November Home Sales and Prices in Deep Plunge

According to cnnmoney.com, the number of home starts in November dropped 8.6% even when home prices are dropping at a record rate.

“Lawrence Yun, the Realtors’ chief economist said that price drop was the largest the Realtors had ever recorded and probably the worst decline since the Great Depression.”

Other points of interest:
- There are 4.2 million unsold homes on the market. That represents a 11 month supply.
- Existing home sales are at 1997 levels
- In Nov. the median existing home sold for $181,300 or down 13.2% from a year ago.

Read the full article here.

Los Angeles REO Inventory Graph

Here is a graph of the REO numbers for Los Angeles county. Housing Tracker.net

Date range: 4/07 to 8/08

Total inventory in 4/07 was 212. Total inventory as of 8/08 1175 units!!

Los Angeles 40% Price Decline

CNN/Fortune is predicting Los Angeles will face a 40% decline in home pricing in the next 5 years. They are using historical relationships between home prices and rent to make this prediction.

I agree with this prediction. If you do the math, there is no way for the average Joe to afford homes at their current pricing. Tighter loan underwriting, and expanding inventory will force prices down.

Renting is not a bad option for the next couple of years. Save your money for a down payment and wait for the market to bottom out.

Los Angeles has Fallen

All counties are now in negative pricing territory. Los Angeles, the last county in California to have a positive year over year median price, ended last month (October 2007). The median price in October 2006 was $520,000. The median price for October 2007 is $500,000. This is a drop of 3.8%.

“LaLa land” is now in line with all other counties in California. The wave of bad news in the real estate market is now taking it’s effect on the consumer and thus the real estate market.

Riverside County had the largest pricing decline. They showed a 15% decline from last year. The current median is $350,000 versus last year, $412,146. Riverside is facing a foreclosure crisis. They are in the top three highest areas in the country in terms for foreclosures.

They keep company with Stockton which is reporting one foreclosure filling for every 31 households!!!

With credit restrictions making mortgages harder to come by and an exploding inventory (sales down 45% from last year), pricing will give way. Home pricing and incomes will need to align before the decline is over. Housing pundits say we are near to the bottom of this down market. Don’t fool yourself, we still have a long way to go.