Inside the Numbers

New Home Sales and Case-Shiller Numbers Easily Misunderstood

This week, two important real estate numbers were reported that had a positive spin put on them that wasn’t really warranted. 

First, New Home Sales were announced for the Month of June by the Census Bureau.  Last month, the May number was reported at 300,000 homes (on an annualized basis) and the forecast was for the sales rate to be at 310,000 homes (annualized) in June, providing an average for the two months of a 305,000 sales rate.  The June number surprised to the high side, coming in at 330,000 which helped spark the market on Monday.  The problem?  The May number was revised downward to 267,000 to provide an average for the two months of 298,000 homes, LOWER than the forecast.  I don’t know why the initial forecast was off by 11% for May.  It could be that since new home sales are calculated when the contract is signed and not when the sale closes, many of the sales cancelled.  If that’s the case,  I would think that the Census Bureau would have allowed for that.  It’s a pretty big mistake, and hopefully we don’t see it again next month.  I like the fact that the government was able to put a positive spin on a negative number, but surprised that the press didn’t question it at all.

The second number was the Case-Shiller Home Prices Index that was released on Wednesday.  The 10 city composite was up 5.4% and the 20 city composite was up 4.6% compared to a year ago.  Case-Shiller is a great index and tool for tracking the real estate market and I know a lot of large banks and investors rely on it because it actually looks at sales of the same home over different periods rather than a median which changes as the size and type of home change.  This makes it a very reliable number.  The weakness is that it is not able to track recent trends.  The reason is that it is a 3 month moving average with a 2 month lag.  In other words, the numbers that were reported up on July 27th were the months of March, April and May – the end of the tax credit when people were paying more than homes were worth to capture the tax credit.  We won’t see the result of the end of the tax credit until the July, August, and September numbers come out in late November. 

So, while I welcome the good press for the real estate market, tread carefully; there was more to the story.

Monday Morning Coffee – The Drip System and a Sink Hole

Monday Morning Coffee

A Sink Hole in San Diego or Why I Have to be Good at Real Estate

Good morning,

I hope you had a great weekend.  Ours was a little slow with only one open house and activity generally slow, Cori and I actually were able to see a movie – Early Grammy betting tip: Salt will not win best picture.  Those of you who have read the last couple of Coffees will remember that I am slooooowwwwlllllyyyyy converting our “spray everything including the side of the house” sprinkler system to a drip system.  Well, it slowed down again this week when I discovered a small sink hole in my back/side yard. 

Now, I am brave enough to try and conserve some water and be more efficient in my application thereof, but when it comes to undermining the integrity of the hardscape in the backyard, I draw the line.   So, I called the gardener in (he is not the same that installed the original system) and fortunately the problem was that the initial contractor did not use much glue at a specific joint and the increased pressure from capping some of the sprinklers caused the joints to slip out.  He quickly fixed it and there should be no more problems…unless there are more joints with insufficient glue. 

Hmm.  I think I will proceed slowly.

Speaking of slowly, how about that real estate market?  This morning, the Census Bureau is set to announce the number of new home sales in June.  When the May number came out is was 30 something percent under last year and increased the worry for a double dip recession.  Well, if you want to sound smart this morning – it’s going to be low again.  So show off at the coffee machine and predict about a 30-35% drop from last year with  the numbers being close to May of this year (the reason is that the tax credit sucked all the demand into the early part of the year).    The residential resale side is really slowing also (at least in San Diego).  Last July, we sold about 2,900 homes throughout the county and last month it was just over 3,000.  Right now, with five workdays to go and sixteen behind us, we have 1,591 closed.  My guess is that we close about 2,350 for the month which would be about a 20% drop from last year .  I expect the homes in escrow will be about the same at the end of the month as last month, indicating the liklihood that August will bel slow also.

With this slowdown, there are some good opportunities for patient investors – and there will be more coming down the line.  I think the end of this year will provide some excellent opportuntites for investors looking for one or two properties in San Diego.  For people buying a home, I don’t think there is a problem buying a home now, as long as you are planning on staying several years.  Yes, the market is going to go down a bit, but if you have found the right house for your family, there is no guarantee it will be there once the market falls a little, and these rates are incredible.

No new listings this week, so time for the Coffee:

A Healthy Life

  by: Jaye Lewis

I’ve never been an athlete. I’ve never been much interested in sports, ever since I stopped playing touch-football with the boys, when I hit puberty. I’ve tried tennis. I hit the ball too high, too long, and way over into left field. I’ve tried softball. Thank goodness that ball is “soft” and big, because it felt just awful when it hit me in the eye. I tried running, but I couldn’t get anyone to chase me.

I tried swimming, but even though I float like a cork, and have had numerous lessons, I can’t seem to get over the idea, that I’m really going to drown. Finally, I settled on walking, and for a number of years, I walked 3 to 5 miles a day. I realize that there is an Olympic sport referred to as “walking,” but when I tried that, all I succeeded in doing was throwing my hip out.

I’m definitely NOT an athlete, but I make do, especially in my “mid-life” years. Which brings a question to my mind. When did I hit mid-life? I remember when I hit thirty. I had to visit a grief counselor, because I knew my life was over. I remember forty. I had to see a grief counselor, the day after my first child graduated from high-school and moved out of the house, because I knew my life was over. I remember forty-four. For some reason I thought my life was over. Then I hit fifty, and I was all excited, because I was able to join an organization called AARP. My husband was, especially, excited because he is younger than I, and he got to join, too!

Fifty became the magic age. I knew that as long as I was in good health, in this day and age, I probably had a good fifty years ahead of me. Then came the asthma. O.K., I had that much earlier, but it only became life threatening after fifty. Then came the firbromyalgia. O.K., I had THAT earlier, but it’s not life threatening. Then came the arthritis, and, more recently, at fifty-five, came the diabetes. Somewhere, along in there, I became very interested in pharmaceuticals, and, finally, one day, I became free.

I began by noticing the sunsets, and I had the time to stop and really wonder, at the beauty and the magnitude of it all. Then I moved onto the sunrises, and I quickly found out that if I wasted the early morning, I missed the loveliest part of the day. Then I began to notice how grateful I was to be able to witness the changing of the seasons. The first whisper of spring; the rustling of the leaves beneath my feet, in the fall; that first breathless covering of a winter’s snow; and in the summer, all the flowers, and the buzzing of a bumblebee.

When illness would hit me, I found that I, actually, enjoyed the solitude. A time to reflect, gather my thoughts, and pray, at leisure. I found that I was “experiencing” this mid-life season, and I was no longer missing every moment, shackled to the chains of worry, and what “might” be. I found that worrying about tomorrow, only served to make me overlook the blessings of today.

It’s not always easy. A few loads of laundry, and a pile of dishes can take an entire day; but then I don’t push myself a lot. So, I forget to make the bed, as I watch the rosy glow of dawn meet the rising sun. I have time to walk our little, wooded acre with my little dachshund straining at the leash. I get to read the “signs,” with my Happy Dog, sniff the air, and gaze out at nowhere, studying the sky, with the same intensity that my little dog studies the ground.

I get to meet the day, every day. I get to say “good-night,” to the sunsets. I’ve studied a lot of sunsets, in the last five years, and I’ve never seen two that were alike. I get to know my Creator as I never have before, and I’ve gotten to make MY mind up, about the mysteries of life; and I have grown certain, that all this was no accident.

I feed the birds, and I take great delight in their multicolored hues, especially in the spring. I drag a chair to stand on, so that I can fill the feeders to the brim, myself. I say a little prayer, as I wobble, a little cock-eyed on the chair, and I laugh, at myself, and all the pretensions of my younger life. I take great delight in my life. I thank God for all the precious little things of every day. Friends. Family. Neighbors. And health. A health of the soul. For I have come to understand what real health is, and when you have REAL health, then you truly have everything.

Have a Great Week!

Scott

Monday Morning Coffee – Battle with the Drip System

Monday Morning Coffee

Battle with the Drip System  (or why I should stick to Real Estate)

Good morning,

I hope you had a nice weekend.  It’s been nice to have the sun come back out the last week – although it feels like it is trying to make up for lost time.   In the further mis-adventures of Scott and the drip system, it seems like there was a bit too much pressure and on Wednesday morning while James, the pool guy, was cleaning the pool and I was about to jump in the shower there was a loud “pop” as one of the valves failed.  James almost ended up in the pool (it sounded like a gun shot) and pieces of the valve ended up in opposite directions 30 feet from where they were supposed to be – and I ended up at Home Depot again.

On the real estate side, things continue to slow down.  In July of 2009, we closed over 2,800 homes in San Diego County.  So far this month (11 of the 21 business days completed) we have closed 1,008.  The number in escrow is also down, from over 7,000 to just over 5,200 this year.  Call volume is also down significantly just when it should be picking up for the summer.  I am more solidly in the camp of – another dip in real estate and just hoping it bounces back early next year.  This could be great for investors as rates remain low the forth quarter could bring some great opportunities.

We don’t have any new listings this week, so let’s skip straight to the coffee -

Lessons Learned

Author Unknown

Have a Great Week!

Scott

Monday Morning Coffee – Real Estate Slowdown Coming

Monday Morning Coffee
Real Estate Slowdown Ahead

Good morning,
I hope you had a great weekend – and for those of you who extended the 4th of July weekend into a weeks vacation – congratulations. Now, get back to work:-)

The market has definitely slowed, which has allowed me to get to a couple of projects around the house. We had planted a few vegetables and we have a spaghetti squash and butternut squash plants that have taken over the side yard and are about to try and break into the house. This made me finally tackle the sprinkler system in the yard – trying to convert it to a drip so I stop wattering the house and patio. Of course, only when I got to Home Depot did I realize that I did not even know how much I did not know about what I was trying to do. Four trips back and forth and eight sprinklers (about 40 to go) have been transitioned to drip or capped off – and only three of them leak.

But I digress from the main point, and that is that the only reason I have time to do this is the market has slowed down. Two weeks ago (I took last Monday off too) I said that things felt like they were slowing down. In July of 2009, we sold over 2800 homes. So far, 6 business days into a 21 day month, we have 475 sold. Now, the homes in escrow have increased by 300 so far this month, which might indicate that closings will ramp up at the end of the month, but I still think we could be down by about 20-25%. I hope I am wrong, but it sure feels slow out there. It is moving to a buyers’ market and I think now is the wrong time to try and squeeze every last dollar out of your home if you are selling. The risk/reward of holding out over the summer is not in the sellers favor right now.

That said, we have three great listings to tell you about – should have been four, but we bucked the trend and sold one of them last week:

3 bed townhome in 4S Ranch. This home is in the Gianni complex on the north side of 4S Ranch and is impeccably updated. Walking distance to Monterey Ridge, the Gianni complex is very popular for young families with elementary aged children. The home is priced at $429k.

South 4S Ranch View Home – This is one of two homes we have on Lone Bluff Way. This home is 4 beds, 3 1/2 baths, almost 2,900sf and a great view of Black Mountain. The yard is big enough for a pool. It is priced at $720k and we have 2 offers in. It will likely be gone by Monday evening. So if you are interested, let us know ASAP.

4 bed with loft – This is the other home available on Lone Bluff Way. It has a bedroom dowstairs as well as 3 beds and a large loft upstairs. It is over 3,200 sf of living space on a great cul-d-sac on the south side of 4S Ranch. Asking price is $745k.

That’s it for this week. Enjoy the Coffee (and tell all your friends to help the market and buy a house!)

This week’s edition comes because of those darn books you read to 4 year olds. You know, the ones you can’t get out of your head. Interestingly, there is sometimes more to learn from children’s books than from “adult” books. So, here is some wisdom from Theodore Geisel:

• A person’s a person, no matter how small.
• You have brains in your head. You have feet in your shoes. You can steer yourself, any direction you choose.
• Don’t cry because it’s over. Smile because it happened.
• Today is your day! Your mountain is waiting. So… get on your way.
• If you never did, you should. These things are fun, and fun is good.
• And will you succeed? Yes indeed, yes indeed! Ninety-eight and three-quarters percent guaranteed.
• Sometimes the questions are complicated and the answers are simple.
• All alone! Whether you like it or not, alone is something you’ll be quite a lot.
• The more that you read, the more things you will know. The more that you learn, the more places you’ll go.
• Today was good. Today was fun. Tomorrow is another one.
• Unless someone like you cares a whole awful lot, nothing is going to get better. It’s not.
• I’m afraid sometimes you’ll play lonely games too, games you can’t win because you’ll play against you
• I’m sorry to say so but, sadly it’s true that bang-ups and hang-ups can happen to you
• I know up on the top you are seeing great sights, but down at the bottom we, too, should have rights.

By Theodore Geisel (aka Dr. Seuss).

Cmon, I can’t be serious every week,

Scott Voak

San Diego June Home Sales Numbers

San Diego Home Inventory Rises – Sales Fall

*Note that this data is from the SANDICOR MLS as of July 5, 2009 and does not include homes sold by builders that were not sold through the MLS (New Construction) nor homes sold at Trustee Sale (Foreclosures).

Current numbers shown for June 2010 San Diego Home Sales indicate both a rise in supply and a drop in demand.  The combined affect is an increase inventory (as measured by months required to sell the existing homes for sale at the sales rate of the past year) of 19% over 12 months ago (although at 4.3 months, it is still not at a level that can be considered high).  The specific numbers are:

• There were 3,004 homes sold in June of 2010 as compared to 3,288 a year ago and 3,219 in May of 2010.
  • After last month’s drop in homes that were in escrow, this was to be expected.  Although, it is still dissappointing in that we all hoped the tax credit would help keep demand going through June.
• At the end of the month there were 12,175 homes on the market as opposed to 9,443 a year ago and 11,257 at the end of May, 2010.
  • This was caused by a combination of fewer homes going into escrow (lower demand) and the normal increase in inventory we see over the summer.  Both are expected as the tax credit expiring removed the urgency to purchase for a lot of first time home buyers (similar to when Cash for Clunkers expired for cars, we will likely see an extended period of below average demand for houses now that the tax credit has expired).
• Homes in escrow dropped to 4,961 from 6,862 a year ago and 5,546 in May of 2010. 
  • In the last two  months, the number of homes in escrow has dropped 23%, which points to continued slowness.
• Homes that are “Contingent” fell by 5% in June.  This is  a designation most commonly used for short sale homes that are awaiting bank approval of an offer and might mean that the banks are in fact getting better an processing short sales in a timely fashion.