The big real estate news in the last few days has been the Case-Schiller report which says that home prices have slid! Let’s look at this rationally:
This report is for October-November 2010 sales. When interest rates ticked up in December, the buyers came running for homes to buy before they were priced out of the good deals.
This “big slide” in prices totaled a whopping 1% in Los Angeles County. Come on, folks. Is Chicken Little back in town?
Nationwide, as President Obama says, “…after the worst recession in decades, we see an economy growing again.” Oh, but the news says different about the housing market:
U.S. Home Prices Keep Weakening as Nine Cities Reach New Lows According to the S&P/Case-Shiller Home Price Indices
. November 2010
U.S. Home Prices Weaken Further as Six Cities Make New Lows According to the S&P/Case-Shiller Home Price Indices
. Data through October 2010,
Broad-based Declines in Home Prices in the 3rd Quarter of 2010 According to the S&P/Case-Shiller Home Price Indices
. Data through September 2010.
April, 2006 was the highest index for Los Angeles County: 273.10
November, 2010, was 171.86.
The lowest index was 160.34 in May 2009.
So what is this NEW LOW? The index was all of .22 lower than the previous month’s report, and although it was the lowest of 2010, we are still talking about a total spread over the whole year of less than 5 points, which is over 10 points higher than the low of May 2009. All this in comparison to the truly big drop of over 110 points from the peak of April 2006, to the trough of May 2009. OMG! But let’s not all leave our homes in despair quite yet. (And where would we go? Under the nearest bridge?)
Let’s look at more local data. Just so you don’t think I’m a Pollyanna insisting that everything is wonderful, the table below shows the “peak to trough” numbers for several zip codes in Northeast LA, Altadena, South Pasadena, Northeast and Southwest Pasadena: You can see that we had drops of 41 to 77% from the highest quarter to the lowest. But that doesn’t mean that if you live in Southwest Pasadena that your particular house lost 77% of its value and is now worth less than half of what it was in August of 2008. That zip code actually lost less value over the last 4 years than the others. These numbers reflect what houses sold for in the last few years, not what your house is worth today. And although lenders hire appraisers who look at the past sales to indicate current value, we don’t have very many housing tracts of identical houses in Northeast Los Angeles. What your neighbor’s house sold for is not necessarily what your house will sell for.
Confused yet? Think about the poor buyers in the market right now. Last week it was all about how prices are sliding
. Today the December numbers showed much stronger improvement than “the experts” thought. We who own homes think we are above any of this value talk. My house is worth $800,000 because I say so, doggone it! What is a buyer to do? We can only look at what is available versus what similar (?) properties have sold for, versus what a lender will agree to lend on it. Unless we can pay cash
. I wish we could. Then we wouldn’t have to put up with all this loan craziness. Unfortunately, most home sales involve a lender and the lender wants to make sure their investment is secure. Tiresome, but understandable. Especially if you own stock in a mortgage company or a bank (you don’t want these banks just lending money on anything do you?)
This is the dynamic of the housing market: recent sales influence the value of the current sale. In custom-built, diverse, eclectic neighborhoods like ours in the Northeast LA and Pasadena areas, pricing is an art not a science. Average price per square foot is a Zestimate, and we all know what we think of Zillow’s numbers. I don’t care what some appraiser says, there is a huge subjective aspect to valuing a home. Sometimes the appraiser, buyer, lender, seller and agents all agree, and many times we don’t.