Housing Market Declining Rapidly (Los Angeles, Orange: sales, real estate, foreclosure)

[unlawflcombatnt]

HOUSING MARKET DECLINING RAPIDLY

Friday's New Home Sales report added further evidence that the housing market is declining. Monthly New Home Sales showed the biggest decline in 9 years. The decline in New Home Sales was larger than the real estate mythologists predicted. The annualized New Home Sales rate declined 10.5% during the last month. (Technically, if 0 new homes had been sold during the last month, the annualized sales rate would have only declined 1/12th, or 8.3%. So some previously sold homes must have become "un-sold.") January's number was also revised downward. Had January's number not been revised, the decline would have been 12.5%. The annual New Home Sales rate has declined 21% since July. Median annual prices also declined to a -2.9% annualized rate of increase. Inventories increased from 5.3 months' worth to 6.3 months' in February.

Since October's peak in New Home Sales of 1.345 million/year, the rate has declined to 1.080 million/year. Unsold inventories of New Homes have risen 4 of the last 5 months, from 4.5 months worth in October to 6.3 months' worth in February. The unsold inventory of New Homes is the highest in 10 years according to Briefing.com Over the past year, there has been a 24% increase in new homes on the market, according to CNN Money.

Also, according to CNN Money, the current median price for a new home is now $230,400. This is down $6,900 from February 2005. In addition, the current median New Home Price is down 5.5% from October's $243,900.

In some areas the decline was much larger. In the West, the 1-month decline in the annualized New Home Sales rate was 30%, declining from 357,000/year to 252,000/year. In the West, the annual New Home Sales rate has declined 49% from its October peak of 410,000/year. This information can be found at Briefing.com New Home Sales

EXISTING HOME SALES

The Existing Home Sales report from Thursday, March 23rd, was reported with unjustified optimism. The seasonally adjusted sales rate actually declined from the previous year. February 2006's annualized rate was 6.190 million/year, marking a -0.3% change from February 2005's 6.930 million/year rate. Meanwhile, Existing home inventories INCREASED 5.2% over the last month, and increased 30.2% over the last year. Below are charts from HoweStreet.com showing these changes.




Once again, the declining numbers are even more extreme in the West, especially in California. Existing home sales dropped 15.5% from the same period 1 year ago. The inventory of unsold Existing Homes in California is now 6.7 months' worth, compared to 3.2 months' worth a year ago (from the Orange County Register.) In Orange County, California, there are currently 10.4 months' worth of unsold inventory of Existing Homes, compared to 5.7 months' worth a year ago. The median price of existing homes in California declined 2.9% from January 2006.

The Mortgage Bankers' Association purchase index also declined dramatically. The 4-week Purchase Index moving average has declined from 470 in October to 401.5 at present.

In summary, both New and Existing Home Sales are declining, with New Home Sales declining much more. Meanwhile, inventories are rising rapidly in both New and Existing Homes. The biggest inventory increases and sales declines are in bubble areas, especially California. Prices are actually declining in some areas, most notably Southern California. Housing Starts actually increased over the last month, which will increase inventories even further, and put further downward pressure on home prices.

The Housing Bubble is definitely deflating, and appears to be deflating even faster than many predicted.


unlawflcombatnt

EconomicPopulistCommentary

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[Steve97415]

One should remember that selling price can be a very deceptive indicator of affordability. While it is true that the selling prices of homes have been dropping, affordability has remained flat due to continued interest rate hikes by the feds. Despite a lower sales price, your monthly mortgage payments would be about the same, perhaps even a bit more*, on a house purchased now as opposed to a year ago.


*There is usually a lag time between interest rate changes and market adjustment of home prices. This works in the buyer's favor in times of falling interest rates, and to the buyer's disadvantage in times of rising interest rates.

[jhay1816]

With the fed most likely to raise interest rate even further to compensate with the inflation, and the fear of US having a recession, will deflate the bubble even more. well at least the bubble wont burst according to greenspan, it wll just deflate gradually(hopefully).

Im so concern about the topic specially i live in LA county, because my family is planning to buy a house in the coming months. im just worried that they're making a wrong decision specially with the fear that the "Big One" is coming any time soon, i dont even know whether we should reside here in california or move somewhere else.

[fastfilm]

jhay, the best investment you can make for any new house purchase in Los Angeles is to retrofit it yourself for earthquake safety, in addition to whatever the prior owners claimed was done. We did so, and our house survived the 1994 Northridge quake 3 miles from the epicenter with only cracked walls and the entire chimney coming down. These are insignificent to us because the damage to my block was sufficient to kill two of my neighbors across the street. As my retrofitter had said, he built everything so strongly that it would take something bigger than "the big one" to completely destroy it, in which case we'd all be dead anyway! (A little "gallows" humor from L.A.)

[barryeod]

The time to buy is when rates are high. High rates push prices lower. Buyers can re-finance when rates fall off again. I can never re-negotiate the price that I paid, regardless of what rates or prices do.

[shannon94]

Originally Posted by barryeod

The time to buy is when rates are high. High rates push prices lower. Buyers can re-finance when rates fall off again. I can never re-negotiate the price that I paid, regardless of what rates or prices do.

And what happens when the price of the home they bought drops? That's the silliest thing I've ever heard!!

[RedNC]

Originally Posted by shannon94

And what happens when the price of the home they bought drops? That's the silliest thing I've ever heard!!

You stay in your house until the prices rise again. If you bought a house in CA from 90 to 96 your home would have lost as much as 21%, but from 97 on your house would have appreciated enough to overcome the loss.

[shannon94]

Originally Posted by RedNC

You stay in your house until the prices rise again. If you bought a house in CA from 90 to 96 your home would have lost as much as 21%, but from 97 on your house would have appreciated enough to overcome the loss.

Sure that will work for some people, but the majority of loans taken out in the last couple of years have been either ARM loans or interest only loans. When these adjustments come due alot of people who got in with this creative financing will no longer be able to afford the payment. These people will have to sell. With prices falling , they will owe more than what they can sell for. Not to mention the people who took that false equity out of their homes to live the high life rather than pay their bills off. This is a huge problem in Cali now. The foreclosure listings are astonishing!!

[johnlvs2run]

When I got into real estate in 1985, the broker I worked for said the increase in rates would cause the prices to go up. I had thought they would go down due to making it harder for people to buy homes. But it turned out he was right as the prices shot way up after that. The reasoning might be that since everything else is going up with inflation, and houses are the biggest investment people make, then the higher prices for everything else end up pushing the housing prices even higher.

In any case, if you're going to buy a house then make sure you can afford to keep paying for it, and don't gamble on the market to change to your benefit. It might do that but then it might not. So be prepared for the worst case scenario. Then if things turn out much better that's great.

[johnlvs2run]

Originally Posted by shannon94

the majority of loans taken out in the last couple of years have been either ARM loans or interest only loans. When these adjustments come due alot of people who got in with this creative financing will no longer be able to afford the payment.

That happens a lot.

When there's a choice, I would always go for a fixed rate for a home.