Price per Sqauare Foot Off 12% in OC

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:

1. 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.
2. 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.
3. 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.
4. 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?

OC Median Asking Price Down Almost $120,000

I poured myself a cup of coffee this morning and decided to have a look at asking price data at one of my favorites sites Housing Tracker.

According to the data at Housing Tracker, the median asking price for homes in OC reached it's peak in May of 2006. At that point, the median seller was asking nearly $700,000 ($694,600)for her home. Today, she is asking nearly $120,000 less.

Over life of a 30 year loan at 7.5%, a buyer purchasing a home at today's median versus the median at the peak will save almost $300,000 in principal and interest. That buyer would also save rouhgly $53,000 in property taxes, for a total savings of about $350,000.

That is an amazing amount of money and a tremendous reward exercising bearish prudence. You should be proud of yourself.

Viva los Osos!

OCPB/Lansner Reader Demographics

Quick summary of the survey results; details of bet later.

In general, when I consider the 'icon' associated with my current outlook on OC residential real estate, I consider myself:

Bear 93.9%
Bull 6.1%

In terms of political party, I most consider myself to be a part of:

Registered Unaffiliated (Independent) 31.8%
Republican 30.3%
Democratic 27.3%
Other Party 10.6%

Which best describes your living situation:

I rent or lease the property I live in. 62.5%
I own the property I live in. 37.5%

Choose the location that best and most-specifically describes the locale in which you live?

I live in Orange County 67.2%
I live elsewhere. 15.6%
I live in Southern California 10.9%
I live in California 6.3%

Help Me Setttle a Bet!

A buddy of mine and I are using reponses to a survey to settle a bet. I can't tell you anything about the bet, in part because my buddy is a bit of a cry-baby, and also because we don't want to bias the results.

The survey is very, very simple and is only four questions long. It takes less that minute to complete. We don't ask for any personal information and there's no need to register, provide an email address or anything else that might make a respondent uncomfortable.

So, please, do a Bear a favor, take a minute to answer the simple survey. And remember, let's keep things honest :)

Click Here to Take the Survey

Thanks!