July 7, 2013

The End is Nigh? Or is that Ni?

Terrible bad news! Someone let the air out of Bay Area Bubble 4.0’s tires!  Tragedy!

Bay Area housing frenzy cooling off

By Pete Carey, San Jose Mercury News
Posted:   07/04/2013 04:00:00 PM PDT, Updated:   07/05/2013 08:44:05 AM PDT

130706-over-signThe Bay Area’s frenzied housing market, marked by soaring prices, short supply and a scramble for homes, is showing signs of cooling.

Some buyers, fearful of a new bubble or worried about higher interest rates, are putting their plans on hold, while new listings of homes for sale have been increasing since March, which should put the brakes on spiraling prices.

"It’s a welcome break in the trend, even if it ultimately means prices start to cool off a bit too," said ZipRealty CEO and President Lanny Baker.

Real estate agents in Silicon Valley, where homes have commanded offers hundreds of thousands of dollars over asking price, say bidding is less frenzied than a few months ago, although it’s still one of the hottest markets in the country with a median of 10 days to sell a home.

Santa Clara Median Sale Price / sq. ft.

This can’t be! The party isn’t over just because mortgage rates are going up, or more homes are being put up for sale. Not in the Real Bay Area, anyway! The above map of Santa Clara County real estate sale prices per square foot says so. The spiking rental market keeps pushing buyers forward as well. Besides, It’s Special Here!  (It’s so special we have to tell you that red is county, green is city.)

And that median of ten days to sell a home proves that things can’t be cooling off. Everyone knows the smart agents wait 10 days and get all the overbids all at once. Houses could sell in 15 minutes if the sellers wanted them to.

The housing frenzy isn’t cooling off. This is wishful thinking. Mortgage rates don’t affect the Real Bay Area, because every single house in it was purchased by suitcases-full-of-cash-wielding foreigners, who, HELLO, don’t care what the mortgage rates are because they have, HELLO, suitcases full of cash on hand.  And more houses being listed? That just allows more people the opportunity to lose out to overbids on an excellent property.

We don’t understand why anyone would be allowed to print something this misleading, although the quote from the president of a county Realtard association (in the East Bay, yet), makes us glad they did:

While the steep climb in median sales prices for single-family homes in the East Bay, Peninsula and South Bay has made some buyers nervous, it doesn’t necessarily mean there’s a bubble, said Robin Dickson, president of the Contra Costa Association of Realtors.

"Clients say they are just not going to buy at the top of market, but really, how do you know this is the top of market?" Dickson said.

Other things we don’t know is whether the sun will rise tomorrow morning, when the San Jose Mercury News will admit it’s just a website, and when real estate writers will stop asking realtards for economic analysis knowing damned well all they’re going to get is cheerleading and happy talk.

Really, how do you know this is the top of the market?  It could actually be the floor of the NEXT market, Mr. Negativity!

Comments (33) -- Posted by: madhaus @ 7:15 am

33 Responses to “The End is Nigh? Or is that Ni?”

  1. waiting_for_the_fall Says:

    I look forward to higher mortgage rates and lower house prices. The higher the interest rate, the lower the house price, and the lower the 20% downpayment will be.
    The only people that benefit from high home prices are bankers, realtors and baby boomers that need to finance their retirement by selling their home.

  2. Petsmart groomer Says:

    > I look forward to higher mortgage rates and lower house prices.

    Keep waiting. Can’t you see Zillow is already conditioning us to higher prices? The graph is already labeled with $0.55k, $0.5k, not $550 or $500.

    $1k is the new $100.

  3. wave Says:

    Historically, higher interest rates have not lead to lower prices, and lower rates have not lead to higher prices. Take a look at 2009-2012 where rates dropped and so did prices.

    When interest rates move higher, that generally means one of two things. One, the economy is doing better and so household income is up (there is a correlation between household income and prices). Or two, there is inflation in which house prices will rise with inflation (again, there is a correlation between inflation and house prices).

  4. nomadic Says:

    #1, it’s a nice theory but you may be waiting for a long time.

  5. waiting_for_the_fall Says:

    The housing market is manipulated by 3 items:
    1. low interest rates from QE bond buying.

    2. FHA sponsored low downpayment loans
    3. Banks limiting MLS inventory

    Take any one of the above away and prices will drop.

  6. Real Estater Says:

    Right now at this time this moment there is a great opportunity to buy a house. The amateurs are thinking the prices will drop but it won’t. However, in the short term some of the less experienced buyers will go into hiding. You won’t get the house at a discount but you may actually get the house. In due time buyers will all rush back into the market like herds of sheep, realizing what a great opportunity this is.

  7. waiting_for_the_fall Says:

    #6- I always thought you were a troll.

  8. Real Estater Says:

    #7, likewise. The record speaks for itself. The things I’ve been talking about are aligned with reality. You’re still delusional despite being proven wrong in the most overt way.

  9. waiting_for_the_fall Says:

    #8- let’s hear about how many homes you’ve bought in the last 4 years. If you really believe what you say, you would own several investment properties in the Bay Area.

    Better buy now or be priced out forever. They aren’t making any more land.

  10. Real Estater Says:

    I do, and it’s been talked about here before. My last acquisition is on the East Bay within comfortable distance to my home base on the peninsula.

    I advised before that it was a run-up waiting to happen, and it did. I would also tell you now to wait no longer.

  11. steve Says:

    a nice apple in RE’s hood. built in 2005, so no changes besides light bulbs and draino. the street is a bit busy, but it is a reasonable illustration of peak-to-peak pricing at the $3M level. increases are much more dramatic at the low end.


    Jun 18, 2013 Sold (MLS) $3,195,000
    Jul 01, 2008 Sold (MLS) $2,725,000

  12. SEA Says:

    #4- From your link, “It turns out that in every case, home prices rose over the period in which mortgage interest rates are rising.”

    A big difference from the past is level of inflation, and we always expect both assets and interest rates to rise in a period of increasing inflation.

  13. SEA Says:

    #11- up 15% over 5 years? How far away from the RBA is that place?

  14. nomadic Says:

    Inflation is forecast to be 2.5% this year IIRC. Rates have gone up. People are more optimistic about the economy and more likely to buy if they don’t fear a layoff. So… what point are you trying to make?

  15. Real Estater Says:

    LOL. How long have you been here? Do you really think SEA has a point to make?

  16. SEA Says:

    How much has inflation increased versus interest rates?

    In the late 70s, when interest rates were increasing, inflation was increasing faster, and thus, home prices were going up, as should be expected.

    “People are more optimistic about the economy and more likely to buy if they don’t fear a layoff. – See more at: http://www.burbed.com/2013/07/07/the-end-is-nigh-or-is-that-ni/#comment-86411

    Optimism started increasing in 1982 with DJIA at 777, and thus, as we saw rates come back down, it was displaced by an expanding economy.

  17. Alex Says:

    Scummy-vale is doomed, baby! It’s not about the rates. These crap shacks are disgusting!

  18. Jb Says:

    Wow – 17 comments! Nothing pithy or insightful to add from the east bay.

  19. mtv-knifecatcher Says:

    I used to post as mtv-renter, but I guess I needed to update my username since I bought a house.

    I’ve been watching the purchasing frenzy like a hawk, and the larger market for a couple of years, and when interest rates spiked, prices in Mountain View didn’t change much, but what were formerly 10-20 offer bidding frenzies turned into normal 2-3 offer sales. I bought a house in downtown Mountain View without having to outbid anyone, but still paid ~$880/sqft, but it’s on a nice large lot, on the correct side of Shoreline and easily walkable to downtown. This would have been impossible for me anytime in the last 18 months or so. I placed several offers over the last two years, only to have cash offers 30%-40% over asking (!!) trump my offer which needs to have a financing contingency.

    I expect to lose money on this house if I need to sell in the next decade, so I hope that I don’t have to 🙂

  20. donjumpsuit Says:

    I would like to know this.

    If now is a great time to buy a home, why were homes priced 50% cheaper last year?

    Was last year a bad time to buy a home?

    If now is a great time to buy a home, and a home is 50% more expensive than last year, and homes will never decline in price, a wonderfully crafted statement that ignores recent history, then why aren’t we all given homes for free?

  21. peanutbutter Says:

    Another vital thing that seems missing from the above comments is the increase in supply, which was probably the largest factor to the dramatic spike in priced. Less competition could potentially mean a slowdown in appreciation. As a homeowner myself I would welcome this because the market of late has been unsustainable and when bubbles crash, they tend to take out the overall economy as we just experienced before.

  22. nomadic Says:

    Oh yeah, the frenzy has to slow down. I’m seeing it in my neighborhood. Now that prices are back (or close) to peak, there’s a fairly steady supply. As one house sells, another gets listed. A lot of the people who seemed to be waiting are taking advantage of the situation and cashing out. I think we’ve already had as many sales this year as we had all of last year.

    This Wells Fargo economist was telling people it was a good time to sell last month.

  23. Banker East Says:

    I saw the article. He’s making a bad call, IMHO.

    As fund managers bid up home prices, more people are priced out and become renters. As a result, the demand for rentals increases, and the fund makes even more money. That’s how the game is played.

  24. Banker East Says:

    I’m a contrarian. I say buy when other people are on the sidelines. That’s the lesson learned from the past 5 years.

  25. SEA Says:

    #21- “more people are priced out”

    How long until everyone is “priced out?”

  26. Steve Tyler Says:

    >>”As fund managers bid up home prices, more people are priced out and become renters. As a result, the demand for rentals increases, and the fund makes even more money. That’s how the game is played.”

    Actually, rents have flattened out, and are even declining in some hot markets like Phoenix and Las Vegas. The rental market is saturated.


  27. mtv-renter Says:

    “As fund managers bid up home prices, more people are priced out and become renters. As a result, the demand for rentals increases, and the fund makes even more money. That’s how the game is played.”

    This doesn’t quite add up. Yes, you create more renters, but you also create more rental units, which increases supply and places downward pressure on rents, so it’s hard to make that prediction on investment activity alone.

  28. nomadic Says:

    Not to mention rents can only go up so much when wages are stable.

  29. very amused Says:

    If rents go up and wages don’t, then homes are now great for 2 families!

  30. Petsmart groomer Says:

    > Not to mention rents can only go up so much when wages are stable.

    Five Googlers can easily share a 1-bedroom apartment, so there is virtually no limit.

  31. madhaus Says:

    I just added two comments that went to moderation (no idea why), see #19 and #20.

  32. nomadic Says:

    #30 makes me glad I’m not a Googler.

  33. Bay Area Real Estate Bubble 4.0: Not Over. Nuh Uh Uh. [Burbed.com] Says:

    […] This weekend we featured a Murky News article claiming that frenzied overbidding on Real Bay Area homes was done. It wasn’t the only such piece claiming that RBA overbids out of suitcases full of cash were coming to a halt.  To which we say: Sure it is. Redfin is tracking the bidding wars, and they say it’s cooling off… outside the RBA.  Specifically, there are fewer multiple bid situations outside California, and in the Golden State, things have eased up a bit in the Southland.  But don’t worry.  It’s Still Special Here. […]

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