OC Inventory Passes 20,000 Units
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Consider this: two years ago, in August, we had 7,209 homes for sale in OC. As of yesterday, ZIPRealty.com showed that there were 20,024 homes for sale in OC, or nearly three times as many as we had just two years ago. Three times as many properties and probably a third as many interested/qualified buyers--its a recipe for an epic market decline.
In February of this year, I wrote about a bet I had with a real estate agent friend. In that post, I explained that he and I had a bet as to whether or not the total amount of inventory of residential properties for sale would pass 20,000 units at any point in 2007. We kept the bet friendly at $100. I spoke my Realtor friend this morning (who I think was kidding when the threatened me with bodily harm if I revealed his name (besides, I could take him)) and he's agreed to pay on our bet.
Now don't get me wrong, the $100 is nice. Being right is even nicer. But 20,000 homes is one hell of a lot of property. With the profound tightness of the lending markets and the exodus from California at this point in time and history, I have to wonder who in the hell is going to buy these homes. And, with the loan resets coming due later this year and all of next, I can only see more inventory in the months to come. But where will the buyers come from?Unless both prices and interest rates drop precipitously, I think the answer (apart from the odd ex-pat foreigner) is nowhere.
Houses are too expensive, the market too weak and rents too cheap to even consider buying right now. In my opinion, even houses 10% below market are unattractive. For housing to rebound, we would need prices and rates to conspire to effectively lower prices an additional 15-20% before buyers are going to jump in with both feet.
Agents, you've seen me joke about it, you've heard me prod, but now I am being dead serious. This market is not going to recover until the cost of homes drops dramatically. If you want transaction counts (read: commissions) to rise, you have to convince sellers to lower their prices today. Talking up the market is only delaying the inevitable decline in prices and keep you from earning your commissions.
5 comments:
Meanie. Soon that poor agent will need that $100 to eat. You should give it back.
I knew you couldn't stay away from Lansner's blog. Well neither can I.
That was an interesting bet and I am glad you won. You should call him back and offer a double or nothing bet that by the end of the year one month will have more NODs than sales. Honestly August might make it but I think unless there is some sort of miracle in the credit markets then September will do it for sure.
I am glad you are posting again as your posts are very well thought out.
graphrix,
Yeah, I was staying away from Lansner for a while and had lost interest in the fray, but then I saw yet another real estate 'expert' selling the 'good time to buy' nonesense at pissed me off.
I hate it when the better-informed dupe the less-informed, particularly when the ramifications of the deception is so grand.
So, I guess in the final analysis, it's the bulls themselves that force me to take them down a peg or two and to also give buyers a better chance.
Congratulations on your bet!
I just saw an ad in the Poway Chieftain, from one of Poway's top realtors, titled "Now is a good time to buy". I am going to interview this agent for a story when she gets back from vacation. I'll try to stay calm when I talk with this LIAR.
Inventory rising while sales are falling and credit is tighter is the death knell of this industry. When job losses pick up outside the immediate real estate sector, the inventory will get even higher.
The mortgage market credit meltdown has not shown up in the sales volume in existing home sales yet. Wait until the 2-month delay from the escrow process shows up in the existing home sales volume. The months of inventory will jump thru the roof when this data is released.
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