Listing prices are now $155K below peak levels; inventory is flat

Two headlines duel in this week's analysis of MLS listings from Housing Tracker:  Median listing prices dropped another $1,000 over the week and are now $155,000 below their bubble peak, while inventory dipped again and is now even with year-ago levels.

At $424,000, median listing prices are down 20.7% from year-ago levels -- the steepest decline yet measured in this slump -- and are 26.9% below their peak level of $579,666. The inventory of homes and condos for sale dropped by just over 1,000 units and is now just 0.8% ahead of year-ago levels.

I'm curious to hear your thoughts and theories on this: What's going on with inventory?

Date              Median listing price                    Inventory

4/06               $579,666                                      27,251
4/07               $545,000                                      35,489
5/07               $545,000                                      38,297
6/07               $540,000                                      40,766 (up 20.4% y/y)
7/07               $535,000                                      42,685 (up 14.5% y/y)
8/07               $529,000                                      44,483 (up 13.6% y/y)
9/07               $520,000                                      46,414 (up 16.9% y/y)
10/07             $510,000                                      46,603 (up 15.6% y/y)
11/07             $499,900                                      46,503 (up 19.0% y/y)
12/07             $495,000 (down 10.0% y/y)           43,174 (up 28.2% y/y)
1/08               $479,900 (down 12.6%)                40,850 (up 33.3% y/y)
2/08               $475,000 (down 13.5%)                43,625 (up 38.3%)
3/08               $464,900 (down 15.5%)                42,098 (up 31.4%)
4/08               $450,000 (down 17.4%)                42,430 (up 16.7%)
5/08               $449,900 (down 17.4%)                42,532 (up 11.1%)
6/08               $440,000 (down 18.5%)                42,398 (up 4.0%) 
7/7/08           $425,000 (down 20.6%)                44,726 (up 5.2%)
7/14/08         $425,000 (down 20.6%)                44,636 (up 4.6%)
7/21/08         $424,000 (down 20.7%)                43,584 (up 0.8%)

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

Comments

[monkeyboy]

Inventory is declining because people are buying. A two-earner family making $50-60k each can now afford the median price home. There's been people sitting on the sidelines accumulating the downpayment and now they've pulled the trigger. I know, because it's exactly what I've done.

[Giacomo]

Why are the inventory numbers flat? If I were to guess from the background chatter in my neighborhood, many of the potential sellers have decided to wait for a "better" market.

Clearly there is still a lot of denial out there. House-holders have had these outrageous valuations in their heads so long, they can't let go of them. And rather than do their homework on the economics of the bubble, they will continue to hold on to hope -- the false belief, really - that the value of their house might climb back to new heights.

ONCE I tried pointing out to one of my neighbors that even though we are quite a bit off the peak, today's market price is still probably the best that one will be able to get for years -- or even for the rest of our lives, if inflation is factored in. And therefore it's still a relatively good time to sell and get out with some profit (provided one is not upside-down, of course).

In future I will remember to keep my mouth shut.

[It All Happens on the Margin]

Consider what was happening at this time last year.

The pace of inventory is slowing vs. last year because it was rapidly accelerating at this time a year ago. In simple terms, we've caught up to the levels that were set around August 2007.

[Fred]

Yeah, anecdotally I know of a LOT of sellers who have taken their homes off the market. Can't explain why, but my guess is that they're trying to "wait it out." I don't know how they are deluding themselves that we are going to see these prices again within a decade.

[IToldu2CashOut]

Places are being taken off the market. Condo's in particular have been going rental in droves, and then sitting empty as rental property because the rent prices are equally ridiculous. Home owners are choosing to stay and watch their home depreciate further to perpetuate their fantasy that prices will be coming back.

Check out this article in the nytimes (1984) about a previous housing bust in Los Angeles. This is one of the most hilarious things I've ever read. Its like Realtors are reading from a script:

http://query.nytimes.com/gst/
fullpage.html?res=9E05E3D71538F93BA35751C1A9
62948260

[Laker]

Looking at the number of housing tracker, pay attention to the drop of the 25% and the 75%...
During the last 12 months, the 25% was leading in drops and the 75% was behind having very small drops relative to the 25%.
The past week has changed.....
25% dropped $900, while the 75% dropped $5,000. Since there a lot more houses in the 25%, the median "just" dropped $1,000.

Other than housing tracker numbers, I've been following on couple for REO properties that go foreclosed 4-5 months ago. None of them is listed on MLS or anywhere else. And also, on 4 out of 6 houses, the previous tenants still live in the place. I actually called the bank of one of those houses, and the person in charge told me that the bank is in the process of eviction, but he "does not" see the tenants(squatters) move out in the next 6-9 months...
This is only for the 4-5 houses i'm tracking...how about all the rest...It seems there are tons of houses in REO status that eventually will be put on the market, but at the moment are not "part" of the inventory...
So trust me guys, inventory is a lot more than 43,584...a lot more....

[Laker]

Check out 24423 Clipstone St Woodland Hills, CA 91367
It was sold May 08, 2002 $570,000
Now, it was sold on July 01, 2008 for............................................. $475,000.

This is worth nothing, i do not know the condition of the house, but this sale price pencils out as 2001 price...
This is hard to believe, so check it out. If true, this is Amazing.
And it is coming faster than i ever thought.

[andrew]

In my opinion inventory is flat because lot of people are taking off homes when new ones are placed in market. Meaning it works well in conjunction with listing agent. They take off home for few months only to place them few months later as new listing. Sound too good look at some of home listed now and go back.
My best guess real estate agents are trying hard to save on their commission dollars. This has kept pressure of market for now.
I bet we have all seen it if we been looking for some decent price and still looking.
Now there may be laws for listing but who can enforce them. It is like saying kick me in my hungry tummy.

lol

[Tom Lindmark]

Inventory is down for two reasons:

1. Sellers can't compete with foreclosures so they pull the property off the market. In Phoenix we estimate that this shadow market may have as much inventory as that currently listed on MLS.

2. The servicers are up to their eyeballs in foreclosures and probably falling behind again. There isn't enough manpower at the firms to keep up. It happened earlier this year and I suspect it's just a rerun.

[Giacomo]

I'm also remembering several months ago that the state association of Realtors was attempting to restrain inventory by trying to keep listings off the market that didn't "have to sell." I'm wondering if the trend has been for Realtors to privately discourage "optional" sellers.

Naturally this would not be in the best interests of individual sellers -- who might be missing their last chance to sell at a (relatively) high price. Whether or not the RE industry is helped by managing inventory levels -- that seems questionable.

Perhaps the Realtors are trying to engineer a "soft" landing, with slow sales (SOME commisions) but avoiding a panic-driven freeze-up. They need an environment in which their upbeat sales pitches won't seem completely ridiculous, where a "recovery" might be just around the corner.

[Nelcisco]

Meanwhile Aaron Spelling's widow is buying a 16,000 sq ft penthouse in Century City for 47 million bucks, did you all read that??? $2,848 per sq ft. How obnoxious.

The Lakers are not the only reason why parts of America hates L.A.

[Michael G.]

Housing will have bear market rallies, too (but that ain't much of a rally... 0.8%?).

[xtine]

I have noticed many houses in my price range (250-350) with the same sales history. They have been bought a month or 2 ago and they were relisted soon after for slightly less than the last sales price.

For instance....

1916 W COURT St LOS ANGELES, CA 90026 (a dump I know but just as an example...)

SALES HISTORY (truncated)
Dec 11, 2006 $435,000
Apr 11, 2008 $344,179

LISTING HISTORY (full)
May 07, 2008 $334,900
Jun 10, 2008 $299,000
Jul 14, 2008 $259,900

What happened between 4/11/08 and 5/7/08? And rest assured, almost every time I look at a house the same story is told. Someone overpaid a couple of years ago, and the house was sold at a high price a couple of months ago, and relisted for less very soom after.

What gives?

Is this some type of fraud I'm not catching?

[Are You Kidding Me?]

Nelciisco: So what? She can afford it. Live your own life.

[DF]

Agreed with all the above about stubborn sellers taking homes off the market rather than selling. I've run into countless RE agents and owners at open houses and in other settings who--faced with the possibility of selling at a much lower than hoped for price--simply say "we'll just rent instead". And that may not be a bad idea, assuming you can rent for enough to cover the mortgage.

As for the inventory point, the fact that it's flat right now (with declining median) and that it's in the peak of what is typically the best season for sales shows just how bad things are. This is as good as things are going to get for the housing market this year; just wait until winter, when it's going to really slow to a crawl.

[Ace]

Here are some interesting points that SRAR says about SFV:

The residential real estate market in the San Fernando Valley faired better than other regions of the state during May as buyers negotiated enough bargains to post the fifth consecutive month of sales increases, the Southland Regional Association of Realtors® reported.

Increased sales activity in the lower price ranges continued to bring the median price of homes sold down while also reducing the inventory of properties listed for sale.

"As a result," Funk said, "the San Fernando Valley does not have nearly as many properties that are on the market as a result of a foreclosure or short sale. That’s why we’re not flooded with a huge inventory."

Indeed, the 7,078 properties listed for sale throughout the San Fernando Valley was a surprisingly low number. It was up 5.7 percent from a year ago, but down 2.2 percent from the April tally.

At the current pace of sales, the inventory represents a mere 8.5-month supply. That is still a buyers’ market, but the inventory is down from the double-digit supply of recent months and close to the 5- to 6-month supply deemed to represent a balanced market.

For comparison, the number of properties listed for sale during the 1990s hit a record high of a 23-month supply. Even at the worst point in the current cycle, the highest the inventory rose was to a 15.1-month supply.

[Laker]

Slightly of subject, from American Banker:
"Fifth Third said in June its net charge-offs would triple from last year's second quarter, and KeyCorp expected its charge-offs to be almost 10 times higher, as 40% of the loans in its $650 million commercial real-estate portfolio were expected to fail."

Pay attention to details: charge-offs are 10 times higher...
40% of loans are expected to fail....

[Ragnar]

Hey IToldu2CashOut -

Could you list the keywords used for your search? I copied and pasted the entire NYTimes URL that you provided yet the webpage came up blank.

I'm very interested in reading the article.

Thanks!

[Fred]

Housing will have bear market rallies? What a - sorry - dumb thing to say. Stock traders have cash on hand to buy individiual stocks in great quantities, and therefore the stock market is capable of such rallies because of the whims of traders. Home buyers do not have cash-on-hand to buy at these prices. They just can't do it. So there won't be any rally. There's no historical evidence for such an event and it doesn't make any economic sense either.

[Mike P.]

Sellers who pull their property off the market now are sabotaging themselves. What are they waiting for? For more foreclosures to come on the market, dropping comps even lower in their neighborhood? Price it aggressively now or watch even more of the 'value' evaporate.

I agree with other posters who think the slowing inventory is from the lenders unable (or unwilling?) to put all the foreclosures on the market.

[regehr]

I expect prices will continue to fall at least for the next year; we're in a steep decline now (declining about $30k per quarter), but this will become less and less severe with each passing quarter, eventually flattening out, then probably another year of stagnation once near the bottom. So we're at least 2 yrs away from getting back to stable real estate market.

The question is: how low will prices go? Let's look at it from 2 sides: 1) based on what the fundamentals say people can afford and 2) stable appreciation from the last time the market was in balance (say, in 2000).

1) Affordability: Let's assume L.A. median HH income is $62k by 2010. So by 2010, the avg HH can "afford" a house that is about $325k (PITI = 35% of income; 5% down, 6%/30-yr fixed).

2) The housing market was last stable in 2000, when median price was $200,000. A stable ~ 5%/yr appreciation compounded over 10 yrs also gives us about $325k median price.

So the median still needs to drop another $100k, or between 20-25%. Looking at the trendline, that looks like another 2 yrs before we're back to a stable real estate market.

[jag]

I know for a fact that many foreclosed/REO properties are not listed anywhere in the MLS. Does anyone know why banks don't list their homes in the MLS? I also do know that many homes that have been sitting in the market for a long time are removed from the MLS and placed back in a month or two and are shown as a new listing.

[visfxguy]

Let's not be naive guys... The banks are up to something and doing everything they can to not let their shareholders know that they have a boatload of inactive loans on their books. I've commented about this before and I'm even more convinced about it now... There is a massive amount of "shadow inventory" out there and I would not be surprised that the banks are frantically trying to work something out with the federal government to bail them out and take some of their losses.

Think about it. When things were just starting to go downhill, there was no "lack of manpower" to kick out the people who defaulted on their loans from their homes. When I would go look at open houses, a good 80% of them would be empty -- and, yes, that was in the San Fernando Valley. So, if it were true that these guys were so slammed that they couldn't keep up with the amount of REO's, then we would at least see SOME houses coming onto the MLS. But they're not! Trust me -- I'm looking every day and there is nothing coming onto the MLS. I've said it before here... It's like somebody turned off a spigot!

Just look at the numbers. They don't add up! I agree with Laker above.. There's a lot more houses out there. A lot more.

[IToldu2CashOut]

Ragner, search google for:

THE DAY LOS ANGELES'S BUBBLE BURST

[Ragnar]

Thanks! 'Twas a short, sweet, interesting read.

Ragner, search google for:

THE DAY LOS ANGELES'S BUBBLE BURST

Posted by: IToldu2CashOut | July 22, 2008 at 03:17 PM

[Laker]

xtine,
I'll help you to understand this property specifically, I'm sure the others are the same. From public records:
1916 W COURT St LOS ANGELES, CA 90026

SALES HISTORY (truncated)
Sold to Rafael Cisneros Dec 11, 2006 $435,000
Foreclosed by Citibank on Apr 11, 2008 for $344,179

CITIBANK thinks the property is "worth" $344,000 so it is listing it in the hope of selling...
LISTING HISTORY (full) BY CITIBANK trying to sell the REO
May 07, 2008 $334,900
CITIBANK Reduced price on Jun 10, 2008 $299,000
CITIBANK Reduced price on Jul 14, 2008 $259,900

Hope it clears the picture.

[Laker]

Christopher Thornberg has said today that the housing correction is only half way through. He said 40% decline from peak, would signal stabilization, until then, no way for bottom. Since we have just seen about 20% decline in the last 12 ,months, if everything is kept same, and not worse, another 12 months we will have the 40% decline.
Well if you take X as the peak price, and after 12 months, you have 0.8X, then another 12 months will get you 0.8x0.8X or 0.64X. While 40% down is 0.6X.
In any case, 40% is really a safe number to bet, the bottom will at least be at 40% down from peak or maybe even lower if we see over correction.
A very important note to keep in mind is the ability to detect a ligit peak price. If you buy today a foreclosed house that has reached some peak price in 2006, check if this number is not a mere fraud / some mortgage fraud or alike. Those figures tend to be discount 50% in some case...Be careful.

[xtine]

Laker -

OOOOhhhh. So the "sale" listed on 4/11 was actually a foreclosure (IOW, the property changed hands, back to the bank).

Got it. Extremely helpful. Thank you.

X

[yanni raz]

The Real Estate Market Starts Climing Again

During the past couple of years we've all seen a tremendous change in real estate in the country.
This change actually has spread all over, businesses loosing money while gas prices are extremely high.

The real estate market has become a big issue for all of us out there, we've seen many homeowners loosing their homes and struggling to find a home to rent because of their credit.

What happen to us?
Remember the bubble 4 years ago?

That's exactly the answer, from years of prosperity and times of spending, traveling and investing in stocks and real estate, we are now experiencing another bubble but this time the bubble is going in a different direction and we are wondering what to do.

So real estate was going down and it's still going down, some economists say that it will get stable in 2 years from now.

The sellers market became a buyers market, and today we all know it by now.
Investors and renters that saved their money for better days to buy to make money are in the market today, that's making the real estate market busy.

Real estate agents that learn how to change with the market also learned how to make money from the changes, these real estate professionals are making lots of money and while we are all struggling for business they're making the business.

Today you can get a home directly from the banks for almost half the price.
I've seen homeowners that are so desperate that they're willing to give their homes for free, just come and take their loan and continue their payments.

On the other hand, investors are looking to buy homes in bulk, they can get homes $.50 on the dollar.

Some banks like bank of america and countrywide are selling hundreds of homes in bulk to investors at a discount prices.

So real estate agents are busy getting hundreds of listings and reo's from banks, then they're selling these homes at a low price to future homeowners and investors.

It's definitely a buyer's market like we had in the early 90's, so if you're an investor or a homeowner.
This is your time!

[Westside Home Buyer]

There are probably many reason why the inventory is slowing, frankly what does it matter? A quick look at the statistics will tell you that's not because they're being sold.