Falling faster: L.A. home price declines accelerating

Today's Case-Shiller report on home prices in large cities shows that home price declines in Los Angeles are accelerating, as foreclosures continue to weaken the region's housing market. 

The Case-Shiller report for April shows prices in Los Angeles falling at an annual rate of 23.1%, an increase from an annual rate of decline of 21.7% in March. Nationwide, Case-Shiller's composite of 20 large cities also shows housing price declines accelerating, now falling at a rate of 15.3% from year-earlier levels.

Bloomberg News: "Home prices in 20 U.S. metropolitan areas fell in April by the most on record, signaling the housing recession is far from over, a private survey showed today."

The Case-Shiller report continues to show that the housing collapse is most severe in the west and Florida, with cities in those regions showing price declines much worse than the rest of the country. These are the markets where prices are falling fastest, according to Case-Shiller:

Las Vegas: -26.8%
Miami: -26.7%
Phoenix: -25.0%
Los Angeles: -23.1%
San Diego: -22.4%
San Francisco: -22.1%

Average of 20 large cities: -15.3%
Chicago: -9.3%
New York: -8.4%

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

Comments

[pugtv]

... lol

[bkl]

"home price declines in Los Angeles are accelerating"

If you look at year to year changes, the last three months' declines have been 19.4%, 21.7%, and this month's 23.1%. However, if you look at month to month changes, the last three months' declines have been 4.3%, 3.6%, and this month's 2.2%. (Note that "this month" is "April," which represents an average of March, April, and May).

My view is that the rate of decline is declining. This month's monthly decline is the lowest since October 2007 when it was 2.1%.

[Anon.]

Sanity being restored to the housing market here in LA is a good thing to watch. To the people who were financially invested in the insanity continuing...I'm sorry.

[Rob]

Its going to be an exponentially wonderful summer....

[amir]

Faster pussycat, kill kill

You ain't seen nothing yet...

[cbk16]

Long term this is the best new we could have for the economy. With cheaper housing, we can now afford to fill-up our cars again. Now people can afford a big home again. The good side of this needs to be mentioned since our our children are the beneficiaries of the lower price of homes. Most people are just losing paper value, value that should not have happened when homes were increasing a 30% a year earlier in the decade due to wild speculation.

[Rob Dawg]

A bit of clarification as to your list.

First those are y-o-y actual drops percentagewise and not annualized current rates.

Second, I'd much rather have taken a 26.8% hit on a Las Vegas median home than a 23.1% haircut on a median Los Angeles property. By this second way of measuring fastest, dollars per year, California takes all the top spots.

Just wait until next week when the Legislature has Elizabeth Hill testify in the budget hearings that home mortgage interest be eliminated from the list of California income tax deductions. It doesn't matter that it won't pass. The damage will have been done by the mere mention.

[Pasadena]

Prices in the best neighborhoods are not falling at these levels. In fact, listing prices seem to be higher and closing prices have not gone below the 2006 peak.

Can someone on this blog please pull the plug so I can buy a house already!

[Mike]

I moved from the San Fernando Valley Northridge to Wisconsin in the 80's. My mom and dad bought their Northridge home in the early 60's for about $65,000. In Wisconsin in the 60's a home would cost about $30,000. I just bought a beautiful 3 bedroom 2 bath, and 3 car garage home for $109,000. I think based on these facts, home prices in Los Angeles will continue to drop much much further. I think I would be wise to walk away from these mortgages also. It just makes sense.
Mike M. CPA

[Mike]

I moved from the San Fernando Valley Northridge to Wisconsin in the 80's. My mom and dad bought their Northridge home in the early 60's for about $65,000. In Wisconsin in the 60's a home would cost about $30,000. I just bought a beautiful 3 bedroom 2 bath, and 3 car garage home for $109,000. I think based on these facts, home prices in Los Angeles will continue to drop much much further. I think I would be wise to walk away from these mortgages also. It just makes sense.
Mike M. CPA

[Jonathan]

But now with the falling dollar, the foreigners will start to buy up all the property, right? Prices are going to start rising really soon. You should all buy right away. You don't want to be priced out forever.

[Agnostic Free Thinker]

I am glad that my wife and I bought our house in Northridge 21 years ago and, through being very conservative with refinancing and taking out very little equity over the years (and only for some needed home improvements), have plenty of equity in our house (although not as much as a couple of years ago!). We are (hopefully) in a good position to ride this downturn out and maybe even benefit from it in the long run -- we would like to retire closer to the beach and maybe the right beach house for us will become a little more affordable.

[Iqbal N. McCrevisse]

When prices fall this fast, it makes no sense to buy unless you are putting zero down. Otherwise, say goodbye to the savings.

[flashx2]

People SAY home prices are falling, but I don't see it reflected in the listings. Of course seller's agents are in denial, but it could also be that everything is still just WAY over inflated.

[Arti]

"Today's Case-Shiller report on home prices in large cities shows that home price declines in Los Angeles are accelerating, as foreclosures continue to weaken the region's housing market."

Not in Santa Monica, SFRs there are still listing for more or less what they were closing for at the top of the bubble in 2006.

[Buckoux]

This statistic regarding the fall of home prices is relatively meaningless without any reference to what "price" the Case-Shiller Report is reporting. Is it the price of homes successfully closing escrow, the asking price on the MLS, or some other source of data? Without origin the statistic is without context and therefore useless except for a headline.

[Nelcisco]

I agree pugtv:
but its really no laughing matter. To say that the housing recession is far from over is an understatement.

I believe we're entering a housing depression in Vegas, Miami, Phoenix, LA,SD & SF

[Cal]

Price decline decelerated a bit in April. I think we will see that trend continue a bit during May and June but by the Fall months increase the acceleration downward as banks continue to be motivated sellers but sales slow due to seasonality.

[ex HermosaBoi]

Couldn't happen to a nicer bunch of people

[MyLessThanPrimeBeef]

The cure is sometimes painful short term, but eventually, it will all work out for the better.

When earth was first formed, the atmosphere was all methane. Then came the cyanobacteria, billions and trillions of them, converting sunlight into oxygen. Soon, oxygen replaced all methane, a greenhouse gas, and suddenly the planet started to cool, and before long, the entire globe was covered with ice, even down to the equator. Living organisms died by the millions. But the world somehow survived, as we all know.

So, as counter-intuitive as that may sound, good things, like oxygen and affordable housing, when they first appear, might kill you. But you gotta have faith it will all work out.

[IToldu2CashOut]

but my realtard told me 3 months ago it was the perfect time to buy!

[Mike P.]

This summer will be a wakeup call for sellers, as the usual "summer peak selling season" shows true housing market conditions. Listing prices in LA are cratering, foreclosures and REOs are so backlogged many aren't on the MLS yet, and we are still far, far away from affordability (which is the real metric for homeownership).

[Fred]

Median L.A. household income = $55,000 (approx.)
Median L.A. asking price SHOULD BE = $275,000

That's based on the historical 5x income-to-home price ratio. Yes, I know that the poor people who can't afford homes anyway are dragging down the income level. But that's always been the case, and that's always been a factor in the ratio.

So, if the median needs to hit $275,000 before we're near a bottom, and the median currently sits at $430,000, that means there will be an ADDITIONAL 34% drop in home prices.

...an additional 34% drop in home prices. That's math, people.

[bucky]

The housing market in not falling. Its returning.

[Fred]

Oh, and as an addendum to my last post: a further 34% drop in home price would put us just about even with 2001 prices. So the people foretelling a return to 2001 prices were right all along. That's your bottom, people!

[Pete Doty]

The report you cite also shows other cities not in such price decline, such as Denver. For instance we got the report here that Denver was in the top 14 "MOST DEPRESSED with a .5% decline.

Is that news? The Case Schiller report was admittedly, a poor choice for NAR to affiliate with and was soundly thrashed for their limited data reporting when it was last reported.

I appreciate the post but worry about the source and true depth of their research. And I know I can be incorrect, no flaming intended. Thanks for the info!

[Alan]

Remember, this is not Greenspan's fault.

Repeat this daily.

Alan

[Ragnar]

It seems to be the same story week after week, but it is still interesting. By the time we are ready to buy in CA, we should have a lot more choice of property and area.

There are definitely some great deals to be had in the Phoenix metro area too, if you can stand the heat in summer, that is.

[Erik H]

Keep in mind that the steep declines are in places no one wants to live anyway. There hasn't been anything near a 23% decline is desirable neighborhoods. When coastal San Diego or the OC drops 23%, send me an email. Who wants to live in Lancaster anyway?

[Maggie Knowles]

Why some areas don't seem to be dropping much in price:

From S&P/Case-Shiller Home Price Indices
Housing Bubbles Collapse Inward
http://tinyurl.com/62hnbp

During market downturns, home prices fall the least in the most desirable areas of a metropolitan region. As housing affordability improves, home buyers who were previously priced out of their preferred towns and neighborhoods will be able purchase properties in these areas. So, even as overall sales volume drops, relatively stronger demand for housing will limit price declines in neighborhoods with shorter work commutes, better schools, and easier access to parks, recreation, and retail centers. Because of sharp increases in gasoline prices, living closer to work has become an even more important consideration in the location decisions of homebuyers. When combined with large inventories of unsold housing on the edges of urban areas, this shift in preferences will mean that prices for homes in outlying neighborhoods will continue their more rapid decline and will be slower to rebound when housing markets finally start to recover.

[tealeaf]

Arti, Erik:

please, please visit realtytrac.com and look at the notices of default that are being filed in your beloved coastal areas.

those are known as "leading indicators." Monthly sales volumes are in the single digits in some coastal zips, yet NOD filings are in the double digits.

Stop looking at trailing indicators, start looking at leading ones.

[Wilson]

It's only a matter of time before those prime areas see devastating price declines--especially as we are now entering into a horrible recession.

I'm already seeing it in NYC. All these hotshot Wall Streeters who bought grandiose apartments are now being layed off. Many of them are hanging on to their places, but barely...they will soon have to sell. It's coming in LA too.

It's going to be really enjoyable to watch, especially to see realtors themselves line up to sell their homes in prime areas.

[CD]

It's going to take another year for the truth to sink in, it is not only real estate but all the financial world as well. All of it is going down, it is a world wide crisis, and this bickering owner/renter, now is time to buy or not, will not matter much.... Keep your eyes on the banks and the stock market,we have a few years of rough seas ahead.Thousand of people are being laid off, they were home owners too....
We better find a new conversation, how to rebuild a RE market using all new tech tools available, with complete transparency.We have to talk about the future of RE with gas in mind, with a new nomadic life style in mind, as jobs search will take us all over the country and the world.We better look at the public school system that is all but gone. Private schools are not cheap. Shall we demand accountability from our leaders to be elected or shall we go on with " Now is time or not to buy" " renters are jerks or not" or " how to screw a sucker into buying your home?" What are we going to do to straighten this thing out.....We all know by now, Schiller, Roubini, Patrick had warned us,it's a cliff dive.Trillions gone...... We have to change the conversation .....To whom does this country belong to? Washington DC?

[JPG]

Hey Erik, I don't have your email address, but if I did you'd have something in your in box with the subject line, "OC Price Per Square Plummets." Check out this info from tealeaf in a post yesterday:

"Fact is, average sale price per foot is down as high as 27.6% in Irvine (average 16%) from Apr 06 to May 08.

I say again, that's Irvine, not Compton.

http://tinyurl.com/5fbddj"

And that's price per square foot, which to most people is a much more accurate measure than median sales or listing price.

And don't even try to tell me Irvine is "ghetto."

[x-man]

Foreclosures are what kill high prices. Just showing up on the westside (actually, banks finally putting them out there). There's now 2 on my street in Bel Air. One just sold at 35% off median square foot price.

Can you say comp-killer?

Westside is facing a tsunami of Option Arm resets. Waiting it out is not an option for people whose mortgage just doubled.

Let us not forget, in order to buy a 3 million dollar house with 10% down, there has to be a bank who will lend you 2.7 million. There are no banks that will lend 2.7 million anymore. The only thing selling on the westside are huge downpayments (which will literally be incinerated by the decline).

For those that think the nice areas won't go down: I suggest you study what happened in Tokyo. It was a credit bubble, stupid. As Soros succintly put it, "The value of the collateral was affected by the banks willingness to lend against it". That situation is now in reverse.

West LA will just be the last to fall. The contagion is already into Studio City, Sherman Oaks, Beachwood, Los Feliz. For anyone who thinks their neighborhood is immune, you should pray that no one near you got an Option Arm loan in the last five years.

BTW, 80% of the loans in LA County from 2005-2007 were Option Arms.

Timberrrrrrrrr----

[arroyogrande]

Erik H says:

"When coastal San Diego or the OC drops 23%, send me an email."

Well, if you go by median price, the Orange County median price is down 22.7% (year over year):

http://www.dqnews.com/Charts/Monthly-Charts/
LA-Times-Charts/ZIPLAT.aspx

Is that close enough?

- arroyogrande

[IToldu2CashOut]

This is a great article from a few years back. Its about a nice house in a really nice neighborhood. Tracked over 400 years.

http://www.nytimes.com/2006/03/05/magazine/
305tulips_shorto.1.html

[Arti]

Thanks x-man, I need to hear that often. I have enough of a downpayment saved up for even these westside prices, and the salary, but I absolutely refuse to buy in Santa Monica at prices that have not come down an inch from their bubble height. The thought of giving someone a windfall in the hundreds of thousands just because they held on to a house for three or four years makes me sick to my stomach, I will not do it, not until I see some declines.

[GDC]

Thanks Laker for another good example of how much prices have falled in the SFV. It's really astonishing how inflated the price are due to panic buying during 02-06. I have to say $750k for S. of the bl. in Woodland Hills is not bad at all. It's slighly above the pre-bubble level if adjusted for inflation.

[Laker]

GDC ,
yeah, and that is prime woodland hills, blocks from Ventura bl south, huge 22000 lot and flat. big 2700 sf house. I think the sellers were asking $890,000 or something close, but were smart and accepted the best offer they got. They will be very happy in couple of years.... once this property will be worth $600,000

[Raul Garcia]

"So, even as overall sales volume drops, relatively stronger demand for housing will limit price declines in neighborhoods with shorter work commutes, better schools, and easier access to parks, recreation, and retail centers."

Shouldn't every hard working American be intitled to this?