Wikinvest Wire

SoCal home prices drop to $250K

Friday, February 20, 2009

Yesterday, Dataquick reported that the January median home price across all of Southern California dropped to an even $250,000.

That's pretty amazing, especially when you consider that the median home price was about a half million dollars just a few years ago.

As shown to the right, home prices in all six counties are now down more than forty percent from their peak paced by an incredible decline of 57.4 percent in San Berdoo.

As shown below, the median sales price for all counties except for Los Angeles County now go back to before 2002 or earlier.
Since Marshall "almost all if not all of those gains are here to stay" Prentice is now retired, new DataQuick President John Walsh provides the commentary:

We've heard a lot of talk, regarding the decline in home values, about how 'no one wants to catch a falling knife.' But for months we've seen quite a flurry of sales activity in many inland areas where prices have fallen more in line with local incomes. We can only assume that many first-time buyers, investors and others buying in these areas have concluded it's not worth trying to time the price bottom perfectly.

They're happy to lock in substantial discounts relative to the peak. Whether the inland sales pace holds will hinge on factors such as the health of the job market, the availability and cost of financing, and the new efforts to stem foreclosures and halt price depreciation - efforts that could eventually tame inland bargain hunting.
Well put.

Year-over-year home price declines have got to be hitting a bottom pretty soon...
IMAGE It was a big deal around here back in 2006 when San Diego County was the first area to post an annual decline in sales price. Little did we know that a modest single digit decline would be 30-40-50 percent annual declines a couple years later.


Nostradamus, apparently said...

"for months we've seen quite a flurry of sales activity in many inland areas"

Could that be due to foreclosure sales rather than bargain hunters?

"Year-over-year home price declines have got to be hitting a bottom pretty soon"

Credit Suisse recently produced a graph showing a big peak in interest rate resets for Alt-A and Option Arm loans will happen in May, 2009 and an even bigger peak in May, 2010. They predict a huge wave of foreclosures as a result and those foreclosures, they predict, will result in a further reduction in average home prices in America.

The default rate on Alt-A and option Arms is predicted to be at least as bad as subprime.

Hard to say when the bottom will happen.

Dan said...

I still don't see decent declines in my neighborhood. I'm starting to see some rents coming down, but not by enough to make a difference. I have been seeing tons, and I mean tons of for sale and for rent signs for months though with seemingly no interest... perhaps they are asking too much?

Wearing the hat of Carnac...

Anonymous said...

I don't see the sharp declines either. 250k houses where? The inland empire? That's nice, I'm in the San Gabriel Valley of Los Angeles and housing is still very expensive here and has not come down nearly those percentages. And yes there are indeed a ton of HOUSES with "for rent" signs. It looks like noone is actually selling.

Aaron said...

Obviously prices are declining but median price is not a very meaningful statistic given the fact that the only sales that are taking place are in the cheapest and usually least desirable areas.

Anonymous said...

Little did we know?


I graduated from college in 2005 and entered the work force at a median wage entry level science/engineering job and took one look at the numbers and knew we were headed for smoething on the scale of the great depression.

House prices were 8-12 times local annual wages. The median house price would carry a minimum income requirement of three time the median wage to fit into traditional lending standards. According to wage statistics, only 1-1.5% of could afford homes at or above that median wage. Even "entry level" housing was drawing sale prices often untouchable without some exotic form of financing. I was told by lending agents that you qualify on interest only loans then just refinance before the monthly payment resets. Keep in mind that this was during a period of extremely stagnant wages (even after 3 1/2 years in the workforce, and advancement to a managerial position 2-3 levels above where I started, I am still very close to what was reported as the median wage for my occupation when I graduated). I had no reason to assume that I would be able to afford any more in 2, 5, or 7 years. It didn't make sense. But I knew that some people were less astute with numbers and were walking into a dangerous situation. It was a mania. And it was blatantly obvious that it was a mania. It was the same thing we saw with the dot-com bubble and the stock market over the past decade. Flipping was the new beanie baby. And as all fads go, it could not last forever.

We knew.

We lived in denial by rejecting sensible warnings and branding those bearing them as doomsayers and fools.

But we knew.

AJ said...

Got to agree with the second Anonymous. I graduated in 05, got myself a nice job with a decent pay, and some of my friends were all about this whole housing boom thing. Either "you have a good job, why don't you buy a house?" or "invest! it will keep going up and up!"

I would just stare blankly at them... o_o A house is a huge burden, requiring maintenance (mow the grass, shovel the snow, fix leaks). Additionally, I do not envy the lifestyle of the rich and famous, so I could care less about the current "get-rich-quick" scheme that's sweeping the country.

Timeless words - "there is no such thing as a free lunch"

Anonymous said...

Pre-privatization is the new code word for nationalization -

Anthony J. Alfidi said...

I remember the enthusiasm of suckers I met in the spring of 2006, even after housing prices had clearly begun to decline. "Real estate never goes down!" They told me that with complete conviction, eyes wild with greed. I just walked away. Later that year I pocketed a nice gain with a bearish options bet (via a structured note) on the homebuilder's index.

Now's the time to start bargain-hunting for ready-to-rent properties.

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