For the second month in a row, Dataquick shows pretty robust sales growth for housing sales in Southern California--along with sharply lower prices. I think this may be a bottom (despite what is going on more generally this week) because:
(1) From a user cost perspective, owning really does look pretty good in many SoCal markets right now, especially for houses that are inexpensive enough to use conforming loans. Mortgage rates are down about 75 basis points on Fannie-Freddie loans since they were placed into conservatorship. People have to live somewhere.
(2) Lots of sales are distressed sales (around 40 percent). This means the prices we are observing are not arms-length transactions, and may be below equilibrium market prices.
(3) While I am wary of anecdotal evidence, I have been getting a lot of anecdotes about bidding wars for modestly priced houses (modestly priced by California standards, anyway).
But there are a number of cautions:
(1) After rising sharply for the past four years, rents in Southern California are stagnant, and perhaps are falling a little bit.
(2) Unemployment has risen sharply in San Bernardino, Riverside, Orange and Los Angeles Counties.
(3) The overall sense of pessimism arising from the financial market crisis could keep buyers from buying.
Altogether this suggests to me that house prices won't be going up a lot anytime soon, they won't be falling much more either.
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I think it depends on the community.
Prices have fallen a lot more in Oxnard than in Palos Verdes Estates. http://pics4.city-data.com/ctrends/ctr1960.png
http://pics4.city-data.com/ctrends/ctr1971.png
In Oxnard, there probably were subprime borrowers and so when that market got hit by resets, it was felt in Oxnard. In Palos Verde Estates, there weren't a lot of subprime borrowers so it escaped that problem. But I imagine that alt-a loans will be a much bigger problem in Palos Verdes Estates than Oxnard.
http://blog.potterzot.com/wp-content/uploads/2007/10/mortgage_reset.jpg
The wealthy tend to own there own businesses and have much greater income volitility. As the overall economy slows down, there will probably be fewer people able to buy into Palos Verdes Estates this year and next than there were 3 years ago.
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