L.A. Times: Southland home prices drop to 2005 levels

The data in this November 15 story by Peter Y. Hong and Annette Haddad pretty much repeats the data in my earlier DQNews post, but I thought I would mention it because the story contains a few graphs you might like to see, and, more importantly, it clearly reflects that industry watchers still have not capitulated.

For example, an IHP Capital Partners economist in Irvine believes that the dismal market conditions are partly because of mortgage meltdown problems caused by rising defaults, making it harder for people to get jumbo loans. Prices need to fall within conventional loan limits so people can qualify for them.

This may be splitting hairs, but the article makes it sound like buyers still want jumbo loans en masse. Of course, a lot of them do. But maybe, just maybe, some buyers are looking at the market and thinking that taking on such a big loan would not be a good idea anyway. Maybe these same buyers are starting to think that prices are still at stupid levels, and they are thinking "The hell with it!" Maybe they really are packing up and moving someplace where prices are more rational.

The economist points out that Riverside and San Bernardino are there in terms of prices being within conventional loan limits. So if that is the case, shouldn't sales volume now be more encouraging? So maybe smething else has to happen besides prices dropping below conventional loan limits before a lasting recovery ensues.

Of course, DataQuick still tries finding gems in piles of horse manure. Even though foreclosures are at record levels, the number of new risky mortgages relative to the total mortgage market has been dropping. Bargain-hunters seem to be heading back in to the market, with an increase in non-resident ownership. DataQuick analysts take this as a sign the buyers think the bottom is near.

So the flipping dream is still alive. It is apparent to me that not enough market participants have been scalded by this calamity yet. A few hardy people can hang on and weather a downturn, but they will be the exception, not the rule. We have not seen the real blood spilled on the pages of the newspapers on the same level as the last downturn. We've got a long way to go yet.