Tell me why: Listing prices flat for 4th straight week

Listing prices in Los Angeles County remained nearly flat for the fourth week in a row, and inventory of for-sale homes and condos held steady, according to Housing Tracker's weekly analysis of MLS listings.

Median listing prices were unchanged at $399,000 over the week ending Monday, representing a decline of 23.1% from year-earlier levels. Inventory, at 40,539, was flat from the week earlier, and down 12.4% from year-ago levels.

So my question to you: What explains a month of flat prices? A sign the market is bottoming? A potentially misleading and meaningless lull in the downturn? A change in the mix of what's for sale, with more expensive homes coming onto the market and stopping the decline in median prices? You tell me.

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%)
7/08               $425,000 (down 20.6%)                44,636 (up 4.6%)
8/08              $410,000 (down 22.3%)                 42,279 (down 5.1%) 
9/2/08          $400,000 (down 23.8%)                 42,081 (down 8.6%)
9/8/08           $399,999 (down  23.1%)                41,803 (down 9.9%)
9/15/08         $399,900 (down 23.1%)                 42,553 (down 7.9%)
9/22/08         $399,000 (down 23.1%)                 40,565 (down 12.3%)
9/29/08         $399,000 (down23.1%)                  40,539 (down 12.4%)

-- Peter Viles

Your thoughts? Comments? E-mail story tips to Peter Viles.

Comments

[Rational Renter]

It is odd, although I think it's a synecdoche, in that these numbers represent what's going on in the overall market. I think that this stalemate in median listing prices is akin to the "wait and see" approach that many buyers (and especially sellers) are taking. Unfortunately, this mess isn't going to finish working itself out for YEARS. Eventually the stalemate will end and it will be very ugly for home prices. Everybody has to sell sometime.

But no, by any measure we are no where near a bottom for housing in this city.

[It All Happens on the Margin]

Sellers refuse to accept reality. Capitulation is a psychological event, and it takes a few drops in the dow, friends being unemployed, and months of no/low offers to finally shift direction.

this is the calm before the option ARM storm brewing in the next quarter, which bulls are hoping beyond hope will be alleviated by workouts.

[fezco]

Pete, I think the whole system is constipated. Sellers remain in denial and simply 'test the waters' with their original listings. Lenders aren't going to give away the bank with their dumb 0% loans anymore. I say we need some realistic prices and some ex-lax to get homes moving again. Say another 40% off should do.

[normanpheeny]

Hi Pete, you posed this very same question on April 28, 2008, when there was a simular short-term trend. As we later found out through the Case-Schiller, when the rubber hit the road and the actual sales happens, the price is down. Listing price is only the owner's/re agent's preception so far. The only thing I would take from your data is inventory. It is slowly falling.

BTW, where has shockg gone? Am I somehow missing his comments? Or, did he finally give up?

[Tim K.]

From what I can see in the local Pasadena listings, it's more a symptom of the number of listings that are languishing on the market. There seems to be a "pile up" of the same homes, asking the same prices, getting listed over again. So it's the same delusional sellers still hoping.

A few low priced homes appear on the MLS, they sell immediately, then they are gone. So I think overall what we're seeing is a huge pile of non-selling homes, and those folks haven't changed their tactics.

[mr.bilko]

I'm aware of several people house hunting in the San Fernando Valley who got outbid on a couple of different homes that they tried bidding on.

I suspect the house-flippers are coming back into the market because they are guessing that the SFV is bottoming out.

Blame the house-flippers. They are pulling their money out of the stock market and sinking it into housing, again.

[David]

Basically, the low-income homes had been flooding the market. Now, a greater quantity of upper tier homes are entering the market. That's my guess. But who knows.

Also, median listing price doesn't necessary reflect the median sale price. I would say that more expensive homes have been marked down, thus re-listing them. Meanwhile, less expensive homes have simply been selling at the bargain basement prices. But again, who knows.

[David]

And, in regards to bottoming out, my analysis finds that the houses are still 35-50% overvalued.

[ab]

agree with normanpheeny. This is what the listing looked like in April
4/7/08 $455,000
4/14/08 $450,000
4/21/08 $450,000
4/28/08 $450,000

[John]

It's a psychological sticking point, just like we saw in April/May at $450k/$449.9k.

It's one thing to admit that your house is worth less than half a million, and even $450k, but selling in the THREES?

Good god man, that's like what POOR people pay for houses, or how much houses cost in those flyover states we see on TV. Having to admit our homes were worth that much might mean a full-on personal reevaluation, and the 5 minutes of meditation in yoga class is too much insight already!

Seriously, this market's a long way from done. We've still got the Alt-A / Option ARM corrections of 2010-2011 to come, which will follow the post-bailout recession of 2009, so unless you find a home that you can afford that you just HAVE to have, go ahead and rent and put your money in savings (with one of the safe banks).

[Ana Ras]

People can't lower their wishing prices because they are trapped by their loans.
In the 90024 Westwood area, there's a 2,000 sq foot home selling for $1.625 that was purchased in May of 2007 for $1.4. Another larger one going for $1.675 (lowered from $1.825) that was purchased in 2005 for $1.482.
In the 90025 there is one selling for $1.250 that was bought in 2005 for $1.245. I could go on citing examples, but I'm sure there are similar ones in every single zip code in LA.
Sellers can't capitulate because the implications are dire. Eventually, what is going to happen is their neighbors who did not buy at bubble prizes will end up leading the charge downwards because they have less to lose. If you bought your house in 1995, you still come out ahead if you sell at 2000 prizes. There is nothing anyone can do about that. Current desperate sellers are not going to capitulate. Others are going to capitulate for them.

[aldo818]

It's one of two things: Market Psychology and or all the short-sales are taking time to process through.

That's my guess. I just see this as a bottom yet.

-Aldo

[CompaJD]

I have a friend shopping in West Covina who was supposedly outbid by 10,000$ when he made an offer for the asking price. The very same day he told his agent to walk away he got a call from the sellers RE agent saying they would take his offer. He walked. This my friends is an example of the greed still plaguing the housing industry.

[Nelcisco]

I think its a little bit of all the above, but more leaning toward a change in the mix of whats for sale.

[Pangea]

In my neighborhood in SFV homes are now in the low threes and people are buying them. One home was listed at ~250 and it was in escrow right away.

[ToadB]

Banks sitting on foreclosures waiting for the bailout?

[Dougmc]

It's been said many times in this blog that median numbers don't reflect particular markets. Early in this housing decline, the lower priced areas led the market down, allowing people in the upper income areas to think they wouldn't be much affected. Prices in lower income areas may be starting to stabilize while prices, at least for condos, in higher income areas are starting to crack. Marina del Rey is a great condo market to study price trends because there are literally hundreds of units with the identical floor plan, making price comparisons very easy. As a broker specializing in that area once said to me, there is no place an over-priced listing can hide.

The decline in listings prices for one particular Marina del Rey floor plan is instructive. At the peak in 2006, these units sold in the high 800,000s. Prices and listings stayed at that level through late 2006 and all 2007, although fewer sales occurred. At the end of 2007 and the start of 2008, prices drifted down to the mid to low 800,000s. This spring, a few listings crept into the high 700,000s. By July, almost all the listings were between 750,00 and 800,000, and a few below that. In September, the range fell to 725,00 to 770,00 with only a few holdouts above. This week saw some big price reductions into the 600,000s. Two listings lowered to 680,000, one from 725,00 and the other from 755,000. The third listing went even lower, from 750,000 to 650,000. That last price, 650,000, represents a drop of 200,000, or 23%, in listing prices in less than a year.

It helps that there are a number of owners of these units who bought a decade or more ago and evidently did not suck out all the equity in their property. They have the ability to lower their prices, if they want to. In this respect, I agree completely with Ana Ras at 12:42.

Some have criticized brokers for stubbornly high listing prices. The veteran brokers, who are increasingly the ones still around, know what the market is doing but they are walking a fine line. They must humor sellers to a degree to get the listing, but they also have to eat, so they need a sale to occur. In this market, they have to work a lot harder and may even start to earn their commissions. As a buyer, how would you like to deal directly with a delusional seller?

[tarbubble]

The retired couple down the street from me, who are selling their 38-year-old house for half a million, have already built a retirement home at Lake Havasu. I'm betting they are counting on some of the money from their old house to cover the cost of the new house. Depending on how leveraged they are, they could be in trouble. I view this as but a microcosm of the situations out there. It's a big contest to see who can hold their breath the longest. As a renter, i have to keep reminding myself that I can breathe just fine.

[xtine]

It's same old, same old in the areas I'm looking at. (90026-9) Even when I remove the price restriction from my search - there's not much that's new even at the upper levels. I think sellers are holding their breath.

But ya gotta breathe some time.

Also, I know 2 couples that bought during the bubble and have to move out of LA. Their intention is to rent the house and eat the monthly loss. I wish them the best, but I sure am seeing A LOT of "For Rent" signs on houses in my hood(s).

[Valley Renter]

If I remember correctly, there was some type of foreclosure time-out to give lenders an opportunity to negotiate with troubled lenders... No new foreclosure supply coming in this month might explain the steady prices.

[Nick]

Hard to say anything without the sales trends and listings mix. I'd guess it's likely due to banks holding properties off the market in hopes of a bailout, but that's just speculation. The overpriced houses would also be sticky on the listing market, which would cause the average listing price to trend higher than sales prices the longer the market is slow. Those are my guesses.

[Joan]

In our neighborhood two homes sold within a week recently while a number of other homes languish. Most of those are short sales or foreclosures and from what I understand from people who bought recently, the banks just aren't getting to offers on those homes quickly so people look elsewhere. Could explain, at least partically, the stagnation.

[Jonah]

We've seen prices still for a few weeks before...the market will resume falling even if we see a minor uptick in prices.

[El Guapo]

There was a change in California law which has had the effect of reducing foreclosures dramatically the last few weeks. Basically, it's a paper work issue. From Mr. Mortgage: http://mrmortgage.ml-implode.com/2008/09/19/
ca-foreclosure-notices-fall-90-problem-solved-no-way/

Also, I suspect the mix of homes on the market is changing.

[Guy]

What about the sharp drop in mortgage rates after the whole Fannie/Freddie takeover? It's all about monthly payments. People might be holding onto their listing prices with the hopes that people can afford more because of the lower rates..