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

[Patient_Vulture]

For my zip 90039 (silverlake) the median income levels essentially haven't changed since 1999--before the boom. In fact, when adjusted for inflation, median incomes probably went down.

http://www.city-data.com/zips/90039.html

Median household income (1999): $45,615
Estimated median household income in 2005: $53,050
This zip code $53,050
California: $53,629

This is mostly the case for the rest of LA and California, income levels aren't any different now than in 2000. The only difference during the boom was easy credit and speculation that turned housing into a short term get-rich-you-can't-lose commodity instead of a long term retirement residence.

As reported in this blog, The Southern California median house price in Jan 1997 was $147k (beginning of the bubble). Compare that to the March 2007 peak of $505k! That's a 246% rise folks, all with median income levels essentially unchanged (when adjusted for inflation) over that same time period.

If credit remains tight, meaning, like it always has been historically (before the boom), then only real incomes will become the factor for buying levels, and with a big recession ahead, real incomes will not be going up for a while, and even when they do, they don't go up quickly.

While it seems unlikely (even to me), the data and numbers seem to suggest housing coming down to the year 2000 levels + inflation rate, to match income levels, assuming credit reverts to normal historical qualifications.

Median house prices nationally have gone up at basically the rate of inflation for the last 100 years, not including the boom starting in 2000. As an investment, not so good. Stocks did WAY better in that same time period.

[puckhead]

Jag,

I don’t think anyone disputes that certain parts of SoCal will go back to 2001-2002 prices. I think the IE is in a world of hurt and will go beyond 2001-2002. Many parts of LA will go beyond 01-02. What I have a problem is when people in a broad stroke say that ALL areas will go back to 2001-2002 levels. Like since a house in Riverside and Manhattan Beach are made of the same materials, they should be priced the same. Sorry, I just think people are ignorant and wishful thinking if they think this is the case. IF I am wrong and prices do fall back to 2001 levels at Manhattan Beach, then I’ll write a check and buy the beach house I’ve always dreamed about. I’m not counting on my beach house.

[Graham]

I remember three years ago when Donald Trump talked about how much money could be made in foreclosures over the next 5 years. These same numbers have been available to the Fed and no one saw this coming? Is our Government that stupid? Why are we constantly reacting and not preventing?

[LD in Whittier]

I have no sympathy for the people who overextended themselves to purchase homes at these ridiculous levels. I hear these stories, and think, "you knew you couldn't afford to live there in the first place, don't put your hand out now..."

The market is not doing anything crazy, it is just returning to a state of balance where homebuyers had to actually WORK at their credit score and SAVE enough money to put down on a house. Families who focus on those basic principles can afford a house in today's market, and to a large extent, it's nice to see the ridiculous bubble burst.

[Fred]

This idea that some Pollyannas have about the Westside being immune to the housing implosion is ludicrous. It's a sliding scale. Do you think that houses costing $190k east of La Cienega isn't going to have an effect on those houses west of La Cienega. You think someone will still pay $600k median to be on the other side of the street? This is of course an exaggeration, but you take my point. For a number of reasons, the nicest areas are the last to feel the effects, but they do feel the exact same effects as every other area.

[150 multiple choice questions]

Puckhead;

2001 prices in Manhattan Beach are not the same as 2001 prices in Riverside, no one is saying that. There has always been a premium in certain places and that will remain.

If something is $350,000 in Riverside and 1,000,000 in MB, a lot of people will save the $650,000. And if it's ON the beach let's say it's 2,000,000... a lot of people will save the 1,000,000 to be in MB but not on the beach. The point is that 2,000,000 is way below what it was in 2006-2007 and that NOWHERE is different. I repeat, NOWHERE is different. And always remember, NOWHERE is different. Have I mentioned that NOWHERE is different?

[Steve Wimer]

Tighter credit standards, a domino run of unemployment, and falling sales revenues in a lot of industries point to a deeper downturn in my opinion. So Bush bails out builders instead of homeowners? So corrupt! The rich want free trade until it hurts industry, then they're all for "social" government bail outs. This was all uncessary. If they'd required 20% down a long time ago, this boom/bust cycle would never have happened. Why not use owner financing instead of government bailouts?

[Desperate buyer in Malibu]

This is a funny story.
I close my eyes and remember a parasitic Real Estate agent bringing me to a home that, incidentally, had two bidding couples in the living room.
"Better act NOW, she bellowed!"
I passed and am renting on the beach in Malibu.
The old adage applies. Pigs get fed. Hogs get slaughtered.
Look back to the '90 bust. Or a Case-Shiller chart.
We'll be ok in 2015 or so.

[Jimmy]

I have a question, I heard a foolish coworker today saying (very proudly) that she was going to purchase a second home in Inland Empire for low $300K and then walk away from her first home which she bought for over $500K. It seems to me the banks would want to nail her for that right? What recourse would they have? Not to mention how incredibly dishonest that is.

[save your ammo]

PATIENT VULTURE wrote:
"While it seems unlikely (even to me), the data and numbers seem to suggest housing coming down to the year 2000 levels + inflation rate, to match income levels, assuming credit reverts to normal historical qualifications."

That's right PATIENT. Keep circling your prey. Bide your time. In five years or so, you'll be feeding on the squealing little pigs of San Marino, or maybe Santa Monica, or Culver City, ... or even good old Silver Lake.

[Patient_Vulture]

Posted by: puckhead:
" What I have a problem is when people in a broad stroke say that ALL areas will go back to 2001-2002 levels. Like since a house in Riverside and Manhattan Beach are made of the same materials, they should be priced the same. Sorry, I just think people are ignorant and wishful thinking if they think this is the case. IF I am wrong and prices do fall back to 2001 levels at Manhattan Beach, then I’ll write a check and buy the beach house I’ve always dreamed about. I’m not counting on my beach house."

Beach areas are still strong, even stronger than other desirable areas. Usually the hottest markets are the last to fall, California was late to fall after prices went down nationally, because it was a very hot market. When prices bottom out Nationally, California will continue to fall. California/LA will be one of the 1st to go hot again (years down the road), but for now the last cars of the boom train (beaches, high end properties) are finally starting to get over the hump of the hill it was being pulled up from.

When the much of LA comes down 40% or so, the contrast between Beaches and everyone else will be too great. Too few would chose to pay that much of a premium for a beach area, those areas will correct too, but will be the last to do so. Even so, it will still be more expensive at the beach, as it is now and always has been.

[MaxersLA]

I knew this was going to be bad (Mozillo & Co. last year said the bottom was 2008, now it's 2009/2010 as we're about halfway thru 2008. I'm actually amused by how much our govt and banks expect us to believe...).

But I never thought it would hit home like it has. My brother Kevin lives in a large home in Phoenix, AZ, and after several refinances and purchases of madly expensive things like pools, jewelery, $2K purses for his wife and what not, Kevin finds himself about $200K upside down. The insane thing is his 14 year old son actually has to cut the grass now, instead of the team of landscapers he used to have to do it. THE TRAGEDY!!!! Oh, and, sorry, no college money either, Kevin thought the home would just go up and up, how could HE know??? AH, so UNFAIR, someone is TO BLAME FOR THIS, though, right??? The govt? The banks? The brokers?? Anyone but them!!!!

Final thought: Now that my brother cant afford to buy his wife $2K purses and shoes and what not any longer, how long does the marriage last? No more expensive dinners, trips, all gone. And, OH NO, but she might just have to get a job now. THE HORROR. I give their marriage one year. How many others out there like this? I bet MUCH MORE than anyone reading this thinks...

[andree]

We al were in fact a part of ponzi scheme, making money of the next guy untill we ran out of people. No body and perhaps lot os didnot understand term of deals flying off . We just signed on lines and dreamt about money to be be made. In fact we defied all logistics and definations of normal being.
result is there , wait till it bite us.

[ajax 3456]

taken from another blog, is this real or BS ?

"Weren't there allot of houses in the middle of renovation, but some just ran out of cash and could not finish the project

Just because the bank are asking 25% below market value for their REO you be surprised what they are willing to take.

Even in the Cupertino Foothill Area of Silicon Valley"

BEDS: 3 Baths: 1 Sqft: 1,066
Sold For: $13,500 (02/08/2008)
LAST SALE: $560,000 (02/03/2006)

BEDS: 3 Baths: 1 Sqft: 1,066
Sold For: $4,000 (01/24/2008)
LAST SALE: $615,000 (01/05/2007)

BEDS: 3 Baths: 1 Sqft: 960
Sold For: $11,000 (01/14/2008)
LAST SALE: $591,000 (05/22/2006)

BEDS: 3 Baths: 1 Sqft: 960
Sold For: $30,000 (03/06/2008)
LAST SALE: $610,000 (02/05/2007)

BEDS: 3 Baths: 2 Sqft: 1,409
Sold For: $5,500 (03/18/2008)
LAST SALE: $205,500 (05/19/2006)

BEDS: 3 Baths: 2 Sqft: 1,409
Sold For: $38,000 (03/05/2008)
LAST SALE: $1,025,000 (02/15/2007)

BEDS: 3 Baths: 3.5 Sqft: 1,657
Sold For: $5,500 (02/14/2008)
LAST SALE: $879,000 (02/24/2006)

BEDS: 4 Baths: 2 Sqft: 1,491
Sold For: $18,000 (02/15/2008)
LAST SALE: $449,500 (09/22/2003)

BEDS: 4 Baths: 2 Sqft: 1,412
Sold For: $25,500 (01/22/2008)
LAST SALE: $560,000 (11/15/2004)

BEDS: 4 Baths: 2.5 Sqft: 2,651
Sold For: $7,000 (02/14/2008)
LAST SALE: $995,000 (05/31/2006)

[Tim K.]

puckhead wrote: "What I have a problem is when people in a broad stroke say that ALL areas will go back to 2001-2002 levels. Like since a house in Riverside and Manhattan Beach are made of the same materials, they should be priced the same."

You don't see it, do you puckhead? What you wrote was NOT the same thing. Saying that ALL areas will go back to 2001-2002 levels does NOT mean that all areas are going to be priced the same AS EACH OTHER.

It just means that Manhattan Beach will be just as expensive as MANHATTAN BEACH WAS in 2001-2002.

Sheesh.

No area is immune.

[x-man]

puckhead--

They said the same thing about the nice areas of Tokyo in the early 90s. If it can happen there, it can definitely happen in Malibu and the Platinum Triangle.

[Kathy]

More scary stuff to come: Monthly mortgage resets for 2007-2016:

http://consumerist.com/340334/monthly-mortgage-
rate-resets-2007+2016

[jag]

150 multiple choice questions And puckhead,

I agree with both of you in regards to homes maintaining if not slightly increasing in value in certain areas of Los Angeles (i.e, Beverly Hills, Bel Air, etc.). Also, I agree that homes in these areas will not drop to 2001/2002 levels. However, for the rest of us (80% of the population in L.A.) that can't afford to buy in these expensive neighborhoods we are better off waiting a year or two to save an additional 20% to 25% from peak levels. In essense, a three year wait period that can potentially save an average Angelino, like myself, anywhere from 300Kto 500K is worth every second.

Cheers!

[puckhead]

150 multiple choice questions,

So you’re on the record as saying that the % declines will be the same between Riverside and Manhattan Beach or La Canada or South Pasadena. God I lover perma bears!!!!!

Let me give you some insight on how education and supply/demand factors into housing prices. I have 3 kids and education is VERY VERY VERY important in our family and our friends families. I’ll cut off my left testicle to get my kids into a good school. The cost of sending my 3 kids to private schools K-12 will run me $400-$500K. If I’m looking at two similar houses but one is in a crappy school district (like LAUSD) and one is in a good district (like South Pas), I’m automatically added $500K to the value of the S.Pas school house. Parents will pay for good schools. Good private schools are turning away well qualified kids with parents throwing money at the school. If a decent house in La Canada or South Pas or Manhattan Beach ever goes on the market for under $300K I will break every and all traffic laws to buy that house because the alternative is pay $500K to a f’ing private school!!!!

[Fred]

Patient_Vulture is wise, and I like his train-moving-over-a-hill metaphor.

[Corntrollio]

The percentage decrease in prices for more expensive neighborhoods won't be as much as the percentage decrease in places like Palmdale, because the values weren't run up as crazily in nicer neighborhoods. But the nicer neighborhoods aren't immune to dropping in inflation-adjusted price over the next 3-4 years either. Check out this link for some data on the price run-ups for low tier vs. high tier:

http://westside-bubble.blogspot.com/2008/03/
january-case-shiller.html

[x-man]

Puckhead, you don't think they had similiar issues in Tokyo? It won't happen overnight, but by 2011 Bel Air and South Pas will be off 60% for the peak. A good 15% of that will just be inflation. But a 45% nominal drop is a mathematical certainty.

Tokyo RE values (more concentrated wealth than anything in LA) dropped by NINETY PERCENT.

It can (and will) happen here. I'm not a perma bear. It's just reality.

[Edgar]

Puckhead wrote: "I’ll cut off my left testicle to get my kids into a good school."

You've already got kids, so that isn't much of a sacrifice. Me -- my fiancee and I still have kids to come in the future -- so I think I might sacrifice my small toe (left foot) for a MB house.

[150 Multiple Choice Questions]

I have no idea what you're reading, but I did not say % changes will be the same, nor did I say MB will be under 300k, in fact, I said the exact opposite.

An area returning to 2001 pricing BY DEFINITION removes '% from peak fall' as a factor because all areas went up by different percentages between '01 and whenever they peaked. In general, lower cost areas went up by a larger % than higher cost, because more people could "qualify" in the lower numbers and the laws of smaller numbers (they're easier to make go up larger %). Also the big problem that "qualify" meant "breath" and "lower numbers" were 1 million.

And by the way, what you describe about schools isn't supply and demand... it's one factor of what makes an area attractive.

And Jag, read the part I wrote about "Nowhere is different". I think prices in the 'nice' areas are going down, fast. Because what I really love about people who say "it'll never go down in area X" is it implies everyone in area X has so much money they don't care about throwing it away? You believe that to be true or do you think the people with money are going to try and get as good a deal as they can?

[FlooTheCoop]

I feel kinda bad for you guys. Who would have thought meadian housing prices in LA would drop below those in Seattle by a long shot. Gee, I just might have to consider moving down to LA to pick up a couple of cheap homes.......Nah, don't want to have to deal with the traffic, crime, pollution, obnoxious people, high taxes and living in anything close to a median priced house in A

. I think I will just stay where I am! Life is good.