Valley Meltdown: Home prices down 24% in seven months

News item from the Daily News: "The median price of a San Fernando Valley home plunged a record $113,000 in January from a year ago and sales sank to an all-time low as credit and foreclosure problems further pounded the market, a trade association said Wednesday."

At $500,000, median sales prices in the Valley have now fallen a staggering 23.7% since peaking at $655,000 last June. That's 23.7% in seven months.

More: "Still, prices would have to fall further to make them affordable and turn around the sluggish sales market, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge. 'I'm still not seeing a light at the end of the tunnel,' Blake said."

Hat tip: Brad Greenberg
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo credit: Aerial view of Ventura Boulevard in Sherman Oaks, from L.A. Times.

Comments

[CD]

Well, another 250K to go and we will be about there.

[JohnnyB]

"That's 23.7% in seven months"

That's abso-frickin-loot-ely-AMAZING...

There are still many folks I talk to that are going about there normal busy lives, still very unaware of what's happening out there. Most won't get it until they have to move or a close friend does same and relates their own personal $150-$200k + drop horror story to them.

The real RUDE awakening of the masses has not yet occurred...

[Wilbur Varela]

Considering the dollar has lost 35 per cent of it's value over the last two years, the drop is even more pronounced. Still, in my neighborhood of Studio City, most of the houses go between 800k and a million.....for a 2 bedroom ranch house on 6000 square feet. Break out the snorkle and fins, can you say underwater? The future buyers of these homes will be paying in euros....

[blackbox]

Hey, I thought the Valley was special! A 24% home price nose dive and no end in sight. haha, lol

[amir]

I agree with Johnny B.

The market was so overvalued that a 23% decline just took some cream off the top. The really bad news has not hit home yet.

By the end of 2008 we'll see some serious pain.

[JonM]

lots of homeowners took off their listings because they think the price will come back up to the hey days again. Listen! unless my salary doubles then i will buy your home for the price u want.

[Michael]

Wow. 24% is a near apocalyptic crash. And it's still got some distance to go.

Can't even imagine losing that kind of market value on a hugely leveraged loan that you can barely make payments on. It's just ruinous.

[ART]

What are the boundries of Valley?

Are Burbank & Glendale considered a part of the Valley?

[Cal]

I saw a REO near me that is listed for 43% of its selling price in 2006.

43%

Funny thing is... it's still overpriced. That is how crazy it had gotten.

[MyLessThanPrimeBeef]

Is it me or is the exit door all the sudden becoming smaller?

[Steve]

This dump has another 30% to go.

[Laker]

Wilbur Varela: "can you say underwater? The future buyers of these homes will be paying in euros...."
YEAH RIGHT. All rich European are rushing now to buy your post WW II 3 bedroom 1100 square feet shack on 5000 square feet lot... wake up fool. That shack is worth $250,000 not $1M and this only because of the land value and not even a cent on the rotten termite infested crap.

[GDC]

The 24% drop was only from June 2007. So after four more months of accelerating declines, we could see a 30% drop in ONE YEAR. WOW!

I see a bottom in 2010 and flat prices for about 5 years after that. An analogy (although not exact) is the tech stock bubble. More than 50% of people burned by the crash never got back in. And that was for a few thousand bucks. The housing crash is much more severe.

[xtine]

Where's Kate?

[Laker]

I've been saying this long ago, however i did not expect to see a drop of more than 20% in such short period of time...
Take a look at case shiller graphs for LA, you will see that the shape is rather scary as it is sloping down way way faster than any previous housing decline. It used to be a known fact that housing prices cannot drop fast like stocks,etc. However, for housing to drop 24% in 7 months...means only one thing. IT IS A FREE FALL.

As i was predicting before, and seeing TODAY in action, rents are declining...so the only support level to house prices is also declining...I believe we are going to see a 30-40% decline in 2008 alone, and might actually bottom out in 2009...at 2000-2001 levels and stay at that level for a looooooong time. Flipper mania is now officially shut down for years to come.

[sunsetbeachguy]

Where have all the bubble deniers gone??

Peter:

How about getting NAR's chief economist to comment on the Valley?

What about Lereah? I think he now works in the Valley.

Please go humiliate some bubble deniers!!!

[TakeFive]

"Still, in my neighborhood of Studio City, most of the houses go between 800k and a million..."

Panorama City - at least 23.7%

Studio City - more like 2.37%

The Valley is too broad of a measure for home prices.

[Cal]

I left out a very important word in my sentence, I meant to say a REO near me that is listed for a 43% **discount** of its selling price in 2006.

[mattress man]

Hey, check out "Kate in the Valley's" latest post.

4062 Witzel, Sherman Oaks, south of the Blvd.
4 bed/3 bath, 3,220 sq.ft on 8,000 sq.ft. lot.
Just sold for $799K after 27 days on the
market. Last sold: Jan. 12, 2007, for $1,450,000.
That's a 650K drop in 11.5 months.

To quote the RE agents: "A good house, well-
priced, always sells." OK, sellers. Start wacking
those asking prices, 45% off the top for openers.
Let's get the first dead-cat-bounce underway.

[originalthinker]

Wooooooo, Wilbur!

Better get a deep sea suit. You're gonna be
underwater for a very, very, long time.

Studio City shacks for 800K-1M? I don't
think so. Try 4-500K, from 2009-2015.
Popular prices, coming soon to a Studio City
near you.

[ajax]

Hey, check out "Kate in the Valley's" latest post.

4062 Witzel, Sherman Oaks, south of the Blvd.
4 bed/3 bath, 3,220 sq.ft on 8,000 sq.ft. lot.
Just sold for $799K after 27 days on the
market. Last sold: Jan. 12, 2007, for $1,450,000.
That's a 650K drop in 11.5 months.

THE OWNER PROBALLY BOUGHT IT BACK THEMSELVES TO TRY TO KEEP THE PRICES UP............Highly unethical but legal

[Cantaffordtobuy]

Well, price still need to drop another 50% before I can afford to buy.
Unless a miracle happens and I can double my income from $80k to $160k a year, house price is still out of reach for a working stiff making $80k a year.

And no thanks, I don't want to live in South Central LA for $400k.

House price is still way out of reality to salary. House prices have double and triple in 3 years while our salary have stayed the same...

See you when you're down another 50%!!!

[Uncle Billy]

I wonder if the Donald is still out there taking money from people and telling them that NOW is the time to get into investing in residential real estate. After he called up the LA Times to complain about his negative press here we certainly haven't heard much from him.

I wonder why those "Flip that house" shows are still running on television.

I wonder how many of the folks that are running around making offers currently, know only what the NAR and their trusted real estate agent are telling them?
It's going to be tough for a lot of people to scrounge together 25% down (soon to be 50% at a theater near you?).

[JRLF]

Re: the housing crisis that is now taking place, with home prices dropping 24% in the past 7 months, if and when you are out shopping for a home these days - you ought to keep mind that:" if you are not embarrassed about what you are offering, you probably are paying too much ! "

[InPerspective]

This is scary. However, median prices need to be kept in perspective in that they aren't always an accurate reflection of what is happening with individual home values. In this case, I think it is overstating the drop in individual house values between June 2007 and January 2008.

Here's why: The proportion of high-end houses to average-priced houses sold was higher in June and has dropped off significantly in January while buyers of the higher end houses wait for the increase in government-insured loan limits of FNME and FMAC. The median price index does not record values of the same properties, but simply reflect the midpoint of whichever mix of properties sold for that month. In many areas, I've seen the proportion of higher-end properties were double last June than they were in January, distorting and exaggerating the actual drop in values.

In March, when the higher loan limits go into effect, you will probably see a bunch of wealthy buyers who have been waiting on the sidelines jump into the market, increasing the proportion of high-end properties in the price statistics, and even causing a surprising increase in the median price in April or May stats. At that time, people will probably misinterpret it, just like they are now, and claim, "Hurray, the crash has bottomed and prices are recovering!" They will be wrong, just like people are slightly misinterpreting the median stats right now.

I would estimate that if you looked at the individual properties in the valley, they most likely fell an average of more like 15% in those seven months. That is still a crash, to be sure, but not quite as severe as may first appear.

Generally, I agree with a lot of what people are saying about how most people still haven't fully grasped the true extent of the real estate catastrophe that is just now getting into full swing. The mortgage market collapse is the biggest reason for the speed at which the real estate market is deteriorating, and unless there is some miracle or huge bail-out of the mortgage market to stabilize the credit crunch, there really is no way to know how low prices will go.

[Doug]

Chill out folks. Once again a story is using 'median' to sell newspapers. Median just means the price where there were exactly the same NUMBER of sales lower than the number quoted as there were above it. Sell fewer McMansions and the MEDIAN number drops. Sell more affordable housing and the MEDIAN number drops. Using it by itself tells you nothing about the health of the market.

[Chris]

ART, Burbank could be considered part of the SF Valley, but not Glendale. The Santa Monica mtns end at the 5, and that's about, longitudinally, where Burbank ends and Glendale begins.

[Prices are up 400% in Lefty's metro LA it is ridiculous]

We're all starting to see even the grossest of our estimations in price decline may well have been too conservative. There was a time people thought 30% drop - I mean the bubble sitters - was talking too large. Now 40% seems an assusmption and maybe 50% is the old 30%, until this year's nuclear spring where people will comp their neighbor down 10% a week and we reach a 40% decline in the valley.

By August 2008. Then 50% is going to sound conservative.

[anonymous]

A bailout cannot stablize the market. A bailout will not replace the lost demand due to restricted loan practices and increased interest rates pedulum swing from the no-doc 0 down loan epic. Without the demand, inventory cannot go down. As inventory increases and loan rates go up so banks can cover losses and their a** long term, more downward pressure. Housing is blemished with a severe Herpes outbreak. It doesn't matter what kind of dress you put on her, whether she pays for dinner or how much makeup she wears. People are skeeved.

[American]

I love your line! I 'll remember it when I go low balling. Prices are still way too high today. I wouldn't offer more than 50% of today's asking price.
It's like shopping in China, if you pay more than half of asking price, you got robbed!

"if and when you are out shopping for a home these days - you ought to keep mind that:" if you are not embarrassed about what you are offering, you probably are paying too much ! "

Posted by: JRLF | February 28, 2008 at 10:24 PM "

[SteveF]

And still...the average family has no way of affording the average house with a sane 30-year fixed mortgage! Oh, yes, and even with a "traditional" 10% to 20% down payment. Goodbye CA.

[Jeff]

The use of the median argument to say the decline isn't so bad is actually pretty comical because it is the flip of last year. The optimist kept on pointing to the stable prices last year as a sign that there was no problem in the real estate market. I was one of many who pointed out that the median only remained high because there was no activity in the low end.

Now that the high end is crumbling as well, the optimists can finally accept the median argument. Well, the declines are real, if they weren't reflected last year they are this year.

The median is finally catching up with what we all knew (but some denied) all along.

[Adealia Artist]

Let's face the facts. The song and dance about leaving the markets, now the global market, was a sham. We the people of the United States have become prey for the wealthy and those that control business. Those people do not care about the United States, her people or her culture what they care about is themselves and their money and they do not care who gets hurt as long as they get rich. Time for society to hurt them with huge taxes and if they want to leave then I will drive them to the LAX for their flight to exile Enjoy your new country Dubai rich folks because you people spit on you. We the people are angry and will not take it any more. In November goodbye Bush the looter's tax cuts.

[Laker]

JRLF: " if you are not embarrassed about what you are offering, you probably are paying too much ! "

JRLF, Beautifully said !!!
However, i don't think we should be embarrassed, the sellers should and soon would be embarrassed to have been asking such ridiculous high prices.

[Just Call Me Maria]

Just checking in with folks- the Westside is seeing some pressure too. We are still looking for our enormous yard with a 5 bed house in a decent school district. We are currently in a multiple offer situation for a house in Cheviot Hills. The house was priced at a late 2003/early 2004 amount and we are now the backup offer. The "winner" has bid about $300,000 over our offer. If it makes it through escrow, more power to them- if not, we will finally have a house.

[GDC]

Great find Mattress Man,

You're absolutely right: a house priced right will sell even in this environment. Here's another one in a slightly better area:

14849 VALLEY VISTA BOULEVARD,
SHERMAN OAKS CA 91403
3480 sq ft.
Sale History

06/01/2007: $1,510,345 *
06/02/2006: $1,760,000
01/16/2004: $680,000

Must have been extensively remodeled by the 04 buyer. It just sold for $1.15 as a Countrywise REO. It currently has 2 back up offers at full price.

I still think it's overpriced. In that very nice neighborhood, I think it's worth $1 mil. The point is that if a house is priced right, there will be buyers. The realtors and sellers keep ignoring this point. It's not the market; it's the price, stupid.

[Lewis]

How can people be surprised when there is a 24% decrease in house prices and not be sicked to know that the same house price was overpriced up 130% to start with. House prices HAVE to come down to a healthy level before we can even talk of a "median price". The rest is denial and wishful thinking.

[GDC]

To Just Call Me Maria,

I too was looking at Cheviot Hills and I'm surprised that someone listed their price at 03/04 levels. Since the sellers were listing at 05 prices, I gave up on the area.

My observation is that areas in Encino, BHPO, Sherman Oaks have had a 20% haircut from the peak last year. On the other hand, Westside areas like SM, Brentwood, Pacific Palisades, Cheviot HIlls have not reduced listing prices at all. I am thinking of buying early next year to see where the market is at. I'm very skittish about buying now only to see the house go down 20% in value in one year.

Even though the Cheviot Hills house is listed at 03/04 prices, don't you think there will be many more similar houses at lower prices next year? I certainly don't think the house will appreciate in value the next 5 years or so.

[Jeff]

Don't buy now...just wait....this is just the beginning. Give it one to two more years and you will see what I mean. This all is long overdue.

[Binder]

Witzel sold for $ 1,125,000 last year, now it is trashed and is sold as a short pay, not closed so final price could be higher than 799K

[Mr Pasadena]

I've been thinking and writing about this for the last two years on other sights. I'm people are finally speaking out about the reality in real estate. Without the appropriate income to sustain the home prices, these prices will drop like flies in an air tight room full of RAID. Some will survive but most will drop dead. Well, I think homes in average income neighboorhood will drop significantly by years end. I cannot say what the drop will be and certainly will not be the bottom. But don't by at the end of the year because December will be when the JUMBO CONFORMING gimmick loans will end. When it ends, the following year is probably a good time to buy if you plan on staying in the house as a home for a long long time and not as an investment; 10+ years from next year is probably when you can recoup any cost.

I for one is seriously looking today but not to buy but just to see how low it is going. Any guess what? It hasn't gone that low in the areas I'm looking at. Maybe five to ten percent lower that last years prices. There are some that are significantly lower than the purchase prices but it is REO's.

I really think by the end of the spring selling season, people will finally realize that the prices they are asking for are unrealistic in a traditional lending environment. Now it is just a matter of time because our wages are not growing nearly fast enough to purchase homes at these prices. Maybe in 10-15 years from now. Wait till the bank start asking for twenty percent down payment again. Then the market will really tank since this Country has a negative savings rate.

[EscapeToWisconsin]

Sitting here in Wisconsin, I love reading all of this, having sold my overpriced house August 2007 in Long Beach. As I look out over my 2 acres of pine covered land with no traffic or smog in my 3 year old 1800 sq foot house, that I paid $150k cash for. I think to myself. Thank God for bubbles as long as you get away before they pop.

PS. Yes, There is snow, that's why they invented 4x4 trucks and the internet. It's no big deal.

[Mr Pasadena]

Hey EscapeToWisconsin. You were smart. I would love to do what you did. However, my wife will not live anywhere else but CA. All her family and my family is here and she just can't bare leaving.

I just have to wait for the prices to come down or add to my current house. I really think the end of this year will be the when people will have a dose of reality.

You should be commended for your brave move.

[sam]

i have been shopping for a home, and i go to these homes that are 7 to 800k, and they have termites, the house has a geological problem and when it rains there is a pool you can swim in under the house, the roof is bad, the roof leaks, the plumbing is not the best, the tiles make crickling noises when you walk on them, and so much more. NONE of these were in the inspection report. and the guys goes, yeah this house was inspected and all major things have been fixed. gee let me see so its still okay when it rains and i have a pool under the house. his opinion was, well the house is still standing, is it not? who ever is in the market of buying a house, please spend that extra buck a get your own good inspector. then negotiate on the price. also, you'll find many bedrooms or garages and carports are not up to code.

[KC]

Not according to these prices http://www.latimes.com/business/la-median
homesales-chart,0,3900278.htmlstory

Please state where you're getting your data from!