SoCal home prices down 27% from '07 levels

Housing prices in Southern California continued their record-setting decline in May, falling 27% from year-ago levels, as lenders continued to depress median prices by dumping foreclosed homes in rising numbers, according to DataQuick Information Systems. Housing prices have now rolled back to early 2004 levels, DataQuick reports.

Highlights of DataQuick's report on May sales in the region: Overall home sales for the region fell 14.9% from year-earlier levels and fell 26.7% in Los Angeles County. The overall level of sales in May was the lowest ever measured by DataQuick, which has tracked the regional market for 20 years.

The L.A. Times' Roger Vincent reports potential homebuyers are "doing their best to beat down prices, even if it means delaying the purchase of homes they truly want, agents said."

"Buyers are being very aggressive in the offers they are writing," said Lynette Williams of Re/Max in Pasadena. "They are hearing about foreclosures, hearing prices are dropping and feeling that if they wait long enough the seller is going to come down in price."

Numbers: Median price pad for the Southern California region in May was $370,000, down from $385,000 in April and down 26.7% from the peak median of $505,000 reached in May 2007. The last time prices were that low was March 2004. In Los Angeles, the median price paid fell to $422,000, down $13,000 from April levels, and down 23.3% from the year-ago peak of $550,000, DataQuick reported.

Foreclosed houses made up 37.4% of the region's home sales in May, a dramatic increase from 5.5% a year ago. In hard-hit Riverside County, 56.6% of the homes sold in May had previously been foreclosed on.  “What horsepower this market can generate right now is mainly fueled by bargain shopping, especially by first-time buyers and investors in inland areas,” said Andrew LePage, an analyst for DataQuick. “Meanwhile, sales remain especially slow in most higher-end markets, with jumbo mortgages (over $417,000) making up only a slightly higher percentage of all purchase loans in May than in April. That doesn’t bode well for the high-end, where so far prices have come off their peaks but have generally held up best.”

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

Comments

[Cal]

"Among all Southland resales in May, about 42 percent of homes sold for less than their prior sale price - about 34 percent less, on average, based on an analysis of sales where a full May 2008 and prior sale price were in the public record. Most of the prior sales occurred between early 2004 and mid 2006. "

I thought this stat was interesting because we could probably quantify the amount of short sale activity in the sales stats when removing the foreclosure sales. It was also interesting because the homes sold for 34 percent less than their previous sale price!

[toby]

The good news is, we're half way there.

[NT]

It's a free market economy. Price is what the buyers willing to pay. So far it's been subjective, Buyers only want to pay for low prices in Riverside, however,
on LA westside houses still fetch premium prices.

[yourkillingmelarry]

"on LA westside houses still fetch premium prices."

Well at least the TWO properties that actually sold. Volume is critically low in the high end areas.

[CBK16]

It would be better news if we see the prices fall a lot further. Falling prices is great news for our children who now may be able to afford a home. This will be good new for our economy in the long term since future home buyers can spend money on buying items to fill the home and not be so cash poor paying for a high priced mortgage. The government should be helping to reduce the prices further to help with the economy in the long term.

[jag]

This is incredible! Back to 2004 prices..... WOW! I've been reading many of the bloggers' comments for about a year now and their predictions are turning out to be correct. In fact, some bloggers have predicted 2002 to 2003 home prices levels. All those Westside bloggers it is only a matter of time before the Westside prices start coming down. Just look at the number of sales in your area.

[Arti]

"The good news is, we're half way there."

NOT in West LA, Santa Monica and other areas considered the "high-end". There, prices have softened somewhat and there is virtually no buying or selling right now, but list prices have held up through all of this as sellers refuse to budge. This means that either they will ride out the downturn, or they are simply a year behind where the marginal areas are, and the big declines are still ahead.

"This is incredible! Back to 2004 prices..... WOW!"

Don't get too excited--the worst excesses of the housing bubble occurred from 2001 to 2004, so we have now just barely rolled back to the doorstep of that period. From here, every year rollback will be much more significant. The mean we will revert to, when the dust settles (including any over-correction) by 2010 or 2012, will be around 1999 prices PLUS around 3% a year (which is more in line with the appreciation curve when there's no bubbles and busts) to 2012, or 1999 prices plus about 40% on top of that.

[MyLessThanPrimeBeef]

Apparently, Greenspan is so smart he invented a time machine and we are in March of 2004 now and I just noticed my bushy hair is back to 2004 level as well.

But let's not forget Arnold who recently said that we should be first in everything - I guess that includes 1st in price drop as well.

[David Wolf]

Interested in everyone's opinion as Im considering a purchase now because the monthly payment is going to be about 200/month more than my current rental, but in return getting a much nicer place with more room. I currently rent at around 2500/ month for a 2/2. I am considering a purchase price of 699k for a 4/2, in a good beach community. plan to do a 5/1 I/O with 10% down, 80/10/10. With insurance, Tax, and interest, my monthly payment will be around 3700, but after the interest rate deduction will be 2700/month. Besides for the obvious risk of being underwater after 5 years, can anyone point out other risks?

[ROBERT]

Absolutley no one has any idea when the market will change - no one.

It is ALL complete guess work. We could be half-way there, less than half-way there, or near the end of the cycle.

[amir]

What is amazing is the bifurcation of the market. While Riverside is 40% off, SFV is only at about 20% and the city is at maybe 5% off.

The question is: will the harsh falls reach the city?

I think so, but only in 2009 when a truly severe recession hits. Until then the denial of the nicer areas in town will continue.

As it was said here, 2004 prices are not really cheap. It's 2001 prices that are rational. Most of the bubble was between 2001-2004. I think 2004 had 30% appreciation.

There's lots more to go before we reach a bottom...

[Cal]

David,

What happened to amortization? What about interest rate changes since you are taking an ARM?

Here is one of the more comprehensive Rent vs Buy calculators out there.
http://tinyurl.com/58wg65

Can you afford the fully amortizing cost of the mortgage?

5/1 make sense when you plan on staying in the home a short period of time. But in a time of historic low interest rates.. why a 5/1? If you plan on staying 5 years than the depreciation risk is far to great (unless you have enough cash to make up the difference). If you plan on staying longer.. get a fixed rate and be safe. I suspect you are getting both the 5/1 and IO because of affordability reasons to make the numbers work. It is very risky and this isn't a great market to be taking large risks.

[Ideal 4 Investors]

If 37% - 57% of home sales in SoCal are foreclosures, we have established bottom.

Remember they are talking about MEDIAN numbers here. A lot of the activity is in the lower price ranges brings down the median. Chances are if you live in a desirable area, your home value has not dropped 27%. If it did, this would mean a home that sold for $1 million last year could only sell for $730,000 today.

http://idealinvestment.blogspot.com/

[LA-Architect]

Is anyone paying attention to how quickly mortgage rates are rising? They've risen a good 1/2% in only a couple of weeks.

I'm no mortgage broker, however that seems pretty big. It's a further nail into the already decreasing house prices. With the neverending escalation in the price of filling up your tank and paying for groceries, there is less and less money for an overpriced mortgage.

[MyLessThanPrimeBeef]

I believe the best thing any potential buyer can do right now is, and this is killing two birds with one stone, 1). don't drive out to any open houses nor have any agents drive your around, and 2) stay home and navel gaze, thus slowing down your heart beat and carbon emission rate.

Do not get excited in all cases.

That means no R-rated movies from HBO/Showtime. That can only hasten your CO2 expulsion, with sexy starlets to blame - talk about hypocrisy, they are the ones bragging about buying hydrogen cars, all the time making their audiences discharging ever more carbon into the atmosphere.

[Blob Johnson]

You sir are actually full of crap and the scourge that helped create the circumstances that caused the extreme climb in real estate prices to begin with. Shut your rheotic filled mouth and go to hell.

[Angrier Than Thou]

Blob: May we suggest our unofficial partner site:

http://angrylalandians.blogspot.com/

[Russ]

". . . .prices have softened somewhat and there is virtually no buying or selling right now, but list prices have held up through all of this as sellers refuse to budge. This means that either they will ride out the downturn. . . "

Individuals may be able decide to not sell their house, but large swaths of a metro area can not do this. There are far too many circumstances like job transfers, deaths, other life changing events that require a house sale at current market price, however "low" that may be.

[Nelcisco]

this is incredible! back to2004prices...WOW!
Bloggers predictions turn out to be correct! wrote Jag.

Jag, thats why I've been getting on here for about 8 months, I found a group of bloggers that see the truth for what it is.
it's not that any of us are tarot card readers, if we understand basic math, we can all or should've all seen this coming. $400k in low income hoods? how is that low income? $9 per hr. people can't afford that.

think about. think about what we make at our careers,
would we go live off Slauson and Vermont? never,we would rather leave the LA area all together like tens of thousands of decent upstanding citizens. OR.. go to a great community like Burbank with a great school system and pay $900k for a 1600 sq foot house on a 7k lot

[Price Discovery]

I've noted an interesting phenomena that indicates how "out of whack" the RE market in So Cal really is - and that is the large pricing differences of comparable units within the same condo block. Recently I looked at K Hovanian's Avenue One development at Scholarship in Irvine where single bedroom apartments (725SF) are listed for 235k to 360k for the same floorplan!
In 2000 I looked at brand new one bed + lofts in Oak Creek for 175k (monthly rents 1300pcm at the time).
To the casual observer it looke like we are heading back to the time when renting costs a premium over buying.

[MyLessThanPrimeBeef]

Perhaps I am quibbling, but if you remember Hawking's Big Bang Theory of Housing Price Expansion, you will know that at a certain point, its own weight will arrest the runaway trend and start contracting with time going backwards.

Well, that's what we have here - Time flowing backwards, 2008, 2007, 2006, 2005, 2004 and pretty soon, we will meet Raquel Welch from a million years ago and that big crush, sorry, Big Crunch.... the credit crunch.

[Nelcisco]

See, this is what I mean, bloggers like mylessthanprimebeef that tells it like its & puts witt and humor, you need an agent primebeef, comedy will allow
you to buy Ed McMohan's house, he needs help

[anon]

The rich are merely able to hold onto their houses longer, but I suspect the crash will hit them much harder.

We're seeing lots of houses pop up around here- one or two per block. Some dang fools still think they're going to get $700/sq ft. Some are moving at $450, but not many...

If you're upside down a half a million or more, it's far better to just hold on and wait rather than cough up the cash. Even if you have it...

Go download the Case Shiller data and graph it- we have another 30-40% to go in LA to get back to historical norms. AND that would be if the banks actually had any money to lend.

IndyMac Bank shares are down to 1.5 from a high of 45 late last year (down 95%). They were the number two lender as late as December. IMB has redefined what number two means since to their stockholders.

Ought to give you an idea of just how bad it really is in the financial world when AIG canned their CEO on Father's Day.- a particularly nice touch.

[MyLessThanPrimeBeef]

Nelcisco, thanks, but I need something with a steadier income and supporting work environment.

[Robert in Palm Springs]

This is all very exciting, but the real action hasn’t started yet. Prices will continue to fall at an accelerating rate due to the following facts: (1) Inventory is growing when you include foreclosures in the mix, (2) unemployment is growing forcing a new segment of the market into selling or foreclosure, (3) credit availability is decreasing thus there are fewer qualified buyers, and (4) long-term interest rates are rising reducing the buyer pool even more.

We are at the end of the BIGGEST BORROWING AND SPENDING BINGE OF ALL TIME. The consequences of such gross excess ALWAYS result in a contraction of equal or greater magnitude, according to the Austrian school of economics. Since much of the credit boom was based on real estate, it only follows that real estate will suffer an enormous price adjustment. This housing cycle is very similar to 1920-1932.

The debt bubble really started in the 1980s so we have no idea how much the market will go down; 1999 prices do not seem too farfetched. We know it is not near bottom yet because the other parts of the credit debacle have not yet played out. When they do, then we will go into freefall.

Builder sentiment, which was published today, it is at an all time low and so far their sentiment has been a good bellwether of this market.

Despite all the efforts by the Fed, Congress and Wall Street to prolong what they know is a doomed economic policy, their efforts will fail because they are not built on solid economic principles. Fundamental changes will have to be made and the costs are going to be very high. A tremendous drop in home values will be but one of the adjustments we will have to make.