I've seen it all now

User Forum Topic
Submitted by cashman on July 26, 2007 - 12:46am

Check out this link for new homes in Chino Hills:
Priced from 1.75M to 2.05M. This is Chino Hills, not Beverly Hills! Inland Empire. Simply unbelieveable. I looked at some similiar homes by Toll Brothers in 2000 just a couple of miles from there that were priced from $530-$600K. Now Barratt is asking $2M for essentially the same thing. And the crazy thing is people are buying! I drove by them and over half of them are sold. Housing recession? Not in my neck of the woods!

Submitted by scruffydog on July 26, 2007 - 10:01am.

Easily explained; supply and demand.
I agree there is no housing recession in metro LA! Most of metro LA county is built out, very few new projects can be built, therefore new supply is somewhat restricted and the underlying demand supports the prices. Contrast this with San Diego where numerous large projects have been built adding to the supply. If buyers get spooked, prices can soften. Even then I read on this site that projects are selling and there are some price increases.
Look at Sacramento and other CA areas where builders are able to add lots of new product. These are the areas that are experiencing the price drops.
Foreclosure noise at the lowest end of the market has the bears excited. In LA, rate is still 50% of the peak of mid 90s. Nothing to worry about.
Median SFR price declines of 50% in LA (or even SD?) NOT GONNA' HAPPEN. (**itty El Cajon apt conversions is another story)

Submitted by gn on July 26, 2007 - 10:18am.

Scruffydog is backtracking/retreating

What a big surprise ! Scruffy is conceding that the RE market is SD has problems.

Don't be surprised if, by this time next year, he starts conceding that the metro LA market has problems too.

I can see it now. Scruffydog is slowly retreating with his tail between his legs :-)

Submitted by Bugs on July 26, 2007 - 10:28am.

San Diego entered into the price increases well ahead of the LA/OC areas, and it also entered into the decline earlier. LA is lagging right now, but it's all ultimately connected.

Proximity to employment in this area is relatively good (although not as good as Pasadena), so it will lag in comparison to the outlying areas. It's all connected though, and unless this trend reverses it will eventuially come to town and this area will likewise see some price declines. It's just a matter of time.

There are no havens or safe spots that will be immune from the regional pricing trends that are currently in motion. The differences will be measured by degree, with the better areas suffering less and the worse areas suffering the most. Lancaster and Victorville are going to get it worse than Santa Monica and Westwood.

Submitted by cr on July 26, 2007 - 10:34am.

Sorry Scruffy, but wrong again. Just see yesterday's Times article.

Bel Aire saw 50% declines in the last housing boom/bust and that rise in prices pales in comparison. They're still building in LA Metro too: senior apts, hi-rises converted to lofts, row houses, condos conversions, and massive tracts on the outskirts. They're squeezing them in anywhere they can. I question the truth of a builder's claim the homes are selling out.

I'll concede no one really knows when and how much prices will drop, but the same things were said during the last cycle, and prices plummeted.

Nothing to worry about? As long as you have a mortgage you can afford that won't go up, but I venture to say very few that bought in the last 3 years are so worry-free.

Glad to hear you're coming around on SD though. LA will follow.

Submitted by scruffydog on July 26, 2007 - 11:29am.

Everyone is aware SD median price has declined ~6% from its peak from ~18-24 months ago. That's the whole point - it is such a small decline over an almost 2 year period. Such a tiny decline does not portend the huge declines you predict.
Expensive areas LED the price declines last time. LA Times article noted Bev Hills experienced a 40% decline from 1989 to 1993. If housing market is so bad as you say why such a tiny median decline this time (at least in SD...in LA median is STILL increasing).
You would expect to see something much larger than 6% after almost 2 years from the peak!
Not only are expensive areas not decreasing now they are still increasing and sales are robust. This is a major difference is this r/e cycle from the 90s. Plus the economy is still relatively strong and unemployment low. Doom and gloom 50% median price declines for typical sfrs in this r/e cycle in SoCal will NOT occur.
50% decline is not gonna' happen in SoCal due to demand and limited supply. (In FL different story; we've already seen 50% decline in Ft Myers tract housing project)

Submitted by Bugs on July 26, 2007 - 11:53am.

We're already halfway to 50% declines in some areas of Riverside County, and based on current volume levels it'll be YEARS before the trend reverses. That trend will make it a lot further west than Chino Hills or San Dimas or Glendale before it reverses.

Don't kid yourself - there is no safe haven in a region that is defined in terms of driving distance. If the same home costs twice as much in Santa Monica as it would in Pomona and the home in Pomona declines, the Santa Monica home isn't going to stay the same just because Santa Monica is "special".


"It hasn't happened yet" is not at all the same thing as "It's not going to happen". There were a lot of permabulls in SD who were making the hasn't-happened-yet-argument who ended up eating crow when it did happen. You're making the same mistake now.

Submitted by PerryChase on July 26, 2007 - 12:56pm.

Here's for a little bit of a history lesson. When all is said and done we'll see a lot of similarities with the 1990s RE slump. Too bad we can't learn from our past mistakes.


Submitted by drunkle on July 26, 2007 - 1:22pm.

good read.

so where did all the bitter sellers go...

Submitted by HLS on July 26, 2007 - 1:48pm.

Stick with the facts...

The MEDIAN price is not an accurate indication of anything, in an up market or down market, nor when the current median is compared to a previous median.

IN FACT, it is probably the worst indicator that could be used, but the media uses it. Virtually ever spokespiece of the media is handed a script to say or write. They don't question it or understand it. It's how misinformation gets around, myths that get reported as facts.

In the last few months, (the most recent fuel for the median price) since subprime meltdown started, many people could no longer qualify for purchase loans. These are MOSTLY entry level buyers at the lower end of pricing.

Because they couldn't get loans, they didn't buy. Fewer lower priced homes sold. VOILA, the median went up.
It's NOT an indication of strength in the market in any way shape or form, sorry.

Here's an example:
1,2,3,4,5,6,7, The median is 4
3,4,5,6,7 The median is 5 WOW 25% higher !!

You can skew stats to your favor when necessary, but MEDIAN house prices means nada, even when compared to previous medians.

In Driver's Ed I was taught to avoid the median.

Submitted by kicksavedave on July 26, 2007 - 2:06pm.

2004 - 1200 sq ft 35 year old POS = $500K

2009 - 2500 sq ft brand new house = $500K

Same area, median unchanged.

Submitted by scruffydog on July 26, 2007 - 2:11pm.

Noticeably missing from this story –
1. The 90s economic downturn in CA was second only to the great depression
2. unemployment was ~8%

The 90s housing downturn did not magically happen in a vacuum; the CAUSE was loss of jobs due to aerospace downsizing. ~500,000 jobs total lost statewide.
If the current economy was as sick as the 90s economy I would also jump on the 25 – 30% or more median price loss bandwagon.

Submitted by scruffydog on July 26, 2007 - 2:20pm.

Median price complainers…give it a rest already! It’s been debated here endlessly. Everyone is aware of the limitations.
I would use some other historical measure if it were readily available.

Submitted by an on July 26, 2007 - 3:12pm.

Just because the CAUSE is different now compare to the 90s doesn't mean that the decline won't happen. It already happens in some area. The cause today is not job lost but tightening of credit and proliferation of exotic loans. We haven't seen loose lending like this since the great depression. Also, we never enter a declining RE market with an all time low interest rate. Examples are right there in your face if you just look. In 2005, a 1500 sq-ft condo/townhouse in Carmel Valley was going for $650k. Today, the exact same model just got listed as bank owned for $536k. How's that for 20% drop over 2 years? A 2100 sq-ft house in MM in 2005 w/ canyon view were going for mid $700k. Today, many are listing in the mid $600k with no taker. How's that for 15% drop over 2 years? I can go on. Some drop faster/harder than other but no area is immune unless it didn't experience crazy appreciation over the last 7 years.

Submitted by cashman on July 26, 2007 - 3:46pm.

Getting back to the original post, my point was that this tract is in Chino Hills, which is NOT in LA county, or any of the usual suspect high priced areas, but in San Bernadino county. $2M for tract homes? (Excuse me, semi-custom). Give me a break.

Submitted by scruffydog on July 26, 2007 - 5:31pm.

You're right!! Chino Hills is on the LA county border. Hard to tell (if you miss the little freeway county border signs) because the area is built up and one community blends into another. San Bernardino county border makes an unusual jog west and includes Chino Hills. Interestingly CH ends up west (and south) of Pomona which is in LA!

The close proximity of CH to LA area is the reason these properties are selling and prices are high.

Submitted by LA_Renter on July 26, 2007 - 7:18pm.


This is a quote from Rich's last article

"The early-1990s recession and housing bust have both been universally blamed on declining employment in the defense and aerospace manufacturing industries. In truth, that recession saw more job losses in real estate and construction than in manufacturing. The housing-related job losses that resulted from an unsustainable real estate boom had a big impact on the early-90s economy. They are doing so today as well."

LA will not escape this. Here is a quote from David Streitfeld in the LA Times a while back;

"San Diego had the wildest run-up among major California cities, with prices tripling since the mid-1990s. ... The market also began to fade first in San Diego. ...

Whatever happens here, optimists and pessimists agree, will happen later in the rest of the state."

IMO you are mistaking LA's lag in the current cycle with market strength. It's about year behind San Diego, that's all. Orange County is taking the big hit right now in regards to volume.

Submitted by youngster on July 26, 2007 - 11:50pm.

"If the current economy was as sick as the 90s economy I would also jump on the 25 – 30% or more median price loss bandwagon."

Well...I guess I'm an economy bear. Even with the current real estate/construction sector meltdown, my broken crystal ball says it has been a while since the last consumer-driven recession.

If housing is weak in the absence of recession, then it will be pummeled during recession - which is hard to avoid if the slowdown lasts several years.

It's depressing if the 3 top sectors of additional jobs were in hospitality, government, & education. Maybe the government can balance us out of this one.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.