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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (28195)	3/15/2005 9:55:47 PM
From: CalculatedRisk	Read Replies (2) \| Respond to of 306849

I checked into the numbers ... the numbers should be adjusted by CPI less shelter (adjusting by CPI overstates the real loss). If you make that adjustment, California lost 26% in real terms and the decline lasted 6 years (1991 until Q1 1997) and then started to recover. The person you are talking with is flat out wrong. I owned my current home during that period, and I remember being stunned at the selling price of the house across the street in '96. It was grim for sellers (Obviously it didn't impact me). Best Regards!

To: Wyätt Gwyön who wrote (28195)	3/16/2005 12:37:50 AM
From: Elroy Jetson	Read Replies (2) \| Respond to of 306849

The RERC, which does an index of same-home appraisals every six months has the most accurate information on Southern California, but the data is for members with a fairly expensive fee. You'll notice that there is a several year delay in reporting the numbers, as their work is rather meticulous. Members: csupomona.edu Home Survey: csupomona.edu Home Page: csupomona.edu While the over-all data looks very similar to the numbers Calculated Risk has cited, you will find there is a dramatic variation from one neighborhood to another. Not surprisingly, those neighborhoods which experienced the greatest appreciation on the way up tend to experience the largest declines on the way down. Some West Los Angeles neighborhoods, like Brentwood, saw home prices decline by 50 to 55%, an example from $1.2 million to $520k. Likewise, condo prices declined significantly and this was far more widespread and severe. Very desirable condos purchased for $515k later sold for $242k. Some condo complexes developed problems due to lack of maintenance as owners were loath to spend much when the market price of their unit was less than their mortgage. One condo complex in West Hollywood had studios which sold for $205 at the peak and later sold by the banks at $62k with a subsidized loan and one year's Home Owners Dues prepaid. The one bedrooms had sold for $345k and later sold by the banks at $126k. The banks had been unable to sell these units at all until the delayed work had been completed. Easily 25% of the units in that complex went into foreclosure. By contrast many homes in nondescript areas of Los Angeles appreciated little and declined little. The difference this time is there is little or no bubble in large commercial (office/retail) and multi-tenant properties. But the bubble is far more exaggerated in home prices and small commercial and multi-tenant properties. .

To: Wyätt Gwyön who wrote (28195)	3/16/2005 10:17:11 AM
From: GraceZ	Read Replies (1) \| Respond to of 306849

Those average declines and advances are deceptive because it can hide a lot of individual situations which are nowhere near the average. It's like that old joke about the guy with his head in the oven and feet in the freezer, on average he's doing OK. Back when I held a house underwater, the woman next door to me sold her house 25% below what she paid for it five years after she bought it but she held it empty paying down the mortgage for two years trying to sell it (about 28k worth of payments). She had another house somewhere else she was paying a mortgage on so that money she paid on the mortgage was money sent down a well. So take her real loss on the price of 23k and add the loss on the mortgage payments to nowhere for a loss of 51k and you have her losing 51k on a 89k house, or 57% loss in total before you factor in transaction costs. My neighbor could have rented and recouped some of the losses and if she was lucky the renters wouldn't reduce the value of her house even more. I can tell you from experience that some renters can easily wipe out any appreciation dreams you might have in a single year of renting. Or she could have done what we did, just stay put a few years longer than we wanted to. I didn't have much choice since I had two idiots on either side of me who decided to buy other houses and move leaving their houses empty for over two years. It is impossible to sell a house bracketed by vacant houses except at very depressed prices. We wound up breaking even holding our house for ten years. Our total cost was just slightly more than what we would have paid to rent the same house, but the mental anguish of holding a house underwater is something you can't really put a price on. I never want to go through that again. Edit: The punchline is that this all occured during a period which showed small annual average declines in prices in the selling area that my house would have been measured in, the Greater Baltimore area. The serious declines in my area were offset by significant increases elsewhere.