The real estate coverage in the LA Times skews to the hyperbolic (exuberant during the boom days, nihilistic during the present clime), but there were some relevant facts in today's report that home values in the five-county Southland had fallen to 2002 levels.
- when compared to income, home prices are now below their historical average
- the SoCal median home price in January 2009 was $250,000 -- 40% lower than in January 2008
- Los Angeles County's median home price in January 2009 was $300,000 -- down 35% from a the same month a year ago
- 60% of January 2009 sales were foreclosures
- the local housing market is in the "overshoot" phase of its decline, "when a mid-priced home sells for less than it typically would based on median incomes"
Despite the gloom associated with declining asset values, there's a lot of positive news in this report.
It's the best market in almost ten years for first-time home buyers. They have a vast choice of properties, and with interest rates at historical lows, they can buy them on the best terms. Homes are more affordable than the historic norm.
With so many foreclosed homes changing hands, neighborhoods will not deteriorate from the presence of vacant properties, but will be rejuvenated by new owners who will stay put because they can make their monthly payments.
Homeowners who don't have to sell should not be ruffled by this flux in asset prices. Yes, they have less equity in their homes, but their return on their asset will be determined at the time of sale, not during this downturn.
The most positive aspect of this article is that the real estate market is on the road to normalcy. Home prices are falling in line with incomes. Mortgages and property tax for first-time home buyers will be affordable. Foreclosed homes are selling. And loans that are being written are done under stringent new guidelines so the debacle of the bubble years will not be repeated.
Normalcy is not the same recovery. Home prices will continue to fall as we move through this economic quagmire. But every day there are deals to be had by new exuberant buyers who can fulfill their dream -- with a monthly nut they can afford.