California hints at bottom to housing slump

Reuters ^ | Aug. 1, 2008 | Jim Christie

[SmartInsight]

California's battered homes market may be hitting bottom, suggesting a national housing recovery may follow, veteran banking analyst Charles Peabody said on Friday, citing a rebound in home sales as renters become owners.

As goes California, the most populous state, so goes the rest of the United States, according to Peabody...

Reasons to believe California home prices will firm may be found in data from the California Association of Realtors, Peabody said.

Notably, buyers are responding to sharply lower home prices. The realtors' group reports the state's June home sales rose 17.5 percent from a year earlier while its median home price plunged 37.7 percent. June also marked the third consecutive month of increases in home sales from year-earlier levels in the state.

California's backlog of homes for sale shrank to 7.7 months of supply in June from 16.8 months in January. The days a home for sale stayed on the market fell to 49.1 in June from 71.6 in January.

"At last, the carrying cost of purchasing a home equals rental rates, a condition that should lead to more stable home pricing going forward," he said.

[purpleraine]

Again not true. Only about half of my leads do MLS searches even though we offer the link on our web site and it's available all over.

We have access to five MLSs and I can tell you that if you're searching only one MLS in southern Cal, you're not getting all the listings in the city you're looking for.

You may have the market all figured out, but we are value added to our clients and they seek us out mostly through word of mouth.

[purpleraine]

PS: the state of Cal association is developing a statewide MLS. We look forward to that.

[NVDave]

Looking at localized areas won’t change the larger facts of how the bond/debt/lending markets are changing; things like Freddie/Fannie, Wachovia, CountryWide, et al... those are indications that things got bad, are bad, and the crap handed down by Merrill this past week indicates we’re not done yet.

Everyone, nationwide, will have to deal with the consequences of the current melt-down. Fannie and Freddie are going to increase their requirements of lenders, and are seeking to break down appraisal fraud, as are any national lenders that survive. Right now, Fannie & Freddie account for 80% of the secondary market. The effects of this have not been seen yet, but they will be a major factor in real estate valuations going forward.

[purpleraine]

We have an interesting countrywide loan working (yes still them). A couple getting married. Both with great salaries, same job. She lives with her father and he in his own house. They are buying a house and will move in together after the wedding.

The underwriter asked for a letter explaining why they didn't live together now. They are getting married in September and are religious folks and their morals are not to live together until they are married. I guess countrywide never heard of that. LOL!

[purpleraine]

I just saw the comment “do some paperwork.” I went to school for one year to get a Risk Management Designation. Our average transaction starts with 17 pages and the final typically runs over 100 with reports, loan docs, and such. If you know the difference between local mapping and centralized mapping from a hazard disclosure company, if you know which inspectors will go to court and which won't, and if you can figure out all the other pitfalls and traps of buying a home in California by yourself, God bless you!

Lastly, when the listing agent is getting 5-6% and you have a buyer's agent who will get paid from that, your service is indirectly free because the seller is already factoring that into the transaction. It's not negotiable down since the seller has a contract with their agent to pay the full commission. You're paying for it whether or not you have an agent.

[NVDave]

It is that level of stupidity in the lending business that makes me very pessimistic going forward.

Besides being offensive, a request for such a letter is stupid in the fact that it doesn’t change a) how much they’re each making, and b) that they plan on keeping their jobs, c) their current individual debt:asset ratios, etc.

None of that changes if they’re living together. None of it.

And yet, the lender wants a letter explaining why they’re not shacking up.

See, it is this level of stupidity that makes me so pessimistic about the financial sector. We’re not talking “a few oversights.” We’re talking of people as stupid as a truckload of stump holes.

[Toddsterpatriot]

$220,000 x 1.6 = $320,000
$320,000 x 0.63 = $222,000

Speaking of logic,
$220,000 x 1.6 = $352,000
$320,000 x 0.63 = $201,600. LOL!

[dragnet2]

Before any sales contracts are signed, the sales commission is totally negotiable. I've done that several times over the past 20 years, and never once did I pay 6 percent sales commission. I've paid 4 and 5 percent, but not six. I personally could care less how the selling agent and buyers agent split the commission, but it is negotiable from the sellers stand point.

There are reputable companies out there now that list and sell homes for 3 percent.

http://www.catalisthomes.com/

From one of their sites.

# Our agents provide pricing advice and purchase negotiations on your behalf that is NOT driven by commission.

# We are the only firm that offers full disclosure of all buyers’ inquiries on your home. We provide written documentation of all of our marketing efforts in the form of a four-page status report (available on the web or in print form).

# Homes have doubled in value since 1999. Thus a 5% commission today is equal to 10% in 1999. You would not agree to pay 10% in 1999, so why pay 5% or more today?

# We charge a fee (3%) that is representative of the TRUE cost to market and manage a home sale. We split our fees evenly with cooperating buyer agents. We preserve the equity typically lost to excessive transaction costs. CataList Homes has one mission for home sellers: To maximize your equity (profit) when selling a home.

Also from that one particular site..

The truth is, it does not cost any real estate agent more than 3% to sell a home. Fees in excess of 3% represent an excessive charge to the home seller for the use of a real estate agent involved in an old, inefficient and costly system. Instead, you should be asking: "How can Realtors continue to charge five and six percent commissions (typically eliminating 20-25% of homeowner equity) when the average home is sold in less than 30 days?" When you consider the fact that home prices have virtually doubled in the last five years, how can Realtors keep the commission percentage the same and essentially double their fee? Your conventional agent is asking you for a 100% pay raise in 5 years, and he wants you to pay for it. A 3% commission in 2006 is the same dollar cost as 6% just five years ago when you factor in home appreciation. This is how we offer all the essential service for 3%.

[purpleraine]

What’s amazing to me is that it’s countrywide. I can see they have their eyes on what’s important. Afetr all the bad loans they have written, you’d think they be glad to see some solid borrowers.

[dragnet2]

You said no one was getting 6%. I said that's not true

Well, there is a sucker born every minute. Like I said, for the seller, the sales commission is always negotiable. With today's costs of homes, (even in this market - S. Cal) 6 percent sales commission in my opinion, is really extreme.

I personally would never pay that.

[purpleraine]

Well you never asked me what I charge. I charge 2%. I ask the seller how much they want to pay the other agent if the buyer has one. That usually goes 2.5-3%.You can care less all you want. When you have listings on an MLS there are pre-determined agreements about how the agents who are members sill work.

There are reputable companies charging 7% also and Help-U-Sell does 1.5% so what. People come to us because we provide value added service. We charge lower because it's what we believe in. Many of our clients would stay for a higher commission because of what we know and what we can do for them.

I'm familiar with that site. It's my job to know what's out there.

I mentioned what some agents were doing, don't be so defensive. I don't know anything about your agents and I didn't imply anything about them. If you know that 50% of the agents won't show for less than 3% cut and you don't inform your seller of that, that's your omission.And a five % today is the same as a 3% two years ago. While I charge 2%, many of our associates get 5 and 6 because they are worth it and want to make commission at that level. We don't restrict our agent's in negotiating their commission as long as they get a minimum of 2. The rest is between them and their clients.

You were wrong on your fist two posts and didn't admit it. If that's the way you work, I don't see who would want to have you for an agent. We get business for being right and helping our clients, not for ignoring incorrect comments.

Last advertisment to you. I'm out.

[dragnet2]

I really mean you no offense, but I don't have a great love for RE agents. Many, not you, will lie through their teeth, and do anything to get their commissions as fast as possible. Even attempting to convince the seller to lower their price, in an effort to obtain their commission quicker. Happens all the time. I understand that.

Not all are like this, but *many* are.

Nowadays, there are probably as many licensed agents in Cal as there are homes for sale. lol...

The fact is a property that is priced right, in a desirable area, will sell, regardless of what any real estate agent says or does. Put it on the MLS, and the rest will be history.

By the way, the last property I sold, I paid exactly 4 percent commission and it sold in 58 days.

[dragnet2]

I don't see who would want to have you for an agent.

lol...Given the fact that I'm not in that business, you're right, they wouldn't want me as an agent.

[Freedom_Is_Not_Free]

OK, great points.

[101voodoo]

We do live in a society with a “herd mentality” so as sales pick up the increase will feed on itself as it it did when the housing market was on the way down. Value, after all is just a perception. My opinion is that homes are under priced relative to any “real” value based on available land, location, convenience etc all of which will influence an individuals perception of worth.

[Dutchboy88]

Look at zfacts.com and notice the Truman National Debt at above 90% of GDP, highest ever. The things you mention were more precarious then than now. And five of the things you mention are “potentials”, not realities. The market is smart, selfish and adaptive; it has a way of pressuring these things back into line. If you claim the baby boom solved the debt problem, please also notice that in 1950 no one knew a baby boom was underway. Your concerns would have all been true. And, we were paying for the Marshall plan, headed for Korea, and the cold war was well underway. Remember the bomb shelters being sold? It has always been difficult and precarious. And, the IndyMac thing was induced (thanks Chuck) and could have been averted with care and repositioning.

[Dutchboy88]

Sorry it took so long to respond, I had to leave.

I would still use the lawyer. The problem with the CPA is that some of what you are up against is compliance with the court, not the domain of a CPA (tax only).

[Niteflyr]

It was simply a market correction for an overpriced housing market. Even with a drop in value of over a third of the value, the houses are still a bit overpriced.

I agree...I paid $130K for my house in So Cal in 1994....at the market peak a couple years ago it was appraised at $500K...so even with the decline in value it's still worth a lot...