Housing Price Bust…Getting There!
I’ve written before, a few times, that only the most pessimistic estimates for where the median home prices would end up sounded even close to me. So, where I live, in Southern California, I was looking for prices to fall from their high of $505K to about $303K, a drop of 40%.
And…we’re getting there! Banks, at least, are finally capitulating in a big way, and buyers are returning. Industry Figure Larry Helmerich points out an article in Thursday’s Los Angeles Times, which shows that statewide in California (note that we’ve just gone from discussing oranges to apples), the median price has fallen 30% from its peak of $484K in May 2007 to $339K in May 2008, with about 38% of sales statewide coming from foreclosures.
“All of a sudden, [homes] are in our price range,” said Elizabeth Trezza, a paralegal in Oakland.
Trezza has been on the hunt for a foreclosed property and placed offers on at least six in recent weeks.
The 24-year-old made an offer Tuesday on a two-bedroom, two-bath bank-owned home in Oakland listed at $234,000 — just below her maximum spending limit, $250,000.
“Right now our mortgage would be relatively close to what we pay for in rent,” she said.
If Southern California homes have fallen the same 30% from their peak (moving back from apples to oranges), then they’ll have fallen from $505K to about $354K — still too high, but getting there.
Whether we’ve fallen as much is anyone’s guess. The hardest-hit markets are those out in the boondocks (e.g. Temecula), where high oil prices are taking a huge toll on residents, who often accept terrible commutes in order to find an affordable home. Plus, we’ll still have to work through all the buyers from the last four years who would find themselves under water at today’s prices — if they want to sell, they either have to get their lender to accept a short sale, or else wait until they can find that one extra-special crazy buyer with the moneybags.
Read the full article in the Los Angeles Times.
“Median home price in California drops 30% in May”
June 19, 2008
Jeff Lorenzini wrote:
That’s interesting you mention the banks have finally given in and lowered their prices. We just put an offer on a house out in Thermal, near Palm Springs, for $124k. On Friday, it was $144k, and by Monday is was $124k. They started at $177k, though. It sold last August for $260k. So, we’re getting it for half-price in less than a year. It’s a great deal, actually. Only problem is it’s in Thermal (118 degrees last week!)
Posted 23 Jun 2008 at 11:08 am ¶
Tom Chappell wrote:
Sounds like a pretty good deal, 50% off and all.
Of course, it’s in bumfuck, California, but that’s still only 20 miles from Palm Springs, which is actually fairly classy. Beverly Hills is further away from Sunland, for example.
My own instincts are that we’ve still got further to fall, and property prices will almost certainly overshoot lower than fair value, because that’s what pendulum swings do. That said, it’s really, really hard to accurately call a market bottom.
So I applaud your purchase, especially if you can pay it off immediately, or at least within the next 10 years. You might have an insane water bill, but at least no rent. And nice restaurants only 20 miles away. And coyotes! (They’re bitey!)
Wow, more than 50% off, in less than a year, that’s…I never dared to predict that large of a drop, though I wondered at the possibility.
Posted 23 Jun 2008 at 9:40 pm ¶