Listing prices now down $114K from peak

Median listing prices in greater L.A. slipped by $500 per day over the past week, dropping to $3,500 over the course ot the week, to $465,500, according to Housing Tracker's analysis of MLS listings.

Highlights: Median listing prices have fallen 15.4% over the past year, and 20% from their peak of just under $580,000 in April 2006.

The inventory of unsold homes and condos slipped over the past week, to 41,838. Inventory is still pacing 32.3% ahead of year-ago levels.

Date               Median listing price                   Inventory

4/06               $579,666                                     27,251
4/07               $545,000                                     35,489
5/07               $545,000                                     38,297
6/07               $540,000                                     40,766 (up 20.4% y/y)
7/07               $535,000                                     42,685 (up 14.5% y/y)
8/07               $529,000                                     44,483 (up 13.6% y/y)
9/07               $520,000                                     46,414 (up 16.9% y/y)
10/07             $510,000                                     46,603 (up 15.6% y/y)
11/07             $499,900                                     46,503 (up 19.0% y/y)
12/07             $495,000 (down 10.0% y/y)     43,174 (up 28.2% y/y)
1/08               $479,900 (down 12.6%)           40,850 (up 33.3% y/y)
2/08               $475,000 (down 13.5%)           43,625 (Up 38.3%)
3/3/08            $469,000 (down 14.7%)           42,356 (Up 35.0%)
3/10/08         $465,500 (down 15.4%)            41,838 (Up 32.3%)

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: AP

Comments

[campechano]

you hear that sound?
It's the bubble hissing....!

[NAR is WRONG]

Assuming the easy, no obligation mortgage loans disappear, wouldn’t it be expected that inventory levels would soon rise much higher than 32.3%? 100-150% does not seem unrealistic given many homes have been priced-to-sit for almost a year now. Do we think L.A. real estate is anywhere near a bottom?

Just how many people can afford $465,500 for a house using their own money? Furthermore, of the people that can actually afford this price for a home, I doubt they would settle for what those asking $465,500 actual buys in L.A.. Oh sorry, this is L.A..

[John]

Peter,

Can you start a housing bottom betting pool for charity?

Each person kicks in 5 bucks, and the winner gets dinner or LA Times swag and bragging rights, and the money goes to some good cause, (keeping kids out of gangs, making Laura Chick and Connie Rice co-emperors for life of Los Angeles, helping the NAR fund an economist who knows something about economics, etc.)

[Hugh Jorgan]

Even at 15% off the peak, the prices are still more than they should be. Let 'em fall even more, then watch the bargain hunters come out.

Seriously, as long as the inventory continues to grow, no investor should consider buying. When inventory levels off, that is when the real buying will begin.

[Truth2Pwr]

Yawn.

Somebody wake me when it gets down around $250K. That's when I'll consider watching for a bottom. If this pace continues, that would be right around July of 2009. Hard to believe, I know, but wouldn't shock me in the least if it came to pass.

[bottom line]

Can we all have a chorus of

Don't catch a falling kinfe, don't let it hit your pocket,
always hold it away
Greenspan is a traitor, Cheney's off to Dubai,
will they ever fade away

Carlyle Cap levered $32 to $1 of worth, Blackstone wants your money bad, why, cause they need it!

Just burn this mother down, & BearStearns, you're FIRST. Hey Herbert Walker, lets cough up the do-re-mi to bail out Carlyle Cap, or have you & the neo-cons and Zionists no honor .

The book "The Three Trillion Dollar War" make it painfully obvious why you can't separate the incidental "mortgage mess" from the actions of the traitors in the DOJ, NSA, CIA, the supremes, & 5 deferrment dick & the shrub.

Don't like my politics, well I don't like 'em much myself. America was a lot different before you had fascists calling it "the homeland", lol, ala Herr Goebbels and that freak that was Brownie's boss. Oh, yeah, Paulson also, assisstant to John Erlichmann in '71& '72.

Click on the WaPo or the NYT to see why this pup is crawling into the dumper. Hey the LAT has the stuff too.

[Dominic Smith]

So $500 a day price decreases in listing prices and the houses are spending how many average days on market?
So after 100 days you subtract 50K to keep keep competitive with the newest listings and then you ...
spend another 100 days subtracting 50K.
I'm happy to neither a buyer or seller be just now.

[srla]

In order to reach a bottom, one of two things must occur - either ownership costs must approach the costs of renting, or market psychology must reverse.

Housing prices are still more than two and a half times the cost of renting in most of L.A., so we are far, far off from the point where fundamentals will dictate a bottom.

Market psychology is showing no signs of reversing any time soon, and why should it? Potential buyers see rising interest rates, tightened lending standards, and plummeting prices. Where is the incentive to buy? Given the precipitous plunge we are currently experiencing, it will take a prolonged leveling off in prices before any significant number of buyers will even consider jumping back into the market.

The time will come when real estate again becomes a viable investment. But based on any logical analysis of the present situation, that day looks to be a long, long way off.

[srla]

Oh, and by the way, what ever happened to "Investorguy"? Have all the unflappable real estate bulls vanished into thin air?

[LA-renter]

I'm curious if anyone can address what kind of buyer is buying, and what kind of seller is getting sales.

I would guess that fewer buyers are first timers, and more buyers are selling their own place in the same falling market. Is there must stomach for buying anew with the anticipation that you could "lose" a significant portion of the purchase in only a year or two?

I imagine that, whatever you believed the house was worth at the bubble peak, most owners did not purchase at the peak. Thus, price slashing is disappointing but not devastating to most sellers. Would the most desperate to sell ironically be the most reluctant to give on price and not sell?

[Dan T]

Great chart. If you could add an additional entry as to when the median listing price was at $465,500 prior to the peak, it'd would provide a poignant reference point.

[someday the ants will eat grasshoppers]

I'd like to see Peter or someone here comment on why the same data from housingtracker.net show the price of the 75th percentile going up for the past few weeks for LA.

Is this an artifact of the cheaper homes selling and the expensive ones not moving? Or are the asking prices in the higher end really still rising?

Peter, help us out on this one. I'm tired of hearing realtors say that "good properties don't go down in price." What gives?

[John T Watts]

Maybe it helps some when people who retire move to other parts of the country where they can get more for their money. People who are in the LA area for employment reasons don't always have that option. Vacancies created by retiring people moving out might improve affordability for working people who need to be there. It might improve life for both groups of people.

[Truth2Pwr]

First off in the post-bust reality, the whole "living in L.A. for employment opportunities" concept is about as valid as the "moving to L.A. to become a famous movie star" concept. When many people are forking over 40%, or more, of their salary to pay their mortgage and commuting 2 hours each way to work, I'd say a job waiting tables in Montana probably leaves you with the same amount of take home pay and more time to spend with your family. Bottom line, if you aren't pulling at least six-figs here...leave.

As for "who buys?" in this environment, I can give you one example. I desperately urged my best friend to sell his house and get out before the RE market crashed, which he finally did in November. He moved his wife and daughter into a nice SFR in the same area. No problem, he's golden right?

Well his $400 gucci bag buying wife started whining about wanting to "own" their house. I sent him listings of gorgeous rentals and told him to move into one and tell her to STFU for a couple of years, but of course she (and a bunch of delusional RE agents) finally badgered him into buying a house that had been purchased for $800K in 2005 and was now offered for $625K. That was last month. According to this thread, he probably lost $3,500 last week alone. I just checked and for the same amount of money they could have just moved into the Ritz-Carlton Laguna Beach for the next year or two and still come out ahead. Instead, they live in a 3+2 in Long Beach.

Be careful who you marry boys. You might wind up catching a falling knife.

[sfvrealestate]

--Housing prices are still more than two and a half times the cost of renting in most of L.A--

SRLA, I'm curious as to what numbers you're using? Here in the SFV, a 2+1 house in a decent neighborhood rents for $1500 to $2300. A mortgage for same is $2000 - $3000/mo.

[markl]

Peter,can we finally get what the real peak median price is?In this article you say 580k in april 2006 but the last few weeks you have stated in other posts/articles it was 550k in august 2007.Which is it please?

[peteviles]

markl writes, "Peter,can we finally get what the real peak median price is?In this article you say 580k in april 2006 but the last few weeks you have stated in other posts/articles it was 550k in august 2007.Which is it please?"

Thanks, mark. Sorry to confuse you. Let me un-confuse you.
Median LISTING prices in greater L.A. peaked at $579,666 in April 2006, according to Housing Tracker.
Median SALES prices in L.A. County peaked at $550,000 in August 2007, according to DataQuick.
Two different statistics produced by different organizations using different methods and measuring different areas.

[m]

while I whole heartedly agree with most comments on this blog, I take issue with the insistence that women/wives are causng so many men to buy houses. I am not bashing men, but please stop blaming women for the current problems. If a man bought a house because his wife wanted him to, then possibly the marriage was not in the best shape before the purchase (i.e. a joined effort).

[DF]

This is always good information to have, but it's also deceptive because it's not uniformly distributed. The outlying areas of greater LA are getting crushed, while the traditionally desirable areas like Santa Monica or WeHo are staying steady.

For example, I happened by an open house near where I live (a lovely place you can check out here: 1914catalina.com). It's a gorgeously done old-style CA bungalow on a large-ish lot. Sold for around $500k in 2002, asking $1.08m in 2008. I suggested this might be a bit rich to the realtor, in light of the housing decline, and he responded that his sector of the market (high-end properties in Los Feliz) were still going up and were unaffected by the downturn.

Obviously this point needs to be taken with an entire shaker of salt considering the source, but it does seem that there's been very little downward pressure on higher-end property in desirable areas within LA itself. What does this mean? That the only deals caused by the housing downturn will be on outlying and/or lower-priced properties? Or that the crash has yet to affect higher-end properties? If anyone has thoughts, I'd love to hear them. Thx.

[Roger Moore]

"Median LISTING prices in greater L.A. peaked at $579,666 in April 2006, according to Housing Tracker." --peterviles

Actually, Peter, the Housing Tracker stats are for LA county only. If you look at the fine print, they say that the figures you're quoting are for "The Los Angeles-Long Beach-Glendale Metropolitan Division of the Los Angeles-Long Beach-Santa Ana Metropolitan Statistical Area". That's census speak for LA county.

That's why Housing Tracker has separate listings for Orange County (17,198 listings, $549,000 median price, +17.5% and -15.5% respectively) and Riverside (also include San Bernardino, 49,206, $320,000, +14.9%, -23.6%). Obviously the numbers can't be for Greater LA, since there are more listed in the Inland Empire than the figure you're quoting.

[eprobert]

SFVRealestate - I'd love to know where these $2000 a month (purchased) houses are. I've been looking for one for a while!

$2000 month X12 months = $24,000 per year, interest-only that's a $300,000-ish house. Add in RE taxes and you're at $260,000, but to give you the benefit of the doubt we'll assume the taxes will be a wash, so we're back at $300,000.

Where does one find a 2+1 in the SFV for $300,000? Or even $330,000 with a 10% down payment (which is about 3x the median 1st-time buyer down payment according to the CAR and NAR)?

[ILuvLA]

The inventory figures are now suffering the same problem that commonly appears in unemployment figures: discouraged sellers.

Unemployment figures don't count "discouraged workers," people who have given up and are no longer seeking work. Similarly, some would-be sellers are pulling their houses of the market because they either can't get the price they want or need, or because their houses languished on the market for so long.

This is depressing inventory, which is actually good for housing prices in the short term. In the longer term it means that there's a constant "reserve" of sellable houses to keep the inventory steady (and fairly high).

On the question of why the 75th percentile might be rising: keep in mind that the various weaknesses in the housing market are not evenly distributed, either geographically or by price. We all know that things out in Riverside county or up in Palmdale are really bad. West L.A. may not be great, but it's not at all the same situation (insert standard disclaimer about mortgages coming home to roost). So, yes, it's possible for that 75th percentile to blip up while most of the rest of the market continues to be in trouble. There's also a pickiness factor among buyers now, who just aren't in the "Buy anything, it doesn't matter what flaws it has!" mindset.

[TheHiddenCosts]

sfvrealestate, don't forget that renters don't pay for property taxes, maintenance and upkeep, homeowners insurance and in some cases utilities. I know that doesn't account for all the difference between you and SRLA (OK, renters don't get the tax deduction for mortgage interest and property taxes which further muddies the waters here), but I'm guessing that SRLA isn't comparing apples to apples - most rentals in the city are apartments, not houses. If a two-bedroom apartment ends up costing 1.5 to 2 times less than a 2-bedroom house in the same neighborhood, I can understand why many people would choose to, or have to rent rather than pay that kind of a premium for the house.

But shouldn't there be a premium (even a slight one) for home ownership over renting? I don't buy into the idea that house prices have to be equal to rental costs, they just have to be close enough that people who are renting see the long-term value of buying a house (or condo) AND they can afford to make the jump. We're obviously not there right now.

The knife is falling but it's still too high for for anyone making under 100k to worry about catching it. If they all followed Truth2Pwr's advice and moved to Montana to wait tables, we'd lose most of our police officers, firefighters, teachers, office workers, recent college grads and pretty much the majority of the work force in the city. Yeah that sounds like a great idea, they should all leave.

[GDC]

Truth2Pwr:

$400 Gucci bag? I wish I had married such a frugal wife.

[tew]

Seems odd that prices are only down 15% from the peak at this point. In reality in many LA markets prices are down much more than that.

[MyLessThanPrimeBeef]

Isn't it a wonderful world when you can have one extra day to depreciate your house in a leap year?

[kat]

My first reaction, like another poster's, was that even with this drop, housing prices there are still insane.

But what also struck me about this story is the low overall drop in prices compared to the media fueled hysteria. The way the media would have you believe, the economy is going to go into the next great depression because of this foreclosure "crisis".

It also goes back to my earlier argument that even with the foreclosure rate tripling and quadrupling, it's still an extremely small percentage of homeowners. The very worst areas are still under 5%. Most areas out side of the hot spots have less than a 1% foreclosure rate which has fluctuated little because the markets have remained stable, experiencing neither the boom or the bust.

The media also gives little ink to the fact that this is a blip for most legitimate lending institutions. It's speculators on Wall Street buying up these sub prime loans who are really going to be hurting. Reputable lending institutions that lend to adults who pay thier bills are not going to be deeply effected by this.

All that should happen here is the housing market disgorges itself of the people who shouldn't have been in it in the first place. When that happens, the houses being held up by stupid squatters and deadbeats will be freed up for people who earn them and deserve them which will again expand inventory and allow prices to adjust accordingly.

It's really not rocket sciene.

[Cal]

kat: "The media also gives little ink to the fact that this is a blip for most legitimate lending institutions."

Name one legitimate lending institution that hasn't been affected by this. All the biggest names certainly have, the mid size names are getting slaughtered.

The percent foreclosed is in the mid 1% range and growing rapidly, historically high. The numbers in the foreclosure process are way above that. And those numbers are highly concentrated in the bubble markets like California.

The lending institutions are greatly affected due to the leverage they employed or allowed others they lent to to employ. That is why small losses are magnified so greatly. We are in the hundred of billions of dollar in writedowns range and this thing isn't close to being over.

[sfvrealestate]

Eprobert, my figures were not based on an interest-only mortgage, since those no longer exist. I was thinking more along the lines of a $450k - 500k house with a down payment, so the loan would be $360k-$450k.
However, you might want to check the new FHA guidelines with downpayments of 3%. The new guidelines are on my blog. And yes, there are now some condos in the Valley UNDER $300k and houses UNDER $400k.

[kat]

Cal,

I said "legitimate" lending institutions. I saw a friend of mine who is also president of the bank who has my mortgage and he said they didn't have one single house in foreclosure.

If any given bank has a 1% foreclosre rate that is factored in as the price of doing business anyway. X amount of loans are going to sour. Even in the hottest foreclosure markets the rate of foreclosure is deminimus in light of the overall compliance rate of responsible homeowners.

You are in the eye of the storm in California. It's all you hear, it's all anyone talks about and walking away is a hot fad. But out here in the real world, mortgage loan default and foreclosure is not even an issue - except for the media which loves to do a "gotta feed my babies" story at least twice a week.

The only lending institutions that will actually go under because of this are sub prime/predatory lenders who will fall victim to thier own greed as they well should. It's happened before and it will happen again. The human body purges itself of poisons when it's sick and so the economy will vomit up the deadbeats and the predatory lenders. It will then feel better.

Legitimate banks and financial institutions will feel a little pain but that's all. B of A is not going any where, Bank One isn't going anywhere, Chase isn't going anywhere. The First Bank of Bumf*&k isn't going anywhere.

You are buying into an hysteria that is utterly media contrived. Our economy is so incomprehensively vast that a few million deadbeats with (relatively) penny ante loans will not be able to bring it down. The dot com buble burst supposedly evaporated a trillion dollars out of the economy. We survived. The savings and loan crisis was far worse than this. We survived.

Chill out chicken little.

[Cal]

"I was thinking more along the lines of a $450k - 500k house with a down payment, so the loan would be $360k-$450k"

Ignoring the opportunity cost on the down payment, a 450k house with 50k down at 6% rate would get you $2398 a month on PI, T would 470, we will call I $50 and mortgage insurance would be around 166. We will ignore maintenance the those type of costs for the moment.

So if you find a cracker box dump in the ghetto you love and have 50k burning a hole in your pocket you too can own it for 3k a month.

If you need FHA for the low down payment it'll add another 1.5% to the purchase price and you'll of course have to deal with the highly monthly payment or buying a cheaper house (ether your monthly payment will go up ~$300 a month or you have to buy a 50k cheaper house, no free lunches). If you make 100k a year AND dont mind fearing for your life AND dont mind spending 40 percent of your income on housing... this dream can be yours.

On top of all that you have to worry about selling your little ghetto cracker box in the future and if rates happen to ever go higher then there current historic lows.. good luck with that.

Oh but you get a tax deduction, that'll make it all ok. Right?

[DSL]

DF is 100% correct. I have brought this up before but received a minimal response. The homes in my target market of South Pasadena, Arcadia, Pasadena, San Marino rectangle have not come down one iota in terms of listing prices. Why is this "bubble bursting" as you all put it seemingly only confined to areas no one with a decent income would ever dream of living?

[Paul H]

Everyone it seems is waiting for the bottom to fall out of the market but it never will. At least not in the most desireable areas of Socal. If you're willing to commute, then you're being realistic, but if you're hoping for homes in WLA, the nice parts of the SFV & SGV, and the South bay, then keep on blogging because you'll need a lottery wrist band or a huge chunk of dough before you ever realize that dream. The market will never be what it was in the late 80's early 90's. That opportunity is gone.

[problemwithcaring]

We survived. The savings and loan crisis was far worse than this. We survived.
Chill out chicken little.
Posted by: kat |
Why is this "bubble bursting" as you all put it seemingly only confined to areas no one with a decent income would ever dream of living?
Posted by: DSL |
The market will never be what it was in the late 80's early 90's. That opportunity is gone.
Posted by: Paul H |

Oof, the bulls are back.

But um...a bit perplexing. Why the sudden influx of realtors on the site? Shouldn't yall be busy getting ready for "Open House Month"?

[Cal]

"Legitimate banks and financial institutions will feel a little pain but that's all. B of A is not going any where, Bank One isn't going anywhere, Chase isn't going anywhere. The First Bank of Bumf*&k isn't going anywhere. "

Bank One (JP morgan) had 1.3 billion in writedowns on subprime debt last quarter. Citigroup.. 18 billion. BofA 3 billion.. Fannie, Freddie, Merril, Bear Stearns, Credit Suisse, UBS , Wells, Wachovia, Wamu, CFC.. all big writedowns.

From Wells Fargo Chairman: " He predicted the biggest 15 or so U.S. financial firms, which already have written down about $180 billion in assets, could face further writedowns of $200 billion or so. "

Banks are leveraged, usually about 10-1, so the multiplicative effect of the losses will mean that trillions of dollars of available credit are being removed from being available.

Now most of these banks wont go away but some will, but the others that aren't going away ARE tightening what credit they give out. Credit is contracting and history has shown us what happens to the economy when credit contracts. It isn't chicken little it is looking at the facts as presented and coming to the logical conclusion.

Facts are, losses are mounting at major lenders... logical conclusion credit is contracting. If you accept that credit is contracting then those markets dependent on financing (i.e. housing) will contract right along with it.

[Cal]

"Even in the hottest foreclosure markets the rate of foreclosure is deminimus in light of the overall compliance rate of responsible homeowners. "

http://www.mortgagebankers.org/NewsandMedia/
PressCenter/60619.htm

"The total delinquency rate is the highest in the MBA survey since 1985. The rate of foreclosure starts and the percent of loans in the process of foreclosure are at the highest levels ever. "

"The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 5.82 percent of all loans outstanding in the fourth quarter of 2007 "

Seems like the compliance rate isn't deminimus, in fact its at and near record highs of delinquencies and foreclosures.

p.s. Ever wonder why you the credit markets are not functioning properly and Ben Bernanke has had to dump 400 billion into the markets AND cut rates 175 bps if all this credit contraction is having no effect.

[Truth2Pwr]

In answer to Paul H, the "nice" areas will be coming down later rather than sooner, but they WILL come down. Obviously there is a greater degree of resistance to drop price in those areas, but eventually there will be a forced capitulation. Why?
Because right now, the extremely fortunate folks who exist above the fray of macroeconomics and don't live one false step from the ragged financial edge are standing pat or "buying up" in the kind of areas you describe. That won't last forever though. Only the true super-premium spots like Malibu, Beverly Hills, etc. will retain their cache in the long run. Everything else will eventually capitulate to the broader market and most importantly the affordability index.

[Just Call Me Maria]

We haven't seen anything we want approaching a rapid decline. Since July 2007 we have now gotten our bankers together (well over 20% down) and made offers on three homes within a decent commute of our jobs, with at least 4 bedrooms and 2 1/2 baths in good neighborhoods, with a good sized flat grassy play yard and with excellent public schools .

We are still living in your little post-war crackerbox with a great yard.

Each time we have been outbid by people willing to pay 2-3 or 4 hundred thousand dollars more than we were. So good homes in good areas are still selling for ridiculously high prices and the pressure to move is getting stronger each day.

[DF]

DSL: "I have brought this up before but received a minimal response. The homes in my target market of South Pasadena, Arcadia, Pasadena, San Marino rectangle have not come down one iota in terms of listing prices. Why is this "bubble bursting" as you all put it seemingly only confined to areas no one with a decent income would ever dream of living?"

DSL, looks like we're in the same boat. One possible explanation is simply that incomes in these areas are higher, and that allows people to ride out bad housing markets rather than go into foreclosure. It's also possible, though, that the housing slump simply hasn't hit these areas yet. I've talked to people who recall the slump of the 90s and report that it took a while to hit higher-end housing, but when it did, it took a serious bite out of values. This is, of course, all guesswork.

[hottrannymess_notinagoodway]

--Housing prices are still more than two and a half times the cost of renting in most of L.A--

SRLA, I'm curious as to what numbers you're using? Here in the SFV...
Posted by: sfvrealestate

I think by LA, they probably meant "Los Angeles."

[IToldu2CashOut]

He who can afford to walk away controls the deal.

[Paul H]

In answer to Paul H, the "nice" areas will be coming down later rather than sooner, but they WILL come down.

Yes they will come down, no doubt. But not to the levels of the late 80's early 90's. My wife and I went looking in Porter Ranch area in the early 90's and though the mid 3's was too much. If Porter Ranch gets to the mid 4's let alone mid 3's, it'll blow up. Same with those other nicer areas. I'm sure that if prices in Santa Monica or the Westside for a decent home got into the 4's, you'd be making an offer with 15 other people. PS I'm not a Realtor.

[kat]

Chicken Little (aka Cal)

No one said the banks weren't going to take a hit but they'll get over it.

Every business has it's ups and down. Look at the oil business in the 80s, the dot.com business, in the 90s, and on and on. Interest rates went up daily during the Carter adminstration. At one point, interest rates reached 20%. People lost a house or business every second. Remember the old "baloon payment" - probably not. Anybody remember "stagflation"?

It's a part of the economic cycle. The oil industry recovered, the dot.com business recovered, the housing industry recovered from the Carter administration and so on and so forth.

This whole foreclosure "crisis" is a blip, no matter what you think. It's limited to a very small group of people - mostly low income, minorities, or just plain stupid people. In fact, it's a good thing. The deadbeats and squatters will be ejected from homes they should never have been allowed to be in, thereby freeing up the houses for people who can and will pay. This "crisis" will also bring the prices back to what they should have been before the greed mongers distorted the whole process by giving houses to semi-literate laborers.

So stop wringing your hands. This "crisis" is a good thing.

[Ragnar]

Isn't it a wonderful world when you can have one extra day to depreciate your house in a leap year?

Posted by: MyLessThanPrimeBeef | March 11, 2008 at 11:53 AM

Dude, you just make me laugh out loud at work! A little bit on the pessimistic tip of reality are we? It fits right in with the vibe of this thread yet lightens the levity a bit. Thanks, homie!

[Laker]

Paul H, your reasoning is wrong. You see, if market of house x was $700,000 and now will dictate price to fall to say $400,000 in some area. That by definition is the market price so you will NOT have 15 people bidding on the spot.
If there were 15 other people bidding, prices would not fall to $400,000 ...but would stay closer to the $700,000 or more...The price drops from $700,000 to $400,000 coz there were not bidder....As prices slowly drop, the amount of bidders will SLOWLY rise.

[GDC]

I think Paul H was trying to illustrate a point: that a house in Santa Monica will never fall to $400k levels as in the mid late 90s. I agree. There are A LOT of people on the sidelines with good credit, 20% down payment money, good incomes all waiting for the market to drop in good areas. They held off on buying from 04 to present because the prices got completely out of control. But to suggest that these areas will come down to levels seen 10 years ago is sheer stupidity. Incomes of many of the potential buyers for these areas have increased over 300% since then. Just check the starting salaries of investment bankers, doctors, lawyers, etc. from the mid 90s to now.

These areas will come down because the mania is over and no one in their right mind will pay a premium in this market no matter how desirable the area. That's whyI don't believe Just Call Me Maria who must be a realtor. I've been closely monitoring the market now for 3 years and right now there is no bidding war to the tune of $300k over list price - even in desirable areas. If a house is priced right it will sell at a slight discount. Otherwise, the houses just sit there.

It will take a few years for the prices in good areas to come down - the sellers are simply not as desperate as in the lower income areas.

The housing mania/glorification is coming to an end. In 06, many people I know bragged about buying a $1.5m home and how their equity is going to increase 20% every year. Now, it's a point of embarassment. People make fun of them and how stupid they were for overpaying.

[Cal]

kat:"No one said the banks weren't going to take a hit but they'll get over it."

Nobody is saying the banking system wont get over it. Just that the next few years will be rough and credit will contract. That will make the economy slow and it will hurt the bubble markets. People are still in denial about there even being a housing bubble much less a credit bubble

FYI, compared to the S&L crisis, we are already there in nominal terms (S&L was 160 billion ish) and 2/3's the way there in inflation adjusted dollars.

This is the biggest banking crisis in our nations history and it is coming at a very tenuous time in our economic history (High debt loads, end of current economic cycle)

You call us chicken littles but you are being a pollyanna.

kat: "This "crisis" will also bring the prices back to what
they should have been before "

Isnt that all us "chicken littles" point? But you can't have such deflation without serious consequences.

[Just Call Me Maria]

GDC- I'm not a realtor, but I'm increasingly frustrated by them. My husband is now tired of the nonsense. He wants to find a realtor, crazy seller or whatever who will find us a house with at least 4 bedrooms, 2.5 baths(preferably 5 bed 3 bath) within 30 minutes commute of Santa Monica and Hancock Park in a decent public school district through middle school, with a large flat yard preferably without a pool and without bars on the windows or regular violent crime.

So far, we have bid $1.3 million on a house that sold for 1.65, $1.3 million on a house that sold for $1.575 all cash, and $1.8 on a house that has now gone to a bidder willing to pay all cash.

So yes, there are people out there willing to pay. And right now, they haven't gotten the memo that it isn't 2005 anymore.

We are currently living in a tiny home that originally cost just over $200,000 in 1999. It was valued at just over $850,000 at the height of the mania due to the large lot. No doubt it has drifted downward to a "reasonable" $700,000 and will continue to fall until it is somewhere around 450,000.

No one who could afford the payments on $850,000 with the newer, tighter loan standards would live here among the teachers, nurses and retired people. When the median price of ownership in the area matches what the teachers, nurses and postal carriers earn, then the area will be correctly priced.