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.