17% Percent?!

[capeman]

Whoa! Has the proverbial poo started rolling downhill? 17% is a bigger drop than I ever saw in my wildest dreams by the end of this year. Comments?

http://www.signonsandiego.com/news/business/20061026-1127-bn25housing.html

[Steve Beebo]

“The median price last month for newly built houses and condos and condo conversions locally was $413,500, down 17 percent from a year earlier, with analysts speculating that much of this change was the result of an increase in lower-priced condo conversions.”

This is for new homes only, and condo conversions have got to be a factor.

I’m not going to say that the market is OK right now, (it really sucks), but surprisingly, inventory continues to drop, and resale prices of SFRs and condos have not really dropped much at all yet. Inventory usually does tend to drop at the end of the year, but I think a lot of people are surprised that the # of homes on the market has dropped, especially with the slowdown in sales.

I’m looking for a big increase in the number of bank REOs in the next 1-2 years, which is going to depress prices, but I’m sticking to my prediction from last summer that median home resale prices won’t drop more than 10 to 15%.

[PerryChase]

Steve B, I beg to differ. Certain neighborhoods that I’ve been watching have already dropped 10% to 15%. However, the listings have not sold yet, hence the lag in the stats reflecting reality.

I’m not sure what the future will bring. Let’s see what the stats show 1 year from now. Patience is a virtue.

[Steve Beebo]

Perry – You’re right that certain neighborhoods have dropped 10-15%, but other areas have not dropped at all..yet.

I’m expecting that when median resale prices from Nov. and Dec. are posted, that prices in the County will then have dropped more than the 1% or so that was shown in Sept.

[powayseller]

Why do they report the median year over year? There’s no good reason for it. Why not report gas prices year over year too?

Unlike the past decades, the new home median has been very volatile the last 3 years; example: $500K June 03, $435K Feb 05, $540K Dec 05,$435K Jan 06. In August it was $395K, so September’s $413K was an increase over August. So with that much volatitility, I wouldn’t make a big deal about any one month changes (year over year included).

[capeman]

YOY median prices have quite an effect on the psychology of the local market. It’s that piece of data that helped people justify pulling out equity over and over. It helped make them believe that THEIR houses were really worth 3x more than 6 years earlier. Now with data like this coming out the psychology should really begin to break down.

I don’t believe in the median as a valid number in and of itself but the trending pattern of that number tends to trend with overall home prices.

[Bugs]

I didn’t care for the use of the median a few months ago when it was providing a distorted picture and I don’t think it’s any more accurate now. The comparisons of prices during these different time periods is based on an implied assumption that the datasets are similar in composition. This is an assumption that we already know isn’t true.

It’s valid to the extent that it can be interpreted as demonstrating the direction of the trend, but the actual average decline on an apples-apples basis may be less or more than the percentage shown.

It shouldn’t be considered as being that accurate just because it confirms our judgement that the market is in decline.

By the same token, I think DL must have a little shrine in his office honoring Baghdad Bob, and he must be talking to that shrine on a daily basis. 2007 will not be a good year for the bulls and I don’t think 2008 is even going to be as good as 2007.

[powayseller]

Bugs is right. The composition of homes sold changes every month, so the median is more of a reflection of the change in the mix of homes sold.

I don’t know why there is such volatility in the new home sales. The resale market median varied only $5K – $10K from month to month.

From the U-T: ” Statistics from the National Association of Home Builders showed a similar slide. Builders reported cutting prices in Septemberby 5%, according to the association’s most recent data”.

A 5% cut in September is a 60% annualized slide! If we assume the rate of decrease continues picking up, it can get much worse. And this doesn’t include builder incentives…

[PD]

Plus, that 5% is what they REPORTED. Does anybody doubt that they are trying to hide the true reduction?

[4plexowner]

IMO 17% is just the start.

1998 prices, here we come!!!!

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