Home Prices Have Hit Bottom

Posted by: Chris Palmeri on June 09, 2009

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I’m telling you it’s true. The slump is over. Don’t believe what you read about a second wave of foreclosures coming and things getting worse. In Southern California, where I live, sales are coming back in a big way. Some data points from my weekend.


1)A friend of mine in Los Angeles just lost out on a house. She made a $1.5 million, all-cash offer on a Hollywood Hills home. That’s the living room in the picture above. The seller——a flipper—-had to lower his price by $200,000, but he still got multiple offers. He interviewed my friend on Sunday. He asked her questions. He wanted to know if she had any reservations about the house or the neighborhood. She later got a text message saying he’d chosen another buyer.

2)I was out in my favorite real estate stomping ground Ontario, California on Sunday. I looked at twenty bank-owned homes. All but a couple—the real pig sties—were under contract, in escrow, or had just sold. The one I liked the best had sixteen offers, some significantly over the asking price. By significant I mean a $94,000 asking price, a $120,000 offer.


3)I mentioned this in an earlier blog but two homes on my block that had languished unsold for months just got sold. One couple moved out last week, the other guy is leaving today. Another friend of mine just sold her house, same deal, no good offers for months, then boom two offers. In all three cases, prices were lowered. In two cases the buyers purchased their house at the top of the market and had to take a small loss, but not a crippling one.

Don’t be surprised if the national stats start to show the market turning.

Reader Comments

Wes

June 9, 2009 09:24 AM

To the contrary, home prices continue to slip and foreclosures are increasing in Florida. While I cannot speak to California, I do not buy into the idea that national home sales are increasing outside of speculator sales.

Ballbuster

June 9, 2009 10:51 AM

California, the Golden State, is bankrupt and has turned to more taxes as a bailout solution: sales tax is over 10% in LA; DMV fees have increased substantially; nickel and dime misc taxes, etc, etc. A substantial increase in state income tax is just over the horizon. Otherwise, all the above tax remedies are in vain as they can not slow down the financial bleeding. Presently, about 15% of Californians are unemployed in a recession economy that shows no sign of ending soon. People are leaving California to find work as well as relief. As in all post mania, there are old and new "Flippers" who believe the last mania will be resurrected. Housing mania is no exception. In the aftermath of the tulip or the dot-com bust, there were speculators hoping to cash-in on the new lower prices only to find themselves mired later in a stagnant money losing scheme. An old saying aptly describes recent real estate purchases: "Wise men abandons ship while fools rush in." As to their new founded enthusiasm, they were all of them, deceived. They were fools. The national recession as well as California's high unemployment, multiply taxes, congestion, and extraordinary cost of living in Southern California are some of the reason behind the exodus and collapse of housing prices. In the past, easy loans fueled California's housing speculation. The ensuing collapse of the financials has guaranteed higher mortgage lending standards, putting an end to real estate mania and unsustainable appreciation. For the next ten years or more, when adjusted for inflation and all ownership costs real estate investment will under perform other investments. Palmeri and others who miraculously see a phoenix arising from the real estate ashes do not recognize it as an apparition of their own imagination. Joining other wishful thinking fools who recently bought Southern California real estate, Palmeri has self-servingly declared California real estate price has reached a bottom. Don't let Palmeri's apparition deceive you.

Dr George

June 9, 2009 11:58 AM

This may be true for the low end housing. The sales activity are driven by mostly investors and first time buyers who want to take advantage of the $8000 rebate. The value of more desirable areas just begin to fall. My friend who paid $940,000 on a house in Arcadia just got appraised at $780,000...and the for sale signs in her area are everywhere. The foreclosure rate of prime borrowers in Southern California is increasing at an alarming rate. Until the banking is willing to loosen the lending criteria, it is unrealistic to hope for another housing frenzy or even call it a bottom already.

StuartMiner

June 9, 2009 06:37 PM

Great news! Seattle is also showing signs of warming from a cold winter. Pending sales are up. Median price has remained flat over the past 4 months showing that the slide is ending.

JK

June 10, 2009 12:59 AM

Let's pull up this article a year from now. This guy Chris will be lucky to have a job!

The median price in Ca continues to drop..
The state budget woes are extremely scary...28 billion in cuts needed.

Record NOD's filed..and those won't turn to foreclosures and REO sales?
Want me to continue?

Ok..how about 11% unemployment?

Interest rates that have been artificially suppressed creeping back up?

I'll stop..let's check back in a year from now.

misslivvy

June 10, 2009 03:13 AM

I don't think you can make a blanket statement that home prices have hit bottom. I am a buyer shopping in L.A. and it really seems to depend on the location and your price point. Yes it's true there are bidding wars in certain areas, but go to the less desireable areas and the inventory is moving very slowly. Maybe people who buy in those areas don't fit the BusinessWeek demographic, but still those areas count. Also, if you check web sites like RealtyTrac there seem to be a lot of homes in pre-foreclosure right now. Even if sales are up on a national average, what is the meaning of that to an individual buyer? There is no average buyer. A buyer is always looking in a specific location and for a specific price point. Just my 2c :)

James Huron

June 10, 2009 02:28 PM

Thanks for the best laugh I've had all week! xxoo

CK

June 10, 2009 04:02 PM

1. The CA moratorium on foreclosures is about to end so the market will be flooded very shortly. The only reason those are gettign multiple bids is because they stopped 99% of the foreclosures. Get ready for the avalanche in CA.
2. Interest rates are rising as well as unemployement so that is another stake in the heart of the turn-around.
3. Jobs are leaving CA quicker than most other states.
4. The prime loans are resetting and that will drive foreclosures up even more in CA. 3-5 more years of loans resetting.
5. Commercial real estate is just now starting it's downfall so that will continue for the next 5 years.
6. Banks are not workign with the owners because they are tryig to cover their own rear-ends...they do not care about the consumers...homeowners.

The people buying now will find out their prices will fall over the next 3 years in CA.

This guy is wrong, wrong, wrong!

JL

June 10, 2009 06:40 PM

I can't believe that this column is coming from Business Week. Two man-on-the-streets style anecdotes really don't carry much water with me and they don't prove anything. Yes you should pay some attention to your gut, but how about some numbers and some systemic, statistical analysis, please?

downhill

June 11, 2009 07:42 AM

SoCal's still high-hovering house prices puts the region at a big disadvantage for employers looking to hire. If the employer has an operation in another state, it will find that a same-quality employee can be added at a far lower cost and yet the employee is happier than one in SoCal. Does not bode well for SoCal employment for home prices to remain high while the rest of the country more quickly home in to the 1999 price levels. Those jobs may be gone for good, not to India or China, but to other states like Texas, North Carolina, Oregon, etc.

Economist E

June 11, 2009 01:47 PM

I will save this article to read a year from now for a really good laugh.

JimG

June 11, 2009 04:08 PM

Anecdotal evidence is always welcome to highlight a story or blog entry that is based on hard statistical data. However, this optimistic view of SoCal real estate appears to be based on nothing more than anecdotal evidence. Where are the statistics to back up your contention?

mark

June 11, 2009 05:52 PM

do you feel very secure about your job? I dont. Neither do my friends. We average about 30 years old. we all have homes now. The trend i see is that we are under pressure just to serve the mortgage, eating out is getting less common as sale tax rise and expecting children soon. this is not a good recipe for rebound. i am in ca, and the high end home in my neighborhood on sale outnumber the ones in lower end. and don't ignore the exploding mortgage rate.

Mike

June 12, 2009 12:19 PM

Home prices in Dallas are definitely showing signs of buoyancy. See my analysis of price per square foot indexed from 2007 until 2Q 2009. it is clear that the price per square foot average over thousands of home sales is starting to come back up.

http://blog.homeprodigy.com/home-prodigy-blog/real-estate-blog/36-is-recovery-in-the-air-for-the-dallas-housing-market.html

Gary The Red

June 16, 2009 07:39 PM

CA housing reached a peak in 1990 and during the recession of the 90's it took a full 6 years to "bottom". We went side ways or slightly up for about 4 years after that. Am I reading it wrong when I
think that this recession is much worse and driven by the housing bubble bursting?
In such a case....is it not reasonable to think that it will take much longer than just 4 years this time to reach a bottom?

Paul Langrock

June 18, 2009 01:34 PM

We're bottoming in Pinellas County (Tampa Bay) Florida! See Listing & Sold charts on our "Market Updates" page on our real estate website: TheLangrocks.com
Paul Langrock
Realtor
Remax

Thank you for your interest. This blog is no longer active.

 

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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