Thursday, March 15, 2007

L.A. Times: O.C. home prices decline

Orange County has joined the other Southern California counties already in the negative appreciation club. According to this March 14 story by Annette Haddad, Orange County in February posted its first YOY price decline in more than a decade. Now, Orange, San Diego, and Ventura counties have shown negative YOY appreciation rates and Riverside has shown no appreciation, also for the first time in a decade.

Amazingly, Los Angeles county median price remains levitated, as does San Bernadino's median, though less so. Those two counties were enough to push the median Southern California home price up 5.3% YOY.

In the meantime, sales volumes have continued their plunges off the cliff.

Here are the sales and price information for the Southern California region, according to DataQuick. These figures are for new and previously owned homes:

County         # sold    %YOY chg   Median $$$  %YOY chg
Los Angeles     6300       -11.1%   $528,000    +7.8%
Orange          2449       -16.$%   $620,000    -0.4%
Riverside       3057       -36.3%   $410,000    +0.0%
San Bernadino   2274       -31.4%   $369,000    +2.1%
San Diego       2863       -19.8%   $480,000    -5.9%
Ventura          737       -16.4%   $584,000    -3.5%
SO CAL         17680       -19.8%   $495,000    +5.3%          

It's amazing how Los Angeles manages to levitate, isn't it. And how it and San Bernadino are bolstering the median price for the entire So Cal region.

I also find it remarkable how DataQuick's numbers differ from those of Home Data's numbers, posted in the L.A. Business Journal. Home Data's total for February is 4538, off considerably from the 6300 that DataQuick posts. Apparently these two firms use two different cutoff times when collecting data at the end of the month.

In terms of how credit tightening is affecting the market, DataQuick notes that in February 2006, 74% of originated loans were adjustable rate, whereas this February, 61% were adjustable rate.

February is the beginning of the "official" spring selling season. The area's inventory levels are 30 to 40% higher than a year ago. According to Zip Realty, inventory has not ballooned month-to-month, as the higher inventory is "putting pressure on other people not to put their homes on the market...the people who have to sell are selling, but others are being more cautious". In November, 40% of listings had price reductions, but only about 30% of listings had price reductions as of March 2.

I can interpret that last fact in a few ways. I've actually seen a number of listings increase prices. (1) People who enter data at Zip Realty are terrible typists, and they keep having to adjust the asking price because of their errors. (2) Sellers are increasing prices, forgetting last year ever happened and anticipating a glorious return to the boom days. (3) Another possibility is that newer sellers see the market struggling and are pricing their homes realistically, so they haven't reduced their asking prices. From my own analysis of Redondo Beach data I'd say (2) is very much in force, with a little of (1) and a pinch of (3). There is a dichotomy among sellers. Some sellers still insist on holding out for top dollar, but some are really trying to price in "real time".

I am not familiar with all the mortgage loan products available, but I really question whether merely tightening the standards on adjustable rate loans is enough to bring sanity back to mortgage lending. Are there products out there with fixed rates and balloon payments, which can still potentially put the borrower in a bind? What about negative amortization loans, and interest-only loans?


Blogger GoBig said...

I checked Shorewood today...the March Rains have begun (inventory is starting to pour). Lots and lots of new homes added. It's the beginning of the Spring Inventory Building Season.

8:07 AM, March 15, 2007  
Blogger bearmaster said...

Spring Inventory Building Season? LOL!

But I think you are right. I have over 830 records in my database now, and only 25% have sales that I can account for. Even when realtors say the inventory is "low", it appears to be because people just stopped re-re-listing their properties at the end of last year. Now the sophomores are returning, and we have a new freshman class of sellers.

1:03 PM, March 15, 2007  

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