Wednesday, November 28, 2007

CAR report for October

CAR has released the October report. As usual it is full of ugly numbers but they have included another rosy forecast for the future. Although their rosy forecasts are getting far less rosy as the months go on. It must be hard for these people to try to put a happy face on this real estate implosion.

LOS ANGELES (Nov. 28) – Home sales decreased 40.2 percent in October in California compared with the same period a year ago, while the median price of an existing home fell 9.9 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.

“Financing issues have dogged entry-level buyers since early 2007, but they spilled over into the middle and upper-tier markets in the last few months,” said C.A.R. President William E. Brown. “The decline in sales at the upper end of the market contributed to a significant decline in the statewide median price as even well-qualified borrowers had difficulty securing financing.”

Closed escrow sales of existing, single-family detached homes in California totaled 265,030 in October at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 40.2 percent from the 443,320 sales pace recorded in October 2006.

The statewide sales figure represents what the total number of homes sold during 2007 would be if sales maintained the October pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

The median price of an existing, single-family detached home in California during October 2007 was $497,110, a 9.9 percent decrease from the revised $552,020 median for October 2006, C.A.R. reported. The October 2007 median price fell 6.4 percent compared with September’s $530,830 median price.

“We expect further weakness in sales over the next few months as the liquidity crisis plays out,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Both the state and national economies remain fundamentally sound at this time, despite recent developments in the housing market. While there have been mixed signals in recent months, economic growth is expected to continue into 2008.”

Highlights of C.A.R.’s resale housing figures for October 2007:

  • C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in October 2007 was 16.3 months, compared with 6.4 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
  • Thirty-year fixed-mortgage interest rates averaged 6.38 percent during October 2007, compared with 6.36 percent in October 2006, according to Freddie Mac. Adjustable-mortgage interest rates averaged 5.68 percent in October 2007 compared with 5.56 percent in October 2006.
  • The median number of days it took to sell a single-family home was 59.3 days in October 2007, compared with 56.5 days for the same period a year ago.

The important numbers for us are bolded. As you can see the high desert is getting creamed. Sales are down nearly 60% and the median price is down nearly 20%

Riverside/San Berdu are slightly better with sales down nearly 35% and median down 16%.

One thing to remember is that the median is still not showing the actual depth of the price declines. It's obvious by looking at the listing prices of the aggressively priced homes that the "real" price decline is probably running between 30% and 40% in the IE. The median price is probably still being propped up by the ratio of higher priced homes that are selling. Back in the boom years there were more lower priced homes selling but today the bottom end of the market is DEAD. Most of the homes that are still selling are towards the high end. This has the effect of inflating the median. We heard a lot about this effect 6 months ago when the median prices were still going up. You don't hear much about it now that the median is finally falling. The effect is still there however and it is making the price declines appear less than the actually are.


Briar said...

If the IE is going to be the worst hit area, does that mean that rents here will go up? Will all these displaced home debtors move into rentals and drive the rents up or will they leave the area?

Anonymous said...

In the last crash (mid 90's) rents actually came down. As house prices fell, so did rents. I remember apartments that were going for close to $1000 falling to around $700. I expect that the same thing will happen this time. All those empty homes will cause a glut of rentals which will be competing with each other and against apartments.

There is already an excess of rental units in the IE. There is something like a 10% vacancy rate. So there are plenty of places for the people to go that lose a home.
If things get really bad people will leave the area creating more vacancies. Many of the apartment units are running specials right now because of the high vacancy rate. You can get free LCD TVs, free rent for two or three months etc, if you look around.

Briar said...

I hope it happens by next summer when my lease is up. I'm paying $1570/month for what seems like a tiny 1000 sq feet with an attached garage, and although I like where I am and it has great services, etc., it's way too much. I didn't have much time to look when I was moving here and I felt safer there than the other places I looked. Now that I know my way around, I know I could find something nice for much less. Ideally I like to rent a condo from a private owner but what I see listed on craigslist so far seems way too high.

I'd like to know who came up with the brilliant idea of "pet rent." I don't mind paying a deposit, because I know some pets can be destructive, though my little angels aren't. But having to pay $50 per month for my two mild-mannered cats really burns me. They're going to have to get part time jobs and start paying their own way.

My other plan is to buy a house with a pool in Palm Springs and commute an ungodly distance until I retire, but that's probably just a pipe dream.

FairEconomist said...

The Central Valley, probably the worst-hit area, has "N/A" for its median price. Hmmm. Well, I'm sure that's just a coincidence - we all know how objective the CAR is.

Anonymous said...

My brother in law just rented a 3 bedroom house in Moval with a 2 car garage and a pool for $1250/mo. It's a nice house in a decent area. The owner originally wanted $1700 but my BIL talked him down to $1250.