Friday, February 09, 2007

OC Home Prices Plummet 5.9% in January! Average Buyer Bear Saves Nearly $40K!

I predicted in prior posts that prices for OC homes were headed downward; I just didn't realize it was going to happend this fast or with such a vengence.

The median home price for all homes dropped fully 5.9% from December’s prices, lead by a precipitous drop in new home prices of nearly $188,250 or -23.8%. While I don’t have the numbers to prove it, I would speculate that a drop of 5.9% has got to the worst one of the worst month-on-month performances in all of OC history!

Now, the bulls are going to are get riled up and point out that on a month-on-month basis, the prices of existent homes and condos aare flat. They’re right, they are. But looking at the data from a year-on-year and this month versus 2006 basis, the story is different.

On a year on year basis, both resale houses and resale condo prices are down, .6% and 2.8%, respectively. If we compare this month’s data with all sales from 2006 (a larger sample) we also see that prices have also dropped, 3.1% for resale houses and 3.3% for resale condominiums. Remember, these numbers are on a nominal basis and if adjusted for inflation, the prices drops would be much greater. To wit, numbers from friend of the blog, graphrix;

Year on Year Numbers Adjusted for National Inflation Rate:
Resale homes -3.2%, Condos -5.4%, New homes 11.5%, All homes .3%

Year on Year Numbers Adjusted for OC Inflation Rate:
Resale homes -4.9%, Condos -7.1%, New Homes 9.8%, All homes -1.4%

More imporantly, however, are the real cost saving bears garnered by being patient and not jumping into the fray. By waiting one month and not buying in January the prudent buyers have already saved about $38,000 on the 'average' home purchase. Compared to the 2006 median, bears saved about $23,000. Compared to the all time high of $646,000, prudent bears saved a whopping $42,000. No matter how you look at it that is one hell of a lot of money.

Congratulations to all the bears who resisted the 'priced out forever' rhetoric and stayed on the sidelines! You have been richly rewarded!

Now, it's going to take a while for the market to digest these lower-priced comps, so we may see an upward blip in prices in the next DQ report or two, but stay the course. Over the medium term housing prices appear to be poised to fall further--patient and disciplined buying behavior looks very likely to be rewarded further with even lower home prices in the near future.

To see the gory details in all their glory, click on the image below:

Finally from the OC Buyer Bear Gloat Deparment: Bears have been saying all along that the ‘all homes’ prices were being artificially boosted upward by the ‘new homes’ numbers and that once new homes prices dropped, the ‘all homes’ price would adjust accordingly. The bulls said we were crazy, but these month-on-month numbers prove we were, yet again, right.


graphrix said...

Also take note that interest rates are almost exactly the same as last year. Wa what I thought rates and prices go hand in hand. It is like dejavu from 91 all over again.

You might be right that is the largest drop in a month. If you haven't checked out my blog already in the comments section of the first post is all the articles for housing market from the register's archive.

HB Bear said...


I have had a look at your blog, particularly the articles from the Register. Excellent research.

The paralells are amazing! Keep up the good work.

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