personal thoughts on los angeles real estate market

A recent comment from an earlier post reads as follows:

How are things in the california real estate market these days? Is it as horrible as I have read? What do you think if the economic predictions they are forecasting for the next couple of years? Such as the coming recession or maybe even another depression.

My anecdotal take on the immediate greater Los Angeles market: Because median home prices have risen only <10%>10% annual rate between, say, 2001 until 2005, some homeowners, speculators, and shoppers believe that the market is shaping up to tank (although most disagree how long and how hard the "landing" would occur). Yet, due to the most recent month-over-month figures, you have people like the National Association of Realtors declaring perhaps prematurely that the housing market has bottomed out. Many precursors that do point to the beginning of a down market exist: slowing sales, more days listed for many properties, multiple downward asking price adjustments, larger incentives, homebuilder inventory buildup, increasing foreclosures, ARM resets, and the list can drone on indefinitely.

Do remember that all these factors *might* simply be reverting to the long-term mean-- that, since, we experienced one of the most over-inflated bubbles in history, that, maybe these "doomsday" factors aren't necessarily that bad at all. For example, although foreclosures have increased, apparently the foreclosure rate is still lower than the historical mean. An outright ban on non-traditional mortgages would most likely trigger a larger number of foreclosures than the mean. I believe other additional posts are warranted to examine the the real estate bubble and its possible negative consequences.

In any case, for the here and now, as has the term been used to describe general stock market movements, more than anything, I personally feel the real estate market seems to be moving "sideways." San Diego, Orange County have reported 10% drops from list prices of properties, but Los Angeles itself experienced anywhere from a -2% to a 7-10% change, depending on what you read.

One thing to keep in mind is if rate of value descreases gradually snowball and bring prices further downward, the momentum could be somewhat devastating.