Tuesday, July 28, 2009

May S&P/Case-Shiller

The news with today's May 2009 S&P/Case-Shiller update is that some cities, and Los Angeles' High Tier, have risen slightly. But see Calculated Risk's comments about seasonality - we know that prices rise most in the second quarter of the year - before calling a turnaround.

Overall Los Angeles (including Orange County) is still down again, 41.9% from its September 2006 peak, back to July 2003 levels.

By month that's 0.1% from April, 0.9% from March, 1.4% from February, 2.0% from January, 2.8% from December, 2.5% from November, 2.2% from October, 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 33.3% from its peak in June 2006.

Besides the original city index they have each city broken into Low, Middle, and High tiers (Under $277,621, $277,621 - $433,758, and Over $433,758; updated for May). Los Angeles' Low Tier rose the most and has fallen back the most so far from its November 2006 peak, now 55.8%.

The High Tier rose the least and plateaued for awhile before falling more steeply, now 30.8% from its June 2006 peak. As noted above, it was up 0.6% from April, a return to its March 2009 level (and January 2004). This is consistent locally with the flurry of sales in Mar Vista but continued frozen market for higher-priced houses.

16 comments:

Anonymous said...

Actually, the seasonally adjusted LA "high" tier declined from April to May, down to 166 from 167.

http://www2.standardandpoors.com/spf/pdf/index/SA_cs_tieredprices_072820.xls

tbgpalisades said...

Let's use C-S to see what's selling in PP. I'll skip the details on the index, you can look for yourself.

1104 Via de la Paz
CS value = $1,052,940
Sales price = $1,025,000

17000 Bollinger Dr.
CS value = $1,273,100
Sales price = $1,205,000

It looks like C-S less 5% is the mark.

Now, let's take a look at a typical PP bagholder:

15027 W. Sunset
Purchase 9/21/05 = $1,090,000
CS Price = $771,100
Listing Price = $1,090,000
CS less 5% = $732,500
On market: 190 days

Ok, plus $0.60 on the dollar for any "improvements" (re: normal maintenance).

So many bagholders, so many who have no idea what lies ahead for them.

I wish them well!

Anonymous said...

So many bagholders, so many who have no idea what lies ahead for them.

I think a lot of folks will tough it out, make payments, and never consider a SFR an investment going forward. Back to the old school way of looking at housing - buy for living, hopefully as a store of paid-off value that increases at the same rate of inflation.

The next group to get the memo will the realtors - R/E is not a commissions ATM, sellers will not subsidize what should be a simple fixed fee service.

Call me a curmudgeon, but I am glad R/E is back to earth, and the flippers, realtors, mortgage brokers, mansion spec builders, etc. are getting squeezed out. Good riddance, lets keep housing affordable and purchased for the right reasons.

Anonymous said...

so I am taking in job in LA and moving west. Pac Pal is my target and a 3BR on roughly 8000 sq ft is my target, preferrably east of temescal canyon. what am i looking at for asking and then what should i look to pay? would prefer to remodel but open-minded.....or do i rent instead?

many thanks.

Anonymous said...

Tbgpalisades - Very interesting analysis. I would love to see more examples of that as we move forward!

Based on that analysis there most homes in the Palisades are going to need to see major price cuts to have a chance at getting a bid (especially after the spring/summer selling season turns into the fall/winter/option-arm season).

PS The buyer of 1104 Via de la Paz is trying to sell 16754 Edgar St. OLP was $1.35 and seller was offering financing construction of a 4000 sqft home if desired, now asking $1.175 and no financing is offered. Looks like the seller put that money into 1104 Via de la Paz. It will be interesting to see what happens to 16754 Edgar as it was marketed as a tear down w/ permits.

Anonymous said...

Is he going to live in 1104 Via or tear it down? I thought I saw a moving truck there.

That is great inside info, keep it coming!

Anonymous said...

TBG, how are you figuring the CS price?

Anonymous said...

Using TBGPalisades method from above, 16754 Edgar St would be valued at $713,515 as of May 2009. The home was originally purchased for $950,000 in Sept 2004 when CS for LA was at 212.78. As of May 2009 it is at 159.82 so that's how I got $713,515.

Knowing that prices for most sold listings in the Palisades this year are back to 2004 pricing, this house shouldn't sell for more than $950,000 if it sells at all.

Since there is little to no spec housing happening now, the value of permits for new construction are worthless on 16754 Edgar and the only people who are going to buying the cheap old houses in the Palisades are young couples dying to get into the Palisades. Unfortunately, at current prices they'll need a substantial downpayment to get a conforming loan under $729k when most of these homes are still asking over $1 million. That's why it is very likely that the low end will be coming down substantially if sellers want to sell in the Palisades in 2009.

Anonymous said...

Very very true. Except the part about conforming at 729k, I think it's 625k.

Anonymous said...

729K is conforming in la county

Eyes Wide Open said...

Economy, stock market, commercial real estate, and most of all westside L.A. residential real estate, still have A LONG WAY TO DROP.

What exists to send things back up? The rising unemployment here in L.A.? The 5-year teasers that are about to expire and send thousands of westside homes into foreclosure? The coming inflation that will cause interest rates to rise? The ever-tightening lending standards?

What we are seeing is an end to the plummet. Now we're in the hole and when we stop plummeting we'll look up and see how deep in the hole we are with no way to climb back out.

Real estate is priced at the margin. We've now got a whole city of real estate that people think is worth millions per property, but it's only worth millions if someone can pay you that for it. Who will be able to pay us millions more than these properties were worth ten years ago? The answer is: nobody.

Anonymous said...

"Who will be able to pay us millions more than these properties were worth ten years ago? The answer is: nobody."

There is no shortage of money. The issue is asset allocation and desire to own R/E.

Ask a good tax attorney where his/her clients make their money. The answer is always the usual and odd places, from inheritance, executive comp, options, foreign transfer, asset sales, intellectual property, business sale, etc - you name it, the list goes on forever. The old saying "there is more money than there isn't" is very true in Southern CA.

My point: folks with hard assets are not chasing R/E as an investment, renting and staying put works for them.

I know a number of high net worth folks in my profession, and I have yet to hear anyone saying it is a good time to buy R/E. When it is a good time (who knows), I fully expect the same group to fight over bragging rights about who bagged the biggest trophy property at a fraction of the imputed bubble price.

Francis said...

CS index and tier segregation. I don't think the CS index can follow if houses switch tiers ( when prices drop enough to move into different tier). Since prices are generally declining, the houses left in the high tier will tend to be houses that haven't dropped as much - making it appear quasi stable. Houses in the lowest tier will show the biggest drops in price

Westside Bubble said...

I don't think the CS index can follow if houses switch tiers ( when prices drop enough to move into different tier).

The CS tiers change every month to keep the 1/3-1/3-1/3 shares. I've listed the new breakpoints in each month's report. Although I suppose an individual house could still cross a breakpoint.

Anonymous said...

lets add one more comment - LA is not nearly the place to live that it was 20 years ago. This town is a hole, and to drive anywhere from the Palasades you gotta go through the rest of this hell hole

i miss when this was a beach town with skate rats everywhere.....

Anonymous said...

The old saying "there is more money than there isn't" is very true in Southern CA.

I get zero Google hits for the old saying "there is more money than there isn't." Zero. Even us using the phrase here doesn't show up in the Google search yet.

Ergo, it isn't an old saying.