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Home prices across OC continue to plummet

Posted: 22 Dec 2011 02:30 AM PST

Prices across most of Orange County continue to decline. The OC Register reports prices have hit a near three-year low. My own analysis of the MLS data shows Irvine teetering on the brink of taking out the 2009 low and setting a new eight-year record low.

Home Address ...    8 KANSAS Irvine, CA 92606
Asking Price .......     $639,000

O.C. home prices hit 31-month low

December 13th, 2011, 9:39 am

Orange County’s home pricing got hit with autmun’s chill, as builders had a record-worst sales month.

DataQuick reported this morning that 2,297 residence sold in November. That is up 1.8% from a year ago. That gain came at a price. Literally.

Median selling price was $400,000 — the lowest since April 2009 and off 8.0% in a year. Orange County’s median first hit $400,000 in May 2003.

Anyone who has been reading my writing is not surprised by these numbers. Ever since the spring rally fizzled out in May, I have been predicting a big drop in the fall and winter. When December's numbers are posted, they should be even worse.

By the slice:

  • 1,495 single-family residences sold last month. That is up 6% from a year ago.
  • 664 condos sold last month. That is up 8% from a year ago.

Increasing sales and decreasing prices means the decline is accelerating. The sales volumes are still well below historic norms, but the fact that volume is increasing is a good sign for those waiting for lender capitulation as a sign of a market bottom.

  • Builders had 138 new-home sales last month. That is down 42% from a year ago. It was the slowest November for developers in DataQuick records that date to 1988.

And more analysis …

  • $400,000 median selling price is 38% below June 2007′s peak of $645,000.
  • Current price is 11.1% below 2010′s peak (May and July) of $450,000; 2% below end of 2010′s median ($410,000.)
  • The most recent median is 8% above the cyclical low hit in January 2009 at $370,000 — so the median has recouped 11% of the $275,000 price drop from the peak.
  • Compared to cyclical low, single-family house median is 10% higher ($418,250 in January 2009); condo median is 1% higher ($252,000 in March 2009.) Builder prices for new homes are 35% above June 2009′s $424,000 bottom.

See the follow up post below reminding everyone of how the low of the median in 2009 was an illusion created by the changing mix of houses sold.

  • The median selling price of a single-family home is 37% less than their peak pricing (June ’07). Condos sell 46% below their peak in March 2006. Builder prices for new homes are 34% below their February ’05 top.
  • Single-family homes were 80% more expensive than condos in this period vs. 71% a year ago. From 1988-2010, the average house/condo gap was 57%.
  • Builder’s new homes sales were 6% of all residences sold in the period vs. 10% a year ago. From 1988-2010, builders did 14% of the Orange County homeselling.

These are dismal numbers. There is no way the bulls can convincingly spin this. Prices will fall through January or February, then we will see the start of the season uptick for next year's spring rally. Expect the usual suspects to call the bottom.

Just as a reminder, the median is not the best measure of price performance:

It seems like there may still me a few people who do not understand that the median low is not necessarily and most often not the absolute low of any statistic.  The 2009 Orange County median low for residential home prices was not the low for home prices as can be evidenced by anyone who has been actively been watching home prices for the last few years.  Anyone that is, who is not a moron.

From Wikipedia: In probability theory and statistics, a median is described as the numerical value separating the higher half of a sample, a population, or a probability distribution, from the lower half. The median of a finite list of numbers can be found by arranging all the observations from lowest value to highest value and picking the middle one. If there is an even number of observations, then there is no single middle value; the median is then usually defined to be the mean of the two middle values.

Here are two lists which provide examples of median prices using a sample of ten prices each:

Sale Prices Sale Prices
$200,000 $200,000
$200,000 $250,000
$225,000 $300,000
$225,000 $400,000
$250,000 $500,000
$250,000 $600,000
$500,000 $700,000
$1,000,000 $800,000
$1,500,000 $900,000
$2,000,000 $1,000,000

The median of the first list is $250,000 while the mean is $635,000.

The median of the second list is $550,000, more than the median of the first list, while the mean is less than the mean of the first; only $465,000.

Although they show opposite results, neither the median nor the mean are flawed, but both are limited by their definition and the data set applied.

The Orange County Median Low in 2009 was not the low for home prices and anybody who has been watching home prices for the last few years can attest to the same.  The Orange County median reached a low in 2009 because of the mix of homes being sold.  2009 had an unusually large percentage of distressed sales of lower end homes purchased in 2005/2006 or refied in 2005/2006 by subprime borrowers with 2/1 and 3/1 Option Arm mortgages.  The mortgages recast in 2006 to 2008 and these subprime borrowers had little to no reserves with which to make their larger recast payment, and the resulting distressed sales occurred relatively quickly compared to present default times.  Of course, none of this is news to anyone who has been paying attention or is not denying the facts.

After 2009, the mix of homes being sold changed with 3/1, 5/1, and 7/1 Option Arm mortgages recasting on Alt-A and prime borrowers with more reserves and larger incomes from which to delay a distressed sale on more expensive homes.  This is most easily evidenced by the longer and longer times to foreclosure from default initialization, but Coto Housing Blog readers can probably deduce this from their own observation.

Home prices did not rise as is claimed by the delusional and the logically challenged, (read moron), but rather the rise in the median price reflected a greater percentage of more expensive homes sold.  A trend in any price or metric cannot be accurately determined by observing only one statistic to the exclusion of others.

I have also written about this issue in the past:

2003 Rollback

The owners of today's featured property paid the current asking price over eight years ago. Eight years: no appreciation.

Apparently, they were not paying down their mortgage because it is also listed as a short sale.

This property is available for sale via the MLS.    
Please contact Shevy Akason, #01836707     
Home Address ...    8 KANSAS Irvine, CA 92606
Asking Price .......     $639,000
Beds:  5    
Baths:  3    
Sq. Ft.:  2200    
Property Type: Residential, Single Family    
Style: Two Level, Contemporary    
Year Built:  1999    
Community:  Walnut    
County:  Orange    
MLS#:  P804843    
Source:  CRMLS    
Status:  Active    
On Redfin:  19 days    
One of the popular Plan 3 home situated in a gated community of Harvard Square. One br. one full bath dn stairs. 2.5 Car garage. Property comes with additional side yard & beautiful landscaping. Pergo wood floor, Oak cabinets, plantation wood shutters, Berber carpet and tiles. Close to FW 5 & 261. Short sale.     
Proprietary commentary and analysis    
Asking Price .......     $639,000
Purchase Price …    $639,000
Purchase Date ....    9/4/2003
Net Gain (Loss) ..........    ($38,340)
Percent Change ..........    -6.0%
Annual Appreciation …    -0.0%
Cost of Home Ownership    
$639,000 .......... Asking Price    
$127,800 .......... 20% Down Conventional    
4.02% ............... Mortgage Interest Rate    
$511,200 .......... 30-Year Mortgage    
$126,014 .......... Income Requirement     
$2,446 .......... Monthly Mortgage Payment     
$554 .......... Property Tax (@1.04%)    
$0 .......... Special Taxes and Levies (Mello Roos)    
$133 .......... Homeowners Insurance (@ 0.25%)    
$0 .......... Private Mortgage Insurance    
$122 .......... Homeowners Association Fees    
$3,255 .......... Monthly Cash Outlays    
-$397 .......... Tax Savings (% of Interest and Property Tax)    
-$734 .......... Equity Hidden in Payment (Amortization)    
$179 .......... Lost Income to Down Payment (net of taxes)    
$100 .......... Maintenance and Replacement Reserves    
$2,404 .......... Monthly Cost of Ownership     
Cash Acquisition Demands    
$6,390 .......... Furnishing and Move In @1%    
$6,390 .......... Closing Costs @1%    
$5,112 .......... Interest Points    
$127,800 .......... Down Payment    
$145,692 .......... Total Cash Costs    
$36,800 ............ Emergency Cash Reserves    
$182,492 .......... Total Savings Needed    

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