Change, for the better, at L.A. Land
February 13, 2008 | 4:18
pm
Two quick items worth checking out when you have a spare moment: First, this interactive chart of median home sales prices in Southern California over the past 20 years. It is the work of my new colleague, Ben Welsh, and I think it rocks.
Also new and improved: the search feature for the entire LATimes.com website, which is at the upper right corner of this page. For the first time, you can search and find archived blog posts from this and every other L.A. Times blog. This is a feature BetterVillage has asked for many, many times. It's here.
Comments? Thoughts? E-mail story tips to peter.viles@latimes.com.
Great job Peter. Your blog continues to rock.
Posted by: 1 | February 13, 2008 at 04:54 PM
Peter:
A request would you please add median household income to the chart Ben put together.
That would rock even harder!
Thanks.
Posted by: sunsetbeachguy | February 13, 2008 at 05:19 PM
Peter:
After looking at the chart, the scale should really be a log scale rather than absolute scale.
Failing that you should plot the nominal and real prices against the absolute scale.
Posted by: sunsetbeachguy | February 13, 2008 at 05:27 PM
Love the chart!
Now all you need is some content syndication! How about a facebook link?
Posted by: Kate in the Valley | February 13, 2008 at 05:51 PM
It's laughable how obvious this bubble is when you see graphs (well done, btw) like this. I like to ask people that think prices will flatten soon.."so do you think everyone got a 150% pay raise in the last few years? No, then how are they going to pay the mortgage?"
Anyway, looks like we are back to Jan 2005 pricing.
Posted by: El Guapo | February 13, 2008 at 06:27 PM
Lookin' good, blog. See what happens? Spruce things up a little, and Kate comes back to kick the tires a little.
May the sales price chart be the start of a beautiful graphical real estate "dashboard."
Posted by: Uncle Billy | February 13, 2008 at 07:12 PM
Great chart, it would be ironic if the prices go back to 1988 levels, that would be 20 years of wealth vanishing off the face of this earth, which I guess would be in the trillions ?? here is the new word for this decade, trillions, I wonder if ther e will be a trillionaire soon ?
Posted by: Producer08 | February 14, 2008 at 01:38 AM
Producer08: "...prices go back to 1988 levels, that would be 20 years of wealth vanishing off the face of this earth....
Producer08, nominal price cannot go to 1988 levels since inflation ate huge portion of the dollar value.
However, real prices may very well get to 1988 levels.
=== real as inflation adjusted dollars ===
Posted by: Laker | February 14, 2008 at 09:09 AM
If sunsetbeachguy is asking to add the median income, I suggest that you also add the median mortgage interest rate as well (pick your choice of 15/30 yr fixed or ARM reset rate, etc - doesn't matter; they are just a relative representation of the cost of money at that time period).
Having these three pieces of information ties together what everyone has been saying on this blog - what is the relation between the house price and the monthly mortgage that a buyer can afford or should pay in a normal orderly market.
Median income alone does not fully illustrate and can not explain why house prices went up the last twenty years or where they should end up. In fact, income was mostly stagnant or rose very slowly below the inflation rate. What drove a large percentage of the house price gains was the large drop in mortgage interest rate, an easing of the lending rules that enlarged the pool of buyers, and a corresponding change in buyer mind-set (into a house-buying mania). Since the last two factors (buyer mind-set and easing of lending rules) are being eliminated and/or tightened, then that leaves the interest rate and the income as the factors that largely determine housing prices in a given neighborhood.
For instance, I purchase my first house in the mid-80's for $200K (a basic 3br/2ba SFR a mile from the beach, 90503) almost at the beginning of the last bubble (pre-1989/1990), with a mortgage interest rate of 9.5% for 15yr. Similar homes in the neighborhood are now selling for $650K-$750K and the present interest rate is around 5.25% or so. When the price collapse fully hits this neighborhood and if the mortgage rate is unchanged at 5% and assuming the median income has been stagnant for the last 20 yrs, I can see that the price floor for this type of home will be around $350K-$450K (return to the mean), because the mortgage interest rate has dropped by almost half - the monthly mortgage payment for a $400K home could be approximately the same as the mid-1980's mortgage. And that is also assuming that the mid-1980's was "reasonable" or base price level.
The income/mortgage interest rate combination determines the price of the home (in a rational buyer devoid of the housing mania mindset).
Housing price is not simply: purchase price=3*salary
Housing price is closer to:
Purchase price = Scaling Factor*salary/Int Rate.
The caveats are that this relationship will not hold once the interest rate drops too low (like in Japan).
Posted by: KCLA | February 14, 2008 at 12:50 PM
Ok, the chart is nice and somewhat effective. However, you are comparing 1988 dollars with 2008 dollars without adjusting for inflation.
I am not saying the chart is going to look any better... but at least it will be more accurate.
I think the 1988 median adjusted for inflation would look something like $250k... we are at $400k now so prices would have to drop another 38 percent to get down to 1988 levels.
Posted by: Ace | February 14, 2008 at 03:19 PM
LOVE the improvements. Keep up the good work. I always refer my clients here, espeicially the real estate blog. Not only are the posts good, they are many times greatly enhanced by the commenters with additional information and links. Blogging makes LA Times Real Estate section better!
Posted by: Maggie Knowles | February 14, 2008 at 03:22 PM
just a little math that may be way off while I"m bored at work but: between 1990 and 2000, prices went from 167,500 to 184,000. An increase of 16,500 or an appreciation of 9.8%. Divided by ten, let's call this 1% a year. From 2000-2001, 21,000 dollar increase or 12%. 2001 - 2002, 32,000 dollars or 15%. 2002 - 2003, 40,000 dollars or 17%. 2003 - 2004, 63,000 dollars or 22%. 2004 - 2005, 75,000 or 22%. 2005 - 2006, 50,000 or 12%. Finally, 2006 - 2007 15,000 dollars or 3%. The final value at the peak in 07 was 495,000. Over an eight year period, at an increase of 1%, the 07 value would've been 200,824. 200,824 is 41% of 495,000. Does this mean values will have to fall 41% from 2007 levels in order to come back to reality? Or should I just take my English degree and go home.
Posted by: the markster | February 14, 2008 at 03:37 PM
or does it go like this: the prices have been inflated by 294176, which is 59% of the inflated 07 values. Therefore, prices should fall 59% in order to be in line with 1% a year inflation
Posted by: markster | February 14, 2008 at 04:24 PM