DataQuick: SoCal housing market 'crippled'

The real estate market in Southern California is "crippled by uncertainty and credit constraints," DataQuick said today in a report showing continued declines in sales and prices across the region.

Sales in February fell to the lowest level ever measured by DataQuick,  and DataQuick said roughly one out of every three houses that did sell had been foreclosed on earlier this year.

In Riverside County, prices have fallen 20% over the past year and 48% of February sales were of foreclosed homes.

Bearish economist Christopher Thornberg, who once generated headlines by predicting a 20% decline in Southern California home prices, has now revised  his prediction: he says prices will fall 40%.

Across Southern California, DataQuick reported, median sales prices fell from $415,000 in January to $408,000 in February, a decline of 17.6% from year-ago prices, and 19% from the pricing peak of $505,000, which was reached last spring and summer. Overall sales fell 39%.

In Los Angeles, median sales prices actually rose slightly, from $458,000 in January to $460,000 in February -- the only increase in the six-county region of Southern California. The February L.A. numbers represent a 12.9% decline over the past year, and a decline of 16.4% from the peak of $550,000, reached in August. Overall sales fell 45%.

DQ analysis: "Sales remained extraordinarily low, and a significant portion of what did sell was in areas beset by foreclosure activity. That's where sellers are the most motivated and price cuts are largest. Mainly it's in the inland markets, often in newer suburbs, where prices got pumped up artificially with the sort of crazy loans that no longer exist," said Marshall Prentice, DataQuick president.

"More difficult to glean from today's statistics is the exact status of more established neighborhoods, often near the coast or job centers, where foreclosures aren't a big problem but where sales are scant. We're anxious to see whether the government's recently announced higher conforming loan limits
will have much impact on sales in these areas this spring and summer."

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
Feb 08 $460,000                       -12.9%              68,424

Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com.
Photo Credit: AFP/Getty Images

Comments

[TomG]

I have this image in my head of the Tsunami. Remember the guy in the swimming trunks looking out from the shoreline as the water receeded. I think most Americans are like that guy... they have no idea how bad its going to get.

It makes me mad too because I (like my friends and many others),saw this coming 5 - 6 years ago. It was about that time that I wanted to buy a house, but by the time I had saved enough for a down payment the prices had doubled. Anyone with any REAL common sense would have known that house prices can not go up 20% year over year, especially since salaries were not. Realestate had always been a good investment because it didn't go up that much, it tracked inflation, it was good because you could get out what you put in. Housing was never a good investment because you could retire off your house in 4 years. GIVE ME A BREAK.... Now the economy is destroyed.. thanks.

[sjen]

To Amir:

Rents are not likely to go down.

I work in Real Estate and have talked to various apartment managers to know it for a fact.

People need a roof over their head. If they can't buy, they rent. If they let go of their house due to foreclosure, they rent. If they move to LA, they rent. The demand for rental units is high and will be high for the time being.

The rents may not go up like what a median price of a house had gone up in the past 10 years, it is unlikely to go down.

Even when the landlords had tried to entice potential renters back in the mid 90's; they'd use first month free but never lower rent.

[kat]

Bots,

That's exactly what's wrong with the housing market out there. You all look at it like the stock market.

You don't "snap up" property hoping it will go up. You buy a home to live in and raise your children in and fill it with your life. Then you hope it goes up eventually, you can cash in, down size, and retire after you get rid of those expensive little darlings we call children.

[Laker]

Two issues:
1) Forget about CPI, headline inflation,.etc.. Everybody with brains here, that uses self service gas station, pays child daycare, and goes to Vons/Ralphs/WholeFood/Costco/etc knows that true inflation is now running 10-20% annually. (Heck the dollar lost 20% of it value in the last 10 months versus some currencies...).
Now we also know that houses are pretty much 20% lower than their peaks. Do you guys UNDERSTAND the actual REAL drop in prices???? Nobody talks about this, nominal price declines are easily seen by most people, but real prices (inflation adjusted) are much harder to see and feel. Just combine the 20% nominal decline with the 10-20% true inflation....and you can see the actual drop to date, Also see how incredibly inflated was this market....

2)By the law of unintended consequences, when the government intervenes something bad will happen. It is very easy to see the equation: The MORE the government intervenes in trying to prop up prices, the MORE of an undershoot in prices will occur.
Watch and see.

[kat]

JW,

Wow, guess you told me.

And I would recommend to you that you try really hard to pinch out an original thought but don't give yourself a nosebleed doing it.

The unemployment rate is at an all time low. the vast majority of people in this country (99%) are paying their mortgages. The people who've lost thier jobs in the financial industry are overpaid, commissioned based pimps for these predatory lenders. The rest are other sundry over paid, middle management types that always go first when things get tight.

I too have money in the stock market like everyone else and not only have I not lost money, I've gotten 5.5 this year - not great but I haven't lost.

If you want to blame something for the economy blame the Bush administration and the national debt. The fed just printed 2 trillion in new money to flood the market and bring down the dollar even more and send gold and fuel up even more.

Before you point your finger and hold yourself up to be some sort of financial whiz, look inside. I own one home outright and have a vacation home I owe $50,000 on. I have NO other debt. I'm 46. I live within my means.

But then I have some fool like you who's floundering in debt and paying half your disposable income in housing point your finger at me.

So who's the fifth grader?

[arroyogrande]

"Rents are not likely to go down."

I assume you are not including that big swath of land called "The Inland Empire". Rents are down...big time. If we were to lose the renter in one of our houses out there, we'd have to drop the rent about 10% to remain competitive. We treat her like gold.

"I work in Real Estate and have talked to various apartment managers to know it for a fact."

I work in real estate as well, and am the de facto rental manager. Rents can and do go down. It's all supply and demand.

- arroyogrande

[kat]

Cal,

You want it to be bad for some reason. Why?

[CD]

IT IS NO LONGER ABOUT REAL ESTATE.There are so many factors that have entered the equation now. The stock market is off, the banks are out of money, we may be facing a crisis the like we have never seen before. Nouriel Roubini is always right, just like Patrick.net. As TomG said above do not be the guy in his shorts watching the shoreline receeds,take action now with whatever investments you have, buy metal, euros, have some cash, just don't stand there waiting to be swept away. Stay out of Re, rent and wait. Save your money.

[JW]

Kat, you can come on this blog (and others) and claim anything that you want but it doesn't mean that it's true. Frankly, anyone who as mad some of the comments that you made couldn't be very financially savvy and IF (notice I said if) you ever made any money from investments, you simply got lucky during the boom years. The facts are the facts and your statistics are full of it. 99% of the people in the country are NOT paying their mortgages is just one of your glaring mis-truths.
I think that the majority of people commenting on this blog are well aware of whose comments are bull-s***t.

[DD]

My rent is going up....to $2500 for a 1 BR in Hollywood. I might as well just buy for those crazy rent prices.

[MyLessThanPrimeBeef]

Well, there he goes again!

Representative Frank, in his ceaseless assault on free market correction, just proposed another $300 billion FHA loan guarantee.

[Cal]

kat : "You want it to be bad for some reason. Why?"

Nice that you don't admit that you are wrong lol.

The data is the data, people are skewing it for whatever their purpose is. I think intellectual honesty is important, you are clearly looking for the positives.There are many positives in life. But none are to be found in looking at the delinquency rates and foreclosure data except to say "at least it is not worse".

The credit markets are freezing up, delinquencies are at an all time high (people aren't paying their mortgage as you so glibly thought they were) and foreclosures are getting to a boiling point. These are all negatives for housing in California.

The positives are that prices are coming down and more people will be able to afford a home without destroying their financial future. I am not negative I am just taken where the data leads me. Instead of people like you (and there are many like you on the other side) who put read what they want to into the data.

We can argue all day long about the data but you haven't even got the numbers right yet. Lets start by you getting to that point then we can move forward and have a real argument based on the data.

[kat]

Jw,

I didn't get lucky, my financial advisor did.

And you can say what you want about me. I don't much car. What you believe will not change the facts.

The world is not going to collapse becaus people have overpaid for houses in Southern California, USA. You will survive it, the country will survive it, and the Earth will continue to spin. No matter what you think - or hope.

[sjen]

To ArroyoGrande:

Clarification: what I meant was only for Los Angeles county, not Riverside or San Bernardino. My area of expertise is Los Angeles County therefore I am not qualify to comment on Riverside or San Bernardino.

One big benefit with renting is mobility.

Most renters (who are not married with 2 or 3 kids) prefer to live closer to the job location. Why drive 50 miles each way daily if I can move closer to my work place, right?

[kat]

Cal,

The median house price in So. Cal has dropped by about $100,00 - is that right?

So what the hell is wrong with that? It sucks for people who have overpaid but they are the minority. If those people got stuck on this game of real estate musical chairs then so be it. The rest of you should be glad.

This had to happen. There wasn't a day that it wasn't going to and you don't have to be Adam Smith to know that.

So let it go. Get rid of the deadbeats, free up the homes and flood the market, let the prices go down, and get your house to live your life in. You might pay out the a*s now but if you stay in your home for a number of years you eventually grow into your payment (as long as you don't have an ARM).

That's just the way it works and you don't have to be a financial wizard to figure it out. You all are just distorted from being abused by this madness. You live in a real estate rabbit hole out there.

[CD]

DD where are you renting???? my son has a lovely one bedroom penthouse for 1300/month on top of a really hip street in Hollywood,great views, not far from the 101 cafe'. $2500, are you in an artist condo/loft on the boulevard? MOVE out. There is plenty more to rent at great prices...

[JW]

Oh, SoCal will survive but from peak prices to low....prices will drop 50-60%.
FYI: We sold our residence and our rental home (both paid for) in North County Coastal San Diego in the spring of 2005 and cashed out of CA after living there for 35 years. We haven't had any debt in years so your hypothesis about me is all wet. My wife and I saw this mess coming like a huge freight train coming down the tracks so we elected not to stand on the tracks. We left the state and moved where prices were normal.
Since you are convinced that this is just a small storm and will pass soon, why don't you come back here in one year and eat some crow? I'll do the same if I'm wrong................but I'm not. Prices are going to get much, much smaller and once they hit the bottom around 2012, they will sit there and stagnate for a looooooong time. Wait and see.

[left of lefty]

foreclosures are definitely where the activity is. because that's where the deals are. people selling their own homes are not dropping their prices to the degree that lenders are dropping theirs.

prices were stable from jan to feb.

in jan, there were 2299 sales per day (71256/31).

in feb, there were 2359 sales per day (68424/29).

a spring bounce or a long term trend? with all this talk about bailouts, i think credit is going to become available again soon.

[kat]

Cal,

Read this story and tell me what I'm missing. But first, read it without looking at any percentages. This is how the media has created this hysteria. They say XYZ foreclosure rate has risen 57%, blah, blah. Well, they don't follow up with a little fact like, even if the foreclosure rate doubles it's still less that 1% NATIONWIDE - hear me - NATIONWIDE. Vermont had one foreclsoure in Jauary 2008. That meant that Vermont's foreclosure rate went from two foreclsoure to one.

Even the city with the highest foreclosure rate in the country is only 5% (95% paying) and the story actually says "some stage of foreclosure" which could mean a late notice.

http://money.cnn.com/2008/02/26/real_estate/
foreclosures_rise_again/

[MyLessThanPrimeBeef]

Dollar not welcomed in Lower Manhatten!

At Taj Mahal, they prefer rupees...courtesy of overpriced Southern California real estate, among other things.

http://news.yahoo.com/s/ap/20080313/ap_on_bi_ge/
diving_dollar

[kat]

JW,

If you cashed out an retired you should be thrilled. You must be a damn millionaire!

So why so bitter JW? If you cashed out and took the money and ran while all the fools got left on the deck of the California real estate Titanic you should be a little more gracious.

And if your homes and property were paid for then you shouldn't have been in the path of any freight train but instead sitting on your front porch, sipping ice tea and watching the tracks. You would have been safe in your home of 35 years and property values wouldn't have meant one whit.

[Cal]

Kat,

Prices coming down are great for those wanting to buy, no argument there.

But the problem stems from leverage, both joe homeower and Wall Street.

Joe Homeower extracts equity and that equity disapears.. Joe Homeower is in debt for a long time and his spending is affected.

Joe Homeower who pays too much is overleveraged and his spending is affected.

Those two types of homeowers, will directly effect the US economy going forward due to their lack of consumption.

Wall Street is a different game entirely. They have many complex vehicles tremendously leveraged and even small changes in default rates (and default rates are very closely related to price declines) can have produce tremendous losses.. which then affect the banks who let them borrow the money who are themselves leveraged. The Carlyle fund that blew was leveraged THIRTY TWO times. Many CDOs are leveraged 15-20 times.

The losses in these type of vehicles will reduce credit in 2 ways, A) They are no longer a factor in demand since they are no longer buying so fewer people are buying mortgages. Yields will have to rise as result. B) They have to deleverage through selling meaning more mortgage supply on the market, meaning yields will rise. Or the banks will have to keep the mortgages on their balance sheet which means they have less money to lend (affecting demand, yields will rise).

The housing market is only limping along as it is now because rates are low, if yields start rising (and they will eventually it is just a matter of when) then everything will get worse.

I'm not chicken little and this isn't hyperbole. Ben Bernanke isn't slashing rates 225 bps and dumping 400 billion into the marketplace because there ISN'T a problem. There is no question that we will get past it but there is a question of how bad it will be. Right now the data looks bad.

[areles]

kat, do you own investment properties in southern california? because you seem unusually interested in and stubbornly bullish on los angeles real estate for someone who doesn't even live here.

[CD]

My god I cannot believe the PR machine the NAR has going here.... I wonder how dear Lawrence Yun RE leader from Mars will spin this one ?? Peter you should have a sign, blog dangerous for RE agents, too much reality and datas.

[sjen]

Some houses went into foreclosure not because they were bought at the high of the market (2006/2007) but because they were treated like piggy banks by homeowners.

Too many people took advantage of the real estate boom and easy credit to take cash out of equity to pay for cars, vacations, and credit card debt.

Now that it is harder to get a loan and the value of the property is going down, many such homeowners owe more money than their property's worth.

With each low, more people may decide to walk out than bail out.

In my office, I saw a homeowner who paid $250,000 for a Palisade condo in 1999 and let the bank have it back at the end of last year. At that time that condo was worth $900,000+.