"The ugliest ever" -- SoCal home sales down 45%

Catching up: If you hang around this blog long enough you get to write the headlines. Cal has hung around long enough, so that's his headline. He called yesterday's Southern California home sales report for December from DataQuick, "the ugliest DQ report ever posted." I'm inclined to agree.

Here's the LATimes coverage: "Southern California home sales and prices plummeted again in December, solidifying a view among analysts that the housing slump will not end soon.  "I don't expect it to get better in 2008," UCLA economist Ryan Ratcliff said, citing prices that have fallen out of step with incomes and tightened lending standards.

More headlines, highlights and lowlights:

In Los Angeles County: The number of sales in December dropped slightly from November and 47.8% from year-ago levels, to 4,430. Median sales price, of $470,000, represents a stunning decline of 5.8% from November levels, a decline of 10.5% from year-ago levels, and 14.5% from the August peak of $550,000. (That is a steep decline: 14.5% in four months. That is, as the man said, ugly).

In all of Southern California (these are the statistics highlighted in the Los Angeles Times coverage): The number of sales in December inched slightly higher from November levels, but was down 45% from year-ago levels. Median sales price, of $425,000, was down $10,000 from the November level, down 13.3% from year-ago levels, and 16% below the regional peak, of $505,000.

Month    L.A. Median Sales Price       y/y change       12-month L.A. sales total

Jan. 07   $520,000                        6.0%                 108,755
Feb 07    $528,000                        8.0%                 107,966
Mar 07    $540,000                        6.0%                 105,514
Apr 07    $540,000                        6.0%                 103,45
May 07   $550,000                        7.0%                  100,160
Jun 07    $545,000                        5.0%                   96,513
Jul 07    $547,500                        5.0%                    94,478
Aug 07   $550,000                        6.0%                    90,985
Sept 07 $525,000                         1.2%                    86,610
Oct 07  $500,000                         -3.8%                   82,527
Nov 07  $499,000                         -3.5%                  78,712
Dec 07 $470,000                        -10.5%               74,663

Thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com

Comments

[Uncle Billy]

Don't remember the numbers, but refi loan applications, per reuters, is way way up over last year (last months as well?). They again neglect to mention that it could be that much of this is multiple applications, and that the amount of applications bears no relationship to how many of these are approved.

Rumours flying around that fannie/freddie will be raising limits on conforming loans to $600,000 as part of stimulous package.

[National Bubble]

Well, it seems like the real estate bubble is finally bursting.
Timing couldn't be worse. The bubble is bursting just as the California economy is going into recession. Thousands of layoffs in the mortgage and financial industries. Huge State budget deficits.
I can bet you all know someone in the mortgage/financial/real estate industry who has lost his/her job in the last year. It's sad to see so many people hurting but a correction was inevitable.

http://www.NationalBubble.com

[Cal]

Things that are different in 2008 than 2007:

Negatives:
1) Fannie & Freddie charging a .25% fee to every loan made.
2) Fannie & Freddie adding various costs to any loan with a FICO under 680 and LTV > 70%
3) Countrywide becoming a GSE only lender (I think this is the biggest impact on the market). And to a lesser extent Indymac.
4) Any Alt-A stuff is only through portfolio lenders and fewer lenders are doing portfolio lending.
5) Mortgage Insurance tightening and premiums rising.
6) Less HELOC and 2nds available, homeowners have less places to go to tap equity.
7) Prices are much lower so much less equity to tap.

Positives:
1) Lower interest rates.
2) FHA "modernization" (I think this is the biggest impact). Gov't sponsored subprime.

[MyLessThanPrimeBeef]

Like Churchill said, when you wake up tomorrow, it will still be the ugliest.

[mad_as_hell]

Ugly? I think it's beautiful. Sales are down almost 50% and price declines are increasing each month. I saw a Realtor removing open house signs on Sunday and I almost wanted to yell out my window "haha the party's over".

[Cal]

UB:"Rumours flying around that fannie/freddie will be raising limits on conforming loans to $600,000 as part of stimulous package."

If it wasnt for the stress it would put on the GSEs and taxpayers (if/when the GSEs go boom), I would be 100% for the conforming limit raised.

It would get the mortgage availability question off the table. The real issue is that people fundamentally cant afford what they are buying. Fannie and Freddie do have stated income but it is a much different beast than what fueled the boom.

[Tim K.]

This is indeed Beautiful, not Ugly!

Why? Most everyone else is going to benefit from this. Future workers will be able to afford housing. Future employers will get to benefit from having employees who can actually afford to live in LA!

The only losers are a small minority of recent purchasers and people who worked in the housing industry. EVERYONE ELSE BENEFITS. This is a net positive for the economy.

[Jason M.]

The house I sold for $450K back in 3/06 has been sitting on the market for the past 6 months for $600K. I happened to check on it, and it's down to $350K!. I'm stunned.

[Joseph...The Real Estate Guy]

National Bubble,

Thank you for your "Sympathy" towards people in the business.

We are suffering....I have never seen it this bad.

California Real Estate is in a "Depression"....

You are right...the bubble has burst...worst than I thought

To all those "Naive Buyers" out there(Greedy Bastards I mean) who bought at the peak, to become a "Real Estate Investor" you need to work at it in the upwards of 15, 20 years. There is no overnight success!

Peter, welcome back. We missed you yesterday.

[Happy]

I couldn't agree more with the "Beautiful" comments. My husband and I moved to LA two years ago at the height of the craziness and greed. We are two professional 30 somethings and couldn't even dream of buying anything anywhere near our jobs in West LA. Ridiculous. We weren't looking for a mansion. But 900 sq. foot homes with no land for a million dollars is outrageous and unsustainable. Anyone who is half way sane could have seen this had to happen. It is only a healthy real estate market if there is a diversity in the market and there are products that are obtainable by non millionaires.

[Arti]

What I want to know is, what about the good areas?

The "median" "list" prices have come down, reflecting the deflation of the bubble in unattractive places like Riverside or Paldale or whatever, but so far anecdotally in the desirable areas like the 90402, Brentwood, and Santa Monica, prices seem to have held up strong, with only the rare short sale.

We need to have a discussion on if the bubble will finally pop in those neighborhoods (and if so to what extent), or whether they will pretty much hold up because as the dollar devalues and foreigners buy more of our land due to their relative cheapness, they buy it in the desirable areas of LA (westside) and NY (manhattan).

[l.a.guy]

"If it wasnt for the stress it would put on the GSEs and taxpayers (if/when the GSEs go boom), I would be 100% for the conforming limit raised."

As long as they stick to prudent requirements I don't see a huge problem. The cut-off has been unrealistically low for the large metropolitan areas for a long time. A larger limit won't in and of itself influence the market so long as they require full docs, 20% down and sensible LTV requirements. IMHO the best solution would be to set the limits regionally and automatically adjust them every year or two. (Up or down)

Here's a nice explanation of the new Fanny / Freddie requirements which apparently take effect March 1, 2008.

http://snipurl.com/newloanrequirements

[Cal]

http://tinyurl.com/22j6nv

"Support unlikely for raising Fannie, Freddie loan limits"

Basically, the Senate wont go for it because all the non-bubble states would be hurt because all the money the GSEs have available would be soaked up by FL and CA.

Here is the OFHEOs take:
http://www.ofheo.gov/media/research/
MMNOTE11108.pdf

[mike]

i am starting to hear quite a few ads from lenders on the radio again. does that mean something???

[sam]

Home prices in the Hollywood Riveria area next to Palos Verdes have actually increased by ~ 3 percent from a year ago. Purchased home in 2000 at $600k - now worth ~ $1.3m

[l.a.guy]

Oops... I posted the incorrect link regarding new Freddie/Fannie loan requirements.

Here's the correct one... http://snipurl.com/newloans2

[CD]

ARTI : re What about the good areas
I suppose you mean the "Eurotrash" favorite areas? Check westside bubble or Santa Monica distress monitor.I can tell you though that the Hollywood Hills are not doing good at all, and it is supposed to be the hot area.3 to 5 millions dollar homes being removed from listing everyday. Foreclosure.com can show you all the properties in trouble.
The list is long. I would'nt wait around for some Arab prince to pop up, that is Cinderella thinking. The foreigners are not nuts, they have computers too. If the US catches a cold, as they say, the rest of the world catches pneumonia
so not much relief there...

[mojeaux]

All I can say is thank Jebus I didn't yield to all the 'buy now or be priced out forever' crap that was floating around over the last few years. Not to mention my other favorite: 'renting is just throwing money away'. I'm not rejoicing in other people's pain, but things have to come back to reality. I probably could've extended myself financially and got some exotic loan product and bought an overpriced crackerbox 2 or 3 years ago. My monthly housing related expenses would probably have doubled and possibly tripled compared to renting an equivalent place. So now I've managed to save up a healthy down payment and am seeing places gradually getting more afordable here in Ventura. My only concern is where mortgage interest rates will be when it's time to buy.

[CaptHowdy]

I've read here and there that it's gotten harder to get the crazy types of loans that used to let an average buyer "afford" LA's outrageous prices, but does anyone know in detail how much of the fall in number of sales is due to tightened lending standards? Are the days of free and easy borrowing truly over? Or are buyers just spooked? I've yet to read any articles or find a source telling the behind-the-scenes story about what it's like trying to borrow money these days...

[Joseph...The Real Estate Guy]

Arti,

Riverside and Palmdale are attractive to a lot of people. I don't see the Westside bursting anytime soon. It is holding very well.

CaptHowdy,

The Real Estate Market is Cyclical...the uptrend was over in October, 2005. It took the media about 8 months to find out. Most experienced Real Estate Professionals knew it. It will be a while before the market starts moving up again...

In my opinion, what is happening in California is exactly the same thing that happened in Texas in the 80's. California Housing Market will never be the same again...we will never see prices spike as they did.
We will see a more reasonable market. I don't think people will ever be as blind.

[iabb]

Arti is right. I and friends of mine have been actively looking at those "nice" areas mentioned on the Westside and Santa Monica to see if prices have fallen meaningfully - turns out to be not so much the case, at least not at this point. You've got to wonder whether that bubble will ever burst or will prices in those areas just not go higher for a long, long time. Either way - prices today are still totally out of whack with income levels for the average person/couple with decent paying jobs, even on the westside and it is very very frustrating for people like us who would like to live there.

[peter m]

"The "median" "list" prices have come down, reflecting the deflation of the bubble in unattractive places like Riverside or Paldale or whatever, but so far anecdotally in the desirable areas like the 90402, Brentwood, and Santa Monica, prices seem to have held up strong, with only the rare short sale"

Desirable parts of the westside will take a while before u see some significant price reductions. I am talking about Brentwood, Santa Monica, Mar Vista, beverlywood, cheviot hills, rancho park, Grove area, Culver city, westwood,century city, Marina del rey, Venice west of abbot and south of venice blvd, ect. IF can't wait U might try zip 90019 which is grey area with some bad and good parts, or even farther east toward dwtn. These areas uncomfortably close to ghetto areas south of pico blvd but if U have some tolerance for edge districts look just outside the westside or south of hancock park. Also, dwtn LA will have some decent deals on condos soon - I know dwtn is rather crappy compared to westside but at least is it a reasonabl e commute. U can also try SFV which U will soon get an equal size home at hal f price from the westside though commutes are a bitch coming down the 405 over the sepulveda pass.

[Arti]

Thanks peter m, those are good thoughts you clearly know your areas.

I'm sticking to the more homogenously nice areas though because I can afford it; I didn't buy two years ago not because I couldn't but because the prices looked bubbly and bound to come crashing down. So I thought. I guess it's happening now, I'm reading Santa Monica Distress Monitor and the Westside Bubble pages, and they highlight short sales in the nice areas. It's just that it's anecdotal and there's no data, and for every short sale there's a dozen places going on at all-time high list prices. Very different from the other parts of LA, where you see more consistent and far deeper across-the-board decreases.

[Uncle Billy]

Yeah, the rumors of limits raised on fannie/freddie loans were probably just pushed out to bump up the stock prices. Seems to be happening a *lot* lately. We've all learned that those endearingly named entities buy the loans from the banks, but what are they doing with them after that? They did securitize them in the past, but are they now holding them themselves, or is it busines as usual, but just with better quality loans?

Plus, who decides where the loans go... who says, this goes to fannie, and that goes to freddie? Do the lenders just look at the daily terms and see who is lowest?

[el guapo]

The difference between Palmdale and Santa Monica in regards to the bust has everything to do with how long it takes for the loans to reset. Subprime loans had shorter teaser periods (Palmdale). On the westside the Option Arm was popular 3/1, 5/1, 7/1 (little - if any - down, good FICO, high STATED income). Remember, people had to "stretch" to get in. All reset charts that I've seen, 2008 is when the pain starts for these loans in earnest. 80% of these loan holders pay the bare minimum. So their loan actually adjusts earlier. A 5 year ARM (the most popular) resets in about 3.5 years when you do this because the LTV hits 110-115% of the loan. Ooops. Anyway, it doesn't matter if you make 50K and buy a 500K house or if you make 150K and buy a 1MM house, you can't afford the loan when it resets. If you are interested in a neighborhood, punch up the median income for the area from the census bureau, look up the median price for a home and ask yourself if it makes sense. Also ask yourself "did everyone get a 300% raise in the last few years?" Unlikely. Prices have always been high in the nice areas, but high 5 years ago was less than 50% of what it is now. In any zip code in LA.

During the mania, 80% of loans in LA were "non-conforming". Staggering.