Why I predict a 55% nominal price drop in North County

[sdduuuude]

I am angry about the low quality of your analysis and data, not the results of such.

[sdduuuude]

Again – “It’s been noted that in North SD County, prices have been flat since the middle of 2004”

If prices revert back to 2004 prices and prices have been flat since 2004, that isn’t a 10% drop.

[rankandfile]

Is it me, or do Bernanke’s statements set the stage, or at least justify the government’s role in adding to inflation post 2002? Like foreshadowing the rising inflation that was to come, to the point that we are more than beyond now. I am not an economic expert by any stretch of the imagination, but it seems like he was raising false concerns over deflation (a rare occurrence in his own words) to justify future potential increases in inflation. And I don’t understand how we were experiencing “low” inflation in 2002. Although I have no data to support my argument, I would surmise that prices for most goods seemed to be relatively inflated and steadily increasing in 2002…at least here in SoCal.

Getting back to P.S.’s original post, I tend to agree with her more on gut feeling than anything else. As I’ve said numerous other times, take the current prices of homes, divide by 2, and start negotiating from there. I think that Rich’s graph of home prices vs. per capita income tells the tale. People’s need to live in a home in SoCal has not increased by 25-30%, so why pay 25-30% more of your takehome pay to live in a home here?

The kibitzer will say, “Well, demand is high relative to supply.” Although this may be partially true, as time wears on I am becoming increasingly skeptical that demand was falsely increased by speculation…aka “hype”. This can be attributed to a number of factors, such as the media, IMHO. One can’t help but point out that marketing has an effect on, well, markets, and people’s psyche in general. Of course supply couldn’t keep up with the demand created by hype…I don’t suppose it ever can when it concerns building something as large and complex as a home. Even Apple has trouble stocking enough of those little iPods to keep up with demand. [By the way, for an extra $50 or so you can get a sweet PDA and an SD card that will let you play all your music AND check emails, word process, edit spreadsheets, etc…but I digress).

Back to the main point – Powayseller has my vote on a 55% decrease.

[powayseller]

sduude, how much of a price drop is it to go back to 2004 prices? 15%? 20%? Please correct me.

[sakina96]

Powayseller,

Your 10, 10, 20 logic is mind-boggling. Where did you get that one?

I also seriously question the notion that north county sales prices are at 2004 levels. I am not aware of any data to actually support this one:

1. I have actively looked in the north county market for the past year. For any house that I find interesting I’ll look up previous sales data. It is exceedingly rare that prices are even in the same ballbark as two years ago.

2. Jim the realtor’s own website contradicts the notion. Look at the page entitled Statistics 2006 — monthly. This page compares the median sales prices for 2003, 2004, 2005 and 2006. Unless I’m missing something, the median sales prices for every single month of 2006 is significantly higher than 2004.

For the record, I’m not a homeowner, I’m not angry and I do believe that house prices will go down over the next several years.

[sdduuuude]

From the :
Case-Schiller Methodology

“The main variable used for index calculation is the
price change between two arms-length sales of the same single-family home.”

From the Case-Schiller chart, it is very clear that same-home values have not reverted to 2004 pricing.

[powayseller]

sakina, as I keep explaining to people, the median is a 2 year lagging indicator. Jim’s explanation of falling prices is applicable to specific homes, not to the entire market, becasue the higher end home sales skew the median up. Don’t confuse what a particular home will sell for, with the median. The 10% drop figure is not in the data, but you will get this by talking with realtors, who are telling you what clients can get for their home. You can contact some realtors if you don’t believe me, and get your own examples. Ask for sales prices of homes which sold today, and compare what the person paid for that house in 2004. ocrenter has some on his site too. There’s another guy who tracks downtown condos. I personally got 5% less for my house last December, before the big downturn started. So it’s not hard for me to believe another 5% drop has been added. But those of you just reading median data stuff, can be easily misled. So it is important to *not* rely on the median.

I don’t know how accurate Case-Shiller index is. If it goes against what is happening in the field, it wouldn’t be useful either. I can’t comment on that, because I haven’t researched it, but Rich feels it’s better than the median. But probably it’s not perfect either.

[sdduuuude]

“as I keep explaining to people”

You state it, but don’t necessarily explain it or prove it.

[powayseller]

Bob C. wrote :
“In reality, each home is worth less today than it was in 2005. Most are priced at 2004 values.”

But in all honesty, why don’t you just sell your house if you can’t handle the ride down? It’s just going to get worse. Remember last downturn, years 3-5 were down 20% in the median per year! This one will be worse. If you can’t handle the equity loss, either sell now or stop reading the forums.

Arguing with me won’t change the market.

[sakina96]

You are absolutely right that there are inherent flaws in using median values. I would imagine that the only thing worse is blind acceptance of someone’s anecdotal information as fact.

Sure, it is possible to find an example of an occassional house selling at 2004 levels. However, I absolutely do not think this is representative of the north county market as a whole at this time. As a potential buyer I would love for houses to have fallen that low. I just don’t think that is reality…yet.

[sdduuuude]

Do you know my housing situation?
Did I say I couldn’t handle the ride down?
No. I just can’t handle your analysis.

[sdrealtor]

Time to step in….

Homes in North County are now selling about 5 to 10% below the absolute peak numbers. I know that because I see it everyday. When those peak numbers occured differs from neighborhood to neighborhood but most peaked before or by the end of 2004. As for homes selling at 2004 prices, it really depends. Some are a bit higher and some are a bit lower but it general prices are where they were in Spring 2004.

As for the comment that Jim the realtor said prices are down 20%, that is a complete misinterpretation of what he said. He said homes will sell about 20% below sellers unrealistic expectations. By this he meant that sellers over estimate the value of their home and think it should sell for more than their neighbors (thus 5 to 10% above previous peak numbers generally occuring in late 2004/early 2005) when in fact they are now selling for less than last year (5 to 10% drop since Fall). Thus sellers false belief that prices went up + sellers not knowing prices fell=unrealistic sellers overpricing homes as much as 20% out of the gate!

[powayseller]

Here’s one that is 10% BELOW 2004 prices. It was an REO.

http://www.zillow.com/HomeDetails.htm?city=POWAY%20&state=CA&zprop=52513582

Ten percent below 2004 levels, so that puts this home at mid-2003 price?

Does anyone else know of homes selling at 2003 prices?

[sdrealtor]

2003 prices would be very rare. There was an absolutely HUGE INSANE bump between Dec 2003 and Feb 2004 which is going to take some time to get over. For example, in those 2 months homes in North County Coastal SD increased between $50K and $150K with most getting a $100K bump or better!

[barnaby33]

Because there are alot of them. Borrow 10k from the bank, its your problem. Borrow 10 million its the banks problem.

Josh

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