Wikinvest Wire

Southern California home prices rise?

Thursday, June 18, 2009

The danger of "misleading medians" was demonstrated in the latest Dataquick report on May real estate sales for Southern California.

While DataQuick and most media outlets seem to have addressed this issue promptly in their reporting - how an increase in sales at the high end can push the median price up while home prices continue to fall - it's easy to imagine what surviving real estate sales agents might tell fence-sitting buyers in an effort to compel them to action.

"Oh no, home prices are rising again", said the realtor as they approached the first of their six stops during an afternoon of house hunting. "They just reported it this morning in the newspaper".

The Los Angeles Times described the situation well in this report:

Southern California home prices rise slightly in May
Southern California's median home price rose slightly in May for the first time in nearly two years. But the increase was more reflective of a change in the types of homes sold than an end to falling values, a real estate research firm reported Wednesday.
Hopefully, prospective buyers will read more than just the headline.

There was a clear uptick in median home prices in Orange and Ventura Counties - the two most expensive areas in Southern California. It will be most interesting to see what the S&P Case-Shiller Home Price Index says about the Los Angeles area housing market when they release new data at the end of the month.IMAGE Foreclosures accounted for just 50.2 percent of all sales in May, down from 53.6 percent in April, marking the eighth straight month where distressed sales made up more than half of all resales and sales volume continued to improve, particularly for higher prices homes.

On a year-over-year basis, there is clear improvement in all areas, but annual double-digit price declines were clearly unsustainable. IMAGE 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 appear to be in the early stages of the market gradually tilting back toward a more normal balance of sales across the home price spectrum. As more sellers get realistic, more buyers get off the fence and more lenders offer reasonable terms for high-end purchase financing, we’ll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose.

Let’s not forget we’re into the traditional home buying season right now meaning more people are purchasing for all of the normal reasons, such as a new job or to get settled before school starts. Many are concerned with finding the right home in the right area, not just the most deeply discounted home.
Don't be surprised if a further increase in sales of more expensive homes pushes the median sales price up significantly in the months ahead.


donna said...

Lots of new buyers getting into the market -- we've had a friend buy a foreclosed house this year, other friends just bought a condo here in San Diego. Both first-time buyers.

It's a great time to buy! ;^)

Tom said...

Yes Donna "It's always a great time to buy or sell real estate" as the NAR says. LOL

dangermike said...

Another factor is that mortgages were being written for 2-3 months at 4.5-5.0%. That quickly ceased about 2 weeks ago, with quite a few lenders pushing close to 6%. What most people don't understand (and realtors don't want to educate them on) is that cheaper money pushes prices higher. They see the cost of money rising and think, "well I better buy now before I'm priced out," without realizing that prices will be forced down as rates come up. And when we're printing trillions of dollars to throw at banks, rates *will* come up.

Anonymous said...

Yeah and rents are going up to after having never gone down... gay, gay, gay

Dhi Home Inspection said...

We all are hoping for better home sales in June and July. Maybe the tax credit will help. I am staying positive. Our Home Inspection business is up 25%. Many of the guys that didn't have the customer base we do have fallen off the radar.

I am going to place your link on Twitter so others can follow your blog.

David Founder of

Anonymous said...

dangermike, u r right. I've been trying to point out this very simple idea forever. Home price = downpayment + financed payment and it is mostly the latter. So as rates rise, less can be financed and sales prices are forced down. The last thing you want is to buy at the bottom of an interest rate cycle - exception being you really got something at a steep discount. eg. price/rent <10. The best time to buy is near the top of an interest rate cycle. Then, as rates decline, you can refi repeatedly while prices rise.

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