“What’s the expectation? That once a bottom is reached that housing prices will shoot back up ? Doubt it,” he writes.
http://latimesblogs.latimes.com/laland/2008/11/is-a-bottom-clo.html
Here at The Times, we have avoided jumping on the “Is the bottom close?” question. We’ve quoted economists as stating that even when a bottom is hit, it will be a long time before home prices begin any meaningful appreciation. They include Christopher Thornberg, an economist who was one of the first to call the real estate boom a bubble, as well as the California Assn. of Realtors’ Leslie Appleton-Young — and when’s the last time you heard a real estate agent not say this is the best time to buy?
As consultant Burns notes: “The bottom line is that the housing prices in L.A. are still over-inflated from all of the false appreciation from 2000-2006.”
Indeed, home prices in Southern California have fallen more than 30% from their peak in 2007, and sales activity is picking up. But Los Angeles-area homes are still expensive compared to…
local incomes.
About 15% of homeowners could afford to buy a midpriced house in the Los Angeles market in the second quarter of 2008, according to a National Assn. of Homebuilders index. That’s up from about 10% in the first quarter, and much higher than the 2% rate in 2006.
But it’s still a long way from the late 1990s, when about 50% of L.A. area residents could afford a midpriced home.
The gulf between incomes and house prices suggests that we are not close yet to a “bottom” in the market. Declining house prices may have made some homes more affordable, but now unemployment is rising, meaning some people will not be able to buy a house at any price.
If the past is any guide, when prices start leveling they do tend to bounce along that floor for a long time. When the Southern California median home sales price began to bottom out at around $150,000 in January 1995, it took almost three years to climb back up even to $160,000.
During our most recent long run-up in housing prices, we often heard that double-digit annual percentage gains would not lead to a market crash because this cycle was different.
Now that we are in a downturn, is there any reason why it should not last as long as the previous one? Get ready for a round of news stories exploring why it is really different this time.
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