So Cal Real Estate News

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“).

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.”

Update added 4/7: Lots has happened since we wrote this post about two weeks ago, but it hasn’t resulted in any major changes to our projections. We did, however, release an updated projections post over the weekend: “A Change in Our Projections?”

The roller-coaster ride continues with this morning’s news:

1. Nationwide February resale closing numbers from the National Association of Realtors mirror DataQuick’s So Cal Numbers from last week: Sales up, prices down.

Why the sales increase “caught economists by surprise” is completely beyond us. January closings were the lowest on record, homes that went into escrow during the Thanksgiving to Christmas slowdown in a terrible year. They had nowhere to go but up as we move into spring.

We’ve been predicting the increase since we saw sales picking up in our market in January, & we also think March will reflect an additional increase in sales and possibly at least some firming of prices, maybe increases.

You read it here first–which is our goal, bringing you Los Angeles and Orange County real estate news from the front lines– not the ivory towers! Click for Blomberg’s reporting of NAR’s data.

2. Bear Stearns’ bad loans apparently weren’t as bad as originally thought, since Morgan-Chase this morning quintupled their bid from $2 per share to $10. Maybe things aren’t as bad as they seem? (Click here for our take on how we got into this mortgage mess & on Bear Stearns’ culpability.)

3. Stocks are up. But so are foreclosures. (For some insights into buying foreclosures, click here for our initial “Foreclosure Tips” post.)

This is just more evidence to us that we were right when we said last November that this downturn was wildly unpredictable. But we also told you What to do When Nobody Knows What’s Next.

Sellers, you may also want to review our summary of our workshop on “How to Sell Your So Cal Home for Top Dollar in 30 Days.”

That said, if you’re still intent on market timing to the exclusion of all else (that is, you don’t have a life?) we continue to expect a window of opportunity for sellers for the next several months, followed by opportunities for buyers through this winter. We still think there’s a significant chance (20%?) of a major price collapse of an additional 15 – 25% , but there’s also a possibility that the worst is behind us.

Sorry the picture isn’t clearer, but we’d rather tell you the truth than make something up. Feel free to post your comments, thoughts or questions, we try to respond to every one. Or call us if you want to talk further (562.430.0262).

Added 4/3: If you want to read excerpts from Ben Bernanke’s April 2 testimony to Congress about where he thinks we’re at and where we’re headed, check out “Bernanke Predicts Bottom Later this Year?!“

We even translated some of his remarks into English, for those of us who don’t speak economist. He pretty much agrees with us, except he’s a little more optimistic. But we think that’s part of his job. Being moderately optimistic, that is, not agreeing with us.

4/7: For our updated projections post, check out “A Change in Our Projections?