Friday, December 25, 2009

best apron evar




THANKS MARY!!!

Sunday, December 20, 2009

the California housing market

I found this LA Times piece rather amazing. It contained, in particular this fact that I was astounded by:

"In California, home prices and sales have shown steady improvement in part because foreclosure properties have made up a smaller fraction of the housing for sale in recent months. A report released Thursday by research firm MDA DataQuick showed that the state's median home price in November was up 1.6% over the prior month, at $261,000. Of the previously owned homes sold statewide last month, 40.6% had been foreclosed on during the last year -- the lowest proportion since May 2008, when it was 39.8%, and considerably down from its February peak of 58.8%, DataQuick said."

Yes, for the last year and a half or so basically half of all used houses (which has been most of what's been selling in CA) have been foreclosures. HALF!!!

The point of the article is actually focused on shadow inventory and further downside risks, but it's noteworthy that given the size of the shadow inventory and the fact that most houses being sold are foreclosures that it could have been ALL of the houses had there not been some mechanism to choke that flow. (forgive the hyperbole)

One thing that the article does point to is the incredible softness in the market will persist for some time. Another (considerably more speculative) point is that what we may be seeing now is prices being set by the buy side with the majority of sellers being price takers. This means the market is much more dependent on the temporary tax benefits being given to buyers (recently expanded to expand the potential pool of recipients to those who clearly don't "need" any help but rather could be incented to enter the market out of self interest other than a desire to own a home). Regardless of if the intent of the tax credit was to encourage speculators (of a sort), the distortion on the market is significant. Should we want to avoid a correction I suspect that benefit will have to be extended until the foreclosure glut ends (which may be years given the shadow inventory and the continued decline of the labor market).