Tuesday, July 31, 2007

Los Angeles Area home prices continue down in May 2007 according to S&P/Case-Shiller Home Price Index

S&P/Case-Shiller is the only home valuation methodology I am aware of that is widely published and shows Los Angeles area home prices actually trending DOWN. Conveniently, the Los Angeles Times publishes DataQuick and Los Angeles Business Journal publish HomeData numbers. Case-Shiller avoids many of the problems that these latter two companies wade into with each report they issue.

By Case-Shiller, Los Angeles area May 2007 home prices are down -3.3% YOY. For the MOM change from April to May, it is down -0.1%, the lightest such decline in a while. The MOM March/April change was -0.5%.

You can view the press release at MacroMarkets (PDF file).

6 Comments:

Blogger DeanJonesTrader said...

Now, Here's a personal story!

It finally happened.

I say 'finally' because in less than one year since cancelling our condo purchase, this past Sunday my wife and I returned to Centex Fusion to witness their price reductions (new condo and townhome development in southbay area near manhattan beach). We had originally put down a deposit on a 2bd / 2ba, model 'D' unit only 9 months ago in 2006, asking price at the time $615,000 ...

Anyhow, upon walking into the sales office, before i could even remove my sunglasses, a friendly and humble salesperson immediately greeted us by saying,

"we are having an inventory sale".

AND before i could even think to respond, "like, you mean a 'fire-sale'?!", the salesman whipped out his hand-written revised pricing menu and showed us the "deals"... basically in short, the "original" vs. the "new" revised asking price for the current phase left-over units are shown below and were as follows:

Model 'J'
$723,000 to $604,000 (-17%)

Model 'D'
$611,000 to $554,000 (-10%)

Model 'B'
$537,000 to $469,000 (-13%)

Model 'A'
$525,000 to $449,000 (-15%)

Interestingly, four of the available 'J' units at Centex Fusion sold-out almost immediately that same weekend. Most probably many found worthwhile value in that 'J' model given it was the only 3 bedroom option they offered ... meanwhile however, all 4 total 'A' units to cherry-pick from remained un-sold... (as my wife says, the 'A' units are truly glorified closet-sized like apartments, hence possibly the lack of interest altogether, even at that price).

Basically, here are the FACTS:

If you had showed up with your checkbook this past weekend, willing to buy the 'J' unit today in lieu of the "D" unit days before, one profited in gaining from:

(1) an extra one-bedroom,
(2) an additional one-half bath,
(3) including additional 460 sf, (1,790 vs. 1,330) and ...
(4) still be left with $7,000 to spare to furnish that 'bonus' bedroom and for that z-gallery living room furniture upgrade to boot!

But Wait! There's More! (... to put it in real perspective)

For "shits and grins" as they say, here's a look at the monthly difference in 'pain' you would endure if you had bought a 'J' unit, say, a year or one month ago, vs. just buying the same unit this past couple of days!

Calculate Your Payments:

Home Price: 723,000
Down Payment: 36,150, or 5%
Loan Term: 360 months, or 30 years
Annual Interest Rate: 6.36%
Monthly Payment: 4,278
=================================

Home Price: 605,000
Down Payment: 30,250, or 5%
Loan Term: 360 months, or 30 years
Annual Interest Rate: 6.36% Monthly Payment: 3,580
=================================

Therefore, $4,278 vs. $3,580 = $698.00 monthly mortgage savings(!!):

= $8,376 / year

= $25,128 after 3 Years

= $41,880 after 5 Years

= $83,760 after 10 Years, etc...

... umm, not bad, but really bad(!), considering taking that $8,376 savings the first year and inserting that savings in say, the stock market (ok, S&P 500 index) with expected return at an average yearly rate of 8% ...

Now for "shits and BIGGER grins"...

Taking that $8,376 Savings PER EACH YEAR and Re-Applying it YEARLY with Compounded Rate of Return, grows to the following:

Year Dollar % per Year % $ Total Return
1 8,376 0.08 $670 9,046
2 17,422 0.08 $1,394 18,816
3 27,192 0.08 $2,175 29,367
4 37,743 0.08 $3,019 40,763
5 49,139 0.08 $3,931 53,070
10 121,340 0.08 $9,707 131,048
20 383,306 0.08 $30,664 413,970
30 948,868 0.08 $75,909 1,024,778


Okay, so maybe after that 7th or 10th year, you sold the unit, or better yet, you rode out the down trend and now are renting it out for additional profit ... bottom line, that's the power of any investment ...

... our story? dividing our time between a modest house in palm springs and staying in 4 star hotel downtown LA (which my company covers costs) for 12-16 days a month for 1/2 the mortgage cost we would be paying on a depreciating, "investment", continues to seem... well, bullish.

DeanJonesTrader
--------------------------
Sent from sunny California, via my bitchin' blackBunny wireless handfed!

5:39 PM, July 31, 2007  
Blogger bearmaster said...

I got many emails from Centex and did not bother posting them. Those prices are still way too high for living like an ant in an anthill. But that's just my opinion.

This is definitely starting to look like the stage where the dip buyers are rushing in too soon and about to get their heads handed to them on a granite countertop.

5:53 PM, July 31, 2007  
Blogger Michael said...

Do you know how many more units they have left?

9:41 PM, July 31, 2007  
Blogger bearmaster said...

No, I don't have numbers, but I would guess only a very few left.

6:58 AM, August 01, 2007  
Blogger bearmaster said...

Michael, I just received another Centex email saying they've "extended" their inventory blowout. So to answer your question as to what is currently available...

Unit Plan Sq. Ft. Bed Bath Garage
202 A 1,003 2 2 1-Car
263 C 1,208 2 2 1/2 2-Car
264 D 1,331 2 2 2-Car
265 F 1,473 2 2 1/2 2-Car
266 H 1,603 2 2 1/2 2-Car
267 E 1,419 2 2 1/2 2-Car
268 G 1,510 3 2 2-Car
269 J 1,790 3 2 1/2 2-Car
270 A 1,003 2 2 1-Car
271 B 1,067 2 2 1-Car

9:59 AM, August 02, 2007  
Blogger DeanJonesTrader said...

Here's another Centex Fusion update and price reduction from my visit on 9/02/07:

Model 'J'
$723,000 to $604,000 to NOW $558,000 (-23%)

Model 'D'
$611,000 to $554,000 to NOW $502,000(-18%)

p.s. Power Lines are included in your "ocean", umm i mean, "urban view".

6:45 PM, September 05, 2007  

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