Collapse: L.A. housing prices drop 16.7% in five months

A month ago, I quoted a reader who called the December report on home sales in Southern California "the ugliest DQ report ever posted." Today's DQ report, for January sales, is going to give December a run for its money in the ugly category. This report is unattractive. Not pretty. U-g-l-y.

Headlines: The level of home sales in L.A. County dropped 50% from year-ago levels. The median sales price of homes sold in the county dropped to $458,000 -- now down $12,000 in one month, and $92,000 from its August peak. That's five months. Let me repeat that: Sales prices in L.A. have dropped 16.7% in five months. That is a collapse of prices. Read more about it on LATimes.com.

L.A. median sales prices have now fallen back to levels last seen in May of 2005 (Commenter Kathy asked for that). A better piece of information: Check out this interactive chart put together by my colleague Ben Welsh tracking median Southern California home prices over the last 20 years. Very cool.

You can blame the freeze in jumbo loans; you can argue that prices really aren't falling that fast, that the median is distorting true market conditions. Maybe. But it is still a collapse of median sales prices, the market measure most widely publicized and most widely discussed in this region.

I'll update this post later with more data and analysis.

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%                 103,450
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
Jan 08 $458,000                         -11.9%              71,256

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

Comments

[Mike S]

Lefty, please come to our rescue on this...

Is there any chance Mel Brooks can come out of retirement and do one last Blazing Saddles on the trials and tribulations of the real estate 'industry?' At least we'll have something to laugh about amidst all the tears.

Mike S.

[Kathy]

So, now that we're on our way down, does somebody have the month/year that this current median was the new "high"? I'd be interested to see how far back we've gone already in price points.

[Ace]

Peter said 'You can blame the freeze in jumbo loans; you can argue that prices really aren't falling that fast, that the median is distorting true market conditions.'

Who would make that arguement? If anything, prices are falling much faster than 16 percent... especially in the condo market.

I am sure those of you who track the SFV like I do see condo after condo that has at least a 25 percent price reduction... AND STILL HAS NOT SOLD.

As far as single family houses, so few of them sold in January that you really can't tell what kind of price decrease it takes to sell. A couple of 4 million dollar homes REALLY inflates the prices with that little amount of sales.

[D]

That data is for SFH and condos right, DQ's median SFH in December was 500k

[left of lefty]

i've been saying for awhile now -- buy now before it's too late!

the numbers you see published in the papers are correct -- but they are old! get your nose to the ground and check out the sales happening today that won't show up in any report for another month or two. i've been to home auctions the past few weekend and while prices are still dropping, the momentum has definitely shifted. the smart money see the deals and are bidding again. some properties were sold at the auctions for more than the listing price!!! that hasn't happened since last summer!

those who rely on past data will always be behind the curve. do the data gathering yourself and you'll be months ahead of everyone. that's the difference between a peter lynch and your pool investor who base his decisions on what's in the wsj.

[CaptHowdy]

This is all great news, but does this mean it's time to buy?

No.

No, no, no, no, no. Buyers, don't buy! Patience....

Even better prices are coming!

[GDC]

Truly stunning! Down 16.7% in 5 months? If only we can send this data to each and every seller, the correction will happen a lot sooner.

[MyLessThanPrimeBeef]

It's like that giant rock rolling down the cave in Indiana Jones movies.

"Indie, what are we going to do?!?!"

Maybe the returning writers can save this one, as soon as they get their first paychecks...

[Peter Basson]

The "smart" money is bidding again? Are you kidding me. The "smart" money said prices would never go down, that we were in a temporary "blip", and that prices would recover in the spring, the summer, the fall, the winter (now next summer).

This is all pipe dreaming. Prices will continue to fall until they reach a point where people can afford to buy them with conventional mortgages. Basic economics. Something completely forgotten these last few years of funny money.

It's a long way down and buying now is throwing good money after bad.

[Cal]

Ace:"I am sure those of you who track the SFV like I do see condo after condo that has at least a 25 percent price reduction... AND STILL HAS NOT SOLD."

I am with Ace, though he is just talking about condos, to me the most interesting stories arent the few houses that sell, its those places that have cut massively and still arent sold. Those are by far the most interesting homes on the MLS.

The price drops have been happening for awhile but the median being so easily skewed by the mix in sales has hidden it so now that the mix has shifted again it appears all the price differential has hit at once. Although I have to admit the price decline has been very pronounced since September (the last bastions of denial in lending had to admit reality in August) . Definitely accelerating.

[tew]

Maybe lefty is right about the current activity. but I have a one word response: "meow"

[baruza]

I know it's right there in the LAT story, but it cannot be said enough: Lowest Volume of Socal Home Sales in 20 years. At the same time, spring listings are already skyrocketing, with inventory up 38 percent year-over year

http://www.housingtracker.net/
askingprices/California/LosAngeles-LongBeach-
SantaAna/LosAngeles-LongBeach-Glendale

Hmmm, what was happening 20 years ago when volume hit that last low? Oh, that's right, a total and complete collapse of the very same housing market.

http://krugman.blogs.nytimes.com/2008/02/13/
bubble-bubble/

[MyLessThanPrimeBeef]

Without interference from Paulson, Bernanke & Cohort, it would have been at least 17.6%.

[RZ]

I for one am glad to see the market crash. I sat out the "boom" because I knew I couldn't afford the inflated prices and couldn't understand how so many others could (or believed they could). The market has only just begun to correct itself and will probably fall further for a while. Then those of us who didn't run like idiots to buy houses we couldn't afford might finally be able to get something at a decent and reasonable price.

[peter m]

Is anyone surprised except for RE blog devotes that LA dropped 16.7 % in five months?. Much of LA is marginal or gangland barrios so why be surprised that LA Prices could not hold the median $500.000 mark and will soon be near $400,000. That's the SFH's prices: condos are declining much steeper % wise as there is abundant oversupply all over LA .

Some more observations of LA/long beach area RE/recessionary meltdown :
I was cycling around Long beach taking in almost entire shorefront from naples to dwtn harbor /pike amusement zone. Seems like a neutron bomb went off in dwtn shoreline village-pike area-almost zero pedestrain activity and this on a balmy 70% crisp clear lincoln holiday.
The entire stretch of beach- front condos built into the bluffs stretching from just east of dwtn eastward to belmont pier area have some really ragged decaying units plunked down and facing a nasty stretch of beach reeking with port pollution , impoverished riffraf and views of oil platforms and idle wallowing cargo ships.
LB is one of LA regions worst RE meldown zones and prices are 25-30% off peak for virtually entire city. Very soon decent 2/2 condos will be had for under $200,000 though it might be in a halfway marginal area near dwtn, which along with the north central areas are major crime zones with daily shootings ,beatings ,assaults , gang shootouts so common they don’t even merit several lines in the LB press telegram criminal activities section.

[nico]

To those waiting for prices to drop even further, keep on
paying those rent payments to your landlord's pocket. It
makes the property owner happy.
Even if prices decline
your payments go towards
your own equity not some landlords jet ski.

[Ezra]

look at rents in any area you want to buy. if you can rent it for xxx then you should be able to buy it for xxx/month at current rates for a fixed rate 30 year mortgage. oh, dont for get you will need 20% down.

[Cal]

Nice new chart Peter it mirrors the same home sales (square foot) metric as published by radar logic. Shown here: http://tinyurl.com/yqyoqd

Though I'd be careful about making any huge conclusions about market values in periods of low volumes. Things could be better or worse than they appear, low volumes can hide things either way and make valuation metrics less reliable than during periods of normal or high volumes.

Nico: "Even if prices decline your payments go towards your own equity not some landlords jet ski."

Uhh the definition of equity is "the difference between the market value of a property and the claims held against it "

So if market value is going down faster than your paying down your balance then you arent building equity. So someone renting cheap can "make money" on the spread between what they are paying in rent and what it would cost them to rent an equivalent home PLUS any amount of money that is lost through depreciation.

[Ace]

Check these numbers out. I use Valley Village for my example because I think it is the most middle class neighborhood in the SFV. Also, all of the houses are almost the same 1950 three bedroom tract houses so it is easy to compare.

Last month, a whopping 4 single family houses sold. What does it take to sell your house in Valley Village? A price decrease of $158,250 or 18.7 percent.

House 1 listed for $849k and sold for $685k
House 2 listed for $800k and sold for $600k
House 3 listed for $869k and sold for $750k
House 4 listed for $875k and sold for $725k

Average sales price of $690k after lowering the price by $158k. They were selling for $800k last summer.

If anyone is interested, there are still 68 other houses for sale in this little area.

[ValleyResident]

Now...Why would anyone in their right mind make $7000 payments when the same house can be rented for $3000? No matter how much you get in tax savings, it's better to pay your landlord $3,000 then pay $7000 to the bank (interest) & the government (property taxes) - specially when falling prices are almost certain to give you negative equity... and of course we have not even mentioned that you can invest your down payment elsewhere and get a return.

We are renting a house in one of the best neighborhoods for $3000... we would have to pay at least $1.5 Million to buy the same house at today's prices. There are amazing rental deals out there!

[shannon a]

peter m, i have no idea what you're talking about. i live in long beach and keep a very close watch on the local market, and although prices are certainly dropping the same as everywhere, to say they're 25%-30% off peak is a rather large stretch (so far). look at the comps. we sold our 4/2 1500 square foot home in 90815 last may for 585K - below its value in order to sell fast. i've seen three or four 3/2s with the same square footage in the same zip code go in the last TWO MONTHS for $20K more than we sold ours for almost a year ago.

200K condos are still a ways off. north long beach might see them - downtown/belmont? not a chance.

[jag]

Nico, I rather give my rent payments to my landlord and save $$$$$, than to lose $100,000 in five months. What kind of logic is that? You must be in real estate, just like lefty, hoping to make a commission.

[Hugo]

Prices will continue to decrease. Unless you can qualify for a "FULL" documentation loan with at least 5 to 10% downpayment ...you are not getting a home loan. Take your salary X 3 = purchase price. If you don't believe this number, please see what the actual prices were in 1999-2001. This mess was created by Wall Street providing easy or "dumb" money to create an illusion.
The illusion is over and now we are going to see a drastic reduction in prices that will take 13-20 years to get those prices that we saw during the peak.

[get real]

"Even if prices decline your payments go towards
your own equity not some landlords jet ski."

Unless, of course, your house is LOSING VALUE and you're effectively paying money to lose even more.

Get real.

[mike]

i'm in escrow on a house in reseda right now. i got it at 10 % below the comps and i am going to flip it. it is my first house and i got it for 10% below market. it needs some cosmetic work and my contractor says that there is a crack in the pool plaster but it is only cosmetic and can be repaired for a minimal cost. i had no problem getting a loan after putting 20% down. lender says things are up and so does my realtor who is doing the sale and was also my buyers agent.