When is it going to happen?

I think that I've mentioned here before that one of the things you get when you're in my line of work is a lot of questions from the public at large. It's probably something like being a doctor or lawyer in that when you meet people and they find out what you do, all the questions (and occasional horror stories) come out. I'm OK with that. If you know me, you probably know it's harder to shut me up than anything when I start talking about real estate.

So several times over the past few months, I've met folks and they find out that I'm a Realtor, and inevitably some variation on this question comes about the market: "When are we going to see prices back up where they were?". I think that if you own a home, you're hoping against all hope that I'll tell you that it's right around the corner.

Well, it's not.

Will we get back to 2005 price levels again? Yes, of course we will. Markets tend to work in cycles, but with the ups and downs, the trend line over the long haul is always up. I moved to California in 1982, and when I heard people talking about real estate, everybody was saying that they wished that they'd bought a house 20 years before. Then I bought my first condo in 1992, and everybody told me that it was too bad that I didn't do it 20 years ago. It's a constant throughout the 27 years that I've lived in the Bear Republic - gee, real estate would have been a great investment 20 years ago.

And what do you figure people are going to be saying in 2030?

So here's how I see this - most of us who own a home have a piece of property that would sell for about half of what it would have sold for four years ago, give or take. If you bought it four years ago, that really hurts. But if you aren't over your head on the payments, the time will come when you'll see equity again. The problem we have right now is that a lot of folks can't make the payments. Either the adjustable rate is biting them in the butt, or they've had a loss of income, and as a result we're seeing a lot of foreclosures. I've been hearing more in the news about people doing "strategic defaults", and I have some opinions about that idea that are better saved for another post, but I don't think that accounts for a huge portion of what we're seeing now.

So back to the title of the post: When is it going to happen? When are we going to see a recovery in prices that will get us back to 2005 levels. The real answer here is "It depends". Don't you just love getting vague answers?

But it does depend on a lot of things. Any recovery we see in the foreseeable future is going to have to be driven by affordability. People have to be able to make their payments. So part one of the recovery has to do with household income levels. The bigger economic picture needs to improve to a point where there are good, solid, long-term jobs. As long as we are seeing double digit unemployment, we can probably figure on just about zero in terms of housing price recovery.

Part two has to do with lending. Gone are the days when you could walk into a mortgage office and tell them that you make $100K a year and walk out with a pre-approval for $500K on a stated income loan. And you aren't seeing a lot of lending done with adjustable rate, interest only mortgages any more. You actually have to document income now, and if you do take out an ARM loan, you probably have to qualify for the highest payment on the schedule rather than the intro payment. And zero down? Unless you qualify for VA, forget about it. Ain't happening.

These are all probably healthier things for us in the big picture, but short of our financial and government institutions waking up one morning with amnesia - which admittedly has been known to happen - those days are probably gone for a long time. And in retrospect, the thing that drove prices up to astronomical levels wasn't so much demand as it was access to easy money. Easy money has left the building. We'll probably see it again some time in our lifetimes, but not for a while.

So the bottom line is this: I think that a reasonable expectation when we start to see appreciation again would be something on the order of 3-5% per year for a while, with maybe a few better years here and there. Certainly nothing like the explosion that we saw from 2002-2005. So working with that level of growth, we're probably looking at probably 10 years minimum before we get back to our previous peak. If we get there a lot faster than that, I'd be concerned about sustainability.

I hope everyone has a fun and safe New Year's celebration. See you back here next week for a fresh look at the first market stats of 2010.

Monday Morning Numbers 12/28/09

Welcome back from Christmas. We had a very nice low-key Christmas at our house, just a few small presents and a very tasty non-traditional tri-tip for dinner. Yum. Let's take a look at our market stats for the last time in 2009:

Active Listings: 83
Contingent Listings: 46
Pending Listings: 44 (25.4% of the inventory)
New listings: 4
Months of inventory: 4.2
Click here for an updated price per square foot chart.

Last week and this week are typically very light activity weeks across the board. Not many new listings came on last week, and I'd expect the same this week. And we aren't likely to see a lot of new pending listings either. We're at a high point for inventory both in terms of number of units and months of inventory since the end of September, but I wouldn't be surprised if that drops a little when the calendar changes over to 2010. We usually see a handful of listings expire at the end of the year.

I'm not sure what the post is going to be later this week. I'm trying to come up with something a little more interesting than a neighborhood focus. I have kind of a half-formed idea that I need to flesh out. We'll see if I can pull something together.

Focus On Mesa Oaks & Country Club

Over the river and up the hill we go to take a look at recent activity in our high-end neighborhoods, Mesa Oaks and the Country Club. For a little background on these areas, you can go back to the first post I did on the area several months ago.

The inventory level has been pretty stable up there despite the decrease in overall inventory in our market. This is mostly because unlike most of the rest of our market, this area hasn't been hit hard by distressed sales. At the moment, we have 12 active listings in these areas, with only one REO, 2 short sales, and all of the other 9 are traditional sellers. We only have one contingent sale up there, a short sale awaiting lien holder approval.

Sales activity in these neighborhoods has been slower than the market norm. We only have one pending unit in the area (an REO), with only 3 sales in the past three months. One of those was a short sale, and the other two were traditional sales. Sales in the high end tend to go a little slower in these parts pretty much all the time so that's not shocking, especially with the absence of aggressively priced REO's.

With so few sales, it's almost impossible to identify any kind of price trend. I'd be inclined to say that we're probably flat to slightly decreasing up here because of the lack of activity. I suspect that when we start to see the market rebound, these neighborhoods will follow. At least some of the sales up here have traditionally relied on move-up buyers, and those are as rare as hen's teeth of late. Once we start to see some more recovery in the low-mid range, I would expect a robust recovery in the high end.

Hope everyone has a beautiful and peaceful Christmas. I'll see you back here next week for Monday morning numbers and whatever I can dream up for later in the week.

Monday Morning Numbers 12/21/09

Welcome back to another exciting edition of Monday Morning Numbers! Let's take a look at this week's market stats:

Active Listings: 80
Contingent Listings: 46
Pending Listings: 49 (28.0% of the inventory)
New listings: 13
Months of inventory: 3.9
Click here for an updated price per square foot chart.

No huge changes this week, but we are now at a 3 month high for total active listings on the market. Another week of double digit new listings has pushed us up to 80. We're still lean on inventory, though, and I'd be surprised to see a lot of new listings come on the market in the next two weeks.

Later this week Santa Claus will bring toys for all the good boys and girls. Those of us who didn't make the "nice" list, however, are going to be skipped. You know who you are... So you'll have to settle for an update of Mesa Oaks & Country Club activity instead.

Focus On North Lompoc

On up the map we go, moving into an update of market activity in the north side of town. For a definition of the area and the types of homes we are covering here, you can go take a look at the first post I did on the area back in April.

This area hasn't been as active as the central part of town. We have 7 active listings here at the moment (2 REO's, 3 short sales, and 2 traditional). In addition, we have 10 contingent listings here, all short sales.

Sales activity has been pretty solid, with 9 pending sales (3 REO/4 SS/2 Trad). We've seen 17 total sold units in the past three months (11 REO/4 SS/2 Trad). These numbers track very closely to the larger market, both in terms of months of inventory and in the mix of distressed properties.

Comparing the past three months of sales to the previous three months, it appears that there prices have been pretty stable in recent months, with possibly a very slight trend towards appreciation. It's a pretty diverse area in terms of the ages of homes, but when I pull out the age ranges and compare apples to apples, we're seeing slightly higher median sale prices recently, but slightly lower price per square foot numbers. As has been the case in the other areas I've covered, we're working with a small enough data set to have a lot of play in these numbers, so identifying a strong trend is pretty sketchy business.

Next week is Christmas. If I get a chance to post a "Focus On" piece early in the week, I'll cover Mesa Oaks/Country Club. If I don't, it can wait until next week. Even Realtors take Christmas off most of the time.

Monday Morning Numbers 12/14/09

Can you feel it? That magical time of the year is approaching. Oh yes - right around the corner. For the little kid in all of us, the anticipation is building, and we can't wait to see what surprises are in store.

But enough about the NFL playoffs. Besides, it appears that my beloved Bears are the proverbial lump of coal right now. Let's take a look at our market numbers:

Active Listings: 77
Contingent Listings: 48
Pending Listings: 45 (26.5% of the inventory)
New listings: 12
Months of inventory: 3.5
Click here for an updated price per square foot chart.

Another week of double-digit new listings has pushed our inventory up a but in terms of raw numbers, but because of increasing numbers of sold units, we remain pretty stable in terms of months of inventory. The number of pending listings continues to trend down a bit this week, so we might start to see that three month sales number that I use to calculate our months of inventory drop off in the next month or two.

Later this week I'll move the neighborhood focus north another notch and take a look at the north end of town.

Focus On Central Lompoc

Moving up the map a little bit this week, let's take a look at the activity in the central part of Lompoc. For a definition of the area and a general description of the homes here, you can go back to take a look at the first post I did on the area several months ago.

We've had some very strong, and very stable activity in the area for several months. That may be changing a little in coming months, however. Our inventory is down almost half from the last time I looked at the area, with only 9 active listings (6 REO's, 1 short sale, and 2 traditional sellers). Even with our inventory having been declining, this is a surprisingly large drop. We have moved up in the number of contingent listings in the area, though, with 15 (4 REO/10 SS/1 Trad).

Sales activity has been pretty solid here recently. We have 13 pending units (11 REO/0 SS/2 Trad). Yes, that's right - zero pending short sales in the area, which has been one of the more active parts of our market. We've had 31 sales in the area over the past three months, dominated by REO activity (21 REO/4 SS/6 Trad). Comparing the past three months to the previous three months, it looks like the values in this area have been flat, just like we've been seeing in the broader market.

Considering that this area has a good share of our entry level homes - easily our most active market segment - it could be telling to see how it develops, and how it affects the overall market. We're already thin for inventory, and if Central Lompoc dries up, as it appears to be doing, it could make for some interesting market conditions.

Monday Morning Numbers 12/7/09

Happy Rainy Monday, everyone! Time for our weekly foray into Lompoc market stats:

Active Listings: 72
Contingent Listings: 52
Pending Listings: 46 (27.1% of the inventory)
New listings: 9
Months of inventory: 3.6
Click here for an updated price per square foot chart.

Another week with no big changes. I'm continuing to watch the unlisted REO level, and it's back down in the high 50's now. That's been a pretty normal level for the year. What I've typically been seeing is that when that number gets up into the 60's, we get a little spike of new REO listings. It appears that we had that little spike a couple of weeks ago, and now we're back to a more normal level of activity. I wouldn't be surprised if the active listings drop down again in the next few weeks. Aside from the REO inventory, this is traditionally a time of the year when we don't see a lot of listings.

Later this week I'll re-visit the market numbers for Central Lompoc.

Focus On South Side Lompoc

Let's take a swing through the Southside and see what our market activity has been looking like recently. For a definition of the area and a description of the homes I'm covering here, you can go back to my April post on the area.

Activity has been pretty good in the area in recent months, and on some small numbers, it looks like we might be seeing a bit less REO & short sale activity here lately. We have 7 active listings here at the moment (2 REO/1 short sale/4 traditional). There are only two contingent listings here, one each REO and short sale. The pending numbers are similar, with 9 pending sales in the area (4 REO/2 SS/3 traditional). Both of those sets of numbers would point to a slight decline in the distressed listings in the area, but again, we're looking at very small sample sizes.

The sold numbers look very much like the larger market in terms of percentages. We've had 10 sold units in the area over the past three months (6 REO/1 SS/3 traditional). No big surprises here, but based on the active and pending sales, it looks like at the moment, we're seeing a bit of a decline in market share for distressed properties. That could change a lot in the course of a couple of months, however.

Values appear to be improving in the area. I pulled out the 1960's tract homes from this area that sold over the past three months, and compared them to similar homes in the area from the three months previous to that, and it looks like the prices have trended up quite a bit, by about 10%. Again, keep in mind that we're working with a very small set of data here, about 6 houses for each period, so there can be a lot of variation. I don't think that we have enough data to say that we've seen 10% appreciation in a quarter, but I do think that there is some indication that we might be on the front end of a recovery in the area.

Next week I'll move this analysis north a little bit and take a look at the activity in Central Lompoc.