Louis XIV of France, styled the Sun King, famously opined, “Apres moi, le deluge.” After me, the flood. He was right, of course, for his excesses so infuriated the people that his successor was guillotined and his monarchy overthrown in the French Revolution.
SoCal Plunge In Foreclosure Filings
Something similar seems to be brewing in Southern California and maybe even nationwide as lenders ratchet up their foreclosure filings after the “robo-signing” lull. Though foreclosures dropped dramatically in SoCal this fall, so, too, did all home sales. The reasons seem to be many: the end of the home buyer tax credit, stubbornly high unemployment and the generally still-moribund economy. In fact, sales are down a full 16% from November of 2009. This at the same time foreclosure filings fell 14% from the previous November after a 22% decline in October for a two-month total 36% decline. Nationwide, the filings fell 21%.
December is traditionally a slow month in real estate as consumers focus on retail buying, parties and holiday travel plans. Typically, though, also in December smart investors are out there snapping up last-minute bargains of the now-extremely motivated sellers still on the market. Competition is almost always much less, to put it mildly, and sellers are determined to close out their books for year’s end. This year seems to be different as even investors are holding back.
That may be because the huge drop in foreclosure filings this fall has ominous repercussions for home prices in the new year. With the foreclosure freeze over, informed observers now expect to see the banks ratchet up their foreclosures with a vengeance, restarting filings begun in October and November and barreling ahead with new ones in January. Executives from RealtyTrac, a real estate data collection firm, speculate that the housing recovery could be set back three months, if not more, as the foreclosures pile up. In fact, we can expect ” an avalanche” of foreclosures shortly.
SoCal Home Prices
The most immediate effect of an avalanche of foreclosed properties on the market will be to further depress prices in Southern California which had started a slight upward movement. Los Angeles County home prices had dropped 1.2% over November 2009 to a median of $325,000. Riverside and San Bernardino Counties, the hardest hit by the bursting of the real estate bubble, lost 2.5% and 5.0% respectively to medians of $195,000 and $152,000. But, that is a huge improvement over the 30% and 40% drops of previous years. Other SoCal counties actually gained in value. Orange County eked out a .6% improvement for a $435,000 median home price. San Diego topped the charts with a 3.1% improvement over last year to a median of $335,000 with Ventura County just behind at 2.7% uptick to a median of $375,000.
Future: More Underwater Homes
These hard-earned gains will soon be lost as the promised avalanche of foreclosures hits the market. Perhaps sales will pick up as buyers and investors are lured back into the game. But, bargain-hunting fun aside, another price drop for already distressed homeowners will plunge yet more homeowners underwater. That, in turn, spirals down into more foreclosures and more equity loss in future.
Like Louis XIV, banks see this as well as anyone, yet still refuse to modify loans in any serious way. Like Louis, they see, but, obviously, don’t give a damn as long as they get their bonuses. Short-term is the only term.
Here’s the latest housing values news for many Southern California counties. Compare to one month ago.
Yeah, amazing, eh? Today, the L.A.Times ran an article in the Business Section pointing out that homes in three SoCal counties had actually gone up a notch, a tick, a blip…
Portents for the future? It’s all over now? Not so fast, my friends, not so fast. It’s far from over as the article did mention further down the column. It seems Orange County, Ventura and San Diego County Counties had all edged up in median price just the teeniest, tiniest bit, a couple of thousand, because home sales in the higher price ranges had finally come out of their year-long stall and moved again, thus bringing up the median.
Here’s the L.A. Times graphic illustrating the three: highest Orange, then Ventura, then San Diego.
Overall, SoCal sic counties’ median price moved to $249,000 from $247,000 last month. That’s for all So/Cal counties, including L.A., San Bernardino and Riverside alongside the lucky three with higher medians.
Orange County’s median is up 8% over April, Ventura is up 4% and San Diego 2%. Of course, these are more affluent areas, ranking first, second and third in income levels and so have a larger stock of middle- and high-priced homes. Still, it’s at least a bit of a breather…It seemed as though the real estate plunge was into a bottomless pit. Now we know there’s a bottom.
This is the first upward tick since July of 2007. The new SoCal median is 51% below that peak. Wow. Still last month it was down 54% and still down 33% from last year May 2008. It’s been a brutally fast crash. We are definitely injured, but maybe we’ll make it after all.
What’s the cause of this seeming miracle? Partially, it’s 18 months of solid declines in San Diego and more like 12 in Orange County, convincing many stubborn sellers that the good times weren’t coming back anytime soon. Sellers are becoming more realistic and buyers are buying at appropriate prices.
Another reason is that the jumbo loan market has been virtually frozen for almost a year, and, gradually, banks are getting back into this formerly extremely lucrative market. Banks do charge higher rates for jumbos, and they do get better performance. The thaw has helped buyers who wanted to buy but couldn’t get financing.
So, what’s the story for L.A. County? Holding steady at last month’s median..$300,000. as is Riverside at $180,000 and San Bernardino at $137,000.
Home prices in the greater SoCal region continue to decline, though the declines are slowing. Finally! Some counties are hit harder than others, of course, with San Bernardino and Riverside leading the way as they have throughout this ordeal. The good news is that home sales of these now-bargain homes are increasing during these spring months, traditionally the most active of the year.
So, let’s see, what’s the bad news in San Bernardino? It’s a massive 45% decline to median $135,000 over last April when prices had already been plummeting for six months. Some San Bernardino City ZIP codes are down over 60%, approaching 70% in one year. This is truly horrendous for the homeowners involved. In the six San Bernardino City ZIPs, only one median value is above $100,000 [$123,000 in 92407]. Other hard-hit areas include the high desert cities of Hesperia [down 53% to $89,000 in 92345], Lucerne Valley [down 62% to median $67,000], Apple Valley [down 50% to $100,000 in 92308], Victorville [down 58% in 92395 to $84,000 median, both others down 48% to just over $110,000 median] and Barstow [down 68% to $48,000 median]. These prices are so low, they are undoubtedly below replacement costs in many areas, clearly unsustainable.
Down in the basin, other San Bernardino County cities are also devastated. Fontana is down 50% in 92335 to a median of $127,000, though its other ZIPs are not so hard hit [92336 down 23% to $262,000 and 92337 down 27% to median $192,000. Rialto is down 45% to a median of $116,000 in one ZIP and down 28% to $195,000 in the other.
A few cities have escaped the worst, so far at least. Upland, an upscale suburb close to L. A. County is down around 23% to a median of $434,000 in 91784 and $270,000 in 91786. Chino Hills, another upscale community, is down 14% to median $400,000 while Chino is down 30% to a median $301,000. The City of Ontario is down about 35% overall to a median of about $200,000.
And, what of pricey Orange County, what has happened there? As expected, the devastation there is less with a countywide drop of 23% to a median $430,000 since last April. In fact, many cities in Orange County have done much better than that. Most of the beach cities either didn’t have enough sales to count or did fairly well. Capistrano Beach with a few sales is up significantly.Huntington Beach stayed the same as last year in 92646 [median $580,000] and lost 13% in 92647 [median $450,000]. San Juan Capistrano is up 8% to a median $527,000 while, perhaps surprisingly, Laguna Beach is down 31% to a median $1,160,000, still pretty pricey by our new standards. Newport Beach, too, lost value [79% down in 92661, 59% down in 92663 and 47% down in Newport Coast] but all ZIPs maintain medians well over a million.
So, what cities did reasonably well? Irvine, for one, the family-friendly city either stayed the same of slipped considerably less than the county median but in all ZIPs values are over $600,000..these days–not too shabby. Laguna Hills jumped up 28% to a median of $655,000. In general, the drop in values has hit Orange County, but the strike is much less severe than to its neighbors Riverside, San Bernardino and even L.A. County.
Santa Barbara, devastated by fires in the last six months, has also lost 24% of its home values county-wide. Interior cities like Buelleton [down 39% to $440,00], Guadalupe [down 33% to $120,000], Santa Ynez [down 53% to a median $551,000 with very few sales counted] and Santa Maria. Summerland is actually up 10% to $1,375,000 and most of Santa Barbara city is down as well, though its lowest median is $540,000  while 93103 is up 60% to a median of $1.5 million and 93110 is up 15% to just over $1 mil. 93108 still maintains a median $2.4 mil despite a 16% drop in value.
As we have noted previously, more expensive homes have not really suffered the tremendous drops mainly because more affluent home owners can hang on longer and do not put their homes on the market. As time marches on, however, this will change and even more expensive homes will come on the market, including as foreclosures and short sales, forcing prices lower.
Thanks to Family Home Loans for compiling the data.
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.