Wednesday, June 25, 2008

April Case-Shiller

Yesterday's April 2008 S&P/Case-Shiller numbers continued their free-fall, now back to May 2004 for Los Angeles. And good to see how Case-Shiller is cited in national news now.

Los Angeles (black line, includes Orange County) is now down 26.1% from its peak in September 2006 - 2.2% from March, 3.6% from February, 4.3% from January, 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, their original 10-city Composite) index is down 19.1% from its peak in June 2006.

Besides the original city index they have each city broken into Low, Middle, and High tiers (Under $408,960, $408,960 - $617,001, and Over $617,001; updated down again for April). Los Angeles' Low Tier rose the most and has fallen back the most so far from its November 2006 peak, 33.7%. The High Tier rose the least and plateaued for awhile before falling more steeply, now down 19.5% from June 2006.

Below is an update on my low-end north-of-Montana index, last posted for November data. Counting low-end / tear-down sales on 9th, 10th, 12th, and Euclid Streets, its 25% fall closely tracked the Los Angeles Case-Shiller index in the 1990s.

There have been no low-end sales on these streets closed so far in 2008, so I plotted the $1,880K sale of 219 23rd as a possible trendsetter (rightmost dot). Currently in Escrow (but see comments on SM Distress Monitor), 517 Euclid (last asking $2,139K) will be a new data point.


Anonymous said...

Is it fair to plot 219 23rd without plotting the other "low-end" sales on higher-numbered streets that have closed?

Kevin said...

A better benchmark might be 705 15th -- only two blocks out of the zone. Apparently 7500sqft lot sold for $2.1M in February. That appears to match the 507 Euclid ($2.05M) and 342 12th ($2.2M) sales last summer.

Anonymous said...

Yeah, Westside Bubble is cherry picking.

Westside Bubble said...

Hey, I plotted it with a BIG disclaimer!

Another disclaimer is due: the two points in 2H 2007 are 611 14th, 12/5/07, $2,000K, and 424 11th, 12/20/07, $2,105K, neither on the four benchmark streets.

Anonymous said...

Forget Case Shiller....still can't find a decent SFR in 90405 for under 1.3m....and neither can 100 other families.

Anonymous said...

"still can't find a decent SFR in 90405 for under 1.3m....and neither can 100 other families."

Well then, you, and 100 other families, should look somewhere else. Or... be more patient. Market collapses take time.

Anonymous said...


As of today, In 90405 there are 8 SFR's in default, 4 with auction dates set, and 1 REO. There are quite a few more, but they're condo's and multifamily buildings. You need to look harder... :-)

Anonymous said...

Got it, cherry picking is okay if accompanied with a vague disclaimer.

Anonymous said...

None of the defaults in the 90405 are for SFRs (thats houses, not condos)

Anonymous said...

as someone who's been looking on the westside in $1 million range for a year, i can tell you i don't see the drastic price declines everyone is hoping for. We got outbid on a house on walnut in venice by someone who offered cash ( $1.1) And even considered the modern/remodeled home on Corinth - near the 405- that this blog highlights in a separate section...but in just over 30 days that house is off the market/sold too!
where is the real proof that desireable homes on the westside will drop more in value? I'm curious/would like to understand. thx

Anonymous said...

anon 2:51

Because your reading a bubble blog which is predicated on hoping and praying for a huge collapse so that they all can finally afford to live in the area. When the reality is that the West Los Angeles region hasn't seen too much of a hit. Case in point, the very own Case- Shiller that the bubble blogs love to hang their hat on, provided a heat map to show the greater LA region’s price declines. The outer lining areas were red and orange signifying huge declines. The West LA region was colored green/grey/white signifying relatively low price changes if none at all. So you see you can cherry pick bad examples of homes dropping in price, yet there are twice as many homes that are good examples of quick sales and multiples offers happening in the same area.

Anonymous said...

You sound just like everyone in San Diego/vegas/denver/phoenix/the valley/ventura/orange county 12 months ago... nowhere is different. Sales are down 40-60%, prices are down 10-20% and they're going to continue lower. If you disagree, stop whining, get a stupid loan and buy.

And the "twice as many homes" is total bullsh$t. If you want to play the cherry-pick game, you will lose.

Anonymous said...

"None of the defaults in the 90405 are for SFRs "

Uh... you are absolutely wrong.

Let me repeat.. there are 8 *SFR's* in default, 4 more with auction dates set, and 1 REO.

Anonymous said...

"When the reality is that the West Los Angeles region hasn't seen too much of a hit."

Yet. You really need to look at the macro forces at work here and stop being so parochial. There's a shitstorm going on *right now* in the financial markets and our economy. If you think that won't affect west LA you're delusional.

But hey, it makes you feel good, you go ahead and keep believing that everyone who argues that the market here will get hit can't afford to live here. Enjoy the ride...

WarChestSM said...

Yeah the cherry picking is soooo unfair...

Give me a break...things look terrible right now all over. The "immune" argument is as valid as the "decoupling" and "Goldilocks" arguments.

These things take time and the high end areas always lag the cycle.

Keep up the great work Westside Bubble!

Anonymous said...

The comments about cherry picking are not that it is unfair, it's that it damages Westside Bubble's credibility. The lot value analysis last fall was helpful. Cherry picking lots beyond the tight parameters of last fall's analysis in the update was not.

allsouledout said...

Can we stop with the "everyone reading this blog is just hoping to one day afford to live here" bullcrap?

I would guess (I know - *gasp* - I'm not using hard data) that a majority of the people who read this blog, and SM Distress Monitor, CAN in fact "afford" the area ... if by "afford" you mean doing what a large % of the population was doing over the past 5 years and squeezing into a house that they really shouldn't be buying.

My sense is that people are reading these blogs because 1) they're interested in the psychology behind bubbles and 2) maybe, just maybe, they are rooting for/expecting a slight bit more "affordability" in these areas. Or maybe that's just me.

I'm a relative bear - not because I need to be, but because I lived through/worked on Wall St in the late 90s/early 2000s (and made out OK, so no bitterness here) and became fascinated by the "It's different this time / Don't worry, it will come back / Knife-catching / Capitulation" cycle. The whole process of bubble deflations/burstings is interesting.

That said, if there ARE in fact people on here who think that SFRs in 90402 are going to be $800K, they should probably put down the pipe ... but again, I'm guessing most people on here, even if they could "afford" for buy a $1.8mm house, would feel just a bit more comfortable with a price 10-15% lower.

David's dad said...

Any thoughs on this? Below is federal census' estimate of SM family income broken dowin into several categories.

There are ~14K non-rental housing units in SM and ~5K families that make 200K or more (this group is pretty much the only group that's elegible for loans over $1M).

I belive there is a disconnect and that the current price levels are simply unsustainable.

Total households---46,725---
Less than $10,000---3,573---
$10,000 to $14,999---3,178---
$15,000 to $24,999---3,512---
$25,000 to $34,999---3,321---
$35,000 to $49,999---4,888---
$50,000 to $74,999---8,793---
$75,000 to $99,999---4,817---
$100,000 to $149,999---5,551---
$150,000 to $199,999---3,418---
$200,000 or more---5,674---
Median household income (dollars)---61,423---
Mean household income (dollars)---103,514---

Anonymous said...

There are ~14K non-rental housing units in SM and ~5K families that make 200K or more (this group is pretty much the only group that's elegible for loans over $1M).

I'm not sure how this is relevant. These are people who ALREADY own or rent in 90402. Many of them have owned their properties for decades.

The only way to spin this data into something relevant would be to cross reference recent property sales with income level. As far as I know this is not possible.

I actually find the notion that 5000 families in 90402 have incomes in excess of $200,000 annually to be remarkable for the opposing reason...

...There are not 5674 property transfers on record in the 90402 area for the past five years. Meaning it is possible (though not terribly likely) that every property sale in 90402 since before 2002 was to a family that could have qualified for a conventional loan.

I don't believe that this is true, but I also don't think that 5674 out of 14000 homes is a low level. On the contrary it's exceptionally high.

And, it also has little relevance to the body of consumers who are shopping in that area. These are the people we'd all like to know more about. Can they afford these homes at current rates? How many of them are there? Can they soak up the excess stock that the market will provide when those folks who overextended themselves (as I do believe there were some) are foreclosed upon.

Only time will tell. I for one can't begin to make a legitimate prediction.

Anonymous said...

parents give kids the down payment or more for their homes.

Westside Bubble said...

Thanks, David's Dad!

Though I'm not sure how to evaluate it relative to the price of houses.

Anonymous said...

What is fascinating is that anybody with access to over $2 million would be so gullible and impatient as to buy in 90402 right now .

90402 is the bubble battleground extraordinaire , where developers are trying to keep the prices high and encourage the buyers to remain optimistic even in the face of facts and reason. As witnessed in this blog, the developers and their investors are downright scared, even writing in to a "bubble blog" actively defending the millions they invested ( and hope to wring out of you).

90402 is one of the few expensive areas where the bubble really inflated excessively, and the one that has not yet even deflated because the inventory has so far remained low. 90402 remains enticing because it has the appearance of a neighborhood and also likely because 90402 is not yet full of foreigners and difficult schools like BH.

There can be no doubt that with the inventory coming on line, the developers will have to reduce thier prices to sell. But at least this summer, the adage appears to remain true: a fool and his inheritance are soon parted...

By the end of 2008, with some inventory lingering, the prices will drop because the marginal developers (of which there are several) will be forced to sell or have the bank take the spec house over and liquidate them.

You are witnessing a historic decline in the process. Something to tell the grandchildren about...

At least if you lose your equity you will have trouble convincingly telling others that 'the market reversal took you by surprise?'