The red bars in the chart at the right show the drop in California median sales price of single family houses since last summer. Is this all due to the foreclosures and delinquencies, as is heard so much of in the general media?
Since 1974, the average foreclosure rate per year is .81% (including the highest rates back in 1996 and 1997 of around 2%), and at the end of 2007 was 1.7%. The mortgage delinquency rate was at 4.4% at the end of 2007 (long term average is 3.9% and up as high as 6% in the mid-1980's). This means that out of all the loans made, 1-2% of those loans are having problems.
The loan resets many of this group are facing will continue for some time to come, and certain areas highly impacted by foreclosures will be more affected by lower prices. But in any market, there are always buyers and sellers, however currently, sales are below the 350,000-400,000 the expected "baseline" activity per the state's inventory of home and population demographics, and seems to coincide with the tightening in the credit industry since last summer, so that many people who could buy are delaying.
The statewide median price for detached housing dropped from the mid $580's in August to about $525,000 in October, to $475,460 at the end of December, 2007. However, the Los Angeles County median price for houses in December was $487,000.
Buyers and sellers will need to know their local area prices--sellers should be realistic about their asking price, and buyers should not be expecting cutthroat bargains just because sales are slower. In some areas, sellers are taking their homes off the market and leasing them if they feel they cannot get their price, and therefore there can actually be a shrinking inventory in some neighborhoods. One neighborhood I have been tracking in Costa Mesa (Orange County) featuring Greenbrook homes has actually shrunk from 10-12 houses listed on the market last Spring 2007, to now showing 3 listed as "active" and 1 that went into escrow on Feb. 12, as of Feb. 16, 2008.
Charts and price data per California Association of Realtors
Long Beach 
long beach real estate 'Voice this!
2 comments:
You've sure got a lot of stat-backed facts for everything you say, Julia. But, you know, I really worry about this coming year in RE, which will be closely reflected by the Southern California market.
A lot of economic factors are about to mesh gears: the price of gold soaring over $900, the dollar weakness against the Euro, the RE flipper crisis along with the pending ARM resets, etc.
A bunch of stuff to sweat out...
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Jack, Your comments are appreciated. I think that "The only thing we have to fear is fear itself" ... The dollar weakness against the Euro is just an invitation for overseas buyers to come here, so I want to help. The pending ARM resets are still out there, but there will be an end to them within the next 2 years and I think a lot of them will be helped; and in the meantime, there ARE buyers with financial means who are not dependant on them. I went through the 90's recession in Southern California where over 30,000 jobs were lost in Long Beach alone, and we're not anywhere close to that employment scenario at this point in time.
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