Through July 2009
The magic "Swing indicator" numbers for May are 37-14-3. That means almost 69% of the 54 zip-codes and Counties tracked had a momentum "UP tick" in July. Going back to 1998, the only period that matched or exceeded this momentum turn was Spring/Summer of 2004. That's a mighty meaningful indicator.
- Does it mean this is a bottom? It is A bottom. I'm not convinced it is THE bottom.
- Can it turn and go down? Yes, in some zip-codes that is probable due to the supply still looming.
- What do you mean "in some zip-codes"? You remember that real estate is a local commodity. That means, for example, that parts of 95864 are in higher demand than other parts of that same zip-code. Likewise, adjacent zip-codes can have a material difference in supply and demand. That's why you should not generalize and apply a National statistic (or even a State statistic) to your targeted area. Check out the Communities and see how a local perspective makes a difference in your understanding.
Indicator Chart Summaries: (See the charts at www.JayEmerson.com/Indicators.asp)
- Resales (1 - Existing Home Sales) are increasing but are still understating the demand. My clients who are buying know that sometimes the competition wins. There is still competition and supply is sill low, relatively. The most telling indicator regarding resales is the "months inventory". Currently at 2.9 (normal between 4 and 6).
- The number of bank-owned homes that sold (2 - REO Sales) during the month has decreased on an absolute scale. Relatively, however, REO sales are still over 30% of the sold inventory. That's an indicator of waning supply (and wanting buyers).
- The median price for all of Sacramento County (3a - Median Price (Sac Cnty)) is unchanged and now equal to the median price back in February 2002.
- The El Dorado County median price (3b - Median Price (ED Cnty)) is also unchanged and is equal to the median price back in June 2003.
- The Placer County median price (3c - Median Price (PL Cnty)) is hard to comment on since Placer County hasn't published their numbers!
- NODs, which depict the beginning of the foreclosure process for a home (4 - Notices of Default) are lower than recent history. Banks, in their infinite wisdom only bested by our government, have learned that they should wait as long as possible to foreclose on homes. Accounting regulations require they dispose of non-performing assets within a short timeframe. That means they need to be ready to sell a property when they foreclose on it. THAT is why the supply is taking some time to hit the market.
- Builders are not clammering to get permits for construction of new homes (5 - New Home Permits). These developers and builders SHOULD guage the marketplace for demand and supply BEFORE starting a development. If there are plenty of homes for resale, a builder would have less demand for new homes and, hence, less motivation to get permits.
- The cost of money for homes (6 - Mortgage Rate) is still historically low. Recent financial news also suggests that investors still desire U.S. investment vehicles. With this news, interest rates may see a longer life at this low range. Then again, leave it to the government (a 'Housing Czar') to corrupt naturally occuring corrections.
- As a summarized and simple way of depicting "momentum", my proprietary Swing Indicator (7 - Momentum Swings) shows the remarkable cycles that are natural in real estate markets. And the statistics for July are at a relative peak going back many years.
There are no saviors except time and a functioning market. But a functioning market cannot be continually corrupted by short-sighted politicians. And now those lemmings have inserted things like HVCC (appraisal process) which is adding at least 2 weeks to the duration of every escrow (if a loan is involved). Worse yet is that those gun-shy appraisers are over-depreciating values. They don't want Congress to do any more stupid things. (I know that's a pipe dream.)
For all of you who think the process will get easier, I'm here to tell you that it's not likely. That's why you need an experienced real estate Broker on your side. The indicators are showing a change in the cycle but still not showing a true reversal.
There are points of resistance in certain areas of the region but much of it is artificially instigated by the all-knowing government. It will always be true that, all things remaining equal (e.g.,) Folsom will be priced higher than Florin.
Facts:
Inventory is "short", in more ways than one. The demand is waiting on the sidelines. The government keeps throwing band-aids at the symptoms. Homes are not on the market for long; the May NOD filings are down from April but you can see that they are not on the market; interest rates are at 40-year lows and staring to creep upward; median price momentum is mostly up (for 54 zip codes-see Swing Indicator); and new home permits are low but remained at the same number. When the inventory picks up, the choices will again be plentiful. No more band-aids, just Buyers. That's what we need.
The Swing indicator (#7; my newest indicator) is still showing a swing from "down " to "up ". Simple Ups and Downs depict the swings and gaps between Up ticks and Down ticks. I love it when simple truths are depicted in simple pictures.
What is YOUR NEXT ACTION?
- Investors - Even cash buyers need to move quickly in this market.
- Buyers - this is a market for you! Call me immediately
- I know some creative and resourceful lenders. Don't let fear win.
- Distressed homeowners - Don't pay anyone to help you. You can get free help. Call me.
- More information:
Bottom line: Call me to get started.
See the charts at www.JayEmerson.com/Indicators.asp
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