Inferred Housing Cycles

I was sifting through the data that I have on the local real estate market here in the Inland Empire and I started to wonder when the homes that were on the market were built. So I put together some graphs. It turns out that the homes that are on the market were most commonly (the mode for you statisticians) built in 2005.

This first graph shows the number of listings on 7/30/2008 by the year built. I kept the vertical axis set to 120 so that it was easier to compare the graphs.

Click image for larger view

My data does not indicate anything in particular. However, it does appear that the year that the homes that are on the market were built tend to have peaks and valleys. For example, a sample of data taken on March 30, 2009 with a 30 day window indicates that there is a peak of homes built in 1979, then a relative steady pace from 1985-1989 with a drop in 1987, then a rise again until we peak at 2005.

Keep in mind that all of the years shown are for homes that were on the market during the sample period. So this data does not represent any correlation with the number of homes built during a given year. It represents a sample of listings with a change in status within 30 days of the sample period.

This second graph show the number of listings by year built on 6/29/2009.Click image for larger view

Why would there be such a pattern of peaks and valleys. I sampled the data set for several different months. I went as far back as July 30, 2008. The actual data is a little different, but the peaks and valleys are roughly the same.

So the data begs the question. Why are homes built in 1987 less likely to be listed than homes built in 1988? Why are so many homes that are built in 2005 on the market?

I suspect, but can't seem to find anything to correlate the data, that it may be related to historical housing booms and busts. It is my theory that during the peak of the housing boom that the quality of construction may decline because builders are under pressure to complete projects at an ever increasing pace to keep up with demand. As the boom turns to bust, they are free to spend "quality time" building a structure.

One theory that I also considered was related to financing of the homes. Homes that were purchased in 2005 may be financed with Adjustable Rate Mortgages that are beginning to reset. However, this does not explain the peaks and valleys for the older homes. All of the data represents current listings, not the number of homes listed in that year.

Another theory may be purely related to the number homes built during a particular year. If lots of homes were built during 1986, but not so many in 1987, then it stands to reason that an equal percentage of each year will result in a higher count during boom years and a smaller number during less that active years. Lots of homes were built in 2005. During the period of 2006-2009 less homes were built. So perhaps the data is just a reflection of the building cycle?

Take a look at the two graphs. What is your theory on what the data means?

Note: The data for these graphs were all in the 92336 area code. If a larger geographical area is sampled, then the data may be more uniform.

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Inland Empire Sales 1 in 5

The Inland Empire continues to have strong sales numbers, relatively speaking. According to report from MDA DataQuick, and estimated 39,051 homes and condos were sold in California during the month of May. During the same period, MDA DataQuick reports that 7,548 homes were sold in the Riverside and San Bernardino Counties. Also known as the Inland Empire.

That is about 19% of all homes, or 1 in 5, sold statewide were sold in the Inland Empire. So homes in the Inland Empire are definitely moving. With a median price of $137,000 in San Bernardino County its no wonder homes are selling. First time buyers and investors see that real estate in the Inland Empire is the place to buy. Prices are down and you can find great deals.

For those investors that didn't buy during the boom, this is the time when they are buying some of the best deals. in 3-5 years these homes will have provided decent cash flow from a renter and can be resold for a reasonable profit. If held onto for 10 years, you can expect to make more than $100,000 in profit between monthly rents and an eventual resale without trying very hard. Multiply that by 10 homes and you are averaging $100,000/year income. Most people would consider that a good income.

A quick glance at active listing in San Bernardino County that have been listed in just the last 7 days with 3 or more bedrooms and 2 or more baths gives us 354 listings. Here is just a sample of some of the low price leaders.

Click image for a larger version

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Cost of Fuel Saves Miles

Have you noticed that less people are driving around these days in the Inland Empire? The freeway traffic is much lighter as well as the surface street traffic. With school starting, the traffic will definitely be increasing, but overall, the traffic is down. People are eating out less, they are taking that leisure trip to the mall less and just generally not driving if it isn't necessary. I personally believe that it is the cost of fuel that has caused this reduction. I am not happy about the cost of fuel, but I can see that it definitely impacts the behavior of people. I enjoy the reduction in traffic.

As supporting evidence, I present this release from the Department of Transportation: American Driving Reaches Eighth Month of Steady Decline

New data released today by the U.S. Department of Transportation show that, since last November, Americans have driven 53.2 billion miles less than they did over the same period a year earlier – topping the 1970s' total decline of 49.3 billion miles.

…

Americans drove 4.7 percent less, or 12.2 billion miles fewer, in June 2008 than June 2007. The decline is most evident in rural travel, which has fallen by 4 percent – compared to the 1.2 percent decline in urban miles traveled – since the trend began last November.

Weekly Median Asking Price July 28, 2008

The weekly numbers from HousingTracker.net are out again and the trend continues down. This week the median asking price is at $254,900, a reduction of -1.0%. Inventory decreased -2.6% to 45,999. Inventory levels are hovering around the same amount give or take a few thousand. One week they are up, the next they are down.

The median and upper end prices continue to decline at around an average $3300/week over the last 10 weeks. Lower end homes continue their slide but are averaging only about $1700 over the last 10 weeks. Home inventory is declining at an average of about 130 homes per week over the last 10 weeks.

These statistics are for areas that include the major cities of Corona, Fontana, Moreno Valley, Ontario, Palm Desert, Palm Springs, Rancho Cucamonga, Riverside, San Bernardino, Temecula and many others.

Trend	07/28/2008	1 month	3 month	6 month	12 month
Median Price	$254,900	-5.6%	-14.7%	-25.0%	-36.1%
Inventory	45,999	+0.1%	-4.7%	-9.0%	-12.2%

Date	Inventory (SFH + Condo)	25th Percentile	50th Percentile (Median)	75th Percentile
07/28/2008	45,999	$184,500	$254,900	$369,900
07/21/2008	47,243	$185,000	$257,600	$371,175
07/14/2008	45,778	$189,900	$259,999	$379,000
07/07/2008	46,531	$189,905	$264,900	$379,900
06/30/2008	45,947	$194,900	$269,900	$387,500
06/23/2008	47,519	$195,225	$270,000	$389,000
06/16/2008	46,962	$199,000	$275,000	$395,000
06/09/2008	47,297	$199,900	$279,000	$399,000
06/02/2008	46,949	$200,000	$280,000	$399,000
05/26/2008	47,187	$200,000	$285,000	$399,000

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DataQuick: June 2008 Sales by City

Median Sales prices from DataQuick for June 2008.

County/City/Area

# Sold

June 2008

June 2007

% Chg Yr-to-Yr

CHINO	78	$360,409	$500,000	-27.92%
CHINO HILLS	64	$446,500	$630,000	-29.13%
FONTANA	252	$289,000	$435,000	-33.56%
ONTARIO	96	$290,000	$411,000	-29.44%
RANCHO CUCAMONGA	163	$385,000	$523,500	-26.46%
SAN BERNARDINO	170	$168,500	$287,000	-41.29%
UPLAND	55	$375,000	$555,000	-32.43%

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Weekly Median Asking Price: July 21 2007

The weekly median asking price continues to fall. The latest dip was to $257,600, a change of -0.9%, or $2400, that is keeping to within the current normal range. Inventory climbed 3.2% to 47,243. Until the inventory begins to decline significantly the median price will continue to fall.

The area includes the major cities of Corona, Fontana, Moreno Valley, Ontario, Palm Desert, Palm Springs, Rancho Cucamonga, Riverside, San Bernardino, Temecula and many others.

Trend	07/21/2008	1 month	3 month	6 month	12 month
Median Price	$257,600	-4.6%	-14.1%	-25.1%	-35.4%
Inventory	47,243	-0.6%	-1.4%	-1.6%	-9.0%

Date	Inventory (SFH + Condo)	25th Percentile	50th Percentile (Median)	75th Percentile
07/21/2008	47,243	$185,000	$257,600	$371,175
07/14/2008	45,778	$189,900	$259,999	$379,000
07/07/2008	46,531	$189,905	$264,900	$379,900
06/30/2008	45,947	$194,900	$269,900	$387,500
06/23/2008	47,519	$195,225	$270,000	$389,000
06/16/2008	46,962	$199,000	$275,000	$395,000
06/09/2008	47,297	$199,900	$279,000	$399,000
06/02/2008	46,949	$200,000	$280,000	$399,000
05/26/2008	47,187	$200,000	$285,000	$399,000
05/19/2008	46,779	$208,900	$289,000	$399,900

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Dataquick: June 2008 Sales Report

DataQuick has released the Southern California Home Resale Activity report for June 2008. How is your zip code faring? I have included a few of them from San Bernardino County below.

Some interesting items. Fontana 92336 had the most sales of SFR homes in all zip codes with 119. This was followed by Victorville and Hesperia which are just up the hill with 96 and 86 respectively.

The highest median sales price was Rancho Cucamonga with $508,000 followed by Upland at $503,000.

The majority of resale activity was significantly lower throughout San Bernardino County. Countywide prices were down by 37.50%. A few areas bucked the trend. Pioneertown had an increase in median price of 291% and San Bernardino posted the largest decline of -66.9%.

Percent change is from June 2007

Community Name	ZIP Code	Sales of Single Family Homes	Price Median SFR ($1,000)	Price % Chg from June 2007
SAN BERNARDINO COUNTY		SFR	Price	% chg
Countywide		1,787	$225	-37.50%
Chino	91710	42	$360	-28.00%
Fontana	92336	119	$321	-25.50%
R Cucamonga	91701	29	$403	-23.60%
R Cucamonga	91730	28	$335	-28.60%
R Cucamonga	91737	29	$455	-17.10%
R Cucamonga	91739	32	$508	-25.60%

Max		119.00	$508.00	291.00%
Min		1.00	$38.00	-66.90%
25th Percentile		5.75	$157.25	-44.40%
50th Percentile		23.50	$203.50	-33.65%
75th Percentile		35.25	$282.50	-25.58%
Average		26.24	$228.72	-26.22%

Home sales in Southern California are a their lowest levels in two decades. Foreclosures continue to be a large influence on the market with 41.1% of all resales in June. John Walsh, president of DataQuick, points out one of the other problems plaguing this market, the lack of money to lend. Even those that are well qualified find it difficult to get financing.

From DataQuick: Southland home sales drag along bottom

Home sales in Southern California continued at their slowest pace in more than two decades last month as many potential buyers and sellers held off if they could, or struggled with mortgage financing if they couldn't, a real estate information service reported.

A total of 17,424 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 3.0 percent from 16,917 the previous month and down 13.6 percent from 20,166 for June a year ago, according to DataQuick Information Systems.

While last month's sales were the highest in ten months, it was still the slowest June in DataQuick's statistics, which go back to 1988. The June average is 28,488 sales, the peak was reached in 2005 when 40,156 homes sold.

...

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Inland Empire Sales Pick Up

Recent statistics from DataQuick show that the sales volume in the Inland Empire picked up in June. San Bernardino County saw a rise of 1.1% Year-over-Year and Riverside County saw a rise of 11.8% Year-over-Year.

What is driving these sales are primarily foreclosures and dropping home prices. The median prices for the Inland Empire are about 100k less than any other nearby counties with as much as a -34.2% decline in median prices since June 2007.

From DataQuick: Southland home sales drag along bottom

...

A total of 17,424 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 3.0 percent from 16,917 the previous month and down 13.6 percent from 20,166 for June a year ago, according to DataQuick Information Systems.

While last month's sales were the highest in ten months, it was still the slowest June in DataQuick's statistics, which go back to 1988. The June average is 28,488 sales, the peak was reached in 2005 when 40,156 homes sold.

"The mortgage market turbulence is putting quite a bit of activity on hold. Policy decisions about underwriting don't really mean much if there's little or no money to lend. Even some very well-qualified households aren't getting mortgages these days, although this could all change fast if liquidity comes back," said John Walsh, DataQuick president.

The median price paid for a Southland home was $355,000 last month, down 4.1 percent from $370,000 in May and down 29.3 percent from $502,000 for June 2007. The peak of $505,000 was reached in March, April, May and July of last year.

The median has fallen because of depreciation, especially in inland markets, and because of the steep dropoff in home financing in the so-called jumbo category, which until recently was defined as loans above $417,000.

Before the credit crunch hit in August 2007, nearly 40 percent of Southland sales were financed with jumbo loans. Jumbos last month accounted for 16.3 percent of Southland sales are up from 15.7 percent in May.

Foreclosure resales continue to be a dominant factor in today's Southern California market accounting for 41.1 percent of all resales. That was up from 39.2 percent in May, and up from 7.3 percent in June a year ago. Foreclosure resales ranged from 18.9 percent in Orange County last month to 62.3 percent in Riverside County.

The cause of the up-tick, lower prices, may not be the best news, but at least the inventory is moving. Until the inventory of foreclosed homes are cleared out prices will continue to fall. I don't see this happening anytime this year.

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Weekly Median Asking Price July 14, 2008

The latest data from Housingtracker.net shows that the median price continues to fall. The recent slide is a $4,901 or -1.85%. Inventory fell -1.6% or 753. The recent data shows an increase in the average decline. It is still decreasing in the $3k range, but it is now about $3600.

If you are in the unenviable postion of finding it necessary to sell, be sure you start the process sooner than later. Every week you wait, you lose around $3000-$3500.

The data includes the the major cities of Corona, Fontana, Moreno Valley, Ontario, Palm Desert, Palm Springs, Rancho Cucamonga, Riverside, San Bernardino, Temecula and many others.

Trend	07/14/2008	1 month	3 month	6 month	12 month
Median Price	$259,999	-5.5%	-13.3%	-25.5%	-34.8%
Inventory	45,778	-2.5%	-5.9%	-10.5%	-11.0%

Date	Inventory (SFH + Condo)	25th Percentile	50th Percentile (Median)	75th Percentile
07/14/2008	45,778	$189,900	$259,999	$379,000
07/07/2008	46,531	$189,905	$264,900	$379,900
06/30/2008	45,947	$194,900	$269,900	$387,500
06/23/2008	47,519	$195,225	$270,000	$389,000
06/16/2008	46,962	$199,000	$275,000	$395,000
06/09/2008	47,297	$199,900	$279,000	$399,000
06/02/2008	46,949	$200,000	$280,000	$399,000
05/26/2008	47,187	$200,000	$285,000	$399,000
05/19/2008	46,779	$208,900	$289,000	$399,900
05/12/2008	47,403	$210,000	$292,500	$402,500

Weekly Median Asking Price June 30, 2008

The median asking price according to HousingTracker.net continues to fall at an average rate of $3k per week. This weeks decline was only $100 which is only a -0.04% change. This is in contrast to last weeks decline of $5k, a change of -1.8%. Inventory levels are down to 45,947, a change of -3.3%.

I wouldn't get too excited about this weeks apparent slow down in price declines. The weekly average has been pretty consistent. Until inventories take a significant decline, price declines will continue. With the coming wave of loan resets I expect thave inventories may rise. It all depends on how quickly the banks can unload their current properties.

The area being tracked includes the major cities of Corona, Fontana, Moreno Valley, Ontario, Palm Desert, Palm Springs, Rancho Cucamonga, Riverside, San Bernardino, Temecula and many others.

Trend	06/30/2008	1 month	3 month	6 month	12 month
Median Price	$269,900	-5.3%	-12.9%	-22.9%	-32.5%
Inventory	45,947	-2.6%	-5.2%	-7.9%	-11.4%

Date	Inventory (SFH + Condo)	25th Percentile	50th Percentile (Median)	75th Percentile
06/30/2008	45,947	$194,900	$269,900	$387,500
06/23/2008	47,519	$195,225	$270,000	$389,000
06/16/2008	46,962	$199,000	$275,000	$395,000
06/09/2008	47,297	$199,900	$279,000	$399,000
06/02/2008	46,949	$200,000	$280,000	$399,000
05/26/2008	47,187	$200,000	$285,000	$399,000
05/19/2008	46,779	$208,900	$289,000	$399,900
05/12/2008	47,403	$210,000	$292,500	$402,500
05/05/2008	47,960	$215,000	$299,000	$410,000
04/28/2008	48,253	$219,900	$299,000	$415,000

Morningside Real Estate Sales

Homes in the Morningside neighborhood in North Fontana continue to have an average sell price that is higher than the average list price. From June 9, 2008 through June 30, 2008 homes sold have had an average listing of $297,500. For the same period, the average selling price has been for $308,000.

For those of you in the Morningside neighborhood this number might sound very low. It is low compared to your August 2005 value. These recent sales reflect the sale of REO homes and a short sale. These are distress sales and they generally sale for less. Since the majority of listings are REO or short sale listings that then become REO, the value of homes are declining rapidly. If you do not need to sell your home, I suggest you wait until the record high inventory of foreclosures at least stops rising. Until this happens, you will not get what you want.

To find out what your home is really worth, visit our website at www.iejustlisted.net or www.iehomevalues.net.

Weekly Median Asking Price June 16, 2008

The median asking price according to HousingTracker.net continues to fall for the Riverside-San Bernardino area. The cities tracked include the cities of Corona, Fontana, Rancho Cucamonga, Ontario, and others. The median asking price fell by $4k this week and averages about $3k per week over the last 10 weeks. The weekly median asking price fell -1.4% to $275,000. The weekly inventory dropped -0.7% to a total of 46,962 units. This is only slightly higher than it was two weeks ago.

Trend	06/16/2008	1 month	3 month	6 month	12 month
Median Price	$275,000	-4.8%	-13.9%	-21.4%	-31.2%
Inventory	46,962	+0.4%	-4.4%	-7.5%	-7.8%

Date	Inventory (SFH + Condo)	25th Percentile	50th Percentile (Median)	75th Percentile
06/16/2008	46,962	$199,000	$275,000	$395,000
06/09/2008	47,297	$199,900	$279,000	$399,000
06/02/2008	46,949	$200,000	$280,000	$399,000
05/26/2008	47,187	$200,000	$285,000	$399,000
05/19/2008	46,779	$208,900	$289,000	$399,900
05/12/2008	47,403	$210,000	$292,500	$402,500
05/05/2008	47,960	$215,000	$299,000	$410,000
04/28/2008	48,253	$219,900	$299,000	$415,000
04/21/2008	47,920	$224,000	$299,900	$419,999
04/14/2008	48,625	$225,000	$299,999	$423,990

Weekly Median Asking Price

The median asking price according to HousingTracker.net continues to fall for the Riverside-San Bernardino area, but at a slower pace this week. The cities tracked include the cities of Corona, Fontana, Rancho Cucamonga, Ontario, and others. The weekly median asking price fell -0.4% to $279,000. This week, the weekly inventory also increase dropped +0.7% to a total of 47,297 units.

Trend	06/09/2008	1 month	3 month	6 month	12 month
Median Price	$279,000	-4.6%	-12.8%	-21.6%	-30.9%
Inventory	47,297	-0.2%	-3.9%	-9.9%	-6.4%

Date	Inventory (SFH + Condo)	25th Percentile	50th Percentile (Median)	75th Percentile
06/09/2008	47,297	$199,900	$279,000	$399,000
06/02/2008	46,949	$200,000	$280,000	$399,000
05/26/2008	47,187	$200,000	$285,000	$399,000
05/19/2008	46,779	$208,900	$289,000	$399,900
05/12/2008	47,403	$210,000	$292,500	$402,500
05/05/2008	47,960	$215,000	$299,000	$410,000
04/28/2008	48,253	$219,900	$299,000	$415,000
04/21/2008	47,920	$224,000	$299,900	$419,999
04/14/2008	48,625	$225,000	$299,999	$423,990
04/07/2008	49,226	$229,000	$304,900	$425,000

Dow Plummets

The DOW took a dump today of almost 400 points. Oil was up more than $11 before settling at just under $140/barrel. If you have a 401(k) or an IRA, I suggest you make sure you know where your money is invested. If you have been smart and already made sure your investments are placed in "safe" and diversified investments, then I suggest you just don't look at all!

Recent headlines have been concentrated on how much the market has dropped over the last several months. Some places dropping double digits. Many think a 30% drop in housing is the worst that could happen. I submit that a 30% drop in housing was needed and not nearly as bad as it sounds.

The DOW dropped 3.13% in one day. On the surface, 3.13% doesn't sound that bad. When you annualize it, the figure becomes a bit more daunting. A 3.13% drop in one day annualized is approximately 48,482%. I am rounding, but I think my rounding error can be forgiven.

Just don't look at your portfolio and you will be ok. If this drop had occurred over 5 days, it wouldn't sound nearly as bad. It is only about 8.5%. Unless you need your money today or in the next 10 years, you should be fine. If you plan on retiring in the next 10 years you should already have determined your retirement strategy and how you are going to preserve what capital you have left for retirement. Working part-time to pay the bills doesn't qualify as retirement.