Sunday
Dec302007
How low in San Diego?
Sunday, December 30, 2007 at 10:32AM Lee sent me this graph today, noting that he would do this for other cities, if requested by readers.
Click on image to enlarge
Update on Tuesday, January 1, 2008 at 01:53PM by
Schahrzad Berkland
Schahrzad Berkland
Bruce can post these California cities
Reader Comments (6)
If I extend the lines out, a 30% drop in median price by 2010 seems likely. How this plays into the 2 tier market will be interesting to see...will the desireable areas fall 10%, while the hard hit areas fall 40 - 50%? So far, there is a big gap between the beauties and the beasts. Will this gap narrow, or get larger? This will be interesting to observe. In the last downturn, even the desireable areas fell, but I have not been able to determine how much, since the MLS only came into use in late 1990's, and County Recorder records were often left blank for price and mortgage before 1990s. Any input from long timer is appreciated.
I'd like to see one for Ventura County, specifically Oxnard-Camarillo-Thousand Oaks. TIA
Prices in South Mission Beach went down 30 percent in the early 90s.
I have all the properties prices sold in South Mission Beach since 1984.
Two bedroom house sold for $350,000 six month before the topin 1989. In the mid 90s,they were going for $225,000. About a 30% drop.
Can Lee make one for Calabasas and Woodland hills in Los Angeles? Both have seen tremendous growth during the past 5-7 years, especially in home prices. But I have noticed at least a 10-15% drop in prices during the past 9-12 months.
I've forwarded the request for LA, to Lee.
Just a note of caution on median price. It does not measure price drops on houses. I absolutely never use the median price to tell me about price changes.
Median price is only a Mood Indicator. It shows how much money people spent on houses in a particular month.
Read more here
House price started falling in 2005 (detached), but median price rose for another year and a half! People are getting bigger houses for the money, better views, more quiet location, better condition, etc.
Let me give an example. A 2000 sq ft house on a busy street, built in 1971, in original condition (no upgrades) sold for $500K in 2005. Let's say that all buyers in December of 2005 bought this type of house so the median price was $500,000. (This house is probably $400K today). This house is a beast and has dropped 20%.
Fast forward to 2007 and now nobody wants this old house on the busy street. We have 2 tier pricing and the beauties sell. But buyers are still optimistic over the market, so they are not gloomy. They are still wanting to buy, but they want the beauties. What house sells in this market?
The 2000 sq ft house selling today must be on quiet street, preferably cul de sac, have a nice yard that is private, lots of light, updated kitchen and bath, move-in ready, good school district. This house sells for $ 540K today, let's say for simplicity (price depends on location), and it would have fetched $600K a couple years ago. Only a 10% drop.
So prices are down 10% for the 2000 sq ft house, but you are getting more for your money. Balance the 10% drop with the 20 - 40% drop in other homes, and the median is only down slightly.
Some day, the other house will sell too, but not until it is priced much much less. Buyers today will not pay the top dollar for a beast.
Here is the most important thing I can say about the median. If every home for sale was priced to sell (marked to market), then and only then would the median be useful.
Even then, many people who would sell otherwise, have removed themselves from the market due to being underwater. They would rather not take a loss, so they will try again in a year or two or three. The effect of this seller reluctance is a level inventory. Inventory has not exploded as I expected.
Lee emailed me the list of cities for which he can make this chart. See the follow-up entry above.