Comments on: 8 people living in a house in Redwood City

By: RWCJim

RWCJim — Fri, 20 Jun 2008 18:39:04 +0000

So, the real story here is probably Illegal Aliens purchase house with no money down, that they can’t actually afford and cram everyone inside.

For $4300 a month they could have rented a house in Emerald Hills.

They probably thought that prices were going to go up and they could make a lot of money.

I don’t buy their sob story for one minute.

By: DreamT

DreamT — Fri, 20 Jun 2008 08:01:07 +0000

sorry, rephrasing last sentence:
Maybe lower inventory in an established neighborhood is a greater sign of worry by the locals, justified or not.
There ought to be a formula combining inventory delta, sales delta and median delta and maybe something else to speculate if the locals are comfortable or worried.

By: DreamT

DreamT — Fri, 20 Jun 2008 07:57:54 +0000

The sellers I was referring to – no idea. But I thought their offer price was consistently rather high (save for one). If they were worried they’d have tried and stayed within the comps from two years past rather than price 5% to 10% higher. Anyway as I said that was just an anecdotal observation.
So how does one interpret inventory down in Campbell, I’m curious? Maybe fewer sales in an established neighborhood is a greater sign of worry by the locals, justified or not.

By: Pralay

Pralay — Fri, 20 Jun 2008 07:44:45 +0000

DreamT,
Inventory up is a good sign provided median price (or dollar per sq-ft) goes up. That was the case in 2003-2004-2005. Now median dropped across the board. What makes sellers comfortable? Are they really comfortable or just worried?

By: DreamT

DreamT — Fri, 20 Jun 2008 07:23:42 +0000

Pralay, anecdotally it can be a good sign if inventory is up. There was only one house for sale in my neighborhood last year. Now four long-time residents so far have placed their house for sale, and they’re going one by one above asking price, bringing local median up (above 2006 prices). So inventory being up is a sign that people are comfortable selling again. So the inventory numbers really should include at least % short sales&foreclosures for better interpretation. Why does it mean that campbell inventory is down, for example, how do we interpret that?
-39% median price at Alum Rock, that’s nasty. Bet that one isn’t done crashing either, what with the meth factories in the hills.

By: Pralay

Pralay — Fri, 20 Jun 2008 07:10:29 +0000

Let’s look at Santa Clara County Report from Realtor Ken Callahan’s website.

Year-Over-Year comparison for month of May:

Campbell: Sale drop 60%, Inventory drop 8%, Median drop 13%
Cupertino: Sale drop 23%, Inventory up 12%, Median up 6%
Milpitas: Sale up 29%, Inventory up 29%, Median drop 23%
MV: Sale drop 13%, Inventory up 45%, Median drop 15%
PA: Sale drop 24%, Inventory up 26%, Median drop 5%
Santa Clara: Sale drop 29%, Inventory up 68%, Median drop 11%
Saratoga: Sale drop 33%, Inventory drop 11%, Median drop 4%
Sunnyvale: Sale up 3%, Inventory up 66%, Median up 1%

Lastly,
Overall San Jose: Sale drop 6%, Inventory up 31%, Median drop 17%
Neighborhood-wise,
Willow Glen: sale drop 40%, Inventory up 12%, Median drop 8%
Evergreen: Sale up 9%, Inventory up 29%, Median drop 18%
Alum Rock: Sale up 85%, Inventory up 38%, Median drop 39%

So, except Campbell and Saratoga, inventory is up across the board.

By: DreamT

DreamT — Fri, 20 Jun 2008 06:59:15 +0000

Frank, I’m not as convinced as you are. maybe the people buying REOs are overbidding because that’s still the cheapest way to get into a specific neighborhood today. Some non-REOs still get multiple offers. Maybe they’re thinking that if they hold 5-10 years it is a good deal. Maybe they plan to sell next year, more REOs will flood the market, and it’ll be their loss. That last scenario certainly occurs, but for how many REOs? REOs aren’t reserved to investors: there are people out there who still buy houses for living in long-term, and I’d wager these are the ones who tend to overbid because they’re more emotionally attached to the purchase than pure investors.

By: Frank Jewett

Frank Jewett — Fri, 20 Jun 2008 06:45:38 +0000

DreamT, I think the people buying REOs right now do think they are making an immediate profit because they are comparing the REO discounted price to the “market price” set by the non-sellers. Why do I think this? Because I’m hearing stories about REOs getting multiple offers (more than 10) and selling for well above asking (more than 10% over).

Here’s my question? If the market is flooded with REOs with more on the way, why overbid by more than 10%? The answer is pretty obvious. Buyers still think they are getting a steal. I bet I know who is reinforcing that perception, too. Like I said, we’ll see if the number of REOs increases and prices fall. No point in calling scoreboard today.

By: R

Fri, 20 Jun 2008 06:37:26 +0000

What site are people using to locate REOs? Is there a site tracking REO data?

By: madhaus

madhaus — Fri, 20 Jun 2008 06:09:01 +0000

I would not consider an appraisal necessarily an accurate depiction of true market activity. The appraiser has to justify the price you paid for the house, so the bank can sign off on the loan. Too many lowball appraisals and the bank won’t rehire. Guess what the appraiser will decide to do.

Every time I refi’d my house, the appraisals were complete bull. They’d use comps from different school districts. They’d just plug in houses from a mile away across the dividing lines. They just picked 3 houses to make the numbers work. They’d pick crappy houses so my house would come in higher. I’m amazed they didn’t try a few places in East Palo Alto as comps.

I’ve refi’d 4 times, so I have 5 appraisals on this one house, not one is worth the market analysis. Plus I’ve also played with rental property (and got out), so I’ve done this in another county, same problem with the appraisals. There is nothing to stop these people from saying anything they want as long as they make your loan fly.

By: DreamT

DreamT — Fri, 20 Jun 2008 05:22:59 +0000

Frank, hopefully if anybody bought real estate last year they were not expecting to profit within one year only. WG can confirm or contradict me on this, but I’d assume he’s looking to hold for several years. If not, well it’s quite the risky game.

By: Frank Jewett

Frank Jewett — Fri, 20 Jun 2008 05:11:30 +0000

Here’s how you can check inventory in Santa Clara County.

1) Go to MLSListings.com, the public face of the local MLS.

2) Click View All next to the City field.

3) Check Santa Clara County to select all cities in SCC.

4) Select Class 1: Single Family Residential.

5) Click Preview Count.

6) Repeat steps 4 & 5 for Class 2: Common Interest Development (condos)

Here are the numbers I got tonight:

Homes – 6,417
Condos – 2,133

These numbers include pending show and pending with release, which we consumers can’t filter out. Now that we have our own data source, perhaps Burbed can check on a slow news day and provide periodic updates?

I can verify anecdotally that there is a lot of interest in REOs, which buyers see as a “steal” because of the huge price difference compared to stagnant “lottery ticket” listings.

Santa Clara County appears to have been trailing this wave relative to areas like Inland Empire. I’ve seen knife catchers who bought REO “steals” down there last year that are now upside down. We’ll see what happens.

By: Frank Jewett

Frank Jewett — Fri, 20 Jun 2008 05:11:07 +0000

Here’s how you can check inventory in Santa Clara County.

1) Go to MLSListings.com, the public face of the local MLS.

2) Click View All next to the City field.

3) Check Santa Clara County to select all cities in SCC.

4) Select Class 1: Single Family Residential.

5) Click Preview Count.

6) Repeat steps 4 & 5 for Class 2: Common Interest Development (condos)

Here are the numbers I got tonight:

Homes – 6,417
Condos – 2,133

I can verify anecdotally that there is a lot of interest in REOs, which buyers see as a “steal” because of the huge price difference compared to stagnant “lottery ticket” listings.

Santa Clara County appears to have been trailing this wave relative to areas like Inland Empire. I’ve seen knife catchers who bought REO steals down there last year that are now upside down. We’ll see what happens.

By: WillowGlenner

WillowGlenner — Fri, 20 Jun 2008 03:30:22 +0000

My recent appraisal indicated inventory was abating, and there are plenty of articles like this:
The numbers tell the story:

• For each of the past four weeks, more than 300 houses a week found buyers and went into escrow, the first time that’s happened since May 2005.

• An average of 41.8 homes sold each day in the five weeks ending June 5, faster than the year-ago pace of 34.4 sales a day, and about equal to the June 2006 pace of 41.5 a day.

• There were about 7,140 houses and condos for sale in Santa Clara County on Wednesday, down from a peak of just under 7,600 in mid-May. In normal years, the inventory of homes for sale continues to rise in June and into the summer.

“Those are great numbers, from where we’ve been,” said Fred Hibbert, manager of a Coldwell Banker realty brokerage in Los Altos.
http://www.mercurynews.com/realestatenews/ci_9632445

By: Frank Jewett

Frank Jewett — Fri, 20 Jun 2008 02:40:38 +0000

WG, Madhaus covered my point. I don’t see inventory drops either month-to-month or year-over-year. I look at both because you really do need to account for seasonality in this market. Now that Memorial Day has passed, seasonal data suggests that inventory will grow as sales decline. Perhaps that won’t happen. We’re in uncharted waters because REOs make up an unusually large chunk of inventory and sales, though they aren’t always listed on the MLS.

By: DreamT

DreamT — Fri, 20 Jun 2008 00:47:57 +0000

Pralay,
Points taken. I’ll qualify a bit better what I was trying to say. First of all, we’re mostly talking about people who bought since 2005, they’re the source of the majority of current and upcoming foreclosures. So if you make abstraction of people who bought before in the same location (and obviously typically have lower socio-economical status) then the distressed markets – the ones who must sell – are not as mixed as one’d think. Second, I’d venture many preferred to rent in a nicer area than buy in areas that were “not good enough” for them. So the spillover is more limited than one’d think. Finally, your example MV versus Fremont is good, and I don’t call these loosely connected. Fremont is a good alternative to MV if you cannot afford it. But how about Evergreen vs Tully/Story? Atherton vs East RC? Pacific Heights vs Visitacion Valley? They’re neighbor markets yet almost no buyer in either one would ever look in the other. That’s what I meant by loosely connected.

By: Pralay

Pralay — Fri, 20 Jun 2008 00:25:27 +0000

Pralay – we disagree here. I think local markets are different if loosely connected, and I see many variables that affect not only timing (shifted timelines), but also amplitude (how much does it go down if at all).
———-

DreamT,
Interestingly, all the variables and factors you cited tells me that local market are NOT loosely connected. Your Redwood City and Mountain View example is a good one. In this example, the basic assumption is that there are two set of population – hitech people with higher income and lowtech people with low income. But in reality bay area population constitutes very wide spectrum of economic and social categories. It would be very difficult to draw line somewhere and declare, “ok, these kind of people buy home in Mountain View and those kind of people buy home in Redwood City”. For example, for a single hitech person, who works at Mountain View, may opt to buy home in bad school district at Redwood City because home price is lot cheaper there. I have friend who works at Mountain View bought home in Fremont. Can it be said that Mountain View and Fremont markets are different?

Bottomline, housing market is always affected by surrounding area and they are affected in various ways – price difference, job growth/loss, demographic shift etc.

Secondly, nowhere I claimed that all the markets will go down in same amplitude. In dot-com bust all the companies did not go down same way. Some companies fared better than others. Similar way, some area will fare better than others area in this housing market downturn – especially better area with better school districts. But it would be a bit stretch to say that those better area are and will be immune.

By: bob

bob — Thu, 19 Jun 2008 15:41:59 +0000

DreamT,
Sorry if I was sounding like I was profiling you personally. That wasn’t my intent. But I think there is some confusion in this topic, which is whether the argument is about the general BA and it’s appreciation/depreciation, or whether a specific area is appreciating/depreciating.

In general, the BA is slipping. Of course certain areas claim to show an increase in appreciation. But then again, this might not actually indicate that general prices are increasing. In places like Marin, Palo Alto, and parts of SF where a large supply of million dollar homes exist, their sales have been down consistently for well over a year. But homes are selling. However, if you look at what is selling, they tend to be the upper end of the market. These sales get tossed in with all the rest of the sales, whether it be 1 bedroom condos, crappy fixer-uppers, or mansions. With fewer sales, and most sales being at the top of the market, of course the median will reflect appreciation.

I’ll even admit that yes, certain areas have more rich people that others. By virtue, people that have enough to buy multi-million dollar homes even in a recession probably aren’t exactly concerned about buying at the bottom, top, or rather be worried about the state of the housing market. If you have that kind of cash, then you’re going to simply buy a house. Palo Alto is weird though because so much of the housing stock is so obviously former middle class type housing with prices that defy gravity.

This argument begs to ask exactly how attached are people to the idea of paying 50% more for a so-so house just to be closer to work or say that they live in Palo alto when they could simply move 30 miles to the East Bay, or some other area? While I don’t plan on staying here, I look at the BA as a general area. If I was going to buy, I’d look in a neighborhood that perhaps wasn’t so close to work, wasn’t as perfect, or whatever. I think many are of the same line of thinking.

That brings me to my final point, which is that in housing markets just like economics, a few rotten apples will eventually effect the whole lot. As we speak now, there is some massive corrections happening in the East Bay. Specifically, the not-so-great parts of Oakland. This in turn is starting to affect the better parts, and so on. Let’s say that eventually, the East Bay experiences a 40-50% correction. With its proximity to PA, I’d wager to bet that the severe price differences will draw away demand for the Peninsula, which will ultimately affect places like PA.

Anyhow, again I apologize if I sounded nasty earlier.

By: madhaus aka guitar hero

madhaus aka guitar hero — Thu, 19 Jun 2008 07:41:20 +0000

Wow, I don’t post for a day or so but people are responding to me in a new thread anyway. (esp post #21)

WG, I checked Altos Research inventory numbers and they aren’t going down in the prime zips (I checked a few but not all), maybe inventory going down in one particular neighborhood? There’s a slight (VERY slight) dip but I’d attribute that to end of Spring Bounce.

Even Palo Alto, the so-called superstar, is a buyer’s market with a rating of 21.16. 30 is even between buyer and seller. That’s the SAME rating as Sunnyvale — ALL of Sunnyvale.

By: WillowGlenner

WillowGlenner — Thu, 19 Jun 2008 06:05:28 +0000

Frank Jewitt, if you are going to post YEAR OVER YEAR figures and look for a trend, you won’t declare a turnaround in RE until 2012. Inventory is starting to deplete month over month in Santa Clara county. Thats what it said in my appraisal, and these days, appraisals are really tough. Compared to last month many santa clara counties saw median and avg price increases. I can’t post the chart here otherwise I would. Saratoga saw an 11% rise in median price from last month- cupertino 4%, Sunnyvale 3%. Some were down like Campbell down 7% and Palo Alto down 15%. On sales volume it is up between 40-100% over last month for virtually all cities in Santa Clara. Sales volume always goes up on May over April, but not like this. It was fairly encouraging- so I decided to buy and I’m glad I did. I am either at, or very close to the bottom.