I thought it would be interesting to look at the sale prices of condos in the condo complex where we rent in Downey, CA. The graph speaks for itself. Prices in Southern California were completely out of touch with reality. Look at the bubble in the early 90’s. Prices only went up by 50% and then declined for 6 straight years. In this last bubble, prices increased nearly 350% between 2000 and 2007. Much of those gains have been wiped out in 2 years since the bubble burst.
This graph is quite useful because it is comparing identical units (~300 sq. ft. max difference) in close proximity to each other. Expanding the comparison to Downey as a whole would introduce comparisons between dissimilar homes in substantially different neighborhoods. It doesn’t make much sense mixing the large sprawling homes of Northeast Downey in with the tiny houses south of the 105.
Does anybody really believe prices will continue to trend upwards with high unemployment, shadow inventory twice the size of what is listed and the upcoming wave of Option ARM recasts? Good thing Congress extended the $8,000 credit, wouldn’t want housing to be affordable.
Back in August of 2007 I wrote this post, Someone forgot to refill the Real Estate ATM, and predicted that we would see a continued drop in prices, foreclosures would go up and so on. What I didn’t see coming was a big drop in the stock market, sharp increase in unemployment and the massive expansion of government into the financial and mortgage markets. Things are definitely worse than I thought they would be.
This is some the best mainstream media Housing Bubble coverage I’ve seen and it spells things out pretty clearly. If you aren’t sure what exactly is going on this is a pretty good 15 minute overview of the current situation.
Dr. Housing Bubble featured Downey this week in an edition of Real Homes of Genius that shows just how screwed up things are in housing right now. I couldn’t buy a house even if I wanted to and it’s not like I’m making minimum wage. As long as prices are out of touch with people’s incomes prices will drop and drop. And on another note I don’t think the fact that we just hit a 2 year unemployment rate high is completely unrelated.
“The greatest weakness in December employment came from sectors battered by the housing slump: construction payrolls lost 49,000 jobs, while manufacturing fell by 31,000 and financial services employment declined by 4,000.”