Chuck Ponzi April 15th, 2005

When people in southern California look back on this period, they will be able to characterize this time as having attributes of both illiquidity and disinformation.
Illiquidity
The most recent numbers for San Diego from Sandicor are just in, and it looks interesting. Sales are flat, but wait… the inventory numbers paint a particularly telling picture. The new inventory on the market was greater than 7000 units. Although this number by itself is not surprising; we have seen higher numbers in the past 5 years… by only in May through July. In fact, Sandicor’s statistics for the past 5 years show that they have not had that many units added to the inventory in March on record.
What’s even more interesting is that sales are flat, if a little down compared with a year ago. With all of the anecdotal information out there, it appears that the demand is made up of the “last ones in” trying to get into the market before interest rates go up. And, where is all of that growth that we were told about? Maybe they’re renting for less than half price, 45% of the cost of owning, by the reckoning in the WSJ.
Lastly, average days on the market is averaging about 60 days - not near the less than 30 days we had less than a year ago.
So, for this section, what do you get when you increase supply, keep demand the same (down in the future), and increase the number of days it takes to sell a house? That’s right.. Illiquidity. Speculative real estate bubbles always enter a period of illiquidity right before they burst. This is the signal to real estate speculators, or “flippers” as they are affectionately referred to, that they need to move their property now to avoid losses from holding costs.
Disinformation
There have been numerous articles in area newspapers, and even listed on www.realtytimes.com that we have entered into a “balanced” market… The use of this word is so ubiquitous that I think real estate agents must be cloned from some evil spawn.
The market is anything but balanced. When you have the highest increase in inventory that you have on record, trending upwards, and flat sales with every real estate agent is telling you that the market is “balanced”, what is that? That’s right…Disinformation. Intentionally misleading statements intended to push more buyers into the mix.
Will this work… I doubt it. The past few years have been a fringe buyer’s heaven. Low rates made them believe they could afford more than they could before. Speculators restricted supply, and prices went up. If interest rates go up, locking out fringe buyers and speculators offload their inventory, the bubble bursts. Without rising equities, trade-up buyers are not able to move up.
Conclusion
I’m not trying to convince you that a bubble exists. Go out and do the research yourself. Do I rely on “real-estate professionals” for opinion? In a word no. Much like the stock analysts that pump worthless stocks, real estate “professionals” have a vested interest in selling more and more homes. Prices are not as important as churn to them. If you ask a real estate agent what to do in an up market, he tells you “buy”. If you ask the same agent what to do in a down market, he tells you to “buy”. And you still believe them?

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