It has been a long time since I have posted, but I was inspired when someone posted some DataQuick zip code stats in the forums. I realized I have the April 2006 square foot pricing and sales data. So, I plugged the data into excel and here is what has happened since April of 2006. I do not know exactly when the peak was, but we all know some month in 2006 was the peak, and April is close. I have the June and July 2006 data to compare to as well. One thing... I do not know why DQ has never had the square foot pricing for 92602. My only reason I can think of is the difficulty getting the data from the new home sales. Oh, and the square foot pricing is for SFRs only, sorry no condos.
One thing I found interesting was SFRs are only down -7.9% in sales, but condos were down -42.2%. So while sales are not down that much for SFRs, the square foot price is really down and headed even further down.
With 137 sales last month, and the amount of purdy red, green, and blue pins in Irvine, it looks to me like we have a must sell issue here. Go ahead and call me a nutter, I am used to it, but I have been right more than I have been wrong, and actually... I have been overly optimistic on the foreclosures. BTW, once I have the June foreclosure data, I will do a post on how bad it has become, with some great chartpr0n. Judging by how bad the numbers are so far for June, I may have to adjust my charts to accommodate for the increase in foreclosures; my chart didn't go beyond the high of 96.
Matt was kind enough to send IHB an advance copy, and I am only a few chapters away from finishing it. I have to say it is a great read, and anyone who wants to know about the birth of subprime, the players involved from Lewis Ranieri to Bill Dallas to Brad Morrice to Ralph Cioffi to Stan O'Neal to Roland Arnall, how it went up and down, who screwed who, the death of New Century, who snorted the Kool-Aid, how Merrill got high off their own supply, great pot shots on the Tan Man and his tan, and how the Tan Man drops the f-bomb faster than he can sell his stock, then I suggest you order a copy now. This is a fantastic book, and I am not just saying that to promote Matt Padilla, as he knows I would dissect the book for what it is. I will do a full review once I finish the book, and once it is released. I don't want to upset the publisher when they could be publishing the book that would complement this book, The Great Housing Bubble.
I will be out of town this weekend. Anyone want to guess where I am going?
I would appreciate some help in designing the cover for my upcoming book (I have almost reached a deal with a publisher.)
The following cover was designed by JesseBee:
I like it, but I don't know if it conveys the level of seriousness the subject matter.
I found this image on the web that I like a lot:
I like the idea of a photorealistic image of a house inside a bubble. The backdrop of a sky is also pretty cool.
A simpler version might look like this (although if it were upside down, it would be even better.)
I will need to design my own cover. If someone wants to take on this task, it would be greatly appreciated. I look forward to seeing what you come up with.
This market desperately needs more knife catchers. There are just too many properties that need to be sold and too small a number of people to buy them. I suppose we aren't helping matters any at the IHB .
I hope everyone is getting a laugh out of the daily posts here. The carnage we are witnessing -- and will continue to witness -- isn't funny for the people losing money. Residential real estate bubbles are very painful when they deflate. I vacillate between sadness and laughter reviewing these properties all the time. You have to be able to laugh at the grim happenings in life. Life is too short to be bummed out all the time.
Today's featured property is another speculator who is getting flushed out of the housing market. Not to worry though, he has extracted all the equity and is passing the loss on to the lender.
Do rational people still deny there was a housing bubble? Today's featured property is being offered 25% off its peak purchase price. It is one of many. There was a recent post over at South OC Tracker with a property 60% off in Aliso Viejo. Those kind of price drops are not a correction below value, they are the deflating of a bubble to value. Prices are not going to quickly rebound to peak values from an undervalued condition. They are going to drop to rental value and remain there until the toxic mortgages and overextended homeowners are purged from the market.
Today's featured property is another 100% financing deal gone bad. One of many yet to be purged from the system.
Financial markets are fickle monsters. Whichever way the herd moves the market will go the other direction. I first described this phenomenon in the post How Subprime Lending Created the Housing Bubble, and I extrapolated on that idea in What is Past is Prologue. If you were not a reader of the site in early 2007, I suggest you click on those links and check them out.
During the bubble rally, prices were pushed up the herd mentality. As prices rose, more and more people were convinced prices would continue to rise, so the pool of buyers swelled. Credit standards dropped to qualify more buyers, and the party went on and on. When credit standards were basically eliminated in 2004 and downpayments were eliminated, the buyer pool saw one last burst of activity until everyone that could buy, did buy. The herd had all "gone long" on real estate. The problem came when the pool of available buyers was exhausted and there was nobody left to push prices any higher. Once the herd had all purchased, the only thing they were able to do was sell. When the entire herd became sellers and there were no more buyers available, sales volumes dropped off, inventories increased and prices began to fall.
The behavior of the herd can be illustrated through the behavior of the individual participants. Today's featured property was purchased by a realtor in late 2003 for no money down. He pulled out a bunch of equity, and now he has listed the property at a price that will pay off the debt and get him out of the transaction. There are hundreds if not thousands of people out there just like today's owner trying to get out of their properties. The collective term for this group is called "overhead supply." It is overhead supply that will prevent any appreciation until the market clears them out. The way markets normally do this is through a process known as "capitulatory selling." People resign to their fate and sell at a loss. Some will do it willingly, and some will do it through foreclosure, but the market will clear them all out eventually. The way it looks right now, the process of capitulatory selling is increasing, and it will likely continue to increase through 2009.
Today's featured property is a very rare find in Irvine -- a vacant lot on which you can do what you want. You wouldn't have total freedom, this is still Irvine, and you would have to deal with the Turtle Rock HOA, but you would not have to deal with the Irvine Company or one of its approved builders. You could create a custom home exactly the way you want it, without having to buy an existing house and demolish it. Our challenge today is to figure out what this lot is worth.
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Send In The Clowns
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