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mikthe20

California Prices Below 1989 Levels!

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Pretty unbelievable. I tend to agree with RB that California is simply ahead of the UK in the main by 12-18 monhts in terms of housing, employment and bloated public sector.

I know it's not the whole of CA, but it's a hell of an example.

From yesterday's LA Times (thanks to Calculated Risk where I saw the story):

http://www.latimes.com/business/la-fi-chea...53.story?page=1

Median home prices drop below 1989 levels in some parts of Southland

John and Emily Beatrice

Michal Czerwonka / For The Times

John Beatrice, with daughter Emily, bought his house in Lancaster in 1989 for $120,000. In April, a slightly larger home two doors away sold for $66,500.

Properties in several areas are selling for less than they did 20 years ago, and that's not including inflation. Some first-time buyers are nabbing houses for less than what their parents paid.

By Peter Y. Hong

June 10, 2009

In parts of Southern California, the housing crash has upended a basic tenet of the American dream: that home values always increase over the long term.

Properties in several areas are selling for less than they did 20 years ago, and that's not even counting the effects of inflation.

The reversal is a bonanza for some first-time buyers. They're nabbing houses for less than what their parents paid in the late 1980s, jumping into a real estate market that has become a kind of economic time machine.

To return to the past, take a stroll down Mulberry Avenue in Lancaster. John A. Beatrice, 55, bought his spacious two-story Spanish-style house there brand-new for $120,000 in 1989. It was a price he could comfortably afford, and he planned on staying through retirement, so he wasn't worried about price swings.

"I always knew real estate goes like this," said the aerospace engineer, moving his hand in an undulating motion like bell curves on a graph.

But he never imagined his neighborhood would drop off the charts. In April, a slightly larger home two doors away sold for $66,500. That's just over half the $130,000 it went for new in 1992. In 2005, that house sold for $330,000.

Beatrice's 29-year-old daughter is now shopping for Lancaster houses priced lower than when she was a kid.

Home prices across most of Southern California have not fallen nearly as far. The median price in the six-county area was $247,000 in April, about what it was in 2002.

But in 14 Southland ZIP Codes, mainly desert communities in the Antelope Valley and Inland Empire, median prices have fallen below levels recorded in April 1989, according to MDA DataQuick, a San Diego real estate information service.

That means thousands of homes in those neighborhoods -- even houses barely 20 years old and in decent shape -- have lost every dime of their appreciation, giving back not just the gains of the recent bubble but steady increases logged over a generation.

The April median price in Beatrice's Lancaster ZIP Code of 93535, for example, was $87,000. That's down 74% from a $334,500 peak price in 2007. Even worse was the 92410 ZIP Code in the city of San Bernardino, which covers several older neighborhoods. Its $61,000 April median represents an 84% drop from the peak of $370,000 in 2007.

Prices also tumbled below 1989 levels in neighborhoods in Palmdale, Hemet, Barstow, Desert Hot Springs, Victorville, Highland, Santa Ana and Oxnard, according to DataQuick. Several other inland communities, including parts of Moreno Valley, Banning and Rialto, had median prices that were only slightly above 1989 levels and below the April 1990 median.

The median price is the point at which half the homes sell for more and half for less.

Losing two decades' worth of gains in a single downturn "has never happened," said UCLA economist Edward Leamer, who has studied local areas during booms and busts. "You're seeing something that's abnormal."

What's abnormal this time, Leamer and other analysts said, is the easy credit that pumped up demand and inflated home prices in those communities to unprecedented highs.

Armed with risky subprime mortgages and fearful of being priced out of the market forever, buyers flocked to the outer reaches of the Antelope Valley and Victor Valley. Those distant suburbs became the only option when areas closer to job centers soared out of reach, said John Husing, an economist who specializes in the Inland Empire.

"The families who were buying out there were the ones who couldn't get in anywhere else," Husing said. "They were paying stupid prices."

They were among the first to default when the economy crumbled, bringing real estate prices crashing down. Demand for those far-flung houses vanished when prices dropped for homes closer to workplaces. Riverside and San Bernardino counties have registered more defaults and foreclosures per capita during this downturn than other Southern California counties, according to ForeclosureRadar, an online seller of default data.

These foreclosures, sold at cut-rate prices by banks eager to be rid of them, represent the bulk of the sales activity in some communities.

In the 1990s housing bust, "you had a foreclosure here, a foreclosure there. You did not have almost entire neighborhoods being foreclosed," UCLA's Leamer said.

The fire sales have stoked demand. In April, 237 homes sold in Beatrice's ZIP Code, more than in any other area in Southern California. Most of those properties were foreclosed.

Stable homeowners such as Patricia Hynes have watched their hard-won equity rise and fall, leaving them roughly where they started a generation ago.

Hynes bought her three-bedroom home in Lancaster brand-new for $119,000 in 1989, when Milli Vanilli was riding high on the charts. The poplar, willow and ash saplings she planted in front now tower over the lawn, shading her home from the desert sun.

"It's my little oasis," said Hynes, a 62-year-old public health nurse.

Her home is an island in a sea of repos. Houses on both sides have fallen into foreclosure; one is priced $10,000 less than the amount she paid 20 years ago.

Nearby, a four-bedroom, 2,100-square-foot home sold in May for $89,000. That's less than the construction costs of $100 to $125 a square foot, according to Patrick S. Duffy, principal of Metrointelligence Real Estate Advisors in Los Angeles.

The retro prices are attracting a new wave of speculators. In April, investors bought nearly 1 in 5 homes purchased in Southern California, according to DataQuick. That figure is around 30% in some inland communities.

Mohammed Hafeez, 52, a Culver City electrician, has bought four houses in Lancaster since January.

Hafeez said he paid $49,000 for the least expensive house and $70,000 for the priciest of his investments. He's now renting them for $1,000 to $1,300 a month, and all four houses are occupied and generating positive cash flow, he said.

Still, he's holding off on more purchases. Rents are falling along with home prices as investors like him snap up foreclosures and turn them into rentals.

"I don't know how much or how far down it will go," he said.

He has reason to worry. Another tsunami of foreclosures is threatening to swamp an already saturated market. In Palmdale and Lancaster, 903 homes were sold in April, but according to ForeclosureRadar, more than 7,500 are in some stage of foreclosure.

Some buyers who thought they were getting bargains didn't. In Lancaster, Beatrice's eldest son, Daniel, bought a house near his father's for $175,000 in April 2008; comparable properties are now selling for about $95,000.

To home buyer Al Rossi, timing isn't everything. The 59-year-old bought his first house in February in Lancaster for $140,000. An administrator at the Los Angeles Mission downtown, he wanted a roomy place where he could live with his son-in-law and two grandsons. His mortgage payment on the four-bedroom house is $1,050, just slightly above the $900 a month he was paying for a one-bedroom apartment in Norwalk.

The house was in good shape when Rossi bought it, though the lawn had died. The family will be planting new greenery soon. They've just installed a new hot tub and bought a gas barbecue grill as well.

If neighborhood property values fall further, so be it, Rossi figured. The improvement in his quality of life is gain enough.

"I did not buy a slot machine," he said. "I am not an investor.

"That's what got us into this mess -- greed," he said of the housing crash.

"Greed messed everything up."

Edited by mikthe20

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The article does state that they are 'desert communities' - who wants to live in a desert?

Having said that, the way prices are going in some parts of the UK I wonder how long before UK house buyers give up thoughts of buying here and begin looking across the Atlantic.

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man i hate speculators!!!

Mohammed Hafeez, 52, a Culver City electrician, has bought four houses in Lancaster since January.

Hafeez said he paid $49,000 for the least expensive house and $70,000 for the priciest of his investments. He's now renting them for $1,000 to $1,300 a month, and all four houses are occupied and generating positive cash flow, he said.

so thanks to Mohammed these opportunities for real people to own their own homes are being removed and in its place there are second rate people with no ownership in their community. Its a fact that home owners look differently on the impact they have on their surroundings than renters, who, in general, are less aware. for example, much less likely to join a community watch sceme as they do not have as much at risk. With less ownership comes less of a feeling of belonging and a greater chance of resentment at those that do, etc etc.

i hate speculators.

Thanks to Mohammed the prices will also get pushed up as well. allbeit negligable at the moment.

gggggggrrrrrrrrrrr

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The article does state that they are 'desert communities' - who wants to live in a desert?

Exactly what I thought at first glance, it's a hyperbolic article and in no way applicable to the market as a whole in the US or UK. The US has a much less regulated approach to development so new communities can spring up if they are desirable - old ones die if they can't compete as supply outstrips demand.

In the UK growth is much more limited so communities tend to remain established. Having said that I can envisage a move towards city living and away from country living/suburban commuting/out of town shopping in the UK (as proposed by Dr Bubb) in response to future energy and environmental concerns.

People have generally lived in communities throughout history, mainly for protection. The growth of sprawling suburbs and country living is an abberation produced by the era of cheap oil. I plan to buy a large house in a city setting (i.e. all essential services within short walk/cycle) - demand for this type of property is already high but may increase more in future.

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The article does state that they are 'desert communities' - who wants to live in a desert?

Having said that, the way prices are going in some parts of the UK I wonder how long before UK house buyers give up thoughts of buying here and begin looking across the Atlantic.

The vast majority of California is a desert, yet people still seem to want to live there.

Lancaster is a pit ( I have relatives that live there), but, honestly, compared to vast swathes of areas like Liverpool or Hull, it's a toss up of which is a less desirable place to live.

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man i hate speculators!!!

i hate speculators.

Thanks to Mohammed the prices will also get pushed up as well. allbeit negligable at the moment.

gggggggrrrrrrrrrrr

i think we know what you hate

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I know it's only California, I was looking for a graph of California... I was simply commenting on the form (highs/lows etc) of the graph - it is similar to the one on the front end of this site for the UK.

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There are many similiarities between California and the UK economy. A few differences.

Both went for the FIRE economy, while aggressively chasing out industry with a radical green ideology.

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I know it's not the whole of CA, but it's a hell of an example.

...

Home prices across most of Southern California have not fallen nearly as far. The median price in the six-county area was $247,000 in April, about what it was in 2002.

But in 14 Southland ZIP Codes, mainly desert communities in the Antelope Valley and Inland Empire, median prices have fallen below levels recorded in April 1989, according to MDA DataQuick, a San Diego real estate information service.

I'm sure you will find an example of a pocket of the UK where prices fall that far as well, but such an extreme example does not have much (if anything) to say about the wider average.

The far more interesting figure is that AVERAGE prices are back to 2002 levels. Anyone saying in 2006/7 that this would EVER happen again was laughed at. And yet AVERAGE prices are still falling.

But IMHO anyway the falls are now half-way through.

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Coming soon to this country ? Remember, this is a global problem and it started in America after all ! Expect these green shoots to be heading our way in the next 18 months.

Of special note is the line in red which we are seeing happening right now in the UK, as those "bargains" are snapped up.

LA Times

Properties in several areas are selling for less than they did 20 years ago, and that's not including inflation. Some first-time buyers are nabbing houses for less than what their parents paid.

By Peter Y. Hong

June 10, 2009

In parts of Southern California, the housing crash has upended a basic tenet of the American dream: that home values always increase over the long term.

Properties in several areas are selling for less than they did 20 years ago, and that's not even counting the effects of inflation.

The reversal is a bonanza for some first-time buyers. They're nabbing houses for less than what their parents paid in the late 1980s, jumping into a real estate market that has become a kind of economic time machine.

To return to the past, take a stroll down Mulberry Avenue in Lancaster. John A. Beatrice, 55, bought his spacious two-story Spanish-style house there brand-new for $120,000 in 1989. It was a price he could comfortably afford, and he planned on staying through retirement, so he wasn't worried about price swings.

"I always knew real estate goes like this," said the aerospace engineer, moving his hand in an undulating motion like bell curves on a graph.

But he never imagined his neighborhood would drop off the charts. In April, a slightly larger home two doors away sold for $66,500. That's just over half the $130,000 it went for new in 1992. In 2005, that house sold for $330,000.

Beatrice's 29-year-old daughter is now shopping for Lancaster houses priced lower than when she was a kid.

Home prices across most of Southern California have not fallen nearly as far. The median price in the six-county area was $247,000 in April, about what it was in 2002.

But in 14 Southland ZIP Codes, mainly desert communities in the Antelope Valley and Inland Empire, median prices have fallen below levels recorded in April 1989, according to MDA DataQuick, a San Diego real estate information service.

That means thousands of homes in those neighborhoods -- even houses barely 20 years old and in decent shape -- have lost every dime of their appreciation, giving back not just the gains of the recent bubble but steady increases logged over a generation.

The April median price in Beatrice's Lancaster ZIP Code of 93535, for example, was $87,000. That's down 74% from a $334,500 peak price in 2007. Even worse was the 92410 ZIP Code in the city of San Bernardino, which covers several older neighborhoods. Its $61,000 April median represents an 84% drop from the peak of $370,000 in 2007.

Prices also tumbled below 1989 levels in neighborhoods in Palmdale, Hemet, Barstow, Desert Hot Springs, Victorville, Highland, Santa Ana and Oxnard, according to DataQuick. Several other inland communities, including parts of Moreno Valley, Banning and Rialto, had median prices that were only slightly above 1989 levels and below the April 1990 median.

The median price is the point at which half the homes sell for more and half for less.

Losing two decades' worth of gains in a single downturn "has never happened," said UCLA economist Edward Leamer, who has studied local areas during booms and busts. "You're seeing something that's abnormal."

What's abnormal this time, Leamer and other analysts said, is the easy credit that pumped up demand and inflated home prices in those communities to unprecedented highs.

Armed with risky subprime mortgages and fearful of being priced out of the market forever, buyers flocked to the outer reaches of the Antelope Valley and Victor Valley. Those distant suburbs became the only option when areas closer to job centers soared out of reach, said John Husing, an economist who specializes in the Inland Empire.

"The families who were buying out there were the ones who couldn't get in anywhere else," Husing said. "They were paying stupid prices."

They were among the first to default when the economy crumbled, bringing real estate prices crashing down. Demand for those far-flung houses vanished when prices dropped for homes closer to workplaces. Riverside and San Bernardino counties have registered more defaults and foreclosures per capita during this downturn than other Southern California counties, according to ForeclosureRadar, an online seller of default data.

These foreclosures, sold at cut-rate prices by banks eager to be rid of them, represent the bulk of the sales activity in some communities.

In the 1990s housing bust, "you had a foreclosure here, a foreclosure there. You did not have almost entire neighborhoods being foreclosed," UCLA's Leamer said.

The fire sales have stoked demand. In April, 237 homes sold in Beatrice's ZIP Code, more than in any other area in Southern California. Most of those properties were foreclosed.

Stable homeowners such as Patricia Hynes have watched their hard-won equity rise and fall, leaving them roughly where they started a generation ago.

Hynes bought her three-bedroom home in Lancaster brand-new for $119,000 in 1989, when Milli Vanilli was riding high on the charts. The poplar, willow and ash saplings she planted in front now tower over the lawn, shading her home from the desert sun.

"It's my little oasis," said Hynes, a 62-year-old public health nurse.

Her home is an island in a sea of repos. Houses on both sides have fallen into foreclosure; one is priced $10,000 less than the amount she paid 20 years ago.

Nearby, a four-bedroom, 2,100-square-foot home sold in May for $89,000. That's less than the construction costs of $100 to $125 a square foot, according to Patrick S. Duffy, principal of Metrointelligence Real Estate Advisors in Los Angeles.

The retro prices are attracting a new wave of speculators. In April, investors bought nearly 1 in 5 homes purchased in Southern California, according to DataQuick. That figure is around 30% in some inland communities.

Mohammed Hafeez, 52, a Culver City electrician, has bought four houses in Lancaster since January.

Hafeez said he paid $49,000 for the least expensive house and $70,000 for the priciest of his investments. He's now renting them for $1,000 to $1,300 a month, and all four houses are occupied and generating positive cash flow, he said.

Still, he's holding off on more purchases. Rents are falling along with home prices as investors like him snap up foreclosures and turn them into rentals.

"I don't know how much or how far down it will go," he said.

He has reason to worry. Another tsunami of foreclosures is threatening to swamp an already saturated market. In Palmdale and Lancaster, 903 homes were sold in April, but according to ForeclosureRadar, more than 7,500 are in some stage of foreclosure.

Some buyers who thought they were getting bargains didn't. In Lancaster, Beatrice's eldest son, Daniel, bought a house near his father's for $175,000 in April 2008; comparable properties are now selling for about $95,000.

To home buyer Al Rossi, timing isn't everything. The 59-year-old bought his first house in February in Lancaster for $140,000. An administrator at the Los Angeles Mission downtown, he wanted a roomy place where he could live with his son-in-law and two grandsons. His mortgage payment on the four-bedroom house is $1,050, just slightly above the $900 a month he was paying for a one-bedroom apartment in Norwalk.

The house was in good shape when Rossi bought it, though the lawn had died. The family will be planting new greenery soon. They've just installed a new hot tub and bought a gas barbecue grill as well.

If neighborhood property values fall further, so be it, Rossi figured. The improvement in his quality of life is gain enough.

"I did not buy a slot machine," he said. "I am not an investor.

"That's what got us into this mess -- greed," he said of the housing crash.

"Greed messed everything up."

Amen Brother !

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Apologies - didn't do Due Diligence on the story as I presumed not many other posters would be reading the LA Times online !

MERGE AWAY MODS !

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America is designed for house price crashes.

1 - Non-recourse mortgages mean as soon as you're in negative equity it makes sense to walk away. There's little come back, nothing legal, just a credit rating hit - be a debt free FTP a year later.

2 - Property taxes are fearsome. Banks can't hold for better times, they have to offload at any price.

Edited by Nationalist

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I wonder where central detroit house prices are historically? 1960? 1933? Before it went kaput Gm stock was at 1933 prices.

In some of the rougher areas of Motor City you can buy a house cheaper than a 12 year old Vauxhall Astra so probably 1933 figures are more correct.

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The article does state that they are 'desert communities' - who wants to live in a desert?

Having said that, the way prices are going in some parts of the UK I wonder how long before UK house buyers give up thoughts of buying here and begin looking across the Atlantic.

You can get places for that sort of money in Middlesbrough, Cleveland, England. It's probably about as appealing as Lancaster CA. But of course you can get even cheaper in Detroit.

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man i hate speculators!!!

so thanks to Mohammed these opportunities for real people to own their own homes are being removed and in its place there are second rate people with no ownership in their community. Its a fact that home owners look differently on the impact they have on their surroundings than renters, who, in general, are less aware. for example, much less likely to join a community watch sceme as they do not have as much at risk. With less ownership comes less of a feeling of belonging and a greater chance of resentment at those that do, etc etc.

i hate speculators.

Thanks to Mohammed the prices will also get pushed up as well. allbeit negligable at the moment.

gggggggrrrrrrrrrrr

Get over it. Mohammed gives people that couldnt afford a house a place to live.

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