Real estate : FWC: Could history repeat itself in [San Fernando] Valley's '0

» Jas_Jain - FWC: Could history repeat itself in [San Fernando] Valley's '0

I used to live in SF Valley. During the 1990s slump, the prices fell 29% in nominal dollars and 40%+ in real terms. It took ELEVEN YEARS for the prices to recover.

Jas

-x-x-x-x-x-x-x-x-x-x-x-x-x-x-

http://www.dailynews.com/business/ci_352...

Article Launched: 02/19/2006 12:00 AM PST

Could history repeat itself in [San Fernando] Valley's '06 housing market?
Home sales dip to continue
Gregory J. Wilcox, Staff writer

This year's San Fernando Valley residential real estate market might have started with a pop, unlike last year's, which began with sort of a bang.
The 851 single-family home sales in January 2005 ranks as the fourth-highest number since 1,057 transactions in 1989. Last month's sales total, an anemic 582 transactions, ranks 13th.

To find any deja vu in this, we've got to go way back to 1990, which had the seventh-highest sales total.

But that January's count fell 27.2 percent from the prior year.

This year started with a hefty 31.6 percent decline to the lowest level in nine years.

There are some striking similarities, and differences, between then and now.

Both years started the same way the prior one ended. In May 1989, sales began falling under the prior year levels; that malaise lasted 22 months.

Looking back, it's the point when that real estate bubble began to burst.

This January's sales decline is the fourth in a row and that pattern is expected to continue.

At their respective points in time, both markets were past their prime.

The last boom market peaked in 1988 with 15,263 sales and the next year they fell by 16.4 percent. This crest came in 2003 with 13,878 sales and the annual declines since then have been much more tepid.

Both years started with high energy prices, unrest in the Middle East and a Bush in the White House.

More powerful and quite different forces were in play then versus now, though.

Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., committed them to memory.

"Speculators were really in the market more heavily invested than now, new-home builders raced into the market ... and were left with huge inventory overhangs and the most important thing is your (the Valley's) economy was going through a major restructuring," he said.

A seven-year price decline in the annual median price - halfway between the


most and least expensive homes sold - also started in 1990. Now we are at a record $605,000, a whopping 163 percent higher than where 1990 started.

Kyser also notes that the economy is much more diverse now than in 1990, which was the beginning of a prolonged slump that saw Los Angeles and Orange counties losing 700,000 jobs. Sales and prices didn't fall in response to each other so much as they reacted to jobs leaving the area.

Now the economy is on sound footing and is much more diverse.

Jim Link, executive vice president of the Southland Regional Association of Realtors, does not see a price decline accompanying this fall-off in sales, just a moderation in the rate of appreciation.

"A year from now, I think it will be a single-digit increase but it will be higher than it is now," he said of the median.

He was just as optimistic in January 1990, anticipating that full-year sales would match 1987 or 1989.

Single-family sales ended up plunging 31.6 percent that year, a suddenly familiar number.

Analysts and industry executives don't expect that kind of a train wreck this time around, though. Of course, no one saw the last one until it flattened the market.

But with the year off to a slow start, we might need a full 12 months to find out if 13 is indeed an unlucky number.

Gregory J. Wilcox, (818) 713-3743

-- posted by Jas_Jain