South by Southwest: The housing meltdown is regional

Today's report on falling home values from Case-Shiller is further evidence that the housing meltdown is not a 50-state phenomenon: Price declines are concentrated in California, the rest of the Southwest and Florida, which I'll now call the Bubble Belts. Take a look at these numbers from today's Case-Shiller report:

Declines in California-Southwest-Florida from April '07 to April '08:
Las Vegas -26.8%
Miami  -26.7%
Phoenix -25.0%
Los Angeles -23.1%
San Diego -22.4%
San Francisco -22.1%
Tampa -20.4%
Average decline for Cal.-Southwest-Florida: -23.8%

Declines in other large cities:
Atlanta  -7.5%
Boston -6.4%
Charlotte -0.1%
Chicago -9.3%
Cleveland -6.8%
Dallas -3.4%
Denver -4.7%
Detroit -18.0%
Minneapolis -15.5%
New York -8.4%
Portland -4.7%
Seattle -4.9%
Washington -14.8%
Average decline for rest of the nation: -8.0%

Conclusion: The price declines in the Bubble Belts are three times as severe as those in the rest of the nation.

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

Photo: Getty Images

Comments

[jaleh]

I just got this listing since I'm looking to buy something. This house was sold in 2005 for $533K and was listed in March of this year for $399K, now it's reduced to $299K....I wonder if I should buy it?

http://pro.themls.com/All_Searches_Preview_
Files/pow_one_client_detail_preview.cfm?se=1&header_
title=no_header&chosen=08-265971&property_type=2

[whocares]

first time post to this blog...

i'm an mls junkie in arizona...was in l.a. 2001/2002, migrating from the bay area 15+ years.

was an owner/occupier of 2 condo's in bay area over the 15 yrs....in my opinion the price of re in l.a. in 2002 was out of control even before the peak. (even by bay area standards)

moved to az late part of 2002. me thinks ca took money over to nevada (lost vegas), when that became to pricey they moved money over to az (phoenix)

miami of course dosen't fit into this paradigm but maybe east coasters were following the same script but it was concentrated on the east coast...ie miami

[m&m]

Los Angeles needs some kind of high paying job boom to turn things around. Does anybody know what might make up for the collapse of the most recent california bubble?

[Milla]

wow, you guys sure have a lot of time. i'm just catching up after a week out. who's erin burnett? and what's this about home prices still falling in cali? some things never change. it's the same story here over and again. isn't there some new angle to examine?

[Uncle Billy Sees A Glimmer]

Milla: She hosts "squawk on the street" Some call her "The sweetheart of cnbc." She did a stint at Goldman Sachs and wikipedia notes that she called President Bush a "Monkey" last year.

See video at bottom this post:

http://www.cnbc.com/id/25349121

[d.sternfeld@yahoo.com]

I laugh at the realtors who believe foreigners are beginning to bail out plunging prices. Asians, Indians, Europeans, South & Central Americans may be among those few who are buying real estate now, however given the still rising inventory supply levels and dropping number of seasonally adjusted sales per month (demand), they won't prevent more desperate borrowers from losing their homes or slow the deflation of still more of all of our equity over then next two years as more ARMs ratchet higher, and as global credit costs and rates increase.

You make money in real estate when you buy it, and you don't catch a falling knife. I haven't seen a deal that makes "sense" in the traditional meaning of the word in several years. I'll know it's time to buy when shills like the one above have been scared silent for a while. Meanwhile, think of all the money you'll save when you reap the benefits of the ongoing crash of RE prices in the Bubble Belt... money you'll save in say... 2012 to 2014. It took seven to ten years to get manic bullish pricing and it may take that long to wring out all the bad credit. Bye bye liabilities (loans) bye bye assets (collateral value of homes). Double entry accounting never sleeps.

[Laker]

jaleh, the 2005 price was a complete fraud, and the result foreclosure...
Look at 2002 sale price
May 03, 2002 $209,500
I stand by 2001 price for any LA property. If you want to live in inglewood, fair market price for this duplex-shack is $180,000.
If you really love this place, offer $210,000.

[tealeaf]

Milla:

And for future reference, the answer to this and other mysteries of the universe are conveniently located at

www.google.com

[E]

Sorry Ginny Mcgoonigle...foreigners aren't going to prop up the market for a number of reasons.

1. Most of those foreigners already bought here. Due to the devaluation of the $ vs their native currencies they have lost even more than the Americans that were caught up in the bubble but still use $ instead of Euros, Yen, Whatever.

2. They aren't stupid, they know prices will fall further as will our dollar.

3. Most of them have their own deflating bubbles as we speak.

So save your NAR talking points. I'm not seeing much movement in the market...except for down.

Option ARM resets here we come!

[dougmc]

In the list Peter posted, Detroit was down 18% and Washington was down 14.8%. I suspect other East Coast or Rust Belt big cities that have had economic problems for the last 2 decades would show similar large declines. Squeezed homeowners in those cities were susceptilbe to sub-prime and teaser payment loans and scams designed to do them out of their properties. Aside from having the wrong objectives, the plans of Dodd, Frank et al. are flawed because they don't distinguish between borrowers who were speculators (including owner/residents) and those who turned to these loans because they were financially stressed to begin with.

[BC]

Speaking of fraud (or just a very horrible financial move), this house in a nice area of Encino, south of the blvd., has just fallen out of contract and had the price reduced yet again.

http://www.redfin.com/CA/Encino/3615-
Hayvenhurst-Ave-91436/home/4928401

Sales History
Date Price Appreciation
Aug 30, 1990 $575,000
May 02, 1997 $920,000 7.3%/yr
Mar 19, 2003 $1,200,000 4.6%/yr
May 18, 2005 $1,650,000 15.8%/yr
Jun 23, 2006 $2,272,000 33.8%/yr
Feb 16, 2007 $2,990,000 52.4%/yr

Listing Price History
Date Price
May 21, 2008 $1,950,000
Jun 24, 2008 $1,899,000

$1.1MM - ouch. There is plenty of pain for everyone to share, not just the "slums". And for those that still trumpet the Westide Story, I know plenty who are privately going through their own hell trying to hold on to one or more houses in Beverly Hills, Palisades, etc... and they deserve it, unfortunately. It's called being accountable for your decisions, which unfortunately is a character trait that America has thrown out the window... pass the buck.

[Milla]

who needs google when you have Uncle Billy who can sum up a person concisely by saying that she called the president a "monkey"?

[Laker]

BC,
That is THE house of Jose Canseco that we discussed here couple months ago. By looking at the 2006 sale price, you know that the 2007 is a complete fraud. There is no way it appreciated from 06 to 07 in 6 months to the tunes of $700,000 or 32% (or annual 57%)
Fraud in day light. By the way, Where are the FBI great investigators ?

[BC]

Laker -

How random. I knew of Jose Canseco's housing "issues", but didn't realize it was this one. It was just a house I came across recently when doing a drive-by of a foreclosure that is two houses down from there. That can't be good for the neighborhood...

[Trent]

The reason AZ, NV, CA and FL bubbled up much more than the other states is because in these four states you had high demand for housing. The prevailing belief became real estate in these areas is a sure way to wealth. After all, there is a lot of demand, the thinking went.

When the frenzy intensified, more and more people resorted to adjustable, interest only or exotic mortgages in order to get into the market so they could grab a piece of the action and not get priced out of the market. Take a borrower with $1500 a month to spend on a mortgage, at 3% interest only, this payment enables a borrower to service a $700,000 mortgage and bid up home prices. Now, fast forward to 2008 and take away this purchasing power and limit the borrower to a 6% fully amortized loan. His $1500 per month will only service a
$250,000 mortgage. The difference between 700k and 250k is your bubble. There is a great tool at www.UsHousingMeltdown.org where you can type in your zip-code and find out the median income and median home price for different areas. You can clearly see the ratio of home price to income got way out of kilter in 2005. reaching 10 to 1 in many zip codes in bubble areas. When the income to home price ratio returns to a normal maximum of 4 to 1 you have a major correction in prices.

[AreYouKiddingMe]

Not everywhere, kids. North Florida prices are up year-to-year.