L.A. home prices falling at 24.5% annual rate

Home prices in Los Angeles continued their historic decline in May, falling 24.5% from year-earlier levels, according to the widely watched Case-Shiller index of home values.

National headline: Standard & Poor's economist David Blitzer is talking this morning (CNBC) about an increasingly clear "regional divide" in home prices, with Sun Belt cities showing severe declines while other cities show signs of a turnaround.

Overall, prices in 20 large cities continued to decline at the highest levels ever measured by Case-Shiller.  From Bloomberg: "Home prices in 20 U.S. metropolitan areas fell at a faster pace in May, indicating the three-year housing slump has not stabilized, a private survey showed today." The rate of decline on those 20 large cities was 15.8% for the year ending in May.

More on the numbers: The biggest annual price declines remain concentrated in Sun Belt cities that experienced housing bubbles. These are the cities with the largest annual declines in prices:
Las Vegas  -28.4%
Miami       -28.3%
Phoenix    -26.5%
L.A.         -24.5%
San Diego -23.2%

Ray of hope: Seven cities experienced slight increases in prices from April to May, though Case-Shiller numbers are not seasonally adjusted, which makes monthly fluctuations somewhat suspect. These are the gainers: Atlanta; Boston; Charlotte, N.C.; Dallas; Denver; Minneapolis; and Portland, Ore.

Local angle: Case-Shiller data show home price declines in Los Angeles have accelerated dramatically in recent months. (Update: A number of readers complained about the previous sentence, arguing that price declines are not accelerating at all, but actually decelerating. Read their arguments here.)

Month         Annual decline in Los Angeles         
Sept. 07      7.0%
Oct. 07       8.8%
Nov. 07       11.9%
Dec. 07       13.7%
Jan. 08       16.5%
Feb. 08       19.4%
March 08     21.7%
April 08      23.1%
May 08       24.5%

Note: The Case-Shiller report is an index, and does not translate into a dollar value for home prices, which is why this report does not mention the average, or median price for a home in Los Angeles.

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

Comments

[Edward P. Pita]

If I go to N.Y. City to buy in condo in Manhattan are prices lower, no, if I go to Beverly Hills, River Oaks, etc., are prices lower - no - only in overbuilt areas - another doomsday scenario that our country is going down - same as the stock market - because a few failed the whole economy is down - nothing further from the truth! E. Pita

[Leo]

May numbers - old news. Yes, maybe just reported but this shows what people were doing almost 4 months ago! I'm on the street and seeing multiple offers in South Central, the Valley and Pasadena. My phone is ringing off the hook. This is what people are doing today.

[jimmy]

Go on down to the beach cities in the south bay, or beach cities central orange county or the westside. Prices are sky high. They are as high as ever. The only difference is it is difficult to get financing.

[Home prices need to get lower]

"Ray of hope" because prices still going up in some places? Whose side are you on anyway? My ray of hope is that home prices will continue to slide and housing will become affordable again. My hope is that this carousel of "keeping up with the Joneses" due to rising home prices will end.

[waitingforgodot]

I love how advocates of a "recovery" focus on the delayed nature of the information in Case-Schiller or DataQuick and decide to proclaim an end to world hunger and the housing slump based on a blip in data. Then they go on to proclaim that in the current economic climate, there will be a quick and sudden recovery. Give me a break. I'll see you all in March of next year to see what the real picture is.

[Keith]

For anyone who is interested in context, LA prices as measured by this index are back to about April or May, 2004 levels. The index data can be downloaded from the Standard and Poors Case Shiller site.

[RichW]

"May numbers - old news. Yes, maybe just reported but this shows what people were doing almost 4 months ago! "

How right you are ! Prices have dropped another 3% since then and will continue to drop for some time due to the skyrocketing number of NOD's plus the well known and documented amount of subprime and option-ARM foreclosures in the pipe.

Its good to see that sales remain very low (after all there will always be a certain number of naive knife-catchers). The low sales show that potential buyers are aware that the market will continue to fall. Thats one thing commissioned salespeople hate - an educated buyer in a down market.

[Jan]

You say "L.A. home prices drop 24.8% in May." Tthat is an incorrect and misleading statement, and I expect better from the LA Times.
"L. A. Home prices dropped 24.8% between May, 2007 and May, 2008, would be accurate. People writing for newspapers should strive for accuracy.

[bulwark]

Leo, if your phone is "ringing off the hook" it must be from panicked sellers who are underwater in their home loans. This market is collapsing--you'll even get the same message from DataQuick or the California Association of Realtors.

[Alejandro Salazar]

Prices may fall 25% but they are still too high. 80% of workers in LA and Orange county can not qualify for a loan for average priced house. I make less money than 10 years ago and house price is still triple from 10 years ago price. It is hopeless unless you want to live in Riverside or Lancaster. I would rather rent on the beach.

[Bild Wissenschaftler]

Homes are becoming more affordable. More people are now able to afford homes. The middle class is less priced-out of homeownership.

This is wonderful news - let's all celebrate!

Or so the media would say if it weren't so prone to groupthink...

[Pragmatist]

Whoa! The truth is bad enough but this is very misleading.
What this means is the prices dropped 1.4% last month - bad, but actually better than the 2.8 % in January or 2.7% in February. The 24.5% is the cumulation of 12 months with an average of 2% per month. But the headline could be read to announce a new precipitous drop, which is not true.
As I say bad, but not as bad as portrayed.

[MyLessThanPrimeBeef]

For those whose home prices have fallen, be they be in Hancock Park or Echo Park, to say that it's all imaginary, that all is still sunshine, well, you do them injusitice.

[Bill]

Leo wrote:

"May numbers - old news. Yes, maybe just reported but this shows what people were doing almost 4 months ago! I'm on the street and seeing multiple offers in South Central, the Valley and Pasadena. My phone is ringing off the hook. This is what people are doing today."

The last I heard from the Pasadena market was that the prices were plummeting on Sunday. Did you read the Pasadena Star News regarding how the market in this area is going down? I don't know where you get your information, but I am not buying it.

[nkirv]

The problem is income disparity: the rich are richer and the poor are poorer, and the middle class are squeezed. The rich buy multiple homes, speculate in real estate, and drive prices up, and developers build luxury units, whereas middle income people can't afford to buy a home. Our country has the highest GINI index among all industrialized countries (Japan, Europe, Canada, Australia). I.e. There's a wealthy class, and regular people cannot afford to live. There's a problem in our country if only the wealthy can afford to buy a home. Tax breaks for the wealthy are BAD for economy.

[Manny]

I make 90K an year with wife and kid, which means I am in top 30% of county residents. If I decide to spend one pay check a month completely for my home which includes mortgage, insurance, taxes, maintenance and PMI, then I can afford to spend about $2,400 a month towards home/condo. Now tell me how many homes (or even condos) can I find in down town los angeles 15mile radius. I dont want to live in shady neighborhoods, lancaster or some desert and spend half my day commuting. With a masters degree from great private college, I still dont understand this housing market. The markets are still NOT AFFORDABLE. I HOPE MORE CORRECTION IS ON THE WAY.

[Eduardo Garcia]

The fact, is that this information, is global. Certain areas, are doing better than others. In Santa Monica, sellers, are still insisting on $1000000 plus, for a two bedroom house. Condos are not doing as well. There are some folks still buying at those prices. I am not a sales agent, I just live in the area.

[Tim K.]

To those people proclaiming "prices are still high", remember this: Asking prices are NOT Selling prices.

If you want to see what homes are ACTUALLY selling for, go to redfin.com and do a search on homes recently sold in the last 3 months. Those are the *real* sales happening. Ziprealty has a recent sales tab by every property you can examine that shows what real sales are happening and on which properties.

If you examine the actual sales happening and compare them to the properties for sale, you'll see that 95% of the homes offered for sale are asking WAY too much.

Home prices are going down. But that won't stop a lot of sellers from wishing it won't by asking too much.

[downlo4me]

I agree with Leo. I too have had my phone ringing off the hook. Keep in mind, whether it be rent or a mortgage , people still need to put a roof over their head. If they can afford the payment on a home that is in the area they want with the bedrooms they need and are looking to hold it for long term, then its a no brainer ,because as sure as the sun rises so will these prices once again. Key is fixed payment

[JML]

I live in Pasadena and my wife and I don't go to open houses anymore on Sunday because the same houses have been on the market for months. I'd like to know who's ringing Leo's phone off the hook?

[John Ham]

One thing no one has commented on is how unequal the price drops are across different parts of the market. If you click on 'overview' and then 'July 29, 2008: S&P/Case-Shiller Indices tiered price indices' you will see that the bottom third of the market fell by 5% between April and May, while the middle third fell by 2% and the top third by .5% from April to May.

[cbk16]

Good news, better news if it keeps falling. Now people can afford a home again!! Long term great new for the economy, instead of spending money on mortgages, now people can spend money on items to furnish a home, this will create jobs in the long term. If only the government can keep out of this process so prices will eventually be at levels people can afford.

[yourkillingmelarry]

"As I say bad, but not as bad as portrayed."

No, I have to disagree with that statement, this is just plain awful. You can split hairs all day long, this is one of the most violent housing downturns in this country's history.

I thought Jimmy posted one of the funniest things I have seen on this thread about the higher end coastal areas

"Prices are sky high. They are as high as ever. The only difference is it is difficult to get financing."

EXACTLY. This is the reason you see sales volumes critically low in areas where home prices are sticky. The high end is beginning to crack. The median June sale price for a Redondo Beach home (new or existing, SFR or condo) was $672,500, down -15.4% YOY. Some of that decline is based on the composite but trust me these home prices are still way too high and they are falling.

The original housing bubble argument still stands, home prices were inflated due to unprecedented lax lending standards......not wealth. Now that we are experiencing the inevitable credit crunch, the mortgage market will return to its traditional roots. Those exotic loans in mass are gone for at least a generation. Home prices will now begin to reflect traditional home price metrics of home price to income and home price to rent ratios. That is the correction we are seeing happen right now and it will continue into at least 2010 possibly into 2011.

[tony]

I'm glad prices are going down. I hope they go back to almost 2002 prices and for all these people that are saying that this is old news, they are just trying to get people to start buying again. If you want to lose money buy now. YOU'LL BE SORRY!!

[sean]

Pragmatist is exactly right. It is incorrect to say that prices fell by 24.5% in May. Most readers I think are smart enough to see through this attention grabbing headline. But it is even more misleading and incorrect to say that the price declines are accelerating. They are actually decelerating as pragmatist discussed.