L.A. Times: Anxiety Complex - "It's hard to accept that prices are going down"

This September 3 L.A. Times article by Diane Wedner gives us a snapshot of our real estate market psychology.

The Los Angeles/Long Beach/Santa Ana area was the second most expensive condo market in Q2 2006. The median price of a a condo in all of Southern California in July was $404,000, up just 2% YOY, showing quite a slowing in appreciation. In July 2005, condos had appreciated 16.8% YOY.

In the early 90's downturn, condos dropped like single family homes, then initially got overlooked in the recovery as SFRs were now more affordable. But they tend to be more affordable than SFRs, and they are popular with young professionals and wealthy older buyers who want to downsize.

As we stand now, there is a ton of condominiums out there in the market, but there aren't that many buyers. The buyers have the luxury of waiting, and they are waiting for "great value".

One agent tells the story of a homeseller (flipper?) who bought her downtown L.A. condo in November 2005 for $385,000 then wanted it listed in early July for $485,000. The agent warned the woman she would need to reduce the price, which she did - to $450,000, then $419,000. The agent urged her to stand apart from the other units for sale in the building by reducing the price to $395,000, but she refused. The listing expired and the place went unsold.

Another realtor tells us that the "days of multiple bids are over", but there still places where condos are disappearing in three days, attracting those young professional and older move down buyers.

The housing experts say "in spite of the doom-and-gloom worries", the housing market is in "better shape than it was 15 years ago during the recession", with "supply and demand more balanced". The bulging baby boomer demographic that wants to downsize apparently has builders still busy, although "...many projects that developers swore would go ahead this year in Orange and San Diego counties appear not to be going forward...", according to one economic research director for one realty. One builder says that he wants "...to see the land prices dip more before I make future land purchases."

Wow, there is still a lot of complacency out there, isn't there? Hope is a difficult thing to let go of. It's a sharp contrast to the opinions of those like Nouriel Roubini, one of the biggest housing bears out there.