Thursday, February 08, 2007

Don't Listen to the "Bull"--Prices are Heading Down, Down, Down!

Buyer Bears, the bulls are at it again, trying to talk up the market saying that prices are going up. BBs know that the market is in a slow, but sure steady path downward and aren't swayed by the rantings of bulls bent on keeping prices high despite the loss of any personal credibility.

Here is a summary of indicators showing from just about every perspective imaginable the undeniable truth that prices are headed south here in OC. Next time a bear tells you prices are up, you may want to point them to this page:

First, from the nominal perspective the DQ year-on-year medians:

Resale houses $670,000 +1.0% FLAT
Resale condos $438,000 -3.7% DOWN

Second, from the real perspective prices adjusted for national inflation rate.

Resale houses -1.5% DOWN
Resale condos -5.7% DOWN SHARPLY

Prices adjusted for OC's rate of inflation.

Resale homes -3.2% DOWN
Resale condos -7.4% DOWN SHARPLY

Thanks to graphix for inflation-adjusted numbers.

Third, from a price per square foot perspective and as reported in LA Times:

Average 2006 Price/SF All SFDU: $434/SF
December 2006 Price/SF ALL SFDU: $412/SF
ALL SFDU Price/SF Difference: -3.2%

Fourth, from a market segementation perspective, again with LA Times data and comparing 2006 to Jan 2007:

% of OC ZIPs with Price/SF Down: 61.8%
% of OC ZIPs with SFDU Price Down: 59.2%
% of OC ZIPs with Condo Price Down: 57.8%
% of OC ZIPs with At Least One of Above Down: 93%
% of OC ZIPs with SFDU and/or $/SF Down: 86%


If you'd like to see the data set for these last six metrics click here.

Remember, the same way that Buyer Bears don't buy overpriced homes, they also don't buy the rhetoric of the "bulls." Prices are heading down, albeit at a slow, rational pace for the time being. Keep an eye on the market, demand lower prices and in the mean time enjoy renting a house that would cost you twice as much a month to own.


graphrix said...

HB Bear - Those are some good numbers. Thanks for the support on the inflation case. Even if the drop in prices is small it will take years before you will make a profit.

I have a question: Why are some zip codes missing? Like my favorite Ladera 92694.

HB Bear said...


Great question. We only included those ZIP codes with both 2006 and Jan 2007 price/square foot. There were maybe 10 or so without it; so rather than skewing the numbers one way or the other we excluded them.

Also, I am with you on the inflation case. At the end of the day, the only "real" dollars are real dollars.

graphrix said...

I can see where you would use the sqft data. One thing that would throw it off would be Ladera since most of the product being sold right now are the new large/custom homes in Covenant Hills. Keep the posts coming here and on Lansner blog. We all need to show these pigs that they are about to be slaughtered.

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