Housing market: forecasting a bottom

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Are we there yet?

Just asking that question on this blog is sure to set off the flamethrowers, but some recent numbers are worth exploring.

Southern California’s median home price is down about 50% from its peak, according to MDA DataQuick. In the 1990s downturn, the Southern California median price fell 19% from its peak.

How much worse can it get ? The January Standard & Poor’s/Case-Shiller home price index was down about 40% from its peak. The index compares the sale prices of homes against their previous sales to show whether they’ve appreciated or depreciated.

The median sales price probably shows a more severe drop now because more low-priced homes are selling than high-priced ones -- 55% of Southern California homes sold in March had been foreclosed upon, according to DataQuick.

Higher-end homes haven’t fallen in value as much (the most expensive L.A.-area homes are down 30% from the peak, according to Case-Shiller), which many see as a sign that the housing market still has more room to fall.

But Irvine consultant John Burns has another prism for examining the market. Low mortgage interest rates may make homes even more affordable than their prices suggest. The typical monthly payment for a buyer putting 20% down and purchasing a median-priced home has fallen farther from the peak level than have home prices.

In the Los Angeles-Orange County metro area, the monthly payment is 54% below the peak, according to data that Burns put out this week. In the Inland Empire, the payment is down 64% from the peak.

Still, Burns notes, these are unusually tough times, writing that nationally: ‘We have the best housing affordability in at least 38 years, and the worst economy in 51 years. Hmm....’

Buyers are showing their intentions with actions, not words, but there are apparently two messages: REO properties are moving fast with multiple offers, and high-end homes are languishing. What’s next ?

-- Peter Y. Hong