Case-Shiller: Rapid Home Price Declines in OC

The latest Case-Shiller data was released last week. Here’s a summary of the Los Angeles area, which includes LA and Orange Counties:

October 2008
Month to Month: Down 2.6%
Year to Year: Down 27.9%
Change from Peak: Down 34.4%

Since Case-Shiller lumps LA and Orange Counties together, I won’t repeat everything I wrote on the LA Sweet Digs blog. For more analysis and some graphs of the LA Case-Shiller data, check out my post over there: Case-Shiller: Home Prices Continue Dropping Rapidly in LA.

Biggest Discounts December Update

Let’s have an update on where buyers are currently getting the biggest discount off the asking price. This data should help potential buyers to know which neighborhoods are softer in terms of sale price discounts off list price, better equipping you when making an offer and helping you know where to look for potential bargains.

In the charts below, we have taken all sales data from the last two and a half months in Orange County and sorted it by zip code. 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 zips 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 zip codes with the largest overall discount:

While last month saw three neighborhoods with discounts over 25%, this month only two zips came in over 10% off.

The overall discount for Orange County decreased somewhat from 5.6% last month to 3.6% this month, indicating that either sellers are getting better at pricing their homes according to buyers’ expectations, or that they’re just less willing to negotiate.

Here are the ten zip codes with the smallest discounts:

Of the 5,344 sales we tracked in the 2.5-month period, 75 homes sold for more than 20% off the asking price, while 1,592 homes sold for more than asking.

As a whole, the trend in Orange County is currently moving toward somewhat smaller discounts for most neighborhoods. As we continue to watch this data we will be able to get a better picture of what sale-to-list discounts tell us about the overall health of the local real estate market.

City/Town/Neighborhood December Price Reduction Update

Let’s take another 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. In order to keep from overwhelming you with charts, I am leaving out the top ten cities/towns/neighborhoods with the least reduced-price listings from the post, but you can still see that chart in the downloaded file.

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

Of the 41 cities/towns we ranked in Orange County this month, 20 had price-reduced ratios of fifty percent or more. Much of this month’s top ten list is the same as last month’s, with the notable exception of the Las Flores dropping from the number one spot to completely off the list, and a new contender Portola Hills jumping into #1.

Getting a little more granular, let’s look at the top ten Orange County neighborhoods for price reductions:

28 of the 51 neighborhoods we ranked in Orange County had a price-reduced ratio of fifty percent or more. Huntington Beach neighborhoods still dominate the top ten list, with consistent price reductions continuing to take place.

On the neighborhood level (but not at the city/town level), there is a slight tendency for neighborhoods with higher listing prices (per square foot) to have a larger share of reduced-price listings. If you’re looking for sellers that might be more willing to negotiate a lower price, these would be the places to look.

A Look at Orange County Supply and Demand

Let’s take a look at the big picture of supply (residential listings on the market at month-end) and demand (closed home sales). Having an idea of what is going on with supply and demand can be an excellent way to measure the general “strength” or “hotness” of a real estate market, and often will provide a hint of the future direction of home price changes.

Here’s a brief market summary, based on the lates data I have available:

November 2008
Active Listings: down 18.2% YOY
Closed Sales: up 55.7% YOY

Our first chart displays the raw supply and demand data back through mid-2007 (as far as I have data available):

Unfortunately the data that I have available on inventory and sales for Orange County only goes back 18 months, so we can’t really get a good picture of what this year looks like compared to the real boom years of 2004 and 2005, but we can see what things look like compared to this time last year.

Here’s a look at the year-over-year (YOY) change in the previous chart. YOY is the best way to interpret the direction of the market, due to the highly cyclical nature of real estate.

Sales levels have been way up since July in Orange as well as LA County, probably due to the rather severe price drops we have seen (down 33% from the peak as of September, according to Case-Shiller). With home prices coming back down out of the stratosphere here in SoCal, it would appear that at least some buyers are moving into the market.

Although improved sales volumes and decreasing inventory are two of the primary incredients in increasing prices, they appear to be having little effect right now. I could see this trend (rising sales, falling inventory and prices) continuing for another year or two, but eventually one of the three will have to swap directions. Personally I expect sales to reach a plateau within a year or so, with price declines finally slowing as well.

Case-Shiller: OC Home Prices Still Falling

The latest Case-Shiller data was released last week. Here’s a summary of the Los Angeles area, which includes LA and Orange Counties:

September 2008
Month to Month: Down 2.5%
Year to Year: Down 27.6%
Change from Peak: Down 32.6%

Since Case-Shiller lumps LA and Orange Counties together, I won’t repeat everything I wrote on the LA Sweet Digs blog. For more analysis and some graphs of the LA Case-Shiller data, check out my post over there: Case-Shiller: LA Home Price Declines March On.