L.A. Times: Region's home prices hold firm

sta.bil.i.ty n. pl. -ties. 1. The state or quality of being resistant to change of position or condition; steadfast, especially: a. Resistance to change, deterioration, or displacement. b. Constancy of character or purpose; steadfastness; c. Reliability, dependability.

Once again, the experts are telling us that home prices in Southern California "may be entering a period of stability", that we are "settling down into a steady state", which will "mean different things to different people", but it will be "fine for most people who have owned their homes for a while", as quoted in this November 15, 2006 story by bubble reporter Annette Haddad. Although October sales were at their lowest level in a decade, the rate of sales volume decline was at the smallest level in four months.

And then history is rewritten by describing the 1990's as a period in Southern California's housing market "when prices showed small or no gains after booming by double-digit levels during the late 1980's and falling during the early 1990's."

DataQuick notes that the rate of appreciation is slowing and could turn negative by late this year or early next year, but this is "normal in a market trying to reach equilibrium" after years of eye-popping gains.

The article quotes insiders that expect the final quarter of the year to be slowest for sales (due to seasonality) but expect "an avalanche" of homes to come off the market between now and the end of the year, and expect demand to keep softening.

Analysts seem mighty excited about how San Diego county was actually up over September by nearly 2%, though down YOY by -5.5%.

And here is the table I started filling in yesterday, with corrections and additions.

                                          Median price in
                     No. sold in     %     Oct 05 Oct 06    %
                Oct. '05  Oct. '06 change  (thousands)     change
Los Angeles       9,792     7,662 -21.8%     $492 $514     +4.5%
Orange            3,614     2,715 -24.9       606  625      +3.1
Riverside         5,542     4,200 -24.2       391  410      +4.9
San Bernardino    4,217     3,318 -21.3       354  362      +2.3
San Diego         4,155     3,282 -21.0       513  485      -5.5
Ventura           1,169       940 -19.6       596  582      -2.3
So. California   28,489    22,117 -22.4       473  484      +2.3

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This fall-winter time period is going to be difficult to gauge since some seasonal features come into play. I've been furiously working on constructing a database of Redondo home sale listings that have not sold (class of 2006), to get a sense of how much pent-up selling demand there will be going into spring, when a potentially new crop of homesellers (class of 2007) want to add their homes to the pool.

Glossing over the period in the "early" 1990's when the housing market was in trouble is a major distortion of reality. To get a taste of what newspapers looked like at that time, see this February 10, 2006 post. In my opinion, this is yet another psychological signpost, when we are looking backwards through rose-colored glasses and haven't truly acknowledged the damage done to these markets so far. If you read between the words, stating that those who have owned their homes "for a while" will be fine glosses over the situation of those who have bought in the last two-three years. There really isn't much acknowledgement of their predicament at all!

I expect that when we start hearing and reading some grim talk about the markets that starts to acknowledge the pain that some home sellers are facing, we will be smack in the midst of a hard-down, and maybe with the end perhaps not far off. And when the mainstream housing market news starts sounding truly apocalyptic, that's probably a better time to buy - if you want to stay in an area and state that may have undergone some rapid socioeconomic upheaval. But that kind of change could be underway all over the country.

Californians were polled coming out of the recent election and they are flying high on optimism, voting in big spending bills to fix the potholes. "I feel much more hope now", "[California] is the place to be", and, from a homeowner whose home value has tripled since 1997: "I guess it's going pretty good. I love California", are examples that it just may not get much better than this, and it could go down from there.

I don't know if it'll happen that way or not, but that's the psychological model I am following until something better comes along.