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Prudent Bear Renter Savings $70,000
2007-03-16 04:14:00
With the aberration of housing prices rising as they did last month, renter savings dropped a little month on month, but are still extremely strong at over $70,000 since June last year. A drop in interest rates also benefits bears.Congrats prudent bears, you've managed to save over $70,000 by not buying the RE-industry rhetoric, sticking to your guns and waiting to buy a home on your own terms. Here's a quick break-out of your savings since June of 2006:Saving s on Purchase Price $ 47,300Total Closing Costs $ 7,705Rent Benefit $ 22,844Investment Income $ 1,742Tax Benefit ($9,254.13)Total: $70,337 dollars.For the details click here.In an interesting turn of events interest rates for "typical" home also dropped an eighth of a percent, meaning that if we were to buy today, (which no one is planning to do, right?) we would also have saved tens of thousands on the life of the loan. So all things considered, the savings we've incurred are actually up month over month. More good news for...
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Prices Down in All So Cal Counties!
2007-03-15 16:12:00
On a price per square foot basis, prices are down in all So Cal Count ies both in nominal and real terms.WTF with Santa Barbara?
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Would You Buy a House from this Man?
2007-03-11 18:01:00
The CEO of the nation's #1 builder, D.R. Horton's Donald Tomnitz, told Wall Street analysts, according to The Associated Press: "I don't want to be too sophisticated here, but '07 is going to suck, all 12 months of the calendar year."You have to love this kind of candor from a CEO. Let's face it, the guy has the balls to call it like he sees it, damn the torpedoes. Him, I like. But, more importantly, I find myself thinking that I could TRUST him.Unlike most in the RE industry at this point, he's not trying to sell me some BS, pie-in-the-sky rhetoric about why I should buy a home now so he can land a couple of transaction. He's looking at the longer term, recognizing the fact that what he says today will be remembered tomorrow. He KNOWS that his reputation and credibility are on the line and he's behaving like a professional and telling like it is. There is one huge lesson here for everyone in the RE industry.There's a saying in the Sales profession:You buy from people you t...
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Are Buyer Demographics Skewing Home Prices?
2007-03-10 19:01:00
The Orange County Register reported that the median price for an existent home inched up to $675,000. Some bulls seem to be rejoicing.Like I predicted in a prior post here, the price for existent homes is starting to inch up a bit. My theory is that due to the tightening of non-prime credit, the "typical" buyer has become more "upscale" than in the recent past. Buyer s today are likely more affluent and have better credit ratings than the average buyer last year and are also buying larger, nicer and most importantly more expensive homes. I'm not alone on this, Jon Lansner over at the Register would seem to agree. This skew toward higher-end homes, I'd offer is hiding the fact that home prices here are much weaker than they appear.With ever-tightening credit markets and sales volumes reduced to a trickle, this skew is going to continue to worsen, possibly to be point where looking at the median says almost nothing about the underlying value of the typical home, but only serves to de...
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A Modest Proposal for the NAR Marketing Team
2007-03-09 00:20:02
There I was, sitting on the couch, feet up on the ottoman, relaxing with a nice glass of single-malt, watching a little Letterman before bed and then it happened...a commercial from the NAR came on.There were attractive families from an inclusive range of demographic groups, touring well-staged houses with up-beat music and some fairly good production values. The families all appeared happy and ready to sign on the dotted line for a home. The voice over for the ad among other things said that "When you have a family it is always a great time to buy", "prices are favorable" and "interest are at historic lows", but thankfully I'd only had the one Scotch and was able to resist the temptation to phone up the local 24-hour broker and place a bid on a home.This bit of theatre was brought to us by the National Assocation of Realtors as part of their public awareness campaign titled: "Good Time to Buy." This multi-million dollar print, radio, outdoor, web and television campaign is designe...
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New Poll: At What Median Price Would You Buy?
2007-03-09 00:20:02
I?ve been talking a lot lately. Today, I?ve decided to take another opportunity to listen.I?ve posted a new poll that asks another pretty simple question which is essentially at what price level would you seriously consider buying a the ?typical? home in Orange County. The median price for last month was $600,000 and sale transactions were at a trickle, the slowest sales pace since 1995, so clearly that price level isn?t very motivational for most of us. Would you be very likely to buy at $575,000? $550,000? Are you holding out for $500,000 or less? Take our poll and let us know! As feel free to add a comment or two about your response and your reasoning behind it.
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Stocks Down Sharply, Fear Up Sharply, But Some Good News for Bears
2007-02-28 12:18:05
As most of you are already aware, stocks suffered their worst lost today since the tragedy of 9/11. In total, more than half a billion dollars in stock value were wiped out. Markets were down world-wide indicating a broad scope of weakness. Bears, it looks to me that our stock market just got a whole lot riskier. But don?t take my word for it.There?s an interesting index that you can trade called the CBOE Volatility Index that measures option prices on one of my favorite investment vehicles the S&P 500 index. This volatility index is often referred to as the ?investor fear gauge?, a whitepaper from the CBOE explains why:?Historically, during periods of financial stress, which are often accompanied by steep market declines, option prices - and VIX - tend to rise. The greater the fear, the higher the VIX level.? This index rose 64% today on extremely heavy volume, indicating a dramatic and wide-spread decrease in investor sentiment related to the stock market. And an increase in inves...
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Wither February Sales?
2007-02-27 00:17:02
Are February 's Sale s on track to be the worst in several years? I'm not sure, but it sort of looks that way.DataQuick reported 2,400 All Homes sales in the month of January (a full calendar month.) They also reported for the 22 business days ending Feb 7th sales of 1,335 (again the equivalnent of a calendar month, just starting about a week later than the Jan data.) Can it be right that for a rolling four week period, sales are down 865 units? Am I missing something here? Does anyone know if real estate transactions are massively, no profoundly, back-loaded to the end of the month? If they are, then this may be no big deal. If they're not, February could end up being an absolutely abyssmal month for sales, possibly under 1,500 units. Is this the first massive escalation of the buyer versus seller Mexican stand-off? I am freaking dying to know.Anyone with information regarding backloading (what percentage of RE transactions typically happen in the first, second, etc. week of the m...
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A Call for Data and a "Data Commons"
2007-02-26 18:17:01
As part of our effort to level the informational playing field for buyers, OC Prudent Bears is looking to expand the set of data that we use to perform our analyses. So far, we've been able to find some fairly good published data and have posted what I believe to be useful and beneficial analysis and commentary on that data, but when we're foraging (foraging bears, LOL!) for data we can only get so far. Frankly, I'd like to up the game.With that in mind, I'm putting out a request to the community at large to share data. If you or someone you know has data on pricing, inventory, rental levels, demographics, housing stock, closed deals, current deals, terminated deals, square footage of homes for sale/sold or any other data, I'd like to hear from you.We are primarily looking for this data at a county and ZIP level and the more years of data the better. It doesn't matter if the data is culled from the web, taken from some kind of publication, the census, a university study, somet...
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OC Bears Typical Savings Approaching $50,000
2007-02-26 06:16:03
As was reported in the OC Register today, the "all homes" median price dropped to $600.000 for the month of January. Quite a Valentine's Day gift for us bears.Congratulations once again to OC?s prudent bears! The savings by deferring a purchase and biding your time, keep on rolling in! Let?s have a look at these savings (all homes) your patience has earned you so far:Saving s Compared to Last Week: $4,000Savings Compared to Last Year: $27,000Savings Compared to Last Month: $42,000Savings Compared to All Time High: $46,000With prices down as broadly as I found in my last study I?m not at all surprised to see prices continue to drift down and, as I have said in the past, I think they will continue to do so for quite some time.Another very, noteworthy fact from this last report is that our ?all homes? price is at exactly $600,000. I think this is a profoundly important number in terms of sellers? psychology. If we break through this number, even by $500, I think it very well may cause ...
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OC Bears "Holistic" Savings Nearly $79,000, So Far!
2007-02-26 06:16:03
In an effort to offer an accurate a picture as is possible of the benefits of renting in the current housing market that is OC, I have decided to build a more comprehensive set of calculations for OC renters.This new model incorporates the effect of inflation on "real" housing prices, interest expense costs, property taxcosts, tax benefits of ownership and the changes in the DataQuick pricing history methology. I believe this new savings number reflects a more inclusive, comprehensive and accurate estimation of how much we bears have saved already by not buying at the price peak. In an effort to be as unbiased as possible, we have pulled the pricing data from the OC Register and loan specifics from Eloan.com.Let's have a look at the summary of the numbers for the seven-month period since the peak:Nominal Amount Saved Since Home Price Declines: $ 42,500Housing Price Decline Due to Inflation $ 15,050Savings on Acquisition (Closing and Rate Buy Down): $ 7,705Savings on Renting Versus ...
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January Data Bad News for Flippers, Condo Owners
2007-02-26 06:16:03
Normally, I focus my posts around pricing trends with the commentary centered around buyer behavior. Today, I wanted to shift gears and speculate about how sellers might be behaving in the coming months based on the Data Quick January numbers as reported by the media.If we look at pricing performance between Jan 07 and Jan 06 prices look relatively flat on average. The Median All price is exactly flat at 0.0% and SFDU eked out a gain of .7%. Condo s didn?t fare well, dropping about 3% which was bad news for condo sellers, but new homes zoomed up 14.9% after dropping precipitously last month which may have been heartening to the builders. On the whole, one could rightly come to the opinion that prices as reported last month were flat.I think many potential home sellers picked up their newspapers last week, saw the zero-appreciation headlines and felt while it wasn?t any good news for homes; there also wasn?t any bad news either. But this news wasn?t good news at all for three groups: f...
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Media Stats Hiding Blood in the Streets?
2007-02-26 06:16:03
In my last post, I wrote about how sellers may have reacted to prices changes as reported by the media. Today, I?m going to have a look at how sellers might be reacting if the media were to report those figures just a little differently.In my last post, we had a look at the price performance here in OC by comparing January 2007 price levels to those in January 2006.We noted that the data looked relatively neutral for the most owners but that there was some relatively bad news for flippers and condo owners. All in all, sort of a mixed bag.This kind of year-on-year monthly comparison seems to be very widely reported and sort of the sweetheart stat of the media when it comes to reporting on housing price trends. In addition to, or maybe as a result of that fact, the YOY stat seems to be the stat mostly often referred to in discussion around the blogs--for or whatever reason, the YOY comparison seems to the gold standard of price comparators.But what if the media reported the figures di...
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OC Inventories Up for 6th Report in a Row!
2007-02-26 06:16:03
In a break from our regularly scheduled programming...I read an article and saw some associated postings where real estate agents have been claiming that they have seen rather significant increases in buyer interest and traffic at open houses. So, I go to wondering if either of these factors was actually translating into an increase in sales and a subsequent reduction of inventory.So, I clicked over to my favorite inventory blog and see what the folks at Bubble Markets Inventory Tracking were reporting and found the following data:A quick look at this data shows that inventories have been consitently trending upward since the beginning of the year. That leads me to be believe that the increase in traffic really isn't translating into many deals. Must be a lot of looky loos, or maybe a little wishful thinking on the part of some realtors desperate for a little good news.A couple of other interesting nuggets from the Bubble Markets Inventory Tracking site.Inventories compared year on...
More About: Report , Port , Tories , Repo , Tori

Inventories at 23,000+ in August 2007?
2007-02-26 06:16:03
I got offered a bet by a real estate agent friend regarding housing inventory levels for this year. He wanted to be me $100 that OC real estate inventory won't pass 20,000 units at ANY point this year. I didn't know if that was a good bet or not, so I built a crude (yes, crude) forecasting model to see whether or not I ought to take the bet.The results were a little surprising: The bars are color-coded in two ways, first by season (red is Summer; Orange is Fall, Blue, Winter and Green, Spring), and then the darker bars are actual figures where the lighter are the results of the forecast (also with an E at the front of their label.) Cool, huh?I took as an assumption that because sales are so strongly seasonal, that one might be able to take the January inventory levels and use it as a "baseline" inventory number for the year. So I compared to inventory levels in Jan 2006 to each of the respective months, giving me a relative inventory increase from January by month. I then used a t...
More About: Tories , Tori , August , August 2007 , August 2

Don't Listen to the "Bull"--Prices are Heading Down, Down, Down!
2007-02-26 06:16:03
Buyer Bears, the bulls are at it again, trying to talk up the market saying that prices are going up. BBs know that the market is in a slow, but sure steady path downward and aren't swayed by the rantings of bulls bent on keeping prices high despite the loss of any personal credibility.Here is a summary of indicators showing from just about every perspective imaginable the undeniable truth that prices are headed south here in OC. Next time a bear tells you prices are up, you may want to point them to this page:First, from the nominal perspective the DQ year-on-year medians:Resale houses $670,000 +1.0% FLATResale condos $438,000 -3.7% DOWNSecond, from the real perspective prices adjusted for national inflation rate.Resale houses -1.5% DOWNResale condos -5.7% DOWN SHARPLYPrice s adjusted for OC's rate of inflation.Resale homes -3.2% DOWNResale condos -7.4% DOWN SHARPLY Thanks to graphix for inflation-adjusted numbers.Third, from a price per square foot perspective and as reported in ...
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Orange County: Love It? Like it? Loathe It?
2007-02-26 06:16:03
There's a been a lot of talk on the blogs about how we Orange County residents feel about our fair county. The perception seems to be that there is a significant minority of people living in OC, that actually don't like living here. It follows that members of this minority don't like one or more aspects of living here whether it be traffic, the economy, crime, pollution or some other facet of life in OC.Now, I'm certain there are some people in OC that feel that way. There are people everywhere in the world that feel that way and that some level of dissatisfaction with environment is unavoidable and universal. And, even if a little discontent turns out some how not to be universal, we all know we've got out malcontents here by what we've read on the blogs. But do they represent a significant minority of OC residents?I'd like to find out just how people feel about life and quality of life here in Orange County ; so I've posted a poll that basically asks the question: "How do y...
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Prices Down in Most Areas of Orange County II
2007-02-26 06:16:03
As a reminder, and to tee-up today?s post, I want to review the metrics we?ve been looking in prior posts. They are listed below, along with percentage of ZIPs where the metrics showed decline:· $ Price Change from 2006 (55.4% Down ),· $ Price Change from Dec 2006 (59.0% Down)· $ Price Change Year on Year (48.2% Down)· $ Price Blended Average (51.8% Down)Given that the majority of ZIPs showed three of these metrics down, we concluded that pricing declines were wide-spread and that, along with county-level price declines, there was an implied lack of firmess in OC housing prices.For the next few days, we are going to continue our analysis of the scope of price declines in some ZIP codes a bit further, but this time we're also going to begin to peel the onion back a little and get a glimpse of the preponderance of negative performance of our metrics (those listed above) by ZIP code.We?re going to start by looking at is at the count and percentage of metrics down in each ZIP code. Here...
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Prices Down in Most Areas of Orange County I
2007-02-26 06:16:03
In yesterday?s blog we showed using a variety of metrics that, on average prices in Orange County are falling. In today?s we that show that prices are also falling in most areas of Orange County as well.Today we?re going compare the latest DQ ?all homes median? data with three different benchmarks at ZIP code level. By looking at three comparisons, rather than one, I hope to remove some of the statistical noise associated with this kind of analysis, trying to take a broad a sample as possible, with the three resultant metrics being:$ Price Change from 2006 ($2006)$ Price Change from Dec 2006 ($Dec2006)$ Price Change Year on Year ($YOY)We?ll also include, the $ Price Blended Average, which is simple a weighted average of first three metrics, with two parts $2006 (largest sample), and one part of each $Dec2006 and $YOY. I know, it?s not horribly sophisticated, but I believe it will help us generalize about and remove some of the noise from price trends within a ZIP. So let's have a l...
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OC Home Prices Plummet 5.9% in January! Average Buyer Bear Saves Nearly $4
2007-02-26 06:16:03
I predicted in prior posts that prices for OC homes were headed downward; I just didn't realize it was going to happend this fast or with such a vengence.The median home price for all homes dropped fully 5.9% from December?s prices, lead by a precipitous drop in new home prices of nearly $188,250 or -23.8%. While I don?t have the numbers to prove it, I would speculate that a drop of 5.9% has got to the worst one of the worst month-on-month performances in all of OC history!Now, the bulls are going to are get riled up and point out that on a month-on-month basis, the prices of existent homes and condos aare flat. They?re right, they are. But looking at the data from a year-on-year and this month versus 2006 basis, the story is different.On a year on year basis, both resale houses and resale condo prices are down, .6% and 2.8%, respectively. If we compare this month?s data with all sales from 2006 (a larger sample) we also see that prices have also dropped, 3.1% for resale houses and...
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OC Affordability
2007-02-26 06:16:03
There's been a lot of discussion about affordability of homes in here in OC. By most measure, affordability, on average, is relatively quite low, but that is better in some areas than it is for others. But how much better or how much worse? Quite a bit more than you might imagineI took average household income from the OC Register and combined it with 2006 median prices from the LA Times. I then divided the median housing price by the average household income; giving a measure of relative affordability I'll call the price/income ratio. Having a look at the data, you quickly realize that affordability is by far the lowest for the less-fortunate among us, while if is much less of an issue for the well-to-do. I don't think this is much of a surprise to anyone. What I think you might find surprising, however, is just how much worse affordability is for the less-fortunate.In one Santa Ana ZIP code the price/income ratio was 21.8, meaning that the median house price was about 22 times ...
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OC Buyer Bears Market Perspective
2007-02-26 06:16:03
In the short term, the data and news seem to indicate that prices are either flat or sort of drifting down, depending on the specific data being evaluated and whether or not those data are in real or nominal terms. So there isn't much pricing risk. Cashflow-wise, renting is also very cheap compared to owning, which is nice. And, interest and mortgage rates are flat, negating any apprarent interest risk.Looking out to the medium term, we see several factors that lead us to believe that housing prices are set to drop, among them: short-term price decreases, reduced sales volumes, decreasing affordability, tightening of sub-prime credit, the culling of "flippers" from the market, increasing housing inventory, the reduction of the attractiveness of OC real-estate as an investment option and net emmigration from the county among them.From where we sit, if even only some of these factors were were to put downward pressure on prices, they would drop, but given they they are all are in pla...
More About: Market , Buyer , Bears , Mark , Ears

Sellers Bearish on Real Estate Market
2007-02-26 06:16:03
Think it is only buyers that are bearish on housing prices? No, based on a survey out, virtually half of all Americans think we're headed for a bubble, including 43% of homeowners!Don't beleive it? They say actions speak even louder than words; look at what SELLERS are up to:--List Price Reductions: Roughly half of all listing.--Multiple Price Reductions: Very common.--Accepted Offers Below Asking: Virtually all transaction.--Rate Buy Downs: As common as "Want fries with that?"--Builder incentives: Up to absurd, media-worth levels.If the market isn't headed for a correction, then why all the concessions on the sellers? part? Can't they just wait out the bears and get every last dollar they can for their homes? No, they can?t and know it. That?s why smart sellers are maximizing their gains by selling their properties before the correction gets any worse. Seller s are making concessions en masse, indicating that the power at the negotiating table has shifted to buyers.
More About: Estate , Real Estate , Real Estate Market , Market

Weak Signal: OC Poll Suggests Housing Price Drop of 7-9%
2007-02-26 06:16:03
The Orange County Register recently conducted an informal survey of readers in an online poll regarding the fate of OC's home prices during the next calendar year.Readers were asked to choose one response from a list of five that they felt best described their prediction for housing prices in Orange County for the period Jan 2007 to Dec 2007. Here's how the responses broke out:?1.6% Up dramatically (gains of more than 10%)?8.5% Up a bit (gains between 2% and 10%)?11.2% Essentially flat (from down 2% to up 2%)?33.5% Down a bit (losses between 2% and 10%)?45.2% Down dramatically (losses greater than 10%)Nearly 80% of those responding that housing prices would go down and nearly 90% responding that the market would be flat or down. Only slightly more than 10% felt the market would be up either a bit or up dramatically. Clearly, the overall sentiment of those taking the poll here is overwhelmingly negative.But, what is the consensus of this crowd regarding of this crowd regarding hous...
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The Subprime Meltdown and You
2007-02-26 06:16:03
Normally, I focus my postings around pricing and inventory analysis, but every once in a while, it?s a good practice to poke our heads up and see what?s going on in the world around us. Today were going to have a look at the apparent collapse sub-prime mortgages and discuss the implication on the housing market in OC.I think that everyone who frequents real estate blogs has heard from at least one source or another that the subprime mortgage business is in dire straights as of late. In one sign of weakness, no fewer than 24 subprime lenders have gone bankrupt, closed doors or are no longer operating independently since December of last year. The news gets worse.In the Faber Report on CNBC, David Faber refers to subprime lending market as being in a state of meltdown and shows how the stock prices on subprime lenders have been plummeting over the last several weeks and days. Now, I don?t have an accurate total at this point, but based on the earnings reports, realized losses have to ...
More About: Down , Subprime , Prime , Rime , Prim