Sunday, July 20, 2008

Housing: Cracks in the High End

by Calculated Risk on 7/20/2008 02:00:00 PM

From the San Francisco Chronicle: Bay Area home prices plunge 27% in last year (hat tip Vijay)

Affluent areas such as Marin County and San Francisco, which until now had resisted most price erosion, saw existing single-family home median prices fall by about 11 percent.
...
"This is pretty grim; double digits across the board," said Christopher Thornberg, principal at Los Angeles' Beacon Economics. "It was eminently predictable if you had a realistic view of the world. I heard a lot of people say the Bay Area was never going to see prices fall, San Francisco was untouchable; in San Mateo, it was impossible; San Jose, not with all the tech money, blah, blah, blah. But prices at the peak relative to people's incomes never made any sense."
This seems to be common misperception: "Prices won't fall in our neighborhood."

Housing Cartoon 2007 Click on graph for larger image in new window.

Here is another cartoon from Eric G. Lewis, a freelance cartoonist living in Orange County, CA (used with permission).

Eric drew this cartoon in 2007, when many people in south Orange County, CA were stunned that prices could fall in their areas.

A few months ago, Luke Mullins at the U.S. News and World Report quoted Ryan Tomazin, the director and chief financial officer of Integrated Asset Services on prices in Denver: Some Home Prices Are Actually Rising in Denver
In Denver specifically, what we're seeing is there are some neighborhoods that are very valuable—old historic neighborhoods. Their values have historically held up just because there is a limited supply. They are located very centrally, and they are in fairly affluent areas.
And from the Rocky Mountain News last week on Denver: Foreclosures go high-end
The foreclosure tsunami is starting to sweep over some of Denver's most exclusive neighborhoods.

Homes priced at $1 million or more in places like Cherry Hills, Cherry Creek Country Club and LoDo are popping up more frequently on foreclosure rolls.
The price dynamics will vary by area (more foreclosures will lead to faster price declines), but no area is immune.