L.A. listing prices take a tiny step lower

Listing prices in Greater Los Angeles slipped by a statistically insignificant $100 over the last week, according to Housing Tracker's weekly analysis of MLS listings.  (Oddly enough, this is exactly what I predicted on the blog earlier today. Pure dumb luck, trust me.)

The trend this spring is clear: Listing prices have been flat and inventory of homes and condos for sale has also been flat, consistent with a listless market that is neither deteriorating nor showing signs of life.

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%)
4/08               $450,000 (down 17.4%)               42,430 (up 16.7%)
5/5/08           $450,000 (down 17.4%)                42,647 (up 13.7%)
5/12/08         $449,900 (down 17.4%)                42,532 (up 11.1%)

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

Comments

[jb]

No change is the same as a drop during the spring bounce.

[John]

Statistically insignificant, but HUGELY significant psychologically.

The median home price is now below $450k, so now I'd bet we'll see a pretty quick drop to the next sticking point of $425k.

[shockg]

Inventory slowly going down. Prices flat flat flat. Read Lakers damage control below.

[Fred]

Just you wait, Peter. This summer and fall will be incredibly ugly.

[Laker]

Thanks shockg for calming us down....and only down we shell go from here...
The only damage control is being done (poorly i must say) by you and on rare occasion by lefty.
see you at the bottom...pal.

[Ace]

Measuring inventory as a raw number is not a very accurate way to measure it. Most housing economists measure inventory by how many months of inventory are on the market.

As of April 08, there is 14.5 months of inventory on the market at the current sales rate (2918 houses sold in April and 42,430 on the market).

As of April 07, there was 6.9 months of inventory on the market (5096 houses sold versus 35,489 available).

I think that it is more accurate to say that there is twice as much inventory (14.5 month supply versus 6.9 month supply) than to say that inventory is up 16.7 percent as a raw number.

[tealeaf]

shockg:

inventory is up substantially over last year. all leading indicators, including housing starts and mortgage apps, are looking pitiful.

talk to lereah...

there is no damage control. this is a completely lifeless market, with sellers doing all the scrambling and/or giving up in frustration.

please check back in with reality, we're all waiting for you.

[peter m]

It will be a stagnant spring and summer for sales in the pricy parts of LA followed by a catastrophic drop this fall and winter. Those resets of alt-a combined with continued subprime metdown will reach a critcal mass from now till 2009. The housing bailout package will fail. Economy continues to plunge and CA UEmployment rate is racheting up. The outer exurbs and inner ghettoized areas are already in meltdown, and are working their way inexorably into the better areas.
Ca gov't is flat broke and pink slips given to gov't workers at all levels will have further neg impacts upon housing sales prices. Fed is really cracking down hard on illegals and many are also self-deporting which will reduce demand for lower end homes all over Scal.
The CC credit spigiot and house ATM is drying up with result that consumer spending & retail sales, the drivers of the US econmoy , are sputtering. Bammo, economy comes to a screeching halt, and in a feedback loop housing prices plunge further.
Add to all this the neg effects of $4.00 gas prices and 10 % inflation rate which is severly impacting consumer spending on dicretionaries.
There will of course be a tiny few wealthy investors and buyers who will prop up prices in a handful of westside zips but this effects but a tiny % of the LA population. The income and wealth disparity of LA is about the same now as the third world tinpot dictatorship countries, and the middle class and assorted businesses are fleeing LA & CA to escape confiscatory taxes, fees, and onerous anti-business regulations.

[E]

I suspect that we will continue to see some more downside which will finally have the people that bought 500k homes in 2001 realize that they aren't going to get 1.5-2M now.

If you bought a home in the early 2000's and "couldn't afford to buy it now" at the price that you are trying to sell it. ...doesn't that say something?

Not many others can afford it either....people don't *make* that much more now than they did then.

[waitingitout]

shockg,

prices have fallen twice as fast as inventory since February. I don't know what data you're looking at.

[pugtv]

ShockG,

So when you say "prices could still fall a bit", what is your definition of a bit? 1%, 5%, 10%, 20%?

Also, I suggest you let the "greedy" accusations go. We're all greedy. The people who speculated pre-bubble and the people who are speculating post bubble. There is nothing wrong with taking risks with greed in mind. Just don't complain when the bet goes sour.

[jesse]

To everyone and anyone--especially you Peter.

I am looking at this list intently and reading this blog religiously. I want to buy a house in a year.

I finally found a job. I am single. no debt. super cheap.
Have about 29K saved. And the job will pay 55K gross.

In my dreams, I want to buy a house in Pasadena.

It would be my first home purchase. Wish me luck. And any pointers, advice, throw them at me.

[Joseph]

Here's another, less-discussed reason why no L.A.-area neighborhood is immune from the faltering housng market and economy: with growing income disparity and collapsing neighborhoods, just watch the gang presence return to Venice, Santa Monica, and even nibble the edges of Westwood. Don't forget what happened in the early 90's (barricades in Westwood, riots in L.A.).

Fasten your seatbelts, folks. L.A.'s about to get interesting again.

[miguel]

jesse

go to www.naca.com, its a community development organization that gives 100%loans at lower than market interest. Its a wonderful program, but the lending limit will more than likely not get you into pasadena but, it may.

check it out.

ps. Im in the same boat but I have much more debt and much higher income and its working for me.

[Ragnar]

Good call on the $100 price drop, Peter. I saw your prediction on the "Ask Peter Vol. 3" thread last night.

I am in agreement with John that a median listing price under $450,000 is a significant psychological barrier to break.

[MyLessThanPrimeBeef]

I will be shocked, shocked, I tell you, if the Dutch will let you tell them that little Peter (different Peter) thought that little, tiny hole in the dyke was no big deal.

So, not only is small beautiful (I love that book), but small can also very significant. Now, don't all get chaotic on me now, but it only takes one flap of a butterfly's wings in Brazil to have a huge tornado in Texas. Remember that.

The way I see it, it may be just a tiny step downward by desparate flippers, but a huge leap forward for patient sideliners. At this moment, we are hearing the barrier of unsound lending crack, as the $450K resistance level begrudgingly gives away, and a brave new world dawns on mankind.

[MyLessThanPrimeBeef]

Jesse, I wish you and all of us here good luck.

Personally, I think the time to buy is when everyone avoids real estate like the plague. To pass time, I recommend The Money Pit with Tom Hanks and Shelly Long, or the reality show version of it starring the couple from Santa Cruz.

As for my dream, it is to have a yurt and a couple of Przewalsky's horses (if the zoning people would allow it) by the sea.

[MyLessThanPrimeBeef]

Ace, if you take involuntary sales, the number for April, 08 is more like 29 voluntary months of inventory, vs 7 voluntary months in April 07.

[Ryan]

Jesse, I think youll have to move to Midland Texas. You cant afford a house in Pasadena.

[eprobert]

Jesse - the bank will average 3 years' income when you apply for a loan so 1 year will be too soon for you unless you can work some magic with a subprime lender (very difficult right now).

That bit me in the a$$ in 2004 when I finished grad school.

[TakeFive]

"...and inventory of homes and condos for sale has also been flat..."

I think a stable number of listings on the MLS is misleading on the direction of the market.

Look at the REO pages for the banks. They are expanding week after week. What's odd is that the foreclosed properties drop off the REO list after about 30 days, but don't necessarily show up on MLS.

Another consideration is demographics, and the reason there’s a Walgreens, Rite Aid, or CVS on damn near every corner. A big chunk of the population is getting on in years. I’m seeing an increasing number of homes being sold because the resident has died or moved to a facility, rather than because of a job transfer or need of a bigger home.

Went to a couple of estate sales recently and spoke to the person running the sale. In both cases these were professional sales operations, rather than some relative – hence all the signs posted about sales tax being collected. I asked if they were doing a lot of these sales – both said they were extremely busy.

Kind of depressing though – seeing strangers picking through someone’s fathers day gift with the card from the kids still attached.

[TakeFive]

jesse wrote:

"Have about 29K saved. And the job will pay 55K gross.
In my dreams, I want to buy a house in Pasadena."

You can probably get into northwest Pasadena or West Altadena. I know - not the greatest area. But I spent a lot of time there without much trouble. Just stay away from Kings Village after dark.

Demographics are shifting from Black to Brown with a few White gentrification pioneers, if that's a consideration.

[Milla]

jesse -- check out highland park and other communities in Northeast LA, which is just west of South Pas, for greater affordability. check out CalHFA's first-time homebuyer program for down-payment assistance and 40-year loan options. good luck!

[Nelcisco]

In response to Jesse, stay in your job for 2 yrs. and try to go FHA, its a full doc loan that requires 2 yrs of W-2's, 3% down and buy the house with the intent of living in it, not as some hot stock that you can flip later.

For pugtv, although I agree that one should'nt complain when thing goes sour for taking risks, I have to disagree that there's nothing wrong with greed, investing as a way to improve your lifestyle monotarily is great, we all want that on different levels, but lets not confuse that with greed. Greed is the reason why we're in this crisis.

Great comment last night PeterM, my sentiments are the same, I've said for 3 years that the people who'll be able afford a house anywhere in L.A. at the rate it was going are 'A' list actors, sitcom stars, Lakers, Dodgers, Angles and Kings, middle class working people, in Compton, but what middle income responsible family man or woman 35k to 40k/yr want to raise a family in gang territory. FORGET IT!!!!

[CD]

Peter m is right all the way.

[Jonathan]

"Have about 29K saved. And the job will pay 55K gross.
In my dreams, I want to buy a house in Pasadena."

I think you can afford a mortgage around 220k total. That would get you a cardboard refrigerator box in Pasadena I think.

[Jesse]

Thanks everyone. miguel, myless, ryan, eprobert, takefive, milla and nelcisco.

So I can wait two years to have the w-2's and more money for a down payment.

[tealeaf]

Jesse, 55k gross is an issue.

The rule for about a hundred years on housing is that the payments+interest+taxes+insurance (PITI) for housing should be about 28% of gross income.

With $30k down and $55k annual gross, you're looking at a $220k home (assuming 30yr, 6.5%). And that doesn't include repairs, mello roos, or HOA fees. Anything higher is a stretch, and bears higher interest. And Milla, a 40 year loan only saves a couple of dollars - it's a sucker loan.

Housing got this crazy because there was more buying power with suicide loans - the prices adjusted to meet the payments afforded by interest only and option ARMS. Those are now gone, prices are adjusting as the pool of buyers at that price range has all but evaporated.

Here's a thought: find yourself a mate - you can buy a house together. In the mean time, save your dough. The $30k might evaporate if you pull the trigger too quickly.

[puckhead]

"It will be a stagnant spring and summer for sales in the pricy parts of LA followed by a catastrophic drop this fall and winter. Those resets of alt-a combined with continued subprime metdown will reach a critcal mass from now till 2009. The housing bailout package will fail. Economy continues to plunge and CA UEmployment rate is racheting up. The outer exurbs and inner ghettoized areas are already in meltdown, and are working their way inexorably into the better areas.
Ca gov't is flat broke and pink slips given to gov't workers at all levels will have further neg impacts upon housing sales prices. Fed is really cracking down hard on illegals and many are also self-deporting which will reduce demand for lower end homes all over Scal.
The CC credit spigiot and house ATM is drying up with result that consumer spending & retail sales, the drivers of the US econmoy , are sputtering. Bammo, economy comes to a screeching halt, and in a feedback loop housing prices plunge further.
Add to all this the neg effects of $4.00 gas prices and 10 % inflation rate which is severly impacting consumer spending on dicretionaries.
There will of course be a tiny few wealthy investors and buyers who will prop up prices in a handful of westside zips but this effects but a tiny % of the LA population. The income and wealth disparity of LA is about the same now as the third world tinpot dictatorship countries, and the middle class and assorted businesses are fleeing LA & CA to escape confiscatory taxes, fees, and onerous anti-business regulations. "

Damn Peter M, you must be a joy to talk to over cocktails. When your kids ask you how your day was do you slap them upside the head?

[puckhead]

Jesse,

I live in Pasadena, there are good and bad parts of Pasadena and what you can afford based on your income, you don’t want to live in that part of Pasadena. Try looking in parts of NE LA, Mount Washington or Alhambra. Generally safer and you can get more house for the money.

[Laker]

E: "...If you bought a home in the early 2000's and "couldn't afford to buy it now" at the price that you are trying to sell it. ...doesn't that say something?..."

That is a great line that i think Peter should put emphasis on.
It is just 100% to the point, and i believe shockg will agree with me on this.
In fact, a mean price (that we sometimes refer to as the thinking of prices to get back to the mean) is where the seller could actually afford to buy the house he is trying to sell. We are not there yet...actually, quite far from there....

[Juan]

"but what middle income responsible family man or woman 35k to 40k/yr want to raise a family in gang territory. FORGET IT!!!!"

$35-40K/yr is hardly middle income for CA let alone the LA area. At the peak, middle income hoods were around $800K, assuming a 50% drop at the bottom, one would still need $100k/$100k in down payment and salary which seems hard for the average family.

[Milla]

jesse: depending on the amount you borrow and interest rate, a 40-year loan can shave a hundred bucks or more from your monthly payment, which i know can be meaningful on your salary. CalHFA also offers 35-year loan options where you pay interest only for the first five years, but for that type of loan you might need to qualify at the 30-year fixed level so they know you can pay up when the amount resets. and don't pay attention about waiting to find a mate before buying a house. that's archaic advice. happy hunting!

[Nelcisco]

Jesse,

Ryan would've been right 2 yrs ago. Midland, Texas would've been one of your only options then, but we're in a declining market & 55k a yr in the real world is still OK income. LA county was not in the real world then, but is now seeing the hard way that average people even in L.A. do not make 6 figues. I'm one of those mortgage professions still crazy enough to whether this storm in hopes that things will turn around hopfully sooner than later, what I'm finding when I take a 1003 (loan app) and pull credit is that the deal is dead before I can creat file to submitt it to processing because I know the underwriter of most lenders will just scud missle it down. So, something will have to give. Jesse just hold on, time is on you side, like I said on my last comment, wait 2 yrs. till you can go full doc meaning check stubs, W-2's, cash down, meanwhile watch the market

[tealeaf]

Milla- 40 year loans! Yeah - those are the modern way to do it.

Save 7% on payments, extend 33% on term!

Sweet !!

[Cal]

35 and 40 yr mortgages were invented as safer versions of the toxic "affordability" products offered by Wall St. I suspect the people that take them have never seen an amortization schedule nor understand the true cost of such products. 30 yr fixed is bad enough as far as mortgaging ones future. 35 and 40 yr just mean you should rent until you really can afford a home.

[Milla]

yeah, not like you can refinance into a 30-year or anything after a few more years of working and increasing your salary. not like you're mostly paying interest in those first few years anyway, regardless of whether you go 30 or 40. a 40-year loand can sometimes be the best way for some folks to get into homeownership. think it through.

[MyLessThanPrimeBeef]

How about 70 year loans? Why waste the first 30 or 40 years of a guy's life? Get him in early on that equity participation scheme.

[Nelcisco]

Juan,

I completely argree w/you. thats one of my biggest concerns as a loan officer....Imagine, you need more than 100k down for low income housing when most people in this economy and LA is no different is living paycheck to paycheck, how is that sustainable?

[Cal]

Milla:"a 40-year loand can sometimes be the best way for some folks to get into homeownership"

If your goal is to get into a home and mortgage, then yes a 40 yr loan might get someone in a house sooner rather than later. I think the question would be whether it is a good idea for them to do so, especially in this market and how much it will ultimately cost them.

I firmly believe that a 40 yr loan is very dangerous (it is essentially 10 yr IO + 30 yr fixed, only slightly better) in a down market and they are giving them to people with low down payments to boot. No equity cushion, very small equity building, high total cost. These people really can't afford a home and will ensure they are working poor for a long time unless we see another housing boom like we have just seen. And I think it will be another 40 yrs before we see banks making mistakes at the level we just saw them make.. people forget but it takes awhile.

[Ace]

Milla:"a 40-year loan can sometimes be the best way for some folks to get into homeownership"

There is no way that you typed that with a straight face. No way.

A car lease is sometimes the best way to get some folks into a new BMW they couldn't afford.

No payments for 12 months is sometimes the best way to furnish your new house with stuff that you can't afford.

Rent to own is sometimes the best way to get a big screen tv that you can't afford.

A payday lender is sometimes the best way to get money without waiting until payday.

Doing any (or all) of these things is the best way to make sure that you stay broke your entire life.

[Geek Seek]

It's Caaaaaaaaaaaaaal Worthington and his dog 40 year loan. I always wondered why he offered 10-12 year auto financing since it didn't look like he was going to live for more than a couple of years anyway, back in the 80's. But he's still at it, isn't he?

[Ace]

Geek Seek,

That was too funny! I love those commercials. I really want to buy a 1998 Chevy Blazer on a 8 year loan but I don't have the $99 down payment!

[puckhead]

"A car lease is sometimes the best way to get some folks into a new BMW they couldn't afford."

Per Ace above. Actually BMW has some great lease deals if you don't drive that many miles. Becasue of my job, I drive mucho miles so a lease does not makes sense for me. But if I drove less, hell yes I would lease. BTW, yes I can and have bought a few BMW's.

[shockg]

The 40 year loan is a legit product considering we live in a place where there is a premium to own here. No one keeps the same mortgage for the life of the loan anymore. You speculators know this. Your going to pay a bit more interest but you are going to write it off anyway.

[Laker]

shockg, why don't you pay me $10,000 a month. I will give you 1098T so you will write off 100% interest deductible!
I'll call it 50 year loan - as you say much better than 30 year or 40 year... "...Your going to pay a bit more interest but you are going to write it off anyway...."
upside down speculator.

[shockg]

HAHA. Its funny how the very people who abused ARMS, Neg ams, I/O are now knocking the 40 year loan. (Laker, etc). They used these risky loans on their last flip and will use them again on their next flip, which they are eagerly waiting to buy. Hence the constant posting on housing and bubble blogs. They try and try to impose their will on the market through these blogs. "Yawn"

[tealeaf]

The 40 year loan is a legit product considering we live in a place where there is a premium to own here. No one keeps the same mortgage for the life of the loan anymore. You speculators know this. Your going to pay a bit more interest but you are going to write it off anyway.

Posted by: shockg | May 13, 2008 at 08:03 PM

Shock, why would you try to time the interest rate market? Why not take advantage of low rates? You are assuming the principle will be lower than the value at the time of a refi or sale, which is a dangerous thing with a "home, not an investment."

[shockg]

tealeaf, if someone made a decent down payment it doesnt matter over time. The bottom line is your paying a little more interest and a little less principle than a 30 year loan but if rates dont go your way right away you are still reducing your principle with each monthly payment. You guys are trying to place a blanket "subprime" label on certain loans that could work for some people. The 40 year loan is not going away and will be more prevalent in the future. Welcome to the 21st Century.

[Tokyo Temp - ex LA Renter]

ShockG,

The Japanese had 40 year, 50 year and 100 year loans as well. They probably though those products were here to stay as well.

Now you can't get anything more than a 35 year loan.

All I know is I hope that the US doesn't take the Japanese approach.

Through Shinsei Bank (US owned bank here) I can get a 10 year at 1.1 and then a 20 year at 2.8! But anything decent here is north of one million!

Renter In Tokyo.