Southern California home prices in January rose at their fastest pace in 44 months

From the L.A. Times:

Home prices in Southern California jumped 11.4% in January — the largest year-over-year gain in 44 months as the region's already sizzling housing market got even hotter.

The double-digit rise in the median price put it at $507,000, which was lower than December's peak of $509,500 when the six-county region surpassed bubble-era highs of $505,000 in 2007, according to a report out Tuesday by research firm CoreLogic.

Affordability drives everything in the Inland Empire," said analyst Patrick Duffy, principal of MetroIntelligence Real Estate Advisors...And while mortgage rates remain historically low at about 4.5% for a 30-year fixed loan, they are ticking up and the increases may be impelling some buyers to sign on the dotted line, Duffy said..."I'll bet some people on the fence are saying 'I am going to pull that trigger,'" he said. "Here's your chance to jump before prices go higher."

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SoCal home prices now at $247,000 as sales rise

The latest data from Dataquick for the month of April is out, and prices fell from $250,000 to $247,000 as sales rose by over 31% from the same month of April. Yet the story is certainly not the same for the various counties here, with much of the pricing decline due to foreclosures in the Inland Empire. For now, sales in the coastal markets -- where owners generally have more staying power to wait for prices to stabilize -- remain low. From an L.A. Times story:

Southern California's median home price in April was $247,000, down slightly from the previous month, a real estate research firm reported today.

The price drop -- a decline of 51% from the 2007 peak -- came after three months in which the median price had held steady at $250,000, according to the data from San Diego-based MDA DataQuick. The brief respite from price declines had raised hopes the housing market may have been close to its bottom.

Last month's price drop, however, drove home purchases up. The total of 20,514 homes sold in six Southland counties last month was up 5.2% from March and up 31.4% from a year ago, DataQuick reported.

The rise in home sales is an important step to housing market recovery, said UC Irvine economist Kerry Vandell, because the sales help to clear the surplus of homes -- many vacant -- still flooding the market...

Previously foreclosed homes -- many of them deeply discounted -- accounted for 54% of the sales total. April was the seventh consecutive month in which the majority of homes sold in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties had been foreclosed.

Sales were at record or near-record levels in foreclosure-heavy inland areas. Higher-priced coastal areas, including Malibu, Pacific Palisades, the Palos Verdes Peninsula and Manhattan Beach, as well as Beverly Hills, saw record or near-record lows in sales.

A tale of two markets is clear in Southern California, with low-priced areas appearing close to recovery, while wealthier areas face greater uncertainty as sales languish amid an economic downturn...

Wealthier areas may face new troubles because "we still face two big threats to price stability: layoffs, which can cause foreclosures across the home price spectrum, and possibly a new round of foreclosures triggered by defaults on 'option ARM' and 'stated income' loans used in mid- to high-end markets," Walsh said.

San Bernardino County showed the sharpest price decline in April, with its median price falling 48% from a year ago, to $138,500. Riverside County's median price of $180,000 was a 39% decline. Los Angeles County prices were down 31% to a median of $300,000. Orange County's median price was down 24% to $380,000. Ventura County's median of $340,000 was down 24% from April last year and San Diego's median of $290,000 was down 28% from a year ago...

The typical monthly mortgage payment that Southern California buyers committed themselves to paying was $1,030 last month, down from $1,074 the previous month, and down from $1,831 a year ago. Adjusted for inflation, current payments are 52.9% below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 61.4% below the current cycle's peak in July 2007.

November home prices down 34.5% from a year earlier

The recent stats for Southern California from Dataquick are out, and home prices are down by 34.5% from a year ago, although not all counties performed the same. As we've seen in previous months, prices have fallen more steeply in inland counties such as San Bernardino (-44%) and Riverside (-38%) but less so along the coastal counties of L.A. (-32%), Orange (-31%) and San Diego (-31%).

So are we finally getting closer to a bottom for prices, and when will prices start to rise again? From an L.A. Times story:

Foreclosures continued to drag home prices to new lows in November, as the Southern California median sales price slid to $285,000, its first drop below $300,000 since 2003.

The November median price was down 34.5% from the same month last year, and 43.6% below the peak price of $505,000 recorded during several months in 2007, San Diego real estate information service MDA DataQuick reported Tuesday...

The flow of repossessed homes into the housing inventory persisted last month, undercutting all home prices and dominating sales. Foreclosed homes accounted for 54.6% of the properties sold in November, up from 18.8% in November 2007.

Foreclosed homes typically sell for far less than their previous sale amounts, driving down the median price in foreclosure-heavy regions such as the Inland Empire, where about 70% of November home sales were of foreclosed homes...

Low prices pushed the total number of Southern California homes sold in November up 27%. Economists say that the sales of foreclosed homes will help the market find its bottom but that a return to rising prices is a long way off.

That's because the sale of a foreclosed home doesn't provide the same boost to overall sales as a transaction that involves a homeowner who is selling willingly. An individual selling a house will typically soon purchase another home. That does not happen when a bank clears a foreclosed house from its inventory.

"Those transactions simply repay lenders," MDA DataQuick President John Walsh said. "They don't trigger a move-up purchase."...

By some measures, falling prices have made homes affordable to more Southern Californians. A National Assn. of Home Builders quarterly index showed that at the end of September, about one-fifth of Los Angeles-area residents brought in enough income to qualify for a loan on a median-priced home. During the height of the real estate boom in 2005 and 2006, only about 2% of Los Angeles-area residents could afford a median priced home, the index showed.

"In three to four months we should be back to historic norms" of home affordability, said Christopher Thornberg, principal of Beacon Economics, a Los Angeles consulting firm.

But that doesn't mean there will be a rush of home buying. Many people have lost their jobs, and some have lost savings they might have used for down payments. Others owe more on their mortgages than the value of their current homes and would not have the credit to qualify for a loan on a new home, even if their income would support it.

Thornberg predicted that based on the pace of current price declines, home prices in Southern California will settle at 55% below their peak in late 2009 and probably remain at that level for some time. If, however, unemployment continues to rise, "that may take the life out of the near-term bottom," Thornberg said.

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California foreclosures push prices down by 26%

Increasing rates of foreclosures in California helped push sales prices down by 26% in March from a year ago as housing bust continues to unravel. From an AP story:

A glut of foreclosed homes helped prompt a 26 percent plunge in California home prices in March, spotlighting a trend that experts said is likely to keep squeezing the struggling market for at least several more months.

More than 38 percent of California homes sold in March had been foreclosed at some point during the previous year, DataQuick Information Systems said in its survey released Thursday.

That helped drive the state's median home price down to $358,000, from $484,000 in March 2007, when the market peaked, DataQuick said.

In addition, the number of new and resale houses and condos sold last month plummeted 38.3 percent from a year earlier to 24,565...

Foreclosed homes in the state sell for about 15 percent less than non-foreclosed homes in the same neighborhoods, bringing all prices down, he said.

Riverside and San Bernardino counties — a rapidly growing region known as the Inland Empire — were particularly hard hit. Foreclosures accounted for 56 percent of the sales last month in Riverside County, where the median price of a home fell 27 percent to $306,250.

The nationwide foreclosure glut is expected to worsen in May and June as two- and three-year introductory interest rates expire on homes purchased in 2005 and 2006..

The foreclosure glut has hit California especially hard. The state ranks only behind Nevada — and just ahead of Florida, Arizona and Colorado — in the percentage of households in foreclosure, according to RealtyTrac's March rankings.

SoCal home price declines escalating

One of the reasons that builders of new homes were so quick to drop their prices was to collapse the time period between peak and trough. Owners of resale homes, however, were typically more psychologically attached to peak prices and so have been much more loathe to decrease prices, at least until recently. That's why we're now seeing price declines for existing homes continue and even escalate. From a story in the L.A. Times:

Southern California home prices continued to fall at a record pace in February, and are now at 2004 levels, a real estate information service reported today.

The median price for a Southland home last month was $408,000, down 17.6% from a year ago, according to DataQuick Information Systems. Area home prices have now fallen 19% on average from their peaks last year.

The steep price declines are putting many more homeowners "upside down" -- owing more on their homes than their homes are worth. Forecasters say foreclosures will likely continue to rise and prices will fall further.

About one-third of Southern California homes sold in February had been foreclosed since January 2007, according to DataQuick. A year earlier, previously foreclosed homes accounted for 3.5% of sales.

So what does this mean moving forward?

The rapid pace of the decline has led Los Angeles economist Christopher Thornberg, who last year predicted a 20% decline in Southern California home prices, to revise his projection. He now thinks prices will fall 40%.

But it's important to remember that is an average, and while your neighborhood is unlikely to be spared completely, the value of your home depends on a variety of factors beyond regional affordability statistics. One barometer I look at -- and which remains largely ignored by the media and most economists -- is the underlying value of a property based on its potential monthly rental income. For example, if I can rent out a townhome in Sherman Oaks for $2,000 per month (which is reasonable), then, using a common 200x multiplier, it would be worth around $400,000, perhaps $350,000 if the HOA fees are high, interest rates rise or rents decline because of short-term over-supply. But if its price peaked at $425,000 and declines by 40% to the mid-$200,000s, suddenly I've got a great income property that's throwing off very decent cash flow each month. At the point that rental income costs provide a certain pricing floor value that attracts income property investors.

UCLA's Leamer thinks the decline will be much smaller than 40%:

UCLA Anderson Forecast Director Edward E. Leamer also believes home prices are still declining. He had predicted a 20% to 25% decline from the peak.

Leamer thinks his prediction is still on target, and that other indices show a slightly smaller price decline so far. The Case-Schiller Index, for example, shows Los Angeles and Orange County home prices to be 15% below their peak. That index, Leamer said, shows the market is still correcting itself.

The typical monthly mortgage payment that Southland buyers committed to paying was $1,821 last month, down from $1,889 the previous month, and down from $2,303 a year ago, DataQuick reported. Adjusted for inflation, the current payment is 18% lower than the spring of 1989, the peak of the previous real estate cycle. It is 28% below the current cycle's peak in June 2006.