Median listing prices slip by $9K

Median listing prices slipped again in greater L.A. over the past week, dopping by $9,000, to $500,000, according to Housing Tracker's weekly analysis of MLS listings.

Inventory of for-sale homes slipped by 472 listings, to 46,710, but remains 16.5% ahead of year-ago levels.

The median price drops are significant: Median prices have now dropped $79,666, or 14%, from peak levels of April 2006, and have dropped $45,000, or 8%, since early April of this year.

Date          Median Price            Inventory
4/06          $579,666                 27,251
4/07          $545,000                 35,489
5/07          $545,000                 38,297
6/07          $540,000                 40,766 (up 20.4% y/y)
7/07          $535,000                 42,685 (up 14.5% y/y)
8/07          $529,000                 44,483 (up 13.6% y/y)
9/07          $520,000                 46,414 (up 16.9% y/y)
10/8/07     $514,900                 46,219 (up 15.1% y/y)
10/15/07   $510,000                 46,603 (up 15.6% y/y)
10/22/07  $509,000                  47,182 (up 17.0% y/y)
10/29/07  $500,000                46,710 (up 16.5% y/y)

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Photo Credit: Reuters

Comments

[Steve Reynolds]

It's like watching a stock in freefall. What's that old saying about trying to catch a falling knife? Anyone care to guess where we get some support levels, maybe in the high $300,000's. I think we're going to see a definite division of the city, those areas that are considered safe and have decent school districts should hold up fairly well. Those areas that are mostly low income or working class with rough school districts are really going to take the brunt of this. I can't see the high deserts or the low income areas of the valley sustaining anywhere close to these levels. However, I can see places like La Crescenta and Redondo Beach keeping their levels up. If you're a buyer now, no way are you going to bail out a bad decision made by an inexperienced seller, you have the pick of the litter.

[Jeremy (jemarqu)]

I knew that the median prices were dropping slowly but it finally hit me how hard prices are falling. The best part of this whole deal is this is just the beginning.

A lot of people are in complete denial about this bubble. I heard a co-worker in the office say "If your house is worth 500k it will always be worth 500k, the price will never fall. It may just not go up anymore". I have learned not to argue with the misinformed anymore. In time people will realize the true state of the real estate market.

[mark]

prices will be maintained and determined by financing.Since there is no more financing the floor of support for prices has disappeared and so will prices.Scam Financing is what supported the bubble on the way up.And guess what? it will determine the prices on the way down.And its a long way down.We have just started the meltdown.Reseda and most valley hmes will be in the 150-250k range within 2 yrs.Thats all they are worth intrinsically.Scruffy neighborhood,smog,traffic,gangs-why would you pay any more?
Remember to buy a home in the high 300s you need a minimum of 40k in cash for the downpayment and most likely 80k...Anybody who is smart enugh to have 80k in savings didnt save that money by being a financial moron and they know that investing 80k in a nosedive real estate market is a dumb idea.Not to mention investing in a rough neighborhood.
Also remember when you have to cough a 10 or 20 % downpayment all these home buyers begin to realize that wow,200,300,400k is a lot of money.You didnt have to think that way when you were getting 0% down scam financing.

[Steve Reynolds]

"The best part of this whole deal is this is just the beginning"

Jeremy,
Let's get one thing straight there is no best part of this. This is the cold facts of a free market, there are many families that are going to be financially ruined for many years. I know everyone wants to beat up on the flippers, but many of these buyers are young families just starting out and their entry level into this market was in the $500,000 to $600,000 level. I personally know one friend who is struggling every day to keep his home, he has a new wife and a child on the way and he is working his butt off to try and live a normal "American Life". One more thing chances are you will not be insulated from the effects of this, companies and even governments need revenue to operate. Yes, govt can tax but if a person can't pay they still can't pay.

[MyLessThanPrimeBeef]

I believe $500K is an important psychological support level.

And the way we are approaching that, at maximum velocity, we could be looking at 38.2%, 50% and 61.8% Fibonacci retracement levels soon eough. (disclaimer - I am not a chart technician, so please don't ask me to explain what that means.)

BTW, CNNMoney has an article about the other debt bomb - credit card debt - at $915 billion, that's billion with a 'b,' which is, as the article points out, uncannily similar to the $900 billion subprime debt bomb that detonated this summer.

http://money.cnn.com/2007/10/29/magazines/
fortune/consumer_debt.fortune/index.htm?cnn=yes

[mike]

everyone answering this blog is an armchair quarterback. why don't you admit that you have no more clue than i do about where the market is headed. i'm willing to bet that you also said prices could not possibly go any higher in 2004.
most pepole base their opinions on what they would like to see. most people like to see others fail or lose.

[Jeremy (jemarqu)]

Steve Reynolds wrote: "Let's get one thing straight there is no best part of this. This is the cold facts of a free market, there are many families that are going to be financially ruined for many years. I know everyone wants to beat up on the flippers, but many of these buyers are young families just starting out and their entry level into this market was in the $500,000 to $600,000 level. I personally know one friend who is struggling every day to keep his home, he has a new wife and a child on the way and he is working his butt off to try and live a normal "American Life"."

My parents foreclosed when I was living at home. It was a rough time but it wasn't the end of the world. My parents foreclosed because my dad lost his aerospace job not because he purchased more home then he could afford.

I do not feel sorry for young people that purchased more home then they could afford. I have been in a position to buy for the past 3 years and i haven't. It didn't take a financial genius to figure out that these prices were not sustainable. If your friends do lose their home, the worst thing that will happen to them is they will become a renter like me.

[MyLessThanPrimeBeef]

Mike, when you say most people like to see others fail or lose, do you mean you, yes you personally, like to see other bloggers wrong...that is, fail or lose?

[mike]

good morning "less than chuck roast" if you had read my comment you would see that i have no real opinion at all and that i am also willing to admit a lack of knowledge. which many others cannot seem to be able to do. and the answer is no. i don't like to see others fail.

[ProblemWithCaring]

"if you had read my comment you would see that i have no real opinion at all and that i am also willing to admit a lack of knowledge.'
Posted by: mike

I, for one, appreciate your honesty, mike.

[MyLessThanPrimeBeef]

Steve, people get hurt trying to squeeze into an tiny entrance door.

Then they get hurt again trying to squeeze out of that same door which is the exit now.

In the meantime, there are other problems. The room is filled with foul air and sick people because they can't afford a doctor.

We are all going to be affected.

[MyLessThanPrimeBeef]

Mike, thanks for answering that. I have learned something today that I didn't know before, I admit.

Just another question: For people who lack knowledge, are they more likely to ask questions or answer questions (i.e. make assertions)?

[Mark]

I'm with Jeremy. People file for bankruptcy and/or lose their homes every day. Sure, it's stressful, but it's not the end of the world.

Homeownership is great, but I think our country places too much emphasis on owning a home, and this is one reason why people get into financial trouble. They sacrificed everything to become a homeowner when they probably would have been much better off remaining a renter.

[dog-walker]

"However, I can see places like La Crescenta and Redondo Beach keeping their levels up" -Posted by Steve Reynolds

"prices will be maintained and determined by financing." -Posted by Mark.

Re Steve: Some people have been describing a "two tier" market in an increasingly class divided society, and suggesting that higher priced homes and areas won't fall as much b.c. the wealthy wedge of the economic pyramid are relatively immune. This is an interesting argument (as well as a chilling prospect.) In the area where I rent (Melrose/Fairfax), recent developments (The Grove, West Hollywood Gateway) and the general bubble prosperity seem to have changed this area from one where the wealthy few felt uncomfortable (bars on the windows, graffiti, etc.) to one where they'd like to own. According to the two tier theory, that would somewhat inoculate this area to depreciation. I have two questions about this: 1. What portion of the price run up in areas like this (we can called them "gentrified" areas) can be attributed to the actual creation of value. That is, what portion is due to the fact that the houses are actually now more desirable? And what portion of the run up can be attributed to the bubble psychology of fear and greed? Any ideas about how to parse that out?

Re Mark: I hear this argument often and don't think it's entirely right. The whacko loans made it possible for many more people to participate in the fear/greed frenzy, which, when it's going up, feeds on itself. But when it's going down, the reverse psychology applies. Even if people COULD get the financing again, how many would want to once they see so much blood on the pavement? Lately, if you went to a party at someone's house and they said they bought it three years ago, everyone in the room would turn green with envy and wish they'd bought one too and think about calling a broker. Soon, that same person won't want to talk about buying the house, but if they do, they'll be looked at with sympathy and probably more than a bit of schadenfroude (however the hell that's spelt!) Might that effect outweigh financing?

[longdriver]

The good areas will still fall. The same arguments were made 15 years ago. I had friends that lived in PV and Redondo that argued about they location making them immune to the downturn. It made them immune for a year or two but the wave eventually caught up to them and thier homes fell in value just as much as mine. Now I'm hearing the same thing again. Are those areas any more "special" than they were in 92? No, hell they are probably less desireable. Anyone driven through Redondo lately? it's a friggin nightmare in that area. Traffic sucks many of the nice areas that had reasonable sized homes now have big monsters or two homes on one lot. It's overbuilt and crowded, the charm is gone in many areas. It's also miles from the freeway and getting anywhere outside the area takes forever. This slow motion tsunami will eventually affect all areas.
We have been brain washed into thinking a 700k home is a deal by the last 5 years of this mania. Now millions of people are coming to grips with the fact that 700k is a lot of money. More than most can afford, way more in fact. The next few years will reinforce the fact and average joe's will again realize that they can only afford a 250k home. Sure this bust is bad news for lots of people. I have a hard time feeling sorry for them. I know how much home I can afford. Why didn't they? On the flip side, just as many people will benefit. Once homes fall back in value more people will be able to afford to buy. Many young families will be able to buy without spending 80% of thier take home on a mortgage payment. Did anyone really think that after 5 years of 30% a year gains this would not happen?

[mark]

"prices will be maintained and determined by financing."
I should have just said determined and not maintained....in the upswing the insane prices are maintained by the scam loans and on the downswing price implosion is exacerbated by them.

[N_C]

To those predicators of the future. No one knows what is going to happen. I appreciate reading what others think will happen. However, if one could predict the future that easily, one would already be a millionaire right?

I would love to buy a house someday but prices are still out of reach at my current income level. I understand that so I am playing a waiting game. My husband and I decided we would buy a house we love at a price we can afford. If that doesn't happen in a few years, we'll move somewhere else. I am not 'waiting for the bottom". I'm waiting for affordability.

I have very little sympathy for people who cannot afford their homes. Just because there was easy credit didn't mean you had to take it. It is your own responsibility to ensure that you can pay your bills barring unforeseen circumstances (job loss, death in the family, natural disaster). If you can't afford your house foreclosure is a natural consequence.

[Jeremy (jemarqu)]

dog-walker: "Soon, that same person won't want to talk about buying the house, but if they do, they'll be looked at with sympathy and probably more than a bit of schadenfroude (however the hell that's spelt!) Might that effect outweigh financing?"

I think you are right dog-walker. Even as a kid there were similar trends. I remember spending all my allowance on baseball cards. I thought to myself "one day these cards are going to be worth a fortune". Now 20 years later I still have the cards and I'm not planning an early retirement.

I know that housing is a little different because everyone has to live some place. At the same time, houses are only worth what people are willing to pay.

[MyLessThanPrimeBeef]

N_C, predicting future anything is like predicting the weather - No one can do it, but who's going to stop anyone from doing it? Besides, it makes good party conversation.

I persnoally believe it's more productive to write the local television stations telling them to can their weathermen and their so-called 'weather predictions.'

By the way, I predict SC is going to lose this weekend. Oops, I am not predicting that. I am just wishing that.

[Steve Reynolds]

"Reseda and most valley hmes will be in the 150-250k range within 2 yrs."

Mark,
You may be right, these levels for these areas, especially in places like Temecula, Pamdale, Victorville, Riverside etc. would be more in line with wages and downpayments.

dog-walker
The two tier system seems to be how this market is playing out. It's really going to come down to down payment, cash is king. How much are you bringing to the table? Lenders still don't seem to have a problem lending, but if you want that $700,000 property show me your $140,000. Oh and by the way I want to see it in the form of a cashier check.

"And what portion of the run up can be attributed to the bubble psychology of fear and greed? Any ideas about how to parse that out?"

The best indicator is how much more is the area generating in revenue. Are high income jobs being created around this area or is it retail and restaurant service work. Are there any high tech companies setting up shop? A few Starbucks and a Pier 1 isn't going to cut it. What kind of school districts are around? Chances are you're going to have to sell that down the road if you want children. Do you see the next generation below you willing to spend at those levels? If you actually had $500,0000 in $100 bills sitting in front of you, would you be willing to hand them over for that place. Here's a good little exercise go down to the bank take out $10,000 in twenty dollar bills take them home stack them up on your kitchen table and look at them, then determine what would it take for you to part with them.

[kim]

When to make the big move. That is the question. When do all you homeowner hopefuls make the big move to snatch up that 1500 square foot house sitting on a slab of concrete that's within walking distance of that school where no one speaks English? Will you make your move when it drops to $500,000? Or should you wait to snap it up until it hits $450,000?

Won't it be great when you make your first $3,000 payment on your prize home? Have a beer on your front stoop and play "I spy" with your kids on the gang tatoos.

Oh, the life in L.A.

[mark]

"To those predicators of the future. No one knows what is going to happen."

yes i know and can predict the future...house prices are going to fall a lot more.And lots of people put their money where their mouth is concerning investments.I know i do and make a living from investing.You dont have to be a brain surgeon to predict prices but you do need cojones to take the plunge.
Falling home prices is a no brainer and i would wager anyone who thinks you cant predict that because thats a hell of a profitable wager.

[joeinlosangeles]

N_C: To those predictors of the future. No one knows what is going to happen. I appreciate reading what others think will happen. However, if one could predict the future that easily, one would already be a millionaire right?

Sure, no one can predict the future with absolute certainty. But that doesn't mean you just throw your hands up and say, "Since I can not be absolutely certain of what will happen every decision is just as good as any other decision, and I might as well flip a coin on every big decision." Seriously, you can certainty study market conditions and let that guide you.

[Jason]

Where do you think places like Palmdale will be over the next two years? One development I printed a brochure on last winter was then listed for 358k and when I checked on it earlier this week I now saw the same plan listed for 250k. So I do I determine what is a resonalble level to make a move on my first home since I have been sitting out the market the last few years and decided to start my own company rather than buy a home.

[mark]

palmdale will be in the toilet...I know somebody who has been unable to sell their property there for abut a year...expect at least another 50% haircut for palmdale/lancaster...these areas will be hardest hit...if you wanna make a few hundred grand over the next 2 years do this: dont buy a house now and you will be save that much.
There is no rush to buy,let the bottom develop.This market will not turn on a dime.
Fundamentally the one and only component that drove this mania and nutty hi prices was scam financing.That one component has been removed.This means the mania is over,dead and done with.Watch the implosion unfold as it has barely begun.
Do not buy until there is an upturn in prices-that will mark the bottom of the housing market.
Ive noticed this week the first signs of panic selling and have seen some big price reductions on a few properties.I live in the valley and reseda,canoga homes should by no way ever sell over 150 grand.Its pure lunacy to pay the current 400-600k for this area.Expect a 50-75 haircut there from current prices.
By the way a very influential commodities expert(denis gartman) has predicted today that countrywide will go bankrupt.