We're getting a lot of readers pointing out that the chart that we posted yesterday means squat. An appraiser from Pasadena (can't verify that; guy could be a car mechanic in Boston who likes monkeying around) just wrote us a lengthy email disputing those voodoo-magic numbers. And he added a few more thoughts. His email after the jump.
Hi gang. I am an appraiser in Pasadena. I enjoy the blog.
I wanted to comment on something that may already to obvious. On the blog, August 22, there is a posting: July Prices, Sales By Neighborhood. This information comes from DataQuick and the Los Angeles Times. While the information might be interesting its means very little. Its a snapshot of one month (in 2006) and one month (in 2007). There isn't enough data presented to really get an idea what is happening.
Examples; Westside indicates 92 homes sold. But how many units were sold the previous year? How many homes were actively listed for sale in July 2006 versus July 2007?
What was the average on market times for the homes sold in 2006 versus 2007? Was it 25 days in 2006 and 107 days in 2007?
What was the price per SF in 2006 versus 2007? One large sale on the westside (Ie: $5,000,000) skews the number data quick uses.
Finally, we have also hit a period known as the "credit crunch". This impact was not being felt in July.
From 2001 through 2005, the market experienced one of the longest sustained periods of housing appreciation on record. This was due to low interest rates and an overall "good" economic environment. The market then slowed, but was still best defined as healthy. This cycle has ended and the current mortgage lending market is very volatile, and many lending programs and products that were readily available less than a year ago are no longer available; this is a result of a decline of investors in the secondary market. The result is higher interest rates and higher qualification standards; these conditions result in less loans being made. Fewer loans available reduces the amount of purchase-ready buyers and increases the amount of competition among the sellers for those fewer buyers. When sellers are competing for buyers, they do so by lowering prices. Although this dynamic is not apparent, its influence, based on my research and conversations with market participants, is present in the market and is likely to increase. Therefore, the reasonable conclusion I draw is that this market is best described as volatile and unsteady and is most likely in decline in most all areas.