L.A. Times: L.A. Housing market holds its ground
This March 18 story by Diane Wedner all but implies that the slumping sales volume of the past year in the Los Angeles area and the subprime implosion haven't affected housing prices. The logical extension of that is that these problems won't affect housing prices negatively. I view this as yet more rationalizations to minimize the problems out there. But let's see what the analysts are saying.
For the first two months of 2007, L.A. County median price rose 8.2% YOY to $525,000. Fewer homes sold but levels remain "well above" the mid-90's slump. According to DataQuick analysts, high-end markets are "doing just fine", while low and middle areas are "satisfactory". In the six-county Southern California region, the median price for January and February together was $489,500, up 5.5% YOY.
So why is Los Angeles levitating while San Diego, Orange, Ventura, and Riverside markets have not fared so well. Leslie Appleton-Young of CAR believes that sellers are pricing their homes more realistically, while buyers are coming to realize that sellers won't give their homes away at liquidation prides. Oh really? Does that mean that sellers in Orange, San Diego, and Ventura aren't so realistic? Is it something in the water in L.A. that makes us so special?
Oh, it's true that sales volume continued to fall, but the pace of meltdown was less than mid-2006, so that must mean a bottom must be near. Far be it from me to question why they are comparing winter sales volume to summer sales volume! At least the analysts doing economic forecasting at USC are hedging their bets, saying that activity for the next six months will be "very informative...much depends on how much the supply of existing homes goes up, which could push prices down". And the big question of course is how the below-par quality loans will affect the market.
Amazingly, only 11% of California's 806,022 subprime loans are delinquent, compared with 13% nationally. California's buyers may be well-heeled comparatively speaking. And DataQuick says not to worry, since the vast majority of properties are bought with straightforward loans.
But another DataQuick analyst hedges his bets. "It's hard to be bullish or bearish at this point", he says.
Overall, this sounds a lot like more of the same blah blah we got last year which just indicated to me these analysts really don't know where things are going, or maybe they do, but still aren't willing to publicly admit it. I won't blame them for this, because it's just part of human nature. But I do place great accountability on certain NAR and NAHB cheerleaders who are doing all they can to get people to buy homes when it might not be in their best financial interests to do so.
posted by bearmaster at 8:32 AM
3 Comments:
i would think that the lower subprime delinquency rates in socal are due to the relatively higher home price gains we've had here over the past cycle, which leaves the borrowers here w/ a bigger cushion of equity allowing them to refi one more time than everyone else, along w/ the fact that in los angeles at least prices haven't dropped much yet, which again allows them to refi more easily than people in other parts of the country that are hurting more now.
but it's inevitable based on the flat prices and what's going on in the mortgage markets that the mortgage refi train is going to jump the tracks. we will see the default rate for socal shoot way above the national rate by the fall i would guess.
I agree with Mike. CA residents have had more ability to kick the can forward by doing a final refi in 2006. It's going to take a while for the last round of toxic loans to reset. I think we'll still be talking about the RE bust in 2010, personally.
It's not just California, it's Los Angeles in particular. Leslie Appleton-Young of CAR suggests that Los Angeles county sellers have been more realistic about setting selling prices for their homes. This practically implies that sellers in San Diego, Orange, etc, have not been pricing their homes realistically.
I honestly don't believe that sellers in Los Angeles are smarter about selling than in Orange or San Diego. If anything, Los Angeles sellers have been lulled into a complacent state, since the Los Angeles market has held up better than other markets. There is probably a sound reason why the Los Angeles county market has held up well relative to Orange and San Diego, but Leslie Appleton-Young hasn't identified what it is. As Mike pointed out, if anything, Los Angeles county sellers have had additional opportunities to refi/visit the housing ATM again so they are going to be in even bigger trouble than the San Diego seller who by now has been forced to face the reality of a bad situation.
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