'Faith' in high prices

Posted by Dave Fratello on Wednesday, April 11th, 2007 at 9:53pm.

Today's LA Times
tells us that most Americans have "faith" that home prices won't be going down any time soon.

Specifically, 83% believe that home values in their neighborhoods will remain the same or increase over the next six months. Just 16% think values will decrease.

To be fair, most of the no-decrease folks (51% of the 83% total) are just expecting flat values. Clearly these aren't go-go times.

MBC can offer a bit of context that the LA Times left out. Last year (13 months ago), the paper's polling shop asked the same question, and got about the same results (36 percent: increase, 14: decrease, 49: flat).

Consider that – a whole year's worth of escalating news about weakness in the housing sector, and opinions didn't change. That must be why they call it "faith."

The article offers several reality checks, including data from the National Association of Realtors showing that home prices fell last year. And these ditties:

From an Eagle Rock renter:
"The values are so inflated. It's ridiculous. But people are willing to pay the prices to live in certain areas. They want what they want, and they want it now."
And from a "housing expert:"
"Mortgage credit is clearly tightening, affordability is not good and there are a record number of unoccupied homes for sale," said Scott Simon, a mortgage-bond fund manager for Pacific Investment Management Co. in Newport Beach. "We think prices should be down a few percent this year and, if we are wrong, it will be worse than that."
Of course, all real estate is local.

On that note, Bearmaster at the South Bay bubble blog offers disquieting news for 90266. The total dollar volume of real estate transacted in MB in March was 20% lower than in the same month a year prior. Now, one-month stats don't tell a complete story, but that's a blow.

A 20% drop in dollar volume also undercuts one of the main observations (opinions) you'll hear about the state of the MB market – the notion that high-end properties are moving just fine while the bottom tier has slowed. More volume at the high end could have cancelled out slowing at the "bottom" (in this case, homes priced at $1m-$1.5m), but that didn't work out in March.
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