Record Home Price Slide in Southern California

Posted by: Chris Palmeri on December 16, 2008

Ah, remember when Southern California stood for sunshine, the Beach Boys and eternally rising housing prices? No more.

According to research firm MDA DataQuick, the median home price fell a record breaking 35% in November versus the same month in 2007. The median price paid for all homes combined last month was $285,000, down 5% from October. Last month’s median was the lowest since it was $298,000 in April 2003, which was the last time the median was below $300,000. November’s median stood 43.6 percent below the peak $505,000 median reached in spring and summer of last year.

The median price has eroded consistently over the past 16 months as price depreciation swept the region, discounted foreclosures ballooned in inland markets and sales stagnated in higher-end neighborhoods. The latter have suffered from, among other things, a difficult financing environment for large mortgages.

“Bargains and bargain hunters have kept this market alive through some of the bleakest financial news in memory. There’s this renewed sense that you can score a ‘deal’ – something that had been missing for many years. Last month’s Southland sales weren’t great, given they were the second-lowest for any November in 16 years. But they could have been a lot worse,” said John Walsh, DataQuick president.

Foreclosures have accounted for about half of all Southland resales during the past three months. In November, they reached 55%.

Reader Comments

FBEye

December 16, 2008 1:48 PM

As home prices continue to decline it will force many to cash-in their IRA's & 401K's because their lifestyles were such that the equity in their homes were being used for many things such as college tuition, home improvements, purchasing vehicles, etc. As home prices decline, so will everything else, including the stock market. It looks as though 2009 will be the year that many have dreaded afterall. Homes are now like cars. They've become depreciating assets. Another blow to a fragile economy. When will it stop?

Fred B.

December 16, 2008 2:17 PM

Reverting to the mean.

pb

December 16, 2008 2:51 PM

Good.

stockinator

December 16, 2008 2:53 PM

Looks like Shiller was right and there is more to come.

jt

December 16, 2008 3:00 PM

This article is not accurate. In SoCal, beach properties that were 500K 10 years ago are now 2M+, just a fraction from the high. So the 44% drop in price is misinformation. The truth is the sales has shifted towards cheaper properties, and this is the major reason the median is down. Unfortunate that businessweek left this detail out.

carson grey

December 16, 2008 3:42 PM

There are still a lot of people delusional about what offers they can garner on their properties. Next year as more layoffs are announced, you'll see them begin to loosen their grip and expectations and as more sales actually happen in high-end areas like Santa Monica and Brentwood, the new sales prices will alter the data and show a slide in prices in those areas as well.

Andy

December 16, 2008 4:59 PM

How far back do Dataquick records go? How does this compare with the 89-91 drop?

Bob Jones

December 16, 2008 5:01 PM

This is correct. My home in SoCal lost 40% since we bought it in 2006. And the worst part is that the County of Riverside will not acknowledge the drop. They only lowered my valuation by 10%, although comps showed it had decreased 25% as of the assessment date. This gives them $2,000 more than they should be getting. I had to hire a tax lawyer to file a formal appeal. Everyone in Riverside should file a class action lawsuit and take this to the Supreme Court. Greed, malice, and lawlessness should not be tolerated in America, especially when local government is the perpetrator!!!

Bryan Woolman

December 16, 2008 5:14 PM

Do not look short term. For example, you can still find a home, "south of the boulevard" in Woodland Hills, CA; a very desirable area for $600,000. In 1995, the last time the market bottomed out, this same property would have been $300,000. The gain in value still averages 8% per year. The market is just gong back to where it should have been all along. Look at the trends from 1945 to now. Really only two stupid bubbles, early 1990's and 2004-2007.

Ron Sampson

December 16, 2008 5:33 PM

Southern California- especially the dirty LA basin, ugly Las Vegas & even Phoenix- each are still grotesquely overpriced. It won't get better for a long, long time.

Steve

December 16, 2008 5:47 PM

It still amazes me how some people around here are still trying to cash in by listing their crappy house for $600K. You still see a lot of these in LA. You figure it takes around an income of around $225K to responsibly purpose a $600K house. Last I checked only the top 5% of California residents make above $150K...

wtbirds92

December 16, 2008 6:18 PM

These homes are still over priced!!!

Richard Johnston

December 16, 2008 6:28 PM

The bottom end of the real estate market is extremely hot with properties selling within days. I have a list of bank owned homes listed on my website for the San Fernando Valley & Santa Clarita Valley here: http://www.bankowned.la

susceptor

December 16, 2008 6:50 PM

in san diego its possible to buy a home for under 200K and make a $500 rent profit per month renting it out.

Kashy

December 16, 2008 8:00 PM

In San Diego huh!!!
Good luck finding a good deal in a decent neighborhood. You can only buy Condominium or appartment style condominium in that price and that too in not so nice neighborhood

Jim

December 16, 2008 8:05 PM

Maybe this will slap some economic sense into Californians.

Mark Robinson

December 16, 2008 8:24 PM

Hold on to your hat, folks. We won't hit bottom until 90% of the resale market is forecloseures (that's what happened the last time things really dipped in the greater Denver area).

Sam

December 16, 2008 8:37 PM

High-end San Diego Coastal areas like La Jolla and Del Mar have held their values so far.

Snoz

December 16, 2008 11:59 PM

BW issues just a little article on So. California real estate and behold all the self-serving real estate agents of So. California start blogging about how now is the time to buy at the best prices. Is it any wonder that the real estate scam and bust started in California? Is it coincidental that WaMu, Countrywide, IndyMac, and Downey S&L, etc. are among the dead or destitute financial institutions? In cohort with bogus appraiser and mortgage brokers in creating the real estate bubble bust, these evil real estate agents are symptomatic of an underlying immorality and shamelessness that have afflicted the majority of Californian. Californian reared its ugly head as his feverish pursuit for money-at-any-cost reached its zenith in the real estate frenzy of the 21st century. Like the plague that decimated 1300s Europe and Asia the modern California disease, money-at-any-cost, has spread to the nation's financial capital, and finally reached pandemic proportion, leaving a trail of destruction, death and bankruptcy. Until the evil Californian and its followers are rounded up and incarcerated in painful rehabilitation camp, America will not be safe from the recidivism. Having already been smitten with a growing $20billion deficit, over 10% unemployment, collapse of real estate prices, and record number of foreclosures, many evil California scamers still do not acknowledge that they are in cross-hair of the Almighty.

Neil

December 17, 2008 2:24 AM

"its possible to buy a home for under 200K and make a $500 rent profit per month renting it out" - WOW !! Susceptor, how did ya get to that magic number of a $ 500 rent profit per month? Can ya give us an insight into your Calculation? I am a Saver (an investor?) sitting on some cash and want to make just that kinda money. Thanks in advance.

Istrilyin

December 17, 2008 4:22 AM

Buy for 200k and make $500 rent? That's $6000 per year, so 3% interest. Banks give that, and you don't have to pay maintenance and insurance. Wake me up when a 200k house makes $1600 rent.

midi

December 17, 2008 7:31 AM

Where's the profit if something breaks?

California Boy

December 17, 2008 8:56 AM

Some of these people are delusional. The houses have not lost value the value was never real. Get out of the land of Oz. The curtain has fallen and there are no more buyers pals. The houses in Southern California are on a landslide to where they should be in price, back to 1970s pricing where the value was honest based on stability. This gross overpricing is over. If you got burnt admit it. After this freak scenario the public will never be suckered again. If you got stuck with a small shack in a bad part of Santa Monica for over 500K stand tall and deal with it but do not try to tell me that the place was worth that money. Growing up in town I know it was not. I am just glad I rented over the past seven years - I do not have a 700k loan with no underlying value over my head.

Thom

December 17, 2008 9:35 AM

Ugly LA basin, still grossly overpriced - Boy has that guy got that straight! Look something is only worth what someone is ready, willing, and able to buy. You buy a painting at auction in a frenzy or heated art market - and a few years later you go to sell, but that artist is no longer in demand (it has happended to many people.) You cannot go back for a refund, you cannot ask the government to help you, and you certainly cannot claim that painting is worth what you overpaid for it - it isn't, the goes for the houses in California and many other places. The buyers are gone, the money is gone, the BS has been exposed. As I read elsewhere do not cry about loss of value, it wasn't there in the first place.

saa

December 17, 2008 11:14 AM

Southern CA coast is still way over priced. The people in Coronado that are selling houses do not know what is going on over the bridge. They are still building (not as much) and asking from $800 thousand to a million(s) for a house. WAY OVER PRICED!!

Joan Jett

December 17, 2008 1:40 PM

"Bob Jones
December 16, 2008 05:01 PM
This is correct. My home in SoCal lost 40% since we bought it in 2006. And the worst part is that the County of Riverside will not acknowledge the drop. ............"

Can't agree more about Riverside. They killed the new home construction industry and it won't be coming back soon. They charge $30k for fees and permits alone. $30k before you drive the first nail. Greedy scumbags! In other parts of the US you can buy a whole house for $30k!!!

"susceptor
December 16, 2008 06:50 PM
in san diego its possible to buy a home for under 200K and make a $500 rent profit per month renting it out. "

Rents will be falling along with everything else in this deflationary environment.

ed tse

December 17, 2008 1:59 PM

Ha!
Guess what?
Almost all the mainstream establishments, including FED and National Association of Realtors, are trying very hard to inflate (pump up) the housing price that is not affordable to an average Joe. Please join my "Bank Hug Club" to find a real good deal in SoCal at CA Bank Hug Club (2): 95% off Zestmiate. (http://activerain.com/action/agents/stats)

jbone

December 17, 2008 4:03 PM

Just bought a 2000 SF home on 1/3 acre in a desirable Tampa, FL suburb for $159,500.

alf

December 17, 2008 4:32 PM

well ! let me tell you there is a lot of property that are in old by the bank
corp. because they are geting the insurance that we buy when we get a deal on a loan so they don't care by know but in two or 3 years they will have to put this property on sale and then you will see the realy crash down
most of this house are gonna go back to they original price which is most likly
the 30% of the salary of most people
we said $140,000 we need not to buy know
but old for 2 to 3 years.

Vanessa

December 17, 2008 4:54 PM

This article is inaccurate. Again, it depends on your location. We are currently trying to buy a home in Agoura Hills where the median priced home is $600.000.

JAP

December 17, 2008 5:18 PM

Do NOT buy anything now. By 2011 housing will have dropped another 20-30%. These is no bailout or any other ridiculous government program that will fix it. The "powers that be" are only prolonging the agony.

NYer

December 17, 2008 11:21 PM

what is "southland?"

Trent

December 23, 2008 12:32 PM

Susceptor - that's possible if your a slum lord or supporting crack houses.
What an a$$ - that's half the reason why we're where we are... your greed.

Trent

December 23, 2008 12:56 PM

Susceptor - that's possible if your a slum lord or supporting crack houses.
What an a$$ - that's half the reason why we're where we are... your greed.

Earthling

January 2, 2009 11:38 PM

Home prices will go down ACROSS THE BOARD to 2000 levels (with or without adjustment made for inflation). Remember the mid-90s housing slump? It will happen again. Prices are make-believe still. Most housing values in even the most-desirable areas by the coast still have to come down by HALF. It is funny watching the people list homes at prices that exist only in their fantasies. :-)

To Vanessa, what do you not understand about a median price FOR SOUTHERN CALIFORNIA?? Also Beverly Hills and Bel Air are not $300,000. Get a brain.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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