by Calculated Risk on 5/15/2007 02:54:00 PM

From the LA Times: SoCal home sales hit 12-year low

Southern California home sales plunged to a 12-year low for the month of April, dragged down by a dearth of transactions at the lower end of the market even as prices held steady ... DataQuick Information Systems reported.

... nearly a third fewer homes in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties closed escrow last month compared to a year earlier for the worst April showing since 1995, DataQuick found.
...
Most of the erosion in sales appeared in the lower-priced markets of the Inland Empire that only a year ago still seemed to be soaring. In Riverside County, sales dropped 45.1% to 2,987 year over year, while in neighboring San Bernardino County, sales plunged 46.7% to 2,049 ...

"The falloff in starter home sales has the effect of pushing median prices up a bit, although it's still somewhat surprising prices haven't declined more," said DataQuick president Marshall Prentice.

The changing market poses a problem with the "median price" method of tracking prices. As an example, say 100 homes sold in a certain month, 20 homes each at $300K, $400K, $500K, $600K, and $700K. The median price would be $500K.

However, during the next month, say half the homes in the two lower brackets didn't sell (only 10 each for $300K and $400K), but all the other homes sold at the same price as the month before. Sales would decrease by 20% (similar to the declines reported by DataQuick). However the median price would increase 10% to $550K! Clearly this is misleading.

The OFHEO house price index uses same home sales, so it doesn't suffer from this problem (although there are other problems with the OFHEO Index, especially for more expensive areas). The Q1 OFHEO HPI will be released on Thursday, May 31st.