Peter Viles is senior producer for Real Estate at LATimes.com. We asked him to join the conversation about the region's real estate market, and this the first of three entries Peter shared with us. Check back on Monday, September 29th, and Wednesday, October 1 for the next installments.
The free-fall in housing prices in the Inland Empire has created one of the most vibrant markets in America for a product no one wants to produce: foreclosed houses.
Roughly 2,500 previously foreclosed homes were sold in Riverside County in August, making up 65% of all home sales in the county, according to MDA DataQuick. But supply of foreclosed homes for sale appears to be rising -- banks seized roughly 3,400 foreclosed homes in the county in August, according to Foreclosure Radar.
Home prices in the county, and in neighboring San Bernardino County, are in a virtual free-fall, and the growing list of foreclosed houses for sale threatens to drive prices even lower.
In Lake Elsinore, for example, the median sales price for existing homes is down 47% over the past year; Prices in parts of Moreno Valley have fallen 52% in the past year. These price declines threaten to create a self-reinforcing cycle of decline, forcing more homeowners into
foreclosure and further flooding the market with foreclosed houses.
The result is that California's housing bubble -- which was particularly apparent in the Inland Empire -- is deflating at a rate that disproves the conventional wisdom that housing prices rarely fall as rapidly as they rise. Below is the median sales price for existing homes in
Riverside County:
Although the current price declines have been dramatic, and to many, unexpected, they could continue for some time. If prices in the county had risen in lock-step with inflation since 2000, the median sales price would be approximately $206,000 -- or 17% below current levels. That's a crude analysis though -- housing prices usually appreciate at a rate slightly faster than inflation. But it's a reminder that the current price collapse is not an unforeseen, or isolated, event -- it is the second half of a boom and bust cycle.
Thoughts? Do you think the market has bottomed-out?
You can e-mail Peter Viles at: peter.viles@latimes.com. Or, follow his real estate blog L.A. Land on Twitter at: http://twitter.com/LALandBlog
The free-fall in housing prices in the Inland Empire has created one of the most vibrant markets in America for a product no one wants to produce: foreclosed houses.
Roughly 2,500 previously foreclosed homes were sold in Riverside County in August, making up 65% of all home sales in the county, according to MDA DataQuick. But supply of foreclosed homes for sale appears to be rising -- banks seized roughly 3,400 foreclosed homes in the county in August, according to Foreclosure Radar.
Home prices in the county, and in neighboring San Bernardino County, are in a virtual free-fall, and the growing list of foreclosed houses for sale threatens to drive prices even lower.
In Lake Elsinore, for example, the median sales price for existing homes is down 47% over the past year; Prices in parts of Moreno Valley have fallen 52% in the past year. These price declines threaten to create a self-reinforcing cycle of decline, forcing more homeowners into
foreclosure and further flooding the market with foreclosed houses.
The result is that California's housing bubble -- which was particularly apparent in the Inland Empire -- is deflating at a rate that disproves the conventional wisdom that housing prices rarely fall as rapidly as they rise. Below is the median sales price for existing homes in
Riverside County:
August 2000 $162,000
August 2001 $185,000
August 2002 $215,000
August 2003 $260,000
August 2004 $334,000
August 2005 $388,000
August 2006 $420,000
August 2007 $394,000
August 2008 $247,000
Although the current price declines have been dramatic, and to many, unexpected, they could continue for some time. If prices in the county had risen in lock-step with inflation since 2000, the median sales price would be approximately $206,000 -- or 17% below current levels. That's a crude analysis though -- housing prices usually appreciate at a rate slightly faster than inflation. But it's a reminder that the current price collapse is not an unforeseen, or isolated, event -- it is the second half of a boom and bust cycle.
Thoughts? Do you think the market has bottomed-out?
You can e-mail Peter Viles at: peter.viles@latimes.com. Or, follow his real estate blog L.A. Land on Twitter at: http://twitter.com/LALandBlog
RELATED STORIES:
Foreclosure Alley - By Correspondent Lisa Ling - For the past few years, the Inland Empire has been one of the fastest growing counties in the state. But now the Inland Empire is pretty much the poster child for the foreclosure crisis.
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The prices is not going to stop falling. Gas prices is not going to come down to below $2.00 a gallon. Jobless rate is climbing and it is not going down. We do not have any manufacturing base at all. Yes we have high tech but look at the education system it is in a sad state. We have to import skills workers who can live with much less.
This financial trouble is also adding to the problem. We have overstretch ourselves. This bubble is not like the bubble in the 90's. The different is that in the 90's people are still financially fit to make it through the years of depression or ressession. Today the picture is different. People are over stretch. They do not have the backup funding. They are in debt. Banks are in debt. Loans are tightening up to where no one could get even a dime.
With the dollar falling, gas prices at high, foreign investors scarce.. we are in deep water.
Sorry I have to be so depressing. I felt that we are always living in a dream world here just like hollywood. All the glamour, the wanabes, the idol, etc.. WELL IT IS TIME TO WAKE UP.
Hi, couple of points:
prices usually track inflation because incomes historically have risen in lockstep with inflation. However, real income has declined over the last few years. That is a real wildcard to determining where affordability lies because although income has gone up there are budget pressures in other areas - health insurance, education, groceries, energy etc.
The market is cyclical and the downcycle will be influenced by the recession that is likely with all the recent turmoil. The downcycle usually goes well below the trendline, so if the $206,000 represents a point on your trendline most likely the cycle will bottom well below that.
Thanks for the post! The increase of Oil Prices is a great burden to the consumer’s budget. Predicting the future is tricky – like the next time a person will need payday loans, or who is going to win the lottery. Most often, fortune telling is bunk. A prediction that is specific has about a 50/50 shot at best, and if you make a vague enough prediction, then you'll eventually always be right. There were a lot of predictions about 2008 – and a lot of them came up short. Oil prices plummeted like a rock, and it turns out that Barack Obama will be starting a new job on Jan 20th, as the next President of the United States. 2008 was one tricky year, and 2009 ought to be some fun as well.