Looking at California, the median price dropped -38.2% from 2007=>2008!! The previous largest year-to-year drop was only -4.5% experienced in 1992=>1993. The biggest price move was +28.1% increase between 1976=>1977. So, this -38.2% change in price is a truly unprecedented event for California.
Focusing onto Los Angeles County, the median home price for February 2009 was $298,000 which is roughly the same as the price in April 2003 which was $299,000. Of course when you figure in inflation, today's price would be much lower than April 2003 but let's keep inflation out of the equation to keep things simple. If you were to chart Los County median price which is around $300,000 to Redondo Beach which is $630,000 or to Lancaster at $116,000 it becomes quite difficult to chart and make sense. So, I've taken April 2003 as the "0" price point and plotted the price change as a percent from that point. The data used to plot these charts come from the California Association of Realtors.
In the chart above, Los Angeles County median price is plotted with the heavy red line. I'll use that as the reference point. So, In April 2003, the price change starts at 0% and it reaches a price peak of $550,000 (+85%) achieved between May-August 2007. Next, I've taken select Southern California areas for comparision. First take a look at the plots with the dashed lines. These are areas that experienced significant boom-bust cycles. I'm using Lancaster, Desert Hot Springs, and San Bernadino for this example. Lancaster went from $152,500 in 2003 to $338,000 (+123%) at the peak and collapsed down to $116,000 in Feb 2009. I pity those people who bought at the peak and have homes that are less than 1/2 of what they paid for... Desert Hot Springs went from $123,000=>$320,250 (+160%)=>$84,000 (ouch!) and San Bernadino that went from $120,500=>$328,250 (+172%)=>$83,000. Looking at the price range of these areas and the signifcant boom-bust cycle, you can tell that subprime problems had a major impact in these areas.
Compare that to the solid line areas like Cerritos, West LA, and Beach Cities. These areas did not have the boom-bust cycle of the areas mentioned before and the price is still quite a bit higher than it was back in 2003. Cerritos was $377,500=>$749,000 (+98%)=>$525,000. West LA was $492,250=>$799,000 (+62%)=>$646,500. Beach Cities (Manhattan/Hermosa/Redondo Beach) was $630,000=>$1,180,500 (+87%)=>$850,000. Don't get too hung up on the numbers--just understand that just because the "News" says prices in Los Angeles County has fallen -45% from the peak, it doesn't mean prices in all markets fell by that amount. These "stronger" markets have higher home prices and have very limited open land for new home construction. As a result, they did not get the full price boom caused by the subprime boom, but it also did not suffer the major bust caused by the subprime bust. So, don't expect to see similar price changes in Redondo Beach and Lancaster.
Finally, let's talk about the South Bay area where I am a Realtor®. There are only few cities that are large enough to have sufficient home sales to make meaning of the data. All the zig-zag you see in the plot above is because the data size is small and you can't get a smooth plot like with Los Angeles County median price where there is significant amount of data. So, for the South Bay price trend, first look at the heavy red dashed arrow. This is the general trend of Los Angeles County price. Next look at the channel bounded by the two green lines. This is the general price move for South Bay homes. In the first leg of price increase, you can see LA County and South Bay rise at around the same rate. In the second leg of LA County price increase (the shallower rising slope), South Bay prices top out and is pretty much going sideways. In the third leg which is the decline, you can see that the price of South Bay homes are declining much slower than LA County. Compared to the price trend above for Lancaster/Desert Hot Springs/San Bernadino which looks like it'll keep falling for quite a bit more, the South Bay areas look like they are seeing some kind of price bottom. Prices are still expected to fall until the end of 2009 to the beginning of 2010, but it doesn't look like South Bay areas have too much more to fall.
Before wrapping up, let's talk about reasons why median price fall. First, there is a general price decline. This is an across-the-board price decline that happens in recessive market. Second, there is a median price fall caused by a high number of low-priced distressed properties flooding the market. Even if the non-distressed properties stay at the same price, the large number of distressed homes will bring the median price down. Third, there is the mix change of type of homes being sold. Today, it's difficult to get a Jumbo Loan for homes above $700,000. This means the number of higher-priced homes (single family residential) being sold declines and lower-priced homes (condos) rise and will cause the median price to fall. The lower home prices are also driven by the higher number of first time buyers buying homes now. Today, all of these phenomenas are happening in every market to an extent. The different extent is what causes the difference in price change. Also, don't forget that the zig-zag on the plots are caused by small sample size--look at the larger trend.
James
http://JamesMakishima.com
http://twitter.com/JamesMakishima
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