Here's recent history of the Fed’s policy committee and its Fed Funds rate. Next Fed decision is June 24/25.
Mid-June home pricing near 1st gain since Nov.
July 3rd, 2008, 12:00 am · 75 Comments · posted by Jon Lansner/O.C. Register columnist
DataQuick’s latest homebuying report shows a median selling price of $495,000 for the 22 business days ending June 16. (Full ZIP analysis is HERE!) If that pricing held for the entire month — $10,000 above May’s final number — it would mark the first increase in the countywide median since November.
But that trend’s far more an emotional lift for the market than any sign of true recovery. Ponder these facts …
- That overall median is still $150,000 below the O.C. median’s recent peak — that’s a drop of 23% from June ‘07 at $645,000.
- Pricing of single-family homes runs $185,000 below the recent peak — a drop of 25% vs. June ‘07 at $734,000.
- Condos are now $101,000 below the recent peak — down 21% from high set in March ‘06 at $470,000.
- New residences sell $366,000 below their peak — down 42%! — from February ’05’s $864,000.
Here’s how the market looked for the 22 business days ending June 16 …
| Slice | Price | Vs. ‘07 | Sales | Vs. ‘07 |
|---|---|---|---|---|
| House | $549,000 | -23.2% | 1,511 | -10.4% |
| Condo | $369,000 | -18.0% | 541 | -18.5% |
| New | $498,000 | -16.3% | 167 | -49.5% |
| All | $495,000 | -22.5% | 2,219 | -17.3% |
- O.C. homes seen as 25% less unaffordable
- Big Orange property index takes worst hit in 13 years
- O.C. home affordability jumps in 2008’s first quarter
- SoCal home woes could mean 50% price drop
- O.C. homes seen as undervalued; 1st time since ‘03
- Chapman sees O.C. home price down 9% in ‘09
July 3rd, 2008 at 2:21 am
We expected an increase in the median during the “Spring Selling Season”. There might still be another come July, due to May and June escrows closing.
What’s scarier is that this is the first increase of the “Spring Selling Season”. There should’ve been more, like every month since April, eh?
July 3rd, 2008 at 2:24 am
Jon-
I know you didn’t miss that there were only 3 zips that had price increases for this report; so this is good how?
July 3rd, 2008 at 5:29 am
Nice bounce.
Not much compared to the bounce the stock market had in April/May.
July 3rd, 2008 at 6:11 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 ~ Thoughtful declares “bottom”
$555,000 = Apr
$537,000 = May
$531,000 = 06/05 ~ Watts apologizes “Got it Wrong”
$536,500 = 06/11
$549,000 = 06/16
Per DataQuick, this loss represents a $185,000 decline in single family home prices from the June 2007 high. And the beat goes on … and on … and on!
July 3rd, 2008 at 6:22 am
good morning folks
More bad news
http://www.cnbc.com/id/25509894
July 3rd, 2008 at 6:28 am
and please don’t forget this
http://www.usatoday.com/money/industries/energy/2008-07-03-oil-prices-thursday_N.htm
July 3rd, 2008 at 6:41 am
what happened to all the pendings?
2200 sales? LMFAO….
July 3rd, 2008 at 7:23 am
what a mess!!! Oil just won’t quit. At some point today, oil hit $146
I feel so sorry for all those people driving SUVs. Way too many families are hurting. This is slowly eroding consumer confidence. Really bad for the economy and housing.
July 3rd, 2008 at 7:30 am
Lee said: “Per DataQuick, this loss represents a $185,000 decline in single family home prices from the June 2007 high. And the beat goes on … and on … and on!”
Yeah, it doesnt have anything to do with the mix of homes selling right?
July 3rd, 2008 at 7:47 am
more negative spin on otherwise unbiased facts. why are you such a negative dolt jon? we’re supposed to be in the worst housing apocalypse in history and there’s a price increase? yea, that’s horrible. just state the facts please and leave your pessimism out of it. thanks.
July 3rd, 2008 at 7:53 am
http://bp2.blogger.com/_nSTO-vZpSgc/R_HlCECrufI/AAAAAAAACZE/E1WPLRuaWmY/s1600-h/Mortgage-Rate-Resets-1.png
this is my first time for a post, the graph on the link shows the real story of what’s to come. No real estate spin on this one, real data.
July 3rd, 2008 at 7:56 am
If the upward trend continues that means we might be on a way to recovery.
Im still feeling bearish though
July 3rd, 2008 at 8:17 am
Closed sales:
(Through) June 16: 2,219
June 11: 2,335
June 5: 2,389
May 20: 2,105
I’m obviously missing something. What happened to all the pendings? And to think I gave Steve Thomas the benefit of the doubt
July 3rd, 2008 at 8:57 am
Bubble cracks me up–he is so panicked at the prospect of an improving market he strings multiple posts attempting to convince everyone (and himself?) we “ain’t seen nothing yet!” Sorry, bubble, Newport Beach homes aren’t in the cards for lazy programers who use work time to shamelessly promote their lame side business.
July 3rd, 2008 at 9:05 am
the short uptick is also known as the “suckers rally”.
HEY! look !! the dow is up 90 today.. go long!
July 3rd, 2008 at 9:10 am
“Sorry, bubble, Newport Beach homes aren’t in the cards for lazy programers”
Yes, you are right. We don’t want you here in my neighborhood. Stay inland.
July 3rd, 2008 at 9:14 am
I think it is still going down… http://www.beyondthemargin.net/2008/06/dirt-on-housing.html
I don’t believe it is rebounding yet
July 3rd, 2008 at 9:17 am
………… there wont’ be a rebound until 2016 at the earliest……
we have another 3 to 4 years of price declines……. add in 3 to 4 years of stagnant prices………..
July 3rd, 2008 at 9:22 am
meltdown-
For long term INVESTORS this is precisely the time to go long on stocks, but only if you know how to spot value. For short term TRADERS, well, the direction of the market really doesn’t matter.
July 3rd, 2008 at 9:41 am
For anyone that wants to know how to INVEST in today’s market check out Vitaliy Katsenelson’s “Active Value Investing: Making Money in Range Bound Markets”.
http://www.amazon.com/Active-Value-Investing-Range-Bound-Markets/dp/0470053151
We’ve been in a range bound market for the past 9 years. The Dow and S&P have not gained since 1999. Based on past history, you can expect the market to go up & down for the next 10-12 years (similar to the 1965-1982 market) but there won’t be a true bull market until after that time, starting sometime between 2018-2020.
July 3rd, 2008 at 9:53 am
yes this could be a ‘possible’ buy for long term INVESTING. But people should understand that, although there is less risk in long term positions, it still does not GUARANTEE profit, thats why its called INVESTING. I think we all fall for the “get rich quick” ways too easily. There is always risk.
There is definitely value out there, but choose wisely. Do your homework friends.
Its too bad lots of people saw real estate as the only way to invest. Many people bet everything they got into RE, with nothing left for other investment opportunities.
For all the go-go RE, ballsy people. If you wanna play the short term TRADES. go check out http://www.alphatrends.net
July 3rd, 2008 at 10:12 am
I think a lot of people see RE as the only way to invest because it’s easier to understand and less intimidating than stocks. For people that don’t want to follow stocks, RE probaby is the best investment if done properly. The recent flippers leveraged to the max with neg am loans are not a good example of RE investors. Unfortunately, the late night infomercials perpetuate the myth of fast riches in real estate with little or no effort. Maybe the FBI should investigate Carleton Sheets, Russ Whitney, and Ron LeGrand along with the mortgage fraudsters.
July 3rd, 2008 at 10:15 am
Housing is a place to live not an asset for investment unless you’re a landlord looking for cash flow.
With that in mind the best time to buy is when the cost to own is equivalent or less than the cost to rent over your intended period of residency. Planning to live in a home for just 3 years? Buying is rarely ever good (unless you bought in 2003 and sold in 2006, once in a generation opportunity). But if you calculate the cost over a 6 year period between acquisition and disposition costs of your residence, it may be worthwhile as long as you accept that the “pride of ownership” has value above and beyond the $$ numbers. Honestly, if you account for closing costs, broker fees, and borrowing costs it pretty much trumps the savings you may have over rent. And what about all that equity that’s appreciating? Housing traditionally kept up with inflation, at best, but not always. However, living in O.C. gives you the benefit of appreciation over most other places. The real question is would you have made more money if you invested that equity in the S&P500 index over the same period?
As long as people buy homes knowing that it’s not an investment but simply the price for “pride of ownership”, then their decision can never be wrong because living here is “worth it” for them. A person who borrowers $2.5 million to buy a home in Newport Beach to live in the next 20 years simply wants to own a home in NB, not because he’s looking at the numbers to see if he’s going to make a profit. He’s paying over $13,000 per month on his mortgage (assuming he leveraged all $2.5 mil) plus property taxes and HOA. You don’t think he’d save money by renting an equally nice pad for $9,000 a month?
At a smaller scale, a guy does the same when he pays $2,000 (plus closing costs and property taxes) to “own” a home in Santa Ana rather than pay $1700 to rent that same home.
July 3rd, 2008 at 10:20 am
…………….. LOL……………..the pride of ownership kool aid…………… wow, you could have at least offered us all some they-aren’t-making-any-more-land kool aid…….. i like kool aid options…
July 3rd, 2008 at 10:23 am
This increase is clearly due to a change in the zip mix of closures. I would not expect to see a real increase in sales price for at least 2-years. I think what is more important is answering the question; has the price point for the area that you are interested in been reached. I have been watching a few zips in So. OC and it seems really clear that the $-point has been reached. Anything that is move-in ready and has been updated in the past couple of years is selling reasonably quickly (under 60-days) at $300-275 sq ft. This market requires a micro-analysis not a macro-analysis if you are going to venture into it.
July 3rd, 2008 at 10:30 am
……….. people bought tech stocks…… throughout the tech bubble collapse…. as tech stocks were crashing, they thought they got deals LOL…….. the housing crash is no different………. there are support levels…….. the declines will continue until fundamental price to income ratios are reached……. that’s the correct way to look at the market………. not what is happening during a few months….. once fundamentals return it will be time to consider buying……….OC home prices have another 20% to fall…. and people in the know realize the declines will likely be larger than that……..
July 3rd, 2008 at 10:32 am
The one size fits all appreciation rule is nonsense. Newport Beach will appreciate at a higher rate than Santa Ana, the same way New York, NY will appreciate at a higher rate than Springfield, MO. Half the time the argument is houses don’t appreciate, the other half the time the argument is shouldn’t appreciate….until you buy one.
July 3rd, 2008 at 10:34 am
I’d better go buy a house before they are all gone…PSYCH.
July 3rd, 2008 at 10:36 am
LOL…the kool aid is no doubt a bunch of bs.
But its real, and it flows in all markets.
Dont believe the hype.
Fundamentals matter.
July 3rd, 2008 at 10:39 am
…………….. the inflation adjusted OC home price declines are going to be absolutely shocking………..
……… 25%, inflation adjusted from 2006 is already god awful……….. but just wait till you see the inflation adjusted declines by 2010…………. sorry if you just threw up in your mouth thinking about it………
July 3rd, 2008 at 10:44 am
OCTrojan - I agree with your statements. If you buy a home with the intention to live in it for more than 10-years it is a very safe bet that you will come out better than if you rented the equivalent house for the same period of time. If you look at people who bought before 2002 and wanted/needed to sell now they would clearly be OK. Those who bought between 2003 and 2007 have a longer road to walk, but they too will be OK in another 5-7 years. If they live in the house for 10-15-years I would bet that their return will be very respectable. Of course if these same people pulled out their equity than that is a different story. I have never done that and I do not understand why someone would short of a family emergency.
I do have pride of ownership and enjoy hearing the positive comments when friends and family come over for a BBQ and a dip in the pool - the tax write-offs and not worrying about what the landlord might do or say are great pluses as well.
July 3rd, 2008 at 10:46 am
I agree with mav and his 2016 forecast. Just look at the previous cycles and see that history repeats.
The last real estate downward cycle of 1989-1997 dropped prices 40% from the peak.
Spring sales are meaningless numbers in the big picture. The spin by Gary Watts and Steven Thomas is just that- spin. Anybody that has researched these trends (including realtors) know real estate cycles historically repeat with more impact than the previous cycle.
This is good news for the long, long, long term as the cycle will also bring higher real estate prices.
July 3rd, 2008 at 10:54 am
A PermaBull ask me this question about the DQ median:
“it doesnt have anything to do with the mix of homes selling right?”
Sure it does. Generally, If you have a home listed above $750,000, it sits on the MLS like a piece of dead wood.
This is the primary reason why the median continues to decline … if you can price it below the line in the sand (about $500,000), aka “The Sweet Spot”, you can possible unload the home. However, understand the banks are now setting the prices.
July 3rd, 2008 at 11:01 am
………… the median might not have a lot of meaning if you look at it over a period of a few months…………….. but when you track the median for 36 months….. and see a 40% steady decline………… that my friends will have a lot of meaning……………. have a great 4th………. happy birthday america……… !!! we’re # 1 we’re # 1 !!
July 3rd, 2008 at 11:29 am
Blah blah blah
July 3rd, 2008 at 11:41 am
I think Active Buyer and OC Trojan are the only people on these message boards, throughout their entire history, that have something reasonable and well thought out to say.
I am a first time home buyer, and given the decline in home prices I’m proud to say that I’ve finally been able to purchase a home. I got a REO at $20k under market (SFR - 3BR, 2BTH, 1776 sq ft in a gated community in south county), and plan to live in it for the next 5-8 years. I love the fact that I will be owning my own home. Forget renting. Sure, I’m paying more money, but I’m paying it INTO my home. The interest I pay comes off my taxes which means additional savings. The less money I pay to Uncle Sam the better. I know for darn sure that when I’m ready to move out and move up, my home will be worth more than what I bought it for. I’ve got me a piece of the American dream at a reasonable price and nothing you overly pessimistic bags of hot air can say will change that.
I’ve had my boots on the ground searching for a home for the past year and a half. I can say from experience that when the price is right (affordable) properties go quick, and have, in a lot of instances, have multiple offers on them. I can’t tell you how many times we’ve been out bid on nice properties. The OC market, unlike more marginal areas inland, is still active and properties are still moving. Our economy and housing market are resilient and have historically always bounced back. This is the US. It’s filled with hard working, independent, and ingenious individuals. We can overcome anything, including a housing market slump, credit crunch, and high gas prices. We’ve done it before and will do it again.
Have a happy and save Fourth of July everybody!
July 3rd, 2008 at 11:56 am
Okay, I’m confused. If the average home is $549,000, then (on average) the person/family obtaining the home loan should make at least $200,000 to cover the payments.
From my perspective, this rise in values is temporary. Until home prices come down to realistic levels, aligning with local income levels, the downturn will continue.
July 3rd, 2008 at 12:02 pm
Assuming 20% down you only need to make between 90 and 110k to afford a $549 house.
July 3rd, 2008 at 12:04 pm
I personally look at rents for the area to decide how much a house is really worth.
July 3rd, 2008 at 12:04 pm
True, but how many ppl have almost $110,000 sitting around? Many barley have 3% down.
July 3rd, 2008 at 12:15 pm
mav - within a few months of the tech stock bubble the BS dot.com companies were gone - what we have on the market today was basically all that was left. The problem was that the dot.com bust brought down stocks that were not even related, or only remotely related due to hardware mfg. I know I was there and I may have jumped ship about 3-months too soon, but I still did really well. I am also happy to say that I bought a lot of GLW about 5-months after the crash (major in fiber optics, but otherwise pretty well diversified) and sold this summer making a very nice 175% return. Not bad for a couple of years of kicking back and so much for the idea that it is wrong to buy on the way down – just need to know what you are doing!!
July 3rd, 2008 at 12:17 pm
Past summer, not this summer.
July 3rd, 2008 at 12:19 pm
2008 -20%
2009 -25%
2010 -15%
2011 -5%
2012 flat
2013 flat
July 3rd, 2008 at 12:32 pm
I think more people have the 20% down than many on this blog think - I have no hard numbers, but house sales in the mid price range ($500 to $675) are far from dead. There are many zips in this range that are actually seeing increasing YoY volume.
July 3rd, 2008 at 12:35 pm
“Many barley have 3% down”
These are the people that should refocus their attention on something other than buying a house. There is nothing wrong with renting for the rest of your life
July 3rd, 2008 at 1:03 pm
Everybody is going to make predictions that are in their best interest. People who can’t afford houses and want to buy are hoping and betting prices will continue to slide. Prices can’t go down every year at 23%, the faster the slide the faster we will hit bottom and thusfar it has been a very fast decline.
July 3rd, 2008 at 1:21 pm
I’m still waiting for Steve Thomas’ “pending” escrows from April and May to show up as closed sales. He was touting YOY gains in sales were coming based on his data, but so far we are still keeping the consecutive losing streak going (will June be the 37th consecutive month? I’ve lost track of how many months we are negative YOY in sales). Jon - maybe you can ask Steve Thomas why we aren’t seeing YOY sales gains yet, despite his claims in his reports?
As for the median price bump - it is one data point (and a mid-month data point that everyone will forget as soon as the next data point comes out). One data point does not make a trend. Let’s see how prices move for the rest of this month and the next couple of months before trying to call a bottom.
July 3rd, 2008 at 1:35 pm
“People who can’t afford houses and want to buy are hoping and betting prices will continue to slide.”
Is it just me, or does anybody else notice that whenever someone refers to people waiting to buy, they think that the waiters can not afford to buy? And why do they assume this?
July 3rd, 2008 at 1:50 pm
Awgee-
I agree. My husband and I sold in late 2005. We have $400K in cash waiting to invest in another home. And by the way, we don’t think we can afford the luxury of the Pride of Ownership quotient.
We are buyers in waiting.
July 3rd, 2008 at 2:00 pm
Marcia,
You and your husband were very smart to sell when you did. 1 or 2 years from now you’ll buy twice the house for the same amount of money, while the ones who are buying now will be going into foreclosure. Maybe you’ll buy their house.
The perma bulls were telling people to buy a year ago and look at those people now.
I wish I had sold back in 2005. Even here in newport I see prices coming down.
July 3rd, 2008 at 2:24 pm
Active Buyer: “Assuming 20% down you only need to make between 90 and 110k to afford a $549 house”
OK - let me get this straight. Someone earning $90K today probably did not earn that in years prior - given the fact that people’s income generally increase over time. So, this person would have saved about $110K for a downpayment. Nowadays, they require at least two to three months reserves so tack on another $12K to $15K left in the bank. And this is on an income that will see about $5600 a month take home. Yes? (I’m being generous here - it would actually be less, especially if they have few other write-offs like kids - but seeing they were able to save over a $100K, I doubt highly they have kids)
Now they are going to take that $5600 a month and poor that into an almost $3K a month mortgage. What are rates today on something like this?
What happens when property taxes are due?
What happens on Xmas?
What about saving?
So I ask - who in their right mind can do this and still pay for car, gas, food, clothing, some semblance of a lifestyle worth living, etc.
Active Buyer - please work the numbers for me so I can understand just how insane some people can be. Please use a $100K a year income.
Oh wait - were you thinking of having them go I/O? Or use short term rates? Regardless - aren’t you one touting to look long term?
help me understand the complete logic behind someone making such a decision given such factors you proposed
last question - please tell us if this person pays enough in taxes to even leverage the full tax benefit of such a purchase?
Thanks in advance
July 3rd, 2008 at 2:50 pm
OK - I just re-read what I wrote - I’d correct some of the wording but I think the point/questions are there. (e.g.: “poor” instead of “pour” - how funny looking at one’s wording when written in a rush)
July 3rd, 2008 at 3:01 pm
The ability of Newport Beach and CdM property values to hold so firmly years after the slowdown started in incredible. I am seeing interest in small Newport starter homes. A realtor told me in Newport Heights, starters are moving in under 3 months. This new activity will flow into the higher end of the market after people figure out what a problem inflation may become.
July 3rd, 2008 at 3:02 pm
Mortgage with 20% down would be about $2600 + $580 for taxes and insurance, leaving about $2600/month - for a family of 2 or 3. This is doable considering that as time passes the household income will increase as you point out, but of course their main bill (the mortgage) will be a constant and long term (10+ years) they can look forward to getting their initial down payment back plus some additional return (I would expect 10-15%).
Main tax write offs will be the property tax and the loan interest – I estimate that this would decrease their overall state + federal bracket from just under 30% to somewhere between 19 and 21%. More depending on how they work it. This money could be obtained upfront by increasing their W2 deductions.
Of course the same people could rent the same house in a nice zip, but they would still be paying around $2600/month (more if there are any pets) and not have the tax write-off. When you rent you also need to worry about what the landlord is up to, and if the rent is going to increase next year and by what amount.
Of course they could say no to the $549k rental house and go to SA (or similar zip) and rent a house that is worth $300k. This would cut their monthly rent to somewhere around $1700, but I know I would be worried about what may be happening on the street outside.
Of course why rent a house in SA when they could move into one of these new apartment complexes in a better zip – but wait, now the rent is again $2000+ because they need at least 2-bedrooms. They would also need to consider if they want to deal the complex restrictions on what they can do outside (if they have an outside area), and the types of neighbors they have right on top of them.
But in the end this is all their call, and of course it is your call as well.
July 3rd, 2008 at 3:26 pm
I think the real question is how does one prepare themselves for buying a house - save the money for the down payment, closing costs, and reserves. I will agree 100% that is tough.
Personally I got feed up with landlords and noisy neighbors, paying gym fees, and not having a place to work on my car. I saved like there was no tomorrow, drove a 6-year old car that was paid for, and used my 401(k) to cover the reserve issue and to get to a full 20% down. It took all of my attention, and a lot of discipline, for 6-years.
July 3rd, 2008 at 3:28 pm
I also got the cheapest place I could find to rent (and had nothing worth stealing).
July 3rd, 2008 at 3:35 pm
“A realtor told me in Newport Heights, starters are moving in under 3 months. This new activity will flow into the higher end of the market after people figure out what a problem inflation may become.”
A realtor told you? I wonder how many folks are in foreclosure about now because they based their decision on something a realtor told them.
July 3rd, 2008 at 3:41 pm
Active:
Where are you getting less than a 6% loan?
$439,200 mortgage (80% of $549k)
$2,600 payment
30year fixed
= 5.88% implied rate
Current fixed are well over 6%, probably well over 7% since you are busting the old $417k conforming cap - or are y