Tuesday, March 25, 2008

January Case-Shiller

It's the last Tuesday of the month, time for the latest (January 2008) S&P/Case-Shiller numbers, continuing their plummet, now back to early 2005. Sure doesn't look like a bottom anytime soon!

(December chart) (November chart with Santa Monica index)

Los Angeles (black line, includes Orange County) is now down 18.1% from its peak in September 2006 - 3.7% from December, 3.6% from November, 3.6% from October, 2.1% from September and 1.3% from August. The national (orange line, aka Composite) index is down 13.4% from its peak in June 2006 - 2.2% from December, 2.0% from November, 2.2% from October, 1.4% from September, and .9% from August.

Besides the original city index they have each city broken into Low, Middle, and High tiers (Under $511,420, $511,420 - $735,266, and Over $735,266). Los Angeles' Low Tier rose the most and has fallen back the most so far from its November 2006 peak, 21.9%. The High Tier rose the least and rather plateaued since 2006, but it too is falling more steeply, 13.4% so far from June 2006.


Anonymous said...

Thanks; always an interesting graph. You might think about using logarithmic scaling on the y-axis to allow better comparisons of the present to the last downturn.

Anonymous said...

There is not enough discretionary money in the Federal Reserve to stop this plunge (without doing unprecedented damage to the US dollar).

Watch out below! 2001 here we come again.

Westside Bubble said...

Anon #1, Calculated Risk just did a variation using real dollars. Didn't include Los Angeles, although San Diego is similar. (He didn't note what price deflator he used.) The current bubble is still much larger than 1990's.

Pick Canter Real Estate said...

This analysis is of the entire LA greater county and does not reflect the returns on the westside. I know areas like Beverly Hills have increased year over year. North of Wilshire in the flats area was up 9%, although the numbers can get skewed because of high end sales. However, south Beverly Hills does not have real high end sales and it was up 17% year over year. Santa Monica was up 8% year over year (4th Qtr 2006/2007) and Palisades was up 10%. This is based on the MLS data of sold listings from 2006 to 2007 during the 4th qtr. I know so far this year it has still been very strong in those areas even though it appears inventories have increased. However, do not be misled by increased inventory levels because they are deceiving. Most of the homes that have been on the market are priced too high and the owners are not real sellers. Homes that are priced well in good areas are still selling quickly and above last years prices. One would think this would change at some point, but so far it has been incredibly resilient.

Anonymous said...

Dear Mr. realtor,
So to summarize your post, ignore the plunging sales volume, the increasing inventory, exploding DOM, skyrocketing REOs, the recession, etc., it's always a good time to buy. Well I'm sold, can you please show me some houses?

WarChestSM said...

"This analysis is of the entire LA greater county and does not reflect the returns on the westside."

I would like to invite you to come over to my blog (SM Distress Monitor) so you can tell us all how immune Santa Monica is while we feature our 2004 rollbacks. I'm sure the sellers who are desperately trying to get short sales done and those who are losing hundreds of thousands of dollars would like you to tell them how great their situation is. Maybe the banks losing massive sums on SM properties would like to know how immune everything is.

And if you want to say that the super high end areas are doing great, then I suggest you look at the struggling specs in 90402 and many of the listings up there with big price cuts. Prices are down, not up.

It is too late for denial at this point. Telling the truth is more likely to get you clients and get you your commish.

Anonymous said...

it is certainly possible to find houses in the nicest areas that are struggling to sell

but the overall average sales prices all over the best areas of the west side are up

that is not an opinion, it is a fact - read the statistics - they are clear - average prices are UP

Anonymous said...

6:39, well if you take all 1-4 sales in some of those zip codes, sure, maybe you're right.

Anonymous said...

I agree with anon 6:39.

While some really bad properties, mostly condos, are getting killed, the good houses in good locations have not dropped much, if at all. Some delusional listing prices have declined, but not by enough. Sales have slowed (I am not sure who is buying). I am waiting for something to force sales in Santa Monica. The we will see the drop. Santa Monica is behind the rest of LA because most in Santa Monica can hold out longer than in other areas. This will change eventually. It could take some time.

Anonymous said...

I know so far this year it has still been very strong in those areas even though it appears inventories have increased.

Care to list some ZIP codes for this "strong" activity?

rosebud said...

It's tough to debate the rise in average price in Northern SM year over year. It's simply a fact if you look at the numbers. The quantiy of homes sold over the first three months this year in 90402 has more than doubled compared to last year.

Warchest, the outliers you mention are definitely noteworthy, and as you have shown, aren't solely confined to SM condos. But again, if a property checks all the boxes, it sells fast . Check out the 866 Princeton listing for instance. It spent no time on the market at all (ergo it's not there to help average that ballooning DOM number), and it was a 90403 listing at nearly $2.1MM.

No doubt that undesirables are languishing longer than they have in the past, but we're still seeing some fast movers and escalating average prices. These are just stats that are tough to debate.

From '02 to '05 (last year with IRS published data) Northern SM adjusted gross income increased over 41%. What were the real estate gains over that time? How much has it gone up since?

Here are some recent sales near that Princeton listing as well, for additional data points:

1115 Berkeley, LP: 1,595 SP: 1,508
1016 Franklin, LP: 2,699 SP: 2,699
848 25th, LP 2,950 SP: 2,850

Anonymous said...

This is classic denial.

Not yet.
Not me.
Not that bad.

In this case, we're seeing the ever-shrinking "it's not my area" denial. First it's not LA. Then it's not Santa Monica. Then it's not my area of Santa Monica, then it's not my street, then finally, NOT MY HOUSE.

Give it up realtors.

Anonymous said...

well, put me down as a bear

in my mind and in my heart i believe that santa monica prices have to come down - they have gone up so much they have to come down

however i have to admit that there is no evidence of a fall north of montana - teardowns on normal streets north of montana (ie not crazy busy streets like san vicente and 26th) consistently seem to sell above 2.0 million - even in jan, feb, march 2008
so i think they will fall, but there is just no evidence of it yet

Anonymous said...

While denial ain't just a river in Egypt, the above sales are reality.

As someone looking for a home in Santa Monica now, desirable houses have not had much of a drop, if any.

This does not mean prices will not drop. It may just take time and some/most of the drop may come in the form of inflation, not price reductions.

Sad reality for those wanting to buy now, but reality nonetheless. There must be something that forces sellers to sell at any price, such as a job change/loss or some other serious economic factor. I do not believe most people will just walk away if the value drops below the loan amount if they can still afford the payments. Instead, most just wait it out until wages/inflation catch up, which at today's prices may be a long wait.

Epsilon said...

We're only trying to help you guys. If you don't want to face facts, that's fine, but the fact is that nice areas never decline in value. One property, maybe, but only if the seller doesn't use a realtor. Nice areas as a whole only go up! You will never see any decline in Santa Monica, or Beverly Hills, or the Palisades, or Bel Air, or Marina del Rey, or Palos Verdes, or Manhattan Beach. Or Malibu. Or the Hollywood Hills, or Hermosa... or downtown, now that they have that lovely Staples center. Really, the whole Westside will never go down. Neither will the South Bay. NEVER!

If you don't buy right now, you'll be forever priced out of the American dream. To the untrained eye, it may look like a listing that has dropped from $800,000 to $600,000, or from $1.8 million to $1.4 million has suffered a decline in price, but you'd be wrong. Those numbers really reflect a negative INCREASE! Maybe you unsophisticated ninnies measure houses in dollars, but someone with a canny eye knows that true value is measured in other ways. The number of dollars it takes to buy a house may be plummeting, but the number of shares of Bear Stearns Class A Common Stock it takes to buy a house in Santa Monica is THROUGH THE ROOF!

Really. I just want to help.

Anonymous said...

let's have a civilized discussion and talk facts.

Crazy strawman arguments really don't contribute much.

put me in the category of people who thought for sure that north of montana would be down by now - it boggles the mind that we could have the kind of problems we have had and not have prices down.

i am befuddled by it , but somehow people keep rushing in to buy every lot north of montana -

who can explain it

Anonymous said...

Some high end buyers are hesitant to put down $5 million on a house due to the murder at 5th and Montana - this murder was within short walking distance of many $5 million plus houses.

why would someone pay that kind of money when they could buy something in a safer neighborhood for the sam dough?

jonathankcanter@gmail.com said...

The problem is the market has come down so fast that it really has not caught up with the elite zip codes of LA. If we are near a bottom, these areas will probably go untouched. However, the whole financial crisis has been with us for a short time and it is impossible to see exactly how it is going to affect the high end. Everything eventually get affected and even the high end is having its issues. The major issue though at the moment is inventory and there just is not enough on the high end to satisfy the amount of crazy money out there. Please read my report:

Anonymous said...

I'd like to see all north of montana sales compared on a psf basis, year over year. Until then I can't decide if it has gone down or not.

pvc said...

That murder was the exception, not the rule. The contention that Santa Monica is not a safe place to live is simply not true, especially in comparison to the rest of Los Angeles. SM is still part of the city, and with the many benefits of urban life come a few drawbacks. In SM, the drawbacks are very few (hence the housing prices), but occasionally the uglier side of city life does spill in. You can move to Pacific Palisades, which I guess is probably safer, but you're a bit further out and you lose just a bit more of the edginess of being in the city. Or you can move to Venice the opposite is true. It's all part of the process of figuring out where to be. But this contention that SM is dangerous is, in my mind, absurd.

Anonymous said...

6:39AM, what do you think about these?

12231 Darlington: listed at $1.7M
sold Feb 2007 for $1.435M
optimistic Zestimate of $1.21M

905 Wellesley: listed at $1.875M
sold Apr 2005 for $1.8M
optimistic Zestimate of $1.435M

The 2nd one is already at a loss, given transaction fees. The 1st one is just listed at an absurd price. My point is that anyone can give one-off examples like 1:38PM.

At these low volumes of sales, no one will know for a while whether prices are up or down on parts of the Westside:


Epsilon said...

Wasn't the guy killed at 520 Montana in a condo? Think it will be for sale soon?

...and if it is, what will the Realtor say about it?

Anonymous said...

he was indeed killed in a condo

if you read the blogs written by people who live in other beach neighborhoods, they say this murder is indicative of santa monica

i don't think this murder should impact prices in santa monica vs manhattan beach or pacific pal, but let's step back and see

Anonymous said...


here is an answer for you


Autopsy Shows Santa Monica Artist Beaten and Stabbed
March 25, 2008, 8:10 PM PDT

Autopsy results in the case of a 35-year-old artist who was killed in his Santa Monica condo last week show Alexander "Sasha" Merman was beaten and stabbed to death, authorities said.

Merman, a Russian immigrant, sold paintings on the Internet and taught art classes.

Merman was found dead in his condo on the 500 block of Montana Avenue last week.

It is not known how long he was dead before his body was found. The coroner's office has not determined the time of death.

His murder was discovered just days after that of another Santa Monica resident.

Aspiring model and actress, Juliana Redding, was also murdered in her apartment.

Both victims were found after their mothers were unable to reach them for several days.

Anonymous said...

This is for Epsilon and all the other glass-half-empty folks out there....

I know you are frugal shrewd investment types...but consider for a minute that a house is not always valued on the cheapest you can get it for...

Homes are for living in communities where you know your neighbors, raising your kids, inviting people over for Thanksgiving and playing touch football in the backyard...and yes, the U.S. government likes people to be homeowners and rewards them handsomely for it by giving us some of the largest tax write offs for homeowners...we have been told from a young age that it is the American dream to own your own home.....

so yes, I'm sure some homes will be cheaper than they were 1-3 years ago, but if you are at that life stage where a home is important to you and you can afford it....research your options, then go for it....and no one will think 10 years from now that you were a fool for buying real estate in Santa Monica....I promise. You can't raise kids in the backyard of a mutual fund. And be sure not to invite Epsilon or all the other bitter people to your backyard BBQs....he is a bag of downers and a former hedge fund slash lawyer heartless type always looking to get the upper hand and gloat about it...no one need a friend like him anyway...

Anonymous said...

couple of things -

1. the murder isn't deterring nomo buyers, price depreciation and the bad economy are. No one is worried about one incident like that. It happens in all generally safe places periodically.

2. Yes, you can't raise your kids in the backyard of a mutual fund, but you can raise your kids in the backyward of a rented house that costs less than 50% of owning the same house all the while your mutual fund is outperforming housing (well, maybe not, depending on what you own) and you are getting ready to pounce on a good deal.

3. I wouldn't invite Epsilon to my party either and I somewhat agree with him on certain things.

rosebud said...

I appreciate the denial comments, but really would appreciate actual evidence. Like I said, current evidence shows greater sales volume this year and greater average price. I like Westside's and Warchest's points about much longer DOM's... but like I said, the homes that check all the boxes are still getting snatched up fast (meaning they're not part of the DOM calculation for long).

The Brentwood comps are nice, but a little dated and aren't in Northern SM. Those 3 I listed all took place this year right around the Princeton listing that just went into escrow a few weeks after being listed.

Prefacing a Zestimate with "optimistic" could be a little self serving, and a little inaccurate. Last time I checked, Zestimates were still using condos as comps for SFR's. But again, these are data points, at least close to the neighborhood, so they're more relevant than "it's just got to come down a ton, you're in denial if you don't believe me..."

Also, to be fair, Westside and Warchest both have current SFR's that are listed below their last sale price; that's great evidence too... but only illustrates 2 of the 50 current listings (and one was a somewhat odd set of circumstances with the company that previously purchased it)...

The part about rentals is interesting... but can you list some of the current rental homes in Northern SM that are so cheap? I've only found one 3 BR listed as low as $5k... all of the 4 BR's seem to start around $10k... but I'm no expert on current rentals.

Anonymous said...

As far as price discovery, so far what has been missing is a lot of inventory of homes for sale in the NOM area. Basically, the owners are sophisticated and able to carry, and have experienced great asset appreciation. So they wait for the market to sort itself out.

90402 is also a small area of about 25 blocks x 70 houses (from SV to Montana) or 1750 homes.

But now we have more owners who are looking at the future and deciding to sell. Look at the mid-range NOM properties starting to come onto market, 2 on 19th around Alta, etc.

With product in the market, let's see if we get some price competition (i.e. falling prices). I bet by the end of summer 2008, we will see prices marked to market at least another 10%-15% lower than last year. Not a bear Stearns debacle, but a reversal of the status quo with significant downward momentum, short term with little support in sight. In other words, a trading signal to sell.

And then it is self reinforcing: when people see prices falling (they know the appreciation that occurred), they know the price supports (easy credit) have been breached, and they will not wait (and lose more). So the tendency will be for more to want to sell into the lower market before prices fall even farther. It will not occur quickly, but over the next 3 years the decreases will be substantial (and financially ruinous to many buyers since 2004).

So Anonymous at 11:55 predicts....lower prices!.

By the way, this is a great blog!

Anonymous said...

do people agree that the area from the ocean to 26th and from montana to sv has 1750 single family homes

i have seen very different estimates

i just want to size the area pls help me

Epsilon said...

Anyone who invites anonymous blog posters to their parties needs a wider social circle.

And if you're in a stage of life where it's time to settle down, you should absolutely consider buying, and I have never said otherwise. I also don't think that should preclude anyone from taking a hard look at the facts. I don't think it's heartless to point out those facts. Rather, I think it would be heartless not to.

A housing bubble creates an enormous wealth transfer from current homeowners to future homeowners. A lot of homeowners, and a lot of realtors, are trying to preserve that transfer by ignoring fundamental valuation principles. The simple fact is, most of the people on here being bullish about housing are trying to protect their own jobs and assets, and in the process screwing over young families who would like to be able to afford a home in LA without mortgaging their future. Right now, if you're not in AT LEAST my income bracket, you can't afford housing in LA county, and I think that's a huge problem. All the wishy-washy talk about the American dream is, frankly, nothing more than an attempt to perpetuate that problem by insisting that housing values are fair.

Show me someone waxing poetic about the glory of backyard barbaques and home ownership, and I'll show you someone trying to screw a young family out of their cash. I'd rather see families able to make their rent payments than pushed into a house they can't afford by someone selling a false image of the American dream.

bondinvestor said...

epsilon, that was the best post i think i've ever read about the housing bubble.

it really drives home the point about what the speculators & REIC have done to the younger generation the past 7 years.

it's rather fitting that the greediest, laziest, most spoiled generation in the history of the world (ie, the US baby boomers) will see their retirement savings decimated by the macro-economic havoc the bursting of the real estate bubble has unleashed on the financial system.

many of the boomers are bankrupt and insolvent. they and their politicians borrowed too much. their future earnings will not allow them to amortize the debts they or our government has incurred.

what's really sad is that most of them are so economically illiterate they don't realize yet what is happening.

their only hope is that the government stimulates a massive inflation to make the debt burden easier to bear.

20 years from now, when the standard of living in the US is meaningfully below europe, brazil, china, japan, etc, maybe the boomers will finally understand the error of their ways.

Anonymous said...

can you please show some stats to back up your claims that sales volume is double this quarter versus last year?

Westside Bubble said...

Excellent points, Epsilon and BondInvestor.

Westside Bubble said...

I agree with Rosebud that well-priced new listings have sold fast. As selling prices come in I'll list details.

Yet, as I posted last night, all inventories are at record levels for this time of year, for the time I've been tracking. The Westside total of 1,694 is greater than all months last year except the fall peak of 1,731 on 11/2/07. And high DOM demonstrates some extremely stale listings.

WarChestSM said...

Epsilon and Bond Investor are spot on.

Bond Investor, since you mention the boomers getting screwed by the busting of the bubble, what are your thoughts on mid/long term rates? With the possibility of setting fresh all time lows on these rates, will the eventual turn around in rates be the final nail in the coffin for all the 50-60 year olds out there who are shifting assets further and further towards bonds as they start retiring?

A long, bear market in bonds could be rough since nearly everyone is always taught to rotate out of equities and into bonds as they get older. Just another long term trend to potentially think about.

Richard Mason said...

anonymous: no one will think 10 years from now that you were a fool for buying real estate in Santa Monica....I promise.

Because nothing helps me sleep better than having my investment guaranteed by the full faith and credit of someone called "anonymous."

Westside Bubble said...

Because nothing helps me sleep better than having my investment guaranteed by the full faith and credit of someone called "anonymous."