Fresh DataQuick stats show O.C.’s January median selling price ($520,000) was off 13.3% from a year ago, the largest year-over-year drop since DataQuick started keeping records back in 1988. January sales were weak, too, marking the 28th straight month where O.C.’s home buyers failed to keep pace with the year-ago sales activity. And mortgage problems are still growing. Here’s the January scoop:
PRICING: O.C. median back at April ‘04 level
BUYING: January sales half of 20-year average.
FORECLOSURES: Local mortgage woes at new high
… and see the stats behind the stories …
INDEXES: How six other groups value O.C. homes.
ZIPS: How did prices and sales in your town do in January?
CYCLES: Recent decline from June’s peak surpasses early 1990s drop.
… and don’t forget to get involved:
VOTE! How long will this mess take to fix? Take our poll.
FORECAST! Our handy tool with let you make your own 2008 home-price prediction.
To read DataQuick’s press release, CLICK HERE
Some comments that have flowed in …
• Professor Kerry Vandell, UCI’s real estate project director: “Lots of ‘bad news’ and ’surprises’ have compounded problems in the housing sector. Dataquick is not a repeat sales index. The OFHEO index does not show a decline steeper than the 1990-95 slide, which was 25% or so. Still, the prospect of a recession and contagion in the credit markets has the potential of providing conditions that would counter my predictions of a peak to trough decline of 10-15% or so (remember, I did condition my prediction on continued growth in the economy.) Yet, I am still optimistic that the ‘bottom’ in prices will occur toward the end of this year or beginning of next. The markets today seem more rapid in their response than 15-20 years ago because of the development of the capital markets, which means quicker declines (the jury is out on quicker recoveries).”
• Broker Vince Bindi at Keller-Williams: “Yes, the market is very soft, and prices have dropped substantially. The DataQuick report is not a surprise for we have been seeing this rapid price drop in our Price per Square Foot … prices have dropped about 16% on average from the peak in mid 2006’ until today. I would expect to see prices drop another 5% to 10% on average, and then stabilize for about a year or so, before we see some upward movement in prices sometime in 2009’. Now is a great time to buy though, for many Bank Owned REO and Short Sale properties can now be purchased for 25% less then what they sold for just 2 years ago.”
• Economist Chris Thornberg at Beacon Economics: “UCLA recently reported they expected prices to bottom out in mid-’08. UCSB claims the economy is just fine, outside of construction. This is definitive proof to me that California’s medical marijuana laws are clearly being abused.”
This is all no surprise. Only a moron would think the prices were going to keep climbing. Morons like the NRA, etc.
I don’t like to see bad things happen to good people, and for those in this market I am sorry. However, for all the fraud, speculation, NINJA stuff, and just plain consumer ignorance… no sympathy.
FINALLY! The day is approaching where people like me, 725 FICO, some money down and full documentation (remember those normal days?) will get a normal house, at a normal price, and live a normal non-greedy life.
Mick,
You are right ,this is no surprise to most on here other then the clueless unemployed realtors/brokers that haunt this blog.
The median will take a big drop this year as well as next year.
If someone can’t figure out this housing crash by now their most likely in the business.
I guess it’s time to head over to Newport Beach and go house shopping, right?
Thanks PDU - that was a good read.
To continue that thread: I would add this one:
6. Myth: Owning provides you with security and stability.
Fact - you’re only as secure as your ability to pay your ‘rent’ to the bank. Renting can be just as secure, with the added benefit of mobility that you otherwise would not have if ‘owning’. Want to take a year and travel abroad? Renting can give you quite a bit of ‘freedom’.
I read a story of this tumbling of prices to come back in the summer of 2007. It talked about the spiraling of home values to take place over the next three years before it would even out. I can’t believe there were that many illiterate people out there who couldn’t read a contract before signing?
This market is not the early 90’s. Then, foreclosures everywhere in all beach cities. This time, there are none. Then, job were hard to get. This time, good jobs are easy to get. Then, beach properties dropped up tp 40% in value. This time, beach prices are firm. Then, rentals were empty everywhere, and cheap. This time, rents are strong. I think this article is just bubble food.
A Bigger Drop in the 07 market because the price have farther to fall than the 90’s.
Blogger…..
Thanks for the bid headlines…….the blue text makes it that much better.
“big headlines”
is NRA the national realtor association or the national rifle association? funny.
well who could have guessed? prices going down in the oc. that’s the oc. what’s this world coming to? where are all illegals to prop up housing prices, at least in santa ana?
Jimmy wake up. There are 3 more years of “creative” loans that will reset. There are few good job vacancies and they are getting fewer as more and more companies institute hiring freezes. Newport, Laguna, and Huntington are not immune. You sound like Scott Cambell in disguise with your bullish attitude towards beach real estate.
Price drops faster than 90’s Cycle
That make sense as prices went much higher and much faster this cycle.
Not sure why these Realtors are dilusional all the time. If they were serious about their business, they should be hoping prices come back down to normalized levels. Then they can start selling houses again. Since sales are way down, obviously the degree of separation between buyers and sellers is still very large. Thus you are not going to see alot of sales. As prices come down and these realtors get in sync with market expectations, then maybe their jobs will be saved. Not sure why they continue to BS people when the latest datapoints continue to show declining values. And the fact that I make a six figure salary as a single male and can’t even afford to get a house in the OC unless I take out an ARM and for that matter a leg :), prices should continue to drop until they become affordable again. (OC affordable).
Can’t wait to go buy a townhouse next year for $300K.
This year, I’m just going to take it slow.
PDU:
I read your post….You know I dont buy into that argument however,
I read the LA BUBBLE artical associated with the link.
I do agree that:
So the argument is: It will go down faster and correct faster this cycle
1) Internet: speeds up the flow of information to the informed buyers
2) Government: Has a hand in it too…passing new legislation etc.
3) Banks & lenders: will be hit hard and will have to “work with people”
In the past cycle of the 90’s that was unheard of.
Banks freezing you IO option “Fat chance”
This is going to be interesting to watch as I am on the fence for at least 1 more year
Scott,
You confuse me sometimes.
Didn’t you say you live in AV rental?
To clarify # 3 above
3) The relation between rents and OC median price at bottom of cycle
Will rents be up 7 to 12 % ??
Will rents be down & what % peak VS trough
Remember that old poster Ken who claimed that OC was a “supercity” in which prices were realistic and that people should buy (in 06-07)? Imagine if people actually took that joker’s advice and bought–they’d be screwed right now. After 20% declines, that guy looks about as smart as Gary Watts. How about that firefighter Nick, who boasted about robust housing values in the OC? Gone as well.
My prediction is that Jimmy and Shock G will be gone by this time next year, following in the footsteps of Ken, Nick, and the like.
Jimmy,
You must live in a dream world… The reason the RE market depreciated in the 90s had nothing to do with the Defense Industry per se. It had all to do with a local economy that was too dependent on one sector and that happened to be the Defense/ areospace industry. Back then the economy became too dependent on one sector and this time around we have the exact same scenario in terms of the local job market - too much revolves around one sector. This time it is Real Estate. And this time the problem is 10x worse because not only did the O.C. Economy depend on many Real Estate jobs; but the O.C. Economy also became dependent on that constant cash from appreciating home values and the refinance activity. Just watch ’til the home equity loans dry up and the coming collapse will be very painful. You did read that some Banks already frozen some HELOCs, didn’t you?
But of course you can deny all that and go around telling everybody that everything is great. From your posts I can tell that you are not worried too much about the state of the USD either. We have inflation waiting on our doorsteps that will make everything that much worse. But hey, let’s all sip some of that Kool Aid and convince ourselves that all is fine….
Home price is a place to live with equity build up over the years like a saving accounts, not ATM machine.
My neighbors bought his house in Irvine for $250,000 in 1990 and now expect to sell it for $650,000 (follow by 20 percent price drop and 6 months on the market.
It is that you can do that during the past 5 years. Now it is too little too late to sell. Household income has little increase. Taxes and living standards are 80% more. There are more job losses in 2008 and beyond.
Price has been inflated with frauds, greeds, and cheap credits. It is only the beginning and the worst has yet to come. There are more ARM loans reset.
Our US dollar has lost its value more than 45 percent.
Home price is a place to live with equity build up over the years like a saving accounts, not ATM machine.
My neighbors bought his house in Irvine for $250,000 in 1990 and now expect to sell it for $650,000 (follow by 20 percent price drop and 6 months on the market.
It is that you can do that during the past 5 years. Now it is too little too late to sell. Household income has little increase. Taxes and living standards are 80% more. There are more job losses in 2008 and beyond.
Price has been inflated with frauds, greeds, and cheap credits. It is only the beginning and the worst has yet to come. There are more ARM loans reset in 2008.
Our US dollar has lost its value more than 45 percent.
Jimmy,
I’m not arguing with you that home prices did collapse 40% in the Coastal areas. They didn’t held up pretty well - thus far. But you have to think ahead and look at the economy as a system that includes not only coastal homes sales comps but the monetary system, the credit system and understand why the U.S. Economy did so well during the past 5 years, why the Housing market did so well over the past 5 years.
Do you seriously believe that this housing market can sustain itself when the foundations that supported those home prices are removed? The coastal areas will also depreciate, it just takes a bit longer to reach that demographic.
typo: I meant to write that Coastal Home prices held up - thus far.
Amazing how dense some people are.
Jimmy, shockg, ken, 50 other names are all the same troll.
Nick the firefighter was not the troll, but the troll brought him back for an encore.
Tricky troll.
Here is the situation again for those too dense to get it.
The Chinese and net exporters had a ton of cash they needed to recycle. Bush wanted to get elected so they lowered the interest rates and the foreigners gave away very cheap money. That started the momentum going and people were willing to take advantage of appreciation for easy money. Easy money dried up and the salaries of OC residents does not support rents or housing .
Salaries are not going to go up soon because foreign competition is getting stronger, we shut down a lot of our more productive jobs and traded them for real estate related jobs, those jobs are going away and recession is headed in. It took years to create this mess and it probably will take years to unwind it. I have no good model as to how many years except the mess seems a lot worse than it was say in 82.
People are guessing without much support how bad things are or will get. If I had some insight into the balance sheets of OC residents I might know. Absent that, many scenarios could play out. We could have fast inflation we could have deflation. But until real wages go up it seems likely houses will be going down.
Here is a poll question.
How many of you have 10k in the bank and no credit card debt.
I qualify for this.
Not buying it:
Good post.
I also have “beach property”
No forclosures in my area yet…..
Not to say it wont happen if a sucker bought at the peak on IO paper,
Just one thing though…………….
One sold on my street 03/07 / Orizaba / Belmont Heights LBC / $1.2Mill
They paid 50 % down with cash from a flip / trade up residence.
Another on Vista…..ALL cash for 1.1
So I think that these area’s are not AS subject to the 1st time buyer moron
Most of these people are old money and or had a trade up residence
Like I said ,
We are not immune to foreclosures,
Less 1st time buyers
Less Huge developments of new construction Vs ( Inland )
Less Buyers on risky paper
I for one look forward to see how it all play out ?? Beach Vs Inland
“As far as inflation, I expect that will happen, and real estate is the ultimate inflation hedge.”
Jimmy, please explain to me how overpriced Real Estate is a hedge against inflation, especially in a stagflation environment? How will raising energy prices and growing prices for all those consumer goods we import help Real Estate prices?
You should seriously think about that question. I think you and many others wrongfully reason that inflation will cause Real Estate prices to appreciate.
Jimmy = rich middle-aged to old man who lives in a mansion on the beach. Do you really expect anything he says to be based on the reality that most of the middle class in OC lives every day? I’d be surprised if he’s been more than 5-miles from the beach in the past decade. Too many posters on here are in the top 1-5% of the OC in both pay and net worth, and their unrealistic comments reflect this. They live in a bubble and are not affected by the economy or prices fluctuations. That’s why most current home owners do not realize how far the value of their home has already fallen. Most of them don’t care because they don’t plan to sell, and that’s fine. Just don’t ask them for a realistic point of view on the current mess, because they could care less and just spout whatever gibberish comes into their head without checking any facts at all.
Nvest 80:
“RE is the ultimate hedge against inflation”
I am not full agreement with jimmy but I would like to answer that……
Jimmy and I are old school RE = buy and hold
Jimmy’s properties in CDM and Mine in Belmont are rentals = units
Inflationarry times produce:
1 ) Higher gas prices
2) Higher groceries
3) Higher energy
4) Higher commodities = gold/plat/silver etc
5) Higher RENTS
The agrument Mr Invest80 is……..
Inflation or Deflation/stagflation……??
Time will tell.
good luck to anybody doing it the “old school way” by buying RE and holding it for the long term in this environment. Don’t forget that we are coming of a speculation high that might very well take 10+ years to reach again (look at the Japan RE history). Definitely not the type of situation one wants to be in with a negative cash flow…
Rental properties are a different type of investment. But to simply state that inflation produces higher rents is ingoring the very important variable of affordability. Don’t forget that those people that rent need a job and employers usually don’t hand out inflation bonus checks at the end of the month. So with energy and imported consumer goods heading higher, there will also be a maximum amount you can charge for a rental. It’s one thing to invest in RE that makes fundamental financial sense (e.g. positive cashflow), it’s another to buy RE speculating that prices will head higher in the future.
I certainly wouldn’t want to hold rental property for the coming years but wouldn’t mind investing in some towards the end of the interesting times that are awaiting us.
Time will tell.
Good luck.
a-GREED it’s an uncertain time for landlords. the only thing they have going for them at the moment is the possiblity of more foreclosures, a bit of seaasonality, and on the flip side nobody is qualifying to buy a home. but except for seasonality, the rest are great uncertainties and other factors like higher vacancies offset these..
not the best time to be a landlord wanting to increase rents because there are higher vacancies there have been historically. so, more competition = downward pressure on rents. not to mention has already been a pretty good run up in rents the past few years. people just don’t realize this because they compare it to the run up in home mortgage payments on traditional 30-year fixed and it pales in comparison. but now that 30-year fixed is coming back to earth….
nvest80,
Makes sense, if you’re going to buy investment property, buy at the bottom of the market and therefore increase your chances of it being a profitable venture long-term. I don’t think anyone would argue with that. But then again, I’m amazed at what a few perma-bulls here say on a daily basis.
Prices are going to plummet further and further. Why? Because of the upcoming Presidential transition. Those who believe prices will increase do not have an understanding of American Presidential Economics. It is a fact that when the white house changes the guard due to a 2-term president, the housing market corrects. Compound this with a hotly contested delegate debate and no clear frontrunner nine months prior to the election, and you uncertaintly. Oh, and to make matters worse, doom will occur in mid 2009 when it is clear whoever becomes president has no clear solution or stance on economic policy. All SoCal needs is an earthquake and I will have that beachfront property by 2010 at a $700,000 discount than my neighbors.
thank you rants, good find
Jimmy:
Jimmy, you forgot one thing:
We are just getting started>
Hang on or jump off while the ride has reached the peak.
By the way, what real estate company do you work for?
nvest80…
One segment? Did you forget about the S&L chrisis? Don’t you remember how easy it was to get money from them in the late 80’s? You didn’t even need an appraisal.
Or did you ignore the national recession the country went into in the early 90’s? How about the CA govt raising state taxes right in the middle of that recession? Good economic activity?
What about the national tax change extending the depreciation schedule for commercial real estate from 15 to 27.5 years? It was “grandfathered” so that any building that construction began on before the deadline in the late 80’s could keep the 15 year schedule. The result was a glut of apartment construction that all came to market in the early 90’s.
CA had more defense industry jobs than any other state in the union to the extent of “anywhere but CA” was the call when new jobs were being created in DC. Loss of that industry hurt. It took years to recover.
jake…
I haven’t had any credit card debt in over 20 years. And $10k is not enough. Last year we paid off our home and started raising cash. We are now over 7 figures and rising.
What do you think?
“jake Says:
February 13th, 2008 at 2:32 pm
Amazing how dense some people are.
Jimmy, shockg, ken, 50 other names are all the same troll.
Tricky troll.”
Which of these old characters does Mulliganville remind you of? Ultra-right winger who can’t figure out if he wants to pay less taxes or have the government babysit us. Claims that the bottom is at hand. Tells us that now is a great time to buy because low interest rates and high prices is the best situation we can hope for.
weres the REGISTERS front page headlines….
OC median house price decline of 17% from 07 peak is
greater than the 90’s — no end in sight…
Jimmy you are a true optimist, the foreclosure market is just beginning, trust me I’m talking with the banks and their staffing up to handle the wave of foreclosures coming. Speaking of waves, you find those at the beach as well. The beach appreciates the most and crashes the hardest as I recall from past cycles and its always the last to crash; it’s coming so grab a life vest. How many people in Newport Coast are living beyond their means because they think its the place to be? I’d guess a larger percentage, their big equity lines will be the last to dry up and then guess what happens next? They said prices would never fall in Hong Kong, where demand for real estate is the highest in the world, that was before it crashed over 60%.
Rants:
Great post on the rents,
Not sure why you thought that was an agrement for falling rents in OC?
This artical is actually very Bullish on rents rising:
SF/NYC/Seattle WA/ San Jose CA/
NO mention of LA/OC market however based on Vacancy rates:
We are # 3 in the nation, holding 97% occupancy in our market.
PDU:
OC ECON 101
Great post: I spent the morning reading all of them over coffee.
I like to see all the old data and X-refference that to our current mak-conditions.
It is going to get alot worse before it gets better, based on historical data
NVEST80 says:
“Good luck to anyone doing it the old-school way buying RE and holding in this enviornment ! This is definatley not the situation one would want to be in with Negative Cash-Flow”
I totally agree with that statement.
I would NOT reccoment anyone buying any-time soon based on this model
Good think I bought 10 years ago and the “Beach Props” are BE == Break Even.
They would be positive if I did not…
Place the 30 Fixed note on the Bi-weekly Equity Excellerator program
I pay extra every month however, It takes 8 years and 200Gees off the super Jumbo
top 1%
I believe the numbers would show that beach properties hold up better than inland properties, not fall more. What numbers are you looking at? You are claiming that San Bernadino will hold up better than Newport? The numbers are already showing that to be the opposite, and to say it will invert at the end of the cycle due to that being what has historically occurred is an incorrect statement. That is not what has happened historically, it has been the opposite.