A trend? Listing prices flat for 2nd straight week

A lull in the market decline? A sign we are nearing the bottom? Or a false signal? You tell me: Median listing prices were unchanged for the second week in a row, and inventory of for-sale homes in greater Los Angeles rose only modestly, according to Housing Tracker's analysis of MLS listings.

Highlights:

--Median listing prices were unchanged over the past week at $450,000, a decline of 17.4% from year-ago levels.
--Inventory of homes and condos for sale increased to 42,728, an increase of 14.4% from year-ago levels. A year ago, inventory was building rapidly; this year it has been flat to slightly lower since February.

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%)
3/08               $464,900 (down 15.5%)               42,098 (Up 31.4%)
3/31/08         $459,900 (down 16.2%)               42,038 (Up 27.6%)
4/7/08           $455,000 (down 16.7%)                42,482 (Up 23.3%)
4/14/08         $450,000 (down 17.4%)                42,428 (Up 19.6%)
4/21/08         $450,000 (down 17.4%)                42,430 (up 16.7%)
4/28/08         $450,000 (down 17.4%)                42,728 (up 14.4%)

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com

Comments

[Uncle Billy]

We're just at that point on the roller coaster after the first big drop where we coast along and recover a little, but we know the next big one is coming right up.

[shockg]

The fear monger speculators won't admit the market is slowly stabilizing. No handouts for them. You all sold your home for this?? LOL

[John]

No, people just don't want to accept that their home is worth less than $450k.

After all, "you can't get a nice home for that much."

Give it a week or two. There's a long way to fall yet.

[Fred]

How could this possibly be anywhere close to the bottom given the huge inventory left out there and the anemic number of sales?

No, I think this is a matter of the annual spring sales bump counteracting the downward trendline.

[Ekim]

A little anecdotal observance. I have kept a close look at new listings in the areas I am interested in buying a house. I have noticed the majority of listings are over priced, IMO.

1) Some sellers believe their homes are worth what they want it to be, never mind what the market says.

2) Some sellers hope their house is worth what they want it to be.

3) I have seen commercials from lenders talking about the new FHA limits on loans. This, I believe, is giving some sellers and RE agents hope that prices have or will stabilize.

Overall, I think sellers are trying to hold off the tide. The panic button will be lit up by the Fall.

[anonymous]

I'm with you shockg. I'm investing in land in Riverside, real estate future, California Mortgage Companies, I'm buying up peoples Option ARMs and I'm going to buy out all of the brokerages CDOs! Next thing, I'm going to buy all the auction rate securities! Email me! You, me and Lefty are gonna make a killinggggggg!!!!!!!!!!

[happy jack]

after the hedge funds get bankrupted the highend market will come down 80%

ENJOY !!!!!

oh this came from another blog.

he is telling his friend why she should wait until after the crash to buy a house

why now is not the time to buy a home.

XXXXXX, I am delighted to explain. Some of this is theory and some is fact, but I feel very confident I am painting a very accurate portrait.

The early part of this decade was marked by the bursting of the tech bubble and 9-11, and resulting subsequent economic disruption. The many free trade agreements signed during the 1990's led to bleeding of middle-class manufacturing jobs that used to be the backbone of our economy. Since Bush took office, nearly 4 million manufacturing jobs have been lost. But it goes beyond that. American companies, looking for increased profits, have outsourced millions of white collar jobs so that careers that were supposed to be "the wave of the 21st century", such as computer programminng, engineering, and other high-tech areas, have continued to see negative growth.

In order to keep the economy going, the government did a series of unwise things. Our leaders were happy to have our economy heavily dependent on consumer spending (nearly 75% of total GDP) and debt (consumers have had a negative savings rate the past several years: only time since the Depression!). Moreover, the government greatly expanded legal immigration through H1B and L1 Visas. Much of this was done at the behest of the business community, which has continuously sought cheaper labor costs.

Part of the reason for this increased immigration was that the government wished to stimulate economic activity by expanding the population. Consistent with this, the government wished to greatly expand homeownership, in order to boost the land development and homebuilding industries, along with other related industires such as landscaping, real estate brokerage, and home improvement (Home Depot, etc.). Bush (also known as the Worst President in History: rest easy James Buchanan) regularly boasted about the "ownership society".

Of course, as has always been the case, these millions of first-generation immigrants (along with American renters) had little to no savings and work in service jobs with generally low household income. Notwithstanding that fact, the government and the private sector did a number of things to enable this homebuying orgy. All of these actions were unwise in the long run and are coming home to roost now.

First, Fed Chairman Allan Greenspan, the most overrated public official in American history, lowered rates more than 15 times and kept them extremely low far beyond what was dictated by circumstances. The rate cuts allowed the mortgage industry to offer unprecedented levels of adjustable-rate mortgages to unqualified borrowers, many using "teaser rates" that have huge built-in increases. The rate cuts also encouraged increased consumer borrowing for an already debt-laden society. This allowed Bush to brag about economic growth and "the ownership society" but the consequences of the rate cuts have been enormous. Consumer debt has led to unprecented levels of foreclosures and bankruptcy. The rate decreases have destroyed the value of the dollar. Now the impact of the rate cuts is being felt in terms of inflation. They have been a factor in the huge spikes in oil prices, as more people invest in commodities when dollar-denominat ed investments fall in value and inflation expectations rise.

Of course, the biggest factor in the increased oil prices has been demand from China and India. This was an unintended consequence of the aforementioned globalization, as American companies have been all too happy to outsource their production to the cheaper labor markets. Needless to say, retailers like Wal-Mart have been happy about these developments, and they have pushed hard for expanded so-called free trade. But the rapid growth of these overpopulated (both over 1 billion) third-world backwaters has hugely impacted global oil supply.

Another factor has been the greedy developers and greedy financial industry. These greedy developers, with state and local officials in their pockets, have managed to get subdivision after subdivision approved, many over the objections of the local communities. Because these developers control the politicians, they have not been forced to pay any impact fees. Consequently, taxpayers have been forced to pick up the tab for roads, schools, hospitals, and other infrastructure needs that have exploded due to unprecedented levels of hombuilding activity. Of course, this unprecedented growth has impacted traffic, the environment, schools, hospitals, and every other aspect of quality of life. Now states across the country, led by California, are going bankrupt as they try to keep up with all these costs. An unspoken factor in all of this is the fact that the homes have been built by an enormous wave of illegal immigrants from Mexico, who have been illegally hired by the greedy builders and developers. Needless to say, these low-wage, low-skill (Mexican immigrants average a 7th grade education) immigrants have been an enormous burden on social services, not to mention traffic and other factors.

As noted above, the government sought ways to put millions of people in these homes. The private sector contributed to this effort by disregarding the most basic banking fundamentals. Whereas lenders would hold mortgages in portfolio years ago, they almost never do today. Consequently, they have no concern whatsoever about the repayment capacity of the person to whom they are lending: they make their income from the origniation fees. The aforemenntioned Greenspan rate cuts allowed these lenders to offer adjustable-rate mortgages with very low rates. The lenders could then sell the loans to private investors, who would chop the pools of loans up into thousands of pieces and sell them as CMO (Collateralized Mortgage Obligations) or CDO (Collateralized Debt Obligations) tranches. Since worldwide rates have been very low, investors seeking higher yield have been all too happy to buy these, as they general ly did offer higher yields. Those investors were usually hedge funds and foreign governments, as American consumers with their negative savings have no money to invest.

Needless to say, since these CMO's and CDO's were so esoteric and chopped up, it is doubtful that anyone knew what they were holding. But no one worried because the investments were secured by American homes and, as we all know, residential real estate always increases in value (sarcasm font). What the investors didn't count on was artificial home price inflation caused by compromised lending standards (no down payment, no verification of employment and income, low credit scores, minimal job history, and high debt-to-income ratios) and "flippers", those investors that came in and drove prices up in hopes of selling the home they don't live in and making a quick buck. The CMO's and CDO's were given the AAA stamp of approval from all the rating agencies, including Moody's, Standard and Poor's, and Fitch. Of course, what people did not know (and the lazy American media failed to report) was that these agencies were getting huge fees directly from the bond issuers, a nd they were therefore interest-conflicted and incentivized to give good ratings.

The run-up in home prices, and the unsustainability thereof, were demonstrated by price-rent ratios. These ratios have historically moved in tandem but became hugely out of whack in recent years, a true red flag that the homes were overvalued. If one wasn't inclined to look at these ratios, they could simply apply common sense. Here in Atlanta, the median household income is less than $60,000 per year. Yet you can't touch a new home for less than $250,000. It doesn't add up. And, in terms of home price compared to household income, Atlanta is way better off than places like LA, Phoenix, Washington DC, Las Vegas, and Miami. But, once again, our lazy media was asleep at the switch.

The growth in homebuilding and homeownership was greatly fueled by government-sponsored agencies FNMA and FHLMC. Historically, subprime and more marginal mortgages have been sold to private investors. The primo stuff has historically been sold to "Fannie" and "Freddie", who have securitized the mortgages into CMO's and CDO's as described above. But, during the current decade, Fannie and Freddie bent their standards and they purchased and securitized billions (maybe trillions) of mortgages they would not have done previously. Consequently, a number of economists are predicting that an enormous taxpayer-funded bailout of these agencies will be necessary.

Upon taking office, President Bush appointed a Texas banking buddy, Donald Powell, to be FDIC Chairman. Mr. Powell ran a small national bank in Texas that came within an eyelash of failure in the early 1990's. Powell had a severe disdain for regulation and regulators and immediately proceeded to gut the staff. He publicly stated that "all of these small community banks could fail and it would make no difference." He implemented the MERIT program, which equated to drive-by examinations. Banks throughout the nation (particularly here in Atlanta) proceeded to go crazy making nothing but Acquisition, Development and Construction loans to developers and builders. These local bankers lent millions to developers without regard to the fact that those borrowers were overleveraged and they continued to lend like crazy even when it became evident that the market was oversupplied. Underwriting was poor, to say the least. In other words, bankers did exactly what the banking industry did in the 1980's only on a bigger scale.
We as regulators stood by and let it happen. Now, development loans are defaulting at an incredibly rapid rate and the financial industry is likely to see massive bank failures.

So there it is. Incompetent government leadership, excessive desire by government leaders to make GDP and job growth numbers look good, corporate greed and short-sightedness, have led to an implosion of unprecedented magnitude. And the sad thing is that all of it could have been prevented by applying the most simple and basic fundamentals. But greed, politics, and stupidity took over.

As I have stated before, when the dust settles, this largely government-induced financial and economic implosion, which I think will rival the Depression, will be an even greater black mark on the nightmare that is the Bush legacy than even Iraq.

[save your ammo]

The poor dead kitty's stuck on a ledge ...
When the ledge breaks, the kitty will fall...
and down will come the LA market,
kitty and all.

Duck, Lefty! Duck!

[Laker]

shockg wrote:"...You all sold your home for this?? LOL..."

Since LA prime areas are so great and now very affordable, why don't you but all these vacant homes???

shockg, it is not over till the fat lady sings...and guess who is going to laugh last....LOL LOL LOL....

[brock]

The prices will decline to 2000-2001 levels. All the gains since then have been due to monetary expansion by the Fed, and as such artificial.

When middle class people can afford a middle class home in a middle class area, prices will go flat. Until then, prices will drop.

The era of a 50k/yr income buying a 400-500k home is over. And it is never coming back.

[Chris]

This is the last chance for people to sell at super high prices. I talked to a guy the other day with a 853 sq. ft. 2bed 1bath he has listed for 619K and he says he's not lowering the price. Cutting it down from 749K has been "painful" enough for him. A new trend starting in September will be deemed by the media "PANIC PRICE CUTTING" Enjoy!

[dwr]

"No, I think this is a matter of the annual spring sales bump counteracting the downward trendline."

Fred is absolutely right. Historically, the vast majority of home price gains come in just a few months between March and May or June, so the fact that wishing prices are at best flat right now is not really good news.

[yourkillingmelarry]

The thing that you have to factor in these numbers is the critically low volume right now. Yes there was a seasonal uptick from Feb into March and April, but not much of one, we have literally not seen these types of sales volumes since the 1970's. That is worse than even I anticipated. I'm hearing that many realtors are simply not accepting unrealistic listings, that is limiting the amount of inventory coming online. It is interesting that with the lower prices we are not seeing a true uptick in sales. The forces of Recession are now in effect. People are not going to pull the trigger for a long time. We have a long long way to go yet.

[tealeaf]

Wishing prices are flat ! Wow ! NOW I should buy !

[Keith]

Two weeks are a trend? You're embarrassing yourself.

[Jack]

Flat listing prices will not tell us the market has hit bottom. Flat closing prices will. But we need more than a two- or three-week period to judge that. When markets hit bottom, they usually stay there for two to four years.

[TakeFive]

This downturn will not be a purely continuous function. Look for some steps. I predict the next big one will be when the state budget is finalized and thousands of high paid government workers get their notice. This should hit the middle price range areas.

Meanwhile the increasing fuel and food prices will keep chiping away at the lower end. I think legions of small resturant owners are going to be going under too. What do you think the spike in rice prices is doing to the chinese fast food joints?

[tony]

Many sellers in my neighborhood have pulled their homes off of the market so that they can relist them as new listings for the Summer. That leads me to believe these numbers will balloon come May-June.

[apennysaved]

Hmm, makes me want to sing "Camptown Races"...doh-dah.

[patient_vulture]

happy jack wrote an excellent overview of what happened and the depth of it.

As for the listing prices being flat? It's like ebay, it isn't what the item is listed for that counts, it's what it sells for.

Incomes, adjusted for inflation, have been flat since 2000. Lenders are not giving away mortgages anymore, they're reverting back to traditional qualifications; Income, credit, down payment, etc. Prices have to come down a LOT more before they're in line with real incomes, maybe another 40-50% more.
Yeah, sounds crazy, but this boom was crazy and it will take a crazy decline to bring things down to reality, the reality of what people can actually afford, and we aren't close to that figure yet. Rents here in Silverlake still average 50% less than owning. Making things worse (or better if you think like me), the Recession will drag incomes down even further.

The fraud in the market wasn't just on the financial side. A friend had sold his house w/pool in Silverlake at the top of the market 2 years ago and that buyer had a 110% no-docs loan, and somehow managed to borrow more on top of that, then skipped town. Now there are squatters in a house in a primo part of Silverlake.

The E-ticket ride has just begun.

[Big Picture]

Thanks happy jack for the great post. The pure denial of reality that's been going on for the last 30 years is finally crashing. I was a homeowner, have been renting since there wasn't a decent house to buy with our healthy 6-figure income. The economic reality is that an entire generation has been supporting the idea that everyone "deserves" a certain lifestyle. If you can't afford it, don't buy it. Grandpa knew that and he had an 8th grade education. Interesting to see how people are jumping on the gas tax vacation band wagon. Does anyone think 18 cents a gallon won't immediately be swallowed by the oil companies? And those taxes actually pay for stuff. As PT Barnum said, there's one born every minute.

[puckhead]

It's interesting that listing prices of homes in the 75% percentile is basically flat for 4 months now. This supports the thesis that higher end neighborhoods will hold out better than lower price neighborhoods. But what do I know. I'm just a nacho eater.

[blackbox]

CLICK, CLICK, CLICK, CLICK.................
Don't forget to put your arms straight up and scream..................................

[MyLessThanPrimeBeef]

A good weatherman will tell you that this is the eye of a Category 5 hurricane.

[MyLessThanPrimeBeef]

Hey, Puckhead, sorry, Nacho Eater, I meant to say, this is a typical converstion between a seller and his (or her, excuse me) agent.

Agent: I think you should lower your asking price.

Seller: No, I don't think so. As soon as my buyer gets that $600 check in his account from the government, and it could be today, he will be able to meet my asking price.

Agent: What?

Seller: Yes, that's my theory. Wait till the buyer is stimulated.

Agent: Do you really know how many people out there can meet your $450,000 asking price with at least 10% down?

Seller: The $600 check from Uncle Sam...

Agent: What will that do?

Seller: You're a defeatist. Just wait. You will see I am right. (walks away, mumbling smoething about the $600 check)