As reported a few posts ago, recent real estate sales in L.A. County have increased as prices have plummeted. This is good news. It is common sense as well: if prices fall, consumers are more likely to buy the product. That’s how we perceive ourselves as operating…rationally.
Yet, from 2002-2006 precisely the opposite happened. As real estate prices rose to stratospheric heights, more and more buyers jumped on the bandwagon, offering higher and higher prices for property. The rationale then? Buyers said that if they didn’t buy immediately, they might get priced out of the market. Well, that makes sense, too.
So, what is really going on? Yes, sales rose 27% in L. A. County month over month from February 08 to March 08, as the median home price dropped another 9.1%. Now, the median home price of $431,950 is 25.6% less than March 2007. Painful, but true. Statewide the median is $413,980. That makes sense as well: in large metro areas the cost of living is generally higher, so those homes will be leading the price pack.
For comparison, San Francisco Bay area median price is $704,580, down 10% from March 2007; month over month sales have surged 35%. Santa Clara County, Silicon Valley country, posts a median of $810,000. This price has actually RISEN by almost 4% over February 2008, though it’s down 2.4% over March of 2007. Don’t look for bargains there.
Where’s the real pain? Look to the Inland Empire. In Riverside County/San Bernardino the median price is down by 30% from last year to an affordable $276,630, and, predictably, sales have surged by 45% over February 2008 and are now a mere 4% off from last year at this time. Other hard-hit areas include the High Desert, median down by 34% to $210,660, the lowest in the state; Monterey County down by 35% to $430,000; even the Northern Wine County has seen a 24% hit, making the median in Yuppieland now $458,210.
Predictably, sales are up from last month: 35% in the High Desert, 7.5% in Monterey and 40% in Northern Wine Country. Again, this seems finally to be rational. Prices go down, sales go up.
What to make of these numbers? Californians are obviously pretty sensible people. They realize bargains are out there and they are running for them and this throughout the state, wherever prices have fallen.
Of course, many are still sitting on the sidelines waiting, waiting. Will prices go down more? Will I miss my big chance? No way to know. My best advice is: if this house is for you to live in and you need it now, buy it now. There is no guarantee prices will continue to fall. What is obvious is that buyers are out there. As prices fall, competition will heat up.