I was tooling around the DataQuick site and found an interesting stat I thought I'd share with readers.
According to the most-current data found (October LA Times chart) on the DataQuick website, prices per square foot are down versus the 2006 median a whopping, mind-bending 12.2%. This is more than double the change in the of the median which was reported at 5.2% for the same period.
The disparity between these two numbers leads me to believe that:
- The change in housing prices for OC as reported by the median is historic in magnitude, but is still under-reporting the actual decline in housing prices. As a result, many sellers are still pricing their homes at $/SF prices above the market rate.
- Seller's, once they understand that they are actually priced above the market (in $/ft) they are going to lower their prices further, and possibly dramaticaly so, in an attempt to undercut one another, exacerbating pricing weakness. There are big pockets of this activity in OC already, but I expect it to become far more pervasive next and the go-to strategy for all REO property.
- Buyers, if they analyze the $/sq ft data and see it dropping precipitously, are going to be even more scared than they already are, further deferring the purchase of a home and reducing period demand.
- We have a death-spiral interaction of mutual positive feedback loops between the phenomena described in #3 and #4 above: they both feed and gain energy from one another. Prices will drop and buyer's will balk and nothing short of the arrival of true affordability and improved access to funds is going to change that.
Prices are already dropping at a precipitous rate. A 12.2% decline is epic in its magnitude.
Given the analysis above, I am strongly inclined to believe that prices are set to drop more and drop faster next year. 2009 isn't looking too pretty either.
I'm not exactly sure what to call the phenomenon we're about to go through, but the words "panic" and "crash" come to mind. Scary words. Let's just all hope it doesn't get too bad, too fast--that won't be good for anyone.
Viva los Osos?