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October 27, 2005

Cooling in California

Chris Palmeri

The latest data from real estate researcher DataQuick shows an increase in foreclosures in California, the first year-over-year increase in more than three years. Lending institutions sent default notices to 12,568 California homeowners during the July-to-September period, up 3.5% from last year's third quarter. The last time default notices increased year-over-year was the first-quarter 2002 when the 30,225 count was up 5.2%. Defaults had previously reached a peak of 59,900 in 1996 after Southern California's long housing price slide.

Stats from the California Association of Realtors still show strong gains in prices and sales, with the median-priced home in the state jumping 17.3% to $543,980 in September, on a sales increase of 3.9%.

I went back and looked at California sales and pricing data from the early 1990s bust and it's very hard to define a trend from monthly data in the early stages of a downturn. Some months sales were up and prices down and vice versa. No one puts a sign on the lawn that says: "Home Prices Peaked Today." Perusing the real estate section of the Los Angeles Times this past Sunday, I saw more homes with price reductions than I used to and others seeming (somewhat) more reasonably priced. My hunch is that California home prices peaked this past summer, but we won't know for sure until some months down the road.

02:02 PM

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It's doubtful that prices are decreasing currently in California as a whole. I would have to agree with the CAR (California Association of Realators) report that notes a temporary Fall slowdown in 20 of the past 26 years (with prices picking back up).

However, San Diego's current fortunes likely portend what is to come for California and many other parts of the nation. Statistical evidence definately shows slowing sales, rapidly increasing inventory and real declining prices there even with the real estate press machine applying all the fancy dressings (real estate agents and mortgage brokers have adapted the marketing genius of yesterday's tech stock wranglers).

There will be a healthy lag (6-18 months) before San Diego's fortune spreads to the rest of California, Las Vegas, Phoenix, and other western hot spots. These other locations still have time to reap all the benifts of option ARMs, no interest loans, 40 year mortgages, and affordability indices that still has room to fall. Unfortunately for San Diego, their options appear out. Well, maybe the mortgage bankers can go back to the drawing board and be more creative? (likely) Or, maybe San Diego will find a way to invest in job creation and wage growth apart from realtors, mortgage brokers and homebuilders? (unlikely)

Posted by: Pragmatic at October 28, 2005 02:56 AM

there is data coming from boston, manhattan, and florida showing median home/condo sale prices dropping. Articles from reuters and nytimes confirm national drop in sales price for both new and existing homes. No data yet on Greater LA Metro area showing any significant declines though a few reports in OC confirn slight downward price adjustments. July/august/sept 2005 is the peak: thereafter prices will adjust downward. LA lagging behind compared to other high risk market areas but will definitly drop in 2006/2007 along with lots of forclosures. Much Negative data nationwide coming from local realters themselves. PMI reports LA 33% overvalued. Real estate/media housing spin machine cannot overcome fundamental economics 101 factors in affordabil;ity,risk factors,rent/housing ratios, waning consumer confidence, high energy prices,rising interest rates,inflation,ect. check out Hong Kong bubble pop in 1997-2002 when house declined 57%.

Posted by: peter m at October 29, 2005 02:48 AM

On 11/8/05 KPPC reported a drop in median home price in LA County in October. You can listen to the story at http://www.scpr.org/news/ by clicking on

"Business Update with Mark Lacter

Steve Julian | 11/08/2005

[ Listen ]

The median price of a home drops in LA County"

but I can't find any independent confirmation online. I know the realtor industry/CAR/NAR and real estate spin machine will say it's just seasonal but I'm not sure the rest of the country knows how absurd the CA housing market has become. Could someone please post a link to the report showing a decline in LA County median home price in Oct 2005? I would like to see the details.

Posted by: DaveInCA at November 11, 2005 03:20 AM

The real estate market is cooling in Toronto too.

Posted by: Fraser Beach at December 26, 2005 10:30 AM

http://www.dqnews.com/ZIPLAT.shtm

DataQuick updates their data for SoCal monthly. Year over Year its showing an increase for the LA Area. Archived reports cost money, but you have be able to find a cached copy on Google.

Posted by: Nathan at December 28, 2005 12:58 PM

California coolin'

On a winter's day ...

Posted by: Peter Coy at December 28, 2005 02:24 PM


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