Case-Shiller: L.A./O.C. home prices down 39% from peak

     It's another record-breaking decline for the 20-city Case-Shiller index of home prices. Nationwide, prices were down 19% in January from a year ago. In the Los Angeles/Orange County area, prices dropped 26% from a year ago, reported in the Times today.

     Case-Shiller also splits markets into price tiers: high, low and middle. In the L.A. area, high-end prices were down 29% from their peak, but the low end is down 50%, while the mid-priced range is down 40%. 

     The low end was certainly hit harder by foreclosures and subprime lending. High-end areas tend to lag in real estate cycles, though, so there could be more room to fall in the top end.  

     The Case-Shiller index is favored by some over median sales prices to measure market changes. It compares sales of homes to their previous sales and factors in changes to the properties like remodeling.

     It uses an index number rather than prices. An index score of 100 is equivalent to January 2000 prices. The L.A./O.C. index for January 2009 is 166.54, down 39% from its 2006 peak.

— Peter Y. Hong

Comments

[Alex]

What price ranges correspond to low medium high in LA?

[Wes Boudville]

Let's see. Will this article now get someone [probably a realtor shill] who will write in and complain about the 'shortcomings' of Case-Shiller. Like how it has only 20 cities. If Case-Shiller added 2 more, say, then we'd get complaints about how it has only 22 cities.

Remember last year on this blog, when some respondents were doing that? Where have they all gone? Or has the continued decline in prices finally shut them up.

[Nelcisco]

That sounds like wonderful news for 1st time home buyers but what about the spike in unemployment? Where is the light?

[Todd in WeHo]

If the current L.A./O.C. index for January 2009 is 166.54 compared to a baseline of 100 based on January 2000 prices, I predict the indext will shave off another 66.54 points; and any sellers keeping their prices inordinantly high for the current market are simply going to ride the wave down to the bottom.

[kindergartengraduate]

Alex,

Here's my best shot.

Low: under 175k (i.e., meth-house in Victorhell)
Medium: 175-400k (i.e. crack-house in North Hills)
High: 400k-150mil (i.e. whore-house in 90210)

Hope this helps!

[Lauren Beale]

Alex,
For Los Angeles, the low tier is under $309,184, the midde is $309,184 to $470,182 and the high tier is more than $470,182.
Lauren Beale

[srla]

Foreseeing where the bottom will be really is not that hard. There's a reason the historic trend level stayed relatively even (withing a range of tolerance) for over a century - because in order for people to pay their mortgage and still have money left to buy other things, they can only pay around a fifth to a third of their gross salary for housing. Any more than this and they either a) stop spending and the economy tanks or b) start borrowing until they run out of credit.

Housing will bottom when it reverts back to that trend level or lower. This might well tank a number of banks, but in the long run, no other trajectory is sustainable. If people pay too much for housing AND they are unable to borrow excessively, then they simply will not spend enough on the real economy to allow it to grow and thrive.

The only question now is when the Administration will finally acknowledge that housing needs to reach a natural bottom. Will they do so before wasting trillions on bailing out dead banks? So far it's not looking good, though some relentless optimists seem to think the latest maneuver (the "Geithner Plan") is really intended as a step towards ultimate nationalization and the reprivatization/breakup of the "too large to fail" banking behemoths. We can only hope they are right.

[formerlahomeowner]

Lauren,

High tier is more than $470,182. What qualifies as high tier - the 33% upper percentile of houses for sale? In Valencia 91355/91354, the gets you a nice townhouse or a small house with no lot. So much for high tier.

[Lauren Beale]

I looked it up here: http://www2.standardandpoors.com/spf/pdf/index/cs_tieredprices_033114.xls
Lauren Beale

[Latesummer2009]

Since the bubble began in 1997, rolling back to 2000 is not that far of a stretch. Unfortunately, the LA Area is geographically big and it is hard to break out individual neighborhoods from that 39% drop figure. But it does give you an idea of how still overinflated we are compared to historical norms. My guess is the Westside is still WAY overpriced and is closer to an index of 200, according to Case/Shiller. This means the prices have to be cut in half to approach affordability, according to historical norms.

Still a ways to go on the Westside, before the market turns around.

http://www.westsideremeltdown.blogspot.com

http://www.santamonicameltdownthe90402.blogspot.com

[SoCalJim]

As for riding the wave down, I agree. An 1800 sq ft, 3br, 2ba house in a nice area by us was bought in 2005 for 775k was listed it in 2007 for 795k. Dripped down their price by 10-15k increments over the past year or so. Now, was re-listed at 625k. Not a short sale. It FINALLY sold after more than a year. Don't know the final purchase price yet since the listing says pending.

Century 21 - you probably cost this greedy and/or naive home "owner" tens of thousands or hundreds of thousands of dollars by your greed in listing the house way too high and not considering/accepting higher offers earlier. Instead, you and/or the owner were greedy, and the home "owner" deservedly lost. So much for your RE "expertise" and professionalism. In an actual profession, that may amount to malpractice. But, realtors are realtors - just ordinaly sales people with minimal education and little or no value added. Anyone who listens to these people (like these poor souls who lost 150k in about 3 yrs based on list price alone (and it probably sold for less...) is an idiot. Add in improvements like the new hardwoods, new kitchen appliances, remodeled bathrooms, paint, etc. increase that number to 190k. Add in RE commission, increase that number to 210k. Add in insurance and property tax that they paid over three years if they couldn't deduct it b/c of AMT (which they probably have since they are a younger couple who appear to have put down 200k, and based on the house location, and the cars they drive - but that could mean they are idiots too), increase that number to 240k. 240k LOSS in three years, not cosidering the 28-33% tax benefit for interest paid. So, they lost 240k for being able to deduct interest, which saved them much, much, much less than what they lost. Those are real numbers. So much for the "home ownership" benefit. Funny how we prosecute various types of fraud and misrepresentations, but realtors and the NAR get off free while ruining the lives of many, many people. Sometimes, however, ignorance of such people them them a lesson. Life is hard. It knocks you around. This is just one (very expensive) example.

Calculating 240k that they lost in terms of retirement, say 5% returns in conservative bond investments, over 30 years, amounts to 1.04 million.

So,.... that 240k loss today made a HUGE dent in their retirement. Yeah, the "pride and benefits" of home ownership are GREAT! Where do I sign up!??!?!?!

People don't realize this. They just look at monthly payments and hope they make the payments. Sorry, but the numbers are more meaningful than news types saying housing is up or down, or that your monthly payment will be "X" for 5 yrs and then adjust. Are people that stupid? I guess so... Infomercials, after all, are still on the air. Or maybe it is pure greed, probably both.

[Laker]

Todd in WeHo ,
Keep in mind that case shiller is NOT inflation adjusted....
LA price returning to 100 index in nominal dollars will mean depression in LA. If that happens, rents (as of today) will be double the mortgage...either rents will get halved or 100 index in LA nominally will not happen. I don't think rents will get 1/2. Simply because people are to lazy to move, to ignorant to call their landlord, unable to move, etc.
Rents will be 20-30% less, so from a cash flow prospective, i don't see how we can get to 100 index. I do so 140 index.

[tonylogan]

Laker - People are dumb, but not that dumb. People cannot get easy loans to pay rent like they could to buy a house, so if unemployment keeps up, rents will keep dropping more than you could imagine. (Remember how much faster house prices dropped than we thoght they would?)

I got my rent reduced by 20% a few weeks back just by checking craigslist and finding a comparable place and telling my landlord. The landlord had a choice of lower my rent or end up in foreclosure (on their new house) since they know they will not find anyone to pay above market rent.

I'm guessing you have held off buying a place... hopefully.

[SoCalJim]

On the rent reduction note, I just renewed my lease in a relatively large complex and upgraded. Rent was reduced 21%. IN ADDITION to the reduction, they gave us a free month. That amounts to a 27% reduction in rent. And the manager says there is more pressure on rent, and rents at all of their properties throughout LA and OC are dropping too.

[Nick]

Great comment srla, I said much the same just now on another thread. I also agree with tonylogan: rental prices are gonna fall, probably more than people anticipate (and even more likely more than the fools who caught knives recently for "investment" purposes have factored into their cash flow projections). As the efforts to "jumpstart the economy" though the devaluation of our currency and addition of doses of socialism are revealed to be the shams that they are, the actual economy is only going to get worse, meaning higher occupancy ratios per unit, meaning more units available, meaning lower market valuations. Unless the government really steps up efforts to rewrite the laws of economics and/or seize total socialist control of the market, we should eventually get actual affordable housing in LA (it's a dream).