A market overview: 'It's pretty ugly out there'

This wide-ranging market overview, to be published in Sunday's L.A. Times, but now available online, is worth checking out. Headline: "The Muted Market."

Highlights:

--"It's pretty ugly out there," says longtime Coldwell Banker broker David Toyama.  He says business is down 50% from last year.

--Inventory, expressed in months to sell, is running nearly three times greater than historical averages. In February, inventory in L.A. County stood at 21.2 months' worth of sales -- up from 10.6 months a year ago.

--One seller learned the hard (expensive) way how not to sell into a declining market: She listed her West Covina house for $600,000 in February 2007, reduced it to $550,000, then $480,000, then $460,000. She finally sold it after 11 months on the market, for $440,000.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: L.A. Times

Comments

[Keith - LetItSink.blogspot.com]

I just updated a spreadsheet I started last year tracking Hermosa Beach listings. Several homes have been marked down $600,000. Percentage-wise, the biggest markdown that I've seen is 934 14th Street, which has been marked down from $1,599,000 to $1,099,000 which is $500k or 31.3%. There are many 6 figure markdowns, and many in 10% to 20% range.

540, 544, and 548 21st Street all look like new construction and have been marked down $496k, 496k, and $596k respectively.

All of these are listed on Realtor.com

Anyone who thinks the Westside/Beaches are holding up is clueless.

[JohnnyB]

Sometimes blogging here, one feels like the grinch who stole Christmas… but, these shills aren’t packing gifts a-plenty, their packing lies for fools.

“Those who can stomach the risk of some short-term equity loss on a home they expect to keep for several years and eventually see appreciate are inching their way back to the market, economists and agents say.”

That’s a relief… what great advice. You’d need the stomach of that fat guy in the restaurant from Python’s Meaning Of Life to digest $200k-300k + in equity loss.

“…some sellers and builders are luring buyers into the market with discounted prices and concessions, such as paying loan points, helping with closing costs and upgrading kitchen amenities or carpeting.”

Mmm… that’s the last “wafer” the fat guy above ate before realizing he made a big mistake. Accepting “wafer thin”, unsubstantial gluttony can still burst one’s bubble. Let me think… $250k equity loss or new carpet… please Mr. Builder, what should I do?

“The market slide means bargains galore in areas hard hit by foreclosures…”

The surge is working… the surge is working!

“First-time buyers priced out during the run-up that peaked in 2005 can get killer deals on foreclosed homes all over the Inland Empire…”

Stake your claim now, the new California gold rush is at hand! (Please ignore all the claim jumpers/squatters killing each other for sandy grit.)

“a… foreclosed home… ($500 to $320) recently sparked a bidding frenzy We haven't seen that scenario in years…"

Poor stupid Vicki meant this in a good way. (Embellishment… of course, the “frenzy” was from a foreclosure bus tour full of recent immigrants who still couldn’t afford the home based on their current individual incomes. The frenzy died down when they realized they could not all own this mortgage together.) Ok… bad humor... replace with another group bus tour.

“They wanted to live in Silver Lake. A friend tipped them off to a six-unit condo conversion there, and after ‘jumping through a lot of hoops for lenders’ and getting some financial help from their parents, they closed escrow… for $539,000.” … "We were very, very lucky… We pushed to get it."

Oooh with a little help from my P’s… now they can all “stomach the risk” together as this value is halved within 2 years and doesn’t climb back up to that level until their newborn’s in high school. Call it an early retirement condo conversion… a real keeper. Very lucky indeed.

“And then there are the communities that rarely feel pain, such as Beverly Hills, Indian Wells, Pacific Palisades and Newport Beach, where prices have continued to climb.”

Liar, liar your RE license is on fire.

[Cal]

"One seller learned the hard (expensive) way how not to sell into a declining market"

As bad as it was for her she is way ahead of those who didn't sell.

There are 3 types of sellers.

1 - Get the price right from the beginning and sell.
2 - Get the price wrong, recognize it, reduce price until it sells.
3 - Get the price wrong and stay in denial and keep switching to new realtors who tell them what they want to hear. Eventually put a token $10,000 price drop after 300 DOM, pull house off market 450 days in to wait until market gets better.

[sean]

This doesnt surprise me at all. All we are seeing is a long overdue price correction to artificially inflated home prices.

This trend will continue for another year at least.

Despite the rosy talk we hear from realtors (salespeople) are saying - this is NOT a good time to buy. This is the time to wait.

In another year prices will have dropped at least another 15% - 20%.

[mbob]

JohnnyB

FWIW, his name is Mr. Creosote. His motto: "I'll 'ave th' lot."

He's sort of a totem around mi casa.

[rodriguez24]

Where does one go to find out the month's worth of inventory. I find that to be an important indicator of when to buy. Anyone have a link for a website that updates frequently?

[starchy]

Hey JohhnyB!! you might want to check out CurbedLA blog. LOTS of bitter angry renters there- you will feel right at home!

big kiss

STARCHY

[gman]

The article mentions Newport Beach and Coast as areas where prices are still going up. I'm pretty sure that's wrong. It's the fiction of using the median, similar to what happened everywhere else in mid-2007. The highest end properties are still selling and dragging up the median due to low volume.

However, I look at Newport Beach and Coast listings nearly every day and there are now dozens of listings under a million for single family homes. A year ago I was doing the same search and there were (no exaggeration) none. Not a single listing under a million. As people start buying these lower-priced places, the median should drop.

[Julianne]

The market is very frustrating right now. My husband and I make decent money - together our household income is a little over $100K, but we cannot afford a house in a safe neighborhood within commuting distance from our jobs.

I really hope the home prices in nicer neighborhoods, especially in the Glendale, La Crescenta, Burbank area continue to drop. Otherwise, we will simply have to remain renters. It's still infinitely cheaper to rent in a decent neighborhood than to buy. We are not willing to live in an unsafe , trashy neighborhood just in order to own a home.

[Steve]

The market is very frustrating right now. My husband and I make decent money - together our household income is a little over $100K, but we cannot afford a house in a safe neighborhood within commuting distance from our jobs.

Julianne,

Just move, in CO you can buy a new Mini Mansion for $400K and live a quality of life 10X compared to the hell hole. The reality is also you can make the same income. Stop wasting your money renting and buy.

[ANONYMOUS]

That 605 is selling for 205 in 2 years. As if the drop from a disgustingly overpriced 650 is nothing. Wait until the real nuclear winter comes in housing sellers and you'd wished you'd dropped it 40% in March 2006 to get that depreciating asset off your hands.

[peter m]

Here's my market overview of S Cal and LA in particular:

General large price declines in all overpriced coastal zips in late 2008 and all 2009. Another 10-15 % declines at least. The inland areas 2-5 miles away from the coast are already in the crapper. Look for deals under $300,000 in some yet unghettoized hoods such as lakewood , downey, La Mirada, west SF valley, carson, west side torrance, burbank, glendale, parts of pasadena, santa clarita, ect., all within 1 hr from the westside or 1.5 to 2 hrs if u are in S Clarita. I'm talking about decent untrashed reo 3/2, 1600-2000 sq fts on 6000+ lots, not 2/1 800 sq ft waaaay overpriced 80 yr old termite- infested crappers in edgy districts around dwtn LA such as highland park or glassel .

[Maggie Knowles]

If you want to sell your home in this market, a good formula is to see comparable listings and comparable sales for your neighborhood and price your home 10% less than current market value.

[sfvrealestate]

Okay, here's the contrarian view from a Realtor. Start sharpening your knives. A house I had listed just closed yesterday. (Details and address are on my blog and the link back is in the sfvrealestate.)

First, the house info. It is a 2+1 lite fixer with a redone kitchen, 1400+ sf. It has a 1+1 guest house. The uniqueness of this property is that it's on a 15,000+ sf, flat, buildable lot in a great Burbank neighborhood with a distinguished elementary school.

Now, price. I recommended a list price of $799k to my sellers in October, and we listed it at the end of October for $849k (their choice on the price, as it always is). We had SEVEN offers, and finally got it in to escrow at the end of January for $800k. Closed yesterday. The sellers are happy, the buyers are happy.

Now, I don't deny that the market has declined. And foreclosures are up in Burbank. But as I've said before here, the decline does not mean that the entire sky is falling.

[ANONYMOUS]

The Sky IS falling. Option ARM resets have not even started. Sorros says this is the biggest financial crisis he's seen in his lifetime. Real unemployment is skyrocketing. That 5% number is ficticious. Check out Krugman's recent blogs that show when you count ALL the unemployed it's getting closer to 15%. Credit crunch/liquidity crisis is just starting, 1st inning, citigroup writedowns won't stablize it. Real interest rates (not discount rates) are rising. Auction rate securities are frozen, because they have no actual value and owners are unable to sell them. Find a new profession realtor. Something that works during a serious fiscal crisis, like farming.

[shockg]

"Where does one go to find out the month's worth of inventory. I find that to be an important indicator of when to buy. Anyone have a link for a website that updates frequently?"

Rodriquez24, Don't expect a meaningful answer on inventory from these biased, selfish, angry bubble zombies. The inventory numbers doesnt support their end of the world agenda. FYI. Inventory has been flat all year at around 43K.

[ANONYMOUS]

ShockG, bubble denier. Inventories are at historical highs. A 2 year supply. I guess the good thing for you is, there are plenty of houses to sell. The bad thing? The party is over for you. Permanently. Find a new profession. Homeowner's discounting their properties 40-60% are going to want to give you your 6% of a pound of flesh, when you can do absolutely nothing to help their sale. Only cutting their asking price will help them.

[peter m]

This was quoted from a reuters article :

"Fraud was a basic feature of the run-up in U.S. housing prices that eventually led to the current crisis and record foreclosures, according to an economist who focuses on white-collar crimes......
.. a big portion of subprime loans in the United States were underpinned by a criminal overestimation of home values, said William Black, Associate Professor of Economics and Law at the University of Missouri, Kansas City......
......Seventy percent of stated-income loans exhibited fraudulently inflation appraisals," he told a conference sponsored by Bard College's Levy Institute of Economics."

This describes 60% of homes sold in LA county from 2005-2007. For same time period 75% of homes sold in city of LA and 95% of homes sold in the LA ghettos were fraudulently appraised sales underpinned by a criminal overestimation of home values. Most of this RE fraudulent activity was in subprime sales.

This goes down as the biggest RE ponzi con job ever inflicted on a gullible public in US history, and was perpetrated and pumped up by wall st, feds, bankers, low & high-level REIC specu-vestors, REIC pimp/bottom feeding realtorwhores, greedy sellers,greedy buyers,ect.

The crashing of this ponzi scheme is on a national scale with certain fraud-infested markets such as LA getting hammered.

[Inland Empire]

Just move, in CO you can buy a new Mini Mansion for $400K and live a quality of life 10X compared to the hell hole. The reality is also you can make the same income. Stop wasting your money renting and buy.

You can also endure blizzards, cold weather much of the year, black ice on the roads, hail, snow tires, large heating bills, storm doors, the need for heavy duty clothing so you can go to work etc. Sure, move to CO. Enjoy!

[peter m]

"The Sky IS falling. Option ARM resets have not even started. Sorros says this is the biggest financial crisis he's seen in his lifetime. Real unemployment is skyrocketing. That 5% number is ficticious. Check out Krugman's recent blogs that show when you count ALL the unemployed it's getting closer to 15%. Credit crunch/liquidity crisis is just starting, 1st inning, citigroup writedowns won't stablize it. Real interest rates (not discount rates) are rising."

There will be some serious hurt in CA next two years.
Housing will continue to tank and this goes for the hi-end westside & beachside hoods. CA unemployment rate is officially 6.2% but real UE is closer to 8-9%. This will keep climbing and will help tank housing prices furthur. Libor rates going up. Expect interest rates to climb, which will put a dagger into La RE prices which are already collapsing in 90% of LA zips. And there are those nasty resets.
State is flat broke and Gov't workers soon to get the pink slip. That will help housing prices, NOT!!
There will be no spring nor even summer bounce, instead LA prices continue to plummet. Most LA jobs & household incomes do not support $300,000 much less $400,000 prices in bland, semi-ghetoized or ghettoized middle-lower zips which are 90% of LA.

CA is in a full blown recession combined with escalating inflation in basic necessities like gas & food. These factors have lead to a virtual freeze in consumer discretionary spending which further hastens the ongoing CA economic meltdown.

Just my two cents worth.

[baruza]

Judy, that one property you're crowing about closed 50k below list. Woopdeedoo. How many of your customers from the last two years are now underwater, foreclosed on, or bankrupt? Congratulations on finding another sucker.

[anonymous]

Shockg, inventory may be "flat" at 42.4k, but that's up 19.6 percent year over year. Want to call the bottom once more for old time's sake?

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

[Joan]

While I totally agree that it's obvious prices will continue to drop I think a lot of you overlook the fact that LA has a huge pool of six figure earners so prices will not go back into that 300K territory for any decent, middle class neighborhood.

[tealeaf]

While I totally agree that it's obvious prices will continue to drop I think a lot of you overlook the fact that LA has a huge pool of six figure earners so prices will not go back into that 300K territory for any decent, middle class neighborhood.

Posted by: Joan | April 20, 2008 at 12:58 PM

Joan, let's settle on a household middle class income for a nice neighborhood. Assume $120k (areas like Irvine and Pasadena medians are lower, but we'll just start there). What should an OK house go for? Banks historically say no more than 3x income with fixed, traditional financing and some coin for the down. That puts pricing at $360k for said hypothetical nieghborhood.

Walk through my assumptions and correct accordingly, sister.

[Laker]

sfvrealestate wrote: "...I don't deny that the market has declined. And foreclosures are up in Burbank. But as I've said before here, the decline does not mean that the entire sky is falling...."

We are not saying that the sky is falling. (may interest groups like the NAR and NAHB are saying that...)
The housing price correction is a good thing to solve the 2001-2007 housing crisis.

[Uncle Billy Climbs Mont Pelerin]

Joan, specifiy some decent, middle class neighbourhoods, and then let's take a looksee.

[CamphorTree]

Joan,

I'm also one of those six figure income earners but the type of crap I can buy for my money is absolute CRAP!

I was considering moving my business to Houston, yes I know it has crazy humidity in the summer, but I'm from Wisconsin (also crazy humidity) and lived in Tokyo (again crazy humidity). But the type of home I can get for my SIX FIGURE INCOME is amazing! Even with property taxes (no state income tax) as high as they are, with what my state income taxes are. I still come ahead by moving my self, family and my business along with about 100 high paying jobs. I own a technology/software company.

And another thing , there were still a lot of people earning six figures a year when the home Judy sold for 800k was going for 300k about 9 years ago! I know I was!

[Uncle Billy Climbs Mont Pelerin]

More on tealeaf's theme:

Downpayments. Many of those 6-7 figure income folks have been stretching just like everyone else and buying up a storm, saving little or nothing. Since they don't usually qualify for down payment assistance due to largeish incomes, many can't buy even if they can afford conservative fixed rate loans -- just too little money for a down payment on the kind of home they'd like in the neighbourhoods where they'd feel comfortable.

[jbunniii]

Eagle Rock?! Prior to the bubble, 1999 or earlier, this would have sold for $150 max, and it will likely do so again within a few years. That anyone would pay $605k for this is sheer madness. This correction still has a long way to go.

[Inland Empire]

Judy, that one property you're crowing about closed 50k below list. Woopdeedoo. How many of your customers from the last two years are now underwater, foreclosed on, or bankrupt? Congratulations on finding another sucker.

Figures state that only one out of 33 homeowners is in trouble with their mortgage. Get a grip.

[tealeaf]

Uncle Billy:

Excellent corollary re: downpayments. Adding to that theme, they are saving little because they are engulfed in taxes (many, like our household, are under AMT) based on a lack of an interest deduction. Add the unemployment numbers released for Cali (putting us in worse shape than Ohio and Penn), and it's a complete stalemate.

To the realtors/bulls: I'm not the greedy one here. WIth my $200k household income, I just want to buy a nice 4br/3ba home in a nice neighborhood. No coastal breezes, no mass acreage. Just a simple place with a good school district, 25 mins from a job center at no more than 3x gross. Everything I look at in that price range takes me to backwater or blem houses.

And we're the ones "talking down" the market, shockg? Give me strength. We are the ones who are going to save this market, once fundamentals are in line.

Still affordability.

[JohnnyB]

"Mr. Creosote"!, that's it... thanks. One of the most gut-wrenchingly funny physical comedy scenes ever. Also, a nice metaphor on many levels...

starchy;

Hey, I'm just having fun... not angry. I would have been real angry if I had bought into this bubble, but thankfully my better judgment prevailed.

When reading articles like this, just replace the old saying; if the show fits - with, if the shill fits.

Everyone needs to make a living. Some are just caught in a field that makes a living at others expense – beyond the normal trade and consumerism kind of dynamic. In this current, over-valued housing market collapse, the RE shills are still spewing lies and crap (i.e. the NAR school of shill-speak) - as the above article clearly reveals – and to the very great expense of the fools who bite the hook.

Thanks for the big kiss… you may now open your eyes and look around. See what’s going on out there… recognize if you are part of the problem or part of the solution.

[sfvrealestate]

"Judy, that one property you're crowing about closed 50k below list. Woopdeedoo. How many of your customers from the last two years are now underwater, foreclosed on, or bankrupt?"
-Baruza, it closed at the original recommended price and the sellers are happy. So's the buyer. Sorry that you're not. Oh, it was a conventional loan, too, and it appraised to value.
In answer to your "how many" question: exactly zero.

[mustafa hass bin]

Yes. Just move to some other random state and your life will be better.

[baruza]

Well, I do feel sorry that so many of your customers will be losing money, and I seriously doubt that in the areas you sell, where NODs are way up and values have fallen 10+ percent, no one is underwater. But if they went in expecting to take those losses for the next several years, then good for them. If I'd bought that place I'd be kind of worried about the NOD down the block, as well as the one a block east, and the two more a block west and south, etc. But heh, buying 6 months-1 year before these hit the market bank-owned is their business. Just hope they knew what they were getting into.