California home prices down 30% from '07 levels

California's housing slump continued to accelerate across the state in May, as the median price of homes sold fell a stunning 30% from year-earlier levels, with median prices falling by $2,700 per week, DataQuick Information Services reports today.

The median price paid for a California home in May was $339,000, a decline of $145,000 from the median price of $484,000 in May 2007. DataQuick estimates that roughly half of the decline is due to depreciation in home values, and the other half due to changes in the "mix" of homes selling, with cheaper, previously foreclosed houses increasingly dominating sales numbers.

DataQuick had earlier reported that Southern California home prices fell by 27% in the same period, but the statewide numbers are even weaker, as they include the hard-hit Central Valley of the state, where foreclosures are widespread.

Statewide sales of new and existing homes in May were 10.7% below year-ago levels, and 38.3% of the homes that sold in May were "foreclosure resales," DataQuick reported. A year ago that percentage stood at only 5.4%.

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

Comments

[SoCalJim]

The problem is, all of the people suffering now have noone to blame but themselves. They knew they could not afford it. They took the risk. Now they have to assume the consequences. Simple as that. People who have the incomes to make the payments are fine assuming they do not waste it on needless consumption. Middle class gets squeezed. Happens all the time, and it will only get worse going forward. This is nothing new, and certainly does not warrant wasting tax money on idiots who can't manage their own finances. If they lack the intelligence to actually believe what salesmen / realtors were saying, then that is their own problem for not having a brain, and maybe they should better themselves by going back to school (if they even went in the first place) and obtaining a higher paying job. There are solutions to every problem. Greed, feeling sorry for yourself and laziness close many of those doors, and that is what we have now with a bunch of whiners who bought in 2003-2007 and don't have the bank account to support their decision. Again, people who have incomes will be fine and can ride it out. And if the best response is that a mortgage can be paid off in 7 yrs and you have to "think" about taking a vacation, there's a whole other set of problems. Take it when you want, assuming you have the means. No disrespect intended, maybe I am used to my own schedule and doing what I want when I want since I own my business, and there are many people who can do that, or pay cash. You only live once. Enjoy those mixed drinks on the beach while you still can.

[bobsuruncle]

$650k, $590k in Valley Village and Noho and $740k in Tarzana, still way over priced. Cut another 50% from that should be the real value.

[Drew]

I did read yesterday that last year in California, "jumbo" mortgages over $417k made up about 40% of the market.

Today, these "jumbo" loans make up about 10% of the market.

Is it possible that some of this reported price reduction reflects a reduction in the availability of credit to pay for higher-priced properties, and not so much a reduction in the underlying values of these higher-priced properties?

If loans aren't being made on higher-priced properties, which then aren't selling, but are still available for lower-priced properties, which are continuing to sell, wouldn't this skew the median down?

And what happens when the new "junior jumbos" begin percolating into the market, as was reported here a few days ago to be starting to occur? Might we see a sudden increase in median prices, as suddenly proportionately more higher-priced properties begin to sell?

And then, will people seeing this increase in sales prices believe that we've hit bottom, and start rushing in to buy?

[tealeaf]

puckhead:

you are strengthening the argument that so many of us are making.

if we bought today, all of our discretionary dollars would be going toward a mortgage.

You bought when prices were low, and somehow enjoy shoving it in our faces.

We agree, and are waiting to buy when prices are in line with incomes.

[Cal]

Drew:"If loans aren't being made on higher-priced properties, which then aren't selling, but are still available for lower-priced properties, which are continuing to sell, wouldn't this skew the median down?"

They aren't selling (more accurately, fewer are selling), you don't know what their value is. The market is telling you it is somewhere south of where they are now. We just don't know how much.

"And what happens when the new "junior jumbos" begin percolating into the market, as was reported here a few days ago to be starting to occur? Might we see a sudden increase in median prices, as suddenly proportionately more higher-priced properties begin to sell?"

Junior jumbos have been available for some time, they are full doc products requiring down payments. They aren't what is going to save the market.

The market didn't get where it is at because people were buying homes they could afford. If you assume people are now restricted buying homes affordable relative to their incomes it is clear the market has much further to fall.

[eprobert]

Puckhead that's a disgusting comment.

It's great to know that your financial acumen is so incredible that it enabled you to buy at the exact bottom of the previous housing bust.

What a fool I am for not recognizing the bottom of the market while I was still in college. If I was as smart as you I would have dropped out to work at MacDonalds and buy that 1br condo in Highland Park that I always wanted.

Hats off to you for having the foresight to be born 20 years earlier than todays' buyers.

[puckhead]

To all who took offense to my comment, I apologize. But it seems to me that so many took offense to my post, but no one took offense to Firesale's post that he was happy that I any others were losing equity in our homes. Hey, people are nice to me, I'm nice to them right back. People want to flame, I can flame just as bad.

[Cal]

Puckhead is no shockg, he deserves more respect than that. He has a point of view and is willing to debate it.

[Laker]

Drew wrote: "...Is it possible that some of this reported price reduction reflects a reduction in the availability of credit to pay for higher-priced properties, and not so much a reduction in the underlying values of these higher-priced properties?..."

Drew, Cal answer this but let me add. Yes median can get skewed but read again what you are saying. Drew, do you understand the meaning of "underlying values of these higher-priced properties" ??? Do you know that if starting from tomorrow, mortgages were eliminated completely, what will be the "values" of the houses???
Probably $50,000-100,000 for median house TOP!
The values of the houses are very much related to availability of money to purchase them. That is proved when you look back at times when interest rates were 15%, properties were "cheap". The only reason 1700 sf house in Tarzana or Pasadena could sell for $1,000,000 is availability of stated income, NO DOWN payment, Option ARMS, IOs, and teaser rated. If you remove the stated income, and get back to asking for down payment, you automatically bring back the price to normal, sustainable, economically sensible prices.
That 1700 sf house in Tarzana or Pasadena is only worth $500,000 assuming it is in good area and nice condition. This $500,000 is more than it sold in 1995 only based on inflation.

[Drew]

What I am theorizing is that the temporary unavailability of mortgage money, especially for loans over $417k, may have depressed median prices more than they would otherwise have been simply because the higher-priced properties were not selling in the same volume as the lower-priced houses ($500k and less), for which mortgage loans continued to be more readily available.

The "junior jumbos" have only been available for a little over a month, and they are still in the process of being rolled out by many lenders. At least that's what the article posted here earlier in the week claimed.

Once people can more readily get loans for, say, $600-700k, isn't it possible that the $750-900k houses will be more likely to sell? And if that starts to happen, wouldn't the median sales price start to go up? Even if underlying values were continuing to slide?

And as far as "mortgages being eliminated entirely" - c'mon. We both know that isn't going to happen.

[Cal]

Confumbos have been out since March, they are full doc and maxed out DTI of 45% and requiring significant down payments.

The issue isn't mortgage money availability, qualified buyers can get mortgages. But the qualification standards are full doc (ish) and that will kill the market. No more stated at high LTV. The secondary issue is the mortgage insurers, they are becoming more restrictive not less. If you fit in a FHA box of 31 front end / 43 back end (higher with compensating factors) ratio you can get FHA confumbo up to 97% financing.

This isn't a credit crunch, qualified buyers can get a mortgage. But people misunderstand what being a qualified buyer means. It means good fico, documented income and a down payment.

The median skew (IMHO) has already happened, as we had the slow tightening of stated income from mid-2006 on it impacted the lower end of sales more, skewing the median higher but the lower priced properties were starting to not sell and drop in price. Then subprime (stated income, bad fico) blew up completely in Feb/March 2007 and that propelled the median until the summer then when the high end "alt-A" (stated income, good fico) financing went away the median finally showed the underlying depreciation that was going on.

Your premise of a pickup in higher end home sales presumes their are significant numbers of people willing and able to buy at those higher prices. I see no indication of that, maybe you could point me to some data to support your theory?

[Laker]

Drew, i gave the example of elimination of mortgages just for sake of discussion about find the values of homes. I know it will not happen. Best read what Cal is saying. Mortgages ARE readily available if you can document your income, put down payment, have good credit FICO >720.

Problem is once people document their income, they will not qualify for $729,000 loans....at least not that many that did qualify based on stated income...
Some normal household income is $100,000 that would qualify for $400,000-500,000 mortgages that is it...depends on their debt. median prices got skewed from 2002-2006 as McDonald's workers suddenly were able to buy the $800,000 house...Today that same McDonald's worker can qualify for $100,000 condo loan...that is it.

[original thinker]

Dear Puckhead:

The way I read this blog -- from top to bottom --
seems to indicate that you fired twice before
Firesale took your head-off. Being nice is a linear
experience.

[THOMAS]

Just like the song says California Dreaming. Ya'll need to wake up.

TEX

[Ace]

GDC 'My question to the group is: how should one go about getting these types of "discounts" in the Valley?'

GDC, what I do is use a new site called listingbook. You have to get access from a realtor. But once they sign you up, you can manage everything yourself.

The mapping feature is cool. Instead of searching by city or zip code, you can actually look at a map and select the exact streets that you want to live on. Then you select what you are looking for (number of bedrooms, etc). You will receive an email every single morning that shows all activity in the area you selected.

I mainly just watch for foreclosures and short sales to appear in my area. Although it is fun to watch someone lower the price of their house by $10k when it is still $200k overpriced, looking at $800k houses when the only houses that sell are $500k is kind of a waste of time.

[tealeaf]

Laker,

Try to take your $2,650 "paycheck" to Costco and see if you can buy a bag of rice with it. I'll take my regular paycheck and deduct my so called $2,700 loss and I'll still be able to take the wife and kids to Hawaii for the summer.

Posted by: puckhead | June 18, 2008 at 02:51 PM

this is what i responded to... no firesale comments prior.

it is precisely the point - prices are too high today as buyers AREN'T able to take that vaca when their money is dumped into PITI, mello-roos, HOA, and repairs for an overpriced STUCCO BOX on a POSTAGE STAMP.

Puckhead, thank you for making the point for all of us. It is truly appreciated.

*breath*

[Ragnar]

What exactly are "mello-roos?"

I've only heard this term bounce around a bit when discussing CA real estate, but I have yet to get a good definition of what they are. It would be superb if someone could explain "mello-roos" to me. Thanks!

[tealeaf]

Hey Ragnar:

The answer to this and many other mysteries of the universe are found at:

www.google.com

[Ragnar]

Yeah, yeah, thanks, Tealeaf. I could certainly look it up somewhere on the internet, but I'd be missing the wry whit and interesting personal perspective of bloggers on LA LAnd.

I want learning about mello-roos to be fun, ya know?