Cheapest O.C. homes selling best in late-May

June 13th, 2008, 7:07 am · 71 Comments · posted by Jon Lansner

DataQuick’s late-May homeselling stats show that O.C. sales are destined to be below their year-ago pace for the 32nd consecutive month when full-month figures are out early next week. And May’s median selling price will be under a half-million bucks for the first time since early 2004. (Psst! Tell others by email!)

My trusty spreadsheet tells me that it’s not all all so downcast. Breaking the O.C. market into pricing thirds (by rank, by ZIP code, the most recent median selling price,) one clearly sees where the limited sales oomph is — the cheapest neighborhoods. Here’s what I found for the 22 business days ending May 27:

Cheapest third … 720 homes purchased, a pace down 8% vs. a year ago.
Priciest third … 757 down , 23% vs. a year ago.
In the middle … 723 homes, down 25% vs. a year ago.

So, then ponder another recent report from HousingTracker (read more HERE!) that showed in May that sellers of cheaper O.C. homes have been dropping their listing prices in each of the past 13 months. Meanwhile, in the pricier half, asking prices have actually risen for five straight months. Perhaps the upper crust is missing the “discounts required” message the DataQuick buying results show?

Of course, O.C. mortgag erates are now at 2008’s high. Read more reasons to worry HERE.

For the 22 business days ending May 27, DataQuick says …

Slice	Price	Vs. ‘07	Sales	Vs. ‘07
House	$540,000	-22.3%	1,502	-16.4%
Condo	$363,000	-21.1%	586	-18.7%
New*	$450,000	-28.8%	220	-36.8%
All	$485,000	-23.0%	2,308	-19.5%

For full ZIP analysis CLICK HERE.

Other local pricing news …

• Local appraisers found SoCal pricing at its weakest in 43-plus years.
• Price cuts make the typical O.C. house more affordable than it’s been in five years.
• Buyers may be noticing that the O.C. rent-vs.-purchase math has improved.
• And, pipeline of new purchases put into escrow by brokers is at 2-year high.

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lee in irvine says:

June 13, 2008 at 7 am

Per DataQuick, Single Family Median Home Price:

2006 ~ Month End

$690,000 = Feb ~ Watts 15% “In The Bag” for SFH
$695,000 = Mar
$705,000 = Apr
$705,000 = May
$700,000 = Jun
$699,000 = Jul ~ Watts revises forecast to 11%
$685,000 = Aug
$680,000 = Sep
$665,000 = Oct
$660,000 = Nov
$665,000 = Dec

2007 ~ Month End

$675,000 = Jan ~ Watts forecast 7% SFH
$675,000 = Feb
$695,000 = Mar
$720,000 = Apr
$695,000 = May
$734,000 = Jun ~ Peak of O.C. Housing Bubble
$718,000 = Jul
$710,000 = Aug
$655,000 = Sep
$650,000 = Oct
$655,000 = Nov
$600,000 = Dec

2008 ~ Weekly ~ Month End

$583,250 = Jan ~ Watts declares “Pent up Demand”
$575.000 = Feb
$570,000 = Mar
$555,000 = Apr
$554,000 = 05/06
$540,000 = 05/14
$535,000 = 05/20
$540,000 = 05/28

Per DataQuick, this loss represents a $194,000 decline in single family home prices from the June 2007 high. And the beat goes on … and on … and on!

NationalBubble.com says:

US foreclosure filings surge 48 percent in May

Housing crisis worsens as number of US homes facing foreclosure in May up 48 percent

WASHINGTON (AP) — The number of U.S. homeowners swept up in the housing crisis rose further last month, with foreclosure filings up nearly 50 percent compared with a year earlier, a foreclosure listing company said Friday.

Nationwide, 261,255 homes received at least one foreclosure-related filing in May, up 48 percent from 176,137 in the same month last year and up 7 percent from April, RealtyTrac Inc. said.

One in every 483 U.S. households received a foreclosure filing in May, the highest number since RealtyTrac started the report in 2005 and the second-straight monthly record.

Foreclosure filings increased from a year earlier in all but 10 states. Nevada, California, Arizona, Florida and Michigan had the highest statewide foreclosure rates.

Metropolitan areas in California and Florida accounted for nine of the top 10 areas with the highest rate of foreclosure. That list was led by Stockton, Calif. and the Cape Coral-Fort Myers area in Florida.

Irvine, Calif.-based RealtyTrac monitors default notices, auction sale notices and bank repossessions. Nearly 74,000 properties were repossessed by lenders nationwide in May, while more than 58,000 received default notices, the company said.

In Nevada, one in every 118 households received a foreclosure-related notice last month, more than four times the national rate. In California, one in every 183 households faced foreclosure.

The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing U.S. economy has left financially strapped homeowners with few options to avoid foreclosure. Many can’t find buyers or owe more than their home is worth and can’t get refinanced into an affordable loan.

Making matters worse, mortgage rates have been rising, reflecting increased concerns about what the Federal Reserve might do to battle inflation. Freddie Mac, the mortgage company, reported Thursday that 30-year fixed-rate mortgages averaged 6.32 percent this week, the highest level in nearly eight months and up sharply from 6.09 percent last week.

Efforts by government and the mortgage industry to stem the tide of foreclosures aren’t keeping up with the rising number of troubled homeowners, and critics say a Bush administration-backed mortgage industry coalition, dubbed Hope Now, is falling far short.

Rick Sharga, RealtyTrac’s vice president of marketing, said foreclosures are unlikely to peak until sometime this fall, as more loans made to borrowers with poor credit records reset at higher levels. “I don’t think we’ve seen the high point,” he said.

About 50 to 60 percent of borrowers who receive foreclosure filings are likely to lose their homes, Sharga said. The rest are likely to be able to sell or refinance.

A new government report released Wednesday found that among mortgages held by Bank of America, Citigroup Inc. and seven other large banks, foreclosures climbed to 1.23 percent of all loans in March from 0.9 percent in October.

As foreclosed properties pile up, they add to the inventory of homes on the market and drag down home prices. The trend is most dramatic in many parts of California, Florida, Nevada and Arizona, where prices skyrocketed during the housing boom and are now falling precipitously.

Sales of foreclosures, vacant new homes and other distressed properties now dominate some markets, causing grief for individual homeowners who need to sell for other reasons, like a job in a new city.

Nationwide, one out of every four sales between January and March was a distressed sale, and that figure jumps to more than 50 percent in the hardest-hit areas like Las Vegas, Detroit and distant suburbs of Los Angeles, according to Moody’s Economy.com.

In some neighborhoods, lenders are slashing prices dramatically to rid themselves of an unprecedented number of foreclosed properties, sparking bidding wars and multiple offers.

While that’s a positive for the real estate market, buyers in other parts of the country are still holding back.

“I think a lot of people are waiting to see if we really have hit the bottom,” Sharga said.

Lehman Brothers economist Michelle Meyer said in a report Thursday that U.S. home sales are likely to hit bottom at the end of this summer, but said a recovery in sales is likely to be “feeble.” Home prices, she wrote, are still expected to fall another 10 percent by the end of 2009.

shockg says:

Thats Great. Young families can afford a starter home.

The Money Pit says:

If the conforming rate goes to 7.5% in the face of all this REO getting liquidated, it is really gonna be ugly.

bpsqwerty says:

nope, no stucco box for me…

caliguy2699 says:

I thought young families weren’t supposed to be entitled to a “home.” They only should be buying small condos in bad areas.

-10% sounds about right…

Four times income would be $200K. Yikes!! I’ll be bullish and say OC will never get to fair value. Call me a bull, but the median will only drop to $300K.

Liar Loan says:

June 13, 2008 at 8 am

When is the Steve Thomas sales bump going to happen??? He keeps saying demand is surging to 2006 levels. Riiiighht……….

His metric for “demand” would make any honest economist blush…..

Active Buyer says:

blood - link was on Florida RE - do you have something about our area? This is not the local story that I am hearing or seeing - at least in SO. OC.

June 13, 2008 at 9 am

The link to the ZIPs in the blog post goes to last week’s numbers…

Look Elsewhere says:

the median in the OC ( OverCharged) and the rest of California should be in check with the rest of the Nation; A National Median Home Cost; not entrenched OC setting the median price. These Homes are Not worth the money and built cheaply, rent here ,buy in other states, contries, IE Costa Rica Has great deals on condos a fraction of the cost, and twice as scenic, nice place to retire

Mick says:

So the most expensive, overpriced homes aren’t selling as well.

From April 21: “…It’s a strong hint that when these deals-in-the-works are completed in the next two months, we’ll see a mathematical end of the county’s home-buying losing slump.”

Not too much of an improvement showing up yet in the sold stats one month later. Guess I’ll continue to give Thomas the benefit of the doubt until the end of June.

pdu says:

June 13, 2008 at 11 am

So, the cheapest homes are selling best and “sellers of cheaper O.C. homes have been dropping their listing prices”.
Sort of makes sense; if you want to sell something you need to price it where people can and will buy.
Maybe it really is all about affordability after all.

Mark says:

June 13, 2008 at 12 pm

I am glad home prices in OC are coming down…. When I purchased my newly developed condo back in 1993, (in Irvine, by the way), the resides of the entire development were single professionals. Through the years, I notice more families have moved into the condo complex, now most of the 200 some condo units are families with small children cramped into small 1000sqft condo with no backyards. The community is no longer a quite environment since there are cramped with kids playing in small alley ways between the condo complexes, it is really sad to see family with kids can’t afford to purchase a house, it is a sad reality, living standards have dropped dramatically for OC families.

Homes in Irvine are nothing but cages lined up on flat streets with no characters, most communities look more like military housing to me….stack against each other and all you see are your neighbors windows or walls when looking out your windows or backyards . Yet, people couldn’t get enough for them…. and will pay any price to live in Irvine, it boggles my mind, it seems most don’t question and never asked if they deserve better? I am glad prices are dropping, hopefully more families won’t need to live in a sub-standard condition anymore.

I do not have hard numbers, but I have lived in the UK and Switzerland, and would guess that at least 90% of those people live in tighter quarters - are they all sub-standard? Parents should be taking there kids to parks to play on weekends - quality family time!

typo - their not there - sorry.

Scott says:

It’s the entitlement argument again. What a shock.

# Scott Says:
— “It’s the entitlement argument again. What a shock.”
–

That’s pathetic, if not elitist.
Are you suggesting that there is some inherent superiority possessed by those who bought a house in the past? Are you suggesting that those who want to buy now shouldn’t be entitled to?

mav says:

i think Scott is suggesting that those of us sitting on a pile of cash with the necessary income required……….. should step in a bail out kool aid intoxicated people……….save them from their financial disasters……… sorry those people are SOL……… no credit for you! no more HELOC for you !

keep dreaming……… the bottom is way past 2010………….

Price of Bad Tidings says:

June 13, 2008 at 1 pm

“That’s pathetic, if not elitist.
Are you suggesting that there is some inherent superiority possessed by those who bought a house in the past? Are you suggesting that those who want to buy now shouldn’t be entitled to?”

Note that bulls are the only ones asking for government bailouts to protect their “earned” equity - as if RE should earn interest. In other words, the guilty tend to scream the loudest.

I think that is the basic problem, everyone is looking at RE as an investment when it should be viewed as a place to live where you can (for the most part) do what you like - same as renting only no one is looking over my shoulder to see what color I painted the family room and there is a very good likelyhood that I get more (and at a minimum most) of my money back when I am done with the property sometime in the future (10-15 years). The tax write off is a bonus until then.

David Poggi says:

Just buy a $hit hole condo in a dirty run down neighborhood like I did. Just make sure you pay 20k above market value for it like me too. Rants, please come over again for more strip poker. And make sure you bring the whipped cream and nipple tassles.

Can someone tell me, based on median price or any other information they may have at hand, if someone bought at the height of the last bubble and then had to sell now how much of a profit would they make? I am guessing that unless they hosed them selves by living over the top they would be pulling a very healthy return. Why would we expect things to be any different in the next 10-15 years?

I have tried to look this up but just can not find the data.

How dare Lansner censor me again! I’m just trying to provide an opinion in what is supposed to be a public forum! I wonder what the ACLU would have to say about this!!! I guess we’ll have to find out!

PDU,
I am only suggesting that you buy what you can afford. If you think you cannot afford it, you should look elsewhere.

Do you have a valid argument for why medium income should correlate with the medium house price?

I’ll let the peanut gallery in on this one.

chicken little says:

if i am making the minimum wage, should the average home priced at 20k?

or maybe peedoo is making the minimum wage at kfc?

Scott,

Prices that are 4.5 - 5.5 times median income does not make the median home affordable to the median income.

Check with a financial advisor…. they will tell you, 2.5 - 3 X income is what you can afford…………… based on historic OC home prices…. I do not expect the median to fall to 2.5 X median income……….

Look at historic prices………. we are headed back to a median home price equal to 4.5 times the median income………… which will put us back in the low $400Ks……….. in most bubbles fundamental pricing is over shot……….. ……….the meidan OC price could easily drop into the $300sK………….

nanowest says:

June 13, 2008 at 2 pm

I know that it is very hard for many on this blog to understand……people can no longer purchase homes that they cannot afford. Home prices will continue to fall until they are affordable. This is not “entitlement”, this is common sense.

And mav, I am with you, I believe we will see median home prices in the 350K range in about 3 or 4 years.

nano,

don’t tell truthiness that……….. she thinks a family should spend every last cent on their mortgage payment……….. have no 401K, no savings……… and no life………. just a mortgage payment……….

Active Buyer,

Somebody posted these numbers on this blog a long time ago…. I can no longer remember who. If you look, it appears the previous peak was in 1991 with a OC county median of $200,660. Since the current median is $485,000 according to DQ, that equates to about a 5.3% compounded return since 1991. Also, this has median income and the ratio of price to income for OC over that time.

Year Family Income % Income Increase Home Price % Home Increase Multiple
1980 21,200 N/A 99,550 N/A 4.7
1981 23,300 9.91% 107,710 8.20% 4.6
1982 24,300 4.29% 111,800 3.80% 4.6
1983 25,200 3.70% 114,370 2.30% 4.5
1984 26,400 4.76% 114,260 -0.10% 4.3
1985 29,000 9.85% 119,860 4.90% 4.1
1986 30,800 6.21% 133,640 11.50% 4.3
1987 33,200 7.79% 142,060 6.30% 4.3
1988 34,000 2.41% 168,200 18.40% 4.9
1989 34,500 1.47% 196,120 16.60% 5.7
1990 37,700 9.28% 193,770 -1.20% 5.1
1991 38,200 1.33% 200,660 3.56% 5.3
1992 37,400 -2.09% 197,030 -1.81% 5.3
1993 39,100 4.55% 188,240 -4.46% 4.8
1994 37,700 -3.58% 185,010 -1.72% 4.9
1995 41,400 9.81% 178,160 -3.70% 4.3
1996 43,500 5.07% 177,270 -0.50% 4.1
1997 44,700 2.76% 186,490 5.20% 4.2
1998 46,500 4.03% 200,100 7.30% 4.3
1999 49,800 7.10% 217,510 8.70% 4.4
2000 52,000 4.42% 241,350 10.96% 4.6
2001 53,400 2.69% 262,350 8.70% 4.9
2002 54,800 2.62% 316,130 20.50% 5.8
2003 57,130 4.25% 371,520 17.52% 6.5
2004 55,000 -3.73% 450,770 21.33% 8.2
2005 60,000 9.09% 522,670 15.95% 8.7
2006 62,005 3.34% 556,640 6.50% 9.0

Oh… the numbers didn’t paste from Excel that well. The six columns are:

Year
Family Income
% Income Increase
Home Price
% Home Price Increase
Multiple (Price/Income)

Hopefully you can figure out the numbers from there.

not buying it says:

Active Buyer:”Can someone tell me, based on median price or any other information they may have at hand, if someone bought at the height of the last bubble and then had to sell now how much of a profit would they make? I am guessing that unless they hosed them selves by living over the top they would be pulling a very healthy return. Why would we expect things to be any different in the next 10-15 years?”

First off, why are you even concerned with that? Are you trying to state that by buying when prices are high, you stand a good chance of still owning a home that has increased in real value, after accounting for inflation, over 10 to 15 years? Yeah ……. SO WHAT?!?!

It does not make sense because if you are thinking of your home as an investment and you made that decision - then you are an idiot. If are not thinking of your home as an investment then you would not be concerned with this at all. So what is your point?

Are you trying to justify buying at the height of a market from an investment standpoint? Are you kidding me?

And you own how many properties? And your decision making process was what? Shooting darts?

You are missing many many factors. You are trying to hypothesize that by buying at the height of a bubble and holding for 10 or 15 years, you would still be OK.

And by historical accounts, you are probably correct. However, being OK and feeling like you have achieved signifcant financial gain are two completely separate items. If you like to live life making sub-optimal decisions - then by all means - go ahead. People do it everyday.

During half of those 10 to 15 years, you might be turned over - so for half that time, you are now in a high risk zone - if you had to sell you would be as sad as those who have to sell today. Isn’t that obvious?

Second, you’re recurring costs would have been much higher for that time than if you bought at the bottom. Your neighbors who bought in the few years after you would be paying less per month than you - both in taxes and in principle. Some people don’t like that.

Third, the downpayment could have been used for investing during that time, when the market hit bottom you could have bought more home for the same money with more down.

Fourth, the money you did put into the home is losing value and accounting for inflation - you lost money - maybe alot of money. If you thought of buying that home as an investment - you would have given yourself a failing grade for effort because there are at least 30 other ways to make money on your money than buy an asset at the height of its bubble.

I am amazed that you would even ask such a question that appears to be so simplistic and void of consideration of so many factors.

Do I need to go on?

It is hilarious to read how some attempt to logically justify making ridiculous decisions.

Yeah - I know those folks paying alot more a month for the same home than those that wait are stating they made a great decision since they’ll be up in 10 to 15 years. (LOL)

AB - did you put much thought into that one?

Were you happy with simply getting a D grade in school (for done) or were you a straight A student? In 10 to 15 years, it won’t matter much.

Why would anyone that is making the biggest decision of their lives use such a simplistic approach to rationalize it?

People that buy right now are either (a) not concerned about returns/losses and have other reasons to buy or (b) made a bad decision. That’s a simple as it gets.

# Scott Says:

— “Do you have a valid argument for why medium income should correlate with the medium house price?”

–

Affordability, my man. There needs to be a reasonable correlation between incomes and home prices or those that want to sell won’t be able to find a supply of buyers. It’s the way markets work. It’s why the market isn’t working too well right now.
Houses weren’t “worth more” a couple years ago. The goof-ball financing available allowed lower payments. The supply/demand ratio was thrown off as almost everyone could find a way to “buy” at a payment that they could make and gamblers/investor/speculators jumped into what seemed an easy-money no-lose situation.
……………but you know all this anyway so stop being silly.

AB: not to mention that this last bubble was unprecedented - I bet money the losses will be as well.

Affordability: look - the median income has less to do with home values than the rental equivalent.

A home is a place to live.

Everyone needs a home.

Many (not all) that rent would like to buy

Vacancies are bad. So rents go down/up depending on what it takes to get someone in that place for the most money possible - supply and demand.

the home values are based on supply and demand as well. This last run-up saw easy lending as the fuel - thereby, artificially increasing the demand - home values diverted significantly from the traditional rental equivalent (with a multiplicative factor depending on location and market) and rents just did what they normally do.

We are now seeing home values begin to make their way back down to the rental equivalent. I am sure the multiplicative factor will be exactly as it was back in the late 90’s when this market meets its bottom.

That chart is interesting because it makes all the more sense as to why some ppl (including Lansner) thought at the time that 2002 was the peak. Why? The multiple had gone higher than it did at the end of the 80s, right before the end of that bull market.

By this it looks like the multiple should be somewhere around 4.5-4.6. Assuming median OC household income is $85,000, then the median “should” be about $380,000-390,000.

It’s curious that there seems to be no resistance to the concept that higher interest rates would result in lower prices –(supply/demand, again, and affordability) — and yet we have a reluctance by many here to acknowledge that prices already have fallen substantially, for basically the same reason.
Higher interest rates raise the monthly payment resulting in a drop in those able to afford a house at a given price.
The same thing has already occurred only instead of payments having increased due to interest rate increases, the payment have increased due to goofball loans no longer allowing buyers to make payments far below the amount necessary to amortize (pay off) the mortgage.
Payments are up, prices are down. Same difference.
To cast a little gloom, just to tease the Pollyannas, we’ve only just begun this price descent IF the interest rates continue to climb as they are doing right now and as many expect they will continue to do.

June 13, 2008 at 3 pm

not buying it-

I agree that rental equivalents are probably the most useful ratio, but only on a very localized level. The people who track this usually compare the average rent on 3 bed apts to the median home price. This can be misleading since 3 bed apts don’t have as much demand as 1-2 bed apts, or rental houses for that matter. Also, when you look at high end homes, I’m not sure the rental equivalent has any bearing at all. Those people are paying a luxury status premium that renters typically wouldn’t.

The price/income ratio is nice because it’s so easy to quantify and it gets a lot of attention from readers on this blog.

wantstobuy says:

I am looking to buy at 20% below appraised value.

Not buying it: ……………………. WOULD YOU DO IT?

Will the price go below 20% within 5 years?

not buying it - why do you get so excited?

My opinion is that you should not view RE that is being purchased as a principle residence as an investment, therefore if you find something you like with a payment program you can afford, in the long run you will get a positive return on the RE and in the short term you will benefit from the tax savings.

This is a very simple view point, but it is also very true.

I am not trying to make things complicated, I am not trying to tell anyone they should buy now, and I am not trying to scare anyone.

What are you doing?

- and by the way I like renters, they are my second income.

same here for me. i like renter. jake/rants/peedoo keep on renting.

tonytony says:

June 13, 2008 at 4 pm

i like my landlord, who rents his $600k house for $2500 and takes
care of everything: property tax,hoa,mello ross and maintainence!!!

awgee says:

This is good news. A couple more years of decreasing prices and homes will become more affordable for the average wage earners and the average families.

June 13, 2008 at 5 pm

AB: I understand. However, although how honorable it may seem to buy without considering it as an investment, I find it very very hard to believe that people would not - in some way, shape or form.

The logic you portrayed in your posts above was based on the premise that in the long term, the value will be higher - my question then: if value is not a concern - since its not an investment - then why even mention the fact that over the span of a long time, you will be “out of the water” sort of speak?

I’m just thinking logically here.

Frankly, I find it absurd that someone will state they own investment RE and then make statements such as yours above that support the notion that buyers should not consider their principle residience as an investment.

How did you pick up your first rental? maybe with some equity from your primary?

let’s be real here man. Nobody in their right mind would find much joy in buying a primary residence at the peak of the market when money is a concern by any measure - and losses are being realized - double-digit losses at that!!

What am I trying to do? I am trying very hard to avoid a future wave of whiners that we have seen recently asking for bailouts since they claim they did not see this train coming.

I own RE. I want the values to rise again - but not at the expense of having to provide bailouts to those that make sub-optimal decisions - claiming they did not know. This debacle had the present situation written all over it the moment the OC Register reported that 80% of all buyers were using ARMs when fixed rates were at 5%. People have always and will continue to buy based on a monthly payment more than anything else. Then when they realize that the monthly payment could have been lower if they waited, the whining, the complaining, and the scheming starts.

I also own a business and would very much like to be able to reduce the cost of living adjustments I have to offer to top-level engineering graduates to even have them consider moving out here.

Funny thing is that many folks that are foreclosing can actually afford their homes. They choose not to pay because they know they could get a lower payment if they were to buy now and foreclose on the current home. Or they simply go back to renting and wait it out.

If prices were continuing to rise, you would not see these people foreclosing. Even with higher rates.

it is absolutely critical that buyers know what is important to them and plan accordingly.

The buyer pool in the OC is not what I would call savvy as compared to the pool in NYC. Hence, the increased severity of this debacle locally.

doc says:

I guess we now know where most OC homes should be prices, below 500k.

Thoughtful says:

June 13, 2008 at 6 pm

Looks like stable prices on ever-increasing volume to me. If not for new home sales, it would be much better.

Tom M says:

Thoughtful is correct stable price fall 25% a year. Gas prices are very stable too they went up about 50% from last year.

June 13, 2008 at 7 pm

I’m betting my money on even greater stability next year. Hopefully, RE prices won’t suddenly adopt stock market-like behavior.

n2zs says:

June 13, 2008 at 8 pm

I don’t get it. 19 Sunfish (Irvine) is being listed @ $450,000 for 900 sq.ft. - that’s $500/ sq. ft.? Have they not read the news lately? You have to have an income of $150,000/yr (twice the median income) to “qualify” to buy this piece of junk? Can you explain this to me?

June 13, 2008 at 9 pm

Foreclosures and short sales are 39% of inventory in OC (and consistently climbing). They’re 63% of the $500k and below inventory - where a significant part of the sales action is.

Foreclosures are not tapering off but are increasing.

Nothing at all normal about this market.

Troy says:

June 14, 2008 at 12 am

Lader Ranch zip code median price has declined 35% in one year?

That’s gotta hurt!

ihatelasner&gwbush says:

June 14, 2008 at 6 am

Get out and BUY…We have hit the bottom!!!

June 14, 2008 at 9 am

SeekingAlfalfa: yes, I agree, interest rates are not an indicator that can be used 100% of the time to predict future direction of home pricing. But it does come into play in the next best thing: basic fundamentals of income and price - affordability.

I found it comforting to see we have another well written abstract on the topic.:

“It appears that models based on interest rates fail, whereas housing price models based on actually fundamentals like household income are historically better predictors of house prices”

Alflafa - did you check out his chart showing the income to price multiple?

This bubble is worse than any ever in history. The potential for price decline is huge and its based on fundamentals that can be used to accurately model home prices for the last 40 or so years. Very interesting indeed.

June 14, 2008 at 11 am

PDU
With today’s IR buyers can easily finance 3.5-4 times. 2.5 is 1982 we all know why. Anyway the medium income of those that purchase re in OC is about 95 K yearly. That yields 330-380K financed. Add the down payment of 20% to those numbers and you have OC’s current medium.

median :)

June 14, 2008 at 4 pm

Alfalfa,

I’ve got no fits to throw or alliance to whoever it was you linked to, however I did find his reasoning a bit weak:

— “The interest rate is irrelevant to what you are willing to pay for a particular car. The same is true for housing.

But the lower interest rate does indirectly have a small impact on pricing, not because it lowers the monthly payment, but because it increases demand. The lower financing package will attract some potential buyers of less expensive cars to move up. It will also make new cars more attractive to some used car buyers. So the more attractive financing will probably increase the demand for the $30K car and that might increase the price slightly.”
—-

I find no correlation between car and home purchase, but I do know when a manufacturer needs to push a particular model they will offer factory subsidized financing, including zero down.
That does increase sales and yes, you are offered the zero financing in lieu of a discount, so prices are increased…… but this has nothing to do with what we were discussing, which I believe had to do with affordability.
Raise the interest, the payments increase and affordability decreases. Pretty basic.

Now, if we go back in the past there will be times when one could say that interest rates increased and prices increased at the same time.
This did occur during times of high inflation — more dollars chasing finite inventory and inflationary pressure causing rates to increase.

That is nothing like what we have at work in today’s economy. There is no wage inflation and there are no excess dollars chasing a limited supply of homes.

The little piece your link led us to is an example of one using stats to make a point when the stats don’t tell the whole story.

Rates go up. Payments go up. Payments go up. Sale go down.

OK. I guess it’s time for all those first time buyers to loosen up their purse strings and pull out that 80K + downpayment they have squirreled away, quit bit ching about gas prices, food costs and credit card debt, and go buy that little overpriced “median” home they really can’t afford and don’t really want because it’s still a dumpy place in an edgy area.

Now must be a really good time to buy, huh?

trs says:

June 14, 2008 at 5 pm

i see a posting where someone says the oc housing is “scary, very scary”. i agree. i would be scared if i were a renter. good beach towns are holding those extreme values. gettos and distant towns are crashing. renters blew it big. they never bought the beach home when they could have. now, the only option left to a renter is buy a ghetto home since they came down. “scary, very scary”.

June 14, 2008 at 6 pm

trs,

The echo is because you are all alone with your rantings — it’s coming back to haunt you:)

Slice	Price	Ch.	Sold	Ch.
House	$500,000	+18%	1,833	+11%
Condo	$290,000	+7%	881	+22%
New	$617,500	+24%	171	-17%
All OC	$435,000	+10%	2,885	+12%

Orange County Register