Southern California Home Values: More Bad News

As noted here, L. A. County home values have now dropped 36% in one year.

But, that time period does not show the depth of the plunge. Southern California median home values have dropped 50.4% from the peak of the housing bubble. This is partly a statistical anomaly: few top-of-the-line or new homes were selling. This 50% figure is an aggregate of all SoCal counties. Some counties have it far worse and we know which they are. Riverside prices have plunged 55% from $432,000 median to $195,000. San Bernardino had it worse: median values are down from their height of $380,00 57.4% to $162,000.

Adding to the general misery is the news that about 20% of all mortgage holders in the U.S. are underwater or owe more than their homes are worth. California’s rate of negative equity is 30% of mortgage holders placing it on a par with Florida–in 5th place. It’s not quite so bad in L.A. County even with the statistical drag of  the Antelope Valley and the High Desert areas. In L.A. County about 23% of homeowners are in negative territory.

Of course, owing more than the home is worth is a difficult situation for homeowners. It hardly seems worth the struggle to make the payment. In fact, many don’t. They may have made a” business decision” [does it make sense to pay on a $400,000 mortgage when the house is worth $300,000?]  More likely,  they can no longer afford the payment due to job loss, job cutbacks or readjusting mortgages. Across the country,  4% of mortgage holders were at least 60 days late in the last quarter of 2008. A year earlier, the figure was 3%.

How’s California doing? Not so good, as we might expect, given the rising unemployment statistics. Of California home owners 6.9%  were categorized as delinquent in Q4 08. This compares to Florida, highest in the nation with 9.5% rate. We are still behind also Nevada and Arizona.

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But, these four populous states really are like the Four Horsemen of the Apocalypse. Their condition does presage disaster for the rest of the country. We four are huge markets for the rest of the country and the world. California alone has something like the 10th largest economy in the world. If our economic engine is stilled, what will happen to our trading partners and our fellow citizens in other states?

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SoCal Home Prices: October 2008

With the median price of Southern California homes down more than 40% from its peak, the housing market has now slid further than most economists expected, says The Los Angeles Times.

The median sales price for homes in the region fell to $300,000 in October, a level not seen since 2003 and a 41% drop from the peak price set in the spring and summer of 2007, according to San Diego-based MDA DataQuick

Los Angeles County’s median home sales price was $355,000, down 29% from a year ago.

Prices were dragged down by the large number of foreclosed homes on the market. For the first time since the slump began, repossessed properties in October accounted for more than half of residences sold.

Low prices did drive sales up 56% from a year ago. But a market bottom remains elusive, and a rebound in prices is not on the horizon.

It took only until July for the median price to fall 25% below its 2007 peak of $505,000, and it has kept falling since.

Barring a dramatic economic reversal, the median sales price is on track to slip below $300,000 when November sales are calculated next month.

In October 2007, 16% of the homes sold in Southern California had been foreclosed, compared with 51% last month. Mounting foreclosures flooded the market with discounted repossessed homes, further depressing home values.

The ripple effect from that put even more homeowners underwater — owing more on their homes than they were worth — and led to more foreclosures.

Now,  the most depressed inland areas are probably “over-correcting.”  In communities overrun by foreclosures,  a home cannot be built  for less than what [existing homes] are selling for.

Last month’s Case-Shiller Home Price Index, which tracks home sales by price tiers, showed that Los Angeles-area homes priced in the bottom third of the market had fallen 42% from their peak prices by late last summer — but those in the top third had dropped 21%.

Owners of higher-priced homes may put off selling during the early phases of a downturn, causing more expensive homes to decline in value at a slower rate. But eventually many high-end owners have to sell at prices well below peak levels. That means we can expect to see greater price declines among expensive homes in 2009.

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Where Are Those Foreclosures? An Update

Locally, the rate of foreclosures continues to rise. Previously, the worst of the crisis seemed limited to Riverside and San Bernardino Counties, but, little by little the foreclosure boom has extended to the San Gabriel Valley as well.

For some quick examples, let’s look at one of the worst hit areas, Azusa with 27 foreclosures priced from $159,900 to $659,000. As noted here previously, an obvious place where foreclosures will be widespread is anywhere with many new homes. Voila Azusa where home builders have flooded the market in the past 5 years. This is one reason so many foreclosures are occurring there.

Covina is another foreclosure hotspot with 30 currently on the market ranging in price from $184,900 to $729,000. Single family homes priced below $200,000 are still  a rarity, so  the lower figures are usually condos. In West Covina currently 48 repos are on the market, priced from $205,000 to $527,000. Even pricey Walnut has 6: $209,900 to $994,900. Prestigious Claremont has 9 priced from $237,500 to $489,900.

LaVerne has 6 foreclosures for sale. San Dimas has 8 priced from $269,900 to $631,659. Glendora also has 6 with prices starting at $297,000.

In the western San Gabriel Valley fewer new homes can be built as the area has been built up for a long time. Nevertheless, here as elsewhere, foreclosures are abundant. Our largest city, Pasadena has 32 on the market ranging from $219,000 to $649,000. Monrovia has 10: $220,000 to $579,000. Altadena shows 12 REOs, priced from $190,000 to $565,000. Tiny South Pasadena has 3 and Arcadia has 4.

Economic woes have hit Duarte a bit harder and it shows. Duarte has 16 foreclosures ranging from $106,900 to $474,000.

As always, though, the title of Heartbreak City goes to Pomona which now has 119 foreclosure listings, priced from $106,600 to $454,000 for a lovely 4-bedroom in Phillips Ranch.

Besides our own misery, we also know now that nationwide 12 million homeowners are underwater or owing more than their homes are worth. That is definitely true here as well where on average prices have dropped 25% to 30% over the last year, creating many more “underwater” homeowners.  Of course, that presages more foreclosures in the future as these homeowners bail out of their now way overpriced homes.