Case-Shiller: LA Home Price Drops Still Slowly Moderating

It’s time for our monthly check-in of the S&P/Case-Shiller Home Price Indices (HPI). For the full source data behind this post, plus seasonally adjusted and tiered price data, hit the S&P/Case-Shiller website.

For an explanation of how the Case-Shiller data is calculated, check out their methodology pdf. Also remember that the data released on the last Tuesday of a given month is for the period two months prior (i.e. – April data is released in June).

Here are the basic Case-Shiller stats for the Los Angeles area (which Case-Shiller defines as LA and Orange Counties) as of April:

April 2009
Month to Month: Down 0.9%
Year to Year: Down 21.3%
Change from Peak: Down 41.8% in 31 months

The following chart shows the Los Angeles HPI scaled such that the September 2006 peak is 100% on the y-axis. Data on the x-axis is scaled to display the last time (pre-peak) the Los Angeles HPI was at or lower than it was in the latest data (July 2003).

Prices continue to decline in Los Angeles, and a 21% year-over-year drop is certainly nothing to sneeze at. However, it is defintely worth mentioning that the trend of decreasing magnitude of price drops in LA and San Diego is also continuing:

Here’s a chart of Case-Shiller HPIs for all the markets that Redfin serves, so you can compare LA’s performance to other areas across the country:

To recap, we have seen the following interventions in recent months meant to boost the housing market:

• $8k first-time buyer tax credit
• 4.5% – 5% mortgage rates
• various moratoriums on foreclosures
• numerous federal programs encouraging loan workouts

The apparent result of this host of actions has been a flattening to very slight upticks seen in the chart above, in a month that is historically one of the strongest of the year for the real estate market. I guess you can color me underwhelmed.

And here’s our final chart, in which we line up the peak Case-Shiller HPI value for each of Redfin’s markets, so we can see how long each market has been declining, and how much it has dropped from the peak.

It’s been six months now since we first pointed out on these pages the sign of a possible bottom on the distant horizon for Los Angeles home prices. Things are definitely still heading in that direction, but it could easily be over a year before price drops finally hit that bottom.

June City/Neighborhood Price Reductions

Let’s take our monthly look at which cities and towns have the most price reductions.

The following charts show the percent of MLS, FSBO or REO listings that were price-reduced at some point before leaving the market (either sold or removed unsold from the market) in the past 90 days. Cities/towns or neighborhoods in which the number of homes taken off the market was too small to provide believable estimates are excluded from ranking.

For those that are interested, I have uploaded the full data set in Excel format here. The downloadable Excel file also includes charts showing the top ten cities/towns/neighborhoods with the least reduced-price listings.

First up are the top ten cities with the most price-reduced listings:

Of the 100 cities/towns we ranked in the Los Angeles area this month, just 8 had price-reduced ratios of fifty percent or more.

Getting a little more granular, let’s look at the top ten Los Angeles area neighborhoods for price reductions:

Of the 173 neighborhoods we ranked in the Los Angeles area this month, 31 had a price-reduced ratio of fifty percent or more. On average, the neighborhoods with more price reductions had somewhat higher median closed prices than those with fewer price reductions.

The general trend in Los Angeles looks to be heading slightly toward less price reductions, however every city and neighborhood is of course different. Some may be getting softer while others get tighter. Download the full spreadsheet to check where your neighborhood came in.

Advice from LA First-Time Home Buyers: “Keep Hope Alive!”

Marco Huerta and his wife Youngmin Bae were recently featured in the LA Times for buying their first home with Redfin. We decided to catch up with them and learn more about their experience buying a foreclosed home owned by the bank, also known as an REO (real estate owned).

Marco and Youngmin’s Story

We started looking for our first home in 2006. My wife and I both grew up in homes and were sick of living in apartments. We originally worked with a traditional agent and put in an offer on a home, but decided to pull out of the deal before our inspection contingency expired. After taking a break for a couple of years, we stumbled upon Redfin and loved using the map-based search. We signed up for updates on new listings, price reductions and scoured the details pages to monitor prices and movement of similar homes for sale.

We got pre-approved with our bank early on to set our price range, which was below $500,000. We knew we wanted a 3 bedroom, 2 bathroom house in a quiet neighborhood. We went on five Redfin home tours around Glendale, Mount Rose, Eagle Rock and Burbank and loved our field agent, Todd Lethbridge. He was knowledgeable about the homes, always laid out the pros and cons for each property and never glossed over any potential issues. Redfin agent Joyti Goundar helped us on a few offers that didn’t pan out. But then in November 2008, we found an REO home in Burbank that we loved. We were able to go see it the day after it went on the market. The home was owned by Countrywide (now owned by Bank of America), and they require that buyers get pre-approved with them to put in offer on homes they list for sale. So we started the pre-approval process and put in an offer two days later, but learned that the bank had already accepted an offer from someone else!

Feeling a little discouraged, we decided to take a break for a few months. But then one day in late January, my wife decided to check Redfin and noticed that the home we had found was recently re-listed! We sprung into action and called Joyti who quickly helped us put an offer together. We then got pre-approved with Countrywide, so they knew we meant business. Our offer was accepted the next day — even for $10,000 below list price!

Marco and Youngmin’s Advice for First-Time Buyers

1. Be pro-active: it may seem like there’s a lot of inventory out there, but there’s also a lot of competition. The good homes will sell fast. We’re so glad we checked Redfin again because we probably wouldn’t have known our home was back on the market until it was too late. If you’re looking at an REO, check to see if you need to get pre-approved with the bank that owns the home. We were lucky to know that Countrywide required us to be pre-approved with them; so when the home went back on the market, we were ready to make an offer.
2. Get a thorough inspection: we knew our house might need some repairs, so in addition to the general inspection, we brought in a chimney inspector, sewage and pipes, and an electrician to evaluate the home for potential issues. Banks usually never pay for repairs, but I decided to create a detailed outline of all the problems and potential risks associated with some of the issues with home and presented it to the bank. They ended up giving us around $4,300 for repairs!
3. Choose a mortgage lender carefully: we monitored rates on Bankrate.com and researched all the different types of fees associated with loans. We met in-person with lenders at our local credit union as well as Wells Fargo. After comparing each good faith estimate carefully, we ended up going with Countrywide where we originally got pre-approved. They gave us the best rate and even waived our appraisal fee.

The market is tough, but don’t get too discouraged. If the right house comes along, make sure you’re prepared to make an offer and you just may end up with the perfect place!

Biggest Discounts June Update

Let’s check in on our stats once again and find out where buyers are currently getting the biggest discounts off asking price. If you are a potential buyer, this will help you to know which neighborhoods may be softer in terms of sale price discounts off list price, and help you know where to look for potential bargains.

In the chart below, we have taken all sales data from last month in the Los Angeles area and sorted it by city/town. We calculated the overall difference between the sale price and the list price. Note that this reflects the final list price, after all price drops in the listing. Any areas with fewer than ten sales are excluded from the top and bottom ten rankings, but interested readers may download the full data summary in Excel format (xls).

Here are the top ten areas with the largest overall discount:

The overall discount dropped just a bit in June from our previous update in April, falling to 3.6% from 3.8%.

Here are the ten areas with the smallest discounts:

Twenty areas had an average sale price higher than the average list.

Here’s an added bonus. The following chart shows the top ten areas with the largest overall discount from the original list price, instead of the final list price:

Apparently sellers in Beverly Hills tend to be the most overly-optimistic with their original list prices. 25 of the 107 ranked cities/towns around LA came in with discounts from original list over 10%.

Is the area you’re shopping not on either the top 10 or bottom 10? No problem, just download the full rankings in Excel format and hit the “FullSummary” sheet.

Of the 4,774 sales we tracked in the 1-month period, 429 homes (9%) sold for 10% or more off the asking price, while 677 homes sold for 5% or more above the asking price.

Redfin By The Numbers, May Edition: More People Are Making Offers On Homes

Let’s look at our May brokerage stats for Southern California to see how what our clients are doing right now reflects what’s happening in the market.

Our Clients Love Our Fanatical Service

We survey every client and track every transaction in a central customer database. For the surveys we received in May from our clients in Southern California:

• 35 clients responded to our customer-satisfaction survey and posted a review online, down from 44 in April.
• All 35 of those clients, or 100%, would recommend Redfin to a friend, up from 98% in April.
• 1 of our clients gave Redfin a five-star review on Yelp.

In these surveys, Redfin asks customers to rate the likelihood that they would recommend Redfin to a friend on a 0-to-10 scale. Customers who rated 6 or higher count as people who would recommend Redfin to a friend.

More People Are Making Offers On Homes

In May, our Southern California clients were busy seeing homes and making offers:

• Redfin clients toured 2,055 homes in May, up from 1,695 homes toured in April.
• Our clients submitted 109 signed offers on homes, up from 72 in April.
• Our Southern California agents were busy working on these signed offers:

o Joyti Goundar: 34 offers
o Katrina Jauregui: 32 offers
o Angela Creech: 24 offers
o Anna Nevares: 19 offers

• 31 of those offers or 28% were on bank-owned foreclosures, down from 35% in April.

We also had a great home-buying class in May. Twenty-two people came to the class in Escondido to learn about the home-buying process and meet our agents. Check out the slide deck from the class.

It’s Taking 35 Days To Close On A Home

In May, the time it took our clients in Southern California to close on their homes was 9 days shorter than in April:

• For our clients who bought re-sales, the average time from initial agreement on terms to the close of the deal was 35 days, down from 44 days in April.
• Closing took 38 days for bank-owned homes, but only 33 days for traditional sales.
• 1 of our clients failed to get financing for their home; the same as in April.
• 5 of our clients’ deals failed the home inspection, up from 1 in April.
• Of our closed deals, the average discount off list price for homes sold was 2.94%, down from 5.19% in April.

Look For Our June Report

We’ll be back next month with our analysis of the June numbers. Let us know what you’d like to see in that report.