Wednesday, June 25, 2008 | The county’s housing prices logged a 22.4 percent drop compared to the same month a year ago, according to the most recent Standard & Poor’s/Case-Shiller index for April 2008 released Tuesday.
Compared to the peak in November 2005, the county’s overall house prices were down 27.9 percent. Prices sunk to a level last seen in late 2003.
Declines in the region’s housing prices are starting to show more prominently at the high end. Foreclosures and distressed sales are bringing discounts on homes at price levels that some analysts formerly considered to be impervious to the housing malaise.
Houses selling for more than about $567,000 made up the top one-third of the sales counted in the April 2008 index. That tier showed drops of 15 percent from April 2007 and 19 percent from the tier’s peak in June 2006.
The index only counts homes that sell, and the homes that are selling are the ones priced appealingly to buyers. Often, such sales are homes that have been repossessed and resold by banks. To compete, individual home sellers are forced to either lower their prices or pull their houses off the market and wait for a better time to sell.
It’s unclear when that better time might come.
The price drops in the highest tier have been deepening since August 2006. The 15 percent drop from April 2007 reflected in Tuesday’s index marks the sharpest drop yet for homes at that level. And with foreclosure activity in the county continuing to shatter records month after month, the downward effect on prices appears poised to continue.
“I don’t think anybody expected it, even anybody in the business, to be doing what it’s doing,” said longtime real estate broker Jim Klinge, who focuses on North County homes. “It’s a lot worse than everyone thought.”
Those declines at the top pale in comparison to the ones logged by the lowest tier. Homes priced under $379,636 have dropped 31 percent from April 2007 and 36 percent from the tier’s June 2006 peak.
A total of 6,201 foreclosure-related notices went to county households in May, marking a 17 percent increase from the month before an 84 percent increase compared to May 2007, according to foreclosure tracking firm RealtyTrac. The records are filed when a house reaches a new stage of foreclosure — notice of default, notice of auction and bank repossession.
“I fully agree that we’re far from over, especially with foreclosures,” said Nathan Moeder, principal with the London Group Realty Advisors.
Price declines have mixed with fears interest rates will only continue to rise. And so despite what could come, homebuyers are growing restless and are returning to open houses in droves, agents said.
“I think people are kind of at the point where they’re thinking it’s the time to buy,” said Edward Mracek, a Realtor with Willis Allen in La Jolla. “There’s a lot of more people out kicking the tires. This year’s definitely doing better than last year.”
Moeder said the decline in the top tier is not surprising. Tighter restrictions for mortgages mean buyers often have to ask for more of a compromise on price from sellers. And some sellers have become proactive, lowering their prices to meet buyers who expect bargains left and right.
“The sentiment out there is that sellers of homes are being a little more realistic in what they think they can get for their houses,” Moeder said. “Sellers are no longer in denial. They know what’s going on.”
And even if they know the drops haven’t stopped, buyers are seeing their dollars go further than they did a year or two ago. That leads Moeder to conclude that the region may be approaching stability in some markets that are less dictated by foreclosure sales. Still, he said, the market as a whole has “a lot of fundamental issues that we need to get through.”
Statistics, even ones as specific as the Case-Shiller index, can’t account for pocket neighborhoods or house-by-house changes. The index measures price changes in the same house over the years and then calculates general trends based on those same-house repeat sales.
One trend not captured by statistics, Klinge said, is the overwhelming response he’s been hearing on some of his listings. In one day this week, he received eight offers from buyers hoping to buy houses he was selling. Even in the frenzied boom market, to get eight offers in one day was unheard of, he said.
“The optimism is overwhelming,” he said. “There’s no shortage of demand. There’s a shortage of good-looking listings at great prices.”
Klinge’s listings are either for banks, who just want the repossessed properties sold, or for sellers who are willing to lower their prices to attract buyers, he said. As those homes sell, and the higher-priced ones don’t, the index will continue to fall, he said. He predicted the index will show another 20 percent drop in the highest tier by the end of the year.
“That’s probably going to be a result of sales slowing to a crawl and the only things that are going to be selling are the things that are selling for nothing,” he said. “Because that’s what everybody is willing to pay. Statistically, it’s a mess.”
Some sellers in the region have decided to wait, expecting better conditions in a year. But they might face a struggle if they’re expecting the statistical measures like the median price or the Case-Shiller index to support higher prices in a year, Klinge said.
“They’re crazy, especially if they’re hoping for statistics to help them,” he said, “because statistics are going to be showing the foreclosures.”