Rewind: SoCal home prices fall to 2004 levels

Southern California's historic housing slump worsened in March as bargain-hunters buying foreclosed properties pushed median sales prices down to levels last seen in early 2004, DataQuick reported today in another gloomy assessment of the regional housing market. DataQuick's analysis shows California median home prices dropping by roughly $2,300 per week over the last year.

The typical spring "bounce" in sales from February to March was the weakest ever measured by DataQuick, indicating the spring selling season is off to a historically weak start. Over the last 20 years, the average increase in home sales from February to March in the region was 38%; this year it was just 18%.

DataQuick: "March was the seventh consecutive month in which sales have fallen to the lowest level on record for that particular month."  Across Southern California, sales were down 41.4% from year-ago levels. Median sales prices dropped 5.6% from February levels, to $380,000 -- the lowest level since April 2004, and a decline of 23.8% from peak pricing levels of $505,000.

Sales of homes that had been previously foreclosed on continue to dominate the regional market: More than one in three homes sold in the region, nearly 38%, had been foreclosed on at some point in the previous year. Foreclosure resales are highest in Riverside County, where they made up 56.4% of March sales.

DataQuick said the sharp drop in median sales prices reflects a combination of factors: depreciation, especially in areas hit hard by foreclosures, and a plunge in sales of more expensive homes because of tight credit for jumbo mortgages.

"We continue to believe a  lot of people who could be buying or selling right now are opting to sit tight until they sense we've hit bottom," said Marshal Prentice, DataQuick president. "Often what we're left with, especially in inland areas, are sales driven by foreclosure or the threat of it."

More highlights from the report:
-- In Los Angeles County, sales fell 49% from year-ago levels.
-- In Los Angeles County, the median sales price fell $20,000 from February levels, to $440,000 -- a decline of 18.5% from a year earlier.

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

Comments

[Fred]

Just warms your heart, doesn't it?

[Fred]

Peter, you gotta talk about today's Slate article on the housing front. They predict the option ARM reset mess will be bigger than the subprime mess, but it won't even start until NEXT YEAR.

http://www.slate.com/id/2188982

[NationalBubble.com]

Let me see.
Oil hit another all time high today $115
Food inflation is on the rise.
Foreclosure filings are increasing.
Home prices are going down in SoCal.

Can anybody seriously believe that the housing market in SoCal is going to get better anytime soon?

http://tinyurl.com/54xvvp

[Cal]

"and a plunge in sales of more expensive homes because of tight credit for jumbo mortgages"

I think people will mistakenly believe that because sales are happening at very low volume levels that values are holding. In truth ANY (shiller, ofheo, median, whatever) price measurement is going to break down in periods of low volume, none of them will measurely accurately the true value of the market.

Until volumes start to return to normal you won't know what true market values are but I think it is very clear that is somewhere significantly below where we are at now.

[EG]

Do you the raw numbers? Could you give a more detailed breakdown to see what is going on? Give the percent decline and sales number decline for different price segments (200k-500k, 500k-800k, 800k-1 mil, 1 mil - 2 mil etc. ) and do it for so cal and just la county. I suspect huge drops at the lower end and in the Inland Empire are somewhat distorting things. Thanks.

[Alex]

Prices will continue to go down. It's simple.
Go to city-data.com, look up the AGI (Adjusted Gross Income) of the Zip Code,vmultuply by 3 and there is your average price for that zip code. Don't believe me ...go to zillow.com and enter the address and select the 10 year historical price. 2001-2006 Wall Street Inflation!

[Tim K.]

While I welcome this great news, and of course will join in the chorus of everyone else who says this is needed and long overdue, we now have the new problem of determining just how far down this market will go, and how far it will overshoot on the downside.

Peter, in his Q&A session, said he thought we had until 2009 or 2010 before we hit bottom. At first I was not so sure we'd get there that quickly. But then, perhaps I was anticipating a larger drop than he was.

So, the throw open the discussion, I'd guess that the big deal is not *when* housing turns around, it's at *what price* it turns around. IMO, median income and home prices have to match up, and that is at 3-4X. I have no idea when that will happen, but I'm confident when it does, that people will have reason (and means) to purchase again.

[Rich]

""We continue to believe a lot of people who could be buying or selling right now are opting to sit tight until they sense we've hit bottom,"

Okay, that may be the case, but it then calls into question the judgement of those sellers--do they realize that when the bottom is reached their potential value may be far less than what they might get by selling immediately? Reaching the bottom doesn't mean they can resume marketing at their old price, it means the damage is now baked in and they must offer at a new, lower price...

[jag]

Many folks in this blog have predicted that home prices will come back down to 2001/2002 levels and these same folks have been laughed at by some of you RE folks out there. I'm curious to hear from you RE folks and lefty's feedback.

[Patient_Vulture]

"Median sales prices dropped 5.6% from February levels, to $380,000 -- the lowest level since April 2004, and a decline of 23.8% from peak pricing levels of $505,000."

--Uhm, isn't that more like 24.8%?

[formerlahomeowner]

As recently as last month, I was just thinking that my 30-40% price decline prediction was overly pessimistic with all the bailout plans being proposed. $380,000 seems affordable enough until you look at the median household income of LA County residents, which is ~$60,000 annually.

[toby]

And this is just the beginning.

[D S]

The Headline at the end of this year (around christmas)

"REwind: SOcal home price fall to 2003 levels"

[Los Angelista]

If only that median price could be reflected in Silver Lake/Echo Park. I'm just not seeing major drops like that around here.

[amir]

If you take the dollar's decline into consideration, prices in SoCal have dropped 40% against the Euro zone.

Prediction: before the year is over we'll be in back in 2003.

[SoCalRealEstateNews.com]

Well reported, Mr. Viles. Things are still bad, but sales are up from February, although half as much as usual.

The median number was again skewed by the lack of high end sales.

Thanks for catching the details.

Pretty much what we predicted earlier this morning.

Keep up the good work.

[150 multiple choice questions]

Well, Jag... let me beat the realtors to their punch.

To answer your question, while prices are down some places, where I live in [insert city name here] it's different, things are holding steady at worse or even going up a little!

[Ace]

Alex 'Go to city-data.com, look up the AGI (Adjusted Gross Income) of the Zip Code,vmultuply by 3 and there is your average price for that zip code.'

Alex, I am not seeing AGI. Are you trying to compare the median income to the median price? If so, even back in the year 2000, LA median price was 6 times the median income.

[Shag]

I hope they continue to slide. They were artificially high, and still are. Wages and salaries haven't kept pace with obnoxiousness. Landlords are raising rents, energy and food costs are rising. If this stuff keeps up, we'll all be on the streets.

[Don]

Last year an Appeals Court ruled that the assumption that the "sale" price was the Prop 13 base value did not apply to foreclosure sales per California law (the position of the County assessor). No one was very interested in the issue as the housing bubble was in full swing and foreclosures were rare. So the tax assessor is free to ignore the current foreclosure sale price and assess taxes based on the bubble prices which may not be seen again for years. People buying foreclosures should not assume that these lower current market values will form the basis for their property taxes. A better assumption should be that given the government's hunger for more money, assessor's will look for ways to get around Prop 13 limits.

[E]

Agree with the above posters that the numbers are skewed as the outlying/undesireable areas are the ones having the fire sales bringing the median down.

I think that the info needs to be broken down into segments also so that we can see just how the high end is doing. I don't see much movement.

I still see people who bought in 2005,2006 in the Los Feliz and Hancock Park areas that have still decided that their house appreciated 20-50% in that time.

Maybe the real estate ego is larger in these areas. Too bad that nothing is selling. You can't eat ego!

[Cal]

Comparing median prices to median income ignores the effect of interest rates.

Using the monthly nut of PITI is a much better guage of what is "affordable" at a point in time.

[A Rothman]

Prices continue to hold steady in more desirable areas of LA County. Other less desirable areas are seeing greater price adjustments. Still, prices are too high. When prices reach 2002 levels, then we can talk.

Hmmm. The National Association of Realtors has been stating 'it is a good time to buy' since 2005. You think that they are thinking more about their members than the home-owning public? What a completely transparent recommendation. Somebody should sue them.

[Cal]

SoCalRealEstateNews.com : "The median number was again skewed by the lack of high end sales."

You just don't get it.

It isn't skewed by the lack of high end sales, there won't be a volume of a high end sales for a long time this is the new normal. The ladder is broken, the move up market is broken. The high end market is in denial about the reality because they only know they aren't selling, they don't know what price they would sell at. Then you get a few smattering of sales and people take them all as gospel and market price. But it isn't. And knowing a Supply and Demand chart from Econ 101 and/or that the flaw of the comparable sales appraisal model is that isn't accurate during periods of low volumes will tell you all you need to know.

Not only is the housing chain effectively broken, a higher percentage of the people cashing out today are the banks. So the move up markets are going to be crippled for quite some time. Foreclosures and short sales aren't what makes the move up markets move. A third of the sales were foreclosure (meaning the selling end wasn't someone cashing out) and DQ doesn't even get into the short sales aspect, which is the same thing.

For demand to be effective it must be backed up by purchasing power. During the boom everyone had effectively infinite purchasing power. That is no longer true.

[150 multiple choice questions]

Damn, socalrealestatenews.com beat me to my next punch...

But sales in March are up from February and the median is now an inaccurate measure! We liked median on the way up because it showed what we wanted but now that prices are going down, it's skewed by the lack of high-end sales!

Typical. Number one, March ALWAYS has higher sales than February, to imply that positive move has any meaning on the market is representative of someone who is manipulating the data, to put it nicely. Also, I wonder what is stalling all those high end sales? I bet if they lowered their prices the 25%, more of them might sell.