that way. Here's a graph of the responses:The results of our poll indicates that nearly 80% of people responding will not seriously consider buying a house until prices drop below $450,000. The balance of the responses fell between $475,000 and $600,000 with a very pronounced skew toward cheaper prices. The way I interpret these data, is that people believe that prices are set to drop very significantly over the next few years. The other thing I see in the data i...
More About: Running , Buyer , Demand , Empty

Housing Inventory Spikes! Demand at 11-Year Low.
2007-04-07 18:25:00
Just a quick bit of news, prompted by a phone call from an old friend. Thanks, Tom.Going largely unreported, inventories of homes have continued to sky-rocket with the month-over-month increase in inventory of an amazing 11.8% between the end of February and the end of March. 11.8%! If that rate holds, we will see inventories double from their current levels by Aug, 30.Also going unreported, is the fact that at the end of March this year, we had more homes for sale than we did at the end of May of last year where we are generally well into the selling season. Clearly, the intelligent bearish sellers are trying to beat the Summer rush, beating their neighbors to the punch.Have a look at the source data by clicking here.On the flip side, Lansner is reporting on his blog that home sales are at their slowest rate in 11 years here in OC. Clearly, buyers are utterly rejecting the absurd prices asked for by sellers and are waiting until the inventory situation comes to a head before consid...
More About: Inventory , Housing , Sing , Spike , Vent

Pricing Weakness Epidemic in OC
2007-04-02 04:03:00
I took a look at a handful of pricing metrics for Orange County and I have to say that even as a died-in-the-wool housing bear, I was pretty shocked by what I found. Let?s start with our three key metrics:% of ZIPs with median price down year on year: 77.3%% of ZIPs with median price down from 2006 median: 80.0%% of ZIPs with price per square foot down: 62.7%.Astounding. Fully four in five ZIPs show price declines between February and all of 2006 and nearly that number on a year on year basis. Four-in-five. I can remember not long ago when that number was closer to two in five. Things certainly have changed.Looking at the data another way, fully 92% of OC ZIPs showed weakness in at least one of the three above metrics, with five lonely ZIPs having been spared the from pricing contagion: Laguna Beach?s 92651, Trabuco Canyon?s 92679 , Fullerton?s 92835, Newport Beach's 92660 and Villa Park?s 92861. If you don?t live in one of those four ZIPs, PRICES IN YOUR AREA ARE FALLING by one me...
More About: Pide , Ness , Demi , Epidemic

Inventory Threat Level: What Color is Your City?
2007-03-29 17:56:00
Sorry I haven't posted in a while, my day job has me on planes, trains and automobiles lately. I'm still slammed, but I want to get out this post on inventory threat levels.I've spoken in my last two posts about inventory levels and how they might be leveraged in negotiating prices with sellers. In order to synthesize those posts together, I've developed a simple scoring and rating system that can be used to determine how inventories for given areas compare to the county as a whole.It's a pretty simple system, it takes into account the "month of inventory" and "percent of home listed" stats and creates a compound ranking out of them and then classifies them into a "inventory threat level" grouping. The inventory threat indicates, in my sometimes humble opinion, the amount of risk of significant price decline a city may endure in the medium term. If an area is classified as as blue or green (there are none at this point) there is no or little risk of a significant price decline....
More About: Color , Inventory , What , Hat , Your

More on Orange County Housing Inventory Levels
2007-03-20 04:56:00
In a prior post, I wrote about the surprising inventory data I found out on Homeseekers.com. Today, I am going to continue looking at inventory, but I've also pulled some census data so we can not only look at the months of inventory on the market but also the total percentage of homes on the market. We saw in my last post that there appears to be a lot more inventory on the market than has been reported. We also saw that within the county, the amount of inventory on the market varied very, very widely with some areas like Seal Beach with just a couple of months of inventory and others like San Clemente with over a couple of years of inventory. But months of inventory is only one measure, so maybe some areas aren't really getting a fair break.With that in mind, I decided to pull some demographic data and have a look at the proportion of homes for sale, settling on Total Housing Units the most "fair" basis for comparison. Here are the results:You will note many of the areas with th...
More About: Inventory , Orange , Orange County , County

Are Inventories Actually Higher than are Being Reported?
2007-03-17 00:47:00
I decided to pull some data yesterday from Homeseekers.com to have a look at what their data says about the housing inventory situation here in Orange County. They have a feature that lets the user pull lists for cities either including or excluding properties that are in escrow; so, coming up with "in escrow" counts is a pretty simple, if time consuming, process.What I found blew me away:First, note that there isn't data for all cities, just the largest, those for which there was a decent sample size of listings and those where the data made sense (there were very few homes listed in Fraudera Ranch.) But once you get past that, the data is pretty amazing.If the Homeseekers.com data is correct, there are a total of 13.9 months of inventory currently available in OC largest cities. This is more than double what is being reported in the media elsewhere and over a year's worth the homes already on the market! I have to wonder what a seller might think if he were to know that number-...
More About: Report , Port , Tories , High , Repo