So Cal Real Estate News

Friday update: The DataQuick OC median numbers discussed below came in this morning, and my predictions yesterday (see post below) came out real close to the actual numbers. Wish I could say the same for my predictions for the Duck in the playoffs. Oh well.

The interesting news is that in every category, DQs actual numbers were stronger than I predicted. What’s that mean? Read on. . . .

OK, here’s my call for tomorrow’s “DataSlow” OC house sales update, which I should be for the 4 weeks ended about 4/21. (We’re still a week away from “DataQuick’s April Median numbers, one of the “Two problems with DataQuick’s median prices.”)

Sales (closings) will be up a decent amount from the prior 4-week period but way down from the year before. Right around 1900 total, off about 40% y-t-y. Continued gradual improvement, typical for deals going into escrow in February.

BTW, April closings, when they get released around 5/15, will be up about the normal amount from the very low March closings (but way below last year). It looks like May will do even better on sales.

Price is another matter. Especially median price. Down a small tad below 20% from a year ago, and up a small tad from the last DQ reported median of $506,000. Maybe $508,000.

However, if you look the details, like in the last report, I think you’ll see the new construction pulling down the overall index with both prices and sales down more than for resales. Resale SFRs and even condos aren’t doing as badly as new construction.

What it means is subject to interpretation. I think if long term mortgage rates (not to be confused with short term fed funds rates) started coming down further, we might have passed the bottom, especially with the activity Steve Thomas and I both are seeing in new escrows.

However, rates are already moving up, and instead of passing fiscal restraint issues to push long term rates down, our beloved Congress continues to try to borrow their way out of this mess with massive bailouts from Bear Stearns to folks who lied to get loans on home they never should have bought or refinanced.

With the interest we’re seeing from buyers, I really think if Congress passed long term fiscal reform, we could put the worst behind us. Things like a line item veto for the next president, cancellation of earmarks, a gradual move to a balanced budget with mandatory across the board cuts and tax increases to force discipline on our free borrowing legislators.

That would be a real mortgage relief bill!

I’ll post links to DQs numbers when they’re available, & you can see how we did.

I’d also like to get a more detailed post up about our thoughts about real mortgage relief. Trouble is, I’ve got to get to work on my real job so I can pay my mortgage. Because I really don’t want Barney Frank forcing my grandkids to eventually pay it for me.

Friday 5/9 postscript: DQs actual numbers (click here for OC Register blogger Jon Lansner’s  DQ graphs & comments for today) indicate even greater strengthening than I expected. Still having some optimism left in my troubled soul, I’d like to hope this means we really have reached a bottom.

In fact, I’ll go so far as to say that if long-term mortgage rates dropped 1% instead of continuing to go up, and if lenders adopted more reasonable underwriting standards, I’m pretty sure we could call last winter as the bottom for both prices and sales.

But I doubt either of those will happen soon. Instead, I think rising mortgage rates (not to be confused with the fed’s overnight, short-term rate) will combine with continuing over-reaction by investors and lenders with tougher than necessary standards to cut this party short. The large pool of homes entering foreclosure is also a negative indicator.

It looks to me like we have passed the bottom in terms of sales activity, but the bottom in terms of price probably (or should I say “maybe?”) still lies ahead this coming winter or next.

DataSlow’s lagging and confusing median prices will continue to improve for another 2 - 5 months, but we’ll see price month-over-month price declines kick in later this year, even as the year-over-year percentage drops decrease.

Overall, I’m beginning to become more optimistic, and am willing to admit that the bottom may, indeed, be past. But only if mortgage rates come back down, which I really don’t see happening.

Bottom line: We’re not deviating from our November post, “How low will prices go?” Nobody can really know what’s next.

One of the many unknowns in the current real estate market/meltdown/crisis/challenge (take your pick) is what the government can and will do to get us out of the mess they helped get us into (see “How we got into this mess“).

Monday night  Fed Chairman Ben Bernanke, speaking at Columbi’a Business School, pushed Congress to act for the sake of us all:

High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets and the broader economy. Therefore, doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It’s in everybody’s interest.

We think he’s right on the money on that one.    (For the APs report on the speech, click here.)

The challenge is how to correct the problem without bankrupting us all.

On the one hand, there are probably well over a million homeowners who now owe significantly more on their mortgage than their home is worth.  On the other hand, as Tevye would say, there are also no doubt tens of millions of Americans who owe significantly more on their car loan than their car is worth.

Do we really want to set a precedent that the government will bail people out of their own stupid decisions?  Nobody held a gun to anyone’s head to buy a home.  Most of them signed disclosure documents detailing out their loan’s ridiculous terms somewhere in the fine print.

But I know a rocket scientist (literally) that signed those documents and ended up over $100,000 upside down with an obscene payment.  Yes, he “trusted” his real estate agent/lender (bad sign!), who promised she’d get them a refi out of the loan (oops, guess she forgot to mention the prepayment penalty let alone the potential for decline in value).

I also have heard of lenders who had full time “signers” who supplied signatures on behalf of their borrowers for those subprime loans, whether their borrowers knew it or not.  (Now that I think of it, I don’t recall signing loan docs on some refi loans my wife & I did a while back.  Hmmm.)  Oh, did I mention that those disclosure documents were written in a language many of the borrowers didn’t speak (English)?

Bernanke’s taking a different approach.  Something like “we’re all in this boat together, and if we don’t start bailing these people out, we’ll all sink together.”  And he may be right.

Most commentators take this as a direct push from Bernanke for something akin to Rep. Barney Frank’s proposal for broad based foreclosure relief, which would include write-downs of the principal balance for some upside-down homeowners.  (For interesting details on Frank’s bill & the Bernanke connection, check out this post from TheHill.com).

How this all works could get messy, or it could help us all move on.  Or it could sink us all.  Action-reaction.  Unintended consequences.  Like the Fed dropping short term rates so low the dollar drops and inflation picks up & long-term rates (including fixed mortgages) go up.  That just happened.

Or, as my friend in Tennessee, Vince Thrasher, would say, “Hey, ‘The Fed dropping short term rates so low the dollar drops and inflation picks up & long-term rates (including fixed mortgages) go up’ just happened!”

Kind of like the fed dropping interest rates to save the economy after 9/11 and creating a housing bubble.  Yeah, that just happened, too, although Ben wasn’t driving the bus into the ditch back then.

Maybe it’s just time to let things just run their course.  It’s beginning to look like the longer the government tries to put off or minimize a downturn, the worse it becomes.

I’m still hoping an orderly debate may produce a moderate middle course that will at least partially mitigate some of the damage as we move forward.

We’re also advising our sellers to take advantage of the current spring mini-surge if they want to take the most conservative course of action.  And we’re advising our buyers to be patient, negotiate aggressively, and be sure to lock in a 30 year fixed loan they can live with on a home they won’t have to sell any time soon.

Just more evidence that what we said last November is still true:  We’re in uncharted territory, and nobody knows what’s ahead (see “How low will prices go?“)

Or, as Bernanke said last night, in our favorite quote, “A widespread decline in home prices, by contrast, is a relatively novel phenomenon, and lenders and servicers will have to develop new and flexible strategies to deal with this issue.”

Actually, they should have developed those new strategies a year or two ago.  Instead of the new and flexible subprime lending strategies they were working on.

As my mom would say, “Better late than never.”  If Bernanke’s concerned, maybe we should be too.

Real estate news is coming fast and furious! I take a weekend off from blogging for Barb’s birthday, & suddenly I’m hammered.

Several interesting items popped up over the last few days I found fascinating. In this post we’ll focus on the our own beloved California Association of Realtor’s headline-grabbing announcement that median prices are expected to drop 24% this year.  (Later, a look at remarks by the Fed’s Bernanke last night.)

It happened at the Disneyland hotel where our own Pacific West Board of Realtors was holding it’s spring “expo” and pep rally on Friday. Sadly, and ironically, as we local Realtors were meeting, a businessman decided to end it all by jumping from one of the hotel’s towers. Shades of the Great Depression. It is my understanding he was not a Realtor, surprisingly.

But some Realtors probably thought about joining him after they heard from CAR’s Deputy Chief Economist, Robert Kleinhenz, who revised the Association’s 2008 forecast for median home prices statewide. In March, CAR predicted a 9.5% drop for the year. Kleinhenz almost tripled that 9.5%, to a 24% drop. No wonder his boss, California Association of Realtor’s Chief Economist Leslie Appleton-Young, asked him to give the speech. (Leslie was the one out with 9.5% for the year in March, doubling her 4.5% October figure, which we thought was too conservative. Looks like when she ran the numbers again late in April, she just handed the sheet to poor Bob Kleinhenz on her way out the door to advise some poor businessman staying elsewhere in the hotel.)

But wait a minute–that may not be as bad as it seems. Dataquick’s most recent statewide median prices showed a 26% price drop for March 2008 from March 2007, which was when Dataquick’s price median peaked. Dataquick indicated “about half” of that drop was due to a shift in the market to more sales of lower priced homes. (For a detailed post on the problems with Dataquick’s median numbers, check out “Two big problems with DataQuick’s median prices.”)

So if you read between the lines, Kleinhenz, who apparently is playing “bad cop” to the missing Leslie Appleton-Young’s “good cop,” is implying that the worst is behind us. 2007 ended with CAR reporting a statewide median for Single Family homes of $476,000, and their latest number, for March 2008 is down to $414,000! (Click here for CAR’s press release on their March numbers) . That’s actually lower than the $424,000 median average for the year they’re now predicting.

As a 28 year CAR member, I picked up the phone to talk to old Bob himself, but discovered he was in Sacramento giving another speech today. Something about a statewide tour sponsored by Pierce Brothers Mortuary.

In any case, his capable associate, Oscar Wei was available to assist me, and he confirmed my suspicion that CAR now thinks the worst is behind us: “Hopefully, and that’s a lot of hope, things should be bottoming out soon in terms of price,” he told me.

That agrees with Oscar’s bosses comments last Friday at the resort formerly known as “The Happiest Place on Earth: “We do think this is the year we’re going to see our low point for sales. … Monthly sales have already bottomed out.” Also “All these numbers are going to stabilize and slightly improve. … We’re basically climbing above the liquidity crunch to pre-liquidity numbers.”

Well, I may be paying Bob & Oscar’s salaries, but I’m not quite ready to eat their breadsticks. With homes entering foreclosure still increasing (see “So Cal defaults up again“), and the liquidity problem far from solved, Blair and I are still expecting additional declines in values and sales as we move through fall and winter (See “Predictions 101: Our 2 market cycles“).

That doesn’t mean now may not be a good time to buy if you’re in a position to do so.  Shoot, Bob & Oscar could well be right, and Dave & Blair wrong.  Well, Blair anyway.  In fact, we continue to believe that if you find a home you love at a payment you can live with on a 30 year fixed loan, and you don’t intend to move any time soon, at least write an offer on it.

But if you’re not yet in a position to buy, there’s no need to panic.  While sellers may be less motivated as prices firm, we’re not going to see double digit appreciation any time soon.  And there’s a good chance the bottom may still be a year or two away.

But nobody knows for sure, as we keep saying, much to the annoyance of some of our gentle readers.  (See “How low will prices go?”

That’s what makes So Cal Real Estate so interesting.

What do you think’s next?

The old country veteran looked me in the eye.  “It’s like wrestlin’ a bear, Dave!”

“You either give it your all, and keep wrestlin’ him ’til you finally got him down on the ground & whopped,” he continued,

“Or you just give up and die!”

With those words, spoken to me just a few hours ago in the living room of our model unit deep in the green hills of McMinnville, Tennessee, we resume our adventures in out of state investing (see “What I learned about investing out of state” for the first installment).

Hmmm, I thought to myself.  He sure didn’t use that analogy two and a half years ago when he sold me those two apartment complexes.

About two weeks ago I sent “Brother James” and his associate an e-mail exploring the possibility of disposing of the two rural Tennessee complexes Barb and I acquired two long years ago.  Tired of investing too much time and money trying to turn them around, I’ve begun exploring the option of unloading them sooner rather than later.

This afternoon, after pondering the numbers I sent him and then inspecting both properties, the investment Realtor and his partner were supposed to give me their conclusions about what sort of selling price I could expect.

Instead, it seemed to be turning into a lecture on fighting on in the gallant, life-and-death struggle to turn these properties around.

As a veteran agent myself, it’s always both interesting and educational to have the tables turned and be acting as the seller or buyer.

I’m still in the process of gathering data and evaluating how badly I really want to fight on or if I’m just ready to die, which may be better than the alternative in this case.   We have made a lot of progress, but we’ve still got a lot of “challenges” ahead (in real estate, we never have “problems,” only “challenges”).

At this point, if I had it to do over again, I wouldn’t.  But I think we’ve all had trials that helped us grow, and looking back later, we appreciate the process.  It’s had some fun moments, but they’d be a lot more fun if the cash was flowing in the opposite direction.

So I still say, keep your investments close to home.

And if you do venture far, resist the temptation to leverage yourself beyond what you’re already successful at.  In my case, I bought a complex in rural Tennessee that had three times as many units as our largest California complex, even though it cost less than half what that California complex was worth.  I should have started out with a smaller complex, and I should have at least stayed in a more urban setting at first, such as greater Nashville.

Buying several houses in Franklin might have been a smarter 1031 exchange, in hindsight, as my bar-wrasslin’ realtor suggested.

Or maybe just being content with what I had.  The pursuit of expansion for expansion’s sake does add a layer of complexity which may not be worth it.

I may add more thoughts to this post later.  But right now, I’ve got to go wrestle a bear.

A week ago I told L.A. Times real estate reporter Peter Hong that much of a Realtor’s job in this market involves delivering bad news to homeowners. Pretty much the opposite of three years ago.

“You go from being like a doctor who delivers babies,” in a booming real estate market, I said, “to being an oncologist, just giving people bad news all day long.” (”Foreclosure glut further depresses housing prices“) Shoot the messenger time. Or keep dialing until the seller finds an agent who tells her what she wants to hear. (See #1 in “5 ways NOT to pick an agent.”)

Well, today brought more bad news for homeowners.

But that’s just one side of the coin. Unlike our 1980-82 housing bust, where mortgage rates topping at 16% were bad news for BOTH sellers and buyers, today’s bad news for sellers is good news for buyers.

Which can turn it into good news for some sellers who might also be buyers, and several other types of buyers:

First, this could be an excellent time to buy for “move out” sellers who are headed to more overbuilt areas like the Inland Empire, Vegas, Texas, or the Central Valley. That’s because prices there have generally dropped more than prices in Southern California’s coastal plain.

Such a “move out” seller can get her current home in escrow, then take her time looking in that outlying area, as prices continue to decline. There are plenty of homes to choose from, and lots of motivated sellers out there.

Folks who are willing to sacrifice a little temporary inconvenience for a lot of greenbacks & that elusive “perfect” home should consider renting in their new community while they continue to look. A buyer with cash in hand is in the best negotiating position, too. This move also lets you take advantage of the annual real estate market cycle (See “Market Predictions 101: Our 2 real estate market cycles“.

Second, the time may also be right for “Move Down” sellers, especially those looking to buy a condo. Since we’ve had a glut of condo building through much of our area, even coastal plain condos are experiencing rapidly declining values and lots of foreclosures.

The same goes for the more modest “starter” single family homes, which turn over more often and have more subprime loans and foreclosures. These aren’t just “blue collar” communities like Stanton or North Long Beach, but also communities like Lakewood, Cypress or even parts of Mission Viejo, which include large tracts originally build for first time buyers.

Third, this might be the right time to buy for people who are ready to settle into their dream home now. Specifically:

1. Buyers who will be living in this home for many years, and
2. Who have good credit, a down payment, and
3. Are tired of renting and are ready for the joys and trials of home ownership, and
4. Would like to start the 15 - 30 year process of paying off a mortgage so they can retire, and
5. Could use two of the three last great tax write-offs (mortgage interest, property tax, and donations), and
6. Are able to locate and negotiate an acceptable price on their “dream home.”

These buyers also might want to nail down the kids new school for next year. Maybe they’ve figured out that they want to enjoy their “dream home” while their kids are still at home. Maybe they’re concerned about interest rates going up. Maybe they know they’ve got busier times ahead & now’s the best time to look for a home & fix it up the way they want.

Maybe they know what we’ve been saying since last November: Nobody knows for sure what’s ahead. (See “How low will prices go?“)

Forth, this may well be an excellent time to buy for those whose personal situation suggests it. Someone who’s relocating into California, whether for work, family, or retirement. Someone who desperately needs a tax break. There are lots of different scenarios where personal situation trumps market speculation.

Some people would prefer to gamble with their stocks or in Vegas but not with home ownership. We believe there are plenty of things far more important than money (See “What to do when nobody knows what’s next,” “A little perspective,” and “A little more perspective.”)

Fifth, this might be a great time for buyers who appreciate the security of buying before or near the bottom.

Prices are already down 20% or more in many Southern California neighborhoods, interest rates are low, especially with inflation looming, and some special jumbo loan programs will be expiring soon. Why not take advantage of it?

Truth is, the best time to negotiate is just before the bottom. While prices don’t shoot up dramatically, the ultra motivated sellers and the super buys do disappear fairly quickly. And you never know it’s a bottom for sure until a year or two passes.

To take a very recent example, in January of 2007 we experienced a temporary “false bottom” caused by dropping rates and seasonal demand. In December I could find 10 - 12 low priced “super bargains” in Rossmoor, a popular west Orange County neighborhood. Within a month, they were all gone! We saw the same thing late in 2001 after the Fed dropped rates in the wake of 9/11.

Both 9/11/01 and 1/07 illustrate two things:

1. Super bargains disappear quickly when the market heads up.
2. You can only be sure of a bottom when you’re looking back months or even years later.

The “double dip” recession that started here in So Cal in 1989 during Gulf War I, then reversed to a new peak in 1990, then collapsed into the end-of-the-Cold-War bust of 1991 - 95 is a great example of # 2.

A personal story. During the ‘91 - ‘95 bust, Barb and I did not enjoy watching our rental homes decline in value, even as my income from real estate sales was also tumbling. But I wanted to avoid hefty taxes from selling those homes, many of which we’d owed for along time.

One day my colleague, John Spear, mentioned in passing that multi family properties in Long Beach had dropped to prices as low as four times Gross Rent. That means the price was down to 4 x the annual rent for some apartments.

Well, since apartments generally produce more income than single family homes, I decided it was time to use the wonderful tool of the 1031 Starker Delayed Exchange to convert our rental homes into rental apartment buildings. That way, even if the market continued to drop, at least we’d have some positive cash flow.

At that point, it looked like prices would continue to drop for years to come. A popular New York financial analyst wrote a syndicated column about how Southern California would never recover. Ever.

As they say, it’s always darkest just before the dawn. Turns out, I was buying at the bottom, but I didn’t know it. Possibly the best financial move (other than structured donations) that Barb & I ever made. And we didn’t even know it at the time. We were just lucky. Blessed, actually.

Bottom line?

If you can find a home you love and can afford with a 30-year or 15-year fixed mortgage, in a location you love, maybe it’s time to stop betting on further drops and become a homeowner. Even a professional gambler knows when to cash in his chips.

At least some of them. You could always pick up a rental or vacation home later on if prices continue to drop.

At least it might be time to start looking. Even if we all think the bottom’s still a ways off.

Only God knows for sure.

And He agrees with us that there are things far more important than money (see Matthew 6:19 - 34).

May 21 update: Ongoing increases in foreclosures and long term interest rates now make us more inclined to think that the bottom may be further off than we had hoped.

That doesn’t significantly alter our basic conclusions in this post, but it should at a little more caution. And a little more hope for those who are still saving for a down and seeking to improve their credit.

We recommend you check out today’s post on the subject: “Oh-oh! We just passed a nationwide bottom!.”

Just as the National Association of Realtors’ forecasts tend to be overly optimistic (see this morning’s post), Chapman University’s tend to be quite pessimistic. I think they’re still mad that Gary Watts made them look foolish several years in a row, or it could just be something inherent in their system.

Anyway, as part of their coming June “comprehensive forecast of key economic variables,” Chapman’s Economic Research Center today released their projection of Los Angeles County, Orange County, and Inland Empire housing prices based only on one variable, affordability.

To reach the historical average affordability rate, Chapman says L.A.County median home prices need to fall an additional 23.3% and Orange County by another 13.7%. The Inland Empire, which has had the more severe overbuilding and foreclosure rates, need “only” fall another 8.2% to reach Chapman’s magical median.

Now for the bad news:

“It is likely that home prices will decline even more . . . since corrections usually drop the affordability index below the historical mean.”

Their math assumes modest income increases and flat interest rates. Declining rates could significantly decrease the amount of “correction” needed, while more modest pay increases could offset at least some of that.

I think historical trends in L.A. and Orange Counties are skewed by many years of affordable land. Today’s situation of being practically built out on the coastal plain should result in higher affordability rates, in our opinion. That doesn’t totally invalidate Chapman’s conclusions–we’d just pick more modest numbers. We’re also hopeful that continue declines in mortgage rates will increase affordability.

It seems to us that both Chapman University and Gary Watts are like broken clocks. Gary’s stuck at sunrise: He always thinks prices will keep going up. Chapman’s stuck at midnight: The worst is yet to come. They’re both right once in each economic cycle, like a broken 24-hour clock that’s right once a day.

Still it’s one more thing to consider. We think a 5% - 10% additional price drop will hopefully do it for the coastal plain at least. (See “A Change in Our Projections“).

Like we keep saying, nobody knows for sure (See “How Low Will Prices Go?”).

For Chapman’s full report, including some nifty charts, in PDF form, click here.

And click here for “a little perspective” on our real estate woes, here for “a little more perspective,” here to find out “what to do when nobody knows what’s next,” or here to find out “how to sell your So Cal home for top dollar in 30 days.”

As for me, I think it’s time to get outside in this beautiful weather & go for a jog.

We got our April “Research Update” from NAR yesterday (”Existing Home Sales to Stabilize Before Upturn in Second Half of 2008“) . That seems too optimistic to us.

Maybe Lawrence Yun, their new Chief Economist, hasn’t heard about the annual cycle yet (See “Market Predictions 101:  Our 2 Real Estate Cycles“), because he thinks things will start picking up when they start slowing down in most years.

Here are the first three paragraphs of NAR’s press release:

Little change is expected in existing-home sales over the next few months, before improving notably during the second half of the year, according to the latest forecast by the National Association of Realtors®.

Lawrence Yun, NAR chief economist, said the market will come into clearer focus this summer.  “Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure,” he said.  “We’re looking for essentially stable sales in the near term, before higher mortgage loan limits translate into more sales in high-cost markets.  The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met.”

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in February, slipped 1.9 percent to 84.6 from an upwardly revised reading of 86.2 in January, and was 21.4 percent lower than the February 2007 index of 107.6.  “The slip in pending home sales implies we’re not out of the woods yet, though an era of successive deep sales declines appears to be over,” Yun said.

We do see some signs of bottoming, but from where our office sits on the OC/LA County line off the 605 in Lakewood, we really can’t tell if it’s just a spring uptick on a longer downward trail.  We’re still sticking with our most recent forecast (see “A Change in Our Projections?“)

We think DataQuick’s numbers from yesterday only tend to confirm our perspective (”What DQs numbers mean“)

Update from David Emerson: We wrote the following post early 4/15, in anticipation of DataQuick’s release of their March closing statistics for all of Southern California, including L.A. & Orange Counties, Lakewood, Long Beach, Los Alamitos, and the surrounding area. As we predicted, DQ’s March numbers showed an increase in sales which was quite modest by seasonal standards, and also a modest firming in prices.

We’ll insert excerpts from today’s DQ report at appropriate points through the post below. We’ll indent them & put them in italics. We’re leaving our earlier projections and commentary unchanged, because it’s still applicable:

“DataSlow,” as we like to call them, should be out today with their March closing statistics for Southern California. Here’s our preview & interpretation. We’ll update this as needed once the numbers are out.

Data quick reports Southern California two statistics every week and every month: sales volume and median sales price.

It looks like both will be down from March 2007, which will probably get most of the attention. But the month over month figures should be more hopeful.

We expect sales volume to be up a tad from February,

[Here's what DQ reported:] A total of 12,808 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in March. That was up 18.8 percent from 10,777 the previous month but down 41.4 percent from 21,856 in March 2007.

and median prices to be pretty close to February’s numbers.

The median price paid for a Southland home was $385,000 last month, the lowest since $380,000 in April 2004. Last month’s median was down 5.6 percent from February’s $408,000, and down a record 23.8 percent from $505,000 in February 2007. That peak median of $505,000 was reached several times last spring and summer.

[Dave here. This is still a reduction in the rate of decline, and it was caused by some of the problems with median statistics, details below. When isolated by county, the stabilization is more apparent. For example, Orange County's March median of $506,000 was down less than 3% from February's OC DQ median of $520,000. More significantly, OC's $506k March median was actually up from DQs last 4 week OC reports, which both came in at $500,000. Pretty much what we predicted--but don't read too much into that, bulls (details to follow)

Now a word about what that would mean.

It's important to bear in mind what these numbers actually are. First, in terms of today's rapidly moving market, DQs numbers are ancient history. That's because Data Quick today will report Southern California real estate sales that closed escrow during March.

That means the purchase offer was most likely written 45-60 days earlier: Someplace between January 1 and February 14.

Second, DQ's price numbers are medians. If more homes are selling in stater neighborhoods, the median price will drop even if prices are rising. (For a more detailed discussion of the problems with DataQuick's numbers, see "Two big problems with DataQuick's median prices.")

The sharp and sudden drop of the Southland median price reflects a combination of factors, mainly depreciation, especially in areas hammered by foreclosures, and a big shift in the types of homes selling. Since last August, when the continuing credit crunch hit, sales have plunged for more expensive homes financed with "jumbo" mortgages, which until recently were defined as loans over $417,000.

Sales financed with these larger loans, which the credit crunch made more expensive and harder to get, accounted for just 15 percent of Southland sales last month, down from about 40 percent a year ago.

[This is the problem with medians. DQ explains it, but only in the ninth paragraph of their report.]

Even with their problems, however, DQs numbers can be useful. These should offer something for everyone, but some caution is in order.

Housing bears shouldn’t focus too much on the year over year numbers to the exclusion of some possible modest improvement from February to March.

Likewise, housing bulls should be wary of reading too much into what might just be a normal seasonal increase in activity and prices (see “Southern California’s 2 housing market cycles“).

Over the past 20 years Southland sales have risen by an average of 38 percent between February and March. Last month’s 18.1 percent increase from February was the lowest in DataQuick’s statistics, which go back to 1988.

We don’t think today’s DQ numbers will change our own position on what’s ahead (See “A change in our projections?” for our April 4 projection post, or our “classic” November post on this market, “How low will prices go?“)

DQs report is available here. You might also want to check out Peter Hong’s concise, well-written article on today’s DQ numbers.

For a little longer term perspective, you might want to click back to either of our last two posts, (”A little more perspective”) and (”A little perspective“).

Woke up this morning to one of those stories that makes you thankful for what you have. Even if it is going down in value.

Worth a read:

“Pride in A Paycheck”

There’s more to life than money. Way more.

Maybe it’s not going to get as bad as we’ve been thinking?

Seems like I woke up to nothing but good news today.

Let’s start in Tokyo, where this week Alan Greenspan, apparently fleeing the U.S. for his own protection, proclaimed that the housing bottom isn’t that far away.

The former Fed chairman told a banking conference there that he expects the drop in U.S. home prices will probably end early in 2009 as housing inventory is reduced.

Here’s the really good news (if you’re a homeowner, at least. Greenspan thinks “…it is very likely that home prices will stabilize well before that.”

Greenspan said that in spite of apparently taking off his rose colored glasses, because he also thinks that the damage from the subprime crisis won’t be fully apparent for months. He also called the current credit crisis the worst in 50 years.

A bottom this coming winter has been the most optimistic of our “most likely” scenarios. In fact, the ongoing increase in Southern California foreclosures had us thinking the bottom’s more likely at least two years off (see yesterday’s update to our most recent projections post).

We’re not saying we agree with Greenspan, who we think had a lot to do with getting us into this mess (see “How We Got Into This Mess” for details). But he does have an awful lot of experience, access to more data than I can imagine, and a lot more credibility than Gary Watts.

Then I go to check the O.C.Register’s Mathew Padilla’s “Mortgage Insider Blog” to discover he’s finding signs that the bottom might be behind us. Now that’s the most optimistic scenario possible!

He sites two specific “signs:”

1. “Our local superstar investment manager, Bill Gross of Pimco, has been buying mortgages.“
2. Goldman Sachs CEO Lloyd Blankfein said the credit crisis is “closer to the end than the beginning,” and that the U.s. economy “will be on a growth curve again” by the end of the year.

Again, we’ve got two credible sources, but sources who may well have their own agendas.

Meanwhile, the Senate passed their version of the “Foreclosure Prevention Act” by a lopsided 84 - 12 vote. On first pass, we think the bill, which will probably be modified significantly in the House, does some things well, others poorly, and others not at all.

Overall, we think it’s a step in the right direction, and we feel the bipartisan support is significant, as well as the fast action. Here’s a link to today’s L.A. Times‘ article on the bill.

But foreclosures are still on the rise.

Like we keep saying, nobody really knows what’s next.

But today things look a little brighter than they did yesterday.

Maybe.

P.S. For something more uplifting, you might want to check out our next post, “A little perspective.”