Down (54%) in the Valley

Good morning. If I had to pick only one region of Los Angeles to monitor for housing trends, in hopes of capturing the overall market, I'd probably pick the San Fernando Valley. Yes, it's expensive (median sales price $590,000), but it's a big area, containing within it a range of neighborhoods and properties.

That said, things are looking down in the Valley. From the Daily News: "Home sales in the San Fernando Valley hit a record low for the second consecutive month in October, plunging 54 percent from a year ago as mortgage industry turmoil continued to roil the market, a trade association said Wednesday."

More: "Last month 354 previously owned houses changed owners, 417 fewer than sold last October and down eight sales from the previous record low of 362 in September, said the Van Nuys-based Southland Regional Association of Realtors.

Inventory: 7,730 properties listed for sale in the San Fernando Valley, a 16-month supply.

Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com.
Photo Credit: "The Valley," submitted to LATimes.com's Your Scene by Murchy

Comments

[amir]

You have it right there in the article. Inventory is up, sales are down, but prices have only gone down 8%. What gives? When sellers cut prices 30% like they did recently on a house right here on Noble, they sell.

New Houses, that are built by contractors, cut prices quickly, like we saw in the IE, while existing home owners don't get it. They think a 10% cut is a good discount. They're behind the curve and in denial. They can't say goodbye to their yesteryear paper profits. Since most of the valley is existing homes the prices are sticky and the inventory rises. But at a certain point this cycle will break. Maybe when contractors start slashing new condo prices, houses will follow.

I still expect AT LEAST 50% drop before this is over.

[Cal]

When adjusted for population growth sales are even worse. Things are melting from the bottom up and outside in. The "It cant happen here" people now are more like "It can happen here, but it'll be mild" in regards to the downturn.

Sometimes it pays to look farther than the end of your nose. What is happening at the present moment only is useful in context of where we were and where we are going (are things getting better/worse). The trend is your friend.

The "good" news for the SFV is that pending sales are indicating that this next months sales should improve. The bad news is that the sales will still be the 2nd or 3rd worst in the history of the valley.

[robert No longer in L.A.]

Hey, if you're LATE to a Party, do you still expect platters of smoked salmon and caviar? If you wait and register for class last, do you expect to find all your classes starting at 9am? ALL investing is TIMING - snooze = you lose. EVERY generation learns this fundamental; CA real estate peaked 1970, 1980, 1990 and plowed DOWN for 5 years. Be patient, tighten your belt and please, stop whining!!!

Besides, our wonderful democratic-capitalistic system needs to feast on the flesh of the young (combat, anyone?) and the old (medical care?). Perhaps if you voted, or voted WISELY, you could change all this predatory behavior by our Politicians who are owned by Wall Street.

[upthecreek]

that one number says it all.

16 month supply.....that is UGLY...

[Cal]

For those who think the conforming limit will be the floor, Fannie and Freddie can and do tighten too. Fannie is significantly increasing its prices on loans under 680 fico and higher LTV's. They may still offer the products but the costs will be prohibitive:

https://www.efanniemae.com/sf/guides/
ssg/annltrs/pdf/2007/0716.pdf

Another fly in the ointment is PMI for loans over 80%, Fannie and Freddie may underwrite the loans but they still need to have PMI to go through. The big insurers are tightening their guidelines and increasing their prices as well:
http://biz.yahoo.com/ap/071128/mgic_changes.html?.v=1

This all points to increased costs and reduced availablity of credit at every level of the spectrum.

It was a credit bubble that caused a housing bubble, watch what credit is doing and you'll know where housing is going.

[Rob]

Hello, me name is Mr. Low Ball. I come and bid for this beautiful home you offer to sale. I to bear gifts of cans of tuna and sandwiches of peanutbutter jam for the many who of you too proud to take me offer. May I enter in?

[MyLessThanPrimeBeef]

The subprime ship is sinking. And the Floridians should know. Local schools and governments there want nothing to do with HIV, sorry, SIV.

In today's Bloomberg:

http://www.bloomberg.com/apps/news?pid=
20601087&sid=aDdJ4GDZ6eao&refer=home

[Cal]

I still think its too soon for real lowballs, I see them happening a lot, the flippers are getting pretty good prices on the homes ($90-100k below list on a basic 500k house) and rehabbing them and putting them on the MLS at the same price as all the other junk not selling. But I see price drops 20% on homes bought in 2006 (and not selling). The irrationality of the last few years shouldnt be considered "retail" price and now things are "on sale". The houses even at a 20% discount are just significantly overpriced instead of way overpriced.

Todays great deal is tommorrows overpriced sale.

[Steve]

Part of the reason is the RE market, another part is the Valley is a hell hole and less and less people find it a nice place to live.

[perks]

Steve, I'm sorry I can't afford the mortgage payments to live in Nirvana like you do. I actually like the part of the Valley I'm in. It's quiet, it's clean, I'm walking distance from plenty of stuff, and I can make the drive to my workplace in Westwood in under a half-hour (something I couldn't even do when I DID live in the Westside!).

However, I will fully agree that NOTHING in the Valley justifies paying half a million bucks for an 1100 foot tract house built in 1953 that looks exactly the same as 80% of the other houses in the Valley. Yes, the population is going to grow, and yes, there will be demand for housing, but if you look at the demographics of people who are moving into LA, the overwhelming bulk of them couldn't afford to pay even half that for a house.

Something's just plain wrong with the equation here. Now that the funny money's gone, things can finally get back to normal.

[Kate]

First, and most importantly, saying the Valley is a "hell hole" is ridiculous. Approximately 2 million people live in the San Fernando Valley -- that's about 4 times the size of the entire population of the State of Wyoming. You would be hard pressed to find a more diverse place to live. There's good and there's bad -- just like any other metropolitan place on Earth. You can't just lump it all together and make a generalization. But I digress.

Here's my theory: Valley sales will not pick up until prices are averaging 3-4 times the median income of an average homeowner in the area. Let's assume that in "Lake Balboa" (a.k.a. West Van Nuys) an average homeowner's household income is $80,000 -- then houses in that area will really start to move at $240k to $320k. Right now they are priced in the low $500k range -- which is more than 6 times the average household income for the area -- so there's a ways to go. At the peak of the market they were priced high $500 to low $600k, so there's been some movement but not nearly enough.

[Roland Flores]

Hey California, some Californians have come to Texas. Dallas, Austin, or San Antonio is not a bad place to live! Something to consider.

[toby]

Hello, me name is Mr. Low Ball. I come and bid for this beautiful home you offer to sale. I to bear gifts of cans of tuna and sandwiches of peanutbutter jam for the many who of you too proud to take me offer. May I enter in?

Posted by: Rob

Hello Mr. Low Ball, my name is Mr. Fantasyland, and yes indeed I am offering to sell my beautiful investment. It's a gorgeous post-war bungalow with an amazing view of the 101. But you see, I am asking, and frankly I am expecting, to get my weight in gold...and the letter K stricken from the English language.

So please leave until you have 2.24 million dollars in gold (krugerrand would be best) and don't forget the K. If that's in the alphabet....NO SALE!

PS If this isn't to your liking, I do have a half burned out cardboard box in South Compton for only 400,000. If you like it, you better jump on it...before the city takes it to the dump....

[Problemwithcaring]

Kate: you are right. All of Texas, clearly, is the hell hole.

[Rob]

Toby,
Lemme see here now. hold second, I no good for math. Ummm, 2.24 miillion at 800 per ounce for a pound (imperial lbs) would be, could be, yes you get 4 PBJ's left on doorstep for 175lbs person...

[me]

Kate wrote:
"First, and most importantly, saying the Valley is a "hell hole" is ridiculous. Approximately 2 million people live in the San Fernando Valley -- that's about 4 times the size of the entire population of the State of Wyoming. You would be hard pressed to find a more diverse place to live. There's good and there's bad -- just like any other metropolitan place on Earth. You can't just lump it all together and make a generalization. But I digress."

Yes, Kate, we know it is your ultimate goal to live in that "hell hole". Just because there are 2 million others just like you, it doesn't change the fact that that is how many perceive the Valley. Don't get me wrong. I have many nostalgic memories...and I can speak personally to the Valley, as I was forced to live there part of the 60's, all of the 70's, and some of the 80's (when it really still was a pretty decent place to live). Thank God my parents grew up in metropoliton areas like NYC and Hollywood, so they literally took me on "field trips" every weekend to places like the Farmers Mrkt, Hollywood Bowl, Westwood, Marina Del Rey, Beverly Hills, Phillipes, Pinks, Silverlake,Miracle Mile etc etc with the INTENT that I not grow up thinking the Valley was normal! Thank God they cared! I left after college and never looked back. Took my dad with me....

And why do you think the housing market has been hit harder there than other more resilient, desireable neighborhoods? The fact that the IE, Santa Clarita Valley, SF Valley, etc are sliding fast speaks to the ol' refrain "location, location, location". If it truly is your "dream" to live there, then I am happy for your prospects of getting a great bargain basement deal there. But my advice would be to buy in an area that is more stable. Makes more sense to me, at least. If everyone is desperate to get out, why on earth would you want in? Yes, there are still very lovely neighborhoods south of the boulevard, but you still have to go out past the boulevard and past the mind numbing strip malls...it has simply become hideously unattractive (to me). And crowded.

But like you said, it is diverse, and thank God for diversity. The world is a much more interesting place because we all do not want and treasure the same things. Like the ol' saying "one man's trash is another man's treasure" so can we say, "one man's hellhole is another man's slice of heaven". Just try not to get so offended that more people hate the Valley than love it. If it suits you, then great. Be confident in your preferences. But really, take it from someone who spent many years there, you need to get used to the fact that most have a negative attitude towards that place.

[peter m]

"Good morning. If I had to pick only one region of Los Angeles to monitor for housing trends, in hopes of capturing the overall market, I'd probably pick the San Fernando Valley. Yes, it's expensive (median sales price $590,000), but it's a big area, containing within it a range of neighborhoods and properties"

Why i s that $590,000 figure touted at ALL? Sales volume has dropped dead in the valley for sfh resales and the only movement is in hi-end properties in such hi-end areas of the valley as Agoura hills,Westlake village, Calabasas, expensive hillside communities south of the 101 fwy (E.G .South Encino 91436, Sherman Oaks 91403), and a few h-end parts of Studio city, Toluca lake and Valley Village, which together make up only a misicule portion of the total Valley housing stock. This skews the median upward for resale SFH's sales prices as anyone with any brains for math would know.
Actually 80% or more of the valley consists of former tidy middle class neigborhoods de-gentrifying slowely, or rapidly, into exurban rundown suburban slums and/or immigrant-swamped apt districts. This is most evident in large areas east of the 405 fwy and generally north of Magnolia or burbank blvds . Much of Van Nuys already in this stage. Also many areas north of 101 and east of topanga cyn .
The entire Valley is now 50% or more muli-unit housing stock, and apts/condo/townhome complexes are mulitiplying like crazy . If U combine total sales price for ALL mortgaged housing units including condos and townhomes the sales prices would skewer downward quite a bit. We are now talking at least -10 % decline all ove r the valley and 15-30,% i n many lower- end areas , especially the E . Valley (Lots of decaying slummy areas in the triangle from the 405 east ward all way to the 5/210 fwys, and north of sherman way).

[Diego]

Arnold should give every illegal alien in California amnesty. Then they would not send their cash south of the border, but instead buy up the 16 month inventory in the Valley.

[joeinlosangeles]

--Yes, Kate, we know it is your ultimate goal to live in that "hell hole". Just because there are 2 million others just like you, it doesn't change the fact that that is how many perceive the Valley.--

When people outside the Valley think of the Valley, they tend to imagine Reseda and Pacoima, not Sherman Oaks and Encino and Calabasas. Lots of millionaires and movie stars live in various parts of the SFV "hell hole."

[Ace]

'When people outside the Valley think of the Valley, they tend to imagine Reseda and Pacoima, not Sherman Oaks and Encino and Calabasas. Lots of millionaires and movie stars live in various parts of the SFV "hell hole."'

Fair enough. When I think of the city of LA, I imagine downtown's Skid Row, the crack district of Hollywood, and my blood and crip friends in South Central.

At least the Valley has porn... and I think that K-Fed lives here.

[Brother Joe]

Sales are down, prices are holding....

Good luck waiting for home prices to tumble...

This is California people...

The whole world wants to live here!

[Horizontal Translation]

Tangentially related: Motley Fool sees real estate slump affecting Tribune's bottome line (L.A Times included) http://tinyurl.com/2t4hq7

Sam Zell led investor group just got approval for purchase of Tribune. Shakeups on the way. Hang tight real estate editors!

Tough in the Valley? Starting to slip in Manhattan as well... (courtesy Richard Green's Blog) http://tinyurl.com/3yqu9g

[toby]

Toby,
Lemme see here now. hold second, I no good for math. Ummm, 2.24 miillion at 800 per ounce for a pound (imperial lbs) would be, could be, yes you get 4 PBJ's left on doorstep for 175lbs person...

Posted by: Rob

Ok, I'm going to REALLY lower my price, instead of K, let's say you just need to stricken the letter X from the Alphabet.

Did I mention that it has original plumbing? It's like the Antique Road Show, a collectors dream...for those of course, into collecting original plumbing from the 1950s.

[Kathryn]

I wouldn't want to live in the Valley. I'm sure there are great areas and great schools, but there are also a lot of areas going to crap. In this market, do you really want to risk buying somewhere you wouldn't want to live for at least 5 years, especially if prices are down in much safer areas like Santa Clarita or TO. Unless you're very familiar with the area, buying a house in the Valley seems like a very risky proposition.

[joeinlosangeles]

--I wouldn't want to live in the Valley. I'm sure there are great areas and great schools, but there are also a lot of areas going to crap. In this market, do you really want to risk buying somewhere you wouldn't want to live for at least 5 years, especially if prices are down in much safer areas like Santa Clarita or TO. Unless you're very familiar with the area, buying a house in the Valley seems like a very risky proposition.--

Buying a house in any area you're not very familiar with is stupid; and if you wouldn't want to live in any property for 5 years you shouldn't buy it. Santa Clarita, like anywhere else, has its pros and cons. If you work in, oh, West L.A., living in Santa Clarita over Sherman Oaks adds an hour or 90 minutes of commute time. There's nothing wrong per se with Santa Clarita; there simply isn't anything special about it -- just generic suburbia.

[Myron]

--I wouldn't want to live in the Valley. I'm sure there are great areas and great schools, but there are also a lot of areas going to crap. In this market, do you really want to risk buying somewhere you wouldn't want to live for at least 5 years, especially if prices are down in much safer areas like Santa Clarita or TO. Unless you're very familiar with the area, buying a house in the Valley seems like a very risky proposition.--

Santa Clarita also has several trailer parker neighborhoods, over crowded schools, neo Nazis/white supremacy groups and a high number of hate crimes. These are facts that most people who live in Santa Clarita don’t want to talk about. You see, the developers who built those suburban communities were not able to eliminate these problems, only cover them up. Every community and city has its share of problems. Don’t’ try to expose someone else’s without highlighting your own.

[sfvrealestate]

Enough Valley bashing! I've lived in Burbank for a few decades now. Steve and "Me," I'm probably closer to Hollywood Bowl and the Downtown Arts scene than you are! And citing Pinks!? Please! Believe it or not, not everybody wants to live in 310 or 323. Some of us like our short commutes, good schools, the ability to park our cars close to our destinations, good restaurants with entrees under $35, and solid housing stock that rarely went above $800k and is now at $600k. Wow, I just reread what I wrote and all of a sudden I feel really old...

[Steve]

The Valley's claim to fame is that it is the Porn Capital of the world. That could be the only thing holding up the local RE market. You chumps that live there have no clue how bad it is and will get.