Clues

caturday
Creative Commons License photo credit: me and the sysop 

I think it might be Monday. A working real estate agent can never be sure. Much of the rest of the world identifies Friday as being the day before a day off. Applying this methodology, my Friday will be the day before I retire. And given that I just received a letter from Exxon informing me that the Option ARM on my most recent tank of gas is about to reset, Friday isn’t coming any time soon.

So, it must be Monday. I am pretty good with identifying Saturdays and Sundays. Those are the days when I see teenagers roaming the house. I think they’re mine; they look a little like me. These teenagers, I have come to understand, don’t have school on weekends. Or, maybe they have already graduated. I’m not entirely sure. I’ve been busy.

No, I’m pretty sure I can still spot a Saturday or Sunday a furlong away. These are the days when, as my Grandmother would say, everyone goes visitin’. It’s not the pie on the window sill that signifies an open invitation, but the sign in the yard. And the flags. And the balloons. And the seventy-eight other signs with flags and balloons at the corner. Each door is marked lest they get passed over. Just Listed! Reduced! I’m Gorgeous Inside!

Open 1 to 4! Yep, it must be a weekend.

We held three open houses in San Diego this weekend, two in Scripps Ranch and one in Mira Mesa. With a formidable power team consisting of two buyers’ agents, Steve, and me, I became the odd man out. Our buyers’ agents, of course, each got the nod. Steve was insistent that he take the last spot. The conversation went (always goes) something like this:

Steve: I’ll do it.
Me: OK.

It’s like a little election process, and each voting day can find me hiding in the coat closet. Once again having successfully dodged the bullet and with all of the big slots are filled, I was relegated to the role of historian, but that’s just back story. The real story is in the little clues that we are able to pick up on Sunday (or was it Saturday?).

You can arguably learn more about market direction from sensing the pulse than by studying the numbers. The pulse continues to be just, plain weird. We had three very different homes open yesterday in very different price ranges, but all within two miles of one another. Each is a newer offering. Historically (I am the historian, after all), lower priced homes have attracted more interest at open houses. This is because the buyer pool is traditionally greater for the more affordable product. However, I sense that affordability has been redefined in our current market. Here are my clues:

Home #1: $149,000, 1BR/1BA, 4 visitors.
Home #2: $485,000, 3BR/2.5BA, 6 visitors.
Home #3: $1,199,000, 5BR/3.5BA, 20 visitors.

You don’t have to know what day it is to see the paradox. In a recent comment here, Price/Rent (if that really is his name) said:

Scarcity effects are what drive bubbles. People want to buy before it’s gone! Oh no! There’s only one condo left in that building! I better buy it, before someone else does!

I believe that is part of it. Our million dollar baby is more unique in this market. There are fewer homes competing in this class than in the entry-level category, the latter having been hammered hardest by the mortgage mess. More lower priced home sales are now being controlled by the banks, and more offerings are available. There is a lesser degree of urgency.

Coming from a different angle, Commenter Sven said:

My personal theory is that higher priced homes are usually owned by wealthier people (duh) and wealthier people tend to be more responsible with their money. (or they wouldn’t be wealthy for long) Because of that, they probably didn’t overextended themselves as much, and are less likely to slip into foreclosure.

The corollary would be that buyers in higher price ranges are less effected by tighter underwriting guidelines and higher interest rates. It’s a different scarcity argument, and what is scarce right now is the loan with little or no down payment, the loan with poor credit, and the loan with undocumented income. These are the loans that drove the lower-end markets over the past several years, which in turn fueled the market for the next price point. And the next.

None of our clients’ homes sold yesterday, and even a historian can’t predict the future. Will the challenges of the lower priced homes trickle up over time to the higher-end markets? There is an adage in real estate that “so go the condos goes the market.” Or, will the higher priced homes continue to be more insulated while we flush the distress sales from our inventory and begin to return to more measured buying and selling and lending times?

Those teenagers just left the house, and they were carrying a whole bunch of books. Either they both got jobs at Barnes & Noble or it’s Monday. I have a lot of little clues. If only I knew what they were telling me.

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