Chapman U. professors have their annual O.C. forecast out today. It says ..
- O.C. median single-family home prices will fall 16.1% in ‘08 (We kind of know that) and then fall an extra 9% in ‘09. Affordability and huge inventory are key culprits.
- Ratio of O.C. prices to income went from 3.8 in 1997 to 9.4 in 2005’s third quarter. Chapman expects it to fall to 6.3 by 2009.
- California will be equally smacked: down 23.6% this year, 7.1% next.
In general, Chapman sees more overall economic pain for O.C. (Read more HERE!)
Other recent home-price outlooks …
Why would he not expect it to fall back closer to 3.8 income to price ratio. That ’s a normal and more traditional amount. A 6.3 is still not a healthy price to income ratio and a so called professor of economics should know that. Unless of course you want the foreclosure crisis to continue for the next 20 years. His forcast is already more than a little wrong considering prices are down 24.4% vs last year. It will be different at the end of the year but I doubt it will be anywhere near 16%. What, is he worried about starting a panic if he forcasts what’s probably going to happen?
where is thoughtless,
btw, just -16% for 2008? rather bulish on RE
That puts the median at around 430K next year which is I think is actually too conservative..I think median will be 430K by the END of this year as the RE train wreck completes the capitulation stage quickly and efficiently. Think about it, here we are a -24% in about 10 months so we should see -28% by August at (-2.4%/month) then we enter into a seasonally slow time for sales which tacks on another 4 months of price declines which could easily bring the median into low 400s. Also, consider how the low end market has pulled away potential buyers from the hold outs in the mid-range market. I think the next big drop is going to be the 600-700 range homes as they capitulate down into 500s.
Here we are at March 2004 prices and only a short drop to 2003 and we nearly evaporated the fraud equity already in less than a year. A spectacular example of bubble justice.
I wonder if Chapman predicted the increase in values too…
I think you are right, Eat it. I think this Christmas will be very telling.
Eat It - help me to understand a couple of your comments.
The median is an abstract number since it does not differentiate between the mix of housing and impact of location. There are clearly many zips in OC that have a median sales price well above the overall median ($480k), and those zips out number the zips that are currently driving the median (SA, GG and so on). Once the REO in those areas starts to dry up I am expecting the median to jump up due to the influence of the other zips – why don’t you?
You say “consider how the low end market has pulled away potential buyers from the hold outs in the mid-range market” - are you saying that someone who really wanted to buy a home for their family in say LN bought in SA because foreclosures completely crashed the market in that area and drove up affordability? We are taking about very different areas and very different family/life styles. I can not imagine this happens in any great volume. Is there any proof of this occurring?
Not very useful info here.
Any person giving advice should tell prospective buyers to wait at least until winter to see what the trend is doing. To bad I don’t think that there are that many realtors that will overlook their need for income to tell someone to wait it till then.
Then again I would never be a realtor because of the volubility of the job itself.
AB, you can preach micro-markets until you are blue in the face…they love overall numbers…not the one that is specific to your area. The overall median was garbage when it was high and it is garbage here too. Oh, and the school district component which is ALWAYS left out…schools are a huge factor for people. Point well made…the Laguna Niguel buyers could care less about SA, GG, and the slime. It is where the vast majority of distressed properties are and they are moving the median down. So freaking what.
I firmly believe that RE became very over priced in the last couple of years, and I own a few properties. I am just hoping that some of the people posting here will stop and think about what they are saying - it just does not make any sense.
Provider,
Is that you thoughtful? The post has thoughtful’s usual reaction to sour news about the RE market. Anyone want to take bets that it is thoughtful.
The median asking price in Orange County is down by 12% so far this year. This is documented on Housingtracker. Since the asking price is continuing to drop, I think it is a very, very save prediction that housing will be down by 16% this year.
I believe that as the sellers with properties for sale above $500,000 finally realize that we are in a bursting asset bubble, the median will start to fall very rapidly. Realistically, the median will be down more like 20% - 25% this year.
Leave me out of your pisssing match.
AB,
I agree with Mulli, except that I wouldn’t even give some of the bears that much credit. Eat It obviously was just thowing out some half-baked theory (opinion) that lacks any basis in fact. I’ve challenged him and others to back up some outrageous claims in the past and was met with……….silence. Unfortunately, that kind of ridiculous “throw it against the wall and see what sticks” commentary is rampant on this blog.
Rants, let’s see, that’s 19 minutes since Mulli posted. I guess I must be him.
VOR,
The best part of this whole tr oll thing is none of the “bull” personalities even think or care if one “bear” is acting the part of 2,3,4 or whatever. It is pointless diatribe. Jake just does not get that…nor will he ever.
Well I have said before 5-15% more. It looks like someone at Chapman agrees with me.
Ponee,
Good call.
VOR showed up too.
I believe they hang out together — in the mirror:)
To fall only 16% the price would basically have to stop falling now, as we are seeing 24% year over year declines already in June. With all the NOD’s going out and the number of foreclosures going up not down, can anyone believe that? The pressure is building not abating.
The idea that we will stop at 6 times income is absurd. Bubbles like this overshoot. We will probably hit 4 times income like in 97, and that is if we are lucky, 3 might be more like it when all is said and done. That, folks, is 150-200K.
All this REO has to get sold, and who out there can afford these prices without the “magic money” financing that has disappeared. Fannie and Freddie are putting their money to work in Omaha and don’t seem interested in making jumbo loans with little down in California. Who can blame them?
From the Bizjournals:
The number of seasonally adjusted nonagricultural jobs in the state grew by 8,700 in May, bringing the total added in the past 12 months to 238,700, according to figures released by the Texas Workforce Commission.
I guess it is Texas’s day in the sun.
test
I live in Mission Viejo, not SA or GG, my condo complex is full of foreclosures or those about ready to be in foreclosure. The last HOA meeting minutes showed 20 units way behind on their HOA dues, I’m sure their also late on their mortgage payments. This isn’t just happening in the “bad” areas of Orange County, it’s also happening in South OC. Get your head out of the sand.
TX has a very strong economy, high property taxes, but no state income tax…Houston was voted the #1 relo spot of Metro areas for 2008 on Yahoo Biz.
I live in Mission Viejo, not SA or GG, my condo complex is full of foreclosures or those about ready to be in foreclosure. The last HOA meeting minutes showed 20 units way behind on their HOA dues, I’m sure their also late on their mortgage payments. This isn’t just happening in the “bad” areas of Orange County, it’s also happening in South OC. Get your head out of the sand.
It is happening all over the county…but the majority are in GG, SA, and Anaheim.
Chapman is almost always on the ball, if not a bit conservative. 16% however, is conservative almost to the point of being odd. but there are certainly factors that could have it falling it in that 15-20% range
Mulli
You are quite right. Home values haven’t changed much in Houston in the last 7 years. You can buy a beautiful loaded home (granite, 3-4000 sq feet, landscaping, etc. ) for under 400,000. Good schools too. Summers are hot, but you get an awesome home for less money. We lived there 10 years ago- sold 7 years ago- and the values haven’t changed in our neighborhood. The builders would say that they didn’t have to charge so much for homes because of the laborers were so cheap (which I would think they would be here too). But, right on- wish we could import one of those Texas homes here! There is a builder called “Trendmaker”, not so much custom homes but incredible amount of goodies for the money.
Oh yeah, and I should mention Ladera Ranch which is right on the other side of the bridge from me. That whole area is in bad shape. I want to make a comment about the “Beach Areas” that keep getting brought up. Yes, those areas won’t be hit as hard because the majority of homes are older and those owners already have better incomes than the gardeners who bought in SA, GG and Anaheim. But the people in the beach areas have owned those homes a long time and couldn’t afford them if they had to buy them today. But how do you think Talega is holding up? That’s a beach area and I bet they aren’t doing so well.
Mom,
Trendmaker and Village Builders seem to lead the “just under custom” production category. I am a native Houstonian, having moved here some 2 years ago. I sold new construction for VB for 5+ years. You do get so much for your money there…yes it is hot, and yes the state bird is the mosquito…but hey, at least they offer Lupe Tortillas and Papasitos! Man do I miss those restaurants…and Ruggle Grill.
“It is happening all over the county…but the majority are in GG, SA, and Anaheim”.
plurality no doubt… but the gap lessens when you include NODs not just foreclosure proceedings
lol gardeners…
Sorry, not all are gardeners some are house cleaners too.
Lines from the story “Real Foreclosures of Orange County”
“This Stanton 4 bedroom 3 bath at 10207 Banff Street last sold for $557, 536 in August of 2007. The homebuyer “cut lawns for a living,” a neighbor told me.”
“According to neighbor Edgar Facio, the foreclosed owner was a gardener who hadn’t paid his mortgage in a year.”
“Delgado, a housecleaner, bought his three bedroom for $515,000 with an adjustable rate loan in 2005. It will reset in 2010.”
If Chapman is saying it, we know it won’t happen.
/Chapman MBA candidate
No comments on Talega huh?
Talega…planned, 3 miles in…and going through some pain…no question. I would not call it a beach town…more equivalent to Laguna Niguel IMO
Isn’t it part of San Clemente?
Not a city though.
they are down,
You sound like a racist. Might want to tone it down a bit.
-18% in 2008
-20% in 2009
-22% in 2010
-8% in 2011
flat in 2012
Not sure how Chapman defines 2008. WIll this be the difference in price b/w Dec 07 and Dec 08. It so they are off comparing current year over year changes. If you take May 07 vs. May 08 $/sq-ft data then prices have already fallen 23.$%.
Just looking at Jan 08 vs. May 08 prices have already dropped 7.8% during that 4 month plan. Price decreases usually accelerate in the winter months but even if they don’t this year and rate of price declines stays the same then by end of year will have 3 x 7.8% = 23.4% drop.
2006 $/SqFt
$444/sq-ft = June
$433 /sq-ft = July
$435/sq-ft = September
$420/sq-ft = November
2007
$427/sq-ft = January
$420/sq-ft = February
$418/sq-ft = March
$424/sq-ft = April
$415/sq-ft = May
$419/sq-ft = June
$413/sq-ft = July
$404/sq-ft = August
$379/sq-ft = September
$381/sq-ft = October
$369/sq-ft = November
$353/sq-ft = December
2008
$345/sq-ft = January
$335/sq-ft = February
$330/sq-ft = March
$322/sq-ft = April
$318/sq-ft = May
Looks like prices have dropped from $444 to $318 per sqft - which calculates out to a 28.4% drop in prices since June 2006. When comparing versus price per square foot data the median price has been a lagging indicator of the real drop in home prices.
(only 26.9% if you base the drop on overall mean instead of per sq.foot)..
Scott, I was directly quoting from the Registers’ story on “The Real Foreclosures of Orange County”. How do I sound like a racist?
And yes, Talega is part of San Clemente not a city. Just like Ladera Ranch is part of Mission Viejo, not yet their own city.
BIS…if RE is not local, why does NB cost so much more than SA right across the bay?
I would have known that if you would have indicated it was from the Register. That is what most do with a “direct quote.”
Scott, he did say “from the story…”
I did. I even put it in quotes.
they are down Says:
June 24th, 2008 at 2:59 pm
Sorry, not all are gardeners some are house cleaners too.
Lines from the story “Real Foreclosures of Orange County”
“This Stanton 4 bedroom 3 bath at 10207 Banff Street last sold for $557, 536 in August of 2007. The homebuyer “cut lawns for a living,” a neighbor told me.”
“According to neighbor Edgar Facio, the foreclosed owner was a gardener who hadn’t paid his mortgage in a year.”
“Delgado, a housecleaner, bought his three bedroom for $515,000 with an adjustable rate loan in 2005. It will reset in 2010.”
Who said I was a “he” ;)
Sure RE is local but still needs a market for it price range. SA is lowering their price to reach their market target. NB will have to do the same.
Newport 92660: Price, beds, baths, sqft $/sqft DOM
LISTING STATS (255): $1,950,000 4.0 3.7 3,160 $748 119
Last three months:
SOLD STATS (33): $1,250,000 3.5 2.7 2,349 $582 -
It does not say “OC Register” in your post.
I interpreted it as you making a fictional headline.
Does anyone else see it that way?
Anyway you made you point that it was not your intent.
No you’re right. I did read it again and realized I didn’t say the Register, just the story title. Sorry.
No problem Eat it…so what is that same s.f. going for in SA? Thus, the local market.
Mulli,
You just don’t get it do you. MLS does not list all the REO/Foreclosures. This has been said over and over but maybe it will get through to you on this hundredth attempt.
mully is deliberately ignorant of such things.
try realtytrac and see the light.
Mully - That search didn’t give you all the info. There are ~130 properties in 92692 bigger than 1000 sq ft that are in some stage of foreclosure right now. 19 of those are bank-owned. Not to say these are or aren’t on the MLS (obviously they aren’t all, and I would guess not many are).
These are simply the foreclosure numbers, not what is up for sale.
In my area foreclosureradar has properties listed as preforeclosure that have already been sold.
I checked with my agent and the bump in inventory on housingtracker.net is false. For those of us really in the market, these erroneous stories (from both sides) are really irritating.
According to foreclosureradar, a preforeclosure is a property receiving an NOD within the past 120 days. Guess they just let them drop off without a follow up.
How would your agent know the bump is or is not false?
Nice job hiding there in plain site girlfriend.
My agent told me the exact number of active listings and it is nearly identical to the recent past, that’s how. Sorry, not your girlfriend either. Some of you should stand back and see what you really sound like with your constant bickering. It looks to me like there are no active participants on either side of the equation taking part in this fight. I am after facts, not opinions, not pisssing matches and not boyfriends.
Mulli
what about Americas! best south american food I’ve ever had. The homes were just nice there. VB as well. Some of those trendmaker 300,000 homes would be several million here in NB.
I wonder why it costs so much more to build a home here (excluding land) than there. Even if you tear down on your own lot here, you’re looking at a million dollars to build the same “trendmaker / VB” type 300,000.
Provider,
Good to see you here, our last village idiot disappeared.
Some of you should stand back and see what you really sound like with your constant bickering.
It’s worse than you can imagine.
“O.C. median single-family home prices will fall 16.1% in ‘08 ”
I wonder how much of this -16% we have already seen in 2008. If half 8% then by the end of 09 with another 9% we could see another 15%-17%.
I just watched my house in MV go from selling at well over 700k to 550K and by 09 could take another 15% and be worth something in the mid/450k range.
Would it make sense to sell now and take our 200k off the table or just take our lumps and hope to be whole again later in life.
I’m thinking take the money and run.
We are seeing 15-18% in Pac Hills in MV from peak.
Mom–Love America’s…and Taste of Texas…and pretty much any of the Pappas Bros. shops as well as most BBQ spots…how about Goode Co.!! Houston just brings it when it comes to restaurants…how crowded do you think Pappasitos would be if they opened up shop in Newport Beach or Laguna? Oh my…..
AB - The problem is that there are more foreclosures in more areas - across all price levels (low-end condos in Lake Forest and Santa Ana to multi-million dollar homes in Newport, CdM and Laguna Beach). Since the foreclosure numbers are not slowing but are in fact increasing significantly, I would be very hesitant to think things can get better in the months ahead.
It would be nice is we had some stabilization sooner rather than later, I just don’t see it yet.
Oh and Mom, they charge more here because they can…the market bears it. Standard Pacific is a production builder and 3-4mill in Newport Coast is the standard deal with them.
Sure there are going to be more foreclosures, but they will be in the higher dollar areas - as a result, even thougfh there are still foreclosures the median will increase. This will be reported and will have an impact on both the buyer and potential seller mind set.
Another interesting note is that RE in the higher dollar zip codes is selling pretty good with a 15-18% discount from peak. Sure the trash sits on the market - but anything that is close to move in ready is moving OK.
that’s a hoot…….
now the bulls are talking about how high end foreclosures are going to bring the market up….. and change psychology around…… LMAO………….
you gotta be kidding me right? did i really just hear that?
………..the nonsense never ends……….. the beatings will continue until fundamental price to income ratios return……………. get with the program clowns……..
Please, please please stop the lunacy. Of all the people currently in a jumbo loans right now - only 10% could qualify for the a jumbo loan today. Thats right, only 10% can qualify for the same loan today!!!!!!!!!!!!!! Explain to me how that means the market it stabilizing and values are only going to drop another 8% next year????? These people dont have a clue how tight money has become. You think they would realize it since everyones equity lines are being shut down. Ill give you all some advice, if you have an equity line that hasnt been shut down, go to the bank tomorrow and max it out because it wont be available for you in 6 months.
M.M.
Correct………..
One more thing, you think NB, LB and Corona Del Mar are exempt? not even close - 80% of the purchases in the last 8 years in these areas are with pay option arms. No one in these areas can get that loan now, you dont beleive me, call WAMU and give them a NB zip code and watch how fast they hang up on you.
mav, that is not what he said…he said the median would go up as a result of that activity in the high dollar areas. Do you disagree with that?
yes actually i do disagree, the bubble money is gone, now it takes incomes
put another way……. the million dollar mc mansions…. were never really relevant without the credit bubble……..
the carnage in that segment will be historic….
Where did I say the market was going to go up. I said the area mix will change from what we have today. When it does we will see an increase in the median as the contribution from higher dollar areas increases – much the same as SA and GG are currently driving the median down.
I also really do not care about the $1M and higher RE within 10-blocks of the beach. I would rather take a couple of nice holidays than spend all of my money paying for that luxury, but there are many who will and can. I know a few.
My concern is the bottom price for an 1800 – 2200 sq ft house, in move in condition, in a good area. Based on my observations we are just about there with a dollar range of $325 to $275/sq ft.
In general I can not say how people are paying for these houses, but the people I know are saving the 20% (or more), and getting the loans.
Are things mucked up – sure they are. Is this going to blow over – sure it will. Will 80-90% of the people that have houses today have them then – I would bet money that the answer is yes. In the interim between now and the bottom however, I feel really sorry for the people that buy into the doom and gloom that flows so freely from this blog and the people that make money spreading it.
so, the lower end predominantly in effect now is driving the median downwards, yet the converse is not true….hmmmm….i think you are wrong here mav. i think the median will increase once the activity picks up in the upper ranges…including the REO’s. They are simply worth more and will be contributing to the upwards pressure of the stupid median measuring stick.
AB brings up some valid points. They are just on the other end of the spectrum…kinda like the elephants and the donkeys in Washington. One points to the moon and the other says it is the sun out of stubborn party loyalty. We have two parties here and we are both loyal to a fault at times. There are still 2300 families buying homes in this county today…that number will go up once the credit crisis ends…and end it will. Like I have said many times: the overzealous lending practices of the past have been replaced with irrational fear.
I make my living by funding loans, have for 15 years. Look if you think that 2200 sq ft house is going to sell for $600k on the low end in MV I think you are way off. I am just speculating like you, but I dont see people paying $600k for a 2200 sq ft house when they dont think it will be appreciating in the short term. There are builders all over place that agree with me - they just shut down operation. Condo towers all over the county are shutting down and they are basically complete buildings. id say we are going to about 200 per sq foot.
Lending practices are not irational - they are actually just back to being able to show that you can pay the loan back with the income you make.
If you can qualify income wise for a $600k loan, they are not hard to get even if you just have mediocre credit, fact is, not that many people in OC make enough money to qualify for such a loan.
The mix might change, but the direction will still be down. Case-Schiller has the paired sales down some 30% in LA-OC. The median (in real terms) is down about that, even with the mix changing. Even if we get more foreclosures in the higher end, and more high-end sales, a 25% decline will be about a 25% decline.
Mulliganville Says:
“There are still 2300 families buying homes in this county today…that number will go up once the credit crisis ends…and end it will.”
Would it truly be a credit crisis if OC RE didn’t require such gigantic loans? In other words, the “credit crisis” will end once affordability is restored based on sustainable mortgages.
“Like I have said many times: the overzealous lending practices of the past have been replaced with irrational fear.”
Good. We should all fear cheap and easy money.
two doors down from me just closed for $700K at 2300 s.f. $300 per foot is the magic number in pacific hills with only 14 weeks of inventory in the community. Some higher per foot closings have been noted as well, and some below. I think the peak was about 350 in this community.
you think price that the credit crisis is just in OC? This is one area where national applies…one of the few.
Sure, if you can make your payments, in the long run you will be fine. But the number of folks who took out option ARMS and have resetting payments is tremendous. There just aren’t that many people who are still paying on their $1500 mortgage. Most people cashed out or traded up and now have a heavy burden to bear. It will be 2025 before we see the 2006 highs again, that is, absent Ben Bernanke’s helicopters lifting off the USS Paper Money in Operation Mother of All Bailouts.
Move to Houston, Dallas, or San Antonio people…and you can then begin living in your new home for the amount of money you all are wanting to spend. It will never quite happen here.
BEND OVER AND TAKE IT HARD if you are an OC homeowner trying to sell. You will not get an offer unless you are 20% below current comps.
total garbage and unsubstantiated drivel coming out of your piehole there fat chin.
Mulliganville Says:
“so, the lower end predominantly in effect now is driving the median downwards, yet the converse is not true….hmmmm….i think you are wrong here mav. i think the median will increase once the activity picks up in the upper ranges…including the REO’s. They are simply worth more and will be contributing to the upwards pressure of the stupid median measuring stick.”
——————-
Mulliganman,
You might want to pick up a math book and read about medians.
Activity in the high end can pick up, but w/o a corresponding drop in low end activity the median price won’t climb.
…….Now AVERAGE is effected by this, not MEDIAN.
You realtor guys…….sheeesh.
Mulligan……
Give it up, man.
Pacific Hills is dear to your heart but taking a hit along with all the rest of the county.
You can dis Zillow all you want, hey we understand - you need to, — but anyone checking can see the $200-$300K hits in your area.
In light of this it becomes easier to understand your desperation.
come on pdu…you know i am accounting for more volume on the higher end…not less…and with pac hills, brother i am not selling…that being said, zillow is a joke. There is a reason the state of AZ booted them.
i think having solar panels on my house would be cool and i’d also like to have a well in the backyard or forget the whole thing and I would settle for drilling in the backyard if i could be gauranteed a return of no less than 3 barrels of oil a day, but, seriously, energy independence isnt a reality yet, not on the micro level but one day i hope to go all solar, buy an electric car that is powered by my solar powered house and then i will no longer contribute to this feeding frenzy oil issue…. is this the solar energy thread?
Mulliganville Says:
June 24th, 2008 at 10:58 pm
“you think price that the credit crisis is just in OC? This is one area where national applies…one of the few.”
I would say that the “credit crisis” exists in places where RE prices have zoomed past what local incomes are able to support on normal terms. As mortgage maker said, if you have the income/money, there is no credit crisis. OC residents generally don’t have the money for today’s prices.
“Move to Houston, Dallas, or San Antonio people…and you can then begin living in your new home for the amount of money you all are wanting to spend. It will never quite happen here.”
Simple question. Are OC prices generally supported by local incomes based on normal lending standards?
No they are not…..and they have not been as homes were going for $100 plus per foot 15 years ago…for a production home, your mcmansion. As Mom in CDM and I have been chatting about…why do builders charge more to build out here? That is a simple question with a simple answer.
Mulliganville Says:
June 25th, 2008 at 7:10 am
“No they are not…..and they have not been as homes were going for $100 plus per foot 15 years ago…for a production home, your mcmansion.”
Oh come now. Of course RE was far more affordable before the bubble. That’s why prices are slowly returning to historical norms. What is your explanation for prices overshooting wage growth by several factors?
Wait a minute: Active Buyer: ” do not see any comment that leads me to feel that someone was trying to said that RE in certain zips was not selling off peak”
Seems that everyone here agrees that pricing has fallen around 16% or more - hmmmmm. What are you guys arguing about?
Do you guys argue for the sake of arguing?
Argue for the sake of arguing?
I disagree with that!
:)
Prices in 1997 were at a bargain, OC economy had started to recovered from a record loss of jobs. Housing market was undervalued by 30-40%. Stock market was soaring, and more investment went into the stock market, not housing. When you consider rent to income and income ratios, a bottom should be valued closer to 5.5-6.0. In addition, interest rates were higher in 1997. Lower rates today, puts housing 10% higher per 1% decline in interest rates.
In a worst case situation, recession, higher intererst rates, more losses from Jumbo variables, Alt-A mortgages, I suspect the price could be driven back to 3.8. Realestate value on a nationwide basis tends to be fairly constant over the long term when comparing to income and net worth. With nationwide values likely adjusting around 25%, I suspect OC will correct to around 40% lower than the peak, which puts us at 5.8 times, or about 50% higher than in 1997. The 50% “premium” can be explained by lower interest rates, higher income/net worth, and home values at a relative bargain. I bet for 5.5-6.0 as the relative bottom, or about 20% lower than today. Since it took 3-4 years to appreciate, it will take 3-4 years to depreciate. Look for home values priced in early 2004 as the bottom.