We've Crested the Peak

After years of run-ups and double-digit appreciation in the real estate market, I think it is safe to say now that we've crossed over the peak of the mountain and are ready to begin our trek down. Anecdotally, I've been noticing this here in San Diego for several months now, with homes staying much longer on the market, with prices being reduced, with the sharp increase in the number of 'For Sale' and 'Open House' signs. 18 months ago you could just slap up a 'For Sale By Owner' sign in your front yard and have he place sold within a week. These days, though, I see dozens of 'Open House' signs on the corner each weekend... one condo conversion project down the street has even employed sign flippers to stand out on a corner and toss the 'Condos For Sale!' sign up into the air, in a lame attempt to sell.

My sentiment and observations appear not to be just a SoCal thing. From
Slowing Is Seen in Housing Prices in Hot Markets, authors David Leonhardt and Motoko Rich note:

A real estate slowdown that began in a handful of cities this summer has spread to almost every hot housing market in the country ... More sellers are putting their homes on the market, houses are selling less quickly and prices are no longer increasing as rapidly as they were in the spring... Brokers said that some houses seemed to be on the market longer because sellers priced them too high, assuming that their value was still rising sharply. In other cases, people who otherwise would have waited a year or two to sell their homes - like empty nesters ready to move into smaller quarters - had listed them now out of fear that prices would soon fall.

Too many sellers asking too much money and not enough buyers. In addition to this fact, lenders are tighening their credit standards, making the "easy money" of past years harder to come by. Couple that with the rise in interest rates, and it's no surprise that home prices are facing a decline.

One of the best ways to guage the fiscal health of a sector or business is to examine what the top brass are doing - how are the CEOs and board members positioning themselves? For real estate, the picture is dire, as "executives at big home builders have sold almost $1 billion worth of company stock this year." Eep. I pity the suckers investors that bought those shares.