Sharp drop in L.A. listing prices

For the fifth week in a row, median listing prices in the greater L.A. area dropped, this time by $3,000, according to Housing Tracker's analysis of MLS listings.

Stats: Median listing price dropped to $525,000, a decline of $14,000 since early July, and 7.9% over the past year. Inventory spiked again, rising by more than 600 listings to 45,168 listings.

Date         Median Price             Inventory
4/16         $545,000                 35,489
5/14         $545,000                 38,297
6/11         $540,000                 40,766  (up 20.4% y/y)
7/16         $535,000                 42,685 (up 14.5% y/y)
7/23         $535,000                43,225 (Up 14.5% y/y)
7/30         $530,000                 43,676 (Up 14.0% y/y)
8/6          $529,900                  43,989  (Up 14.1% y/y)
8/13        $529,000                  44,483  (Up 13.6% y/y)
8/20        $528,000                 44,451 (Up 13.0% y/y)
8/27        $525,000               45,168 (Up 13.2% y/y)

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Photo Credit: Reuters

Comments

[Jonah]

Sharp drop to me is 50k! :) :)

[RealPro]

Notice that the trend in falling prices is accelerating.

The supply is increasing. Houses are not even selling at lower prices. Appropriately priced credit or even available credit has evaporated. Potential buyers can not even purchase if they wanted to.

And who would want to buy if you could buy a much better home for much less in a year? Especially when the bank owned houses will come on the market as rentals because they can not be sold. Rent the same house that the bank foreclosed on for half the payment!

In a "good scenario" for homeowners, in 8 months, the median price will be about $415,000 with an inventory of 62,000 units. In a bad scenario the prices will be in the $300,000s! And falling. In 2 years time, who knows?

Popped investment bubbles always "over correct", meaning that the prices fall below the fundamental value. The fundamental value of a home is what LA wage earners could finance. Even with increasing wages over the current about $50-$60 k income average, that would be a median home price of about $250,000. Or less than half.

Incredible. This is just the beginning of a real bust.

The time to sell has passed. And it is not yet the time to buy. The residential real estate markets are fundamentally changing from providing a new asset class for Wall Street to securitize to once again providing "shelter" at a cost based on a buyer's income. Mortgage bonds and residential real estate are no longer asset classes that others will float. The buyer has to float all the costs based on their income ( 3 to 4 times annual income or somewhat like they use to).

This will be a blow out. Big time. So the next 2 years will be the time to suffer (for current owners) and wait (for buyers). The real pain is starting.

[Pete Viles]

Jonah wrote, "Sharp drop to me is 50k!"

Be patient, grasshopper. 3k a week is 156K in a year. (I did that without the benefit of a calculator).

[MyLessThanPrimeBeef]

Most people prefer short, sharp pain to long, drawn-out water torture, which is why we are getting the latter: no V-shaped correction typical of the stock market and mostly like no over-correction to below fundamental value - the scenario least liked by bargain hunters - and therefore most likely to happen.

I can just seei t now: after an intial drop, home- and land-appreciation stays flat for so long until one day in the distant future, when kids would ask their grandparents, 'Was land really flat when you were young?'

Yes, folks, we are about to become Flat-Landers.

[vultur]

looking at a prime westside condo...ask is $2.3 mil...been on the market since march...gonna get below $2 mil?

How's that market holding up? Anyone with intimate knowledge?

[1]

It has a long, long way to go.

[JK]

With the tightening of the lending standards, does anyone know if in 2 years I will be able to get into a home with only 10% down and a 797 FICO? or will I have to come up with 20%? It makes a huge difference when you are a single person.

[John T Watts]

The numbers may continue to drop for a long time and they may not. Maybe there are some individuals out there who are already doing their homework and buying the right properties on the courthouse steps and some REO's from the banks. Once the bottom is reached, prices may rise again rapidly and some opportunities will have been lost. Some will have started personal fortunes. Others will have waited too long. Anyone have a crystal ball?

[ivamarie]

JK...

Though I'm married, my husband and I have a similar financial picture -- we've got enough for maybe 10 percent down and have excellent credit.

I think some lenders will allow you (or encourage you) to take out a separate loan to cover the rest of your down payment. (So if you have 50K for 10 percent, they finance a loan of 50K for the other 10 percent.) These loans are shorter-term, maybe 10 years. I don't know that they even fall in the same category as mortgages. Then, with your 20 percent down, you get the remaining loan for 30 years for your mortgage.I think the assisted 20 percent can also help you get a lower interest rate on your traditional. I don't know that this still happens but it has been proposed to us as a solution to not having 20 percent down.

We want to start shopping in October (I know there will be people booing me but we're ready to get in the market and know we'll stay in a house long enough not to lose money -- and we don't feel we have to make money hand over fist on the home.) so we haven't done prequalifying yet but I'm hoping the solution I depicted above will work. I think with documented income, a sum of money that shows you were able to make it to 10 percent down and a willingness to take on a traditional loan rather than something with resets, you should be able to get in, especially 2 years from now.

Does anyone else know about this type of financing?

[MyLessThanPrimeBeef]

Ivamarie, ask the seller to carry a second.

[ivamarie]

My Less Than...

What do you mean?

[Pat]

The recent posts here got me thinking about PMI. With the rising defaults, one would think that PMI payouts would be rising too. Who is on the hook for PMI? Since it is insurance and the rate of using it is rising, shouldn't PMI rates be rising too? Wouldn't this add to the costs of not having 20% down and keep people like the above out of the market (or force them to consider properties at half the price they are considering now)?

[MyLessThanPrimeBeef]

Ivamarie, sellers can be lenders as well. Sometimes, you see ads where a seller will lend the buyer 100% @ 0% interest. I stay away from those. But there were times before, when loans were hard to get, that sellers lend back part of the purchase price, secured by a second trust deed.

So, for example, if you have a deal at $500,000 and if the appraisal comes in OK, but you only have $50,000 for 10% downpayment, you can still get 80% loan to value by borrowing the other $50,000 from the seller.

[ivamarie]

Thanks, MyLessThan...

I didn't realize that this existed. Can there be legal issues with borrowing money from a home seller? Are the terms usually over 10 years and do the loans go through a bank? (I would imagine I wouldn't just be paying the person back, but who knows.) Or are you talking about these only related to new home construction? Sorry for all the questions, this is just new to me!

[JK]

Thanks ivamarie, I'd rather just wait to save the other 10%. I only have $50,000 but I figure that in 2 years, the prices will have dropped enough for me to have saved another 10,000 or so and have that comprise 20%. I only make $80,000 so I won't qualify for much, but it has taken me years and years to save what I have and I don't want to lose it to creative financing, just want to go traditional all the way.

Pat, why are people so bent on keeping "people like us" out of the market?

[MyLessThanPrimeBeef]

JK is right. But if you must buy now and don't have enough for 20% downpayment, you can ask the seller to loan you some money. If you are really interested, you should ask your broker.