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Market Outlook, November 2009
Written by Seth Chalnick | November 20, 2009 6:06 PM Market Conditions in San DiegoNo comments | 55 views
The market has been very interesting to say the least. There is a big disconnect between the low and high-end markets... in fact, they're almost behaving oppositely.
On the lower-end of the pricing spectrum, we simply can't get enough inventory. The banks and government are working together to artificially limit supply, and this is driving up prices and volume. On the high-end, there is very little demand for the loans that underpin the transactions, so very few sales are being made.
I expect downward pressure on prices in both market segments... but an especially significant correction on the high-end as the 5-yr interest-only loans start to re-set. Yes, I mean more of a correction... like another 30%. This may actually benefit lower-end homeowners, as higher-end folks who are displaced still need a place to live. (Btw, I went on record predicting this 11 months ago.)
Meantime the low-end market will suffer from overall economic problems too (i.e. unemployment) especially when the high-end corrects. But here's the thing... the low-end values have already dropped by half in some areas. Even if they drop another 15%, which would be huge, the rates are almost unanimously predicted to climb within the next 3-12 months. If prices drops by $50k, while rates increase by 2%, then your monthly payment will actually increase.
Right now rates are absurdly low (on amounts below $417k anyway)... around 4.625% with 1 point. The historic average is around 8%. It's only a matter of time before they spike. Most US citizens also benefit from an $8k tax credit if they close before July 2010, so this is a factor as well.
Bottom line: for low-end buyers with solid job outlook who can hold the property for 10+ years... I believe now is simply a great time to buy a home... if you can find one. 20% down payment is very helpful in this regard. For high-end buyers, time is on your side to wait, especially if you are putting down a lot of cash (which everyone is by necessity on the loan front). Unless you can afford to buy a high-end home just for the lifestyle, then stay out of the kitchen until things cool down from an investment perspective.
And that's the SethReport :) -
Average Sales Prices, Number of Transactions
Written by Seth Chalnick | November 17, 2009 6:31 PM Market Conditions in CardiffNo comments | 37 viewsHere are statistics for 'average sales price' and 'number of transactions' for the areas that include: Solana Beach, Cardiff By The Sea, & Encinitas [92075, 92007, 92024]...
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Just a Thought...
Written by Seth Chalnick | November 12, 2009 6:52 PM Market Conditions in San Diego CountyNo comments | 47 views
Is it just me?
Alan Greenspan
Woody Allen -
Market Imbalance
Written by Seth Chalnick | October 15, 2009 8:10 PM Market Conditions in CardiffNo comments | 135 views
Impossible SeeSaw
Originally uploaded by R_Thull
Check this out... to keep abreast of local sales trends, I activley monitor MLS inventory in the territory that includes: Solana Beach, Cardiff, and Encinitas.This year 78% of sales in this territory closed below $1 million... while the current asking price for 63% of homes that are actively listed for sale are above $1 million.
I thought this was interesting, so I checked the stats for the entire San Diego MLS... 80% of sales closed below $500k... while the asking price of 58% of homes actively listed for sale are above $500k.
On 12/12/2008 I went on record in an article published on Seeking Alpha, called "Market Prices: The Great Chasm" calling for a significant "Prime market" correction. Here is an excerpt.
“Prime” homes will also decline in value. My call is 35%-40% off peak prices. Only this time, the real drivers of economic stimulus, the small business class, will cut back spending for real. And lay people off. And cash out investments. And sell assets below value.
Major banks who have just received unprecedented amounts of cash infusions to plug up cartoon-like, bullet-ridden lending ratios will have to address the fact that depreciation of portfolios to date only reflects subprime default-related losses.
Maybe I should have entitled this article, “Market Prices: Which Chasm is Greatest?"It was the adjusting of prime loans from "interest/only" to "principal and interest" that I predicted would stress the system. These loans are starting to adjust now. Houston, stand by.
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Falling Up: The New Business Model
Written by Seth Chalnick | October 5, 2009 9:47 AM Market Conditions in San Diego2 comments | 113 views
I am happy to report that my latest Seeking Alpha article submission was published this morning.
To view it, click here.
Seeking Alpha handpicks articles from the world's top market blogs, money managers, financial experts and investment newsletters - publishing approximately 175 articles daily. SA was named the Most Informative Website by Kiplinger's Magazine and has received Forbes' 'Best of the Web' Award. -
There's a Financial Elephant In The Room
Written by Seth Chalnick | October 5, 2009 9:19 AM Market Conditions in San DiegoNo comments | 104 views
When folks say "there's an elephant in the room", they are referring to an important and obvious topic, which everyone present is aware of, but which isn't discussed, as such discussion is considered tbe uncomfortable.
Well in today's bankerment cirlcles there is a humungous, hungry, stinky elephant, and it looks very silly covered up by a blanket.
For a succinct overview of the problems that led to our banking crisis, and the reasons we are still in for very rough ride, you just have to watch this interview of Janet Tavakoli (a structured finance expert) by Max Keiser, a popular media broadcaster. They do a brilliant job of distilling the facts into laymen's terms. -
4 Types of Transactions I Do Not Execute
Written by Seth Chalnick | October 2, 2009 11:24 PM Market Conditions in San DiegoNo comments | 155 views
- Short Sale Listings- Click to see why. In addition to this link, which describes why I direct buyers to look at short-sales only as a last resort... I suspect, down the road, the folks who "successfully sell short" may look to place blame elsewhere if and when they find out they may still be on the hook for tax consequences and credit problems.
- Loan Modifications- Click to see why.
- Hard Money Loans- Click to see why. Also, while this could technically be a helpful tool for some specific scenarios, in my experience, the only deals the lenders make are the ones where the scale is tipped way in their favor... away from the borrower, who has everything to lose... and often does.
- Reverse Mortgages- Click to see why.
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