A Tale of Three Markets

There's been a lot of hoopla lately about the median home price in OC bumping up close to historic highs. The data, such as they are, seem to indicate that is the case, but remember here, that's true only if you're looking at the county-wide median price.

In the past, you've seen me and others deride the county-wide median price stat because of the sheer size and/or heterogeneity of OC. Talking about the county as a whole, particularly when using the flawed median as a metric, just doesn't tell one a whole lot. Parts of the county could be collapsing, while other parts rise, but when you throw every neighborhood in the county into one big bucket, all of that movement is washed out, all of the uniqueness statistically smoothed over. County-level stats just aren't granular enough to truly convey any meaningful information.

For the vibrancy and dynamism of the market to be seen, we need to analyze the market by segment. Simply by bucketing areas of the county together by similar characteristics and then analyzing them, patterns that betray notion that prices in the county are strong quickly appear, particularly if you look at homes by price segment.

I decided to divide OC's ZIPs into three segments based on median price: ZIPs with median prices less than 85% of the county-wide average (23 ZIPs) , ZIPs with median prices between 85 and 115% of the county median (33 ZIPs) and the last group with prices more than 115% of the median (27 ZIPs.) I then looked at the number of ZIPs in each group where the YOY sales volume and/or price were down. The results were dramatic.

In the ZIPs with the lowest prices, essentially all of the ZIPs were down in terms of price (91%) and volume (96%)--a profoundly weak segment. In the middle price group, both price and volume were down for 70% of ZIPs--a weak to very weak segment. While the most expensive ZIPs showed volumes down less than half of ZIPs, at 41%, and a relatively equal number of ZIPs (52% down) with price declines--a neutral segment. Clearly, OC is not one market, but at least three, varying from neutral to very weak in terms of their market strength.

Just to emphasize how different OC's price segments are performing, ZIPs in the lowest price range were roughly twice as likely to be down in terms of volumes and price as the most expensive ZIPs. Twice as likely.

Now, my personal area of interest are the middle ZIPs: white picket fences, middle class, 2.3 kids, regular folk. Fully 70% of those ZIPs have have dropped in terms of prices and volume. At 50%, we'd be at parity, but at 70% were in the midst of some serious volume/price weakness. As half a dozen Realtors told me today at open houses, this weakness could be a sign to buy, but as I explained to them, I don't think so. After all of the mortgage resets occur next summer and sellers panic, that may be a time to buy.

In the mean time bears, eschew claims that the "OC prices are strong", keep your financial powder dry, your FICO score up and enjoy another 12 months of cheap rent. Next summer if the middle is collapsing like the bottom price segment is today, it might, just might be time to get a great deal on a distressed home.

Viva los Osos!

How Many Can You Find?

Fourteen for sale signs (and two others)at the corner of Saybrook and Heil last weekend. Seems though HB's Harbor area is getting a little, if you will forgive the pun, liquid.

My guess is that this intersection has got to have the highest concentrations of for sale signs in the county, but I bet there are some that have nearly as many or maybe more.

If you find an intersection, stretch of road or a street corner with a lot of for sale signs, send it to hbbear at ocpredicts dot com and I'll post it on the site.

HB Joins the 1,000 Club

Huntington Beach has joined the ranks of infamy by passing 1,000 real estate units for sale within its borders. To get just a little idea of how happy this makes your blogger, click on YouTube vid below...the video is fun, but the music conveys, partially, the joy in my heart!

Are They Sure It's "A Good Time to Buy"?

We've been hearing a constant stream of propoganda from the NAR, NAHB and unscrupulous agents that it's a good time to buy. I submit it is time for them to put their money where their mouths are.

We've seen the ads in the paper and on TV and also heard them on the radio where those who benefit to profit from housing transactions are claiming it's "a good time to buy." You've seen me write about how absurd and unethical I believe their claims are, but yet the assault on our sensibilities continues. Go figure.

Clearly these salespeople must know something we don't. Maybe huge amounts of inventory, increasing defaults and foreclosures, historic credit-tightening and affordability actually don't matter and all those years of studying finance and economics have be, in fact, for naught. Apparently, these guys are on to some big secret that they aren't willing to articulate outright, but that feeds their certainty that real estate is still an excellent investment. But they aren't sharing, are they? Must be some kind of, ultra-pervasive, iron-clad non-disclosure agreement they all must have signed. It must be very frustrating to have this secret knowledge and not be able to share it with buyers.

I feel their pain. But I think I have come up with a way that they can convince us that is indeed a good time to buy; it's called a price guarantee and it works like this:

A buyer makes an offer that is accepted by the seller, the house goes through escrow and the buyer takes possession of the property. At the end of five years, the buyer is required to hire a professional appraiser who will determine the market value of the home. If the appraisal for the home comes in below the price the buyer paid, the agent/Realtor/clerk who sold the house would be required to reimburse the buyer for the difference. If the appraisal is above the sales price, the agent/Realtor/clerk who sold the house is off the hook and is under no further obligation.

Can you see the beauty of this? Realtors can now demonstrate their certitude that they believe it's a good time to buy by guaranteeing the price themselves! Now, the price guarantees would have to be collateralized in some way, preferably with some non-real estate asset; so, the NAR may have to place a few billion into a restricted use account to keep the RE clerks liquid. Of course, the clerks/NAR may want to spread the risk a little; so, maybe the could ping Lloyd's of London to see if they want to get in on the action. They're clever folks, they'll figure it out.

Now, it's going to take some time for this idea to spread, but I think if there's enough buyer demand for the program, it'll get legs. So, the next time you're looking at a house, ask the agent about a price guarantee. You will probably have to explain them, (clapping out the big words might help) but if you're patient, I am sure they will understand. Under the unlikely circumstance that they aren't willing to offer a price guarantee, ask them if they'd consider an offer of 20-25% under asking instead. It's got the same net-effect and doesn't have the burden of being a little difficult to understand.

I'm going to go try it out a couple of open houses today and encourage you to do the same.

Vivo los Osos!

Mission Viejo Breaks 1,000 Inventory Units

Congratulations to the newest member of the One Thousand Club, Mission Viejo!

According to ZIP Realty, Mission Viejo joined the infamous ranks of inventory-laden cities this morning at 1,007 units of inventory for sale. If you're shopping for a home in that city, be sure to whack an extra 10 or 15% off of your offer.

Mission Viejo sellers, gird your loins, you officially have lost ALL leverage in any price negotiations. Good luck.

Vivo los Osos!

OC Inventory Passes 18,000!

ZipRealty shows that there are more than 18,000 units for sale in OC.

We all have already heard that cities like Anaheim, Santa Ana and Irvine has more than 1,000 units for sale, but did you realize that there are other OC cities getting ready to join the 1,000 Club?

Leading the pack are Mission Viejo at 993 units and Huntington Beach at 930 units; that these cities will pass 1,000 units for sale this year, is a foregone conclusion.

At over 650 units for sale each, I would say that Garden Grove (732), Fullerton (681), Orange (753) and San Clemente (692) have a better than even money chance of passing 1,000 units this summer.

20,000+ units and unrestrained seller panic, here we come!

Everyone Selling a House in OC, Raise Their Hand!

According to ZIPRealty, the total number of properties for sale in Orange County is 17,779 which is already higher than the peak amount seen last year of 17,758. Not bad, considering it's only May16th and last year's peak happened at the end of August. Looks like it is going to be a long summer for sellers.

All of this is great news for buyers. Though it's still far from a good time to buy, things are lining up for some real bargains, maybe as early as next summer. Be patient, you will be rewarded.

Vivo los Osos!

A Modest Proposal for the NAR Marketing Team

This is one of my favorite posts from the past. I enjoyed writing it so much and the response to it was so positive, I thought I'd throw it up to the top of the list. If the NAHB keeps up with their nonsense, they may be next. Enjoy!

There I was, sitting on the couch, feet up on the ottoman, relaxing with a nice glass of single-malt, watching a little Letterman before bed and then it happened...a commercial from the NAR came on.

There were attractive families from an inclusive range of demographic groups, touring well-staged houses with up-beat music and some fairly good production values. The families all appeared happy and ready to sign on the dotted line for a home. The voice over for the ad among other things said that "When you have a family it is always a great time to buy", "prices are favorable" and "interest are at historic lows", but thankfully I'd only had the one Scotch and was able to resist the temptation to phone up the local 24-hour broker and place a bid on a home.

This bit of theatre was brought to us by the National Association of Realtors as part of their public awareness campaign titled: "Good Time to Buy." This multi-million dollar print, radio, outdoor, web and television campaign is designed to convince the public that buying now the smart thing to do. They even have banner ads for local agents to put on their sites, with my favorite banner being:


Now, don't get me wrong. I'd like to have a fence of my own some day, too. I'm not sure how proud I will be of my fence, but I think it were a good fence and it played nicely with the other neighborhood fences, I might be able to well up with pride like this fella in the ad. There's also a print version of the ad, that does a little better job of conveying the message, but only a little.

These ads are all target at we "fence-sitters" and are designed to compel us to join the fray and buy a fence (and possibly a home as well) of our own.

(Which I think raises a very important question. If we're fence-sitters, but we don't yet own our own fence, exactly whose fence is it that we're sitting on? Is it okay with that person that we sit on her fence? Is it considered a trespass to sit on another's fence? What if that fence borders a common area or is subject to an easement, are we okay then?)

The ads try to speak to the heart, playing on emotions, using messages and images of pride, choice and family security so we feel good about buying a home. They also address the head, telling us rates are low, prices are favorable (for whom, they don't say) and that there are a lot of choices (read: a lot inventory) so that buying at this point is the rational thing to do. But the ads fail on both counts and won't end up compelling a single person off the proverbial fence and into the real estate office.

It's not that we bubble-sitters don't understand all the social, emotional, status and (at some point in the future) economic benefits of home ownership--we do and we don't need to be sold on them and trying to do so is simply a waste of money. What they NAR needs to understand is that, while we appreciate the benefits of ownership, we aren't willing to pay today's price for those benefits. In other words, the cost/benefit ratio is out of whack and until it's corrected, we fence-sitters are not buying.

This may mean a redirection of their advertising dollar from the buyer to the seller.

I've heard many a realtor bemoan the fact that their sellers are unrealistic in their pricing expectations. Based on what I've seen on the market and the lengthening DOM for properties, I have every reason to believe that the Realtors are right. If the NAR were to spend as much time, energy and money educating owners on pricing and the benefits of pricing their homes correctly as they did reselling buyers on home ownership benefits, I think they could really impact sales volumes. With the price benefits ratio in alignment with buyer's expectations, home would start to sell and the commissions would start rolling in once again.

Now, I realize that our friends at the NAR have thrown down a lot of scratch on the "Good Time to Buy" campaign and that they might be a little tapped at the moment. So being the populist humanitarian that I am (we all need to make a living, right?), I thought I'd come up with some ideas, at no charge, to get things rolling. Below you will find some print ad examples for my pro bono seller campaign, "Discuss it with a Realtor."

This first piece is directed at a new seller (click on it for a larger image):

While this piece is directed toward price-stubborn sellers:


And this last piece is to motivate sellers in distress:

I'd like to invite our friends at the NAR to use these pieces, in any way they see fit, to help bring some life back to the real estate market. As I said before, I'm not looking for any payment for these ideas, I'm just trying to do my part.

Sorry So Long

Dear Readers,

As I write this from Terminal 'K' at Chicago Ohare Airport, I want to apologize for the long absence, but the day job has me on planes, trains and automobiles frequently. With that, and trying to be a good dad and husband and the desire to have a modicum of a social life, I just haven't had the time post lately. Hopefully soon I will find the time to catch up on the market and post a little analysis and commentary.

I have to be honest as well that I've lost a little of the steam behind my motivations for posting. You see, I started this blog to debunk the idea that housing prices were going to continue to rise in LA/OC. Now that I consider it a foregone conclusion that prices are set to drop and the bulls have been acting more like geldings, some of the passion's gone. But don't lose heart. I am certain that some some bovine idiot will say something stupid in the days to come and that will stoke my ire, causing me to make the time for the odd posting now and again.

In the mean time, keep the faith, offer bulls percussive maintenance when they need it and for crying out loud, wear sunscreen.

Buyer Demand: Running on Empty!

With the best of intentions, I asked readers in March's poll to tell me the price level at which they were very likely to buy a house, but things didn't work out exactly as planned.

You see, I posted the poll to test a theory that I had where buyers would be willing to buy at prices points much lower than I had anticipated. In fact, I had already begun writing (at least in my head) a story about how sellers could access significant incremental demand, just by lowering their prices a little. Well, the data didn't work out that way. Here's a graph of the responses:

The results of our poll indicates that nearly 80% of people responding will not seriously consider buying a house until prices drop below $450,000. The balance of the responses fell between $475,000 and $600,000 with a very pronounced skew toward cheaper prices.

The way I interpret these data, is that people believe that prices are set to drop very significantly over the next few years. The other thing I see in the data is that people aren't willing (and under new lending standard may not be able) to stretch comfortably beyond their economic means. I applaud this insight and this economic discipline--readers of this blog are clearly Prudent Bears.

This isn't good news for sellers, of course. If 80% of us are going to wait for prices to drop 25% or more before buying, demand is going to fall even further. I reported the other day that the pace of housing sales has dropped to an eleven year low here in OC, with these data in hand, I can only believe that I will write another posting at this time next year stating that demand at that point is at 12 year low.

Bears, during our last housing downturn in OC, prices dropped 30% over the course of six years. Clearly we are looking for some of that same magic to happen again. Keep your powder dry, stay the course and keep your eye on the market. Your discipline will be rewarded.

Vivo los Osos!

Housing Inventory Spikes! Demand at 11-Year Low.

Just a quick bit of news, prompted by a phone call from an old friend. Thanks, Tom.

Going largely unreported, inventories of homes have continued to sky-rocket with the month-over-month increase in inventory of an amazing 11.8% between the end of February and the end of March. 11.8%! If that rate holds, we will see inventories double from their current levels by Aug, 30.

Also going unreported, is the fact that at the end of March this year, we had more homes for sale than we did at the end of May of last year where we are generally well into the selling season. Clearly, the intelligent bearish sellers are trying to beat the Summer rush, beating their neighbors to the punch.

Have a look at the source data by clicking here.

On the flip side, Lansner is reporting on his blog that home sales are at their slowest rate in 11 years here in OC. Clearly, buyers are utterly rejecting the absurd prices asked for by sellers and are waiting until the inventory situation comes to a head before considering buying.

Supply is up; demand is down. Prices are certain to fall. Readers, today may be the worst time in recent economic history to buy a house. Do not even consider buying a house today, unless you can get it a tremendous discount, say ~30% from last year's comps.

Vivo los Osos!

Pricing Weakness Epidemic in OC

I took a look at a handful of pricing metrics for Orange County and I have to say that even as a died-in-the-wool housing bear, I was pretty shocked by what I found. Let’s start with our three key metrics:

% of ZIPs with median price down year on year: 77.3%
% of ZIPs with median price down from 2006 median: 80.0%
% of ZIPs with price per square foot down: 62.7%.

Astounding. Fully four in five ZIPs show price declines between February and all of 2006 and nearly that number on a year on year basis. Four-in-five. I can remember not long ago when that number was closer to two in five. Things certainly have changed.

Looking at the data another way, fully 92% of OC ZIPs showed weakness in at least one of the three above metrics, with five lonely ZIPs having been spared the from pricing contagion: Laguna Beach’s 92651, Trabuco Canyon’s 92679 , Fullerton’s 92835, Newport Beach's 92660 and Villa Park’s 92861. If you don’t live in one of those four ZIPs, PRICES IN YOUR AREA ARE FALLING by one measure or another.

The data also show that not only are price declines widespread, but they are much more severe than I think people realize after having been fed a steady diet of “prices are flat” bull in the media. The media takes a single figure, the year on year median and proclaims that prices have essentially moved no where from last year. I say fuck the county-wide year on year median! The number is next to meaningless and anyone who would be lazy enough to rely on it as a basis from home appreciation is a lackadaisical moron.

Here’s what a careful analysis of the February medians versus 2006 medians show:

Percentage of ZIPs with increase in price: 20%
Percentage of ZIPs with decrease in price of less than 5%: 37.3%
Percentage of ZIPs with decrease in price 5 and 10%: 18.7%
Percentage of ZIPs with decrease in price 10 and 15: 12.0%
Percentage of ZIPs with decrease in price of greater than 15%: 12.0%

That’s right roughly 40% of homes have seen a decline of less than 5%, while roughly that same number of have seen a decline of 5 or more percent. In addition, nearly 1 in 4 ZIPs has already seen declines of more than 10%. What’s in God’s green earth is FLAT about that?

I get a kick out of some of the permabulls seen around Lansner’s blog an elsewhere claiming that a 10% price decline here in OC is absolutely unthinkable. They bristle at the very idea. But for one in four homeowners in OC, 10%+ price declines HAVE already happened. And one in eight already wishes their price declines would have ONLY been 10%.

Some will call these declines a blip; others an indication of things to come. What would I call these declines? About the same I would call a busload of lawyers (sorry, Bob) going over a cliff: a good start. I believe that these declines, as significant and widespread as they are, represent only the very beginning of a long and very severe correction in housing prices.

In fact, based on what I’ve seen in this data, I would be at all surprised to the majority of ZIPs down from the 2006 median at least 10% a year from now, and a quarter of all ZIPs down 20-25% for that same period and some small percent of ZIPs, maybe 5%, down 25% or more.

Bears, it’s a great time not to buy a house. Prices are falling! Rent is cheap! If you must, bid, please consider not what your heart tells you the home is worth today, but what your head tells you it will be worth 2 to 5 years down the road.

If you'd like to see the data for your area, click here, but I'd pour a nice single-malt first--if you're a future buyer you have some celebrating to do, if you're a seller it might help and drown your sorrows.

Vivo Los Osos!

Inventory Threat Level: What Color is Your City?

Sorry I haven't posted in a while, my day job has me on planes, trains and automobiles lately. I'm still slammed, but I want to get out this post on inventory threat levels.

I've spoken in my last two posts about inventory levels and how they might be leveraged in negotiating prices with sellers. In order to synthesize those posts together, I've developed a simple scoring and rating system that can be used to determine how inventories for given areas compare to the county as a whole.

It's a pretty simple system, it takes into account the "month of inventory" and "percent of home listed" stats and creates a compound ranking out of them and then classifies them into a "inventory threat level" grouping. The inventory threat indicates, in my sometimes humble opinion, the amount of risk of significant price decline a city may endure in the medium term. If an area is classified as as blue or green (there are none at this point) there is no or little risk of a significant price decline. If it is yellow there is a moderate risk; orange indicates a strong risk and red a severe risk.

Please click the chart for a larger, readable version.

My suggestion to buyers is to print this out and carry it with you to open houses. Then ask the Realtor about the price of the house, and then wince as though you just got a shot. Then present this handy-dandy little guide and tell them something along the lines of, "Sorry, but this city has an inventory threat level of orange; so, I would need to make an offer of 15-17% less than asking. Would you entertain such an offer?" Now, here's where your choice footwear becomes important.

The agent and/or seller are likely not to like you, your threat level chart or your offer very much, possibly inciting them to rage. If you're in a pair of CFM stilettos or slick-bottomed leather shoes, you're not likely to be able to run away at a safe enough speed to evade these enraged bulls. So, I suggest a good running shoe or a high-quality cross-trainer; they have the traction you'll need.

Vivo los Osos!

More on Orange County Housing Inventory Levels

In a prior post, I wrote about the surprising inventory data I found out on Homeseekers.com. Today, I am going to continue looking at inventory, but I've also pulled some census data so we can not only look at the months of inventory on the market but also the total percentage of homes on the market.

We saw in my last post that there appears to be a lot more inventory on the market than has been reported. We also saw that within the county, the amount of inventory on the market varied very, very widely with some areas like Seal Beach with just a couple of months of inventory and others like San Clemente with over a couple of years of inventory. But months of inventory is only one measure, so maybe some areas aren't really getting a fair break.

With that in mind, I decided to pull some demographic data and have a look at the proportion of homes for sale, settling on Total Housing Units the most "fair" basis for comparison. Here are the results:

You will note many of the areas with the highest percentage of homes on sale are also areas that added a lot of housing units in the last several years. Given that the Housing Unit data is from the 2000 census, there is a reasonable argument that could be made that the percentage for high growth areas is likely overstated. I think it probably is, but with some cities having more than twice county average percentage of homes for sale, I think that argument only goes so far.

If you were do a comparison of both methods, you'd note that many of the cities listed here as having the highest percentage of homes for sale also had the great number of months of inventory as well. To save you the effort, the cities of Dana Point, Laguna Niguel, Yorba Linda, Lake Forest and San Clemente all fared very poorly in both methods of analysis. Other cities fared realtively well under both methods, including Fullerton, Seal Beach, Buena Park and Garden Grove. And, of course, there were many citites that showed strength in one measure in weakness in the other.

In a post later this week, we'll take even a closer look at these two inventory metrics and how they interplay in different Orange County cities. We will also discover that some of these cities have much more in common than just their inventory levels.

Are Inventories Actually Higher than are Being Reported?

I decided to pull some data yesterday from Homeseekers.com to have a look at what their data says about the housing inventory situation here in Orange County. They have a feature that lets the user pull lists for cities either including or excluding properties that are in escrow; so, coming up with "in escrow" counts is a pretty simple, if time consuming, process.

What I found blew me away:

First, note that there isn't data for all cities, just the largest, those for which there was a decent sample size of listings and those where the data made sense (there were very few homes listed in Fraudera Ranch.) But once you get past that, the data is pretty amazing.

If the Homeseekers.com data is correct, there are a total of 13.9 months of inventory currently available in OC largest cities. This is more than double what is being reported in the media elsewhere and over a year's worth the homes already on the market! I have to wonder what a seller might think if he were to know that number--he just might be forced to get serious about selling his home and cut his price.

On the other hand, his level of panic may be influenced, as well it should, by his LOCAL conditions. Have another look at the chart. Some cities like Seal Beach and Laguna Hills have few months of inventory, while other areas like San Clemente, Newport Beach and Lake Forest have have huge amounts, at over 2.5 years of inventory a piece.

There seems to be a general pattern here. In-land cities, in general, seem to have fewer months of inventory than their coastal counterparts while southern OC, seems to have much more inventory than northern OC. With that in mind, I would NOT want to be trying to sell a house in Dana Point or San Clemente at this point.

On the other hand if you're a buyer and want to cut your best deal, print out the worksheet and take it with you when you go to open houses. Ask the your seller (in Dana Point?) if he plans on keeping his house on the market for 27 months and ask him to consider an offer that will get his house sold before the glut of homes hits this summer. Just a thought.

Now like I said before, these data look very different from what I've seen on Lasner's blog and elsewhere so somethings going on. It could be:

1. Homeseekers.com data is unreliable. (I don't think so.)
2. Homeseekers.com classifies houses in escrow differently than others. (Could be.)
3. We're on the cusp of the largest inventory run-up in OC history and I beat the mainstream media to the punch by reporitng it first. (THAT would be cool.)

Have a great weekend.

Vivo los Osos!

Prudent Bear Renter Savings $70,000

With the aberration of housing prices rising as they did last month, renter savings dropped a little month on month, but are still extremely strong at over $70,000 since June last year.

A drop in interest rates also benefits bears.

Congrats prudent bears, you've managed to save over $70,000 by not buying the RE-industry rhetoric, sticking to your guns and waiting to buy a home on your own terms. Here's a quick break-out of your savings since June of 2006:

Savings on Purchase Price $ 47,300
Total Closing Costs $ 7,705
Rent Benefit $ 22,844
Investment Income $ 1,742

Tax Benefit ($9,254.13)

Total: $70,337 dollars.

For the details click here.

In an interesting turn of events interest rates for "typical" home also dropped an eighth of a percent, meaning that if we were to buy today, (which no one is planning to do, right?) we would also have saved tens of thousands on the life of the loan. So all things considered, the savings we've incurred are actually up month over month. More good news for bears.

As we go through the transition in buyer demographics, prices for the homes being sold may make it appear as though they are heading up from time to time. It's an aberration causing by demographics and the tiny number of homes being sold. Remember inventories are up and sales volumes are down and things are about to get a lot worse for sellers.

Irvine Renter, a fellow OC blogger, posted a great article on his blog regarding how the credit crunch is going to affect real estate demand side, while loan resets are going to create more supply. It's a must read.

Vivo los Osos!

Prices Down in All So Cal Counties!

On a price per square foot basis, prices are down in all So Cal Counties both in nominal and real terms.



WTF with Santa Barbara?

Would You Buy a House from this Man?

The CEO of the nation's #1 builder, D.R. Horton's Donald Tomnitz, told Wall Street analysts, according to The Associated Press: "I don't want to be too sophisticated here, but '07 is going to suck, all 12 months of the calendar year."

You have to love this kind of candor from a CEO. Let's face it, the guy has the balls to call it like he sees it, damn the torpedoes. Him, I like. But, more importantly, I find myself thinking that I could TRUST him.

Unlike most in the RE industry at this point, he's not trying to sell me some BS, pie-in-the-sky rhetoric about why I should buy a home now so he can land a couple of transaction. He's looking at the longer term, recognizing the fact that what he says today will be remembered tomorrow. He KNOWS that his reputation and credibility are on the line and he's behaving like a professional and telling like it is. There is one huge lesson here for everyone in the RE industry.

There's a saying in the Sales profession:

You buy from people you trust. You trust the people you like.

When I buy my home, you can be it bet it will be from parties I trust. Case in point, if I decided to buy new, my first stop is going to be at a D R Horton development. They have earned to right to try and win my business. These other developers? Not so much.

The same logic applies when you are buying an existing home. Why buy a home from a realtor where they're trying BS you about the market? If they're not being honest about the market, what else aren't they telling you? When a realtor tries to pump up the market, he is acting in HIS interest not YOUR interests. This ought to be a HUGE red-flag for you and you ought to really consider heading for the door.

Realtors have got to realize that every sales transaction requires TWO parties, both a seller AND a buyer. No buyer, no transaction: it's that simple. Yet, all the propaganda is coming out of the NAR is all bullish and pure bullshit. No self-respecting well-informed buyer is believes this nonsense and it is killing their credibility. Many agents aren't any better. Take these two yahoos as examples:

"Here we go again! For those of you who speculated a drastic decrease in residential property sales and prices... think again! Prices are increasing as I type this "opinion" and will once again result in a mad scramble for anything in Orange County with four walls and a roof. It likely won't be as ridiculous as it was last year however, but it will be similar. Buyers should buy now before summer prices escalate. Sellers should list their property around the beginning of April." As Quoted in Realty Times.

For buyers who have been waiting "for the bubble to burst," it's not looking very hopeful," says Realtor Vicki Lloyd. "For the beginning of the year, it is starting to look a lot like last year, but with higher prices. County-wide, our inventory levels have fallen back to less than two months supply, and well-priced homes are again selling within days of coming on the market." As Quoted in Realty Times.

Do I even need to point out how severely these two are wrong? I won't bother. But I will ask you this question: "Would you buy a house from either of these people?" I wouldn't and I won't. If they can spread BS around like this, how could possibly consider involving them in a transaction of several hundred thousand dollars? They have NO credibility and I, for one, do not trust them.

We may be bears, but we have memories like elephants. We are going to remember who tried to manipulate the market and who was honest. If you're a realtor and you ever want a chance to earn our business you'd better start shooting straight.

Vivo los Osos!

Are Buyer Demographics Skewing Home Prices?

The Orange County Register reported that the median price for an existent home inched up to $675,000. Some bulls seem to be rejoicing.

Like I predicted in a prior post here, the price for existent homes is starting to inch up a bit. My theory is that due to the tightening of non-prime credit, the "typical" buyer has become more "upscale" than in the recent past. Buyers today are likely more affluent and have better credit ratings than the average buyer last year and are also buying larger, nicer and most importantly more expensive homes. I'm not alone on this, Jon Lansner over at the Register would seem to agree. This skew toward higher-end homes, I'd offer is hiding the fact that home prices here are much weaker than they appear.

With ever-tightening credit markets and sales volumes reduced to a trickle, this skew is going to continue to worsen, possibly to be point where looking at the median says almost nothing about the underlying value of the typical home, but only serves to describe the demographics of buyers. Until we can all agree that the median is un-skewed, I think the better metric is likely price per square foot.

I have to sit here and wonder what's going on with the price per square foot this month. I don't have the data for Feb yet, but as I've discussed on this blog the price per square foot was down 5.1% comparing January 07 to all of 06. On a $600,000 home, that represents a $30,000+ decrease in price and that's compared to the full year and not to the peak. This is a lot of money by any stretch of the imagination. While I don't have the data to prove it, (data commons anyone?) I would speculate that once the data is available, we will see price per SQFT drop in February as well

So, if a bull tries to make the argument with you that prices are inching up, tell him, "Yes, that's right, they have. We bears have been expecting that..." But also add, "...but what's going to happen when all the well-heeled buyers to be have purchased and there's almost no one in the county with a FICO score above 650 AND an income above $150,000 looking for a home?"

New Poll: At What Median Price Would You Buy?

I’ve been talking a lot lately. Today, I’ve decided to take another opportunity to listen.

I’ve posted a new poll that asks another pretty simple question which is essentially at what price level would you seriously consider buying a the “typical” home in Orange County. The median price for last month was $600,000 and sale transactions were at a trickle, the slowest sales pace since 1995, so clearly that price level isn’t very motivational for most of us.

Would you be very likely to buy at $575,000? $550,000? Are you holding out for $500,000 or less?

Take our poll and let us know! As feel free to add a comment or two about your response and your reasoning behind it.