Southern California Home Prices: Another Sign of a Bottom

Posted by: Chris Palmeri on April 15, 2009

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The latest news from DataQuick:

Home sales in Southern California increased again last
month, led by strong foreclosure resale activity in the Inland Empire. The median price paid for a home was unchanged from January and February, indicating that the market may be exploring price floor levels, the real estate information service reported.
A total of 19,486 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 27.9 percent from 15,231 for the prior month, and up 52.1 percent from March 2008.
An increase from February to March is normal for the season. Last month was the ninth in a row with a year-over-year sales increase. March last year as the slowest March in DataQuick’s statistics, which go back to 1988. The
March average is 25,138.
“We’re still waiting for the upper half of the mortgage market to open up,” said John Walsh, MDA DataQuick president. “We know that sales of lower-cost housing, especially foreclosure resales in Riverside and San Bernardino counties, are driving today’s market. What we don’t know is how the recession has affected the more expensive neighborhoods.”
“Those neighborhoods are dormant right now, but when so-called jumbo financing becomes available, possibly before summer, we expect enough sales to close escrow to generate more meaningful price statistics. Of late the statistics haven’t represented the overall market. Rather, to a large extent they’re simply a reflection of what is selling – mainly distressed properties
and homes in the more affordable neighborhoods,” Walsh said.
Jumbo loans of more than $417,000 accounted for just under 40 percent of all home purchases two years ago. Last month they accounted for just 10.0 percent.
At the same time, a common form of financing used by first-time home buyers in more affordable neighborhoods is near record levels. Government-insured, FHA mortgages made up 37.8 percent of all purchase loans in March, up from 10.1% in March last
year.
Regionwide, foreclosure resales accounted for 55.4 percent of sales in March, up from 35.7 percent in March 2008.
The median price paid in Southern California was $250,000 last month, the same as in January and February. That was down 35.1 percent from $385,000 for March a year ago. The median peaked at $505,000 in mid-2007.

Reader Comments

Ballbuster

April 17, 2009 12:05 PM

Claiming another real estate bottom, Palermi is trying to stop the death spiral of his own real estate speculation. Like many flippers, he is upside down on his mortgage. Despite his repeated attempt at spreading real estate propaganda, no amount of his info-commericals masqueraded as journalism will save him or alter the market. Palmeri has no shame; he shall be punished for his misdeeds. But to be fair to Palmeri, neither does the NAR, its ex-chief economist as well as its current chief economist, Lawrence Yun, and all the real estate people who said real estate prices will never go down. As the US economic depression is only one year into a minimum four year cycle, Palmeri will kneel and bow to Karma before all this is over.

Bottom Killer

April 24, 2009 2:38 PM

Bad idea to call a bottom on the basis of medians. The statistics show so far are normally medians. Therefore, only the low end market has been moving, and medians have been driven way down. When the high end market starts moving the median prices will start moving up.

If that is what you define as a bottom, then you've got no understanding of statistics. A median is not a good metric for calling a bottom to the market. Even so, the Case-Schiller median data is so negative right now that calling a bottom in the near future is like saying 2+2 = 12. You have the median data, when the Case-Schiller goes to 0% or god forbid even a positive number. . . the data will be released a month later and then you can call the housing bottom. Until that happens, house prices are still dropping. Why try to predict it when the data that shows a bottom is available on a 30 day lag?

In terms of understanding how long it takes for a bottom to form in realestate. . . in 1991 the CS median went negative, it didn't return to sustained positive territory until 1996 (which is when the bottom happened). That bust only went to -7%, this one is approaching -20%. Just based on history a bottom is probably 3-5 years out at the earliest.

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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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