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Bank says O.C. home prices to drop 19% more
June 23rd, 2009, 12:00 pm · 94 Comments · posted by Jeff Collins
The latest news from DataQuick shows home prices increasing in recent months.
But a new report from Deutsche Bank says that while the home price bottom is getting closer, we aren’t there yet. Highlights:
| Rank | Area | % more | F/peak |
|---|---|---|---|
| 1 | New York | -40.6% | -52.1% |
| 2 | Ft. Lauderdale | -35.3% | -62.1% |
| 3 | W. Palm, Fla. | -33.6% | -58.4% |
| 5 | Miami | -29.9% | -62.4% |
| 6 | Baltimore | -28.6% | -36.8% |
| 7 | Long Island | -28.0% | -43.3% |
| 14 | Seattle | -21.4% | -35.2% |
| 15 | O.C. | -19.1% | -49.7% |
| 20 | Orlando | -14.6% | -50.1% |
| 23 | Inland Empire | -14.3% | -63.1% |
| 24 | Denver | -14.3% | -31.8% |
| 25 | Las Vegas | -14.2% | -57.8% |
| 32 | Bakersfield | -13.2% | -61.4% |
| 36 | Chicago | -12.7% | -39.0% |
| 37 | Santa Clara | -12.7% | -53.1% |
| 41 | DC | -12.3% | -42.7% |
| 45 | L.A. County | -11.3% | -50.4% |
| 46 | Sacramento | -11.1% | -60.1% |
| 47 | Phoenix | -10.8% | -57.2% |
| 53 | Atlanta | -9.7% | -38.7% |
| 60 | San Diego | -8.7% | -51.6% |
| U.S. | -14.0% | -41.7% |
- Orange County home prices are likely to fall 19.1 percent more — the 15th-biggest drop among 100 U.S. metro areas, or MSA’s.
- New York’s projected drop was the largest at 40.6%.
- When the dust settles, O.C. prices will have tumbled 49.7% from the peak of the market to the bottom of the 3.5-year-old slump.
- If true, that means that a median-priced home here will sell for $311,000 to $325,000 at the bottom of the slump. (The median in May was $410,000, according to DataQuick.)
The report said:
“Orange County is the other top MSA (after New York) that still has an affordability issue. Based on affordability reversion alone, we project that prices need to drop another 7.9% in Orange County. Orange County is likely to see some pressure from unemployment, which has been increasing at a faster pace in recent months. Our updated current-to-trough forecast considering all factors is now 19.1%, and peak-to-trough is 49.7%.”
Nationwide, the forecast predicted that:
- U.S. home prices may drop 14% more.
- U.S. home prices will fall 41.7% from their peak.
Said the report:
“Affordability is no longer the driving issue in the housing market, and we
believe prices still have a ways to fall in many areas before home prices reach their trough. The bottom is getting closer, but we are not there yet.”
As for other SoCal metro areas, prices are projected to drop:
- 14.3% in the Inland Empire.
- 11.3% in Los Angeles County.
- 8.7% in San Diego County.
More news on the housing market outlook …
- O.C. real estate enjoys rare job spurt
- Harvard: Housing recovery yet to emerge
- Chapman sees O.C. home prices up 1.6% in 2010
- Housing recovery set to begin, forecast says
- Demand for O.C. homes nears 4-year high
- Housing stats: Good news or bad?
May’s market from DataQuick …
- Back above $400,000! O.C. home price at 7-month high
- Weakest O.C. housing markets at the beach
- SoCal home price sees first monthly jump in 22 months
- 48 O.C. ZIPs had May sales gains! Did yours?
- O.C. foreclosures increased in May
- Foreclosures account for 34% of May home resales
Reader Comments
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94 Comments
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But Gunner said we bottomed in Jan ‘09? How can that be? Who is wrong? A RE agent or everyone else?
Finally un unbiased report telling the truth about the OC housing market. It’s nice to see the banks being honest
These guys are the biggest liars on the face of the earth their precious little Greg Lippman caused this mess by figuring out how to write phony mortgae bonds then short them and buy CDS. the guys a crud and so is the bank.
And it was the realtors that brought the buyers into the lending office. What roll did you play? Door stopper?
anybody who looks at home prices in OC without an agenda, can tell that prices are still too high compared to incomes which mean that either salaries have to increase or home prices have to come down. And we all know that salaries won’t go up that much for the near future so there you have your answer: HOM
Hey brilliant bubble boy–the premise of this study is that real estate is, in many markets already at or below affordability levels, but will nonetheless continue to fall.
Gee, what could cause that to happen? Hmm. That’s a tough one. Well, I guess we’ll never know because it won’t happen in the OC.
Late model Rolls Royce Corniche is 2 to 10 times more affordable than the average house in OC, but not many of them are being sold
My specific point is that buying something requires justifiable benefit to offset the cost. “Affordable” is not a benefit, but a market condition. Houses are selling, but many people DO NOT see a justifiable benefit at this time.
Personally my wife and I are very happy to be moving into an 80’s 2100 sq ft front 3+3 unit in a decent part of HB this week for $1950/mo water and trash paid and 2 car attached garage and 2 patios. Even as mortgages and rents continue to fall, but that’s personal choice in play.
Um, everyone has an agenda with RE. If you are not actively selling, but an owner, I do not care who you are…you are not happy about what is happening to OC home values. Owners want values to increase…buyers want values to continue to drop. Look, you can tell me till you are blue in the face that you do not care about the value of your home…well, that would be like the value of your retirement fund being satisfactory as well. Uh huh…probably not too happy about that one are ya! We all know the reality about what is going on here. Under $500K is firming…beyond that, it is a guessing game.
Woohoo! The doom and gloomers finally got their one article out of 20 that says prices are going to fall. Aren’t you guys happy?
But, the only problem is an economist wrote this article. They are looking at historical numbers and pointing the arrow in that direction–which is down.
Harvard economists wrote in 05′ that RE is likely to not have a problem–WOOPS!
Next year at this time lets publish Deutsche Bank (whom nobody who wrote the article lives in the OC to understand the huge demand and huge amount of cash that is pouncing on RE right now) and show their big WOOPS.
And what did RE agents say in 2005 and 2006? Answer: “you better buy before you are priced out” and “prices will continue to rise”…. Take a look at idiots like Gary Watts and Steve Thomas. All of the houses priced above 750k in our area haven’t moved, even with price reductions. Under 500k is moving, but not more expensive homes in the 1M range, and those will continue to fall - funny money is gone. Sorry…. At least a bank with more skin in the game than you and other RE agents will ever have was willing to put out a negative report.
I don’t know about “huge” cash, where’s the sales in the $1M-2M range. Oh, I guess not that huge then huh?
Sure it will drop 19% this year, plus another 20% next year
So finally I’m reading some common-sense here
Better hide this data! Don’t let the marks know that they are buying into a dead cat bounce!
Common-sense is always right
Peak to bottom will be 50% on average. JC said it, “common sense is always right” Generally, OC house prices are laughable. Some of you need to get out more often, there are much better places to live, at half the cost.
Sorry to burst your bubble….but common sense isn’t so common. Otherwise we wouldn’t be in this mess.
better a door stop than a buttplug
So that’s what you use your head for! Lol
actually I investigate fraud and I am going to be so busy in the next few months I wont have time to post so you guys can lie to eachother all day long
What kind of fraud? Bank fraud? Go get ‘em! :)
Somebody will pay you off to leave their books alone. If your a realtor, most likely your final report will point to no fraud committed.
Fraud like posting under multiple names Dealio? Debtracker? Oiwas Sellinhome?
…and lest we forget…
ROC/Truthiness/ShockG and so many more…
Very true. This is not the Orange County of the ’70s and ’80s. It’s best days are long gone. There are plenty of great RE opportunities elsewhere at much cheaper prices. Glad I sold in late ‘07 and escaped northward before the total collapse began.
The analysis is far from common sense. I paged through their entire report. Basically, it gives certain weights to mulitple factors to predict the future decline. Unless I missed it, I saw no discussion of whether this methodology can be shown to predict prices with any accuracy. Simple enough to do. You plug in the same formula in 1998 and see if it predicts what happened in 1999. The lack of such “proof” is revealing. Indeed, you can’t find any models for pricing homes that actually “work” i.e. can be shown to reliably predict home prices in the next year. I wonder if the fool permabears who commented even reviewed the report or just said “Amen” to the headline they agree with?
Well below avg market rates confirm that prices have further to fall.
More importantly, an additional 15-20% reduction in price will eat-up almost all of what remains of the existing mortgageholders/homedebtors equity.
It’s no wonder attitudes are changing re: homedebtorship.
On another note . . ..
LOLLL, realtors across the country are whining about the new appraisal rules (appraisals coming in way low) Poor babies.
Where’s Mrs. Doubtfire’s (dealeo) comments on this.
On a job interview?
my only question is this- when prices fall back to 1998 levels-
as I predicted right here on this blog- will I get the nobel prize
for economics?
No way Rants. I think they are headed back to 80’s price levels.
Did you catch Obama’s comment on double digit unemployment today?
This is one of the biggest bank when it comes to underwriting junk bonds & CDO from all of the sub-prime crap few years ago. They were wrong back then to bet a farm on those junkies CDO.
To make it right and go with the flow, they now turn 180 degree around.
Good news for you, rant, by these boy prediction, you can get to 1998 price in no time. May be in a year or two, you can get a nice 2500 sq ft in Irvine or Huntington Beach for $250K (98 price), with 10% down payment, your mortgage will be around $1400, and you can rent it for around $3000/month. What else, oh, how about dealer will lease you a new S550 with zero down, for $299/month, and they subside your insurance & gas money.
Keep dreaming, it’s free.
Speaking of 1998 … ..
“S&P Downgrades Prime Jumbo MBS”
S&P said it lowered ratings on 102 classes from 33 U.S. prime jumbo residential mortgage-backed securities that were issued from 1998 to 2004. The rating agency also affirmed ratings on 669 classes from 32 of the downgraded deals, as well as 34 other deals.
“The downgrades reflect our opinion that projected credit support for the affected classes is insufficient to maintain the previous ratings, given our current projected losses,” S&P said in a statement.
Naw I think they’ll probably give you a nice room at Bellvue though
Awesome report !!!. I hope the mass public will read this report, and help to slow or stop the insane bidding war out there.
Then supply would be ample like last year, so that I could pick up couple more rental units. It’s been tough lately on small investors like us, even offer at $20-40K above listed price simply be ignored by bank/seller.
Yes, nothing like picking up a rental that is cash flow negative, or even neutral (with the risk of further price drops). I sold in ‘07 and have been renting. My SFH rental was just sold b/c the owner had financial problems. Even at the price paid (around $550K, which is down ~$250K from the peak) the new owner, at our rent, is cash flow negative! She’s making a bet on appreciation (either capital and/or rent)…. That’s a risky bet I’ll let other people make!
They shoot real estate agents, don’t they?
http://www.salon.com/mwt/feature/2009/04/11/real_estate/
All I wanted was a good job I couldn’t lose. I didn’t realize I’d end up bringing down the global economy. By Erica Ferencik
Editor’s note: “Pinched” is a series about life during a recession.
Next page: “I hear Orange Julius is hiring. You go, girl!”
They shoot real estate agents, don’t they?
http://www.salon.com/mwt/feature/2009/04/11/real_estate/
All I wanted was a good job I couldn’t lose. I didn’t realize I’d end up bringing down the global economy. By Erica Ferencik
Editor’s note: “Pinched” is a series about life during a recession.
Next page: “I hear Orange Julius is hiring. You go, girl!”
Were is Lansner and his RE compadres to inflate and distort the truth now.
These numbers are utterly meaningless since they are based on the utterly meaningless median. Prices are rock solid and have been for many months.
The median only matters to you when it supports your theory.
these clueless losers failed to call the
biggest bubble in the history of
real estate- now were supposed to believe
prices have another 20% to go
what a bunch of clueless idiots
hey lansner why don’t you interview me for a change
after all i’m brilliant, good looking, and gosh darnit
people like me…. @@LOLRIBSPLITTER@@!!!!!!!!!!!!!
hey liar - imitation is the sincerest form of flattery
this is a very enlightening article on investment banks–
ya know like goldman sachs– and obama wants to give
even more power to the fed who allowed this crap to
begin with…
http://market-ticker.org/archives/2009/06/23.html
hey gunner- is this some of the fat that you said was being cut?
http://economy.freedomblogging.com/2009/06/23/investment-firm-confirms-240-oc-layoffs/
even the sheriffs dept is getting its fat cut-
http://totalbuzz.freedomblogging.com/2009/06/23/sheriff-to-lay-off-up-to-50-employees/17913/
Ya, layoff the excess workers! The only way the bloated and inefficient government will become economically productive is when they have the balls to trim the fat. Thank goodness they are doing it. We need these downturns to make us leaner, faster, and better.
The local government is not in the business of “economic productivity” it’s in the business of keeping their budgets and collecting taxes. Productivity has nothing to do with it.
I read the report and I saw no indication that this methodology has ever accurately predicted home sale prices. This is an analysis that you should be able to back test. In other words, you should be able to plug in the numbers in 1998 and see if it predicted prices for 1999. If it can’t be demonstrated to have accurately predicted prices in the past, it is just some guy’s list of various factors, which he has arbitrarily weighted, which proves nothing.
I disagree with the analyst…median pricing will stay about the same if not go up in the next year or so. This is because those $2m-$4m production homes will be coming way down in price. The wealthier among us have held on this long but with $20k/mth payments and no more bonuses/commissions for a couple of years - they can’t hold on anymore. They have to lower their price - which means more million dollar homes will sell. With more million dollar homes contributing to the median price statistics - the median price will stay where it’s at (if not go up).
knife-catchers are in a bidding war? yet more proof that were
nowhere near the bottom-
remember this—
when the true bottom is in- there will be NO bidding wars
none nada zip– that dear readers- will truely signify the bottom
RUT ROH–new appraisal rules hurt home sales–
hey dildeo why didnt you tell us this was happening?
come on girl- get with the program llooollllllllllllllllll
http://www.cnbc.com/id/31509964
Good link
“remember this—
when the true bottom is in- there will be NO bidding wars
none nada zip– that dear readers- will truely signify the bottom”
Translation: Rantswood still can’t afford the home he feels he deserves.
Re-translation: ShockG is scared to death that he’s losing the bubble equity he feels he deserves.
Too funny. Some bulls still have no shame when insulting renters. This despite the multitudes of handouts from the Fed and the state and federal governments. Going into debt is easy. Admitting to a mistake in doing so is hard.
When house is up, everybody saying it is keep up. But it sudden stopped.
When house price down, everybody saying it is keeping down.
Where is the bottom? “when most average person saying it is keeping down”
Most people in this forum are renting.
We are all going to have to guess at what you mean.
Average Man need to guess.
The answer is straight forward.
Inventory shows orange county is in balance market.
If this bank say OC will get 91% down, it will get more clips from renting people
I think the best part of this Deutsche Bank report is the statement “real estate markets will not recover until 2017”.
http://www.reuters.com/article/GlobalRealEstate09/idUSTRE55L3YZ20090622
This is a big blow for all of you unemployed realtors, frantically waiting for another bubble.
This means dealeo has another 8 years of trying to convince people that a recovery will be coming any decade now.
For all of the people that aren’t preparing for this downturn, with their heads stuck in an artificial bubble, you will be in for a very rough ride!
Yeah, all the unemployed realtors are standing in line at the big box stores (Costco and Sam’s) for free samples.. If you believe a realtor and trust what they say, then you’ll beleive them when they try and convince you that it’s the new dining out concept.
Bill,
You conveniently left out the word “commercial”… as in “commercial real estate markets will not recover until 2017″. Thanks for playing though.
And before some dumb realtor points out that the above scenario is for commercial real estate, we need to remember that weakness in commercial real estate turns into increasing unemployment.
And high unemployment gives way to more weakness in residential real estate.
Classic economic analysis Bill… What did you get in Econ 101 again?
RealtyTrac, which monitors housing activity, said foreclosure rates in 40 U.S. counties had doubled in May from a year ago.
http://www.upi.com/Business_News/2009/06/23/US-foreclosures-up-with-joblessness/UPI-14161245772911/
Do you like the salespeople at your place of employment? Just curious…
The 19% median drop may be true, but for the “desirable” upper- middle class neighborhoods in parts of Fountain Valley, Irvine, Costa Mesa, Orange and Garden Grove, buyers are currently engaged in a bidding war for REO properties.
You will not get list, and will pay above list. However, the entire county taken as a whole may drop 19% due to the correction on the upper end, but where “most” people shop, between $350,000 and $550,000, you will NOT have an easy time find a home right now. I believe this section of the market is near bottom. I had about 3 REO listings in the last 60 days, and they ALL sold at list or higher within 5 days. It’s NOT a buyers’ market if you are looking at REOs and even Short Sales are moving.
No one denies that there is a bidding war on REO properties under 400k, maybe even 500k. The problem is many of these buyers are investors. With a large supply of shadow foreclosures, when these come to market (and they will eventually), this will push home prices down even further. What do you think these investors will do? Some will try to rent it out and realize rent prices are dropping every year. Eventually, these investors will give up and add to the home supply and sell for a loss.
That’s why we are calling them knife catchers. When we do see bottom, there will be no crazy bidding wars like we do now. It is artificial because the banks are not pressured to sell because they no longer need to worry about marked to market. They control the supply of available foreclosed homes, rest in shadow inventory, to stabilize prices to give the impression housing has bottomed.
Just look at the last housing recession. In 1990, the housing recession started. Prices slowly continued to go down for years and eventually stayed flat for a couple years. It wasn’t until 1997 home prices started to ramp up. It took approximately 7 years! Now compare that to today. The worst housing crisis since the Great Depression. Do you really believe housing prices will shoot to the sky within 3 years since this crisis started? Compare that to the last housing recession and it makes no sense, unless you are a RE salesman trying to make money.
Give it some time. Government is throwing tons of money and the kitchen sink to prevent lower prices. In the long run, they will lose and the market will dictate price. When the knife catchers eventually stop buying from getting burned too often, Dildeo and other RE agents no longer pump up the market like they do now, then we seen the bottom. Because of unprecedented government intervention in the housing market, we have years to go before we see bottom.
Excellent post, of what is really going on.
Good point. All I see is what’s happening currently. If there is a shadow inventory waiting to flood the market, then recent buyers may regret their decision. My fear is that the Fed will come in and BUY up the shadow inventory with OUR tax money, and then create artificial demand by selling these properties with “special” financing incentives subsidized, again, by OUR tax money.
Greedy Realtors preached that housing was going up up up forever. Greedy bears are preaching that housing is going down down down forever. Both pushing their agenda. See the similarities?
So, who is the winner from as far back as records go?
What bear said that housing will go down forever? To rephrase, which camp preaches RE pricing based on economic fundamentals and not pie in the sky promises?
Post of the month right here ^
Oh, I don’t know. Your post in response to Olivas’ banking conspiracy was quite good too!
You mean 3-4X the median income as economic fundamentals?? That would be you guys that are preaching that nonesense.
Blaming the Realtors still I see…wow…this is soooooo tired. Work with me here Magna Cum Laude types: see if you can get these correct.
Is it the owners of the sports teams that are at fault for high ticket prices, or would it be the fans keep gobbling them up by the dozens?
If you loaned your friend $50,000 because he told you he had $400,000 in a Swiss bank account which was being transferred to his US account in a few days, AND YOU DID NOT VERIFY THIS INFORMATION, and he stiffs you on the IOU, is it his fault or yours?
If the sales clerk brings you size 32’s as you insist, even though you clearly need 36’s, but you just cannot bring yourself to realize you are now a fatty, and you split the seems, is this your fault or his for just following what your lead and selling you the “skinny jeans” anyhow?
Many of the vocal bears here utilize said logic on a daily basis on this blog. I am certain you know the answers to these and to those questions that surround the lending boom we all experienced and the lack of checkpoints.
Do you have a point or is this just mumbling?
The point is Tom, he who controls the money makes the rules. Case in point…is it harder to get financing today or back then? Now, are the Realtors making it harder to get financing or are the banks? While you ponder this most difficult agreement, I will be right over here on the edge of my seat.
red-fin-.-com is the only realto worth using
Hey Mulli–it is just people who made bad choices or were affected by a situation they got themselves into and are eager to blame someone else. I pitty the people that blame RE agents for their own folly. It is the same group of people that blame credit card companies for their own debt problems.
I had my realtor specifically tell me that it was mistake not to use an exotic loan in 2006 to buy a home. SPECIFICALLY his words were, “everybody uses these products now, it’s the new norm for buying homes in OC.” I knew then that the whole RE ponzi scheme was going to collapse, I’ll I had to do was wait. I can wait a long, long time if necessary.
Does Gunner ever get tired of being wrong, or does he just keep on pretending?
Yet you are unable to prove me wrong, so who is the dumb kid sitting in the corner now?
OMG! Who has been saying $310k for a year now? ME!
Thank you, thank you very much…
In CdM, we are still waiting for the beach cottages to fall the first 19%. They are selling, albeit slowly, at near all time high prices.
I remember the builders in the IE saying the same thing, homes are selling, albeit slowly.
OC = Poster Child
note to self- never try to have an intelligent debate with an imbicile-
yes
Jimmy
take a look at the preforeclosures in our zip, even south pch.
He is in denial or simply posting for fodder. Prices are crumbling in many beach locales…but, they will not go as low as many here wish…too much money was made by too many people over the last 10 years or so.
Wait till the illegals keep moving-in, you can find them at Newport Harbor High already. Just a matter of time when they keeping heading down PCH.
How low can it go.
Does the report say how long it thinks OC will take to drop another 19.1%? I don’t think Jon mentioned that. I think some here are assuming it will be in a year. It may be that it will take longer than a year but I can wait.
let’s move out to some place which is cheaper in living and have more jobs :)