SoCal home sales now 54% below peak

Southern California home sales continued to slump in July, falling 27% from year-ago levels, and are now running 54% below peak levels reached in July 2003, DataQuick reported today.  Some industry experts have warned that August sales may be even weaker, given the widening credit squeeze that has spread to non-subprime mortgages.

The only area of sales growth: foreclosed houses, which now make up 8.3% of the Southern California home sale market, up from 7.7% in June and just 2.0% last July, DataQuick reports.

"The last time we had sales this slow, Southern California had been in recession for a few years. Jobs were being lost in droves, people were leaving the area and home prices fell significantly. This time around we haven't seen that, sellers are holding out and we can only assume demand is building up," said Marshall Prentice, DataQuick president.

For the Southern California region, sales were the slowest since July of 1995. Sales were particularly weak in the Inland Empire, where sales are down 42% from year-ago levels.

The DataQuick numbers show continued price increases in parts of the region -- median selling price in LA, for example, inched up from $545,000 in June to $547,500 in July. But DataQuick has said for some time now that those numbers are misleading, because lower-priced homes are not selling, creating the illusion that overall prices are rising.

"When adjusted for shifts in market mix (i.e. fewer lower-cost homes selling now), year-over-year price changes went negative in January and are now roughly three percent below year-ago levels. The declines are in the lower half of the market, while prices are flat or even increasing in the upper half of the market," DataQuick said.

That said, the DataQuick numbers show declining median sales prices in the Inland Empire, and many analysts expect further price declines across the region: "A decline in prices, like increases, tends to be self-fulling," Michael Carney, head of Cal Poly Pomona's Real Estate Research Council, tells the LATimes here. "If buyers see prices falling, they hold off and don't buy and cause prices to fall even further. But it takes a while.

 

Photo Credit: Reuters

Comments

[Yipshnip]

Please! LA is wonderful. Like anyplace in the world, you find what you look for.

I find it hilarious that the realtors are saying "demand must be building up". All of us who have been on the sidelines for the past few years have been watching what I've been calling "internet fever". The passion with the home buying thing has been the same as the internet stock buying thing of the late 90's. We all know where that led.

This real estate thing is going to get MUCH uglier, and I can't wait!

[Pete Viles]

EagleroickinLA -- Why did we post yesterday that median prices fell in LA? Yesterday's post was about LISTING prices. ASKING prices. And they are falling. Today's post is about median SALES prices, which continue to move higher even though just about every economist agrees that prices are flat to falling. We've told this story a million times, but we'll tell it again: median sales prices are rising not because houses are gaining value, but because lower-priced houses are not selling. When you take some lower-priced houses out of the mix, the median rises, giving the impression -- a misleading impression -- that prices are rising. Sorry if it's confusing.

[MyLessThanPrimeBeef]

Actually, if the agent was smart, he'd switch over to foreclosures. There will be tons of money to be made in that arena as soon as the lenders come to their senses.

[LA-renter]

Sounds like it's not so much who as what to blame.

Here's my recipe:

I'd say a 1/4 cup of greed well mixed with a 1/2 cup of anxiety,
and folded into a 1/2 cup of envy,
and then rolled in 1 cup of gullibility.

This is California, so swill it down with a glass of wine.

[chet]

yesterday's median housing price post was a combination of single family housing and condos. Today's is single family housing on it's own...

[hangzen]

Yada yada yada....

I'm just waiting for all my neighbors to lose their houses in forclosure. Then I'm going to buy them all up and rename it 'Pottersville'.

[Ezekiel38]

The real estate depression will be insanely profitable to the very liquid investor.

[David]

From Marshall Prentice, DataQuick president. "We can only assume demand is building up" Was this idiot the publicist for eToys before he got this gig?

[Ken P.]

One consequence of the buble bursting is the multitude of realtors. For awhile, it almost seemed like there were more realtors than wanna be actors. In Pasadena, its no exaggeration that we probably had 2 or 3 realtors for every house in town. That is probably changing now. They'll probably have to go back to being wanna be actors.

[ray]

What do you think will happen when illegal immigrant homeowners are forced to leave or sell their properties? How nice it will be for them to walk away across the border leaving us holding the bag.

[tv2112]

Ahh. I left San Diego in 1989 and never looked back. I love my 2000 SqFt house on 1.34 acres for my whopping 638 a month. California is a great place to visit but I would never live there again. Dang Libs ruined it. Better fishing, hunting, and lower crime in the Midwest. And I love the concealed carry laws out here too.

[kim]

If there are people stuck in $550,000 1200 square foot houses that are now losing their homes or are upside down by tenes of thousands then shame on them. There is no where on the planet I would pay that kind of money to live in a three bedroom home. For that kind of money where I live, you can have your own lake, and 5000 square feet. This madness was going to have to end. Working families (cop & nurse, accountant & teacher, etc.) cannot possible make enough money to live a decent life and crack a $3500 nut every month. This was bound to happen and these fools who are stuck in overpriced homes were part of the problem because they paid outlandish prices that drove up the market.

Not to mention that So.Cal is turning into a Mexican sewar. Good luck you guys.

[Global Studies Professor]

Hi BetterVillage,
Thanks for the question. Based on my field research within the new-immigrant communities coming from China and Taiwan... the urban global centers are still desirable. Mainly because having a foot here in the U.S. is a safety net for them. China has lots of billionaires and millionaires now and more to come as it is not as socialistic as many people think. We need to start talking “globally” and not just “locally”. Transnational citizens are moving, buying, and staying… this will keep the inflated North and South Cal real estate markets up…. Sure, there might not be increases in value like we experienced recently, but there will not be a sharp decline either as many hope… at least not in “global cities” (e.g. SF, LA, NY, etc.). Plus, rich Asian investors know about the situation, and they too are waiting on the sidelines to come in and buy when the market is at the bottom… they buy as investments, not with the idealistic notion that it is a “home” because they live in multiple countries. Look for investors from South Korea, China, Taiwan, and India.
The other part of this equation is the poor level of U.S. education re: science and technology. Taiwanese, Chinese, and Indian graduates are graduating with degrees in engineering by the thousands, while the U.S. is way behind. As a result we import a lot of our engineers, who then buy up homes in the urban centers because that is where the high paying jobs are.
You ask about the urban congestion… our urban congestion is nothing compared to what it is in global cities like Taipei, Beijing, Shanghai, New Deli, etc.
New transnational immigrants are moving in, they have high levels of capital, and are a huge force in transforming local regional real estate.
I’m not suggesting that this is happening everywhere in the U.S. but only in global cities where there are high paying jobs that are high density. Places where there are good universities and places where immigrant communities have been established. In LA county, this would include such areas as Monrovia, Arcadia, Hacienda, etc. Prices might fall, and the subprime barrowers may loose their home, but there are lots of ready Asian investors waiting to come in.

[kim]

To the person who said this is the same all over. You are wrong. Property values where I live have been steady and are still steady. We had no boom and we've had no bust. People might be considered backward here in West Virginia but we aren't stupid enough to pay half a million dollars for a 1500 square foot home. Likewise, despite what people think, there is a very good way of life here. We have scenic beauty, no problems with illegals turning our nieghborhoods into sewars, low crime and a working family can buy a beautiful roomy home with acreage and privacy for little more than $100,000. I have a paid for house in Charleston and a log home in the mountains, by a river where it's so beautiful it would make you cry. And my household income is $115,000. I lived in San Francisco years ago and it was no better then. Although I loved it there, I could never see living my life out there struggling and broke just to pay for a place to live.

[Kathy]

The median of all homes sold in the county is not really a good baseline to go by, not when you have a David Beckham or Peter O'Malley purchasing a home for 20-30 million. The Case/Shiller median index is a more accurate depiction of price, based on tracking the same home over time.

[Jeff]

So in 1980 a house sold for $70,000, which now sells for $700,000. Lets see - a blue collar worker is making 10 times more than 1980 - yeah right. What's that? Social security will be bankrupt in 15 years...The prices on houses are so over inflated that $700,000 house will soon be worth $300,000... So sorry for you!

[Global Studies Professor]

Kim,
"So. Cal is not turning into a Mexican sewar" (which by the way is spelled "sewEr".
So. Cal is diverse, and pluralistic, and a key actor in the global economy. Your comment is offensive and speaks volume about your mentality.
Good luck to you.

[Don Robertson, The American Philosopher]

The paradigm, "The payments you can afford." was never tied even remotely to the reality of the value of the real estate.

Those who bought, and still own, or who have suffered the humiliity of foreclosure, each of you have affirmed the widespread and readily acknowledged idiom, that there is a sucker born every minute.

And if you do not believe it, consider that now welfare's section 8 will by you a house, no monye down, and no payments for you to make either.

Don Robertson, The American Philosopher

[Roger]

For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.
1 Timothy 6:10

From religion to the secular world, the love of money and also covetousness is evil and causes sorrow and grief.

[Cal]

I love the "rich immigrant" coming to save all the homeowners argument. Just too funny.

[BetterVillage]

Global Prof,

Have you pubished your findings anywhere? If so, do you have a link? My anectodal experience is that there have been high net worth buyers coming from all over the place and purchasing both homes and commercial properties.

They definitely helped push up the values at the upper levels. If they come in with tons of cash, I could foresee them scooping up property all over the place by outbidding the local folks with all cash, higher offers. If we just outlawed property purchases by foreign buyers, do you think our situation would improve in the long run? The Chinese would have a fit, I'm sure and threaten to pull their trillions away again, but seems like we've become economic puppets to foreign economies.

I think it would take just one generation to improve education and create the sort of homegrown workforce we need, but that would take more than just lip service, and more than a huge leaky educational sieve like we have here in Los Angeles for example -- 100's of millions into the pockets of developers, consultants, attorneys, lobbyists, etc. Not to mention: Where the hell is all that lottery money going that was earmarked for education? A few years back I tried to find some account of how much was actually flowing to the schools, and how it was being used... and found nothing. Maybe we're getting shocked out of our apathy to the point where people will demand REAL reforms.

[DIon]

Is this going to spill into the Canadian Market as I was looking for property in lovely BC and would love to buy if it gets this low.

[BetterVillage]

Don,

Was that comment about section 8 housing "sucker bait"? If true, in which areas?

I heard through the grapevine that there was a waiting list of over a year for section 8 housing... and that in recent weeks they haven't been even adding people to the waiting list.

[Pier Johnson]

False beliefs abound. There are many tall tales here, few truths. Let's set the record straight.

Massive inflation by the Federal Reserve created an outrageous amount of dollars. Typically, we would see this show up as higher prices for trinkets.

Yet, because of Chinese goods sold in Wal-Mart, excess dollars pushed higher prices in paper contract assets and realty. This alone is the cause of the Realty Bubble.

The bubble popped.

Realty prices cannot exceed the cash flow necessary to support mortgage payments for very long.

Southern California wil be a place where Americans and foreigners alike will want to live. The climate of Southern California exists only in a few other places -- Capetown South Africa, Perth Western Australia, a stretch of Chile. Americans dream of the sun and Hollywood.

Yet, prices outrageously raced beyond the income to support mortgage payments .

Prices and sales will fall for a time to come.

[Alex]

Don Robertson -

Love your comment about "payments you can afford." It reminds me of when a saleman says "how much are you looking to spend?" I guess there can be an honest application of it, but when I hear that sort of talk I just want to RUN!