Thursday, September 14, 2006

L.A. Times: SoCal Home Sales Eroding

This September 13 L.A. Times short piece by Annette Haddad continues to document the ongoing housing market decline, focusing on San Diego and Los Angeles counties.

The Southern California housing market has contracted to its lowest level in six years, and San Diego has gone deeper in the negative. There are now so few buyers in the Los Angeles market that the August sales volume of 9,193 is a level not seen since August 1997. Sales volume is down 21% YOY.

Although the Southern California median home price in August rose 4.7% over August of 2005 to $517,000, the median price has been virtually flat across June to August.

San Diego County continues to lead the way over the cliff. There, the median YOY price is down 2.2% to $482,000, which was the median around March 2005. That was also the biggest % decline since December 1995, towards the tail end of the preceding down trend. August is the third straight month of depreciation in San Diego.

Well the real estate analysts will find something to cheer about. It turns out sales volume did pick up over July in Los Angeles and San Diego counties. One analyst notes that this could be the "last blast" from buyers before the school year started, but then claims that if the trend persists, we are in for a "soft landing".

Arrgghh!! How long will it be before "soft landing" is stricken from our vocabularies!?!?!


Blogger Wannabuy said...

Arrgghh!! How long will it be before "soft landing" is stricken from our vocabularies!?!?! Well... it wasn't until gold was seized from private holders that they stopped talking about it during the great depression.

I'm just waiting for all of the layoffs. Every hiring manager I'm talking to is pretty negative (except for Lockheed with the JSF and "Orion" large contract wins lately... But those jobs aren't in the south bay, some in Palmdale, most out of state). Most "hint" at layoffs. This is from people in banking and other finance plus engineering.

I'm not thinking that will help the local property market.

A local realtor at a HOA meeting touted how great the local market was... While noting that selection was great... and that 8 homes within the small HOA were deliquent! (A new HOA record IIRC.) His great and my great... aren't the same word. :P Oh, this is my folks HOA, I'm still a renter. :)

HOA=home owners association


10:48 AM, September 14, 2006  
Blogger Darrell said...

Did you also catch this item inside the Times Business section?

Juxtapose borrowers too young to have experienced house price declines expecting "the rate of negative amortization is less than the increased value in my house each month" with today's cover story you cited ....

<< CEO Makes Call on Pay-Option Loans: It's Risky
From Bloomberg News
September 14, 2006

Mortgage lender Countrywide Financial Corp. regularly warns customers about the risks of paying less than the interest due on loans offering that option. Now Chief Executive Angelo Mozilo is calling some of them personally.

Mozilo reached out to borrowers as part of a "little experiment" to understand the reasoning behind making only minimum payments on so-called pay-option loans, a practice that boosts the total amount due, the 67-year-old CEO told investors Wednesday in New York.

"What we're finding out is that they're pretty smart," Mozilo said. "It's like voters: Individually they're sort of idiots, but collectively they seem to make the right decisions."

The customers Mozilo spoke with were convinced their home values would continue to rise, more than making up for the added costs, he said. Pay-option loans can accumulate interest, or "negatively amortize," until a cap or a set date is reached and the interest rate automatically rises. Mozilo said he wanted to know why customers were paying only the minimum.

"The answer was, 'I'm doing it because the rate of negative amortization is less than the increased value in my house each month,' " Mozilo said. "The average age of our borrower is about 38 years old. They have never in their adult lives seen values going down. The concept is alien to them."

Pay-option loans accounted for about 18% of the $220 billion in residential loans Countrywide extended in the first half of the year. >>,1,1749119.story?coll=la-headlines-pe-business

1:40 PM, September 14, 2006  
Blogger vfsv said...

Silicon Valley house prices are headed in the same direction.

Santa Clara Co prices are -$47K the last four weeks:

See for more complete coverage.

11:41 PM, September 14, 2006  
Blogger banned_on_the_run said...

The deflating has started in earnest in places like West Palm Beach, FL and San Diego, CA where housing bubblemania took root early. The crap hasn't hit the wall for other places, but it will. Go to the site below and read their "The Hard Landing For Housing is Already Here" article for jaw dropping statistics on the Bubble splatter to be:

1:33 PM, September 15, 2006  
Blogger bearmaster said...

A recent publication from Elliott Wave International gave an example of what was happening with the sale of one upscale home (I think it was West Virginia). It went on the market early this year for about $1.2 mil. After repeated price cuts, the home still didn't sell. The highest bid it got at auction was $575,000, which was refused. Somebody finally agreed to pay $625,000 for the place.

From $1.2 million to $625K, that's about a 48% deflation in expectations, isn't it. So it is probably true that some houses at this point in time are being sold for 50% below original asking price. Not many yet, but we'll be hearing more and more stories like this, I think.

2:19 PM, September 15, 2006  

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