Friday, June 20, 2008

if it's 50% in the OC, how much in the IE??

From the OC Register, an interview with Chris Thornberg.

Economist Chris Thornberg said Southern California home prices likely will continue falling until mid-to-late 2009. When the dust settles, he added, homes here could end up being worth half as much as they were at the peak of the housing boom.

“The reason prices are falling is because of gravity,” Thornberg (pictured here) told the Register after delivering the UCLA Extension Real Estate Forecast at the Skirball Cultural Center in Los Angeles. The run-up in home prices over the past decade was “ludicrous,” he said, noting that the increase wasn’t accompanied by a comparable increase in income.

By Thornberg’s math, a typical Southern California house payment equaled about a third of its owner’s gross annual income in 1999. By 2007, it equaled about 70%. “That’s why prices are coming down. They have to come down.”

Thornberg, founding partner at Beacon Economics and former UCLA economics professor, said home prices would have to fall about 40% from peak to trough to return to the historical norm. But add in the impact of rising gasoline prices, the subprime mortgage meltdown and rising foreclosures, and it’s likely prices will fall 50% peak to trough.

The S&P/Case-Shiller index shows that prices for the L.A./O.C. area are down 24% from the peak, so the region is about halfway to the bottom, Thornberg said.

In Orange County, price declines will be more severe at the bottom of the price spectrum than the top end, but “the top end is going to get hit, (too),” he said.

That will be a rude awakening for many homeowners suffering from what he called “homallucinations,” or the ability to convince oneself that while the price of everyone else’s home will fall, your neighborhood is clearly different.

Said Thornberg: “That’s what people go through — until reality kicks them in the butt.”


I'm Not POTUS said...
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I'm Not POTUS said...
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I'm Not POTUS said...

Quote: Owner will consider a trade in Orange County.

I wonder what you could find for him for $2,149,000. And even better find someone in the OC who will trade? Perhaps someone in Santa Ana.

golfer_X said...

Gotta admit though, that's a beautiful house. I doubt it's going to fetch 2 mil these days. Quite a few REOs out that way have listed for under a million. None as nice as that house but they easily could be with 300k of landscaping and upgrades.