Tuesday, December 30, 2008

October S&P/Case-Shiller

Today's October 2008 S&P/Case-Shiller numbers continued down, now 34.4% from its peak in September 2006, back to February 2004 levels. Notice how symmetrical it has been (unlike the DataQuick median prices). It's been retracing another month with each new month passed, and seemingly closing on its longer-term trend line.

By month that's 2.6% from September, 2.5% from August, 1.8% from July, 1.6% from June, 1.4% from May, 1.9% from April, 2.2% from March, 3.6% from February, 4.3% from January, 3.7% from December 2007, 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 25.0% from its peak in June 2006.

Besides the original city index they have each city broken into Low, Middle, and High tiers (Under $351,171, $351,171 - $530,387, and Over $530,387; updated for October). Los Angeles' Low Tier rose the most and has fallen back the most so far from its November 2006 peak, 45.5%. The High Tier rose the least and plateaued for awhile before falling more steeply, now down a steeper 2.2% to 24.4% from its June 2006 peak.

30 comments:

NeedleBrain said...

As far as providing support for prices, the "long term trend line" will be irrelevant with the force and growing momentum of the decline. The prices will fall right through any historic "support" level because neither rising incomes nor available credit are sufficient to provide an economic reason for people to buy or banks to lend.

The game has changed, folks. Recent history is no guide for how to price or predict prices in this economic disaster.

Even prices of the best homes in North of Montana cannot (for long) maintain their fluff with this basic change in fundamentals.

Don't mean either to be (1) an alarmist; (2) tin hat wearing doom sayer, or (3) a psychic.

Just a subscriber to the Wall Street Journal.

Anonymous said...

I hear you - but look at the past three or four sales North of Montana -

NOV 5 2008 · 603 25th St: $4,700,000
OCT 31 2008 · 416 21st Pl: $2,185,000
OCT 29 2008 · 508 Marguerita Ave: $4,000,000
OCT 15 2008 · 423 15th St: $2,365,000
OCT 9 2008 · 411 Lincoln Blvd: $4,100,000
SEP 25 2008 · 621 Marguerita Ave: $3,500,000

These are real transactions - when stuff moves it moves at prices higher than 2007 prices

Anonymous said...

If you draw a straight line from '98 to '03, all things being equal, we are just about where we should be by historical levels. Putting aside statistics, there are forces at work here which are going to continue to place downward pressure on prices. EESA (aka TARP) is going to place enormous pressure on the already very high levels of debt, slowing growth to 1% per anum for the next ten years. With a sluggish economy, unemployment is likely to remain high, and this alone will be the single biggest factor in price declines. Although sales have improved in the lower price range, the new conforming limit to be introduced in 2009, is going to make it even more difficult to purchase expensive homes. I would expect to see prices decline to 2001 levels by 2010 in many areas, and we may well see continued declines for 2-3 years after that. This is really where we want it to go. Propping up prices just pushes the problem of hyper-inflation down the road. If it happens slowly enough, I don't see that lenders are going to be pulled under, especially with Government bail outs. Homeowners with silly mortgages are going to get burned, but many sensible borrowers should survive. Amazingly, the same brokers responsible for the subprime lending are now at it again, with FHA insured loans, which is going to add another big burden onto tax payers.

Anonymous said...

3 or 4 sales are meaningless, except that it's only 3 or 4 sales instead of the 20+ it was very recently.

And it's hard to say the prices are higher, apples to apples. I don't know these few houses well enough but I bet they would have sold for at least 15% more last year.

Anonymous said...

Sales are going to crash in NoMO because of 'conforming loan limits'?

Really don't think that matters in this case of uber high real estate.

Anonymous said...

Conforming loans will stay low for 15 more minutes and then when everyone realizes (again) that 500 billion is nothing and that there is one buyer (the government) the rates will continue to rise.

Prices in the wealthy areas will continue to fall because those borrowing costs are already 7.5% + and will continue to rise. (Notice how the real / non government manipulated numbers are much worse?) incomes will continue to fall and the belief that you can't lose money in real estate because it always goes up 25% a year is gone.

Latesummer2009 said...

If we begin in 1986 and smooth out both bubbles, we find a bottom at an index of around 100, in 2010, based on today's velocity. Almost 50% off more to go in all tiers.

Unless we overshoot.....

Wooster said...

Can you illustrate the "longer term trend line" as you would see it?

Anonymous said...

"If we begin in 1986 and smooth out both bubbles, we find a bottom at an index of around 100, in 2010"

Time to change the name to latesummer2010.

Latesummer2009 said...

There will be some REO and Foreclosure opportunities on The Westside, at the end of the traditional selling season (during, Late Summer of 2009)...

This will mark the beginning of distress sales affecting the Westside Market. 2010 and 2011 will get even worse.

Anonymous said...

Help me out here -

I have been looking for SFR foreclosures in the 90402

I want to pick up a house in the 90402 at a slight discount to today's market price

So far i haven't seen any

if any of the readers of this blog spot foreclosures in the 90402 (not canyon) please post them

I am a super super super bear and want to take advantage of the coming distress

Anonymous said...

Fellow anons

I need your assistance

I am sitting on $10 million

but I don't know how to research building costs, REOs, market trends or anything else on my own

please don't ask how I acquired $10 million

can some anon on here please tell me what to do with my $10 million?

I need some anonymous advice from a total stranger and will then commit my $10 million to whatever an anon tells me to.

thanks

Anonymous said...

Are you riffing on the 90402 home looker? Funny.....

Anonymous said...

Are you riffing on the 90402 home looker? Funny.....

Anonymous said...

Infrastructure projects will be roads, dams, bridges, maybe railroads. I can see that propping up the price of concrete, asphalt, and maybe steel (although the collapse of the auto industry will be pulling steel down hard).

I don't see public infrastructure programs doing much to affect the price of lumber, flooring, copper, glass, plumbing fixtures, etc.

Anonymous said...

I'm not sure what the joke is here - seems to me that plenty of people are looking to pick up a foreclosure in North Santa Monica

some of us are looking for huge % off today's prices and some are looking for small % off today's prices

Anonymous said...

The joke is

The anon who posts with this style

Talks as if he/she will be buying a $1.5MM home one day

And yet seems to be pretty clueless

Comprende?

Anonymous said...

Has Beltran been sentenced yet? My daughter tells me that the DA is working to persuade him to testify against the other guilty teachers at Lincoln

Anonymous said...

Thinks for the random comment about the child molester teacher at Lincoln.....hello?

Anonymous said...

Hello?

This blog is about real estate. The quality of the schools is a big driver in the decision to buy real estate.

I know that I bought North of Wilshire and not South of Wilshire because of the massive difference in the schools

So yes the schools are important.

Anonymous said...

I own a small place North of Montana - i am not super wealthy like some of my neighbors and i want to leave SM for the summer

My house is on a block with 3 and 4 million dollar houses - mine is on a normal 7500 square foot lot -

my house is a two bedroom one and a half bath. Most people would consider it a three bedroom since in addition to two bedrooms there is a den that has doors that turn it in to a bedroom. Since the house is small and it is on a full 7500 square foot lot the back yard is absolutely huge by SM standards and is great for kids who want to play on wide open green grass

I want to rent it out for the month of June and for the month of July. Furnished.

My understanding is that if i advertise it widely and will accept any tennant i can get someone to rent it at a high price but they might trash it and make the neighbors unhappy. So i want to rent it out for those two months at a below market price so that i can select a family to rent it to who will treat my place with respect.

Can anyone on this board explain to me what "full market rental price" is for a place like mine and also explain what discount below market i should offer in order to get a great great tennant.

I don't want to extract every last penny I want to rent it to someone who is safe and reliable

Anonymous said...

I rent out a 1600 sq.ft. 3 bedroom/2 bath vintage Spanish home with a big backyard, furnished in less desirable Sunset Park for $5K/mo. long term....

I don't know if summer rentals would be more or less (short term) if you are not on the beach, and 2 vs. 3 bedrooms makes a big difference to a family looking to rent from Europe/East Coast, etc.

Look at the website VRBO.com (vacation homes by owner)to gage where the market is for vacation rentals in Santa Monica.....

Anonymous said...

Short term rentals with a big backyard are less of a selling point for vacation renters than # of beds and baths.

They are out sightseeing and at the beach, not playing croquet in the backyard park.

Anonymous said...

wow

this is helpful thanks

I close off the doors to the den and furnish the den as a third bedroom

So the house will be a three bedroom / one and a half bath furnished.

Thank you for the help

Anonymous said...

I've got a long term in 90404 (on Arizona, in college streets): 2 bed 2 bath, 780sq ft. 4400 lot. Renting for $4250 a month, long term. The neighboring residence is smaller on a smaller lot renting for $5750 short term in summer and $3500 in winter.

Anonymous said...

Ok so if i have a 3 bedroom one and a half bath 1100 square foot furnished place in 90402 i should get what per month for a summer rental ?

Anonymous said...

Try 5K/month....1100 sq. ft is pretty small. Sounds like a large 2 bedroom really.

Anonymous said...

5k a month will make it the cheapest rental on the block, even as a long term rental. If it's west of 20th _summer_rentals_ (which is what the poster asked about), have been going for more like $8,500-$50,000 a month (you can imagine the high end requires something special), long term rentals have been going between $6000 and $15,000 a month.

For a place the size you describe, even if it "looks like a rental" and is on the inland side, a summer rental should draw about 50% more than a long term price on the same house. Use that as your point of comparison and you'll be fine.

Also remember most summer renters don't want a whole month. Typically they want to renegotiate rates by the week, or even the day. I'd stay away from that sort of thing if I were you.

Anonymous said...

The house is located between 7th and 20th and is located between Montana and Georgina ( I don't want to give exact location )

The house is small - 1100 square feet, with three bedrooms and one and a half bathrooms. It is fully furnished.

Other houses on the block sell for three and four million dollars each. My house is so small that of course if it were sold it would sell for land value only

Anyway, I don't want the hassle of renting it for less than one month at a time. Ideally i would like to rent it to one person who will take it for both June and July, but i will also accept one person for June and one for July

I just want to make sure that I fully understand the comments here - the "market price" for a one month summer rental is probably eight to ten thousand a month for my house.

The second point is that if I advertise it at $4,500 a month, and state in the advertisement that I know I am renting for half of market, and that I am renting at half of market specifically in order to get the most reliable tenant I can, I should have multiple applicantions from super reliable tenants - and i can choose the person that I think is the most reliable, honest tenant. I can choose a person i feel certain will not trash the place or host a loud party that will offend my neighbors.

Have i indeed captures what was said?

Anonymous said...

"Have i indeed captures what was said?"

Yes.

But...

Your plan honestly is not sound. Renting WELL under market value doesn't buy you a good tennant. On the contrary, it buys you a CHEAP tennant.

There are plenty who would point out, a tennant who is willing to pay more for a property simply has more INVESTED in every sense of the word.

Undercutting market by a little will move your property, renting for half market value will make people wonder what the hell is wrong with the house.