Sunday, February 11, 2007

Prices Down in Most Areas of Orange County I

In yesterday’s blog we showed using a variety of metrics that, on average prices in Orange County are falling. In today’s we that show that prices are also falling in most areas of Orange County as well.

Today we’re going compare the latest DQ “all homes median” data with three different benchmarks at ZIP code level. By looking at three comparisons, rather than one, I hope to remove some of the statistical noise associated with this kind of analysis, trying to take a broad a sample as possible, with the three resultant metrics being:

$ Price Change from 2006 ($2006)
$ Price Change from Dec 2006 ($Dec2006)
$ Price Change Year on Year ($YOY)

We’ll also include, the $ Price Blended Average, which is simple a weighted average of first three metrics, with two parts $2006 (largest sample), and one part of each $Dec2006 and $YOY. I know, it’s not horribly sophisticated, but I believe it will help us generalize about and remove some of the noise from price trends within a ZIP. So let's have a look at the data:

Metric: % of ZIPs Down
$ Price Change from 2006: 55.4%
$ Price Change from Dec 2006: 59.0%
$ Price Change Year on Year: 48.2%
$ Price Blended Average: 51.8%

On the whole, it would appear that the widely-celebrated, very-inclusive appreciation party here in OC has come to an end.

With nearly 60% of the homes down month-on-month, and more than 55% down from last year’s median and with the generalized, blended average nearly at 52%, I don’t think it’s a stretch to say that prices are also falling in most areas of Orange County. This is significant because it reinforces the price declines we’ve seen at the county level.

Were prices declining at the county level but most ZIP were showing appreciation we might rightly be tempted to say a few poorly-performing areas are pulling down the market. But when more than half of the ZIPs are showing prices declines one can’t write off the drop in prices so easily because the scope of price declines is so very broad.

Taken together, I believe that the combination of poorly-performing county-level and ZIP level pricing metrics indicate weakness in price levels in Orange County. It is also my opinion that this weakness will translate to a further drop of prices in the coming months and that deferring a home purchase until prices drop further is a very prudent choice.

No comments:

Real Estate Blogs - Blog Top Sites Listed in LS Blogs Listed in LS Blogs Real Estate blogs Add to Technorati Favorites